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PREFERRED SECURITIES GUARANTEE AGREEMENT
TDS Capital I
Dated as of November 18, 1997
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . 1
Section 1.2. Interpretation . . . . . . . . . . . . . . . . 5
ARTICLE II
TRUST INDENTURE ACT
Section 2.1. Trust Indenture Act; Application . . . . . . . 5
Section 2.2. Lists of Holders of Preferred Securities . . . 6
Section 2.3. Reports by the Guarantee Trustee . . . . . . . 6
Section 2.4. Periodic Reports to Guarantee Trustee. . . . . 6
Section 2.5. Evidence of Compliance with Conditions
Precedent . . . . . . . . . . . . . . . . . 6
Section 2.6. Events of Default; Waiver. . . . . . . . . . . 7
Section 2.7. Events of Default; Notice. . . . . . . . . . . 7
Section 2.8. Conflicting Interests. . . . . . . . . . . . . 7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE
Section 3.1. Powers and Duties of the Guarantee Trustee . . 7
Section 3.2. Certain Rights of Guarantee Trustee. . . . . . 9
Section 3.3. Not Responsible for Recitals or Issuance
of Guarantee. . . . . . . . . . . . . . . . 12
ARTICLE IV
GUARANTEE TRUSTEE
Section 4.1. Guarantee Trustee; Eligibility . . . . . . . . 12
Section 4.2. Appointment, Removal and Resignation of
Guarantee Trustee . . . . . . . . . . . . . 13
ARTICLE V
GUARANTEE
Section 5.1. Guarantee. . . . . . . . . . . . . . . . . . . 13
Section 5.2. Waiver of Notice and Demand. . . . . . . . . . 14
Section 5.3. Obligations Not Affected . . . . . . . . . . . 14
Section 5.4. Rights of Holders. . . . . . . . . . . . . . . 15
Section 5.5. Guarantee of Payment . . . . . . . . . . . . . 15
Section 5.6. Subrogation. . . . . . . . . . . . . . . . . . 15
Section 5.7. Independent Obligations. . . . . . . . . . . . 16
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ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 6.1. Limitation of Transaction. . . . . . . . . . 16
Section 6.2. Ranking. . . . . . . . . . . . . . . . . . . 16
ARTICLE VII
TERMINATION
Section 7.1. Termination. . . . . . . . . . . . . . . . . 17
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Exculpation. . . . . . . . . . . . . . . . . 17
Section 8.2. Indemnification. . . . . . . . . . . . . . . 18
ARTICLE IX
SUCCESSOR CORPORATION
Section 9.1. Guarantor May Consolidate, Etc . . . . . . . 18
Section 9.2. Successor Corporation Substituted. . . . . . 20
Section 9.3. Evidence of Consolidation, Etc. to
Trustee . . . . . . . . . . . . . . . . . 20
ARTICLE IX
MISCELLANEOUS
Section 10.1. Successors and Assigns. . . . . . . . . . . 21
Section 10.2. Amendments. . . . . . . . . . . . . . . . . 21
Section 10.3. Notices . . . . . . . . . . . . . . . . . . 21
Section 10.4. Benefit . . . . . . . . . . . . . . . . . . 22
Section 10.5. Governing Law . . . . . . . . . . . . . . . 22
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PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Guarantee
Agree ment"), dated as of November 18, 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
I, 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 November 18, 1997, 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 8.50% 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 otherwise requires: (a) capitalized terms used in this Guarantee
Agreement but not defined in the preamble above have the respective meanings
as signed 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.
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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 Dis
tributions 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
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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 Pre-
ferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any Affiliate of the
Guarantor.
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
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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.
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
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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 8.50% Junior
Subordinated Deferable Interest Debentures due December 31, 2037 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.
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(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.
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.
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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 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
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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:
(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
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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 pro-
tected 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
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have been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by a di-
rection 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 Guar-
antor.
(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 coun-
sel 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; pro-
vided that, nothing contained in this Section 3.2(a)(vi) shall,
however, relieve the Guarantee Trustee, upon the occurrence of an
Event of
10
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 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 in
structions 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 re-
ceived, 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
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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).
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(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
provi sions 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
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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 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 agree-
ment, 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 Distribu-
tion 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 readjust-
ment of debt of, or other similar proceedings affecting, the Issuer or any
of the assets of the Issuer;
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(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 circum
stances.
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 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.
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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).
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
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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. Notwith standing 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.
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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 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).
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,
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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 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
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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 evidence that any such consolidation, merger, sale,
conveyance, transfer or other disposition, and any such assumption, comply
with the provisions of this Article.
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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.
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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.
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.
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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: