SECURITIES LOAN AGREEMENT, dated _________ ___,
1995, between MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED ("Borrower") and TELEPHONE AND
DATA SYSTEMS, INC. ("Lender").
WHEREAS, Lender and Harris Trust and Savings Bank ("Harris") are
parties to a Custody Agreement dated , 1995 (the "Custody
Agreement") pursuant to which Harris is acting as custodian (in such capacity,
the "Custodian");
WHEREAS, pursuant to the Securities Lending Customer Agreement Custody
Account, dated , 1995 (the "Customer Agreement"), between Lender,
Custodian and Harris, Harris may lend securities held in the custody account
established pursuant to the Custody Agreement to borrowers pursuant to borrower
loan agreements in the form attached to the Customer Agreement;
WHEREAS, Borrower and Harris are parties to a Borrowing Agreement,
dated , 1995 (the "Borrowing Agreement"), pursuant to which the
Borrower may borrow securities from Harris, including, without limitation,
the Common Shares, par value $1.00 per share, of United States Cellular
Corporation, a Delaware corporation ("USM") (including any other shares of
capital stock of USM, into which such Common Shares shall be reclassified or
changed, the "USM Common Shares"), held in the custody account (the "Custody
Account") established under the Custody Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, Borrower and Lender hereby agree as follows:
1. LOANS OF SECURITIES.
1.1. Subject to the terms and conditions of the Borrowing
Agreement, Borrower may, from time to time, initiate a transaction whereby
Borrower seeks to borrow USM Common Shares held in the Custody Account from
Harris. So long as the total number of USM Common Shares so borrowed by
Borrower from Harris under the Borrowing Agreement and not yet returned
thereunder would not, after giving effect to any request (a "Request") by
Borrower that Harris make a Loan, be greater than the amount permitted in
accordance with Schedule A hereto and Borrower is not in default under the
Borrowing Agreement or this Agreement, such Request shall be a valid request
for a Loan under the Borrowing Agreement. A Loan
under the Borrowing Agreement shall not occur until the Loaned Securities are
delivered by Harris to Borrower in accordance with the Borrowing Agreement.
It shall be a condition to the obligations of Lender to make USM Common
Shares available for borrowing by Borrower from Harris under the Borrowing
Agreement, that Borrower shall have delivered the Collateral to Harris as
required by the Borrowing Agreement.
The terms "Business Day", "Collateral", "Loan", and "Loaned
Securities", and certain other terms are defined below.
1.2. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, Lender
and Borrower agree that Lender will not make USM Common Shares available
through the Custody Account to be loaned by Harris to Borrower and Borrower
will not borrow USM Common Shares held in the Custody Account from Harris
pursuant to the Borrowing Agreement or otherwise, if Lender shall have orally
notified Custodian and Borrower that no USM Common Shares held in the Custody
Account and that do not constitute Loaned Securities may then be loaned by
Harris or borrowed by Borrower from Harris pursuant to the Borrowing
Agreement. Any such notice shall be confirmed in writing (including by
facsimile transmission) to Custodian and to Borrower by the end of the
Business Day following the date of
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such notice. Lender may provide any such notice at its sole discretion, at
any time or times and for any reason. Lender shall not inform Custodian or
Borrower in any such notice or otherwise (x) of the reason why USM Common
Shares may not then be loaned by Harris or borrowed by Borrower from
Harris pursuant to the Borrowing Agreement or (y) of the subsection of
Section 1 of this Agreement pursuant to which such notice is being given.
Any such notice shall (i) apply to all or any specified portion (provided
that such portion shall result in a whole number of USM Common Shares then
being able to be loaned by Harris and borrowed by Borrower from Harris
under the Borrowing Agreement) of the USM Common Shares that do not
constitute Loaned Securities at the time of receipt of such notice by
Custodian and Borrower and (ii) be in effect until the receipt by Custodian
and Borrower of the notice provided for in Section 1.4 hereof.
1.3. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, if (i)
USM shall have notified Lender of the occurrence of any of the events
specified in Section 2(k)(i) of the Registration Rights Agreement, dated as
of ____________ __, 1995, by and between Borrower, USM and Lender (the
"Registration Rights Agreement") or (ii) Lender is otherwise aware of the
occurrence of any such event (which in the case of the event described in
Section 2(k)(i)(c) of the Registration Rights Agreement, shall mean, for
purposes of this Section 1.3(ii), that USM or Lender, on the advice of its
respective counsel, reasonably concludes that it is inadvisable as a matter
of federal securities law that the Prospectus (as defined in the Registration
Rights Agreement) continue to be used), Lender shall in any such case (unless
a notice from Lender pursuant to Section 1.2 (relating to all of the USM
Common Shares that do not constitute Loaned Securities) or this Section 1.3
is already then in effect) promptly orally notify Custodian and Borrower that
no USM Common Shares that do not constitute Loaned Securities are then
available through the Custody Account to be loaned by Harris or borrowed by
Borrower from Harris pursuant to the Borrowing Agreement or otherwise.
Lender shall confirm any such notice in writing (including by facsimile
transmission) to Custodian and to Borrower by the end of the Business Day
following the date of such notice. Lender shall not inform Custodian or
Borrower in any such notice or otherwise (x) of the reason why USM Common
Shares held in the Custody Account may not then be loaned by Harris or
borrowed by Borrower from Harris pursuant to the Borrowing Agreement or (y)
of the subsection of Section 1 of this Agreement pursuant to which such
notice is being given. Any such notice shall (i) apply to all (but not less
than all) of the USM Common Shares that do not constitute Loaned Securities
and (ii) be in effect until the receipt by Custodian
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and Borrower of the notice provided for in Section 1.4 hereof.
1.4. If (i) Lender shall have notified Custodian and Borrower in
accordance with Section 1.2 or 1.3 that all or any specified portion of USM
Common Shares are not then available through the Custody Account to be loaned
by Harris or borrowed by Borrower from Harris pursuant to the Borrowing
Agreement or otherwise and (ii) none of the events requiring a notice
provided for in Section 1.3 hereof is then continuing, Harris may resume the
lending of USM Common Shares held in the Custody Account and Borrower may
resume the borrowing of such USM Common Shares from Harris pursuant to the
Borrowing Agreement at any time after Lender orally notifies Custodian and
Borrower of the resumption of the availability of USM Common Shares through
the Custody Account for lending by Harris to Borrower and Lender shall
confirm any such notice in writing (including by facsimile transmission) to
Custodian and to Borrower by the end of the Business Day following the date
of such notice.
1.5. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, any
notice provided for in Section 1.2 or 1.3 hereof shall advise Harris not to
deliver any USM Common Shares from the Custody Account as Loaned Securities
to Borrower under the Borrowing Agreement pursuant to any Request until the
receipt by Harris of a Request subsequent to Custodian receiving a notice
provided for in Section 1.4 hereof.
1.6. Notwithstanding anything to the contrary herein or in the
Borrowing Agreement, the Custody Agreement or the Customer Agreement, if
Borrower shall make a Request at a time when any USM Common Shares subject to
such Request are not then available through the Custody Account to be loaned
by Harris or borrowed by Borrower from Harris under the Borrowing Agreement
or otherwise because Lender has given the notice specified in Section 1.2 or
1.3 hereof that all or a specified portion of USM Common Shares are not then
available through the Custody Account to be loaned by Harris or borrowed by
Borrower from Harris under the Borrowing Agreement, Lender shall notify
Custodian not to deliver any USM Common Shares that are subject to such
notice specified in Section 1.2 or 1.3 hereof pursuant to the Borrowing
Agreement and Lender shall orally notify Borrower on the date of such Request
that all or such specified portion of USM Common Shares are not then
available through the Custody Account to be loaned by Harris or borrowed by
Borrower from Harris under the Borrowing Agreement. Lender shall confirm
such notice in writing (including by facsimile transmission) to Custodian and
Borrower by the end of the Business Day following the date of such Request.
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1.7. Upon receipt by Borrower of a notice provided for in Section
1.2 (provided that such notice relates to all (but not less than all) of the
USM Common Shares that do not constitute Loaned Securities) or 1.3 hereof,
Borrower shall not (i) offer, sell or deliver in settlement of any trade any
Loaned Security if such offer, sale or delivery requires, in the reasonable
opinion of Borrower's counsel, delivery (including constructive delivery (a
"Constructive Prospectus Delivery") pursuant to Rule 153, or any successor or
similar rule or regulation under the Securities Act of 1933, as amended (the
"Act")) of the Prospectus (as defined in the Registration Rights Agreement)
pursuant to the Act or the rules or regulations thereunder or (ii) deliver
any Loaned Security in connection with a Common Share Delivery Arrangement
(as defined in the Indenture, dated as of __________, 1995, between USM and
Harris, as trustee, relating to USM's Liquid Yield Option Notes due 2015 (the
"Indenture")) pursuant to the Common Share Delivery Arrangement Agreement,
dated as of ________, 1995, between USM, Borrower and Harris, as conversion
agent under the Indenture (the "Common Share Delivery Arrangement
Agreement"), if such delivery requires, in the reasonable opinion of
Borrower's counsel, delivery of the Prospectus (as defined in the Registration
Rights Agreement) pursuant to the Act or the rules or regulations thereunder, in
each case until the receipt by Borrower of a notice provided for in Section 1.4
hereof.
1.8. WITHOUT WAIVING ANY RIGHTS GIVEN TO LENDER HEREUNDER, IT IS
UNDERSTOOD AND AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR
PROTECTION ACT OF 1970 MAY NOT PROTECT LENDER WITH RESPECT TO LOANED
SECURITIES HEREUNDER AND THAT, THEREFORE, THE COLLATERAL DELIVERED TO HARRIS
UNDER THE BORROWING AGREEMENT MAY CONSTITUTE THE ONLY SOURCE OF SATISFACTION
OF BORROWER'S OBLIGATIONS IN THE EVENT BORROWER FAILS TO RETURN THE LOANED
SECURITIES.
2. FEES FOR LOANS. Borrower shall pay Harris a monthly fee in
arrears for Loans, such fee to equal 20 basis points, on a per annum basis,
of the average daily market value of all Loaned Securities (as calculated
pursuant to Section 2 of the Borrowing Agreement) outstanding during such
month, which fee shall be the sole amount of compensation payable by Borrower
to Harris or Lender for borrowing USM Common Shares pursuant to the Borrowing
Agreement and this Agreement. Borrower shall provide Lender and Custodian
with a written confirmation of such basis of compensation and the calculation
thereof. Any fee payable hereunder shall be payable by Borrower to Harris
(i) within 10 days of the end of the month for which the fee was incurred, or
(ii) immediately, in the event of a default hereunder or under the Borrowing
Agreement by Borrower.
3. TERMINATION OF THE LOAN. Unless otherwise agreed and subject
to the terms of the Borrowing Agreement, Borrower may terminate a Loan of
Loaned Securities under the Borrowing
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Agreement in accordance with the terms of the Borrowing Agreement, and Lender
may terminate a Loan made to Borrower pursuant to the Borrowing Agreement
upon three Business Days' notice to Borrower. Lender shall exercise such
right to terminate a Loan made to Borrower pursuant to the Borrowing
Agreement (or to exercise any remedies for Borrower's failure to deliver such
Loaned Securities or cause such Loaned Securities to be credited to Harris'
account in accordance with the terms of the following sentence) by
instructing Harris to terminate such Loan (or to exercise such remedies) in
accordance with the terms of the Borrowing Agreement pursuant to the terms of
the Securities Loan Termination Agreement dated as of _____, 1995 among
Lender, Harris and Borrower (the "Securities Loan Termination Agreement.")
Unless otherwise agreed and subject to the terms of the Borrowing Agreement,
Borrower shall, on or before such termination date, deliver such Loaned
Securities to Harris, or cause the Loaned Securities to be credited to
Harris' account at a central depository clearing system; provided, however,
that, notwithstanding anything to the contrary herein or in the Borrowing
Agreement, Borrower's failure to so deliver the Loaned Securities or so cause
the Loaned Securities to be so credited on or before such termination date
shall not constitue a default hereunder or an Event of Default under the
Borrowing Agreement, nor give rise to any of the remedies permitted pursuant
to Section 8, 9 or 12 of the Borrowing Agreement, if such failure is caused
by the Borrower's inability to acquire such Loaned Securities, in the
reasonable opinion of counsel to Borrower, in compliance with applicable law,
including, without limitation, Rule 10b-6 (or any sucessor or similar rule or
regulation) under the Securities Exchange Act of 1934, as amended, unless
such failure shall continue for a period of more than 10 days from the date
of Harris' notice to Borrower terminating such Loan. In the circumstances
described in the proviso in the preceding sentence, the Loan shall not
terminate on the date called for in Harris' notice, but shall terminate on
such later date upon which Borrower shall have delivered such Loaned
Securities or caused such Loaned Securities to be credited to Harris' account
as provided above.
4. RIGHTS OF BORROWER IN RESPECT OF THE LOANED SECURITIES. Until
a Loan is terminated in accordance herewith and with the Borrowing Agreement,
the Securities Loan Termination Agreement and the Customer Agreement and
subject to the terms of the Borrowing Agreement, Borrower shall have all the
incidents of ownership of the Loaned Securities, including, without limitation,
the right to transfer the Loaned Securities to any purchaser (as defined in the
New York Uniform Commercial Code) free of any adverse claim (as defined in
Article 8 in the New York Uniform Commercial Code). Lender hereby waives the
right to vote the Loaned Securities during the term of the Loan.
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5. REPRESENTATIONS OF THE PARTIES HERETO. The parties hereby make
the following representations and warranties as of the date of each Loan of USM
Common Shares under the Borrowing Agreement and the Customer Agreement:
5.1. Each of Borrower and Lender represents and warrants that (a)
it has the corporate power to execute and deliver this Agreement, the Securities
Loan Termination Agreement, the Borrowing Agreement (with respect to Borrower)
and the Customer Agreement (with respect to Lender), to enter into the
tranactions contemplated by this Agreement, the Securities Loan Termination
Agreement, the Borrowing Agreement (with respect to Borrower) and the Customer
Agreement (with respect to Lender) and to perform its obligations hereunder
and thereunder; (b) it has taken all necessary action to authorize such
execution, delivery and performance; and (c) this Agreement, the Securities Loan
Termination Agreement, the Borrowing Agreement (with respect to Borrower) and
the Customer Agreement (with respect to Lender) each constitutes a legal, valid
and binding obligation enforceable against it in accordance with its terms,
except as the enforceability hereof and thereof may be subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or other similar laws now or hereafter in effect affecting creditors'
rights generally, (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity) and (iii)
public policy considerations that could limit the enforceability of
indemnification provisions.
5.2. Each of Borrower and Lender represents and warrants that the
execution, delivery and performance by it of this Agreement, the Securities Loan
Termination Agreement, the Borrowing Agreement (with respect to Borrower) and
the Customer Agreement (with respect to Lender) and each Loan under the
Borrowing Agreement (with respect to Borrower) and the Customer Agreement (with
respect to Lender) will at all times comply with all applicable laws and
regulations applicable to it, including those of securities regulatory or
self-regulatory organizations applicable to it.
5.3. Each of Borrower and Lender represents and warrants that it has
made its own determination as to the tax treatment of any dividends,
remuneration or other funds received hereunder.
5.4. Borrower represents and warrants that (a) it is a corporation
duly organized and validly existing under the laws of the State of Delaware and
(b) it is borrowing or will borrow the Loaned Securities for the purpose of
making delivery of such securities in the case of short sales, failure
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to receive securities required to be delivered, or as otherwise permitted
pursuant to Regulation T of the Board of Governors of the Federal Reserve
System.
5.5. Lender represents and warrants that it is a corporation duly
organized and validly existing under the laws of the State of Iowa.
6. COVENANTS.
6.1. Each party hereto agrees that this Agreement and the Loans
made under the Borrowing Agreement and the Customer Agreement shall be
"securities contracts" for purposes of the U.S. Bankruptcy Code and any
bankruptcy proceeding thereunder.
6.2. Borrower has furnished, or promptly upon (and in any event
within five Business Days after) demand by Lender shall furnish, Lender with its
most recent statement required to be furnished to customers pursuant to Rule
17a-5(c) under the 1934 Act.
6.3. At all times, Lender shall ensure that, unless a default by
Borrower has occurred and is continuing under this Agreement or the Borrowing
Agreement, the number of USM Common Shares held by Custodian pursuant to the
Custodian Agreement, when added to the number of USM Common Shares that are
the subject of outstanding Loans, is not less than the maximum number of USM
Common Shares that could be the subject of outstanding Loans under the
Borrowing Agreement at such time in accordance with the terms of Section 1.1
hereof and Schedule A hereto.
6.4 Lender agrees that all USM Common Shares constituting Loaned
Securities shall be freely transferable, provided that Borrower complies with
all applicable laws in connection with its borrowing and disposition of such
USM Common Shares.
7. DEFINITIONS. For the purpose hereof:
"Business Day" shall mean any day recognized as a settlement day by
the American Stock Exchange.
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"Collateral" shall have the meaning given to such term in the
Borrowing Agreement.
"Loan" shall mean a loan by Harris to Borrower of Loaned Securities
under the Borrowing Agreement and the Customer Agreement.
"Loaned Security" shall mean any USM Common Share delivered as a
Loan under the Borrowing Agreement and the Customer Agreement until the
clearing organization used by Harris and Borrower credits Harris' account or
the certificate for such share (or an equivalent share) is delivered or
otherwise accepted back thereunder or until the share is replaced by purchase of
an equivalent security, except that, if any new or different security shall be
exchanged for any Loaned Security by reorganization, recapitalization or merger
of the issuer of such Loaned Security, such new or different security shall,
effective upon such exchange, be deemed to become a Loaned Security in
substitution for the former Loaned Security for which such exchange was made.
8. APPLICABLE LAW. This Agreement shall be governed and construed
in accordance with the internal laws of the State of Illinois.
9. WAIVER. The failure of any party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. All
waivers in respect of a default under this Agreement must be in writing.
10. REMEDIES. All remedies and limitations on damages hereunder
shall survive the termination of the relevant Loan, return of Loaned
Securities or Collateral and termination of this Agreement.
11. TERMINATION. This Agreement, subject to the proviso in the
penultimate sentence of Section 3 hereof, may be terminated by any party upon
three Business Days' notice to the other party.
12. NOTICES. Any request, demand, authorization, notice, waiver,
consent, report or communication to a party hereunder shall, unless this
Agreement specifically provides otherwise, be in writing and delivered in person
or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission to the following facsimile numbers (or to
such address or facsimile number as such party may designate by the notice):
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if to Borrower:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
100 Church Street, 18th Floor
New York, New York 10080
Attention: Stock Loan Department
Facsimile No.: (212) 602-7585
Telephone No.: (212) 602-7521
with copies in the case of any notice, advice or instruction under
Section 3 or 11 above to:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281
Attention: Trading General Counsel
Facsimile No.: (212) 449-4590
Telephone No.: (212) 449-4385
and to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Michael A. Campbell
Facsimile No.: (312) 701-7711
Telephone No.: (312) 782-0600
if to the Lender:
Telephone and Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, Illinois 60602
Attention: Ronald D. Webster, Treasurer
Facsimile No.: (312) 630-1908
Telephone No.: (312) 630-1900
with a copy, except in the case of any notice, advice or instruction
under Sections 1, 2 or 3, to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Michael G. Hron
Facsimile No.: (312) 853-7036
Telephone No.: (312) 853-7000
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if to the Custodian:
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Attention:
Facsimile No.:
Telephone No.:
Any request, demand, authorization, notice, waiver, consent, report or
communication hereunder shall be deemed given when actually received, except
that any request, demand, authorization, notice, waiver, consent, report or
communication actually received on a day that is not a Business Day or after
business hours on a Business Day shall be deemed given and received on the next
succeeding Business Day.
13. MISCELLANEOUS. This Agreement shall not be assigned by any party
without the prior written consent of the other parties, and any such assignment
without such consent shall be void. Subject to the foregoing, this Agreement
shall be binding upon and shall enure to the benefit of the parties hereto and
their respective heirs, representatives, successors and assigns. This Agreement
shall not be modified, except by an instrument in writing signed by the party
against whom enforcement is sought.
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MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED,
by
---------------------------------
Name:
Title:
TELEPHONE AND DATA SYSTEMS, INC.
by
---------------------------------
Name:
Title:
[Signature Page to TDS Securities Loan Agreement]
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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 and Custodian, in
accordance with the terms of Sections 1.2, 1.3 and 1.4, of any change in the
maximum number of USM Common Shares that may be the subject of outstanding
Loans.
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