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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from______________________to_________________________
Commission File Number 1-9712
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UNITED STATES CELLULAR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 62-1147325
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8410 West Bryn Mawr, Suite 700, Chicago, Illinois 60631
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (773) 399-8900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1997
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Common Shares, $1 par value 53,227,678 Shares
Series A Common Shares, $1 par value 33,005,877 Shares
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<PAGE>
UNITED STATES CELLULAR CORPORATION
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3RD QUARTER REPORT ON FORM 10-Q
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INDEX
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Page(s)
No. ------
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Part I. Financial Information
Management's Discussion and Analysis of
Results of Operations and Financial Condition 3-13
Consolidated Statements of Operations -
Three Months and Nine Months Ended
September 30, 1997 and 1996 14
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 15
Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 16-17
Notes to Consolidated Financial Statements 18-21
Part II. Other Information 22
Signatures 23
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PART I. FINANCIAL INFORMATION
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UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
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AND FINANCIAL CONDITION
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RESULTS OF OPERATIONS
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Nine Months Ended 9/30/97 Compared to Nine Months Ended 9/30/96
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United States Cellular Corporation (the "Company" - AMEX symbol: USM) owns,
operates and invests in cellular markets throughout the United States. USM owned
either majority or minority cellular interests in 202 markets at September 30,
1997, representing 25,083,000 population equivalents ("pops"). USM included the
operations of 132 majority-owned and managed cellular markets, representing 20.5
million pops, in consolidated operations ("consolidated markets") as of
September 30, 1997. Noncontrolling interests in 60 markets, representing 4.6
million pops, were accounted for using the equity method and were included in
investment income at that date. All other interests, representing less than
100,000 pops in the aggregate, were accounted for using the cost method.
Following is a table of summarized operating data for USM's consolidated
operations.
Nine Months Ended
or at September 30,
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1997 1996
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Total market population (in thousands) (1) 21,844 21,483
Customers 1,357,000 940,000
Market penetration 6.21% 4.38%
Markets in operation 132 130
Cell sites in service 1,556 1,270
Average monthly revenue per customer $ 56.58 $ 64.96(2)
Churn rate per month 1.9% 1.9%
Marketing cost per net customer addition $ 561 $ 531(2)
(1) Calculated using the respective Donnelley Marketing Service estimates for
each year.
(2) Recomputed to show the effect of change in current year presentation of
certain revenues and expenses.
The Company's operating income for the first nine months of 1997, which includes
100% of the revenues and expenses of its consolidated markets plus its corporate
office operations, primarily reflects improvement in the Company's overall
operations compared to the first nine months of 1996. This improvement resulted
from growth in its customer base and revenues coupled with increasing economies
of scale. Operating revenues, driven by increases in customers served, rose
$140.8 million, or 29%. Operating expenses rose $105.2 million, or 25%.
Operating cash flow (operating income before minority share plus depreciation
and amortization expense) increased $51.0 million, or 33%.
Beginning on January 1, 1997, the Company changed its income statement
presentation of certain credits given to customers on their monthly bills.
Customer incentive programs which result in either new or current customers
receiving free or reduced-price airtime or access are now reported as a
reduction of local retail revenue. Prior to January 1, 1997, the Company
reported the foregone revenues resulting from these incentive programs as
marketing and selling expense (for new customers) and general and administrative
expense (for current customers). Amounts in the currently
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affected revenue and expense categories have been reclassified for previous
years, including the 1996 information provided throughout this Form 10-Q.
Operating income and net income are not affected by this change.
Investment and other income decreased $102.4 million, or 59%, to $72.6 million,
due primarily to the decrease of $119.3 million in gains on the sales of
cellular interests. Interest expense increased $2.8 million, or 16%, in 1997.
Income tax expense decreased $39.0 million to $66.1 million, as improved
operating results were more than offset by decreased gains on the sales of
cellular interests.
Net income totaled $86.4 million in 1997, a decrease of $32.2 million, or 27%,
from 1996. In both years, net income included gains on sales of cellular
interests. A summary of the after-tax effects of these gains on net income and
earnings per share is shown below.
Nine Months Ended
September 30,
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1997 1996
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(Dollars in thousands,
except per share amounts)
Net income before after-tax effects of gains $ 79,263 $ 52,140
Add: After-tax effects of gains 7,119 66,442
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Net income as reported $ 86,382 $118,582
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Earnings per share before after-tax effects of gains $ .92 $ .61
Add: After-tax effects of gains .08 .77
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Earnings per share as reported $ 1.00 $ 1.38
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Operating Revenues
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Operating revenues totaled $634.1 million in 1997, up $140.8 million, or 29%,
over 1996. As explained previously, operating revenues for 1996 have been
reclassified to conform to current period presentation of customer incentive
program credits.
Service revenues primarily consist of: (i) charges for access, airtime and
value-added services provided to the Company's local retail customers who use
the local systems operated by the Company ("local retail"); (ii) charges to
customers of other systems who use the Company's cellular systems when roaming
("inbound roaming"); and (iii) charges for long-distance calls made on the
Company's systems. Service revenues totaled $618.2 million in 1997, up $137.7
million, or 29%, over 1996. The increase was primarily due to the growing number
of local retail customers and the growth in inbound roaming revenue. The
reclassification of customer credits reduced service revenues by $38.2
million, or 6%, in 1997 and $16.9 million, or 3%, in 1996.
Average monthly service revenue per customer declined 13% to $56.58 in 1997 from
$64.96 in 1996. The 13% decrease in average monthly service revenue per customer
resulted from a decrease in average revenue per minute of use from both local
retail customers and inbound roamers. Also contributing was slower growth in
inbound roaming minutes of use than in the Company's customer base. The
reclassification of customer credits reduced average monthly service
revenue per customer by $3.50, or 6%, in 1997 and $2.29, or 3%, in 1996.
Although average monthly local minutes of use per retail customer decreased less
than 1% to 105 in 1997 from 106 in 1996, the Company's increasing use of
incentive programs that encourage weekend
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and off-peak usage, in order to stimulate overall usage, resulted in a larger
decrease in average local retail revenue per minute of use during the year. Also
contributing to the decline in average local retail revenue per minute of use
are increased amounts of credits given to new and current customers as
incentives to become or remain the Company's customers.
The Company believes that its customer base is growing faster than that of the
industry as a whole, which has a dilutive effect on inbound roaming revenue per
customer. Inbound roaming minutes of use have been growing at a slower rate than
the Company's customer base (28% compared to 44%). Also, the Company's average
inbound roaming revenue per minute of use decreased during 1997, in line with
the ongoing trend toward reduced per minute prices for roaming negotiated
between the Company and other cellular operators.
Local retail revenue increased $107.6 million, or 36%, in 1997. Growth in the
Company's customer base was the primary reason for the increase in local
revenue. The number of customers increased 44% to 1,357,000 at September 30,
1997 from 940,000 at September 30, 1996. The Company added 284,000
net new customers in the first nine months of 1997 compared to
232,000 in 1996. While the percentage increase in customer additions
is expected to be lower in the future, management anticipates that
the Company will continue to increase its customer base over the
next few years. The reclassification of customer credits reduced local
retail revenue by $38.2 million, or 9%, in 1997 and $16.9 million, or 5%, in
1996.
Average monthly local retail revenue per customer declined to $37.30 in 1997
from $40.54 in 1996. Monthly local retail minutes of use per customer decreased
less than 1% to 105 in 1997. While average minutes of use per customer remained
relatively the same, average revenue per minute of use decreased as a result of
the incentive programs stated previously. Average local retail revenue per
minute totaled $.36 in 1997 compared to $.38 in 1996. The decrease in average
monthly local retail revenue per customer is part of an
industry-wide trend. It reflects the Company's and the industry's continued
penetration of the consumer market, which tends to include fewer peak
business hour-usage customers and the effects of increasing competition in the
industry. The reclassification of customer credits reduced average
monthly local retail revenue per customer by $3.50, or 9%, in 1997 and $2.29,
or 5%, in 1996.
Inbound roaming revenue increased $23.9 million, or 17%, in 1997. This increase
was attributable to the 28% increase in the number of minutes used by customers
from other wireless systems when roaming in the Company's service areas. Also
contributing were the increased number of cell sites within the Company's
service areas. These effects were offset somewhat by the decrease in average
revenue per minute due to the downward trend in negotiated rates. Average
inbound roaming revenue per minute totaled $.86 in 1997 and $.93 in 1996.
Monthly inbound roaming revenue per Company customer averaged $14.97 in 1997 and
$18.88 in 1996. This decrease is related to both the decrease in roaming revenue
per minute and the faster increase in the Company's customer base as compared to
the growth in inbound roaming minutes of use.
Long-distance revenue increased $6.5 million, or 17%, in 1997 as the volume of
long-distance calls billed by the Company increased. Monthly long-distance
revenue per customer averaged $4.19 in 1997 and $5.31 in 1996. The decrease in
monthly long-distance revenue per customer is primarily due to the dilution of
the portion of long-distance revenue that comes from inbound roaming customers.
In a manner similar to inbound roaming revenue, this revenue is not growing as
fast as the Company's customer base.
Equipment sales revenues increased $3.1 million, or 24%, in 1997. Equipment
sales reflect the sale of 393,000 and 288,000 cellular telephone units in 1997
and 1996, respectively, plus installation and
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<PAGE>
accessories revenue. The average revenue per unit was $40 in 1997 compared to
$44 in 1996. The average revenue per unit decline partially reflects the
Company's decision to reduce sales prices on cellular telephones to stimulate
growth in the number of customers, to maintain its market position and to meet
competitive prices as well as to pass through reduced manufacturers' prices to
customers. Also, the Company uses promotions which are based on increased
equipment discounting. The success of these promotions has led to both an
increase in units sold and a decrease in average equipment sales revenue per
unit.
Operating Expenses
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Operating expenses totaled $523.6 million in 1997, up $105.2 million, or 25%,
over 1996. As explained previously, operating expenses for 1996 have been
reclassified to conform to current period presentation of customer incentive
program credits. The reclassification of customer credits reduced operating
expenses by $38.2 million, or 7%, in 1997 and $16.9 million, or 4%, in 1996.
System operations expenses increased $29.8 million, or 37%, in 1997 as a result
of increases in customer usage expenses and costs associated with serving the
Company's increased number of customers, which include the costs of roaming
fraud, and the growing number of cell sites within the Company's systems. In
total, system operations costs are expected to continue to increase as the
number of customers using and the number of cell sites within the Company's
systems grows.
Customer usage expenses represent charges from other telecommunications service
providers for the Company's customers' use of their facilities as well as for
the Company's inbound roaming traffic on these facilities. Also included are
costs related to local interconnection to the landline network, toll charges and
expenses incurred by the Company when its customers use systems other than their
local systems ("outbound roaming"). These expenses are offset somewhat by
amounts the Company bills to its customers for outbound roaming. Customer usage
expenses increased $22.1 million, or 46%, in 1997. The increase in 1997 is
primarily due to the increase in net outbound roaming expense, which has
resulted from the Company offering its customers increasingly larger service
footprints in which their calls are billed at local rates. In certain cases
these service areas include other operators' service areas. The Company pays
roaming rates to the other carriers for calls its customers make in these areas,
while charging those customers a local rate which is usually lower than the
roaming rate. Also contributing to the increase in 1997 were costs related to
the increase in minutes used on the Company's systems, partially offset by the
reduction in costs related to fraudulent use of the Company's customers'
cellular telephone numbers. The Company continues to implement procedures in
its markets to combat this fraud, which is primarily related to roaming usage.
Customer usage expenses represented 11% of service revenues in 1997 and 10% in
1996. The percentage increase in 1997 is primarily due to the increase in net
outbound roaming expense.
Maintenance, utility and cell site expenses increased $7.7 million, or 24%, in
1997, primarily reflecting a 23% increase in the number of cell sites in the
Company's systems to 1,556 in 1997 from 1,270 in 1996.
Marketing and selling expenses increased $33.3 million, or 38%, in 1997.
Marketing and selling expenses primarily consist of salaries, commissions and
expenses of field sales and retail personnel and offices; agent expenses; local
advertising and public relations expenses. The increase was primarily due to a
32% rise in the number of gross customer activations (excluding acquisitions and
divestitures), to 494,000 in 1997 from 373,000 in 1996. Cost per gross customer
activation, including losses on equipment sales, decreased to $322 in 1997 from
$331 in 1996. The reclassification of customer credits reduced cost per
gross addition by $62, or 16%, in 1997 and $37, or 10%, in 1996; in total, the
reclassification reduced marketing and selling expenses by $30.3 million, or
20%, in 1997 and $13.9 million, or 14%, in 1996.
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Cost of equipment sold increased $5.8 million, or 12%, in 1997. The increase
reflects the growth in unit sales related to the rise in gross customer
activations made through the Company's direct and retail distribution channels,
offset somewhat by falling manufacturer prices per unit. The average cost to the
Company of a telephone unit sold, including accessories and installation, was
$141 in 1997 compared to $172 in 1996.
General and administrative expenses increased $20.9 million, or 17%, in 1997.
These expenses include the costs of operating the Company's local business
offices and its corporate expenses. The increase includes the effects of
increases in expenses required to serve the growing customer base in existing
markets and an expansion of both local administrative office and corporate
staff, necessitated by growth in the Company's business. The Company is using an
ongoing clustering strategy to combine local operations wherever feasible in
order to gain operational efficiencies and reduce its administrative expenses.
The reclassification of customer credits reduced general and administrative
expenses by $7.9 million, or 5%, in 1997 and $3.1 million, or 2%, in 1996.
Operating cash flow increased $51.0 million, or 33%, to $205.2 million in 1997.
The improvement was primarily due to substantial growth in customers and service
revenues and the effects of improved operational efficiencies on cash operating
expenses. Operating cash flow margins were 33.2% in 1997 and 32.1% in 1996.
Depreciation expense increased $15.0 million, or 28%, in 1997. The increase
reflects rising average fixed asset balances, which increased 29% in 1997.
Increased fixed asset balances primarily result from the increase in cell sites
built to improve coverage and capacity in the Company's markets.
Operating Income before Minority Share
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Operating income before minority share totaled $110.5 million in 1997, an
increase of $35.6 million, or 47%, over 1996. The operating income margin (as a
percent of service revenues) was 17.9% in 1997 and 15.6% in 1996. The
improvement in operating income and operating income margin reflects increased
revenues resulting from growth in the number of customers served by the
Company's systems and the effect of improved operational efficiencies on total
operating expenses.
The Company expects service revenues to continue to grow during the remainder of
1997 and in 1998; however, management anticipates that average monthly revenue
per customer will continue to decrease as local retail and inbound roaming
revenue per minute of use decline. Additionally, the Company expects expenses to
increase during the remainder of 1997 and in 1998 as it incurs costs associated
with both customer growth and cell sites added.
Management believes there exists a seasonality in both service revenues, which
tend to increase more slowly in the first and fourth quarters, and operating
expenses, which tend to be higher in the fourth quarter due to increased
marketing activities and customer growth, which may cause operating income to
vary from quarter to quarter. Additionally, competitors licensed to provide
personal communications services ("PCS") have initiated service in certain of
the Company's markets over the past fifteen months. The Company expects PCS
operators to complete initial deployment of PCS across all of the Company's
markets by the end of 1998. The Company's management is monitoring these and
other wireless communications providers' strategies to determine what effect
this additional competition will have on the Company's future strategies and
results. While the effects of additional wireless competition have slowed
customer growth in certain of the Company's markets, the overall effect on the
Company's operations to date has not been material.
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Investment and Other Income
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Investment and other income totaled $72.6 million in 1997, a decrease of $102.4
million, or 59%, from 1996. Gain on sale of cellular interests totaled $13.4
million in 1997, reflecting gains recorded on the sales of the Company's
majority interest in one market partition and minority interests in two other
markets. Gain on sale of cellular interests totaled $132.8 million in 1996,
reflecting gains recorded on the sales of the Company's majority interests in
eight markets and minority interests in two other markets, on cash received in
an exchange of markets with another cellular operator and on cash received from
the settlement of two separate legal matters.
Investment income was $60.5 million in 1997 compared to $36.4 million in 1996, a
66% increase. Investment income primarily represents the Company's share of net
income from the markets managed by others that are accounted for by the equity
method. Although investment income increased significantly in the nine months of
1997, future investment income may be negatively impacted by the completion of
the exchange transaction with BellSouth Corporation ("BellSouth").
See "Financial Resources and Liquidity - Acquisitions and Divestitures"
for further discussion of this transaction.
Interest and Income Taxes
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Total interest expense increased $2.8 million, or 16%, in 1997. Interest expense
in 1997 is primarily related to Liquid Yield Option Notes ("LYONs") ($11.4
million); borrowings under vendor financing agreements ($4.5 million);
borrowings under the Revolving Credit Agreement with Telephone and Data Systems,
Inc. ("TDS"), the Company's parent organization ($1.9 million); and the
Company's 7.25% notes (the "Notes") issued during the third quarter of 1997
($1.8 million). Interest expense in 1996 is primarily related to LYONs
($10.7 million) and borrowings under vendor financing agreements ($6.1 million).
In August 1997, the Company sold $250 million principal amount of 7.25% Notes
under a shelf registration statement, priced to yield 7.33% to maturity. The
Notes are unsecured and become due on August 15, 2007. Interest on the Notes is
payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1998. The Notes will be redeemable, in whole or in part, at the
option of the Company at any time on or after August 15, 2004.
The LYONs are zero coupon convertible debentures which accrete interest at 6%
annually, but do not require current cash payments of interest. All accreted
interest is added to the outstanding principal balance on June 15 and December
15 of each year. All borrowings under the vendor financing agreements were
repaid in August 1997 with a portion of the proceeds from the Notes offering.
Borrowings under the Revolving Credit Agreement with TDS were outstanding from
April 1997 through August 1997, at which time all outstanding amounts were
repaid with a portion of the proceeds from the Notes offering.
Income tax expense was $66.1 million in 1997 and $105.2 million in 1996. In
1997, $6.3 million of income tax expense related to the gains on sales of
cellular interests compared to $66.4 million in 1996. The effective tax rates
were 43% in 1997 and 47% in 1996. The decrease in 1997's effective tax rate is
primarily due to the decrease in gains on sales of cellular interests from 1996;
taxes on these gains are generally higher than taxes on income from operations.
In both 1997 and 1996, state income taxes and gains on sales of cellular
interests increased the effective rate above the statutory federal income tax
rate.
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The Company is included in a consolidated federal income tax return with other
members of the TDS consolidated group. For financial reporting purposes, the
Company computes federal income taxes as if it were filing a separate return as
its own affiliated group and was not included in the TDS group. TDS and the
Company are parties to a Tax Allocation Agreement under which the Company is
able to carry forward any losses and credits and use them to offset any current
or future income tax liabilities to TDS.
Net Income
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Net income totaled $86.4 million in 1997 compared to $118.6 million in 1996.
Earnings per share was $1.00 in 1997 and $1.38 in 1996. Net income and earnings
per share in both years included gains on the sales of cellular interests. See
Page 4 for a summary of the after-tax effects of gains on net income and
earnings per share.
Three Months Ended 9/30/97 Compared to Three Months Ended 9/30/96
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Operating revenues totaled $232.0 million in the third quarter of 1997, up $51.7
million, or 29%, over 1996. Average monthly service revenue per customer
decreased 12% to $57.56 in the third quarter of 1997 compared to $65.15 in the
same period of 1996 for reasons generally the same as the first nine months of
1997. The reclassification of customer credits reduced service revenues by
$13.7 million, or 6%, in 1997 and $7.4 million, or 4%, in 1996.
Revenues from local customers' usage of the Company's systems increased $39.0
million, or 36%, in 1997 primarily due to the increased number of customers
served. Average monthly local retail minutes of use per customer totaled 105 in
the third quarter of 1997 compared to 112 in 1996. Also, as the number of
customers and amount of revenue earned continued to grow, average revenue per
minute of use continued to decline. As a result, average monthly local retail
revenue per customer declined 7% to $37.48 in the third quarter of 1997 compared
to $40.11 in 1996.
Inbound roaming revenue increased $8.7 million, or 17%, in 1997 due to the
increased number of other wireless operators' customers using the Company's
systems and the growth in the number of cell sites within those systems. Monthly
inbound roaming revenue per customer averaged $15.52 in 1997 compared to $19.35
in 1996.
Long-distance revenue increased $2.8 million, or 19%, in 1997 as the volume of
long-distance calls billed by the Company increased. Monthly long-distance
revenue per customer averaged $4.47 in 1997 and $5.45 in 1996.
Equipment sales revenue reflects sales of 142,000 cellular telephones in 1997
compared to 111,000 in 1996. The average revenue per unit sold was $40 in 1997
and $39 in 1996.
Operating expenses totaled $187.0 million in the third quarter of 1997, up $39.9
million, or 27%, over 1996. The reclassification of customer credits
reduced operating expenses by $13.7 million, or 7%, in 1997 and $7.4 million, or
5%, in 1996.
System operations expenses increased $12.9 million, or 47%, in 1997 as a result
of increased customer usage expenses and costs associated with maintaining 23%
more cell sites than in 1996. Customer usage expenses were $26.6 million in 1997
compared to $16.4 million in 1996. Maintenance, utility and cell site expenses
were $13.7 million in 1997 compared to $10.9 million in 1996.
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Marketing and selling expenses increased $11.3 million, or 36%, in 1997. The
increase was primarily due to a 30% increase in the number of gross customer
activations (excluding acquisitions and divestitures) to 173,000 in 1997 from
133,000 in 1996. Cost per gross customer activation was $328 in 1997 and $341 in
1996. The reclassification of customer credits reduced marketing and
selling expenses by $10.9 million, or 20%, in 1997 and $6.1 million, or 16%, in
1996.
Cost of equipment sold increased $1.5 million, or 8%, in 1997. The increase
reflects a rise in the number of cellular telephones sold in 1997, partially
offset by a decrease in average cost per telephone sold.
General and administrative expenses increased $8.6 million, or 20%, in 1997,
primarily related to the increase in customers served. The reclassification of
customer credits reduced general and administrative expenses by $2.8
million, or 5%, in 1997 and $1.3 million, or 3%, in 1996.
Operating cash flow increased $17.4 million, or 29%, to $78.0 million in 1997,
and operating cash flow margins totaled 34.5% in 1997 and 34.4% in 1996.
Depreciation expense increased $5.9 million, or 32%, in 1997, reflecting a 31%
increase in average fixed asset balances.
Operating income before minority share totaled $44.9 million in 1997 compared to
$33.1 million in 1996, a 36% increase. The operating income margin improved to
19.9% in 1997 from 18.8% in 1996. The improvement in operating income and
operating income margin was primarily the result of increased revenues and
improved operational efficiencies.
Investment income increased $10.0 million, or 71%, in 1997 due to improved
results in markets managed by others accounted for by the equity method. Gain on
sale of cellular and other investments totaled $5.2 million in 1997 and $7.8
million in 1996. Total interest expense increased $2.4 million, or 41%, in 1997.
Interest expense in 1997 is primarily related to LYONs ($3.9 million),
borrowings under vendor financing agreements ($1.0 million), borrowings under
the Revolving Credit Agreement with TDS ($935,000) and the Notes ($1.8 million).
Interest expense in 1996 is primarily related to LYONs ($3.6 million) and
borrowings under vendor financing agreements ($2.0 million). Income tax expense
totaled $26.7 million in 1997 and $23.2 million in 1996. In 1997, $1.0 million
of income tax expense related to gains on sales of cellular interests compared
to $5.6 million in 1996.
Net income totaled $36.2 million in 1997 compared to $26.1 million in 1996. Both
net income and earnings per share in 1997 reflect improved operating results and
investment income, partially offset by increased interest expense and a
reduction in gains on the sales of cellular interests. A summary of the
after-tax effect of these gains on net income and earnings per share is shown
below.
Three Months Ended
September 30,
-------------------------
1997 1996
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(Dollars in thousands,
except per share amounts)
Net income before after-tax effects of gains $ 32,014 $ 23,899
Add: After-tax effects of gains 4,208 2,241
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Net income as reported $ 36,222 $ 26,140
========== =========
Earnings per share before after-tax
effects of gains $ .37 $ .28
Add: After-tax effects of gains .05 .02
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Earnings per share as reported $ .42 $ .30
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FINANCIAL RESOURCES AND LIQUIDITY
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The Company operates a capital and marketing-intensive business. In recent
years, the Company has generated operating cash flow and received cash proceeds
from divestitures to fund most of its construction costs and substantially all
of its operating expenses. The Company anticipates further substantial increases
in cellular units in service, revenues and cell sites as it continues its growth
strategy. Operating cash flow may fluctuate from quarter to quarter depending on
the seasonality of each of these growth factors.
Cash flows from operating activities provided $183.6 million in 1997 and $126.3
million in 1996. Operating cash flow provided $205.2 million in 1997 and $154.2
million in 1996. Cash flows from other operating activities (investment and
other income, interest expense, changes in working capital and changes in other
assets and liabilities) required cash investments totaling $21.6 million in 1997
and $27.9 million in 1996.
Cash flows from financing activities provided $140.8 million in 1997 and
required $6.3 million in 1996. In August 1997, the Notes offering provided
$247.0 million of cash. A portion of the proceeds from the Notes offering was
used to repay all outstanding borrowings under the Revolving Credit Agreement
with TDS and under vendor financing agreements, aggregating $160.5 million.
Repayments of borrowings under the vendor financing agreements earlier in 1997
totaled $13.7 million. In 1996, issuances of USM Common Shares, primarily to
TDS, provided $9.8 million while repayments of debt under the vendor financing
agreements required $15.8 million.
Cash flows from investing activities required $218.3 million in 1997 and $93.1
million in 1996. The Company received net cash proceeds totaling $32.9 million
in 1997 and $193.6 million in 1996 related to the sales and exchanges of
cellular interests. Cash distributions from cellular entities in which the
Company has an interest provided $40.0 million in 1997 and $14.9 million in
1996. Cash required for property, plant and equipment and system development
expenditures totaled $248.0 million in 1997, financed primarily with internally
generated cash and the proceeds of the Notes offering, and $172.9 million in
1996, financed primarily with internally generated funds and proceeds from the
sales of cellular interests. These expenditures primarily represent the
construction of 234 and 184 cell sites, respectively, plus other plant additions
and costs related to the development of the Company's office systems.
Acquisitions required $39.2 million in 1997 and $112.1 million in 1996.
Anticipated capital requirements for 1997 primarily reflect the Company's
construction and system expansion program. The Company's construction and system
expansion budget for 1997 is approximately $300 million, primarily for new cell
sites to expand and enhance the Company's coverage in its service areas and for
the enhancement of the Company's office systems.
Acquisitions and Divestitures
- -----------------------------
The Company assesses its cellular holdings on an ongoing basis in order to
maximize the benefits derived from clustering its markets. As the Company's
clusters have grown, the Company's focus has shifted toward exchanges and
divestitures of managed and investment interests. Over the past few years, the
Company has completed exchanges of controlling interests in its less strategic
markets for controlling interests in markets which better complement its
clusters. The Company has also completed outright sales of other less strategic
markets. The proceeds from these sales have been used to further the Company's
growth.
In the first nine months of 1997, the Company purchased a majority interest in
one market and several minority interests, representing 327,000 pops. The total
consideration paid in these transactions was $48.7 million in cash.
11
<PAGE>
In the first nine months of 1996, the Company purchased a majority interest in
one market and several minority interests, representing 971,000 pops, and
received a majority interest in another market through an exchange with another
cellular operator. The total consideration paid for these purchases, primarily
in the form of USM Common Shares issued to TDS to reimburse TDS for the value of
TDS Common Shares issued to third parties, was $153.9 million.
In the first nine months of 1997, the Company sold a majority interest in one
market partition and minority interests in two other markets, representing
183,000 pops. The Company received consideration consisting of cash and
receivables totaling $34.5 million from these sales. The two minority interests
involved interests the Company had previously acquired from TDS pursuant to an
agreement between the two companies signed in June 1996. In the aggregate, the
Company recorded a substantial book gain on the divestitures of the interests
acquired from TDS.
In the first nine months of 1996, the Company sold majority interests in eight
markets and one market partition, plus minority interests in two other markets,
representing 1.1 million pops, and divested a controlling interest in another
market through an exchange with another cellular operator. The Company received
consideration, consisting of cash and receivables, totaling $187.8 million both
from these sales and from the exchange. The Company also settled two separate
legal matters during the first nine months of 1996, receiving $30.3 million from
those transactions. In total, sales, exchanges and litigation settlements
provided the Company with cash and receivables totaling $218.1 million in the
first nine months of 1996.
At September 30, 1997, the Company had entered into an agreement to acquire a
majority interest in one market, representing 202,000 pops, for consideration
totaling $32.5 million. The consideration paid to the sellers will be
approximately 759,000 TDS Common Shares; USM will reimburse TDS for the value of
these shares by issuing approximately 996,000 shares to TDS when the transaction
is completed. The Company also has an agreement pending to divest a majority
interest in the wireline licensee in one market, representing 174,000 pops, for
$20.0 million in cash. Pursuant to a waiver received from the Federal
Communications Commission, the Company owned both wireline and nonwireline
licensees in this market as of the completion of the transaction with BellSouth,
described below, and will continue to do so until the divestiture of the
wireline license is completed. These acquisition and divestiture transactions
are both expected to be completed by year-end.
In October 1997, the Company completed the exchange with BellSouth it had
announced earlier in 1997. Pursuant to the exchange, the Company received
majority interests in 12 markets adjacent to its Iowa and Wisconsin/Illinois
clusters. In exchange, the Company divested its majority interests in 10 markets
and minority interests in nine markets and paid a net amount of $87 million in
cash ($103 million paid in October less $16 million received in September).
Certain aspects of this transaction are taxable; the amount of these taxes will
be determined by year-end and will be paid in the first quarter of 1998. No book
gain or loss will be recorded on the transaction which is being treated
as a like-kind exchange. The Company received majority interests
representing approximately 4.0 million pops in the transaction, and
divested majority interests representing 2.0 million pops and minority interests
representing approximately 1.1 million pops.
The Company expects that this transaction will have a net positive effect on its
operating cash flow after the transition of operators is complete, which is
expected to occur in the next 12 to 18 months. As it includes the divestiture of
significant investment interests in exchange for majority interests, the
transaction may also significantly reduce investment income in the future.
12
<PAGE>
Liquidity
- ---------
The Company anticipates that the aggregate resources required for the remainder
of 1997 will include approximately $52 million for capital spending and
approximately $103 million to complete the transaction with BellSouth. The
Company is generating substantial cash from its operations and anticipates
financing its capital spending for the remainder of 1997 primarily with
internally generated cash and its financing facilities. The Company had $121
million of cash and cash equivalents at September 30, 1997 and expects to
receive approximately $20 million from pending divestitures during the remainder
of 1997.
Additionally, in August 1997 the Company established a $500 million revolving
credit facility with a group of banks. This seven-year facility replaces the
Company's Revolving Credit Agreement with TDS. No borrowings have been made
under the new credit facility to date.
The Company filed a shelf registration statement in July 1997 covering $400
million of debt securities, and in August 1997 sold $250 million of Notes under
such shelf registration statement. The remaining $150 million is available for
future borrowings.
Management believes that the Company's operating cash flows and sources of
external financing, including the revolving credit facility and shelf
registration mentioned previously, provide substantial financial flexibility for
the Company to meet both its short and long-term needs. The Company also
currently has access to public and private capital markets to help meet its
long-term financing needs. The Company anticipates issuing debt and equity
securities only when capital requirements (including acquisitions), financial
market conditions and other factors warrant.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY
STATEMENT
This Management's Discussion and Analysis of Results of Operations and Financial
Condition and other sections of this Quarterly Report on Form 10-Q contain
"forward-looking" statements as defined in the Private Securities Litigation
Reform Act of 1995, that are based on current expectations, estimates and
projections. Statements that are not historical facts, including statements
about the Company's beliefs and expectations, are forward-looking statements.
These statements contain potential risks and uncertainties; therefore, actual
results may differ materially. The Company undertakes no obligation to update
publicly any forward-looking statements whether as a result of new information,
future events or otherwise.
Important factors that may affect these projections or expectations include, but
are not limited to: changes in the overall economy; changes in competition in
markets in which the Company operates; advances in telecommunications
technology; changes in the telecommunications regulatory environment;
pending and future litigation; availability of future financing;
start-up of PCS operations; and unanticipated changes in growth in
cellular customers, penetration rates, churn rates and the mix of products and
services offered in the Company's markets. Readers should evaluate any
statements in light of these important factors.
13
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Unaudited
---------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Dollars in thousands,
except per share amounts)
OPERATING REVENUES
Service $ 226,230 $ 175,894 $ 618,209 $ 480,541
Equipment sales 5,729 4,325 15,913 12,790
--------- --------- --------- ---------
Total Operating Revenues 231,959 180,219 634,122 493,331
--------- --------- --------- ---------
OPERATING EXPENSES
System operations 40,268 27,339 109,545 79,728
Marketing and selling 42,729 31,384 119,728 86,455
Cost of equipment sold 19,716 18,241 55,473 49,631
General and administrative 51,285 42,696 144,224 123,364
Depreciation 24,504 18,631 68,735 53,691
Amortization of intangibles 8,545 8,834 25,906 25,525
--------- --------- --------- ---------
Total Operating Expenses 187,047 147,125 523,611 418,394
--------- --------- --------- ---------
OPERATING INCOME BEFORE
MINORITY SHARE 44,912 33,094 110,511 74,937
Minority share of operating income (3,023) (3,195) (10,271) (8,616)
--------- --------- --------- ---------
OPERATING INCOME 41,889 29,899 100,240 66,321
--------- --------- --------- ---------
INVESTMENT AND OTHER INCOME
Investment income 24,114 14,073 60,537 36,401
Amortization of licenses
related to investments (535) (280) (1,603) (854)
Interest income 1,629 3,374 3,212 7,644
Other income (expense), net (1,250) 198 (3,032) (1,069)
Gain on sale of cellular and
other investments 5,208 7,797 13,445 132,793
--------- --------- --------- ---------
Total Investment and Other Income 29,166 25,162 72,559 174,915
--------- --------- --------- ---------
INCOME BEFORE INTEREST
AND INCOME TAXES 71,055 55,061 172,799 241,236
Interest expense - affiliate 934 -- 1,948 --
Interest expense - other 7,180 5,741 18,347 17,496
--------- --------- --------- ---------
Total Interest Expense 8,114 5,741 20,295 17,496
========= ========= ========= =========
INCOME BEFORE INCOME TAXES 62,941 49,320 152,504 223,740
Income tax expense 26,719 23,180 66,122 105,158
--------- --------- --------- ---------
NET INCOME $ 36,222 $ 26,140 $ 86,382 $ 118,582
========= ========= ========= =========
WEIGHTED AVERAGE COMMON
AND SERIES A COMMON
SHARES (000s) 86,260 86,158 86,228 86,002
PRIMARY EARNINGS PER COMMON
AND SERIES A COMMON SHARE $ .42 $ .30 $ 1.00 $ 1.38
========= ========= ========= =========
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
14
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Unaudited
---------
Nine Months Ended
September 30,
----------------------
1997 1996
---------- ----------
(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 86,382 $ 118,582
Add (Deduct) adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 94,641 79,216
Investment income (60,537) (36,401)
Gain on sale of cellular and other investments (13,445) (132,793)
Minority share of operating income 10,271 8,616
Other noncash expense 18,123 15,371
Change in accounts receivable (21,510) (17,080)
Change in accounts payable 16,008 (9,365)
Change in accrued interest 1,971 113
Change in accrued taxes 25,384 47,206
Change in deferred taxes 21,053 42,604
Change in unearned revenue 3,646 3,577
Change in other assets and liabilities 1,649 6,668
---------- ---------
183,636 126,314
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in 7.25% notes 246,985 --
Vendor financing borrowings -- 3,922
Repayment of vendor financing (103,802) (15,752)
Borrowings from Revolving Credit Agreement - TDS 70,444 --
Repayment of Revolving Credit Agreement - TDS (70,444) --
Common Shares issued 1,971 9,784
Capital (distributions) to minority partners (4,310) (4,302)
---------- ---------
140,844 (6,348)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (219,311) (156,387)
System development costs (28,646) (16,528)
Investments in and advances to investment entities (497) (16,709)
Distributions from investment entities 40,029 14,922
Proceeds from sale of cellular and other investments 32,866 193,625
Acquisitions, excluding cash acquired (39,169) (112,071)
Other investments (1,896) --
Change in temporary cash and marketable
non-equity securities (1,675) --
---------- ---------
(218,299) (93,148)
---------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 106,181 26,818
CASH AND CASH EQUIVALENTS-
Beginning of period 14,377 38,404
---------- ---------
End of period $ 120,558 $ 65,222
========== =========
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
15
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
(Unaudited)
September 30, December 31,
1997 1996
--------------- ------------
(Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents
General funds $ 15,464 $ 802
Affiliated cash equivalents 105,094 13,575
------------- ------------
120,558 14,377
Temporary cash investments 336 --
Accounts receivable
Customers, net of allowance 71,305 58,034
Roaming 37,469 29,742
Affiliates 126 607
Other 8,624 7,568
Inventory 8,648 11,893
Prepaid and other current assets 9,587 6,398
------------- ------------
256,653 128,619
------------- ------------
PROPERTY, PLANT AND EQUIPMENT
In service and under construction 1,044,988 846,005
Less accumulated depreciation 252,709 195,251
------------- ------------
792,279 650,754
------------- ------------
INVESTMENTS
Licenses, net of accumulated amortization 1,052,490 1,044,141
Cellular entities 208,772 186,791
Notes and interest receivable 13,828 14,943
Marketable non-equity securities 1,339 --
------------- ------------
1,276,429 1,245,875
------------- ------------
DEFERRED CHARGES
System development costs,
net of accumulated amortization 67,694 44,319
Other, net of accumulated amortization 19,150 16,332
------------- ------------
86,844 60,651
------------- ------------
Total Assets $ 2,412,205 $ 2,085,899
============= ============
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
16
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
---------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(Unaudited)
September 30, December 31,
1997 1996
------------- -------------
(Dollars in thousands)
CURRENT LIABILITIES
Current portion of long-term debt $ -- $ 23,065
Notes payable 1,375 1,375
Accounts payable
Affiliates 2,466 2,729
Other 83,379 66,638
Accrued taxes 44,384 18,781
Accrued interest 2,175 204
Customer deposits and deferred revenues 20,057 16,410
Other current liabilities 15,282 17,252
------------- -------------
169,118 146,454
------------- -------------
LONG-TERM DEBT
6% zero coupon convertible debentures 261,465 250,107
7.25% notes 250,000 --
Vendor financing, excluding current
portion -- 80,589
------------- -------------
511,465 330,696
------------- -------------
DEFERRED LIABILITIES AND CREDITS
Net deferred income tax liability 99,765 78,833
Other 5,534 2,444
------------- -------------
105,299 81,277
------------- -------------
MINORITY INTEREST 55,177 51,270
------------- -------------
COMMON SHAREHOLDERS' EQUITY
Common Shares, par value $1 per share 53,218 53,117
Series A Common Shares, par value $1
per share 33,006 33,006
Additional paid-in capital 1,253,527 1,245,066
Retained earnings 231,395 145,013
------------- -------------
1,571,146 1,476,202
------------- -------------
Total Liabilities and Shareholders' Equity $ 2,412,205 $ 2,085,899
============= =============
The accompanying notes to consolidated
financial statements are an integral part
of these statements.
17
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K.
The accompanying unaudited consolidated financial statements contain the
following: all adjustments (consisting of only normal recurring items)
necessary to present fairly the financial position as of September 30,
1997 and December 31, 1996; the results of operations for the nine months
and three months ended September 30, 1997 and 1996; and cash flows for the
nine months ended September 30, 1997 and 1996. The results of operations
for the nine months ended September 30, 1997 and 1996, are not necessarily
indicative of the results to be expected for the full year.
2. Certain amounts reported in prior periods have been reclassified to
conform to the current period presentation which nets certain customer
promotional and retention expenses against service revenues.
3. Primary earnings per Common and Series A Common Share for the nine months
ended September 30, 1997 and 1996, was computed by dividing Net Income by
the weighted average number of Common Shares, Series A Common Shares and
dilutive common equivalent shares outstanding during the period. Dilutive
common stock equivalents at September 30, 1997 and 1996, consist primarily
of dilutive Common Shares issuable, Redeemable Preferred Stock and Common
Share options, and stock appreciation rights.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share" in March 1997
which will become effective in December 1997. Earnings per share would not
change significantly if SFAS No. 128 had been in effect as of January 1,
1996.
18
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Assuming that acquisitions accounted for as purchases during the period
January 1, 1996, to September 30, 1997, had taken place on January 1,
1996, pro forma results of operations would have been as follows:
Nine Months Ended
September 30,
-------------------------
1997 1996
----------- -----------
(Dollars in thousands,
except per share amounts)
Service Revenues $ 618,209 $ 481,145
Equipment Sales 15,913 12,797
Interest Expense
(including cost to finance acquisitions) 21,346 20,132
Net Income 85,632 119,741
Earnings per Common and Series A Common Share $ .99 $ 1.39
5. Supplemental Cash Flow Information
The Company acquired certain cellular licenses and interests during the
first nine months of 1997 and 1996. In conjunction with these
acquisitions, the following assets were acquired, liabilities assumed and
Common Shares issued.
Nine Months Ended
September 30,
------------------------
1997 1996
---------- ----------
(Dollars in thousands)
Property, plant and equipment $ -- $ 7,069
Cellular licenses 37,258 88,006
Increase (Decrease) in equity-method
investment in cellular interests -- 13,971
Accounts receivable -- 1,332
Revolving Credit Agreement - TDS -- --
Accounts payable -- (1,106)
Other assets and liabilities,
excluding cash acquired 1,911 (463)
Common Shares issued and issuable -- 3,262
---------- ----------
Decrease in cash due to acquisitions $ 39,169 $ 112,071
========== ==========
19
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summarizes certain noncash transactions and interest and income
taxes paid.
Nine Months Ended
September 30,
------------------------
1997 1996
---------- ----------
(Dollars in thousands)
Interest paid $ 6,431 $ 5,142
Income taxes paid 24,840 21,409
Non-cash interest expense 11,506 11,952
Common Shares issued by USM for conversion
of USM Preferred Stock and
TDS Preferred Shares $ -- $ 18,450
6. Debt Securities
The Company filed a shelf Registration Statement on Form S-3 in July
1997 for the sale of up to $400 million of unsecured debt. The Company
issued $250 million of 7.25% Notes due August 15, 2007 (the "Notes")
under the shelf registration in August 1997. The Company used a portion
of the net proceeds from the sale of the Notes of approximately $247.0
million to repay $70.4 million of variable-rate borrowings under the
Revolving Credit Agreement with USM's parent organization, Telephone and
Data Systems, Inc. (AMEX: TDS) as well as $90.1 million principal amount
of variable-rate borrowings under a vendor financing agreement. The
remaining net proceeds were used for general corporate purposes.
7. Contingencies
The Company owns a 5.5% interest in the Los Angeles SMSA Limited
Partnership (the "Partnership"). In November 1993, a class action
complaint was filed on behalf of cellular customers in Orange County
Superior Court naming, among others, the Partnership. These complaints
allege certain facts, including a similarity in the pricing structures
of the two defendant cellular carriers, which plaintiffs contend are
circumstantial evidence that the Partnership and Los Angeles Cellular
Telephone Company conspired to fix the prices of retail and wholesale
cellular radio services in the Los Angeles market. The complaint seeks
damages for the class "in a sum in excess of $100 million." The case was
settled in July 1997 before reaching trial. The Partnership agreed to
give subscribers $90 million worth of free service and discounted
merchandise to settle the complaint.
For further discussion of this contingency, see Note 14 of Notes to
Consolidated Financial Statements included in the Company's Report on
Form 10-K for the year ended December 31, 1996.
20
<PAGE>
UNITED STATES CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Subsequent Events
In October 1997, the Company completed the exchange with BellSouth it
had announced earlier in 1997. Pursuant to the exchange, the Company
received majority interests in 12 markets adjacent to its Iowa and
Wisconsin/Illinois clusters. In exchange, the Company divested its
majority interests in 10 markets and minority interests in nine markets
and paid a net amount of $87 million in cash ($103 million paid in
October less $16 million received in September). Certain aspects of this
transaction are taxable; the amount of these taxes will be determined by
year-end and will be paid in the first quarter of 1998. No book gain or
loss will be recorded on the transaction.
21
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 5. Other Information
- --------------------------
On November 3, 1997, the Company announced the completion of an
exchange transaction with BellSouth Corporation, pursuant to agreements
entered into in February 1997. The new release issued to announce this
is attached as Exhibit 99.1.
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits:
Exhibit 3 - Restated By-laws.
Exhibit 4 - Revolving Credit Agreement, dated August 19, 1997, among
United States Cellular Corporation and BankBoston N.A. and Toronto
Dominion (Texas), Inc., as agents (except for exhibits and schedules
which will be supplied supplementally to the commission upon request).
Exhibit 11 - Computation of earnings per common share.
Exhibit 12 - Statement regarding computation of ratios.
Exhibit 27 - Financial Data Schedule.
Exhibit 99.1 - News release dated November 3, 1997.
(b) Reports on Form 8-K filed during the quarter ended September 30, 1997:
On September 5, 1997, the Company filed a Current Report on Form 8-K
for the purposes of filing certain documents as exhibits relating to
the August 26, 1997 sale of the Company's $250,000,000 principal amount
of 7.25% Notes due August 15, 2007.
No other reports on Form 8-K were filed during the quarter ended
September 30, 1997.
22
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATES CELLULAR CORPORATION
----------------------------------
(Registrant)
Date November 13, 1997 H. DONALD NELSON
----------------------- -----------------------------
H. Donald Nelson
President
(Chief Executive Officer)
Date November 13, 1997 KENNETH R. MEYERS
----------------------- -----------------------------
Kenneth R. Meyers
Senior Vice President-Finance
and Treasurer
(Chief Financial Officer)
Date November 13, 1997 PHILLIP A. LORENZINI
----------------------- ------------------------------
Phillip A. Lorenzini
Controller
(Principal Accounting Officer)
23
<PAGE>
UNITED STATES CELLULAR CORPORATION
RESTATED BYLAWS
(As Amended as of November 4, 1997)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be
in the City of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have
offices at such other places both within and without the State of Delaware as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders
for the election of directors shall be held at such place either within or
without the State of Delaware as shall be designated from time to time by the
board of directors and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Time of Annual Meeting and Vote Required to Elect
Directors. Annual meetings of stockholders shall be held on the first Friday in
May if not a legal holiday, and if a legal holiday, then on the next secular day
following, at 10:00 A.M., or at such other date and time as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting, at which they shall elect by a plurality vote directors to succeed
those whose terms expire, and transact such other business as may properly be
brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the
annual meeting stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting.
-1-
<PAGE>
Section 4. Voting List. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the certificate of incorporation, may be called by the president
and shall be called by the president or secretary at the request in writing of a
majority of the board of directors, or at the request in writing of holders of a
majority of the votes of the stock issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
Section 6. Notice of Special Meetings. Written notice of a
special meeting, stating the place, date and hour of the meeting and the
purposes or purposes for which the meeting is called, shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 7. Business to be Transacted at Special Meetings.
Business transacted at any special meeting of stockholders shall be limited to
the purposes stated in the notice.
Section 8. Quorum and Adjournments. The holders of a majority
of the votes of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business except as otherwise
provided by statute or by the certificate of incorporation, and except where a
separate vote by a class or classes is required, in which case the holders of a
majority of the votes of the stock of such class or classes, present in person
or represented by a proxy, shall constitute a quorum entitled to take action
with respect to that vote on that matter. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
-2-
<PAGE>
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 9. Vote Required. When a quorum is present at any
meeting, the vote of the holders of a majority of the votes of the stock having
voting power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of statute, of the certificate of incorporation, or the bylaws, a
different vote is required, in which case such express provision shall govern
and control the decision or such question.
Section 10. Voting. Each stockholder shall at every meeting of
stockholders be entitled to vote in person or by proxy the shares of capital
stock having voting power held by such stockholder, but no proxy shall be voted
after three years from its date, unless the proxy provides for a longer period.
Section 11. Informal Action. Any action required to be taken
at any annual or special meeting of stockholders of the corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Section 12. Introduction of Business at a Meeting of
Stockholders. At an annual or special meeting of stockholders, only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been properly brought before an annual or special meeting of
stockholders. To be properly brought before an annual or special meeting of
stockholders, business must be (1) in the case of a special meeting, specified
in the notice of the special meeting (or any supplement thereto) given by or at
the direction of the board of directors, or (2) in the case of an annual
meeting, properly brought before the meeting by or at the direction of the board
of directors, or otherwise properly brought before an annual meeting by a
stockholder. For business to be properly brought before an annual meeting of
stockholders by a stockholder, the stockholder must have given timely notice
thereof in writing to the President or Secretary of the corporation. To be
timely, a stockholder's
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notice must be received at the principal executive offices of the corporation
not earlier than 120 calendar days nor later than 90 calendar days in advance of
the anniversary date of the date of the corporation's proxy statement to
stockholders in connection with the most recent preceding annual meeting of
stockholders, except that if the date of the current year's annual meeting has
been changed by more than 30 calendar days from the anniversary date of the most
recent preceding annual meeting, a stockholder proposal shall be received by the
corporation not later than the close of business on the tenth day following the
date of public notice of the date of the current year's annual meeting.
A stockholder's notice shall set forth as to each matter the
stockholder proposes to bring before an annual meeting of stockholders (1) a
brief description of the business desired to be brought before the annual
meeting and the reason for conducting such business at the annual meeting, (2)
the name and address, as they appear on the corporation's books, of the
stockholder proposing such business and any other stockholders known by such
stockholder to be supporting such proposal, (3) the class and number of shares
of the corporation which are beneficially owned by such stockholder on the date
of such stockholder's notice and by any other stockholders known by such
stockholder to be supporting such proposal on the date of such stockholder's
notice and (4) any material interest of the stockholder in such proposal.
Notwithstanding anything in the bylaws to the contrary, no
business shall be conducted at a meeting of stockholders except in accordance
with the procedure set forth in this Section 12. The chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that the
business was not properly brought before the meeting in accordance with the
procedures described by the bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be considered.
Section 13. Nomination of Directors. Only persons nominated in
accordance with the procedures set forth in this section shall be eligible for
election as directors. Nominations of persons for election to the board may be
made at a meeting of stockholders (1) by or at the direction of the board of
directors, or (2) by any stockholder of the corporation entitled to vote for the
election of directors at such meeting who complies with the notice procedures
set forth in this Section 13. Such nominations, other than those made by or at
the direction of the board of directors, shall be made pursuant to timely notice
in writing to the President or Secretary of the corporation. To be timely, a
stockholder's notice must be received at the principal executive offices of the
corporation not earlier than 120 calendar days nor later than 90 calendar days
in advance of the anniversary date of the date of the corporation's proxy
statement to stockholders in connection with the preceding year's
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annual meeting of stockholders, except that if the date of the current year's
annual meeting has been changed by more than 30 calendar days from the
anniversary date of the most recent preceding annual meeting, a nomination shall
be received by the corporation not later than the close of business on the tenth
day following the date of public notice of the date of the current year's annual
meeting.
A stockholder's notice shall set forth (1) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of the corporation which are beneficially owned by such
person on the date of such stockholder's notice and (d) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including without limitation such person's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected); and
(2) as to the stockholder giving the notice (a) the name and address, as they
appear on the corporation's books, of such stockholder and any other
stockholders known by such stockholder to be supporting such nominees and (b)
the class and number of shares of the corporation which are beneficially owned
by such stockholder on the date of such stockholder's notice and by any other
stockholders known by such stockholder to be supporting such nominees on the
date of such stockholder's notice.
No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in this
section. The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the bylaws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
This Section 13 shall not apply to the election of a director
to a directorship which may be filled by the board of directors under the
Delaware General Corporation Law.
ARTICLE III
DIRECTORS
Section 1. Number, Classification and Term of Office. The
number of directors which shall constitute the whole board shall not be less
than three nor more than eleven. Upon the adoption of this bylaw, the board
shall consist of seven directors. Thereafter, within the limits above specified,
the
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number of directors shall be determined by resolution of the board of directors
or by the stockholders at the annual meeting. The directors shall be divided
into three classes: Class I, Class II and Class III. Such classes shall be as
nearly equal in number as possible. The term of office of the initial Class I
directors shall expire at the annual meeting of stockholders in 1988; the term
of office of the initial Class II directors shall expire at the annual meeting
of stockholders in 1989; and the term of office of the initial Class III
directors shall expire at the annual meeting of stockholders in 1990, or
thereafter when their respective successors in each case are elected and
qualified. At each annual election held after the adoption of this bylaw the
directors chosen to succeed those whose terms then expire shall be identified as
being of the same class as the directors they succeed and shall be elected for a
term expiring at the third succeeding annual meeting or thereafter when their
respective successors in each case are elected and qualified. Any director
elected to a particular class by the stockholders or directors shall be
eligible, upon resignation, to be elected to a different class.
Section 2. General Powers. The business of the corporation
shall be managed by its board of directors, which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by the bylaws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3. Place of Meetings. The board of directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw, immediately after,
and at the same place as, the annual meeting of stockholders. The board of
directors may provide, by resolution, the time and place, either within or
without the State of Delaware, for the holding of additional regular meetings
without other notice than such resolution.
Section 5. Special Meetings. Special meetings of the board of
directors may be called by the president on two days notice to each director,
either personally or by mail or by telegram; special meetings shall be called by
the president or secretary in like manner and on like notice on the written
request of two directors.
Section 6. Quorum. At all meetings of the board of directors,
a majority of directors then in office shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which
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there is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 7. Informal Action. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 8. Resignations. Any director of the corporation may
resign at any time by giving written notice to the board of directors, the
president, or the secretary of the corporation. Such resignation shall take
effect at the time specified therein; and, unless tendered to take effect upon
acceptance thereof, the acceptance of such resignation shall not be necessary to
make it effective.
Section 9. Presumption of Assent. A director of the
corporation who is present at a meeting of the board of directors at which
action on any corporate matter is taken shall be conclusively presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
COMMITTEE OF DIRECTORS
Section 10. Appointment and Powers. The board of directors
may, by resolution passed by a majority of the whole board, designate one or
more committees, each committee to consist of one or more directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether the member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all the powers and
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authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and, unless the resolution so provides, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 11. Minutes. Each committee shall keep regular minutes
of its meetings and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 12. Compensation. The board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payments shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Notice. Whenever, under the provisions of statute
or of the certificate of incorporation or of these bylaws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at the stockholder's address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram, telex or similar
device.
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Section 2. Waiver. Whenever any notice is required to be
given under the provisions of statute or of the certificate of incorporation
or of these bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. Number and Qualifications. The officers
of the corporation shall be chosen by the board of directors and shall be a
chairman, president, one or more vice-presidents, a secretary and a treasurer.
The board of directors may also choose one or more assistant secretaries and
assistant treasurers. Any number of offices may be held by the same
person, unless the certificate of incorporation or these bylaws otherwise
provide.
Section 2. Election. The board of directors at its first
meeting after each annual meeting of stockholders shall choose a chairman,
president, one or more vice-presidents, a secretary and a treasurer.
Section 3. Other Officers and Agents. The board of directors
may appoint such other officers and agents as it shall deem necessary who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.
Section 4. Salaries. The salaries of all officers and agents
of the corporation shall be fixed by the board of directors.
Section 5. Term of Office. The officers of the corporation
shall hold office until their successors are chosen and qualify. Any officer
elected or appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
THE CHAIRMAN
Section 6. Chairman. The chairman shall preside at all
meetings of the shareholders and of the board of directors and shall see that
orders and resolutions of the board of directors are carried into effect. He may
sign bonds, mortgages, certificates for shares and all other contracts and
documents whether or not under the seal of the corporation except in cases where
the signing and execution thereof shall be expressly delegated by law, by the
board of directors or by these bylaws to some other officer or agent of the
corporation. In the absence
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of the president (including a vacancy in such office) or in the event of his
inability or refusal to act, which inability shall be determined by the
chairman, the chairman shall perform the duties of the principal executive
officer and, when so acting, shall have all the powers of the President.
THE PRESIDENT
Section 7. The President. The president shall be the principal
executive officer of the corporation and shall in general supervise and control
all of the business and affairs of the corporation, subject to the general
powers of the board of directors. In the absence of the chairman, he shall
preside at all meetings of the shareholders and of the board of directors. He
may sign bonds, mortgages, certificates for shares and all other contracts and
documents whether or not under seal of the corporation except in cases where the
signing and execution thereof shall be expressly delegated by the board of
directors or by these bylaws to some other office or agent of the corporation.
In general, he shall perform all duties incident to the office of president and
such other duties as may by prescribed by the board of directors from time to
time. He shall have general powers of supervision and shall be the final arbiter
of all differences between officers of the corporation and his decision as to
any matter affecting the corporation shall be final and binding as between the
officers of the corporation subject only to the chairman and the board of
directors.
THE VICE-PRESIDENT
Section 8. The Vice-President. In the absence of the chairman
or the president or in the event of the chairman's or the president's inability
or refusal to act, the vice-president (or in the event there be more than one
vice-president, the vice-presidents in the order designated, or in the absence
of any designation then in the order of their election) shall perform the duties
of the president, and when so acting shall have all the powers of and be subject
to all the restrictions upon the president. The vice-president shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The Secretary. The secretary shall attend all
meetings of the board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and of the board
of directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special
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meetings of the board of directors, and shall perform such other duties as may
be prescribed by the board of directors or president, under whose supervision
the secretary shall be. The secretary shall have custody of the corporate seal
of the corporation and the secretary, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and, when so affixed,
it may be attested by the secretary's signature or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
the secretary's signature.
Section 10. The Assistant Secretary. The assistant secretary
or, if there be more than one, the assistant secretaries in the order determined
by the board of directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the secretary or in the event
of the secretary's inability or refusal to act, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURER
Section 11. The Treasurer. The treasurer shall have custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
The treasurer shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all transactions as treasurer and of the financial condition of the corporation.
If required by the board of directors, the treasurer shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of the office and for the
restoration to the corporation, in case of the treasurer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in the treasurer's possession or under the
treasurer's control belonging to the corporation.
Section 12. The Assistant Treasurer. The assistant
treasurer or, if there shall be more than one, the assistant
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treasurers in the order determined by the board of directors (of if there be no
such determination, then in the order of their election), shall, in the absence
of the treasurer or in the event of the treasurer's inability or refusal to act,
perform the duties and exercise the powers of the treasurer and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form of Certificates. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman, president or a vice-president and the
treasurer or an assistant treasurer or the secretary or an assistant secretary
of the corporation, certifying the number of shares owned by the stockholder in
the corporation. If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
references and relative, participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in ss.202 of Title 8 of the Delaware Code, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 2. Facsimile Signatures. Where a certificate is
countersigned (1) by a transfer agent other than the corporation or its
employee, or (2) by a registrar other than the corporation or its employee, any
other signature on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue.
Section 3. Lost Certificates. The board of directors may
direct that a new certificate or certificates be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed
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upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfer of Stock. Upon surrender to the
corporation or the transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation, within a
reasonable period of time, to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. Registered Stockholders. The corporation
shall be entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends, and to vote as such owner,
and to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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Section 2. Checks. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the board of directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the corporation
shall be fixed by resolution of the board of directors.
Section 4. Seal. The corporate seal shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the board of directors at any regular
meeting of the board of directors or of the stockholders or at any special
meeting of the board of directors or of the stockholders, if notice of such
alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting of the stockholders.
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$500,000,000
REVOLVING CREDIT AGREEMENT
dated
as of August 29, 1997
AMONG
UNITED STATES CELLULAR CORPORATION,
as Borrower,
-- --------
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
BANKBOSTON, N.A.,
as Administrative Agent,
-- -------------- -----
TORONTO DOMINION (TEXAS), INC.,
as Documentation Agent,
-- ------------- -----
and
BANKBOSTON, N.A.,
and
TORONTO DOMINION (TEXAS), INC.,
as Managing Agents
-- -------- ------
<PAGE>
TABLE OF CONTENTS
----- -- --------
Section 1. DEFINITIONS AND RULES OF INTERPRETATION............. 1
Section 1.1. Definitions............................ 1
Section 1.2. Rules of Interpretation................ 10
Section 2. THE CREDIT FACILITIES............................... 11
Section 2.1. Commitment to Lend..................... 11
Section 2.2. Facility Fee........................... 11
Section 2.3. Reduction of Commitment................ 11
Section 2.4. The Revolving Credit Notes............. 11
Section 2.5. Requests for Revolving Credit Loans.... 12
Section 2.6. Funds for Revolving Credit Loans....... 12
Section 2.7. Mandatory Repayments of Loans.......... 13
Section 2.8. Optional Repayments of Loans........... 13
Section 2.9. Swing Line Facility.................... 13
Section 3. INTEREST; CERTAIN GENERAL PROVISIONS................ 15
Section 3.1. Interest on Loans; Payment............. 15
Section 3.2. Interest Period Options................ 16
Section 3.3. Indemnity.............................. 16
Section 3.4. Funds for Payments..................... 16
Section 3.5. Computations........................... 17
Section 3.6. Inability to Determine Eurodollar Rate. 17
Section 3.7. Illegality............................. 18
Section 3.8. Additional Costs, Etc.................. 18
Section 3.9. Certificate............................ 19
Section 3.10. Capital Adequacy....................... 19
Section 3.11. Interest on Overdue Amounts............ 20
Section 4. REPRESENTATIONS AND WARRANTIES...................... 20
Section 4.1. Corporate Authority.................... 20
Section 4.2. Governmental Approvals................. 21
Section 4.3. Title to Properties; Leases............ 21
<PAGE>
Section 4.4. Financial Statements................... 21
Section 4.5. No Material Changes, Etc............... 21
Section 4.6. Franchises, Patents, Copyrights, Etc... 22
Section 4.7. No Litigation.......................... 22
Section 4.8. No Materially Adverse Contracts, Etc... 22
Section 4.9. Compliance, With Other Instruments,
Laws, Etc.......................... 22
Section 4.10. Tax Status............................. 23
Section 4.11. No Event of Default.................... 23
Section 4.12. Holding Company and Investment Company
Acts............................... 23
Section 4.13. Certain Transactions................... 23
Section 4.14. ERISA Compliance....................... 23
Section 4.15. Purpose Credit......................... 24
Section 4.16. Environmental Compliance............... 25
Section 4.17. Compliance With Fair Labor Standards Act 26
Section 4.18. Subsidiaries........................... 26
Section 4.19. Disclosure............................. 26
Section 5. AFFIRMATIVE COVENANTS OF THE BORROWER............... 26
Section 5.1. Punctual Payment....................... 26
Section 5.2. Maintenance of Office.................. 26
Section 5.3. Records and Accounts................... 27
Section 5.4. Financial Statements, Certificates and
Information........................ 27
Section 5.5. Corporate Existence; Maintenance of
Properties......................... 28
Section 5.6. Insurance.............................. 28
Section 5.7. Taxes; Etc............................. 29
Section 5.8. Inspection of Properties and Books..... 29
Section 5.9. Compliance with Laws, Contracts,
Licenses,and Permits............... 29
Section 5.10. Pension Plans.......................... 30
Section 5.11. Further Assurances..................... 30
Section 5.12. Notices................................ 30
Section 5.13. Fair Labor Standards Act............... 30
Section 5.14. Environmental Events................... 31
Section 5.15. Notification of Claims................. 31
Section 5.16. Use of Proceeds........................ 31
Section 5.17. Notice of Litigation, Judgment and
Material Events.................... 31
<PAGE>
Section 6. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.......... 31
Section 6.1. Indebtedness........................... 31
Section 6.2. Restrictions on Liens.................. 32
6.2.1. The Borrower........................... 32
6.2.2. Subsidiaries........................... 34
Section 6.3. Limitation on Sales, Consolidation,
Merger, Etc........................ 36
Section 6.4. Federal Regulations.................... 36
Section 6.5. Restrictions on Ability to Repay Loans. 37
Section 6.6. Employee Benefit Plans................. 37
Section 6.7. Compliance with Environmental Laws..... 37
Section 6.8. Limitation on Sale and Leaseback....... 38
Section 7. FINANCIAL COVENANTS OF THE BORROWER................. 39
Section 7.1. Debt to Capitalization Ratio........... 39
Section 7.2. Interest Coverage Ratio................ 39
Section 8. CLOSING CONDITIONS.................................. 39
Section 8.1. Corporate Action....................... 39
Section 8.2. Loan Documents......................... 39
Section 8.3. Opinion of Borrower's Legal Counsel.... 39
Section 8.4. Certified Copies of Charter Documents.. 39
Section 8.5. Incumbency Certificate................. 39
Section 8.6. Good Standing Certificates............. 39
Section 9. CONDITIONS TO ALL BORROWINGS........................ 39
Section 9.1. Representations True; No Event
of Default........................ 39
Section 9.2. No Legal Impediment.................... 40
Section 9.3. Governmental Regulation................ 40
Section 9.4. Proceedings and Documents.............. 40
Section 10. EVENTS OF DEFAULT; ACCELERATION..................... 40
<PAGE>
Section 11. THE AGENTS.......................................... 42
Section 11.1. Authorization.......................... 42
Section 11.2. Employees and Agents................... 42
Section 11.3. No Liability........................... 42
Section 11.4. No Representations..................... 42
Section 11.5. Payments............................... 43
Section 11.6. Holders of Notes....................... 43
Section 11.7. Indemnity.............................. 44
Section 11.8. Agents as Banks........................ 44
Section 11.9. Resignation............................ 44
Section 11.10. Documentation Agent; Managing Agents... 44
Section 12. EXPENSES............................................ 44
Section 13. INDEMNIFICATION..................................... 45
Section 14. SURVIVAL OF COVENANTS, ETC.......................... 45
Section 15. ASSIGNMENT AND PARTICIPATION........................ 45
Section 15.1. Conditions to Assignment by Banks...... 45
Section 15.2. Certain Representations and Warranties;
Limitations; Covenants................. 46
Section 15.3. Register............................... 46
Section 15.4. New Notes.............................. 47
Section 15.5. Participations......................... 47
Section 15.6. Disclosure............................. 47
Section 15.7. Assignee or Participant Affiliated with
the Borrower........................... 48
Section 15.8. Miscellaneous Assignment Provisions.... 48
Section 15.9. Assignment by Borrower................. 48
Section 16. NOTICES, ETC........................................ 48
Section 17. GOVERNING LAW....................................... 49
Section 18. HEADINGS............................................ 49
Section 19. COUNTERPARTS........................................ 49
Section 20. ENTIRE AGREEMENT, ETC............................... 49
<PAGE>
Section 21. WAIVER OF JURY TRIAL................................ 49
Section 22. CONSENTS, AMENDMENTS, WAIVERS, ETC.................. 50
Section 23. FCC APPROVAL........................................ 50
Section 24. SEVERABILITY........................................ 50
Section 25. TREATMENT OF CERTAIN CONFIDENTIAL
INFORMATION......................................... 51
Section 25.1. Sharing of Information with Section 20
Subsidiary......................... 51
Section 25.2. Confidentiality........................ 51
Section 25.3. Prior Notification..................... 51
Section 25.4. Other.................................. 51
<PAGE>
SCHEDULES AND EXHIBITS
- --------- --- --------
EXHIBIT A-1: Form of Revolving Credit Note
EXHIBIT A-2 Form of Swing Line Note
EXHIBIT B: Form of Loan Request
EXHIBIT C: Form of Compliance Certificate
EXHIBIT D: Form of Opinion of Borrower's
Counsel
EXHIBIT E: Form of Assignment and Acceptance
<PAGE>
SCHEDULE 1.1(a): Revolving Credit Commitments
SCHEDULE 1.1(b): Eurodollar Lending Offices
SCHEDULE 1.2: Margin Percentage
SCHEDULE 4.14: Assets and Accrued Benefits
SCHEDULE 4.18: Material Subsidiaries
SCHEDULE 6.2.1: Existing Liens of Borrower
SCHEDULE 6.2.2: Existing Liens of Subsidiaries
SCHEDULE 6.8: Sale and Leaseback Transactions
<PAGE>
REVOLVING CREDIT AGREEMENT
--------------------------
This REVOLVING CREDIT AGREEMENT is made as of the 29th day of August,
1997, by and among UNITED STATES CELLULAR CORPORATION a Delaware corporation
having its principal place of business at 8410 West Bryn Mawr Avenue, Suite 700,
Chicago, Illinois 60631 (the "Borrower"), the financial institutions listed on
Schedule 1.1(a) hereto (the "Banks"), BANKBOSTON, N.A., as administrative agent
for the Banks (the "Administrative Agent"), TORONTO DOMINION (TEXAS), INC., as
documentation agent for the Banks, and BANKBOSTON, N.A., and TORONTO DOMINION
(TEXAS), INC., as Managing Agents.
Section 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. Definitions. The following terms shall have the meanings
set forth in this Section 1 or elsewhere in the provisions of this Credit
Agreement referred to below:
Administrative Agent. BankBoston acting as administrative agent for
the Banks.
Affiliate. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
Agents. The Administrative Agent, the Documentation Agent, and the
Managing Agents, together, and each of them, an "Agent".
Assignment and Acceptance. See Section 15.1.
Balance Sheet Date. December 31, 1996.
BankBoston. BankBoston, N.A., a national banking association, formerly
known as The First National Bank of Boston.
Banks. The Swing Line Bank, the financial institutions listed on
Schedule 1.1(a), and any of their respective successors and assigns.
Base Rate. The lower of (a) the annual rate of interest announced from
time to time by the Administrative Agent at its head office in Boston,
Massachusetts as its "base rate" and (b) the Federal Funds Rate plus
three-quarters of one percent (3/4%).
Basis Points or bps. One one-hundredth of one percent (0.01%).
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Borrower. United States Cellular Corporation, a Delaware corporation.
Business Day. Any day on which banking institutions in Boston,
Massachusetts, New York, New York and Chicago, Illinois are open for the
transaction of banking business.
Capitalized Lease. As applied to any Person, any lease of property by
such Person as lessee or obligor, the discounted future rental payments under
which are required to be capitalized on the balance sheet of such Person in
accordance with Generally Accepted Accounting Principles.
Capitalized Rent. The present value (discounted semi-annually at a
discount rate equal to the weighted average rate of interest borne by the
Obligations) of the total net amount of rent payable for the remaining term of
any lease of property by the Borrower (including any period for which such lease
has been extended); provided that no such rental obligation shall be deemed to
be Capitalized Rent unless the lease resulted from a Sale and Leaseback
Transaction. The total net amount of rent payable under any lease for any period
shall be the total amount of the rent payable by the lessee with respect to such
period but shall not include amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water rates, sewer rates
and similar charges.
Closing Date. August 29, 1997.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Commitment. With respect to each Bank, the amount set forth in the
column labeled Commitment, opposite such Bank's name on Schedule 1.1(a) hereto,
as the same may be reduced from time to time.
Commitment Percentage. With respect to each Bank, the percentage set
forth opposite such Bank's name on Schedule 1.1(a) thereto.
Compliance Certificate. See Section 5.4(c).
Consolidated or consolidated. With reference to any term defined
herein, shall mean that term as applied to the accounts of the Borrower and all
of its Subsidiaries, consolidated in accordance with Generally Accepted
Accounting Principles.
Consolidated Capitalization. The sum of (i) Funded Debt of the Borrower
and its Subsidiaries calculated on a consolidated basis, plus (ii) Consolidated
Net Worth plus (iii) deferred taxes and deferred investment credit to the extent
deducted in calculating Consolidated Net Worth.
Consolidated EBITDA. For any period, an amount equal to (a) the sum of
(i) Consolidated Net Income for such period, plus (ii) depreciation,
amortization and all other non-cash charges deducted from Consolidated Net
Income for such period, plus (iii) to the extent deducted in the calculation of
Consolidated Net Income, Consolidated Interest Expense and taxes paid or payable
for such period, less (b) the aggregate amount of all dividends and
distributions paid to minority shareholders of the Borrower's Subsidiaries in
such period.
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Consolidated Interest Expense. For any period, the aggregate amount of
interest required to be paid or payable in cash by the Borrower or any of its
Subsidiaries during such period on all Funded Debt of the Borrower or any of its
Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of Capitalized
Leases (including, without duplication, the interest for rental payments made
with respect to Sale and Leaseback Transactions) and including Facility Fees
payable pursuant to Section 2.2.
Consolidated Net Income. For any period, the net income of the Borrower and
its Subsidiaries for such period, including (without duplication) cash dividends
or cash distributions received in such period from entities in which the
Borrower or any of its Subsidiaries holds a minority interest, after deduction
of all expenses, taxes, and other proper charges for such period, determined on
a consolidated basis in accordance with Generally Accepted Accounting
Principles, after eliminating therefrom (a) all extraordinary nonrecurring gains
or losses, including, without limitation, any gains (or losses) from any sales
of assets other than sales in the ordinary course of business, and (b) non-cash
dividends or non-cash distributions from entities in which the Borrower or any
of its Subsidiaries holds a minority interest.
Consolidated Net Worth. The excess of Consolidated Total Assets over
Consolidated Total Liabilities.
Consolidated Total Assets. All assets of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
Consolidated Total Liabilities. All liabilities of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles (including all Funded Debt and other indebtedness
of the Borrower and its Subsidiaries).
Continuation Request. A notice given by the Borrower to the
Administrative Agent in accordance with Section 3.2 pursuant to which the
Borrower notifies the Administrative Agent of its election to continue a Loan
for a particular Interest Period.
Credit Agreement. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto.
Debt Rating. At the relevant time of reference thereto, the debt rating
issued by S&P or Moody's with respect to unsecured indebtedness of the Borrower
not maturing within twelve months and not by its terms or pursuant to any other
contractual arrangement subordinated in right of payment to other indebtedness
of the Borrower.
Default. See Section 10.
Delinquent Bank. See Section 11.5(c).
Documentation Agent. TD acting as documentation agent for the Banks.
<PAGE>
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Dollars. Dollars in lawful currency of the United States of America.
Drawdown Date. The date on which any Loan is made or is to be made in
accordance with Section 2.
Eligible Assignee. Any of (a) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (b) a
savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $1,000,000,000, calculated in accordance with generally
accepted accounting principles; (c) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (d) the central
bank of any country which is a member of the OECD; and (e) if, but only if, an
Event of Default has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution approved by
the Administrative Agent, such approval not to be unreasonably withheld.
Environmental Laws. See Section 4.16(a).
EPA. See Section 4.16(b).
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Requirement. For any day with respect to a
Revolving Credit Loan, the maximum rate (expressed as a decimal) at which any
lender subject thereto would be required to maintain reserves under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Requirement shall be adjusted
automatically on and as of the effective date of any change in the Eurocurrency
Reserve Requirement.
Eurodollar Business Day. Any Business Day on which commercial banks are
open for international business (including dealings in Dollar deposits) in
London or such other eurodollar interbank market as may be selected by the
Administrative Agent in its sole discretion acting in good faith.
<PAGE>
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Eurodollar Lending Office. Initially, the office of each Bank
designated as such on Schedule 1.1(b) hereto and, thereafter, such other office
of such Bank, if any, that shall be making or maintaining Revolving Credit
Loans.
Eurodollar Rate. For any Interest Period with respect to a Revolving
Credit Loan, a rate per annum equal to the quotient (rounded upwards to the next
higher 1/16 of one percent) of (a) (i) the rate per annum for deposits in
Dollars for a period comparable to such Interest Period which appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two
Eurodollar Business Days prior to the beginning of such Interest Period, or (ii)
if such rate specified in clause (i) does not appear on the Telerate Page 3750,
the rate at which the Administrative Agent's Eurodollar Lending Office is
offered Dollar deposits two Eurodollar Business Days prior to the beginning of
such Interest Period in the eurodollar interbank market where the eurodollar and
foreign currency and exchange operations of such Eurodollar Lending Office are
customarily conducted at or about 11:00 a.m., Boston time, for delivery on the
first day of such Interest Period for the number of days comprised therein and
in an amount comparable to the amount of the Revolving Credit Loan to which such
Interest Period applies, divided in either case by (b) a number equal to 1.00
minus the Eurocurrency Reserve Requirement.
Event of Default. See Section 10.
FCC. The Federal Communications Commission (or any successor agency,
commission, bureau, department or other political subdivision) of the United
States.
FCC License. Any license, permit, certificate of compliance, franchise,
approval or authorization granted or issued by the FCC.
Facility Fee. See Section 2.2.
Federal Funds Rate. For any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or if such day is not a Business Day, of the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three funds brokers of recognized standing selected by the
Administrative Agent.
Funded Debt. As to any Person and without duplication, the amount of
(a) any obligation of such Person to repay money borrowed, (b) any indebtedness
of such Person evidenced by notes (other than short-term trade debt incurred in
the ordinary course of business), bonds, debentures or similar instruments, (c)
any obligation of others constituting Funded Debt of such other Person which is
secured by a lien on the property of such Person or for which such Person is
contingently liable, whether or not such obligation is assumed by such Person
and (d) all obligations of such Person with respect to Capitalized Leases.
<PAGE>
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Funded Debt to Capitalization Ratio. At the relevant time of reference
thereto, the ratio of (a) Funded Debt of the Borrower and its Subsidiaries
calculated on a consolidated basis to (b) Consolidated Capitalization.
Generally Accepted Accounting Principles. Principles that are
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors in effect for the fiscal year of
the Borrower ended on the Balance Sheet Date, and to the extent consistent with
such principles, the accounting practice of the Borrower reflected in its
financial statements for the year ended on the Balance Sheet Date; provided that
a certified public accountant would, insofar as the use of such accounting
principles is pertinent, be in a position to deliver an unqualified opinion
(other than a qualification regarding changes in generally accepted accounting
principles) as to financial statements in which such principles have been
properly applied.
Guaranteed Pension Plan. Any pension plan maintained by the Borrower or
any of its Subsidiaries, or to which the Borrower or any of its Subsidiaries
contributes, that is required to pay plan termination insurance premiums to the
PBGC.
Hazardous Substances. See Section 4.16(b).
Ineligible Securities. Securities which may not be underwritten or
dealt in by member banks of the Federal Reserve System under Section 16 of the
Banking Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
Interest Coverage Ratio. For each period consisting of four consecutive
fiscal quarters of the Borrower, the ratio of (i) Consolidated EBITDA for such
period to (ii) Consolidated Interest Expense for such period.
Interest Payment Date. As to any Revolving Credit Loan in respect of
which the Interest Period is (i) 3 months or less, the last day of such Interest
Period and (ii) more than 3 months, the date that is 3 months from the Drawdown
Date thereof and the last day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan, (a)
initially, the period commencing on the date such Loan is made and ending on the
last day of a period of either seven (7) days or 1, 2, 3, or 6 months as
selected by the Borrower in a Loan Request for any Revolving Credit Loan, and
(b) thereafter, each period commencing on the last day of the immediately
preceding Interest Period applicable to such Revolving Credit Loan and ending on
the last day of one of the periods set forth above, as selected by the Borrower
in a Continuation Request; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:
(i) if any Interest Period with respect to a Revolving Credit
Loan would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
immediately preceding Eurodollar Business Day;
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(ii) if the Borrower shall fail to give a Continuation Request
as provided in Section 3.2 with respect to a Revolving Credit Loan, the Borrower
shall be deemed to have requested that a seven (7) day Interest Period apply to
such Revolving Credit Loan commencing on the last day of the then current
Interest Period with respect thereto;
(iii) any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Business Day of a calendar month unless such
Interest Period is a seven day Interest Period; and
(iv) the Borrower may not select an Interest Period for any
Revolving Credit Loan that would extend beyond the scheduled Maturity Date.
Lien. Any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement, the interest of a lessor under a
Capitalized Lease, any financing lease having substantially the same economic
effect as any of the foregoing and the filing of any financing statement naming
the owner of the asset to which such Lien relates as debtor.
Loan Documents. This Credit Agreement and the Notes.
Loan Request. See Section 2.5.
Loans. Revolving Credit Loans and Swing Line Loans.
Majority Banks. As of any date, the Banks holding at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding principal amount of the
Notes on such date, and if no such principal is outstanding, the Banks whose
aggregate Commitment constitutes at least sixty-six and two-thirds percent
(66-2/3 %) of the Total Commitment.
Managing Agents. BankBoston and TD, together, acting as Managing
Agents for the Banks.
Margin Percentage. At the relevant time of reference thereto, the
applicable rate per annum, expressed in Basis Points, set forth in the table
attached hereto as Schedule 1.2 beneath the column for the applicable Debt
Rating in the row labeled "Margin Percentage".
Material Subsidiaries. United States Cellular Operating Company, a Delaware
corporation, United States Cellular Investment Company, a Delaware corporation,
and any other Subsidiary that is directly or indirectly owned by the Borrower
and whose total assets constitute at least 10% of Consolidated Total Assets or
whose gross revenues determined in accordance with Generally Accepted Accounting
Principles constitute at least 10% of the consolidated gross revenues of the
Borrower and its Subsidiaries calculated in accordance with Generally Accepted
Accounting Principles.
<PAGE>
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Maturity Date. August 29, 2004, provided that in any case, if earlier,
the Maturity Date shall be deemed to occur on the date on which the outstanding
Loans hereunder are declared or become due and payable pursuant to the terms of
this Credit Agreement, including, without limitation, pursuant to Section 6.2.2
and/or Section 10 hereof, or on which the Total Commitment is terminated.
Maximum Swing Line Loan Amount. See Section 2.9(a).
Moody's. Moody's Investors Service, Inc.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by any of the Borrowers or
any ERISA Affiliate.
Note Record. The grid attached to a Note, or the continuation of such
grid, or any other similar record maintained by the Bank holding such Note with
respect to any Loan.
Notes. The promissory notes issued pursuant to Sections 2.4 and 2.9(c)
of this Credit Agreement evidencing the Loans.
Obligations. All indebtedness, obligations and liabilities of the
Borrower and its Subsidiaries to the Banks, individually or collectively,
existing on the date of this Credit Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under this Credit Agreement or any of
the other Loan Documents or in respect of any Loans or Notes or other
instruments at any time evidencing any thereof.
Outstanding or outstanding. With respect to the Loans, the aggregate
unpaid principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Person. Any individual, corporation, partnership, limited liability
company, trust, unincorporated association, business, or other legal entity, and
any government or any governmental agency or political subdivision thereof.
Proprietary Rights. See Section 4.6.
Real Estate. All real property at any time owned or leased by the
Borrower or any of its Subsidiaries.
Register. See Section 15.3.
Revolving Credit Loans. Collectively, the revolving credit loans
advanced to the Borrower by the Banks pursuant to Section 2.1 of this Credit
Agreement.
<PAGE>
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S&P. Standard & Poor's Rating Group, Inc.
Sale. Any sale, transfer or other disposition of assets (other than by
means of a simultaneous exchange of assets of a similar type and having a
comparable value), whether in one transaction or a series of related
transactions, if the assets so transferred have a value taken at the greater of
(i) fair value (which shall be the price at which the Board of Directors of the
relevant Person shall have agreed to sell such assets in an arm's length
transaction to a third party buyer which is not an Affiliate) or (ii) book
value, as of the date of reference thereto, in excess of five percent (5%) of
the Consolidated Net Worth of the Borrower.
Sale and Leaseback Transaction. Any arrangement with any Person other
than a Tax Consolidated Subsidiary providing for the leasing (as lessee) by the
Borrower of any property (except for temporary leases for a term, including any
renewal thereof, of not more than three (3) years (provided that any such
temporary lease may be for a term of up to five (5) years if (a) the Board of
Directors reasonably finds such term to be in the best interest of the Borrower
and (b) the primary purpose of the transaction of which such lease is a part is
not to provide funds to or financing for the Borrower)), which property has been
or is to be sold or transferred by the Borrower (i) to any subsidiary of the
Borrower in contemplation of or in connection with such arrangement or (ii) to
such other Person.
Section 20 Subsidiary. A Subsidiary of the bank holding company controlling
any Bank, which Subsidiary has been granted authority by the Federal Reserve
Board to underwrite and deal in certain Ineligible Securities.
Special Counsel. Bingham, Dana & Gould LLP of Boston, Massachusetts,
or such other counsel as may be approved by the Administrative Agent.
Subsidiary. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
Swing Line Bank. BankBoston.
Swing Line Loan Maturity Date. See Section 2.9(b).
Swing Line Loans. Collectively, the swing line loans advanced to the
Borrower by the Swing Line Bank pursuant to Section 2.9 of this Credit
Agreement.
Tax Consolidated Subsidiary. Any subsidiary of the Borrower with which,
at the time a Sale and Leaseback Transaction is entered into by the Borrower,
the Borrower would be entitled to file a consolidated federal income tax return.
TD. Toronto Dominion (Texas), Inc.
TDS. Telephone and Data Systems, Inc., an Iowa corporation having its
principal place of business at 30 LaSalle Street, Chicago, Illinois 60602
<PAGE>
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Telerate Page 3750. The display page designated 3750 on the Dow Jones
Telerate Service (or such other page as may replace that page on that service,
or such other service as may replace the Dow Jones Telerate Service as a
customary reference for interest rates).
Total Commitment. The sum of the Commitments of the Banks, as in
effect from time to time.
Voting Stock. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
Section 1.2. Rules of Interpretation.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification
to such law.
(d) A reference to any Person includes its permitted successors
and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by Generally Accepted Accounting Principles applied
on a consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by Generally
Accepted Accounting Principles, which terms are defined in the Uniform
Commercial Code as in effect in Massachusetts, have the meanings assigned to
them therein.
(h) Reference to a particular "Section" refers to that section of
the agreement in which such reference appears unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to the agreement in which they appear as a whole and not to
any particular section or subdivision of that agreement unless otherwise
specifically indicated.
(j) The Section references and defined terms set forth in
parentheticals at the end of certain definitions in Section 1.1 are intended for
convenience of reference only to cite to other sections of this Credit Agreement
where such terms are used and shall not define or limit the defined terms set
forth in Section 1.1.
<PAGE>
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Section 2. THE CREDIT FACILITIES.
--- ------ ----------
Section 2.1. Commitment to Lend. Subject to the terms and conditions
set forth in this Credit Agreement, each of the Banks severally agrees to lend
to the Borrower and the Borrower may borrow, repay, and reborrow from time to
time between the date of this Credit Agreement and the Maturity Date upon notice
by the Borrower to the Administrative Agent given in accordance with Section 2.5
such sums as requested by the Borrower up to a maximum aggregate principal
amount outstanding (after giving effect to all amounts then being requested) at
any one time equal to such Bank's Commitment, provided that the sum of the
outstanding principal amount of Revolving Credit Loans (after giving effect to
all amounts then being requested) plus the outstanding principal amount of Swing
Line Loans (after giving effect to all amounts then being requested) shall not
exceed the Total Commitment. The Loans shall be made pro rata in accordance with
each Bank's Commitment Percentage. Each request for a Loan shall constitute a
representation by the Borrower that the conditions set forth in Section 8 and
Section 9, in the case of the initial Loans to be made on the Closing Date, and
Section 9, in the case of all other Loans, have been satisfied on the date of
such request.
Section 2.2. Facility Fee. The Borrower agrees to pay to the
Administrative Agent for the accounts of the Banks in accordance with their
respective Commitment Percentages a facility fee (the "Facility Fee") calculated
daily on the Total Commitment in effect on such date at the per annum rate equal
to that amount set forth on Schedule 1.2 in the row headed "Facility Fee"
beneath the column for the Debt Rating in effect for such date. The amount of
such Facility Fee shall be payable quarterly in arrears on the last day of each
March, June, September and December and on the Maturity Date for the fiscal
quarter of the Borrower, or portion thereof, then ended.
Section 2.3. Reduction of Commitment.
(a) The Borrower shall have the right at any time and from time to time
upon two (2) Business Days' written notice to the Administrative Agent to reduce
by $1,000,000 or an integral multiple thereof or terminate entirely the
unborrowed portion of the Total Commitment, whereupon the Commitments of the
Banks shall be reduced pro rata in accordance with their respective Commitment
Percentages of the amount specified in such notice or, as the case may be,
terminated. Promptly after receiving any notice of the Borrower delivered
pursuant to this Section 2.3, the Administrative Agent will notify the Banks of
the substance thereof. No reduction of the Commitments of the Banks may be
reinstated.
(b) Upon the effective date of any such termination, the Borrower shall
pay to the Administrative Agent for the respective accounts of the Banks the
full amount of any Facility Fee then accrued.
Section 2.4. The Revolving Credit Notes. The Revolving Credit Loans
shall be evidenced by separate promissory notes of the Borrower in substantially
the form of Exhibit A-1 hereto (each a "Revolving Credit Note"), dated the
Closing Date and completed with appropriate insertions. One Revolving Credit
Note shall be payable to the order of each Bank in a principal amount equal to
such Bank's Commitment or, if less, the outstanding amount of all Revolving
Credit Loans made by such Bank, plus interest accrued thereon, as set forth
below. The Borrower irrevocably authorizes each Bank to make
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or cause to be made, at or about the time of receipt of any payment of principal
on such Bank's Revolving Credit Note, an appropriate notation reflecting such
payment on the Note Record attached to such Bank's Revolving Credit Note. The
outstanding amount of the Revolving Credit Loans set forth on such Note Record
shall be prima facie evidence of the principal amount thereof owing and unpaid
to such Bank, but the failure to record, or any error in so recording, any such
amount on such Note Record shall not limit or otherwise affect the obligations
of the Borrower hereunder or under any Revolving Credit Note to make payments of
principal of or interest on any Revolving Credit Note when due.
Section 2.5. Requests for Revolving Credit Loans. The Borrower shall
give to the Administrative Agent written notice in the form of Exhibit B hereto
(or telephonic notice confirmed in a writing in the form of Exhibit B hereto) of
each Revolving Credit Loan requested hereunder (a "Loan Request") no later than
11:00 a.m. (Boston time) at least two (2) Eurodollar Business Days prior to the
proposed Drawdown Date of any Revolving Credit Loan. Each such notice shall
specify (i) the principal amount of the Revolving Credit Loan requested, (ii)
the proposed Drawdown Date of such Revolving Credit Loan and (iii) the Interest
Period for such Revolving Credit Loan. Promptly upon receipt of any such Loan
Request, the Administrative Agent shall notify each of the Banks of the
substance thereof. Each Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to accept the Revolving Credit Loan
requested from the Banks on the proposed Drawdown Date. Each Loan Request for a
Revolving Credit Loan shall be in a minimum amount of $3,000,000 or an integral
multiple of $250,000 in excess thereof.
Section 2.6. Funds for Revolving Credit Loans.
(a) Not later than 11:00 a.m. (Boston time) on the proposed Drawdown
Date of any Revolving Credit Loans, each of the Banks, severally, will make
available to the Administrative Agent, at its head office, in immediately
available funds, the amount of such Bank's Commitment Percentage of the amount
of the requested Revolving Credit Loans. Upon receipt from each Bank of such
amount, and upon receipt of the documents required by Sections 8 and 9 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Administrative Agent will make the aggregate amount of such
Revolving Credit Loans available to the Borrower. The failure or refusal of any
Bank to make available to the Administrative Agent at the aforesaid time on any
Drawdown Date the amount of its Commitment Percentage of the requested Revolving
Credit Loans shall not relieve any other Bank from its several obligation
hereunder to make available to the Administrative Agent the amount of its
Commitment Percentage of any requested Revolving Credit Loans.
(b) The Administrative Agent may (unless notified to the contrary by
any Bank prior to a Drawdown Date) assume that each Bank has made available to
the Administrative Agent on such Drawdown Date the amount of such Bank's
Commitment Percentage of the Revolving Credit Loans to be made on such Drawdown
Date, and the Administrative Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If any Bank makes available to the Administrative Agent such amount
advanced by the Administrative Agent on a date after such Drawdown Date, such
Bank shall pay to the Administrative Agent on demand an amount equal to the
product of (i) the average computed for the period referred to in clause (iii)
below, of the weighted average interest rate paid by the Administrative Agent
for federal funds acquired by the Administrative Agent during each day included
in such period, times (ii) the amount equal to such Bank's Commitment
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Percentage of such Revolving Credit Loans, times (iii) a fraction, the numerator
of which is the number of days that elapse from and including such Drawdown Date
to the date on which the amount of such Bank's Commitment Percentage of such
Revolving Credit Loans shall become immediately available to the Administrative
Agent, and the denominator of which is 365. If the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans is not made available to
the Administrative Agent by such Bank within three (3) Business Days of such
Drawdown Date, the Administrative Agent shall be entitled to recover such amount
from the Borrower on demand, with interest thereon at the rate per annum
applicable to the Revolving Credit Loans made on such Drawdown Date. A statement
of the Administrative Agent submitted to any Bank with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due and
owing to the Administrative Agent by such Bank.
Section 2.7. Mandatory Repayments of Loans. The Borrower promises to
pay the outstanding amount of all Loans on the Maturity Date. In addition, if at
any time the outstanding amount of the Loans exceeds the Total Commitment, then
the Borrower shall immediately pay the amount of such excess to the
Administrative Agent for application to the Loans.
Section 2.8. Optional Repayments of Loans. The Borrower shall have the
right, at its election, to repay the outstanding amount of any Loans, as a whole
or in part, at any time without penalty or premium; provided that in the case of
any full or partial prepayment of the outstanding amount of any Revolving Credit
Loans prior to the end of the Interest Period applicable thereto, the Borrower
shall be obligated to reimburse the Banks in respect thereof pursuant to Section
3.3. The Borrower shall give the Administrative Agent, no later than 11:00 a.m.
(Boston time), at least two (2) Eurodollar Business Days' notice of any proposed
repayment of Revolving Credit Loans, in each case specifying the proposed date
of repayment and the principal amount to be paid, which notice, if not in
writing, shall be promptly confirmed in writing. Each such partial payment of
Revolving Credit Loans shall be in a minimum amount of $3,000,000 or an integral
multiple of $250,000 in excess thereof. Each partial payment of Swing Line Loans
shall be in an amount of $10,000 or an integral multiple thereof. Each repayment
pursuant to this Section 2.8 shall be accompanied by the payment of accrued
interest on the principal repaid to the date of payment. Each partial repayment
of Revolving Credit Loans shall be allocated among the Banks, in proportion, as
nearly as practicable, to the respective unpaid principal amount of each Bank's
Revolving Credit Note, with adjustments to the extent practicable to equalize
any prior repayments not exactly in proportion, and each partial repayment of
Swing Line Loans shall be allocated as described in Section 2.9(d) below.
Section 2.9. The Swing Line Loans.
(a) Subject to the terms and conditions hereinafter set forth, upon notice
by the Borrower made to the Swing Line Bank in accordance with Section 2.9(b),
the Swing Line Bank agrees to lend to the Borrower Swing Line Loans on any
Business Day from the Closing Date until the Maturity Date in an aggregate
principal amount not to exceed $20,000,000 (the "Maximum Swing Line Loan
Amount"). Each Swing Line Loan shall be in a minimum amount equal to $10,000 or
an integral multiple thereof. Notwithstanding any other provisions of this
Agreement and in addition to the limit set forth above, at no time shall the
aggregate principal amount of all outstanding Swing Line Loans plus the
aggregate principal amount of all Revolving Credit Loans outstanding exceed the
Total Commitment then in effect;
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provided however that subject to the limitations set forth in this Section
2.9(a) from time to time the sum of the aggregate outstanding Swing Line Loans
plus all outstanding Revolving Credit Loans made by BankBoston may exceed
BankBoston's Commitment Percentage of the Total Commitment then in effect.
(b) Notice of Borrowing. When the Borrower desires the Swing Line Bank to
make a Swing Line Loan, it shall send to the Administrative Agent and the Swing
Line Bank a Loan Request, which shall set forth the principal amount of the
proposed Swing Line Loan and the date on which the proposed Swing Line Loan
would mature (the "Swing Line Loan Maturity Date"), which shall in no event be
later than the Maturity Date. Each such Loan Request must be received by the
Swing Line Bank not later than 12:00 p.m. (Boston time) on the date of the
proposed borrowing. Each Loan Request shall be irrevocable and binding on the
Borrower and shall obligate the Borrower to borrow the Swing Line Loan from the
Swing Line Bank on the proposed Drawdown Date thereof. Upon satisfaction of the
applicable conditions set forth in this Agreement, on the proposed Drawdown Date
the Swing Line Bank shall make the Swing Line Loan available to the Borrower no
later than 3:00 p.m. (Boston time) on the proposed Drawdown Date by crediting
the amount of the Swing Line Loan to the Borrower's account maintained with
LaSalle National Bank, Chicago, ABA #071-000-505, Account #22-2813-9 in the name
of United States Cellular Corporation; provided that the Swing Line Bank shall
not advance any Swing Line Loans after it has received notice from any Bank or
the Administrative Agent that a Default or Event of Default has occurred and
stating that no new Swing Line Loans are to be made until such Default or Event
of Default has been cured or waived in accordance with the provisions of this
Credit Agreement. The Swing Line Bank shall not be obligated to make any Swing
Line Loans at any time when any Bank is a Delinquent Bank unless the Swing Line
Bank has entered into arrangements satisfactory to it to eliminate the Swing
Line Bank's risk with respect to such Delinquent Bank, including by cash
collateralizing such Delinquent Bank's Commitment Percentage of the outstanding
Swing Line Loans and any such additional Swing Line Loans to be made.
(c) Interest on Swing Line Loans. The outstanding amount of each Swing Line
Loan shall bear interest from the Drawdown Date thereof until repaid in full at
the rate per annum equal to the Base Rate from time to time in effect less
one-half of one percent (0.50%), except as otherwise provided in Section 3.11,
and shall be paid quarterly in arrears on the last day of each calendar quarter.
(d) Repayment of Swing Line Loans. The Borrower shall repay each
outstanding Swing Line Loan on or prior to the Swing Line Loan Maturity Date
relating thereto. Upon notice by the Swing Line Bank on any Business Day
(whether before or on the Maturity Date), each of the Banks hereby agrees to
make payments to the Administrative Agent, for the account of the Swing Line
Bank, on the next succeeding Business Day following such notice, in an amount
equal to such Bank's Commitment Percentage of the aggregate amount of all Swing
Line Loans outstanding. The parties hereto agree that such payments made to the
Administrative Agent for the pro rata account of the Swing Line Bank shall
constitute Revolving Credit Loans made to the Borrower hereunder, except that
such Loans shall bear interest from the date of such payment to the
Administrative Agent until repaid in full at the per annum rate equal to the
Base Rate from time to time in effect less one-half of one percent (0.50%),
except as otherwise provided for in Section 3.11. The proceeds thereof shall be
applied directly to the Swing Line Bank to repay the Swing Line Bank for such
outstanding Swing Line Loans. Each Bank hereby absolutely, unconditionally and
irrevocably agrees to make such Revolving Credit Loans upon one Business Day's
notice as set forth above, notwithstanding (i) that the amount of such Loan may
not comply with the applicable minimums
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set forth in Section 2.5, (ii) the failure of the Borrower to meet the
conditions set forth in Sections 8 or 9, (iii) the occurrence or continuance of
a Default or an Event of Default hereunder, (iv) the date of such Loan, and (v)
the Total Commitment in effect at such time. In the event that it is
impracticable for such amounts to be paid to the Administrative Agent or the
Swing Line Bank or such Loan to be made for any reason on the date otherwise
required above, then each Bank hereby agrees that it shall forthwith purchase
(as of the date such payment and such Loan would have been made, but adjusted
for any payments received from the Borrower on or after such date and prior to
such purchase) from the Swing Line Bank, and the Swing Line Bank shall sell to
each Bank, such participations in the Swing Line Loans (including all accrued
and unpaid interest thereon) outstanding as shall be necessary to cause the
Banks to share in such Swing Line Loans pro rata based on their respective
Commitment Percentages (without regard to any termination of the Total
Commitment) by making available to the Swing Line Bank an amount equal to such
Bank's participation in the Swing Line Loans; provided that (x) all interest
payable on the Swing Line Loans shall be for the account of the Swing Line Bank
as a funding and administrative fee until the date as of which the respective
participation is purchased, and (y) at the time any purchase of such
participation is actually made, the purchasing Bank shall be required to pay the
Swing Line Bank interest on the principal amount of the participation so
purchased for each day from and including the date such Loan would otherwise
have been made until the date of payment for such participation at the rate of
interest equal to the Base Rate in effect during such period.
(e) The Swing Line Note. The obligation of the Borrower to repay the
Swing Line Loans made pursuant to this Agreement and to pay interest thereon as
set forth in this Agreement shall be evidenced by a promissory note of the
Borrower with appropriate insertions substantially in the form of Exhibit A-2
attached hereto (the "Swing Line Note"), dated the Closing Date and payable to
the order of the Swing Line Bank in a principal amount stated to be the lesser
of (i) the Maximum Swing Line Loan Amount, or (ii) the aggregate principal
amount of Swing Line Loans at any time advanced by the Swing Line Bank and
outstanding thereunder. The Borrower irrevocably authorizes the Swing Line Bank
to make or cause to be made, at or about the time of the Drawdown Date of any
Swing Line Loan or at the time of receipt of any payment of principal on the
Swing Line Note, an appropriate notation on the Note Record of the Swing Line
Note reflecting the making of such Swing Line Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Swing Line Loans set
forth on such Note Record shall be prima facie evidence of the principal amount
thereof owing and unpaid to the Swing Line Bank, but the failure to record, or
any error in so recording, any such amount on such Note Record shall not limit
or otherwise affect the actual amount of the obligations of the Borrower
hereunder or under the Swing Line Note to make payments of principal of or
interest on the Swing Line Note when due.
Section 3. INTEREST; CERTAIN GENERAL PROVISIONS.
-------- ------- ------- ----------
Section 3.1. Interest on Loans; Payment. Except as otherwise increased
pursuant to Section 3.11 hereof, the outstanding amount of each Revolving Credit
Loan shall bear interest during each Interest Period relating thereto at a rate
per annum equal to the Eurodollar Rate determined for such Interest Period plus
the applicable Margin Percentage as in effect on the first day of such Interest
Period. The Borrower absolutely and unconditionally promises to pay interest on
each Revolving Credit Loan in arrears on each Interest Payment Date with respect
thereto.
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Section 3.2. Interest Period Options. Upon notice (a "Continuation
Request") given to the Administrative Agent no later than 11:00 a.m. (Boston
time) at least two (2) Eurodollar Business Days' prior to the expiration of an
Interest Period applicable to any Revolving Credit Loan, the Borrower may elect
to continue such Revolving Credit Loan upon the expiration of the then
applicable Interest Period for another Interest Period of the duration specified
in such notice; provided that no Revolving Credit Loan may be continued for an
Interest Period in excess of seven (7) days when any Default or Event of Default
has occurred and is continuing; provided further that the Revolving Credit Loans
to which a particular Interest Period applies shall be in an aggregate principal
amount of $3,000,000 or an integral multiple of $250,000 in excess thereof. Each
continuation of a Revolving Credit Loan hereunder shall be allocated between the
Banks in proportion, as nearly as practicable, to such Bank's Commitment
Percentage, with adjustments to the extent practicable to equalize any prior
continuations not exactly in proportion.
Section 3.3. Indemnity. The Borrower agrees to indemnify each Bank and
to hold each Bank harmless from any loss or expense that such Bank may sustain
or incur as a consequence of (a) default by the Borrower in payment of the
principal amount of or interest on any Loans, including any such loss or expense
arising from interest or fees payable by such Bank to lenders of funds obtained
by it in order to maintain its Loans, (b) default by the Borrower in making a
borrowing after the Borrower has given (or is deemed to have given) a Loan
Request or a Continuation Request in accordance with Sections 2.5 or 3.2 other
than as a result of a default by any Bank, (c) the making of any payment of a
Revolving Credit Loan on a day that is not the last day of the applicable
Interest Period with respect thereto, including interest or fees payable by any
Bank to lenders of funds obtained by it in order to maintain any such Revolving
Credit Loan, to the extent not off-set by income derived from the redeployment
of such funds, or (d) default by the Borrower in making any repayment of a Loan
after the Borrower has given a notice in accordance with Section 2.8. This
covenant shall survive the termination of this Credit Agreement and payment of
the Notes.
Section 3.4. Funds for Payments. Except as set forth in Section 2.9(d),
all payments of principal, interest, and the Facility Fee and any other amounts
due hereunder or under any of the other Loan Documents shall be made by the
Borrower to the Administrative Agent at the Administrative Agent's head office
at 100 Federal Street, Boston, Massachusetts 02110 or at such other location in
the Boston, Massachusetts area that the Administrative Agent may from time to
time designate, in each case in immediately available funds. All payments by the
Borrower hereunder and under any of the other Loan Documents shall be made
without setoff or counterclaim and free and clear of and without deduction for
any taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof or
taxing or other authority therein unless the Borrower is compelled by law to
make such deduction or withholding. If any such obligation is imposed upon the
Borrower with respect to any amount payable by it hereunder or under any of the
other Loan Documents, the Borrower will pay to the Administrative Agent, for the
account of the Banks or (as the case may be) the Administrative Agent, on the
date on which such amount is due and payable hereunder or under such other Loan
Document, such additional amount in Dollars as shall be necessary to enable the
Banks or the Administrative Agent to receive the same net amount which the Banks
or the Administrative Agent would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly to
the Administrative Agent certificates or other valid vouchers for all taxes or
other charges deducted
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from or paid with respect to payments made by the Borrower hereunder or under
such other Loan Document. The Borrower may, within 90 days of the imposition of
any such obligation by any Bank, by notice in writing to the Administrative
Agent and such Bank, (a) require such Bank that imposed such obligation to
cooperate with the Borrower in obtaining an Eligible Assignee satisfactory to
the Administrative Agent as a replacement bank for such Bank and in assigning
such Bank's interest hereunder and under its Note to such Eligible Assignee
subject to the terms, conditions, and procedures of Section 15, or (b) repay all
amounts owed to such Bank, terminate such Bank's Commitment and reduce the
aggregate of the Commitments under the Credit Agreement by a corresponding
amount. Each Bank that is not incorporated or organized under the laws of the
United States of America or a state thereof or the District of Columbia agrees
that, on an annual basis, it will deliver to the Borrower and the Administrative
Agent two duly completed copies of United States Internal Revenue Service Form
1001 or 4224 or successor applicable form, as the case may be, certifying in
each case that such Bank is entitled to receive payments under this Credit
Agreement and the Note payable to it, without deduction or withholding of any
United States federal income taxes.
Section 3.5. Computations. All computations of interest on the
Revolving Credit Loans and the Facility Fee shall be based on a 360 day year and
paid for the actual number of days elapsed. All computations of interest on the
Swing Line Loan shall be based on a 365 day year and paid for the actual number
of days elapsed. Except as otherwise specifically provided herein, whenever a
payment hereunder or under any of the other Loan Documents becomes due on a day
that is not a Business Day, the due date for such payment shall be extended to
the next succeeding Business Day, and interest shall accrue during such
extension. The outstanding amount of the Loans as reflected on the Note Records
from time to time shall be considered conclusive and binding absent manifest
mathematical error on the Borrower unless within thirty (30) Business Days after
receipt of any notice by the Administrative Agent or any of the Banks of such
outstanding amount, the Borrower shall notify the Administrative Agent or such
Bank to the contrary.
Section 3.6. Inability to Determine Eurodollar Rate. In the event the
Administrative Agent shall determine that adequate and reasonable methods do not
exist for ascertaining the Eurodollar Rate that would otherwise determine the
rate of interest to be applicable during any Interest Period, the Administrative
Agent shall forthwith give telex notice of such determination (which shall be
conclusive and binding on the Borrower) to the Borrower at least one (1)
Business Day before the first day of such Interest Period. In such event, (a)
any Loan Request or Continuation Request with respect to Loans shall be
automatically withdrawn, (b) the Borrowers and the Banks shall negotiate in good
faith to agree on an alternative interest rate which is reasonably equivalent to
the Eurodollar Rate; provided that if the Borrowers and the Banks are unable to
agree on such alternative interest rate prior to the last day of the then
current Interest Period, each Revolving Credit Loan then outstanding will as of
the last day of the then current Interest Period bear interest at a per annum
rate equal to the Base Rate in effect from time to time payable in arrears on
the last day of each fiscal quarter of the Borrower and (c) the obligations of
the Banks to make additional Revolving Credit Loans shall be suspended until the
Administrative Agent determines that the circumstances giving rise to such
suspension no longer exist, whereupon the Administrative Agent shall so notify
the Borrower and the Banks.
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Section 3.7. Illegality. Notwithstanding any other provisions herein,
if any introduction of or change in any law, regulation, treaty or directive or
in the interpretation or application thereof shall make it unlawful, or any
central bank or other governmental authority having jurisdiction over any Bank
or its Eurodollar Lending Office shall assert that it is unlawful, for such Bank
or its Eurodollar Lending Office to make or maintain Loans that bear interest
calculated by reference to the Eurodollar Rate, (a) such Bank shall forthwith
give notice by telefax of such circumstances, confirmed in a writing delivered
to the Borrower by courier or postal service (which notice shall be withdrawn by
such Bank when such Bank shall reasonably determine that it shall no longer be
illegal for such Bank or its Eurodollar Lending Office to make or maintain such
Loans), (b) the commitment of such Bank to make or maintain Revolving Credit
Loans shall forthwith be cancelled and (c) such Bank's Revolving Credit Loans
then outstanding, if any, shall be converted automatically on the next
succeeding last day of each Interest Period applicable to such Revolving Credit
Loans or within such earlier period as may be required by law to Loans which
bear interest at a per annum rate equal to an alternative interest rate which is
reasonably equivalent to the Eurodollar Rate upon which the Administrative Agent
and the Banks may in good faith agree; provided that if the Borrower and the
Banks are unable to agree on such alternative interest rate, such Loans shall
bear interest at a per annum rate equal to the Base Rate in effect from time to
time payable in arrears on the last day of each fiscal quarter of the Borrower.
The Borrower agrees promptly to pay the Administrative Agent for the account of
each Bank, upon demand by the Administrative Agent, any additional amounts
necessary to compensate the Banks for any costs incurred by the Banks in making
any conversion in accordance with this Section 3.7, including any interest or
fees payable by the Banks to lenders of funds obtained by them in order to make
or maintain their Loans (the Administrative Agent's written notice of such
costs, as certified to the Borrower, to be conclusive absent manifest error).
Section 3.8. Additional Costs, Etc. If any present or future, or any
change in any present or future, applicable law, which expression, as used
herein, includes statutes, rules and regulations thereunder and interpretations
thereof by any competent court or by any governmental or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law),
shall:
(a) subject any Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Credit Agreement,
the other Loan Documents, such Bank's Commitment or the Loans advanced by such
Bank (other than taxes based upon or measured by the income or profits of such
Bank), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or the
interest on any Loans or any other amounts payable to such Bank under this
Credit Agreement or the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, or other similar requirements against
assets held by, or deposits in or for the account of, or loans by, or
commitments of, or letters of credit issued by, an office of any Bank, or
<PAGE>
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(d) impose on any Bank any other conditions or requirements with
respect to this Credit Agreement, the other Loan Documents, the Loans, such
Bank's Commitment, or any class of loans or commitments of which any of the
Loans or such Bank's Commitment forms a part;
and the result of any of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining the Loans or such Bank's
Commitment, or
(ii) to reduce the amount of principal, interest or other
amounts payable to such Bank hereunder on account of such Bank's
Commitment or the Loans, or
(iii) to require such Bank to make any payment or to forego
any interest or other sum payable hereunder, the amount of which
payment or foregone interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
from the Borrower hereunder,
then, and in each such case, the Borrower will, upon written demand made by such
Bank at any time and from time to time and as often as the occasion therefor may
arise, pay to such Bank such additional amounts as will be sufficient to
compensate such Bank for such additional cost, reduction, payment or foregone
interest or other sum (after such Bank shall have allocated the same fairly and
equitably among all customers of any class generally affected thereby); provided
that in the event that such additional cost, reduction, payment, or foregone
interest or other sum which was incurred by such Bank is subsequently returned
or reimbursed to such Bank, such Bank shall return or reimburse to the Borrower
any additional amount paid pursuant to this Section 3.8 by the Borrower to such
Bank with respect thereto. In the event that any of the foregoing events occur,
each Bank will use its reasonable efforts to take such actions as are reasonably
feasible and available to such Bank to decrease the additional costs payable
hereunder; provided that no Bank shall be required to transfer any activities
related to this Agreement to any jurisdiction in which such Bank does not at
such time regularly conduct ordinary banking operations or to a jurisdiction
which otherwise will be disadvantageous to such Bank. Such Bank shall give the
Borrower written notice of any event causing such additional cost, reduction,
payment or foregone interest or other sum within 90 days of the occurrence
thereof and the Borrower shall not be liable for any such costs incurred prior
to the date which is 90 days prior to the date of such notice.
Section 3.9. Certificate. A certificate setting forth any additional
amounts payable pursuant to Sections 3.7 and 3.8 and the changes as a result of
which such amounts are due and the computations in reasonable detail pursuant to
which such amounts were calculated, submitted by any Bank to the Borrower, shall
be conclusive absent manifest error. Upon delivery of a notice to such Bank no
more than thirty Business Days after receipt of such certificate, the Borrower
shall have reasonable opportunity to review and discuss such computations with a
responsible officer at such Bank.
Section 3.10. Capital Adequacy. If any present or future, or any change
in any present or future, law, governmental rule, regulation, policy, guideline
or directive (whether or not having the force of law) or the interpretation
thereof by a court or governmental authority with appropriate jurisdiction
affects the amount of capital required or expected to be maintained by any Bank
or any corporation controlling
<PAGE>
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such Bank and such Bank determines that the amount of capital required to be
maintained by it or such corporation is increased by or based upon the existence
of its Commitment or the Loans made pursuant hereto, then such Bank may notify
the Borrower of such fact. To the extent that the costs of such increased
capital requirements are not reflected in the rates of interest payable
hereunder, the Borrower and such Bank shall thereafter attempt to negotiate in
good faith, within thirty (30) days of the day on which the Borrower receives
such notice, an adjustment payable hereunder that will adequately compensate
such Bank in light of these circumstances. If the Borrower and such Bank are
unable to agree to such adjustment within thirty (30) days of the date on which
the Borrower receives such notice, then commencing on the date of such notice
(but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that will,
in such Bank's reasonable determination, provide adequate compensation to such
Bank, such amount to be conclusive and binding on the Borrower, absent manifest
error. Each Bank shall allocate such cost increases among its customers in good
faith and on an equitable basis.
Section 3.11. Interest on Overdue Amounts. Overdue principal and (to
the extent permitted by applicable law) interest on the Loans and all other
overdue amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded daily and payable on demand at a rate per annum which
is two percent (2%) above the per annum interest rate otherwise applicable to
such Loans, until such amount shall be paid in full (after as well as before
judgment).
Section 4. REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants to the Banks as follows:
Section 4.1. Corporate Authority.
(a) Incorporation; Good Standing. Each of the Borrower and its Material
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, (ii) has all requisite
corporate power and authority and legal right to own and operate its property,
to lease the property it operates as lessee and to conduct its business as now
conducted and as presently contemplated, and (iii) is in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where such qualification is necessary except where (x) a failure to be so
qualified would not have a materially adverse effect on the business, assets or
financial condition of the Borrower or the Borrower and its Material
Subsidiaries, taken as a whole or the Borrower's ability to perform the
Obligations or (y) the Borrower or such Subsidiary has applied for qualification
to do business in such jurisdiction and such application is pending.
(b) Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which the Borrower is or is to
become a party and the transactions contemplated hereby and thereby (i) are
within the corporate authority and legal right of the Borrower, (ii) have been
duly authorized by all necessary corporate proceedings, (iii) do not conflict
with or result in any breach or contravention of any provision of law, statute,
rule or regulation to which the Borrower is subject or any judgment, order,
writ, injunction, license or permit applicable to the Borrower which would have
a materially adverse effect on the business, assets or financial condition of
the Borrower or the Borrower and its Material Subsidiaries, taken as a whole and
(iv) do not conflict with any provision of the corporate charter or bylaws of,
or any agreement or other instrument binding upon, the Borrower.
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(c) Enforceability. The execution and delivery of this Credit Agreement
and the other Loan Documents to which the Borrower is or is to become a party
will result in valid and legally binding obligations of the Borrower enforceable
against it in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights and except to the extent that availability of
the remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
Section 4.2. Governmental Approvals. The execution, delivery and
performance by the Borrower of this Credit Agreement and the other Loan
Documents to which the Borrower is or is to become a party and the transactions
contemplated hereby and thereby do not require the Borrower to obtain the
approval or consent of, to make a filing with, or to perform or obtain the
performance of any other act by or in respect of any governmental agency or
authority other than those already obtained or performed.
Section 4.3. Title to Properties; Leases. Other than as noted on the
audited consolidated financial statements of the Borrower and its Subsidiaries
as at the Balance Sheet Date, the Borrower and its Subsidiaries own all of the
assets reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date and except for defects of title to certain real
property which do not materially impair the value or usefulness thereof),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances,
except for liens permitted pursuant to Section 6.2. The Borrower and its
Material Subsidiaries enjoy peaceful and undisturbed possession under all leases
under which they are operating, and all said leases are valid and subsisting and
in full force and effect except to the extent that the failure to enjoy peaceful
and undisturbed possession of such lease or the failure of such lease to be
valid, subsisting and in full force and effect does not have a material adverse
effect on the assets, financial condition or business of the Borrower and its
Material Subsidiaries, taken as a whole.
Section 4.4. Financial Statements. There has been furnished to each of
the Banks a consolidated balance sheet of the Borrower and its Subsidiaries as
at the Balance Sheet Date, and related consolidated statements of income,
retained earnings and cash flow for the fiscal year then ended, certified by
Arthur Andersen and Company, the Borrower's independent certified public
accountants. Such balance sheet and statements of income, retained earnings and
cash flow have been prepared in accordance with Generally Accepted Accounting
Principles consistently applied and are correct and complete and fairly present
the financial condition of the Borrower and its Material Subsidiaries as at the
close of business on the date thereof and the consolidated results of operations
for the fiscal year then ended. There are no contingent liabilities of the
Borrower or any of its Subsidiaries as of such date involving material amounts,
known to the officers of the Borrower and not disclosed in said balance sheet
and the related notes thereto.
Section 4.5. No Material Changes, Etc. Since the Balance Sheet Date
there has occurred no materially adverse change in the financial condition or
business of the Borrower and its Subsidiaries as shown on or reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date, or the related consolidated statements of income, retained
earnings or cash flow for the fiscal year then ended, other than changes in the
ordinary course of business that have not had any
<PAGE>
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materially adverse effect either individually or in the aggregate on the
business or financial condition of the Borrower and its Material Subsidiaries,
taken as a whole.
Section 4.6. Franchises, Patents, Copyrights, Etc. Each of the Borrower
and its Subsidiaries, respectively, possesses or has a valid right to use all
material franchises, patents, copyrights, inventions, technology, trademark
registrations, trademarks, trade names, trade secrets, service marks, FCC
Licenses, other licenses and permits, and rights in respect of the foregoing
and, to the best of its knowledge, patent and trademark applications and rights
in respect thereto (collectively, the "Proprietary Rights"), adequate for the
conduct of its business substantially as now conducted without known conflict
with any rights of others which could affect or impair in a material manner the
business or assets of the Borrower and its Material Subsidiaries, taken as a
whole. Except as disclosed in the financial statements referred to in Section
4.4, the Borrower is not aware of any existing or threatened infringement or
misappropriation of (a) any Proprietary Rights of others by the Borrower or any
of its Subsidiaries or (b) any Proprietary Rights of the Borrower or any of its
Subsidiaries by others, in any way which might materially adversely affect the
business, assets or condition, financial or otherwise, of the Borrower and its
Material Subsidiaries, taken as a whole.
Section 4.7. No Litigation. There are no actions, suits, proceedings or
investigations of any kind pending or, to the Borrower's knowledge, threatened
against the Borrower or any of its Subsidiaries before any court, tribunal or
administrative agency or board that, if adversely determined are reasonably
likely to in the aggregate, materially adversely affect the properties, assets,
financial condition or business of the Borrower and its Material Subsidiaries,
taken as a whole or materially impair the right of the Borrower and its Material
Subsidiaries, taken as a whole, to carry on business substantially as now
conducted by them, or result in any substantial liability not adequately covered
by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Borrower, or which question the validity of
this Credit Agreement or any of the other Loan Documents, or any action taken or
to be taken pursuant hereto or thereto. There are no final judgments against the
Borrower or any of its Subsidiaries that, with other outstanding final
judgments, undischarged and not covered by insurance, exceeds in the aggregate
five percent (5%) of the Consolidated Net Worth of the Borrower.
Section 4.8. No Materially Adverse Contracts, Etc. Neither the Borrower
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation that has or, to
the Borrower's knowledge, is expected in the future to have a materially adverse
effect on the business, assets or financial condition of the Borrower and its
Material Subsidiaries, taken as a whole. Neither the Borrower nor any of its
Subsidiaries is a party to any contract or agreement that has or, to the best of
the Borrower's knowledge, is expected, in the judgment of the Borrower's
officers, to have any materially adverse effect on the business of the Borrower
and its Material Subsidiaries, taken as a whole.
Section 4.9. Compliance With Other Instruments, Laws, Etc. Neither the
Borrower nor any of its Subsidiaries is in violation of any provision of its
charter documents, bylaws, or any agreement or instrument to which it is subject
or by which it or any of its properties are bound or any decree, order,
judgment, statute, license, rule or regulation, in any of the foregoing cases in
a manner that are reasonably likely to result in the imposition of substantial
penalties or materially and adversely affect the financial
<PAGE>
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condition, properties or business of the Borrower and its Material Subsidiaries,
taken as a whole or the Borrower's ability to perform the Obligations.
Section 4.10. Tax Status. The Borrower and, to the best of the
Borrower's knowledge, its Subsidiaries have (a) made or filed all federal and
state income and all other material tax returns, reports and declarations
required by any jurisdiction to which any of them is subject or properly filed
for and received extensions with respect thereto which are still in full force
and effect and which have been fully complied with in all material respects, (b)
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith by appropriate proceedings and for which adequate
reserves, to the extent required by Generally Accepted Accounting Principles,
have been established and (c) set aside on their books provisions reasonably
adequate for the payment of all estimated taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Borrower know of no basis for any such
claim.
Section 4.11. No Event of Default. No Default or Event of Default has
occurred and is continuing.
Section 4.12. Holding Company and Investment Company Acts. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it a "registered investment company", or an "affiliated company" or a "principal
underwriter" of a "registered investment company", as such terms are defined in
the Investment Company Act of 1940.
Section 4.13. Certain Transactions. Except for arm's length
transactions pursuant to which the Borrower makes payments in the ordinary
course of business upon terms no less favorable than the Borrower could obtain
from third parties and transactions disclosed in the Borrower's Form 10-K filed
with the Securities and Exchange Commission for its fiscal year ending December
31, 1996, none of the officers, directors or other key employees of the Borrower
or any of its Material Subsidiaries is presently a party to any transaction with
the Borrower or any of its Material Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such key employee or, to the knowledge of
the Borrower, any corporation, partnership, trust or other entity in which any
officer, director, or any such key employee has a substantial interest or is an
officer, director, trustee or partner.
Section 4.14. ERISA Compliance.
(a) In General. To the best of the Borrower's knowledge, the Borrower
and its Subsidiaries have complied in all material respects with provisions of
the Code, to the extent applicable, and of ERISA relevant to the Borrower's
Pension Plans (as defined in Section 3(2) of ERISA), including the provisions
thereof respecting funding requirements for, and the termination of, such plans
and respecting prohibited
<PAGE>
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transactions thereunder, and the funding of any Guaranteed Pension Plan complies
with the minimum funding standards of Section 412 of the Code.
(b) Guaranteed Pension Plans. Each contribution required to be made to
a Guaranteed Pension Plan, whether required to be made to avoid the incurrence
of an accumulated funding deficiency, the notice or lien provisions of Section
302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated
funding deficiency or extension of amortization periods has been received with
respect to any Guaranteed Pension Plan. No liability to the PBGC (other than
required insurance premiums, all of which have been paid) has been incurred by
the Borrowers or any ERISA Affiliate with respect to any Guaranteed Pension Plan
and there has not been any ERISA Reportable Event, or any other event or
condition which presents a material risk of termination of any Guaranteed
Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed
Pension Plan (which in each case occurred within twelve months of the date of
this representation), and except as disclosed on Schedule 4.14 attached hereto,
the current value of all accrued benefits under each of such plans did not, as
of the latest valuation date, exceed the then current value of the assets of
such plans allocable to such accrued benefits based upon the actuarial methods
and assumptions used for such plans.
(c) Multiemployer Plans. Neither the Borrower nor any ERISA Affiliate
has incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA. Neither the Borrower nor any ERISA
Affiliate has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA
or that any Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
Section 4.15. Purpose Credit.
(a) The Borrower has not engaged principally or as one of its important
activities in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve
System.
(b) The Borrower shall not, directly or indirectly, apply any part of
the proceeds of the Notes for the purpose of or in connection with the
Borrower's broker-dealer activities, if any, within the meaning of Regulation T
of the Federal Reserve Board (Title 12, Part 220, Code of Federal Regulations,
as amended) or any published regulations, interpretations or rulings thereunder.
(c) The issuance of the Notes and the application of the proceeds
thereof by the Borrower will not contravene Regulation X of the Federal Reserve
Board (Title 12, Part 224, Code of Federal Regulations, as amended) or any
published regulations, interpretations or rulings thereunder.
(d) The Borrower shall not, directly or indirectly, apply any part of
the proceeds of the Notes for the purpose of (i) knowingly purchasing, or
providing credit support for the purchase of, Ineligible Securities from a
Section 20 Subsidiary during any period in which such Section 20 Subsidiary
makes a market in such Ineligible Securities, (ii) knowingly purchasing, or
providing credit support for the
<PAGE>
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purchase of, during the underwriting or placement period, any Ineligible
Securities being underwritten or privately placed by a Section 20 Subsidiary, or
(iii) making, or providing credit support for the making of, payments of
principal or interest on Ineligible Securities underwritten or privately placed
by a Section 20 Subsidiary and issued by or for the benefit of the Borrower or
any Subsidiary or other Affiliate of the Borrower.
Section 4.16. Environmental Compliance.
(a) The Borrower has no actual knowledge that any
operator of the Real Estate, has violated, or is alleged to
have violated, any judgment, decree, order, law, license, rule
or regulation pertaining to environmental matters (hereinafter
"Environmental Laws"), which violation would have a material
adverse effect on the environment or the business, assets or
financial condition of the Borrower or any of its Material
Subsidiaries, taken as a whole.
(b) Neither the Borrower nor any of its Material
Subsidiaries has received notice from any third party
including, without limitation, any federal, state or local
governmental authority, (i) that any one of them has been
identified by the United States Environmental Protection
Agency ("EPA") as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980 with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii)
that any hazardous waste, as defined by 42 U.S.C. Section
6903(5), any hazardous substances as defined by 42 U.S.C.
Section 9601(14), any pollutant or contaminant as defined by
42 U.S.C. Section 9601(33) and any toxic substances, oil or
hazardous materials or other chemicals or substances regulated
by any Environmental Laws (hereinafter "Hazardous Substances")
which any one of them has generated, transported or disposed
of has been found at any site at which a federal, state or
local agency or other third party has conducted or has ordered
that the Borrower or any of its Material Subsidiaries conduct
a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or
shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each
case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of
any kind whatsoever in connection with the release of
Hazardous Substances.
(c) Neither the Borrower nor any of its
Material Subsidiaries are subject to any applicable
environmental law requiring the performance of Hazardous
Substances site
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assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any governmental agency
or the recording or delivery to other Persons of an
environmental disclosure document or statement by virtue of
the transactions set forth herein and contemplated hereby or
the effectiveness of any other transactions contemplated
hereby.
Section 4.17. Compliance With Fair Labor Standards Act. To the best of
the Borrower's knowledge, the Borrower has at all times operated its business in
compliance with all applicable provisions of the Fair Labor Standards Act of
1938 (29 U.S.C. Section 106 and 207) except to the extent that the Borrower's
failure to comply therewith would not have a material adverse affect on the
business, assets or condition, financial or otherwise, of the Borrower and its
Material Subsidiaries, taken as a whole. To the best of the Borrower's
knowledge, none of the Borrower's inventory has been produced by employees who
are or were employed in violation of the minimum wage or maximum hour provisions
of such Act or any regulations thereunder.
Section 4.18. Subsidiaries. Attached hereto as Schedule 4.18 is a
schedule showing with respect to each Material Subsidiary the jurisdiction in
which it is organized and the approximate percentage of the outstanding Voting
Stock of that Subsidiary held either by the Borrower or another Subsidiary. All
of the outstanding capital stock of each Material Subsidiary has been duly
authorized and issued and is fully-paid and non-assessable; and, except as
indicated in Schedule 4.18, free and clear of any pledge, charge, lien, security
interest or other encumbrance or restriction on transfer.
Section 4.19. Disclosure. No representation or warranty made by the
Borrower in any of the Loan Documents or in any other document furnished from
time to time in connection herewith or therewith, contains any misrepresentation
of a material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to the
Borrower that materially adversely affects, or that might reasonably be expected
to materially adversely affect, the business, property or financial condition of
the Borrower and its Material Subsidiaries on a consolidated basis.
Section 5. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower
covenants and agrees that, so long as any Loan or Note is outstanding or any
Bank has any obligation to make any Loans hereunder:
Section 5.1. Punctual Payment. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loans and the Facility
Fee, all in accordance with the terms of this Credit Agreement and the Notes.
Section 5.2. Maintenance of Office. The Borrower will maintain its
chief executive office in Chicago, Illinois, or at such other place in the
United States of America as the Borrower shall designate upon written notice to
the Administrative Agent, where notices, presentations and demands to or upon
the Borrower in respect of the Loan Documents may be given or made.
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Section 5.3. Records and Accounts. The Borrower will (a) keep, and
cause each of its Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in accordance with
Generally Accepted Accounting Principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of its
Subsidiaries, contingencies, and other reserves.
Section 5.4. Financial Statements, Certificates and Information. The
Borrower will deliver to each of the Banks or, with respect to subsection (f) of
this Section 5.4 only, make available to each of the Banks at the Borrower's
principal place of business:
(a) as soon as practicable, but in any event not later than ninety (90)
days after the end of each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such year, and the
related consolidated statements of income, retained earnings and cash flows for
such year, each setting forth in comparative form the figures for the previous
fiscal year and all such consolidated statements to be in reasonable detail,
prepared in accordance with Generally Accepted Accounting Principles, and
certified without material qualification as to any circumstance which could
reasonably be expected to have a material adverse effect on the Borrower and its
Material Subsidiaries, taken as a whole, by independent public accountants of
nationally recognized standing selected by the Borrower and acceptable to the
Majority Banks, together with a written statement from such accountants to the
effect that they have read a copy of this Credit Agreement, and that, in making
the examination necessary to said certification, they have obtained no knowledge
of any Default or Event of Default, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall disclose
in such statement any such Default or Event of Default; provided that such
accountants shall not be liable to the Banks for failure to obtain knowledge of
any Default or Event of Default;
(b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three fiscal quarters in each of
the Borrower's fiscal years, copies of the unaudited consolidated balance sheet
of the Borrower and its Subsidiaries as at the end of such quarter, and the
related consolidated statements of income and cash flows for such quarter and
the portion of the Borrower's fiscal year then elapsed, together with
comparative consolidated figures for the same periods of the preceding year, all
in reasonable detail and prepared in accordance with Generally Accepted
Accounting Principles and accompanied by a certificate of the principal
financial officer of the Borrower stating that the information contained in such
financial statements is correct and complete and fairly presents the financial
position of the Borrower and its Subsidiaries on the date thereof and the
results of their operations for the periods covered thereby (subject to year-end
adjustments);
(c) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial officer of the Borrower in substantially the form of Exhibit
C hereto and setting forth in reasonable detail computations evidencing
compliance with the covenants contained in Sections 7.1 and 7.2 as at the end of
the period covered by such statements or during such period as may be required,
and (if applicable)
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reconciliations to reflect changes in Generally Accepted Accounting Principles
since the Balance Sheet Date (each, a "Compliance Certificate");
(d) contemporaneously with the filing or mailing thereof, copies of all
material of a financial nature filed with the Securities and Exchange Commission
or sent to the stockholders of the Borrower or any holder of the Borrower's
Funded Debt;
(e) promptly upon request by the Administrative Agent or any Bank, all
detailed audits or reports submitted to the Borrower by independent public
accountants in connection with any annual or interim audits of the books of the
Borrower or any Material Subsidiary; and
(f) from time to time upon request by the Administrative Agent or any
Bank, such other financial data and information (including, without limitation,
accountants management letters and such other information regarding the business
and affairs and condition, financial and other, of the Borrower, its
Subsidiaries and their respective properties) as the Administrative Agent or any
Bank may reasonably request, subject to the confidentiality provisions set forth
in Section 25 hereof.
Section 5.5. Corporate Existence; Maintenance of Properties. The
Borrower will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, material rights, franchises
and Proprietary Rights and those of its Subsidiaries except to the extent that
the Borrower's failure to do so will not have a materially adverse effect on the
assets, financial condition or business of the Borrower and its Material
Subsidiaries, taken as a whole. It (a) will cause all of its material properties
and those of its Subsidiaries used or useful in the conduct of its business or
the business of its Subsidiaries to be maintained and kept in good condition,
repair and working order and supplied with all reasonably necessary equipment,
(b) will cause to be made all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will, and will cause each of its Material Subsidiaries to, continue to engage
primarily in the businesses now conducted by them and in related businesses;
provided that nothing in this Section 5.5 shall prevent the Borrower from
discontinuing the operation and maintenance of any of its properties or those of
its Material Subsidiaries if such discontinuance is, in the sole judgment of the
Borrower, desirable in the conduct of its or their business and that do not in
the aggregate materially adversely affect the business of the Borrower and its
Material Subsidiaries on a consolidated basis.
Section 5.6. Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its insurable properties and business against such
casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic
areas and in amounts, containing such terms, in such forms and for such periods
as may be reasonably satisfactory to the Administrative Agent; provided,
however, that the Borrower and any Subsidiary may self-insure for physical
damage to automobiles, welfare benefits and against liability to workers in any
state or jurisdiction, or may effect worker's compensation insurance therein
through an insurance fund operated by such state or jurisdiction; and provided,
further, that notwithstanding anything to the contrary contained herein, the
Borrower or such Subsidiary will keep its assets which are of an insurable
character insured by
<PAGE>
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financially sound and reputable insurers against loss or damage by fire or
explosion in amounts sufficient to prevent the Borrower or such Subsidiary from
becoming a co-insurer and not in any event less than 80% of the full insurable
value of the property insured.
Section 5.7. Taxes; Etc. The Borrower will, and will cause each of its
Subsidiaries to, (a) duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue or (b) properly file for and receive
extensions for such payment and duly pay and discharge, or cause to be paid and
discharged, within such extension period, all taxes, assessments and other
governmental charges (other than taxes, assessments and other governmental
charges imposed by foreign jurisdictions, including states in which neither the
Borrower nor any of its Subsidiaries conducts a material portion of its
business, that in the aggregate are not material to the business or assets of
the Borrower on an individual basis or of the Borrower and its Subsidiaries on a
consolidated basis) imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto; and provided further that the Borrower
and each Subsidiary of the Borrower will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
Section 5.8. Inspection of Properties and Books. The Borrower shall
permit the Banks, through the Administrative Agent or any of the Banks' other
designated representatives, to visit and inspect any of the properties of the
Borrower or any of its Subsidiaries, to examine the books of account of the
Borrower and its Subsidiaries (and to make copies thereof and extracts
therefrom), and to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with, and to be advised as to the same by, its and their
officers, employees and independent public accountants (such accountants being
hereby authorized by the Borrower to so discuss and advise) all at such
reasonable times and intervals as the Administrative Agent or any Bank may
reasonably request. In connection with any such inspections or discussions, each
Bank, on behalf of itself and any representative authorized by it, agrees to
treat all non-public information as confidential information pursuant to Section
25 and to take all reasonable precautions to prevent such confidential
information from being exposed to third parties and to those of its employees
and representatives who do not need to know such confidential information;
provided that this Section 5.8 shall not affect the disclosure by any Bank of
information required to be disclosed to its auditors, regulatory agencies or
pursuant to subpoena or other legal process or by virtue of any other law,
regulation, order or interpretation.
Section 5.9. Compliance with Laws, Contracts, Licenses, and Permits.
The Borrower will, and will cause each of its Material Subsidiaries to, comply
with (a) the applicable laws and regulations wherever its business is conducted,
including all Environmental Laws which may be in effect from time to time, (b)
the provisions of its charter documents and by-laws, (c) all agreements and
instruments by which it or any of its properties or business may be bound and
(d) all applicable decrees, orders, and judgments; if in each such case failure
to comply would have a materially adverse effect on the Borrower and its
Material Subsidiaries, taken as a whole. If at any time any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any
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government shall become necessary or required in order that the Borrower may
fulfill any of the Obligations, the Borrower will promptly take or cause to be
taken all reasonable steps within the power of the Borrower to obtain such
authorization, consent, approval, permit or license and furnish the Banks with
evidence thereof.
Section 5.10. Pension Plans. The Borrower and any ERISA Affiliate
shall:
(a) promptly after the Borrower or any ERISA Affiliate knows or has
reason to know that any ERISA Reportable Event has occurred, notify the
Administrative Agent that such ERISA Reportable Event has occurred;
(b) promptly upon request make available to each Bank at the Borrower's
principal place of business a copy of (i) any actuarial statement related to any
pension plan required to be submitted under Section 103(d) of ERISA or (ii) any
notice, report or demand sent or received by a pension plan under Section 4065
of ERISA;
(c) furnish to each Bank forthwith, a copy of (i) any notice of a
pension plan termination sent to the PBGC under Section 4041(a) of ERISA and
(ii) any notice, report or demand sent or received by a pension plan under
Sections 4041, 4042, 4043, 4063, 4066 or 4068 of ERISA; and
(d) furnish to each Bank a copy of any request for waiver from the
funding standards or extension of the amortization periods required by Section
412 of the Code no later than the date on which the request is submitted to the
Department of Labor or the Internal Revenue Service, as the case may be.
Section 5.11. Further Assurances. The Borrower will cooperate with the
Banks and the Administrative Agent and execute such further instruments and
documents as the Banks or the Administrative Agent shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Credit
Agreement and the other Loan Documents.
Section 5.12. Notices. The Borrower will promptly notify the
Administrative Agent and each of the Banks in writing of the occurrence of any
Default or Event of Default. If any Person shall give any notice or take any
other action in respect of a claimed default (whether or not constituting an
Event of Default) under this Credit Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to which
the Borrower or any of its Subsidiaries is a party or obligor, whether as
principal or surety, the Borrower shall forthwith give written notice thereof to
each of the Banks, describing the notice or action and the nature of the claimed
default.
Section 5.13. Fair Labor Standards Act. The Borrower will, and will
cause each of its Subsidiaries to, at all times operate its business in
compliance with all applicable provisions of the Fair Labor Standards Act of
1938 (29 U.S.C. Sections 206 and 207) if the failure to comply with such
provisions might reasonably be expected to have a materially adverse affect on
the Borrower and its Subsidiaries, taken as a whole.
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Section 5.14. Environmental Events. The Borrower will promptly give
notice to the Administrative Agent (a) of any violation of any Environmental Law
that the Borrower or any of its Subsidiaries reports in writing or is reportable
by such Person in writing (or for which any written report supplemental to any
oral report is made) to any federal, state or local environmental agency and (b)
upon becoming aware thereof, of any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental liability,
or any federal, state or local environmental agency or board, that might
reasonably be expected to materially adversely affect the assets, liabilities,
financial conditions or operations of the Borrower and its Material Subsidiaries
on a consolidated basis.
Section 5.15. Notification of Claims. The Borrower will, immediately
upon becoming aware thereof, notify the Administrative Agent in writing of any
uninsured set-off, claims (including, with respect to the Real Estate,
environmental claims), withholdings or other defenses which might reasonably be
expected to have a materially adverse affect on the assets, liabilities,
financial conditions or operations of the Borrower and its Material Subsidiaries
on a consolidated basis.
Section 5.16. Use of Proceeds. The Borrower will use the proceeds of
the Loans for general corporate purposes, including without limitation the
financing of acquisitions, capital expenditures and for working capital
purposes.
Section 5.17. Notice of Litigation, Judgment and Material Events. The
Borrower will give notice to the Administrative Agent in writing within fifteen
(15) days of becoming aware of any litigation or proceedings threatened in
writing or any pending litigation and proceedings affecting the Borrower or any
of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or
becomes a party involving an uninsured claim against the Borrower individually
or the Borrower and its Subsidiaries on a consolidated basis that could
reasonably be expected to have a materially adverse effect on the Borrower and
its Subsidiaries on a consolidated basis and stating the nature and status of
such litigation or proceedings. The Borrower will, and will cause each of its
Subsidiaries to, give notice to the Administrative Agent, in writing, in form
and detail satisfactory to the Administrative Agent, (a) within ten (10) days of
any judgment not covered by insurance or reserves, final or otherwise, against
the Borrower or any of its Subsidiaries in an amount which in aggregate with
other such judgments against the Borrower or any of its Subsidiaries exceeds
five percent (5%) of the Consolidated Net Worth of the Borrower and (b) promptly
after becoming aware thereof, of the occurrence of any event that it is
reasonable to expect will be required to be reported to or filed with the
Securities and Exchange Commission.
Section 6. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The
Borrower covenants and agrees that, so long as any Loan or Note is outstanding
or any Bank has any obligation to make any Loans hereunder:
Section 6.1. Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, incur any Funded Debt if an Event of Default will
occur hereunder immediately after giving effect thereto as a consequence of the
incurrence of such Funded Debt. The Borrower will not incur any obligation to
repay money borrowed in an aggregate amount in excess of $150,000,000 under or
in
<PAGE>
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connection with any line of credit having an initial or scheduled maturity date
of less than one year from the initial borrowing date or renewal date therefor.
Section 6.2 Restrictions on Liens.
Section 6.2.1. The Borrower. The Borrower will not create or incur or
suffer to be created or incurred or to exist any Lien of any kind upon any of
its property or assets of any character, whether now owned or hereafter
acquired, or upon the income or profits therefrom to secure Funded Debt without
in any such case effectively providing concurrently with the creation or
incurrence of any such Liens that the Obligations shall be secured equally and
ratably with (or, at the option of the Borrower, prior to) such Funded Debt,
unless immediately after the incurrence of such Funded Debt (and after giving
effect to the application of the proceeds, if any, therefrom), the aggregate
principal amount of all such Funded Debt, together with the aggregate amount of
Capitalized Rent in respect of Sale and Leaseback Transactions (other than Sale
and Leaseback Transactions described in clauses (a) through (d), inclusive, of
Section6.8), would not exceed two percent (2%) of Consolidated Capitalization;
provided that the foregoing restrictions shall not apply to, and there shall be
excluded in computing the aggregate amount of Funded Debt secured by Liens for
the purpose of such restrictions:
(a) liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties to secure claims for
labor, material or supplies in respect of obligations not overdue or in respect
of which the Borrower shall at the time in good faith be prosecuting an appeal
or proceeding for review and in respect of which a stay of execution shall have
been obtained pending such appeal or review and for which any reserves required
in accordance with Generally Accepted Accounting Principles have been
established;
(b) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security obligations;
(c) liens on properties in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so long
as execution is not levied thereunder or in respect of which the Borrower shall
at the time in good faith be prosecuting an appeal or proceeding for review and
in respect of which a stay of execution shall have been obtained pending such
appeal or review and for which any reserves required in accordance with
Generally Accepted Accounting Principles have been established;
(d) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties in existence less than 120 days from the date of
creation thereof in respect of obligations not overdue;
(e) encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's liens under leases
to which the Borrower is a party, and other minor liens or encumbrances none of
which in the opinion of the Borrower interferes materially with the use of the
property affected in the ordinary conduct of the business of the Borrower, which
defects do not individually or in the
<PAGE>
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aggregate have a materially adverse effect on the business of the Borrower
individually or of the Borrower and its Subsidiaries on a consolidated basis;
(f) presently outstanding liens listed on Schedule 6.2.1 hereto;
(g) liens on property existing at the time the Borrower acquires such
property and not created in anticipation of such acquisition, purchase money
security interests in or purchase money mortgages on real or personal property
acquired or constructed after the date hereof to secure Funded Debt permitted to
be incurred hereunder and incurred in connection with the acquisition or
construction of such property at the time of or within 270 days following the
acquisition of such property, which security interests or mortgages cover only
the real or personal property so acquired, and Liens on existing properties or
assets to secure Funded Debt permitted hereunder and incurred for improvements
on such properties or assets;
(h) liens on the property of a Person (i) existing at the time such
Person is merged into or consolidated with the Borrower as permitted hereby or
at the time of a sale, lease or other disposition of the properties of a Person
as an entirety or substantially as an entirety to the Borrower as permitted
hereby, (ii) resulting from such merger, consolidation, sale, lease or
disposition by virtue of any Lien on property granted by the Borrower as
permitted hereby prior to such merger, consolidation, sale, lease or disposition
(and not in contemplation thereof or in connection therewith) which applies to
after-acquired property of the Borrower, or (iii) resulting from such merger,
consolidation, sale, lease or disposition pursuant to a Lien or contractual
provision granted or entered into by such Person prior to such merger,
consolidation, sale, lease or disposition (and not at the request of the
Borrower); provided that any such Lien referred to in clause (i) shall not apply
to any property of the Borrower other than the property subject thereto at the
time such Person or properties were acquired and any such Lien referred to in
clause (ii) or (iii) shall not apply to any property of the Borrower other than
the property so acquired;
(i) Liens arising by reason of deposits with, or the giving of any form
of security to, any governmental agency or any body created or approved by law
or governmental regulation, which Lien is required by law or governmental
regulation as a condition to the transaction of any business or the exercise of
any privilege, franchise, license or permit and Liens in favor of a government
or governmental entity to secure partial progress, advance or other payments, or
other obligations, pursuant to any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the costs
of acquiring, constructing or improving the property subject to such Liens
(including, without limitation, Liens incurred in connection with pollution
control, industrial revenue, private activity bond or similar financing); and
(j) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing clauses (a) through (i), inclusive; provided, however, that the
principal amount secured thereby shall not exceed the principal amount secured
thereby at the time of such extension, renewal or replacement, and that such
extension, renewal or replacement shall be limited to all or a part of the
property which secured the obligation so extended, renewed or replaced (plus
improvements to such property).
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Section 6.2.2. Subsidiaries. No Subsidiary of the Borrower shall create
or incur or suffer to be created or incurred or to exist any Lien of any kind
(but in any event, subject to the exceptions set forth in the last sentence of
this Section 6.2.2) upon any of its property or assets of any character, whether
now owned or hereafter acquired, or upon the income or profits therefrom, to
secure its obligations with respect to Funded Debt in an aggregate amount for
all Subsidiaries in excess of two percent (2%) of the Consolidated
Capitalization of the Borrower unless contemporaneously with the creation or
incurrence of such Lien, but in any event not later than ten Business Days
following such creation or incurrence, the Borrower shall request S&P and
Moody's to review its Debt Rating of the Borrower. The Borrower shall promptly
notify the Administrative Agent if such review results in a change in the Debt
Rating issued by either S&P or Moody's. In the event that the Debt Rating issued
by S&P is downgraded to BB or worse following such review or the Debt Rating
issued by Moody's is downgraded to Ba3 or worse following such review, the
Administrative Agent, upon the request of the Majority Banks, shall notify the
Borrower that on the later to occur of (a) the date which is thirty (30) days
following the date of such notice, or (b) the date which is one hundred and
eighty (180) days following the issuance of such downgraded Debt Rating. the
unused portion of the credit hereunder shall terminate and all amounts owing
with respect to this Credit Agreement and the Notes shall be due and payable
without presentment, demand or protest Upon the occurrence of such accelerated
Maturity Date, the unused portion of the credit shall terminate and all amounts
owing with respect to this Credit Agreement and the Notes shall be due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Borrower. Notwithstanding anything to
the contrary set forth herein, the foregoing restriction on Liens shall not
apply to, and there shall be excluded in calculating the aggregate amount of
Funded Debt secured by Liens for purposes of the requirement set forth in the
first sentence of this Section 6.2.2, Funded Debt secured by the following:
(a) liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties to secure claims for
labor, material or supplies in respect of obligations not overdue or in respect
of which the relevant Subsidiary shall at the time in good faith be prosecuting
an appeal or proceeding for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review and for which any
reserves required in accordance with Generally Accepted Accounting Principles
have been established;
(b) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or other
social security obligations;
(c) liens on properties in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so long
as execution is not levied thereunder or in respect of which the relevant
Subsidiary shall at the time in good faith be prosecuting an appeal or
proceeding for review and in respect of which a stay of execution shall have
been obtained pending such appeal or review and for which any reserves required
in accordance with Generally Accepted Accounting Principles have been
established;
(d) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties in existence less than 120 days from the date of
creation thereof in respect of obligations not overdue;
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(e) encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's liens under leases
to which any Subsidiary is a party, and other minor liens or encumbrances none
of which in the opinion of the Borrower interferes materially with the use of
the property affected in the ordinary conduct of the business of such
Subsidiary, which defects do not individually or in the aggregate have a
materially adverse effect on the business of such Subsidiary individually or of
the Borrower and its Subsidiaries on a consolidated basis;
(f) presently outstanding liens listed on Schedule 6.2.2 hereto;
(g) Liens on property existing at the time the relevant Subsidiary
acquires such property and not created in anticipation of such acquisition,
purchase money security interests in or purchase money mortgages on real or
personal property acquired or constructed after the date hereof to secure Funded
Debt permitted to be incurred hereunder and incurred in connection with the
acquisition or construction of such property at the time of or within 270 days
following the acquisition of such property, which security interests or
mortgages cover only the real or personal property so acquired, and Liens on
existing properties or assets to secure Funded Debt permitted hereunder and
incurred for improvements on such properties or assets;
(h) liens on the property of a Person (i) existing at the time such
Person is merged into or consolidated with the relevant Subsidiary as permitted
hereby or at the time of a sale, lease or other disposition of the properties of
a Person as an entirety or substantially as an entirety to the relevant
Subsidiary as permitted hereby, (ii) resulting from such merger, consolidation,
sale, lease or disposition by virtue of any Lien on property granted by the
relevant Subsidiary as permitted hereby prior to such merger, consolidation,
sale, lease or disposition (and not in contemplation thereof or in connection
therewith) which applies to after-acquired property of the relevant Subsidiary,
or (iii) resulting from such merger, consolidation, sale, lease or disposition
pursuant to a Lien or contractual provision granted or entered into by such
Person prior to such merger, consolidation, sale, lease or disposition (and not
at the request of the relevant Subsidiary); provided that any such Lien referred
to in clause (i) shall not apply to any property of the relevant Subsidiary
other than the property subject thereto at the time such Person or properties
were acquired and any such Lien referred to in clause (ii) or (iii) shall not
apply to any property of the relevant Subsidiary other than the property so
acquired;
(i) Liens arising by reason of deposits with, or the giving of any form
of security to, any governmental agency or any body created or approved by law
or governmental regulation, which Lien is required by law or governmental
regulation as a condition to the transaction of any business or the exercise of
any privilege, franchise, license or permit and Liens in favor of a government
or governmental entity to secure partial progress, advance or other payments, or
other obligations, pursuant to any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the costs
of acquiring, constructing or improving the property subject to such Liens
(including, without limitation, Liens incurred in connection with pollution
control, industrial revenue, private activity bond or similar financing) and
Liens to secure Funded Debt incurred by any telephone companies owned by the
Borrower or any of its Subsidiaries to secure Funded Debt owing to governmental
entities such as the Rural Utility Services;
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(j) Liens to secure Funded Debt incurred by any telephone company owned
by the Borrower or any of its Subsidiaries to secure Funded Debt owing to
governmental entities and Liens incurred by the Borrower or any of its
Subsidiaries to secure the indebtedness incurred to finance the purchase of
equipment or services; and
(k) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing clauses (a) through (j), inclusive; provided, however, that the
principal amount secured thereby shall not exceed the principal amount secured
thereby at the time of such extension, renewal or replacement, and that such
extension, renewal or replacement shall be limited to all or a part of the
property which secured the obligation so extended, renewed or replaced (plus
improvements to such property).
Section 6.3. Limitation on Sales, Consolidation, Merger, Etc.
(a) The Borrower will not complete, and will not permit any of its
Subsidiaries to complete, a Sale if a Default or Event of Default is continuing,
or would result immediately after giving effect to such Sale.
(b) Nothing contained in this Credit Agreement shall prevent any
consolidation of the Borrower with or merger of the Borrower into any other
Person or Persons (whether or not affiliated with the Borrower), or successive
consolidations or mergers to which the Borrower or its successor or successors
shall be a party or parties, provided that, and the Borrower hereby consents and
agrees that, upon any such consolidation or merger, the due and punctual payment
of the principal of and interest on all of the Loans and the due and punctual
performance and observance of all of the covenants, conditions and other
obligations of the Credit Agreement and the Notes to be performed and observed
by the Borrower, shall be expressly assumed in an agreement satisfactory in form
and substance to the Administrative Agent and the Banks, executed and delivered
to the Administrative Agent by the Person formed by such consolidation or
merger, provided, further, that the Person formed by such consolidation or
merger shall be a Person organized and existing under the laws of the United
States, any state thereof or the District of Columbia, and provided, further,
that immediately before and after giving effect to any such transaction (and
treating any Funded Debt or Sale and Leaseback Transaction which becomes an
obligation of the resulting or surviving Person as a result of such transaction
as having been incurred or entered into by such Person at the time of such
transaction), no Default or Event of Default shall exist. Unless the conditions
prescribed above in this Section 6.3(b) are satisfied, no such consolidation or
merger shall be permitted.
(c) Nothing contained in this Credit Agreement shall prevent any
consolidation of any Subsidiary of the Borrower with, or merger of any
Subsidiary of the Borrower into, any other Person or Persons (whether or not
affiliated with the Borrower), or successive consolidations or mergers to which
any such Subsidiary of the Borrower or its successor or successors shall be a
party or parties, provided that, immediately before and after giving effect to
any such transaction, no Default or Event of Default shall exist. Unless the
condition prescribed above in this Section 6.3(c) is satisfied, no such
consolidation or merger shall be permitted.
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Section 6.4. Federal Regulations. The Borrower will not, and will not
permit any of its Subsidiaries to, engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System. The Borrower will not, directly or indirectly, use any
part of the proceeds of any Loans for "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System or for any
purpose that violates, or that would be inconsistent with, the provisions of the
Regulations of such Board of Governors.
Section 6.5. Restrictions on Ability to Repay Loans. The Borrower will
not, and will not permit any of its Material Subsidiaries to, become or remain
subject to any restriction which could reasonably be expected to impair the
Borrower's ability to repay in full its Obligations hereunder, including,
without limitation, any restriction which would prohibit the distribution by any
Material Subsidiary to the Borrower of proceeds from asset sales.
Section 6.6. Employee Benefit Plans. Neither the Borrower nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code which could result in a
material liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan (other than those maintained by
Persons that become ERISA Affiliates after the Closing Date) to incur an
"accumulated funding deficiency", as such term is defined in Section 302 of
ERISA, in excess of $500,000, whether or not such deficiency is or may be
waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could result
in the imposition of a lien or encumbrance on the assets of the Borrower or any
of its Subsidiaries pursuant to Section 302(f) or Section 4068 of ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans (other than those maintained by Persons that become
ERISA Affiliates after the Closing Date) exceeding the value of the aggregate
assets of such Plans by more than $500,000, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess of benefit
liabilities.
Section 6.7. Compliance with Environmental Laws. Except as permitted by
any applicable Environmental Laws, the Borrower will not, and will not permit
any of its Subsidiaries to, (a) use any of the Real Estate or any portion
thereof for the handling, processing, storage or disposal of Hazardous
Substances, (b) cause or permit to be located on any of the Real Estate any
underground tank or other underground storage receptacle for Hazardous
Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d)
conduct any activity at any Real Estate or use any Real Estate in any manner
which is likely to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) of Hazardous Substances on, upon or into the Real Estate
or (e) otherwise conduct any activity at any Real Estate or use any Real Estate
in any manner that might reasonably be expected to violate any Environmental Law
or bring such Real Estate in violation of any Environmental Law if any of the
foregoing would be reasonably likely to have a material adverse effect on the
Borrower and its Subsidiaries, taken as a whole.
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Section 6.8. Limitation on Sale and Leaseback. The Borrower will not
enter into any Sale and Leaseback Transaction unless immediately thereafter (and
after giving effect to the application of the proceeds, if any, therefrom), the
aggregate amount of Capitalized Rent in respect of Sale and Leaseback
Transactions, together with the aggregate principal amount of all Funded Debt
secured by Liens (other than Funded Debt described in clauses (a) through (j),
inclusive, of Section 6.2.1) would not exceed two percent (2%) of Consolidated
Capitalization; provided that foregoing restrictions shall not apply to, and
there shall be excluded in computing Funded Debt for the purpose of such
restrictions:
(a) presently outstanding Sale and Leaseback Transactions listed on
Schedule 6.8 hereto;
(b) any Sale and Leaseback Transaction entered into by the Borrower to
finance the payment of all or any part of the purchase price of such real or
personal property (including any improvements to existing property) acquired or
constructed after the date hereof at the time of or within 270 days following
the acquisition or construction of such property, which covers only the real or
personal property so acquired and does not in the aggregate exceed the lesser of
the purchase price or the fair market value of such property;
(c) any Sale and Leaseback Transaction involving property of a Person
existing at the time such Person is merged into or consolidated with the
Borrower as permitted hereby or at the time of a sale, lease or other
disposition of the properties of a Person as an entirety or substantially as an
entirety to the Borrower as permitted hereby;
(d) any Sale and Leaseback Transaction in which the lessor is a
government or governmental entity and which Sale and Leaseback Transaction is
entered into to secure partial progress, advance or other payments, or other
obligations, pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of securing all or any part of the cost of constructing
or improving the property subject to such Sale and Leaseback Transaction
(including, without limitation, Sale and Leaseback Transactions incurred in
connection with pollution control, industrial revenue, private activity bond or
similar financing);
(e) any Sale and Leaseback Transaction involving the extension, renewal
or replacement (or successive extensions, renewals or replacements) in whole or
in part of a lease pursuant to a Sale and Leaseback Transaction referred to in
the foregoing clauses (a) through (d), inclusive; provided, however, that any
such lease, extension, renewal or replacement shall be limited to all or any
part of the same property leased under the lease so extended, renewed or
replaced (plus improvements to such property); and
(f) any Sale and Leaseback Transaction the net proceeds of which are at
least equal to the fair value (as determined by the Borrower's Board of
Directors) of the property leased pursuant to such Sale and Leaseback
Transaction, so long as within 270 days of the effective date of such Sale and
Leaseback Transaction, the Borrower applies (or irrevocably commits to an escrow
account for the purpose or purposes hereinafter mentioned) an amount equal to
the net proceeds of such Sale and Leaseback Transaction to either (x) the
purchase of other property having a fair market value at least equal to the fair
market value of the property leased in such Sale and Leaseback Transaction and
having a similar utility and function or (y) the repayment of Funded Debt of the
Borrower or the retirement of preferred stock of any Subsidiary (other than
preferred stock owned by the Borrower or any Subsidiary) and if any such
repayment is applied to the Loans then upon such repayment the Total Commitment
shall be automatically reduced by an amount equal to the amount of such
repayment.
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Section 7. FINANCIAL COVENANTS OF THE BORROWER.
------------------------------------
Section 7.1. Debt to Capitalization Ratio. The Borrower will not permit
its Funded Debt to Capitalization Ratio to exceed sixty-five percent at any
time.
Section 7.2. Interest Coverage Ratio. The Borrower will not permit its
Interest Coverage Ratio for any period consisting of the four consecutive fiscal
quarters of the Borrower most recently ended to be less than 3.00 to 1.00.
Section 8. CLOSING CONDITIONS. The effectiveness of this Agreement and
the obligation of any Bank to make the initial Revolving Credit Loan on the
Closing Date shall be subject to the satisfaction of the following conditions
precedent:
Section 8.1. Corporate Action. All corporate action necessary for the
valid execution, delivery and performance by the Borrower of this Credit
Agreement and the other Loan Documents to which it is or is to become a party
shall have been duly and effectively taken, and evidence thereof satisfactory to
the Banks shall have been provided to each of the Banks.
Section 8.2. Loan Documents. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to each of the
Banks. Each Bank shall have received a fully executed copy of each such
document.
Section 8.3 Opinion of Borrower's Legal Counsel. Each of the Banks and
the Administrative Agent shall have received from legal counsel to the Borrower,
a favorable opinion addressed to the Banks and the Administrative Agent dated
the Closing Date, in substantially the form of Exhibit D hereto.
Section 8.4. Certified Copies of Charter Documents. Each of the Banks
shall have received from the Borrower a copy of the Borrower's charter or other
incorporation documents and by-laws certified by the Secretary of the Borrower
to be true and complete as of the Closing Date.
Section 8.5. Incumbency Certificate. Each of the Banks shall have
received from the Borrower an incumbency certificate, dated the Closing Date,
signed by a duly authorized officer of the Borrower, and giving the name and
bearing a specimen signature of each individual who shall be authorized: (a) to
sign, in the name and on behalf of the Borrower, each of the Loan Documents to
which it is or is to become a party; (b) to make application for the Loans; and
(c) to give notices and to take other action on its behalf under the Loan
Documents.
Section 8.6. Good Standing Certificates. The Administrative Agent shall
have received, with a copy for each Bank, a certificate from the Secretary of
State, or other appropriate authority of such jurisdiction, evidencing the good
standing of the Borrower in the jurisdiction of its incorporation and each
jurisdiction in which a failure to so qualify could have a materially adverse
effect on the business, operations, property or financial or other condition of
the Borrower.
Section 9. CONDITIONS TO ALL BORROWINGS. The obligation of any
Bank to make any Loan, including the initial Loan to be made on the Closing Date
shall be subject to the satisfaction of the following conditions precedent:
Section 9.1. Representations True; No Event of Default. Each of the
representations and warranties of the Borrower contained in this Credit
Agreement or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of which
they were made and shall also be true
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at and as of the time of the making of the Loan, with the same effect as if made
at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing. The Administrative Agent shall
have received a certificate of the Borrower signed by an authorized officer of
the Borrower to such effect.
Section 9.2. No Legal Impediment. No change shall have occurred in any
law or regulations thereunder or interpretations thereof that in the reasonable
opinion of any Bank would make it illegal for such Bank to make Loans.
Section 9.3. Governmental Regulation. Each Bank shall have received
such statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
Section 9.4. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Credit Agreement and all documents
incident thereto shall be satisfactory in substance and in form to the Banks and
to Special Counsel, and the Banks and Special Counsel shall have received all
information and such counterpart originals or certified or other copies of such
documents as the Banks may reasonably request.
Section 10. EVENTS OF DEFAULT; ACCELERATION. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) the Borrower shall fail to pay any principal of the Loans when the
same shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans, the
Facility Fee, or other sums due hereunder or under any of the other Loan
Documents, on or prior to the second day immediately succeeding the day on which
the same shall become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for payment;
(c) the Borrower or any Subsidiary of the Borrower shall fail to comply
with any of its covenants contained in Sections 5.9, 5.10, 5.12, 5.15 through
5.17, inclusive, Section 6 or Section 7;
(d) the Borrower fails to perform any term, covenant or agreement
contained in Section 5.4 for five (5) days after written notice of such failure
has been given to the Borrower by the Administrative Agent or the Borrower shall
fail to perform any other term, covenant or agreement contained herein or in any
of the other Loan Documents (other than those specified elsewhere in this
Section 10) for thirty (30) days after written notice of such failure has been
given to the Borrower by the Administrative Agent or, if such performance is not
possible within such thirty (30) day period, the Borrower shall fail to
undertake such performance within such thirty (30) day period and thereafter to
diligently and in good faith pursue the completion of such performance;
(e) any representation or warranty of the Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents or in
any other document or instrument delivered pursuant to or in connection with
this Credit Agreement shall prove to have been false in any material respect
upon the date when made;
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(f) the Borrower or any of its Subsidiaries shall (i) fail to pay at
maturity, or within any applicable period of grace, any obligation for borrowed
money in an aggregate amount equal to or greater than two percent (2%) of the
Consolidated Capitalization of the Borrower or (ii) fail to observe or perform
any term, covenant or agreement relating to or contained in any instrument or
agreement evidencing or securing any obligation for borrowed money which results
in the acceleration (whether by declaration or automatically) of such
indebtedness in an aggregate amount equal to or greater than two percent (2%) of
the Consolidated Capitalization of the Borrower;
(g) the Borrower or any of its Material Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower or any of its Material Subsidiaries or of
any substantial part of the assets of the Borrower or any of its Material
Subsidiaries or shall commence any case or other proceeding relating to the
Borrower or any of its Material Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in effect, or
shall take any action to authorize or in furtherance of any of the foregoing, or
if any such petition or application shall be filed or any such case or other
proceeding shall be commenced against the Borrower or any of its Material
Subsidiaries and the Borrower or any of its Material Subsidiaries shall indicate
its approval thereof, consent thereto or acquiescence therein;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of its
Material Subsidiaries bankrupt or insolvent, or approving a petition in any such
case or other proceeding, or a decree or order for relief is entered in respect
of the Borrower or any Material Subsidiary of the Borrower in an involuntary
case under federal bankruptcy laws as now or hereafter constituted; or
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty (30) days, whether or not consecutive, any final
judgment against the Borrower or any of its Subsidiaries that, with other
outstanding final judgments, undischarged and not covered by insurance, against
such Person(s) exceeds in the aggregate five percent (5%) of the Consolidated
Net Worth of the Borrower;
then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Majority Banks shall, by
notice in writing to the Borrower declare all amounts owing with respect to this
Credit Agreement and the Notes to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrower; provided
that in the event of any Event of Default specified in Section 10(g) or Section
10(h), all such amounts shall become immediately due and payable automatically
and without any requirement of notice from the Administrative Agent or any Bank.
If any one or more of the Events of Default specified in Section 10(g)
or Section 10(h) shall occur, any unused portion of the credit hereunder shall
forthwith terminate and each of the Banks shall be relieved of all obligations
to make Loans hereunder. If any other Event of Default shall have occurred and
be continuing, the Administrative Agent, upon the request of the Majority Banks,
shall, by notice to the Borrower, terminate the unused portion of the credit
hereunder, and upon such notice being given such unused portion of the credit
hereunder shall terminate immediately and each of the Banks shall be relieved of
all further obligations to make Loans. If any such notice is given to the
Borrower, the Administrative Agent will forthwith furnish a copy thereof to each
of the Banks. No termination of the credit hereunder shall relieve the Borrower
of any of the Obligations or any of its existing obligations to the Banks
arising under other agreements or instruments.
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Section 11. THE AGENTS.
Section 11.1. Authorization.
(a) Each of the Agents is authorized to take such action on behalf of
each of the Banks and to exercise all such powers as are hereunder and in
related documents delegated to such Agent, together with such powers as are
reasonably incident thereto; provided that no duties or responsibilities not
expressly assumed herein or therein shall be implied to have been assumed by any
of the Agents.
(b) The relationship between each of the Agents and each of the Banks
is that of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between each of the Agents and each of the
Banks. Nothing contained in this Credit Agreement or the other Loan Documents
shall be construed to create an agency, trust or other fiduciary relationship
between any of the Agents, on the one hand, and any of the Banks, on the other
hand.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder and
under the other Loan Documents, the Administrative Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the Banks
and the Agents with respect to all collateral security and guaranties (if any)
contemplated by the Loan Documents. Such actions include the designation of the
Administrative Agent as "secured party", "mortgagee" or the like on all
financing statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement of
any security interests, mortgages or deeds of trust in collateral security
intended to secure the payment or performance of any of the Obligations, all for
the benefit of the Banks and the Agents.
Section 11.2. Employees and Agents. The Administrative Agent may
exercise its powers and execute its duties by or through employees or agents and
shall be entitled to take, and to rely on, advice of counsel concerning all
matters pertaining to its rights and duties under this Credit Agreement and the
other Loan Documents. The Administrative Agent may utilize the services of such
Persons as the Administrative Agent in its sole discretion may reasonably
determine, and upon the occurrence and during the continuation of a Default or
an Event of Default, all reasonable fees and expenses of any such Persons shall
be paid by the Borrower.
Section 11.3. No Liability. None of the Agents nor any of their
respective shareholders, directors, officers or employees nor any other Person
assisting them in their duties nor any agent or employee thereof, shall be
liable for any waiver, consent or approval given or any action taken, or omitted
to be taken, in good faith by it or them hereunder or under any of the other
Loan Documents, or in connection herewith or therewith, or be responsible for
the consequences of any oversight or error of judgment whatsoever, except that
each of the Agents or such other Person, as the case may be, may be liable for
losses due to its own willful misconduct or gross negligence.
Section 11.4. No Representations.
(a) The Agents shall not be responsible for the execution or validity
or enforceability of this Credit Agreement or the Notes or any instrument at any
time constituting, or intended to constitute, collateral security for the Notes,
or for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to the
Notes, or for any recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of the Borrower, or be bound to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Notes. The
Agents shall not be bound to ascertain whether any notice, consent,
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waiver or request delivered to any of them by the Borrower or any holder of any
of the Notes shall have been duly authorized or is true, accurate and complete.
The Agents have not made nor do they now make any representations or warranties,
express or implied, nor do they assume any liability to the Banks, with respect
to the credit worthiness or financial conditions of the Borrower or any of its
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Administrative Agent, the Documentation Agent, the Managing
Agents, or the other Banks, and based upon such information and documents as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Credit Agreement.
(b) For purposes of determining compliance with the conditions set forth
in Section 8, each Bank that has executed this Credit Agreement shall be deemed
to have consented to, approved or accepted, or to be satisfied with, each
document and matter either sent, or made available, by the Administrative Agent
or by BancBoston Securities, Inc., or TD Securities (USA), Inc., as arrangers,
to such Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
such Bank, unless an officer of the Administrative Agent active upon the
Borrower's account shall have received notice from such Bank not less than two
(2) Business Days prior to the Closing Date specifying such Bank's objection
thereto and such objection shall not have been withdrawn by notice to the
Administrative Agent to such effect on or prior to the Closing Date.
Section 11.5. Payments.
(a) A payment by the Borrower to the Administrative Agent hereunder or
any of the other Loan Documents for the account of any Bank shall constitute a
payment to such Bank. The Administrative Agent agrees promptly to distribute
to each Bank such Bank's pro rata share of payments received by the
Administrative Agent for the account of the Banks, except as otherwise
expressly provided herein or in any of the other Loan Documents.
(b) If in the opinion of the Administrative Agent the distribution of
any amount received by it in such capacity hereunder or under the Notes might
involve it in liability, it may refrain from making distribution until its right
to make distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any amount
received and distributed by the Administrative Agent is to be repaid, each
Person to whom any such distribution shall have been made shall either repay to
the Administrative Agent its proportionate share of the amount so adjudged to be
repaid or shall pay over the same in such manner and to such Persons as shall be
determined by such court.
(c) Notwithstanding anything to the contrary contained in this Credit
Agreement or any of the other Loan Documents, any Bank that fails to make
available to the Administrative Agent its pro rata share of any Loan as,
when and to the full extent required by the provisions of this Credit
Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due to
it from the Borrower, whether on account of outstanding Loans, interest,
fees or otherwise, to the remaining nondelinquent Banks for application to,
and reduction of, their respective pro rata shares of all outstanding Loans.
The Delinquent Bank hereby authorizes the Administrative Agent to distribute
such payments to the nondelinquent Banks in proportion to their respective
pro rata shares of all outstanding Loans. A Delinquent Bank shall be deemed
to have satisfied in full a delinquency when and if, as a result of application
of the assigned payments to all outstanding Loans of the nondelinquent Banks,
the Banks' respective pro rata shares of all outstanding Loans have
returned to those in effect immediately prior to such delinquency and
without giving effect to the nonpayment causing such delinquency.
Section 11.6. Holders of Notes. Each of the Agents may deem and treat
the payee of any Note as the absolute owner thereof for all purposes hereof
until it shall have been furnished in writing with a different name by such
payee or by a subsequent holder.
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Section 11.7. Indemnity. The Banks jointly and severally agree hereby
to indemnify and hold harmless each of the Agents from and against any and all
claims, actions and suits (whether groundless or otherwise), losses, damages,
costs, expenses (including any expenses for which such Agent has not been
reimbursed by the Borrower as required by Section 12 or Section 13), and
liabilities of every nature and character arising out of or related to this
Credit Agreement or the Notes or the transactions contemplated or evidenced
hereby or thereby, or such Agent's actions taken hereunder or thereunder, except
to the extent that any of the same shall be directly caused by such Agent's own
willful misconduct or gross negligence.
Section 11.8. Agents as Banks. In their individual capacities, each of
BankBoston and TD shall have the same obligations and the same rights, powers
and privileges in respect to its Commitments and the Loans made by it, and as
the holder of any of the Notes, as it would have were it not also the
Administrative Agent, the Documentation Agent or a Managing Agent, as the case
may be.
Section 11.9. Resignation. Any Agent may resign at any time by giving
ninety (90) days' prior written notice thereof to the Banks and the Borrower.
Upon any such resignation, the Majority Banks shall have the right to appoint
another Bank or any other financial institution as a successor Administrative
Agent, Documentation Agent or Managing Agent, as applicable. Unless a Default or
Event of Default shall have occurred and be continuing, such successor, if other
than a Bank, shall be reasonably acceptable to the Borrower. If no successor
Administrative Agent, Documentation Agent or Managing Agent shall have been so
appointed by the Majority Banks and shall have accepted such appointment within
thirty (30) days after the retiring Agent's giving of notice of resignation,
then the retiring Administrative Agent, Documentation Agent or Managing Agent
may, on behalf of the Banks, appoint a successor Administrative Agent,
Documentation Agent or Managing Agent, respectively, as the case may be. Upon
the acceptance of any appointment as an Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation, the provisions of this Credit Agreement shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as an Agent.
Section 11.10. Documentation Agent; Managing Agents. Neither the
Documentation Agent nor any of the Managing Agents shall have any right, power,
obligation, liability, responsibility or duty under this Agreement in such
capacity, other than those applicable to all Banks as Banks.
Section 12. EXPENSES. The Borrower agrees to pay (a) the reasonable
cost of producing and reproducing this Credit Agreement, the other Loan
Documents and the other agreements and instruments mentioned herein, (b) any
taxes (including any interest and penalties in respect thereto) payable by the
Administrative Agent or the Banks (other than taxes based upon the
Administrative Agent's or any Bank's net income) on or with respect to the
transactions contemplated by this Credit Agreement (the Borrower hereby agreeing
to indemnify the Banks with respect thereto), (c) the reasonable fees, expenses
and disbursements of Special Counsel or any local counsel to the Administrative
Agent incurred in connection with the preparation, administration or
interpretation of the Loan Documents and other instruments mentioned herein,
each closing hereunder, and amendments, modifications, approvals, consents or
waivers hereto or hereunder regardless of whether any such transaction is
consummated, (d) the fees, expenses and disbursements of the Administrative
Agent incurred by the Administrative Agent in connection with the preparation,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder and amendments, modifications,
approvals, consents or waivers hereto or hereunder, regardless of whether any
such transaction is consummated, and (e) all reasonable out-of-pocket expenses
(including reasonable attorneys' (which attorneys may be, but shall not be
required to be,
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employees of any Bank or Agent) fees and costs) incurred by any Bank or Agent in
connection with (i) the enforcement of any of the Loan Documents against the
Borrower or any of its Subsidiaries or the administration thereof after the
occurrence of a Default or Event of Default, (ii) any so-called "work-out" of
the Obligations and (iii) any litigation, proceeding or dispute whether arising
hereunder or otherwise in connection with the transactions contemplated hereby
or under the other Loan Documents, in any way related to any Bank's or any
Agent's relationship with the Borrower or any of its Subsidiaries. The covenants
of this Section 12 shall survive payment or satisfaction of payment of amounts
owing under or with respect to the Loan Documents.
Section 13. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Agents and the Banks from and against any and all claims, actions
and suits whether groundless or otherwise, and from and against any and all
liabilities, losses, damages and expenses of every nature and character arising
out of this Credit Agreement or any of the other Loan Documents or the
transactions evidenced hereby unless any such claims, actions or suits arise out
of the Agents' or the Banks' intentional misconduct or gross negligence. In
litigation, or the preparation therefor, the Banks and the Agents shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. If, and to the extent that the obligations of the Borrower
under this Section 13 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The covenants of this
Section 13 shall survive payment or satisfaction of payment of amounts owing
under or with respect to the Loan Documents.
Section 14. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein, in any of the other Loan Documents
or in any documents or other papers delivered by or on behalf of the Borrower
pursuant hereto shall be deemed to have been relied upon by the Banks and the
Administrative Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of the Loans, as
herein contemplated, and shall continue in full force and effect so long as any
Obligation remains outstanding or any Bank has any obligation to make any Loans.
All statements contained in any certificate or other paper delivered to any Bank
or the Administrative Agent at any time by or on behalf of the Borrower pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower hereunder.
Section 15. ASSIGNMENT AND PARTICIPATION.
Section 15.1. Conditions to Assignment by Banks. Except as provided herein,
each Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it) and the Notes held by it; provided that (a)
the Administrative Agent and the Borrower (unless such assignment is (i) to any
Federal Reserve Bank or (ii) from any Bank which is as Administrative Agent to
an affiliate of an Agent) shall have given its prior written consent to such
assignment, which consent will not be unreasonably withheld, (b) each such
assignment shall be of a constant, and not a varying, percentage of all the
assigning Bank's rights and obligations under this Credit Agreement, (c) each
Bank shall have a Commitment that is at least $5,000,000 and (d) the parties to
such assignment shall execute and deliver to the Administrative Agent, for
recording in the Register (as
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hereinafter defined), an Assignment and Acceptance, substantially in the form of
Exhibit E hereto (an "Assignment and Acceptance"), together with any Notes
subject to such assignment. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business Days after
the execution thereof, (i) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder, (ii) the assigning Bank shall, to the extent
provided in such assignment and upon payment to the Administrative Agent of the
registration fee referred to in Section 15.3, be released from its obligations
under this Credit Agreement and (iii) Schedule 1.1(a) shall be deemed to be
automatically amended to reflect the change in the Banks and each Bank's
Commitment and Commitment Percentage resulting from such Assignment and
Acceptance.
Section 15.2. Certain Representations and Warranties; Limitations;
Covenants. By executing and delivering an Assignment and Acceptance, the parties
to the assignment thereunder confirm to and agree with each other and the other
parties hereto as follows: (a) other than the representation and warranty that
it is the legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or the
attachment, perfection or priority of any security interest or mortgage; (b) the
assigning Bank makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower and its Subsidiaries or
any other Person primarily or secondarily liable in respect of any of the
Obligations, or the performance or observance by the Borrower and its
Subsidiaries or any other Person primarily or secondarily liable in respect of
any of the Obligations of any of their obligations under this Credit Agreement
or any of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto; (c) such assignee confirms that it has received a
copy of this Credit Agreement, together with copies of the most recent financial
statements referred to in Section 4.4 and Section 5.4 and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (d) such assignee will,
independently and without reliance upon the assigning Bank, the Administrative
Agent or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Credit Agreement; (e) such assignee
represents and warrants that it is an Eligible Assignee; (f) such assignee
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Credit Agreement and the other
Loan Documents as are delegated to the Administrative Agent by the terms hereof
or thereof, together with such powers as are reasonably incidental thereto; (g)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Credit Agreement are required to be
performed by it as a Bank; and (h) such assignee represents and warrants that it
is legally authorized to enter into such Assignment and Acceptance.
Section 15.3. Register. The Administrative Agent shall maintain a copy of
each Assignment and Acceptance delivered to it and a register or similar list
(the "Register") for the recordation of the names and addresses of the Banks and
the Commitment Percentage of, and principal amount of the Loans owing to the
Banks from time to time. The entries in the Register shall be conclusive, in the
absence of manifest
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error, and the Borrower, the Administrative Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrower and the Banks at any reasonable time and from time to
time upon reasonable prior notice. Upon each such recordation, the assigning
Bank agrees to pay to the Administrative Agent a registration fee in the sum of
$3,000.
Section 15.4. New Notes. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Administrative Agent shall (a) record the information
contained therein in the Register, and (b) give prompt notice thereof to the
Borrower and the Banks (other than the assigning Bank). Within five (5) Business
Days after receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent, in exchange for each
surrendered Note, a new Note to the order of such Eligible Assignee in an amount
equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Bank in
an amount equal to the amount retained by it hereunder. Such new Notes shall
provide that they are replacements for the surrendered Notes, shall be in an
aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the assigned
Notes. Upon the request of any Bank, the Borrower shall within five (5) days of
the issuance of any new Notes pursuant to this Section 15.4, at the requesting
Bank's expense, deliver an opinion of counsel, addressed to the Banks and the
Administrative Agents, relating to the due authorization, execution and delivery
of such new Notes and the legality, validity and binding effect thereof, in form
and substance satisfactory to the Banks. The surrendered Notes shall be
cancelled and returned to the Borrower.
Section 15.5. Participations. Each Bank may sell participations to one or
more banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (a) each such participation shall be in an amount of not less than
$5,000,000, (b) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (c) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any facility fees to which such participant is entitled or extend
any regularly scheduled payment date for principal or interest.
Section 15.6. Disclosure. The Borrower agrees that in addition to
disclosures made in accordance with standard and customary banking practices,
any Bank may in accordance with the terms of Section 25.2 hereof disclose
information obtained by such Bank pursuant to this Credit Agreement to assignees
or participants and potential assignees or participants hereunder; provided that
such assignees or participants or potential assignees or participants shall
agree (a) to treat in confidence such information unless such information
otherwise becomes public knowledge, (b) not to disclose such information to a
third party, except as required by law or legal process and (c) not to make use
of such information for purposes of transactions unrelated to such contemplated
assignment or participation.
<PAGE>
- 48 -
Section 15.7. Assignee or Participant Affiliated with the Borrower. If any
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Administrative Agent pursuant to Section
10, and the determination of the Majority Banks shall for all purposes of this
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Loans. If any Bank sells a participating interest
in any of the Loans to a participant, and such participant is the Borrower or an
Affiliate of the Borrower, then such transferor Bank shall promptly notify the
Administrative Agent of the sale of such participation. A transferor Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Administrative Agent pursuant to ss.10 to the
extent that such participation is beneficially owned by the Borrower or any
Affiliate of the Borrower, and the determination of the Majority Banks shall for
all purposes of this Agreement and the other Loan Documents be made without
regard to the interest of such transferor Bank in the Loans to the extent of
such participation.
Section 15.8. Miscellaneous Assignment Provisions. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 12 and Section 13 with
respect to any claims or actions arising prior to the date of such assignment.
Any assignee Bank that is not incorporated or organized under the laws of the
United States of America or any state thereof, shall, prior to the date on which
any interest or fees are payable hereunder or under any of the other Loan
Documents for its account, deliver to the Borrower and the Administrative Agent
two duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each case
that such Bank is entitled to receive payments under this Credit Agreement or
any of the other Loan Documents payable to it, without deduction or withholding
of any United States federal income taxes. Anything contained in this Section 15
to the contrary notwithstanding, any Bank may at any time pledge all or any
portion of its interest and rights under this Credit Agreement (including all or
any portion of its Notes) to any of the twelve Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
Section 15.9. Assignment by Borrower. The Borrower shall not assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of the Administrative Agent and each of the
Banks.
Section 16. NOTICES, ETC. Except as otherwise expressly provided in
this Credit Agreement, all notices and other communications made or required to
be given pursuant to this Credit Agreement or the Notes shall be in writing and
shall be delivered in hand, mailed by United States registered or certified
first class mail, postage prepaid, or sent by telegraph, telecopy, telefax or
telex and confirmed by delivery via courier or postal service, addressed as
follows:
(a) if to the Borrower, at 8410 West Bryn Mawr Avenue, Suite 700,
Chicago, Illinois 60631, Attention: Chief Financial Officer, with copies to the
Secretary of the Borrower, Stephen P. Fitzell, at Sidley & Austin, One First
National Plaza, Chicago, Illinois 60603, to TDS at 30 North LaSalle Street,
<PAGE>
- 49 -
Chicago, Illinois 60602, Attention: Corporate Treasurer, and to the Secretary of
TDS, Michael G. Hron, at Sidley & Austin, One First National Plaza, Chicago,
Illinois 60603, or at such other address(es) for notice as the Borrower shall
last have furnished in writing to the Person giving the notice; and
(b) if to any Agent or any Bank, at the address set forth for such
Agent or Bank in Schedule 1.1(a) hereto or such other address for notice as such
Agent or such Bank shall have last furnished in writing to the Person giving the
notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if telecopied, or delivered by hand to a
responsible officer of the party to which it is directed, at the time of the
receipt thereof by such officer and (ii) if sent by registered or certified
first-class mail, postage prepaid, three days after the date mailed.
Section 17. GOVERNING LAW. THIS CREDIT AGREEMENT AND EACH OF THE OTHER
LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF SAID COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE
OF LAW). THE BORROWER CONSENTS TO THE JURISDICTION IN ANY OF THE FEDERAL OR
STATE COURTS LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS IN CONNECTION WITH ANY
SUIT TO ENFORCE THE RIGHTS OF THE BANKS AND THE AGENT UNDER THIS CREDIT
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
Section 18. HEADINGS. The captions in this Credit Agreement are
for convenience of reference only and shall not define or limit the provisions
hereof.
Section 19. COUNTERPARTS. This Credit Agreement and any amendment
hereof may be executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an original,
and all of which together shall constitute one instrument. In proving this
Credit Agreement it shall not be necessary to produce or account for more than
one such counterpart signed by the party against whom enforcement is sought.
Section 20. ENTIRE AGREEMENT, ETC. The Loan Documents and any other
documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Credit Agreement nor any term hereof may be changed,
waived, discharged or terminated, except as provided in Section 22.
Section 21. WAIVER OF JURY TRIAL. The Borrower hereby waives its right
to a jury trial with respect to any action or claim arising out of any dispute
in connection with this Credit Agreement or any of the other Loan Documents, any
rights or obligations hereunder or thereunder or the performance of such rights
and obligations. The Borrower (a) certifies that no representative, agent or
attorney of any Bank or the Administrative Agent has represented, expressly or
otherwise, that such Bank or the Administrative Agent would not, in the event of
litigation seek to enforce the foregoing waivers
<PAGE>
- 50 -
and (b) acknowledges that it has been induced to enter into this Credit
Agreement and the other Loan Documents by, among other things, the mutual
waivers and certifications contained herein.
Section 22. CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as otherwise
expressly provided in this Credit Agreement, any consent or approval required or
permitted by this Credit Agreement to be given by the Banks may be given, and
any term of this Credit Agreement or of any other instrument related hereto or
mentioned herein may be amended, and the performance or observance by the
Borrower of any terms of this Credit Agreement or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with, but
only with, the written consent of the Borrower and the written consent of the
Majority Banks. Notwithstanding the foregoing, (i) the term and the amount of
the Commitments of the Banks may not be changed, (ii) the rate of interest on
the Loans and the amount of the Facility Fee hereunder may not be decreased,
(iii) the terms of Section 2.9 may not be changed without the written consent of
the Swing Line Bank and the Majority Banks, and (iv) the terms of this Section
22 may not be changed without the written consent of the Borrower and the
written consent of each of the Banks; the definition of Majority Banks or the
number of Banks required for any consent or approval hereunder may not be
amended without the written consent of each of the Banks; and ss.11 may not be
amended without the written consent of each of the Agents. No waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of any
Bank or Agent in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
Section 23. FCC APPROVAL. Notwithstanding anything to the contrary
contained in this Credit Agreement or in the other Loan Documents, neither the
Administrative Agent nor any Bank will take any action pursuant to this
Agreement or any of the other Loan Documents which would constitute or result in
a change in control of the Borrower or any of its Subsidiaries requiring the
prior approval of the FCC without first obtaining such prior approval of the
FCC. After the occurrence of an Event of Default, the Borrower shall take or
cause to be taken any action which the Administrative Agent may reasonably
request in order to obtain from the FCC such approval as may be necessary to
enable the Administrative Agent to exercise and enjoy the full rights and
benefits granted to the Administrative Agent, for the benefit of the Banks and
the Agents, by this Credit Agreement or any of the other Loan Documents,
including, at the Borrower's cost and expense, the use of the Borrower's best
efforts to assist in obtaining such approval for any action or transaction
contemplated by this Credit Agreement or any of the other Loan Documents for
which such approval is required by law.
Section 24. SEVERABILITY. The provisions of this Credit Agreement are
severable and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction.
<PAGE>
- 51 -
Section 25. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
Section 25.1. Sharing of Information with Section 20 Subsidiary.
The Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to
the Borrower or one or more of its Subsidiaries, in connection with
this Credit Agreement or otherwise, by a Section 20 Subisdiary.
The Borrower, for itself and each of its Subsidiaries, hereby
authorizes (a) such Section 20 Subsidiary to share with the Administrative Agent
and each Bank any information delivered to such Section 20 Subsidiary by the
Borrower or any of its Subsidiaries, and (b) the Administrative Agent and each
Bank to share with such Section 20 Subsidiary any information delivered to the
Administrative Agent or such Bank by the Borrower or any of its Subsidiaries
pursuant to this Credit Agreement, or in connection with the decision of such
Bank to enter into this Credit Agreement; it being understood, in each case,
that any such Section 20 Subsidiary receiving such information shall be bound by
the confidentiality provisions of this Credit Agreement. Such authorization
shall survive the payment and satisfaction in full of all of Obligations.
Section 25.2. Confidentiality. Each of the Banks and the
Agent agrees to keep any non-public information delivered or made
available to it pursuant to this Credit Agreement or any other
Loan Document confidential from any Person other than officers,
employees, agents, accountants, professional advisors, counsel, designees or
representatives of such Bank or the Agent who are or are expected to become
engaged in evaluating, approving, structuring or administering this Credit
Agreement or any of the other Loan Documents; provided, that, nothing herein
shall prevent the Agent or any Bank from disclosing such information (i) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant agrees to be bound by the provisions of Section 15.6,
(ii) to any of its Affiliates to the extent any such Affiliates require such
information in the ordinary course of the Agent's or such Bank's credit
committee or asset management procedures, or (iii) as required or requested by
any governmental authority or representative thereof or pursuant to subpoena or
other legal process, by virtue of any other law, regulation, order, or
interpretation, (iv) to the Administrative Agent, any Bank or any Section 20
Subsidiary, (v) in connection with any litigation to which any one or more of
the Banks, the Administrative Agent or any Section 20 Subsidiary is a party, or
in connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, and (vi) to a Subsidiary or Affiliate of such Bank as
provided in Section 25.1 or as required in connection with the exercise of any
remedy under this Credit Agreement or any of the other Loan Documents.
Section 25.3. Prior Notification. Unless specifically prohibited
by applicable law or court order, each of the Banks and the
Administrative Agent shall, prior to disclosure thereof, notify the
Borrower of (i) any proposed or required disclosure of any such
non-public information pursuant to clauses (iii) or (v) of Section 25.2,
and (ii) any request for disclosure of any such non-public information by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Bank by such
governmental agency).
Section 25.4. Other. In no event shall any Bank or Agent be
obligated or required to return any materials furnished to it or
any Section 20 Subsidiary by the Borrower or any of its
Subsidiaries. The obligations of each Bank under this Section 25
shall supersede and replace the obligations of such Bank under any
confidentiality letter in respect of this financing signed and delivered by
such Bank to the Borrower prior to the date hereof and shall be binding upon
any assignee of, or purchaser of any participation in, any interest in any of
the Loans from any Bank.
<PAGE>
- 52 -
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement under seal as of the date first set forth above.
UNITED STATES CELLULAR CORPORATION
By
Name:
Title:
BANKBOSTON, N.A., individually, as Swing Line Bank,
as Administrative Agent and as Managing Agent
By:
Name:
Title:
TORONTO DOMINION (TEXAS), INC., individually,
as Documentation Agent and as Managing Agent
By:
Title:
<PAGE>
- 1 -
Schedule 1.1(a) to
-------- ------ --
Credit Agreement
------ -----------
REVOLVING CREDIT COMMITMENTS
----------------------------
Commitment
Bank Commitment Percentage
----- ---------- ----------
BankBoston, N.A. $250,000,000 50%
100 Federal Street
Boston, Massachusetts 02110
Telefax Number: (617) 434-3401
Telex: 940581
Answerback: BOSTONBK BSN
Attention: Mary E. Meduski
Managing Director
Julie V. Jalelian
Vice President
Toronto Dominion (Texas), Inc. $250,000,000 50%
909 Fannin Street
Houston, TX 77010
Telefax Number: (713) 951-9921
Telephone Number: (713) 653-8245
Attention: Debbie Greene
<PAGE>
- 1 -
Schedule 1.1(b) to
-------- ------ --
Credit Agreement
------ -----------
EURODOLLAR LENDING OFFICES
--------------------------
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Telefax Number: (617) 434-3401
Telex: 940581
Answerback: BOSTONBK BSN
Attention: Mary E. Meduski
Managing Director
Julie V. Jalelian
Vice President
Toronto Dominion (Texas), Inc.
909 Fannin Street
Houston, TX 77010
Telefax Number: (713) 951-9921
Telephone Number: (713) 653-8245
Attention: Debbie Greene
<PAGE>
- 1 -
Schedule 1.2 to
-------- --- --
Credit Agreement
------ ----------
Pricing Grid
Debt Rating
- ---------- ------------ ------------ ------------ ------------ ------------
- ---------- ------------ ------------ ------------ ------------ ------------
Margin Level 1 Level 2 Level 3 Level 4 Level 5
Percentage
------------ ------------ ------------ ------------ ------------
If Borrower's If Borrower's If Borrower's If Borrower's If Borrower's
long-term long-term long-term long-term long-term
senior senior senior senior senior
unsecured unsecured unsecured unsecured unsecured
debt is rated debt is rated debt is rated debt is rated debt is rated
at least A- less than less than less than less than
by S&P or Level 1 Level 2 Level 3 BBB-
at least but at least but at least but at least by S&P and
least A3 by BBB+ by BBB by S&P BBB- by S&P less than
Moody's S&P or Baa1 or Baa2 by or Baa3 by Baa3 by
by Moody's Moody's Moody's Moody's
- --------------------------------------------------------------------------------
Facility Fee 9.0 bps 9.5 bps 13.5 bps 16.0 bps 25.0 bps
- --------------------------------------------------------------------------------
Margin 19.5 bps 22.5 bps 26.5 bps 33.5 bps 44.5 bps
Percentage
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 11
United States Cellular Corporation
Computation of Earnings Per Common Share and Series A Common Share
(Dollars and shares in thousands, except per share amounts)
Three Months Ended September 30, 1997 1996
- --------------------------------------------------------------------------------
Primary Earnings
Net Income Available to Common $ 36,222 $ 26,140
========== ==========
Primary Shares
Weighted average number of Common and Series A
Common Shares Outstanding 86,203 86,092
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 57 66
---------- ----------
Primary Shares 86,260 86,158
========== ==========
Primary Earnings per Common Share
Net Income $ .42 $ .30
========== ==========
Fully Diluted Earnings*
Net Income Available to Common, as reported $ 36,222 $ 26,140
Interest expense eliminated as a result of the
pro forma conversion of Convertible Debentures 2,198 1,926
---------- ----------
Net Income Available to Common, as adjusted 38,420 28,066
========== ==========
Fully Diluted Shares
Weighted average number of Common and Series A
Common Shares Outstanding 86,203 86,092
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 107 67
Conversion of Convertible Debentures 7,059 7,059
---------- ----------
Fully Diluted Shares 93,369 93,218
========== ==========
Fully Diluted Earnings per Common Share
Net Income $ .41 $ .30
========== ==========
* This calculation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083 although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
<PAGE>
Exhibit 11
United States Cellular Corporation
Computation of Earnings Per Common Share and Series A Common Share
(Dollars and shares in thousands, except per share amounts)
Nine Months Ended September 30, 1997 1996
- -------------------------------------------------------------------------------
Primary Earnings
Net Income Available to Common $ 86,382 $ 118,582
=========== ==========
Primary Shares
Weighted average number of Common and Series A
Common Shares Outstanding 86,176 85,696
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 52 85
Redeemable Preferred Shares -- 68
Common Shares Issuable -- 153
----------- ----------
Primary Shares 86,228 86,002
=========== ==========
Primary Earnings per Common Share
Net Income $ 1.00 $ 1.38
=========== ==========
Fully Diluted Earnings*
Net Income Available to Common, as reported $ 86,382 $ 118,582
Interest expense eliminated as a result of the
pro forma conversion of Convertible Debentures 6,474 5,665
----------- ----------
Net Income Available to Common, as adjusted 92,856 124,247
=========== ==========
Fully Diluted Shares
Weighted average number of Common and Series A
Common Shares Outstanding 86,176 85,696
Additional shares assuming issuance of:
Options and Stock Appreciation Rights 218 85
Redeemable Preferred Shares -- 68
Common Shares Issuable -- 153
Conversion of Convertible Debentures 7,059 7,059
----------- ----------
Fully Diluted Shares 93,453 93,061
=========== ==========
Fully Diluted Earnings per Common Share
Net Income $ .99 $ 1.34
=========== ==========
* This calculation is submitted in accordance with Securities Exchange Act of
1934 Release No. 9083 although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
Exhibit 12
UNITED STATES CELLULAR CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
Nine Months
Ended
September 30, 1997
-------------------
(Dollars in thousands)
EARNINGS
Income from Continuing Operations before
income taxes $ 152,504
Add (Deduct):
Minority Share of Cellular Losses (200)
Earnings on Equity Method (60,537)
Distributions from Minority Subsidiaries 39,861
Amortization of Capitalized Interest --
Minority interest in income of majority-owned --
subsidiaries that have fixed charges
---------------
131,628
Add fixed charges:
Consolidated interest expense 19,911
Interest Portion (1/3) of Consolidated Rent Expense 3,094
Amortization of debt expense and discount on
indebtedness 384
---------------
$ 155,017
===============
FIXED CHARGES
Consolidated interest expense $ 19,911
Interest Portion (1/3) of Consolidated Rent Expense 3,094
Amortization of debt expense and discount on indebtedness 384
---------------
$ 23,389
===============
RATIO OF EARNINGS TO FIXED CHARGES 6.63
===============
Tax-Effected Preferred Dividends $ 62
Fixed Charges 23,389
---------------
Fixed Charges and Preferred Dividends $ 23,451
===============
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS $ 6.61
===============
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF UNITED STATES CELLULAR CORPORATION AS OF
SEPTEMBER 30, 1997, AND FOR THE NINE MONTHS THEN ENDED, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> $ 120,558
<SECURITIES> 0
<RECEIVABLES> 75,382
<ALLOWANCES> 4,077
<INVENTORY> 8,648
<CURRENT-ASSETS> 256,653
<PP&E> 1,044,988
<DEPRECIATION> 252,709
<TOTAL-ASSETS> 2,412,205
<CURRENT-LIABILITIES> 169,118
<BONDS> 511,465
0
0
<COMMON> 86,224
<OTHER-SE> 1,484,922
<TOTAL-LIABILITY-AND-EQUITY> 2,412,205
<SALES> 15,913
<TOTAL-REVENUES> 634,122
<CGS> 55,473
<TOTAL-COSTS> 523,611
<OTHER-EXPENSES> (72,559)
<LOSS-PROVISION> 19,458
<INTEREST-EXPENSE> 18,347
<INCOME-PRETAX> 152,504
<INCOME-TAX> 66,122
<INCOME-CONTINUING> 86,382
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,382
<EPS-PRIMARY> 1.00
<EPS-DILUTED> .99
</TABLE>
Exhibit 99.1
FOR RELEASE: IMMEDIATE Contact: Kenneth R. Meyers
Senior Vice President - Finance
(773) 399-8900
UNITED STATES CELLULAR ANNOUNCES COMPLETION OF EXCHANGE
OF PROPERTIES WITH BELLSOUTH
November 3, 1997, Chicago, Illinois -- United States Cellular Corporation
[AMEX:USM] announced that it has completed the exchange transaction with
BellSouth Corporation ("BellSouth"), pursuant to agreements entered into in
February 1997. USM acquired controlling interests in a 12-market cluster that
provides cellular service to most of Wisconsin and parts of northern Illinois,
including Milwaukee, Madison, Appleton, Green Bay and Sheboygan, as well as
Rockford, Illinois. Approximately 4.1 million people live in this service area.
In exchange for these markets, USM has transferred to BellSouth a nine-market
cluster in southern Indiana and Kentucky, a controlling interest in one market
in central Tennessee, investment interests in nine other markets and an
undisclosed amount of cash. In total, USM received controlling interests
representing approximately 4.0 million population equivalents ("pops") in
exchange for controlling interests representing approximately 2.0 million pops,
investment interests representing approximately 1.1 million pops and the cash
mentioned previously.
H. Donald Nelson, USM President and Chief Executive Officer, commented, "We look
forward to capturing the synergies of adding markets that serve over four
million people to our Midwest cluster. In addition to serving nearly 90% of the
population of Wisconsin, we now have a contiguous service area of over 100,000
square miles which covers a population of nearly nine million people. Our
expanded service areas will play an important role as we seek to improve
customer satisfaction in the face of increasing competition. We wish nothing but
the best for our former associates in the Indiana, Kentucky and Tennessee
markets. Their contributions to our past successes will be missed."
Headquartered in Chicago, USM manages and invests in cellular systems throughout
the United States. As of today, USM owns interests representing approximately
25.9 million pops, making it the eighth largest cellular telephone company in
the United States based on pops. USM now manages operational systems serving 142
markets.
USM Internet Home Page:
http://www.uscc.com
<PAGE>
