SECURITIES LOAN AGREEMENT, dated _________ ___,
1995, between MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED ("Borrower") and TELEPHONE AND
DATA SYSTEMS, INC. ("Lender")
WHEREAS, Lender and Harris Trust and Savings Bank ("Harris") are
parties to a Custody Agreement dated _____________, 1995 (the "Custody
Agreement") pursuant to which Harris is acting as custodian (in such capacity,
the "Custodian");
WHEREAS, pursuant to the Securities Lending Customer Agreement Custody
Account, dated ____________, 1995 (the "Customer Agreement"), between Lender,
Custodian and Harris, Lender may lend securities held in the custody account
established pursuant to the Custody Agreement to borrowers pursuant to borrower
loan agreements in the form attached to the Customer Agreement;
WHEREAS, Borrower and Harris are parties to a Borrowing Agreement,
dated , 19 (the "Borrowing Agreement"), pursuant to which the
Borrower may borrow securities from Custodian, including, without limitation,
the Common Shares, par value $1.00 per share (the "USM Common Shares"), of
United States Cellular Corporation, a Delaware corporation ("USM"), held in the
custody account (the "Custody Account") established under the Custody Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, Borrower and Lender hereby agree as follows:
1. LOANS OF SECURITIES.
1.1. Subject to the terms and conditions of the Borrowing Agreement,
Borrower may, from time to time, initiate a transaction whereby Borrower seeks
to borrow USM Common Shares from Lender through Custodian. So long as the total
number of USM Common Shares borrowed by Borrower under the Borrowing Agreement
and not yet returned thereunder would not, after giving effect to any request (a
"Request") by Borrower that Custodian make a Loan, be greater than the amount
set forth in Schedule A hereto and Borrower is not in Default under the
Borrowing Agreement or this Agreement, such Request shall be a valid request for
a Loan under the Borrowing Agreement. A Loan under the Borrowing Agreement
shall not occur until the Loaned Securities are delivered by Harris to Borrower
in accordance with the Borrowing Agreement. It shall be a condition to the
first Loan under the Borrowing Agreement that Lender will have a perfected lien
and security interest thereunder. The terms "Business Day", "Default", "Loan",
"Loaned Securities", "Clearing Organization" and certain other terms are defined
below.
1.2. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, Lender,
through Harris, will not lend USM Common Shares to Borrower pursuant to the
Borrowing Agreement if Lender shall have orally notified Custodian and Borrower
that no securities may then be loaned or borrowed pursuant to the Borrowing
Agreement. Any such notice shall be confirmed in writing (including by
facsimile transmission) to Custodian and to Borrower by the end of the Business
Day following the date of such notice. Lender may provide any such notice at
its sole discretion, at any time or times and for any reason. Lender shall not
inform Custodian or Borrower in any such notice or otherwise (x) of the reason
why USM Common Shares may not then be loaned or borrowed pursuant to the
Borrowing Agreement or (y) of the subsection of Section 1 of this Agreement
pursuant to which such notice is being given. Any such notice shall (i) apply
to all or any specified portion (provided that such portion shall result in a
whole number of USM Common Shares then being able to be borrowed under the
Borrowing Agreement) of the USM Common Shares that do not constitute Loaned
Securities (A) at the time of receipt of such notice by Custodian or (B)
subsequent to such receipt of such notice and prior to the time of receipt by
Custodian of the notice provided for in Section 1.4 hereof and (ii) be in effect
until the receipt by Custodian of the notice provided for in Section 1.4 hereof.
1.3. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, if (i) USM
shall have notified Lender of the occurrence of any of the events specified in
Section 2(k)(i) of the Registration Rights Agreement, dated as of ____________
__, 1995, by and between Borrower, USM and Lender (the "Registration Rights
Agreement") or (ii) Lender is otherwise aware of the occurrence of any such
event (which in the case of the event described in Section 2(k)(i)(c) of the
Registration Rights Agreement, shall mean, for purposes of this Section 1.3(ii),
that USM or Lender, on the advice of its respective counsel, reasonably
concludes that it is inadvisable as a matter of federal securities law that the
Prospectus (as defined in the Registration Rights Agreement) continue to be
used), Lender shall in any such case (unless a notice from Lender pursuant to
Section 1.2 or this Section 1.3 is already then in effect) promptly orally
notify Custodian and Borrower that no USM Common Shares may then be loaned or
borrowed pursuant to the Borrowing Agreement. Lender shall confirm any such
notice in writing (including by facsimile transmission) to Custodian and to
Borrower by the end of the Business Day following the date of such notice.
Lender shall not inform Custodian or Borrower in any such notice or otherwise
(x) of the reason why securities may not then be loaned or borrowed pursuant to
the Borrowing Agreement or (y) of the subsection of Section 1 of this Agreement
pursuant to which such notice is being given. Any such notice
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shall apply to all (but not less than all) of the securities hereunder that do
not constitute Loaned Securities (A) at the time of receipt of such notice by
Custodian or (B) subsequent to such receipt of such notice and prior to the time
of receipt of the notice provided for in Section 1.4 hereof by Custodian and
(ii) be in effect until the receipt by Custodian of the notice provided for in
Section 1.4 hereof.
1.4. If (i) Lender shall have notified Custodian in accordance with
Section 1.2 or 1.3 that all or any specified portion of USM Common Shares may
then be loaned pursuant to the Borrowing Agreement and (ii) none of the events
requiring a notice provided for in Section 1.3 hereof is then continuing, Lender
may resume the lending of USM Common Shares pursuant to the Borrowing Agreement
at any time by orally notifying Custodian and Borrower of the resumption of the
lending of USM Common Shares and Lender shall confirm any such notice in writing
(including by facsimile transmission) to Custodian and to Borrower by the end of
the Business Day following the date of such notice.
1.5. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, upon
receipt by Custodian of a notice provided for in Section 1.2 or 1.3 hereof,
Lender shall cause Harris not to deliver any USM Common Shares as Loaned
Securities under the Borrowing Agreement pursuant to any Request until the
receipt by Custodian of a Request subsequent to Custodian receiving a notice
provided for in Section 1.4 hereof.
1.6. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, if
Borrower shall make a Request at a time when any USM Common Shares subject to
such Request may not be loaned or borrowed under the Borrowing Agreement because
Lender has given the notice specified in Section 1.2 or 1.3 hereof that all or a
specified portion of USM Common Shares may not then be loaned or borrowed under
the Borrowing Agreement, Lender shall cause Custodian not to deliver any USM
Common Shares that are subject to such notice specified in Section 1.2 or 1.3
hereof pursuant to the Borrowing Agreement and Lender shall cause Custodian to
orally notify Borrower on the date of such Request that all or such specified
portion of USM Common Shares may not currently be loaned or borrowed under the
Borrowing Agreement. Lender shall cause Custodian to confirm such notice in
writing (including by facsimile transmission) to Borrower by the end of the
Business Day following the date of such Request.
1.7. Upon receipt by Borrower of a notice provided for in Section 1.2
(provided that such notice relates to all (but not less than all) of the
securities that do not constitute Loaned Securities) or 1.3 hereof, Borrower
shall not (i) offer, sell or
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deliver in settlement of any trade any Loaned Security if such offer, sale or
delivery requires, in the reasonable opinion of Borrower's counsel, delivery
(including constructive delivery (a "Constructive Prospectus Delivery") pursuant
to Rule 153, or any successor or similar rule or regulation under the Securities
Act of 1933, as amended (the "Act")) of the Prospectus (as defined in the
Registration Rights Agreement) pursuant to the Act or the rules or regulations
thereunder or (ii) deliver any Loaned Security in connection with a Common Share
Delivery Arrangement (as defined in the Indenture, dated as of __________, 1995,
between USM and Harris, as trustee, relating to USM's Liquid Yield Option Notes
due 2015 (the "Indenture")) pursuant to the Common Share Delivery Arrangement
Agreement, dated as of ________, 1995, between USM, Borrower and Harris, as
conversion agent under the Indenture (the "Common Share Delivery Arrangement
Agreement"), if such delivery requires, in the reasonable opinion of Borrower's
counsel, delivery of the Prospectus pursuant to the Act or the rules or
regulations thereunder, in each case until the receipt by Borrower of a notice
provided for in Section 1.4 hereof.
1.8. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION
ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED SECURITIES HEREUNDER
AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO LENDER MAY CONSTITUTE THE ONLY
SOURCE OF SATISFACTION OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO
RETURN THE LOANED SECURITIES.
2. FEES FOR LOANS. Borrower shall pay Lender a monthly fee in
arrears for Loans of USM Common Shares borrowed by Borrower under the Borrowing
Agreement, such fee to equal ______ basis points, on a per annum basis, of the
average daily market value of all Loaned Securities (as calculated pursuant to
Section 2 of the Borrowing Agreement) outstanding during such month. Borrower
shall provide Lender and Custodian with a written confirmation of such basis of
compensation and the calculation thereof. Any fee payable hereunder shall be
payable by Borrower to Lender (i) within 10 days of the end of the month for
which the fee was incurred, or (ii) immediately, in the event of a Default
hereunder by Borrower.
3. TERMINATION OF THE LOAN. Unless otherwise agreed, Borrower may
terminate a Loan of Loaned Securities under the Borrowing Agreement on any
Business Day by returning the Loaned Securities due under such Loan before 11:30
a.m. New York City time on such day to Custodian, and Lender may terminate a
Loan made to Borrower pursuant to the Borrowing Agreement on the fifth Business
Day following the day on which Lender, prior to the close of business on that
day, gives written notice of termination of the Loan to Borrower. Unless
otherwise agreed, Borrower shall, on or before such termination date, deliver
such
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Loaned Securities to Custodian, or cause the Loaned Securities to be credited to
Custodian's account at a Clearing Organization.
4. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SECURITIES. Until a
Loan is terminated in accordance herewith and with the Borrowing Agreement and
the Customer Agreement, Borrower shall have all the incidents of ownership of
the Loaned Securities, including, without limitation, the right to transfer the
Loaned Securities to any purchaser (as defined in the New York Uniform
Commercial Code) free of any adverse claim (as defined in Article 8 in the New
York Uniform Commercial Code). Lender hereby waives the right to vote the
Loaned Securities during the term of the Loan.
5. REPRESENTATIONS OF THE PARTIES HERETO. The parties hereby make
the following representations and warranties as of the date of each Loan of USM
Common Shares under the Borrowing Agreement and the Customer Agreement:
5.1. Each of Borrower and Lender represents and warrants that (a) it
has the corporate power to execute and deliver this Agreement, the Borrowing
Agreement (with respect to Borrower) and the Customer Agreement (with respect to
Lender), to enter into the Loans contemplated by the Borrowing Agreement and the
Customer Agreement and to perform its obligations hereunder and thereunder; (b)
it has taken all necessary action to authorize such execution, delivery and
performance; and (c) this Agreement, the Borrowing Agreement (with respect to
Borrower) and the Customer Agreement (with respect to Lender) each constitutes a
legal, valid and binding obligation enforceable against it in accordance with
its terms, except as the enforceability hereof and thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or other similar laws now or hereafter in effect affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
5.2. Each of Borrower and Lender represents and warrants that the
execution, delivery and performance by it of this Agreement, the Borrowing
Agreement (with respect to Borrower) and the Customer Agreement (with respect to
Lender) and each Loan under the Borrowing Agreement and the Customer Agreement
will at all times comply with all applicable laws and regulations applicable to
it, including those of securities regulatory or self-regulatory organizations
applicable to it.
5.3. Each of Borrower and Lender represents and warrants that it has
made its own determination as to the tax treatment of any dividends,
remuneration or other funds received hereunder.
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5.4. Borrower represents and warrants that (a) it is a corporation
duly organized and validly existing under the laws of the State of Delaware and
(b) it is borrowing or will borrow the Loaned Securities for the purpose of (i)
making delivery of such securities in the case of short sales, failure to
receive securities required to be delivered, or as otherwise permitted pursuant
to Regulation T of the Board of Governors of the Federal Reserve, or (ii) making
delivery of such securities in connection with Common Share Delivery
Arrangements (as defined in the Indenture) pursuant to the Common Share Delivery
Arrangement Agreement.
5.5. Lender represents and warrants that it is a corporation duly
organized and validly existing under the laws of the State of Iowa.
6. COVENANTS.
6.1. Each party hereto agrees that this Agreement and the Loans made
under the Borrowing Agreement and the Customer Agreement shall be "securities
contracts" for purposes of the Bankruptcy Code and any bankruptcy proceeding
thereunder.
6.2. Borrower has furnished, or promptly upon (and in any event
within five Business Days after) demand by Lender shall furnish, Lender with its
most recent statement required to be furnished to customers pursuant to Rule
17a-5(c) under the 1934 Act.
6.3. At all times, Lender shall ensure that, unless a Default by
Borrower has occurred and is continuing, the number of USM Common Shares held by
Custodian pursuant to the Custodian Agreement, when added to the number of USM
Common Shares that are the subject of outstanding Loans, is not less than the
maximum number of USM Common Shares that could be the subject of outstanding
Loans at such time pursuant to Section 1.1 hereof and Schedule A hereto (without
giving effect to any notice provided for in Section 1.2, 1.3, or 1.6 hereof).
7. DEFINITIONS. For the purpose hereof:
"Business Day" shall mean any day recognized as a settlement day by
the American Stock Exchange.
"Clearing Organization" shall mean The Depository Trust Company
("DTC"), or, if agreed to by the parties hereto, such other clearing agency at
which Borrower and Custodian maintain accounts, or a Federal Reserve Bank which
maintains a book-entry system.
"Loan" shall mean a loan of Loaned Securities under the Borrowing
Agreement and the Customer Agreement.
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"Loaned Security" shall mean any USM Common Share delivered as a Loan
under the Borrowing Agreement and the Customer Agreement until the Clearing
Organization credits the Custodian's account or the certificate for such share
(or an equivalent share) is delivered or otherwise accepted back hereunder or
until the share is replaced by purchase of an equivalent security, except that,
if any new or different security shall be exchanged for any Loaned Security by
reorganization, recapitalization or merger of the issuer of such Loaned
Security, such new or different security shall, effective upon such exchange, be
deemed to become a Loaned Security in substitution for the former Loaned
Security for which such exchange was made.
8. APPLICABLE LAW. This Agreement shall be governed and construed
in accordance with the internal laws of the State of New York.
9. WAIVER. The failure of any party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. All waivers in respect of a
Default must be in writing.
10. REMEDIES. All remedies and limitations on damages hereunder
shall survive the termination of the relevant Loan, return of Loaned Securities
or Collateral and termination of this Agreement.
11. TERMINATION. This Agreement may be terminated by any party upon
five Business Days' notice to the other party.
12. NOTICES. Any request, demand, authorization, notice, waiver,
consent, report or communication to a party hereunder shall, unless this
Agreement specifically provides otherwise, be in writing and delivered in person
or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission to the following facsimile numbers (or to
such address or facsimile number as such party may designate by the notice):
if to Borrower:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
100 Church Street, 18th Floor
New York, New York 10080
Attention: Stock Loan Department
Facsimile No.: (212) 602-7585
Telephone No.: (212) 602-7521
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with copies in the case of any notice, advice or instruction under
Section 3 or 11 above to:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
Attention: Trading General Counsel
Facsimile No.: (212) 449-4590
Telephone No.: (212) 449-4385
and to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Michael A. Campbell
Facsimile No.: (312) 701-7711
Telephone No.: (312) 782-0600
if to the Lender:
Telephone and Data Systems,Inc.
30 North LaSalle Street, Suite 4000
Chicago, Illinois 60602
Attention: Ronald D. Webster, Treasurer
Facsimile No.: (312) 630-1908
Telephone No.: (312) 630-1900
with a copy, except in the case of any notice, advice or instruction
under Sections 1, 2 or 3, to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Michael G. Hron
Facsimile No.: (312) 853-7000
Telephone No.: (312) 853-7036
if to the Custodian:
Harris Trust and Savings Bank
-----------------------------
-----------------------------
Attention:
Facsimile No.:
Telephone No.:
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Any request, demand, authorization, notice, waiver, consent, report or
communication hereunder shall be deemed given when actually received, except
that any request, demand, authorization, notice, waiver, consent, report or
communication actually received on a day that is not a Business Day or after
business hours on a Business Day shall be deemed given and received on the next
succeeding Business Day.
13. MISCELLANEOUS. This Agreement supersedes any other agreement
between the parties concerning loans of securities between the parties hereto.
This Agreement shall not be assigned by any party without the prior written
consent of the other parties, and any such assignment without such consent shall
be void. Subject to the foregoing, this Agreement shall be binding upon and
shall enure to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns. This Agreement shall not be modified,
except by an instrument in writing signed by the party against whom enforcement
is sought.
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MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
by
---------------------------------
Name:
Title:
TELEPHONE AND DATA SYSTEMS, INC.
by
---------------------------------
Name:
Title:
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SCHEDULE A
The maximum number of USM Common Shares that may be the subject of
outstanding Loans as of any date is 750,000 subject to appropriate adjustment
for stock splits, reverse stock splits and stock dividends. Lender may, in its
sole discretion, at any time and from time to time, increase (but not above
750,000 USM Common Shares) or decrease the maximum number of USM Common Shares
that may be the subject of outstanding Loans as of any date, subject in each
such case to appropriate adjustments for stock splits, reverse stock splits and
stock dividends. Lender shall promptly notify Borrower, in accordance with the
terms of Sections 1.2, 1.3 and 1.4, of any change in the maximum number of USM
Common Shares that may be the subject of outstanding Loans.
EXHIBIT A
(Bank Name)
(Address)
IRREVOCABLE STAND-BY LETTER OF CREDIT NO.
- ------------------------------------------------
Effective Date:
AMOUNT AVAILABLE:
(In Numbers):
(In Words):
BENEFICIARY:
APPLICANT:
ATTN:
EXPIRY DATE:
Dear Sir:
We hereby issue in your favor this irrevocable Stand-by Letter of Credit which
is available against your draft drawn at sight on us accompanied by the
following:
Your signed statement that "(THE APPLICANT/ADDRESS) has failed to
comply with the terms of the securities loan agreement dated
______________ ____, 1995."
Reference in this Letter of Credit to that certain agreement between (THE
APPLICANT) and (THE BENEFICIARY) is for identification purposes only and is not
incorporated herein by reference.
Drafts drawn under this Letter of Credit must be drawn and presented together
with the accompanying documentation at our __________ ATTN: _____________ not
later than (EXPIRY DATE).
Drafts must be marked as drawn under this letter of credit (mentioning our
reference number).
We hereby engage with you that all drafts drawn and/or documents presented under
and in compliance with the terms of the Letter of Credit will be duly honored
upon presentation to us.
It is a condition of this Letter of Credit that it shall be deemed automatically
extended without amendment for one year from its expiry date, or from any
further expiry date, unless thirty days prior to any such expiry date we shall
notify you by registered mail, that we elect not to consider this Letter of
Credit extended for any such additional period.
This Letter of Credit is to be issued subject to the Uniform Customs and
Practice for Documentary Credits, International Chamber of Commerce, Publication
No. 500, and where not inconsistent with said Uniform Customs and Practice,
Article 5 of the New York Uniform Commercial Code.
Yours truly,
(BANK NAME)
- ------------------------ ----------------------------------------
Authorized Signature Authorized Signature
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