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, 1996
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 28, 1997 was approximately
$111,240,000.
The number of shares outstanding of the registrant's common stock as of March
21, 1997, was:
Class A common stock - 38,159,299 shares; and
Class B common stock - 4,071,659 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 6, 1997 are incorporated by reference into Part III of
this report.
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GENERAL COMMUNICATION, INC.
1996 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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Page
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PART I..........................................................................................................3
Item 1. BUSINESS............................................................................................3
General Background and Description of Business............................................................3
Industries................................................................................................4
Geographic Concentration and Alaska Economy...............................................................7
Products..................................................................................................8
Facilities...............................................................................................11
Customers................................................................................................12
Alaska Voice, Video and Data Markets.....................................................................14
Competition..............................................................................................15
Financial Information About Industry Segments............................................................19
Recent Developments......................................................................................19
Employees................................................................................................20
Environmental Regulations................................................................................20
Foreign and Domestic Operations and Export Sales.........................................................20
Backlog of Orders and Inventory..........................................................................21
Patents, Trademarks, Licenses, Certificates..............................................................21
Regulation, Franchise Authorizations and Tariffs.........................................................21
Other....................................................................................................22
Item 2. PROPERTIES.........................................................................................22
Item 3. LEGAL PROCEEDINGS..................................................................................25
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................25
PART II........................................................................................................26
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........................26
Market Information for Common Stock......................................................................26
Holders..................................................................................................26
Dividends................................................................................................26
Item 6. SELECTED FINANCIAL DATA............................................................................27
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............28
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA......................................................................................................35
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............67
PART III
Incorporated by reference from the Company's Proxy Statement for its
1997 Annual Shareholder's Meeting.
PART IV........................................................................................................68
Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.......................................................................................................68
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PART I
Item 1. BUSINESSItem 1. BUSINESS
General Background and Description of Business
General Communication, Inc. ("GCI"), an Alaska-based corporation,
together with its subsidiaries (collectively the "Company"), is a diversified
telecommunications provider with a leading position in facilities-based long
distance service in the state of Alaska and, as a result of recent acquisitions,
has become Alaska's leading cable television service provider. The Company seeks
to become the first significant provider in Alaska of an integrated package of
telecommunications and cable television services. Complementing its long
distance, cable, and cellular resale operations, the Company has announced plans
to provide facilities based competitive local exchange and wireless
communications services in Alaska's major population centers. The Company
expects to launch local exchange services in Anchorage as early as the second
half of 1997. The Company also acquired a state-wide 30 MHz B block personal
communication service ("PCS") license in June 1995 for approximately $1.7
million and is currently evaluating various technologies for a proposed wireless
PCS network.
Telecommunication Services. GCI supplies a full range of common-carrier
long-distance and other telecommunication products and services to residential,
commercial and government users. The Company operates a state-of-the-art,
competitive telecommunications network employing the latest digital transmission
technology based upon fiber optic and digital microwave facilities within and
between Anchorage, Fairbanks and Juneau, a digital fiber optic cable linking
Alaska to the networks of other carriers in the lower 49 states and the use of
satellite transmission to remote areas of Alaska (and for certain interstate
traffic as well).
The Company also offers data communication equipment sales and technical
services. Telecommunication services that the Company provides are carried over
facilities that are owned by the Company or are leased from other companies. 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 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.
Following the Company's acquisition of cable television companies as described
below, MCI's ownership interest at December 31, 1996 totaled approximately 23.4
percent.
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.
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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.
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.
Cable Services. As a result of acquisitions completed effective October 31,
1996, the Company has become Alaska's leading cable television service provider
to residential, commercial and government users in the state of Alaska. The
Company's cable systems serve 21 communities and areas in Alaska, including the
state's three largest urban areas, Anchorage, Fairbanks, and Juneau. As of
December 31, 1996 the Company cable systems passed approximately 162,500 homes
or approximately 74% of all households in Alaska and served approximately
102,115 subscribers representing approximately 63% of households passed. The
Company cable systems consisted of approximately 1,780 miles of installed cable
plant having 300 to 450 MHz of channel capacity.
Cable television services are provided through GCI Cable, Inc. ("GCI
Cable") and through its ownership in Prime Cable of Alaska L.P., and GCI Cable's
wholly owned subsidiaries GCI Cable/Fairbanks, Inc., and GCI Cable/Juneau, Inc.
GCI Cable and its subsidiaries are Alaska corporations and were incorporated in
1996. GCI Cable is a wholly-owned subsidiary of GCI. Prime Cable of Alaska L.P.
is a Delaware limited partnership.
Industries
The Company believes that the size and growth potential of the voice, video
and data market, the increasing deregulation of telecommunications services, and
the increased convergence of telephony, wireless and cable services offer the
Company considerable opportunities to integrate its telecommunications and cable
services and expand into communications markets both within and, longer-term,
outside of Alaska. The Company expects the rate of growth in industry-wide
telecommunications revenues to increase as the historical dominance of monopoly
providers is challenged as a result of deregulation. Considerable deregulation
has already taken place in the United States as a result of the Federal
Telecommunications Act of 1996 (the "1996 Telecom Act") with the barriers to
competition between telecommunications, local exchange and cable providers being
lowered. The Company believes that its acquisition of cable television systems
and its development of local exchange service and PCS leave it well positioned
to take advantage of this deregulation process in telecommunications markets.
The telecommunications and cable television industries have been
characterized by rapid technological change, frequent new service introductions
and evolving industry standards. The U.S. telecommunication industry remains in
a state of flux, with companies faced with the
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challenges of new technologies and rapid changes in the competitive and
regulatory environment. Growing competition has resulted in lower prices, which
could stimulate ongoing volume gains, even in the heavily saturated U.S. market.
The 1996 Telecom Act, 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.
Expanding voice markets such as computer-telephony integration, and
wireline and wireless Private Branch Exchanges ("PBXs"), are expected to
continue to drive growth in the telecommunications market in 1997. 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 services. Telecommuting,
PBXs and internetworking are among the market forces pushing the growth.
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. Videoconferencing and unified
messaging are two applications analysts expect to become popular in the future.
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 electronic mail.
Communication sectors not traditionally competitive with telephone
companies, such as cable and wireless services, are projected to grow an average
of 10.9% per year. This compares with the projected 3% average per year growth
in revenue for traditional local telephone services through 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 enable them 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, 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.
Mergers continue to be expected throughout the telecommunications industry
aimed at creating geographic clustering and expansion of the breadth of services
offered to customers (i.e.,
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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 1997 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 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-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.
Industry analysts predict 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 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 10 years.
The 1996 Telecom 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 opportunities exist for other service
providers, particularly commercial
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mobile radio service ("CMRS") providers. Within the local exchange market
consumers likely will be presented with an array of choices for local telephone
service.
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.
The 1996 Telecom Act substantially changed the competitive and regulatory
environment for telecommunications providers by significantly amending the
Communications Act including certain of the rate regulation provisions
previously imposed by the Cable Television Consumer Protection and Competition
Act of 1992 (the "1992 Cable Act"). The 1996 Telecom Act provides that rate
regulation of the cable programming service tier will be phased out altogether
in 1999. Further, the regulatory environment will continue to change pending,
among other things, the outcome of legal challenges and FCC rulemaking and
enforcement activity in respect of the 1992 Cable Act and the completion of a
significant number of FCC rulemakings under the 1996 Telecom Act.
The confluence of new technology and consumer response is forcing
competition among telephone, computer, and entertainment industries just as each
industry converges on similar digital technologies. 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 will likely intensify. To survive in this competitive
environment, the Company must respond to this technologically driven change with
services that its customers demand.
Geographic Concentration and Alaska Economy
The Company offers telecommunication and video services to customers
primarily throughout Alaska. As a result of this geographic concentration, the
Company's growth and operations depend upon economic conditions in Alaska. The
economy of Alaska is dependent upon the natural resource industries, and in
particular oil production, as well as tourism, government, and United States
military spending. Any deterioration in these markets could have an adverse
impact on the Company. Oil revenues over the past several years have contributed
in excess of 75% of the revenues from all segments of the Alaska economy. The
volume of oil transported by the TransAlaska Oil Pipeline System over the past
20 years has been as high as 2.0 million barrels per day in 1988. Over the past
several years, it has begun to decline and is expected to average approximately
1. 4 million barrels per day in 1997. The volume of oil transported by that
pipeline is expected to decrease to 1. 0 million barrels per day in less than
ten years, based upon present developed oil fields using the pipeline for
transport.
The two largest producers of oil in Alaska (the primary users of the
TransAlaska Oil Pipeline System) independently resolved in 1996 to substantiate
their commitment to resource development in the state by redoubling their
respective efforts to explore, develop and produce new oil fields and to enhance
recovery from existing fields to offset the decline in production from the
Prudhoe Bay field. One of these producers has resolved to staunch that decline
by 1999. Both companies have invested large sums of money in developing and
implementing oil recovery techniques at the Prudhoe Bay field and other nearby
fields. Effective March 1997, the State of Alaska passed new legislation
relaxing state oil royalties with respect to marginal oil fields that the oil
companies claim would not be economic to develop otherwise. No assurance can be
given that these two oil companies or other oil companies doing business in
Alaska will be successful in discovering new fields or further developing
existing fields which are economic
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to develop and produce oil with access to the pipeline or other means of
transport to market, even with the reduced level of royalties. Should the oil
companies not be successful in these discoveries or developments, the trend of
continued decline in oil production from the Prudhoe Bay field area is
inevitable with a corresponding adverse impact on the economy of the state, in
general, and on demand for telecommunications and cable television services,
and, therefore, on the Company, in particular.
The Company has, since its entry into the telecommunication marketplace
aggressively marketed its services to seek a larger share of the available
market. However, with a small population of approximately 600,000 people,
one-half of whom are located in the Anchorage area and the rest of whom are
spread out over the vast reaches of Alaska, the customer base in Alaska is
limited. No assurance can be given that the driving forces in the Alaska
economy, and in particular, oil production, will continue at levels to provide
an environment for expanded economic activity.
Products
Telecommunication Services. The Company offers a broad spectrum of
telecommunication services to residential, commercial and government customers
primarily throughout Alaska. The Company operates in three industry segments and
offers four primary product lines. The telecommunication services industry
segment offers long-distance message toll services, private line and private
network services, the cable television industry segment offers cable television
services, and the local services industry segment intends to offer local
telecommunication services.
The Company's long distance services industry segment is engaged in the
transmission of interstate and intrastate switched MTS and private line and
private network communication service between the major communities in Alaska,
and the remaining United States and foreign countries. The Company's message
toll services include intrastate, interstate and international direct dial, 800,
calling and debit card, operator and enhanced conference calling, as well as
termination of northbound toll service for MCI, U. S. Sprint ("Sprint") and
several large resellers who do not have facilities of their own in Alaska. The
Company also provides origination of southbound calling card and 800 toll
services for MCI and Sprint customers. Regulated telephone relay services for
the deaf, hard-of-hearing and speech impaired are provided through the Company's
operator service center. The Company offers its message services to commercial,
residential, and government subscribers. Subscribers may generally cancel
service at any time. Toll related services account for approximately 86.5%,
92.8% and 90.4% of the Company's 1996, 1995 and 1994 total revenues,
respectively. 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.
The Company 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 its competitors.
In addition to providing communication services, the Company designs,
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 business. 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. The Company's equipment sales and services revenue totaled
$10.4 million in the year ended December 31, 1996, or approximately 6.3% of
total revenues. Presently, there are five companies in Alaska that actively sell
and maintain data and voice communication systems.
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The Company's ability to integrate telecommunications networks and data
communication equipment has allowed it to maintain its market position on the
basis of "value added" support rather than price competition. The Company has
expanded its technical services business to include outsourcing, onsite
technical contract services and telecommunications consulting. The Company has
consolidated its technical services business into a new department, Enterprise
Services. This department provides a number of technical operating and
engineering services directly to commercial customers. These services are
blended with other GCI transport products into unique customer solutions,
including managed services and outsourcing. In addition to serving many
commercial customers through projects and managed services, Enterprise Services
has two significant outsource management contracts. The Company was awarded a 3
year extension to its existing outsource contract with BP Exploration (Alaska)
("BP") and given additional work scope associated with the customer's North
Slope telecommunications operations. In this Contract, which would otherwise
have expired in April 1997, the Company has assumed overall responsibility for
the customer's Alaska communications services. BP is the largest oil company
presently operating in Alaska. The Company has entered into the second contract
year of a five-year outsource contract with National Bank of Alaska. The Company
has assumed responsibility for the bank's communications services in over 65
branch locations throughout the State.
The Company, using its new demand assigned multiple access ("DAMA")
facilities, expanded its network to 56 additional locations within the state of
Alaska in 1996 which facilities management expects to be fully operational in
1997. 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 Alaska
Public Utilities Commission ("APUC") and Federal Communications Commission
("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 partial deployment occurred in 1996, with services in some areas commencing
during the fourth quarter of 1996. Construction and deployment costs are
expected to total $19 to $20 million, of which $18.9 million had been incurred
through December 31, 1996.
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 $1.7 million is anticipated to allow
the Company to introduce new PCS services in Alaska.
Cable Services. The programming services offered to subscribers of the
Company's cable television systems differ by system (all information as of
December 31, 1996).
Anchorage, Bethel, Kenai and Soldotna systems. Each system offered a basic
service. In addition, Anchorage and Bethel offer a cable programming service
("CPS"). A new product tier ("NPT") is only offered in the Anchorage cable
system. The Anchorage system, which is located in the urban center for Alaska,
is fully addressable, with all optional services scrambled, aside from the
broadcast basic. Kenai, Soldotna, and Bethel had fewer channels, less service
options and less an urban orientation, and use traps for program control. As a
result, these smaller systems do not have access to pay-per-view services.
The composition and rates of the levels of service vary between the
systems. Anchorage cable system offers a basic service that includes the
18-channel basic. The Anchorage cable system offers a CPS which includes 26
channels at an additional cost. Subscribers, for an additional cost, received
the six channel NPT service which includes TNT, CNN, Discovery, America's
Talking, Outdoor Life and the Sci-/Fi Channel. The Bethel cable system offers a
basic service
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and a CPS of 13 channels for an additional cost per month. The basic service for
the Kenai/Soldotna cable system consisted of 32 channels. Pay TV services are
available either individually or as part of a value package. Commercial
subscribers such as hospitals, hotels and motels were charged negotiated monthly
service fees. Apartment and other multi-unit dwelling complexes received basic
services at a negotiated bulk rate.
Fairbanks, Juneau, Ketchikan and Sitka systems. The programming services
currently offered to subscribers are structured so that each cable system
offered a basic service and a CPS. Each of the cable systems has different basic
service packages at different rates. The Fairbanks cable system offered a CPS
that included 12 channels and no pay-per-view service. The cable system
"satellite service" included the limited service options plus 24 additional
channels. The Juneau cable system offered an 11-channel basic service package
and a CPS Tier 1 that included the basic service plus an additional 4 channels.
The system also offered a CPS Tier 2 which consisted of the basic service plus
an additional 34 channels. The Ketchikan system offered an 8-channel basic
service and a CPS Tier 1 which consisted of the basic service plus 33 additional
channels. The system also offered a CPS Tier 2 which consisted of the basic
service, the CPS Tier 1 and an additional 4 channels. The Sitka system offered
an 8 channel basic service. An expanded basic service included the basic service
plus 38 additional channels.
Kodiak, Valdez, Cordova, Petersburg, Wrangell, Kotzebue and Nome systems.
These systems offered up to 30 channels of the most popular basic cable
channels, as well as the major broadcast networks, packaged into three levels of
service. The basic service consisted of three channels, one of which was a PBS
channel. The CPS Tier 1 (which included the basic service) had either 24 or 25
channels. The CPS Tier 2 had between 8 and 14 cable channels. In addition, each
system offered 4 or 5 channels of premium pay services, except for Kodiak which
offered 8 channels of premium pay services and 3 channels of pay-per-view
programming. In 1994, the Kodiak cable system was rebuilt to allow added channel
capacity. At that time, addressability was added to the system in order to add
the 3 channels of pay-per-view movies.
Seward system. The Seward cable system offered 39 channels packaged into
two levels of service. The basic service consisted of 3 channels, one of which
was a PBS channel. The CPS had 30 channels (including the basic service). All of
the channels, with the exception of local origination programming, were received
via satellite. In addition there were five channels of premium pay services. The
system is fully addressable. In addition, the system provides 12 channels to 300
outlets in a State of Alaska correction facility through a separate receive and
headend site.
Homer system. The Homer cable system offered 36 cable channels packaged
into two levels of service. The basic service consisted of 7 channels, including
the local translator channels. The CPS had 36 channels (including the basic
service channels). All of the channels, with the exception of three local
translator channels and local origination programming were received via
satellite. In addition there were five channels of premium pay services. The
system was fully addressable.
Seasonality. Long distance revenues have historically been highest in the
summer months as a result of temporary population increases attributable to
tourism and increased seasonal economic activity such as construction,
commercial fishing, and oil and gas activities. Cable television revenues, on
the other hand, are higher in the winter months because consumers tend to watch
more television, and spend more time at home, during these months. The Company's
ability to implement construction projects is also reduced during the winter
months because of cold temperatures, snow and short daylight hours.
Customer-sponsored research. The Company has not expended material amounts
during the last three fiscal years on customer-sponsored research activities.
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Facilities
Telecommunication Services. Currently, the Company's telecommunication
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. The Company 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 the Company's southbound traffic to the
remaining 49 states and international destinations. During 1996, the Company
expanded its network by constructing DAMA earth station facilities in 56
additional communities in rural Alaska.
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-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.
Pursuant to a purchase and lease-purchase option agreement entered into in
August 1995 the Company leases C-band transponders on Hughes Communications
Galaxy, Inc. ("Hughes") Galaxy IX satellite and has agreed to acquire satellite
transponders on Hughes Galaxy X satellite to meet its long-term satellite
capacity requirements. The Galaxy X satellite is expected to be placed in
service during the third quarter of 1998. The Company paid a $9.1 million
deposit to Hughes during 1996. The balance payable upon expected delivery of the
transponders in 1998 is not expected to exceed $41 million.
The Company 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.
Cable Services. The Company's cable television businesses are located in
Anchorage, Eagle River, Chugiak, Kenai, Soldotna, Bethel, Fort Richardson,
Elmendorf Air Force Base, Fairbanks, Fort Wainwright, Eielson Air Force Base,
Juneau, Sitka, Ketchikan, Petersburg, Wrangell, Cordova, Valdez, Kodiak,
Kotzebue, and Nome, Alaska. Company facilities include cable plant and head-end
distribution equipment. Certain of the head-end distribution centers are
co-located with customer service and administrative offices.
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Customers
Telecommunication Services. The Company had approximately 93,900, 85,600
and 73,100 active Alaska subscribers to its message telephone service at
December 31, 1996, 1995 and 1994, respectively. Approximately 11,000, 9,500 and
9,300 of these were business and government users at December 31, 1996, 1995 and
1994, respectively, and the remainder were residential customers. MTS revenues
averaged approximately $9.9 million per month during 1996.
Substantially all service areas, in which the Company has facilities,
except Bethel, Alaska and most locations serviced by DAMA facilities, have
completed the equal access balloting process. The Company estimates it carries
33% to 49% of the southbound interstate MTS traffic and 21% to 48% of the
intrastate MTS traffic originating in those service areas.
<TABLE>
A summary of switched MTS traffic minutes follows:
<CAPTION>
Interstate Minutes
---------------------------------------
Combined
Interstate
Inter- and
South-bound North-bound Calling national International Intrastate
For Quarter ended Card Minutes Minutes Minutes
----------------------------------------------------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994 54,884 39,664 4,431 1,234 100,213 18,711
June 30, 1994 57,493 38,293 4,220 1,316 101,322 20,318
September 30, 1994 60,301 39,678 4,210 1,414 105,603 21,048
December 31, 1994 58,548 40,424 4,605 1,354 104,931 19,564
------ ------ ----- ----- ------- ------
Total 1994 231,226 158,059 17,466 5,318 412,069 79,641
======= ======= ====== ===== ======= ======
March 31, 1995 58,759 41,600 4,351 1,381 106,091 21,208
June 30, 1995 63,475 43,721 4,113 1,556 112,865 23,051
September 30, 1995 70,219 45,027 4,233 1,699 121,178 23,883
December 31, 1995 70,570 46,545 5,518 1,749 124,382 25,228
------ ------ ----- ----- ------- ------
Total 1995 263,023 176,893 18,215 6,385 464,516 93,370
======= ======= ====== ===== ======= ======
March 31, 1996 76,369 49,158 6,094 1,890 133,511 28,910
June 30, 1996 81,753 51,465 6,049 1,964 141,231 30,671
September 30, 1996 86,094 52,856 6,453 1,896 147,299 31,253
December 31, 1996 82,255 55,675 7,863 1,774 147,567 30,374
------ ------ ----- ----- ------- ------
Total 1996 326,471 209,154 26,459 7,524 569,608 121,208
======= ======= ====== ===== ======= =======
</TABLE>
All minutes data were taken from the Company's billing statistics reports.
In 1993, the Company entered into a significant business relationship with
MCI which includes the following agreements: (1) the Company agreed to terminate
all Alaska-bound MCI long distance traffic and MCI agreed to terminate all of
the Company's long distance traffic terminating in the lower 49 states excluding
Washington, Oregon and Hawaii; (2) MCI licensed certain service marks to the
Company for use in Alaska; (3) MCI, in connection with providing to the Company
credit enhancement to permit the Company to purchase an undersea cable linking
Seward, Alaska, with Pacific City, Oregon, leased from the Company all of the
capacity owned by the Company on the undersea fiber optic cable and the Company
leased such capacity
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back from MCI; (4) MCI purchased certain service marks of the Company; and (5)
the parties agreed to share some communications network resources and various
marketing, engineering and operating resources. The Company also handles MCI's
800 traffic originating in Alaska and terminating in the lower 49 states and
handles traffic for MCI's calling card customers when they are in Alaska.
Concurrently with these agreements, MCI purchased approximately 31% of GCI's
Common Stock and presently controls nominations to two seats on the Board. In
conjunction with the Cable Acquisition Transactions, MCI purchased an additional
two million shares at a premium to the then current market price for $13 million
or $6.50 per share.
Revenues attributed to the MCI Agreement in 1996, 1995, and 1994 totaled
$29.2 million, $23.9 million and $19.5 million, or 17.7%, 18.5%, and 16.7% of
total revenues, respectively. The contract was amended in March, 1996 extending
its term three years to March 31, 2001. The amendment also reduced the rate in
dollars to be charged by the Company for certain MCI traffic for the period
April 1, 1996 through July 1, 1999 and thereafter. The rate reduction applied to
the number of minutes carried by the Company in 1996 reduced the Company's 1996
revenue by approximately $322,000. With the amendments, the Company is assured
that MCI, the Company's largest customer, will continue to make use of the
Company's service during the extended term.
In 1993 the Company entered into a long-term agreement with Sprint,
pursuant to which the Company agreed to terminate all Alaska-bound Sprint
long-distance traffic and Sprint agreed to handle substantially all of the
Company's international traffic. Services provided pursuant to the contract with
Sprint resulted in revenues in 1996, 1995, and 1994 of approximately $18.8
million, $14.9 million, and $12.4 million or approximately 11.4%, 11.5%, and
10.6% of total revenues, respectively.
Both MCI and Sprint are major customers of the Company in its
telecommunication 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 790 commercial and government accounts in
1996. Private lines and private network communication products and services
generated approximately 8.6% of total long-distance revenues in the year ended
December 31, 1996.
Although the Company has several agreements to facilitate the origination
and termination of international toll traffic, it has neither foreign operations
nor export sales (see -Foreign and Domestic Operations and Export Sales).
Cable Services. As of December 31, 1996, the Company's cable television
systems passed approximately 162,500 homes and served approximately 102,115
subscribers. Revenues derived from cable television services totaled $9.5
million for the two-month period of initial operations ended December 31, 1996.
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<PAGE>
Alaska Voice, Video and Data Markets
The Alaskan voice, video and data markets are unique within the United
States. Alaska is physically distant from the rest of the United States and is
characterized by large geographical size and relatively small, dense population
clusters (with the exception of population centers such as Anchorage, Fairbanks
and Juneau). It lacks a well-developed terrestrial transportation
infrastructure, and the majority of Alaska's communities are accessible only by
air or water. As a result, Alaska's telecommunications networks are different
from those found in the lower 49 states.
Alaska today relies extensively on satellite-based long distance
transmission for intrastate calling between remote communities where investment
in a terrestrial network would be uneconomic or impractical. Also, given the
remoteness of Alaska's communities and lack, in many cases, of major civic
institutions such as hospitals, libraries and universities, Alaskans are
dependent on telecommunications to access the resources and information of large
metropolitan areas in the rest of the U.S. and elsewhere. In addition to
satellite-based communications, the telecommunications infrastructure in Alaska
includes traditional copper wire, digital microwave links between Anchorage and
Fairbanks and Juneau and fiber optic cable. For interstate and international
communication, Alaska is currently connected to the lower 49 states by undersea
fiber optic cable with a capacity of nine DS3s and is backed-up by additional
satellite capacity.
Prior to 1982, Alascom was the sole long distance carrier in Alaska. Under
an agreement with the State of Alaska, Alascom was required to maintain a number
of low bandwidth links and expand service to remote or less developed areas of
the state. Interstate rates initially charged for Alaska telecommunications
services had been substantially higher than interstate rates in the contiguous
48 states. In 1972, the FCC established a policy of rate integration intended to
equalize all domestic interstate rates based on distances of calls. This policy
was used to support a subsidy mechanism to help Alascom cover higher costs
associated with rural operations. When the Company began providing interstate
long distance service in 1982, AT&T Corp. ("AT&T") provided almost all of the
telecommunications services in the lower 49 states, and Alascom provided almost
all of the long distance telecommunications services in Alaska and between
Alaska and the lower 49 states and foreign countries. Although Alascom's
business was highly subsidized, the Company competed against Alascom without the
advantage of a subsidy. In 1983, the State of Alaska petitioned the FCC to
initiate a rulemaking to determine how to rationalize the 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. This action ultimately led to a negotiated
buyout of Alascom from Pacific Telecom, Inc. ("PTI") by AT&T in August 1995 for
consideration of approximately $350 million. After the buyout, Alascom changed
its name to AT&T Alascom.
The Alaskan telecommunications business today comprises three distinct
markets: long distance services (interstate and intrastate), local exchange
services and wireless communications services (cellular and eventually PCS). In
the local exchange market, the Company will compete against various incumbent
local exchange carriers including the Anchorage Telephone Utility ("ATU") and
PTI in Juneau. PTI is also expected to be the local exchange carrier in
Fairbanks by the end of 1997. In the wireless communications services market,
the Company's PCS business expects to compete against the cellular subsidiaries
of AT&T and ATU in the Anchorage market and the cellular subsidiaries of PTI and
others outside of Anchorage. In the long distance market, the Company competes
against AT&T Alascom and may in the future compete against ATU or new market
entrants. For calendar year 1996, the Company estimates that the aggregate
telecommunications market in Alaska generated revenues of approximately $704
million. Of this amount, approximately $387 million was attributable to
interstate and intrastate long distance service, $282 million was attributable
to local exchange services, and $35 million was attributable to wireless
communications services.
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<PAGE>
The market for programmed video services in Alaska includes traditional
broadcast television, cable television, wireless cable, and direct broadcast
satellite ("DBS") systems. The urban centers in Alaska are served by broadcast
television stations including network affiliates and independent stations.
Anchorage, Fairbanks and Juneau are served by seven, four and two broadcast
stations, respectively. In addition, several smaller communities such as Bethel
are served by one local television station. In addition, other rural communities
without cable systems receive a single state sponsored channel of television by
a satellite dish and a low power transmitter.
In Alaska, cable television was introduced in the 1970s to provide
television signals to communities with few or no available off-air television
signals and to communities with poor reception or other reception difficulties
caused by terrain interference. Since that time, as on the national level, the
cable television providers in Alaska have added non-broadcast programming,
utilized improved technology to increase channel capacity and expanded service
markets to include more densely populated areas and those communities in which
off-air reception is not problematic.
At present, 21 communities and areas in Alaska, including the state's three
largest urban areas (Anchorage, Fairbanks and Juneau) are served by the
Company's Cable Systems. As of December 31, 1996, the acquired cable systems
passed 162,500 homes or approximately 74% of all households in Alaska. A number
of cable operators other than the Company provide cable service in Alaska. All
of these companies are relatively small, with the largest having fewer than
6,000 subscribers.
Competition
Telecommunication Services. The telecommunications industry is intensely
competitive, rapidly evolving and subject to constant technological change.
Competition is based upon pricing, customer service, billing services and
perceived quality. Certain of the Company's competitors are substantially larger
and have greater financial, technical and marketing resources than the Company.
Although the Company believes it has the human and technical resources to pursue
its strategy and compete effectively in this competitive environment, its
success will depend upon its continued ability to profitably provide high
quality, high value services at prices generally competitive with, or lower
than, those charged by its competitors.
The Company's principal competitor in long distance services, AT&T Alascom,
has substantially greater resources than the Company. This competitor's
interstate rates are integrated with those of AT&T Corp. and are regulated in
part by the FCC. While the Company initially competed based upon offering
substantial discounts, those discounts have been eroded in recent years due to
lowering of prices by AT&T Alascom. Under the terms of AT&T's acquisition of
Alascom, AT&T Alascom rates and services must "mirror" those offered by AT&T, so
changes in AT&T prices indirectly affect the rates and services of the Company.
AT&T's and AT&T Alascom's prices are regulated under a price cap plan whereby
their rate of return is no longer regulated or restricted. AT&T and AT&T Alascom
are 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 the following: (1) small businesses or
residential customers; (2) users of 800 services; and (3) large business
customers including government. Price increases by AT&T and AT&T Alascom
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. However, if AT&T Alascom significantly lowers its rates, the Company
may be forced to reduce its rates, which could have a material adverse effect on
the Company.
15
<PAGE>
In the local exchange market, the Company believes that the 1996 Telecom
Act and state legislative regulatory initiatives and developments, as well as a
recent series of transactions and proposed transactions between telephone
companies, long distance carriers and cable companies, increase the likelihood
that barriers to local exchange competition will be substantially reduced or
removed. These initiatives include requirements that local exchange carriers
negotiate with entities such as the Company to provide interconnection to the
existing local telephone network, to allow the purchase, at cost-based rates, of
access to unbundled network elements, to establish dialing parity, to obtain
access to rights-of-way and to resell services offered by the incumbent local
exchange carriers. Certain pricing provisions of the Interconnection Decision
implementing the interconnection portions of the 1996 Telecom Act have been
challenged and are currently stayed by the U.S. Court of Appeals for the Eighth
Circuit, on a jurisdictional basis. While the stay may affect the level of
prices in the near term, it does not appear that it will limit or delay the
development of competition in the Alaskan local exchange switched services
market. In addition the 1996 Telecom Act expressly prohibits any legal barriers
to competition in intrastate or interstate communications service under state
and local laws. The 1996 Telecom Act further empowers the FCC, after notice and
an opportunity for comment, to preempt the enforcement of any statute,
regulation or legal requirement that prohibits, or has the effect of
prohibiting, the ability of any entity to provide any intrastate or interstate
telecommunications service.
The 1996 Telecom Act provides incumbent local exchange carriers with new
competitive opportunities. The 1996 Telecom Act removes previous restrictions
concerning the provision of long distance service by local exchange carriers and
also provides them with increased pricing flexibility. Under the 1996 Telecom
Act, the Regional Bell Operating Companies will, upon the satisfaction of
certain conditions, be able to offer long distance services that would enable
them to duplicate the "one-stop" integrated telecommunications approach used by
the Company. The Company believes that it has certain advantages over these
companies in providing its telecommunications services, including the Company's
brand awareness by Alaskan customers, its owned telecommunications network, and
management's prior experience in, and knowledge of, the Alaskan market. The 1996
Telecom Act provides that rates charged by incumbent local exchange carriers for
interconnection to the incumbent carrier's network are to be nondiscriminatory
and based upon the cost of providing such interconnection, and may include a
"reasonable profit," which terms are subject to interpretation by regulatory
authorities. If the incumbent local exchange carriers charge alternative
providers such as the Company unreasonably high fees for interconnection to the
local exchange carriers' networks, or significantly lower their retail rates for
local exchange services, the Company's local service business could be placed at
a significant competitive disadvantage.
In May 1996, ATU filed an application with the APUC to provide long
distance telecommunications services as a reseller of intrastate
telecommunications services throughout the state of Alaska. The application was
acted upon favorably in September 1996. ATU has also announced plans to offer
interstate long distance services. ATU is a public utility owned by the
Municipality of Anchorage.
Competition for the Company's PCS services will come primarily from
traditional cellular providers and new PCS entrants. Anchorage has mature
cellular systems in both the wireline (ATU) and non-wireline (AT&T Wireless)
license blocks that together have achieved approximately a 20% penetration of
potential subscribers based on the number of existing wireline access lines.
Fairbanks and Juneau have not achieved the cellular penetration that has
occurred in Anchorage. Cellular pricing has been high in Alaska compared to the
lower 48 states, but rates in Anchorage have become more competitive since the
Company entered the cellular resale market two years ago.
Of the five other PCS licensees, none have announced plans for service in
Alaska. The Alaska A block PCS license that was awarded at the same time as the
Company's PCS license, has been
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<PAGE>
offered for sale, but no transaction had taken place as of March 15, 1997. The
high cost per POP of a PCS system infrastructure may deter some license owners
from building a system. PCS has the potential disadvantage when compared to
cellular service of requiring the licensee to enter into interconnection
agreements with cellular providers in order to permit PCS subscribers with dual
mode handsets to continue to receive service once they stray from the PCS
service area. However, the Company believes that the portion of the Alaska
population which will need to operate outside the Company's planned PCS service
areas is small.
Cable Services. Cable television systems face competition from alternative
methods of receiving and distributing television signals and from other sources
of news, information and entertainment such as off-air television broadcast
programming, newspapers, movie theaters, live sporting events, interactive
computer services and home video products, including videotape cassette and
video records. The extent to which a cable television system is competitive
depends, in part, upon the cable system's ability to provide quality programming
and other services at competitive prices.
The 1996 Telecom Act authorizes LECs and others to provide a wide variety
of video services competitive with services provided by cable systems and to
provide cable services directly to subscribers. Certain LECs in Alaska may seek
to provide video services within their telephone service areas through a variety
of distribution methods. Cable systems could be placed at a competitive
disadvantage if the delivery of video services by LECs becomes widespread since
LECs may not be required, under certain circumstances, to obtain local
franchises to deliver such video services or to comply with the variety of
obligations imposed upon cable systems under such franchises. Issues of
cross-subsidization by LECs of video and telephony services also pose strategic
disadvantages for cable operators seeking to compete with LECs who provide video
services.
Cable television systems generally operate pursuant to franchises granted
on a non-exclusive basis. The 1992 Cable Act gives local franchising authorities
jurisdiction over basic cable service rates and equipment in the absence of
"effective competition," prohibits franchising authorities from unreasonably
denying requests for additional franchises and permits franchising authorities
to operate cable systems. Well financed businesses from outside the cable
industry (such as the public utilities that own certain of the poles on which
cable is attached) may become competitors for franchises or providers of
competing services.
The Cable Systems face limited additional competition from private
satellite master antenna television ("SMATV") systems that serve condominiums,
apartment and office complexes and private residential developments. The
operators of these SMATV systems often enter into exclusive agreements with
building owners or homeowners' associations. Due to the widespread availability
of reasonably priced earth stations, SMATV systems now can offer both improved
reception of local television stations and many of the same satellite-delivered
program services offered by franchised cable systems. The ability of the Cable
Systems to compete for subscribers in residential and commercial developments
served by SMATV operators is uncertain. The 1996 Telecom Act gives cable
operators greater flexibility with respect to pricing of cable television
services provided to subscribers in multi-dwelling unit residential and
commercial developments. It also broadens the definition of SMATV systems not
subject to regulation as a franchised cable television service.
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<PAGE>
The availability of reasonably-priced home satellite dish earth stations
("HSDs") enables individual households to receive many of the
satellite-delivered program services formerly available only to cable
subscribers. Furthermore, the 1992 Cable Act contains provisions, which the FCC
has implemented with regulations, to enhance the ability of cable competitors to
purchase and make available to HSD owners certain satellite-delivered cable
programs at competitive costs.
In recent years, the FCC and the Congress have adopted policies providing a
more favorable operating environment for new and existing technologies that
provide, or have the potential to provide, substantial competition to cable
systems. These technologies include, among others, direct broadcast satellite
("DBS") services which transmit signals by satellite to receiving facilities
located on the premises of subscribers. Programming is currently available to
the owners of HSDs through conventional, medium and high-powered satellites.
Primestar Partners L.P., a consortium comprised of cable operators and a
satellite company, commenced operation in 1990 of a medium-power DBS satellite
system using the Ku portion of the frequency spectrum and, as of December 31,
1996, provided service consisting of approximately 95 channels of programming,
including broadcast signals and pay-per-view services. DirecTV, which has
entered into a marketing alliance with AT&T, began offering nationwide
high-power DBS service in 1994 accompanied by extensive marketing efforts.
Several other major companies are preparing to develop and operate high-power
DBS systems, including MCI and News Corp. DBS systems are expected to use video
compression technology to increase the channel capacity of their systems to
provide movies, broadcast stations and other program services competitive with
those of cable systems. The extent to which DBS systems are competitive with the
service provided by cable systems depends, among other things, on the
availability of reception equipment at reasonable prices and on the ability of
DBS operators to provide competitive programming. DBS services do not currently
provide local programming and DBS signals are subject to degradation from
atmospheric conditions such as rain and snow. The receipt of DBS signals in
Alaska currently has the disadvantage of requiring subscribers to install larger
satellite dishes (generally four to six feet in diameter) because of the weaker
satellite signals available in northern latitudes. In addition, existing
satellites have a relatively low altitude above the horizon when viewed from
Alaska, making their signals subject to interference from mountains, buildings
and other structures.
Cable television systems also compete with wireless program distribution
services such as multichannel, multipoint distribution service ("MMDS")
providers which use low-power microwave frequencies to transmit video
programming over-the-air to subscribers. There are MMDS operators who are
authorized to provide or are providing broadcast and satellite programming to
subscribers in areas served by several of the Company's cable systems, including
Anchorage, Fairbanks and Juneau. Additionally, the FCC has allocated frequencies
in the 28 GHz band for a new multichannel wireless video service similar to
MMDS. MMDS operations have the disadvantage of requiring line-of-sight access,
making their signals subject to interference from mountains, buildings and other
structures, and are subject to interference from rain, snow and wind. The
Company is unable to predict whether wireless video services will have a
material impact on its operations.
Other new technologies may become competitive with non-entertainment
services that cable television systems can offer. The FCC has authorized
television broadcast stations to transmit textual and graphic information useful
both to consumers and businesses. The FCC also permits commercial and
non-commercial FM stations to use their subcarrier frequencies to provide
non-broadcast services including data transmissions. The FCC established an
over-the-air interactive video and data service that will permit two-way
interaction with commercial and educational programming along with informational
and data services. LECs and other common carriers also provide facilities for
the transmission and distribution to homes and businesses of interactive
computer-based services, including the Internet, as well as data and other
non-video services. The FCC has conducted spectrum auctions for licenses to
provide PCS. PCS will enable license
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<PAGE>
holders, including cable operators, to provide voice and data services. The
Company recently acquired a PCS license.
Advances in communications technology as well as changes in the marketplace
are constantly occurring. The Company cannot predict the effect that ongoing or
future developments might have on the telecommunications and cable television
industries or on the Company specifically.
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 9 of the Notes to
Consolidated Financial Statements included in Part II of this Report.
Recent Developments
Acquisitions. Effective October 31, 1996, the Company acquired securities
and assets ("Cable Acquisition Transactions") of the following seven cable
television companies ("Cable Companies"): (1) all of the equity interests in
Prime Cable of Alaska, L.P., a Delaware limited partnership ("Prime"); (2)
substantially all of the assets of three corporations comprising Alaskan Cable
Network: Alaskan Cable Network/Fairbanks, Inc. ("Alaskan Cable/Fairbanks");
Alaskan Cable Network/Juneau, Inc. ("Alaskan Cable/Juneau"); and Alaskan Cable
Network/Ketchikan-Sitka, Inc. ("Alaskan Cable/Ketchikan"); (3) substantially all
of the assets of Alaska Cablevision, Inc., a Delaware corporation ("Alaska
Cablevision"); (4) McCaw/Rock Homer Cable Systems, J.V., an Alaska joint venture
("McCaw/Rock Homer"); and (5) McCaw/Rock Seward Cable Systems, J.V., an Alaska
joint venture ("McCaw/Rock Seward"). These seven Cable Companies provide cable
television services to more than 102,000 subscribers through distribution
systems passing approximately 74% of the households throughout Alaska.
The total purchase price for the acquisition of the Cable Companies was
$280.1 million. The purchase price included issuance of 14.7 million shares of
GCI's class A common stock and cash, debt assumption and issuance of
subordinated notes. Financing for the transactions came from borrowings under a
new $205 million bank credit facility and from additional capital provided from
the sale of 2.0 million shares of GCI's Class A common stock to MCI for $6.50
per share. The convertible, subordinated notes were converted in accordance with
their terms into approximately 1.5 million shares of the Company's Class A
Common Stock in January 1997.
The acquisition is expected to 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 is expected
to provide a platform for developing new customer products and services over the
next several years.
Local Telecommunication Services. The Company filed an application in
March, 1996 with the APUC for authority to provide facilities based local
services in the Anchorage area using the ATU local loop and through wholesale
resale of ATU's retail service offerings. The APUC approved the Company's
application in February 1997 and granted the Company authority to provide local
services in the Anchorage area. Additionally, the APUC on January 15, 1997,
approved an arbitrated interconnection agreement between ATU and the Company.
This agreement will enable the company to sell ATU's local retail services at a
discount from retail rates. The agreement also enables the Company to sell
unbundled ATU network elements and to collocate certain of its switching and
transmission equipment facilities within ATU's wire centers.
During 1996, the Company completed construction of 38 miles of a planned
130 mile fiber
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<PAGE>
optic Metropolitan Area Network in Anchorage, over which it plans to offer
facilities-based local service to selected major customers, in those cases where
it is economically feasible to directly connect them to the network.
Additionally, the Metropolitan Area Network will provide supplemental capacity
and connectivity for cable television services. The Company intends to offer
local service to selected customers during the second half of 1997.
Employees
The Company and its subsidiaries employ approximately 758 persons as of
February 1, 1997, including employees involved with the operation of the
recently-acquired cable systems. The Company and its subsidiaries are not
parties to any union contracts with their employees. The Company believes that
its future success will depend upon its continued ability to attract and retain
highly skilled and qualified employees. The Company believes that its relations
with its employees are 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.
In the course of operating the cable television systems, the Company has
used various materials defined as hazardous by applicable governmental
regulations. These materials have been used for insect repellent, locate paint
and pole treatment, and as heating fuel, transformer oil, cable cleaner,
batteries, and in various other ways in the operation of those systems.
Management of the Company does not believe that these materials, when used in
accordance with manufacturer instructions, pose an unreasonable hazard to those
who use them or to 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 $6.3 million, $5.6 million and
$4.6 million for the years ended December 31, 1996, 1995 and 1994, respectively.
20
<PAGE>
Backlog of Orders and Inventory
As of December 31, 1996 and 1995, the Company's long distance services
segment had a backlog of equipment sales orders of approximately $364,000 and
$258,000, respectively. The increase in backlog as of December 31, 1996 can be
attributed primarily to sales growth in 1996 as compared to 1995. The Company
expects that all of the orders in backlog at the end of 1996 will be delivered
during 1997.
Patents, Trademarks, Licenses, Certificates of Public Convenience and
Necessity, and Military Franchises
Telecommunication Services. 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 long distance 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 30 megahertz block of spectrum for provision of PCS
services in Alaska. The Company's operations may require additional licenses in
the future.
Cable Services. Applications for transfer of control of 15 certificates of
public convenience and necessity held by the acquired cable companies to the
Company were approved in an APUC order dated September 23, 1996, with transfers
to be effective on October 31, 1996. Such transfer of control allowed the
Company to take control and operate the cable systems of the acquired cable
companies located in Alaska.
The approval of the transfer of the 15 certificates of public convenience
and necessity to the Company by the FCC is not required under federal law, with
one area of limited exception. The Cable Companies operate in part through the
use of several radio-band frequencies licensed through the FCC. These licenses
were transferred to the Company prior to October 31, 1996.
The Company obtained consent of the military commanders at the military
bases serviced by the acquired cable systems to the assignment of the respective
franchises for those bases.
Regulation, Franchise Authorizations and Tariffs
The following summary of regulatory developments and legislation does
not purport to describe all present and proposed federal, state, and local
regulation and legislation affecting the telecommunications and cable television
industries. Other existing federal and state regulations are currently the
subject of judicial proceedings, legislative hearings and administrative
proposals which could change, in varying degrees, the manner in which these
industries operate. Neither the outcome of these proceedings nor their impact
upon the telecommunications and cable television industries or the Company can
be predicted at this time. This section also sets forth a brief description of
regulatory, environmental, and tariff issues pertaining to the operations of the
Company.
The Company is subject to regulation by the FCC and by the APUC as a
non-dominant provider of long distance services. Among other regulatory
requirements, the Company is required to file tariffs with the FCC for
international service, and with the APUC for intrastate service but such tariffs
routinely become effective without intervention by the FCC, APUC or other third
parties since the Company is a non-dominant carrier. The Company received
approval from the APUC in February 1997 to permit the Company to provide local
exchange services throughout the existing service area of the Municipality of
Anchorage d/b/a Anchorage Telephone Utility. Military franchise requirements
also affect the Company in its
21
<PAGE>
provision of telecommunications and cable television services to military bases.
Substantial changes in the federal regulation of the telecommunications and the
cable industries were accomplished through the 1996 Telecom Act which was signed
into law in February, 1996. Certain provisions of the 1996 Telecom Act could
materially affect growth and operation of the telecommunications and cable
industries and the services provided by the Company. Although the 1996 Telecom
Act is expected to substantially lessen regulatory burdens, the
telecommunications and cable television industries may be subject to additional
competition as a result thereof. There are numerous rulemakings which have been
and which will be undertaken by the FCC, which will interpret and implement the
1996 Telecom Act's provisions. In addition, certain provisions of the 1996
Telecom Act are not immediately effective. Furthermore, certain of the 1996
Telecom Act's provisions have been, and are likely to continue to be, judicially
challenged. The Company is unable to predict the outcome of such rulemakings or
litigation or the substantive effect (financial or otherwise) of the 1996
Telecom Act and the rulemakings on the Company. The Company is also subject to
federal and state regulation as a cable television operator pursuant to the
Cable Communications Policy Act of 1984 (the "1984 Cable Act") and 1992 Cable
Act, both amended by the 1996 Telecom Act. The 1992 Cable Act significantly
expanded the scope of cable television regulation on an industry-wide basis by
imposing rate regulation, carriage requirements for local broadcast stations,
customer service obligations and other requirements. The 1992 Cable Act and the
FCC's rules implementing that Act generally have increased the administrative
and operational expenses and in certain instances required rate reductions for
cable television systems and have resulted in additional regulatory oversight by
the FCC and state or local (depending on the regulatory scheme) authorities.
Because the Company is authorized to offer local exchange services in
Alaska, it will be regulated as a competitive LEC by the APUC. In addition, the
Company will be subject to other regulatory requirements, including certain
requirements imposed by the 1996 Telecom Act on all LECs, which requirements
include permitting resale of LEC services, number portability, dialing parity,
and reciprocal compensation.
As a PCS licensee, the Company is subject to regulation by the FCC, and
must comply with certain buildout and other conditions of the license, as well
as with the FCC's regulations governing the PCS service. On a more limited
basis, the Company may be subject to certain regulatory oversight by the APUC
(e.g., in the areas of consumer protection and transfer of its license),
although states are not permitted to regulate the rates of PCS and other
commercial mobile service providers. PCS licensees may also be subject to
regulatory requirements of local jurisdictions pertaining to, among other
things, the siting of tower facilities.
Other
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
Telecommunication Services. The Company operates a state-of-the-art,
competitive telecommunications network employing the latest digital transmission
technology based upon fiber optic and digital microwave facilities within and
between Anchorage, Fairbanks and Juneau, a digital fiber optic cable linking
Alaska to the contiguous 48 states and providing access to other carriers'
networks for communications around the world, and the use of satellite
transmission to remote areas of Alaska (and for certain interstate traffic as
well).
The Company leases its long distance services industry segment's executive,
corporate and administrative facilities in Anchorage, Fairbanks and Juneau,
Alaska. The Company's operating,
22
<PAGE>
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.
The Company's long distance services segment owns properties and facilities
including satellite earth stations, and distribution, transportation and office
equipment. Additionally, the Company acquired in December 1992, access to
capacity on an undersea fiber optic cable from Seward, Alaska to Pacific City,
Oregon. The undersea fiber optic cable capacity is owned subject to an
outstanding mortgage. Substantially all of the Company's properties secure its
credit agreement and senior loan. See Note 6 to the Consolidated Financial
Statements in Item 8 for further discussion.
The Company entered into a purchase and lease-purchase option agreement in
August 1995 for the acquisition of satellite transponders on the Hughes Galaxy X
satellite to meet its long-term satellite capacity requirements. The balance
payable upon delivery of the transponders as early as the second quarter of 1998
is dependent upon a number of factors. The Company does not expect the remaining
balance payable at delivery to exceed $41 million. The Company expects to
further amend or refinance its credit agreement to fund its remaining
commitment. The agreement provides for the interim lease of transponder capacity
on the Hughes Galaxy IX satellite from June 1996 through the delivery of the
transponders to be purchased.
The Company 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.
The Company's MTS services and private line and network services, excluding
vSAT services, are distributed via its C-band satellite network which is also
used for transmission to remote areas of Alaska. In connection with its C-band
distribution, the Company owns and operates five 13-meter earth stations in
Anchorage, Fairbanks, Juneau, Alaska and Issaquah, Washington and Dallas, Texas.
In addition, the Company owns and operates six 9-meter and three 7-meter earth
stations throughout the state. The Company also owns 49% of a 13-meter earth
station in Adak, Alaska providing MTS and private line services. During 1996 the
Company installed six 9-meter earth stations in Barrow, Kotzebue, Nome, Bethel,
Dillingham, and King Salmon, Alaska.
The Company also uses its C-band capacity to operate a DAMA satellite
network to serve rural communities in Alaska, which includes features of both a
toll switch and a satellite transmission network. Most existing satellite
technology relies on fixed channel assignments to a central hub. The Company's
DAMA communication technology, developed in 1994, 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. A four-module demonstration
system was constructed in 1994 and was integrated into the Company's
telecommunications network in 1995. The Company's 56 site DAMA project in rural
communities of Alaska is substantially complete, and half of the sites are
currently providing service. The DAMA system is currently capable of interfacing
with local exchange carriers using standard toll to local office signaling
protocols.
The Company's Ku-band satellite network uses one leased Ku-band transponder
on the Hughes SBS5 satellite and will transition to an owned Ku-band transponder
on the Galaxy X satellite once that satellite is successfully launched. The
Ku-band network is higher power and is used primarily for point-to-point data
communications. The Company's Ku-band network comprises an 8.1-meter hub station
located in Anchorage, a 7.3-meter hub station located near
23
<PAGE>
Seattle, Washington, and provides services to 98 customer owned vSAT earth
stations located throughout the state of Alaska, 95 customer owned vSAT earth
stations in Hawaii, and 6 customer owned vSAT earth stations in the lower 48
states.
The Company utilizes leased digital microwave facilities from AT&T Alascom
to carry long distance traffic among and between Anchorage, Juneau and Fairbanks
Most of the Company's interstate long distance traffic is carried to the
contiguous 48 states, Hawaii and international destinations over an undersea
fiber optic cable that connects Pacific City, Oregon to Miura, Japan, with a
branch to Seward, Alaska. Of the nine DS3s of capacity in this undersea cable,
the Company owns one and leases 28% of another DS3 channel.
The Company's switched network consists of three medium capacity DSC
digital toll switches located in Anchorage, Fairbanks and Juneau, the three main
urban centers in Alaska. The Company owns and operates these switching centers
as well as a fourth digital toll switch in Seattle, Washington. The Company
leases switching capacity in Dallas, Texas from GTE Telecom. These switches
provide a wide range of toll services including routing of direct dial, calling
card, toll free and operator assisted calls.
Since 1990, the Company has utilized signaling system number 7 ("SS7") in
its main toll switched network to speed call setup. In 1993, the Company began
SS7 interconnection with other interexchange carriers and local exchange
carriers so that approximately half of the state's interstate direct dial and
toll free (800) traffic is currently processed using SS7 signaling. The Company
leases and operates a toll tandem switch located in Anchorage that provides the
Company's first intelligent network service for routing of toll free calls.
The Company's future switched network plans call for consolidating its
network on new combined long distance and local switches. Such a switch (a
Lucent 5ESS switch) was installed in Anchorage for activation in April 1997 and
is expected to be interconnected with the incumbent local exchange carrier's
network to allow carriage of local access traffic beginning as early as the
second half of 1997. Additional 5ESS combined long distance/local switches are
planned for installation in Seattle, Washington in 1997 or 1998, and for
Fairbanks and Juneau in 1998. These new switching systems will enable the
Company to offer local and long distance traffic, as well as operator assisted
calls, via a single switching platform. The switches will be SSP functional,
allowing the removal of the Company's current leased toll tandem switch. The
Company plans to add enhanced SS7 signaling capabilities and to introduce
advanced intelligent network switched services to its network in 1997.
The traffic patterns experienced by the Company in the Alaskan market vary
by location. The majority of interstate traffic is carried to and from the lower
49 by undersea fiber optic cable, with some traffic carried by leased digital
microwave facilities and satellite. In Anchorage, 93% of interstate long
distance traffic is routed to and from the lower 49 states via undersea fiber
and 7% of interstate traffic is routed via satellite. In Fairbanks, interstate
traffic is split 50% on a combined route of leased digital microwave facilities
and undersea fiber and 50% routed via satellite. Juneau's interstate traffic is
routed entirely by satellite. Intrastate traffic between Anchorage, Fairbanks
and Juneau is carried by a combination of leased digital microwave facilities
and satellite. Anchorage's intrastate traffic to Fairbanks is routed via leased
digital microwave facilities and intrastate traffic to Juneau is routed 52% by
leased digital microwave facilities and 48% by satellite. Intrastate traffic
between Juneau and Fairbanks is carried by leased digital microwave facilities.
In addition, the Company carries some traffic between Juneau and Ketchikan and
Sitka via leased digital microwave facilities. All other intrastate traffic is
carried predominantly by satellite.
The Company recently installed a new network monitoring and control center
in Anchorage, Alaska. The new control center enables the Company to centralize
its network
24
<PAGE>
personnel and to remotely monitor and reconfigure the network as needed. This
capability will result in reduced staffing and technical experience levels
required for maintenance of the Company's facilities.
Cable Services. The Cable Systems serve 21 communities and areas in Alaska
including Anchorage, Fairbanks and Juneau, the state's three largest urban
areas. As of December 31, 1996, the Cable Systems passed 162,500 homes or
approximately 74% of all households in Alaska and served 102,115 subscribers
representing 63% of households passed by the Cable Systems. As of that date, the
Cable Systems consisted of approximately 1,780 miles of installed cable plant
having between 300 to 450 MHz of channel capacity (or enough capacity to carry
from 70 to 130 channels).
Item 3. LEGAL PROCEEDINGS
Except as set forth in this item, neither the Company, its property or any
of its subsidiaries or their property is a party to or subject to any material
pending legal proceedings. The Company and its subsidiaries are parties to
various claims and pending litigation as part of the normal course of business.
The Company is also involved in several administrative proceedings and filings
with the FCC and state regulatory authorities. In the opinion of management, the
nature and disposition of these matters are considered routine and arising in
the ordinary course of business which management believes, even if resolved
unfavorably to the Company, would not have a materially adverse affect on the
Company's business or financial statements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Date of meeting - October 17, 1996
Nature of meeting - 1996 annual meeting
(b) Election of Directors:
Names of directors elected at the meeting:
John W. Gerdelman Votes: 33,599,891 For; 4,412 Withheld
Carter F. Page Votes: 33,599,891 For; 4,412 Withheld
Robert M. Walp Votes: 33,599,891 For; 4,412 Withheld
Names of directors whose term of office continued after the meeting:
Ronald A. Duncan
Donne F. Fisher
John W. Gerdelman
Carter F. Page
Larry E. Romrell
James M. Schneider
Robert M. Walp
(c) Other matters voted upon:
Approval of a plan of acquisition allowing the Company to acquire
all of the assets or securities of seven companies offering cable
television services in Alaska, expanding the Company Board by two
positions and in addition increasing its capital by issuing and
selling shares of the Company's Class A common stock to MCI.
Votes: 33,559,849 For; 412 Against; 44,042 Abstain
(d) Not applicable.
25
<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 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>
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
1996:
First Quarter 6 7/8 4 1/2 6 7/8 4 1/2
Second Quarter 9 1/4 6 9 1/4 6
Third Quarter 8 3/8 5 3/4 8 3/8 5 3/4
Fourth Quarter 8 1/4 5 3/4 8 1/4 5 3/4
</TABLE>
Holders
As of March 27, 1997 there were 1,771 holders of record of the Company's
Class A common stock and 697 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 6 to the
financial statements included in Part II of this Report).
26
<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,
--------------------------------------------------------
1996 1995 1994 1993 1992
(Amounts in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $164,894 129,279 116,981 102,213 96,499
Net earnings before income taxes $12,690 12,601 11,681 6,715 1,524
Net earnings $7,462 7,502 7,134 3,951 890
Net earnings per common share $0.27 0.31 0.30 0.17 0.02
Total assets1 $447,335 84,765 74,249 71,610 72,351
Long-term debt, including current portion (1) $223,242 9,980 12,554 20,823 37,235
Obligations under capital leases, including current portion $ 746 1,047 1,297 1,522 1,720
Preferred stock (2) $0 0 0 0 3,282
Total stockholders' equity (1, 3) $149,554 43,016 35,093 27,210 14,870
Dividends declared per Common share (4) $0.00 0.00 0.00 0.00 0.00
Dividends declared per Preferred share (5) $0.00 0.00 0.00 0.44 1.78
<FN>
- ------------------------
1 Increases in the Company's total assets, long-term debt and stockholders'
equity in 1996 as compared to 1995 result in part from the cable company
acquisitions and MCI stock issuance described in Notes (2) and (8) to the
financial statements included in Part II of this Report.
2 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.
3 The 1993 increase in stockholders' equity is primarily attributed to the
Company's issuance of common stock to MCI.
4 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 (6) to the
financial statements included in Part II of this Report.
5 The Company declared and issued stock dividends of approximately 304,000
shares of Class B Common Stock in 1992, and paid dividends totaling $153,000
in 1993 on its non-voting Series A 15% Convertible Cumulative Preferred Stock.
</FN>
</TABLE>
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<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto and the
other financial data appearing elsewhere.
Factors Affecting Future Performance
Future operating results of the Company will depend upon many factors and
will be subject to various risks and uncertainties, including those set forth in
this and other sections of Form 10-K. The information contained in Form 10-K
includes forward looking statements regarding the Company and the Cable
Companies' future performance. In particular, Form 10-K contains pro forma data
and comparative per share data giving effect to the consummation of the cable
company acquisitions. This pro forma information is based upon numerous
assumptions and is subject to various risks. Some or all of these assumptions
may prove to be inaccurate. Future results of the Company may differ materially
from any forward looking statement due to such assumptions and risks.
Overview
The Company has historically reported revenues principally from the
provision of interstate and intrastate long distance telecommunications services
to residential, commercial and governmental customers and to other common
carriers (principally MCI and Sprint). These services accounted for 86.5% of the
Company's telecommunications revenues in 1996. The balance of telecommunications
revenues have been attributable to corporate network management contracts,
telecommunications equipment sales and service and other miscellaneous revenues
(including revenues from prepaid and debit calling cards, the installation and
leasing of customers' VSAT equipment and fees charged to MCI and Sprint for
certain billing services). Factors that have the greatest impact on year-to-year
changes in telecommunications revenues include the rate per minute charged to
customers and usage volumes, usually expressed as minutes of use.
The Company's telecommunications cost of sales and services has consisted
principally of the direct costs of providing services, including local access
charges paid to LECs for the origination and termination of long distance calls
in Alaska, fees paid to other long distance carriers to carry calls that
terminate in areas not served by the Company's network (principally the lower 49
states, most of which calls are carried over MCI's network, and international
locations, which calls are carried principally over Sprint's network), and the
cost of equipment sold to the Company's customers. In 1996, local access charges
accounted for 49.8% of the telecommunication cost of sales and services, fees
paid to other long distance carriers represented 34.7%, satellite transponder
lease and undersea fiber maintenance costs represented 9.1%, and
telecommunications equipment accounted for 5.2% of telecommunication cost of
sales.
The Company's selling, general, and administrative expenses have consisted
of operating and engineering, service, sales and marketing, general and
administrative, legal and regulatory expenses. Most of these expenses consist of
salaries, wages and benefits of personnel and certain other indirect costs (such
as rent, travel, utilities and certain equipment costs). A significant portion
of selling, general, and administrative expenses, 28.6% in 1996, represents the
cost of the Company's sales, advertising and promotion programs.
The Company expects to commence offering local exchange services initially
in Anchorage during the second half of 1997, and expects that local services
will represent less than 2.0% of
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<PAGE>
revenues in 1997 and less than 8.0% in 1998. The Company expects that it may
generate moderately negative EBITDA from local services during this time period.
EBIDTA is an acronym representing earnings before interest, taxes, depreciation
and amortization. As a measure of a company's ability to generate cash flows,
EBITDA should be considered in addition to, but not as a substitute for, or
superior to, other measures of financial performance reported in accordance with
generally accepted accounting principles. EBIDTA, also known as operating cash
flow, is often used by analysts when evaluating companies in the cable
television industry.
The Company began developing plans for PCS wireless communications
service deployment in 1995 and is currently evaluating alternative technologies
for its proposed PCS network. The Company expects to launch its PCS service as
early as 1999.
Results of Operations
<TABLE>
The following table sets forth selected Statement of Operations data as a
percentage of total revenues for the periods indicated:
Year Ended December 31, Percentage Change
----------------------- -----------------
1995 1996
vs. vs.
1994 1995 1996 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues
Telecommunications services..... 100.0% 100.0% 94.2% 10.5% 20.2%
Cable services.................. --- --- 5.8% --- ---
Total revenues..................... 100.0% 100.0% 100.0% 10.5% 27.5%
Cost of sales and services...... 54.6% 55.8% 56.2% 12.9% 28.5%
Selling, general and
administrative
expenses..................... 28.6% 29.2% 28.1% 12.6% 23.1%
Depreciation and
amortization................. 5.7% 4.6% 5.7% (9.7)% 57.0%
Operating income................... 11.1% 10.4% 10.0% 3.9% 21.5%
Net earnings before income taxes... 10.0% 9.7% 7.7% 7.9% 0.7%
Net earnings....................... 6.1% 5.8% 4.5% 5.2% (0.5)%
Other Financial Data:
Cable operating income (1)......... --- --- 23.2% --- ---
Cable EBITDA (1)(2)............... --- --- 48.4% --- ---
Consolidated EBITDA (2)............ 16.8% 15.1% 15.7% (0.7)% 33.4%
<FN>
(1) Computed as a percentage of total cable services revenues.
(2) Computed before deducting management fees.
</FN>
</TABLE>
29
<PAGE>
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995.
Revenues
Total revenues increased 27.5% from $129.3 million in 1995 to $164.9
million in 1996. Long distance transmission revenues from commercial,
residential, governmental, and other common carrier customers increased 18.8%
from $120.0 million in 1995 to $142.6 million in 1996. This increase reflected a
22.6% increase in interstate minutes of use to 569.6 million minutes and a 29.8%
increase in intrastate minutes of use to 121.2 million minutes, principally due
to a new marketing program which the Company launched during the third quarter
of 1995. This program consisted of the introduction of a new flat-rate calling
plan ("Great Rate") coupled with telemarketing, direct sales, and the promotion
of a $1 million sweepstakes. Revenue growth in 1996 was also due to a 23.7%
increase in revenues from other common carriers (principally MCI and Sprint),
from $38.8 million in 1995 to $48.0 million in 1996 and a 23.7% increase in
private line and private network transmission services revenues, from $11.4
million in 1995 to $14.1 million in 1996. Systems sales and services revenues
increased 44.4% from $7.2 million in 1995 to $10.4 million in 1996, primarily
due to the commencement in the second quarter of 1996 of services provided under
a new outsourcing contract with National Bank of Alaska. The Company also
reported two months' of cable services revenues in 1996 following its
acquisition of the Cable Systems effective October 31, 1996.
The above increases in revenues were offset in part by a 6.3% reduction in
the Company's average rate per minute on long distance traffic from $0.191 per
minute in 1995 to $0.179 per minute in 1996. The decrease in rates resulted from
the Company's promotion of and customers' enrollment in new calling plans
offering discounted rates and length of service rebates, such new plans being
prompted in part by the Company's primary long distance competitor, AT&T
Alascom, reducing its rates.
Cost of Sales and Services
Cost of sales and services was $72.1 million in 1995 and $92.7 million in
1996. As a percentage of total revenues, cost of sales and services increased
from 55.8% in 1995 to 56.2% in 1996. The increase in cost of sales and services
as a percentage of revenues during 1996 as compared to 1995 resulted primarily
from the reduced average rate per minute billed to customers in 1996 as compared
to 1995 without an offsetting reduction in the rate per minute billed to the
Company for the local access and interstate termination services it obtains from
third parties. These increases were offset in part by refunds in the first two
quarters of 1996 aggregating approximately $960,000 from a local exchange
carrier and the National Exchange Carriers Association in respect of earnings by
them which exceeded regulatory requirements.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 23.1% from $37.7
million in 1995 to $46.4 million in 1996, and, as a percentage of revenues,
decreased from 29.2% in 1995 to 28.1% in 1996. Selling, general and
administrative expenses increased as a result of increased sales and customer
service volumes, bad debt expense totaling $1.7 million for 1996 compared to
$1.5 million in 1995 (directly associated with increased revenues), and
increased sales, advertising and telemarketing costs totaling $9.9 million in
1995 compared to $13.3 million in 1996 due to the introduction of various
marketing plans and other proprietary rate plans. Additionally, selling, general
and administrative expenses increased in 1996 due to increased personnel and
other costs totaling $2.7 million in sales, engineering, operations, accounting,
human resources, legal and regulatory, and management information services. Such
costs were associated with the development and introduction, or planned
introduction, of new products and services including local services, cable
television services, rural message and data telephone services, PCS services,
30
<PAGE>
and Internet services.
Depreciation and Amortization
Depreciation and amortization expense increased 56.7% from $6.0 million in
1995 to $9.4 million in 1996. This increase resulted primarily from the
Company's acquisition of the Cable Systems effective October 31, 1996.
Interest Expense, Net
Interest expense, net of interest income, increased 309.7% from $903,000
in 1995 to $3.7 million in 1996. This increase resulted primarily from increases
in the Company's average outstanding indebtedness resulting primarily from its
acquisition of the Cable Systems and construction of new facilities in rural
Alaska, offset in part by increases in the amount of interest capitalized during
1996.
Income Tax Expense
Income tax expense increased 2.0% from $5.1 million in 1995 to $5.2
million in 1996 due to an increase in net earnings before income taxes and a
slightly higher effective income tax rate from 40.5% in 1995 to 41.2% in 1996.
As a result of its acquisition of the Cable Companies described further
below, the Company acquired net operating loss carryforwards for income tax
purposes totaling $58.5 million which begin to expire in 2004 if not utilized.
The Company's utilization of these carryforwards is subject to certain
limitations pursuant to section 382 of the Internal Revenue Code. A valuation
allowance of $8.1 million was established to offset the deferred tax assets
related to these carryforwards due to uncertainty regarding realizability. 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
periods are reduced. The Company estimates that its effective income tax rate
for financial statement purposes will be approximately 42% in 1997.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994.
Revenues
Total revenues increased 10.5% from $117.0 million in 1994 to $129.3
million in 1995. Revenue growth was primarily attributable to increases in
minutes of use and the average rate per minute for long distance traffic. The
Company's average rate per minute increased 2.7% from $0.186 in 1994 to $0.191
in 1995. Interstate minutes of use increased 12.7% to 464.5 million minutes and
intrastate minutes of use increased 17.3% to 93.4 million minutes. Revenue
growth was also attributable to a 21.6% increase in revenues derived from other
common carriers (principally MCI and Sprint), from $31.9 million in 1994 to
$38.8 million in 1995, and a 7.6% increase in private line and private network
transmission services revenues, from $10.6 million in 1994 to $11.4 million in
1995.
These increases in revenues were partially offset by a 20.9% decline in
system sales and services revenues from $9.1 million in 1994 to $7.2 million in
1995. This decline was due to fewer large-dollar equipment sales orders received
during 1995 as well as a temporary reduction in the level of the Company's
outsourcing services provided to the oil field services industry.
Cost of Sales and Services
Cost of sales and services were $63.9 million in 1994 and $72.1 million in
1995. Cost of sales
31
<PAGE>
and services as a percentage of total revenues increased from 54.6% of revenues
in 1994 to 55.8% in 1995. The increase in cost of sales and services as a
percentage of revenues for 1995 as compared to 1994 resulted primarily from
increases in costs associated with the Company's lease of transponder capacity.
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. During 1995 the Company
incurred approximately $450,000 for nonrecurring costs related to breaks in the
undersea fiber optic cable and costs associated with its new DAMA technology.
The Company also experienced reduced margins associated with equipment sales and
service contracts.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 12.5% from $33.5
million in 1994 to $37.7 million in 1995. As a percentage of total revenues,
selling, general and administrative expenses increased from 28.6% in 1994 to
29.2% in 1995. Increases in selling, general and administrative expenses for the
period were primarily due to increased personnel necessary to support the
Company's expansion efforts and the increase in minutes of traffic carried.
Additional costs were incurred during the fourth quarter of 1995 attributable to
promotion of the Company's calling plans.
Depreciation and Amortization
Depreciation and amortization expense decreased 9.1% from $6.6 million in
1994 to $6.0 million in 1995 resulting primarily from the Company's retirement
of two owned wideband transponders in August 1994 that were replaced with leased
rather than owned capacity.
Interest Expense, Net
Interest expense, net of interest income, decreased 30.5% from $1.3
million in 1994 to $903,000 in 1995. This decrease resulted primarily from a
reduction in the Company's average outstanding indebtedness.
Income Tax Expense
Income tax expense increased 13.3% from $4.5 million in 1994 to $5.1
million in 1995 due to an increase in net earnings before income taxes and a
higher effective income tax rate from 38.9% in 1994 to 40.5% in 1995.
Liquidity and Capital Resources
The Company reported cash flows from operating activities in 1996 of $22.4
million net of changes in the components of working capital. Additional sources
of cash in 1996 included long-term borrowings of $208.0 million, sales of
additional common stock to MCI of $13.0 million, and payments on notes
receivable of $288,000. The Company's uses of cash included payment of the cash
portion of the consideration for the acquisition of the Cable Companies. The
total purchase price for the acquisition of the Cable Companies was $280.1
million and was financed by the Company through the issuance of approximately
14.7 million shares of GCI's class A common stock valued at $86.7 million, cash,
debt assumption of $105.2 million, and issuance of subordinated notes totaling
$10 million. The subordinated notes were converted in accordance with their
terms into approximately 1.5 million shares of the Company's Class A Common
Stock in January 1997.
The Company's expenditures for property and equipment, including
construction in
32
<PAGE>
progress, totaled $38.6 million and $8.9 million during 1996 and 1995,
respectively. The Company anticipates that capital expenditures plan for 1997
includes approximately $60 to $65 million in capital necessary to pursue its
business plans, to maintain the network and to enhance transmission capacity to
meet projected traffic demands. Planned capital expenditures over the next five
years include $160 million to $180 million for long-distance network expansion,
(excluding completion of the Company's rural DAMA network), $50 million to $60
million for facilities and equipment necessary to commence providing local
exchange services, and $45 million to $50 million for upgrades to the Cable
Systems The Company has not yet finalized its construction plans for a PCS
network and therefore cannot predict the level or timing of its PCS network
expenditures. Sources of funds for these planned capital expenditures will
likely include internally generated cash flows, borrowings under the Company's
credit facilities, and additional debt and equity offerings. Sufficient
additional financing has not been arranged as of March 25, 1997 for total
planned capital expenditures. To the extent that the necessary financing is not
obtained, certain of the Company's capital expenditures will be postponed until
such financing is obtained.
Other uses of cash during 1996 included payment of a $9.1 million
transponder purchase deposit, repayment of $5.0 million of long-term borrowings
and capital lease obligations, purchase of $621,000 of stock held by an officer
which stock is held in treasury to satisfy a deferred compensation obligation in
lieu of satisfying the obligation in cash, payment of loan fees totaling
$764,000, and investment in other assets.
Net receivables increased $7.1 million from December 31, 1995 to December
31, 1996 resulting from: (1) increased MTS revenues in 1996 as compared to 1995;
(2) increased amounts due from other common carriers attributed to growth in
their traffic carried by the Company; (3) increased private line sales activity
in 1996 as compared to 1995; and (4) increases in receivables resulting from the
cable company acquisitions.
The Company reported a working capital deficit of $22.8 million as of
December 31, 1996 as compared to working capital of $5.1 million at December 31,
1995. As disclosed in Note 6 to the accompanying Consolidated Financial
Statements, the Company restructured its senior credit facility in April 1996.
Since the entire facility matures within the twelve-month period ending December
31, 1997, the outstanding balance as of December 31, 1996 was included in
current maturities of long-term debt. Except for the classification of the
Company's senior indebtedness as current, working capital at December 31, 1996
totaled $7.3 million, a $2.2 million increase from 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 payable upon expected delivery of
the transponders in 1998 is 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 remaining balance payable on
delivery to exceed $41 million.
The Company obtained necessary APUC and FCC approvals and commenced
construction and deployment of DAMA technology in 56 sites in rural Alaska on a
demonstration basis in 1996. Construction and deployment is expected to be
substantially completed in mid 1997, with services expected to be provided at
that time. Construction and deployment costs are expected to total $19 to $20
million, of which $18.9 million had been incurred through December 31, 1996.
Alaska Economy
The Company offers telecommunication and video services to customers
primarily throughout Alaska. As a result of this geographic concentration, the
Company's growth and
33
<PAGE>
operations depend upon economic conditions in Alaska. The economy of Alaska is
dependent upon the natural resource industries, in particular oil production, as
well as tourism, government, and United States military spending. Any
deterioration in these markets could have an adverse impact on the Company. Oil
revenues over the past several years have contributed in excess of 75% of the
revenues from all segments of the Alaska economy. The volume of oil transported
by the TransAlaska Oil Pipeline System over the past 20 years has been as high
as 2.0 million barrels per day in 1988. Over the past several years, it has
begun to decline and is expected to average approximately 1.4 million barrels
per day in 1997. The volume of oil transported by that pipeline is expected to
decrease to 1.0 million barrels per day in less than ten years, based upon
present developed oil fields using the pipeline for transport.
The two largest producers of oil in Alaska independently resolved in 1996
to pursue exploration, development and production activities within Alaska. Both
producers have invested large sums of money in oil recovery technology and
development to enhance oil recovery in marginal oil fields. Effective March 1997
the State of Alaska passed new legislation relaxing state oil royalties on
marginal oil fields to facilitate development of such marginal oil fields. No
assurance can be given that oil companies will be successful in discovering new
oil fields, further developing existing oil fields, or increasing yields in
marginal oil fields. If the oil companies are not successful, continued decline
in oil production is likely in the future. This decline would adversely affect
the state and demand for telecommunications and cable television services.
Seasonality
Long distance revenues have historically been highest in the summer months
as a result of temporary population increases attributable to tourism and
increased seasonal economic activity such as construction, commercial fishing,
and oil and gas activities. Cable television revenues, on the other hand, are
higher in the winter months because consumers tend to watch more television, and
spend more time at home, during these months. The Company's ability to implement
construction projects is also reduced during the winter months because of cold
temperatures, snow and short daylight hours.
Inflation
The Company does not believe that inflation has a significant effect on
its operations.
Accounting Pronouncement
In June 1996, the Final Accounting Standards Board issued SFAS No. 125,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. SFAS No. 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996 and is to be applied prospectively. This Statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings. Management of the Company does not expect that adoption of SFAS No.
125 will have a material impact on the Company's financial position, results of
operations, or liquidity.
34
<PAGE>
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company are filed under this
Item, beginning on Page 36. The financial statement schedules required under
Regulation S-X are filed pursuant to Item 14 of this Report.
35
<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, 1996 and 1995, 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, 1996.
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 did not audit the financial
statements of GCI Cable, Inc., a wholly owned subsidiary, which 1996 statements
reflect total assets of $310 million and total revenues of $9.5 million of the
related consolidated totals. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for GCI Cable, Inc., is based solely on the report of the
other auditors.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Anchorage, Alaska
February 21, 1997
36
<PAGE>
Report of Independent Auditors
Board of Directors
GCI Cable, Inc. and Subsidiaries
We have audited the consolidated balance sheet of GCI Cable, Inc. and
Subsidiaries ("the Company") as of December 31, 1996 and the related
consolidated statements of operations, shareholder's equity and cash flows for
the period from inception (April 12, 1996) to December 31, 1996 (not presented
separately herein). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of GCI Cable, Inc.
and Subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for the period from inception (April 12,
1996) to December 31, 1996 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Austin, Texas
February 14, 1997
37
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
- ------------------------------------------------------------------ ---------------------------
(Amounts in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,349 4,017
---------------------------
Receivables:
Trade 27,953 21,737
Other 1,412 253
---------------------------
29,365 21,990
Less allowance for doubtful receivables 597 295
---------------------------
Net receivables 28,768 21,695
---------------------------
Prepaid and other current assets 2,236 1,566
Deferred income taxes, net (note 7) 835 746
Inventories 1,589 991
Notes receivable (note 4) 325 167
---------------------------
Total current assets 47,102 29,182
---------------------------
Property and equipment, at cost (notes 6, 9,
10 and 11)
Land and buildings 692 73
Telephony distribution systems 81,414 67,434
Cable television distribution systems 52,284 0
Transportation equipment 1,064 0
Support equipment 19,994 11,610
Property and equipment under capital leases 2,030 2,030
---------------------------
157,478 81,147
Less amortization and accumulated depreciation 41,497 33,789
---------------------------
Net property and equipment in service 115,981 47,358
Construction in progress 20,770 3,096
---------------------------
Net property and equipment 136,751 50,454
Notes receivable (note 4) 1,016 904
Intangible assets, net of amortization
(notes 2 and 5) 250,920 3,125
Transponder deposit (note 13) 9,100 0
Deferred loan costs, net of amortization 900 110
Other assets, at cost, net of amortization 1,546 990
---------------------------
Total assets $ 447,335 84,765
===========================
See accompanying notes to consolidated financial statements.
</TABLE>
38 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ------------------------------------------------------------------- ---------------------------
(Amounts in thousands)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt (note 6) $ 31,969 1,689
Current maturities of obligations under capital leases
(note 11) 71 282
Accounts payable 23,677 16,861
Accrued payroll and payroll related obligations 3,830 2,108
Accrued liabilities 4,173 1,134
Accrued income taxes (note 7) 0 547
Accrued interest 2,708 132
Subscriber deposits and deferred revenues 3,449 1,317
---------------------------
Total current liabilities 69,877 24,070
Long-term debt, excluding current maturities
(note 6) 191,273 8,291
Obligations under capital leases, excluding
current maturities (note 11) 0 26
Obligations under capital leases due to related parties,
excluding current maturities
(notes 10 and 11) 675 739
Deferred income taxes, net (note 7) 33,720 7,004
Other liabilities 2,236 1,619
---------------------------
Total liabilities 297,781 41,749
---------------------------
Stockholders' equity (notes 2, 3, 6, 7 and 8):
Common stock (no par):
Class A. Authorized 50,000,000 shares; issued and
outstanding 36,586,973 and 19,680,199 shares at December
31, 1996 and 1995, respectively 113,421 13,912
Class B. Authorized 10,000,000 shares; issued and outstanding
4,074,028 and 4,175,434 shares at December 31, 1996 and
1995, respectively; convertible on a share-per-share basis
into Class A common stock 3,432 3,432
Less cost of 199,081 and 122,611 Class A common shares held in
treasury at December 31, 1996 and 1995, respectively (1,010) (389)
Paid-in capital 4,229 4,041
Retained earnings 29,482 22,020
---------------------------
Total stockholders' equity 149,554 43,016
---------------------------
Commitments and contingencies (notes 11 and 13)
Total liabilities and stockholders' equity $ 447,335 84,765
===========================
See accompanying notes to consolidated financial statements.
</TABLE>
39
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(Amounts in thousands except per share amounts)
<S> <C> <C> <C>
Revenues (notes 9 and 10):
Telecommunication services $ 155,419 129,279 116,981
Cable services 9,475 0 0
--------- --------- ---------
Tota1 revenues 164,894 129,279 116,981
Cost of sales and services 92,664 72,091 63,877
Selling, general and administrative expenses 46,412 37,691 33,468
Depreciation and amortization 9,409 5,993 6,639
--------- --------- ---------
Operating income (note 9) 16,409 13,504 12,997
Interest expense, net (notes 3 and 6) 3,719 903 1,316
--------- --------- ---------
Net earnings before income taxes 12,690 12,601 11,681
Income tax expense (notes 3 and 7) 5,228 5,099 4,547
--------- --------- ---------
Net earnings $ 7,462 7,502 7,134
========= ========= =========
Net earnings per common share $ 0.27 0.31 0.30
========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
40
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Class A
Shares of Class A Class B Shares
Common Stock Common Common Held in Paid-in Retained
(Amounts in thousands) Class A Class B Stock Stock Treasury Capital Earnings
------- ------- ----- ----- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
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 72 --- 96 --- --- --- ---
Shares issued under warrant agreement,
net 254 --- 185 --- --- --- ---
Shares issued and issuable under
officer stock option agreements 281 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
Net earnings --- --- --- --- --- --- 7,462
Class B shares converted to Class A 102 (102) --- --- --- --- ---
Tax effect of excess stock compensation
expense for tax purposes over amounts
recognized for financial reporting
purposes --- --- --- --- --- 187 ---
Shares issued to MCI (notes 2 and 8) 2,000 --- 13,000 --- --- --- ---
Shares issued pursuant to
acquisitions, net of costs totaling
$432 (note 2) 14,723 --- 86,278 --- --- --- ---
Shares purchased and held in Treasury --- --- --- --- (621) --- ---
Shares issued under stock option plan 82 --- 231 --- --- --- ---
Shares issued and issuable under
officer stock option agreements --- --- --- --- --- 1 ---
---------------------------------------------------------------------------
Balances at December 31, 1996 36,587 4,074 $113,421 3,432 (1,010) 4,229 29,482
===========================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
41
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
(Amounts in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,462 7,502 7,134
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 9,409 5,993 6,639
Amortization of deferred loan costs 63 230 100
Deferred income tax expense 2,252 1,017 1,588
Deferred compensation and compensatory
stock options 619 433 343
Disposals of property and equipment 30 170 0
Bad debt expense, net of write-offs (34) (114) (312)
Other noncash income and expense items (42) 354 (36)
Change in operating assets and liabilities
(note 3) 2,612 (1,307) 3,063
------------ ----------- -----------
Net cash provided by operating activities 22,371 14,278 18,519
------------ ----------- -----------
Cash flows from investing activities:
Acquisitions of businesses, net of cash
acquired (notes 2 and 3) (72,818) 0 0
Purchases of property and equipment (38,642) (8,938) (10,604)
Purchases of other assets including long-term
deposits (10,959) (510) (1,110)
Proceeds from the sale of investment security 0 832 0
Notes receivable issued (515) (251) (339)
Payments received on notes receivable 288 184 10
Restricted cash investments 0 0 684
------------ ----------- -----------
Net cash used in investing activities (122,646) (8,683) (11,359)
------------ ----------- -----------
Cash flows from financing activities:
Long-term borrowings 208,000 0 0
Repayments of long-term borrowings and capital
lease obligations (5,039) (2,824) (8,494)
Proceeds from common stock issuance 13,231 82 360
Purchase of treasury stock (621) (61) 0
Retirement of bank debt assumed (105,200) 0 0
Payment of deferred loan costs (764) (424) 0
------------ ----------- -----------
Net cash provided (used) by financing activities 109,607 (3,227) (8,134)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents 9,332 2,368 (974)
Cash and cash equivalents at beginning of year 4,017 1,649 2,623
------------ ----------- -----------
Cash and cash equivalents at end of year $ 13,349 4,017 1,649
============ =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
42
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(l) Organization and summary of Significant Accounting Principles
(a) Organization
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 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.
Cable television services are provided through GCI Cable, Inc. and
through its ownership in Prime Cable of Alaska L.P. ("Prime"), and
through GCI Cable, Inc.'s wholly owned subsidiaries GCI
Cable/Fairbanks, Inc., and GCI Cable/Juneau, Inc. (collectively "GCI
Cable" or "Cable Companies"). GCI Cable, Inc. and its subsidiaries
are Alaska corporations and were incorporated in 1996. GCI Cable,
Inc. is a wholly-owned subsidiary of GCI. Prime is a limited
partnership organized under the laws of the state of Delaware whose
partnership interests are wholly owned by GCI Cable, Inc.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of GCI,
its wholly-owned subsidiaries GCC, Communication Services, GCI Cable,
and Communication Services' wholly owned subsidiary Leasing Company
(collectively "the Company"). All significant intercompany balances
and transactions have been eliminated in consolidation.
43 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(c) Net Earnings Per Common Share
<TABLE>
Primary earnings per common share are determined by dividing net
earnings by the weighted number of common and common equivalent
shares outstanding:
<CAPTION>
1996 1995 1994
---------- ---------- ----------
(Amounts in thousands)
<S> <C> <C> <C>
Weighted average common shares outstanding 26,498 23,723 23,199
Common equivalent shares outstanding 1,170 703 884
---------- ---------- ----------
27,668 24,426 24,083
========== ========== ==========
</TABLE>
The difference between shares for primary and fully diluted earnings
per share was not significant in any period presented.
(d) Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash.
(e) Inventories
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.
Cable television inventories are carried at the lower of cost
(weighted average unit cost) or market.
(f) Property and Equipment
Telecommunications 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 on December 31, 1996; management intends to place
this equipment in service during 1997.
The Company's investment in jointly owned earth station assets on
Adak Island, Alaska is stated at cost and is depreciated on a
straight-line basis over lives ranging from 10 to 12 years. Revenues
derived from customers whose service transits the joint facilities
are recognized based upon the level of service and supporting
facilities that are provided by each owner.
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.
44 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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.
Cable Television Property and Equipment
Cable television equipment depreciation is computed by the
straight-line method over the estimated useful lives of the assets.
The composite method and a 10 year life are used for cable television
distribution systems. Under the composite method, proceeds from the
retirement of cable television distribution system assets are
credited to the allowance for depreciation. Gains or losses on
disposition of property, plant and equipment (other than cable
television distribution systems) are credited or charged to income.
Maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and betterments are capitalized.
(g) Other Assets
Intangible assets are valued at the lower of unamortized cost or fair
value. Management reviews the valuation and amortization of
intangible assets on a periodic basis, taking into consideration any
events or circumstances which might result in diminished fair value.
Goodwill represents the excess of cost over fair value of net assets
acquired and is being amortized on a straight-line basis over periods
of 20 to 40 years. Goodwill and certificates of operating rights
arising from the 1996 acquisition of the Cable Companies are
amortized using the straight line method over forty years.
Other assets, excluding deferred loan costs, certificates of
operating rights and goodwill, are recorded at cost and are amortized
on a straight-line basis over 2 to 15 years.
The cost of the Company's PCS license and related financing costs
have been capitalized as a long-term other asset. Once the associated
assets are placed into service, the recorded cost of the license will
begin being amortized over a 40 year period using the straight line
method.
(h) Deferred Loan Costs
Debt issuance costs are deferred and amortized using the
straight-line method, which approximates the interest method, over
the term of the related debt.
(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.
Cable television and private line telecommunication revenues are
generally billed in advance and are recognized as the associated
service is provided.
45 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Other revenues are recognized when the service is provided.
(j) Advertising Expense
The Company expenses advertising costs as incurred. Advertising
expenses were approximately $3,061,000, $1,924,000 and $796,000 for
1996, 1995 and 1994, respectively.
(k) Interest Expense
Interest costs incurred during the construction period of significant
capital projects are capitalized. Interest capitalized by the Company
totaled $1,034,000, $112,000, and $0 during the years ended December
31, 1996, 1995, and 1994.
(l) Income Taxes
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities be 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. Deferred tax assets are
recognized to the extent that the benefits are more likely to be
realized than not.
(m) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option
plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the
Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date
of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of
SFAS No. 123.
(n) 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.
46 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(o) Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash, temporary
investments, and accounts receivable. Excess cash is invested in
high quality short-term liquid money instruments issued by
highly-rated financial institutions. At December 31, 1996,
substantially all of the Company's cash balances were invested in
short-term liquid money instruments. Though limited to one
geographical area, the concentration of credit risk with respect to
the Company's receivables is minimized due to the large number of
customers, individually small balances, short payment terms and
required deposits.
(p) Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, on January 1, 1996. This Statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs
to sell. Adoption of this Statement did not have a material impact on
the Company's financial position, results of operations, or
liquidity.
(q) Reclassifications
Reclassifications have been made to the 1994 and 1995 financial
statements to make them comparable with the 1996 presentation.
(2) Acquisition of Cable Television Systems
Effective October 31, 1996, following shareholder and regulatory
approvals, the Company completed the acquisition of seven Alaska
cable television companies ("Cable Systems"). Under the terms of the
transactions, accounted for using the purchase method, the final
purchase price was $280.1 million, which was the aggregate value for
all the Cable Systems and included certain transaction and financing
costs. The purchase price included issuance of 14.7 million shares of
GCI's class A common stock and cash, debt assumption and issuance of
subordinated notes. Financing for the transactions resulted from
borrowings under a new $205 million bank credit facility and from
additional capital provided from the sale of two million shares of
GCI's Class A common stock to MCI Telecommunications Corporation for
$6.50 per share.
Acquisition costs totaling $304.4 million were allocated to tangible
and identifiable intangible assets and liabilities based upon fair
market values. Approximately $206.5 million was allocated to the
certificate of operating rights and approximately $42.4 was allocated
to goodwill.
Various tax attributes of Prime gave rise to a deferred tax liability
(see Note 7) of $24.4 million recorded by the Company as a result of
the acquisition.
47 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During January 1997, holders of the GCI subordinated notes exercised
a conversion option which allowed them to exchange their notes for
GCI Class A common shares at a predetermined conversion price of
$6.50 per share. As a result, the note holders will receive a total
of 1,538,457 shares of GCI Class A common stock. As of January 1997,
1,415,385 shares were issued for the converted notes. The remaining
shares will be issued upon release of the related notes still held in
escrow (see below).
The final closing required approval of the Alaska Public Utilities
Commission (APUC), which was granted on September 23, 1996. The APUC
approval included several conditions placed on the transfer, such as
continuing the existing conditions requiring provision of public
access channels and requiring the cable operations to file annual
income and operating statements.
In connection with the Acquisitions, GCI placed 1,093,750 shares of
GCI Class A common stock, $800,000 of GCI subordinated notes, and
$150,000 cash into an indemnity escrow account. The various selling
entities collectively placed the same amounts in escrow. Upon
satisfactory completion of the indemnity period (180 days after each
closing), the escrowed amounts will be returned to GCI and the
various sellers.
The following table sets forth for the periods indicated, in
comparative columnar form, unaudited pro forma operating data and pro
forma per-share data for the Company including operating data for
Prime Cable of Alaska L.P., Alaska Cablevision, Inc., and Alaskan
Cable companies. Results of operations and per share data, where
applicable, is provided for the following items: (1) total revenues;
(2) earnings before extraordinary items; (3) cumulative effect of
accounting changes; and (4) net earnings. The pro forma information
shown gives effect to the cable company acquisitions as if they had
occurred as of the beginning of the periods presented. Company common
stock issued pursuant to the cable company acquisitions is valued at
approximately $5.89 per share (the trading price for the shares on
the dates surrounding the announcement of the transactions) for
purposes of the pro forma presentation below.
<TABLE>
The pro forma financial data are unaudited and are not necessarily
indicative of the results of operations of the Company that would
have occurred had the cable company acquisitions been completed as of
the beginning of the earliest periods presented or of the future
results of operations of the Company.
<CAPTION>
Years Ended
December 31,
------------
1996 1995
---- ----
(Amounts in thousands except
per share amounts)
<S> <C> <C>
Total revenues $210,762 182,308
Net earnings $6,700 5,918
Net earnings per common share $0.16 0.14
Shares used in computation 41,604 41,149
</TABLE>
48 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Consolidated Statements of Cash Flows Supplemental Disclosures
<TABLE>
Changes in operating assets and liabilities consist of (in
thousands):
<CAPTION>
Year ended December 31, 1996 1995 1994
----------- ---------- ---------
(Amounts in thousands)
<S> <C> <C> <C>
(Increase) decrease in trade receivables $ (4,604) (4,701) 63
(Increase) in other receivables (134) (32) (91)
(Increase) decrease in prepaid and other
current assets (467) (222) 312
(Increase) decrease in inventory 412 (317) (38)
(Increase) in income taxes receivable (1,026) 0 0
Increase in accounts payable 5,517 5,020 1,434
Increase in accrued liabilities 914 423 195
Increase (decrease) in accrued payroll and
payroll related obligations 1,723 (1,928) 1,238
Increase (decrease) in accrued income taxes (547) 330 163
Increase in accrued interest 2,188 31 14
Increase (decrease) in deferred revenues (4) 220 (90)
(Decrease) in components of other liabilities (1,360) (131) (137)
----------- ---------- ---------
$ 2,612 (1,307) 3,063
=========== ========== =========
</TABLE>
Acquisitions of businesses, net of cash acquired for the year ended
December 31, 1996 consists of (in thousands):
Fair value of asset acquired $ 304,441
Bank debt and net working capital deficit
assumed (110,538)
Common stock issued to sellers (86,710)
Convertible, subordinated debt issued
to sellers (10,000)
Net deferred income tax liability (24,375)
--------
Net cash used to acquire business $ 72,818
========
Income taxes paid totaled $4,361,000, $3,752,000 and $2,796,000
during 1996, 1995 and 1994, respectively.
Interest paid totaled approximately $2,657,000, $1,227,000 and
$1,525,000 during 1996, 1995 and 1994, respectively.
The Company recorded $187,000, $397,000 and $371,000 in 1996, 1995
and 1994, 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.
49 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Notes Receivable
<TABLE>
A summary of notes receivable follows:
<CAPTION>
December 31,
--------------------
1996 1995
--------------------
(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 on demand
and through August 26, 2004. 488 261
--------------------
Total notes receivable 1,212 985
Less current portion (325) (167)
Plus long-term accrued interest 129 86
--------------------
$ 1,016 904
====================
</TABLE>
50 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Intangible Assets
<TABLE>
Intangible assets consist of the following (thousands of dollars):
<CAPTION>
December 31,
------------------------------
1996 1995
------------------------------
<S> <C> <C>
Certificates of operating rights $ 206,492 0
Goodwill 44,347 1,983
PCS license and related costs 1,913 1,802
Other intangibles 121 439
------------------------------
252,873 4,224
Less amortization 1,953 1,099
------------------------------
Intangible assets, net $ 250,920 3,125
==============================
</TABLE>
(6) Long-term Debt
<TABLE>
Long-term debt is summarized as follows:
<CAPTION>
December 31,
------------------------------
1996 1995
------------------------------
(Amounts in thousands)
<S> <C> <C>
Senior loan (a) $ 175,900 0
Credit Agreement (b) 30,100 1,000
Convertible, subordinated
notes (c) 10,000 0
Undersea Fiber and Equipment Loan
Agreement (d) 6,886 8,271
Financing Obligation (e) 356 709
------------------------------
223,242 9,980
Less current maturities 31,969 1,689
------------------------------
Long-term debt, excluding current
maturities $ 191,273 8,291
==============================
</TABLE>
(a) GCI Cable entered into a credit facility totaling $205
million ("Senior Loan") effective October 31, 1996,
associated with the acquisition of the cable companies.
Loans (advances) made pursuant to the Senior Loan mature on
September 30, 2005 or such earlier date as payment of the
loans are due, whether by acceleration or otherwise.
The Senior Loan provides for interest at the bank's prime
rate plus 1.875%. At GCI Cable's option, interest on all or
a specified portion of the indebtedness may be fixed for
periods ranging from one to six months based on Eurodollar
rates plus 2.875%. Upon the request of GCI Cable and the
approval of the banks, the period of a Eurodollar advance
can be extended beyond six months. The interest rates under
the new agreement are subject to reductions of up to 1.75%
per annum if certain financial tests are met. GCI Cable is
required to pay a commitment fee equal to 0.50% per annum on
the unused portion of the commitment. In addition, if the
obligations under the Senior Loan are not repaid
51 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
in full on or before September 30, 1997, GCI Cable has
agreed to pay an additional fee of $712,500. Interest and
fees are payable quarterly.
The Senior Loan facility contains, among others, covenants
requiring maintenance of specific levels of operating cash
flow to indebtedness and to interest expense. The Senior
Loan facility includes limitations on acquisitions and
additional indebtedness, and prohibits any direct or
indirect distribution, dividend, redemption or other payment
to any person on account of any general or limited
partnership interest in, or shares of capital stock or other
securities of GCI Cable or any of its subsidiaries. GCI
Cable was in compliance with all credit agreement covenants
during the period commencing October 31, 1996 (date of the
Senior Loan) through December 31, 1996.
While GCI Cable may elect at any time to reduce amounts due
and available under the loan agreement, a mandatory
prepayment is required each May, beginning in May 2000, if,
for the prior year ended December 31, GCI Cable's Operating
Cash Flow (defined as net income before extraordinary items
and gains and losses on asset sales, plus interest expense,
depreciation, amortization, bank fees, deferred management
fees, expenses and other amounts deferred under the
management agreement, income tax expense and other non-cash
expenses) exceeds payments made for cash interest expense,
permanent prepayments of principal amounts outstanding under
the loan agreement, bank fees, cash income tax payments,
capital expenditures, amounts previously deferred under the
management agreement and capital lease obligations. GCI
Cable is required to make a prepayment in the amount of 50%
of such excess. Additionally, a mandatory prepayment may be
required in the event of asset sales (other than
dispositions of obsolete inventory and equipment in the
ordinary course of business) or the issuance of capital
stock or other debt or equity securities. All such mandatory
prepayments permanently reduce the amounts due and available
under the loan commitment.
The loan agreement is collateralized by essentially all of
GCI Cable Inc.'s assets as well as a pledge of GCI Cable's
stock by GCI.
In connection with the funding of the loan agreement, GCI
Cable Inc. paid bank fees and other expenses of
approximately $764,000, which will be amortized to interest
expense over the life of the agreement.
(b) GCI entered into a new $62.5 million interim telephony
credit facility with its senior lender during April 1996.
The interim facility replaced in its entirety the prior
senior facility described in the Company's December 31, 1995
Form 10-K. The new facility allows the Company to invest up
to $60 million in capital expenditures through the first
quarter of 1997. The Company plans to restructure the
facility prior to its maturity on April 25, 1997. Since the
entire facility matures within the twelve-month period
ending December 31, 1997, the outstanding balance at
December 31, 1996 is included in current maturities of
long-term debt.
The interim facility provides for interest (7.33% weighted
average interest rate at December 31, 1996), among other
options, at LIBOR plus one and three quarters to two and one
quarter percent, depending on the Company's leverage ratio
as defined in the agreement. A fee of 0.50% per annum is
assessed on the unused portion of the facility.
52 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
$3.4 million of the facility 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.
The interim facility contains, among others, covenants
requiring maintenance of specific levels of operating cash
flow to indebtedness and to interest expense. 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 April (date of the new interim credit facility)
through December 31, 1996.
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.
(c) GCI issued subordinated notes totaling $10 million in
connection with the acquisitions described in Note 2. The
notes bear simple, non compounding interest at the lowest
allowable rate of the Internal Revenue Service under imputed
interest rules in effect at closing. The notes are
subordinated to all of the Company's senior indebtedness.
During January 1997, the holders of the GCI subordinated
notes exercised a conversion option which allowed them to
exchange their notes for GCI Class A common shares at a
predetermined conversion price of $6.50 per share. As a
result, the former note holders received 1,538,457 shares of
GCI Class A common stock.
(d) 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.
(e) As consideration for MCI's role in enabling Leasing Company
to finance and acquire the undersea fiber optic cable
capacity described at note 6(d) above, Leasing Company
agreed to pay MCI $2,040,000 in sixty monthly payments of
53 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
$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, 1996 maturities of long-term debt including
mandatory reductions of loan commitments pursuant to the Company's
Senior Loan were as follows (in thousands):
Year ending December 31,
------------------------
1997 $ 31,969
1998 1,647
1999 6,917
2000 4,497
2001 5,125
2002 and thereafter 163,087
-----------
213,242
Subordinated debt converted into
GCI Class A common stock in
January 1997 10,000
-----------
$ 223,242
===========
(7) Income Taxes
<TABLE>
Total income tax expense (benefit) for the years ended December 31,
1996, 1995 and 1994 were allocated as follows:
<CAPTION>
Years ended
December 31,
----------------------------------
1996 1995 1994
----------------------------------
(Amounts in thousands)
<S> <C> <C> <C>
Earnings from continuing operations $ 5,228 5,099 4,547
Stockholders' equity, for stock option compensation
expense for tax purposes in excess of amounts
recognized for financial reporting purposes (187) (397) (371)
----------------------------------
$ 5,041 4,702 4,176
==================================
</TABLE>
54 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
Income tax expense consists of the following:
<CAPTION>
Years ended
December 31,
----------------------------------
1996 1995 1994
----------------------------------
(Amounts in thousands)
<S> <C> <C> <C>
Current tax expense:
Federal taxes $ 2,292 3,077 2,604
State taxes 684 1,005 355
----------------------------------
2,976 4,082 2,959
----------------------------------
Deferred tax expense:
Federal taxes 1,734 780 816
State taxes 518 237 772
----------------------------------
2,252 1,017 1,588
----------------------------------
$ 5,228 5,099 4,547
==================================
</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:
Years ended
December 31,
-----------------------------------
1996 1995 1994
-----------------------------------
(Amounts in thousands)
<S> <C> <C> <C>
"Expected" statutory tax expense $ 4,314 4,284 3,971
State income taxes, net of federal benefit 793 820 742
Income tax effect of goodwill amortization,
nondeductible expenditures and other items, net 55 41 0
Change in valuation allowance (225) (200) 0
Other 291 154 (166)
-----------------------------------
$ 5,228 5,099 4,547
===================================
</TABLE>
55 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<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, 1996 and 1995 are presented below.
<CAPTION>
December 31,
------------------------
1996 1995
------------------------
(Amounts in thousands)
<S> <C> <C>
Net current deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts $ 98 119
Compensated absences, accrued for financial
reporting purposes 380 400
Workers compensation and self insurance health
reserves, principally due to accrual for
financial reporting purposes 243 183
Other 114 133
------------------------
Total gross current deferred tax assets 835 835
Less valuation allowance 0 89
------------------------
Net current deferred tax assets $ 835 746
========================
Net long-term deferred tax assets:
Net operating loss carryforwards $ 23,507 0
Deferred compensation expense for financial
reporting purposes in excess of amounts
recognized for tax purposes
617 587
Employee stock option compensation expense for financial
reporting purposes in excess of amounts recognized
for tax purposes
198 206
Sweepstakes award in excess of amounts recognized
for tax purposes 211 215
Other 197 261
------------------------
Total gross long-term deferred tax assets
24,730 1,269
Less valuation allowance 8,129 136
------------------------
Net long-term deferred tax assets 16,601 1,133
------------------------
Net long-term deferred tax liabilities:
Plant and equipment, principally due to
differences in depreciation 50,163 7,997
Other 158 140
------------------------
Total gross long-term deferred tax liabilities
50,321 8,137
------------------------
Net combined long-term deferred tax liabilities
$ 33,720 7,004
========================
</TABLE>
56 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In conjunction with the acquisition of the Cable Companies the
Company incurred a net deferred income tax liability of $24,375,000
which is net of gross deferred tax assets of $23,253,000 and a
valuation allowance of $8,129,000.
The valuation allowance for deferred tax assets was $8,129,000,
$225,000 and $425,000 as of December 31, 1996, 1995 and 1994,
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.
At December 31, 1996, the Company has tax net operating loss
carryforwards of approximately $58,475,000 which will begin expiring
in 2004 if not utilized. The Company's utilization of these
carryforwards is subject to certain limitations pursuant to section
382 of the Internal Revenue Code. A valuation allowance of $8,129,000
was recognized to offset the deferred tax assets related to these
carryforwards due to uncertainty regarding realizability. If
realized, the tax benefit for the carryforwards offset by the
valuation allowance will be applied to reduce goodwill and other
non-current intangibles, and then applied to reduce income tax
expense.
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 quarter of 1995 and was
completed during the second quarter of 1996. The Company received a
no change letter upon completion of the examination.
(8) 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.
After the transaction described in Note 2, MCI owns a total of
8,251,509 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 23 and 31 percent of the issued and outstanding shares
of the respective class at December 31, 1996.
After the transaction described in Note 2, the owners of the cable
television properties acquired in 1996 own a total of 14,723,077
shares of GCI's Class A common stock which on a fully diluted basis
represented approximately 40 percent of the issued and outstanding
Class A common shares at December 31, 1996.
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.
57 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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.
The Option Plan provides that all options granted under the Option
Plan must expire not later than ten years after the date of grant. If
at the time an option is granted the exercise price is less than the
market value of the underlying common stock, the "in the money"
amount at the time of grant is expensed ratably over the vesting
period of the option. 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.
<TABLE>
Information for the years 1994, 1995 and 1996 with respect to the
Plan follows:
<CAPTION>
Weighted
Average Range of
Exercise Exercise
Shares Price Prices
--------------- ------------- ---------------
<S> <C> <C> <C>
Outstanding at December 31, 1993 1,823,658 $2.87 $0.75-$4.00
---------------
Granted --- ---
Exercised (72,459) $2.39 $0.75-$3.00
Forfeited (21,500) $4.00
---------------
Outstanding at December 31, 1994 1,729,699 $2.88 $0.75-$4.00
---------------
58 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Granted 610,000 $4.00
Exercised (40,000) $2.06 $1.87-$2.25
Forfeited (11,500) $4.00
---------------
Outstanding at December 31, 1995 2,288,199 $3.19 $0.75-$4.00
---------------
Granted 321,000 $5.79 $3.75-$6.50
Exercised (82,291) $2.80 $0.75-$4.00
Forfeited (79,785) $3.11 $0.75-$4.50
---------------
Outstanding at December 31, 1996 2,447,123 $3.54 $0.75-$6.50
===============
Available for grant at December 31, 1996 108,338
===============
</TABLE>
The options expire at various dates through December 2006. At
December 31, 1996 and 1995, the weighted-average remaining
contractual lives of options outstanding were 6.73 and 7.15 years,
respectively.
At December 31, 1996 and 1995, the number of options exercisable was
1,275,903 and 986,999, respectively, and the weighted-average
exercise price of those options was $2.85 and $2.56, respectively.
The per share weighted-average fair value of stock options granted
during 1996 was $3.50 for compensatory options and $2.28 for
non-compensatory options; for 1995, the per share weighted-average
fair value of non-compensatory stock options granted was $1.62. The
amounts were determined as of the options' grant dates using a
qualified binomial option-pricing model with the following
weighted-average assumptions: 1996 - risk-free interest rate of 6.3%
and an expected life of 8 years; 1995 - risk-free interest rate of
6.25% and an expected life of 8 years.
<TABLE>
Had compensation cost for the Company's 1995 and 1996 grants for
stock-based compensation plans been determined consistent with SFAS
123, the Company's net income and net income per common share would
approximate the pro forma amounts below (in millions except per share
data):
<CAPTION>
As Reported Pro Forma
----------- ---------
<S> <C> <C>
1995:
Net earnings $7,502 $7,438
Net earnings per common share $0.31 $0.30
1996:
Net earnings $7,462 $7,322
Net earnings per common share $0.27 $0.26
</TABLE>
Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS 123 is not
59 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
reflected in the pro forma net income amounts presented above because
compensation cost is reflected over the options' vesting period of 5
years and compensation cost for options granted prior to January 1,
1995 is not considered.
Stock Options Not Pursuant to a Plan
In June 1989, an officer 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 an
officer providing 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 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 and July 1996, the Company acquired a total of 93,970 additional
shares of Class A common stock for approximately $672,000 to fund
additional deferred compensation agreements for two of its officers.
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
$9,500 in 1996; 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. Such 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
$1,013,000, $864,000 and $792,000 for the years ended December 31,
1996, 1995, and
60 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1994, 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.
(9) Industry Segments Data
<TABLE>
The Company is engaged in the provision or sale of services and
products in three principal industries: (1) long-distance
telecommunication services ("long-distance services"), (2) cable
television services, and, on a pre-operating basis, (3) local
telecommunication services ("local services").
<CAPTION>
December 31,
-------------------------------------
1996 1995 1994
-------------------------------------
(Amounts in thousands)
<S> <C> <C> <C>
Net sales
Long-distance services $ 155,419 129,279 116,981
Cable television services 9,475 0 0
-------------------------------------
Total net sales $ 164,894 129,279 116,981
=====================================
Operating income
Long-distance services $ 15,083 13,504 12,997
Cable television services 2,196 0 0
Local services (870) 0 0
-------------------------------------
Total operating income $ 16,409 13,504 12,997
=====================================
Identifiable assets
Long-distance services $ 133,780 81,377 72,744
Cable television services 62,039 0 0
-------------------------------------
Total identifiable assets $ 195,819 81,377 72,744
=====================================
Capital expenditures
Long-distance services $ 37,793 8,938 10,604
Cable television services 849 0 0
-------------------------------------
Total capital expenditures $ 38,642 8,938 10,604
=====================================
Depreciation and amortization expense
Long-distance services $ 7,189 5,993 6,639
Cable television services 2,220 0 0
-------------------------------------
Total depreciation and amortization expense $ 9,409 5,993 6,639
=====================================
</TABLE>
Reclassifications have been made to 1995 and 1994 data to make them
comparable with the 1996 presentation. Intersegment sales approximate
market and are not significant. Identifiable assets are assets
associated with a specific industry segment. Revenues derived from
leasing operations are allocated to the message and data transmission
services segment. Long-distance services includes equipment sales and
service which were previously reported as a separate segment.
The Company provides message telephone service to MCI and Sprint,
major customers (see Note 10). The Company earned revenues pursuant
to a contract with Sprint totaling approximately $18,781,000,
$14,885,000 and $12,412,000 for the years ended December
61 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
31, 1996, 1995 and 1994 respectively. Amounts receivable from Sprint
totaled $1,683,000 and $2,362,000 at December 31, 1996 and 1995,
respectively.
(10) Related Party Transactions
Pursuant to the terms of a contract with MCI, a major shareholder of
the Company (see note 8), the Company earned revenues of
approximately $29,208,000, $23,939,000 and $19,512,000 for the years
ended December 31, 1996, 1995 and 1994, respectively. Amounts
receivable from MCI totaled $5,252,000 and $4,256,000 at December 31,
1996 and 1995, respectively. The Company paid MCI for distribution of
its traffic in the lower 49 states totaling approximately
$12,224,000, $12,556,000 and $10,252,000 for the years ended December
31, 1996, 1995 and 1994, respectively.
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 is guaranteed by the Company. The lease term is 15
years with monthly payments increasing in $800 increments at each two
year anniversary of the lease. Monthly lease costs will increase to
$16,800 effective 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 Cable Company is a party to a Management Agreement with Prime II
Management, L.P. ("PMLP"). Certain of the Prime sellers are
affiliated with PMLP. The Management Agreement expires on October 31,
2005, however, it will be terminated earlier upon loss of a license
to operate the systems, sale of the systems, breach of contract, or
upon exercise of an option to terminate the Management Agreement by
PMLP or GCI Cable any time after October 31, 1998. Under the terms of
the Management Agreement, PMLP manages the operations of the acquired
cable television systems for fees of $1,000,000 in the first year,
$750,000 in the second year, and $500,000 thereafter (unless the
agreement is terminated as outlined above) and reimbursement for
certain expenses. The fees and reimbursed expenses are payable on a
monthly basis. Under the terms of the bank loan agreement (Note 6),
the Cable Company must defer payment of management fees if it fails
to meet certain financial ratio covenants. Any deferred fees bear
interest at a rate of 17.5% per annum. In connection with the
agreement, the Cable Company incurred approximately $197,000 in
management fees and reimbursable expenses for the period ended
December 31, 1996.
(11) 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 $7,364,000, $4,353,000
and $4,258,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
62 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
A summary of future minimum lease payments for all leases as of
December 31, 1996 follows:
<CAPTION>
Year ending December 31: Operating Capital
------------------------ ------------------------------
(Amounts in thousands)
<S> <C> <C>
1997 $ 10,772 194
1998 8,211 202
1999 4,990 204
2000 3,283 211
2001 1,870 214
2002 and thereafter 2,568 1,265
-----------------------------
Total minimum lease payments $ 31,694 2,290
==============
Less amount representing interest (1,544)
Less current maturities of obligations under
capital leases (71)
---------------
Subtotal - long-term obligations under capital
leases 675
Less long-term obligations under capital leases
due to related parties, excluding current
maturities (675)
---------------
Long-term obligations under capital leases,
excluding current maturities $ 0
===============
</TABLE>
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.
(12) 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, 1996 and 1995 for the Company's financial assets and
liabilities approximate their fair values.
(13) Commitments and Contingencies
Deferred Compensation Plan
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
63 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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 $222,000 and $340,000 as of December 31, 1996 and 1995,
respectively.
Satellite Transponders
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 balance payable upon expected delivery of the transponders in
1998 is dependent upon a number of factors. The Company does not
expect the remaining balance payable at delivery to exceed $41
million.
Self-Insurance
The Company is self-insured for losses and liabilities related
primarily to health and welfare claims up to predetermined amounts
above which third party insurance applies. A reserve of $450,000 was
recorded at December 31, 1996 to cover estimated reported losses,
estimated unreported losses based on past experience modified for
current trends, and estimated expenses for investigating and settling
claims. Actual losses will vary from the recorded reserve. While
management uses what it believes is pertinent information and factors
in determining the amount of reserves, future additions to the
reserves may be necessary due to changes in the information and
factors used.
Litigation
The Company is involved in various lawsuits and legal proceedings
which have arisen in the normal course of business. While the
ultimate results of these matters cannot be predicted with certainty,
management does not expect them to have a material adverse effect on
the financial position of the Company.
Cable Service Rate Reregulation
Beginning in April 1993, the Federal Communications Commission
("FCC") adopted regulations implementing the Cable Television
Consumer Protection and Competition Act of 1992 ("The Cable Act of
1992"). Included are rules governing rates charged by cable operators
for the basic service tier, the installation, lease and maintenance
of equipment (such as converter boxes and remote control units) used
by subscribers to receive this tier and for cable programming
services other than programming offered on a per-channel or
per-program basis (the "regulated services"). Generally, the
regulations require affected cable systems to charge rates for
regulated services that have been reduced to prescribed benchmark
levels, or alternatively, to support rates using costs-of-service
methodology.
The regulated services rates charged by the Company may be reviewed
by the State of Alaska, operating through the Alaska Public Utilities
Commission ("APUC") for basic service, or by the FCC for cable
programming service. Refund liability for basic service rates is
limited to a one year period. Refund liability for cable programming
service rates may be calculated from the date a complaint is filed
with the FCC until the rate reduction is implemented.
64 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In order for the State of Alaska to exercise rate regulation
authority over the Company's basic service rates, 25% of a systems'
subscribers must request such regulation by filing a petition with
the APUC. At December 31, 1996, the State of Alaska has rate
regulation authority over the Juneau system's basic service rates.
(The Juneau system serves 9% of the Company's total basic service
subscribers at December 31, 1996.) Juneau's current rates have been
approved by the APUC and there are no other pending filings with the
APUC, therefore, there is no refund liability for basic service at
this time.
Complaints by subscribers relating to cable programming service rates
were filed with, and accepted by, the FCC for certain franchise
areas, however, PCOA's filings made in response to those complaints
related to the period prior to July 15, 1994 were approved by the
FCC. Therefore, the potential liability for cable programming service
refunds would be limited to the period subsequent to July 15, 1994
for these areas. Management of the Company believes that it has
complied in all material respects with the provisions of the FCC
rules and regulations and that the Company is, therefore, not liable
for any refunds. Accordingly, no provision has been made in the
financial statements for any potential refunds. The FCC rules and
regulations are, however, subject to judgmental interpretations, and
the impact of potential rate changes or refunds ordered by the FCC
could cause the Company to make refunds and/or to be in default of
certain debt covenants.
In February 1996, a telecommunications bill was signed into federal
law which impacts the cable industry. Most notably, the bill allows
cable system operators to provide telephony services, allows
telephone companies to offer video services, and provides for
deregulation of cable programming service rates by 1999. Management
of the Company believes the bill will not have a significant adverse
impact on the financial position or results of operations of the
Company.
(14) Supplementary Financial Data
<TABLE>
The following is a summary of unaudited quarterly results of
operations for the years ended December 31, 1996 and 1995.
(Amounts in thousands, except per share amounts)
<CAPTION>
First Second Third Fourth Total
1996 Quarter Quarter Quarter Quarter Year
---- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Total revenues $37,969 37,199 38,664 51,062 164,894
Net earnings $2,137 2,150 2,140 1,035 7,462
Net earnings per share $0.09 0.09 0.09 0.00 0.27
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Total
1995 Quarter Quarter Quarter Quarter Year
---- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Total revenues $29,693 31,860 33,363 34,363 129,279
Net earnings $1,607 1,836 2,252 1,807 7,502
Net earnings per share $0.07 0.08 0.09 0.07 0.31
</TABLE>
65 (Continued)
<PAGE>
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(15) Supplemental financial information
<TABLE>
(Amounts in thousands)
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------
Long- Long- Long-
Distance Cable Local Combined Distance Distance
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Telecommunication revenues $ 155,419 0 0 155,419 129,279 116,981
Cable television revenues 0 9,475 0 9,475 0 0
---------------------------------------------------------------------------
Total revenues 155,419 9,475 0 164,894 129,279 116,981
Cost of sales and services:
Distributions costs and costs of services 90,597 0 0 90,597 72,091 63,877
Programming and copyright costs 0 2,067 0 2,067 0 0
---------------------------------------------------------------------------
Total cost of sales and services 90,597 2,067 0 92,664 72,091 63,877
Selling, general and administrative expenses:
Operating and engineering 9,095 0 92 9,187 9,182 7,607
Cable television, including
management fees of $197 0 2,992 0 2,991 0 0
Sales and communications 13,013 0 28 13,041 9,865 7,040
General and administrative 17,349 0 316 17,666 15,645 16,658
Legal and regulatory 1,357 0 434 1,791 1,540 1,334
Bad debts 1,736 0 0 1,736 1,459 829
Depreciation and amortization 7,189 2,220 0 9,409 5,993 6,639
---------------------------------------------------------------------------
Operating income (loss) $ 15,083 2,196 ( 870) 16,409 13,504 12,997
===========================================================================
</TABLE>
66
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
67
<PAGE>
PART IV
Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
(a)(l) Consolidated Financial Statements
Included in Part II of this Report:
Independent Auditors' Reports 36 -- 37
Consolidated Balance Sheets, December 31, 1996 and 1995 38 -- 39
Consolidated Statements of Operations,
Years ended December 31, 1996, 1995 and 1994 40
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1996, 1995 and 1994 41
Consolidated Statements of Cash Flows,
Years ended December 31, 1996, 1995 and 1994 42
Notes to Consolidated Financial Statements 43 -- 66
(a)(2) Consolidated Financial Statement Schedules
Included in Part IV of this Report:
Independent Auditors' Report 75
Schedule VIII - Valuation and Qualifying Accounts,
Years ended December 31, 1996, 1995 and 1994 76
</TABLE>
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.
68
<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.
Stock Purchase Agreement, dated as of September 13, 1996,
between General Communication, Inc. and MCI
Telecommunications Corporation.
Voting Agreement, dated October 31, 1996, among Prime II
Management, L.P., as agent for the Prime Sellers, MCI
Telecommunications Corporation, Ronald A. Duncan,
Robert M.
Walp, and TCI GCI, Inc. (6)
Registration Rights Agreement, dated October 31, 1996,
between General Communication, Inc. and the Prime
Sellers.
- ------------------------
6 Included as an exhibit to the Prime Purchase Agreement filed with the
Company's S-4 Registration Statement dated October 4, 1996.
69
<PAGE>
Registration Rights Agreement, dated October 31, 1996,
between General Communication, Inc., and Alaskan Cable
Network/Fairbanks, Inc. ("ACNFI"), Alaskan Cable
Network/Juneau, Inc. ("ACNJI"), Alaskan Cable
Network/Ketchikan-Sitka, Inc. ("ACNKSI") and Jack Kent
Cooke, Inc. (7)
Registration Rights Agreement, dated October 31, 1996,
between General Communication, Inc., and the owners of
Alaska Cablevision, Inc. (8)
All of the above incorporated herein by reference to the
Company's Form S-4 Registration Statement dated October
4, 1996.
10 - Material Contracts:
Westin Building Lease
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.
Duncan and Hughes Deferred Bonus Agreements
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31,
1989.
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.
- ------------------------
7 Included as an exhibit to the Alaskan Cable Network Purchase Agreement filed
with the Company's S-4 Registration Statement dated October 4, 1996.
8 Included as an exhibit to the Alaska Cablevision Purchase Agreement filed with
the Company's S-4 Registration Statement dated October 4, 1996.
70
<PAGE>
Pledge Agreement between General Communication, Inc. and
Ronald A. Duncan, dated August 13, 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.
The GCI Special Non-Qualified Deferred Compensation Plan
Transponder Purchase Agreement for Galaxy X between Hughes
Communications Galaxy, Inc. and GCI Communication Corp.
Equipment Purchase Agreement between GCI Communication
Corporation and Scientific-Atlanta, 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, 1995.
Management Agreement, between Prime II Management, L.P., and
GCI Cable, Inc., dated October 31, 1996. (9)
Securities Purchase and Sale Agreement, dated May 2, 1996,
among General Communication, Inc., and the Prime Sellers.
Agreement and Plan of Merger of ACI with and into GCI Cable,
Inc., dated October 31, 1996.
Certificate of Merger Merging ACI into GCI Cable, Inc.
(filed in Delaware on October 31, 1996).
Articles of Merger between GCI Cable, Inc., and ACI (filed
in Delaware on October 31, 1996).
Agreement and Plan of Merger of PCFI with and into GCI
Cable, Inc., dated October 31, 1996.
Certificate of Merger Merging PCFI into GCI Cable, Inc.
(filed in Delaware on October 31, 1996).
Articles of Merger between GCI Cable and PCFI (for filing in
Alaska) Asset Purchase Agreement, dated April 15, 1996,
among General Communication, Inc., ACNFI, ACNJI and
ACNKSI.
Asset Purchase Agreement, dated May 10, 1996, among General
Communication, Inc., and Alaska Cablevision, Inc.
Asset Purchase Agreement, dated May 10, 1996, among General
Communication, Inc., and McCaw/Rock Homer Cable System,
J.V.
Asset Purchase Agreement, dated May 10, 1996, between
General Communication, Inc., and McCaw/Rock Seward Cable
System, J.V.
Allof the above incorporated herein by reference to the
Company's Form S-4 Registration Statement dated October
4, 1996.
Amendment No. 1 to Securities Purchase and Sale Agreement,
dated October 31, 1996, among General Communication,
Inc., and the Prime Sellers Agent.
First Amendment to Asset Purchase Agreement, dated October
30, 1996, among General Communication, Inc., ACNFI, ACNJI
and ACNKSI.
Third Amended and Restated Credit Agreement, dated as of
October 31, 1996, between GCI Communication Corp., and
NationsBank of Texas, N.A.
- ------------------------
9 Included as an exhibit to the Prime Purchase Agreement filed with the
Company's S-4 Registration Statement dated October 4, 1996.
71
<PAGE>
Loan Agreement among GCI Cable, Inc., as Borrower;
Toronto-Dominion (Texas), Inc., et al., as of October 31,
1996.
Allof the above incorporated herein by reference to the
Company's Current Report on Form 8-K dated November 13,
1996.
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.
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
21.1 Subsidiary of Registrant:
GCI Cable, Inc.
State of Incorporation: Alaska
21.2 Subsidiary of Subsidiary of Registrant:
GCI Cable / Fairbanks, Inc.
State of Incorporation: Alaska
21.3 Subsidiary of Subsidiary of Registrant:
GCI Cable / Juneau, Inc.
State of Incorporation: Alaska
21.4 Subsidiary of Subsidiary of Registrant:
GCI Cable Holdings, Inc.
State of Incorporation: Alaska
23.1 Consents of experts
27 - Financial Data Schedule
72
<PAGE>
99 - 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.
99.1 The By-laws of GCI Cable, Inc.
99.2 The Articles of Incorporation of GCI Cable, Inc.
99.3 The By-laws of GCI Cable / Fairbanks, Inc.
99.4 The Articles of Incorporation of GCI Cable / Fairbanks,
Inc.
99.5 The By-laws of GCI Cable / Juneau, Inc.
99.6 The Articles of Incorporation of GCI Cable / Juneau, Inc.
99.7 The By-laws of GCI Cable Holdings, Inc.
99.8 The Articles of Incorporation of GCI Cable Holdings, Inc.
73
<PAGE>
(c) Reports on Form 8-K
Form 8-K filed with the Securities and Exchange Commission on
November 13, 1996 describing the Company's closing as of October 31,
1996 of the following purchase and acquisition transactions and
certain other related agreements: (1) Prime Securities Purchase and
Sale Agreement; (2) the Alaskan Cable Purchase Agreement; (3) Alaska
Cablevision Asset Purchase Agreement; (4) McCaw/Rock Homer Asset
Purchase Agreement; (5) McCaw/Rock Seward Asset Purchase Agreement;
and (6) MCI Stock Purchase Agreement. The transactions include other
agreements entered into as of the closing date or otherwise
implemented as of that date and a new voting agreement entered into
between certain holders of Class A and Class B common stock. Through
the transactions the Company acquired interests in seven cable
companies providing services in Alaska
As part of the consideration for the acquisition of Prime Cable of
Alaska, L.P. and Alaskan Cable Companies, the Company, as of the
closing date, issued and sold 14,723,077 shares of Company Class A
common stock which was divided between those companies for further
distribution to their respective security holders and subject to
share holdback. Through the MCI Stock Purchase Agreement the Company
issued, as of the closing date, 2 million shares of Company Class A
common stock. The transactions were approved by the shareholders of
the Company at its annual meeting held on October 17, 1996. The
security holders of each of the Cable Companies approved the
transaction corresponding to their respective Cable Companies or
otherwise consented to the transactions on or prior to October 30,
1996.
Portions of the Company Stock were held back as of the closing date
for deposit in escrow with third-party escrow agents to secure each
party's corresponding indemnification for breaches of
representations, warranties and covenants. If no breach of the
corresponding purchase agreement occurs the escrowed shares will be
released to the party which deposited them into the corresponding
escrow, effective 180 days after the closing date. A portion of
the Prime Company Shares are subject to other escrow and holdback
conditions.
74
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
General Communication, Inc.:
Under date of February 21, 1997, we reported on the consolidated balance sheets
of General Communication, Inc. and Subsidiaries ("Company") as of December 31,
1996 and 1995 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, 1996, which are included in the Company's 1996 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 1996 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.
KPMG PEAT MARWICK LLP
Anchorage, Alaska
February 21, 1997
75
<PAGE>
Schedule VIII
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<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, 1996:
Allowance for doubtful
receivables $ 295 1,736 354 (1) 1,788 597
===== ===== ===== ====== =====
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
===== ====== ===== ====== =====
<FN>
(1) Allowance for doubtful receivables acquired pursuant to the Cable Company
acquisitions described in footnote (2) to the Company's consolidated
financial statements.
</FN>
</TABLE>
76
<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 28, 1997
<TABLE>
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.
<CAPTION>
Signature Title Date
------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ Carter F. Page Chairman of Board March 28, 1997
Carter F. Page and Director
/s/ Robert M. Walp Vice Chairman of Board and March 28, 1997
Robert M. Walp Director
/s/ Ronald A. Duncan President and Director, March 28, 1997
Ronald A. Duncan (Chief Executive Officer)
Director
Donne F. Fisher
Director
Jeffery C. Garvey
/s/ John W. Gerdelman Director March 28, 1997
John W. Gerdelman
Director
William P. Glasgow
/s/ Donald Lynch Director March 28, 1997
Donald Lynch
Director
Larry E. Romrell
/s/ James M. Schneider Director March 25, 1997
James M. Schneider
</TABLE>
(Continued)
77
<PAGE>
SIGNATURES
(Continued)
<TABLE>
<CAPTION>
Signature Title Date
------------------------- ---------------------------- -----------------
<S> <C> <C>
/s/ John M. Lowber Senior Vice President, Chief March 28, 1997
John M. Lowber Financial Officer, Secretary
and Treasurer
/s/ Alfred J. Walker Vice President and Chief March 28, 1997
Alfred J. Walker Accounting Officer
</TABLE>
78
EXHIBIT 23.1.1
The Board of Directors
General Communication, Inc.:
We consent to incorporation by reference in the registration statements (No.
33-60728 and No. 33-60222) on Forms S-8 of General Communication, Inc. of our
report dated February 21, 1997, relating to the consolidated balance sheets of
General Communication, Inc. and subsidiaries as of December 31, 1996 and 1995,
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,
1996, and the related schedule, which report appears in the December 31, 1996,
annual report on Form 10-K of General Communication, Inc.
KPMG Peat Marwick LLP
Anchorage, Alaska
February 21, 1997
EXHIBIT 23.1.2
Consent of Independent Auditors
We consent to incorporation by reference in (i) the Registration
Statement (Form S-8 Number 33-60728) and (ii) the Registration Statement (Form
S-8 Number 33-60222) of General Communication, Inc. of our report dated February
14, 1997, included in this Annual Report on Form 10-K for the year ended
December 31, 1996, with respect to the consolidated financial statements of GCI
Cable, Inc. for the year ended December 31, 1996 (not presented separately
therein).
Ernst & Young LLP
Austin, Texas
March 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,349
<SECURITIES> 0
<RECEIVABLES> 27,953
<ALLOWANCES> 597
<INVENTORY> 1,589
<CURRENT-ASSETS> 47,102
<PP&E> 178,248
<DEPRECIATION> 41,497
<TOTAL-ASSETS> 447,335
<CURRENT-LIABILITIES> 69,877
<BONDS> 191,948
0
0
<COMMON> 115,843
<OTHER-SE> 33,711
<TOTAL-LIABILITY-AND-EQUITY> 447,335
<SALES> 0
<TOTAL-REVENUES> 164,894
<CGS> 0
<TOTAL-COSTS> 92,664
<OTHER-EXPENSES> 23,421
<LOSS-PROVISION> 1,736
<INTEREST-EXPENSE> 4,199
<INCOME-PRETAX> 12,690
<INCOME-TAX> 5,228
<INCOME-CONTINUING> 7,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,462
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
BYLAWS
OF
GCI CABLE, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. OFFICES 1
ARTICLE II. SHAREHOLDERS' MEETINGS 1
Section l. Annual Meeting 1
Section 2. Special Meetings 1
Section 3. Place of Meeting 2
Section 4. Notice of Meeting 2
Section 5. Closing of Transfer Books or
Fixing of Record Date 2
Section 6. Voting Lists 3
Section 7. Quorum 3
Section 8. Proxies 3
Section 9. Voting of Shares 4
Section 10. Voting of Shares by Certain Holders 4
Section 11. Informal Action by Shareholders 4
ARTICLE III. BOARD OF DIRECTORS 5
Section l. General Powers 5
Section 2. Number, Tenure and Qualifications 5
Section 3. Regular Meetings 5
Section 4. Special Meetings 5
Section 5. Quorum 6
Section 6. Manner of Acting 6
Section 7. Attendance at Meetings 6
Section 8. Vacancies 6
Section 9. Compensation 6
Section 10. Presumption of Assent 7
Section 11. Removal of Directors 7
Section 12. Resignation 7
Section 13. Voting by Interested Directors 7
Section 14. Action by Directors Without a Meeting 7
ARTICLE IV. OFFICERS 8
Section l. Number 8
Section 2. Election and Term of Office 8
Section 3. Removal 8
Section 4. Vacancies 8
-i-
<PAGE>
Section 5. President 8
Section 6. The Vice Presidents 9
Section 7. The Secretary 9
Section 8. The Treasurer 9
Section 9. Assistant Secretaries and
Assistant Treasurers 10
Section 10. Salaries 10
ARTICLE V. LIMITATION OF LIABILITY AND INDEMNIFICATION
OF DIRECTORS, OFFICERS AND AGENTS OF THE
CORPORATION 10
Section l. Limitation of Liability 10
Section 2. Right of Indemnification 11
Section 3. Rights Cumulative 11
ARTICLE VI. CONTRACTS, LOANS, CHECKS, DEPOSITS AND
COMPENSATION 12
Section l. Contracts 12
Section 2. Loans 12
Section 3. Checks, Drafts, etc. 12
Section 4. Deposits 12
Section 5. Compensation
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER 12
Section l. Certificates for Shares 12
Section 2. Transfer of Shares 13
ARTICLE VIII. TAXABLE YEAR AND ACCOUNTING PERIOD 13
ARTICLE IX. DIVIDENDS 13
ARTICLE X. CORPORATE SEAL 14
ARTICLE XI. WAIVER OF NOTICE 14
ARTICLE XII. AMENDMENTS 14
-ii-
<PAGE>
ARTICLE XIII. EXECUTIVE COMMITTEE 14
Section l. Appointment 14
Section 2. Authority 14
Section 3. Tenure and Qualifications 15
Section 4. Meetings 15
Section 5. Quorum 15
Section 6. Action Without a Meeting 15
Section 7. Vacancies 15
Section 8. Resignations and Removal 15
Section 9. Procedure 16
ARTICLE XIV. CONDUCT OF MEETINGS 16
-iii-
<PAGE>
ARTICLE I
OFFICES
The principal office of GCI Cable, Inc. (the "Corporation") shall be
located in Anchorage, Alaska. The Corporation may have such other offices,
either within or without the State of Alaska, as the Board of Directors may
designate or as the business of the Corporation may require from time to time.
The registered office of the Corporation required by the Alaska
Corporations Code to be maintained in the State of Alaska may be, but need not
be, identical with the principal office in the State of Alaska, and the address
of the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of the Shareholders shall
be held in the month of June of each year, for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting.
If the election of Directors shall not be held on the day designated for the
annual meeting of the Shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
Shareholders as soon thereafter as it conveniently may be held.
(a) Meetings of the Shareholders shall be presided over by the
President or by any officer or Director or person selected at any time by the
President to act as Chairman, or if he is not present or available or makes no
selection, then by the Chairman of the Board of Directors. If neither the
President nor the Chairman of the Board of Directors is present and no selection
has been made, a Chairman should be chosen by a majority in interest of the
Shareholders present in person or by proxy at the meeting and entitled to vote
thereat.
(b) The Secretary of the meeting shall be the Secretary of the
Corporation or an Assistant Secretary, or if none of such officers is present,
any person appointed by the Chairman of the meeting.
Section 2. Special Meetings. Special meetings of the Shareholders for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth of all the
outstanding shares of the corporation entitled to vote at the meeting.
-1-
<PAGE>
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Alaska, as the place of meeting
called by the Board of Directors. A waiver of notice signed by all Shareholders
entitled to vote at a meeting may designate any place, either within or without
the State of Alaska, as the place for the holding of such meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the Corporation in the State of Alaska.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than twenty (20)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the President, or the Secretary, or the
persons calling the meeting, to each Shareholder of record entitled to vote at
such meeting. If mailed, the notice is considered delivered when deposited with
postage prepaid in the United States mail addressed to the shareholder at the
address of the shareholder as it appears on the stock transfer book of the
corporation, or, if the shareholder has filed with the secretary of the
corporation a written request that notice be mailed to a different address,
addressed to the shareholder at the new address.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of a dividend, or in order to make a determination of
Shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, seventy (70) days. If the stock
transfer books shall be closed for the purpose of determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders, such books shall
be closed for at least twenty (20) days immediately preceding such meeting.
Instead of closing the stock transfer books, the Board of Directors may
fix a date as the record date for any such determination of Shareholders. This
record date shall be not more than sixty (60) days, and in case of a meeting of
Shareholders not less than twenty (20) days, prior to the date on which the
particular action requiring such determination of Shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of Shareholders entitled to notice of or to vote at a meeting of
Shareholders, or Shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring the dividend is adopted is, as
the case may be, the record date for the determination of Shareholders. When a
determination of Shareholders entitled to vote at any meeting of Shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of closing has
expired.
-2-
<PAGE>
Section 6. Voting Lists. At least twenty (20) days before each meeting
of the Shareholders, the officer or agent having charge of the stock transfer
books for shares of the Corporation shall make a complete list of the
Shareholders entitled to vote at each meeting of Shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. The list shall be kept on file at the registered office of
the corporation and is subject to inspection by a Shareholder or the agent or
attorney of a Shareholder at any time during the usual business hours for a
period of twenty (20) days before the meeting. Such list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any Shareholder during the whole time of the meeting.
Section 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of Shareholders. If a quorum is present, the
affirmative vote of the majority of shares represented at the meeting and
entitled to vote on the subject matter is the act of the Shareholders unless the
vote of a greater number or voting by class is required by the articles of
incorporation, bylaws or the Alaska Corporations Code.
The Shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken other than
adjournment is approved by at least a majority of shares required to constitute
a quorum.
If less than a majority of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. Proxies. At all meetings of Shareholders, a Shareholder may
vote in person or by proxy executed in writing by the Shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. A proxy continues in full
force and effect until revoked by the person executing it, however, no proxy
shall be valid after eleven (11) months from the date of its execution, unless
such proxy qualifies as an irrevocable proxy as defined within AS 10.06.418(e).
Section 9. Voting of Shares. An outstanding share, regardless of class,
is entitled to one vote on each matter submitted to a vote at a meeting of
Shareholders, except as may be otherwise provided in the articles of
incorporation.
-3-
<PAGE>
Section 10. Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provisions, as the board of directors of such
corporation may determine.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a trustee may be voted
by the trustee, either in person or by proxy, but no trustee shall be entitled
to vote shares held by him without a transfer of such shares into his name.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer into his name if authority to transfer the
shares is contained in an appropriate order of the court by which such receiver
was appointed.
(d) A Shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(e) Neither treasury shares, nor shares of its own stock held by the
Corporation in a fiduciary capacity, nor shares held by another corporation if a
majority of the shares entitled to vote for the election of directors of the
other corporation is held by the Corporation, may be voted at a meeting or
counted in determining the total number of outstanding shares.
Section 11. Informal Action by Shareholders. Any action required to be
taken at a meeting of the Shareholders, or any other action which may be taken
at a meeting of the Shareholders, may be taken without a meeting by written
consent, identical in content setting out the action taken, signed by all of the
Shareholders entitled to vote on the action.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors
of the Corporation shall be not less than one (l) nor more than nine (9); unless
the Corporation, now or at any time in the future, has three (3) or more
Shareholders in which case the Corporation shall have not fewer than three (3)
directors; or unless the Corporation has
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only two (2) Shareholders, in which case the Corporation shall have at least two
(2) directors. Each Director shall hold office until the next annual meeting of
Shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Alaska or Shareholders of the
Corporation. The initial number of Directors shall be five (5).
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of the Shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Alaska, for the holding of additional regular meetings
without other notice than such resolution.
Section 4. Special Meetings.
(a) Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President, a Vice President, the Secretary, or a
Director or such person authorized to call the meeting may fix the time and
place for holding the meeting, either inside or outside the State of Alaska.
(b) Notice of any special meeting shall be given at least ten (10) days
prior thereto by written notice delivered personally or mailed to each Director
at his business address, or at least seventy-two (72) hours before the meeting
by electronic means, personal messenger, or comparable person-to-person
communication. If mailed by certified mail, such notice shall be deemed to be
delivered when deposited in the United States mail properly addressed, with
postage thereon prepaid. Any Director may waive notice of any meeting. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 5. Quorum. A majority of the presently qualified Directors
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time
without further notice; provided, further, that where there are only two
Directors, both shall be necessary to constitute a quorum.
Section 6. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 7. Attendance at Meetings. The Board of Directors may conduct a
meeting of the Board by communicating simultaneously with each other by means of
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conference telephones or similar communications equipment and any action taken
at such meeting shall not be invalidated by reason of the fact that the
respective members of the Board were not assembled together in one place at the
time of taking such action or conducting such business.
Section 8. Vacancies. Where a vacancy created by the removal of a
Director is pursuant to AS 10.06.460 or 10.06.463, such vacancies occurring on
the Board may be filled only by a vote of the Shareholders. Any other vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of Directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of Directors by the Shareholders. In no case may a vacancy continue
longer than six (6) months or until the next annual meeting, whichever occurs
first.
Section 9. Compensation. By resolution of the Board of Directors, each
Director may be paid his or her expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a stated salary as Director or a
fixed sum for attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his/her dissent shall be entered in the minutes of the meeting or unless he/she
shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
Section 11. Removal of Directors. Any Director may be removed with or
without cause, at any time, by a vote of the Shareholders holding a majority of
the shares then issued and outstanding, at any special meeting called for that
purpose, or at the annual meeting. Except as otherwise prescribed by statute, a
Director may be removed for cause by a vote of the majority of the entire board.
Prior to vote by the Board on the question of removal of any Director for cause,
such Director must be given written notice of the reasons for such action.
Section 12. Resignation. A Director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary, or
the Board of Directors of the Corporation, unless the notice specifies a later
time for the effectiveness of the
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resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
Section 13. Voting by Interested Directors. No Director may vote upon
any matter in which he has an adverse or personal interest, unless such interest
has been fully disclosed to the Board of Directors and the Board of Directors,
by majority of vote without the interested Director voting, permits such
interested Director to vote.
Section 14. Action by Directors Without a Meeting. Action required or
permitted to be taken by the Board or a committee designated by the Board may be
taken without a meeting on written consents, identical in consent, setting out
the action taken and signed by all the members of the Board or the committee.
The written consents shall be filed with the minutes. The consents have the same
effect as an unanimous vote.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two (2) or more offices may be held by the same person, except the offices
of President and Secretary.
Section 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the Shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
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Section 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the Shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 6. Vice Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the Secretary
or an Assistant Secretary, certificates for shares of the Corporation; and shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
Section 7. The Secretary. The Secretary shall:
(a) keep the minutes of the proceedings of the Shareholders and of the
Board of Directors in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law;
(c) be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized;
(d) keep a register of the post office address of each Shareholder
which shall be furnished to the Secretary by such Shareholder;
(e) sign with the President, or a Vice President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(f) have general charge of the stock transfer books of the Corporation;
and
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(g) in general perform all duties incident to the office of the
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 8. The Treasurer. The Treasurer shall:
(a) have charge and custody of and be responsible for all funds and
securities of the Corporation;
(b) receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or other depositories as shall
be selected; and
(c) in general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
Section 9. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President or a Vice President certificates for shares of the Corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President of the Board of Directors.
Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
ARTICLE V
LIMITATION OF LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS
AND AGENTS OF THE CORPORATION
Section 1. Limitation of Liability. No person shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken in good faith, as a Director, member of a Committee or
Officer of the Corporation, if such person exercised or used the same degree of
care and skill, including reasonable inquiry, as a prudent person would have
exercised or used under the circumstances in the conduct
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of his/her own affairs. Without limitation on the foregoing, any such person
shall be deemed to have exercised or used such degree of care and skill if such
action were taken or omitted in reliance in good faith upon advice of counsel
for the Corporation, or the books of account or other records of the
Corporation, or reports or information made or furnished to the Corporation by
any officials, accountants, engineers, agents or employees of the Corporation,
or by an independent Certified Public Accountant or auditor, engineer,
appraiser, or other expert employed by the Corporation and selected with
reasonable care by the Board of Directors, by any such committee or by an
authorized officer of the Corporation.
Section 2. Right of Indemnification. Each Director, member of a
Committee, Officer, Agent and Employee of the Corporation, and each former
director, member of a committee, officer, agent and employee of the Corporation,
and any person who may have served at its request as a director, officer, agent
or employee of another Corporation in which it is a creditor, and his heirs and
personal representative shall be indemnified by the Corporation against all loss
or damage suffered and all costs and expenses imposed upon or incurred by him in
connection with or arising out of any action, suit or proceedings (whether civil
or criminal in nature) in which he may be involved, to which he may be a party
by reason of being or having been (or his personal representative or estate
having been) such director, member of a committee, officer, agent or employee,
except in relation to matters as to which he shall be adjudged in such action,
suit or proceeding to be liable for negligence or misconduct in performance of
his duty; provided, however, that the Corporation shall be given reasonable
notice of the institution of such action, suit or proceedings; and in the event
the same shall be settled in whole or in part, the Corporation or its counsel
shall consent to such settlement if it be determined by its counsel or found by
a majority of the Board of Directors then in office and not involved in such
controversy, that such settlement is to the best interest of the Corporation and
that the person to be indemnified was not guilty of negligence or misconduct in
performance of duty.
Indemnification (unless ordered by the court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification is proper in the circumstances because the director,
officer, employee or committee member has met the applicable standard of
conduct. This determination shall be made (a) by the Board of Directors, by a
majority vote of a quorum consisting of directors who were not parties to the
action or proceeding; or (b) by independent legal counsel in a written opinion,
either (i) if such a quorum is not obtainable, or (ii) if a quorum of
disinterested directors so requests such a written opinion; or (c) by approval
of the outstanding shares.
Section 3. Rights Cumulative. The provisions of this Article V shall
not be deemed exclusive or in limitation of, but shall be cumulative of and in
addition to any other limitations of liability, indemnities, and rights to which
such Director, member of a Committee, Officer, Agent or other person may be
entitled under Alaska Statute, these
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Bylaws or pursuant to any agreement or resolution of the Board of Directors or
of the Shareholders, or otherwise.
ARTICLE VI
CONTRACTS, LOANS, CHECKS,
DEPOSITS AND COMPENSATION
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or one of
its employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person or entity to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled; except that in case
of a lost, destroyed or mutilated certificate a new one may be issued
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therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
All shares issued by the Corporation shall contain a legend on the
certificates stating substantially the following:
The shares represented by this certificate have
not been registered under any federal or state
securities law. They have been acquired for
investment and may not be transferred without an
effective registration statement pursuant to such
laws or an opinion of counsel satisfactory to the
corporation that registration is not required.
Section 2. Transfer of Shares. Transfer of any shares of the
Corporation shall be done in compliance with all federal, state and local
securities laws, and any transfer of in violation thereof is void. Transfer of
shares of the Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by its legal representative, who
shall furnish proper evidence of authority to transfer filed with the Secretary
of the Corporation, and on surrender for cancellation of the certificate for
such shares. The entity or person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes.
ARTICLE VIII
TAXABLE YEAR AND ACCOUNTING PERIOD
The taxable year and accounting period of the Corporation shall begin
on January 1 and end on December 31, unless changed by resolution of the Board
of Directors.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in cash, property, or
its own shares, except when the Corporation is insolvent, or when the dividend
would render the Corporation insolvent, or when the dividend is contrary to
restrictions contained in the Articles of Incorporation.
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ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal."
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given to any Shareholder or
Director of the Corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
Alaska Corporation Code, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XII
AMENDMENTS
Except as may be provided in the Articles, these Bylaws may be altered,
amended or repealed and new Bylaws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors.
ARTICLE XIII
EXECUTIVE COMMITTEE
Section 1. Appointment. The Board of Directors, by resolution adopted
by a majority of the full board, may designate two (2) or more of its members to
constitute an Executive Committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 2. Authority. Except as limited by the Articles or AS
10.06.468, the Executive Committee, when the Board of Directors is not in
session, shall have and may exercise all of the authority of the Board of
Directors except to the extent, if any, that such authority shall be limited by
the resolution appointing the Executive Committee.
Section 3. Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated as
a member of the Executive Committee and is elected and qualified.
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Section 4. Meetings. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee may
be called by any member thereof upon not less than five (5) days' notice,
stating the place, date and hour of the meeting, which notice may be written or
oral, and if mailed by certified mail, shall be deemed to be delivered when
deposited in the United States mail addressed to the member of the Executive
Committee at his business address, postage prepaid. Any member of the Executive
Committee may waive notice of any meeting, and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the Executive Committee need not state the business proposed to be transacted at
the meeting.
Section 5. Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action that may be taken by
the Executive Committee at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed by all of
the members of the Executive Committee before such action be taken further. The
Executive Committee can validly conduct a meeting by communicating
simultaneously with each other by means of conference telephones or similar
communications equipment.
Section 7. Vacancies. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 8. Resignations and Removal. Any member of the Executive
Committee may be removed at any time, with or without cause, by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the Corporation and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 9. Procedure. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
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ARTICLE XIV
CONDUCT OF MEETINGS
All meetings conducted under these Bylaws shall be governed in
accordance with Roberts Rules of Order.
We, the undersigned, hereby certify that the foregoing Bylaws for
governing the operation and management of GCI Cable, Inc., were duly adopted by
the Directors by unanimous written consent, effective as of April 26, 1996.
/s/
John M. Lowber, Secretary
APPROVED:
/s/
Ronald A. Duncan, President
ymg\f:\docs\6552\34\bylaws.gci
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ARTICLES OF INCORPORATION
OF
GCI CABLE, INC.
We, the undersigned natural persons over the age of eighteen (18)
years, acting as incorporators of a corporation under the Alaska Corporation
Code, AS 10.06, do hereby adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - Name
The name of the corporation ("Corporation") is: GCI Cable, Inc.
ARTICLE II - Purposes and Powers
The purpose for which the Corporation is organized is to provide
telecommunication and cable business services, and in general, to pursue any
lawful purpose authorized under the Alaska Corporations Code.
The Corporation shall have and may exercise all of the general powers
of a natural person, including those provided in AS 10.06.010, as amended, and
may transact any or all lawful business for which corporations may be
incorporated under the Alaska Corporations Code.
ARTICLE III - Registered Office and Agent
The address of the Corporation's registered office and the name of its
registered agent is Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., 717 "K"
Street, Anchorage, AK 99501.
ARTICLE IV - Capital
The Corporation shall have the authority to issue ten thousand (10,000)
shares of no par value stock. These shares shall be common voting shares, each
share having one (1) vote.
ARTICLE V - No Presumptive Rights
Pursuant to AS 10.06.210(a)(1)(B), no holder of any stock of the
Corporation shall be entitled to purchase, subscribe for or otherwise acquire,
as a matter of right, any new or additional shares of stock,, of any class, in
the Corporation, any options or warrants to
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purchase, subscribe for or otherwise acquire any new or additional shares in the
Corporation, or any shares, bonds, notes, debentures, or other securities
convertible into or carrying options or warrants to purchase, subscribe for or
otherwise acquire any such shares.
ARTICLE VI - No Cumulative Voting
Pursuant to AS 10.06.420(d), shareholders shall not cumulate their
votes, but must vote shares held by them for as many persons as there are
directors to be elected.
ARTICLE VII - Power to Redeem Shares
Pursuant to AS 10.06.325, the Corporation has the power on majority
vote of the shareholders, to redeem, in whole or in part, any class of
outstanding shares.
ARTICLE VIII - Quorum of Shareholders
A quorum for the conducting of any shareholder business shall be
fifty-one percent (51%) of all outstanding shares that are entitled to vote.
ARTICLE IX - Initial Directors
The initial number of directors of the Corporation shall be five (5).
The names and addresses of the initial directors, who shall serve until the
first annual meeting of shareholders or until their successors are elected and
qualified are as follows:
Ronald A. Duncan
2550 Denali Street, Suite 1000
Anchorage, AK 99503
Larry E. Romrell
4643 S. Ulster, Suite 400
Denver, CO 80237
Donne F. Fisher
4643 S. Ulster, Suite 400
Denver, CO 80237
Robert M. Walp
2550 Denali Street, Suite 1000
Anchorage, AK 99503
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Carter Page
c/o Semaphore Partners
8101 Prentice Plaza
Suite M-200
Englewood, CO 80111
The number of directors may be increased or decreased from time to time
by an amendment of the Bylaws; but no decrease shall have the effect of
shortening the term of any incumbent director. The directors may fill any
vacancy on the board created by reason of removal or retiring of any director.
ARTICLE X - Alien Affiliates
The Corporation is not affiliated with any nonresident alien or a
corporation whose place of incorporation is outside the United States (as
defined in AS 10.06.990(2) and (3)).
ARTICLE XI - Liability of Directors
The directors of the Corporation shall not be liable to the Corporation
for monetary damages for a breach of fiduciary duty except for:
(1) A breach of a director's duty of loyalty to the
Corporation;
(2) Acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
or
(3) A transaction from which the director derives an
improper personal benefit.
ARTICLE XII - Bylaws
The initial Bylaws of the Corporation shall be adopted by the Board of
Directors, and the power to alter, amend or repeal the Bylaws shall be reserved
to the board. The Bylaws may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with the Alaska
Corporation Code or with these Articles of Incorporation.
ARTICLE XIII - Duration
The duration of the Corporation shall be perpetual.
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ARTICLE XIV - Effective Date
These Articles will be effective upon filing.
IN WITNESS WHEREOF, I have signed these Articles this 11th day of
April, 1996.
/s/
Ronald A. Duncan
IN WITNESS WHEREOF, I have signed these Articles this 11th day of
April, 1996.
/s/
John M. Lowber
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing Articles of Incorporation of GCI Cable, Inc. was
acknowledged before me this 11th day of April, 1996, at Anchorage, Alaska, by
Ronald A. Duncan.
/s/ Barb Bearman
Notary Public in and for the State of Alaska
My commission expires:1-17-97
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing Articles of Incorporation of GCI Cable, Inc. was
acknowledged before me this 11th day of April, 1996, at Anchorage, Alaska, by
John M. Lowber.
/s/ Barb Bearman
Notary Public in and for the State of Alaska
My commission expires:1-17-97
ymg\f:\docs\6552\34\articles.gci
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BYLAWS
OF
GCI CABLE/ FAIRBANKS, INC.
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TABLE OF CONTENTS
ARTICLE I. OFFICES 1
ARTICLE II. SHAREHOLDERS' MEETINGS 1
Section l. Annual Meeting 1
Section 2. Special Meetings 1
Section 3. Place of Meeting 2
Section 4. Notice of Meeting 2
Section 5. Closing of Transfer Books or
Fixing of Record Date 2
Section 6. Voting Lists 3
Section 7. Quorum 3
Section 8. Proxies 3
Section 9. Voting of Shares 4
Section 10. Voting of Shares by Certain Holders 4
Section 11. Informal Action by Shareholders 4
ARTICLE III. BOARD OF DIRECTORS 5
Section l. General Powers 5
Section 2. Number, Tenure and Qualifications 5
Section 3. Regular Meetings 5
Section 4. Special Meetings 5
Section 5. Quorum 6
Section 6. Manner of Acting 6
Section 7. Attendance at Meetings 6
Section 8. Vacancies 6
Section 9. Compensation 6
Section 10. Presumption of Assent 7
Section 11. Removal of Directors 7
Section 12. Resignation 7
Section 13. Voting by Interested Directors 7
Section 14. Action by Directors Without a Meeting 7
ARTICLE IV. OFFICERS 8
Section l. Number 8
Section 2. Election and Term of Office 8
Section 3. Removal 8
Section 4. Vacancies 8
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Section 5. President 8
Section 6. The Vice Presidents 9
Section 7. The Secretary 9
Section 8. The Treasurer 9
Section 9. Assistant Secretaries and
Assistant Treasurers 10
Section 10. Salaries 10
ARTICLE V. LIMITATION OF LIABILITY AND INDEMNIFICATION
OF DIRECTORS, OFFICERS AND AGENTS OF THE
CORPORATION 10
Section l. Limitation of Liability 10
Section 2. Right of Indemnification 11
Section 3. Rights Cumulative 11
ARTICLE VI. CONTRACTS, LOANS, CHECKS, DEPOSITS AND
COMPENSATION 12
Section l. Contracts 12
Section 2. Loans 12
Section 3. Checks, Drafts, etc. 12
Section 4. Deposits 12
Section 5. Compensation
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER 12
Section l. Certificates for Shares 12
Section 2. Transfer of Shares 13
ARTICLE VIII. TAXABLE YEAR AND ACCOUNTING PERIOD 13
ARTICLE IX. DIVIDENDS 13
ARTICLE X. CORPORATE SEAL 14
ARTICLE XI. WAIVER OF NOTICE 14
ARTICLE XII. AMENDMENTS 14
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ARTICLE XIII. EXECUTIVE COMMITTEE 14
Section l. Appointment 14
Section 2. Authority 14
Section 3. Tenure and Qualifications 15
Section 4. Meetings 15
Section 5. Quorum 15
Section 6. Action Without a Meeting 15
Section 7. Vacancies 15
Section 8. Resignations and Removal 15
Section 9. Procedure 16
ARTICLE XIV. CONDUCT OF MEETINGS 16
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ARTICLE I
OFFICES
The principal office of GCI Cable/Fairbanks, Inc. (the "Corporation")
shall be located in Anchorage, Alaska. The Corporation may have such other
offices, either within or without the State of Alaska, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
The registered office of the Corporation required by the Alaska
Corporations Code to be maintained in the State of Alaska may be, but need not
be, identical with the principal office in the State of Alaska, and the address
of the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of the Shareholders shall
be held in the month of June of each year, for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting.
If the election of Directors shall not be held on the day designated for the
annual meeting of the Shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
Shareholders as soon thereafter as it conveniently may be held.
(a) Meetings of the Shareholders shall be presided over by the
President or by any officer or Director or person selected at any time by the
President to act as Chairman, or if he is not present or available or makes no
selection, then by the Chairman of the Board of Directors. If neither the
President nor the Chairman of the Board of Directors is present and no selection
has been made, a Chairman should be chosen by a majority in interest of the
Shareholders present in person or by proxy at the meeting and entitled to vote
thereat.
(b) The Secretary of the meeting shall be the Secretary of the
Corporation or an Assistant Secretary, or if none of such officers is present,
any person appointed by the Chairman of the meeting.
Section 2. Special Meetings. Special meetings of the Shareholders for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth of all the
outstanding shares of the corporation entitled to vote at the meeting.
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Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Alaska, as the place of meeting
called by the Board of Directors. A waiver of notice signed by all Shareholders
entitled to vote at a meeting may designate any place, either within or without
the State of Alaska, as the place for the holding of such meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the Corporation in the State of Alaska.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than twenty (20)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the President, or the Secretary, or the
persons calling the meeting, to each Shareholder of record entitled to vote at
such meeting. If mailed, the notice is considered delivered when deposited with
postage prepaid in the United States mail addressed to the shareholder at the
address of the shareholder as it appears on the stock transfer book of the
corporation, or, if the shareholder has filed with the secretary of the
corporation a written request that notice be mailed to a different address,
addressed to the shareholder at the new address.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of a dividend, or in order to make a determination of
Shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, seventy (70) days. If the stock
transfer books shall be closed for the purpose of determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders, such books shall
be closed for at least twenty (20) days immediately preceding such meeting.
Instead of closing the stock transfer books, the Board of Directors may
fix a date as the record date for any such determination of Shareholders. This
record date shall be not more than sixty (60) days, and in case of a meeting of
Shareholders not less than twenty (20) days, prior to the date on which the
particular action requiring such determination of Shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of Shareholders entitled to notice of or to vote at a meeting of
Shareholders, or Shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring the dividend is adopted is, as
the case may be, the record date for the determination of Shareholders. When a
determination of Shareholders entitled to vote at any meeting of Shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of closing has
expired.
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Section 6. Voting Lists. At least twenty (20) days before each meeting
of the Shareholders, the officer or agent having charge of the stock transfer
books for shares of the Corporation shall make a complete list of the
Shareholders entitled to vote at each meeting of Shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. The list shall be kept on file at the registered office of
the corporation and is subject to inspection by a Shareholder or the agent or
attorney of a Shareholder at any time during the usual business hours for a
period of twenty (20) days before the meeting. Such list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any Shareholder during the whole time of the meeting.
Section 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of Shareholders. If a quorum is present, the
affirmative vote of the majority of shares represented at the meeting and
entitled to vote on the subject matter is the act of the Shareholders unless the
vote of a greater number or voting by class is required by the articles of
incorporation, bylaws or the Alaska Corporations Code.
The Shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken other than
adjournment is approved by at least a majority of shares required to constitute
a quorum.
If less than a majority of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. Proxies. At all meetings of Shareholders, a Shareholder may
vote in person or by proxy executed in writing by the Shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. A proxy continues in full
force and effect until revoked by the person executing it, however, no proxy
shall be valid after eleven (11) months from the date of its execution, unless
such proxy qualifies as an irrevocable proxy as defined within AS 10.06.418(e).
Section 9. Voting of Shares. An outstanding share, regardless of class,
is entitled to one vote on each matter submitted to a vote at a meeting of
Shareholders, except as may be otherwise provided in the articles of
incorporation.
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Section 10. Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provisions, as the board of directors of such
corporation may determine.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a trustee may be voted
by the trustee, either in person or by proxy, but no trustee shall be entitled
to vote shares held by him without a transfer of such shares into his name.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer into his name if authority to transfer the
shares is contained in an appropriate order of the court by which such receiver
was appointed.
(d) A Shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(e) Neither treasury shares, nor shares of its own stock held by the
Corporation in a fiduciary capacity, nor shares held by another corporation if a
majority of the shares entitled to vote for the election of directors of the
other corporation is held by the Corporation, may be voted at a meeting or
counted in determining the total number of outstanding shares.
Section 11. Informal Action by Shareholders. Any action required to be
taken at a meeting of the Shareholders, or any other action which may be taken
at a meeting of the Shareholders, may be taken without a meeting by written
consent, identical in content setting out the action taken, signed by all of the
Shareholders entitled to vote on the action.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors
of the Corporation shall be not less than one (l) nor more than nine (9); unless
the Corporation, now or at any time in the future, has three (3) or more
Shareholders in which case the Corporation shall have not fewer than three (3)
directors; or unless the Corporation has
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only two (2) Shareholders, in which case the Corporation shall have at least two
(2) directors. Each Director shall hold office until the next annual meeting of
Shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Alaska or Shareholders of the
Corporation. The initial number of Directors shall be five (5).
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of the Shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Alaska, for the holding of additional regular meetings
without other notice than such resolution.
Section 4. Special Meetings.
(a) Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President, a Vice President, the Secretary, or a
Director or such person authorized to call the meeting may fix the time and
place for holding the meeting, either inside or outside the State of Alaska.
(b) Notice of any special meeting shall be given at least ten (10) days
prior thereto by written notice delivered personally or mailed to each Director
at his business address, or at least seventy-two (72) hours before the meeting
by electronic means, personal messenger, or comparable person-to-person
communication. If mailed by certified mail, such notice shall be deemed to be
delivered when deposited in the United States mail properly addressed, with
postage thereon prepaid. Any Director may waive notice of any meeting. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 5. Quorum. A majority of the presently qualified Directors
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time
without further notice; provided, further, that where there are only two
Directors, both shall be necessary to constitute a quorum.
Section 6. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 7. Attendance at Meetings. The Board of Directors may conduct a
meeting of the Board by communicating simultaneously with each other by means of
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conference telephones or similar communications equipment and any action taken
at such meeting shall not be invalidated by reason of the fact that the
respective members of the Board were not assembled together in one place at the
time of taking such action or conducting such business.
Section 8. Vacancies. Where a vacancy created by the removal of a
Director is pursuant to AS 10.06.460 or 10.06.463, such vacancies occurring on
the Board may be filled only by a vote of the Shareholders. Any other vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of Directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of Directors by the Shareholders. In no case may a vacancy continue
longer than six (6) months or until the next annual meeting, whichever occurs
first.
Section 9. Compensation. By resolution of the Board of Directors, each
Director may be paid his or her expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a stated salary as Director or a
fixed sum for attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his/her dissent shall be entered in the minutes of the meeting or unless he/she
shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
Section 11. Removal of Directors. Any Director may be removed with or
without cause, at any time, by a vote of the Shareholders holding a majority of
the shares then issued and outstanding, at any special meeting called for that
purpose, or at the annual meeting. Except as otherwise prescribed by statute, a
Director may be removed for cause by a vote of the majority of the entire board.
Prior to vote by the Board on the question of removal of any Director for cause,
such Director must be given written notice of the reasons for such action.
Section 12. Resignation. A Director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary, or
the Board of Directors of the Corporation, unless the notice specifies a later
time for the effectiveness of the
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resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
Section 13. Voting by Interested Directors. No Director may vote upon
any matter in which he has an adverse or personal interest, unless such interest
has been fully disclosed to the Board of Directors and the Board of Directors,
by majority of vote without the interested Director voting, permits such
interested Director to vote.
Section 14. Action by Directors Without a Meeting. Action required or
permitted to be taken by the Board or a committee designated by the Board may be
taken without a meeting on written consents, identical in consent, setting out
the action taken and signed by all the members of the Board or the committee.
The written consents shall be filed with the minutes. The consents have the same
effect as an unanimous vote.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two (2) or more offices may be held by the same person, except the offices
of President and Secretary.
Section 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the Shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
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Section 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the Shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 6. Vice Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the Secretary
or an Assistant Secretary, certificates for shares of the Corporation; and shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
Section 7. The Secretary. The Secretary shall:
(a) keep the minutes of the proceedings of the Shareholders and of the
Board of Directors in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law;
(c) be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized;
(d) keep a register of the post office address of each Shareholder
which shall be furnished to the Secretary by such Shareholder;
(e) sign with the President, or a Vice President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(f) have general charge of the stock transfer books of the Corporation;
and
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(g) in general perform all duties incident to the office of the
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 8. The Treasurer. The Treasurer shall:
(a) have charge and custody of and be responsible for all funds and
securities of the Corporation;
(b) receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or other depositories as shall
be selected; and
(c) in general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
Section 9. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President or a Vice President certificates for shares of the Corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President of the Board of Directors.
Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
ARTICLE V
LIMITATION OF LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS
AND AGENTS OF THE CORPORATION
Section 1. Limitation of Liability. No person shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken in good faith, as a Director, member of a Committee or
Officer of the Corporation, if such person exercised or used the same degree of
care and skill, including reasonable inquiry, as a prudent person would have
exercised or used under the circumstances in the conduct
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of his/her own affairs. Without limitation on the foregoing, any such person
shall be deemed to have exercised or used such degree of care and skill if such
action were taken or omitted in reliance in good faith upon advice of counsel
for the Corporation, or the books of account or other records of the
Corporation, or reports or information made or furnished to the Corporation by
any officials, accountants, engineers, agents or employees of the Corporation,
or by an independent Certified Public Accountant or auditor, engineer,
appraiser, or other expert employed by the Corporation and selected with
reasonable care by the Board of Directors, by any such committee or by an
authorized officer of the Corporation.
Section 2. Right of Indemnification. Each Director, member of a
Committee, Officer, Agent and Employee of the Corporation, and each former
director, member of a committee, officer, agent and employee of the Corporation,
and any person who may have served at its request as a director, officer, agent
or employee of another Corporation in which it is a creditor, and his heirs and
personal representative shall be indemnified by the Corporation against all loss
or damage suffered and all costs and expenses imposed upon or incurred by him in
connection with or arising out of any action, suit or proceedings (whether civil
or criminal in nature) in which he may be involved, to which he may be a party
by reason of being or having been (or his personal representative or estate
having been) such director, member of a committee, officer, agent or employee,
except in relation to matters as to which he shall be adjudged in such action,
suit or proceeding to be liable for negligence or misconduct in performance of
his duty; provided, however, that the Corporation shall be given reasonable
notice of the institution of such action, suit or proceedings; and in the event
the same shall be settled in whole or in part, the Corporation or its counsel
shall consent to such settlement if it be determined by its counsel or found by
a majority of the Board of Directors then in office and not involved in such
controversy, that such settlement is to the best interest of the Corporation and
that the person to be indemnified was not guilty of negligence or misconduct in
performance of duty.
Indemnification (unless ordered by the court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification is proper in the circumstances because the director,
officer, employee or committee member has met the applicable standard of
conduct. This determination shall be made (a) by the Board of Directors, by a
majority vote of a quorum consisting of directors who were not parties to the
action or proceeding; or (b) by independent legal counsel in a written opinion,
either (i) if such a quorum is not obtainable, or (ii) if a quorum of
disinterested directors so requests such a written opinion; or (c) by approval
of the outstanding shares.
Section 3. Rights Cumulative. The provisions of this Article V shall
not be deemed exclusive or in limitation of, but shall be cumulative of and in
addition to any other limitations of liability, indemnities, and rights to which
such Director, member of a Committee, Officer, Agent or other person may be
entitled under Alaska Statute, these
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Bylaws or pursuant to any agreement or resolution of the Board of Directors or
of the Shareholders, or otherwise.
ARTICLE VI
CONTRACTS, LOANS, CHECKS,
DEPOSITS AND COMPENSATION
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or one of
its employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person or entity to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled; except that in case
of a lost, destroyed or mutilated certificate a new one may be issued
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therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
All shares issued by the Corporation shall contain a legend on the
certificates stating substantially the following:
The shares represented by this certificate have
not been registered under any federal or state
securities law. They have been acquired for
investment and may not be transferred without an
effective registration statement pursuant to such
laws or an opinion of counsel satisfactory to the
corporation that registration is not required.
Section 2. Transfer of Shares. Transfer of any shares of the
Corporation shall be done in compliance with all federal, state and local
securities laws, and any transfer of in violation thereof is void. Transfer of
shares of the Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by its legal representative, who
shall furnish proper evidence of authority to transfer filed with the Secretary
of the Corporation, and on surrender for cancellation of the certificate for
such shares. The entity or person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes.
ARTICLE VIII
TAXABLE YEAR AND ACCOUNTING PERIOD
The taxable year and accounting period of the Corporation shall begin
on January 1 and end on December 31, unless changed by resolution of the Board
of Directors.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in cash, property, or
its own shares, except when the Corporation is insolvent, or when the dividend
would render the Corporation insolvent, or when the dividend is contrary to
restrictions contained in the Articles of Incorporation.
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<PAGE>
ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal."
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given to any Shareholder or
Director of the Corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
Alaska Corporation Code, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XII
AMENDMENTS
Except as may be provided in the Articles, these Bylaws may be altered,
amended or repealed and new Bylaws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors.
ARTICLE XIII
EXECUTIVE COMMITTEE
Section 1. Appointment. The Board of Directors, by resolution adopted
by a majority of the full board, may designate two (2) or more of its members to
constitute an Executive Committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 2. Authority. Except as limited by the Articles or AS
10.06.468, the Executive Committee, when the Board of Directors is not in
session, shall have and may exercise all of the authority of the Board of
Directors except to the extent, if any, that such authority shall be limited by
the resolution appointing the Executive Committee.
Section 3. Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated as
a member of the Executive Committee and is elected and qualified.
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<PAGE>
Section 4. Meetings. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee may
be called by any member thereof upon not less than five (5) days' notice,
stating the place, date and hour of the meeting, which notice may be written or
oral, and if mailed by certified mail, shall be deemed to be delivered when
deposited in the United States mail addressed to the member of the Executive
Committee at his business address, postage prepaid. Any member of the Executive
Committee may waive notice of any meeting, and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the Executive Committee need not state the business proposed to be transacted at
the meeting.
Section 5. Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action that may be taken by
the Executive Committee at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed by all of
the members of the Executive Committee before such action be taken further. The
Executive Committee can validly conduct a meeting by communicating
simultaneously with each other by means of conference telephones or similar
communications equipment.
Section 7. Vacancies. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 8. Resignations and Removal. Any member of the Executive
Committee may be removed at any time, with or without cause, by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the Corporation and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 9. Procedure. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
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<PAGE>
ARTICLE XIV
CONDUCT OF MEETINGS
All meetings conducted under these Bylaws shall be governed in
accordance with Roberts Rules of Order.
We, the undersigned, hereby certify that the foregoing Bylaws for
governing the operation and management of GCI Cable/Fairbanks, Inc., were duly
adopted by the Directors by unanimous written consent, effective as of May 16,
1996.
/s/
John M. Lowber, Secretary
APPROVED:
/s/
Ronald A. Duncan, President
ejs\F:\DOCS\65520\36\BYLAWS.GCI\May 3, 1996 (10:33am)
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ARTICLES OF INCORPORATION
OF
GCI CABLE/FAIRBANKS, INC.
We, the undersigned natural persons over the age of eighteen (18)
years, acting as incorporators of a corporation under the Alaska Corporation
Code, AS 10.06, do hereby adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - Name
The name of the corporation ("Corporation") is:
GCI Cable/Fairbanks, Inc.
ARTICLE II - Purposes and Powers
The purpose for which the Corporation is organized is to provide
telecommunication and cable business services, and in general, to pursue any
lawful purpose authorized under the Alaska Corporations Code.
The Corporation shall have and may exercise all of the general powers
of a natural person, including those provided in AS 10.06.010, as amended, and
may transact any or all lawful business for which corporations may be
incorporated under the Alaska Corporations Code.
ARTICLE III - Registered Office and Agent
The address of the Corporation's registered office and the name of its
registered agent is Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., 717 "K"
Street, Anchorage, AK 99501.
ARTICLE IV - Capital
The Corporation shall have the authority to issue ten thousand (10,000)
shares of no par value stock. These shares shall be common voting shares, each
share having one (1) vote.
ARTICLE V - No Presumptive Rights
Pursuant to AS 10.06.210(a)(1)(B), no holder of any stock of the
Corporation shall
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<PAGE>
be entitled to purchase, subscribe for or otherwise acquire, as a matter of
right, any new or additional shares of stock, of any class, in the Corporation,
any options or warrants to purchase, subscribe for or otherwise acquire any new
or additional shares in the Corporation, or any shares, bonds, notes,
debentures, or other securities convertible into or carrying options or warrants
to purchase, subscribe for or otherwise acquire any such shares.
ARTICLE VI - No Cumulative Voting
Pursuant to AS 10.06.420(d), shareholders shall not cumulate their
votes, but must vote shares held by them for as many persons as there are
directors to be elected.
ARTICLE VII - Power to Redeem Shares
Pursuant to AS 10.06.325, the Corporation has the power on majority
vote of the shareholders, to redeem, in whole or in part, any class of
outstanding shares.
ARTICLE VIII - Quorum of Shareholders
A quorum for the conducting of any shareholder business shall be
fifty-one percent (51%) of all outstanding shares that are entitled to vote.
ARTICLE IX - Initial Directors
The initial number of directors of the Corporation shall be five (5).
The names and addresses of the initial directors, who shall serve until the
first annual meeting of shareholders or until their successors are elected and
qualified are as follows:
Ronald A. Duncan
2550 Denali Street, Suite 1000
Anchorage, AK 99503
Larry E. Romrell
4643 S. Ulster, Suite 400
Denver, CO 80237
Donne F. Fisher
4643 S. Ulster, Suite 400
Denver, CO 80237
Robert M. Walp
2550 Denali Street, Suite 1000
Anchorage, AK 99503
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<PAGE>
Carter Page
c/o Semaphore Partners
8101 Prentice Plaza
Suite M-200
Englewood, CO 80111
The number of directors may be increased or decreased from time to time
by an amendment of the Bylaws; but no decrease shall have the effect of
shortening the term of any incumbent director. The directors may fill any
vacancy on the board created by reason of removal or retiring of any director.
ARTICLE X - Alien Affiliates
The Corporation is not affiliated with any nonresident alien or a
corporation whose place of incorporation is outside the United States (as
defined in AS 10.06.990(2) and (3)).
ARTICLE XI - Liability of Directors
The directors of the Corporation shall not be liable to the Corporation
for monetary damages for a breach of fiduciary duty except for:
(1) A breach of a director's duty of loyalty to the
Corporation;
(2) Acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
or
(3) A transaction from which the director derives an
improper personal benefit.
ARTICLE XII - Bylaws
The initial Bylaws of the Corporation shall be adopted by the Board of
Directors, and the power to alter, amend or repeal the Bylaws shall be reserved
to the board. The Bylaws may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with the Alaska
Corporation Code or with these Articles of Incorporation.
ARTICLE XIII - Duration
The duration of the Corporation shall be perpetual.
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<PAGE>
ARTICLE XIV - Effective Date
These Articles will be effective upon filing.
IN WITNESS WHEREOF, I have signed these Articles this 14th day of May,
1996.
/s/
Bonnie J. Stratton
IN WITNESS WHEREOF, I have signed these Articles this 14th day of May,
1996.
/s/
Robert B. Flint
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
Bonnie J. Stratton says on oath or affirms that she has read the
foregoing Articles of Incorporation for GCI CABLE/FAIRBANKS, INC., and believes
all statements made in the document are true.
SUBSCRIBED AND SWORN to before me this 14th day of May, 1996, at
Anchorage, Alaska.
/s/ Janet M. Hite
Notary Public in and for the State of Alaska
My commission expires: 4-11-97
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
Robert B. Flint says on oath or affirms that she has read the foregoing
Articles of Incorporation for GCI CABLE/FAIRBANKS, INC., and believes all
statements made in the document are true.
SUBSCRIBED AND SWORN to before me this 14th day of May, 1996, at
Anchorage, Alaska.
/s/ Janet M. Hite
Notary Public in and for the State of Alaska
My commission expires: 4-11-97
ejs\F:\DOCS\65520\36\ARTICLES.GCIMay 14, 1996 (9:31am)
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BYLAWS
OF
GCI CABLE/JUNEAU, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. OFFICES 1
ARTICLE II. SHAREHOLDERS' MEETINGS 1
Section l. Annual Meeting 1
Section 2. Special Meetings 1
Section 3. Place of Meeting 2
Section 4. Notice of Meeting 2
Section 5. Closing of Transfer Books or
Fixing of Record Date 2
Section 6. Voting Lists 3
Section 7. Quorum 3
Section 8. Proxies 3
Section 9. Voting of Shares 4
Section 10. Voting of Shares by Certain Holders 4
Section 11. Informal Action by Shareholders 4
ARTICLE III. BOARD OF DIRECTORS 5
Section l. General Powers 5
Section 2. Number, Tenure and Qualifications 5
Section 3. Regular Meetings 5
Section 4. Special Meetings 5
Section 5. Quorum 6
Section 6. Manner of Acting 6
Section 7. Attendance at Meetings 6
Section 8. Vacancies 6
Section 9. Compensation 6
Section 10. Presumption of Assent 7
Section 11. Removal of Directors 7
Section 12. Resignation 7
Section 13. Voting by Interested Directors 7
Section 14. Action by Directors Without a Meeting 7
ARTICLE IV. OFFICERS 8
Section l. Number 8
Section 2. Election and Term of Office 8
Section 3. Removal 8
Section 4. Vacancies 8
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<PAGE>
Section 5. President 8
Section 6. The Vice Presidents 9
Section 7. The Secretary 9
Section 8. The Treasurer 9
Section 9. Assistant Secretaries and
Assistant Treasurers 10
Section 10. Salaries 10
ARTICLE V. LIMITATION OF LIABILITY AND INDEMNIFICATION
OF DIRECTORS, OFFICERS AND AGENTS OF THE
CORPORATION 10
Section l. Limitation of Liability 10
Section 2. Right of Indemnification 11
Section 3. Rights Cumulative 11
ARTICLE VI. CONTRACTS, LOANS, CHECKS, DEPOSITS AND
COMPENSATION 12
Section l. Contracts 12
Section 2. Loans 12
Section 3. Checks, Drafts, etc. 12
Section 4. Deposits 12
Section 5. Compensation
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER 12
Section l. Certificates for Shares 12
Section 2. Transfer of Shares 13
ARTICLE VIII. TAXABLE YEAR AND ACCOUNTING PERIOD 13
ARTICLE IX. DIVIDENDS 13
ARTICLE X. CORPORATE SEAL 14
ARTICLE XI. WAIVER OF NOTICE 14
ARTICLE XII. AMENDMENTS 14
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<PAGE>
ARTICLE XIII. EXECUTIVE COMMITTEE 14
Section l. Appointment 14
Section 2. Authority 14
Section 3. Tenure and Qualifications 15
Section 4. Meetings 15
Section 5. Quorum 15
Section 6. Action Without a Meeting 15
Section 7. Vacancies 15
Section 8. Resignations and Removal 15
Section 9. Procedure 16
ARTICLE XIV. CONDUCT OF MEETINGS 16
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<PAGE>
ARTICLE I
OFFICES
The principal office of GCI Cable/Juneau, Inc. (the "Corporation")
shall be located in Anchorage, Alaska. The Corporation may have such other
offices, either within or without the State of Alaska, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
The registered office of the Corporation required by the Alaska
Corporations Code to be maintained in the State of Alaska may be, but need not
be, identical with the principal office in the State of Alaska, and the address
of the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of the Shareholders shall
be held in the month of June of each year, for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting.
If the election of Directors shall not be held on the day designated for the
annual meeting of the Shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
Shareholders as soon thereafter as it conveniently may be held.
(a) Meetings of the Shareholders shall be presided over by the
President or by any officer or Director or person selected at any time by the
President to act as Chairman, or if he is not present or available or makes no
selection, then by the Chairman of the Board of Directors. If neither the
President nor the Chairman of the Board of Directors is present and no selection
has been made, a Chairman should be chosen by a majority in interest of the
Shareholders present in person or by proxy at the meeting and entitled to vote
thereat.
(b) The Secretary of the meeting shall be the Secretary of the
Corporation or an Assistant Secretary, or if none of such officers is present,
any person appointed by the Chairman of the meeting.
Section 2. Special Meetings. Special meetings of the Shareholders for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth of all the
outstanding shares of the corporation entitled to vote at the meeting.
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<PAGE>
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Alaska, as the place of meeting
called by the Board of Directors. A waiver of notice signed by all Shareholders
entitled to vote at a meeting may designate any place, either within or without
the State of Alaska, as the place for the holding of such meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the Corporation in the State of Alaska.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than twenty (20)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the President, or the Secretary, or the
persons calling the meeting, to each Shareholder of record entitled to vote at
such meeting. If mailed, the notice is considered delivered when deposited with
postage prepaid in the United States mail addressed to the shareholder at the
address of the shareholder as it appears on the stock transfer book of the
corporation, or, if the shareholder has filed with the secretary of the
corporation a written request that notice be mailed to a different address,
addressed to the shareholder at the new address.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of a dividend, or in order to make a determination of
Shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, seventy (70) days. If the stock
transfer books shall be closed for the purpose of determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders, such books shall
be closed for at least twenty (20) days immediately preceding such meeting.
Instead of closing the stock transfer books, the Board of Directors may
fix a date as the record date for any such determination of Shareholders. This
record date shall be not more than sixty (60) days, and in case of a meeting of
Shareholders not less than twenty (20) days, prior to the date on which the
particular action requiring such determination of Shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of Shareholders entitled to notice of or to vote at a meeting of
Shareholders, or Shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring the dividend is adopted is, as
the case may be, the record date for the determination of Shareholders. When a
determination of Shareholders entitled to vote at any meeting of Shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of closing has
expired.
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Section 6. Voting Lists. At least twenty (20) days before each meeting
of the Shareholders, the officer or agent having charge of the stock transfer
books for shares of the Corporation shall make a complete list of the
Shareholders entitled to vote at each meeting of Shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. The list shall be kept on file at the registered office of
the corporation and is subject to inspection by a Shareholder or the agent or
attorney of a Shareholder at any time during the usual business hours for a
period of twenty (20) days before the meeting. Such list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any Shareholder during the whole time of the meeting.
Section 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of Shareholders. If a quorum is present, the
affirmative vote of the majority of shares represented at the meeting and
entitled to vote on the subject matter is the act of the Shareholders unless the
vote of a greater number or voting by class is required by the articles of
incorporation, bylaws or the Alaska Corporations Code.
The Shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken other than
adjournment is approved by at least a majority of shares required to constitute
a quorum.
If less than a majority of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. Proxies. At all meetings of Shareholders, a Shareholder may
vote in person or by proxy executed in writing by the Shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. A proxy continues in full
force and effect until revoked by the person executing it, however, no proxy
shall be valid after eleven (11) months from the date of its execution, unless
such proxy qualifies as an irrevocable proxy as defined within AS 10.06.418(e).
Section 9. Voting of Shares. An outstanding share, regardless of class,
is entitled to one vote on each matter submitted to a vote at a meeting of
Shareholders, except as may be otherwise provided in the articles of
incorporation.
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<PAGE>
Section 10. Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provisions, as the board of directors of such
corporation may determine.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a trustee may be voted
by the trustee, either in person or by proxy, but no trustee shall be entitled
to vote shares held by him without a transfer of such shares into his name.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer into his name if authority to transfer the
shares is contained in an appropriate order of the court by which such receiver
was appointed.
(d) A Shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(e) Neither treasury shares, nor shares of its own stock held by the
Corporation in a fiduciary capacity, nor shares held by another corporation if a
majority of the shares entitled to vote for the election of directors of the
other corporation is held by the Corporation, may be voted at a meeting or
counted in determining the total number of outstanding shares.
Section 11. Informal Action by Shareholders. Any action required to be
taken at a meeting of the Shareholders, or any other action which may be taken
at a meeting of the Shareholders, may be taken without a meeting by written
consent, identical in content setting out the action taken, signed by all of the
Shareholders entitled to vote on the action.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors
of the Corporation shall be not less than one (l) nor more than nine (9); unless
the Corporation, now or at any time in the future, has three (3) or more
Shareholders in which case the Corporation shall have not fewer than three (3)
directors; or unless the Corporation has
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only two (2) Shareholders, in which case the Corporation shall have at least two
(2) directors. Each Director shall hold office until the next annual meeting of
Shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Alaska or Shareholders of the
Corporation. The initial number of Directors shall be five (5).
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of the Shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Alaska, for the holding of additional regular meetings
without other notice than such resolution.
Section 4. Special Meetings.
(a) Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President, a Vice President, the Secretary, or a
Director or such person authorized to call the meeting may fix the time and
place for holding the meeting, either inside or outside the State of Alaska.
(b) Notice of any special meeting shall be given at least ten (10) days
prior thereto by written notice delivered personally or mailed to each Director
at his business address, or at least seventy-two (72) hours before the meeting
by electronic means, personal messenger, or comparable person-to-person
communication. If mailed by certified mail, such notice shall be deemed to be
delivered when deposited in the United States mail properly addressed, with
postage thereon prepaid. Any Director may waive notice of any meeting. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 5. Quorum. A majority of the presently qualified Directors
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time
without further notice; provided, further, that where there are only two
Directors, both shall be necessary to constitute a quorum.
Section 6. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 7. Attendance at Meetings. The Board of Directors may conduct a
meeting of the Board by communicating simultaneously with each other by means of
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<PAGE>
conference telephones or similar communications equipment and any action taken
at such meeting shall not be invalidated by reason of the fact that the
respective members of the Board were not assembled together in one place at the
time of taking such action or conducting such business.
Section 8. Vacancies. Where a vacancy created by the removal of a
Director is pursuant to AS 10.06.460 or 10.06.463, such vacancies occurring on
the Board may be filled only by a vote of the Shareholders. Any other vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of Directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of Directors by the Shareholders. In no case may a vacancy continue
longer than six (6) months or until the next annual meeting, whichever occurs
first.
Section 9. Compensation. By resolution of the Board of Directors, each
Director may be paid his or her expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a stated salary as Director or a
fixed sum for attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his/her dissent shall be entered in the minutes of the meeting or unless he/she
shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
Section 11. Removal of Directors. Any Director may be removed with or
without cause, at any time, by a vote of the Shareholders holding a majority of
the shares then issued and outstanding, at any special meeting called for that
purpose, or at the annual meeting. Except as otherwise prescribed by statute, a
Director may be removed for cause by a vote of the majority of the entire board.
Prior to vote by the Board on the question of removal of any Director for cause,
such Director must be given written notice of the reasons for such action.
Section 12. Resignation. A Director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary, or
the Board of Directors of the Corporation, unless the notice specifies a later
time for the effectiveness of the
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<PAGE>
resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
Section 13. Voting by Interested Directors. No Director may vote upon
any matter in which he has an adverse or personal interest, unless such interest
has been fully disclosed to the Board of Directors and the Board of Directors,
by majority of vote without the interested Director voting, permits such
interested Director to vote.
Section 14. Action by Directors Without a Meeting. Action required or
permitted to be taken by the Board or a committee designated by the Board may be
taken without a meeting on written consents, identical in consent, setting out
the action taken and signed by all the members of the Board or the committee.
The written consents shall be filed with the minutes. The consents have the same
effect as an unanimous vote.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two (2) or more offices may be held by the same person, except the offices
of President and Secretary.
Section 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the Shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
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<PAGE>
Section 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the Shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 6. Vice Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the Secretary
or an Assistant Secretary, certificates for shares of the Corporation; and shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
Section 7. The Secretary. The Secretary shall:
(a) keep the minutes of the proceedings of the Shareholders and of the
Board of Directors in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law;
(c) be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized;
(d) keep a register of the post office address of each Shareholder
which shall be furnished to the Secretary by such Shareholder;
(e) sign with the President, or a Vice President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(f) have general charge of the stock transfer books of the Corporation;
and
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<PAGE>
(g) in general perform all duties incident to the office of the
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 8. The Treasurer. The Treasurer shall:
(a) have charge and custody of and be responsible for all funds and
securities of the Corporation;
(b) receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or other depositories as shall
be selected; and
(c) in general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
Section 9. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President or a Vice President certificates for shares of the Corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President of the Board of Directors.
Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
ARTICLE V
LIMITATION OF LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS
AND AGENTS OF THE CORPORATION
Section 1. Limitation of Liability. No person shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken in good faith, as a Director, member of a Committee or
Officer of the Corporation, if such person exercised or used the same degree of
care and skill, including reasonable inquiry, as a prudent person would have
exercised or used under the circumstances in the conduct
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<PAGE>
of his/her own affairs. Without limitation on the foregoing, any such person
shall be deemed to have exercised or used such degree of care and skill if such
action were taken or omitted in reliance in good faith upon advice of counsel
for the Corporation, or the books of account or other records of the
Corporation, or reports or information made or furnished to the Corporation by
any officials, accountants, engineers, agents or employees of the Corporation,
or by an independent Certified Public Accountant or auditor, engineer,
appraiser, or other expert employed by the Corporation and selected with
reasonable care by the Board of Directors, by any such committee or by an
authorized officer of the Corporation.
Section 2. Right of Indemnification. Each Director, member of a
Committee, Officer, Agent and Employee of the Corporation, and each former
director, member of a committee, officer, agent and employee of the Corporation,
and any person who may have served at its request as a director, officer, agent
or employee of another Corporation in which it is a creditor, and his heirs and
personal representative shall be indemnified by the Corporation against all loss
or damage suffered and all costs and expenses imposed upon or incurred by him in
connection with or arising out of any action, suit or proceedings (whether civil
or criminal in nature) in which he may be involved, to which he may be a party
by reason of being or having been (or his personal representative or estate
having been) such director, member of a committee, officer, agent or employee,
except in relation to matters as to which he shall be adjudged in such action,
suit or proceeding to be liable for negligence or misconduct in performance of
his duty; provided, however, that the Corporation shall be given reasonable
notice of the institution of such action, suit or proceedings; and in the event
the same shall be settled in whole or in part, the Corporation or its counsel
shall consent to such settlement if it be determined by its counsel or found by
a majority of the Board of Directors then in office and not involved in such
controversy, that such settlement is to the best interest of the Corporation and
that the person to be indemnified was not guilty of negligence or misconduct in
performance of duty.
Indemnification (unless ordered by the court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification is proper in the circumstances because the director,
officer, employee or committee member has met the applicable standard of
conduct. This determination shall be made (a) by the Board of Directors, by a
majority vote of a quorum consisting of directors who were not parties to the
action or proceeding; or (b) by independent legal counsel in a written opinion,
either (i) if such a quorum is not obtainable, or (ii) if a quorum of
disinterested directors so requests such a written opinion; or (c) by approval
of the outstanding shares.
Section 3. Rights Cumulative. The provisions of this Article V shall
not be deemed exclusive or in limitation of, but shall be cumulative of and in
addition to any other limitations of liability, indemnities, and rights to which
such Director, member of a Committee, Officer, Agent or other person may be
entitled under Alaska Statute, these
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<PAGE>
Bylaws or pursuant to any agreement or resolution of the Board of Directors or
of the Shareholders, or otherwise.
ARTICLE VI
CONTRACTS, LOANS, CHECKS,
DEPOSITS AND COMPENSATION
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or one of
its employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person or entity to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled; except that in case
of a lost, destroyed or mutilated certificate a new one may be issued
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<PAGE>
therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
All shares issued by the Corporation shall contain a legend on the
certificates stating substantially the following:
The shares represented by this certificate have
not been registered under any federal or state
securities law. They have been acquired for
investment and may not be transferred without an
effective registration statement pursuant to such
laws or an opinion of counsel satisfactory to the
corporation that registration is not required.
Section 2. Transfer of Shares. Transfer of any shares of the
Corporation shall be done in compliance with all federal, state and local
securities laws, and any transfer of in violation thereof is void. Transfer of
shares of the Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by its legal representative, who
shall furnish proper evidence of authority to transfer filed with the Secretary
of the Corporation, and on surrender for cancellation of the certificate for
such shares. The entity or person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes.
ARTICLE VIII
TAXABLE YEAR AND ACCOUNTING PERIOD
The taxable year and accounting period of the Corporation shall begin
on January 1 and end on December 31, unless changed by resolution of the Board
of Directors.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in cash, property, or
its own shares, except when the Corporation is insolvent, or when the dividend
would render the Corporation insolvent, or when the dividend is contrary to
restrictions contained in the Articles of Incorporation.
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<PAGE>
ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal."
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given to any Shareholder or
Director of the Corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
Alaska Corporation Code, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XII
AMENDMENTS
Except as may be provided in the Articles, these Bylaws may be altered,
amended or repealed and new Bylaws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors.
ARTICLE XIII
EXECUTIVE COMMITTEE
Section 1. Appointment. The Board of Directors, by resolution adopted
by a majority of the full board, may designate two (2) or more of its members to
constitute an Executive Committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 2. Authority. Except as limited by the Articles or AS
10.06.468, the Executive Committee, when the Board of Directors is not in
session, shall have and may exercise all of the authority of the Board of
Directors except to the extent, if any, that such authority shall be limited by
the resolution appointing the Executive Committee.
Section 3. Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated as
a member of the Executive Committee and is elected and qualified.
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<PAGE>
Section 4. Meetings. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee may
be called by any member thereof upon not less than five (5) days' notice,
stating the place, date and hour of the meeting, which notice may be written or
oral, and if mailed by certified mail, shall be deemed to be delivered when
deposited in the United States mail addressed to the member of the Executive
Committee at his business address, postage prepaid. Any member of the Executive
Committee may waive notice of any meeting, and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the Executive Committee need not state the business proposed to be transacted at
the meeting.
Section 5. Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action that may be taken by
the Executive Committee at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed by all of
the members of the Executive Committee before such action be taken further. The
Executive Committee can validly conduct a meeting by communicating
simultaneously with each other by means of conference telephones or similar
communications equipment.
Section 7. Vacancies. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 8. Resignations and Removal. Any member of the Executive
Committee may be removed at any time, with or without cause, by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the Corporation and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 9. Procedure. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
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<PAGE>
ARTICLE XIV
CONDUCT OF MEETINGS
All meetings conducted under these Bylaws shall be governed in
accordance with Roberts Rules of Order.
We, the undersigned, hereby certify that the foregoing Bylaws for
governing the operation and management of GCI Cable/Juneau, Inc., were duly
adopted by the Directors by unanimous written consent, effective as of May 16,
1996.
/s/
John M. Lowber, Secretary
APPROVED:
/s/
Ronald A. Duncan, President
ejsF:\DOCS\65520\37\BYLAW.GCI\May 3, 1996 (11:17am)
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ARTICLES OF INCORPORATION
OF
GCI CABLE/JUNEAU, INC.
We, the undersigned natural persons over the age of eighteen (18)
years, acting as incorporators of a corporation under the Alaska Corporation
Code, AS 10.06, do hereby adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - Name
The name of the corporation ("Corporation") is:
GCI Cable/Juneau, Inc.
ARTICLE II - Purposes and Powers
The purpose for which the Corporation is organized is to provide
telecommunication and cable business services, and in general, to pursue any
lawful purpose authorized under the Alaska Corporations Code.
The Corporation shall have and may exercise all of the general powers
of a natural person, including those provided in AS 10.06.010, as amended, and
may transact any or all lawful business for which corporations may be
incorporated under the Alaska Corporations Code.
ARTICLE III - Registered Office and Agent
The address of the Corporation's registered office and the name of its
registered agent is Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., 717 "K"
Street, Anchorage, AK 99501.
ARTICLE IV - Capital
The Corporation shall have the authority to issue ten thousand (10,000)
shares of no par value stock. These shares shall be common voting shares, each
share having one (1) vote.
ARTICLE V - No Presumptive Rights
Pursuant to AS 10.06.210(a)(1)(B), no holder of any stock of the
Corporation shall
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<PAGE>
be entitled to purchase, subscribe for or otherwise acquire, as a matter of
right, any new or additional shares of stock, of any class, in the Corporation,
any options or warrants to purchase, subscribe for or otherwise acquire any new
or additional shares in the Corporation, or any shares, bonds, notes,
debentures, or other securities convertible into or carrying options or warrants
to purchase, subscribe for or otherwise acquire any such shares.
ARTICLE VI - No Cumulative Voting
Pursuant to AS 10.06.420(d), shareholders shall not cumulate their
votes, but must vote shares held by them for as many persons as there are
directors to be elected.
ARTICLE VII - Power to Redeem Shares
Pursuant to AS 10.06.325, the Corporation has the power on majority
vote of the shareholders, to redeem, in whole or in part, any class of
outstanding shares.
ARTICLE VIII - Quorum of Shareholders
A quorum for the conducting of any shareholder business shall be
fifty-one percent (51%) of all outstanding shares that are entitled to vote.
ARTICLE IX - Initial Directors
The initial number of directors of the Corporation shall be five (5).
The names and addresses of the initial directors, who shall serve until the
first annual meeting of shareholders or until their successors are elected and
qualified are as follows:
Ronald A. Duncan
2550 Denali Street, Suite 1000
Anchorage, AK 99503
Larry E. Romrell
4643 S. Ulster, Suite 400
Denver, CO 80237
Donne F. Fisher
4643 S. Ulster, Suite 400
Denver, CO 80237
Robert M. Walp
2550 Denali Street, Suite 1000
Anchorage, AK 99503
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<PAGE>
Carter Page
c/o Semaphore Partners
8101 Prentice Plaza
Suite M-200
Englewood, CO 80111
The number of directors may be increased or decreased from time to time
by an amendment of the Bylaws; but no decrease shall have the effect of
shortening the term of any incumbent director. The directors may fill any
vacancy on the board created by reason of removal or retiring of any director.
ARTICLE X - Alien Affiliates
The Corporation is not affiliated with any nonresident alien or a
corporation whose place of incorporation is outside the United States (as
defined in AS 10.06.990(2) and (3)).
ARTICLE XI - Liability of Directors
The directors of the Corporation shall not be liable to the Corporation
for monetary damages for a breach of fiduciary duty except for:
(1) A breach of a director's duty of loyalty to the
Corporation;
(2) Acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
or
(3) A transaction from which the director derives an
improper personal benefit.
ARTICLE XII - Bylaws
The initial Bylaws of the Corporation shall be adopted by the Board of
Directors, and the power to alter, amend or repeal the Bylaws shall be reserved
to the board. The Bylaws may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with the Alaska
Corporation Code or with these Articles of Incorporation.
ARTICLE XIII - Duration
The duration of the Corporation shall be perpetual.
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<PAGE>
ARTICLE XIV - Effective Date
These Articles will be effective upon filing.
IN WITNESS WHEREOF, I have signed these Articles this 14th day of May,
1996.
/s/
Bonnie J. Stratton
IN WITNESS WHEREOF, I have signed these Articles this 14th day of May,
1996.
/s/
Robert B. Flint
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
Bonnie J. Stratton says on oath or affirms that she has read the
foregoing Articles of Incorporation for GCI CABLE/JUNEAU, INC., and believes all
statements made in the document are true.
SUBSCRIBED AND SWORN to before me this 14th day of May, 1996, at
Anchorage, Alaska.
/s/ Janet M. Hite
Notary Public in and for the State of Alaska
My commission expires: 4-11-97
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
Robert B. Flint says on oath or affirms that she has read the foregoing
Articles of Incorporation for GCI CABLE/JUNEAU, INC., and believes all
statements made in the document are true.
SUBSCRIBED AND SWORN to before me this 14th day of May, 1996, at
Anchorage, Alaska.
/s/ Janet M. Hite
Notary Public in and for the State of Alaska
My commission expires: 4-11-97
ejs\F:\DOCS\65520\37\ARTICLES.GCI\May 14, 1996 (9:17am)
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BYLAWS
OF
GCI CABLE HOLDINGS, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. OFFICES 1
ARTICLE II. SHAREHOLDERS' MEETINGS 1
Section 1. Annual Meeting 1
Section 2. Special Meetings 1
Section 3. Place of Meeting 2
Section 4. Notice of Meeting 2
Section 5. Closing of Transfer Books or Fixing of Record Date 2
Section 6. Voting Lists 3
Section 7. Quorum 3
Section 8. Proxies 3
Section 9. Voting of Shares 4
Section 10. Voting of Shares by Certain Holders 4
Section 11. Informal Action by Shareholders 4
ARTICLE III. BOARD OF DIRECTORS 5
Section 1. General Powers 5
Section 2. Number, Tenure and Qualifications 5
Section 3. Regular Meetings 5
Section 4. Special Meetings 5
Section 5. Quorum 6
Section 6. Manner of Acting 6
Section 7. Attendance at Meetings 6
Section 8. Vacancies 6
Section 9. Compensation 6
Section 10. Presumption of Assent 7
Section 11. Removal of Directors 7
Section 12. Resignation 7
Section 13. Voting by Interested Directors 7
Section 14. Action by Directors Without a Meeting 7
ARTICLE IV. OFFICERS 8
Section 1. Number 8
Section 2. Election and Term of Office 8
Section 3. Removal 8
Section 4. Vacancies 8
Section 5. President 8
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Section 6. The Vice Presidents 9
Section 7. The Secretary 9
Section 8. The Treasurer 9
Section 9. Assistant Secretaries and Assistant Treasurers 10
Section 10. Salaries 10
ARTICLE V. LIMITATION OF LIABILITY AND INDEMNIFICATION
OF DIRECTORS, OFFICERS AND AGENTS OF THE
CORPORATION 10
Section 1. Limitation of Liability 10
Section 2. Right of Indemnification 11
Section 3. Rights Cumulative 11
ARTICLE VI. CONTRACTS, LOANS, CHECKS, DEPOSITS AND
COMPENSATION 12
Section 1. Contracts 12
Section 2. Loans 12
Section 3. Checks, Drafts, etc. 12
Section 4. Deposits 12
Section 5. Compensation
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER 12
Section 1. Certificates for Shares 12
Section 2. Transfer of Shares 13
ARTICLE VIII. TAXABLE YEAR AND ACCOUNTING PERIOD 13
ARTICLE IX. DIVIDENDS 13
ARTICLE X. CORPORATE SEAL 14
ARTICLE XI. WAIVER OF NOTICE 14
ARTICLE XII. AMENDMENTS 14
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<PAGE>
ARTICLE XIII. EXECUTIVE COMMITTEE 14
Section 1. Appointment 14
Section 2. Authority 14
Section 3. Tenure and Qualifications 15
Section 4. Meetings 15
Section 5. Quorum 15
Section 6. Action Without a Meeting 15
Section 7. Vacancies 15
Section 8. Resignations and Removal 15
Section 9. Procedure 16
ARTICLE XIV. CONDUCT OF MEETINGS 16
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<PAGE>
ARTICLE I
OFFICES
The principal office of GCI Cable Holdings, Inc. (the "Corporation")
shall be located in Anchorage, Alaska. The Corporation may have such other
offices, either within or without the State of Alaska, as the Board of Directors
may designate or as the business of the Corporation may require from time to
time.
The registered office of the Corporation required by the Alaska
Corporations Code to be maintained in the State of Alaska may be, but need not
be, identical with the principal office in the State of Alaska, and the address
of the registered office may be changed from time to time by the Board of
Directors.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of the Shareholders shall
be held in the month of June of each year, for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting.
If the election of Directors shall not be held on the day designated for the
annual meeting of the Shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
Shareholders as soon thereafter as it conveniently may be held.
(a) Meetings of the Shareholders shall be presided over by the
President or by any officer or Director or person selected at any time by the
President to act as Chairman, or if he is not present or available or makes no
selection, then by the Chairman of the Board of Directors. If neither the
President nor the Chairman of the Board of Directors is present and no selection
has been made, a Chairman should be chosen by a majority in interest of the
Shareholders present in person or by proxy at the meeting and entitled to vote
thereat.
(b) The Secretary of the meeting shall be the Secretary of the
Corporation or an Assistant Secretary, or if none of such officers is present,
any person appointed by the Chairman of the meeting.
Section 2. Special Meetings. Special meetings of the Shareholders for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or by the Board of Directors, and shall be called by the
President at the request of the holders of not less than one-tenth of all the
outstanding shares of the corporation entitled to vote at the meeting.
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<PAGE>
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Alaska, as the place of meeting
called by the Board of Directors. A waiver of notice signed by all Shareholders
entitled to vote at a meeting may designate any place, either within or without
the State of Alaska, as the place for the holding of such meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the Corporation in the State of Alaska.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than twenty (20)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the President, or the Secretary, or the
persons calling the meeting, to each Shareholder of record entitled to vote at
such meeting. If mailed, the notice is considered delivered when deposited with
postage prepaid in the United States mail addressed to the shareholder at the
address of the shareholder as it appears on the stock transfer book of the
corporation, or, if the shareholder has filed with the secretary of the
corporation a written request that notice be mailed to a different address,
addressed to the shareholder at the new address.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining Shareholders entitled to notice of or to vote at any
meeting of Shareholders or any adjournment thereof, or Shareholders entitled to
receive payment of a dividend, or in order to make a determination of
Shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, seventy (70) days. If the stock
transfer books shall be closed for the purpose of determining Shareholders
entitled to notice of or to vote at a meeting of Shareholders, such books shall
be closed for at least twenty (20) days immediately preceding such meeting.
Instead of closing the stock transfer books, the Board of Directors may
fix a date as the record date for any such determination of Shareholders. This
record date shall be not more than sixty (60) days, and in case of a meeting of
Shareholders not less than twenty (20) days, prior to the date on which the
particular action requiring such determination of Shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of Shareholders entitled to notice of or to vote at a meeting of
Shareholders, or Shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring the dividend is adopted is, as
the case may be, the record date for the determination of Shareholders. When a
determination of Shareholders entitled to vote at any meeting of Shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof except where the determination has been made through the
closing of the stock transfer books and the stated period of closing has
expired.
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Section 6. Voting Lists. At least twenty (20) days before each meeting
of the Shareholders, the officer or agent having charge of the stock transfer
books for shares of the Corporation shall make a complete list of the
Shareholders entitled to vote at each meeting of Shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. The list shall be kept on file at the registered office of
the corporation and is subject to inspection by a Shareholder or the agent or
attorney of a Shareholder at any time during the usual business hours for a
period of twenty (20) days before the meeting. Such list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any Shareholder during the whole time of the meeting.
Section 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of Shareholders. If a quorum is present, the
affirmative vote of the majority of shares represented at the meeting and
entitled to vote on the subject matter is the act of the Shareholders unless the
vote of a greater number or voting by class is required by the articles of
incorporation, bylaws or the Alaska Corporations Code.
The Shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Shareholders to leave less than a quorum, if any action taken other than
adjournment is approved by at least a majority of shares required to constitute
a quorum.
If less than a majority of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
Section 8. Proxies. At all meetings of Shareholders, a Shareholder may
vote in person or by proxy executed in writing by the Shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. A proxy continues in full
force and effect until revoked by the person executing it, however, no proxy
shall be valid after eleven (11) months from the date of its execution, unless
such proxy qualifies as an irrevocable proxy as defined within AS 10.06.418(e).
Section 9. Voting of Shares. An outstanding share, regardless of class,
is entitled to one vote on each matter submitted to a vote at a meeting of
Shareholders, except as may be otherwise provided in the articles of
incorporation.
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Section 10. Voting of Shares by Certain Holders.
(a) Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provisions, as the board of directors of such
corporation may determine.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by such person, either in person or by proxy, without a transfer of
such shares into his name. Shares standing in the name of a trustee may be voted
by the trustee, either in person or by proxy, but no trustee shall be entitled
to vote shares held by him without a transfer of such shares into his name.
(c) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer into his name if authority to transfer the
shares is contained in an appropriate order of the court by which such receiver
was appointed.
(d) A Shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
(e) Neither treasury shares, nor shares of its own stock held by the
Corporation in a fiduciary capacity, nor shares held by another corporation if a
majority of the shares entitled to vote for the election of directors of the
other corporation is held by the Corporation, may be voted at a meeting or
counted in determining the total number of outstanding shares.
Section 11. Informal Action by Shareholders. Any action required to be
taken at a meeting of the Shareholders, or any other action which may be taken
at a meeting of the Shareholders, may be taken without a meeting by written
consent, identical in content setting out the action taken, signed by all of the
Shareholders entitled to vote on the action.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors
of the Corporation shall be not less than one (l) nor more than nine (9); unless
the Corporation, now or at any time in the future, has three (3) or more
Shareholders in which case the Corporation shall have not fewer than three (3)
directors; or unless the Corporation has
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only two (2) Shareholders, in which case the Corporation shall have at least two
(2) directors. Each Director shall hold office until the next annual meeting of
Shareholders and until his successor shall have been elected and qualified.
Directors need not be residents of the State of Alaska or Shareholders of the
Corporation. The initial number of Directors shall be five (5).
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately after,
and at the same place as, the annual meeting of the Shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Alaska, for the holding of additional regular meetings
without other notice than such resolution.
Section 4. Special Meetings.
(a) Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President, a Vice President, the Secretary, or a
Director or such person authorized to call the meeting may fix the time and
place for holding the meeting, either inside or outside the State of Alaska.
(b) Notice of any special meeting shall be given at least ten (10) days
prior thereto by written notice delivered personally or mailed to each Director
at his business address, or at least seventy-two (72) hours before the meeting
by electronic means, personal messenger, or comparable person-to-person
communication. If mailed by certified mail, such notice shall be deemed to be
delivered when deposited in the United States mail properly addressed, with
postage thereon prepaid. Any Director may waive notice of any meeting. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 5. Quorum. A majority of the presently qualified Directors
shall constitute a quorum for the transaction of business at any meeting of the
Board of Directors, but if less than such majority is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time
without further notice; provided, further, that where there are only two
Directors, both shall be necessary to constitute a quorum.
Section 6. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 7. Attendance at Meetings. The Board of Directors may conduct a
meeting of the Board by communicating simultaneously with each other by means of
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conference telephones or similar communications equipment and any action taken
at such meeting shall not be invalidated by reason of the fact that the
respective members of the Board were not assembled together in one place at the
time of taking such action or conducting such business.
Section 8. Vacancies. Where a vacancy created by the removal of a
Director is pursuant to AS 10.06.460 or 10.06.463, such vacancies occurring on
the Board may be filled only by a vote of the Shareholders. Any other vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of Directors may be filled by election by
the Board of Directors for a term of office continuing only until the next
election of Directors by the Shareholders. In no case may a vacancy continue
longer than six (6) months or until the next annual meeting, whichever occurs
first.
Section 9. Compensation. By resolution of the Board of Directors, each
Director may be paid his or her expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a stated salary as Director or a
fixed sum for attendance at each meeting of the Board of Directors or both. No
such payment shall preclude any Director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his/her dissent shall be entered in the minutes of the meeting or unless he/she
shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
Section 11. Removal of Directors. Any Director may be removed with or
without cause, at any time, by a vote of the Shareholders holding a majority of
the shares then issued and outstanding, at any special meeting called for that
purpose, or at the annual meeting. Except as otherwise prescribed by statute, a
Director may be removed for cause by a vote of the majority of the entire board.
Prior to vote by the Board on the question of removal of any Director for cause,
such Director must be given written notice of the reasons for such action.
Section 12. Resignation. A Director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary, or
the Board of Directors of the Corporation, unless the notice specifies a later
time for the effectiveness of the
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resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
Section 13. Voting by Interested Directors. No Director may vote upon
any matter in which he has an adverse or personal interest, unless such interest
has been fully disclosed to the Board of Directors and the Board of Directors,
by majority of vote without the interested Director voting, permits such
interested Director to vote.
Section 14. Action by Directors Without a Meeting. Action required or
permitted to be taken by the Board or a committee designated by the Board may be
taken without a meeting on written consents, identical in consent, setting out
the action taken and signed by all the members of the Board or the committee.
The written consents shall be filed with the minutes. The consents have the same
effect as an unanimous vote.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two (2) or more offices may be held by the same person, except the offices
of President and Secretary.
Section 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the Shareholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
convenient. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
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Section 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the Shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation authorized by the Board of
Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or by these
Bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 6. Vice Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the Secretary
or an Assistant Secretary, certificates for shares of the Corporation; and shall
perform such other duties as from time to time may be assigned to him by the
President or by the Board of Directors.
Section 7. The Secretary. The Secretary shall:
(a) keep the minutes of the proceedings of the Shareholders and of the
Board of Directors in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law;
(c) be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized;
(d) keep a register of the post office address of each Shareholder
which shall be furnished to the Secretary by such Shareholder;
(e) sign with the President, or a Vice President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(f) have general charge of the stock transfer books of the Corporation;
and
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(g) in general perform all duties incident to the office of the
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors.
Section 8. The Treasurer. The Treasurer shall:
(a) have charge and custody of and be responsible for all funds and
securities of the Corporation;
(b) receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the name
of the Corporation in such banks, trust companies or other depositories as shall
be selected; and
(c) in general perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
Section 9. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President or a Vice President certificates for shares of the Corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President of the Board of Directors.
Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
ARTICLE V
LIMITATION OF LIABILITY AND
INDEMNIFICATION OF DIRECTORS, OFFICERS
AND AGENTS OF THE CORPORATION
Section 1. Limitation of Liability. No person shall be liable to the
Corporation for any loss or damage suffered by it on account of any action taken
or omitted to be taken in good faith, as a Director, member of a Committee or
Officer of the Corporation, if such person exercised or used the same degree of
care and skill, including reasonable inquiry, as a prudent person would have
exercised or used under the circumstances in the conduct
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of his/her own affairs. Without limitation on the foregoing, any such person
shall be deemed to have exercised or used such degree of care and skill if such
action were taken or omitted in reliance in good faith upon advice of counsel
for the Corporation, or the books of account or other records of the
Corporation, or reports or information made or furnished to the Corporation by
any officials, accountants, engineers, agents or employees of the Corporation,
or by an independent Certified Public Accountant or auditor, engineer,
appraiser, or other expert employed by the Corporation and selected with
reasonable care by the Board of Directors, by any such committee or by an
authorized officer of the Corporation.
Section 2. Right of Indemnification. Each Director, member of a
Committee, Officer, Agent and Employee of the Corporation, and each former
director, member of a committee, officer, agent and employee of the Corporation,
and any person who may have served at its request as a director, officer, agent
or employee of another Corporation in which it is a creditor, and his heirs and
personal representative shall be indemnified by the Corporation against all loss
or damage suffered and all costs and expenses imposed upon or incurred by him in
connection with or arising out of any action, suit or proceedings (whether civil
or criminal in nature) in which he may be involved, to which he may be a party
by reason of being or having been (or his personal representative or estate
having been) such director, member of a committee, officer, agent or employee,
except in relation to matters as to which he shall be adjudged in such action,
suit or proceeding to be liable for negligence or misconduct in performance of
his duty; provided, however, that the Corporation shall be given reasonable
notice of the institution of such action, suit or proceedings; and in the event
the same shall be settled in whole or in part, the Corporation or its counsel
shall consent to such settlement if it be determined by its counsel or found by
a majority of the Board of Directors then in office and not involved in such
controversy, that such settlement is to the best interest of the Corporation and
that the person to be indemnified was not guilty of negligence or misconduct in
performance of duty.
Indemnification (unless ordered by the court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification is proper in the circumstances because the director,
officer, employee or committee member has met the applicable standard of
conduct. This determination shall be made (a) by the Board of Directors, by a
majority vote of a quorum consisting of directors who were not parties to the
action or proceeding; or (b) by independent legal counsel in a written opinion,
either (i) if such a quorum is not obtainable, or (ii) if a quorum of
disinterested directors so requests such a written opinion; or (c) by approval
of the outstanding shares.
Section 3. Rights Cumulative. The provisions of this Article V shall
not be deemed exclusive or in limitation of, but shall be cumulative of and in
addition to any other limitations of liability, indemnities, and rights to which
such Director, member of a Committee, Officer, Agent or other person may be
entitled under Alaska Statute, these
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Bylaws or pursuant to any agreement or resolution of the Board of Directors or
of the Shareholders, or otherwise.
ARTICLE VI
CONTRACTS, LOANS, CHECKS,
DEPOSITS AND COMPENSATION
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or one of
its employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person or entity to whom the
shares represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled; except that in case
of a lost, destroyed or mutilated certificate a new one may be issued
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therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
All shares issued by the Corporation shall contain a legend on the
certificates stating substantially the following:
The shares represented by this certificate have
not been registered under any federal or state
securities law. They have been acquired for
investment and may not be transferred without an
effective registration statement pursuant to such
laws or an opinion of counsel satisfactory to the
corporation that registration is not required.
Section 2. Transfer of Shares. Transfer of any shares of the
Corporation shall be done in compliance with all federal, state and local
securities laws, and any transfer of in violation thereof is void. Transfer of
shares of the Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by its legal representative, who
shall furnish proper evidence of authority to transfer filed with the Secretary
of the Corporation, and on surrender for cancellation of the certificate for
such shares. The entity or person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for all
purposes.
ARTICLE VIII
TAXABLE YEAR AND ACCOUNTING PERIOD
The taxable year and accounting period of the Corporation shall begin
on January 1 and end on December 31, unless changed by resolution of the Board
of Directors.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in cash, property, or
its own shares, except when the Corporation is insolvent, or when the dividend
would render the Corporation insolvent, or when the dividend is contrary to
restrictions contained in the Articles of Incorporation.
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ARTICLE X
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal."
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given to any Shareholder or
Director of the Corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation or under the provisions of the
Alaska Corporation Code, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE XII
AMENDMENTS
Except as may be provided in the Articles, these Bylaws may be altered,
amended or repealed and new Bylaws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors.
ARTICLE XIII
EXECUTIVE COMMITTEE
Section 1. Appointment. The Board of Directors, by resolution adopted
by a majority of the full board, may designate two (2) or more of its members to
constitute an Executive Committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 2. Authority. Except as limited by the Articles or AS
10.06.468, the Executive Committee, when the Board of Directors is not in
session, shall have and may exercise all of the authority of the Board of
Directors except to the extent, if any, that such authority shall be limited by
the resolution appointing the Executive Committee.
Section 3. Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated as
a member of the Executive Committee and is elected and qualified.
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Section 4. Meetings. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may fix
from time to time by resolution. Special meetings of the Executive Committee may
be called by any member thereof upon not less than five (5) days' notice,
stating the place, date and hour of the meeting, which notice may be written or
oral, and if mailed by certified mail, shall be deemed to be delivered when
deposited in the United States mail addressed to the member of the Executive
Committee at his business address, postage prepaid. Any member of the Executive
Committee may waive notice of any meeting, and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the Executive Committee need not state the business proposed to be transacted at
the meeting.
Section 5. Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action that may be taken by
the Executive Committee at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so to be taken, shall be signed by all of
the members of the Executive Committee before such action be taken further. The
Executive Committee can validly conduct a meeting by communicating
simultaneously with each other by means of conference telephones or similar
communications equipment.
Section 7. Vacancies. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 8. Resignations and Removal. Any member of the Executive
Committee may be removed at any time, with or without cause, by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the President or Secretary of the Corporation and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 9. Procedure. The Executive Committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
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ARTICLE XIV
CONDUCT OF MEETINGS
All meetings conducted under these Bylaws shall be governed in
accordance with Roberts Rules of Order.
We, the undersigned, hereby certify that the foregoing Bylaws for
governing the operation and management of GCI Cable Holdings, Inc., were duly
adopted by the Directors by unanimous written consent, effective as of
October 22, 1996.
/s/
John M. Lowber, Secretary
APPROVED:
/s/
Ronald A. Duncan, President
ymg\F:\DOCS\65520\38\BYLAWS.GCI\October 30, 1996 (12:09pm)
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ARTICLES OF INCORPORATION
OF
GCI CABLE HOLDINGS, INC.
We, the undersigned natural persons over the age of eighteen (18)
years, acting as incorporators of a corporation under the Alaska Corporation
Code, AS 10.06, do hereby adopt the following Articles of Incorporation for such
corporation.
ARTICLE I - Name
The name of the corporation ("Corporation") is: GCI Cable Holdings,
Inc.
ARTICLE II - Purposes and Powers
The purpose for which the Corporation is organized is to provide
telecommunication and cable business services, and in general, to pursue any
lawful purpose authorized under the Alaska Corporations Code.
The Corporation shall have and may exercise all of the general powers
of a natural person, including those provided in AS 10.06.010, as amended, and
may transact any or all lawful business for which corporations may be
incorporated under the Alaska Corporations Code.
ARTICLE III - Registered Office and Agent
The address of the Corporation's registered office and the name of its
registered agent is Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., 717 "K"
Street, Anchorage, AK 99501.
ARTICLE IV - Capital
The Corporation shall have the authority to issue ten thousand (10,000)
shares of no par value stock. These shares shall be common voting shares, each
share having one (1) vote.
ARTICLE V - No Presumptive Rights
Pursuant to AS 10.06.210(a)(1)(B), no holder of any stock of the
Corporation shall be entitled to purchase, subscribe for or otherwise acquire,
as a matter of right, any new or additional shares of stock, of any class, in
the Corporation, any options or warrants to
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<PAGE>
purchase, subscribe for or otherwise acquire any new or additional shares in the
Corporation, or any shares, bonds, notes, debentures, or other securities
convertible into or carrying options or warrants to purchase, subscribe for or
otherwise acquire any such shares.
ARTICLE VI - No Cumulative Voting
Pursuant to AS 10.06.420(d), shareholders shall not cumulate their
votes, but must vote shares held by them for as many persons as there are
directors to be elected.
ARTICLE VII - Power to Redeem Shares
Pursuant to AS 10.06.325, the Corporation has the power on majority
vote of the shareholders, to redeem, in whole or in part, any class of
outstanding shares.
ARTICLE VIII - Quorum of Shareholders
A quorum for the conducting of any shareholder business shall be
fifty-one percent (51%) of all outstanding shares that are entitled to vote.
ARTICLE IX - Initial Directors
The initial number of directors of the Corporation shall be five (5).
The names and addresses of the initial directors, who shall serve until the
first annual meeting of shareholders or until their successors are elected and
qualified are as follows:
Ronald A. Duncan
2550 Denali Street, Suite 1000
Anchorage, AK 99503
Larry E. Romrell
4643 S. Ulster, Suite 400
Denver, CO 80237
Donne F. Fisher
4643 S. Ulster, Suite 400
Denver, CO 80237
Robert M. Walp
2550 Denali Street, Suite 1000
Anchorage, AK 99503
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<PAGE>
Carter Page
c/o Semaphore Partners
8101 Prentice Plaza
Suite M-200
Englewood, CO 80111
The number of directors may be increased or decreased from time to time
by an amendment of the Bylaws; but no decrease shall have the effect of
shortening the term of any incumbent director. The directors may fill any
vacancy on the board created by reason of removal or retiring of any director.
ARTICLE X - Alien Affiliates
The Corporation is not affiliated with any nonresident alien or a
corporation whose place of incorporation is outside the United States (as
defined in AS 10.06.990(2) and (3)).
ARTICLE XI - Liability of Directors
The directors of the Corporation shall not be liable to the Corporation
for monetary damages for a breach of fiduciary duty except for:
(1) A breach of a director's duty of loyalty to the
Corporation;
(2) Acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
or
(3) A transaction from which the director derives an
improper personal benefit.
ARTICLE XII - Bylaws
The initial Bylaws of the Corporation shall be adopted by the Board of
Directors, and the power to alter, amend or repeal the Bylaws shall be reserved
to the board. The Bylaws may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with the Alaska
Corporation Code or with these Articles of Incorporation.
ARTICLE XIII - Duration
The duration of the Corporation shall be perpetual.
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<PAGE>
ARTICLE XIV - Effective Date
These Articles will be effective upon filing.
IN WITNESS WHEREOF, I have signed these Articles this 15th day of
October, 1996.
/s/
Ronald A. Duncan
IN WITNESS WHEREOF, I have signed these Articles this 15th day of
October, 1996.
/s/
John M. Lowber
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing Articles of Incorporation of GCI Cable Holdings, Inc. was
acknowledged before me this 15th day of October, 1996, at Anchorage, Alaska, by
Ronald A. Duncan.
/s/ Barb Bearman
Notary Public in and for the State of Alaska
My commission expires: 1-17-97
STATE OF ALASKA )
) ss.
THIRD JUDICIAL DISTRICT )
The foregoing Articles of Incorporation of GCI Cable Holdings, Inc. was
acknowledged before me this 15th day of October, 1996, at Anchorage, Alaska, by
John M. Lowber.
/s/ Barb Bearman
Notary Public in and for the State of Alaska
My commission expires: 1-17-97
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