UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to
Commission File No. 0-15279
GENERAL COMMUNICATION, INC.
---------------------------
(Exact name of registrant as specified in its charter)
ALASKA 92-0072737
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2550 Denali Street Suite 1000 Anchorage, Alaska 99503
---------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (907) 265-5600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A common stock Class B common stock
-------------------- --------------------
(Title of class) (Title of class)
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the average bid and asked prices of such
stock as of the close of trading on February 29, 1996 was approximately
$38,439,000.
The number of shares outstanding of the registrant's common stock as of February
29, 1996, was:
Class A common stock - 19,681,207 shares; and
Class B common stock - 4,175,434 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive Proxy Statement to be filed
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended,
in connection with the Annual Meeting of Stockholders of the registrant to be
held on or after June 5, 1996 are incorporated by reference into Part III of
this report.
<PAGE>
GENERAL COMMUNICATION, INC.
1995 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
PART I.........................................................................1
Item 1. BUSINESS.......................................................1
Item 2. PROPERTIES....................................................13
Item 3. LEGAL PROCEEDINGS.............................................14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........14
PART II.......................................................................15
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...........................................15
Item 6. SELECTED FINANCIAL DATA.......................................16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................17
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA..........................................................22
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...........................45
PART III
Incorporated by reference from the Company's Proxy Statement for its
1996 Annual Shareholders' Meeting
PART IV.......................................................................46
Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.......................................46
<PAGE>
PART I
Item 1. BUSINESS
Background and Description of Business
General Communication, Inc. ("GCI") is an Alaska-based corporation that
supplies common-carrier long-distance and other telecommunication products and
services to residential, commercial and government users. Telecommunication
services that GCI and its subsidiaries ("the Company") provides are carried over
facilities that are owned by the Company or are leased from other companies.
GCI began commercial operations in November 1982 in competition with the
former monopoly carrier, Alascom, Inc. ("Alascom"). In many respects, GCI's
entry into the market parallels that of MCI Telecommunications Corporation
("MCI") which, in the contiguous United States, entered the market to compete
with the former monopoly carrier American Telephone and Telegraph Company
("AT&T"). GCI followed in MCI's footsteps approximately a decade later.
MCI acquired an approximate 30 percent ownership interest in GCI during 1993.
Industry
The U.S. telecommunication industry remains in a state of flux, with
companies faced with the challenges of new technologies and rapid changes in the
competitive and regulatory environment. Growing competition has resulted in
lower prices, which should stimulate ongoing volume gains, even in the heavily
saturated U.S. market. The policies of President Clinton's Administration, the
Telecommunications Act of 1996, emerging technologies, and a blurring of
distinctions among industry sectors all portend new revenue possibilities for
the industry. Where the focus was once on regulation of a closely guarded
monopoly, regulators are now ushering the telecommunication industry into an era
of competition and reduced regulation. Decisions made now will influence the
industry's future in ways difficult to foresee, as technology continues to
catapult the industry forward.
What once was a $94 billion telephone service industry before divestiture of
the Bell System in 1984 has evolved into an estimated $200 billion-plus
communications marketplace, comprised of the following:
(1) $40 billion -- digitally priced long distance services;
(2) $97 billion -- analog-priced local services;
(3) $25 billion -- analog-priced cable TV services;
(4) $15 billion -- analog-priced cellular services;
(5) $4 billion -- digitally priced messaging/paging services; and
(6) $20 billion -- digital private data and value-added services.
Industry analysts in trade journals estimate that long distance revenues
received by U.S. based interexchange carriers for public network services will
grow to $77 billion in the year 2000 at a 5 percent compound annual rate.
International revenues for these carriers are expected to continue to pace
market growth, growing more than twice as fast as the mature domestic market,
growing to $16.5 billion in 2000 at a better than 10 percent compound annual
rate. International revenues for these carriers are roughly divided into thirds
in terms of the region of the world from which they are generated: the Western
Hemisphere, Europe and the remainder of the world, with the latter growing most
rapidly, paced by traffic with the Pacific Rim.
Expanding voice markets such as computer-telephony integration, and
wireline and wireless PBXs, are expected to drive growth in the
telecommunications market in 1996. These newer market segments contributed to a
15 percent overall increase in U.S. telecommunications revenues. The revenue
growth is attributed to businesses' greater need for communications equipment,
software and
1
<PAGE>
services. Telecommuting, Private Branch Exchanges ("PBXs") and internetworking
are among the market forces pushing the growth.
Trade journal analysts predicted that sales of wireless PBXs--systems that
interface a wireless controller with an existing PBX--would grow from $394
million in 1995 to $3.3 billion in 1998. Wireless PBXs give employees wireless
capabilities at their desktops. Improvements in high-speed wireline networking,
such as building asynchronous transfer mode local area networks, also are
allowing powerful messaging capabilities to connect workers. Video conferencing
and unified messaging are two applications analysts expect to become popular in
1996. Data communications and internetworking revenue increased 19.4 percent
last year as a result of added demand for enterprise networking.
Sudden, widespread use of the Internet caused the modem market to grow by
50 percent, while integrated services digital network ("ISDN") lines became both
widely available and desired, expanding 126 percent last year. Industry players
expect the Internet phenomenon to spark growing interest in ISDN. Major vendors
now are looking at linking voice mail systems through use of internetworking
techniques over the Internet, such as standardized protocols and messaging
features similar to E-mail.
Communication sectors not traditionally competitive with telephone
companies, such as cable and wireless services, are projected to grow an average
10.9% per year. This compares with the 3% average per year growth in revenue for
traditional local telephone service from 1993 to 1998. Cable TV companies may
gain a competitive advantage through marketing of cable modems. Computer-based
services likely will be a strong market for cable TV firms. Cable modems may
give them the ability to offer a competitive alternative to the second telephone
line into the home, providing high-speed access to data services. Content is
expected be the ultimate driver of Cable TV profits and may determine which
companies gain the most market share.
The emergence of new services -- especially digital cellular radio,
personal communications services ("PCS"), interactive TV, and video dial tone --
has created opportunities for significant growth in local loop services. These
opportunities are also laying the foundation for a restructuring of the newly
competitive local loop services market. Not only are competitors entering the
core business of the local telephone companies, but they are beginning to pursue
the fast-growing markets that previously were closed to them, such as consumer
video. Competition between telephony, cable TV, and PCS markets will
increasingly overlap in the 1990s. As opportunities for new wireless and video
services arise and competitors expand beyond their traditional markets,
competition between existing telephone companies and these major industries is
expected to intensify.
Future mergers are expected throughout the telecommunications industry
aimed at creating geographic clustering and expansion of the breadth of services
offered to customers (i.e., local, long distance, cable and wireless). In
addition, interexchange carriers are poised to enter the local service market.
At the core of several of currently existing ventures are the integration of
wireless and wireline technology. The ventures plan to provide services in which
customers would use a phone similar to a portable cordless device linked to the
existing wired infrastructure of the partners. When customers leave their homes
or offices, the phones would become mobile and would be serviced through the
wireless network that would be created by the venture. Moreover, the venture's
local telephone services will be packaged with cable and multimedia services,
long-distance service and entertainment services. Customers will be able to
select the mix of services and products that fit their needs. Increased
competition in 1996 may result in fewer players providing more expanded services
- -- growth by acquisition will be a key component of the survivors' strategy.
On September, 23, 1993, the Federal Communications Commission ("FCC")
adopted a broad set of rules for the licensing of PCS. The FCC concluded an
auction of spectrum to be used for the provision of PCS in March, 1995. PCS
systems are expected to make an individual carrying a pocket-
2
<PAGE>
sized phone available at the same number, whether at home, at work or traveling.
Unlike cellular systems, a caller using PCS will not need to know the location
of the person he or she is trying to reach. The difference in the way PCS
systems are configured as compared to cellular systems means that PCS systems
could be less costly to operate than cellular systems and therefore less
expensive for users. Rapid growth of cellular telephone services and the
anticipation of PCS services has generated substantial interest in wireless
communications. The FCC's efforts are expected to encourage reduction of
communication prices and put the technology within financial reach of most
American homes and businesses.
It is predicted that PCS will grow rapidly, reaching 17.9 million
subscribers by 2005. By then, PCS services will be generating annual revenues of
nearly $8 billion. PCS's success is expected to occur even with competition from
other wireless services such as cellular, paging and enhanced specialized mobile
radio. Increases in services are expected to be fueled by declining usage rates
and expanded coverage.
PCS licensees will be required to offer service to at least one-third of
their market population within five years or risk losing their licenses. Service
must be extended to two-thirds of the population within seven years and must
reach 90% population coverage within 10 years.
The Telecommunications Act of 1996 ("Act") was signed into law Feb. 8,
1996. It is expected to have a dramatic impact on the telecommunications
industry, resulting in even greater changes than the 1984 breakup of the Bell
System. Bell Operating Companies (BOCs) can immediately begin manufacturing,
research and development; GTE Corp. can begin providing interexchange services
through its telephone companies nationwide; laws in 27 states that foreclose
competition are knocked down; co-carrier status for competitive local exchange
carriers is ratified; and the concept of "physical collocation" of competitors'
facilities in Local Exchange Carriers ("LECs") central offices, which an appeals
court rejected, is resurrected.
The legislation breaks down the old barriers that prevented three groups of
companies--the LECs, including the BOCs, the long distance carriers, and the
cable TV operators--from competing head-to-head with each other.
The Act requires LECs to let new competitors into their business. It also
requires the LECs to open up their networks to ensure that new market entrants
have a fair chance of competing. The bulk of the legislation is devoted to
establishing the terms under which the LECs, and more specifically the BOCs,
must open up their networks.
The principal beneficiaries of this "unbundling" are expected to be the
interexchange carriers ("IXCs"), however the new regime offers opportunities for
other service providers, particularly commercial mobile radio service ("CMRS")
providers. Within the local exchange market, estimated to be worth more than $90
billion annually, consumers likely will be presented with an array of choices
for local telephone service.
The new legislation sets up four classes of carriers, with an increasing
number of obligations placed on each one. The first group, telecommunications
carriers, includes any provider that offers subscription-based telecommunication
services.
The second group includes LECs, which have five specific duties:
(1) Resale: LECs cannot prohibit or impose unreasonable or
discriminatory conditions or limitations on the resale of their
services.
(2) Number portability: LECs must provide to the extent technically
feasible number portability, which would permit LEC subscribers to
switch to another carrier without losing their existing phone
numbers.
3
<PAGE>
(3) Dialing parity: LECs must provide dialing parity to competing
providers so that their customers can access the services of
another without special dialing requirements or delays.
(4) Access: LECs must provide competing carriers with access to their
rights-of-way, including poles, ducts, and conduits.
(5) Reciprocal compensation: LECs must pay other carriers, including
CMRS providers, the same fee to terminate calls originating on the
LEC's network as the competing carrier has to pay to terminate
calls on the LEC's network.
The next class of carriers includes incumbent local exchange carriers,
which are tasked with six duties. These include a duty
(1) to negotiate interconnection agreements;
(2) to provide interconnection on request that is at least equal in
quality to the services it provides itself;
(3) to provide unbundled access to network elements, so that a
competitor can buy only those LEC services that it needs (such as
unbundled access to the local loop);
(4) to offer its services at wholesale rates for resale;
(5) to provide notice of changes in its network; and
(6) to offer co-location of competing carriers' equipment in its
switching offices.
The final classification includes the BOCs, which are given authority to
enter the intercity market, but only after they have satisfied a long list of
requirements, including a fourteen-point checklist of specific actions--all
aimed at easing the lot of the competing carrier.
The Act is expected to require the Federal Communications Commission to
begin no fewer than 50 rulemaking proceedings. The legislation calls for the
establishment of a new federal-state joint board on universal service within 30
days of enactment. That board will have to develop proposals to revamp the
universal service subsidy system that has evolved over the years which could be
among the most far-reaching provisions of the Act.
Enactment of the bill affects local exchange service markets almost
immediately by requiring states to authorize local exchange service resale.
Resellers will be able to market new bundled service packages to attract
customers. Over the long term, the requirement that local exchange carriers
unbundle access to their networks may lead to increased price competition. Local
exchange service competition may not take hold immediately because
interconnection arrangements are not in place in most areas.
General
GCI was incorporated under the laws of the State of Alaska in 1979. From
1980 to January, 1987, GCI was a wholly-owned subsidiary of WestMarc
Communications, Inc. ("WSMC"), formerly Western Tele-Communications, Inc., then
a microwave communication common carrier. On January 23, 1987, WSMC distributed
all of the outstanding shares of the Class A and Class B common stock of GCI to
its shareholders. This distribution was made as a dividend to WSMC's
shareholders of record at the close of business on December 29, 1986, on the
basis of one share of GCI Class A common stock for each outstanding share of
WSMC Class A common stock, and one share of GCI Class B common stock for each
outstanding share of WSMC Class B common stock. Following the distribution GCI
became an independent publicly-held company.
Effective November 30, 1990, GCI transferred substantially all of its
operating assets to its wholly owned subsidiary, GCI Communication Corp.
("GCC"), an Alaska corporation, which assumed all of GCI's liabilities and
became the operating company. GCI serves as a holding company and remains liable
as a guarantor on certain of GCC's obligations. All of the issued and
outstanding shares of GCC were pledged as security under GCC's credit agreement
with its senior lenders.
4
<PAGE>
The Company was authorized to and began providing intrastate services on
May 15, 1991 on its own facilities in the areas where it provided interstate
service and through resale of others' services where it has no facilities.
GCI Communication Services, Inc. ("Communication Services"), an Alaska
corporation, is a wholly-owned subsidiary of GCI and was incorporated in 1992.
Communication Services provides private network point-to-point data and voice
transmission services between Alaska, Hawaii and the western contiguous United
States. Communication Services products are marketed directly by GCC.
GCI Leasing Co., Inc. ("Leasing Company"), an Alaska corporation, is a
wholly-owned subsidiary of Communication Services and was incorporated in 1992.
Leasing Company owns and leases undersea fiber optic cable capacity for carrying
a majority of the Company's interstate switched message and private line long
distance services between Alaska and the remaining United States.
Products
The Company offers a broad spectrum of telecommunication services to
residential, commercial and government customers primarily throughout Alaska.
The Company operates in two industry segments and offers five primary product
lines. The message and data transmission services industry segment offers
message toll, private line and private network services, and the system sales
and service industry segment offers data communication equipment sales and
technical services.
The Company's message and data transmission services industry segment is
engaged in the transmission of interstate and intrastate switched message toll
service ("MTS") and private line and private network communication service
between the major communities in Alaska, and the remaining United States and
foreign countries. GCI's message toll services include intrastate, interstate
and international direct dial, 800, calling card, operator and enhanced
conference calling, as well as termination of northbound toll service for MCI,
U.S. Sprint ("Sprint") and several large resellers without facilities in Alaska.
GCI also provides origination of southbound calling card and 800 toll services.
Private line and private network services utilize voice and data transmission
circuits, dedicated to particular subscribers, which link a device in one
location to another in a different location. Regulated telephone relay services
for the deaf, hard-of-hearing and speech impaired are provided though the
Company's operator service center. The Company offers its message services to
commercial and residential subscribers. Subscribers may cancel service at any
time. Toll related services account for approximately 93%, 90% and 90% of the
Company's 1995, 1994 and 1993 total revenues, respectively.
GCI has positioned itself as the price leader in the Alaska
telecommunication market and, as such, rates charged for the Company's
telecommunication services are designed to be equal to or below those for
comparable services provided by the only other significant competitor in the
Alaska telecommunications market, AT&T Alascom.
In addition to providing communication services, GCC sells, services and
operates, on behalf of certain customers, dedicated communication and computer
networking equipment and provides field/depot, third party, technical support,
consulting and outsourcing services through its systems sales and service
industry segment.
The Company also supplies integrated voice and data communication systems
incorporating interstate and intrastate digital private lines, point-to-point
and multipoint private network and small earth station services operating at
data rates up to 1.544 mbs. In addition, the Company designs, installs and
maintains data communication systems for commercial and government customers
throughout Alaska. Presently, there are five companies in Alaska that actively
sell and maintain data and voice communication systems. The Company's unique
ability to integrate telecommunication
5
<PAGE>
networks and data communication equipment has allowed it to maintain its
dominant market position on the basis of "value added" support rather than price
competition.
GCI has expanded its technical services business to include outsourcing,
onsite technical contract services and telecommunication consulting. GCI was
awarded a five year contract, effective April 1, 1992, to assume management
responsibility for all of BP Exploration (Alaska) ("BP") telecommunication and
computer networking assets in Alaska. BP is the largest oil company presently
operating in Alaska. GCI was awarded a five year contract, effective October 31,
1995, to assume management responsibility for all of National Bank of Alaska
telecommunication and computer networking assets in Alaska.
Expenditures of approximately $2.5 million were made in 1994 developing
new demand assigned multiple access ("DAMA") satellite communication technology.
A four-module demonstration system was constructed in 1994 and was integrated
into the Company's telecommunication network in 1995. Existing satellite
technology relies on fixed channel assignments to a central hub. DAMA technology
assigns satellite capacity on an as needed basis. The digital DAMA system allows
calls to be made between remote villages using only one satellite hop thereby
reducing satellite delay and capacity requirements while improving quality.
The Company obtained the necessary APUC and FCC approvals waiving current
prohibitions against construction of competitive facilities in rural Alaska,
allowing for deployment of DAMA technology in 56 sites in rural Alaska on a
demonstration basis. Construction and deployment will occur in 1996, with
services expected to be provided during the fourth quarter of 1996. Total
construction and deployment costs are expected to total $18 to $20 million.
The FCC concluded an auction of spectrum to be used for the provision of
PCS in March, 1995. The Company was named by the FCC as the high bidder for one
of the two 30 megahertz blocks of spectrum, with Alaska statewide coverage.
Acquisition of the license for a cost of $1.65 million will allow GCI to
introduce new PCS services in Alaska. The Company began developing plans for PCS
deployment in 1995 with technology service trials expected to take place in 1996
and service to be offered as early as 1997 or 1998.
Neither GCI or any of its subsidiaries has revenues that are materially
affected by seasonality. The Company has not expended material amounts during
the last three fiscal years on customer-sponsored research activities.
Facilities
Currently, GCI's facilities comprise earth stations at Eagle River,
Fairbanks, Juneau, Prudhoe Bay, Valdez, Kodiak, Sitka, Ketchikan, Unalaska and
Cordova, all in Alaska and at Issaquah, Washington, serving the communities in
their vicinity. The Eagle River and Fairbanks earth stations are linked by
digital microwave facilities to distribution centers in Anchorage and Fairbanks,
respectively. The Issaquah earth station is connected with the Seattle
distribution center by means of diversely routed fiber optic cable transmission
systems, each having the capability to restore the other in the event of
failure. The Juneau earth station and distribution center are co-located. The
Ketchikan, Prudhoe Bay, Valdez, Kodiak, Sitka, Unalaska and Cordova
installations consist only of an earth station. GCI constructed microwave
facilities serving the Kenai Peninsula communities and owns a 49 percent
interest in an earth station located on Adak Island in Alaska. GCI maintains an
operator service center in Wasilla, Alaska. Each of the distribution centers
contains electronic switches to route calls to and from local exchange companies
and, in Seattle, to obtain access to MCI and other facilities to distribute GCI
southbound traffic to the remaining 49 states and international destinations.
Leasing Company owns a portion of an undersea fiber optic cable which
allows the Company to carry its Anchorage, Eagle River, Wasilla, Palmer, Kenai
Peninsula, Glenallen and approximately one-
6
<PAGE>
half of its Fairbanks area traffic to and from the contiguous lower 48 states
over a terrestrial circuit, eliminating the one-quarter second delay associated
with a satellite circuit. The Company's preferred routing for this traffic is
via the undersea fiber optic cable which makes available satellite capacity to
carry the Company's intrastate traffic.
The Company employs satellite transmission for certain other major routes
and uses advanced digital transmission technology throughout its system. The
Company leases C-band transponders on AT&T's Telstar 303 satellite. The lease
expires June 1996 and may be renewed, at the Company's option, through the end
of the satellite's useful life, currently projected to be 1998. The Company will
redirect its earth stations toward the Hughes Communications Galaxy, Inc.
("Hughes") Galaxy IX satellite upon its successful delivery by Hughes expected
to occur in June 1996.
GCI employs advanced transmission technologies to carry as many voice
circuits as possible through a satellite transponder without sacrificing voice
quality. Other technologies such as terrestrial microwave systems, metallic
cable, and fiber optics tend to be favored more for point-to-point applications
where the volume of traffic is substantial. With a sparse population spread over
a wide geographic area, neither terrestrial microwave nor fiber optic
transmission technology will be economically feasible in rural Alaska in the
foreseeable future.
Customers
The Company had approximately 85,600, 73,100 and 73,600 active Alaska
subscribers to its message telephone service at December 31, 1995, 1994 and
1993, respectively. Approximately 9,500, 9,300 and 9,500 of these were business
users at December 31, 1995, 1994 and 1993, respectively, and the remainder were
residential customers. MTS revenues currently amount to approximately $9,050,000
per month.
Substantially all service areas, except Bethel, Alaska, in which GCI has
facilities have completed the equal access balloting process. GCI carries 33% to
49% of the southbound interstate MTS traffic and 21% to 48% of the intrastate
MTS traffic originating in those service areas.
In January, 1993 GCI entered into a five-year contract with MCI to provide
facilities for MCI's Alaska message toll and 800 service traffic. The contract
supplanted a previous contract and provides for expanded usage by MCI of GCI's
facilities and usage by GCI of MCI's facilities. Revenues attributed to the
contract in 1995, 1994 and 1993 totaled approximately $23,939,000, $19,512,000
and $16,068,000, or approximately 18.5%, 16.7%, and 15.7% of total revenues,
respectively. The contract was amended in March 1996 extending its term three
years to March 31, 2001.
Services provided pursuant to a contract with Sprint resulted in revenues
in 1995, 1994 and 1993 of approximately $14,885,000, $12,412,000 and $10,123,000
or approximately 11.5%, 10.6%, and 9.9% of total revenues, respectively.
Both MCI and Sprint are major customers of the Company in its message and
data transmission services industry segment. Loss of one or both of these
customers would have a significant detrimental effect on the Company's revenues
and contribution. There are no other individual customers, the loss of which
would have a material impact on the Company's revenues or gross profit.
The Company provided private line and private network communication
products and services to approximately 566 commercial and government accounts in
1995. Private line and private network communication products and services
currently generate approximately $1,050,000 in monthly, revenues.
7
<PAGE>
<TABLE>
A summary of switched MTS traffic minutes follows:
<CAPTION>
Interstate Minutes
-------------------------------------------------
For Calling Intrastate
Quarter Ended Southbound Northbound Card Minutes
------------- ---------- ---------- ---- -------
(amounts in thousands)
<S> <C> <C> <C> <C>
March 31, 1993 47,100 34,713 3,947 16,178
June 30, 1993 49,928 34,651 3,811 17,283
September 30, 1993 54,403 36,282 4,043 18,770
December 31, 1993 56,549 39,348 4,459 17,989
------- ------- ------ ------
Total 1993 207,980 144,994 16,260 70,220
======= ======= ====== ======
March 31, 1994 56,118 39,664 4,431 18,910
June 30, 1994 58,809 38,293 4,220 20,534
September 30, 1994 61,715 39,678 4,210 21,253
December 31, 1994 59,902 40,424 4,605 19,786
------- ------- ------ ------
Total 1994 236,544 158,059 17,466 80,483
======= ======= ====== ======
March 31, 1995 60,140 41,600 4,351 21,208
June 30, 1995 65,031 43,721 4,113 23,051
September 30, 1995 71,918 45,027 4,233 23,883
December 31, 1995 72,319 46,545 5,518 25,228
------- ------- ------ ------
Total 1995 269,408 176,893 18,215 93,370
======= ======= ====== ======
</TABLE>
All minutes data were taken from GCC's billing statistics reports.
Markets
The dominant carrier and GCI's primary competition in the Alaska market
for interstate and intrastate MTS, private line and private network
telecommunication services continues to be AT&T Alascom. Other carriers, such as
MCI and Sprint can enter the market by constructing their own facilities in
Alaska. At the present time, however, MCI, Sprint and several other carriers
interconnect with GCC in Seattle and Dallas for delivery of their Alaska bound
interstate traffic. Sprint and MCI also originate 800 services in Alaska on
GCI's facilities.
Five companies in Alaska actively sell and service data and voice
communication systems. Other companies can enter the market at any time.
Financial Information About Industry Segments
For financial information with respect to industry segments of GCI,
reference is made to the information set forth in Note 8 of the Notes to
Consolidated Financial Statements included in Part II of this Report, which Note
is included herein by reference.
8
<PAGE>
History of Telecommunication in Alaska
The first telecommunication facilities in Alaska were telegraph lines
operated by the U.S. Army. Later, telephone service was added, and the Alaska
Communications System ("the ACS") grew to cover much of the state. Wherever
military communication was not hampered, the Army allowed its circuits to be
used for civilian purposes. Control of the ACS was transferred to the U.S. Air
Force and eventually, the ACS supplied long distance trunks to local exchanges
in the state's growing communities.
As the civilian population increased, the need for a transition to
commercial operation became apparent. In 1969, ten years after Alaska statehood,
the Alaska Communications Disposal Act ("the Act") was passed by Congress. The
RCA Corporation was the successful bidder under the Act and purchased the ACS.
RCA formed a subsidiary, RCA Alaska Communications, later Alascom, to own and
operate the system.
Through its purchase of the ACS, Alascom became the sole long lines
carrier in Alaska. In the lower 48 states, Alascom interconnected with AT&T. In
Alaska, it interconnected with the telephone companies providing local exchange
service. Additionally, Alascom was required to maintain a number of thin-line
links to remote areas of the state. Under the terms of the ACS purchase
agreement, Alascom was required to expand service to the less developed areas of
Alaska. In 1979 Alascom was acquired by Pacific Power and Light, Inc., a utility
holding company, which has since transferred Alascom to its publicly-traded
subsidiary, Pacific Telecom, Inc. ("PTI").
Rates initially charged for Alaska telecommunication services had been
substantially higher than interstate rates in the contiguous states. In 1972 the
FCC established a policy of rate integration intended to equalize all domestic
interstate rates. This policy was used to support a subsidy mechanism to help
Alascom cover higher costs associated with rural operations.
When GCI began operations in 1982, AT&T provided almost all of the
telecommunication services in the lower 48 states and Alascom provided almost
all of the long distance telecommunication services in Alaska and between Alaska
and the lower 48 states, Hawaii, and foreign countries. Although Alascom's
business was highly subsidized, GCI competed with Alascom with no subsidy
whatsoever.
In 1983 the State of Alaska petitioned the FCC to initiate a rule making
to determine how to rationalize the policies of rate integration and competition
in the Alaska market in light of the rapid changes in the telecommunication
industry brought on by the AT&T divestiture and changing FCC competition
policies. This led the FCC to initiate a rule making proceeding ("the Alaska
rule making proceeding") in 1984. Issues involved in the Alaska rule making
proceeding, namely the harmonizing of the FCC's policies of competition and rate
integration for the Alaska market and the implementation of a permanent
structure for that market, were referred to a Federal-State Joint Board ("Joint
Board"). Joint Board activity, including the consideration of several
alternative market structures, continued through the adoption of a recommended
transition mechanism in 1993, which was later adopted by the full FCC in 1994.
This FCC action led to a negotiated buyout of Alascom by AT&T, as further
described in Part I, History of Regulatory Affairs and Recent Developments
below.
History of Regulatory Affairs
The Company's activities in the telecommunication market are regulated by
two agencies. The Communications Act of 1934 gives the FCC the authority to
certificate market entry and regulate rates for interstate telecommunication.
Intrastate telecommunication services are regulated by the Alaska Public
Utilities Commission ("APUC").
9
<PAGE>
The Company's entry into the intrastate telecommunication market had been
hampered because the APUC had no policy on intrastate competition. In May 1990
the Alaska legislature passed legislation mandating competition in the Alaska
intrastate telecommunication market. The legislature further directed the APUC
to adopt regulations governing a competitive telecommunication market and to
begin accepting applications for service on February 15, 1991. On February 15,
1991 GCI, through its wholly-owned operating subsidiary GCC, filed an
application to provide competitive intrastate telecommunication services. The
Company was authorized to and began providing intrastate services on May 15,
1991 on its own facilities in the areas where it provided interstate service and
through resale of others' services where it has no facilities.
In the first quarter of 1992 the APUC granted GCC a Certificate of Public
Convenience and Necessity to provide telephone relay services ("TRS") for the
deaf, hard-of-hearing and speech impaired though the Company's operator service
center in Wasilla, Alaska. GCC commenced its regulated TRS operations on June
21, 1992. Intrastate TRS operating costs, capital costs and a rate of return are
being funded through a universal access surcharge billed by all local telephone
companies in the state of Alaska. Under an FCC decision, starting in 1993, a
portion of the TRS operating costs are recovered through an interstate pool
administered by the National Exchange Carrier Association ("NECA").
The FCC regulates dominant interstate carriers, such as the Company's only
interstate competitor, AT&T/Alascom. Company's only interstate competitor,
Alascom. Because, under the terms of the AT&T acquisition of Alascom, Alascom
rates and services must "mirror" those offered by AT&T, changes in AT&T prices
indirectly affect the rates and services of the Company. AT&T's prices, and thus
those of Alascom, are regulated under a price cap plan whereby AT&T's rate of
return is no longer regulated or restricted. AT&T is allowed to raise and lower
prices for three groups of services within pre-established floor and ceiling
levels with little regulatory oversight. These services include products offered
to: 1) small businesses or residential customers; 2) users of 800 services and
3) large business customers. Price increases by AT&T generally improve the
Company's ability to raise its prices while price decreases pressure the Company
to follow. The Company has, so far, successfully adjusted its pricing and
marketing strategies to respond to AT&T pricing practices.
In 1983 the State of Alaska petitioned the FCC to commence a rulemaking
proceeding to determine how to harmonize the FCC's policies of rate integration
and competition in the Alaska market in light of the rapid changes in the
telecommunications industry brought on by the AT&T divestiture and changing FCC
competition policies. In 1984 the FCC initiated the Alaska rulemaking proceeding
in response to the State's request. Issues involved in the Alaska rulemaking
proceeding, namely the harmonizing of the FCC's policies of competition and rate
integration for the Alaska market and the implementation of a permanent
structure for that market, were referred to a Federal-State Joint Board ("Joint
Board"), consisting of state utility commissioners and FCC commissioners.
On May 17, 1993 the Joint Board issued a Tentative Recommendation and
Order Inviting Comments. Comments were filed by the various parties, with the
Company supporting this Tentative Recommendation. On October 26, 1993, the Joint
Board made its Final Recommended Decision, rejecting the market structure plans
previously advanced by Alascom and AT&T and, instead, recommended a market
structure based on that set forth in the Tentative Recommendation.
The Final Recommended Decision proposes to end the AT&T/Alascom Joint
Services Arrangement ("JSA") on September 1, 1995, subject to the adoption and
implementation of certain transition mechanisms. These include requiring AT&T to
provide interstate MTS/WATS between Alaska and the other 49 states at integrated
rates and under terms and conditions applicable to AT&T's services in the rest
of the country. After the JSA is terminated, Alascom could offer interstate
MTS/WATS independently from AT&T, under its own tariff and with no obligation to
charge AT&T's integrated rates. During a four year transition, AT&T would be
required to purchase services from Alascom to meet its MTS/WATS obligations. For
the first one and one-half years AT&T would obtain
10
<PAGE>
such services under the continued JSA. For the remaining two and one-half years,
after the termination of the JSA, AT&T would be required to purchase a declining
amount of service from Alascom, with this obligation declining to zero at the
end of this second phase.
Final FCC action on the Joint Board's Final Recommended Decision, took
place on May 19, 1994, and is contained in its Memorandum Opinion and Order,
released May 19, 1994. In the Memorandum Opinion and Order, the FCC adopted the
provisions of the Final Recommended Decision and set the termination of the JSA
to be effective January 1, 1996. AT&T/Alascom has filed an appeal of the
Memorandum Opinion and Order.
On October 17, 1994, Pacific Telecom, Inc. ("PTI") announced a definitive
agreement to sell the stock of Alascom to AT&T, subject to certain conditions,
including state and federal regulatory approvals. AT&T, PTI and Alascom filed
for such approvals before the FCC and the APUC on December 15, 1994, alleging
that the buyout would further the Joint Board objectives and fulfill the
provisions of the FCC Order. The Company participated fully in both transfer
proceedings. The buyout was approved, with conditions, by the APUC on March 31,
1995 and the FCC on August 2, 1995.
In the normal course of the Company's operations, it is involved in legal
and regulatory matters before the FCC and the APUC. While management does not
anticipate abrupt changes in the competitive structure of the Alaska market, no
assurances can be given that such changes will not occur and that such changes
would not be materially adverse to the Company.
Recent Developments
The Company announced March 15, 1996 that it has signed letters of intent
to acquire three Alaska cable companies that offer cable television service to
more than 101,000 subscribers serving 74 percent of households throughout the
state of Alaska. The Company intends to acquire Prime Cable of Alaska, Alaska
Cablevision, Inc. of Kirkland, Washington and Alaskan Cable Network. Prime Cable
operates the state's largest cable television system including stations in
Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision owns and
operates cable stations in Petersburg, Wrangell, Cordova, Valdez, Kodiak, Homer,
Seward, Nome and Kotzebue, Alaska. Alaskan Cable Network operates stations in
Fairbanks, Juneau, Ketchikan and Sitka, Alaska. This acquisition will allow the
Company to integrate cable services to bring more information not only to more
customers, but in a manner that is quicker, more efficient and more cost
effective than ever before. The purchase will facilitate consolidation of the
cable operations and will provide a platform for developing new customer
products and services over the next several years.
The total purchase price is $280.7 million. According to terms of the
letters of intent, GCI will issue 16.3 million shares of Class A Common stock to
the owners of the three cable companies valued at $105.7 million. The balance of
the purchase will be provided by approximately $175 million of bank financing.
Additional capital will be provided from the sale of 2 million shares of GCI's
Class A Common Stock to MCI Telecommunications Corporation for $6.50 per share.
Definitive agreements are expected to be finalized in April 1996 at which
time GCI will apply to the APUC to transfer the licenses of the cable companies.
Once all regulatory approvals are granted, the cable companies will be
consolidated into a single organization owned by the Company.
11
<PAGE>
Employees
GCC and affiliated companies employ approximately 435 persons as of
February 20, 1996 in operations, engineering, marketing, network services,
customer and operator services, data processing, billing, accounting, and
administration. GCC and affiliated companies are not parties to any union
contracts with their employees. In general, relations with employees have been
satisfactory.
Environmental Regulations
The Company and its subsidiaries may undertake activities which, under
certain circumstances may affect the environment. Accordingly, they are subject
to federal, state, and local regulations designed to preserve or protect the
environment. The FCC, the Bureau of Land Management, the U.S. Forest Service,
and the National Park Service are required by the National Environmental Policy
Act of 1969 to consider the environmental impact prior to the commencement of
facility construction. Management believes that compliance with such regulations
has no material effect on the Company's consolidated operations. The principal
effect of Company facilities on the environment would be in the form of
construction of the facilities at various locations in Alaska. Company
facilities have been constructed in accordance with federal, state, and local
building codes and zoning regulations whenever and wherever applicable. Some of
the facilities may be on lands which may be subject to state and federal wetland
regulation.
Uncertainty as to the applicability of environmental regulations is caused
in major part by the federal government's decision to consider a change in the
definition of wetlands, however, none of the Company's facilities has been
constructed in areas which are subject to flooding, tsunami's, etc. and as such
are most likely to fall outside any new wetland designation. Most of the
Company's facilities are on lands leased by the Company, and, with respect to
all of these facilities, the Company is unaware of any violations of lease terms
or federal, state or local regulations pertaining to preservation or protection
of the environment.
Foreign and Domestic Operations and Export Sales
Although the Company has several agreements to facilitate the origination
and termination of international toll traffic, it has neither foreign operations
nor export sales. The Company conducts operations throughout the western
contiguous United States, Alaska and Hawaii and believes that any subdivision of
its operations into distinct geographic areas would not be meaningful. Revenues
associated with international toll traffic were $5,643,000, $4,427,000 and
$3,734,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Backlog of Orders and Inventory
As of December 31, 1995 and 1994, the Company's systems sales and service
industry segment had a backlog of equipment sales orders of approximately
$258,000 and $608,000, respectively. The decrease in backlog as of December 31,
1995 can be attributed primarily to faster completion of outstanding sales
orders in 1995. The Company expects that all of the orders in backlog at the end
of 1995 will be delivered during 1996.
Patents, Trademarks and Licenses
Neither GCI nor its affiliates hold patents, trademarks, franchises or
concessions. The Communications Act of 1934 gives the FCC the authority to
license and regulate the use of the electromagnetic spectrum for radio
communication. The Company through its message and data transmission services
industry segment holds licenses for its satellite and microwave transmission
facilities for provision of its telecommunication services. The Company acquired
a license for use of a
12
<PAGE>
30 megahertz block of spectrum for provision of PCS services in Alaska. The
Company's operations may require additional licenses in the future.
Other
GCC has filed FCC tariffs for its international service, interstate
domestic services, and domestic operator services.
Each tariff contains the rates and other contractual terms applicable to
customers who purchase the services covered by the tariff. In accord with the
FCC's deregulatory approach with respect to non-dominant carriers, tariffs and
tariff revisions filed by such carriers routinely become effective without
intervention by the FCC or third parties.
The State of Alaska has the authority to regulate telecommunications that
originate and terminate within the state. In 1990 the State legislature
introduced intrastate competition in Alaska. Subsequently, the APUC developed
regulations that allow for the certification of additional carriers for such
intrastate telecommunications and, to varying degrees, requires filing of
tariffs and regulation of the rates for such services. Under the APUC's current
policy and regulations, all certified carriers are required to file tariffs for
the provision of intrastate services. When filing for a rate increase, the
dominant carrier is required to file an accompanying rate case. Non-dominant
carriers are not rate regulated. Tariff revisions filed by non-dominant carriers
routinely become effective without intervention by the APUC or third parties.
Tariffs can be filed or revised on 30 days notice.
On March 15, 1996 the Company filed a tariff with the APUC requesting
approval for provision of local services based on the terms of the
Telecommunications Act of 1996 which, in part, requires local exchange carriers
to open up their networks and allow resale of their services. Once APUC approval
is obtained, the Company intends to offer local services through its facilities
or resale of local exchange carrier facilities.
No material portion of the businesses of the Company is subject to
renegotiation of profits or termination of contracts at the election of the
federal government.
Item 2. PROPERTIES
The Company leases its message and data transmission services industry
segment's executive, corporate and administrative facilities in Anchorage,
Fairbanks and Juneau, Alaska. GCC owns a 49 percent interest in an earth station
located on Adak Island in Alaska. GCC's message and data transmission services
segment owns properties and facilities including satellite earth stations, and
distribution, transportation and office equipment. Additionally, GCC acquired in
December 1992, access to capacity on an undersea fiber optic cable from Seward,
Alaska to Pacific City, Oregon.
The Company's systems sales and service industry segment occupies space in
the buildings housing its executive offices and operating facilities in
Anchorage, Fairbanks and Juneau, Alaska, and Seattle, Washington. Facilities in
Fairbanks and Juneau, Alaska, and Seattle, Washington are occupied under
short-term operating lease agreements. The Anchorage property is leased pursuant
to a 15 year capital lease agreement.
The undersea fiber optic cable capacity is owned subject to an outstanding
mortgage. Substantially all of the Company's properties secure its senior credit
agreement. See Note 5 to the Consolidated Financial Statements in Item 8 for
further discussion.
The two wideband transponders the Company owned reached the end of their
expected useful life in August, 1994, at which time the Company leased temporary
replacement capacity. The Company leased replacement transponder capacity
subsequent to a transition period utilizing four C band
13
<PAGE>
transponders on AT&T's Telstar 303 satellite. The lease expires June 1996. The
Company entered into a purchase and lease-purchase option agreement in August
1995 for the acquisition of satellite transponders to meet its long-term
satellite capacity requirements. The agreement provides for interim the interim
lease of transponder capacity from June 1996 through the delivery of the
purchased transponders as early as the fourth quarter of 1997. The amount of the
down payment required in 1996 and the balance payable upon delivery of the
transponders are dependent upon a number of factors including the number of
transponders required and the timing of their delivery and acquisition. The
Company does not expect the down payment to exceed $10.1 million and the
remaining balance payable coinciding with a staged delivery to exceed $46
million. The Company amended its existing senior credit facility and provided a
letter of credit to accommodate the payment in 1996 and expects to further amend
or refinance its credit agreement to fund its remaining commitment.
The Company's operating, executive, corporate and administrative
properties are in good condition. The Company considers its properties suitable
and adequate for its present needs and are being fully utilized.
Item 3. LEGAL PROCEEDINGS
Neither the Company or any if its subsidiaries is a party to any material
pending legal proceedings. Neither the Company's property nor that of any if its
subsidiaries is subject to any material pending legal proceedings.
The Company and its subsidiaries are a party to various claims and pending
litigation as part of the normal course of business. In the opinion of
management, the disposition of these matters is not expected to have a material
adverse effect on the Company's financial statements. Neither the Company's
property nor that of any if its subsidiaries is subject to any material pending
legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders of the Company during
the fourth quarter of 1995.
14
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information for Common Stock
<TABLE>
Shares of the Company's Class A common stock are traded on the Nasdaq
National Market tier of the Nasdaq Stock Market under the symbol GNCMA. Shares
of the Company's Class B common stock are traded on the Over-the-Counter market.
The Company's Class B common stock is convertible into the Company's Class A
common stock. The following table sets forth the high and low sales price for
the above-mentioned common stock for the periods indicated. The prices, rounded
up to the nearest eighth, represent prices between dealers, do not include
retail markups, markdowns, or commissions, and do not necessarily represent
actual transactions.
<CAPTION>
Class A Class B
----------------------------------- -----------------------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1994:
First Quarter 5 7/8 4 1/8 5 7/8 4 1/8
Second Quarter 4 5/8 3 1/8 4 5/8 3 1/8
Third Quarter 5 3 1/2 5 3 1/2
Fourth Quarter 5 4 1/8 5 4 1/8
1995:
First Quarter 4 5/8 3 3/4 4 5/8 3 3/4
Second Quarter 4 1/4 3 7/8 4 1/4 3 7/8
Third Quarter 4 1/8 3 1/4 4 1/8 3 1/4
Fourth Quarter 5 1/8 3 3/4 5 1/8 3 3/4
</TABLE>
Holders
As of March 5, 1996 there were approximately 1,830 holders of record of
the Company's Class A common stock and approximately 750 holders of record of
the Company's Class B common stock (amounts do not include the number of
shareholders whose shares are held of record by brokers, but do include the
brokerage house as one shareholder).
Dividends
The Company has never paid cash dividends on its Class A or Class B common
stock and has no present intention of doing so. Payment of cash dividends in the
future, if any, will be determined by the Company's Board of Directors in light
of the Company's earnings, financial condition and other relevant
considerations. GCC's existing bank loan agreements contain provisions that
prohibit payment of dividends, other than stock dividends (see note 5(a) to the
financial statements included in Part II of this Report).
15
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
The following table presents selected historical information relating to
financial condition and results of operations over the past five years.
<CAPTION>
Years ended December 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Amounts in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $129,279 116,981 102,213 96,499 75,522
Net earnings (loss) before income taxes $12,601 11,681 6,715 1,524 (1,422)
Net earnings (loss) $7,502 7,134 3,951 890 (1,092)
Earnings (loss) per share $0.31 0.30 0.17 0.02 (0.12)
Total assets $84,765 74,249 71,610 72,351 70,167
Long-term debt, including current portion 1 $9,980 12,554 20,823 37,235 24,850
Obligations under capital leases, including current portion 2 $1,047 1,297 1,522 1,720 10,975
Preferred stock 3 $0 0 0 3,282 3,282
Total stockholders' equity 4 $43,016 35,093 27,210 14,870 13,554
Dividends declared per Common share 5 $0.00 0.00 0.00 0.00 0.00
Dividends declared per Preferred share 6 $0.00 0.00 0.44 1.78 1.69
<FN>
1 The Company exercised the purchase option described in footnote (2) below
in December 1992 to acquire capacity on a fiber optic undersea cable from
Seward, Alaska to Pacific City, Oregon. Long term debt associated with this
purchase is recorded in long-term debt and current portion of long-term
debt in the Consolidated Financial Statements included in Part II of this
Report.
2 The Company entered into a capital lease agreement in May 1991 for access
to capacity on an undersea fiber optic cable from Seward, Alaska to Pacific
City, Oregon. The lease term was ten years with monthly payments including
maintenance of approximately $230,000 per month commencing August 22, 1991,
the date the fiber optic cable became operational. The Company had an
option expiring December 31, 1992 to purchase the leased capacity for
$10.12 million, less the prior six month's lease payments, excluding
maintenance. The lease was capitalized in 1991 at the underlying asset's
fair market value and the related obligation was recorded in the
Company's Consolidated Financial Statements.
3 In January, 1991, the Company sold 347,047 shares of non-voting Series A
15% Convertible Cumulative Preferred Stock to WestMarc Communications, Inc.
for $9.5088 per share. The preferred stock accrued dividends on each share
in cash or stock at the Company's discretion. The accrued dividends were
payable semi-annually at the rate of 15% per annum if paid in cash or at
the rate of 18.75% if paid in Class B Common Stock. Pursuant to an
agreement with WestMarc Communications, Inc. the Company acquired and
retired the preferred stock in 1993.
4 The 1993 increase in stockholders' equity is primarily attributed to the
Company's issuance of common stock to MCI.
5 The Company has never paid a cash dividend on its common stock and does not
anticipate paying any dividends in the foreseeable future. The Company
intends to retain its earnings, if any, for the development of its
business. Payment of cash dividends in the future, if any, will be
determined by the board of directors of the Company in light of the
Company's earnings, financial condition, credit agreements and other
relevant considerations. The Company's existing bank loan agreements
contain provisions that prohibit payment of dividends, other than stock
dividends, as further described in Note (5)(a) to the financial statements
included in Part II of this Report.
6 The Company declared and issued stock dividends of approximately 304,000
and 286,000 shares of Class B Common Stock in 1992 and 1991, respectively,
and paid dividends totaling $153,000 in 1993 on its non-voting Series A 15%
Convertible Cumulative Preferred Stock.
</FN>
</TABLE>
16
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Year ended December 31, 1995 ("1995"), compared with year ended December
31, 1994 ("1994"), compared with year ended December 31, 1993 ("1993").
The Company's liquidity (ability to generate adequate amounts of cash to
meet the Company's need for cash) was affected by a net increase in the
Company's cash and cash equivalents of $2.4 million from 1994 to 1995. Sources
of cash in 1995 included the Company's operating activities which generated
positive cash flow of $14.3 million net of changes in the components of working
capital, proceeds from the sale of investment securities held for sale totaling
$832,000, repayments of notes receivable totaling $184,000, and proceeds from
the issuance of common stock of $82,000. Uses of cash during 1995 included
repayment of $2.8 million of long-term borrowings and capital lease obligations,
investment of $8.9 million in distribution and support equipment, and payment of
the final installment for a PCS spectrum license totaling approximately
$521,000.
Net receivables increased $4.8 million from 1994 to 1995 resulting from
increased sales and receipt of a payment from a major customer in January 1996,
beyond the cutoff date for recording in the current year.
Payments of approximately $1.9 million of accrued payroll and payroll
related obligations resulted in reduced balances at 1995 as compared to 1994.
Working capital totaled $5.1 million and $1.8 million at December 31, 1995
and 1994, respectively. Working capital generated by operations exceeded
expenditures for property, equipment and other assets, repayment of long-term
borrowings and capital lease obligations, and the additional investment in the
PCS license resulting in the $3.3 million increase at December 31, 1995 as
compared to 1994.
Cash flow from operating activities, as depicted in the Consolidated
Statements of Cash Flows, decreased $4.2 million in 1995 as compared 1994. Cash
flow generated from operating activities was reduced by payment of current
obligations. Cash flow from operating activities increased $6.8 million during
1994 as compared to 1993 primarily as a result of revenue growth and decreased
distribution costs as a percentage of revenues as further described below.
The Company's expenditures and other additions to property and equipment
totaled $8.9 million, $10.6 million, and $5.7 million during 1995, 1994 and
1993, respectively. Management's capital expenditures plan for 1996 includes
approximately $30 to $50 million in capital necessary to pursue strategic
initiatives, to maintain the network and to enhance transmission capacity to
meet projected traffic demands.
The two wideband transponders the Company owned reached the end of their
expected useful life in August, 1994, at which time the Company leased
replacement capacity. The cost of the leased capacity contributed to an increase
in distribution costs during 1995 as compared to 1994. The existing leased
capacity is expected to meet the Company's requirements until such time that
capacity is available pursuant to the terms of a new long-term agreement
described below.
The Company entered into a purchase and lease-purchase option agreement in
August 1995 for the acquisition of satellite transponders to meet its long-term
satellite capacity requirements. The amount of the down payment required in 1996
and the balance payable upon delivery of the transponders as early as the fourth
quarter of 1997 are dependent upon a number of factors including the number of
transponders required and the timing of their delivery and acquisition. The
Company
17
<PAGE>
does not expect the down payment to exceed $10.1 million and the remaining
balance payable coinciding with a staged delivery to exceed $46 million. The
Company amended its existing senior credit facility to provide a letter of
credit to accommodate the required down payment in 1996 and expects to further
amend or refinance its credit agreement to fund its remaining commitment.
The Company continues to evaluate the most effective means to integrate
its telecommunications network with that of MCI. Such integration will require
capital expenditures by the Company in an amount yet to be determined. Any
investment in such capital expenditures is expected to be recovered by increased
revenues from expanded service offerings and reductions in costs resulting from
integration of the networks.
The FCC concluded an auction of spectrum to be used for the provision of
PCS in March, 1995. The Company was named by the FCC as the high bidder for one
of the two 30 megahertz blocks of spectrum, with Alaska statewide coverage.
Acquisition of the license for a cost of $1.65 million will allow GCI to
introduce new PCS services in Alaska. The Company began developing plans for PCS
deployment in 1995 with limited technology service trials planned for 1996 and
service to be offered as early as 1997 or 1998. Expenditures for PCS deployment
could total $50 to $100 million over the next 10 year period. The estimated cost
for PCS deployment is expected to be funded through income from operations and
additional debt and perhaps, equity financing. The Company expects to arrange
additional debt financing capacity in 1996. The Company's ability to deploy PCS
services will be dependent on its available resources.
Expenditures of approximately $2.5 million were made in 1994 developing
new DAMA satellite communication technology. A four-module demonstration system
was constructed in 1994 and was integrated into the Company's telecommunication
network in 1995. Existing satellite technology relies on fixed channel
assignments to a central hub. DAMA technology assigns satellite capacity on an
as needed basis. The digital DAMA system allows calls to be made between remote
villages using only one satellite hop thereby reducing satellite delay and
capacity requirements while improving quality.
The Company obtained the necessary APUC and FCC approvals waiving current
prohibitions against construction of competitive facilities in rural Alaska,
allowing for deployment of DAMA technology in 56 sites in rural Alaska on a
demonstration basis. Construction and deployment will occur in 1996, with
services expected to be provided during the fourth quarter of 1996. Construction
and deployment costs are expected to total $18 to $20 million, and are expected
to be funded through a combination of cash generated from operations and bank
financing.
The Company announced March 15, 1996 that it has signed letters of intent
to acquire three Alaska cable companies that offer cable television service to
more than 101,000 subscribers serving 74 percent of households throughout the
state of Alaska. The Company intends to acquire Prime Cable of Alaska, Alaska
Cablevision, Inc. of Kirkland, Washington and Alaskan Cable Network. Prime Cable
operates the state's largest cable television system including stations in
Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision owns and
operates cable stations in Petersburg, Wrangell, Cordova, Valdez, Kodiak, Homer,
Seward, Nome and Kotzebue, Alaska. Alaskan Cable Network operates stations in
Fairbanks, Juneau, Ketchikan and Sitka, Alaska. This acquisition will allow the
Company to integrate cable services to bring more information not only to more
customers, but in a manner that is quicker, more efficient and more cost
effective than ever before. The purchase will facilitate consolidation of the
cable operations and will provide a platform for developing new customer
products and services over the next several years.
The total purchase price is $280.7 million. According to terms of the
agreements, GCI will issue 16.3 million shares of Class A Common stock to the
owners of the three cable companies valued at $105.7 million. The balance of the
purchase will be provided by approximately $175 million of bank financing.
Additional capital will be provided from the sale of 2 million shares of GCI's
Class A Common Stock to MCI Telecommunications Corporation for $6.50 per share.
18
<PAGE>
Definitive agreements are expected to be executed in April 1996 at which
time GCI will apply to the APUC to transfer the licenses of the cable companies.
Once all regulatory approvals are granted, the cable companies will be
consolidated into a single organization owned by the Company.
Management expects that cash flow generated by the Company will be
sufficient to meet no less than the minimum required for maintenance level
capital expenditures and scheduled debt repayment. The Company's ability to
invest in discretionary capital and other projects will depend upon its future
cash flows and access to additional debt and/or equity financing.
Results of Operations
Year ended December 31, 1995 ("1995"), compared with year ended December
31, 1994 ("1994"), compared with year ended December 31, 1993 ("1993").
The Company's message data and transmission services industry segment
provides interstate and intrastate long distance telephone service to all
communities within the state of Alaska through use of its facilities and
interconnect agreements with other carriers. The Company's average rate per
minute for message transmission during 1995, 1994, and 1993 was 19.1(cent),
18.6(cent), and 18.2(cent), respectively. Total revenues for 1995 were $129.3
million, an approximate 10.5 percent increase over 1994 revenues of $117.0
million, which revenues increased 14.4 percent over 1993 revenues of $102.2
million. Revenue growth is attributed to the increase in the average rate per
minute and to four fundamental factors, as follows:
(1) Growth in interstate telecommunication services which resulted in
billable minutes of traffic carried totaling 465, 415 and 365 million
minutes in 1995, 1994 and 1993, respectively, or 83.2, 83.9 and 83.9
percent of total 1995, 1994 and 1993 minutes, respectively.
(2) Provision of intrastate telecommunication services which resulted in
billable minutes of traffic carried totaling 93.4, 79.6 and 70.1
million minutes in 1995, 1994 and 1993, respectively, or 16.8, 16.1,
and 16.1 percent of total 1995, 1994 and 1993 minutes, respectively.
(3) Increases in revenues derived from other common carriers ("OCC")
including MCI and Sprint. OCC traffic accounted for $38.8 million or
30.0 percent, $31.9 million or 27.3 percent, $26.2 million or 25.6
percent of total revenues in 1995, 1994 and 1993, respectively. Both
MCI and Sprint are major customers of the Company. Loss of one or
both of these customers would have a significant detrimental effect
on revenues and on contribution. There are no other individual
customers, the loss of which would have a material impact on the
Company's revenues or gross profit.
(4) Increased revenues associated with private line and private network
transmission services, which increased 8 percent in 1995 as compared
to 1994, increased 6 percent in 1994 as compared to 1993, and
increased 8 percent in 1993 as compared to 1992.
System sales and service revenues totaled $7.2 million, $9.1 million and
$8.3 million in 1995, 1994 and 1993, respectively. The decrease in system sales
and service revenues is attributed to fewer larger dollar equipment sales orders
received during 1995 as compared to 1994 as well as a reduction of the company's
outsourcing services provided to the oil field services industry.
Transmission access and distribution costs, which represent cost of sales
for transmission services, amounted to approximately 56.5 percent, 55.4 percent,
58.9 percent of transmission revenues during 1995, 1994 and 1993, respectively.
The increase in distribution costs as a percentage of transmission revenues for
1995 as compared to 1994 results primarily from increases in costs associated
with the Company's lease of transponder capacity as previously described. The
decrease in distribution costs as a percentage of transmission revenues during
1994 as compared to 1993 results from proportionate increases in revenues as
compared to costs and decreases in access tariff charges commencing July 1993,
offset by increases in costs associated with the Company's lease of
19
<PAGE>
replacement transponder capacity as previously described. Changes in
distribution costs as a percentage of revenues will occur as the Company's
traffic mix changes. The Company is unable to predict if or when access charge
rates will change in the future and the impact of such changes on the Company's
distribution costs.
Sales and service cost of sales as a percentage of sales and service
revenues amounted to approximately 73.3 percent, 70.4 percent and 65.7 percent
during 1995, 1994 and 1993, respectively. Increases in cost of sales as a
percentage of sales and service revenues result from reduced margins associated
with equipment sales and service contracts.
Contribution increased 5.3 percent during 1995 as compared to 1994, and
increased 22.5 percent during 1994 as compared to 1993. Increases in
distribution costs associated with the Company's lease of transponder capacity
as previously described reduced the rate of growth in 1995 contribution as
compared to 1994. Proportionate decreases in distribution costs during 1994 as
compared to 1993 coupled with proportionate increases in revenues during the
same period resulted in the 1994 increase.
Total operating costs and expenses increased 5.7 percent during 1995 as
compared to the same period in 1994, and increased 16.5 percent during 1994 as
compared to the same period in 1993. 1995 and 1994 increases in operating and
engineering, service, sales and communications, and general and administrative
costs were necessary to support the Company's expansion efforts and the increase
in minutes of traffic carried. During 1995 the Company incurred approximately
$450,000 for what is expected to be nonrecurring costs related to breaks in the
undersea fiber optic cable and promotion of its new DAMA technology. Additional
costs were incurred during the fourth quarter of 1995 attributed to the
promotion of the Company's calling plans. Significant marketing, telemarketing,
and promotional expenditures were incurred in 1994 to promote the Company's
introduction of new services and programs resulting from its strategic alliance
with MCI, including MCI's Friend's and Family calling plan, 1-800-COLLECT,
PhoneCash prepaid calling cards, and an Amway distributor resale program.
Additional general and administrative costs were incurred in 1994 resulting from
the Company's performance based bonus and incentive compensation plans which are
funded from incremental operating cash flow. Increases in 1994 expenses were
offset in part by reductions in bad debt and depreciation and amortization
costs. In general, the Company has dedicated additional resources in certain
areas to pursue longer term opportunities. It must balance the desire to pursue
such opportunities with the need to continue to improve current performance.
Continuing legal and regulatory costs are, in large part, associated with
regulatory matters involving the FCC, the APUC, and the Alaska Legislature.
Interest expense decreased 25.5 percent during 1995 as compared to 1994
and decreased 31.7 percent during 1994 as compared to 1993. The decreases in
interest expense result primarily from reduction in the Company's outstanding
indebtedness.
Income tax expense totaled $5,099,000, $4,547,000 and $2,764,000 in 1995,
1994 and 1993, respectively, resulting from the application of statutory income
tax rates to net earnings before income taxes
The Company has capital loss carryovers totaling approximately $56,000
which expire in 1997. Tax benefits associated with recorded deferred tax assets,
net of valuation allowances, are considered to be more likely than not
realizable through taxable income earned in carryback years, future reversals of
existing taxable temporary differences, and future taxable income exclusive of
reversing temporary differences and carryforwards.
The Alaska economy is supported in large part by the oil and gas industry.
ARCO announced a 715 person downsizing in July 1994. Similar downsizing was
announced in 1994 by other companies operating in the oil and gas industry in
Alaska for 1995.
20
<PAGE>
The Alaska economy is also supported by the United States armed services
and the United States Coast Guard which maintain bases in Anchorage, Fairbanks,
Adak, Kodiak, and other communities in Alaska. The military presence in the
state of Alaska provides a significant source of revenues to the economy of the
state. The Company provides message telephone services in a variety of ways to
the United States government and its armed forces personnel. The Company
provides private lines for secured point-to-point data and voice transmission
services and long distance services individually to military personnel.
A reduction in federal military spending or closure of a major facility in
Alaska would have a substantial adverse impact on the state and would both
directly and indirectly affect the Company. A reduction in the number of
military personnel served by the Company and a reduction in the number of
private lines required by the armed forces would have a direct effect on
revenues. Indirect effects would include a reduction of services provided across
the state in support of the military community and as a result, a reduction in
the number of customers served by the Company and volume of traffic carried.
On July 13, 1995, the president approved and Congress subsequently
accepted the independent Defense Base Closure and Realignment Commission report
to close 79 military bases and downsize 26 others. The commission estimates its
list would save $19.3 billion over 20 years, at a cost nationwide of 43,742
military and civilian jobs and 49,823 indirect jobs. Since its first round of
action in 1991, the Defense Base Closure and Realignment Commission has claimed
more than $5 billion in savings by closing or realigning military bases.
The following military installations located in Alaska were recommended
for closure or realignment in the 1995 report: Fort Greely (realign, estimated
loss of 438 military and 286 civilian jobs), Fort Wainwright (realign, estimated
gain of 205 military and 56 civilian jobs), NAF Adak (closure, estimated loss of
540 military and 138 civilian jobs).
The loss of jobs and associated revenues attributed to oil and gas
industry and military workforce reductions is not expected to have a material
effect on the Company's operations. No assurance can be given that funding for
existing military installations in Alaska will not be adversely affected by
reprioritization of needs for military installations or federal budget cuts in
the future.
In October 1994, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instrument" ("SFAS No. 119"). SFAS No.
119 requires disclosures regarding amount, nature and terms of derivative
financial instruments, for instance futures, forward, swap and option contracts
and other instruments with similar characteristics. The Company anticipates that
the adoption of SFAS No. 119 in 1996 will not have a material effect on its
consolidated financial statements.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121").
This statement sets forth new standards for determining when long-lived assets
are impaired and requires such impaired assets to be written down to fair value.
The Company anticipates that the adoption of SFAS No. 121 in 1996 will not have
a material effect on its consolidated financial statements.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans. Those plans
include all arrangements by which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. This statement
also applies to transactions in
21
<PAGE>
which an entity issues its equity instruments to acquire goods or services from
nonemployees. The Company anticipates that the adoption of SFAS No. 123 in 1996
will not have a material effect on its consolidated financial statements.
The Company generally has experienced increased costs in recent years due
to the effect of inflation on the cost of labor, material and supplies, and
plant and equipment. A portion of the increased labor and material and supplies
costs directly affects income through increased maintenance and operating costs.
The cumulative impact of inflation over a number of years has resulted in higher
depreciation expense and increased costs for current replacement of productive
facilities. However, operating efficiencies have partially offset this impact,
as have price increases, although the latter have generally not been adequate to
cover increased costs due to inflation. Competition and other market factors
limit the Company's ability to price services and products based upon
inflation's effect on costs.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company are filed under this
Item, beginning on Page 23. The financial statement schedules required under
Regulation S-X are filed pursuant to Item 14 of this Report.
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
General Communication, Inc.:
We have audited the accompanying consolidated balance sheets of General
Communication, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General
Communication, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/KPMG PEAT MARWICK LLP
Anchorage, Alaska
March 15, 1996
23
<PAGE>
<TABLE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
<CAPTION>
ASSETS 1995 1994
--------------------------------------- ---- ----
(Amounts in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................................................... $ 4,017 1,649
------- ------
Receivables:
Trade ....................................................................................... 21,737 17,036
Other ....................................................................................... 253 221
------- ------
21,990 17,257
Less allowance for doubtful receivables ............................................................. 295 409
------- ------
Net receivables ............................................................................. 21,695 16,848
------- ------
Prepaid and other current assets .................................................................... 1,566 1,344
Deferred income taxes, net (note 6) ................................................................. 746 884
Inventory ........................................................................................... 991 674
Notes receivable (note 3) ........................................................................... 167 200
------- ------
Total current assets ........................................................................ 29,182 21,599
------- ------
Property and equipment, at cost (notes 5, 8 and 9)
Land ................................................................................................ 73 73
Distribution systems ................................................................................ 67,434 63,272
Support equipment ................................................................................... 11,610 10,223
Property and equipment under capital leases ......................................................... 2,030 2,030
------- ------
81,147 75,598
Less amortization and accumulated depreciation ...................................................... 33,789 28,085
------- ------
Net property and equipment in service ....................................................... 47,358 47,513
Construction in progress ............................................................................ 3,096 --
------- ------
Net property and equipment .................................................................. 50,454 47,513
Notes receivable (note 3) ............................................................................. 904 767
Investment securities available for sale (note 4) ..................................................... -- 785
Other assets, at cost, net of amortization ............................................................ 4,225 3,585
------- ------
Total assets ................................................................................ $ 84,765 74,249
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
24 (Continued)
<PAGE>
<TABLE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Continued)
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
--------------------------------------------------- ---- ----
(Amounts in thousands)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (note 5) ....................................................... $ 1,689 1,585
Current maturities of obligations under
capital leases (note 9) .......................................................................... 282 249
Accounts payable .................................................................................... 16,861 11,841
Accrued payroll and payroll related obligations ..................................................... 2,108 4,036
Accrued liabilities ................................................................................. 1,134 711
Accrued income taxes (note 6) ....................................................................... 547 217
Accrued interest .................................................................................... 132 101
Deferred revenues ................................................................................... 1,317 1,097
-------- ------
Total current liabilities ................................................................... 24,070 19,837
Long-term debt, excluding current maturities (note 5) ................................................. 8,291 10,969
Obligations under capital leases, excluding
current maturities (note 9) ........................................................................ 26 257
Obligations under capital leases due to related parties,
excluding current maturities (note 9) .............................................................. 739 791
Deferred income taxes, net (note 6) ................................................................... 7,004 6,522
Other liabilities ..................................................................................... 1,619 780
-------- ------
Total liabilities ........................................................................... 41,749 39,156
-------- ------
Stockholders' equity (notes 2, 6 and 7): Common stock (no par):
Class A. Authorized
50,000,000 shares; issued and
outstanding 19,680,199 and 19,616,614
shares at December 31, 1995 and
1994, respectively ....................................................................... 13,912 13,830
Class B. Authorized
10,000,000 shares; issued and
outstanding 4,175,434 and 4,179,019
shares at December 31, 1995 and
1994, respectively ....................................................................... 3,432 3,432
Less cost of 122,611 and 105,111 Class A common
shares held in treasury at December 31, 1995
and 1994, respectively ........................................................................... (389) (328)
Paid-in capital ..................................................................................... 4,041 3,641
Retained earnings ................................................................................... 22,020 14,518
-------- ------
Total stockholders' equity .................................................................. 43,016 35,093
-------- ------
Commitments, contingencies and subsequent
event (notes 9, 11 and 12)
Total liabilities and stockholders' equity .................................................. $ 84,765 74,249
======== ======
</TABLE>
See accompanying notes to consolidated financial statements
25
<PAGE>
<TABLE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
---- ---- ----
(Amounts in thousands except per share amounts)
<S> <C> <C> <C>
Revenues (note 8):
Transmission services ..................................................................... $ 120,005 105,789 91,838
Systems sales and service ................................................................. 7,193 9,138 8,299
Other ..................................................................................... 2,081 2,054 2,076
-------- ------- -------
Total revenues ..................................................................... 129,279 116,981 102,213
Cost of sales ............................................................................... 70,221 60,896 56,437
-------- ------- -------
Contribution ....................................................................... 59,058 56,085 45,776
-------- ------- -------
Operating costs and expenses:
Operating and engineering ................................................................ 9,182 7,607 5,588
Service .................................................................................. 2,793 4,751 3,798
Sales and communications ................................................................. 9,865 7,040 4,992
General and administrative ............................................................... 14,492 14,788 13,037
Legal and regulatory ..................................................................... 1,540 1,334 1,372
Bad debt ................................................................................. 1,459 829 1,207
Depreciation and amortization ............................................................ 6,223 6,739 6,978
-------- ------- -------
Total operating costs and expenses ................................................. 45,554 43,088 36,972
-------- ------- -------
Operating income (note 8) .......................................................... 13,504 12,997 8,804
-------- ------- -------
Other income (expense):
Interest expense (notes 2 and 5) ......................................................... (1,146) (1,539) (2,254)
Interest income .......................................................................... 243 223 165
-------- ------- -------
Total other income (expense) ....................................................... (903) (1,316) (2,089)
-------- ------- -------
Earnings before income taxes ........................................................ 12,601 11,681 6,715
Income tax expense (notes 2 and 6) .......................................................... (5,099) (4,547) (2,764)
-------- ------- -------
Net earnings ........................................................................ $ 7,502 7,134 3,951
========= ======== ========
Net earnings per common share ...................................................... $ .31 .30 .17
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
<TABLE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
Shares of Class A Class B Class A
Common Stock Preferred Common Common Shares Held Paid-in Retained
Class A Class B Stock Stock Stock in Treasury Capital Earnings
(Amounts in thousands) (Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 ......................... 12,639 2,853 $3,282 2,430 1,210 (328) 4,690 3,586
Net earnings .......................................... -- -- -- -- -- -- -- 3,951
Class B shares converted to Class A ................... 15 (15) -- -- -- -- -- --
Tax effect of excess stock compensation
expense for tax purposes over amounts
recognized for financial reporting purposes ......... -- -- -- -- -- 514 -- --
Retirement of shares .................................. (562) (3,282) (359) -- -- (1,987) --
Preferred stock dividend paid ......................... -- -- -- -- -- -- -- (153)
Shares issued under stock option plan ................. 118 -- -- 124 -- -- -- --
Shares issued and issuable under
officer stock option agreements .................... 539 -- -- 385 -- -- 35 --
Shares issued, net of associated costs ................ 6,252 1,276 -- 10,890 2,222 -- -- --
------ ----- ----- ------ ----- ------ ----- ------
Balances at December 31, 1993 ......................... 19,001 4,114 -- 13,470 3,432 (328) 3,252 7,384
Net earnings .......................................... -- -- -- -- -- -- -- 7,134
Class B shares converted to Class A ................... 9 (9) -- -- -- -- -- --
Tax effect of excess stock compensation
expense for tax purposes over amounts
recognized for financial reporting purposes ......... -- -- -- -- -- 371 -- --
Shares issued under stock option plan ................. 37 -- -- 96 -- -- -- --
Shares issued under warrant agreement, net ............ 254 -- -- 185 -- -- -- --
Shares issued and issuable under
officer stock option agreements ..................... 316 74 -- 79 -- -- 18 --
------ ----- ----- ------ ----- ------ ----- ------
Balances at December 31, 1994 ......................... 19,617 4,179 $ -- 13,830 3,432 (328) 3,641 14,518
Net earnings .......................................... -- -- -- -- -- -- -- 7,502
Class B shares converted to Class A ................... 3 (3) -- -- -- -- -- --
Tax effect of excess stock compensation
expense for tax purposes over amounts
recognized for financial reporting purposes ......... -- -- -- -- -- 397 -- --
Shares purchased and held in Treasury ................. -- -- -- -- -- (61) -- --
Shares issued under stock option plan ................. 40 -- -- 82 -- -- -- --
Shares issued and issuable under
officer stock option agreements ..................... 20 -- -- -- -- -- 3 --
------ ----- ----- ------ ----- ------ ----- ------
Balances at December 31, 1995 ......................... 19,680 4,176 $ -- 13,912 3,432 (389) 4,041 22,020
====== ===== ===== ====== ===== ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
<TABLE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings ......................................... $ 7,502 7,134 3,951
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization .................. 6,223 6,739 6,978
Deferred income tax expense .................... 1,017 1,588 1,136
Deferred compensation and compensatory
stock options ................................ 433 343 183
Disposals of property and equipment ............ 170 -- --
Bad debt expense, net of write-offs ............ (114) (312) 46
Other noncash income and expense items ......... 354 (36) 7
Change in operating assets and
liabilities (note 2) ............................... (1,307) 3,063 (591)
-------- ------- ------
Net cash provided by operating activities ...... 14,278 18,519 11,710
-------- ------- ------
Cash flows from investing activities:
Purchases of property and equipment ................... (8,938) (10,604) (5,744)
Cash received from disposal of property and equipment . -- -- 105
Purchases of other assets including long-term deposits (934) (1,110) (303)
Proceeds from the sale of available for sale security 832 -- --
Notes receivable issued .............................. (251) (339) (602)
Payments received on notes receivable ................ 184 10 964
Restricted cash investments .......................... -- 684 2,268
-------- ------- ------
Net cash used in investing activities .......... (9,107) (11,359) (3,312)
-------- ------- ------
Cash flows from financing activities:
Long-term borrowings ................................. -- -- 10,000
Repayments of long-term borrowings and
capital lease obligations .......................... (2,824) (8,494) (26,610)
Proceeds from common stock issuance .................. 82 360 13,641
Purchase of treasury stock ........................... (61) -- --
Disbursements to retire common and
preferred stock ................................... -- -- (5,627)
Dividends paid on preferred stock .................... -- -- (153)
-------- ------- ------
Net cash used by financing activities .......... (2,803) (8,134) (8,749)
-------- ------- ------
Net increase (decrease) in cash and cash equivalents . 2,368 (974) (351)
Cash and cash equivalents at beginning of year ......... 1,649 2,623 2,974
-------- ------- ------
Cash and cash equivalents at end of year ............... $ 4,017 1,649 2,623
======== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(l) Summary of Significant Accounting Principles
(a) General
General Communication, Inc. ("GCI"), an Alaska corporation, was
incorporated in 1979. GCI Communication Corp. ("GCC") , an Alaska
corporation, is a wholly owned subsidiary of GCI and was incorporated
in 1990. GCI Network Systems, Inc. ("Network Systems"), formerly
Transalaska Network Systems, Inc., an Alaska corporation, was a
wholly-owned subsidiary of GCC and was incorporated in 1988.
Effective December 31, 1993 Network Systems operations were merged
into GCC. Both GCC and Network Systems operations continue to be
provided by the surviving corporation, GCC, subsequent to the merger.
GCI Communication Services, Inc. ("Communication Services"), an
Alaska corporation, is a wholly-owned subsidiary of GCI and was
incorporated in 1992. GCI Leasing Co., Inc. ("Leasing Company"), an
Alaska corporation, is a wholly-owned subsidiary of Communication
Services and was incorporated in 1992. GCI and GCC are engaged in the
transmission of interstate and intrastate private line and switched
message long distance telephone service between Anchorage, Fairbanks,
Juneau, and other communities in Alaska and the remaining United
States and foreign countries. GCC also provides northbound services
to certain common carriers terminating traffic in Alaska and sells
and services dedicated communications systems and related equipment.
Communication Services provides private network point-to-point data
and voice transmission services between Alaska, Hawaii and the
western contiguous United States. Leasing Company owns and leases
capacity on an undersea fiber optic cable used in the transmission of
interstate private line and switched message long distance services
between Alaska and the remaining United States and foreign countries.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of GCI,
its wholly-owned subsidiaries GCC and Communication Services, and
Communication Services wholly owned subsidiary Leasing Company. All
significant intercompany balances and transactions have been
eliminated in consolidation.
(c) Net Earnings Per Common Share
<TABLE>
Primary earnings per common share are determined by dividing net
earnings (after deducting preferred stock dividends of $153,000 in
1993) by the weighted number of common and common equivalent shares
outstanding:
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Weighted average common
shares outstanding 23,723 23,199 21,085
Common equivalent shares
outstanding 703 884 1,243
------ ------ ------
24,426 24,083 22,328
====== ====== ======
</TABLE>
The difference between shares for primary and fully diluted earnings
per share was not significant in any period presented.
29 (Continued)
<PAGE>
(d) Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash.
(e) Inventory
Inventory of merchandise for resale and parts is stated at the lower
of cost or market. Cost is determined using the first-in, first-out
method for parts and the specific identification method for equipment
held for resale.
(f) Property and Equipment
Property and equipment is stated at cost. Construction costs of
transmission facilities are capitalized. Equipment financed under
capital leases is recorded at the lower of fair market value or the
present value of future minimum lease payments. Construction in
progress represents distribution systems and support equipment not
placed in service at December 31, 1995; management intends to place
this equipment in service during 1996.
Depreciation and amortization is computed on a straight-line basis
based upon the shorter of the lease term or the estimated useful
lives of the assets ranging from 3 to 20 years for distribution
systems and 5 to 10 years for support equipment. Amortization of
equipment financed under capitalized leases is included in
depreciation expense.
Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. Gains or losses are recognized at the time
of ordinary retirements, sales or other dispositions of property.
(g) Marketable Securities
Effective January 1, 1994, GCI and subsidiaries ("the Company")
adopted Statement of Financial Accounting Standards No. 115 ("SFAS
No. 115"), Accounting for Certain Investments in Debt and Equity
Securities. Under SFAS No. 115, securities when purchased, are
classified in either the trading account securities portfolio, the
securities available for sale portfolio, or the securities held to
maturity portfolio. Securities are classified as trading account
securities when the intent is profit maximization through market
appreciation and resale. Securities are classified as available for
sale when management intends to hold the securities for an indefinite
period of time. Securities are classified as held to maturity when it
is management's intent to hold these securities until maturity.
Unrealized gains or losses on securities available for sale are
excluded from earnings and reported as a net amount in a separate
component of stockholders' equity. There was no cumulative effect on
the financial statements from the adoption of SFAS No. 115.
Securities available for sale are stated at fair market value which
approximates cost.
(h) Other Assets
Other assets, excluding deferred loan costs and goodwill, are
recorded at cost and are amortized on a straight-line basis over 2 to
15 years. Deferred loan costs are recorded at cost and are amortized
on a straight-line basis over the life of the associated loan.
Goodwill totaled approximately $1,286,000 and $1,387,000 at December
31, 1995 and 1994, respectively, net of amortization of approximately
$697,000 and $596,000,
30 (Continued)
<PAGE>
respectively. Goodwill represents the excess of cost over fair value
of net assets acquired and is being amortized on a straight-line
basis over twenty years.
(i) Revenue From Services and Products
Revenues generated from long distance telecommunication services are
recognized when the services are provided. Revenues from the sale of
equipment are recognized at the time the equipment is delivered or
installed. Service revenues are derived primarily from maintenance
contracts on equipment and are recognized on a prorated basis over
the term of the contract. Other revenues are recognized when the
service is provided.
(j) Interest Expense
Interest costs incurred during the construction period of significant
capital projects are capitalized. Interest capitalized by the Company
totaled $112,000 during the year ended December 31, 1995.
(k) Income Taxes
In February, 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes". SFAS No. 109 requires a change from
the deferred method of accounting for income taxes of APB Opinion 11
to the asset and liability method of accounting for income taxes.
Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable earnings in the years in which
those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in earnings in the period that
includes the enactment date.
Effective January 1, 1993, the Company adopted SFAS No. 109. The
adjustment required for this change in accounting for income taxes
was recorded in the first quarter of 1993 and resulted in increases
in current deferred tax assets and net long-term deferred tax
liabilities, and provision of a valuation allowance for deferred tax
assets. No cumulative effect adjustment to the Company's consolidated
statement of operations was required.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(m) Reclassifications
Reclassifications have been made to the 1994 financial statements to
make them comparable with the 1995 presentation.
31 (Continued)
<PAGE>
(2) Consolidated Statements of Cash Flows Supplemental Disclosures
For purposes of the Statement of Cash Flows, the Company's cash
equivalents includes cash and all invested assets with original
maturities of less than three months.
<TABLE>
Changes in operating assets and liabilities consist of (in
thousands):
<CAPTION>
Year ended December 31, 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
(Increase) decrease in trade receivables $ (4,701) 63 (2,287)
(Increase) decrease in other receivables (32) (91) 535
(Increase) decrease in prepaid and other
current assets (222) 312 (477)
(Increase) decrease in inventory (317) (38) 70
Decrease in income taxes receivable --- --- 17
Increase in accounts payable 5,020 1,434 621
Increase (decrease) in accrued liabilities 423 195 (64)
Increase (decrease) in accrued payroll
and payroll related obligations (1,928) 1,238 857
Increase in accrued income taxes 330 163 54
Increase (decrease) in accrued interest 31 14 (43)
Increase (decrease) in deferred revenues 220 (90) 126
Decrease in components of other liabilities (131) (137) ---
-------- ----- ------
$ (1,307) 3,063 (591)
========= ===== ======
</TABLE>
Income taxes paid totaled $3,752,000, $2,796,000 and $1,558,000
during 1995, 1994 and 1993, respectively.
Interest paid totaled approximately $1,227,000, $1,525,000 and
$2,297,000 during 1995, 1994 and 1993, respectively.
The Company recorded $397,000, $371,000 and $514,000 in 1995, 1994
and 1993, respectively, in paid-in capital in recognition of the
income tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting purposes.
32 (Continued)
<PAGE>
(3) Notes Receivable
<TABLE>
A summary of notes receivable follows:
<CAPTION>
December 31,
1995 1994
---- ----
(Amounts in thousands)
<S> <C> <C>
Note receivable from officer bearing interest at the rate paid by the
Company on its senior indebtedness, secured by GCI Class A common
stock, due on the 90th day after termination of employment or July
30, 1998,whichever is earlier. $ 500 500
Note receivable from officer bearing interest at 10%, secured by
Company stock; payable in equal annual installments of $36,513
through August 26, 2004. 224 224
Notes receivable from officers and others bearing interest at 7% to
10%, unsecured and secured by Company common stock, shares of other
common stock and equipment; due September 20, 1996
through August 26, 2004. 261 194
------ -----
Total notes receivable 985 918
Less current portion (167) (200)
Plus long-term accrued interest 86 49
------ -----
$ 904 767
====== =====
</TABLE>
(4) Investment Securities Available for Sale
As of January 1, 1994 the Company adopted SFAS No. 115. Accordingly,
the Company's marketable equity securities have been classified as
available for sale securities and are reported at fair market value
which approximate cost at December 31, 1994. The Company held no
trading account investment securities or available for sale
securities at December 31, 1995.
33 (Continued)
<PAGE>
(5) Long-term Debt
<TABLE>
Long-term debt is summarized as follows:
<CAPTION>
December 31,
--------------------
1995 1994
---- ----
(Amounts in thousands)
<S> <C> <C>
Credit Agreement (a) $ 1,000 2,000
Undersea Fiber and Equipment
Loan Agreement (b) 8,271 9,500
Financing Obligation (c) 709 1,054
------- ------
9,980 12,554
Less current maturities 1,689 1,585
------- ------
Long-term debt, excluding
current maturities $ 8,291 10,969
======= ======
</TABLE>
(a) GCI completed a refinancing of its senior indebtedness on
May 14, 1993. The facility was amended on October 31, 1995
to provide financing for the initial letter of credit and
subsequent down payment required pursuant to the terms of
the Company's transponder purchase agreement with Hughes.
The facility is comprised of two components, the first of
which is a $15,750,000 reducing revolver requiring payments
or reductions of $650,000 per quarter through December 31,
1996, and $812,500 thereafter through its expiration on
December 31, 1997. $2.65 million of this component has been
used to provide a letter of credit to secure payment of
certain access charges associated with the Company's
provision of telecommunications services within the state of
Alaska. $4.6 million of this portion of the facility was
available for additional borrowings at December 31, 1995,
$3.3 million of which was drawn down in March 1996. The
other component totals $10.08 million, and has been used to
provide a $9.1 million letter of credit to Hughes. The
letter of credit is expected to be drawn down by Hughes
after delivery of transponder capacity scheduled for May or
June of 1996. Once drawn upon, the facility will be repaid
in quarterly installments of $455,000 beginning September
30, 1996, with all remaining outstanding principal due on
December 31, 1997.
The Credit agreement provides for interest (8.18% at
December 31, 1995), among other options, at LIBOR plus two
and one-quarter to two and three-quarters percent depending
on the Company's leverage ratio as defined in the Agreement.
A fee of .50% per annum is assessed on the unused portion of
the facility.
The credit agreement contains, among others, covenants
requiring maintenance of specific levels of operating cash
flow to indebtedness, to interest expense, to fixed charges,
and to pro forma debt service. The credit agreement includes
limitations on acquisitions and additional indebtedness, and
prohibits payment of dividends, other than stock dividends.
The Company was in compliance with all credit agreement
covenants during the period commencing May 14, 1993 (date of
the refinancing) through December 31, 1995.
34 (Continued)
<PAGE>
Security for the credit agreement includes a pledge of the
stock of GCC and Communication Services, and a first lien on
substantially all of GCC's assets. GCI and its subsidiaries,
Communication Services and Leasing Company, are liable as
guarantors.
In June, 1993, the Company entered into a two-year interest
rate swap agreement with a bank whereby the rate on
$18,200,000 of debt (reduced by $422,500 per quarter
beginning July 1, 1993) was fixed at 4.45 percent plus
applicable margins. The interest effect of the difference
between the fixed rate and the three-month LIBOR rate was
either added to or served to reduce interest expense
depending on the relative interest rates. The agreement
expired June 30, 1995.
(b) On December 31, 1992, Leasing Company entered into a
$12,000,000 loan agreement, of which approximately
$9,000,000 of the proceeds were used to acquire capacity on
the undersea fiber optic cable linking Seward, Alaska and
Pacific City, Oregon. Concurrently, Leasing Company leased
the capacity under a ten year all events, take or pay,
contract to MCI, who subleased the capacity back to the
Company. The lease and sublease agreements provide for
equivalent terms of 10 years and identical monthly payments
of $200,000. The proceeds of the lease agreement with MCI
were pledged as primary security for the financing. The loan
agreement provides for monthly payments of $170,000
including principal and interest through the earlier of
January 1, 2003, or until repaid. The loan agreement
provides for interest at the prime rate plus one-quarter
percent. Additional collateral includes substantially all of
the assets of Leasing Company including the fiber capacity
and a security interest in all of its outstanding stock. MCI
has a second position security interest in the assets of
Leasing Company.
(c) As consideration for MCI's role in enabling Leasing Company
to finance and acquire the undersea fiber optic cable
capacity described at note 5(b) above, Leasing Company
agreed to pay MCI $2,040,000 in sixty monthly payments of
$34,000. For financial statement reporting purposes, the
obligation has been recorded at its remaining present value,
using a discount rate of 10% per annum. The agreement is
secured by a second position security interest in the assets
of Leasing Company.
As of December 31, 1995 maturities of long-term debt were as follows
(in thousands):
Year ending
December 31,
1996 $ 1,689
1997 2,882
1998 1,631
1999 1,780
2000 1,942
2001 and thereafter 56
-------
$ 9,980
=======
35 (Continued)
<PAGE>
(6) Income Taxes
<TABLE>
Total income tax expense (benefit) for the years ended December 31,
1995, 1994 and 1993 were allocated as follows (amounts in thousands):
<CAPTION>
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Earnings from continuing operations $5,099 4,547 2,764
Stockholders' equity, for stock option compensation
expense for tax purposes in excess of amounts
recognized for financial reporting purposes (397) (371) (514)
----- ----- -----
$4,702 4,176 2,250
===== ===== =====
</TABLE>
<TABLE>
Income tax expense consists of the following:
<CAPTION>
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C>
Current tax expense:
Federal taxes $3,077 2,604 1,615
State taxes 1,005 355 13
----- ----- -----
4,082 2,959 1,628
----- ----- -----
Deferred tax expense:
Federal taxes 780 816 508
State taxes 237 772 628
----- ----- -----
1,017 1,588 1,136
----- ----- -----
$5,099 4,547 2,764
===== ===== =====
</TABLE>
<TABLE>
Total income tax expense differed from the "expected" income tax
expense determined by applying the statutory federal income tax rate
of 34% as follows:
<CAPTION>
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C>
"Expected" statutory tax expense $4,284 3,971 2,283
State income taxes, net of federal benefit 820 742 424
Income tax effect of goodwill
amortization, nondeductible
expenditures and other items, net (5) (166) 57
----- ----- -----
$5,099 4,547 2,764
===== ===== =====
</TABLE>
36 (Continued)
<PAGE>
<TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1995 and 1994 are presented below.
<CAPTION>
December 31,
1995 1994
---- ----
(Amounts in thousands)
<S> <C> <C>
Net current deferred tax assets:
Accounts receivable, principally due to allowance for
for doubtful accounts ................................................................ $ 119 199
Compensated absences, accrued for financial reporting purposes ......................... 400 333
Federal and state alternative minimum tax credit carryforwards ......................... -- 330
Workers compensation and self insurance health reserves,
principally due to accrual for financial reporting purposes .......................... 183 185
Other .................................................................................. 133 36
------- -----
Total gross current deferred tax assets ......................................... 835 1,083
Less valuation allowance ........................................................ (89) (199)
------- -----
Net current deferred tax assets ................................................. $ 746 884
======= =====
Net long-term deferred tax assets:
Deferred compensation expense for financial
reporting purposes in excess of amounts recognized
for tax purposes ..................................................................... $ 587 511
Employee stock option compensation expense for financial
reporting purposes in excess of amounts recognized
for tax purposes ..................................................................... 206 234
Capital loss carryforwards ............................................................. 23 168
Other .................................................................................. 453 311
------- -----
Total gross long-term deferred tax assets ....................................... 1,269 1,224
Less valuation allowance ........................................................ (136) (226)
------- -----
Net long-term deferred tax assets ............................................... 1,133 998
------- -----
Net long-term deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation ......................................................................... 7,997 7,507
Other .................................................................................. 140 13
------- -----
Total gross long-term deferred tax liabilities .................................. 8,137 7,520
------- -----
Net combined long-term deferred tax liabilities ................................. $ 7,004 6,522
======= =====
</TABLE>
The valuation allowance for deferred tax assets was $225,000,
$425,000 and $425,000 as of December 31, 1995, 1994 and 1993,
respectively.
Tax benefits associated with recorded deferred tax assets, net of
valuation allowances, are considered to be more likely than not
realizable through taxable income earned in carryback years, future
reversals of existing taxable temporary differences, and future
taxable income exclusive of reversing temporary differences and
carryforwards. The amount of deferred tax asset considered
realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
For income tax reporting purposes, the Company has available capital
loss carryovers totaling approximately $56,000 which expire in 1997.
The Company's U.S. income tax return for 1993 was selected for
examination by the Internal Revenue Service during 1995. The
examination commenced during the fourth
37 (Continued)
<PAGE>
quarter of 1995. Management believes this examination will not
adversely affect the consolidated financial statements.
(7) Stockholders' Equity
Common Stock
GCI's Class A common stock and Class B common stock are identical in
all respects, except that each share of Class A common stock has one
vote per share and each share of Class B common stock has ten votes
per share. In addition, each share of Class B common stock
outstanding is convertible, at the option of the holder, into one
share of Class A common stock.
MCI owns a total of 6,251,509 shares of GCI's Class A and 1,275,791
shares of GCI's Class B common stock which on a fully diluted basis
represented approximately 31 and 30 percent of the issued and
outstanding shares of the respective class.
Stock Warrants
On May 18, 1994 an officer of the Company exercised warrants. In
exchange for $114, the Company issued 160,297 and 74,028 shares of
GCI Class A and Class B common stock, respectively.
Pursuant to the terms of a stock appreciation right granted in 1988,
the Company issued to its former senior lender warrants to acquire
1,021,373 shares of GCI Class A common stock for $.85669 per share.
Warrants to purchase 600,000 shares of Class A common stock were
exercised in April and May, 1991, an additional 168,085 were
exercised in September, 1991 and the remaining warrants to purchase
253,288 shares were exercised in September and October, 1994.
Stock Option Plan
In December 1986, GCI adopted a Stock Option Plan (the "Option Plan")
in order to provide a special incentive to officers, non-employee
directors, and employees by offering them an opportunity to acquire
an equity interest in GCI. The Option Plan provides for the grant of
options for a maximum of 3,200,000 shares of GCI Class A common
stock, subject to adjustment upon the occurrence of stock dividends,
stock splits, mergers, consolidations or certain other changes in
corporate structure or capitalization. If an option expires or
terminates, the shares subject to the option will be available for
further grants of options under the Option Plan. The Option Plan is
administered by GCI's Board of Directors or a committee of
disinterested persons.
Employees of GCI (including officers and directors), employees of
affiliated companies and non-employee directors of GCI are eligible
to participate in the Option Plan. Options granted under the Option
Plan must expire not later than ten years after the date of grant.
The exercise price may be less than, equal to, or greater than the
fair market value of the shares on the date of grant. Options granted
pursuant to the Option Plan are only exercisable if at the time of
exercise the option holder is an employee or non-employee director of
GCI.
38 (Continued)
<PAGE>
<TABLE>
Information for the years 1993, 1994 and 1995 with respect to the Plan
follows:
<CAPTION>
Shares Option Price
------ ------------
<S> <C> <C>
Outstanding at December 31, 1992 1,660,677 $0.75-$3.00
---------
Granted 298,500 $4.00
Exercised (129,519) $0.75-$2.25
Forfeited (6,000) $4.00
---------
Outstanding at December 31, 1993 1,823,658 $0.75-$4.00
---------
Granted --- ---
Exercised (72,459) $0.75-$3.00
Forfeited (21,500) $4.00
---------
Outstanding at December 31, 1994 1,729,699 $0.75-$4.00
Granted 610,000 $4.00
Exercised (40,000) $1.87-$2.25
Forfeited (11,500) $4.00
---------
Outstanding at December 31, 1995 2,288,199 $0.75-$4.00
=========
Available for grant at December 31, 1995 349,553
=========
Exercisable at December 31, 1995 986,999
=========
</TABLE>
The options expire at various dates through October 2005.
Stock Options Not Pursuant to a Plan
In June 1989, officer John Lowber was granted options to acquire
100,000 Class A common shares at $.75 per share. The options vested
in equal annual increments over a five-year period and expire
February, 1999.
The Company entered into an incentive agreement in June 1989 with Mr.
Behnke, an officer of the Company. The incentive agreement provides
for the acquisition of 85,190 remaining shares of Class A common
stock of the Company for $.001 per share exercisable through June 16,
1997. The shares under the incentive agreement vested in equal annual
increments over a three-year period.
Class A Common Shares Held in Treasury
The Company acquired 105,111 shares of its Class A common stock in
1989 for approximately $328,000 to fund a deferred bonus agreement
with Mr. Duncan, an officer of the Company. The agreement provides
that the balance is payable after the later of a) termination of
employment or b) six months after the effective date of the
agreement. In September 1995, the Company acquired an additional
17,500 shares of Class A common stock for approximately $61,000 to
fund additional deferred compensation agreements for two of its
officers, including Mr. Duncan.
39 (Continued)
<PAGE>
Employee Stock Purchase Plan
In December 1986, GCI adopted an Employee Stock Purchase Plan (the
"Plan") qualified under Section 401 of the Internal Revenue Code of
1986 (the "Code"). The Plan provides for acquisition of the Company's
Class A and Class B common stock at market value. The Plan permits
each employee of GCI and affiliated companies who has completed one
year of service to elect to participate in the Plan. Eligible
employees may elect to reduce their compensation in any even dollar
amount up to 10 percent of such compensation up to a maximum of
$9,240 in 1995; they may contribute up to 10 percent of their
compensation with after-tax dollars, or they may elect a combination
of salary reductions and after-tax contributions.
GCI may match employee salary reductions and after tax contributions
in any amount, elected by GCI each year, but not more than 10 percent
of any one employee's compensation will be matched in any year. The
combination of salary reductions, after tax contributions and GCI
matching contributions cannot exceed 25 percent of any employee's
compensation (determined after salary reduction) for any year. GCI's
contributions vest over six years. Prior to July 1, 1995 employee and
GCI contributions were invested in GCI common stock and employee
contributions received up to 100% matching, as determined by the
Company each year, in GCI common stock. Beginning July 1, 1995
employee contributions may be invested in GCI common stock, MCI
common stock, Tele-Communications, Inc. common stock or various
mutual funds. Beginning July 1, 1995 employee contributions invested
in GCI common stock receive up to 100% matching, as determined by the
Company each year, in GCI common stock. Employee contributions
invested in other than GCI common stock receive up to 50% matching,
as determined by the Company each year, in GCI common stock. The
Company's matching contributions allocated to participant accounts
totaled approximately $864,000, $792,000 and $485,000 for the years
ended December 31, 1995, 1994, and 1993, respectively. The Plan may,
at its discretion, purchase shares of common stock from the Company
at market value or may purchase GCI common stock on the open market.
40 (Continued)
<PAGE>
(8) Industry Segments Data
<TABLE>
The Company is engaged in the design, development, sale and service
of telecommunication services and products in two principal
industries: (1) message and data transmission services and (2)
telecommunication systems sales and service.
<CAPTION>
1995 1994 1993
---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C>
Net sales
Message and data transmission svcs. $122,086 107,843 93,914
Systems sales and service 7,193 9,138 8,299
------- ------- -------
Total net sales $129,279 116,981 102,213
======= ======= =======
Operating income
Message and data transmission svcs. $ 25,183 24,952 18,707
System sales and service 1,847 2,112 428
Corporate (13,526) (14,067) (10,331)
------- ------- -------
Total operating income $ 13,504 12,997 8,804
======= ======= =======
Identifiable assets
Message and data transmission svcs. $ 69,715 60,335 59,277
Systems sales and service 2,554 2,838 4,306
Corporate 12,496 11,076 8,027
------- ------- -------
Total identifiable assets $ 84,765 74,249 71,610
======= ======= =======
Capital expenditures
Message and data transmission svcs. $ 5,946 10,003 4,457
Systems sales and service --- --- 369
Corporate 2,992 601 918
------- ------- -------
Total capital expenditures $ 8,938 10,604 5,744
======= ======= =======
Depreciation and amortization expense
Message and data transmission svcs. $ 5,385 6,194 6,572
Systems sales and service 84 103 132
Corporate 754 442 274
------- ------- -------
Total depreciation and
amortization expense $ 6,223 6,739 6,978
======= ======= =======
</TABLE>
Intersegment sales approximate market and are not significant.
Identifiable assets are assets associated with a specific industry
segment. General corporate assets consist primarily of cash,
temporary cash investments and other assets and investments which are
not specific to an industry segment. Goodwill and the related
amortization associated with the acquisition of Network Systems is
allocated to the message and data telephone services segment.
Goodwill and the related amortization related to the acquisition of
the Transalaska Data Systems, Inc. assets is allocated to the systems
sales and service segment. Revenues derived from leasing operations
are allocated to the message and data transmission services segment.
The Company provides message telephone service to MCI and Sprint,
major customers. Pursuant to the terms of a contract with MCI, the
Company earned revenues of approximately $23,939,000, $19,512,000 and
$16,068,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. Amounts receivable from MCI totaled $4,256,000
41 (Continued)
<PAGE>
and $3,257,000 at December 31, 1995 and 1994, respectively. The
Company earned revenues pursuant to a contract with Sprint totaling
approximately $14,885,000, $12,412,000 and $10,123,000 for the years
ended December 31, 1995, 1994 and 1993 respectively. Amounts
receivable from Sprint totaled $2,362,000 and $981,000 at December
31, 1995 and 1994, respectively.
(9) Leases
The Company leases business offices, has entered into site lease
agreements and uses certain equipment and satellite transponder
capacity pursuant to operating lease arrangements. Rental costs under
such arrangements amounted to approximately $4,353,000, $4,258,000
and $4,029,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
<TABLE>
A summary of future minimum lease payments for all leases as of
December 31, 1995 follows:
<CAPTION>
Year ending December 31: Operating Capital
------------------------ --------- -------
(Amounts in thousands)
<S> <C> <C>
1996 $ 6,343 435
1997 7,493 221
1998 1,441 202
1999 1,343 204
2000 1,247 211
2001 and thereafter 778 1,301
------- ------
Total minimum lease payments $ 18,645 2,574
=======
Less amount representing interest (1,527)
Less current maturities of obligations
under capital leases (282)
Subtotal - long-term obligations under capital
leases 765
Less long-term obligations under capital leases due
to related parties, excluding current maturities (739)
------
Long-term obligations under capital leases,
excluding current maturities $ 26
======
</TABLE>
The Company entered into a long-term capital lease agreement in 1991
with the wife of the Company's president for property occupied by the
Company. The lease term is 15 years with monthly payments of $14,400,
increasing in $800 increments at each two year anniversary of the
lease. Monthly lease costs increased to $15,200 effective October
1993 and $16,000 effective October 1995. Monthly lease costs will
increase to $16,800 in October 1997. If the owner sells the premises
prior to the end of the tenth year of the lease, the owner will
rebate to the Company one-half of the net sales price received in
excess of $900,000. If the property is not sold prior to the tenth
year of the lease, the owner will pay the Company the greater of
one-half of the appreciated value of the property over $900,000, or
$500,000. The leased asset was capitalized in 1991 at the owner's
cost of $900,000 and the related obligation was recorded in the
accompanying financial statements.
The leases generally provide that the Company pay the taxes,
insurance and maintenance expenses related to the leased assets.
It is expected that in the normal course of business, leases that
expire will be renewed or replaced by leases on other properties.
42 (Continued)
<PAGE>
(10) Disclosure about Fair Value of Financial Instruments
Statement of Financial Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS No. 107") requires disclosure
of the fair value of financial instruments for which it is
practicable to estimate that value. SFAS No. 107 specifically
excludes certain items from its disclosure requirements. The fair
value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. The carrying amounts at
December 31, 1995 for the Company's assets and liabilities
approximate their fair values.
(11) Commitments and Contingencies
During 1995, the Company adopted a non-qualified, unfunded deferred
compensation plan to provide a means by which certain employees may
elect to defer receipt of designated percentages or amounts of their
compensation and to provide a means for certain other deferrals of
compensation. The Company may, at its discretion, contribute matching
deferrals equal to the rate of matching selected by the Company.
Participants immediately vest in all elective deferrals and all
income and gain attributable thereto. Matching contributions and all
income and gain attributable thereto vest over a six-year period.
Participants may elect to be paid in either a single lump sum payment
or annual installments over a period not to exceed 10 years. Vested
balances are payable upon termination of employment, unforeseen
emergencies, death and total disability. Participants are general
creditors of the Company with respect to deferred compensation plan
benefits. Compensation deferred pursuant to the plan totaled $340,000
as of December 31, 1995.
The Company entered into a purchase and lease-purchase option
agreement in August 1995 for the acquisition of satellite
transponders to meet its long-term satellite capacity requirements.
The amount of the down payment required in 1996 and the balance
payable upon delivery of the transponders as early as the fourth
quarter of 1997 are dependent upon a number of factors. The Company
does not expect the down payment to exceed $10.1 million and the
remaining balance payable at delivery to exceed $46 million.
In the normal course of the Company's operations, it is involved in
various legal and regulatory matters before the FCC and the APUC.
While the Company does not anticipate that the ultimate disposition
of such matters will result in abrupt changes in the competitive
structure of the Alaska market or of the business of the Company, no
assurances can be given that such changes will not occur and that
such changes would not be materially adverse to the Company.
(12) Subsequent Event
Subsequent to year-end, the Company announced that it has signed
letters of intent to acquire three Alaska cable companies that offer
cable television service to more than 101,000 subscribers serving 74
percent of households throughout the state of Alaska. The Company
intends to acquire Prime Cable of Alaska, Alaska Cablevision, Inc. of
Kirkland, Washington and Alaskan Cable Network. Prime Cable operates
the state's largest cable television system including stations in
Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision
owns and operates cable stations in Petersburg, Wrangell, Cordova,
Valdez, Kodiak, Homer, Seward, Nome and Kotzebue, Alaska. Alaskan
Cable Network operates stations in Fairbanks, Juneau, Ketchikan and
Sitka, Alaska. This acquisition will allow the Company to integrate
cable services to bring more information not only to more customers,
but in a manner that is quicker, more efficient and more cost
effective than ever before. The purchase
43 (Continued)
<PAGE>
will facilitate consolidation of the cable operations and will
provide a platform for developing new customer products and services
over the next several years. Upon closing and after all approvals are
obtained, the cable companies will be consolidated into a single
organization owned by the Company.
The total purchase price is $280.7 million. According to terms of the
letters of intent, GCI will issue 16.3 million shares of Class A
Common stock to the owners of the three cable companies valued at
$105.7 million. The balance of the purchase will be provided by
approximately $175 million of bank financing. Additional capital will
be provided from the sale of 2 million shares of GCI's Class A Common
Stock to MCI Telecommunications Corporation for $6.50 per share.
The more significant contingencies which must be resolved include
negotiation and execution of definitive agreements with the owners of
the cable companies and MCI, approval of the transactions and
transfer of licenses by the APUC and the FCC, and approval of the
transactions by the Company's shareholders and senior lender and the
cable companies' shareholders, partners and lenders.
Management is confident that once the contingencies are resolved, the
transactions will be financed through modification or assumption of
an existing or negotiation of a new bank credit agreement facility.
Although the Company has held discussions with existing lenders
regarding such a facility, no agreement exists concerning the amounts
or terms of such a facility.
(13) Selected Quarterly Information (Unaudited)
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------------------
Dec. 31, 1995 Sept. 30, 1995 June 30, 1995 Mar. 31, 1995
------------- -------------- ------------- -------------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Total revenues $34,363 33,363 31,860 29,693
Contribution $15,808 15,548 14,026 13,676
Net earnings $1,807 2,252 1,836 1,607
Net earnings per share $.07 .09 .08 .07
</TABLE>
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------------------
Dec. 31, 1994 Sept. 30, 1994 June 30, 1994 Mar. 31, 1994
------------- -------------- ------------- -------------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Total revenues $29,143 30,685 28,962 28,191
Contribution $14,061 14,740 14,387 12,897
Net earnings $1,320 1,994 2,122 1,698
Net earnings per share $.06 .08 .09 .07
</TABLE>
44 (Continued)
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
45
<PAGE>
PART IV
Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a)(l) Consolidated Financial Statements Page No.
Included in Part II of this Report:
Independent Auditors' Report ...............................23
Consolidated Balance Sheets, December 31, 1995
and 1994 .............................................24 -- 25
Consolidated Statements of Operations,
Years ended December 31, 1995, 1994 and 1993 ............26
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1995, 1994 and 1993 ............27
Consolidated Statements of Cash Flows,
Years ended December 31, 1995, 1994 and 1993 ............28
Notes to Consolidated Financial Statements ...........29 -- 44
(a)(2) Consolidated Financial Statement Schedules
Included in Part IV of this Report:
Independent Auditors' Report................................51
Schedule VIII - Valuation and Qualifying Accounts,
Years ended December 31, 1995, 1994 and 1993 ............52
Other schedules are omitted as they are not required or are not
applicable, or the required information is shown in the applicable
financial statements or notes thereto.
46
<PAGE>
(b) Exhibits
Listed below are the exhibits which are filed as a part of this
Report (according to the number assigned to them in Item 601 of Regulation
S-K):
3 - Articles of Incorporation and By-laws:
Restated Articles of Incorporation of General Communication,
Inc. dated August 16, 1993.
Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 31,
1994
Bylaws of General Communication, Inc., as amended and
restated dated March 24, 1993
Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 31,
1994
4 - Instruments defining the rights of security holders:
Registration Rights Agreement, dated as of January 18, 1991,
between General Communication, Inc. and WestMarc
Communications, Inc.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990.
Employee stock option agreements issued to individuals
Spradling, O'Hara, Strid, Behnke, Lewkowski and Snyder.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991.
Lease agreement between GCI Communication Services, Inc. and
National Bank of Alaska Leasing Corporation dated January
15, 1992.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
Stock Purchase Agreement between MCI Telecommunications
Corporation and General Communication, Inc. dated March
31, 1993.
Incorporated herein by reference to the Company's Current
Report on Form 8-K dated June 4, 1993.
Voting Agreement by and between MCI Telecommunications
Corporation, Ronald A. Duncan, Robert M. Walp, and
WestMarc Communications, Inc., dated March 31, 1993.
Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1994
47
<PAGE>
10 - Material Contracts:
Denali Towers Lease
MCI Telecommunications Corporation Carrier Agreement
Westin Building Lease
All the above incorporated herein by reference to the
Company's Registration Statement on Form 10 (File No.
0-15279), mailed to the Securities and Exchange
Commission on December 30, 1986.
Denali Towers Lease, Suites 1000 and 1105
Denali Towers Lease, Suites 910 and 1110
Denali Towers Lease, Suite 400
Hughes Transponder Lease Agreement
Duncan and Hughes Deferred Bonus Agreements
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989.
Service Agreement dated January 1, 1990 between General
Communication, Inc. and US Sprint Communications Company
Limited Partnership of Delaware
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1990.
Order approving Application for a Certificate of Public
Convenience and Necessity to operate as a
Telecommunications (Intrastate Interexchange Carrier)
Public Utility within Alaska.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1991.
1986 Stock Option Plan, as amended
Loan agreement between National Bank of Alaska and GCI
Leasing Co., Inc. dated December 31, 1992.
Pledge and Security Agreement between National Bank of
Alaska and GCI Communication Services, Inc. dated
December 31, 1992.
Lease Agreement between MCI Telecommunications Corporation
and GCI Leasing Co., Inc. dated December 31, 1992.
Sublease Agreement between MCI Telecommunications
Corporation and General Communication, Inc. dated
December 31, 1992.
Financial Assistance Agreement between MCI
Telecommunications Corporation and GCI Leasing Co., Inc.
dated December 31, 1992.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
Letter of intent between MCI Telecommunications Corporation
and General Communication, Inc. dated December 31, 1992.
Incorporated herein by reference to the Company's Current
Report on Form 8-K dated January 13, 1993.
MCI Carrier Agreement between MCI Telecommunications
Corporation and General Communication, Inc. dated January
1, 1993.
Contract for Alaska Access Services Agreement between MCI
Telecommunications Corporation and General Communication,
Inc. dated January 1, 1993.
All of the above incorporated herein by reference to the
Company's Current Report on Form 8-K dated June 4, 1993.
Promissory Note Agreement between General Communication,
Inc. and Ronald A. Duncan, dated August 13, 1993.
Deferred Compensation Agreement between General
Communication, Inc. and Ronald A. Duncan, dated August
13, 1993.
Pledge Agreement between General Communication, Inc. and
Ronald A. Duncan, dated August 13, 1993.
48
<PAGE>
Amended and Restated Credit Agreement between General
Communication, Inc. and Nationsbank of Texas, N.A., dated
April 30, 1993.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
Revised Qualified Employee Stock Purchase Plan of General
Communication, Inc.
Summary Plan Description pertaining to the Revised Qualified
Employee Stock Purchase Plan of General Communication,
Inc.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
Company's press release on the letters of intent, dated
March 15, 1996
Amendments to Contract for Alaska Access, effective April 1,
1996
Amendments to MCI Carrier Agreement:
Sixth Amendment, effective April 1, 1996 (there was no
fifth amendment as of the date of this report)
Fourth Amendment, dated September 24, 1995
Third Amendment, dated October 1, 1994
MCI Carrier Addendum MCI 800 DAL Service (First
Amendment), dated April 20, 1994
All of the above incorporated herein by reference to the
Company's Current Report on Form 8-K dated March 14,
1996, filed March 28, 1996.
10.1 - The GCI Special Non-Qualified Deferred Compensation Plan
10.2 - Second Amendment to the Amended and Restated Credit
Agreement between General Communication, Inc. and
Nationsbank of Texas, N.A., dated October 31, 1995.
10.3 - Equipment Purchase Agreement between GCI Communication
Corporation and Scientific-Atlanta, Inc.
Licenses:
214 Authorization
International Resale Authorization
Digital Electronic Message Service Authorization
Fairbanks Earth Station License
Fairbanks (Esro) Construction Permit for P-T-P Microwave Service
Fairbanks (Polaris) Construction Permit for P-T-P Microwave
Service
Anchorage Earth Station Construction Permit
License for Eagle River P-T-P Microwave Service
License for Juneau Earth Station
Issaquah Earth Station Construction Permit
All the above incorporated herein by reference to the Company's
Registration Statement on Form 10 (File No. 0-15279), mailed to
the Securities and Exchange Commission on December 30, 1986.
49
<PAGE>
21 - Subsidiary of Registrant:
GCI Communication Corp.
State of Incorporation: Alaska
Subsidiary of Registrant:
GCI Communication Services, Inc.
State of Incorporation: Alaska
Subsidiary of Subsidiary of Registrant:
GCI Leasing Co., Inc.
State of Incorporation: Alaska
27 - Financial Data Schedule
28 - Additional Exhibits:
The Articles of Incorporation of GCI Communication Corp.
The By-laws of GCI Communication Corp.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the period ended
December 31, 1990
The By-laws of GCI Communication Services, Inc.
The Articles of Incorporation of GCI Communication Services,
Inc.
The By-laws of GCI Leasing Co., Inc.
The Articles of Incorporation of GCI Leasing Co., Inc.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
(c) Reports on Form 8-K
None filed during the quarter ended December 31, 1995.
50
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
General Communication, Inc.:
Under date of March 15, 1996, we reported on the consolidated balance sheets of
General Communication, Inc. and Subsidiaries ("Company") as of December 31, 1995
and 1994 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1995, which are included in the Company's 1995 Annual Report on
Form 10-K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule in the consolidated financial statements, which is listed in
the index in Item 14(a)(2) of the Company's 1995 Annual Report on Form 10-K.
This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion this consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects the information set forth therein.
/s/KPMG PEAT MARWICK LLP
Anchorage, Alaska
March 15, 1996
51
<PAGE>
<TABLE>
Schedule VIII
-------------
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
Additions Deductions
-------------------- -----------
Balance at Charged Write-offs Balance
beginning to profit net of at end
Description of year and loss Other recoveries of year
- ---------------------------------------- ---------- --------- ----- ---------- -------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful
receivables $ 409 1,459 --- 1,573 295
===== ===== === ===== ===
Year ended December 31, 1994:
Allowance for doubtful
receivables $ 721 829 --- 1,141 409
===== ===== === ===== ===
Year ended December 31, 1993:
Allowance for doubtful
receivables $ 675 1,207 --- 1,161 721
===== ===== === ===== ===
</TABLE>
52
<PAGE>
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.
GENERAL COMMUNICATION, INC.
By: /s/ Ronald A. Duncan
Ronald A. Duncan, President
(Chief Executive Officer)
Date: March 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
---------------------- ------------------------- --------------
/s/ Carter F. Page Chairman of Board March 15, 1996
Carter F. Page and Director
/s/ Robert M. Walp Vice Chairman of Board and March 15, 1996
Robert M. Walp Director
/s/ Ronald A. Duncan President and Director, March 15, 1996
Ronald A. Duncan (Chief Executive Officer)
/s/ Donne F. Fisher Director March 15, 1996
Donne F. Fisher
/s/ John W. Gerdelman Director March 15, 1996
John W. Gerdelman
/s/ Larry E. Romrell Director March 15, 1996
Larry E. Romrell
/s/ James M. Schneider Director March 15, 1996
James M. Schneider
/s/ John M. Lowber Senior Vice President, March 15, 1996
John M. Lowber Chief Financial Officer,
Secretary and Treasurer
/s/ Alfred J. Walker Vice President and Chief March 15, 1996
Alfred J. Walker Accounting Officer
53
THE GCI SPECIAL NON-QUALIFIED
DEFERRED COMPENSATION PLAN
ARTICLE 1 - INTRODUCTION
1.1 Purpose of Plan
The Employer has adopted the Plan set forth herein to provide a means by which
certain employees may elect to defer receipt of designated percentages or
amounts of their Compensation and to provide a means for certain other deferrals
of compensation.
1.2 Status of Plan
The Plan is intended to be "a plan which is unfunded and is maintained by an
employer primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees" within the meaning
of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), and shall be interpreted and administered to the extent
possible in a manner consistent with that intent.
ARTICLE 2 - DEFINITIONS
Wherever used herein, the following terms have the meanings set forth below,
unless a different meaning is clearly required by the context:
2.1 Account means for each Participant, the account established for his or her
benefit under Section 5.1.
2.2 Adoption Agreement means the GCI Special Non-Qualified Deferred Compensation
Plan for Select Employees Adoption Agreement signed by the Employer to establish
the Plan and containing all the options selected by the Employer, as the same
may be amended from time to time.
2.3 Change of Control means (a) the purchase or other acquisition in one or more
transactions other than from the Employer, by any individual, entity or group of
persons, within the meaning of section 13(d)(3) or 14(d) of the Securities
Exchange Act of 1934 or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d-3 of Securities Exchange Act of 1934)
of 50.01 percent or more of either the outstanding shares of common stock or the
combined voting power of the Employer's then outstanding voting securities
entitled to vote generally, or (b) the approval by the stockholders of the
Employer of a reorganization, merger, or consolidation, in each case, with
respect to which persons who were stockholders of the Employer immediately prior
to such reorganization, merger or consolidation do not immediately thereafter
own more than 50 percent of the combined voting power of the reorganized, merged
or consolidated Employer's then outstanding securities that are entitled to vote
generally in the election of directors or (c) the sale of substantially all of
the Employer's assets.
2.4 Code means the Internal Revenue Code of 1986, as amended from time to time.
Reference to any section or subsection of the Code includes reference to any
comparable or succeeding provisions of any legislation which amends, supplements
or replaces such section or subsection.
2.5 Compensation has the meaning elected by the Employer in the Adoption
Agreement.
2.6 Effective Date means the date chosen in the Adoption Agreement as of which
the Plan first becomes effective.
2.7 Election Form means the participation election form as approved and
prescribed by the Plan Administrator.
2.8 Elective Deferral means the portion of Compensation which is deferred by a
Participant under Section 4.1.
2.9 Eligible Employee means, on the Effective Date or on any Entry Date
thereafter, each employee of the Employer who satisfies the criteria established
in the Adoption Agreement.
2.10 Employer means the corporation referred to in the Adoption Agreement, any
successor to all or a major portion of the Employer's assets or business which
assumes the obligations of the Employer, and each other entity that is
affiliated with the Employer which adopts the Plan with the consent of the
Employer, provided that the Employer that signs the Adoption Agreement shall
have the sole power to amend this plan and shall be the Plan Administrator if no
other person or entity is so serving at any time.
2.11 ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Reference to any section or subsection of ERISA includes
reference to any comparable or succeeding provisions of any legislation which
amends, supplements or replaces such section or subsection.
2.12 Incentive Contribution means a discretionary additional contribution made
by the Employer as described in Section 4.3.
2.13 Insolvent means either (i) the Employer is unable to pay its debts as they
become due, or (ii) the Employer is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.
2.14 Matching Deferral means a deferral for the benefit of a Participant as
described in Section 4.2.
2.15 Participant means any individual who participates in the Plan in accordance
with Article 3.
2.16 Plan means the Employer's plan in the form of the GCI Special Non-Qualified
Deferred Compensation Plan for Select Employees and the Adoption Agreement and
all amendments thereto.
2.17 Plan Administrator means the person, persons or entity designated by the
Employer in the Adoption Agreement to administer the Plan and to serve as the
agent for the "Company" with respect to the Trust as contemplated by the
agreement establishing the Trust. If no such person or entity is so serving at
any time, the Employer shall be the Plan Administrator.
2.18 Plan Year means the 12-month period chosen in the Adoption Agreement.
2.19 Total and Permanent Disability means the inability of a Participant to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less that 12 months, and the permanence and degree of which shall be
supported by medical evidence satisfactory to the Plan Administrator.
2.20 Trust means the trust established by the Employer that identifies the Plan
as a plan with respect to which assets are to be held by the Trustee.
2.21 Trustee means the trustee or trustees under the Trust.
2.22 Year of Service means the computation period and service requirement
elected in the Adoption Agreement.
ARTICLE 3 - PARTICIPATION
3.1 Commencement of Participation
Any individual who elects to defer part of his or her Compensation in accordance
with Section 4.1 shall become a Participant in the Plan as of the date such
deferrals commence in accordance with Section 4.1. Any individual who is not
already a Participant and whose Account is credited with an incentive
Contribution shall become a Participant as of the date such amount is credited.
3.2 Continued Participation
A Participant in the Plan shall continue to be a Participant so long as any
amount remains credited to his or her Account.
ARTICLE 4 - ELECTIVE AND MATCHING DEFERRALS
4.1 Elective Deferrals
An individual who is an Eligible Employee on the Effective Date may, by
completing an Elections Form and filing it with the Plan Administrator within 30
days following the Effective Date, elect to defer a percentage or dollar amount
of one or more payments of Compensation, on such terms as the Plan Administrator
may permit, which are payable to the Participant after the date on which the
individual files the Election form. Any individual who becomes an Eligible
Employee after the Effective Date may, by completing an Election Form and filing
it with the Plan Administrator within 30 days following the date on which the
Plan Administrator gives such individual written notice that the individual is
an Eligible Employee, elect to defer a percentage or dollar amount of one or
more payments of Compensation, on such terms as the Plan Administrator may
permit, which are payable to the Participant after the date on which the
individual files the Election Form. Any Eligible Employee who has not otherwise
initially elected to defer Compensation in accordance with this paragraph 4.1
may elect to defer a percentage of dollar amount of one or more payments of
Compensation, on such terms as the Plan Administrator may permit, commencing
with Compensation paid in the next succeeding Plan Year, by completing an
Election form prior to the first day of such succeeding Plan Year. In addition,
a Participant may defer all or part of the amount of any elective deferral or
matching contribution made on his or her behalf to the Employer's 401(k) plan
for the prior Plan year but treated as an excess contribution or otherwise
limited by the application of the limitations of sections 401(k), 401(m), 415 or
402(q) of the Code, so long as the Participant so indicates on an Election Form.
A Participant's Compensation shall be reduced in accordance with Participant's
election hereunder and amounts deferred hereunder shall be paid by the Employer
to the Trust as soon as administratively feasible and credited to the
Participant's Account as of the date the amounts are received by the Trustee.
An election to defer a percentage or dollar amount of Compensation for any Plan
Year shall apply for subsequent Plan years unless changed or revoked. A
Participant may change or revoke his or her deferral election as of the first
day of any Plan Year by giving written notice to the Plan Administrator before
such first day (or any such earlier date as the Plan Administrator man
prescribe).
4.2 Matching Deferrals
After each payroll period, monthly, quarterly, or annually, at the Employer's
discretion, the Employer shall contribute to the Trust Matching Deferrals equal
to the rate of Matching Contribution selected by the Employer, if any, and
multiplied by the amount of the Elective Deferrals credited to the Participants'
Accounts for such period under Section 4.1. Each Matching Deferral will be
credited, as of the later of the date it is received by the Trustee or the date
The Trustee receives from the Plan Administrator such instructions as the
Trustee may reasonably require to allocate the amount received among the asset
accounts maintained by the Trustee, to the Paricipants' Accounts pro rata in
accordance with the amount of Elective Deferrals of each Participant which are
taken into account in calculating the Matching Deferral.
4.3 Incentive Contributions
In addition to other contributions provided for under the Plan, the Employer
may, in its sole discretion, select one or more Eligible Employees to receive an
Incentive Contribution to his or her Account on such terms as the Employer shall
specify at the time it makes the contribution. For example, the Employer may
contribute an amount to a Participant's Account and condition the payment of
that amount and accrued earnings thereon upon the Participant remaining employed
by the Employer for an additional specified period of time. The terms specified
by the Employer shall supersede any other provision of this Plan as regards
Incentive Contributions and earnings with respect thereto, provided that if the
Employer does not specify a method of distribution, the Incentive Contribution
shall be distributed in a manner consistent with the election last made by the
particular Participant prior to the year in which the Incentive Contribution is
made. The Employer, in its discretion, may permit the Participant to designate a
distribution schedule for a particular Incentive Contribution provided that such
designation is made prior to the time that the Employer finally determines that
the Participant will receive the Incentive Contribution.
ARTICLE 5 - ACCOUNTS
5.1 Accounts
The plan Administrator shall establish an Account for each Participant
reflecting Elective Deferrals, Matching Deferrals and Incentive Contributions
made for the Participant's benefit together with any adjustments for income,
gain or loss and any payments from the Account. The Plan Administrator may cause
the Trustee to maintain and invest separate asset accounts corresponding to each
Participant's Account. The Plan Administrator shall establish sub-accounts for
each Participant that has more than one election in effect under Section 7.1 and
such other sub-accounts as are necessary for the proper administration of the
Plan. As of the last business day of each calendar quarter, the Plan
Administrator shall provide the Participant with a statement of his or her
Account reflecting the income, gains and losses (realized and unrealized),
amounts of deferrals, and distributions of such Account since the prior
statement.
5.2 Investments
The assets of the Trust shall be invested in such investments as the Trustee
shall determine. The Trustee may (but is not required to) consider the
Employer's or a Participant's investment preferences when investing the assets
attributable to a Participant's Account.
ARTICLE 6 - VESTING
6.1 General
A Participant shall be immediately vested in, i.e., shall have a nonforfeitable
right to, all Elective Deferrals, and all income and gain attributable thereto,
credited to his or her Account. A Participant shall become vested in the portion
of his or her Account attributable to Matching Deferrals and income and gain
attributable thereto in accordance with the schedule selected by the Employer in
the Adoption Agreement, subject to earlier vesting in accordance with Sections
6.3, 6.4, and 6.5.
6.2 Vesting Service
For purposes of applying the vesting schedule in the Adoption Agreement, a
Participant shall be considered to have completed a Year of Service for each
complete year of full-time service with the Employer of an Affiliate, measured
from the Participant's first date of such employment, unless the Employer also
maintains a 401(k) plan that is qualified under section 401(a) of the Internal
Revenue Code in which the Participant participates, in which case the rules
governing vesting service under that plan shall also be controlling under this
Plan.
6.3 Change of Control
A Participant shall become fully vested in his or her Account immediately prior
to a Change of Control of the Employer.
6.4 Death or Disability
A Participant shall become fully vested in his or her Account immediately prior
to termination of the Participant's employment by reason of the Participant's
death or Total and Permanent Disability. Whether a Participant's termination of
employment is by reason of the Participant's Total and Permanent Disability
shall be determined by the Plan Administrator in its sole discretion.
6.5 Insolvency
A Participant shall become fully vested in his or her Account immediately prior
to the Employer becoming insolvent, in which case the Participant will have the
same rights as a general creditor of the Employer with respect to his or her
Account balance.
ARTICLE 7 - PAYMENTS
7.1 Election as to Time and Form of Payment
A Participant shall elect (on the Election Form used to elect to defer
Compensation under Section 4.1) the date at which the Elective Deferrals and
vested Matching Deferrals (including any earnings attributable thereto) will
commence to be paid to the Participant.
The Participant shall also elect thereon for payments to be paid in either:
a. a single lump-sum payment; or
b. annual installments over a period elected by the Participant up to 10
years, the amount of each installment to equal the balance of his or
her Account immediately prior to the installment divided by the number
of installments remaining to be paid.
Each such election will be effective for the Plan Year for which it is made and
succeeding Plan Years, unless changed by the Participant. Any change will be
effective only for Elective Deferrals and Matching Deferrals made for the first
Plan Year beginning after the date on which the Election Form containing the
change is filed with the Plan Administrator. Except as provided in Sections 7.2,
7.3, 7.4, or 7.5, payment of a Participant's Account shall be made in accordance
with the Participant's elections under this Section 7.1.
7.2 Change of Control
As soon as possible following a Change of Control of the Employer, each
Participant shall be paid his or her entire Account balance (including any
amount vested pursuant to Section 6.3) in a single lump sum.
7.3 Termination of Employment
Upon termination of a Participant's employment for any reason other than death
and prior to the attainment of the Retirement Age specified in the Adoption
Agreement, the vested portion of the Participant's Account (including any
portion vested pursuant to Section 6.4 as a consequence of the Participant's
Total and Permanent Disability) shall be paid to the Participant in a single
lump sum as soon as practicable following the date of such termination;
provided, however, that the Plan Administrator in its sole discretion, may pay
out a Participant's Account balance in annual installments if the Participant's
employment terminates by reason of the Participant's Total and Permanent
Disability.
7.4 Death
If a Participant dies prior to the complete distribution of his or her Account,
the balance of the Account shall be paid as soon as practicable to the
Participant's designated beneficiary or beneficiaries, in the form elected by
the Participant under either of the following options:
a. a single lump-sum payment; or
b. annual installments over a period elected by the Participant up to 10
years, the amount of each installment to equal the balance of the
Account immediately prior to the installment divided by the number of
installments remaining to be paid.
Any designation of beneficiary and form of payment to such beneficiary shall be
made by the Participant on an Election Form filed with the Plan Administrator
and may be changed by the Participant at any time by filing another Election
Form containing the revised instructions. If no beneficiary is designated or no
designated beneficiary survives the Participant, payment shall be made to the
Participant's surviving spouse, or, if none, to his or her issue per stirpes, in
a single payment. If no spouse or issue survives the Participant, payment shall
be made in a single lump sum to the Participant's estate.
7.5 Unforeseen Emergency
If a Participant suffers an unforeseen emergency, as defined herein, the Plan
Administrator, in its sole discretion, may pay to the Participant only that
portion, if any, of the vested portion of his or her Account which the Plan
Administrator determines is necessary to satisfy the emergency need, including
any amounts necessary to pay any federal, state or local income taxes reasonably
anticipated to result from the distribution. A Participant requesting an
emergency payment shall apply for the payment in writing in a form approved by
the Plan Administrator and shall provide such additional information as the Plan
Administrator may require. For purposes of this paragraph, "unforeseen
emergency" means an immediate and heavy financial need resulting from any of the
following:
a. expenses which are not covered by insurance and which the Participant
or his or spouse or dependent has incurred as a result of, or is
required to incur in order to receive, medical care;
b. the need to prevent eviction of a Participant from his or her principal
residence or foreclosure on the mortgage of the Participant's principal
residence; or
c. any other circumstance that is determined by the Plan Administrator in
its sole discretion to constitute an unforeseen emergency which is not
covered by insurance and which cannot reasonably be relieved by the
liquidation of the Participant's assets.
7.6 Forfeiture of Non-vested Amounts
To the extent that any amounts credited to a Participant's Account are not
vested at the time such amounts are otherwise payable under Sections 7.1 or 7.3,
such amounts shall be forfeited and shall be used to satisfy the Employer's
obligation to make contributions to the Trust under the Plan.
7.7 Taxes
All federal, state or local taxes that the Plan Administrator determines are
required to be withheld from any payments made pursuant to this Article 7 shall
be withheld.
7.8 Limitation on Distributions
The total amount of distributions from the Plan to any individual during any
Plan year when added to all other taxable compensation received by that
individual from the Company during that Plan year shall be limited so the total
amount of compensation for that individual can be deducted by the Company as
compensation expense during that same period for Federal Income Tax reporting
purposes.
ARTICLE 8 - PLAN ADMINISTRATOR
8.1 Plan Administration and Interpretation
The Plan Administrator shall oversee the administration of the Plan. The Plan
Administrator shall have complete control and authority to determine the rights
and benefits and all claims, demands and actions arising out of the provisions
of the Plan of any Participant, beneficiary, deceased Participant, or other
person having or claiming to have any interest under the Plan. The Plan
Administrator shall have complete discretion to interpret the Plan and to decide
all matters under the Plan. Such interpretation and decision shall be final,
conclusive and binding on all Participants and any person claiming under or
through any Participant, in the absence of clear and convincing evidence that
the Plan Administrator acted arbitrarily and capriciously. Any individual(s)
serving as Plan Administrator who is a Participant will not vote or act on any
matter relating solely to himself or herself. When making a determination or
calculation, the Plan Administrator shall be entitled to rely on information
furnished by a Participant, a beneficiary, the Employer or the Trustee. The Plan
Administrator shall have the responsibility for complying with any reporting and
disclosure requirements of ERISA.
8.2 Powers, Duties, Procedures, Etc.
The Plan Administrator shall have such powers and duties, may adopt such rules
and tables, may act in accordance with such procedures, may appoint such
officers or agents, may delegate such powers and duties, may receive such
reimbursements and compensation, and shall follow such claims and appeal
procedures with respect to the Plan as it may establish.
8.3 Information
To enable the Plan Administrator to perform its functions, the Employer shall
supply full and timely information to the Plan Administrator on all matters
relating to the compensation of Participants, their employment, retirement,
death, termination of employment, and such other pertinent facts as the Plan
Administrator may require.
8.4 Indemnification of Plan Administrator
The Employer agrees to indemnify and to defend to the fullest extent permitted
by law any officer(s) or employee(s) who serve as Plan Administrator (including
any such individual who formerly served as Plan Administrator) against all
liabilities, damages, costs and expenses (including attorney's fees and amounts
paid in settlement of any claims approved by the Employer) occasioned by any act
or omission to act in connection with the Plan, if such act or omission is in
good faith.
ARTICLE 9 - AMENDMENTS AND TERMINATION
9.1 Amendments
The Employer shall have the right to amend the Plan from time to time, subject
to Section 9.3, by an instrument in writing which has been executed on the
Employer's behalf by its duly authorized officer.
9.2 Termination of Plan
This Plan is strictly a voluntary undertaking on the part of the Employer and
shall not be deemed to constitute a contract between the Employer and any
Eligible Employee (or any other employee) or a consideration for, or an
inducement or condition of employment for, the performance of the services by
any Eligible Employee (or other employee). The Employer reserves the right to
terminate the Plan at any time, subject to Section 9.3, by an instrument in
writing which has been executed on the Employer's behalf by its duly authorized
officer. Upon termination, the Employer may (a) elect to continue to maintain
the Trust to pay benefits hereunder as they become due as if the Plan had not
terminated or (b) direct the Trustee to pay promptly to Participants (or their
beneficiaries) the vested balance of their Accounts. For purposes of the
preceding sentence, in the event the Employer chooses to implement clause (b),
the Account balances of all Participants who are in the employ of the Employer
at the time the Trustee is directed to pay such balances shall become fully
vested and nonforfeitable. After Participants and their beneficiaries are paid
all Plan benefits to which they are entitled, all remaining assets of the Trust
attributable to Participants who terminated employment with the Employer prior
to termination of the Plan and who were not fully vested in their Accounts under
Article 6 at that time shall be returned to the Employer.
9.3 Existing Rights
No amendment or termination of the Plan shall adversely affect the rights of any
Participant with respect to amounts that have been credited to his or her
Account prior to the date of such amendment or termination.
ARTICLE 10 - MISCELLANEOUS
10.1 No Funding
The Plan constitutes a mere promise by the Employer to make payments in
accordance with the terms of the Plan and Participants and beneficiaries shall
have the status of general unsecured creditors of the Employer. Nothing in the
Plan will be construed to give any employee or any other person rights to any
specific assets of the Employer or of any other person. In all events, it is the
intent of the Employer that the Plan be treated as unfunded for tax purposes and
for purposes of Title I of ERISA.
10.2 Non-assignability
None of the benefits, payments, proceeds or claims of any Participant or
beneficiary shall be subject to any claim of any creditor of any Participant or
beneficiary and, in particular, the same shall not be subject to attachment or
garnishment or other legal process by any creditor of such Participant or
beneficiary, nor shall any Participant or beneficiary have any right to
alienate, anticipate, commute, pledge, encumber or assign any of the benefits or
payments or proceeds which he or she may expect to receive, contingently or
otherwise, under the Plan.
10.3 Limitation of Participants' Rights
Nothing contained in the Plan shall confer upon any person a right to be
employed or to continue in the employ of the Employer, or interfere in any way
with the right of the Employer to terminate the employment of a Participant in
the Plan at any time, with or without cause.
10.4 Participants Bound
Any action with respect to the Plan taken by the Plan Administrator or the
Employer or the Trustee or any action authorized by or taken at the direction of
the Plan Administrator, the Employer or the Trustee shall be conclusive upon all
Participants and beneficiaries entitled to benefits under the Plan.
10.5 Receipt and Release
Any payment to any Participant or beneficiary in accordance with the provisions
of the Plan shall, to the extent thereof, be in full satisfaction of all claims
against the Employer, the Plan Administrator and the Trustee under the Plan, and
the Plan Administrator may require such Participant or beneficiary, as a
condition precedent to such payment, to execute a receipt and release to such
effect. If any Participant or beneficiary is determined by the Plan
Administrator to be incompetent by reason of Physical or mental disability
(including minority) to give a valid receipt and release, the Plan Administrator
may cause the payment or payments becoming due to such person to be made to
another person for his or her benefit without responsibility on the part of the
Plan Administrator, the Employer or the Trustee to follow the application of
such funds.
10.6 Governing Law
The Plan shall be construed, administered, and governed in all respects under
and by the laws of the state in which the Employer maintains its primary place
of business. If any provision shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.
10.7 Headings and Subheadings
Headings and subheadings in this Plan are inserted for convenience only and are
not to be considered in the construction of the provisions hereof.
THE GCI SPECIAL NON-QUALIFIED DEFERRED COMPENSATION
PLAN ADOPTION AGREEMENT
1. EMPLOYER INFORMATION
A. Name of Plan: The GCI Special Non-Qualified Deferred Compensation Plan
B. Name and Address of employer sponsoring the Plan. Please provide
employer's business name.
General Communication, Inc.
Business Name
2550 Denali Street, Suite 1000
Address
Anchorage
City
Alaska 99503
State Zip Code
C. Provide employer's primary contact for the Plan and telephone and FAX
numbers. Also include the employer's Tax Identification Number.
John M. Lowber
Primary Contact
Sr. V.P. & CFO
Title
907-265-5628
Telephone
907-265-5676
FAX
92-0072737
Employer Tax Identification Number
D. Give the first day of the 12-month period for which the employer pays
taxes: January 1
2. PLAN INFORMATION
A. What is the effective date of the Plan?
February 9, 1995
B. Plan Years Ends. Your "Plan Year" is the 12 consecutive-month period
for which you credit elective and matching deferrals and keep Plan
records. Enter the last day of your Plan Year. December 31
3. ELIGIBLE EMPLOYEES
Those key employees of the Company selected by the Compensation
Committee of the Board of Directors.
4. COMPENSATION
Compensation is used to determine the amount of Elective Deferrals a
Participant can elect. Compensation under the Plan is defined as the
Participant's wages, salaries, fees for professional services and other
amounts received (without regard to whether or not an amount is paid in
cash) for personal services actually rendered in the course of
employment with the Employer or an Affiliate to the extent that the
amounts are includable in gross income, including but not limited to
commissions paid to salespersons, compensation for services on the
basis of a percentage of profits and bonuses, but not including those
items excludable from the definition of compensation under Treas. Reg.
section 1.415-2(d)(3). For purposes of the Plan, Compensation will be
determined before giving effect to Elective Deferrals and other salary
reduction amounts which are not included in the Participant's gross
income under Code section 125, 401(k), 402(h) or 403(b).
5. CONTRIBUTIONS
A. Elective Deferrals. Participants may elect to reduce their Compensation
and to have Elective Deferrals credited to their Accounts by making an
election under the Plan (which may be changed each year for later Plan
Years as described in the plan), but no Participant may defer more than
100% of his or her Compensation for a Plan Year.
B. Matching Deferrals. The Employer will decide from year to year whether
Matching Deferrals will be made and will notify Participants annually
of the manner in which Matching Deferrals, if any, will be calculated
for the subsequent year.
C. Discretionary Incentive Contributions. The Employer may make
Discretionary Incentive Contributions in any amounts the Employer
selects. These contributions will be subject to the vesting schedule
selected in Item 6C.
6. VESTING OF MATCHING DEFERRALS AND DISCRETIONARY INCENTIVE CONTRIBUTIONS
A. Vesting Schedule for Matching Deferrals. Matching Deferrals shall vest
on a case by case basis as specified by the Employer.
B. Vesting Service. Service with a predecessor employer will not be
considered.
C. Vesting Schedule for Discretionary Incentive Contributions.
Discretionary Incentive Contributions vest in accordance with a
schedule adopted by the Employer on a case by case basis.
7. ACCOUNTS
The Trustee can either invest each Participant's Account balance as a
separate account (in which case the Trustee, could, but would not be
required to, take into consideration the investment preferences of the
Participants) or invest the Account balances of all Participants as a
single fund (in which case the Trustee could, but would not be required
to, take into consideration the investment preference of the Employer)
Account balances are to be invested separately.
8. RETIREMENT AGE
The Retirement Age under the Plan is age 60.
9. WITHDRAWALS WHILE WORKING
Withdrawals for Unforeseen Emergency. Participants may make withdrawals
while working in the event they encounter an unforeseen emergency. They
generally can withdraw the vested portions of their Accounts.
NOTE: Withdrawals are strictly limited as described in Plan Section
7.5. It is the Plan Administrator's responsibility to ensure that the
limits are being followed. Excess withdrawals may result in loss of the
tax deferral on all amounts credited under the Plan for the benefit of
all Participants.
Withdrawals of the vested portion of a Participant's Account for
unforeseen emergencies are permitted to the full extent allowable under
the plan.
10. ADMINISTRATION
Plan Administrator. The Plan Administrator is legally responsible for
the operation of the Plan, including:
- Keeping track of which employees are eligible to participate in the
Plan and the date each employee becomes eligible to participate.
- Maintaining Participants' Accounts, including all sub-accounts
required for different contribution types and payment elections, and
keeping track of all elections made by Participants under the Plan and
any other relevant information.
- Transmitting important communications to the Participants, and
obtaining relevant information from Participants such as changes in
investment selections:
- Filing important reports required to be submitted to governmental
agencies.
The Plan Administrator will be the person identified below:
John M. Lowber
Name
Sr. Vice President & Chief Financial Officer
Title
11. SIGNATURES
After reviewing the Adoption Agreement, enter the name of the Employer.
The signature of the Employer or person signing for the Employer must
be witnessed.
General Communication, Inc.
Name of Employer
By:
/s/ Ronald A. Duncan
Authorized Signature
Ronald A. Duncan, President
Print Name and Title
WITNESS:
/s/ John M. Lowber
John M. Lowber, SVP & CFO
Print Name and Title
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is dated as of the 31st day of October, 1995, and entered into
among GCI Communication Corp., an Alaskan corporation (herein, together with its
successors and assigns, called the "Company"), the Banks (as defined in the
Credit Agreement as defined below), NATIONSBANK OF TEXAS, N.A., a national
banking association, as Administrative Agent for itself and the Banks (the
"Administrative Agent").
WITNESSETH:
----------
WHEREAS, the Company, the Banks, and the Administrative Agent entered
into an Amended and Restated Credit Agreement, dated April 30, 1993, as
amended by that certain First Amendment to Credit Agreement, dated as of
October 3, 1994 (as further amended, restated or otherwise modified from time
to time, the "Credit Agreement");
WHEREAS, the Company has requested that the Credit Agreement be amended
to provide for an increase and changes in the letter of credit provisions,
changes in certain financial covenants and certain other changes;
WHEREAS, the Banks, the Administrative Agent and the Company have
agreed to modify the Credit Agreement upon the terms and conditions set forth
below;
NOW, THEREFORE, for valuable consideration hereby acknowledged, the
Company, the Banks and the Administrative Agent agree as follows:
SECTION 1. Definitions.
(a) In General. Unless specifically defined or redefined below,
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement.
(b) Definition of Aggregate Commitment . The definition of "Aggregate
Commitment" on page 2 of the Credit Agreement is hereby amended and restated
in its entirety as follows:
"Aggregate Commitment" means the aggregate of the Commitments of
all the Banks hereunder, as such Aggregate Commitment may be reduced
pursuant to Section 2.1(f) of this Agreement.
(c) Definition of Commitment. The definition of "Commitment" on page 5
of the Credit Agreement is hereby amended and restated in its entirety as
follows:
"Commitment" means, for each Bank, the obligation of the Bank to
make Loans and issue Facility Letters of Credit not exceeding its pro
rata part of $15,750,000, as such amount may be modified from time to
time, as specified and set forth in any Assignment and Acceptance
Agreement, or any amendment to this Agreement.
(d) Definition of Facility Letter of Credit Commitment . The definition
of "Facility Letter of Credit Commitment" on page 7 of the Credit Agreement is
hereby amended and restated in its entirety as follows:
"Facility Letter of Credit Commitment" means an amount equal to
$3,000,000, as such amount may be reduced by the Company from time to
time.
(e) Definition of Fixed Charges. The definition of "Fixed Charges" on
page 8 of the Credit Agreement is hereby amended and restated in its entirety
as follows:
"Fixed Charges" means, for any period, the sum of (A) interest
expense on all Indebtedness of the Parent, the Company and the
Subsidiaries, (B) scheduled principal payments on all Indebtedness of
the Parent, the Company and its Subsidiaries, plus (C) Capital
Expenditures paid by the Company or any Subsidiary, minus the cash
balance in the Company and its Subsidiaries as of any such quarter end
upon which such determination is made.
(f) Definition of Loan Documents. The definition of "Loan Documents" on
page 11 of the Credit Agreement is hereby amended and restated in its entirety
as follows:
"Loan Documents" means this Agreement, the Notes, the Second
Facility Loan Notes, the Pledge and Security Agreement, the Parent
Pledge Agreement, the Assignment and Security Agreement executed by
the Company, any Guaranties of the Obligations, the Fee Letter, Rate
Hedging Agreements executed by the Company with any Bank, any other
fee letter, the Facility Letters of Credit, the Second Facility Letter
of Credit and all Applications and other agreements relating to the
Facility Letters of Credit and the Second Facility Letter of Credit,
notes, instruments, documents and other items executed or delivered by
any Person in connection herewith, as any such documents, instruments,
notes or items may be amended, substituted, modified, replaced or
extended from time to time.
(g) Definition of Obligations. The definition of "Obligations" on page
12 of the Credit Agreement is hereby amended and restated in its entirety as
follows:
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Notes, all obligations under the Loan
Documents, including, without limitation, all accrued and unpaid fees,
all Reimbursement Obligations, Second Reimbursement Obligations,
Facility Letter of Credit Obligations, Second Facility Letter of
Credit Obligations and all other obligations of the Company, the
Parent and the Subsidiaries to the Banks or to any Bank or the
Administrative Agent arising under or in connection with the Facility
Letters of Credit, the Second Facility Letter of Credit, the
Applications, the Notes, the Second Facility Loan Notes, this
Agreement, any Guaranties of the Obligations, the Loan Documents and
Rate Hedging Obligations which are owed to any Bank, including without
limitation, interest, fees and other charges that would accrue or
become owing both prior to and subsequent to and but for the
commencement of any proceeding against or with respect to the Company,
the Parent, or any of their Subsidiaries under any chapter of the
Bankruptcy Code of 1978, 11 U.S.C. Sec. 101 et. seq whether or not a
claim is allowed for the same in any such proceeding to the extent
permitted by law.
(h) Definition of Note. The definition of "Note" on pages 11 and 12 of
the Credit Agreement is hereby amended and restated in its entirety as
follows:
"Note" means (a) a promissory note in substantially the form of
Exhibit "A" hereto, duly executed and delivered to the Administrative
Agent by the Company and payable to the order of a Bank in the amount
of its Commitment, or (b) any Second Facility Loan Note, or both, as
applicable in the context, including any amendment, modification,
extension, renewal or replacement of all of such promissory notes.
(i) Definition of Required Banks. The definition of "Required Banks" on
page 14 of the Credit Agreement is hereby amended and restated in its entirety
as follows:
"Required Banks" means Banks in the aggregate holding at least
66-2/3% of the sum of (a) the aggregate unpaid principal amount of the
outstanding Advances and (b) the aggregate unpaid amount of the
Reimbursement Obligations plus the Second Reimbursement Obligations,
or, if no Advances, Facility Letter of Credit Obligations or the
Second Facility Letter of Credit are outstanding, Banks in the
aggregate having least 66-2/3% of the Aggregate Commitment.
(j) Definition of Second Facility Letter of Credit Commitment. The
definition of "Second Facility Letter of Credit Commitment" shall be added in
its entirety to page 14 of the Credit Agreement in alphabetical order as
follows:
"Second Facility Letter of Credit Commitment" means an amount
equal to $10,080,000, as such amount may be reduced by the Company
from time to time.
(k) Definition of Second Facility Letter of Credit. The definition of
"Second Facility Letter of Credit" shall be added in its entirety to page 14
of the Credit Agreement in alphabetical order as follows:
"Second Facility Letter of Credit" means that certain
irrevocable stand-by NationsBank of Texas, N.A. Letter of Credit
issued or to be issued for the benefit of Hughes Communications
Galaxy, Inc. for the account of the Company, in the original maximum
face amount of $9,100,000.
(1) Definition of Second Facility Letter of Credit Obligations. The
definition of "Second Facility Letter of Credit Obligations" shall be added in
its entirety to page 14 of the Credit Agreement in alphabetical order as
follows:
"Second Facility Letter of Credit Obligations" means, as at the
time of determination thereof, all liabilities, whether actual or
contingent, of the Company to the Banks with respect to their
interests in the Second Facility Letter of Credit as Issuer or
participant, including the sum of (a) unpaid Second Reimbursement
Obligations and (b) the aggregate undrawn face amount of the
outstanding Second Facility Letter of Credit.
(m) Definition of Second Facility Loan. The definition of "Second
Facility Loan" shall be added in its entirety to page 14 of the Credit
Agreement in alphabetical order as follows:
"Second Facility Loan" has the meaning ascribed thereto in
Section 2.1(a)(ii) of this Agreement.
(n) Definition of Second Facility Loan Note. The definition of "Second
Facility Loan Note" shall be added in its entirety to page 14 of the Credit
Agreement in alphabetical order as follows:
"Second Facility Loan Note" means promissory notes in form
acceptable to the Administrative Agent evidencing the Second Facility
Loan, duly executed and delivered to the Administrative Agent and each
Bank in the amount of each Bank's pro rata percentage of the Second
Facility Loan, including any amendment, modification, extension,
renewal or replacement of any of such promissory notes.
(o) Definition of Second Reimbursement Obligations. The definition of
"Second Reimbursement Obligations" shall be added in its entirety to page 14
of the Credit Agreement in alphabetical order as follows:
"Second Reimbursement Obligations" means, at any time, the
aggregate of the obligations of the Company to the Banks in respect of
all unreimbursed payments or disbursements made by the Banks under or
pursuant to the Second Facility Letter of Credit.
SECTION 2. Heading on Page 1. The number $15,000,000 on the top of
page 1 of the Credit Agreement is hereby amended and restated in its entirety
to read $25,830,000.
SECTION 3. Sections 2.1, 2.2., 2.3, 2.4 and 2.5. Sections 2.1, 2.2,
2.3, 2.4 and 2.5 on pages 15 through 22 of the Credit Agreement are hereby
amended and restated in their entirety to read as follow:
2.1. Loans.
(a) (i) Loans Prior to Maturity Date. From and including the date of
this Agreement and prior to the Maturity Date, each Bank severally
agrees, subject to the terms and conditions set forth in this
Agreement, to make Loans to the Company from time to time in amounts
not to exceed in the aggregate at any one time outstanding the amount
of its Available Commitment. Subject to the terms of this Agreement,
the Company may borrow, repay and reborrow up to the amount of the
Aggregate Available Commitment at any time prior to the Maturity Date.
(ii) Loans Upon Draws Under the Second Facility Letter of Credit. So
long as (A) there exists no Unmatured Default or Default under this
Agreement both before and immediately after giving effect to any such
loan, (B) the Second Facility Letter of Credit has been terminated,
(C) there has been a draw under the Second Facility Letter of Credit,
and (D) each Bank has received a duly completed and executed Second
Facility Loan Note, and subject to the terms of this Agreement, each
Bank severally agrees to make a term Loan to the Company in an amount
not to exceed in the aggregate, the draw under the Second Facility
Letter of Credit (the "Second Facility Loan"). Amounts repaid by the
Company under the Second Facility Loan are not entitled to be
reborrowed by the Company.
(b) Ratable Loans. Each Advance hereunder shall consist of Loans made
from the several Banks ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
(c) Rate Options; Interest Period Payments. Each Advance shall bear
interest at either the Floating Rate, the Fixed CD Rate or the Eurodollar
Rate, as the Company may select in accordance with the terms of Section 2.l(h)
of this Agreement. Each Advance shall be paid in full by the Company on the
last day of the Interest Period applicable thereto.
(d) Interest Recapture. If at any time the applicable rate of interest
under the Agreement on any portion of the Obligations (the "Designated Rate")
exceeds the Highest Lawful Rate, the rate of interest on any Advance shall be
limited to the Highest Lawful Rate, but any subsequent reductions in the
Designated Rate shall not reduce the rate of interest thereon below the
Highest Lawful Rate until the total amount of interest paid and accrued
thereon equals the amount of interest which would have accrued thereon if the
Designated Rate had at all times been in effect. In the event that at maturity
(stated or by acceleration or otherwise), or at final payment of the
Obligations, the total amount of interest paid and accrued is less than the
amount of interest which would have accrued if the Designated Rate had at all
times been in effect, then, at such time and to the extent permitted by law,
the Company shall pay to the Banks an amount equal to the difference between
(i) the lesser of the amount of interest which would have accrued if the
Designated Rate had at all times been in effect and the amount of interest
which would have accrued if the Highest Lawful Rate had at all times been in
effect, and (ii) the amount of interest actually paid on the Obligations.
(e) Mandatory Principal Payments.
(i) If the Company shall grant or implement a material price
decrease in MTS Service and the Company shall fail to demonstrate to
the satisfaction of the Required Banks, by projections employing
revised revenue forecasts based upon such price decrease that, after
giving effect thereto, the Company will be in compliance with the
provisions of Section 7.4 for the remaining term of this Agreement,
then the Company shall either (i) make a mandatory prepayment on the
Advances outstanding in such amount as the Required Banks shall deem
necessary to accomplish compliance with the provisions of Section 7.4
or (ii) furnish the Banks with cash collateral in such amount as the
Required Banks shall deem satisfactory. Mandatory payments made
pursuant to this Section 2.1.(e)(i) may not be reborrowed.
(ii) Upon any reduction in the Aggregate Commitment in
accordance with the terms of Section 2.1(f) below, the Company shall
immediately pay any amount necessary to reduce the outstanding
Obligations to an amount equal to or less than the sum of the
Aggregate Available Commitment plus the Second Facility Letter of
Credit or Second Reimbursement Obligations, together with interest
and fees accrued through such date on such amount repaid.
(iii) All outstanding Obligations shall be due and payable in
full on the Maturity Date.
(iv) The Company may from time to time pay all outstanding
Floating Rate Advances, or, in a minimum aggregate amount of
$100,000, or any integral multiple thereof, any portion of the
outstanding Floating Rate Advances upon one Business Day's prior
notice to the Administrative Agent without penalty or premium.
Subject to the terms of Section 4.3, the Company may from time to
time pay all Fixed Rate Advances, or, in a minimum aggregate amount
of $1,000,000, or any integral multiple of $100,000 in excess
thereof, any portion of the outstanding Fixed Rate Advances upon
three Business Days' prior written notice.
(v) All Reimbursement Obligations and Second Reimbursement
Obligations shall be due and payable on the earlier of (A) the
Maturity Date or (B) demand by the Administrative Agent.
(vi) If at any time the Company or any Subsidiary sells assets
or properties not in the ordinary course of business, which, in the
aggregate for any fiscal year of the Company, exceeds a gross sales
price of $500,000, the Company shall immediately make a prepayment on
the Second Facility Loan (or, if the Second Facility Letter of Credit
shall not have been drawn upon, the Company shall establish a cash
collateral account with the Administrative Agent to secure a draw
against the Second Facility Loan) in an amount equal to 100% of the
net proceeds of each such sale until the Second Facility Loan has
been repaid in full (or is 100% cash collateralized).
(f) Reduction of Commitment
(i) Optional. The Company may permanently reduce the Aggregate
Commitment in whole, or in part ratably among the Banks, in integral
multiples of $500,000, upon at least ten Business Days' written notice
to the Administrative Agent, which shall specify the amount of any such
reduction, provided, however, that the amount of the Aggregate
Commitment may not be reduced below the outstanding principal amount of
the Advances outstanding thereunder. No reduction in the Aggregate
Commitment shall reduce the Facility Letter of Credit Commitment unless
(A) there are no outstanding Facility Letters of Credit and (B) (I) the
Company shall designate such Aggregate Commitment reduction in writing
to apply to the Facility Letter of Credit Commitment or (II) the
Facility Letter of Credit Commitment shall be the only part of the
Aggregate Commitment that has not been reduced to zero. All accrued
fees shall be payable on the effective date of any termination of the
Aggregate Commitment.
(ii) Mandatory.
(A) Scheduled Reduction. Notwithstanding any other provision of
this Agreement reducing the Aggregate Commitment or otherwise,
commencing June 30, 1993 and on each Payment Date thereafter, the
Aggregate Commitment shall be permanently reduced by the amount set
forth opposite the applicable Payment Date below until the Aggregate
Commitment is reduced to zero. the Aggregate Commitment shall never be
less than zero. Once reduced, the Aggregate Commitment (or the
Commitment of any Bank) may not be reinstated.
Amount of Commitment
Payment Dates Reduction
June 30, 1993 $650,000
September 30, 1993 $650,000
December 31, 1993 $650,000
March 31, 1994 $650,000
June 30, 1994 $650,000
September 30, 1994 $650,000
December 31, 1994 $650,000
March 31, 1995 $650,000
June 30, 1995 $650,000
September 30, 1995 $650,000
December 31, 1995 $650,000
March 31, 1996 S650,000
June 30, 1996 $650,000
September 30, 1996 $650,000
December 31, 1996 $650,000
March 31, 1997 $812,500
June 30, 1997 $812,500
September 30, 1997 $812,500
December 31, 1997 All remaining amounts in
excess of zero
(B) Asset Sales. After the Second Facility Loan is repaid in
full, if at any time the Company or any Subsidiary sells assets or
properties not in the ordinary course of business, which, in the
aggregate for any fiscal year of the Company, exceeds a gross sales
price of $500,000, the Aggregate Commitment shall be immediately
reduced by an amount equal to 100% of the net proceeds of each such
sale until the Aggregate Commitment is zero.
(C) Expiration of Facility Letters of Credit. At such time
as the Company permits all of the Facility Letters of Credit to
terminate according to their terms (or such Facility Letters of Credit
are replaced or substituted by Letters of Credit issued by an
institution other than Administrative Agent), the Facility Letter of
Credit Commitment shall be reduced to zero.
(D) Maturity Date. The Aggregate Commitment, the Facility
Letter of Credit Commitment and each Bank's Commitment shall be
reduced immediately to zero on the Maturity Date.
(E) Expiration of Second Facility Letter of Credit. The
Second Facility Letter of Credit Commitment shall be immediately
reduced to zero on June 30, 1996.
(g) Method of Borrowing. Not later than noon Dallas time on each
Borrowing Date, each Bank shall make available its Loan or Loans in funds
immediately available in Dallas, to the Administrative Agent at its address
specified on the signature pages or to such other address as the
Administrative Agent requests in writing. The Administrative Agent will make
the funds so received from the Banks available to the Company at the
Administrative Agent's address set forth in Section 11.18 below.
Notwithstanding the foregoing provisions of this Section, to the extent that a
Loan made by a Bank matures on the Borrowing Date of a requested Loan, such
Bank shall apply the proceeds of the Loan it is then making to the repayment
of the maturing Loan.
(h) Method of Selecting Rate Options and Interest Periods. The Company
shall select the Rate Option and Interest Period applicable to each Advance
from time to time. The Company shall give the Administrative Agent irrevocable
notice (a "Borrowing Notice") to Ms. Linda Brown, telephone number (214)
508-3044 (facsimile number (214) 508-2020), not later than 10:00 a.m. Dallas
time at least one Business Day before the Borrowing Date of each Floating Rate
Advance, two Business Days before the Borrowing Date of each Fixed CD Rate
Advance and three Business Days before the Borrowing Date of each Eurodollar
Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii)the aggregate amount of such Advance and whether such Advance is
made under the Aggregate Commitment or the Second Facility Loan,
(iii) the Rate Option selected for such Advance, and
(iv)in the case of each Fixed Rate Advance, the Interest Period
applicable thereto.
Each Fixed Rate Advance shall bear interest from and including the first day
of the Interest Period applicable thereto to (but not including) the last day
of such Interest Period at the interest rate determined as applicable to such
Fixed Rate Advance. The Company may not select a Fixed Rate for an Advance if
there exists a Default or Unmatured Default. The Company shall select Interest
Periods with respect to Fixed Rate Advances so that it is not necessary to pay
a Fixed Rate Advance prior to the last day of the applicable Interest Period
in order to repay Advances because of a mandatory reduction of the Aggregate
Commitment pursuant to Section 2.1(f) of this Agreement, or a repayment of the
Second Facility Loan as provided in Section 2.l(n) hereof.
(i) Minimum Amount of Each Advance. Each Fixed Rate Advance shall be
in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$100,000 (and in multiples of $100,000 if in excess thereof), provided,
however, that any Floating Rate Advance may be in the amount of the unused
Aggregate Available Commitment.
(j) Rate after Default. Except as provided in the next sentence,
after the occurrence and during the continuance of any Default, all Advances
outstanding hereunder shall bear interest until paid in full at a rate per
annum equal to the lesser of (i) the Highest Lawful Rate and (ii) the sum of
the Eurodollar Rate, the Fixed CD Rate or the Floating Rate otherwise
applicable thereto, plus two percent per annum. No Fixed Rate Advance may be
selected by the Company after the occurrence and during the continuance of any
Default. In the case of a Fixed Rate Advance the maturity of which is
accelerated, such Fixed Rate Advance shall bear interest for the remainder of
the applicable Interest Period, at the lesser of (i) the Highest Lawful Rate
and (ii) the higher of (A) the sum of the rate otherwise applicable to such
Interest Period plus two percent per annum or (B) the Floating Rate plus three
percent per annum.
(k) Notes; Telephonic Notices. Each Bank is hereby authorized to
record the principal amount of each of its Loans and each repayment on the
schedule attached to its Note provided, however, that the failure to so record
shall not affect the Company's obligations under such Note. The Company hereby
authorizes the Banks and the Administrative Agent to extend Advances and
effect Rate Option selections based on telephonic notices made by any person
or persons the Administrative Agent or any Bank in good faith believes to be
an Authorized Officer acting on behalf of the Company. The Company agrees to
deliver promptly to the Administrative Agent a written confirmation of each
telephonic notice signed by an Authorized Officer. If the written confirmation
differs in any material respect from the action taken by the Administrative
Agent and the Banks, the records of the Administrative Agent and the Banks
shall govern absent manifest error.
(l) Interest Payment Dates; Interest Basis. Interest accrued on each
Advance shall be payable on the last day of its applicable Interest Period and
on any date on which the Advance is prepaid, whether due to acceleration or
otherwise. Interest accrued on each Fixed Rate Advance having an Interest
Period longer than three months shall also be payable on the last day of each
three-month interval during such Interest Period. Interest on Floating Rate
Advances shall be calculated for actual days elapsed on the basis of a 365, or
when appropriate 366, day year; interest on Fixed Rate Advances and fees shall
be calculated for actual days elapsed on the basis of a 360-day year. Interest
shall be payable for the day an Advance is made but not for the day of any
payment on the amount paid if payment is received prior to noon (Dallas time)
at the place of payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment, provided that, if any Eurodollar
Loan extension shall be payable in the next calendar month, then such payment
shall be made on the next preceding Business Day.
(m) Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Administrative
Agent will notify each Bank of the contents of each Aggregate Commitment
reduction notice, Borrowing Notice and repayment notice received by it
hereunder. The Administrative Agent will notify each Bank of the interest rate
applicable to each Fixed Rate Advance promptly upon determination of such
interest rate and will give each Bank prompt notice of each change in the
Corporate Base Rate.
(n) Repayment of the Second Facility Loan. The Second Facility Loan
shall be repaid in installments on the following dates in the amounts set
forth opposite such dates:
Date Amount Due
---- ----------
September 30, 1996 5% of Initial Amount of Second
Facility Loan
December 31, 1996 5% of Initial Amount of Second
Facility Loan
March 31, 1997 5% of Initial Amount of Second
Facility Loan
June 30, 1997 5% of Initial Amount of Second
Facility Loan
September 30, 1997 5% of Initial Amount of Second
Facility Loan
December 31, 1997 75% of Initial Amount of Second
Facility Loan and all other
Obligations
(o) Lending Installations. Each Bank may book its Loans at any Lending
Installation selected by such Bank and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Bank for the benefit
of such Lending Installation. Each Bank may, by written, telex, or telecopy
notice to the Administrative Agent and the Company, designate a Lending
Installation through which Loans will be made by it and for whose account Loan
payments are to be made.
2.2. Participation in Facility Letters of Credit and Second
Facility Letter of Credit. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement and pursuant to Article III
hereof, to purchase on the date hereof (or on the date such Bank
became a party to this Agreement) participations in the Facility
Letter of Credit Commitment and the Second Facility Letters of Credit
Commitment and in each of the Facility Letters of Credit, the Second
Facility Letters of Credit, Reimbursement Obligations and Second
Reimbursement Obligations in an aggregate amount not to exceed its
ratable portion (based upon the ratio such Bank's Commitment bears to
the Aggregate Commitment) of the aggregate undrawn face amount of each
of the Facility Letters of Credit and Second Facility Letter of
Credit.
2.3. Fees. The Company agrees to pay to the Administrative
Agent the following fees:
(a) subject to Section 11.17 hereof, for the account of each
Bank, a commitment fee equal to 1/2 of 1% per annum on the
daily unused portion of such Bank's Commitment from the
date hereof to and including the Maturity Date, payable
hereafter as it accrues on each Payment Date hereafter and
on the Maturity Date;
(b) subject to Section 11.17 hereof, for the ratable account
of each Bank, a per annum fee on each Facility Letter of
Credit equal to 2% of the face amount of each Facility
Letter of Credit, payable in accordance with Section 3.2
below;
(c) subject to Section 11.17 hereof, for the Administrative
Agent's own account, such other fees as the Company and
the Administrative Agent shall have heretofore agreed upon
in writing, dated the date hereof (the "Fee Letter"), and
(d) subject to Section 11.17 hereof, for the ratable account
of each Bank, a per annum fee on the Second Facility
Letter of Credit equal to 2% of the face amount of the
Second Facility Letter of Credit, payable in accordance
with Section 3.2 below.
2.4. Method of Payment. All payments of principal, interest,
and fees hereunder shall be made in immediately available funds to the
Administrative Agent at the Administrative Agent's address on the
signature pages hereto or as otherwise specified pursuant to Section
11.18 hereof or at any other Lending Installation of the
Administrative Agent specified in writing by the Administrative Agent
to the Company, by noon (Dallas time) on the date when due and shall
be made ratably among the Banks. Each payment delivered to the
Administrative Agent for the account of any Bank shall be delivered
promptly by the Administrative Agent to such Bank in the same type of
funds which the Administrative Agent received at its address specified
pursuant to Section 11.18 hereof or at any Lending Installation
specified in a notice received by the Administrative Agent from such
Bank. The Administrative Agent is hereby authorized to charge the
account of the Company maintained with NationsBank for each payment of
principal, interest and fees as it becomes due hereunder.
2.5 Non-Receipt of Funds by the Administrative Agent. Unless
the Company or a Bank, as the case may be, notifies the Administrative
Agent prior to the date on which it is scheduled to make payment to
the Administrative Agent of (a) in the case of a Bank, the proceeds of
a Loan or (b) in the case of the Company, a payment of principal,
interest or fees to the Administrative Agent for the account of the
Banks, that it does not intend to make such payment, the
Administrative Agent may assume that such payment has been made. The
Administrative Agent may, but shall not be obligated to make the
amount of such payment available to the intended recipient in reliance
upon such assumption. If such Bank or the Company, as the case may be,
has not in fact made such payment to the Administrative Agent, the
recipient of such payment shall, on demand by the Administrative
Agent, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers
such amount at a rate per annum equal to (a) in the case of payment by
a Bank, the federal funds rate for such day (as determined by the
Administrative Agent) or (b) in the case of payment by the Company,
the interest rate applicable to the relevant Loan.
SECTION 4. ARTICLE III. ARTICLE III on pages 23 through 27 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
3.1. Issuance of Letters of Credit
(a) Issuance of Facility Letters of Credit. The Company shall give the
Issuer not less than three Business Days prior written notice of a request for
the issuance of a Facility Letter of Credit. Until the Maturity Date, upon
receipt of the Company's properly completed and duly executed Applications and
subject to the terms of such Applications and to the terms of this Agreement,
the Issuer agrees to issue Facility Letters of Credit on behalf of the Company
in an aggregate face amount not in excess of Facility Letter of Credit
Commitment at any one time outstanding. No Facility Letter of Credit shall
have a maturity extending beyond the earliest of (i) the Maturity Date, or
(ii) such earlier date as may be required to enable the Company to satisfy its
repayment obligations under Section 2.1(e) hereof. Subject to such maturity
limitations and so long as no Default or Unmatured Default has occurred and is
continuing or would result from the renewal of a Facility Letter of Credit,
the Facility Letters of Credit may be renewed by the Issuer in its discretion.
The Banks shall participate in any liability under the Facility Letters of
Credit and in any unpaid Reimbursement Obligations of the Company with respect
to any Facility Letter of Credit ratably according to the percentage their
Commitment bears to the Aggregate Commitment. The amount of the Facility
Letters of Credit issued and outstanding and the unpaid Reimbursement
Obligations of the Company for such Facility Letters of Credit shall reduce
the amount of Aggregate Commitment available, so that at no time shall the
aggregate outstanding Advances together with the sum of Reimbursement
Obligations plus the face amount of all outstanding Facility Letters of Credit
exceed an amount equal to the Aggregate Commitment, and at no time shall the
sum of all Loans by any Bank, plus its ratable share of amounts available to
be drawn under the Facility Letters of Credit and its ratable share of the
unpaid Reimbursement Obligations of the Company in respect of such Facility
Letters of Credit, exceed its ratable percentage of the Aggregate Commitment.
(b) Issuance of Second Facility Letter of Credit. The Company shall
give the Issuer not less than three Business Days prior written notice of a
request for the issuance of the Second Facility Letter of Credit or any
increase thereto. Until October 31, 1995, upon receipt of the Company's
properly completed and duly executed Application and subject to the terms of
such Application and to the terms of this Agreement, the Issuer agrees to
issue the Second Facility Letter of Credit on behalf of the Company in an
aggregate face amount not in excess of $9,100,000 at any one time outstanding.
Until June 20, 1996, upon receipt of the Company's properly completed and duly
executed Application and subject to the terms of such Application and to the
terms of this Agreement, the Issuer agrees to replace or amend the Second
Facility Letter of Credit on behalf of the Company to an aggregate face amount
not in excess of Second Facility Letter of Credit Commitment at any one time
outstanding. The Second Facility Letter of Credit shall not have a maturity
extending beyond June 30, 1996 and may not be renewed. The Banks shall
participate in any liability under the Second Facility Letter of Credit and in
any unpaid Second Reimbursement Obligations of the Company with respect to the
Second Facility Letter of Credit ratably according to the percentage their
Commitment bears to the Aggregate Commitment.
3.2. Letter of Credit Fee.
(a) Facility Letter of Credit Fees. In consideration for the issuance
of each Facility Letter of Credit and any renewal thereof, the Company shall
pay to the Administrative Agent for the account of the Issuer and the Banks,
ratably in accordance with the percentage that their Commitment bears to the
Aggregate Commitment, a letter of credit fee as set forth in Section 2.3(b)
hereof. The letter of credit fee shall accrue from the date of issuance of
each Facility Letter of Credit and shall be payable quarterly in arrears on
each Payment Date and on the date of termination of such Facility Letter of
Credit, and upon the Issuer's demand pursuant to Section 3.3 hereof.
(b) Second Facility Letter of Credit Fee. In consideration for the
issuance of the Second Facility Letter of Credit and any renewal thereof, the
Company shall pay to the Administrative Agent for the account of the Issuer
and the Banks, ratably in accordance with the percentage that their Commitment
bears to the Aggregate Commitment, a letter of credit fee as set forth in
Section 2.3(d) hereof. The letter of credit fee shall accrue from the date of
issuance of the Second Facility Letter of Credit and shall be payable
quarterly in arrears on each Payment Date and on the date of termination of
the Second Facility Letter of Credit, and upon the Issuer's demand pursuant to
Section 3.3 hereof.
3.3. Reimbursement Obligations and Second Reimbursement
Obligations.
(a) The Company hereby agrees to reimburse the Issuer, immediately upon
demand by the Issuer, and in immediately available funds, for any payment or
disbursement made by the Issuer under any Facility Letter of Credit or the
Second Facility Letter of Credit. Payment shall be made by the Company with
interest on the amount so paid or disbursed by the Issuer from and including
the date payment is made under any Facility Letter of Credit or the Second
Facility Letter of Credit to and including the date of payment, at the Floating
Rate in effect from time to time plus three percent per annum; provided,
however, that (a) with respect to any draw under any Facility Letter of Credit,
if the Company would be permitted under the terms of Section 2.1 to borrow
Advances in amounts at least equal to its reimbursement obligation for a
drawing under any Facility Letter of Credit, a Floating Rate Loan by each Bank,
ratably in an amount equal to the percentage that such Bank's Commitment bears
to the Aggregate Commitment, shall automatically be deemed made on the date of
any such payment or disbursement made by the Issuer in the amount of such
obligation and subject to the terms of this Agreement, and (b) with respect to
any draw under the Second Facility Letter of Credit, subject to the terms of
this Agreement, the Company may be entitled to borrow a term-loan from the
Banks in the form of a Second Facility Loan in accordance with the terms of
this Agreement.
(b) The Company hereby also agrees to pay to the Issuer, immediately
upon demand by the Issuer and in immediately available funds, as security for
its reimbursement obligations in respect of the Facility Letters of Credit and
Second Facility Letter of Credit under Section 3.3(a) hereof and any other
amounts payable hereunder and under the Notes, an amount equal to the sum of
the aggregate amount available to be drawn under Facility Letters of Credit
and the Second Facility Letter of Credit then outstanding plus any
Reimbursement Obligations and Second Reimbursement Obligations, irrespective
of whether any of the Facility Letters of Credit or the Second Facility Letter
of Credit has been drawn upon, at the occurrence of a Default or Unmatured
Default. Any such payments shall be deposited in a separate account designated
"GCIC Special Account" or such other designation as the Issuer shall elect.
All such amounts deposited with the Issuer shall be and shall remain funds of
the Company on deposit with the Issuer and may be invested by the Issuer as
the Issuer shall determine. Such amounts may not be used by the Issuer to pay
the drawings under the Facility Letters of Credit and the Second Facility
Letter of Credit; however, such amounts may be used by the Issuer as
reimbursement for Facility Letter of Credit or Second Facility Letter of
Credit drawings which the Issuer has paid. During the existence of a Default
or an Unmatured Default but after the expiry of any Facility Letter of Credit
or Second Facility Letter of Credit that was not drawn upon, the Company may
direct the Administrative Agent to use any cash collateral for any such
expired Facility Letter of Credit or Second Facility Letter of Credit, if any,
to prepay Advances in accordance with Section 2.1. Any amounts remaining in
the GCIC Special Account after the date of the expiry of all Facility Letters
of Credit and the Second Facility Letter of Credit and after all Obligations
have been paid in full, shall be repaid to the Company promptly after such
expiry and such payment in full.
(c) The obligations of the Company under this Section 3.3 will continue
until all Facility Letters of Credit and the Second Facility Letter of Credit
have expired and all Reimbursement Obligations and Second Reimbursement
Obligations with respect thereto have been paid in full by the Company and
until all of the other Obligations shall have been paid in full.
(d) The Company shall be obligated to reimburse the Issuer upon demand
for all amounts paid under the Facility Letters of Credit and Second Facility
Letter of Credit as set forth in Section 3.3(a) hereof; provided, however, if
the Company for any reason fails to reimburse the Issuer in full upon demand,
whether by borrowing Advances to pay such Reimbursement Obligations, Second
Reimbursement Obligations or otherwise, the Banks shall reimburse the Issuer
ratably in accordance with percentage that each Bank's ratable percentage of
the Commitment bears to the Aggregate Commitment, for amounts due and unpaid
from the Company as set forth in Section 3.4 hereof; provided, however, that
no such reimbursement made by the Banks shall discharge the Company's
obligations to reimburse the Issuer.
(e) The Company shall indemnify and hold the Issuer or any Bank, its
officers, directors, representatives and employees harmless from loss for any
claim, demand or liability which may be asserted against the Issuer or such
indemnified party in connection with actions taken under the Facility Letters
of Credit or the Second Facility Letter of Credit, or in connection with
either thereof (including losses resulting from the negligence of the Issuer
or such indemnified party), and shall pay the Issuer for reasonable fees of
attorneys (who may be employees of the Issuer) and legal costs paid or
incurred by the Issuer in connection with any matter related to the Facility
Letters of Credit or the Second Facility Letter of Credit, except for losses
and liabilities incurred as a direct result of the gross negligence or willful
misconduct of the Issuer or such indemnified party. If the Company for any
reason fails to indemnify or pay the Issuer or such indemnified party as set
forth herein in full, the Banks shall indemnify and pay the Issuer upon
demand, ratably in accordance with each Bank's percentage of the Aggregate
Commitment, such amounts due and unpaid from the Company. The provisions of
this Section 3.3(e) shall survive the termination of this Agreement.
3.4. Banks' Obligations. Each Bank agrees, unconditionally and
irrevocably to reimburse the Issuer (to the extent the Issuer is not
otherwise reimbursed by the Company in accordance with Section 3.3(a)
hereof) on demand for such Bank's ratable percentage according to the
percentage that such Bank's Commitment bears to the Aggregate
Commitment of each draw paid by the Issuer under any Facility Letter of
Credit or the Second Facility Letter of Credit. All amounts payable by
any Bank under this subsection shall include interest thereon at the
Federal Funds Effective Rate, from the date of the applicable draw to
the date of reimbursement by such Bank. No Bank shall be liable for the
performance or nonperformance of the obligations of any other Bank
under this Section. The obligations of the Banks under this Section
shall continue after the Maturity Date and shall survive termination of
any Loan Documents.
3.5. The Issuer's Obligations.
(a) The Issuer makes no representation or warranty, and assumes no
responsibility with respect to the validity, legality, sufficiency or
enforceability of any Application or any document relative thereto, or to the
collectibility thereunder. The Issuer assumes no responsibility for the
financial condition of the Company or for the performance of any obligation
of the Company. The Issuer may use its discretion with respect to exercising
or refraining from exercising any rights, or taking or refraining from taking
any action which may be vested in it or which it may ' entitled to take or
assert with respect to any Facility Letter of Credit, the Second Facility
Letter of Credit or any Application.
(b) The Issuer shall be under no liability to any Bank, with respect to
anything the Bank may do or refrain from doing in the exercise of its
judgment, the sole liability and responsibility of the Issuer being to handle
each Bank's share on as favorable a basis as the Issuer handles its own share
and to promptly remit to each Bank its share of any sums received by the
Issuer under any Application. The Issuer shall have no duties or
responsibilities except those expressly set forth herein and those duties and
liabilities shall be subject to the limitations and qualifications set forth
herein.
(c) Neither the Issuer nor any of its directors, officers, or employees
shall be liable for any action taken or omitted (whether or not such action
taken or omitted is expressly set forth herein, is negligent, or otherwise)
under or in connection herewith or any other instrument or document in
connection herewith, except for gross negligence or willful misconduct. The
Issuer shall incur no liability to any Bank or the Company in acting upon any
notice, document, order, consent, certificate, warrant or other instrument
believed by the Issuer to be genuine or authentic and to be signed by the
proper party.
SECTION 5. Section 5.2. Section 5.2 on pages 32 and 33 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
5.2. Each Advance or the Issuance of any Facility Letter of
Credit or the Second Facility Letter of Credit. The Banks shall not be
required to make any Advance, and the Issuer shall not be obligated to
issue any Facility Letter of Credit or the Second Facility Letter of
Credit, unless on the applicable Borrowing Date or the date of
issuance of such Facility Letter of Credit or Second Facility Letter
of Credit:
(a) There exists no Default or Unmatured Default.
(b) The representations and warranties contained in Article
VI and in any Application and Loan Document are true and
correct as of such Borrowing Date.
(c) In the event the Company shall have theretofore granted,
implemented or given notice of its intent to grant or
implement a material price decrease in MTS Service, the
Company shall demonstrate to the satisfaction of the
Required Banks that the Company shall be in compliance
with the provisions of Section 7.4.
(d) A duly completed and executed Application acceptable to
the Issuer for each and every Facility Letter of Credit
or for the Second Facility Letter of Credit, as
applicable.
(e) All legal matters incident to the making of such Advance
shall be satisfactory to the Banks and their respective
counsel.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Company that the
conditions contained in Sections 5.2(a) and 5.2(b) have been
satisfied. Any Bank may require a duly completed Compliance
Certificate as a condition to making an Advance.
SECTION 6. Section 7.4(a). Section 7.4(a) on page 41 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
(a) Leverage Ratio. The Company will maintain at all times
during the time periods set forth below, a Leverage Ratio
not greater than the ratio set forth below opposite each
such period:
Period Ratio
------ -----
Date hereof through and including 6/29/93 3.50 to 1.00
6/30/93 through and including 9/29/93 3.20 to 1.00
9/30/93 through and including 12/30/93 2.75 to 1.00
12/31/93 through and including 6/30/94 2.40 to 1.00
7/01/94 through and including 9/30/96 2.00 to 1.00
10/01/96 and thereafter 1.50 to 1.00
SECTION 7. Section 7.4(c). Section 7.4(c) on page 41 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
(c) Fixed Charge Coverage. At all times during the time
periods set forth below, the Company will not permit the
ratio of (i) Annualized Operating Cash Flow to (ii) Fixed
Charges for the four fiscal quarters then most recently
ended for the Company and the Subsidiaries on a
consolidated basis, to be less than the following ratios
set forth below opposite each such period:
Period Ratio
------ -----
Date hereof through and including 6/30/94 1.00 to 1.00
7/01/94 through and including 6/30/95 1.10 to 1.00
7/01/9S through and including 12/31/95 1.20 to 1.00
1/01/96 and thereafter 1.00 to 1.00
SECTION 8. Section 7.4(d). Section 7.4(d) on page 41 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
(d) Pro Forma Debt Service Coverage Ratio. The Company will
not permit the ratio of (i) Annualized Operating Cash
Flow to (ii) Pro Forma Debt Service for the Company and
the Subsidiaries on a consolidated basis, to be less than
the following ratios set forth below opposite each such
period:
Period Ratio
------ -----
Date hereof through and including 6/30/96 1.50 to 1.00
7/01/96 and thereafter 1.15 to 1.00
SECTION 9. Section 7.12. Section 7.12 on page 43 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
7.12. Dividends and Stock Repurchases. The Company will not
declare or pay (or set aside any funds or establish any sinking fund
for such purpose) any dividends on its capital stock (other than
dividends payable in its own capital stock), and the Company will not,
nor will it permit any Subsidiary to, redeem, repurchase or otherwise
acquire or retire any of its capital stock at any time outstanding,
provided that, so long as (a) both before and after giving effect to
such repurchase, there exists no Default or any event or circumstance
which, with the giving of notice or the passing of time could become a
Default, (b) such repurchase is prior to December 31, 1997, and (c)
the Company may declare or pay (or set aside any funds or establish
any sinking fund for such purpose) any dividends on its capital stock
to the Parent to enable the Parent to repurchase its capital stock up
to the lesser of (i) 1,000,000 shares or (ii) an amount of shares for
which the purchase price is less than or equal to $5,000,000 in the
aggregate. No Subsidiary may declare or pay any dividends on its
capital stock (other than dividends payable in its own capital stock),
except that Wholly-Owned Subsidiaries may declare or pay any dividend.
SECTION 10. Section 7.21. Section 7.21 on page 46 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
7.21. Letters of Credit. The Company will not, nor will it permit
any Subsidiary to, apply for or become liable upon any Letter of
Credit except the Facility Letters of Credit and the Second Facility
Letter of Credit.
SECTION 11. Section 8.12. Section 8.12 on page 51 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
8.12. Nonpayment by the Parent, the Company or any Subsidiary of
any Reimbursement Obligations or Second Reimbursement Obligations when
due, or the occurrence of any "default" as defined in any Loan
Document (other than this Agreement or the Notes), or the breach of
any term or provision in any Application for any Facility Letter of
Credit or Second Facility Letter of Credit, or the breach of any of
the terms or provisions of any Loan Document (other than this
Agreement or the Notes), which default or breach continues beyond any
period of grace therein provided.
SECTION 12. Section 9.1. Section 9.1 on pages 52 and 53 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
9.1. Acceleration and Other Remedies. If any Default described in
Section 8.6 or 8.7 occurs, the obligations of the Banks to make Loans
hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on
the part of the Administrative Agent or any Bank. If any other Default
occurs, Fixed Rate Loans shall no longer be available to the Company
and the Required Banks may, and at the direction of the Required Banks
the Administrative Agent shall, (a) terminate or suspend the
obligations of the Banks to make Loans hereunder, terminate any or all
of the Facility Letter of Credit Commitment, the Second Facility
Letter of Credit Commitment, the Aggregate Commitment or any
Commitment, or declare the Obligations to be due and payable,
whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of
which the Company hereby expressly waives, and (b) demand and the
Company shall pay to the Issuer, immediately upon demand and in
immediately available funds, the amount equal to the aggregate amount
of the sum of the Facility Letters of Credit plus the Second Facility
Letter of Credit then outstanding, irrespective of whether such
Facility Letters of Credit or Second Facility Letter of Credit have
been drawn upon, all as set forth and in accordance with the terms of
provisions of Article III hereof. The Issuer shall promptly advise the
Company of any such declaration or demand but failure to do so shall
not impair the effect of such declaration or demand. The
Administrative Agent and the Banks may exercise all of the
post-default rights granted to them under the Loan Documents or under
Applicable Law. The rights and remedies of the Administrative Agent
and the Banks hereunder shall be cumulative, and not exclusive.
SECTION 13. Section 11.18. Section 11.18 on pages 62 and 63 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
11.18. Giving Notice. Any notice required or permitted to be
given under this Agreement may be, and shall be deemed, given when
deposited in the United States mail, postage prepaid, or by facsimile
when transmitted to the Company, the Banks or the Administrative Agent
at the addresses indicated below, or at such other addresses as any
party shall request by notice to the other parties:
If to the Administrative Agent:
NationsBank of Texas, N.A.
901 Main Street
64th Floor
Dallas, Texas 75202
Attn: W. Hutchinson McClendon, IV
Whitney L. Busse
Telephone: (214) 508-0996 (Mr. McClendon)
(214) 508-0950 (Ms. Busse)
Telecopy: (214) 508-9390
With a copy to:
Donohoe, Jameson & Carroll, P.C.
3400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Attn: Melissa Ruman Stewart, Esq.
Telephone: (214) 698-3814
Telecopy: (214) 744-0231
If to the Company:
GCI Communication Corp.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503-2781
Attn: Mr. John M. Lowber
Telephone: (907) 265-5600
Telecopy: (907) 265-5676
With a copy to:
Hartig, Rhodes, Norman, Mahoney & Edwards
717 K Street
Anchorage, Alaska
Attn: Robert B. Flint, Esq.
Telephone: (907) 276-1592
Telecopy: (907) 277-4352
SECTION 14. Conditions Precedent. This Amendment shall not be effective
until the Administrative Agent shall have determined in its sole discretion
that all proceedings of the Company taken in connection with this Amendment
and the transactions contemplated hereby shall be satisfactory in form and
substance to the Administrative Agent:
(a) a loan certificate of the Company certifying (i) as to the
accuracy of its representations and warranties set forth in Article VI
of the Credit Agreement, as amended by this Amendment, the other Loan
Documents and in this Amendment, (ii) that there exists no Default, or
event which but for the giving of notice or passage of time or both
would constitute a Default, and the execution, delivery and
performance of this Amendment will not cause a Default or event which
but for the giving of notice or passage of time or both would
constitute a Default, (iii) as to resolutions authorizing the Company
to execute, deliver and perform this Amendment and all Loan Documents
and other documents and instruments delivered or executed in
connection with this Amendment, and (iv) that it has complied with all
agreements and conditions to be complied with by it under the Credit
Agreement, the other Loan Documents and this Amendment by the date
hereof;
(b) an opinion of counsel of Company acceptable to the
Administrative Agent with respect to this Second Amendment and all
other Loan Documents executed in connection herewith, including,
without limitation, an opinion with respect to the validity and
enforceability of the Loan Documents before and after giving effect to
this Second Amendment (including with respect to all security
interests and liens securing the increased Obligations";
(c) the Company shall have paid in full to the Administrative
Agent for the account of the Banks, a one-time facility fee for the
increase in the loan facility provided to the Company in the amount of
$81,225;
(d) new Notes for each Bank;
(e) the Company shall have executed and delivered to the
Administrative Agent that certain Assignment and Security Agreement
dated the date hereof, and the Administrative Agent and the Banks
shall have a valid first perfected security interest in all rights of
the Company in and to that certain Transponder Purchase Agreement for
Galaxy X, dated August 24, 1995, by and between the Company and Hughes
Communications Galaxy, Inc. (and Hughes Communications Galaxy, Inc.
shall have consented thereto in form and substance satisfactory to
Administrative Agent);
(f) a new compliance certificate executed and completed after
giving effect to the facility increases and covenant changes set forth
herein; and
(g) such other documents, instruments, and certificates, in form
and substance satisfactory to the Administrative Agent, as the
Administrative Agent shall deem necessary or appropriate in connection
with this Amendment and the transactions contemplated hereby.
SECTION 15. Representations and Warranties. The Company represents and
warrants to the Banks and the Administrative Agent that (a) the Aggregate
Commitment under the Credit Agreement as of the date hereof, as previously
reduced and after giving effect to this Amendment, is $9,250,000 (which
includes the $3,000,000 Facility Letter of Credit Commitment), (b) this
Amendment constitutes its legal, valid, and binding obligation, enforceable in
accordance with the terms hereof (subject as to enforcement of remedies to any
applicable bankruptcy, reorganization, moratorium, or other laws or principles
of equity affecting the enforcement of creditors' rights generally), (c) there
exists no Default or event which but for the giving of notice or passage of
time or both would constitute a Default, under the Credit Agreement, (d) its
representations and warranties set forth in the Credit Agreement and other
Loan Documents are true and correct on the date hereof, (e) it has complied
with all agreements and conditions to be complied with by it under the Credit
Agreement and the other Loan Documents by the date hereof, and (f) the Credit
Agreement, as amended hereby, and the other Loan Documents remain in full
force and effect.
SECTION 16. Entire Agreement; Ratification. THE CREDIT AGREEMENT AND
THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. EXCEPT AS MODIFIED OR SUPPLEMENTED HEREBY, THE CREDIT AGREEMENT, THE
OTHER LOAN DOCUMENTS AND ALL OTHER DOCUMENTS AND AGREEMENTS EXECUTED IN
CONNECTION THEREWITH SHALL CONTINUE IN FULL FORCE AND EFFECT.
SECTION 17. Counterparts. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument. In making proof hereof, it shall not be necessary to produce or
account for any counterpart other than one signed by the party against which
enforcement is sought.
SECTION 18. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS.
SECTION 19. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
TEXAS STATE COURT SITTING IN DALLAS IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENTS AND THE COMPANY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST
THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING
BY THE COMPANY AGAINST THE ADMINISTRATIVE AGENT OR ANY BANK OR ANY AFFILIATE
OF THE ADMINISTRATIVE AGENT OR ANY BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN DALLAS, TEXAS.
SECTION 20. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE AGENT
AND EACH BANK HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
IN WITNESS WHEREOF, this Second Amendment to Credit Agreement is executed as
of the date first set forth above.
GCI COMMUNICATION CORP.
/s/ John M. Lowber
By:
Its:SVP & CAO
NATIONSBANK OF TEXAS, N.A.,
Individually and as Administrative Agent
/s/ Whitney L. Busse
By:Whitney L. Busse
Its:Vice President
<PAGE>
EXHIBIT A
NOTE
Dallas, Texas
$
------------- --------------
GCI Communication Corp., an Alaskan corporation ("Company"), promises to
pay to the order of NationsBank of Texas, N.A. ("Bank") the lesser of the
principal sum of NO\ONE-HUNDREDTHS DOLLARS ($ ) or the aggregate unpaid
principal amount of all Loans made by Bank to Company pursuant to Section 2.1
(a)(i) of the Agreement (as hereinafter defined) in immediately available funds
at the principal office of NationsBank of Texas, N.A., as Administrative Agent,
together with interest on the unpaid principal amount hereof at the rates and on
the dates set forth in the Agreement. The Company shall pay each Loan in full on
the last day of such Loan's applicable Interest Period and shall make such
mandatory payments and prepayments as are required to be made under the terms of
Article II of the Agreement.
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT
THE LAW OF CONFLICTS) OF THE STATE OF TEXAS BUT GIVING EFFECT TO THE FEDERAL
LAWS APPLICABLE TO NATIONAL BANKS.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Amended and Restated Credit Agreement, dated as of April 30,
1993 (as amended or modified and in effect from time to time, the "Agreement"),
among Company, the banks named therein and NationsBank of Texas, N.A., as
Administrative Agent, to which Agreement reference is hereby made for a
statement of the terms and conditions under which this Note may be prepaid or
its maturity date accelerated. This Note is secured pursuant to certain pledge
and security agreements, all as more specifically described in the Agreement,
and reference is made thereto for a statement of the terms and provisions
thereof. Capitalized terms used herein and not otherwise defined herein are used
with the meanings attributed to them in the Agreement.
This Note is a renewal, extension, increase and modification of that
certain Note dated May 14, 1993 (the "Original Note") executed by the Company
and made payable to the Administrative Agent.
GCI COMMUNICATION CORP.
By:
EQUIPMENT PURCHASE
AGREEMENT
between
GCI Communication Corporation
and
Scientific-Atlanta, Inc.
<PAGE>
EQUIPMENT PURCHASE AGREEMENT
TABLE OF CONTENTS
SECTION 1 DEFINITIONS
SECTION 2 SCOPE OF THE AGREEMENT
SECTION 3 PRICE AND PAYMENT
SECTION 4 DELIVERY SCHEDULE
SECTION 5 TITLE AND RISK OF LOSS
SECTION 6 INTERNATIONAL SALES
SECTION 7 REPRESENTATIONS
SECTION 8 INSPECTION, TEST AND ACCEPTANCE
SECTION 9 WARRANTY
SECTION 10 TERM AND TERMINATION
SECTION 11 LICENSED SOFTWARE
SECTION 12 NO RIGHTS IN TRADEMARKS
SECTION 13 OTHER INTELLECTUAL PROPERTY
SECTION 14 INJUNCTION
SECTION 15 PROPRIETARY RIGHTS INDEMNIFICATION
SECTION 16 INDEMNIFICATION AND LIMITATION OF LIABILITY
SECTION 17 FORCE MAJEURE
SECTION 18 NOTICES
SECTION 19 AMENDMENTS AND CHANGES
SECTION 20 ASSIGNMENT AND SUBCONTRACTING
SECTION 21 INDEPENDENT CONTRACTOR
SECTION 22 PUBLIC RELEASE OF INFORMATION
SECTION 23 MISCELLANEOUS
SECTION 24 ARBITRATION
EXHIBITS
EXHIBIT A PRICES
EXHIBIT B SCHEDULE
EXHIBIT C SOFTWARE LICENSE
EXHIBIT D FEATURE GROUP B/1 800 950 XXX SPECIFICATION
<PAGE>
EQUIPMENT PURCHASE AGREEMENT
This Equipment Purchase Agreement (the "Agreement"), effective as of the 20th
day of December, 1995(the "Agreement Date"), is entered into by and between GCI
Communication Corporation, a corporation organized and existing under the laws
of Alaska (hereinafter referred to as "GCI' or "Buyer"), and Scientific-Atlanta,
Inc., a corporation organized and existing under the laws of the State of
Georgia (hereinafter referred to as "S-A").
WITNESSETH:
WHEREAS, S-A is engaged in the design and manufacture of satellite
communication equipment and the related software which resides therein; and
WHEREAS, Buyer is a financially responsible and independent business
organization engaged in the sale, installation and service of products similar
to those manufactured by S-A, and desires to purchase from S-A the satellite
communication equipment and license from S-A the related software which resides
therein; and
WHEREAS, S-A is willing to sell such equipment and deliver such software to
Buyer under the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions
"Acceptance" is defined as the satisfactory resolution of all hardware
and software Specification deficiencies by S-A as identified by GCI.
GCI shall notify S-A of any deficiencies within thirty (30) days of
receipt of the last contract deliverable. Satisfaction of the list of
deficiencies will be the sole determinant of final payment. Not
withstanding any other remedies for latent defects, this list maybe
amended by mutual agreement of both parties.
"Agreement Date" is used as defined in the preamble.
"Equipment" means the items set forth on Exhibit A hereto, but expressly
excluding the Licensed software.
"Extreme Environment Mount" is defined as Model No. 8009AE. This mount
constitutes S-A's standard 11 Meter Mount and Actuators when used in
conjunction with S-A's standard 9.15 Meter Reflector.
"Licensed Software" is used herein as defined in the Software License.
"Remote Terminals" shall mean, collectively and as a combined operation,
the Equipment purchased by the Buyer and the Licensed software used
thereon, functioning as a DAMA satellite communications terminal.
"Proprietary Documentation" means any user manuals, training materials,
installation, repair or maintenance manuals, drawings, schematics or
any related documents provided by S-A to the Buyer.
"Prices" means the prices applicable to the Equipment set forth in
Exhibit A as adjusted from time to time in accordance with this
Agreement.
"Proprietary Information" shall mean any and all information, whether or
not in tangible form, of a confidential, proprietary or secret nature
belonging to, or licensed by S-A which is material to S-A and not
generally known by the public, other than Trade Secrets.
"Software License" means a Software License substantially in the form of
Exhibit C hereto.
"Specifications" shall mean the specifications as defined in the "GCI
ALASKA RURAL DEMONSTRATION PROJECT EQUIPMENT SUPPLY AND SERVICES
AGREEMENT ", dated June 21, 1994.
"Term" is used as defined in Section 10.1.
"Trademarks" shall mean the trademarks, trade names and logotypes used by
S-A to identify or in connection with the Equipment from time to
time, including without limitation, "Scientific-Atlanta" and
"SkyRelay (TM)".
"Trade Secrets" shall mean any and all information, whether or not in
tangible form, belonging to S-A or licensed by it including, but not
limited to, technical or non-technical data, formulae, patterns,
compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, marketing
plans, and lists of actual or potential customers or suppliers which
derive economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from their disclosure or
use and are the subjects of efforts that are reasonable under the
circumstances to maintain their secrecy. Specifically included in the
definition of Trade Secrets, but not by way of limitation, are (a)
marketing information obtained or derived during the term hereof on
existing and anticipated markets of S-A; (b) pricing, product costs,
product cost structures (ie.,, breakdown of cost among materials,
labor and overhead), and bills of materials for current or
anticipated product; (c) information on S-A's program strategies,
product features and performance for products under design or
anticipated for design; and (d) specific limitations and actual or
perceived deficiencies in existing or planned products and
technologies of S-A
"DAMA" shall mean "demand assigned multiple access."
2. Scope of the Agreement
The equipment specified in Exhibit A will be delivered in accordance with
Section 4 "Delivery Schedule". During the first thirty (30) days of the Term,
the Buyer may adjust the equipment quantities down by not more than ten percent
(10%). During the Term, the Buyer may order additional Equipment by submitting a
purchase order to S-A requesting delivery not sooner than ninety 90 days nor
longer than one hundred eighty (180) days from the date thereof or as mutually
agreed to by S-A and GCI. S-A will sell and deliver such Equipment on or before
the requested delivery date. S-A shall convey the Equipment free and clear of
all liens, claims and encumbrances.
Any terms, conditions or provisions in any purchase order received from the
Buyer inconsistent with this Agreement shall be deemed null and void unless an
authorized representative of S-A signs a document that contains such different
or additional provisions and conspicuously states an intention to amend the
terms and conditions of this Agreement.
Any Licensed Software residing in Equipment delivered to Buyer is subject
to the Software License as set forth in Section 11. S-A shall place into escrow
all source code for all software and firmware supplied to GCI as part of the
DAMA network; to include all future revisions. All initial escrow costs and
maintenance costs will be the responsibility of GCI.
The performance of each of S-A and the Buyer under this Agreement shall
comply with all applicable federal, state and local laws, regulations and
ordinances.
Buyer agrees that it shall not purchase any equipment which, in the opinion
of S-A, are competitive with the Equipment during the term of this Agreement
unless prior written consent of the S-A is first obtained.
The equipment described in Exhibit A comprises two projects, a DAMA network
expansion and the purchase and installation of six, 9.15M antennas. Termination
of one project will not automatically imply termination of the other.
3. Price and Payment
The prices for the Equipment and Services are listed in Exhibit A. The
total price for all Equipment and Services is: $7,688,447 (Contract Price),
increased or decreased by any amendment or change order made in accordance with
the Terms of this contract.
.1 The price shall be paid in United Stated Dollar currency in accordance
Section 3.2 below:
.2 Payment milestones are mutually agreed to be as follows:
Upon Contract Signature $1,013,603
Each subsequent calendar month for six months $984,813
(due upon the day of the month this agreement
is signed)
At successful completion of 9.15M install
and testing. $106,417
Final payment upon Acceptance $659,549*
* - When S-A meets each of the seven equipment delivery milestones, for the
months of February through July, 1996 for (equipment excluding the 9.15M antenna
systems), as set forth in Exhibit B, Buyer agrees to pay an incentive of $47,111
for each monthly milestone met. This amount would be added to the subsequent mid
month payment. Each time such payment is made the final payment of $659,549
shown above would be reduced by the corresponding amount. If; at the time of
delivery compliance with a milestone, the previous months' delivery has still
not been met, the incentive payment will not be applicable.
.3 Any amounts not paid when due shall bear interest at the rate of 1-1/2%
per month from the date such payment was due until the date payment is received.
.4 The Prices include all costs for the performance by S-A of its
responsibilities in accordance with the provisions of this Agreement but do not
include any amounts for duties, customs, shipping, federal, state or local taxes
imposed on the sale or use of such items or on the basis of the amounts paid or
the value of the items or services delivered or located at the installation
sites or on the basis of gross receipts (collectively, the "Shipping Charges and
Taxes"). The Buyer shall reimburse S-A for any of the Shipping Charges and Taxes
that S-A is required to pay. The Buyer shall not be responsible for taxes on
S-A's income or gross receipts from its overall business activities.
.5 The Statement of Work (SOW) for the installation of the 9.15 Meter
antenna installation at GCI's sites located at Barrow, Bethel, Dillingham, King
Salmon, Kotzebue, and Nome, Alaska is outlined below.
GCI will be responsible for providing the following:
Design and installation of the foundations.
Staging of antenna at the build site.
Provide forklift and crane as necessary.
Provide power to the outdoor antenna controller.
Provide a shelter and power for the indoor controller.
Provide test equipment for performing Antenna Tests
Install the RF.
S-A will be responsible for providing the following:
Provide 2 installation teams,
Will install the antennas and mounts.
Provide a list of required test equipment.
Perform antenna patterns to demonstrate that the antenna patterns meet
Code of Federal Regulations 47, Part 25 ss. 25.209, dated, October
1995.
Installation Sites and Schedule:- The installation window for a given site may
be changed by mutual agreement
Site Earliest Start Date Latest Start Date
1 Barrow June 12th, 1996 July 3rd, 1996
2 Bethel June 24th, 1996 July 24th, 1996
3 Dillingham July 3rd, 1996 August 14th, 1996
4 King Salmon June 12th, 1996 July 3rd, 1996
5 Kotzebue June 24th, 1996 July 24th, 1996
6 Nome July 3rd, 1996 August 14th, 1996
4. Delivery Schedule
The Buyer and S-A mutually agree to delivery schedule milestones
for equipment. The delivery schedule is attached to this Agreement as
Exhibit B.
Feature Group B/1800950 software specification are as defined in
Exhibit D.
5. Title and Risk of Loss
Title and risk of loss to all Equipment sold by S-A shall pass to
the Buyer upon delivery by S-A to a common carrier for shipment to the
Buyer.
6. International Sales
In no event shall the Buyer export any Equipment without the prior
written consent of S-A. If Buyer exports any Equipment outside the
United States, or such Equipment is re-exported from a foreign
destination, the Buyer shall insure that the distribution and
export/re-export of the Equipment is in compliance with all laws,
regulations, orders, or other restrictions of the U.S. Export
Administration regulations. Neither the Buyer, nor any of its
subsidiaries, will export or re-export any technical data, process,
product, or service, directly or indirectly, to any country for which
the United States government or any agency thereof requires an export
license or other governmental approval without first obtaining such
license or approval.
7. Representations
.1 The Buyer represents and warrants to S-A that (a) all information,
technical drawings, blueprints summaries and data of every kind
provided by the Buyer and its agents to S-A is in all material respects
accurate and correct as of the Agreement Date, and (b) no information
is known to the Buyer which, if disclosed to S-A, would have a material
impact on the technical requirements of and Specifications relating to
the Equipment and the Licensed Software.
.2 The Buyer covenants and agrees to cooperate with S-A by (i)
providing S-A access to the Buyer's premises, (ii) making Buyer's
technical personnel available to S-A on a timely basis, (iii) providing
additional information to S-A from time to time at S-A's request, and
(iv) taking such further actions as S-A may reasonably request in
connection with the efforts of S-A to fulfill its obligations under
this Agreement.
.3 The Buyer acknowledges and agrees that in order to preserve S-A's
image for high quality Equipment and thereby enhance its own sales, and
in consideration for S-A's making available to the Buyer the Equipment
at favorable prices, the Buyer agrees that it shall not engage in any
activities or sell or offer for sale any product which in S-A's
reasonable opinion would be competitive with the Equipment without
S-A's former written approval.
8. Inspection, Test and Acceptance
.1 S-A shall test and inspect the Equipment during production in
accordance with S-A's standard procedures.
.2 GCI shall notify S-A of any Specification deficiencies within thirty
(30) days of receipt of the last deliverable milestone as defined in
Exhibit B. Satisfactory resolution of the list of hardware and software
deficiencies will be the sole determinant of final payment. S-A shall
investigate such claims within fifteen (15) days of S-A's receipt of
the Buyer's written explanation and remedy any failure of such
Equipment to comply with the Specifications within thirty (30) days of
the completion of S-A's investigation. If the Buyer does not, within
ten (10) days of the expiration of the foregoing thirty (30) day
period, indicate in writing that it believes the Equipment does not
comply with the Specifications, the Buyer shall be deemed to have
Accepted the applicable Equipment. Any dispute between the parties
shall be resolved either by (i) mutual agreement or (ii) in accordance
with the arbitration procedures set forth in this Agreement.
9. Warranty
.1 Not withstanding the Acceptance terms stated above, S-A warrants
that the Equipment will comply with the Specifications, and will be
free from defects in materials and workmanship for a period of one (1)
year after date of Acceptance (the "Warranty Period").
.2 Except as provided in the Software License, S-A extends no
representations or warranties with respect to the Licensed Software.
.3 With respect to the Equipment, during the Warranty Period, S-A will,
following written notice of any breach of warranty from the Buyer, at
S-A's option, either (i) repair or replace any nonconforming Equipment
at Buyer's site or at the site where the Equipment is otherwise located
or (ii) request the Buyer to ship any nonconforming Equipment to S-A,
and S-A will either repair or replace and return to the Buyer such
nonconforming Equipment. Title to nonconforming Equipment being shipped
to S-A shall pass to S-A when delivered to the shipping carrier, and
title to the repaired or replacement Equipment shall pass to the Buyer
when delivered by S-A to the shipping carrier for return to the Buyer.
If any Equipment is shipped to S-A or S-A dispatches its personnel to a
Buyer's site and the applicable Equipment is determined either to
comply with the Specifications or to have been damaged or misused other
than through the fault of S-A, the Buyer shall pay S-A's normal charges
in connection therewith.
.4 S-A MAKES NO WARRANTIES OTHER THAN THE EXPRESS WARRANTIES IN THIS
SECTION AND IN THE SOFTWARE LICENSE AND NONE SHALL BE IMPLIED. THERE IS
NO WARRANTY OF MERCHANTABlLlTY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT PROVIDED HEREUNDER. THE ENTIRE OBLIGATION OF S-A FOR
EQUIPMENT OR LICENSED SOFTWARE MALFUNCTIONS OR DEFECTIVE INSTALLATIONS
AFTER ACCEPTANCE IS AS EXPRESSLY STATED IN THIS SECTION OR IN THE
SOFTWARE LICENSE.
10. Terms and Termination
.1 The "Term" of this Agreement shall commence on the Agreement Date,
and, unless sooner terminated pursuant to Sections 10.2 or 10.3 below,
shall end upon completion of obligations of the parties.
.2 The non-defaulting party may terminate this Agreement immediately
upon written notice of the occurrence of any of the following events:
a. Either party shall default in any of its material obligations
hereunder and fail to cure the default within fifteen (15) days,
or as mutually agreed to by both parties, after the non defaulting
party has given written notice of such default, such termination
to be effective as of the day of such notice. Written notice of
cure shall be delivered to non-defaulting party within fifteen
(15) days of notice of default: or
b. Either party shall become insolvent or shall seek protection in
bankruptcy or the appointment of a receiver or a petition in
bankruptcy or seeking the appointment of a receiver shall be filed
against such party and such petition shall not be dismissed within
thirty (30) days of its filing, such termination shall be
effective as of the date of such notice.
.3 The Buyer shall further have the right to terminate this Agreement
for convenience, through March 1, 1996. The parties agree that S-A has
no means to determine actual cost impact and therefore the parties
agree that the costs associated with this termination for convenience
shall be liquidated as follows:
December 1st, 1995 10%
January 1st, 1996 20%
February 1st, 1996 30%
March 1st, 1996 40%
where % is defined as the percentage of the price of the canceled
portion of the agreement.
The liquidated termination costs shall be due S-A within 30 days
of date of notice of termination by the Buyer.
In the event of Termination of the agreement and payment of the
appropriate liquidation costs detailed above, GCI would subsequently
have the right to repurchase some or all of the canceled equipment. A
percentage of the liquidated costs previously paid by GCI as a result
of termination would be credited to GCI as follows:
If reordered by:
March 31st, 1996 50%
April 1st - May 31st, 1996 35%
June 1st - July 31st, 1996 30%
August lst- Sept. 30th, 1996 25%
Oct. 1st - Dec. 31st, 1996 20%
Said credit will be applied to the repurchased products on a prorated
basis.
.4 Except as set forth in subsection 10.3, immediately above, the
termination or expiration of this Agreement by either party shall not
affect the rights and obligations of the parties that have vested prior
to the effective date of such termination with respect to orders
accepted by S-A. Final settlement for such orders shall be on the same
basis as though the Agreement were continuing, and any obligations of
one party to the other with respect to such orders shall remain in full
force and effect until fully paid or discharged. In addition to the
foregoing, the provisions of Sections 6, 7, 9, 10, 11, 12, 13, 14, 15,
21, 22 and 23 shall survive the termination of this Agreement.
11. Licensed Software
All copies of the Licensed Software residing in the Equipment
purchased by the Buyer under this Agreement shall remain the property
of S-A and Buyer shall be required to execute the Software License, the
terms and conditions of which are incorporated herein by reference and
made a part hereof. In the event, however, that terms of this Agreement
conflict with terms of the Software License, the terms of this
Agreement shall prevail over the Software License.
a. S-A grants to Buyer during the Term of this Agreement a
royalty-free, non-exclusive license to use the Trademarks in
connection with the promotion and sale of the Equipment as
provided for herein. Buyer shall not use or incorporate the
Trademarks on any other products or in or as part of a trade
name, corporate name, or business name. Buyer acknowledges that
considerable time and money has been expended to create the
goodwill associated with the Trademarks. Buyer shall always act
in a manner that would maintain the quality and goodwill
associated with the Trademarks. Nothing contained herein shall
give Buyer any interest or right in the Trademarks, except as is
expressly granted herein.
b. Buyer further agrees that it will not in any manner represent
that it has ownership of the Trademarks and that it will not
register or attempt to register any Trademarks under the laws of
any jurisdiction, and will not at any time do, or cause to be
done, any act or thing contesting, or in any way impairing or
tending to impair, any part of S-A's right, title, and interest
in the Trademarks, whether or not they are registered in the
jurisdictions in which Buyer is located or does business;
provided, however, that Buyer may register Trademarks where
expressly required by law, solely for the purpose of
establishing its distributorship status. Buyer shall promptly
notify S-A of any unauthorized use or infringement of S-A's
Trademarks, licenses or rights thereto.
c. Buyer agrees not to obscure, alter, modify or remove from the
Equipment any of the Trademarks or other product identification.
12. No Rights in Trademarks
S-A grants to Buyer during the Term of this Agreement a
royalty-free, non-exclusive license to use the Trademarks in connection
with the promotion and sale of the Equipment as provided for herein.
Buyer shall not use or incorporate the Trademarks on any other products
or in or as part of a trade name, corporate name, or business name.
Buyer acknowledges that considerable time and money has been expended
to create the goodwill associated with the Trademarks. Buyer will
always act in a manna that would maintain the quality and goodwill
associated with the Trademarks. Nothing contained herein shall give
Buyer any interest or right in the Trademarks, except as is expressly
granted herein.
Buyer further agrees that it will not in any manner represent that
it has ownership of the Trademarks and that it will not register or
attempt to register any Trademarks under the laws of any jurisdiction,
and will not at any time do, or cause to be done, any act or thing
contesting, or in any way impairing or tending to impair, any part of
S-A's right, title, and interest in the Trademarks, whether or not they
are registered in the jurisdictions in which Buyer is located or does
business; provided, however, that Buyer may register Trademarks where
expressly required by law, solely for the purpose of establishing its
distributorship status. Buyer shall promptly notify S-A of any
unauthorized use or infringement of S-A's Trademarks, licenses or
rights thereto.
Buyer agrees not to obscure, alter, modify or remove from the
Equipment any of the Trademarks or other product identification..
13. Other Intellectual Property
.1 The Buyer acknowledges that as an integral part of S-A's business,
S-A has developed, at a considerable investment of time and expense,
Trade Secrets and Proprietary Information, and acknowledges that S-A
has a legitimate business interest in protecting the Trade Secrets and
Proprietary Information. Buyer acknowledges that it and its employees
will be entrusted with such Trade Secrets and Proprietary Information.
Pursuant therewith, the Buyer agrees to that it will treat as
confidential and will not, without the prior written approval of S-A,
use (other than in the performance of its duties hereunder), publish,
disclose, copyright or authorize anyone else to use, publish, disclose
or copyright, (a) any information that constitutes Trade Secrets either
during the term hereof or subsequent thereto; or (b) any information
that constitutes Proprietary Information either during the term hereof
or for two (2) years after expiration or termination, with or without
cause.
.2 All records, notes, files, drawings, documents, plans and like
items, and all copies thereof, relating to or containing or disclosing
Trade Secrets or Proprietary Information of S-A which are made or kept
by the Buyer or which are disclosed to or come into the possession of
the Buyer, shall be and remain the sole and exclusive property of S-A
and shall be returned to S-A upon expiration or termination of this
Agreement.
.3 The Buyer further agrees that it will require each of its
shareholders, officers, directors and employees who act on its behalf
with respect to this Agreement to be bound by the requirements of this
Agreement and that, upon request of S-A, the Buyer will provide
evidence of such requirement to S-A.
14. Injunction
The Buyer agrees that its (or anyone acting on its behalf) actual
or threatened breach of the provisions of Sections 10, 11 or 12 shall
constitute irreparable harm to S-A, and S-A, in addition to all other
rights, shall be entitled to seek an injunction restraining the Buyer
or such person therefrom. Nothing herein shall be construed as
prohibiting S-A from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages from the
Buyer or such person. This provision shall remain in full force and
effect in the event the Buyer or such person should claim that S A
violated any of the terms of this Agreement. In such event, the Buyer
or such person agrees to pursue such claim against S-A independently of
the covenants set forth in this section.
15. Proprietary Rights Indemnification
.1 Indemnification. S-A shall settle, at its sole cost, or defend and
pay costs and damages finally awarded in any suit against the Buyer to
the extent based upon a finding that the design, construction or use of
the Equipment, including Licensed Software (either separately or in
combination), furnished under this Agreement, as furnished and used in
accordance with S-A instructions, infringes a patent, trademark,
copyright or other intellectual property right of a third party (except
infringement which is directly caused by incorporating a specific
design or modification at the Buyer's request). S-A shall not indemnify
the Buyer's for that portion of any final award that is based on
revenue derived from use of the Equipment and that is in excess of the
maximum liability of S-A provided in Section 15.5 below.
.2 Procedures. In the event of any allegation of infringement of the
type described in Section 15.1 or a claim or suit based thereon (the
"Allegation"), the Buyer shall promptly notify S-A of such Allegation
in writing. S-A shall promptly commence efforts to settle or to defend
against such Allegation and the Buyer shall reasonably cooperate with
S-A at the expense of S-A in such settlement or defense.
.3 Injunction. In the event that the use of the Equipment delivered
under this Agreement is enjoined or, in the discretion of S-A, is
likely to be enjoined, S-A shall do one or more of the following, at
S-A's option:
(a) obtain for the Buyer the right to use the infringing item at
no cost to the Buyer;
(b) modify the infringing item so that it becomes noninfringing
while remaining in compliance with the Specifications in all
material respects;
(c) replace the item with a noninfringing item which is in
compliance with the Specifications in all material respects; or
(d) if (a), (b) or (c) cannot be effected by S-A's reasonable and
diligent efforts, and further subject to the Notice of Refund
Option, below, refund the amount paid by the Buyer for the
applicable Equipment, less depreciation calculated on a
straight-line basis over a five (5) year period, provided that the
payment of any such refund shall not become due until return by
the Buyer of the applicable Equipment.
(e) Notice of Refund Option. In the event S-A shall elect to
exercise the provisions of subsection 15.3(d), above, S-A shall
give Buyer 90 days written notice of such election. Buyer shall
have the option, during such 90 day period, to negotiate on its
own behalf a license or other agreement with the Plaintiff so that
such item is no longer infringing. In the event Buyer is
successful, S-A shall under Section 15.1 above, pay on behalf of
Buyer any royalties and other costs related to such settlement,
including attorney's fees, up to the amount set forth in Section
15.5, below.
.4 Combinations and Modifications. Notwithstanding any other provision
of this section, S-A shall have no liability for any infringement
arising from (i) use of delivered items in combination with other
items, unless S-A sold, made or specifically recommended them all as a
combination, or the specific combination would be necessary for the use
in the normal course of events in connection with the Equipment sold
hereunder, or (ii) modification of items after delivery, unless S-A
made or specifically recommended the modification, or the modification
constitutes normal repair, replacement or implementation of S-A
provided options and enhancements for the Equipment sold hereunder.
.5 Limitation. Notwithstanding any other provision of this Agreement to
the contrary, this Section 15 states the entire liability of S-A and
the sole and exclusive remedy of the Buyer for any alleged infringement
of a third party's intellectual property right arising out of the sale
or use of the Equipment supplied under this Agreement or a process
practiced by such item, and S-A shall not be liable under this Section
15 in the aggregate for any amount exceeding the total price of the
Equipment purchased hereunder.
16. Indemnification and Limitation of Liability
.1 The Buyer agrees to indemnify and hold S-A and its officers,
directors and employees harmless from any loss, damage, liability and
expense on account of bodily injuries or physical damage to tangible
property, including the property of S-A, arising from any occurrence
caused by a negligent or willful act or omission of the Buyer or any
employee or agent of the Buyer (other than S-A), or of an independent
contractor of the Buyer (other than S-A), which indemnity shall survive
this Agreement.
.2 S-A agrees to indemnify and hold the Buyer and its officers,
directors and employees harmless from any loss, damage, liability and
expense on account of bodily injuries or physical damage to tangible
property, including the property of the Buyer, arising from any
occurrence caused by a negligent or willful act or omission of S-A, or
any employee or agent of S-A or of any subcontractor or independent
contractor of S-A, which indemnity shall survive this Agreement.
.3 UNDER NO CIRCUMSTANCES SHALL S-A BE RESPONSIBLE FOR INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
RELATED AGREEMENTS OR ANY ACTS OR OMISSIONS ASSOCIATED THEREWITH OR
RELATING TO THE USE OF ANY EQUIPMENT, LICENSED SOFTWARE OR SERVICES
FURNISHED, WHETHER SUCH CLAIM IS BASED ON BREACH OF WARRANTY, CONTRACT,
TORT OR OTHER LEGAL THEORY AND REGARDLESS OF THE CAUSES OF SUCH LOSS OR
DAMAGES OR WHETHER ANY OTHER REMEDY PROVIDED HEREIN FAILS, NOR SHALL
S-A'S TOTAL LIABILITY EXCEED AN AMOUNT EQUAL TO THE TOTAL PURCHASE
PRICE PAID BY THE BUYER TO S-A UNDER THIS AGREEMENT, MEASURED AS OF THE
DATE SUCH LIABILITY OF S-A SHALL FIRST EXIST.
17. Force Majeure
S-A shall not be responsible for delays caused by conditions
beyond the reasonable control of S-A, including without limitation such
conditions as acts of God, civil insurrections, wars, sabotage, fires,
floods, sun outages, atmospherics and externally caused interference,
accidents, labor disputes, acts or requirements of governmental
authorities or governmental laws, ordinances, rules and regulations,
transportation delays, unusually severe weather, or other similar or
different conditions beyond the reasonable control of S-A including,
without limitation, limitations and restrictions imposed by third
parties. In the event of delay due to any such condition, any
performance obligation shall be adjusted equitably. Any orders in
purchase orders to the Buyer which contains a penalty clause or
liquidated damage clause accepted by the Buyer shall be wholly at
Buyer's risk unless S-A has given prior written consent to such clause.
18. Notices
All notices given pursuant to this Agreement shall be in writing
and either delivered in person or by telegram, telex or facsimile
transmission or mailed by certified mail, return receipt requested,
postage prepaid, to each party at the following address or such other
address as such party may direct by similar notice to the other:
To S-A: Scientific-Atlanta, Inc.
4356 Communications Drive
Norcross, GA 30093
ATTN: Bob Roseman
Telephone: (770) 903 6684
Facsimile: (770) 903 5524
To Buyer:
GCI Communication Corp.
2550 Denali Street Suite 1000
Anchorage AK USA 99503
ATTN: Jimmy R Sipes
Telephone: (907) 265-5557
Facsimile: (907) 265-5673
Any notice given pursuant to this Agreement shall be deemed to have been
given upon receipt.
19. Amendments and Changes
This Agreement may not be amended, modified or waived in any
material respect except in a written amendment signed by authorized
representatives of both parties.
20. Assignment and Subcontracting
.1 This Agreement will be bring upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective legal
representatives, successors and assigns; provided, however, that
neither this Agreement nor any rights hereunder may be assigned by
either party without the prior written consent of the other party,
except that this Agreement may be assigned to a parent or associated
corporation or to an entity that acquires all or substantially all of
the capital stock, business, or assets of a party hereto and agrees in
writing to assume the rights and obligations.
.2 S-A may engage one or more subcontractors to perform any or all of
the obligations of S-A hereunder. Any such assignment or subcontracting
shall not, unless the parties otherwise agree in writing, relieve
either party hereto from any obligations hereunder.
21. Independent Contractor
Each party hereto is an independent contractor and shall not be deemed the
agent or employee of the other party hereto. The Buyer acknowledges that the
Specifications and the other matters set forth herein are the only limitations
and restrictions on the source quality and performance of the Equipment
hereunder.
22. Public Release of Information
Neither party may issue any press release or circular or otherwise disclose
the existence or terms of this Agreement or the relationship contemplated hereby
without the prior written approval of the other party unless required by an
APUC, FCC or other governmental reporting requirement.
23. Miscellaneous
.1 This Agreement expresses the entire understanding of the parties
with reference to the subject matter hereof, and supersedes any prior
or contemporaneous representations, understandings and agreements,
whether oral or written, and no representations or agreements modifying
or supplementing the terms of this Agreement shall be valid unless in
writing and signed by the parties hereto.
.2 This Agreement shall be interpreted in accordance with and governed
by the laws of the State of Georgia, excluding its rules or principles
regarding conflicts of law.
.3 Except as set forth in Sections 10.3 and 24, the enumeration herein
of the rights and remedies of the parties is not intended to be
exclusive, and such rights and remedies are in addition to and not by
way of limitation of any other rights or remedies that either party may
have under applicable law.
.4 No act, failure or delay by either party hereto shall constitute a
waiver of any of such party's rights and remedies. No single or partial
waiver by either party hereto of any provision of this Agreement, or of
any breach or default hereunder, or of any right or remedy which such
party may have, shall operate as a waiver of any other provision,
breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion.
.5 If any provision of this Agreement shall be prohibited or invalid
under applicable law, such provision shall be invalid only to such
extent, without invalidating the remainder of this Agreement.
.6 This Agreement may be executed in any number of counterparts, and by
S-A and the Buyer in separate counterparts, each of which shall be an
original, but all of which shall together constitute one and the same
Agreement.
.7 The captions contained in this Agreement are for convenience only,
are without substantive meaning and should not be construed to modify,
enlarge, or restrict any provision.
24. Arbitration
.1 Except as otherwise provided in the Software License, any
controversy or claim between or among the parties, including but not
limited to those arising out of or relating to this Agreement or any
agreements or instruments relating hereto or delivered in connection
herewith and any claim based on or arising from an alleged tort, shall
if incapable of resolution by mutual agreement in good faith, be
determined by arbitration as provided in this Section 24.
.2 The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U. S. Code), notwithstanding any
choice of law provision in this Agreement, and under the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). The
arbitration shall be conducted in the City of Seattle, Washington . The
arbitrator shall give effect to statutes of limitation in determining
any claim. Any controversy concerning whether an issue is arbitrable
shall be determined by the arbitrator. The decision of the arbitrator
shall be final and binding on the parties. Judgment upon the
arbitration award may be entered in any court having jurisdiction. In
rendering any decision or making findings of fact the arbitrator shall
apply the express intentions of the parties set forth in this Agreement
and the laws of the State of Georgia, including without limitation any
applicable statutes, regulations and binding judicial decisions, as
such would be applied by the courts of the State of Georgia and the
United States District Court for the Northern District of Georgia.
.3 In connection with any arbitration having an amount in controversy
of less than $1,000,000, such arbitration shall be conducted by a
single arbitrator, chosen by the AAA. The AAA shall be guided by any
applicable rules with respect to the choosing of an arbitrator for
arbitrations conducted pursuant to the Commercial Arbitration Rules of
the AAA, and, in addition, thereto, (i) the AAA shall attempt to
appoint an arbitrator having a technical background, where available,
consistent with the technical issues and procedures which are the
subject matter of this Agreement and (ii) the AAA shall prefer an
arbitrator who is an attorney in good standing and licensed to practice
law within the State of Georgia. In connection with any arbitration
where the amount in controversy is equal to or greater than $1,000,000,
the arbitration shall be conducted of a panel of three (3) or more
arbitrators chosen by the AAA, giving preference to those factors
identified in subsections (i) and (ii) in the foregoing sentence.
4 Notwithstanding any of the foregoing provisions, nothing contained in
this Section 24 shall prohibit either party from seeking injunctive
relief in any court having jurisdiction thereof and each party consents
to such jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective authorized representatives as of the
date first above written.
GCI Communication Corp: Scientific-Atlanta, Inc.:
By: /s/ Ron Duncan By:/s/ David A. Berger
Ron Duncan David A. Berger
(Typed Name) (Typed Name)
President President-Networks Division
(Title) (Title)
December 20, 1995 December 28, 1995
(Date) (Date)
<PAGE>
<TABLE>
Exhibit A - Prices
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
GCI
C-BAND 3.6 METER ANTENNA REMOTE
DAMA STATIONS MFR OR PRICE
ITEM DESCRIPTION QTY EQUIV. (U.S.$)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I. EQUIPTMENT
This quote is excluding the following items:
1- ISDN Interface and Equipment
2- Single unit LNB
3- Shipping
4- Integration
5- Transceiver IFL
1. 3.6-Meter Non-Deiced Antenna (51 Sites)
consisting of:
a. Non-motorizable mount 1 S-A
b. Non heated panels 1 S-A
c. Spars and feed boom 1 S-A
d. GCI Mount pipe 1 S-A
e. Cross-pol heated feed 1 S-A
f. Raven protection kit 1 S-A
g. Feed boom electric deice kit 1 S-A
3.6-Meter Non-Deiced Antenna Unit Price $10,561
3.6-Meter Non-Deiced Antenna Total Price (Qty-51) $538,611
2. Model 7890B Tranceiver subsystem (55 Sites)
consisting of:
Note: Excludes IFL & Mounting Hardware
a. Model 7890 C-Band 20 watt Outdoor RF Unit 1 S-A
(5.85-6.425 GHz)
b. Model CLNA-35-60-N Low Noise Amplifier 1 EF DATA
c. Model 7792B Tranceiver Indoor Unit, -48VDC 1 S-A
d. Block Downconverter (3.625-4.2 GHz) 1 S-A
e. Temperature Sensor Remote Assy. (P/N 482439) 1 S-A
Model 7890B Tranceiver Unit Price $20,572
Model 7890B Tranceiver Unit Price (Qty-55) $1,131,460
3. Baseband Equipment consisting of:
a. Model 7800 DAMA Eight channel chassis 86 S-A $688,000
-48 VDC Multi Transponder IF Input/Output
b. Model 7802 Channel Unit, Voice and Data, 128kbps 550 S-A $2,722,500
Fax Relay option, Switchless
c. Remote Signaling Channel Unit, Switchless 56 S-A $252,000
d. Remote Signaling Channel Unit, Switchless
System Spares 6 S-A
e. DAMA Standby Power Supply for 7800 Chassis, 62 S-A $458,986
-48 VDC, Panel Mount
Subtotal: $5,791,557
4. Monitor & Control Subsystem consisting of:
a. Alarm/Status Sense inputs (28 points) 53 S-A
b. Outdoor Temperature Meter 53 S-A
c. Indoor Temperature Meter 53 S-A
d. Power Module Temperature Meter 53 S-A
e. DC Current Meter 53 S-A
f. DC Voltage Meter 53 S-A
g. (3) Temperature Probes 53 S-A
h. RSCU/Modern/PMT Port enhancement 53 S-A
i. Modem addition to 4.h 53 S-A
Subtotal; $426,650
5. Optional 2 ft. Mount Pipe Extension 51 S-A $ 42,330
6. Optional Elevation Drill Drive Adapter 3 S-A $ 6,905
FOB ATLANTA PRICE: $6,267,442
II. SERVICES
1. Freight and Insurance (Customer Responsibility) 0 Lot
2. Site Survey 0 Lot
3. Civil Works (Customer Responsibility) 0 Lot
4. Installation, Test & Commissioning 0 Lot
5. Training Programs 0 Lot
6. Progrm Management & Engineering Services 1 Lot $218,047
7. Feature Group B, 1800950 Development 1 Lot $25,000
8. 64Kbps PCM Development 1 Lot $85,000
TOTAL DAMA EXPANSION NETWORK $6,595,489
9 METER ANTENNA PROJECT
1. Model 8009A 9.15 M Antenna 6
Reflector, motorized polarization, non deiced S-A
Extreme Mount, galvanized and painted S-A Foundation
Kit, 120 deg. S-A 4 port C-Band Linear Feed S-A
Extreme Environment Radome/Raven Protection Kit S-A
Motorized Single Speed actuators, 120* Azimuth S-A
Travel, 208 VAC
Transmit Waveguide Kit S-A
Lightning Protection Kit S-A
Work Platform and Ladder Kit S-A
2. Antenna Controls Subsystem: 6
Model 8861 Antenna Motor Controller S-A Model 8860-2
Adaptrack Indoor Unit S-A AZ/EI Kits, 208 VAC S-A
Feed Kits 208 VAC/60 HZ Phase 3 S-A Installation Kits
S-A
Deice Control System 5 S-A
Main Reflector, Feed and Sub-Reflector 5 S-A
Electric De-Ice
Hardware Subtotal: $856,258
3. Installation 6 $236,700
Note:
i) GCI to provide test equipment
ii) GCI to install the RF system prior to antenna
testing
TOTAL 9M ANTENNA PROJECT $1,092,958
TOTAL CONTRACT
DAMA EXPANSION AND 9M ANTENNA PROJECTS $7,688,447
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
I.EQUIPMENT QTY 1-Jan 1-Feb 1-Mar 1-Apr 1-May 15-May 1-Jun 15-Jun 1-Jul 1-Aug
-96 -96 -96 -96 -96 -96 -96 -96 -96 -96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 3.6 Meter non-Deiced Antenna, consisting of: 51 1 18 18 14
a. Non-motorized mount
b. Non heated panels
c. Spars and feed boom
d. GCI mount pipe
e. Cross-pol heated feed
f. Raven protection
g. Feed boom electric deice kit
2 Model 7890B Transceiver Subsystem, consisting of: 55 19 18 18
a. Model 6610 C-band 20 W ORU
b. Model CLNA-35-60-N LNA
c. Model 7792B Transceiver IDU, -48 VDC
d. Block Downconverter
e. IFL and Hardware including
- ORU TX and RX Coaxial Cabling, 40' -
ORU power and Control
Cabling, 40' - OD Temp Sensor Cabling,
25' - ORU/LNA/LNB/Feed Cabling - Mounting
Hardware
3 Baseband Equipment, consisting of:
a. Model 7800 DAMA Eight channel chassis, -48 VDC 86 8 8 19 18 17 16
Multi Transponder IF Input/Output
b. Model 7802 Channel Unit, Voice and Data, 128 550 30 30 140 150 100 100
kb/s,Fax Relay option, Switchless
c. Remote Signaling Channel Unit, Switchless 62 4 4 20 18 16
d. DAMA Standby Power Supply for 7800 chassis, 62 4 3 19 18 18
-48 VDC, Panel Mount
</TABLE>
<TABLE>
<CAPTION>
I. EQUIPMENT QTY 1-Jan 1-Feb 1-Mar 1-Apr 1-May 15-May 1-Jun 15-Jun 1-Jul 1-Aug
-96 -96 -96 -96 -96 -96 -96 -96 -96 -96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4 Monitor & Control Subsystem consisting of: 53 19 18 16
a. Alarm/Status Sense Inputs (28 points)
b. Outdoor Temperature Meter
c. Indoor Temperature Meter
d. Power Module Temperature Meter
e. DC Current Meter
f. DC Voltage
g. (3) Temperature Probes
5 Feature Group-B Software/Hardware lot
6 1-800-950-XXXX Software/Hardware lot
7 9.15 Meter Antenna 6
a. Reflector, motorized polarization, non-deiced 2 2 2
b. Extreme Mount, 120 azimuth, galvanized and 2 2 2
painted
c. Foundation Kit, 120 2 2 2
d. 4 port C-band Linear Feed 2 2 2
e. Motorized Single Speed Actuators 2 2 2
120 Azimuth travel, 208 VAC, 60 Hz
f. Model 8861 Antenna Motor Controller 2 2 2
g. Model 8860-2 Adaptrack Indoor Unit, -48 VDC 2 2 2
primary input power
h. Antenna Control Cable and Installation Kits 2 2 2
i. Lightning Protection Kit 2 2 2
j. Work Platform and Ladder Kit 2 2 2
k. Transmit Waveguide Interface Kit 2 2 2
l. Feed Deice 2 2 2
m. Extreme Environment Radome/Raven Protection Kit 2 2 2
</TABLE>
<PAGE>
Exhibit C - Software License
SOFTWARE LICENSE AGREEMENT
SCIENTIFIC-ATLANTA
END USER SOFTWARE LICENSE AGREEMENT FOR USE
WITH DESIGNATED EQUIPMENT
Customer: GCI Communication Corporation
Address: 2550 Denali St, Anchorage. AK. 99503-2781
Scientific-Atlanta, Inc. ("S-A") by its acceptance agrees to grant to Customer,
and Customer accepts on the following terms and conditions a license to the
identified Licensed Software for use only with the Designated Equipment set out
below.
This Agreement covers all Software provided by S-A to GCI for the purpose of
operating the S-A DAMA Network equipment, purchased by GCI from S-A pursuant the
Equipment Purchase Agreement of even date.
1.LICENSE GRANT
1.1 "Licensed Software" means a computer program, including any
modifications, updates or additions which may be supplied by S-A to
Customer, in object code or executable form in any medium, such as
magnetic tape, disks, or optical media; and related materials such as
flow charts, logic diagrams, manuals, and other documentation which are
provided to Customer by S-A with or for use in Designated Equipment.
Licensed Software may reside within Designated Equipment at the time of
delivery to Customer in which case identification of such equipment
shall also constitute identification of the corresponding software; or
it may be provided separately for installation on Designated Equipment.
1.2 Subject to these terms and conditions, S-A grants to Customer, subject
to the limitations herein, a personal, nonexclusive, nontransferable
license to use Licensed Software in and for the Designated Equipment
and not otherwise. This license may be assigned to any bona fide
successor in interest to Designated Equipment who first agrees in
writing to be bound by the terms of this Agreement. Should the Licensed
Software include a unique implementation of a security algorithm,
Customer shall have the exclusive right to use such unique Customer
security algorithm implementation in and for use with the Designated
Equipment and not otherwise.
1.3 Customer may make one (1) copy of Licensed Software (but not including
read-only memories or similar devices) for archival purposes only and
shall reproduce and attach all copyright and proprietary notices.
Customer shall not otherwise copy or allow to be copied Licensed
Software except to install Licensed Software on the Designated
Equipment. Customer agrees that S-A shall have the right to have an
independent accounting firm conduct an audit at Customer's premises
during normal business hours to verify the number of copies of Licensed
Software in use by Customer.
1.4 Customer shall not make any modifications to Licensed Software or
remove any proprietary notices of S-A or third parties found in or on
the Licensed Software. Customer agrees not to reverse engineer,
decompile, or reverse assemble Licensed Software except to the extent
that such prohibition may be unenforceable under applicable law.
1.5 Licensed Software is and shall remain the exclusive property of S-A. No
license other than that specifically stated herein is granted to
Customer, and Customer shall have no right to sublicense Licensed
Software nor any right under any patent, trademark, copyright, trade
secret or other intellectual property of S-A other than that granted by
this Agreement.
2. PROTECTION AND SECURITY
2.1 Customer agrees not to disclose, release, or make available in any form
any portion of Licensed Software to any person other than Customer's
own employees or contractors. Customer represents that its employees
and contractors having access to Licensed Software are or shall be
party to written agreements acknowledging a duty to protect Customer's
confidential materials, including the Licensed Software.
2.2 Customer shall keep Licensed Software (including archival copies, if
any), in a secure environment and shall take all steps reasonably
necessary to protect Licensed Software or any part thereof from
unauthorized disclosure or release. Customer may not export or reexport
the Licensed Software in any form except in compliance with all
applicable laws and regulations.
2.3 Customer expressly agrees that a breach of this Agreement will cause
irreparable harm to S-A and that S-A shall have the right to obtain
injunctive relief against any unauthorized use, disclosure, copying or
transfer of any part of Licensed Software. Licensed Software may
contain software from third parties who are intended to be third party
beneficiaries of this Agreement.
3. WARRANTY AND LIABILITY
3.1 S-A warrants that Licensed Software, as provided, shall conform to the
Specifications as that term is defined in the Equipment Purchase
Agreement of even date or if not covered by such Specification, the
published specification of S-A. During the first one (1) year after the
date of delivery of Licensed Software, S-A shall use reasonable
commercial efforts to correct errors detected in Licensed Software
after receiving notification of such errors from Customer. This
paragraph sets forth the entire obligation of S-A with respect to
Licensed Software and in no event shall S-A be liable to Customer for
loss of profit, indirect, special, or consequential damages arising out
of its provision of the Licensed Software to Customer under tort,
contract, or any other legal theory. In no event shall S-A be liable
to Customer for any damages, however based, in excess of ten thousand
United States dollars (US$10,000.00).
S-A MAKES NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED WITH RESPECT TO ANY
PRODUCTS OR SERVICES PROVIDED UNDER THIS AGREEMENT INCLUDING BUT NOT LIMITED
TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OTHER THAN COMPLIANCE WITH THE SPECIFICATIONS S-A DOES NOT WARRANT THAT THE
FUNCTIONS CONTAINED IN Licensed Software WILL MEET THE CUSTOMER'S
REQUIREMENTS, OR THAT THE OPERATION OF Licensed Software WILL BE
UNINTERRUPTED OR ERROR-FREE. S-A MAKES NO WARRANTY OF NONINFRINGEMENT,
EXPRESS OR IMPLIED. ANY THIRD PARTY SOFTWARE SUPPLIED WITH OR INCORPORATED IN
Licensed Software IS PROVIDED "AS-IS" WITHOUT WARRANTIES OF ANY KIND. IF ANY
ADDITIONAL WARRANTIES ARE SUPPLIED BY A THIRD PARTY, SUCH WARRANTIES WILL BE
OFFERED DIRECTLY BY SUCH THIRD PARTY TO Customer.
3.3 Customer acknowledges its responsibility to use all reasonable methods
to prove out and thoroughly test the operation of and output from
Licensed Software prior to its use in Customer's operations.
3.4 Unless otherwise provided in a separate writing, and subject only to
the warranty of this Section, S-A is under no obligation to provide
Customer with any modifications, updates, additions or revisions to
Licensed Software, nor to maintain Licensed Software in any manner.
3.5 In the event that any modifications are made to Licensed Software, any
and all warranty and other obligations of S-A shall immediately cease
with respect to such software.
4.INDEMNIFICATION
4.1 S-A shall provide defense and indemnification to the Customer under terms
set forth in Section 15 of the Equipment Purchase Agreement of even date
herewith.
5. TERM AND TERMINATION
This Agreement shall continue indefinitely unless terminated by one of the
parties. This Agreement may be terminated by Customer upon thirty (30) days'
notice to S-A and by S-A upon breach of any term of this Agreement, which
breach is not cured within thirty (30) days after notice by S-A, or should
Customer be adjudged a bankrupt or become a party to a similar proceeding for
the benefit of its creditors. Immediately after such termination, Customer
will deliver to S-A Licensed Software and any and all copies and
modifications thereof (except copies which reside within the Designated
Equipment and which shall be erased) and will, if requested, provide S-A with
its written certification that it has retained no copies.
6. TAXES
Except for taxes based on S-A's income, S-A shall not be responsible for any
federal, state or local taxes based upon Customer's purchase, possession or
use of Licensed Software or upon any charges payable or services performed
hereunder.
7. APPLICABLE LAW, INTEGRATION AND MODIFICATION
7.1 This Agreement shall be construed and enforced in accordance with the
laws of the State of Georgia, United States of America, not including
any conflicts of laws provisions thereof. The UN Convention on
Contracts for the Sale of Goods shall not apply.
7.2 This Agreement comprises the full and final understanding between S-A
and Customer, and merges and supersedes any and all other agreements,
understandings or representations, written or oral, with respect to the
subject matter hereof. It may not be modified except by a writing
signed by authorized representatives of both S-A and Customer, and
referring specifically to this Agreement.
7.3 Any attempt by Customer to assign this Agreement shall be void unless
the assignment is incidental to the sale of the Designated Equipment.
7.4 Waiver by any party of the breach of a provision of this Agreement by
the other party shall not be construed as a continuing waiver of such
provision or waiver of any other breach of any other provision of this
Agreement.
AGREED: ACCEPTED AND APPROVED:
CUSTOMER SCIENTIFIC-ATLANTA, INC.
/s/Ron Duncan /s/Gregory Taylor
By By
Ron Duncan Greg Taylor
Printed Name Printed Name
President VP Operations,
Systems Integ
Title Title
December 20, 1995 December 28, 1995
Date Date
<PAGE>
Exhibit D - Feature Group B/ 1 800 950 XXX Specification
S-A DAMA Features for FGB
and 800 950 1077
Dec. 12, 1995, Rev. 4
FGB (Feature Group B)
FGB is a trunk class offered by a Local Exchange Carrier (LEC) to an Inter
Exchange Carrier (IXC) before the advent of FGD equal access trunking was
available. In such a non equal access LEC office FGC signaling also exists but
historically is only grandfathered to AT&T as they were the original and only
IXC. (There have been exceptions in Alaska where GCI has received FGC from a LEC
for payphone access and 800 number lookup). FGB can coexist with FGD when that
service is available. There are two types of FGB signaling; one with ANI and one
without. FGB with ANI is a NECA offering without any additional charges over and
above FGB without ANI. The following will be a description of how it functions
and what S-A will have to incorporate into the DAMA product to provide this FGB
requirement for GCI. Drawings are also included showing the signaling protocol
exchanges for both types.
S-A shall design the DAMA product for the following two FGB trunking
signaling protocol. GCI's FGB Carrier Identification Code (CIC) is 1077. FGB
access NXX is 950 so the access number is 950 1077. There will be a new file to
be downloaded to the CUs called the "Parameter File". The CIC will be placed in
the new downloadable file. Format of the new file is TBD. FGB with ANI and FGB
without ANI will be selectable from the same field in the parameter screen where
FGC, FGD, IMT, and PBX are currently selected. The new entries will be FGBANI
and FGBNOANI. FGB with ANI and FGB without ANI and IMT protocols will reside
within the same state machine FGB###.BIN The first described is FGB with ANI.
FGB with ANI
Customer phone number is 907 265 5650
Customer dials GCI FGB Access number 950 1077
Customer wants to call 1+213+554+1212
LEC DAMA
Seize -------------------------------------
-----------------------------------------Wink
KP+950+1077+ST --------------------------
-----------------------------------------Off hook seizure
ANI Request
KP+0+265+5650+ST -------------------------
-----------------------------------------400 Hz Dial tone
-------------------------------------------
Customer then enters the called number as 1+213+554+1212 from their DTMF
phone. (No MF tones or rotary phones)
The customer with local LEC line will dial 950 1077. The LEC, at the LEC
GCI FGB trunk, will then send an off hook seizure to the DAMA channel unit. The
DAMA channel unit will then send an approximate 200 ms off hook wink to the LEC
when the DAMA is ready to receive digits in MF. The LEC will spill KP9501077ST
important digression -- In most all cases the LEC when asked will suppress all
digits of the called number and just spill KP ST. This shortens post dial delay.
The DAMA must be able to just recognize KP ST for this trunk type). The DAMA
then returns an off hook seizure to the LEC. The LEC recognizes this as the
request for ANI and then sends the ANI as KP 0 2655650 ST. This ends the LEC
trunking signalling protocol, (with the exception of ultimate on hook
disconnect). The DAMA then shall return a single frequency 400 Hz dial tone. (If
it hasn't been observed already this signalling protocol is identical to FGC
originating previously designed for DAMA). The similarity ends however at this
point where the DAMA returns dial tone. The originator of the call who first
dialed 950 1077 to access GCI DAMA (who will continue the signalling addressing)
must now at the DAMA dial tone enter the 1+10 digit called number. This 10 digit
destination number must replace the previous called number 9501077, if spilled,
with the new 10 digit called number for the purpose of call routing and
completion. The ANI will be used for billing. The DAMA channel unit must have
the filed 907 NPA for purpose of completing the ANI with the prefacing of the
907 to the seven digit ANI spill. Presently the DAMA NMS has ANI validation to
the extent that if an ANI is to be turned off for non payment it is entered into
the system to be blocked. If an ANI is to route normal it is not entered. S-A
shall provide the capability to reverse this based on a CU basis so that an ANI
must be entered to be allowed to route and that if no ANI is present in the NMS
database then it will block the call and go to recording.
Next will be described the second scenario of FGB without ANI.
FGB without ANI
Customer phone number is 907 265 5650 Customer dials GCI FGB Access
number 950 1077 Customer wants to call 1+213+554+1212 Customer has GCI
authorization code number 123456
LEC DAMA
Seize --------------------------------
-------------------------------------Wink
KP+950+1077+ST-------------------------
--------------------------------------Off hook seizure
400 Hz Dial tone
---------------------------------------
Customer then enters a 6 digit authorization code and the called number
as 123456 +1+213+554+1212 from their DTMF phone. (No MF tones or rotary
phones)
The customer with local LEC line will dial 950 1077. The LEC, at the LEC
GCI FGB trunk, will then send an off hook seizure to the DAMA channel unit. The
DAMA channel unit will then send an approximate 200 ms off hook wink to the LEC
when the DAMA is ready to receive digits in MF. The LEC will spill KP9501077ST
Important digression -- In most all cases the LEC when asked will suppress all
digits of the called number and just spill KP ST. This shortens post dial delay.
The DAMA must be able to just recognize KP ST for this trunk type). The DAMA
then returns an off hook seizure to the LEC along with single frequency 400 Hz.
dial tone. This ends the LEC trunking signalling protocol, (with the exception
of ultimate on hook disconnect). The user, in continuing the addressing
signalling, must enter at the tone a 6 digit authorization code and then the 1 +
10 digit called number from their DTMF phone. The authorization code will
replace the ANI for billing purposes only but will not replace the ANI for any
other purpose such as FGD repeat. Where FGB does not provide an actual ANI the
NS will use the telephone number entered in the routing table of the originating
CU as the ANI for FGC and FGD repeat. This scheme is the same as what FGC and
FGD do for an IMT originating call which has no ANI. If no telephone number is
used an ANI of KP+ST will be output by the FGC or FGD repeat terminating trunk.
This 6 digit authcode (Called the Hometown authcode feature by GCI Mktg when
going to non equal access areas) must be validated in the NMS in a database of 6
digit authcodes stored. S-A shall provide memory for up to 20 thousand 6 digit
authorization codes.
Bellcore standards documents are available for FGB signalling and function.
Compatibility Information for Feature Group B Switched Access Service -
TR-NPL-000175 Issue 1, July 1985 $16.50.
Feature Group B FSD 20-24-0300 -- TR-TSY-000698 Issue 1, June 1989 $30.00; Rev
1, July 1990
$N/A.
800 950 1077
This feature can be best described as 800 950 1077 "peel out". S-A shall
provide the following set of feature requirements. In the case where an
originating DAMA FGC or FGD channel unit receives the GCI 800 950 1077 number,
regardless of whether the channel unit trunk group is an 800 query or route as
is one, the DAMA NMS or channel unit will recognize this number and "peel it
out" and keep it temporarily within the originating channel unit for the
following additional call processing. All LEC trunking signalling to DAMA
channel unit has already taken place once the 800 950 1077 and ANI have been
received. Once the 800 950 1077 number is received and recognized S-A shall
design the DAMA product so that the channel unit will return a single frequency
400Hz. dial tone. Then the user, from a DTMF phone, will dial a 0+10 digit
destination number. Then the DAMA channel unit will return a "Bong tone" to the
user followed by a recording that says "Enter your GCI calling card number now".
Then the customer, from their DTMF phone, will enter a 14 digit GCI Big Dipper
calling card number. The 14 digit GCI Big Dipper calling card number will
replace the ANI sent to the NS for billing purposes. Then the return link will
send all this information to the NMS. The NMS will validate the 14 digit number.
If validated then the call will route and terminate to a destination channel
unit based on the 0+10 digit called number. At the same time a recording to the
originator will say "Thank you for using GCI". S-A shall provide memory for up
to 100,000 14 digit calling card numbers. In the event where the customer
originated the call from a rotary phone S-A shall provide for the following. At
the point where the DAMA channel unit has returned the single frequency 400 Hz.
dial tone and the customer cannot enter the DTMF 0+10 number as they are at a
rotary phone there needs to be incorporated a default timer value where the call
can be routed to the operator trunking should no DTMF digits be received before
the expiration of the timer. This timer needs to be programmable within the
range of 1 second to 15 seconds. If no DTMF digits are received within the
programmed default range then the call will be routed as a 0- FGD repeat call to
the terminating channel unit designated for 0- operator calls. That is the FGD
repeat trunk group will repeat the originating ANI and insert 0- as the called
number. This will allow an operator to handle the call verbally.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 30, 1995
AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000808461
<NAME> GENERAL COMMUNICATION, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,017
<SECURITIES> 0
<RECEIVABLES> 21,737
<ALLOWANCES> 295
<INVENTORY> 991
<CURRENT-ASSETS> 29,182
<PP&E> 84,243
<DEPRECIATION> 33,789
<TOTAL-ASSETS> 84,765
<CURRENT-LIABILITIES> 24,070
<BONDS> 9,056
0
0
<COMMON> 16,955
<OTHER-SE> 26,061
<TOTAL-LIABILITY-AND-EQUITY> 84,765
<SALES> 0
<TOTAL-REVENUES> 129,279
<CGS> 0
<TOTAL-COSTS> 70,221
<OTHER-EXPENSES> 19,738
<LOSS-PROVISION> 1,459
<INTEREST-EXPENSE> 1,146
<INCOME-PRETAX> 12,601
<INCOME-TAX> 5,099
<INCOME-CONTINUING> 7,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,502
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
