Exhibit 4.2
------------------------------------
PREFERRED SECURITIES GUARANTEE AGREEMENT
TDS Capital II
Dated as of February 10, 1998
------------------------------------
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions........................................1
Section 1.2. Interpretation.....................................4
ARTICLE II
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application...................4
Section 2.2. Lists of Holders of Preferred Securities...........5
Section 2.3. Reports by the Guarantee Trustee...................5
Section 2.4. Periodic Reports to Guarantee Trustee..............5
Section 2.5. Evidence of Compliance with Conditions
Precedent.........................................5
Section 2.6. Events of Default; Waiver..........................5
Section 2.7. Events of Default; Notice..........................5
Section 2.8. Conflicting Interests..............................6
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee.........6
Section 3.2. Certain Rights of Guarantee Trustee................7
Section 3.3. Not Responsible for Recitals or Issuance
of Guarantee......................................9
ARTICLE IV
GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility.....................9
Section 4.2. Appointment, Removal and Resignation of
Guarantee Trustee.................................9
ARTICLE V
GUARANTEE
Section 5.1. Guarantee..........................................9
Section 5.2. Waiver of Notice and Demand........................9
Section 5.3. Obligations Not Affected..........................10
Section 5.4. Rights of Holders.................................10
Section 5.5. Guarantee of Payment..............................11
Section 5.6. Subrogation.......................................11
Section 5.7. Independent Obligations...........................11
i
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.1. Limitation of Transaction.........................11
Section 6.2. Ranking...........................................12
ARTICLE VII
TERMINATION
Section 7.1. Termination.......................................12
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Exculpation.......................................12
Section 8.2. Indemnification...................................12
ARTICLE IX
SUCCESSOR CORPORATION
Section 9.1. Guarantor May Consolidate, Etc....................13
Section 9.2. Successor Corporation Substituted.................14
Section 9.3. Evidence of Consolidation, Etc. to
Trustee..........................................14
ARTICLE IX
MISCELLANEOUS
Section 10.1. Successors and Assigns...........................15
Section 10.2. Amendments.......................................15
Section 10.3. Notices..........................................15
Section 10.4. Benefit..........................................16
Section 10.5. Governing Law....................................16
ii
PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Guarantee
Agreement"), dated as of February 10, 1997, is executed and delivered by
TELEPHONE AND DATA SYSTEMS, INC., an Iowa corporation (the "Guarantor"), and The
First National Bank of Chicago, a national banking association duly organized
and existing under the laws of the United States, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Preferred Securities (as defined herein) of TDS Capital II, a Delaware
statutory business trust (the "Issuer").
W I T N E S S E T H:
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of February 10, 1998, among the trustees of
the Issuer, the Guarantor as Sponsor and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof $150,000,000 aggregate stated liquidation amount of
its 8.04% Trust Originated Preferred Securities (the "Preferred Securities");
and
WHEREAS, as incentive for the Holders to purchase the
Preferred Securities, the Guarantor desires irrevocably and unconditionally to
agree, to the extent set forth in this Guarantee Agreement, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the purchase by each
Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. In this Guarantee Agreement, unless
the context other wise requires: (a) capitalized terms used in this Guarantee
Agreement but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1; (b) a term defined anywhere in this
Guarantee Agreement has the same meaning throughout; and (c) a term defined in
the Trust Indenture Act has the same meaning when used in this Guarantee
Agreement unless otherwise defined in this Guarantee Agreement or unless the
context otherwise requires.
Affiliate:
The term "Affiliate" has the same meaning as given to that
term in Rule 405 of the Securities Act of 1933 or any successor rule thereunder.
Business Day:
The term "Business Day" means any day other than a day on
which banking institutions in Chicago, Illinois or New York, New York are
authorized or required by any applicable law to close.
Common Securities:
The term "Common Securities" means the securities representing
common undivided beneficial interests in the assets of the Issuer.
Covered Person:
The term "Covered Person" means any Holder or beneficial owner
of Preferred Securities.
Event of Default:
The term "Event of Default" means a default by the Guarantor
on any of its payment or other obligations under this Guarantee Agreement.
Guarantee Payments:
The term "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
the Preferred Securities to the extent the Issuer shall have funds available
therefor, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price") to the extent
the Issuer has funds available therefor, with respect to any Preferred
Securities called for redemption by the Issuer, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Issuer (other than in
connection with the distribution of Subordinated Debentures to the Holders in
exchange for Preferred Securities as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment to the extent
the Issuer has funds available therefor, and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer (in either case, the "Liquidation Distribution").
Guarantee Trustee:
The term "Guarantee Trustee" means The First National Bank of
Chicago, as trustee under this Guarantee Agreement, until a Successor Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this Guarantee Agreement and thereafter means such Successor Guarantee
Trustee.
Guarantor:
The term "Guarantor" means Telephone and Data Systems, Inc.,
and its successor or successors by merger, consolidation or purchase of all or
substantially all of its assets.
Holder:
The term "Holder" shall mean any holder, as registered on the
books and records of the Issuer, of any Preferred Securities; provided, however,
that, in determining whether the holders of the requisite percentage of
Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any Affiliate of the
Guarantor.
2
Indemnified Person:
The term "Indemnified Person" means the Guarantee Trustee, any
Affiliate of the Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives or agents of the Guarantee
Trustee.
Indenture:
The term "Indenture" means the Indenture dated as of October
15, 1997, between the Guarantor (the "Debenture Issuer") and The First National
Bank of Chicago, as trustee, and any amendment thereto and any indenture
supplemental thereto pursuant to which certain unsecured subordinated debt
securities of the Debenture Issuer are to be issued to the Property Trustee of
the Issuer.
Majority in liquidation amount of the Securities:
The term "Majority in liquidation amount of the Securities"
means, except as provided by the Trust Indenture Act, a vote by Holder(s) of
Preferred Securities, voting separately as a class, of more than 50% of the
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or maturity, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Preferred
Securities.
Officer's Certificate:
The term "Officer's Certificate" means, with respect to any
Person, a certificate signed by an authorized officer of such Person. Any
Officer's Certificate delivered with respect to compliance with a condition or
covenant provided for in this Guarantee Agreement shall include:
(a) a statement that each such officer signing the
Officer's Certificate has read the covenant or condition and
the definition relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each such officer
in rendering the Officer's Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of each
such officer, such condition or covenant has been complied
with.
Person:
The term "Person" means any individual, corporation,
partnership, limited liability company, joint venture, joint stock company,
unincorporated association or government or any agency or political subdivision
thereof, or any other entity of whatever nature.
3
Responsible Officer:
The term "Responsible Officer", when used with respect to the
Guarantee Trustee, means the Chairman of the board of directors, the President,
any Vice President, the Secretary, the Treasurer, any trust officer, any
corporate trust officer or any other officer or assistant officer of the
Guarantee Trustee customarily performing functions similar to those performed by
any of the persons who at the time shall be such officers, respectively, or to
whom any corporate trust matter is referred because of that officer's knowledge
of and familiarity with the particular subject.
Subordinated Debentures:
The term "Subordinated Debentures" means the series of
unsecured subordinated debt securities of the Guarantor designated the 8.04%
Junior Subordinated Deferable Interest Debentures due March 31, 2038 held by the
Property Trustee of the Issuer.
Successor Guarantee Trustee:
The term "Successor Guarantee Trustee" means a successor
Guarantee Trustee possessing the qualifications to act as Guarantee Trustee
under Section 4.1.
Trust Indenture Act:
The term "Trust Indenture Act" means the Trust Indenture Act
of 1939.
Section 1.2. Interpretation. Each definition in this Guarantee
Agreement includes the singular and the plural, and references to the neuter
gender include the masculine and feminine where appropriate. Terms which relate
to accounting matters shall be interpreted in accordance with generally accepted
accounting principles in effect from time to time. References to any statute
mean such statute as amended at the time and include any successor legislation.
The word "or" is not exclusive, and the words "herein," "hereof" and "hereunder"
refer to this Guarantee Agreement as a whole. The headings to the Articles and
Sections are for convenience of reference and shall not affect the meaning or
interpretation of this Guarantee Agreement. References to Articles and Sections
mean the Articles and Sections of this Guarantee Agreement unless otherwise
specified.
ARTICLE II
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of
the Trust Indenture Act that are required to be part of this Guarantee Agreement
and shall, to the extent applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
4
Section 2.2. Lists of Holders of Preferred Securities.
(a) The Guarantor shall provide the Guarantee Trustee with a
list, in such form as the Guarantee Trustee may reasonably require, of the names
and addresses of the Holders of the Preferred Securities ("List of Holders") as
of such date, (i) within ten Business Days after January 1 and June 30 of each
year, and (ii) at any other time, within 30 days of receipt by the Guarantor of
a written request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Guarantee Trustee, provided that the
Guarantor shall not be obligated to provide such List of Holders at any time
when the List of Holders does not differ from the most recent List of Holders
given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.
(b) The Guarantee Trustee shall comply with its obligations
under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
Section 2.3. Reports by the Guarantee Trustee. Within 60 days
after May 15 of each year, the Guarantee Trustee shall provide to the Holders of
the Preferred Securities such reports as are required by Section 313 of the
Trust Indenture Act, if any, in the form and in the manner provided by Section
313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
Section 2.4. Periodic Reports to Guarantee Trustee. The
Guarantor shall provide to the Guarantee Trustee such documents, reports and
information as required by Section 314 (if any) and the compliance certificate
required by Section 314 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 314 of the Trust Indenture Act.
Section 2.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given by an officer
pursuant to Section 314(c)(1) may be given in the form of an Officer's
Certificate.
Section 2.6. Events of Default; Waiver. The Holders of a
Majority in liquidation amount of Preferred Securities may, by vote, on behalf
of the Holders of all of the Preferred Securities, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
Section 2.7. Events of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after a
Responsible Officer has knowledge of the occurrence of an Event of Default,
transmit by mail, first class postage prepaid, to the Holders of the Preferred
Securities, notices of all Events of Default known to the Guarantee Trustee,
unless such defaults have been cured before the giving of such notice, provided,
that the Guarantee Trustee shall be protected in withholding such notice if and
so long as the board of directors, the executive committee, or a trust committee
of directors and/or
5
Responsible Officers of the Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the Preferred
Securities.
(b) The Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Guarantee Trustee shall have
received written notice, or a Responsible Officer charged with the
administration of the Declaration shall have obtained written notice, of such
Event of Default.
Section 2.8. Conflicting Interests. The Declaration shall be
deemed to be specifically described in this Guarantee Agreement for the purposes
of clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee
Trustee for the benefit of the Holders of the Preferred Securities, and the
Guarantee Trustee shall not transfer this Guarantee Agreement to any Person
except to a Holder of Preferred Securities exercising the rights of such Holder
pursuant to Section 5.4(b) or to a Successor Guarantee Trustee on acceptance by
such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, and such vesting of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders of the Preferred Securities.
(c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be
construed to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of Default that may
have occurred:
6
(A) the duties and obligations of the
Guarantee Trustee shall be determined solely by the express
provisions of this Guarantee Agreement, and the Guarantee
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Guarantee Agreement, and no implied covenants or obligations
shall be read into this Guarantee Agreement against the
Guarantee Trustee; and
(B) in the absence of bad faith on the part
of the Guarantee Trustee, the Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee
and conforming to the requirements of this Guarantee
Agreement; but in the case of any such certificates or
opinions that by any provision hereof are specifically
required to be furnished to the Guarantee Trustee, the
Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of
this Declaration;
(ii) the Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;
(iii) the Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Preferred Securities at the time
outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee Trustee
under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall
require the Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if
there is reasonable grounds for believing that the repayment of such
funds or liability is not reasonably assured to it under the terms of
this Guarantee Agreement or adequate indemnity against such risk or
liability is not reasonably assured to it.
Section 3.2. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Guarantee Trustee may rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, approval, bond, security or
other paper or document believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
7
(ii) Any direction or act of the Guarantor
contemplated by this Guarantee Agreement shall be sufficiently
evidenced by a direction or an Officer's Certificate.
(iii) Whenever in the administration of this
Guarantee Agreement the Guarantee Trustee shall deem it desirable that
a matter be proved or established before taking, suffering or omitting
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on its
part, request and rely upon an Officer's Certificate which, upon
receipt of such request, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or any
rerecording, refiling or reregistration thereof).
(v) The Guarantee Trustee may consult with counsel
and the written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such advice or opinion. Such counsel
may be counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration of
this Guarantee Agreement from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Guarantee Agreement at the request or direction of any Holder, unless
such Holder shall have provided to the Guarantee Trustee reasonable
security or indemnity against the costs, expenses (including attorneys'
fees and expenses) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable
advances as may be requested by the Guarantee Trustee; provided that,
nothing contained in this Section 3.2(a)(vi) shall, however, relieve
the Guarantee Trustee, upon the occurrence of an Event of Default, of
its obligation to exercise the rights and powers vested in it by this
Guarantee Agreement.
(vii) The Guarantee Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, approval, bond, security or
other papers or documents, but the Guarantee Trustee, in its
discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit.
(viii) The Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the Guarantee
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder.
(ix) Any action taken by the Guarantee Trustee or its
agents
8
hereunder shall bind the Holders of the Preferred Securities, and the
signature of the Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party
shall be required to inquire as to the authority of the Guarantee
Trustee to so act or as to its compliance with any of the terms and
provisions of this Guarantee Agreement, both of which shall be
conclusively evidenced by the Guarantee Trustee's or its agent's taking
such action.
(x) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation amount of
the Preferred Securities, (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are
received, and (iii) shall be protected in acting in accordance with
such instructions.
(b) No provision of this Guarantee Agreement shall be deemed
to impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty.
Section 3.3. Not Responsible for Recitals or Issuance of
Guarantee. The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital
and surplus of at least fifty million U.S. dollars ($50,000,000), and
subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements
of the supervising or examining authority referred to above, then, for
the purposes of this Section 4.1(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible so to act under Section 4.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply
with the provisions of Section 310(b) of the Trust Indenture Act.
Section 4.2. Appointment, Removal and Resignation of
Guarantee Trustee.
(a) Subject to Section 4.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed in accordance
with Section 4.2(a) until a Successor Guarantee Trustee has been appointed and
has accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by instrument in writing executed by
such Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.
ARTICLE V
GUARANTEE
Section 5.1. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by the Issuer), as and when
due, regardless of any defense, right of set-off or counterclaim that the Issuer
may have or assert. The Guarantor's obligation to make a Guarantee Payment may
be satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders.
Section 5.2. Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of this Guarantee Agreement and of any liability to
which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the Issuer or any other Person before
proceeding against the Guarantor, protest, notice of
9
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
Section 5.3. Obligations Not Affected. The obligations,
covenants, agreements and duties of the Guarantor under this Guarantee Agreement
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or
implied agreement, covenant, term or condition relating to the
Preferred Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of
Distributions that results from the extension of any interest payment
period on the Subordinated Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Preferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar proceedings
affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.3 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and
all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
Section 5.4. Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of this Guarantee Agreement or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement.
(b) If the Guarantee Trustee fails to enforce this Guarantee
Agreement, any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to
10
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against the Issuer, the Guarantee Trustee or any other Person.
Section 5.5. Guarantee of Payment. This Guarantee Agreement
creates a guarantee of payment and not of collection.
Section 5.6. Subrogation. The Guarantor shall be subrogated to
all (if any) rights of the Holders of Preferred Securities against the Issuer in
respect of any amounts paid to such Holders by the Guarantor under this
Guarantee Agreement; provided, however, that the Guarantor shall not (except to
the extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Guarantee Agreement, if, at the time of any such payment, any amounts are
due and unpaid under this Guarantee Agreement. If any amount shall be paid to
the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders.
Section 5.7. Independent Obligations. The Guarantor
acknowledges that its obligations hereunder are independent of the obligations
of the Issuer with respect to the Preferred Securities, and that the Guarantor
shall be liable as principal and as debtor hereunder to make Guarantee Payments
pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence
of any event referred to in subsections (a) through (g), inclusive, of Section
5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.1. Limitation of Transaction. So long as any
Preferred Securities remain outstanding, if there shall have occurred and be
continuing an Event of Default or an event of default under the Declaration,
then (a) the Guarantor shall not declare or pay any dividend on, or make any
distribution with respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock (other than (i) purchases or
acquisitions of shares of Guarantor common stock in connection with the
satisfaction by the Guarantor of its obligations under any employee benefit
plans or any other contractual obligations of the Guarantor (other than a
contractual obligation ranking pari passu, with or junior to the Subordinated
Debentures), (ii) as a result of a reclassification of Company capital stock or
the exchange or conversion of one class or series of Company capital stock for
another class or series of Company capital stock or (iii) the purchase of
fractional interests in shares of Company capital stock pursuant to the
conversion or exchange provisions of such Company capital stock or the security
being converted or exchanged), (b) the Guarantor shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities (including guarantees) issued by the Guarantor which rank pari
passu with or junior to the Subordinated Debentures and (c) the Guarantor shall
not make any guarantee payments with respect to the foregoing (other than
pursuant to this Guarantee Agreement and other guarantee agreements entered into
by the Guarantor with respect to preferred securities of any Affiliate of the
Guarantor).
11
Section 6.2. Ranking. This Guarantee Agreement will constitute
an unsecured obligation of the Guarantor and will rank (i) subordinate and
junior in right of payment to all other liabilities of the Guarantor, including
the Subordinated Debentures, except those liabilities of the Guarantor made pari
passu or subordinate by their terms, (ii) pari passu with the most senior
preferred stock now or hereafter issued by the Guarantor and with any guarantee
now or hereafter entered into by the Guarantor in respect of any preferred
securities of any Affiliate of the Guarantor, and (iii) senior to the
Guarantor's common stock.
ARTICLE VII
TERMINATION
Section 7.1. Termination. This Guarantee Agreement shall
terminate upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) upon the distribution of the Subordinated Debentures to the
Holders of all of the Preferred Securities or (iii) upon full payment of the
amounts payable in accordance with the Declaration upon liquidation of the
Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid under the Preferred Securities or
under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Exculpation.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this
Guarantee Agreement and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Guarantee Agreement or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
Section 8.2. Indemnification.
(a) To the fullest extent permitted by applicable law, the
Guarantor shall indemnify and hold harmless each Indemnified Person from and
against any loss, damage or claim incurred by such Indemnified Person by reason
of any act or omission performed or omitted by such Indemnified Person in good
faith in accordance with this Guarantee Agreement
12
and in a manner such Indemnified Person reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this Guarantee
Agreement, except that no Indemnified Person shall be entitled to be indemnified
in respect of any loss, damage or claim incurred by such Indemnified Person by
reason of negligence or willful misconduct with respect to such acts or
omissions.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Guarantor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Guarantor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 8.2(a).
(c) The provisions of this Section 8.2 shall survive
termination of this Guarantee Agreement or the resignation or removal of the
Guarantee Trustee.
ARTICLE IX
SUCCESSOR CORPORATION
Section 9.1. Guarantor May Consolidate, Etc. Nothing contained
in this Guarantee Agreement shall prevent any consolidation or merger of the
Guarantor with or into any other Person or Persons (whether or not affiliated
with the Guarantor), or successive consolidations or mergers in which the
Guarantor or its successor or successors shall be a party or parties, or shall
prevent any sale, conveyance, transfer or other disposition of the property of
the Guarantor or its successor or successors as an entirety, or substantially as
an entirety, to any other Person (whether or not affiliated with the Guarantor
or its successor or successors) authorized to acquire and operate the same
provided that (a) any Person formed in such consolidation or into which the
Company is merged or to which the Company has sold, conveyed, transferred or
otherwise disposed of its properties as an entirety or substantially as an
entirety is an entity validly existing under the laws of the jurisdiction of its
organization and such Person assumes the Company's obligations under this
Guarantee Agreement and (b) immediately after giving effect to the transaction
no Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing;
provided, further, the Guarantor hereby covenants and agrees that, upon any such
consolidation, merger, sale, conveyance, transfer or other disposition, the due
and punctual payment, performance and observance of all the covenants and
conditions of this Guarantee Agreement to be paid, performed or observed by the
Guarantor shall be expressly assumed, by supplemental indenture (which shall
conform to the provisions of the Trust Indenture Act, as then in effect)
satisfactory in form to the Trustee executed and delivered to the Trustee by the
entity formed by such consolidation, or into which the Guarantor shall have been
merged, or by the entity which shall have acquired such property; and provided
further that, if the Person formed in such consolidation or into which the
Company is merged or to which the Company has sold, conveyed, transferred or
otherwise disposed of its properties as an entirety or substantially as an
entirety is not organized and validly existing under the laws of the United
States, any state thereof or the District of Columbia, the supplemental
indenture described in this Section 9.1 shall also contain the following
provisions:
"(a) [Such Person] hereby agrees to pay to the holders of
Trust Securities any additional amounts as may be necessary in order
that every net payment or other
13
amount due on the Trust Securities, after withholding for or on account
of any present or future tax, assessment or governmental charge imposed
upon such holder of Trust Securities (except for a tax, assessment or
charge imposed solely as a result of a connection between the recipient
and the jurisdiction imposing such tax, assessment or charge) by reason
of or as a result of such payment or other amount being paid by an
entity which is not an entity existing under the laws of the United
States or any state thereof or the District of Columbia, will not be
less than the amount provided for in the Indenture, the Trust
Securities, the Guarantee Agreement or this Supplemental Indenture, as
the case may be, to be then due and payable.
(b) Any litigation based hereon, or arising out of, under, or
in connection with, the Guarantee Agreement and/or this Supplemental
Indenture or any other document relating hereto or thereto, or any
course of conduct, course of dealing, statements (whether verbal or
written) or actions of the Trustee or [such Person] shall be brought
and maintained exclusively in the courts of the State of Illinois or in
the United States District Court for the Northern District of Illinois;
provided, however, that any suit seeking enforcement against any
property may be brought at Trustee's or [such Person's] option, in the
courts of any jurisdiction where such property may be found. [Such
Person] hereby expressly and irrevocably submits to the jurisdiction of
the courts of the State of Illinois and of the United States District
Court for the Northern District of Illinois for the purpose of any such
litigation as set forth above and irrevocably agrees to be bound by any
judgment rendered thereby in connection with such litigation. [Such
Person] further irrevocably consents to the service of process by
registered mail, postage prepaid, or by personal service within or
without the State of Illinois. [Such Person] hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter may have to the laying of
venue of any such litigation brought in any such court referred to
above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that [such Person] has or hereafter
may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, [such Person] hereby irrevocably waives such
immunity in respect of its obligations under the Guarantee Agreement
and this Supplemental Indenture."
Section 9.2. Successor Corporation Substituted.
(a) In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition and upon the assumption by the
successor Person, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual
payment, performance and observance of all of the covenants and conditions of
this Guarantee Agreement to be paid, performed or observed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named as the Guarantor herein.
(b) Nothing contained in this Guarantee Agreement shall
prevent the Guarantor from merging into itself or acquiring by purchase or
otherwise all or any part of the property of any other Person (whether or not
affiliated with the Guarantor).
Section 9.3. Evidence of Consolidation, Etc. to Trustee. The
Trustee, subject to the provisions of Section 3.01, may receive an opinion of
counsel as conclusive
14
evidence that any such consolidation, merger, sale, conveyance, transfer or
other disposition, and any such assumption, comply with the provisions of this
Article.
ARTICLE IX
MISCELLANEOUS
Section 10.1. Successors and Assigns. All guarantees and
agreements contained in this Guarantee Agreement shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the Preferred Securities then
outstanding.
Section 10.2. Amendments. Except with respect to any changes
that do not materially adversely affect the rights of Holders (in which case, no
consent of Holders will be required), this Guarantee Agreement may only be
amended with the prior approval of the Holders of at least 66-2/3% in
liquidation amount of all the outstanding Preferred Securities. The provisions
of Section 12.2 of the Declaration with respect to meetings of Holders of the
Preferred Securities apply to the giving of such approval.
Section 10.3. Notices. All notices provided for in this
Guarantee Agreement shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by registered or certified
mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee
Trustee's mailing address set forth below (or such other address as the
Guarantee Trustee may give notice of to the Holders of the Preferred
Securities):
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may
give notice of to the Holders of the Preferred Securities):
Telephone and Data Systems, Inc.
30 N. LaSalle Street
Chicago, Illinois 60602
Attention: President and Chief Executive Officer
(c) If given to any Holder of Preferred Securities, at the
address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver.
15
Section 10.4. Benefit. This Guarantee Agreement is solely
for the benefit of the Holders of the Preferred Securities and, subject to
Section 3.1(a), is not separately transferable from the Preferred Securities.
Section 10.5. Governing Law. THIS GUARANTEE AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
16
THIS GUARANTEE AGREEMENT is executed as of the day and year
first above written.
TELEPHONE AND DATA SYSTEMS, INC.
By: _______________________
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, Not in its
individual capacity but
solely as Guarantee Trustee
By: _______________________
Title: