<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1995
REGISTRATION NO. 33-58911
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNITED STATES CELLULAR CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 62-1147325
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or
organization)
</TABLE>
SUITE 700
8410 WEST BRYN MAWR
CHICAGO, ILLINOIS 60631
(312) 399-8900
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
<TABLE>
<S> <C>
H. DONALD NELSON, President WILBUR C. DELP, JR.
United States Cellular Corporation Sidley & Austin
Suite 700 One First National Plaza
8410 West Bryn Mawr Chicago, Illinois 60603
Chicago, Illinois 60631 (312) 853-7000
(312) 399-8900
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agents for service)
Copy to:
MICHAEL A. CAMPBELL
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
(312) 782-0600
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE AND
FROM TIME TO TIME THEREAFTER.
------------------------------
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, 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, 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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT BEING MAXIMUM OFFERING AGGREGATE AMOUNT OF
SECURITIES BEING REGISTERED REGISTERED PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Liquid Yield Option-TM- Notes due 2015......... $745,000,000(1) 30.656%(2) $228,387,200(2) $79,100(6)
Common Shares, par value $1.00 per share....... -- (3) -- -- --
Common Shares, par value $1.00 per share....... 750,000(4) $28.3125(5) $21,234,375(5) $7,323(6)
TOTAL.................................. -- -- -- $86,423(6)
<FN>
(1) Including $95,000,000 aggregate principal amount at maturity of LYONs-TM-
subject to the Underwriter's over-allotment option. After the initial
public offering thereof, the LYONs may be reacquired and resold by a
Standby Share Deliverer, initially the Underwriter, as described herein.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Also being registered are such indeterminate number of Common Shares as may
be issuable by the Company, or deliverable by a Standby Share Deliverer,
upon conversions of the LYONs registered hereby. Pursuant to Rule 457(i)
and Rule 416, no additional registration fee is required for the shares
issuable upon conversion of the LYONs, as such shares may be adjusted from
time to time under anti-dilution provisions.
(4) Represents the maximum number of Common Shares that may be borrowed under a
Securities Loan Agreement by the Underwriter from Telephone and Data
Systems, Inc., for the purposes described herein.
(5) Estimated for the Common Shares solely for the purpose of calculating the
registration fee on the basis of the average of the high and low prices of
the Common Shares of the Company on the American Stock Exchange on April
26, 1995.
(6) Previously paid.
- -TM- Trademark of Merrill Lynch & Co., Inc.
</TABLE>
------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement includes two alternative cover pages and two
alternative back cover pages. One cover page and one back cover page relate to
the initial offering of the LYONs and the Common Shares issuable upon the
conversion thereof, as well as resales of LYONs by the Standby Share Deliverer,
as described in the Registration Statement. The alternate cover page and back
cover page relate to the delivery of Common Shares by the Standby Share
Deliverer upon conversion of LYONs as well as Common Shares which may be sold by
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and which
have been obtained by Merrill Lynch under a Securities Loan Agreement between
Merrill Lynch and Telephone and Data Systems, Inc., the registrant's parent.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. 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 State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 26, 1995
PROSPECTUS $650,000,000
[LOGO]
UNITED STATES CELLULAR CORPORATION
LIQUID YIELD OPTION-TM- NOTES DUE 2015
(ZERO COUPON--SUBORDINATED)
-----------------
The Issue Price of each Liquid Yield Option-TM- Note ("LYON"-TM-) to be
issued by United States Cellular Corporation (the "Company") will be $
( % of principal amount at maturity) and there will be no periodic payments of
interest. The LYONs will mature on , 2015. The Issue Price of each
LYON represents a yield to maturity of % per annum (computed on a semi-annual
bond equivalent basis) calculated from , 1995. The LYONs will be
subordinated to all existing and future Senior Indebtedness of the Company. As
of March 31, 1995, the Company had approximately $329.5 million of indebtedness
outstanding which would have constituted Senior Indebtedness (which amount would
have been approximately $ million after the application of the net
proceeds of this offering). The LYONs will also be effectively subordinated to
all liabilities, including trade payables, of subsidiaries of the Company, which
as of March 31, 1995 totalled approximately $69.9 million. See "Capitalization"
and "Description of LYONs--Subordination of LYONs; Effect of Corporate
Structure."
Each LYON will be convertible at the option of the Holder at any time on or
prior to maturity, unless previously redeemed or otherwise purchased by the
Company. Upon conversion, the Company may elect the delivery of Common Shares,
par value $1.00 per share (the "Common Shares"), of the Company at a conversion
rate of shares per LYON (the "Conversion Rate") or cash equal to the
market value of the Common Shares into which the LYONs are convertible. The
Conversion Rate will not be adjusted for accrued Original Issue Discount but
will be subject to adjustment upon the occurrence of certain events affecting
the Common Shares. Upon conversion, the Holder will not receive any cash payment
representing accrued Original Issue Discount; such accrued Original Issue
Discount will be deemed paid by the Common Shares or cash received on
conversion, unless such LYON remains outstanding pursuant to a Common Share
Delivery Arrangement entered into by the Company with a Standby Share Deliverer
in respect of such conversion. See "Description of LYONs--Conversion Rights."
The Company's Common Shares have less voting power than its Series A Common
Shares, par value $1.00 per share (the "Series A Common Shares"). The LYONs are
not convertible into Series A Common Shares, which have effective control of the
Company. On May 25, 1995, the last reported sale price of the Common Shares on
the American Stock Exchange was $29 per share.
The Company will purchase LYONs, at the option of the Holder, as of
, 2000 for a Purchase Price per LYON of $ (Issue Price plus
accrued Original Issue Discount through such Purchase Date). The Company may
also elect to offer to purchase LYONs, at the option of the Holder, as
of , 2005 for a Purchase Price per LYON of $ (Issue Price plus
accrued Original Issue Discount through such Optional Purchase Date). If the
Company elects to offer to purchase LYONs as of the Optional Purchase Date it
will notify the Holders of such election prior to the Purchase Date. The
Company, at its option, may elect to pay the Purchase Price as of the Purchase
Date or the Optional Purchase Date, if applicable, in cash, Common Shares or
publicly traded common equity securities (the "TDS Common Equity Securities") of
Telephone and Data Systems, Inc. ("TDS") (the Company's parent), or any
combination thereof. See "Description of LYONs--Purchase of LYONs at the Option
of the Holder." In addition, as of 35 business days after the occurrence of any
Change in Control of the Company occurring on or prior to , 2000 the
Company will purchase LYONs, at the option of the Holder, for a Change in
Control Purchase Price, in cash, equal to the Issue Price plus accrued Original
Issue Discount through the date set for such purchase. The Change in Control
purchase feature of the LYONs may in certain circumstances have an anti-takeover
effect. See "Description of LYONs--Change in Control Permits Purchase of LYONs
at the Option of the Holder."
The LYONs are not redeemable by the Company prior to , 2000.
Beginning on , 2000, the LYONs are redeemable for cash at any time
at the option of the Company, in whole or in part, at Redemption Prices equal to
the Issue Price plus accrued Original Issue Discount through the date of
redemption. See "Description of LYONs--Redemption of LYONs at the Option of the
Company."
For a discussion of certain United States Federal income tax consequences to
Holders of LYONs, see "Certain Tax Aspects."
Application has been made for listing of the LYONs on the American Stock
Exchange. The Common Shares are currently listed on the American Stock Exchange
under the symbol USM. The Common Shares of TDS, par value $1.00 per share (the
"TDS Common Shares"), are currently listed on the American Stock Exchange under
the symbol TDS.
SEE "RISK FACTORS" ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE LYONS.
---------------------------
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.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRICE TO UNDERWRITING PROCEEDS TO
AT MATURITY PUBLIC DISCOUNT COMPANY(1)
<S> <C> <C> <C> <C>
Per LYON......................... 100% % % %
Total (2)........................ $650,000,000 $ $ $
<FN>
(1) Before deducting expenses payable by the Company estimated at $755,000.
(2) The Company has granted the Underwriter an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
$95,000,000 aggregate principal amount at maturity of LYONs on the same
terms as set forth above to cover over-allotments, if any. If the option
is exercised in full, the total Principal Amount at Maturity, Price to
Public, Underwriting Discount and Proceeds to Company will be
$745,000,000, $ , $ and $ , respectively. See
"Underwriting."
</TABLE>
---------------------------
The LYONs are offered by the Underwriter, subject to prior sale, when, as
and if delivered to and accepted by the Underwriter, and subject to certain
other conditions. The Underwriter reserves the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the LYONs will be made in New York, New York on or about
, 1995.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), as
Standby Share Deliverer and at the request of the Company, may agree to acquire,
through the delivery of Common Shares, LYONs upon conversion by the Holders
thereof and Merrill Lynch may resell such LYONs. Any such sales may be made
directly to one or more purchasers at negotiated prices, at market prices
prevailing at the time of sale or at prices related to such market prices. This
Prospectus may be used by the Standby Share Deliverer in connection with such
transactions.
"Liquid Yield Option" and "LYONs" are Trademarks of Merrill Lynch & Co.,
Inc.
---------------------------
MERRILL LYNCH & CO.
------------
The date of this Prospectus is , 1995.
<PAGE>
[MAP OMITTED]
[The map on the inside front cover of the Prospectus presents the Company's
managed markets, including markets in which it has the right to acquire an
interest.]
<PAGE>
IN CONNECTION WITH THE OFFERING OF THE LYONS, THE UNDERWRITER MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE LYONS
OFFERED HEREBY OR OF THE COMMON SHARES, OR BOTH, AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE AMERICAN STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company and TDS each 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"). Such reports, proxy
statements and other information can be inspected at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549; New York Regional Office, Public Reference Room, Seven
World Trade Center, 13th Floor, New York, New York 10048; and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material 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 Company's Common Shares and the TDS Common Shares are listed on the
American Stock Exchange, and reports, proxy statements and other information
concerning the Company or TDS may be inspected at the office of the American
Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities offered by this Prospectus. This Prospectus does not
contain all of the information set forth in such Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. Reference is made to such Registration Statement and to the
exhibits thereto for further information with respect to the Company and the
securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein by
reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
(2) The Company's Current Reports on Form 8-K dated March 15, 1995 and April
27, 1995.
(3) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995.
(4) The description of the Company's Common Shares included in the Company's
Report on Form 8-A/A-2 dated December 20, 1994.
All reports and other documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offerings made
by this Prospectus shall be deemed to be incorporated by reference in this
Prospectus 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
herein by reference shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated herein
by reference modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon his written or oral
request, a copy of any and all of the documents described above, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to:
UNITED STATES CELLULAR CORPORATION
SUITE 700
8410 WEST BRYN MAWR
CHICAGO, ILLINOIS 60631
ATTENTION: EXTERNAL REPORTING
(312) 399-8900
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED BY THE DETAILED INFORMATION AND FINANCIAL
STATEMENTS INCLUDED ELSEWHERE OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITER'S OVER-ALLOTMENT OPTION IS NOT EXERCISED.
THE COMPANY
United States Cellular Corporation owns, operates and invests in cellular
telephone systems throughout the United States. As of March 31, 1995, the
Company provided cellular telephone service to 478,000 customers through 135
majority-owned and managed cellular systems serving approximately 17% of the
geographic area and approximately 9% of the population of the contiguous United
States. The Company's operations consist of nine regional market clusters, five
of which each have a total population of more than two million, and each of
which have a total population of more than one million, plus other unclustered
markets. Overall, 84% of the Company's 25.2 million population equivalents are
in markets which are or will be majority-owned and managed ("consolidated"), 1%
are in managed but not consolidated markets and 15% are in markets in which the
Company holds an investment interest.
The Company is the seventh largest cellular telephone company in the United
States, based on the aggregate number of population equivalents it owns or has
the right to acquire. The Company's corporate development strategy is to acquire
controlling interests in MSA and RSA licensees in areas adjacent to or in
proximity to its other markets in order to build and expand market clusters.
Customers benefit from larger service areas which provide longer uninterrupted
service and the ability to make outgoing calls and receive incoming calls within
the designated area without special roaming arrangements. In addition, the
Company anticipates that clustering will continue to provide the Company certain
economies in its capital and operating costs.
The Company is building a substantial presence in selected geographic areas
throughout the United States where it believes it can efficiently integrate and
manage cellular telephone systems. Its cellular interests include regional
market clusters in the following areas: Virginia/North Carolina/South Carolina,
the Midwest, the Northwest, Indiana/Kentucky, Texas/Oklahoma/Missouri/Kansas,
the Northeast, Eastern Tennessee/Western North Carolina, the Southeast and
Southwestern Texas.
Since 1985, when the Company began providing cellular service, the Company
has expanded its cellular networks and customer service operations to cover 147
markets in 33 states as of March 31, 1995. Over the last five years, the
Company's customer base has grown at a compound annual growth rate of 63% to
478,000 customers at March 31, 1995. The average penetration rate in the
Company's consolidated markets was 2.17% at March 31, 1995, and the percentage
of customers who terminate service each month (the "churn rate") in all of its
consolidated markets averaged 2.1% per month for the quarter ended March 31,
1995.
The Company is a majority-owned subsidiary of TDS. TDS owns 81.1% of the
combined total of the outstanding Common Shares and Series A Common Shares of
the Company and controls 95.9% of the combined voting power of both classes of
common stock. The Company benefits from the extensive telecommunications
industry experience of TDS. At March 31, 1995, TDS, through its wholly owned
subsidiary, TDS Telecommunications Corporation, served approximately 410,000
access lines through 100 local exchange telephone subsidiaries in 29 states and,
through American Paging, Inc., its 82.5%-owned subsidiary, had approximately
705,100 pagers in service. In March 1995, American Portable Telecommunications,
Inc., TDS's wholly owned subsidiary, was the successful bidder for eight
broadband Personal Communications Services ("PCS") licenses at an auction
conducted by the FCC, substantially all of which are for markets other than
those in which the Company operates cellular systems.
CERTAIN DEFINITIONS
As used in this Prospectus, population equivalents, unless otherwise
indicated, means the Donnelley Marketing Service estimate of the 1994 population
of a Metropolitan Statistical Area ("MSA") or Rural Service Area ("RSA")
multiplied by the percentage interest that the Company owns or has the right to
acquire in an entity licensed, designated to receive a license or expected to
receive a construction permit
3
<PAGE>
("licensee") from the Federal Communications Commission (the "FCC") to construct
or operate a cellular telephone system in that MSA or RSA. The number of
population equivalents should not be confused with the current number of users
of cellular services and is not necessarily indicative of the number of users of
cellular services in the future. MSAs and RSAs which the Company owns or has a
right to acquire are sometimes collectively referred to herein as its "markets"
or "systems." As used in this Prospectus, unless the context indicates
otherwise, (i) references to the "Company" refer to United States Cellular
Corporation and its subsidiaries and (ii) references to "TDS" refer to Telephone
and Data Systems, Inc., and its subsidiaries.
RISK FACTORS
Prospective purchasers of the securities offered hereby should carefully
consider the factors discussed under "Risk Factors."
THE OFFERING
<TABLE>
<S> <C>
LYONs............................. $650,000,000 aggregate principal amount at maturity
(excluding $95,000,000 aggregate principal amount at
maturity subject to the Underwriter's over-allotment
option) of LYONs due , 2015. There will be no
periodic interest payments on the LYONs. Each LYON will
have an Issue Price of $ and a principal amount
due at maturity of $1,000.
Yield to Maturity of LYONs........ % per annum (computed on a semi-annual bond equivalent
basis) calculated from , 1995.
Conversion Rights................. Each LYON will be convertible, at the option of the
Holder, at any time on or prior to maturity. Upon
conversion of a LYON, the Company may elect the delivery
of Common Shares, at a Conversion Rate of shares per
LYON, or cash equal to the market value of the Common
Shares into which the LYONs are convertible. In
connection with the conversion of any LYON, the Company
may enter into a Common Share Delivery Arrangement with
a Standby Share Deliverer, initially Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
whereby, upon the agreement of the Standby Share
Deliverer to so act in connection with such conversion,
it will deliver the Common Shares (and any cash payment
in lieu of a fractional Common Share) deliverable to the
Holder upon such conversion. As a result of such a Com-
mon Share Delivery Arrangement, the converted LYON will
not be retired or cancelled, but shall remain
outstanding with the Standby Share Deliverer becoming
the Holder thereof. The Conversion Rate will not be
adjusted for accrued Original Issue Discount, but will
be subject to adjustment upon the occurrence of certain
events affecting the Common Shares. Upon conversion, the
Holder will not receive any cash payment representing
accrued Original Issue Discount; such accrued Original
Issue Discount will be deemed paid by the Common Shares
or cash received on conversion unless such LYON remains
outstanding pursuant to a Common Share Delivery
Arrangement. See "Description of LYONs--Conversion
Rights." The Company's Common Shares have less voting
power than its Series A Common Shares. The LYONs are not
convertible into Series A Common Shares, which have
effective control of the Company. TDS owns more than 81%
of the combined total of the outstanding Common Shares
and Series A Common Shares of the Company
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
and controls more than 95% of their combined voting
power. As a result, TDS is effectively able to elect all
of the Company's seven directors.
Subordination..................... The LYONs will be subordinated to all existing and
future Senior Indebtedness of the Company. As of March
31, 1995, the Company had approximately $329.5 million
of indebtedness outstanding which would have constituted
Senior Indebtedness (which amount would have been
approximately $ million after the application of
the net proceeds of this offering). The LYONs will also
be effectively subordinated to all liabilities,
including trade payables, of subsidiaries of the
Company, which as of March 31, 1995 totalled
approximately $69.9 million. See "Capitalization" and
"Description of LYONs--Subordination of LYONs; Effect of
Corporate Structure."
Original Issue Discount........... Each LYON is being offered at an Original Issue Discount
for United States Federal income tax purposes equal to
the excess of the principal amount at maturity of the
LYON over the amount of its Issue Price. Prospective
purchasers of LYONs should be aware that, although there
will be no periodic payments of interest on the LYONs,
accrued Original Issue Discount will be includable
periodically in a Holder's gross income for United
States Federal income tax purposes prior to conversion,
redemption, other disposition or maturity of such
Holder's LYONs, whether or not such LYONs are ultimately
converted, redeemed, sold (to the Company or otherwise)
or paid at maturity. See "Certain Tax Aspects."
Sinking Fund...................... None.
Optional Redemption............... The LYONs will not be redeemable by the Company prior to
, 2000. Beginning on , 2000, the
LYONs are redeemable for cash at any time at the option
of the Company, in whole or in part, at Redemption
Prices equal to the Issue Price plus accrued Original
Issue Discount through the date of redemption. See
"Description of LYONs--Redemption of LYONs at the Option
of the Company."
Purchase at the Option of the The Company will purchase LYONs, at the option of the
Holder............................ Holder, as of , 2000 (the "Purchase Date")
for a Purchase Price per LYON of $ (Issue Price
plus accrued Original Issue Discount through such
Purchase Date). The Company may also elect to offer to
purchase LYONs, at the option of the Holder, as of
, 2005 (the "Optional Purchase Date") for a
Purchase Price per LYON of $ (Issue Price plus
accrued Original Issue Discount through such Optional
Purchase Date). If the Company elects to also offer to
purchase LYONs as of the Optional Purchase Date it will
notify the Holders of such election prior to the
Purchase Date. The Company, at its option, may elect to
pay the Purchase Price as of the Purchase Date or the
Optional Purchase Date, as applicable, in cash, Common
Shares or TDS Common Equity Securities, or any
combination thereof. TDS has not waived any rights that
it may have under an agreement between TDS and the
Company to purchase Common Shares if the Company elects
to pay the Purchase Price (or a portion thereof) in
Common Shares (as of the Purchase Date or Optional Pur-
chase Date, as applicable). As a result, in such event,
TDS may
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
notify the Company that it intends to exercise any such
rights to acquire additional Common Shares up to an
amount equal to TDS's percentage ownership of Common
Shares at that time (assuming that all outstanding
securities that are or may become convertible into
Common Shares, including LYONs, were converted into
Common Shares), at a price per share payable in cash
equal to the Market Price per Common Share. Because the
Market Price of any Common Shares or TDS Common Equity
Securities to be delivered in payment, in whole or in
part, of a Purchase Price is determined as of the third
Business Day prior to the applicable Purchase Date or
Optional Purchase Date, Holders of LYONs bear the market
risk with respect to the value of the Common Shares or
TDS Common Equity Securities to be received from the
date such Market Price is determined to the applicable
Purchase Date or Optional Purchase Date. See
"Description of LYONs--Purchase of LYONs at the Option
of the Holder" and "Description of Capital
Stock--Preemptive and Similar Rights." In addition, as
of 35 business days after the occurrence of a Change in
Control of the Company occurring on or prior to
, 2000, the Company will purchase LYONs, at
the option of the Holder, at a Change in Control
Purchase Price, in cash, equal to the Issue Price plus
accrued Original Issue Discount through the date set for
such purchase. The LYONs will not, however, be subject
to purchase by the Company at the option of the Holder
in connection with (i) certain transactions involving
TDS, the Company or LeRoy T. Carlson and certain members
of his family that would otherwise constitute a Change
in Control or (ii) the disposition of Common Shares or
Series A Common Shares by TDS in the absence of a Rating
Decline. The Change in Control purchase feature of the
LYONs may in certain circumstances have an anti-takeover
effect. See "Description of LYONs--Change in Control
Permits Purchase of LYONs at the Option of the Holder"
for a summary of this provision and the definition of
"Change in Control" and related terms.
Use of Proceeds................... The net proceeds to the Company from the initial sale of
the LYONs will be applied to the repayment of the
Company's outstanding indebtedness to TDS under a
revolving credit agreement (the "Revolving Credit
Agreement"). Any additional net proceeds will be used
for general corporate purposes, and, on an interim
basis, may be invested with TDS under an affiliated cash
management program. See "Use of Proceeds."
Listing........................... Application has been made for listing of the LYONs on
the American Stock Exchange. The Common Shares are
currently listed on the American Stock Exchange under
the symbol USM. TDS Common Shares are currently listed
on the American Stock Exchange under the symbol TDS.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
SUBSEQUENT SALES OF SECURITIES
Resales of LYONs.................. In connection with the conversion of any LYON, the
Company may enter into a Common Share Delivery
Arrangement with a third party Standby Share Deliverer,
initially Merrill Lynch, whereby, upon the agreement of
the Standby Share Deliverer to so act in connection with
such conversion, it will deliver the Common Shares (and
any cash payment in lieu of a fractional Common Share)
deliverable to the Holder upon such conversion, through
the Conversion Agent, in the same amounts and within the
same time periods as for conversions in respect of which
the Company were to deliver the Common Shares. As a
result of such a Common Share Delivery Arrangement, the
converted LYON will not be retired or cancelled, but
shall remain outstanding with the Standby Share
Deliverer becoming the Holder thereof. The Standby Share
Deliverer may resell such LYONs. This Prospectus covers
the delivery of Common Shares (acquired pursuant to the
Securities Loan Agreement described below, or otherwise)
by the Standby Share Deliverer in connection with any
Common Share Delivery Arrangement and any resales of
LYONs by the Standby Share Deliverer.
Securities Loan Agreement......... In connection with the offering of the LYONs, TDS and
Merrill Lynch intend to enter into a Securities Loan
Agreement, which provides that, subject to certain
restrictions, Merrill Lynch may, with the agreement of
TDS, from time to time borrow, return and reborrow from
TDS up to 750,000 Common Shares, which number of Common
Shares may be reduced from time to time by TDS. The
Securities Loan Agreement is intended to facilitate
ordinary trading and market-making activity in the LYONs
by Merrill Lynch and may also be used by Merrill Lynch,
as Standby Share Deliverer, to obtain Common Shares
deliverable by it in connection with any Common Share
Delivery Arrangement entered into with the Company, as
described above. The availability of Common Shares under
the Securities Loan Agreement, if any, at any time is,
as described above, not assured and any such
availability does not assure market-making activity in
the LYONs by Merrill Lynch. This Prospectus may be used
by Merrill Lynch in connection with the sale of Common
Shares borrowed by Merrill Lynch from TDS under the
Securities Loan Agreement.
Merrill Lynch is not under any obligation to engage in
market-making activity with respect to the LYONs, or to
agree to any Common Share Delivery Arrangement, and any
market-making, or activity as a Standby Share Deliverer,
actually engaged in by Merrill Lynch may cease at any
time.
</TABLE>
7
<PAGE>
SUMMARY OPERATING DATA
The following table is a summary of the Company's markets and consolidated
operations.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH ------------------------------------------------------
31, 1995 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
MAJORITY-OWNED AND MANAGED (CONSOLIDATED) MARKETS:(1)
Population equivalents (in thousands)(2)............ 18,266 18,204 18,464 14,475 10,572 5,172
Customers........................................... 478,000 421,000 261,000 150,800 97,000 57,300
Market penetration at end of period(3).............. 2.17% 1.98% 1.35% 1.00% 0.84% 0.91%
Markets in operation................................ 135 130 116 92 67 32
Cell sites in service............................... 841 790 522 320 186 107
Average monthly revenue per customer*............... $ 71 $ 80 $ 85 $ 88 $ 84 $ 87
Churn rate per month................................ 2.1% 2.3% 2.3% 2.4% 2.2% 1.9%
Marketing cost per net customer addition............ $ 646 $ 667 $ 677 $ 765 $ 710 $ 686
MINORITY-OWNED AND MANAGED MARKETS:(4)
Population equivalents (in thousands)(2)............ 686 1,191 1,157 2,039 1,783 1,310
Markets in operation................................ 11 15 20 24 24 12
MARKETS TO BE MANAGED, NET OF MARKETS TO BE
DIVESTED:(5)
Population equivalents (in thousands)(2)............ 2,477 2,187 1,018 1,836 3,139 4,896
Markets............................................. 3 5 8 13 21 44
TOTAL MARKETS MANAGED AND TO BE MANAGED BY THE
COMPANY:
Population equivalents (in thousands)(2)............ 21,429 21,582 20,639 18,350 15,494 11,378
Markets............................................. 149 150 144 129 112 88
MARKETS MANAGED BY OTHERS:(6)
Population equivalents (in thousands)(2)............ 3,816 3,619 3,429 3,517 3,274 3,480
Markets in operation................................ 61 57 61 64 65 67
TOTAL MARKETS:
Population equivalents (in thousands)(2)............ 25,245 25,201 24,068 21,867 18,768 14,858
Markets............................................. 210 207 205 193 177 155
<FN>
- ------------
* 1993-1990 average monthly revenue per customer has been restated to conform
to 1994 presentation.
(1) Includes one market managed by third parties in 1995, two in 1994 and one
in 1993 and 1992, and one wholly owned reseller operation in 1992, 1991 and
1990.
(2) 1994 Donnelley Marketing Service estimates are used for all years. Includes
population equivalents relating to interests which are acquirable in the
future.
(3) The decrease from 1990 to 1991 is due to the addition of 32 majority-owned
and managed RSAs in 1991. Market penetration for majority-owned and managed
MSAs was 1.48% in 1991 and 1.07% in 1990.
(4) Includes markets where the Company has the right to acquire an interest but
did not own an interest at the respective dates (two markets in 1995, four
in 1994, two in 1993, six in 1992, seven in 1991 and four in 1990);
excludes one market in 1995 which will become a market managed by others.
(5) "Markets to be Managed" represents markets which are managed by third
parties until the Company acquires a majority interest in the markets. In
1995, represents the net of 15 markets to be managed and 12 markets which
are currently majority-owned and managed and will be divested.
(6) Represents markets in which the Company owns or has the right to acquire a
minority interest and which are managed by others.
</TABLE>
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Set forth below is summary consolidated financial information for the
Company as of and for the periods indicated. The following information should be
read in conjunction with the consolidated financial statements and related notes
of the Company included in its reports filed under the Exchange Act that are
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
----------- --------- --------- --------- --------- --------- ---------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING FINANCIAL DATA
Service revenues(1)................. $ 96,400 $ 63,361 $ 318,649 $ 203,800 $ 130,666 $ 77,456 $ 47,099
Equipment sales revenues............ 3,348 2,872 13,755 10,510 9,263 7,500 7,522
Operating income (loss) before
depreciation and amortization and
minority share..................... 27,758 13,714 82,839 36,371 16,934 2,438 2,509
Depreciation and amortization
expense(2)......................... 19,694 14,718 65,454 45,027 29,639 19,269 11,650
Operating income (loss) before
minority share..................... 8,064 (1,004) 17,385 (8,656) (12,705) (16,831) (9,141)
Minority share of operating
income............................. (1,888) (1,118) (5,152) (3,496) (2,615) (1,467) (155)
Operating income (loss)............. 6,176 (2,122) 12,233 (12,152) (15,320) (18,298) (9,296)
Investment income, net of related
amortization expense............... 9,485 4,947 25,627 16,005 11,859 6,871 6,153
Gain on sale of cellular
interests(3)....................... 18,517 -- 3,321 4,851 31,396 557 842
Interest expense.................... 7,705 3,991 21,883 33,190 20,095 16,421 11,492
Income (loss) before income taxes... 26,795 (851) 21,310 (22,749) 8,181 (24,357) (14,641)
Net income (loss) before cumulative
effect of a change in accounting
principle.......................... 23,598 (1,830) 16,393 (25,441) 6,194 (24,373) (14,723)
Cumulative effect of a change in
accounting principle(4)............ -- -- -- -- -- (10,269) --
Net income (loss)................... $ 23,598 $ (1,830) $ 16,393 $ (25,441) $ 6,194 $ (34,642) $ (14,723)
Weighted Average Common and Series A
Common Shares (000s)............... 82,131 75,140 79,514 57,152 57,778 38,715 28,644
Earnings (loss) per Common and
Series A Common Share:
Before cumulative effect of a
change in accounting principle... $ .29 $ (.02) $ .21 $ (.45) $ .11 $ (.63) $ (.51)
Cumulative effect of a change in
accounting principle............. -- -- -- -- -- (.26) --
Net income (loss)................. .29 (.02) .21 (.45) .11 (.89) (.51)
Additions to property, plant and
equipment.......................... $ 38,203 $ 18,444 $ 148,058 $ 91,501 $ 56,122 $ 59,469 $ 16,084
Ratio of earnings to fixed
charges(5)......................... 3.35x .83x 1.49x .17x 1.24x -- --
Pro forma ratio of earnings to fixed
charges(5)......................... -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital.................... $ (23,754) $ (33,813) $ (28,386) $ (17,827) $ (614) $ (979)
Property, plant and equipment,
net............................... 404,677 368,181 246,414 158,948 109,305 44,334
Investments--
Cellular partnerships............ 105,702 99,495 90,104 86,406 75,089 56,489
Licenses, net of amortization.... 1,014,408 947,399 824,491 547,171 386,489 141,107
Marketable equity securities..... 20,742 20,145 17,584 18,210 -- --
Total assets....................... 1,653,392 1,534,787 1,245,396 855,579 616,786 279,844
Long-term debt, excluding current
portion........................... 119,597 57,691 51,130 56,645 26,959 10,703
Revolving Credit Agreement--TDS.... 183,921 232,954 141,524 265,766 166,501 129,005
Common shareholders' equity........ $ 1,207,163 $ 1,093,967 $ 940,128 $ 450,984 $ 360,749 $ 112,380
<FN>
- ------------
(1) The Company changed its financial reporting presentation for outbound, or
pass-through, roaming revenue during 1994. Pass- through roaming revenue is
now treated as an offset to the expense charged by other cellular carriers,
with the net amount included in system operations expense. Prior years'
amounts have been reclassified to conform to the 1994 presentation.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
(2) Represents Depreciation and amortization expense included in Total Costs
and Expenses in the Consolidated Statements of Operations.
(3) Gain on sale of cellular interests of $18.5 million in the first quarter of
1995 reflects the sale of one majority-owned market and the sale of two
minority interests. The gain of $3.3 million in 1994 reflects the gain on
the exchange of cellular interests with another cellular company. The gain
of $4.9 million in 1993 reflects the sale of two minority interests. The
gain of $31.4 million in 1992 includes a $17.1 million gain on the sale of
a majority-owned market, an $11.4 million gain on the exchange of cellular
interests with another cellular company and a $2.9 million gain from the
sale of a minority interest.
(4) Effective January 1, 1991, the Company changed its method of accounting for
sales commissions from capitalizing and amortizing these costs to expensing
as incurred. In addition, two of the Company's equity-method investees made
a similar change. The cumulative effect of the Company's and the investees'
change on all prior years has been reflected in 1991 results of operations.
Financial information for 1990 has not been restated.
(5) For the computation of the earnings ratio: (i) earnings consist of net
income from continuing operations before income taxes, distributions from
minority subsidiaries, minority share in income of subsidiaries that have
fixed charges and amortization of capitalized interest, less equity in
undistributed earnings of unconsolidated investments and minority share of
losses; and (ii) fixed charges consist of interest expense and estimated
interest portion of rentals. For the years ended December 31, 1991 and
1990, the Company's earnings before fixed charges were insufficient to
cover fixed charges. The amounts of such deficiencies were $27,837,000 and
$16,543,000 for the years ended December 31, 1991 and 1990, respectively.
For the computation of the pro forma earnings ratio, the only adjustments
made to the historical ratio were to give effect to the net decrease in
interest expense resulting from the pro forma initial issuance of the LYONs
offered hereby and the corresponding repayment of the Revolving Credit
Agreement-TDS from the net proceeds thereof.
</TABLE>
10
<PAGE>
RECENT DEVELOPMENTS
Service revenues totaled $96.4 million for the three months ended March 31,
1995, a 52% increase over the $63.4 million reported for 1994. Growth in the
number of customers and strong inbound roaming revenue were the principal
factors behind this improvement. The customer base in the Company's 135
majority-owned and managed markets totaled 478,000 customers at March 31, 1995,
a 63% increase over the 294,000 customers in service at March 31, 1994.
Excluding acquisitions, the Company's distribution channels added 43,000 new
customers during the first quarter, a 59% increase over the 27,000 net new
customers added during the same quarter in 1994. Acquisitions and divestitures
netted an additional 14,000 customers in the first quarter of 1995 compared to
6,000 during the first quarter of 1994. Inbound roaming revenue increased 50% to
$29.6 million for the quarter.
Average monthly service revenue per customer totaled $71 during the first
quarter of 1995, down from $76 for the same period in 1994 and from the $78
generated in the fourth quarter of 1994. This decline primarily reflects the
effect of additional customers generating fewer local minutes of use and roaming
revenues growing more slowly. Local retail revenue from the Company's customers
averaged $43 during the first quarter of 1995 compared to $46 in the same
quarter of 1994, while inbound, or keeper, roaming revenue per customer averaged
$22 in the most recent quarter compared to $24 in 1994. These decreases were
expected and were outweighed by the effect of the increase in customers.
Total operating expenses, excluding depreciation and amortization, increased
37% to $72.0 million in the first quarter of 1995 from $52.5 million in 1994.
Marketing expenses, including losses on equipment sales, rose 45%, or $8.6
million, due to a 59% increase in net customer activations. The cost to add a
net customer in 1995 decreased 9% to $646 from $711 in 1994. The Company's churn
rate was 2.1% in the first quarter of 1995, down from 2.3% in the same quarter
last year and from 2.4% in the fourth quarter of 1994.
Growth in revenues, coupled with continued cost efficiencies, resulted in a
$14.0 million, or 102%, increase in operating cash flow compared to the first
quarter of 1994. Operating cash flow margin improved to 29% in 1995 from 22% in
1994. Cash flow, including operating cash flow and $1.8 million of cash flow
from minority cellular investments, increased 61% to $29.6 million. Depreciation
and amortization increased 34% to $19.7 million due to a 14% increase in license
costs and a 57% rise in fixed assets since March 31, 1994. The Company's network
consisted of 841 cell sites serving 135 consolidated markets at March 31, 1995,
compared to 566 cell sites serving 120 such markets at March 31, 1994.
Operating income before minority share totaled $8.1 million in the most
recent quarter compared to a loss of $1.0 million in the same period of 1994.
Investment income increased 87% to $9.7 million, mostly as a result of an
increase in investment income from markets managed by others which the Company
accounts for using the equity method. Interest expense increased $3.7 million,
or 93%, as average debt balances increased 39% from the first quarter of 1994
and as interest rates increased. The Company recorded pretax gains totaling
$18.5 million on the sales of its interests in three markets during the quarter.
One market was 100%-owned and managed and the Company had investment interests
in the other two markets.
The Company generated net income of $23.6 million in the first quarter of
1995, or $.29 per share, compared to a net loss of $1.8 million, or $.02 per
share, in 1994. Excluding the net-of-tax effect of the gains on the sales of
cellular interests, net income for the first quarter of 1995 was $6.4 million,
or $.08 per share.
11
<PAGE>
RISK FACTORS
PRIOR TO DECIDING TO INVEST IN THE SECURITIES OFFERED HEREBY, POTENTIAL
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, TOGETHER WITH OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN
EVALUATING THE COMPANY AND ITS BUSINESS.
OPERATING AND FINANCIAL PERFORMANCE
The Company has only recently achieved profitability and has previously
incurred significant start-up costs and operating losses. The Company
anticipates increasing growth in cellular units in service and revenues as it
continues its expansion and development programs. Marketing and system
operations expenses associated with this expansion will most likely reduce the
rate of growth in operating cash flow and operating income over the next several
quarters. In addition, the Company anticipates that the seasonality of revenue
streams and operating expenses may affect the Company's operating and net
results over the next several quarters.
While there are numerous cellular systems operating in the United States and
other countries, the industry has only a limited operating history. While the
Company produced operating income and net income during 1994, changes in any of
several factors could reduce the Company's growth in operating income and net
income over the next few years. These factors include: (i) the growth rate in
the Company's customer base; (ii) the usage and pricing of cellular services;
(iii) the churn rate; (iv) the cost of providing cellular services, including
the cost of attracting new customers; (v) the introduction of competition from
PCS and other emerging technologies; and (vi) continuing technological advances
which may provide additional competitive alternatives to cellular service.
COMPETITION AND NEW TECHNOLOGIES
Currently, the Company's only competitor for cellular telephone service in
each market is the licensee of the second cellular system in that market. Since
each competitor operates its cellular system on a 25 megahertz ("MHz") frequency
block licensed by the FCC using comparable technology and facilities,
competition for customers between the two systems in each market is principally
on the basis of quality, price, size of area covered, services offered and
responsiveness of customer service. The competing entities in many of the
markets in which the Company has an interest have financial resources which are
substantially greater than those of the Company and its partners in such
markets.
In addition to competition from the other cellular licensee in each market,
there is also competition from, among other technologies, conventional mobile
telephone and Specialized Mobile Radio ("SMR") systems, both of which are able
to connect with the landline telephone network. The Company believes that
conventional mobile telephone systems and conventional SMR systems are
competitively disadvantaged because of technological limitations on the capacity
of such systems. The FCC has recently given approval, through waivers of its
rules, to Enhanced Specialized Mobile Radio ("ESMR"). ESMR systems may have
cells and frequency reuse like cellular, thereby potentially eliminating any
current technological limitation. The first ESMR systems were implemented in
1993 in Los Angeles. Although less directly a substitute for cellular service,
wireless data services and one-way paging service (and, in the future, two-way
paging services) may be adequate for those who do not need full two-way voice
service.
The FCC has completed the auction of two of the three 30 MHz frequency
blocks allocated to broadband PCS. The Company anticipates that the FCC may
begin issuing PCS licenses during the second quarter of 1995. PCS trials are in
process throughout the United States. PCS may become a significant source of
competition in the Company's markets once PCS systems have been built and
developed. One or more PCS providers are expected to begin offering digital,
wireless communications services in markets served by the Company beginning as
early as 1996. Similar technological advances or regulatory changes in the
future may make available other alternatives to cellular service, thereby
creating additional sources of competition.
Continuing technological advances in the communications field make it
difficult to predict the extent of additional future competition for cellular
systems. For example, the FCC has allocated radio channels to a mobile satellite
system in which transmissions from mobile units to satellites would augment or
replace transmissions to cell sites, and several consortia have been formed to
provide such service. Such a system is
12
<PAGE>
designed primarily to serve the communications needs of remote locations and a
mobile satellite system could provide viable competition for land-based cellular
systems in such areas. It is also possible that the FCC may in the future assign
additional frequencies to cellular telephone service to provide for more than
two cellular telephone systems per market.
REGULATION
The licensing, construction, operation, acquisition and sale of cellular
systems are regulated by the FCC. In addition, certain aspects of cellular
system operations may be subject to public utility regulation in the states in
which service is provided. Changes in the regulation of cellular operators or
their activities and of other mobile service providers could have a material
adverse effect on the Company's operations. In addition, FCC licenses to provide
cellular service are subject to renewal. There may be competition for licenses
upon the expiration of their initial ten-year terms and there is no assurance
that any license will be renewed. See "Business--Regulation" and "--Regulatory
Proceedings."
VALUE OF FCC LICENSES
The Company's assets consist principally of intangible assets in the form of
investments in licenses. In many cases the transfer of such interests is
restricted and subject to prior FCC or state regulatory approval. In some cases
the transfer of the Company's interests is subject to rights of first refusal.
In addition, the future value of all cellular interests will depend
significantly upon the success of the Company's business. While there is a
current market for cellular licenses, such a market may not exist in the future
or the values obtainable may be significantly lower than at present. In
addition, the value of licenses may be affected by the level of supply and
demand for such licenses and therefore awards of additional licenses for
competitive wireless technologies, such as those awarded by the auction for PCS
recently completed by the FCC, may adversely affect the value of cellular
licenses.
MARKETS
Many of the Company's markets or market clusters are located in areas which
are not densely populated and may not benefit from operating efficiencies
available to systems operated in metropolitan areas and larger market clusters.
Typically, smaller and less densely populated markets take longer to reach
profitability and positive cash flow than larger individual markets or larger
market clusters. Due to the fact that the FCC issued cellular licenses for MSAs
in order of market size, most of the Company's MSAs were placed in service later
than larger MSAs served by other cellular operators. RSAs are several years
behind the typical MSA in their development and thus may be at least several
years behind typical MSAs in achieving profitability and positive cash flow.
LIQUIDITY AND CAPITAL RESOURCES
The construction of a cellular telephone system is capital-intensive and
requires substantial investment prior to operation. The initial operation of a
cellular system also requires additional investment to cover start-up, operating
and marketing expenses. The Company intends to continue to pursue opportunities
to acquire cellular interests, including additional interests in cellular
systems in which it owns or has rights to acquire an interest. The Company may
require additional funds to build and operate systems with respect to any such
acquired interests and to pursue the acquisition of new interests.
Since the Company has only recently begun to generate positive operating
income and cash flows from operating activities, it requires outside financing
to provide the funds necessary for investment. The timing and amount of the
Company's funding requirements will depend on the number of licensees acquired
by the Company, the plans for the construction and operation of individual
cellular systems, and other relevant factors. The Company anticipates that
during 1995 it will require external financing to fund acquisitions and to fund
capital requirements for markets which the Company currently owns or has the
right to acquire pursuant to definitive agreements. These requirements may be
met through additional borrowings from TDS, the issuance of equity or debt
securities, vendor financing, bank financing, the sale of assets, or a
combination thereof.
There can be no assurance that sufficient funds will be available to the
Company on terms or at prices acceptable to the Company. If sufficient funding
is not available to the Company on terms and prices
13
<PAGE>
acceptable to the Company, the Company would have to reduce its construction,
development and acquisition programs. In the long term, reduction of the
Company's construction, development and acquisition programs would have a
negative impact on the ability of the Company to increase its consolidated
revenues and cash flows.
RADIOFREQUENCY EMISSION CONCERNS
Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones might be linked to cancer. The Company is not
aware of any authoritative evidence linking the usage of portable cellular
telephones with cancer. The FCC currently has a rulemaking proceeding pending to
update the guidelines and methods it uses for evaluating RF emissions in radio
equipment, including cellular telephones. While the proposal would impose more
restrictive standards on RF emissions from low-power devices such as portable
cellular telephones, it is anticipated that all cellular telephones currently
marketed and in use will comply with those standards.
CONTROL BY PRINCIPAL SHAREHOLDER; ANTI-TAKEOVER PROVISIONS
As of March 31, 1995, TDS owned 81.1% of the combined total of both classes
of common stock of the Company, including a majority of the outstanding Common
Shares, and had 95.9% of their combined voting power. As a result, TDS is
effectively able to elect all of the Company's seven directors and otherwise
control the management and operations of the Company. See "Description of
Capital Stock."
The control of the Company by TDS and various provisions of the Company's
Restated Certificate of Incorporation, as amended, may tend to deter
non-negotiated tender offers or other efforts to obtain control of the Company
and thereby deprive shareholders of opportunities to sell shares at prices
higher than those prevailing in the market. See "Description of Capital Stock."
RELATIONSHIP WITH TDS; CONFLICTS OF INTEREST
Directors and officers of TDS and its subsidiaries who are also directors
and officers of the Company, and TDS as the Company's controlling shareholder,
are in positions involving the possibility of conflicts of interest with respect
to certain transactions concerning the Company. When the interests of TDS and
the Company diverge, TDS may exercise its influence in its own best interests.
See "Description of Capital Stock--Corporate Opportunity Arrangements."
The Company and TDS have entered into contractual arrangements governing
certain transactions and relationships between them. These agreements were
executed prior to the initial public offering of the Company's Common Shares and
were not the result of arm's-length negotiations. Accordingly, there is no
assurance that the terms and conditions of these agreements are as favorable to
the Company as it could have obtained from unaffiliated third parties. See
"Certain Relationships and Related Transactions" in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, which is incorporated herein
by reference.
In the future, the Company expects to resolve any potential conflicts of
interest with TDS on a case by case basis, taking into consideration relevant
factors including its existing agreements with TDS, the requirements of the
American Stock Exchange and prevailing corporate practices.
14
<PAGE>
USE OF PROCEEDS
The net proceeds from the initial sale of LYONs offered by this Prospectus
are estimated to be approximately $ ($ if the Underwriter's
over-allotment option is exercised in full). The net proceeds of such offering
will be applied to the repayment of the Company's outstanding indebtedness to
TDS under its Revolving Credit Agreement, which indebtedness was incurred to
fund the Company's acquisitions, working capital requirements and construction
and operations of its cellular systems. Any additional net proceeds will be used
for general corporate purposes and, on an interim basis, may be invested with
TDS under an affiliated cash management program. As of March 31, 1995, the
Company's outstanding indebtedness to TDS under the Revolving Credit Agreement
totaled $183.9 million. All of such indebtedness was issued at an interest rate
of 1 1/2% above the prime rate announced from time to time by LaSalle National
Bank of Chicago, which resulted in an interest rate at March 31, 1995, of 10.5%
per annum. The entire balance under the Revolving Credit Agreement is scheduled
to become due and payable on July 1, 1996. Giving effect to the repayment of
debt from the net proceeds of such offering, as of March 31, 1995, the Company's
outstanding indebtedness to TDS would have been approximately $ million
and the total line of credit under the Revolving Credit Agreement would have
been approximately $100 million, subject to change from time to time by
agreement between the Company and TDS. The Company anticipates drawing down
funds under the Revolving Credit Agreement as appropriate to meet its financial
needs. See "Risk Factors--Liquidity and Capital Resources."
The Company will not receive any of the cash proceeds from any resale of
LYONs by the Standby Share Deliverer or from any sale by Merrill Lynch of Common
Shares acquired from TDS under the Securities Loan Agreement. See
"Underwriting."
15
<PAGE>
CAPITALIZATION
The Company has entered into a number of transactions in which it will issue
securities in addition to those issued pursuant to the offering of the LYONs.
The following table sets forth (A) the capitalization of the Company as of March
31, 1995, (B) the Pro Forma capitalization of the Company reflecting (i) the
Company's obligation to issue an aggregate of 297,173 Common Shares to third
parties in connection with certain acquisitions pending at March 31, 1995; (ii)
the Company's obligation to issue an aggregate of 765,316 Common Shares to
reimburse TDS for the value of TDS Common Shares to be issued in connection with
certain acquisitions pending at March 31, 1995; and (iii) an increase in the
balance under the Revolving Credit Agreement to TDS of an estimated $15.5
million to fund cash payments in connection with such pending acquisitions, and
(C) the Pro Forma as Adjusted capitalization reflecting the Pro Forma
adjustments, described in (B), and (i) the sale by the Company of the LYONs
initially offered hereby (assuming no exercise of the Underwriter's
over-allotment option) and (ii) the application of the estimated net proceeds of
such sale (before deducting expenses of the offering) to the repayment of the
Company's outstanding indebtedness to TDS under its Revolving Credit Agreement.
See "Use of Proceeds" and "Description of Capital Stock."
<TABLE>
<CAPTION>
MARCH 31, 1995
----------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
------------ --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Current portion of long-term debt................................ $ 10,092 $ 10,092 $ 10,092
------------ --------------- ---------------
------------ --------------- ---------------
Long-term Debt:
Revolving Credit Agreement--TDS................................ $ 183,921 $ 199,373(1) $ (2)
Long-term debt, excluding current portion(3)................... 119,597 119,597 119,597
LYONs offered hereby........................................... -- -- (4)
------------ --------------- ---------------
Total Long-term Debt....................................... 303,518 318,970
------------ --------------- ---------------
Redeemable Preferred Stock, $1.00 par value, outstanding 95,972
shares(5)....................................................... 9,597 9,597 9,597
Minority Interest................................................ 35,934 35,934 35,934
Common Shareholders' Equity(6):
Common Shares, $1.00 par value, authorized 140,000,000 shares,
issued and outstanding 48,775,305 shares...................... 48,775 48,775 48,775
Common Shares issuable, 541,780 shares; Pro Forma and Pro Forma
as Adjusted 1,604,269 shares(7)(8)............................ 11,633 43,320 43,320
Series A Common Shares, $1.00 par value, authorized 50,000,000
shares; issued and outstanding 33,005,877 shares(7)(8)........ 33,006 33,006 33,006
Additional paid-in capital..................................... 1,174,809 1,174,809 1,174,809
Retained (deficit)............................................. (61,060) (61,060) (61,060)
------------ --------------- ---------------
Total Common Shareholders' Equity.......................... 1,207,163 1,238,850 1,238,850
------------ --------------- ---------------
Total Capitalization....................................... $ 1,556,212 $ 1,603,351 $
------------ --------------- ---------------
------------ --------------- ---------------
<FN>
- ---------
(1) Reflects the actual amount outstanding under the Revolving Credit Agreement
at March 31, 1995, plus the estimated aggregate increase in the amount
outstanding under the Revolving Credit Agreement to occur from time to time
to fund cash payments in connection with acquisitions pending at March 31,
1995.
(2) Reflects the estimated amount that would have been outstanding under the
Revolving Credit Agreement if all of the pending acquisitions had been
consummated at March 31, 1995, after the application of the net proceeds of
the LYONs offering to reduce the Revolving Credit Agreement.
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
(3) Reflects the actual amount outstanding at March 31, 1995 under an Amended
and Restated Term Loan Agreement dated December 22, 1994 (the "Vendor
Financing Agreement") between the Company and NTFC Capital Corporation
("NTFC"). The Vendor Financing Agreement is an amendment and restatement of
a similar 1991 agreement with NTFC under which the Company borrowed
approximately $56.0 million in principal, plus capitalized interest in the
amount of approximately $3.3 million. Pursuant to the 1994 agreement, NTFC
agreed to lend additional amounts of up to approximately $81.9 million (of
which approximately $72.2 million had been drawn down through March 31,
1995), plus capitalized interest in an amount not to exceed approximately
$6.8 million.
The loans from NTFC to the Company are evidenced by either construction and
equipment notes or refinancing notes. The original principal amount of the
1991 construction and equipment notes totals $52 million. The original
principal amount of the 1994 construction and equipment notes totals $75
million. The balance of the original principal amounts borrowed or
available for borrowing is evidenced by refinancing notes.
Loans under the 1991 agreement bear interest at a rate equal to a 90-day
commercial paper rate plus 2.307%. Each advance under the 1991 notes is
scheduled to be repaid in substantially equal monthly installments of
principal, plus the interest thereon, over a seven-year period commencing,
in the case of the 1991 construction and equipment notes, after the
deferral of interest for the first year.
Loans under the 1994 agreement bear interest at a rate equal to a 90-day
commercial paper rate plus 2.25%. Each advance under the 1994 construction
and equipment notes is scheduled to be repaid in substantially equal
monthly installments of principal, plus the interest thereon, over a
six-year period commencing after the deferral of interest for the first
year. The 1994 refinancing notes have shorter amortization periods and do
not have a deferred interest period.
Under this arrangement with NTFC, the Company is permitted to borrow money
from NTFC on a quarterly basis and relend the proceeds to affiliates that
hold licenses issued by the FCC to construct or operate cellular radio
communications systems for the purposes of financing, refinancing or
reimbursing the payment of the costs of constructing or equipping such
systems. Each loan from the Company to its affiliate (i) is secured by a
security interest in all of the affiliate's personal property and fixtures,
other than (a) accounts receivable, (b) FCC licenses and (c) instruments or
general intangibles representing or evidencing ownership interests in any
other entity holding a license or permit from the FCC to construct or
operate a cellular radio communications system and (ii) together with the
documentation and security therefor, is assigned to NTFC as security for
the loans from NTFC to the Company.
(4) Net of unamortized discount of $ .
(5) Reflects Redeemable Preferred Stock held by TDS at its liquidation
preference of $100 per share. The Preferred Stock is redeemable in 1996 by
the delivery to TDS of an aggregate of 621,904 Common Shares of the
Company.
(6) The LYONs are initially convertible into Common Shares of the Company
(assuming no exercise of the Underwriter's over-allotment option). Common
Shareholders' Equity Pro Forma as Adjusted does not reflect any such
conversion of LYONs into Common Shares of the Company.
(7) The following table details the number of Common Shares and Series A Common
Shares to be issued by the Company in the future pursuant to existing
arrangements for the acquisition of cellular interests. Such existing
arrangements relate to the Company's acquisitions of additional interests
in cellular licensees or systems representing 403,000 of the 25.2 milion
population equivalents which the Company owned or had the right to acquire
at March 31, 1995. The table does not reflect any conversion of LYONs into
Common Shares of the Company.
TDS owned an aggregate of 66,284,155 shares of common stock of the Company
at March 31, 1995, representing 81.1% of the combined total of the
Company's outstanding Common and Series A Common Shares and 95.9% of their
combined voting power. Assuming the Company's Common Shares are issued in
all instances in which the Company has the choice to issue its Common
Shares or other consideration and assuming all issuances of the Company's
common stock to TDS and third parties for
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
completed and pending acquisitions and redemptions of the Company's
Preferred Stock and TDS's Preferred Shares had been completed at March 31,
1995, TDS would have owned 79.9% of the total outstanding common stock of
the Company and controlled 95.6% of the combined voting power of both
classes of its common stock.
</TABLE>
<TABLE>
<CAPTION>
SERIES A COMMON
COMMON SHARES SHARES
--------------- ---------------
<S> <C> <C>
Shares outstanding at March 31, 1995................................ 48,775,305 33,005,877
Shares to be issued in the future for acquisitions pursuant to
definitive agreements:
Shares issuable to third parties at March 31, 1995................ 541,780 --
Shares to be issued to third parties pursuant to acquisition
agreements entered into through March 31, 1995................... 297,173 --
Shares estimated to be issued to TDS in reimbursement for TDS
Common Shares to be issued for acquisitions...................... 765,316 --
--------------- ---------------
Pro forma issuable shares at March 31, 1995....................... 1,604,269 --
--------------- ---------------
Total............................................................... 50,379,574 33,005,877
--------------- ---------------
--------------- ---------------
The above table does not include Common Shares to be issued upon redemption of the Company's
Redeemable Preferred Stock (see note 5 above).
<FN>
(8) Does not include 1,092,967 Common Shares and 55,000 Series A Common Shares
reserved for issuance pursuant to certain employee benefit plans.
</TABLE>
18
<PAGE>
DIVIDEND POLICY
The Company has not paid any cash dividends and, except for cash dividends
payable on any future series of Preferred Stock, intends to retain all earnings
for use in the Company's business. In addition, the Revolving Credit Agreement
with TDS prohibits the payment of dividends on the Company's Common Shares and
Series A Common Shares, except to the extent of one-half of the cumulative
consolidated net income, if any, of the Company for the period after July 1,
1989, which currently prevents the Company from paying dividends. The Vendor
Financing Agreement also restricts the payment of dividends if certain financial
requirements under such agreement would be violated. See "Description of Capital
Stock."
PRICE RANGE OF COMMON SHARES
The Company's Common Shares are listed on the American Stock Exchange under
the symbol "USM" and in THE WALL STREET JOURNAL as "US Cellu." The following
table sets forth, for the periods indicated, the high and low sale prices of the
Common Shares as reported by the American Stock Exchange:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1993:
First Quarter................................................................... $24 5/8 $20 3/4
Second Quarter.................................................................. 28 1/2 23
Third Quarter................................................................... 34 7/8 27 1/2
Fourth Quarter.................................................................. 39 1/4 30 1/8
1994:
First Quarter................................................................... $35 1/4 $24 5/8
Second Quarter.................................................................. 29 5/8 24 1/2
Third Quarter................................................................... 33 1/8 22 3/8
Fourth Quarter.................................................................. 34 30
1995:
First Quarter................................................................... $33 3/8 $29 1/2
Second Quarter (through May 25, 1995)........................................... 30 1/2 28
</TABLE>
On May 25, 1995, the closing price of the Common Shares as reported on the
American Stock Exchange was $29 per share.
On February 28, 1995, there were 463 record holders of the Company's Common
Shares. All of the Company's Series A Common Shares are held by TDS. No public
trading market exists for the Series A Common Shares, but the Series A Common
Shares are convertible on a share-for-share basis into Common Shares.
19
<PAGE>
BUSINESS
GENERAL
United States Cellular Corporation owns, operates and invests in cellular
telephone systems throughout the United States. As of March 31, 1995, the
Company provided cellular telephone service to 478,000 customers through 135
majority-owned and managed cellular systems serving approximately 17% of the
geographic area and approximately 9% of the population of the contiguous United
States. The Company's operations consist of nine regional market clusters, five
of which each have a total population of more than two million, and each of
which have a total population of more than one million, plus other unclustered
markets. Overall, 84% of the Company's 25.2 million population equivalents are
in markets which are or will be consolidated, 1% are in managed but not
consolidated markets and 15% are in markets in which the Company holds an
investment interest.
The Company is the seventh largest cellular telephone company in the United
States, based on the aggregate number of population equivalents it owns or has
the right to acquire. The Company's corporate development strategy is to acquire
controlling interests in MSA and RSA licensees in areas adjacent to or in
proximity to its other markets in order to build and expand market clusters.
Customers benefit from larger service areas which provide longer uninterrupted
service and the ability to make outgoing calls and receive incoming calls within
the designated area without special roaming arrangements. In addition, the
Company anticipates that clustering will continue to provide the Company certain
economies in its capital and operating costs.
The Company is building a substantial presence in selected geographic areas
throughout the United States where it believes it can efficiently integrate and
manage cellular telephone systems. Its cellular interests include regional
market clusters in the following areas: Virginia/North Carolina/South Carolina,
the Midwest, the Northwest, Indiana/Kentucky, Texas/Oklahoma/Missouri/Kansas,
the Northeast, Eastern Tennessee/Western North Carolina, the Southeast and
Southwestern Texas.
Since 1985, when the Company began providing cellular service, the Company
has expanded its cellular networks and customer service operations to cover 147
markets in 33 states as of March 31, 1995. Over the last five years, the
Company's customer base has grown at a compound annual growth rate of 63% to
478,000 customers at March 31, 1995. The average penetration rate in the
Company's consolidated markets was 2.17% at March 31, 1995, and the churn rate
in all of its consolidated markets averaged 2.1% per month for the quarter ended
March 31, 1995.
The Company is a majority-owned subsidiary of TDS. TDS owns 81.1% of the
combined total of the outstanding Common Shares and Series A Common Shares of
the Company and controls 95.9% of the combined voting power of both classes of
common stock. The Company benefits from the extensive telecommunications
industry experience of TDS. At March 31, 1995, TDS, through its wholly owned
subsidiary, TDS Telecommunications Corporation, served approximately 410,000
access lines through 100 local exchange telephone subsidiaries in 29 states and,
through American Paging, Inc., its 82.5%-owned subsidiary, had approximately
705,100 pagers in service. In March 1995, American Portable Telecommunications,
Inc., TDS's wholly owned subsidiary, was the successful bidder for eight
broadband PCS licenses at an auction conducted by the FCC, substantially all of
which are for markets other than those in which the Company operates cellular
systems. The Company was incorporated in Delaware in 1983. The Company's
executive offices are located at 8410 West Bryn Mawr, Suite 700, Chicago,
Illinois 60631. Its telephone number is 312-399-8900.
CELLULAR TELEPHONE INDUSTRY
Cellular telephone technology provides high-quality, high-capacity
communications services to in-vehicle and hand-held portable cellular
telephones. Cellular technology is a major improvement over earlier mobile
telephone technologies. Cellular telephone systems are designed for maximum
mobility of the customer. Access is provided through system interconnections to
local, regional, national and world-wide telecommunications networks. Cellular
telephone systems also offer a full range of ancillary services such as
conference calling, call-waiting, call-forwarding, voice mail, facsimile and
data transmission.
20
<PAGE>
Cellular telephone systems divide each service area into smaller geographic
areas or "cells." Each cell is served by radio transmitters and receivers
operating on discrete radio frequencies licensed by the FCC. All of the cells in
a system are connected to a computer-controlled Mobile Telephone Switching
Office ("MTSO") which is connected to the conventional ("landline") telephone
network and potentially other MTSOs. Each conversation on a cellular phone
involves a transmission over a specific set of radio frequencies from the
cellular phone to a transmitter/receiver at a cell site. The transmission is
forwarded from the cell site to the MTSO and from there may be forwarded to the
landline telephone network to complete the call. As the cellular telephone moves
from one cell to another, the MTSO determines radio signal strength and
transfers ("hands off") the call from one cell to the next. This hand-off is not
noticeable to either party on the phone call.
The FCC currently grants only two licenses to provide cellular telephone
service in each market. However, competition for customers includes other
communications technologies such as conventional landline and mobile telephone,
SMR systems and radio paging. PCS is expected to be competitive with cellular
service in the future in many of the Company's markets, and emerging
technologies such as ESMR and mobile satellite communication systems may prove
to be competitive with cellular service in the future in some or all of the
markets where the Company has operations.
The services available to cellular customers and the sources of revenue
available to cellular system operators are similar to those provided by
conventional landline telephone companies. Customers may be charged a separate
fee for system access, airtime, long-distance calls, and ancillary services.
Cellular system operators often provide service to customers of other operators'
cellular systems while the customers are temporarily located within the
operators' service areas. Customers using service away from their home system
are called "roamers." Roaming is available because technical standards require
that analog cellular telephones be compatible in all market areas in the United
States. The system that provides the service to these roamers will generate
usage revenue. Many operators, including the Company, charge premium rates for
this roaming service.
There are a number of recent technical developments in the cellular
industry. Currently, while most of the MTSOs process information digitally, most
of the radio transmission is done on an analog basis. During 1992, a new digital
transmission technique was approved for implementation by the cellular industry.
Time Division Multiple Access ("TDMA") technology was selected as one industry
standard by the cellular industry and has been deployed in several markets,
including the Company's operations in Tulsa, Oklahoma. Another digital
technology, Code Division Multiple Access ("CDMA"), is expected to be in a
commercial trial by the end of 1995. The Company also expects to deploy some
CDMA digital radio channels in other markets on a trial basis in the near
future. Digital radio technology offers advantages, including greater privacy,
less transmission noise, greater system capacity, and potentially lower
incremental costs for additional customers. The conversion from analog to
digital radio technology is expected to be an industry-wide process that will
take a number of years.
The cellular telephone industry is characterized by high initial fixed
costs. Accordingly, if and when revenues less variable costs exceed fixed costs,
incremental revenues should yield an operating profit. The amount of operating
profit, if any, under such circumstances is dependent on, among other things,
prices and variable marketing costs which in turn are affected by the amount and
extent of competition. Until technological limitations on total capacity are
approached, additional cellular system capacity can normally be added in
increments that closely match demand and at less than the proportionate cost of
the initial capacity.
THE COMPANY'S OPERATIONS
From its inception in 1983 until very recently, the Company has principally
been in a start-up phase. The Company's activities have been concentrated
significantly on the acquisition of interests in entities licensed or designated
to receive a license ("licensees") from the FCC to provide cellular service and
on the construction and initial operation of cellular systems. The development
of a cellular system is capital-intensive and requires substantial investment
prior to and subsequent to initial operation. The Company has experienced
operating losses and net losses from its inception until the past few quarters.
The Company anticipates increasing growth in cellular units in service and
revenues as the Company continues its expansion and development programs.
Marketing and system operations expenses associated with this expansion
21
<PAGE>
will most likely reduce the rate of growth in operating cash flow and operating
income over the next several quarters. In addition, the Company anticipates that
the seasonality of revenue streams and operating expenses may affect the
Company's operating and net results over the next several quarters.
While the Company produced operating income and net income during 1994,
changes in any of several factors could reduce the Company's growth in operating
income and net income over the next few years. These factors include: (i) the
growth rate in the Company's customer base; (ii) the usage and pricing of
cellular services; (iii) the churn rate; (iv) the cost of providing cellular
services, including the cost of attracting new customers; (v) the introduction
of competition from PCS and other emerging technologies; and (vi) continuing
technological advances which may provide additional competitive alternatives to
cellular service.
The following table is a summary of the Company's markets and consolidated
operations.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH -----------------------------------------------------
31, 1995 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
MAJORITY-OWNED AND MANAGED (CONSOLIDATED) MARKETS:(1)
Population equivalents (in thousands) (2)............ 18,266 18,204 18,464 14,475 10,572 5,172
Customers............................................ 478,000 421,000 261,000 150,800 97,000 57,300
Market penetration at end of period (3).............. 2.17% 1.98% 1.35% 1.00% 0.84% 0.91%
Markets in operation................................. 135 130 116 92 67 32
Cell sites in service................................ 841 790 522 320 186 107
Average monthly revenue per customer*................ $ 71 $ 80 $ 85 $ 88 $ 84 $ 87
Churn rate per month................................. 2.1% 2.3% 2.3% 2.4% 2.2% 1.9%
Marketing cost per net customer addition............. $ 646 $ 667 $ 667 $ 765 $ 710 $ 686
MINORITY-OWNED AND MANAGED MARKETS: (4)
Population equivalents (in thousands) (2)............ 686 1,191 1,157 2,039 1,783 1,310
Markets in operation................................. 11 15 20 24 24 12
MARKETS TO BE MANAGED, NET OF MARKETS TO BE
DIVESTED:(5)
Population equivalents (in thousands) (2)............ 2,477 2,187 1,018 1,836 3,139 4,896
Markets.............................................. 3 5 8 13 21 44
TOTAL MARKETS MANAGED AND TO BE MANAGED BY THE COMPANY:
Population equivalents (in thousands) (2)............ 21,429 21,582 20,639 18,350 15,494 11,378
Markets.............................................. 149 150 144 129 112 88
MARKETS MANAGED BY OTHERS: (6)
Population equivalents (in thousands) (2)............ 3,816 3,619 3,429 3,517 3,274 3,480
Markets in operation................................. 61 57 61 64 65 67
TOTAL MARKETS:
Population equivalents (in thousands) (2)............ 25,245 25,201 24,068 21,867 18,768 14,858
Markets.............................................. 210 207 205 193 177 155
<FN>
- ------------
* 1993-1990 average monthly revenue per customer has been restated to conform
to 1994 presentation.
(1) Includes one market managed by third parties in 1995, two in 1994 and one
in 1993 and 1992, and one wholly owned reseller operation in 1992, 1991 and
1990.
(2) 1994 Donnelley Marketing Service estimates are used for all years. Includes
population equivalents relating to interests which are acquirable in the
future.
(3) The decrease from 1990 to 1991 is due to the addition of 32 majority-owned
and managed RSAs in 1991. Market penetration for majority-owned and managed
MSAs was 1.48% in 1991 and 1.07% in 1990.
(4) Includes markets where the Company has the right to acquire an interest but
did not own an interest at the respective dates (two markets in 1995, four
in 1994, two in 1993, six in 1992, seven in 1991 and four in 1990);
excludes one market in 1995 which will become a market managed by others.
(5) "Markets to be Managed" represents markets which are managed by third
parties until the Company acquires a majority interest in the markets. In
1995, represents the net of 15 markets to be managed and 12 markets which
are currently majority-owned and managed and will be divested.
(6) Represents markets in which the Company owns or has the right to acquire a
minority interest and which are managed by others.
</TABLE>
22
<PAGE>
CELLULAR SYSTEMS DEVELOPMENT
ACQUISITIONS. The Company has acquired its cellular interests through the
wireline application process (22%), including settlements and exchanges with
other applicants, and through acquisitions (78%), including acquisitions from
TDS and third parties. During the last five years, the Company has expanded its
size, particularly in contiguous or adjacent markets through an ongoing
acquisition program aimed at strengthening the Company's position in the
cellular industry. This growth has resulted primarily from acquisitions of
interests in RSAs and has been based on obtaining interests with rights to
manage the underlying market.
During the past five years, the Company has more than doubled its population
equivalents to approximately 25.2 million at March 31, 1995. Markets managed or
to be managed by the Company have increased from 50 markets at December 31,
1989, to 149 markets at March 31, 1995. Additionally, as of March 31, 1995,
almost 85% of the Company's population equivalents represented interests in
markets the Company manages or expects to manage compared to 65% at December 31,
1989.
Recently, the pace of acquisitions has slowed as industry-wide consolidation
has reduced the number of markets available for acquisition. The Company's
population equivalents grew at a compound annual rate of over 22% over the last
five years, but only 5% in 1994.
The Company plans to acquire additional cellular interests through
acquisitions or trades in markets that further strengthen its market clusters
and in other attractive markets. The Company also seeks to acquire minority
interests in markets where it already owns (or has the right to acquire) the
majority interest. While the Company believes that it will be successful in
making additional acquisitions or trades, there can be no assurance that the
Company, or TDS for the benefit of the Company, will be able to negotiate
additional acquisitions or trades on terms acceptable to it or that regulatory
approvals, where required, will be received. The Company presently plans to
retain minority interests in certain cellular markets which it believes will
earn a favorable return on investment. Other minority interests may be traded
for interests in markets which enhance the Company's market clusters or may be
sold for cash or other consideration. The Company also continues to evaluate the
disposition of certain managed interests which are not essential to its
corporate development strategy.
The Company, or TDS for the benefit of the Company, ordinarily makes
acquisitions using securities or cash or by exchanging cellular interests it
already owns. Historically, the Company, or TDS for the benefit of the Company,
has negotiated acquisitions of cellular interests from third parties primarily
in consideration for the Company's or TDS's equity securities. Cellular
interests acquired by TDS are generally assigned to the Company. At that time,
the Company reimburses TDS for the value of TDS securities or other
consideration issued in such transactions, generally by issuing Common Shares to
TDS or by increasing the balance due TDS under the Company's Revolving Credit
Agreement in amounts equal to the value of TDS securities or other consideration
delivered at the time the acquisitions are closed. In connection with agreements
that require the delivery of TDS equity securities, the fair market value of the
Company's securities issued to TDS as reimbursement is equal to the fair market
value of the TDS securities delivered in the transactions and is determined at
the time the transactions are closed.
COMPLETED ACQUISITIONS. During 1994 and the first quarter of 1995, the
Company completed the acquisition of controlling interests in 15 markets and
several additional minority interests representing in total approximately 2.3
million population equivalents for an aggregate consideration of $220.7 million.
The consideration consisted of 6.3 million of the Company's Common Shares, an
increase of $9.9 million in the debt to TDS under the Revolving Credit
Agreement, $11.0 million in cash and a $1.4 million cancellation of a note
receivable. The debt under the Revolving Credit Agreement and 6.2 million of the
Company's Common Shares were issued to TDS to reimburse TDS for TDS Common
Shares issued and issuable and cash paid to third parties in connection with
these acquisitions.
23
<PAGE>
PENDING ACQUISITIONS. At March 31, 1995, the Company, or TDS for the
benefit of the Company, had entered into agreements to acquire controlling
interests in four markets and one minority interest representing in total
approximately 403,000 population equivalents for an aggregate consideration
estimated to be approximately $47.1 million. If all of the pending acquisitions
are completed as planned, the Company will issue approximately 297,000 of its
Common Shares and pay $15.5 million in cash and TDS will pay approximately $23.0
million in TDS Common Shares and cash. Any interests acquired by TDS in these
transactions are expected to be assigned to the Company and, at that time, the
Company will reimburse TDS for TDS's consideration delivered and costs incurred
in such acquisitions in the form of Common Shares of the Company or increases in
the balance under the Revolving Credit Agreement. Based on the estimated value
of the consideration at the time the agreements were entered into, the Company
expects to reimburse TDS by issuing approximately 765,000 of the Company's
Common Shares to TDS. The Company also expects to increase the balance due TDS
under the Revolving Credit Agreement by $15.5 million to fund cash payments for
the acquisitions. The Company has also entered into agreements to exchange
markets with five other cellular operators. Pursuant to the exchange agreements,
the Company will receive majority interests in 13 new markets in exchange for
majority interests in 11 markets and three market partitions the Company
currently owns.
The Company maintains shelf registration of its Common Shares and Preferred
Stock under the Securities Act for issuance specifically in connection with
acquisitions.
TDS owned an aggregate of 66,284,155 shares of common stock of the Company
at March 31, 1995, representing 81.1% of the combined total of the Company's
outstanding Common and Series A Common Shares and 95.9% of their combined voting
power. Assuming the Company's Common Shares are issued in all instances in which
the Company has the choice to issue its Common Shares or other consideration and
assuming all other issuances of the Company's common stock to TDS and third
parties for completed and pending acquisitions and redemptions of the Company's
Preferred Stock and TDS's Preferred Shares had been completed at March 31, 1995,
TDS would have owned 79.9% of the total outstanding common stock of the Company
and controlled 95.6% of the combined voting power of both classes of its common
stock.
CELLULAR INTERESTS AND CLUSTERS
The Company operates clusters of adjacent cellular systems wherever
feasible, enabling its customers to benefit from larger service areas than
otherwise possible. Where the Company offers wide-area coverage, its customers
enjoy uninterrupted service within the designated area. Customers may also make
outgoing calls and receive incoming calls within this area without special
roaming arrangements. In addition to benefits to customers, clustering has
provided to the Company certain economies in its capital and operating costs.
These economies are made possible through increased sharing of facilities,
personnel and other costs and have resulted in a reduction of the Company's per
customer cost of service. The extent to which the Company benefits from these
revenue enhancements and economies of operation is dependent on market
conditions, population size of each cluster and engineering considerations.
The Company anticipates that it will continue to pursue strategic
acquisitions and trades which will complement its established market clusters.
From time to time, the Company may also consider trading or selling its
interests in markets which do not fit well with its long-term strategies.
The following table details the Company's cellular interests, including
those it owned or had the right to acquire as of March 31, 1995. The table lists
clusters of markets that the Company manages or anticipates managing. The
Company's market clusters show the areas in which the Company is currently
focusing its development efforts. These clusters have been devised with a
long-term goal of allowing delivery of cellular service to areas of economic
interest and along corridors of economic activity. See the map on the inside
24
<PAGE>
front cover of this Prospectus. The number of population equivalents represented
by the Company's cellular interests may have no direct relationship to the
number of potential cellular customers or the revenues that may be realized from
the operation of the related cellular systems.
<TABLE>
<CAPTION>
TOTAL CURRENT
1994 POPULATION AND ACQUIRABLE
OF LICENSED POPULATION
CLUSTER/MAJOR SERVICE AREA SERVICE AREA EQUIVALENTS
- --------------------------------------------------------------------------------- --------------- --------------
<S> <C> <C>
MARKETS MANAGED BY THE COMPANY:
Virginia/North Carolina/South Carolina Regional Market Cluster:
Eastern North Carolina/Virginia/South Carolina................................. 3,238,000 3,170,000
West Virginia/Pennsylvania/Maryland............................................ 1,398,000 1,398,000
Other Markets.................................................................. 502,000 376,000
--------------- --------------
Subtotal..................................................................... 5,138,000 4,944,000
--------------- --------------
Midwest Regional Market Cluster:
Iowa........................................................................... 2,706,000 2,461,000
Wisconsin/Illinois/Minnesota................................................... 1,819,000 1,700,000
Missouri....................................................................... 564,000 564,000
--------------- --------------
Subtotal..................................................................... 5,089,000 4,725,000
--------------- --------------
Northwest Regional Market Cluster:
Oregon/California.............................................................. 1,005,000 937,000
Washington/Oregon.............................................................. 974,000 746,000
Other Markets.................................................................. 441,000 441,000
--------------- --------------
Subtotal..................................................................... 2,420,000 2,124,000
--------------- --------------
Indiana/Kentucky Regional Market Cluster:
Indiana/Kentucky............................................................... 1,552,000 1,226,000
Other Markets.................................................................. 658,000 658,000
--------------- --------------
Subtotal..................................................................... 2,210,000 1,884,000
--------------- --------------
Texas/Oklahoma/Missouri/Kansas Regional Market Cluster:
Oklahoma/Missouri/Kansas....................................................... 1,406,000 954,000
Missouri....................................................................... 341,000 341,000
Texas/Oklahoma................................................................. 685,000 490,000
--------------- --------------
Subtotal..................................................................... 2,432,000 1,785,000
--------------- --------------
Northeast Regional Market Cluster:
Maine/New Hampshire/Vermont.................................................... 1,472,000 1,397,000
Other Markets.................................................................. 375,000 327,000
--------------- --------------
Subtotal..................................................................... 1,847,000 1,724,000
--------------- --------------
Eastern Tennessee/Western North Carolina Market Cluster.......................... 1,934,000 1,600,000
--------------- --------------
Southeast Regional Market Cluster:
Northern Florida/Georgia....................................................... 1,206,000 1,206,000
Other Markets.................................................................. 279,000 137,000
--------------- --------------
Subtotal..................................................................... 1,485,000 1,343,000
--------------- --------------
Southwestern Texas Market Cluster................................................ 1,172,000 1,160,000
--------------- --------------
Other Operations................................................................. 140,000 140,000
--------------- --------------
TOTAL MANAGED MARKETS........................................................ 23,867,000 21,429,000
--------------- --------------
MARKETS MANAGED BY OTHERS........................................................ 3,816,000
--------------
TOTAL POPULATION EQUIVALENTS................................................... 25,245,000
--------------
--------------
</TABLE>
25
<PAGE>
SYSTEM DESIGN AND CONSTRUCTION. The Company designs and constructs its
systems in a manner it believes will permit it to provide high-quality service
to mobile, transportable and portable cellular telephones, generally based on
market and engineering studies which relate to specific markets. Engineering
studies are performed by Company personnel or independent engineering firms. The
Company's switching equipment is digital, which reduces noise and crosstalk and
is capable of interconnecting in a manner which reduces costs of operation.
While digital microwave interconnections are typically made between the MTSO and
cell sites, primarily analog radio transmission is used between cell sites and
the cellular telephones themselves.
In accordance with its strategy of building and strengthening market
clusters, the Company has selected high capacity digital cellular switching
systems that are capable of serving multiple markets through a single MTSO. The
Company's cellular systems are designed to facilitate the installation of
equipment which will permit microwave interconnection between the MTSO and each
cell site. The Company has implemented such microwave interconnection in most of
the cellular systems it manages. In other systems in which the Company owns or
has an option to purchase a majority interest and where it is believed to be
cost-efficient, such microwave technology is intended to be implemented.
Otherwise, such systems will rely upon landline telecommunications connections
or microwave links owned by others to link cell sites with the MTSO. Although
the installation of microwave network interconnection equipment requires a
greater initial capital investment, a microwave network enables a system
operator to avoid the current and future charges associated with leasing
communications lines from the landline telephone company or others, while
generally improving system reliability. In addition, microwave facilities can be
used to connect separate cellular systems to allow shared switching, which
reduces the aggregate cost of the equipment necessary to operate such systems.
The Company has continued to expand its internal network in 1994 to
encompass over 100 markets in the United States. This network provides automatic
call delivery for the Company's customers and handoff between adjacent markets.
The network has also been extended through links with certain systems operated
by several other carriers, including GTE, US West, Ameritech, BellSouth,
Centennial Cellular, Southwestern Bell, McCaw Cellular Communications, Vanguard
Cellular Systems and others. Additionally, the Company has implemented two
Signal Transfer Points which will allow it to interconnect efficiently with
network providers such as Independent Telephone Network and the North American
Cellular Network.
During 1995, the Company intends to extend the network for its customers
through interconnection with one or more network providers as well as additional
"point to point" connections required for hand-off. This expanded network will
increase the area in which customers can automatically receive incoming calls
and should also reduce the incidence of fraud due to the pre-call validation
feature capability of networked systems.
The Company believes that currently available technologies will allow
sufficient capacity on the Company's networks to meet anticipated demand over
the next few years.
COSTS OF SYSTEM CONSTRUCTION AND FINANCING. Construction of cellular
systems is capital-intensive, requiring substantial investment for land and
improvements, buildings, towers, MTSOs, cell site equipment, microwave
equipment, engineering and installation. The Company, consistent with FCC
control requirements, uses primarily its own personnel to engineer and oversee
construction of each cellular system where it owns or has the right to acquire a
controlling interest. In so doing, the Company expects to improve the overall
quality of its systems and to reduce the expense required to make them
operational.
The costs (exclusive of license costs) to construct and develop the
operational systems in which the Company owns or has the right to acquire an
interest are generally financed through capital contributions or intercompany
loans from the Company to the partnerships or subsidiaries owning the systems,
and through certain vendor financing.
MARKETING
The Company's marketing plan is designed to continue rapid penetration of
its market clusters and to increase consumer awareness of cellular service. The
marketing plan stresses the quality of the Company's service offerings and
incorporates rate plans which are designed to meet the needs of a variety of
customer
26
<PAGE>
usage patterns. The Company's distribution channels include direct sales
personnel and agents and the Company has recently added retail service centers
in many of its markets. These Company-owned and managed locations are designed
to market cellular service to the consumer segment in a retail setting which is
attractive to these potential customers.
The Company manages each of its major service areas out of one
administrative office with a local staff, including marketing, customer service,
engineering and in some cases installation personnel. Direct sales consultants
market cellular service to potential customers throughout each major service
area. Retail associates work out of the retail locations and market cellular
service to the consumer segment. The Company maintains an ongoing training
program to improve the effectiveness of sales consultants and retail associates
by focusing their efforts on obtaining customers and maximizing the sale of
high-user packages. These packages commit customers to pay for a minimum amount
of usage at discounted rates per minute, even if usage falls below a defined
monthly minimum amount.
The Company also relies on agents, dealers and non-Company retailers to
obtain customers. Agents and dealers are independent business people who obtain
customers for the Company on a commission basis. The Company's agents are
generally in the business of selling cellular telephones, cellular service
packages and other related products. The Company's dealers include car stereo
companies and other companies whose customers are also potential cellular
customers. The non-Company retailers include car dealers, major appliance
dealers, office supply dealers and mass merchants.
The Company opened its own retail locations in late 1993, expanding to over
140 locations by the end of 1994. These Company-owned and operated businesses
utilize rental facilities located in high-traffic areas. The Company is working
toward a uniform appearance in these stores, with all having similar displays
and layouts. The retail centers' hours of business match those of the retail
trade in the local marketplace, often staying open on weekends and later in the
evening than a typical business supplier. Additionally, to fully serve customer
needs, these stores sell accessories to complement the phones and services the
Company has traditionally provided.
In addition to its own retail centers, the Company actively pursues national
retail accounts, as agents of the Company, which may potentially yield new
customer additions in multiple markets. Agreements have been entered into with
such national distributors as Chrysler Corporation, Ford Motor Company, General
Motors, AT&T, Radio Shack, Best Buy and Sears, Roebuck & Co. in certain of the
Company's markets. Upon the sale of a cellular telephone by one of these
national distributors, the Company receives, often exclusively within the
territories served, the resulting cellular customer.
The Company uses a variety of direct mail, billboard, radio, television and
newspaper advertising to stimulate interest by prospective customers in cellular
service and to establish familiarity with the Company's name. Advertising is
directed at gaining customers, increasing usage by existing customers and
increasing the public awareness and understanding of the cellular services
offered by the Company. The Company attempts to select the advertising and
promotion media that are most appealing to the targeted groups of potential
customers in each local market. The Company utilizes local advertising media and
public relations activities and establishes programs to enhance public awareness
of the Company, such as providing telephones and service for public events and
emergency uses.
27
<PAGE>
The following table summarizes, by major service area, the total population,
the Company's customers and penetration for the Company's majority-owned and
managed markets that were operational as of March 31, 1995.
<TABLE>
<CAPTION>
MAJOR SERVICE AREAS POPULATION CUSTOMERS PENETRATION
- -------------------------------------------------------------------------- ------------ ----------- -------------
<S> <C> <C> <C>
Eastern North Carolina/Virginia/South Carolina............................ 2,454,000 42,000 1.71%
West Virginia/Pennsylvania/Maryland....................................... 1,143,000 18,700 1.64%
Iowa...................................................................... 1,710,000 45,700 2.67%
Wisconsin/Illinois/Minnesota.............................................. 1,819,000 32,400 1.78%
Missouri.................................................................. 976,000 14,500 1.49%
Oregon/California......................................................... 1,005,000 18,000 1.79%
Washington/Oregon......................................................... 701,000 14,600 2.08%
Indiana/Kentucky.......................................................... 1,248,000 31,400 2.52%
Oklahoma/Missouri/Kansas.................................................. 1,146,000 55,300 4.83%
Texas/Oklahoma............................................................ 1,126,000 27,100 2.41%
Maine/New Hampshire/Vermont............................................... 1,472,000 32,200 2.19%
Eastern Tennessee/Western North Carolina.................................. 1,693,000 45,100 2.66%
Northern Florida/Georgia.................................................. 1,117,000 25,000 2.24%
Southwestern Texas........................................................ 798,000 12,800 1.60%
Other Operations.......................................................... 3,653,000 63,200 1.73%
------------ ----------- ------
22,061,000 478,000 2.17%
------------ ----------- ------
------------ ----------- ------
</TABLE>
CUSTOMERS AND SYSTEM USAGE
Cellular customers come from a wide range of occupations. They typically
include a large proportion of individuals who work outside of their offices such
as people in the construction, real estate, wholesale and retail distribution
businesses and professionals. Most of the Company's customers use in-vehicle
cellular telephones. However, more customers are selecting portable cellular
telephones as these units become more compact and fully featured as well as more
attractively priced.
In addition to revenue from local retail customers, the Company generates
revenue from roaming customers and other services. The Company's roaming service
allows a customer to place or receive a call in a cellular service area away
from the customer's home service area. The Company has entered into "roaming
agreements" with operators of other cellular systems covering virtually all
systems in the United States and Canada. These agreements offer customers the
opportunity to roam in these systems. These reciprocal agreements automatically
pre-register the customers of the Company's systems in the other carriers'
systems. Also, a customer of a participating system roaming (i.e. travelling) in
a Company market where this arrangement is in effect is able to make and receive
calls on the Company's system. The charge for this service is typically at
premium rates and is billed by the Company to the customer's home system, which
then bills the customer. The Company has entered into agreements with other
cellular carriers to transfer roaming usage at agreed-upon rates. In some
instances, based on competitive factors, the Company may charge a lower amount
to its customers than the amount actually charged to the Company by another
cellular carrier for roaming.
The Company's cellular systems are used most extensively during normal
business hours between 7:00 am and 6:00 pm. On average, the local retail
customers in the Company's majority-owned and managed systems used their
cellular systems approximately 95 minutes per unit each month and generated
retail revenue of approximately $47 per month during 1994, compared to 103
minutes and $49 per month in 1993. Average local minutes of use and average
monthly retail revenue per retail customer were 86 and $43, respectively, during
the first quarter of 1995, and 89 and $46, respectively, during the first
quarter of 1994. Revenue generated by roamers, together with local, toll and
other revenues, brought the Company's average monthly service revenue per
customer in majority-owned and managed markets to $80 during 1994 compared to
$85 in 1993. This decrease of approximately 6% reflects both the decline in
average local minutes per customer and slower growth in roaming revenues. The
Company anticipates that average monthly service revenue per customer will
continue to decline as its distribution channels provide additional customers
who generate fewer local minutes of use and as roaming revenues grow more
slowly.
28
<PAGE>
PRODUCTS AND SERVICES
CELLULAR TELEPHONES AND INSTALLATION. There are a number of different types
of cellular telephones, all of which are currently compatible with cellular
systems nationwide. The Company offers a full range of vehicle-mounted,
transportable and hand-held portable cellular telephones. Features offered in
some of the cellular telephones include hands-free calling, repeat dialing, horn
alert and others.
The Company negotiates volume discounts from its cellular telephone
suppliers. The Company discounts cellular telephones in most markets to meet
competition or to stimulate sales by reducing the cost of becoming a cellular
customer. In these instances, where permitted by law, customers are generally
required to sign an extended service contract with the Company. The Company also
cooperates with cellular equipment manufacturers in local advertising and
promotion of cellular equipment.
The Company has established service and/or installation facilities in many
of its local markets to ensure quality installation and service of the cellular
telephones it sells. These facilities allow the Company to improve its service
by promptly assisting customers who experience equipment problems.
CELLULAR SERVICES. The Company's customers are able to choose from a
variety of packaged pricing plans which are designed to fit different calling
patterns. The Company's customer bills typically show separate charges for
custom-calling features, airtime in excess of the packaged amount, and toll
calls. Custom-calling features provided by the Company include wide-area call
delivery, call forwarding, call waiting, three-way calling and no-answer
transfer. The Company also offers a voice message service in many of its
markets. This service, which functions like a sophisticated answering machine,
allows customers to receive messages from callers when they are not available to
take calls.
REGULATION
The operations of the Company are subject to FCC and state regulation. The
licenses held by the Company are granted by the FCC for the use of radio
frequencies and are an important component of the overall value of the assets of
the Company. The construction, operation and transfer of cellular systems in the
United States are regulated to varying degrees by the FCC pursuant to the
Communications Act of 1934 (the "Communications Act"). The FCC has promulgated
regulations governing construction and operation of cellular systems, and
licensing (including renewal of licenses) and technical standards for the
provision of cellular telephone service.
For licensing purposes, the FCC divided the United States into separate
geographic markets (MSAs and RSAs). In each market, the allocated cellular
frequencies are divided into two equal 25 MHz blocks. During the application
process, the FCC reserved one block of frequencies for nonwireline applicants
and another block for wireline applicants. Subject to FCC approval, a cellular
system may be sold to either a wireline or nonwireline entity, but no entity
which controls a cellular system may own an interest in another cellular system
in the same MSA or RSA.
The completion of acquisitions involving the transfer of control of a
cellular system requires prior FCC approval. Acquisitions of minority interests
generally do not require FCC approval. Whenever FCC approval is required, any
interested party may file a petition to dismiss or deny the Company's
application for approval of the proposed transfer.
When the first cell of a cellular system has been constructed, the licensee
is required to notify the FCC that construction has been completed. The licensee
is then said to have "operating authority." Initial operating licenses are
granted for ten-year periods. The FCC must be notified each time an additional
cell is constructed which enlarges the service area of a given market.
The FCC's rules also generally require persons or entities holding cellular
construction permits or licenses to coordinate their proposed frequency usage
with other cellular users and licensees in order to avoid electrical
interference between adjacent systems. The height and power of base stations in
the cellular system are regulated by FCC rules, as are the types of signals
emitted by these stations. In addition to regulation by the FCC, cellular
systems are subject to certain Federal Aviation Administration regulations with
respect to the siting and construction of cellular transmitter towers and
antennas.
29
<PAGE>
In a series of actions, most recently on July 7, 1994, the FCC has
established standards for conducting comparative renewal proceedings between a
cellular licensee seeking renewal of its license and challengers filing
competing applications. The FCC: (i) established criteria for comparing the
renewal applicant to challengers, including the standards under which a "renewal
expectancy" will be granted to the applicant seeking license renewal; (ii)
established basic qualifications standards for challengers; and (iii) provided
procedures for preventing possible abuses in the comparative renewal process.
The FCC has concluded that it will award a renewal expectancy if the licensee
has (i) provided "substantial" performance, which is defined as "sound,
favorable and substantially above a level of mediocre service just minimally
justifying renewal," and (ii) complied with FCC rules, policies and the
Communications Act. If a renewal expectancy is awarded to an existing licensee,
its license is renewed and competing applications are not considered. The
Company's Tulsa and Knoxville renewal applications filed in 1994 were unopposed
and the Company expects its licenses in these markets to be renewed. The
Company's next renewal applications are due to be filed in 1996. See "Regulatory
Proceedings" below.
The Company conducts and plans to conduct its operations in accordance with
all relevant FCC rules and regulations and anticipates being able to qualify for
a renewal expectancy, if applicable. Accordingly, the Company believes that
current regulations will have no significant effect on its operations and
financial condition. However, changes in the regulation of cellular operators or
their activities and of other mobile service providers could have a material
adverse effect on the Company's operations.
The FCC has also provided that five years after the initial licenses are
granted, unserved areas within markets previously granted to licensees may be
applied for by both wireline and nonwireline entities and by third parties.
Accordingly, many unserved area applications have been filed by the Company and
others. The Company's strategy with respect to system construction in its
markets has been and will be to build cells covering areas within such markets
that the Company considers economically feasible to serve or might conceivably
wish to serve and to do so within the five-year period following issuance of the
license.
The Company is also subject to state and local regulation in some instances.
In 1981, the FCC pre-empted the states from exercising jurisdiction in the areas
of licensing, technical standards and market structure. In addition, Congress
and the FCC have taken action which restricts the ability of states to regulate
intrastate cellular rates. However, certain states require cellular system
operators to go through a state certification process to serve communities
within their borders. All such certificates can be revoked for cause. In
addition, certain state authorities regulate several aspects of a cellular
operator's business, including the resale of intra-state long-distance service
to its customers, the technical arrangements and charges for interconnection
with the landline network and the transfer of interests in cellular systems. The
siting and construction of the cellular facilities, including transmitter
towers, antennas and equipment shelters may also be subject to state or local
zoning, land use and other local regulations. Public utility or public service
commissions (or certain of the commissioners) in several states have expressed
an interest in examining whether the cellular industry should be more closely
regulated by such states.
Recent Congressional legislation, legislative proposals under consideration
and FCC regulatory proceedings may have significant impact on some or all of the
Company's operations by altering FCC and state regulatory responsibilities for
mobile service, the procedures for the award by the FCC of licenses to conduct
existing and new mobile services, the terms and conditions of business
relationships between mobile service providers and Local Exchange Carriers
("LECs") and the scope of the competitive opportunities available to mobile
service providers. In general, the trend of these developments is toward an
increase in the number of competitors and of competitive services. For the most
part, FCC regulations which implement changes in the law have not yet been
adopted, or are subject to requests for reconsideration, and the Company is
therefore not able to predict the extent of such impact.
The Omnibus Reconciliation Act of 1993 (the "Budget Act") amended the
Communications Act by eliminating legislatively enacted distinctions affecting
FCC and state regulation of common carrier and private carrier mobile operations
and directed the FCC to classify all mobile services, including cellular,
paging, SMR and other services under two categories: Commercial Mobile Radio
Services ("CMRS"), subject to common carrier regulation; or Private Mobile Radio
Services ("PMRS"), not subject to common carrier regulation. In 1994 the FCC
released a decision classifying mobile service offerings as CMRS
30
<PAGE>
operations if they include a service offering to the public, for a fee, which is
interconnected to the public switched network. Cellular, SMR and paging, among
other services, will be classified as CMRS if they fit this definition. The
Company anticipates that most of its service offerings will be classified as
CMRS. The FCC decision also states that it would forebear from requiring that
CMRS providers comply with a number of statutory provisions, otherwise
applicable to common carriers, such as the filing of tariffs. It requires LECs
to provide reasonable and fair interconnection to all CMRS providers, subject to
mutual compensation, reasonable charges for interstate interconnection and
reasonable forms of interconnection. Numerous petitions for reconsideration of
this decision were filed and remain pending.
The Budget Act also amended the Communications Act to authorize the FCC to
use a system of competitive bidding to issue initial licenses for the use of
radio frequencies for which there are mutually exclusive applications and where
the principal use of the license will be to offer service in return for
compensation from customers. In response, the FCC adopted generic rules for
competitive bidding, defined eligibility criteria for small businesses,
minority- and female-owned businesses and rural telephone companies which
qualify for preferential bidding treatment, as required under the Budget Act,
and described the bidding mechanisms to be used by businesses qualifying for
preferential treatment in future spectrum auctions.
Under other amendments to the Communications Act included in the Budget Act,
states will generally be prohibited from regulating the entry of, or the rates
charged by, any CMRS provider. The new law does not, however, prohibit a state
from regulating other terms and conditions of CMRS offerings and permits states
to petition the FCC for authority to continue rate regulation. These new
statutory provisions took effect in August 1994, and eight states filed
petitions.
The FCC has allocated a total of 140 MHz to broadband PCS, 20 MHz to
unlicensed operations and 120 MHz to licensed operations. The 120 MHz for
licensed operations consists of two 30 MHz frequency blocks in each of the 51
Rand McNally Major Trading Areas, and one 30 MHz frequency block and three 10
MHz frequency blocks in each of 493 Rand McNally Basic Trading Areas. Cellular
operators are permitted to participate in the award of these new PCS licenses,
except for licenses reserved for rural, small, minority- and female-owned
businesses and licenses for markets in which such cellular operator owns a 20%
or greater interest in a cellular licensee which holds a license covering 10% or
more of the population of the respective PCS licensed area. In the latter case,
the cellular licensee is limited to one 10 MHz PCS frequency block. Numerous
requests for reconsideration of the FCC's decision have been filed and remain
pending before the FCC and at least one appeal was filed. On March 15, 1995, the
U.S. Court of Appeals for the District of Columbia issued an order delaying the
commencement of the auction of the 30 MHz frequency block for Basic Trading
Areas pending a resolution of a challenge to the FCC's rules giving bidding
preferences to certain participants. A September 1995 hearing is presently
scheduled but settlement negotiations are underway and it is possible that such
auction may take place in the near future. The FCC has classified PCS as CMRS.
PCS technology is currently under development and is expected to be similar
in some respects to cellular technology. When it becomes commercially available,
this technology is expected to offer increased capacity for wireless two-way and
one-way voice, data and multimedia communications services and is expected to
result in increased competition in the Company's operations. The ability of
these future PCS licensees to complement or compete with existing cellular
licensees will be affected by future FCC rule-making. These and other future
technological developments in the wireless telecommunications industry and the
enhancement of current technologies will likely create new products and services
that are competitive with the services currently offered by the Company. There
can be no assurance that the Company will not be adversely affected by such
technological developments.
Media reports have suggested that certain RF emissions from portable
cellular telephones might be linked to cancer. The Company is not aware of any
authoritative evidence linking the usage of portable cellular telephones with
cancer. The FCC currently has a rulemaking proceeding pending to update the
31
<PAGE>
guidelines and methods it uses for evaluating RF emissions in radio equipment,
including cellular telephones. While the proposal would impose more restrictive
standards on RF emissions from low-power devices such as portable cellular
telephones, it is anticipated that all cellular telephones currently marketed
and in use will comply with those standards.
REGULATORY PROCEEDINGS
LA STAR AND WISCONSIN RSA 8 APPLICATIONS. The Company indirectly owns 49%
of La Star Cellular Telephone Company ("La Star"), which was an applicant for a
construction permit for a cellular system in the New Orleans MSA. In June 1992,
the FCC affirmed an Administrative Law Judge's order which had granted the
application of another applicant and dismissed La Star's application. The basis
for the FCC's action was its finding that the Company improperly controlled La
Star. In a footnote to its decision, the FCC stated that questions regarding the
conduct of the Company in that proceeding may be revisited in future
proceedings. As a result of that footnote, FCC authorizations in uncontested FCC
proceedings have been granted to TDS and its subsidiaries subject to any
subsequent action the FCC might take concerning its findings and conclusions in
the La Star decision.
La Star, TDS and the Company appealed the FCC's decision in the La Star
proceeding. On March 29, 1994, the United States Court of Appeals for the
District of Columbia Circuit vacated the FCC's decision in the La Star
proceeding and remanded the matter to the FCC for further proceedings. On
remand, the FCC affirmed the dismissal of the La Star application but did not
address the subject matter of its footnote in the original La Star decision. As
a result, the Wisconsin RSA 8 case, discussed below, now constitutes the only
FCC expression calling for conditions on authorizations to TDS and its
subsidiaries.
On February 1, 1994, in a proceeding involving a license originally issued
to TDS for Wisconsin RSA 8, the FCC instituted a hearing to determine whether in
the La Star case the Company had misrepresented facts to, lacked candor in its
dealings with or attempted to mislead the FCC, and, if so, whether TDS possesses
the requisite character qualifications to hold that Wisconsin license. The FCC
stated in its decision that, pending resolution of the issues in the Wisconsin
proceeding, subsequent authorizations to TDS and its subsidiaries would be
conditioned on the outcome of that proceeding. TDS was granted interim authority
to continue to operate that Wisconsin system pending completion of the hearing.
Following extensive discovery by the FCC and other parties, TDS and the
Company have reached preliminary and definitive settlement agreements with
parties to the proceeding contemplating a summary decision finding TDS and its
affiliates fully qualified to be FCC licensees. Pending the negotiation of a
definitive settlement agreement with a group of Wisconsin telephone companies
who are parties to the proceeding, the hearing has been postponed. Final
settlement will also be subject to the action of the judge presiding in the
proceeding.
COMPETITION
Currently, the Company's only competitor for cellular telephone service in
each market is the licensee of the second cellular system in that market. Since
each competitor operates its cellular system on a 25 MHz frequency block
licensed by the FCC using comparable technology and facilities, competition for
customers between the two systems in each market is principally on the basis of
quality of service, price, size of area covered, services offered and
responsiveness of customer service. The competing entities in many of the
markets in which the Company has an interest have financial resources which are
substantially greater than those of the Company and its partners in such
markets.
The FCC's rules require all operational cellular systems to provide, on a
nondiscriminatory basis, cellular service to resellers which purchase blocks of
mobile telephone numbers from an operational system and then resell them to the
public.
In addition to competition from the other cellular licensee in each market,
there is also competition from, among other technologies, SMR systems which are
able to connect with the landline telephone network. The Company believes that
conventional mobile telephone systems and conventional SMR systems are
competitively disadvantaged because of technological limitations on the capacity
of such systems. The FCC has recently given approval, through waivers of its
rules, to ESMR, an enhanced SMR system. ESMR
32
<PAGE>
systems may have cells and frequency reuse like cellular, thereby potentially
eliminating any current technological limitation. The first ESMR systems were
implemented in 1993 in Los Angeles and are beginning to be constructed in
several other cities across the United States. Although less directly a
substitute for cellular service, wireless data services and one-way paging
service (and, in the future, two-way paging services) may be adequate for those
who do not need full two-way voice service.
The FCC has completed the auction of two of the three 30 MHz frequency
blocks allocated to broadband PCS. The Company anticipates that the FCC may
begin issuing PCS licenses during the second quarter of 1995. PCS trials are in
process throughout the United States. PCS may become a significant source of
competition in the Company's markets once PCS systems have been built and
developed. One or more PCS providers are expected to begin offering digital,
wireless communications services in markets served by the Company beginning as
early as 1996. Similar technological advances or regulatory changes in the
future may make available other alternatives to cellular service, thereby
creating additional sources of competition.
Continuing technological advances in the communications field make it
difficult to predict the extent of additional future competition for cellular
systems. For example, the FCC has allocated radio channels to a mobile satellite
system in which transmissions from mobile units to satellites would augment or
replace transmissions to cell sites, and several consortia have been formed to
provide such service. Such a system is designed primarily to serve the
communications needs of remote locations and a mobile satellite system could
provide viable competition for land-based cellular systems in such areas. It is
also possible that the FCC may in the future assign additional frequencies to
cellular telephone service to provide for more than two cellular telephone
systems per market.
See "Description of Capital Stock--Corporate Opportunity Arrangements" for a
discussion of certain limitations on the Company's ability to enter into
non-cellular activities.
DESCRIPTION OF LYONS
The LYONs are to be issued under an indenture to be dated as of ,
1995 (the "Indenture"), between the Company and Harris Trust and Savings Bank,
as trustee (the "Trustee"). A copy of the form of Indenture is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summaries of certain provisions of the LYONs and the Indenture do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the LYONs and the Indenture, including
the definitions therein of certain terms which are not otherwise defined in this
Prospectus. Wherever particular provisions or defined terms of the Indenture (or
of the Form of LYON which is a part thereof) are referred to, such provisions or
defined terms are incorporated herein by reference. References herein are to
sections in the Indenture and paragraphs in the Form of LYON. As used in this
"Description of LYONs," the "Company" refers to United States Cellular
Corporation and does not include its subsidiaries, other affiliates, partners or
entities in which it holds an investment.
GENERAL
The LYONs will be unsecured obligations of the Company limited to
$650,000,000 aggregate principal amount at maturity ($745,000,000 aggregate
principal amount at maturity if the Underwriter's over-allotment option is
exercised in full) and will mature on , 2015. The principal amount at
maturity of each LYON is $1,000 and will be payable at the office of the Paying
Agent, initially the Trustee. (Section 2.03 and Form of LYON, paragraph 3.)
The LYONs are being offered at a substantial discount from their principal
amount at maturity. See "Certain Tax Aspects--Original Issue Discount." There
will be no periodic payments of interest. The calculation of the accrual of
Original Issue Discount (the difference between the Issue Price and the
principal amount at maturity of a LYON) in the period during which a LYON
remains outstanding will be on a semi-annual bond equivalent basis using a
360-day year composed of twelve 30-day months; such accrual will commence from
the Issue Date of the LYONs. (Form of LYON, paragraph 1.) Maturity, conversion
(other than pursuant to a Common Share Delivery Arrangement (as defined below),
purchase by the Company at the option of a Holder, or redemption of a LYON will
cause Original Issue Discount and
33
<PAGE>
interest, if any, to cease to accrue on such LYON, under the terms and subject
to the conditions of the Indenture. (Section 2.08.) The Company may not reissue
a LYON that has matured or been converted, purchased by the Company at the
option of a Holder, redeemed or otherwise cancelled (except for registration of
transfer, exchange or replacement thereof), provided that a LYON converted
pursuant to a Common Share Delivery Arrangement shall remain outstanding as
described in "Conversion Rights" below. (Section 2.10.)
The LYONs will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount at maturity or an integral multiple
thereof. (Form of LYON, paragraph 11.) LYONs may be presented for conversion at
the office of the Conversion Agent and for exchange or registration of transfer
at the office of the Registrar, each such agent initially being the Trustee.
(Section 2.03.) The Company will not charge a service charge for any
registration of transfer or exchange of LYONs; however, the Company may require
payment by a Holder of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection therewith. (Section 2.06.)
The Company will maintain in the Borough of Manhattan, the City of New York,
an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent
where LYONs may be presented or surrendered for payment, where LYONs may be
surrendered for registration of transfer, exchange, purchase, redemption or
conversion and where notices and demands to or upon the Company in respect of
the LYONs and the Indenture may be served, which shall initially be the
corporate trust office of the Trustee in such Borough. (Section 4.05.)
SUBORDINATION OF LYONS; EFFECT OF CORPORATE STRUCTURE
Indebtedness evidenced by the LYONs will be subordinated in the right of
payment, as set forth in the Indenture, to the prior payment in full of all
existing and future Senior Indebtedness of the Company. (Section 10.01 and Form
of LYON, paragraph 8.) Senior Indebtedness is defined in the Indenture as the
principal of (and premium, if any) and interest on (including interest accruing
after the filing of a petition initiating any proceeding pursuant to any
Bankruptcy Law (including, with respect to the Vendor Financing Agreement (and
any other Debt if the instrument creating or evidencing the same expressly
provides therefor), such interest whether or not allowed as a claim in such
proceeding, but, with respect to all other Debt, only to the extent allowed or
permitted to the holder of such Debt against the bankruptcy or any other
insolvency estate of the Company in such proceeding)) and other amounts due on
or in connection with any Debt incurred, assumed or guaranteed by the Company,
whether outstanding on the date of the Indenture or thereafter incurred, assumed
or guaranteed, and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any such Debt. Excluded from the
definition of Senior Indebtedness are the following: (a) any Debt which
expressly provides (i) that such Debt shall not be senior in right of payment to
the LYONs, or (ii) that such Debt shall be subordinated to any other Debt of the
Company, unless such Debt expressly provides that such Debt shall be senior in
right of payment to the LYONs; and (b) any Debt of the Company in respect of the
LYONs. (Section 10.01.)
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceedings, upon any distribution of assets, (i)
the Holders of LYONs will be required to pay over their share of such
distribution to the trustee in bankruptcy, receiver or other person distributing
the assets of the Company for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all holders of
Senior Indebtedness in full (Section 10.02.); and (ii) unsecured creditors of
the Company who are not Holders of LYONs or holders of Senior Indebtedness may
recover less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the Holders of LYONs.
In the event that the LYONs are declared due and payable prior to their
Stated Maturity by reason of the occurrence of an Event of Default, then the
Company is obligated to notify promptly holders of Senior Indebtedness of such
acceleration. The Company may not pay the LYONs until 120 days have passed after
such notice is given and may thereafter pay the LYONs if the terms of the
Indenture otherwise permit payment at that time. (Section 10.03.)
No payment of the principal amount at maturity, Issue Price plus accrued
Original Issue Discount, Redemption Price, Change in Control Purchase Price or
interest, if any, with respect to any LYONs may be
34
<PAGE>
made, nor may the Company pay cash in respect of the Purchase Price (or any
portion thereof) or upon conversion of any LYON (other than for fractional
interests in Common Shares) or otherwise acquire any LYONs except as set forth
in the Indenture, if any default with respect to Senior Indebtedness occurs and
is continuing that permits the acceleration of the maturity thereof and either
such default is the subject of judicial proceedings or the Company receives
notice of the default, unless (a) in the case of defaults on Senior Indebtedness
other than payment defaults, 120 days pass after notice of the default is given
and such default is not then the subject of judicial proceedings or (b) the
default with respect to the Senior Indebtedness is cured or waived and, in each
case, the terms of the Indenture otherwise permit the payment or acquisition of
the LYONs at that time. (Section 10.04.)
The LYONs are obligations exclusively of the Company. Since the current
operations of the Company are primarily conducted through subsidiaries, the cash
flow and the consequent ability to service debt, including the LYONs, of the
Company are primarily dependent upon the earnings of its subsidiaries and the
distribution of those earnings to, or upon loans or other payments of funds by
those subsidiaries to, the Company. The subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the LYONs or to make any funds available therefor,
whether by dividends, loans or other payments. In addition, the payment of
dividends and the making of loans and advances to the Company by its
subsidiaries may be subject to statutory or contractual restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business considerations.
Any right of the Company to receive assets of any of its subsidiaries upon
their liquidation or reorganization (and the consequent right of the Holders of
the LYONs to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's creditors (including trade creditors), except to
the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security interest in the assets of such subsidiary and any indebtedness
of such subsidiary senior to that held by the Company.
As of March 31, 1995, the Company and its subsidiaries had outstanding
approximately $389.6 million of Debt or other liabilities ($ million after
application of the estimated net proceeds of this offering) which would have
constituted either Senior Indebtedness or liabilities of the subsidiaries of the
Company which would not have constituted Senior Indebtedness but to which the
LYONs would have been effectively subordinated. See "Use of Proceeds" and
"Capitalization." There are no restrictions in the Indenture on the creation of
additional Senior Indebtedness (or any other indebtedness).
Under the Vendor Financing Agreement, which constitutes Senior Indebtedness
of the Company, the Company has agreed not to create, incur, assume or suffer to
exist any indebtedness (including capital lease obligations) that would cause
the sum of such indebtedness plus certain operating lease obligations to exceed
an amount equal to $40 per population equivalent for all of the then existing
cellular markets owned by the Company, excluding indebtedness under the Vendor
Financing Agreement and subordinated indebtedness (as defined in such
agreement). The Vendor Financing Agreement provides that indebtedness evidenced
by a LYON will be treated as subordinated indebtedness for purposes of such
agreement only to the extent such LYON has not been accelerated, and that no
cash payment is made, or required to be made, by the Company thereunder (whether
at maturity, upon a change in control, upon early redemption or otherwise).
CONVERSION RIGHTS
A Holder of a LYON may convert it at any time before the close of business
on , 2015; provided, however, that if a LYON is called for
redemption, the Holder may convert it only until the close of business on the
Redemption Date. On conversion of a LYON, the Company may elect to deliver (or,
with respect to Common Shares, arrange for a Standby Share Deliverer (as defined
below) to deliver) Common Shares or an amount of cash determined as described
below. A LYON in respect of which a Holder has delivered a Purchase Notice or a
Change in Control Purchase Notice exercising the option of such Holder to
require the Company to purchase such LYON may be converted only if such notice
is withdrawn in accordance with the terms of the Indenture. (Form of LYON,
paragraph 9.) A Holder may convert a portion of such Holder's LYONs so long as
such portion is $1,000 principal amount at maturity or an integral multiple
thereof. (Section 11.01.)
35
<PAGE>
The initial Conversion Rate is Common Shares per LYON, subject to
adjustment upon the occurrence of certain events described below. (Form of LYON,
paragraph 9.) See "Price Range of Common Shares." A Holder otherwise entitled to
a fractional Common Share shall receive cash equal to the then current market
value of such fractional share. (Section 11.03.)
On conversion of a LYON, a Holder must (i) complete and manually sign the
conversion notice on the back of the LYON (or complete and manually sign a
facsimile thereof) and deliver such notice to the Conversion Agent, (ii)
surrender the LYON to the Conversion Agent, (iii) if required, furnish
appropriate endorsements and transfer documents, and (iv) if required, pay all
transfer or similar taxes. Pursuant to the Indenture, the date on which all of
the foregoing requirements have been satisfied is the Conversion Date. (Sections
11.02 and 11.04 and Form of LYON, paragraph 9.)
On conversion of a LYON, a Holder will not receive any cash payment
representing accrued Original Issue Discount. The Company's delivery, in
connection with conversions not involving a Common Share Delivery Arrangement
(as defined below), to the Holder of the fixed number of Common Shares (or cash
in the applicable amount as provided below) into which the LYON is convertible
(together with the cash payment, if any, in lieu of a fractional Common Share)
will be deemed to satisfy the Company's obligation to pay the principal amount
of such LYON including the accrued Original Issue Discount attributable to the
period from the Issue Date through the Conversion Date. Thus, the accrued
Original Issue Discount of such LYON is deemed to be paid in full rather than
cancelled, extinguished or forfeited. The Conversion Rate will not be adjusted
at any time during the term of the LYONs for such accrued Original Issue
Discount.
In lieu of the delivery of Common Shares upon notice of conversion of any
LYON, the Company may elect to pay the Holder surrendering a LYON an amount in
cash equal to the Sale Price of a Common Share on the Trading Day immediately
prior to the Conversion Date multiplied by the Conversion Rate in effect on such
Trading Day, as adjusted for certain events described below; provided, that if
such payment of cash is not permitted pursuant to the provisions of the
Indenture or otherwise, the Company will deliver (or, pursuant to a Common Share
Delivery Arrangement, arrange for the delivery of) Common Shares (and cash in
lieu of fractional Common Shares) as set forth below. Upon conversion of any
LYON, the Company shall inform the Holder through the Conversion Agent, no later
than two business days following the Conversion Date, (i) of its election of the
delivery of Common Shares or to pay cash in lieu of delivery of such shares and
(ii) whether or not any such delivery of Common Shares may be a taxable event to
such Holder as a result of such delivery being made by means of a Common Share
Delivery Arrangement. If the Company elects the delivery of Common Shares, such
shares will be delivered through the Conversion Agent (and cash in lieu of
fractional Common Shares will be paid by the Company) as soon as practicable
following the Conversion Date. If the Company elects to pay cash, such cash
payment will be made to the Holder surrendering such LYON no later than the
fifth business day following such Conversion Date. (Sections 11.01 and 11.02.)
For a discussion of the tax treatment of a Holder receiving cash or Common
Shares, see "Certain Tax Aspects-- Dispositions."
The Company may not pay cash upon conversion of any LYON (other than cash in
lieu of fractional Common Shares) (i) if there has occurred and is continuing an
Event of Default described under "Events of Default; Notice and Waiver" below
(other than a default in such payment on such LYON) and (ii) unless the Common
Shares are listed or admitted to trading on a United States national or regional
securities exchange or reported on The Nasdaq Stock Market ("NASDAQ"). (Section
11.1.)
The "Sale Price" on any Trading Day means the closing sale price per share
for the Common Shares (or, if no closing price is reported, the average of the
bid and ask prices or, if more than one in either case, the average of the
average bid and the average ask prices) on such date as reported in the
composite transactions for the principal United States securities exchange on
which the Common Shares are traded or, if the Common Shares are not listed on a
United States national or regional securities exchange, as reported by NASDAQ. A
"Trading Day" means each day on which the securities exchange or quotation
system which is used to determine the Sale Price is open for trading or
quotation.
In connection with the conversion of any LYON, the Company may enter into an
arrangement (a "Common Share Delivery Arrangement") with a third party (the
"Standby Share Deliverer"), initially Merrill Lynch, whereby, upon the agreement
of the Standby Share Deliverer to so act in connection with
36
<PAGE>
such conversion, it will deliver the Common Shares (and any cash payment in lieu
of a fractional Common Share) deliverable to the Holder upon such conversion,
through the Conversion Agent, in the same amounts and within the same time
periods set forth above for conversions in respect of which the Company were to
deliver the Common Shares. As a result of such a Common Share Delivery
Arrangement, the converted LYON will not be retired or cancelled, but shall
remain outstanding with the Standby Share Deliverer becoming the Holder thereof.
It is anticipated that the Standby Share Deliverer will resell LYONs it obtains
pursuant to a Common Share Delivery Arrangement, although there can be no
assurance in this regard, and that this Prospectus will be available to be used
by the Standby Share Deliverer to meet any prospectus delivery requirements it
then has under the Securities Act in connection with (i) the delivery of Common
Shares to the converting Holder pursuant to any Common Share Delivery
Arrangement and (ii) any such resales of LYONs. The Standby Share Deliverer may
(with the agreement of TDS), but is not obligated to, obtain Common Shares to be
so delivered by it in connection with such a Common Share Delivery Arrangement
from TDS pursuant to the Securities Loan Agreement described in "Underwriting."
For a discussion of the tax treatment of a Holder receiving Common Shares from
the Standby Share Deliverer, rather than the Company, upon conversion, see
"Certain Tax Aspects--Dispositions."
The Conversion Rate will be adjusted for dividends or distributions on
Common Shares payable in Common Shares or other Capital Stock; subdivisions,
combinations or certain reclassifications of Common Shares; distributions to all
Holders of Common Shares; distributions to all Holders of Common Shares of
certain rights to purchase Common Shares for a period expiring within 60 days at
less than the Quoted Price at the time; and distributions to such holders of
assets or debt securities of the Company or certain rights to purchase
securities of the Company (excluding cash dividends or other cash distributions
from current or retained earnings other than any Extraordinary Cash Dividend).
However, no adjustment need be made (i) if Holders may participate in the
transaction, (ii) for rights to purchase Common Shares pursuant to a Company
dividend or interest reinvestment plan, (iii) for changes in the par value of
the Common Shares or (iv) unless such adjustment, together with any other
adjustments similarly deferred, equals at least 1% of the then current
Conversion Rate. In cases where the fair market value (per Common Share) of the
assets, debt securities or certain rights, warrants or options to purchase
securities of the Company distributed to stockholders equals or exceeds the
Average Quoted Price of the Common Shares, or such Average Quoted Price exceeds
the fair market value (per Common Share) of such assets, debt securities or
rights, warrants or options so distributed by less than $1.00, rather than being
entitled to an adjustment in the Conversion Rate, the Holder of a LYON upon
conversion thereof will be entitled to receive, in addition to the Common Shares
(or cash in lieu thereof, as set forth above) into which such LYON is
convertible, the kind and amount of assets, debt securities or rights, warrants
or options comprising the distribution that such Holder would have received if
such Holder had converted such LYON immediately prior to the record date for
determining the stockholders entitled to receive the distribution. The Indenture
permits the Company to increase the Conversion Rate from time to time at its
discretion. (Sections 11.06, 11.07, 11.08, 11.10, 11.12, 11.14 and 11.17 and
Form of LYON, paragraph 9.)
If the Company is party to a consolidation, merger or binding share exchange
or a transfer of all or substantially all of its assets, the right to convert a
LYON into Common Shares may be changed into a right to convert it into the kind
and amount of securities, cash or other assets of the Company or another person
which the Holder would have received if the Holder had converted such Holder's
LYONs immediately prior to the transaction. (Section 11.14.)
In the event of a taxable distribution to holders of Common Shares that
results in an adjustment of the Conversion Rate or in the event the Conversion
Rate is increased at the discretion of the Company, the Holders of the LYONs
may, in certain circumstances, be deemed to have received a distribution subject
to Federal income tax as a dividend. See "Certain Tax Aspects--Constructive
Dividend."
REDEMPTION OF LYONS AT THE OPTION OF THE COMPANY
No sinking fund is provided for the LYONs. Prior to , 2000, the
LYONs will not be redeemable at the option of the Company. Beginning on
, 2000, the Company may redeem the
37
<PAGE>
LYONs for cash at any time as a whole, or from time to time in part. (Sections
3.01 and 3.03 and Form of LYON, paragraph 5.) Not less than 30 days' nor more
than 60 days' notice of redemption shall be given by mail to Holders of LYONs.
(Section 3.03 and Form of LYON, paragraph 7.)
The table below shows Redemption Prices of a LYON on , 2000, at
each thereafter prior to maturity and at maturity on ,
2015, which prices reflect the accrued Original Issue Discount calculated
through each such date. The Redemption Price of a LYON redeemed between such
dates would include an additional amount reflecting the additional Original
Issue Discount accrued from the next preceding date in the table through the
actual Redemption Date. (Form of LYON, paragraph 5.)
<TABLE>
<CAPTION>
(2)
ACCRUED
ORIGINAL (3)
(1) ISSUE REDEMPTION
LYON ISSUE DISCOUNT AT PRICE
PRICE % (1) + (2)
------------ ------------ ------------
<S> <C> <C> <C>
Redemption Date
, 2000..................................................... $ $ $
, 2001.....................................................
, 2002.....................................................
, 2003.....................................................
, 2004.....................................................
, 2005.....................................................
, 2006.....................................................
, 2007.....................................................
, 2008.....................................................
, 2009.....................................................
, 2010.....................................................
, 2011.....................................................
, 2012.....................................................
, 2013.....................................................
, 2014.....................................................
At maturity............................................................. 1,000.00
</TABLE>
If less than all of the outstanding LYONs are to be redeemed, the Trustee
shall select the LYONs to be redeemed in principal amounts at maturity of $1,000
or integral multiples thereof by lot, pro rata or by another method the Trustee
considers fair and appropriate. If a portion of a Holder's LYONs is selected for
partial redemption and such Holder converts a portion of such LYONs after such
selection and prior to such redemption, such converted portion shall be deemed
to be of the portion selected for redemption. (Section 3.02.)
PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
On , 2000 (the "Purchase Date"), the Company will become
obligated, and the Company may also elect to become obligated on ,
2005 (the "Optional Purchase Date") to purchase, at the option of the Holder
thereof, any outstanding LYON for which a written Purchase Notice has been
delivered by the Holder to the Paying Agent at any time from the opening of
business on the date that is 20 Business Days prior to such Purchase Date or
Optional Purchase Date, as applicable, until the close of business on such
Purchase Date or Optional Purchase Date, and for which such Purchase Notice has
not been withdrawn, subject to certain additional conditions. The Purchase Price
payable in respect of a LYON shall be equal to the Issue Price plus accrued
Original Issue Discount through the Purchase Date or Optional Purchase Date, as
applicable. The Company, at its option, may elect to pay the Purchase Price with
respect to the Purchase Date or the Optional Purchase Date, as applicable, in
cash, Common Shares or TDS Common Equity Securities, or any combination thereof.
TDS has not waived any rights that it may have under an agreement between TDS
and the Company to purchase Common Shares if the Company elects to pay the
Purchase Price (or a portion thereof) in Common Shares (as of the Purchase Date
or Optional Purchase Date, as applicable). As a result, in such event, TDS may
notify the Company that it intends to exercise any
38
<PAGE>
such rights to acquire additional Common Shares up to an amount equal to TDS's
percentage ownership of Common Shares at that time (assuming that all
outstanding securities that are or may become convertible into Common Shares,
including LYONs, were converted into Common Shares), at a price per share
payable in cash equal to the Market Price per Common Share. See "Description of
Capital Stock--Preemptive and Similar Rights." (Section 3.08 and Form of LYON,
paragraph 6.) For a discussion of the tax treatment of a Holder receiving cash,
Common Shares, TDS Common Equity Securities or any combination thereof, see
"Certain Tax Aspects--Dispositions."
The Company will be required to give notice (the "Company Notice") on a date
not less than 20 Business Days prior to the Purchase Date or the Optional
Purchase Date, as applicable, to all Holders at their addresses shown in the
register of the Registrar (and to beneficial owners as required by applicable
law) stating, among other things, (i) whether the Company will pay the Purchase
Price of LYONs in cash, Common Shares or TDS Common Equity Securities
(identifying such TDS Common Equity Securities) or any combination thereof
(specifying the percentages of each); (ii) if the Company elects to pay in
Common Shares or TDS Common Equity Securities, in whole or in part, the method
of calculating the Market Price of such Common Shares or TDS Common Equity
Securities; and (iii) the procedures that Holders must follow to require the
Company to purchase LYONs from such Holders. In addition, the Company Notice
with respect to the Purchase Date shall notify Holders of whether or not the
Company is electing to become obligated to purchase LYONs, at the option of the
Holders thereof, on the Optional Purchase Date. (Section 3.08.)
The Purchase Notice given by each Holder electing to require the Company to
purchase LYONs shall state (i) the certificate numbers of the LYONs to be
delivered by such Holder for purchase by the Company; (ii) the portion of the
principal amount at maturity of LYONs to be purchased, which portion must be
$1,000 or an integral multiple thereof; (iii) that such LYONs are to be
purchased by the Company pursuant to the applicable provisions of the LYONs; and
(iv) in the event the Company elects, pursuant to the Company Notice, to pay the
Purchase Price with respect to the Purchase Date or Optional Purchase Date, as
applicable, in Common Shares or specified TDS Common Equity Securities, in whole
or in part, but such Purchase Price (or portion(s) thereof) is ultimately to be
paid to such Holder entirely in cash because any of the conditions to payment of
the Purchase Price (or such portion(s) thereof) in Common Shares or such
specified TDS Common Equity Securities is not satisfied prior to the close of
business on such Purchase Date or Optional Purchase Date, as described below,
whether such Holder elects (a) to withdraw such Purchase Notice as to some or
all of the LYONs to which it relates (stating the principal amount at maturity
and certificate numbers of the LYONs as to which such withdrawal shall relate),
or (b) to receive cash in respect of the entire Purchase Price (or such
portion(s) thereof) for all LYONs subject to such Purchase Notice. Unless the
Holder indicates, in the Purchase Notice or in any written notice of withdrawal,
such Holder's choice with respect to the election described in clause (iv) above
as it relates to the applicable portion(s) of such Purchase Price, such Holder
shall be deemed to have elected to receive cash in respect of the entire
Purchase Price (or such applicable portion(s) thereof) for all LYONs subject to
such Purchase Notice in such circumstances. (Section 3.08.) For a discussion of
the tax treatment of a Holder receiving cash instead of Common Shares or TDS
Common Equity Securities, see "Certain Tax Aspects--Dispositions."
Any Purchase Notice may be withdrawn by the Holder by a written notice of
withdrawal delivered to the Paying Agent prior to the close of business on the
Purchase Date or Optional Purchase Date, as applicable. The notice of withdrawal
shall state the principal amount at maturity and the certificate numbers of the
LYONs as to which the withdrawal notice relates and the principal amount at
maturity, if any, which remains subject to the Purchase Notice. (Section 3.10.)
The table below shows the Purchase Price of a LYON as of the Purchase Date
and the Optional Purchase Date, if applicable:
<TABLE>
<CAPTION>
PURCHASE DATE PURCHASE PRICE
- ---------------------- ---------------
<S> <C>
, 2000 $
OPTIONAL PURCHASE DATE PURCHASE PRICE
- ---------------------- ---------------
, 2005 $
</TABLE>
39
<PAGE>
If the Company elects to pay the Purchase Price, in whole or in part, in
Common Shares or TDS Common Equity Securities, the number of Common Shares or
shares of the specified TDS Common Equity Securities to be delivered in respect
of the portion of the Purchase Price to be paid in Common Shares or such
specified TDS Common Equity Securities shall be equal to such portion of the
Purchase Price divided by the Market Price (as defined below) of a Common Share
or a share of such specified TDS Common Equity Securities, as applicable. No
fractional Common Shares or fractional shares of TDS Common Equity Securities
will be delivered upon any purchase by the Company of LYONs through the delivery
of Common Shares or TDS Common Equity Securities in payment, in whole or in
part, of the Purchase Price. Instead, the Company will pay cash based on the
Market Price for all fractional Common Shares or TDS Common Equity Securities.
(Section 3.08.) See "Certain Tax Aspects--Dispositions."
The "Market Price" means the average of the Sale Prices of the Common Shares
or the specified TDS Common Equity Securities, as applicable, for the five
trading day period ending on (if the third Business Day prior to the Purchase
Date or Optional Purchase Date, as applicable, is a trading day or, if not, then
on the last trading day prior to) the third Business Day prior to the Purchase
Date or Optional Purchase Date, as applicable, appropriately adjusted to take
into account the occurrence, during the period commencing on the first of such
trading days during such five trading day period and ending on such Purchase
Date or Optional Purchase Date, of (i) certain events that would result in an
adjustment of the Conversion Rate with respect to the Common Shares or (ii)
certain similar events with respect to the specified TDS Common Equity
Securities, as applicable. The "Sale Price" of the Common Shares or the
specified TDS Common Equity Securities, as applicable, on any date means the
closing per share sale price (or if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and the average ask prices) on such date as reported
in composite transactions for the principal United States securities exchange on
which the Common Shares or the specified TDS Common Equity Securities, as
applicable, are traded or, if the Common Shares or the specified TDS Common
Equity Securities, as applicable, are not listed on a United States national or
regional securities exchange, as reported by NASDAQ. Because the Market Price of
the Common Shares or the specified TDS Common Equity Securities, as applicable,
is determined prior to the Purchase Date or Optional Purchase Date, as
applicable, Holders of LYONs bear the market risk with respect to the value of
the Common Shares or the specified TDS Common Equity Securities, as applicable,
to be received from the date such Market Price is determined to the Purchase
Date or Optional Purchase Date, as applicable. The Company may pay the Purchase
Price (or any portion thereof) in Common Shares or the specified TDS Common
Equity Securities only if the information necessary to calculate the applicable
Market Price is published in a daily newspaper of national circulation and only
if the Common Shares or the specified TDS Common Equity Securities, as
applicable, are listed or admitted to trading on a United States national or
regional securities exchange or reported by NASDAQ. (Section 3.08).
Upon determination of the actual number of Common Shares or of the specified
TDS Common Equity Securities in accordance with the foregoing provisions, the
Company will publish such determination in a daily newspaper of national
circulation. (Section 3.08.)
The Company's right to purchase LYONs, in whole or in part, with Common
Shares or with TDS Common Equity Securities is subject to the satisfaction of
various conditions, including; (i) the registration of the Common Shares or the
specified TDS Common Equity Securities, as applicable, under the Securities Act
and the Exchange Act, if required; and (ii) any necessary qualification or
registration under applicable state securities law or the availability of an
exemption from such qualification and registration. If such conditions are not
satisfied with respect to a Holder or Holders prior to the close of business on
the Purchase Date or Optional Purchase Date, as applicable, the Company will pay
the Purchase Price of the LYONs of such Holder or Holders entirely in cash.
(Section 3.08.) See "Certain Tax Aspects--Dispositions." The Company may not
change the form of consideration (or components or percentages of components
thereof) to be paid once the Company has given its Company Notice to Holders of
LYONs except as described in the second sentence of this paragraph. (Section
3.08).
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The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act which may then be applicable
and will file Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by the Company to purchase LYONs at the option of
Holders. (Section 3.13.)
Payment of the Purchase Price for a LYON for which a Purchase Notice has
been delivered and not validly withdrawn is conditioned upon delivery of such
LYON (together with necessary endorsements) to the Paying Agent at any time
(whether prior to, on or after the Purchase Date or Optional Purchase Date, as
applicable) after delivery of such Purchase Notice. (Section 3.08.) Payment of
the Purchase Price for such LYON will be made promptly following the later of
(i) the Purchase Date or Optional Purchase Date, as applicable, and (ii) the
time of delivery of such LYON. (Section 3.08.) If the Paying Agent holds, in
accordance with the terms of the Indenture, money or securities sufficient to
pay the Purchase Price of such LYON on the Business Day following the Purchase
Date or Optional Purchase Date, as applicable, then, immediately after such
Purchase Date or Optional Purchase Date, such LYON will cease to be outstanding
and Original Issue Discount on such LYON will cease to accrue, whether or not
such LYON is delivered to the Paying Agent, and all other rights of the Holder
shall terminate (other than the right to receive the Purchase Price upon
delivery of the LYON). (Section 2.08.)
The Company's ability to purchase LYONs with cash may be limited by the
terms of its then-existing borrowing agreements. No LYONs may be purchased at
the option of Holders for cash if there has occurred (prior to, on, or after the
giving, by the Holders of such LYONs, of the required Purchase Notice) and is
continuing an Event of Default with respect to the LYONs described under "Events
of Default; Notice and Waiver" below (other than a default in the payment of the
Purchase Price with respect to such LYONs). (Section 3.10.)
CHANGE IN CONTROL PERMITS PURCHASE OF LYONS AT THE OPTION OF THE HOLDER
In the event of any Change in Control (as defined below) of the Company
occurring on or prior to , 2000, each Holder of LYONs will have the
right, at the Holder's option, subject to the terms and conditions of the
Indenture, to require the Company to purchase all or any portion (provided that
the principal amount at maturity must be $1,000 or an integral multiple thereof)
of the Holder's LYONs as of the date that is 35 Business Days after the
occurrence of such Change in Control (a "Change in Control Purchase Date") at a
cash price equal to the Issue Price plus accrued Original Issue Discount through
the Change in Control Purchase Date (the "Change in Control Purchase Price").
(Section 3.09 and Form of LYON, paragraph 6.)
Within 15 Business Days after the occurrence of a Change in Control, the
Company is obligated to mail to the Trustee and to all Holders of LYONs at their
addresses shown in the register of the Registrar (and to beneficial owners as
required by applicable law) a notice regarding the Change in Control, which
notice shall include a form of Change in Control Purchase Notice (a "Change in
Control Purchase Notice") to be completed by the Holder and shall state, among
other things: (i) the events causing a Change in Control and the date of such
Change in Control, (ii) the last date on which the purchase right may be
exercised, (iii) the Change in Control Purchase Price, (iv) the Change in
Control Purchase Date, (v) the name and address of the Paying Agent and the
Conversion Agent, (vi) the Conversion Rate and any adjustments thereto, (vii)
that LYONs with respect to which a Change in Control Purchase Notice is given by
the Holder may be converted only if the Change in Control Purchase Notice has
been withdrawn in accordance with the terms of the Indenture, and (viii) the
procedures that Holders must follow to exercise these rights. The Company will
cause a copy of such notice to be published in a daily newspaper of national
circulation. (Section 3.09.)
To exercise this right, the Holder must deliver the Change in Control
Purchase Notice to the Paying Agent (initially the Trustee) prior to the close
of business on the Change in Control Purchase Date. The Change in Control
Purchase Notice shall state (i) the certificate numbers of the LYONs to be
delivered by the Holder thereof for purchase by the Company; (ii) the portion of
the principal amount at maturity of LYONs to be purchased, which portion must be
$1,000 or any integral multiple thereof; and (iii) that such LYONs are to be
purchased by the Company pursuant to the applicable provisions of the LYONs.
(Section 3.09.)
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Any Change in Control Purchase Notice may be withdrawn by the Holder by a
written notice of withdrawal delivered to the Paying Agent prior to the close of
business on the Change in Control Purchase Date. The notice of withdrawal shall
state the principal amount at maturity and the certificate numbers of the LYONs
as to which the withdrawal notice relates and the principal amount at maturity,
if any, which remains subject to a Change in Control Purchase Notice. (Section
3.10.)
Payment of the Change in Control Purchase Price for a LYON for which a
Change in Control Purchase Notice has been delivered and not validly withdrawn
is conditioned upon delivery of such LYON (together with necessary endorsements)
to the Paying Agent at any time (whether prior to, on or after the Change in
Control Purchase Date) after the delivery of such Change in Control Purchase
Notice. (Section 3.09.) Payment of the Change in Control Purchase Price for such
LYON will be made promptly following the later of the Change in Control Purchase
Date or the time of delivery of such LYON. (Section 3.10.) If the Paying Agent
holds, in accordance with the terms of the Indenture, money sufficient to pay
the Change in Control Purchase Price of such LYON on the Business Day following
the Change in Control Purchase Date, then, immediately after such Change in
Control Purchase Date, Original Issue Discount on such LYON will cease to
accrue, whether or not such LYON is delivered to the Paying Agent, and all other
rights of the Holder shall terminate (other than the right to receive the Change
in Control Purchase Price upon delivery of the LYON). (Section 2.08).
Under the Indenture, a "Change in Control" of the Company is deemed to have
occurred at such time as (i) any person, including its Affiliates and Associates
(other than TDS, the Company, their Subsidiaries, their employee stock ownership
plans or any of their other employee benefit plans, the Carlson Family (meaning
LeRoy T. Carlson, his family members (meaning his spouse, siblings and lineal
descendants), estate and heirs and any trust or other investment vehicle for the
primary benefit of any of such persons or their respective family members or
heirs (collectively, the "Carlson Family"))) files a Schedule 13D or 14D-1 (or
any successor schedule, form or report under the Exchange Act) disclosing that
such person has become the beneficial owner of 50% or more of the combined
voting power of all of the Company's then outstanding equity securities (of all
classes or series) or such other Capital Stock of the Company into which such
equity securities are reclassified or changed, with certain exceptions, (ii) the
number of outstanding Common Shares (or such other class or series of Capital
Stock of the Company into which the Common Shares are reclassified or changed)
the beneficial owners of which are not Affiliates of the Company is at any time
reduced to less than 10 million Common Shares (appropriately adjusted to reflect
the impact of any stock dividend, subdivision or combination) as a result of
acquisitions of Common Shares (or such other Capital Stock) by, or in concert
with, the Company, TDS, any of their Subsidiaries, Affiliates, employee stock
ownership plans or employee benefit plans, or the Carlson Family, (iii) there
shall be consummated any consolidation or merger of the Company (a) in which the
Company is not the continuing or surviving corporation or (b) pursuant to which
the Common Shares would be converted into cash, securities or other property, in
each case other than a consolidation or merger of the Company in which the
holders of the Common Shares and Series A Common Shares immediately prior to the
consolidation or merger have, directly or indirectly, 50% or more of the
combined voting power of the common equity securities of the continuing or
surviving corporation immediately after such consolidation or merger; or (iv)
TDS and its Subsidiaries cease to collectively be beneficial owners of at least
50% of (x) the total of the Common Shares and Series A Common Shares (or such
other classes or series of Capital Stock of the Company into which such Common
Shares or Series A Common Shares are reclassified or changed) then outstanding
or (y) the combined voting power of all of the Company's then outstanding equity
securities (of all classes or series) or such other Capital Stock of the Company
into which such equity securities are reclassified or changed (the event or
transaction giving rise to such circumstances described in (x) or (y) of item
(iv) being referred to as the "Designated Transaction") and, in either case (x)
or (y) of item (iv), there shall occur a Rating Decline (as defined below)
within the time period described below in the definition of Rating Decline and
with a Reference Date (as defined below) occurring on or prior to ,
2000. The Indenture does not permit the Board of Directors of the Company to
waive the Company's obligation to purchase LYONs at the option of Holders in the
event of a Change in Control of the Company. (Section 3.09.)
Under the Indenture a "Rating Decline" will be deemed to have occurred if,
on any date within the period (the "Rating Period") beginning on the date (the
"Reference Date") of the earlier to occur of (a) the
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first public announcement by TDS, the Company or any other person of an
intention to effect the Designated Transaction and (b) the occurrence of such
Designated Transaction and ending on the date that is 60 days after the later to
occur of (A) the occurrence of such Designated Transaction and (B) the first
public announcement by TDS, the Company or any other person of the occurrence of
such Designated Transaction, either of the following events has occurred: (i)
the LYONs shall be rated by any Rating Agency at any time during the Rating
Period at a rating which is lower than the rating of the LYONs by such Rating
Agency on the Rating Date by more than one gradation (including gradations
within Rating Categories as well as between Rating Categories) or (ii) any
Rating Agency shall have withdrawn its rating of the LYONs during the Rating
Period.
"Rating Agency" is defined in the Indenture as Standard & Poor's Corporation
and its successors ("S&P"), and Moody's Investors Service, Inc. and its
successors ("Moody's"), or, if S&P or Moody's, or both, shall not make a rating
of the LYONs publicly available, a nationally recognized United States
statistical rating agency or agencies, substituted by the Company, with written
notice to the Trustee, for S&P or Moody's, or both, as the case may be.
"Rating Category" is defined in the Indenture as each major rating category
symbolized by (x) in the case of S&P, AAA, AA, A, BBB, BB, B, CCC, CC and C and
each such Rating Category shall include pluses or minuses ("gradations")
modifying such capital letters; (y) in the case of Moody's, Aaa, Aa, A, Baa, Ba,
B, Caa, Ca and C and each such Rating Category shall include added numerals such
as 1, 2 or 3 ("gradations") modifying such letters; and (z) with respect to any
other Rating Agency, comparable or equivalent symbols. "Rating Date" is defined
as the date that is 60 days prior to the Reference Date.
The Company will comply with the provisions of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act which may then be applicable
and will file Schedule 13E-4 or any other schedule required thereunder in
connection with any offer by the Company to purchase LYONs at the option of
Holders upon a Change in Control. (Section 3.13.) The Change in Control purchase
feature of the LYONs may in certain circumstances make more difficult or
discourage a takeover of the Company. The Change in Control purchase feature,
however, is not the result of management's knowledge of any specific effort to
accumulate Common Shares or Series A Common Shares or to obtain control of the
Company by means of a merger, tender offer, solicitation or otherwise, or part
of a plan by management to adopt a series of anti-takeover provisions. See
"Description of Capital Stock." Instead, a change in control purchase feature is
a standard term contained in other LYONs offerings that have been marketed by
the Underwriter, and the terms of such feature result from negotiations between
the Company and the Underwriter.
The Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change in
Control with respect to the Change in Control purchase feature of the LYONS, but
that would increase the amount of Senior Indebtedness outstanding at such time.
No LYONs may be purchased at the option of Holders upon a Change in Control of
the Company if there has occurred (prior to, on or after the giving, by the
Holders of such LYONs, of the required Change in Control Purchase Notice) and is
continuing an Event of Default with respect to the LYONs described under "Events
of Default; Notice and Waiver" below (other than a default in the payment of the
Change in Control Purchase Price with respect to such LYONs). (Sections 3.10 and
10.03.) Further, the LYONs are subordinated to the prior payment of Senior
Indebtedness as described under "Subordination of LYONs; Effect of Corporate
Structure" above.
The Vendor Financing Agreement does not include any provision accelerating
the debt incurred thereunder upon a change in control, but does include
covenants prohibiting the Company from entering into certain transactions,
including a merger, consolidation or sale of substantially all of the Company's
assets, unless the Company is the surviving entity or obtains the consent of
NTFC.
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other person or
convey, transfer or lease all or substantially all of its properties and assets
to another person, unless, among other items, (i) the resulting, surviving or
transferee person (if other than the Company) is organized and existing under
the laws of the United States, any state thereof or the District of Columbia and
such person assumes all obligations of the
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Company under the LYONs and the Indenture, and (ii) the Company or such
successor person shall not immediately thereafter be in default under the
Indenture. Upon the assumption of the Company's obligations by such a person in
such circumstances, subject to certain exceptions, the Company shall be
discharged from all obligations under the LYONs and the Indenture. (Section
5.01.) Although such transactions are permitted under the Indenture, certain of
the foregoing transactions occurring on or prior to , 2000 could
constitute a Change in Control of the Company permitting each Holder to require
the Company to purchase the LYONs of such Holder as described above. (Section
3.09.)
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Indenture provides that, if an Event of Default specified therein shall
have happened and be continuing, either the Trustee or the Holders of not less
than 25% in aggregate principal amount at maturity of the LYONs then outstanding
may declare the Issue Price of the LYONs plus the Original Issue Discount on the
LYONs accrued through the date of such declaration to be immediately due and
payable. In the case of certain events of bankruptcy or insolvency, the Issue
Price of the LYONs plus the Original Issue Discount accrued thereon through the
occurrence of such event shall automatically become and be immediately due and
payable. Upon acceleration, as described in either of the preceding sentences,
the subordination provisions of the Indenture preclude any payment being made to
Holders of LYONs for at least 120 days. (Section 10.03.) See "Subordination of
LYONs; Effect of Corporate Structure." Under certain circumstances, the Holders
of a majority in aggregate principal amount at maturity of the outstanding LYONs
may rescind any such acceleration with respect to the LYONs and its
consequences. (Section 6.02.) Interest shall, to the extent permitted by law,
accrue and be payable on demand upon a default in the payment of the principal
amount at maturity, Issue Price plus accrued Original Issue Discount, cash in
respect of a conversion, or any Redemption Price, Purchase Price or Change in
Control Purchase Price with respect to any LYON and such interest shall be
compounded semi-annually. The accrual of such interest on overdue amounts shall
be in lieu of, and not in addition to, the continued accrual of Original Issue
Discount. (Form of LYON, paragraph 1.)
Under the Indenture, Events of Default are defined as: (i) default in
payment of the principal amount at maturity, Issue Price plus accrued Original
Issue Discount, Redemption Price, Purchase Price or Change in Control Purchase
Price with respect to any LYON when such becomes due and payable or default in
payment of cash upon conversion of any LYON (in each case whether or not payment
is prohibited by the provisions of the Indenture); (ii) failure by the Company
to deliver Common Shares (or cash in lieu of fractional Common Shares) when such
Common Shares (or cash in lieu of fractional Common Shares) are required to be
delivered following conversion of a LYON and the continuance of such default for
10 days; (iii) failure by the Company to comply with any of its other agreements
in the LYONs or the Indenture upon receipt by the Company of notice of such
default by the Trustee or by Holders of not less than 25% in aggregate principal
amount at maturity of the LYONs then outstanding and the Company's failure to
cure (or obtain a waiver of) such default within 60 days after receipt by the
Company of such notice; (iv) default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company having an aggregate
outstanding principal amount of in excess of $25,000,000, which default shall
have resulted in such indebtedness being accelerated, without such indebtedness
being discharged or such acceleration having been rescinded or annulled within
twenty days after receipt of notice thereof by the Company from the Trustee or
the Company and the Trustee from the Holders of not less than 25% in aggregate
principal amount at maturity of the LYONs then outstanding (unless such default
has been cured or waived); or (v) certain events of bankruptcy or insolvency.
(Section 6.01.)
The Trustee shall give notice to Holders of the LYONs of any continuing
default known to the Trustee within 90 days after the occurrence thereof;
provided, that the Trustee may withhold such notice, as to any default other
than a payment default, if it determines in good faith that withholding the
notice is in the interests of the Holders. (Section 7.05.)
The Holders of a majority in aggregate principal amount at maturity of the
outstanding LYONs may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, provided that such direction shall not be in
conflict with any law or the Indenture and subject to certain other limitations.
(Section 6.05.) Before proceeding to
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exercise any right or power under the Indenture at the direction of such
Holders, the Trustee shall be entitled to receive from such Holders reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
(Section 7.01.) No Holder of any LYON will have any right to pursue any remedy
with respect to the Indenture or the LYONs, unless (i) such Holder shall have
previously given the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount at maturity of
the outstanding LYONs shall have made a written request to the Trustee to pursue
such remedy; (iii) such Holder or Holders have offered to the Trustee reasonable
security or indemnity satisfactory to the Trustee; (iv) the Holders of a
majority in aggregate principal amount at maturity of the outstanding LYONs have
not given the Trustee a direction inconsistent with such request within 60 days
after receipt of such request; and (v) the Trustee shall have failed to comply
with the request within such 60-day period. (Section 6.06.)
However, the right of any Holder (x) to receive payment of the principal
amount at maturity, Issue Price plus accrued Original Issue Discount, cash in
respect of a conversion, Redemption Price, Purchase Price or Change in Control
Purchase Price with respect to any LYON and any interest in respect of a default
in the payment of any such amounts on such LYON, on or after the due date
expressed in such LYON, (y) to convert LYONs or (z) to institute suit for the
enforcement of any such payments or conversion shall not be impaired or
adversely affected without such Holder's consent. (Section 6.07.) The Holders of
at least a majority in aggregate principal amount at maturity of the outstanding
LYONs may waive an existing default and its consequences, other than (i) any
default in any payment on the LYONs, (ii) any default which constitutes a
failure to convert any LYON in accordance with its terms or (iii) any default in
respect of certain covenants or provisions in the Indenture which may not be
modified without the consent of the Holder of each LYON as described in
"Modification" below. (Section 6.04.)
The Company will be required to furnish to the Trustee annually a statement
as to any default by the Company in the performance and observance of its
obligations under the Indenture. (Section 4.03.)
MODIFICATION
Without the consent of any Holder of LYONs, the Company and the Trustee may
amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor person of the obligations of the
Company under the Indenture, to provide for uncertificated LYONs in addition to
certificated LYONs (so long as any uncertificated LYONs are in registered form
for purposes of the Internal Revenue Code), to eliminate the Company's option to
pay cash in lieu of delivering Common Shares upon conversion of LYONs (other
than cash in lieu of fractional Common Shares and except with respect to such
elections already made) or to eliminate the Company's option to enter into
Common Share Delivery Arrangements in respect of conversions of LYONs (except
for those already entered into), to make any change that does not adversely
affect the rights of any Holder of LYONs or to comply with any requirement of
the Commission in connection with the qualification of the Indenture under the
Trust Indenture Act of 1939. (Section 9.01.) No amendment may be made to the
subordination provisions of the Indenture that adversely affects the rights of
any holder of Senior Indebtedness then outstanding, unless the holders of such
Senior Indebtedness (as required pursuant to the terms of such Senior
Indebtedness) consent to such change. (Section 9.02.)
Modification and amendment of the Indenture or the LYONs may be effected by
the Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount at maturity of the LYONs then
outstanding. However, without the consent of each Holder affected thereby, no
amendment may, among other things: (i) reduce the principal amount at maturity,
Issue Price, amount of cash to be paid by the Company in respect of a conversion
of LYONs, Purchase Price, Change in Control Purchase Price or Redemption Price
with respect to any LYON, or extend the stated maturity of any LYON or alter the
manner or rate of accrual of Original Issue Discount or interest, or make any
LYON payable in money or securities other than that stated in the LYON; (ii)
make any reduction in the principal amount at maturity of LYONs whose Holders
must consent to an amendment or any waiver under the Indenture or modify the
Indenture provisions relating to such amendments or waivers; (iii) make any
change that adversely affects the right to convert any LYON or the right to
require the Company to purchase a LYON (including the right to receive cash in
lieu of Common Shares upon conversion or cash or TDS Common Equity Securities in
lieu
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of, or in combination with, Common Shares upon purchase by the Company at the
option of Holders of LYONs, other than elimination of the Company's option to
pay cash in lieu of delivering Common Shares upon conversion of LYONs as
described above); (iv) modify the provisions of the Indenture relating to the
subordination of the LYONs in a manner adverse to the Holders of the LYONs; or
(v) impair the right to institute suit for the enforcement of any payment with
respect to, or conversion of, the LYONs. (Section 9.02.)
LIMITATIONS OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of the Company, the claim
of the Holder of a LYON is, under Title 11 of the United States Code, limited to
the Issue Price of the LYON plus that portion of the Original Issue Discount
that has accrued from the date of issue to the commencement of the proceeding.
In addition, the Holders of the LYONs will be subordinated in right of payment
to Senior Indebtedness and effectively subordinated to the indebtedness and
other obligations of the Company's subsidiaries. See "Subordination of LYONs;
Effect of Corporate Structure."
TAXATION OF LYONS
See "Certain Tax Aspects" for a discussion of certain United States Federal
income tax aspects that will apply to Holders of LYONs.
INFORMATION CONCERNING THE TRUSTEE
Harris Trust and Savings Bank will initially be the Trustee, Registrar,
Paying Agent and Conversion Agent under the Indenture and custodian in
connection with the Securities Loan Agreement. Harris Trust and Savings Bank is
also the transfer agent and registrar for the Company's Common Shares.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 140,000,000 Common
Shares, $1.00 par value; 50,000,000 Series A Common Shares, $1.00 par value; and
5,000,000 shares of Preferred Stock, $1.00 par value, issuable in series. As of
March 31, 1995, the Company had outstanding 48,775,305 Common Shares, 33,005,877
Series A Common Shares and 95,972 shares of Preferred Stock.
PREFERRED STOCK
Pursuant to the Company's Restated Certificate of Incorporation, as amended,
the Board of Directors is authorized to establish and designate one or more
series of Preferred Stock, without further authorization of the Company's
shareholders, and to fix the number of shares and the relative rights,
preferences and limitations of any such series, except that so long as not less
than 500,000 shares of Series A Common Shares are outstanding, no shares of any
series of Preferred Stock may have more than one vote per share, have the right
to vote as a separate class with respect to elections of directors or (subject
to any requirements of applicable law) any other matter, or be issued for
consideration of less than $100 per share. The shares of any series of Preferred
Stock need not be identical in any respect with the shares of any other series.
VOTING RIGHTS
Each Series A Common Share is entitled to ten votes on all matters, and each
Common Share is entitled to one vote on all matters. The Company's Restated
Certificate of Incorporation, as amended, provides that the number of directors
shall be not less than three, and that the directors shall be divided into three
classes serving staggered three-year terms. The holders of Common Shares, voting
as a separate class, are entitled to elect 25% of the directors (rounded up to
the nearest whole number), and the holders of Series A Common Shares and
Preferred Stock, voting together, are entitled to elect the remaining directors.
However, if at the time of an election of directors the outstanding Series A
Common Shares represent less than 12.5% of the total outstanding shares of
common stock of the Company, then the holders of Series A Common Shares and the
Preferred Stock do not have class voting rights in the election of directors,
and the holders of Common Shares, Series A Common Shares, and Preferred Stock
vote together for the election of the remaining 75% of the directors (rounded
down to the nearest whole number). See "Risk Factors--Control by Principal
Shareholder; Antitakeover Provisions."
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Except as mentioned above and except for matters where applicable law
requires the approval by one or more classes of stock voting as separate
classes, all classes of stock of the Company vote as a single class.
DIVIDEND RIGHTS
Subject to the payment of all dividends accumulated and unpaid on
outstanding shares of Preferred Stock, the holders of Common Shares are entitled
to receive such dividends as may be declared from time to time by the Board of
Directors. Unless the same or greater dividends, on a per share basis, are
declared and paid at the same time on Common Shares, no dividends may be
declared or paid on the Series A Common Shares.
In the case of stock dividends, the Board of Directors is authorized to
distribute shares of a particular class of the Company's capital stock only as
follows: (i) Common Shares may be paid to the holders of Common Shares and
proportionately to holders of Series A Common Shares; (ii) Series A Common
Shares may be paid to the holders of Common Shares and proportionately to the
holders of Series A Common Shares; or (iii) Common Shares may be paid to the
holders of Common Shares and Series A Common Shares may be paid proportionately
to the holders of Series A Common Shares. The Board of Directors also is
authorized to distribute to Common and Series A Common Shareholders shares of
any subsidiary that has two classes of common stock with each class possessing
respective rights, preferences and limitations similar to the respective rights,
preferences and limitations of the Common and Series A Common Shares. Thus,
although it has no present intention to do so, the Company could recapitalize
any of its subsidiaries and then spin the subsidiary off to the Company's
shareholders, with the holders of Series A Common Shares receiving the
subsidiary's Series A Common Shares and the holders of Common Shares receiving
the subsidiary's Common Shares.
The Revolving Credit Agreement and the Vendor Financing Agreement impose
certain restrictions on the payment of dividends. See "Dividend Policy."
CONVERSION RIGHTS
The Common Shares have no conversion rights. The Series A Common Shares are
convertible, on a share-for-share basis, into Common Shares. The Series A Common
Shares which are converted may not be reissued.
LIQUIDATION RIGHTS
Upon liquidation, the holders of Common Shares and Series A Common Shares
are entitled to receive a pro rata share of all assets available to shareholders
after payment of the aggregate liquidation preference of any Preferred Stock
then outstanding.
PREEMPTIVE AND SIMILAR RIGHTS
Under the Company's Restated Certificate of Incorporation, as amended, TDS,
as the holder of Series A Common Shares, has preemptive rights to purchase any
additional Series A Common Shares issued or sold by the Company, including
treasury shares other than Series A Common Shares not sold for cash.
In addition to the preemptive rights granted to TDS as a holder of Series A
Common Shares of the Company pursuant to the Restated Certificate of
Incorporation, as amended, of the Company, TDS has the right under an Exchange
Agreement between the Company and TDS to subscribe to any issuance of Common
Shares or any other voting securities of the Company, or of any securities
convertible into or exchangeable for, or carrying a right to subscribe to or
acquire, Common Shares or any other voting securities of the Company. To the
extent an issuance is made for consideration other than cash, the fair market
value of the non-cash consideration will be determined by resolution of the
Board of Directors of the Company. The proportion of each such issuance that TDS
has the right to subscribe to (which right may be exercisable in full or in
part) is equal to the proportion of the Common Shares that TDS would own
immediately before the issuance if all securities of the Company that are
convertible into Common Shares (including securities convertible into another
class that is convertible into Common Shares and including securities that in
the future will become convertible) were converted (successively, if necessary)
into Common Shares. The rights of TDS to subscribe to Common Shares may be
transferred to any one or more transferees from TDS of any Common Shares, Series
A Common Shares, or any securities convertible into
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or exchangeable for, or carrying a right to subscribe to or acquire, shares of
either such class. In connection with the offering of LYONs, TDS has waived its
right under the Exchange Agreement to purchase LYONs (which are convertible into
Common Shares) and any Common Shares deliverable upon conversion thereof.
However, TDS has expressly not waived any rights it might have under the
Exchange Agreement to acquire Common Shares in the event the Company determines
to deliver Common Shares in connection with the election of holders to cause the
Company to purchase LYONs on the Purchase Date or Optional Purchase Date. TDS
has agreed, in the event it has such rights, that the fair market value of the
consideration paid for the Common Shares for purposes of any such purchase
right, will be equal to the Market Price of the Common Shares as determined for
such Purchase Date or Optional Purchase Date under the Indenture. TDS has also
waived any rights it may have permitting it to transfer its rights to subscribe
for and purchase such Common Shares on the Purchase Date or Optional Purchase
Date. See "Description of LYONs-- Purchase of LYONs at the Option of the
Holder."
Pursuant to a Common Stock Purchase Agreement, dated April 24, 1987, between
the Company and S.A. Coditel, an affiliate of Coditel Brabant S.A. and
Codiservices S.A. (collectively, "Coditel"), as a result of the transfer of the
rights of S.A. Coditel to Coditel, for a period of 10 years after the closing
date of such agreement, Coditel has the right to subscribe to any issuance of
the Company's common stock or of securities convertible into such common stock
except for issuance to employees and directors of the Company or its
subsidiaries or any issuance made in connection with the acquisition of an
interest in any other entity. To the extent an issuance is made for
consideration other than cash, the fair market value of the non-cash
consideration will be determined by resolution of the Board of Directors of the
Company. The amount of common stock of each of such issue to which Coditel may
subscribe shall not exceed such proportion of such issue as (i) the amount of
the Company's common stock held by Coditel immediately prior to the time of such
issuance bears to (ii) the sum of the amount of issued and outstanding common
stock of the Company and the amount of such common stock issuable upon
conversion of all of the Company's issued and outstanding securities, warrants
and options (regardless of whether such securities, warrants and options are
then convertible), immediately prior to the time of such issuance. In connection
with the offering of LYONs, Coditel has waived its right to purchase LYONs
(which are convertible into Common Shares) and any Common Shares deliverable
upon conversion thereof.
REDEMPTION BY COMPANY
The Company may redeem stock (other than Series A Common Shares) from any
holder at the lesser of (i) fair market value, or (ii) such holder's purchase
price if purchased within a year of such redemption, to prevent the loss, or
permit the reinstatement of any license or franchise from any governmental
agency, where such loss is based upon such holder failing to possess
qualifications prescribed by such governmental agency. This right of redemption
could be applicable to a person receiving Common Shares upon the conversion of
LYONS by the Holder thereof or upon purchase by the Company of LYONs at the
option of the Holder thereof if such person falls within such category of
holders based on qualifications prescribed by any such governmental agency at
the time.
CORPORATE OPPORTUNITY ARRANGEMENTS
The Company's Restated Certificate of Incorporation, as amended, provides
that, so long as at least 500,000 Series A Common Shares are outstanding, the
Company may not, without the written consent of TDS, engage in any non-cellular
activities. The Company has been informed that TDS intends to give its consent
to the acquisition of any non-cellular interest that is incidental to the
acquisition of a cellular interest. However, TDS could impose conditions on any
such consent, including a requirement that the Company resell any non-cellular
interest to TDS or that the Company give TDS the right of first refusal with
respect to such sale.
The Restated Certificate of Incorporation, as amended, also restricts the
circumstances under which the Company is entitled to claim that an opportunity,
transaction, agreement or other arrangement to which TDS, or any person in which
TDS has or acquires a financial interest, is or should be the property of the
Company or its subsidiaries. In general, so long as at least 500,000 Series A
Common Shares are outstanding, the Company will not be entitled to any such
"corporate opportunity" unless it relates solely to the construction of, the
ownership of interests in, and/or the management of, cellular telephone systems,
and
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then only if such corporate opportunity did not arise in any way as a result of
the rights otherwise retained by TDS. The Restated Certificate of Incorporation
allows the Company to pursue future opportunities to provide cellular service
and design, consulting, engineering and construction management services for
cellular telecommunications systems located outside the United States.
GENERAL
All issued and outstanding shares of Preferred Stock, Common Shares and
Series A Common Shares are fully paid and nonassessable, and all Common Shares
issued by the Company upon conversion of LYONs or upon purchase of LYONs by the
Company at the option of the Holders thereof will be fully paid and
nonassessable when issued.
The transfer agent and registrar for the Company's Common Shares is Harris
Trust and Savings Bank, Chicago, Illinois. The Company serves as transfer agent
and registrar for shares of Preferred Stock and Series A Common Shares.
The Company will distribute annual reports to its shareholders which will
contain its audited financial statements.
CERTAIN TAX ASPECTS
The following summary of material United States Federal income tax
considerations is for general information only. The summary is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), its legislative history,
existing and proposed regulations thereunder, administrative rulings and court
decisions, all as in effect and existing on the date hereof and all of which are
subject to change at any time. The tax treatment of a Holder of LYONs may vary
depending upon the Holder's particular situation. Certain Holders (including
insurance companies, tax-exempt organizations, individual retirement and other
tax-deferred accounts, financial institutions, broker-dealers, foreign
corporations, and individuals who are not citizens or residents of the United
States) may be subject to special rules not discussed below. This summary does
not discuss the tax considerations of subsequent purchasers of LYONs, including
those who purchase LYONs resold by the Standby Share Deliverer, and is limited
to investors who hold LYONs as capital assets. Accordingly, purchasers of LYONs,
including such subsequent purchasers, should consult their own tax advisors as
to the particular tax consequences to them of acquiring, holding, converting or
otherwise disposing of the LYONs, including the applicability and the effect of
any state, local or foreign tax laws and any changes in applicable tax laws.
The Company has been advised by its counsel, Sidley & Austin, that in the
opinion of such counsel the LYONs will be treated as indebtedness for United
States Federal income tax purposes. The following discussion of tax
considerations assumes that the LYONs will be so treated.
ORIGINAL ISSUE DISCOUNT
The LYONs are being issued at a substantial discount from their principal
amount at maturity. For Federal income tax purposes, the difference between the
issue price (the first price at which a substantial amount of the LYONs are sold
for money) and the principal amount at maturity of each LYON constitutes
Original Issue Discount. Holders of the LYONs will be required to include
Original Issue Discount in income periodically over the term of the LYONs before
the receipt of the cash, Common Shares, TDS Common Equity Securities or other
payments attributable to such income.
A Holder of a LYON must include in gross income for Federal income tax
purposes the sum of the daily portions of Original Issue Discount with respect
to the LYON for each day during the taxable year or portion of a taxable year on
which such Holder holds the LYON (for purposes of this tax discussion, "Accrued
Original Issue Discount"). The daily portion is determined by allocating to each
day of the accrual period a pro rata portion of an amount equal to the adjusted
issue price of the LYON at the beginning of the accrual period multiplied by the
yield to maturity of the LYON (determined by compounding at the close of each
accrual period and adjusted for the length of the accrual period). The accrual
period will generally be each six month period which ends on the day in each
calendar year corresponding to the maturity date of the LYON or the date six
months before such maturity date. The information returns provided to holders
and the Internal Revenue Service (the "Service") by the Company regarding the
accrual of Original Issue Discount will be based on these
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six month accrual periods. Treasury regulations, however, permit a Holder to
select an accrual period of any length and to vary the length of the accrual
period over the term of the debt instrument, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs on the final day of an accrual period or on the first day of an accrual
period. The adjusted issue price of the LYON at the start of any accrual period
will be the issue price of the LYON increased by the Accrued Original Issue
Discount for each prior accrual period. Under these rules, Holders will have to
include in gross income increasingly greater amounts of Original Issue Discount
in each successive accrual period. The Company will be required to furnish
annually to the Service and to certain noncorporate Holders information
regarding the amount of Original Issue Discount attributable to that year.
DISPOSITIONS
GENERAL. A Holder's basis for determining gain or loss on the sale,
redemption, retirement, conversion, purchase by the Company or other disposition
of a LYON (any such event, a "Disposition") will be increased by any Accrued
Original Issue Discount includable in such Holder's gross income. Gain or loss
recognized upon a Disposition under the rules described below will generally be
capital gain or loss, and will be long-term capital gain or loss if the LYON has
been held for more than one year. A Holder's obligation to include in gross
income the daily portions of Original Issue Discount with respect to a LYON will
prospectively terminate on the date of a Disposition.
SALE, REDEMPTION, RETIREMENT OR PURCHASE BY THE COMPANY FOR CASH. Upon the
sale, redemption, retirement or purchase by the Company of a LYON for cash
(including pursuant to a Purchase Notice or a Change in Control Purchase
Notice), a Holder will recognize capital gain or loss equal to the difference
between the amount of cash received and such Holder's adjusted tax basis in the
LYON.
CONVERSION. The tax treatment of a Holder who elects to convert a LYON will
depend on whether the Company chooses (i) to deliver cash, (ii) to deliver
Common Shares (other than through a Standby Share Deliverer) or (iii) to arrange
for a Standby Share Deliverer to deliver Common Shares. In no event will a
combination of cash and Common Shares be delivered to a Holder with respect to
the conversion of any given LYON (except with respect to cash received in lieu
of a fractional Common Share).
If the Company delivers cash, a Holder will recognize capital gain or loss
equal to the difference between the amount of cash received and such Holder's
adjusted tax basis in the LYON.
If the Company delivers Common Shares (other than through a Standby Share
Deliverer), a Holder will not recognize gain or loss (except with respect to
cash received in lieu of a fractional Common Share), and the Holder's tax basis
in the Common Shares received will be the same as the Holder's tax basis in the
LYON on the date of conversion (exclusive of any tax basis allocable to a
fractional Common Share). The holding period for the Common Shares received will
include the holding period for the LYON tendered to the Company in exchange
therefor, except that the holding period of Common Shares allocable to Accrued
Original Issue Discount may commence on the day following the date of
conversion.
If the Company arranges for a Standby Share Deliverer to deliver Common
Shares, a Holder will recognize capital gain or loss equal to the difference
between the fair market value of such Common Shares (plus any cash received in
lieu of a fractional Common Share) and such Holder's adjusted tax basis in the
LYON. The Holder's tax basis in the Common Shares received will be equal to
their fair market value at the time of conversion, and the holding period for
such Common Shares will begin on the day following the date of conversion.
As a result of these rules, a Holder's receipt of Common Shares upon
conversion of a LYON will either be taxable or tax-free, depending on the source
of the Common Shares. Because the source of the Common Shares will depend on
whether the Company, at its option (with the agreement of a Standby Share
Deliverer in the case of a Common Share Delivery Arrangement), chooses to
deliver the Common Shares or arranges for a Standby Share Deliverer to do so, a
Holder will have no control over whether its receipt of Common Shares upon
conversion is taxable or tax-free. The Company will notify each converting
Holder, through the Conversion Agent, of the source of the Common Shares on or
prior to the delivery thereof, at which time the Holder will be able to
determine whether its receipt of the Common Shares is taxable or tax-free.
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PURCHASE AT THE OPTION OF THE HOLDER. The tax treatment of a Holder that
elects to have a LYON purchased by the Company with respect to the Purchase Date
or, if applicable, the Optional Purchase Date will depend on the type of
consideration the Company elects to deliver.
If the Company elects to pay the Purchase Price in cash, TDS Common Equity
Securities or any combination thereof, a Holder will recognize capital gain or
loss equal to (i) the sum of any cash received and the fair market value of any
TDS Common Equity Securities received, minus (ii) such Holder's adjusted tax
basis in the LYON. The Holder's tax basis in any TDS Common Equity Securities
received will be equal to their fair market value upon receipt following the
Purchase Date (or Optional Purchase Date), and the Holder's holding period for
the TDS Common Equity Securities will begin on the day following such receipt.
If the Company elects to pay the Purchase Price in Common Shares, a Holder
will not recognize gain or loss (except with respect to cash received in lieu of
a fractional Common Share), and the Holder's tax basis in the Common Shares
received will be the same as the Holder's tax basis in the LYON exchanged
therefor (exclusive of any tax basis allocable to a fractional Common Share).
The holding period for the Common Shares received will include the holding
period for the LYON tendered to the Company in exchange therefor, except that
the holding period of Common Shares allocable to Accrued Original Issue Discount
may commence on the day following such exchange.
If the Company elects to pay the Purchase Price partly in cash and/or TDS
Common Equity Securities and partly in Common Shares, a Holder will recognize
capital gain (but not loss) equal to the lesser of (i) the sum of any cash
received and the fair market value of any TDS Common Equity Securities received
and (ii) such sum plus the fair market value of the Common Shares received minus
such Holder's adjusted tax basis in the LYON. The Holder's tax basis in any TDS
Common Equity Securities received will be equal to their fair market value upon
receipt following the Purchase Date (or Optional Purchase Date), and the
Holder's holding period for the TDS Common Equity Securities will begin on the
day following such receipt. The Holder's tax basis in the Common Shares received
will be the same as the Holder's tax basis in the LYON exchanged therefor,
decreased by the sum of any cash received and the fair market value of any TDS
Common Equity Securities received and increased by the amount of gain
recognized. The holding period for the Common Shares received will include the
holding period for the LYON tendered to the Company in exchange therefor, except
that the holding period of Common Shares allocable to Accrued Original Issue
Discount may commence on the day following such exchange.
CASH IN LIEU OF FRACTIONAL SHARES. Cash received in lieu of a fractional
Common Share upon a Disposition of a LYON should be treated as a payment in
exchange for the fractional interest in such Common Share. Accordingly, the
receipt of cash in lieu of a fractional Common Share should generally result in
capital gain or loss, if any (measured by the difference between the cash
received for the fractional Common Share and the Holder's tax basis in the
fractional Common Share).
CONSTRUCTIVE DIVIDEND
If at any time the Company makes a distribution of property to stockholders
that would be taxable to such stockholders as a dividend for United States
Federal income tax purposes (for example, distributions of evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe for Common Shares) and, pursuant to the antidilution
provisions of the LYONs, the Conversion Rate of the LYONs is increased, such
increase will likely result in taxable income for the Holders of the LYONs.
Similarly, if the Conversion Rate is increased at the discretion of the Company,
such increase will likely result in taxable income for the Holders of the LYONs.
TELEPHONE AND DATA SYSTEMS, INC.
TDS owned all of the 33,005,877 Series A Common Shares which were
outstanding and all of the 95,972 shares of Preferred Stock which were
outstanding as of March 31, 1995. TDS also owned 33,278,278 or 68.2% of the
48,775,305 Common Shares which were outstanding as of March 31, 1995. This
Prospectus covers 750,000 of such Common Shares owned by TDS in connection with
the transactions contemplated by
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the Securities Loan Agreement described under "Underwriting." Since TDS is only
lending such Common Shares to Merrill Lynch under the Securities Loan Agreement,
Merrill Lynch is obligated to return such borrowed Common Shares to TDS.
UNDERWRITING
Merrill Lynch (the "Underwriter") has agreed, subject to the terms and
conditions of the Purchase Agreement, to purchase $650,000,000 aggregate
principal amount at maturity of the LYONs from the Company. The Purchase
Agreement provides that the Underwriter will be obligated to purchase all such
LYONs if any are purchased. The Underwriter has advised the Company that it
proposes to offer the LYONs directly to the public at the offering price set
forth on the front cover page of this Prospectus. After the initial public
offering, the offering price may be changed. The LYONs are offered subject to
receipt and acceptance by the Underwriter and to certain other conditions,
including the right to reject orders in whole or in part.
The Company has granted the Underwriter an option for 30 days after the date
of this Prospectus to purchase up to an additional $95,000,000 aggregate
principal amount at maturity of the LYONs to cover over-allotments, if any, at
the initial public offering price less the underwriting discount, plus accrued
Original Issue Discount, if any, accrued from the Issue Date, computed on a
semi-annual bond equivalent basis.
The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriter may be required to make in respect thereof.
The Company has agreed with the Underwriter not to sell, offer to sell,
grant any option for the sale of, or otherwise dispose of or transfer any
securities similar to the LYONs, any Common Shares or any Series A Common Shares
or any securities convertible into or exercisable or exchangeable for such
securities, Common Shares or Series A Common Shares for a period of 90 days
after the date of this Prospectus without the prior written consent of the
Underwriter other than Common Shares issuable upon the conversion of LYONs
offered hereby, Common Shares issued or sold pursuant to employee benefit plans
and dividend reinvestment plans, Common Shares issued upon exercise of currently
outstanding options or warrants, or Common Shares issued in connection with
acquisitions of interests in cellular licenses or systems. In addition, TDS has
agreed with the Underwriter, except pursuant to the Securities Loan Agreement
described below, not to sell, offer to sell, grant any option for the sale of,
or otherwise dispose of or transfer any Common Shares or Series A Common Shares
or any securities convertible into or exercisable or exchangeable for Common
Shares or Series A Common Shares for a period of 90 days after the date of this
Prospectus without the prior written consent of the Underwriter.
In connection with the offering of the LYONs, TDS and Merrill Lynch intend
to enter into a securities loan agreement (the "Securities Loan Agreement"),
which provides that, subject to certain restrictions and with the agreement of
TDS, Merrill Lynch may from time to time borrow, return and reborrow Common
Shares from TDS; provided, however, that the number of Common Shares borrowed
under the Securities Loan Agreement at any time may not exceed 750,000 (which
number of Common Shares may be reduced from time to time by TDS). Merrill Lynch
shall be obligated generally to return borrowed securities on three business
days' notice from TDS. The obligation of Merrill Lynch to return borrowed
securities shall be secured by cash, an irrevocable letter of credit or U.S.
Government Obligations, in form satisfactory to Harris Trust and Savings Bank,
as custodian, in an amount not less than 102% of the market value of the
borrowed securities. If the market value of the borrowed securities falls or
rises over time, Merrill Lynch may be required to provide additional collateral
or may be entitled to the return of collateral. The recalculation of the market
value of the borrowed securities will be done on a daily basis. Any fees payable
by Merrill Lynch under the Securities Loan Agreement will be paid directly to
TDS. The Securities Loan Agreement is intended to facilitate ordinary trading
and market-making activity in the LYONs by Merrill Lynch and may also be used by
Merrill Lynch, as Standby Share Deliverer, to obtain Common Shares deliverable
by it in connection with any Common Share Delivery Arrangement entered into with
the Company, as described in "Description of LYONs--Conversion Rights." The
availablility of Common Shares under the Securities Loan Agreement, if any, at
any time is, as described above, not assured and any such availability does not
assure market-making activity in the LYONs by Merrill Lynch. This Prospectus may
be used by Merrill Lynch in connection with the sale of Common Shares borrowed
by Merrill Lynch from TDS under the Securities
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Loan Agreement. Merrill Lynch is not under any obligation to engage in
market-making activity with respect to the LYONs, or to agree to any such Common
Share Delivery Arrangement, and any market-making, or activity as a Standby
Share Deliverer, actually engaged in by Merrill Lynch may cease at any time.
The Underwriter has previously marketed (and anticipates continuing to
market) securities of issuers under the trademark "LYONs." The LYONs offered by
the Company hereby contain certain terms and provisions which are different from
such other previously marketed LYONs, the terms and provisions of which also
vary. See "Description of LYONs."
From time to time the Underwriter and certain of its affiliates have
performed, and may in the future perform, investment banking or financial
advisory services for the Company and TDS.
Merrill Lynch, as Standby Share Deliverer and at the request of the Company,
may agree to acquire, through the delivery of Common Shares, LYONs upon
conversion by the Holders thereof and Merrill Lynch may resell such LYONs. Any
such sales may be made directly to one or more purchasers at negotiated prices,
at market prices prevailing at the time of sale or at prices related to such
market prices. This Prospectus may be used by the Standby Share Deliverer in
connection with such transactions.
Merrill Lynch may from time to time offer Common Shares borrowed from TDS
under the Securities Loan Agreement directly to one or more purchasers at
negotiated prices, at market prices prevailing at the time of sale or at prices
related to such market prices.
LEGAL MATTERS
Certain legal matters with respect to the securities of the Company offered
hereunder will be passed upon by Sidley & Austin, Chicago, Illinois. Stephen P.
Fitzell and Sherry S. Treston, Secretary and Assistant Secretary, respectively,
of the Company, are partners of Sidley & Austin. Walter C.D. Carlson, a director
of the Company and TDS, and a trustee and beneficiary of the voting trust which
controls TDS and the Company, is a partner of Sidley & Austin. Michael G. Hron,
and William S. DeCarlo, the Secretary and Assistant Secretary of TDS,
respectively, are partners of Sidley & Austin. Mayer, Brown & Platt, Chicago,
Illinois, is acting as counsel for the Underwriter in connection with certain
legal matters relating to the initial sale of the LYONs offered hereby. Mayer,
Brown & Platt from time to time acts as counsel in certain matters for the
Company, TDS and members of the Carlson family. Debora de Hoyos, the spouse of
Walter C. D. Carlson and a director of American Paging, Inc., a publicly traded
subsidiary of TDS, is a partner of Mayer, Brown & Platt.
EXPERTS
The audited consolidated financial statements and schedule of United States
Cellular Corporation 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. Reference is made to the above
said report on the consolidated financial statements of United States Cellular
Corporation which includes explanatory paragraphs that describe uncertainties
discussed in Note 14 of the Notes to Consolidated Financial Statements and the
change in the method of accounting for income taxes in 1993 as discussed in Note
9 of the Notes to Consolidated Financial Statements. In their report, that firm
states that with respect to certain limited partnership interests, their opinion
is based on the reports of other independent accountants, namely Coopers &
Lybrand L.L.P. The text of these reports is incorporated by reference in this
Prospectus. The combined financial statements incorporated by reference in this
Prospectus have been reviewed for compilation by Arthur Andersen LLP, as
indicated in their report incorporated by reference herein. Reference is made to
this report which includes an explanatory paragraph with respect to
uncertainties discussed in Note 7 of the Notes to Unaudited Combined Financial
Statements. The reports of other independent accountants on the underlying
financial statements which have been combined are incorporated by reference
herein. The financial statements referred to above have been incorporated by
reference in reliance upon the authority of such firms as experts in accounting
and auditing in giving said reports.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, TDS OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR THE
AFFAIRS OF THE COMPANY OR TDS SINCE THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents By
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 12
Use of Proceeds................................ 15
Capitalization................................. 16
Dividend Policy................................ 19
Price Range of Common Shares................... 19
Business....................................... 20
Description of LYONs........................... 33
Description of Capital Stock................... 46
Certain Tax Aspects............................ 49
Telephone and Data Systems, Inc................ 51
Underwriting................................... 52
Legal Matters.................................. 53
Experts........................................ 53
</TABLE>
$650,000,000
[LOGO]
UNITED STATES
CELLULAR CORPORATION
LIQUID YIELD OPTION-TM- NOTES
DUE 2015
(ZERO COUPON--SUBORDINATED)
-----------------
PROSPECTUS
-----------------
MERRILL LYNCH & CO.
, 1995
"LIQUID YIELD OPTION" AND "LYONS" ARE
TRADEMARKS OF MERRILL LYNCH & CO., INC.
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. 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 State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
ALTERNATE COVER PAGE
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 26, 1995
PROSPECTUS [LOGO]
UNITED STATES CELLULAR CORPORATION
COMMON SHARES, $1.00 PAR VALUE
------------
This Prospectus relates to Common Shares, par value $1.00 per share ("Common
Shares"), of United States Cellular Corporation (the "Company"), which are owned
by Telephone and Data Systems, Inc. ("TDS"), and may be sold by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), in connection with
ordinary trading or market-making activities by Merrill Lynch in Common Shares
or Liquid Yield Option-TM- Notes due 2015 of the Company ("LYONs"-TM-). In
addition, at the request of the Company, the Standby Share Deliver, initially
Merrill Lynch, may agree to deliver such Common Shares, and/or other Common
Shares, to which this Prospectus also relates, which it acquires from other
sources, to Holders of LYONs upon conversion thereof.
Merrill Lynch may obtain Common Shares from TDS pursuant to a Securities
Loan Agreement (the "Securities Loan Agreement") between Merrill Lynch and TDS.
Under the Securities Loan Agreement, subject to certain restrictions, Merrill
Lynch may, with the agreement of TDS, from time to time borrow, return and
reborrow Common Shares from TDS. The number of Common Shares that may be
borrowed under the Securities Loan Agreement at any time may not exceed 750,000
shares, which number of Common Shares may be reduced from time to time by TDS.
The Securities Loan Agreement was entered into in connection with the public
offering of the LYONs by the Company and is intended to facilitate ordinary
trading and market-making activity in the LYONs by Merrill Lynch. The Securities
Loan Agreement is also intended to enhance the ability of the Standby Share
Deliverer to deliver Common Shares to Holders of LYONs which are converted into
Common Shares. The availability of Common Shares under the Securities Loan
Agreement, if any, at any time is, as described above, not assured and any such
availability does not assure market-making activity in the LYONs by Merrill
Lynch.
Merrill Lynch may from time to time offer Common Shares directly to one or
more purchasers at negotiated prices, at market prices prevailing at the time of
sale or at prices related to such market prices. In addition, at the request of
the Company, the Standby Share Deliverer may agree to deliver Common Shares to
Holders of LYONs which are converted into Common Shares. LYONs acquired by the
Standby Share Deliverer in connection with such conversions or otherwise may be
resold by the Standby Share Deliverer. See "Underwriting."
The Common Shares are currently listed on the American Stock Exchange under
the symbol USM.
SEE "RISK FACTORS" ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN COMMON SHARES.
"Liquid Yield Option" and "LYONs" are Trademarks of Merrill Lynch & Co.,
Inc.
-------------------
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 , 1995.
<PAGE>
Alternate Back Cover Page
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE SALES COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, TDS OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON SHARES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR THE AFFAIRS OF
THE COMPANY OR TDS SINCE THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents By
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 12
Use of Proceeds................................ 15
Capitalization................................. 16
Dividend Policy................................ 19
Price Range of Common Shares................... 19
Business....................................... 20
Description of LYONs........................... 33
Description of Capital Stock................... 46
Certain Tax Aspects............................ 49
Telephone and Data Systems, Inc................ 51
Underwriting................................... 52
Legal Matters.................................. 53
Experts........................................ 53
</TABLE>
[LOGO]
UNITED STATES
CELLULAR CORPORATION
COMMON SHARES, $1.00 PAR VALUE
-----------------
PROSPECTUS
-----------------
, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities being registered are:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $ 86,423
Rating Agency Fees*............................................... 140,000
Trustee and Paying Agent Fees and Expenses*....................... 11,000
Printing and Engraving Expenses*.................................. 150,000
Legal Fees and Expenses*.......................................... 200,000
Accounting Fees and Expenses*..................................... 40,000
Blue Sky Fees and Expenses*....................................... 20,000
American Stock Exchange Listing Fee............................... 27,500
NASD Registration Fee............................................. 25,553
Miscellaneous*.................................................... 54,524
---------
$ 755,000
---------
---------
<FN>
- ---------
* Estimated
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware permits
indemnification of directors, officers and employees of a corporation under
certain conditions and subject to certain limitations. Article XI of the
Company's Restated Certificate of Incorporation, as amended, contains provisions
for the indemnification of directors, officers and employees of the Company
within the limitations permitted by Section 145.
The Company has directors' and officers' liability insurance which provides,
subject to certain policy limits, deductible amounts and exclusions, coverage
for all persons who have been, are or may in the future be, directors or
officers of the Company, against amounts which such persons must pay resulting
from claims against them by reason of their being such directors or officers
during the policy period for certain breaches of duty, omissions or other acts
done or wrongfully attempted or alleged.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Purchase Agreement.
4.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit
to the Company's Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form
8-A.
4.2 Restated Bylaws, as amended, are hereby incorporated by reference to an exhibit to the Company's
Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form 8-A.
4.3 Amended and restated Term Loan Agreement between NTFC Capital Corporation and the Company dated
December 22, 1994 is hereby incorporated by reference to Exhibit 4.3 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
4.4 Form of Indenture between the Company and Harris Trust and Savings Bank, as Trustee, relating to the
LYONs.
4.5 Form of Certificate for Liquid Yield Option Note (included in Exhibit 4.4).
5 Opinion and Consent of Sidley & Austin.
8* Opinion of Sidley & Austin with respect to certain tax matters.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S>
12.1 Statement regarding computation of ratios for the years ended December 31, 1991-1990 is hereby
incorporated by reference to Post-Effective Amendment No. 2 to the Company's Registration Statement
on Form S-1 (Registration No. 33-41826).
12.2 Statement regarding computation of ratios for the years ended December 31, 1994-1992 is hereby
incorporated by reference to Exhibit 12 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
23.1 Consent of Counsel (included in Exhibits 5 and 8* above).
23.2 Consent of independent public accountants.
23.3 Consents of independent accountants.
25* Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 on Form T-1 of
Harris Trust and Savings Bank to act as Trustee under the Indenture.
99.1 Form of Securities Loan Agreement between TDS and Merrill Lynch.
99.2 Form of Registration Rights Agreement among the Company, TDS and Merrill Lynch.
99.3 Form of Common Share Delivery Arrangement Agreement among the Company, TDS and Merrill Lynch.
99.4* Form of LYONs Offering Agreement between the Company and TDS.
<FN>
- ---------
* Previously filed.
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 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.
(2) That, 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 registrant 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.
(3) That, 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.
(4) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high 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
II-2
<PAGE>
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) 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; and
(5) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
(6) 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-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 the 26th day of
May, 1995.
UNITED STATES CELLULAR CORPORATION
By /s/ H. DONALD NELSON
------------------------------------
H. Donald Nelson, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ H. DONALD NELSON PRESIDENT
- ----------------------------------- (CHIEF EXECUTIVE OFFICER) May 26, 1995
H. Donald Nelson AND DIRECTOR
/s/ LEROY T. CARLSON
- ----------------------------------- DIRECTOR May 26, 1995
LeRoy T. Carlson
/s/ LEROY T. CARLSON, JR.
- ----------------------------------- DIRECTOR May 26, 1995
LeRoy T. Carlson, Jr.
/s/ MURRAY L. SWANSON
- ----------------------------------- DIRECTOR May 26, 1995
Murray L. Swanson
/s/ PAUL-HENRI DENUIT
- ----------------------------------- DIRECTOR May 26, 1995
Paul-Henri Denuit
/s/ WALTER C.D. CARLSON
- ----------------------------------- DIRECTOR May 26, 1995
Walter C.D. Carlson
/s/ ALLAN Z. LOREN
- ----------------------------------- DIRECTOR May 26, 1995
Allan Z. Loren
/s/ KENNETH R. MEYERS VICE PRESIDENT-FINANCE
- ----------------------------------- AND TREASURER (CHIEF May 26, 1995
Kenneth R. Meyers FINANCIAL OFFICER)
/s/ PHILLIP A. LORENZINI CONTROLLER
- ----------------------------------- (PRINCIPAL ACCOUNTING May 26, 1995
Phillip A. Lorenzini OFFICER)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Purchase Agreement.
4.1 Restated Certificate of Incorporation, as amended, is hereby incorporated by reference to an exhibit
to the Company's Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form
8-A.
4.2 Restated Bylaws, as amended, are hereby incorporated by reference to an exhibit to the Company's
Amendment No. 2 on Form 8 dated December 28, 1992 to the Company's Report on Form 8-A.
4.3 Amended and restated Term Loan Agreement between NTFC Capital Corporation and the Company dated
December 22, 1994 is hereby incorporated by reference to Exhibit 4.3 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
4.4 Form of Indenture between the Company and Harris Trust and Savings Bank, as Trustee, relating to the
LYONs.
4.5 Form of Certificate for Liquid Yield Option Note (included in Exhibit 4.4).
5 Opinion and Consent of Sidley & Austin.
8* Opinion of Sidley & Austin with respect to certain tax matters.
12.1 Statement regarding computation of ratios for the years ended December 31, 1991-1990 is hereby
incorporated by reference to Post-Effective Amendment No. 2 to the Company's Registration Statement
on Form S-1 (Registration No. 33-41826).
12.2 Statement regarding computation of ratios for the years ended December 31, 1994-1992 is hereby
incorporated by reference to Exhibit 12 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
23.1 Consent of Counsel (included in Exhibits 5 and 8* above).
23.2 Consent of independent public accountants.
23.3 Consents of independent accountants.
25* Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 on Form T-1 of
Harris Trust and Savings Bank to act as Trustee under the Indenture.
99.1 Form of Securities Loan Agreement between TDS and Merrill Lynch.
99.2 Form of Registration Rights Agreement among the Company, TDS and Merrill Lynch.
99.3 Form of Common Share Delivery Arrangement Agreement among the Company, TDS and Merrill Lynch.
99.4* Form of LYONs Offering Agreement between the Company and TDS.
<FN>
- ---------
* Previously filed.
</TABLE>
<PAGE>
UNITED STATES CELLULAR CORPORATION
(a Delaware corporation)
$650,000,000
Liquid Yield Option-TM- Notes
Due 2015
(Zero Coupon -- Subordinated)
PURCHASE AGREEMENT
________, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Sirs:
United States Cellular Corporation, a Delaware corporation (the "Company"),
confirms its agreement with you with respect to the sale by the Company and the
purchase by you of $650,000,000 aggregate principal amount at maturity of the
Company's Liquid Yield Option-TM- Notes due 2015 (the "LYONs"-TM-) and with
respect to the grant by the Company to you of the option described in Section 2
hereof to purchase all or any part of an additional $95,000,000 aggregate
principal amount at maturity of the Company's LYONs solely to cover
over-allotments. The aforesaid $650,000,000 of LYONs (the "Initial Securities")
and all or any part of the $95,000,000 aggregate principal amount at maturity
of LYONs subject to the over-allotment option described in Section 2 hereof (the
"Option Securities") are collectively referred to herein as the "Securities".
The Securities are to be issued pursuant to an indenture dated as of ______ __,
1995 (the "Indenture") between the Company and Harris Trust and Savings Bank, as
Trustee (the "Trustee").
The Securities are convertible into either, at the Company's option, (i)
common shares, $1.00 par value per share, of the Company (the "Common Shares")
at the conversion rate per $1,000 principal amount at maturity of Securities
specified in the Pricing Agreement (defined below) or (ii) cash in an amount
equal to the market value of the Common Shares into which the Securities are
- ----------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
<PAGE>
convertible, in either case, at any time before the close of business on the
maturity date with respect to the LYONs. As of the fifth, and, if the Company
so elects prior to the fifth anniversary of the initial issuance date of the
Securities in accordance with the terms of the Indenture, the tenth anniversary
of the initial issuance date of the Securities, holders of Securities each have
the option to require the Company to purchase such Securities for a price to be
paid, at the Company's option, in cash, Common Shares or publicly traded common
equity securities (the "TDS Common Equity Securities") of Telephone and Data
Systems, Inc. ("TDS"), or in any combination thereof, equal to the issue price
of the Securities plus the accrued original issue discount thereon through the
date of such purchase.
Prior to your purchase and public offering of the Securities, you and the
Company shall enter into an agreement substantially in the form of Exhibit A
hereto (the "Pricing Agreement"). The Pricing Agreement may take the form of an
exchange of any standard form of written telecommunication between you and the
Company and shall specify such applicable information as is indicated in Exhibit
A hereto. The offering of the Securities will be governed by this Agreement, as
supplemented by the Pricing Agreement. From and after the date of the execution
and delivery of the Pricing Agreement, this Agreement shall be deemed to
incorporate the Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-58911) and a
related preliminary prospectus for the registration under the Securities Act
of 1933 (the "1933 Act") of the Securities and the Common Shares issuable
upon the conversion of Securities at the option of holders of Securities.
The Company has filed such amendments thereto, if any, and such amended
preliminary prospectuses as may have been required to the date hereof and
will file such additional amendments thereto and such amended or supplemented
prospectuses as may hereafter be required. Such registration statement (as
amended, if applicable) and the prospectus constituting a part thereof
(including in each case all documents, if any, incorporated by reference
therein and the information, if any, deemed to be part thereof pursuant to
Rule 430A(b) or Rule 434 of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations")), in each case as from time to time
amended or supplemented pursuant to the 1933 Act or otherwise, are
hereinafter referred to as the "Registration Statement" and the "Prospectus",
respectively, except that if any revised prospectus shall be provided to you
by the Company for use in connection with the offering of the Securities
which differs from the Prospectus on file at the Commission at the time the
Registration Statement becomes effective (whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) of
the 1933 Act Regulations), the term "Prospectus",
-2-
<PAGE>
shall refer to such revised prospectus from and after the time it is first
provided to you for such use.
The Company understands that you propose to make a public offering of the
Securities as soon as you deem advisable after the Registration Statement
becomes effective, the Indenture has been qualified under the Trust Indenture
Act of 1939, as amended (the "1939 Act"), and the Pricing Agreement has been
executed and delivered.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to you as of the date hereof and
as of the date of the Pricing Agreement (such latter date being hereinafter
referred to as the "Representation Date") as follows:
(i) At the time the Registration Statement becomes effective and
at the Representation Date, the Registration Statement, including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and the Indenture conforms in all material respects to the
applicable requirements of the 1939 Act and the rules and regulations of
the Commission thereunder (the "1939 Act Regulations") and the
Registration Statement will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus,
at the time the Registration Statement becomes effective (unless the term
"Prospectus" refers to a prospectus which has been provided to you by the
Company for use in connection with the offering of the Securities which
differs from or supplements a prospectus on file at the Commission at the
time the Registration Statement becomes effective, in which case at the
time it is first provided to you for such use), at the Representation Date
and at the Closing Time referred to in Section 2, will not contain an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection shall
not apply to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by you expressly for use in such
Registration Statement or Prospectus.
(ii) The documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time they were
filed with the Commission, complied in
-3-
<PAGE>
all material respects with the requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read together and
with the other information in the Prospectus, at the time the Registration
Statement becomes effective under the 1933 Act, at the Representation Date and
at Closing Time, will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and any documents deemed to be incorporated by reference in the
Prospectus will, if and when they are filed with the Commission, comply in all
material respects with the requirements of the 1934 Act and the 1934 Act
Regulations, and will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
(iii) The accountants who certified the Company's consolidated
financial statements and supporting schedules included in or incorporated
by reference into the Registration Statement are independent public
accountants with respect to the Company and its consolidated subsidiaries
as required by the 1933 Act and the 1933 Act Regulations.
(iv) The consolidated financial statements of the Company and its
subsidiaries included in or incorporated by reference into the Registration
Statement present fairly the financial position and results of operations
of the Company and its subsidiaries on a consolidated basis at the
respective dates or for the respective periods to which they apply; such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
respective periods involved and such financial statements have been
prepared, and the combined financial statements of the Los Angeles SMSA
Limited Partnership, the Nashville/Clarksville MSA Limited Partnership and
the Baton Rouge MSA Limited Partnership (collectively, the "Cellular System
Partnerships") incorporated by reference into the Registration Statement
have been properly compiled from the amounts and notes of the underlying
separate audited financial statements of the Cellular System Partnerships,
in each case in compliance with the applicable accounting requirements of
the 1933 Act and the 1933 Act Regulations or the 1934 Act and the 1934 Act
Regulations, as the case may be; and the supporting schedules incorporated
by reference into the Registration Statement present fairly the information
required to be stated therein.
-4-
<PAGE>
(v) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its consolidated subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business,
(B) there have been no transactions entered into by the Company or any of
its consolidated subsidiaries other than those in the ordinary course of
business which are material to the Company and its consolidated
subsidiaries considered as one enterprise, and (C) there has been no
dividend or distribution of any kind declared, paid or made by the Company
on any class of its capital stock.
(vi) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus; and the Company
is duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse affect on the Company and its consolidated subsidiaries
considered as one enterprise.
(vii) Each consolidated subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the corporate
power and authority to own, lease and operate its properties and to conduct
its business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which it owns or leases substantial properties or in which
the conduct of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse affect on the
Company and its consolidated subsidiaries considered as one enterprise; all
of the issued and outstanding capital stock of each such consolidated
subsidiary has been duly authorized and validly issued and is fully paid
and non-assessable; and the Company owns a majority of the issued and
outstanding shares of capital stock of each of its consolidated
subsidiaries which are corporations and, except as described in the
Prospectus, owns such capital stock and its interests in each of its
consolidated subsidiaries which are not corporations, directly or through
one or more consolidated subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or
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equity, except such security interest, mortgage, pledge, lien, encumbrance,
claim or equity the enforcement of which, individually or in the aggregate,
would not have a material adverse affect on the Company and its
consolidated subsidiaries considered as one enterprise.
(viii) The Securities to be issued and sold pursuant to this
Agreement have been duly authorized, and when issued, authenticated and
delivered pursuant to this Agreement, against payment of the consideration
set forth in the Pricing Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute legal, valid and
binding obligations of the Company, subject, as to enforcement, to
bankruptcy, insolvency, reorganization or other similar laws of general
applicability now or hereafter in effect relating to or affecting
creditors' rights, to public policy considerations and to general equity
principles, and will be entitled to the benefits provided by the Indenture
under which they are to be issued, which will be substantially in the form
included as an exhibit to the Registration Statement; the Indenture has
been duly authorized by the Board of Directors of the Company, and when
executed and delivered by the Company and the Trustee (assuming due
authorization, execution and delivery by the Trustee), will constitute a
legal, valid and binding instrument enforceable against the Company in
accordance with its terms subject, as to enforcement, to bankruptcy,
insolvency, reorganization or other similar laws of general applicability
now or hereafter in effect relating to or affecting creditors' rights, to
public policy considerations and to general equity principles; and the
Securities and the Indenture conform to the descriptions thereof in the
Prospectus.
(ix) The Common Share Delivery Arrangement Agreement (the "Common
Share Delivery Arrangement Agreement") between you and the Company has been
duly authorized by the Board of Directors of the Company, and when executed
and delivered by the Company and you (assuming due authorization, execution
and delivery by you), will constitute a legal, valid and binding agreement
enforceable against the Company in accordance with its terms subject, as to
enforcement, to bankruptcy, insolvency, reorganization or other similar
laws of general applicability now or hereafter in effect relating to or
affecting creditor's rights, to public policy considerations and to general
equity principles.
(x) The authorized, issued and outstanding capital stock of the
Company is as set forth in or incorporated by reference into the
Registration Statement (except for subsequent issuances, if any, pursuant
to reservations or agreements referred to in the Prospectus); all of the
issued and outstanding shares of capital stock of the Company have
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been duly authorized and validly issued and are fully paid and non-
assessable; the capital stock of the Company, including, without
limitation, the Common Shares, conforms to the description thereof included
in or incorporated by reference into the Registration Statement and, except
as set forth in the Prospectus, is not subject to preemptive or other
similar rights.
(xi) Upon issuance and delivery of the Securities in accordance
with this Agreement, the Pricing Agreement and the Indenture, the
Securities will be convertible at the option of the holder thereof for
Common Shares in accordance with the terms of the Securities and the
Indenture (with the Company having the election to pay cash equal to the
value of the Common Shares issuable upon conversion); and the Common Shares
initially issuable upon conversion of the Securities (assuming no exercise
of such election by the Company) have been duly authorized and reserved for
issuance, and when issued and delivered, pursuant to the terms of the
Indenture, will be validly issued, fully paid and non-assessable.
(xii) No consents or waivers from the holders of the Company's
capital stock are required to consummate the transactions contemplated
hereby or by the Registration Rights Agreement (as defined below), the
Common Share Delivery Arrangement Agreement or the Securities Loan
Agreement (the "Securities Loan Agreement") between TDS and you or the
issuance or delivery of Common Shares upon conversion of Securities; and
no holders of securities of the Company have rights to the registration of
such securities in connection with the registration of the Securities, the
Common Shares issuable or deliverable upon conversion of Securities, sales
of Common Shares borrowed pursuant to the Securities Loan Agreement or
resales of Securities acquired by a Standby Share Deliverer (as defined
in the Indenture) pursuant to the Common Share Delivery Arrangement
Agreement.
(xiii) Neither the Company nor any of its consolidated subsidiaries
is in violation of its charter or by-laws or other documents of
organization, and none of the Company or any of its consolidated
subsidiaries is in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Company or any of its consolidated subsidiaries is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company or any of its consolidated subsidiaries is subject;
the execution, delivery and performance of this Agreement, the Pricing
Agreement, the Indenture, the Registration Rights Agreement (the
"Registration Rights Agreement") between you, the Company and TDS and the
Common Share Delivery Arrangement Agreement and the consummation of the
transactions
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contemplated herein and therein have been duly authorized by all necessary
corporate action by the Company and will not conflict with or constitute a
breach of, or a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any of its consolidated subsidiaries pursuant to the terms of, any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or any of its consolidated
subsidiaries is a party or by which the Company or any of them may be
bound, or to which any property or assets of the Company or any of its
consolidated subsidiaries is subject; nor will such action result in a
violation of the provisions of the charter or by-laws of the Company or any
applicable law, rule, regulation, judgment, order or administrative or
court decree; nor will such action conflict with or have an adverse effect
on any of the certificates, authorities, licenses or permits of the Company
or any of its consolidated subsidiaries that enable them to carry on the
business and operations now operated by them and which are material to the
business of the Company and its consolidated subsidiaries considered as one
enterprise.
(xiv) No labor dispute with the employees of the Company or any of
its consolidated subsidiaries exists or, to the knowledge of the Company,
is imminent which would materially adversely affect the business operations
of the Company and its consolidated subsidiaries considered as one
enterprise.
(xv) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the Company
or any of its consolidated subsidiaries which is required to be disclosed
in or incorporated by reference into the Registration Statement or, except,
in the case of (A) and (B) below, as disclosed in the Prospectus, which
might (A) result in any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of
the Company and its consolidated subsidiaries considered as one enterprise,
(B) materially and adversely affect the properties or assets of the
Company, and its consolidated subsidiaries, considered as one enterprise,
or (C) materially and adversely affect the consummation of the transactions
contemplated by this Agreement, the Pricing Agreement, the Indenture, the
Common Share Delivery Arrangement Agreement or the Registration Rights
Agreement; all pending legal or governmental proceedings to which the
Company any of its consolidated subsidiaries is a party or of which any of
their respective property is the subject which are not described in or
incorporated by reference into the Registration Statement, including
ordinary routine litigation incidental to the
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business, are, considered in the aggregate, not material to the Company and
its consolidated subsidiaries considered as one enterprise; and there are
no contracts or documents of the Company or any of its consolidated
subsidiaries which are required to be filed or incorporated by reference as
exhibits to the Registration Statement by the 1933 Act or by the 1933 Act
Regulations which have not been so filed or incorporated by reference.
(xvi) The Company and its consolidated subsidiaries own or possess,
or can acquire on reasonable terms, the patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information),
systems or procedures, trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them and
neither the Company nor any of its consolidated subsidiaries has received
any notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would result in
any material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Company and its
consolidated subsidiaries considered as one enterprise.
(xvii) No consent, approval or authorization of any court or
governmental authority or agency is necessary in connection with the sale
of the Securities by the Company or the consummation by the Company of the
other transactions contemplated by this Agreement, the Pricing Agreement,
the Indenture, the Registration Rights Agreement or the Common Share
Delivery Arrangement Agreement, except as may be required under the 1933
Act or 1933 Act Regulations, the 1934 Act or 1934 Act Regulations, the 1939
Act or state securities laws.
(xviii) All taxes and fees required to be paid with respect to the
execution of the Indenture and the issuance of the Securities have been
paid.
(xix) The Company and its consolidated subsidiaries possess such
certificates, authorities, licenses or permits issued by the appropriate
local, state, federal or foreign regulatory agencies or bodies necessary to
conduct the business now operated by them, and, except as disclosed in the
Registration Statement or the documents incorporated by reference therein,
none of the Company or any of its consolidated subsidiaries has received
any notice of proceedings relating to the revocation or modification of any
such certificate, authority, license or permit which, singly or in the
aggregate, if the subject of any unfavorable
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decision, ruling or finding, would materially and adversely affect the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its consolidated subsidiaries
considered as one enterprise.
(xx) The Company has complied and will comply with the provisions
of Florida H.B. 1771, codified as Section 517.075 of the Florida Statutes,
1987, as amended, and all regulations promulgated thereunder relating to
issuers doing business in Cuba.
(b) Any certificate signed by any officer of the Company and delivered to
you or to your counsel shall be deemed a representation and warranty by the
Company to you as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO THE UNDERWRITER; CLOSING.
(a) On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company agrees to
sell to you and you agree to purchase from the Company, at the purchase price
per $1,000 principal amount at maturity set forth in the Pricing Agreement, the
Initial Securities.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth and the
delivery and payment for the Initial Securities pursuant to this Agreement, the
Company hereby grants an option to you to purchase from it any or all of the
Option Securities (in multiples of $1,000 principal amount at maturity) at the
same price per $1,000 principal amount at maturity as is to be paid by you for
the Initial Securities, plus, in the case of the Option Securities, accrued
Original Issue Discount, if any, from the Closing Time to the Date of Delivery
(as defined below). The option hereby granted will expire automatically 30 days
after the date the Registration Statement becomes effective or 30 days after the
date of the Pricing Agreement, whichever is later, and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by you to the Company setting forth the number of
Option Securities as to which you are then exercising the option and the time,
date and place of payment and delivery for such Option Securities. Any such
time and date of delivery (a "Date of Delivery") shall be determined by you but
shall not be later than seven full business days after the exercise of such
option, nor in any event before Closing Time, unless otherwise agreed upon by
you and the Company.
If the Company has elected to rely upon Rule 430A under the 1933 Act
Regulations, the purchase price per $1,000 principal
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amount at maturity to be paid by you for the Securities shall be an amount
equal to the initial public offering price, less an amount to be determined
by agreement between you and the Company. The initial public offering price
per $1,000 principal amount at maturity of the Securities shall be a fixed
price to be determined by agreement between you and the Company. The initial
public offering price and the purchase price, when so determined, shall be
set forth in the Pricing Agreement. If such prices have not been agreed upon
and the Pricing Agreement has not been executed and delivered by all parties
thereto by the close of business on the fourth (or, if the effective date of
the Registration Statement is on or after June 7, 1995, the fourteenth)
business day following the date of this Agreement, this Agreement shall
terminate forthwith without liability of any party to any other party, unless
otherwise agreed to by you and the Company, except as otherwise provided in
Section 4 hereof. If the Company has elected not to rely upon Rule 430A
under the 1933 Act Regulations, the initial public offering price and the
purchase price per $1,000 principal amount at maturity to be paid by you for
the Securities have each been determined and set forth in the Pricing
Agreement, dated the date hereof, and an amendment to the Registration
Statement and the Prospectus will be filed by the Company before the
Registration Statement becomes effective.
(b) Payment of the purchase price for the Initial Securities shall be
made at the office of Merrill Lynch & Co., 5500 Sears Tower, Chicago,
Illinois 60606, and delivery of the certificates for the Initial Securities
shall be made against payment therefor at the office of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Merrill Lynch World Headquarters, North
Tower, World Financial Center, New York, New York 10281-1305, or (in either
case) at such other place or places as shall be agreed upon by you and the
Company, at 11:00 A.M. on the third (or, if the Pricing Agreement is executed
after 4:30 p.m. Eastern time, the fourth) business day following the date the
Registration Statement becomes effective (or, if the Company has elected to
rely upon Rule 430A, the third (or, if the Pricing Agreement is executed
after 4:30 p.m. Eastern time, the fourth) business day after execution of the
Pricing Agreement), or such other time not later than ten business days after
such date as shall be agreed upon by you and the Company (such time and date
of payment and delivery being herein called "Closing Time"). In addition, if
you purchase any or all of the Option Securities, payment of the purchase
price for, and delivery of certificates for, such Option Securities shall be
made at your offices as set forth above, or at such other place as shall be
agreed upon by you and the Company, on each Date of Delivery as specified in
the notice from you to the Company. Payment for Securities purchased by you
shall be made to the Company by certified or official bank check or checks
drawn in New York Clearing House funds or similar next day funds payable to
the order of the Company, against delivery to you for your account of
certificates for the purchased Securities.
(c) Certificates for the purchased Securities shall be in such
denominations and registered in such names as you may request in writing at
least two business days before Closing Time or the Date of Delivery, as the case
may be. The certificates for the
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purchased Securities will be made available for examination and packaging by you
not later than 11:00 A.M. on the last business day prior to Closing Time or the
Date of Delivery, as the case may be, at the offices of Depository Trust
Company, 55 Water Street, New York, New York.
SECTION 3. COVENANTS. The Company covenants with you as follows:
(a) The Company will notify you immediately, and confirm the notice in
writing, (i) of the effectiveness of the Registration Statement and any
amendment thereto (including any post-effective amendment), (ii) of the receipt
of any comments from the Commission in respect of the Registration Statement or
the documents incorporated by reference therein, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (iv) of the receipt
from the Commission of any stop order suspending the effectiveness of the
Registration Statement or any order preventing or suspending the use of any
preliminary prospectus, or the initiation of any proceedings for any such
purpose, and (v) of the receipt of notice of suspension of the qualification of
the Securities or the Common Shares issuable upon conversion of Securities, for
offering or sale in any jurisdiction, or the initiation or threatening of any
proceedings for any such purpose. The Company will use every reasonable effort
to prevent the issuance of any stop order or any order preventing or suspending
the use of any preliminary prospectus or suspending such qualification, and, in
the event of the issuance of a stop order or any order preventing or suspending
the use of any preliminary prospectus or suspending such qualification, to
obtain the lifting thereof at the earliest possible moment.
(b) The Company will give you notice of its intention to file or prepare
any amendment to the Registration Statement (including any post-effective
amendment) or any amendment or supplement to the Prospectus (including any
revised prospectus which the Company proposes for use by you in connection with
the offering of the Securities which differs from the prospectus on file with
the Commission at the time the Registration Statement becomes effective, whether
or not such revised prospectus is required to be filed pursuant to Rule 424(b)
of the 1933 Act Regulations), whether pursuant to the 1933 Act or the 1934 Act,
will furnish to you copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file any such amendment or supplement or use any such prospectus to
which you or your counsel shall reasonably object.
(c) The Company will file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the
date of the
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Prospectus for so long as the delivery of a prospectus is required in connection
with the offering or sale of the Securities.
(d) The Company will deliver to you as many signed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein and, if
applicable, documents incorporated by reference into the Prospectus pursuant to
Item 12 of Form S-3 under the 1933 Act) as you may reasonably request and will
also deliver to you as many conformed copies of the Registration Statement as
originally filed and of each amendment thereto (without exhibits) as you may
reasonably request.
(e) The Company will furnish to you, from time to time during the period
when the Prospectus is required to be delivered under the 1933 Act or the 1934
Act, such number of copies of the Prospectus (as amended or supplemented) as you
may reasonably request for the purposes contemplated by the 1933 Act or the 1934
Act or the respective applicable rules and regulations of the Commission
thereunder.
(f) If any event shall occur as a result of which it is necessary, in the
reasonable opinion of your counsel or in the judgment of the Company, to amend
or supplement the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered to a
purchaser, the Company will forthwith amend or supplement the Prospectus (in
form and substance reasonably satisfactory to your counsel) so that, as so
amended or supplemented, the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading and the Company will furnish to you a
reasonable number of copies of such amendment or supplement.
(g) The Company will endeavor, in cooperation with you, to qualify the
Securities and the Common Shares issuable upon conversion of Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions as you may designate; provided, however, that the Company shall
not be obligated to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified. In each jurisdiction in which the Securities or
such Common Shares have been so qualified, the Company will file such statements
and reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for so long as may be required to complete such
distribution of such securities.
(h) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act)
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covering a twelve-month period beginning after the "effective date" (as defined
in said Rule 158) of the Registration Statement but not later than the first day
of the Company's fiscal quarter next following the "effective date" of the
Registration Statement.
(i) The Company will use the net proceeds received by it from the sale of
the Securities in the manner specified in the Prospectus under "Use of
Proceeds".
(j) The Company will make generally available to its security holders as
soon as practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, shareholders' equity and
changes in financial position of the Company and its consolidated subsidiaries
and such other financial statements as are required by the 1934 Act Regulations,
in each case, certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the first of such fiscal quarters ending after the
effective date of the Registration Statement), consolidated summary financial
information of the Company and its consolidated subsidiaries for such quarter.
(k) For a period of three years, the Company will furnish to you copies of
all reports and communications delivered to its stockholders as a class and
copies of all reports (excluding exhibits) filed with the Commission on Forms 8-
K, 10-Q and 10-K.
(l) If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A
or Rule 434 of the 1933 Act Regulations, then, immediately following the
execution of the Pricing Agreement, the Company will prepare and file or
transmit for filing with the Commission in accordance with such Rule 430A or
Rule 434 and Rule 424(b) of the 1933 Act Regulations, copies of an amended
Prospectus, or, if required by such Rule 430A or Rule 434, a post-effective
amendment to the Registration Statement (including an amended Prospectus),
containing all information so omitted.
(m) If the Company has elected to rely upon Rule 430A or Rule 434, it
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) under the 1933
Act was actually received for filing by the Commission and, in the event that
it was not, it will promptly file such prospectus.
(n) The Company will not contract to sell or announce or make any
offering, sale or other disposition of any debt securities of the Company having
a maturity greater than one year during the period beginning from the date of
this Agreement and continuing through the earlier of the termination of trading
restrictions with respect to the Securities, as notified to the Company by you,
or Closing Time except for (i) proposed issues of debt securities with
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respect to which the Company shall have advised you in writing prior to the
execution hereof, (ii) debt incurred under the Revolving Credit Agreement, as
amended as of the date hereof, between the Company and TDS or the Amended and
Restated Term Loan Agreement between NTFC Capital Corporation and the Company
dated December 22, 1994, in each case in the form in effect on the date hereof
and described in the Prospectus and (iii) such other debt securities with
respect to which you have given your prior written consent.
(o) The Company will not contract to sell or announce or make any
offering, sale or other disposition of any securities similar to the Securities,
any Common Shares or any Series A Common Shares, $1.00 par value per share, of
the Company (the "Series A Common Shares") or any securities convertible into or
exercisable or exchangeable for such securities, Common Shares or Series A
Common Shares, nor will the Company sell or grant options, rights or warrants
with respect to any securities similar to the Securities, any Common Shares or
any Series A Common Shares or any securities convertible into or exercisable or
exchangeable for such securities, Common Shares or Series A Common Shares,
except Common Shares issuable upon the conversion of the Securities, Common
Shares issued or sold pursuant to existing employee benefit plans and dividend
reinvestment plans, Common Shares issued upon exercise of currently outstanding
options or warrants, or Common Shares in connection with acquisitions of
interests in cellular licenses or systems, in each case during a period of 90
days after the date of the Pricing Agreement, without your prior written
consent.
(p) The Company will use its best efforts to effect the listing of the
Securities and the Common Shares issued upon conversion of Securities on the
American Stock Exchange and to cause the Securities to be registered under the
1934 Act.
(q) The Company will reserve and keep available at all times, Common
Shares for the purpose of enabling the Company to satisfy any obligations to
issue Common Shares upon conversion of Securities (assuming no exercise of the
Company's election to pay cash in lieu of delivering Common Shares upon
conversions) and such Common Shares when issued for such purpose will not be
subject to nor violate any preemptive rights or other rights to subscribe for
Common Shares.
SECTION 4. PAYMENT OF EXPENSES. The Company will pay all expenses
incident to the performance of its obligations under this Agreement and the
Pricing Agreement, including (i) the printing and filing of the Registration
Statement as originally filed and of each amendment thereto, (ii) the printing
of this Agreement, the Pricing Agreement and the Indenture, (iii) the
preparation, issuance and delivery to you of the certificates for the
Securities, (iv) the fees and disbursements of the Company's counsel and
accountants, (v) the qualification of the Securities
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and the Common Shares issuable upon conversion of Securities under securities
laws in accordance with the provisions of Section 3(g), including filing fees
and the fees and disbursements of your counsel in connection therewith and in
connection with the preparation of the Blue Sky surveys, (vi) the printing and
delivery to you of copies of the Registration Statement as originally filed and
of each amendment thereto, of the preliminary prospectuses, and of the
Prospectus and any amendments or supplements thereto, (vii) the printing and
delivery to you of copies of the Blue Sky surveys, (viii) the fees and expenses
of the Trustee, including the fees and disbursements of counsel for the Trustee
in connection with the Indenture, (ix) any fees payable in connection with the
rating of the Securities, (x) the fee of the National Association of Securities
Dealers, Inc. and (xi) the fees and expenses incurred in connection with the
listing of the Securities, and the Common Shares into which the Securities are
convertible, on the American Stock Exchange.
If this Agreement is terminated by you in accordance with the provisions of
Section 5 or Section 9(a)(i), the Company shall reimburse you for all of your
out-of-pocket expenses, including the reasonable fees and disbursements of your
counsel.
SECTION 5. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. Your obligations
hereunder are subject to the accuracy of the representations and warranties of
the Company herein contained, to the performance by the Company of its
obligations hereunder, and to the following further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date hereof, or with your consent, at a later time and
date, not later, however, than 5:30 P.M. on the first business day following
the date hereof, or at such later time and date as may be approved by you;
and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission. If the
Company has elected to rely upon Rule 430A or Rule 434 of the 1933 Act
Regulations, the price of the Securities and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A or Rule 434 shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) of the 1933 Act Regulations within the
prescribed time period, and prior to Closing Time the Company shall have
provided evidence satisfactory to you of such timely filing, or a
post-effective amendment providing such information shall have been promptly
filed and declared effective in accordance with the requirements of Rule 430A
of the 1933 Act Regulations.
(b) At Closing Time, you shall have received:
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(1) The opinion, dated as of Closing Time, of Sidley & Austin,
counsel for the Company, in form and substance reasonably satisfactory to
your counsel, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus.
(iii) To the knowledge of such counsel, the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to have a material adverse affect on the
Company and its consolidated subsidiaries considered as one
enterprise.
(iv) Each of United States Cellular Operating Company
("USCOC") and United States Cellular Investment Company ("USCIC" and,
together with USCOC, the "Direct Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware and, to the knowledge of such
counsel, is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which it owns
or leases substantial properties or in which the conduct of its
business requires such qualification, except where the failure to be
so qualified could not reasonably be expected to have a material
adverse affect on the Company and its consolidated subsidiaries
considered as one enterprise; all of the issued and outstanding
capital stock of each of the Direct Subsidiaries has been duly
authorized and validly issued and is fully paid and non-assessable and
all of such capital stock is owned of record by the Company free and
clear, to such counsel's knowledge, of any security interest,
mortgage, pledge, lien, encumbrance or claim.
(v) The Initial Securities or Option Securities, as the
case may be, to be issued and sold by the Company pursuant to this
Agreement have been duly authorized by the requisite corporate action
on the part of the Company, and the Securities, when executed and
authenticated in accordance with the terms of the Indenture and
delivered to and paid for by you as provided in this Agreement, will
be valid and binding
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obligations of the Company entitled to the benefits of the Indenture
and enforceable against the Company in accordance with their terms,
except to the extent that enforcement thereof may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (2) public policy considerations and (3) general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); and the Securities and the Indenture
conform as to legal matters in all material respects to the
descriptions thereof in the Prospectus.
(vi) The Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement
enforceable against the Company in accordance with its terms, except
to the extent that enforcement thereof may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (2) public policy considerations and (3) general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); the Indenture has been duly qualified
under the 1939 Act.
(vii) The Common Share Delivery Arrangement Agreement has
been duly authorized, executed and delivered by the Company and is a
valid and binding agreement enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by (1) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating
to creditors' rights generally, (2) public policy considerations and
(3) general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).
(viii) The Company has authorized capital stock as set forth
in or incorporated by reference into the Registration Statement; to
the knowledge of such counsel, all of the issued and outstanding
shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable; and the
capital stock of the Company, including, without limitation, the
Common Shares, conforms as to legal matters in all material respects
to the descriptions thereof included in or incorporated by reference
into the Prospectus.
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(ix) Upon issuance and delivery of the Securities in
accordance with this Agreement, the Pricing Agreement and the
Indenture, the Securities shall be convertible at the option of the
holder thereof into Common Shares in accordance with the terms of the
Securities and the Indenture (with the Company having the election to
pay cash equal to the value of the Common Shares deliverable upon
conversion); and the Common Shares initially issuable upon conversion
of the Securities (assuming no exercise of such election to pay cash
by the Company) have been duly authorized and reserved for issuance
and, when issued and delivered pursuant to the terms of the Indenture,
will be validly issued, fully paid and non-assessable.
(x) This Agreement, the Pricing Agreement and the
Registration Rights Agreement have each been duly authorized, executed
and delivered by the Company; and the Registration Rights Agreement,
the Securities Loan Agreement and the Securities Loan Termination
Agreement (the "Securities Loan Termination Agreement") among you,
TDS and Harris Trust and Savings Bank have each been duly authorized,
executed and delivered by TDS.
(xi) The Registration Statement is effective under the 1933
Act, and to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued under the
1933 Act or proceedings therefor initiated or threatened by the
Commission.
(xii) At the time the Registration Statement became effective
and at the Representation Date, the Registration Statement and the
Prospectus (other than the financial statements, financial data and
supporting schedules included therein and the Included Specified
Information, as to which no opinion need be rendered) complied as to
form in all material respects with the applicable requirements of the
1933 Act and the 1933 Act Regulations. As used in such opinion,
"Included Specified Information" shall mean the following information
contained in the Prospectus: (1) the information under the captions
"Summary Operating Data," "Summary Consolidated Financial Information"
and "Capitalization," (2) the table summarizing the Company's markets
and consolidated operations under the caption "The Company's
Operations," (3) the table of the Company's cellular interests under
the caption "The Company's Cellular Interests" and (4) the table
summarizing the Company's major service areas under the caption
"Customers and System Usage."
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(xiii) The documents incorporated by reference into the
Prospectus (other than the financial statements, financial data and
supporting schedules included therein and the Incorporated Specified
Information, as to which no opinion need be rendered), when they were
filed with the Commission, complied as to form in all material
respects with the applicable requirements of the 1934 Act and the 1934
Act Regulations. As used in such opinion, "Incorporated Specified
Information" shall mean the following information incorporated by
reference into the Prospectus from Part I, Item 1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1994: (1)
the table summarizing the status of the Company's interests in
cellular markets at December 31, 1994 under the caption "The Company,"
(2) the table under the caption "The Company's Cellular Interests,"
(3) the table summarizing certain information about customer and
market penetration in the Company's managed operations under the
caption "Customers and System Usage" and (4) the table summarizing
certain information by operating cluster under the caption "Customers
and System Usage."
(xiv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened which are required to
be disclosed in the Registration Statement other than those disclosed
therein or incorporated by reference therein.
(xv) The information in the Registration Statement under
"Description of LYONs", "Description of Capital Stock" and "Certain
Tax Aspects", to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and is correct in
all material respects.
(xvi) To such counsel's knowledge, (1) there are no
contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described in the Registration
Statement or to be filed as exhibits thereto which are not described
or filed as required and (2) such descriptions are correct in all
material respects.
(xvii) No consent, approval, authorization or order of, or
registration or qualification with, any court or governmental
authority or agency is required in connection with the issuance and
sale of the Securities or the consummation of the transactions
contemplated by this Agreement, the Pricing Agreement, the
Registration Rights Agreement, the Common Share Delivery Arrangement
Agreement, the Securities Loan Agreement or the Securities Loan
Termination Agreement, except (1) the registration under the 1933
Act of the Securities,
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the Common Shares issuable upon conversion of Securities, the sale of
Common Shares borrowed by you pursuant to the Securities Loan
Agreement, the delivery of Common Shares in connection with Common
Share Delivery Arrangements (as defined in the Indenture) and the sale
of Securities acquired by a Standby Share Deliverer (as defined in the
Indenture) pursuant to any such Common Share Delivery Arrangement, (2)
registration under the 1934 Act of the Securities, (3) the
qualification of the Indenture under the 1939 Act and (4) such
consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by
you, the issuance of Common Shares upon conversion of any of the
Securities, the sale of Common Shares borrowed by you pursuant to the
Securities Loan Agreement, the delivery of Common Shares in connection
with Common Share Delivery Arrangements and the sale of Securities
acquired by a Standby Share Deliverer pursuant to any such Common
Share Delivery Arrangement.
(xviii) To such counsel's knowledge, no consents or waivers
from the holders of the Company's capital stock are required to
consummate the transactions contemplated hereby or by the Registration
Rights Agreement, the Common Share Delivery Arrangement Agreement,
the Securities Loan Agreement or the Securities Loan Termination
Agreement or the issuance or delivery of Common Shares upon
conversion of Securities, other than such consents and waivers as
have been obtained; and no holders of securities of the Company have
rights to the registration of such securities in connection with the
registration of the Securities, the Common Shares issuable or
deliverable upon conversion of Securities, sales of Common Shares
borrowed pursuant to the Securities Loan Agreement or resales of
Securities acquired by a Standby Share Deliverer (as defined in the
Indenture) pursuant to the Common Share Delivery Arrangement
Agreement, other than such rights as have been waived.
(xix) The execution and delivery of this Agreement, the
Pricing Agreement, the Indenture, the Common Share Delivery
Arrangement Agreement and the Registration Rights Agreement, the
issuance of the Initial Securities or the Option Securities, as the
case may be, the issuance of Common Shares upon the purchase of any of
the Securities by the Company at the option of holders of Securities,
the issuance of Common Shares upon conversion of any of the
Securities, the compliance by the Company with all of the
provisions of
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the Securities, the Indenture, this Agreement, the Pricing Agreement,
the Common Share Delivery Arrangement Agreement and the Registration
Rights Agreement and the consummation of the transactions herein or
therein contemplated do not and will not constitute a breach of, or
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or,
to such counsel's knowledge, any of the Company's consolidated
subsidiaries pursuant to the terms of, (1) the Certificate of
Incorporation or by-laws of the Company, (2) any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or instrument
of which such counsel has knowledge, to which the Company or any of
the Company's consolidated subsidiaries is a party or by which the
Company or any of the Company's consolidated subsidiaries may be
bound, or to which any property or assets of the Company or any of the
Company's consolidated subsidiaries is subject, or (3) to such
counsel's knowledge, any currently applicable law, rule, regulation,
judgment, order or administrative or court decree.
Such opinion of Sidley & Austin shall additionally state that nothing
has come to their attention that has caused them to believe that the
Registration Statement (including the information deemed to be part of the
Registration Statement at such time of effectiveness pursuant to Rule 430A(b)
or Rule 434, if applicable, but excluding the financial statements, financial
data and supporting schedules included or incorporated by reference therein,
the Included Specified Information and the Incorporated Specified
Information, as to which no belief need be expressed) at the time it became
effective or at the Representation Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus (other than the financial statements, financial data and
supporting schedules included or incorporated by reference therein, the
Included Specified Information and the Incorporated Specified Information, as
to which no belief need be expressed) at the Representation Date (unless the
term "Prospectus" refers to a prospectus which has been provided to you by
the Company for use in connection with the offering of the Securities which
differs from the Prospectus on file at the Commission at the Representation
Date, in which case at the time it is provided to you for such use) or at
Closing Time, included an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Such opinion shall be limited to the laws of the State of New York, the
General Corporation Law of the State of Delaware and the laws of the United
States of America (other than the Communications
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Act of 1934, as amended (the "Communications Act"), and the rules and
regulations thereunder.)
(2) The opinion, dated as of Closing Time, of Koteen and Naftalin,
special counsel to the Company, in form and substance reasonably
satisfactory to your counsel, to the effect that:
(i) No consent, approval, authorization or order of, or
registration or qualification with, the Federal Communications
Commission (the "FCC") is required in connection with the issuance and
sale of Securities or the consummation of the transactions
contemplated by this Agreement, the Pricing Agreement, the
Registration Rights Agreement, the Common Share Delivery Arrangement
Agreement or the Securities Loan Agreement, except to the extent, if
any, that ownership of a given number of Common Shares, whether or not
acquired pursuant to any of the agreements identified above, would be
inconsistent with (a) limitations on alien ownership and/or cross
interests (i.e., ownership or control of competing cellular or
Personal Communications Services ("PCS") systems serving the same
general area) contained in the Communications Act or a rule,
regulation, judgment, order or administrative or court decree issued,
enacted or promulgated thereunder and now in effect, or (b) some
future provision or provisions of the Communications Act or a rule,
regulation, judgment, order or court decree issued, enacted or
promulgated thereunder.
(ii) The execution and delivery of this Agreement, the
Pricing Agreement, the Indenture, the Common Share Delivery
Arrangement Agreement and the Registration Rights Agreement, the
issuance of the Initial Securities or the Option Securities, as the
case may be, the issuance of Common Shares upon the purchase of any of
the Securities by the Company at the option of holders of Securities,
the issuance of Common Shares upon conversion of any of the
Securities, the acquisition and delivery by the Company of the TDS
Common Equity Securities upon the purchase of any of the Securities by
the Company at the option of holders of Securities, the compliance by
the Company with all of the provisions of the Securities, the
Indenture, this Agreement, the Pricing Agreement, the Common Share
Delivery Arrangement Agreement and the Registration Rights Agreement
and the consummation of the transactions herein or therein
contemplated do not and will not, to such counsel's knowledge,
conflict with or result in any violation of, or the creation of any
lien, charge or encumbrance upon, the property or assets of the
Company or, to such counsel's knowledge, its consolidated
subsidiaries, under
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the Communications Act or any rule, regulation, judgment, order or
administrative or court decree issued, enacted or promulgated
thereunder; neither will any such action conflict with or have a
material adverse effect on any of the certificates, authorities,
licenses or permits, if any, issued or to be issued by the FCC to the
Company or, to such counsel's knowledge, any of the Company's
consolidated subsidiaries that enable them to carry on the business
and operations now operated by them and which are material to the
business of the Company and its consolidated subsidiaries considered
as one enterprise, except to the extent, if any, that ownership of a
given number of Common Shares, whether or not acquired pursuant to any
of the agreements identified above, would be inconsistent with (a)
limitations on alien ownership and/or cross interests (i.e., ownership
or control of competing cellular or PCS Systems serving the same
general area) contained in the Communications Act or a rule,
regulation, judgment, order or administrative or court decree issued,
enacted or promulgated thereunder and now in effect, or (b) some
future provision or provisions of the Communications Act or a rule,
regulation, judgment, order or court decree issued, enacted or
promulgated thereunder.
(3) The opinion, dated as of Closing Time, of Mayer, Brown &
Platt, your counsel, with respect to the matters set forth in item (i)
(insofar as it relates to the existence and good standing of the Company),
(v), (vi), (vii) and (viii) (insofar as item (viii) relates to the
conformity of the capital stock of the Company to the description thereof
included in or incorporated by reference into the Prospectus) and (ix)
through (xii), inclusive, of subsection (b)(1) of this Section, as well as
in the last paragraph of subsection (b)(1) of this Section.
(c) At Closing Time there shall not have been, since the date hereof or
since the respective dates as of which information is given in the Prospectus,
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and you shall have received a certificate of the
Chairman, President or Vice President-Finance of the Company and of the
Controller or Treasurer of the Company, dated as of Closing Time, to the effect
that (i) there has been no such material adverse change with respect to the
Company and its subsidiaries considered as one enterprise, (ii) the
representations and warranties in Section 1(a) are true and correct with the
same force and effect as though expressly made at and as of Closing Time, (iii)
the Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied
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at or prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been received by the Company or, to the
Company's knowledge, issued and, to the Company's knowledge, no proceedings for
that purpose have been initiated or threatened by the Commission. As used in
this Section 5(c), the term "Prospectus" means the Prospectus in the form first
used to confirm sales of the Securities.
(d) At the time of the execution of this Agreement, you shall have
received from Arthur Andersen LLP a letter dated such date, in form and
substance satisfactory to you, to the effect that:
(i) they are independent public accountants with respect to the
Company and its consolidated subsidiaries within the meaning of the 1933
Act and the 1933 Act Regulations and no information concerning their
relationship with or interest in the Company and its consolidated
subsidiaries is required by Item 10 of the Registration Statement;
(ii) it is their opinion that (i) the financial statements and
supporting schedules included in or incorporated by reference into the
Registration Statement and covered by their opinions therein comply, and
(ii) the combined financial statements of the Cellular System Partnerships
incorporated by reference into the Registration Statement have been
properly compiled from the amounts and notes of the underlying separate
audited financial statements of the Cellular System Partnerships so as to
comply, in each case as to form in all material respects with the
applicable accounting requirements of the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations;
(iii) based upon limited procedures set forth in detail in such
letter, nothing has come to their attention which causes them to believe
that (A) the unaudited financial statements and supporting schedules, if
any, of the Company and its consolidated subsidiaries included in or
incorporated by reference into the Registration Statement do not comply
as to form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations or the 1934 Act
and the 1934 Act Regulations, as the case may be, or are not presented in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements included in or incorporated by reference into the Registration
Statement, (B) the unaudited amounts of revenues, net income and net
income per share set forth following "Summary Consolidated Financial
Information" in the Prospectus were not determined on a basis
substantially consistent with that used in determining the corresponding
amounts in the audited financial statements incorporated by reference in
the
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Registration Statement, (C) at a specified date not more than five days
prior to the date of this Agreement, there has been any change in the
capital stock of the Company or any increase in the consolidated long term
debt of the Company and its consolidated subsidiaries as compared with the
amounts shown in the March 31, 1995, balance sheet incorporated by
reference into the Registration Statement or, during the period from
April 1, 1995, to a specified date not more than five days prior to the
date of this Agreement, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated revenues,
operating income or operating cash flow of the Company and its
consolidated subsidiaries, except in all instances for changes, increases
or decreases which the Registration Statement and the Prospectus disclose
have occurred or may occur; and
(iv) in addition to the examination referred to in their opinions and
the limited procedures referred to in clause (iii) above, they have carried
out certain specified procedures, not constituting an audit, with respect
to certain amounts, percentages and financial information which are
included in the Registration Statement and Prospectus and which are
specified by you, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of the Company and its consolidated subsidiaries identified
in such letter.
(e) At Closing Time, you shall have received from Arthur Andersen LLP a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (d) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to Closing Time.
(f) At Closing Time your counsel shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities, as
contemplated herein, and related proceedings, or in order to evidence the
accuracy of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities and with respect to the
Common Shares or TDS Common Equity Securities issuable upon the purchase of
Securities by the Company at the option of holders of Securities and the Common
Shares issuable upon conversion of Securities as herein contemplated shall be
reasonably satisfactory in form and substance to you and your counsel.
(g) In the event you exercise your option provided in Section 2 hereof to
purchase all or any portion of the Option Securities,
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the representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall be true
and correct as of each Date of Delivery, and you shall have received:
(1) A certificate, dated such Date of Delivery, of the Chairman or
President of the Company and of the Controller or Treasurer of the Company
confirming that the certificate of the officers of the Company delivered at
Closing Time pursuant to Section 5(c) hereof remains true and correct as of
such Date of Delivery.
(2) The opinion of Sidley & Austin, counsel for the Company, in form
and substance reasonably satisfactory to your counsel, dated such Date of
Delivery, relating to the Option Securities and otherwise to the same
effect as the opinion required by Section 5(b)(1) hereof.
(3) The opinion of Koteen & Naftalin, special counsel for the
Company, in form and substance reasonably satisfactory to your counsel,
dated such Date of Delivery, relating to the Option Securities and
otherwise to the same effect as the opinion required by Section 5(b)(2)
hereof.
(4) The opinion of your counsel, Mayer, Brown & Platt, dated such
Date of Delivery, relating to the Option Securities and otherwise to the
same effect as the opinion required by Section 5(b)(3) hereof.
(5) A letter from Arthur Andersen LLP, in form and substance
reasonably satisfactory to you and dated such Date of Delivery,
substantially the same in scope and substance as the letter furnished to
you pursuant to Section 5(d) hereof, except that the "specified date" in
the letter furnished pursuant to this Section 5(g)(5) shall be a date not
more than five days prior to such Date of Delivery.
(h) At the time of the execution of this Agreement, you shall have
received a letter from TDS, addressed to you and in form and substance
satisfactory to you, confirming that (i) other than pursuant to the Securities
Loan Agreement, TDS will not sell, contract to sell or announce or make any
offering, sale or other disposition of any Common Shares or any Series A Common
Shares or any securities convertible into or exercisable or exchangeable for
Common Shares or Series A Common Shares, nor will it sell or grant options,
rights or warrants with respect to any Common Shares or any Series A Common
Shares or any securities convertible into or exercisable or exchangeable for
Common Shares or Series A Common Shares, in each case during a period of 90 days
after the date of the Pricing Agreement, without your prior written consent,
(ii) the Securities Loan Agreement and the Registration Rights Agreement and the
transactions contemplated therein have been duly authorized by
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all necessary corporate action of TDS, and (iii) TDS has waived and has not
transferred any of its rights permitting it to subscribe for or purchase
Securities upon issuance of the Securities or for Common Shares upon conversions
of Securities and has waived its rights permitting it to transfer any rights it
may have to subscribe for Common Shares upon the purchases of Securities by the
Company at the option of holders of Securities for (in whole or in part), at the
option of the Company, Common Shares.
(i) At the time of the execution of this Agreement, you shall have
received a letter from S.A. Coditel, Coditel Brabant S.A. and Codiservices S.A.
(collectively, "Coditel"), addressed to you and in form and substance
satisfactory to you, confirming that they have waived all of their rights
permitting them to subscribe for or purchase Securities upon issuance of the
Securities or Common Shares upon conversion of Securities, and that Coditel has
not transferred any of such rights.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement and the Pricing Agreement
may be terminated by you by notice to the Company at any time at or prior to
Closing Time or the applicable Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except as
provided in Section 4.
SECTION 6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless you and each person,
if any, who controls you within the meaning of Section 15 of the 1933 Act as
follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the information deemed to be part of
the Registration Statement pursuant to Rule 430A(b) of the 1933 Act
Regulations, if applicable, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any
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investigation or proceeding by any governmental agency or body, commenced
or threatened, or of any claim whatsoever based upon any such untrue
statement or omission or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the indemnifying
party; and
(iii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the fees and disbursements of counsel
chosen by you), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under (i) or (ii) above;
provided, however, that (A) this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by you
expressly for use in the Registration Statement (or any amendment thereto) or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) and (B) this indemnity agreement, with respect to any preliminary
prospectus, does not apply to any loss, liability, claim, damage or expense if a
copy of the Prospectus (as then amended or supplemented, if the Company shall
have furnished any amendments or supplements thereto to you) was not sent or
given by or on behalf of you to the person asserting any such loss, liability,
claim, damage or expense if such is required by law at or prior to the written
confirmation of the sale of such Securities to such person and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
loss, liability, claim, damage or expense.
(b) You agree to indemnify and hold harmless the Company, each of the
Company's directors, each of the Company's officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by you expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
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(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.
SECTION 7. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and you shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
you, as incurred, in such proportions that you are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the initial public offering price
appearing thereon and the Company is responsible for the balance; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section, each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act shall have the same right to contribution
as you, and each director of the Company, each officer of the Company who signed
the Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement and the Pricing Agreement, or contained in certificates of officers of
the Company submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of you or any
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to you.
SECTION 9. TERMINATION OF AGREEMENT.
(a) You may terminate this Agreement and the Pricing Agreement by notice to
the Company, at any time at or prior to Closing Time (i) if there has been,
since the date of this Agreement or since the respective dates as of which
information is given in the
-30-
<PAGE>
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, in each case, whether
or not arising in the ordinary course of business, (ii) if there has occurred
any material adverse change in the financial markets in the United States or any
outbreak of hostilities or escalation thereof or other calamity or crisis, the
effect of which is such as to make it, in your reasonable judgment,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, (iii) if trading in the Common Shares has been suspended by the
Commission, (iv) any downgrading in the rating accorded the Company's debt
securities by any "nationally recognized statistical rating organization," as
that term is defined by the Commission for purposes of Rule 436(g)(2) under the
Act, or any such organization shall have announced publicly that it has placed
any of such debt securities on what is commonly termed a "watch list" for
possible downgrading, or (v) if trading generally on either the American Stock
Exchange or the New York Stock Exchange has been suspended, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by either of said Exchanges or by order of the
Commission or any other governmental authority, or if a banking moratorium has
been declared by either Federal or New York authorities. As used in this
Section 9(a), the term "Prospectus" means the Prospectus in the form first used
to confirm sales of the Securities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4.
SECTION 10. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to you shall be
directed to you at Merrill Lynch & Co., 5500 Sears Tower, Chicago, Illinois
60606, attention of Steven R. Jackson; notices to the Company shall be directed
to it at United States Cellular Corporation, 8410 West Bryn Mawr, Suite 7000,
Chicago, Illinois 60631-3486; Attention: President.
SECTION 11. PARTIES. This Agreement and the Pricing Agreement shall each
inure to the benefit of and be binding upon you, the Company, and your and the
Company's respective successors. Nothing expressed or mentioned in this
Agreement or the Pricing Agreement is intended or shall be construed to give any
person, firm or corporation, other than you, the Company and your and the
Company's respective successors and the controlling persons and officers and
directors referred to in Sections 6, 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or the Pricing Agreement or any provision herein or
therein contained.
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<PAGE>
This Agreement and the Pricing Agreement and all conditions and provisions
hereof and thereof are intended to be for the sole and exclusive benefit of you,
the Company and your and the Company's respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Securities from you shall be deemed to be a successor by reason
merely of such purchase.
SECTION 12. GOVERNING LAW AND TIME. This Agreement and the Pricing
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be performed in said
State. Specified times of day refer to New York City time.
-32-
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
UNITED STATES CELLULAR CORPORATION
By
---------------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
-------------------------
[Purchase Agreement for the LYONs]
-33-
<PAGE>
UNITED STATES CELLULAR CORPORATION
$650,000,000
Liquid Yield Option-TM- Notes
Due 2015
(Zero Coupon -- Subordinated)
PRICING AGREEMENT
____________, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Sirs:
Reference is made to the Purchase Agreement, dated ____________, 1995 (the
"Purchase Agreement"), relating to the purchase by you of the above Liquid Yield
Option Notes (the "Initial Securities"), of United States Cellular Corporation
(the "Company").
Pursuant to Section 2 of the Purchase Agreement, the Company agrees with
you as follows:
1. The initial public offering price per $1,000 principal amount at
maturity of the Initial Securities, determined as provided in such Section 2,
shall be $______.
2. The Securities shall be convertible into common shares, $1.00 par
value per share, of the Company ("Common Shares") at an initial rate of ______
Common Shares per $1,000 principal amount at maturity of Securities; provided,
however, that the Company may elect to pay cash equal to the value of the Common
Shares into which the Initial Securities are convertible in lieu of delivering
such Common Shares upon conversion.
- ------------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
<PAGE>
3. Prior to ____________, 2000, the Securities will not be redeemable by
the Company. Beginning on ____________, 2000, the Securities will be redeemable
by the Company for cash at any time in whole, or from time to time in part, at
redemption prices equal to the issue price thereof plus accrued original issue
discount through the date of redemption.
4. The purchase price per $1,000 principal amount at maturity of Initial
Securities to be paid by you shall be $______, being an amount equal to the
initial public offering price set forth above, less $____ per $1,000 principal
amount at maturity of Initial Securities.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
you and the Company in accordance with its terms.
Very truly yours,
UNITED STATES CELLULAR CORPORATION
By
----------------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first
above written:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
--------------------------
[Purchase Agreement for the LYONs]
-2-
<PAGE>
-------------------------------------------------
UNITED STATES CELLULAR CORPORATION
Liquid Yield Option-TM- Notes
due 2015
(Zero Coupon-Subordinated)
-------------------------------
INDENTURE
Dated as of _________ __, 1995
HARRIS TRUST AND SAVINGS BANK,
TRUSTEE
-----------------------------------------------------
-TM-Trademark of Merrill Lynch & Co., Inc.
<PAGE>
|| CROSS REFERENCE TABLE(1)
TIA Indenture
Section Section
- ------- ---------
310(a)(1) ........................................... 7.10
(a)(2) ........................................... 7.10
(a)(3) ........................................... N.A.
(a)(4) ........................................... N.A.
(b) ........................................ 7.08; 7.10
(c) ........................................... N.A.
311(a) ........................................... 7.11
(b) ........................................... 7.11
(c) ........................................... N.A.
312(a) ........................................... 2.05
(b) ........................................... 12.03
(c) ........................................... 12.03
313(a) ........................................... 7.06
(b)(1) ........................................... N.A.
(b)(2) ........................................... 7.06
(c) ........................................... 12.02
(d) ........................................... 7.06
314(a) ................................. 4.02; 4.03; 12.02
(b) ........................................... N.A.
(c)(1) ........................................... 12.04
(c)(2) ........................................... 12.04
(c)(3) ........................................... N.A.
(d) ........................................... N.A.
(e) ........................................... 12.05
(f) ........................................... N.A.
315(a) ........................................... 7.01
(b) ....................................... 7.05; 12.02
(c) ........................................... 7.01
(d) ........................................... 7.01
(e) ........................................... 6.11
316(a) (last sentence) .............................. 2.08
(a)(1)(A) ........................................ 6.05
(a)(1)(B) ........................................ 6.04
(a)(2) ........................................... N.A.
(b) ........................................ 6.06; 6.07
317(a)(1) ........................................... 6.08
(a)(2) ........................................... 6.09
(b) ........................................... 2.04
318(a) ........................................... 12.01
N.A. means Not Applicable.
- ------------------------
(1) Note: This Cross Reference Table shall not, for any purpose, be deemed
to be part of the Indenture.
<PAGE>
TABLE OF CONTENTS(1)
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions. . . . . . . . . . . . . . . . . . . . . 6
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.04. Rules of Construction. . . . . . . . . . . . . . . . . . . 7
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . 8
SECTION 2.03. Registrar, Paying Agent and Conversion
Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.04. Paying Agent to Hold Money and
Securities in Trust . . . . . . . . . . . . . . . . . . . 9
SECTION 2.05. Securityholder Lists . . . . . . . . . . . . . . . . . . .10
SECTION 2.06. Transfer and Exchange. . . . . . . . . . . . . . . . . . .10
SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . .11
SECTION 2.08. Outstanding Securities; Determinations
of Holders' Action. . . . . . . . . . . . . . . . . . . .11
SECTION 2.09. Temporary Securities . . . . . . . . . . . . . . . . . . .12
SECTION 2.10. Cancellation . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 2.11. Persons Deemed Owners. . . . . . . . . . . . . . . . . . .13
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01. Right to Redeem; Notices to Trustee. . . . . . . . . . . .14
SECTION 3.02. Selection of Securities to Be Redeemed . . . . . . . . . .14
SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . .15
SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . .15
SECTION 3.05. Deposit of Redemption Price. . . . . . . . . . . . . . . .16
SECTION 3.06. Securities Redeemed in Part. . . . . . . . . . . . . . . .16
SECTION 3.07. Conversion Arrangement on Call for
Redemption. . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 3.08. Purchase of Securities at Option of the
Holder. . . . . . . . . . . . . . . . . . . . . . . . . .17
- ---------------------
(1)Note: This Table of Contents shall not, for any purposes, be deemed to be
part of the Indenture.
-ii-
<PAGE>
SECTION 3.09. Purchase of Securities at Option of the
Holder upon Change in Control . . . . . . . . . . . . . .27
SECTION 3.10. Effect of Purchase Notice or Change in
Control Purchase Notice . . . . . . . . . . . . . . . . .32
SECTION 3.11. Deposit of Purchase Price or Change in
Control Purchase Price. . . . . . . . . . . . . . . . . .33
SECTION 3.12. Securities Purchased in Part . . . . . . . . . . . . . . .34
SECTION 3.13. Covenant to Comply With Securities Laws
Upon Purchase of Securities . . . . . . . . . . . . . . .34
SECTION 3.14. Repayment to the Company . . . . . . . . . . . . . . . . .34
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities. . . . . . . . . . . . . . . . . . .35
SECTION 4.02. SEC and Other Reports. . . . . . . . . . . . . . . . . . .35
SECTION 4.03. Compliance Certificate . . . . . . . . . . . . . . . . . .36
SECTION 4.04. Further Instruments and Acts . . . . . . . . . . . . . . .36
SECTION 4.05. Maintenance of Office or Agency. . . . . . . . . . . . . .36
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge or Transfer
Assets. . . . . . . . . . . . . . . . . . . . . . . . . .37
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default. . . . . . . . . . . . . . . . . . . . .38
SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . .41
SECTION 6.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . .41
SECTION 6.05. Control by Majority. . . . . . . . . . . . . . . . . . . .41
SECTION 6.06. Limitation on Suits. . . . . . . . . . . . . . . . . . . .42
SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . .42
SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . .42
SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . .43
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . .44
SECTION 6.12. Waiver of Stay, Extension or Usury Laws. . . . . . . . . .45
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee. . . . . . . . . . . . . . . . . . . . .45
SECTION 7.02. Rights of Trustee. . . . . . . . . . . . . . . . . . . . .46
SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . .48
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<PAGE>
SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . .48
SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . .49
SECTION 7.06. Reports by Trustee to Holders. . . . . . . . . . . . . . .49
SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . .49
SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . .50
SECTION 7.09. Successor Trustee by Merger. . . . . . . . . . . . . . . .51
SECTION 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . .51
SECTION 7.11. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . . .51
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Discharge of Liability on Securities . . . . . . . . . . .52
SECTION 8.02. Repayment to the Company . . . . . . . . . . . . . . . . .52
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . .52
SECTION 9.02. With Consent of Holders. . . . . . . . . . . . . . . . . .53
SECTION 9.03. Compliance with Trust Indenture Act. . . . . . . . . . . .54
SECTION 9.04. Revocation and Effect of Consents,
Waivers and Actions . . . . . . . . . . . . . . . . . . .54
SECTION 9.05. Notation on or Exchange of Securities. . . . . . . . . . .55
SECTION 9.06. Trustee to Sign Supplemental Indentures. . . . . . . . . .55
SECTION 9.07. Effect of Supplemental Indentures. . . . . . . . . . . . .55
ARTICLE 10
SUBORDINATION
SECTION 10.01. Securities Subordinate to Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . .55
SECTION 10.02. Payment Over of Proceeds upon
Dissolution, Etc . . . . . . . . . . . . . . . . . . . .56
SECTION 10.03. Acceleration of Securities. . . . . . . . . . . . . . . .58
SECTION 10.04. Default on Senior Indebtedness. . . . . . . . . . . . . .59
SECTION 10.05. Payment Permitted If No Default . . . . . . . . . . . . .60
SECTION 10.06. Subrogation to Rights of Holders of
Senior Indebtedness. . . . . . . . . . . . . . . . . . .61
SECTION 10.07. Provisions Solely to Define Relative
Rights . . . . . . . . . . . . . . . . . . . . . . . . .61
SECTION 10.08. Trustee to Effectuate Subordination . . . . . . . . . . .62
SECTION 10.09. No Waiver of Subordination Provisions . . . . . . . . . .62
SECTION 10.10. Notice to Trustee . . . . . . . . . . . . . . . . . . . .63
SECTION 10.11. Reliance on Judicial Order or
Certificate of Liquidating Agent . . . . . . . . . . . .64
SECTION 10.12. Trustee Not Fiduciary for Holders of
Senior Indebtedness. . . . . . . . . . . . . . . . . . .64
-iv-
<PAGE>
SECTION 10.13. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights . . . . . . . . . . . . . . . . . . . . . . . . .64
SECTION 10.14. Article 10 Applicable to Paying Agents
and Conversion Agents. . . . . . . . . . . . . . . . . .64
ARTICLE 11
CONVERSION
SECTION 11.01. Conversion Privilege. . . . . . . . . . . . . . . . . . .65
SECTION 11.02. Conversion Procedure. . . . . . . . . . . . . . . . . . .67
SECTION 11.03. Fractional Shares . . . . . . . . . . . . . . . . . . . .69
SECTION 11.04. Taxes on Conversion . . . . . . . . . . . . . . . . . . .69
SECTION 11.05. Company to Provide Common Shares. . . . . . . . . . . . .70
SECTION 11.06. Adjustment for Change in Capital Stock. . . . . . . . . .70
SECTION 11.07. Adjustment for Rights Issue . . . . . . . . . . . . . . .71
SECTION 11.08. Adjustment for Other Distributions. . . . . . . . . . . .72
SECTION 11.09. When Adjustment May Be Deferred . . . . . . . . . . . . .75
SECTION 11.10. When No Adjustment Required . . . . . . . . . . . . . . .75
SECTION 11.11. Notice of Adjustment. . . . . . . . . . . . . . . . . . .76
SECTION 11.12. Voluntary Increase. . . . . . . . . . . . . . . . . . . .76
SECTION 11.13. Notice of Certain Transactions. . . . . . . . . . . . . .76
SECTION 11.14. Reorganization of Company; Special
Distributions. . . . . . . . . . . . . . . . . . . . . .76
SECTION 11.15. Company Determination Final . . . . . . . . . . . . . . .77
SECTION 11.16. Trustee's Adjustment Disclaimer . . . . . . . . . . . . .78
SECTION 11.17. Simultaneous Adjustments. . . . . . . . . . . . . . . . .78
SECTION 11.18. Successive Adjustments. . . . . . . . . . . . . . . . . .78
SECTION 11.19. Common Share Delivery Arrangement . . . . . . . . . . . .78
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls. . . . . . . . . . . . . . .81
SECTION 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . .81
SECTION 12.03. Communication by Holders with Other
Holders. . . . . . . . . . . . . . . . . . . . . . . . .82
SECTION 12.04. Certificate and Opinion as to
Conditions Precedent . . . . . . . . . . . . . . . . . .82
SECTION 12.05. Statements Required in Certificate or
Opinion. . . . . . . . . . . . . . . . . . . . . . . . .83
SECTION 12.06. Separability Clause . . . . . . . . . . . . . . . . . . .83
SECTION 12.07. Rules by Trustee, Paying Agent,
Conversion Agent and Registrar . . . . . . . . . . . . .83
SECTION 12.08. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . .83
SECTION 12.09. No Recourse Against Others. . . . . . . . . . . . . . . .83
SECTION 12.10. Successors. . . . . . . . . . . . . . . . . . . . . . . .83
SECTION 12.11. Multiple Originals. . . . . . . . . . . . . . . . . . . .84
-v-
<PAGE>
INDENTURE dated as of _________ __, 1995 between UNITED STATES
CELLULAR CORPORATION, a Delaware corporation ("COMPANY"), and HARRIS TRUST AND
SAVINGS BANK ("TRUSTEE").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's Liquid Yield
Option-TM- Notes due 2015 (Zero Coupon - Subordinated):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person; "CONTROL" when used with respect to any
specified person means the power to direct or cause the direction of the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"BOARD OF DIRECTORS" means, with respect to any matter, either the
board of directors of the Company or any committee of such board duly
authorized, with respect to such matter, to exercise the powers of such board.
"BUSINESS DAY" means each day of the year on which banking
institutions are not required or authorized to close in the City of New York,
New York or the City of Chicago, Illinois.
"CAPITAL STOCK" for any corporation means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that
corporation.
"CASH" or "cash" means such coin or currency of the United States of
America as at any time of payment is legal tender for the payment of public and
private debts.
"COMMON SHARES" means the Common Shares, par value $1.00 per share, of
the Company as they exist on the date of this
- -----------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
<PAGE>
Indenture or any other shares of Capital Stock of the Company into which the
Common Shares shall be reclassified or changed.
"COMPANY" means the party named as the "Company" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President, a
Senior Vice President or a Vice President, and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the
Trustee.
"DEBT" means with respect to any person at any date, without
duplication, (i) all obligations of such person for borrowed money, (ii) all
obligations of such person evidenced by bonds, debentures, notes or other
similar instruments, other than any account payable or other accrued current
liability or obligation incurred in the ordinary course of business in
connection with the obtaining of materials or services, (iii) all Debt of others
secured by a lien on any asset of such person, whether or not such Debt is
assumed by such person, (iv) all obligations of such person with respect to
letters of credit (or local guaranties, as applicable) or bankers' acceptances
issued for the account of such person or with respect to interest rate
protection agreements or currency exchange or purchase agreements, (v) all
obligations of such person in respect to leases of such person as lessee which,
in conformity with generally accepted accounting principles, are required to be
accounted for as capitalized lease obligations on the balance sheet of such
person, (vi) all obligations of such person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such person and
all obligations of such person under any title retention agreement, and (vii)
all Debt of others for the payment of which such person is responsible or liable
as obligor or guarantor, including, without limitation, obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the type described in clauses (i) through (vi).
"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
- --------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
-2-
<PAGE>
"HOLDER" or "SECURITYHOLDER" means a person in whose name a Security
is registered on the Registrar's books.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.
"ISSUE DATE" of any Security means the date on which the Security was
originally issued or deemed issued as set forth on the face of the Security.
"ISSUE PRICE" of any Security means, in connection with the original
issuance of such Security, the initial issue price at which the Security is sold
as set forth on the face of the Security.
"OFFICER" means the Chairman of the Board, the President, any Senior
Vice President, any Vice President, the Treasurer, the Secretary, the
Controller, any Assistant Treasurer, any Assistant Secretary or any Assistant
Controller of the Company.
"OFFICERS' CERTIFICATE" means a written certificate containing the
information specified in Sections 12.04 and 12.05, signed in the name of the
Company by its Chairman of the Board, its President, a Senior Vice President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary,
an Assistant Secretary, its Controller or an Assistant Controller, and delivered
to the Trustee. An Officers' Certificate given pursuant to Section 4.03 shall
be signed by the principal executive, financial or accounting officer of the
Company but need not contain the information specified in Sections 12.04 and
12.05.
"OPINION OF COUNSEL" means a written opinion containing the
information specified in Sections 12.04 and 12.05, from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of, or
counsel to, the Company or the Trustee.
"ORIGINAL ISSUE DISCOUNT" of any Security means the difference between
the Issue Price and the Principal Amount at Maturity of the Security as set
forth on the face of the Security.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
or government or any agency or political subdivision thereof.
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"PRINCIPAL AMOUNT AT MATURITY" of a Security means the Principal
Amount at Maturity as set forth on the face of the Security.
"REDEMPTION DATE" or "REDEMPTION DATE" shall mean the date specified
for redemption of the Securities in accordance with the terms of the Securities
and this Indenture.
"REDEMPTION PRICE" or "REDEMPTION PRICE" shall have the meaning set
forth in paragraph 5 of the Securities.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means
any officer within the Corporate Trust Department (or any successor group)
including without limitation any vice president, any assistant vice president,
any trust officer, any assistant secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above-
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"SEC" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the bodies
performing such duties at such time.
"SECURITIES" means any of the Company's Liquid Yield Option Notes due
2015 (Zero Coupon-Subordinated), as amended or supplemented from time to time,
issued under this Indenture.
"SECURITYHOLDER" or "HOLDER" means a person in whose name a Security
is registered on the Registrar's books.
"SERIES A COMMON SHARES" means the Series A Common Shares, par value
$1.00 per share, of the Company as they exist on the date of this Indenture or
any other shares of Capital Stock of the Company into which the Series A Common
Shares shall be reclassified or changed.
"STATED MATURITY", when used with respect to any Security, means the
date specified in such Security as the fixed date on which an amount equal to
the Principal Amount at Maturity of such Security is due and payable.
"SUBSIDIARY" means (i) a corporation, a majority of whose Capital
Stock with voting power, under ordinary circumstances, to elect directors is, at
the date of determination, directly or indirectly owned by the Company, by one
or more Subsidiaries of the Company or by the Company and one
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or more Subsidiaries of the Company, (ii) a partnership in which the Company or
a Subsidiary of the Company holds a majority interest in the equity capital or
profits of such partnership, or (iii) any other person (other than a
corporation) in which the Company, a Subsidiary of the Company or the Company
and one or more Subsidiaries of the Company, directly or indirectly, at the date
of determination, has (x) at least a majority ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such person.
"TDS" means Telephone and Data Systems, Inc., an Iowa corporation, and
any successors.
"TDS COMMON EQUITY SECURITIES" means common equity securities of TDS
which are publicly traded at the applicable time such common equity securities
are being referred to herein.
"TIA" means the Trust Indenture Act of 1939 as in effect on the date
of this Indenture, provided, however, that in the event the TIA is amended after
such date, TIA means, to the extent required by any such amendment, the TIA as
so amended.
"TRADING DAY" means a day during which trading in securities generally
occurs on the American Stock Exchange or, if the Common Shares or the specified
TDS Common Equity Securities, as applicable, are not listed on the American
Stock Exchange, on the principal other national or regional securities exchange
on which the Common Shares or the specified TDS Common Equity Securities, as
applicable, are then listed or, if the Common Shares or the specified TDS Common
Equity Securities, as applicable, are not listed on a national or regional
securities exchange, on The Nasdaq Stock Market or, if the Common Shares or the
specified TDS Common Equity Securities, as applicable, are not quoted on The
Nasdaq Stock Market, on the principal other market on which the Common Shares or
the specified TDS Common Equity Securities, as applicable, are then traded.
"TRUSTEE" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.
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SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"ASSOCIATE" ............................................ 3.09(a)
"AVERAGE QUOTED PRICE" ................................. 11.01
"BANKRUPTCY LAW" ....................................... 6.01
"BENEFICIAL OWNER" ..................................... 3.09(a)
"CARLSON FAMILY" ...................................... 3.09
"CHANGE IN CONTROL" .................................... 3.09(a)
"CHANGE IN CONTROL PURCHASE DATE" ...................... 3.09(a)
"CHANGE IN CONTROL PURCHASE NOTICE" .................... 3.09(c)
"CHANGE IN CONTROL PURCHASE PRICE" ..................... 3.09(a)
"COMMON SHARE DELIVERY ARRANGEMENT" .................... 11.19
"COMPANY NOTICE" ....................................... 3.08(e)
"COMPANY NOTICE DATE"................................... 3.08(c)
"CONVERSION AGENT" ..................................... 2.03
"CONVERSION DATE" ...................................... 11.02
"CONVERSION RATE" ...................................... 11.01
"CUSTODIAN" ............................................ 6.01
"DESIGNATED TRANSACTION" .............................. 3.09
"EVENT OF DEFAULT" ..................................... 6.01
"EXCHANGE ACT" ......................................... 3.08(d)
"EX-DIVIDEND TIME" ..................................... 11.01
"EXTRAORDINARY CASH DIVIDEND" .......................... 11.08
"MARKET PRICE" ......................................... 3.08(d)
"MOODY'S" ............................................. 3.09
"NOTICE OF DEFAULT" .................................... 6.01
"OPTIONAL PURCHASE DATE" ............................... 3.08(a)
"OVER-ALLOTMENT OPTION" ................................ 2.02
"PAYING AGENT" ......................................... 2.03
"PURCHASE DATE" ........................................ 3.08(a)
"PURCHASE NOTICE" ...................................... 3.08(a)
"PURCHASE PRICE" ....................................... 3.08(a)
"QUOTED PRICE" ......................................... 11.01
"RATING AGENCY" ....................................... 3.09
"RATING CATEGORY" ..................................... 3.09
"RATING DATE" ......................................... 3.09
"RATING DECLINE" ...................................... 3.09
"RATING PERIOD" ....................................... 3.09
"REFERENCE DATE" ...................................... 3.09
"REGISTRAR" ............................................ 2.03
"S&P" ................................................. 3.09
"SALE PRICE" ........................................... 3.08(d)
"SECURITIES ACT" ....................................... 3.08(d)
"SENIOR INDEBTEDNESS"................................... 10.01
"SPECIFIED TDS COMMON EQUITY SECURITIES"................ 3.08(b)
"STANDBY SHARE DELIVERER"............................... 11.19
"TIME OF DETERMINATION" ................................ 11.01
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SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITY HOLDER" means a Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(3) "or" is not exclusive;
(4) "including" means including, without limitation; and
(5) words in the singular include the plural, and words in the plural
include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A,
which is a part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule or usage (provided that any
such
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notation, legend or endorsement required by usage is in a form acceptable to the
Company). The Company shall provide any such notations, legends or endorsements
to the Trustee in writing. Each Security shall be dated the date of its
authentication.
SECTION 2.02. EXECUTION AND AUTHENTICATION. The Securities shall be
executed on behalf of the Company by its Chairman of the Board, its President,
one of its Senior Vice Presidents or one of its Vice Presidents, under its
corporate seal reproduced thereon and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at the time of the execution of the Securities the proper Officers of
the Company shall bind the Company, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the authentication and
delivery of such Securities or did not hold such offices at the date of
authentication of such Securities.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein duly
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
The Trustee shall authenticate and deliver Securities for original
issue in an aggregate Principal Amount at Maturity of up to $650,000,000 upon a
Company Order without any further action by the Company; PROVIDED, HOWEVER, that
in the event that the Company sells any Securities pursuant to the underwriter's
over-allotment option (the "OVER-ALLOTMENT OPTION") granted pursuant to Section
2 of the Purchase Agreement between the Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated dated _________ __, 1995 then the Trustee shall
authenticate and deliver Securities for original issue in an aggregate Principal
Amount at Maturity of up to $650,000,000 plus up to $95,000,000 aggregate
Principal Amount at Maturity of Securities sold pursuant to the Over-Allotment
Option upon a Company Order without any further action by the Company. The
aggregate Principal Amount at Maturity of Securities outstanding at any time may
not exceed the amount set forth in the foregoing sentence, subject to the
proviso set forth therein, except as provided in Section 2.07.
The Securities shall be issued only in registered form without coupons
and only in denominations of $1,000 of Principal Amount at Maturity and any
integral multiple thereof.
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SECTION 2.03. REGISTRAR, PAYING AGENT AND CONVERSION AGENT. The
Company shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange ("REGISTRAR"), an office or agency
where Securities may be presented for purchase or payment ("PAYING AGENT") and
an office or agency where Securities may be presented for conversion
("CONVERSION AGENT"). The Registrar shall keep a register of the Securities and
of their transfer and exchange. The Company may have one or more co-registrars,
one or more additional paying agents and one or more additional conversion
agents. The term Registrar includes any co-registrar, including any named
pursuant to Section 4.05. The term Paying Agent includes any additional paying
agent, including any named pursuant to Section 4.05. The term Conversion Agent
includes any additional conversion agent, including any named pursuant to
Section 4.05.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (other than the
Trustee). The agreement shall implement the provisions of this Indenture that
relate to such agent. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar, Paying
Agent or Conversion Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.07. The Company or
any Subsidiary or an Affiliate of either of them may act as Paying Agent,
Registrar, Conversion Agent or co-registrar.
The Company initially appoints the Trustee as Registrar, Conversion
Agent and Paying Agent in connection with the Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY AND SECURITIES IN TRUST.
Except as otherwise provided herein, on or prior to each due date of payments in
respect of any Security, the Company shall deposit with the Paying Agent a sum
of money (in immediately available funds if deposited on the due date) or, if
permitted by the terms hereof, securities sufficient to make such payments when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money and securities held by the
Paying Agent for the making of payments in respect of the Securities and shall
notify the Trustee of any default by the Company in making any such payment. At
any time during the continuance of any such default, the Paying Agent shall,
upon the written request of the Trustee, forthwith pay to the Trustee all money
and securities so held in trust. If the Company, a Subsidiary or an Affiliate
of either of them acts as Paying Agent, it shall segregate the money and
securities held by it as Paying Agent and hold it as a separate trust fund. The
Company at any time may require a Paying Agent to pay all money and
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securities held by it to the Trustee and to account for any money and securities
disbursed by it. Upon doing so, the Paying Agent shall have no further
liability for the money or securities.
SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on ____________ __ and ____________ __ a listing of Securityholders
dated within 15 days of the date on which the list is furnished and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE. Upon surrender for
registration of transfer of any Security, together with a written instrument
of transfer satisfactory to the Company and the Registrar duly executed by
the Securityholder or such Securityholder's attorney duly authorized in
writing, at the office or agency of the Company designated as Registrar
pursuant to Section 2.03, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denomination or
denominations, of a like aggregate Principal Amount at Maturity. The Company
shall not charge a service charge for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges that may be imposed in
connection with the transfer or exchange of the Securities from the
Securityholder requesting such transfer or exchange.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
Principal Amount at Maturity, upon surrender of the Securities to be exchanged,
together with a written instrument of transfer satisfactory to the Registrar
duly executed by the Securityholder or such Securityholder's attorney duly
authorized in writing, at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of (a) Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion thereof
not to be redeemed), (b) any Securities in respect of which a Purchase Notice or
Change in Control Purchase Notice has been given and
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not withdrawn by the Holder thereof in accordance with the terms of this
Indenture (except, in the case of Securities to be purchased in part, the
portion thereof not to be purchased) or (c) any Securities for a period of 15
days before a selection of Securities to be redeemed.
SECTION 2.07. REPLACEMENT SECURITIES. If (a) any mutilated Security
is surrendered to the Trustee, or (b) the Company and the Trustee receive
evidence to their satisfaction of the destruction, loss or theft of any
Security, and there is delivered to the Company and the Trustee such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall execute and upon a Company
Order the Trustee shall authenticate and deliver, in exchange for any such
mutilated Security or in lieu of any such destroyed, lost or stolen Security, a
new Security of like tenor and Principal Amount at Maturity, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, or is about to be purchased by the
Company pursuant to Article 3 hereof, the Company in its discretion may, instead
of issuing a new Security, pay or purchase such Security, as the case may be.
Upon the issuance of any new Securities under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.08. OUTSTANDING SECURITIES; DETERMINATIONS OF HOLDERS'
ACTION. Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding. A
Security does not cease to be outstanding because the Company or an
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Affiliate thereof holds the Security; PROVIDED, HOWEVER, that in determining
whether the Holders of the requisite Principal Amount at Maturity of Securities
have given or concurred in any request, demand, authorization, direction,
notice, consent or waiver hereunder, Securities owned by the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Subject to the foregoing, only Securities outstanding at the time of such
determination shall be considered in any such determination (including, without
limitation, determinations pursuant to Articles 6 and 9).
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on the Business Day following the Purchase Date, the
Optional Purchase Date, if applicable, or a Change in Control Purchase Date, or
on Stated Maturity, money or, if permitted hereunder, securities sufficient to
pay Securities payable on that date, then immediately after such Redemption
Date, Purchase Date, Optional Purchase Date, Change in Control Purchase Date or
Stated Maturity, as the case may be, such Securities shall cease to be
outstanding and Original Issue Discount and interest, if any, on such Securities
shall cease to accrue and all other rights of the Holder shall terminate (other
than the right to receive the applicable Redemption Price, Purchase Price,
Change in Control Purchase Price or Principal Amount at Maturity, as the case
may be, upon delivery of the Security in accordance with the terms of this
Indenture); PROVIDED, that if such Securities are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made.
If a Security is converted in accordance with Article 11 (other than
pursuant to a Common Share Delivery Arrangement), then from and after the time
of such conversion on the Conversion Date, such Security shall cease to be
outstanding and Original Issue Discount and interest, if any, shall cease to
accrue on such Security and all other rights of the Holder shall terminate
(other than the right to receive cash, securities or other property upon
conversion in accordance with Article 11).
SECTION 2.09. TEMPORARY SECURITIES. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and
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deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 2.03,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like Principal Amount at
Maturity of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 2.10. CANCELLATION. All Securities surrendered for payment,
purchase by the Company pursuant to Article 3, conversion (other than pursuant
to a Common Share Delivery Arrangement), redemption or registration of transfer
or exchange shall, if surrendered to any person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly cancelled
by the Trustee. The Company may not issue new Securities to replace Securities
it has paid or delivered to the Trustee for cancellation or that any Holder has
converted pursuant to Article 11 (other than pursuant to a Common Share Delivery
Arrangement). No Securities shall be authenticated in lieu of or in exchange
for any Securities cancelled as provided in this Section, except as expressly
permitted by this Indenture. All cancelled Securities held by the Trustee shall
be destroyed by the Trustee and the Trustee shall deliver a certificate of
destruction to the Company quarterly.
SECTION 2.11. PERSONS DEEMED OWNERS. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company or the Trustee may treat the person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of the Security or the payment of any Redemption Price, Purchase Price
or Change in Control Purchase Price in
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respect thereof, and interest thereon, for the purpose of conversion and for all
other purposes whatsoever, whether or not such Security be overdue, and neither
the Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
ARTICLE 3
REDEMPTION AND PURCHASES
SECTION 3.01. RIGHT TO REDEEM; NOTICES TO TRUSTEE. The Company, at
its option, may redeem the Securities in accordance with the provisions of
paragraphs 5 and 7 of the Securities. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the Redemption Date, the Principal Amount at Maturity of
Securities to be redeemed and the Redemption Price.
The Company shall give the notice to the Trustee provided for in this
Section 3.01 by a Company Order at least 45 days before the Redemption Date
(unless a shorter notice shall be satisfactory to the Trustee).
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If less than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by any other method the Trustee considers
fair and appropriate (so long as such method is not prohibited by the rules of
any stock exchange on which the Securities are then listed). The Trustee shall
make the selection at least 30 days but not more than 60 days before the
Redemption Date from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the Principal
Amount at Maturity of Securities that have denominations larger than $1,000.
Securities and portions of them the Trustee selects shall be in Principal
Amounts at Maturity of $1,000 or an integral multiple of $1,000. Provisions of
this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be redeemed.
If any Security selected for partial redemption is converted (other
than pursuant to a Common Share Delivery Arrangement) in part before
termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security so selected for
redemption shall be deemed (so far as may be) to be the portion selected for
redemption. Securities which have been converted during a selection of
Securities to be redeemed may be treated by the Trustee as outstanding for
the purpose of such selection.
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SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first-class mail, postage prepaid, to each Holder of Securities to
be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Conversion Rate;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that Securities called for redemption may be converted at any
time before the close of business on the Redemption Date;
(6) that Holders who want to convert Securities must satisfy the
requirements set forth in paragraph 9 of the Securities;
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(8) if fewer than all the outstanding Securities are to be redeemed,
the certificate number and Principal Amounts at Maturity of the particular
Securities to be redeemed;
(9) that, unless the Company defaults in making payment of such
Redemption Price, Original Issue Discount on Securities called for
redemption, and interest, if any, will cease to accrue immediately after
the Redemption Date; and
(10) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense, provided that the
Company makes such request at least three Business Days prior to such notice of
redemption.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is given, Securities called for redemption become due and payable
on the Redemption Date and at the Redemption Price stated in the notice
except for Securities that are converted (other than pursuant to a Common
Share Delivery Arrangement) in accordance with the terms of this Indenture.
Upon the later of the Redemption Date and the date such Securities are
surrendered to the Paying Agent, such Securities
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called for Redemption shall be paid at the Redemption Price stated in the
notice.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to or on the
Redemption Date, the Company shall deposit with the Paying Agent (or if the
Company or a Subsidiary or an Affiliate of either of them is the Paying
Agent, shall segregate and hold in trust) money sufficient to pay the
Redemption Price of all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which on or prior
thereto have been delivered by the Company to the Trustee for cancellation or
that the Conversion Agent has informed the Trustee have been converted (other
than pursuant to a Common Share Delivery Arrangement). The Paying Agent
shall as promptly as practicable return to the Company any money, with
interest, if any, thereon (subject to the provisions of Section 7.01(f)), not
required for that purpose because of conversion (other than pursuant to a
Common Share Delivery Arrangement) of Securities pursuant to Article 11. If
such money is then held by the Company or a Subsidiary or an Affiliate of
either in trust and is not required for such purpose it shall be discharged
from such trust.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security in an authorized
denomination equal in Principal Amount at Maturity to the unredeemed portion of
the Security surrendered.
SECTION 3.07. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion of any Securities called for redemption by an agreement
with one or more investment bankers or other purchasers to purchase such
Securities by paying to the Paying Agent in trust for the Securityholders, on or
before the close of business on the Redemption Date, an amount that, together
with any amounts deposited with the Paying Agent by the Company for the
redemption of such Securities, is not less than the Redemption Price, together
with interest, if any, accrued to the Redemption Date, of such Securities.
Notwithstanding anything to the contrary contained in this Article 3, the
obligation of the Company to pay the Redemption Price of such Securities,
including all accrued interest, if any, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such purchasers. If such an
agreement is entered into, any Securities not duly surrendered for conversion by
the Holders thereof may, at the option of the Company, be deemed, to the fullest
extent permitted by law, acquired by such purchasers from such Holders and
(notwithstanding anything to the contrary contained in Article 11) surrendered
by such purchasers for conversion, all as of immediately prior to the close of
business on the Redemption Date, subject to payment of the above amount as
aforesaid. The
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Paying Agent shall hold and pay to the Holders whose Securities are selected for
redemption any such amount paid to it for purchase and conversion in the same
manner as it would moneys deposited with it by the Company for the redemption of
Securities. Without the Paying Agent's prior written consent, no arrangement
between the Company and such purchasers for the purchase and conversion of any
Securities shall increase or otherwise affect any of the powers, duties,
responsibilities or obligations of the Paying Agent as set forth in this
Indenture, and the Company agrees to indemnify the Paying Agent from, and hold
it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Securities between the Company and such purchasers, including the costs and
expenses incurred by the Paying Agent in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its
powers, duties, responsibilities or obligations under this Indenture.
SECTION 3.08. PURCHASE OF SECURITIES AT OPTION OF THE HOLDER.
(a) GENERAL. Securities shall be purchased by the Company pursuant
to paragraph 6 of the Securities (x) as of __________ __, 2000 (the "PURCHASE
DATE") and (y) at the election of the Company exercised in accordance with the
terms of Section 3.08(e), as of _________ __, 2005 (the "OPTIONAL PURCHASE
DATE"), at the purchase price specified therein (each, a "PURCHASE PRICE"), at
the option of the Holder thereof, upon:
(1) delivery to the Paying Agent, by the Holder, of a written notice of
purchase (a "PURCHASE NOTICE") at any time from the opening of business on
the date that is 20 Business Days prior to such Purchase Date or Optional
Purchase Date, if applicable, until the close of business on such Purchase
Date or Optional Purchase Date stating:
(A) the certificate number of the Security which the Holder will
deliver to be purchased,
(B) the portion of the Principal Amount at Maturity of the
Security which the Holder will deliver to be purchased, which portion
must be $1,000 or an integral multiple thereof,
(C) that such Security shall be purchased as of the Purchase
Date or Optional Purchase Date, as applicable, pursuant to the terms
and conditions specified in paragraph 6 of the Securities and in this
Indenture, and
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(D) in the event the Company elects, pursuant to Section
3.08(b), to pay the Purchase Price to be paid as of the Purchase Date
or Optional Purchase Date, as applicable, in whole or in part, in
Common Shares and/or the specified TDS Common Equity Securities but
such Purchase Price (or portion(s) thereof) shall ultimately be
payable to such Holder entirely in cash because any of the conditions
to payment of the Purchase Price (or such portion(s) thereof) in
Common Shares and/or such specified TDS Common Equity Securities is
not satisfied prior to the close of business on such Purchase Date or
Optional Purchase Date, as set forth in Section 3.08(d), whether such
Holder elects (i) to withdraw such Purchase Notice as to some or all
of the Securities to which such Purchase Notice relates (stating the
Principal Amount at Maturity and certificate numbers of the Securities
as to which such withdrawal shall relate), or (ii) to receive cash in
respect of the entire Purchase Price (or such portions(s) thereof) for
all Securities (or portions thereof) to which such Purchase Notice
relates; and
(2) delivery of such Security to the Paying Agent prior to, on or after
the Purchase Date or Optional Purchase Date, as applicable (together with
all necessary endorsements), at the offices of the Paying Agent, such
delivery being a condition to receipt by the Holder of the Purchase Price
therefor; PROVIDED, HOWEVER, that such Purchase Price shall be so paid
pursuant to this Section 3.08 only if the Security so delivered to the
Paying Agent shall conform in all respects to the description thereof in
the related Purchase Notice.
Unless a Holder, in such Holder's Purchase Notice or in any written
notice of withdrawal delivered by such Holder pursuant to the terms of Section
3.10, indicates such Holder's choice with respect to the election set forth in
clause (D) of Section 3.08(a)(1) as it relates to the applicable portion(s) of
such Purchase Price, such Holder shall be deemed to have elected to receive cash
in respect of the Purchase Price (or such applicable portion(s) thereof) for all
Securities subject to such Purchase Notice in the circumstances set forth in
such clause (D).
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.08, a portion of a Security if the Principal Amount at Maturity of
such portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.
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Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.08 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Purchase Date or
Optional Purchase Date, as applicable, and the time of delivery of the Security.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a)
shall have the right to withdraw such Purchase Notice at any time prior to the
close of business on the Purchase Date or Optional Purchase Date, as applicable,
by delivery of a written notice of withdrawal to the Paying Agent in accordance
with Section 3.10.
The Paying Agent shall promptly notify the Company of the receipt by
it of any Purchase Notice or written notice of withdrawal thereof.
(b) COMPANY'S RIGHT TO ELECT MANNER OF PAYMENT OF PURCHASE PRICE.
The Securities to be purchased pursuant to Section 3.08(a) may be paid for, at
the election of the Company, in cash, Common Shares or specified TDS Common
Equity Securities, or in any combination of cash, Common Shares and specified
TDS Common Equity Securities, subject to the conditions set forth in Sections
3.08(c) and (d). The Company shall designate, in the Company Notice delivered
pursuant to Section 3.08(e), whether the Company will purchase the Securities
for cash, Common Shares or any TDS Common Equity Securities (specifying which
TDS Common Equity Securities (the TDS Common Equity Securities so specified are
referred to herein as "specified TDS Common Equity Securities")), or, if a
combination thereof, the percentages of the Purchase Price of Securities in
respect of which it will pay in cash, Common Shares or the specified TDS Common
Equity Securities; PROVIDED that the Company will pay cash for fractional Common
Shares or TDS Common Equity Securities. For purposes of determining the
existence of potential fractional interests, all Securities subject to purchase
by the Company held by a Holder shall be considered together (no matter how many
separate certificates are to be presented). Each Holder whose Securities are
purchased pursuant to this Section 3.08 shall receive the same percentage of
cash, Common Shares or the specified TDS Common Equity Securities in payment of
the Purchase Price for such Securities, except (i) as provided in Section
3.08(d) with regard to the payment of cash in lieu of fractional Common Shares
and TDS Common Equity Securities and (ii) in the event that the Company is
unable to purchase the Securities of a Holder or Holders for Common Shares or
the specified TDS Common Equity Securities because any necessary qualifications
or registrations of the Common Shares or the specified TDS Common Equity
Securities under applicable state securities laws cannot be obtained, the
Company may purchase the Securities of such
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Holder or Holders for cash. The Company may not change its election with
respect to the consideration (or components or percentages of components
thereof) to be paid once the Company has given its Company Notice to
Securityholders except pursuant to this Section 3.08(b) or pursuant to Section
3.08(d) in the event of a failure to satisfy, prior to the close of business on
the Purchase Date or Optional Purchase Date, as applicable, any condition to the
payment of the Purchase Price, in whole or in part, in Common Shares or the
specified TDS Common Equity Securities.
At least three Business Days before the Company Notice Date, the
Company shall deliver an Officers' Certificate to the Trustee specifying:
(i) the manner of payment selected by the Company,
(ii) the information required by Section 3.08(e),
(iii) if the Company elects to pay the Purchase Price, or a specified
percentage thereof, in Common Shares and/or specified TDS Common Equity
Securities, that the conditions to such manner of payment set forth in
Section 3.08(d) have been or will be complied with, and
(iv) whether the Company desires the Trustee to give the Company
Notice required by Section 3.08(e).
(c) PURCHASE WITH CASH. As of the Purchase Date or the Optional
Purchase Date, as applicable, at the option of the Company, the Purchase Price
of Securities in respect of which a Purchase Notice pursuant to Section 3.08(a)
has been given, or a specified percentage thereof, may be paid by the Company
with cash equal to the aggregate Purchase Price, or such specified percentage
thereof, as the case may be, of such Securities. If the Company elects to
purchase Securities with cash, the Company Notice, as provided in Section
3.08(e), shall be sent to Holders (and to beneficial owners as required by
applicable law) not less than 20 Business Days prior to such Purchase Date or
Optional Purchase Date, as applicable (the "COMPANY NOTICE DATE").
(d) PAYMENT WITH COMMON SHARES AND/OR TDS COMMON EQUITY SECURITIES.
As of the Purchase Date or the Optional Purchase Date, as applicable, at the
option of the Company, the Purchase Price of Securities in respect of which a
Purchase Notice pursuant to Section 3.08(a) has been given, or a specified
percentage thereof, may be paid by the Company with a number of Common Shares
and/or shares of the specified TDS Common Equity Securities equal to the
quotient obtained by dividing (i) the amount of cash to which the
Securityholders would have been entitled had the Company elected to pay all or
such specified percentage, as the case may be, of the Purchase Price of such
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Securities in cash by (ii) the Market Price of a Common Share (in the case of
payment with Common Shares) or a share of such specified TDS Common Equity
Securities (in the case of payment with such specified TDS Common Equity
Securities), subject to the next succeeding paragraph.
The Company will not issue fractional Common Shares or fractional
shares of TDS Common Equity Securities in payment of the Purchase Price or the
Optional Purchase Price, if applicable. Instead the Company will pay cash for
the current market value of the fractional share. The current market value of a
fractional Common Share or a fractional share of the specified TDS Common Equity
Security shall be determined by multiplying the applicable Market Price by such
fraction and rounding the product to the nearest whole cent. It is understood
that if a Holder elects to have more than one Security purchased, the number of
Common Shares or specified TDS Common Equity Securities shall be based on the
aggregate amount of Securities to be purchased.
If the Company elects to purchase the Securities with Common Shares
and/or specified TDS Common Equity Securities, the Company Notice, as provided
in Section 3.08(e), shall be sent to the Holders (and to beneficial owners as
required by applicable law) not later than the Company Notice Date.
The Company's right to exercise its election to purchase the
Securities pursuant to Section 3.08 with Common Shares and/or specified TDS
Common Equity Securities shall be conditioned upon:
(i) the Company not having given its Company Notice of an election
to pay entirely in cash and its giving of timely Company Notice of election
to purchase all or a specified percentage of the Securities with Common
Shares and/or the specified TDS Common Equity Securities as provided
herein;
(ii) the registration of the Common Shares and/or the specified TDS
Common Equity Securities to be used in respect of the payment of the
specified percentage of the Purchase Price under the Securities Act of
1933, as amended (the "SECURITIES ACT"), and the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), in each case, if required for the
initial issuance thereof;
(iii) any necessary qualification or registration under applicable
state securities laws or the availability of an exemption from such
qualification and registration; and
(iv) in the event the Company intends to elect to pay the Purchase
Price (or a specified percentage thereof) with
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specified TDS Common Equity Securities, prior to sending its Company Notice
indicating such election, the Company and TDS shall have entered into a
duly authorized, validly executed, valid and binding agreement relating to
the acquisition of such specified TDS Common Equity Securities on terms
permitting the Company to deliver such specified TDS Common Equity
Securities in payment of such Purchase Price (or such specified percentage
thereof) (A) in accordance with the terms of this Section 3.08, including
provisions for (x) any required registration of such specified TDS Common
Equity Securities under the Securities Act or the Exchange Act, (y) any
required registration or qualification of such specified TDS Common Equity
Securities under applicable state securities laws or for the perfection of
the availability of an exemption therefrom and (z) the listing or admission
to quotation of such specified TDS Common Equity Securities as required by
the terms of this Section 3.08), and (B) such that such specified TDS
Common Equity Securities are duly authorized, validly issued, fully paid,
nonassessable, free of any lien, other encumbrance or adverse claim and not
subject to or in violation of any preemptive or similar rights.
(v) the receipt by the Trustee of an Officers' Certificate and an
Opinion of Counsel each stating that (A) the terms of the issuance of the
Common Shares and/or the specified TDS Common Equity Securities, as
applicable, are in conformity with this Indenture and (B) the Common Shares
and/or the specified TDS Common Equity Securities to be used by the Company
in payment of the specified percentage of the Purchase Price in respect of
Securities have been duly authorized and, when issued and delivered
pursuant to the terms of this Indenture in payment of such specified
percentage of the Purchase Price in respect of the Securities, will be
validly issued, fully paid and non-assessable and, to the best of such
counsel's knowledge, free from preemptive rights, and, in the case of such
Officer's Certificate, stating that conditions (i), (ii), (iii) and (iv)
above and the condition set forth in the succeeding sentence have been
satisfied and, in the case of such Opinion of Counsel, stating that
conditions (ii), (iii) and (iv) above have been satisfied.
The Company may pay the Purchase Price (or any portion thereof) in Common Shares
and/or specified TDS Common Equity Securities only if the information necessary
to calculate the Market Price of a Common Share (in the case of payment with
Common Shares) or a share of the specified TDS Common Equity Securities (in the
case of payment with such TDS Common Equity Securities) is published in a daily
newspaper of national circulation and only if the Common Shares and/or the
specified TDS Common Equity Securities, as applicable, are listed or admitted to
trading on a
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United States national or regional securities exchange or reported by The Nasdaq
Stock Market. If the foregoing conditions are not satisfied with respect to a
Holder or Holders prior to the close of business on the Purchase Date or
Optional Purchase Date, as applicable, and the Company has elected to purchase
the Securities pursuant to this Section 3.08 with Common Shares and/or specified
TDS Common Equity Securities, the Company shall pay that portion of the Purchase
Price of the Securities of such Holder or Holders that would have been paid in
Common Shares and/or specified TDS Common Equity Securities (whichever in
respect of which such condition has not been met) in cash. On the Business Day
following the Purchase Date or Optional Purchase Date, as applicable, the
Company shall deliver to the Trustee an Officers' Certificate setting forth the
number of Common Shares and/or the specified TDS Common Equity Securities, to be
paid for each $1,000 Principal Amount at Maturity of Securities and the Sale
Price of a Common Share and/or a share of the specified TDS Common Equity
Securities, as applicable, on each trading day during the period commencing on
the first trading day of the period during which the Market Price is calculated
and ending on the Purchase Date or Optional Purchase Date, as applicable.
The "MARKET PRICE" means the average of the Sale Prices of the Common
Shares or the specified TDS Common Equity Securities, as applicable, for the
five trading day period ending on (if the third Business Day prior to the
applicable Purchase Date or Optional Purchase Date, as applicable, is a trading
day, or if not, then on the last trading day prior to) the third Business Day
prior to the Purchase Date or Optional Purchase Date, as applicable,
appropriately adjusted to take into account the occurrence, during the period
commencing on the first of such trading days during such five trading day period
and ending on such Purchase Date or Optional Purchase Date, of (i) in the case
of Common Shares, any event described in Section 11.06, 11.07 or 11.08; subject,
however, to the conditions set forth in Sections 11.09 and 11.10 or (ii) in the
case of the specified TDS Common Equity Securities, any event described in the
preceding clause (i), subject to the conditions described in the preceding
clause (i), as if such Sections 11.06, 11.07, 11.08, 11.09 and 11.10 had been
made applicable to the specified TDS Common Equity Securities, MUTATIS MUTANDIS.
The "SALE PRICE" of the Common Shares or the specified TDS Common
Equity Securities, as applicable, on any date means the closing per share sale
price (or, if no closing sale price is reported, the average of the bid and ask
prices or, if more than one in either case, the average of the average bid and
average ask prices) on such date as reported in the composite transactions for
the principal United States securities exchange on which the Common Shares or
the specified TDS Common Equity Securities, as applicable, are traded or, if the
Common Shares or the specified TDS Common Equity Securities, as applicable, are
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not listed on a United States national or regional securities exchange, as
reported on The Nasdaq Stock Market.
(e) NOTICE OF ELECTION. The Company's notice of election to purchase
with cash, Common Shares or specified TDS Common Equity Securities or any
combination thereof shall be sent to the Holders (and to beneficial owners as
required by applicable law) in the manner provided in Section 12.02 at the time
specified in Section 3.08(c) or (d), as applicable (the "COMPANY NOTICE"). Such
Company Notice shall state the manner of payment elected, as set forth in
Section 3.08(b), and shall contain the following information:
In the event the Company has elected to pay the Purchase Price (or a
specified percentage thereof) with Common Shares and/or specified TDS Common
Equity Securities, the Company Notice shall:
(1) state that each Holder will receive Common Shares and/or the
specified TDS Common Equity Securities, as applicable, with a Market Price
determined as of a specified date prior to the Purchase Date or Optional
Purchase Date, as applicable, equal to such specified percentage of the
Purchase Price of the Securities held by such Holder (except any cash
amount to be paid in lieu of fractional Common Shares and/or TDS Common
Equity Securities);
(2) set forth the method of calculating the Market Price of the
Common Shares and/or the specified TDS Common Equity Securities; and
(3) state that because the Market Price of the Common Shares and/or
the specified TDS Common Equity Securities will be determined prior to the
Purchase Date or Optional Purchase Date, as applicable, Holders will bear
the market risk with respect to the value of the Common Shares and/or the
specified TDS Common Equity Securities to be received from the date such
Market Price is determined to the Purchase Date or Optional Purchase Date,
as applicable.
In any case, each Company Notice shall include a form of Purchase
Notice to be completed by a Securityholder and shall state:
(i) the Purchase Price and the Conversion Rate;
(ii) the name and address of the Paying Agent and the Conversion
Agent;
(iii) that Securities as to which a Purchase Notice has been given may
be converted pursuant to Article 11 hereof
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only if the applicable Purchase Notice has been withdrawn in accordance
with the terms of this Indenture;
(iv) that Securities must be surrendered to the Paying Agent to
collect payment;
(v) that the Purchase Price for any Security as to which a Purchase
Notice has been given and not withdrawn will be paid promptly following the
later of the Purchase Date or Optional Purchase Date, as applicable, and
the time of surrender of such Security as described in (iv);
(vi) the procedures the Holder must follow to exercise rights under
Section 3.08 and a brief description of those rights;
(vii) briefly, the conversion rights of the Securities; and
(viii) the procedures for withdrawing a Purchase Notice (including,
without limitation, for a conditional withdrawal pursuant to the terms of
Section 3.08(a)(1)(D) or Section 3.10).
The Company Notice in respect of the Purchase Date shall state whether
or not the Company is electing to become obligated to purchase Securities, at
the option of the Holder thereof, on the Optional Purchase Date.
At the Company's request set forth in the Officers' Certificate
delivered to the Trustee pursuant to Section 3.08(b)(iv), the Trustee shall give
such Company Notice in the Company's name and at the Company's expense;
PROVIDED, HOWEVER, that, in all cases, the text of such Company Notice shall be
prepared by the Company.
Notwithstanding anything to the contrary contained in this Section
3.08, the Company shall not be obligated to send notice of its election to pay
the Purchase Price with cash, Common Shares and/or specified TDS Common Equity
Securities or a combination thereof if (i) prior to the Company Notice Date in
respect of the Purchase Date, the Company has mailed a notice of redemption in
respect of all outstanding Securities in accordance with Section 3.03 and the
Redemption Date specified in such notice of redemption is the Purchase Date or
(ii) prior to the Company Notice Date in respect of the Optional Purchase Date,
if applicable, the Company has mailed a notice of redemption in respect of all
outstanding Securities in accordance with Section 3.03 and the Redemption Date
specified in such notice of redemption is on or prior to such Optional Purchase
Date. Any such notice of redemption shall further state that as a result of the
giving of such notice the Company will not be obligated to
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give the notice of its election in respect of the Purchase Date or the Optional
Purchase Date, as applicable.
Upon determination of the actual number of Common Shares and/or of
shares of the specified TDS Common Equity Securities to be issued for each
$1,000 Principal Amount at Maturity of Securities, the Company will publish such
determination in a daily newspaper of national circulation.
(f) COVENANTS OF THE COMPANY. All Common Shares delivered upon
purchase of Securities shall be newly issued shares or treasury shares, shall be
fully paid and nonassessable and shall be free from preemptive rights and free
of any lien or adverse claim.
The Company shall use its best efforts to list or cause to have quoted
any Common Shares to be issued to purchase Securities on each national
securities exchange or over-the-counter or other domestic market on which the
Common Shares are then listed or quoted.
All TDS Common Equity Securities delivered by the Company upon
purchase of Securities shall be, to the best of the Company's knowledge, duly
authorized, validly issued, fully paid and nonassessable, free of any lien,
other encumbrance or adverse claim and not subject to nor in violation of any
preemptive or similar rights.
The Company shall use its best efforts to cause TDS to list or cause
to have quoted any TDS Common Equity Securities to be used by the Company to
purchase Securities on each national securities exchange or over-the-counter or
other domestic market on which such TDS Common Equity Securities are then listed
or quoted.
(g) PROCEDURE UPON PURCHASE. The Company shall deposit cash (in
respect of a cash purchase under Section 3.08(c) or for fractional interests, as
applicable), Common Shares or the specified TDS Common Equity Securities, or a
combination thereof, as applicable, at the time and in the manner as provided in
Section 3.11, sufficient to pay the aggregate Purchase Price of all Securities
to be purchased pursuant to this Section 3.08. As soon as practicable after the
Purchase Date or Optional Purchase Date, as applicable, the Company shall
deliver to each Holder entitled to receive Common Shares and/or specified TDS
Common Equity Securities through the Paying Agent, a certificate (or
certificates in the case of payment of both Common Shares and specified TDS
Common Equity Securities) for the number of Common Shares and/or specified TDS
Common Equity Securities payable in payment of the Purchase Price and cash in
lieu of any fractional Common Shares or TDS Common Equity Securities. The
person in whose name the certificate or certificates for Common Shares
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and/or specified TDS Common Equity Securities is registered shall be treated as
a holder of record of such Common Shares and/or specified TDS Common Equity
Securities on the Business Day following the Purchase Date or Optional Purchase
Date, as applicable. Subject to Section 3.08(d), no payment or adjustment will
be made for dividends or other distributions on the Common Shares and/or the
specified TDS Common Equity Securities the record date for which occurred on or
prior to the Purchase Date or Optional Purchase Date, as applicable.
(h) TAXES. If a Holder of a Security is paid in Common Shares and/or
TDS Common Equity Securities, the Company shall pay any documentary, stamp or
similar issue or transfer tax due on such payment of Common Shares and/or TDS
Common Equity Securities. However, the Holder shall pay any such tax which is
due because the Holder requests the Common Shares and/or TDS Common Equity
Securities to be issued in a name other than the Holder's name. The Paying
Agent may refuse to deliver the certificates representing the Common Shares
and/or TDS Common Equity Securities being issued in a name other than the
Holder's name until the Paying Agent receives a sum sufficient to pay any tax
which will be due because the Common Shares and/or TDS Common Equity Securities
are to be issued in a name other than the Holder's name. Nothing herein shall
preclude any income tax withholding required by law or regulations.
SECTION 3.09. PURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON
CHANGE IN CONTROL. (a) If on or prior to , 2000 there shall have
occurred a Change in Control, Securities shall be purchased by the Company, at
the option of the Holder thereof, at the purchase price specified in paragraph 6
of the Securities (the "CHANGE IN CONTROL PURCHASE PRICE"), as of the date that
is 35 Business Days after the occurrence of the Change in Control (the "CHANGE
IN CONTROL PURCHASE DATE"), subject to satisfaction by or on behalf of the
Holder of the requirements set forth in Section 3.09(c).
A "CHANGE IN CONTROL" shall be deemed to have occurred at such time as any
of the following events shall occur:
(i) There is a report filed on Schedule 13D or 14D-1 (or any successor
schedule, form or report) pursuant to the Exchange Act, disclosing that any
person (for the purposes of this Section 3.09 only, as the term "PERSON" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (for purposes of this Section 3.09, as the term
"BENEFICIAL OWNER" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of 50% or more of the
combined voting power of all of the Company's then outstanding equity
securities (of all classes or series) or such other Capital Stock of the
Company into which such
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equity securities are reclassified or changed; PROVIDED, HOWEVER, that a
person shall not be deemed beneficial owner of, or to own beneficially, (A)
any securities tendered pursuant to a tender or exchange offer made by or
on behalf of such person or any of such person's Affiliates or Associates
until such tendered securities are accepted for purchase or exchange
thereunder, or (B) any securities if such beneficial ownership (1) arises
solely as a result of a revocable proxy delivered in response to a proxy or
consent solicitation made pursuant to the applicable rules and regulations
under the Exchange Act, and (2) is not also then reportable on Schedule 13D
(or any successor schedule) under the Exchange Act;
(ii) the number of outstanding Common Shares (or such other class or
series of Capital Stock of the Company into which the Common Shares are
reclassified or changed) the beneficial owners of which are not Affiliates
of the Company is at any time reduced to less than ten million (such number
to be appropriately adjusted to reflect the impact of any transaction of
the type described in Section 11.06(1), (2) or (3), including in connection
with any such reclassification or change) as a result of acquisitions of
Common Shares (or such other Capital Stock) by, or in concert with, (A) the
Company, (B) TDS, (C) any of their Subsidiaries, Affiliates, employee stock
ownership plans or employee benefit plans or (D) LeRoy T. Carlson, his
family members (meaning his spouse, siblings and lineal descendants),
estate and heirs and any trust or other investment vehicle for the primary
benefit of any of such persons or their respective family members or heirs
(collectively, the "CARLSON FAMILY").
(iii) There shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving
corporation or (B) pursuant to which the Common Shares would be converted
into cash, securities or other property, in each case other than a
consolidation or merger of the Company in which the holders of the Common
Shares and Series A Common Shares immediately prior to the consolidation or
merger have, directly or indirectly, 50% or more of the combined voting
power of the common equity securities of the continuing or surviving
corporation immediately after such consolidation or merger; or
(iv) TDS and its Subsidiaries cease to collectively be beneficial
owners of at least 50% of (A) the total of the Common Shares and Series A
Common Shares (or such other classes or series of Capital Stock of the
Company into which such Common Shares or Series A Common Shares are
reclassified or changed) then outstanding or (B) the combined voting power
of all of the Company's then
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outstanding equity securities (of all classes or series) or such other
Capital Stock of the Company into which such equity securities are
reclassified or changed (treating any Common Shares held by the custodian
pursuant to the Custodian Agreement (the "CUSTODIAN AGREEMENT"), dated
______ __, 1995, between TDS and Harris Trust and Savings Bank, as
custodian, and any Common Shares lent pursuant to the Securities Loan
Agreement (the "SECURITIES LOAN AGREEMENT"), dated _______ __, 1995,
between Merrill Lynch, Pierce, Fenner & Smith Incorporated and TDS, or any
successor agreement or agreements entered into by TDS with substantially
similar terms, as being beneficially owned by TDS for purposes of (A) or
(B) above) (the event or transaction giving rise to such circumstances
described in (A) or (B) above being referred to as the "Designated
Transaction") and, in either case (A) or (B), there shall occur a Rating
Decline within the time period described below in the definition of "Rating
Decline" and with a Reference Date occurring on or prior to ,
2000.
Notwithstanding the foregoing provisions of this Section 3.09, except as
described in clauses (ii), (iii) or (iv) of the above definition of Change in
Control, a Change in Control shall not be deemed to have occurred by virtue of
(A) TDS, (B) the Company, (C) their subsidiaries, (D) their employee stock
ownership plans or any of their other employee benefit plans, (E) the Carlson
Family or (F) any person holding any of the Company's outstanding equity
securities (of all classes or series) or other Capital Stock of the Company into
which such equity securities are reclassified or changed for or pursuant to the
terms of any such employee benefit plan, in any such case, filing or becoming
obligated to file a report under or in response to Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report) under the Exchange Act
disclosing beneficial ownership by it of any of the Company's outstanding equity
securities (of any or all classes or series) or such other Capital Stock of the
Company into which such equity securities are reclassified or changed, whether
in excess of 50% or otherwise.
"ASSOCIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
A "Rating Decline" will be deemed to have occurred if, on any date within
the period (the "Rating Period") beginning on the date (the "Reference Date") of
the earlier to occur of (a) the first public announcement by TDS, the Company or
any other person of an intention to effect the Designated Transaction and (b)
the occurrence of such Designated Transaction and ending on the date that is 60
days after the later to occur of (A) the occurrence of such Designated
Transaction and (B) the first public announcement by TDS, the Company or any
other person of the occurrence of such
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Designated Transaction, either of the following events has occurred: (i) the
Securities shall be rated by any Rating Agency at any time during the Rating
Period at a rating which is lower than the rating of the Securities by such
Rating Agency on the Rating Date by more than one gradation (including
gradations within Rating Categories as well as between Rating Categories) or
(ii) any Rating Agency shall have withdrawn its rating of the Securities during
the Rating Period.
"Rating Agency" means Standard & Poor's Corporation and its successors
("S&P"), and Moody's Investors Service, Inc. and its successors ("Moody's"), or,
if S&P or Moody's, or both, shall not make a rating of the Securities publicly
available, a nationally recognized United States statistical rating agency or
agencies, substituted by the Company, with written notice to the Trustee, for
S&P or Moody's, or both, as the case may be.
"Rating Category" means each major rating category symbolized by (x) in the
case of S&P, AAA, AA, A, BBB, BB, B, CCC, CC and C and each such Rating Category
shall include pluses or minuses ("gradations") modifying such capital letters;
(y) in the case of Moody's, Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C and each such
Rating Category shall include added numerals such as 1, 2 or 3 ("gradations")
modifying such letters; and (z) with respect to any other Rating Agency,
comparable or equivalent symbols. "Rating Date" is defined as the date that is
60 days prior to the Reference Date.
(b) Within 15 Business Days after the occurrence of a Change in
Control, the Company shall mail a written notice of Change in Control by
first-class mail to the Trustee and to each Holder (and to beneficial owners as
required by applicable law) and shall cause a copy of such notice to be
published in a daily newspaper of national circulation. The notice shall
include a form of Change in Control Purchase Notice to be completed by the
Securityholder and shall state:
(1) briefly, the events causing a Change in Control and the date of
such Change in Control;
(2) the date by which the Change in Control Purchase Notice pursuant
to this Section 3.09 must be given;
(3) the Change in Control Purchase Date;
(4) the Change in Control Purchase Price;
(5) the name and address of the Paying Agent and the Conversion
Agent;
(6) the Conversion Rate and any adjustments thereto;
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(7) that Securities as to which a Change in Control Purchase Notice
has been given may be converted pursuant to Article 11 hereof only if the
Change in Control Purchase Notice has been withdrawn in accordance with the
terms of this Indenture;
(8) that Securities must be surrendered to the Paying Agent to
collect payment;
(9) that the Change in Control Purchase Price for any Security as to
which a Change in Control Purchase Notice has been duly given and not
withdrawn will be paid promptly following the later of the Change in
Control Purchase Date and the time of surrender of such security as
described in (8);
(10) briefly, the procedures the Holder must follow to exercise
rights under this Section 3.09;
(11) briefly, the conversion rights of the Securities; and
(12) the procedures for withdrawing a Change in Control Purchase
Notice.
(c) A Holder may exercise its rights specified in Section 3.09(a)
upon delivery of a written notice of purchase (a "CHANGE IN CONTROL PURCHASE
NOTICE") to the Paying Agent at any time prior to the close of business on the
Change in Control Purchase Date, stating:
(1) the certificate number of the Security which the Holder will
deliver to be purchased;
(2) the portion of the Principal Amount at Maturity of the Security
which the Holder will deliver to be purchased, which portion must be $1,000
or an integral multiple thereof; and
(3) that such Security shall be purchased pursuant to the terms and
conditions specified in paragraph 6 of the Securities.
The delivery of such Security to the Paying Agent prior to, on or
after the Change in Control Purchase Date (together with all necessary
endorsements) at the offices of the Paying Agent shall be a condition to the
receipt by the Holder of the Change in Control Purchase Price therefor;
PROVIDED, HOWEVER, that such Change in Control Purchase Price shall be so paid
pursuant to this Section 3.09 only if the Security so delivered to the Paying
Agent shall conform in all respects to the
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description thereof set forth in the related Change in Control Purchase Notice.
The Company shall purchase from the Holder thereof, pursuant to this
Section 3.09, a portion of a Security if the Principal Amount at Maturity of
such portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.
Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.09 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Change in Control
Purchase Date and the time of delivery of the Security to the Paying Agent in
accordance with this Section 3.09.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Change in Control Purchase Notice contemplated by this
Section 3.09(c) shall have the right to withdraw such Change in Control Purchase
Notice at any time prior to the close of business on the Change in Control
Purchase Date by delivery of a written notice of withdrawal to the Paying Agent
in accordance with Section 3.10.
The Paying Agent shall promptly notify the Company of the receipt by
it of any Change in Control Purchase Notice or written withdrawal thereof.
SECTION 3.10. EFFECT OF PURCHASE NOTICE OR CHANGE IN CONTROL PURCHASE
NOTICE. Upon receipt by the Paying Agent of the Purchase Notice or Change in
Control Purchase Notice specified in Section 3.08(a) or Section 3.09(c), as
applicable, the Holder of the Security in respect of which such Purchase Notice
or Change in Control Purchase Notice, as the case may be, was given shall
(unless such Purchase Notice or Change in Control Purchase Notice is withdrawn
as specified in the following two paragraphs) thereafter be entitled to receive
solely the Purchase Price or Change in Control Purchase Price, as the case may
be, with respect to such Security. Securities in respect of which a Purchase
Notice or Change in Control Purchase Notice, as the case may be, has been given
by the Holder thereof may not be converted pursuant to Article 11 hereof on or
after the date of the delivery of such Purchase Notice or Change in Control
Purchase Notice, as the case may be, unless such Purchase Notice or Change in
Control Purchase Notice, as the case may be, has first been validly withdrawn as
specified in the following two paragraphs.
A Purchase Notice or Change in Control Purchase Notice, as the case
may be, may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent in accordance with the Purchase Notice or Change
in Control Purchase
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Notice, as the case may be, at any time prior to the close of business on the
Purchase Date, Optional Purchase Date, if applicable, or the Change in Control
Purchase Date, as the case may be, specifying:
(1) the certificate number of the Security in respect of which such
notice of withdrawal is being submitted,
(2) the Principal Amount at Maturity of the Security with respect to
which such notice of withdrawal is being submitted, and
(3) the Principal Amount at Maturity, if any, of such Security which
remains subject to the original Purchase Notice or Change in Control
Purchase Notice, as the case may be, and which has been or will be
delivered for purchase by the Company.
A written notice of withdrawal of a Purchase Notice may be in the form
set forth in the preceding paragraph or may be in the form of (i) a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of Section
3.08(a)(1)(D) or (ii) a conditional withdrawal containing the information set
forth in Section 3.08(a)(1)(D) and the preceding paragraph and contained in a
written notice of withdrawal delivered to the Paying Agent as set forth in the
preceding paragraph.
There shall be no purchase of any Securities pursuant to Section 3.08
(other than through the issuance of Common Shares and/or specified TDS Common
Equity Securities in payment of the Purchase Price, including cash in lieu of
fractional shares) thereof or 3.09 if there has occurred (prior to, on or after,
as the case may be, the giving, by the Holders of such Securities, of the
required Purchase Notice or Change in Control Purchase Notice, as the case may
be) and is continuing an Event of Default (other than a default in the payment
of the Purchase Price or Change in Control Purchase Price, as the case may be,
with respect to such Securities). The Paying Agent will promptly return to the
respective Holders thereof any Securities (x) with respect to which a Purchase
Notice or Change in Control Purchase Notice, as the case may be, has been
withdrawn in compliance with this Indenture, or (y) held by it during the
continuance of an Event of Default (other than a default in the payment of the
Purchase Price or Change in Control Purchase Price, as the case may be, with
respect to such Securities) in which case, upon such return, the Purchase Notice
or Change in Control Purchase Notice with respect thereto shall be deemed to
have been withdrawn.
SECTION 3.11. DEPOSIT OF PURCHASE PRICE OR CHANGE IN CONTROL PURCHASE
PRICE. Prior to 1:00 p.m. (local time in the City of New York) on the Business
Day following the Purchase Date, the Optional Purchase Date, as applicable, or
the Change in
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Control Purchase Date, as the case may be, the Company shall deposit with the
Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an
Affiliate of either of them is acting as the Paying Agent, shall segregate and
hold in trust as provided in Section 2.04) an amount of cash (in immediately
available funds if deposited on such Business Day) or securities, if permitted
hereunder, sufficient to pay the aggregate Purchase Price or Change in Control
Purchase Price, as the case may be, of all the Securities or portions thereof
which are to be purchased as of the Purchase Date, Optional Purchase Date or
Change in Control Purchase Date, as the case may be.
SECTION 3.12. SECURITIES PURCHASED IN PART. Any Security which is to
be purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing) and the Company shall execute and the Trustee shall
authenticate and deliver to the Holder of such Security, without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder in aggregate Principal Amount at Maturity equal to, and in exchange
for, the portion of the Principal Amount at Maturity of the Security so
surrendered which is not purchased.
SECTION 3.13. COVENANT TO COMPLY WITH SECURITIES LAWS UPON PURCHASE
OF SECURITIES. In connection with any offer to purchase or purchase of
Securities under Section 3.08 or 3.09 hereof (provided that such offer or
purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which
term, as used herein, includes any successor provision thereto) under the
Exchange Act at the time of such offer or purchase), the Company shall (i)
comply with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (ii) file the
related Schedule 13E-4 (or any successor schedule, form or report) under the
Exchange Act, and (iii) otherwise comply, and use its best efforts to cause TDS
to comply with respect to any TDS Common Equity Securities, with all Federal and
state securities laws so as to permit the rights and obligations under Sections
3.08 and 3.09 to be exercised in the time and in the manner specified in
Sections 3.08 and 3.09.
SECTION 3.14. REPAYMENT TO THE COMPANY. The Trustee and the Paying
Agent shall return to the Company any cash, Common Shares or TDS Common Equity
Securities that remain unclaimed as provided in paragraph 13 of the Securities,
together with interest or dividends, if any, thereon (subject to the provisions
of Section 7.01(f)), held by them for the payment of the Purchase Price or
Change in Control Purchase Price, as the case may be; PROVIDED, HOWEVER, that to
the extent that the aggregate amount of cash, Common Shares or TDS Common Equity
Securities deposited
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by the Company pursuant to Section 3.11 exceeds the aggregate Purchase Price or
Change in Control Purchase Price, as the case may be, of the Securities or
portions thereof which the Company is obligated to purchase as of the Purchase
Date or Optional Purchase Date, as applicable, or Change in Control Purchase
Date, as the case may be, then promptly after the Business Day following the
Purchase Date or Optional Purchase Date, as applicable, or Change in Control
Purchase Date, as the case may be, the Trustee and the Paying Agent shall return
any such excess to the Company together with interest or dividends, if any,
thereon (subject to the provisions of Section 7.01(f)).
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly make
all payments in respect of the Securities on the dates and in the manner
provided in the Securities or pursuant to this Indenture. Principal Amount at
Maturity, Issue Price plus accrued Original Issue Discount, cash in respect of
conversion in accordance with Article 11, Redemption Price, Purchase Price,
Change in Control Purchase Price and interest, if any, shall be considered paid
on the applicable date due if on such date (or, in the case of a Purchase Price
or Change in Control Purchase Price, on the Business Day following the Purchase
Date or Optional Purchase Date, as applicable, or Change in Control Purchase
Date, as the case may be) the Trustee or the Paying Agent holds, in accordance
with this Indenture, money or, if permitted hereunder, securities sufficient to
pay all such amounts then due.
The Company shall, to the extent permitted by law, pay interest on
overdue amounts at the rate per annum set forth in paragraph 1 of the
Securities, compounded semiannually, which interest shall accrue from the date
such overdue amount was originally due to the date payment of such amount,
including interest thereon, has been made or duly provided for. All such
interest shall be payable on demand. The accrual of such interest on overdue
amounts shall be in lieu of, and not in addition to, the continued accrual of
Original Issue Discount.
SECTION 4.02. SEC AND OTHER REPORTS. The Company shall file with the
Trustee, within 15 days after it files such with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. In the event the Company is at any
time no longer subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, it shall
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continue to provide the Trustee with reports containing substantially the same
information as would have been required to be filed with the SEC had the Company
continued to have been subject to such reporting requirements. In such event,
such reports shall be provided at the times the Company would have been required
to provide reports had it continued to have been subject to such reporting
requirements. The Company also shall comply with the other provisions of TIA
Section 314(a).
SECTION 4.03. COMPLIANCE CERTIFICATE. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 1995) an Officers'
Certificate stating whether or not to the knowledge of the signers thereof the
Company is in default in the performance and observance of any of the terms,
provisions, covenants or conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and if the Company
shall be in default, specifying all such defaults and the nature and status
thereof of which they may have knowledge.
SECTION 4.04. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.
SECTION 4.05. MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in the Borough of Manhattan, the City of New York, an office or agency
of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities
may be presented or surrendered for payment, where Securities may be surrendered
for registration of transfer, exchange, purchase, redemption or conversion and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The office of the agent of the Trustee, at 77
Water Street, 4th Floor, New York, New York 10005, shall initially be such
office or agency for all of the aforesaid purposes. The Company shall give
prompt written notice to the Trustee of the location, and of any change in the
location, of any such office or agency (other than a change in the location of
the office of the Trustee). If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 12.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
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relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes.
The Company shall furnish to the Trustee on or before December 15 of
each year during which the Securities are outstanding, such information as may
be requested by the Trustee in order that the Trustee may prepare the
information which is required to be reported for such year on Internal Revenue
Service Forms 1096 and 1099 pursuant to section 6049 of the Internal Revenue
Code of 1986, as amended. Such information shall include and the Company shall
provide the amount of Original Issue Discount includable in income for each
$1,000 of Principal Amount at Maturity of the Securities for the year in which
such information is required to be furnished to the Trustee.
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company
shall not consolidate with or merge with or into any other person or convey,
transfer or lease all or substantially all of its properties and assets to any
person, unless:
(a) either (1) the Company shall be the continuing corporation or (2)
the person (if other than the Company) formed by such consolidation or into
which the Company is merged or the person which acquires by conveyance,
transfer or lease all or substantially all of the properties and assets of
the Company (i) shall be a corporation, partnership or trust organized and
validly existing under the laws of the United States or any State thereof
or the District of Columbia and (ii) shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all of the obligations of the Company
under the Securities and this Indenture;
(b) immediately after giving effect to such transaction, no Default
shall have occurred and be continuing; and
(c) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with this Article 5 and that
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all conditions precedent herein provided for relating to such transaction
have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise) of all or substantially all of the properties and assets of
one or more Subsidiaries (other than to the Company or another Subsidiary),
which, if such properties and assets were owned by the Company, would constitute
a transfer of all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company.
The successor person formed by such consolidation or into which the
Company is merged or the successor person to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor had been named as the Company herein; and thereafter, except in
the case of (i) a lease of its properties and assets substantially as an
entirety and (ii) obligations the Company may have under a supplemental
indenture pursuant to Section 11.14, the Company shall be discharged from all
obligations and covenants under this Indenture and the Securities. Subject to
Section 9.06, the Company, the Trustee and the successor person shall enter into
a supplemental indenture to evidence the succession and substitution of such
successor person and such discharge and release of the Company.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if:
(1) the Company defaults in the payment of the Principal Amount at
Maturity, Issue Price plus accrued Original Issue Discount, Redemption
Price, Purchase Price or Change in Control Purchase Price on any Security
when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration, when due for purchase by the Company or
otherwise, or defaults in the payment of cash in accordance with Article 11
upon conversion of any Security, in all cases whether or not such payment
shall be prohibited by Article 10;
(2) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in clause (1)
above or clause (6) below) and such failure continues for 60 days after
receipt by the Company of a Notice of Default;
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(3) a default shall occur under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company having an
aggregate outstanding principal amount of in excess of $25,000,000, which
default shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have been due
and payable, without such indebtedness having been discharged, such
acceleration having been rescinded or annulled or there having been
deposited in trust a sum of money sufficient to discharge in full such
indebtedness, in each case within a period of 20 days after receipt by the
Company of a Notice of Default;
(4) the Company pursuant to or under or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding or the commencement of any case
against it;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
(E) files a petition in bankruptcy or answer or consent seeking
reorganization or relief; or
(F) consents to the filing of such petition or the appointment
of or taking possession by a Custodian;
(5) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case or
proceeding, or adjudicates the Company insolvent or bankrupt;
(B) appoints a Custodian of the Company or for any substantial
part of its property; or
(C) orders the winding up or liquidation of the Company;
and the order or decree remains unstayed and in effect for 60 days; or
(6) The Company fails to deliver Common Shares (or cash in lieu of
fractional Common Shares) when such Common
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Shares (or cash in lieu of fractional Common Shares) are required to be
delivered by the Company in accordance with Article 11 upon conversion of
any Security (including a failure by the Company to deliver Common
Shares (or cash in lieu of fractional Common Shares) in accordance with
Article 11 following a failure by the Standby Share Deliverer to make a
required delivery of Common Shares (or cash in lieu of fractional
Common Shares) pursuant to a Common Share Delivery Arrangement) and
such failure continues for 10 days.
"BANKRUPTCY LAW" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
A Default under clause (2) or clause (3) above is not an Event of
Default until the Trustee notifies the Company, or the Holders of at least 25%
in aggregate Principal Amount at Maturity of the Securities at the time
outstanding notify the Company and the Trustee, of the Default and the Company
does not cure such Default (and such Default is not waived) within the time
specified in clause (2) or clause (3) above after actual receipt of such notice.
Any such notice must specify the Default, demand that it be remedied and state
that such notice is a "NOTICE OF DEFAULT".
The Company shall deliver to the Trustee, within 30 days after it
becomes aware of the occurrence thereof, written notice of any event which with
the giving of notice or the lapse of time, or both, would become an Event of
Default under clause (2) or clause (3) above, its status and what action the
Company is taking or proposes to take with respect thereto.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(4) or (5)) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of at least 25% in
aggregate Principal Amount at Maturity of the Securities at the time outstanding
by notice to the Company and the Trustee, may declare the Issue Price plus
accrued Original Issue Discount through the date of declaration on all the
Securities to be immediately due and payable. Upon such a declaration, such
Issue Price plus accrued Original Issue Discount shall be due and payable
immediately. If an Event of Default specified in Section 6.01(4) or (5) occurs
and is continuing, the Issue Price plus accrued Original Issue Discount on all
the Securities shall become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Securityholders. The
Holders of a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding, by notice to the Trustee (and without notice
to any other Securityholder) may rescind an acceleration
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and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of the Issue Price plus accrued Original Issue Discount that have
become due solely as a result of acceleration and if all amounts due to the
Trustee under Section 7.07 have been paid. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the Issue Price plus accrued Original Issue Discount on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Securities or does not produce any of the Securities in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate Principal Amount at Maturity of the Securities at the time
outstanding, by notice to the Trustee (and without notice to any other
Securityholder), may waive an existing Default and its consequences except
(a) an Event of Default described in Section 6.01(1) or (6) or (b) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected. When a Default is waived, it is deemed
cured, but no such waiver shall extend to any subsequent or other Default or
impair any consequent right. This Section 6.04 shall be in lieu of Section
316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded
from this Indenture, as permitted by the TIA.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
aggregate Principal Amount at Maturity of the Securities at the time outstanding
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines in good
faith is unduly prejudicial to the rights of other Securityholders (it being
understood that the Trustee shall have no duty to ascertain whether or not such
actions or forbearances are unduly prejudicial to such holders) or would involve
the Trustee in personal liability. The Trustee shall be entitled to
indemnification satisfactory to it against losses or expenses caused by the
taking of such action. This
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Section 6.05 shall be in lieu of Section 316(a)1(A) of the TIA and such
Section 316(a)1(A) is hereby expressly excluded from this Indenture, as
permitted by the TIA.
SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in aggregate Principal Amount at
Maturity of the Securities at the time outstanding make a written request
to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of such notice, request and offer of security or indemnity; and
(5) the Holders of a majority in aggregate Principal Amount at
Maturity of the Securities at the time outstanding do not give the Trustee
a direction inconsistent with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any other
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, but subject to Article 10, the right of
any Holder to receive payment of the Principal Amount at Maturity, Issue Price
plus accrued Original Issue Discount, cash in respect of a conversion in
accordance with Article 11, Redemption Price, Purchase Price, Change in Control
Purchase Price or interest, if any, in respect of the Securities held by such
Holder, on or after the respective due dates expressed in the Securities or any
Redemption Date, and to convert the Securities in accordance with Article 11, or
to bring suit for the enforcement of any such payment on or after such
respective dates or the right to convert, shall not be impaired or affected
adversely without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
described in Section 6.01(1) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
for the whole amount
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owing with respect to the Securities and the amounts provided for in Section
7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the Principal Amount at Maturity, Issue Price
plus accrued Original Issue Discount, cash in respect of a conversion in
accordance with Article 11, Redemption Price, Purchase Price, Change in Control
Purchase Price or interest, if any, in respect of the Securities shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of any such amount) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of the Principal
Amount at Maturity, Issue Price plus accrued Original Issue Discount, cash
in respect of a conversion in accordance with Article 11, Redemption Price,
Purchase Price, Change in Control Purchase Price, or interest, if any, and
to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
advances, reasonable compensation, expenses and disbursements of the
Trustee, its agents and counsel or any other amounts due the Trustee under
Section 7.07) and of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding;
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provided, however, that the Trustee may, on behalf of the Holders, vote for the
election of a trustee in bankruptcy or similar official and may be a member of
the creditors' committee.
SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant
to this Article 6, it shall pay out the money in the following order:
FIRST: to the payment of costs and expenses of collection, including
all sums paid or advanced by the Trustee hereunder and the reasonable
compensation, expenses and disbursements of the Trustee, its agents and
counsel, and all other amounts due the Trustee under Section 7.07;
SECOND: to holders of Senior Indebtedness to the extent required by
Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for the Principal Amount at Maturity, Issue Price plus accrued
Original Issue Discount, cash in respect of conversions in accordance with
Article 11, Redemption Price, Purchase Price, Change in Control Purchase
Price or interest, if any, as the case may be, ratably, without preference
or priority of any kind, according to such amounts due and payable on the
Securities; and
FOURTH: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and the amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit
by Holders of more than 10% in aggregate Principal Amount at Maturity of the
Securities at the time outstanding. This Section 6.11 shall be in lieu of
Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded
from this Indenture, as permitted by the TIA.
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SECTION 6.12. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the Principal Amount at
Maturity, Issue Price plus accrued Original Issue Discount, cash in respect of a
conversion in accordance with Article 11, Redemption Price, Purchase Price or
Change in Control Purchase Price in respect of Securities, or any interest on
such amounts, as contemplated herein, or which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in its
exercise as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee need perform only those duties that are
specifically set forth in this Indenture and the Trustee shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any statements, certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
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This Section 7.01(b) shall be in lieu of Section 315(a) of the TIA and such
Section 315(a) is hereby expressly excluded from this Indenture, as permitted by
the TIA.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph (c) does not limit the effect of paragraph
(b) of this Section 7.01;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
Subparagraphs (c)(1), (2) and (3) shall be in lieu of Sections 315(d)(1),
315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and
315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the
TIA.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
perform any duty or exercise any right or power or extend or risk its own funds
or otherwise incur any financial liability in the performance of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that the repayment of such funds or adequate
security and indemnity against such risk or liability are not reasonably assured
to it.
(f) Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. Neither the
Trustee (acting in any capacity hereunder) nor the Paying Agent shall be under
any liability for interest on any money received by it hereunder unless
otherwise agreed in writing with the Company.
SECTION 7.02. RIGHTS OF TRUSTEE. Subject to its duties and
responsibilities under the TIA,
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper
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person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee may consult with counsel selected by it and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate.
(h) Prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, officer's certificate, or other certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, appraisal, bond,
debenture, note, coupon, security, or other paper or document unless requested
in writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Securities then outstanding; PROVIDED, that, if the
payment within a reasonable time to the Trustee of the costs, expenses or
liability likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it
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by the terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such examination shall be paid by the Company or,
if advanced by the Trustee, shall be repaid by the Company upon demand.
(i) The Trustee shall not be responsible for the computation of any
adjustment to the Conversion Price or for any determination as to whether an
adjustment is required.
(j) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(k) The Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions or agreements on the part
of the Company, except as otherwise set forth herein, but the Trustee may
require of the Company full information and advice as to the performance of the
covenants, conditions and agreements contained herein and shall be entitled in
connection herewith to examine the books, records and premises of the Company.
(l) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or willful default.
(m) Except for (i) a default under Section 6.01(1) or (6) hereof,
and (ii) any other event of which the Trustee has "actual knowledge" and
which event, with the giving of notice or the passage of time or both, would
constitute an Event of Default under this Indenture, the Trustee shall not be
deemed to have notice of any default or event unless specifically notified in
writing of such event by the Company or the Holders of not less than 25% in
aggregate principal amount of the Securities outstanding; as used herein, the
term "actual knowledge" means the actual fact or statement of knowing,
without any duty to make any investigation with regard thereto.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion
Agent or co-registrar may do the same with like rights. However, the Trustee
must comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use or application of
the proceeds from the Securities,
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it shall not be responsible for any statement in the registration statement or
prospectus for the Securities under the Securities Act or in the Indenture or
the Securities (other than its certificate of authentication), or the
determination as to which beneficial owners are entitled to receive any notices
hereunder.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and if it is
known to the Trustee, the Trustee shall give to each Securityholder notice of
the Default within 90 days after it occurs unless such Default shall have been
cured or waived before the giving of such notice. Except in the case of a
Default described either in Section 6.01(1) or Section 6.01(6), the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of
Securityholders. The second sentence of this Section 7.05 shall be in lieu of
the proviso to Section 315(b) of the TIA and such proviso is hereby expressly
excluded from this Indenture, as permitted by the TIA.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. To the extent required
by the TIA, within 60 days after each May 15 and commencing with the first May
15 following the date of this Indenture, the Trustee shall mail to each
Securityholder a brief report dated as of such May 15 that complies with TIA
Section 313(a), if required by such Section 313(a). The Trustee also shall
comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each securities exchange on which the Securities
are listed. The Company agrees to notify the Trustee whenever the Securities
become listed on any securities exchange and of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company agrees:
(a) to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it
hereunder (which compensation shall not be limited (to the extent permitted
by law) by any provision of law in regard to the compensation of a trustee
of an express trust);
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses, advances and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or willful misconduct; and
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(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, damage, claim, liability, cost or expense (including attorney's
fees) incurred without negligence or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of
this trust, including, without limitation, any liability whatsoever related
to the violations of federal or state securities laws and the costs and
expenses of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay the Principal
Amount at Maturity, Issue Price plus accrued Original Issue Discount, Redemption
Price, Purchase Price, Change in Control Purchase Price or interest, if any, as
the case may be, on, or cash in respect of a conversion of, particular
Securities.
The Company's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in Section 6.01(4) or (5), the expenses
are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign by so
notifying the Company; PROVIDED, HOWEVER, no such resignation shall be effective
until a successor Trustee has accepted its appointment pursuant to this Section
7.08. The Holders of a majority in aggregate Principal Amount at Maturity of
the Securities at the time outstanding may remove the Trustee by so notifying
the Trustee and the Company. The Company may remove the Trustee at any time
without the consent of any Holder of Securities, provided that no Event of
Default, or event which following notice or the passage of time or both would
constitute an Event of Default, shall then exist with respect to the Securities
and such removal does not adversely affect the interests of any Holder of
Securities. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or its
property; or
(4) the Trustee otherwise becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint, by
resolution of its Board of Directors, a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company satisfactory in form and
substance to the retiring Trustee and the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. Nothing herein
contained shall prevent the Trustee from filing with the Commission the
application referred to in the penultimate paragraph of TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF LIABILITY ON SECURITIES. When (i) the
Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable and the Company deposits with
the Trustee cash or, if expressly permitted by the terms of the Securities,
securities sufficient to pay all amounts due and owing on all outstanding
Securities (other than Securities replaced pursuant to Section 2.07), and if in
either case the Company pays all other sums payable hereunder by the Company,
then this Indenture shall, subject to Section 7.07, cease to be of further
effect. The Trustee shall join in the execution of a document prepared by the
Company acknowledging satisfaction and discharge of this Indenture on demand of
the Company accompanied by an Officers' Certificate and Opinion of Counsel and
at the cost and expense of the Company.
SECTION 8.02. REPAYMENT TO THE COMPANY. The Trustee and the
Paying Agent shall return to the Company upon written request any money or
securities held by them for the payment of any amount with respect to the
Securities that remains unclaimed for two years, PROVIDED, HOWEVER, that the
Trustee or such Paying Agent, before being required to make any such return, may
at the expense of the Company cause to be published once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled to
the money or securities notice that such money or securities remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication or mailing, any unclaimed money or securities
then remaining will be returned to the Company. After return to the Company,
Holders entitled to the money or securities must look solely to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person and the Trustee and the Paying Agent shall have no
further liability to the Securityholders with respect to such money or
securities for that period commencing after the return thereof.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without the consent of any
Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
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(2) to comply with Article 5 or Section 11.14;
(3) to provide for uncertificated Securities in addition to
certificated Securities so long as such uncertificated Securities are in
registered form for purposes of the Internal Revenue Code of 1986, as
amended;
(4) to eliminate the Company's option to pay cash in lieu of
delivering Common Shares upon conversion of Securities (other than cash in
lieu of fractional shares and except with respect to such elections already
made by the Company to so pay cash) or to eliminate the Company's option to
enter into Common Share Delivery Arrangements in respect of conversions of
Securities pursuant to Section 11.19 (except for those Common Share
Delivery Arrangements already entered into);
(5) to make any change that does not adversely affect the rights of
any Securityholder; or
(6) to make any change to comply with the TIA, or any amendment
thereto, or to comply with any requirement of the SEC in connection with
the qualification of the Indenture under the TIA.
SECTION 9.02. WITH CONSENT OF HOLDERS. With the written consent of
the Holders of at least a majority in aggregate Principal Amount at Maturity of
the Securities at the time outstanding, the Company and the Trustee may amend
this Indenture or the Securities in any manner. However, without the consent of
each Securityholder affected, an amendment to this Indenture or the Securities
may not:
(1) make any change to the Principal Amount at Maturity of Securities
whose Holders must consent to an amendment;
(2) make any change in the manner or rate of accrual in connection
with Original Issue Discount, reduce the rate of interest referred to in
paragraph 1 of the Securities or extend the time for payment of Original
Issue Discount or interest, if any, on any Security;
(3) reduce the Principal Amount at Maturity or the Issue Price of or
extend the Stated Maturity of any Security;
(4) reduce the amount of cash the Company must pay in respect of a
conversion of any Security in accordance with Article 11 or the Redemption
Price, Purchase Price or Change in Control Purchase Price of any Security;
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(5) make any Security payable in money or securities other than that
stated in the Security;
(6) make any change in Article 10 that adversely affects the rights
of any Securityholder;
(7) make any change in Section 6.04, Section 6.07 or this Section
9.02, except to increase any percentage set forth therein;
(8) make any change that materially adversely affects the right to
convert any Security (including the right to receive cash in lieu of Common
Shares upon conversion in accordance with the terms of Article 11, other
than the elimination of the Company's option to pay cash in lieu of
delivering Common Shares or to enter into Common Share Delivery
Arrangements upon conversion of Securities, as set forth in
Section 9.01(4)); or
(9) make any change that materially adversely affects the right to
require the Company to purchase the Securities in accordance with the terms
thereof and this Indenture (including, without limitation, the right to
receive cash in lieu of or in combination with Common Shares and/or
specified TDS Common Equity Securities upon purchase by the Company at the
option of the Holders of Securities in accordance with Section 3.08).
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.02 or Section 9.01 may not make any
change that adversely affects the rights under Article 10 of any holder of
Senior Indebtedness then outstanding unless the requisite holders of such Senior
Indebtedness consent to such change pursuant to the terms of such Senior
Indebtedness.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every
supplemental indenture executed pursuant to this Article shall comply with the
TIA.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS.
Until an amendment, waiver or other action by Holders becomes effective, a
consent thereto by a Holder of a Security hereunder is a continuing consent by
the Holder and every subsequent Holder of that Security or portion of the
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Security that evidences the same obligation as the consenting Holder's Security,
even if notation of the consent, waiver or action is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent, waiver or
action as to such Holder's Security or portion of the Security if the Trustee
receives the notice of revocation before the date the amendment, waiver or
action becomes effective. After an amendment, waiver or action becomes
effective, it shall bind every Securityholder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for outstanding Securities.
SECTION 9.06. TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee
shall sign any supplemental indenture authorized pursuant to this Article 9 if
the amendment contained therein does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign such supplemental indenture. In signing such supplemental indenture
the Trustee shall be entitled to receive, and (subject to the provisions of
Section 7.01) shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that such amendment is authorized or permitted
by this Indenture.
SECTION 9.07. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
ARTICLE 10
SUBORDINATION
SECTION 10.01. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS. The
Company covenants and agrees, and each Holder of a Security by such Holder's
acceptance thereof likewise covenants and agrees, that, to the extent and in the
manner hereinafter set forth in this Article 10, the indebtedness represented by
the Securities and the payment of the Principal Amount at Maturity, Issue Price
plus accrued Original Issue
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Discount, cash in respect of a conversion (other than cash in lieu of fractional
shares upon conversion), Redemption Price, Purchase Price, Change in Control
Purchase Price and interest, if any, in respect of each and all of the
Securities are hereby expressly made subordinate and subject in right of payment
to the prior payment in full of all Senior Indebtedness.
"SENIOR INDEBTEDNESS" means the principal of (and premium, if any) and
interest on (including interest accruing after the filing of a petition
initiating any proceeding pursuant to any Bankruptcy Law (including, with
respect to the Amended and Restated Term Loan Agreement, dated as of December
22, 1994, between the Company and NTFC Capital Corporation (and any other Debt
if the instrument creating or evidencing the same expressly provides therefor),
such interest whether or not allowed as a claim in such proceeding, but, with
respect to all other Debt, only to the extent allowed or permitted to the holder
of such Debt against the bankruptcy or other insolvency estate of the Company in
such proceeding)) and fees, expenses, reimbursement obligations, indemnity
obligations and other amounts due on or in connection with any Debt incurred,
assumed or guaranteed by the Company, whether outstanding on the date of the
Indenture or thereafter incurred, assumed or guaranteed and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any such Debt; PROVIDED, HOWEVER, that the following will not
constitute Senior Indebtedness: (a) any Debt if the instrument creating the
same or evidencing the same or pursuant to which the same is outstanding
expressly provides (i) that such Debt shall not be senior in right of payment to
the Securities, or (ii) that such Debt shall be subordinated to any other Debt
of the Company, unless such instrument expressly provides that such Debt shall
be senior in right of payment to the Securities; and (b) any Debt of the Company
in respect of the Securities.
SECTION 10.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. Upon
any distribution of assets of the Company in the event of
(a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or
(b) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or
(c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company,
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then and in any such event
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness before the Holders of the Securities are entitled to
receive any payment on account of the Principal Amount at Maturity, Issue
Price plus accrued Original Issue Discount, cash in respect of a conversion
(other than cash in lieu of fractional shares upon conversion) Redemption
Price, Purchase Price, Change in Control Purchase Price or interest, if
any, in respect of the Securities; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article 10, including any such payment or
distribution which may be payable or deliverable by reason of the payment
of any other Debt of the Company being subordinated to the payment of the
Securities, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to the
holders of Senior Indebtedness or their representative or representatives
or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Senior Indebtedness may have been
issued, ratably according to the aggregate amounts remaining unpaid on
account of the principal of, and premium, if any, and interest on the
Senior Indebtedness held or represented by each, to the extent necessary to
make payment in full of all Senior Indebtedness remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of
such Senior Indebtedness.
In the event that, notwithstanding the foregoing provisions of this
Section 10.02, the Company shall have made payment to the Trustee or directly to
the Holder of any Security of any payment or distribution of assets of the
Company of any kind or character, whether such payment shall be in cash,
property or securities, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other Debt of the Company
being subordinated to the payment of the Securities, before all Senior
Indebtedness is paid in full or payment thereof provided for, and if such fact
shall then have been made known to the Trustee as provided in Section 10.10 or
such Holder, as the case may be, pursuant to the terms of this Indenture, then
and in such event such payment or distribution shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
Custodian, assignee, agent or other person making payment or distribution of
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assets of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
For purposes of this Article 10 only, the words "CASH, PROPERTY OR
SECURITIES" shall not be deemed to include shares of Capital Stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the payment
of which is subordinated, at least to the extent provided in this Article 10
with respect to the Securities, to the payment of all Senior Indebtedness which
may at the time be outstanding; provided, however, that (i) Senior Indebtedness
is assumed by the new corporation, if any, resulting from any such
reorganization or readjustment, and (ii) the rights of the holders of the Senior
Indebtedness are not, without the consent of such holders, altered by such
reorganization or readjustment.
The consolidation of the Company with, or the merger of the Company
into, another person or the liquidation or dissolution of the Company following
the conveyance or transfer of its properties and assets substantially as an
entirety to another person upon the terms and conditions set forth in Article 5
shall not be deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshalling of assets and liabilities
of the Company for the purposes of this Section 10.02 if the person formed by
such consolidation or into which the Company is merged or the person which
acquires by conveyance or transfer the properties and assets of the Company
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article 5.
SECTION 10.03. ACCELERATION OF SECURITIES. In the event that any
Securities are declared due and payable before their Stated Maturity pursuant to
Section 6.02, then and in such event the Company shall promptly, and in any
event within ten Business Days of the occurrence thereof, notify holders of
Senior Indebtedness of such acceleration. The Company may not make any payment
on the Securities until 120 days have passed after such notice of acceleration
is given to holders of Senior Indebtedness and may thereafter pay the Securities
if this Article 10 permits the payment at that time.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or directly to the Holder of any Securities
prohibited by the foregoing provisions of this Section 10.03, and if such facts
shall, at or prior to the time of such payment, have been made known to the
Trustee as
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provided in Section 10.10 or such Holder, as the case may be, pursuant to the
terms of this Indenture, then and in such event such payment shall be paid over
and delivered forthwith to the Company by or on behalf of the person holding
such payment for the benefit of the holders of Senior Indebtedness.
The provisions of this Section 10.03 shall not apply to any payment
with respect to which Section 10.02 would be applicable.
SECTION 10.04. DEFAULT ON SENIOR INDEBTEDNESS. The Company may not
make any payment of the Principal Amount at Maturity, Issue Price plus accrued
Original Issue Discount, cash in respect of conversion (other than cash in lieu
of fractional shares upon conversion), Redemption Price, Change in Control
Purchase Price or interest, if any, in respect of the Securities and may not pay
cash in respect of the Purchase Price (or portion thereof) of any Security
(other than for fractional shares) or otherwise acquire any Securities for cash
or property (except as otherwise provided by Article 11 with respect to the
conversion of Securities for Common Shares (and for cash in lieu of fractional
shares upon conversion) and otherwise for Capital Stock of the Company) if:
(1) a default on Senior Indebtedness occurs and is continuing that
permits holders of such Senior Indebtedness to accelerate its maturity; and
(2) the default is the subject of judicial proceedings or the Company
receives a notice of default thereof from any person who may give such
notice pursuant to the instrument evidencing or document governing such
Senior Indebtedness. If the Company receives any such notice, then a
similar notice received within nine months thereafter relating to the same
default (as distinguished from a subsequent default, including a subsequent
default of the same provision) on the same issue of Senior Indebtedness
shall not be effective for purposes of this Section 10.04.
The Company may resume payments on the Securities and may acquire
Securities if and when:
(A) the default is cured or waived in accordance with the terms of
such Senior Indebtedness; or
(B) in the case of defaults on Senior Indebtedness other than payment
defaults, 120 or more days pass after the receipt by the Company of the
notice described in clause (2) above and the default is not then the
subject of judicial proceedings; and
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this Article 10 otherwise permits the payment or acquisition at that time.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section 10.04, and if such facts shall, at or prior
to the time of such payment, have been made known to the Trustee as provided in
Section 10.10 or such Holder, as the case may be, pursuant to the terms of this
Indenture, then and in such event such payment shall be paid over and delivered
forthwith to the Company by or on behalf of the person holding such payment for
the benefit of the holders of the Senior Indebtedness.
Nothing contained in this Article 10 or elsewhere in this Indenture or
in any of the Securities shall prevent the conversion by a Holder of any
Securities in accordance with the provisions for conversion of such Securities
set forth in this Indenture, including the payment of cash in lieu of fractional
Common Shares in accordance with Article 11, or in any of such Securities in the
event of an occurrence of the events described in clauses (1) and (2) of this
Section 10.04; provided that upon such conversion the Company (or, in the case
of a Common Share Delivery Arrangement, the Standby Share Deliverer or, in the
case of a failure by the Standby Share Deliverer to so deliver, the Company in
accordance with Article 11) delivers Common Shares and not cash (other than cash
in lieu of fractional shares upon such conversion).
The provisions of this Section 10.04 shall not apply to any payment
with respect to which Section 10.02 would be applicable.
SECTION 10.05. PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in
this Article 10 or elsewhere in this Indenture or in any of the Securities shall
prevent (a) the Company, at any time except during the pendency of any case,
proceeding, dissolution, liquidation or other winding up, assignment for the
benefit of creditors or other marshalling of assets and liabilities of the
Company referred to in Section 10.02 or under the conditions described in
Section 10.03 or 10.04, from making payments at any time of the Principal Amount
at Maturity, Issue Price plus accrued Original Issue Discount, cash in respect
of conversion in accordance with Article 11, Redemption Price, Purchase Price,
Change in Control Purchase Price or interest, if any, as the case may be, in
respect of the Securities, or (b) the application by the Trustee or the
retention by any Holder of any money deposited with it hereunder to the payment
of or on account of the Principal Amount at Maturity, Issue Price plus accrued
Original Issue Discount, cash in respect of conversion in accordance with
Article 11, Redemption Price, Purchase Price, Change in Control Purchase
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Price or interest, if any, as the case may be, in respect of the Securities if
the Trustee did not have, at the time provided in the proviso to the first
paragraph of Section 10.10, notice that such payment would have been prohibited
by the provisions of this Article 10.
SECTION 10.06. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS. Subject to the payment in full of all Senior Indebtedness, the
Holders of the Securities shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant to the
provisions of this Article 10 (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordinated to
indebtedness of the Company to substantially the same extent as the Securities
are subordinated and is entitled to like rights of subrogation) to the rights of
the holders of such Senior Indebtedness to receive payments or distributions of
cash, property or securities applicable to the Senior Indebtedness until the
Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount,
cash in respect of conversion in accordance with Article 11, Redemption Price,
Purchase Price or Change in Control Purchase Price or interest, if any, as the
case may be, in respect of the Securities shall be paid in full. For purposes
of such subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee would be entitled except for the provisions of this
Article 10, and no payments pursuant to the provisions of this Article 10 to the
Company or to the holders of Senior Indebtedness by Holders of the Securities or
the Trustee, shall, as between the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, be deemed to be a payment
or distribution by the Company to or on account of the Senior Indebtedness.
SECTION 10.07. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article 10 are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities, on one hand, and
the holders of Senior Indebtedness, on the other hand. Nothing contained in
this Article 10 or elsewhere in this Indenture or in the Securities is intended
to or shall
(a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders of the Securities, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of
the Securities the Principal Amount at Maturity, Issue Price plus accrued
Original Issue Discount, cash in respect of conversion in accordance with
Article 11, Redemption Price, Purchase Price, Change in Control Purchase
Price, and interest, if any, as the case may be, in respect of the
Securities as and
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when the same shall become due and payable in accordance with the terms of
the Securities and this Indenture and which, subject to the rights under
this Article 10 of the holders of Senior Indebtedness, is intended to rank
equally with all other general obligations of the Company; or
(b) affect the relative rights against the Company of the Holders of
the Securities and creditors of the Company other than holders of Senior
Indebtedness; or
(c) prevent the Trustee or the Holder of any Security from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article 10 of the
holders of Senior Indebtedness to receive cash, property or securities
otherwise payable or deliverable to the Trustee or such Holder.
SECTION 10.08. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a
Security by such Holder's acceptance thereof authorizes and directs the Trustee
on such Holder's behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article 10 and appoints the
Trustee such Holder's attorney-in-fact for any and all such purposes.
SECTION 10.09. NO WAIVER OF SUBORDINATION PROVISIONS. No right of
any present or future holder of any Senior Indebtedness to enforce subordination
as herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of, or notice to, the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article 10
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise dispose of any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (iii) release any person liable in any manner for the
collection
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of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company or any other person.
SECTION 10.10. NOTICE TO TRUSTEE. The Company shall give prompt
written notice to the Trustee of any fact known to the Company which would
prohibit the making of any payment to or by the Trustee in respect of the
Securities or that would permit the resumption of any such payment.
Notwithstanding the provisions of this Article 10 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Securities or that would permit the resumption of any such
payment, unless and until the Trustee shall have received written notice thereof
from the Company or a holder of Senior Indebtedness or from any trustee or agent
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 7.01, shall be entitled in all respects to
assume that no such facts exist; PROVIDED, HOWEVER, that if a Responsible
Officer of the Trustee shall not have received, at least two Business Days prior
to the date upon which by the terms hereof any such money may become payable for
any purpose (including, without limitation, the payment of the Principal Amount
at Maturity, Issue Price plus accrued Original Issue Discount, cash in respect
of conversion in accordance with Article 11, Redemption Price, Purchase Price,
Change in Control Purchase Price or interest, if any, as the case may be, in
respect of any Security), the notice with respect to such money provided for in
this Section 10.10, then, anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive such
money and to apply the same to the purpose for which such money was received and
shall not be affected by any notice to the contrary which may be received by it
within two Business Days prior to such date.
Subject to the provisions of Section 7.01, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a person
representing himself to be a holder of Senior Indebtedness (or a trustee or
agent on behalf of such holder) to establish that such notice has been given by
a holder of Senior Indebtedness (or a trustee or agent on behalf of any such
holder). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article 10, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such person under this Article 10, and if such evidence is not furnished, the
Trustee may defer any payment which it may be required to make for the benefit
of such person pursuant to the terms of this Indenture
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pending judicial determination as to the right of such person to receive such
payment.
SECTION 10.11. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT. Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee, subject to the provisions of
Section 7.01, and the Holders of the Securities shall be entitled to rely upon
any order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, Custodian, receiver, assignee for
the benefit of creditors, agent or other person making such payment or
distribution, delivered to the Trustee or to the Holders of Securities, for the
purpose of ascertaining the persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.12. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness. The Trustee shall not be charged with knowledge
of the existence of Senior Indebtedness or of any facts that would prohibit any
payment hereunder or that would permit the resumption of any such payment unless
a Responsible Officer of the Trustee shall have received notice to that effect
at the address of the Trustee set forth in Section 12.02. With respect to the
holders of Senior Indebtedness, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article 10 and no implied covenants or obligations with respect to holders of
Senior Indebtedness shall be read into this Indenture against the Trustee.
SECTION 10.13. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS;
PRESERVATION OF TRUSTEE'S RIGHTS. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article 10 with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article 10 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 7.07.
SECTION 10.14. ARTICLE 10 APPLICABLE TO PAYING AGENTS AND CONVERSION
AGENTS. In case at any time any Paying Agent or Conversion Agent other than the
Trustee shall have been appointed
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by the Company and be then acting hereunder, the term "Trustee" as used in this
Article 10 shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent or Conversion Agent,
as the case may be, within its meaning as fully for all intents and purposes as
if such Paying Agent or Conversion Agent, as the case may be, were named in this
Article 10 in addition to or in place of the Trustee; PROVIDED, HOWEVER, that
Sections 10.10 and 10.12 shall not apply to the Company or any Affiliate of the
Company if it or such Affiliate acts as Paying Agent or Conversion Agent, as the
case may be.
ARTICLE 11
CONVERSION
SECTION 11.01. CONVERSION PRIVILEGE. A Holder of a Security may
convert such Security into Common Shares at any time during the period stated
in paragraph 9 of the Securities. The number of Common Shares issuable upon
conversion of a Security per $ 1,000 of Principal Amount at Maturity thereof
(the "CONVERSION RATE") shall be that set forth in paragraph 9 in the
Securities, subject to adjustment as herein set forth. Such right of Holders
to convert Securities into Common Shares is subject to the Company's right to
elect to pay a Holder surrendering a Security pursuant to this Article 11 the
amount of cash set forth in the next succeeding sentence, in lieu of
delivering such Common Shares; provided that if such payment of cash is not
allowed pursuant to the provisions of the Indenture or otherwise, the Company
(or the Standby Share Deliverer in accordance with terms of Section 11.19)
shall deliver Common Shares (and cash in lieu of fractional Common Shares) in
accordance with this Article 11, whether or not the Company has delivered its
notice of whether such Security shall be converted into Common Shares or cash
pursuant to Section 11.02. The amount of cash to be paid in lieu of Common
Shares pursuant to such election by the Company per $1,000 Principal Amount
at Maturity of a Security upon conversion of such Security shall be equal to
the Sale Price of a Common Share on the trading day immediately prior to the
Conversion Date multiplied by the Conversion Rate in effect on such trading
day, as adjusted in accordance with this Article 11 and as further adjusted
to reflect adjustments thereto calculated pursuant to the terms of this
Article 11 with respect to events (i) that give rise to an adjustment to the
Conversion Rate pursuant to the terms of this Article 11 which has not become
effective on or prior to such trading day and (ii) with respect to which the
Time of Determination has occurred.
The Company shall not pay cash in lieu of delivering Common Shares
upon the conversion of any Security pursuant to the
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terms of this Article 11 (other than cash in lieu of fractional shares pursuant
to Section 11.03) (i) if there has occurred (prior to, on or after, as the case
may be, the Conversion Date or the date on which the Company delivers its notice
of whether such Security shall be converted into Common Shares or cash pursuant
to Section 11.02) and is continuing an Event of Default (other than a default in
such payment on such Securities) and (ii) unless the Common Shares are listed or
admitted to trading on a United States national or regional securities exchange
or reported on The Nasdaq Stock Market.
A Holder may convert a portion of the Principal Amount at Maturity of
a Security if the portion is $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to conversion of all of a Security also
apply to conversion of a portion of a Security.
"QUOTED PRICE" means, for any given day, the last reported per share
sale price (or, if no sale price is reported, the average of the bid and ask
prices or, if more than one in either case, the average of the average bid and
average ask prices) on such day of the Common Shares as reported in the
composite transactions for the principal United States securities exchange upon
which the Common Shares are listed, or, if the Common Shares are not listed on a
United States national or regional securities exchange, as quoted on The Nasdaq
Stock Market or by the National Quotation Bureau Incorporated. In the absence
of such quotations, the Company shall be entitled to determine the Quoted Price
on the basis of such quotations as it considers appropriate.
"AVERAGE QUOTED PRICE" means the average of the Quoted Prices of the
Common Shares for the shortest of
(i) 30 consecutive trading days ending on the last full trading day
prior to the Time of Determination with respect to the rights, warrants or
options or distribution in respect of which the Average Quoted Price is
being calculated, or
(ii) the period (x) commencing on the date next succeeding the first
public announcement of (a) the issuance of rights, warrants or options or
(b) the distribution, in each case, in respect of which the Average Quoted
Price is being calculated and (y) proceeding through the last full trading
day prior to the Time of Determination with respect to the rights, warrants
or options or distribution in respect of which the Average Quoted Price is
being calculated (excluding days within such period, if any, which are not
trading days), or
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(iii) the period, if any, (x) commencing on the date next succeeding
the Ex-Dividend Time with respect to the next preceding (a) issuance of
rights, warrants or options or (b) distribution, in each case, for which an
adjustment is required by the provisions of Section 11.06(4), 11.07 or
11.08 and (y) proceeding through the last full trading day prior to the
Time of Determination with respect to the rights, warrants or options or
distribution in respect of which the Average Quoted Price is being
calculated (excluding days within such period, if any, which are not
trading days).
In the event that the Ex-Dividend Time (or in the case of a
subdivision, combination or reclassification, the effective date with respect
thereto) with respect to a dividend, subdivision, combination or
reclassification to which Section 11.06(1), (2), (3) or (5) applies occurs
during the period applicable for calculating "Average Quoted Price" pursuant to
the definition in the preceding sentence, "Average Quoted Price" shall be
calculated for such period in a manner determined by the Board of Directors to
reflect the impact of such dividend, subdivision, combination or
reclassification on the Quoted Price of the Common Shares during such period.
"TIME OF DETERMINATION" means the time and date of the earlier of (i)
the determination of shareholders entitled to receive rights, warrants or
options or a dividend or distribution, in each case, to which Section 11.06,
11.07 or 11.08 applies and (ii) the time ("EX-DIVIDEND TIME") immediately prior
to the commencement of "ex-dividend" trading for such rights, warrants or
options or dividend or distribution on the American Stock Exchange or such other
national or regional exchange or market on which the Common Shares are then
listed or quoted.
SECTION 11.02. CONVERSION PROCEDURE. To convert a Security a Holder
must satisfy the requirements in paragraph 9 of the Securities. The date on
which the Holder satisfies all those requirements is the conversion date (the
"CONVERSION DATE"). Within two Business Days after the Conversion Date, the
Company shall deliver to the Holder, through the Conversion Agent, written
notice of whether Common Shares (and cash in lieu of fractional shares) or cash
shall be delivered to such Holder in connection with such conversion. If Common
Shares are to be delivered to the Holder pursuant to a Common Share Delivery
Arrangement, such notice shall inform the Holder that the delivery of Common
Shares in connection with such conversion may constitute a taxable event to such
Holder because the Common Shares are being delivered by the Standby Share
Deliverer. If the Company shall have notified the Holder that Common Shares
(and cash in lieu of fractional shares) shall be delivered, the Company (except
as set forth in Section 11.19 in connection with
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a conversion to be executed pursuant to a Common Share Delivery Arrangement)
shall deliver to the Holder as soon as practicable following such Conversion
Date, through the Conversion Agent, a certificate for the number of full
Common Shares to be delivered upon conversion and cash in lieu of any
fractional share determined pursuant to Section 11.03. If the Company shall
have notified the Holder that such Security shall be converted into cash, the
Company shall deliver to the Holder surrendering such Securities, through the
Conversion Agent, the amount of cash payable upon such conversion no later
than the fifth Business Day following such Conversion Date. If (i) the
Company shall have notified the Holder that such Security shall be converted
into cash, (ii) such payment of cash is not allowed pursuant to the
provisions of the Indenture or otherwise and (iii) the Company has arranged
for such conversion to be executed pursuant to a Common Share Delivery
Arrangement, the Company shall promptly (but no later than five Business Days
after the Conversion Date) deliver to the Holder, through the Conversion
Agent, written notice that Common Shares (and cash in lieu of fractional
shares) shall be delivered to such Holder in connection with such Conversion
and that the delivery of Common Shares in connection with such Conversion may
constitute a taxable event to such Holder because the Common Shares are being
delivered by the Standby Share Deliverer. The person in whose name the
certificate described in the third preceding sentence is registered shall be
treated as a shareholder of record on and after the Conversion Date;
PROVIDED, HOWEVER, that no surrender of a Security on any date when the share
transfer books of the Company shall be closed shall be effective to
constitute the person or persons entitled to receive the Common Shares upon
such conversion as the record holder or holders of such Common Shares on such
date, but such surrender shall be effective to constitute the person or
persons entitled to receive such Common Shares as the record holder or
holders thereof for all purposes at the close of business on the next
succeeding day on which such share transfer books are open; such conversion
shall be at the Conversion Rate in effect on the date that such Security
shall have been surrendered for conversion, as if the share transfer books of
the Company had not been closed. Upon conversion of a Security, such person
shall no longer be a Holder of such Security.
No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Common Shares except as provided in this
Article 11. On conversion of a Security (other than a conversion executed
pursuant to delivery of Common Shares (and cash in lieu of fractional shares) by
the Standby Share Deliverer pursuant to a Common Share Delivery Arrangement),
that portion of accrued Original Issue Discount attributable to the period from
the Issue Date of the Security through the Conversion Date with respect to the
converted Security shall not be cancelled, extinguished or forfeited, but rather
shall be
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deemed to be paid in full to the Holder thereof through delivery of the Common
Shares (together with the cash payment, if any, in lieu of any fractional Common
Shares) or of cash, as the case may be, in exchange for the Security being
converted pursuant to the provisions hereof; and, if the Company delivers Common
Shares (and cash in lieu of fractional shares) upon conversion of Securities,
the fair market value of such Common Shares (together with any such cash payment
in lieu of any fractional Common Shares) shall be treated as issued, to the
extent thereof, first in exchange for Original Issue Discount accrued through
the Conversion Date, and the balance, if any, of such fair market value of such
Common Shares (and any such cash payment) shall be treated as issued in exchange
for the Issue Price of the Security being converted pursuant to the provisions
hereof.
If the Holder converts more than one Security at the same time, the
number of Common Shares deliverable or the amount of cash to be paid, as the
case may be, upon the conversion shall be based on the total Principal Amount at
Maturity of the Securities converted.
Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security in an authorized denomination equal in Principal Amount at Maturity
to the unconverted portion of the Security surrendered.
If the last day on which a Security may be converted is not a Business
Day, the Security may be surrendered on the next succeeding day that is a
Business Day.
SECTION 11.03. FRACTIONAL SHARES. Fractional Common Shares will not
be delivered upon conversion of a Security. Instead, the Company (or the
Standby Share Deliverer, through the Conversion Agent, in the case of a Common
Share Delivery Arrangement) will deliver cash for the current market value of
such fractional share. The current market value of a fractional Common Share
shall be determined, to the nearest 1/1,000th of a Common Share, by multiplying
the Quoted Price, on the last trading day prior to the Conversion Date, of a
full Common Share by the fractional amount and rounding the product to the
nearest whole cent.
SECTION 11.04. TAXES ON CONVERSION. If a Holder converts
(including pursuant to a Common Share Delivery Arrangement) a Security, the
Company shall pay any documentary, stamp or similar issue or transfer tax due
on the issue or delivery of Common Shares upon the conversion. However, the
Holder shall pay any such tax which is due because the Holder requests the
Common Shares to be issued in a name other than the Holder's name. The
Conversion Agent may refuse to deliver the certificates representing the
Common Shares being issued in a name other than the Holder's name until the
Conversion Agent receives a sum
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sufficient to pay any tax which will be due because the Common Shares are to be
issued in a name other than the Holder's name. Nothing herein shall preclude
any tax withholding required by law or regulations.
SECTION 11.05. COMPANY TO PROVIDE COMMON SHARES. The Company shall,
prior to issuance of any Securities under this Article 11, and from time to time
as may be necessary, reserve out of its authorized but unissued Common Shares a
sufficient number of Common Shares to permit the conversion of all of the
outstanding Securities for Common Shares (assuming no conversions are to be
executed pursuant to a Common Share Delivery Arrangement).
Except in the case of Common Shares delivered by the Standby Share
Deliverer pursuant to a Common Share Delivery Arrangement, all Common Shares
delivered upon conversion of the Securities shall be newly issued Common Shares
or treasury Common Shares. All Common Shares delivered upon conversion of the
Securities shall be duly and validly issued and fully paid and nonassessable,
shall not be subject to nor violate any preemptive rights and shall be free of
any lien or adverse claim.
The Company will endeavor promptly to comply with all Federal and
state securities laws regulating the offer and delivery of Common Shares upon
conversion of Securities, if any, and will list or cause to have quoted such
Common Shares on each national securities exchange or in the over-the-counter
market or such other market on which the Common Shares are then listed or
quoted.
SECTION 11.06. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the
Issue Date of the Securities, the Company:
(1) pays a dividend or makes a distribution on its Common Shares in
Common Shares;
(2) subdivides its outstanding Common Shares into a greater number of
Common Shares;
(3) combines its outstanding Common Shares into a smaller number of
Common Shares;
(4) pays a dividend or makes a distribution on its Common Shares in
shares of its Capital Stock (other than Common Shares or rights, warrants
or options for its Capital Stock); or
(5) issues by reclassification of its Common Shares any shares of its
Capital Stock (other than rights, warrants or options for its Capital
Stock),
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then the conversion privilege and the Conversion Rate in effect immediately
prior to such action shall be adjusted so that the Holder of a Security
thereafter converted may receive the number of shares of Capital Stock of the
Company which such Holder would have owned immediately following such action if
such Holder had converted the Security immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Security upon conversion of such
Security may receive shares of two or more classes of Capital Stock of the
Company, the Conversion Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article 11 with respect to the Common Shares, on terms
comparable to those applicable to Common Shares in this Article 11.
SECTION 11.07. ADJUSTMENT FOR RIGHTS ISSUE. If after the Issue Date
of the Securities, the Company distributes any rights, warrants or options to
all holders of its Common Shares entitling them, for a period expiring within 60
days after the record date for such distribution, to purchase Common Shares at a
price per Common Share less than the Quoted Price as of the Time of
Determination, the Conversion Rate shall be adjusted in accordance with the
formula:
R' = R x (O + N)
---------------
(O + (N x P)/M)
where:
R' =the adjusted Conversion Rate.
R =the current Conversion Rate.
O = the number of Common Shares outstanding on the record date for the
distribution to which this Section 11.07 is being applied.
N = the number of additional Common Shares offered pursuant to the
distribution.
P = the exercise price per share of the additional Common Shares.
M = the Average Quoted Price, MINUS, in the case of (i) a distribution to
which Section 11.06(4) applies or (ii) a distribution to which Section
11.08 applies, for
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which, in each case, (x) the record date shall occur on or before the
record date for the distribution to which this Section 11.07 applies
and (y) the Ex-Dividend Time shall occur on or after the date of the
Time of Determination for the distribution to which this Section 11.07
applies, the fair market value (on the record date for the
distribution to which this Section 11.07 applies) of the
(1) Capital Stock of the Company distributed in respect of each Common
Share in such Section 11.06(4) distribution and
(2) assets of the Company or debt securities or any rights, warrants
or options to purchase securities of the Company distributed in
respect of each Common Share in such Section 11.08 distribution.
The Board of Directors shall determine fair market values for the purposes
of this Section 11.07.
The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the rights,
warrants or options to which this Section 11.07 applies. If all of the Common
Shares subject to such rights, warrants or options have not been issued when
such rights, warrants or options expire, then the Conversion Rate shall promptly
be readjusted to the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such rights, warrants or options been made on
the basis of the actual number of Common Shares issued upon the exercise of such
rights, warrants or options.
No adjustment shall be made under this Section 11.07 if the
application of the formula stated above in this Section 11.07 would result in a
value of R' that is equal to or less than the value of R.
SECTION 11.08. ADJUSTMENT FOR OTHER DISTRIBUTIONS. If, after the
Issue Date of the Securities, the Company distributes to all holders of its
Common Shares any of its assets, or debt securities or any rights, warrants or
options to purchase securities of the Company (including securities or cash, but
excluding (x) distributions of Capital Stock referred to in Section 11.06 and
distributions of rights, warrants or options referred to in Section 11.07 and
(y) cash dividends or other cash distributions that are paid out of consolidated
current net earnings or earnings retained in the business as shown on the books
of the Company unless such cash dividends or other cash distributions are
Extraordinary Cash Dividends) the Conversion Rate shall be adjusted, subject to
the provisions of the last paragraph of this Section 11.08, in accordance with
the formula:
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R' = R x M
-
M-F
where:
R' =the adjusted Conversion Rate.
R =the current Conversion Rate.
M = the Average Quoted Price, MINUS, in the case of a distribution to
which Section 11.06(4) applies, for which (i) the record date shall
occur on or before the record date for the distribution to which this
Section 11.08 applies and (ii) the Ex-Dividend Time shall occur on or
after the date of the Time of Determination for the distribution to
which this Section 11.08 applies, the fair market value (on the record
date for the distribution to which this Section 11.08 applies) of any
Capital Stock of the Company distributed in respect of each Common
Share in such Section 11.06(4) distribution.
F = the fair market value (on the record date for the distribution to
which this Section 11.08 applies) of the assets, securities, rights,
warrants or options to be distributed in respect of each Common Share
in the distribution to which this Section 11.08 is being applied
(including, in the case of cash dividends or other cash distributions
giving rise to an adjustment, all such cash distributed concurrently).
The Board of Directors shall determine fair market values for the purposes
of this Section 11.08.
The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution
to which this Section 11.08 applies.
For purposes of this Section 11.08, the term "EXTRAORDINARY CASH
DIVIDEND" shall mean any cash dividend with respect to the Common Shares the
amount of which, together with the aggregate amount of cash dividends on the
Common Shares to be aggregated with such cash dividend in accordance with the
provisions of this paragraph, equals or exceeds the threshold percentages set
forth in item (i) or (ii) below:
(i) If, upon the date prior to the Ex-Dividend Time with respect to a
cash dividend on the Common Shares, the aggregate amount of such cash
dividend together with the amounts of all cash dividends on the Common
Shares with Ex-Dividend Times occurring in the 85 consecutive day period
ending on the date prior to the Ex-Dividend Time with respect to the cash
dividend to which this provision is being applied equals or exceeds on a
per share basis 12.5% of the average of the Quoted Prices during the period
beginning on the date after the first such Ex-Dividend Time in such period
and ending on the date prior to the Ex-Dividend Time with
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respect to the cash dividend to which this provision is being applied
(except that if no other cash dividend has had an Ex-Dividend Time
occurring in such period, the period for calculating the average of the
Quoted Prices shall be the period commencing 85 days prior to the date
prior to the Ex-Dividend Time with respect to the cash dividend to which
this provision is being applied), such cash dividend together with each
other cash dividend with an Ex-Dividend Time occurring in such 85 day
period shall be deemed to be an Extraordinary Cash Dividend and for
purposes of applying the formula set forth above in this Section 11.08, the
value of "F" shall be equal to (w) the aggregate amount of such cash
dividend together with the amounts of the other cash dividends with
Ex-Dividend Times occurring in such period MINUS (x) the aggregate amount
of such other cash dividends with Ex-Dividend Times occurring in such
period for which a prior adjustment in the Conversion Rate was previously
made under this Section 11.08.
(ii) If, upon the date prior to the Ex-Dividend Time with respect to
a cash dividend on the Common Shares, the aggregate amount of such cash
dividend together with the amounts of all cash dividends on the Common
Shares with Ex-Dividend Times occurring in the 365 consecutive day period
ending on the date prior to the Ex-Dividend Time with respect to the cash
dividend to which this provision is being applied equals or exceeds on a
per share basis 25% of the average of the Quoted Prices during the period
beginning on the date after the first such Ex-Dividend Time in such period
and ending on the date prior to the Ex-Dividend Time with respect to the
cash dividend to which this provision is being applied (except that if no
other cash dividend has had an Ex-Dividend Time occurring in such period,
the period for calculating the average of the Quoted Prices shall be the
period commencing 365 days prior to the date prior to the Ex-Dividend Time
with respect to the cash dividend to which this provision is being
applied), such cash dividend together with each other cash dividend with an
Ex-Dividend Time occurring in such 365 day period shall be deemed to be an
Extraordinary Cash Dividend and for purposes of applying the formula set
forth above in this Section 11.08, the value of "F" shall be equal to (y)
the aggregate amount of such cash dividend together with the amounts of the
other cash dividends with Ex-Dividend Times occurring in such period MINUS
(z) the aggregate amount of such other cash dividends with Ex-Dividend
Times occurring in such period for which a
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prior adjustment in the Conversion Rate was previously made under this
Section 11.08.
In making the determinations required by items (i) and (ii) above, the
amount of cash dividends paid on a per share basis and the average of the
Quoted Prices, in each case during the period specified in item (i) or (ii)
above, as applicable, shall be appropriately adjusted to reflect the
occurrence during such period of any event described in Section 11.06.
In the event that, with respect to any distribution to which this
Section 11.08 would otherwise apply, the difference "M-F" as defined in the
above formula is less than $1.00 or "F" is equal to or greater than "M", then
the adjustment provided by this Section 11.08 shall not be made and in lieu
thereof the provisions of Section 11.14 shall apply to such distribution.
SECTION 11.09. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.
All calculations under this Article 11 shall be made to the nearest
cent or to the nearest 1/1,000th of a share, as the case may be.
SECTION 11.10. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be
made for a transaction referred to in Section 11.06, 11.07, 11.08 or 11.14 if
Securityholders are to participate in the transaction on a basis and with notice
that the Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Shares participate in the
transaction. Such participation by Securityholders may include participation
upon conversion provided that an adjustment shall be made at such time as the
Securityholders are no longer entitled to participate.
No adjustment need be made for rights to purchase Common Shares
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no par
value of the Common Shares.
To the extent the Securities become convertible pursuant to the terms
of Section 11.06, 11.07, 11.08 or 11.14, no adjustment need be made thereafter
as to the cash. Interest will not accrue on the cash.
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SECTION 11.11. NOTICE OF ADJUSTMENT. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Securityholders a notice of the
adjustment. The Company shall file with the Trustee and the Conversion Agent
such notice and a certificate from the Company's independent public accountants
briefly stating the facts requiring the adjustment and the manner of computing
it. The certificate shall be conclusive evidence that the adjustment is
correct. Neither the Trustee nor any Conversion Agent shall be under any duty
or responsibility with respect to any such certificate except to exhibit the
same to any Holder desiring inspection thereof.
SECTION 11.12. VOLUNTARY INCREASE. The Company from time to time may
increase the Conversion Rate by any amount for any period of time. Whenever the
Conversion Rate is increased, the Company shall mail to Securityholders and file
with the Trustee and the Conversion Agent a notice of the increase. The Company
shall mail the notice at least 15 days before the date the increased Conversion
Rate takes effect. The notice shall state the increased Conversion Rate and the
period it will be in effect.
A voluntary increase of the Conversion Rate does not change or adjust
the Conversion Rate otherwise in effect for purposes of Section 11.06, 11.07 or
11.08.
SECTION 11.13. NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company takes any action that would require an adjustment in
the Conversion Rate pursuant to Section 11.06, 11.07 or 11.08 (unless no
adjustment is to occur pursuant to Section 11.10); or
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 11.14; or
(3) there is a liquidation or dissolution of the Company;
then the Company shall mail to Securityholders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, binding share exchange, transfer,
liquidation or dissolution. The Company shall file and mail the notice at least
15 days before such date. Failure to file or mail the notice or any defect in
it shall not affect the validity of the transaction.
SECTION 11.14. REORGANIZATION OF COMPANY; SPECIAL DISTRIBUTIONS. If
the Company is a party to a transaction subject to Section 5.01 (other than a
sale of all or
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substantially all of the assets of the Company in a transaction in which the
holders of Common Shares immediately prior to such transaction do not receive
securities, cash or other assets of the Company or any other person) or a merger
or binding share exchange which reclassifies or changes its outstanding Common
Shares, the person obligated to deliver securities, cash or other assets upon
conversion of Securities shall enter into a supplemental indenture. If the
issuer of securities deliverable upon conversion of Securities is an Affiliate
of the successor Company, that issuer shall join in the supplemental indenture.
The supplemental indenture shall provide that the Holder of a Security
may convert it into the kind and amount of securities, cash or other assets
which such Holder would have received immediately after the consolidation,
merger, binding share exchange or transfer if such Holder had converted the
Security into Common Shares immediately before the effective date of the
transaction, assuming (to the extent applicable) that such Holder (i) was not a
constituent person or an Affiliate of a constituent person to such transaction;
(ii) made no election with respect to the type or types of consideration such
Holder would have received immediately after such transaction; and (iii) was
treated alike with the plurality of non-electing Holders. The supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Article 11. The
successor Company shall mail to Securityholders a notice briefly describing the
supplemental indenture.
If this Section applies, neither Section 11.06 nor 11.07 applies.
If the Company makes a distribution to all holders of its Common Shares of any
of its assets, or debt securities or any rights, warrants or options to purchase
securities of the Company that, but for the provisions of the last paragraph of
Section 11.08, would otherwise result in an adjustment in the Conversion Rate
pursuant to the provisions of Section 11.08, then, from and after the record
date for determining the holders of Common Shares entitled to receive the
distribution, a Holder of a Security that converts such Security into Common
Shares in accordance with the provisions of this Indenture shall upon such
conversion be entitled to receive, in addition to the Common Shares into which
the Security is convertible, the kind and amount of securities, cash or other
assets comprising the distribution that such Holder would have received if such
Holder had converted the Security into Common Shares immediately prior to the
record date for determining the holders of Common Shares entitled to receive the
distribution.
SECTION 11.15. COMPANY DETERMINATION FINAL. Any determination that
the Company or the Board of Directors must
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make pursuant to Section 11.03, 11.06, 11.07, 11.08, 11.09, 11.10, 11.14 or
11.17 is conclusive.
SECTION 11.16. TRUSTEE'S ADJUSTMENT DISCLAIMER. The Trustee has no
duty to determine when an adjustment under this Article 11 should be made, how
it should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 11.14 need be entered into or
whether any provisions of any supplemental indenture are correct. The Trustee
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article 11. Each Conversion Agent shall have the same protection under this
Section 11.16 as the Trustee.
SECTION 11.17. SIMULTANEOUS ADJUSTMENTS. In the event that this
Article 11 requires adjustments to the Conversion Rate under more than one of
Sections 11.06(4), 11.07 or 11.08, and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of Section 11.06,
second, the provisions of Section 11.08 and, third, the provisions of
Section 11.07.
SECTION 11.18. SUCCESSIVE ADJUSTMENTS. After an adjustment to the
Conversion Rate under this Article 11, any subsequent event requiring an
adjustment under this Article 11 shall cause an adjustment to the Conversion
Rate as so adjusted.
SECTION 11.19. COMMON SHARE DELIVERY ARRANGEMENT. Notwithstanding
any other provision contained in this Article 11 or paragraph 9 of the
Securities, in connection with the conversion of any Security, if a Holder
satisfies the conversion requirements in paragraph 9 of the Securities and the
Company notifies the Holder in accordance with Section 11.02 that Common Shares
shall be delivered to the Holder converting such Security in accordance with
Section 11.02 or if the Company has notified the Holder in accordance with
Section 11.02 that cash will be delivered to such Holder in connection with such
conversion and such payment of cash is not allowed pursuant to the provisions of
the Indenture or otherwise, rather than the Company delivering Common Shares to
such Holder, through the Conversion Agent, as contemplated by Section 11.02, the
Company may arrange by an agreement with the Standby Share Deliverer for the
Standby Share Deliverer to deliver Common Shares (and cash in lieu of fractional
shares) to such Holder, through the Conversion Agent, in accordance with the
procedures set forth in Section 11.02 and in the amounts calculated pursuant to
Section 11.01 and 11.03 (any such arrangement actually agreed to by the Company
and the Standby Share Deliverer with respect to a conversion of Securities is
referred to herein as a "COMMON SHARE DELIVERY
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ARRANGEMENT"). If the Standby Share Deliverer agrees to so act, (i) the
Standby Share Deliverer shall deliver to the Conversion Agent no later than
the close of business on the fifth Business Day following the Conversion
Date, for delivery to the Holder so converting such Holder's Securities, the
number of full Common Shares to be delivered upon conversion (calculated
pursuant to Section 11.01) and cash in lieu of fractional shares (determined
pursuant to Section 11.03) and (ii) the Conversion Agent shall deliver to
such Holder in accordance with Section 11.02, as soon as practicable
following the Conversion Date, a certificate for the number of full Common
Shares to be delivered upon conversion (calculated pursuant to Section 11.01)
and cash in lieu of fractional shares (determined pursuant to Section 11.03)
and shall, unless not required by the Securities Act, deliver to such Holder
(on behalf of the Company and the Standby Share Deliverer) a current
prospectus covering such Common Shares (copies of such prospectus to be
prepared by the Company and provided to the Conversion Agent by the Company
for such delivery) at the same time as the Conversion Agent delivers the
Common Shares certificate referred to in this clause (ii). Upon such
delivery of Common Shares (and cash in lieu of fractional shares) by the
Standby Share Deliverer to the Conversion Agent, the Company shall execute
and the Trustee shall authenticate and deliver to the Standby Share Deliverer
a new Security in an authorized denomination equal in Principal Amount at
Maturity to the Security (or portion thereof) being converted by the Holder
thereof in respect of which conversion the Standby Share Deliverer has agreed
to so act, and, upon delivery of such Common Shares to the Conversion Agent,
the Standby Share Deliverer shall be treated as the Holder of such Security
on and after the Conversion Date. Such Security (or portion thereof) so
converted pursuant to a Common Share Delivery Arrangement shall not cease to
be outstanding, but shall remain outstanding (and retain all of its
conversion rights, including those set forth in this Article 11) with such
Standby Share Deliverer as the Holder thereof. Notwithstanding anything to
the contrary contained in this Article 11, the obligation of the Company to
deliver Common Shares (and cash in lieu of fractional shares) or cash upon
conversion in accordance with this Article 11 shall be deemed to be satisfied
and discharged to the extent the Standby Share Deliverer delivers Common
Shares (and cash in lieu of fractional shares) in accordance with this
Section 11.19 pursuant to a Common Share Delivery Arrangement; provided,
however, that any Security acquired by the Standby Share Deliverer pursuant
to a Common Share Delivery Arrangement shall continue to have all of the
conversion rights set forth herein applicable to Securities. If the Standby
Share Deliverer defaults in its obligation to deliver any Common Shares (or
any cash in lieu of fractional shares) required to be delivered to the
Conversion Agent pursuant to a Common Share Delivery Arrangement, the
Conversion Agent shall promptly notify the Company of the Standby Share
Deliver's failure to deliver such Common Shares (or such cash in lieu of
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fractional shares), and the Company shall, within one Business Day of receipt of
such notice from the Conversion Agent, deliver to such Holder, through the
Conversion Agent, cash (if allowed pursuant to the Indenture and otherwise) in
the amount calculated pursuant to Section 11.01 or the full number of Common
Shares (and the full amount of cash in lieu of fractional shares) that were
required to be delivered to such Holder by the Standby Share Deliverer pursuant
to a Common Share Delivery Arrangement regardless of the number of such Common
Shares that were not so delivered, and the Company shall, in the case of payment
with Common Shares, at the time of delivery of such Common Shares (and such cash
in lieu of fractional shares), deliver to such Holder, through the Conversion
Agent, written notice that there may be no taxable event to such Holder with
respect to those Common Shares delivered by the Company to such Holder;
provided, that, in the circumstances described in this sentence, (A) any
Security so converted will not remain outstanding and will be treated in all
respects as if it had been converted otherwise than pursuant to a Common Share
Delivery Arrangement and the Standby Share Deliverer will not become the Holder
of the Security so converted, and (B) the Conversion Agent shall promptly
deliver back to the Standby Share Deliverer any Common Shares (and cash in lieu
of fractional shares) previously delivered by the Standby Share Deliverer in
connection with such conversion by such Holder and; provided, further, that if
such failure by the Standby Share Deliverer to deliver the full number of Common
Shares (or the full amount of cash in lieu of fractional shares) deliverable
upon conversion relates to conversions by more than one Holder of Securities
with the same Conversion Date, any Common Shares (and any cash in lieu of
fractional shares) delivered by the Standby Share Deliverer shall be delivered
to such Holders so as to maximize the number of Securities that may be so
converted in accordance with the terms of a Common Share Delivery Arrangement.
Except as expressly set forth herein, the provisions of this Article 11 shall
apply to a conversion executed pursuant to the delivery of Common Shares by the
Standby Share Deliverer pursuant to the terms of a Common Share Delivery
Arrangement as if such Security had been converted into Common Shares in
accordance with this Article 11.
"STANDBY SHARE DELIVERER" means the person that enters into an agreement
with the Company and the Conversion Agent pursuant to which the Company may
request such person to deliver Common Shares in connection with the conversion
of Securities in accordance with this Section 11.19. The initial Standby Share
Deliverer shall be Merrill Lynch & Co. or any Affiliate of Merrill Lynch & Co.
so agreeing to act or any successors to Merrill Lynch & Co. or any such
Affiliate.
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<PAGE>
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies, or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 12.02. NOTICES. Any request, demand, authorization, notice,
waiver, consent or communication shall be in writing and delivered in person or
mailed by first-class mail, postage prepaid, addressed as follows or transmitted
by facsimile transmission (confirmed by guaranteed overnight courier) to the
following facsimile numbers:
if to the Company:
United States Cellular Corporation
8410 West Bryn Mawr, Suite 700
Chicago, IL 60631-3486
Telephone No. (312) 399-8900
Facsimile No. (312) 399-8936
Attention: President
with copies to:
Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, IL 60602
Telephone No. (312) 630-1900
Facsimile No. (312) 630-1908
Attention: LeRoy T. Carlson, Jr.
and
Sidley & Austin
1 First National Plaza
Chicago, IL 60603
Telephone No. (312) 853-7000
Facsimile No. (312) 853-7036
Attention: Michael G. Hron
-81-
<PAGE>
if to the Trustee:
Harris Trust and Savings Bank
311 West Monroe Street
12th Floor
Chicago, Illinois 60606
Telephone No. (312) 461-2533
Facsimile No. (312) 461-3525
Attention: Indenture Trust Division
The Company or the Trustee by notice given to the other in the manner
provided above may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication given to a Securityholder shall be mailed
to the Securityholder, by first-class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.
If the Company mails a notice or communication to the Securityholders,
it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion
Agent or co-registrar.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
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<PAGE>
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(1) a statement that each person making such Officers' Certificate or
Opinion of Counsel has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
Officers' Certificate or Opinion of Counsel are based;
(3) a statement that, in the opinion of each such person, he has made
such examination or investigation as is necessary to enable such person to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement that, in the opinion of such person, such covenant or
condition has been complied with.
SECTION 12.06. SEPARABILITY CLAUSE. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.07. RULES BY TRUSTEE, PAYING AGENT, CONVERSION AGENT AND
REGISTRAR. The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.
SECTION 12.08. GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THIS INDENTURE AND THE SECURITIES.
SECTION 12.09. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 12.10. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
-83-
<PAGE>
SECTION 12.11. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed
this Indenture on behalf of the respective parties hereto as of the date first
above written.
UNITED STATES CELLULAR CORPORATION
By
--------------------------------
Title:
Attest:
- ----------------------------
Title:
[SEAL]
HARRIS TRUST AND SAVINGS BANK
By
-------------------------------
Title:
Attest:
- -------------------------
Title:
[SEAL]
[Signature page for the LYONs Indenture]
-85-
<PAGE>
EXHIBIT A
[FORM OF FACE OF LYON]
UNITED STATES CELLULAR CORPORATION
Liquid Yield Option-TM- Note due 2015
(Zero Coupon-Subordinated)
Number
Issue Date: __________ __, 1995 Original Issue Discount: $
Issue Price: $ (for each $1,000 Principal
(for each $1,000 Principal Amount at Maturity)
Amount at Maturity)
UNITED STATES CELLULAR CORPORATION, a Delaware corporation, promises to pay
to _________ or registered assigns, the Principal Amount at Maturity of
__________ Dollars on ___________, 2015.
This Security shall not bear interest except as specified on the other side
of this Security. Original Issue Discount will accrue as specified on the other
side of this Security. This Security is convertible as specified on the other
side of this Security.
Additional provisions of this Security are set forth on the other side of
this Security.
UNITED STATES CELLULAR CORPORATION
[SEAL] By
--------------------------------
Title:
Attest:
- ----------------------
Title:
A-1
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
HARRIS TRUST AND SAVINGS BANK
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture.
By
-------------------------
Authorized Signatory
Dated: _________________________
- ------------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
A-2
<PAGE>
[FORM OF REVERSE SIDE OF LYON]
Liquid Yield Option-TM- Note Due 2015
(Zero Coupon-Subordinated)
1. INTEREST.
This Security shall not bear interest, except that if the Principal Amount
at Maturity hereof or any portion of such Principal Amount at Maturity is not
paid when due (whether upon acceleration pursuant to Section 6.02 of the
Indenture, upon the date set for payment of the Redemption Price pursuant to
paragraph 5 hereof, upon the date set for payment of the Purchase Price or
Change in Control Purchase Price pursuant to paragraph 6 hereof or upon the
Stated Maturity of this Security) or if cash or Common Shares in respect of a
conversion of this Security in accordance with the terms of Article 11 of the
Indenture is not paid or delivered, as the case may be, when due, then in each
such case the overdue amount shall, to the extent permitted by law, bear
interest at the rate of ____% per annum, compounded semi-annually, which
interest shall accrue from the date such overdue amount was originally due
through the date payment of such amount, including interest thereon, has been
made or duly provided for. All such interest shall be payable on demand. The
accrual of such interest on overdue amounts shall be in lieu of, and not in
addition to, the continued accrual of Original Issue Discount.
Original Issue Discount (the difference between the Issue Price and the
Principal Amount at Maturity of the Security), in the period during which a
Security remains outstanding, shall accrue at ____% per annum, on a semiannual
bond equivalent basis using a 360-day year composed of twelve 30-day months,
from the Issue Date of this Security.
2. METHOD OF PAYMENT.
Subject to the terms and conditions of the Indenture, the Company will make
payments in respect of Redemption Prices, Purchase Prices, Change in Control
Purchase Prices and at Stated Maturity to Holders who surrender Securities to a
Paying Agent appointed to collect such payments in respect of the Securities.
The Company will pay cash amounts in money of the United States that at the time
of payment is legal tender for payment of public and private debts. However,
the Company may make such cash payments by check payable in such money.
- ------------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
A-3
<PAGE>
3. PAYING AGENT, CONVERSION AGENT AND REGISTRAR.
Initially, Harris Trust and Savings Bank (the "TRUSTEE"), will act as
Paying Agent, Conversion Agent and Registrar. The Company may appoint and change
any Paying Agent, Conversion Agent, Registrar or co-registrar without notice,
other than notice to the Trustee except that the Company will maintain at least
one office or agency of the Paying Agent, Conversion Agent and Registrar in the
State of New York, City of New York, Borough of Manhattan. The Company or any
of its Subsidiaries or any of their Affiliates may act as Paying Agent,
Conversion Agent, Registrar or co-registrar.
4. INDENTURE.
The Company issued the Securities under an Indenture dated as of
_____________, 1995 (the "INDENTURE"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"TIA"). Capitalized terms used herein and not defined herein have the meanings
ascribed thereto in the Indenture. The Securities are subject to all such
terms, and Securityholders are referred to the Indenture and the TIA for a
statement of those terms.
The Securities are general unsecured obligations of the Company limited to
$650,000,000 aggregate Principal Amount at Maturity (subject to Sections 2.02
and 2.07 of the Indenture). The Indenture does not limit other Debt of the
Company, secured or unsecured, including Senior Indebtedness.
5. REDEMPTION AT THE OPTION OF THE COMPANY.
No sinking fund is provided for the Securities. The Securities are
redeemable as a whole, or from time to time in part, at any time at the option
of the Company at the Redemption Prices set forth below, provided that the
Securities are not redeemable prior to ___________ __, 2000.
The table below shows Redemption Prices of a Security per $1,000 Principal
Amount at Maturity on the dates shown below and at Stated Maturity, which prices
reflect accrued Original Issue Discount calculated through each such date. The
Redemption Price of a Security redeemed between such dates shall include an
additional amount reflecting the additional Original Issue Discount accrued from
the next preceding date in the table through the actual Redemption Date.
A-4
<PAGE>
(1) (2) (3)
Accrued
Original
Issue Redemption
LYON Discount Price
Redemption Date Issue Price at ___% (1) + (2)
- --------------- ----------- -------- ----------
_______ __, 2000 $ $ $
_______ __, 2001
_______ __, 2002
_______ __, 2003
_______ __, 2004
_______ __, 2005
_______ __, 2006
_______ __, 2007
_______ __, 2008
_______ __, 2009
_______ __, 2010
_______ __, 2011
_______ __, 2012
_______ __, 2013
_______ __, 2014
At Stated Maturity ..... 1,000.00
6. PURCHASE BY THE COMPANY AT THE OPTION OF THE HOLDER OR UPON A CHANGE IN
CONTROL.
Subject to the terms and conditions of the Indenture, on the following
Purchase Date the Company shall become obligated, and the Company may also elect
to become obligated on the following Optional Purchase Date, to purchase, at the
option of the Holder, the Securities held by such Holder on such Purchase Date
or, if applicable, such Optional Purchase Date, at the following Purchase Prices
per $1,000 Principal Amount at Maturity, upon delivery by the Holder of a
Purchase Notice containing the information set forth in the Indenture, at any
time from the opening of business on the date that is 20 Business Days prior to
such Purchase Date or Optional Purchase Date, as applicable, until the close of
business on such Purchase Date or Optional Purchase Date and upon delivery of
the Securities to the Paying Agent by the Holder as set forth in the Indenture.
Purchase Date Purchase Price
------------- --------------
_______ __, 2000 $
Optional Purchase Date Purchase Price
---------------------- --------------
_______ __, 2005 $
A-5
<PAGE>
Each such Purchase Price (equal to the Issue Price plus accrued
Original Issue Discount through the Purchase Date or Optional Purchase Date, as
applicable) may be paid, at the option of the Company, in cash, by the issuance
and delivery of Common Shares of the Company or by the delivery of publicly
traded common equity securities of Telephone and Data Systems, Inc. ("TDS") to
be specified by the Company, or in any combination thereof.
At the option of the Holder and subject to the terms and conditions of
the Indenture, the Company shall become obligated to purchase the Securities
held by such Holder 35 Business Days after the occurrence of a Change in Control
of the Company occurring on or prior to , 2000 for a Change in
Control Purchase Price equal to the Issue Price plus accrued Original Issue
Discount through the Change in Control Purchase Date, which Change in Control
Purchase Price shall be paid in cash.
Holders have the right to withdraw any Purchase Notice or Change in
Control Purchase Notice, as the case may be, by delivering to the Paying Agent a
written notice of withdrawal in accordance with the provisions of the Indenture
prior to the close of business on the Purchase Date or Change in Control
Purchase Date, as the case may be.
If cash (and/or securities if permitted under the Indenture) sufficient
to pay the Purchase Price or Change in Control Purchase Price, as the case may
be, of all Securities or portions thereof to be purchased as of the Purchase
Date or the Optional Purchase Date, as applicable, or the Change in Control
Purchase Date, as the case may be, is deposited with the Paying Agent on the
Business Day following the Purchase Date or the Optional Purchase Date, as
applicable, or the Change in Control Purchase Date, as the case may be, Original
Issue Discount ceases to accrue on such Securities (or portions thereof)
immediately after such Purchase Date, Optional Purchase Date or Change in
Control Purchase Date, as the case may be, and the Holder thereof shall have no
other rights as such (other than the right to receive the Purchase Price or
Change in Control Purchase Price, as the case may be, upon surrender of such
Security).
7.NOTICE OF REDEMPTION.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at the Holder's registered address. If money sufficient to pay the Redemption
Price of all Securities (or portions thereof) to be redeemed on the Redemption
Date is deposited with the Paying Agent prior to or on the Redemption Date,
immediately after such Redemption Date
A-6
<PAGE>
Original Issue Discount ceases to accrue on such Securities or portions thereof.
Securities in denominations larger than $1,000 of Principal Amount at Maturity
may be redeemed in part but only in integral multiples of $1,000 of Principal
Amount at Maturity.
8.SUBORDINATION.
The Securities are subordinated to all existing and future Senior
Indebtedness. To the extent provided in the Indenture, Senior Indebtedness must
be paid before the Securities may be paid. The Indenture does not limit the
present or future amount of Senior Indebtedness the Company may have. The
Company agrees, and each Securityholder by accepting a Security agrees, to the
subordination and authorizes the Trustee to give it effect and appoints the
Trustee as attorney-in-fact for such purpose.
9.CONVERSION.
Subject to the first, second and fourth succeeding sentences, a
Holder of a Security may convert it into Common Shares of the Company at any
time before the close of business on , 2015. If the Security is
called for redemption, the Holder may convert it at any time before the close
of business on the Redemption Date. A Security in respect of which a Holder
has delivered a Purchase Notice or Change in Control Purchase Notice
exercising the option of such Holder to require the Company to purchase such
Security may be converted only if such notice of exercise is withdrawn in
accordance with the terms of the Indenture. The number of Common Shares to
be delivered upon conversion of a Security into Common Shares per $1,000 of
Principal Amount at Maturity shall be equal to the Conversion Rate in effect
on the Conversion Date. Subject to the terms of the Indenture, the Holder's
right to convert Securities into Common Shares is subject to the Company's
right to elect to pay a Holder surrendering a Security pursuant to Article 11
of the Indenture an amount of cash as set forth in the next succeeding
sentence, in lieu of delivering such Common Shares; provided that if such
payment is not permitted pursuant to the terms of the Indenture or otherwise,
the Company (or the Standby Share Deliverer in accordance with Section 11.19
of the Indenture) shall deliver Common Shares (and cash in lieu of fractional
shares) upon conversion of Securities. The amount of cash to be paid in lieu
of Common Shares pursuant to such election by the Company per $1,000 of
Principal Amount at Maturity of a Security upon conversion of such Security
shall be equal to the Sale Price of Common Shares on the trading day
immediately preceding the Conversion Date multiplied by the Conversion Rate
in effect on such trading day subject to adjustment upon the occurrence of
certain events.
The initial Conversion Rate is Common Shares per $1,000
Principal Amount at Maturity, subject to adjustment in
A-7
<PAGE>
certain events described in the Indenture. The Company will deliver cash or a
check in lieu of any fractional Common Shares.
To convert a Security, a Holder must (1) complete and manually sign the
conversion notice below (or complete and manually sign a facsimile of such
notice) and deliver such notice to the Conversion Agent, (2) surrender the
Security to the Conversion Agent, (3) furnish appropriate endorsements and
transfer documents if required by the Conversion Agent, the Company or the
Trustee and (4) pay any transfer or similar tax, if required.
If the Holder converts more than one Security at the same time, the
number of Common Shares issuable upon the conversion shall be based on the total
Principal Amount at Maturity of the Securities converted.
A Holder may convert a portion of a Security if the Principal Amount at
Maturity of such portion is $1,000 or an integral multiple of $1,000. No
payment or adjustment will be made for dividends or other distributions on the
Common Shares except as provided in the Indenture. On conversion of a Security
(other than a conversion executed pursuant to the delivery of Common Shares by
the Standby Share Deliverer pursuant to a Common Share Delivery Arrangement
contemplated by Section 11.19 of the Indenture), that portion of accrued
Original Issue Discount attributable to the period from the Issue Date through
the Conversion Date with respect to the converted Security shall not be
cancelled, extinguished or forfeited, but rather shall be deemed to be paid in
full to the Holder thereof through the delivery of the Common Shares (together
with the cash payment, if any, in lieu of fractional Common Shares) or of the
cash, as the case may be, in exchange for the Security being converted pursuant
to the terms hereof; and, if the Company delivers Common Shares (and cash in
lieu of fractional shares) upon conversion of Securities, the fair market value
of such Common Shares (together with any such cash payment in lieu of fractional
Common Shares) shall be treated as issued, to the extent thereof, first in
exchange for Original Issue Discount accrued through the Conversion Date, and
the balance, if any, of such fair market value of such Common Shares (and any
such cash payment) shall be treated as issued in exchange for the Issue Price of
the Security being converted pursuant to the provisions hereof.
The Conversion Rate will be adjusted for dividends or distributions on
Common Shares payable in Common Shares or other Capital Stock; subdivisions,
combinations or certain reclassifications of Common Shares; distributions to all
holders of Common Shares of certain rights to purchase Common Shares for a
period expiring within 60 days at less than the Quoted Price at the Time of
Determination; and distributions to such holders of assets or debt securities of
the Company or certain rights to
A-8
<PAGE>
purchase securities of the Company (excluding certain cash dividends or
distributions). However, no adjustment need be made if Securityholders may
participate in the transaction or in certain other cases. The Company from time
to time may voluntarily increase the Conversion Rate.
If the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, or upon
certain distributions described in the Indenture, the right to convert a
Security into Common Shares may be changed into a right to convert it into
securities, cash or other assets of the Company or another person.
In connection with the conversion of any Security, the Company may
enter into a Common Share Delivery Arrangement with the Standby Share
Deliverer in accordance with Section 11.19 of the Indenture, whereby, upon
the agreement of the Standby Share Deliverer to so act in connection with
such conversion, the Standby Share Deliverer will deliver the Common Shares
(and any cash payment in lieu of a fractional Common Share) deliverable to
the Holder upon such conversion. As a result of such a Common Share Delivery
Arrangement, the converted Security will not be retired or cancelled, but
shall remain outstanding with the Standby Share Deliverer becoming the Holder
thereof. The tax treatment of a Holder receiving Common Shares from the
Standby Share Deliverer, rather than the Company, on conversion, may be
different than the tax treatment of a Holder receiving Common Shares from the
Company on conversion.
10. CONVERSION ARRANGEMENT ON CALL FOR REDEMPTION.
Any Securities called for redemption, unless surrendered for conversion
before the close of business on the Redemption Date, may be deemed to be
purchased from the Holders of such Securities at an amount not less than the
Redemption Price, together with accrued interest, if any, to the Redemption
Date, by one or more investment bankers or other purchasers who may agree with
the Company to purchase such Securities from the Holders, to convert them into
Common Shares of the Company and to make payment for such Securities to the
Paying Agent in trust for such Holders.
11. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in fully registered form, without coupons, in
denominations of $1,000 of Principal Amount at Maturity and integral multiples
of $1,000. A Holder may transfer or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not transfer
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities in respect of which a Purchase Notice or Change in Control
Purchase Notice has been given and not withdrawn (except, in the case of a
Security to be purchased in part, the portion of the Security not to be
purchased) or any Securities for a period of 15 days before a selection of
Securities to be redeemed.
12. PERSONS DEEMED OWNERS.
The registered Holder of this Security may be treated as the owner of
this Security for all purposes.
A-9
<PAGE>
13. UNCLAIMED MONEY OR SECURITIES.
The Trustee and the Paying Agent shall return to the Company upon
written request any money or securities held by them for the payment of any
amount with respect to the Securities that remains unclaimed for two years,
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required
to make any such return, may at the expense of the Company cause to be published
once in a newspaper of general circulation in The City of New York or mail to
each Holder entitled to the money or securities notice that such money or
securities remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication or mailing, any
unclaimed money or securities then remaining will be returned to the Company.
After return to the Company, Holders entitled to the money or securities must
look to the Company for payment as general creditors unless an applicable
abandoned property law designates another person.
14. AMENDMENT; WAIVER.
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in aggregate Principal Amount at Maturity of the
Securities at the time outstanding and (ii) certain Defaults may be waived with
the written consent of the Holders of a majority in aggregate Principal Amount
at Maturity of the Securities at the time outstanding. Subject to certain
exceptions set forth in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend the Indenture or the
Securities to cure any ambiguity, omission, defect or inconsistency, to comply
with Article 5 or Section 11.14 of the Indenture, to provide for uncertificated
Securities in addition to or in place of certificated Securities, to eliminate
the Company's option to pay cash in lieu of delivering Common Shares upon
conversion of Securities (other than cash in lieu of fractional shares and
except with respect to such elections already made) or to enter into Common
Share Delivery Arrangements in connection with conversions of Securities (other
than such arrangements already entered into), to make any change that does not
adversely affect the rights of any Securityholder, or to comply with any
requirement of the SEC in connection with the qualification of the Indenture
under the TIA.
15. DEFAULTS AND REMEDIES.
Under the Indenture, Events of Default include (i) default in payment
of the Principal Amount at Maturity, Issue Price plus accrued Original Issue
Discount, Redemption Price, Purchase Price or Change in Control Purchase Price,
as the case may be, in respect of the Securities when the same becomes due
A-10
<PAGE>
and payable or default in the payment of cash in accordance with the terms of
the Indenture upon conversion of any security; (ii) failure by the Company to
comply with other agreements in the Indenture or the Securities, subject to
notice and lapse of time; (iii) default under any bond, debenture, note or
other evidence of indebtedness for money borrowed by the Company having an
aggregate outstanding principal amount of in excess of $25,000,000, which
default shall have resulted in such indebtedness becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable without such indebtedness being discharged or such acceleration
having been rescinded or annulled, or there having been deposited in trust a
sum of money sufficient to discharge such indebtedness, in each case within a
period of 20 days after the receipt by the Company of a Notice of Default;
(iv) certain events of bankruptcy or insolvency; and (v) failure by the
Company to deliver Common Shares (or cash in lieu of fractional Common
Shares) when such Common Shares (or cash in lieu of fractional Common Shares)
are required to be delivered by the Company in accordance with Article 11 of
the Indenture upon conversion of any Security (including a failure by the
Company to deliver Common Shares (or cash in lieu of fractional Common
Shares) in accordance with Article 11 of the Indenture following a failure by
the Standby Share Deliverer to make a required delivery of Common Shares (or
cash in lieu of fractional Common Shares) pursuant to a Common Share Delivery
Arrangement) and the continuance of such default for 10 days. If an Event of
Default occurs and is continuing, the Trustee, or the Holders of at least 25%
in aggregate Principal Amount at Maturity of the Securities at the time
outstanding, may declare all the Securities to be due and payable
immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities becoming due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in aggregate Principal Amount at
Maturity of the Securities at the time outstanding may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Securityholders
notice of any continuing Default (except a Default in payment of amounts
specified in clause (i) above) if it determines that withholding notice is in
their interests.
16. TRUSTEE DEALINGS WITH THE COMPANY.
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
A-11
<PAGE>
17. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
18. AUTHENTICATION.
This Security shall not be valid until an authorized signatory of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. GOVERNING LAW.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THIS
SECURITY.
-------------------------
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture which has in it the text of this Security
in larger type. Requests may be made to:
United States Cellular Corporation
8410 West Bryn Mawr, Suite 700
Chicago, IL 60631-3486
Attention: Corporate Secretary
A-12
<PAGE>
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Security, fill To convert this Security into
in the form below: Common Shares of the
Company, check the box:
I or we assign and transfer ----
this Security to : :
: :
----------------------- ----
: :
----------------------- To convert only part of this
Security, state the Principal
Amount at Maturity to be converted
(Insert assignee's soc. (which must be $1,000 or an
sec. or tax ID no.) integral multiple of $1,000):
-----------------------
- ------------------------------ :$ :
-----------------------
- ------------------------------
If you want the share
- ------------------------------ certificate made out in
another person's name, fill
- ------------------------------ in the form below:
(Print or type assignee's
name, address and zip code) -----------------------
: :
and irrevocably appoint -----------------------
- ---------------------agent (Insert other person's
to transfer this Security on soc. sec. or tax ID no.)
the books of the Company.
The agent may substitute --------------------------------
another to act for him.
--------------------------------
--------------------------------
--------------------------------
(Print or type other person's
name, address and zip code)
- ------------------------------------------------------------------
Date: Your Signature:
----------------- ------------------------
- ----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
A-13
<PAGE>
EXHIBIT 5
Sidley & Austin
One First National Plaza
Chicago, IL 60603
(312) 853-7000
May 26, 1995
United States Cellular Corporation
Suite 700
8410 West Bryn Mawr
Chicago, Illinois 60631
Re: Liquid Yield Option Notes due 2015
Ladies and Gentlemen:
We refer to the Registration Statement on Form S-3, as amended (the
"Registration Statement") filed by United States Cellular Corporation (the
"Company") with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), relating to the registration of (i)
$745,000,000 aggregate principal amount of the Company's Liquid Yield Option
Notes due 2015 (the "LYONs"); (ii) an indeterminate number (the "New Shares") of
the Company's Common Shares, $1.00 par value, issuable by the Company upon
conversion of the LYONs; and (iii) 750,000 (the "TDS Shares") of the Company's
Common Shares, $1.00 par value, currently issued and outstanding and held of
record by Telephone and Data Systems, Inc. ("TDS"), which are to be deposited
with the custodian for lending under the Securities Loan Agreement, as more
fully described in the Registration Statement. The LYONs are to be issued under
an Indenture to be entered into between the Company and Harris Trust and Savings
Bank, as trustee (the "Trustee").
In rendering this opinion, we have examined and relied upon a copy of the
Registration Statement. We have also examined and relied upon originals, or
copies of originals certified to our satisfaction, of such agreements,
documents, certificates and other statements of governmental officials and other
instruments, and have examined such questions of law and have satisfied
ourselves as to such matters of fact, as we have considered relevant and
necessary as a basis for this opinion. We have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all signatures, the
legal capacity of all natural persons and the conformity with the original
documents of any copies thereof submitted to us for our examination.
Based on the foregoing, we are of the opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the General Corporation Law of the State of Delaware.
2. The Company has corporate power and authority to execute and deliver
the Indenture, to authorize, issue and sell the LYONs and to issue the New
Shares upon conversion of the LYONs.
3. The LYONs 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, shall have become effective
under the Securities Act and the Indenture shall have been qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and
duly executed and delivered by the Company and the Trustee; (ii) the
Company's Board of Directors or a duly authorized committee thereof shall
have duly adopted final resolutions authorizing the issuance and sale of the
LYONs as contemplated by the Registration Statement and the Indenture; and
(iii) the LYONs 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 against payment of the agreed consideration therefor.
<PAGE>
4. After the LYONs shall have become legally issued and binding
obligations of the Company in accordance with paragraph 3 above, the New
Shares issued upon conversion of the LYONs in accordance with the terms of
the LYONs and the Indenture will be legally issued, fully paid and non-
assessable when (i) the Company's Board of Directors or a duly authorized
committee thereof shall have duly adopted final resolutions authorizing the
issuance of the New Shares as contemplated by the Registration Statement,
the Indenture and the LYONs and (ii) certificates representing the New
Shares shall have been duly executed, countersigned and registered and duly
delivered to the persons entitled thereto against delivery of the LYONs
being converted therefor, as provided in the Indenture.
5. The TDS Shares are legally issued, fully paid and non-assessable.
We do not find it necessary for the purposes of this opinion to cover, and
accordingly we express no opinion as to, the application of the securities or
blue sky laws of the various states to the sale of the LYONs or the issuance of
the New Shares.
This opinion is limited to the Delaware General Corporation Law and to the
Securities Act and the Trust Indenture Act to the extent applicable.
The Company is controlled by TDS and TDS is controlled by a voting trust.
Walter C.D. Carlson, a trustee and beneficiary of the voting trust and a
director of TDS, the Company and certain other subsidiaries of TDS, Michael G.
Hron, the Secretary of TDS and of certain other subsidiaries of TDS, William S.
DeCarlo, the Assistant Secretary of TDS, Stephen P. Fitzell, the Secretary of
the Company and certain other subsidiaries of TDS, and Sherry S. Treston, the
Assistant Secretary of the Company and certain other subsidiaries of TDS, are
partners of this Firm.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to our firm included in or made a
part of the Registration Statement.
Very truly yours,
SIDLEY & AUSTIN
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Pre-Effective Amendment No. 1 to Form S-3 Registration
Statement of United States Cellular Corporation of our reports dated February 7,
1995 (except with respect to the matters discussed in Note 15 to the
consolidated financial statements, as to which the date is March 14, 1995), on
the consolidated financial statements and financial statement schedule of United
States Cellular Corporation and Subsidiaries, included or incorporated by
reference in the United States Cellular Corporation Form 10-K for the year ended
December 31, 1994, and to the incorporation by reference in this Pre-Effective
Amendment No. 1 to Form S-3 Registration Statement of our compilation report
dated February 17, 1995, on the combined financial statements of the Los Angeles
SMSA Limited Partnership, the Nashville/Clarksville MSA Limited Partnership and
the Baton Rouge MSA Limited Partnership, included in the United States Cellular
Corporation Form 10-K for the year ended December 31, 1994. We also consent to
all references to our Firm included in this Pre-Effective Amendment No. 1 to
Form S-3 Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 25, 1995
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 1 to Form S-3 Registration Statement of United States Cellular Corporation
of our report, which includes paragraphs relating to contingencies, dated
February 17, 1995, on our audits of the financial statements of the Los Angeles
SMSA Limited Partnership as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994; such financial statements are
not included separately in this Registration Statement. We also consent to the
reference to our Firm under the caption "Experts" only to the extent that it
relates to our report on our audits of the Los Angeles SMSA Limited Partnership
financial statements referred to above.
COOPERS & LYBRAND L.L.P.
Newport Beach, California
May 25, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 1 to Form S-3 Registration Statement of United States Cellular Corporation
of our reports dated February 10, 1995, February 11, 1994 and February 11, 1993,
on our audits of the financial statements of the Nashville/ Clarksville MSA
Limited Partnership as of December 31, 1994, 1993 and 1992, and for the years
ended December 31, 1994, 1993 and 1992; such financial statements are not
included separately in this Registration Statement. We also consent to the
reference to our Firm under the caption "Experts" only to the extent that it
relates to our report on our audits of the Nashville/Clarksville MSA Limited
Partnership financial statements referred to above.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
May 25, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 1 to Form S-3 Registration Statement of United States Cellular Corporation
of our reports dated February 10, 1995, February 11, 1994 and February 11, 1993,
on our audits of the financial statements of the Baton Rouge MSA Limited
Partnership as of December 31, 1994, 1993 and 1992, and for the years ended
December 31, 1994, 1993 and 1992; such financial statements are not included
separately in this Registration Statement. We also consent to the reference to
our Firm under the caption "Experts" only to the extent that it relates to our
report on our audits of the Baton Rouge MSA Limited Partnership financial
statements referred to above.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
May 25, 1995
<PAGE>
SECURITIES LOAN AGREEMENT, dated _________ ___,
1995, between MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED ("Borrower") and TELEPHONE AND
DATA SYSTEMS, INC. ("Lender").
WHEREAS, Lender and Harris Trust and Savings Bank ("Harris") are
parties to a Custody Agreement dated , 1995 (the "Custody
Agreement") pursuant to which Harris is acting as custodian (in such capacity,
the "Custodian");
WHEREAS, pursuant to the Securities Lending Customer Agreement Custody
Account, dated , 1995 (the "Customer Agreement"), between Lender,
Custodian and Harris, Harris may lend securities held in the custody account
established pursuant to the Custody Agreement to borrowers pursuant to borrower
loan agreements in the form attached to the Customer Agreement;
WHEREAS, Borrower and Harris are parties to a Borrowing Agreement,
dated , 1995 (the "Borrowing Agreement"), pursuant to which the
Borrower may borrow securities from Harris, including, without limitation,
the Common Shares, par value $1.00 per share, of United States Cellular
Corporation, a Delaware corporation ("USM") (including any other shares of
capital stock of USM, into which such Common Shares shall be reclassified or
changed, the "USM Common Shares"), held in the custody account (the "Custody
Account") established under the Custody Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, Borrower and Lender hereby agree as follows:
1. LOANS OF SECURITIES.
1.1. Subject to the terms and conditions of the Borrowing
Agreement, Borrower may, from time to time, initiate a transaction whereby
Borrower seeks to borrow USM Common Shares held in the Custody Account from
Harris. So long as the total number of USM Common Shares so borrowed by
Borrower from Harris under the Borrowing Agreement and not yet returned
thereunder would not, after giving effect to any request (a "Request") by
Borrower that Harris make a Loan, be greater than the amount permitted in
accordance with Schedule A hereto and Borrower is not in default under the
Borrowing Agreement or this Agreement, such Request shall be a valid request
for a Loan under the Borrowing Agreement. A Loan
<PAGE>
under the Borrowing Agreement shall not occur until the Loaned Securities are
delivered by Harris to Borrower in accordance with the Borrowing Agreement.
It shall be a condition to the obligations of Lender to make USM Common
Shares available for borrowing by Borrower from Harris under the Borrowing
Agreement, that Borrower shall have delivered the Collateral to Harris as
required by the Borrowing Agreement.
The terms "Business Day", "Collateral", "Loan", and "Loaned
Securities", and certain other terms are defined below.
1.2. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, Lender
and Borrower agree that Lender will not make USM Common Shares available
through the Custody Account to be loaned by Harris to Borrower and Borrower
will not borrow USM Common Shares held in the Custody Account from Harris
pursuant to the Borrowing Agreement or otherwise, if Lender shall have orally
notified Custodian and Borrower that no USM Common Shares held in the Custody
Account and that do not constitute Loaned Securities may then be loaned by
Harris or borrowed by Borrower from Harris pursuant to the Borrowing
Agreement. Any such notice shall be confirmed in writing (including by
facsimile transmission) to Custodian and to Borrower by the end of the
Business Day following the date of
2
<PAGE>
such notice. Lender may provide any such notice at its sole discretion, at
any time or times and for any reason. Lender shall not inform Custodian or
Borrower in any such notice or otherwise (x) of the reason why USM Common
Shares may not then be loaned by Harris or borrowed by Borrower from
Harris pursuant to the Borrowing Agreement or (y) of the subsection of
Section 1 of this Agreement pursuant to which such notice is being given.
Any such notice shall (i) apply to all or any specified portion (provided
that such portion shall result in a whole number of USM Common Shares then
being able to be loaned by Harris and borrowed by Borrower from Harris
under the Borrowing Agreement) of the USM Common Shares that do not
constitute Loaned Securities at the time of receipt of such notice by
Custodian and Borrower and (ii) be in effect until the receipt by Custodian
and Borrower of the notice provided for in Section 1.4 hereof.
1.3. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, if (i)
USM shall have notified Lender of the occurrence of any of the events
specified in Section 2(k)(i) of the Registration Rights Agreement, dated as
of ____________ __, 1995, by and between Borrower, USM and Lender (the
"Registration Rights Agreement") or (ii) Lender is otherwise aware of the
occurrence of any such event (which in the case of the event described in
Section 2(k)(i)(c) of the Registration Rights Agreement, shall mean, for
purposes of this Section 1.3(ii), that USM or Lender, on the advice of its
respective counsel, reasonably concludes that it is inadvisable as a matter
of federal securities law that the Prospectus (as defined in the Registration
Rights Agreement) continue to be used), Lender shall in any such case (unless
a notice from Lender pursuant to Section 1.2 (relating to all of the USM
Common Shares that do not constitute Loaned Securities) or this Section 1.3
is already then in effect) promptly orally notify Custodian and Borrower that
no USM Common Shares that do not constitute Loaned Securities are then
available through the Custody Account to be loaned by Harris or borrowed by
Borrower from Harris pursuant to the Borrowing Agreement or otherwise.
Lender shall confirm any such notice in writing (including by facsimile
transmission) to Custodian and to Borrower by the end of the Business Day
following the date of such notice. Lender shall not inform Custodian or
Borrower in any such notice or otherwise (x) of the reason why USM Common
Shares held in the Custody Account may not then be loaned by Harris or
borrowed by Borrower from Harris pursuant to the Borrowing Agreement or (y)
of the subsection of Section 1 of this Agreement pursuant to which such
notice is being given. Any such notice shall (i) apply to all (but not less
than all) of the USM Common Shares that do not constitute Loaned Securities
and (ii) be in effect until the receipt by Custodian
3
<PAGE>
and Borrower of the notice provided for in Section 1.4 hereof.
1.4. If (i) Lender shall have notified Custodian and Borrower in
accordance with Section 1.2 or 1.3 that all or any specified portion of USM
Common Shares are not then available through the Custody Account to be loaned
by Harris or borrowed by Borrower from Harris pursuant to the Borrowing
Agreement or otherwise and (ii) none of the events requiring a notice
provided for in Section 1.3 hereof is then continuing, Harris may resume the
lending of USM Common Shares held in the Custody Account and Borrower may
resume the borrowing of such USM Common Shares from Harris pursuant to the
Borrowing Agreement at any time after Lender orally notifies Custodian and
Borrower of the resumption of the availability of USM Common Shares through
the Custody Account for lending by Harris to Borrower and Lender shall
confirm any such notice in writing (including by facsimile transmission) to
Custodian and to Borrower by the end of the Business Day following the date
of such notice.
1.5. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, any
notice provided for in Section 1.2 or 1.3 hereof shall advise Harris not to
deliver any USM Common Shares from the Custody Account as Loaned Securities
to Borrower under the Borrowing Agreement pursuant to any Request until the
receipt by Harris of a Request subsequent to Custodian receiving a notice
provided for in Section 1.4 hereof.
1.6. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, if
Borrower shall make a Request at a time when any USM Common Shares subject to
such Request are not then available through the Custody Account to be loaned
by Harris or borrowed by Borrower from Harris under the Borrowing Agreement
or otherwise because Lender has given the notice specified in Section 1.2 or
1.3 hereof that all or a specified portion of USM Common Shares are not then
available through the Custody Account to be loaned by Harris or borrowed by
Borrower from Harris under the Borrowing Agreement, Lender shall notify
Custodian not to deliver any USM Common Shares that are subject to such
notice specified in Section 1.2 or 1.3 hereof pursuant to the Borrowing
Agreement and Lender shall orally notify Borrower on the date of such Request
that all or such specified portion of USM Common Shares are not then
available through the Custody Account to be loaned by Harris or borrowed by
Borrower from Harris under the Borrowing Agreement. Lender shall confirm
such notice in writing (including by facsimile transmission) to Custodian and
Borrower by the end of the Business Day following the date of such Request.
4
<PAGE>
1.7. Upon receipt by Borrower of a notice provided for in Section
1.2 (provided that such notice relates to all (but not less than all) of the
USM Common Shares that do not constitute Loaned Securities) or 1.3 hereof,
Borrower shall not (i) offer, sell or deliver in settlement of any trade any
Loaned Security if such offer, sale or delivery requires, in the reasonable
opinion of Borrower's counsel, delivery (including constructive delivery (a
"Constructive Prospectus Delivery") pursuant to Rule 153, or any successor or
similar rule or regulation under the Securities Act of 1933, as amended (the
"Act")) of the Prospectus (as defined in the Registration Rights Agreement)
pursuant to the Act or the rules or regulations thereunder or (ii) deliver
any Loaned Security in connection with a Common Share Delivery Arrangement
(as defined in the Indenture, dated as of __________, 1995, between USM and
Harris, as trustee, relating to USM's Liquid Yield Option Notes due 2015 (the
"Indenture")) pursuant to the Common Share Delivery Arrangement Agreement,
dated as of ________, 1995, between USM, Borrower and Harris, as conversion
agent under the Indenture (the "Common Share Delivery Arrangement
Agreement"), if such delivery requires, in the reasonable opinion of
Borrower's counsel, delivery of the Prospectus (as defined in the Registration
Rights Agreement) pursuant to the Act or the rules or regulations thereunder, in
each case until the receipt by Borrower of a notice provided for in Section 1.4
hereof.
1.8. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR
PROTECTION ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED
SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO HARRIS
UNDER THE BORROWING AGREEMENT MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION
OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE LOANED
SECURITIES.
2. FEES FOR LOANS. Borrower shall pay Harris a monthly fee in
arrears for Loans, such fee to equal 20 basis points, on a per annum basis,
of the average daily market value of all Loaned Securities (as calculated
pursuant to Section 2 of the Borrowing Agreement) outstanding during such
month, which fee shall be the sole amount of compensation payable by Borrower
to Harris or Lender for borrowing USM Common Shares pursuant to the Borrowing
Agreement and this Agreement. Borrower shall provide Lender and Custodian
with a written confirmation of such basis of compensation and the calculation
thereof. Any fee payable hereunder shall be payable by Borrower to Harris
(i) within 10 days of the end of the month for which the fee was incurred, or
(ii) immediately, in the event of a default hereunder or under the Borrowing
Agreement by Borrower.
3. TERMINATION OF THE LOAN. Unless otherwise agreed and subject
to the terms of the Borrowing Agreement, Borrower may terminate a Loan of
Loaned Securities under the Borrowing
5
<PAGE>
Agreement in accordance with the terms of the Borrowing Agreement, and Lender
may terminate a Loan made to Borrower pursuant to the Borrowing Agreement
upon three Business Days' notice to Borrower. Lender shall exercise such
right to terminate a Loan made to Borrower pursuant to the Borrowing
Agreement (or to exercise any remedies for Borrower's failure to deliver such
Loaned Securities or cause such Loaned Securities to be credited to Harris'
account in accordance with the terms of the following sentence) by
instructing Harris to terminate such Loan (or to exercise such remedies) in
accordance with the terms of the Borrowing Agreement pursuant to the terms of
the Securities Loan Termination Agreement dated as of _____, 1995 among
Lender, Harris and Borrower (the "Securities Loan Termination Agreement.")
Unless otherwise agreed and subject to the terms of the Borrowing Agreement,
Borrower shall, on or before such termination date, deliver such Loaned
Securities to Harris, or cause the Loaned Securities to be credited to
Harris' account at a central depository clearing system; provided, however,
that, notwithstanding anything to the contrary herein or in the Borrowing
Agreement, Borrower's failure to so deliver the Loaned Securities or so cause
the Loaned Securities to be so credited on or before such termination date
shall not constitue a default hereunder or an Event of Default under the
Borrowing Agreement, nor give rise to any of the remedies permitted pursuant
to Section 8, 9 or 12 of the Borrowing Agreement, if such failure is caused
by the Borrower's inability to acquire such Loaned Securities, in the
reasonable opinion of counsel to Borrower, in compliance with applicable law,
including, without limitation, Rule 10b-6 (or any sucessor or similar rule or
regulation) under the Securities Exchange Act of 1934, as amended, unless
such failure shall continue for a period of more than 10 days from the date
of Harris' notice to Borrower terminating such Loan. In the circumstances
described in the proviso in the preceding sentence, the Loan shall not
terminate on the date called for in Harris' notice, but shall terminate on
such later date upon which Borrower shall have delivered such Loaned
Securities or caused such Loaned Securities to be credited to Harris' account
as provided above.
4. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SECURITIES. Until
a Loan is terminated in accordance herewith and with the Borrowing Agreement,
the Securities Loan Termination Agreement and the Customer Agreement and
subject to the terms of the Borrowing Agreement, Borrower shall have all the
incidents of ownership of the Loaned Securities, including, without limitation,
the right to transfer the Loaned Securities to any purchaser (as defined in the
New York Uniform Commercial Code) free of any adverse claim (as defined in
Article 8 in the New York Uniform Commercial Code). Lender hereby waives the
right to vote the Loaned Securities during the term of the Loan.
6
<PAGE>
5. REPRESENTATIONS OF THE PARTIES HERETO. The parties hereby make
the following representations and warranties as of the date of each Loan of USM
Common Shares under the Borrowing Agreement and the Customer Agreement:
5.1. Each of Borrower and Lender represents and warrants that (a)
it has the corporate power to execute and deliver this Agreement, the Securities
Loan Termination Agreement, the Borrowing Agreement (with respect to Borrower)
and the Customer Agreement (with respect to Lender), to enter into the
tranactions contemplated by this Agreement, the Securities Loan Termination
Agreement, the Borrowing Agreement (with respect to Borrower) and the Customer
Agreement (with respect to Lender) and to perform its obligations hereunder
and thereunder; (b) it has taken all necessary action to authorize such
execution, delivery and performance; and (c) this Agreement, the Securities Loan
Termination Agreement, the Borrowing Agreement (with respect to Borrower) and
the Customer Agreement (with respect to Lender) each constitutes a legal, valid
and binding obligation enforceable against it in accordance with its terms,
except as the enforceability hereof and thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or other similar laws now or hereafter in effect affecting creditors'
rights generally, (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and (iii)
public policy considerations that could limit the enforceability of
indemnification provisions.
5.2. Each of Borrower and Lender represents and warrants that the
execution, delivery and performance by it of this Agreement, the Securities Loan
Termination Agreement, the Borrowing Agreement (with respect to Borrower) and
the Customer Agreement (with respect to Lender) and each Loan under the
Borrowing Agreement (with respect to Borrower) and the Customer Agreement (with
respect to Lender) will at all times comply with all applicable laws and
regulations applicable to it, including those of securities regulatory or
self-regulatory organizations applicable to it.
5.3. Each of Borrower and Lender represents and warrants that it has
made its own determination as to the tax treatment of any dividends,
remuneration or other funds received hereunder.
5.4. Borrower represents and warrants that (a) it is a corporation
duly organized and validly existing under the laws of the State of Delaware and
(b) it is borrowing or will borrow the Loaned Securities for the purpose of
making delivery of such securities in the case of short sales, failure
7
<PAGE>
to receive securities required to be delivered, or as otherwise permitted
pursuant to Regulation T of the Board of Governors of the Federal Reserve
System.
5.5. Lender represents and warrants that it is a corporation duly
organized and validly existing under the laws of the State of Iowa.
6. COVENANTS.
6.1. Each party hereto agrees that this Agreement and the Loans
made under the Borrowing Agreement and the Customer Agreement shall be
"securities contracts" for purposes of the U.S. Bankruptcy Code and any
bankruptcy proceeding thereunder.
6.2. Borrower has furnished, or promptly upon (and in any event
within five Business Days after) demand by Lender shall furnish, Lender with its
most recent statement required to be furnished to customers pursuant to Rule
17a-5(c) under the 1934 Act.
6.3. At all times, Lender shall ensure that, unless a default by
Borrower has occurred and is continuing under this Agreement or the Borrowing
Agreement, the number of USM Common Shares held by Custodian pursuant to the
Custodian Agreement, when added to the number of USM Common Shares that are
the subject of outstanding Loans, is not less than the maximum number of USM
Common Shares that could be the subject of outstanding Loans under the
Borrowing Agreement at such time in accordance with the terms of Section 1.1
hereof and Schedule A hereto.
6.4 Lender agrees that all USM Common Shares constituting Loaned
Securities shall be freely transferable, provided that Borrower complies with
all applicable laws in connection with its borrowing and disposition of such
USM Common Shares.
7. DEFINITIONS. For the purpose hereof:
"Business Day" shall mean any day recognized as a settlement day by
the American Stock Exchange.
8
<PAGE>
"Collateral" shall have the meaning given to such term in the
Borrowing Agreement.
"Loan" shall mean a loan by Harris to Borrower of Loaned Securities
under the Borrowing Agreement and the Customer Agreement.
"Loaned Security" shall mean any USM Common Share delivered as a
Loan under the Borrowing Agreement and the Customer Agreement until the
clearing organization used by Harris and Borrower credits Harris' account or
the certificate for such share (or an equivalent share) is delivered or
otherwise accepted back thereunder or until the share is replaced by purchase of
an equivalent security, except that, if any new or different security shall be
exchanged for any Loaned Security by reorganization, recapitalization or merger
of the issuer of such Loaned Security, such new or different security shall,
effective upon such exchange, be deemed to become a Loaned Security in
substitution for the former Loaned Security for which such exchange was made.
8. APPLICABLE LAW. This Agreement shall be governed and construed
in accordance with the internal laws of the State of Illinois.
9. WAIVER. The failure of any party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. All
waivers in respect of a default under this Agreement must be in writing.
10. REMEDIES. All remedies and limitations on damages hereunder
shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement.
11. TERMINATION. This Agreement, subject to the proviso in the
penultimate sentence of Section 3 hereof, may be terminated by any party upon
three Business Days' notice to the other party.
12. NOTICES. Any request, demand, authorization, notice, waiver,
consent, report or communication to a party hereunder shall, unless this
Agreement specifically provides otherwise, be in writing and delivered in person
or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission to the following facsimile numbers (or to
such address or facsimile number as such party may designate by the notice):
9
<PAGE>
if to Borrower:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
100 Church Street, 18th Floor
New York, New York 10080
Attention: Stock Loan Department
Facsimile No.: (212) 602-7585
Telephone No.: (212) 602-7521
with copies in the case of any notice, advice or instruction under
Section 3 or 11 above to:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
Attention: Trading General Counsel
Facsimile No.: (212) 449-4590
Telephone No.: (212) 449-4385
and to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Michael A. Campbell
Facsimile No.: (312) 701-7711
Telephone No.: (312) 782-0600
if to the Lender:
Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, Illinois 60602
Attention: Ronald D. Webster, Treasurer
Facsimile No.: (312) 630-1908
Telephone No.: (312) 630-1900
with a copy, except in the case of any notice, advice or instruction
under Sections 1, 2 or 3, to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Michael G. Hron
Facsimile No.: (312) 853-7036
Telephone No.: (312) 853-7000
10
<PAGE>
if to the Custodian:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Attention:
Facsimile No.:
Telephone No.:
Any request, demand, authorization, notice, waiver, consent, report or
communication hereunder shall be deemed given when actually received, except
that any request, demand, authorization, notice, waiver, consent, report or
communication actually received on a day that is not a Business Day or after
business hours on a Business Day shall be deemed given and received on the next
succeeding Business Day.
13. MISCELLANEOUS. This Agreement shall not be assigned by any party
without the prior written consent of the other parties, and any such assignment
without such consent shall be void. Subject to the foregoing, this Agreement
shall be binding upon and shall enure to the benefit of the parties hereto and
their respective heirs, representatives, successors and assigns. This Agreement
shall not be modified, except by an instrument in writing signed by the party
against whom enforcement is sought.
11
<PAGE>
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
by
---------------------------------
Name:
Title:
TELEPHONE AND DATA SYSTEMS, INC.
by
---------------------------------
Name:
Title:
[Signature Page to TDS Securities Loan Agreement]
12
<PAGE>
SCHEDULE A
The maximum number of USM Common Shares that may be the subject of
outstanding Loans as of any date is 750,000 subject to appropriate adjustment
for stock splits, reverse stock splits and stock dividends. Lender may, in its
sole discretion, at any time and from time to time, increase (but not above
750,000 USM Common Shares) or decrease the maximum number of USM Common Shares
that may be the subject of outstanding Loans as of any date, subject in each
such case to appropriate adjustments for stock splits, reverse stock splits and
stock dividends. Lender shall promptly notify Borrower and Custodian, in
accordance with the terms of Sections 1.2, 1.3 and 1.4, of any change in the
maximum number of USM Common Shares that may be the subject of outstanding
Loans.
13
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of __________ __, 1995, by and between Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), United States Cellular Corporation, a
Delaware corporation (the "Company") and Telephone and Data Systems, Inc.
("TDS").
The parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings ascribed to them below:
"Borrowing Agreement" shall mean the Borrowing Agreement dated
________ __, 1995, between Merrill Lynch and Harris.
"Business Day" shall mean any day recognized as a settlement day by
the American Stock Exchange.
"Common Share Delivery Arrangement Agreement" shall mean the Common
Share Delivery Arrangement Agreement dated as of ______ __, 1995, between
Merrill Lynch and the Company.
"Common Shares" shall mean the common shares, par value $1.00 per
share, of the Company.
"Conversion Agent" shall mean Harris Trust and Savings Bank, as
conversion agent under the Indenture, or any successor thereto pursuant to the
terms of the Indenture.
"Custodian" shall mean Harris, in its capacity as custodian pursuant
to a Custody Agreement dated _______ __, 1995, between TDS and Harris.
"Customer Agreement" shall mean the Securities Lending Customer
Agreement Custody Account dated _________ __, 1995, between TDS, Custodian
and Harris.
"Harris" shall mean Harris Trust and Savings Bank.
"Indenture" shall mean the Indenture dated as of __________, 1995
between the Company and Harris Trust and Savings Bank, as Trustee.
"Loan" shall mean a loan by Harris to Merrill Lynch of Loaned
Securities under the Borrowing Agreement and the Customer Agreement.
"Loaned Security" shall mean any Common Share delivered as a Loan
pursuant to the Borrowing Agreement and the Customer Agreement until the
clearing organization used by Harris and Merrill Lynch credits Harris'
Custodian's account or the certificate for such share (or an equivalent
share) is delivered or otherwise accepted back thereunder or until the share
is replaced by purchase of an equivalent security, except that, if any new or
different security shall be exchanged for any Loaned Security by
reorganization, recapitalization or merger of the
<PAGE>
issuer of such Loaned Security, such new or different security shall, effective
upon such exchange, be deemed to become a Loaned Security in substitution for
the former Loaned Security for which such exchange was made.
"Purchase Agreement" shall mean the Purchase Agreement dated
_________ __, 1995, between Merrill Lynch and the Company.
"Securities Loan Agreement" shall mean the Securities Loan
Agreement dated _________ __, 1995 between Merrill Lynch and TDS.
"Securities Loan Termination Agreement" shall mean the Securities
Loan Termination Agreement dated ___________ __, 1995 among Merrill Lynch,
TDS and Harris Trust and Savings Bank.
2. REGISTRATION RIGHTS. (a) Prior to the execution hereof, the
Securities and Exchange Commission (the "Commission") has declared effective
under the Securities Act of 1933, as amended (the "Act"), a registration
statement on Form S-3 of the Company covering, among other things, (i)
resales from time to time by Merrill Lynch of the Company's Liquid Yield
Option-TM-Notes due 2015 (the "LYONs"-TM-) obtained by Merrill Lynch pursuant
to Common Share Delivery Arrangements (as defined in the Indenture), (ii)
deliveries from time to time of Common Shares ("Conversion Shares") by
Merrill Lynch, through the Conversion Agent, to converting LYONs holders in
accordance with either Section 1(a) or 1(b) of the Common Share Delivery
Arrangement Agreement and Section 11.19 of the Indenture (whether such
Conversion Shares are Loaned Securities or were otherwise obtained by Merrill
Lynch), and (iii) sales from time to time by Merrill Lynch of Common Shares
that constitute Loaned Securities ("Loaned Shares"). Such Registration
Statement (as amended, if applicable) and the prospectus constituting a part
thereof (including in each case all documents, if any, incorporated by
reference therein and the information, if any, deemed to be part thereof
pursuant to Rule 430A(b) or Rule 434 of the rules and regulations of the
Commission under the Act (the "1933 Act Regulations")), in each case as from
time to time amended or supplemented pursuant to the Act or otherwise, are
hereinafter referred to as the "Registration Statement" and the "Prospectus",
respectively, except that if any revised prospectus shall be provided by the
Company for use in connection with the offering, sale or delivery of the
Covered Securities which differs from the Prospectus on file at the
Commission at the time the Registration Statement became effective (whether
or not such revised prospectus is required to be filed by the Company
pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus",
shall refer to such revised prospectus from and after the time it is first
provided for such use. The LYONs, the Conversion Shares and the Loaned
Shares are collectively referred to herein as the "Covered Securities."
(b) The Company shall use its best efforts to keep the Registration
Statement continuously effective in order to permit the Prospectus to be usable
by Merrill Lynch in connection with any offering, sale or delivery of Covered
Securities.
- -----------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
<PAGE>
(c) Notwithstanding any other provision hereof, the Company (i)
represents and warrants to Merrill Lynch that (A) the Registration Statement and
the Prospectus comply in all material respects with the Act and the rules and
regulations thereunder, (B) the Registration Statement did not, when it became
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (C) the Prospectus did not, as of the date hereof,
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (ii) will ensure
that (A) the Registration Statement, as amended from time to time, and any
Prospectus, as amended or supplemented from time to time, will comply in all
material respects with the Act and the rules and regulations thereunder, (B) the
Registration Statement, at the time any amendment thereto becomes effective,
will not, if used in connection with the transactions contemplated hereby,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (C) any Prospectus, as amended or supplemented from time to time,
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the Company shall not be responsible for the correctness of any information
contained in the Registration Statement or the Prospectus or any amendment or
supplement thereto provided to the Company in writing by Merrill Lynch
specifically for inclusion therein.
(d) The Company shall furnish to Merrill Lynch, prior to the filing
thereof with the Commission, a copy of each amendment to the Registration
Statement and each supplement, if any, to the Prospectus and shall use its best
efforts to reflect in each such document, when so filed with the Commission,
such comments as Merrill Lynch reasonably may propose.
(e) The Company shall advise Merrill Lynch, and, if requested by
Merrill Lynch, confirm such advice in writing:
(i) when any amendment to the Registration Statement has been filed
with the Commission and when such amendment has become effective;
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus or for additional
information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration
3
<PAGE>
Statement or the initiation of any proceedings for that purpose; and
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Covered Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(f) The Company shall make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible time.
(g) The Company shall furnish to Merrill Lynch, without charge, at
least one copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if Merrill Lynch so
requests in writing, all exhibits (including those incorporated by reference).
(h) The Company shall deliver to Merrill Lynch, without charge, as
many copies of the Prospectus and any amendment or supplement thereto as Merrill
Lynch may reasonably request; and the Company consents to the use of the
Prospectus or any amendment or supplement thereto by Merrill Lynch in connection
with the offering, sale or delivery of Covered Securities.
(i) The Company shall register or qualify or cooperate with Merrill
Lynch in connection with the registration or qualification of the Covered
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as Merrill Lynch reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Covered Securities; PROVIDED, HOWEVER, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action which would subject it
to general service of process or to taxation in any such jurisdiction where it
is not then so subject.
(j) Upon the occurrence of any event that requires the making of any
changes in the Registration Statement or the Prospectus in order to make the
statements therein not misleading (a "Material Event"), the Company shall
promptly prepare a post-effective amendment to the Registration Statement or a
supplement to the Prospectus or file any other required document so that, as
thereafter delivered in connection with the offering, sale or delivery of
Covered Securities, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the
4
<PAGE>
light of the circumstances under which they were made, not misleading.
(k) (i) Upon the occurrence of any of the following events: (a) the
Commission has issued a stop order suspending the effectiveness of the
Registration Statement; (b) a Material Event; or (c) the Company, on the
advice of its counsel, reasonably concludes that it is inadvisable as a
matter of the federal securities law that the Prospectus continue to be
used, the Company shall promptly (A) notify TDS that such event has
occurred and that use of the Prospectus should be suspended and (B)
notify such other parties in the manner required by Section 1 of the
Securities Loan Agreement and Section 1 of the Common Share Delivery
Arrangement Agreement.
(ii) The Company shall promptly notify TDS (and any other party, as
required by Section 1 of the Securities Loan Agreement or Section 1 of the
Common Share Delivery Arrangement Agreement) when the circumstances set
forth in Section 2(k)(i) no longer apply and use of the Prospectus may be
recommenced, and the Company shall use its best efforts to cause such
circumstances no longer to exist and to enable use of the Prospectus.
(iii) Except as otherwise required herein (or in the Securities Loan
Agreement or the Common Share Delivery Arrangement Agreement, as
applicable), the notices required to be given pursuant to this Section 2(k)
shall be given orally, and confirmed in writing (including by facsimile
transmission) by the end of the Business Day following the date of such
notice. Such notices shall be deemed received (A) if receipt by the
required recipient of such written confirmation is telephonically confirmed
between the hours of 7:30 a.m. and 4:30 p.m. on any Business Day, one hour
after the last such telephonic confirmation is obtained or (B) otherwise,
upon the next opening of business of the American Stock Exchange following
the time the last such telephonic confirmation is made.
(iv) The Company agrees to indemnify and hold harmless Merrill Lynch
against any and all Losses (as defined below), as incurred, to the extent
such Loss arises out of Merrill Lynch's inability, without duplication, (A)
to deliver Loaned Securities pursuant to the terms of the Securities Loan
Agreement, as a direct or indirect result of the giving by the Company of
any notice pursuant to Section 2(k)(i) hereof, the giving by TDS or the
Company of the notice provided for in Section 1.3 of the Securities Loan
Agreement, the giving by the Custodian of the notice provided for in
Section 1.6 of the Securities Loan Agreement
5
<PAGE>
or the occurrence of any of the events set forth in Section 2(k)(i) hereof,
upon settlement of trades entered into prior to the giving of any such
notice or the occurrence of any such events, as the case may be, (B) to
deliver Loaned Securities in connection with any Common Share Delivery
Arrangement (as defined in the Indenture) pursuant to the terms of the
Securities Loan Agreement or the Common Share Delivery Arrangement
Agreement as a direct or indirect result of the giving by the Company of
any notice pursuant to Section 2(k)(i) hereof, the giving by TDS or the
Company of the notice provided for in Section 1.3 of the Securities Loan
Agreement, the giving by the Custodian of the notice provided for in
Section 1.6 of the Securities Loan Agreement or the occurrence of any of
the events set forth in Section 2(k)(i) hereof, (C) to deliver Conversion
Shares (including any Loaned Securities) in connection with any Common
Share Delivery Arrangement (as defined in the Indenture) pursuant to the
terms of the Common Share Delivery Arrangement Agreement as a direct or
indirect result of the giving by the Company of any notice pursuant to
Section 2(k)(i) hereof, the giving by TDS or the Company of the notice
provided for in Section 1.3 of the Securities Loan Agreement, the giving by
the Custodian of the notice provided for in Section 1.6 of the Securities
Loan Agreement, the giving by the Company of the notice provided for in
Section 1(e) of the Common Share Delivery Arrangement Agreement, the
delivery by the Conversion Agent of the notice provided for in Section 1(f)
of the Common Share Delivery Arrangement Agreement or the occurrence of any
of the events set forth in Section 2(k)(i) hereof, or (D) to resell LYONs
obtained by Merrill Lynch pursuant to any Common Share Delivery Arrangement
(as defined in the Indenture) pursuant to the Common Share Delivery
Arrangement Agreement as a direct or indirect result of the giving by the
Company of any notice pursuant to Section 2(k)(i) hereof, the giving by the
Company of the notice provided for in Section 1(e) of the Common Share
Delivery Arrangement Agreement, the giving by the Conversion Agent of the
notice provided for in Section 1(f) of the Conversion Share Delivery
Arrangement Agreement or the occurrence of any of the events set forth in
Section 2(k)(i) hereof; PROVIDED that in the case of (D), any such notices
are given or events occur within 20 Business Days of the Conversion Date
with respect to a conversion in respect of which the Company and Merrill
Lynch have entered into a Common Share Delivery Arrangement pursuant to
Section 1(a) or Section 1(b) of the Common Share Delivery Arrangement
Agreement. The Company shall not be required under this Section 2(k)(iv)
to indemnify Merrill Lynch for any Loss to the extent such Loss (x) arises
otherwise than out of Merrill Lynch's inability to take the actions
described in (A), (B), (C) or (D) above,
6
<PAGE>
(y) arises out of the bad faith, willful misconduct or gross negligence of
Merrill Lynch or (z) arises out of Merrill Lynch's failure to take
reasonable steps to mitigate its Loss.
(l) The Company agrees to indemnify and hold harmless Merrill Lynch and
each person, if any, who controls Merrill Lynch within the meaning of Section 15
of the Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever ("Loss"), as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all Losses, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred, reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to
any Loss to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by Merrill
Lynch expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto).
7
<PAGE>
(m) Merrill Lynch agrees to indemnify and hold harmless the Company,
each of the Company's directors, each of the Company's officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the Act against any and all Loss described in the
indemnity contained in Section (l) above, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions, made
in the Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by Merrill Lynch expressly for use
in the Registration Statement (or any amendment thereto) or the Prospectus (or
any amendment or supplement thereto).
(n) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have otherwise than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
defense of any such action. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
(o) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Sections 2(l),
(m) and (n) above is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and
Merrill Lynch shall contribute to the aggregate Losses of the nature
contemplated by said indemnity agreement incurred by the Company and Merrill
Lynch, as incurred, in such proportions as is appropriate to reflect the
relative fault of the Company, on the one hand, and Merrill Lynch, on the other
hand, in connection with the statements or omissions that resulted in such
Losses, determined by reference to whether any alleged untrue statement or
omission relates to information provided by the Company, on the one hand, or
Merrill Lynch, on the other hand; PROVIDED, HOWEVER, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 2(o), each person,
if any, who controls Merrill Lynch within the meaning of Section 15 of the Act
shall have the same rights to contribution as Merrill Lynch, and each director
of the Company,
8
<PAGE>
officer of the Company who signed the Registration Agreement, and each person,
if any, who controls the Company within the meaning of Section 15 of the Act
shall have the same rights to contribution as the Company.
(p) On the date of execution hereof, the Company shall deliver to
Merrill Lynch:
(1) The opinion of Sidley & Austin, counsel for the Company, in form
and substance reasonably satisfactory to Merrill Lynch's counsel, to the
effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(ii) The Company has the corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus.
(iii) To the knowledge of such counsel, the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to have a material adverse affect on the
Company and its consolidated subsidiaries considered as one
enterprise.
(iv) Each of United States Cellular Operating Company ("USCOC")
and United States Cellular Investment Company ("USCIC" and, together
with USCOC, the "Direct Subsidiaries") has been duly incorporated and
is validly existing as a corporation in good standing under the laws
of the State of Delaware and, to the knowledge of such counsel, is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which it owns or leases
substantial properties or in which the conduct of its business
requires such qualification, except where the failure to be so
qualified could not reasonably be expected to have a material adverse
affect on the Company and its consolidated subsidiaries considered as
one enterprise; all of the issued and outstanding capital stock of
each of the Direct Subsidiaries has been duly authorized and validly
issued and is fully paid and non-assessable and all of such capital
stock is owned of record by the Company free and clear, to such
counsel's knowledge, of any
9
<PAGE>
security interest, mortgage, pledge, lien, encumbrance, or claim.
(v) The LYONs have been duly authorized by the requisite
corporate action on the part of the Company and, when executed and
authenticated in accordance with the terms of the Indenture and
delivered to and paid for by you as provided in the Purchase
Agreement, will be valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable against
the Company in accordance with their terms, except to the extent
that enforcement thereof may be limited by (1) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, (2)
public policy considerations and (3) general principles of equity
(regardless of whether enforceability is considered in a proceeding
at law or in equity); and the LYONs and the Indenture conform as to
legal matters in all material respects to the descriptions thereof
in the Prospectus.
(vi) The Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement
enforceable against the Company in accordance with its terms, except
to the extent that enforcement thereof may be limited by (1)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (2) public policy considerations and (3) general principles
of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); the Indenture has been duly qualified
under the Trust Indenture Act of 1939, as amended (the "1939 Act").
(vii) The Company has authorized capital stock as set forth in
or incorporated by reference into the Registration Statement; to the
knowledge of such counsel, all of the issued and outstanding shares of
capital stock of the Company (including, without limitation, the
Conversion Shares and the Loaned Shares) have been duly and validly
authorized and issued and are fully paid and non-assessable; and the
capital stock of the Company, including, without limitation, the
Common Shares, conforms as to legal matters in all material respects
to the descriptions thereof included in or incorporated by reference
into the Prospectus.
(viii) This Agreement has been duly authorized, executed and
delivered by the Company and TDS and each of the Securities Loan
Agreement and the Securities Loan Termination Agreement has been
duly authorized, executed and delivered by TDS.
10
<PAGE>
(ix) The Common Share Delivery Arrangement Agreement has been
duly authorized, executed and delivered by the Company and is a valid
and binding agreement enforceable against the Company in accordance
with its terms, except to the extent that enforcement thereof may be
limited by (1) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights generally, (2) public policy considerations and (3) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(x) The Registration Statement is effective under the Act, and,
to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued by the
Commission and no proceeding for that purpose is pending or threatened
by the Commission.
(xi) At the time the Registration Statement became effective and
at the date of such opinion, the Registration Statement (other than
the financial statements, financial data and supporting schedules
included therein and the Included Specified Information, as to which
no opinion need be rendered) complied as to form in all material
respects with the applicable requirements of the Act and the 1933 Act
Regulations. As used in such opinion, "Included Specified
Information" shall mean the following information contained in the
Prospectus: (1) the information under the captions "Summary Operating
Data," "Summary Consolidated Financial Information" and
"Capitalization," (2) the table summarizing the Company's markets and
consolidated operations under the caption "The Company's Operations,"
(3) the table of the Company's cellular interests under the caption
"The Company's Cellular Interests" and (4) the table summarizing the
Company's major service areas under the caption "Customers and
System Usage."
(xii) The documents incorporated by reference into the
Prospectus (other than the financial statements, financial data and
supporting schedules included therein and the Incorporated Specified
Information, as to which no opinion need be rendered), when they were
filed with the Commission, complied as to form in all material
respects with the applicable requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act") and the regulations
thereunder. As used in such opinion, "Incorporated Specified
Information" shall mean the following
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information incorporated by reference into the Prospectus from Part I,
Item 1 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994: (1) the table summarizing the status of the
Company's interests in cellular markets at December 31, 1994 under the
caption "The Company," (2) the table under the caption "The Company's
Cellular Interests," (3) the table summarizing certain information
about customer and market penetration in the Company's managed
operations under the caption "Customers and System Usage" and (4) the
table summarizing certain information by operating cluster under the
caption "Customers and System Usage."
(xiii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or, to such counsel's knowledge,
threatened, which are required to be disclosed in the Registration
Statement other than those disclosed therein or incorporated by
reference therein.
(xiv) The information in the Registration Statement under
"Description of LYONs", Description of Capital Stock" and "Certain Tax
Aspects", to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is correct in all
material respects.
(xv) To such counsel's knowledge, (1) there are no contracts,
indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described in the Registration Statement or
to be filed as exhibits thereto which are not described or filed as
required and (2) such descriptions are correct in all material
respects.
(xvi) No consent, approval, authorization or order of, or
registration or qualification with any court or governmental authority
or agency is required in connection with the offer, sale or delivery
of the Covered Securities or the consummation of the transactions
contemplated by this Agreement the Common Share Delivery Arrangement
Agreement, the Securities Loan Agreement or the Securities Loan
Termination Agreement, except (1) the registration under the Act of
the Covered Securities, (2) registration under the 1934 Act of the
LYONs, (3) the qualification of the Indenture under the 1939 Act and
(4) such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
12
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laws in connection with the offer, sale or delivery of any of the
Covered Securities.
(xvii) To such counsel's knowledge, no consents or waivers from
the holders of the Company's capital stock are required to consummate
the transactions contemplated hereby or by the Common Share Delivery
Arrangement Agreement, the Securities Loan Agreement or the
Securities Loan Termination Agreement, including, without limitation,
the offer, sale or delivery of the Covered Securities, other than
such consents and waivers as have been obtained; and, to such
counsel's knowledge, no holders of securities of the Company have
rights to the registration of such securities in connection with the
registration of the Covered Securities or the offer, sale or delivery
of the Covered Securities, other than such rights as have been
waived.
(xviii) The execution and delivery of this Agreement and the
Common Share Delivery Arrangement Agreement and the offer, sale or
delivery of the Covered Securities, the compliance by the Company with
all of the provisions of this Agreement and the Common Share Delivery
Arrangement Agreement and the consummation of the transactions herein
or therein contemplated do not and will not constitute a breach of, or
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or,
to such counsel's knowledge, any of the Company's consolidated
subsidiaries pursuant to the term of, (1) the Certificate of
Incorporation or by-laws of the Company, (2) any contract, indenture,
mortgage, loan agreement, note, lease or other agreement or
instrument, of which such counsel has knowledge, to which the Company
or any of the Company's consolidated subsidiaries is a party or by
which the Company or any of the Company's consolidated subsidiaries
may be bound, or to which any property or assets of the Company or any
of the Company's consolidated subsidiaries is subject, or (3) to such
counsel's knowledge, any currently applicable law, rule, regulation,
judgment, order or administrative or court decree.
Such opinion of Sidley & Austin shall additionally state that nothing
has come to their attention that has caused them to believe that the
Registration Statement (including the information deemed to be part of the
Registration Statement at the time it became effective pursuant to Rule 430A(b),
if applicable, but excluding the financial statements, financial data and
supporting schedules included or incorporated by reference therein, the Included
Specified Information and the
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<PAGE>
Incorporated Specified Information, as to which no belief need be expressed)
at the time it became effective contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (other than the financial statements, financial data and
supporting schedules included or incorporated by reference therein, the
Included Specified Information and the Incorporated Specified Information, as
to which no belief need be expressed), as of the date of such Prospectus and
at the date of such opinion included an untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Such opinion shall be limited to the laws of the State of New York,
the General Corporation Law of the State of Delaware and the laws of the United
States of America (other than the Communications Act of 1934, as amended (the
"Communications Act"), and the rules and regulations thereunder).
(2) The opinion, of Koteen and Naftalin, special counsel to the
Company, in form and substance reasonably satisfactory to your counsel, to
the effect that:
(i) No consent, approval, authorization or order of, or
registration or qualification with, the Federal Communications
Commission (the "FCC") is required in connection with the offer, sale
or delivery of the Covered Securities or the consummation of the
transactions contemplated by this Agreement, the Common Share Delivery
Arrangement Agreement or the Securities Loan Agreement, except to the
extent that ownership of a given number of Common Shares, whether or
not acquired pursuant to any of the agreements identified above, would
be inconsistent with (a) limitations on alien ownership and/or cross
interest (i.e., ownership or control of competing cellular or Personal
Communications Services ("PCS") systems serving the same general area)
contained in the Communications Act or a rule, regulation, judgment,
order or administrative or court decree issued, enacted or promulgated
thereunder and now in effect or (b) some future provision or
provisions of the Communications Act or a rule, regulation, judgment,
order or court decree, issued, enacted or promulgated thereunder.
14
<PAGE>
(ii) The execution and delivery of this Agreement and the Common
Share Delivery Arrangement Agreement, the offer, sale or delivery of
the Covered Securities, the compliance by the Company with all of the
provisions of this Agreement and the Common Share Delivery Arrangement
Agreement and the consummation of the transactions herein or therein
contemplated do not and will not, to such counsel's knowledge,
conflict with or result in any violation of, or the creation of any
lien, charge or encumbrance upon, the property or assets of the
Company or, to such counsel's knowledge, its consolidated
subsidiaries, under the Communications Act or any rule, regulation,
judgment, order or administrative or court decree issued, enacted or
promulgated thereunder; neither will any such action conflict with or
have a material adverse effect on any of the certificates,
authorities, licenses or permits, if any, issued or to be issued by
the FCC to the Company or, to such counsel's knowledge, any of the
Company's consolidated subsidiaries that enable them to carry on the
business and operations now operated by them and which are material to
the business of the Company and its consolidated subsidiaries
considered as one enterprise, except to the extent that ownership of a
given number of Common Shares, whether or not acquired pursuant to any
of the agreements identified above, would be inconsistent with (a)
limitations on alien ownership and/or cross interest (i.e., ownership
or control of competing cellular or PCS systems serving the same
general area) contained in the Communications Act or a rule,
regulation, judgment, order or administrative or court decree issued,
enacted or promulgated thereunder and now in effect or (b) some future
provision or provisions of the Communications Act or a rule,
regulation, judgment, order or court decree, issued, enacted or
promulgated thereunder.
(3) The opinion of Mayer, Brown & Platt, counsel for Merrill Lynch,
with respect to the matters set forth in item (i) (insofar as it relates to
the existence and good standing of the Company), (v), (vi), (vii) (insofar
as item (vii) relates to the conformity of the capital stock of the Company
to the description thereof included in or incorporated by reference into
the Prospectus), (viii) and (ix) through (xi), inclusive, of subsection
(p)(1) of this Section, as well as in the last paragraph of subsection
(p)(1) of this Section.
(4) A certificate of the Chairman, President or Vice President-
Finance of the Company and of the Controller or Treasurer of the Company to
the effect that (i) from the
15
<PAGE>
date of the most recent financial information included or incorporated by
reference into the Prospectus, there has been no material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, (ii)
the Prospectus, as amended or supplemented to the date of such certificate,
does not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
(iii) no stop order suspending the effectiveness of the Registration
Statement has been received by the Company or, to the Company's knowledge,
issued and, to the Company's knowledge, no proceedings for that purpose
have been initiated or threatened by the Commission.
(5) From Arthur Andersen LLP, a letter dated such date, in form and
substance satisfactory to Merrill Lynch, to the effect that:
(i) they are independent public accountants with respect to the
Company and its consolidated subsidiaries within the meaning of the Act and
the 1933 Act Regulations and no information concerning their relationship
with or interest in the Company and its consolidated subsidiaries is
required by Item 10 of the Registration Statement;
(ii) it is their opinion that (A) the financial statements and
supporting schedules included in or incorporated by reference into the
Registration Statement and covered by their opinions therein comply, and
(B) the combined financial statements of the Los Angeles SMSA Limited
Partnership, the Nashville/Clarksville MSA Limited Partnership and the
Baton Rouge MSA Limited Partnership (collectively, the "Cellular System
Partnerships") incorporated by reference into the Registration Statement
have been properly compiled from the amounts and notes of the underlying
separate audited financial statements of the Cellular System Partnerships
so as to comply, in each case as to form in all material respects with the
applicable accounting requirements of the Act and the 1933 Act Regulations
and the 1934 Act and the regulations thereunder;
(iii) based upon limited procedures set forth in detail in such
letter, nothing has come to their attention which causes them to believe
that (A) the unaudited financial statements and supporting schedules, if
any, of the Company and its consolidated subsidiaries included in or
incorporated by reference into the Registration Statement do
16
<PAGE>
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the 1933 Act Regulations or the 1934
Act and the regulations thereunder, as the case may be, or are not
presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements included in or incorporated by reference into the
Registration Statement, (B) the unaudited amounts of revenues, net income
and net income per share set forth following "Summary Consolidated
Financial Information" in the Prospectus were not determined on a basis
substantially consistent with that used in determining the corresponding
amounts in the audited financial statements incorporated by reference in
the Registration Statement, (C) at a specified date not more than five days
prior to the date of this Agreement, there has been any change in the
capital stock of the Company or any increase in the consolidated long term
debt of the Company and its consolidated subsidiaries as compared with the
amounts shown in the March 31, 1995, balance sheet incorporated by
reference into the Registration Statement or, during the period from
April 1, 1995, to a specified date not more than five days prior to the
date of this Agreement, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated revenues,
operating income or operating cash flow of the Company and its
consolidated subsidiaries, except in all instances for changes, increases
or decreases which the Registration Statement and the Prospectus disclose
have occurred or may occur; and
(iv) in addition to the examination referred to in their opinions and
the limited procedures referred to in clause (iii) above, they have carried
out certain specified procedures, not constituting an audit, with respect
to certain amounts, percentages and financial information which are
included in the Registration Statement and Prospectus and which are
specified by you, and have found such amounts, percentages and financial
information to be in agreement with the relevant accounting, financial and
other records of the Company and its consolidated subsidiaries identified
in such letter.
(q) Upon request by Merrill Lynch no later than 30 days following the
filing by the Company of its Annual Report on Form 10-K or any post-effective
amendment to the Registration Statement or supplement to the Prospectus (as
contemplated by Section 2(j) above), the Company, within 30 days of the later to
occur of (i) such request by Merrill Lynch and (ii) such filing by the Company,
shall deliver to Merrill Lynch opinions of
17
<PAGE>
counsel (who need not be outside counsel) to the effect of Sections 2(p)(1) and
2(p)(2) above, an officer's certificate to the effect of Section 2(p)(4) above
and an accountant's letter to the effect of Section 2(p)(5) above.
(r) The Company will bear all expenses incurred in connection with
the performance of its obligations under this Section 2.
3. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York.
4. REMEDIES. The parties hereto agree that irreparable damage would
occur in the event of the provisions of this Agreement were not to be performed
in accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or in equity.
5. AMENDMENTS. Except as otherwise provided herein, the provisions
of this Agreement may be not amended, modified or supplemented unless the
Company shall have obtained the prior written consent of Merrill Lynch and,
insofar as such amendment, modification or supplement relates to Loaned
Securities, TDS.
6. TERMINATION. This Agreement may be terminated by any party upon
five Business Days' notice to the other parties if none of the LYONs are
outstanding.
7. NOTICES. Any request, demand, authorization, notice, waiver,
consent, report or communication to a party hereunder shall, unless this
Agreement specifically provides otherwise, be in writing and delivered in person
or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission to the following facsimile numbers (or to
such address or facsimile number as such party may designate by the notice):
if to Merrill Lynch:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
100 Church Street, 18th Floor
New York, New York 10080
Attention: Stock Loan Department
Facsimile No.: (212) 602-7585
Telephone No.: (212) 602-7521
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<PAGE>
with copies to:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
Attention: Trading General Counsel
Facsimile No.: (212) 449-4590
Telephone No.: (212) 449-4385
and to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Michael A. Campbell
Facsimile No.: (312) 701-7711
Telephone No.: (312) 782-0600
if to the Company:
United States Cellular Corporation
8410 West Bryn Mawr
Suite 7000
Chicago, Illinois 60631-3486
Attention: Kenneth R. Myers
Vice President-Finance
Facsimile No.: (312) 399-8959
Telephone No.: (312) 399-8900
if to TDS:
Telephone and Data Systems, Inc.
30 North LaSalle Street
Suite 4000
Chicago, Illinois 60602
Attention: Ronald D. Webster, Treasurer
Facsimile No.: (312) 630-1908
Telephone No.: (312) 630-1900
with copies to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Michael G. Hron
Facsimile No.: (312) 853-7036
Telephone No.: (312) 853-7000
19
<PAGE>
Except as otherwise set forth herein or in the Securities Loan
Agreement, the Securities Loan Termination Agreement or the Common Share
Delivery Arrangement Agreement, any request, demand, authorization, notice,
waiver, consent, report or communication hereunder shall be deemed given when
actually received, except that any request, demand, authorization, notice,
waiver, consent, report or communication actually received on a day that is
not a Business Day or after business hours on a Business Day shall be deemed
given and received on the next succeeding Business Day.
8. MISCELLANEOUS. This Agreement supersedes any other agreement
between the parties concerning the subject matter hereof. This Agreement shall
not be assigned by any party without the prior written consent of the other
party, and any such assignment without such consent shall be void. Subject to
the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and assigns.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
By:__________________________________
Name:
Title:
UNITED STATES CELLULAR CORPORATION
By:__________________________________
Name:
Title:
TELEPHONE AND DATA SYSTEMS, INC.
By:__________________________________
Name:
Title:
[Signature page for the Registration Rights Agreement]
21
<PAGE>
COMMON SHARE DELIVERY ARRANGEMENT AGREEMENT
COMMON SHARE DELIVERY ARRANGEMENT AGREEMENT, dated as of_________ __, 1995
(the "Agreement"), among UNITED STATES CELLULAR CORPORATION, a Delaware
corporation (the "Company") and MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED (the "Standby Share Deliverer"). Capitalized terms used in this
Agreement but not defined herein shall have the meanings specified in the
Indenture.
WHEREAS, the Company has executed and delivered an Indenture (as amended
from time to time, the "Indenture") dated as of __________ __ , 1995, to Harris
Trust and Savings Bank, as Trustee (herein referred to as the "Conversion
Agent");
WHEREAS, under and pursuant to the Indenture the Company may issue its
Liquid Yield Option-TM- Notes due 2015 (the "Securities");
WHEREAS, pursuant and subject to the terms of the Securities and the
Indenture, the Securities are convertible at any time prior to their maturity at
the option of the Holder thereof into Common Shares, par value $1.00 per share
(the "Common Shares"), of the Company;
WHEREAS, pursuant to Section 11.19 of the Indenture, in connection with the
conversion of any Security, if a Holder satisfies the conversion requirements in
the Securities and the Company notifies the Holder that Common Shares shall be
delivered to the Holder converting such Security or if the Company is not
allowed to pay cash on conversion pursuant to the terms of the Indenture or
otherwise, rather than the Company delivering Common Shares to such Holder, the
Company may arrange with the Standby Share Deliverer for the Standby Share
Deliverer to deliver Common Shares to such Holder.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the Company and the Standby Share Deliverer hereby agree as
follows:
1. COMMON SHARE DELIVERY ARRANGEMENT.
(a) Subject to the provisions of Sections 1(d), 1(e), 1(f) and 1(i) of
this Agreement and in accordance with Section 11.19 of the Indenture, in
connection with the conversion of any Security, if a Holder satisfies the
conversion requirements of paragraph 9 of the Securities (the date on which the
Holder satisfies all those requirements is the "Conversion Date"), the
- ---------------------
- -TM- Trademark of Merrill Lynch & Co., Inc.
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Company may, prior to _____ a.m. New York City time on the Business Day
following the Conversion Date, request the Standby Share Deliverer to deliver
Common Shares (and cash in lieu of fractional shares) to such Holder, through
the Conversion Agent, in accordance with the procedures set forth in Section
11.02 of the Indenture and in the amounts calculated pursuant to Sections
11.01 and 11.03 of the Indenture. The Standby Share Deliverer may either
accept or reject such a request in its sole discretion. The Standby Share
Deliverer shall notify the Company of its decision to either accept or reject
such a request no later than _____ a.m. New York City time on the Business
Day following the date of such Company request. If the Standby Share
Deliverer notifies the Company of its acceptance of such a request, (i) the
Company shall deliver to the Holder, through the Conversion Agent, written
notice in accordance with Section 11.02 of the Indenture, that Common Shares
(and cash in lieu of fractional shares) shall be delivered to such Holder in
connection with such conversion and that the delivery of such Common Shares
(and cash in lieu of fractional shares) may constitute a taxable event to
such Holder because such Common Shares (and cash in lieu of fractional
shares) are being delivered by the Standby Share Deliverer, (ii) the Standby
Share Deliverer shall deliver to the Conversion Agent no later than the close
of business on the fifth Business Day following the Conversion Date, for
delivery to the Holder so converting such Holder's Securities, the number of
full Common Shares to be delivered upon conversion (calculated pursuant to
Section 11.01 of the Indenture) and cash in lieu of fractional shares
(determined pursuant to Section 11.03 of the Indenture) and (iii) the Company
shall cause the Conversion Agent to deliver to such Holder in accordance with
Section 11.02 of the Indenture, as soon as practicable following the
Conversion Date, a certificate for the number of full Common Shares to be
delivered upon conversion (calculated pursuant to Section 11.01 of the
Indenture) and cash in lieu of fractional shares (determined pursuant to
Section 11.03 of the Indenture) and shall, unless notified by the Company and
the Standby Share Deliverer that, in the reasonable opinion of each of their
respective counsel, such delivery is not required by the Securities Act,
deliver to such Holder (on behalf of the Company and the Standby Share
Deliverer) a current prospectus covering such Common Shares (copies of such
prospectus to be prepared by the Company and provided to the Conversion Agent
by the Company for such delivery in accordance with the Registration Rights
Agreement, dated as of ____ __, 1995, by and between the Company, the Standby
Share Deliverer and TDS (the "Registration Rights Agreement")) at the same
time as the Conversion Agent delivers the Common Shares certificate referred
to in this clause (iii).
(b) Subject to the provisions of Sections 1(d), 1(e), 1(f) and 1(i) of
this Agreement and in accordance with Section 11.19 of the Indenture, in
connection with the conversion of any
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<PAGE>
Security, if a Holder satisfies the conversion requirements of paragraph 9 of
the Securities and the Company shall have delivered to the Holder, through the
Conversion Agent, written notice in accordance with Section 11.02 of the
Indenture, that cash shall be delivered to such Holder in connection with such
conversion and such payment of cash is not allowed pursuant to the provisions of
the Indenture or otherwise, the Company may, prior to ____ a.m. New York City
time on the third Business Day following the Conversion Date, request the
Standby Share Deliverer to deliver Common Shares (and cash in lieu of fractional
shares) to such Holder, through the Conversion Agent, in accordance with the
procedures set forth in Section 11.02 of the Indenture and in the amounts
calculated pursuant to Sections 11.01 and 11.03 of the Indenture. The Standby
Share Deliverer may either accept or reject such a request in its sole
discretion. The Standby Share Deliverer shall notify the Company of its
decision to either accept or reject such a request no later than ______ a.m. New
York City time on the Business Day following the date of such Company request.
If the Standby Share Deliverer notifies the Company of its acceptance of such a
request, (i) the Company shall promptly (but no later than five Business Days
after the Conversion Date) deliver to the Holder, through the Conversion Agent,
written notice that Common Shares (and cash in lieu of fractional shares) shall
be delivered to such Holder in connection with such conversion and that the
delivery of Common Shares (and cash in lieu of fractional shares) in connection
with such conversion may constitute a taxable event to such Holder because the
Common Shares (and cash in lieu of fractional shares) are being delivered by the
Standby Share Deliverer and (ii) the procedures set forth in clauses (ii) and
(iii) of the last sentence of Section 1(a) of this Agreement shall be followed.
(c) Upon the delivery of Common Shares (and cash in lieu of fractional
shares) by the Standby Share Deliverer to the Conversion Agent pursuant to
Section 1(a) or 1(b) of this Agreement, in accordance with Section 11.19 of the
Indenture the Company shall execute and the Company shall cause the Trustee to
authenticate and deliver to the Standby Share Deliverer a new Security in an
authorized denomination equal in Principal Amount at Maturity to the Security
(or portion thereof) being converted by the Holder thereof in respect of which
conversion the Standby Share Deliverer has agreed to deliver Common Shares (and
cash in lieu of fractional shares) and, upon delivery of such Common Shares (and
cash in lieu of fractional shares) to the Conversion Agent, the Standby Share
Deliverer shall be treated as the Holder of such Security on and after the
Conversion Date. In accordance with Section 11.19 of the Indenture, such
Security (or portion thereof) so converted shall not cease to be outstanding,
but shall remain outstanding (and retain all of its conversion rights,
including, without limitation, those set forth in
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<PAGE>
Article 11 of the Indenture) with the Standby Share Deliverer as the Holder
thereof.
(d) The Company shall not request the Standby Share Deliverer to deliver
Common Shares (or cash in lieu of fractional shares) to a converting Holder
pursuant to Section 1(a) or 1(b) of this Agreement if (i) any of the events
described in Section 2(k)(i) of the Registration Rights Agreement have occurred
and are continuing or (ii) the Company has knowledge that any of such events are
reasonably likely to occur within 20 Business Days after the Conversion Date
applicable to the conversion of such converting Holder.
(e) If at any time that the Conversion Agent would be required to
deliver a prospectus to a converting Holder pursuant to subsection (iii) of
Section 1(a) of this Agreement (including pursuant to its incorporation by
reference into Section 1(b) of this Agreement) and (i) the Company has
requested the Standby Share Deliverer to deliver Common Shares (and cash in
lieu of fractional shares) to a converting Holder pursuant to Section 1(a) or
1(b) of this Agreement, (ii) the Standby Share Deliverer has notified the
Company of its acceptance of such a request in accordance with Section 1(a)
or 1(b) of this Agreement, as applicable, and (iii) any of the events
described in Section 2(k)(i) of the Registration Rights Agreement have
occurred after the time of the Company request referred to in clause (i)
above but prior to the delivery of the prospectus referred to above to the
converting Holder by the Conversion Agent, and such event or events are
continuing, the Company shall (A) promptly notify the Conversion Agent and
the Standby Share Deliverer of the occurrence of such event, and (B) promptly
instruct the Standby Share Deliverer not to deliver any Common Shares (or
cash in lieu of fractional shares) to the Conversion Agent in connection with
such conversion. If the events described in clauses (i), (ii) and (iii) of
the preceding sentence shall have occurred, the Standby Share Deliverer shall
be relieved of its obligation to deliver Common Shares (and cash in lieu of
fractional shares) to the Conversion Agent and the Company shall be required
to (1) deliver Common Shares (and cash in lieu of fractional shares) or cash
(if permitted by the terms of the Indenture and otherwise) to the converting
Holder in accordance with the provisions of Article 11 of the Indenture, (2)
promptly deliver to the Holder, through the Conversion Agent, written notice
in accordance with Section 11.02 of the Indenture, as to whether the Company
will deliver Common Shares (and cash in lieu of fractional shares) or cash to
the converting Holder and (3) if the Company has elected to deliver Common
Shares to the converting Holder and has previously notified such Holder that
it will receive Common Shares (and cash in lieu of fractional shares) upon
conversion and that the delivery of such Common Shares (and cash in lieu of
fractional shares) may constitute a taxable event to such Holder because such
Common Shares (and cash in lieu of fractional shares) were
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<PAGE>
to be delivered by the Standby Share Deliverer, promptly deliver to the
converting Holder, through the Conversion Agent, and, in any event,
contemporaneous to the delivery of Common Shares on conversion to such Holder,
written notice that such Common Shares (and cash in lieu of fractional shares)
are being delivered by the Company and that such delivery should not constitute
a taxable event to such Holder.
(f) If the events described in clauses (i), (ii) and (iii) of the first
sentence of Section 1(e) of this Agreement shall have occurred, and the
Standby Share Deliverer delivers Common Shares (and cash in lieu of
fractional shares) to the Conversion Agent in connection with such conversion
(whether or not the Company has satisfied its obligations under clauses (A)
and (B) of such first sentence of Section 1(e) of this Agreement), the
Company shall cause the Conversion Agent to (i) promptly return such
delivered Common Shares (and cash in lieu of fractional shares) to the
Standby Share Deliverer and (ii) promptly notify the Standby Share Deliverer
of the Conversion Agent's receipt of notice from the Company of the
occurrence of any of the events described in Section 2(k)(i) of the
Registration Rights Agreement pursuant to Section 1(e)(A) of this Agreement.
(g) If (i) the Standby Share Deliverer has acquired a Security in
accordance with Section 1(a) or (b) and Section 1(c) of this Agreement and
(ii) any of the events described in Section 2(k)(i) of the Registration
Rights Agreement occurs on a date that is on or prior to 20 Business Days
after a Conversion Date in respect of which the Standby Share Deliverer
acquires a Security in connection with a Common Share Delivery Arrangement,
the Company shall (1) promptly notify the Standby Share Deliverer of the
occurrence of such event and instruct the Standby Share Deliverer to cease
use of the Prospectus referred to in the Registration Rights Agreement in
connection with offers or sales of Securities obtained by the Standby Share
Deliverer through Common Share Delivery Arrangements and (2) promptly notify
the Standby Share Deliverer if such event is no longer continuing and the
Prospectus described in the Registration Rights Agreement is available for
use in connection with offers of sales of Securities obtained by the Standby
Share Deliverer through Common Share Delivery Arrangements; provided,
however, that the Company shall not give either of such notices if the giving
of the notice described in clause (1) above in accordance with the terms of
this Section 1(g) would occur on any date that is (A) 21 or more Business
Days after the most recent Conversion Date in connection with which the
Standby Share Deliverer has acquired a Security pursuant to a Common Share
Delivery Arrangement or (B) except as required by Section 1(e) of this
Agreement, after the Standby Share Deliverer has notified, at its discretion,
the Company that it does not own any Securities acquired by it in connection
with a Common Share Delivery Arrangement and prior to the time the
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Standby Share Deliverer has acquired a Security in accordance with Section 1(a)
or (b) and Section 1(c) of this Agreement.
(h) If the Standby Share Deliverer has acquired a Security in accordance
with Section 1(a) or (b) and Section 1(c) of this Agreement, then beginning on
the date that is 21 Business Days after the latest Conversion Date in connection
with which the Standby Share Deliverer has acquired a Security pursuant to a
Common Share Delivery Arrangement, unless the Standby Share Deliverer has
notified, at its discretion, the Company that it does not own any Securities
acquired by it in connection with a Common Share Delivery Arrangement, (1) the
Company shall promptly notify the Conversion Agent (but not the Standby Share
Deliverer) of the occurrence and continuance of any of the events described in
Section 2(k)(i) of the Registration Rights Agreement and (2) the Standby Share
Deliverer shall inquire of the Conversion Agent whether or not the Company has
so notified it of the occurrence and continuance of any such events before the
Standby Share Deliverer offers, sells, otherwise disposes of or delivers any
Security acquired from a converting Holder pursuant to a Common Share Delivery
Arrangement, unless such offer, sale, other disposition or delivery is, in the
reasonable opinion of counsel for the Standby Share Deliverer, exempt from the
registration or prospectus delivery requirements of the Securities Act. If the
Standby Share Deliverer so inquires of the Conversion Agent in accordance with
the preceding sentence, the Company shall cause the Conversion Agent to promptly
notify the Standby Share Deliverer whether or not the Company has so notified
the Conversion Agent and, (A) if the Company has not so notified the Conversion
Agent, (x) the Company shall cause the Conversion Agent to promptly notify the
Standby Share Deliverer that the Company has not so notified the Conversion
Agent and promptly notify the Company of such inquiry by the Standby Share
Deliverer and (y) the Standby Share Deliverer may offer, sell, otherwise dispose
of or deliver the Securities obtained by it in Common Share Delivery
Arrangements, using the Prospectus referred to in the Registration Rights
Agreement to satisfy any prospectus delivery requirement in connection
therewith, during the next 10 Business Day period following such inquiry without
further inquiry of the Conversion Agent under this Section 1(h) (provided that
during such 10 Business Day period, unless the Standby Share Deliverer has
notified, at its discretion, the Company that it does not own any Securities
acquired by it in connection with a Common Share Delivery Arrangement, the
Company shall promptly notify the Standby Share Deliverer and the Conversion
Agent of the occurrence and continuance of any of the events described in
Section 2(k)(i) of the Registration Rights Agreement and, in such event, the
provisions specified in clauses (B)(y) and (z) of this sentence shall apply) and
(B) if the Company has so notified the Conversion Agent, then (x) the Conversion
Agent shall promptly notify the Standby Share Deliverer that the Company has so
notified the Conversion Agent, (y) the Company shall promptly
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notify the Standby Share Deliverer and the Conversion Agent if such event is no
longer continuing and the Prospectus described in the Registration Rights
Agreement is available for use in connection with offers or sales of Securities
obtained by the Standby Share Deliverer through Common Share Delivery
Arrangements and (z) the Standby Share Deliverer shall not offer, sell,
otherwise dispose of or deliver any Security acquired from a converting Holding
pursuant to a Common Share Delivery Arrangement, unless such offer, sale, other
disposition or delivery is, in the reasonable opinion of counsel for the Standby
Share Deliverer, exempt from the registration or prospectus delivery
requirements of the Securities Act, until it receives the notice required by
clause (B)(y) of this sentence.
(i) If (i) the Standby Share Deliverer has notified the Company in
accordance with Section 1(a) or 1(b) of this Agreement of its acceptance of the
Company's request that the Standby Share Deliverer deliver Common Shares (and
cash in lieu of fractional shares) to a converting Holder and (ii) the Standby
Share Deliverer defaults in its obligation to deliver any Common Shares (or any
cash in lieu of fractional shares) required to be delivered to the Conversion
Agent within five Business Days after the Conversion Date applicable to such
conversion by such Holder, the Company shall, within one Business Day of receipt
of notice, in accordance with Section 11.19 of the Indenture, from the
Conversion Agent of the Standby Share Deliverer's failure to deliver such Common
Shares (or such cash in lieu of fractional shares), deliver to such Holder,
through the Conversion Agent, cash (if allowed pursuant to the Indenture and
otherwise) in the amount calculated pursuant to Section 11.01 of the Indenture
or the full number of Common Shares (and the full amount of cash in lieu of
fractional shares) that were required to be delivered to such Holder by the
Standby Share Deliverer regardless of the number of such Common Shares (and the
amount of cash in lieu of fractional shares) that were not so delivered (and the
Company shall, in the case of payment with Common Shares, at the time of
delivery of such Common Shares (and such cash in lieu of fractional shares),
deliver to such Holder, through the Conversion Agent, written notice that there
may be no taxable event to such Holder with respect to those Common Shares
delivered by the Company to such Holder); provided, that, in the circumstances
described in this sentence, (A) any Security so converted will not remain
outstanding and will be treated in all respects as if it had been converted
otherwise than in accordance with an arrangement between the Company and the
Standby Share Deliverer pursuant to Section 1(a) or 1(b) of this Agreement for
the Standby Share Deliverer to deliver Common Shares (and cash in lieu of
fractional shares) to such Holder on conversion of a Security and the Standby
Share Deliverer will not become the Holder of the Security so converted, and (B)
the Company shall cause the Conversion Agent to promptly deliver back to the
Standby Share Deliverer any Common Shares (and cash in lieu of
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<PAGE>
fractional shares) previously delivered by the Standby Share Deliverer in
connection with such conversion by such Holder and; provided, further, that if
such failure by the Standby Share Deliverer to deliver the full number of Common
Shares (or the full amount of cash in lieu of fractional shares) deliverable
upon conversion relates to conversions by more than one Holder of Securities
with the same Conversion Date, any Common Shares (and any cash in lieu of
fractional shares) delivered by the Standby Share Deliverer shall be delivered
to such Holders so as to maximize the number of Securities that may be so
converted in accordance with the arrangement between the Company and the Standby
Share Deliverer pursuant to Section 1(a) or 1(b) of this Agreement. Nothing
herein shall relieve the Standby Share Deliverer from liability for its default
with respect to its obligation to deliver Common Shares (and cash in lieu of
fractional shares) required to be delivered in respect of such conversion and
the Standby Share Deliverer's liability shall be limited to its liability
arising out of such default.
2. COMPANY REQUEST. Any request made by the Company pursuant to
Section 1(a) or 1(b) of this Agreement shall inform the Standby Share
Deliverer of (i) the number of Common Shares required to be delivered to the
converting Holder calculated pursuant to Section 11.01 of the Indenture and
(ii) the amount of cash in lieu of fractional shares required to be delivered
to the converting Holder calculated pursuant to Section 11.03 of the
Indenture and the Standby Share Deliverer shall be entitled to rely on such
calculations and its obligations under Section 1(a) or (b) of this Agreement
shall be to deliver only such number of shares and such amount of cash to the
Conversion Agent in accordance with the terms of Section 1(a) or (b) of this
Agreement, as applicable. Any Common Shares so delivered to the Conversion
Agent in excess of the number of Common Shares actually required to be
delivered to the converting Holder, calculated in accordance with the terms
of Section 11.01 of the Indenture, shall be promptly returned by the
Conversion Agent to the Standby Share Deliverer and the Company shall
promptly reimburse the Standby Share Deliverer for any loss, liability,
claim, damage and expense incurred by it in obtaining such excess Common
Shares for such delivery. Any cash in lieu of fractional shares so delivered
to the Conversion Agent in excess of the amount of such cash actually
required to be delivered to the converting Holder, calculated in accordance
with the terms of Section 11.01 of the Indenture, shall be promptly returned
by the Conversion Agent to the Standby Share Deliverer.
3. TAXES ON CONVERSION. If a Holder converts a Security in accordance
with Section 11.19 of the Indenture, the Company shall pay any documentary,
stamp or similar issue or transfer tax due on the delivery of Common Shares
upon such conversion as provided in Section 11.04 of the Indenture.
4. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York.
5. WAIVER. The failure of any party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive that party of the right
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<PAGE>
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
6. NOTICES. Any request, demand, authorization, notice, waiver, consent,
report, instruction or communication to a party hereunder shall, unless this
Agreement specifically provides otherwise, be in writing and delivered in person
or transmitted by facsimile transmission (confirmed by guaranteed overnight
courier) to the following addresses and facsimile numbers (or to such address or
facsimile number as such party may designate by the notice):
if to the Standby Share Deliverer:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
100 Church Street, 18th Floor
New York, New York 10080
Attention:
Facsimile No.:
Telephone No.:
if to the Company:
United States Cellular Corporation
8410 West Bryn Mawr, Suite 700
Chicago, Illinois 60631
Attention: Kenneth R. Meyers
Vice President-Finance
Facsimile No.: (312) 399-8959
Telephone No.: (312) 399-8900
and, if such notice is not delivered pursuant to Section 1 or 2
hereof, with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Michael G. Hron
Facsimile No.: (312) 853-7036
Telephone No.: (312) 853-7000
Except as otherwise set forth herein or in the Registration Rights
Agreement or the Securities Loan Agreement, dated ____________ __, 1995, among
the Standby Share Deliverer, TDS and ____________, as custodian, any request,
demand, authorization, notice, waiver, consent, report or communication
hereunder shall be deemed given when actually received, except that any request,
demand, authorization, notice, waiver, consent, report or communication actually
received on a day that is not a Business
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<PAGE>
Day or after business hours on a Business Day shall be deemed given and received
on the next succeeding Business Day.
7. MISCELLANEOUS. This Agreement supersedes any other agreement
between the parties concerning the subject matter of this Agreement. This
Agreement shall not be assigned by any party without the prior written
consent of the other parties, and any such assignment without such consent
shall be void; PROVIDED, HOWEVER, that any successor Conversion Agent under
the Indenture shall automatically succeed to the rights and obligations of
the Conversion Agent hereunder. Subject to the foregoing, this Agreement
shall be binding upon and shall enure to the benefit of the parties hereto
and their respective heirs, representatives, successors and assigns. This
Agreement shall not be modified, except by an instrument in writing signed by
the party against whom enforcement is sought.
UNITED STATES CELLULAR CORPORATION
by
------------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED,
by
------------------------------
Name:
Title:
[Signature page to Common Share Delivery Arrangement Agreement]
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