-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MCp/+a28+7XwcHriVmZWUXGLDR2t4hGG+pfPswtmEyGthzoEm4Ix3Jjut/18ZJaH UA8efhqw2iyRSbsCDgVp8g== 0001104659-01-500832.txt : 20010516 0001104659-01-500832.hdr.sgml : 20010516 ACCESSION NUMBER: 0001104659-01-500832 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RURAL CELLULAR CORP CENTRAL INDEX KEY: 0000869561 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 411693295 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-27416 FILM NUMBER: 1640258 BUSINESS ADDRESS: STREET 1: 3905 DAKOTA ST SW STREET 2: P O BOX 2000 CITY: ALEXANDRIA STATE: MN ZIP: 56308 BUSINESS PHONE: 3207622000 MAIL ADDRESS: STREET 1: P O BOX 2000 CITY: ALEXANDRIA STATE: MN ZIP: 56038 10-Q/A 1 j0763_10qa.htm Prepared by MerrillDirect

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2001.
   
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ______________to ____________.

 

Commission File Number 0-27416

 

 


RURAL CELLULAR CORPORATION
(Exact name of registrant as specified in its charter)

 

Minnesota   41-1693295
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

PO Box 2000
3905 Dakota Street SW
Alexandria, Minnesota 56308
(320) 762-2000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months  (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
          YESx                  NO o

 

          Number of shares of common stock outstanding as of the close of business on May 8, 2001:

 

Class A 11,128,101
Class B 727,416

 

TABLE OF CONTENTS

 

Part I. - Financial Information
   
        Item 1. Financial Statements
   
  Condensed Consolidated Balance Sheets-
As of March 31, 2001 and December 31, 2000
   
  Condensed Consolidated Statements of Operations-
Three months ended March 31, 2001 and 2000
   
  Condensed Consolidated Statements of Cash Flows-
Three months ended March 31, 2001 and 2000
   
  Notes to Condensed Consolidated Financial Statements
   
        Item 2.  Management’s Discussion and Analysis
of Financial Condition and Results of Operations
   
        Item 3.  Quantitative and Qualitative Disclosures about Market Risk
 
Part II. - Other Information
   
        Item 6.  Exhibits and Reports on Form 8-K
 
        Signature page

 

Part I.    FINANCIAL INFORMATION
Item 1.    FINANCIAL STATEMENTS

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

(Unaudited)

ASSETS

  March 31,
2001
 December 31,
2000
CURRENT ASSETS:    
     Cash $76,403 $2,205
     Accounts receivable, less allowance of $2,801 and $2,385 43,960 43,324
     Inventories 7,745 6,753
     Assets held for sale 37,131 -
     Other current assets 2,348
 2,618
         Total current assets 167,587
 54,900
 PROPERTY AND EQUIPMENT, less accumulated depreciation of $103,424 and $93,446 245,190
 234,490
     
LICENSES AND OTHER ASSETS:    
     Licenses and other intangible assets, less accumulated amortization of  $81,742 and $66,574 1,561,366 1,442,806
     Deferred debt issuance costs, less accumulated amortization of $5,778 and $5,163 21,863 22,331
     Restricted funds in escrow - 10,000
     Other assets 12,572
 7,269
     
         Total licenses and other assets 1,595,801
 1,482,406
  $2,008,578
 $1,771,796

 

The accompanying notes are an integral part of these condensed consolidated balance sheets.

 

 

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, except par value)

(Unaudited)

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  March 31,
2001
 December 31,
2000
CURRENT LIABILITIES:    
     Accounts payable $30,540 $41,545
     Advance billings and customer deposits 8,800 7,563
     Accrued interest 21,808 15,724
     Dividends payable 14,336 11,911
     Other accrued expenses 6,805
 8,561
         Total current liabilities 82,289 85,304
LONG TERM LIABILITIES 1,431,026
 1,157,472
     
         Total liabilities 1,513,315
 1,242,776
     
PREFERRED SECURITIES 459,570 449,065
     
SHAREHOLDERS’ EQUITY:    
     Class A common stock; $.01 par value; 200,000  shares authorized, 11,126 and 11,034 issued 111 110
     Class B common stock; $.01 par value; 10,000 shares authorized, 727 and 782 issued 7 8
     Additional paid-in capital 191,509 190,751
     Accumulated deficit (139,171) (110,914)
     Accumulated other comprehensive loss (16,763)
 -
     
         Total shareholders’ equity 35,693
 79,955
  $2,008,578
 $1,771,796

The accompanying notes are an integral part of these condensed consolidated balance sheets.

 

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
 (Unaudited)

 

  Three months ended March 31,
  2001
 2000
REVENUES:    
     Service $70,036 $33,594
     Roamer 23,215 10,310
     Equipment 5,133
 2,725
         Total revenues 98,384
 46,629
OPERATING EXPENSES:    
     Network costs 23,006 9,888
     Cost of equipment sales 6,428 5,934
     Selling, general and administrative 26,219 15,286
     Depreciation and amortization 26,898
 11,200
         Total operating expenses 82,551
 42,308
OPERATING INCOME 15,833
 4,321
OTHER INCOME (EXPENSE):    
     Interest expense, net (31,280) (3,432)
     Other 0
 (22)
         Other expense, net (31,280)
 (3,454)
 INCOME (LOSS) BEFORE CUMULATIVE EFFECT ADJUSTMENT (15,447) 867
 CUMULATIVE EFFECT ADJUSTMENT 137
 -
 NET INCOME (LOSS) (15,310)
 867
PREFERRED STOCK DIVIDEND (12,947)
 (6,887)
 NET LOSS APPLICABLE TO COMMON SHARES $(28,257)
 $(6,020)
 NET LOSS PER BASIC COMMON AND DILUTED SHARE $(2.39)
 $(0.57)
 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED 11,840
 10,643

The accompanying notes are an integral part of these condensed consolidated financial statements.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

  Three months ended March 31,
  2001
 2000
OPERATING ACTIVITIES:    
     Net income (loss) $(15,310) $867
     Adjustments to reconcile to net cash provided by operating activities:    
         Depreciation and amortization 26,898 11,200
         Change in financial instrument valuation 1,095 -
         Other (158) 125
         Change in other operating elements:    
             Accounts receivable 1,587 (3,954)
             Inventories (794) 1,155
             Other current assets 278 (307)
             Accounts payable (11,949) (3,240)
             Advance billings and customer deposits 684 251
             Other accrued expenses 3,922
544
                 Net cash provided by operating activities 6,253
6,641
INVESTING ACTIVITIES:    
     Purchases of property and equipment, net (7,255) (2,520)
     Purchases of wireless properties (141,917) -
     Assets held for sale (37,131) -
     Pending acquisition costs - (136,239)
     Other (36)
(683)
                 Net cash used in investing activities (186,339)
(139,442)
FINANCING ACTIVITIES:    
     Proceeds from issuance of common stock related to stock purchase plans and stock options 758 470
     Proceeds from offering of common stock, net - 160,546
     Proceeds from issuance of preferred securities, net - 158,167
     Proceeds from swaption 8,720 -
     Proceeds from issuance of long-term debt 315,350 1,000
     Repayments of long-term debt (69,650) (186,000)
     Payment of debt issuance costs (1,101) 104
     Other 207
-
                 Net cash provided by financing activities 254,284
134,287
NET INCREASE IN CASH 74,198 1,486
CASH, at beginning of year 2,205
1,285
CASH, at end of period $76,403
$2,771

The accompanying notes are an integral part of these condensed consolidated financial statements.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1)          BASIS OF PRESENTATION:

The accompanying condensed consolidated financial statements for the three months ended March 31, 2001 and 2000 have been prepared by Rural Cellular Corporation and Subsidiaries (the “Company” or “RCC”) without audit. In the opinion of management, normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Report on Form 10-K for the year ended December 31, 2000.  The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the operating results for the full fiscal year or for any other interim periods.

2)          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Roaming Revenue Reclassification

Rural Cellular Corporation generates revenue from charges to its customers when they use their cellular phone in other wireless providers’ markets (“Incollect Revenue”). Until April 2000, RCC included Incollect Revenue in the roaming revenue line item in its statement of operations. Expense associated with Incollect Revenue, charged by third-party wireless providers, was also included in roaming revenue on a net basis. RCC used this method because, historically, it has passed through to its customers most of the costs related to Incollect Revenue. However, the wireless industry, including RCC, has increasingly been using pricing plans that include flat rate pricing and larger home service areas. Under these types of plans, amounts charged to RCC by other wireless providers may not necessarily be passed through to its customers.

In April 2000, RCC adopted a policy to include the associated expense from its incollect activity in network cost rather than reducing roaming revenue and to include Incollect Revenue as service revenue rather than increasing roaming revenue.  Roaming revenue will include only the revenue from other wireless providers’ customers who use RCC’s network (“Outcollect Revenue”). Prior periods have been restated to conform to this new presentation.  This change in presentation has no impact on operating income.

Recently Issued Accounting Pronouncements

In June 1998, SFAS No. 133 (as amended by SFAS No. 137 and No. 138), Accounting for Derivative Instruments and Hedging Activities, was issued. This statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the fair value of the derivative be recognized currently in earnings unless specific hedge accounting criteria are met. If specific hedge accounting criteria are met, changes in the fair value of derivatives will either be offset against the change in the fair value of the hedged assets, liabilities or recognized in accumulated other comprehensive loss until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. SFAS No. 133, as amended, is effective January 1, 2001 for the fiscal year ended December 31, 2001.

As of January 1, 2001 the adoption of SFAS No. 133 resulted in a net benefit to the cumulative effect adjustment of $137,000 in the statement of operations, an increase to long term liabilities of $14.9 million, an increase to other assets of $1.6 million and an increase of $5.9 million to accumulated other comprehensive loss.  As of March 31, 2001, reflecting the change in fair market valuation of the Company's derivatives, interest expense increased by $1.1 million, long-term liabilities increased by $11.4 million, other assets decreased by $110,000 and accumulated other comprehensive loss increased by $10.9 million.  Management does not believe that adoption of SFAS No. 133 will significantly alter the Company's hedging strategies, however its application may increase the volatility of interest expense and other comprehensive income (loss).

Comprehensive income (loss)

The Financial Accounting Standards Board defines comprehensive income (loss) as all changes to the equity of a business enterprise during a period, except for those resulting from transactions with owners.  For example, dividend distributions are excepted.  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Net income (loss) may include such items as income (loss) from continuing operations, discontinued operations, extraordinary items, and cumulative effects of changes in accounting principles.

The Company’s first quarter 2001 total comprehensive loss is as follows:

(In thousands) Three months ended March 31,
  2001
 2000
Net loss applicable to common shares $(28,257)
 $(6,020)
  Hedging activity:    
        Cumulative effect of SFAS No. 133 (5,917) -
        Quarterly hedging adjustment (10,846)
 -
Total comprehensive loss $(45,020)
 $(6,020)

Acquisitions

Effective April 2000, RCC acquired the Alabama, Kansas, Mississippi, Oregon and Washington cellular licenses, operations and related assets of Triton Cellular Partners, L.P. (“Triton Cellular”) for approximately $1.256 billion in cash.

Effective January 2001, RCC completed the $190 million acquisition of the outstanding shares of the Saco River Telegraph and Telephone Company (“Saco River”) for cash. Saco River provides wireless and ILEC telecommunication services to southern Maine and eastern New Hampshire. RCC has engaged an agent to sell, within the next twelve months, certain Saco River assets, primarily from the ILEC operations. As such, the estimated fair value of the entities for sale are included as a current asset and are treated as held for sale in the financial statements.

The following unaudited financial summary presents the consolidated results of operations for RCC together with the “Held for Sale” ILEC operations of Saco River Telegraph and Telephone for the three month period ended March 31, 2001.

 

(In thousands) As  Reported
 ILEC
(Assets held for sale)
 Combined
REVENUES:      
     Service $70,036 $2,686 $72,722
     Roamer 23,215 - 23,215
     Equipment 5,133
-
5,133
         Total revenues 98,384
2,686
101,070
OPERATING EXPENSES:      
     Network costs 23,006 766 23,772
     Cost of equipment sales 6,428 - 6,428
     Selling, general and administrative 26,219 292 26,511
     Depreciation and amortization 26,898
721
27,619
         Total operating expenses 82,551
1,779
84,330
OPERATING INCOME $15,833
$907
$16,740
       
EBITDA (1) $42,731 $1,628 $44,359
(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.

Accounting Treatment

The purchase prices for Triton Cellular and Saco River were allocated to the net assets based on their estimated fair values and the excess was allocated to licenses, customer lists and goodwill and is being amortized.  The purchase price allocations for Triton Cellular and Saco River have been completed on a preliminary basis, subject to adjustment should new or additional facts about the businesses become known. The Triton and Saco River acquisitions were 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 acquisition of Triton Cellular and Saco River, excluding Saco River’s ILEC, had occurred as of January 1, 2000. This summary is not necessarily indicative of what the results of operations of the Company and Triton Cellular and Saco River 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.

Unaudited Pro forma Condensed Consolidated Statements of Operations
(In thousands)

 

  Three months ended March 31,
  2001
 % of Rev
 2000
 % of Rev
REVENUES:        
     Service $70,036 71.2% $62,913 66.9%
     Roamer 23,215 23.6 25,947 27.6
     Equipment 5,133
 5.2
 5,129
5.5
         Total revenues 98,384
 100.0
 93,989
100.0
OPERATING EXPENSES:        
     Network costs 23,006 23.4 21,673 23.1
     Cost of equipment sales 6,428 6.5 9,385 10.0
     Selling, general and administrative 26,219 26.7 28,250 30.1
     Depreciation and amortization 26,898
 27.3
 28,937
30.7
         Total operating expenses 82,551
 83.9
 88,245
93.9
OPERATING INCOME $15,833
 16.1%
 $5,744
6.1%
         
EBITDA (*) $42,731
 43.4%
 $34,681
36.9%
Net loss applicable to common shares $(28,257)
 (28.7)%
 $(35,980)
(38.3)%
Net loss per basic and diluted common share $(2.39)
   $(3.06)
 

(*)  See footnote (1) on page 9 under Acquisitions.

 

3)          LONG TERM LIABILITIES:

The Company had the following long-term liabilities:

 

  (In thousands)
  March 31, 2001 December 31, 2000
  Amount
 Amount
     
Credit facility:    
    Revolver $264,050 $93,350
    Term loan A (terminates 04/03/2008) 450,000 450,000
    Term loan B (terminates 04/03/2008) 237,500 237,500
    Term loan C (terminates 04/03/2009) 237,500 237,500
    Term loan D (terminates 10/03/2009) 75,000
-
  1,264,050 1,018,350
     
9 5/8% Senior subordinated notes 125,000 125,000
Derivative financial instruments and other long term liabilities 41,976
14,122
    Total Long-term liabilities $1,431,026
$1,157,472

 

Credit facility –Advances under the credit facility bear interest at the London Interbank Offering Rate (“LIBOR”) plus an applicable margin based on the Company’s ratio of indebtedness to annualized operating cash flow as of the end of the most recently completed fiscal quarter.  As of March 31, 2001, the effective rate of interest on the credit facility, excluding the impact of hedge agreements, was 9.08%.  A commitment fee of 0.50% on the unused portion of the credit facility is payable quarterly. Borrowings under the credit facility are secured by a pledge of all the assets of the Company, excluding its ownership in the stock of Cellular 2000, Inc. and its 70% ownership in Wireless Alliance, LLC. The 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. Mandatory commitment reductions will be required upon any material sale of assets.

Effective March 31, 2001, the credit facility was amended revising certain leverage covenant levels.  As of March 31, 2001, the Company was in compliance with all covenants under the credit facility.

4)          PREFERRED SECURITIES:

The Company has issued the following preferred stock with liquidation preferences of $1,000 per share:

 

  Dividend rate
per annum
Number of shares originally issued
Shares distributed as dividends through
 March 31, 2001
Accrued dividends at March 31, 2001
(In thousands)
Senior Exchangeable Preferred Stock 11.375% 150,000 48,023 $2,816
Junior Exchangeable Preferred Stock 12.250% 140,000 17,969 2,419
Redeemable Voting Convertible Preferred Stock (“Class M”) 8.000% 110,000 - 8,800
Class T Convertible Preferred Stock 4.000% 7,541
-
301
Total   407,541
65,992
$14,336

As of March 31, 2001, unamortized debt issuance costs from the Company's preferred security issuances were approximately $13.9 million.

Dividends on the Senior Exchangeable Preferred Stock are cumulative, 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.

Dividends on the Junior Exchangeable Preferred Stock are cumulative, are payable quarterly, and may be paid, at the Company’s option, on any dividend payment date occurring on or before February 15, 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.

The purchasers of the Class M Convertible Preferred Stock included Madison Dearborn Capital Partners III, L.P., Madison Dearborn Special Equity III, L.P., Special Advisors Fund I, LLC, Boston Ventures Limited Partnership V and Toronto Dominion Investments, Inc. Dividends on the Class M Preferred Stock are cumulative and accrue at 8% per annum.

In order to comply with the Federal Communication Commission’s (“FCC”) rules regarding cross-ownership of cellular licensees within a given market, the Company issued 7,541 shares of Class T Convertible Preferred Stock to Telephone & Data Systems, Inc. (“TDS”) with a par value of $1,000 on March 31, 2000 in exchange for 43,000 shares of Class A Common Stock and 105,940 shares of Class B Common Stock owned by TDS. TDS or the Company can convert the Class T preferred stock into the original number of shares of Class A or Class B Common Stock in the future if ownership by TDS of the Common Stock would then be permissible under FCC rules. Dividends on the Class T preferred stock are cumulative and have a fixed coupon rate of 4% per annum.

The Senior Exchangeable Preferred Stock is senior to all classes of junior preferred stock and common stock of the Company with respect to dividend rights and rights on liquidation, winding-up and dissolution of the Company.  The Junior Exchangeable Preferred Stock is junior to the Senior Exchangeable Preferred Stock and Class T Convertible Preferred Stock and senior to the Class M Convertible Preferred Stock and common stock with respect to dividend rights and rights on liquidation, winding-up and dissolution of the Company. Shares of the Senior and Junior Exchangeable Preferred Stock are non-voting, except as otherwise required by law and as provided in their respective Certificates of Designation.

5)          FINANCIAL INSTRUMENTS

As required by the credit facility, the Company must maintain interest rate swaps and collars on at least 50% of the principal amount of the loans outstanding for an average period of three years from the date of the hedge agreements.  The purpose of these financial instruments is to contain the interest rate variability of the Company’s long term debt.

As of March 31, 2001, the Company has entered into several financial instruments with a total outstanding notional amount of $1.012 billion. Income and expense associated with these instruments are accrued over the periods prescribed by the contracts.

The carrying amounts of the Company’s financial instruments are as follows:

 

    Interest  rate  range
 Carrying amount
(In thousands) Notional amount
 (Not to
exceed)
 (Not to be
less)
 March 31,
2001
 December 31,
 2000
Financial asset          
      Cash $- - - $79,403 $2,205
      Accounts receivable, net - - - 43,960 43,324
           
Financial liabilities          
      Credit facility - - - 1,264,050 1,018,850
      9 5/8 % Senior Subordinated Notes - - - 125,000 125,000
      Other long term debt - - - 41,976 14,122
           
Other financial instruments          
      Interest rate swap agreements:          
              TD Securities (terminates May 16, 2003) $84,000 7.632% 7.632% (5,226) -
              PNC Bank (terminates May 16, 2003) 42,000 7.632% 7.632% (2,590) -
              Union Bank (terminates May 16, 2003) 84,000 7.591% 7.591% (5,145) -
              Fleet Bank (terminates May 16, 2003) 42,000 7.598% 7.598% (2,579) -
           
      Interest rate collar agreements:          
              PNC Bank (terminates May 25, 2003) 47,000 9.000% 6.510% (1,758) -
              Fleet Bank (terminates May 25, 2003) 94,000 9.000% 5.810% (2,706) -
              Union Bank (terminates June 5, 2003) 96,000 9.000% 5.480% (1,489) -
              PNC Bank (terminates June 6, 2003) 94,000 9.000% 5.860% (2,525) -
              Union Bank (terminates June 5, 2003) 46,000 9.000% 6.100% (1,362) -
           
      Swaption (*):          
              TD Securities (terminates March 15, 2008) 131,016 - - (9,641)  
           
      Interest rate Flooridor (**):          
              Fleet Bank (terminates May 12, 2003) 252,000
- - 2,530 -
                                             Total $1,012,016
       

(*) Rural Cellular Corporation has $125 million in subordinated debt that was issued in May 1998 and matures in May 2008.  The $8.7 million value of an embedded call option within the subordinated debt was monetized in March 2001 resulting in a swaption.  The swaption qualifies for hedge accounting treatment under SFAS 133.

(**) During 2000, the Company entered into an interest rate instrument (“Flooridor”) that is carried at the lower of cost or market in the accompanying balance sheet.  The Flooridor does not qualify for hedge accounting treatment under SFAS No. 133 and will be required to be recorded in the balance sheet at fair value.  The related changes in fair value are included in our statement of operations.

6)          SUPPLEMENTAL DISCLOSURE OF CONDENSED CONSOLIDATED CASH FLOW
             INFORMATION:

 

  (In thousands)
Three  months ended March 31,
(Unaudited)
  2001
 2000
Cash paid during the period for interest $24,727 $4,007

 

             Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                                                       RESULTS OF OPERATIONS

INTRODUCTION

Affecting the year-to-year financial comparability of RCC is its acquisition activity. The Company materially expanded its business through the acquisition of Triton Cellular and Saco River in April 2000 and January 2001, respectively.

The April 2000 acquisition of Triton Cellular was accounted for under the purchase method of accounting and, therefore, the Company’s historical results of operations include the results of operations for Triton Cellular subsequent to the acquisition date.

The January 2001 acquisition of Saco River was also accounted for under the purchase method of accounting. In March 2001, however, RCC engaged an agent to sell the assets and liabilities of Saco River’s ILEC operations. As a result, the ILEC operations are treated as held for sale and excluded from the Company’s consolidated statements of operations.

Other factors affecting year-to-year financial comparability include increased borrowings under the Company’s credit facility and issuance of preferred securities.

Accordingly, the Company does not believe its historical financial condition and results of operations set forth below are indicative nor should they be relied upon as an indicator of  future performance.

GENERAL

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 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. The Company also includes the charges to its customers when they use their cellular phone in other wireless providers' markets (“Incollect Revenue”) as service revenue.

•            Roamer revenues include only the revenue from other wireless providers’ customers who use RCC's network (“Outcollect Revenue”).

•            Equipment revenues include sales of cellular and paging equipment, accessory sales to customers, and network equipment reselling.

RCC’s operating expenses include network costs, cost 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 the Company’s wireless network facilities, as well as charges from other service providers for resold minutes and the expense associated with incollect revenue.

•            Cost of equipment sales includes the costs associated with telephone equipment and accessories sold to customers. In recent years, the Company and other cellular providers have increased the use of discounts on phone equipment as competition between service providers has intensified. As a result, the Company has incurred, and expects to continue to incur, losses on equipment sales and increased marketing and selling costs per gross additional customer. RCC expects to continue these discounts and promotions because it believes they will result in increases in the number of cellular customers and, consequently, increased revenues.

•            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 RCC’s fixed assets and the amortization of its intangible assets, primarily cellular license acquisition costs, goodwill and customer lists.  The high level of depreciation and amortization is associated with the Company’s acquisition activities and the build-out and upgrade of its network.

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

•            Interest expense primarily results from borrowings under the credit facility and senior subordinated notes, the proceeds of which were used to finance acquisitions and further develop the Company’s cellular network.  Also contributing to interest expense are adjustments reflecting the change in fair market value of the Company's derivatives not qualifying for hedge accounting.

•            Other income (expense) includes RCC’s minority partner's absorption of Wireless Alliance losses as accounted for under generally accepted accounting principles. RCC realized the maximum benefit from the allocation of losses to the minority partner as of December 31, 2000 and will receive no further benefit until Wireless Alliance generates income.

Preferred stock dividends are related to the Company’s issuances of preferred stock as described in the notes to the financial statements.

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.

 

  Three months ended
 March 31,
  2001
 2000
REVENUES:    
     Service 71.2% 72.1%
     Roamer 23.6 22.1
     Equipment 5.2
 5.8
         Total revenues 100.0
 100.0
OPERATING EXPENSES:    
     Network costs 23.4 21.2
     Cost of equipment sales 6.5 12.7
     Selling, general and administrative 26.7 32.8
     Depreciation and amortization 27.3
 24.0
         Total operating expenses 83.9
 90.7
OPERATING INCOME 16.1
 9.3
OTHER INCOME (EXPENSE):    
     Interest expense, net (31.8) (7.4)
     Other -
 0.0
         Other expense, net (31.8)
 (7.4)
INCOME (LOSS) BEFORE CUMULATIVE EFFECT ADJUSTMENT (15.7) 1.9
CUMULATIVE EFFECT ADJUSTMENT 0.1
 -
NET INCOME (LOSS) (15.6)
 1.9
PREFERRED STOCK DIVIDEND (13.1)
 (14.8)
NET LOSS APPLICABLE TO COMMON SHARES (28.7)%
 (12.9)%

The following table presents the Company’s operating data for the periods indicated.

 

Other Operating Data: Three months ended March 31,
  2001
 2000
     
Customers at period end:    
Voice:    
    Postpaid 555,913 236,812
    Prepaid 24,486 3,059
    Wireless Alliance 14,517 16,659
    Wholesale 23,069
 -
     617,985 256,530
Paging 9,958
 12,615
        Total customers 627,943 269,145
     
Penetration: (1)   (5) 10.1% 8.0%
     
Retention: (2) 98.0% 98.0%
     
Average monthly revenue per customer: (3) $54 $57
     
Acquisition cost per customer: (4) $247 $432
     
POPs (5)    
    RCC Cellular 5,161,000 2,469,000
    Wireless Alliance 732,000
 732,000
        Total POPs 5,893,000 3,201,000
1. Represents the ratio of wireless voice customers, excluding wholesale customers, at the end of the period to POPs.
   
2. Determined for each period by dividing total postpaid wireless voice customers discontinuing service during such period by the average postpaid wireless voice customers for such 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 such result from one.
   
3. Determined for each period by dividing the sum of access, airtime, roaming, long distance, features, connection, disconnection, and other revenues for such period by the monthly average postpaid wireless voice customers for such 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 such period.
   
4. Determined for each period by dividing selling and marketing expenses, net costs of equipment sales, and depreciation of rental telephone equipment by the gross postpaid wireless voice customers added during such period.
   
5. Updated to reflect 2000 U.S. Census Bureau data.

 

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000

 

  Three Months EndedMarch 31,
(In thousands)
  2001
 % Change
 2000
REVENUES:      
     Service $70,036 108.5% $33,594
     Roamer 23,215 125.2 10,310
     Equipment 5,133
 88.4
2,725
         Total revenues 98,384
 111.0
46,629
OPERATING EXPENSES:      
     Network costs 23,006 132.7 9,888
     Cost of equipment sales 6,428 8.3 5,934
     Selling, general and administrative 26,219 71.5 15,286
     Depreciation and amortization 26,898
 140.2
11,200
         Total operating expenses 82,551
 95.1
42,308
OPERATING INCOME $15,833
 266.4%
$4,321
       
INTEREST EXPENSE $(31,280) 811.4% $(3,432)
PREFERRED STOCK DIVIDEND $(12,947) 88.0% $(6,887)
* EBITDA $42,731 175.3% $15,521

(*)  See footnote (1) under Acquisitions.

Revenues

Service Revenues. Consolidated service revenues for 2001 increased 108.5% to $70.0 million from $33.6 million in 2000. The revenue growth reflects the additional revenue resulting from the acquisitions of Triton Cellular and Saco River Telegraph and Telephone (“Saco River”) combined with additional customers added through increased penetration in existing markets. The Company expects service revenues to increase in the future primarily as a result of further anticipated industry-wide growth in customers and expansion of coverage.

Roamer Revenues. Reflecting the acquisition of Triton Cellular and Saco together with increases in outcollect roaming minutes, consolidated roamer revenues for 2001 increased 125.2% to $23.2 million from $10.3 million in 2000. Roaming minutes in existing markets have increased in part due to the activation of additional cell sites and increased industry-wide wireless usage resulting from the now popular single rate calling plans. Partially offsetting the revenue increase during 2001 was the decrease in roaming yield per minute. Including toll, outcollect yield decreased to $0.38 in 2001 as compared to $0.59 in 2000.

Equipment Revenues. Consolidated equipment revenues for 2001 increased 88.4% to $5.1 million from $2.7 million in 2000. This revenue growth reflects the additional equipment revenue from the Triton Cellular and Saco River operations and increased sales of network equipment.

Operating Expenses

Network Costs. Primarily reflecting the additional network costs from the acquisition of Triton Cellular and Saco River, consolidated network costs for 2001 increased 132.7% over 2000 to $23.0 million as compared to $9.9 million in 2000. Also contributing to this increase was the cost relating to greater incollect activity resulting from service plans with expanded local service areas. Partially offsetting the increase in incollect minutes was a decline in per minute cost.  For example, 2001 incollect cost per minute decreased to $0.30 as compared to $0.52 in 2000.  Total incollect cost was $11.7 million in 2001 as compared to $5.0 million in 2000. As a percentage of total revenues, consolidated network costs for 2001 increased to 23.4% from 21.2% in 2000.

Cost of Equipment Sales. Reflecting the additional equipment costs from the acquisitions of Triton Cellular and Saco River, cost of equipment sales for 2001 increased 8.3% over 2000 to $6.4 million. As a percentage of revenue, cost of equipment sales for 2001 decreased to 6.5% as compared to 12.7% in 2001.

Contributing to the decrease in cost of equipment sales, as a percentage of revenue, was a greater reliance on the Company’s phone service plans under which the cost of handsets are capitalized rather than included in cost of equipment. The initial cost of these capitalized handsets is also not included in the calculation of acquisition cost per customer (“ACPC”) which has therefore significantly contributed to the decrease in total ACPC in 2001 as compared 2000. The corresponding depreciation expense from capitalized handsets however, is included in ACPC.

Selling, General and Administrative. Selling, general and administrative expenses for 2001 increased 71.5% over 2000 to $26.2 million from $15.3 million. The increase in selling, general and administrative expenses primarily reflects RCC’s ownership of Triton Cellular and Saco River operations in 2001. Reflecting efficiencies resulting from the acquisition of Triton Cellular and Saco River, selling, general and administrative expenses, as a percentage of sales for 2001, decreased to 26.7% as compared to 32.8% in 2000.

Depreciation and Amortization. Depreciation and amortization expense for 2001 increased 140.2% over 2000 to $26.9 million from $11.2 million. The increase reflects added amortization relating to the intangible assets acquired from Triton Cellular and Saco River, additional depreciation attributable to Triton Cellular and Saco River’s property, plant and equipment and depreciation related to $59.6 million of capital expenditures during the first quarter of 2001and the last three quarters of 2000.

Other Income (Expense)

Interest Expense. Interest expense for 2001 increased 811.4% to $31.3 million as compared to $3.4 million in 2000. The increase primarily reflects increased borrowings under the credit facility to complete the acquisitions of Triton Cellular and Saco River. Also contributing to the increase in interest expense was a $1.4 million charge reflecting the change in fair market valuation of the Company’s derivatives not qualifying for hedge accounting.

Preferred Stock Dividends

Preferred stock dividends in 2001 increased 88.0% to $12.9 million as compared to $6.9 million in 2000. The increase primarily resulted from the issuances of junior and senior exchangeable preferred stock in February 2000, Class T preferred stock issued in March 2000 and Class M preferred stock issued in April 2000.

Dividends on the junior and senior preferred stock were and will be paid through the issuance of additional shares of exchangeable preferred stock. RCC will distribute 5,631 and 4,837 shares of Senior and Junior Preferred Stock dividends, respectively, on May 15, 2001.

Seasonality

The Company experiences seasonal fluctuations in revenues and operating income. RCC’s average monthly roaming revenue per cellular customer increases during the second and third calendar quarters. This increase reflects greater usage by roaming customers who travel in the Company’s cellular service area for weekend and vacation recreation or work in seasonal industries. Because RCC’s cellular service area includes many seasonal recreational areas, the Company expects that roaming revenues will continue to fluctuate seasonally more than service revenues.

LIQUIDITY AND CAPITAL RESOURCES

The Company has a $1.275 billion credit facility with a consortium of lenders. The credit facility provides for $275 million in revolving loans and $1.000 billion in term loans. As of March 31, 2001, $1.264 billion was outstanding under the credit facility. On March 31, 2001, the credit facility was amended to revise certain leverage covenant levels. As of March 31, 2001, the Company was in compliance with all covenants under the credit facility.

Under the 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. The Company had approximately $11.0 million available to borrow under the credit facility at March 31, 2001.

Net cash provided by operating activities was $6.3 million for the quarter ended March 31, 2001. Adjustments to the $15.3 million net loss to reconcile to net cash provided by operating activities included $26.9 million in depreciation and amortization, a $1.6 million decrease in accounts receivable, a $12.0 million decrease in accounts payable and a $3.9 million increase in other accrued expenses.

Net cash used in investing activities for the quarter ended March 31, 2001 was $186.3 million. The principal uses of cash included $141.9 million for the acquisition of Saco River, $37.1 million in assets “held for sale” from the Saco River ILEC and $7.3 million in purchases of property and equipment.

Not including capital expenditures required for the buildout of RCC’s Northeast Region PCS licenses, capital expenditures for 2001 are expected to be approximately $50 to $60 million. These purchases reflect the continued expansion of our existing cellular coverage, the leasing of handsets to certain customer groups and upgrading of existing cell sites and switching equipment. RCC has developed several buildout options for the Northeast PCS licenses.  Although a final decision regarding these options has not been made, the approximate cost is expected to be in the $10 to $15 million range.

Net cash provided by financing activities was $254.3 million for the quarter ended March 31, 2001, consisting primarily of $315.4 million from the issuance of long-term debt, partially offset by $69.7 million in repayments of long-term debt.  In addition, the Company received $8.7 million in proceeds from entering into a swaption contract.

The Company is currently marketing both the Saco River ILEC and its tower portfolio, including the Wireless Alliance towers.  Proceeds from the sale of both the towers and ILEC will be used to reduce the credit facility.

Based on the above, RCC’s primary liquidity requirements are for working capital, capital expenditures, debt service, and acquisitions. RCC will meet these requirements through cash flow from operations and utilization of cash on hand.

Forward Looking Statements

Forward-looking statements herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although RCC believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. A number of factors could cause actual results, performance, achievements of RCC, 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 competitive considerations, success of customer enrollment initiatives, the ability to increase wireless usage and reduce customer acquisition costs, the successful integration of newly acquired operations with RCC’s existing operations, the ability to negotiate favorable roaming agreements, the ability to service debt incurred in connection with expansion, the resolution of certain network technology issues and other factors discussed from time to time in RCC's  Report on Form 10-K for the year ended December 31, 2000 and other filings with the Securities and Exchange Commission.  Investors are cautioned that all forward-looking statements involve risks and uncertainties.

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 RCC or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. RCC disclaims any obligation to update any such statements or to announce publicly the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Rural Cellular Corporation has used senior subordinated notes and bank credit facilities as part of its financing of acquisition activities, capital requirements and operations.  These on-balance sheet financial instruments, to the extent they provide for variable rates of interest, expose RCC to interest rate risk, with the primary interest rate risk exposure resulting from changes in LIBOR or the prime rate, which are used to determine the interest rates that are applicable to borrowings under RCC’s bank credit facilities.  RCC uses derivative financial instruments, including interest rate swap and interest rate protection agreements, to manage interest rate risk.

At March 31, 2001, RCC had debt totaling $1.264 billion under the credit facility.  RCC has interest rate swap, collar, swaption and flooridor agreements covering debt with a notional amount of $1.012 billion to effectively change the interest on the underlying debt from a variable rate to a fixed rate for the term of the agreements.  After giving effect to these instruments, over 50% of RCC’s debt was essentially fixed rate debt at March 31, 2001.  For fixed rate debt, interest rate changes affect the fair market value but do not impact earnings or cash flows.  Conversely, for variable rate debt, interest rate changes generally do not affect the fair market value but do impact our future earnings and cash flows, assuming other factors are held constant. Had RCC not entered into the interest rate swaps, collars and flooridor, and holding other variables constant, such as debt levels, a one percentage point increase in interest rates, net of the effect of derivatives, would have impacted pretax earnings and cash flows for the three months ended March 31, 2001 by approximately $3.0 million.

 

PART II.  OTHER INFORMATION

ITEM 5.   OTHER INFORMATION

In January 2001, the Company completed the $190 million acquisition of the outstanding shares of the Saco River Telegraph and Telephone Company for cash.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits
    10.1 (a) Second Amendment to third amended and restated loan agreement dated March 31, 2001 among Rural Cellular Corporation and certain financial institutions and Toronto Dominion (Texas), Inc. as administrative agent.

(b)  Reports on Form 8-K
  A Report on Form 8-K dated February 20, 2001, was filed during the three months ended March 31, 2001, reporting under Item 9.  Including in the Form 8-K was RCC’s 4th quarter 2000 financial press release issued on February 20, 2001 and the script of RCC’s prepared teleconference from the webcast earnings conference call held on February 21, 2001, 8:00 AM CT.

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

                RURAL CELLULAR CORPORATION
     (Registrant)
     
     
     
     
Dated: May 15, 2001   /s/ Richard P. Ekstrand
    Richard P. Ekstrand
    President and Chief Executive Officer
     
     
Dated: May 15, 2001   /s/ Wesley E. Schultz
    Wesley E. Schultz
    Executive Vice President and Chief Financial Officer
    (Principal Financial Officer)

 

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Exhibit 10.1(a)

EXECUTION COPY

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT

             THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT (this "Amendment"), dated as of the 31st day of March, 2001 (the "Amendment Date"), by and among RURAL CELLULAR CORPORATION, a Minnesota corporation (the "Borrower"); the financial institutions signatory hereto (the "Lenders"); and TORONTO DOMINION (TEXAS), INC., as administrative agent (the "Administrative Agent") for the Lenders;

W I T N E S S E T H:

             WHEREAS, the Borrower, the Administrative Agent and the Lenders are parties to that certain Third Amended and Restated Loan Agreement, dated as of June 29, 2000, as amended by that certain First Amendment thereto dated as of December 14, 2000 (as heretofore and hereafter amended, modified, supplemented and restated from time to time, the "Loan Agreement"); and

             WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders amend and waive certain provisions in the Loan Agreement as more specifically set forth below; and

             WHEREAS, the Administrative Agent and the Lenders have agreed to such amendments and waiver on the terms and conditions set forth herein;

             NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed to such terms in the Loan Agreement, and further agree as follows:

             1.          Amendment to Article 1.  Article 1 of the Loan Agreement, Definitions, is hereby amended by deleting the definition of "Unreinvested Net Proceeds" in its entirety.

             2.          Amendments to Article 2.

                           (a)         Amendment to Section 2.3 .  Section 2.3(f) of the Loan Agreement, Applicable Margin, is hereby amended by deleting Section 2.3(f) in its entirety and substituting in lieu thereof the following:

"(f) Applicable Margin.

             (i)          Revolving Loans and Term Loan A Loans.  With respect to any Advance under the Revolving Loan Commitments or the Term Loan A Commitments, the Applicable Margin shall be as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent based upon the Total Leverage Ratio for the most recent fiscal quarter end for which financial statements are furnished by the Borrower to the Administrative Agent and each Lender as follows:
  Total Leverage Ratio
Base Rate Advance
Applicable Margin
LIBOR Advance
Applicable Margin
 A. Greater than 7.50:1.00 2.250% 3.250%
 B. Greater than 7.00:1.00, but less than or equal to 7.50:1.00 2.125% 3.125%
 C. Greater than 6.50:1.00, but less than or equal to 7.00:1.00 2.000% 3.000%
 D. Greater than 6.00:1.00, but less than or equal to 6.50:1.00 1.500% 2.500%
 E. Greater than 5.00:1.00, but less than or equal to 6.00:1.00 1.000% 2.000%
 F. Greater than 4.00:1.00, but less than or equal to 5.00:1.00 0.750% 1.750%
 G. Less than or equal to 4.00:1.00 0.500% 1.500%

             (ii)         Term Loan B Loans.  With respect to any Advance under the Term Loan B Commitments, the Applicable Margin shall be as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent based upon the Total Leverage Ratio for the most recent fiscal quarter end for which financial statements are furnished by the Borrower to the Administrative Agent and each Lender as follows:
  Total Leverage Ratio
Base Rate Advance
Applicable Margin
LIBOR Advance
Applicable Margin
 A. Greater than 7.00:1.00 2.500% 3.500%
 B. Less than or equal to 7.00:1.00 2.250% 3.250%

             (iii)        Term Loan C Loans.  With respect to any Advance under the Term Loan C Commitments, the Applicable Margin shall be as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent based upon the Total Leverage Ratio for the most recent fiscal quarter end for which financial statements are furnished by the Borrower to the Administrative Agent and each Lender as follows:
  Total Leverage Ratio
Base Rate Advance
Applicable Margin
LIBOR Advance
Applicable Margin
 A. Greater than 7.00:1.00 2.750% 3.750%
 B. Less than or equal to 7.00:1.00 2.500% 3.500%

             (iv)       Incremental Facility Loans.  With respect to any Advance under the Incremental Facility Commitments, the Applicable Margin shall be as set forth in a certificate of the chief financial officer of the Borrower delivered to the Administrative Agent based upon the Total Leverage Ratio for the most recent fiscal quarter end for which financial statements are furnished by the Borrower to the Administrative Agent and each Lender as follows:
  Total Leverage Ratio
Base Rate Advance
Applicable Margin
LIBOR Advance
Applicable Margin
 A. Greater than 7.00:1.00 3.000% 4.000%
 B. Less than or equal to 7.00:1.00 2.750% 3.750%

             (v)        Notwithstanding any provision to the contrary herein, the Applicable Margin on April 23, 2001 shall be at the highest Applicable Margin set forth for the applicable Loans above, with any adjustments to the Applicable Margin to be based upon the receipt by the Administrative Agent of financial statements for the fiscal quarter ending March 31, 2001 and effective as set forth in Section 2.3(f)(vi) below.

             (vi)       Subject to the last sentence hereof, with respect to Section 2.3(f)(i), (ii), (iii) and (iv), changes to the Applicable Margin shall be effective as of the second (2nd) Business Day after the day on which the financial statements are delivered to the Administrative Agent and the Lenders pursuant to Section 6.1 or 6.2 hereof, as the case may be.  Upon the occurrence and during the continuance of an Event of Default, the Applicable Margins shall not be subject to downward adjustment and shall automatically revert to the Applicable Margins set forth in, (A) with respect to Section 2.3(f)(i), part A of the table in Section 2.3(f)(i) above, (B) with respect to Section 2.3(f)(ii), part (A) of the table in Section 2.3(f)(ii) above, (C) with respect to Section 2.3(f)(iii), part A of the table in Section 2.3(f)(iii) above and (D) with respect to Section 2.3(iv), part (A) of the table in Section 2.3(f)(iv) above, in each case, until such time as such Event of Default is cured or waived.”

                           (b)        Amendment to Section 2.5. Section 2.5(c) of the Loan Agreement, Mandatory Revolving Loan Commitment Reductions, is hereby amended by deleting Section 2.5(c) in its entirety and substituting in lieu thereof the following:

                           "(c)       Reductions From Permitted Asset Sales. After the Agreement Date, on the date that any repayment of the Loans under Section 2.7(b)(vi) hereof is made, the Revolving Loan Commitments and, if applicable, the Incremental Facility Commitments shall be automatically and permanently reduced by an amount equal to the repayment of Revolving Loans and, if applicable, the Incremental Facility Loans required under Section 2.7(b)(vi) hereof; provided, however, that if there are no Loans then outstanding, or if the amount of such repayment exceeds the amount of the outstanding Loans, the Revolving Loan Commitments and, if applicable, the Incremental Facility Commitments shall be reduced on a pro rata basis by an aggregate amount equal to the repayment that would have been made had there been Loans outstanding, or the excess of such repayment over the Loans (which reduction shall be in addition to the reduction set forth in the first part of this Section 2.5(c)), as applicable, regardless of any repayment of the Revolving Loans (or, if applicable, the Incremental Facility Loans).  Reductions under this Section 2.5(c) to the Revolving Loan Commitments shall be applied to the reductions set forth in Section 2.5(a) hereof (and, if applicable, to the Incremental Facility Commitments shall be applied to the reductions set forth in the Notice of Incremental Facility Commitments) in inverse order of the reductions set forth therein."

                           (c)         Amendment to Section 2.7 .  Section 2.7(b)(vi) of the Loan Agreement, Prepayments and Repayments, is hereby amended by deleting Section 2.7(b)(vi) in its entirety and substituting in lieu thereof the following:

                           "(vi)     Asset Sales.  On the date that the Borrower or any of its Subsidiaries receives any Net Proceeds from any disposition or sale of assets by the Borrower or any of its Subsidiaries in accordance with Section 7.4 hereof, the Borrower shall make a repayment of the Loans then outstanding in an amount equal to such Net Proceeds; provided, however, that, prior to the occurrence or continuance of a Default of Event or Default, the Borrower shall not be required to make a repayment hereunder with respect to (A) any disposition of assets, in the ordinary course of business, which are obsolete or which are no longer used or useful in the business of the Borrower or any of its Subsidiaries or (B) the Net Proceeds of any disposition or sale of assets (other than those Net Proceeds resulting from any sale/leaseback transaction or those resulting from the sale of the incumbent local exchange carrier business of Saco River) which do not exceed (1) $5,000,000 for any single transaction (or series of related transactions), and (2) $15,000,000 in the aggregate during the term hereof.  Subject to Section 2.7(b)(xii) hereof, the amount of the Net Proceeds required to be repaid under this Section 2.7(b)(vi) shall be applied to the Term Loans then outstanding (on a pro rata basis for all Term Loans) in inverse order of maturity for each Term Loan, second to the Revolving Loans and then, if applicable, to the Incremental Facility Loans.  Accrued interest on the principal amount of the Loans being prepaid pursuant to this Section 2.7(b)(vi) to the date of such prepayment will be paid by the Borrower concurrently with such principal prepayment."

             3.          Amendments to Article 7.

                           (a)         Amendment to Section 7.4 .  Section 7.4(a) of the Loan Agreement Liquidation, Merger, or Disposition of Assets, is hereby amended by deleting Section 7.4(a) in its entirety and substituting in lieu thereof the following:

                           "Section 7.4     Liquidation, Merger, or Disposition of Assets

             (a)         Disposition of Assets.  The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time sell, lease, abandon, or otherwise dispose of any assets (other than assets disposed of in the ordinary course of business) without the prior written consent of the Lenders; provided, however, that (i) the prior written consent of the Lenders shall not be required for (A) the transfer of assets (including, without limitation, cash or cash equivalents) among the Borrower and its Subsidiaries (excluding Wireless Alliance) or for the transfer of assets (including, without limitation, cash or cash equivalents, but excluding the Licenses) between or among Subsidiaries (excluding Wireless Alliance) of the Borrower or (B) dispositions of assets the proceeds of which are applied pursuant to Section 2.5(c) or 2.7(b)(vi) hereof (provided, however, that, with respect to such sales under Section 2.5(c) or 2.7(b)(vi), the Borrower provides to the Administrative Agent and the Lenders on the date of such sale a certificate reflecting compliance with the terms and provisions of Sections 7.8, 7.9, 7.10, 7.11 and 7.12 hereof both before and after giving effect to such sale or transfer) and (ii) on or prior to March 31, 2002, the Borrower or any of its Subsidiaries shall (A) enter into one or more sale/leaseback transactions with respect to a substantial portion of the Borrower's cellular towers, the documentation for which to be approved as to form by the Administrative Agent (such approval not to be unreasonably withheld) and (B) finalize the sale of the incumbent local exchange carrier business of Saco River for an aggregate sales price of not less than its fair market value (as reasonably determined by the Borrower)."

                           (b)        Amendment to Section 7.8 .  Section 7.8 of the Loan Agreement, Total Leverage Ratio, is hereby amended by deleting Section 7.8 in its entirety and substituting in lieu thereof the following:

             "Section 7.8     Total Leverage Ratio.  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit its Total Leverage Ratio to exceed the ratios set forth below during the periods indicated:
Period
Total Leverage Ratio
January 1, 2001 through
March 31, 2001		 8.65:1.00
   
April 1, 2001 through
June 30, 2001		 8.00:1.00
   
July 1, 2001 through
March 31, 2002		 7.00:1.00
   
April 1, 2002 through
June 30, 2002		 6.25:1.00
   
July 1, 2002 through
December 31, 2002		 6.00:1.00
   
January 1, 2003 and thereafter 5.00:1.00”

             (c)         Amendment to Section 7.9.  Section 7.9 of the Loan Agreement, Senior Leverage Ratio, is hereby amended by deleting Section 7.9 in its entirety and substituting in lieu thereof the following:

             "Section 7.9     Senior Leverage Ratio.  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit the ratio of (i) the principal amount of the Loans outstanding on such date to (ii) its Annualized Operating Cash Flow (as of the calendar quarter end being tested, or as of the most recently completed calendar quarter for which financial statements are required to have been delivered pursuant to Section 6.1 or 6.2 hereof, as the case may be) to exceed the ratios set forth below during the periods indicated:
Period
Senior Leverage Ratio
   
January 1, 2001 through
March 31, 2001		 7.90:1.00
   
April 1, 2001 through
June 30, 2001		 7.50:1.00
   
July 1, 2001 through
March 31, 2002		 6.50:1.00
   
April 1, 2002 through
June 30, 2002		 5.75:1.00
   
July 1, 2002 through
December 31, 2002		 5.00:1.00
   
January 1, 2003 and thereafter 4.50:1.00"

                           (d)        Amendment to Section 7.11.  Section 7.11 of the Loan Agreement, Annualized Operating Cash Flow to Interest Expense, is hereby amended by deleting Section 7.11 in its entirety and substituting in lieu thereof the following

             Section 7.11     Annualized Operating Cash Flow to Interest Expense.  (a) As of the end of any calendar quarter, and (b) at the time of any Advance hereunder (after giving effect to such Advance), the Borrower shall not permit the ratio of (i) its Annualized Operating Cash Flow (as of the calendar quarter end being tested, or as of the most recently completed calendar quarter for which financial statements are required to have been delivered pursuant to Section 6.1 or 6.2 hereof, as the case may be) to (ii) its Interest Expense for the twelve (12) calendar months immediately preceding the calculation date to be less than the ratios set forth below for the periods indicated:
Period
Annualized Operating Cash
Flow to Interest Expense
   
January 1, 2001 through
June 30, 2001		 1.25:1.00
   
July 1, 2001 through
December 31, 2001		 1.50:1.00
   
January 1, 2002 through
March 31, 2002		 1.25:1.00
   
April 1, 2002 through
June 30, 2002		 1.50:1.00
   
July 1, 2002 and thereafter” 2.00:1.00

 

             4.          Waiver to Credit Agreement.  The Required Lenders and the Administrative Agent hereby waive compliance by the Borrower with Section 7.12 of the Loan Agreement, Fixed Charge Coverage Ratio, for the period from March 31, 2001 through June 30, 2001.  This waiver is effective for that period only and the Borrower shall be required to comply with Section 7.12 at all other times.

             5.          Amendment Fee.  The Borrower shall pay to the Administrative Agent on behalf of the Lenders executing and delivering this Amendment on or prior to 5 p.m. (EST) Monday, April 23, 2001, an amendment fee in the amount of 0.250% of the sum of (a) the aggregate outstanding Loans (other than the outstanding Revolving Loans and Swing Line Loans) of such Lenders and (b) the Revolving Loan Commitments of such Lenders (such sum, the “Amendment Fee”).  The Administrative Agent shall distribute pro rata to each Lender executing this Amendment a portion of the Amendment Fee based on such Lender’s portion of the outstanding Loans (other than the outstanding Revolving Loans and Swing Line Loans) and such Lender’s Revolving Loan Commitment.  The Amendment Fee shall be fully earned when due and non-refundable when paid.

             6.          Amendment to Loan Documents.  All of the Loan Documents are hereby amended to the extent necessary to give full force and effect to the amendment contained in this Amendment.

             7.          Representations and Warranties.  The Borrower hereby represents and warrants to and in favor of the Administrative Agent and the Lenders as follows:

             (a)         each representation and warranty set forth in Article 4 of the Loan Agreement is hereby restated and affirmed as true and correct in all material respects as of the date hereof, except to the extent previously fulfilled in accordance with the terms of the Loan Agreement or to the extent relating specifically to the Agreement Date (or date prior thereto) or otherwise inapplicable;

             (b)        the Borrower has the corporate power and authority (i) to enter into this Amendment and (ii) to do all acts and things as are required or contemplated hereunder to be done, observed and performed by it;

             (c)         this Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower, and this Amendment and the Loan Agreement constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with its respective terms, subject, as to enforcement of remedies, to the following qualifications:  (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors’ rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and

             (d)        the execution and delivery of this Amendment and performance by the Borrower under the Loan Agreement does not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor be in contravention of or in conflict with the Certificate of Incorporation of the Borrower, or any provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is party or by which the Borrower’s assets or properties are bound.

             8.          Conditions Precedent to Effectiveness of Amendment.  The effectiveness of this Amendment is subject to:

             (a)         receipt by the Administrative Agent of duly executed counterpart signature pages of the Borrower and the Required Lenders to this Amendment;

             (b)        all of the representations and warranties of the Borrower under Section 7 hereof being true and correct in all material respects, except to the extent previously fulfilled in accordance with the terms of the Loan Agreement or to the extent relating specifically to the Agreement Date (or date prior thereto) or otherwise inapplicable;

             (c)         receipt by the Administrative Agent of the Amendment Fee; and

             (d)        receipt of any other documents or instruments that the Administrative Agent, the Lenders signatory hereto or any of them, may reasonably request, certified by an officer of the Borrower if so requested.

             9.          No Other Amendment or Waiver.  Except for the amendment set forth above, the text of the Loan Agreement and all other Loan Documents shall remain unchanged and in full force and effect.  No waiver by the Administrative Agent or the Lenders under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth herein, and the Administrative Agent and the Lenders expressly reserve the right to require strict compliance in all other respects (whether or not in connection with any Requests for Advance).  Except as set forth herein, the amendment agreed to herein shall not constitute a modification of the Loan Agreement or any of the other Loan Documents, or a course of dealing with the Administrative Agent and the Lenders at variance with the Loan Agreement or any of the other Loan Documents, such as to require further notice by the Administrative Agent and the Lenders, or the Required Lenders to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future.

             10.        Loan Documents.  This document shall be deemed to be a Loan Document for all purposes under the Loan Agreement and the other Loan Documents.

             11.        Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.

             12.        Governing Law.  This Amendment shall be construed in accordance with and governed by the laws of the State of New York.

             13.        Severability.  Any provision of this Amendment which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

             IN WITNESS WHEREOF, the parties hereto have executed this Amendment or caused it to be executed by their duly authorized officers, all as of the day and year first above written.

BORROWER: RURAL CELLULAR CORPORATION, a Minnesota corporation
   
  By:
 
        Name: 
        Title: 
   
   
ADMINISTRATIVE AGENT AND LENDERS: TORONTO DOMINION (TEXAS), INC., as Administrative Agent and as a Lender
   
  By:
 
        Name: 
        Its:
   
   
   
  ABN AMRO BANK N.V., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  By:
 
        Name: 
        Its:
   
   
   
   
  ADDISON CDO, LIMITED (Acct 1279), as a Lender
  By: Pacific Investment Management Company LLC, as its Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  ATHENA CDO, LIMITED (Acct 1277), as a Lender
  By: Pacific Investment Management Company LLC, as its Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  CAPTIVA III FINANCE LTD. (Acct. 275), as a Lender as advised by Pacific Investment Management Company LLC
   
  By:
 
        Name: 
        Its:
   
   
  CAPTIVA IV FINANCE LTD. (Acct. 1275), as a Lender as advised by Pacific Investment Management Company LLC
   
  By:
 
        Name: 
        Its:

 

  JISSEKIKUN FUNDING, LTD., as a Lender
  By: Pacific Investment Management Company, LLC, as its Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  PIMCO HIGH YIELD FUND (ACCOUNT 705), as a Lender
By: Pacific Investment Management Company, LLC, as its Investment Advisor, acting through Investors Fiduciary Trust Company in the Nominee Name of IFTCO
   
  By:
 
        Name: 
        Its:
   
   
  ALLFIRST BANK, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  AMARA-I FINANCE, LTD., as a Lender
  By: INVESCO Senior Secured Management, Inc., as Subadvisor
   
  By:
 
        Name: 
        Its:
   
   
  AMARA 2 FINANCE, LTD., as a Lender
  By: INVESCO Senior Secured Management, Inc., as Subadvisor
   
  By:
 
        Name: 
        Its:
   
   
  AVALON CAPITAL LTD., as a Lender
  By: INVESCO Senior Secured Management, Inc., as Portfolio Manager
   
  By:
 
        Name: 
        Its:
   
   
  AVALON CAPITAL LTD. 2, as a Lender
  By: INVESCO Senior Secured Management, Inc., as Portfolio Manager
   
  By:
 
        Name: 
        Its:

 

  AMMC CDO II, LIMITED, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  ARCHIMEDES FUNDING II, LTD., as a Lender
  By: ING Capital Advisors LLC, as Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  ARCHIMEDES FUNDING III, LTD., as a Lender
  By: ING Capital Advisors LLC, as Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P., as a Lender
  By: ING Capital Advisors LLC, as Investment Manager
   
  By:
 
        Name: 
        Its:
   
   
  SEQUILS-ING I (HBDGM), LTD., as a Lender
  By: ING Capital Advisors LLC, as Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  SWISS LIFE US RAINBOW LIMITED, as a Lender
  ING Capital Advisors LLC, as Investment Manager
   
  By:
 
        Name: 
        Its:
   
   
  BANK OF AMERICA, N.A., as a Lender and as a Swing Line Lender
   
  By:
 
        Name: 
        Its:
   
  BANK OF MONTRÉAL, as a Lender
   
  By:
 
        Name: 
        Its:

 

  THE BANK OF NOVA SCOTIA, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  BEAR STEARNS INVESTMENT PRODUCTS, INC., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  BLUE SQUARE FUNDING LIMITED SERIES 3, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  BNP PARIBAS, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  By:
 
        Name: 
        Its:
   
   
  CARLYLE HIGH YIELD PARTNERS II, LTD., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  CENTURION CDO II, LTD., as a Lender
  By: American Express Asset Management Group, Inc., As Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  CENTURION CDO III, LTD., as a Lender
  By: American Express Asset Management Group, Inc.,  As Collateral Manager
   
  By:
 
        Name: 
        Its:

 

  THE CIT GROUP / EQUIPMENT FINANCING, INC., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  CITIZENS BANK OF MASSACHUSETTS, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  CITY NATIONAL BANK, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  COBANK, ACB, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  COLUMBUS LOAN FUNDING LTD., as a Lender
  By: Travelers Asset Management International Company LLC
   
  By:
 
        Name: 
        Its:
   
   
  THE TRAVELERS INSURANCE COMPANY, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  TRAVELERS CORPORATE LOAN FUND INC., as a Lender
  By: Travelers Asset Management International Company LLC
   
  By:
 
        Name: 
        Its:
   
   
  COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a Lender
   
  By:
 
        Name: 
        Its:
   
  By:
 
        Name: 
        Its:

 

  CREDIT AGRICOLE INDOSUEZ, as a Lender
   
  By:
 
        Name: 
        Its:
   
  By:
 
        Name: 
        Its:
   
   
  CYPRESSTREE INVESTMENT PARTNERS I, LTD., as a Lender
  By: CypressTree Investment Management Company, Inc. as Portfolio Manager
   
  By:
 
        Name: 
        Its:
   
   
  CYPRESSTREE INVESTMENT PARTNERS II, LTD., as a Lender
  By: CypressTree Investment Management Company, Inc. as Portfolio Manager
   
  By:
 
        Name: 
        Its:
   
   
  CYPRESSTREE SENIOR FLOATING RATE FUND, as a Lender
  By: CypressTree Investment Management Company, Inc. as Portfolio Manager
   
  By:
 
        Name: 
        Its:
   
   
  NORTH AMERICAN SENIOR FLOATING RATE FUND, as a Lender
  By: CypressTree Investment Management Company, Inc. as Portfolio Manager
   
  By:
 
        Name: 
        Its:
   
   
  THE DAI-ICHI KANGYO BANK, LTD. – NEW YORK BRANCH, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  DEBT STRATEGIES FUND, INC., as a Lender
   
  By:
 
        Name: 
        Its:

 

  MASTER SENIOR FLOATING RATE TRUST, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  DEXIA CREDIT LOCAL DE FRANCE – NEW YORK AGENCY, as a Lender
   
  By:
 
        Name: 
        Its:
   
  By:
 
        Name: 
        Its:
   
   
  EATON VANCE CDO III, LTD., as a Lender
  By: Eaton Vance Management, as Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  EATON VANCE INSTITUTIONAL SENIOR LOAN FUND, as a Lender
  By: Eaton Vance Management, as Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  ATON VANCE SENIOR INCOME TRUST, as a Lender
  By: Eaton Vance Management, as Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  GRAYSON & CO, as a Lender
  By: Boston Management and Research, as Investment Advisor
   
  By:
 
        Name: 
        Its:

 

  OXFORD STRATEGIC INCOME FUND, as a Lender
  By: Eaton Vance Management, as Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  SENIOR DEBT PORTFOLIO, as a Lender
  By: Boston Management and Research, as Investment Advisor
   
  By:
 
        Name: 
        Its:
   
   
  ELF FUNDING TRUST, as a Lender
  By: Highland Capital Management, L.P. as Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  EMERALD ORCHARD LIMITED, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  HIGHLAND LEGACY LIMITED, as a Lender
  By: Highland Capital Management, L.P. as Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  HIGHLAND LOAN FUNDING V, LTD., as a Lender
  By: Highland Capital Management, L.P. as Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  SL LOANS I LIMITED, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  FIRST UNION NATIONAL BANK, as a Lender
   
  By:
 
        Name: 
        Its:

 

  FIRSTAR BANK, N.A., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  FLEET NATIONAL BANK, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  FRANKLIN FLOATING RATE FUND PLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  GALAXY CLO 1999-1, LTD., as a Lender
  By: SAI Investment Adviser, Inc. its Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  GREAT POINT CLO 1999-1 LTD., as a Lender
  By: Sankaty Advisors, LLC as Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  SANKATY HIGH YIELD PARTNERS II, L.P., as a Lender
   
  By:
 
        Name: 
        Its:

 

  HOWARD BANK, N.A., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  IBM CREDIT CORPORATION, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KEMPER FLOATING RATE FUND, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KEY CORPORATE CAPITAL, INC., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH CRESCENT LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH CRESCENT-2 LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH ING-1 LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH ING-2 LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH ING-3 LLC, as a Lender
   
  By:
 
        Name: 
        Its:

 

  KZH LANGDALE LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH PAMCO LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH RIVERSIDE LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH SOLEIL LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH SOLEIL-2 LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  KZH STERLING LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  LIBERTY-STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND, as a Lender
  By: Stein Roe & Farnham Incorporated, As Advisor
   
  By:
 
        Name: 
        Its:
   
   
  STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, as a Lender
   
  By:
 
        Name: 
        Its:
        Stein Roe & Farnham Incorporated, as Advisor to the Stein Roe Floating Rate Limited Liability Company

 

  STEIN ROE & FARNHAM INCORPORATED, as a Lender
  as agent for Keyport Life Insurance Company
   
  By:
 
        Name: 
        Its:
   
   
  FLEET NATIONAL BANK
  As Trust Administrator for Long Lane Master Trust IV, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  MERITA BANK PLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
  By:
 
        Name: 
        Its:
   
   
  MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  METROPOLITAN LIFE INSURANCE COMPANY, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  ML CLO XV PILGRIM AMERICA (CAYMAN) LTD., as a Lender
  By: Pilgrim Investments, Inc. as its investment manager
   
  By:
 
        Name: 
        Its:
   
   
  PILGRIM CLO 1999-1 LTD., as a Lender
  By: Pilgrim Investments, Inc. as its investment manager
   
  By:
 
        Name: 
        Its:
   
   
  PILGRIM PRIME RATE TRUST, as a Lender
  By: Pilgrim Investments, Inc. as its investment manager
   
  By:
 
        Name: 
        Its:

 

  MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  MUIRFIELD TRADING LLC, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  OLYMPIC FUNDING TRUST, SERIES, 1999-1, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  PPM SPYGLASS FUNDING TRUST, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  SRF TRADING, INC., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  NATIONAL CITY BANK, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  OCTAGON INVESTMENT PARTNERS II, LLC, as a Lender
  By: Octagon Credit Investors, LLC as sub-investment manager
   
  By:
 
        Name: 
        Its:
   
   
  PNC BANK, NATIONAL ASSOCIATION, as a Lender
   
  By:
 
        Name: 
        Its:

 

  PUTNAM DIVERSIFIED INCOME TRUST, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  PUTNAM HIGH YIELD TRUST, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  CAPTIVA II FINANCE LTD., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  SEQUILS IV, LTD., as a Lender
  By: TCW Advisors, Inc., as its Collateral Manager
   
  By:
 
        Name: 
        Its:
   
  By:
 
        Name: 
        Its:
   
   
  SEQUILS-CUMBERLAND I, LTD., as a Lender
  By: Deerfield Capital Management, L.L.C. as its collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  STANFIELD CLO, LTD., as a Lender
  By: Stanfield Capital Partners LLC as its Collateral Manager
   
  By:
 
        Name: 
        Its:
   
   
  STANFIELD / RMF TRANSATLANTIC CDO, LTD., as a Lender
  By: Stanfield Capital Partners LLC as its Collateral Manager
   
  By:
 
        Name: 
        Its:

 

  WINDSOR LOAN FUNDING, LIMITED, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  FLEET NATIONAL BANK, as Successor to Summit Bank, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  SUNTRUST BANK, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  SYNDICATED LOAN FUNDING TRUST, as a Lender
  By: Lehman Commercial Paper, Inc., Not in its individual capacity but solely as Asset Manager
   
  By:
 
        Name: 
        Its:
   
   
  TRYON CLO LTD. 2000-1, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  UNION BANK OF CALIFORNIA, N.A., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  U.S. BANK NATIONAL ASSOCIATION, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  VAN KAMPEN PRIME RATE INCOME TRUST, as a Lender
  By: Van Kampen Investment Advisory Corp.
   
  By:
 
        Name: 
        Its:
   
   
  VAN KAMPEN SENIOR FLOATING RATE FUND, as a Lender
  By: Van Kampen Investment Advisory Corp.
   
  By:
 
        Name: 
        Its:

 

  WEBSTER BANK, as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  WELLS FARGO BANK N.A., as a Lender
   
  By:
 
        Name: 
        Its:
   
   
  CAPTIVA II FINANCE LTD., as a Lender
   
  By:
 
        Name: 
        Its:

 

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