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Guarantee And Collateral Agreement

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EXHIBIT 10.1(b)


GUARANTEE AND COLLATERAL AGREEMENT


GUARANTEE AND COLLATERAL AGREEMENT (as amended, supplemented or otherwise modified from time to time, this "Agreement"), dated as of March 25, 2004, made by RURAL CELLULAR CORPORATION, a Minnesota corporation (the "Borrower"), and each of the subsidiaries of the Borrower that are signatories hereto (such subsidiaries together with any other subsidiary that may become a party hereto as provided herein, the "Guarantors"; the Borrower and the Guarantors being referred to collectively herein as the "Pledgors"), in favor of LEHMAN COMMERCIAL PAPER INC., as Administrative Agent (in such capacity, together with its successors, the "Administrative Agent") for the Secured Parties (as defined herein).


W I T N E S S E T H:


WHEREAS, pursuant to the Credit Agreement dated as of March 25, 2004 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among the Borrower, the banks and other financial institutions or entities (the "Lenders") from time to time a party thereto, the Administrative Agent and Bank of America, N.A., as Documentation Agent, the Lenders have severally agreed to make Loans to the Borrower and participate in Letters of Credit upon the terms and subject to the conditions set forth therein;


WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Pledgor;


WHEREAS, the proceeds of the Loans and Letters of Credit under the Credit Agreement may be used in part to enable the Borrower to make valuable transfers to one or more of the other Pledgors in connection with the operation of their respective businesses;


WHEREAS, the Borrower and the other Pledgors are engaged in related businesses, and each Pledgor will derive substantial direct and indirect benefit from the making of the Loans and the issuing of Letters of Credit under the Credit Agreement; and


WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective Loans to the Borrower and participate in Letters of Credit under the Credit Agreement that the Pledgors shall have executed and delivered this Agreement to the Administrative Agent, for the ratable benefit of the Secured Parties;


NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the other Lenders to enter into the Credit Agreement and to induce the Lenders to make the Loans to the Borrower and participate in Letters of Credit thereunder and for other good and valuable consideration the receipt and sufficiency of


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which are hereby acknowledged, each Pledgor hereby agrees with the Administrative Agent, for the ratable benefit of the Secured Parties, as follows:


SECTION 1


DEFINED TERMS


1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms which are defined in the UCC on the date hereof are used herein as so defined: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Commodity Account, Deposit Account, Documents, Electronic Chattel Paper, Equipment, Fixtures, General Intangibles, Instruments, Inventory, Letter-of-Credit Rights, Proceeds, Promissory Note, Securities Account and Supporting Obligations.


(b) The following terms shall have the following meanings:


"Account Agent" has the meaning assigned to such term in the Intercreditor Agreement.


"Account Institution" means (i) with respect to any Controlled Account that is a Deposit Account, the bank at which such account is held and (ii) with respect to any Controlled Account that is a Securities Account, the securities intermediary for such Securities Account.


"Alexandria Regulatory Reserve Account" means any and all segregated Deposit Accounts maintained at KeyBank National Association in the name of Alexandria Indemnity Corporation Loss Reserve Account or any and all replacements of such accounts, in each case to the extent set up and maintained by Alexandria Indemnity solely for the purpose of satisfying any regulatory reserve requirement.


"Administrative Agent" has the meaning assigned to such term in the preamble to this Agreement.


"Agreement" has the meaning assigned to such term in the preamble to this Agreement.


"Associated Operations and Liabilities" means business operations and liabilities associated with the acquisition of a Restricted PCS Block C or F License or control of the holder of a Restricted PCS Block C or F License by TLA Spectrum.


"Borrower" has the meaning assigned to such term in the preamble to this Agreement.


"Borrower Obligations" means, collectively, each Obligation of the Borrower to any Secured Party.


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"Collateral" has the meaning assigned to such term in Section 3.


"Collateral Account" means any collateral account established by the Administrative Agent as provided in Section 6.1 or 6.4.


"Contracts" means all construction contracts, subscriber contracts, customer service agreements, management agreements, rights of way, easements, pole attachment agreements, transmission capacity agreements, public utility contracts, and other agreements to which the Pledgor is a party, whether now existing or hereafter arising, but excluding any Contract which is Excluded Property.


"Control Event" means either (i) an Event of Default described in Article VII (a), (b), (d) (with respect to Section 6.12 of the Credit Agreement only) or (h) through (j) of the Credit Agreement has occurred and is continuing or (ii) the Loans have become due and payable prior to the Maturity Date as a result of any Event of Default pursuant to Article VII.


"Controlled Accounts" means all Included Deposit Accounts and all Same-Institution Accounts.


"Copyright Licenses" means any written agreement providing for the grant by or to any Pledgor of any right under any Copyright (including, without limitation, those registered copyrights listed on Schedule 4.7).


"Copyrights" means (i) all copyrights arising under the laws of the United States, whether registered or unregistered and whether published or unpublished (including, without limitation, those listed on Schedule 4.7), all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, and (ii) the right to obtain all renewals thereof.


"Credit Agreement" has the meaning assigned to such term in the recitals to this Agreement.


"Dropdown Subsidiary" means a Wholly Owned Subsidiary that is a direct Subsidiary of RCC Atlantic or RCC Holdings formed for the purpose of holding the FCC Licenses held as of the date hereof by such entity.


"Eligible Entity" means a Person that is eligible to hold or acquire PCS Block C or F licenses, as specified in the rules, regulations and orders of the FCC, including, without limitation, 47 C.F.R. Sections 24.709 & 24.839.


"Excluded Disbursement Account" means any Deposit Account that is a disbursement, payroll, tax or impress account (other than any Existing Controlled Deposit Account or Same-Institution Account) but only if (1) such account has a zero balance as of the end of each day, (2) the Pledgors do not transfer during any day into such account


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any funds exceeding the amount reasonably expected to be paid from such account during such day and (3) no other Person has a control agreement on such account.


"Excluded Permitted Lien Property" means any property or assets of the Pledgors that are subject to the following Permitted Liens (but only to the extent that (i) the agreements relating to such Liens prohibit the creation of Liens in favor of the Administrative Agent on any such property or assets or (ii) the grant of a Lien on any such property or assets would constitute or result in the abandonment, invalidation or unenforceability of any material right under any such agreement):


(a) Liens on Securities Accounts and Deposit Accounts permitted under clause (c) or (d) of the definition of Permitted Encumbrances in the Credit Agreement,


(b) Liens permitted under Section 6.02(iii), (iv), (v), (vi), (viii) or (x) of the Credit Agreement,


(c) Liens permitted under Section 6.02(ix) of the Credit Agreement with respect to replacements of Liens permitted under Section 6.02(iii) of the Credit Agreement, and


(d) Liens permitted under Section 6.02(xi) of the Credit Agreement on property or assets the Fair Market Value of which does not exceed $10,000,000 in the aggregate; provided that no property or assets shall constitute Excluded Permitted Lien Property pursuant to this clause (d) unless such property or assets constitutes "Excluded Permitted Lien Property" pursuant to clause (d) of the definition of "Excluded Permitted Lien Property" in the Collateral Agreement (as defined in the New Indenture);


provided that Excluded Permitted Lien Property will not include any property or assets of a Pledgor subject to (x) a Permitted Lien described in clauses (a), (b) or (c) above that was created during the continuance of an Event of Default under the Credit Agreement or an event of default under the New Indenture or (y) a Permitted Lien described in clause (d) above that was created during the continuance of a Default or an Event or Default under the Credit Agreement or an event of default under the New Indenture.


"Excluded Property" means (a) any Chattel Paper, Promissory Note, Lease, Contract, General Intangible, license, property right or agreement (collectively, "Contract Collateral") to which any Pledgor is a party (i) to the extent that the grant of a security interest therein by such Pledgor would constitute or result in the abandonment, invalidation or unenforceability of any material right, title or interest of such Pledgor under such Contract Collateral, (ii) to the extent that the terms of such Contract Collateral prohibit the creation by such Pledgor of a security interest therein or (iii) to the extent that any Requirement of Law applicable thereto prohibits the creation of a security interest therein (other than, in the case of clauses (i), (ii) and (iii), to the extent that any such result would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, or 9-409 of the UCC), (b) any Capital Stock of Wireless Alliance or Cellular 2000 or (c) the


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Alexandria Regulatory Reserve Account; provided that any Proceeds, substitutions or replacements of any Excluded Property shall not themselves be Excluded Property (unless such Proceeds, substitutions or replacements would constitute property described in clause (a), (b) or (c) above).


"Existing Control Agreement" means the Blocked Account Control Agreement among the Borrower, Toronto Dominion (Texas), Inc. and U.S. Bank National Association as in effect prior to the date hereof in the form attached as Exhibit A hereto.


"Existing Controlled Deposit Accounts" means all Deposit Accounts covered by the Existing Control Agreement.


"FCC License" has the meaning assigned to the term "License" in the Credit Agreement


"Guarantors" has the meaning assigned to such term in the preamble to this Agreement.


"Included Deposit Accounts" means (x) all Deposit Accounts that are Existing Controlled Deposit Accounts, and (y) all other Deposit Accounts of the Pledgors, other than (i) Excluded Disbursement Accounts, (ii) Excluded Permitted Lien Property and the Alexandria Regulatory Reserve Account and (iii) Deposit Accounts to the extent that the aggregate amount of funds credited to all such Deposit Accounts does not exceed $10,000,000 at any time outstanding and no other Person has a control agreement on such Deposit Accounts. For the avoidance of doubt, the term "Included Deposit Accounts" shall not include any Collateral Account.


"Intellectual Property" means, collectively, all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.


"Investment Property" means the collective reference to (i) all "investment property" as such term is defined in Section 9-102(a)(49) of the UCC and (ii) whether or not constituting "investment property" as so defined, all Pledged Notes and all Pledged Stock.


"Issuers" means, collectively, the issuers of Pledged Stock.


"Leases" means all lease agreements for personal property or fixtures to which any Pledgor is a party, whether now existing or hereafter arising, but excluding any Lease that is Excluded Property.


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"Lenders" has the meaning assigned to such term in the recitals to this Agreement.


"Material Adverse Tax Effect" means, with respect to the transfer or acquisition of an FCC License, an adverse tax consequence to the Borrower and its Subsidiaries (after taking into account any applicable tax benefits, including the application of any net operating loss carryforwards that will expire during the then-current tax year) in an amount that exceeds the lesser of (x) 2.0% of the Fair Market Value of the FCC License to be acquired or transferred and (y) $200,000.


"Material Intellectual Property" means all Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses that are included in the Collateral and (a) used in or necessary for the conduct of the Pledgors' respective businesses as currently conducted and (b) material to the business, assets, operations, properties or condition (financial or otherwise) of the Pledgors, taken as a whole; and "Material Patent" and "Material Trademark" mean all Patents and Trademarks, respectively, that meet the criteria described in clauses (a) and (b) above.


"Other Receivables" means those Promissory Notes, other Instruments, negotiable documents and Chattel Paper which, collectively, evidence Receivables or other obligations of the Pledgors in an aggregate amount not in excess of $1,000,000 in any fiscal year.


"Patents" means (i) all letters patent of the United States, all reissues thereof and including, without limitation, any of the foregoing referred to in Schedule 4.7, (ii) all applications for letters patent of the United States and all divisions, continuations and continuations-in-part thereof, including, without limitation, any of the foregoing referred to on Schedule 4.7, and (iii) all rights to obtain any reissues or extensions of the foregoing.


"Patent Licenses" means any written agreements providing for the grant by or to any Pledgor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including, without limitation, any of the foregoing referred to in Schedule 4.7.


"Permitted Control Agreement" means, with respect to any Controlled Account, a control agreement among the Pledgor that owns such Controlled Account, the Account Institution for such Controlled Account and the Account Agent, which control agreement meets the requirements of Section 5.16 of this Agreement.


"Pledged Notes" means all Promissory Notes issued to or held by any Pledgor, including, without limitation, the Promissory Notes listed on Schedule 4.5.


"Pledged Securities" means, collectively, all Pledged Notes and all Pledged Stock.


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"Pledged Stock" means all the Capital Stock issued by any Subsidiary that may be issued or granted to, or held by, any Pledgor while this Agreement is in effect, including, without limitation, the Capital Stock listed on Schedule 4.5, but excluding any Capital Stock that is Excluded Property.


"Pledgor" has the meaning assigned to such term in the preamble to this Agreement.


"RCC Atlantic" means RCC Atlantic, Inc., a Minnesota corporation.


"RCC Holdings" means RCC Holdings, Inc., a Minnesota corporation.


"Receivable" means any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account).


"Restricted PCS Block C or F License" means an FCC License in PCS Frequency Block C or F that has been in effect for a period of less than five years from its initial grant, such that it may only be held by or assigned to an Eligible Entity.


"Same-Institution Accounts" means all Deposit Accounts and Securities Accounts that are maintained with the same financial institution where any Pledgor has any Included Deposit Account. For the avoidance of doubt, the term "Same-Institution Account" shall not include any Collateral Account.


"Secured Documents" as used herein means all Loan Documents and all Hedging Agreements with Secured Hedging Counterparties.


"Secured Hedging Counterparty" means any counterparty to a Hedging Agreement that was the Administrative Agent or a Lender or an Affiliate of a Lender at the time such Hedging Agreement was entered into.


"Secured Parties" means, collectively, (i) the Administrative Agent, (ii) the Lenders (including, without limitation, any Issuing Bank and any Swing Line Lender), (iii) a Secured Hedging Counterparty and (iv) the permitted successors and assigns of any of the foregoing.


"Securities Act" means the Securities Act of 1933, as amended.


"Termination Date" shall have the meaning assigned to such term in Section 2.1(d).


"Trademarks" means (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the


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United States, any State thereof, or otherwise, and all common-law rights related thereto, including, without limitation, any of the registered trademarks and trademark applications referred to on Schedule 4.7, and (ii) the right to obtain all renewals thereof.


"Trademark License" means any written agreement providing for the grant by or to any Pledgor of any right to use any Trademark, including, without limitation, any of the foregoing referred to on Schedule 4.7.


1.2 Other Definitional Provisions. (a) The words "hereof," "herein," "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.


(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.


(c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Pledgor, shall refer to such Pledgor's Collateral or the relevant part thereof.


SECTION 2


GUARANTEE


2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, as primary obligor and not merely as surety, guarantees to the Administrative Agent, for the ratable benefit of the Secured Parties, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise, but after the expiration of any grace period or the giving of any required notice provided for in the Credit Agreement or other Secured Document) of the Borrower Obligations.


(b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Secured Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2).


(c) Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Administrative Agent hereunder.


(d) The guarantee contained in this Section 2 shall remain in full force and effect until the date (the "Termination Date") on which all of the following shall have occurred, notwithstanding that from time to time prior thereto the Borrower


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may be free from any Borrower Obligations: (i) the principal of and interest on each Loan and all fees and other amounts then payable in respect of the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by payment in full, (ii) all Letters of Credit shall have been Fully Satisfied, (iii) all Hedging Agreements with Secured Hedging Counterparties shall have been terminated or fully cash collateralized in a manner reasonably satisfactory to the Administrative Agent and (iv) the Revolving Commitments shall have been terminated.


(e) Prior to the Termination Date, no payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any other Secured Party from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the enforceability of this Agreement with respect to any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Termination Date.


(f) By written notice to the Administrative Agent, any Guarantor organized under the laws of the State of Minnesota may revoke prospectively the guarantee contained in this Section 2 only as to such Guarantor and only as to any New Extension of Revolver Credit under the Credit Agreement made after the time of actual receipt of such notice by the Administrative Agent to the extent such New Extension of Revolver Credit was not committed for at the time of such actual receipt. Such revocation shall not be effective as to any Indebtedness existing or committed for at the time of such actual receipt of such notice or as to any accrued interest thereon whether arising before or after such receipt, or as to any renewals, extensions or refinancings thereof, or as to any other Borrower Obligations that were outstanding or committed for at the time of such actual receipt or that arise, whether before or after such receipt, from events or circumstances existing at or prior to such receipt. Any revocation given in accordance with this clause (f) shall constitute an immediate Event of Default under clause (o) of Article VII of the Credit Agreement.


2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent for the ratable benefit of the Secured Parties, and each Guarantor shall remain liable to the Administrative Agent for the ratable benefit of the Secured Parties for the full amount guaranteed by such Guarantor hereunder.


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2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any other Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured Party against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any other Secured Party for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until the Termination Date. If any amount shall be paid to any Guarantor on account of such subrogation, contribution or reimbursement rights at any time prior to the Termination Date, such amount shall be held by such Guarantor in trust for the Administrative Agent and the other Secured Parties, segregated from other funds of such Guarantor, and shall, promptly upon receipt by such Guarantor, be turned over to the Administrative Agent in substantially the same form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.


2.4 Amendments, etc. with respect to the Borrower Obligations. Each Guarantor shall remain obligated hereunder until the Termination Date notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obliga
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