Information contained in this prospectus is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION — January 21, 2000

PROSPECTUS

Filed Pursuant to Rule 424(a)
File No. 333-94195

[LOGO]

$135,000,000

Rural Cellular Corporation
110,000 Shares of    % Junior Exchangeable Preferred Stock
25,000 Shares of 11³/8% Senior Exchangeable Preferred Stock

Dividends

Junior Exchangeable Preferred Stock

•

Dividends are payable quarterly on      ,      ,      , and      of each year, beginning on       . We may, at our option, pay dividends in cash or by the issuance of additional shares of junior exchangeable preferred stock on or prior to      , 2005. Thereafter all dividends will be payable in cash only.

•

We have the option to exchange the junior exchangeable preferred stock, in whole but not in part, for our  % senior subordinated debentures due 2011 on any dividend payment date.

Senior Exchangeable Preferred Stock

•

Dividends are payable quarterly on February 15, May 15, August 15, and November 15 of each year. We may, at our option, pay dividends in cash or by the issuance of additional shares of senior exchangeable preferred stock on or prior to May 15, 2003. Thereafter all dividends will be payable in cash only.

•

We have the option to exchange the senior exchangeable preferred stock, in whole but not in part, for our 11³/8% senior subordinated debentures due 2010 on any dividend payment date.

Redemption

Junior Exchangeable Preferred Stock

•

We may redeem some or all of the junior exchangeable preferred stock at any time after      , 2005 at the redemption prices described in this prospectus.

•

In addition, we may redeem up to 35% of the junior exchangeable preferred stock prior to      , 2003 at the redemption price described in this prospectus using the proceeds of specified equity offerings.

Senior Exchangeable Preferred Stock

•

We may redeem some or all of the senior exchangeable preferred stock at any time after May 15, 2003 at the redemption prices described in this prospectus.

•

In addition, we may redeem up to 25% of the senior exchangeable preferred stock prior to May 15, 2001 at the redemption price described in this prospectus using the proceeds of specified equity offerings.

Change of Control

•

If we experience a change of control, we must offer to repurchase the senior exchangeable preferred stock and the junior exchangeable preferred stock for cash at the price described in this prospectus.

Ranking

Junior Exchangeable Preferred Stock

•

The junior exchangeable preferred stock will rank, with respect to dividend rights and rights on liquidation, junior to the existing 11³/8% senior exchangeable preferred stock and to our Class T convertible preferred stock. The junior exchangeable preferred stock will be senior to our Class M preferred stock and all classes of our common stock.

Senior Exchangeable Preferred Stock

•

The senior exchangeable preferred stock will rank, with respect to dividend rights and rights on liquidation, senior to all other classes of junior preferred stock, including our  % junior exchangeable preferred stock, and all other classes of our capital stock.

Mandatory Redemption

•

We are required to redeem all of the junior exchangeable preferred stock and senior exchangeable preferred stock on      , 2011 and       , 2010, respectively, at 100% of its aggregate liquidation preference plus accumulated and unpaid dividends.

•

The net proceeds from the junior exchangeable preferred stock offering will be held in escrow pending the consummation of the acquisition of the licenses, operations, and related assets of Triton Cellular Partners, L.P. In the event this acquisition is not completed by June 30, 2000, subject to certain extensions, we are required to redeem the junior exchangeable preferred stock at 101% of its aggregate liquidation preference plus accumulated and unpaid dividends.

An investment in the junior exchangeable preferred stock or the senior exchangeable preferred stock involves certain risks. See "Risk Factors" beginning on page 22.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Price to Investors (1) (2)	Underwriters' Discount	Proceeds, before expenses, to us (1) (2)
Per Junior Exchangeable Preferred Share
Total
Per Senior Exchangeable Preferred Share
Total

(1)

Plus accumulated dividends, if any, on the junior exchangeable preferred stock from      , 2000.

(2)

Includes accumulated dividends, if any, on the senior exchangeable preferred stock from the last dividend payment date to      , 2000. If these securities close after such date, the pricing will be adjusted for accumulated dividends through the closing date.

   We expect that delivery of the junior exchangeable preferred stock and the senior exchangeable preferred stock will be made in New York, New York on or about      , 2000.

TD Securities	First Union Securities, Inc.
The date of this prospectus is      , 2000.

[Map of United States showing RCC's operating regions]

PROSPECTUS SUMMARY

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of junior exchangeable preferred stock and senior exchangeable stock only in jurisdictions where offers and sales are permitted.

References in this prospectus to "Rural Cellular," "we," "our," and "us" refer to Rural Cellular Corporation and its predecessors and subsidiaries as a combined entity, except where it is more clear that those terms mean only the parent company. All references to "Triton" are to Triton Cellular Partners, L.P. and its predecessors, affiliates and subsidiaries.

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully.

Overview

   We are a leading cellular operator in the United States, primarily in rural markets, covering a total population of approximately 4.7 million and serving 427,000 cellular customers as of September 30, 1999, on a pro forma basis after giving effect to our pending acquisition of the licenses, operations, and related assets of Triton Cellular Partners, L.P. We currently provide cellular communications services in three regional clusters operating in seven states, and upon completion of the Triton acquisition, we will add two additional regional clusters operating in five states. We also own a 70% interest in Wireless Alliance, which provides personal communications services covering a total population of 708,000 and serving 11,000 customers in four states. We believe that owning and operating wireless systems in rural markets provides strong growth opportunities because these systems have lower penetration rates, a higher proportion of roamer revenues, and less competition for customers than wireless systems located in larger metropolitan areas due to their lower population density.

   Our markets generally are characterized by concentrations of small businesses, vacation destinations, and, given the distance between population centers, substantial travel time. We believe these characteristics promote strong local wireless usage and allow us to generate significant roamer revenues. We operate our wireless systems using a decentralized management approach, which allows us to achieve substantial marketing and distribution benefits, as well as operating efficiencies. This decentralized management approach allows us to develop a strong local presence in the communities we serve, which enhances our competitive position and allows us to tailor our products and services to meet our customers' specific needs. We believe that our ability to customize our products and services results in greater customer satisfaction, customer retention, and market penetration. In addition, where appropriate, we share our successful service programs and operating practices among our various markets. As a result of these strategies, we have been able to generate strong internal growth and improve the operating and financial performance of our systems.

   We follow a disciplined strategy of acquiring cellular systems primarily in rural markets. We focus on acquiring underdeveloped cellular systems that include a high concentration of highway corridors and, as a result, tend to have a significant amount of roaming activity. In November 1999, we reached an agreement to acquire the cellular licenses, operations, and related assets of Triton Cellular Partners, L.P. and its affiliates, covering portions of Alabama, Kansas, Mississippi, Oregon, and Washington, for a purchase price of approximately $1.24 billion in cash plus the assumption of specified liabilities. This is the latest in a series of acquisitions, which have included:

•

Glacial Lakes Cellular, covering a portion of South Dakota adjacent to our Minnesota markets, in February 1999;



•

Western Maine Cellular, covering a portion of Maine adjacent to our then existing Maine markets, in August 1998;



•

Atlantic Cellular, covering Vermont and portions of Massachusetts, New Hampshire, and New York, in July 1998; and



•

Unity Cellular, covering portions of Maine, in May 1997.

   In November 1996, we extended our wireless communications footprint in our Midwest region through the formation of Wireless Alliance, a joint venture between us and an affiliate of Aerial Communications, which owns and operates personal communications services licenses in Minnesota, North Dakota, South Dakota and Wisconsin. Wireless Alliance began providing personal communications services in 1998 and continues to fund the development of its customer base.

   We believe that we have been successful in integrating our acquired systems into our operations and intend to seek opportunities to further expand our existing clusters and, where appropriate, pursue the acquisition of wireless systems in new markets with similar demographics and operating characteristics.

   We have invested substantial capital and resources to enhance the quality of our networks, expand our geographic footprint, and broaden our service offerings. As a result of our significant network investments, customers benefit from a high level of both regional and local hand-held coverage, minimal call blocking and dropped calls, seamless call delivery and hand-off, and the availability of expanded digital services. We offer a wide array of digital services, including caller identification, short message services, and numeric paging, as well as other ancillary services including voicemail and call waiting. We believe our quality network coverage combined with our enhanced services promotes increased cellular usage and greater customer satisfaction. With the exception of our Atlantic region, digital services are available in all of our markets, including the Triton regions. We plan to have digital services available in our Atlantic region by year end 2000.

Our Systems

   The following chart summarizes our existing wireless systems and the systems covered by the Triton acquisition as of September 30, 1999:

Regions	Percentage Ownership		Total Population Served(1)	Customers(2)	Penetration(2)		Square Miles	Location by State
Cellular Clusters:
Midwest	100	%	705,000	75,000	10.6	%	45,000	MN, SD
Maine	100		595,000	51,000	8.6		24,000	ME
Atlantic	100		1,110,000	92,000	8.3		21,000	MA, NH, NY, VT
South (pending)	100		1,435,000	86,000	6.0		71,000	AL, KS, MS
Northwest (pending)	100		890,000	123,000	13.8		81,000	OR, WA
Cellular Total			4,735,000	427,000	9.0	%	242,000
PCS Cluster:
Wireless Alliance	70	%	708,000	11,000	1.6	%	19,000	MN, ND, SD, WI
Total			5,443,000	438,000	8.0	%	261,000

(1)

1990 census figures, updated for the July 1, 1997 estimates of the U.S. Census Bureau.

(2)

Midwest, Maine, and Atlantic region customer numbers exclude paging, prepaid, and long distance customers.

Business Strategy

   Our objectives are to continue to expand our market position as the leading full service provider of wireless communications services in our markets by offering a full set of quality products and services that meet our customers' needs and providing extensive coverage and superior customer service at competitive prices. The key elements of our strategy are to:

•

introduce innovative marketing strategies to capitalize on new and enhanced products and services;



•

maximize customer satisfaction and retention;



•

develop efficient operating clusters and a strong local presence using a decentralized management approach;



•

develop and maintain superior distribution channels;



•

expand our market presence through strategic acquisitions and alliances;



•

maintain a superior network infrastructure; and



•

maximize financial flexibility.

Recent Developments

   In November 1999, we entered into an asset purchase agreement to acquire the Alabama, Kansas, Mississippi, Oregon and Washington cellular licenses, operations, and related assets of Triton Cellular Partners, L.P. and its affiliates for a purchase price of approximately $1.24 billion in cash plus the assumption of specified liabilities. Subject to regulatory approvals and other conditions, the Triton acquisition is expected to close in the spring of 2000. The cellular systems being acquired are clustered in rural markets in the Northwest and South regions of the United States, with a total service area of approximately 152,000 square miles, and, as of September 30, 1999, covering a total population of approximately 2.3 million and serving 209,000 customers.

   Financing of the Triton acquisition will come from the following sources:

•

Up to $1.2 billion in senior secured debt from a new credit facility to be provided by a consortium of banks with TD Securities (USA) Inc. as the lead arranger, which will replace our existing credit facility;



•

$100.0 million by issuance of Class M preferred stock to Madison Dearborn Capital Partners III, LP (50%), Boston Ventures Limited Partnership V (33¹/3%), and Toronto Dominion Investments, Inc. (16²/3%) (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the sale of the common stock offered hereby will reduce the amount of Class M preferred stock issued to $100.0 million);



•

$135.0 million by issuance of 110,000 shares of our   % junior exchangeable preferred stock and 25,000 additional shares of our 11³/8% senior exchangeable preferred stock; and



•

$     from the net proceeds of the offering of 2,390,000 shares of our Class A common stock.

   This offering, together with the offering of our Class A common stock, is sometimes referred to herein as the "preferred and common stock offerings."

   We believe that the financing described above will be sufficient to fund the Triton acquisition, repay our existing credit facility, and pay related fees and expenses.

   The Triton acquisition is conditioned upon our satisfying Federal Communications Commission requirements regarding cross-ownership of cellular licenses. An affiliate of Telephone & Data Systems, Inc., a significant shareholder of Rural Cellular, operates the competing cellular licensee in two of the rural service areas involved in the Triton acquisition. In order to satisfy Federal Communications Commission requirements, we will issue shares of Class T convertible preferred stock or a convertible debenture to Telephone & Data Systems, Inc. in exchange for a sufficient number of shares of Class A and Class B common stock to reduce its holdings below the threshold allowed.

Risk Factors

   You should consider carefully the information set forth under the caption "Risk Factors" beginning on page 22 and all the other information set forth in this prospectus before you decide whether to invest in our junior exchangeable preferred stock and senior exchangeable preferred stock.

Other Corporate Information

   Our principal executive offices are located at 3905 Dakota Street S.W., Alexandria, Minnesota 56308. Our telephone number is (320) 762-2000 and our website is located at www.rccwireless.com. The information on our website is not part of this prospectus.

The Offering

The summary below describes the principal terms of the preferred stock offerings. Certain of the terms and conditions described below are subject to important limitations and exceptions. You should read the "Description of Junior Exchangeable Preferred Stock and Junior Preferred Exchange Debentures" and the "Description of Senior Exchangeable Preferred Stock and Senior Preferred Exchange Debentures" sections of this prospectus for a more detailed description of the terms and conditions of the preferred stock offerings.

Junior Exchangeable Preferred Stock:

Junior Exchangeable Preferred Stock Offered	110,000 shares of     % junior exchangeable preferred stock. Under the certificate of designation, we may issue an additional 50,000 shares of junior exchangeable preferred stock, in addition to any shares issued as dividends, after the closing of the offering. Such additional shares of junior exchangeable preferred stock must be issued in increments of not less than 25,000 shares.
Liquidation Preference	$1,000 per share, plus accumulated and unpaid dividends from the date of issuance.
Ranking	With respect to dividend rights and rights on our liquidation, winding-up, and dissolution, the junior exchangeable preferred stock will be:
	• junior to our senior exchangeable preferred stock, including the add-on issue of senior exchangeable preferred stock being issued in this offering and to our Class T convertible preferred stock; and
	• senior to our Class M preferred stock and all classes of our common stock.
Mandatory Redemption	In whole on     , 2011, subject to certain conditions under Minnesota law, at a price equal to 100% of the liquidation preference thereof, plus, without duplication, accumulated and unpaid dividends, if any, to the date of redemption.
	The net proceeds of the junior exchangeable preferred stock will be held in escrow pending the consummation of the Triton acquisition. If on or prior to June 30, 2000, subject to certain extensions, the pending acquisition of cellular licenses, operations, related assets, and a subsidiary of Triton Cellular Partners, L.P. and its affiliates has not occurred, we are required to redeem all of the junior exchangeable preferred stock at a redemption price equal to 101% of the aggregate liquidation preference of all shares plus accumulated and unpaid dividends, if any, to July 15, 2000.
Optional Redemption	The junior exchangeable preferred stock will be redeemable at our option, as follows:
	• At any time prior to          , 2005, we may redeem, in whole but not part, all of the shares at a price equal to 100% of the aggregate liquidation preference thereof plus the applicable premium described in this prospectus and accumulated and unpaid dividends, if any, to the date of redemption.
	• At any time on or after          , 2005, we may redeem all or less than all of the shares at the redemption prices set forth in this prospectus, plus, without duplication, accumulated and unpaid dividends, if any, to the date of redemption.
	At any time prior to          , 2003, we may redeem shares representing up to 35% of the aggregate liquidation preference of the junior exchangeable preferred stock, including any shares of junior exchangeable preferred stock issued as additional shares or dividend shares, with not less than $50.0 million net cash proceeds from a public equity offering or strategic equity investment. This redemption will be at a price equal to    % of the aggregate liquidation preference thereof, plus, without duplication, accumulated and unpaid dividends, if any, to the date of redemption. In order to complete this redemption, however, at least 65% of the aggregate liquidation preference of the junior exchangeable preferred stock originally issued must remain outstanding immediately after the redemption.
Change of Control	Within 30 days after the occurrence of a change of control, we will be required to make an offer to purchase all outstanding shares of junior exchangeable preferred stock at a price equal to 101% of the aggregate liquidation preference thereof plus, without duplication, accumulated and unpaid dividends, if any, to the date of purchase.
Dividends	per annum, payable quarterly on   ,     ,     , and     , commencing on          , 2000. Dividends on all shares of junior exchangeable preferred stock will be cumulative and accrue from the date of issuance and may be paid, at our option, on any dividend payment date occurring on or before           , 2005, either in cash or by the issuance of additional shares of junior exchangeable preferred stock having an aggregate liquidation preference equal to the amount of such dividends. Thereafter all dividends will be payable in cash only.
Voting Rights	The junior exchangeable preferred stock will be non-voting, except as otherwise required by law and as provided in the certificate of designation. The certificate of designation will provide that upon the occurrence of any of the following events, the holders of a majority of the outstanding shares of junior exchangeable preferred stock, voting as a class, together with the holders of any parity stock having similar voting rights, will be entitled to elect the lesser of two directors or 25% of the members of the Board of Directors:
	• the accumulation of accrued and unpaid dividends, if any, in an amount equal to six full quarterly dividends (whether or not consecutive);
	• our failure to satisfy any mandatory redemption or repurchase obligation with respect to the junior exchangeable preferred stock;
	• our failure to make a change of control offer in accordance with the certificate of designation;
	• our continued failure to comply with any of the other covenants or agreements set forth in the certificate of designation for 30 consecutive days or more;

	• our failure or the failure of any of our restricted subsidiaries to make payments on certain indebtedness; or
	• the occurrence of an event of bankruptcy, insolvency or reorganization affecting us or one of our significant subsidiaries.
	The voting rights will continue until such time as any failure giving rise to such voting rights is remedied or waived by the holders of at least a majority of the shares of the junior exchangeable preferred stock then outstanding, at which time the terms of any directors elected pursuant to these voting rights will terminate.
	The certificate of designation will also provide that we will not authorize any class of stock ranking senior or equal to the junior exchangeable preferred stock without the affirmative vote or consent of holders of at least:
	• 662/3% of the shares of the junior exchangeable preferred stock then outstanding with respect to senior stock; and
	• a majority of the shares of junior exchangeable preferred stock then outstanding with respect to parity stock.
	We may issue any shares of Class T convertible preferred stock and any additional shares of junior exchangeable preferred stock authorized for issuance under the certificate of designation without the approval of the holders of the junior exchangeable preferred stock.
Exchange Option	On any scheduled dividend payment date following the consummation of the Triton acquisition, we may, at our option, exchange, in whole but not in part, the junior exchangeable preferred stock for    % senior subordinated debentures. This exchange is subject to certain conditions set forth in the indenture governing these junior preferred exchange debentures. The aggregate principal amount of the exchange is equal to the aggregate liquidation preference of the shares of junior exchangeable preferred stock exchanged, plus, without duplication, accumulated and unpaid dividends, if any, to the date of exchange.
Junior Preferred Exchange Debentures:
Debentures Which May Be Issued	% senior subordinated debentures due 2011, issuable in exchange for the junior exchangeable preferred stock, in an aggregate principal amount equal to the liquidation preference of the shares of junior exchangeable preferred stock being exchanged, plus, without duplication, accumulated and unpaid dividends on the shares, if any, to the date of the exchange.
Maturity	, 2011.
Interest Payment Dates	and   of each year, commencing with the first of such dates to occur after the date of issuance thereof. Interest on the junior preferred exchange debentures will accrue from the date of issuance thereof and may be paid, at our option, on any interest payment date occurring on or before          , 2005, either in cash or by the issuance of additional junior preferred exchange debentures.
Optional Redemption	The junior preferred exchange debentures will be redeemable at our option as follows:
	• At any time prior to          , 2005, the junior preferred exchange debentures may be redeemed, at our option, in whole but not in part. The redemption price will be equal to 100% of the aggregate principal amount thereof plus the applicable premium described in this prospectus as of, and accrued and unpaid interest, if any, to but excluding, the redemption date.
	• At any time on or after          , 2005, at the redemption prices set forth in this prospectus, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
	• At any time prior to          , 2003, we may also redeem up to 35% of the aggregate principal amount of junior preferred exchange debentures issued under the exchange indenture with the net cash proceeds of at least $50.0 million from a public equity offering or strategic equity investment. The redemption price will be equal to   % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption. In order to complete this redemption:
	– at least 65% in aggregate principal amount of the junior preferred exchange debentures must remain outstanding immediately after such redemption; and
	– the aggregate liquidation preference of any shares of junior exchangeable preferred stock previously redeemed with proceeds of a public equity offering or strategic equity investment shall be counted as aggregate principal amount of junior preferred exchange debentures issued and redeemed for purposes of the foregoing 35% calculation.
Ranking	The junior preferred exchange debentures will be unsecured senior subordinated obligations of Rural Cellular and will be subordinated in right of payment to all our present and future senior indebtedness and effectively subordinated to all obligations of our subsidiaries (including the guarantees by such subsidiaries of our credit facility). The junior preferred exchange debentures will rank pari passu in right of payment with our existing senior subordinated notes, any senior preferred exchange debentures issued into which the senior exchangeable preferred stock is exchangeable and all of our future senior subordinated indebtedness. The exchange debentures and the existing senior subordinated notes will also rank pari passu with or senior in right of payment to all our present and future debt that expressly provides that such debt ranks pari passu with or junior to the junior preferred exchange debentures, existing senior subordinated notes or senior preferred exchange debentures, as the case may be.
Certain Covenants	The junior preferred exchange debentures, if issued, will impose limitations on our ability and the ability of our restricted subsidiaries to, among other things, incur indebtedness, effect specified asset sales, enter into specified transactions with affiliates and related persons, incur liens, merge or consolidate with any other person, or transfer all or substantially all of our properties and assets.
Change of Control	Within 30 days after the occurrence of a change of control, we will be required to make an offer to purchase all outstanding junior preferred exchange debentures at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of repurchase.
Events of Default	Events of default under the junior preferred exchange indenture will include:
	• failure to pay principal of or interest on the junior preferred exchange debentures;
	• failure to make payments on specified indebtedness;
	• breach of specified covenants;
	• specified events of bankruptcy and insolvency; and
	• other customary events of default.
Senior Exchangeable Preferred Stock:
Senior Exchangeable Preferred Stock Offered	25,000 shares of 113/8% senior exchangeable preferred stock. Under the certificate of designation, we may issue these additional 25,000 shares of senior exchangeable preferred stock, in addition to any shares issued as dividends, after the closing of the May 14, 1998 offering of senior exchangeable preferred stock. These additional shares of senior exchangeable preferred stock must, however, all be issued at the same time.
Liquidation Preference	$1,000 per share, plus accumulated and unpaid dividends from the last dividend payment date.
Ranking	With respect to dividend rights and rights on our liquidation, winding-up, and dissolution, the senior exchangeable preferred stock will be senior to our Class T convertible preferred stock, our junior exchangeable preferred stock, our Class M preferred stock and to all other classes of our capital stock.
Mandatory Redemption	In whole on May 15, 2010, subject to certain conditions under Minnesota law, at a price equal to 100% of the liquidation preference thereof, plus, without duplication, accumulated and unpaid dividends, if any, to the date of redemption.
Optional Redemption	The senior exchangeable preferred stock will be redeemable at our option, as follows:
	• At any time on or after May 15, 2003, we may redeem all or less than all of the shares at the redemption prices set forth in this prospectus, plus, without duplication, accumulated and unpaid dividends, if any, to the date of redemption.
	• At any time prior to May 15, 2001, we may redeem shares representing up to 25% of the aggregate liquidation preference of the senior exchangeable preferred stock, including any shares of senior exchangeable preferred stock issued as additional shares or dividend shares, with not less than $50.0 million net cash proceeds from a public equity offering or strategic equity investment. This redemption will be at a price equal to 111.375% of the aggregate liquidation preference thereof, plus, without duplication, accumulated and unpaid dividends, if any, to the date of redemption. In order to complete this redemption, however, at least $75 million in aggregate liquidation preference of senior exchangeable preferred stock must remain outstanding immediately after the redemption.
Change of Control	Within 30 days after the occurrence of a change of control, we will be required to make an offer to purchase all outstanding shares of senior exchangeable preferred stock at a price equal to 101% of the aggregate liquidation preference thereof plus, without duplication, accumulated and unpaid dividends, if any, to the date of purchase.
Dividends	113/8% per annum payable quarterly on February 15, May 15, August 15, and November 15, commencing on          , 2000. Dividends on all shares of senior exchangeable preferred stock will be cumulative and accrue from the date of issuance and may be paid, at our option, on any dividend payment date occurring on or before May 15, 2003 either in cash or by the issuance of additional shares of senior exchangeable preferred stock having an aggregate liquidation preference equal to the amount of such dividends. Investors in the senior exchangeable preferred stock will pay a per share purchase price which includes accumulated dividends, if any, on the senior exchangeable preferred stock from the last dividend payment date to the date of issuance. Thereafter all dividends will be payable in cash only.
Voting Rights	The senior exchangeable preferred stock will be non-voting, except as otherwise required by law and as provided in the certificate of designation. The certificate of designation provides that upon the occurrence of any of the following events, the holders of a majority of the outstanding shares of senior exchangeable preferred stock, voting as a class, together with the holders of any stock ranking equally and having similar voting rights, will be entitled to elect the lesser of two directors or 25% of the members of the Board of Directors:
	• the accumulation of accrued and unpaid dividends, if any, in an amount equal to six full quarterly dividends (whether or not consecutive);
	• our failure to satisfy any mandatory redemption or repurchase obligation with respect to the senior exchangeable preferred stock;
	• our failure to make a change of control offer in accordance with the certificate of designation;
	• our continued failure to comply with any of the other covenants or agreements set forth in the certificate of designation for 30 consecutive days or more; or
	• our failure or the failure of any of our restricted subsidiaries to make payments on certain debt.
	The voting rights will continue until such time as any failure giving rise to such voting rights is remedied or waived by the holders of at least a majority of the shares of the senior exchangeable preferred stock then outstanding, at which time the terms of any directors elected pursuant to these voting rights will terminate.
	The certificate of designation also provides that we will not authorize any class of stock ranking senior or equal to the senior exchangeable preferred stock without the affirmative vote or consent of holders of at least:
	• 662/3% of the shares of the senior exchangeable preferred stock then outstanding with respect to senior stock; and
	• a majority of the shares of senior exchangeable preferred stock then outstanding with respect to parity stock.
	We may issue any additional shares of senior exchangeable preferred stock authorized for issuance under the certificate of designation without the approval of the holders of the senior exchangeable preferred stock.
Exchange Option	On any scheduled dividend payment date, we may, at our option, exchange, in whole but not in part, the senior exchangeable preferred stock for 113/8% senior subordinated debentures. This exchange is subject to certain conditions set forth in the indenture governing the senior preferred exchange debentures. The aggregate principal amount of these senior preferred exchange debentures must be equal to the aggregate liquidation preference of the shares of senior exchangeable preferred stock exchanged, plus, without duplication, accumulated and unpaid dividends, if any, to the date of exchange.
Senior Preferred Exchange Debentures:
Debentures Which May Be Issued	113/8% senior subordinated debentures due 2010, issuable in exchange for the senior exchangeable preferred stock, in an aggregate principal amount equal to the liquidation preference of the shares of senior exchangeable preferred stock being exchanged, plus, without duplication, accumulated and unpaid dividends on the shares, if any, to the date of the exchange.
Maturity	May 15, 2010.
Interest Payment Dates	May 15 and November 15 of each year, commencing with the first of such dates to occur after the date of issuance thereof. Interest on the exchange debentures will accrue from the date of issuance thereof and may be paid, at our option, on any interest payment date occurring on or before May 15, 2003, either in cash or by the issuance of additional senior preferred exchange debentures.
Optional Redemption	The senior preferred exchange debentures will be redeemable at our option as follows:
	• At any time on or after May 15, 2003, at the redemption prices set forth in this prospectus, plus accrued and unpaid interest, if any, to the date of redemption.
	• At any time prior to May 15, 2001, we may redeem up to 25% of the aggregate principal amount of senior preferred exchange debentures issued under the senior preferred exchange indenture with the net cash proceeds of at least $50.0 million from a public equity offering or strategic equity investment. The redemption price will be equal to 111.375% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption. In order to complete this redemption:
	– at least $75.0 million in aggregate principal amount of the senior preferred exchange debentures must remain outstanding immediately after such redemption; and
	– the aggregate liquidation preference of any shares of senior exchangeable preferred stock previously redeemed with proceeds of a public equity offering or strategic equity investments shall be counted as aggregate principal amount of senior preferred exchange debentures issued and redeemed for purposes of the foregoing 25% calculation.
Ranking	The senior preferred exchange debentures will be unsecured senior subordinated obligations of Rural Cellular and will be subordinated in right of payment to all our present senior debt and effectively subordinated to all obligations of our subsidiaries, including the guarantees by our subsidiaries of our credit facility. The senior preferred exchange debentures will rank pari passu in right of payment with our existing senior subordinated notes and any junior preferred exchange debentures issued in exchange for shares of our junior exchangeable preferred stock. The senior preferred exchange debentures, the existing senior subordinated notes and the junior preferred exchange debentures will rank pari passu with or senior in right of payment to all our present and future debt that expressly provides that such debt ranks pari passu with or junior to the senior preferred exchange debentures, the existing senior subordinated notes or the junior preferred exchange debentures, as the case may be.
Certain Covenants	The senior preferred exchange debentures, if issued, will impose limitations on our ability and the ability of our restricted subsidiaries to, among other things, incur debt, effect specified asset sales, enter into specified transactions with affiliates and related persons, incur liens, merge or consolidate with any other person, or transfer all or substantially all of our properties and assets.
Change of Control	Within 30 days after the occurrence of a change of control, we will be required to make an offer to purchase all outstanding senior preferred exchange debentures at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of repurchase.
Events of Default	Events of default under the senior preferred exchange indenture will include:
	• failure to pay principal of or interest on the senior preferred exchange debentures;
	• failure to make payments on specified debt;
	• breach of specified covenants;
	• specified events of bankruptcy and insolvency; and
	• other customary events.
Concurrent Common Stock Offering	2,390,000 shares of our Class A common stock.

   We derived unaudited summary pro forma consolidated financial and operating data as of and for the nine months ended September 30, 1999 and for the year ended December 31, 1998 from historical consolidated financial statements of Rural Cellular and other financial statements included elsewhere in this prospectus. Our financial results have been adjusted based on currently available information and assumptions that we believe are reasonable to give effect to the following transactions as if each transaction had occurred as of January 1, 1998:

•

Our acquisition of Atlantic Cellular on July 1, 1998;



•

The issuance of 2,390,000 shares of our Class A common stock with total proceeds of $200.0 million;



•

The issuance of 25,000 shares of our 11³/8% senior exchangeable preferred stock with total proceeds of $25.0 million;



•

The issuance of 110,000 shares of our % junior exchangeable preferred stock with total proceeds of $110.0 million;



•

Our acquisition of Triton for a purchase price of $1.24 billion;



•

The issuance of $100.0 million of Class M preferred stock (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the sale of common stock offered hereby will reduce the amount of the Class M preferred stock issued to $100.0 million);



•

The issuance of Class T convertible preferred stock to Telephone & Data Systems, Inc. in exchange for shares of our Class A or Class B common stock; and



•

A new credit facility consisting of $1.2 billion in senior secured debt, which will replace our existing credit facility.

   Pro forma results for the nine months ended September 30, 1999 are not necessarily indicative of the results that may be expected for a full year.

   We provide the following unaudited pro forma condensed consolidated financial statements and the related notes for informational purposes only. The unaudited pro forma condensed consolidated financial data are based on currently available information and assumptions that we believe are reasonable. The accompanying data do not purport to represent what our results of operations would have been if the pro forma transactions had been completed on the dates indicated, nor do they purport to indicate our future financial position or results of operations. The "Unaudited Pro Forma Condensed Consolidated Financial Data" includes consolidated financial data both prior to, and after giving effect to, the Triton acquisition.

   The data set forth below should be read in conjunction with "Capitalization," "Unaudited Pro Forma Condensed Consolidated Financial Data," "Selected Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

UNAUDITED SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA

(In thousands, except per share amounts and operating data)

	Pro Forma as Adjusted(3)
	Year Ended December 31, 1998(1)			Nine Months Ended September 30, 1999(2)
Revenues:
Service	$	164,363		$	141,325
Roamer		58,219			72,494
Equipment		10,193			10,610
Total revenues		232,775			224,429
Operating expenses:
Network costs		37,124			26,910
Cost of equipment sales		17,394			16,075
Selling, general and administrative		86,098			72,369
Depreciation and amortization		91,914			74,461
Total operating expenses		232,530			189,815
Operating income		245			34,614
Other income (expense):
Interest expense		(109,254	)		(82,728	)
Interest and dividend income		—			—
Other expense		(535	)		(210	)
Minority interest		4,553			1,538
Other expense		(105,236	)		(81,400	)
Loss before income tax and extraordinary item		(104,991	)		(46,786	)
Income tax provision		—			—
Loss before extraordinary item		(104,991	)		(46,786	)
Extraordinary item-early retirement of debt		—			—
Net loss		(104,991	)		(46,786	)
Preferred stock dividend		(39,777	)		(32,320	)
Net loss applicable to common shares	$	(144,768	)	$	(79,106	)
Net loss per basic and diluted common share	$	(12.98	)	$	(7.02	)
Weighted average common shares outstanding, basic and diluted		11,152			11,265

UNAUDITED SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts and operating data)

	Pro Forma as Adjusted(3)
	Year Ended December 31, 1998(1)			Nine Months Ended September 30, 1999(2)
Balance sheet data:
Cash and cash equivalents		—		$	21,073
Property and equipment, net		—			221,199
Total assets		—			1,805,346
Total debt		—			1,178,297
Preferred stock		—			381,847
Total shareholders' equity		—			197,642
Other financial data:
EBITDA(4):
Cellular	$	96,984		$	111,156
Wireless Alliance		(4,825	)		(2,081	)
Total	$	92,159		$	109,075
EBITDA Margin(4):
Cellular		44.0	%		51.1	%
Wireless Alliance		(39.0	)		(29.7	)
Roamer revenue as a percentage of adjusted revenue(5)		27.4	%		34.8	%
Ratio of earnings to combined fixed charges and preferred stock dividend(6)		0.03			0.31
Operating data:
Customers at end of period:
Cellular		304,601			426,532
Wireless Alliance-PCS		5,129			11,110
Wireless Alliance-Cellular		11,079			1,840
Other(7)		11,550			13,790
Total		332,359			453,272
Penetration(8):
Cellular		7.5	%		9.0	%
Wireless Alliance-PCS		0.7			1.6
Retention(9):
Cellular		—			98.3	%
Wireless Alliance-PCS		98.2	%		98.1
Average monthly revenue per customer(10):
Cellular		—			$60
Wireless Alliance-PCS		$64			52
Cell sites:
Cellular		383			519
Wireless Alliance-PCS		53			57

UNAUDITED SUMMARY PRO FORMA FINANCIAL AND OPERATING DATA

Notes to Unaudited Summary Pro Forma Financial and Operating Data

(1)

Includes the historical operations of Rural Cellular and gives effect to the following transactions as if they had occurred as of January 1, 1998: (i) our acquisition of Atlantic Cellular, (ii) the issuance of Class A common stock, (iii) the issuance of additional shares of our senior exchangeable preferred stock, (iv) the issuance of junior exchangeable preferred stock, (v) our acquisition of Triton, (vi) the issuance of Class M preferred stock, (vii) the borrowing under the new credit facility and (viii) the repayment in full and termination of the existing credit facility.

(2)

Includes the historical operations of Rural Cellular and gives effect to the following transactions as if they had occurred as of January 1, 1999: (i) the issuance of Class A common stock, (ii) the issuance of additional shares of our senior exchangeable preferred stock, (iii) the issuance of junior exchangeable preferred stock, (iv) our acquisition of Triton, (v) the issuance of Class M preferred stock, (vi) the borrowing under the new credit facility, and (vii) the repayment in full and termination of the existing credit facility.

(3)

If the Triton acquisition is not consummated on or prior to June 30, 2000, subject to certain extensions, Rural Cellular is required to redeem all of the junior exchangeable preferred stock at a price equal to 101% of the total liquidation preference plus accumulated and unpaid dividends, if any, to July 15, 2000. In that event, Rural Cellular will use the net proceeds of the issuance of the junior exchangeable preferred stock, senior exchangeable preferred stock and Class A common stock to fund the redemption and to reduce outstanding debt under the existing credit facility. In addition, failure to consummate the Triton acquisition could result in forfeiting our $35.0 million escrow payment.

(4)

EBITDA is the sum of earnings before interest, taxes, depreciation and amortization and is utilized as a performance measure within the wireless industry. EBITDA should not be regarded as an alternative for other performance measures and should not be considered in isolation. EBITDA is not a measurement of financial performance under generally accepted accounting principles and does not reflect all expenses of doing business (e.g., interest expense, depreciation). Accordingly, EBITDA should not be considered as having greater significance than or as an alternative to net income or operating income as an indicator of operating performance or to cash flows as a measure of liquidity.

(5)

Determined for each period by dividing roamer revenue for such period by total revenues excluding equipment sales and Wireless Alliance revenues.

(6)

For purposes of computing the ratio of earnings to combined fixed charges and preferred stock dividends, earnings include earnings before extraordinary items and accounting changes, interest expense, amortization of deferred financing costs, taxes and capitalized interest. Fixed charges and preferred stock dividends consists of interest expense, amortization of deferred financing costs, capitalized interest and preferred stock dividends. The deficiency of earnings to combined fixed charges and preferred stock dividends totaled $145,064 and $79,226 for the year ended December 31, 1998 and the nine months ended September 30, 1999, respectively.

(7)

Comprised of prepaid cellular and paging customers.

(8)

Represents the ratio of cellular or PCS customers to total POPs at the end of the period.

(9)

Determined for each period by:

•

Dividing total cellular or PCS customers discontinuing service during the period by the average cellular or PCS customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two);

•

Dividing that result by the number of months in the period; and

•

Subtracting the result from one.

(10)

Determined for each period by:

•

Dividing the sum of access, airtime, roaming, long distance, features, connection, disconnection, and other revenues for the period by average cellular or PCS customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two); and

•

Dividing that result by the number of months in the period.

SUMMARY FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts and operating data)

   We derived Rural Cellular's historical consolidated financial data for the period from January 1, 1996 through December 31, 1998 from its consolidated financial statements, which have been audited by Arthur Andersen LLP. The historical consolidated financial data for the nine months ended September 30, 1998 and 1999 are derived from Rural Cellular's unaudited consolidated financial statements, which include all adjustments, consisting of normal recurring accruals, which management considers necessary for a fair presentation of the financial results for the interim period.

   Our operating results for the nine months ended September 30, 1998 and 1999 are not necessarily indicative of the results that may be expected for a full year.

   The data set forth below should be read in conjunction with "Selected Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

	Year Ended December 31									Nine Months Ended September 30
	1996			1997			1998			1998			1999
										(Unaudited)
Revenues:
Service	$	23,120		$	43,408		$	75,633		$	51,178		$	78,263
Roamer		6,413			9,475			20,199			13,577			33,310
Equipment		927			1,020			2,700			1,669			5,704
Total revenues		30,460			53,903			98,532			66,424			117,277
Operating expenses:
Network costs		6,731			11,578			18,877			13,335			14,352
Cost of equipment sales		1,375			2,807			5,968			4,012			8,145
Selling, general and administrative		13,575			25,225			39,156			25,811			39,318
Depreciation and amortization		5,539			12,458			26,532			17,523			29,549
Total operating expenses		27,220			52,068			90,533			60,681			91,364
Operating income		3,240			1,835			7,999			5,743			25,913
Other income (expense):
Interest expense		(280	)		(6,065	)		(19,060	)		(12,340	)		(20,207	)
Interest and dividend income		335			232			1,461			1,318			289
Other income (expense)		51			(350	)		(535	)		(645	)		(210	)
Minority interest		331			3,082			4,553			3,126			1,538
Other income (expense)		437			(3,101	)		(13,581	)		(8,541	)		(18,590	)
Income (loss) before income tax and extraordinary item		3,677			(1,266	)		(5,582	)		(2,798	)		7,323
Income tax provision		200			—			—			—			34
Income (loss) before extraordinary item		3,477			(1,266	)		(5,582	)		(2,798	)		7,289
Extraordinary item-early retirement of debt		—			—			(1,042	)		(1,042	)		—
Net income (loss)		3,477			(1,266	)		(6,624	)		(3,840	)		7,289
Preferred stock dividend		—			—			(9,090	)		(5,398	)		(11,765	)
Net income (loss) applicable to common shares	$	3,477		$	(1,266	)	$	(15,714	)	$	(9,238	)	$	(4,476	)
Net income (loss) per basic and diluted common share	$	0.41		$	(0.14	)	$	(1.76	)	$	(1.04	)	$	(0.50	)
Weighted average common shares outstanding, basic and diluted		8,509			8,853			8,916			8,893			9,029

SUMMARY FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts and operating data)

	Year Ended December 31									Nine Months Ended September 30
	1996			1997			1998			1998			1999
										(Unaudited)
Balance sheet data:
Cash and cash equivalents	$	237		$	1,995		$	2,062		$	9,149		$	1,073
Property and equipment, net		41,935			77,920			131,714			119,753			128,764
Total assets		60,507			181,588			480,524			475,833			495,334
Total debt		8,492			128,000			298,851			298,874			307,143
Senior exchangeable preferred stock		—			—			132,201			124,316			143,767
Total shareholders' equity		34,996			33,731			19,279			25,720			15,572
Other financial data:
EBITDA(1):
Cellular	$	9,450		$	19,860		$	39,356		$	26,778		$	57,543
Wireless Alliance		(671	)		(5,567	)		(4,825	)		(3,512	)		(2,081	)
Total	$	8,779		$	14,293		$	34,531		$	23,266		$	55,462
EBITDA margin(1):
Cellular		31.0	%		41.7	%		44.9	%		45.9	%		52.0	%
Wireless Alliance		—			(75.9	)		(39.0	)		(37.9	)		(29.7	)
Capital expenditures:
Cellular	$	23,850		$	26,127		$	29,563		$	15,726		$	12,584
Wireless Alliance		364			8,801			13,300			8,230			3,110
Total	$	24,214		$	34,928		$	42,863		$	23,956		$	15,694
Roamer revenue as a percentage of adjusted revenue(2)		21.7	%		20.3	%		23.7	%		23.9	%		31.4	%
Ratio of earnings to combined fixed charges and preferred stock dividends(3)		11.43			0.75			0.44			0.47			0.86
Operating data:
Customers at end of period:
Cellular		45,094			84,600			186,892			175,847			217,689
Wireless Alliance-PCS		—			—			5,129			2,264			11,110
Wireless Alliance-Cellular		—			17,167			11,079			15,481			1,840
Other(4)		6,890			9,312			11,550			11,469			13,790
Total		51,984			111,079			214,650			205,061			244,429
Penetration(5):
Cellular		7.5	%		7.6	%		8.0	%		7.5	%		9.0	%
Wireless Alliance-PCS		—			—			0.7			0.3			1.6
Retention(6):
Cellular		98.7	%		98.4	%		98.5	%		98.6	%		98.4	%
Wireless Alliance-PCS		—			—			98.2			98.8			98.1
Average monthly revenue per customer(7):
Cellular		$66			$55			$52			$52			$55
Wireless Alliance-PCS		—			—			64			65			52
Acquisition cost per customer(8):
Cellular		$307			$403			$362			$393			$367
Wireless Alliance-PCS		—			—			565			525			518
Cell sites:
Cellular		72			121			233			204			257
Wireless Alliance-PCS		—			—			53			40			57

SUMMARY FINANCIAL AND OPERATING DATA
Notes to Summary Financial and Operating Data

(1)

EBITDA is the sum of earnings before interest, taxes, depreciation and amortization and is utilized as a performance measure within the wireless industry. EBITDA should not be regarded as an alternative for other performance measures and should not be considered in isolation. EBITDA is not a measurement of financial performance under generally accepted accounting principles and does not reflect all expenses of doing business (e.g., interest expense, depreciation). Accordingly, EBITDA should not be considered as having greater significance than or as an alternative to net income or operating income as an indicator of operating performance or to cash flows as a measure of liquidity.

(2)

Determined for each period by dividing roamer revenue for such period by total revenues excluding equipment sales and Wireless Alliance revenues.

(3)

For purposes of computing the ratio of earnings to combined fixed charges and preferred stock dividends, earnings include earnings before extraordinary items and accounting changes, interest expense, amortization of deferred financing costs, taxes and capitalized interest. Fixed charges and preferred stock dividends consists of interest expense, amortization of deferred financing costs, capitalized interest and preferred stock dividends. The deficiency of earnings to combined fixed charges and preferred stock dividends totaled $1,540, $16,010, $9,534 and $4,630 for the years ended December 31, 1997 and 1998 and the nine months ended September 30, 1998 and 1999, respectively.

(4)

Comprised of prepaid cellular and paging customers.

(5)

Represents the ratio of cellular or PCS customers to total POPs at the end of the period.

(6)

Determined for each period by:

•

Dividing total cellular or PCS customers discontinuing service during the period by the average cellular or PCS customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two);

•

Dividing that result by the number of months in the period; and

•

Subtracting the result from one.

(7)

Determined for each period by:

•

Dividing the sum of access, airtime, roaming, long distance, features, connection, disconnection and other revenues for the period by average cellular or PCS customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two); and

•

Dividing that result by the number of months in the period.

(8)

Determined for each period by dividing selling and marketing expenses, cost of equipment sales net of equipment revenues, and depreciation of rental telephone equipment by the gross cellular or PCS customers added during the period.

RISK FACTORS

You should carefully consider the following matters, as well as the other information contained in this prospectus, before making an investment decision. Information contained in this prospectus contains "forward-looking statements," which are subject to the qualifications discussed below. If any of the risks described below were to materialize, our ability to satisfy our obligations to the holders of our junior exchangeable preferred stock and senior exchangeable preferred stock and the trading price of these securities would be adversely affected.

Risks Related To Our Business

Our future operating results could fluctuate significantly. This fluctuation could adversely impact our ability to satisfy our obligations to the holders of our junior exchangeable preferred stock and our senior exchangeable preferred stock and the trading price of the junior exchangeable preferred stock and senior exchangeable preferred stock.

   We believe that our future operating results and cash flows will be subject to fluctuations due to many factors, several of which are outside our control. These factors include the following:

•

increased costs we may incur in connection with the build-out of our networks and the further development, expansion, and upgrade of our cellular systems and those we have recently and/or may acquire;



•

fluctuations in the demand for our services and equipment and wireless services generally;



•

increased competition, including price competition, which has led to declining average monthly local service revenues per subscriber for us and our competitors;



•

changes in our regulatory environment;



•

the cost and availability of equipment components; and



•

changes in general economic conditions.

   We may not sustain profitability from our operating activities in the future.

We are highly dependent on our relationships with our roaming partners. This dependence could adversely affect our operating results and growth strategy if we are unable to maintain our existing relationships or replace them with alternative relationships on equally favorable terms.

   Our results of operations are highly dependent on our relationships with our roaming partners. Roamer revenues accounted for approximately 28.4% of our total revenues for the nine months ended September 30, 1999, without giving effect to the Triton acquisition. After giving effect to the Triton acquisition, roamer revenues would have accounted for 32.3% of our total revenues, of which roamer revenues from AT&T would represent 14.0% of our total revenues. The roaming rates that we receive under our agreements with our roaming partners will decline over the next several years. As a result, if we are unable to lower our operating costs or if roaming call volume does not increase, our operating income may decline.

   Our roaming agreements are short to medium term, including some which are terminable with 30 days' written notice, and may be terminated prior to expiration upon breach of any of the material terms. When these agreements expire or are terminated, we may be unable to renegotiate these roaming agreements or to obtain roaming agreements with other wireless providers, the failure of which could lead to a substantial decline in our revenues and cash flow.

We have a significant amount of debt, which may limit our ability to meet our dividend obligations and debt service, to borrow additional money, or to survive a downturn in our business.

   We have a significant amount of debt, and we will incur significant additional debt in connection with the Triton acquisition. As of September 30, 1999, on a pro forma basis after giving effect to the transactions described in our unaudited pro forma consolidated financial data appearing elsewhere in this prospectus, we would have had approximately $1.2 billion of consolidated debt, approximately $381.8 million total liquidation preference of preferred stock, and consolidated shareholders' equity of approximately $197.6 million. Our current levels of debt could have important consequences to you, including the following:

•

we must use a substantial portion of our cash flows from operations to make principal and interest payments on our debt, thereby reducing funds that would otherwise be available to us for working capital, capital expenditures, future business opportunities, the payment of cash dividends on our preferred or common stock and other purposes;



•

we may not be able to obtain additional financing for future acquisitions, working capital, capital expenditures, and other purposes on terms favorable to us or at all;



•

borrowings under our bank credit facilities are at variable interest rates, which could cause us to be vulnerable to increases in interest rates;



•

we may have more debt than many of our competitors, which may place us at a competitive disadvantage; and



•

we may have limited flexibility to react to changes in our business.

We anticipate incurring additional debt in the future to fund expansion and maintenance of our business. If we do so, the related risks we and you now face could intensify.

We rely on the use of third-party service marks. The loss of, or the failure to renew, any license to use these service marks could impair our ability to attract and/or retain customers.

   We use various service marks in our business, some of which we own and some of which we license from third parties. If any of our licenses with third parties are not renewed upon expiration, or if we fail to meet the applicable operating or service quality standards or otherwise lose the rights to use any licensed service marks, our ability both to attract new customers and to retain existing customers could be impaired.

Any loss of our key personnel could have a material adverse effect on our business and our ability to manage our planned growth successfully.

   Our business is managed by a small number of key management and operating personnel, including Richard P. Ekstrand, President and Chief Executive Officer; Wesley E. Schultz, Senior Vice President and Chief Financial Officer; Ann K. Newhall, Senior Vice President and General Counsel, and Scott G. Donlea, Vice President, Market Development. The loss of any of these individuals could have a material adverse effect on our business. We believe that our ability to manage our planned growth successfully will depend in large part on our continued ability to attract and retain highly skilled and qualified personnel.

We operate in a very competitive business environment, which can adversely affect our business and operations.

   The wireless communications industry is highly competitive. Many of our competitors and potential competitors have substantially greater financial, personnel, technical, marketing, and other resources than we do, as well as other competitive advantages. Some competitors may market services we do not offer, such as cable television access or landline local exchange or long distance services. Competition for customers is based principally upon services and features offered, technical quality of wireless systems, strength of distribution channels, customer service, system coverage, capacity and price.

   In each of our cellular markets we compete with one other cellular licensee, and in many of our service areas, with providers of personal communications services. To a lesser extent, we also compete in many of our service areas with dispatch and conventional mobile telephone companies, resellers of wireless services, paging companies, and landline telephone service providers. We expect to face increased competition in the future in our cellular markets and our personal communications services operations from other cellular licensees and entities providing other technologies and services, including digital mobile communication systems using enhanced specialized mobile radio licenses and broadband personal communications services licenses. More providers may enter the industry if the Federal Communications Commission approves a disaggregation of spectrum for any license in a personal communications services area, or if any C block licensee elected to surrender, pursuant to a special Federal Communications Commission program, 15 megahertz of its 30 megahertz license.

   Our operations will also face competition when more broadband spectrum is licensed and as other technologies are developed in the future including, but not limited to, fixed wireless and satellite systems. Moreover, one or more of the technologies that we currently utilize may become inferior or obsolete at some time in the future. We may not be able to continue to compete successfully and new technologies and products that are superior to ours may be developed.

Our business could be materially and adversely affected by our failure to anticipate and react to frequent and significant technological changes.

   The telecommunications industry is subject to rapid and significant changes in technology that are evidenced by:

•

the increasing pace of digital upgrades in existing analog wireless systems;



•

evolving industry standards;



•

the availability of new radio frequency spectrum allocations for wireless services;



•

ongoing improvements in the capacity and quality of digital technology;



•

shorter development cycles for new products and enhancements;



•

developments in emerging wireless transmission technologies; and



•

changes in end-user requirements and preferences.

   We may be required to select in advance one technology over another. At the time we make our selection, it may be impossible to predict accurately which technology may prove to be the most economic, efficient, or capable of attracting customer usage. Consequently, it is possible that we may select a technology that does not achieve widespread commercial success and, as a result, our business, results of operations, and financial condition could be materially and adversely affected.

Our business is subject to extensive government regulation. The applicable legislation and regulations, and changes to them, could adversely affect our business by increasing our expenses. We may also be unable to obtain regulatory approvals necessary to operate our business. Any failure to obtain these approvals could negatively affect our results of operations.

   The Federal Communications Commission regulates the licensing, construction, operation, acquisition, and sale of our wireless systems, as well as the number of cellular and other wireless licenses permitted in each of our markets. Changes in legislation and regulations governing wireless activities and wireless carriers or our loss of any license or licensed area could have a material adverse effect on our operations. In addition, some aspects of the Telecommunications Act of 1996 place additional burdens upon us or subject us to increased competition and increase our costs of doing business.

   All of our cellular licenses are subject to renewal upon expiration of each license's initial ten-year term. Grants of cellular renewals are based upon Federal Communications Commission rules establishing a presumption in favor of licensees that have complied with their regulatory obligations during the ten-year license period. However, we cannot assure you that the Federal Communications Commission will grant us any future renewal applications or that our applications will be free from challenge.

Our business could be affected by as yet undetected problems arising from Year 2000 issues.

   We continue to assess the impact of the Year 2000 issue on our computer systems and applications. If we or any of the entities with whom we conduct business has not properly completed Year 2000 modifications, or suffers any adverse consequences because of any problems which have not yet occurred or been discovered, our operations could be adversely affected.

Equipment failure and natural disasters may adversely affect our operations.

   A major equipment failure or a natural disaster affecting any of our central switching offices, microwave links, or cell sites could have a material adverse effect on our operations. Our inability to operate any portion of our cellular system for an extended time period could result in a loss of customers or impair our ability to attract new customers, which would have a material adverse effect on our business, results of operations, and financial condition.

Concerns about health-related and safety-related risks associated with wireless handsets, and the possibility of related legislation, may affect our business.

   Media reports and some scientific studies have suggested that radio frequency emissions from portable wireless handsets may be linked to cancer and may interfere with pacemakers and other electronic medical devices. The Food and Drug Administration has said that more studies are needed before any health problems can be ruled out. These and other health-related and safety-related concerns over radio frequency emissions may have the effect of discouraging the future use of wireless handsets and of creating liability for past damages to the health of users, either of which could have an adverse effect on our business.

   Several states have proposed or enacted legislation that would limit or prohibit the use of mobile phones while driving an automobile. If adopted, this legislation could have an adverse effect on our business.

Risks Related to Our Acquisition Strategy

We may be unable to consummate the Triton acquisition. If this occurred, we could be in default under the acquisition agreement, which could lead to legal proceedings being initiated against us. This in turn could lead to defaults under our other obligations.

   The offering of the senior exchangeable preferred stock is not contingent or in any way dependent on the completion of the Triton acquisition, which is not expected to occur until after we complete this offering. The closing of the acquisition is subject to a number of conditions, including Federal Communications Commission and other regulatory approvals. If we are unable to complete the Triton acquisition, we would not receive any of the benefits we expect the acquisition will provide. Failure to consummate the Triton acquisition could also cause us to be in default under the acquisition agreement, which could result in our forfeiting our $35.0 million escrow payment and could lead to legal proceedings being initiated against us. This in turn could lead to defaults under our other obligations.

The number of cellular systems and businesses available for acquisition is limited. This could adversely affect our growth strategy.

   A substantial part of our growth has been and is expected to continue to be from acquisitions of cellular systems or businesses. There are a limited number of cellular systems available for acquisition that meet our criteria and the competition among purchasers for these cellular systems is increasing. As a result, our ability to acquire properties on an attractive basis in the future may be limited, which would reduce our future growth.

The cellular systems we acquire may be unsuccessful and we may experience difficulty integrating them into our operations. This could adversely affect our growth strategy and operating results.

   The cellular systems we acquire may not perform as we expect. As a result, the operating results of cellular systems we acquire may not support the debt we incur or equity we issue to acquire, or the capital expenditures needed to develop and integrate, those systems. The expansion of our operations, including the Triton acquisition, may place a significant strain on our management, financial and other resources. Our ability to manage future growth will depend upon our ability to monitor operations, control costs, maintain effective quality controls, and significantly expand our internal management, technical, and accounting systems, all of which will result in higher operating expenses. In addition, telecommunications providers generally experience higher customer and employee turnover rates during and after an acquisition. We cannot assure you that we will be able to integrate successfully the cellular systems or businesses we acquire, including Triton. Our failure to integrate and manage our acquired cellular systems, including Triton, could have a material adverse effect on our business, operating results, and financial condition.

We may be unable to consummate the Triton acquisition. If it is not consummated, our management will have broad discretion with respect to the use of the proceeds allocated to the acquisition.

   We cannot assure you that the Triton acquisition will be consummated, and the offering of senior exchangeable preferred stock is not contingent or in any way dependent on the consummation of the acquisition. If the Triton acquisition is not consummated, the proceeds from the offering of senior exchangeable preferred stock will not be designated for a specific use. In these circumstances, our management will have broad discretion with respect to the use of the proceeds of the offering and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.

Risks Related to This Offering

The absence of a public market for our preferred stock could result in possible volatility in the price of our preferred stock.

   We do not intend to apply for listing of the junior exchangeable preferred stock or senior exchangeable preferred stock on any securities exchange or for their inclusion in any automated quotation system. Although the underwriters currently intend to make a market in the junior exchangeable preferred stock and the senior exchangeable preferred stock, they are not obligated to do so and any market making activities may be discontinued at any time without notice. Accordingly, we cannot assure you as to the development or liquidity of any market for the junior exchangeable preferred stock or the senior exchangeable preferred stock. If a market for either series of the preferred stock were to develop, it could trade at prices that may be higher or lower than their initial offering prices, depending upon many factors, including prevailing interest rates, our operating results, and the markets for similar securities.

   Historically, the market for non-investment grade securities has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the junior exchangeable preferred stock and the senior exchangeable preferred stock. We cannot assure you that if a market for the junior exchangeable preferred stock or the senior exchangeable preferred stock were to develop, it would not be subject to similar disruptions.

There are limitations on the remedies available to the holders of the junior exchangeable preferred stock and senior exchangeable preferred stock.

   If we fail to comply with the terms of the junior exchangeable preferred stock or the senior exchangeable preferred stock, the sole remedy of the holders of the junior exchangeable preferred stock or the senior exchangeable preferred stock, as applicable, will be the election of directors to our board of directors. These terms include the accumulation of accrued and unpaid dividends in an amount equal to six quarterly dividends, whether or not consecutive, on the outstanding junior exchangeable preferred stock or senior exchangeable preferred stock and our failure to satisfy any obligation with respect to the junior exchangeable preferred stock or senior exchangeable preferred stock.

If we file for bankruptcy while the proceeds of your investment in the junior exchangeable preferred stock are being held in an escrow account pending the Triton acquisition, you may experience delay in the return of your investment or you may lose all or most of your investment.

   If we become a debtor under the U.S. Bankruptcy Code while the funds from your investment are held in escrow, there is a risk that these funds will be deemed to be part of our general bankruptcy estate and therefore available to creditors and to payment of expenses of administering the bankruptcy. If a claim is made, there may be delays in distribution while the issue is resolved. If the escrowed funds are found to be a part of the general estate, it will be dealt with in accordance with the ranking and priority as set forth in the U.S. Bankruptcy Code. Administrative expenses, creditor claims and other claims may rank ahead of you as a holder of junior exchangeable preferred stock. If our assets are insufficient to pay the higher-ranking claims, you may not receive any return of your investment, or you may receive only a portion of it after long delays.

   In addition, even if the money is returned to you, once it is determined that the Triton acquisition will not occur, we may subsequently find ourselves in bankruptcy. You may then be subject to a claim that the money should be recovered from you as a preference under U.S. bankruptcy laws. A preference is a payment made with property of the debtor on a debt incurred prior to the bankruptcy, which enables the creditor who was paid to receive more than it would otherwise receive in a bankruptcy liquidation under Chapter 7 of the U.S. Bankruptcy Code. Many of the legal exceptions and defenses to a preference claim may be available to you depending on the exact circumstances when your investment is returned.

   Ordinarily, you could be subject to a preference recovery claim if we become subject to a bankruptcy any time within 90 days after the funds are returned to you. In special circumstances where an investor is an "insider" as defined under the bankruptcy laws, this recovery period will be for payments made to you up to one year before the bankruptcy filing. An insider under the U.S. Bankruptcy Code, generally speaking, is someone who is one of our affiliates, officers, or directors, or a person who controls us either directly or indirectly.

Risks Related To Our Existing Debt

Our junior exchangeable preferred stock and our senior exchangeable preferred stock will be subordinate to our new credit facility and our existing debt, including our senior subordinated notes.

   With respect to the right of payment upon liquidation, the junior exchangeable preferred stock will rank junior to our senior exchangeable preferred stock and our Class T convertible preferred stock, but senior to our common stock. In addition, the senior exchangeable preferred stock will rank junior to all our existing and future debt, including any convertible debenture we issue to Telephone & Data Systems, Inc. in lieu of the Class T convertible preferred stock. Therefore, in the event of our insolvency, liquidation, or other reorganization, our senior debt must be paid in full before either the junior exchangeable preferred stock or the senior exchangeable preferred stock can be redeemed. As of September 30, 1999, after giving pro forma effect to the Triton acquisition and the related financings, including the offerings of preferred and common stock, the total amount of senior debt would have been $1,178.3 million and the unused balance under the credit facility would have been $146.7 million. Under the documents governing our existing debt and preferred stock, we may incur additional debt.

   We secure our borrowings under our existing credit facility, and will secure our borrowings under the new credit facility, by pledging the stock of some of our subsidiaries. We and some of our subsidiaries also have granted, and will grant, liens on substantially all of our assets as security for our obligations under the credit facilities. If we become insolvent or are liquidated, or if payment under the existing or new credit facility is accelerated, the lenders under the existing or new credit facility would be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to instruments governing the debt. Accordingly, the lenders will have a claim on our assets prior to the holders of the junior exchangeable preferred stock and the senior exchangeable preferred stock.

Our junior exchangeable preferred stock and our senior exchangeable preferred stock will rank junior to the debt of our subsidiaries.

   Our obligations with respect to the junior exchangeable preferred stock and the senior exchangeable preferred stock, or, if issued, the exchange debentures, will be effectively subordinated in right of payment to all our subsidiaries' obligations. As of September 30, 1999, there was no material indebtedness of these subsidiaries (excluding the guarantees by the subsidiaries of the credit facility). Under documents governing our existing debt and preferred stock, our subsidiaries can incur a limited amount of debt if specified conditions are met.

The restrictive covenants in our existing debt and preferred stock instruments and agreements may limit our ability to operate our business.

   The instruments governing our debt, including our existing credit facility and those proposed in our new credit facility, and the certificates of designation governing our existing stock, impose significant operating and financial restrictions on us. These restrictions significantly limit, among other things, our ability and that of our subsidiaries to:

•

incur additional debt;



•

pay dividends;



•

repay junior debt prior to stated maturities;



•

sell assets;



•

make investments;



•

engage in transactions with shareholders and affiliates;



•

create liens; and



•

engage in some types of mergers or acquisitions.

In addition, our existing credit facility requires, and our new credit facility will require, us to maintain specified financial ratios. Substantially all our assets are or will be subject to liens securing our credit facilities. These restrictions could limit our ability to obtain future financings, make needed capital expenditures, withstand a future downturn in our business or the economy in general, or otherwise conduct necessary corporate activities. Our failure to comply with these restrictions could lead to a default under the terms of the relevant debt or a violation of the terms of the preferred stock even though we are able to meet debt service and dividend obligations.

   If there were an event of a default under our existing or new credit facility or other debt, the holders of the affected debt could elect to declare all of that debt to be due and payable which, in turn, could cause all of our other debt to become due and payable. We cannot assure you that we and our subsidiaries would have sufficient funds available to make these payments or that we would be able to obtain sufficient funds from alternative sources to make these payments. Even if we could obtain additional financing, we cannot assure you that the terms would be favorable to us. If the amounts outstanding under our existing or new credit facility were accelerated, our lenders could proceed against our assets and the stock and assets of our subsidiaries. As a result, any event of default could have a material adverse effect on our business and financial condition and could cause the price of our junior exchangeable preferred stock or our senior exchangeable preferred stock to decline substantially.

We expect to require substantial amounts of capital in the future. Our ability to generate the capital required to meet our obligations and to maintain and expand our systems depends on many factors beyond our control. Any failure to raise necessary capital in the future could materially limit our ability to compete.

   We have required, and will continue to require, substantial capital to develop, expand and upgrade our wireless systems and those we may acquire. We had capital expenditures of $15.7 million during the first nine months of 1999. We have budgeted capital expenditures for fiscal 2000 of approximately $32.4 million, excluding Triton and other acquisitions, and of approximately $40.0 million, including the Triton acquisition. We may also require additional financing for future acquisitions, to refinance our debt at its final maturities, and to meet mandatory redemption provisions on our preferred stock. Our sources of additional capital may include public and private equity and debt financings, including vendor financing. The extent of the additional financing that we may require will depend on the success of our operations. We may not be able to obtain additional financing on terms acceptable to us and within the limitations contained in the instruments governing our debt and our preferred stock, or any future financing arrangements. If we cannot raise sufficient funds to meet our planned growth or debt and preferred stock repayment obligations, we may delay or abandon some or all of our planned expansion or seek to sell assets to raise additional funds, which could materially limit our ability to compete in the wireless industry.

We are subject to limitations on our ability to pay cash dividends on and to repurchase or otherwise satisfy our obligations under the junior exchangeable preferred stock and senior exchangeable preferred stock. As a result, if we do not satisfy these obligations, we may be in default under our existing debt and the holders of these series of preferred stock may have the right to elect directors to our board of directors.

   Our ability to pay cash dividends and to redeem the junior exchangeable preferred stock and senior exchangeable preferred stock or repurchase the exchange debentures when required is substantially restricted under various covenants contained in documents governing our outstanding preferred stock and our debt. In addition, under Minnesota law, we can pay dividends on or redeem our capital stock, including the junior exchangeable preferred stock and the senior exchangeable preferred stock, only if our board of directors determines that we will be able to pay our debts in the ordinary course of business after paying the dividends or completing the redemption. We cannot predict what the value of our assets or the amount of our liabilities will be in the future. Accordingly, we cannot assure you that we will be able to:

•

pay cash dividends on the junior exchangeable preferred stock or senior exchangeable preferred stock;



•

redeem the junior exchangeable preferred stock or senior exchangeable preferred stock in the event of a change in control or otherwise;



•

redeem the junior exchangable preferred stock in the event the Triton acquisition is not completed (although we anticipate that we will have the ability to complete this redemption); or



•

exchange the junior exchangeable preferred stock or the senior exchangeable preferred stock for exchange debentures.

   If we fail to comply with the terms of the junior exchangeable preferred stock or the senior exchangeable preferred stock, the holders of these series of stock will each have the right to elect directors to our board. In addition, the failure to comply could constitute an event of default under our existing debt. As a result, the lenders of this debt could accelerate payment of all amounts owing under the debt.

Under the terms of our existing debt, we may be unable to satisfy our obligations to the holders of junior exchangeable preferred stock and senior exchangeable preferred stock in the event of a change of control.

   We must make separate offers to purchase the junior exchangeable preferred stock and the senior exchangeable preferred stock within 30 days after the occurrence of specified change of control events at a price equal to 101% of the total liquidation preference of all outstanding shares, plus, without duplication, accumulated and unpaid dividends, if any, to the date of repurchase.

   However, our credit facility and the indenture governing our outstanding senior subordinated notes prohibit us from redeeming the junior exchangeable preferred stock and the senior exchangeable preferred stock pursuant to a change of control offer, as described above. Prior to commencing an offer to redeem, we would be required to:

•

repay in full all our debt that would prohibit us from redeeming the junior exchangeable preferred stock and senior exchangeable preferred stock, including amounts owed under the credit facility; or



•

obtain any requisite consent to permit the repurchase.

   We cannot assure you that we would be able to obtain capital sufficient to repay this debt or that the relevant lenders would grant their consent. The events that constitute a change of control may also be events of default under our credit facility or our other debt and may permit the lenders to accelerate payment of all amounts owing under the debt. If the debt is not paid, the lenders may enforce their security interests in our assets, thereby limiting our ability to raise cash to repurchase the junior exchangeable preferred stock or senior exchangeable preferred stock, or, if issued, the exchange debentures relating to both series of preferred stock, and reducing the practical benefit of the offer to purchase provisions to the holders of the junior exchangeable preferred stock and senior exchangeable preferred stock or, if issued, the exchange debentures.

Risks Related To Forward-Looking Statements

There are risks that may make it difficult for us to achieve the outcomes predicted in our forward-looking statements.

   Many of the statements included in this prospectus, including the description of our plans, strategies, capital expenditures, Year 2000 preparedness, pending or possible acquisitions, and financing plans are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by the use of terminology such as "may," "will," "expect," "intend," "plan," "estimate," "anticipate," "believe," or similar phrases. Our actual future performance could differ materially from these forward-looking statements. These forward-looking statements are inherently subject to a number of risks, uncertainties, and assumptions. Important factors that could cause actual results to differ materially from our expectations include those risks identified in the foregoing "Risk Factors" and elsewhere in this prospectus and include, but are not limited to:

•

our plans to achieve growth by offering new products and services and through possible acquisitions;



•

our anticipated capital expenditures to maintain, upgrade, and expand our systems;



•

our beliefs regarding the effects of governmental regulation on our business;



•

our ability to compete effectively in a highly competitive environment; and



•

our ability to respond to Year 2000 problems.

   We caution you not to place undue reliance on these forward-looking statements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by these cautionary statements.

USE OF PROCEEDS

   We expect our net proceeds from the offerings of our preferred and common stock to be a total of $       . We intend to use the net proceeds from the junior exchangeable preferred stock offering, and the senior exchangeable preferred stock offering, and the common stock offering, together with borrowings under the new credit facility and proceeds from the sale of Class M preferred stock, to fund the Triton acquisition, to repay existing bank debt, to fund capital expenditures, and for general corporate purposes.

   The closings of the common stock offering, the junior exchangeable preferred stock offering, and the senior exchangeable preferred stock offering are not contingent upon each other or upon completion of the Triton acquisition. Pending consummation of the Triton acquisition, we will use the net proceeds from the senior exchangeable preferred stock and common stock offerings to reduce indebtedness under our existing credit facility. We will deposit the net proceeds from the sale of the junior exchangeable preferred stock in an escrow account and such proceeds will be used to purchase securities which will earn interest.

Sources and Uses of Funds
(In thousands)

Sources:
New credit facility	$	1,053,297
Senior exchangeable preferred stock		25,000
Junior exchangeable preferred stock		110,000
Class M preferred stock		100,000
Class A common stock		200,000
Total sources	$	1,488,297
Uses:
Triton purchase price	$	1,240,000
Triton working capital		7,339
Refinance existing credit facility		182,143
Estimated fees and expenses of the Triton acquisition and offerings		38,815
Funds for general corporate purposes		20,000
Total uses	$	1,488,297

   If we do not complete the Triton acquisition by June 30, 2000, subject to certain extensions, we are required to redeem all the junior exchangeable preferred stock at a price equal to 101% of the total liquidation preference, plus accumulated and unpaid dividends. We intend to use the proceeds remaining after the repurchase of the junior exchangeable preferred stock to reduce outstanding indebtedness under our existing credit facility and for working capital and other corporate purposes.

CAPITALIZATION

   The following table sets forth Rural Cellular's capitalization as of September 30, 1999:

•

on an actual basis;



•

as adjusted after giving effect to the issuance of the Class A common stock and the senior exchangeable preferred stock; and



•

on a pro forma as adjusted basis after giving effect to the completion of the common stock, senior exchangeable preferred stock and junior exchangeable preferred stock offerings, the Triton acquisition, the new credit facility, the issuance of the Class M preferred stock and Class T convertible preferred stock, and the repayment in full of the existing credit facility.

   This table should be read in conjunction with our consolidated financial statements, including the notes thereto, and the "Unaudited Pro Forma Condensed Consolidated Financial Data" and notes thereto included elsewhere in this prospectus.

	September 30, 1999
	Actual			As Adjusted			Pro Forma As Adjusted
				(In thousands)
Cash and cash equivalents	$	1,073		$	32,840		$	21,073
Existing credit facility	$	182,143		$	—		$	—
New credit facility		—			—			1,053,297
Senior subordinated notes		125,000			125,000			125,000
Total debt		307,143			125,000			1,178,297
Senior exchangeable preferred stock		143,767			167,827			167,827
Class T convertible preferred stock		—			—			7,780
Junior exchangeable preferred stock		—			—			106,240
Class M preferred stock		—			—			100,000
Total preferred stock		143,767			167,827			381,847
Shareholders' equity:
Class A common stock, $.01 par value		79			103			102
Class B common stock, $.01 par value		11			11			10
Additional paid-in capital		36,476			226,302			218,524
Accumulated deficit		(20,994	)		(20,994	)		(20,994	)
Total shareholders' equity		15,572			205,422			197,642
Total capitalization	$	466,482		$	498,249		$	1,757,786

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

   We derived summary unaudited pro forma consolidated financial and operating data as of and for the nine months ended September 30, 1999 and for the year ended December 31, 1998 from historical consolidated financial statements of Rural Cellular Corporation and other financial statements included elsewhere in this prospectus. Rural Cellular financial results have been adjusted based on currently available information and assumptions that we believe are reasonable to give effect to the following transactions as if each transaction had occurred as of January 1, 1998:

•

Our acquisition of Atlantic Cellular on July 1, 1998;



•

The issuance of 2,390,000 shares of our Class A common stock with total proceeds of $200.0 million;



•

The issuance of 25,000 shares of our 11³/8% senior exchangeable preferred stock with total proceeds of $25.0 million;



•

The issuance of 110,000 shares of our   % junior exchangeable preferred stock with total proceeds of $110.0 million;



•

Our acquisition of Triton for a purchase price of $1.24 billion;



•

The issuance of $100.0 million of Class M preferred stock (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the sale of common stock offered hereby will reduce the amount of the Class M preferred stock issued to $100.0 million);



•

The issuance of Class T convertible preferred stock to Telephone & Data Systems, Inc. in exchange for shares of our Class A and Class B common stock; and



•

A new credit facility consisting of $1.2 billion in senior secured debt, which will replace our existing credit facility.

   Pro forma results for the nine months ended September 30, 1999 are not necessarily indicative of the results that may be expected for a full year.

   We provide the following unaudited pro forma condensed consolidated financial statements and the related notes for informational purposes only. The unaudited pro forma condensed consolidated financial data are based on currently available information and assumptions that we believe are reasonable. The accompanying data do not purport to represent what our results of operations would have been if the pro forma transactions had been completed on the dates indicated, nor do they purport to indicate our future financial position or results of operations. The "Unaudited Pro Forma Condensed Consolidated Financial Data" includes consolidated financial data both prior to, and after giving effect, to the Triton acquisition.

   The data set forth below should be read in conjunction with "Unaudited Summary Pro Forma Financial and Operating Data," "Summary Financial and Operating Data," "Capitalization," "Selected Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Nine Months Ended September 30, 1999
(In thousands, except per share amounts)

	Rural Cellular Historical			Adjustments for Senior Exchangeable Preferred Stock and Common Stock Offerings			Rural Cellular as Adjusted			Triton Pro Forma(4)		Other Adjustments(5)(6)			Pro Forma as Adjusted
Revenues:
Service	$	78,263		$	—		$	78,263		$	63,062	$	—		$	141,325
Roamer		33,310			—			33,310			39,184		—			72,494
Equipment		5,704			—			5,704			4,906		—			10,610
Total revenues		117,277			—			117,277			107,152		—			224,429
Operating expenses:
Network costs		14,352			—			14,352			12,558		—			26,910
Cost of equipment sales		8,145			—			8,145			7,930		—			16,075
Selling, general and administrative		39,318			—			39,318			33,051		—			72,369
Depreciation and amortization		29,549			—			29,549			34,380		10,532	(7)		74,461
Total operating expenses		91,364			—			91,364			87,919		10,532			189,815
Operating income		25,913			—			25,913			19,233		(10,532	)		34,614
Other income (expense):
Interest expense		(20,207	)		11,612	(1)		(8,595	)		—		(74,133)	(8)		(82,728	)
Interest and dividend income		289			—			289			—		(289)	(9)		—
Other expense		(210	)		—			(210	)		—		—			(210	)
Minority interest		1,538			—			1,538			—		—			1,538
Other income (expense)		(18,590	)		11,612			(6,978	)		—		(74,422	)		(81,400	)
Income (loss) before income tax and extraordinary item		7,323			11,612			18,935			19,233		(84,954	)		(46,786	)
Income tax provision		34			—			34			—		(34)	(10)		—
Income (loss) before extraordinary item		7,289			11,612			18,901			19,233		(84,920	)		(46,786	)
Extraordinary item-early retirement of debt		—			—			—			—		—			—
Net income (loss)		7,289			11,612			18,901			19,233		(84,920	)		(46,786	)
Preferred stock dividend		(11,765	)		(2,961)	(2)		(14,726	)		—		(17,594)	(11)		(32,320	)
Net income (loss) applicable to common shares	$	(4,476	)	$	8,651		$	4,175		$	19,233	$	(102,514	)	$	(79,106	)
Net income (loss) per basic and diluted common share	$	(0.50	)				$	0.37							$	(7.02	)
Weighted average common shares outstanding, basic and diluted		9,029						11,419	(3)							11,265	(3)

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated
Statement of Operations

For the Nine Months Ended September 30, 1999
(In thousands)

The following notes are provided for purposes of determining pro forma effects of the transactions described above on the historical consolidated statement of operations of Rural Cellular both prior to, and after giving effect to, the Triton acquisition for the nine months ended September 30, 1999. Certain assumptions are required to present this pro forma data. The Rural Cellular stock offering price represents the average price using the high and the low stock price on January 3, 2000, the junior exchangeable preferred stock assumes an 11⁷/8% dividend rate, and the interest rates related to our new credit facility are based on the recent London Interbank Offer Rates plus an estimated margin factor as described in note 9, below.

(1)

Represents a decrease in interest expense due to the repayment of $182.1 million of indebtedness from the proceeds of the issuance of $200.0 million of Class A common stock and $25.0 million of senior exchangeable preferred stock, net of related issuance costs.

Net proceeds from issuance of senior exchangeable preferred stock	$	24,060
Net proceeds from issuance of Class A common stock		189,850
Net proceeds	$	213,910
Increase in cash and cash equivalents		(31,767	)
Reduction in long-term debt		182,143
Interest rate		8.5%
Annual reduction in interest expense	$	15,482
Factor for nine months		.75
Pro forma adjustment	$	11,612

(2)

Represents an increase in preferred stock dividends due to the issuance of $25.0 million of senior exchangeable preferred stock.

Senior exchangeable preferred stock dividend	$	14,726
Less historical preferred stock dividend		(11,765	)
Pro forma adjustment	$	2,961

(3)

The following represents the weighted average number of common shares outstanding after giving effect to the issuance of Class A common stock and the conversion of 74 Class A and 80 Class B common shares owned by Telephone & Data Systems, Inc. to Class T convertible preferred stock.

Rural Cellular historical common shares outstanding	9,029
Issuance of Class A common stock	2,390
Rural Cellular common shares outstanding as adjusted	11,419
Conversion of common stock owned by Telephone & Data Systems, Inc. to Class T convertible preferred stock	(154	)
Pro forma common shares outstanding as adjusted	11,265

(4)

Pro forma operating results for Triton include the financial results of the following transaction from January 1, 1999 through the date of acquisition:

•

Acquisition of the Oregon and Washington wireless telephone operations and related assets of BMCT, L.P. on February 1, 1999.

	Triton Historical Nine Months Ended September 30, 1999			BMCT, L.P. One Month Ended January 31, 1999			Adjustments			Triton Pro Forma
Revenues:
Service	$	61,053		$	2,009		$	—		$	63,062
Roamer		37,870			1,314			—			39,184
Equipment		4,744			162			—			4,906
Total revenues		103,667			3,485			—			107,152
Operating expenses:
Network costs		12,380			178			—			12,558
Cost of equipment sales		7,644			286			—			7,930
Selling, general and administrative		34,192			1,266			(2,407)	(a)		33,051
Deferred compensation		53,954			3,164			(57,118)	(b)		—
Nonrecurring charges		624			1,061			(1,685)	(c)		—
Depreciation and amortization		32,993			1,387			—			34,380
Total operating expenses		141,787			7,342			(61,210	)		87,919
Operating income (loss)		(38,120	)		(3,857	)		61,210			19,233
Other income (expense):
Interest expense		(26,076	)		(725	)		26,801	(d)		—
Interest income		283			4			(287)	(d)		—
Other income (expense)		—			11			(11)	(d)		—
Other income (expense)		(25,793	)		(710	)		26,503			—
Income (loss) before income tax		(63,913	)		(4,567	)		87,713			19,233
Income tax expense (benefit)		3,524			—			(3,524)	(d)		—
Net income (loss)	$	(67,437	)	$	(4,567	)	$	91,237		$	19,233

(a)

Represents the elimination of Triton corporate selling, general, and administrative expenses offset by additional corporate expenses that we expect to incur.



(b)

Represents the elimination of deferred compensation expense incurred by Triton and BMCT, L.P.



(c)

Represents the elimination of nonrecurring expenses related to the sale of Triton and BMCT, L.P.



(d)

Reflects the elimination of interest expense, interest income, other income and income tax effects related to assets and liabilities not being acquired by us.

(5)

Other adjustments include the following for the Triton acquisition:

•

The issuance of 110,000 shares of our  % junior exchangeable preferred stock with total proceeds of $110.0 million;

•

Our acquisition of Triton for a purchase price of $1.24 billion;

•

The issuance of $100.0 million of Class M preferred stock (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the sale of common stock offered hereby will reduce the amount of the Class M preferred stock issued to $100.0 million); and

•

A new credit facility consisting of $1.2 billion in senior secured debt, which will replace our existing credit facility.

 In the event we issue a convertible debenture to Telephone & Data Systems, Inc., in lieu of Class T convertible preferred stock, interest expense, preferred stock dividend, and net income will be affected.

(6)

If the Triton acquisition is not consummated on or prior to June 30, 2000, subject to certain extensions, Rural Cellular is required to redeem all of the junior exchangeable preferred stock at a price equal to 101% of the total liquidation preference plus accumulated and unpaid dividends, if any, to July 15, 2000. In that event, Rural Cellular will use the net proceeds of the issuance of the junior exchangeable preferred stock, senior exchangeable preferred stock and Class A common stock to fund the redemption and to reduce outstanding debt under the existing credit facility. In addition, failure to consummate the Triton acquisition could result in forfeiting our $35.0 million escrow payment.

(7)

Represents an increase to historical amortization and depreciation expense based on the preliminary allocation of the Triton purchase price and other costs. The fair value for fixed assets represents the net increase in value of fixed assets based on our preliminary valuation.

	Estimated Fair Value		Asset Life	Pro Forma Expense
Licenses	$	829,100	40	$	15,546
Goodwill		221,450	20		8,304
Subscriber lists		106,000	7		11,357
Total amortization expense					35,207
Triton pro forma amortization expense					(24,817	)
Amortization adjustment					10,390
Triton fixed asset valuation adjustment		1,700	9		142
Pro forma adjustment				$	10,532

(8)

Represents an increase to interest expense due to additional borrowing under our new credit facility.

	Principal		Interest Rate		Pro Forma Expense
Senior secured revolving credit facility	$	128,297	8.75	%	$	8,517
Senior secured term loan A		450,000	8.75			29,873
Senior secured term loan B		237,500	9.13			16,442
Senior secured term loan C		237,500	9.38			16,892
Senior subordinated notes		125,000	9.63			9,023
Amortization of deferred financing costs						1,981
Pro forma expense						82,728
Rural Cellular as adjusted interest expense						(8,595	)
Pro forma adjustment					$	74,133
A change of 1/8% in interest rates would increase or decrease interest expense by $1,532 per annum.

(9)

To eliminate interest income on an adjusted basis, assuming minimal cash balances will be maintained.

(10)

To eliminate tax expense as the combined entity will have a net loss and as a result no tax expense will be recorded.

(11)

Represents an increase in preferred stock dividends due to the issuance of $7.8 million of Class T convertible preferred stock, $110.0 million of junior exchangeable preferred stock, and $100.0 million of Class M preferred stock.

Class T convertible preferred stock dividend	$	233
Junior exchangeable preferred stock dividend		11,361
Class M preferred stock dividend		6,000
Pro forma adjustment	$	17,594

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1998
(In thousands, except per share amounts)

	Rural Cellular Historical			Atlantic Pro Forma(1)			Rural Cellular Combined			Adjustments for Senior Exchangeable Preferred Stock and Common Stock Offerings			Rural Cellular as Adjusted			Triton Pro Forma(5)		Other Adjustments(6)(7)			Pro Forma as Adjusted
Revenues:
Service	$	75,633		$	15,688		$	91,321		$	—		$	91,321		$	73,042	$	—		$	164,363
Roamer		20,199			7,475			27,674			—			27,674			30,545		—			58,219
Equipment		2,700			1,843			4,543			—			4,543			5,650		—			10,193
Total revenues		98,532			25,006			123,538			—			123,538			109,237		—			232,775
Operating expenses:
Network costs		18,877			3,289			22,166			—			22,166			14,959		—			37,124
Cost of equipment sales		5,968			1,911			7,879			—			7,879			9,515		—			17,394
Selling, general and administrative		39,156			7,614			46,770			—			46,770			39,328		—			86,098
Depreciation and amortization		26,532			6,544			33,076			—			33,076			40,345		18,493	(8)		91,914
Total operating expenses		90,533			19,358			109,891			—			109,891			104,147		18,493			232,530
Operating income (loss)		7,999			5,648			13,647			—			13,647			5,090		(18,493	)		245
Other income (expense):
Interest expense		(19,060	)		(6,593	)		(25,653	)		15,482	(2)		(10,171	)		—		(99,083	)(9)		(109,254	)
Interest and dividend income		1,461			—			1,461			—			1,461			—		(1,461	)(10)		—
Other expense		(535	)		—			(535	)		—			(535	)		—		—			(535	)
Minority interest		4,553			—			4,553			—			4,553			—		—			4,553
Other income (expense)		(13,581	)		(6,593	)		(20,174	)		15,482			(4,692	)		—		(100,544	)		(105,236	)
Income (loss) before income tax and extraordinary item		(5,582	)		(945	)		(6,527	)		15,482			8,955			5,090		(119,037	)		(104,991	)
Income tax provision		—			—			—			—			—			—		—			—
Income (loss) before extraordinary item		(5,582	)		(945	)		(6,527	)		15,482			8,955			5,090		(119,037	)		(104,991	)
Extraordinary item-early retirement of debt		(1,042	)		1,042			—			—			—			—		—			—
Net income (loss)		(6,624	)		97			(6,527	)		15,482			8,955			5,090		(119,037	)		(104,991	)
Preferred stock dividend		(9,090	)		(5,332	)		(14,422	)		(3,382	)(3)		(17,804	)		—		(21,973	)(11)		(39,777	)
Net income (loss) applicable to common shares	$	(15,714	)	$	(5,235	)	$	(20,949	)	$	12,100		$	(8,849	)	$	5,090	$	(141,010	)	$	(144,768	)
Net loss per basic and diluted common share	$	(1.76	)										$	(0.78	)						$	(12.98	)
Weighted average common shares outstanding, basic and diluted		8,916												11,306	(4)							11,152	(4)

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated
Statement of Operations

For the Year Ended December 31, 1998
(In thousands)

The following notes are provided for purposes of determining the pro forma effects of the transactions described above on the historical consolidated statement of operations of Rural Cellular both prior to, and after giving effect to, the Triton acquisition for the year ended December 31, 1998. Certain assumptions are required to present this pro forma data. The Rural Cellular stock offering price represents the average price, using the high and low stock price on January 3, 2000, the junior exchangeable preferred stock assumes an 11⁷/8% dividend rate, and the interest rates related to our new credit facility are based on the recent London Interbank Offer Rates plus an estimated margin factor as described in note 10, below.

(1)

The following represents pro forma operating results for Atlantic Cellular:

	Atlantic Cellular Historical Six Months Ended June 30, 1998			Adjustments			Atlantic Cellular Pro Forma
Revenues:
Service	$	25,006		$	(9,318	)(a)	$	15,688
Roamer		—			7,475	(a)		7,475
Equipment		—			1,843	(a)		1,843
Total revenues		25,006			—			25,006
Operating expenses:
Network costs		11,759			(8,470	)(a)		3,289
Cost of equipment sales		—			1,911	(a)		1,911
Selling, general and administrative		2,101			5,513	(a)(b)		7,614
Depreciation and amortization		4,964			1,580	(c)(d)		6,544
Total operating expenses		18,824			534			19,358
Operating income (loss)		6,182			(534	)		5,648
Other income (expense):
Interest expense		(1,571	)		(5,022	)(e)		(6,593	)
Interest income		90			(90	)(c)		—
Other income (expense)		3,395			(3,395	)(c)		—
Equity in net income of unconsolidated partnership		886			(886	)(c)		—
Minority interest		13			(13	)(c)		—
Other income (expense)		2,813			(9,406	)		(6,593	)
Income (loss) before income tax and extraordinary item		8,995			(9,940	)		(945	)
Income tax provision		—			—			—
Income (loss) before extraordinary item		8,995			(9,940	)		(945	)
Extraordinary item-early retirement of debt		—			1,042	(f)		1,042
Net income (loss)		8,995			(8,898	)		97
Preferred stock dividend		—			(5,332	)(g)		(5,332	)
Net income (loss) applicable to common shares	$	8,995		$	(14,230	)	$	(5,235	)

(a)

Represents the reclassification of certain revenues and expenses to conform to our financial statement presentation.



(b)

Represents the elimination of Atlantic Cellular's corporate selling, general and administrative expenses, offset by additional corporate expenses that we expect to incur.



(c)

Reflects the elimination of depreciation expense, interest income, other income, equity in net income of unconsolidated partnership and minority interest related to assets and liabilities not acquired by us.



(d)

Represents increase to historical amortization expense based on the allocation of the Atlantic Cellular purchase price. The resulting intangible assets are being amortized over 40 years for licenses and goodwill and 10 years for subscriber lists.

Amortization of intangible assets from the Atlantic Cellular acquisition	$	4,218
Elimination of historical amortization		(2,420	)
Pro forma adjustment	$	1,798

(e)

Represents an increase in interest expense of $6,593 related to indebtedness we incurred to partially fund the Atlantic Cellular acquisition, offset with the elimination of $1,571 in interest expense related to Atlantic Cellular debt that we did not assume.



(f)

To eliminate extraordinary item related to early retirement of deferred financing costs for a credit facility that was terminated and replaced with a new facility when the Atlantic Cellular agreement was signed.



(g)

Represents an increase in preferred stock dividend of $5,332 related to 11³/8% senior exchangeable preferred stock that we issued to partially fund the Atlantic Cellular acquisition.

(2)

Represents a decrease in interest expense due to the repayment of $213.9 million of indebtedness from the proceeds of the issuance of $200.0 million of class A common stock and $25.0 million of senior exchangeable preferred stock, net of related issuance costs.

Net proceeds from issuance of senior exchangeable preferred stock	$	24,060
Net proceeds from issuance of Class A common stock		189,850
Net proceeds		213,910
Increase in cash and cash equivalents		(31,767	)
Reduction in long-term debt		182,143
Interest rate		8.5%
Pro forma adjustment	$	15,482

(3)

Represents an increase in preferred stock dividend due to the issuance of $25.0 million of senior exchangeable preferred stock.

Senior exchangeable preferred stock dividend	$	17,804
Less Rural Cellular combined preferred stock dividend		(14,422	)
Pro forma adjustment	$	3,382

(4)

The following represents the weighted average number of common shares outstanding after giving effect to the issuance of Class A common stock and the conversion of 74 Class A and 80 Class B common shares owned by Telephone & Data Systems, Inc. to Class T convertible preferred stock.

Rural Cellular historical common shares outstanding	8,916
Issuance of Class A common stock	2,390
Rural Cellular common shares outstanding as adjusted	11,306
Conversion of common stock owned by Telephone & Data Systems, Inc. to Class T convertible preferred stock	(154	)
Pro forma common shares outstanding as adjusted	11,152

(5)

Pro forma operating results for Triton include the financial results of the following transactions from January 1, 1998 through the date of acquisition:

•

Acquisition of the wireless telephone operations and related assets of Point Telesystems, Inc. on January 16, 1998;

•

Acquisition of the wireless telephone operations and related assets of Columbia River Cellular Partners, L.P. on April 16, 1998;

•

Acquisition of the wireless telephone operations and related assets of "A Markets" of U.S. Unwired, Inc. and Subsidiary on July 1, 1998;

•

Acquisition of the wireless telephone operations and related assets of AAT RSA Company, Limited Partnership on August 7, 1998; and

•

Acquisition of the wireless telephone operations and related assets of BMCT, L.P. on February 1, 1999.

	Triton Historical Year Ended December 31, 1998			Point Telesystems, Inc. January 1- January 15, 1998			"A Markets" of U.S. Unwired, Inc. and Subsidiary Six Months Ended June 30, 1998			BMCT, L.P. Year Ended December 31, 1998			Other Acquisitions			Adjustments			Triton Pro Forma
Revenues:
Service	$	31,464		$	556		$	11,050		$	23,923		$	6,508		$	(459	)(a)	$	73,042
Roamer		14,208			342			5,448			10,172			375			—			30,545
Equipment		2,605			66			507			2,096			376			—			5,650
Total revenues		48,277			964			17,005			36,191			7,259			(459	)		109,237
Operating expenses:
Network costs		7,210			280			4,040			1,949			1,939			(459	)(a)		14,959
Cost of equipment sales		3,650			73			1,833			3,243			716			—			9,515
Selling, general and administrative		17,841			621			6,501			13,421			2,419			(1,475	)(b)		39,328
Deferred compensation		—			—			—			2,353			—			(2,353	)(c)		—
Nonrecurring charges		—			—			—			1,308			—			(1,308	)(d)		—
Depreciation and amortization		17,950			46			4,802			16,379			1,168			—			40,345
Total operating expenses		46,651			1,020			17,176			38,653			6,242			(5,595	)		104,147
Operating income (loss)		1,626			(56	)		(171	)		(2,462	)		1,017			5,136			5,090
Other income (expense):
Interest expense		(13,797	)		—			(3,994	)		(8,783	)		(782	)		27,356	(e)		—
Interest and dividend income		—			9			48			136			3			(196	)(e)		—
Other income (expense)		—			—			—			—			6			(6	)(e)		—
Other income (expense)		(13,797	)		9			(3,946	)		(8,647	)		(773	)		27,154			—
Income (loss) before income tax		(12,171	)		(47	)		(4,117	)		(11,109	)		244			32,290			5,090
Income tax benefit		(115	)		—			—			—			—			115	(e)		—
Net income (loss)	$	(12,056	)	$	(47	)	$	(4,117	)	$	(11,109	)	$	244		$	32,175		$	5,090

(a)

Represent reclassifications of certain revenues and expenses to conform to our financial statement presentation.



(b)

Represents the elimination of Triton corporate selling, general and administrative expenses offset by additional corporate expenses that we expect to incur.



(c)

Represents the elimination of deferred compensation expense incurred by BMCT, L.P.



(d)

Represents the elimination of nonrecurring expenses relating to the sale of BMCT, L.P.



(e)

Reflects the elimination of interest expense, interest income, other income and income tax expense related to assets and liabilities not being acquired by us.

(6)

Other adjustments include the following for the Triton acquisition:

•

The issuance of 110,000 shares of our % junior exchangeable preferred stock with total proceeds of $110.0 million;

•

Our acquisition of Triton for a purchase price of $1.24 billion;

•

The issuance of $100.0 million of Class M preferred stock (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the sale of common stock offered hereby will reduce the amount of the Class M preferred stock issued to $100.0 million); and

•

A new credit facility consisting of $1.2 billion in senior secured debt, which will replace our current credit facility.

 In the event we issue a convertible debenture to Telephone & Data Systems, Inc. in lieu of Class T convertible preferred stock, interest expense, preferred stock dividend, and net income will be affected.

(7)

If the Triton acquisition is not consummated on or prior to June 30, 2000, subject to certain extensions, Rural Cellular is required to redeem all of the junior exchangeable preferred stock at a price equal to 101% of the total liquidation preference plus accumulated and unpaid dividends, if any, to July 15, 2000. In that event, Rural Cellular will use the net proceeds of the issuance of the junior exchangeable preferred stock, senior exchangeable preferred stock and Class A common stock to fund the redemption and to reduce outstanding debt under the existing credit facility. In addition, failure to consummate the Triton acquisition could result in forfeiting our $35.0 million escrow payment.

(8)

Represents an increase to historical amortization and depreciation expense based on the preliminary allocation of the Triton purchase price and other costs. The fair value for fixed assets represents the net increase in the value of fixed assets based on our preliminary valuation.

	Estimated Fair Value		Asset Life	Pro Forma Expense
Licenses	$	829,100	40	$	20,728
Goodwill		221,450	20		11,073
Subscriber lists		106,000	7		15,143
Total amortization expense					46,944
Triton pro forma amortization expense					(28,639	)
Amortization adjustment					18,305
Triton fixed asset valuation adjustment		1,700	9		188
Pro forma adjustment				$	18,493

(9)

Represents an increase to interest expense due to additional borrowings under our new credit facility.

	Principal		Interest Rate		Pro Forma Expense
Senior secured revolving credit facility	$	128,297	8.75	%	$	11,232
Senior secured term loan A		450,000	8.75			39,393
Senior secured term loan B		237,500	9.13			21,681
Senior secured term loan C		237,500	9.38			22,275
Senior subordinated notes		125,000	9.63			12,031
Amortization of deferred financing costs						2,642
Pro forma expense						109,254
Rural Cellular as adjusted interest expense						(10,171	)
Pro forma adjustment					$	99,083
A change of 1/8% in interest rates would increase or decrease interest expense by $1,532 per annum.

(10)

To eliminate interest income on an adjusted basis, assuming minimal cash balances will be maintained.

(11)

Represents an increase in preferred stock dividends due to the issuance of $7.8 million Class T convertible preferred stock, $110.0 million of junior exchangeable preferred stock and $100.0 million of Class M preferred stock.

Class T convertible preferred stock dividend	$	311
Junior exchangeable preferred stock dividend		13,662
Class M preferred stock dividend		8,000
Pro forma adjustment	$	21,973

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 1999
(In thousands)

	Rural Cellular Historical			Adjustments for Senior Exchangeable Preferred Stock and Common Stock Offerings			Rural Cellular as Adjusted			Triton Pro Forma(5)		Other Adjustments(6)(7)			Pro Forma as Adjusted
Assets
Current assets:
Cash and cash equivalents	$	1,073		$	31,767	(1)	$	32,840		$	—	$	(11,767	)(8)	$	21,073
Accounts receivable, less allowance		22,944			—			22,944			20,759		—			43,703
Inventories		3,068			—			3,068			3,974		—			7,042
Other current assets		631			—			631			1,314		—			1,945
Total current assets		27,716			31,767			59,483			26,047		(11,767	)		73,763
Property and equipment, less accumulated depreciation		128,764			—			128,764			90,735		1,700	(9)		221,199
Licenses and other assets:
Licenses and other intangible assets		321,135			—			321,135			474,988		681,562	(10)		1,477,685
Deferred financing costs, less accumulated amortization		10,949			—			10,949			—		14,980	(11)		25,929
Other assets		6,770			—			6,770			—		—			6,770
Total licenses and other assets		338,854			—			338,854			474,988		696,542			1,510,384
Total assets	$	495,334		$	31,767		$	527,101		$	591,770	$	686,475		$	1,805,346
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	11,906		$	—		$	11,906		$	7,835	$	—		$	19,741
Advance billings and customer deposits		3,795			—			3,795			2,047		—			5,842
Accrued interest		6,305			—			6,305			—		—			6,305
Dividends payable		2,044			—			2,044			—		—			2,044
Other accrued expenses		4,802			—			4,802			8,826		—			13,628
Total current liabilities		28,852			—			28,852			18,708		—			47,560
Long-term debt		307,143			(182,143	)(2)		125,000			463,916		589,381	(12)		1,178,297
Total liabilities		335,995			(182,143	)		153,852			482,624		589,381			1,225,857
Senior exchangeable preferred stock		143,767			24,060	(3)		167,827			—		—			167,827
Class T convertible preferred stock		—			—			—			—		7,780	(13)		7,780
Junior exchangeable preferred stock		—			—			—			—		106,240	(14)		106,240
Class M preferred stock		—			—			—			—		100,000	(15)		100,000
Total preferred stock		143,767			24,060			167,827			—		214,020			381,847
Partners' equity		—			—			—			109,146		(109,146	)(16)		—
Shareholders' equity:
Class A common stock, $.01 par value		79			24	(4)		103			—		(1	)(13)		102
Class B common stock, $.01 par value		11			—			11			—		(1	)(13)		10
Additional paid-in capital		36,476			189,826	(4)		226,302			—		(7,778	)(13)		218,524
Accumulated deficit		(20,994	)		—			(20,994	)		—		—			(20,994	)
Total shareholders' equity		15,572			189,850			205,422			—		(7,780	)		197,642
Total liabilities and shareholders' equity	$	495,334		$	31,767		$	527,101		$	591,770	$	686,475		$	1,805,346

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
Notes to the Unaudited Pro Forma Condensed Consolidated
Balance Sheet

As of September 30, 1999
(In thousands)

The following notes are provided for purposes of determining pro forma effects of the transactions described above on the historical consolidated balance sheet of Rural Cellular both prior to, and after giving effect to, the Triton acquisition as of September 30, 1999. Certain assumptions are required to present this pro forma data. The Rural Cellular stock offering price represents the average price using the high and low stock price on January 3, 2000.

(1)

Represents proceeds from the common stock and senior exchangeable preferred stock offerings in excess of amounts used to reduce indebtedness.

(2)

Represents a reduction in long-term debt from the proceeds of the issuance of senior exchangeable preferred stock and Class A common stock.

Net proceeds from issuance of senior exchangeable preferred stock	$	24,060
Net proceeds from issuance of Class A common stock		189,850
Net proceeds		213,910
Increase in cash and cash equivalents		(31,767	)
Reduction in long-term debt	$	182,143

(3)

Represents the issuance of senior exchangeable preferred stock.

Gross proceeds from issuance of senior exchangeable preferred stock	$	25,000
Less deferred issuance costs		(940	)
Pro forma adjustment	$	24,060

(4)

Represents the issuance of 2,390 shares of Class A common stock at a price of $83.69 per share.

Gross proceeds from issuance of Class A common stock	$	200,000
Less issuance costs		(10,150	)
Pro forma adjustment	$	189,850

(5)

Pro forma balance sheet for Triton consists of the following:

	Triton Historical		Adjustments			Triton Pro Forma
Assets
Current assets:
Cash	$	—	$	—		$	—
Accounts receivable, less allowance		24,842		(4,083	)(a)		20,759
Inventories		3,974		—			3,974
Other current assets		1,314		—			1,314
Total current assets		30,130		(4,083	)		26,047
Property and equipment, less accumulated depreciation		90,788		(53	)(a)		90,735
Licenses and other assets:
Licenses and other intangible assets		474,988		—			474,988
Total licenses and other assets		474,988		—			474,988
Total assets	$	595,906	$	(4,136	)	$	591,770
Liabilities and partners' equity
Current liabilities:
Accounts payable	$	7,835	$	—		$	7,835
Advance billings and customer deposits		2,047		—			2,047
Accrued interest		2,052		(2,052	)(a)		—
Other accrued expenses		8,826		—			8,826
Due to related parties, net		1,046		(1,046	)(a)		—
Tax payable		8,244		(8,244	)(a)		—
Total current liabilities		30,050		(11,342	)		18,708
Long-term debt		463,916		—			463,916
Deferred compensation		53,954		(53,954	)(b)		—
Deferred income tax		1,511		(1,511	)(b)		—
Total liabilities		549,431		(66,807	)		482,624
Partners' equity		46,475		62,671	(c)		109,146
Total liabilities and partners' equity	$	595,906	$	(4,136	)	$	591,770

(a)

Reflects the elimination of assets and liabilities not being acquired by us.



(b)

Represents the elimination of deferred compensation and deferred income tax incurred by Triton that will not be assumed by us.



(c)

Represents adjustments in partners' capital as a result of the elimination of certain assets and liabilities that will not be assumed by us.

(6)

Other adjustments include the following for the Triton acquisition:

•

The issuance of 110,000 shares of our % junior exchangeable preferred stock with total proceeds of $110.0 million;

•

Our acquisition of Triton for a purchase price of $1.24 billion;

•

The issuance of $100.0 million of Class M preferred stock (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the sale of common stock offered hereby will reduce the amount of the Class M preferred stock issued to $100.0 million); and

•

A new credit facility consisting of $1.2 billion in senior secured debt, which will replace our current credit facility.

 In the event we issue a convertible debenture to Telephone & Data Systems, Inc., in lieu of Class T convertible preferred stock, long-term debt will increase and Class T convertible preferred stock will not be issued.

(7)

If the Triton acquisition is not consummated on or prior to June 30, 2000, subject to certain extensions, Rural Cellular is required to redeem all of the junior exchangeable preferred stock at a price equal to 101% of the total liquidation preference plus accumulated and unpaid dividends, if any, to July 15, 2000. In that event, Rural Cellular will use the net proceeds of the issuance of the junior exchangeable preferred stock, senior exchangeable preferred stock and Class A common stock to fund the redemption and to reduce outstanding debt under the existing credit facility. In addition, failure to consummate the Triton acquisition could result in forfeiting our $35.0 million escrow payment.

(8)

Represents an $11,767 decrease in cash that will be used to partially fund the Triton acquisition.

(9)

Represents an increase of $1,700 in the net book value of fixed assets based on our preliminary allocation of the Triton purchase price.

(10)

Represents an increase in licenses and intangible assets based on the preliminary allocation of the Triton purchase price.

Licenses	$	829,100
Goodwill		221,450
Subscriber lists		106,000
Total valuation of acquired licenses and intangibles		1,156,550
Less current net book value of Triton's licenses and intangibles		(474,988	)
Pro forma adjustment	$	681,562

(11)

Represents an increase in deferred financing costs as a result of a new credit facility that will replace the existing credit facility.

Deferred financing costs related to new credit facility	$	18,000
Less write-off of deferred financing costs related to existing credit facility		(3,020	)
Pro forma adjustment	$	14,980

(12)

Represents an increase in long-term debt as a result of a new credit facility that will replace the existing credit facility.

Senior secured revolving credit facility	$	128,297
Senior secured term loan A		450,000
Senior secured term loan B		237,500
Senior secured term loan C		237,500
Senior subordinated debt		125,000
Total long term-debt		1,178,297
Elimination of Rural Cellular as adjusted debt		(125,000	)
Elimination of Triton pro forma debt		(463,916	)
Pro forma adjustment	$	589,381

(13)

Represents the conversion of 74 Class A and 80 Class B common shares owned by Telephone & Data Systems, Inc. to Class T convertible preferred stock at a price of $50.63, resulting in a total conversion of $7,780.

(14)

Represents the issuance of junior exchangeable preferred stock.

Gross proceeds from issuance of junior exchangeable preferred stock	$	110,000
Less deferred issuance costs		(3,760	)
Pro forma adjustment	$	106,240

(15)

Represents the issuance of $100.0 million of Class M preferred stock (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the sale of common stock offered hereby will reduce the amount of the Class M preferred stock issued to $100.0 million).

(16)

Represents the elimination of partners' capital on an adjusted basis.

SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts and operating data)

Rural Cellular

   The following tables set forth certain of our historical consolidated financial and operating data as of and for each of the five years in the period ended December 31, 1998 and the nine months ended September 30, 1998 and 1999. We derived consolidated financial data for each of the five years ended December 31 from our consolidated financial statements, which have been audited by Arthur Andersen LLP. The consolidated financial data for the nine months ended September 30, 1998 and 1999 are derived from our unaudited consolidated financial statements, which include all adjustments, consisting of normal recurring accruals, which our management considers necessary for a fair presentation of our financial position and results of operations for these periods.

   Operating results for the nine months ended September 30, 1998 and 1999 are not necessarily indicative of the results that may be expected for an entire year.

   The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

	Year Ended December 31															Nine Months Ended September 30
	1994			1995			1996			1997			1998			1998			1999
																(Unaudited)
Revenues:
Service	$	9,784		$	14,289		$	23,120		$	43,408		$	75,633		$	51,178		$	78,263
Roamer		3,897			4,562			6,413			9,475			20,199			13,577			33,310
Equipment		2,008			1,476			927			1,020			2,700			1,669			5,704
Total revenues		15,689			20,327			30,460			53,903			98,532			66,424			117,277
Operating expenses:
Network costs		3,293			4,974			6,731			11,578			18,877			13,335			14,352
Cost of equipment sales		2,214			1,914			1,375			2,807			5,968			4,012			8,145
Selling, general and administrative		6,570			7,700			13,575			25,225			39,156			25,811			39,318
Depreciation and amortization		2,426			3,249			5,539			12,458			26,532			17,523			29,549
Total operating expenses		14,503			17,837			27,220			52,068			90,533			60,681			91,364
Operating income		1,186			2,490			3,240			1,835			7,999			5,743			25,913
Other income (expense):
Interest expense		(1,195	)		(1,365	)		(280	)		(6,065	)		(19,060	)		(12,340	)		(20,207	)
Interest and dividend income		170			277			335			232			1,461			1,318			289
Other income (expense)		(37	)		(37	)		51			(350	)		(535	)		(645	)		(210	)
Minority interest		—			—			331			3,082			4,553			3,126			1,538
Other income (expense)		(1,062	)		(1,125	)		437			(3,101	)		(13,581	)		(8,541	)		(18,590	)
Income (loss) before income tax and extraordinary item		124			1,365			3,677			(1,266	)		(5,582	)		(2,798	)		7,323
Income tax (benefit) provision		(486	)		575			200			—			—			—			34
Income (loss) before extraordinary item		610			790			3,477			(1,266	)		(5,582	)		(2,798	)		7,289
Extraordinary item—early retirement of debt		—			—			—			—			(1,042	)		(1,042	)		—
Net income (loss)		610			790			3,477			(1,266	)		(6,624	)		(3,840	)		7,289
Preferred stock dividend		—			—			—			—			(9,090	)		(5,398	)		(11,765	)
Net income (loss) applicable to common shares	$	610		$	790		$	3,477		$	(1,266	)	$	(15,714	)	$	(9,238	)	$	(4,476	)
Net income (loss) per basic and diluted common share	$	0.11		$	0.13		$	0.41		$	(0.14	)	$	(1.76	)	$	(1.04	)	$	(0.50	)
Weighted average common shares outstanding, basic and diluted		5,522			5,983			8,509			8,853			8,916			8,893			9,029

SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except per share amounts and operating data)

	Year Ended December 31															Nine Months Ended September 30
	1994			1995			1996			1997			1998			1998			1999
																(Unaudited)
Balance sheet data:
Cash and cash equivalents	$	236		$	125		$	237		$	1,995		$	2,062		$	9,149		$	1,073
Property and equipment, net		16,479			23,517			41,935			77,920			131,714			119,753			128,764
Total assets		22,439			30,138			60,507			181,588			480,524			475,833			495,334
Total debt		15,117			19,123			8,492			128,000			298,851			298,874			307,143
Senior exchangeable preferred stock		—			—			—			—			132,201			124,316			143,767
Total shareholders' equity		4,668			5,458			34,996			33,731			19,279			25,720			15,572
Other financial data:
EBITDA(1):
Cellular	$	3,612		$	5,739		$	9,450		$	19,860		$	39,356		$	26,778		$	57,543
Wireless Alliance		—			—			(671	)		(5,567	)		(4,825	)		(3,512	)		(2,081	)
Total	$	3,612		$	5,739		$	8,779		$	14,293		$	34,531		$	23,266		$	55,462
EBITDA margin(1):
Cellular		23.0	%		28.2	%		31.0	%		41.7	%		44.9	%		45.9	%		52.0	%
Wireless Alliance		—			—			—			(75.9	)		(39.0	)		(37.9	)		(29.7	)
Capital expenditures:
Cellular	$	6,933		$	10,011		$	23,850		$	26,127		$	29,563		$	15,726		$	12,584
Wireless Alliance		—			—			364			8,801			13,300			8,230			3,110
Total	$	6,933		$	10,011		$	24,214		$	34,928		$	42,863		$	23,956		$	15,694
Roamer revenue as a percentage of adjusted revenue(2)		28.5	%		24.2	%		21.7	%		20.3	%		23.7	%		23.9	%		31.4	%
Ratio of earnings to combined fixed charges and preferred stock dividends(3)		1.10			2.00			11.43			0.75			0.44			0.47			0.86
Operating data:
Customers at end of period:
Cellular		17,402			26,764			45,094			84,600			186,892			175,847			217,689
Wireless Alliance–PCS		—			—			—			—			5,129			2,264			11,110
Wireless Alliance–Cellular		—			—			—			17,167			11,079			15,481			1,840
Other(4)		2,089			3,783			6,890			9,312			11,550			11,469			13,790
Total		19,491			30,547			51,984			111,079			214,650			205,061			244,429
Penetration(5):
Cellular		2.9	%		4.5	%		7.5	%		7.6	%		8.0	%		7.5	%		9.0	%
Wireless Alliance–PCS		—			—			—			—			0.7			0.3			1.6
Retention(6):
Cellular		99.2	%		99.0	%		98.7	%		98.4	%		98.5	%		98.6	%		98.4	%
Wireless Alliance–PCS		—			—			—			—			98.2			98.8			98.1
Average monthly revenue per customer(7):
Cellular		$84			$69			$66			$55			$52			$52			$55
Wireless Alliance–PCS		—			—			—			—			64			65			52
Acquisition cost per customer(8):
Cellular		$448			$395			$307			$403			$362			$393			$367
Wireless Alliance–PCS		—			—			—			—			565			525			518
Cell sites:
Cellular		55			64			72			121			233			204			257
Wireless Alliance–PCS		—			—			—			—			53			40			57

SELECTED FINANCIAL AND OPERATING DATA
Notes to Rural Cellular's Selected Financial and Operating Data

(1)

EBITDA is the sum of earnings before interest, taxes, depreciation and amortization and is utilized as a performance measure within the wireless industry. EBITDA should not be regarded as an alternative for other performance measures and should not be considered in isolation. EBITDA is not a measurement of financial performance under generally accepted accounting principles and does not reflect all expenses of doing business (e.g., interest expense, depreciation). Accordingly, EBITDA should not be considered as having greater significance than or as an alternative to net income or operating income as an indicator of operating performance or to cash flows as a measure of liquidity.

(2)

Determined for each period by dividing roamer revenue for such period by total revenues excluding equipment sales and Wireless Alliance revenues.

(3)

For purposes of computing the ratio of earnings to combined fixed charges and preferred stock dividends, earnings include earnings before extraordinary items and accounting changes, interest expense, amortization of deferred financing costs, taxes and capitalized interest. Fixed charges and preferred stock dividends consists of interest expense, amortization of deferred financing costs, capitalized interest and preferred stock dividends. The deficiency of earnings to combined fixed charges and preferred stock dividends totaled $1,540, $16,010, $9,534 and $4,630 for the years ended December 31, 1997 and 1998 and the nine months ended September 30, 1998 and 1999, respectively.

(4)

Comprised of prepaid cellular and paging customers.

(5)

Represents the ratio of cellular or PCS customers to total POPs at the end of the period.

(6)

Determined for each period by:

•

Dividing total cellular or PCS customers discontinuing service during the period by the average cellular or PCS customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two);

•

Dividing that result by the number of months in the period; and

•

Subtracting the result from one.

(7)

Determined for each period by:

•

Dividing the sum of access, airtime, roaming, long distance, features, connection, disconnection and other revenues for the period by average cellular or PCS customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two); and

•

Dividing that result by the number of months in the period.

(8)

Determined for each period by dividing selling and marketing expenses, cost of equipment sales net of equipment revenues, and depreciation of rental telephone equipment by the gross cellular or PCS customers added during the period.

SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except operating data)

Triton

   The following tables set forth certain of Triton and its predecessor's historical consolidated financial and operating data as of and for the years ended December 31, 1997 and 1998, for the period from January 1, 1998 through January 15, 1998, and the nine months ended September 30 1998 and 1999. We derived consolidated financial data for the year ended December 31, 1998 and the nine months ended September 30, 1999 from Triton's consolidated financial statements, which have been audited by Arthur Andersen LLP. We derived consolidated financial data for Triton's predecessor for the year ended December 31, 1997 and for the period from January 1, 1998 through January 15, 1998 from its consolidated financial statements, which have been audited by Arthur Andersen LLP. The consolidated financial data for the nine months ended September 30, 1998 are derived from Triton's unaudited financial statements, which include all adjustments, consisting of normal recurring accruals, which Triton's management considers necessary for a fair presentation of the financial position and financial results for the interim period.

   Operating results for the nine months ended September 30, 1998 and 1999 are not necessarily indicative of the results that may be expected for a full year.

   The data set forth below should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

	Predecessor						Triton
	Year Ended December 31, 1997			January 1- January 15, 1998			Year Ended December 31, 1998			Nine Months Ended September 30, 1998			Nine Months Ended September 30, 1999
										(Unaudited)
Revenues:
Service	$	12,793		$	556		$	31,464		$	18,515		$	61,053
Roamer		4,802			342			14,208			8,451			37,870
Equipment		981			66			2,605			1,722			4,744
Total revenues		18,576			964			48,277			28,688			103,667
Operating expenses:
Network costs		3,662			280			7,210			2,165			12,380
Cost of equipment sales		1,371			73			3,650			2,064			7,644
Selling, general and administrative		6,337			621			17,841			11,865			34,192
Nonrecurring compensation		—			—			—			—			53,954
Nonrecurring charges		—			—			—			—			624
Depreciation and amortization		984			46			17,950			9,893			32,993
Total operating expenses		12,354			1,020			46,651			25,987			141,787
Operating income (loss)		6,222			(56	)		1,626			2,701			(38,120	)
Other income (expense):
Interest expense		(687	)		—			(13,797	)		(9,913	)		(26,076	)
Interest and dividend income		666			9			—			—			283
Other income (expense)		—			—			—			2			—
Other income (expense)		(21	)		9			(13,797	)		(9,911	)		(25,793	)
Income (loss) before income tax		6,201			(47	)		(12,171	)		(7,210	)		(63,913	)
Income tax expense (benefit)		—			—			(115	)		—			3,524
Net income (loss)	$	6,201		$	(47	)	$	(12,056	)	$	(7,210	)	$	(67,437	)

SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except operating data)

	Predecessor						Triton
	Year Ended December 31, 1997			January 1- January 15, 1998			Year Ended December 31, 1998			Nine Months Ended September 30, 1998			Nine Months Ended September 30, 1999
										(Unaudited)
Balance sheet data:
Cash and cash equivalents	$	635		$	—		$	3,890		$	6,321		$	—
Property and equipment, net		7,868			—			48,822			45,635			90,788
Total assets		11,159			—			350,682			352,403			595,906
Total debt		2,510			—			261,500			259,500			463,916
Total shareholders' equity		7,447			—			66,821			71,687			46,475
Other financial data:
EBITDA(1)	$	7,206		$	(10	)	$	19,576		$	12,594		$	(5,127	)
EBITDA margin(1)		38.8	%		(1.0	)%		40.5	%		43.9	%		(4.9	)%
Capital expenditures	$	2,156		$	4		$	4,277		$	7,929		$	25,773
Roamer revenue as a percentage of adjusted revenue(2)		27.3	%		38.1	%		31.1	%		31.3	%		38.3	%
Operating data:
Customers at end of period		28,026			28,089			117,709			109,507			208,843
Penetration(3)		11.9	%		12.0	%		7.1	%		6.6	%		8.8	%
Retention(4)		98.6	%		98.6	%		98.3	%		98.3	%		98.2	%
Average monthly revenue per customer(5)	$	56		$	64		$	52		$	44		$	67
Acquisition cost per customer(6)		—			—		$	280		$	291		$	301
Cell sites		25			25			150			—			262

SELECTED FINANCIAL AND OPERATING DATA
Notes to Triton's Selected Financial and Operating Data

(1)

EBITDA is the sum of earnings before interest, taxes, depreciation and amortization and is utilized as a performance measure within the wireless industry. EBITDA should not be regarded as an alternative for other performance measures and should not be considered in isolation. EBITDA is not a measurement of financial performance under generally accepted accounting principles and does not reflect all expenses of doing business (e.g., interest expense, depreciation). Accordingly, EBITDA should not be considered as having greater significance than or as an alternative to net income or operating income as an indicator of operating performance or to cash flows as a measure of liquidity.

(2)

Determined for each period by dividing roamer revenue for such period by total revenues excluding equipment sales.

(3)

Represents the ratio of cellular customers to total POPs at the end of the period.

(4)

Determined for each period by

•

Dividing total cellular customers discontinuing service during the period by the average cellular customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two), and

•

Dividing that result by the number of months in the period, and

•

Subtracting the result from one.

(5)

Determined for each period by:

•

Dividing the sum of access, airtime, roaming, long distance, features, connection, disconnection, and other revenues for the period by average cellular customers for the period (customers at the beginning of the period plus customers at the end of the period, divided by two) and

•

Dividing that result by the number of months in the period.

(6)

Determined for each period by dividing selling and marketing expenses, cost of equipment sales net of equipment revenues, and depreciation of rental telephone equipment by the gross cellular customers added during the period.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with Rural Cellular and Triton's audited and unaudited financial statements and the notes thereto appearing elsewhere in this prospectus. The discussion contains forward-looking statements that involve risks and uncertainties.

Introduction

   We have materially expanded our business over the last three years through acquisitions. For example, the acquisitions of Unity Cellular, Atlantic Cellular, and Triton Cellular Partners in 1997, 1998, and 1999, respectively, approximately doubled our number of customers at the time of each transaction, on a pro forma basis. All acquisitions have been accounted for under the purchase method of accounting and, therefore, our historical results of operations include the results of operations for each acquired system, other than the Triton acquisition, subsequent to its respective acquisition date. We anticipate closing the Triton acquisition in the spring of 2000.

   Over the past three years, our financial performance, and the year-to-year comparability of such performance, has been affected by:

•

the acquisitions described below;



•

our development of Wireless Alliance; and



•

the issuance of our senior subordinated notes and senior exchangeable preferred stock to fund our growth.

Accordingly, we do not believe the discussion and analysis of our historical financial condition and results of operations set forth below are indicative nor should they be relied upon as an indicator of our future performance.

Acquisition and Joint Venture History

   We follow a disciplined strategy of acquiring and developing wireless systems, primarily in rural markets. Through September 30, 1999, we have entered into a joint venture to develop and offer personal communications services, or PCS, and have completed four acquisitions of cellular systems as described below:

•

In November 1996, we formed a joint venture named Wireless Alliance with an affiliate of Aerial Communications. We originally owned 51% of Wireless Alliance; as of June 1999, we increased our ownership to 70%, with an affiliate of Aerial Communications owning the remaining 30%.



•

Effective May 1997, we acquired the Maine wireless operations and assets of Unity Cellular Systems, Inc. and related cellular and microwave licenses from InterCel, Inc., for approximately $85.7 million.



•

Effective July 1998, we acquired the Vermont, New Hampshire, New York, and Massachusetts cellular telephone licenses, operations, and related assets of Atlantic Cellular Company L.P. and one of its subsidiaries, for approximately $262.5 million.



•

Effective August 1998, we acquired the outstanding stock of Western Maine Cellular, Inc., a wholly-owned subsidiary of Utilities, Inc., for approximately $7.5 million.



•

Effective February 1999, we acquired the outstanding stock of RGI Group, Inc., d/b/a Glacial Lakes Cellular 2000, for approximately $11.9 million.

Pending Acquisition

   In November 1999, we entered into an asset purchase agreement to acquire the cellular licenses, operations, and related assets of Triton Cellular Partners, L.P. and its affiliates for a purchase price of approximately $1.24 billion in cash, plus the assumption of specified liabilities.

   Under the agreement with Triton, we will acquire licenses to operate cellular systems in rural markets in the Northwest and South regions of the United States, with a total service area of approximately 152,000 square miles, and, as of September 30, 1999, covering a total population, or POPs, of 2.3 million and serving 209,000 customers.

   As of September 30, 1999, on a pro forma basis, after giving effect to the Triton acquisition, our markets cover 5.4 million POPs (4.7 million cellular POPs and 0.7 million PCS POPs), serving 427,000 cellular and 11,000 PCS customers.

   The cellular properties to be acquired from Triton include:

•

the Northwest region, consisting of the north central and southeastern regions of Washington and the northeast, south central, and eastern regions of Oregon; and



•

the South region, consisting of portions of the central, south central, and southwestern regions of Alabama, the northern region of Mississippi, and the western half of Kansas.

   The purchase price is subject to adjustment, based on the amount by which Triton's current assets exceed, or are less than, Triton's current liabilities on the closing date. We will assume Triton's current liabilities and all of Triton's obligations under contracts entered into in the ordinary course of business. We will not assume bank debt or long-term liabilities of Triton. In the event that, prior to closing, Triton breaches any representations, warranties, or covenants that would, individually or in total, reasonably be expected to have a material adverse effect on the business or operations of the cellular systems we are acquiring, we would have the right to terminate the agreement with Triton. Triton's representations and warranties do not survive the closing of the acquisition.

   Closing of the Triton acquisition is expected to occur in the spring of 2000 following the latest of:

•

Federal Communications Commission consent to the assignment of the Triton licenses;



•

the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act; and



•

the date on which all other conditions to closing set forth in the agreement with Triton have been satisfied, but in no event earlier than April 1, 2000.

   The agreement may be terminated by either party if closing has not occurred (for example, due to failure or delay in obtaining Federal Communications Commission or other regulatory approvals which are material to the transaction) on or before May 6, 2000.

   In connection with the Triton acquisition, we have agreed to exchange shares of Class T convertible preferred stock or a convertible debenture for shares of our Class A and Class B common stock held by Telephone & Data Systems, Inc. in order to reduce Telephone & Data Systems, Inc.'s holdings to 5%. This reduction is required under a Federal Communications Commission rule limiting the ownership of competing cellular licenses. An affiliate of Telephone & Data Systems, Inc. operates licensees that compete with licenses that we will acquire in two rural service areas in Oregon.

General

   Rural Cellular's principal operating objective is to increase revenues and profitability through the acquisition and development of new markets and increased penetration in existing markets. We believe that owning and operating wireless systems in rural markets provides strong growth opportunities because these systems have lower penetration rates, a higher proportion of roamer revenues, and less competition for customers than wireless systems located in larger metropolitan areas due to lower population density.

   We have a disciplined strategy of acquiring cellular systems primarily in rural markets and focus on acquiring underdeveloped cellular systems that include a high concentration of highway corridors and, as a result, tend to have a significant amount of roamer activity. We intend to pursue acquisitions to the extent they enhance or extend our network.

   We operate our wireless systems using a decentralized management approach that allows us to achieve substantial marketing and distribution benefits, as well as operating efficiencies. We develop a strong local presence in the communities we serve, which enhances our competitive position and allows us to tailor our products and services to meet our customers' specific needs. We believe that our ability to customize our products and services results in greater customer satisfaction, customer retention, and market penetration. We also believe that we will be able to continue to maintain high retention rates due in part to our territory manager distribution philosophy, by offering communication service packages and value-added features anticipating customer needs, and by providing high quality and knowledgeable customer service. For the nine months ended September 30, 1999, we experienced an average monthly cellular retention rate of 98.4%.

   We have continued to penetrate our existing Midwest, Atlantic, and Maine regions through innovative sales initiatives, resulting in increased revenues in the nine months ended September 30, 1999, as compared to the same period in the prior year, and intend to roll out our successful marketing strategies throughout our existing systems and newly acquired systems, including systems acquired in the Triton acquisition. As a result of these strategies, we have been able to generate strong internal growth and improve the operating and financial performance of our systems.

   Our revenues primarily consist of service, roamer and equipment revenues, each of which is described below:

•

Service revenues include monthly access charges, charges for airtime used in excess of the time included in the service package purchased, long distance charges derived from calls placed by our customers as well as cellular and paging equipment lease revenues. Total service revenues are affected by the number of customers, pricing, and number of minutes used. Additional charges include activation fees and charges for such features as voicemail, call waiting, and call forwarding.



•

Roamer revenues consist of airtime, long distance, and service fees charged for providing service to customers of other cellular systems that place or receive a call within our cellular service area and our customers that place or receive a call outside of our cellular service area. The per minute rate paid by a roamer, or the intercarrier exchange rate, is determined by an agreement between Rural Cellular and the roamer's cellular carrier. We have agreements with cellular licensees in other cellular service areas that allow us to provide service to our customers calling from or receiving calls in these territories at favorable rates.



•

Equipment revenues include cellular and paging equipment, accessory sales to customers, and network equipment reselling. Within certain markets, we rent equipment to customers as an alternative to selling such cellular equipment. This program has reduced equipment sales as a percentage of total revenues in these markets; however, we believe our equipment rental policy enhances customer retention and market penetration, reduces acquisition cost, and increases revenue per customer.

   Our operating expenses include network costs, costs of equipment sales, selling, general and administrative expenses and depreciation and amortization, each of which is described below:

•

Network costs include switching and transport expenses and the expenses associated with the maintenance and operation of our wireless network facilities, as well as charges from other service providers for resold minutes and services.



•

Cost of equipment sales include the costs associated with telephone equipment and accessories sold to customers. In recent years, we and other cellular providers have increased the use of discounts on phone equipment as competition between service providers has intensified. As a result, we have incurred, and expect to continue to incur, losses on equipment sales and increased marketing and selling costs per gross additional customer. We expect to continue these discounts and promotions because we believe that they will result in increased revenues from increases in the number of our cellular customers.



•

Selling, general and administrative includes salaries, benefits, and operating expenses such as marketing, commissions, customer support, accounting, administration, and billing.



•

Depreciation and amortization represents the costs associated with the depreciation of our fixed assets and the amortization of our intangible assets, primarily cellular license acquisition costs, goodwill, and customer lists. The high level of depreciation and amortization is associated with our acquisition activities and the build-out and upgrade of our network.

   In addition to the operating expenses discussed above, we also incur other income (expense), primarily interest expense related to our financing and acquisition activities.

•

Interest expense results from our borrowings under our credit facilities and our senior subordinated notes, the proceeds of which were used to finance our acquisitions and develop our systems.



•

Other income (expense) includes our minority partner's absorption of Wireless Alliance losses. We have currently realized the maximum benefit from the allocation of losses to our minority partner and will receive no further benefit until Wireless Alliance generates income.

   Preferred stock dividends are related to our issuance in May 1998 of 125,000 shares of 11³/8% senior exchangeable preferred stock in conjunction with our acquisition of Atlantic Cellular. Dividends on the senior exchangeable preferred stock are cumulative, are payable quarterly, and may be paid, at our option, on any dividend payment date occurring on or before May 15, 2003, either in cash or by the issuance of additional shares of senior exchangeable preferred stock having an aggregate liquidation preference equal to the amount of such dividends.

   Wireless Alliance is our joint venture with an affiliate of Aerial Communications. Our policies and practices in accounting for Wireless Alliance are the same as those we use in our other regions. We follow generally accepted accounting principles in accounting for the minority ownership and eliminate all inter-company transactions on consolidation. Any allocable Wireless Alliance losses are first applied to reduce the carrying value of the minority interest in the joint venture and thereafter consolidated with Rural Cellular's operating results. As of September 30, 1999, the minority ownership interest had been fully used to offset Wireless Alliance losses.

   EBITDA represents the sum of earnings before interest, taxes, depreciation and amortization. EBITDA:

•

is not intended to be a performance measure that should be regarded as an alternative either to operating income or net income as an indicator of operating performance or to cash flows as a measure of liquidity;



•

is not intended to represent funds available for debt service, dividends, reinvestment, or other discretionary uses; and



•

should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles.

   EBITDA is included in this prospectus because our management believes that EBITDA is a meaningful measurement commonly used in the wireless industry and by the investment community. Our definition of EBITDA may not be identical to similarly titled measures reported by other companies.

Results of Operations

   The following table presents certain consolidated statement of operations data as a percentage of total revenues as well as other operating data for the periods indicated.

	Year Ended December 31						Nine Months Ended September 30
	1996		1997		1998		1998		1999
REVENUES:
Service	75.9	%	80.5	%	76.8	%	77.0	%	66.7	%
Roamer	21.1		17.6		20.5		20.5		28.4
Equipment	3.0		1.9		2.7		2.5		4.9
Total revenues	100.0		100.0		100.0		100.0		100.0
OPERATING EXPENSES:
Network costs	22.1		21.5		19.2		20.1		12.2
Cost of equipment sales	4.5		5.2		6.1		6.0		7.0
Selling, general and administrative	44.6		46.8		39.7		38.9		33.5
Depreciation and amortization	18.2		23.1		26.9		26.4		25.2
Total operating expenses	89.4		96.6		91.9		91.4		77.9
OPERATING INCOME	10.6		3.4		8.1		8.6		22.1
OTHER INCOME (EXPENSE):
Interest expense	(0.9	)	(11.3	)	(19.4	)	(18.6	)	(17.2	)
Interest and dividend income	1.1		0.4		1.5		2.0		0.2
Other income (expense)	0.2		(0.6	)	(0.5	)	(1.0	)	(0.2	)
Minority interest	1.1		5.7		4.6		4.7		1.3
Other income (expense)	1.5		(5.8	)	(13.8	)	(12.9	)	(15.9	)
INCOME (LOSS) BEFORE INCOME TAX AND EXTRAORDINARY ITEM	12.1		(2.4	)	(5.7	)	(4.3	)	6.2
INCOME TAX PROVISION	0.7		—		—		—		—
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM	11.4		(2.4	)	(5.7	)	(4.3	)	6.2
EXTRAORDINARY ITEM—EARLY RETIREMENT OF DEBT	—		—		(1.0	)	(1.6	)	—
NET INCOME (LOSS)	11.4		(2.4	)	(6.7	)	(5.9	)	6.2
PREFERRED STOCK DIVIDEND	—		—		(9.2	)	(8.1	)	(10.0	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	11.4	%	(2.4	)%	(15.9	)%	(14.0	)%	(3.8	)%
EBITDA MARGIN	28.8	%	26.5	%	35.0	%	35.0	%	47.3	%

Nine Months Ended September 30, 1999 and 1998

Revenues

   Service Revenues. Service revenues for the nine months ended September 30, 1999 increased 52.9% to $78.3 million from $51.2 million in 1998. The revenue growth reflects the effect of 23,000 additional customers added through increased penetration in existing markets and our acquisitions of Atlantic Cellular, Western Maine Cellular, and Glacial Lakes Cellular. We expect service revenues to increase in the future primarily as a result of future acquisitions, further anticipated industry-wide growth in subscribers, and expansion of our coverage. During the nine months ended September 30, 1999, Wireless Alliance generated $6.5 million in service revenues.

   Roamer Revenues. Roamer revenues for the nine months ended September 30, 1999 increased 145.4% to $33.3 million from $13.6 million in 1998. Roamer revenues have increased due to the activation of additional cell sites, acquisitions of new service areas, and increased industry-wide wireless usage resulting from the now popular single rate calling plans. Partially offsetting the effect of increases in roaming minutes of use during the nine months ended September 30, 1999 was the impact of lower roaming rates with two major roaming partners. Wireless Alliance generated $334,000 in PCS roamer revenue during the nine months ended September 30, 1999.

   Equipment Revenues. Equipment revenues for the nine months ended September 30, 1999 increased 241.8% to $5.7 million from $1.7 million in the comparable period of the prior year. This growth reflects network equipment reselling and increases in direct phone sales programs.

   Key Revenue Indicators. Our cellular penetration increased to 9.0% at September 30, 1999 as compared to 7.5% at September 30, 1998. Wireless Alliance PCS penetration increased to 1.6% at September 30, 1999 as compared to 0.3% at September 30, 1998. Cellular average monthly revenue per customer for the nine months ended September 30, 1999 increased to $55, as compared to $52 in the comparable period of the prior year. Wireless Alliance average monthly revenue per customer for the nine months ended September 30, 1999 decreased to $52, as compared to $65 in the comparable period of the prior year.

Operating Expenses

   Network Costs. Network costs for the nine months ended September 30, 1999, have increased 7.6% over the comparable period of the prior year to $14.4 million from $13.3 million. Wireless Alliance network costs for the nine months ended September 30, 1999 decreased to $3.5 million from $7.1 million in the comparable period of the prior year. As a percentage of total revenues, network costs for the nine months ended September 30, 1999 decreased to 12.2% from 20.1% in the comparable period of the prior year. The increase in network costs resulted primarily from expenses incurred in our Atlantic region, which more than offset Wireless Alliance network cost reductions. We expect consolidated network costs to continue to decline as a percentage of revenues as revenues continue to outpace the fixed components of network costs.

   Cost of Equipment Sales. Cost of equipment sales for the nine months ended September 30, 1999 increased 103.0% over the comparable period of the prior year to $8.1 million from $4.0 million. As a percentage of revenue, cost of equipment sales for the nine months ended September 30, 1999 increased to 7.0% as compared to 6.0% in the comparable period of the prior year. This growth was primarily due to the cost of resold network equipment combined with an increase in the number of phones sold to customers.

   Selling, General and Administrative. Selling, general and administrative expenses for the nine months ended September 30, 1999 increased 52.3% over the comparable period of the prior year to $39.3 million from $25.8 million. The increase in selling, general and administrative expenses resulted primarily from additional costs related to the operation of our Atlantic region. Reflecting certain economies achieved through the acquisition of the Atlantic assets and the relatively fixed nature of selling, general and administrative expenses, selling, general and administrative expenses decreased as a percentage of total revenues for the nine months ended September 30, 1999 to 33.5% as compared to 38.9% in the comparable period of the prior year. Due to the seasonality of our revenue stream, selling, general and administrative expenses as a percentage of total revenues has typically been higher in the fourth quarter as compared to the first three quarters.

   Depreciation and Amortization. Depreciation and amortization expense for the nine months ended September 30, 1999 increased 68.6% over the comparable period of the prior year to $29.6 million from $17.5 million. The increase reflects the depreciable assets acquired as part of the Atlantic Cellular acquisition, our continued construction and acquisition efforts, and our investments in network facilities, including our launch of PCS services through Wireless Alliance, and rental equipment.

Other Income (Expense)

   Interest Expense. Interest expense for the nine months ended September 30, 1999 increased 63.8% to $20.2 million as compared to $12.3 million in the comparable period of the prior year. The increase resulted from higher average borrowings under the existing credit facility and interest related to the senior subordinated notes. Borrowings under the existing credit facility and senior subordinated notes were used to finance the acquisitions of Atlantic Cellular and Western Maine Cellular, the continued build-out of additional cell sites, and other growth initiatives.

   Other Income. Other income for the nine months ended September 30, 1999 includes a decrease of 50.8% in the minority partner's absorption of Wireless Alliance losses, to $1.5 million from $3.1 million in the comparable period of the prior year.

Preferred Stock Dividends

   Preferred Stock Dividends. Preferred stock dividends increased 117.9% to $11.8 million in the nine months ended September 30, 1999 as compared to $5.4 million for the comparable period in 1998. The increase primarily resulted from the senior exchangeable preferred stock having been outstanding for a full nine months in 1999, versus less than four months in the same period in 1998. The preferred stock dividends were paid by issuing additional shares of senior exchangeable preferred stock.

EBITDA

   EBITDA. EBITDA increased 138.4% to $55.5 million in the nine months ended September 30, 1999 as compared to $23.3 million for the comparable period in 1998. For the nine months ended September 30, 1999, our cellular operations generated $57.5 million in EBITDA, which was partially offset by Wireless Alliance's negative EBITDA of $2.1 million. We expect that Wireless Alliance will continue to have negative EBITDA in the remaining quarter of 1999.

Years Ended December 31, 1998 and 1997

Revenues

   Service Revenues. Service revenues for the year ended December 31, 1998 increased 74.2% to $75.6 million from $43.4 million in 1997. This growth was primarily due to a 26.1% increase in customers from existing markets and a 67.1% increase in customers through the acquisition of Atlantic Cellular. During the year ended December 31, 1998, Wireless Alliance generated service revenues of $12.2 million.

   Roamer Revenues. Roamer revenues for the year ended December 31, 1998 increased 113.2% to $20.2 million from $9.5 million in 1997. Roamer revenues have increased due to the activation of additional cell sites and acquisitions of new service areas. Wireless Alliance generated an immaterial amount in roamer revenues during 1998 and had no roamer revenues in 1997 because it was exclusively engaged in reselling cellular services.

   Equipment Revenues. Equipment revenues for the year ended December 31, 1998 increased 164.7% to $2.7 million from $1.0 million in 1997. This growth was primarily due to an increase in the number of customers, as a result of our acquisition of Atlantic Cellular, who purchase their phones as opposed to the number of customers who participate in the equipment rental program currently popular in our Midwest region.

   Key Revenue Indicators. Our cellular penetration as of December 31, 1998 increased to 8.0% from 7.6% as of December 31, 1997. Reflecting its market launch, Wireless Alliance PCS penetration reached 0.7% for 1998. Cellular average monthly revenue per customer for the year ended December 31, 1998 decreased to $52 as compared to $55 in 1997. Wireless Alliance PCS average revenue per customer was $64 in 1998.

Operating Expenses

   Network Costs. Network costs for the year ended December 31, 1998, increased 63.0% to $18.9 million from $11.6 million in 1997. The increase in network costs resulted primarily from expenses incurred by Wireless Alliance and our Maine and Atlantic regions, which more than offset network cost reductions in our Midwest operations. However, as a percentage of total revenues, network costs decreased to 19.2% in 1998 from 21.5% in 1997. Contributing to the reduction of network costs in the Midwest service area was the completed installation of our switch in the third quarter of 1997, thereby reducing our network costs for switching services. Network costs for Wireless Alliance increased to $9.3 million for the year ended December 31, 1998, from $6.0 million in 1997. The increase is attributable to additional network costs associated with an increase in the average number of cellular reselling customers.

   Cost of Equipment Sales. Cost of equipment sales for the year ended December 31, 1998 increased 112.6% to $6.0 million from $2.8 million in 1997. As a percentage of total revenues, cost of equipment sales for the year ended December 31, 1998 increased to 6.1% as compared to 5.2% in the comparable period of the prior year. This growth primarily reflects our Atlantic region customers who prefer to purchase their phones as opposed to utilizing the equipment rental program currently popular in our Midwest region.

   Selling, General and Administrative. Selling, general and administrative expenses for the year ended December 31, 1998 increased 55.2% to $39.2 million from $25.2 million in 1997. The increase in selling, general and administrative expenses over the prior year resulted primarily from additional costs related to the acquisition of Atlantic Cellular in July 1998 and from operating our Maine region during all of 1998. As a percentage of total revenues, selling, general and administrative expenses decreased to 39.7% in 1998 from 46.8% in 1997, reflecting operating efficiencies achieved through the integration of our Atlantic operation.

   Depreciation and Amortization. Depreciation and amortization expense for the year ended December 31, 1998 increased 113.0% to $26.5 million from $12.5 million in 1997. The increase reflects our continued construction and acquisition efforts and our investments in network facilities and rental equipment. Specifically contributing to the increase was the depreciation relating to the construction of 23 additional cell sites in our Midwest region, an additional 89 cell sites from the acquisition of Atlantic Cellular, and the activation of 53 Wireless Alliance PCS cell sites. In addition, license and other intangible asset amortization resulting from acquisitions increased to $8.1 million for the year ended December 31, 1998 from $1.5 million in the prior year.

Other Income (Expense)

   Interest Expense. Interest expense for the year ended December 31, 1998 increased to $19.1 million from $6.1 million in 1997. The increase in interest expense resulted from higher average borrowings under our credit facilities and interest related to the senior subordinated notes used to finance the acquisitions of Atlantic Cellular and Western Maine Cellular, the construction of 23 cell sites, and other growth initiatives.

   Other Income. Other income includes an increase in the year ended December 31, 1998 in the minority partner's absorption of Wireless Alliance losses.

Extraordinary Item

   In May 1998, we repaid approximately $140.0 million of the outstanding principal amount under our $160.0 million credit facility utilizing the proceeds from our issuance of $125.0 million in senior subordinated notes and $125.0 million in senior exchangeable preferred stock. Accordingly, we recognized an extraordinary loss of approximately $1.0 million related to the early retirement of debt representing the unamortized debt issuance costs.

Preferred Stock Dividends

   Preferred Stock Dividends. Preferred stock dividends of $9.1 million were paid in the year ended December 31, 1998. The preferred stock dividends were incurred as a result of our issuance of 125,000 shares of senior exchangeable preferred stock in May 1998. The preferred stock dividends were paid by issuing additional shares of senior exchangeable preferred stock.

EBITDA

   EBITDA. EBITDA for the year ended December 31, 1998 increased 141.6% to $34.5 million as compared to $14.3 million in 1997. In 1998, our cellular operations generated $39.4 million in EBITDA, which was partially offset by Wireless Alliance's negative EBITDA of $4.8 million due to the significant costs associated with customer growth.

Years Ended December 31, 1997 and 1996

Revenues

   Service Revenues. Service revenues for the year ended December 31, 1997 increased 87.8% to $43.4 million from $23.1 million in 1996. This growth was primarily due to the increase in the number of customers. Customer growth in existing markets accounted for approximately 25% of the increase in customers, while newly acquired or developing markets accounted for the other 75%. Newly acquired or developing markets include customers gained through the acquisition of our Maine region and the formation of Wireless Alliance. In 1997, Wireless Alliance generated service revenues of $7.3 million.

   Roamer Revenues. Roamer revenues for the year ended December 31, 1997 increased 47.7% to $9.5 million from $6.4 million in 1996, reflecting the increase in the number of markets served. Markets have increased as a result of the activation of additional cell sites and acquisitions of new service areas.

   Equipment Revenues. Equipment revenues for the year ended December 31, 1997 increased 10.0% to $1.0 million from $927,000 in 1996. This growth reflects an increase in customers, acquired through the acquisition of our Maine region, purchasing their cellular handsets and equipment as compared to our Midwest customers who more frequently rent them.

   Key Revenue Indicators. Our cellular penetration as of December 31, 1997 increased to 7.6% from 7.5% at December 31, 1996. Cellular average monthly revenue per customer for the year ended December 31, 1997 decreased to $55 as compared to $66 in 1996.

Operating Expenses

   Network Costs. Network costs for the year ended December 31, 1997 increased 72.0% to $11.6 million from $6.7 million in 1996 and improved as a percentage of total revenues to 21.5% in 1997 from 22.1% in 1996. The increase in network costs resulted primarily from expenses incurred by Wireless Alliance and in Maine, which more than offset network cost reductions in our Midwest operations. Contributing to the reduction of network costs in the Midwest service area was the substantial completion in late 1996 of our digital microwave network, which reduced our reliance on third-party assistance in connecting cell site communication to the switch. In addition, we completed installation of our own switch in the third quarter of 1997, thereby reducing our network costs for switching services. Network costs for Wireless Alliance increased to $6.0 million in 1997 from $220,000 in 1996. The increase is attributable to additional network costs associated with increased customers.

   Cost of Equipment Sales. Cost of equipment sales for the year ended December 31, 1997 increased 104.1% to $2.8 million from $1.4 million in 1997. As a percentage of total revenues, cost of equipment sales for the year ended December 31, 1997 increased to 5.2% as compared to 4.5% in the comparable period of the prior year. This growth was primarily due to our recently acquired Maine customers purchasing their phones as opposed to renting them through our phone rental program currently popular in the Midwest region.

   Selling, General and Administrative. Selling, general and administrative expenses for the year ended December 31, 1997 increased 85.8% to $25.2 million from $13.6 million in 1996. The increase in selling, general and administrative expenses over the prior year results primarily from additional costs in Maine and a $6.2 million increase in costs of Wireless Alliance.

   Depreciation and Amortization. Depreciation and amortization expense for the year ended December 31, 1997 increased 124.9% to $12.5 million from $5.5 million in 1996. The increase reflects our continued construction and acquisition efforts and our investment in network facilities, including our newly installed switch, and rental equipment. Contributing to the increase was the depreciation relating to the construction of 15 additional cell sites and the acquisition of 35 cell sites in Maine. In addition, we shortened the depreciable life from three years to two years for new rental telephones placed in service during 1997.

Other Income (Expense)

   Interest expense. Interest expense for the year ended December 31, 1997 increased to $6.1 million from $280,000 in 1996. The increase in interest expense was a result of higher average borrowings to finance the acquisition of our Maine region, the construction of 15 cell sites for our cellular network, and other growth initiatives.

   Other Income. Other income includes an increase in the year ended December 31, 1997 in the minority partner's absorption of losses of Wireless Alliance.

EBITDA

   EBITDA. EBITDA for the year ended December 31, 1997 increased 62.8% to $14.3 million as compared to $8.8 million in 1996. In 1997, our cellular operations generated $19.9 million in EBITDA, which was partially offset by Wireless Alliance's negative EBITDA of $5.6 million due to the significant costs associated with its initial customer growth.

Liquidity and Capital Resources

   Our primary liquidity requirements are for working capital, capital expenditures, debt service, acquisitions, and customer growth. In the past we have met these requirements through cash flow from operations, sales of our common and preferred stock, borrowings under our credit facility, and issuance of our senior subordinated notes. Our existing credit facility provides for borrowings up to $300.0 million. As of December 31, 1998 and September 30, 1999, we had $173.0 million and $181.0 million, respectively, outstanding under our credit facility. Under the existing credit facility, amounts may be borrowed, subject to mandatory repayments, or repaid at any time through maturity, provided that the outstanding borrowings do not exceed the total amount available under the existing credit facility.

   In connection with the Triton acquisition, we intend to enter into a new credit facility, which will provide for up to $1.2 billion in borrowing capacity. We believe that the funds available under this facility, together with the proceeds of the preferred and common stock offerings and the issuance of up to $100.0 million in Class M preferred stock (we have received a commitment for the purchase of up to $200.0 million of Class M preferred stock, but anticipate that the proceeds from the common stock offering will reduce the amount issued to $100.0 million), and cash from operations, will be sufficient to fund the Triton acquisition, repay amounts owing under the existing credit facility, and fund capital expenditures and operating expenses through fiscal 2000. We anticipate that after the Triton acquisition we will have $146.7 million available under the new credit facility. In the event that the Triton acquisition does not close, we will not enter into the new credit facility and will be required to redeem the junior exchangeable preferred stock. In that event, the funds available under our existing credit facility and proceeds from the senior exchangeable preferred and common stock offerings will be adequate to fund anticipated capital expenditures and operations. Capital expenditures for 2000 are expected to be approximately $40.0 million (including $3.0 million for Wireless Alliance and $7.6 million for Triton).

   Net cash provided by operating activities was $26.1 million for the nine months ended September 30, 1999. Adjustments to the $7.3 million net income to reconcile to net cash provided by operating activities included $29.5 million in depreciation and amortization and a $9.3 million increase in accounts receivable.

   Net cash used in investing activities for the nine months ended September 30, 1999 was $36.1 million. The principal uses of cash included our $11.9 million acquisition of Glacial Lakes Cellular and $15.7 million in purchases of property and equipment, of which $3.1 million was attributable to Wireless Alliance capital expenditures. These purchases reflect our continued expansion of our existing cellular coverage and the continued upgrading of existing cell sites and switching equipment. In addition, one of our affiliates was a successful bidder in the auction of local multi-point distribution system licenses, acquiring 13 licenses at a cost of $7.0 million, and was a successful bidder in the PCS C block license auction, acquiring the license for the St. Cloud, Minnesota basic trading area for $1.6 million.

   Net cash provided by financing activities was $9.0 million for the nine months ended September 30, 1999, consisting primarily of $8.0 million in additional borrowings under the $300.0 million credit facility, net of a partial repayment of $16.0 million.

   Net cash provided by operating activities was $28.6 million for the year ended December 31, 1998. Adjustments to the $6.6 million net loss to reconcile to net cash provided by operating activities included $26.5 million in depreciation and amortization and a $9.1 million increase in accounts payable, partially offset by a $4.5 million decrease in minority interest.

   Net cash used in investing activities for the year ended December 31, 1998 was $313.2 million. The principal uses of cash included our $270.0 million acquisition of the assets of Atlantic Cellular and all of the issued and outstanding stock of Western Maine Cellular and purchases of property and equipment of $41.5 million, of which $13.3 million was attributable to Wireless Alliance capital expenditures. These purchases reflect the construction and launch of Wireless Alliance's PCS network, expansion of existing coverage in our Midwest region, and the continued upgrading of existing cell sites and switching equipment.

   Net cash provided by financing activities was $284.7 million for the year ended December 31, 1998. Financing activities for such period consisted primarily of the placement in May 1998 of $125.0 million of senior subordinated notes and 125,000 shares of senior exchangeable preferred stock. The net proceeds were used to repay a portion of indebtedness and to finance the acquisitions of Atlantic Cellular and Western Maine Cellular.

OTHER MATTERS

Seasonality

   Somewhat offset by the higher year round roamer revenues generated in our Atlantic region, we experience seasonal fluctuations in revenues and operating income (loss). Our average monthly roamer revenue per cellular customer increases during the second and third calendar quarters. This increase reflects greater usage by our roamer customers who travel in our cellular service area for weekend and vacation recreation or work in seasonal industries. Because our cellular service area includes many seasonal recreational areas, we expect that roamer revenues will continue to fluctuate seasonally more than service revenues. With the Triton acquisition, we will cover a more diverse geographic area, and we anticipate that this diversification will reduce the effects of seasonality on our operating results.

	1999 Quarter Ended
	March 31		June 30		September 30
	(in thousands, except for customer data)
Total revenues	$	32,165	$	38,170	$	46,942
Operating income		3,720		8,098		14,095
EBITDA		13,446		18,025		23,991
Average monthly revenue per cellular customer		$47		$54		$63

	1998 Quarter Ended
	March 31			June 30		September 30		December 31
	(in thousands, except for customer data)
Total revenues	$	14,797		$	17,672	$	33,955	$	32,108
Operating income (loss)		(524	)		364		5,903		2,256
EBITDA		3,694			5,211		14,361		11,266
Average monthly revenue per cellular customer		$46			$53		$57		$51

Year 2000 Matters

   Prior to January 1, 2000, our Y2K project team, staffed with subject matter experts, evaluated our computerized systems to ensure that our business and operational systems would be Y2K ready. As a result, we believe all of our mission critical software and hardware were remedied and made Y2K ready.

   Our cellular network has continued to function without service affecting outages due to Y2K problems. However, some network equipment suppliers were and/or continue to be unwilling or unable to give unqualified warranties that network equipment is Y2K compliant.

   The terms and conditions under which we provide cellular and paging services to our customers provide that we are not liable for any consequential or incidental damages to our customers. Service affecting outages have occurred in limited geographic areas in the past and we have not been found liable to any person for damages in excess of the limitations imposed by the terms and conditions of service. We believe it is unlikely that an outage related to Y2K readiness would lead to a different result, but we cannot assure you that our liability will be limited to that extent. As we have not experienced any outages related to Y2K, we do not anticipate that any litigation involving us would arise as a result of Y2K readiness issues.

   As the year 2000 progresses, we may experience problems associated with the year 2000 that have not yet been discovered. For example, due to the timing of our billing cycles, we have not completed an entire monthly billing cycle since December 31, 1999. We have tested our billing systems and we do not anticipate significant problems; however, a billing system interruption could have a material impact on the receipt of customer payments.

   We continue to monitor and test our systems to identify and correct any problems. Our Y2K project team will remain in place at least through the first quarter of 2000.

Quantitative and Qualitative Disclosures About Market Risk

   Incorporated by reference to our report on Form 10-K for the year ended December 31, 1998, and our report on Form 10-Q for the quarter ended September 30, 1999.

Forward-Looking Information

   Forward-looking statements herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. A number of factors could cause actual results, performance, achievements by us, or industry results to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, our ability to respond to the competitive environment in the wireless and telecommunications industries, changes in economic conditions in general and in our business, changes in legislation and regulations applicable to our business, demographic changes, changes in prevailing interest rates and the availability and terms of financing to fund the anticipated growth of our business, our ability to attract and retain qualified personnel, our significant indebtedness, our ability to achieve our growth plans, potential problems related to our Y2K readiness or the Y2K readiness of parties with whom we do business, and changes in our acquisition and capital expenditure plans. Investors are cautioned that all forward-looking statements involve risks, uncertainties, and assumptions

   In addition, such forward-looking statements are necessarily dependent upon assumptions, estimates, and data that may be incorrect or imprecise and involve known and unknown risks, uncertainties, and other factors. Accordingly, any forward-looking statements included herein do not purport to be predictions of future events or circumstances and may not be realized. All subsequent written and oral forward-looking statements attributable to Rural Cellular Corporation or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

THE WIRELESS COMMUNICATIONS INDUSTRY

Overview

   Wireless communications systems use a variety of radio frequencies to transmit voice and data. Broadly defined, the wireless communications industry includes one-way radio applications, such as paging services, and two-way radio applications, such as cellular telephones, personal communications services and enhanced specialized mobile radio networks. Historically, each application has been licensed and operated in a distinct radio frequency block.

   The following table sets forth domestic wireless industry statistics (cellular, personal communications services, and enhanced specialized mobile radio) derived from data survey results published semi-annually by the Cellular Telecommunications Industry Association. These statistics represent results for the industry as a whole. In general, rural markets, where we concentrate our wireless operations, were licensed later than urban markets by the Federal Communications Commission and, accordingly, have shorter operating and financial histories and, therefore, tend to have lower penetration rates than those shown below.

	Year Ended December 31
																			June 30, 1999
	1993			1994			1995			1996			1997			1998
Total service revenues (in billions)	$	10.9		$	14.2		$	19.1		$	23.6		$	27.5		$	33.1		$	19.4
Subscribers at end of period (in millions)		16.0			24.1			33.8			44.0			55.3			69.2			76.3
Subscriber growth		45.1	%		50.8	%		40.0	%		30.4	%		25.6	%		25.1	%		25.4%	(1)
Average monthly service revenues per subscriber, excluding roaming revenues	$	58.74		$	51.48		$	47.59		$	44.66		$	41.12		$	39.66		$	39.97
Average monthly revenues per subscriber, including roaming revenues	$	67.13		$	59.08		$	54.91		$	50.61		$	46.11		$	44.35		$	44.37
Penetration at end of period		6.2	%		9.4	%		13.0	%		16.3	%		20.7	%		25.7	%		27.9	%

(1)

As compared to June 30, 1998.

   Although cellular telephones have remained the technology of choice for wireless communications, potential users of cellular systems may find their communications needs satisfied by other current and developing technologies, particularly broadband personal communications services. Personal communications services operators providing digital communication technology may compete with cellular service with regard to rates, enhanced privacy, and additional features such as electronic mail and built-in paging. One-way paging or beeper services that feature voice message and data display as well as tones may be adequate for potential customers who do not need to speak to the caller. In the future, cellular service may also compete more directly with traditional landline telephone service providers.

Cellular

   Since its introduction in 1983, cellular service has grown dramatically and now dominates the wireless communications market. Cellular communication service is a form of telecommunication capable of providing high quality, high capacity voice and data communications to and from vehicle-mounted and hand-held radio telephones. Cellular communication systems generally offer customers the features offered by the most technologically advanced landline telephone services. Two significant features of cellular communication systems are frequency reuse, which enables the simultaneous use of the same frequency in two adequately separated cells, and call handoff. A cellular communication system's frequency reuse and call handoff features result in highly efficient use of available frequencies and enable cellular communication systems to process more simultaneous calls and service more users over a greater area than conventional mobile communication systems.

   Cellular communication technology is based upon the division of a given market area into a number of smaller geographic areas or cells. Each cell has a base station or cell site that is equipped with a relatively low power transmitter, a receiver, and other equipment that communicates by radio signal with cellular equipment located within range of the cell. Cells have a maximum operating range of up to 25 miles. The standard operating range is four to ten miles. Cells are typically designed on a grid, although terrain factors, including natural and man-made obstructions, signal coverage patterns and capacity constraints may result in irregularly shaped cells and overlaps or gaps in coverage.

   Each cell site is connected by microwave link or telephone line to a switch. Because cellular communications systems are fully interconnected with the landline telephone network and long distance systems, customers can receive and originate both local and long distance calls from their cellular equipment on a worldwide basis. When a customer in a particular cell dials a number, the cellular equipment sends the call by radio signal to the cell's transmitter-receiver, which in turn transmits it to the switch. The switch then completes the call by connecting it with the landline telephone network or another cellular unit. Incoming calls are received by the switch from the landline telephone office (unless the call is originated by another cellular telephone). The switch then instructs the appropriate cell to complete the communications link by radio signal between the transmitter-receiver of a cell and the cellular equipment.

   The switch and the cell sites periodically monitor the signal strength of calls in progress. The signal strength of the transmission between a customer and the cell site declines as the unit moves away from the cell site. When the signal strength of a call declines to a pre-determined level, the switch automatically determines if the signal strength is greater in an adjacent cell and, if so, hands off the call in a fraction of a second to another cell site. This handoff is virtually unnoticeable to the user.

   If a wireless telephone user leaves the service area of the wireless telephone system during a call, the call is generally continued and carried through a technical interface established with an adjacent system through intersystem networking arrangements. Wireless system operators normally agree to provide service to subscribers from other compatible wireless systems who are temporarily located in or traveling through their service areas in a practice called "roaming." If a roaming arrangement has not been established with an adjacent system, the call will be disconnected. Agreements among system operators provide that the carrier that normally provides services to the roaming subscriber pays the serving carrier at rates prescribed by the serving carrier.

   Cellular telephone systems operate under interconnection agreements with various local exchange carriers and interexchange (long distance) carriers. The interconnection agreements establish the manner in which the cellular system integrates with other telecommunication systems. The cellular operator and the local landline telephone company must cooperate in the interconnection between the cellular and landline telephone systems to permit cellular customers to call landline customers and vice versa. The technical and financial details of these interconnection arrangements are subject to negotiation, vary from system to system, and, to the present time, generally have not been subject to Federal Communications Commission regulation or oversight. However, the implementation of the Telecommunications Act of 1996 by the Federal Communications Commission is expected to result in arrangements between cellular carriers and local exchange carriers at rates more closely related to cost for interconnection services. On August 1, 1996, the Federal Communications Commission adopted rules implementing the interconnection policies imposed by the 1996 Telecommunications Act. Various aspects of the rules were overturned by the U.S. Court of Appeals for the Eighth Circuit on jurisdictional grounds; however, in January 1999 the Supreme Court reversed the Eighth Circuit's decision and reinstated the Commission's pricing rules. The Eighth Circuit currently is considering the substantive appeals of the Federal Communications Commission's interconnection rules.

   Federal Communications Commission rules require that all cellular telephones be functionally compatible with cellular telephone systems in all markets within the United States and with all frequencies allocated for cellular use, allowing a cellular telephone to be used wherever a customer is located, subject to appropriate arrangements for service charges. Analog cellular handsets are functionally compatible with cellular systems in all markets within the United States. As a result, analog cellular handsets may be used wherever a subscriber is located, as long as a cellular system is operational in the area and necessary roaming arrangements exist. Although cellular, personal communications services, and enhanced specialized mobile radio systems utilize similar technologies and hardware, they operate on different frequencies and use different technical and network standards. Multi-mode phones, however, make it possible in many instances for users of one type of system to roam on a different type of system outside of their service area.

   The rapid growth of the industry's cellular customer base has begun to strain the call-processing capacity of many existing analog systems, especially in densely populated urban areas. Each cellular network is designed to meet a specified level of customer density and traffic demand. Once these traffic levels are exceeded, the operator must take steps to increase the network capacity. Capacity can be increased initially by using techniques such as sectorization and cell splitting. Network operators and infrastructure manufacturers are developing a number of additional solutions, which are expected to increase network capacity and coverage.

   Within specified limitations, increasing demand may be met by simply adding available frequency capacity to cells as required or by using directional antennae to divide a cell into multiple sectors or coverage areas, thereby reducing the required distance between cells using the same frequency. Further, an area within a cellular telephone system may be served by more than one cell through procedures that utilize available channels in adjacent cells. When all possible channels are in use, further growth can be accomplished through a process called "cell splitting." Cell splitting entails dividing a single cell into a number of smaller cells served by lower-power transmitters, thereby increasing the reuse factor and the number of calls that can be handled in a given area.

   Network capacity can also be enhanced through the development of newer technologies like N-AMPS analog technology (which triples call carrying capacity over conventional analog technology) and time division multiple access or code division multiple access digital technology (which significantly increases call carrying capacity). In each case, these advanced technologies allow cellular carriers to add customers without reducing service quality. Digital technology offers advantages including improved voice quality, larger system capacity, and perhaps lower incremental costs for additional customers. The conversion from analog to digital radio technology is expected to be an industry-wide process that will take a number of years. Some cellular service providers currently utilize digital radio technology in addition to analog technology.

Personal Communications Services

   Personal communications services, or PCS, is a term commonly used in the United States to describe a portion of radio spectrum (1850-1990 megahertz). There are at least six potential broadband personal communications services providers in each service area. Licensing areas for broadband personal communications services are divided into 51 metropolitan trading areas, which have been further subdivided into 493 smaller basic trading areas based on the geographic divisions in the 1992 Rand McNally Commercial Atlas & Marketing Guide. Two 30 megahertz frequency blocks, known as the A and B blocks, were licensed in each metropolitan trading area. One 30 megahertz frequency block, known as the C block, and three 10 megahertz frequency blocks, known as D, E, and F blocks, were licensed in each basic trading area. The 30 megahertz frequency blocks permit licensees to offer a broad range of two-way voice, data, and related communications services employing digital micro-cellular technology. The 10 megahertz frequency blocks are expected to be used to provide niche services, or purchased by existing commercial mobile radio service providers, including cellular operators, for added spectrum. More personal communications services providers are possible if the Federal Communications Commission approves a disaggregation of spectrum for any license for personal communications services, or if any C block licensee elected to surrender, pursuant to a special Federal Communications Commission program, 15 megahertz of its 30 megahertz license. Rural cellular carriers are subject to a 55 megahertz spectrum cap for their combined cellular and personal communications services spectrum in areas where they offer both services.

Digital Technology

   Digital technology increases system capacity while simultaneously providing architecture that supports delivery of revenue enhancing features and services. Digital features include extended 60+ hours of battery life on hand-held model telephones, improved call security, intelligent system selection/zone billing, alpha-numeric paging, internet based electronic mail receipt, presentation of calling party identification, voicemail message waiting information, and enhanced data/ facsimile transmission.

   The Federal Communications Commission has not mandated a single national digital standard (as it did with the analog advanced mobile phone system historically used in cellular systems), and as a result, the following three distinct technologies have evolved as standards and are being deployed nationally in cellular and personal communications services systems:

•

Time division multiple access, or TDMA, is the standard adopted and certified by the Cellular Telecommunications Industry Association and is also the standard being deployed nationally by AT&T Wireless, Inc. and Southwestern Bell Mobile Systems.



•

Global system for mobile communications, or GSM, is the digital standard that originated in Europe and has been widely deployed by 1.9 gigahertz license holders such as BellSouth Corporation, Powertel, Inc., Aerial Communications, Inc. and VoiceStream Wireless Corporation.



•

Code division multiple access, or CDMA, is a spread-spectrum technology that is predominantly being used by Sprint Corporation, AirTouch Communications, Inc., U.S. West, and Bell Atlantic Corporation.

   TDMA, GSM, and CDMA are currently incompatible with each other. However, a subscriber using a multi-mode phone may obtain service from both digital and analog systems and may also utilize both cellular and personal communication services. Until digital networks become fully built-out, these multi-mode handsets are necessary for the digital subscribers who wish to utilize wireless service in areas currently without digital coverage that utilizes their applicable digital standard.

BUSINESS

General

   We are a leading cellular operator in the United States, primarily in rural markets, covering a total population, which we call POPs, of approximately 4.7 million and serving 427,000 cellular customers as of September 30, 1999, on a pro forma basis after giving effect to our pending acquisition of the licenses, operations, and related assets of Triton Cellular Partners, L.P. We currently provide cellular communications services in three regional clusters operating in seven states. Upon completion of our pending acquisition, we will add two additional regional clusters operating in five states. We also own a 70% interest in Wireless Alliance, which provides personal communications services, or PCS, covering a total population of 708,000 and serving 11,000 customers in four states. We believe that owning and operating wireless systems in rural markets provides strong growth opportunities because these systems have lower penetration rates, a higher proportion of roamer revenues, and less competition for customers than wireless systems located in larger metropolitan areas due to their lower population density.

   Our markets generally are characterized by concentrations of small businesses, vacation destinations, and, given the distance between population centers, substantial travel time. We believe these characteristics promote strong local wireless usage and allow us to generate significant roamer revenues. We operate our wireless systems using a decentralized management approach, which allows us to achieve substantial marketing and distribution benefits, as well as operating efficiencies. This decentralized management approach allows us to develop a strong local presence in the communities we serve, which enhances our competitive position and allows us to tailor our product and service offerings to meet our customers' specific needs. We believe that our ability to customize our products and services results in greater customer satisfaction, customer retention, and market penetration. In addition, where appropriate, we share our successful service programs and operating practices among our various markets. As a result of this strategy, we have been able to generate strong internal growth and improve the operating and financial performance of our systems.

   Rural Cellular was incorporated in the State of Minnesota in October 1990 and commenced operations in April 1991, following the merger of five partnerships, each holding a cellular license for a specific rural service area, or RSA, in northern Minnesota. Since 1991, we have achieved significant growth in POPs, customers, revenues, and cash flows and have substantially increased the geographic scope of our operations. We have used a disciplined strategy of acquiring and developing wireless systems primarily in rural markets with favorable demographic profiles, and we believe that we have been successful in integrating acquired systems into our operations.

   In November 1996, we extended our wireless communications footprint in our Midwest region through the formation of Wireless Alliance with an affiliate of Aerial Communications. Wireless Alliance's personal communications services network, which utilizes the global system for mobile technology platform, became fully operational in late 1998. Wireless Alliance markets its personal communications services in Fargo and Grand Forks, North Dakota; Duluth, Hibbing, and Virginia, Minnesota; Sioux Falls, South Dakota; and Superior, Wisconsin. Prior to the launch of its personal communications services network, Wireless Alliance initiated a cellular resale program, which focused on establishing relationships with wireless agents and resale customers in its service area. We intend to integrate our cellular network with our personal communications services network to enable us to provide seamless wireless communications services to our customers. As of September 30, 1999, Wireless Alliance served 11,000 PCS customers.

   Between May 1997 and September 1999, we completed four acquisitions, increasing our total cellular POPs from approximately 600,000 to 2.4 million. These acquisitions included the following:

•

In May 1997, we acquired Unity Cellular in Maine, consisting of two rural service areas and one metropolitan statistical area, or MSA, and covering a total of 20,502 square miles. At the time of the acquisition Maine had 27,000 customers. This acquisition doubled our total cellular POPs from 600,000 to 1.1 million.



•

In July 1998, we acquired Atlantic Cellular, which included five rural service areas and one metropolitan statistical area, covering a total of 21,459 square miles in Vermont and portions of Massachusetts, New Hampshire, and New York. This acquisition also included Atlantic Cellular's long-distance business. At the time of the acquisition Atlantic Cellular had 74,000 customers. The acquisition of Atlantic Cellular approximately doubled our size again, increasing our total cellular POPs from 1.1 million to 2.2 million.



•

In August 1998, we expanded our presence in Maine through the acquisition of Western Maine Cellular, Inc., consisting of one rural service area adjacent to our Maine markets. At the time of the acquisition, Western Maine Cellular consisted of 83,000 POPs, covering 3,752 square miles, and was largely undeveloped in terms of its network with approximately 2,500 customers. This acquisition increased our total cellular POPs from 2.2 million to 2.3 million.



•

In February 1999, we expanded our Midwest cluster through the acquisition of RGI Group, Inc., consisting of one rural service area in South Dakota, covering 6,444 square miles with approximately 70,000 POPs and consisting of approximately 7,000 customers. This acquisition increased our total cellular POPs from 2.3 million to 2.4 million.

   In November 1999, we entered into a definitive agreement to acquire the Alabama, Kansas, Mississippi, Oregon, and Washington cellular licenses, operations, and related assets of Triton Cellular Partners, L.P. and its affiliates. Triton was formed in 1997 by former members of the Horizon Cellular Group executive management team and a group of private equity investors. Triton has grown through an acquisition strategy focused on acquiring underdeveloped rural properties with low population densities. The Triton properties include 20 rural service areas and cover approximately 152,000 square miles and a total of 2.3 million POPs. All of these properties are 100% owned and are contiguous within their respective geographic regions. Triton has made significant investments in its time division multiple access digital cellular network, which has enabled it to provide both analog and digital services and positioned it to serve market clusters around large cities. As a result, Triton has generated substantial roaming traffic, primarily from AT&T, Western Wireless, and GTE.

   We have invested substantial capital and resources to enhance the quality of our networks, expand our geographic footprint, and broaden our service offerings. As a result of our significant network investments, customers benefit from a high level of both regional and local hand-held coverage, minimal call blocking and dropped calls, seamless call delivery and hand-off, and the availability of expanded digital services. We offer a wide array of digital services, including caller identification, short message service, and numeric paging, as well as ancillary services such as voicemail and call waiting. We believe our quality network coverage, combined with our enhanced services, promotes increased cellular usage and greater customer satisfaction. With the exception of our Atlantic region, digital services are available in all of our markets, including the Triton regions. We plan to have digital services available in our Atlantic region by year end 2000.

Wireless Markets and Systems

   The following chart summarizes our existing wireless systems and the systems covered by the Triton acquisition as of September 30, 1999:

Region	Percentage Ownership		Total POPs(1)	Customers(2)	Penetration(2)		Square Miles	Date of Acquisition
Cellular
Midwest:
Minnesota RSA 1	100	%	50,000				5,592	04/01/91
Minnesota RSA 2	100		64,000				6,239	04/01/91
Minnesota RSA 3	100		59,000				5,769	04/01/91
Minnesota RSA 5	100		206,000				9,748	04/01/91
Minnesota RSA 6	100		257,000				10,765	04/01/91
South Dakota RSA 4	100		69,000				6,444	02/01/99
Total			705,000	75,000	10.6	%	44,557
Maine:
Maine, Bangor MSA	100	%	143,000				3,430	05/01/97
Maine RSA 1	100		83,000				3,752	08/01/98
Maine RSA 2	100		148,000				14,638	05/01/97
Maine RSA 3	100		221,000				2,434	05/01/97
Total			595,000	51,000	8.6	%	24,254
Atlantic:
Massachusetts RSA 1	100	%	71,000				702	07/01/98
New Hampshire RSA 1	100		223,000				4,775	07/01/98
New York RSA 2	100		226,000				6,710	07/01/98
Vermont, Burlington MSA	100		148,000				629	07/01/98
Vermont RSA 1	100		210,000				4,504	07/01/98
Vermont RSA 2	100		232,000				4,139	07/01/98
Total			1,110,000	92,000	8.3	%	21,459
South:
Alabama RSA 3	100	%	137,000				6,195	Pending
Alabama RSA 4	100		142,000				4,558	Pending
Alabama RSA 5	100		214,000				4,479	Pending
Alabama RSA 7	100		169,000				4,372	Pending
Mississippi RSA 1	100		173,000				3,936	Pending
Mississippi RSA 3	100		158,000				4,289	Pending
Mississippi RSA 4	100		128,000				3,146	Pending
Kansas RSA 1	100		27,000				5,600	Pending
Kansas RSA 2	100		30,000				5,100	Pending
Kansas RSA 6	100		19,000				6,767	Pending
Kansas RSA 7	100		79,000				6,108	Pending
Kansas RSA 11	100		86,000				7,092	Pending
Kansas RSA 12	100		44,000				4,550	Pending
Kansas RSA 13	100		29,000				4,867	Pending
Total			1,435,000	86,000	6.0	%	71,059
Northwest:
Oregon RSA 3	100	%	151,000				25,800	Pending
Oregon RSA 4	100		228,000				3,946	Pending
Oregon RSA 6	100		200,000				28,757	Pending
Washington RSA 2	100		132,000				10,354	Pending
Washington RSA 3	100		58,000				6,140	Pending
Washington RSA 8	100		121,000				5,723	Pending
Total			890,000	123,000	13.8	%	80,720
Total Cellular			4,735,000	427,000	9.0	%	242,049
Wireless Alliance (PCS)(3)
Duluth, Minnesota/Superior, Wisconsin: Cook, Lake, St. Louis and Carlton (portion) Counties in Minnesota and Douglas County in Wisconsin	70	%	270,000				11,083	04/10/97
Fargo, North Dakota/Moorhead, Minnesota: Cass and Trail Counties in North Dakota and Clay County in Minnesota	70		175,000				3,671	04/10/97
Grand Forks, North Dakota: Grand Forks County in North Dakota and Polk County in Minnesota	70		102,000				2,494	04/10/97
Sioux Falls, South Dakota: Minnehaha and Lincoln Counties in South Dakota	70		161,000				1,247	11/06/97
Total PCS			708,000	11,000	1.6	%	18,495
Total			5,443,000	438,000	8.0	%	260,544

(1)

1990 census figures, updated for the July 1, 1997 estimate of the U.S. Census Bureau

(2)

Midwest, Maine, and Atlantic region customers do not include paging, prepaid, or long distance customers.

(3)

The personal communications services licenses are for partitioned areas of the Minneapolis-St. Paul metropolitan trading area served by Wireless Alliance.

   Currently we own, but have not yet developed operating plans for, several additional wireless licensed properties. These wireless licenses include both local multi-point distribution system and personal communications services spectrum.

•

Our local multi-point distribution system licensed properties cover approximately 2.6 million POPs and either overlap or are adjacent to our cellular systems in each of our three operating regions. We currently plan to use a portion of the local multi-point distribution system licenses for testing new products, services and systems. We will then conduct market research on these products and services to determine whether to introduce them in our markets.



•

In 1999, we acquired a personal communications services basic trading area license for a market adjacent to our Midwest region that covers 277,000 POPs. We are considering several options for future business development using this spectrum. In the Triton acquisition, we will acquire four additional personal communications services basic trading area licenses, which primarily overlap Triton cellular systems in the Northwest region and cover 482,000 POPs. We plan to review this opportunity and determine how best to use this spectrum.

Business Strategy

   Our objective is to continue to expand our position as the leading full service provider of wireless communications services in our markets, by offering a full range of quality products and services that meet our customers' needs and providing extensive coverage and superior customer service at competitive prices. The key elements of our strategy are to:

   Introduce innovative marketing strategies to capitalize on new and enhanced products and services. Our marketing strategy is to offer our customers an array of bundled services designed to increase customer satisfaction and loyalty, while also stimulating customer usage. Our marketing programs offer customers greater value by offering services such as long distance, voicemail, personal toll-free numbers, and other services at varying competitive price points on a bundled or individual basis. These programs are also designed to satisfy the local needs of the markets we serve by offering regional calling plans that are tailored to our customers' usage patterns and leverage our wireless footprint. Additionally, customers can select our nationwide calling option, which charges a flat fee for all long distance charges when calling from our service areas. We also offer an equipment option called  Phone Service that allows customers to rent cellular telephones for a nominal monthly charge with extended warranty and insurance coverage. We believe that Phone Service facilitates upgrading telephone equipment as individual needs change, reduces customers' concerns about equipment obsolescence, and increases penetration.

   With our digital network, we believe there are substantial opportunities to sell new and enhanced services to both new and existing customers. We currently offer enhanced digital service features including caller identification and short message services. These services, in addition to other ancillary services such as voicemail, call waiting, and conference calling, stimulate cellular usage by increasing the functionality of cellular phones. We believe that our innovative marketing strategies combined with our new and enhanced product offerings have improved penetration and customer retention, and we intend to continue to utilize these and other marketing strategies in an effort to increase penetration and cellular usage throughout our entire service area.

   Maximize customer satisfaction and retention. By providing superior customer service and attractively priced products and services, we maintain a high level of customer satisfaction and retention. We believe our investments in upgrading and enhancing our cellular network promote customer satisfaction by allowing us to introduce new products and services, expand cellular coverage areas, and improve quality of service. In each of our markets, we have implemented separate sophisticated local monitoring and control systems and maintain separate customer service departments consisting of highly trained personnel who are aware of the needs of customers in those markets. Our customer service personnel can be accessed toll-free, 24 hours a day, 365 days a year, and are capable of handling both routine and complex technical questions. We believe that our focus on customer service has enhanced our reputation in the communities we serve and increased customer loyalty and the demand for our products and services. Our average monthly cellular customer retention rate was 98.5% for the year ended December 31, 1998, and 98.4% for the nine months ended September 30, 1999, as compared to the industry average monthly customer retention rate of 97.8%, as calculated using data from the Cellular Telecommunications Industry Association semi-annual data survey dated June 1999.

   Develop efficient operating clusters and a strong local presence using a decentralized management approach. We employ a decentralized approach to managing our clusters that enables us to maintain a strong local presence and deliver superior products and customer service. Each of our clusters is a separately managed regional business unit, which allows us to tailor our marketing and product offerings to meet the specific needs of each regional market. Additionally, this approach enables us to distinguish ourselves as the local provider in our markets by allowing us to maintain close customer contact and to continuously monitor customer needs. Each region is managed by a vice president who operates out of a regional office and oversees all decentralized management functions, including sales and distribution, customer service, billing, and network operations. Each of our regions is further supported by a number of territory managers, who are principally responsible for establishing sales and distribution channels. Our territory managers are also instrumental in establishing and maintaining strong civic and business relationships within each local community to increase our local presence and enhance our competitive position.

   Develop and maintain superior distribution channels. Our distribution network is comprised of direct sales, retail stores and independent agent sales channels. Our decentralized management approach allows our territory managers to determine the optimal distribution channel mix and to focus on the needs of the markets in which they operate. This improves their ability to establish relationships with our distribution channel partners and better understand the needs of existing and potential customers. In addition, we have implemented an annual certification process for all distribution channel members in order to maintain a consistent level of product knowledge and customer service across all of our regions. As a result of this certification process, we believe that our ability to increase penetration and maintain high customer retention rates is significantly enhanced. We will evaluate implementation of the certification process in the Triton regions upon the closing of the acquisition.

   Expand our market presence through strategic acquisitions and alliances. We have focused and expect to continue to focus on acquiring wireless systems serving rural service areas and small metropolitan statistical areas which complement our current markets. Acquisitions enhance the clustering of our wireless systems and enable us to achieve operating efficiencies, as well as joint advertising and marketing benefits. Clustering also allows us to offer our customers an expanded home service territory, which enables customers to avoid roaming charges which would otherwise be paid to other carriers. We believe that there are considerable opportunities to expand our current clusters through the acquisition of neighboring or proximate cellular systems. We also intend to pursue strategic alliances or acquisitions that will enable us to extend our geographic coverage into new markets with similar demographics and operating characteristics. In general, we will seek to acquire cellular operations that have attractive demographics and growth trends, have low population densities and penetration rates, are located adjacent to metropolitan areas and/or include significant highway corridors, and have a favorable competitive environment. Prior to completion of an acquisition, we formulate plans for customer service and billing improvements, network upgrades, new product and service launches, competitive positioning, and human resource requirements. After completing an acquisition, we implement managerial, operating, personnel, and network engineering changes designed to effect these plans and efficiently integrate the acquired systems.

   Maintain a superior network infrastructure. Our goal is to continue to develop and maintain a superior wireless network infrastructure capable of providing extensive geographic coverage and enhanced capacity. As a result of our significant network investments, customers benefit from a high level of both regional and local hand-held coverage, minimal call blocking and dropped calls, seamless call delivery and hand-off, and the availability of expanded digital services. Currently, our systems, including the Triton regions, have approximately 9,500 radio channels available for customer use. Of these, over 37% are digital capable covering the larger towns, cities, and high traffic roaming areas within our markets, excluding our Atlantic region. We expect to complete the upgrade of our Atlantic network as well as enhance the coverage in our other markets in 2000. For the periods ended December 31, 1998 and September 30, 1999, we have invested approximately $61.0 million and $27.0 million, respectively, in our networks, including Triton.

   Maximize financial flexibility. As we expand our business, we continue to focus on increasing cash flow and reducing financial leverage. We have successfully accomplished this in the past by minimizing customer acquisition costs, focusing our sales organization to maximize average revenue per customer and penetration as well as by maintaining strong customer retention rates and actively managing our roaming contracts. We intend to continue these initiatives going forward. Lower financial leverage and increased cash flow enhance our financial flexibility, enabling us to capitalize on acquisition opportunities and improve our ability to respond to changes in the industry and the competitive environment.

Marketing of Products and Services

   We have developed our marketing strategy on a market-by-market basis and offer service plan options to our customers tailored to address their specific needs and to maximize their cellular usage. Most service plans have a fixed monthly access fee, which includes a specified number of minutes, and incremental fees for enhanced services. As a result of our focus on innovative marketing strategies as well as the upgrade of our networks to digital capability, we are able to offer our customers a wide array of enhanced services on an individual or bundled basis. We believe these services stimulate demand for wireless usage and increase customer loyalty. These services include the following:

•

Caller ID—Allows a customer to see the phone number and name of the calling party before answering the call or after not answering a call.



•

Short Message Service—Allows a customer to receive text messages or content messages.



•

Numeric Paging—Allows calling parties to leave a phone number rather than a voice message.



•

Visual Message Notification—Allows a customer to know that a text or voice message has been received by displaying an icon on the customer's phone.



•

Group Ring—Allows a customer to have multiple phones ring simultaneously when a single cellular phone number is called.



•

Add-A-Line—Allows an additional phone to be included on a single account for a flat fee, permitting a customer to share the service plan minutes.



•

Voicemail—Allows a customer to receive and retrieve voicemail.



•

Regional Personal Toll-Free Number—Provides a customer with a regional personal toll-free number, which encourages customers to distribute their cellular numbers and keep their telephones turned on to accept incoming calls.



•

Nationwide Calling Option—Allows a customer to pay a flat fee for all long distance calls made from our service areas.



•

Phone Service—Allows customers the option to rent telephones for a nominal monthly charge. This service reduces customers' concerns regarding equipment obsolescence and enables us to better compete with our competitors' free telephone offers.



•

Paging Services—Marketed both through our own system, covering northern Minnesota and eastern North Dakota, and as a reseller of paging services covering most of our other service areas. We market our paging services as part of our bundled service offerings.

   Because of our decentralized management approach, we have developed a strong local presence in the communities we serve, which allows us to tailor our product and service offerings to meet our customers' specific needs. We believe that our ability to customize our products and services results in greater customer satisfaction, customer retention, and market penetration.

   In addition to tailoring our service plans based on features and minutes of use, we also offer our customers regional calling plans and roaming packages that allow our customers to pay home usage rates while traveling within specified regional zones, both in and outside of our cellular service areas. We have also established preferred roaming contracts and developed system integration with adjacent cellular carriers, which permit our customers to receive automatic call delivery, call forwarding, toll-free access to voicemail, call hand-off, and reduced roaming rates nationwide.

   Roaming is an integral component of our service offerings to our customers and allows us to generate incremental revenue from our cellular properties. We currently have roaming agreements with AT&T Wireless, AirTouch, GTE, and others. We have structured our roaming agreements to enable us to provide expanded network access to our customers both regionally and nationally and provide roaming rates based upon factors such as network coverage, feature functionality, and number of customers. By establishing these relationships we are able to provide expanded services to our customers that address their lifestyle patterns. For the periods ended December 31, 1998 and September 30, 1999, roamer revenues accounted for 20.5% and 28.4% of our total revenues, respectively.

   We also have agreements with the North American Cellular Network. North American Cellular Network is the largest wireless telephone network system in the world, linking cellular operators throughout the United States and Canada and enabling customers to use their cellular phones to place and receive calls in these areas as easily as they do in their home areas. Through North American Cellular Network, customers are able to receive calls automatically without the use of complicated roaming codes as they roam in more than 5,000 cities and towns in the United States and Canada. In addition, North American Cellular Network enables special services such as call forwarding and call waiting to automatically follow subscribers as they travel.

Service Marks

   We use the registered service mark CELLULAR 2000® to market our cellular services in our Midwest cellular markets. The CELLULAR 2000® name and related marks are owned by Cellular 2000, Inc., of which we currently own a 50% interest. The only business of Cellular 2000, Inc. is the licensing of its service mark to its shareholders. We do not pay any license fees for the use of the CELLULAR 2000® mark.

   We use our registered service mark UNICEL® to market personal communications systems and digital services in our Midwest region and to market cellular services in our Maine region.

   We market our cellular services in our Atlantic region under the service mark CELLULARONE®, our long distance services under the service mark LONG DISTANCE by CELLULARONE®, our paging services under the service mark PAGING by CELLULARONE®, and our digital services under the name DIGITAL by CELLULARONE®. Upon completion of the Triton acquisition, we will use the service mark CELLULARONE® in the Triton service areas. The CELLULARONE® mark is owned by Cellular One Group, and we use the CELLULARONE® service mark pursuant to licensing agreements with Cellular One Group. We believe we obtain substantial marketing benefits from the name recognition associated with this widely used service mark, both with existing subscribers traveling outside of our service areas and with potential new subscribers moving into our service areas.

   We also provide paging services under our service marks KEYPAGE®, KEYPAGE® PLUS and UNICEL Paging Services as a complement to our wireless services.

Distribution and Sales

   We market our wireless services through independent sales agents, direct sales personnel and company-owned retail locations. All sales personnel are managed by district and territory managers. We believe that our territory manager strategy is a major contributor to our success because the territory manager is able to tailor the distribution strategy to meet the needs of each local market.

   We have a company-wide distribution plan that establishes high standards and distribution guidelines for our territory managers. The territory managers make distribution decisions based upon specific distribution plans and analyses that are specific to their markets. We utilize the following distribution channels:

•

direct sales through:




-

retail stores that we own, operate, and staff with our employees. These stores are primarily located in our more densely populated markets, and as of September 30, 1999, we had 83 stores, on a pro forma basis. Our retail stores provide an established company presence and promote retail customer sales and service; and




-

account executives who are our employees and focus on business and major account sales and service; and



•

indirect sales through independent sales agents. Our independent sales agents are established businesses in our communities and may include retail electronics stores, farm implement dealers, automobile dealers, automobile parts suppliers, college and university bookstores, video and music stores, and local telephone companies. Most of the agents sell our service in conjunction with their principal business. We provide cellular, digital, and paging equipment to the agents for sale or rent to customers, and the agents market our services utilizing a cooperative advertising program.

   Each territory manager is responsible for recruiting, training, and supporting sales personnel for each distribution channel in a specific geographic market. The training and support provided to sales personnel is extensive and continuous. In addition, individuals who have customer contact are required to complete a certification process annually in order to maintain a consistent level of customer service and product knowledge in all regions. As a result of this certification process, we believe that our ability to increase market penetration and maintain high customer retention rates is significantly enhanced. We will evaluate its implementation in the Triton regions upon the closing of the acquisition.

Customer Service

   We believe that easy access to our customer service professionals is essential to maintaining a high level of customer satisfaction and loyalty and that our strong emphasis on customer service contributes to our high customer retention rate. To provide consistently superior customer service in our service centers, we have implemented sophisticated local monitoring and control systems and maintain customer service departments consisting of highly trained personnel who are aware of the needs of the customers in our local markets.

   Our service centers are located in Alexandria, Minnesota; Colchester, Vermont; and Bangor, Maine. Triton maintains customer service centers in Enterprise, Alabama; Bend, Oregon; and Walla Walla, Washington. Our customer service centers can be accessed 24 hours a day, 365 days a year, and are capable of handling both routine and complex technical questions. We believe that having calling centers located in or near our regional clusters provides a significant competitive advantage because it reinforces the local nature of our product and allows the customer service representatives to offer more customized service as a result of their inherent local knowledge. The customer service centers are also responsible for processing new service orders and service changes for existing customers and maintaining customer records. Our customer service centers maintain a quality control process that monitors call center performance and balances customer service center resources to match call center load levels.

   Territory managers work closely with customer service center personnel to maintain high standards of service for their existing customers as well as to attract new customers. Customers are also contacted periodically and offered additional calling features such as voicemail, call waiting, and call forwarding and are recommended the best service pricing plan for that customer's usage levels. These contact programs enhance customer loyalty, maintain high retention, and increase sales of additional features that increase customer airtime usage and generate customer referrals.

Network Operations

Cellular

   We develop and build our cellular service areas in response to customer demand by adding channels to existing cell sites and by building new cell sites to increase coverage and capacity. Where appropriate, we also upgrade acquired properties to enable us to provide similar quality service over our entire network. We expect to continue our cellular system expansion where necessary to add and retain customers, enhance customer usage on our systems, and increase roaming traffic. We will continually focus on utilizing the best methods to enhance and develop our cellular systems. These enhancements may include scalable network equipment, cell site splitting, cell site sectorization, and digital upgrades of our systems. In addition to the customer quality aspects, these enhancements will typically provide greater network system performance and efficiency of operations.

   We have chosen time division multiple access as our digital standard for our cellular system enhancements. Time division multiple access is the digital standard adopted and certified by the Cellular Telecommunications Industry Association and is the digital standard being deployed by AT&T. By using time division multiple access, our customers' phones will have digital compatibility with other cellular systems using time division multiple access service, like AT&T, which further enhances our customers' ability to roam.

   As of September 30, 1999, our cellular network consisted of 257 cell sites, and Triton's network consisted of 262 cell sites. We will continue to develop our cellular service area by building new cell sites in locations that increase capacity and improve coverage. We added 23 cell sites during 1998 and 12 sites during the nine months ended September 30, 1999. We plan to add an additional six new cell sites (excluding acquisitions) during the fourth quarter of 1999. The additional cell sites will further expand capacity and will allow customers to use lower-powered or hand-held portable telephones throughout our service areas and network.

Wireless Alliance

   At September 30, 1999, Wireless Alliance had 57 cell sites. Wireless Alliance has a global system for mobile technology-based personal communications services network. Wireless Alliance utilizes the Aerial Communications switch to switch personal communications services calls and AirTouch Communications, Inc. and CommNet Cellular, Inc. networks to transport its resale of cellular airtime within these markets.

Paging

   As of September 30, 1999, our paging network consisted of 54 paging transmitters located throughout northern Minnesota and eastern North Dakota. The paging transmitters are connected to and controlled by a paging terminal that is connected to the public telephone network. The paging transmitters use a transmit-only radio frequency licensed for a given coverage contour around the paging transmitter that allows messages to be broadcast to the paging customer.

Through our wholly owned subsidiary, RCC Paging, Inc., we hold licenses granted by the Federal Communications Commission for paging and radiotelephone service on the radio common carrier frequency of 158.100 megahertz.

Suppliers and Equipment Partners

   We do not manufacture any customer or network equipment. The high degree of compatibility among different manufacturers' models of handsets and network facilities equipment allows us to design, supply, and operate our systems without being dependent upon a single source of equipment. We currently purchase handsets primarily from Motorola, Inc., Ericsson, Inc. and Nokia Telecommunications, Inc. We currently purchase network equipment from Northern Telecom, Inc., Lucent Technologies Inc., Harris, Inc., and Nokia Telecommunications, Inc., Alcatel, and Motorola, Inc.

Competition

   We compete primarily against one other cellular carrier in each of our markets and also compete with a number of personal communications services providers and enhanced specialized mobile radio service providers. We compete for customers based on wireless system coverage and quality, service value equation (minutes and features over price), local market presence, digital voice and features, customer service, distribution strength, and name brand recognition. Some competitors also market other services, such as long distance, landline local exchange, and Internet access service, with their wireless telecommunication service offerings. Many of our competitors have been operating for a number of years, currently serve a substantial subscriber base, and have significantly greater financial, personnel, technical, marketing, sales, and distribution resources than we do.

   The following table highlights our competitors on a market-by-market basis:

Region	Cellular Competitors	Personal Communications Systems/ESMR Competitors
Cellular
Midwest:
Minnesota RSA 1 and RSA 2	Western Wireless Corporation	None
Minnesota RSA 3, RSA 5 and RSA 6	American Cellular Corporation	WirelessNorth, L.L.C.
South Dakota RSA 4	Western Wireless Corporation	Sprint PCS Group
Maine:
Maine, Bangor MSA, RSA 1, RSA 2 and RSA 3	United States Cellular Corporation	None
Atlantic:
Massachusetts RSA 1	SBC Communications Inc.	None
New Hampshire RSA 1	United States Cellular Corporation	None
New York RSA 2	Bell Atlantic Corporation	None
Vermont, Burlington MSA, RSA 1	Bell Atlantic Corporation	None
Vermont RSA 2	Bell Atlantic Corporation, United States Cellular Corporation	None
South (Pending):
Alabama RSA 3	BellSouth Corporation	Powertel, Inc.
Alabama RSA 4	ALLTEL Corporation	Powertel, Inc.
Alabama RSA 5	ALLTEL Corporation, BellSouth Corporation, Public Service Telephone	Powertel, Inc., Nextel Communications, Inc.
Alabama RSA 7	ALLTEL Corporation	Powertel, Inc., Sprint PCS Group
Mississippi RSA 1	BellSouth Corporation, Telepak, Inc.	Powertel, Inc.
Mississippi RSA 3	Telepak, Inc.	Powertel, Inc.
South (Pending)—Continued:
Mississippi RSA 4	BellSouth Corporation, Telepak, Inc.	Powertel, Inc.
Kansas RSA 1,2,6,7,12,13	ALLTEL Corporation	None
Kansas RSA 11	ALLTEL Corporation	Panhandle Telecommunications Systems, Inc.
Northwest (Pending):
Oregon RSA 3	United States Cellular Corporation	None
Oregon RSA 4	Airtouch Cellular	VoiceStream Wireless Corporation, Sprint PCS Group, Nextel Communications, Inc., U.S. WEST
Oregon RSA 6	United States Cellular Corporation	Sprint PCS Group, Nextel Communications, Inc.
Washington RSA 2	Airtouch Cellular	None
Washington RSA 3	Airtouch Cellular	None
Washington RSA 8	Inland Cellular	None
PCS
Wireless Alliance:
Duluth, Minnesota/Superior, Wisconsin	American Cellular Corporation, Airtouch Cellular	Wireless North, L.L.C.
Fargo, North Dakota/Moorhead, Minnesota; Grand Forks, North Dakota	Western Wireless Corporation, Airtouch Cellular	Wireless North, L.L.C.
Sioux Falls, South Dakota	Western Wireless Corporation, CommNet Cellular Inc.	Sprint PCS Group

   The telecommunications industry is experiencing significant technological changes, as evidenced by the increasing pace of improvements in the capacity and quality of digital technology, shorter cycles for new products and enhancements, and changes in consumer preferences and expectations. Accordingly, with the entrance of new competitors and the development of new technologies, products, and services, competition in the wireless telecommunications industry has been dynamic and intense.

   In the future, we expect to face increased competition from entities holding licenses for personal communications services spectrum not yet operating in our markets. We believe that personal communications services networks will continue to be focused primarily in urban areas due to capital and population coverage requirements. The Federal Communications Commission has issued licenses for both narrowband and broadband personal communications services, and six broadband licenses were issued in each of our cellular service areas. Narrowband personal communications services typically are advanced paging and messaging services. Broadband personal communications services consist of wireless two-way telecommunications services for voice, data, and other transmissions employing digital micro-cellular technology. Many broadband personal communications services compete with existing cellular systems. Under recent Federal Communications Commission rulings, license holders are allowed to disaggregate the spectrum covered by their license. Accordingly, we may face competition from additional providers of personal communications services if the Federal Communications Commission approves a disaggregation of spectrum for any license for personal communications services in one of our service areas, or if any C Block licensee elects to surrender, pursuant to a special Federal Communications Commission program, 15 megahertz of its 30 megahertz license. In addition, the Omnibus Budget Reconciliation Act of 1993 requires, among other things, the allocation to commercial use of a portion of 200 megahertz of the spectrum currently reserved for government use. It is possible that some portion of the spectrum that is reallocated will be used to create new land-mobile services or to expand existing land-mobile services. Further, the Federal Communications Commission has announced plans to auction licenses in the 39 gigahertz spectrum and 700 megahertz spectrum that may be used for wireless communications.

   Specialized mobile radio and other private radio systems, such as those generally used by local dispatch, fleet services, and other communications services that have the technical capability to handle mobile telephone calls, including interconnection to the landline telephone network, may provide competition in some markets. In addition, enhanced specialized mobile radio systems may compete with cellular service by providing high quality digital communication technology, lower rates, enhanced privacy, and additional features such as paging, particularly in metropolitan areas.

   We also compete to a lesser extent with resellers, landline telephone service providers, fixed wireless services, and satellite-based telecommunications systems. The Federal Communications Commission requires all cellular and personal communications services licensees to provide service to "resellers." A reseller provides wireless services to customers but does not hold a Federal Communications Commission license and might not own facilities. Instead, the reseller buys blocks of wireless telephone numbers and capacity from a licensed carrier and resells service through its own distribution network to the public. Thus, a reseller is both a customer of a wireless licensee's service and also a competitor of that licensee. Several small resellers currently operate in competition with our systems. Although not yet economically feasible, in the future we may also face competition from new technologies such as satellite networks.

   We anticipate that market prices for wireless communications service and equipment will continue to decline in the future based upon increased competition and cost reductions. Our ability to compete successfully is dependent, in part, on our ability to anticipate and respond to various competitive factors affecting the industry. Our marketing and sales organization includes a group that carefully monitors and analyzes competitive products and service offerings, changes in consumer preferences, changes in demographic trends and economic conditions, and pricing strategies by competitors that could adversely affect our operations or present strategic opportunities.

   We believe that we are strategically positioned to compete with other communications technologies that now exist and with cellular and paging resellers. Continuing technological advances in telecommunications and Federal Communications Commission policies that encourage the development of new spectrum-based technologies make it difficult, however, to predict the extent of future competition.

Employees and Sales Agents

   As of November 30, 1999, we had 538 employees, including 202 in sales and marketing, 144 in customer service, 91 in network and systems operations, 64 in administration and 37 in finance and accounting. Thirty of our employees were part-time. None of our employees is represented by a labor organization, and we believe we have excellent relations with our employees. In addition, we utilize approximately 440 independent sales agents. Wireless Alliance has no full-time or part-time employees but operates utilizing our employees.

   As of November 30, 1999, Triton Cellular Partners had a total of 498 employees, not including those employed in its corporate office. Of these, 261 were in sales and marketing, 100 were in customer service, 62 were in network and systems operations, and 75 were in finance and administration. In addition, Triton also utilized approximately 83 independent sales agents. It is expected that the majority of Triton's employees, excluding those located in its corporate headquarters office in Berwyn, Pennsylvania, will become our employees.

Properties

   We own our principal corporate headquarters located at 3905 Dakota Street SW, Alexandria, Minnesota. The headquarters is a two-story, 50,000 square-foot facility with land available for a 24,000 square-foot expansion. Our newly constructed Maine regional corporate headquarters, located at 6 Telcom Drive in Bangor, Maine, is a two-story, 36,250 square-foot facility. In addition, we maintain a 5,500 square-foot storage facility in Maine.

   As of September 30, 1999, our network consisted of the following cell sites:

	Owned	Leased	Total
Midwest	76	33	109
Maine	11	46	57
Atlantic	2	89	91
Wireless Alliance	—	57	57
Total	89	225	314

   Our leased sites consist of land leases, tower leases or both. We own all the equipment within the leased sites. The leases covering leased sites have various expiration dates and are with numerous lessors. These leases generally have renewal terms that we would anticipate exercising. Due to our network design, loss of a leased location would not have a material impact on the operations of a region's business.

   Numerous state and federal laws govern the disposal of hazardous and other materials on properties we own or lease. Although we have undertaken reasonable due diligence with regards to the properties upon which our towers are located to ascertain their environmental status, unknown environmental conditions may adversely affect such properties, and we may be held liable for costs in removing or remediating any contamination.

   As of September 30, 1999, we owned 54 paging transmitters in our Midwest paging business.

   Our distribution system is comprised of 39 retail locations, of which 36 are leased. The leases covering these locations have various expiration dates.

   As of September 30, 1999, Wireless Alliance had 57 personal communications services cell sites. We own the equipment within all of the cell sites. Wireless Alliance owns the land of one cell site and leases the land of the other 56 cell sites.

   As of September 30, 1999, the Triton regions had a total of 262 cell sites. Of these, 248 were subject to lease. Triton also has 44 retail locations, of which 43 are leased, with various expiration dates. We will assume Triton's lease obligations. None of the individual leases is deemed to be material to the operation of Triton. Triton also has a lease agreement with AT&T for switching services in its Northwest region. This lease expires in November 2000.

Legal Proceedings

   We are a party to routine filings and customary regulatory proceedings with the Federal Communications Commission and state regulatory agencies from time to time. Also, we are involved in legal proceedings from time to time relating to claims arising out of our operations in the normal course of business. There are no pending legal proceedings to which we are a party or of which any of our property is subject which, if adversely decided, would have a material effect on us.

   One of the licenses we are acquiring from Triton is for a cellular system operating in the Alabama 5 rural service area. Pursuant to a Federal Communications Commission consent granted in April 1999, Triton acquired the license from a company that had won it in a lottery held by the Federal Communications Commission in 1989. That company had participated with other lottery applicants in a so-called risk-sharing agreement. In 1997, the Federal Communications Commission denied challenges to its award of licenses to the risk-sharing applicants. The Federal Communications Commission found that the risk-sharing agreement did not create any proscribed ownership interests and that the violation of the Federal Communications Commission's rule prohibiting partial settlement agreements by lottery applicants did not render the risk-sharing applications defective. Subsequent attempts to have the matter reconsidered by the Federal Communications Commission or reviewed by an appellate court have been unsuccessful to date. Some of the numerous parties involved in the proceeding have reached settlements with one another.

   Most recently, on October 18, 1999, the Federal Communications Commission dismissed the claims of two groups, one of which had filed a petition for reconsideration of the Federal Communications Commission's earlier actions, and the other of which had filed a statement for the record. The Federal Communications Commission concluded that both groups failed to show why it was not possible for them to participate in the earlier stages of the Federal Communications Commission's proceeding, as required by Federal Communications Commission rules. The Federal Communications Commission found that neither group had filed a timely petition before the Federal Communications Commission or otherwise achieved status as a party in the proceeding. On November 17, 1999, members of both groups filed with the U.S. Court of Appeals for the D.C. Circuit timely appeals of the Federal Communications Commission's October 18, 1999 decision. We filed a notice of intention to intervene with the court to support the Federal Communications Commission's position in the matter. If either appellant is successful in convincing the court to order the Federal Communications Commission to review the group's claims on the merits, it is possible that the Federal Communications Commission or the court will reverse the decision to grant the risk-sharing applications. This action could cause our loss of the license for the Alabama 5 rural service area.

Legislation And Regulation

The following summary of regulatory developments and legislation does not purport to describe all present and proposed federal, state, and local legislation and regulation affecting the telecommunications industry. Existing federal and state legislation and regulations are currently the subject of judicial proceedings, legislative hearings, and administrative proposals which could change, in varying degrees, the manner in which this industry operates. Neither the outcome of these proceedings nor their impact upon us or the telecommunications industry in general can be predicted at this time.

Overview

   Our services are subject to varying degrees of federal, state, and local regulation. The Federal Communications Commission exercises jurisdiction over all facilities of, and services offered by, telecommunications common carriers, to the extent those facilities are used to provide, originate, or terminate interstate or international communications. State regulatory commissions retain jurisdiction over most of the same facilities and services to the extent they are used to originate or terminate intrastate communications. In addition, many of the regulations issued by these regulatory bodies may be subject to judicial review, the result of which review we are unable to predict.

Federal Regulation

   We must comply with the requirements of common carriage under the Communications Act of 1934. Comprehensive amendments to the Communications Act were made by the Telecommunications Act of 1996. The 1996 Act effected plenary changes in regulation at both the federal and state levels that affect virtually every segment of the telecommunications industry. The stated purpose of the 1996 Act is to promote competition in all areas of telecommunications and to reduce unnecessary regulation to the greatest extent possible. While management believes it will take years for the industry to feel the full impact of the 1996 Act, it is already clear the legislation provides us with both opportunities and challenges.

   The 1996 Act greatly expands the Federal Communications Commission's interconnection requirements for incumbent local exchange carriers. The 1996 Act requires the incumbent local exchange carriers to:

•

provide physical co-location;



•

unbundle and provide access to components of their local service networks to other providers of local service; and



•

establish "wholesale" rates for the services they offer at retail.

The 1996 Act also requires all local exchange carriers to:

•

establish number portability;



•

establish dialing parity; and



•

provide nondiscriminatory access to telephone poles, ducts, conduits, and rights-of-way.

In addition, the 1996 Act requires local exchange carriers to compensate telecommunications carriers for traffic originated by the local exchange carriers and terminated on the other carriers' networks. The 1996 Act requires all telecommunications carriers, including us, to provide interconnection upon reasonable request.

   Local exchange carriers are required to negotiate in good faith with carriers requesting any or all of the above arrangements. If a requesting carrier and the local exchange carrier cannot reach an agreement within the prescribed time, either carrier may request binding arbitration by the appropriate state commission. Where an agreement cannot be reached, carriers remain subject to the interconnection obligations established by the Federal Communications Commission and state telecommunications regulatory commissions.

   The Federal Communications Commission is charged with establishing national guidelines to implement the 1996 Act. The Federal Communications Commission issued its interconnection orders on August 8, 1996, which established detailed rules regarding rates, terms, and conditions for interconnection between telecommunications carriers and local exchange carriers and regarding the implementation of dialing parity. The interconnection orders were appealed to the U.S. Court of Appeals for the Eighth Circuit. On July 18, 1997, the Eighth Circuit issued a decision vacating many of the interconnection pricing rules and the "most favored nation" rule as well as other interconnection rules on jurisdictional grounds. The Eighth Circuit affirmed some rules as they pertain to commercial mobile radio service providers. Several parties appealed the Eighth Circuit decision to the United States Supreme Court. In January 1999 the Supreme Court reversed the Eighth Circuit's decision and reinstated the Commission's pricing rules. The Eighth Circuit is currently hearing the substantive challenges to the Federal Communication Commission's interconnection rules.

   Since some of the 1996 Act's interconnection requirements apply to all providers of telecommunications services, including us, it may provide us with the ability to reduce our own access costs by interconnecting directly with non-incumbent local exchange carriers, but may also cause us to incur additional administrative and regulatory expenses in replying to interconnection requests.

   The Federal Communications Commission also regulates the construction, operation, and acquisition of commercial mobile radio service systems in the United States. Cellular and personal communications services operate under licenses granted by the Federal Communications Commission within a specified market area. Paging licenses historically were granted for generally smaller areas, based upon the area served by a particular facility. The Federal Communications Commission has adopted rules pursuant to which paging systems will be licensed on a market-wide basis in the future. An auction of certain paging spectrum has been scheduled to commence in February 2000. There is an application freeze in place with respect to paging services pending the implementation of the market area licensing scheme. The Federal Communications Commission's rules have been appealed to the United States Court of Appeals for the District of Columbia Circuit. The current application freeze and proposed transition to a market area based licensing scheme for paging services may hinder our ability to modify existing facilities and secure authorization for additional facilities. The licenses are generally transferable, subject to specified limitations prescribed by the Federal Communications Commission.

   Near the conclusion of the initial term of a cellular, personal communications services, or paging license, licensees must file applications for renewal of licenses to obtain authority to operate for up to an additional ten-year term. Applications for license renewal may be denied if the Federal Communications Commission determines that the renewal would not serve the public interest, convenience, or necessity. The Federal Communications Commission also may revoke a license prior to the end of its term in extraordinary circumstances. In addition, at license renewal time, other parties may file competing applications for the authorization. The Federal Communications Commission has adopted specific standards stating renewal expectancy will be awarded to a commercial mobile radio service licensee that has provided substantial service during its license term and has substantially complied with applicable Federal Communications Commission rules and policies and the Communications Act. If the Federal Communications Commission awards the commercial mobile radio service licensee a renewal expectancy, its license renewal application generally is granted and the competing applications are dismissed.

   Although we are unaware of any circumstances that would prevent the approval of any future renewal application, no assurance can be given that the Federal Communications Commission will renew any of our licenses. Moreover, although revocation and involuntary modification of licenses are extraordinary measures, the Federal Communications Commission has the authority to restrict the operation of a licensed facility or revoke or modify licenses. None of our licenses has ever been revoked or involuntarily modified.

   The Communications Act and Federal Communications Commission rules require the Federal Communications Commission's prior approval of the assignment or transfer of control of commercial mobile radio service licenses where there would be a substantial change in the ownership or control of the licenses. Any acquisition by us of an interest in any commercial mobile radio service authorization may also require the prior approval of state or local regulatory authorities having jurisdiction over the commercial mobile radio service industry.

   Commercial mobile radio service providers also must satisfy a variety of Federal Communications Commission requirements relating to technical and reporting matters, including coordination of proposed frequency usage with adjacent systems in order to avoid electrical interference between adjacent systems. The Federal Communications Commission also requires licensees to secure Federal Communications Commission consent to system modifications in specified instances.

   Commercial mobile radio service systems are subject to Federal Aviation Administration regulations respecting the location, marking, lighting, and construction of transmitter towers and antennas and may be subject to regulation under the National Environmental Policy Act and the environmental regulations of the Federal Communications Commission. Effective September 1997, the Federal Communications Commission updated the guidelines and methods it uses for evaluating radio frequency emissions from radio equipment. While the Federal Communications Commission's new rules impose more restrictive standards on radio frequency emissions from low power devices such as our wireless devices, we believe that all wireless devices we currently provide to our customers comply with the new standards.

   The 1996 Act mandates that telecommunications carriers pay into the federal Universal Service Fund. The purpose of the Universal Service Fund is to ensure that basic telephone services are available and affordable for all citizens. The Universal Service Fund will promote access to communications services in high cost areas and for low income persons, schools, libraries, and rural health care providers. We also are required to contribute to state universal service funds. The federal Universal Service Fund is administered jointly by the Federal Communications Commission, the fund administrator, and state regulatory authorities, many of which are still in the process of establishing their administrative rules. While the Federal Communications Commission has commenced collecting quarterly contributions, the financial effect of these regulations on us cannot be determined at this time. However, because we are permitted to collect the required contribution amounts from our customers, we expect that our obligation to contribute to the Universal Service Fund will have a minimal financial impact on us.

   We also are required to contribute annually to the Telecommunications Relay Service Fund and the North American Numbering Plan Administration Fund, Local Number Portability and to remit regulatory fees to the Federal Communications Commission with respect to our operations. We do not expect that these contribution obligations will have a material financial impact on us.

   Cellular and broadband commercial mobile radio service providers also must comply with the Federal Communications Commission's rules regarding emergency 911 service. In 1997, the Federal Communications Commission released revised timetables and provisions for emergency 911 service availability provided by cellular, personal communications services, and other mobile service providers, including enhanced 911 services that provide the caller's telephone number, location, and other useful information. Phase I of implementation required that by April 1998, the metropolitan markets must be able to provide automatic number identification and cell site information for 911 calls to the 911 dispatch points, called Public Safety Answering Points. This mandate was effective June 1, 1998 for rural markets. Phase II provides that by October 1, 2001, covered carriers must have the capability to identify the location of mobile units making 911 calls within a radius of no less than 125 meters. On October 26, 1999, the Wireless Communications and Public Safety Act was signed into law by President Clinton. This new law enhances public safety by making 911 the universal emergency assistance number, promoting wireless communications, clarifying and enhancing the liability protections offered to wireless carriers for both emergency and non-emergency service, and supporting the location of wireless consumers in distress. A recent Federal Communications Commission order on enhanced 911, which has not yet become effective, states that a cost recovery mechanism no longer has to be in place before a carrier is obligated to provide enhanced 911 service. The implementation of enhanced 911 obligations may have a financial impact on us. We are not yet able to predict the extent of that impact.

   Cellular and broadband personal communications services providers are now required to provide number portability, which enables customers to change providers and services without changing their telephone number. Based upon financial and technological considerations and the current level of competition in the marketplace, several parties have requested that the Federal Communications Commission forbear from requiring broadband commercial mobile radio service carriers to implement service provider number portability until personal service carriers have completed their five-year buildout requirements. By November 24, 2002, commercial mobile radio service providers must be able to offer number portability without impairment of quality, reliability, or convenience when switching service providers, including the ability to support roaming throughout their networks. The Federal Communications Commission has solicited further comment on the appropriate cost recovery methods regarding long-term number portability. To date, the Federal Communications Commission has not generally extended this deadline. Although the failure to comply with this obligation could result in a fine or revocation of our licenses, we are not yet able to predict whether we will be able to comply with the number portability requirements prior to the existing deadline.

   Personal communications services licensees must comply with microwave relocation rules. For a period of up to ten years after the grant of a personal communications services license (subject to extension), a personal communications services licensee will be required to share spectrum with existing licensees that operate specified fixed microwave systems which exist within the personal communications services licensee's markets. To secure a sufficient amount of unencumbered spectrum to offer our personal communications services efficiently, we may need to negotiate agreements to relocate many of these existing licensees. In places where relocation is necessary to permit offering our personal communications services, any delay in the relocation of these licensees may adversely affect our ability to commence timely commercial operation of our personal communications services. In an effort to balance the competing interests of existing microwave users and newly authorized personal communications services licensees, the Federal Communications Commission has adopted a transition plan to relocate these microwave operators to other spectrum blocks and a cost sharing plan so that if the relocation of an incumbent benefits more than one personal communications services licensee, the benefiting personal communications services licensees will share the costs of the relocation. In the case of A and B Block personal communications services license holders, this transition plan allows most microwave users to operate in the personal communications services spectrum for a two-year voluntary negotiation period and an additional one-year mandatory negotiation period. For public safety entities dedicating a majority of their system communications for police, fire or emergency medical services operations, the voluntary negotiation period is three years, with a two-year mandatory negotiation period. Parties unable to reach agreement within these time periods may refer the matter to the Federal Communications Commission for resolution, but the existing microwave user is permitted to continue its operations until final Federal Communications Commission resolution of the matter. The transition and cost sharing plans expire on April 4, 2005 for A and B Block licenses, at which time remaining incumbents in the personal communications services spectrum will be responsible for their costs to relocate to alternate spectrum locations. The Federal Communications Commission has shortened the voluntary negotiation period to one year (for non-public safety entities) for all Blocks other than A and B. We believe that we are in compliance with applicable spectrum relocation requirements enacted by the Federal Communications Commission.

   Telecommunications carriers also are subject to the Communications Assistance for Law Enforcement Act, also known as the Wiretap Act, which is under the purview of the Department of Justice. The Wiretap Act requires carriers to have a specific number of open ports available for law enforcement personnel with the appropriate legal authority to perform wiretaps on each carrier's network. Full implementation of the Wiretap Act's assistance capability requirements, however, is not required until June 30, 2000 because Federal Communications Commission has found that there is a lack of equipment available to meet these requirements. Several carriers and industry organizations have urged the FBI to delay the implementation date and also have sought relief from the Federal Communications Commission, due to, among other things, the unavailability of compliant equipment. To date, however, the deadline for compliance has not been extended. If we are not able to comply with the Wiretap Act prior to the deadline, we could be fined up to $10,000 per day. We are not yet able to predict whether we will be able to comply with the Wiretap Act regulations prior to the existing deadline.

   Telecommunications carriers also must comply with the Federal Communications Commission's rules regarding the use and protection of customer proprietary network information. The Federal Communications Commission's rules were found by the Tenth Circuit to be unconstitutional and it vacated them. In a separate action, on October 27, 1999, the Federal Communications Commission released new rules regarding customer proprietary network information, which became effective on December 14, 1999. The Federal Communications Commission petitioned for rehearing of the Tenth Circuit's decision, thereby staying the effect of the decision. These rules substantially increase the regulation of our use of this information. We expect that our implementation of measures to comply with these new rules will have a financial impact upon us, but we do not expect that impact to be material.

   For most of our facilities, we use lead-acid batteries as back-up power sources. As a result, we are subject to reporting requirements under the Community Right-To-Know Act. In addition, we may be subject to other environmental controls or liabilities due to failure to comply with reporting requirements or emissions or contamination regulations in connection with facilities we own or operate or have previously owned or operated. Although we are not aware of any material liabilities of this type, we can not assure you that none will arise in the future.

Limitation on Foreign Ownership

   Ownership of our capital stock by non-U.S. citizens is subject to limitations under the Communications Act and Federal Communications Commission regulations.

State and Local Regulation

   We are also subject to regulation by state and local governments. The extent of this regulation varies from state to state. The Communications Act preempts state and local regulation of the entry of or the rates charged by, any commercial mobile radio service provider, subject to the ability of a state to petition the Federal Communications Commission for authority to regulate rates due to local market conditions. The states in which we operate our systems do not currently regulate the rates for any commercial mobile service, but could petition the Federal Communications Commission for authority in the future. The siting and construction of commercial mobile radio service transmitter towers, antennas and equipment shelters are often subject to state or local zoning, land use, and other regulation.

   We are subject to state and local environmental legislation and regulations, including land use and related permitting legislation and regulation. We are currently unaware of any material violation of these laws or regulations, but we can not assure you that none will arise in the future.

MANAGEMENT

Name	Age	Position
Richard P. Ekstrand	50	President, Chief Executive Officer and Director
Wesley E. Schultz	42	Senior Vice President and Chief Financial Officer, Assistant Secretary and Director
Ann K. Newhall	48	Senior Vice President, General Counsel, Assistant Secretary and Director
David J. Del Zoppo	44	Vice President, Finance and Accounting
Scott G. Donlea	39	Vice President, Market Development
George W. Wikstrom(1)	62	Vice President and Director
Don C. Swenson(1)	57	Secretary and Director
Jeffrey S. Gilbert(2)	50	Director
Marvin C. Nicolai(1)(2)	58	Director
George M. Revering(2)	58	Director

(1)

Member of Compensation Committee

(2)

Member of Audit Committee

Richard P. Ekstrand has served as our President, Chief Executive Officer and a director since 1990. Since 1984, Mr. Ekstrand has also served as Vice President and a director of Lowry Telephone Co., Inc., a local exchange telephone company and a shareholder of Rural Cellular. Mr. Ekstrand is the sole shareholder of Lowry Telephone Company, Inc. Mr. Ekstrand currently serves as a director of Cellular 2000, Inc. Mr. Ekstrand is past president of the Minnesota Telephone Association and the Association of Minnesota Telephone Utilities. He currently serves as a director of the Rural Cellular Association and is active in the Cellular Telecommunications Industry Association, serving as its Secretary and on its Board of Directors, Executive Committee, and Small Operators Committee. Mr. Ekstrand also serves as Vice Chairman and as a member of the board of directors of The Wireless Foundation.

Wesley E. Schultz joined us in May 1996 as Vice President of Finance and Chief Financial Officer. On October 21, 1999, he was appointed Senior Vice President and Chief Financial Officer and Assistant Secretary. On August 9, 1999, he was appointed to our board of directors. Prior to joining us, Mr. Schultz had served as acting Chief Financial Officer of Spanlink Communications, Inc. since February 1996, as Chief Financial Officer of Nicollet Process Engineering, Inc. from March 1995 through October 1995, and as Chief Financial Officer of Data Systems & Management, Inc. from November 1994 through March 1995. Mr. Schultz is a certified public accountant and served for three years as an auditor with Deloitte and Touche, LLP.

Ann K. Newhall joined us as Senior Vice President and General Counsel in February 1999. On June 17, 1999, she was appointed Assistant Secretary, and on August 9, 1999, she was appointed to our board of directors. Prior to joining Rural Cellular, Ms. Newhall was a shareholder attorney with Moss & Barnett, A Professional Association, most recently serving as President and a director of the firm. Moss & Barnett, A Professional Association, serves as our outside general counsel. Ms. Newhall received her J.D. from the University of Minnesota Law School, cum laude, in 1977.

David J. Del Zoppo joined us in May 1997 as Controller. In July 1998, Mr. Del Zoppo was promoted to Vice President, and in October 1999 he was named Vice President, Finance and Accounting. Prior to joining Rural Cellular, Mr. Del Zoppo served as a Vice President of Operations with Business Records Corporation from January 1988 to May 1997 and as Divisional Controller from 1986 to 1988, and with Jostens, Inc. as an Internal Audit Manager from 1982 to 1986. Mr. Del Zoppo is a certified public accountant and served as an auditor with KPMG Peat Marwick from 1978 through 1982.

Scott G. Donlea served as our Vice President of Sales and Marketing beginning in August 1995 and on June 17, 1999, was appointed Vice President, Market Development. Mr. Donlea joined us in 1992 as Manager of Market Operations. From 1990 to 1992, Mr. Donlea was regional manager for CommNet Cellular, Inc., responsible for marketing and sales in Iowa and South Dakota. From 1988 to 1990, Mr. Donlea served as branch manager for US WEST Cellular, Inc., in Sioux Falls, South Dakota. Mr. Donlea currently serves as Chairperson of the Rural Cellular Association's business and marketing committee.

George W. Wikstrom has been a director since 1990 and Vice President since 1991. Mr. Wikstrom has been Vice President of Wikstrom Telephone Company, Incorporated, a local exchange telephone company and a shareholder of Rural Cellular, for more than ten years. He also serves as President and a director of Cellular 2000. Mr. Wikstrom has been the Commissioner of the Northwest Regional Development Commission since 1979 and has served as a director of the Association of Minnesota Telephone Utilities, and Onvoy, Inc.

Don C. Swenson has been a director since 1990 and Secretary since June 1995. Mr. Swenson has been with Arvig Communication Systems, a local exchange telephone company and a shareholder of Rural Cellular, since 1981, serving most recently as Director of Operations of that company. Mr. Swenson also serves as a director of Arvig Enterprises, Inc. and Cellular 2000. He has also been a member of the board of directors of United Community Bank, Perham, Minnesota, since 1993 and of Independent Emergency Services LLC since 1996.

Jeffrey S. Gilbert has been a director since 1995. Since September 1996, he has served as Assistant Manager of Paul Bunyan Rural Telephone Cooperative and General Manager of Northern Communications, Inc., a wholly-owned subsidiary of Paul Bunyan. Both Paul Bunyan and Northern Communications, Inc. are shareholders of Rural Cellular. He previously served beginning January 1993 as General Manager of Deer River Telephone Co., Inc., a local exchange telephone company and formerly a subsidiary of Paul Bunyan and one of our shareholders, and as a manager and in other positions with that company since 1982. He has also been a director of Cellular 2000 and the Minnesota Telephone Association.

Marvin C. Nicolai has been a director since 1995. He became General Manager of Consolidated Telephone Company, a local exchange telephone company and one of our shareholders, and Northland Communications Corporation, a wholly-owned subsidiary of Consolidated, in January 1995. From 1988 to 1995, he was a manager of Northland. Mr. Nicolai has been a director of Cellular 2000 since 1998, a director of Onvoy, Inc. since 1996, a director of Independent Information Services Corp. since 1995, and a member of the board of governors of Independent Emergency Services LLC since 1996.

George M. Revering has been a director since 1990. Mr. Revering has been President and General Manager of Midwest Information Systems, Inc. since 1976 and is President of Midwest Telephone Company and President of Peoples Telephone Company of Big Fork, both subsidiaries of Midwest Information Systems and shareholders of Rural Cellular, and President of Osakis Telephone Company, a subsidiary of Midwest Information Systems. Mr. Revering is also a director of Cellular 2000 and Onvoy, Inc. and is President of Onvoy, Inc.'s subsidiary, Means Telecom.

   In addition to the above, the holders of our convertible preferred stock, Madison Dearborn Capital Partners III, LP and Boston Ventures Limited Partnership V, will have the right to appoint two individuals to our board of directors. The following individuals have been designated to fill those positions:

John Hunt, age 34, is a director of Boston Ventures Management, Inc., where he focuses on telecommunications investments. He joined Boston Ventures in 1990 as an Associate, was promoted to Associate Director in 1996, and was named to his current position in 1998. Prior to joining Boston Ventures, Mr. Hunt was an investment analyst at Bear, Stearns & Co., Inc. Mr. Hunt also serves on the board of directors of Integra Telecom, Inc., a competitive local exchange carrier, and on the board of managers of Sports Trend Info, LLC. Mr. Hunt received a bachelor's degree in finance from the University of Massachusetts at Amherst in 1988.

Paul Finnegan, age 46, is a Managing Director of Madison Dearborn Partners, where he concentrates on investments in the communications industry. Mr. Finnegan has been with Madison Dearborn Partners since he co-founded that company in 1993. Prior to that time, Mr. Finnegan worked at First Chicago Venture Capital for ten years. Mr. Finnegan serves on the boards of directors of Allegiance Telecom, Inc., @link Networks, Inc., CompleTel Europe LLC, Enews.com, Focal Communications Corporation, Madison River Telephone Company, LLC, Reiman Holding Company, LLC, Spectrum Healthcare Services, Inc., and Wireless One Network, L.P. He also serves on the board of trustees of The Skyline Fund, a small cap mutual fund. Mr. Finnegan received his B.A. from Harvard College and his M.B.A. from the Harvard Graduate School of Business Administration.

Compensation of Directors

   Directors' Fees. Beginning in 2000, directors who are not employees of Rural Cellular are paid an annual fee of $10,000, $750 for each board meeting attended in person, $350 for each board meeting attended via telephone conference, $500 for each committee meeting attended in person, and $350 for each committee meeting attended via telephone conference. They are also reimbursed for travel and other expenses incurred in attending meetings and serving as a director. Total fees paid to all nonemployee directors as a group for services rendered during 1998 were $48,800.

   Directors' Stock Option Plan. Directors who are not employees of Rural Cellular are eligible to be granted options under our stock option plan for nonemployee directors. The plan provides that all nonemployee directors serving as of the day following an annual meeting will be granted options on that date to purchase 5,250 shares of Class A common stock. Nonemployee directors serving as of the day following the 1999 annual meeting were granted options to purchase a total of 26,250 shares of Class A common stock at $17.00 per share.

Summary Compensation Table

   The following table sets forth information with regard to compensation paid to our Chief Executive Officer and to each other executive officer whose total annual salary and bonus for fiscal 1998 exceeded $100,000.

							Long-Term Compensation Awards
			Annual Compensation
Name and Principal Position	Fiscal Year							All Other Compensation(1)
			Salary		Bonus		Options
Richard P. Ekstrand President and Chief Executive Officer	1998 1997 1996		$	312,500 176,000 120,000	$	148,393 54,559 52,000	75,000 11,750 81,000	$	4,970 4,207 4,255
Wesley E. Schultz Senior Vice President and Chief Financial Officer	1998 1997 1996	(2)	$	217,500 126,000 56,567	$	57,068 30,738 13,333	22,500 6,500 90,000	$	4,970 2,908 —
Scott G. Donlea Vice President, Market Development	1998 1997 1996		$	140,000 113,000 84,100	$	34,249 51,587 35,000	12,500 2,500 64,600	$	3,778 4,116 3,170
David J. Del Zoppo Vice President, Finance and Accounting	1998 1997 1996	(3)	$	90,000 49,583 —	$	23,704 — —	15,000 10,000 —	$	2,511 687 —

(1)

For all years, all other compensation consists of company contributions on behalf of each Named Executive Officer to the 401(k) plan.

(2)

Mr. Schultz joined as Vice President, Finance and Chief Financial Officer on May 14, 1996.

(3)

Mr. Del Zoppo joined as Corporate Controller on May 27, 1997.

Option Grants in Last Fiscal Year

   The following table sets forth information regarding options granted to the Named Executive Officers during the 1998 fiscal year.

	Individual Grants
								Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(2)
			Percent of Total Options Granted to Employees in Fiscal Year
	Number of Shares Underlying Options Granted(1)
Name					Exercise Price ($/Share)		Expiration Date
								5%		10%
Richard P. Ekstrand	25,000 50,000	(3) (4)	9.4 18.9	%	$	13.31 15.50	01/02/08 08/19/08	$	209,265 487,393	$	530,318 1,235,150
Wesley E. Schultz	12,500 10,000	(5) (4)	4.7 3.8			13.31 15.50	01/02/08 08/19/08		104,632 97,479		265,159 247,030
Scott G. Donlea	12,500	(5)	4.7			13.31	01/02/08		104,632		265,159
David J. Del Zoppo	5,000 10,000	(5) (5)	1.9 3.8			13.31 16.25	01/02/08 06/25/08		41,853 102,195		106,064 258,983

(1)

The number indicated is the number of shares of Class A common stock that can be acquired upon the exercise of options. Rural Cellular has not granted any stock appreciation rights.

(2)

The assumed rates of 5% and 10% are hypothetical rates of stock price appreciation selected by the Securities and Exchange Commission and are not intended to, and do not, forecast or assume actual future stock prices. We believe that future stock appreciation, if any, is unpredictable, and we are not aware of any formula that will determine with any reasonable accuracy the present value of stock options. No gain to optionees is possible without an appreciation in stock prices, and any increase will benefit all shareholders commensurately. There can be no assurance that the amounts reflected in this table will be achieved.

(3)

Consists of an incentive stock option for 9,000 shares and a nonqualified stock option for 16,000 shares. Each option has a term of ten years, but provides for early expiration upon termination of employment, is not transferable, and becomes exercisable in five annual installments of 1,800 and 3,200 shares, respectively.

(4)

Consists of nonqualified stock options, which have a term of ten years, but provide for early expiration upon termination of employment, are not transferable, and become exercisable in five equal annual installments.

(5)

Consists of incentive stock options, which have a term of ten years, but provide for early expiration upon termination of employment, are not transferable, and become exercisable in five equal annual installments.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

   The following table provides information relating to option exercises during fiscal 1998 and the number and value of shares of Class A common stock subject to options held by the Named Executive Officers as of December 31, 1998.

Name	Shares Acquired on Exercise	Value Realized		Number of Shares Underlying Unexercised Options at Fiscal Year-End (1) Exercisable/Unexercisable	Value of Unexercised In-the-Money Options at Fiscal Year-End (2) Exercisable/Unexercisable
Richard P. Ekstrand	54,200	$	307,135	58,950/123,600	$44,775/$66,825
Wesley E. Schultz	—		—	45,500/73,500	53,625/70,125
Scott G. Donlea	19,900		115,681	28,840/51,260	30,170/53,101
David J. Del Zoppo	—		—	2,000/23,000	2,740/10,960

(1)

Rural Cellular has not granted any stock appreciation rights.

(2)

Value is calculated as the difference between the closing price of Class A common stock on December 31, 1998 ($10.50) and the related option exercise price (if lower than the closing price) multiplied by the number of shares underlying the option.

Employment Agreements/Change in Control Provisions

   We have entered into employment agreements with Messrs. Ekstrand, Schultz, and Donlea and Ms. Newhall. Each agreement may be terminated at any time by either the individual or us. Each agreement prohibits the individual from engaging in any activity competitive with our business or contacting our customers or employees for that purpose for a period of one year (six months for Mr. Donlea) following termination of employment. The employment agreements with Messrs. Ekstrand and Schultz and Ms. Newhall, which were entered into in January 1999, provide for an initial term ending December 31, 2001 and are renewable each year for an additional one-year period, so that the remaining term of employment is never less than two years. We have renewed all three contracts. The employment agreement with Mr. Donlea (originally entered into in December 1995) currently expires on December 31, 2000. If any of the agreements is terminated at any time by us for other than just cause, we are obligated to continue payment of salary and other benefits for the remainder of the term of the agreement. The employment agreements provide for annual base salaries plus increases as may be determined from time to time, but at least annually.

   If any of these individuals is terminated for other than just cause following a change in control of Rural Cellular, he or she will be entitled to receive compensation in an amount equal to 2.99 times an amount equal to the sum of the individual's annual base salary in effect immediately prior to the change in control, plus an amount equal to the annual incentive plan payment to that individual for performance in the last full calendar year prior to the year in which the change in control occured, in the case of Messrs. Ekstrand and Schultz and Ms. Newhall, and in an amount equal to 2.99 times his "base amount" of compensation (as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended), in the case of Mr. Donlea. In addition, in the event of a change in control, any award granted under our 1995 Stock Compensation Plan will become fully vested and exercisable. A change in control occurs when

•

the majority of our directors are not persons whose election was solicited by our board or who were appointed by our board,



•

any person or group of persons acquires 30% or more of our outstanding voting stock, or



•

the shareholders approve a liquidation or dissolution or specified mergers or consolidations, exchanges of shares, or dispositions of substantially all of our assets.

   Subject to specified limitations, in the event that any payment made to Mr. Ekstrand, Mr. Schultz, or Ms. Newhall upon the occurrence of a change in control becomes subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, we are required to pay additional amounts to put the individual in the same after-tax position as if the excise tax did not apply.

CERTAIN TRANSACTIONS

   Rural Cellular and its management and security holders and their respective affiliates engage in a variety of transactions between or among each other in the ordinary course of their respective businesses. As a general rule, we have not retained an independent third party to evaluate these transactions, and there has been no independent committee of our board of directors to evaluate these transactions. Notwithstanding this fact, we believe that the terms and conditions of these transactions, including the fees or other amounts paid by us, were established through arm's-length negotiations which adequately took into account transactions of a similar nature entered into by us with unaffiliated third parties and/ or market transactions of a similar nature entered into by unaffiliated third parties. There can be no assurance that we could not have obtained more favorable terms from an unaffiliated third party.

Switching Services

   One of the switches used in our cellular network is owned by Switch 2000, of which we previously held a 40.8% ownership interest. Richard P. Ekstrand, President, Chief Executive Officer, and a director of Rural Cellular, served as Chairman of the board of governors of Switch 2000 until September 30, 1998, when we liquidated our interest in Switch 2000. Under a user agreement with Switch 2000, we were obligated to pay our portion of the costs of cellular switching and related services. During 1996, 1997 and 1998, and for the first nine months of 1999, charges from Switch 2000 for switching services and related equipment totaled approximately $4.8 million, $3.2 million, $710,000, and $237,000, respectively. During 1997 we activated a new mobile telephone switching office and reduced our reliance on services provided by Switch 2000.

   We were also required to make capital contributions to Switch 2000. In 1996, this contribution totaled $220,156. No contribution was made in 1997 or 1998.

Transactions with Management and Security Holders

   We have entered into various arrangements with our shareholders or their affiliates. Arrangements involving shareholders or their affiliates that beneficially own more than 5% of any class of our stock and in which total payments for all of these arrangements exceeded $60,000 in fiscal 1996, 1997, 1998 or during the first nine months of 1999 are described below. Except as may be otherwise indicated below, we anticipate that amounts earned or incurred in 2000 will be similar to the 1999 amounts.

   Leases, Transmission Services, and Agency Agreements. We have arrangements with several of our shareholders for leasing cell sites and using telephone lines for transmission between cell sites and the switch serving our cellular network. We formerly leased space for our retail store in Brainerd, Minnesota, from a subsidiary of Consolidated Telephone Company and currently lease office space in Detroit Lakes, Minnesota, from an affiliate of Arvig Enterprises, Inc. In addition, several of our shareholders and their affiliates serve as agents for the sale of our cellular and paging services.

•

During 1996, 1997, and 1998 and the first nine months of 1999, we paid $535,759, $1,092,247, $360,919, and $400,948, respectively, to Arvig Enterprises, Inc. and its affiliates for all services. Arvig Enterprises, Inc. is the beneficial owner of more than 5% of our outstanding Class B common stock. Don C. Swenson, one of our directors, serves as a director of Arvig Enterprises, Inc.



•

During 1996, 1997, and 1998 and the first nine months of 1999, we paid $266,646, $554,706, $180,434, and $138,042, respectively, to Consolidated Telephone Company and its affiliates for all services. Consolidated Telephone Company beneficially owns more than 5% of our outstanding Class B common stock. Marvin C. Nicolai, one of our directors, is the general manager of Consolidated.



•

During 1996, 1997, 1998, and the first nine months of 1999, we paid $76,015, $90,168, $90,259 and $96,316, respectively, to Paul Bunyan Rural Telephone Cooperative and its affiliates, which beneficially own more than 5% of our outstanding Class B common stock, for all services. Jeffrey S. Gilbert, one of our directors, is general manager of Northern Communications, Inc., a subsidiary of Paul Bunyan, and assistant manager of Paul Bunyan.



•

During 1996, we were charged $207,313, by affiliates of Telephone & Data Systems, Inc., which beneficially owns more than 5% of our outstanding shares, for all services.

   Acquisition of RGI Group, Inc. Effective February 1, 1999, we acquired all of the outstanding stock of RGI Group, Inc., a corporation which conducted business under the name Glacial Lakes Cellular, for approximately $11.9 million. George M. Revering, a member of our board of directors, was a shareholder, president, and a director of RGI Group, Inc. The purchase price was determined by negotiation among the parties, and we obtained the opinion of an investment banker that the transaction was fair to us.

   Tower Purchase. In 1995 we purchased a transmission tower from a subsidiary of Consolidated Telephone Company. The total purchase price was $67,000, of which payments of $17,000 were made in each of 1995, 1996, 1997 and 1998. We paid interest on any outstanding balance of the purchase price at 5% per annum.

   Roaming Arrangements. We have roaming agreements with United States Cellular Corporation, a subsidiary of Telephone & Data Systems, Inc. Under the roaming agreements, we pay for service provided to our customers in areas served by United States Cellular Corporation and receive payment for service provided to customers of United States Cellular Corporation in our cellular service area. We negotiated the rates of reimbursement with United States Cellular Corporation, and the rates reflect those charged by all carriers. Roaming charges are passed through to the customer. During 1996, 1997, 1998, and the first nine months of 1999, charges to our customers for services provided by United States Cellular Corporation totaled $99,920, $50,258, $978,557, and $1,418,645, respectively, and charges by us to customers of United States Cellular Corporation totaled $39,179, $108,819, $314,390, and $47,214, respectively.

   Cellular and Paging Service and Equipment. Several of our shareholders are our customers for cellular and paging services and, in connection therewith, also purchase or lease cellular telephones and pagers from us. During 1996, 1997, 1998 and the first nine months of 1999, Arvig Enterprises, Inc. and its affiliates were billed $82,114, $1,643, $77,108, and $62,443, respectively; Consolidated Telephone Company and its affiliates were billed $15,200, $8,366, $6,967, and $18,465, respectively, and Paul Bunyan and its affiliates were billed $16,508, $11,193, $25,571, and $31,152, respectively, for these services and equipment.

   Exchange of Securities. Telephone & Data Systems, Inc. currently holds 586,799 shares of our Class A common stock and 132,597 shares of our Class B common stock. Telephone & Data Systems, Inc. also controls United States Cellular Corporation, which operates cellular licensees in Oregon rural service areas 3 and 6 that compete with licenses in those rural service areas that we will acquire from Triton in the pending acquisition. Federal Communications Commission regulations place specific restrictions on the interests in competing cellular licenses that an entity may hold. To satisfy these restrictions, we have entered into an agreement with Telephone & Data Systems, Inc. to exchange a sufficient number of its shares of our Class A and Class B common stock to reduce Telephone & Data Systems, Inc. ownership of our common stock to less than 5%.

   Our agreement with Telephone & Data Systems, Inc. provides that, in exchange for its shares, Telephone & Data Systems, Inc. will receive either shares of Class T convertible preferred stock or a convertible debenture that will be created specifically for the exchange. If the Federal Communications Commission does not approve the issuance of the convertible preferred stock as a remedy for reducing Telephone & Data Systems, Inc.'s interest, then we have agreed that Telephone & Data Systems, Inc. will receive a convertible debenture instead of the convertible preferred stock. If we are required to issue a convertible debenture, we will also be obligated to reimburse Telephone & Data Systems, Inc. for any taxes it is required to pay as a consequence. The convertible preferred stock and the convertible debenture include an option for either party to convert the preferred stock or convertible debenture into the same number and class as the shares of stock being exchanged, but only at a time when conversion is permissible under Federal Communications Commission regulations.

   In accordance with the terms of our outstanding senior subordinated notes and senior exchangeable preferred stock, we have obtained an opinion that the proposed transaction is fair to us from a financial point of view.

SECURITY OWNERSHIP OF BENEFICIAL
OWNERS AND MANAGEMENT

   The following table sets forth information provided to us by the holders or contained in our stock ownership records regarding beneficial ownership of our common stock as of December 22, 1999 (except as otherwise noted), and after giving effect to the offering of the Class A common stock, by:

•

each person known by us to be the beneficial owner of more than 5% of any class of our outstanding common stock;



•

each Named Executive Officer;



•

each director; and



•

all directors and executive officers as a group.

Unless otherwise indicated, each person has sole voting and investment power with respect to the shares listed.

	Before Offering
									After Offering
	Class A Common Stock			Class B Common Stock
							Percentage of combined voting power				Percentage of combined voting power
Name and address of beneficial owner	Number of shares	Percentage of class		Number of shares	Percentage of class				Percentage of all common stock
Baron Capital Group, Inc.(1) 767 Fifth Avenue 24th Floor New York, NY 10153	800,000	9.9	%	—	—		4.3	%	6.9	%	3.8	%
Franklin Resources, Inc.(2) 777 Mariners Island Boulevard San Mateo, CA 94404	732,200	9.1		—	—		4.0		6.4		3.5
Telephone & Data Systems, Inc.(3) 30 North LaSalle Street Chicago, IL 60602	586,799	7.3		132,597	12.8	%	10.4		6.2		9.2
Goldman Sachs Asset Management(4) 85 Broad Street New York, New York 10004	470,650	5.8		—	—		2.6		4.1		2.3
Arvig Enterprises, Inc. 160 2nd Ave. S.W. Perham, MN 56573	338,893	4.2		121,664	11.8		8.4		4.0		7.5
Consolidated Telephone Company 1102 Madison Street Brainerd, MN 56401	171,107	2.1		86,189	8.4		5.6		2.2		5.0
Sherburne TelCom, Inc. 444 N. Eagle Lake Road Big Lake, MN 55309	133,123	1.6		54,289	5.3		3.7		1.6		3.2
Melrose Telcom, Inc. 320 East Main Street Melrose, MN 56352	105,822	1.3		79,493	7.7		4.9		1.6		4.3
Hector Communications Corporation(5) 211 South Main Street Hector, MN 55342	70,381	*		75,361	7.3		4.5		1.3		4.0
Paul Bunyan Rural Telephone Cooperative(6) 1831 Anne Street NW Bemidji, MN 56601	54,106	*		85,332	8.3		4.9		1.2		4.4
West Central CelCom, Inc. 209 Minnesota Avenue Sebeka, MN 56477	—	—		79,857	7.7		4.3		*		3.8
Richard P. Ekstrand(7)	205,177	2.5		32,708	3.2		2.9		2.1		2.5
Jeffrey S. Gilbert(8)	70,956	*		85,332	8.3		5.0		1.4		4.4
Ann K. Newhall(9)	32,000	*		—	—		*		*		*
Marvin C. Nicolai(10)	188,257	2.3		86,189	8.4		5.7		2.4		5.0
George M. Revering(11)	100,100	1.2		—	—		*		*		*
Wesley E. Schultz(12)	79,517	1.0		—	—		*		*		*
Don C. Swenson(13)	361,707	4.5		121,664	11.8		8.6		4.2		7.6
George W. Wikstrom(14)	95,535	1.2		34,944	3.4		2.4		1.1		2.1
Scott G. Donlea(15)	41,664	*		—	—		*		*		*
David Del Zoppo(16)	8,347	*		—	—		*		*		*
All directors and executive officers as a group (10 persons)(17)	1,183,260	14.1	%	360,837	35.0	%	25.6	%	13.1	%	22.7	%

*

Denotes less than 1%.

(1)

Based on Schedule 13G dated May 11, 1998 (updated by information provided to us as of October 31, 1999), filed jointly by Baron Capital Group, Inc., BAMCO, Inc., an investment adviser; Baron Small Cap Fund, an investment company, and Ronald Baron. Baron Capital Group, Inc. and Mr. Baron disclaim beneficial ownership of securities held by BAMCO, Inc. and Baron Small Cap Fund (or the investment advisory clients thereof) to the extent the shares are held by persons other than Baron Capital Group, Inc. and Mr. Baron. BAMCO, Inc. disclaims beneficial ownership of shares held by its investment advisory clients to other than its affiliates.

(2)

Based on Schedule 13G dated February 2, 1999 (updated by information provided to us as of October 31, 1999), filed jointly by Franklin Resources, Inc., Charles B. Johnson and Rupert H. Johnson, Jr., principal shareholders of Franklin Resources, Inc., and Franklin Advisers, Inc., a subsidiary of Franklin Resources, Inc. Franklin Advisers, Inc. has sole voting and dispositive power over the shares, which are held for the benefit of investment advisory clients.

(3)

Based on Schedule 13G dated February 11, 1999. Includes shares of Class A and Class B common stock owned by Arvig Cellular, Inc. (172,348 Class A and 70,243 Class B); Mid-State Telephone Co. (74,746 Class A and 31,177 Class B); and Minnesota Invco RSA #5 (339,705 Class A and 31,177 Class B). Telephone & Data Systems, Inc. owns (i) 100% of TDS Telecommunications Corporation, which owns 100% of Arvig Telcom, Inc., which in turn owns 100% of Arvig Cellular, Inc., and 100% of Mid-State Telephone Co. and (ii) approximately 96% of the issued and outstanding shares of United States Cellular Corporation, which owns 100% of United States Cellular Investment Company, which owns 100% of Minnesota Invco RSA #5, Inc. In connection with the Triton acquisition, we will exchange through the issuance of Class T convertible preferred stock or a convertible debenture, a sufficient number of shares held by Telephone & Data Systems, Inc. and its affiliates to reduce their total holdings to 5% or less. This will be done to comply with Federal Communications Commission rules regarding ownership of competing cellular licenses.

(4)

Based on Schedule 13G/A dated January 10, 2000, filed by Goldman Sachs Asset Management, an operating division of Goldman Sachs & Co. Goldman Sachs Asset Management disclaims beneficial ownership of shares owned by any client accounts with respect to which it or its employees have voting or investment discretion, or both, and certain investment entities of which its affiliate is the general partner, managing general partner, or other manager, to the extent interests in such entities are held by persons other than the Asset Management division.

(5)

Includes shares of Class A and Class B common stock owned Felton Telephone Company (20,000 Class A and 37,680 Class B) and Loretel Systems, Inc. (50,381 Class A and 37,681 Class B). Hector Communications Corporation owns 68% of Alliance Telecommunications Corporation. Alliance Telecommunications Corporation owns 100% of Felton Telephone Company and Loretel Systems, Inc.

(6)

Includes 19,285 shares of Class A common stock owned by a subsidiary of Paul Bunyan Rural Telephone Cooperative.

(7)

Includes 97,276 shares of Class A common stock and 32,708 shares of Class B common stock owned by Lowry Telephone Co., Inc., of which Mr. Ekstrand is the sole shareholder and Vice President, and 1,000 shares of Class A common stock held by or on behalf of Mr. Ekstrand's children. Also includes 81,583 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(8)

Includes 34,821 shares of Class A common stock and 85,332 shares of Class B common stock owned by Paul Bunyan Rural Telephone Cooperative, of which Mr. Gilbert is Assistant Manager, and 19,285 shares of Class A common stock owned by Northern Communications, Inc., of which Mr. Gilbert is the General Manager. Mr. Gilbert disclaims beneficial ownership of these shares. Also includes 15,750 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(9)

Includes 29,000 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(10)

Includes 171,107 shares of Class A common stock and 86,189 shares of Class B common stock owned by Consolidated Telephone Company, of which Mr. Nicolai is the General Manager. Mr. Nicolai disclaims beneficial ownership of these shares. Also includes 15,750 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(11)

Includes 15,750 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(12)

Includes 76,846 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(13)

Includes 338,893 shares of Class A common stock and 121,664 shares of Class B common stock owned by affiliates of Arvig Enterprises, Inc., of which Mr. Swenson is a member of the board of directors. Mr. Swenson disclaims beneficial ownership of these shares. Also includes 15,750 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(14)

Includes 81,535 shares of Class A common stock and 34,944 shares of Class B common stock owned by Wikstrom Telephone Company, Inc., of which Mr. Wikstrom is a shareholder and Vice President. Mr. Wikstrom disclaims beneficial ownership of these shares. Also includes 10,500 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(15)

Includes four shares of Class A common stock owned by or on behalf of Mr. Donlea's wife and children and 31,760 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(16)

Includes 8,347 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

(17)

Includes 301,036 shares of Class A common stock that may be purchased upon exercise of currently exercisable options.

DESCRIPTION OF FINANCING ARRANGEMENTS

The following is a summary of our current and proposed financing arrangements. This summary is qualified in its entirety by reference to the various documents governing the financing arrangements.

Existing Credit Facility

   As of the date of this prospectus, we are party to a loan agreement dated as of July 1, 1998 with a consortium of banks. The existing credit facility comprises a revolving credit line in the maximum principal amount of $200.0 million and a $100.0 million term loan. It is anticipated that the proceeds from the preferred and common stock offerings, together with the proceeds of the new credit facility described below, will pay all remaining obligations under the existing credit facility in full. As of September 30, 1999, $182.1 million was outstanding under our existing credit facility.

   Our obligations under the existing credit facility are secured by a first security interest in all of our assets, excluding our ownership interest in Cellular 2000, and in some of our real estate. Repayment is unconditionally guaranteed by some of our subsidiaries, each of which has executed a security agreement in favor of the banks granting a first perfected security interest in all of its property and assets. The security interests granted by us and our subsidiaries pledge as collateral all property, whenever acquired, including inventory, accounts, equipment, contracts and leases, general intangibles, licenses, furniture and fixtures, deposit accounts, miscellaneous items, and proceeds of any of the foregoing.

   Interest is payable quarterly on borrowings under the existing credit facility at rates based on, at our option, either (i) the 1, 2, 3, 6 or, if made available by the banks, 9 or 12 months London Interbank Offer Rate for U.S. dollar deposits, or LIBOR, or (ii) the Base Rate, which is the higher of the prime rate quoted by Toronto Dominion (Texas), Inc., which is the administrative agent for the banks, or the Federal Funds Rate plus 0.5%. In each case, an additional margin of interest is payable by us above the Base Rate or LIBOR rate. The margin is based on the ratio of our total debt (including debt of our subsidiaries) to our operating cash flow and that of our subsidiaries for the twelve calendar month period ending as of the end of the most recently completed fiscal quarter. The margin above the Base Rate fluctuates from zero to 1.25%. The margin above LIBOR fluctuates from 0.75% to 2.25%.

   Under specified terms and conditions, subject to the approval of a majority of the lender interests in the existing credit facility, the amount available may be increased from $300.0 million to an amount not to exceed $425.0 million. The $125.0 million incremental facility will have a maturity no earlier than 12 months after the maturity of the $300.0 million debt under the existing credit facility, with principal repayments commencing not earlier than and in amounts not larger than, the repayment of the $300.0 million debt under the existing credit facility.

   Subsequent to an event of default under the existing credit facility that continues beyond the applicable cure period, interest on outstanding amounts is payable at the highest applicable margin plus 2.0%.

   The existing credit facility requires that the outstanding commitment be reduced in quarterly installments beginning March 31, 2001. The installment amounts payable each year increase over the term of the loan agreement, with a reduction of 1.875% each quarter in the first year, increasing to a reduction of 6.875% each quarter in the final year ending December 31, 2006, when payment in full is due.

   The existing credit facility contains covenants that, subject to specified exceptions, restrict our ability to:

•

make capital expenditures;


•

sell or dispose of our assets;


•

incur additional debt;


•

incur contingent liabilities and liens;



•

merge with or acquire other companies or be subject to a change of control 50% or more in ownership;



•

make loans or advances or stock repurchases;



•

engage in transactions with affiliates;



•

make investments; or



•

change our primary business activity from the wireless communications industry.

   The existing credit facility also requires that we satisfy specified financial tests and maintain specified financial ratios. We are required to enter into specified interest rate swap agreements which rank pari passu with the existing credit facility. In addition to the scheduled reductions of outstanding principal described above, we are required to reduce the amount of commitment available under the existing credit facility on each March 31, beginning on March 31, 2001, by an amount equal to 50% of our excess cash flow for the immediately preceding year or portion thereof. In addition, we must pay specified costs if we prepay LIBOR advances.

   Upon the occurrence of an event of default under the existing credit facility, the banks may cease making loans, terminate the facility, and declare all amounts outstanding to be immediately due and payable. The existing credit facility specifies a number of events of default including, among others, the failure to make timely principal and interest payments, to perform the covenants, or to maintain the required financial performance ratios.

New Credit Facility

   We have a received a commitment from an affiliate of TD Securities (USA) Inc. to replace our existing credit facility. Concurrent with the closing of the Triton acquisition, we intend to close on a new credit facility in a total amount of $1.2 billion, which, together with the proceeds from the preferred and common stock offerings and the issuance of the Class M preferred stock described below, will be used to finance the Triton acquisition, repay borrowings under our existing credit facility, pay related fees and expenses, fund additional acquisitions, and for capital expenditures and other corporate purposes. In the event the Triton acquisition does not close, the existing credit facility will remain in place, and we will not enter into the new credit facility.

   The new credit facility will be subject to negotiation of definitive terms and conditions. As of the date of this prospectus, assuming the Triton acquisition closes, it is expected that the new credit facility will consist of:

•

$275.0 million Senior Secured 8 year Reducing Revolving Credit Facility;



•

$450.0 million 8 year Senior Secured Amortizing Term Loan A;



•

$237.5 million 8¹/2 year Senior Secured Term Loan B/Fund Tranche; and



•

$237.5 million 9 year Senior Secured Term Loan C/Fund Tranche.

   Our obligations under the new credit facility will be secured by a first security interest in all of our assets, excluding certain real estate and our ownership interest in some of our subsidiaries. Repayment will be unconditionally guaranteed by some of our subsidiaries, including our wholly owned subsidiaries, each of which will execute a security agreement in favor of the lender granting a first security interest in all of its property and assets. The security interests granted by us and our wholly owned subsidiaries will include all property, whenever acquired, including inventory, accounts, equipment, contracts and leases, general intangibles, licenses, furniture and fixtures, deposit accounts, miscellaneous items, and proceeds of any of the foregoing.

   Interest will be payable on borrowings under the new credit facility at rates based on, at our option, either (i) the 1, 2, 3, 6 or, if made available by the lender, 9 or 12 months LIBOR or (ii) the Base Rate, which is the higher of the prime rate of Toronto Dominion (Texas), Inc. or the Federal Funds Rate, plus 0.5%. In each case, we will be required to pay an additional margin of interest above the Base Rate or LIBOR. The margin will be based on the ratio of our debt (including the debt of our subsidiaries) to our annualized operating cash flow as of the end of the most recently completed fiscal quarter. The margin above the Base Rate ranges from 0.50% to 2.375%. The margin above LIBOR fluctuates from 1.50% to 3.375%.

   Under specified terms and conditions, the amount available under the new credit facility may be increased from $1.2 billion to an amount not to exceed $1.375 billion. The $175.0 million incremental facility will have a maturity no earlier than 12 months after the maturity of the $1.2 billion debt under the new credit facility, with principal repayments commencing not earlier than and in amounts not larger than, the repayments under the $1.2 billion debt under the new credit facility.

   Subsequent to an event of default under the agreements governing the new credit facility that continues beyond the applicable cure period, interest on all outstanding amounts shall be payable at 2% over the highest applicable margin otherwise applicable under the Base Rate option.

   It is anticipated that the closing on the new credit facility will occur immediately prior to the closing of the Triton acquisition. Interest only will be payable for the first three years. Thereafter, the new credit facility commitment shall be reduced and outstanding borrowings will be repaid in installments increasing over its term. Payment in full of the Revolving Credit and Term Loan A will be due eight years following closing of the new credit facility. The balance of Term Loan B is due 8¹/2 years from the date of closing, and the balance of Term Loan C is due 9 years from the date of closing.

   In addition to the scheduled reductions of outstanding principal described above, we will be required to reduce the amount of commitment available under the new credit facility on each March 31, beginning on March 31, 2004, by an amount equal to 50% of our excess cash flow for the immediately preceding year or portion thereof. We must also pay specified costs if we prepay LIBOR advances. We will also be required, subject to specified exceptions, to reduce the amount of commitment available upon any material sale of assets unless the after-tax proceeds are used to acquire substitute assets in the ordinary course of business within 12 months from the date of sale.

   The new credit facility will contain covenants that, subject to specified exceptions, restrict our ability to:

•

make capital expenditures;



•

sell or dispose of our assets;



•

incur additional debt;



•

incur contingent liabilities and liens;



•

merge with or acquire other companies or be subject to a change of control of 50% or more in ownership;



•

make loans or advances or stock repurchases;



•

engage in transactions with affiliates;



•

make investments; or



•

change our primary business activity from the wireless communications industry.

   The new credit facility will also require that we satisfy specified financial tests and maintain specified financial ratios. We will be required to enter into specified interest rate swap agreements which will rank pari passu with the new credit facility.

   Upon the occurrence of an event of default under the new credit facility, the lenders may cease making loans, terminate the new credit facility, and declare all amounts outstanding to be immediately due and payable. The new credit facility specifies a number of events of default including, among others, the failure to make timely principal and interest payments, to perform the covenants, or to maintain the required financial performance ratios.

Senior Subordinated Notes Due 2008

   In 1998, we issued $125.0 million principal amount 9⁵/8% senior subordinated notes due 2008. The notes are unsecured, senior subordinated obligations, subordinated in right of payment to our senior debt, including amounts outstanding under the existing credit facility prior to the consummation of the Triton acquisition and under the new credit facility after the consummation of the Triton acquisition, pari passu in right of payment with all of our future senior subordinated debt and senior in right of payment to any future subordinated debt. The notes mature on May 15, 2008. Interest on the notes accrues at a rate of 9⁵/8% per annum and is payable in cash semiannually on each May 15 and November 15. After May 15, 2003, the notes may be redeemed at any time at our option, at a redemption price of 104.813% of their principal amount. The indenture governing the senior subordinated notes specifies that the redemption price declines annually at May 15th, to 103.208% at May 15, 2004, to 101.604% at May 15, 2005, and to 100.000% of the principal amount on or after May 15, 2006.

   The indenture governing the senior subordinated notes contains specified restrictions with respect to the conduct of our business and specified restrictive covenants, including, among others, limitations on our ability to:

•

incur additional debt;



•

pay dividends or make other distributions on our capital stock;



•

make investments in, or loans to, any person;



•

dispose of assets, create liens, or incur any debt which is subordinate in right of payment to senior debt, unless the debt is subordinate in right of payment to, or ranks pari passu with, the notes; or



•

effect a merger or consolidation unless specified financial tests are met.

   The indenture specifies a number of events of default, including, among others, a failure to make timely principal or interest payments or to perform the covenants contained therein. If an event of default occurs and is continuing, the trustee under the indenture or the holders of a specified principal amount of the outstanding notes may declare the principal of and accrued but unpaid interest on all the notes to be due and payable on the date provided for in accordance with the indenture. An acceleration of the notes may, under specified circumstances, be rescinded by the holders of a majority of the total principal amount of the then outstanding notes.

Senior Exchangeable Preferred Stock

   In May 1998, we issued 125,000 shares of 11³/8% senior exchangeable preferred stock. An additional 25,000 shares are reserved for possible future issuance. Additional shares may also be used to pay dividends on the 11³/8% senior exchangeable preferred stock if we elect to pay dividends in additional shares of this stock. We intend to sell an additional $25 million of the senior exchangeable preferred stock as part of this offering. For more information see "Description of Senior Exchangeable Preferred Stock and Senior Preferred Exchange Debentures."

Junior Exchangeable Preferred Stock

   We are offering 110,000 shares of our junior exchangeable preferred stock. An additional 50,000 shares are reserved for possible future issuance. For a detailed description of the terms of the junior exchangeable preferred stock, see "Description of Junior Exchangeable Preferred Stock and Junior Preferred Exchange Debentures."

Class M Preferred Stock

   The Company has entered into an agreement with Madison Dearborn Capital Partners III, LP, Boston Ventures Limited Partnership V, and Toronto Dominion Investments, Inc. for the purchase, concurrently with the closing of the Triton acquisition, of up to 200,000 shares of Class M preferred stock, consisting of redeemable voting convertible preferred stock and redeemable nonvoting nonconvertible preferred stock. The issue price is $1,000 per share. The shares of redeemable voting convertible preferred stock will represent no more than 19.9% of the combined voting power or number of shares of common stock outstanding as of the date of issuance of the Class M preferred stock (reduced by any other convertible securities issued in connection with the Triton acquisition). The number of shares of redeemable voting convertible preferred stock may exceed 19.9% if our shareholders vote to approve the issuance of additional shares in accordance with the rules of the Nasdaq Stock Market. Rural Cellular is required to issue a minimum of $100.0 million in Class M preferred stock to the investors. We can redeem up to $25.0 million through the 90th day following issuance so long as a minimum of $100.0 million in Class M preferred stock remains outstanding. If at any time there is less than $25.0 million in Class M preferred stock outstanding, we have the option to redeem it.

   The Class M preferred stock will be entitled to dividends at a rate of 8.0% per annum and to participate in any dividends payable on the common stock. The convertible preferred stock may be converted into Class A common stock at a conversion rate of $53.00 per share at the option of an investor at any time after it is issued. The Class M preferred stock ranks junior to the senior exchangeable preferred stock, the junior exchangeable preferred stock, the Class T convertible preferred stock and the junior bridge preferred stock, if issued, with respect to dividend rights and rights on liquidation, winding-up, and dissolution.

   The Class M preferred stock is subject to mandatory redemption twelve years after the date of issuance. The convertible preferred stock may be redeemed at our option after five years at the issue price plus all accrued but unpaid dividends. The nonconvertible preferred stock may be redeemed at our option after five years at the greater of the issue price or an alternative price based on a trailing 15-day average of the market price of our Class A common stock as of the time of redemption. Either can be redeemed at our option after three years if the closing price of our Class A common stock equals or exceeds 175% of $53.00 for a period of 30 consecutive days.

   The investors have the right, after August 15, 2003, to require us to redeem the nonconvertible preferred stock at the greater of the issue price together with all accrued and unpaid dividends or the alternative price described above, so long as the repurchase does not violate any restrictions imposed by our senior subordinated notes or exchangeable preferred stock. We are required to use our best efforts to satisfy those conditions. The investors also have the right to require us to buy back the Class M preferred stock under other cicumstances, such as a change of control of Rural Cellular. We have other rights to redeem all or part of the Class M preferred stock under certain circumstances or at certain times.

   So long as the Class M preferred stock is outstanding, Rural Cellular will not be permitted to declare, pay or set apart for payment any dividends or other distribution on any stock junior to the Class M preferred stock (other than dividends payable in shares of junior stock), or purchase, redeem, retire or otherwise acquire any shares of junior stock, or any option or warrant in respect thereof, other than out of cumulative earnings available to common stock, net proceeds from the sale of junior stock subsequent to the issue date, or equity subscription or stock option agreements in effect on the issue date.

   Upon conversion of the convertible preferred stock, the holders of the convertible preferred stock will be entitled to certain demand and participatory registration rights.

   Madison Dearborn and Boston Ventures each have the right to designate one member of our board of directors. This right terminates at any time that either of these investors holds an amount of Class M preferred stock less than 50% of the Class M preferred stock originally issued to Madison Dearborn. With the exception of certain matters affecting their particular rights, the holders of the voting convertible preferred stock will vote on all matters with our Class A common stock on an as-converted basis. For example, if all 200,000 shares of the Class M preferred stock are voting preferred stock, the holders of the Class M preferred stock would have the equivalent of 3,773,585 shares of Class A common stock for voting purposes.

DESCRIPTION OF CAPITAL STOCK

   The following description of our existing capital stock is based, in part, on the provisions of our Articles of Incorporation, as amended, and our Amended and Restated Bylaws. For a complete description, you should review our Articles of Incorporation and Bylaws.

   Our authorized capital stock consists of 15,000,000 shares of Class A common stock, par value $.01 per share, 5,000,000 shares of Class B common stock, par value $.01 per share, and 10,000,000 undesignated shares of capital stock, par value $.01 per share. As of December 22, 1999, 8,090,196 shares of Class A common stock, 1,032,163 shares of Class B common stock, and 147,849 shares of 11³/8% senior exchangeable preferred stock, par value $.01 per share, were issued and outstanding.

Common Stock

   The Class A common stock and the Class B common stock are identical except as to voting rights. The Class A common stock has one vote per share, and the Class B common stock has ten votes per share. As of December 22, 1999, there were 121 holders of record of Class A common stock and 25 holders of record of Class B common stock. The Class A common stock is publicly held and is traded on The Nasdaq National Market under the symbol "RCCC." The Class B common stock is not traded on any market. Our directors and executive officers, together with entities with which they are affiliated, control approximately 35% of the outstanding Class B common stock.

   Shares of Class B common stock are to be converted into Class A common stock on a share-for-share basis:

•

at any time at the option of the holder;



•

immediately upon the transfer of shares of Class B common stock to any holder other than an affiliate of the current holder; or



•

at any time upon the vote of the holders of at least two-thirds of the Class B common stock then outstanding.

   Holders of common stock have no cumulative voting rights or preemptive rights. Subject to preferences that may be applicable to any outstanding preferred stock, holders of common stock are entitled to receive ratably dividends as may be declared by our board of directors out of legally available funds. Cash dividends, if any, must be paid equally to holders of Class A common stock and Class B common stock. Dividends paid in shares of common stock are to be in shares of Class A common stock to holders of Class A common stock and in shares of Class B common stock to holders of Class B common stock. In the event of a liquidation, dissolution, or winding-up, holders of common stock will be entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock.

Undesignated Shares

   The Articles of Incorporation authorize the board of directors to establish and issue one or more series of capital stock from the undesignated shares, and to fix the relative rights and preferences of the shares, including voting powers, dividend rights, liquidation preferences, redemption rights, and conversion privileges. The issuance of undesignated shares may have the effect of delaying, deferring, or preventing a change in control without further action by the shareholders. Undesignated shares issued with voting, conversion, or redemption rights may adversely affect the voting power of the holders of the common stock and could discourage any attempt to obtain control of Rural Cellular. As of the date of this prospectus, the board of directors has authorized the issuance of 450,000 shares of senior exchangeable preferred stock, 200,000 shares of Series A junior participating preferred stock, par value $.01 per share, 50,000 shares of Series B junior participating preferred stock, par value $.01 per share and, except for the shares being offered in the preferred and common stock offerings and the shares of convertible preferred stock, currently has no plan or intention to issue any additional series or class of capital stock.

Limitation on Foreign Ownership and Transfers of Control

   The Communications Act and related regulations prohibit the holding of a common carrier license by a corporation if more than 25% of the capital stock of the licensee's controlling company is owned directly or beneficially by non-U.S. citizens. For this purpose, capital stock includes all equity interests, including our Class A and Class B common stock and our preferred stock. Absent Federal Communications Commission approval of foreign ownership exceeding these limits, failure to comply with these requirements may result in a Federal Communications Commission order requiring divestiture of alien ownership. In addition, fines or denial of renewal or revocation of the license is possible. The Articles of Incorporation permit us to redeem our common stock from shareholders where necessary to protect our licenses.

   The Communications Act and related regulations also require prior approval of changes in control of entities holding common carrier licenses.

Limitation of Liability and Indemnification

   As permitted by the Minnesota Business Corporation Act, our Articles of Incorporation provide that none of our directors will be liable to us or to our shareholders for monetary damages for breach of a fiduciary duty as a director other than for:

•

any breach of the director's duty of loyalty to us or to our shareholders;



•

acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law;



•

approval of specified unlawful dividends or stock repurchases or redemptions; and



•

any transaction from which the director derived an improper personal benefit.

   In appropriate circumstances, equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Minnesota law.

   Section 302A.521 of the Minnesota Business Corporation Act, our Articles of Incorporation, and our Amended and Restated Bylaws provide that we must indemnify any director, officer, employee or agent made or threatened to be made a party to a proceeding, by reason of the former or present official capacity of the person, against judgments, penalties, fines, settlements, and reasonable expenses incurred by the person in connection with the proceeding if specified statutory standards are met. "Proceeding" means a threatened, pending, or completed civil, criminal, administrative, arbitration, or investigative proceeding, including one by us or in our behalf. For a complete statement of these indemnification rights, please see Section 302A.521 of the Minnesota Business Corporation Act, our Articles of Incorporation and our Amended and Restated Bylaws.

Antitakeover Effects

   In addition to the undesignated shares, specific provisions of the Minnesota Business Corporation Act, our Articles of Incorporation, and our Amended and Restated Bylaws could have the effect of discouraging attempts to acquire us, including a hostile takeover, or remove incumbent management even if some or a majority of our shareholders were to deem the attempt to be in their best interest, including an attempt that might result in the payment of a premium over the market price for the shares of Class A common stock held by our shareholders.

Classified Board of Directors, Removal, Vacancies

   Our Articles of Incorporation and our Amended and Restated Bylaws provide that the board of directors is divided into three classes of directors serving staggered three-year terms. The classification of directors has the effect of making it more difficult for shareholders to change the composition of the board of directors in a relatively short period of time. Our Articles of Incorporation and our Amended and Restated Bylaws also provide that directors may be removed only by the affirmative vote of the holders of at least two-thirds of the voting power of all of the outstanding shares of common stock entitled to vote for the election of directors. In addition, vacancies, whether created by resignation, death, removal, or an increase in the number of directors, may be filled by a vote of a majority of directors then in office, even though less than a quorum. The foregoing provisions could prevent shareholders from removing incumbent directors and filling the resulting vacancies with their own nominees.

Advance Notice Provisions for Shareholder Proposals and Nominations of Directors

   Our Amended and Restated Bylaws establish procedures with regard to the nomination, other than by our board of directors, of candidates for election as directors and with regard to matters to be brought before a meeting of our shareholders. The nomination procedures require that a shareholder give prior written notice, in specified form, of a planned nomination to the board of directors to the company's secretary. Any person who is not so nominated will not be eligible for election as a director under the nomination procedure. A shareholder seeking to have any business conducted at an annual or special meeting must give prior written notice, in specified form, to the secretary. If business is not properly brought before a meeting in accordance with the established procedures, the business will not be transacted at the meeting. Although our Amended and Restated Bylaws do not give the board of directors the power to approve or disapprove shareholder nominations for the election of directors or any other business desired by shareholders to be conducted at an annual or any other meeting, the procedures may have the effect of precluding a nomination for the election of directors or precluding the conduct of business at a particular annual or special meeting and may discourage or deter a third party from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempt to obtain control of the company, even if the conduct of the solicitation or attempt might be beneficial to the company and its shareholders.

Supermajority Vote

   Our Articles of Incorporation require the affirmative vote of at least two-thirds of the voting power of all outstanding shares entitled to vote to authorize any merger, consolidation, exchange, sale, or other disposition of all or substantially all of our assets or our voluntary dissolution. Supermajority shareholder approval is not required if two-thirds of our directors approve the transaction. These actions require only majority shareholder approval if the proposed action has been approved by the affirmative vote of two-thirds of the directors.

Amendments

   The approval of the holders of at least two-thirds of the voting power of all outstanding shares of common stock entitled to vote for the election of directors is required to amend specified provisions of our Articles of Incorporation and our Amended and Restated Bylaws, including those described above.

Statutory Provisions

   Section 302A.671 of the Minnesota Business Corporation Act applies, with specified exceptions, to any acquisition of our voting stock resulting in the acquisition of beneficial ownership of 20% or more of the voting stock then outstanding. Section 302A.671 requires approval of any acquisition by a majority of our shareholders prior to its consummation. In general, shares acquired in the absence of approval are denied voting rights and are redeemable by us at their then fair market value within 30 days after the acquiring person has failed to provide us with a timely information statement or the date the shareholders have voted not to grant voting rights to the acquiring person's shares.

   Section 302A.673 of the Minnesota Business Corporation Act generally prohibits any shareholder that owns 10% or more of our voting shares to enter into any business combination with us, or with any of our subsidiaries, for four years following the shareholder's share acquisition date, unless the business combination is approved by a committee of all of the disinterested members of the board of directors before the interested shareholder's share acquisition.

Share Rights Plans

   The board of directors has authorized share rights plans which provide for a dividend distribution of one right for each share of our Class A and Class B common stock. With some exceptions, the rights will be distributed on the 15th day after an acquiring party accumulates 15% or more of our voting stock or a party announces an offer to acquire 15% or more of the voting stock. The rights will expire on May 20, 2009, if not previously redeemed or exercised. Each right will entitle the holder to purchase 1/100 of a share of preferred stock at a price of $120, subject to adjustment under specified circumstances. In addition, upon the occurrence of specified events, holders of the rights will be entitled to purchase a defined number of shares of an acquiring entity or shares of our common stock at half its then current market value. We will generally be entitled to redeem the rights at $.001 per right at any time prior to a triggering event.

DESCRIPTION OF JUNIOR EXCHANGEABLE PREFERRED STOCK
AND JUNIOR PREFERRED EXCHANGE DEBENTURES

Junior Exchangeable Preferred Stock

   The following summary of the material provisions of the junior exchangeable preferred stock does not purport to be complete and is subject to and qualified in its entirety by reference to the provisions of the certificate of designation relating thereto, a copy of which may be obtained from us (referred to as the "Junior Certificate of Designation"). Definitions relating to certain capitalized terms that are used in this section of this prospectus are set forth under "—Certain Definitions" and throughout this description. Capitalized terms that are used in this section but not otherwise defined herein have the meanings assigned to them in the Junior Certificate of Designation and such definitions are incorporated herein by reference. Unless otherwise indicated, references in this section to covenants are to covenants set forth in the Junior Certificate of Designation. References in this section to "Rural Cellular," "we," "our" and "us" refer to Rural Cellular Corporation. All references to "junior preferred exchange debentures" are to our    % senior subordinated debentures.

General

   On the Issue Date we will be authorized to issue     shares of preferred stock, par value $.01 per share, and pursuant to the Junior Certificate of Designation there will be     shares of junior exchangeable preferred stock authorized for issuance with a liquidation preference of $1,000 per share. Such shares shall include 110,000 shares of junior exchangeable preferred stock to be issued pursuant to this offering, an additional 50,000 shares of junior exchangeable preferred stock (the "Additional Shares") reserved for possible future issuance, and additional shares that may be used to pay dividends on the junior exchangeable preferred stock if we elect to pay dividends in additional shares of such stock (the "Dividend Shares") (future references to junior exchangeable preferred stock shall include Additional Shares and Dividend Shares, as the context requires). To the extent we issue any Additional Shares, such issuance shall be made in increments of not less than 25,000 shares. Subject to certain conditions, the junior exchangeable preferred stock will be exchangeable for the junior preferred exchange debentures at our option on any dividend payment date. The junior exchangeable preferred stock to be issued by us in this offering, when issued by us and paid for by the underwriters, will be fully paid and non-assessable and the holders thereof will not have any subscription or preemptive rights in connection therewith. Norwest Bank Minnesota, National Association is the Exchange Agent and the transfer agent and registrar (the "Transfer Agent") for the junior exchangeable preferred stock.

Ranking

   The junior exchangeable preferred stock will, with respect to dividend rights and rights upon our liquidation, winding-up and dissolution, rank:

(i)

junior to the 11³/8% senior exchangeable preferred stock, including an "add-on" issue of an additional 25,000 shares of such 11³/8% senior exchangeable preferred stock issued concurrently with the junior exchangeable preferred stock being issued pursuant to this offering, and junior to the Class T Convertible Preferred Stock;



(ii)

senior to all classes of common stock and to each other class of Capital Stock established after the date of this prospectus by our board of directors the terms of which expressly provide that it ranks junior to the junior exchangeable preferred stock as to dividend rights and rights upon our liquidation, winding-up and dissolution, including any shares of our Class M preferred stock and any shares of our Series A junior participating preferred stock or Series B junior participating preferred stock issued to holders of our Class A common stock or Class B common stock, respectively, pursuant to either of the Share Rights Agreements (collectively referred to, together with all classes of our common stock, as "Junior Stock");



(iii)

subject to certain conditions, described below, on a parity with each other class of Capital Stock established after the date of this prospectus by our board of directors the terms of which expressly provide that such class or series will rank on a parity with the junior exchangeable preferred stock as to dividend rights and rights upon our liquidation, winding-up and dissolution (collectively referred to as "Parity Stock"); and



(iv)

subject to certain conditions, described below, junior to each class of Capital Stock established after the date of this prospectus by our board of directors the terms of which do not expressly provide that such class or series of Capital Stock will rank junior to, or on a parity with, the junior exchangeable preferred stock as to dividend rights and rights upon our liquidation, winding-up and dissolution (collectively referred to as "Senior Stock").

   We may not authorize or issue any new class of Senior Stock or Parity Stock without the affirmative vote or consent (voting or consenting as one class) of the holders of at least

(i)

66²/3% of the shares of junior exchangeable preferred stock then outstanding with respect to Senior Stock; and



(ii)

a majority of the shares of junior exchangeable preferred stock then outstanding with respect to Parity Stock;

provided that any shares of junior exchangeable preferred stock and the Class T Convertible Preferred Stock may be issued by us without the approval of the holders of the junior exchangeable preferred stock; provided further, that, without the approval of holders of the junior exchangeable preferred stock, we may issue shares of Senior Stock in exchange for, or the proceeds of which are used to redeem or purchase, all (but not less than all) shares of the junior exchangeable preferred stock then outstanding in accordance with the Junior Certificate of Designation.

Dividends

   Holders of the outstanding shares of junior exchangeable preferred stock will be entitled to receive, when, as and if declared by our board of directors out of funds legally available therefor, dividends on the junior exchangeable preferred stock, which shall accrue at a rate per annum equal to  %. If at any time dividends on the junior exchangeable preferred stock are in arrears and unpaid for six or more quarterly dividend periods (whether or not consecutive), holders of junior exchangeable preferred stock will be entitled to certain voting rights. See "—Voting Rights" below. All dividends will be cumulative, whether or not earned or declared, from          , 2000 and will be payable quarterly in arrears on          ,          ,          , and     , of each year, commencing on     , to holders of record on the          ,           ,          , or          immediately preceding the relevant dividend payment date. On or before          , 2005 (the "Final Payment-in-Kind Date") we may, at our option, pay dividends in cash or in Dividend Shares having an aggregate liquidation preference equal to the amount of such dividends. After the Final Payment-in-Kind Date, dividends may be paid only in cash. If any dividend (or portion thereof) payable on any dividend payment date on or before the Final Payment-in-Kind Date, is not declared or paid in full in cash or in Dividend Shares as described above on such dividend payment date, the amount of the accumulated and unpaid dividends will bear interest at the dividend rate on the junior exchangeable preferred stock, compounding quarterly from such dividend payment date until paid in full. If any dividend (or portion thereof) payable on any dividend payment date after the Final Payment-in-Kind Date is not declared or paid in full in cash on such dividend payment date, the amount of the accumulated and unpaid dividend will bear interest at the dividend rate on the junior exchangeable preferred stock, compounding quarterly from such dividend payment date until paid in full.

   No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Stock for any period unless full cumulative dividends shall have been or contemporaneously are declared and paid (or are deemed declared and paid) in full or declared and, if payable in cash, a sum in cash sufficient for such payment set apart for such payment on the junior exchangeable preferred stock. If full dividends are not so paid, the junior exchangeable preferred stock will share dividends pro rata with the Parity Stock. No dividends may be paid or set apart for such payment on Junior Stock (except dividends on Junior Stock payable in additional shares of Junior Stock) and no Junior Stock or Parity Stock may be repurchased, redeemed or otherwise retired nor may funds be set apart for payment with respect thereto, if full cumulative dividends have not been paid in full (or deemed paid) on the junior exchangeable preferred stock. Dividends on account of arrears for any past dividend period and dividends in connection with any optional redemption may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record of the junior exchangeable preferred stock on such date, not more than 45 days prior to the payment thereof, as may be fixed by our board of directors.

Optional Redemption

   After          , 2005, the junior exchangeable preferred stock may be redeemed (subject to contractual and other restrictions with respect thereto and to certain conditions under Minnesota corporate law) at any time at our option, in whole or from time to time in part, on not less than 30 nor more than 60 days prior notice, at the redemption prices (expressed as percentages of the then effective liquidation preference thereof) set forth below, plus, without duplication, all accumulated and unpaid dividends, if any, to but excluding the redemption date (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the redemption date to but excluding the redemption date), if redeemed during the 12-month period beginning on          of the years indicated below:

Year	Redemption Price
2005		%
2006		%
2007		%
2008		%
2009 and thereafter	100.000	%

   In addition, at any time prior to          , 2003, we may redeem shares of junior exchangeable preferred stock having an aggregate liquidation preference of up to 35.0% of the aggregate liquidation preference of all shares of junior exchangeable preferred stock (including Additional Shares and Dividend Shares issued), from the net cash proceeds of a Qualifying Event at a price equal to % of the aggregate liquidation preference thereof, plus, without duplication, accumulated and unpaid dividends, if any, to but excluding the date fixed for redemption (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the redemption date to but excluding the redemption date), subject to the right of holders of record on the relevant record date to receive dividends due on a dividend payment date;provided that at least 65% of the aggregate liquidation preference of the junior exchangeable preferred stock originally issued remains outstanding immediately following such redemption. Any such redemption must be made within 60 days after the related Qualifying Event.

   In addition, at any time prior to          , 2005, the junior exchangeable preferred stock may be redeemed at our option, in whole but not in part, at a redemption price equal to 100% of the aggregate liquidation preference thereof plus the Applicable Premium as of, and accumulated and unpaid dividends, if any, to but excluding, the redemption date.

   Notice of any optional redemption of any junior exchangeable preferred stock (or portion thereof) will be given to Holders at their addresses as given to the Transfer Agent, not less than 30 nor more than 60 days prior to the date fixed for redemption. The notice of redemption shall state the redemption date, the redemption price, if less than all the outstanding shares of junior exchangeable preferred stock are to be redeemed, the liquidation preference of, and accrued and unpaid dividends on, the particular junior exchangeable preferred stock to be redeemed, that on the redemption date the redemption price will become due and payable upon each share of junior exchangeable preferred stock to be redeemed and the place or places where such junior exchangeable preferred stock is to be surrendered for payment of the redemption price.

   No optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid or a sum set apart for such payment on the junior exchangeable preferred stock.

   The Credit Facility, the Notes Indenture, the certificate of designation governing the Senior Preferred Stock and the Senior Preferred Exchange Indenture contemplated thereunder and Minnesota corporate law limit our ability to redeem the junior exchangeable preferred stock, and future agreements may contain similar or more restrictive limitations.

Escrow of Proceeds; Special Mandatory Redemption

   Pending the consummation of the Triton acquisition, we will deposit the net proceeds from the sale of the junior exchangeable preferred stock in an escrow account and such proceeds will be used to purchase securities which will earn interest. In the event the consummation of the Triton acquisition has not occurred on or prior to June 30, 2000 (or, in the case described below, September 30, 2000), then we will redeem all of the junior exchangeable preferred stock (the "Special Mandatory Redemption") at a redemption price in cash equal to 101% of the aggregate liquidation preference of the junior exchangeable preferred stock plus accumulated and unpaid dividends, if any, to the Special Mandatory Redemption Date. For purposes hereof, "Special Mandatory Redemption Date" means July 15, 2000, in the event the consummation of the Triton acquisition has not occurred by June 30, 2000;provided that in the event the Triton acquisition is not consummated by June 30, 2000 solely as a result of the failure of any Person to receive any necessary consent, approval, order or authorization of any governmental authority, the Special Mandatory Redemption Date shall be October 15, 2000, in the event the Triton acquisition has not occurred by September 30, 2000.

   Upon consummation of this offering, we and    , as escrow agent (the "Escrow Agent"), will enter into an escrow agreement (the "Escrow Agreement"). Pursuant to the Escrow Agreement, the "Escrowed Funds" will consist of the net proceeds of this offering. Escrowed Funds will be held by the Escrow Agent in an escrow account and will be required to be invested in Cash Equivalents (as defined in the Escrow Agreement). We will be permitted to obtain release of assets in the Escrow Account upon consummation of the Triton acquisition.

   If the Escrow Agent receives a notice of Special Mandatory Redemption pursuant to the terms of the junior exchangeable preferred stock, the Escrow Agent will arrange for the liquidation of all Escrowed Funds to the extent invested then held by it so as to release to the paying agent for the junior exchangeable preferred stock immediately available funds on the Special Mandatory Redemption Date to pay the redemption price for the junior exchangeable preferred stock. Concurrently with such release to the paying agent, the Escrow Agent will release to us any excess of Escrowed Funds over the redemption price, and we will be permitted to use such funds in our discretion. The Credit Facility, Notes Indenture, the certificate of designation governing the Senior Preferred Stock and the Senior Preferred Exchange Indenture and Minnesota corporate law may limit our ability to redeem the junior exchangeable preferred stock, and our future agreements may contain similar or more restrictive limitations. However, we are in the process of securing the consent of the lenders under our Credit Facility to allow the Special Mandatory Redemption. In addition, we anticipate that we will have the ability to consummate the Special Mandatory Redemption under the terms of the Notes Indenture, the certificate of designation governing the Senior Preferred Stock and the Senior Preferred Exchange Indenture.

   The provisions relating to our obligation to redeem the junior exchangeable preferred stock in the Special Mandatory Redemption described above may not be waived or modified without the written consent of the holders of shares of junior exchangeable preferred stock representing 66²/3% of the aggregate liquidation preference of all junior exchangeable preferred stock then outstanding.

Mandatory Redemption

   The junior exchangeable preferred stock will also be subject to mandatory redemption, subject to certain conditions under Minnesota corporate law, in whole on      , 2011 (the "Mandatory Redemption Date"), at a redemption price equal to 100% of the aggregate liquidation preference thereof, plus, without duplication, all accumulated and unpaid dividends, if any, to but excluding the date fixed for redemption (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the redemption date to but excluding the redemption date). The Credit Facility, Notes Indenture, the certificate of designation governing the Senior Preferred Stock or the Senior Preferred Exchange Indenture and Minnesota corporate law limit our ability to redeem the junior exchangeable preferred stock, and our future agreements may contain similar or more restrictive limitations.

Procedure for Redemption

   Notice of any redemption of any shares of junior exchangeable preferred stock will be given to the Holders at their registered address not less than 30 nor more than 60 days prior to the date fixed for redemption. The notice of redemption shall state the redemption date, the redemption price, if less than all of the outstanding shares of junior exchangeable preferred stock are to be redeemed, the liquidation preference of, and accrued and unpaid dividends on, the shares of junior exchangeable preferred stock to be redeemed, that on the redemption date the redemption price will become due and payable upon each share of junior exchangeable preferred stock to be redeemed and the place or places where such shares are to be surrendered for payment of the redemption price. If less than all of the junior exchangeable preferred stock is to be redeemed, the particular shares to be redeemed will be determined pro rata, except that we may redeem the shares held by a Holder of fewer than 100 shares without regard to such pro rata redemption requirement.

   On and after the redemption date, unless we default in the payment of the applicable redemption price, dividends will cease to accumulate on shares of junior exchangeable preferred stock called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price, without interest; provided, however, that if a notice of redemption has been given and we have segregated and irrevocably set apart in trust for the benefit of the Holders of the shares called for redemption the funds necessary for redemption (including an amount in respect of all dividends that will accrue to the redemption date), then dividends will cease to accumulate on the redemption date on the shares to be redeemed and, at the close of business on the day on which such funds are segregated and set apart, the Holders of the shares to be redeemed shall cease to be our shareholders and shall be entitled only to receive the redemption price for such shares. New certificates of junior exchangeable preferred stock having an aggregate liquidation preference equal to the unredeemed portion of junior exchangeable preferred stock will be issued in the name of the Holder thereof upon cancellation of the original shares of junior exchangeable preferred stock. Shares of junior exchangeable preferred stock issued and reacquired by us will, upon compliance with the applicable requirements of Minnesota law, have the status of our authorized but unissued undesignated shares and may, with any and all of our other authorized but unissued undesignated shares, be designated or redesignated, and issued or reissued, as the case may be, as part of any series of our capital stock, except that any issuance or reissuance of shares of junior exchangeable preferred stock must be in compliance with the Junior Certificate of Designation.

Exchange

   We may, at our option, on any scheduled dividend payment date following the consummation of the Triton acquisition, exchange, in whole but not in part, the junior exchangeable preferred stock for junior preferred exchange debentures; provided that:

(a)

on the date of such exchange there are no accumulated and unpaid dividends on the junior exchangeable preferred stock (including the dividend payable on such date) or other contractual impediments to such exchange;



(b)

there shall be legally available funds sufficient therefor (including, without limitation, funds sufficient under Minnesota law to repay Indebtedness when due);



(c)

either:



•

a registration statement relating to the junior preferred exchange debentures shall have been declared effective under the Securities Act prior to or on the Exchange Date and shall continue to be in effect on the date of such exchange or



•

We shall have obtained a written Opinion of Counsel that an exemption from the registration requirements of the Securities Act is available for such exchange and that upon receipt of such junior preferred exchange debentures pursuant to such exchange made in accordance with such exemption, each Holder of a junior preferred exchange debenture that is not one of our Affiliates will not be subject to any restrictions imposed by the Securities Act upon the resale of such junior preferred exchange debenture, and such exemption is relied upon by us for such exchange;



(d)

if required by applicable law, the Junior Preferred Exchange Indenture and the Junior Preferred Debentures Trustee thereunder shall have been qualified under the Trust Indenture Act of 1939, as amended;



(e)

immediately prior and subsequent to such exchange, no Event of Default (as defined in the Junior Preferred Exchange Indenture) or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing; and no material breach or default would exist under the Credit Facility or Notes Indenture; and



(f)

we shall have delivered to the Junior Preferred Debentures Trustee a written Opinion of Counsel, dated the date of exchange, regarding the satisfaction of all the conditions to be satisfied prior to such exchange including, without limitation, those conditions set forth in clauses (a), (b), (c) and (d) and the due authorization, execution, delivery and enforceability of both the junior preferred exchange debentures and the Junior Preferred Exchange Indenture.

Notwithstanding the foregoing, in the event of any such exchange occurring on or before the Final Payment-in-Kind Date, any accumulated and unpaid dividends on the junior exchangeable preferred stock (including the dividends payable on such date) may be paid through the issuance of junior preferred exchange debentures. Currently, the exchange of the junior exchangeable preferred stock into junior preferred exchange debentures is restricted by covenants contained in our Credit Facility and the indenture governing our senior subordinated notes, and future agreements may contain similar or more restrictive limitations. There can be no assurance that the conditions in such covenants for the exchange of junior exchangeable preferred stock for junior preferred exchange debentures will be satisfied or that the exchange will occur or that our future Indebtedness would not also restrict an exchange. See "—Description of Senior Subordinated Notes" and "—Description of Other Indebtedness."

   Notice of any exchange of any shares of junior exchangeable preferred stock will be given to each Holder at its registered address not less than 30 nor more than 60 days prior to the date fixed for such exchange (the "Exchange Date"). On the Exchange Date, if the conditions set forth in clauses (a) through (f) above are satisfied and the exchange is permitted under our then outstanding Indebtedness, we shall issue junior preferred exchange debentures in exchange for the junior exchangeable preferred stock as provided in the next paragraph. In the event that (1) the issuance of the junior preferred exchange debentures is not permitted on the Exchange Date or (2) any of the conditions set forth in clauses (a) through (f) of the preceding paragraph is not satisfied on the Exchange Date, we are required use our best efforts to satisfy such conditions and effect such exchange as soon as practicable. We will comply with the provisions of Rule 13e-4 promulgated pursuant to the Exchange Act in connection with any exchange, to the extent applicable.

   Upon any exchange of junior exchangeable preferred stock for junior preferred exchange debentures on the Exchange Date pursuant to the preceding paragraph, Holders of outstanding shares of junior exchangeable preferred stock will be entitled to receive, subject to the second succeeding sentence, $1.00 of principal amount of junior preferred exchange debentures for each $1.00 of the then effective liquidation preference of junior exchangeable preferred stock held by them. The junior preferred exchange debentures will be issued in registered form, without coupons. Junior preferred exchange debentures issued in exchange for junior exchangeable preferred stock will be issued in principal amounts of $1,000 and integral multiples thereof, and we will pay cash in lieu of issuing a junior preferred exchange debenture in any other principal amount. On and after the Exchange Date, dividends will cease to accumulate on the outstanding shares of junior exchangeable preferred stock, and all rights of the holders of junior exchangeable preferred stock (except the right to receive the junior preferred exchange debentures, an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the Exchange Date and cash in lieu of any junior preferred exchange debenture that is in a principal amount less than $1,000) will terminate. The person entitled to receive junior preferred exchange debentures issuable upon such exchange will be treated for all purposes as the registered holder of such junior preferred exchange debentures.

Liquidation Preference

   Upon our voluntary or involuntary liquidation, dissolution or winding-up, Holders of junior exchangeable preferred stock will be entitled to be paid, out of our assets available for distribution to stockholders, the then effective liquidation preference per share of junior exchangeable preferred stock ($1,000 per share), plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends thereon to but excluding the date fixed for liquidation, dissolution or winding-up (including an amount equal to a prorated dividend for the period from the last dividend payment date to the date fixed for liquidation, dissolution or winding-up), before any distribution is made on any Junior Stock, including, without limitation, our common stock. If, upon our voluntary or involuntary liquidation, dissolution or winding-up, the amounts payable with respect to the junior exchangeable preferred stock and all other Parity Stock are not paid in full, the Holders of the junior exchangeable preferred stock and the Parity Stock will share equally and ratably in any distribution of our assets in proportion to the full liquidation preference to which each is entitled. After payment of the full amount of the liquidation preference and accumulated and unpaid dividends to which they are entitled, the Holders of shares of junior exchangeable preferred stock will not be entitled to any further participation in any distribution of our assets. However, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of our property or assets nor our consolidation or merger with one or more entities shall be deemed to be our liquidation, dissolution or winding-up.

No Sinking Fund

   The Junior Certificate of Designation for the junior exchangeable preferred stock will not contain any provision requiring funds to be set aside to protect the liquidation preference of the junior exchangeable preferred stock.

Voting Rights

   The holders of junior exchangeable preferred stock, except as otherwise required under Minnesota law or as set forth below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by our stockholders.

   The Junior Certificate of Designation will provide that if:

(a)

at any time, dividends on the junior exchangeable preferred stock are in arrears and unpaid for six or more quarterly dividend periods (whether or not consecutive);



(b)

we fail to redeem the junior exchangeable preferred stock on          , 2011, or fail to otherwise discharge any redemption or repurchase obligation with respect to the junior exchangeable preferred stock;



(c)

we fail to make an Offer to Purchase if such offer is required by the provisions set forth under the "—Change of Control" covenant below or fail to purchase shares of junior exchangeable preferred stock from Holders who elect to have such shares purchased pursuant to an Offer to Purchase;



(d)

a breach or violation of any other provisions described under the caption "—Certain Covenants" occurs and the breach or violation continues for a period of 30 days or more after we receive notice thereof specifying the default from the Holders of at least 25.0% of the shares of junior exchangeable preferred stock then outstanding;



(e)

there occurs a default by us or any of our Restricted Subsidiaries under the terms of any instrument evidencing or securing Indebtedness having an outstanding principal amount in excess of $10.0 million in the aggregate, which default results in the acceleration of the payment of such Indebtedness or constitutes the failure to pay the principal of such Indebtedness at maturity; or



(f)

certain events of bankruptcy, insolvency or reorganization occur affecting us or a Restricted Subsidiary that is a Significant Subsidiary,

   then the Holders of a majority of the then outstanding shares of junior exchangeable preferred stock, voting as a class (together with the holders of any Parity Stock having similar voting rights), shall be entitled to elect the lesser of:

•

two directors of our board of directors and



•

25.0% of the members of our board of directors.

If applicable, the voting rights will continue until such time as, in the case of a dividend default, all dividends in arrears on the junior exchangeable preferred stock are paid in full (and in the case of dividends payable after     , 2005, paid in cash) and, in all other cases, any failure, breach or default giving rise to such voting rights is remedied or waived by the holders of at least a majority of the shares of junior exchangeable preferred stock then outstanding, at which time the term of any directors elected pursuant to the provisions of this paragraph shall terminate. Each such event described in clauses (a) through (f) above is referred to herein as a "Voting Rights Triggering Event." If the voting rights provided herein are applicable, then they shall represent each Holder's exclusive remedy at law or in equity.

   The Junior Certificate of Designation will also provide that we will not authorize or issue any new class of Senior Stock or Parity Stock except as described above under "—Ranking."

   Under Minnesota law, holders of preferred stock are entitled to vote as a class upon a proposed amendment to the articles of incorporation, whether or not entitled to vote thereon by the terms of the articles of incorporation, if the amendment would:

•

increase or decrease the aggregate number of authorized shares of preferred stock;



•

effect an exchange, reclassification, or cancellation of all or part of the shares of preferred stock;



•

effect an exchange, or create a right of exchange, of all or any part of the shares of another class or series for the shares of preferred stock;



•

change the rights or preferences of the preferred stock;



•

change the shares of preferred stock into the same or a different number of shares, either with or without par value, of another class or series of stock;



•

create a new class or series of shares having rights and preferences prior and superior to the shares of preferred stock, or increase the rights and preferences or the number of authorized shares of a class or series having rights and preferences prior or superior to the shares of preferred stock;



•

divide the shares of preferred stock into series and determine the designation of each series and the variations in the relative rights and preferences between the shares of each series, or authorize the board of directors to do so;



•

limit or deny any existing preemptive rights of the shares of preferred stock; or



•

cancel or otherwise affect distributions on the shares of preferred stock that have accrued but have not been declared.

Change of Control

   Upon the occurrence of a Change of Control, each Holder of junior exchangeable preferred stock shall have the right to have such junior exchangeable preferred stock repurchased by us on the terms and conditions set forth in the Junior Certificate of Designation. We shall, within 30 days following the date of the consummation of a transaction resulting in a Change of Control, mail an Offer to Purchase all outstanding shares of junior exchangeable preferred stock at a purchase price equal to 101.0% of the aggregate liquidation preference thereof plus, without duplication, accumulated and unpaid dividends, if any, to but excluding the date of purchase (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the date of purchase to but excluding the date of purchase). The occurrence of a Change of Control constitutes an event of default under the Credit Facility, entitling the lenders thereunder to accelerate all obligations owing thereunder. Moreover, the holders of our Senior Subordinated Notes and the holders of the Senior Preferred Stock (or the exchange debentures contemplated thereby) have the right to require us to repurchase all the Senior Subordinated Notes and the Senior Preferred Stock (or the exchange debentures contemplated thereby), respectively, upon the occurrence of a Change of Control, which would have to be satisfied prior to the satisfaction of the Offer to Purchase the junior exchangeable preferred stock. In addition, Minnesota corporate law imposes certain conditions on our ability to purchase shares of junior exchangeable preferred stock. We can not assure you that we would be able to make or satisfy such Offer to Purchase.

   "Change of Control" means:

(a)

directly or indirectly, a sale, transfer or other conveyance of all or substantially all of our assets, on a consolidated basis, to any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), excluding transfers or conveyances to or among our Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that any Person or group of Persons owns more than 50.0% of the total Voting Power entitled to vote in the election of directors, managers or trustees of the transferee entity immediately after such transaction;



(b)

any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50.0% of our total Voting Power; or



(c)

during any period of 24 consecutive months, individuals who at the beginning of such period constituted our board of directors (together with any new directors whose election by such board or whose nomination for election by our shareholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of our board of directors then in office.

For purposes of clause (c) above, any new directors elected:

•

by the holders of junior exchangeable preferred stock, pursuant to the terms of the Junior Certificate of Designation; or



•

if we issue convertible preferred stock in connection with the Triton acquisition, by Madison Dearborn Capital Partners III, LP and Boston Ventures Limited Partnership V or any of their affiliates or permitted transferees, exercising rights as holders of shares of our convertible preferred stock

shall be deemed to be members of the board of directors at the beginning of any such 24 month period.

   We will comply with any tender offer rules under the Exchange Act which may then be applicable, including Rule 14e-l thereunder, in connection with any Offer to Purchase.

Certain Covenants

Limitation on Consolidated Indebtedness

   The Junior Certificate of Designation will prohibit us and our Restricted Subsidiaries from Incurring any Indebtedness, except that we may Incur Indebtedness if (1) there exists no Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event immediately prior and subsequent thereto and (2) after giving effect thereto, our Annualized Operating Cash Flow Ratio on a pro forma basis (calculated on the assumption that such Indebtedness had been incurred on the first day of the applicable Reference Period), would have been less than:

For the Period	Ratio
Prior to July 1, 2001	9.0 to 1.0
Thereafter	8.0 to 1.0

   Notwithstanding the foregoing, we and our Restricted Subsidiaries may Incur the following Indebtedness without regard to the foregoing limitations (provided that if there exists a Voting Rights Triggering Event pursuant to clause (a), (b), (c) or (f) of the second sentence under the caption "—Voting Rights" or an event which with notice or lapse of time or both would become a Voting Rights Triggering Event pursuant to clauses (a), (b), (c) or (f) of the second sentence under the caption "—Voting Rights" immediately prior and subsequent thereto, we and our Restricted Subsidiaries may without regard to the foregoing limitations only incur the Indebtedness described in the following clauses (c), (d) and (l)):

(a)

Indebtedness outstanding on the Issue Date;



(b)

our Incurrence of:



•

prior to the date of the consummation of the Triton acquisition, Indebtedness Incurred under the Existing Credit Facility provided that the amount of Indebtedness Incurred under the Existing Credit Facility and any other credit facilities similar in type to the Existing Credit Facility does not exceed in an aggregate principal amount $300.0 million at any time outstanding, reduced by such repayments and permanent reductions thereof due to application of:



•

Net Cash Proceeds (as defined in the indenture governing the Senior Subordinated Notes) as set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the indenture governing the Senior Subordinated Notes or



•

Net Cash Proceeds (as defined in the Senior Preferred Exchange Indenture) as set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the Senior Preferred Exchange Indenture; and



•

on and after the date of consummation of the Triton acquisition, Indebtedness Incurred under the New Credit Facility provided that the amount of Indebtedness Incurred under the New Credit Facility and any other credit facilities similar in type to the New Credit Facility does not exceed in an aggregate principal amount $1.375 billion at any time outstanding, reduced by repayments and permanent reductions thereof due to application of:



•

Net Cash Proceeds (as defined in the indenture governing the Senior Subordinated Notes) as set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the indenture governing the Senior Subordinated Notes or



•

Net Cash Proceeds (as defined in the Senior Preferred Exchange Indenture) as set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the Senior Preferred Exchange Indenture;



(c)

Indebtedness Incurred by us or any of our Restricted Subsidiaries owing to us or any of our Restricted Subsidiaries; provided that:



•

in the case of any such Indebtedness of Rural Cellular, such obligations will be unsecured and subordinated in all respects to the rights of the holders of the junior preferred exchange debentures, if and when issued, to the same extent as the junior preferred exchange debentures will be subordinated to Senior Indebtedness and



•

if any event occurs that causes a Restricted Subsidiary to no longer be a Restricted Subsidiary, then this clause (c) will no longer be applicable to such Indebtedness of that Restricted Subsidiary;



(d)

Indebtedness Incurred by us or any of our Restricted Subsidiaries to renew, extend, refinance or refund any of our Indebtedness or that of any of our Restricted Subsidiaries outstanding or committed on the date of renewal, extension, refinancing or refunding other than Indebtedness Incurred pursuant to clause (b) or (c); provided, however, that such Indebtedness does not exceed the principal amount of outstanding or committed Indebtedness so renewed, extended, refinanced or refunded plus premiums, accrued dividends, accrued interest, financing fees and other expenses associated therewith; and provided further, however, that:



•

such renewing, extending, refinancing or refunding Indebtedness will not have a final maturity and will not have any other mandatory repayments or redemptions prior to those of the Indebtedness being renewed, extended, refinanced or refunded;



•

in the case of any refinancing or refunding of Indebtedness that would rank pari passu in right of payment to the junior preferred exchange debentures (if and when issued), the refinancing or refunding Indebtedness would rank pari passu or subordinate in right of payment to the junior preferred exchange debentures (if and when issued), and, in the case of any refinancing or refunding of Indebtedness that would rank subordinate to the junior preferred exchange debentures (if and when issued), the refinancing or refunding Indebtedness ranks subordinate in right of payment to the junior preferred exchange debentures (if and when issued) to substantially the same extent as the Indebtedness refinanced or refunded; and



•

none of our Restricted Subsidiaries will be permitted to refinance any of our Indebtedness pursuant to this clause (d), except that any Restricted Subsidiary may guarantee Indebtedness incurred under this clause (d) if such Restricted Subsidiary had guaranteed the Indebtedness refinanced under this clause (d);



(e)

Indebtedness Incurred by us or any of our Restricted Subsidiaries under Interest Hedge Agreements to hedge interest on permitted Indebtedness;provided that the notional principal amount of any such Interest Hedge Agreements does not exceed the principal amount of Indebtedness to which such Interest Hedge Agreements relate;



(f)

(1) Indebtedness of any of our Restricted Subsidiaries (excluding Indebtedness of Wireless Alliance, if it becomes a Restricted Subsidiary, incurred pursuant to clause (f)(2) below) which does not exceed $75.0 million in the aggregate for all such Restricted Subsidiaries at any time outstanding (excluding any Intercompany Indebtedness or Acquired Indebtedness permitted to be Incurred under the Junior Certificate of Designation), provided that after giving effect thereto on a pro forma basis our Annualized Operating Cash Flow Ratio is less than, prior to July 1, 2001, 9.0 to 1.0, and thereafter, 8.0 to 1.0, and the Adjusted Annualized Operating Cash Flow Ratio of such Restricted Subsidiary is less than 5.0 to 1.0 and




(2) if it becomes one of our Restricted Subsidiaries, Indebtedness of Wireless Alliance (excluding any Intercompany Indebtedness or Acquired Indebtedness permitted to be Incurred under the Junior Certificate of Designation) which does not exceed $75.0 million in the aggregate at any time outstanding, provided that after giving effect thereto on a pro forma basis our Annualized Operating Cash Flow Ratio is less than, prior to July 1, 2001, 9.0 to 1.0, and, thereafter 8.0 to 1.0, and the Adjusted Annualized Operating Cash Flow Ratio of such Restricted Subsidiary is less than 5.0 to 1.0;

(g)

any guarantee by any Restricted Subsidiary of any Indebtedness Incurred under the Credit Facility in compliance with this covenant;



(h)

Acquired Indebtedness, provided that on a pro forma basis after giving effect to the Incurrence of such Indebtedness, we shall be able to Incur $1.00 of additional Indebtedness pursuant to the provisions described under the first paragraph of this covenant "—Limitation on Consolidated Indebtedness";



(i)

Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of business, indebtedness constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business in respect of workers' compensation claims, and self-insurance of other Indebtedness issued in the ordinary course of business with respect to reimbursement type obligations regarding workers' compensation claims;



(j)

Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any of our obligations or any obligations of our Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any of our business, assets or Restricted Subsidiaries (other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of our business, our assets or any of our Restricted Subsidiaries for the purpose of financing such acquisition), in an amount not to exceed the gross proceeds actually received by us or any of our Restricted Subsidiaries in connection with such disposition;



(k)

Indebtedness (including Capital Lease Obligations) Incurred to finance the cost (including the cost of design, development, construction, installation or integration) of telecommunications network assets, equipment or inventory acquired by us or one of our Restricted Subsidiaries which, in the aggregate, does not exceed $15.0 million at any time outstanding; and



(l)

Indebtedness Incurred by us or any of our Restricted Subsidiaries which does not exceed $75.0 million at any time outstanding.

   For purposes of determining any particular amount of Indebtedness under this "—Limitation on Consolidated Indebtedness" covenant:

•

guarantees, Liens or obligations with respect to letters of credit or other similar instruments supporting Indebtedness otherwise included in the determination of such particular amount shall not be included; and



•

any Liens securing the junior preferred exchange debentures granted pursuant to the equal and ratable provisions referred to under the caption "—Limitation on Liens" shall not be treated as giving rise to Indebtedness.

   For purposes of determining compliance with this "—Limitation on Consolidated Indebtedness" covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses (other than Indebtedness referred to in clause (b) above), we, in our sole discretion, shall classify (including under the first paragraph of this covenant), and from time to time may reclassify (including under the first paragraph of this covenant), such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses (or paragraphs).

   The accrual of interest or dividends or the accretion of accreted value will not be deemed an Incurrence of Indebtedness for the purposes of this "—Limitation on Consolidated Indebtedness" covenant.

Limitation on Preferred Stock of Restricted Subsidiaries

   The Junior Certificate of Designation will prohibit us from allowing any of our Restricted Subsidiaries to create or issue any Preferred Stock except:

(a)

Preferred Stock outstanding on the Issue Date;



(b)

Preferred Stock issued to and held by us or any of our Restricted Subsidiaries (provided that, if such Restricted Subsidiary is not one of our Wholly Owned Restricted Subsidiaries, the portion of the liquidation value of such Preferred Stock equal to the product of:



•

the percentage of the common equity interest of such Restricted Subsidiary that we do not own, directly or indirectly and



•

the aggregate liquidation value of such Preferred Stock




must be permitted to be issued pursuant to clause (e) below);

(c)

Preferred Stock issued by any Person prior to that Person's having become our direct or indirect Restricted Subsidiary;



(d)

Preferred Stock issued by a Restricted Subsidiary the proceeds of which are used to refinance certain outstanding Preferred Stock of a Restricted Subsidiary,provided that:



•

the liquidation value of the refinancing Preferred Stock does not exceed the liquidation value so refinanced plus premiums, accrued dividends, financing fees and other expenses associated with such refinancing and



•

such refinancing Preferred Stock has no mandatory redemptions prior to (and in no greater amounts than) the Preferred Stock being refinanced; and



(e)

Preferred Stock issued by a Restricted Subsidiary to the extent such Preferred Stock, together with all other Restricted Subsidiary Indebtedness, could be incurred pursuant to clause (f) or (l) of the covenant entitled "—Limitation on Consolidated Indebtedness" above.

Limitation on Restricted Payments

   The Junior Certificate of Designation will prohibit us or any of our Restricted Subsidiaries from making any Restricted Payment unless after giving effect thereto:

(a)

no Voting Rights Triggering Event or event which, with notice or lapse of time or both, would become a Voting Rights Triggering Event has occurred and is continuing;



(b)

we would be permitted to Incur an additional $1.00 of Indebtedness pursuant to the provision of the Junior Certificate of Designation described in the first paragraph under "—Limitation on Consolidated Indebtedness";



(c)

the total of all Restricted Payments made on or after July 1, 1998 does not exceed the sum of:



•

Cumulative Operating Cash Flow less 1.75 times Cumulative Interest Expense;



•

100% of our aggregate Qualified Capital Stock Proceeds after the Issue Date (excluding Qualified Capital Stock Proceeds received to consummate the Triton Acquisition) and



•

an amount equal to the sum of:



(1)

the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to us or any of our Restricted Subsidiaries or from the Net Cash Proceeds from the sale of any such Investments (except, in each case, to the extent any such proceeds or other amounts are included in the calculation of Consolidated Net Income) and



(2)

the portion (proportionate to our direct or indirect equity interest in such Subsidiary) of the Fair Market Value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any Person (including any Unrestricted Subsidiary), the amount of Investments previously made (and treated as a Restricted Payment) by us or any of our Restricted Subsidiaries in such Person; and




(d)

all accumulated and unpaid dividends on the junior exchangeable preferred stock shall have been paid in full as provided in the Junior Certificate of Designation.

   The foregoing provision shall not be violated, so long as (except as otherwise provided in clause (d) below) no Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event has occurred and is continuing or shall occur as a consequence of the actions or payments set forth below, by reason of:

(a)

the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the foregoing provision;



(b)

the purchase, acquisition, redemption or other acquisition or retirement for value of shares of Capital Stock of any Restricted Subsidiary held by Persons other than us or any of our Restricted Subsidiaries;



(c)

the redemption, defeasance, repurchase or other acquisition or retirement of any of our Junior Stock either in exchange for or out of the net cash proceeds of the substantially concurrent sale (other than to one of our Subsidiaries) of Qualified Junior Stock;



(d)

the issuance of the Class T Convertible Preferred Stock, without regard for whether a Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event has occurred and is continuing or shall occur as a consequence of such issuance (provided that:



•

the liquidation preference of all such preferred stock issued upon such exchange shall not exceed $15.0 million,



•

the annual dividend rate on such preferred stock shall not exceed 5.0%,



•

no dividend shall be payable on such preferred stock prior to the mandatory redemption date of such preferred stock,



•

the mandatory redemption of such preferred stock shall not occur prior to one year after the mandatory redemption of the junior exchangeable preferred stock and



•

such preferred stock is issued in exchange for shares of our Class A common stock and Class B common stock in order to satisfy the Federal Communications Commission cross ownership rules);



(e)

the purchase, redemption, acquisition, cancellation or other retirement for value of shares of our Junior Stock to the extent necessary in the good faith judgment of our board of directors (evidenced by the vote of a majority of the disinterested members) to prevent the loss or secure the renewal or reinstatement of any license or franchise held by us or any of our Restricted Subsidiaries from any governmental agency, that is deemed material to us or to such Restricted Subsidiary, as the case may be, by our board of directors;



(f)

the purchase, redemption, retirement or other acquisition for value of shares of our Junior Stock, or options, warrants or other rights to purchase such shares, held by our directors, employees or former directors or employees or of any Restricted Subsidiary, or their estates or beneficiaries under their estates, upon death, disability, retirement, termination of employment or pursuant to the terms of any agreement under which such shares of Junior Securities or options, warrants or other rights were issued, but only if the aggregate consideration paid for such purchase, redemption, acquisition, cancellation or other retirement of such shares of Junior Stock or options, warrants or other rights after the Issue Date does not exceed:



•

$2.0 million in any calendar year (provided that unused amounts may be carried over to succeeding 12 month periods, subject to a maximum aggregate carry over of $2.0 million), plus



•

the aggregate net cash proceeds received by us during that calendar year from any reissuance of our Qualified Capital Stock to our directors and employees and our Restricted Subsidiaries' directors and employees (provided that the amount of any such net cash proceeds that are used to permit a purchase, redemption, retirement or other acquisition for value pursuant to this clause (f) shall be excluded from clause (b) of the preceding paragraph); and



(g)

Restricted Payments, in addition to Restricted Payments permitted pursuant to clauses (a) through (f) of this paragraph, not in excess of $25.0 million in the aggregate after the Issue Date.

   The payments described in clauses (a), (c) (provided the proceeds of the sale of the Qualified Junior Stock constitute Qualified Capital Stock Proceeds), (e), (f) and (g) of this paragraph will count as Restricted Payments for the calculation under the first paragraph of this section "—Limitation on Restricted Payments."

Limitations Concerning Distributions and Transfers by Restricted Subsidiaries

   The Junior Certificate of Designation will provide that we will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual restriction or prohibition on the ability of any Restricted Subsidiary to:

(1)

pay dividends on, or make other distributions in respect of, its Capital Stock, or any other ownership interest or participation in, or measured by, its profits, to us or any of our Restricted Subsidiaries or pay any Indebtedness or other obligation owed to us or any of our Restricted Subsidiaries;



(2)

make any loans or advances to us or any of our Restricted Subsidiaries; or



(3)

transfer any of its property or assets to us or any of our Restricted Subsidiaries.

   Notwithstanding the foregoing, we may, and may permit any Restricted Subsidiary to, suffer to exist any such restriction or prohibition:

(a)

pursuant to the Junior Certificate of Designation, the indenture governing our senior subordinated notes, the Credit Facility, the certificate of designation governing the Senior Preferred Stock or any other agreement in effect on the Issue Date;



(b)

pursuant to an agreement relating to any Indebtedness of such Restricted Subsidiary which was outstanding or committed prior to the date on which such Restricted Subsidiary was acquired by us other than in anticipation of becoming a Restricted Subsidiary; provided that such restriction or prohibition shall not apply to any of our property or assets or any of our Restricted Subsidiaries' property or assets other than the property or assets of such Restricted Subsidiary and its Subsidiaries;



(c)

pursuant to an agreement effecting a renewal, extension, refinancing or refunding of any agreement described in clauses (a) and (b) above;  provided, however, that the provisions contained in such renewal, extension, refinancing or refunding agreement relating to such restriction or prohibition are no more restrictive in any material respect than the provisions contained in the agreement which is the subject thereof;



(d)

existing under or by reason of applicable law;



(e)

customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Restricted Subsidiary;



(f)

purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (3) of this covenant;



(g)

restrictions of the type referred to in clause (3) of this covenant contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent that such Liens were otherwise incurred in accordance with "—Limitations on Liens" below and restrict the transfer of property subject to such agreements;



(h)

customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; and



(i)

pursuant to contracts with respect solely to a Restricted Subsidiary which have been entered into for the sale or disposition of Capital Stock or assets of such Restricted Subsidiary (provided that:



•

such restriction or prohibition applies solely to the Capital Stock or assets of such Restricted Subsidiary which are being sold;



•

immediately after giving effect to the transactions contemplated by such contract, no Voting Rights Triggering Event or circumstance which with notice or lapse of time or both would become a Voting Rights Triggering Event would exist; and



•

such restriction or prohibition is terminated on the earlier of the date the transactions contemplated by such contract are consummated or the first anniversary of the date of such contract).

Limitations on Transactions with Affiliates and Related Persons

   The Junior Certificate of Designation will provide that we will not, and will not permit any of our Restricted Subsidiaries to, enter into any transaction or series of transactions involving aggregate consideration:

(a)

up to $1.0 million, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with or to any of our Affiliates or Related Persons (other than a Restricted Subsidiary), unless our management determines in good faith that:



•

such transaction is in our best interests or the best interests of our Restricted Subsidiaries; and



•

such transaction is on terms no less favorable to us or such Restricted Subsidiary than those which might be obtained in an arms length transaction with a third party at the time;



(b)

in excess of $1.0 million but not exceeding $5.0 million, unless our management makes the determinations (which determinations will be evidenced by an Officers' Certificate) set forth in clause (a) of this paragraph; and



(c)

in excess of $5.0 million, unless a majority of the disinterested members of our board of directors makes the determinations (which determinations will be evidenced by a Board Resolution) set forth in clause (a) of this paragraph.

   Notwithstanding the foregoing, the following payments shall not be subject to the provisions described in the first paragraph of this covenant:

•

payment of customary fees and indemnity payments to our directors who are not our employees and the payment of compensation and indemnity payments to our officers, in each case, in the ordinary course of business; and



•

Restricted Payments made in compliance with the provisions of the Junior Certificate of Designation described under the caption "—Limitation on Restricted Payments."

Limitations on Liens

   The Junior Certificate of Designation will provide that we will not, and will not permit any of our Restricted Subsidiaries to, Incur or suffer to exist any Lien on or with respect to any property or assets now owned or hereafter acquired to secure any Indebtedness that ranks in right of payment pari passu with or subordinate to the junior preferred exchange debentures, if and when issued, without making, or causing such Restricted Subsidiary to make, effective provision for securing the junior preferred exchange debentures, if and when issued:

•

equally and ratably with such Indebtedness as to such property for so long as such Indebtedness will be so secured; or



•

in the event such Indebtedness is our Indebtedness or Indebtedness of one of our Restricted Subsidiaries which is subordinate in right of payment to the junior preferred exchange debentures, if and when issued, prior to such Indebtedness as to such property for so long as such Indebtedness will be so secured.

   The foregoing restrictions shall not apply to:

(a)

Liens existing in respect of any Indebtedness that exists on the Issue Date;



(b)

Liens in our favor or Liens in favor of one of our Wholly Owned Restricted Subsidiaries on the assets or Capital Stock of another of our Wholly Owned Restricted Subsidiaries;



(c)

Liens to secure Indebtedness outstanding or committed for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the equipment or other property subject to such Liens; provided, however, that:



•

the principal amount of any Indebtedness secured by such a Lien does not exceed 100% of such purchase price or cost,



•

such Lien does not extend to or cover any property other than such item of property or any improvements on such item, and



•

the Incurrence of such Indebtedness is otherwise permitted by the Junior Certificate of Designation;



(d)

Liens on property existing immediately prior to the time of acquisition thereof (and not Incurred in anticipation of the financing of such acquisition);



(e)

Liens to secure Indebtedness to extend, renew, refinance or refund (or successive extensions, renewals, refinancings or refundings), in whole or in part, Indebtedness secured by any Lien referred to in the foregoing clauses (a), (c) and (d) so long as such Lien does not extend to any other property and the principal amount of Indebtedness so secured is not increased except as otherwise permitted under the provision of the Junior Certificate of Designation described under clause (b) or (d) of "—Limitation on Consolidated Indebtedness";



(f)

Liens on any Permitted Investment in Cooperative Bank Equity in favor of any Cooperative Banks;



(g)

Liens securing letters of credit entered into in the ordinary course of business and consistent with past business practice; or



(h)

any other Liens in respect of any Indebtedness which Indebtedness does not exceed $1.0 million in the aggregate.

Limitation on Certain Debt

   The Junior Certificate of Designation will provide that we will not Incur any Indebtedness that is subordinate in right of payment to any of our Senior Indebtedness unless the Indebtedness so Incurred is either pari passu or subordinate in right of payment to the junior preferred exchange debentures (if and when issued). For the avoidance of doubt, the foregoing limitation will not apply to distinctions between categories of our Senior Indebtedness that exist by reason of any Liens or guarantees arising or created in respect of some but not all such Senior Indebtedness.

Consolidation, Merger, Conveyance, Transfer or Lease

   The Junior Certificate of Designation will provide that we will not consolidate with or merge into any Person or permit any other Person to consolidate with or merge into us, or transfer, sell, convey or lease or otherwise dispose of all or substantially all of its assets to, any Person unless:

(a)

•  we are the surviving entity or



•

if we are not the surviving entity, then the successor or transferee will be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and the junior exchangeable preferred stock shall be converted into or exchanged for and shall become shares of such successor or transferee company, having in respect of such successor or transferee company substantially the same powers, preferences and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon that the junior exchangeable preferred stock had immediately prior to such transaction;



(b)

the Consolidated Net Worth of the successor or transferee immediately after the transaction is not less than 100% of our Consolidated Net Worth immediately prior to the transaction;



(c)

immediately after giving effect to such transaction, we (or our permitted successor or transferee) would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the provision of the Junior Certificate of Designation described in the first paragraph under "—Limitation on Consolidated Indebtedness;"



(d)

after giving effect to such transaction no Voting Rights Triggering Event or event which with notice or lapse of time would become a Voting Rights Triggering Event has occurred and is continuing; and



(e)

an Officers' Certificate and an Opinion of Counsel covering such conditions shall be delivered to the Transfer Agent.

However, clause (c) above will not apply if, in the good faith determination of our board of directors, whose determination shall be evidenced by a Board Resolution, the principal purpose of the transaction is to change our state of incorporation and the transaction shall not have as one of its purposes the evasion of the foregoing limitations.

Reports

   The Junior Certificate of Designation will provide that whether or not we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, we shall deliver to the Transfer Agent and to each Holder, within 15 days after it is or would have been required to file such with the Commission, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the Commission, if we were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by our certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required.

Certain Definitions

   "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary):

(a)

existing at the time such Person becomes a Restricted Subsidiary; or



(b)

assumed in connection with the acquisition of assets from such Person,

in the case of both of the preceding clause (a) and clause (b), other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition. Acquired Indebtedness will be deemed to be Incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.

   "Adjusted Annualized Operating Cash Flow Ratio" of any Person means the Annualized Operating Cash Flow Ratio of such Person as adjusted to treat all Preferred Stock of such Person as Redeemable Stock.

   "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

   "Annualized Operating Cash Flow" of any Person means the Operating Cash Flow of such Person for the Reference Period multiplied by two.

   "Annualized Operating Cash Flow Ratio" of any Person on any date (the "Transaction Date") means, with respect to any Person and its Restricted Subsidiaries, the ratio of:

•

Consolidated Indebtedness of such Person and its Restricted Subsidiaries on the Transaction Date (after giving pro forma effect to the Incurrence of any Indebtedness on such Transaction Date) divided by



•

the aggregate amount of Annualized Operating Cash Flow of such Person (determined on a pro forma basis after giving effect to all dispositions of businesses made by such Person and its Restricted Subsidiaries from the beginning of the Reference Period through the Transaction Date as if such dispositions had occurred at the beginning of such Reference Period);

provided that for purposes of such computation, in calculating Annualized Operating Cash Flow and Consolidated Indebtedness:

(a)

the transaction giving rise to the need to calculate the Annualized Operating Cash Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first day of the Reference Period;



(b)

the incurrence of any Indebtedness during the Reference Period or subsequent thereto and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to retire Indebtedness) will be assumed to have occurred (on a pro forma basis) on the first day of such Reference Period;



(c)

Consolidated Interest Expense attributable to any Indebtedness (whether existing or being incurred) bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date had been the applicable rate for the entire period;



(d)

all members of the consolidated group of such Person on the Transaction Date that were acquired during the Reference Period shall be deemed to be members of the consolidated group of such Person for the entire Reference Period; and



(e)

the Indebtedness and Annualized Operating Cash Flow of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be determined in accordance with the actual percentage of the Person's common equity interest in such Restricted Subsidiary on the date of determination of the Annualized Operating Cash Flow Ratio (thus, for example, in the case of a Restricted Subsidiary in which such Person owns a 51.0% common equity interest, 51.0% of such Subsidiary's Indebtedness and of such Subsidiary's Annualized Operating Cash Flow would be included in the calculation of such Person's aggregate Indebtedness and Annualized Operating Cash Flow, respectively).

When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and its Restricted Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Applicable Premium" means, with respect to any junior exchangeable preferred stock being redeemed or paid on any redemption date, the greater of:

(i)

1.0% of the aggregate liquidation preference of such junior exchangeable preferred stock being redeemed or paid; or



(ii)

the excess of:



(A)

the present value at such redemption date of the redemption price of such junior exchangeable preferred stock being redeemed or paid at          , 2005 (such redemption price being set forth in the table under the section entitled "Optional Redemption" above) plus all required dividend payments due on such junior exchangeable preferred stock being redeemed or paid through          , 2005 (such dividends to be deemed to be payable in cash for purposes of such determination (assuming a 360 day year consisting of twelve 30-day months), but excluding accumulated and unpaid dividends since the most recent dividend payment date), computed on a quarterly basis for junior exchangeable preferred stock using a discount rate equal to the Treasury Rate plus 50 basis points, over



(B)

the aggregate liquidation preference of such junior exchangeable preferred stock being redeemed or paid.

   "Board Resolution" means a copy of a resolution certified by our Secretary or one of our Assistant Secretaries to have been duly adopted by our board of directors, to be in full force and effect on the date of such certification and delivered to the Transfer Agent.

   "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City or the State of Minnesota are authorized or obligated by law or executive order to close.

   "Capital Lease Obligation" means that portion of any obligation of a Person as lessee under a lease which is required to be capitalized on the balance sheet of such lessee in accordance with generally accepted accounting principles.

   "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of equity of such Person.

   "Cash Equivalents" means:

(a)

securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), in each case maturing within one year after the date of acquisition;



(b)

time deposits and certificates of deposit of, and commercial paper issued by the parent corporation of, any domestic commercial bank or domestic branch of any foreign commercial bank organized in an OECD member country, in each case of recognized standing having capital and surplus in excess of $500.0 million and commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within one year after the date of acquisition;



(c)

repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clauses (b) and (d) herein; and



(d)

investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (a) and (b) above.

   "Class A Share Rights Agreement" means the Class A Share Rights Agreement, dated as of April 30, 1999, by and among us and Norwest Bank Minnesota, National Association Rights Agent.

   "Class B Share Rights Agreement" means the Class B Share Rights Agreement, dated as of April 30, 1999, by and among us and Norwest Bank Minnesota, National Association Rights Agent.

   "Class T Convertible Preferred Stock" means any shares of our Class T Convertible preferred stock issued from time to time to Telephone & Data Systems Inc., a Delaware corporation, and/or its affiliates in exchange for shares of our common stock, on the terms contemplated by the Recapitalization Agreement dated of as of October 31, 1999, between us and Telephone & Data Systems Inc. (as amended on December 6, 1999), as such agreement may be amended or otherwise modified from time to time in a manner not inconsistent with the terms of the Junior Certificate of Designation.

   "Commission" means the Securities and Exchange Commission.

   "Consolidated Indebtedness" of any Person means at any date the Indebtedness of such Person and its Restricted Subsidiaries at such date.

   "Consolidated Interest Expense" of any Person means for any period the interest expense included in an income statement (taking into account the effect of any Interest Hedge Agreements but without deduction of interest income) of such Person and its Restricted Subsidiaries for such period, including without limitation or duplication (or, to the extent not so included, with the addition of):

•

the portion of any rental obligation in respect of any Capital Lease Obligation allocable to interest expense in accordance with generally accepted accounting principles;


•

the amortization of Indebtedness discounts;


•

any payments or fees with respect to letters of credit, bankers' acceptances or similar facilities;


•

fees with respect to Interest Hedge Agreements;


•

the portion of any rental obligations in respect of any Sale and Leaseback Transaction allocable to interest expense (determined as if such were treated as a Capital Lease Obligation); and


•

Preferred Stock dividends accrued or payable other than dividends on our Qualified Capital Stock.

   "Consolidated Net Income" of any Person means for any period the net income (or loss) of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (to the extent included and without duplication):

•

the net income (or loss) of any Person acquired by such Person or a Restricted Subsidiary of such Person after the Issue Date in a pooling of interests transaction for any period prior to the date of such transaction;


•

the net income (or loss) of any Person that is not a Restricted Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person or Restricted Subsidiary of such Person by such other Person during such period;


•

gains or losses from sales of assets other than sales of assets acquired and held for resale in the ordinary course of business;


•

for the purposes of the "—Limitation on Restricted Payments" covenant, the net income, if positive, of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at that time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to such Restricted Subsidiary; and



•

all extraordinary gains and extraordinary losses.

   "Consolidated Net Worth" of any Person means the consolidated shareholders' equity of such Person, determined on a consolidated basis in accordance with generally accepted accounting principles; provided that with respect to us, adjustments following the Issue Date to our accounting books and records in accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the acquisition of control of us by another Person and its Subsidiaries shall not be given effect;  provided further, that such computation shall exclude:

•

any amounts attributable to Redeemable Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of our Capital Stock or Capital Stock of any of our Restricted Subsidiaries; and



•

Unrestricted Subsidiaries.

   "Cooperative Bank Equity" means non-voting equity interests in Cooperative Banks.

   "Cooperative Banks" means lenders under the Credit Facility which are cooperative banks.

   "Credit Facility" means the Existing Credit Facility and the New Credit Facility, including, in each case, any and all instruments and agreements executed in connection therewith, as such documents may be amended, restated, supplemented, renewed, replaced or otherwise modified from time to time irrespective of any changes in the terms and conditions thereof.

   "Cumulative Interest Expense" means the total amount of our Consolidated Interest Expense and that of our Restricted Subsidiaries for the period beginning on July 1, 1998 through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Cumulative Operating Cash Flow" means our Operating Cash Flow and Operating Cash Flow of our Restricted Subsidiaries for the period beginning on July 1, 1998, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Existing Credit Facility" means the Amended and Restated Loan Agreement, dated as of July 1, 1998, by and among TD Securities (USA) Inc., as arranging agent for the lenders party thereto and as such agreement may be further amended, supplemented, restated or otherwise modified from time to time, including without limitation, any renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementation or other modifications of the foregoing that increase the aggregate amount of borrowings outstanding or the aggregate commitments of the lenders thereunder, extend or shorten the maturity of any Indebtedness incurred thereunder or contemplated thereby or add or delete borrowers or guarantors thereunder or that effect any other change in the terms and conditions thereof.

   "Fair Market Value" means, with respect to any assets or Person, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined:

•

if such Person or assets have a Fair Market Value in excess of $250,000 but not in excess of $5.0 million, by any of our officers and evidenced by an Officers' Certificate dated within 30 days of the relevant transaction; or



•

if such Person or assets have a Fair Market Value in excess of $5.0 million, by a majority of our board of directors and evidenced by a Board Resolution, dated within 30 days of the relevant transaction, based on an appraisal of an independent appraiser of national reputation.

   "Holder" means a Person in whose name a share of junior exchangeable preferred stock is registered.

   "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness.

   "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent:

(a)

every obligation of such Person for money borrowed;



(b)

every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses;



(c)

every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person;



(d)

every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business);



(e)

every Capital Lease Obligation of such Person;



(f)

the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination;



(g)

every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party, other than any such obligation which would constitute an operating lease obligation of such Person under United States generally accepted accounting principles;



(h)

all obligations under Interest Hedge Agreements;



(i)

every obligation of the type referred to in clauses (a) through (h) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise, or which is secured by a lien on any asset of such Person; and



(j)

the liquidation value of Preferred Stock of a Subsidiary of such Person issued and outstanding and held by other than such Person (or one of its Restricted Subsidiaries, except that if such Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary of such Person, the portion of the liquidation value of such Preferred Stock equal to the product of:



•

the percentage of the common equity interest of such Restricted Subsidiary that is not owned, directly or indirectly, by such Person; and



•

the aggregate liquidation value of such Preferred Stock shall constitute Indebtedness);

provided that for all purposes of the Junior Certificate of Designation:

(A)

the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the unamortized portion of the original issue discount of such Indebtedness at the time of its issuance as determined in conformity with generally accepted accounting principles;



(B)

money borrowed at the time of the Incurrence of any Indebtedness in order to pre-fund the payment of interest on such Indebtedness shall be deemed not to be "Indebtedness"; and



(C)

Indebtedness shall not include any liability for federal, state, local or other taxes.

For purposes of the Junior Certificate of Designation, the amount of any Indebtedness shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, and in making such determination, if any agreement relating to such obligation provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person or in any event until the counterparty thereunder defaults in its corresponding payment, then in each such case, the amount of such obligations shall be the net amount so determined, plus any premium due upon default by such Person.

   "Interest Hedge Agreements" means any interest rate swap, cap, collar, floor, caption or swaption agreements, or any similar arrangements designed to hedge the risk of variable interest rate volatility or to reduce interest costs, arising at any time between us or any of our Restricted Subsidiaries, on the one hand, and any Person (other than any of our Affiliates or any of our Restricted Subsidiaries), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time.

   "Investment" by any Person in any other Person means (without duplication):

(a)

the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of Capital Stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such other Person or any agreement to make any such acquisition;



(b)

the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension;



(c)

the entering into by such Person of any guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of such other Person;



(d)

the making of any capital contribution by such Person to such other Person; and



(e)

the designation by our board of directors of any Person to be an Unrestricted Subsidiary.

   For purposes of the covenant described in "—Limitation on Restricted Payments,"

•

"Investment" shall include and be valued at the Fair Market Value of such Person's pro rata interest in the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the lesser of:



(A)

the Fair Market Value of such Person's pro rata interest in the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary; and



(B)

the Fair Market Value of the amount of such Person's Investments (other than Permitted Investments) made in (net of cash distributions received from) such Unrestricted Subsidiary since the Issue Date; and




•

the amount of any Investment shall be the Fair Market Value of such Investment at the time any such Investment is made.

   "Issue Date" means the time and date of the first issuance of the junior exchangeable preferred stock.

   "Junior Certificate of Designation" means the certificate of designation governing the % junior exchangeable preferred stock.

   "Junior Preferred Debentures Trustee" means the Trustee under the Junior Preferred Exchange Indenture.

   "Junior Preferred Exchange Indenture" means the indenture governing the junior preferred exchange debentures.

   "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than an easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).

   "New Credit Facility" means the amendment and restatement or the refinancing or replacement of the Existing Credit Facility in connection with and conditioned upon the consummation of the Triton acquisition with the same, a deletion of, or additional lenders, including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing that increase the aggregate amount of borrowings outstanding or the aggregate commitments of the lenders thereunder, extend or shorten the maturity of any Indebtedness incurred thereunder or contemplated thereby or add or delete borrowers or guarantors thereunder or that effect any other change in the terms and conditions thereof.

   "Notes Indenture" means the indenture governing the Senior Subordinated Notes.

   "Offer to Purchase" means a written offer (the "Offer") sent by us to each Holder at its registered address on the date of the Offer offering to purchase junior exchangeable preferred stock having a liquidation preference up to the amount specified in such Offer at the purchase price specified in such Offer. Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which, subject to any contrary requirements of applicable law, shall be not less than 30 days nor more than 60 days after the date of such Offer to Purchase and a settlement date (the "Purchase Date") for purchase of junior exchangeable preferred stock within five Business Days after the Expiration Date. The Offer shall also state the section of the Junior Certificate of Designation pursuant to which the Offer to Purchase is being made, the Expiration Date and the Purchase Date, the aggregate liquidation preference of the outstanding junior exchangeable preferred stock offered to be purchased by us, the purchase price to be paid by us and the place or places where shares of junior exchangeable preferred stock are to be surrendered for tender pursuant to the Offer to Purchase.

   "Officers' Certificate" means a certificate signed by two officers, at least one of whom shall be our principal executive officer, principal accounting officer, or principal financial officer, and delivered to the Transfer Agent.

   "Operating Cash Flow" for any Person for any period means:

(a)

the Consolidated Net Income of such Person for such period, plus



(b)

the sum, without duplication (and only to the extent such amounts are deducted from net revenues in determining such Consolidated Net Income), of:



•

the provisions for income taxes for such period for such Person and its Subsidiaries;



•

depreciation, amortization and other non-cash charges of such Person and its Subsidiaries; and



•

Consolidated Interest Expense of such Person for such period, determined, in each case, on a consolidated basis for such Person and its Subsidiaries in accordance with generally accepted accounting principles, less



(c)

the sum, without duplication (and only to the extent such amounts are included in such Consolidated Net Income), of:



•

all extraordinary gains of such Person and its Subsidiaries during such period; and



•

the amount of all cash payments made during such period by such Person and its Subsidiaries to the extent such payments relate to non-cash charges that were added back in determining Operating Cash Flow for such period or for any prior period and in the case of a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary, the determination of the percentage of the Operating Cash Flow of such Restricted Subsidiary that is to be included in the calculation of our Annualized Operating Cash Flow Ratio shall be made on a pro forma basis on the assumption that the percentage of our common equity interest in such Restricted Subsidiary throughout the applicable Reference Period was equivalent to its common equity interest on the date of the determination.

When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and its Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Opinion of Counsel" means a written opinion of counsel, who may be counsel for us, and who shall be reasonably acceptable to the Transfer Agent, delivered to the Transfer Agent.

   "Permitted Investments" means:

(a)

Investments in Cash Equivalents;



(b)

Investments in us or one of our Restricted Subsidiaries (other than payments described in clause (b) of the second paragraph under "—Limitation on Restricted Payments" and Investments in us by one of our Restricted Subsidiaries pursuant to clause (b) of the definition of "Restricted Payments");



(c)

Investments in a Person substantially all of whose assets are of a type generally used in a Wireless Communications Business (an "Acquired Person") if, as a result of such Investments:



(A)

the Acquired Person immediately thereupon becomes a Restricted Subsidiary or



(B)

the Acquired Person immediately thereupon either:




•

is merged or consolidated with or into us or any of our Restricted Subsidiaries or



•

transfers or conveys all or substantially all of its assets to, or is liquidated into, us or any of our Restricted Subsidiaries;



(d)

Investments in accounts and notes receivable acquired in the ordinary course of business;



(e)

any securities received in connection with an Asset Sale that complies with the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant;



(f)

advances and prepayments for asset purchases in the ordinary course of business in one of our Wireless Communications Businesses or any of our Restricted Subsidiaries;



(g)

customary loans or advances made in the ordinary course of business to our officers, directors or employees or any of our Restricted Subsidiaries' officers, directors or employees for travel, entertainment, and moving and other relocation expenses;



(h)

the purchase of Cooperative Bank Equity in Cooperative Banks to the extent required by the charter documents of such Cooperative Banks in connection with the Incurrence of any Indebtedness which is provided by such Cooperative Banks under the Credit Facility, provided that such Incurrence is permitted under the terms of the Junior Certificate of Designation;



(i)

any Investment by us of Qualified Capital Stock Proceeds received after July 1, 1998 in any Unrestricted Subsidiary which conducts or will conduct a Telecommunications Business (provided that any such Qualified Capital Stock Proceeds used to consummate the Triton acquisition shall be deemed not to have been used and shall remain available for such an Investment); and



(j)

Investments in Wireless Alliance during the period it is an Unrestricted Subsidiary not exceeding $25.0 million in the aggregate made after July 1, 1998;



provided that:

(A)

the matters referenced in clauses (c) and (j) above shall not be Permitted Investments if made at any time that a Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event has occurred and is continuing,



(B)

matters referenced in clause (i) above shall not be a Permitted Investment if at any time:




•

a Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event has occurred and is continuing and



•

we would not be permitted to Incur an additional $1.00 of Indebtedness pursuant to the provision of the Junior Certificate of Designation described in the first paragraph under "—Limitation of Consolidated Indebtedness;" and

(C)

following any Permitted Investment pursuant to clause (i), the Unrestricted Subsidiary in which such Investment is made shall be prohibited from using the proceeds of such Investment (directly or indirectly) to make any Restricted Payment with respect to Junior Stock or options, warrants or rights to acquire our Junior Stock of the type described in clause (b) of the definition of Restricted Payment.

   "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

   "Preferred Stock" means, with respect to any Person, any and all shares of Capital Stock of such Person that have preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

   "Public Equity Offering" means an underwritten public offering of our common stock pursuant to an effective registration statement filed with the Commission in accordance with the Securities Act.

   "Qualified Capital Stock" means, with respect to any Person, any and all shares of Capital Stock other than Redeemable Stock issued by such Person, and any options, warrants or other rights to purchase such Capital Stock.

   "Qualified Capital Stock Proceeds" means, with respect to any Person:

(a)

in the case of any sale of Qualified Junior Stock (other than to any Subsidiary), the aggregate net cash proceeds received by such Person, after payment of expenses, commissions and the like, Incurred by such Person in connection therewith, and net of Indebtedness that such Person Incurred, guaranteed, or otherwise became liable for in connection with the issuance or acquisition of such Qualified Junior Stock; and



(b)

in the case of any exchange, exercise, conversion or surrender of any Redeemable Stock, Qualified Capital Stock (other than Qualified Junior Stock) or Indebtedness of such Person issued (other than to any Subsidiary) for cash after the Issue Date for or into shares of Qualified Junior Stock of such Person, the aggregate net cash proceeds received from the issuance of such Redeemable Stock, Qualified Capital Stock or Indebtedness, plus the aggregate net cash proceeds, if any, received by such Person upon such exchange, exercise, conversion or surrender of such Redeemable Stock, Qualified Capital Stock or Indebtedness, and less any and all payments made to the security holders, and all other expenses, commissions and the like Incurred by such Person or any Subsidiary in connection therewith.

   "Qualified Junior Stock" means Junior Stock that does not constitute Redeemable Stock.

   "Qualifying Event" means a Public Equity Offering or one or more Strategic Equity Investments which in either case results in aggregate net proceeds of not less than $50.0 million; provided that any Public Equity Offering or Strategic Equity Investment, the net proceeds from which are intended to be used to consummate the Triton acquisition, shall not be a Qualifying Event.

   "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the Mandatory Redemption Date or is redeemable at the option of the holder thereof (other than an equity security that is redeemable at the option of the holder and the applicable redemption price is payable only in shares of Qualified Junior Stock) at any time prior to the Mandatory Redemption Date, provided that any Capital Stock that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of a "change of control" occurring prior to the Mandatory Redemption Date shall not constitute Redeemable Stock if the "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Change of Control" covenant and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to our repurchase of the junior exchangeable preferred stock as required pursuant to the "Change of Control" covenant.

   "Reference Period" with regard to any Person means the last two full fiscal quarters of such Person immediately preceding any date upon which any determination is to be made pursuant to the terms of the Senior Subordinated Notes or the Junior Certificate of Designation.

   "Related Person" of any Person means any other Person owning:

(a)

5.0% or more of the outstanding Common Stock of such Person; or



(b)

5.0% or more of the Voting Power of such Person.

   "Restricted Payment" means, with respect to any Person:

(a)

any declaration or payment of a dividend or other distribution on any shares of the Junior Stock of such Person or any Subsidiary of such Person (other than a dividend payable solely in shares of its Junior Stock or options, warrants or other rights to acquire its Junior Stock and other than any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to us or another Restricted Subsidiary);



(b)

any payment on account of the purchase, redemption, retirement or acquisition of:



•

any shares of Junior Stock of such Person or any Subsidiary of such Person held by other than such Person or any of its Restricted Subsidiaries; or



•

any option, warrant or other right to acquire shares of Junior Stock of such Person or any Subsidiary of such Person held by other than such Person or any of its Restricted Subsidiaries, in each case other than pursuant to the cashless exercise of options;



(c)

any Investment (other than a Permitted Investment) made by such Person;

provided that the term "Restricted Payment" does not include the payment of a dividend or other distribution by any Restricted Subsidiary on shares of its Capital Stock that is paid pro rata to all holders of such Capital Stock.

   "Restricted Subsidiary" of any Person means any Subsidiary of such Person other than an Unrestricted Subsidiary.

   "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty.

   "Securities Act" means the Securities Act of 1933, as amended.

   "Senior Indebtedness" means the principal of (and premium, if any) and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us whether or not a claim for post-petition interest is allowed in such proceeding) on:

•

our Indebtedness created pursuant to the Credit Facility and all other obligations thereunder or under the notes, security documents, pledge agreements, Interest Hedge Agreements or other agreements or instruments executed in connection therewith;



•

our Indebtedness created pursuant to any vendor financing Incurred for the acquisition, construction or improvement by us or any of our Restricted Subsidiaries of assets in the Wireless Communications Business;



•

all our Indebtedness referred to in the definition of Indebtedness other than:



(A)

Indebtedness incurred pursuant to clauses (d) and (f) thereof (and clause (i) thereof to the extent applicable to Indebtedness Incurred under clauses (d) and (f) thereof), whether Incurred on or prior to the Issue Date and



(B)

the Senior Subordinated Notes; and




•

amendments, renewals, extensions, modifications, refinancings and refundings of any such Indebtedness; provided, however, the following shall not constitute Senior Indebtedness:



(A)

any Indebtedness owed to a Person when such Person is our Restricted Subsidiary,



(B)

any Indebtedness which by the terms of the instrument creating or evidencing the same is not superior in right of payment to the junior preferred exchange debentures, if and when issued,



(C)

any Indebtedness Incurred in violation of the Junior Certificate of Designation (but, as to any such Indebtedness, no such violation shall be deemed to exist for purposes of this clause (C) if the holder(s) of such Indebtedness or their representative shall have received an Officers' Certificate from us to the effect that the Incurrence of such Indebtedness does not (or in the case of revolving credit Indebtedness, that the Incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate the Junior Certificate of Designation),



(D)

any Indebtedness which is subordinated in right of payment to any of our other Indebtedness,



(E)

Indebtedness or other obligations of or amounts owed by us or any of our Restricted Subsidiaries for compensation to our or their employees, as applicable, or for services rendered by such employees to us or any of our Restricted Subsidiaries or



(F)

any liability for federal, state, local or other taxes owed or owing by us.

   "Senior Preferred Exchange Indenture" means the indenture governing our 11³/8% Senior Subordinated Debentures.

   "Senior Preferred Stock" means our 11³/8% senior exchangeable preferred stock.

   "Senior Subordinated Notes" means our 9⁵/8% Senior Subordinated Notes due 2008.

   "Share Rights Agreements" means the Class A Share Rights Agreement and the Class B Share Rights Agreement.

   "Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of Regulation S-X under the Securities Act; provided that all references to "10 percent" under such definition shall be deemed to be references to "5 percent."

   "Strategic Equity Investment" means an investment in Qualified Junior Stock made by a Strategic Investor in an aggregate amount of not less than $50.0 million.

   "Strategic Investor" means a Person (other than one of our Affiliates or a Person who by virtue of such Investment becomes such an Affiliate) engaged in one or more Telecommunications Businesses with an equity market capitalization at the time such Person makes a Strategic Equity Investment in us in excess of $1.0 billion.

   "Subsidiary" means, as applied to any Person:

•

any corporation of which more than fifty percent (50.0%) of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary Voting Power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such Voting Power by reason of the happening of any contingency, or any entity other than a corporation of which more than fifty percent (50.0%) of the outstanding ownership interests, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person; or



•

any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person.

   "Telecommunications Business" means the business of:

(a)

transmitting, or providing services relating to the transmission of, voice, video or data through owned or leased wireline or wireless transmission facilities;



(b)

creating, developing, constructing, installing, repairing, maintaining or marketing communications-related systems, network equipment and facilities, software and other products; or



(c)

evaluating, owning, operating, participating in or pursuing any other business that is primarily related to those identified in clause (a) or (b) above (in the case of this clause (c), however, in a manner consistent with our manner of business on the Issue Date), and shall, in any event, include all businesses in which we or any of our Subsidiaries is engaged on the Issue Date or has entered into agreements to engage in or to acquire a company to engage in or contemplate engaging in, as expressly set forth in this Prospectus;

provided that the determination of what constitutes a Telecommunications Business shall be made in good faith by our board of directors.

   "Treasury Rate" means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to     , 2005,  provided, however, that if the period from the redemption date to      , 2005 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

   "Unrestricted Subsidiary" of any Person means:

•

any Subsidiary of such Person that at the time of determination shall be designated an Unrestricted Subsidiary by the board of directors of such Person in the manner provided below; and



•

any Subsidiary of an Unrestricted Subsidiary.

The board of directors of any Person may designate any Restricted Subsidiary to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, such Person or any Restricted Subsidiary; provided that either:

•

the Subsidiary to be so designated has total assets of $1,000 or less; or



•

if such Subsidiary has assets greater than $1,000, such Person's pro rata interest in the Fair Market Value of the net assets of such Subsidiary at the time of such designation would be permitted as an Investment under the provision of the Junior Certificate of Designation described under "—Limitation on Restricted Payments."

The board of directors of any Person may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of such Person; provided that immediately after giving effect to such designation:

•

such Person would be permitted to Incur $1.00 of additional Indebtedness pursuant to the provision of the Junior Certificate of Designation described in the first paragraph under "—Limitation on Consolidated Indebtedness"; and



•

no Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event has occurred and is continuing.

Any such designation by the board of directors shall be evidenced by a Board Resolution submitted to the Transfer Agent. Wireless Alliance shall be deemed an Unrestricted Subsidiary as of the Issue Date and shall thereafter remain an Unrestricted Subsidiary unless and until designated by the board of directors as a Restricted Subsidiary in accordance with the terms of the Junior Certificate of Designation.

   "Voting Power" of any Person means the aggregate number of votes of all classes of Capital Stock of such Person which ordinarily have voting power for the election of directors of such Person.

   "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

   "Wireless Communications Business" means any business substantially related to the ownership, development, operation or acquisition of fixed and mobile wireless communications services permitted under the Federal Communications Commission's Commercial Mobile Radio Service rules (and the related provisions of the Federal Communications Commission's Public Mobile Services and Personal Communications Services rules), and other related telecommunications business services.

Form, Denomination, Book-Entry Procedures and Transfer

   Junior exchangeable preferred stock will be issued only in fully registered form in denominations of $1,000 and integral multiples thereof. Junior exchangeable preferred stock will not be issued in bearer form.

   If the junior exchangeable preferred stock is to be redeemed in part, we will not be required to:

•

issue, register the transfer of or exchange any junior exchangeable preferred stock during a period beginning at the opening of business 15 days before the day of mailing of notice of redemption of any such junior exchangeable preferred stock that may be selected for redemption and ending at the close of business on the day of such mailing; or



•

register the transfer of or exchange any junior exchangeable preferred stock so selected for redemption, in whole or in part, except the unredeemed portion of any such junior exchangeable preferred stock being redeemed in part.

Junior Preferred Exchange Debentures

   The    % senior subordinated debentures will be issued under an Indenture, to be dated as of the Exchange Date, by and between us and                            , as Trustee (the "Debentures Trustee"). If the junior preferred exchange debentures are issued, the junior preferred exchange debentures will be subject to and governed by the Trust Indenture Act. The following summary of the material terms and provisions of the junior preferred exchange debentures and the Junior Preferred Exchange Indenture does not purport to be complete and is subject to and qualified in its entirety by reference to the Junior Preferred Exchange Indenture (including the terms made part of the Junior Preferred Exchange Indenture by reference to the Trust Indenture Act), copies of which are available for inspection at the corporate trust office of the Junior Preferred Debentures Trustee in Minneapolis, Minnesota and which may also be obtained from us. Definitions relating to certain capitalized terms used in this section of this prospectus are set forth under "—Certain Definitions" and throughout this description. Capitalized terms that are used in this section but not otherwise defined herein have the meanings assigned to them in the Junior Preferred Exchange Indenture and such definitions are incorporated herein by reference. Unless otherwise indicated, references in this section to covenants are to covenants set forth in the Junior Preferred Exchange Indenture.

General

   The junior preferred exchange debentures will be our unsecured obligations and will be limited in aggregate principal amount to the liquidation preference of the junior exchangeable preferred stock exchanged for junior preferred exchange debentures on the Exchange Date plus any additional junior preferred exchange debentures thereafter issued in lieu of cash interest as described herein. The junior preferred exchange debentures will be our senior subordinated obligations, subordinated in right of payment to our Senior Indebtedness,pari passu in right of payment with the Senior Subordinated Notes, the Senior Preferred Exchange Debentures (if issued) and all our future senior subordinated indebtedness and senior in right of payment to any of our future subordinated indebtedness.

Maturity, Interest and Principal

   The junior preferred exchange debentures will mature on       , 2011. Interest on the junior preferred exchange debentures will accrue at a rate of      % per annum and will be payable in cash (or, on or prior to       , 2005, in additional junior preferred exchange debentures having an aggregate principal amount equal to the amount of such interest, at our option) semiannually on each          and     , commencing on the first such date following the Exchange Date to the Holders of record on the immediately preceding          and          . Interest will be computed on the basis of a 360-day year of twelve 30-day months. The junior preferred exchange debentures will be payable both as to principal and interest at our office or one of our agencies maintained for such purpose within the City and State of New York. Until otherwise designated by us, our office or agency in New York will be the office of the Junior Preferred Debentures Trustee maintained for such purpose.

   All moneys paid by us to a paying agent for the payment of principal of (and premium, if any) and any interest on any junior preferred exchange debentures which remain unclaimed for two years after such principal (and premium, if any) or interest has become due and payable may be repaid to us and thereafter the Holder of such junior preferred exchange debentures may look only to us for payment thereof.

Subordination

   The payment of the principal of and premium, if any, and interest on the junior preferred exchange debentures will, to the extent set forth in the Junior Preferred Exchange Indenture, be subordinated in right of payment to the prior payment in full of all Senior Indebtedness. Upon any payment or distribution of our assets to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshaling of assets or any bankruptcy, insolvency or similar proceedings of us, the holders of all Senior Indebtedness will be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the junior preferred exchange debentures will be entitled to receive any Junior Preferred Exchange Debenture payment.

   In the event that any Senior Payment Default shall have occurred and be continuing, or the maturity of any Senior Indebtedness shall have been accelerated, then no Junior Preferred Exchange Debentures payment shall be made unless and until such Senior Payment Default shall have been cured or waived and any acceleration of Senior Indebtedness shall have been rescinded or annulled. In the event that any Senior Nonmonetary Default shall have occurred and be continuing, then, upon the receipt by us and the Junior Preferred Debentures Trustee of written notice of such Senior Nonmonetary Default from a Person designated as a representative for the Designated Senior Indebtedness or, if there is no outstanding Designated Senior Indebtedness, any holder of Senior Indebtedness, no Junior Preferred Exchange Debentures Payment shall be made during the period (the "Payment Blockage Period") commencing on the date of such receipt of such written notice and ending on the earlier of:

•

the date on which such Senior Nonmonetary Default shall have been cured or waived or shall have ceased to exist and any acceleration of Senior Indebtedness shall have been rescinded or annulled or the Senior Indebtedness to which such Senior Nonmonetary Default relates shall have been discharged; or



•

the 179th day after the date of such receipt of such written notice.

   No more than one Payment Blockage Period may be commenced with respect to the junior preferred exchange debentures during any 360-day period and there shall be a period of at least 181 consecutive days in each 360-day period in which no Payment Blockage Period is in effect. For all purposes of this paragraph, no Senior Nonmonetary Default that was known to the holders of Senior Indebtedness to exist or be continuing on the date of commencement of any Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by a representative for the Designated Senior Indebtedness unless such Senior Nonmonetary Default shall have been cured for a period of not less than 90 consecutive days.

   The subordination provisions described above will cease to be applicable to the junior preferred exchange debentures upon any defeasance or covenant defeasance of the junior preferred exchange debentures as described under "Defeasance."

   As of September 30, 1999, on a pro forma basis after giving effect to the Triton Acquisition and the sale of the junior exchangeable preferred stock, Senior Indebtedness aggregated approximately $1.18 billion. We expect from time to time to Incur additional Indebtedness constituting Senior Indebtedness. See "Capitalization." In addition, all existing and future indebtedness and other liabilities of our Subsidiaries will be effectively senior in right of payment to the junior preferred exchange debentures. As of September 30, 1999, on a pro forma basis after giving effect to the Triton Acquisition and the Offering, our Subsidiaries had no material Indebtedness, other than Intercompany Indebtedness and guarantees by our Subsidiaries of the Credit Facility.

Optional Redemption

   After     , 2005, the junior preferred exchange debentures may be redeemed at any time at our option, in whole or from time to time in part, on not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount thereof), together with accrued and unpaid interest to but excluding the date fixed for redemption, if redeemed during the 12-month period beginning on          of each of the years indicated below:

Year	Redemption Price
2005		%
2006		%
2007		%
2008		%
2009 and thereafter	100.000	%

   In addition, at any time prior to       , 2003, we may redeem up to 35.0% of the aggregate principal amount of junior preferred exchange debentures actually issued under the Indenture from the net cash proceeds of a Qualifying Event at a price equal to  % of the aggregate principal amount thereof, together with accrued and unpaid interest to but excluding the date fixed for redemption; provided that at least 65.0% in aggregate principal amount of junior preferred exchange debentures remains outstanding immediately following such redemption; and provided further, however, that the aggregate liquidation preference of any shares of junior exchangeable preferred stock previously redeemed out of the net cash proceeds of a Qualifying Event shall be counted as aggregate principal amount of junior preferred exchange debentures issued and redeemed for purposes of the foregoing 35.0% calculation. Any such redemption must be made within 60 days after the related Qualifying Event.

   In addition, at any time prior to       , 2005, the junior preferred exchange debentures may be redeemed at our option, in whole but not in part, at a redemption price equal to 100% of the aggregate principal amount thereof plus the Applicable Premium as of, and accrued and unpaid interest, if any, to but excluding, the redemption date.

   Notice of any optional redemption of any junior preferred exchange debentures (or portion thereof) will be given to Holders at their addresses appearing in the Security Register, not less than 30 nor more than 60 days prior to the date fixed for redemption. The notice of redemption shall state the redemption date, the redemption price, if less than all the outstanding junior preferred exchange debentures are to be redeemed, principal amounts of the particular junior preferred exchange debentures to be redeemed, that on the redemption date the redemption price will become due and payable upon each junior preferred exchange debenture to be redeemed and the place or places where such junior preferred exchange debentures are to be surrendered for payment of the redemption price. If less than all of the junior preferred exchange debentures are to be redeemed, the particular junior preferred exchange debentures to be redeemed will be selected not more than 60 days prior to the redemption date by the Junior Preferred Debentures Trustee by such method as the Junior Preferred Debentures Trustee deems fair and appropriate.

No Sinking Fund

   No sinking fund will be provided for the junior preferred exchange debentures.

Change of Control

   Upon the occurrence of a Change of Control, each Holder of a junior preferred exchange debenture shall have the right to have such junior preferred exchange debenture repurchased by us on the terms and conditions set forth in the Junior Preferred Exchange Indenture. We shall, within 30 days following the date of the consummation of a transaction resulting in a Change of Control, mail an Offer to Purchase all outstanding junior preferred exchange debentures at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to but excluding the date of purchase. The occurrence of a Change of Control constitutes an event of default under the Credit Facility, entitling the lenders thereunder to accelerate all obligations owing thereunder, which would result in a block on all payments under the junior preferred exchange debentures. We cannot assure you that we will be able to make or satisfy the Offer to Purchase.

   "Change of Control" means:

(a)

directly or indirectly a sale, transfer or other conveyance of all or substantially all our assets, on a consolidated basis, to any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), excluding transfers or conveyances to or among our Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that any Person or group of Persons owns more than 50% of the total Voting Power entitled to vote in the election of directors, managers or trustees of the transferee entity immediately after such transaction;



(b)

any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50.0% of our total Voting Power; or



(c)

during any period of 24 consecutive months, individuals who at the beginning of such period constituted our board of directors (together with any new directors whose election by such board or whose nomination for election by our shareholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of our board of directors then in office.

   For purposes of clause (c) above, any new directors elected:

•

by the holders of junior exchangeable preferred stock, pursuant to the terms of the Junior Certificate of Designation; or



•

if we issue convertible preferred stock in connection with the Triton acquisition, by Madison Dearborn Capital Partners III, LP and Boston Ventures Limited Partnership V or any of their affiliates or permitted transferees, exercising rights as holders of shares of our convertible preferred stock shall be deemed to be members of the board of directors at the beginning of any such 24 month period.

   We will comply with any tender offer rules under the Exchange Act which may then be applicable, including Rule 14e-l thereunder, in connection with any Offer to Purchase.

Certain Covenants

Limitation on Consolidated Indebtedness

   The Junior Preferred Exchange Indenture will prohibit us and our Restricted Subsidiaries from Incurring any Indebtedness, except that we may Incur Indebtedness if (1) there exists no Event of Default or an event which with notice or lapse of time or both would become an Event of Default immediately prior and subsequent thereto, and (2) after giving effect thereto, our Annualized Operating Cash Flow Ratio on a pro forma basis (calculated on the assumption that such Indebtedness had been incurred on the first day of the applicable Reference Period), would have been less than:

For the Period	Ratio
Prior to July 1, 2001	9.0 to 1.0
Thereafter	8.0 to 1.0

   Notwithstanding the foregoing, we and our Restricted Subsidiaries may Incur the following Indebtedness without regard to the foregoing limitations (provided that if there exists an Event of Default pursuant to clauses (a), (b), (c) or (h) of the first sentence under the caption "—Events of Default and Remedies" or an event which with notice or lapse of time or both would become an Event of Default pursuant to clauses (a), (b), (c) or (h) of the first sentence under the caption "—Events of Default and Remedies" immediately prior and subsequent thereto, we and our Restricted Subsidiaries may without regard to the foregoing limitations only incur the Indebtedness described in the following clauses (c), (d) and (l)):

(a)

Indebtedness evidenced by the junior preferred exchange debentures on the Exchange Date, and junior preferred exchange debentures issued after the Exchange Date in lieu of cash interest as described herein.



(b)

Indebtedness Incurred under the New Credit Facility provided that the amount of Indebtedness Incurred under the New Credit Facility and any other credit facilities similar in type to the New Credit Facility does not exceed in an aggregate principal amount $1.375 billion at any time outstanding, reduced by repayments and permanent reductions thereof due to application of:



•

Net Cash Proceeds (as defined in the indenture governing the Senior Subordinated Notes) as set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the indenture governing the Senior Subordinated Notes; or



•

Net Cash Proceeds (as defined in the Senior Preferred Exchange Indenture) as set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the Senior Preferred Exchange Indenture.



(c)

our Indebtedness or that of any of our Restricted Subsidiaries owing to us or any of our Restricted Subsidiaries;provided that:



•

in the case of any of our Indebtedness, such obligations will be unsecured and subordinated in all respects to the Holders' rights pursuant to the junior preferred exchange debentures to the same extent as the junior preferred exchange debentures are subordinated to Senior Indebtedness, and



•

if any event occurs that causes a Restricted Subsidiary to no longer be a Restricted Subsidiary, then this clause (c) will no longer be applicable to such Indebtedness of that Restricted Subsidiary.



(d)

our Indebtedness or that of any of our Restricted Subsidiaries to renew, extend, refinance or refund any of our Indebtedness or that of our Restricted Subsidiaries outstanding or committed on the date of renewal, extension, refinancing or refunding other than Indebtedness Incurred pursuant to clause (b) or (c); provided, however, that such Indebtedness does not exceed the principal amount of outstanding or committed Indebtedness so renewed, extended, refinanced or refunded plus premiums, accrued dividends, accrued interest financing fees and other expenses associated therewith; and provided further, however, that:



•

such renewing, extending, refinancing or refunding Indebtedness will not have a final maturity and shall not have any other mandatory repayments or redemptions prior to or in amounts greater than those of the Indebtedness being renewed, extended, refinanced or refunded,



•

in the case of any refinancing or refunding of Indebtedness that ranks pari passu in right of payment to the junior preferred exchange debentures, the refinancing or refunding Indebtedness ranks pari passu or is subordinated in right of payment to the junior preferred exchange debentures and, in the case of any refinancing or refunding of Indebtedness subordinated to the junior preferred exchange debentures, the refinancing or refunding Indebtedness ranks subordinate in right of payment to the junior preferred exchange debentures to substantially the same extent as the Indebtedness refinanced or refunded and



•

none of our Restricted Subsidiaries will be permitted to refinance any of our Indebtedness pursuant to this clause (d) except that any Restricted Subsidiary may guarantee Indebtedness incurred under this clause (d) if such restricted subsidiary had guaranteed the Indebtedness refinanced under this clause (d);



(e)

our Indebtedness Incurred or that of any of our Restricted Subsidiaries, under Interest Hedge Agreements to hedge interest on permitted Indebtedness,  provided that the notional principal amount of any such Interest Hedge Agreements does not exceed the principal amount of Indebtedness to which such Interest Hedge Agreements relate;



(f)

(1)   Indebtedness of any of our Restricted Subsidiaries (excluding Indebtedness of Wireless Alliance, if it becomes a Restricted Subsidiary, incurred pursuant to clause (f)(2) below) which does not exceed $75.0 million in the aggregate for all such Restricted Subsidiaries at any time outstanding (excluding any Intercompany Indebtedness or Acquired Indebtedness permitted to be Incurred under the Junior Preferred Exchange Indenture), provided that after giving effect thereto on a pro forma basis our Annualized Operating Cash Flow Ratio is less than, prior to July 1, 2001, 9.0 to 1.0 and thereafter, 8.0 to 1.0 and the Adjusted Annualized Operating Cash Flow Ratio of such Restricted Subsidiary is less than 5.0 to 1.0 and



(2)

if it becomes our Restricted Subsidiary, Indebtedness of Wireless Alliance (excluding any Intercompany Indebtedness or Acquired Indebtedness permitted to be Incurred under the Junior Preferred Exchange Indenture) which does not exceed $75.0 million in the aggregate at any time outstanding, provided that after giving effect thereto on a pro forma basis our Annualized Operating Cash Flow Ratio is less than, prior to July 1, 2001, 9.0 to 1.0, and, thereafter 8.0 to 1.0, and the Adjusted Annualized Operating Cash Flow Ratio of such Restricted Subsidiary is less than 5.0 to 1.0;




(g)

any guarantee by any Restricted Subsidiary of any Indebtedness Incurred under the Credit Facility in compliance with this covenant;



(h)

Acquired Indebtedness; provided that on a pro forma basis after giving effect to the Incurrence of such Indebtedness, we shall be able to Incur $1.00 of additional Indebtedness pursuant to the provisions described under the first paragraph of this covenant "—Limitation on Consolidated Indebtedness";



(i)

Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of business, indebtedness constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business in respect of workers' compensation claims, and self-insurance of other Indebtedness issued in the ordinary course of business with respect to reimbursement type obligations regarding workers' compensation claims;



(j)

Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any of our obligations or that of any of our Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any of our business, our assets or that of our Restricted Subsidiaries (other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of our business, our assets or that of our Restricted Subsidiaries for the purpose of financing such acquisition), in an amount not to exceed the gross proceeds actually received by us or any of our Restricted Subsidiaries in connection with such disposition;



(k)

Indebtedness (including Capital Lease Obligations) Incurred to finance the cost (including the cost of design, development, construction, installation or integration) of telecommunications network assets, equipment or inventory acquired by us or any of our Restricted Subsidiaries, which, in the aggregate does not exceed $15.0 million at any time outstanding or committed; and



(l)

our Indebtedness or that of any of our Restricted Subsidiaries which does not exceed $75.0 million at any time outstanding.

   For purposes of determining any particular amount of Indebtedness under this "—Limitation on Consolidated Indebtedness" covenant:

•

guarantees, Liens or obligations with respect to letters of credit or other similar instruments supporting Indebtedness otherwise included in the determination of such particular amount shall not be included; and



•

any Liens securing the junior preferred exchange debentures granted pursuant to the equal and ratable provisions referred to under the caption "—Limitation on Liens" shall not be treated as giving rise to Indebtedness.

   For purposes of determining compliance with this "—Limitation on Consolidated Indebtedness" covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses (other than Indebtedness referred to in clause (b) above), we, in our sole discretion, shall classify, and from time to time may reclassify (including under the first paragraph of this covenant), such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses (or paragraph).

   The accrual of interest or dividends or the accretion of accreted value will not be deemed an incurrence of Indebtedness for the purposes of this "—Limitation on Consolidated Indebtedness" covenant.

Limitation on Preferred Stock of Restricted Subsidiaries

   The Junior Preferred Exchange Indenture will prohibit us from allowing any of our Restricted Subsidiaries to create or issue any Preferred Stock except:

(a)

Preferred Stock outstanding on the Exchange Date;



(b)

Preferred Stock issued to and held by us or any of our Restricted Subsidiaries (provided that, if such Restricted Subsidiary is not one of our Wholly Owned Restricted Subsidiaries the portion of the liquidation value of such Preferred Stock equal to the product of:



•

the percentage of the common equity interest of such Restricted Subsidiary that is not owned, directly or indirectly, by us and



•

the aggregate liquidation value of such Preferred Stock must be permitted to be issued pursuant to clause (e) below);



(c)

Preferred Stock issued by any Person prior to that Person's having become our direct or indirect Restricted Subsidiary;



(d)

Preferred Stock issued by a Restricted Subsidiary the proceeds of which are used to refinance outstanding Preferred Stock of a Restricted Subsidiary, provided that:



•

the liquidation value of the refinancing Preferred Stock does not exceed the liquidation value so refinanced plus premiums, accrued dividends, financing fees and other expenses associated with such refinancing and



•

such refinancing Preferred Stock has no mandatory redemptions prior to (and in no greater amounts than) the Preferred Stock being refinanced; and



(e)

Preferred Stock issued by a Restricted Subsidiary to the extent such Preferred Stock, together with all other Restricted Subsidiary Indebtedness, could be incurred pursuant to clause (f) or (l) of the covenant entitled "—Limitation on Consolidated Indebtedness" above.

Limitation on Asset Sales and Sales of Subsidiary Stock

   The Junior Preferred Exchange Indenture will provide that after the Exchange Date we will not, and will not permit any of our Restricted Subsidiaries to, in one transaction or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of its property, business or assets, including any sale or other transfer or issuance of any Capital Stock of any of our Restricted Subsidiaries, whether owned on the Exchange Date or thereafter acquired (an "Asset Sale") unless:

(a)

such Asset Sale is for Fair Market Value;



(b)

at least 80.0% of the value of the consideration for such Asset Sale consists of:



•

cash,



•

the assumption by the transferee (and release of Rural Cellular or a Subsidiary, as the case may be) of Senior Indebtedness or Indebtedness of Rural Cellular that ranks pari passu in right of payment to the junior preferred exchange debentures or Indebtedness of such Restricted Subsidiary or



•

notes, obligations or other marketable securities (collectively "Marketable Securities") that are immediately converted into cash; and



(c)

the Net Cash Proceeds therefrom are applied on or prior to the date that is 360 days after the date of such Asset Sale:



•

to the repayment of Indebtedness under the Credit Facility (which payment permanently reduces the commitment thereunder) and, to the extent required pursuant to the terms of such Indebtedness, to the repayment or repurchase of any other Senior Indebtedness or any Indebtedness that ranks in right of payment pari passu with the junior preferred exchange debentures (provided that we offer to repurchase any outstanding junior preferred exchange debentures (in accordance with the terms and procedures of an Asset Sale Offer) on a pro rata basis with such pari passu Indebtedness, based on the aggregate principal amount of the junior preferred exchange debentures, plus accrued and unpaid interest, and the aggregate principal amounts of such Indebtedness); or



•

to the repurchase of the junior preferred exchange debentures pursuant to an offer to purchase (an "Asset Sale Offer") described below or



•

to an investment in a Wireless Communications Business (or, in the event such Asset Sale constitutes a transfer of assets related to a Telecommunications Business that is not a Wireless Communications Business, in a Telecommunications Business).

   Notwithstanding the foregoing provisions of the prior paragraph:

(a)

any of our Restricted Subsidiaries may convey, sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to us or one of our Wholly Owned Restricted Subsidiaries;



(b)

we and our Restricted Subsidiaries may:



(A)

convey, sell, lease, transfer, assign or otherwise dispose of assets in the ordinary course of business provided that the consideration received reflects the Fair Market Value of such assets; and



(B)

exchange assets for either assets or equity interests in Wireless Communications Businesses, provided that:



(I)

the assets or equity interests received have a Fair Market Value substantially equal to the assets exchanged,



(II)

the assets we receive are controlled by us with respect to voting rights and day-to-day operations, or the equity interests received by us represent a controlling interest in the total Voting Power and day-to-day operations of a Person that is the issuer of such equity interests,



(III)

there exists no Event of Default or event which with notice or lapse of time or both would become an Event of Default immediately prior and subsequent thereto,



(IV)

immediately after giving effect to such transaction, we would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the provision of the Junior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness," and



(V)

the assets being received by us or any of our Restricted Subsidiaries in such exchange are not Capital Stock of an Unrestricted Subsidiary or an entity to be designated as an Unrestricted Subsidiary;




(c)

we and our Restricted Subsidiaries may convey, sell, lease, transfer, assign or otherwise dispose of assets pursuant to and in accordance with the covenants described in "Consolidation, Merger, Conveyance, Transfer or Lease";



(d)

we and our Restricted Subsidiaries may:



•

sell damaged, worn out or other obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of our business or the business of any of our Restricted Subsidiaries, or



•

abandon such property if it cannot, through reasonable efforts, be sold;



(e)

we and our Restricted Subsidiaries may make any Restricted Payment that complies with the covenant description under the caption "—Limitation of Restricted Payments";



(f)

we and our Restricted Subsidiaries may make any Permitted Investment that complies with the covenant described under the caption "—Limitation of Restricted Payments" other than Permitted Investments described under clause (e) of the definition of such term; and



(g)

in addition to the Asset Sales permitted by the foregoing clauses (a) through (f), we and our Restricted Subsidiaries may consummate Asset Sales (other than in the case of Capital Stock of any of our Restricted Subsidiaries) with respect to property, business or assets the Fair Market Value of which does not exceed $10.0 million in the aggregate after the Exchange Date.

   The Junior Preferred Exchange Indenture will provide that an Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds not applied to the uses set forth in subsection (c) in the first paragraph of this Section "—Limitation on Asset Sales and Sales of Subsidiary Stock" exceed $5.0 million. An Asset Sale Offer will remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Asset Sale Offer Period"). No later than five Business Days after the termination of the Asset Sale Offer Period (the "Asset Sale Purchase Date"), we will purchase the principal amount of junior preferred exchange debentures required to be purchased pursuant to this covenant (the "Asset Sale Offer Amount") at a purchase price equal to 100% of the principal amount of the junior preferred exchange debentures plus accrued and unpaid interest to but excluding the date of the purchase or, if less than the Asset Sale Offer Amount has been tendered, all junior preferred exchange debentures tendered in response to the Asset Sale Offer. Payment for any junior preferred exchange debentures so purchased will be made in the same manner as interest payments are made.

   If the Asset Sale Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest will be paid to the Person in whose name a junior preferred exchange debenture is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender junior preferred exchange debentures pursuant to the Asset Sale Offer.

   On or before the Asset Sale Purchase Date, we will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Asset Sale Offer Amount of junior preferred exchange debentures or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered, all junior preferred exchange debentures tendered, and will deliver to the Junior Preferred Debentures Trustee an Officers' Certificate stating that such junior preferred exchange debentures or portions thereof were accepted for payment by us in accordance with the terms of this covenant. We or the Depositary or the paying agent, as the case may be, will promptly (but in any case not later than five days after the Asset Sale Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the junior preferred exchange debentures tendered by such Holder and accepted by us for purchase, and we will promptly issue a new junior preferred exchange debenture, and the Junior Preferred Debentures Trustee, upon written request from us, will authenticate and mail or deliver such new junior preferred exchange debenture to such Holder, in a principal amount equal to any unpurchased portion of the junior preferred exchange debenture surrendered. Any junior preferred exchange debenture not so accepted will be promptly mailed or delivered by us to the Holder thereof. We will publicly announce the results of the Asset Sale Offer on the Asset Sale Purchase Date.

Limitation on Restricted Payments

   The Junior Preferred Exchange Indenture will prohibit us or any Restricted Subsidiary from making any Restricted Payment unless after giving effect thereto:

(a)

no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing;



(b)

we would be permitted to Incur an additional $1.00 of Indebtedness pursuant to the provision of the Junior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness"; and



(c)

the total of all Restricted Payments made on or after July 1, 1998 does not exceed the sum of:



•

Cumulative Operating Cash Flow less 1.75 times Cumulative Interest Expense,



•

100% of our aggregate Qualified Capital Stock Proceeds after July 1, 1998 and



•

an amount equal to the sum of:



(1)

the net reduction in Investments (other than reductions in Permitted Investments in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case to us or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investments (except, in each case, to the extent any such proceeds or other amounts are included in the calculation of Consolidated Net Income) and



(2)

the portion (proportionate to our direct or indirect equity interest in such Subsidiary) or the Fair Market Value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary;




provided, however, that the foregoing sum shall not exceed, in the case of any Person (including any Unrestricted Subsidiary), the amount of Investments previously made (and treated as a Restricted Payment) by us or any Restricted Subsidiary in such Person.

   The foregoing provision shall not be violated, so long as no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing (other than in the case of clause (b)), by reason of:

(a)

the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the foregoing provision;



(b)

any refinancing of any Indebtedness otherwise permitted under the provision of the Junior Preferred Exchange Indenture described under clause (b) or (d) of "—Limitation on Consolidated Indebtedness;"



(c)

the purchase, redemption or other acquisition or retirement for value of shares of Capital Stock of any Restricted Subsidiary held by Persons other than us or any of our Restricted Subsidiaries;



(d)

the redemption, defeasance, repurchase or other acquisition or retirement of any of our Capital Stock or any Subordinated Indebtedness prior to its scheduled maturity either in exchange for or out of the net cash proceeds of the substantially concurrent sale (other than to one of our Subsidiaries) of our Qualified Capital Stock;



(e)

the purchase, redemption, acquisition, cancellation or other retirement for value of shares of our Junior Stock to the extent necessary in the good faith judgment of our board of directors (evidenced by the vote of a majority of the disinterested members) to prevent the loss or secure the renewal or reinstatement of any license or franchise held by us or any of our Restricted Subsidiaries from any governmental agency that is deemed material to us or to such Restricted Subsidiary, as the case may be, by our board of directors;



(f)

the purchase, redemption, retirement or other acquisition for value of shares of our Junior Stock, or options, warrants or other rights to purchase such shares, held by our directors, employees or former directors or employees or of any of our Restricted Subsidiaries, or their estates or beneficiaries under their estates, upon death, disability, retirement, termination of employment or pursuant to the terms of any agreement under which such shares of Junior Securities or options, warrants or other rights were issued, but only if the aggregate consideration paid for such purchase, redemption, acquisitions, cancellation or other retirement of such shares of Junior Stock or options, warrants or other rights after the Issue Date does not exceed



•

$2.0 million in any calendar year (provided that unused amounts may be carried over to succeeding 12 month periods, subject to a maximum aggregate carryover of $2.0 million), plus



•

the aggregate net cash proceeds received by us during that calendar year from any reissuance of our Qualified Capital Stock to our directors and employees and our Restricted Subsidiaries' directors and employees (provided that the amount of any such net cash proceeds that are used to permit a purchase, redemption, retirement or other acquisition for value pursuant to this clause (f) shall be excluded from clause (b) of the preceding paragraph); and



(g)

Restricted Payments, in addition to Restricted Payments permitted pursuant to clauses (a) through (f) above, not in excess of $25.0 million in the aggregate after the Issue Date.

   The payments described in clauses (a), (d) (provided the proceeds of the sale of the Qualified Capital Stock referred to in such clause constitute Qualified Capital Stock Proceeds), (e), (f) and (g) of this paragraph will count as Restricted Payments for the calculation under the first paragraph of this section "—Limitation on Restricted Payments."

Limitations Concerning Distributions and Transfers by Restricted Subsidiaries

   The Junior Preferred Exchange Indenture will provide that we shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual restriction or prohibition on the ability of any Restricted Subsidiary to:

(1)

pay dividends on, or make other distributions in respect of, its Capital Stock, or any other ownership interest or participation in, or measured by, its profits, to us or any of our Restricted Subsidiaries or pay any Indebtedness or other obligation owed to us or any of our Restricted Subsidiaries;



(2)

make any loans or advances to us or any of our Restricted Subsidiaries; or



(3)

transfer any of its property or assets to us or any of our Restricted Subsidiaries.

   Notwithstanding the foregoing, we may, and may permit any Restricted Subsidiary to, suffer to exist any such restriction or prohibition:

(a)

pursuant to the Junior Preferred Exchange Indenture, the Credit Facility, the certificate of designation governing the Senior Preferred Stock or the indenture governing the exchange debentures contemplated thereunder or any other agreement in effect on the Junior Preferred Exchange Date;



(b)

pursuant to an agreement relating to any Indebtedness of such Restricted Subsidiary which was outstanding or committed prior to the date on which such Restricted Subsidiary became a Restricted Subsidiary of us other than in anticipation of becoming one of our Restricted Subsidiaries; provided that such restriction or prohibition shall not apply to any of our property or assets or any properties or assets of any of our Restricted Subsidiaries other than the property or assets of any Restricted Subsidiary and its Subsidiaries;



(c)

pursuant to an agreement effecting a renewal, extension, refinancing or refunding of any agreement described in clauses (a) and (b) above,  provided, however, that the provisions contained in such renewal, extension, refinancing or refunding agreement relating to such restriction or prohibition are no more restrictive in any material respect than the provisions contained in the agreement which is the subject thereof;



(d)

existing under or by reason of applicable law;



(e)

customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Restricted Subsidiary;



(f)

purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (3) of this covenant;



(g)

restrictions of the type referred to in clause (3) of this covenant contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent that such Liens were otherwise incurred in accordance with "—Limitations on Liens" below and restrict the transfer of property subject to such agreements;



(h)

customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; and



(i)

pursuant to contracts with respect solely to a Restricted Subsidiary which have been entered into for the sale or disposition of Capital Stock or assets of such Restricted Subsidiary (provided that:



•

such restriction or prohibition applies solely to the Capital Stock or assets of such Restricted Subsidiary which are being sold,



•

immediately after giving effect to the transactions contemplated by such contract, no Event of Default or circumstance which with notice or lapse of time or both would become a Event of Default would exist and



•

such restriction or prohibition is terminated on the earlier of the date the transactions contemplated by such contract are consummated or the first anniversary of the date of such contract).

Limitations on Transactions with Affiliates and Related Persons

   The Junior Preferred Exchange Indenture will provide that we will not, and will not permit any of our Restricted Subsidiaries to, enter into any transaction or series of transactions involving aggregate consideration:

(a)

up to $1.0 million, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with or to any of our Affiliates or Related Persons (other than a Restricted Subsidiary), unless our management determines in good faith that:



•

such transaction is in our best interests or that of our Restricted Subsidiaries; and



•

such transaction is on terms no less favorable to us or any of our Restricted Subsidiaries than those which might be obtained in an arm's-length transaction with a third party at the time;



(b)

in excess of $1.0 million but not exceeding $5.0 million, unless our management makes the determinations (which determinations will be evidenced by an Officers' Certificate) set forth in clause (a) of this paragraph; and



(c)

in excess of $5.0 million, unless a majority of the disinterested members of our board of directors makes the determinations (which determinations will be evidenced by a Board Resolution) set forth in clause (a) of this paragraph.

   Notwithstanding the foregoing, the following payments shall not be subject to the provisions described in the first paragraph of this covenant:

•

payment of customary fees and indemnity payments to our directors who are not our employees and the payment of compensation and indemnity payments to our officers, in each case, in the ordinary course of business; and



•

Restricted Payments made in compliance with the provisions of the Junior Certificate of Designation described under the caption "—Limitation on Restricted Payments."

Limitations on Liens

   The Junior Preferred Exchange Indenture will provide that we will not, and will not permit any of our Restricted Subsidiaries to, Incur or suffer to exist any Lien on or with respect to any property or assets now owned or hereafter acquired to secure any Indebtedness that ranks in right of payment pari passu with or subordinate to the junior preferred exchange debentures without making, or causing such Restricted Subsidiary to make, effective provision for securing the junior preferred exchange debentures:

•

equally and ratably with such Indebtedness as to such property for so long as such Indebtedness will be so secured; or



•

in the event such Indebtedness is our Indebtedness or Indebtedness of a Restricted Subsidiary which is subordinate in right of payment to the junior preferred exchange debentures, prior to such Indebtedness as to such property for so long as such Indebtedness will be so secured.

   The foregoing restrictions shall not apply to:

(a)

Liens existing in respect of any Indebtedness that exists on the Exchange Date;



(b)

Liens in favor of us or Liens in favor of our Wholly Owned Restricted Subsidiaries on the assets or Capital Stock of another of our Wholly Owned Restricted Subsidiaries;



(c)

Liens to secure Indebtedness outstanding or committed for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the equipment or other property subject to such Liens; provided, however, that:



•

the principal amount of any Indebtedness secured by such a Lien does not exceed 100% of such purchase price or cost,



•

such Lien does not extend to or cover any property other than such item of property or any improvements on such item, and



•

the Incurrence of such Indebtedness is otherwise permitted by the Junior Preferred Exchange Indenture;



(d)

Liens on property existing immediately prior to the time of acquisition thereof (and not Incurred in anticipation of the financing of such acquisition);



(e)

Liens to secure Indebtedness to extend, renew, refinance or refund (or successive extensions, renewals, refinancings or refundings), in whole or in part, Indebtedness secured by any Lien referred to in the foregoing clauses (a), (c) and (d) so long as such Lien does not extend to any other property and the principal amount of Indebtedness so secured is not increased except as otherwise permitted under the provision of the Junior Preferred Exchange Indenture described under clause (b) or (d) of "—Limitation on Consolidated Indebtedness";



(f)

Liens on any Permitted Investment in Cooperative Bank Equity in favor of any Cooperative Banks;



(g)

Liens securing letters of credit entered into in the ordinary course of business and consistent with past business practice; or



(h)

any other Liens in respect of any Indebtedness, which Indebtedness does not exceed $1.0 million in the aggregate.

Limitation on Certain Debt

   The Junior Preferred Exchange Indenture will provide that we will not Incur any Indebtedness that is subordinate in right of payment to any of our other Indebtedness unless the Indebtedness so Incurred is either pari passu or subordinate in right of payment to the junior preferred exchange debentures. For the avoidance of doubt, the foregoing limitation will not apply to distinctions between categories of our Senior Indebtedness that exist by reason of any Liens or guarantees arising or created in respect of some but not all such Senior Indebtedness.

Consolidation, Merger, Conveyance, Transfer or Lease

   The Junior Preferred Exchange Indenture will provide that we will not consolidate with or merge into any Person or permit any other Person to consolidate with or merge into us, or transfer, sell, convey or lease or otherwise dispose of all or substantially all of its assets to, any Person unless:

(a)

• we are the surviving entity or



•

if we are not the surviving entity then the successor or transferee assumes all our obligations under the junior preferred exchange debentures and the Junior Preferred Exchange Indenture and the surviving entity shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof;



(b)

the Consolidated Net Worth of the successor or transferee immediately after the transaction is not less than 100% of our Consolidated Net Worth immediately prior to the transaction;



(c)

immediately after giving effect to such transaction, we (or our permitted successor or transferee) would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the provision of the Junior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness;"



(d)

after giving effect to such transaction no Event of Default or event which with notice or lapse of time would become an Event of Default has occurred and is continuing; and



(e)

an Officers' Certificate and an Opinion of Counsel covering such conditions shall be delivered to the Junior Preferred Debentures Trustee.

   However, clause (c) above will not apply if, in the good faith determination of our board of directors, whose determination shall be evidenced by a Board Resolution, the principal purpose of the transaction is to change our state of incorporation and the transaction shall not have as one of its purposes the evasion of the foregoing limitations.

Reports

   The Junior Preferred Exchange Indenture will provide that whether or not we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, we shall deliver to the Junior Preferred Debentures Trustee and to each Holder, within 15 days after it is or would have been required to file such with the Commission, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the Commission, if we were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by our certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required.

Events of Default and Remedies

   The following are Events of Default under the Junior Preferred Exchange Indenture:

(a)

failure to pay the principal of or premium, if any, on the junior preferred exchange debentures at Maturity;



(b)

failure to pay any interest on the junior preferred exchange debentures for a period of 30 days or more after it becomes due and payable;



(c)

failure to purchase in a timely fashion junior preferred exchange debentures required to be purchased by us pursuant to either of the provisions of the Junior Preferred Exchange Indenture described under "—Change of Control" or "—Covenants Limitation on Asset Sales and Sales of Subsidiary Stock";



(d)

failure to perform or comply with the provisions of the Junior Preferred Exchange Indenture described under "—Consolidation, Merger, Conveyance, Transfer or Lease";



(e)

failure to perform any of our other covenants or agreements under the Junior Preferred Exchange Indenture that continues for 30 days after written notice to us by the Junior Preferred Debentures Trustee or Holders of at least 25.0% in aggregate principal amount of outstanding junior preferred exchange debentures;



(f)

our default or that of any of our Restricted Subsidiaries under the terms of any instrument evidencing or securing Indebtedness having an outstanding principal amount in excess of $10 million in the aggregate (net of any amounts with respect to which a reputable and financially sound insurance company has acknowledged liability in writing), which default results in the acceleration of the payment of such Indebtedness or constitutes the failure to pay the principal of such Indebtedness at maturity;



(g)

the rendering of a final judgment or judgments against us or one of our Restricted Subsidiaries in an amount in excess of $10.0 million which remains undischarged or unstayed for a period of 60 days after the date on which the right of appeal has expired; and



(h)

certain events of bankruptcy, insolvency or reorganization affecting us or a Restricted Subsidiary that is a Significant Subsidiary.

   If an Event of Default, other than an event described under (h) above, shall occur and be continuing, either the Junior Preferred Debentures Trustee or the Holders of at least 25.0% in aggregate principal amount of the junior preferred exchange debentures by notice as provided in the Junior Preferred Exchange Indenture may declare the principal amount of the junior preferred exchange debentures to be due and payable immediately; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of outstanding junior preferred exchange debentures may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal of the junior preferred exchange debentures, have been cured or waived as provided in the Junior Preferred Exchange Indenture. If an Event of Default described under (h) above shall occur, the junior preferred exchange debentures will become immediately due and payable without any declaration or other act on the part of the Junior Preferred Debentures Trustee or any Holder.

   No Holder of any junior preferred exchange debenture will have any right to institute any proceeding with respect to the Junior Preferred Exchange Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Junior Preferred Debentures Trustee written notice of an Event of Default and unless the Holders of at least 25% in aggregate principal amount of the outstanding junior preferred exchange debentures shall have made written request to the Junior Preferred Debentures Trustee and the Junior Preferred Debentures Trustee shall not have received from the Holders of a majority in aggregate principal amount of the outstanding junior preferred exchange debentures a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a Holder of a junior preferred exchange debenture for enforcement of payment of the principal of and premium, if any, or interest on such junior preferred exchange debenture on or after the respective due dates expressed in such junior preferred exchange debenture. The Holders of a majority in aggregate principal amount of the junior preferred exchange debentures outstanding may waive any existing Event of Default except an Event of Default in the payment of interest or principal (including premium) on the junior preferred exchange debentures.

Modification and Waiver

   Modifications and amendments of the Junior Preferred Exchange Indenture may be made by us and the Junior Preferred Debentures Trustee with the consent of the Holders of a majority in aggregate principal amount of the outstanding junior preferred exchange debentures; provided, however, that no such modification or amendment may, without the consent of the Holder of each junior preferred exchange debenture affected thereby:

(a)

change the Stated Maturity of the principal of, or any installment of interest on, any junior preferred exchange debenture;



(b)

reduce the principal amount of, or premium, if any, or interest on any junior preferred exchange debenture;



(c)

change the place or currency of payment of principal of, or premium, if any, or interest on any junior preferred exchange debenture;



(d)

impair the right to institute suit for the enforcement of any payment on or with respect to any junior preferred exchange debenture;



(e)

reduce the percentage of aggregate principal amount of junior preferred exchange debentures outstanding necessary to amend the Junior Preferred Exchange Indenture;



(f)

reduce the percentage of aggregate principal amount of junior preferred exchange debentures outstanding necessary for waiver of compliance with certain provisions of the Junior Preferred Exchange Indenture or for waiver of certain defaults;



(g)

modify such provisions with respect to modification and waiver;



(h)

modify the subordination provisions in a manner adverse to the Holders of the junior preferred exchange debentures; or



(i)

following the mailing of an offer to purchase junior preferred exchange debentures, modify the provisions of the Junior Preferred Exchange Indenture with respect to such offer to purchase in a manner adverse to such Holder.

   The Holders of a majority in aggregate principal amount of the outstanding junior preferred exchange debentures may waive compliance by us with certain restrictive provisions of the Junior Preferred Exchange Indenture. The Holders of a majority in aggregate principal amount of the outstanding junior preferred exchange debentures may waive any past default under the Junior Preferred Exchange Indenture, except a continuing default in the payment of principal, premium, if any, or interest and certain covenants and provisions of the Junior Preferred Exchange Indenture which cannot be amended without the consent of the Holder of each outstanding junior preferred exchange debenture affected.

Defeasance

   The Junior Preferred Exchange Indenture will provide that we, at our option:

(a)

will be discharged from any and all obligations in respect of outstanding junior preferred exchange debentures (except for certain obligations to register the transfer or exchange of junior preferred exchange debentures, to replace mutilated, lost, destroyed or stolen junior preferred exchange debentures and to maintain paying agents and hold moneys for payment in trust), and the provisions of the Junior Preferred Exchange Indenture described under "—Subordination" shall cease to be effective; or



(b)

need not comply with certain restrictive covenants and that such omission shall not be deemed to be an Event of Default under the Junior Preferred Exchange Indenture and the junior preferred exchange debentures, and the provisions of the Junior Preferred Exchange Indenture described under "—Subordination" shall cease to be effective.

   In either case (a) or (b), upon irrevocable deposit with the Junior Preferred Debentures Trustee, in trust, of money, and/or U.S. government obligations which will provide money without the need for reinvestment, in an amount sufficient in the opinion of a nationally recognized firm of independent public accountants to pay the principal of, and premium, if any, and each installment of interest, if any, on the outstanding junior preferred exchange debentures in accordance with the terms of the Junior Preferred Exchange Indenture and the junior preferred exchange debentures.

   Such trust may only be established if, among other things:

(1)

with respect to clause (a), we shall have delivered to the Junior Preferred Debentures Trustee an Opinion of Counsel to the effect that we have received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which provides that Holders of junior preferred exchange debentures will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; or, with respect to clause (b), we shall have delivered to the Junior Preferred Debentures Trustee an Opinion of Counsel to the effect that the Holders of the junior preferred exchange debentures will not recognize gain or loss for federal income tax purposes as a result or such deposit and defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred;



(2)

no Event of Default or event that, with the passing of time or the giving of notice, or both, shall constitute an Event of Default shall have occurred and be continuing on the date of such deposit;



(3)

no Event of Default described under clause (h) under "Events of Default and Remedies" above or event that, with the passing of time or the giving of notice, or both, shall constitute an Event of Default under such clause (h) shall have occurred and be continuing at any time during the period ending on the 121st day following such date of deposit;



(4)

such deposit shall not cause the trust so created to be subject to the Investment Company Act of 1940, as amended, or shall be qualified under such act or exempt from regulation thereunder; and



(5)

certain other customary conditions precedent.

Notices

   Notices to Holders of junior preferred exchange debentures will be sent by mail to the addresses of such Holders as they may appear in the Security Register.

Title

   We, the Junior Preferred Debentures Trustee and any agent of the Junior Preferred Debentures Trustee may treat each Holder of a junior preferred exchange debenture as the absolute owner thereof (whether or not such junior preferred exchange debenture may be overdue) for the purpose of making payment and for all other purposes.

Governing Law

   The Junior Preferred Exchange Indenture and the junior preferred exchange debentures will be governed by and construed in accordance with the laws of the State of New York.

The Junior Preferred Debentures Trustee

   The Junior Preferred Exchange Indenture will provide that, subject to the duty of the Junior Preferred Debentures Trustee during an Event of Default to act with the required standard of care, the Junior Preferred Debentures Trustee will be under no obligation to exercise any of its rights or powers under the Junior Preferred Exchange Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Junior Preferred Debentures Trustee reasonable security or indemnity. Subject to certain provisions, including those requiring security or indemnification of the Junior Preferred Debentures Trustee, the Holders of a majority in principal amount of the junior preferred exchange debentures will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Junior Preferred Debentures Trustee, or exercising any trust or power conferred on the Junior Preferred Debentures Trustee.

   We will be required to furnish to the Junior Preferred Debentures Trustee annually a statement as to the performance by us of our obligations under the Junior Preferred Exchange Indenture and as to any default in such performance. The Junior Preferred Debentures Trustee will also serve as the Notes Trustee under the Notes Indenture.

Certain Definitions

   "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary):

(a)

existing at the time such Person becomes a Restricted Subsidiary; or



(b)

assumed in connection with the acquisition of assets from such Person,

in the case of both of the preceding clause (a) and clause (b), other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition. Acquired Indebtedness will be deemed to be Incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.

   "Adjusted Annualized Operating Cash Flow Ratio" of any Person means the Annualized Operating Cash Flow Ratio of such Person as adjusted to treat all Preferred Stock of such Person as Redeemable Stock.

   "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

   "Annualized Operating Cash Flow" of any Person means the Operating Cash Flow of such Person for the Reference Period multiplied by two.

   "Annualized Operating Cash Flow Ratio" of any Person on any date (the "Transaction Date") means, with respect to any Person and its Restricted Subsidiaries, the ratio of:

•

Consolidated Indebtedness of such Person and its Restricted Subsidiaries on the Transaction Date (after giving pro forma effect to the Incurrence of any Indebtedness on such Transaction Date) divided by



•

the aggregate amount of Annualized Operating Cash Flow of such Person (determined on a pro forma basis after giving effect to all dispositions of businesses made by such Person and its Restricted Subsidiaries from the beginning of the Reference Period through the Transaction Date as if such dispositions had occurred at the beginning of such Reference Period);

provided that for purposes of such computation, in calculating Annualized Operating Cash Flow and Consolidated Indebtedness:

(a)

the transaction giving rise to the need to calculate the Annualized Operating Cash Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first day of the Reference Period;



(b)

the Incurrence of any Indebtedness during the Reference Period or subsequent thereto and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to retire Indebtedness) will be assumed to have occurred (on a pro forma basis) on the first day of such Reference Period;



(c)

Consolidated Interest Expense attributable to any Indebtedness (whether existing or being incurred) bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date had been the applicable rate for the entire Reference Period;



(d)

all members of the consolidated group of such Person on the Transaction Date that were acquired during the Reference Period shall be deemed to be members of the consolidated group of such Person for the entire Reference Period; and



(e)

the Indebtedness and Annualized Operating Cash Flow of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be determined in accordance with the actual percentage of the Person's common equity interest in such Restricted Subsidiary on the date of determination of the Annualized Operating Cash Flow Ratio (thus, for example, in the case of a Restricted Subsidiary in which such Person owns a 51.0% common equity interest, 51.0% of such Subsidiary's Indebtedness and of such Subsidiary's Annualized Operating Cash Flow would be included in the calculation of such Person's aggregate Indebtedness and Annualized Operating Cash Flow, respectively).

When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and its Restricted Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Applicable Premium" means, with respect to any junior preferred exchange debentures being redeemed or paid on any redemption date, the greater of:

(i)

1.0% of the aggregate principal amount of such junior preferred exchange debentures being redeemed or paid; or



(ii)

the excess of:



(A)

the present value at such redemption date of the redemption price of such junior preferred exchange debentures being redeemed or paid at     , 2005 (such redemption price being set forth in the table under the section entitled "Optional Redemption" above) plus all required interest payments due on such junior preferred exchange debentures being redeemed or paid through     , 2005 (such interest to be deemed to be payable in cash for purposes of such determination (assuming a 360 day year consisting of twelve 30-day months) but excluding accrued and unpaid interest since the most recent interest payment date), computed on a semi-annual basis for junior preferred exchange debentures using a discount rate equal to the Treasury Rate plus 50.0 basis points over,



(B)

the principal amount of such junior preferred exchange debentures being redeemed or paid.

   "Board Resolution" means a copy of a resolution certified by our Secretary or one of our Assistant Secretaries to have been duly adopted by our board of directors, to be in full force and effect on the date of such certification and delivered to the Junior Preferred Debentures Trustee.

   "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City or the State of Minnesota are authorized or obligated by law or executive order to close.

   "Capital Lease Obligation" means that portion of any obligation of a Person as lessee under a lease which is required to be capitalized on the balance sheet of such lessee in accordance with generally accepted accounting principles.

   "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, including voting and non-voting) of equity of such Person.

   "Cash Equivalents" means:

(a)

securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), in each case maturing within one year after the date of acquisition;



(b)

time deposits and certificates of deposit of, and commercial paper issued by the parent corporation of any domestic commercial bank or domestic branch of any foreign commercial bank organized in an OECD member country, in each case of recognized standing having capital and surplus in excess of $500.0 million and commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within one year after the date of acquisition;



(c)

investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clauses (b) and (d) herein; and



(d)

investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (a) and (b) above.

   "Commission" means the United States Securities and Exchange Commission.

   "Consolidated Indebtedness" of any Person means at any date the Indebtedness of such Person and its Restricted Subsidiaries at such date.

   "Consolidated Interest Expense" of any Person means for any period the interest expense included in an income statement (taking into account the effect of any Interest Hedge Agreements but without deduction of interest income) of such Person and its Restricted Subsidiaries for such period, including without limitation or duplication (or, to the extent not so included, with the addition of):

•

the portion of any rental obligation in respect of any Capital Lease Obligation allocable to interest expense in accordance with generally accepted accounting principles;



•

the amortization of Indebtedness discounts;



•

any payments or fees with respect to letters of credit, bankers' acceptances or similar facilities;



•

fees with respect to Interest Hedge Agreements;



•

the portion of any rental obligations in respect of any Sale and Leaseback Transaction allocable to interest expense (determined as if such were treated as a Capital Lease Obligation); and



•

Preferred Stock dividends accrued or payable other than dividends on Qualified Capital Stock of such Person.

   "Consolidated Net Income" of any Person means for any period the net income (or loss) of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (to the extent included and without duplication):

•

the net income (or loss) of any Person acquired by such Person or a Restricted Subsidiary of such Person after the Issue Date in a pooling of interests transaction for any period prior to the date of such transaction;



•

the net income (or loss) of any Person that is not a Restricted Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person or Restricted Subsidiary of such Person by such other Person during such period;



•

gains or losses from sales of assets other than sales of assets acquired and held for resale in the ordinary course of business;



•

for purposes of the "—Limitation on Restricted Payments" covenant, the net income, if positive, of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at that time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to such Restricted Subsidiary; and



•

all extraordinary gains and extraordinary losses.

   "Consolidated Net Worth" of any Person means the consolidated shareholders' equity of such Person, determined on a consolidated basis in accordance with generally accepted accounting principles; provided that with respect to us, adjustments following the Issue Date to our accounting books and records in accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the acquisition of control of us by another Person and its Subsidiaries shall not be given effect;  provided further that such computation shall exclude:

•

any amounts attributable to Redeemable Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of our Capital Stock or Capital Stock of any of our Restricted Subsidiaries; and



•

Unrestricted Subsidiaries.

   "Cooperative Bank Equity" means non-voting equity interests in Cooperative Banks.

   "Cooperative Banks" means lenders under the Credit Facility which are cooperative banks.

   "Credit Facility" means the Existing Credit Facility and the New Credit Facility, including, in each case, any and all instruments and agreements executed in connection therewith, as such documents may be amended, restated, supplemented, renewed, replaced or otherwise modified from time to time irrespective of any changes in the terms and conditions thereof.

   "Cumulative Interest Expense" means the total amount of our Consolidated Interest Expense and the Consolidated Interest Expense of our Restricted Subsidiaries for the period beginning July 1, 1998, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Cumulative Operating Cash Flow" means our Operating Cash Flow and Operating Cash Flow of our Restricted Subsidiaries for the period beginning July 1, 1998, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Depositary" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the junior preferred exchange debentures until a successor Depositary shall have become such pursuant to the applicable provisions of the Junior Preferred Exchange Indenture, and thereafter "Depositary" shall mean such successor Depositary. The Depositary initially is DTC.

   "Designated Senior Indebtedness" means the Indebtedness under the Credit Facility.

   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Exchange Date" means the time and date the junior preferred exchange debentures are first issued under the Junior Preferred Exchange Indenture in exchange for the junior exchangeable preferred stock.

   "Exchange Debentures Payment" means any payment or distribution of any kind or character, whether in cash, property or securities, on account of principal of (or premium, if any) or interest on or other obligations in respect of our junior preferred exchange debentures or our other Indebtedness that is pari passu or subordinate in right of payment to the junior preferred exchange debentures or on account of any purchase or other acquisition of junior preferred exchange debentures or such other Indebtedness by us or any of our Subsidiaries.

   "Existing Credit Facility" means the Amended and Restated Loan Agreement, dated as of July 1, 1998, by and among TD Securities (USA) Inc., as arranging agent for the lenders and as such agreement may be further amended, supplemented, restated or otherwise modified from time to time, including without limitation, any renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementation or other modifications of the foregoing that increase the aggregate amount of borrowings outstanding or the aggregate commitments of the lenders thereunder, extend or shorten the maturity of any Indebtedness incurred thereunder or contemplated thereby or add or delete borrowers or guarantors thereunder or that effect any other change in the terms and conditions thereof.

   "Fair Market Value" means, with respect to any assets or Person, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined:

•

if such Person or assets have a Fair Market Value in excess of $250,000 but not in excess of $5.0 million, by one of our officers and evidenced by an Officers' Certificate, dated within 30 days of the relevant transaction; or



•

if such Person or assets have a Fair Market Value in excess of $5.0 million, by a majority of our board of directors and evidenced by a Board Resolution, dated within 30 days of the relevant transaction, based on an appraisal of an independent appraiser of national reputation.

   "Holder" means a Person in whose name a junior preferred exchange debenture is registered in the Security Register.

   "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such indebtedness.

   "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent:

(a)

every obligation of such Person for money borrowed;



(b)

every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses;



(c)

every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person;



(d)

every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business);



(e)

every Capital Lease Obligation of such Person;



(f)

the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination;



(g)

every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party other than any other such obligation which would constitute an operating lease obligation of such Person under United States generally accepted accounting principles;



(h)

all obligations under Interest Hedge Agreements;



(i)

every obligation of the type referred to in clauses (a) through (h) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise or which is secured by a lien on any asset of such Person; and



(j)

the liquidation value of Preferred Stock of a Subsidiary of such Person issued and outstanding and held by other than such Person (or one of its Restricted Subsidiaries, except that if such Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary of such Person, the portion of the liquidation value of such Preferred Stock equal to the product of:



(1)

the percentage of the common equity interest of such Restricted Subsidiary that is not owned, directly or indirectly, by such Person and



(2)

the aggregate liquidation value of such Preferred Stock shall constitute Indebtedness);

provided that for all purposes of the Junior Preferred Exchange Indenture:

•

the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the unamortized portion of the original issue discount of such Indebtedness at the time of its issuance as determined in conformity with generally accepted accounting principles;



•

money borrowed at the time of the Incurrence of any Indebtedness in order to pre-fund the payment of interest on such Indebtedness shall be deemed not to be "Indebtedness"; and



•

Indebtedness shall not include any liability for federal, state, local or other taxes.

For purposes of the Junior Preferred Exchange Indenture, the amount of any Indebtedness shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, and in making such determination, if any agreement relating to such obligation provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person or in any event until the counterparty thereunder defaults in its corresponding payment, then in each such case, the amount of such obligations shall be the net amount so determined, plus any premium due upon default by such Person.

   "Interest Hedge Agreements" means any interest rate swap, cap, collar, floor, caption or swap agreements, or any similar arrangements designed to hedge the risk of variable interest rate volatility or to reduce interest costs, arising at any time between us or any of our Restricted Subsidiaries, on the one hand, and any Person (other than any of our Affiliates or any of our Restricted Subsidiaries), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time.

   "Investment" by any Person in any other Person means (without duplication):

(a)

the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such other Person or any agreement to make any such acquisition;



(b)

the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension;



(c)

the entering into by such Person of any guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of such other Person;



(d)

the making of any capital contribution by such Person to such other Person; and



(e)

the designation by our board of directors of any Person to be an Unrestricted Subsidiary.

For purposes of the covenant described in "—Limitation on Restricted Payments,"

•

"Investment" shall include and be valued at the Fair Market Value of such Person's pro rata  interest in the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the lesser of:



(A)

the Fair Market Value of such Person's pro rata interest in the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and



(B)

the Fair Market Value of the amount of such Person's Investments (other than Permitted Investments) made in (net of cash distributions received from) such Unrestricted Subsidiary since the Issue Date; and




•

the amount of any Investment shall be the Fair Market Value of such Investment at the time any such Investment is made.

   "Issue Date" means the time and date of the first issuance of the junior exchangeable preferred stock.

   "Junior Certificate of Designation" means the certificate of designation governing the junior exchangeable preferred stock.

   "Junior Preferred Debentures Trustee" means the Trustee under the Junior Preferred Exchange Indenture.

   "Junior Preferred Exchange Indenture" means the indenture governing the Junior Preferred Exchange Debentures.

   "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than an easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).

   "Maturity" means, when used with respect to any junior preferred exchange debenture, the date on which the principal of such junior preferred exchange debenture becomes due and payable, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

   "Net Cash Proceeds" means the aggregate amount of cash and Cash Equivalents received by us and our Restricted Subsidiaries in respect of an Asset Sale (including upon the conversion to cash and Cash Equivalents of:

(a)

any note or installment receivable at any time; or



(b)

any other property as and when any cash and Cash Equivalents are received in respect of any property received in an Asset Sale but only to the extent such cash and Cash Equivalents are received within one year after such Asset Sale), less the sum of:



•

all reasonable out-of-pocket fees, commissions and other expenses incurred in connection with such Asset Sale, including the amount (estimated in good faith by our board of directors) of income, franchise, sales and other applicable taxes required to be paid by us or any of our Restricted Subsidiaries in connection with such Asset Sale and



•

the aggregate amount of cash so received which is used to retire any of our existing Senior Indebtedness or our Indebtedness that rankspari passu in right of payment with the junior preferred exchange debentures or any existing Indebtedness of any Restricted Subsidiaries, as the case may be, which is required to be repaid in connection with such Asset Sale or is secured by a Lien on our property or assets or the property or assets of any of our Restricted Subsidiaries, as the case may be.

   "New Credit Facility" means the amendment and restatement of the refinancing or replacement of the Existing Credit Facility in connection with and conditioned upon the consummation of the Triton acquisition, with the same, a deletion of, or additional lenders, including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing that increase the aggregate amount of borrowings outstanding or the aggregate commitments of the lenders thereunder, extend or shorten the maturity of any Indebtedness incurred thereunder or contemplated thereby or add or delete borrowers or guarantors thereunder or that effect any other change in the terms and conditions thereof.

   "Notes Indenture" means the indenture governing the Senior Subordinated Notes.

   "Offer to Purchase" means a written offer (the "Offer") sent by us to each Holder at his address appearing in the Security Register on the date of the Offer offering to purchase up to the principal amount of junior preferred exchange debentures specified in such Offer at the purchase price specified in such Offer. Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which, subject to any contrary requirements of applicable law, shall be not less than 30 days nor more than 60 days after the date of such Offer to Purchase and a settlement date (the "Purchase Date") for purchase of junior preferred exchange debentures within five Business Days after the Expiration Date. The Offer shall also state the section of the Junior Preferred Exchange Indenture pursuant to which the Offer to Purchase is being made, the Expiration Date and the Purchase Date, the aggregate principal amount of the outstanding junior preferred exchange debentures offered to be purchased by us, the purchase price to be paid by us and the place or places where junior preferred exchange debentures are to be surrendered for tender pursuant to the Offer to Purchase.

   "Officers' Certificate" means a certificate signed by two officers, at least one of whom shall be our principal executive officer, principal accounting officer, or principal financial officer, and delivered to the Junior Preferred Debentures Trustee.

   "Operating Cash Flow" for any Person for any period means:

(a)

the Consolidated Net Income of such Person for such period, plus



(b)

the sum, without duplication (and only to the extent such amounts are deducted from net revenues in determining such Consolidated Net Income), of:



•

the provisions for income taxes for such period for such Person and its Subsidiaries;



•

depreciation, amortization and other non-cash charges of such Person and its Subsidiaries; and



•

Consolidated Interest Expense of such Person for such period, determined, in each case, on a consolidated basis for such Person and its Subsidiaries in accordance with generally accepted accounting principles, less



(c)

the sum, without duplication (and only to the extent such amounts are included in such Consolidated Net Income), of:



•

all extraordinary gains of such Person and its Subsidiaries during such period and

•

the amount of all cash payments made during such period by such Person and its Restricted Subsidiaries to the extent such payments relate to non-cash charges that were added back in determining Operating Cash Flow for such period or for any prior period; and in the case of a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary, the determination of the percentage of the Operating Cash Flow of such Restricted Subsidiary that is to be included in the calculation of our Annualized Operating Cash Flow Ratio shall be made on a pro forma basis on the assumption that the percentage of our common equity interest in such Restricted Subsidiary throughout the applicable Reference Period was equivalent to its common equity interest on the date of the determination.

When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and its Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Opinion of Counsel" means a written opinion of counsel, who may be counsel for us, and who shall be reasonably acceptable to the Junior Preferred Debentures Trustee, delivered to the Junior Preferred Debentures Trustee.

   "Permitted Investments" means:

(a)

Investments in Cash Equivalents;



(b)

Investments in us or a Restricted Subsidiary (other than payments described in clause (d) of the second paragraph under "—Limitation on Restricted Payments" and Investments in us by one of our Restricted Subsidiaries pursuant to clause (b) of the definition of "Restricted Payments");



(c)

Investments in a Person substantially all of whose assets are of a type generally used in a Wireless Communications Business (an "Acquired Person") if, as a result of such Investments:



(A)

the Acquired Person immediately thereupon becomes a Restricted Subsidiary or



(B)

the Acquired Person immediately thereupon either:




•

is merged or consolidated with or into us or any of our Restricted Subsidiaries or



•

transfers or conveys all or substantially all of its assets to, or is liquidated into, us or any of our Restricted Subsidiaries;



(d)

Investments in accounts and notes receivable acquired in the ordinary course of business;



(e)

any securities received in connection with an Asset Sale that complies with the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant;



(f)

advances and prepayments for asset purchases in the ordinary course of business in our Wireless Communications Business or one of our Restricted Subsidiaries;



(g)

customary loans or advances made in the ordinary course of business to our officers, directors or employees or any of our Restricted Subsidiaries' officers, directors or employees for travel, entertainment, and moving and other relocation expenses;



(h)

the purchase of Cooperative Bank Equity in Cooperative Banks to the extent required by the charter documents of such Cooperative Banks in connection with the Incurrence of any Indebtedness which is provided by such Cooperative Banks under the Credit Facility, provided that such Incurrence is permitted under the terms of the Junior Preferred Exchange Indenture;



(i)

any Investment by us of Qualified Capital Stock Proceeds received after July 1, 1998, in any Unrestricted Subsidiary which conducts or will conduct a Telecommunications Business (provided that any such Qualified Capital Stock Proceeds used to consummate the Triton acquisition shall be deemed not to have been used and shall remain available for such an Investment); and



(j)

Investments in Wireless Alliance during the period it is an Unrestricted Subsidiary not exceeding $25.0 million in the aggregate made after July 1, 1998;




provided that:

(A)

the matters referenced in clauses (c) and (j) above shall not be Permitted Investments if made at any time that an Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing,



(B)

the matters referenced in clause (i) shall not be Permitted Investments if at any time:




•

an Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing and



•

we would not be permitted to Incur an additional $1.00 of Indebtedness pursuant to the provision of the Junior Preferred Exchange Indenture described in the first paragraph under "—Limitation of Consolidated Indebtedness" and



(C)

following any Permitted Investment pursuant to clause (i), the Unrestricted Subsidiary in which such Investment is made shall be prohibited from using the proceeds of such Investment (directly or indirectly) to make any Restricted Payment with respect to our Junior Stock or options, warrants or rights to acquire our Junior Stock of the type described in clause (b) of the definition of Restricted Payment.

   "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

   "Preferred Stock" means, with respect to any Person, any and all shares of Capital Stock of such Person that have preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

   "Public Equity Offering" means an underwritten public offering of our common stock pursuant to an effective registration statement filed with the Commission in accordance with the Securities Act.

   "Qualified Capital Stock" means, with respect to any Person, any and all shares of Capital Stock other than Redeemable Stock issued by such Person, and any options, warrants or other rights to purchase such Capital Stock.

   "Qualified Capital Stock Proceeds" means, with respect to any Person:

(a)

in the case of any sale of Qualified Capital Stock (other than to any Subsidiary), the aggregate net cash proceeds received by such Person, after payment of expenses, commissions and the like Incurred by such Person in connection therewith, and net of Indebtedness that such Person Incurred, guaranteed or otherwise became liable for in connection with the issuance or acquisition of such Capital Stock; and



(b)

in the case of any exchange, exercise, conversion or surrender of any Redeemable Stock or Indebtedness of such Person issued (other than to any Subsidiary) for cash after the Issue Date for or into shares of Qualified Capital Stock of such Person, the liquidation value of the Redeemable Stock or the net book value of such Indebtedness as adjusted on the books of such Person to the date of such exchange, exercise, conversion or surrender, plus any additional amount paid by the security holders to such Person upon such exchange, exercise, conversion or surrender and less any and all payments made to the security holders, and all other expenses, commissions and the like Incurred by such Person or any Subsidiary in connection therewith.

   "Qualifying Event" means a Public Equity Offering or one or more Strategic Equity Investments which in either case results in aggregate net proceeds of not less than $50.0 million provided that any Public Equity Offering or Strategic Equity Investment, the net proceeds from which are intended to be used to consummate the Triton acquisition, shall not be a Qualifying Event.

   "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the final Stated Maturity of the junior preferred exchange debentures or is redeemable at the option of the holder thereof (other than an equity security that is redeemable at the option of the holder and the applicable redemption price is payable only in shares of Qualified Capital Stock) at any time prior to the final Stated Maturity of the junior preferred exchange debentures;provided that any Capital Stock that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of a "change of control" occurring prior to the final Stated Maturity of the junior preferred exchange debentures shall not constitute Redeemable Stock if the "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Change of Control" covenant of the Junior Preferred Exchange Indenture and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to our repurchase of the junior preferred exchange debentures as required pursuant to such "Change of Control" covenant.

   "Reference Period" with regard to any Person means the last two full fiscal quarters of such Person immediately preceding any date upon which any determination is to be made pursuant to the terms of the junior preferred exchange debentures or the Junior Preferred Exchange Indenture.

   "Related Person" of any Person means any other Person owning:

(a)

5.0% or more of the outstanding Common Stock of such Person; or



(b)

5.0% or more of the Voting Power of such Person.

   "Restricted Payment" means, with respect to any Person:

(a)

any declaration or payment of a dividend or other distribution on any shares of Capital Stock of such Person or any Subsidiary of such Person (other than a dividend payable solely in shares of its Capital Stock or options, warrants or other rights to acquire its Capital Stock and other than any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to us or another Restricted Subsidiary);



(b)

any payment on account of the purchase, redemption, retirement or acquisition (including by way of issuing any Indebtedness or Redeemable Stock in exchange for Qualified Capital Stock) of:



•

any shares of Capital Stock of such Person or any Subsidiary of such Person held by other than such Person or any of its Restricted Subsidiaries or



•

any option, warrant or other right to acquire shares of Capital Stock of such Person or any Subsidiary of such Person held by other than such Person or any of its Restricted Subsidiaries, in each case other than pursuant to the cashless exercise of options;



(c)

any Investment (other than a Permitted Investment) made by such Person; and



(d)

any redemption, defeasance, repurchase or other acquisition or retirement for value prior to any scheduled maturity, repayment or sinking fund payment of any Subordinated Indebtedness of such Person;

provided that the term "Restricted Payment" does not include the payment of a dividend or other distribution by any Restricted Subsidiary on shares of its Capital Stock that is paid pro rata to all holders of such Capital Stock.

   "Restricted Subsidiary" of any Person means any Subsidiary of such Person other than an Unrestricted Subsidiary.

   "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty.

   "Security Register" has the meaning set forth in the Junior Preferred Exchange Indenture.

   "Senior Indebtedness" means the principal of (and premium, if any) and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us whether or not a claim for post-petition interest is allowed in such proceeding) on:

•

our Indebtedness created pursuant to the Credit Facility and all other obligations thereunder or under the notes, security documents, pledge agreements, Interest Hedge Agreements or other agreements or instruments executed in connection therewith;



•

our Indebtedness created pursuant to any vendor financing Incurred for the acquisition, construction or improvement by us or any of our Restricted Subsidiaries of assets in the Wireless Communications Business;



•

all our other Indebtedness referred to in the definition of Indebtedness other than:



•

Indebtedness incurred pursuant to clauses (d) and (f) thereof (and clause (i) thereof to the extent applicable to Indebtedness Incurred under clauses (d) and (f) thereof), whether Incurred on or prior to the Exchange Date and



•

the Senior Subordinated Notes; and



•

amendments, renewals, extensions, modifications, refinancings and refundings of any such Indebtedness; provided, however, the following shall not constitute Senior Indebtedness:



(A)

any Indebtedness owed to a Person when such Person is one of our Restricted Subsidiaries,



(B)

any Indebtedness which by the terms of the instrument creating or evidencing the same is not superior in right of payment to the junior preferred exchange debentures,



(C)

any Indebtedness Incurred in violation of the Junior Preferred Exchange Indenture (but, as to any such Indebtedness, no such violation shall be deemed to exist for purposes of this clause (C) if the holder(s) of such Indebtedness or their representative and the Junior Preferred Debentures Trustee shall have received our Officers' Certificate to the effect that the Incurrence of such Indebtedness does not (or in the case of revolving credit Indebtedness, that the Incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate the Junior Preferred Exchange Indenture),



(D)

any Indebtedness which is subordinated in right of payment to any of our other Indebtedness,



(E)

Indebtedness or other obligations of or amounts owed by us or any of our Restricted Subsidiaries for compensation to our or their employees, as applicable, or for services rendered by such employees to us or any of our Restricted Subsidiaries or



(F)

any liability for federal, state, local or other taxes owed or owing by us.

   "Senior Nonmonetary Default" means the occurrence or existence and continuance of any event of default, or of any event which after notice or lapse of time or both would become an event of default, under the terms of any instrument pursuant to which any Senior Indebtedness is outstanding, permitting (after notice or lapse of time or both) one or more holders of such Senior Indebtedness (or an administrative agent on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise become due and payable, other than a Senior Payment Default.

   "Senior Payment Default" means any default in the payment of principal of (or premium, if any) or interest on any Senior Indebtedness when due, whether at the stated maturity of any such payment or by declaration of acceleration, call for redemption or otherwise.

   "Senior Preferred Exchange Debentures" means the debentures issuable in exchange for shares of senior exchangeable preferred stock.

   "Senior Preferred Exchange Indenture" means the indenture governing the 11³/8% Senior Subordinated Debenture.

   "Senior Preferred Stock" means our 11³/8% Senior Exchangeable Preferred Stock.

   "Senior Subordinated Notes" means our 9⁵/8% Senior Subordinated Notes due 2008.

   "Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of Regulation S-X under the Securities Act;provided that all references to "10 percent" under such definition shall be deemed to be references to "5 percent."

   "Stated Maturity," when used with respect to any junior preferred exchange debenture or any installment of interest thereon, means the date specified in such junior preferred exchange debenture as the date on which the principal of such junior preferred exchange debenture or such installment of interest is due and payable.

   "Strategic Equity Investment" means an investment in Qualified Stock made by a Strategic Investor in an aggregate amount of not less than $50.0 million.

   "Strategic Investor" means a Person (other than one of our Affiliates or a Person who by virtue of such Investment becomes such an Affiliate) engaged in one or more Telecommunications Businesses with an equity market capitalization at the time such Person makes a Strategic Equity Investment in us in excess of $1.0 billion.

   "Subordinated Indebtedness" mean our Indebtedness that is subordinated in right of payment to the junior preferred exchange debentures.

   "Subsidiary" means, as applied to any Person:

•

any corporation of which more than fifty percent (50.0%) of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary Voting Power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such Voting Power by reason of the happening of any contingency, or any entity other than a corporation of which more than fifty percent (50.0%) of the outstanding ownership interests, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person; or



•

any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person.

   "Telecommunications Business" means the business of:

(a)

transmitting, or providing services relating to the transmission of, voice, video or data through owned or leased wireline or wireless transmission facilities;



(b)

creating, developing, constructing, installing, repairing, maintaining or marketing communications-related systems, network equipment and facilities, software and other products; or



(c)

evaluating, owning, operating, participating in or pursuing any other business that is primarily related to those identified in clause (a) or (b) above (in the case of this clause (c), however, in a manner consistent with our manner of business on the Issue Date), and shall, in any event, include all businesses in which we or any of our Subsidiaries is engaged on the Issue Date or has entered into agreements to engage in or to acquire a company to engage in or contemplate engaging in, as expressly set forth in this Prospectus;

provided that the determination of what constitutes a Telecommunications Business shall be made in good faith by our board of directors.

   "Treasury Rate" means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to     , 2005,  provided, however, that if the period from the redemption date to     , 2005 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

   "Unrestricted Subsidiary" of any Person means:

•

any Subsidiary of such Person that at the time of determination shall be designated an Unrestricted Subsidiary by the board of directors of such Person in the manner provided below; and



•

any Subsidiary of an Unrestricted Subsidiary.

The board of directors of any Person may designate any Restricted Subsidiary to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, such Person or any Restricted Subsidiary; provided that either:

•

the Subsidiary to be so designated has total assets of $1,000 or less; or



•

if such Subsidiary has assets greater than $1,000, such Person's pro rata interest in the Fair Market Value of the net assets of such Subsidiary at the time of such designation would be permitted as an Investment under the provision of the Junior Preferred Exchange Indenture described under "—Limitation on Restricted Payments."

The board of directors of any Person may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of such Person; provided that immediately after giving effect to such designation:

•

such Person would be permitted to Incur $1.00 of additional Indebtedness pursuant to the provision of the Junior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness;" and



•

no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing.

Any such designation by the board of directors shall be evidenced by a Board Resolution submitted to the Junior Preferred Debentures Trustee. Wireless Alliance shall be deemed an Unrestricted Subsidiary as of the Issue Date and shall thereafter remain an Unrestricted Subsidiary unless and until designated by the board of directors as a Restricted Subsidiary in accordance with the terms of the Junior Preferred Exchange Indenture.

   "Voting Power" of any Person means the aggregate number of votes of all classes of Capital Stock of such Person which ordinarily have voting power for the election of directors of such Person.

   "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

   "Wireless Communications Business" means any business substantially related to the ownership, development, operation or acquisition of fixed and mobile wireless communications services permitted under the Federal Communications Commission's Commercial Mobile Radio Services rules (and the related provisions of the Federal Communications Commission's Public Mobile Services and Personal Communications Services rules), and other related telecommunications business services.

Form, Denomination, Book-Entry Procedures and Transfer

   The junior preferred exchange debentures will be issued only in fully registered form in denominations of $1,000 and integral multiples thereof. The junior preferred exchange debentures will not be issued in bearer form.

   If the junior preferred exchange debentures are to be redeemed in part, we will not be required to:

•

issue, register the transfer of or exchange any junior preferred exchange debentures during a period beginning at the opening of business 15 days before the day of mailing of notice of redemption of any such junior preferred exchange debentures that may be selected for redemption and ending at the close of business on the day of such mailing; or



•

register the transfer of or exchange any junior preferred exchange debentures so selected for redemption, in whole or in part, except the unredeemed portion of any such junior preferred exchange debentures being redeemed in part.

DESCRIPTION OF SENIOR EXCHANGEABLE PREFERRED STOCK
AND SENIOR PREFERRED EXCHANGE DEBENTURES
Senior Exchangeable Preferred Stock

   The following summary of the material provisions of the 11³/8% senior exchangeable preferred stock does not purport to be complete and is subject to and qualified in its entirety by reference to the provisions of the certificate of designation relating thereto, a copy of which may be obtained from us (referred to as the "Senior Certificate of Designation"). Definitions relating to certain capitalized terms that are used in this section of this prospectus are set forth under "—Certain Definitions" below and throughout this description. Capitalized terms that are used in this section but not otherwise defined herein have the meanings assigned to them in the Senior Certificate of Designation and such definitions are incorporated by reference into this prospectus. Unless otherwise indicated, references in this section to covenants are to covenants set forth in the Senior Certificate of Designation. References in the section to "Rural Cellular," "we," "our" and "us" refer to Rural Cellular Corporation. All references to "senior preferred exchange debentures" are to our  % senior subordinated debentures.

General

   We are authorized to issue 450,000 shares of senior exchangeable preferred stock, par value $.01 per share, pursuant to the Senior Certificate of Designation. Such shares include 125,000 shares of currently outstanding senior exchangeable preferred stock, an additional 25,000 shares (these additional shares are referred to as "Additional Shares") reserved for possible future issuance, and additional shares that may be used to pay dividends on the senior exchangeable preferred stock if we elect to pay dividends in additional shares of such stock (these shares so used are referred to as "Dividend Shares") (future references to senior exchangeable preferred stock shall include Additional Shares and Dividend Shares, as the context requires). To the extent we issue any Additional Shares, such issuance shall include all such Additional Shares. Subject to certain conditions, the senior exchangeable preferred stock will be exchangeable for senior preferred exchange debentures due 2003 at our option on any dividend payment date. The new senior exchangeable preferred stock we will issue in the exchange offering, when issued in accordance with the terms of the exchange offer, will be fully paid and non-assessable and the holders thereof will not have any subscription or preemptive rights in connection therewith. Norwest Bank Minnesota, National Association is the exchange agent and the transfer agent and registrar for the senior exchangeable preferred stock.

Ranking

   The senior exchangeable preferred stock will, with respect to dividend rights and rights upon our liquidation, winding-up and dissolution, rank:

•

senior to all classes of common stock and to each other class of Capital Stock established after May 14, 1998, by our board of directors the terms of which expressly provide that it ranks junior to the senior exchangeable preferred stock as to dividend rights and upon our liquidation, winding-up and dissolution (collectively referred to, together with all classes of our common stock, as "Junior Stock");



•

subject to certain conditions, described below, on a parity with each other class of Capital Stock established after May 14, 1998, by our board of directors the terms of which expressly provide that such class or series will rank on a parity with the senior exchangeable preferred stock as to dividend rights and rights upon our liquidation, winding-up and dissolution (collectively referred to as "Parity Stock"); and



•

subject to certain conditions, described below, junior to each class of Capital Stock established after May 14, 1998, by our board of directors the terms of which do not expressly provide that such class or series of Capital Stock will rank junior to, or on a parity with, the senior exchangeable preferred stock as to dividend rights and rights upon our liquidation, winding-up and dissolution (collectively referred to as "Senior Stock").

   We may not authorize or issue any new class of Senior Stock or Parity Stock without the affirmative vote or consent (voting or consenting as one class) of the holders of at least:

•

66²/3% of the shares of senior exchangeable preferred stock then outstanding with respect to Senior Stock, and



•

a majority of the shares of senior exchangeable preferred stock then outstanding with respect to Parity Stock.

   Any shares of senior exchangeable preferred stock may, however, be issued by us without the approval of the holders of the senior exchangeable preferred stock. In addition, without the approval of holders of the senior exchangeable preferred stock, we may issue shares of senior exchangeable preferred stock in exchange for, or the proceeds of which are used to redeem or purchase, all (but not less than all) shares of the senior exchangeable preferred stock then outstanding in accordance with the Senior Certificate of Designation.

Dividends

   Holders of the outstanding shares of senior exchangeable preferred stock will be entitled to receive, when, as and if declared by our board of directors out of funds legally available therefor, dividends on the senior exchangeable preferred stock, which shall accrue at a rate per annum equal to 11³/8%. If at any time dividends on the senior exchangeable preferred stock are in arrears and unpaid for six or more quarterly dividend periods (whether or not consecutive), holders of senior exchangeable preferred stock will be entitled to certain voting rights. See "—Voting Rights" below. All dividends will be cumulative, whether or not earned or declared, from May 14, 1998, and will be payable quarterly in arrears on February 15, May 15, August 15, and November 15, of each year, commencing on August 15, 1998, to holders of record on the February 1, May 1, August 1 or November 1 immediately preceding the relevant dividend payment date. On or before May 15, 2003 we may, at our option, pay dividends in cash or in Dividend Shares having an aggregate liquidation preference equal to the amount of such dividends. After May 15, 2003, dividends may be paid only in cash. If any dividend (or portion thereof) payable on any dividend payment date on or before May 15, 2003, is not declared or paid in full in cash or in Dividend Shares as described above on such dividend payment date, the amount of the accumulated and unpaid dividends will bear interest at the dividend rate on the senior exchangeable preferred stock, compounding quarterly from such dividend payment date until paid in full. If any dividend (or portion thereof) payable on any dividend payment date after May 15, 2003, is not declared or paid in full in cash on such dividend payment date, the amount of the accumulated and unpaid dividend will bear interest at the dividend rate on the senior exchangeable preferred stock, compounding quarterly from such dividend payment date until paid in full. The Credit Facility, the Notes Indenture and Minnesota corporate law limit our ability under certain circumstances to pay cash dividends on our Capital Stock, and future agreements may contain similar or more restrictive limitations. See "Description of Other Indebtedness" and "Description of Senior Subordinated Notes."

   No full dividends may be declared or paid or funds set apart for the payment of dividends on any Parity Stock for any period unless full cumulative dividends shall have been or contemporaneously are declared and paid (or are deemed declared and paid) in full or declared and, if payable in cash, a sum in cash sufficient for such payment set apart for such payment on the senior exchangeable preferred stock. If full dividends are not so paid, the senior exchangeable preferred stock will share dividends pro rata with the Parity Stock. No dividends may be paid or set apart for such payment on Junior Stock (except dividends on Junior Stock payable in additional shares of Junior Stock) and no Junior Stock or Parity Stock may be repurchased, redeemed or otherwise retired nor may funds be set apart for payment with respect thereto, if full cumulative dividends have not been paid in full (or deemed paid) on the senior exchangeable preferred stock. Dividends on account of arrears for any past dividend period and dividends in connection with any optional redemption may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record of the senior exchangeable preferred stock on such date, not more than 45 days prior to the payment thereof, as may be fixed by our board of directors.

Optional Redemption

   After May 15, 2003, the senior exchangeable preferred stock may be redeemed (subject to contractual and other restrictions with respect thereto and to certain conditions under Minnesota corporate law) at any time at our option, in whole or from time to time in part, on not less than 30 nor more than 60 days prior notice, at the redemption prices (expressed as percentages of the then effective liquidation preference thereof) set forth below, plus, without duplication, all accumulated and unpaid dividends, if any, to but excluding the redemption date (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the redemption date to but excluding the redemption date), if redeemed during the 12-month period beginning on May 15 of the years indicated below:

Year	Redemption Price
2003	105.688	%
2004	104.266	%
2005	102.844	%
2006	101.422	%
2007 and thereafter	100.000	%

   In addition, at any time prior to May 15, 2001, we may redeem shares of senior exchangeable preferred stock having an aggregate liquidation preference of up to 25.0% of the aggregate liquidation preference of all shares of senior exchangeable preferred stock (including Additional Shares and Dividend Shares but excluding any New senior exchangeable preferred stock to the extent the Old senior exchangeable preferred stock in exchange for which it was issued is included in the amount of all such shares of senior exchangeable preferred stock issued) issued, from the net cash proceeds of a Qualifying Event at a price equal to 111.375% of the aggregate liquidation preference thereof, plus, without duplication, accumulated and unpaid dividends, if any, to but excluding the date fixed for redemption (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the redemption date), subject to the right of holders of record on the relevant record date to receive dividends due on a dividend payment date. At least $75 million in aggregate liquidation preference of the senior exchangeable preferred stock must, however, remain outstanding immediately following such redemption. Any such redemption must be made within 30 days after the related Qualifying Event.

   Notice of any optional redemption of any senior exchangeable preferred stock (or portion thereof) will be given to Holders at their addresses as given to the transfer agent, not less than 30 nor more than 60 days prior to the date fixed for redemption. The notice of redemption shall state the redemption date, the redemption price, if less than all the outstanding shares of senior exchangeable preferred stock are to be redeemed, the liquidation preference of, and accrued and unpaid dividends on, the particular senior exchangeable preferred stock to be redeemed, that on the redemption date the redemption price will become due and payable upon each share of senior exchangeable preferred stock to be redeemed and the place or places where such senior exchangeable preferred stock is to be surrendered for payment of the redemption price.

   No optional redemption may be authorized or made unless on or prior to such redemption full unpaid cumulative dividends shall have been paid or a sum set apart for such payment on the senior exchangeable preferred stock.

   The Credit Facility, the notes indenture and Minnesota corporate law limit our ability to redeem the senior exchangeable preferred stock, and future agreements may contain similar or more restrictive limitations.

Mandatory Redemption

   The senior exchangeable preferred stock will also be subject to mandatory redemption (subject to certain conditions under Minnesota corporate law) in whole on May 15, 2010 (referred to as the "Mandatory Redemption Date"), at a redemption price equal to 100% of the aggregate liquidation preference thereof, plus, without duplication, all accumulated and unpaid dividends, if any, to but excluding the date fixed for redemption (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the redemption date). The Credit Facility, the indenture governing our senior subordinated notes and Minnesota corporate law limit our ability to redeem our senior exchangeable preferred stock, and our future agreements may contain similar or more restrictive limitations.

Procedure for Redemption

   Notice of any redemption of any shares of senior exchangeable preferred stock will be given to the Holders at their registered address not less than 30 nor more than 60 days prior to the date fixed for redemption. The notice of redemption shall state the redemption date, the redemption price, if less than all of the outstanding shares of senior exchangeable preferred stock are to be redeemed, the liquidation preference of, and accrued and unpaid dividends on, the shares of senior exchangeable preferred stock to be redeemed, that on the redemption date the redemption price will become due and payable upon each share of senior exchangeable preferred stock to be redeemed and the place or places where such shares are to be surrendered for payment of the redemption price. If less than all of the senior exchangeable preferred stock is to be redeemed, the particular shares to be redeemed will be determined pro rata, except that we may redeem such shares held by a Holder of fewer than 100 shares without regard to suchpro rata redemption requirement.

   On and after the redemption date, unless we default in the payment of the applicable redemption price, dividends will cease to accumulate on shares of senior exchangeable preferred stock called for redemption and all rights of holders of such shares will terminate except for the right to receive the redemption price, without interest. However, if a notice of redemption has been given and the funds necessary for redemption (including an amount in respect of all dividends that will accrue to the redemption date) will have been segregated and irrevocably set apart by us, in trust for the benefit of the Holders of the shares called for redemption, then dividends will cease to accumulate on the redemption date on the shares to be redeemed and, at the close of business on the day on which such funds are segregated and set apart, the Holders of the shares to be redeemed shall cease to be our stockholders and shall be entitled only to receive the redemption price for such shares. New certificates of senior exchangeable preferred stock having an aggregate liquidation preference equal to the unredeemed portion of senior exchangeable preferred stock will be issued in the name of the Holder thereof upon cancellation of the original shares of senior exchangeable preferred stock. Shares of senior exchangeable preferred stock issued and reacquired by us will, upon compliance with the applicable requirements of Minnesota law, have the status of our authorized but unissued undesignated shares and may, with any and all other of our authorized but unissued undesignated shares be designated or redesignated, and issued or reissued, as the case may be, as part of any series of our Capital Stock except that any issuance or reissuance of shares of senior exchangeable preferred stock must be in compliance with the Senior Certificate of Designation.

Exchange

   We may, at our option, on any scheduled dividend payment date, exchange, in whole but not in part, the senior exchangeable preferred stock for the senior preferred exchange debentures; provided that:

(a)

on the date of such exchange there are no accumulated and unpaid dividends on the senior exchangeable preferred stock (including the dividend payable on such date) or other contractual impediments to such exchange;



(b)

there shall be legally available funds sufficient therefor (including, without limitation, funds sufficient under Minnesota law to repay debt when due);



(c)

either:



•

a registration statement relating to the senior preferred exchange debentures shall have been declared effective under the Securities Act prior to or on the Senior Preferred Exchange Date and shall continue to be in effect on the date of such exchange or



•

we shall have obtained a written Opinion of Counsel that an exemption from the registration requirements of the Securities Act is available for such exchange and that upon receipt of such senior preferred exchange debentures pursuant to such exchange made in accordance with such exemption, each Holder of a senior preferred exchange debenture that is not our affiliate will not be subject to any restrictions imposed by the Securities Act upon the resale of such senior preferred exchange debenture, and such exemption is relied upon by us for such exchange;



(d)

if required by applicable law, the Senior Preferred Exchange Indenture and the Debentures Trustee thereunder shall have been qualified under the Trust Indenture Act of 1939, as amended;



(e)

immediately prior and subsequent to such exchange, no Event of Default (as defined in the Senior Preferred Exchange Indenture) or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing; and no material breach or default would exist under the Credit Facility or the indenture governing our senior subordinated notes; and



(f)

we shall have delivered to the Debentures Trustee a written Opinion of Counsel, dated the date of exchange, regarding the satisfaction of all the conditions to be satisfied prior to such exchange including, without limitation, those conditions set forth in clauses (a), (b), (c) and (d) above and the due authorization, execution, delivery and enforceability of both the senior preferred exchange debentures and the Senior Preferred Exchange Indenture.




   Currently, the exchange of the senior exchangeable preferred stock into senior preferred exchange debentures is restricted by covenants contained in the Credit Facility and the Notes Indenture, and future agreements may contain similar or more restrictive limitations. There can be no assurance that the conditions in such covenants for the exchange of senior exchangeable preferred stock for senior preferred exchange debentures will be satisfied or that the exchange will occur or that our future Indebtedness would not also restrict an exchange. See "Description of Senior Subordinated Notes" and "Description of Other Indebtedness."

   Notice of any exchange of any shares of senior exchangeable preferred stock will be given to each Holder at its registered address not less than 30 nor more than 60 days prior to the date fixed for such exchange (referred to as the "Senior Preferred Exchange Date"). On the Senior Preferred Exchange Date, if the conditions set forth in clauses (a) through (f) above are satisfied and the exchange is permitted under our then outstanding Indebtedness, we shall issue senior preferred exchange debentures in exchange for the senior exchangeable preferred stock as provided in the next paragraph. In the event that (i) the issuance of the senior preferred exchange debentures is not permitted on the Senior Preferred Exchange Date or (ii) any of the conditions set forth in clauses (a) through (f) of the preceding paragraph are not satisfied on the Senior Preferred Exchange Date, we shall use our best efforts to satisfy such conditions and effect such exchange as soon as practicable.

   We will comply with the provisions of Rule 13e-4 promulgated pursuant to the Exchange Act in connection with any exchange, to the extent applicable.

   Upon any exchange of senior exchangeable preferred stock for senior preferred exchange debentures on the Senior Preferred Exchange Date pursuant to the preceding paragraph, Holders of outstanding shares of senior exchangeable preferred stock will be entitled to receive, subject to the second succeeding sentence, $1.00 of principal amount of the senior preferred exchange debentures for each $1.00 of the then effective liquidation preference of senior exchangeable preferred stock held by them. The senior preferred exchange debentures will be issued in registered form, without coupons. The senior preferred exchange debentures issued in exchange for senior exchangeable preferred stock will be issued in principal amounts of $1,000 and integral multiples thereof, and we will pay cash in lieu of issuing a senior preferred exchange debenture in any other principal amount. On and after the Senior Preferred Exchange Date, dividends will cease to accumulate on the outstanding shares of senior exchangeable preferred stock, and all rights of the holders of senior exchangeable preferred stock (except the right to receive the senior preferred exchange debentures, an amount in cash, to the extent applicable, equal to the accumulated and unpaid dividends to the Senior Preferred Exchange Date and cash in lieu of any senior preferred exchange debenture that is in a principal amount less than $1,000) will terminate. The person entitled to receive senior preferred exchange debentures issuable upon such exchange will be treated for all purposes as the registered holder of such senior preferred exchange debentures.

Liquidation Preference

   Upon our voluntary or involuntary liquidation, dissolution or winding-up, Holders of senior exchangeable preferred stock will be entitled to be paid, out of our assets available for distribution to stockholders, the then effective liquidation preference per share of senior exchangeable preferred stock ($1,000 per share), plus, without duplication, an amount in cash equal to all accumulated and unpaid dividends thereon to but excluding the date fixed for liquidation, dissolution or winding-up (including an amount equal to a prorated dividend for the period from the last dividend payment date to the date fixed for liquidation, dissolution or winding-up), before any distribution is made on any Junior Stock, including, without limitation, our common stock. If, upon our voluntary or involuntary liquidation, dissolution or winding-up, the amounts payable with respect to the senior exchangeable preferred stock and all other Parity Stock are not paid in full, the Holders of the senior exchangeable preferred stock and the Parity Stock will share equally and ratably in any distribution of our assets in proportion to the full liquidation preference to which each is entitled. After payment of the full amount of the liquidation preference and accumulated and unpaid dividends to which they are entitled, the Holders of shares of senior exchangeable preferred stock will not be entitled to any further participation in any distribution of our assets. However, neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of our property or assets nor our consolidation or merger with one or more entities shall be deemed to be a liquidation, dissolution or winding-up.

No Sinking Fund

   The Senior Certificate of Designation for the senior exchangeable preferred stock does not contain any provision requiring funds to be set aside to protect the liquidation preference of the senior exchangeable preferred stock.

Voting Rights

   The holders of senior exchangeable preferred stock, except as otherwise required under Minnesota law or as set forth below, shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by our stockholders.

   The Senior Certificate of Designation provides that if:

(a)

at any time, dividends on the senior exchangeable preferred stock are in arrears and unpaid for six or more quarterly dividend periods (whether or not consecutive);



(b)

we fail to redeem the senior exchangeable preferred stock on May 15, 2010, or fail to otherwise discharge any redemption or repurchase obligation with respect to the senior exchangeable preferred stock;



(c)

we fail to make an Offer to Purchase if such offer is required by the provisions set forth under the "Change of Control" covenant below or fail to purchase shares of senior exchangeable preferred stock from holders who elect to have such shares purchased pursuant to an Offer to Purchase;



(d)

a breach or violation of any other provisions described under the caption "—Certain Covenants" occurs and the breach or violation continues for a period of 30 days or more after we receive notice thereof specifying the default from the holders of at least 25.0% of the shares of senior exchangeable preferred stock then outstanding; or



(e)

default by us or any Restricted Subsidiary under the terms of any instrument evidencing or securing Indebtedness having an outstanding principal amount in excess of $5.0 million in the aggregate, which default results in the acceleration of the payment of such Indebtedness or constitutes the failure to pay the principal of such Indebtedness at maturity, then the Holders of a majority of the then outstanding shares of senior exchangeable preferred stock, voting as a class (together with the holders of any Parity Stock having similar voting rights), shall be entitled to elect the lesser of:



•

two directors of our board of directors; and



•

25.0% of the members of our board of directors.

   If applicable, the voting rights will continue until such time as, in the case of a dividend default, all dividends in arrears on the senior exchangeable preferred stock are paid in full (and in the case of dividends payable after May 15, 2003, paid in cash) and, in all other cases, any failure, breach or default giving rise to such voting rights is remedied or waived by the holders of at least a majority of the shares of senior exchangeable preferred stock then outstanding, at which time the term of any directors elected pursuant to the provisions of this paragraph shall terminate. Each such event described in clauses (a) through (e) above is referred to herein as a "Voting Rights Triggering Event." If the voting rights provided herein are applicable, then they shall represent each Holder's exclusive remedy at law or in equity.

   The Senior Certificate of Designation also provides that we will not authorize or issue any new class of Senior Stock or Parity Stock except as described above under "—Ranking."

   Under Minnesota law, holders of preferred stock are entitled to vote as a class upon a proposed amendment to the articles of incorporation, whether or not entitled to vote thereon by the terms of the articles of incorporation, if the amendment would:

•

increase or decrease the aggregate number of authorized shares of preferred stock;



•

effect an exchange, reclassification, or cancellation of all or part of the shares of preferred stock;



•

effect an exchange, or create a right of exchange, of all or any part of the shares of another class or series for the shares of preferred stock;



•

change the rights or preferences of the preferred stock;



•

change the shares of preferred stock into the same or a different number of shares, either with or without par value, of another class or series of stock;



•

create a new class or series of shares having rights and preferences prior and superior to the shares of preferred stock, or increase the rights and preferences or the number of authorized shares of a class or series having rights and preferences prior or superior to the shares of preferred stock;



•

divide the shares of preferred stock into series and determine the designation of each series and the variations in the relative rights and preferences between the shares of each series, or authorize the board of directors to do so;



•

limit or deny any existing preemptive rights of the shares of preferred stock; or



•

cancel or otherwise affect distributions on the shares of preferred stock that have accrued but have not been declared.

Change of Control

   Upon the occurrence of a Change of Control, each Holder of senior exchangeable preferred stock shall have the right to have such senior exchangeable preferred stock repurchased by us on the terms and conditions set forth in the Senior Certificate of Designation. We shall, within 30 days following the date of the consummation of a transaction resulting in a Change of Control, mail an Offer to Purchase all outstanding shares of senior exchangeable preferred stock at a purchase price equal to 101.0% of the aggregate liquidation preference thereof plus, without duplication, accumulated and unpaid dividends, if any, to but excluding the date of purchase (including an amount in cash equal to a prorated dividend for the period from the dividend payment date immediately prior to the date of purchase). The occurrence of a Change of Control constitutes an event of default under the Credit Facility, entitling the lenders thereunder to accelerate all obligations owing thereunder. Moreover, the holders of our senior subordinated notes have the right to require us to repurchase all these notes upon the occurrence of a Change of Control, which would have to be satisfied prior to the satisfaction of the Offer to Purchase the senior exchangeable preferred stock. In addition, Minnesota corporate law imposes certain conditions on our ability to purchase shares of senior exchangeable preferred stock. We cannot assure you that we would be able to make or satisfy such Offer to Purchase.

   "Change of Control" means:

•

directly or indirectly, a sale, transfer or other conveyance of all or substantially all our assets, on a consolidated basis, to any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), excluding transfers or conveyances to or among our Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that any Person or group of Persons owns more than 50.0% of the total Voting Power entitled to vote in the election of directors, managers or trustees of the transferee entity immediately after such transaction;



•

any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50.0% of our total Voting Power; or



•

during any period of 24 consecutive months, individuals who at the beginning of such period constituted our board of directors (together with any new directors whose election by such board or whose nomination for election by our shareholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of our board of directors then in office.

   We will comply with any tender offer rules under the Exchange Act which may then be applicable, including Rule 14e-l thereunder, in connection with any Offer to Purchase.

Certain Covenants

Limitation on Consolidated Indebtedness

   The Senior Certificate of Designation prohibits us and our Restricted Subsidiaries from Incurring any Indebtedness, except that we may Incur Indebtedness if (1) there exists no Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event immediately prior and subsequent thereto and (2) after giving effect thereto, our Annualized Operating Cash Flow Ratio on a pro forma basis (calculated on the assumption that such Indebtedness had been incurred on the first day of the applicable Reference Period), would have been less than:

For the Period	Ratio
Prior to January 1, 2000	9.0 to 1.0
Thereafter	8.0 to 1.0

   Notwithstanding the foregoing, if there exists no Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event immediately prior and subsequent thereto, we and our Restricted Subsidiaries may Incur the following Indebtedness without regard to the foregoing limitations:

(a)

Indebtedness evidenced by the notes on the Issue Date;



(b)

our Incurrence of (the following discussion refers to the Atlantic Acquisition which was completed in 1998):



•

prior to the date of the consummation of the Atlantic Acquisition, Indebtedness Incurred under the Existing Credit Facility in an aggregate principal amount not to exceed $160.0 million at any time outstanding, reduced by repayments and permanent reductions thereof due to application of Net Cash Proceeds (as defined in the notes indenture) pursuant to the "Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the notes indenture. If, however, such Indebtedness is repaid with the net proceeds of the sale of the notes pursuant to the covenant entitled "—Limitation on Use of Proceeds; Proceeds Purchase Offer" set forth in the notes indenture, no Indebtedness in excess of $30.0 million in the aggregate at any time outstanding may be Incurred thereunder except for Indebtedness whose proceeds are applied by us for the sole purpose of funding a repurchase of the notes under the covenant entitled "—Limitation on Use of Proceeds; Proceeds Purchase Offer" set forth in the notes indenture and



•

on and after the date of the consummation of the Atlantic Acquisition, Indebtedness Incurred under the New Credit Facility in an aggregate principal amount not to exceed $300.0 million at any time outstanding, reduced by such repayments and permanent reductions thereof due to application of Net Cash Proceeds (as defined in the notes indenture) as set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant set forth in the notes indenture;



(c)

our indebtedness or that of any of our Restricted Subsidiaries owing to us or any of our Restricted Subsidiaries; provided that:



•

in the case of any such of our Indebtedness, such obligations will be unsecured and subordinated in all respects to the rights of the holders of the senior preferred exchange debentures, if and when issued, to the same extent as the senior preferred exchange debentures will be subordinated to Senior Indebtedness; and



•

if any event occurs that causes a Restricted Subsidiary to no longer be a Restricted Subsidiary, then this clause (c) will no longer be applicable to such Indebtedness of that Restricted Subsidiary;



(d)

our indebtedness or that of any of our Restricted Subsidiaries to renew, extend, refinance or refund any of our Indebtedness or that of any of our Restricted Subsidiaries outstanding or committed on the date of renewal, extension, refinancing or refunding other than Indebtedness Incurred pursuant to clause (b) or (c); provided, however, that such Indebtedness does not exceed the principal amount of outstanding or committed Indebtedness so renewed, extended, refinanced or refunded plus financing fees and other expenses associated therewith; and provided further, however, that:



•

such renewing, extending, refinancing or refunding Indebtedness will not have a final maturity and will not have any other mandatory repayments or redemptions prior to those of the Indebtedness being renewed, extended, refinanced or refunded;



•

in the case of any refinancing or refunding of Indebtedness that would rank pari passu in right of payment to the senior preferred exchange debentures (if and when issued), the refinancing or refunding Indebtedness would rank pari passu or subordinate in right of payment to the senior preferred exchange debentures (if and when issued), and, in the case of any refinancing or refunding of Indebtedness that would rank subordinate to the senior preferred exchange debentures (if and when issued), the refinancing or refunding Indebtedness ranks subordinate in right of payment to the senior preferred exchange debentures (if and when issued) to substantially the same extent as the Indebtedness refinanced or refunded; and

•

none of our Restricted Subsidiaries will be permitted to refinance any of our Indebtedness.



(e)

Indebtedness Incurred by us or any of our Restricted Subsidiaries under Interest Hedge Agreements to hedge interest on permitted Indebtedness; provided, that the notional principal amount of any such Interest Hedge Agreements does not exceed the principal amount of Indebtedness to which such Interest Hedge Agreements relate;



(f)

Indebtedness of any of our Restricted Subsidiaries which does not exceed $30.0 million in the aggregate for all such Restricted Subsidiaries at any time outstanding (excluding any Intercompany Indebtedness or Acquired Indebtedness permitted to be Incurred under the Senior Certificate of Designation), provided that after giving effect thereto on a pro forma basis our Annualized Operating Cash Flow Ratio is less than 7.5 to 1.0 and the Adjusted Annualized Operating Cash Flow Ratio of such Subsidiary is less than 5.0 to 1.0;



(g)

any guarantee by any Restricted Subsidiary of any Indebtedness Incurred under the Existing Credit Facility or New Credit Facility in compliance with this covenant;



(h)

Acquired Indebtedness, provided that on a pro forma basis after giving effect to the Incurrence of such Indebtedness, we shall be able to Incur $1.00 of additional Indebtedness pursuant to the provisions described under the first paragraph of this covenant "—Limitation on Consolidated Indebtedness;"



(i)

Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of business;



(j)

Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any of our obligations or any of our Restricted Subsidiaries, obligations pursuant to such agreements, in any case Incurred in connection with the disposition of any of our business, assets or any of our Restricted Subsidiaries (other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of our business, assets or Restricted Subsidiaries for the purpose of financing such acquisition), in an amount not to exceed the gross proceeds actually received by us or any of our Restricted Subsidiaries in connection with such disposition; and



(k)

our Indebtedness or that of any of our Restricted Subsidiaries, other than Indebtedness permitted pursuant to clauses (a) through (j) above, which does not exceed $10.0 million at any time outstanding or committed.

Limitation on Preferred Stock of Restricted Subsidiaries

   The Senior Certificate of Designation prohibits us from allowing any of our Restricted Subsidiaries to create or issue any Preferred Stock except:

•

Preferred Stock outstanding on the Issue Date;



•

Preferred Stock issued to and held by us or any of our Wholly Owned Restricted Subsidiaries;



•

Preferred Stock issued by any Person prior to that Person's having become one of our direct or indirect Restricted Subsidiaries; and



•

Preferred Stock issued by a Restricted Subsidiary the proceeds of which are used to refinance certain outstanding Preferred Stock of a Restricted Subsidiary, provided that:



•

the liquidation value of the refinancing Preferred Stock does not exceed the liquidation value so refinanced plus financing fees and other expenses associated with such refinancing; and



•

such refinancing Preferred Stock has no mandatory redemptions prior to (and in no greater amounts than) the Preferred Stock being refinanced.

Limitation on Restricted Payments

   The Senior Certificate of Designation prohibits us or any of our Restricted Subsidiaries from making any Restricted Payment unless after giving effect thereto:

(a)

no Voting Rights Triggering Event or event which, with notice or lapse of time or both, would become a Voting Rights Triggering Event has occurred and is continuing;



(b)

we would be permitted to Incur an additional $1.00 of Indebtedness pursuant to the provision of the Senior Certificate of Designation described in the first paragraph under "—Limitation on Consolidated Indebtedness;"



(c)

the total of all Restricted Payments made on or after the Issue Date does not exceed the sum of:



•

Cumulative Operating Cash Flow less 1.75 times Cumulative Interest Expense;



•

100% of our aggregate Qualified Capital Stock Proceeds after the Issue Date; and



•

100% of the cash proceeds received from an Unrestricted Subsidiary to the extent of Investments (other than Permitted Investments) made in such Unrestricted Subsidiary since the Issue Date; and



(d)

all accumulated and unpaid dividends on the senior exchangeable preferred stock shall have been paid in full as provided in the Senior Certificate of Designation.

   The foregoing provision shall not be violated, so long as no Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event has occurred and is continuing or shall occur as a consequence of the actions or payments set forth below, by reason of:

(a)

the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the foregoing provision;



(b)

the purchase, acquisition, redemption or other acquisition or retirement for value of shares of Capital Stock of any Restricted Subsidiary held by Persons other than us or any of our Restricted Subsidiaries;



(c)

the redemption, defeasance, repurchase or other acquisition or retirement of any of our Junior Stock or that of our Restricted Subsidiaries either in exchange for or out of the net cash proceeds of the substantially concurrent sale (other than to one of our Subsidiaries) of Qualified Junior Stock; and



(d)

Restricted Payments, in addition to Restricted Payments permitted pursuant to clauses (a) through (c) of this paragraph, not in excess of $10.0 million in the aggregate after the Issue Date.

The payments described in clauses (a), (c) (provided the proceeds of the sale of the Qualified Junior Stock constitute Qualified Capital Stock Proceeds) and (d) of this paragraph will count as Restricted Payments for the calculation under the first paragraph of this section "—Limitation on Restricted Payments."

Limitations Concerning Distributions and Transfers by Restricted Subsidiaries

   The Senior Certificate of Designation provides that we will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual restriction or prohibition on the ability of any Restricted Subsidiary to:

(a)

pay dividends on, or make other distributions in respect of, its Capital Stock, or any other ownership interest or participation in, or measured by, its profits, to us or any of our Restricted Subsidiaries or pay any Indebtedness or other obligation owed to us or any of our Restricted Subsidiaries;



(b)

make any loans or advances to us or any of our Restricted Subsidiaries; or



(c)

transfer any of our property or assets to us or any of our Restricted Subsidiaries.

Notwithstanding the foregoing, we may, and may permit any Restricted Subsidiary to, suffer to exist any such restriction or prohibition:

(1)

pursuant to the Senior Certificate of Designation, the indenture governing our senior subordinated notes, the Existing Credit Facility or any other agreement in effect on the Issue Date;



(2)

pursuant to an agreement relating to any Indebtedness of such Restricted Subsidiary which was outstanding or committed prior to the date on which such Restricted Subsidiary was acquired by us other than in anticipation of becoming a Restricted Subsidiary; provided that such restriction or prohibition shall not apply to any of our property or assets or any of our Restricted Subsidiaries other than the property or assets of such Restricted Subsidiary and its Subsidiaries;



(3)

pursuant to an agreement effecting a renewal, extension, refinancing or refunding of any agreement described in clauses (1) and (2) above, provided, however, that the provisions contained in such renewal, extension, refinancing or refunding agreement relating to such restriction or prohibition are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof (it being understood that for purposes of this clause (3) the New Credit Facility is deemed to be a refinancing of the Existing Credit Facility);



(4)

existing under or by reason of applicable law;



(5)

customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Restricted Subsidiary;



(6)

purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (c) of this covenant;



(7)

restrictions of the type referred to in clause (c) of this covenant contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent that such Liens were otherwise incurred in accordance with "—Limitations on Liens" below and restrict the transfer of property subject to such agreements; or



(8)

customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business.

Limitations on Transactions with Affiliates and Related Persons

   The Senior Certificate of Designation provides that we will not, and will not permit any of our Restricted Subsidiaries to, enter into any transaction involving aggregate consideration in excess of:

(a)

$1.0 million, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with or to any of our Affiliates or any Related Persons (other than a Restricted Subsidiary), unless a majority of the disinterested members of our board of directors determines (which determination will be evidenced by a Board Resolution) that:



•

such transaction is in our best interests or that of our Restricted Subsidiaries; and



•

such transaction is on terms that are no less favorable to us or our Restricted Subsidiaries than those which might be obtained in arm's-length transactions with a third party at the time; and



(b)

$5.0 million unless (in addition to the provisions of the foregoing clause (a)) we receive a written opinion from an investment banking firm of national reputation to the effect that such transaction is fair to us or our Restricted Subsidiaries, from a financial point of view.

In the case of transactions entered into in the ordinary course of business principally involving the provision of telecommunications services by our Affiliates or any Related Persons (who are regularly engaged in the provision of telecommunications services) to us or any of our Restricted Subsidiaries:

•

if the aggregate consideration involved is not in excess of $5.0 million, then clause (a) above will be applicable but the good faith judgment of our officers will be substituted for the requirement of a resolution of the board of directors; and



•

if the aggregate consideration involved exceeds $5.0 million, clause (b) above will not be applicable but clause (a) above will be applicable.

Limitations on Liens

   The Senior Certificate of Designation provides that we will not, and will not permit any of our Restricted Subsidiaries to, Incur or suffer to exist any Lien on or with respect to any property or assets now owned or hereafter acquired to secure any Indebtedness that ranks in right of payment pari passu with or subordinate to the senior preferred exchange debentures, if and when issued, without making, or causing such Restricted Subsidiary to make, effective provision for securing the senior preferred exchange debentures, if and when issued:

•

equally and ratably with such Indebtedness as to such property for so long as such Indebtedness will be so secured; or



•

in the event such Indebtedness is our Indebtedness or that of a Restricted Subsidiary which is subordinate in right of payment to the senior preferred exchange debentures, if and when issued, prior to such Indebtedness as to such property for so long as such Indebtedness will be so secured.

   The foregoing restrictions shall not apply to:

(a)

Liens existing in respect of any Indebtedness that exists on the Issue Date;



(b)

Liens in favor of us or Liens in favor of one of our Wholly Owned Restricted Subsidiaries on the assets or Capital Stock of another of our Wholly Owned Restricted Subsidiaries;



(c)

Liens to secure Indebtedness outstanding or committed for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the equipment or other property subject to such Liens; provided, however, that:



•

the principal amount of any Indebtedness secured by such a Lien does not exceed 100% of such purchase price or cost;



•

such Lien does not extend to or cover any property other than such item of property or any improvements on such item; and



•

the Incurrence of such Indebtedness is otherwise permitted by the Senior Certificate of Designation;



(d)

Liens on property existing immediately prior to the time of acquisition thereof (and not Incurred in anticipation of the financing of such acquisition);



(e)

Liens to secure Indebtedness to extend, renew, refinance or refund (or successive extensions, renewals, refinancings or refundings), in whole or in part, Indebtedness secured by any Lien referred to in the foregoing clauses (a), (c) and (d) so long as such Lien does not extend to any other property and the principal amount of Indebtedness so secured is not increased except as otherwise permitted under the provision of the Senior Certificate of Designation described under clause (b) or (d) of "—Limitation on Consolidated Indebtedness;"



(f)

Liens on any Permitted Investment in Cooperative Bank Equity in favor of any Cooperative Banks; or



(g)

any other Liens in respect of any Indebtedness which Indebtedness does not exceed $500,000 in the aggregate.

Limitation on Certain Debt

   The Senior Certificate of Designation provides that we will not Incur any Indebtedness that is subordinate in right of payment to any of our other Indebtedness unless the Indebtedness so Incurred is either pari passu or subordinate in right of payment to the senior preferred exchange debentures (if and when issued).

Consolidation, Merger, Conveyance, Transfer or Lease

   The Senior Certificate of Designation provides that we will not consolidate with or merge into any Person or permit any other Person to consolidate with or merge into us, or transfer, sell, convey or lease or otherwise dispose of all or substantially all of its assets to, any Person unless:

(a)

(1) we are the surviving entity, or



(2)

if we are not the surviving entity, then the successor or transferee will be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and the senior exchangeable preferred stock shall be converted into or exchanged for and shall become shares of such successor or transferee company, having in respect of such successor or transferee company substantially the same powers, preferences and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereon that the senior exchangeable preferred stock had immediately prior to such transaction;




(b)

the Consolidated Net Worth of the successor or transferee immediately after the transaction is not less than 100% of our Consolidated Net Worth immediately prior to the transaction;



(c)

immediately after giving effect to such transaction, we (or our permitted successor or transferee) would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the provision of the Senior Certificate of Designation described in the first paragraph under "—Limitation on Consolidated Indebtedness;"



(d)

after giving effect to such transaction no Voting Rights Triggering Event or event which with notice or lapse of time would become a Voting Rights Triggering Event has occurred and is continuing; and



(e)

an officers' certificate and an Opinion of Counsel covering such conditions shall be delivered to the transfer agent.

Reports

   The Senior Certificate of Designation provides that whether or not we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, we shall deliver to the transfer agent and to each Holder, within 15 days after we are or would have been required to file such with the Commission, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the Commission, if we were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by our certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required.

Certain Definitions

   "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary):

(a)

existing at the time such Person becomes a Restricted Subsidiary; or



(b)

assumed in connection with the acquisition of assets from such Person, in the case of both of the preceding clause (a) and clause (b), other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition.

Acquired Indebtedness will be deemed to be Incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.

   "Adjusted Annualized Operating Cash Flow Ratio" of any Person means the Annualized Operating Cash Flow Ratio of such Person as adjusted to treat all Preferred Stock of such Person as Redeemable Stock.

   "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

   "Annualized Operating Cash Flow" of any Person means the Operating Cash Flow of such Person for the Reference Period multiplied by two.

   "Annualized Operating Cash Flow Ratio" of any Person on any date (referred to as the "Transaction Date") means, with respect to any Person and its Restricted Subsidiaries, the ratio of:

•

Consolidated Indebtedness of such Person and its Restricted Subsidiaries on the Transaction Date (after giving pro forma effect to the Incurrence of any Indebtedness on such Transaction Date) divided by



•

the aggregate amount of Annualized Operating Cash Flow of such Person (determined on a pro forma basis after giving effect to all dispositions of businesses made by such Person and its Restricted Subsidiaries from the beginning of the Reference Period through the Transaction Date as if such dispositions had occurred at the beginning of such Reference Period).

For purposes of such computation, however, in calculating Annualized Operating Cash Flow and Consolidated Indebtedness:

(a)

the transaction giving rise to the need to calculate the Annualized Operating Cash Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first day of the Reference Period;



(b)

the incurrence of any Indebtedness during the Reference Period or subsequent thereto and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to retire Indebtedness) will be assumed to have occurred (on a pro forma basis) on the first day of such Reference Period;



(c)

Consolidated Interest Expense attributable to any Indebtedness (whether existing or being incurred) bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date had been the applicable rate for the entire period;



(d)

all members of the consolidated group of such Person on the Transaction Date that were acquired during the Reference Period shall be deemed to be members of the consolidated group of such Person for the entire Reference Period; and



(e)

the Indebtedness and Annualized Operating Cash Flow of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be determined in accordance with the actual percentage of the Person's common equity interest in such Restricted Subsidiary on the date of determination of the Annualized Operating Cash Flow Ratio (thus, for example, in the case of a Restricted Subsidiary in which such Person owns a 51.0% common equity interest, 51.0% of such Subsidiary's Indebtedness and of such Subsidiary's Annualized Operating Cash Flow would be included in the calculation of such Person's aggregate Indebtedness and Annualized Operating Cash Flow, respectively).

When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and its Restricted Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Board Resolution" means a copy of a resolution certified by our Secretary or one of our Assistant Secretaries to have been duly adopted by the board of directors, to be in full force and effect on the date of such certification and delivered to the transfer agent.

   "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City or the State of Minnesota are authorized or obligated by law or executive order to close.

   "Capital Lease Obligation" means that portion of any obligation of a Person as lessee under a lease which is required to be capitalized on the balance sheet of such lessee in accordance with generally accepted accounting principles.

   "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of equity of such Person.

   "Cash Equivalents" means:

(a)

securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), in each case maturing within one year after the date of acquisition,



(b)

time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $500.0 million and commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within one year after the date of acquisition, and



(c)

investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (a) and (b) above.

   "Commission" means the Securities and Exchange Commission.

   "Consolidated Income Tax Expense" of any Person means for any period the provision for income taxes of such Person and its Restricted Subsidiaries for such period.

   "Consolidated Indebtedness" of any Person means at any date the Indebtedness of such Person and its Restricted Subsidiaries at such date.

   "Consolidated Interest Expense" of any Person means for any period the interest expense included in an income statement (taking into account the effect of any Interest Hedge Agreements but without deduction of interest income) of such Person and its Restricted Subsidiaries for such period, including without limitation or duplication (or, to the extent not so included, with the addition of):

•

the portion of any rental obligation in respect of any Capital Lease Obligation allocable to interest expense in accordance with generally accepted accounting principles;



•

the amortization of Indebtedness discounts;



•

any payments or fees with respect to letters of credit, bankers' acceptances or similar facilities;



•

fees with respect to Interest Hedge Agreements;



•

the portion of any rental obligations in respect of any Sale and Leaseback Transaction allocable to interest expense (determined as if such were treated as a Capital Lease Obligation); and



•

Preferred Stock dividends accrued or payable other than dividends on our Qualified Capital Stock.

   "Consolidated Net Income" of any Person means for any period the net income (or loss) of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (to the extent included and without duplication):

•

the net income (or loss) of any Person acquired by such Person or a Restricted Subsidiary of such Person after the Issue Date in a pooling of interests transaction for any period prior to the date of such transaction;



•

the net income (or loss) of any Person that is not a Restricted Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person by such other Person during such period;



•

gains or losses from sales of assets other than sales of assets acquired and held for resale in the ordinary course of business;



•

for the purposes of the "—Limitation on Restricted Payments" covenant, the net income, if positive, of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at that time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to such Restricted Subsidiary; and



•

all extraordinary gains and extraordinary losses.

   "Consolidated Net Worth" of any Person means the consolidated shareholders' equity of such Person, determined on a consolidated basis in accordance with generally accepted accounting principles; provided, that with respect to us, adjustments following the Issue Date to our accounting books and records in accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the acquisition of control of us by another Person and its Subsidiaries shall not be given effect; provided further, that such computation shall exclude:

•

any amounts attributable to Redeemable Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of our Capital Stock or any of our Restricted Subsidiaries and



•

Unrestricted Subsidiaries.

   "Cooperative Banks" means lenders under the Credit Facility which are cooperative banks.

   "Cooperative Bank Equity" means non-voting equity interests in Cooperative Banks.

   "Credit Facility" means the Existing Credit Facility or the New Credit Facility.

   "Cumulative Interest Expense" means the total amount of our Consolidated Interest Expense and that of our Restricted Subsidiaries for the period beginning on the first day of the fiscal quarter immediately following the Issue Date through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Cumulative Operating Cash Flow" means our Operating Cash Flow and that of our Restricted Subsidiaries for the period beginning on the first day of the fiscal quarter immediately following the Issue Date, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Depositary" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the senior exchangeable preferred stock until a successor Depositary shall have become such pursuant to the applicable provisions of the Senior Certificate of Designation, and thereafter "Depositary" shall mean such successor Depositary. The Depositary initially is DTC.

   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Existing Credit Facility" means the Loan Agreement, dated as of May 1, 1997, among us, The Toronto-Dominion Bank, Bank Boston, N.A., St. Paul Bank for Cooperatives, CoBank, Fleet National Bank, First National Bank of Maryland, Société Générale, New York Branch and Merita Bank Ltd., New York Branch, as amended by a first amendment to loan agreement dated as of August 4, 1997, a second amendment to loan agreement dated as of December 30, 1997, a third amendment to loan agreement dated as of April 17, 1998 and a fourth amendment to loan agreement dated as of April 24, 1998, and as such agreement may be further amended, supplemented, restated or otherwise modified from time to time.

   "Fair Market Value" means, with respect to any assets or Person, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined:

•

if such Person or assets have a Fair Market Value in excess of $20,000 but not in excess of $5 million, by any of our officers and evidenced by an Officers' Certificate dated within 30 days of the relevant transaction, or



•

if such Person or assets have a Fair Market Value in excess of $5 million, by a majority of our board of directors and evidenced by a Board Resolution, dated within 30 days of the relevant transaction, based on an appraisal of an independent appraiser of national reputation.

   "Holder" means a Person in whose name a share of senior exchangeable preferred stock is registered.

   "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness.

   "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent:

(a)

every obligation of such Person for money borrowed;



(b)

every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses;



(c)

every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person;



(d)

every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business);



(e)

every Capital Lease Obligation of such Person;



(f)

the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination;



(g)

every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party;



(h)

all obligations under Interest Rate Agreements;



(i)

every obligation of the type referred to in clauses (a) through (h) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor, guarantor or otherwise, or which is secured by a lien on any asset of such Person; and



(j)

the liquidation value of Preferred Stock of a Subsidiary of such Person issued and outstanding and held by other than such Person (or one of its Wholly Owned Restricted Subsidiaries).

For all purposes of the Senior Certificate of Designation, however,

•

the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the unamortized portion of the original issue discount of such Indebtedness at the time of its issuance as determined in conformity with generally accepted accounting principles,



•

money borrowed at the time of the Incurrence of any Indebtedness in order to pre-fund the payment of interest on such Indebtedness shall be deemed not to be "Indebtedness," and



•

Indebtedness shall not include any liability for federal, state, local or other taxes.

For purposes of the Senior Certificate of Designation, the amount of any Indebtedness shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Indebtedness had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such obligation provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person or in any event until the counterparty thereunder defaults in its corresponding payment, then in each such case, the amount of such obligations shall be the net amount so determined, plus any premium due upon default by such Person.

   "Interest Hedge Agreements" means any interest rate swap, cap, collar, floor, caption or swap agreements, or any similar arrangements designed to hedge the risk of variable interest rate volatility or to reduce interest costs, arising at any time between us or any of our Restricted Subsidiaries, on the one hand, and any Person (other than any of our Affiliates or any of our Restricted Subsidiaries), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time.

   "Investment" by any Person in any other Person means (without duplication):

(a)

the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of Capital Stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such other Person or any agreement to make any such acquisition;



(b)

the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension;



(c)

the entering into by such Person of any guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of such other Person;



(d)

the making of any capital contribution by such Person to such other Person; and



(e)

the designation by our board of directors of any Person to be an Unrestricted Subsidiary.

For purposes of the covenant described in "—Limitation on Restricted Payments":

(a)

Investment" shall include and be valued at the Fair Market Value of such Person's pro rata interest in the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the lesser of



•

Fair Market Value of such Person's pro rata interest in the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and



•

the Fair Market Value of the amount of such Person's Investments (other than Permitted Investments) made in (net of cash distributions received from) such Unrestricted Subsidiary since the Issue Date; and



(b)

the amount of any Investment shall be the Fair Market Value of such Investment at the time any such Investment is made.

   "Issue Date" means the time and date of the first issuance of the senior exchangeable preferred stock.

   "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than an easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).

   "New Credit Facility" means the amendment and restatement or the refinancing or replacement of the Existing Credit Facility with the same, a deletion of, or additional lenders, including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing that increase the aggregate amount of borrowings outstanding or the aggregate commitments of the lenders thereunder.

   "Offer to Purchase" means a written offer sent by us to each Holder at its registered address on the date of the written offer offering to purchase senior exchangeable preferred stock having a liquidation preference up to the amount specified in such written offer at the purchase price specified in such written offer. Unless otherwise required by applicable law, the written offer shall specify an expiration date of the Offer to Purchase which, subject to any contrary requirements of applicable law, shall be not less than 30 days nor more than 60 days after the date of such Offer to Purchase and a settlement date (the "Purchase Date") for purchase of senior exchangeable preferred stock within five Business Days after the expiration date. The written offer shall also state the section of the Senior Certificate of Designation pursuant to which the Offer to Purchase is being made, the expiration date and the Purchase Date, the aggregate liquidation preference of the outstanding senior exchangeable preferred stock offered to be purchased by us, the purchase price to be paid by us and the place or places where shares of senior exchangeable preferred stock are to be surrendered for tender pursuant to the Offer to Purchase.

   "Officers' Certificate" means a certificate signed by two officers, at least one of whom shall be our principal executive officer, principal accounting officer, or principal financial officer, and delivered to the transfer agent.

   "Operating Cash Flow" for any Person for any period means:

(a)

the Consolidated Net Income of such Person for such period, plus



(b)

the sum, without duplication (and only to the extent such amounts are deducted from net revenues in determining such Consolidated Net Income), of



•

the provisions for income taxes for such period for such Person and its Subsidiaries,



•

depreciation, amortization and other non-cash charges of such Person and its Subsidiaries and



•

Consolidated Interest Expense of such Person for such period, determined, in each case, on a consolidated basis for such Person and its Subsidiaries in accordance with generally accepted accounting principles, less



(c)

the sum, without duplication (and only to the extent such amounts are included in such Consolidated Net Income), of:



•

all extraordinary gains of such Person and its Subsidiaries during such period; and



•

the amount of all cash payments made during such period by such Person and its Subsidiaries to the extent such payments relate to non-cash charges that were added back in determining Operating Cash Flow for such period or for any prior period; and in the case of a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary, the determination of the percentage of the Operating Cash Flow of such Restricted Subsidiary that is to be included in the calculation of our Annualized Operating Cash Flow Ratio shall be made on a pro forma basis on the assumption that the percentage of our common equity interest in such Restricted Subsidiary throughout the applicable Reference Period was equivalent to its common equity interest on the date of the determination.

When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and its Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Opinion of Counsel" means a written opinion of counsel, who may be counsel for us, and who shall be reasonably acceptable to the transfer agent, delivered to the transfer agent.

   "Permitted Investments" means:

(a)

Investments in Cash Equivalents;



(b)

Investments in us or a Restricted Subsidiary (other than payments described in clause (b) of the second paragraph under "—Limitation on Restricted Payments");



(c)

Investments in a Person substantially all of whose assets are of a type generally used in a Wireless Communications Business (an "Acquired Person") if, as a result of such Investments:



(1)

the Acquired Person immediately thereupon becomes a Restricted Subsidiary or



(2)

the Acquired Person immediately thereupon either




•

is merged or consolidated with or into us or any Restricted Subsidiary or



•

transfers or conveys all or substantially all of its assets to, or is liquidated into, us or any of our Restricted Subsidiaries;



(d)

Investments in accounts and notes receivable acquired in the ordinary course of business;



(e)

any securities received in connection with an Asset Sale and any investment with the Net Cash Proceeds from any Asset Sale in Capital Stock of a Person, all or substantially all of whose assets are of a type used in a Wireless Communications Business, that complies with the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant;



(f)

advances and prepayments for asset purchases in the ordinary course of business in a Wireless Communications Business of us or a Restricted Subsidiary;



(g)

customary loans or advances made in the ordinary course of business to our officers, directors or employees or any of our Restricted Subsidiaries for travel, entertainment, and moving and other relocation expenses;



(h)

the purchase of Cooperative Bank Equity in Cooperative Banks to the extent required by the charter documents of such Cooperative Banks in connection with the Incurrence of any Indebtedness which is provided by such Cooperative Banks under the Credit Facility, provided that such Incurrence is permitted under the terms of the Senior Certificate of Designation; and



(i)

Investments in Wireless Alliance not exceeding $25.0 million in the aggregate made after the Issue Date; provided, that the matters referenced in clauses (c) and (h) above shall not be Permitted Investments if made at any time that an Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing.

   "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

   "Preferred Stock" means, with respect to any Person, any and all shares of Capital Stock of such Person that have preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

   "Public Equity Offering" means an underwritten public offering of our common stock pursuant to an effective registration statement filed with the Commission in accordance with the Securities Act.

   "Qualified Capital Stock" means, with respect to any Person, any and all shares of Capital Stock other than Redeemable Stock issued by such Person after the date of the Senior Certificate of Designation.

   "Qualified Capital Stock Proceeds" means, with respect to any Person:

(a)

in the case of any sale of Qualified Capital Stock, the aggregate net cash proceeds received by such Person, after payment of expenses, commissions and the like, Incurred by such Person in connection therewith, and net of Indebtedness that such Person Incurred, guaranteed, or otherwise became liable for in connection with the issuance or acquisition of such Capital Stock; and



(b)

in the case of any exchange, exercise, conversion or surrender of any Redeemable Stock or Indebtedness of such Person issued (other than to any Subsidiary) for cash after the Issue Date for or into shares of Qualified Capital Stock of such Person, the aggregate net cash proceeds received from the issuance of such Qualified Capital Stock, plus the aggregate net cash proceeds, if any, received by such Person upon such exchange, exercise, conversion or surrender, and less any and all payments made to the securityholders, and all other expenses, commissions and the like Incurred by such Person or any Subsidiary in connection therewith.

   "Qualified Junior Stock" means Junior Stock that does not constitute Redeemable Stock.

   "Qualifying Event" means a Public Equity Offering or one or more Strategic Equity Investments which in either case results in aggregate net proceeds of not less than $50.0 million.

   "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the Mandatory Redemption Date or is redeemable at the option of the holder thereof at any time prior to the Mandatory Redemption Date, provided that any Capital Stock that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of a "change of control" occurring prior to the Mandatory Redemption Date shall not constitute Redeemable Stock if the "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Change of Control" covenant and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to our repurchase of the senior exchangeable preferred stock as required pursuant to the "—Change of Control" covenant.

   "Reference Period" with regard to any Person means the last two full fiscal quarters of such Person immediately preceding any date upon which any determination is to be made pursuant to the terms of the notes or the Senior Certificate of Designation.

   "Related Person" of any Person means any other Person owning:

(a)

5% or more of the outstanding Common Stock of such Person or



(b)

5% or more of the Voting Power of such Person.

   "Restricted Payment" means, with respect to any Person:

(a)

any declaration or payment of a dividend or other distribution on any shares of the Junior Stock of such Person or any Subsidiary of such Person (other than a dividend payable solely in shares of its Junior Stock or options, warrants or other rights to acquire its Junior Stock and other than any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to us or another Restricted Subsidiary);



(b)

any payment on account of the purchase, redemption, retirement or acquisition of:



•

any shares of Junior Stock of such Person or any Subsidiary of such Person held by other than such Person or any of its Restricted Subsidiaries or



•

any option, warrant or other right to acquire shares of Junior Stock of such Person or any Subsidiary of such Person or any of its Restricted Subsidiaries, in each case other than pursuant to the cashless exercise of options; and



(c)

any Investment (other than a Permitted Investment) made by such Person; provided, that the term "Restricted Payment" does not include the payment of a dividend or other distribution by any Restricted Subsidiary on shares of its Capital Stock that is paid pro rata to all holders of such Capital Stock.

   "Restricted Subsidiary" of any Person means any Subsidiary of such Person other than an Unrestricted Subsidiary.

   "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty.

   "Securities Act" means the Securities Act of 1933, as amended.

   "Senior Indebtedness" means the principal of (and premium, if any) and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us whether or not a claim for post-petition interest is allowed in such proceeding) on:

(a)

our Indebtedness created pursuant to the Credit Facility and all other obligations thereunder or under the notes, security documents, pledge agreements, Interest Hedge Agreements or other agreements or instruments executed in connection therewith;



(b)

our Indebtedness created pursuant to any vendor financing Incurred for the acquisition, construction or improvement by us or any Restricted Subsidiary of assets in the Wireless Communications Business;



(c)

all our other Indebtedness referred to in the definition of Indebtedness other than clauses (d), (f) and (i) thereof (and clause (h) thereof to the extent applicable to Indebtedness Incurred under clauses (d) and (f) thereof), whether Incurred on or prior to the Issue Date, other than the Notes; and



(d)

amendments, renewals, extensions, modifications, refinancings and refundings of any such Indebtedness.

The following shall not constitute Senior Indebtedness:

(a)

any Indebtedness owed to a Person when such Person is our Restricted Subsidiary;



(b)

any Indebtedness which by the terms of the instrument creating or evidencing the same is not superior in right of payment to the senior preferred exchange debentures, if and when issued;



(c)

any Indebtedness Incurred in violation of the Senior Certificate of Designation (but, as to any such Indebtedness, no such violation shall be deemed to exist for purposes of this clause (c) if the holder(s) of such Indebtedness or their representative shall have received our officers' certificate to the effect that the Incurrence of such Indebtedness does not (or in the case of revolving credit Indebtedness, that the Incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate the Senior Certificate of Designation; or



(d)

any Indebtedness which is subordinated in right of payment to any of our other Indebtedness.

   "Strategic Equity Investment" means an investment in Qualified Junior Stock made by a Strategic Investor in an aggregate amount of not less than $50.0 million.

   "Strategic Investor" means a Person (other than one of our Affiliates or a Person who by virtue of such Investment becomes such an Affiliate) engaged in one or more Telecommunications Businesses with an equity market capitalization at the time such Person makes a Strategic Equity Investment in us in excess of $1.0 billion.

   "Subordinated Indebtedness" mean our Indebtedness that is subordinated in right of payment to the senior preferred exchange debentures, if and when issued.

   "Subsidiary" means, as applied to any Person:

•

any corporation of which more than fifty percent (50.0%) of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary Voting Power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such Voting Power by reason of the happening of any contingency, or any entity other than a corporation of which more than fifty percent (50.0%) of the outstanding ownership interests, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, or



•

any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person.

   "Telecommunications Business" means the business of:

(a)

transmitting, or providing services relating to the transmission of, voice, video or data through owned or leased wireline or wireless transmission facilities;



(b)

creating, developing, constructing, installing, repairing, maintaining or marketing communications-related systems, network equipment and facilities, software and other products; or



(c)

evaluating, owning, operating, participating in or pursuing any other business that is primarily related to those identified in clause (a) or (b) above (in the case of this clause (c), however, in a manner consistent with our manner of business on the Issue Date), and shall, in any event, include all businesses in which we or any of our Subsidiaries is engaged on the Issue Date or have entered into agreements to engage in or to acquire a company to engage in or contemplate engaging in, as expressly set forth in this Prospectus;

provided that the determination of what constitutes a Telecommunications Business shall be made in good faith by our board of directors.

   "Unrestricted Subsidiary" of any Person means:

•

any Subsidiary of such Person that at the time of determination shall be designated an Unrestricted Subsidiary by the board of directors of such Person in the manner provided below; and



•

any Subsidiary of an Unrestricted Subsidiary.

The board of directors of any Person may designate any Restricted Subsidiary to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, such Person or any Restricted Subsidiary; provided that either:

•

the Subsidiary to be so designated has total assets of $1,000 or less; or



•

if such Subsidiary has assets greater than $1,000, such Person's pro rata interest in the Fair Market Value of the net assets of such Subsidiary at the time of such designation would be permitted as an Investment under the provision of the Senior Certificate of Designation described under "—Limitation on Restricted Payments."

The board of directors of any Person may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of such Person; provided that immediately after giving effect to such designation:

•

such Person would be permitted to Incur $1.00 of additional Indebtedness pursuant to the provision of the Senior Certificate of Designation described in the first paragraph under "—Limitation on Consolidated Indebtedness"; and



•

no Voting Rights Triggering Event or event which with notice or lapse of time or both would become a Voting Rights Triggering Event has occurred and is continuing.

   Any such designation by the board of directors shall be evidenced by a Board Resolution submitted to the transfer agent. Wireless Alliance shall be deemed an Unrestricted Subsidiary as of the Issue Date and shall thereafter remain an Unrestricted Subsidiary unless and until designated by our board of directors as a Restricted Subsidiary in accordance with the terms of the Senior Certificate of Designation.

   "Voting Power" of any Person means the aggregate number of votes of all classes of Capital Stock of such Person which ordinarily have voting power for the election of directors of such Person.

   "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

   "Wireless Communications Business" means any business substantially related to the ownership, development, operation or acquisition of mobile wireless communications services permitted under the Federal Communications Commission's ("FCC") Commercial Mobile Radio Service rules (and the related provisions of the FCC's Public Mobile Services and Personal Communications Services rules), and other related telecommunications business services.

Form, Denomination, Book-Entry Procedures and Transfer

   New senior exchangeable preferred stock will be issued only in fully registered form in denominations of $1,000 and integral multiples thereof. New senior exchangeable preferred stock will not be issued in bearer form.

   If the senior exchangeable preferred stock is to be redeemed in part, we will not be required to:

•

issue, register the transfer of or exchange any senior exchangeable preferred stock during a period beginning at the opening of business 15 days before the day of mailing of notice of redemption of any such senior exchangeable preferred stock that may be selected for redemption and ending at the close of business on the day of such mailing; or



•

register the transfer of or exchange any senior exchangeable preferred stock so selected for redemption, in whole or in part, except the unredeemed portion of any such senior exchangeable preferred stock being redeemed in part.

Senior Preferred Exchange Debentures

   The senior preferred exchange debentures will be issued under an indenture, to be dated as of the Senior Preferred Exchange Date (referred to as the "Senior Preferred Exchange Indenture"), by and between us and Norwest Bank Minnesota, National Association, as Trustee (the "Debentures Trustee"). If the senior preferred exchange debentures are issued, the senior preferred exchange debentures will be subject to and governed by the Trust Indenture Act. The following summary of the material terms and provisions of the senior preferred exchange debentures and the Senior Preferred Exchange Indenture does not purport to be complete and is subject to and qualified in its entirety by reference to the Senior Preferred Exchange Indenture (including the terms made part of the Senior Preferred Exchange Indenture by reference to the Trust Indenture Act), copies of which are available for inspection at the Corporate Trust Office of the Debentures Trustee in Minneapolis, Minnesota and which may also be obtained from us. Definitions relating to certain capitalized terms used in this section of this Prospectus are set forth under "—Certain Definitions" and throughout this description. Capitalized terms that are used in this section but not otherwise defined herein have the meanings assigned to them in the Senior Preferred Exchange Indenture and such definitions are incorporated herein by reference. Unless otherwise indicated, references in this section to covenants are to covenants set forth in the Senior Preferred Exchange Indenture.

General

   The senior preferred exchange debentures will be our unsecured obligations and will be limited in aggregate principal amount to the liquidation preference of the senior exchangeable preferred stock exchanged for senior preferred exchange debentures on the Senior Preferred Exchange Date plus any additional senior preferred exchange debentures thereafter issued in lieu of cash interest as described herein. The senior preferred exchange debentures will be senior subordinated obligations of us, subordinated in right of payment to Senior Indebtedness of us, including amounts outstanding under the Existing Credit Facility prior to the consummation of our acquisition of Atlantic Cellular and under the New Credit Facility after the consummation of the Atlantic Acquisition, pari passu in right of payment with all our future senior subordinated indebtedness and senior in right of payment to any of our future subordinated indebtedness.

Maturity, Interest and Principal

   The senior preferred exchange debentures will mature on May 15, 2010. Interest on the senior preferred exchange debentures will accrue at a rate of 11³/8% per annum and will be payable in cash (or, on or prior to May 15, 2003, in additional senior preferred exchange debentures having an aggregate principal amount equal to the amount of such interest, at our option) semiannually on each May 15 and November 15, commencing on the first such date following the Senior Preferred Exchange Date to the Holders of record on the immediately preceding May 1 and November 1. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The senior preferred exchange debentures will be payable both as to principal and interest at our office or agency maintained for such purpose within the City and State of New York. Until otherwise designated by us, our office or agency in New York will be the office of the Debentures Trustee maintained for such purpose.

   All moneys paid by us to a paying agent for the payment of principal of (and premium, if any) and any interest on any senior preferred exchange debentures which remain unclaimed for two years after such principal (and premium, if any) or interest has become due and payable may be repaid to us and thereafter the Holder of such senior preferred exchange debentures may look only to us for payment thereof.

Subordination

   The payment of the principal of and premium, if any, and interest on the senior preferred exchange debentures will, to the extent set forth in the Senior Preferred Exchange Indenture, be subordinated in right of payment to the prior payment in full of all Senior Indebtedness. Upon any payment or distribution of our assets to creditors upon our liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings, the holders of all Senior Indebtedness will be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the senior preferred exchange debentures will be entitled to receive any Exchange Debentures Payment.

   In the event that any Senior Payment Default shall have occurred and be continuing, or the maturity of any Senior Indebtedness shall have been accelerated, then no Exchange Debentures Payment shall be made unless and until such Senior Payment Default shall have been cured or waived and any acceleration of Senior Indebtedness shall have been rescinded or annulled. In the event that any Senior Nonmonetary Default shall have occurred and be continuing, then, upon receipt by us and the Debentures Trustee of written notice of such Senior Nonmonetary Default from a Person designated as a representative for the Designated Senior Indebtedness or, if there is no outstanding Designated Senior Indebtedness, any holder of Senior Indebtedness, no Exchange Debentures Payment shall be made during the period (the "Payment Blockage Period") commencing on the date of such receipt of such written notice and ending on the earlier of:

•

the date on which such Senior Nonmonetary Default shall have been cured or waived or shall have ceased to exist and any acceleration of Senior Indebtedness shall have been rescinded or annulled or the Senior Indebtedness to which such Senior Nonmonetary Default relates shall have been discharged; or



•

the 179th day after the date of such receipt of such written notice.

   No more than one Payment Blockage Period may be commenced with respect to the senior preferred exchange debentures during any 360-day period and there shall be a period of at least 181 consecutive days in each 360-day period in which no Payment Blockage Period is in effect. For all purposes of this paragraph, no Senior Nonmonetary Default that was known to the holders of Senior Indebtedness to exist or be continuing on the date of commencement of any Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by a representative for the Designated Senior Indebtedness unless such Senior Nonmonetary Default shall have been cured for a period of not less than 90 consecutive days.

   The subordination provisions described above will cease to be applicable to the senior preferred exchange debentures upon any defeasance or covenant defeasance of the senior preferred exchange debentures as described under "—Defeasance."

   As of September 30, 1999, on a pro forma basis after giving effect to the Triton acquisitions and the sale of our senior subordinated notes and the senior exchangeable preferred stock, Senior Indebtedness aggregated approximately $1.18 billion. We expect from time to time to Incur additional Indebtedness constituting Senior Indebtedness. See "Capitalization." In addition, all existing and future indebtedness and other liabilities of our Subsidiaries will be effectively senior in right of payment to the senior preferred exchange debentures. As of September 30, 1999, on a pro forma basis after giving effect to the Triton acquisition and our preferred and common stock offerings, our Subsidiaries had no material Indebtedness, other than Intercompany Indebtedness and guarantees by such Subsidiaries of our Credit Facility.

Optional Redemption

   After May 15, 2003, the senior preferred exchange debentures may be redeemed at any time at our option, in whole or from time to time in part, on not less than 30 nor more than 60 days prior notice, at the following redemption prices (expressed as percentages of principal amount thereof), together with accrued and unpaid interest to but excluding the date fixed for redemption, if redeemed during the 12-month period beginning on May 15 of each of the years indicated below:

Year	Redemption Price
2003	105.688%
2004	104.266%
2005	102.844%
2006	101.422%
2007 and thereafter	100.000%

   Notwithstanding the foregoing, at any time prior to May 15, 2001, we may redeem up to 25.0% of the aggregate principal amount of senior preferred exchange debentures actually issued under the Indenture from the net cash proceeds of a Qualifying Event at a price equal to 111.375% of the aggregate principal amount thereof, together with accrued and unpaid interest to but excluding the date fixed for redemption. In addition, at least $75 million in aggregate principal amount of senior preferred exchange debentures must remain outstanding immediately following such redemption. The aggregate liquidation preference of any shares of senior exchangeable preferred stock previously redeemed out of the net cash proceeds of a Qualifying Event shall be counted as aggregate principal amount of senior preferred exchange debentures issued and redeemed for purposes of the foregoing 25.0% calculation. Any such redemption must be made within 30 days after the related Qualifying Event.

   Notice of any optional redemption of any senior preferred exchange debentures (or portion thereof) will be given to Holders at their addresses appearing in the Security Register, not less than 30 nor more than 60 days prior to the date fixed for redemption. The notice of redemption shall state the redemption date, the redemption price, if less than all the outstanding senior preferred exchange debentures are to be redeemed, principal amounts of the particular senior preferred exchange debentures to be redeemed, that on the redemption date the redemption price will become due and payable upon each Exchange Debenture to be redeemed and the place or places where such senior preferred exchange debentures are to be surrendered for payment of the redemption price. If less than all of the senior preferred exchange debentures are to be redeemed, the particular senior preferred exchange debentures to be redeemed will be selected not more than 60 days prior to the redemption date by the Debentures Trustee by such method as the Debentures Trustee deems fair and appropriate.

No Sinking Fund

   No sinking fund is provided for the senior preferred exchange debentures.

Change of Control

   Upon the occurrence of a Change of Control, each Holder of a senior preferred exchange debenture shall have the right to have such senior preferred exchange debenture repurchased by us on the terms and conditions set forth in the Senior Preferred Exchange Indenture. We shall, within 30 days following the date of the consummation of a transaction resulting in a Change of Control, mail an Offer to Purchase all outstanding senior preferred exchange debentures at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to but excluding the date of purchase. The occurrence of a Change of Control constitutes an event of default under the Credit Facility, entitling the lenders thereunder to accelerate all obligations owing thereunder, which would result in a block on all payments under the senior preferred exchange debentures. There can be no assurance that we will be able to make or satisfy the Offer to Purchase.

   "Change of Control" means:

(a)

directly or indirectly a sale, transfer or other conveyance of all or substantially all our assets, on a consolidated basis, to any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), excluding transfers or conveyances to or among our Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that any Person or group of Persons owns more than 50.0% of the total Voting Power entitled to vote in the election of directors, managers or trustees of the transferee entity immediately after such transaction,



(b)

any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50.0% of our total Voting Power or



(c)

during any period of 24 consecutive months, individuals who at the beginning of such period constituted our board of directors (together with any new directors whose election by our board or whose nomination for election by our shareholders was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of our board of directors then in office.

   We will comply with any tender offer rules under the Exchange Act which may then be applicable, including Rule 14e-l thereunder, in connection with any Offer to Purchase.

Certain Covenants

Limitation on Consolidated Indebtedness

   The Senior Preferred Exchange Indenture will prohibit us and our Restricted Subsidiaries from Incurring any Indebtedness, except that we may Incur Indebtedness if:

(a)

there exists no Event of Default or an event which with notice or lapse of time or both would become an Event of Default immediately prior and subsequent thereto; and



(b)

after giving effect thereto, our Annualized Operating Cash Flow Ratio on a pro forma basis (calculated on the assumption that such Indebtedness had been incurred on the first day of the applicable Reference Period), would have been less than:

For the Period	Ratio
Prior to January 1, 2000	9.0 to 1.0
Thereafter	8.0 to 1.0

   Notwithstanding the foregoing, if there exists no Event of Default or an event which with notice or lapse of time or both would become an Event of Default immediately prior and subsequent thereto, we and our Restricted Subsidiaries may Incur the following Indebtedness without regard to the foregoing limitations:

(a)

our Indebtedness evidenced by the senior preferred exchange debentures on the Senior Preferred Exchange Date, and senior preferred exchange debentures issued after the Senior Preferred Exchange Date in lieu of cash interest as described herein;



(b)

Incurrence by us of (the following discussion refers to the Atlantic Acquisition which was completed in 1998):



•

prior to the date of the consummation of the Atlantic Acquisition, Indebtedness Incurred under the Existing Credit Facility in an aggregate principal amount not to exceed $160.0 million at any time outstanding, reduced by repayments and permanent reductions thereof due to application of Net Cash Proceeds pursuant to the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant; provided, however, that if such Indebtedness is repaid with the net proceeds of the sale of the Notes pursuant to the covenant entitled "—Limitation on Use of Proceeds; Proceeds Purchase Offer" set forth in the Notes Indenture, no Indebtedness in excess of $30.0 million in the aggregate at any time outstanding may be Incurred thereunder except for Indebtedness whose proceeds are applied by us for the sole purpose of funding a repurchase of the Notes under the covenant entitled "—Limitation on Use of Proceeds; Proceeds Purchase Offer" set forth in the Notes Indenture and



•

on and after the date of the consummation of the Atlantic Acquisition, Indebtedness Incurred under the New Credit Facility in an aggregate principal amount not to exceed $300.0 million at any time outstanding, reduced by repayments and permanent reductions thereof due to the application of Net Cash Proceeds set forth in the "—Limitation on Asset Sales and Sales of Subsidiary Stock" covenant;



(c)

our Indebtedness or Indebtedness of any of our Restricted Subsidiaries owing to us or any of our Restricted Subsidiaries; provided, that:



•

in the case of any of our Indebtedness, such obligations will be unsecured and subordinated in all respects to the Holders' rights pursuant to the senior preferred exchange debentures to the same extent as the senior preferred exchange debentures are subordinated to Senior Indebtedness; and



•

if any event occurs that causes a Restricted Subsidiary to no longer be a Restricted Subsidiary, then this clause (c) will no longer be applicable to such Indebtedness of that Restricted Subsidiary;



(d)

our Indebtedness or Indebtedness of any of our Restricted Subsidiaries to renew, extend, refinance or refund any of our Indebtedness or Indebtedness of our Restricted Subsidiaries outstanding or committed on the date of renewal, extension, refinancing or refunding other than Indebtedness Incurred pursuant to clause (b) or (c); provided, however, that such Indebtedness does not exceed the principal amount of outstanding or committed Indebtedness so renewed, extended, refinanced or refunded plus financing fees and other expenses associated therewith; and provided further, however, that:



•

such renewing, extending, refinancing or refunding Indebtedness will not have a final maturity and shall not have any other mandatory repayments or redemptions prior to or in amounts greater than those of the Indebtedness being renewed, extended, refinanced or refunded,



•

in the case of any refinancing or refunding of Indebtedness that ranks pari passu in right of payment to the senior preferred exchange debentures, the refinancing or refunding Indebtedness ranks pari passu or is subordinated in right of payment to the senior preferred exchange debentures and, in the case of any refinancing or refunding of Indebtedness subordinated to the senior preferred exchange debentures, the refinancing or refunding Indebtedness ranks subordinate in right of payment to the senior preferred exchange debentures to substantially the same extent as the Indebtedness refinanced or refunded and



•

none of our Restricted Subsidiaries will be permitted to refinance any of our Indebtedness;



(e)

Indebtedness Incurred by us or any of our Restricted Subsidiaries, under Interest Hedge Agreements to hedge interest on permitted Indebtedness; provided, that the notional principal amount of any such Interest Hedge Agreements does not exceed the principal amount of Indebtedness to which such Interest Hedge Agreements relate;



(f)

Indebtedness of any of our Restricted Subsidiaries which does not exceed $30.0 million in the aggregate for all such Restricted Subsidiaries at any time outstanding (excluding any Intercompany Indebtedness or Acquired Indebtedness permitted to be Incurred under the Senior Preferred Exchange Indenture); provided, that after giving effect thereto on a pro forma basis our Annualized Operating Cash Flow Ratio is less than 7.5 to 1.0 and the Adjusted Annualized Operating Cash Flow Ratio of such Restricted Subsidiary is less than 5.0 to 1.0;



(g)

any guarantee by any Restricted Subsidiary of any Indebtedness Incurred under the Existing Credit Facility or New Credit Facility in compliance with this covenant;



(h)

Acquired Indebtedness; provided that on a pro forma basis after giving effect to the Incurrence of such Indebtedness, we shall be able to Incur $1.00 of additional Indebtedness pursuant to the provisions described under the first paragraph of this covenant "—Limitation on Consolidated Indebtedness;"



(i)

Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of business;



(j)

Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any of our obligations or that of any of our Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any of our business, assets or Restricted Subsidiaries (other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of our business, assets or any of our Restricted Subsidiaries for the purpose of financing such acquisition), in an amount not to exceed the gross proceeds actually received by us or any of our Restricted Subsidiaries in connection with such disposition; and



(k)

our Indebtedness or any Restricted Subsidiary, other than Indebtedness permitted pursuant to clauses (a) through (j) above, which does not exceed $10.0 million at any time outstanding or committed.

Limitation on Preferred Stock of Restricted Subsidiaries

   The Senior Preferred Exchange Indenture will prohibit us from allowing any of our Restricted Subsidiaries to create or issue any Preferred Stock except:

(a)

Preferred Stock outstanding on the Senior Preferred Exchange Date;



(b)

Preferred Stock issued to and held by us or any of our Wholly Owned Restricted Subsidiaries;



(c)

Preferred Stock issued by any Person prior to that Person's having become one of our direct or indirect Restricted Subsidiaries; and



(d)

Preferred Stock issued by a Restricted Subsidiary the proceeds of which are used to refinance outstanding Preferred Stock of a Restricted Subsidiary, provided that



•

the liquidation value of the refinancing Preferred Stock does not exceed the liquidation value so refinanced plus financing fees and other expenses associated with such refinancing; and



•

such refinancing Preferred Stock has no mandatory redemptions prior to (and in no greater amounts than) the Preferred Stock being refinanced.

Limitation on Asset Sales and Sales of Subsidiary Stock

   The Senior Preferred Exchange Indenture will provide that after the Senior Preferred Exchange Date we will not, and will not permit any of our Restricted Subsidiaries to, in one transaction or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of our property, business or assets, including any sale or other transfer or issuance of any Capital Stock of any of our Restricted Subsidiaries, whether owned on the Senior Preferred Exchange Date or thereafter acquired (an "Asset Sale") unless:

(a)

such Asset Sale is for Fair Market Value,



(b)

at least 80.0% of the value of the consideration for such Asset Sale consists of:



•

cash,



•

the assumption by the transferee (and release of us or one of our Subsidiaries, as the case may be) of our Senior Indebtedness or Indebtedness that ranks pari passu in right of payment to the senior preferred exchange debentures or Indebtedness of such Restricted Subsidiary, or



•

notes, obligations or other marketable securities (collectively "Marketable Securities") that are immediately converted into cash and



(c)

the Net Cash Proceeds therefrom are applied on or prior to the date that is 360 days after the date of such Asset Sale:



•

to the repayment of Indebtedness under the Credit Facility (which payment permanently reduces the commitment thereunder) or



•

to the repurchase of the senior preferred exchange debentures pursuant to an offer to purchase (an "Asset Sale Offer") described below or



•

to an investment in a Wireless Communications Business.

   Notwithstanding the foregoing provisions of the prior paragraph:

(a)

any of our Restricted Subsidiaries may convey, sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to us or one of our Wholly Owned Restricted Subsidiaries;



(b)

we and our Restricted Subsidiaries may, in the ordinary course of business:



(1)

convey, sell, lease, transfer, assign or otherwise dispose of assets in the ordinary course of business provided that the consideration received reflects the Fair Market Value of such assets and



(2)

exchange assets for either assets or equity interests in Wireless Communications Businesses, provided that:




•

the assets or equity interests received have a Fair Market Value substantially equal to the assets exchanged,



•

the assets received by us are controlled by us with respect to voting rights and day-to-day operations, or the equity interests received by us represent a controlling interest in the total Voting Power and day-to-day operations of a Person that is the issuer of such equity interests,



•

there exists no Event of Default or event which with notice or lapse of time or both would become an Event of Default immediately prior and subsequent thereto, and

•

immediately after giving effect to such transaction, we would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the provision of the Senior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness;"



(c)

we and our Restricted Subsidiaries may:



•

convey, sell, lease, transfer, assign or otherwise dispose of assets pursuant to and in accordance with the covenants described under the caption "—Consolidation, Merger, Conveyance, Transfer or Lease;"



(d)

we and our Restricted Subsidiaries may:



•

sell damaged, worn out or other obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of our business or the business of any of our Restricted Subsidiaries or



•

abandon such property if it cannot, through reasonable efforts, be sold; and



(e)

in addition to the Asset Sales permitted by the foregoing clauses (a) through (d), we and our Restricted Subsidiaries may consummate Asset Sales (other than in the case of Capital Stock of any of our Restricted Subsidiaries) with respect to property, business or assets the Fair Market Value of which does not exceed $5 million in the aggregate after the Senior Preferred Exchange Date.

   The Senior Preferred Exchange Indenture will provide that an Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds not applied to the uses set forth in subsections (c)(1) or (c)(3) in the first paragraph of this Section "—Limitation on Asset Sales and Sales of Subsidiary Stock" exceed $5.0 million. An Asset Sale Offer will remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (referred to as the "Asset Sale Offer Period"). No later than five Business Days after the termination of the Asset Sale Offer Period (referred to as the "Asset Sale Purchase Date"), we will purchase the principal amount of senior preferred exchange debentures required to be purchased pursuant to this covenant (the "Asset Sale Offer Amount") at a purchase price equal to 100% of the principal amount of the senior preferred exchange debentures plus accrued and unpaid interest to but excluding the date of the purchase or, if less than the Asset Sale Offer Amount has been tendered, all senior preferred exchange debentures tendered in response to the Asset Sale Offer. Payment for any senior preferred exchange debentures so purchased will be made in the same manner as interest payments are made.

   If the Asset Sale Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest will be paid to the Person in whose name an Exchange Debenture is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender senior preferred exchange debentures pursuant to the Asset Sale Offer.

   On or before the Asset Sale Purchase Date, we will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Asset Sale Offer Amount of senior preferred exchange debentures or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered, all senior preferred exchange debentures tendered, and will deliver to the Debentures Trustee an Officers' Certificate stating that such senior preferred exchange debentures or portions thereof were accepted for payment by us in accordance with the terms of this covenant. We, the Depositary or the paying agent, as the case may be, will promptly (but in any case not later than five days after the Asset Sale Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the senior preferred exchange debentures tendered by such Holder and accepted by us for purchase, and we will promptly issue a new senior preferred exchange debenture, and the Debentures Trustee, upon written request from us, will authenticate and mail or deliver such new Exchange Debenture to such Holder, in a principal amount equal to any unpurchased portion of the senior preferred exchange debenture surrendered. Any senior preferred exchange debenture not so accepted will be promptly mailed or delivered by us to the Holder thereof. We will publicly announce the results of the Asset Sale Offer on the Asset Sale Purchase Date.

Limitation on Restricted Payments

   The Senior Preferred Exchange Indenture will prohibit us or any of our Restricted Subsidiaries from making any Restricted Payment unless after giving effect thereto:

(a)

no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing;



(b)

we would be permitted to Incur an additional $1.00 of Indebtedness pursuant to the provision of the Senior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness;" and



(c)

the total of all Restricted Payments made on or after the Issue Date does not exceed the sum of:



•

Cumulative Operating Cash Flow less 1.75 times Cumulative Interest Expense,



•

100% of our aggregate Qualified Capital Stock Proceeds after the Issue Date, and



•

100% of the cash proceeds received from an Unrestricted Subsidiary to the extent of Investments (other than Permitted Investments) made in such Unrestricted Subsidiary since the Issue Date.

   The foregoing provision shall not be violated, so long as no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing (other than in the case of clause (2)), by reason of:

(a)

the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the foregoing provision;



(b)

any refinancing of any Indebtedness otherwise permitted under the provision of the Senior Preferred Exchange Indenture described under clause (b) or (d) of "—Limitation on Consolidated Indebtedness";



(c)

the purchase, redemption or other acquisition or retirement for value of shares of Capital Stock of any Restricted Subsidiary held by Persons other than us or any of our Restricted Subsidiaries;



(d)

the redemption, defeasance, repurchase or other acquisition or retirement of any of our Capital Stock or any Subordinated Indebtedness prior to its scheduled maturity either in exchange for or out of the net cash proceeds of the substantially concurrent sale (other than to one of our Subsidiaries) of our Qualified Capital Stock; and



(e)

Restricted Payments, in addition to Restricted Payments permitted pursuant to clauses (a) through (d) above, not in excess of $10.0 million in the aggregate after the Issue Date.

The payments described in clauses (a), (d) (provided the proceeds of the sale of the Qualified Capital Stock referred to in such clause constitute Qualified Capital Stock Proceeds) and (e) of this paragraph will count as Restricted Payments for the calculation under the first paragraph of this section "—Limitation on Restricted Payments."

Limitations Concerning Distributions and Transfers by Restricted Subsidiaries

   The Senior Preferred Exchange Indenture will provide that we shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or suffer to exist or become effective any consensual restriction or prohibition on the ability of any Restricted Subsidiary to:

(a)

pay dividends on, or make other distributions in respect of, its Capital Stock, or any other ownership interest or participation in, or measured by, its profits, to us or any of our Restricted Subsidiaries or pay any Indebtedness or other obligation owed to us or any of our Restricted Subsidiaries,



(b)

make any loans or advances to us or any of our Restricted Subsidiaries or



(c)

transfer any of our property or assets to us or any of our Restricted Subsidiaries.

   Notwithstanding the foregoing, we may permit any Restricted Subsidiary to suffer to exist any such restriction or prohibition:

(1)

pursuant to the Senior Preferred Exchange Indenture, the Credit Facility or any other agreement in effect on the Senior Preferred Exchange Date,

(2)

pursuant to an agreement relating to any Indebtedness of such Restricted Subsidiary which was outstanding or committed prior to the date on which such Restricted Subsidiary became one of our Restricted Subsidiaries other than in anticipation of becoming a Restricted Subsidiary; provided, that such restriction or prohibition shall not apply to any property or assets of ours or any Restricted Subsidiary other than the property or assets of such Restricted Subsidiary and its Subsidiaries,

(3)

pursuant to an agreement effecting a renewal, extension, refinancing or refunding of any agreement described in clauses (1) and (2) above; provided, however, that the provisions contained in such renewal, extension, refinancing or refunding agreement relating to such restriction or prohibition are no more restrictive in any material respect than the provisions contained in the agreement which is the subject thereof (it being understood that for purposes of this clause (3) the New Credit Facility is deemed to be a refinancing of the Existing Credit Facility),

(4)

existing under or by reason of applicable law,

(5)

customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Restricted Subsidiary,

(6)

purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (c) of this covenant,

(7)

restrictions of the type referred to in clause (c) of this covenant contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent that such Liens were otherwise incurred in accordance with "—Limitations on Liens" below and restrict the transfer of property subject to such agreements, or

(8)

customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business.

Limitations on Transactions with Affiliates and Related Persons

   The Senior Preferred Exchange Indenture will provide that we will not, and will not permit any of our Restricted Subsidiaries to, enter into any transaction involving aggregate consideration in excess of:

(a)

$1 million, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with or to any of our Affiliate or Related Persons (other than a Restricted Subsidiary), unless a majority of the disinterested members of our board of directors determines (which determination will be evidenced by a Board Resolution) that:



•

such transaction is in our best interests or the best interests of our Restricted Subsidiaries; and



•

such transaction is on terms that are no less favorable to us or one of our Restricted Subsidiaries than those which might be obtained in arm's-length transactions with a third party at the time; and



(b)

$5 million unless (in addition to the provisions of the foregoing clause (a)) we receive a written opinion from an investment banking firm of national reputation to the effect that such transaction is fair to us or such Restricted Subsidiary, from a financial point of view.

   However, in the case of transactions entered into in the ordinary course of business involving the provision of telecommunications services by Affiliates or Related Persons (who are regularly engaged in the provision of telecommunications services) to us or any of our Restricted Subsidiaries

•

if the aggregate consideration involved is not in excess of $5.0 million, then clause (a) above shall be applicable but the good faith judgment of one of our officers shall be substituted for the requirement of a resolution of the board of directors and



•

if the aggregate consideration involved exceeds $5.0 million, clause (b) above shall not be applicable but clause (a) above shall be applicable.

Limitations on Liens

   The Senior Preferred Exchange Indenture will provide that we will not, and will not permit any of our Restricted Subsidiaries to, Incur or suffer to exist any Lien on or with respect to any property or assets now owned or hereafter acquired to secure any Indebtedness that ranks in right of payment pari passu with or subordinate to the senior preferred exchange debentures without making, or causing such Restricted Subsidiary to make, effective provision for securing the senior preferred exchange debentures

•

equally and ratably with such Indebtedness as to such property for so long as such Indebtedness will be so secured or



•

in the event such Indebtedness is our Indebtedness or Indebtedness of one of our Restricted Subsidiaries which is subordinate in right of payment to the senior preferred exchange debentures, prior to such Indebtedness as to such property for so long as such Indebtedness will be so secured.

   The foregoing restrictions shall not apply to:

(a)

Liens existing in respect of any Indebtedness that exists on the Senior Preferred Exchange Date;



(b)

Liens in favor of us or Liens in favor of one of our Wholly Owned Restricted Subsidiaries on the assets or Capital Stock of another of our Wholly Owned Restricted Subsidiaries;



(c)

Liens to secure Indebtedness outstanding or committed for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the equipment or other property subject to such Liens; provided, however, that



•

the principal amount of any Indebtedness secured by such a Lien does not exceed 100% of such purchase price or cost,



•

such Lien does not extend to or cover any property other than such item of property or any improvements on such item and



•

the Incurrence of such Indebtedness is otherwise permitted by the Senior Preferred Exchange Indenture;



(d)

Liens on property existing immediately prior to the time of acquisition thereof (and not Incurred in anticipation of the financing of such acquisition);



(e)

Liens to secure Indebtedness to extend, renew, refinance or refund (or successive extensions, renewals, refinancings or refundings), in whole or in part, Indebtedness secured by any Lien referred to in the foregoing clauses (a), (c) and (d) so long as such Lien does not extend to any other property and the principal amount of Indebtedness so secured is not increased except as otherwise permitted under the provision of the Senior Preferred Exchange Indenture described under clause (b) or (d) of "—Limitation on Consolidated Indebtedness;"



(f)

Liens on any Permitted Investment in Cooperative Bank Equity in favor of any Cooperative Banks; or



(g)

any other Liens in respect of any Indebtedness, which Indebtedness does not exceed $500,000 in the aggregate.

Limitation on Certain Debt

   The Senior Preferred Exchange Indenture will provide that we will not Incur any Indebtedness that is subordinate in right of payment to any of our other Indebtedness unless the Indebtedness so Incurred is either pari passu or subordinate in right of payment to the senior preferred exchange debentures.

Consolidation, Merger, Conveyance, Transfer or Lease

   The Senior Preferred Exchange Indenture will provide that we will not consolidate with or merge into any Person or permit any other Person to consolidate with or merge into us, or transfer, sell, convey or lease or otherwise dispose of all or substantially all of our assets to, any Person unless:

(a)

(1) we are the surviving entity or



(2)

if we are not the surviving entity then the successor or transferee assumes all of our obligations under the senior preferred exchange debentures and the Senior Preferred Exchange Indenture and the surviving entity shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof;




(b)

the Consolidated Net Worth of the successor or transferee immediately after the transaction is not less than 100% of our Consolidated Net Worth immediately prior to the transaction;



(c)

immediately after giving effect to such transaction, we (or our permitted successor or transferee) would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the provision of the Senior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness;"



(d)

after giving effect to such transaction no Event of Default or event which with notice or lapse of time would become an Event of Default has occurred and is continuing; and



(e)

an Officers' Certificate and an Opinion of Counsel covering such conditions shall be delivered to the Debentures Trustee.

Reports

   The Senior Preferred Exchange Indenture will provide that whether or not we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, we shall deliver to the Debentures Trustee and to each Holder, within 15 days after we are or would have been required to file such with the Commission, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the Commission, if we were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by our certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required.

Events of Default and Remedies

   The following are Events of Default under the Senior Preferred Exchange Indenture:

(a)

failure to pay the principal of or premium, if any, on the senior preferred exchange debentures at Maturity;



(b)

failure to pay any interest on the senior preferred exchange debentures for a period of 30 days or more after it becomes due and payable;



(c)

failure to purchase in a timely fashion senior preferred exchange debentures required to be purchased by us pursuant to either of the provisions of the Senior Preferred Exchange Indenture described under "—Change of Control" or "—Limitation on Asset Sales and Sales of Subsidiary Stock;"



(d)

failure to perform or comply with the provisions of the Senior Preferred Exchange Indenture described under "—Consolidation, Merger, Conveyance, Transfer or Lease;"



(e)

failure to perform any of our other covenants or agreements under the Senior Preferred Exchange Indenture that continues for 30 days after written notice to us by the Debentures Trustee or Holders of at least 25.0% in aggregate principal amount of outstanding senior preferred exchange debentures;



(f)

default by us or any Restricted Subsidiary under the terms of any instrument evidencing or securing Indebtedness having an outstanding principal amount in excess of $5.0 million in the aggregate, which default results in the acceleration of the payment of such Indebtedness or constitutes the failure to pay the principal of such Indebtedness at maturity;



(g)

the rendering of a final judgment or judgments against us or a Restricted Subsidiary in an amount in excess of $5 million which remains undischarged or unstayed for a period of 60 days after the date on which the right of appeal has expired; and



(h)

certain events of bankruptcy, insolvency or reorganization affecting us or a Restricted Subsidiary.

   If an Event of Default, other than an event described under (h) above, shall occur and be continuing, either the Debentures Trustee or the Holders of at least 25.0% in aggregate principal amount of the senior preferred exchange debentures by notice as provided in the Senior Preferred Exchange Indenture may declare the principal amount of the senior preferred exchange debentures to be due and payable immediately; provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of outstanding senior preferred exchange debentures may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal of the senior preferred exchange debentures, have been cured or waived as provided in the Senior Preferred Exchange Indenture. If an Event of Default described under (h) above shall occur, the senior preferred exchange debentures will become immediately due and payable without any declaration or other act on the part of the Debentures Trustee or any Holder.

   No Holder of any senior preferred exchange debenture will have any right to institute any proceeding with respect to the Senior Preferred Exchange Indenture or for any remedy thereunder, unless such Holder shall have previously given to the Debentures Trustee written notice of an Event of Default and unless the Holders of at least 25% in aggregate principal amount of the outstanding senior preferred exchange debentures shall have made written request to the Debentures Trustee and the Debentures Trustee shall not have received from the Holders of a majority in aggregate principal amount of the outstanding senior preferred exchange debentures a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a Holder of a senior preferred exchange debenture for enforcement of payment of the principal of and premium, if any, or interest on such senior preferred exchange debenture on or after the respective due dates expressed in such senior preferred exchange debenture. The Holders of a majority in aggregate principal amount of the senior preferred exchange debentures outstanding may waive any existing Event of Default except an Event of Default in the payment of interest or principal (including premium) on the senior preferred exchange debentures.

Modification and Waiver

   Modifications and amendments of the Senior Preferred Exchange Indenture may be made by us and the Debentures Trustee with the consent of the Holders of a majority in aggregate principal amount of the outstanding senior preferred exchange debentures; provided, however, that no such modification or amendment may, without the consent of the Holder of each senior preferred exchange debenture affected thereby:

(a)

change the Stated Maturity of the principal of, or any installment of interest on, any senior preferred exchange debenture;



(b)

reduce the principal amount of, or premium, if any, or interest on any senior preferred exchange debenture;



(c)

change the place or currency of payment of principal of, or premium, if any, or interest on any senior preferred exchange debenture;



(d)

impair the right to institute suit for the enforcement of any payment on or with respect to any senior preferred exchange debenture;



(e)

reduce the percentage of aggregate principal amount of senior preferred exchange debentures outstanding necessary to amend the Senior Preferred Exchange Indenture;



(f)

reduce the percentage of aggregate principal amount of senior preferred exchange debentures outstanding necessary for waiver of compliance with certain provisions of the Senior Preferred Exchange Indenture or for waiver of certain defaults;



(g)

modify such provisions with respect to modification and waiver;



(h)

modify the subordination provisions in a manner adverse to the Holders of the senior preferred exchange debentures; or



(i)

following the mailing of an offer to purchase senior preferred exchange debentures, modify the provisions of the Senior Preferred Exchange Indenture with respect to such offer to purchase in a manner adverse to such Holder.

   The Holders of a majority in aggregate principal amount of the outstanding senior preferred exchange debentures may waive compliance by us with certain restrictive provisions of the Senior Preferred Exchange Indenture. The Holders of a majority in aggregate principal amount of the outstanding senior preferred exchange debentures may waive any past default under the Senior Preferred Exchange Indenture, except a default in the payment of principal, premium, if any, or interest and certain covenants and provisions of the Senior Preferred Exchange Indenture which cannot be amended without the consent of the Holder of each outstanding senior preferred exchange debenture affected.

Defeasance

   The Senior Preferred Exchange Indenture will provide that we, at our option,

(a)

will be discharged from any and all obligations in respect of outstanding senior preferred exchange debentures (except for certain obligations to register the transfer or exchange of senior preferred exchange debentures, to replace mutilated, lost, destroyed or stolen senior preferred exchange debentures and to maintain paying agents and hold moneys for payment in trust), and the provisions of the Senior Preferred Exchange Indenture described under "—Subordination" shall cease to be effective, or



(b)

need not comply with certain restrictive covenants and that such omission shall not be deemed to be an Event of Default under the Senior Preferred Exchange Indenture and the senior preferred exchange debentures, and the provisions of the Senior Preferred Exchange Indenture described under "—Subordination" shall cease to be effective, in either case (a) or (b) upon irrevocable deposit with the Debentures Trustee, in trust, of money, and/or U.S. government obligations which will provide money without the need for reinvestment, in an amount sufficient in the opinion of a nationally recognized firm of independent public accountants to pay the principal of, and premium, if any, and each installment of interest, if any, on the outstanding senior preferred exchange debentures in accordance with the terms of the Senior Preferred Exchange Indenture and the senior preferred exchange debentures.

   Such trust may only be established if, among other things,

(1)

with respect to clause (a), we shall have delivered to the Debentures Trustee an Opinion of Counsel to the effect that we have received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which provides that Holders of senior preferred exchange debentures will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred; or, with respect to clause (b), we shall have delivered to the Debentures Trustee an Opinion of Counsel to the effect that the Holders of the senior preferred exchange debentures will not recognize gain or loss for federal income tax purposes as a result or such deposit and defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred;



(2)

no Event of Default or event that, with the passing of time or the giving of notice, or both, shall constitute an Event of Default shall have occurred and be continuing on the date of such deposit;



(3)

no Event of Default described under clause (h) under "Events of Default and Remedies" above or event that, with the passing of time or the giving of notice, or both, shall constitute an Event of Default under such clause (h) shall have occurred and be continuing at any time during the period ending on the 121st day following such date of deposit;



(4)

such deposit shall not cause the trust so created to be subject to the Investment Company Act of 1940, as amended, or shall be qualified under such act or exempt from regulation thereunder; and



(5)

certain other customary conditions precedent.

Notices

   Notices to Holders of senior preferred exchange debentures will be sent by mail to the addresses of such Holders as they may appear in the Security Register.

Title

   We, the Debentures Trustee and any agent of the Debentures Trustee may treat each Holder of senior preferred exchange debenture as the absolute owner thereof (whether or not such senior preferred exchange debenture may be overdue) for the purpose of making payment and for all other purposes.

Governing Law

   The Senior Preferred Exchange Indenture and the senior preferred exchange debentures will be governed by and construed in accordance with the laws of the State of New York.

The Debentures Trustee

   The Senior Preferred Exchange Indenture will provide that, subject to the duty of the Debentures Trustee during an Event of Default to act with the required standard of care, the Debentures Trustee will be under no obligation to exercise any of its rights or powers under the Senior Preferred Exchange Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Debentures Trustee reasonable security or indemnity. Subject to certain provisions, including those requiring security or indemnification of the Debentures Trustee, the Holders of a majority in principal amount of the senior preferred exchange debentures will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Debentures Trustee, or exercising any trust or power conferred on the Debentures Trustee.

   We will be required to furnish to the Debentures Trustee annually a statement as to the performance by us of our obligations under the Senior Preferred Exchange Indenture and as to any default in such performance. The Debentures Trustee will also serve as the Notes Trustee under the indenture governing our senior subordinated notes.

Certain Definitions

   "Acquired Indebtedness" means Indebtedness of a Person (including an Unrestricted Subsidiary):

(a)

existing at the time such Person becomes a Restricted Subsidiary or



(b)

assumed in connection with the acquisition of assets from such Person, in the case of both of the preceding clause (a) and clause (b), other than Indebtedness incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition.

Acquired Indebtedness will be deemed to be Incurred on the date of the related acquisition of assets from any Person or the date the acquired Person becomes a Restricted Subsidiary.

   "Adjusted Annualized Operating Cash Flow Ratio" of any Person means the Annualized Operating Cash Flow Ratio of such Person as adjusted to treat all Preferred Stock of such Person as Redeemable Stock.

   "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

   "Annualized Operating Cash Flow" of any Person means the Operating Cash Flow of such Person for the Reference Period multiplied by two.

   "Annualized Operating Cash Flow Ratio" of any Person on any date (the "Transaction Date") means, with respect to any Person and its Restricted Subsidiaries, the ratio of:

•

Consolidated Indebtedness of such Person and its Restricted Subsidiaries on the Transaction Date (after giving pro forma effect to the Incurrence of any Indebtedness on such Transaction Date) divided by



•

the aggregate amount of Annualized Operating Cash Flow of such Person (determined on a pro forma basis after giving effect to all dispositions of businesses made by such Person and its Restricted Subsidiaries from the beginning of the Reference Period through the Transaction Date as if such dispositions had occurred at the beginning of such Reference Period).

   For purposes of such computation, however, in calculating Annualized Operating Cash Flow and Consolidated Indebtedness:

(a)

the transaction giving rise to the need to calculate the Annualized Operating Cash Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first day of the Reference Period;



(b)

the Incurrence of any Indebtedness during the Reference Period or subsequent thereto and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to retire Indebtedness) will be assumed to have occurred (on a pro forma basis) on the first day of such Reference Period;



(c)

Consolidated Interest Expense attributable to any Indebtedness (whether existing or being incurred) bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date had been the applicable rate for the entire Reference Period;



(d)

all members of the consolidated group of such Person on the Transaction Date that were acquired during the Reference Period shall be deemed to be members of the consolidated group of such Person for the entire Reference Period; and



(e)

the Indebtedness and Annualized Operating Cash Flow of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be determined in accordance with the actual percentage of the Person's common equity interest in such Restricted Subsidiary on the date of determination of the Annualized Operating Cash Flow Ratio (thus, for example, in the case of a Restricted Subsidiary in which such Person owns a 51.0% common equity interest, 51.0% of such Subsidiary's Indebtedness and of such Subsidiary's Annualized Operating Cash Flow would be included in the calculation of such Person's aggregate Indebtedness and Annualized Operating Cash Flow, respectively).

   When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and our Restricted Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Board Resolution" means a copy of a resolution certified by our Secretary or one of our Assistant Secretaries to have been duly adopted by the board of directors, to be in full force and effect on the date of such certification and delivered to the Debentures Trustee.

   "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City or the State of Minnesota are authorized or obligated by law or executive order to close.

   "Capital Lease Obligation" means that portion of any obligation of a Person as lessee under a lease which is required to be capitalized on the balance sheet of such lessee in accordance with generally accepted accounting principles.

   "Capital Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, including voting and non-voting) of equity of such Person.

   "Cash Equivalents" means:

(a)

securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof), in each case maturing within one year after the date of acquisition;



(b)

time deposits and certificates of deposit and commercial paper issued by the parent corporation of any domestic commercial bank of recognized standing having capital and surplus in excess of $500.0 million and commercial paper issued by others rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in each case maturing within one year after the date of acquisition; and



(c)

investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (a) and (b) above.

   "Commission" means the United States Securities and Exchange Commission.

   "Consolidated Income Tax Expense" of any Person means for any period the provision for income taxes of such Person and its Restricted Subsidiaries for such period.

   "Consolidated Indebtedness" of any Person means at any date the Indebtedness of such Person and its Restricted Subsidiaries at such date.

   "Consolidated Interest Expense" of any Person means for any period the interest expense included in an income statement (taking into account the effect of any Interest Hedge Agreements but without deduction of interest income) of such Person and its Restricted Subsidiaries for such period, including without limitation or duplication (or, to the extent not so included, with the addition of):

(a)

the portion of any rental obligation in respect of any Capital Lease Obligation allocable to interest expense in accordance with generally accepted accounting principles;



(b)

the amortization of Indebtedness discounts;



(c)

any payments or fees with respect to letters of credit, bankers' acceptances or similar facilities;



(d)

fees with respect to Interest Hedge Agreements;



(e)

the portion of any rental obligations in respect of any Sale and Leaseback Transaction allocable to interest expense (determined as if such were treated as a Capital Lease Obligation); and



(f)

Preferred Stock dividends accrued or payable other than dividends on Qualified Capital Stock of such Person.

   "Consolidated Net Income" of any Person means for any period the net income (or loss) of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (to the extent included and without duplication):

(a)

the net income (or loss) of any Person acquired by such Person or a Restricted Subsidiary of such Person after the Issue Date in a pooling of interests transaction for any period prior to the date of such transaction,



(b)

the net income (or loss) of any Person that is not a Restricted Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person by such other Person during such period,



(c)

gains or losses from sales of assets other than sales of assets acquired and held for resale in the ordinary course of business,



(d)

for purposes of the "—Limitation on Restricted Payments" covenant, the net income, if positive, of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at that time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulations applicable to such Restricted Subsidiary, and



(e)

all extraordinary gains and extraordinary losses.

   "Consolidated Net Worth" of any Person means the consolidated shareholders' equity of such Person, determined on a consolidated basis in accordance with generally accepted accounting principles; provided that, with respect to us, adjustments following the Issue Date to our accounting books and records in accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the acquisition of control of us by another Person and its Subsidiaries shall not be given effect; provided further that, such computation shall exclude:

(a)

any amounts attributable to Redeemable Stock or any equity security convertible into or exchangeable for Indebtedness, the cost of treasury stock and the principal amount of any promissory notes receivable from the sale of our Capital Stock or that of any of our Restricted Subsidiaries; and



(b)

Unrestricted Subsidiaries.

   "Cooperative Banks" means lenders under the Credit Facility which are cooperative banks.

   "Cooperative Bank Equity" means non-voting equity interests in Cooperative Banks.

   "Credit Facility" means the Existing Credit Facility or the New Credit Facility.

   "Cumulative Interest Expense" means the total amount of our Consolidated Interest Expense and that of our Restricted Subsidiaries for the period beginning on the first day of the fiscal quarter immediately following the Issue Date, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Cumulative Operating Cash Flow" means our Operating Cash Flow and that of our Restricted Subsidiaries for the period beginning on the first day of the fiscal quarter immediately following the Issue Date, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment.

   "Depositary" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the senior preferred exchange debentures until a successor Depositary shall have become such pursuant to the applicable provisions of the Senior Preferred Exchange Indenture, and thereafter "Depositary" shall mean such successor Depositary. The Depositary initially is DTC.

   "Designated Senior Indebtedness" means the Indebtedness under the Credit Facility.

   "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   "Existing Credit Facility" means the Loan Agreement, dated as of May 1, 1997, among us, The Toronto-Dominion Bank, BankBoston, N.A., St. Paul Bank for Cooperatives, CoBank, Fleet National Bank, First National Bank of Maryland, Société Générale, New York Branch and Merita Bank Ltd. New York Branch, as amended by a first amendment to loan agreement dated as of August 4, 1997, a second amendment to loan agreement dated as of December 30, 1997, a third amendment to loan agreement dated as of April 17, 1998 and a fourth amendment to loan agreement dated as of April 24, 1998, and as such agreement may be further amended, supplemented, restated or otherwise modified from time to time.

   "Fair Market Value" means, with respect to any assets or Person, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined:

(a)

if such Person or assets have a Fair Market Value in excess of $20,000 but not in excess of $5.0 million, by any of our officers and evidenced by an Officers' Certificate, dated within 30 days of the relevant transaction; or



(b)

if such Person or assets have a Fair Market Value in excess of $5.0 million, by a majority of our board of directors and evidenced by a Board Resolution, dated within 30 days of the relevant transaction, based on an appraisal of an independent appraiser of national reputation.

   "Holder" means a Person in whose name a senior preferred exchange debenture is registered in the Security Register.

   "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such indebtedness.

   "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent:

(a)

every obligation of such Person for money borrowed;



(b)

every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses;



(c)

every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person;



(d)

every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business);



(e)

every Capital Lease Obligation of such Person;



(f)

the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination;



(g)

every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party;



(h)

all obligations under Interest Hedge Agreements;



(i)

every obligation of the type referred to in clauses (a) through (h) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise or which is secured by a lien on any asset of such Person; and



(j)

the liquidation value of Preferred Stock of a Subsidiary of such Person issued and outstanding and held by other than such Person (or one of its Wholly Owned Restricted Subsidiaries).

For all purposes of the Senior Preferred Exchange Indenture, however,

•

the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the unamortized portion of the original issue discount of such Indebtedness at the time of its issuance as determined in conformity with generally accepted accounting principles,



•

money borrowed at the time of the Incurrence of any Indebtedness in order to pre-fund the payment of interest on such Indebtedness shall be deemed not to be "Indebtedness" and



•

Indebtedness shall not include any liability for federal, state, local or other taxes.

For purposes of the Senior Preferred Exchange Indenture, the amount of any Indebtedness shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Indebtedness had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such obligation provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person or in any event until the counterparty thereunder defaults in its corresponding payment, then in each such case, the amount of such obligations shall be the net amount so determined, plus any premium due upon default by such Person.

   "Interest Hedge Agreements" means any interest rate swap, cap, collar, floor, caption or swaption agreements, or any similar arrangements designed to hedge the risk of variable interest rate volatility or to reduce interest costs, arising at any time between us or any of our Restricted Subsidiaries, on the one hand, and any Person (other than any of our Affiliates or Restricted Subsidiaries), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time.

   "Investment" by any Person in any other Person means (without duplication):

(a)

the acquisition (whether by purchase, merger, consolidation or otherwise) by such Person (whether for cash, property, services, securities or otherwise) of Capital Stock, bonds, notes, debentures, partnership or other ownership interests or other securities of such other Person or any agreement to make any such acquisition;



(b)

the making by such Person of any deposit with, or advance, loan or other extension of credit to, such other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other Person) or any commitment to make any such advance, loan or extension;



(c)

the entering into by such Person of any guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of such other Person;



(d)

the making of any capital contribution by such Person to such other Person; and



(e)

the designation by our board of directors of any Person to be an Unrestricted Subsidiary.

For purposes of the covenant described in "—Limitation on Restricted Payments":

(a)

"Investment" shall include and be valued at the Fair Market Value of such Person's pro rata interest in the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the lesser of:



•

the Fair Market Value of such Person's pro rata interest in the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and



•

the Fair Market Value of the amount of such Person's Investments (other than Permitted Investments) made in (net of cash distributions received from) such Unrestricted Subsidiary since the Issue Date; and



(b)

the amount of any Investment shall be the Fair Market Value of such Investment at the time any such Investment is made.

   "Issue Date" means the time and date of the first issuance of the senior exchangeable preferred stock.

   "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than an easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).

   "Maturity" means, when used with respect to any senior preferred exchange debenture, the date on which the principal of such senior preferred exchange debenture becomes due and payable, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

   "Net Cash Proceeds" means the aggregate amount of cash and Cash Equivalents received by us and our Restricted Subsidiaries in respect of an Asset Sale (including upon the conversion to cash and Cash Equivalents of:

(a)

any note or installment receivable at any time; or



(b)

any other property as and when any cash and Cash Equivalents are received in respect of any property received in an Asset Sale (but only to the extent such cash and Cash Equivalents are received within one year after such Asset Sale), less the sum of:



•

all reasonable out-of-pocket fees, commissions and other expenses incurred in connection with such Asset Sale, including the amount (estimated in good faith by our board of directors) of income, franchise, sales and other applicable taxes required to be paid by us or any of our Restricted Subsidiaries in connection with such Asset Sale; and



•

the aggregate amount of cash so received which is used to retire any of our existing Senior Indebtedness or Indebtedness that ranks pari passu in right of payment with the senior preferred exchange debentures or any existing Indebtedness of such Restricted Subsidiaries, as the case may be, which is required to be repaid in connection with such Asset Sale or is secured by a Lien on the property or assets of Rural Cellular or any of its Restricted Subsidiaries, as the case may be).

   "New Credit Facility" means the amendment and restatement or the refinancing or replacement of the Existing Credit Facility with the same, a deletion of, or additional lenders, including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing that increase the aggregate amount of borrowings outstanding or the aggregate commitments of the lenders thereunder.

   "Offer to Purchase" means a written offer sent by us to each Holder at his address appearing in the Security Register on the date of the written offering to purchase up to the principal amount of senior preferred exchange debentures specified in such written offer at the purchase price specified in such written offer. Unless otherwise required by applicable law, the written offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which, subject to any contrary requirements of applicable law, shall be not less than 30 days nor more than 60 days after the date of such Offer to Purchase and a settlement date (the "Purchase Date") for purchase of senior preferred exchange debentures within five Business Days after the Expiration Date. The written offer shall also state the section of the Senior Preferred Exchange Indenture pursuant to which the Offer to Purchase is being made, the Expiration Date and the Purchase Date, the aggregate principal amount of the outstanding senior preferred exchange debentures offered in writing to be purchased by us, the purchase price to be paid by us and the place or places where senior preferred exchange debentures are to be surrendered for tender pursuant to the Offer to Purchase.

   "Officers' Certificate" means a certificate signed by two officers, at least one of whom shall be our principal executive officer, principal accounting officer, or principal financial officer, and delivered to the Debentures Trustee.

   "Operating Cash Flow" for any Person for any period means:

(a)

the Consolidated Net Income of such Person for such period; plus



(b)

the sum, without duplication (and only to the extent such amounts are deducted from net revenues in determining such Consolidated Net Income), of:



•

the provisions for income taxes for such period for such Person and its Subsidiaries,



•

depreciation, amortization and other non-cash charges of such Person and its Subsidiaries and



•

Consolidated Interest Expense of such Person for such period, determined, in each case, on a consolidated basis for such Person and its Subsidiaries in accordance with generally accepted accounting principles; less



(c)

the sum, without duplication (and only to the extent such amounts are included in such Consolidated Net Income), of:



•

all extraordinary gains of such Person and its Subsidiaries during such period and

•

the amount of all cash payments made during such period by such Person and its Restricted Subsidiaries to the extent such payments relate to non-cash charges that were added back in determining Operating Cash Flow for such period or for any prior period; and in the case of a Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary, the determination of the percentage of the Operating Cash Flow of such Restricted Subsidiary that is to be included in the calculation of our Annualized Operating Cash Flow Ratio shall be made on a pro forma basis on the assumption that the percentage of our common equity interest in such Restricted Subsidiary throughout the applicable Reference Period was equivalent to its common equity interest on the date of the determination.

When the foregoing definition is used in connection with us and our Restricted Subsidiaries, references to a Person and its Subsidiaries in the foregoing definition shall be deemed to refer to us and our Restricted Subsidiaries.

   "Opinion of Counsel" means a written opinion of counsel, who may be our counsel, and who shall be reasonably acceptable to the Debentures Trustee, delivered to the Debentures Trustee.

   "Permitted Investments" means:

(a)

Investments in Cash Equivalents;



(b)

Investments in us or one of our Restricted Subsidiaries (other than payments described in clause (d) of the second paragraph under "—Limitation on Restricted Payments");



(c)

Investments in a Person substantially all of whose assets are of a type generally used in a Wireless Communications Business (an "Acquired Person") if, as a result of such Investments:



•

the Acquired Person immediately thereupon becomes a Restricted Subsidiary or



•

the Acquired Person immediately thereupon either (1) is merged or consolidated with or into us or any Restricted Subsidiary or (2) transfers or conveys all or substantially all of its assets to, or is liquidated into, us or any of our Restricted Subsidiaries;



(d)

Investments in accounts and notes receivable acquired in the ordinary course of business;



(e)

any securities received in connection with an Asset Sale and any investment with the Net Cash Proceeds from any Asset Sale in Capital Stock of a Person, all or substantially all of whose assets are of a type used in a Wireless Communications Business, that complies with the "Limitation on Asset Sales and Sales of Subsidiary Stock" covenant;



(f)

advances and prepayments for asset purchases in the ordinary course of business in a Wireless Communications Business of us or a Restricted Subsidiary;



(g)

customary loans or advances made in the ordinary course of business to our officers, directors or employees of Rural Cellular or any of its Restricted Subsidiaries for travel, entertainment, and moving and other relocation expenses;



(h)

the purchase of Cooperative Bank Equity in Cooperative Banks to the extent required by the charter documents of such Cooperative Banks in connection with the Incurrence of any Indebtedness which is provided by such Cooperative Banks under the Credit Facility, provided that such Incurrence is permitted under the terms of the Senior Preferred Exchange Indenture; and



(i)

Investments in Wireless Alliance not exceeding $25 million in the aggregate made after the Issue Date;

provided, that the matters referenced in clauses (c) and (i) above shall not be Permitted Investments if made at any time that an Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing.

   "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

   "Preferred Stock" means, with respect to any Person, any and all shares of Capital Stock of such Person that have preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

   "Public Equity Offering" means an underwritten public offering of our common stock pursuant to an effective registration statement filed with the Commission in accordance with the Securities Act.

   "Qualified Capital Stock" means, with respect to any Person, any and all shares of Capital Stock other than Redeemable Stock issued by such Person after the date of the Senior Preferred Exchange Indenture.

   "Qualified Capital Stock Proceeds" means, with respect to any Person:

(a)

in the case of any sale of Qualified Capital Stock, the aggregate net cash proceeds received by such Person, after payment of expenses, commissions and the like Incurred by such Person in connection therewith, and net of Indebtedness that such Person Incurred, guaranteed or otherwise became liable for in connection with the issuance or acquisition of such Capital Stock; and



(b)

in the case of any exchange, exercise, conversion or surrender of any Redeemable Stock or Indebtedness of such Person issued (other than to any Subsidiary) for cash after the Issue Date for or into shares of Qualified Capital Stock of such Person, the liquidation value of the Redeemable Stock or the net book value of such Indebtedness as adjusted on the books of such Person to the date of such exchange, exercise, conversion or surrender, plus any additional amount paid by the securityholders to such Person upon such exchange, exercise, conversion or surrender and less any and all payments made to the securityholders, and all other expenses, commissions and the like Incurred by such Person or any Subsidiary in connection therewith.

   "Qualifying Event" means a Public Equity Offering or one or more Strategic Equity Investments which in either case results in aggregate net proceeds of not less than $50.0 million.

   "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the final Stated Maturity of the senior preferred exchange debentures or is redeemable at the option of the holder thereof at any time prior to the final Stated Maturity of the senior preferred exchange debentures; provided that any Capital Stock that would not constitute Redeemable Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of a "change of control" occurring prior to the final Stated Maturity of the senior preferred exchange debentures shall not constitute Redeemable Stock if the "change of control" provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the "Change of Control" covenant of the Senior Preferred Exchange Indenture and such Capital Stock specifically provides that such Person will not repurchase or redeem any such stock pursuant to such provision prior to our repurchase of the senior preferred exchange debentures as required pursuant to such "—Change of Control" covenant.

   "Reference Period" with regard to any Person means the last two full fiscal quarters of such Person immediately preceding any date upon which any determination is to be made pursuant to the terms of the senior preferred exchange debentures or the Senior Preferred Exchange Indenture.

   "Related Person" of any Person means any other Person owning:

(a)

5.0% or more of the outstanding Common Stock of such Person; or



(b)

5.0% or more of the Voting Power of such Person.

   "Restricted Payment" means, with respect to any Person:

(a)

any declaration or payment of a dividend or other distribution on any shares of Capital Stock of such Person or any Subsidiary of such Person (other than a dividend payable solely in shares of its Capital Stock or options, warrants or other rights to acquire its Capital Stock and other than any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to us or another Restricted Subsidiary);



(b)

any payment on account of the purchase, redemption, retirement or acquisition (including by way of issuing any Indebtedness or Redeemable Stock in exchange for Qualified Capital Stock) of:



•

any shares of Capital Stock of such Person or any Subsidiary of such Person held by other than such Person or any of its Restricted Subsidiaries or



•

any option, warrant or other right to acquire shares of Capital Stock of such Person or any Subsidiary of such Person or any of its Restricted Subsidiaries, in each case other than pursuant to the cashless exercise of options;



(c)

any Investment (other than a Permitted Investment) made by such Person; and



(d)

any redemption, defeasance, repurchase or other acquisition or retirement for value prior to any scheduled maturity, repayment or sinking fund payment of any Subordinated Indebtedness of such Person;

provided, that the term "Restricted Payment" does not include the payment of a dividend or other distribution by any Restricted Subsidiary on shares of its Capital Stock that is paid pro rata to all holders of such Capital Stock.

   "Restricted Subsidiary" of any Person means any Subsidiary of such Person other than an Unrestricted Subsidiary.

   "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty.

   "Securities Act" means the Securities Act of 1933, as amended.

   "Security Register" has the meaning set forth in the Senior Preferred Exchange Indenture.

   "Senior Indebtedness" means the principal of (and premium, if any) and interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to us whether or not a claim for post-petition interest is allowed in such proceeding) on:

(a)

our Indebtedness created pursuant to the Credit Facility and all other obligations thereunder or under the notes, security documents, pledge agreements, Interest Hedge Agreements or other agreements or instruments executed in connection therewith;



(b)

our Indebtedness created pursuant to any vendor financing Incurred for the acquisition, construction or improvement by us or any Restricted Subsidiary of assets in the Wireless Communications Business;



(c)

all other Indebtedness referred to in the definition of Indebtedness other than clauses (d), (f) and (i) thereof (and clause (h) thereof to the extent applicable to Indebtedness Incurred under clauses (d) and (f) thereof), whether Incurred on or prior to the Senior Preferred Exchange Date, other than the Notes; and



(d)

amendments, renewals, extensions, modifications, refinancings and refundings of any such Indebtedness;

provided, however, the following shall not constitute Senior Indebtedness:

(a)

any Indebtedness owed to a Person when such Person is our Restricted Subsidiary,



(b)

any Indebtedness which by the terms of the instrument creating or evidencing the same is not superior in right of payment to the senior preferred exchange debentures,



(c)

any Indebtedness Incurred in violation of the Senior Preferred Exchange Indenture (but, as to any such Indebtedness, no such violation shall be deemed to exist for purposes of this clause (c) if the holder(s) of such Indebtedness or their representative and the Debentures Trustee shall have received an Officers' Certificate of Rural Cellular to the effect that the Incurrence of such Indebtedness does not (or in the case of revolving credit Indebtedness, that the Incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate the Senior Preferred Exchange Indenture) or



(d)

any Indebtedness which is subordinated in right of payment to any of our other Indebtedness.

   "Senior Nonmonetary Default" means the occurrence or existence and continuance of any event of default, or of any event which after notice or lapse of time or both would become an event of default, under the terms of any instrument pursuant to which any Senior Indebtedness is outstanding, permitting (after notice or lapse of time or both) one or more holders of such Senior Indebtedness (or an administrative agent on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise become due and payable, other than a Senior Payment Default.

   "Senior Payment Default" means any default in the payment of principal of (or premium, if any) or interest on any Senior Indebtedness when due, whether at the stated maturity of any such payment or by declaration of acceleration, call for redemption or otherwise.

   "Senior Preferred Exchange Date" means the time and date the senior preferred exchange debentures are first issued under the Senior Preferred Exchange Indenture in exchange for the senior exchangeable preferred stock.

   "Senior Preferred Exchange Debentures Payment" means any payment or distribution of any kind or character, whether in cash, property or securities, on account of principal of (or premium, if any) or interest on or other obligations in respect of the senior preferred exchange debentures or other Indebtedness that is pari passu or subordinate in right of payment to the senior preferred exchange debentures or on account of any purchase or other acquisition of senior preferred exchange debentures or any of our other Indebtedness or any Indebtedness of any of our Subsidiaries.

   "Stated Maturity," when used with respect to any senior preferred exchange debenture or any installment of interest thereon, means the date specified in such senior preferred exchange debenture as the date on which the principal of such senior preferred exchange debenture or such installment of interest is due and payable.

   "Strategic Equity Investment" means an investment in Qualified Stock made by a Strategic Investor in an aggregate amount of not less than $50.0 million.

   "Strategic Investor" means a Person (other than one of our Affiliates or a Person who by virtue of such Investment becomes such an Affiliate) engaged in one or more Telecommunications Businesses with an equity market capitalization at the time such Person makes a Strategic Equity Investment in us in excess of $1.0 billion.

   "Subordinated Indebtedness" mean our Indebtedness that is subordinated in right of payment to the senior preferred exchange debentures.

   "Subsidiary" means, as applied to any Person:

(a)

any corporation of which more than fifty percent (50%) of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary Voting Power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such Voting Power by reason of the happening of any contingency, or any entity other than a corporation of which more than fifty percent (50%) of the outstanding ownership interests, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person; or



(b)

any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person.

   "Telecommunications Business" means the business of:

(a)

transmitting, or providing services relating to the transmission of, voice, video or data through owned or leased wireline or wireless transmission facilities;



(b)

creating, developing, constructing, installing, repairing, maintaining or marketing communications-related systems, network equipment and facilities, software and other products; or



(c)

evaluating, owning, operating, participating in or pursuing any other business that is primarily related to those identified in clause (a) or (b) above (in the case of this clause (c), however, in a manner consistent with our manner of business on the Issue Date), and shall, in any event, include all businesses in which we or any of our Subsidiaries is engaged on the Issue Date or has entered into agreements to engage in or to acquire a company to engage in or contemplate engaging in, as expressly set forth in this prospectus;

provided that the determination of what constitutes a Telecommunications Business shall be made in good faith by our board of directors.

   "Unrestricted Subsidiary" of any Person means:

•

any Subsidiary of such Person that at the time of determination shall be designated an Unrestricted Subsidiary by the board of directors of such Person in the manner provided below; and



•

any Subsidiary of an Unrestricted Subsidiary.

The board of directors of any Person may designate any Restricted Subsidiary to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, such Person or any Restricted Subsidiary; provided, that either

•

the Subsidiary to be so designated has total assets of $1,000 or less or



•

if such Subsidiary has assets greater than $1,000, such Person's pro rata interest in the Fair Market Value of the net assets of such Subsidiary at the time of such designation would be permitted as an Investment under the provision of the Senior Preferred Exchange Indenture described under "—Limitation on Restricted Payments."

The board of directors of any Person may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of such Person; provided, that immediately after giving effect to such designation

•

such Person would be permitted to Incur $1.00 of additional Indebtedness pursuant to the provision of the Senior Preferred Exchange Indenture described in the first paragraph under "—Limitation on Consolidated Indebtedness" and



•

no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing.

Any such designation by the board of directors shall be evidenced by a Board Resolution submitted to the Debentures Trustee. Wireless Alliance shall be deemed an Unrestricted Subsidiary as of the Issue Date and shall thereafter remain an Unrestricted Subsidiary unless and until designated by the board of directors as a Restricted Subsidiary in accordance with the terms of the Senior Preferred Exchange Indenture.

   "Voting Power" of any Person means the aggregate number of votes of all classes of Capital Stock of such Person which ordinarily have voting power for the election of directors of such Person.

   "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person.

   "Wireless Communications Business" means any business substantially related to the ownership, development, operation or acquisition of wireless communications services permitted under the Federal Communications Commission's ("FCC") Commercial Mobile Radio Services rules (and the related provisions of the FCC's Public Mobile Services and Personal Communications Services rules), and other related telecommunications business services.

Form, Denomination, Book-Entry Procedures and Transfer

   Senior preferred exchange debentures will be issued only in fully registered form in denominations of $1,000 and integral multiples thereof. Senior preferred exchange debentures will not be issued in bearer form.

   If the senior preferred exchange debentures are to be redeemed in part, we will not be required to:

(a)

issue, register the transfer of or exchange any senior preferred exchange debentures during a period beginning at the opening of business 15 days before the day of mailing of notice of redemption of any such senior preferred exchange debentures that may be selected for redemption and ending at the close of business on the day of such mailing; or



(b)

register the transfer of or exchange any senior preferred exchange debentures so selected for redemption, in whole or in part, except the unredeemed portion of any such senior preferred exchange debentures being redeemed in part.

   For purposes of the section "Description of the Senior Exchangeable Preferred Stock and senior preferred exchange debentures," all references to "senior exchangeable preferred stock" shall be deemed to refer collectively to the old senior exchangeable preferred stock and the new senior exchangeable preferred stock, unless the context otherwise requires.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

General

   The discussion set forth below summarizes certain material United States federal income tax consequences that may be relevant to holders who are "United States persons" (as defined below) and who hold the preferred stock as capital assets. These persons are referred to in this discussion as holders. The discussion is intended only as a summary and does not purport to be a complete analysis or listing of all potential tax considerations that may be relevant to such holders. The discussion does not include special rules that may apply to certain holders (including insurance companies, tax-exempt organizations, financial institutions, or broker-dealers, and persons holding exchangeable preferred stock or exchange debentures as part of a "straddle," "hedge," or "conversion transaction," and, except as otherwise discussed below, investors who are not "United States persons"), and does not address the tax consequences of the law of any state, locality, or foreign jurisdiction. The discussion is based upon currently existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed United States Treasury Regulations promulgated thereunder, and current administrative rulings and court decisions. All of the foregoing are subject to change (possibly with retroactive effect), and any such change could affect the continuing validity of this discussion. An investor should consult his or her own tax advisor concerning this offering and concerning the tax treatment arising from application of foreign, state or local tax laws.

   As used herein, "United States person" means a beneficial owner of exchangeable preferred stock or exchange debentures who or that:

•

is a citizen or resident of the United States;



•

is a corporation, partnership, or other entity created or organized in or under the laws of the United States or a political subdivision thereof;



•

is an estate the income of which is subject to United States federal income taxation regardless of its source;



•

is a trust if a United States court is able to exercise primary supervision over the administration of the trust and one or more United States fiduciaries have authority to control all substantial decisions of the trust;



•

is a certain type of trust in existence on August 20, 1996 which was treated as a United States person under the Code in effect immediately prior to such date and which has made a valid election to be treated as a "United States person" under the Code; or



•

is otherwise subject to United States federal income tax on a net income basis in respect of its worldwide taxable income.

A "United States holder" is a holder that is a "United States person." A "Non-United States holder" is a holder that is not a United States holder. We do not intend to treat the junior exchangeable preferred stock and the senior exchangeable preferred stock, which are being offered concurrently, as an investment unit for United States federal income tax purposes.

Junior Exchangeable Preferred Stock and Senior Exchangeable Preferred Stock

Distributions on the Junior Exchangeable Preferred Stock and Senior Exchangeable Preferred Stock

   Distributions on the junior exchangeable preferred stock and senior exchangeable preferred stock paid in cash will be taxable to a United States holder as dividends, taxable as ordinary income to the extent of our current and accumulated earnings and profits (as determined for United States federal income tax purposes). A distribution on the junior exchangeable preferred stock or senior exchangeable preferred stock made in the form of additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock will be treated as being made in an amount equal to the fair market value of the additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock and will be treated as a dividend taxable as ordinary income, to the extent of our current and accumulated earnings and profits. The holding period of any such additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock will commence on the date of the distribution. We believe that we currently have no accumulated earnings and profits, and we cannot predict whether, or when, we will have sufficient earnings and profits to be distributed as dividends.

   To the extent that the amount of any distribution paid on the junior exchangeable preferred stock or the senior exchangeable preferred stock (including distributions made in the form of additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock) exceeds our current and accumulated earnings and profits allocable to such distributions, such distribution will be treated as a return of capital, thus reducing the United States holder's adjusted tax basis in such junior exchangeable preferred stock or the senior exchangeable preferred stock. Any such excess distribution that is greater than the United States holder's adjusted basis in the junior exchangeable preferred stock or the senior exchangeable preferred stock will be taxed as capital gain from the sale or exchange of the junior exchangeable preferred stock or the senior exchangeable preferred stock and will be long-term capital gain if the United States holder's holding period for such junior exchangeable preferred stock or the senior exchangeable preferred stock exceeds one year. For purposes of the remainder of this discussion, the term "dividend" refers to a distribution on the junior exchangeable preferred stock or the senior exchangeable preferred stock paid out of our accumulated or current earnings and profits, unless the context indicates otherwise.

   Constructive distributions (including those arising from a redemption premium) are taxable to the United States holder as dividends to the extent of our current or accumulated earnings and profits. If the size of the constructive dividend is greater than our current or accumulated earnings and profits, the excess is treated as a tax-free recovery of basis in the junior exchangeable preferred stock or the senior exchangeable preferred stock until such United States holder's basis is equal to zero, and then as capital gain from the sale or exchange of the junior exchangeable preferred stock or the senior exchangeable preferred stock.

   If the fair market value of any additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock at the time of distribution is less than the redemption price of such additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock by more than a de minimis amount, the resulting redemption premium will be required, pursuant to section 305 of the Code, to be accrued by the United States holder as a constructive distribution of additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock as described below under "Preferred Stock Discount."

Dividends Received Deduction

   Dividends paid to a corporate United States holder who owns less than 20% of our outstanding capital stock (by vote or value) will be eligible for the 70% dividends-received deduction under section 243 of the Code, subject to the limitations contained in sections 246 and 246A of the Code. In general, the dividends-received deduction is available only if the stock in respect of which the dividend is paid is held for at least 46 days during the 90-day period that begins 45 days before the stock becomes ex-dividend with respect to the dividend (91 days during the 180-day period that begins 90 days before the stock becomes ex-dividend with respect to a dividend in the case of a dividend attributable to a period or periods aggregating more than 366 days). Under section 246(c) of the Code, a taxpayer's holding period for these purposes is reduced by periods during which the taxpayer's risk of loss with respect to the stock is considered diminished by reason of the existence of options, contracts to sell and similar transactions. The dividends-received deduction will also not be available if the taxpayer is under an obligation to make related payments with respect to positions in substantially similar or related property. The dividends-received deduction is limited to specified percentages of a corporate United States holder's taxable income and may be reduced or eliminated if the corporate United States holder has indebtedness "directly attributable" to its investment in the stock. Prospective corporate purchasers of the junior exchangeable preferred stock or the senior exchangeable preferred stock should consult their own tax advisers to determine whether these limitations might apply to them.

   For purposes of computing its alternative minimum tax, dividends eligible for the 70% dividends-received deduction are included in a corporate United States holder's "adjusted current earnings." If such adjusted current earnings exceed the corporate United States holder's alternative minimum taxable income (determined without regard to the adjustments for adjusted current earnings or the alternative tax net operating loss deduction), 75% of the excess is added to the corporate United States holder's alternative minimum taxable income.

Extraordinary Dividends

   Under section 1059 of the Code, if a corporate United States holder receives an "extraordinary dividend" with respect to the junior exchangeable preferred stock or the senior exchangeable preferred stock which has not been held for more than two years on the dividend announcement date, the basis of the junior exchangeable preferred stock or the senior exchangeable preferred stock will be reduced (but not below zero) by the non-taxed portion of the dividend. The reduction in basis is treated as occurring at the beginning of the ex-dividend date of the extraordinary dividend to which the reduction relates. If, because of the limitation on reducing basis below zero, any amount of the non-taxed portion of an extraordinary dividend is not applied to reduce basis, such amount will be treated as gain from the sale or exchange of the junior exchangeable preferred stock or the senior exchangeable preferred stock in the year in which the extraordinary dividend is received. Generally, the non-taxed portion of an extraordinary dividend is the amount excluded from income under section 243 of the Code (relating to the dividends-received deduction). An extraordinary dividend on the junior exchangeable preferred stock or the senior exchangeable preferred stock generally would include any dividend that (i) equals or exceeds five percent of the United States holder's adjusted tax basis in the junior exchangeable preferred stock or the senior exchangeable preferred stock, treating all dividends having ex-dividend dates within an 85-day period as one dividend or (ii) exceeds 20% of the United States holder's adjusted tax basis in the junior exchangeable preferred stock or the senior exchangeable preferred stock, treating all dividends having ex-dividend dates within a 365-day period as one dividend. In determining whether a dividend paid on the senior exchangeable preferred stock or the junior exchangeable preferred stock is an extraordinary dividend, a United States holder may elect to use the fair market value of such stock rather than its adjusted tax basis for purposes of determining the applicable percentage limitation if the United States holder is able to establish to the satisfaction of the Internal Revenue Service the fair market value of the junior exchangeable preferred stock or the senior exchangeable preferred stock as of the day before the ex-dividend date. An extraordinary dividend would also include any amount treated as a dividend in the case of a redemption of the junior exchangeable preferred stock or the senior exchangeable preferred stock that is either non-pro rata as to all corporate United States holders of junior exchangeable preferred stock or senior exchangeable preferred stock or part of a partial liquidation, without regard to the period the United States holder held the stock. Corporate United States holders should see "Redemption and Exchange of Junior Exchangeable Preferred Stock or the Senior Exchangeable Preferred Stock" for a discussion of when a redemption of the junior exchangeable preferred stock or the senior exchangeable preferred stock will constitute an extraordinary dividend.

   Certain "qualified preferred dividends," however, are not considered extraordinary dividends. A qualified preferred dividend is any fixed dividend payable with respect to preferred stock which (i) provides for fixed preferred dividends payable not less frequently than annually and (ii) is not in arrears as to dividends when acquired, provided, however, that the actual rate of return (as determined under section 1059(e)(3) of the Code) on such stock does not exceed 15%. If a qualified preferred dividend announced within two years of the date of acquisition of the preferred stock exceeds the five percent (or 20%) threshold for extraordinary dividend status described above, (i) section 1059(a) will not apply (and no reduction in basis will be required) if the United States holder holds the stock for more than five years and (ii) the aggregate reduction in basis under section 1059(a) will not exceed the excess of the qualified preferred stock dividends paid on such stock during the period held by the United States holder over the qualified preferred dividends that would have been paid during such period on the basis of the stated rate of return, as determined under section 1059(e)(3) of the Code. The length of time that a United States holder is deemed to have held stock for purposes of section 1059 of the Code is determined under principles similar to those contained in section 246(c) of the Code discussed above.

   We do not now have any current or accumulated earnings and profits, and we cannot predict whether or when we will have sufficient earnings and profits for distributions with respect to the junior exchangeable preferred stock or the senior exchangeable preferred stock to be treated as dividends. Until such time, if any, as such distributions are treated as dividends, corporate United States holders of the junior exchangeable preferred stock or the senior exchangeable preferred stock will not be eligible for the dividends-received deduction described above.

Preferred Stock Discount

   The junior exchangeable preferred stock and the senior exchangeable preferred stock are subject to mandatory redemption on          , 2011 and May 15, 2010, respectively (the "mandatory redemption"). The junior exchangeable preferred stock will also be subject to mandatory redemption if we do not complete the acquisition of cellular licenses, operations and related assets of Triton and its affiliates by June 30, 2000, subject to extensions. In addition, on or after May 15, 2003 in the case of the senior exchangeable preferred stock and on or after          , 2005, in the case of the junior exchangeable preferred stock, and subject to certain restrictions, the junior exchangeable preferred stock and the senior exchangeable preferred stock are redeemable at any time at our option at specified redemption prices (the "optional redemption"). Pursuant to section 305(c) of the Code, United States holders of junior exchangeable preferred stock and senior exchangeable preferred stock generally may be required to treat a portion of the difference between the issue price of the junior exchangeable preferred stock or the senior exchangeable preferred stock and its redemption price as constructive distributions of property includible in income on a periodic basis. For purposes of determining whether such constructive distribution treatment applies, the mandatory redemption and the optional redemption are tested separately. Constructive distribution treatment is required if either (or both) of these tests is satisfied.

   Section 305(c) of the Code provides that the entire amount of a redemption premium with respect to preferred stock that is subject to mandatory redemption is treated as being distributed to the holders of such preferred stock on an economic accrual basis. Preferred stock generally is considered to have a redemption premium for this purpose if the price at which it must be redeemed, the redemption price, exceeds its issue price by more than a de minimis amount. For this purpose, such excess (the "preferred stock discount") will be treated as zero if it is less than ¹/4 of 1% of the redemption price multiplied by the number of complete years from the date of issuance until the stock must be redeemed. Preferred stock discount is taxable as a constructive distribution to the United States holder (treated as a dividend to the extent of our current and accumulated earnings and profits and otherwise subject to the treatment described above for distributions) over the term of the junior exchangeable preferred stock or the senior exchangeable preferred stock using a constant interest rate method similar to that employed for accruing original issue discount pursuant to the Code.

   Preferred stock discount will arise due to the optional redemption feature only if, based on all of the facts and circumstances as of the issue date, the junior exchangeable preferred stock redemption or the senior exchangeable preferred stock redemption pursuant to the optional redemption is more likely than not to occur. Even if redemption were more likely than not to occur, however, constructive distribution treatment would not result if the redemption premium were solely in the nature of a penalty for premature redemption. For this purpose, a penalty for premature redemption is a premium paid as a result of changes in economic or market conditions over which neither the issuer nor the holder has legal or practical control, such as changes in prevailing dividend rates. The United States Treasury Regulations provide a safe harbor pursuant to which constructive distribution treatment will not result from an issuer call right if (i) the issuer and the holder are unrelated, (ii) there are no arrangements that effectively require the issuer to redeem the stock and (iii) exercise of the option to redeem would not reduce the yield of the stock. Although the issue is not free from doubt, we believe that the junior exchangeable preferred stock and the senior exchangeable preferred stock should not be considered to have been issued with preferred stock discount by reason of the optional redemption feature.

   Any additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock distributed by the Company in lieu of cash dividend payments on the junior exchangeable preferred stock or the senior exchangeable preferred stock to United States holders of the junior exchangeable preferred stock or the senior exchangeable preferred stock may bear preferred stock discount depending upon the issue price of such shares (i.e., the fair market value of the additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock on the date of their issuance). A United States holder's initial tax basis in additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock will equal the fair market value of such additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock on their date of distribution. Depending on the fair market value of the junior exchangeable preferred stock or the senior exchangeable preferred stock on that date, United States holders may be required to include additional preferred stock discount in income based on the difference between (x) the fair market value of such shares on the date of their issuance and (y) the amount payable on redemption of such shares, unless the difference is de minimis, as described above. If shares of junior exchangeable preferred stock or the senior exchangeable preferred stock (including additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock) bear preferred stock discount, such shares generally will have different tax characteristics from other shares of junior exchangeable preferred stock or the senior exchangeable preferred stock (including other additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock) and might trade separately, which might adversely affect the liquidity of such shares.

Redemption and Exchange of Junior Exchangeable Preferred Stock and Senior Exchangeable Preferred Stock

   A redemption of shares of junior exchangeable preferred stock and senior exchangeable preferred stock for cash or in exchange for exchange debentures would be a taxable event.

   A redemption of shares of the junior exchangeable preferred stock or the senior exchangeable preferred stock for cash will generally be treated as a sale or exchange if the United States holder does not own, actually or constructively within the meaning of section 318 of the Code, any of our capital stock other than the junior exchangeable preferred stock or the senior exchangeable preferred stock. Under section 318 of the Code, a person generally will be treated as the owner of any of our capital stock owned by certain related parties or certain entities in which the person owns an interest. If a United States holder does own, actually or constructively, other of our capital stock, a redemption of junior exchangeable preferred stock or senior exchangeable preferred stock may be treated as a dividend to the extent of our current and accumulated earnings and profits. Dividend treatment would not apply, however, if the redemption is "not essentially equivalent to a dividend" with respect to the United States holder under section 302(b)(1) of the Code. A distribution to a United States holder will be "not essentially equivalent to a dividend" if it results in a "meaningful reduction" in the United States holder's stock interest in the company. For this purpose, a redemption of junior exchangeable preferred stock or senior exchangeable preferred stock that results in a reduction in the proportionate interest in our capital stock (taking into account any actual ownership of our common stock and any stock constructively owned) of a United States holder whose relative stock interest in Rural Cellular is minimal should be regarded as a meaningful reduction in the United States holder's stock interest in Rural Cellular.

   If a redemption of the junior exchangeable preferred stock or the senior exchangeable preferred stock for cash is not treated as a distribution taxable as a dividend, the redemption would result in capital gain or loss equal to the difference between the amount of cash received and the United States holder's adjusted tax basis in the junior exchangeable preferred stock or the senior exchangeable preferred stock redeemed, except to the extent that the redemption price includes dividends which have been declared by our board of directors prior to the redemption. Similarly, upon the sale of the junior exchangeable preferred stock or the senior exchangeable preferred stock (other than in a redemption or in exchange for the exchange debentures), the difference between the sum of the amount of cash and the fair market value of other property received and the United States holder's adjusted basis in the junior exchangeable preferred stock or the senior exchangeable preferred stock would result in capital gain or loss. This gain or loss would be long-term capital gain or loss if the United States holder's holding period for the junior exchangeable preferred stock or the senior exchangeable preferred stock exceeds one year. Under current law, net capital gains recognized by corporations are currently taxed at a maximum rate of 35% and the maximum rate on net capital gains in the case of individuals is currently 20% for property held for more than 12 months. A redemption of junior exchangeable preferred stock or the senior exchangeable preferred stock in exchange for exchange debentures will be subject to the same general rules as a redemption for cash, except that any gain or loss generally will be determined based upon the issue price of the exchange debentures (as determined for purposes of computing the original issue discount on such exchange debentures). See the discussion below under "Issue Price of Exchange Debentures."

   If a redemption of the junior exchangeable preferred stock or the senior exchangeable preferred stock is treated as a distribution that is taxable as a dividend, the amount of the distribution will be measured by the amount of cash or the issue price of the exchange debentures, as the case may be, received by the United States holder. It is possible, however, that the fair market value of the exchange debentures (if different from their issue price) may constitute the amount of the distribution. The United States holder's adjusted tax basis in the redeemed junior exchangeable preferred stock or senior exchangeable preferred stock will be transferred to any remaining stock holdings in Rural Cellular, subject to reduction or possible gain recognition under section 1059 of the Code in respect of the non-taxed portion of such dividend. If the United States holder does not retain any actual stock ownership in Rural Cellular (i.e., such United States holder is treated as having received a dividend because such United States holder constructively owns stock in Rural Cellular, but such United States holder does not actually own any Rural Cellular stock), such United States holder may lose the benefit of its basis in the junior exchangeable preferred stock or the senior exchangeable preferred stock. However, such basis may be transferred to the person or entity whose ownership of stock is attributed to the United States holder.

Exchange Debentures

Issue Price of Exchange Debentures

   If the exchange debentures are traded on an established securities market within the 60-day period ending thirty days after the exchange date, the issue price of the exchange debentures will be their fair market value as of their issue date. Subject to certain limitations described in the United States Treasury regulations, the exchange debentures will be deemed to be traded on an established securities market if, at a minimum, price quotations will be readily available from dealers, brokers or traders. If the junior exchangeable preferred stock or the senior exchangeable preferred stock, but not the exchange debentures issued in exchange therefor, is traded on an established securities market within the 60-day period ending thirty days after the exchange date, then the issue price of each exchange debenture should be the fair market value of the junior exchangeable preferred stock or the senior exchangeable preferred stock exchanged therefor at the time of the exchange. The junior exchangeable preferred stock or the senior exchangeable preferred stock generally will be deemed to be traded on an established securities market if, at a minimum, it appears on a system of general circulation that provides a reasonable basis to determine fair market value based either on recent price quotations or recent sales transactions. In the event that neither the junior exchangeable preferred stock or the senior exchangeable preferred stock nor the exchange debentures are traded on an established securities market within the applicable period, the issue price of the exchange debentures will be their stated principal amount (i.e., their face value) unless either (i) the exchange debentures do not bear "adequate stated interest" within the meaning of section 1274 of the Code, or (ii) the exchange debentures are issued in a so-called "potentially abusive situation" as defined in the United States Treasury Regulations under section 1274 of the Code (including a situation involving a recent sales transaction), in which case the issue price of such exchange debentures generally will be the fair market value of the junior exchangeable preferred stock or the senior exchangeable preferred stock surrendered in exchange therefor. It cannot be determined at the present time whether the junior exchangeable preferred stock or the senior exchangeable preferred stock or the exchange debentures will, at the relevant time, be traded on an established securities market within the meaning of the United States Treasury regulations or whether the exchange debentures will bear "adequate stated interest."

Interest on the Exchange Debentures

   Except as set forth below, interest on the exchange debentures will be taxable to a United States holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the United States holder's method of accounting for United States federal income tax purposes.

   Original Issue Discount. The exchange debentures may be issued with original issue discount equal to the excess of their "stated redemption price at maturity" over their "issue price" if such excess is greater than a de minimis amount. United States holders of exchange debentures will be subject to special tax accounting rules, as described in greater detail below. United States holders of exchange debentures should be aware that they generally must include original issue discount in gross income for United States federal income tax purposes on an annual basis under a constant yield accrual method. As a result, such United States holders will include original issue discount in income in advance of the receipt of cash attributable to that income. However, United States holders of exchange debentures generally will not be required to include separately in income cash payments received on such exchange debentures, even if denominated as interest, to the extent such payments do not constitute qualified stated interest (as defined below). We will report to United States holders of exchange debentures on a timely basis the reportable amount of original issue discount and interest income based on our understanding of applicable law.

   The "stated redemption price at maturity" of a debt instrument is the sum of its principal amount plus all other payments required thereunder, other than payments of "qualified stated interest." For this purpose, "qualified stated interest" means stated interest that is unconditionally payable in cash or in property (other than the debt instruments of the issuer), at least annually at a single fixed rate, during the entire term of the debt instrument that appropriately takes into account the length of the intervals between payments. If the exchange debentures are issued at a time when we have the right to make interest payments with additional exchange debentures in lieu of cash, none of the stated interest on such exchange debentures will be treated as qualified stated interest. The "issue price" of an exchange debenture will be determined as described above under "Issue Price of Exchange Debentures."

   The amount of original issue discount includible in income by the initial United States holder of an exchange debenture is the sum of the "daily portions" of original issue discount with respect to the exchange debenture for each day during the taxable year or portion of the taxable year in which such United States holder held such exchange debenture ("accrued original issue discount"). The daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the original issue discount allocable to that accrual period. The "accrual period" for an exchange debenture may be of any length and may vary in length over the term of the exchange debenture, provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on the first day or the final day of an accrual period. The amount of original issue discount allocable to any accrual period is an amount equal to the excess, if any, of (a) the product of the exchange debenture "adjusted issue price" at the beginning of such accrual period and its yield to maturity (determined on the basis of compounding at the closing of each accrual period and properly adjusted for the length of the accrual period) over (b) the sum of any qualified stated interest allocable to the accrual period. Original issue discount allocable to a final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Special rules will apply for calculating original issue discount for an initial short accrual period. The "adjusted issue price" of an exchange debenture at the beginning of any accrual period is equal to its issue price increased by the accrued original issue discount for each prior accrual period (determined without regard to the amortization of any amortizable bond premium, as described below) and reduced by any payments made on such exchange debenture (other than qualified stated interest) on or before the first day of the accrual period. Under these rules, a United States holder will have to include in income increasingly greater amounts of original issue discount in successive accrual periods.

Prospective investors are urged to consult their own tax advisers as to the tax consequences of owning exchange debentures.

Election

   A United States holder of exchange debentures, subject to certain limitations, may elect to include all interest and discount on the exchange debentures in gross income under the constant yield method. For this purpose, interest includes stated and unstated interest, and original issue discount and de minimisoriginal issue discount, as adjusted by any amortizable bond premium.

Amortizable Bond Premium

   If the junior exchangeable preferred stock or the senior exchangeable preferred stock is exchanged for exchange debentures at a time when the "issue price" of the exchange debentures exceeds the amount payable at maturity of the exchange debentures, such excess will constitute amortizable bond premium that the United States holder may elect to amortize under the constant yield method over the term of the exchange debentures. A United States holder who elects to amortize bond premium must reduce its tax basis in the exchange debentures by the amount of the aggregate amortization allowable for amortizable bond premium. Amortizable bond premium will be treated under the Code as an offset to interest income on the related debt instrument for federal income tax purposes.

Sale or Other Disposition of Exchange Debentures

   Generally, any sale, exchange, redemption (including pursuant to an offer by us), or other disposition of exchange debentures by a United States holder would result in taxable gain or loss equal to the difference between the sum of the amount of cash and the fair market value of other property received (except to the extent that cash received is attributable to accrued but previously untaxed interest, which portion of the consideration would be taxed as ordinary income) and the United States holder's adjusted tax basis in the exchange debentures. The adjusted tax basis of a United States holder who receives an exchange debenture in exchange for junior exchangeable preferred stock or senior exchangeable preferred stock will generally be equal to the issue price of the exchange debenture, increased by any original issue discount previously included in the United States holder's income and reduced by any amortizable bond premium, if any, deducted over the term of the exchange debentures and by payments on the exchange debentures. Any such gain or loss generally would be long-term capital gain or loss if the United States holder's holding period for the exchange debentures exceeds one year. Under current law, net capital gains recognizable by corporations are currently taxed at a maximum rate of 35% and the maximum rate on net capital gains in the case of individuals is currently 20% for property held for more than 12 months. At the time of sale, exchange, disposition, retirement or redemption, a United States holder of the exchange debenture must also include in income any previously accrued but unrecognized original issue discount.

Applicable High Yield Discount Obligations

   It is possible that the exchange debentures will be treated as applicable high yield discount obligations for United States federal income tax purposes. The exchange debentures will constitute applicable high yield discount obligations if they (i) have a term of more than five years, (ii) have a yield to maturity equal to or greater than the sum of the applicable federal rate at the time of issuance of the exchange debentures plus 500 basis points and (iii) have significant original issue discount. The applicable federal rate is an interest rate, announced monthly by the Internal Revenue Service, that is based on the yield of debt obligations issued by the United States Treasury. A debt instrument is treated as having "significant original issue discount" if the aggregate amount that would be includable in gross income with respect to such debt instrument for periods before the close of any accrual period ending after the date five years after the date of issue exceeds the sum of (i) the aggregate amount of interest to be paid in cash under the debt instrument before the close of such accrual period and (ii) the product of the initial issue price of such debt instrument and its yield to maturity. For purposes of determining whether an exchange debenture is an applicable high yield discount obligation, United States holders are bound by our determination of the appropriate accrual period. Because the amount of original issue discount, if any, attributable to the exchange debentures will be determined at the time such exchange debentures are issued and the applicable federal rate at that time is not predictable, it is currently impossible to determine whether the exchange debentures will be treated as applicable high yield discount obligations.

   If the exchange debentures are treated as applicable high yield discount obligations, (i) a portion of the original issue discount that accrues on the exchange debentures may be treated as a dividend (to the extent of our current and accumulated earnings and profits) generally eligible for the dividends received deduction in the case of corporate United States holders, (ii) we would not be entitled to deduct the "disqualified portion" of the original issue discount that accrues on the exchange debentures and (iii) we would be allowed to deduct the remainder of the original issue discount only when we pay amounts attributable to such original issue discount in cash. The "disqualified portion" of the original issue discount is equal to the lesser of (x) the amount of original issue discount or (y) the portion of the "total return" (i.e., the excess of all payments to be made with respect to an exchange debenture over its issue price) with respect to the exchange debentures in excess of the applicable federal rate plus 600 basis points per annum.

Backup Withholding and Information Reporting

   A United States holder may be subject to backup withholding at the rate of 31% with respect to distributions (actual or constructive) on the junior exchangeable preferred stock or the senior exchangeable preferred stock, interest (including original issue discount) on the exchange debentures, or sales proceeds of any of the foregoing, unless such United States holder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates its exempt status or (ii) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. A United States holder who does not provide us with the United States holder's correct taxpayer identification number may be subject to penalties imposed by the Internal Revenue Service. Any amount paid as backup withholding would be creditable against the United States holder's federal income tax liability.

   We will furnish annually to the Internal Revenue Service and to record United States holders of the junior exchangeable preferred stock and the senior exchangeable preferred stock (other than with respect to certain exempt holders) information relating to dividends paid during the calendar year. In the case of junior exchangeable preferred stock and the senior exchangeable preferred stock or additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock distributed in lieu of cash dividends subject to section 305 of the Code, such information may be based upon dividends accruing to the record United States holder of such junior exchangeable preferred stock and the senior exchangeable preferred stock or additional shares of junior exchangeable preferred stock or senior exchangeable preferred stock distributed in lieu of cash dividends at the time of issuance.

   We will furnish annually to the Internal Revenue Service and to record United States holders of the exchange debentures (other than with respect to certain exempt holders) information relating to the stated interest and the original issue discount, if any, accruing during the calendar year. Such information will be based on the amount of original issue discount that would have accrued to a United States holder who acquired the exchange debenture in exchange for its junior exchangeable preferred stock or senior exchangeable preferred stock. Accordingly, other United States holders will be required to determine for themselves whether they are eligible to report a reduced amount of original issue discount for federal income tax purposes.

   THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF JUNIOR EXCHANGEABLE PREFERRED STOCK OR SENIOR EXCHANGEABLE PREFERRED STOCK OR EXCHANGE DEBENTURES IN LIGHT OF ITS/HIS PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF JUNIOR EXCHANGEABLE PREFERRED STOCK OR SENIOR EXCHANGEABLE PREFERRED STOCK OR EXCHANGE DEBENTURES SHOULD CONSULT SUCH HOLDER'S TAX ADVISER AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE JUNIOR EXCHANGEABLE PREFERRED STOCK, SENIOR EXCHANGEABLE PREFERRED STOCK, OR EXCHANGE DEBENTURES, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR SUBSEQUENT REVISIONS THEREOF.

UNDERWRITING

   TD Securities (USA) Inc. and First Union Securities, Inc. have severally agreed, subject to the terms and conditions contained in an underwriting agreement with us, to purchase from us the number of shares of junior exchangeable preferred stock and senior exchangeable preferred stock set forth below opposite their respective names:

Underwriters	Number of Shares of Junior Exchangeable Preferred Stock	Number of Shares of Senior Exchangeable Preferred Stock
TD Securities (USA) Inc.
First Union Securities, Inc.
Total	110,000	25,000

   The underwriting agreement provides that the obligation of the underwriters to pay for and accept delivery of the shares is subject to certain conditions, including delivery of certain legal opinions by their counsel. Subject to the terms and conditions of the underwriting agreement, the underwriters are committed to take and pay for all of the shares, if any are taken.

   The underwriting agreement provides that we will indemnify the underwriters and their controlling persons against specified liabilities under the Securities Act, or will contribute to payments that the underwriters may be required to make in respect thereof.

   In connection with the offering, specified persons participating in the offering may engage in transactions that stabilize, maintain, or otherwise affect the price of the shares of junior exchangeable preferred stock and senior exchangeable preferred stock during and after the offering. Specifically, the underwriters may bid for and purchase shares in the open market to stabilize the price of the shares. The underwriters may also overallot the offering, creating a syndicate short position. In addition, the underwriters may bid for and purchase shares in marketmaking transactions and impose penalty bids.

   These activities may stabilize or maintain the market price of the shares above market levels that may otherwise prevail. The underwriters are not required to engage in these activities and, if commenced, may end these activities at any time.

   The following table shows the underwriting fees we will pay to the underwriters in connection with this offering. These amounts are shown separately for the junior exchangeable preferred stock and senior exchangeable preferred stock.

	Underwriting Fees Paid by Rural Cellular Corporation
	Junior Exchangeable Preferred Stock	Senior Exchangeable Preferred Stock
Per Share	$	$
Total	$	$

   We will pay the offering expenses, estimated to be $     .

   The shares of junior exchangeable preferred stock and senior exchangeable preferred stock are not listed on a national securities exchange or authorized for trading on The Nasdaq Stock Market. Prior to the offering, there has been no active market for the shares. No assurance can be given as to the liquidity of, or trading market for, the shares, and if a market develops, whether it will continue. The underwriters have indicated that they intend to make a market in the junior exchangeable preferred stock and senior exchangeable preferred stock, but they are under no obligation to do so and such market making may be discontinued at any time without notice, at their sole discretion.

   We have agreed with the underwriters not to, without the prior written consent of TD Securities (USA) Inc., directly or indirectly, issue, sell, offer or agree to sell, grant any option for the sale of, or otherwise dispose of, any securities that are substantially similar to the shares of junior exchangeable preferred stock and senior exchangeable preferred stock or securities that are exchangeable for or convertible into any shares of junior exchangeable preferred stock or senior exchangeable preferred stock from the date of the final prospectus continuing for a period of 90 days. This agreement does not apply to:

•

shares of the junior exchangeable preferred stock or senior exchangeable preferred stock issued in lieu of cash dividends thereon,



•

debentures issued in exchange for shares of junior exchangeable preferred stock or senior exchangeable preferred stock in accordance with its terms, or



•

debentures issued in lieu of cash dividends thereon.

   TD Securities (USA) Inc. is the lead arranger under our existing credit facility and will be the lead arranger under our proposed new credit facility, and an affiliate of First Union Securities, Inc. is a lender under our existing credit facility. Toronto Dominion (Texas), Inc., an affiliate of TD Securities (USA) Inc., and First Union National Bank, an affiliate of First Union Securities, Inc., have received and will receive customary fees for these services. In addition, an affiliate of First Union Securities, Inc. and an affiliate of TD Securities (USA) Inc. are equity holders in Triton Cellular Partners, L.P.

   Proceeds of the preferred and common stock offerings will be used to repay outstanding obligations under the existing credit facility, including Toronto Dominion (Texas), Inc.'s and First Union National Bank's pro rata share of such outstanding obligations, and will be used to complete the Triton acquisition. Therefore, First Union Securities, Inc. and TD Securities (USA) Inc. will receive more than 10% of the net proceeds from this offering. As a result, this offering is being made in compliance with paragraph (8) of Rule 2710(c) of the Conduct Rules of the NASD, which relates to offerings with respect to which net proceeds are directed to members of the NASD. A qualified independent underwriter will be appointed in connection with the offering and will assume the customary responsibilities of acting as a qualified independent underwriter in pricing and conducting due diligence for this offering. Such qualified independent underwriter will be indemnified against certain liabilities, including liabilities under the Securities Act, and will be afforded certain rights of contribution.

   TD Securities (USA) Inc. and an affiliate of First Union Securities, Inc. have entered into an agreement with us to purchase junior cumulative exchangeable pay-in-kind preferred stock. This agreement is contingent upon the closing of the Triton acquisition and our new credit facility. In addition, Toronto Dominion Investments, Inc. has entered into an agreement to purchase Class M preferred stock.

   The underwriters have provided and will continue to provide underwriting and financial advisory services to us, for which the underwriters have received and will receive customary fees.

LEGAL MATTERS

   The validity of the issuance of the shares of junior exchangeable preferred stock and senior exchangeable preferred stock offered and other legal matters will be passed upon for us by Moss & Barnett, A Professional Association, Minneapolis, Minnesota. Paul, Hastings, Janofsky & Walker LLP, New York, New York, will pass upon matters related to the offering on behalf of the underwriters.

EXPERTS

   Arthur Andersen LLP, independent auditors, have audited the following financial statements. We have included these financial statements in this Registration Statement in reliance on Arthur Andersen LLP's reports, given their authority as experts in accounting and auditing.

•

Our audited consolidated financial statements as of December 31, 1997 and 1998 and for each of the three years in the period ended December 31, 1998.



•

The consolidated financial statements of Triton Cellular Partners, L.P. and Subsidiaries as of December 31, 1998 and September 30, 1999 and for the year ended December 31, 1998 and the nine months ended September 30, 1999.



•

The consolidated financial statements of Point Telesystems, Inc. for the year ended December 31, 1997 and for the period from January 1, 1998 through January 15, 1998.



•

The consolidated financial statements of BMLT, L.P. d/b/a CELLULARONE for the years ended December 31, 1997 and 1998 and for the period from January 1, 1999 through January 31, 1999.



•

The consolidated financial statements of "A Markets" of U.S. Unwired, Inc. and Subsidiary for the year ended December 31, 1997 and for the six months ended June 30, 1998.

   The audited consolidated financial statements of for Atlantic Cellular Company, L.P. and subsidiaries as of December 31, 1996 and 1997 and for each of the years in the three-year period ended December 31, 1997, included in this prospectus and elsewhere in the Registration Statement, have been audited by KPMG LLP, independent certified public accountants, as indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report.

AVAILABLE INFORMATION

   Rural Cellular files annual, quarterly, and special reports, proxy statements, and other information with the Securities and Exchange Commission. You may read and copy any reports, statements, or other information that Rural Cellular files with the Securities and Exchange Commission at the Securities and Exchange Commission's public reference rooms at the following locations:

PUBLIC REFERENCE ROOM
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549 NEW YORK REGIONAL OFFICE
7 World Trade Center
Suite 1300
New York, NY 10048 CHICAGO REGIONAL OFFICE
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, IL 60661-2511

   Please call the Securities and Exchange Commission at 1-800-SEC-0330 for information on the operations of the public reference rooms. These Securities and Exchange Commission filings are also available to the public from commercial document retrieval services and at the Internet world wide web site maintained by the Securities and Exchange Commission at "http://www.sec.gov."

   Rural Cellular filed a registration statement on Form S-3 with the Securities and Exchange Commission to register the preferred stock offered hereby. This prospectus is part of that registration statement. As allowed by Securities and Exchange Commission rules, this prospectus does not contain all the information you can find in Rural Cellular's registration statement or the exhibits to the registration statement.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   The Securities and Exchange Commission allows Rural Cellular to "incorporate by reference" information into this prospectus, which means that Rural Cellular can disclose important information to you by referring you to other documents filed separately with the Securities and Exchange Commission. The information incorporated by reference is considered part of this prospectus, except for any information superseded by information contained directly in this prospectus or in later filed documents incorporated by reference in this prospectus.

   This prospectus incorporates by reference the documents set forth below that Rural Cellular has previously filed with the Securities and Exchange Commission. These documents contain important business and financial information about Rural Cellular that is not included in or delivered with this prospectus.

1.	Annual Report on Form 10-K	Fiscal year ended December 31, 1998
2.	Quarterly Reports on Form 10-Q	Quarters ended March 31, 1999, June 30, 1999, and September 30, 1999
3.	Current Reports on Form 8-K	Filed on May 5, 1999, and June 18, 1999, as amended on July 24, 1999
4.	The description of Rural Cellular common stock and rights to acquire junior preferred stock set forth in the Rural Cellular registration statements on Form 8-A	Filed under Section 12(g) of the Securities Exchange Act of 1934 on December 13, 1995 and May 19, 1999

   Rural Cellular also incorporates by reference additional documents that may be filed with the Securities and Exchange Commission under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act after the date of this prospectus and prior to the time all of the securities offered by this prospectus are sold. These include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.

   Documents incorporated by reference are available from Rural Cellular without charge, excluding all exhibits, except that if Rural Cellular has specifically incorporated by reference an exhibit in this prospectus, the exhibit will also be provided without charge. You may obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone from Rural Cellular at the following address:

Rural Cellular Corporation
P.O. Box 2000
3905 Dakota Street S.W.
Alexandria, MN 56308
Telephone: (320) 762-2000

INDEX TO FINANCIAL STATEMENTS

	Page
Rural Cellular Corporation and Subsidiaries
Report of Independent Public Accountants	F-3
Consolidated Balance Sheets as of December 31, 1997 and 1998 and Unaudited September 30, 1999	F-4
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1997, and 1998 and Unaudited Nine Months Ended September 30, 1998 and 1999	F-6
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1996, 1997, and 1998 and Unaudited Nine Months Ended September 30, 1999	F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997, and 1998 and Unaudited Nine Months Ended September 30, 1998 and 1999	F-8
Notes to Consolidated Financial Statements	F-9
Atlantic Cellular Company, L.P. and Subsidiary
Independent Auditors' Report	F-25
Consolidated Balance Sheets as of December 31, 1996 and 1997 and Unaudited June 30, 1998	F-26
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and 1997 and Unaudited Six Months Ended June 30, 1997 and 1998	F-27
Consolidated Statements of Partners' Capital for the Years Ended December 31, 1995, 1996 and 1997 and Unaudited Six Months Ended June 30, 1998	F-28
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997 and Unaudited Six Months Ended June 30, 1997 and 1998	F-29
Notes to Consolidated Financial Statements	F-30
Triton Cellular Partners, L.P. and Subsidiaries
Report of Independent Public Accountants	F-37
Consolidated Balance Sheets as of December 31, 1998 and September 30, 1999	F-38
Consolidated Statements of Operations for the Year Ended December 31, 1998 and Nine Months Ended September 30, 1999	F-39
Consolidated Statements of Partners' Equity for the Year Ended December 31, 1998 and Nine Months Ended September 30, 1999	F-40
Consolidated Statements of Cash Flows for the Year Ended December 31, 1998 and Nine Months Ended September 30, 1999	F-41
Notes to Consolidated Financial Statements	F-42
Point Telesystems, Inc.
Report of Independent Public Accountants	F-53
Balance Sheet as of December 31, 1997	F-54
Statements of Operations and Retained Earnings for the Year Ended December 31, 1997 and for the Period from January 1, 1998 to January 15, 1998	F-55
Statements of Cash Flows for the Year Ended December 31, 1997 and for the Period from January 1, 1998 to January 15, 1998	F-56
Notes to Financial Statements	F-57
"A Markets" of U.S. Unwired, Inc. and Subsidiary
Report of Independent Public Accountants	F-60
Statements of Operations and Parent's Equity (Deficit) in "A Markets" for the Year Ended December 31, 1997 and for the Six Months Ended June 30, 1998	F-61
Statements of Cash Flows for the Year Ended December 31, 1997 and for the Six Months Ended June 30, 1998	F-62
Notes to Financial Statements	F-63
BMCT, L.P. D/B/A CellularOne
Report of Independent Public Accountants	F-67
Statements of Operations and Partners' Capital (Deficit) for the Years Ended December 31, 1997 and 1998 and for the One-Month Period Ended January 31, 1999	F-68
Statements of Cash Flows for the Years Ended December 31, 1997 and 1998 and for the One-Month Period Ended January 31, 1999	F-69
Notes to Financial Statements	F-70

Report of Independent Public Accountants

    To Rural Cellular Corporation:

   We have audited the accompanying consolidated balance sheets of Rural Cellular Corporation (a Minnesota corporation) and subsidiaries as of December 31, 1997 and 1998, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of Rural Cellular Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rural Cellular Corporation and subsidiaries as of December 31, 1997 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
February 5, 1999

RURAL CELLULAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS

	December 31
					September 30, 1999
	1997		1998
					(Unaudited)
CURRENT ASSETS:
Cash	$	1,995	$	2,062	$	1,073
Accounts receivable, less allowance of $1,146, $1,555 and $985		9,621		13,796		22,944
Inventories		1,774		2,321		3,068
Other current assets		766		813		631
Total current assets		14,156		18,992		27,716
PROPERTY AND EQUIPMENT, less accumulated depreciation of $23,874, $42,538 and $60,903		77,920		131,714		128,764
LICENSES AND OTHER ASSETS:
Licenses and other intangible assets, less accumulated amortization of $1,490 and $8,108 and $16,812		81,348		309,672		321,135
Deferred debt issuance costs, less accumulated amortization of $120 and $509 and $1,429		1,080		11,761		10,949
Other assets		7,084		8,385		6,770
Total licenses and other assets		89,512		329,818		338,854
	$	181,588	$	480,524	$	495,334

The accompanying notes are an integral part of these consolidated balance sheets.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

LIABILITIES AND SHAREHOLDERS' EQUITY

	December 31
							September 30, 1999
	1997			1998
							(Unaudited)
CURRENT LIABILITIES:
Accounts payable	$	7,960		$	16,524		$	11,906
Advance billings and customer deposits		2,541			3,229			3,795
Accrued interest		1,595			3,508			6,305
Dividends payable		—			1,880			2,044
Other accrued expenses		1,546			3,389			4,802
Total current liabilities		13,642			28,530			28,852
LONG-TERM DEBT		128,000			298,851			307,143
Total liabilities		141,642			327,381			335,995
COMMITMENTS AND CONTINGENCIES (Note 9)
MINORITY INTEREST		6,215			1,663			—
SENIOR EXCHANGEABLE PREFERRED STOCK		—			132,201			143,767
SHAREHOLDERS' EQUITY:
Class A common stock; $.01 par value; 15,000 shares authorized, 7,593, 7,780 and 7,935 shares issued and outstanding		76			78			79
Class B common stock; $.01 par value; 5,000 shares authorized, 1,260, 1,203 and 1,144 shares issued and outstanding		13			12			11
Additional paid-in capital		34,446			35,707			36,476
Accumulated deficit		(804	)		(16,518	)		(20,994	)
Total shareholders' equity		33,731			19,279			15,572
	$	181,588		$	480,524		$	495,334

The accompanying notes are an integral part of these consolidated balance sheets.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Years Ended December 31									Nine Months Ended September 30
	1996			1997			1998			1998			1999
										(Unaudited)
REVENUES:
Service	$	23,120		$	43,408		$	75,633		$	51,178		$	78,263
Roamer		6,413			9,475			20,199			13,577			33,310
Equipment		927			1,020			2,700			1,669			5,704
Total revenues		30,460			53,903			98,532			66,424			117,277
OPERATING EXPENSES:
Network costs		6,731			11,578			18,877			13,335			14,352
Cost of equipment sales		1,375			2,807			5,968			4,012			8,145
Selling, general and administrative		13,575			25,225			39,156			25,811			39,318
Depreciation and amortization		5,539			12,458			26,532			17,523			29,549
Total operating expenses		27,220			52,068			90,533			60,681			91,364
OPERATING INCOME		3,240			1,835			7,999			5,743			25,913
OTHER INCOME (EXPENSE):
Interest expense		(280	)		(6,065	)		(19,060	)		(12,340	)		(20,207	)
Interest and dividend income		335			232			1,461			1,318			289
Equity in earnings (losses) of unconsolidated affiliates		51			(350	)		(535	)		(645	)		(210	)
Minority interest		331			3,082			4,553			3,126			1,538
Other income (expense), net		437			(3,101	)		(13,581	)		(8,541	)		(18,590	)
INCOME (LOSS) BEFORE INCOME TAX AND EXTRAORDINARY ITEM		3,677			(1,266	)		(5,582	)		(2,798	)		7,323
INCOME TAX PROVISION		200			—			—			—			34
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM		3,477			(1,266	)		(5,582	)		(2,798	)		7,289
EXTRAORDINARY ITEM—EARLY EXTINGUISHMENT OF DEBT		—			—			(1,042	)		(1,042	)		—
NET INCOME (LOSS)		3,477			(1,266	)		(6,624	)		(3,840	)		7,289
PREFERRED STOCK DIVIDEND		—			—			(9,090	)		(5,398	)		(11,765	)
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES	$	3,477		$	(1,266	)	$	(15,714	)	$	(9,238	)	$	(4,476	)
NET INCOME (LOSS) PER BASIC AND DILUTED / COMMON SHARES	$	0.41		$	(0.14	)	$	(1.76	)	$	(1.04	)	$	(0.50	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED		8,509			8,853			8,916			8,893			9,029

The accompanying notes are an integral part of these consolidated financial statements.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For Years Ended December 31, 1996, 1997, and 1998 and
the (Unaudited) Nine Months Ended September 30, 1999

(In thousands)

	Class A Common Stock			Class B Common Stock
											Retained Earnings (Accumulated Deficit)
									Additional Paid-In Capital					Total Shareholders' Equity
	Shares	Amount		Shares		Amount
BALANCE, December 31, 1995	4,303	$	43	1,680		$	17		$	8,413	$	(3,015	)	$	5,458
Issuance of common stock, net of offering expenses	2,870		29	—			—			26,033		—			26,062
Conversion of Class B common stock to Class A common stock	330		3	(330	)		(3	)		—		—			—
Net income applicable to common shares	—		—	—			—			—		3,477			3,477
BALANCE, December 31, 1996	7,503		75	1,350			14			34,446		462			34,997
Conversion of Class B common stock to Class A common stock	90		1	(90	)		(1	)		—		—			—
Net loss applicable to common shares	—		—	—			—			—		(1,266	)		(1,266	)
BALANCE, December 31, 1997	7,593		76	1,260			13			34,446		(804	)		33,731
Conversion of Class B common stock to Class A common stock	57		1	(57	)		(1	)		—		—			0
Stock issued through employee stock purchase plan	6		0	—			—			57		—			57
Stock options exercised	124		1	—			—			1,204		—			1,205
Net loss applicable to common shares	—		—	—			—			—		(15,714	)		(15,714	)
BALANCE, December 31, 1998	7,780		78	1,203			12			35,707		(16,518	)		19,279
Conversion of Class B common stock to Class A common stock (Unaudited)	59		1	(59	)		(1	)		—		—			—
Stock issued through employee stock purchase plan (Unaudited)	17		—	—			—			151		—			151
Stock options exercised (Unaudited)	79		—	—			—			618		—			618
Net loss applicable to common shares (Unaudited)	—		—	—			—			—		(4,476	)		(4,476	)
BALANCE, September 30, 1999 (Unaudited)	7,935	$	79	1,144		$	11		$	36,476	$	(20,994	)	$	15,572

The accompanying notes are an integral part of these consolidated financial statements.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years Ended December 31									Nine Months Ended September 30
	1996			1997			1998			1998			1999
										(Unaudited)
OPERATING ACTIVITIES:
Net income (loss)	$	3,477		$	(1,266	)	$	(6,624	)	$	(3,840	)	$	7,289
Adjustments to reconcile to net cash provided by operating activities
Depreciation and amortization		5,539			12,458			26,532			17,523			29,549
Extraordinary item—early extinguishment of debt		—			—			1,042			1,042			—
Equity in (earnings) losses of unconsolidated affiliates		(52	)		350			655			654			2
Change in minority interest		(331	)		(3,082	)		(4,552	)		(3,125	)		(1,663	)
Other		(184	)		(42	)		7			(60	)		769
Change in other operating elements:
Accounts receivable		(3,220	)		(1,008	)		(1,058	)		(1,512	)		(9,273	)
Inventories		(682	)		(27	)		(230	)		249			(748	)
Other current assets		(246	)		(262	)		365			(308	)		189
Accounts payable		4,872			(2,525	)		9,097			1,220			(4,494	)
Advance billings and customer deposits		435			797			(16	)		6,230			557
Other accrued expenses		31			2,649			3,346			(83	)		3,917
Net cash provided by operating activities		9,639			8,042			28,564			17,990			26,094
INVESTING ACTIVITIES:
Purchases of property and equipment, net		(24,214	)		(34,928	)		(41,491	)		(23,956	)		(15,694	)
Contributions to unconsolidated affiliates		(225	)		(2	)		—			—			—
Acquisition of Glacial Lakes Cellular		—			—			—			—			(11,156	)
Acquisition of Atlantic and Western Maine Cellular		—			—			(269,984	)		(269,984	)		—
Acquisition of Unicel and Northern Maine		—			(85,706	)		—			—			—
Acquisition of FCC licenses		—			—			—			—			(8,655	)
Other		(997	)		(3,983	)		(1,734	)		(1,621	)		(550	)
Net cash used in investing activities		(25,436	)		(124,619	)		(313,209	)		(295,561	)		(36,055	)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options		—			—			1,262			1,227			770
Proceeds from issuance of senior subordinated notes		—			—			125,000			125,000			—
Proceeds from issuance of senior exchangeable preferred stock		—			—			125,000			125,000			—
Proceeds from issuance of common stock		26,540			—			—			—			—
Proceeds from issuance of long-term debt		14,741			137,695			193,625			188,625			24,000
Proceeds from termination of interest rate swap		—			—			1,003			1,003			360
Repayments of long-term debt		(25,372	)		(18,161	)		(148,625	)		(143,625	)		(16,000	)
Payments of debt issuance costs		—			(1,199	)		(12,553	)		(12,505	)		(158	)
Net cash provided by financing activities		15,909			118,335			284,712			284,725			8,972
NET INCREASE (DECREASE) IN CASH		112			1,758			67			7,154			(989	)
CASH, at beginning of period		125			237			1,995			1,995			2,062
CASH, at end of period	$	237		$	1,995		$	2,062		$	9,149		$	1,073

The accompanying notes are an integral part of these consolidated financial statements.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1997 and 1998

(Including data applicable to unaudited periods)

1. Organization and Nature of Business:

   Rural Cellular Corporation and its subsidiaries (the Company or Rural Cellular) provide cellular communication service in the northern half of Minnesota and portions of New England and paging service in northern Minnesota, eastern North Dakota and portions of Maine. The Company operates cellular and paging systems under licenses granted by the Federal Communications Commission (FCC). Its operations are subject to the applicable rules and regulations of the FCC.

2. Acquisitions:

Unity Cellular System, Inc.

   In May 1997, the Company completed the acquisition of the Maine wireless telephone operations and related assets of Unity Cellular Systems, Inc. and related cellular and microwave licenses from InterCel, Inc. ("InterCel"). In addition, the Company acquired InterCel's 51% interest in the Northern Maine Cellular Partnership, and acquired the remaining 49% from an unrelated third party. The cost for all of the acquired properties in Maine was approximately $85.7 million. The acquired licenses cover the Bangor, Maine metropolitan statistical area (MSA), Maine rural service area (RSA) 2 and Maine RSA 3 (which includes Augusta, the state capitol). Rural Cellular operates its Maine operations through a wholly owned subsidiary, MRCC, Inc. Headquartered in Bangor, MRCC serves a 20,500 square-mile service area that encompasses approximately 518,000 POPs.

Atlantic Cellular Company, L.P.

   In July 1998, the Company completed the acquisition of the Massachusetts, New Hampshire, New York and Vermont cellular telephone licenses, operations and related assets of Atlantic Cellular Company L.P. and one of its subsidiaries, for approximately $262.5 million. Under the terms of the agreement, the Company acquired a contiguous, multi-state service area of 21,000 square miles, encompassing approximately 1.1 million POPs. The cellular properties acquired from Atlantic include: (i) northwestern Massachusetts (RSA 1); (ii) western New Hampshire (RSA 1); (iii) the northeastern corner of New York (RSA 2); and (iv) the entire state of Vermont (RSA 1, RSA 2, and the Burlington MSA). In addition, the Company acquired Atlantic's long distance business. The Atlantic operations are operated through a wholly-owned subsidiary, RCC Atlantic, Inc.

Western Maine Cellular, Inc.

   In August 1998, the Company completed the acquisition of the outstanding stock of Western Maine Cellular, Inc. (WMC), a wholly-owned subsidiary of Utilities, Inc. for approximately $7.5 million. WMC provides cellular service to western Maine RSA 1, which incorporates a 3,700 square-mile service area of western Maine and encompasses 83,000 POPs. WMC is operated through MRCC, Inc.

Glacial Lakes Cellular 2000.

   In February 1999, the Company acquired RGI, Inc. d/b/a Glacial Lakes Cellular 2000 (Glacial) for approximately $11.9 million. Operating under the name Cellular 2000®, Glacial provides cellular service to northeastern South Dakota (RSA 4), which includes eight counties and is adjacent to Rural Cellular's existing cellular operation in northern and central Minnesota. Glacial's service area encompasses 69,000 POPs.

Accounting Treatment

   The purchase prices for Atlantic, WMC and Glacial were allocated to the net assets based on their estimated fair values and the excess was recorded as goodwill and is being amortized over 39 years. All of the above acquisitions have been accounted for under the purchase method of accounting; accordingly, operating results have been included from the date of acquisition.

   The following unaudited pro forma information presents the consolidated results of operations as if the acquisitions of Atlantic, WMC and Glacial had occurred as of January 1, 1997. This summary is not necessarily indicative of what the results of operations of the Company and the acquired entities would have been if they had been a single entity during such period, nor does it purport to represent results of operations for any future periods.

	Years Ended December 31						Nine Months Ended September 30
	1997			1998			1998			1999
	(In thousands, except per share data)
Total revenues	$	104,601		$	126,613		$	93,260		$	117,630
Operating income		9,178			13,454			11,026			25,943
Net loss	$	(28,557	)	$	(25,432	)	$	(19,972	)	$	(4,548	)
Basic and diluted net loss per share	$	(3.23	)	$	(2.85	)	$	(2.25	)	$	(0.50	)

3. Summary of Significant Accounting Policies:

Recently Issued Accounting Pronouncements

   Rural Cellular adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," effective January 1, 1998. SFAS 130 establishes standards for reporting and display of comprehensive earnings and its components in financial statements; however, the adoption of this Statement had no impact on the Company's net earnings or shareholders' equity. SFAS 130 requires minimum pension liability adjustments, unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity, to be included in other comprehensive earnings.

   Rural Cellular adopted SFAS 131, "Disclosures about Segments of an Enterprise and Related Information" effective January 1, 1998. This standard requires companies to disclose segment data based on how management makes decisions about allocating resources to segments and how it measures segment performance. SFAS 131 requires companies to disclose a measure of segment profit or loss (operating income, for example), segment assets and reconciliations to consolidated totals. It also requires entity-wide disclosures about a company's products and services, its major customers and the material countries in which it holds assets and reports revenues.

   SFAS 133, "Accounting for Derivative Instruments and for Hedging Activities," was issued in July 1998. This standard establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at fair value. SFAS 133 requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, and designate and assess the effectiveness of transactions that receive hedge accounting treatment. SFAS 133 is effective for fiscal years beginning after June 15, 2000, and cannot be applied retroactively. The Company has not yet quantified the impact of adopting SFAS 133 on its financial statements; however, SFAS 133 could increase the volatility of reported earnings and other comprehensive income once adopted.

   In April 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. The initial application of SOP 98-5 will be reported as the cumulative effect of a change in accounting principle. The Company adopted SOP 98-5 effective January 1, 1999. The adoption of SOP 98-5 has not had a material effect on its financial position or results of operations.

Principles of Consolidation

   The consolidated financial statements include the accounts of Rural Cellular and its wholly-owned subsidiaries, RCC Atlantic, Inc., MRCC, Inc., RCC Paging, Inc., RCC Atlantic Long Distance, Inc., RCC Network, Inc. and the majority owned joint venture, Wireless Alliance, LLC ("Wireless Alliance"). All significant intercompany balances and transactions have been eliminated. Investments in unconsolidated affiliates represent investments in companies in which RCC has a 20% to 50% ownership interest and which are accounted for under the equity method.

Revenue Recognition

   Rural Cellular receives revenues by providing cellular and paging services to its customers and other cellular carriers traveling (roaming) in its service areas and from sales and rentals of cellular and paging equipment and accessories. Service revenue consists of the base monthly service fee and airtime revenue. Base monthly service fees are billed one month in advance and are recognized in the month earned. Airtime revenue is recognized when service is provided. Roamer revenue consists of the fee charged to other cellular carriers' customers for roaming in its service area as well as related airtime revenue for use of the Company's cellular network. Roamer revenue is recognized when the service is rendered. The Company recognizes other service revenues from equipment installations, equipment leases and connection fees when earned.

Income Taxes

   The Company follows the liability method of accounting for income taxes and deferred income taxes are based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities based on enacted tax laws.

Net Income (Loss) Per Common Share

   In 1997, the Company adopted SFAS 128, "Earnings per Share." SFAS 128 replaced primary earnings per share (EPS) with basic EPS. Basic EPS is computed by dividing net income (loss) applicable to common shares by the weighted average number of shares outstanding during the year. Diluted EPS is computed by including dilutive common stock equivalents with the basic weighted average shares outstanding. At the time of adoption, all prior year EPS was restated in accordance with SFAS 128.

Inventories

   Inventories consist of cellular telephone equipment, pagers and accessories and are stated at the lower of cost, determined using the specific identification method, or market.

Property and Equipment

   Property and equipment are recorded at cost. Additions, improvements or major renewals are capitalized, while expenditures that do not enhance or extend the asset's useful life are charged to operating expenses as incurred. Depreciation is computed using the straight-line method based on the estimated useful life of the asset.

   The components of property and equipment and the useful lives of the assets are as follows:

	December 31
							September 30, 1999
	1997			1998						Useful Lives
	(In thousands)
Land	$	1,965		$	4,247		$	4,806		—
Building and towers		23,836			43,947			48,810		15 Years
Equipment		62,164			115,661			124,451		2-10 Years
Furniture and fixtures		6,604			9,620			11,219		3-10 Years
Assets under construction		7,225			777			381		—
		101,794			174,252			189,667
Less: accumulated depreciation		(23,874	)		(42,538	)		(60,903	)
Property and equipment, net	$	77,920		$	131,714		$	128,764

   Network construction expenditures are recorded as assets under construction until the system or assets are placed in service, at which time the assets are transferred to the appropriate property and equipment category. As a component of assets under construction, the Company capitalizes salaries of its engineering employees during the construction period for projects that extend beyond one year.

Licenses and Other Intangible Assets

   Licenses consist of the cost of acquiring paging licenses, the value assigned to the Wireless Alliance personal communication systems (PCS) licenses, other PCS licenses, local multi-point distribution (LMDs) licenses, and the value assigned to cellular licenses acquired through the acquisitions of Unicel, Northern Maine, Atlantic, Western Maine Cellular, and Glacial Lakes Cellular. Other intangibles, resulting primarily from the acquisitions of Unicel, Northern Maine, Atlantic, Western Maine Cellular and Glacial Lakes Cellular, include the value assigned to subscriber lists and goodwill.

   The components of licenses and other intangible assets and their amortizable lives are as follows:

	December 31
							September 30, 1999			Amortizable Lives
	1997			1998
	(In thousands)
Licenses:
Cellular	$	31,891		$	135,407		$	138,857		33 - 39 Years
PCS		9,629			9,629			11,115		40 Years
Paging		275			275			275		30 Years
LMDs		—			—			7,044		40 Years
Other intangible assets:
Goodwill		26,452			122,744			127,826		33 - 39 Years
Subscriber lists		14,591			49,725			52,830		10 Years
		82,838			317,780			337,947
Less: accumulated amortization		(1,490	)		(8,108	)		(16,812	)
Licenses and other intangible assets, net	$	81,348		$	309,672		$	321,135

Deferred Debt Issuance Costs

   Deferred debt issuance costs relate to the Credit Facility, the Senior Subordinated Notes and the Exchangeable Preferred Stock (see Notes 4 and 6). These costs are being amortized over the respective instruments' terms.

Other Assets

   Other assets primarily consist of costs related to spectrum relocation, restricted investments, and investments in unconsolidated affiliates. Investments in unconsolidated affiliates are accounted for using the equity method and represent the Company's ownership interests in Cellular 2000, Inc., an entity organized to own the trade name and related trademark for Cellular 2000. Restricted investments represent investments in stock of the St. Paul Bank for Cooperatives and are stated at cost, which approximates fair value. The restricted investments were purchased pursuant to the terms of a loan agreement and are restricted as to withdrawal.

Business and Credit Concentrations

   The Company's cellular customers are geographically located in the northern half of Minnesota, eastern North Dakota, western and central Maine, Vermont, New Hampshire, northeastern New York, and north central Massachusetts. No single customer accounted for a significant amount of revenues or accounts receivable.

Long-Lived Assets

   Rural Cellular periodically evaluates the value of all long-lived assets to determine if events have occurred that indicate the remaining estimated useful lives of these assets may warrant revision, or whether the remaining balance may not be recoverable. If asset recovery is in question, Rural Cellular uses an estimate of future net cash flows over the remaining useful lives of the long-lived assets to measure recoverability.

Fair Value of Financial Instruments

   SFAS 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. SFAS 107 excludes certain financial instruments and all non-financial instruments from the disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value.

   The carrying amounts and fair values of financial instruments are as follows:

	Carrying Amount						Estimated Fair Value
	December 31				September 30		December 31					September 30
	1997		1998		1999		1997		1998			1999
	(In thousands)
Financial asset:
Cash	$	1,995	$	2,062	$	1,073	$	1,995	$	2,062		$	1,073
Financial liabilities:
$300 million credit facility		—		173,000		181,000		—		173,000			181,000
$160 million credit facility		128,000		—		—		128,000		—			—
95/8% Senior Subordinated Notes		—		125,000		125,000		—		131,250			130,000
Other financial instruments:
$65 million Toronto Dominion Bank interest rate swap agreement		—		—		—		—		(1,701	)		(112	)
$65 million Bank Boston interest rate swap agreement		—		—		—		—		(2,238	)		(77	)
$35 million PNC Bank interest rate swap agreement		—		—		—		—		(819	)		(302	)

Use of Estimates

   The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Ultimate results could differ from those estimates.

Interim Financial Information

   The accompanying balance sheet as of September 30, 1999, the statements of operations and cash flows for the nine months ended September 30, 1998 and 1999 and the statement of shareholders' equity for the nine months ended September 30, 1999 are unaudited but, in the opinion of management, include all adjustments, consisting solely of normal recurring adjustments necessary for a fair presentation of results for these interim periods. The results of operations for the nine months ended September 30, 1999 are not necessarily indicative of results to be expected for the entire year.

Reclassifications

   Certain 1997 and 1996 amounts in the accompanying consolidated financial statements have been reclassified to conform to the 1998 and September 30, 1999 presentation. These reclassifications had no effect on consolidated net income or total shareholders' equity as previously reported.

4. Long-Term Debt:

   Rural Cellular had the following long-term debt outstanding:

	December 31
					September 30, 1999
	1997		1998
	(In thousands)
$160.0 million credit facility	$	128,000	$	—	$	—
$300.0 million credit facility		—		173,000		181,000
Deferred gain on hedge agreement		—		851		1,143
95/8% Senior Subordinated Notes		—		125,000		125,000
Long-term debt	$	128,000	$	298,851	$	307,143

$160.0 Million Credit Facility—On May 28, 1998, the Company repaid $140.0 million of the outstanding principal amount of its $160.0 million credit facility utilizing the proceeds from the issuance of Senior Subordinated Notes and $125.0 million in 11³/8% Senior Exchangeable Preferred Stock. Accordingly, the Company recognized an extraordinary loss of $1.0 million related to the early retirement of debt, representing the unamortized debt issuance costs.

$300.0 Million Credit Facility—On July 1, 1998, the Company entered into a revolving credit facility for $300.0 million with a syndicate of banks, which replaced the $160.0 million credit facility. At RCC's discretion, advances under the $300.0 million credit facility bear interest at the London Interbank Offering Rate (LIBOR) plus an applicable margin (1.75% and 1.25% as of December 30, 1998 and September 30, 1999, respectively) and will be based on the ratio of indebtedness to annualized operating cash flow as of the end of the most recently completed fiscal quarter. As of December 31, 1998 and September 30, 1999, the effective rate of interest on the $300.0 million credit facility, excluding the impact of the hedge agreements, was 7.07% and 7.04%, respectively. A commitment fee of 0.375% on the unused portion of the $300.0 million credit facility is payable quarterly. Borrowings under the $300.0 million credit facility are secured by a pledge of all the assets of Rural Cellular excluding our ownership in the stock of Cellular 2000, Inc. Mandatory commitment reductions will be required upon any material sale of assets. The $300.0 million credit facility is subject to various covenants including the ratio of indebtedness to annualized operating cash flow and the ratio of annualized operating cash flow to interest expense. As of December 31, 1998 and September 30, 1999, Rural Cellular was in compliance with all covenants under the $300.0 million credit facility.

   The $300.0 million credit facility is to be reduced in equal quarterly amounts as follows:

Year	Amount
	(In thousands)
1999	$	—
2000		—
2001		13,575
2002		18,100
2003		27,150
2004		36,200
Thereafter		85,975
Total	$	181,000

9⁵/8% Senior Subordinated Notes—On May 14, 1998, the Company issued $125.0 million principal amount of 9⁵/8% Senior Subordinated Notes due 2008 (Senior Subordinated Notes). Interest on the Senior Subordinated Notes began to accrue on May 14, 1998, and is payable semi-annually on May 15 and November 15 of each year, commencing on November 15, 1998. The Senior Subordinated Notes will mature on May 15, 2008, and are redeemable, in whole or in part, at the Company's option, at any time on or after May 15, 2003. In addition, at any time prior to May 15, 2001, the Company may redeem up to 25% of the aggregate principal amount of the Senior Subordinated Notes with the net cash proceeds of a qualified event at a price equal to 109.625% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption; provided that at least $90.0 million in aggregate principal amount of the Senior Subordinated Notes remains outstanding immediately after such redemption. A qualified event is a public equity offering or one or more strategic equity investments which in either case results in aggregate net proceeds of not less than $50.0 million. Within 30 days after the occurrence of a change of control, the Company will be required to make an offer to purchase all outstanding Senior Subordinated Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. The Senior Subordinated Notes are unsecured senior subordinated obligations and will be subordinated in right of payment to future senior indebtedness (as defined in the Indenture related to the Senior Subordinated Notes) and effectively subordinated to all obligations of the Company's subsidiaries (including the guarantees by such subsidiaries of the $300.0 Million Credit Facility described above).

5. Financial Instruments:

   As required by the $300.0 million credit facility, Rural Cellular maintains interest rate swaps on at least 50% of the principal amount of the loans outstanding such that the weighted average term of all interest rate protection is not less than three years at all dates of determination, and as otherwise provided in the $300.0 million credit facility. Under the interest rate swap agreements, the Company will pay the difference between LIBOR and the fixed swap rate if the LIBOR exceeds the swap rate. Income and expense associated with swap transactions are accrued over the periods prescribed by the contracts. As of December 31, 1998 and September 30, 1999, the Company was party to three interest rate swaps expiring August 6, 2003, with a total outstanding notional amount of $165.0 million and a fair market value of $(4.8) million and $(491,000) respectively.

   In anticipation of the offering of the Senior Subordinated Notes and Senior Exchangeable Preferred Stock, the Company also entered into a $150.0 million hedge agreement. On May 12, 1998, Rural Cellular settled the hedge agreement, resulting in a gain of $1.0 million. This gain is being accreted as a reduction of interest expense over the lives of the underlying debt instruments.

   On February 2, 1999, Rural Cellular also entered into two swap transactions with TD Bank Financial Group, which, together, effectively lower the interest rate on the Senior Subordinated Notes from 9.625% to 8.535% through May 2003. During the period of June 2003 through May 2008, the Company will pay the difference between LIBOR and the fixed swap rate if the swap rate exceeds LIBOR, and will receive the difference between LIBOR and the fixed swap rate if LIBOR exceeds the swap rate. Settlement occurs on the semiannual reset dates specified by the terms of the contracts. The notional principal amount of the interest rates swaps outstanding was $125.0 million at February 2, 1999. As of September 30, 1999, the positive fair market value of the swap transactions was $3.3 million.

6. Senior Exchangeable Preferred Stock:

   On May 14, 1998, the Company completed the placement of 125,000 shares of 11³/8% Senior Exchangeable Preferred Stock with a liquidation preference of $1,000 per share. The Senior Exchangeable Preferred Stock is senior to all classes of junior preferred stock and common stock of Rural Cellular with respect to dividend rights and rights on liquidation, winding-up and dissolution. The Senior Exchangeable Preferred Stock is non-voting, except as otherwise required by law and as provided in the Certificate of Designation. Dividends on the Senior Exchangeable Preferred Stock are cumulative, accrue at 11³/8% per annum from May 14, 1998, are payable quarterly, and may be paid, at the Company's option, on any dividend payment date occurring on or before May 15, 2003, either in cash or by the issuance of additional shares of Senior Exchangeable Preferred Stock having an aggregate liquidation preference equal to the amount of such dividends. Thereafter, all dividends will be payable in cash only. As of December 31, 1998 and September 30, 1999, Rural Cellular had accrued $1.9 million and $2.0 million, respectively, in preferred stock dividends which were distributed on February 15, 1999 and November 15, 1999 respectively.

7. Shareholders' Equity:

Authorized Shares

   The Restated Articles of Incorporation authorize the issuance of 30,000,000 shares of $.01 par value stock. Of such authorized shares, 9,550,000 shares and 9,300,000 shares have not been designated as to class as of December 31, 1998 and September 30, 1999, respectively.

Initial Public Offering

   During 1996, Rural Cellular completed an initial public offering of 3,450,000 shares of Class A common stock, of which 2,869,863 shares were sold by Rural Cellular and 580,137 previously issued shares were sold by certain shareholders. The net proceeds were approximately $26.0 million and were used to repay long-term debt and to provide capital for future expansion. In connection with the initial public offering, the exercise price of 150,600 employee stock options was fixed at $10.00 per share, the price at which the stock was sold to the public in the initial public offering.

Common Stock Rights

   Class A common shareholders are entitled to one vote for each share owned and Class B common shareholders are entitled to ten votes for each share owned. Each share of Class B common stock may at any time be converted into one share of Class A common stock at the option of the holder. Additionally, all issued Class B common shares will be converted into an equivalent number of Class A common shares upon the affirmative vote of not less than 66²/3 of the then issued Class B common shares. Further, Class B common shares are automatically converted to an equal number of Class A common shares if they are transferred to anyone who is not an affiliate of the transferring shareholder of Rural Cellular.

Stock Compensation Plans

   The stock compensation plan (the Plan) for employees authorizes the issuance of up to 1,400,000 shares of Class A common stock in the form of stock options, stock appreciation rights or other stock-based awards. The Plan provides that the exercise price of any option shall not be less than 85% of the fair market value of the Class A common stock as of the date of the grant (100% in the case of incentive stock options). Options and other awards granted under the Plan vest and become exercisable as determined by the Board of Directors or a stock option committee.

   The stock option plan for nonemployee directors authorizes the issuance of up to 210,000 shares of Class A common stock. The plan provides that the option price shall not be less than the fair market value of the Class A common stock as of the date of grant. The options vest and become exercisable over one to three years and expire between four and six years from the date of grant.

   The employee stock purchase plan authorizes the issuance of 200,000 shares of Class A common stock. Employees who satisfy certain length of service and other criteria are permitted to purchase shares at 85% of the fair market value of the Class A common stock on January 1 or December 31 of each year, whichever is lower.

   Options outstanding as of September 30, 1999 have exercise prices ranging between $8.75 and $43.25. Information related to stock options is as follows:

	December 31
													September 30, 1999
	1996				1997				1998
Options	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding, beginning of period	—		$	—	459,700		$	9.99	735,200		$	9.47	872,700		$	11.17
Granted	549,700			10.32	319,750			9.09	291,250			14.66	323,250			14.53
Exercised	—			—	—			—	(123,750	)		9.78	(86,478	)		9.85
Canceled	(90,000	)		12.00	(44,250	)		8.75	(30,000	)		9.13	(12,500	)		10.74
Outstanding, end of period	459,700			9.99	735,200			9.47	872,700			11.17	1,096,972			12.27
Exercisable, end of period	55,200		$	9.92	161,895		$	9.92	264,590		$	10.06	307,862		$	11.31
Weighted average fair value of options granted			$	5.60			$	6.40			$	10.94			$	10.82

   Rural Cellular accounts for stock options under Accounting Principles Board Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for the plans been determined consistent with SFAS 123, "Accounting for Stock-Based Compensation," the Company's results of operations and net income (loss) per share would have approximated the following pro forma amounts:

	Years Ended December 31								Nine Months Ended September 30
	1996		1997			1998			1998			1999
	(in thousands, except per share data)
Net income (loss):
As reported	$	3,477	$	(1,266	)	$	(15,714	)	$	(9,238	)	$	(4,476	)
Pro forma		3,215		(1,890	)		(16,790	)		(10,045	)		(5,925	)
Basic and diluted net income (loss) per share:
As reported	$	0.41	$	(0.14	)	$	(1.76	)	$	(1.04	)	$	(0.50	)
Pro forma		0.38		(0.21	)		(1.88	)		(1.13	)		(0.66	)

   The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1997, 1998 and the nine months period ended September 30, 1999: expected volatility of 51.6%, 50.5% and 53.3%, respectively; risk-free interest rates of 6.3%, 5.6% and 8.3%; and no expected dividend yield. The per share weighted average fair value of options granted in 1997, 1998 and the nine months ended September 30, 1999 was $6.40, $10.04, and $10.82, respectively.

8. Income Taxes:

   The components of the Company's income tax provisions are as follows:

	Years Ended December 31
	1996		1997		1998
	(in thousands)
Current:
Federal	$	106	$	–	$	–
State		94		–		–
		200		–		–
Deferred		–		–		–
	$	200	$	–	$	–

   Reconciliation between the federal income tax rate and the effective income tax rate is as follows:

	Years Ended December 31
	1996		1997		1998
Federal income tax rate	34.0	%	—	%	—	%
Tax benefit of loss carryforwards	(29.8	)	—		—
State income taxes, net of federal tax benefit	1.2		—		—
	5.4	%	—	%	—	%

   The income tax effect of the items that create deferred income tax assets and liabilities are as follows:

	December 31
	1997			1998
	(in thousands)
Deferred income tax assets:
Operating loss carryforwards	$	4,488		$	14,383
Tax credit carryforwards		—			485
Temporary differences:
Allowance for doubtful accounts		450			616
Other		302			1,745
Valuation allowance		(400	)		(7,781	)
Total deferred income tax assets		4,840			9,448
Deferred income tax liabilities:
Depreciation		(3,971	)		(6,225	)
Intangible assets		(724	)		(3,223	)
Other		(145	)		—
Net deferred income tax asset	$	—		$	—

   A valuation allowance was established in 1997 for net deferred income tax assets not expected to be offset by deferred income tax liabilities due to the uncertainty of the realization of future tax benefits.

   As of December 31, 1998, the Company had tax operating loss carryforwards of $36.0 million available to offset future income tax liabilities. These carryforwards expire in the years 2006 through 2018. The Tax Reform Act of 1986 contains provisions that may limit the availability and timing of usage of net operating loss carryforwards in the event of certain changes in the ownership of its common stock.

9. Commitments and Contingencies:

Employment Agreements

   Rural Cellular has employment agreements with executive officers with terms ranging from two to three years. These agreements provide for payment of amounts up to three times their annual compensation if there is a termination of their employment as a result of change in control of the Company, as defined in the agreements. The maximum contingent liability under these agreements was $3.0 million at September 30, 1999.

Legal and Regulatory Matters

   Rural Cellular is subject to various legal and regulatory matters arising in the normal course of business. Management does not believe any of these matters will have a significant effect on the Company and its financial position or results of operations.

Leases (In thousands)

   Rural Cellular leases office space and real estate under noncancelable operating leases. Future minimum payments under these leases as of September 30, 1999, are as follows:

Year	Amount
1999 (three months ended December 31, 1999)	$	728
2000		2,393
2001		1,473
2002		1,193
2003		988
Thereafter		1,418
Total	$	8,193

   Under the terms of the lease agreements, Rural Cellular also is responsible for certain operating expenses and taxes. Total rent expense of $379, $839 and $2,300 was charged to operations for the years ended December 31, 1996, 1997 and 1998, respectively. For the nine months ended September 30, 1998 and 1999, rent expense was $1,266 and $2,427, respectively.

10. Related-Party Transactions (in thousands):

Service Agreement

   Rural Cellular paid Switch 2000 LLC for cellular switching and interconnection services. The rates of reimbursement are negotiated by the parties to the agreement and are similar to rates charged by other service providers. Amounts billed by Switch 2000, Inc. to RCC totaled $4,824, $3,230 and $710 for the years ended December 31, 1996, 1997, and 1998, respectively. In September 1998, the Company sold its interest in Switch 2000 for book value.

Roaming Agreement

   Rural Cellular has a roaming agreement with a partnership that is affiliated with a beneficial owner of greater than 10% of our common stock. Roaming charges are passed through to the customer. The rates of reimbursement are negotiated by the parties to the agreement and reflect rates charged by other service providers. Net payments by the Company to the partnership were $331, $167 and $664 for the years ended December 31, 1996, 1997 and 1998, respectively. For the nine months ended September 30, 1998 and 1999, net payments to the partnership were $498 and $871, respectively.

11. Defined Contribution Plan (in thousands):

   Rural Cellular has a defined contribution savings and profit-sharing plan for employees who meet certain age and service requirements. Under the savings portion of the plan, employees may elect to contribute a percentage of their salaries to the plan, with the Company contributing a matching percentage of the employees' contributions. Under the profit-sharing portion of the plan, Rural Cellular contributes a percentage of employees' salaries. Contributions charged to operations for the years ended December 31, 1996, 1997 and 1998 were $74, $162 and $297, respectively. Contributions charged to operations for the nine months ended September 30, 1998 and 1999 were $191 and $391, respectively. The percentages matched under the savings portion of the plan and contributes under the profit-sharing portion of the plan are determined annually by the Company's Board of Directors.

12. Segment Information:

   Rural Cellular's consolidated financial statements consist of the business units RCC Cellular and Wireless Alliance. RCC Cellular includes cellular operations in Minnesota, Maine, Massachusetts, New Hampshire, New York and Vermont. Wireless Alliance, a joint venture that commenced cellular reselling operations in November 1996 and launched its first PCS networks in the second quarter of 1998, is 70% owned by the Company and 30% owned by APT Inc., an affiliate of Aerial Communications, Inc. Information about operations in these business units for the years ended December 31, 1998 and 1997 and the nine months ended September 30, 1998 and 1999 are as follows:

	Years Ended December 31						Nine Months Ended September 30
	1997			1998			1998			1999
	(In thousands)
Statements of Operations:
Revenues
RCC Cellular	$	47,591		$	87,720		$	58,391		$	110,581
Wireless Alliance LLC		7,339			12,369			9,273			7,008
Eliminating		(1,027	)		(1,557	)		(1,240	)		(312	)
Total revenues		53,903			98,532			66,424			117,277
Operating expenses
RCC Cellular		39,531			71,853			47,133			78,921
Wireless Alliance LLC		13,564			20,237			14,788			12,755
Eliminating		(1,027	)		(1,557	)		(1,240	)		(312	)
Total operating expenses		52,068			90,533			60,681			91,364
Operating income (loss)
RCC Cellular		8,060			15,867			11,258			31,660
Wireless Alliance LLC		(6,225	)		(7,868	)		(5,515	)		(5,747	)
Total operating income		1,835			7,999			5,743			25,913
Depreciation and amortization
RCC Cellular		11,800			23,490			15,520			25,883
Wireless Alliance LLC		658			3,042			2,003			3,666
Total depreciation and amortization		12,458			26,532			17,523			29,549
Interest expense
RCC Cellular		6,065			19,208			12,487			20,207
Wireless Alliance LLC		65			1,439			871			1,901
Eliminating		(65	)		(1,587	)		(1,018	)		(1,901	)
Total interest expense		6,065			19,060			12,340			20,207
Other Operating Data:
EBITDA(1)
RCC Cellular	$	19,860		$	39,357		$	26,778		$	57,543
Wireless Alliance LLC		(5,567	)		(4,826	)		(3,512	)		(2,081	)
Total EBITDA		14,293			34,531			23,266			55,462
Capital expenditures
RCC Cellular		26,127			29,563			15,726			12,584
Wireless Alliance LLC		8,801			13,300			8,230			3,110
Total capital expenditures		34,928			42,863			23,956			15,694
Balance Sheet Data:
Property and equipment
RCC Cellular		92,630			151,227			139,435			165,815
Wireless Alliance LLC		9,164			23,025			17,385			23,852
Total property and equipment		101,794			174,252			156,820			189,667
Total assets
RCC Cellular		175,612			480,251						504,422
Wireless Alliance LLC		24,273			34,870						33,995
Eliminating		(18,297	)		(34,597	)					(43,083	)
Total assets	$	181,588		$	480,524					$	495,334

(1)

EBITDA is the sum of earnings before interest, taxes, depreciation and amortization and is utilized as a performance measure within the cellular industry. EBITDA is not intended to be a performance measure that should be regarded as an alternative for other performance measures and should not be considered in isolation. EBITDA is not a measurement of financial performance under generally accepted accounting principles and does not reflect all expenses of doing business (e.g., interest expense, depreciation). Accordingly, EBITDA should not be considered as having greater significance than or as an alternative to net income or operating income as an indicator of operating performance or to cash flows as a measure of liquidity.

13. Supplemental Cash Flow Information:

	Years Ended December 31
							Nine Months Ended September 30 1999
	1996		1997		1998
	(In thousands)
Cash paid for:
Interest	$	564	$	4,630	$	16,273	$	16,302
Income taxes		805		64		—		34
Non-cash investing and financing activities:
Preferred stock dividends paid in kind		—		—		7,201		11,566
Contribution by an affiliate of Aerial Communications, Inc. of PCS licenses		6,453		3,175		—		—

14. Events Subsequent to September 30, 1999:

   On November 8, 1999 the Company announced that its subsidiary, RCC Holdings, Inc., entered into a definitive agreement to acquire the cellular telephone licenses, operations and related assets of Triton Cellular Partners, L.P. The transaction is valued at approximately $1.24 billion. Triton Cellular's Partners, L.P. multi-state service area covers approximately 152,000 square miles with approximately 2.3 million POPs. This acquisition will bring the Company's total managed POPs to approximately 5.4 million. In addition, Triton Cellular Partners, L.P.'s 209,000 cellular customers will increase the Company's customer base from approximately 244,000 at the end of third quarter 1999 to 453,000.

INDEPENDENT AUDITORS' REPORT

The Partners of Atlantic Cellular Company, L.P. and Subsidiaries:

   We have audited the accompanying consolidated balance sheets of Atlantic Cellular Company, L.P. and Subsidiaries as of December 31, 1996 and 1997 and the related consolidated statements of operations, partners' capital and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Atlantic Cellular Company, L.P. and Subsidiaries at December 31, 1996 and 1997 and the results of their operations and cash flows for each of the years in the three year period ended December 31, 1997, in conformity with generally accepted accounting principles.

   As discussed in note 9, the Partnership entered into two separate purchase and sale agreements in February 1998 which will result in the sale of substantially all of the Partnership's assets.

KPMG LLP

Providence, Rhode Island
February 17, 1998

ATLANTIC CELLULAR COMPANY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	1996			1997		June 30, 1998
						(Unaudited)
Assets
Current assets (notes 7 and 9):
Cash and cash equivalents	$	124,789		$	1,014,060	$	995,462
Due from Hawaiian Wireless, Inc. (notes 2(a) and 3(e))		405,235			659,568		688,398
Due from Michiana Partnership, L.P.		15,622			4,620		15,050
Accounts receivable, net of allowance for doubtful accounts of $277,000 in 1996, $447,000 in 1997 and $534,000 (unaudited) in 1998		3,890,862			3,676,212		5,928,470
Inventories of cellular telephones and equipment		1,083,699			602,882		413,735
Total current assets		5,520,207			5,957,342		8,041,115
Property and equipment (notes 4, 5, 7, 8 and 9):
Cellular telephone systems		179,053,629			162,555,149		163,891,393
PCS Licenses		—			9,996,948		—
Other property and equipment		5,490,066			4,913,454		4,994,927
		184,543,695			177,465,551		168,886,320
Less accumulated depreciation and amortization		38,439,343			41,064,781		46,028,418
Net property and equipment		146,104,352			136,400,770		122,857,902
Other assets (note 7 and 9):
Deposit (note 5)		3,000,000			—		—
Investment in equity securities		292,491			—		—
Investments in other wireless entities (note 6)		355,551			297,835		102,563
Other assets		11,900			—		—
Deferred financing costs, net of accumulated amortization		1,965,366			1,637,805		1,474,025
Total other assets		5,625,308			1,935,640		1,576,588
Total assets	$	157,249,867		$	144,293,752	$	132,475,605
Liabilities and Partners' Capital
Current liabilities:
Accounts payable	$	17,608		$	19,321	$	102,392
Due to Atlantic Cellular Management Company (note 2(a))		2,890,849			911,689		576,909
Accrued consulting fees (note 2(c))		75,000			75,000		—
Accrued interest (note 7)		546,638			458,089		—
Deposits on sales of other wireless entities		—			123,345		123,345
Current portion of capital lease obligations (note 8)		73,635			49,316		37,967
Total current liabilities		3,603,730			1,636,760		840,613
Notes payable — bank (note 7)		81,500,000			40,000,000		23,000,000
Capital lease obligations, net of current portion (note 8)		83,595			32,059		28,652
Total liabilities		85,187,325			41,668,819		23,869,265
Minority interests in partnerships (note 3)		7,689,420			7,536,804		7,523,144
Partners' capital		64,708,945			95,088,129		101,083,196
Valuation allowance for unrealized loss on equity securities		(335,823	)		—		—
Partners' capital, net		64,373,122			95,088,129		101,083,196
Commitments (note 8)
Total liabilities and partners' capital	$	157,249,867		$	144,293,752	$	132,475,605

See accompanying notes to consolidated financial statements.

ATLANTIC CELLULAR COMPANY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended December 31,									Six months ended June 30, 1997			Six months ended June 30, 1998
	1995			1996			1997
										(Unaudited)			(Unaudited)
Revenues from cellular operations	$	34,350,693		$	43,283,440		$	45,087,272		$	22,041,848		$	25,005,945
Operating costs:
Costs of cellular operations		22,605,996			25,870,905			25,604,407			13,338,297			11,758,921
Corporate overhead expenses (notes 2(a) and 3)		2,595,020			3,034,394			4,078,365			1,681,778			2,101,693
Depreciation and amortization		9,264,938			10,204,142			9,885,345			5,339,456			4,963,637
Total operating costs		34,465,954			39,109,441			39,568,117			20,359,531			18,824,251
Income (loss) from operations		(115,261	)		4,173,999			5,519,155			1,682,317			6,181,694
Other income (expenses):
Gain on sale of Mountain Cellular assets (note 3(b))		—			—			28,076,875			28,076,875			—
Management fee income (note 2(a))		—			1,200,000			1,200,000			600,000			600,000
Interest expense		(6,958,712	)		(6,502,602	)		(4,170,338	)		(2,474,266	)		(1,406,765	)
Interest income		142,010			145,552			201,073			100,537			89,866
Amortization of deferred financing fees		(629,637	)		(590,802	)		(327,561	)		(163,780	)		(163,780	)
Consulting fees (note 2(c))		(150,000	)		(150,000	)		(150,000	)		(75,000	)		(75,000	)
Loss on sale of equity securities		(206,540	)		—			(50,799	)		—			—
Gain (loss) on sale of equipment		—			—			(79,723	)		68,176			—
Gain from sale of PCS licenses and SMR Channels		—			50,625			—			—			2,869,531
Equity in net income (loss) of Michiana Partnership, L.P. and distribution from related gain on sale		(466	)		4,545			7,886			—			885,861
Total other income (expenses), net		(7,803,345	)		(5,842,682	)		24,707,413			26,132,542			2,799,713
Income (loss) before minority partners' share of loss		(7,918,606	)		(1,668,683	)		30,226,568			27,814,859			8,981,407
Minority partners' share of income (loss)		(694,557	)		(221,687	)		(152,616	)		(82,777	)		(13,660	)
Net income (loss)	$	(7,224,049	)	$	(1,446,996	)	$	30,379,184		$	27,897,636		$	8,995,067

See accompanying notes to consolidated financial statements.

ATLANTIC CELLULAR COMPANY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL

Balance at December 31, 1994	$	77,160,416
Net loss		(7,224,049	)
Balance at December 31, 1995		69,936,367
Stock distribution (note 3(e))		(3,780,426	)
Net loss		(1,446,996	)
Balance at December 31, 1996		64,708,945
Net income		30,379,184
Balance at December 31, 1997		95,088,129
Distributions (unaudited)		(3,000,000	)
Net income (unaudited)		8,995,067
Balance at June 30, 1998 (unaudited)	$	101,083,196

See accompanying notes to consolidated financial statements.

ATLANTIC CELLULAR COMPANY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended December 31
										Six months ended June 30, 1997			Six months ended June 30, 1998
	1995			1996			1997
										(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	(7,224,049	)	$	(1,446,996	)	$	30,379,184		$	27,897,636		$	8,995,067
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Gain on sale of Mountain Cellular assets		—			—			(28,076,875	)		(28,076,875	)		—
(Gain) loss on sale of equipment		—			—			79,723			(68,176	)		—
Depreciation and amortization		9,849,573			10,794,944			10,212,906			5,503,236			5,127,417
Gain on sale of PCS Licenses and SMR Channels		—			(50,625	)		—			—			(2,869,531	)
Loss on sale of equity securities		206,540			—			50,799			50,799			—
Equity in income of unconsolidated investment		—			4,545			7,886			—			5,601
Minority partners' share of loss		(694,557	)		(221,687	)		(152,616	)		(82,777	)		(13,660	)
Provision for doubtful accounts		446,793			276,610			521,517			210,910			221,899
Changes in assets and liabilities:
(Increase) decrease in due from Hawaiian Wireless, Inc.		—			(405,235	)		(254,333	)		78,745			(28,830	)
Decrease (increase) in due from Michiana Partnership, L.P.		25,108			4,587			11,002			(117,434	)		(10,430	)
Increase in accounts receivable		(1,638,288	)		(385,860	)		(791,330	)		(223,343	)		(2,474,157	)
Decrease (increase) in inventories		581,562			(223,907	)		480,817			540,133			189,147
(Decrease) increase in accounts payable		52,982			(315,977	)		1,713			551,574			83,071
Increase (decrease) in advances from Atlantic Cellular Management Company		1,107,686			622,369			(1,979,160	)		(3,703,516	)		(334,780	)
Decrease in accrued interest		(138,406	)		(78,568	)		(88,549	)		(546,638	)		(458,089	)
Decrease in accrued consulting fees											(75,000	)		(75,000	)
Increase in deposit		—			—			123,345			—			—
Net cash provided by operating activities		2,574,944			8,574,200			10,526,029			1,939,274			8,357,725
Cash flows from investing activities:
Net proceeds from sale of Mountain Cellular assets		—			—			41,314,294			41,314,294			—
Purchase and/or build-out of cellular telephone systems		(9,541,700	)		(6,053,502	)		(2,745,947	)		(1,677,091	)		(1,417,717	)
Purchase of PCS licenses		—			—			(9,996,948	)		—			—
Proceeds from sale of PCS licenses and disposal of other wireless investments		—			—			—			—			13,056,150
Other capital expenditures		(1,187,873	)		(967,700	)		(374,039	)		—			—
Investment in specialized mobile radio systems		(1,509,511	)		—			—			—			—
(Increase) decrease in other investments		8,716			(42,680	)		50,000			(456,105	)		—
Proceeds from sale of equity securities		373,460			—			577,514			577,514			—
Proceeds from sale of equipment		—			—			88,018			—			—
Decrease in other assets		—			—			—			11,900			—
(Increase) decrease in deposits		—			(3,000,000	)		3,000,000			3,000,000			—
Net cash provided by (used in) investing activities		(11,856,908	)		(10,063,882	)		31,912,892			42,770,512			11,638,433
Cash flows from financing activities:
(Payments) borrowings under senior secured revolver, net		7,000,000			—			(41,500,000	)		(41,500,000	)		(17,000,000	)
Decrease (increase) in note receivable		(1,500,000	)		1,500,000			—			(2,879,300	)		—
Repayment of note payable other, net		(500,000	)		—			—			—			—
Payments on capital lease obligations		(27,120	)		(62,500	)		(49,650	)		(157,230	)		(14,756	)
Proceeds from minority partners' capital contributions		160,800			—			—			—			—
Increase in deferred financing costs		(193,811	)		(115,878	)		—			—			—
Distribution to partners		—			—			—			—			(3,000,000	)
Net cash provided by (used in) financing activities		4,939,869			1,321,622			(41,549,650	)		(44,536,530	)		(20,014,756	)
Net increase (decrease) in cash and cash equivalents		(4,342,095	)		(168,060	)		889,271			173,256			(18,598	)
Cash and cash equivalents at beginning of period		4,634,944			292,849			124,789			124,789			1,014,060
Cash and cash equivalents at end of period	$	292,849		$	124,789		$	1,014,060		$	298,045		$	995,462
Supplemental cash flow information:
Non cash investing and financing activities:
- Contribution of net assets to an affiliated entity	$	—		$	3,928,000		$	—		$	—		$	—
- Interest payments	$	6,947,000		$	6,581,000		$	4,082,000		$	2,474,000		$	1,407,000
- Acquisition of property and equipment through capital lease	$	141,000		$	—		$	—		$	—		$	—

See accompanying notes to consolidated financial statements.

ATLANTIC CELLULAR COMPANY, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1995, 1996, and 1997

(1) Summary of Significant Accounting Policies:

(a) Organization

   Atlantic Cellular Company, L.P. (the Partnership) is a Delaware limited partnership created on May 5, 1989 to acquire, own and operate cellular telephone systems throughout the United States. The term of the partnership will continue until December 31, 2009, unless terminated earlier under the provisions of the Partnership Agreement. On August 28, 1990 the original partnership agreement was amended to allow additional partners to join the partnership under terms and conditions set forth in the amended partnership agreement. In July 1996, the Partnership Agreement was again amended to allow for the distribution of shares of HW Holding, Inc. to individual partners under the terms and conditions set forth in the Amendment Agreement (see note 3(e)).

   The partners and their respective capital account balances at December 31, 1995, 1996, and 1997 are reflected in the accompanying Statements of Partners' Capital. Profits, losses and distributable cash are allocated to the individual partners based upon their adjusted capital contributions and subject to certain special allocations as defined in the amended partnership agreement.

(b) Principles of Consolidation

   The consolidated financial statements include the accounts of Atlantic Cellular Company, L.P. and the following subsidiaries:

   Atlantic Cellular/New Hampshire RSA Number One Limited Partnership (NH #1)

   ACC Cellular Holdings, L.P. (ACCCH)

   Mountain Cellular, L.P. (MC)

   ACC Wireless L.P. (ACCW)

   ACC Wireless Holdings, L.P. (ACCWH)

   Hawaiian Wireless Partners, L.P. (HWP)

   The Partnership owns a direct interest in NH #1 of 50.01% and owned a direct interest in HWP of 83.7% in 1995. In 1996, HWP was dissolved as discussed in note 3(e). The remaining partnerships are owned 100% by the Partnership and its existing partners (see note 3). All significant intercompany balances and transactions have been eliminated in consolidation.

   At December 31, 1995, 1996, and 1997 ACCW owned a 17.2%, 17.2% and 6.7% interest, respectively, in Michiana Partnership, L.P. (Michiana), an unconsolidated equity investment, which was formed to acquire Specialized Mobile Radio (SMR) channels. ACCW is also the General Partner. On March 21, 1997 the partnership agreement was amended to admit additional partners and to approve the transactions contemplated by an Assignment and Assumption Agreement with an unrelated third party. Under the terms of the Assignment and Assumption Agreement essentially all assets of Michiana are to be sold during 1998. ACCW has recorded its investment in Michiana in accordance with the equity method of accounting. In addition to its investment, the Partnership was owed $20,209, $15,622 and $4,620 from Michiana at December 31, 1995, 1996, and 1997, respectively.

(c) Cash and Cash Equivalents

   Cash equivalents represent overnight repurchase agreements whose underlying security consists of U.S. Treasury securities. At December 31, 1996 and 1997, approximately $108,000 and $997,000, respectively is held by ACCW for investment in wireless telephone systems other than cellular.

(d) Inventories of Cellular Telephones and Equipment

   Inventories of cellular telephones and equipment are stated at cost determined on a specific identification basis.

(e) Property and Equipment

   Costs incurred for the purchase of various personal communication service ("PCS") licenses are stated at cost. Costs incurred for the purchase of cellular telephone construction permits and licenses are capitalized and amortized using the straight-line method over twenty-five years. Costs incurred for the construction of the cellular telephone systems are stated at cost and depreciated over ten years using the straight-line method. Property and equipment are stated at cost and depreciated or amortized using the straight-line method with estimated useful lives ranging from five to ten years.

(f) Investment in Equity Securities

   Investment in equity securities consisted of shares of a publicly traded, unconsolidated company that owns and operates various wireless communication systems. This investment was classified as available for sale and carried at its market value. The equity securities were sold during 1997.

(g) Investments in Other Wireless Entities

   Investment in other wireless entities includes investments made in unconsolidated partnerships, including Michiana, formed to carry on business in other wireless communication systems and/or licenses. Investments in unconsolidated partnerships are accounted for under the equity method of accounting and investments in licenses are carried at the lower of their cost or net realizable value.

(h) Deferred Financing Costs

   Costs incurred in obtaining a revolving loan agreement from a consortium of banks in October, 1994 are being amortized on a straight line basis over eight years, the life of the debt. Costs incurred to provide interest rate protection, such as interest rate caps, required by the revolving loan agreement, are being amortized as a rate adjustment over the respective lives of the cap or swap agreements.

(i)  Derivatives

   Premiums paid for purchased interest rate cap agreements and options to enter into interest swap agreements are amortized to interest expense over the terms of the agreement. Unamortized premiums are included in deferred financing cost in the consolidated balance sheet.

(j)  Revenue and Expense Recognition

   Cellular airtime revenue and access charges are recognized as service is provided. Cellular airtime is billed in arrears and a majority of access charges are billed in advance. Subscriber acquisition costs are expensed when incurred. Accounts receivable consist mainly of amounts due from subscribers and other cellular companies whose subscribers use the Company's cellular service.

(k) Financial Instruments

   Financial instruments of the Partnership consist of cash, accounts receivable, accounts payable, notes payable and capital lease obligations. The carrying amounts of these financial instruments approximate their fair value.

(l)  Income Taxes

   No provision is made for income taxes since the income or loss of the Partnership is included in the income tax returns of the partners. Income for financial statement purposes will differ from taxable income because of the requirement to capitalize organization and pre-operating expenses and because of different methods of depreciation used for tax and financial statement purposes.

(m) Use of Estimates

   The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(2) Related Party Transactions:

(a) Management Contracts

   Atlantic Cellular Company, L.P. and Subsidiaries have entered into a management agreement with Atlantic Cellular Management Company, the managing general partner, to manage the business and affairs of the Partnership. Under the terms of the management agreement, Atlantic Cellular Management Company is reimbursed for all costs associated with its operation of the Partnership, which totaled approximately $2,600,000, $3,000,000 and $4,000,000 in 1995, 1996, and 1997, respectively. The Partnership advances monies to the management company which it uses to pay liabilities of the Partnership.

   On March 6, 1996, Atlantic Cellular Company, L.P. entered into a management agreement with Hawaiian Wireless, Inc. (see note 3(e)) to manage the design, construction and operation of its SMR system in the State of Hawaii. The Partnership is reimbursed for all out of pocket expenses reasonably incurred and receives an annual management fee in an amount equal to the greater of $1,200,000 or 5% of gross revenues of the SMR system, not to exceed $2,000,000 annually. This management fee amounted to $1,200,000 for both 1996 and 1997. At December 31, 1996 and 1997, respectively, the Partnership was owed $405,235 and $659,568 pursuant to the management agreement.

(b) Reimbursement of Expenses

   Pursuant to the terms of the Partnership Agreement, all partners are reimbursed by the Partnership for any reasonable and necessary expenses, as defined in the Partnership Agreement, incurred by them on behalf of the Partnership.

(c) Consulting Fees

   Pursuant to the amended Partnership Agreement, the Partnership was obligated for consulting fees to the following partners:

SP Cellular Corp.—Commencing July 1, 1990, SP Cellular Corp. is entitled to an annual fee of $93,750 payable on June 27, 1991, and each succeeding year until termination of the partnership. At December 31, 1996 and 1997, $46,875 of this annual fee remained to be paid.

Saugatuck Associates, Inc.—Commencing July 1, 1990, Saugatuck Associates, Inc. is entitled to an annual fee of $150,000 payable on June 27, 1991 and each succeeding year until June 27, 1994. Thereafter, $56,250 will be paid each June 27th until termination of the partnership. At December 31, 1996 and 1997, $28,125 of the annual fee remained to be paid.

(3) Consolidated Subsidiaries:

(a) Atlantic Cellular/New Hampshire RSA Number One Limited Partnership

   On February 21, 1991, the Partnership entered into an agreement to purchase a 50.01% interest in the non-wireline New Hampshire Number One Rural Service Area License (the license) from New Hampshire One Cellular Telephone Company, Inc. (the Limited Partner), which owned 100% of the license. Concurrently with the transaction to purchase, the Partnership and the Limited Partner formed a new partnership, Atlantic Cellular/New Hampshire RSA Number One Limited Partnership (NH #1), and each contributed its interests in the license (50.01% and 49.99%, respectively) to NH #1. The purpose of NH #1 is to construct and operate a cellular system in the license area.

   The Partnership has a put/call option to purchase the remaining 49.99% from the Limited Partner on August 31, 1998 at fair market value under the terms of the agreement as amended on September 30, 1997. Upon transfer of any portion of the Limited Partners' interest, the Partnership is to receive 20% of the sale price in excess of the Limited Partners' adjusted capital contribution as defined by the Partnership Agreement.

   The Partnership manages NH #1 under a management agreement. The Partnership is reimbursed for all direct costs. At December 31, 1996 and 1997, the amount currently payable to/receivable from NH #1 was $226,484 and $752,092, respectively (eliminated in consolidation). Indirect costs are reimbursed based on the allocation of total indirect expenses of the Partnership to all cellular systems managed by the Partnership according to the relative size of their 1980 and 1990 U.S. Census populations, but not to exceed $437,000 per year for NH #1. In addition, the Partnership receives a management fee of $96,000 per year or 5% of gross revenues calculated on a quarterly basis, whichever is higher. The Partnership is currently restricted under the terms of a revolving loan agreement with various banks to receive payment for indirect costs and management fees. Indirect costs and management fees not paid currently are stated as a deferred account receivable and are subject to interest at 13.5%. At December 31, 1996 and 1997, the deferred account receivable amounted to $5,416,840 and $7,130,396 (eliminated in consolidation) and interest for the years ended December 31, 1995, 1996, and 1997 amounted to $425,168, $604,839 and $850,449, respectively (eliminated in consolidation).

(b) Mountain Cellular

   On October 25, 1994, the Partnership, together with its existing partners, formed Mountain Cellular, L.P. (MC) for the sole purpose of conducting its business operations in the California Rural Service Area No. 11. As a result, the Partnership contributed its assets used solely in the California system to the new partnership. At December 31, 1996 the Partnership owned approximately 99% of MC, and the remaining 1% was owned by ACCCH.

   On April 30, 1997, the Partnership sold substantially all its assets in MC to an unrelated third party. Total proceeds of the sale were $41,500,000 plus working capital on hand at the time of the sale. At the date of sale the carrying value of the assets sold was approximately $13,200,000. Net income for MC included in the operations of the Partnership for 1997 was approximately $410,000. The proceeds of the sale were used to reduce the outstanding balance of the Partnership's revolving loan agreement.

(c) ACC Wireless, L.P.

   On October 25, 1994, the Partnership, together with its existing partners, formed ACC Wireless, L.P. (ACCW) for the purpose of investing, developing and operating wireless telephone systems other than cellular. The Partnership contributed approximately $2,800,000 in cash plus other assets comprised of options to purchase SMR channels and equipment to the new partnership. At December 31, 1996 and 1997 the Partnership owned approximately 99% of ACCW, and the remaining 1% is owned by ACCWH.

(d) ACC Cellular Holdings, L.P. and ACC Wireless Holdings, L.P.

   On October 25, 1994, the Partnership formed ACC Cellular Holdings, L.P. (ACCCH) and ACC Wireless Holdings, L.P. (ACCWH). Concurrent with their formation, the Partnership assigned its interest in ACCCH and ACCWH to its existing partners in the same proportion of their respective ownership ratio in ACLP.

(e) Hawaiian Wireless Partners, L.P.

   On October 25, 1994, ACCW formed Hawaiian Wireless Partners, L.P. (HWP) by contributing options to purchase 100 SMR Channels for a 74.1% ownership. The remaining 25.9% was owned by a single minority partner, who also contributed options to purchase SMR channels. During 1995, ACCW contributed additional options plus cash to HWP, increasing its ownership interest to 83.7% at December 31, 1995. The purpose of HWP, which was consolidated with the Partnership in the 1995 financial statements, is to purchase, develop and operate enhanced specialized mobile radio systems in the State of Hawaii.

   On March 6, 1996, substantially all the net assets of HWP totaling approximately $3,900,000 were contributed to HW Holding, Inc. (HWH) in exchange for 2,386 shares of HWH Series A Convertible Preferred Stock. The 2,386 shares of HWH Series A Convertible Preferred Stock of HWH were concurrently distributed to the partners of HWP with approximately 1,989 shares being distributed to the Partnership. In July 1996, the Partnership Agreement was amended to allow for the distribution of these shares to partners per the terms and conditions set forth in the Amendment Agreement. On May 23, 1996, HWP was dissolved.

(4) Property and Equipment:

   Property and equipment consists of the following at December 31:

	1996		1997
Construction permits and licenses	$	135,016,100	$	121,016,080
Operating systems		44,037,529		41,539,069
PCS Licenses		—		9,996,948
Leasehold improvements		1,139,326		871,698
Other property and equipment		4,350,740		4,041,756
	$	184,543,695	$	177,465,551

(5) Deposit:

   On August 9, 1996 a wholly-owned subsidiary of ACC Wireless, L.P. deposited $3,000,000 with the Federal Communications Commission as part of the requirements enabling the subsidiary to participate in an auction of additional spectrum which commenced in August 1996. In January 1997, the auction terminated with the subsidiary of ACC Wireless L.P. winning high bids in nine markets for a total cost of approximately $10,000,000 (see note 9).

(6) Deposits on Sales of Other Wireless Entities:

   During 1997, an unconsolidated investee of the Partnership entered into an Assignment and Assumption Agreement with a third party to sell substantially all of its assets. The buyer was required to pay a portion of the total anticipated purchase price as a down payment. The Partnership's pro rata share of the down payment, totaling $123,345, was distributed by the investee to the Partnership. This amount has been recorded as deposits on sale of other wireless entities at December 31, 1997. It is anticipated that the Partnership will recognize a gain on its investment upon consummation of the sale which is expected to occur in 1998.

(7) Notes Payable — Bank:

   On October 25, 1994 the Partnership entered into a $90,000,000 revolving loan agreement with a consortium of banks. The loan agreement was amended on September 11, 1996 to reduce the borrowing rate, to eliminate certain financial covenants and to adjust the schedule of principal repayments. The interest rate charged to the Partnership is based on a formula related to the bank's prime lending rate and LIBOR. The weighted average interest rate charged on outstanding balances was approximately 9%, 8% and 7% for the years ended December 31, 1995, 1996, and 1997, respectively. In addition, the Partnership is required to pay quarterly fees on the unused commitment. Substantially all of the cellular assets of the Partnership are pledged as security under the loan agreement. At December 31, 1996 and 1997, the outstanding borrowings under these loan agreements were $81,500,000 and $40,000,000, respectively. In accordance with the new revolving loan agreement, the Partnership's loan commitment will be reduced quarterly as follows:

Last Days of March, June, September and December in:	Quarterly Commitment Reduction	Annual Commitment Reduction
1998	1,125,000	$	4,500,000
1999	5,625,000		22,500,000
2000	5,062,500		20,250,000
2001	5,062,500		20,250,000
2002	5,625,000		22,500,000
		$	90,000,000

   At December 31, 1996 and 1997 the Partnership had an interest rate cap agreement on a notional amount of $35,000,000 of the note payable through June 4, 1998. As of December 31, 1996 and 1997 the fair value of this hedge approximated its carrying value. The fair value of the hedge agreement is the amount at which the agreement could be exchanged in a current transaction between willing parties and its value or cost is estimated using option pricing models and essentially values the potential for the agreement to become in-the-money through changes in interest rates during the remaining terms.

   The loan agreements contain various covenants including limitations on indebtedness, investments and certain transactions with Partners. The Partnership was in full compliance with all covenants at December 31, 1996 and 1997.

(8) Commitments:

   The Company is obligated under various capital leases entered into during 1996 and 1997 for vehicles used in its operations that expire at various dates during the next three years. The total capitalized cost of vehicles leased at December 31, 1996 and 1997 under capital leases is approximately $250,000 and $230,000, respectively.

   In addition, the Partnership leases facilities for its cellular offices, installation and operation locations, cell sites and corporate offices under operating lease agreements. Total rent expense was approximately $1,400,000, $1,600,000 and $2,000,000 in 1995, 1996, and 1997, respectively.

   The future minimum lease payments required pursuant to capital and operating leases as of December 31, 1997 are as follows:

	Operating		Capital
Year ended December 31:
1998	$	1,356,222	$	63,132
1999		1,055,287		29,842
2000		874,757		3,282
2001		665,250		—
2002		372,293		—
Thereafter		209,485		—
Total minimum lease payments	$	4,533,294		96,256
Less amount representing interest				14,881
Net minimum capital lease payments				81,375
Less current installments				49,316
Obligations under capital leases, excluding current installments			$	32,059

(9) Subsequent Event — Sale of Cellular Operations and PCS Licenses:

   On February 13, 1998, the Partnership entered into a purchase and sale agreement (the "Agreement") with an unrelated third party for the sale of the Partnership's cellular operations. The Agreement provides that substantially all of the assets of the Partnership will be transferred to the buyer for a purchase price of $256 million or $239 million depending on whether the transaction is structured as a sale of assets or a sale of partnership interests, respectively. The ultimate purchase price is subject to potential adjustments for working capital and a failure to attain targeted cash flow and subscriber levels as defined in the Agreement. The sale is expected to be consummated in 1998.

   On February 17, 1998, the Partnership entered into a separate purchase and sale agreement with a different third party buyer for the sale of all of the Partnership's PCS licenses for approximately $13 million. The carrying value of the PCS licenses is approximately $10 million. The sale is also expected to be consummated in 1998.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Triton Cellular Partners, L.P.:

   We have audited the accompanying consolidated balance sheets of Triton Cellular Partners, L.P. and Subsidiaries as of December 31, 1998 and September 30, 1999, and the related consolidated statements of operations, partners' equity and cash flows for the year ended December 31, 1998 and the nine months ended September 30, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Triton Cellular Partners, L.P. and Subsidiaries as of December 31, 1998 and September 30, 1999, and the results of its operations and its cash flows for the year ended December 31, 1998 and the nine months ended September 30, 1999, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania,
December 23, 1999

TRITON CELLULAR PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	December 31, 1998			September 30, 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,890		$	—
Accounts receivable, less allowance of $2,936 and $1,986		12,646			24,842
Inventories		1,282			3,974
Other current assets		3,131			1,314
Total current assets		20,949			30,130
PROPERTY AND EQUIPMENT, less accumulated depreciation of $3,736 and $12,898		48,822			90,788
LICENSES AND OTHER INTANGIBLE ASSETS, less accumulated amortization of $13,882 and $37,713		280,911			474,988
	$	350,682		$	595,906
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,021		$	7,835
Accrued expenses		7,433			8,826
Accrued interest		5,067			2,052
Due to related parties, net		951			1,046
Income tax payable		—			8,244
Advance billings and customer deposits		1,658			2,047
Total current liabilities		16,130			30,050
LONG-TERM DEBT		261,500			463,916
DEFERRED COMPENSATION		—			53,954
DEFERRED INCOME TAXES		6,231			1,511
Total liabilities		283,861			549,431
COMMITMENTS AND CONTINGENCIES (NOTE 12)
PARTNERS' EQUITY:
Partners' contributions		78,877			125,968
Accumulated deficit		(12,056	)		(79,493	)
Total partners' equity		66,821			46,475
	$	350,682		$	595,906

The accompanying notes are an integral part of these consolidated balance sheets.

TRITON CELLULAR PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

	Year Ended December 31, 1998			Nine Months Ended September 30, 1999
REVENUES:
Service	$	31,464		$	61,053
Roamer		14,208			37,870
Equipment		2,605			4,744
Total revenues		48,277			103,667
OPERATING EXPENSES:
Network costs		7,210			12,380
Cost of equipment sales		3,650			7,644
Sales and marketing		6,633			14,738
General and administrative		11,208			20,078
Deferred compensation		—			53,954
Depreciation and amortization		17,950			32,993
Total operating expenses		46,651			141,787
OPERATING INCOME (LOSS)		1,626			(38,120	)
OTHER INCOME (EXPENSE):
Interest expense		(14,059	)		(26,076	)
Interest income		262			283
Other income (expense), net		(13,797	)		(25,793	)
LOSS BEFORE INCOME TAXES		(12,171	)		(63,913	)
INCOME TAX EXPENSE (BENEFIT)		(115	)		3,524
NET LOSS	$	(12,056	)	$	(67,437	)

The accompanying notes are an integral part of these consolidated financial statements.

TRITON CELLULAR PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY

(In thousands)

	Partners' Contributions			Accumulated Deficit			Total
BALANCE, December 31, 1997	$	—		$	—		$	—
Partners' contributions		79,384			—			79,384
Costs related to capital contributions		(486	)		—			(486	)
Return of contribution		(21	)		—			(21	)
Net loss		—			(12,056	)		(12,056	)
BALANCE, December 31, 1998		78,877			(12,056	)		66,821
Partners' contributions		47,148			—			47,148
Costs related to capital contributions		(57	)		—			(57	)
Net loss		—			(67,437	)		(67,437	)
BALANCE, September 30, 1999	$	125,968		$	(79,493	)	$	46,475

The accompanying notes are an integral part of these consolidated financial statements.

TRITON CELLULAR PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31, 1998			Nine Months Ended September 30, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(12,056	)	$	(67,437	)
Adjustments to reconcile net loss to net cash provided by operating activities—
Depreciation and amortization		17,950			32,993
Deferred income taxes		(115	)		(4,720	)
Provision for bad debts		1,061			2,162
Deferred compensation		—			53,954
Accreted interest on seller notes		—			566
Change in other operating elements:
Accounts receivable		(5,565	)		(10,383	)
Inventories		(34	)		(1,853	)
Other current assets		(2,933	)		2,018
Accounts payable		(3,009	)		5,240
Accrued expenses		10,215			(2,492	)
Income tax payable		—			8,244
Other current liabilities		657			612
Net cash provided by operating activities		6,171			18,904
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(4,277	)		(25,773	)
Acquisitions, net of cash acquired		(314,014	)		(213,932	)
Net cash used in investing activities		(318,291	)		(239,705	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facility		253,000			175,600
Financing costs		(4,346	)		(5,859	)
Capital contributions from partners		66,922			47,148
Costs related to capital contributions		(486	)		(57	)
Return of capital contribution		(21	)		—
Advances from related parties, net		951			95
Other		(10	)		(16	)
Net cash provided by financing activities		316,010			216,911
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,890			(3,890	)
CASH AND CASH EQUIVALENTS, beginning of period		—			3,890
CASH AND CASH EQUIVALENTS, end of period	$	3,890		$	—

The accompanying notes are an integral part of these consolidated financial statements.

TRITON CELLULAR PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1998 and September 30, 1999

1. Organization and Nature of the Business:

   Triton Cellular Partners, L.P. was formed on December 3, 1997 by Triton Cellular, Inc., the general partner of the partnership, and commenced operations during 1998. Triton Cellular Partners, L.P. and its subsidiaries (Triton or the Company) provide cellular communication services in Washington, Oregon, Kansas, Alabama and Mississippi. The Company operates under licenses granted by the Federal Communications Commissions (FCC). The Company's operations are subject to the applicable rules and regulations of the FCC.

2. Summary of Significant Accounting Policies:

Principles of Consolidation

   The consolidated financial statements of the Company include the accounts of Triton Cellular Partners, L.P. and its wholly owned subsidiaries. All significant intercompany accounts and balances have been eliminated in consolidation.

Cash and Cash Equivalents

   Cash and cash equivalents includes cash on hand, demand deposits and short-term investments with original maturities of three months or less.

Inventories

   Inventories, consisting primarily of wireless handsets and accessories held for resale, are valued at the lower of cost or market. Cost is determined by the first-in, first-out method.

Property and Equipment

   Property and equipment are recorded at cost. Additions, improvements or major renewals are capitalized, while expenditures that do not enhance or extend the asset's useful life are charged to operating expenses as incurred. In connection with network construction-related activities, the Company capitalizes salaries of the Company's engineering employees responsible for the design and construction. Depreciation is calculated based on the straight-line method over the estimated useful lives of the respective assets as follows:

Network infrastructure and equipment	7 years
Office furniture, fixtures and equipment	5 years
Leasehold improvements	5 years or life of lease, if shorter
Automobiles	5 years
Computer equipment and software	3 years
Buildings	40 years

Licenses and Other Intangible Assets

   Licenses primarily consist of the cost of cellular licenses acquired through acquisitions. Other intangibles, resulting primarily from acquisitions, include the value assigned to covenants not to compete, subscriber lists and goodwill. License costs are amortized over a period of 40 years using the straight-line method. Goodwill is amortized over periods ranging from 20 to 40 years using the straight-line method. Covenants not to compete are amortized using the straight-line method over the covenant period and subscriber lists are amortized using the straight-line method over the estimated average customer life.

Deferred Costs (in thousands)

   Deferred costs consist primarily of fees incurred to secure credit facilities. Deferred financing costs are being amortized over eight and one-half years, the estimated period the debt will remain outstanding.

   Amortization expense of $489 and $793 was recorded in the year ended December 31, 1998 and nine months ended September 30, 1999, respectively.

Long-Lived Assets

   The Company periodically evaluates the value of all long-lived assets to determine if events have occurred that indicate that the remaining estimated useful lives of these assets may warrant revision, or whether the remaining balance may not be recoverable. If asset recovery is in question, the Company uses an estimate of future net cash flows over the remaining useful lives of the long-lived assets to measure recoverability.

Revenue Recognition

   The Company earns revenue by providing cellular and paging services to customers of the Company and of other cellular carriers traveling (roaming) in the Company's service area and from sales of cellular and paging equipment and accessories. Service revenue consists of the base monthly service fee and airtime revenue. Base monthly service fees are primarily billed one month in advance and are recognized in the month earned. Airtime revenue is recognized when service is provided. Roamer revenue consists of the fees charged to other cellular carriers' customers for roaming in the Company's service area as well as related airtime revenue for use of the Company's cellular network. Roamer revenue is recognized when the service is rendered. The Company recognizes other service revenues from equipment installations and connection fees when earned.

Income Taxes

   As a partnership, the Company and a majority of its subsidiaries are not subject to income taxes. However, income taxes applicable to Mississippi–34 Cellular Corporation (Mississippi–34), which has not elected treatment as an S corporation, are accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Financial Instruments

   SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

   The carrying amounts and fair values of the Company's financial instruments are as follows:

	Carrying Amount				Estimated Fair Value
	December 31, 1998		September 30, 1999		December 31, 1998			September 30, 1999
	(In thousands)
Financial Asset:
Cash	$	3,890	$	—	$	3,890		$	—
Financial Liabilities:
$500.0 million credit facility		253,000		428,600		253,000			428,600
Notes held by sellers (see Note 3)		2,000		28,816		2,000			28,816
Purchase option payable		6,500		6,500		6,500			6,500
Other Financial Instruments:
$50.0 million JP Morgan interest rate swap agreement		—		—		(1,538	)		218
$75.0 million PNC interest rate swap agreement		—		—		325			1,618
$50.0 million First Union interest rate swap agreement		—		—		518			1,363
$35.0 million Rabobank interest rate swap agreement		—		—		—			726

Customer Acquisition Costs

   Costs to acquire customers are charged to expense when incurred. Also, the Company charges advertising costs to expense when the advertisement occurs.

Use of Estimates

   The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Business and Credit Concentrations

   The Company's cellular customers are geographically located in Washington, Oregon, Kansas, Alabama and Mississippi. Revenues from one roaming partner represent approximately 10% and 17% of the Company's consolidated revenues for the year ended December 31, 1998 and the nine months ended September 30, 1999, respectively.

New Accounting Pronouncements

   The Company adopted SFAS No. 130, "Reporting Comprehensive Income," effective January 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components. The adoption of this statement had no impact on the Company's financial statements.

   The Company adopted Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up Activities," effective January 1, 1998. This statement requires that the costs of start-up activities, including organization costs, be expensed as incurred and is effective for fiscal years beginning after December 31, 1998. The adoption did not have a material effect on the Company's financial position or results of operations.

   SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000. The Company is evaluating the impact of the implementation of this accounting standard.

3. Acquisitions:

   During 1998 and 1999, the Company acquired six businesses for an aggregate purchase price of $563.0 million, consisting of approximately $515.8 million in cash, $34.8 million in debt and $12.4 million in limited partnership interest.

Point Telesystems, Inc.

   Effective January 16, 1998, the Company acquired the Oregon cellular telephone license, operations and related assets of Point Telesystems, Inc. (Point), an independent provider of wireless communication services in Oregon, for approximately $77.7 million in cash. Point provided cellular service to western Oregon 4 RSA, a 3,946 square-mile service area that encompasses 234,800 POPs. The Company entered into an option agreement (the Option) for consideration of $1.5 million, which was paid at the closing, which entitles the Company to acquire certain cell sites in the future for $6.5 million. The Option expires February 28, 2003. Since the Company expects to exercise the Option after January 1, 2001 and prior to its expiration, the total cost of $8.0 million has been included in the purchase price and the unpaid portion of $6.5 million has been reflected in the consolidated balance sheet as long-term debt. The Company has entered into an agreement to utilize the assets covered by the Option for the period prior to exercising the Option. The ongoing payments paid pursuant to this agreement have been reflected as interest expense in the consolidated statement of operations. The average effective interest rate over the term of the Option is 5.5%.

Columbia River Cellular Partners, L.P.

   Effective April 16, 1998, the Company acquired the Washington cellular telephone licenses, operations and related assets of Columbia River Cellular Partners, L.P. (Columbia), an independent provider of wireless communication services in Washington, for approximately $34.6 million, consisting of $22.2 million in cash and a partnership interest in the Company valued at $12.4 million. Columbia provided cellular service to Washington 2 and 3 RSAs, a 16,494 square-mile service area that encompasses 198,200 POPs.

U.S. Unwired, Inc.

   Effective July 1, 1998, the Company acquired the Western Kansas (Kansas 1, 2, 6, 7, 11, 12, and 13 RSAs and interim operating authority for Oklahoma 1 RSA) and Mississippi/Alabama (Mississippi 1 RSA and interim operating authority for the Mississippi 5 RSA and Alabama 3 and 4 RSAs) cellular telephone licenses, operations and related assets from U. S. Unwired, Inc. (U.S. Unwired), an independent provider of wireless communication services, for approximately $149.9 million in cash. These licenses allow the Company to provide cellular service to a 54,773 square-mile service area that encompasses 769,800 POPs.

   Effective July 1, 1998, the Company acquired the outstanding stock of Mississippi–34 from U.S. Unwired and Bailey Cable & Wireless, Inc. for approximately $22.3 million in cash. Mississippi—34 provides cellular service to Mississippi 3 and 4 RSAs, a 7,435 square-mile service area that encompasses 287,800 POPs.

AAT RSA Company Limited Partnership

   Effective August 7, 1998, the Company acquired the Alabama cellular telephone license, operations and related assets of AAT RSA Company Limited Partnership (AAT RSA), an independent provider of wireless communication services in Alabama for approximately $39.9 million, consisting of $37.9 million in cash and a 10% junior subordinated promissory note in the amount of $2.0 million payable on August 7, 2003. AAT RSA provided cellular service to Alabama 7 RSA, a 4,372 square-mile service area that encompasses 170,800 POPs.

BMCT, L.P.

   Effective February 1, 1999, the Company acquired the Oregon and Washington cellular telephone licenses, operations and related assets of BMCT, L.P., an independent provider of wireless communications to portions of both Washington and Oregon, for approximately $208.2 million, consisting of $203.2 million in cash and a 10% junior subordinated promissory note in the amount of $5.0 million payable on February 1, 2009. BMCT, L.P. provided cellular service to Oregon 3 and 6 RSAs and Washington 8 RSA, a 60,280 square-mile service area that encompasses 486,100 POPs.

Cranford Cellular Communications, L.L.C.

   Effective June 15, 1999, the Company acquired the Alabama 5 RSA license from Cranford Cellular Communications, L.L.C. (Cranford) for approximately $22.3 million, consisting of $1.0 million in cash and a 9% promissory note in the amount of $21.3 million payable on the later of i) January 2, 2000 or ii) the date that is 60 days after the date that the FCC permit order shall become a final order. Based upon all the facts that management currently has, the Company believes that it is probable that the FCC final order will not be issued within the next year. Therefore, the payable of $21.3 million has been classified as long-term debt in the accompanying balance sheets. The acquired license covers a 4,479 square-mile service area that encompasses 215,400 POPs.

   The purchase price allocations have been completed on a preliminary basis, subject to adjustment should new or additional facts about the businesses become known. All of the above acquisitions have been accounted for under the purchase method of accounting with the excess of the purchase price over estimated fair value of net tangible assets being allocated to licenses, goodwill, customer lists, and covenants not to compete; accordingly, operating results have been included from the date of acquisition. The following unaudited pro forma information presents the consolidated results of operations as if the above acquisitions had occurred as of January 1, 1998. This summary is not necessarily indicative of what the results of operations of the Company and the acquired entities would have been if they had been a single entity during such period, nor does it purport to represent results of operations for any future periods.

	Year Ended December 31, 1998			Nine Months Ended September 30, 1999
	(In thousands)
Total revenues	$	109,237		$	107,152
Operating loss	$	(1,063	)	$	(41,977	)
Net loss	$	(27,458	)	$	(68,480	)

4. Property and Equipment (in thousands):

   The Company's property and equipment consisted of the following:

	December 31, 1998			September 30, 1999
Network infrastructure and equipment	$	48,855		$	91,319
Office furniture, fixtures and other equipment		3,703			12,367
		52,558			103,686
Less: accumulated depreciation		(3,736	)		(12,898	)
Property and equipment, net	$	48,822		$	90,788

   Depreciation expense was $4,068 for the year ended December 31, 1998 and $9,162 for the nine months ended September 30, 1999.

5. Licenses and Other Intangible Assets (in thousands):

   The Company's intangible assets and their useful lives consisted of the following:

	December 31, 1998			September 30, 1999			Useful Lives
Licenses	$	140,053		$	286,976		40 years
Goodwill		110,399			143,771		20-40 years
Customer lists		25,458			52,447		4 years
Covenants not to compete		14,500			19,250		2-3 years
Bank financing		4,383			10,257		8.5 years
		294,793			512,701
Less: accumulated amortization		(13,882	)		(37,713	)
Other assets, net	$	280,911		$	474,988

   Amortization expense was $13,882 for the year ended December 31, 1998 and $23,831 for the nine months ended September 30, 1999.

6. Long-Term Debt:

   The Company's long-term debt consisted of the following:

	December 31, 1998		September 30, 1999
	(In thousands)
Credit facility	$	253,000	$	428,600
Note payable to AAT RSA (see Note 3)		2,000		2,233
Note payable to BMCT, L.P. (see Note 3)		—		5,333
Note payable to Cranford (see Note 3)		—		21,250
Purchase option payable to Point (see Note 3)		6,500		6,500
		261,500		463,916
Less: current portion of long-term debt		—		—
Long-term debt	$	261,500	$	463,916

   The Company has a credit facility agreement (the Credit Facility) with a group of commercial banks. The Credit Facility provides for 1) a $100.0 million revolving credit facility (the Revolver), 2) a $270.0 million term loan facility (Term Loan A) and 3) a $130.0 million term loan facility (Term Loan B).

   At the Company's discretion, advances under the Credit Facility bear interest at either the London Interbank Offered Rate (LIBOR) plus margin or the administrative agent's prime rate plus margin. The margin for the Revolver and Term Loan A is determined by the Company's leverage ratio and ranges between 1.5% and 2.75% for LIBOR advances and 0.5% and 1.75% for prime rate advances. With respect to Term Loan B, the margin is 3.25% for LIBOR advances and 2.25% for prime rate advances. The loan agreement requires an annual commitment fee of between .375% and 0.5% of the unused portion of the Revolver, depending on the Company's leverage ratio. Commitment fee payments are made quarterly.

   The commitment to make advances under the Revolver reduces each quarter beginning on September 30, 2001 and continuing through maturity on June 30, 2007. Balances outstanding under the term loans are required to be repaid in quarterly installments beginning on September 30, 2001 (Term Loan A) and September 30, 2002 (Term Loan B) and continuing through maturity on June 30, 2007 (Term Loan A) and December 31, 2007 (Term Loan B).

   The Credit Facility contains certain standard and customary covenants which, among other things, require the maintenance of certain financial ratios (including the ratio of indebtedness to annualized operating cash flow and the ratio of annualized operating cash flow to interest expense), the hedging of interest rate risk exposure, restrictions on partnership distributions and limitations on the sale of assets. During the periods presented, the Company was in compliance with all such covenants.

   The Credit Facility is collateralized by substantially all of the assets of the Company as well as its subsidiaries and a pledge of substantially all of the ownership interests in the Company and its subsidiaries.

   The weighted average interest rate for amounts outstanding under the Credit Facility was 7.99% at September 30, 1999 and 7.79% at December 31, 1998.

   Scheduled principal payments under the Credit Facility are as follows (in thousands):

2000	$	—
2001		13,500
2002		27,650
2003		32,350
2004 and thereafter		355,100
	$	428,600

   In June 1999, the Company established a $5.0 million demand discretionary line of credit (the Swing Line), as a sublimit under the Revolver, with a lender under the Credit Facility. The Swing Line borrowing rate is negotiated daily based upon 1) the federal funds rate, plus 2) the applicable margin for Eurodollar advances, minus 3) the commitment fee rate. There were no borrowings outstanding as of September 30, 1999.

7. Partners' Capital:

   Limited and general partners' capital contributions are recorded when received. Total committed capital of the limited partners at December 31, 1998 and September 30, 1999 was $155.1 million and $157.7 million, respectively, of which $79.3 million and $126.3 million, respectively, has been called and received. In addition, total committed capital of the general partner at December 31, 1998 and September 30, 1999 was $165,000 and $215,000, respectively, of which $67,000 and $215,000, respectively, has been called and funded. The Partnership Agreement provides for the following classes of limited partnership interest: Class A, Special Class A, Class B, Special Class B and Classes C, D, E, F and G.

   In general, the general partner is vested with the right to operate, manage, control and make all decisions affecting the affairs of the Company's business, except those which would be unlawful, in breach of its fiduciary responsibility to the limited partners or inconsistent with the Partnership Agreement. The Company has established an advisory committee comprised of three representatives of the Class A limited partners and two members of the general partner. The general partner must receive approval from the advisory committee for significant actions including, but not limited to, acquisition of investments; sale, exchange or disposition of any investment; any capital call or distribution of cash or securities; any borrowings, loans or guarantees by the Partnership; admission of additional partners; and determinations of fair value.

   Net profits and losses, both realized and unrealized, are allocated to the limited partners and general partner as prescribed in the Partnership Agreement. As set out in the Partnership Agreement, the general partner has the discretion to determine amounts available for distribution, subject to the approval of the advisory committee. However, proceeds from disposition of an investment (less reasonable reserves established by the general partner) must be distributed within 60 days of the disposition.

   Costs related to capital contributions consist primarily of legal fees and expenses incurred in connection with the offering of limited partnership interests and the Partnership Agreement. These costs are presented in the accompanying financial statements as a reduction of total partners' equity.

8. Deferred Compensation:

   During 1998 and 1999, the Company granted performance incentive awards to certain officers and key employees in the form of Class D, E and G limited partnership interests. Class F limited partnership interests have not been issued; however, the Company expects to issue such interests prior to the consummation of the transaction described in Note 15. These performance awards vest over four years from the date of issuance or 100% upon change of control. The performance awards entitle the holder to participate in the appreciation of the Company's value as defined in the limited partnership agreement. Deferred compensation expense for the performance awards is being recognized based upon a four-year vesting schedule as defined in the limited partnership agreement and the estimated value of the performance awards at the end of the appplicable period. Compensation expense was $0.0 for the year ended December 31, 1998 and $53.6 million for the nine months ended September 30, 1999.

   The unvested portion of the performance awards of approximately $40.5 million will continue to be recognized based upon a four-year vesting until the consummation of the transaction discussed in Note 15, at which time vesting will be accelerated to 100%.

9. Income Taxes:

   Expense (benefit) for income taxes were as follows:

	Year Ended December 31, 1998			Nine Months Ended September 30, 1999
	(In thousands)
Federal income taxes:
Current	$	—		$	7,172
Deferred		(100	)		(4,102	)
		(100	)		3,070
State income taxes:
Current		—			1,072
Deferred		(15	)		(618	)
		(15	)		454
Total income tax expense (benefit)	$	(115	)	$	3,524

   The income tax effect of the items that create deferred tax assets and liabilities are as follows:

	December 31, 1998		September 30, 1999
	(In thousands)
Deferred tax assets:
Nondeductible accrued liabilities	$	123	$	149
Net operating loss carryforward		2,156		—
Net deferred tax assets		2,279		149
Deferred tax liabilities:
Intangible assets		8,197		1,196
Fixed assets		313		464
Deferred tax liabilities		8,510		1,660
Net deferred tax liabilities	$	6,231	$	1,511

   The Company's income tax provision, relating to Mississippi–34, was computed based on the federal statutory rate and the average state statutory rates, net of the related federal benefit. The income tax provision for the nine months ended September 30, 1999 of approximately $3.5 million primarily relates to the transfer of FCC licenses by Mississippi–34 to a related party.

   During 1999, Mississippi–34 distributed its FCC licenses to a wholly owned subsidiary, a limited liability corporation, of the Company. For book purposes the transfer of FCC licenses was recorded at net book value. For tax purposes this transaction was a taxable event resulting in an income tax provision of approximately $3.5 million and an income tax payable of approximately $8.2 million.

   The Company recorded a deferred tax liability of $6.3 million when it acquired all of the outstanding stock of Mississippi–34. This represents the tax effect of temporary differences arising from the excess of the financial statement basis of the net assets acquired over the tax basis carried over from the predecessor.

   In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management has considered the scheduled reversal of deferred tax liabilities and tax planning strategies in making this assessment. Based upon the assessment, management believes it is more likely than not that the Company will realize the benefits of the deferred tax assets at September 30, 1999.

10. Financial Instruments:

   The Company has entered into interest rate protection agreements to lock in interest rates on a portion of its variable rate debt. The Company does not use these agreements for trading or other speculative purposes. Although these agreements are subject to fluctuations in value, they are generally offset by fluctuations in the value of the underlying instrument or anticipated transaction.

   Under each interest rate swap agreement, the Company pays the difference between LIBOR and the fixed rate if LIBOR exceeds the fixed rate. Income and expense associated with the transactions are recognized over periods prescribed by the contracts.

   The following table summarizes the Company's off-balance sheet interest rate swap agreements (pay fixed rate, receive variable rate) at September 30, 1999 (in thousands):

	Settlement	Notional Amount		Fair Value		Maturity	Pay Fixed Rate		Receive Variable Rate
1.	Monthly	$	50,000	$	1,363	October 2001	4.7	%	5.1	%
2.	Monthly		75,000		1,618	September 2001	4.9		5.1
3.	Quarterly		50,000		218	June 2002	6.0		5.1
4.	Monthly		35,000		726	March 2004	5.3		5.1

11. Related-Party Transactions (in thousands):

   The Company is affiliated with Triton PCS, Inc. and Triton Management Company, Inc. by certain common ownership and management overlap. As part of this affiliation, certain costs are incurred and paid by these related parties on behalf of the Company and are subsequently reimbursed. Such costs totaled $482 and $822 for the year ended December 31, 1998 and nine months ended September 30, 1999, respectively. In addition, under an agreement between the Company and Triton Management Company, Inc., management services rendered are charged to the Company. Such amounts totaled $469 and $405 for the year ended December 31, 1998 and the nine months ended September 30, 1999, respectively. The outstanding balance due to these related parties at December 31, 1998 and September 30, 1999 was $951 and $1,046, respectively.

12. Commitments and Contingencies (in thousands):

   The Company has entered into various leases for its offices, land for cell sites, cell sites, and furniture and equipment under operating leases expiring through December 31, 2010. As of September 30, 1999, the estimated future minimum rental payments under these lease agreements having an initial or remaining term in excess of one year were as follows:

2000	$	2,340
2001		2,128
2002		1,958
2003		1,815
2004		1,080
Thereafter		1,982
	$	11,303

   Rent expense under operating leases was $879 for year ended December 31, 1998 and $1,622 for the nine months ended September 30, 1999.

Legal and Regulatory Matters

   The Company is subject to various legal and regulatory matters arising in the normal course of business. Management does not believe any of these matters will have a significant effect on the Company and, accordingly, no provision for any liability that may result from these matters has been made.

13. 401(k) Savings Plan (in thousands):

   The Company sponsors a 401(k) savings plan which permits employees to make contributions to the savings plan on a pretax salary reduction basis in accordance with the Internal Revenue Code. Substantially all full-time employees are eligible to participate in the next quarterly open enrollment after 90 days of service. The Company matches a portion of the voluntary employee contributions. The cost of the savings plan charged to expense was $50 for the year ended December 31, 1998 and $205 for the nine-month period ended September 30, 1999.

14. Supplemental Cash Flow Information (in thousands):

	Year Ended December 31, 1998			Nine Months Ended September 30, 1999
Cash paid during the period for interest	$	9,046		$	27,353
Cash paid during the period for income taxes		—			29
Noncash investing and financing activities:
Value of partnership interest exchanged for assets acquired		(12,462	)		—
Liabilities assumed		(15,762	)		(28,942	)

15. Events Subsequent to September 30, 1999:

   On November 8, 1999, the Company entered into a purchase and sale agreement (the Agreement) with an unrelated third party for the sale of the Company's cellular operations. The Agreement provides that substantially all of the assets of the Company will be transferred to the buyer for a purchase price of approximately $1.24 billion, subject to potential adjustments for working capital as defined in the Agreement. The sale is expected to be consummated in the spring of 2000.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Point Telesystems, Inc.:

   We have audited the accompanying balance sheet of Point Telesystems, Inc. as of December 31, 1997, and the related statements of operations and retained earnings and cash flows for the period from January 1, 1998 to January 15, 1998 and for the year ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Point Telesystems, Inc. as of December 31, 1997, and the results of its operations and its cash flows for the period from January 1, 1998 to January 15, 1998 and for the year ended December 31, 1997 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
December 10, 1999

POINT TELESYSTEMS, INC.

BALANCE SHEET

As of December 31, 1997

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	635,171
Accounts receivable, less allowance for doubtful accounts of $105,000		2,321,461
Inventories		224,403
Other current assets		22,012
Total current assets		3,203,047
PROPERTY AND EQUIPMENT, less accumulated depreciation of $3,546,955		7,868,493
ORGANIZATION COSTS, less accumulated amortization of $16,234		87,880
	$	11,159,420
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	574,035
Advance billings and customer deposits		242,167
Accrued liabilities		387,048
Current portion of long-term debt		4,166
Total current liabilities		1,207,416
LONG-TERM DEBT		2,505,384
Total liabilities		3,712,800
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 25,000 shares authorized; 9,000 shares outstanding		90
Additional paid-in capital		4,406,927
Retained earnings		3,039,603
Total stockholders' equity		7,446,620
	$	11,159,420

The accompanying notes are an integral part of this balance sheet.

POINT TELESYSTEMS, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

	Year Ended December 31, 1997			Period From January 1, 1998 To January 15, 1998
REVENUES:
Service	$	12,792,723		$	556,478
Roamer		4,801,757			341,943
Equipment		981,093			65,664
Total revenues		18,575,573			964,085
OPERATING EXPENSES:
Network costs		3,662,273			280,087
Cost of equipment sales		1,370,629			73,183
Selling, general and administrative		6,337,281			620,897
Depreciation and amortization		983,615			46,026
Total operating expenses		12,353,798			1,020,193
OPERATING INCOME (LOSS)		6,221,775			(56,108	)
OTHER INCOME (EXPENSE):
Interest expense		(686,808	)		(130	)
Interest income		666,068			8,647
Other income (expense), net		(20,740	)		8,517
NET INCOME (LOSS)		6,201,035			(47,591	)
DISTRIBUTIONS TO STOCKHOLDERS		(5,397,722	)		(300,000	)
RETAINED EARNINGS, beginning of period		2,236,290			3,039,603
RETAINED EARNINGS, end of period	$	3,039,603		$	2,692,012

The accompanying notes are an integral part of these financial statements.

POINT TELESYSTEMS, INC.

STATEMENTS OF CASH FLOWS

	Year Ended December 31, 1997			Period from January 1, 1998 to January 15, 1998
OPERATING ACTIVITIES:
Net income (loss)	$	6,201,035		$	(47,591	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities—
Depreciation and amortization		983,615			46,026
Change in other operating elements:
Accounts receivable		26,502			227,530
Inventories		(29,801	)		12,550
Other current assets		(9,760	)		2,828
Accounts payable		363,559			(579,774	)
Bank overdraft		—			328,826
Customer security deposits		(6,365	)		(1,850	)
Accrued liabilities		(34,478	)		322,172
Net cash provided by operating activities		7,494,307			310,717
INVESTING ACTIVITIES:
Purchases of property and equipment		(2,156,327	)		(4,115	)
Note receivable		680,516			—
Sale of investments		3,746,442			—
Net cash provided by (used in) investing activities		2,270,631			(4,115	)
FINANCING ACTIVITIES:
Distributions to stockholders		(5,397,722	)		(300,000	)
Proceeds from long-term debt		16,249			—
Payments of long-term debt		(4,880,916	)		(329	)
Net cash used in financing activities		(10,262,389	)		(300,329	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(497,451	)		6,273
CASH AND CASH EQUIVALENTS, beginning of period		1,132,622			635,171
CASH AND CASH EQUIVALENTS, end of period	$	635,171		$	641,444
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	686,808		$	130

The accompanying notes are an integral part of these financial statements.

POINT TELESYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

December 31, 1997 and January 15, 1998

1. Nature of Business:

   Point Telesystems, Inc. (the Company), a Nevada S corporation, was formed on July 1, 1996 and provides cellular communication services for the Oregon-4 Rural Service Area. The Company operates its cellular services under a license granted by the Federal Communications Commission (FCC). The Company's operations are subject to the applicable rules and regulations of the FCC.

2. Summary of Significant Accounting Policies:

Recently Issued Accounting Pronouncements

   Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," was issued in June 1997. SFAS No. 130 establishes standards for reporting and display of comprehensive earnings and its components in financial statements. This statement is effective for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 130 did not materially affect the Company's results of operations or financial position.

Use of Estimates

   The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates.

Cash and Cash Equivalents

   Cash and cash equivalents are comprised of deposits and highly liquid investments with a remaining maturity of three months or less at the time of purchase. All cash equivalents are recorded at cost, which approximates market.

Inventories

   Inventories consist of cellular telephone equipment, pagers and accessories and are stated at the lower of cost, determined using the specific identification method, or market.

Property and Equipment

   Property and equipment are stated at cost. Repair and maintenance costs are charged to expense when incurred. Renewals and betterments are capitalized. Gains or losses on disposition of equipment are reflected in operations currently. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 3 to 40 years. Leasehold improvements are amortized using the straight-line method over the shorter of the term of the lease or the estimated useful lives of the assets.

   Property, plant and equipment consisted of the following as of December 31, 1997:

				Useful Lives in Years
Land and buildings	$	1,519,051		40
Antennas, equipment and tower		8,730,406		10
Vehicles		88,938		5
Office furniture and equipment		1,077,053		3-5
		11,415,448
Less—Accumulated depreciation		(3,546,955	)
	$	7,868,493

Long-Lived Assets

   The Company periodically evaluates the value of all long-lived assets to determine if events have occurred that indicate that the remaining estimated useful lives of these assets may warrant revision, or whether the remaining balance may not be recoverable. If asset recovery is in question, the Company uses an estimate of future net cash flows over the remaining useful lives of the long-lived assets to measure recoverability.

Fair Value of Financial Instruments

   SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments for which it is practicable to estimate that value, whether or not recognized in the balance sheet. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. SFAS No. 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

   The carrying amounts and fair values of the Company's financial instruments at December 31, 1997 approximate market.

Revenue Recognition

   Cellular airtime is recorded as revenue when services are provided. Sales of equipment and related services are recorded when goods and services are delivered. Cellular access charges are billed in advance or arrears, depending on the customer, and revenue is recognized when the services are provided.

Income Taxes

   The Company is an S corporation and is not a taxpaying entity for federal or state income tax purposes. Accordingly, no income tax effects have been recorded in the accompanying financial statements. The Company's income or loss is included in the stockholders' individual returns.

Business and Credit Concentrations

   The Company's cellular customers are geographically located in central Oregon. No single customer accounted for a significant amount of revenues or accounts receivable.

3. Long-Term Debt:

   Long-term debt is summarized as follows as of December 31, 1997:

Credit facility	$	2,493,613
Auto note payable		15,937
Less: current maturities		(4,166	)
Long-term debt	$	2,505,384

   On July 1, 1996, the Company entered into a credit facility with US Bank of Washington permitting the Company to borrow up to $15,000,000 through June 30, 1999. Subsequent to June 30, 1999, the maximum allowable outstanding balance decreases quarterly through March 31, 2006, when the maximum outstanding balance is limited to $750,000. The remaining balance is due June 30, 2006. Interest is paid monthly at an annual rate determined by a matrix included in the credit agreement. The rate is based on the ratio of funded debt to cash flow and one of three options chosen at the time of each advance. The interest rate is adjusted 90 days after each fiscal quarter. On December 31, 1997, the interest rate was 7.5%. As of December 31, 1997, the Company was in compliance with all covenants under the credit facility.

   The Company has a $15,608 note payable to US Bank of Oregon collateralized by a vehicle, payable in monthly installments of $460 including interest at 9.50% per annum, due May 5, 2001.

   Maturities of long-term debt are as follows:

1998 (period from January 16 - December 31, 1998)	$	4,166
1999		4,582
2000		5,037
2001		2,152
2002		—
Thereafter		2,493,613
	$	2,509,550

4. Commitments and Contingencies:

Legal and Regulatory Matters

   The Company is subject to various legal and regulatory matters arising in the normal course of business. Management does not believe any of these matters will have a significant effect on the Company's financial position or results of operations. Accordingly, no provision for any liability that may result from these matters has been made.

Operating Leases

   The Company has entered into various operating leases for cell sites and office space. Most cell sites are on lease from a partnership related by common ownership. At January 15, 1998, future minimum payments for noncancelable operating leases were as follows:

1998	$	284,610
1999		288,760
2000		288,760
2001		38,760
2002		38,760
	$	939,650

   Management expects that in the normal course of business, leases will be renewed or replaced by other leases. Cell site leases begin to expire in October 1998. Lease expense was $296,243 and approximately $12,300 for the year ended December 31, 1997 and for the period from January 1, 1998 to January 15, 1998, respectively.

5. 401(k) Retirement Plan:

   The Company sponsors a 401(k) profit-sharing plan. Employees become eligible to participate in the plan after three months of service. An eligible employee may defer up to 15% of compensation. The Company makes a matching contribution of 50% of the deferral, up to 4% of compensation or less. Matching contributions for 1997 were $26,345. In addition, at the Company's discretion, profit-sharing contributions may be made at year-end. A discretionary profit-sharing contribution of $49,458 was made for 1997. There were no contributions made for the period from January 1, 1998 to January 15, 1998.

6. Subsequent Event:

   Effective January 16, 1998, the Company consummated the sale of the Company's cellular operations to an unrelated third party. The transaction provided for the transfer of substantially all of the assets and liabilities of the Company to the buyer for a purchase price of approximately $85.7 million.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To U.S. Unwired, Inc. and Subsidiary:

   We have audited the statements of operations and parent's equity (deficit) in "A Markets" and cash flows of "A Markets" of U.S. Unwired, Inc. and Subsidiary for the year ended December 31, 1997 and for the six months ended June 30, 1998. These financial statements are the responsibility of "A Markets" management. Our responsibility is to express an opinion on these financial statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in all material respects, the results of its operations and its cash flows of "A Markets" of U.S. Unwired, Inc. and Subsidiary for the year ended December 31, 1997 and for the six months ended June 30, 1998 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

New Orleans, Louisiana,
December 17, 1999

"A MARKETS" OF U.S. UNWIRED, INC. AND SUBSIDIARY

STATEMENTS OF OPERATIONS AND PARENT'S EQUITY (DEFICIT) IN "A MARKETS"

	Year Ended December 31, 1997			Six Months Ended June 30, 1998
REVENUES:
Service	$	20,687,277		$	11,050,068
Roamer		10,420,752			5,447,859
Equipment		835,978			506,866
Total revenues		31,944,007			17,004,793
OPERATING EXPENSES:
Network costs		6,355,589			4,039,915
Cost of equipment sales		3,230,064			1,832,519
Selling, general and administrative		10,753,333			6,500,830
Depreciation and amortization		8,984,962			4,802,375
Total operating expenses		29,323,948			17,175,639
OPERATING INCOME (LOSS)		2,620,059			(170,846	)
OTHER INCOME (EXPENSE):
Interest expense		(7,888,327	)		(3,993,891	)
Interest income		1,212,700			48,138
Total other income (expense)		(6,675,627	)		(3,945,753	)
LOSS BEFORE INCOME TAXES		(4,055,568	)		(4,116,599	)
INCOME TAX PROVISION		—			—
NET LOSS		(4,055,568	)		(4,116,599	)
PARENT'S EQUITY (DEFICIT) IN "A MARKETS," beginning of period		(7,757,778	)		(11,813,346	)
PARENT'S EQUITY (DEFICIT) IN "A MARKETS," end of period	$	(11,813,346	)	$	(15,929,945	)

The accompanying notes are an integral part of these financial statements.

"A MARKETS" OF U.S. UNWIRED, INC. AND SUBSIDIARY

STATEMENTS OF CASH FLOWS

	Year Ended December 31, 1997			Six Months Ended June 30, 1998
OPERATING ACTIVITIES:
Net loss	$	(4,055,568	)	$	(4,116,599	)
Adjustments to reconcile net loss to net cash provided by operating activities—
Depreciation and amortization		8,984,962			4,802,375
Loss on sale of assets		—			9,551
Changes in other operating elements:
Accounts receivable		(372,248	)		375,824
Due from affiliates		465,762			720,639
Inventories		425,281			268,073
Other current assets		(253,443	)		332,118
Accounts payable		(1,280,152	)		750,687
Accrued liabilities		(314,867	)		(641,867	)
Net cash provided by operating activities		3,599,727			2,500,801
INVESTING ACTIVITIES:
Purchases of property and equipment		(4,707,784	)		(11,578,404	)
FINANCING ACTIVITIES:
Proceeds from long-term debt		215,953			7,317,514
Loan origination costs		(336,948	)		—
Payments of long-term debt		(560,993	)		(254,116	)
Net cash provided by (used in) financing activities		(681,988	)		7,063,398
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,790,045	)		(2,014,205	)
CASH AND CASH EQUIVALENTS, beginning of period		4,323,917			2,533,872
CASH AND CASH EQUIVALENTS, end of period	$	2,533,872		$	519,667
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for—
Interest	$	7,404,621		$	3,811,894
SIGNIFICANT NONCASH TRANSACTIONS:
Capital expenditures financed by accounts payable	$	9,915,965		$	1,734,790

The accompanying notes are an integral part of these financial statements.

"A MARKETS" OF U.S. UNWIRED, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

For the Year Ended December 31, 1997 and Six Months Ended June 30, 1998

1. Nature of Business and Organization:

   The "A Markets" of U.S. Unwired, Inc. and Subsidiary ("A Markets") consists of two divisions of U.S. Unwired, Inc. (U.S. Unwired) and Mississippi—34 Cellular Corporation (Mississippi—34) that have been "carved out" in connection with the transaction described in Note 5 below. "A Markets" provides cellular mobile telephone service in Western Kansas, Mississippi and Alabama. U.S. Unwired and its Subsidiary provide "A Markets" with various administrative and financial services under management agreements as described in Note 3 below. "A Markets" operates its cellular services under a license granted by the Federal Communications Commission (FCC). The "A Markets" operations are subject to the applicable rules and regulations of the FCC.

2. Summary of Significant Accounting Policies:

Recently Issued Accounting Pronouncements

   "A Markets" adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," effective January 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive earnings and its components in financial statements. The adoption of SFAS No. 130 had no impact on "A Markets"' financial statements.

   SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in July 1998. This statement establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or a liability measured at fair value. SFAS No. 133 requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000, and cannot be applied retroactively. The adoption of SFAS No. 133 is not expected to have a material effect on "A Markets"' financial position or results of operations.

   In April 1998, the Accounting Standards Executive Committee issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. "A Markets" adopted SOP 98-5 effective January 1, 1999. The adoption of SOP 98-5 is not expected to have a material effect on "A Markets"' financial position or results of operations.

Cash and Cash Equivalents

   Cash and cash equivalents are comprised of deposits and highly liquid investments with a remaining maturity of three months or less at the time of purchase. All cash equivalents are recorded at cost, which approximates market.

Inventories

   Inventories, consisting primarily of wireless handsets and accessories held for resale, are valued at the lower of cost or market. Cost is determined by the first-in, first-out method.

Property and Equipment

   Property and equipment is stated at cost and includes primarily cellular network facilities, computer equipment, software and office equipment. In connection with network construction-related activities, "A Markets" capitalizes expenditures related to the design, construction and microwave relocation. Expenditures for repairs and maintenance are charged to expense as incurred.

   Depreciation is calculated based on the straight-line method over the estimated useful lives of the respective assets as follows:

Network infrastructure and equipment	5 years
Office furniture, fixtures and equipment	5 years
Leasehold improvements	5 years or life of lease, if shorter
Automobiles	5 years
Computer equipment and software	3 years

   Depreciation expense was $4,518,897 for the year ended December 31, 1997 and $2,569,061 for the six months ended June 30, 1998.

Licenses and Other Intangible Assets

   Licenses primarily represent costs incurred to acquire cellular licenses owned by "A Markets," principally through acquisition. Other intangibles include loan origination fees, subscriber base and organization costs. License costs are amortized over a period of 20 years using the straight-line method. Loan origination fees are amortized over the life of the related borrowings. Subscriber base and organization costs are amortized over a period of five years using the straight-line method.

   Amortization expense was $4,466,065 for the year ended December 31, 1997 and $2,233,314 for the six months ended June 30, 1998.

Long-Lived Assets

   "A Markets" periodically evaluates the value of all long-lived assets to determine if events have occurred that indicate the remaining estimated useful lives of these assets may warrant revision, or whether the remaining balance may not be recoverable. If asset recovery is in question, "A Markets" uses an estimate of future cash flows over the remaining useful lives of the long-lived assets to measure recoverability.

Revenue Recognition

   "A Markets" earns revenue by providing cellular and paging services to its customers and other cellular carriers traveling (roaming) in its service area and from sales and rentals of cellular and paging equipment and accessories. Service revenue consists of the base monthly service fee and airtime revenue. Base monthly service fees are billed one month in advance and are recognized in the month earned. Airtime revenue is recognized when service is provided. Roamer revenue consists of the fee charged to other cellular carriers' customers for roaming in "A Markets"' service area as well as related airtime revenue for use of the cellular network. Roamer revenue is recognized when the service is rendered. "A Markets" recognizes other service revenues from equipment installations, equipment leases and connection fees when earned.

Income Taxes

   Mississippi—34 accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under the asset and liability method of SFAS No. 109, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance has been established for net deferred tax assets not expected to be offset by deferred income tax liabilities due to the uncertainty of the realization of future tax benefits.

   U.S. Unwired accounts for income taxes in accordance with SFAS No. 109. U.S. Unwired allocates deferred income tax assets and liabilities to the divisions included in "A Markets" as if the divisions were separate taxpaying entities. A valuation allowance has been established for net deferred tax assets not expected to be offset by deferred income tax liabilities due to the uncertainty of the realization of future tax benefits.

Use of Estimates

   The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates.

Business and Credit Concentrations

   "A Markets" cellular customers are geographically located in Western Kansas, Mississippi and Alabama. No single customer accounted for a significant amount of revenues or accounts receivable.

3. Management Agreements and Allocation of Expenses:

   Operating expenses consist of "A Markets"' direct expenses and management fees for various administrative and financial services provided by U.S. Unwired and certain of its subsidiaries under management agreements. The various services include treasury, insurance and tax administration, legal, certain payroll and employee benefit administration, marketing, network infrastructure management, accounting, human resources, customer service and information technology. U.S. Unwired allocates actual expenses to "A Markets" based on their portion of subscribers and POPs, as defined in the management agreement. Management fees were $1.3 million for the year ended December 31, 1997 and $1.0 million for the six months ended June 30, 1998. Management believes these allocations have been made on a reasonable basis; however, they are not necessarily indicative of the level of expenses which might have been incurred had "A Markets" been operated as a stand-alone entity.

4. Commitments and Contingencies:

   "A Markets" has entered into leases for its offices, land for cell sites, cell sites, and furniture and equipment under operating leases expiring through April 2009. As of June 30, 1998, the estimated future minimum rental payments under these lease agreements were as follows:

1998 (July to December)	$	258,126
1999		447,348
2000		391,639
2001		351,067
2002		284,598
2003		101,152
Thereafter		95,292
	$	1,929,222

   Rent expense under operating leases was $323,537 for the year ended December 31, 1997 and $221,089 for the six months ended June 30, 1998.

Legal and Regulatory Matters

   "A Markets" is subject to various legal and regulatory matters arising in the normal course of business. Management does not believe any of these matters will have a significant effect on "A Markets"' financial position or results of operations and, accordingly, no provision for any liability that may result from these matters has been made.

5. Subsequent Events:

   On July 1, 1998, Triton Cellular Partners, Inc. (Triton) acquired the Western Kansas (Kansas 1, 2, 6, 7, 11, 12 and 13 RSAs and interim operating authority for Oklahoma 1 RSA) and Mississippi/Alabama (Mississippi 1 RSA and interim operating authority for Mississippi 5 RSA and Alabama 3 and 4 RSAs) operating licenses and certain other assets and liabilities from U.S. Unwired for a purchase price of approximately $149.9 million.

   On the same date, Triton acquired all of the outstanding capital stock of Mississippi—34 Cellular Corporation, which owned the operating licenses of Mississippi 3 and 4 RSAs, from U.S. Unwired and Bailey Cable & Wireless, Inc. for a purchase price of approximately $22.3 million.

BMCT, L.P. d/b/a CELLULARONE

STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL (DEFICIT)

	Years Ended December 31
							One-Month Period Ended January 31, 1999
	1997			1998
REVENUES:
Service	$	13,196,174		$	23,923,047		$	2,008,539
Roamer		4,082,670			10,171,699			1,314,322
Equipment		1,145,939			2,096,311			162,490
Total revenues		18,424,783			36,191,057			3,485,351
OPERATING EXPENSES:
Network costs		1,049,290			1,949,344			178,416
Cost of equipment sales		1,838,710			3,243,129			286,237
Selling, general and administrative		6,714,901			13,420,845			1,265,668
Depreciation and amortization		5,929,816			16,379,418			1,386,763
Deferred incentive bonus		1,355,755			2,352,439			3,163,899
Non-recurring charges		—			1,307,686			1,060,880
Total operating expenses		16,888,472			38,652,861			7,341,863
OPERATING INCOME (LOSS)		1,536,311			(2,461,804	)		(3,856,512	)
OTHER INCOME (EXPENSE):
Interest expense		(3,579,329	)		(8,782,833	)		(725,344	)
Interest income		52,309			135,680			4,106
Other		3,866			(313	)		10,952
Total other income (expense), net		(3,523,154	)		(8,647,466	)		(710,286	)
NET LOSS		(1,986,843	)		(11,109,270	)		(4,566,798	)
PARTNER CONTRIBUTIONS		5,000,000			—			—
PARTNER DISTRIBUTIONS		(3,343,419	)		(750,390	)		—
PARTNERS' CAPITAL (DEFICIT), beginning of period		229,662			(100,600	)		(11,960,260	)
PARTNERS' DEFICIT, end of period	$	(100,600	)	$	(11,960,260	)	$	(16,527,058	)

The accompanying notes are an integral part of these financial statements.

BMCT, L.P. d/b/a CELLULARONE

STATEMENTS OF CASH FLOWS

	Years Ended December 31
							One-Month Period Ended January 31, 1999
	1997			1998
OPERATING ACTIVITIES:
Net loss	$	(1,986,843	)	$	(11,109,270	)	$	(4,566,798	)
Adjustments to reconcile net loss to net cash provided by operating activities—
Depreciation and amortization		5,929,816			16,379,418			1,386,763
Write-off of deferred financing costs		115,180			—			—
Loss (gain) on sale of equipment		1,726			—			(10,952	)
Change in other operating elements:
Accounts receivable		(286,077	)		(1,198,467	)		(431,995	)
Inventory		(105,968	)		(336,478	)		88,900
Other current assets		(1,530	)		(147,971	)		1,400
Accounts payable		1,361,320			(1,782,780	)		(227,878	)
Bank overdraft		(174,116	)		—			—
Roamer incollect payable		265,213			140,954			324,087
Accrued liabilities		(270,554	)		(46,089	)		6,979,877
Deferred incentive bonus		1,355,755			1,980,205			(3,861,086	)
Accrued interest		2,151,513			(1,511,576	)		959,775
Other		(150,677	)		(99,911	)		—
Net cash provided by operating activities		8,204,758			2,268,035			642,093
INVESTING ACTIVITIES:
Purchases of property and equipment		(5,172,841	)		(5,967,490	)		(122,015	)
Business acquisition		(72,200,000	)		—			—
Proceeds from sale of equipment		—			—			42,296
Net cash used in investing activities		(77,372,841	)		(5,967,490	)		(79,719	)
FINANCING ACTIVITIES:
Distributions to partners		(3,343,419	)		(750,390	)		—
Proceeds from long-term debt		86,230,669			5,000,000			—
Loan origination costs		(2,300,000	)		—			—
Payments of long-term debt		(11,000,000	)		—			—
Net cash provided by financing activities		69,587,250			4,249,610			—
NET INCREASE IN CASH AND CASH EQUIVALENTS		419,167			550,155			562,374
CASH AND CASH EQUIVALENTS, beginning of period		—			419,167			969,322
CASH AND CASH EQUIVALENTS, end of period	$	419,167		$	969,322		$	1,531,696
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	1,226,363		$	701,615		$	809,942
NONCASH INVESTING AND FINANCING ACTIVITIES:
Sellers' note issued in business acquisition	$	15,000,000		$	—		$	—
Class B limited partnership interests issued in business acquisition	$	5,000,000		$	—		$	—

The accompanying notes are an integral part of these financial statements.

BMCT, L.P. d/b/a CELLULARONE

NOTES TO FINANCIAL STATEMENTS

For the Years Ended
December 31, 1997 and 1998 and
the One-Month Period Ended January 31, 1999

1. Nature of Business and Organization:

   BMCT, L.P. d/b/a CELLULARONE (the Company), a Washington limited partnership, was formed on November 30, 1991, by Blue Mountain Cellular Telephone, Inc. and FiberComm, Inc., which both act as general and limited partners and are wholly owned by the Company's president/CEO. The Company provides cellular communication services to portions of Oregon and Washington. The Company operates its cellular systems under licenses granted by the Federal Communications Commission (the FCC). The Company's operations are subject to the applicable rules and regulations of the FCC.

   On September 2, 1997, the Company purchased the Oregon 6 Rural Service Area cellular license, the associated customer contracts, four PCS licenses, property, equipment and certain other assets and liabilities (the Acquisition) from Central Oregon Cellular, Inc. (the Sellers). The Sellers received cash, a convertible subordinated note and Class B limited partnership interests as consideration.

   The following approximates the pro forma results of operations for the year ended December 31, 1997 as if this transaction had closed on January 1, 1997:

	Unaudited
Net revenues	$	28,750,000
Net loss		(11,644,000	)

2. Summary of Significant Accounting Policies:

Recently Issued Accounting Pronouncements

   The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," effective January 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive earnings and its components in financial statements; however, the adoption of SFAS No. 130 had no impact on the Company's financial statements.

   SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in July 1998. This statement establishes accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an asset or liability measured at fair value. SFAS No. 133 requires that changes in a derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment. SFAS No. 133 is effective for fiscal years beginning after June 15, 2000, and cannot be applied retroactively. The adoption of SFAS No. 133 is not expected to have a material effect on the Company's financial position or results of operations.

   In April 1998, the Accounting Standards Executive Committee issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. The Company adopted SOP 98-5 effective January 1, 1999. The adoption did not have a material effect on the Company's financial position or results of operations.

Cash and Cash Equivalents

   Cash and cash equivalents are comprised of deposits and highly liquid investments with a remaining maturity of three months or less at the time of purchase. All cash equivalents are recorded at cost, which approximates market value.

Inventories

   Inventories consist of cellular telephone equipment, pagers and accessories and are stated at the lower of cost, determined using the specific identification method, or market.

Property and Equipment

   Property and equipment are recorded at cost. Repair and maintenance costs are charged to expense when incurred. Renewals and betterments are capitalized. Gains or losses on disposition of equipment are reflected in income currently. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from 5 to 40 years. Leasehold improvements are amortized using the straight-line method over the shorter of the term of the lease or the estimated useful lives of the assets.

Licenses and Other Intangible Assets

   Cellular licenses, PCS licenses and customer contracts primarily represent amounts allocated as part of the Acquisition, which are being amortized using the straight-line method over periods of 40, 40 and 3 years, respectively. Deferred financing costs are amortized over the life of the related loan using the straight-line method, which approximates the effective interest method.

Revenue Recognition

   Cellular air time is recorded as revenue when services are provided. Sales of equipment and related services are recorded when goods and services are delivered. Cellular access charges are generally billed in advance and recognized as revenue when the services are provided.

Income Taxes

   The Company is a partnership and is not a taxpaying entity for federal or state income tax purposes. Accordingly, no income tax effects have been recorded in the accompanying financial statements. The partnership loss is included in the partners' individual returns in accordance with the partnership agreement.

Use of Estimates

   The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates.

Business and Credit Concentrations

   The Company's cellular customers are geographically located in Oregon and Washington. No single customer accounted for a significant amount of revenues or accounts receivable.

Long-Lived Assets

   The Company periodically evaluates the value of all long-lived assets to determine if events have occurred that indicate the remaining estimated useful lives of these assets may warrant revision, or whether the remaining balance may not be recoverable. If asset recovery is in question, the Company uses an estimate of future net cash flows over the remaining useful lives of the long-lived assets to measure recoverability.

3. Deferred Incentive Bonus:

   The Company has two nonqualified employee benefit plans with phantom units of the Company. The first plan includes a fixed number of units that are allocated quarterly to employees' accounts based on a formula which considers their wages earned and seniority. Vesting occurs over a five-year period from the employee's original hire date. The second plan includes initial allocated units and additional units that can be purchased through elective salary deferrals. Vesting in this second plan is calculated annually based on the percentage determined by the Company's economic value-added calculation.

4. 401(k) Retirement Plan:

   The Company sponsors a 401(k) retirement plan and trust (the Plan). The Plan covers employees of the Company who are at least 18 years of age and have completed 500 or more hours of service during six consecutive months. The Company's matching contribution is 50% of the first 6% of compensation each employee elects to contribute to the Plan. Company matching contributions under the Plan for the years ended December 31, 1997 and 1998 were $64,804 and $109,464, respectively, and $10,273 for the one-month period ended January 31, 1999.

5. Nonrecurring Charges:

   Nonrecurring charges consist of expenses, primarily professional fees, associated with the sale of substantially all of the assets of the Company (see Note 7).

6. Commitments and Contingencies:

Operating Leases

   The Company has entered into various operating leases for cell sites and office space. Management expects that in the normal course of business, leases will be renewed for or replaced by other leases. Lease expense was $360,839 and $497,180 for 1997 and 1998, respectively, and $55,625 for the one-month period ended January 31, 1999.

Legal and Regulatory Matters

   The Company is subject to various legal and regulatory matters arising in the normal course of business. Management does not believe any of these matters will have a significant effect on the Company's results of operations. Accordingly, no provision for any liability that may result from these matters has been made.

7. Subsequent Event:

   Effective February 1, 1999, the Company consummated the sale of the Company's cellular operations to an unrelated third party. The transaction provided for the transfer of substantially all of the assets and liabilities of the Company to the buyer for a purchase price of approximately $208.2 million.

[PICTURE]

[LOGO]

We have not authorized any dealer, salesperson or other person to give you written information other than this prospectus or make representation as to matters not stated in this prospectus. You must not rely on unauthorized information. This prospectus is not an offer to sell these securities or a solicitation of your offer to buy the securities in any jurisdiction where that would not be permitted or legal. The information contained in this prospectus is current only as of the date on its cover, and may change after that date.

TABLE OF CONTENTS

	Page
Prospectus Summary	3
Risk Factors	22
Use of Proceeds	30
Capitalization	31
Unaudited Pro Forma Condensed Consolidated Financial Data	32
Selected Financial and Operating Data	49
Management's Discussion and Analysis of Financial Condition and Results of Operations	55
The Wireless Communications Industry	67
Business	70
Management	86
Certain Transactions	91
Security Ownership of Beneficial Owners and Management	93
Description of Financing Arrangements	96
Description of Capital Stock	100
Description of Junior Exchangeable Preferred Stock and Junior Preferred Exchange Debentures	103
Description of Senior Exchangeable Preferred Stock and Senior Preferred Exchange Debentures	158
Certain United States Federal Income Tax Considerations	205
Underwriting	213
Legal Matters	215
Experts	215
Available Information	215
Incorporation of Certain Documents By Reference	216
Index to Financial Statements	F-1

$135,000,000

[LOGO]

Rural Cellular Corporation

110,000 shares
    % Junior Exchangeable
Preferred Stock

25,000 shares
11³/8% Senior Exchangeable
Preferred Stock

PROSPECTUS

TD Securities

First Union Securities, Inc.

             , 2000

QuickLinks

Notes to Unaudited Summary Pro Forma Financial and Operating Data
SUMMARY FINANCIAL AND OPERATING DATA (In thousands, except per share amounts and operating data)
SUMMARY FINANCIAL AND OPERATING DATA (In thousands, except per share amounts and operating data)
SUMMARY FINANCIAL AND OPERATING DATA Notes to Summary Financial and Operating Data

USE OF PROCEEDS
Sources and Uses of Funds (In thousands)
CAPITALIZATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
RURAL CELLULAR CORPORATION AND SUBSIDIARIES Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Nine Months Ended September 30, 1999 (In thousands, except per share amounts)

CERTAIN TRANSACTIONS
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

DESCRIPTION OF FINANCING ARRANGEMENTS
DESCRIPTION OF CAPITAL STOCK

DESCRIPTION OF JUNIOR EXCHANGEABLE PREFERRED STOCK AND JUNIOR PREFERRED EXCHANGE DEBENTURES
Junior Exchangeable Preferred Stock

UNDERWRITING
LEGAL MATTERS
EXPERTS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE