[GCI Logo]
LETTER TO SHAREHOLDERS
April 30, 2001
Re: 2001 Annual Meeting of Shareholders
of General Communication, Inc.
Dear Shareholder:
The board of directors of General Communication, Inc. cordially invites
and encourages you to attend the annual meeting of shareholders of the Company.
The meeting will be held at Josephine's Restaurant on the 15th floor in the
Sheraton Hotel at 401 East 6th Avenue in Anchorage, Alaska at 6:00 p.m. (Alaska
Daylight Time) on Thursday, June 7, 2001. The board has chosen the close of
business on April 10, 2001 as the record date for determining the shareholders
entitled to notice of and to vote at the meeting. A reception for shareholders
will be held prior to the meeting from 5:00 p.m. to 6:00 p.m. at the site of the
meeting.
Copies of the Notice of Annual Meeting of Shareholders, Proxy and Proxy
Statement are enclosed covering the formal business to be conducted at the
meeting. Also enclosed for your information is a copy of the Company's annual
report to shareholders in the form of the Company's Form 10-K for the year ended
December 31, 2000.
At the meeting, the shareholders will be asked to elect individuals to
fill four positions on the board of directors as a classified board as required
by the revised Bylaws of the Company and to conduct other business as described
more fully in the Proxy Statement and as may properly come before the meeting.
Regardless of the number of shares you own, your careful consideration of and
vote on these matters is important.
In order to ensure that we have a quorum and that your shares are voted
at the meeting, please complete, date and sign the enclosed Proxy and return it
promptly in the enclosed addressed and stamped envelope.
In addition to conducting the formal business at the meeting, we shall
also review the Company's activities over the past year and its plans for the
future. I hope you will be able to join us.
Sincerely,
/s/
Ronald A. Duncan
President and Chief Executive Officer
PROXY PROXY
GENERAL COMMUNICATION, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
June 7, 2001
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated April 30, 2001 and holding Class A common stock, Class B common
stock, or Series B convertible, redeemable, accreting preferred stock of General
Communication, Inc. ("Company") of record determined as of April 10, 2001,
hereby appoints Ronald A. Duncan, on behalf of the board of directors of the
Company, and each of them, the proxy of the undersigned, with full power of
substitution, to attend that annual meeting of shareholders, to be held at
Josephine's Restaurant on the 15th floor in the Sheraton Hotel at 401 East 6th
Avenue in Anchorage, Alaska at 6:00 p.m. (Alaska Daylight Time) on Thursday,
June 7, 2001 and any adjournment or adjournments of that meeting. The
undersigned further directs those holders of this Proxy to vote at that annual
meeting, as specified in this Proxy, all of the shares of stock of the
undersigned in the Company, which the undersigned would be entitled to vote if
personally present, as follows:
1. To elect three directors, each for three-year terms, as part of
Class III of the ten-member classified board of directors and to
elect one director to complete the remaining two years of the
three-year term in Class II of that board, as identified in this
Proxy:
| | FOR all nominees listed | | WITHHOLD AUTHORITY to
below (except as marked vote for all nominees
to the contrary) listed below
(a) Class II: Stephen M. Brett
(b) Class III: Donne F. Fisher
William P. Glasgow
James M. Schneider
INSTRUCTIONS:
To withhold authority under this Proxy to vote for one or more
individual nominees, draw a line through the name of the nominee for which you
wish authority to be withheld.
Should the undersigned choose to mark this Proxy as withholding
authority to vote for one or more nominees as listed above, this Proxy will,
nevertheless, be used for purposes of establishing a quorum at the annual
meeting of shareholders.
2. To transact in the proxyholder's discretion such other business as
may come before that annual meeting of shareholders, including the
approval (but not the ratification) of the minutes of the June 8,
2000 annual meeting of shareholders of the Company and other
matters as described in the Proxy Statement. As of the record date,
the Board was unaware of any other business to be brought at the
meeting other than the approval of those minutes.
The undersigned hereby ratifies and confirms all that the proxyholder
or the holder's substitute lawfully does or causes to be done by virtue of this
Proxy and hereby revokes any and all proxies given prior to this Proxy by the
undersigned to vote at the annual meeting of shareholders or any adjournments of
the meeting. The undersigned acknowledges receipt of the Notice of the Annual
Meeting and the Proxy Statement accompanying that notice.
DATED:
Signature of Shareholder
Print Name:
Signature of Shareholder
Print Name:
Please date this Proxy, sign it above as your name appears printed
elsewhere on this Proxy, and return it in the enclosed envelope which requires
no postage. Joint owners should each sign personally. When signing as attorney,
executor, trustee, guardian, administrator, or officer of a corporation or other
entity, please give that title.
The board recommends a vote "for" proposal no. (1). This Proxy, when
properly executed, will be voted as directed. If no direction is made, it will
be voted "for" proposal no. (1). If any other business is properly presented at
the annual meeting, this Proxy will be voted in accordance with the best
judgment and discretion of the proxyholder.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 7, 2001
-------------------------
April 30, 2001
To the Shareholders of
General Communication, Inc.
NOTICE IS HEREBY GIVEN that, pursuant to the Bylaws of General
Communication, Inc. ("Company") and the call of the board of directors of the
Company, the annual meeting of shareholders of the Company, will be held at
Josephine's Restaurant on the 15th floor in the Sheraton Hotel at 401 East 6th
Avenue in Anchorage, Alaska at 6:00 p.m. (Alaska Daylight Time) on Thursday,
June 7, 2001. At the meeting, shareholders will consider and vote upon the
following matters:
- Electing directors, each for three-year terms, as part of Class
III of the ten-member classified board; and electing one director
to complete the remaining two years of the three-year term in
Class II of the classified board
- Transacting such other business as may properly come before the
annual meeting and any adjournment or adjournments of it
All of the above matters are more fully described in the accompanying
Proxy Statement. A reception for shareholders will precede the annual meeting,
commencing at 5:00 p.m.
By resolution adopted by the board, the close of business on April 10,
2001 has been fixed as the record date for the annual meeting. Only holders of
shares of Class A common stock, Class B common stock and Series B convertible,
redeemable, accreting preferred stock of the Company of record as of that date
will be entitled to notice of and to vote at the annual meeting or any
adjournment or adjournments of it.
The accompanying form of Proxy is solicited by the board. The enclosed
Proxy Statement contains further information with regard to the business to be
transacted at the annual meeting. A list of shareholders of the Company as of
the record date will be kept at the Company's offices at 2550 Denali Street,
Suite 1000, Anchorage, Alaska for a period of 30 days prior to the annual
meeting and will be subject to inspection by any shareholder at any time during
normal business hours.
In order to ensure that we have a quorum and that your shares are voted
at the annual meeting, please sign and date the enclosed Proxy and mail it to
the Company's transfer agent (Mellon Investor Services LLC) in the enclosed,
addressed and stamped envelope. If you send in your Proxy and later do attend
the annual meeting, you may then withdraw your Proxy should you desire to do so.
However, in this case, you must revoke your Proxy in writing and present that
written revocation at the annual meeting. Thereafter, you may vote in person if
you wish. The Proxy may be revoked at any time prior to its exercise.
BY ORDER OF THE BOARD OF DIRECTORS
/s/
John M. Lowber, Secretary
GENERAL COMMUNICATION, INC.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
(907) 265-5600
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 7, 2001
This Proxy Statement is submitted with the Notice of Annual Meeting of
Shareholders of General Communication, Inc. ("Company") where the annual meeting
("Annual Meeting") is to be held at Josephine's Restaurant on the 15th floor in
the Sheraton Hotel at 401 East 6th Avenue in Anchorage, Alaska at 6:00 p.m.
(Alaska Daylight Time) on Thursday, June 7, 2001.
This Proxy Statement, the Letter to Shareholders, Notice of Annual
Meeting, and the accompanying Proxy are first being sent or delivered to
shareholders of the Company on or about April 30, 2001. A copy of the Company's
Annual Report, in the form of the Company's Form 10-K for the year ended
December 31, 2000, accompanies this Proxy Statement. See, "Annual Report."
DATED: April 30, 2001
TABLE OF CONTENTS
Page
----
COMPANY ANNUAL MEETING.........................................................3
MANAGEMENT OF COMPANY..........................................................8
CERTAIN TRANSACTIONS..........................................................29
OWNERSHIP OF COMPANY..........................................................39
LITIGATION AND REGULATORY MATTERS.............................................46
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS..............................46
ANNUAL REPORT.................................................................47
FUTURE SHAREHOLDER PROPOSALS..................................................47
Proxy Statement
Page 2
COMPANY ANNUAL MEETING
Voting Procedure
Overview. This Proxy Statement is furnished in connection with the
solicitation by the Company's board of directors ("Board") of proxies from the
holders of the Company's outstanding Class A and Class B common stock and
outstanding Series B convertible, redeemable, accreting preferred stock for use
at the Annual Meeting. The Proxy Statement, Letter to Shareholders, Notice of
Annual Meeting and accompanying Board proxy ("Proxy") are first being sent or
delivered to shareholders of the Company on or about April 30, 2001. A copy of
the Company's Annual Report, in the form of the Company's Form 10-K for the year
ended December 31, 2000, accompanies this Proxy Statement. See, "Annual Report."
Time and Place. The Annual Meeting will be held at Josephine's
Restaurant on the 15th floor in the Sheraton Hotel at 401 East 6th Avenue in
Anchorage, Alaska at 6 p.m. (Alaska Daylight Time) on Thursday, June 7, 2001. A
reception for shareholders will commence at 5 p.m. at that location.
Purpose. As indicated in the Notice of Annual Meeting, the following
matters will be considered and voted upon at the Annual Meeting:
- Electing three directors in Class III of the classified Board for
three-year terms and electing one director to complete the
remaining two years of the three-year term in Class II of the
board
- Transacting such other business as may properly come before the
meeting and any adjournment or adjournments of it
Outstanding Voting Securities. Only holders of Class A and Class B
common stock and Series B preferred stock as of the record date for the Annual
Meeting ("Shareholders") will be entitled to notice of, and to vote at, the
Annual Meeting. The Board has chosen the close of business on April 10, 2001 as
the record date for the Annual Meeting ("Record Date"). As of the Record Date
and under the current Restated Articles of Incorporation ("Articles"), the
outstanding stock of the Company was divided into three categories:
- Class A common stock, for which the holder of a share is entitled
to one vote
- Class B common stock, for which the holder of a share is entitled
to ten votes
- Series B preferred stock, for which the holder has limited voting
rights
Proxy Statement
Page 3
On the Record Date, there were 48,788,473 shares of Class A common
stock and 3,898,706 shares of Class B common stock outstanding and entitled to
be voted at the Annual Meeting. In addition, there were, as of that date, 20,000
shares of Series B preferred stock outstanding. Under the terms of issuance of
the shares of Series B preferred stock in April 1999, the shares are entitled,
with limited exception, to a number of votes at the meeting equal to the largest
number of full shares of Class A common stock into which the Series B preferred
stock may be converted. As of the Record Date, that number of equivalent shares
of Class A common stock (excluding equivalent shares of Class A common stock
representing dividends paid in Series B preferred stock accrued through that
date) was 3,603,603 shares.
Voting Rights, Votes Required for Approval. At the Annual Meeting, a
simple majority of the issued and outstanding Company common stock and preferred
stock entitled to be voted as of the Record Date will constitute a quorum. As an
example, since there were a total of 48,788,473 shares of Class A common stock,
3,898,706 shares of Class B common stock and 20,000 shares of Series B preferred
stock issued and outstanding and entitled to be voted as of the Record Date, a
quorum would be established by the presence of Shareholders, directly or by
proxy, holding at least 3,098,906 shares of Class A common stock, all 3,898,706
shares of Class B common stock, and all 20,000 shares of Series B preferred
stock. See "Certain Transactions: Series B Preferred Stock."
Because of the ten-for-one voting power of the Class B common stock,
shares of that stock have a substantial impact on the voting power for purposes
of taking votes on matters addressed at the Annual Meeting. The total number of
votes to which Class A common stock (including the issued and outstanding Series
B preferred stock on an as-converted basis) and Class B common stock were
entitled as of the Record Date were 52,392,076 and 38,987,060 respectively.
Adoption of the Annual Meeting agenda item pertaining to electing
directors will require an affirmative vote by the holders of at least a simple
majority of the voting power of the issued and outstanding Class A common stock
(including the issued and outstanding Series B preferred stock on an
as-converted basis) and Class B common stock entitled to vote as of the Record
Date. Under the Articles, voting on this item must be by the Class A and Class B
common stock and the Series B preferred stock voting as a group.
The Articles expressly provide for non-cumulative voting in the
election of directors.
As of the Record Date, the number and percentage of outstanding shares
entitled to vote held by directors and executive officers of the Company and
their affiliates were 4,082,431 shares of Class A common stock (not including
the issued and outstanding Series B preferred stock on an as-converted basis),
constituting approximately 8.1% of the outstanding stock in that class,
1,501,993 shares of Company Class
Proxy Statement
Page 4
B common stock, constituting approximately 38.5% of the outstanding stock in
that class, and all 20,000 shares of the outstanding Series B preferred stock.
As of the Record Date, 9,616,385 shares of Company Class A common
stock, constituting approximately 19.6% of the outstanding stock in that class,
and 2,030,591 shares of Company Class B common stock, constituting approximately
52.1% of the outstanding stock in that class, were subject to a voting agreement
("Voting Agreement"). Also as of the Record Date, the voting power of the common
stock of the Company subject to the Voting Agreement was approximately 34.1% of
the effective voting power of the combined outstanding Class A and Class B
common stock of the Company. As of the Record Date, when combined, the voting
power held by management of the Company and the parties to the Voting Agreement
constituted approximately 47.7% of the outstanding voting power of Class A and
Class B common stock and Series B preferred stock of the Company. See,
"Management of Company: Voting Agreement."
None of the Board nominees have been recommended by the parties to the
Voting Agreement. See, "Management of Company: Voting Agreement."
Mr. Brett, management's nominee for the Class II position on the Board,
is proposed by the Board to fill the vacancy caused by the resignation of Larry
E. Romrell in January 2001. The Board did appoint Mr. Brett, and he has served
as a director of the Company since that appointment.
In past annual meetings, the parties to the Voting Agreement have voted
for management's slate of nominees for the Board. Management has no reason to
believe the parties to the present Voting Agreement will not vote for
management's slate of nominees for the Board as identified in this Proxy
Statement. See, "Management of Company: Voting Agreement"; "Ownership of
Company: Principal Shareholders" and "-- Changes in Control--Voting Agreement."
Proxies. The accompanying form of Proxy is being solicited on behalf of
the Board for use at the Annual Meeting.
Subject to the conditions described in this section, the shares
represented by each Proxy executed in the accompanying form of Proxy will be
voted at the Annual Meeting in accordance with the instructions in that Proxy.
The Proxy will be voted for management's nominees for directors as a classified
board and as otherwise specified in the Proxy, unless a contrary choice is
specified.
The form Proxy also gives discretionary authority to the holder on
other matters. See, within this section, "--Other Business."
All votes cast by Shareholders, directly or by Proxy completed and
executed in accordance with the instructions on the Proxy, will be counted at
the Annual Meeting. A
Proxy Statement
Page 5
Proxy having one or more clearly marked abstentions on one or more of the
proposals to be addressed at the Annual Meeting will be honored as an
abstention. However, such a Proxy will be counted for purposes of establishing a
quorum at the Annual Meeting. A Proxy having no indication of a vote on one or
more of the proposals to be addressed at the Annual Meeting will be voted "for"
the corresponding proposals.
A Proxy executed in the form enclosed may be revoked by the Shareholder
signing the Proxy at any time before the authority granted under the Proxy is
exercised by giving written notice to the Secretary of the Board, whose address
is as follows: General Communication, Inc., 2550 Denali Street, Suite 1000,
Anchorage, Alaska 99503, ATTN: Corporate Secretary. The notice may also be
delivered to the Secretary prior to a vote using the Proxy at the Annual
Meeting. Thereafter the Shareholder signing the Proxy may vote in person or by
other proxy as provided by the revised Bylaws of the Company in effect as of the
Record Date ("Bylaws"). The Shareholder signing the Proxy may also revoke that
proxy by a duly executed proxy bearing a later date.
The expenses of the Proxy solicitation made by the Board for the Annual
Meeting, including the cost of preparing, assembling and mailing the Notice of
Annual Meeting, Proxy, Proxy Statement, and return envelopes, the handling and
tabulation of proxies received, and charges of brokerage houses and other
institutions, nominees or fiduciaries for forwarding such documents to
beneficial owners, will be paid by the Company. In addition to the mailing of
these proxy materials, solicitation may be made in person or by telephone,
telecopy, telegraph, or electronic mail by officers, directors, or regular
employees of the Company, none of whom will receive additional compensation for
that effort.
Director Elections
Overview. The Board is composed of ten directors classified into the
following three classes with the number of members as indicated: Class I (four
members), Class II (three members), and Class III (three members).
At the Annual Meeting, three individuals will be elected to positions
in Class III of the Board for three-year terms, and one individual will be
elected to a position in Class II of the Board to complete the remaining two
years of the three-year term in that class. The individuals so elected will
serve subject to the provisions of the Bylaws and until the election and
qualification of their respective successors.
Management believes that its proposed nominees for election as
directors are willing to serve as such. It is intended that the proxyholders
named in the accompanying form of Proxy or their substitutes will vote for the
election of these nominees unless specifically instructed to the contrary.
However, if any nominee at the time of the election is unable or unwilling or is
otherwise unavailable for election and as a conse-
Proxy Statement
Page 6
quence, other nominees are designated, the proxyholders named in the Proxy or
their substitutes will have discretion and authority to vote or refrain from
voting in accordance with their judgment with respect to other nominees.
Recommendation of Board. Management and the Board recommend to the
Shareholders a vote "FOR" the slate of four individuals as directors in the
positions up for election at the Annual Meeting, i.e., a vote for item number 1
of the Proxy. This slate of individuals and the respective classes on the Board
for which they are nominated are as follows:
- Stephen M. Brett (Class II)
- Donne F. Fisher (Class III)
- William P. Glasgow (Class III)
- James M. Schneider (Class III)
Background and other information on each of the nominees is provided
elsewhere in this Proxy Statement. See, "Management of Company."
Other Business
Other matters, beyond the election of directors identified in this
proxy statement, which may be addressed at the Annual Meeting consist of
approval (but not the ratification) of the minutes of the past annual
shareholder meeting held on June 8, 2000, matters incident to the conduct of the
Annual Meeting, and other business as may properly come before the Shareholders
at that meeting. A vote for the adoption of those minutes will be an affirmation
that the minutes, as written, properly reflect the proceedings of that meeting
and the action taken at that meeting. However, such a vote will not be an action
constituting approval or disapproval of the matters referred to in those
minutes. While the Company was, as of the Record Date, unaware of other business
to come before the meeting, they could include election of a person to the Board
for which a bona fide nominee is named in the proxy statement and where that
nominee is unable to serve or for good cause will not serve, and matters
proposed by Shareholders for which the Company has not received timely notice.
The Board intends to use discretionary voting authority given it under
the Company's Bylaws adopted pursuant to Rule 14a-4(c) promulgated under the
Securities Exchange Act of 1934, as amended, should any other matter come before
the Annual Meeting.
Other than these matters, the Board does not intend to bring other
business before the Annual Meeting and does not know of any other matter which
anyone else
Proxy Statement
Page 7
proposes to present for action at the Annual Meeting. However, if any other
matters properly come before the Annual Meeting, the persons named in the
accompanying form of Proxy or their duly constituted substitutes acting at the
Annual Meeting will be deemed authorized to vote or otherwise act upon those
matters in accordance with their judgment.
MANAGEMENT OF COMPANY
Directors and Executive Officers
The following table sets forth certain information about the Company's
directors and executive officers as of the Record Date.
Name Age Position
---- --- --------
Carter F. Page (1),(2),(3),(4),(5) 69 Chairman and Director
Ronald A. Duncan (1),(3) 48 President, Chief Executive Officer and Director
Robert M. Walp (1),(3) 73 Vice Chairman and Director
John M. Lowber (2) 51 Senior Vice President, Chief Financial Officer, Secretary
and Treasurer
G. Wilson Hughes 55 Executive Vice President and General Manager
William C. Behnke 43 Senior Vice President-Marketing and Sales
Richard P. Dowling 57 Senior Vice President-Corporate Development
Dana L. Tindall 39 Senior Vice President-Regulatory Affairs
Ronald R. Beaumont (1),(3) 52 Director
Stephen M. Brett (1),(3),(5) 60 Director, Nominee
Donne F. Fisher (1),(2),(3),(4),(5) 62 Director, Nominee
William P. Glasgow (1),(3),(5) 42 Director, Nominee
Paul S. Lattanzio (1),(3),(5) 37 Director
Stephen R. Mooney (1),(3) 41 Director
James M. Schneider (1),(3),(4),(5) 48 Director, Nominee
- --------------------------------
1 Member of Compensation Committee.
2 Member of Finance Committee.
3 The present classification of the Board is as follows: (1) Class 1 -
Messrs. Beaumont, Lattanzio, Page, and Walp, whose present terms expire
at the time of the 2002 annual meeting; (2) Class II - Messrs. Duncan
and Mooney whose present terms expire at the time of the 2003 annual
meeting (in addition, Mr. Brett is nominated to this class by
management); and (3) Class III - Messrs. Fisher, Glasgow, and
Schneider, whose present terms expire at the time of the Annual
Meeting.
4 Member of the Audit Committee.
5 Member of the Option Committee.
Proxy Statement
Page 8
Carter F. Page. Mr. Page has served as Chairman and a director of the
Company since 1980. From December 1987 to December 1989, he served as a
consultant to WestMarc Communications, Inc. ("WestMarc") a wholly-owned
subsidiary of AT & T Corp. in matters related to the Company. Mr. Page served as
President and director of WestMarc from 1972 to December 1987. His present term
as a director of the Company expires in 2002.
Ronald A. Duncan. Mr. Duncan is a co-founder of the Company and has
been a director of the Company since 1979. Mr. Duncan has served as President
and Chief Executive Officer of the Company since January 1, 1989. From 1979
through December 1988 he was the Executive Vice President of the Company. He is
his own nominee to the Board pursuant to the Voting Agreement. See, within this
section, "-- Voting Agreement." His present term as a director of the Company
expires in 2003.
Robert M. Walp. Mr. Walp is a co-founder of the Company and has been a
director of the Company since 1979. Mr. Walp has served as Vice Chairman of the
Company since January 1, 1989 and is an employee of the Company. From 1979
through 1988, he served as President and Chief Executive Officer of the Company.
Mr. Walp is his own nominee to the Board pursuant to the Voting Agreement. See,
within this section, "-- Voting Agreement." His present term as a director of
the Company expires in 2002.
John M. Lowber. Mr. Lowber has served as Chief Financial Officer of the
Company since January 1987, as Secretary and Treasurer since July 1988 and as
Senior Vice President since December 1989. He was Vice President-Administration
for the Company from 1985 to December 1989. Prior to joining the Company, Mr.
Lowber was a senior manager at KPMG LLP, formerly Peat Marwick Mitchell and Co.
G. Wilson Hughes. Mr. Hughes has served as Executive Vice President and
General Manager of the Company since June 1991. He was President and a member of
the board of directors of Northern Air Cargo, Inc. from March 1989 to June 1991.
From June 1984 to December 1988, Mr. Hughes was President and a member of the
board of directors of Enserch Alaska Services, Inc.
William C. Behnke. Mr Behnke has served as Senior Vice
President-Strategic Initiatives for the Company since January 2001 and, prior to
that, had served as Senior Vice President-Marketing and Sales for the Company
from January 1994. He was Vice President of the Company and President of GCI
Network Systems, Inc., a former subsidiary of the Company, from February 1992 to
January 1994. From June 1989 to February 1992, Mr. Behnke was Vice President of
the Company and General Manager of GCI Network Systems, Inc. From August 1984 to
June 1989, he was Senior Vice President for TransAlaska Data Systems, Inc.
Richard P. Dowling. Mr. Dowling has served as Senior Vice
President-Corporate Development for the Company since December 1990. He was
Senior Vice
Proxy Statement
Page 9
President-Operations and Engineering for the Company from December 1989 to
December 1990. From 1981 to December 1989, Mr. Dowling served as Vice
President-Operations and Engineering for the Company.
Dana L. Tindall. Ms. Tindall has served as Senior Vice
President-Regulatory Affairs since January 1994. She was Vice
President-Regulatory Affairs for the Company from January 1991 to January 1994.
From October 1989 through December 1990, Ms. Tindall was Director of Regulatory
Affairs for the Company, and she served as Manager of Regulatory Affairs for the
Company from 1985 to October 1989. In addition, Ms. Tindall was an adjunct
professor of telecommunications economics at Alaska Pacific University from
September through December 1995.
Ronald R. Beaumont. Mr. Beaumont has served as a director of the
Company since his appointment by the Board in February 1999. He has more than 25
years experience in the telecommunications industry. Mr. Beaumont has been Chief
Operating Officer at WorldCom, Inc. ("WorldCom") since November 2000 and, prior
to that, he had served as President of Operations and Technology at WorldCom
from September 1998. Prior to that, Mr. Beaumont was President of WorldCom
Network Services from its formation, after the merger of WorldCom and MFS
Communications in December 1996, to September 1998. Prior to that, he was
President and Chief Executive Officer of MFS North America, Inc. from October
1994 to December 1996. Mr. Beaumont has been one of WorldCom's nominees to the
Board pursuant to the Voting Agreement. See, within this section, "--Voting
Agreement." His present term as a director of the Company expires in 2002.
Stephen M. Brett. Nominee. Mr. Brett was appointed to the Board in
January 2001 to fill a vacancy on the Board and is a nominee to complete the
term to which he was appointed. He has been of counsel to Sherman and Howard, a
law firm, since January 2001. He served as Senior Executive Vice President for
AT&T Broadband from March 1999 to April 2000. Prior to that Mr. Brett served as
Executive Vice President, General Counsel and Secretary to Tele-Communications,
Inc. ("TCI") from 1991 to March 1999. His present term as a director of the
Company would expire in 2003.
Donne F. Fisher. Nominee. Mr. Fisher has served as a director of the
Company since 1980. Mr. Fisher had been a consultant to TCI since January 1996
and a director of TCI from 1980 to March 1999 when TCI merged into AT&T Corp.
From 1982 until 1996, he held various executive officer positions with TCI and
its subsidiaries. Mr. Fisher had served on the board of directors of most of
TCI's subsidiaries through the years. He presently manages his personal assets
and is involved in the management of Fisher Capital Partners, Ltd.
William P. Glasgow. Nominee. Mr. Glasgow has served as a director of
the Company since 1996. He has been President and Chief Executive Officer of
@Security Broadband Corporation since 2000 and is also a managing director of
Prime New
Proxy Statement
Page 10
Ventures Management. Since July 1996, he has been President of Prime II
Management, Inc., a Delaware corporation and sole general partner of Prime II
Management, L.P., a Delaware limited partnership ("Prime Management").
Previously, he was Senior Vice President-Finance from September 1991, and Vice
President-Finance from February 1989, to September 1991 for that corporation. He
is presently a managing director of the general partner of Prime VIII, L.P. Mr.
Glasgow joined Prime Cable Corp. (an affiliate of Prime II Management, Inc.) in
1983 and served in various capacities until that corporation was liquidated in
1987. He currently serves on the boards of directors of Prime Cellular
Corporation., Prime II Management Group, Inc., Prime Comm, Inc., SKA Management,
Inc. and @Security Broadband Corporation, none of which corporations are
publicly held.
Paul S. Lattanzio. Mr. Lattanzio has served as a director of the
Company since his appointment by the Board in May 2000. He has been a director
of Administaff, Inc., a publicly traded company, since 1995. He has been a
Managing Director for Toronto Dominion Capital, the private equity arm for
Toronto Dominion Bank, since July 1999. From February 1998 to March 1999, Mr.
Lattanzio was a co-founder and Senior Managing Director of NMS Capital
Management, LLC, a $600 million private equity fund affiliated with NationsBanc
Montgomery Securities. Prior to NMS Capital, he served in several positions with
various affiliates of Bankers Trust New York Corporation for over 13 years, most
recently as a Managing Director of BT Capital Partners, Inc. Mr. Lattanzio has
experience in a variety of investment banking disciplines, including mergers and
acquisitions, private placements and restructuring advisory areas. He presently
serves on the board of directors of Adminstaff, Inc., a publicly held company,
and he serves on the board of directors of Medical Logistics, Inc., a privately
held company. Mr. Lattanzio was included in management's slate of nominees to
the Board at the 2000 annual meeting at the request of holders of Company Series
B preferred stock and in accordance with the terms of the issuance and sale of
that stock. His present term as director of the Company expires in 2002. See,
"Certain Transactions: Series B Preferred Stock" and "Company Annual Meeting:
Voting Procedure -- Voting Rights, Votes Required for Approval."
Stephen R. Mooney. Mr. Mooney has served as a director of the Company
since his appointment by the Board in January 1999. He has been Vice President
of WorldCom Ventures, Inc. since February 1999. Prior to that, he held various
corporate development positions with MCI Communications Corporation and
MCImetro, Inc. Mr. Mooney presently serves on the board of directors of Netifice
Communications, Inc. and HotDispatch, Inc. He has been one of WorldCom's
nominees to the Board pursuant to the Voting Agreement. See, within this
section, "-- Voting Agreement." His present term as director of the Company
expires in 2003.
James M. Schneider. Nominee. Mr. Schneider has served as a director of
the Company since July 1994. He has been Senior Vice President and Chief
Financial Officer for Dell Computer Corporation since March 2000. Prior to that,
he was Senior Vice President-Finance for Dell Computer Corporation from
September 1998 to March
Proxy Statement
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2000. Prior to that, from September 1996 to September 1998 he was Vice
President-Finance for that corporation. Prior to that, from September 1993 to
September 1996, he was Senior Vice President for MCI Communications Corporation
in Washington, D.C. Mr. Schneider was with the accounting firm of Price
Waterhouse from 1973 to September 1993 and was a partner in that firm from
October 1983 to September 1993.
Board of Directors and Executive Officers
The Board currently consists of ten director positions, divided into
three classes of directors serving staggered three-year terms. A director of the
Company is elected at an annual meeting of shareholders and serves until he or
she resigns or is removed or until his or her successor is elected and
qualified. Executive officers of the Company generally are appointed at the
Board's first meeting after each annual meeting of shareholders and serve at the
discretion of the Board.
Voting Agreement
The Voting Agreement was entered into in 1996 in connection with the
Company's acquisition of Prime Cable of Alaska, L.P., a Delaware limited
partnership, and other cable television systems in Alaska. It was amended in
December 1997 and presently provides that each party to the agreement must vote
the party's Company common stock for the nominees of the other parties in the
election of directors to the Board. As of the Record Date, the parties to the
agreement and the number of directors which each party may nominate under these
terms were as follows:
- Two directors nominated by WorldCom
- One director nominated by Mr. Duncan
- One director nominated by Mr. Walp
The Voting Agreement states that the shares subject to it are also to
be voted on other matters to which the parties unanimously agree. However, as of
the Record Date, the Company was unaware of any other matters subject to the
Voting Agreement.
Under the terms of the Voting Agreement, if any party to it disposes of
more than 25% of the votes represented by its holdings of the common stock of
the Company, such party will cease to be subject to the agreement and such
disposition will trigger on behalf of each other party to the agreement the
right to withdraw from the agreement. Under its terms, the Voting Agreement will
continue until the earlier of completion of the annual shareholder meeting of
the Company in June 2001 or until there is only one party to the Voting
Agreement.
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Rights of Holders of Series B Preferred Stock in Nomination to, or Observer
Status Regarding, the Board
Under the terms of the issuance and sale of the Series B preferred
stock, so long as any shares of that stock remain outstanding, the Company must
cause its board of directors to include one seat, the nominee for which is to be
designated under terms of that sale. This is, the nominee is to be designated by
Prime VIII, L.P. (as long as it is a holder of Series B preferred stock) and
such other holders of Series B preferred stock as are not prohibited from
participation in the designation of that board member by law or regulation,
including the federal Bank Holding Company Act.
Under the terms of the issuance and sale of the Series B preferred
stock, upon designation of an individual by the holders of the Series B
preferred stock, the Board must cause such designated individual to be nominated
for approval by the holders of Company common stock at each meeting of
shareholders of the Company at which directors are to be elected. The Board is
then expected, upon that nomination, to recommend approval of that designated
individual. In the event the holders of the Company common stock shall fail to
elect that designated individual, the holders of Series B preferred stock will
have the right to appoint an observer to attend the meetings of the Board. With
the nomination and election of Mr. Lattanzio at the Company's 2000 annual
meeting, the Board believes these terms have been satisfied for Mr. Lattanzio's
three-year term on the Board.
The terms of the issuance and sale of the Series B preferred stock also
require, independent of this observer right, that, at any time that the
designated individual is not an employee of either investor in the Series B
preferred stock, i.e., Prime VIII, L.P. or Toronto Dominion Investments, Inc.,
or their respective affiliates, that investor is to have an additional right to
appoint an observer to attend all meetings of the Board. See also, "Certain
Transactions: Series B Preferred Stock."
Board and Committee Meetings
During the year ended December 31, 2000, the Board had four committees:
- Audit Committee
- Compensation Committee
- Finance Committee
- Option Committee
The Audit Committee is composed of Messrs. Fisher, Page and Schneider,
all considered by the Board to be independent directors of the Board. Under
Nasdaq Stock Market rules, to which the Company is subject, an independent
director is an
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Page 13
individual other than an officer or employee of a company or its subsidiaries or
any other individual having a relationship which the company's board believes
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.
The Audit Committee acts on behalf of the Board and oversees all
material aspects of the Company's reporting, control and audit functions. Its
role includes a particular focus on the qualitative aspects of financial
reporting to shareholders and on Company processes for management of business
and financial risk and for compliance with significant applicable legal,
ethical, and regulatory requirements. The committee's role also includes
coordination with other Board committees and maintenance of strong, positive
working relationships with management, external auditors, legal counsel and
other committee advisors. This committee is responsible for making
recommendations to the Board on conducting the annual audit of the Company and
its subsidiaries, including the selection of an external auditor to conduct the
annual audit and such other audits or accounting reviews of those entities as
the committee deems necessary. The committee is also responsible for reviewing
the plan or scope of an audit or review and the results of such audit or review
and carrying out other duties as delegated in writing by the Board.
The Audit Committee is composed only of independent directors as
previously identified. The Audit Committee met two times during the year ended
December 31, 2000.
The Compensation Committee is composed of all members of the Board.
This committee establishes compensation policies regarding executive officers
and directors and makes recommendations to the Board regarding such
compensation, including establishing an overall cap on executive compensation
and setting performance standards for executive officer compensation. The
Compensation Committee met one time during the year ended December 31, 2000.
The Finance Committee is composed of Messrs. Fisher, Page and Lowber.
It is responsible for reviewing Company finance matters from time to time and
providing guidance to the Chief Financial Officer regarding these matters. The
Finance Committee did not meet during the year ended December 31, 2000.
The Option Committee is composed of Messrs. Brett, Fisher, Glasgow,
Lattanzio, Page, and Schneider. This committee administers the Stock Option Plan
and approves the grant of options pursuant to the plan. The Option Committee met
five times during the year ended December 31, 2000.
The Board has no separately designated nominating committee. Issues
relating to filling of vacancies on the Board and nominating persons for
election to the Board in conjunction with shareholder meetings are addressed by
the full Board.
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The Board held six meetings during the year ended December 31, 2000.
All incumbent directors, as disclosed in this Proxy Statement, attended 100% of
the meetings of the Board and of committees of the Board for which they
individually were seated as directors, with certain exceptions. Those exceptions
are the following directors who only attended a percentage of the meetings for
which they were seated as indicated: Mr. Beaumont (33%); Mr. Glasgow (83%); Mr.
Page (83%), and Mr. Schneider (50%). In January 2001, Larry E. Romrell tendered
his resignation from the Board for personal reasons unrelated to the Company and
its subsidiaries.
Director Compensation
Board members waived and did not receive director fees for the period
from July 2000 through June 2001. During the year ended December 31, 2000, the
directors on the Board received no direct compensation for serving on the Board
and its committees. However, they were reimbursed for travel and out-of-pocket
expenses incurred in connection with attendance at meetings of the Board and its
committees.
In February 1997, the Company made contingent grants, pursuant to the
Stock Option Plan, to each of Messrs. Brett, Fisher, Page, and Schneider. The
corresponding option agreements were issued in February 1998. Each option was
for 25,000 shares of Class A common stock with an exercise price of $7.50 per
share. The options vest in 25% increments for each year that the optionee
participates in at least 50% of Board meetings. As of the Record Date, options
for all of these shares had separately vested for each of these individuals.
In June 2000 the Company made option grants to Messrs. Beaumont,
Glasgow, Lattanzio, Mooney and Walp or to the company for which each may have
been employed. Each option was for 25,000 shares of Class A common stock with an
exercise price of $7.50 per share. The options vest in four equal annual
installments and expire if not exercised within ten years of their grant.
Executive Compensation
Summary Compensation. The following table sets forth certain
information concerning the cash and non-cash compensation earned during fiscal
years 1998, 1999 and 2000 by the Company's Chief Executive Officer and by each
of the four other most highly compensated executive officers of the Company or
its subsidiaries whose individual combined salary and bonus each exceeded
$100,000 during the fiscal year ended December 31, 2000 (collectively, "Named
Executive Officers").
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SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
------------------------------------------------ ------------------------------
Restricted
Other Annual Stock Securities All Other
Name and Principal Bonus Compensation Awards Underlying Compensation
Position Year Salary ($) ($) ($) ($) Options/SARs(#) ($)(1),(2)
- -------- ---- ---------- ----- -------------- ---------- --------------- -------------
Ronald A. Duncan 2000 288,746 30,000(3) -0- -0- -0- 19,362
President and Chief 1999 195,000 -0- -0- -0- 50,000 14,917
Executive Officer 1998 195,000(4) -0- -0- -0- 200,000 15,642
William C. Behnke 2000 192,708 26,490 -0- -0- 100,000 216
Senior Vice President- 1999 140,004 1,883 -0- -0- -0- 496
Marketing and Sales 1998 149,381 3,442 -0- -0- 5,425 372
G. Wilson Hughes 2000 125,006 76,863 -0- -0- 250,000 116,693
Executive Vice President 1999 150,006 1,883 -0- -0- 50,000 16,216
and General Manager 1998 150,006 -0- -0- -0- -0- 21,341
John M. Lowber 2000 167,084 40,490 -0- -0- 250,000 93,688
Senior Vice President, 1999 135,005 1,883 -0- -0- -0- 88,063
Chief Financial Officer 1998 149,381 -0- -0- -0- 5,425 90,847
and Secretary/Treasurer
Dana L. Tindall 2000 187,668 21,363 -0- -0- 100,000 22,902
Senior Vice President- 1999 144,006 1,883 -0- -0- -0- 21,022
Regulatory Affairs 1998 159,340 -0- -0- -0- 5,787 21,813
- -------------------
1 The amounts reflected in this column include accruals under deferred
compensation agreements between the Company and the named individuals as
follows: Mr. Duncan, $60 in 1998; Mr. Behnke, $114 in 1998; Mr. Hughes,
$100,000 and $4,894 in 2000 and 1998, respectively; and Mr. Lowber $67,925
in 2000 and $65,000, in each of 1999 and 1998. See, within this section,
"-Employment and Deferred Compensation Agreements."
2 The amounts reflected in this column also include matching contributions
under the Stock Purchase Plan as follows: Mr. Duncan, $12,948, $14,526, and
$15,000 in 2000, 1999, and 1998, respectively; Mr. Hughes, $12,689, $15,000,
and $15,000 in 2000, 1999, and 1998, respectively; Mr. Lowber, $12,857,
$10,125, and $12,857 in 2000, 1999, and 1998, respectively; and Ms. Tindall,
$15,000, $14,064, and $15,000 in 2000, 1999, and 1998, respectively. Amounts
shown for Mr. Duncan include premiums of $90, $132, and $174 under a term
life insurance policy paid in 2000, 1999, and 1998, respectively. Amounts
shown for Mr. Behnke include premiums of $216, $81, and $102 under a term
life insurance policy paid in 2000, 1999, and 1998, respectively. Amounts
shown for Mr. Hughes include premiums of $1,334, $1,216, and $1,447 under
life insurance policies paid in each of 2000, 1999, and 1998, respectively.
Amounts for Mr. Lowber include premiums of $899, $931, and $983 under life
insurance policies paid in each of 2000, 1999, and 1998, respectively.
Amounts shown for Ms. Tindall include premiums of $54, $60, and $66 under a
term life insurance policy paid in 2000, 1999, and 1998, respectively.
Includes a waiver of accrued interest on January 1, 2001 on notes owed to
the Company by Ms. Tindall and Mr. Lowber in the amounts of $7,848 and
$12,007, respectively, on January 1, 2000 of $6,639 and $12,007,
respectively, on January 1, 1999 of $6,639 and $12,007 respectively.
Includes $6,324 and $2,670 for Messrs. Duncan and Hughes, respectively, in
2000 for the personal use of the Company's leased aircraft.
3 Represents base amount of bonus allocated to Mr. Duncan. As of the Record
Date, the Compensation Committee had not determined whether an additional
amount might be allocated as a bonus to him.
4 Does not include $50,000 of Mr. Duncan's 1999 salary that was paid in
advance during 1998.
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Option/SAR Grants
The following table sets forth information on the individual grants of
stock options (whether or not in tandem with stock appreciation rights
("SARs")), and freestanding SARs made during the Company's fiscal year ended
December 31, 2000 to its Named Executive Officers. There were no tandem SARs or
freestanding SARs associated with the Company during this period.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term
- -------------------------------------------------------------------------------- ------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or
Option/SARs Employees in Base
Granted(1) Fiscal Year Price(2) Expiration
Name (#) (%) ($/Sh) Date 5%($)(3) 10%($)(3)
- ---- ----------- ------------ -------- ---------- ---------- ---------
Ronald A. Duncan -0- -0- -0- --- --- ---
William C. Behnke 100,000 5.1 6.50 3/14/10 413,880 1,044,051
G. Wilson Hughes 250,000 12.7 6.50 3/14/10 1,034,700 2,610,127
John M. Lowber 250,000 12.7 6.50 3/14/10 1,034,700 2,610,127
Dana L. Tindall 100,000 5.1 6.50 3/14/10 413,880 1,044,051
- -------------------
1 Options in Class A common stock.
2 The exercise price of the options was in excess of the market price of the
Class A common stock at the time of grant.
3 The potential realizable dollar value of a grant is calculated as the
product of (a) the difference between (i) the product of the per-share
market price at the time of grant and the sum of 1 plus the adjusted stock
price appreciation rate (the assumed rate of appreciation compounded
annually over the term of the option or SAR) and (ii) the per-share exercise
price of the option or SAR and (b) the number of securities underlying the
grant at fiscal year end.
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Option Exercise and Fiscal Year-End Values
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 2000 by each of the Named
Executive Officers and the fiscal year-end value of unexercised options held by
each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at Fiscal Year-End In-the-Money Options/SARs
(#) at Fiscal Year-End($)(1)
------------------------------- ----------------------------
Shares
Acquired
on
Exercise Value
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ----------- ------------- ----------- -------------
Ronald A. Duncan -0- -0- -0- 200,000 -0- -0-
William C. Behnke -0- -0- 171,949 183,476 518,560 101,784
G. Wilson Hughes 250,000 812,500 80,000 250,000 240,000 125,000
John M. Lowber -0- -0- 290,282 315,143 823,560 221,784
Dana L. Tindall -0- -0- 220,524 135,263 564,468 57,234
--------------
1 Represents the difference between the fair market value of the securities
underlying the options/SAR and the exercise price of the options/SAR based
upon the last trading price on December 31, 2000.
Employment and Deferred Compensation Agreements
On April 30, 1991, the Company entered into a deferred compensation
agreement with Mr. Hughes (as amended in 1996, "Hughes Agreement"). Under the
terms of the Hughes Agreement, Mr. Hughes is entitled to an annual base salary
of $150,000 and customary benefits. Pursuant to the agreement, Mr. Hughes was
granted stock options in 1991 for 250,000 shares of Class A common stock at an
exercise price of $1.75 per share, all of which are fully vested and
exercisable. The Hughes Agreement also provides for Mr. Hughes to receive
deferred compensation, with interest compounded annually at 10% of $50,000 in
each of 1992, 1993, and 1994, $65,000 in 1995 and $75,000 in 1996, and each year
thereafter, to vest on December 31 of each year. Mr. Hughes did not receive a
contribution during the year ended December 31, 1999 or 1998. His deferred
compensation amount did receive a contribution of $100,000 in 2000. Upon
termination of his employment with the Company, Mr. Hughes may elect to
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Page 18
have the full balance of the deferred compensation paid in cash, in a lump sum
or in monthly installments for up to ten years. If the monthly installment
method is chosen, the unpaid balance will continue to accrue interest at 10%.
Interest accrued under the Hughes Agreement in the amount of $4,894
during the year ended December 31, 1998. No interest accrued during the years
ended December 31, 1999 and 2000. In May 1998, at the request of Mr. Hughes, the
Company purchased 30,000 shares of Company Class A common stock in the open
market at a price of $6.63 per share and, in April 2000, an additional 10,000
shares of Class A common stock at $5.20 per share to fund the remaining balance
of the vested portion of his deferred compensation balance. Mr. Hughes' interest
in these shares had vested as of the Record Date. The stock is held in treasury
by the Company for the benefit of Mr. Hughes, is not voted and may not be
disposed of by the Company or Mr. Hughes.
The Company entered into an employment and deferred compensation
agreement with Mr. Lowber in July 1992. Under the terms of the agreement, as
amended in 2000, Mr. Lowber is entitled to an annual base salary of $175,000
effective April 1, 2000 and customary benefits. Mr. Lowber's salary was reduced
to $135,000 effective December 1, 1998 and was reinstated to $150,000 effective
January 1, 2000. In addition, Mr. Lowber is eligible to receive an annual cash
bonus of up to $30,000 based upon the Company's and his performance. The
agreement also provides for Mr. Lowber to receive deferred compensation of
$65,000 per year with interest accrued at 9% per annum.
If Mr. Lowber's employment or position with the Company is terminated,
or if he dies, the entire deferred balance will be immediately payable. Through
1999, the deferred compensation was used to purchase a life insurance policy
which has been collaterally assigned to the Company to the extent of premiums
paid by the Company. The Company's deferred compensation contributions were made
each July 1 through 1999 and were fully vested when made. At the earlier of
termination of employment or upon election by Mr. Lowber and with the
concurrence of the Company, the collateral assignment of the insurance policy
will be terminated.
In February 1995, the Company agreed to pay deferred compensation to
Mr. Behnke in the amount of $20,000 per year for each of 1995 and 1996, each
contribution by the Company to vest at the end of the calendar year during which
the allocation was made, and accruing interest at 10% per annum. The first
allocation under the plan was made in December 1995. The interest accrued under
this deferred compensation plan was $114 during the year ended December 31,
1998. No interest accrued during the years ended December 31, 1999 and 2000.
Effective January 1, 1997, the Company and Mr. Behnke entered into a
compensation agreement ("Behnke Agreement") which provided for compensation
through December 31, 2001. The Behnke Agreement provided for base compensation
of $150,000 per year, increasing $5,000
Proxy Statement
Page 19
annually for the years ending December 31, 1999, 2000 and 2001. The Behnke
Agreement provided for target incentive compensation of $45,000 per year of
which 78% was to be deferred. Mr. Behnke's compensation was reduced to $135,000
effective December 1, 1998. Mr. Behnke's base compensation was increased to
$175,000, and his incentive compensation reduced to $25,000, effective on
November 1, 1999. Effective April 1, 2000 his base compensation was increased to
$200,000.
Pursuant to the Behnke Agreement, the Company agreed to grant Mr.
Behnke an option to purchase 100,000 shares of Class A common stock at an
exercise price of $7.00 per share, which will vest in equal amounts on January
1, 2000, 2001 and 2002. Pursuant to the Behnke Agreement, the Company has
created a deferred compensation account for Mr. Behnke in the amount of
$285,000, of which $64,149 plus accrued interest of $6,314 was vested on
December 31, 2000 and the rest of which will vest as earned under the incentive
compensation provision of the Behnke Agreement. Mr. Behnke may direct the
Company to invest the entire $285,000 in the Company's common stock. At the
request of Mr. Behnke, the Company purchased 23,786 shares of Class A common
stock to fund a portion of his deferred compensation account. The vested
portions of the deferred compensation account will be paid to Mr. Behnke upon
termination of his employment with the Company. As of the Record Date, Mr.
Behnke had a vested interest in 9,055 of those shares held for his benefit.
Non-Qualified, Unfunded Deferred Compensation Plan
In February 1995, the Company established a non-qualified, unfunded,
deferred compensation plan to provide a means by which certain employees of the
Company may elect to defer receipt of designated percentages or amounts of their
compensation and to provide a means for certain other deferrals of compensation.
Employees eligible to participate in the plan are determined by the Board. The
Company may, at its discretion, contribute matching deferrals in amounts
selected by the Company.
Participants immediately vest in all elective deferrals and all income
and gain attributable to that participation. Matching contributions and all
income and gain attributable to them vest on a case-by-case basis as determined
by the Company. Participants may elect to be paid in either a single lump-sum
payment or annual installments over a period not to exceed ten years. Vested
balances are payable upon termination of employment, unforeseen emergencies,
death or total disability and change of control or insolvency of the Company.
Participants are general unsecured creditors of the Company with respect to
deferred compensation benefits of the plan.
During the year ended December 31, 2000 and up through the Record Date,
none of the Named Executive Officers had participated in this plan.
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Except as disclosed in this Proxy Statement, as of December 31, 2000
and the Record Date, there were no compensatory plans or arrangements, including
payments to be received from the Company, with respect to the Named Executive
Officers for the year ended December 31, 2000. This statement is limited to
situations where such a plan or arrangement resulted in or will result from the
resignation, retirement, or any other termination of a Named Executive Officer's
employment with the Company or its subsidiaries or from a change of control of
the Company or a change in that officer's responsibilities following a change in
control and where the amount involved, including all periodic payments or
installments, exceeded $100,000.
Long-Term Incentive Plan Awards
The Company had no long-term incentive plan in operation during the
year ended December 31, 2000.
Stock Purchase Plan
In December 1986, the Company adopted a Qualified Employee Stock
Purchase Plan which has been subsequently amended from time to time ("Stock
Purchase Plan"). The plan is qualified under Section 401 of the Internal Revenue
Code of 1986, as amended. All employees of the Company, who have completed at
least one year of service, are eligible to participate in the plan. Eligible
employees may elect to reduce their taxable compensation in any even dollar
amount up to 10% of such compensation up to a maximum per employee of $10,500
for 2001. Employees may contribute up to an additional 10% of their compensation
with after-tax dollars.
Subject to certain limitations, the Company may make matching
contributions of common stock for the benefit of employees. Such a contribution
will vest in increments over the first six years of employment. Thereafter, they
are fully vested when made. No more than 10% of any one employee's compensation
will be matched in any year. In addition, the combination of salary reductions,
after-tax contributions and Company matching contributions for any employee
cannot exceed the lesser of $30,000 or 25% of such employees' compensation
(determined after salary reduction) for any year.
Under the terms of the Stock Purchase Plan, participating eligible
employees may direct their contributions to be invested in Company common stock,
WorldCom common stock, AT&T Corp. common stock, and various identified mutual
funds.
Employee contributions invested in Company common stock are eligible to
receive up to 100% Company matching contributions in common stock as determined
by the Company each year. Employee contributions that are directed into
investments other than Company common stock are eligible to receive Company
matching contribu-
Proxy Statement
Page 21
tions of up to 50%, as determined by the Company each year, for the purchase by
or otherwise issuance to the Plan of additional shares of common stock of the
Company. All contributions are invested in the name of the plan for the benefit
of the respective participants in the plan. The participants generally do not
have voting or disposition power with respect to the Company shares allocated to
their accounts. Those shares are voted by a committee for the plan.
The Stock Purchase Plan is administered through a plan administrator
(currently Alfred J. Walker), and the plan's committee is appointed by the
Board. The assets of the plan are invested from time to time by the trustee at
the direction of the plan's committee, except that participants have the right
to direct the investment of their contributions to the Stock Purchase Plan
(although an election to invest in Company common stock is generally
irrevocable). The plan administrator and members of the plan's committee are all
employees of the Company or its subsidiaries. The plan's committee has broad
administrative discretion under the terms of the plan.
As of the Record Date, there remained 1,958,099 shares of Class A and
464,240 shares of Class B common stock allocated to the plan and available for
issuance by the Company or otherwise acquisition by the plan for the benefit of
participants in the plan.
Stock Option Plan
In December 1986, the Company adopted the 1986 Stock Option Plan. The
plan has been subsequently amended from time to time.
Under the plan, the Company is authorized to grant non-qualified
options to purchase shares of Class A common stock to key employees of the
Company, a subsidiary of the Company, or a subsidiary of a subsidiary of the
Company (including officers and directors who are employees) and non-employee
directors of the Company or those subsidiaries. The number of shares of Class A
common stock allocated to the Stock Option Plan was increased to 8.7 million
shares upon approval by the shareholders of the Company at its 2000 annual
meeting. The number of shares for which options may be granted is subject to
adjustment upon the occurrence of stock dividends, stock splits, mergers,
consolidations and certain other changes in corporate structure or
capitalization.
As of the Record Date, 5,641,091 shares were subject to outstanding
options under the Stock Option Plan, 2,116,229 shares had been issued upon the
exercise of options under the plan and 942,680 shares remained available for
additional grants under the plan.
As of the Record Date, the Stock Option Plan was administered by the
Option Committee composed of six members of the Board, i.e., the Option
Committee. The
Proxy Statement
Page 22
members of that committee are identified elsewhere in this Proxy Statement. See,
"Management of Company: Board and Committee Meetings." The Option Committee was
established by the Board in July 1997. Prior to that date, the entire Board
administered the plan.
The Option Committee selects optionees and determines the terms of each
option, including the number of shares covered by each option, the exercise
price and the option exercise period which, under the Stock Option Plan, may be
up to ten years from the date of grant. Options granted that have not become
exercisable terminate upon the termination of the employment or directorship of
the optionholder. Exercisable options terminate from one month to one year after
such termination, depending on the cause of such termination. If an option
expires or terminates, the shares subject to such option become available for
additional grants under the Stock Option Plan.
Report on Repricing of Options/SARs
During the year ended December 31, 2000, the Company did not adjust or
amend the exercise price of stock options or SARs previously awarded to any of
the Named Executive Officers, whether through amendment, cancellation or
replacement grants, or any other means.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of all members of the Board, and
the identity and relationships of the Board members to the Company are described
elsewhere in this Proxy Statement. See, "Management of Company: Directors and
Executive Officers"; "Ownership of Company"; and "Certain Transactions." During
the year ended December 31, 2000, Messrs. Duncan (a Named Executive Officer) and
Walp participated in deliberations of the Compensation Committee concerning
executive officer compensation other than deliberations concerning their own
compensation.
Compensation Committee Report on Executive Compensation
The duties of the Compensation Committee are as follows:
- Prepare, on an annual basis for the review of and action by the
Board, a statement of policies, goals, and plans for executive
officer and Board member compensation, if any --
- Statement is specifically to address expected performance and
compensation of and the criteria on which compensation is
based
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for the chief executive officer and such other executive
officers of the Company as the Board may designate for this
purpose
- Monitor the effect of ongoing events on and the effectiveness of
existing compensation policies, goals, and plans--
- Events specifically include but are not limited to the status
of the premise that all pay systems correlate with the
compensation goals and policies of the Company
- Report from time to time, its findings to the Board
- Monitor compensation-related publicity and public and private
sector developments on executive compensation
- Familiarize itself with, and monitor the tax, accounting,
corporate, and securities law ramifications of, the compensation
policies of the Company, including but not limited to --
- Comprehending a senior executive officer's total compensation
package
- Comprehending the package's total cost to the Company and its
total value to the recipient
- Paying close attention to salary, bonuses, individual
insurance and health benefits, perquisites, loans made or
guaranteed by the Company, special benefits to specific
executive officers, individual pensions, and other retirement
benefits
- Establish the overall cap on executive compensation and the
measure of performance for executive officers, either by
predetermined measurement or by a subjective evaluation
- Strive to make the compensation plans of the Company simple, fair,
and structured so as to maximize shareholder value
For the year ended December 31, 2000, the duties of the Compensation
Committee in the area of executive compensation specifically included addressing
the reasonableness of compensation paid to executive officers. In doing so, the
committee took into account how compensation compared to compensation paid by
competing companies as well as the Company's performance and available
resources.
The compensation policy of the Company as established by the
Compensation Committee is that a portion of the annual compensation of senior
executive officers
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relates to and is contingent upon the performance of the Company. In addition,
executive officers participating in deferred compensation agreements established
by the Company are, under those agreements, unsecured creditors of the Company.
In March 2000, the Compensation Committee established compensation
levels for 2000 for all corporate officers, including the Named Executive
Officers. Also at that time the Compensation Committee established structured
annual incentive bonus agreements with Mr. Duncan and with each of several of
its senior and other executive officers, including Messrs. Behnke, Hughes and
Lowber, and Ms. Tindall. The agreements included the premise that the Company's
performance, or that of a division or subsidiary, as the case may be, for
purposes of compensation would be measured by the Compensation Committee against
goals established at that time and were reviewed and approved by the Board. The
goals included targets for revenues and cash flow standards for the Company or
the relevant division or subsidiary. Targeted objectives were set and measured
from time to time by the Compensation Committee. Other business achievements of
the Company obtained through the efforts of an executive officer were also taken
into consideration in the evaluation of performance. Performances were evaluated
and bonuses were issued as described elsewhere in this section. See, within this
section, "-- Executive Compensation."
During the year ended December 31, 2000 the Compensation Committee
monitored and provided direction for the Stock Purchase Plan and Stock Option
Plan. In addition, the Compensation Committee reviewed compensation levels of
members of management, evaluated the performance of management, and considered
management succession and related matters. The Compensation Committee reviewed
in detail all aspects of compensation for the Named Executive Officers and other
executive officers of the Company and its subsidiaries.
The practice of the Compensation Committee in future years will likely
be to continue to review directly the compensation and performance of Mr. Duncan
as chief executive officer and to review recommendations by Mr. Duncan for the
compensation of other senior executive officers.
Audit Committee Report
The Audit Committee has reviewed and discussed with management the
Company's audited financial statements for the year ended December 31, 2000.
In addition, the committee has discussed with KPMG LLP, the Company's
independent auditors for that year, the matters required to be discussed by
Statement of Accounting Standard 61. Those matters consisted of the auditors
discussing with the committee the auditors' judgment about the quality, not just
acceptability, of the Company's financial reporting.
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The committee has received a letter dated February 2, 2001 from KPMG
LLP as required by Independence Standards Board Standard No. 1 and discussed
with those auditors their independence from the Company. The letter addressed
all relationships with the Company that could affect the auditors' independence
and stated that for the period from January 1, 2000 through February 2, 2001
KPMG LLP considered itself as independent accountants with respect to the
Company. The Audit Committee has concluded that the services provided by KPMG
LLP, other than for the audit of the Company's annual financial statement for
the year ended December 31, 2000 and reviews of financial statements included in
the Company's Forms 10-Q for that year, are compatible with maintaining KPMG
LLP's independence regarding the Company.
Based upon these reviews and discussions, the committee has recommended
to the Board that the audited financial statements for the year ended December
31, 2000 should be included in the Company's annual report on Form 10-K for that
year.
All of the members of the Audit Committee are independent directors as
defined under Rule 4200(a)(15) of the National Association of Securities
Dealers' listing standards. That is, each member of the committee is an
individual who is not an officer or employee of the Company or any other
individual having a relationship which, in the opinion of the Board, would
interfere with the exercise of independent judgment in carrying out
responsibilities of a director.
The foregoing report of the Audit Committee was approved, as of the
Record Date, by all members of the committee, identified as follows: Messrs.
Schneider (Chair), Fisher and Page.
In May 2000, the Board adopted an Audit Committee Charter which sets
forth parameters for the operation of the Audit Committee. These parameters
include the role of the Audit Committee, and its membership prerequisites,
operating principles, meeting frequency requirements, shareholder reports
requirements, relationship with external auditors, primary responsibilities, and
other matters relating to it. A copy of the Audit Committee Charter is attached
to this Proxy Statement as Appendix I.
Performance Graph
The following graph includes a line graph comparing the yearly
percentage change in the Company's cumulative total shareholder return on its
Class A common stock during the five-year period from December 31, 1995 through
December 31, 2000. This return is measured by dividing (1) the sum of (a) the
cumulative amount of dividends for the measurement period (assuming dividend
reinvestment, if any) and (b) the difference between the Company's share price
at the end and the beginning of the measurement period, by (2) the share price
at the beginning of that measurement
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period. This line graph is compared in the following graph with two other line
graphs during that five-year period, i.e., a market index and a peer index.
The market index is the Center for Research in Securities Prices Index
for the Nasdaq Stock Market for United States companies. It presents cumulative
total returns for a broad based equity market assuming reinvestment of dividends
and is based upon companies whose equity securities are traded on the Nasdaq
Stock Market. The peer index is the Center for Research in Securities Prices
Index for Nasdaq Telecommunications Stock. It presents cumulative total returns
for the equity market in the telecommunications industry segment assuming
reinvestment of dividends and is based upon companies whose equity securities
are traded on the Nasdaq Stock Market. The line graphs represent monthly index
levels derived from compounding daily returns.
In constructing each of the line graphs in the following graph, the
closing price at the beginning point of the five-year measurement period has
been converted into a fixed investment, stated in dollars, in the Company's
Class A common stock (or in the stock represented by a given index, in the cases
of the two comparison indexes), with cumulative returns for each subsequent
fiscal year measured as a change from that investment. Data for each succeeding
fiscal year during the five-year measurement period are plotted with points
showing the cumulative total return as of that point. The value of a
shareholder's investment as of each point plotted on a given line graph is the
number of shares held at that point multiplied by the then prevailing share
price.
The Company's Class B common stock is traded over-the-counter on a more
limited basis. Therefore, comparisons similar to those previously described for
the Class A common stock are not directly available. However, the performance of
Class B common stock may be analogized to that of the Class A common stock in
that the Class B common stock is readily convertible into Class A common stock
by request to the Company.
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Comparison of Five-Year Cumulative Return
Performance Graph for General Communication, Inc.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS PERFORMANCE GRAPH FOR GENERAL COMMUNICATION, INC., NASDAQ STOCK
MARKET INDEX FOR UNITED STATES COMPANIES, AND NASDAQ TELECOMMUNICATIONS STOCK(1),(2),(3),(4)
- --------------------------------------------------------------------------------------------------------------------
Nasdaq Stock Market Nasdaq
Measurement Period Index for U.S. Telecommunications
(Fiscal Year Covered) Company ($) Companies ($) Stock ($)
--------------------- ----------- ------------- ---------
FYE 12/31/95 100.0 100.0 100.0
FYE 12/31/96 158.5 123.0 102.3
FYE 12/31/97 129.3 150.7 149.3
FYE 12/31/98 79.3 212.5 247.0
FYE 12/31/99 85.4 394.9 438.3
FYE 12/31/00 136.6 237.6 188.4
- -------------------
1 The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
2 The indexes are reweighted daily, using the market capitalization on the
previous trading day.
3 If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
4 The index level for all series was set to $100.00 on 12/29/95.
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Legal Proceedings
The Board is unaware of any legal proceedings which may have occurred
during the past five years and which would be material to an evaluation of the
ability or integrity of any director or executive officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of Forms 3, 4, and 5 adopted pursuant to the
Exchange Act and completed and furnished to the Company by its shareholders and
any amendments to those forms furnished to the Company, the Company is unaware
of any director, officer, or beneficial owner of more than 10% of any class of
common stock of the Company who failed to file on a timely basis, as provided in
those forms, reports required under Section 16(a) of that act during the year
ended December 31, 2000.
CERTAIN TRANSACTIONS
Series B Preferred Stock
On April 30, 1999, the Company issued and sold the Series B preferred
stock for $20 million, i.e., a total of 20,000 convertible, redeemable,
accreting shares of its preferred stock to Prime VIII, L.P., a Delaware
partnership, and to Toronto Dominion Investments, Inc. Prior to that issuance,
the Board, by resolution, approved the Statement of Stock Designation for the
issuance of Series B preferred stock ("1999 Designation") and a Series B
preferred stock agreement in anticipation of the issuance and sale of the stock.
The 1999 Designation sets forth the specific rights of holders of the
Series B preferred stock, including dividend rights, liquidation rights,
redemption rights, voting rights, and conversion rights. The Series B preferred
stock agreement sets forth the terms of the sale of the stock and
representations and warranties of the parties, and includes other rights of the
holders of the stock, including registration rights granted to the investors.
The terms and conditions of the 1999 Designation and that agreement are
generally referred to in this section as the terms of the "Preferred Stock
Sale."
The Preferred Stock Sale terms provide that the shares of Series B
preferred stock must be ranked senior to all other classes of equity securities
of the Company. The holders of the Series B preferred stock will receive
dividends through the fourth anniversary of issuance of the stock, i.e., April
30, 2003, at the rate of 8.5% of a liquidation preference payable semiannually,
in cash, or in additional fully-paid shares of Series B preferred stock. After
that fourth anniversary, the interest rate increases to 17% per annum payable in
cash. The terms of the offering also include that, should the
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Company be permitted to issue equity redeemable at the option of the holder, the
parties to the offering would agree to enter into appropriate amendments to the
offering to permit the holders to demand redemption at any time after the fourth
anniversary of the issuance of the Series B preferred stock and to remove the
provision increasing the dividend rate on that stock to 17% per annum after that
fourth anniversary. The liquidation preference specified in the offering is
$1,000 per share, plus accrued but unpaid dividends and fees. In 2000, the
Alaska legislature enacted revisions to the Alaska Corporations Code to allow an
Alaska corporation, e.g., the Company, to issue such redeemable equity. As of
the Record Date, the Company had not amended the terms of the Preferred Stock
Sale to include these redemption provisions. However, the Company expects to
make such amendments prior to that fourth anniversary.
The Preferred Stock Sale terms provide for mandatory redemption twelve
years from the date of closing on the sale of stock or upon the occurrence of
certain "triggering events." These events include an acceleration of certain
obligations of the Company or its subsidiaries having an outstanding balance in
excess of $5 million, a change in control of the Company, commencement of
bankruptcy or insolvency proceedings against the Company, a breach of the
limitations on certain Company long term debt set forth in the offering, a
liquidation or dissolution of the Company, or a merger, consolidation or sale of
all or substantially all of the assets of the Company which would significantly
and adversely affect the rights and preferences of the outstanding Series B
preferred stock. The terms also include redemption of those shares at the option
of the Company any time after the fourth anniversary of the closing. The
redemption price is the amount paid plus accrued and unpaid dividends.
The Preferred Stock Sale terms include that the Series B preferred
stock is convertible at any time into shares of Company Class A common stock
with a conversion price of $5.55 per share. The terms further provide for
mandatory conversion, in the discretion of the Company, at any time subsequent
to the third anniversary of the closing at a price equal to two times the
conversion price previously described, assuming the stock is trading at no less
than two times the conversion price. The terms include, in the event the Company
is unable or unwilling to redeem the Series B preferred stock subject to the
terms of the mandatory redemption, the investors will have the option to convert
their Series B preferred stock into Company Class A common stock. The terms
further include that the shares of Series B preferred stock are exchangeable, in
whole but not in part, at the Company's option into subordinated debt with terms
and conditions comparable to those governing the Series B preferred stock.
The Preferred Stock Sale terms provide that the holders of the Series B
preferred stock will have the right to vote on all matters presented for vote to
the holders of common stock on an as-converted basis. Additionally, the terms of
the Preferred Stock Sale require, as long as shares of Series B preferred stock
are outstanding and unconverted, that the holders have the right to vote, as a
class, and the Company must
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obtain the written consent of holders of a majority (at least 80% for the first
three items) of that stock to take any of the following actions:
- Amend the Articles or amend or repeal the Bylaws in a way which
significantly and adversely affects the rights or preferences of
holders of the outstanding Series B preferred stock
- Issue additional shares of Company preferred stock except as may
be required under the terms and conditions of the issuance of the
Series B preferred stock
- Merge or consolidate the Company with another entity or sell all
or substantially all of its assets, in any case where the terms of
that action would significantly and adversely affect the rights,
privileges, and preferences of the Series B preferred stock
- Liquidate or dissolve the Company
- Declare or pay any dividends on capital stock of the Company,
other than to the holders of the Series B preferred stock, or set
aside any sum for any such purpose
- Purchase, redeem or otherwise acquire for value, or pay into or
set aside as a sinking fund for such purpose, any capital stock of
the Company, other than the Series B preferred stock, or any
warrant, option or right to purchase any such capital stock, other
than that Series B preferred stock
- Take any action which would result in taxation of the holders of
the Series B preferred stock under Section 305 of the Internal
Revenue Code of 1986, as amended
Of these seven specific actions, the Alaska Corporations Code,
generally, requires shareholder approval of actions one (article amendment),
three (merger and other reorganization), and four (dissolution). The code
requires an affirmation vote by at least a simple majority of the outstanding
shares to approve an amendment to corporate articles. The code further provides
that holders of outstanding shares of a class may vote as a class on such
proposed amendment where the amendment addresses certain specific changes,
including changes to the designations, preferences, limitations or relative
rights of the shares of the class or changes which increase the rights and
preference of a class having rights and preferences prior or superior to the
shares of the class. In this instance at least a simple majority of the
outstanding shares, by class, would be required to approve the article
amendment.
The Alaska Corporations Code further requires an affirmative vote by at
least two-thirds of the outstanding shares per class (and by at least two-thirds
of the out-
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standing shares per class, if a class of shares is entitled to vote) to approve
a merger, consolidation, sale of assets not in the regular course of business,
or dissolution of a corporation. The code allows a corporation to specify in its
articles of incorporation that its board shall have the exclusive right to
adopt, alter, amend or repeal its bylaws. The Articles provide that the Board
has that exclusive right with respect to the Bylaws. The other four specific
actions, i.e., two (issuance of additional shares), five (declaration of
dividends), six (purchase of capital stock), and seven (action adverse to
taxation position regarding the Series B preferred stock), typically do not
require shareholder approval. That is, under the present Articles, these four
actions, normally, are matters upon which the Board has authority to act.
At the 2000 annual meeting, the shareholders of the Company approved an
amendment to the Articles, allowing the Company to enter into agreements for the
sale of preferred stock with no restriction on voting rights by class. These
amendments to the Articles were subsequently filed with the State of Alaska and
became effective July 31, 2000. With this change, the Company may seek an
amendment to the underlying documents of the Preferred Stock Sale to eliminate
from the triggering events a reorganization of the Company. As of the Record
Date, the Company had not yet entered into an amendment to these documents to
eliminate those items from the list of triggering events.
The holders of Series B preferred stock have other rights with respect
to membership on the Board or observing status at Board meetings as described
elsewhere in this Proxy Statement. See, "Management of Company: Rights of
Holders of Series B Preferred Stock in Nomination To or Observer Status
Regarding the Board."
The Preferred Stock Sale terms include that the holders of the Series B
preferred stock will have a right of first refusal to acquire up to a total of
$5 million in the next private financing that the Company might choose to
initiate.
The Series B preferred stock is convertible at any time into Class A
common stock of the Company with registration rights.
WorldCom Agreements
As of the Record Date, the Company continued to have a significant
business relationship with WorldCom, including the following:
- Under the WorldCom Traffic Carriage Agreement, the Company agrees
to terminate all Alaska-bound WorldCom long distance traffic and
WorldCom agrees to terminate all of the Company's long distance
traffic terminating in the lower 49 states, excluding Washington,
Oregon and Hawaii
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- WorldCom licenses certain service marks to the Company for use in
Alaska
- WorldCom has purchased certain service marks of the Company
- The parties agree to share some communications network resources
and various marketing, engineering and operating resources
- Company manages and has agreed to acquire WorldCom's 85% interest
in Kanas Telecom, Inc., a company that owns and operates a fiber
optic cable system constructed along the trans-Alaska oil pipeline
corridor extending from Prudhoe Bay to Valdez, Alaska
The Company handles WorldCom's 800 traffic originating in Alaska and
terminating in the lower 49 states and handles traffic for WorldCom's calling
card customers when they are in Alaska, while WorldCom originates calls for the
Company's calling card customers when they are in the lower 49 states. Revenues
attributed to the WorldCom Traffic Carriage Agreement in 2000 were approximately
$53.1 million, or approximately 18.1% of total revenues.
Prime Management Agreement
In connection with its acquisition of several cable systems in 1996,
the Company entered into the Prime Management Agreement, a cable television
management agreement with Prime Management, i.e., Prime II Management, L.P., a
Delaware limited partnership, to manage those systems. Under the Voting
Agreement, the parties to it agreed to vote for the nominee designated by Prime
Management in the election of directors to the Board. The Company is unaware of
the total shareholdings in the Company of Prime Management and its affiliates.
See, "Management of Company: Voting Agreement"; and "Ownership of Company:
Changes in Control -- Voting Agreement."
Under the Prime Management Agreement, the Company pays Prime Management
a fee for managing the Company's cable systems. For management services under
the agreement and subsequent to October 31, 1997, Prime Management agreed to
consideration in the form of $125,000 and a stock warrant which provides for the
purchase of 425,000 shares of Company Class A common stock at a price of $3.25
per share. The Company paid to Prime Management fees for similar services in the
amount of $200,000 for the nine-month period ended October 31, 1999. The Company
paid fees for similar services in the amount of $233,000 for the seven month
period ended July 31, 2000. The warrant was exercised in June 2000.
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The Company was required to reimburse Prime Management for any costs
and expenses incurred by it in connection with managing the Company's cable
systems, including travel and entertainment expenses. The agreement terminated
in July 2000 by mutual agreement of the parties.
Duncan Leases
The Company entered into a long-term capital lease agreement ("Duncan
Lease") in 1991 with a partnership in which Mr. Duncan, the President and Chief
Executive Officer and a director of the Company, held a 50% ownership interest.
Mr. Duncan sold his interest in the partnership in 1992 to Dani Bowman, who
later became Mr. Duncan's spouse. However, Mr. Duncan remains a guarantor on the
note which was used to finance the acquisition of the property subject to the
Duncan Lease. That property consists of a building presently occupied by the
Company. The Duncan Lease term is 15 years with monthly payments of $14,400,
increasing in $800 increments at each two-year anniversary of the lease,
beginning in 1993.
As of the Record Date, the monthly payments were $17,600. If the
partnership sells the property subject to the Duncan Lease prior to the end of
the tenth year of the Duncan Lease, the partnership will pay to the Company
one-half of the net proceeds in excess of $1,035,000. If that property is not
sold prior to the end of the tenth year of the lease, the partnership will pay
to the Company the greater of one-half of the appreciated value of the property
over $1,035,000, or $500,000. The property subject to the Duncan Lease was
capitalized in 1991 at the partnership's cost of $900,000, and the Duncan Lease
obligation was recorded in the consolidated financial statements of the Company.
See, "Annual Report."
On September 11, 1997, the Company purchased for $150,000, a parcel of
property adjoining the property subject to the Duncan Lease. The parcel was
purchased to provide space for additional parking facilities for the Company's
use of the adjoining property under the Duncan Lease. A portion of the parcel,
valued at $87,900, was simultaneously deeded to Dani Bowman in order to
accommodate the platting requirements of the Municipality of Anchorage necessary
to allow use of the parcel for parking facilities. In June 1999, the Company
agreed, in exchange for a payment of $135,000, to extend the lease term for an
additional five-year term expiring September 30, 2011 at a rental rate of
$20,000 per month and to incorporate the adjoining property into the lease
agreement.
In January 2001 the Company entered into an aircraft operating lease
agreement with a company owned by Mr. Duncan. The lease agreement is
month-to-month, may be terminated at any time upon 120 days written notice and
provides for a monthly lease rate at $40,000. Upon executing the lease
agreement, the lessor was granted an option to purchase 250,000 shares of
Company Class A common stock at $6.50 per
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share. At January 22, 2001, a portion of the option became exercisable for
83,333 shares. The remaining portion of the option for 166,667 shares became
exercisable at a rate of approximately 11,000 shares per month, beginning
February 22, 2001. The Company paid a deposit of $1.5 million to the lessor in
connection with the lease agreement. The deposit will be repaid to the Company
upon the earlier of 36 months from the initial date of the lease agreement, 6
months after the lease terminates, or 9 months after the date of a termination
notice as provided in the lease agreement.
Hughes and Behnke Stock Sales
The Company has purchased shares of Class A common stock from Mr.
Hughes for the purpose of funding his deferred compensation account under the
Hughes Agreement. Similarly, the Company has purchased shares of Class A common
stock from Mr. Behnke for the purpose of funding his deferred compensation
account under the Behnke Agreement. These transactions are described further
elsewhere in this Proxy Statement. See, "Management of Company: Executive
Compensation" and "-- Employment and Deferred Compensation Agreements."
Indebtedness of Management
A significant portion of the compensation paid to executive officers of
the Company is in the form of stock options. Because insider sales of capital
stock of the Company upon exercise of such options may have a negative impact on
the price of the Company's common stock, the Board has encouraged executive
officers of the Company not to exercise stock options and sell the underlying
stock to meet personal financial requirements. The Company has instead extended
loans to such executive officers secured by their shares or options. As of the
Record Date, total indebtedness of management was $5,359,202 (including accrued
interest of $787,556), $1,309,982 in principal amount of which was secured by
shares or options, $519,058 of which was otherwise secured by collateral of the
borrowers, and $2,742,606 of which was unsecured.
As of the Record Date, Mr. Duncan was indebted to the Company in the
aggregate principal amount of $1,112,500 plus accrued interest of $240,162
("Outstanding Duncan Loans"). The Outstanding Duncan Loans were made to Mr.
Duncan for his personal use and to exercise stock option agreements. They
consist of a loan of $150,000 made in December 1996, an additional loan of
$50,000 made in January 1997, an additional loan of $150,000 made in December
1997, an additional loan of $600,000 made in October 1998, and $162,500 in
November 1999. These loans accrue interest at the Company's variable rate under
the Company's senior credit facility, are unsecured and become due and payable,
together with accrued interest through November 1, 2002.
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The largest aggregate principal amount of indebtedness owed by Mr.
Duncan to the Company at any time since January 1, 2000 was $1,112,500, all of
which remained outstanding as of the Record Date.
In addition to the previously described indebtedness of Mr. Duncan,
during 2000 the Company made payments to others on behalf of Mr. Duncan in the
amount of $24,497. The amount of these payments by the Company during 2000 and
through March 31, 2001 came to $26,285. The payments bear no interest, and the
Company expects to be reimbursed by Mr. Duncan for them.
The Company loaned $45,000 to Mr. Hughes in December 1995 for his
personal requirements. The principal under the promissory note bears interest at
the Company's variable rate under its senior credit facility and is unsecured.
The principal is due, together with accrued interest, on June 30, 2003. In
August 1996 and April 1999, Mr. Hughes received advances of $25,000 and $20,000,
respectively, from the Company which bear interest at the Company's variable
rate under its senior credit facility. This indebtedness is unsecured. The
$25,000 advance is to be repaid by Mr. Hughes on June 30, 2003. The $20,000
advance was repaid in June 1999. On December 3, 1999, the Company loaned Mr.
Hughes an additional $882,500 to exercise stock options. The loan is unsecured,
bears interest at the Company's variable rate under its senior credit facility
and is due on December 3, 2002. On July 28, 2000, the Company loaned Mr. Hughes
an additional $677,606 to exercise Company stock options. The loan is unsecured
with interest at the Company's variable rate under its senior credit facility
and is due on June 30, 2003. As of the Record Date, the accrued interest under
these advances and loans was $157,131.
In addition to the previously described indebtedness of Mr. Hughes,
during 2000 the Company made payments to others on behalf of Mr. Hughes in the
amount of $21,838. The amount of these payments by the Company during 2000 and
through March 31, 2001 came to $23,936. The payments bear no interest, and the
Company expects to be reimbursed by Mr. Hughes for them.
As of the Record Date, Messrs. Behnke and Dowling were indebted to the
Company in the respective principal amounts of $459,002 and $1,000,981 plus
accrued interest of $81,318 and $246,238, respectively. As of the Record Date,
Ms. Tindall had no principal balance in indebtedness to the Company but had
accrued interest owed in the amount of $1,419.
The $459,002 owed by Mr. Behnke, is secured by an option to purchase
100,000 shares of Company Class A common stock ("Behnke Collateral"), all of
which is due and payable, together with accrued interest through November 1,
2004 and consists of the following:
Proxy Statement
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- $9,002 (remaining balance on a $48,000 loan entered into in April
1993) borrowed for his personal requirements, which amount bears
interest at 9% per annum
- $50,000 borrowed in September 1995 for his personal requirements,
which amount bears interest at the Company's variable rate under
its senior credit facility
- $50,000 borrowed in January 1997 for his personal requirements,
which amount bears interest at the Company's variable rate under
the Company's senior credit facility
- $50,000 borrowed in June 1999 for this personal requirements,
which amount bears interest at the Company's variable rate under
its senior credit facility
- $50,000 borrowed in September 1999 for his personal requirements,
which amount bears interest at the Company's variable rate under
its senior credit facility
- $250,000 borrowed in November 1999 for his personal requirements,
which amount bears interest at the Company's variable rate under
its senior credit facility
Should the Company elect to terminate Mr. Behnke's employment, other than for
cause prior to November 1, 2004, the Company will forgive any remaining balance
of principal and interest associated with the September and November 1999
borrowings.
Of the $1,000,981 owed by Mr. Dowling, $850,981 is secured by 160,297
shares of Class A common stock and 74,028 shares of Class B common stock. This
indebtedness consists of $224,359 borrowed in August 1994 and $86,000 borrowed
in April 1995, each to pay income taxes due upon exercise of stock options, an
additional $20,000 borrowed in June 1997, and an additional $5,500 borrowed in
June 1998, all for his personal requirements, and an additional $515,122
borrowed on January 7, 2000 to exercise stock options. On May 17, 2000, the
Company advanced an additional $150,000 to Mr. Dowling for his personal
requirements. The loan is secured by a second deed of trust on real property.
Mr. Dowling's loans are payable in full through August 26, 2004 and bear
interest at the Company's variable rate under its senior credit facility.
The Company loaned Ms. Tindall $70,000 in January 1996 and an
additional $50,000 in May 1998, both for her personal requirements, which
amounts accrued interest at the rate of 6.54% per annum, were secured by options
to purchase 150,000 shares of Class A common stock and were due and payable,
together with accrued interest, on January 1, 2001. So long as Ms. Tindall
remains in the employ of the
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Company, the accrued interest payment will be waived at the beginning of each
year. Interest forgiven for the year ended December 31, 2000 was $7,848.
Interest accrued as of the Record Date totaled $1,419. The notes were repaid on
February 8, 2001.
The largest aggregate principal amount of indebtedness owed to the
Company by each of Mr. Behnke, Mr. Dowling and Ms. Tindall at any time since
January 1, 2000 and through the Record Date was, as of the Record Date,
$459,002, $1,000,981, and $120,000, respectively.
The Company loaned $185,000 to Mr. Lowber during April 1997 to purchase
real property. The promissory note is secured by the cash surrender value of a
life insurance policy, bears interest at 6.49% and will be due and payable,
together with accrued interest, in three equal annual installments beginning
June 30, 2002. So long as Mr. Lowber remains in the employ of the Company, the
accrued interest will be waived at the beginning of each year. Interest to be
forgiven for the year ended December 31, 2000 was $12,007.
In July 1998, September 1998, and February 1999, the Company loaned Mr.
Lowber, $46,819, $33,935, and $103,303, respectively. The proceeds of the loans
were used to exercise rights under a stock option agreement and pay income taxes
resulting from that exercise. These notes are secured by the cash surrender
value of a life insurance policy, bear interest at the Company's variable rate
under its senior credit facility and are due on June 30, 2003. Interest accrued
as of the Record Date totaled $33,954.
Registration Rights Agreements
The Company is a party to registration rights agreements ("Registration
Rights Agreements") with WorldCom regarding Class A common stock, the holders of
Company Series B preferred stock (Toronto Dominion Investments, Inc. and Prime
VIII, L.P.) and certain other persons. Since January 1, 2000 and up through the
Record Date, the Company believed the only party to those agreements who owned
of record or beneficially more than five percent of any class of the Company's
common stock was WorldCom (Class A common stock), and Toronto Dominion
Investments, Inc. and Prime VIII, L.P. (Series B preferred stock convertible to
Class A common stock). None of these persons, other than those identified
elsewhere in this Proxy Statement, were directors, officers, nominees for
election as directors, owners of 5% or more of the outstanding stock of the
Company, or members of the immediate family of such directors, officers, or
nominees of the Company. All of the WorldCom shareholdings of the Company and
all of the shareholdings of Toronto Dominion Investments, Inc. and Prime VIII,
L.P. are subject to corresponding Registration Rights Agreements with the
Company. See, "Management of Company: Directors and Executive Officers" and
"Ownership of Company."
Proxy Statement
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The terms of the Registration Rights Agreements vary, although they
generally share several common terms. The basic terms are as follows.
If the Company proposes to register any of its securities under the
Securities Act of 1933, as amended ("Securities Act") for its own account or for
the account of other shareholders, the Company must notify all of the holders
under the Registration Rights Agreements of the Company's intent to register
such common stock. In addition, the Company must allow the holders an
opportunity to include their shares ("Registerable Shares") in that
registration.
Each holder also has the right, under certain circumstances, to require
the Company to register all or any portion of such holder's Registerable Shares
under the Securities Act. The Registration Rights Agreements are subject to
certain limitations and restrictions including, in cases other than the Series B
preferred stock, the right of the Company to limit the number of Registerable
Shares included in the registration. Generally, the Company is required to pay
all registration expenses in connection with each registration of Registerable
Shares pursuant to the Registration Rights Agreements.
The Registration Rights Agreement between the Company and WorldCom,
dated March 31, 1993, specifically requires the Company to effect no more than
two registrations at the request of WorldCom. However, each registration request
by WorldCom must include Registerable Shares having an aggregate market value of
more than $500,000. WorldCom executed a second Registration Rights Agreement
with the Company dated October 31, 1996, pursuant to which the Company is
required to effect no more than two registrations at the request of WorldCom,
with each request to cover Registerable Shares having an aggregate market value
of at least $1.5 million.
The Registration Rights Agreement between the Company and the holders
of the Series B preferred stock pertains to Class A common stock which is issued
by the Company upon the holders' exercise of rights to convert the Series B
preferred stock. The agreement specifically requires the Company to effect no
more than two registrations at the request of holders of at least 15% of the
registerable securities.
OWNERSHIP OF COMPANY
Principal Shareholders
The following table sets forth, as of the Record Date, certain
information regarding the beneficial ownership of Company Class A common stock
and Class B common stock and Company Series B preferred stock by each of the
following:
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- Each person known by the Company to own beneficially 5% or more of
the outstanding shares of Class A common stock or Class B common
stock, or Series B preferred stock
- Each director of the Company
- Each of the Named Executive Officers
- All current executive officers and directors of the Company as a
group
All information with respect to beneficial ownership has been furnished to the
Company by the respective shareholders of the Company.
Amount and
Nature of % Combined
Beneficial % of Total Shares Voting
Name and Address of Title of Ownership(2) Outstanding Power
Beneficial Owner(1) Class(2) (#) % of Class(2) (Class A & B)(2) (Class A & B)(2)
------------------- -------- ------------ ------------- ----------------- ----------------
I II I II
--- ---- --- ----
Parties to Voting
Agreement:
WorldCom(3) Class A 8,251,509 16.8 18.0 16.8 23.9 23.0
515 East Amite Street Class B 1,275,791 32.7
Jackson, MS 39201-2702 Series B --- ---
Ronald A. Duncan(3) Class A 1,156,554(4) 2.4 3.1 2.9 6.6 6.3
Class B 460,021(4) 11.8
Series B --- ---
Robert M. Walp(3) Class A 365,312(5) * 1.3 1.2 3.9 3.7
Class B 303,457(5) 7.8
Series B --- ---
Aggregate Shares Class A 9,616,385(6) 19.6(6) 22.0(6) 20.6(6) 34.1(6) 32.8(6)
Subject to Voting Agreement Class B 2,030,591(6) 52.1(6)
Series B --- ---
GCI Qualified Employee Stock Class A 4,296,693 8.8 8.4 7.8 6.4 6.1
Stock Purchase Plan Class B 130,397 3.3
2550 Denali St., Ste. 1000 Series B --- ---
Anchorage, AK 99503
Kim Magness Class A 258,992(7),(8) * 2.1 2.0 9.9 9.5
c/o Raymond L. Sutton, Jr. Class B 844,848(7),(8) 21.7
303 East 17th Ave., Ste. 1100 Series B --- ---
Denver, CO 80203-1264
Proxy Statement
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Amount and
Nature of % Combined
Beneficial % of Total Shares Voting
Name and Address of Title of Ownership(2) Outstanding Power
Beneficial Owner(1) Class(2) (#) % of Class(2) (Class A & B)(2) (Class A & B)(2)
------------------- -------- ------------ ------------- ----------------- ----------------
I II I II
--- ---- --- ----
Gary Magness Class A 264,317(7),(8) * 2.1 2.0 9.9 9.5
c/o Raymond L. Sutton, Jr. Class B 843,448(7),(8) 21.7
303 East 17th Ave., Ste. 1100 Series B --- ---
Denver, CO 80203-1264
Dimensional Fund Advisors, Class A 3,732,100 7.6 7.0 6.6 4.3 4.1
Inc. Class B --- ---
1299 Ocean Ave., 11th Floor Series B --- ---
Santa Monica, CA 90401
Merrill Lynch Asset Class A 2,981,690 6.1 5.6 5.3 3.4 3.3
Management Group Class B --- ---
World Financial Center, Series B --- ---
North Tower
250 Vesey Street
New York, New York 10381
Prime VIII, L.P. Class A -0-(9) --- --- 1.6 --- 1.0
3000 One American Center Class B --- ---
600 Congress Avenue Series B 5,000 25
Austin, Texas 78701
Toronto Dominion Class A 392,582(9) * --- 5.5 --- 3.4
Investments, Inc. Class B --- ---
31 West 52nd Street Series B 15,000 75
New York, NY 10019-6101
William C. Behnke Class A 207,054(10) * * * * *
Class B --- ---
Series B --- ---
Ronald R. Beaumont Class A --- --- --- --- --- ---
Class B --- ---
Series B --- ---
Stephen M. Brett Class A 25,000(11) * * * * *
Class B --- ---
Series B --- ---
Donne F. Fisher Class A 362,335(11),(12) * 1.5 1.4 5.4 5.2
Class B 437,688(11),(12) 11.2
Series B --- ---
Proxy Statement
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Amount and
Nature of % Combined
Beneficial % of Total Shares Voting
Name and Address of Title of Ownership(2) Outstanding Power
Beneficial Owner(1) Class(2) (#) % of Class(2) (Class A & B)(2) (Class A & B)(2)
------------------- -------- ------------ ------------- ----------------- ----------------
I II I II
--- ---- --- ----
William P. Glasgow Class A 21,204(13) * * * * *
Class B --- ---
Series B --- ---
G. Wilson Hughes Class A 692,291(14) 1.4 1.3 1.2 * *
Class B 2,782(14) *
Series B --- ---
Paul S. Lattanzio Class A --- --- --- --- --- ---
Class B --- ---
Series B --- ---
John M. Lowber Class A 517,981(15) 1.1 * * * *
Class B 6,304(15) *
Series B --- ---
Stephen R. Mooney Class A --- --- --- --- --- ---
Class B --- ---
Series B --- ---
Carter F. Page Class A 86,499(11),(16) * * * 2.2 2.1
Class B 186,923 4.8
Series B --- ---
James M. Schneider Class A 55,000(11) * * * * *
Class B --- ---
Series B --- ---
Dana L. Tindall Class A 196,838(17) * * * * *
Class B 3,845(17) *
Series B --- ---
All Directors and Executive Class A 4,082,431(18) 8.1 10.3 9.7 21.5 20.7
Officers As a Group Class B 1,501,993(18) 38.5
(15 Persons) Series B 20,000(18) 100
- --------------------------------
* Represents beneficial ownership of less than 1% of the corresponding
class or series stock.
1 Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act. Shares of stock of the Company that a person has the right
to acquire within 60 days of the Record Date are deemed to be
beneficially owned by such person and are included in the computation of
the ownership and voting percentages only of such person. Each person has
sole voting and investment power with respect to the shares indicated,
except as otherwise stated in the footnotes to the table.
2 "Title of Class" includes Company Class A common stock, Class B common
stock and Series B preferred stock. "Amount and Nature of Beneficial
Ownership" and "% of Class" are given for each class or series of stock.
"% of Total Shares
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Outstanding" and "Combined Voting Power" are given (a) under column I as
excluding Series B preferred stock outstanding and (b) under column II as
including Series B preferred stock outstanding and on an as-converted to
Class A common stock basis at the conversion price set in the Preferred
Stock Sale, i.e., $5.55 per share. Using this ratio and as of the Record
Date, the 20,000 shares of Series B preferred stock (excluding accrued
dividends payable in cash or in Class A common stock to that date) would
convert to 3,603,603 shares. Using this ratio, the 5,000 shares of Series
B preferred stock held by Prime VIII, L.P. are equivalent to 900,901
shares of Class A common stock, and the 15,000 shares of Series B
preferred stock held by Toronto Dominion Investments, Inc. are equivalent
to 2,702,702 shares of Class A common stock.
3 Each of these persons is a party to Voting Agreement and can be deemed a
beneficial owner of all of the 9,616,385 shares of Class A common stock
and 2,030,591shares of Class B common stock that are subject to the
Voting Agreement. See, within this section, "--Changes in Control."
WorldCom reported shared voting and investment power with respect to
shares held by it that are subject to the Voting Agreement. Messrs.
Duncan and Walp reported shared voting power with respect to shares held
by each of them that were subject to the Voting Agreement .
4 Includes 117,315 shares of Class A common stock and 6,270 shares of Class
B common stock allocated to Mr. Duncan under the Stock Purchase Plan.
Does not include 195,331 shares of Class A common stock held by the
Company in treasury pursuant to deferred compensation agreements with the
Company. See, "Management of Company: Executive Compensation." Does not
include 18,560 shares of Class A common stock or 8,242 shares of Class B
common stock held by the Amanda Miller Trust, with respect to which Mr.
Duncan has no voting or investment power. Does not include 5,760 shares
of Class A common stock or 27,020 shares of Class B common stock held by
Dani Bowman, Mr. Duncan's wife, of which Mr. Duncan disclaims beneficial
ownership. Includes 127,777 shares of Class A common stock which a
company owned by Mr. Duncan has the right to acquire within 60 days of
the Record Date by the exercise of stock options.
5 Includes 38,229 shares of Class A common stock and 2,408 shares of Class
B common stock allocated to Mr. Walp under the Stock Purchase Plan.
Includes 1,446 shares of Class A common stock which Mr. Walp has the
right to acquire within 60 days of the Record Date by the exercise of
vested stock options.
6 Does not include shares allocated to Messrs. Duncan and Walp under the
Stock Purchase Plan.
7 Includes 76,688 shares of Class A and 620,608 shares of Class B common
stock owned by Magness FT Investment Company, LLC of which Mr. Magness
owns a 50% interest.
8 Includes 177,324 shares of Class A and 198,440 shares of Class B common
stock owned by Magness Securities, LLC of which Mr. Magness owns a 50%
interest.
9 Excludes accrued dividends.
10 Includes 206,949 shares which Mr. Behnke has the right to acquire within
60 days of the Record Date by the exercise of vested stock options. Does
not include 9,055 shares of Company Class A common stock held in treasury
by the Company pursuant to the Behnke deferred compensation agreement.
11 Includes 25,000 shares of Company Class A common stock each to Messrs.
Brett, Fisher, Page, and Schneider which they each respectively have the
right to acquire within 60 days of the Record Date by the exercise of
respective stock options.
12 Includes 300,200 shares of Class A and 225,000 shares of Class B common
stock owned by Fisher Capital Partners, Ltd., the corporate general
partner of which is controlled by Mr. Fisher.
13 Does not include shareholdings of Prime II Management, Inc. and its
affiliate Prime II Investments, L.P., whose shareholdings included
278,031 shares and 425,000 shares of Company Class A common stock,
respectively, does not include 5,000 shares of Company Series B preferred
stock held by Prime VIII, L.P., and does not include 158 shares
beneficially owned by minor children of Mr. Glasgow. Mr. Glasgow claims
not to have or share investment control of the shares held by these
entities, and he disclaims any beneficial ownership of the shares held by
these entities or held by his children.
14 Includes 130,000 shares of Class A common stock which Mr. Hughes has the
right to acquire within 60 days of the Record Date by the exercise of
vested stock options. Includes 48,291 shares of Class A common stock and
2,782 shares of Class B common stock allocated to Mr. Hughes under the
Stock Purchase Plan. Does not include 47,437 shares of Class A common
stock held in treasury by the Company pursuant to the Hughes Agreement.
See, "Management of Company: Employment and Deferred Compensation
Agreements."
15 Includes 370,282 shares which Mr. Lowber has the right to acquire within
60 days of the Record Date by the exercise of vested stock options.
Includes 40,041 shares of Class A common stock and 6,034 shares of Class
B common stock allocated to Mr. Lowber under the Stock Purchase Plan.
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16 Does not include 10,350 shares of Class A and 21,825 shares of Class B
common stock held in trust for the benefit of Mr. Page's grandchildren of
which Mr. Page disclaims beneficial ownership. The trustee of the trust
is Keith Page, Mr. Page's son.
17 Includes 140,524 shares which Ms. Tindall has the right to acquire within
60 days of the Record Date by the exercise of vested stock options.
Includes 56,055 shares of Class A common stock and 3,845 shares of Class
B common stock allocated to Ms. Tindall under the Stock Purchase Plan.
18 Includes 992,817 shares of Class A common stock which such persons have
the right to acquire within 60 days of the Record Date through the
exercise of vested stock options. Includes 326,758 shares of Class A
common stock and 24,498 shares of Class B common stock allocated to such
persons under the Stock Purchase Plan. Does not include ownership of
parties to the Voting Agreement other than Messrs. Duncan and Walp.
Excludes, as of the Record Date, all of the outstanding Series B
Preferred Stock (on an as-converted basis to Company Class A common
stock) owned by an affiliate of Mr. Lattanzio and the other holder (Prime
VIII, L.P.) of the Company's Series B preferred stock who recommended Mr.
Lattanzio to be on the Board under the terms of that offering.
- --------------------------------
Changes in Control
Series B Preferred Stock. With the Company's sale of the Series B
preferred stock in 1999 as described elsewhere in this Proxy Statement, the
purchasers of those shares now have the right to vote on all matters presented
for vote to the holders of Company Class A common stock on an as-converted
basis. In addition, the holders of the outstanding Series B preferred stock have
limited voting rights as a class or otherwise to require the Company to request
their consent on specific actions which might be taken including amending the
Articles, restructuring the Company, paying dividends, and redeeming stock.
Under the present Articles, the Class A common stock and Class B common stock
vote for directors and on such specific actions, as one class, with limited
exceptions as set forth in the Alaska Corporations Code. These exceptions
include action to amend the articles of incorporation of a corporation in
certain specific areas including changes in the designations, preferences,
limitations, or relative rights of shares of the class.
Holders of outstanding Series B preferred stock have the right to convert
their shares into Class A common stock of the Company at a specified conversion
price, as adjusted. As of the Record Date the conversion price was $5.55 per
share. Using that conversion price and assuming the conversion of all of the
outstanding Series B preferred stock as of the Record Date, the stock could be
converted into 3,603,603 shares of Class A common stock of the Company
(excluding dividends accrued through that date) which would constitute
approximately 6.8% of its outstanding Class A common stock.
As a part of the terms of the issuance of the Series B preferred stock,
the Board increased its size by one director to ten directors and resolved to
appoint an individual recommended by the holders of that preferred stock. Under
the terms of that issuance of preferred stock, the Board must take the
recommendation of those holders in filling any subsequent vacancy in that
position. Should the holders of common stock of the Company in subsequent
shareholder meetings not elect that individual or another individual proposed by
the holders of the Series B preferred stock, those holders would
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Page 44
have the right to appoint an observer at the meetings of the Board and other
observer rights relating to the Board as described elsewhere in the Proxy
Statement.
The terms of the issuance of the Series B preferred stock further provide
that the rights of holders of that preferred stock relating to the Board seat
and observer are to remain effective so long as any of that preferred stock
remains outstanding. See, "Certain Transactions: Series B Preferred Stock."
Voting Agreement. As of the Record Date, the Voting Agreement provided, in
part, that the voting stock of the parties to it will each be voted at
shareholder meetings as a block in favor of two nominees proposed by WorldCom
and one nominee each for Messrs. Duncan and Walp. See, "Management of Company:
Voting Agreement."
Pledged Assets and Securities. The obligations of the Company under its
credit facilities are secured by substantially all of the assets of the Company
and its direct and indirect subsidiaries. Upon a default by the Company under
such agreements, the Company's lenders could gain control of the assets of the
Company, including the capital stock of the Company's subsidiaries. The Company
has been at all times since January 1, 2000 and up through the Record Date, in
compliance with all material terms of these credit facilities. These obligations
and pledges are further described in the Annual Report. See, "Annual Report."
Senior Notes. On August 1, 1997, GCI, Inc., an Alaska corporation and
wholly-owned subsidiary of the Company, publicly sold $180 million of unsecured
9.75% senior notes ("Senior Notes"). The Senior Notes are due in 2007. GCI, Inc.
was formed specifically to issue the Senior Notes. The Senior Notes are subject
to the terms of an indenture ("Indenture") entered into by GCI, Inc. Upon the
occurrence of a change of control, as defined in the Indenture, GCI, Inc. is
required to offer to purchase the Senior Notes at a price equal to 101% of their
principal amount, plus accrued and unpaid interest.
The Indenture provides that the Senior Notes are redeemable at the option
of GCI, Inc. at specified redemption prices commencing in 2002. In addition,
prior to August 1, 2000, GCI, Inc. is permitted to redeem up to 33-1/3% of the
Senior Notes out of the net cash proceeds of one or more public equity
offerings. The terms of the Senior Notes contain limitations on the ability of
GCI, Inc. and its restricted subsidiaries to incur additional indebtedness,
limitations on investments, payment of dividends and other restricted payments
and limitations on liens, asset sales, mergers, transactions with affiliates and
operation of unrestricted subsidiaries. The Indenture also limits the ability of
GCI, Inc. and its restricted subsidiaries to enter into or allow to exist
specified restrictions on the ability of GCI, Inc. to receive distributions from
restricted subsidiaries.
For purposes of the Indenture and the Senior Notes, the restricted
subsidiaries consist of all direct or indirect subsidiaries of the Company, with
the exception of the
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unrestricted subsidiaries. As of the Record Date, the unrestricted subsidiaries
were entities formed by the Company in conjunction with its Fiber Facility as
described in the Company's Annual Report. These unrestricted subsidiaries
consisted of GCI Transport Co., Inc., GCI Satellite Co., Inc., GCI Fiber Co.,
Inc., Fiber Hold Co., Inc. and Alaska United Fiber System Partnership. See,
"Annual Report."
Both the Company and GCI, Inc. have, since January 1, 2000 and up through
the Record Date, been in compliance with all material terms of the Indenture
including making timely payments on the obligations of GCI, Inc.
LITIGATION AND REGULATORY MATTERS
The Company was, as of the Record Date, involved in several administrative
and civil action matters primarily related to its telecommunications markets in
Alaska and the remaining 49 states and other regulatory matters. These actions
are discussed in the Company's Annual Report. See, "Annual Report."
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Overview
The Company Board retained KPMG LLP as the independent certified public
accountants for the Company during the fiscal year ended December 31, 2000. It
is anticipated that the Board will appoint KPMG LLP as the Company's independent
certified public accountants for the fiscal year ending December 31, 2001. A
representative of KPMG LLP is expected to be present at the Annual Meeting. The
representative will have the opportunity to make a statement, if so desired, and
will be able to respond to appropriate questions.
Audit Fees
The aggregate fees billed by KPMG LLP for professional services rendered
for the audit of the Company's annual financial statements for the year ended
December 31, 2000 and the review of the financial statements included in the
Company's Forms 10-Q for that year was $136,089.
Financial Information System Design and Implementation Fees
KPMG LLP did not for the year ended December 31, 2000 provide professional
services to the Company relating to operating, or supervising the operation of,
the Company's information systems or managing the Company's local area network
or
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otherwise providing services or information that was significant to the
Company's financial statements for that year.
All Other Fees
The aggregate fees billed by KPMG LLP for services rendered for the year
ended December 31, 2000, other than services previously described in this
section, was $37,857.
ANNUAL REPORT
The Annual Report to shareholders of the Company in the form of Form 10-K
for the year ended December 31, 2000 is enclosed with this Proxy Statement.
Exhibits to that Form 10-K, as amended, are not enclosed. However, that form
includes a list briefly describing all of those exhibits. In addition, the
Company will furnish a copy of an exhibit to a Shareholder upon written request
to the Company and payment of a fee to cover the Company's expenses in
furnishing that exhibit. Request for exhibits are to be addressed to the Company
as follows: General Communication, Inc., 2550 Denali Street, Suite 1000,
Anchorage, Alaska 99503, ATTN: Corporate Secretary.
FUTURE SHAREHOLDER PROPOSALS
Certain matters are required to be considered at an annual meeting of
shareholders of the Company, e.g., the election of directors. From time to time,
the board of directors of the Company may wish to submit to those shareholders
other matters for consideration. Additionally, those shareholders may be asked
to consider and take action on proposals submitted by shareholders who are not
members of management that cover matters deemed proper under regulations of the
Securities and Exchange Commission and applicable state laws.
Should a shareholder wish to have a proposal included in management's
proxy statement and form proxy for the 2002 annual meeting of shareholders, the
proposal must be received by the Company at 2550 Denali Street, Suite 1000,
Anchorage, Alaska 99503, ATTN: Corporate Secretary, not earlier than December 5,
2001 and not later than January 4, 2002.
Under the Bylaws, any shareholder wishing to make a nomination for
director or wishing to introduce any business at the 2002 annual meeting must
give the Company advance notice as described in the Bylaws. To be timely, the
Company must receive the nomination or shareholder proposal for the 2002 meeting
at the Company`s offices as previously identified not earlier than December 5,
2001 and not later than January 4, 2002. Nominations for director must describe
various matters as specified in the Bylaws, including the name and address of
each nominee, his or her occupation and number of shares held, and certain other
information. The nomination must also be
Proxy Statement
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accompanied by written consent to being named in the proxy statement as a
nominee and to serving as a director if elected.
In addition to the timely submission of notice previously described, a
shareholder proposing to bring other business before the 2002 annual meeting
must include in that notice a description of the proposed business (which must
otherwise be a proper subject for action by the shareholders), the reasons for
that other business and other matters specified in the Bylaws. The Board or the
presiding officer at the meeting may reject any such proposals that are not made
in accordance with these procedures or that are not a proper subject for
shareholder action in accordance with applicable law. The Articles and Bylaws
also set forth specific requirements and limitations applicable to nominations
and proposals at special meetings of shareholders.
A shareholder making a nomination must be a person who was a shareholder
of record both at the time of giving of notice and at the time of the meeting
and who is entitled to vote at the meeting. A shareholder who wishes to present
a proposal of business at the meeting must, in addition to the previous
requirements, be a person who has continuously held at least $2,000 in market
value, or at least 1%, of the Company's securities entitled to be voted on the
matter at the meeting for at least one year by the date of submission of the
proposal to the Company for inclusion on the agenda of the meeting. Any such
notice must be given to the Secretary of the Company at the address previously
identified. Any shareholder desiring a copy of the Articles or Bylaws will be
furnished a copy without charge upon written request to the Secretary.
For any shareholder proposal that is not submitted for inclusion in the
management proxy statement for that 2002 annual meeting but is instead sought to
be presented directly at that meeting, the SEC rules permit management to vote
proxies in its discretion if the Company (i) receives notice of the proposal
during the time interval December 5, 2001 through January 4, 2002 and advises
shareholders in the 2002 proxy statement about the nature of the matter and how
management intends to vote on that matter, or (ii) does not receive notice of
the proposal during the time interval December 5, 2001 through January 4, 2002.
Management intends to exercise this authority, if necessary, in conjunction with
the 2002 meeting.
Management carefully considers all proposals and suggestions from
shareholders. When adoption of a suggestion or proposal is clearly in the best
interest of the Company and the shareholders generally and does not require
shareholder approval, it is usually adopted by the Board, if appropriate, rather
than being included in management's proxy statement.
Proxy Statement
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APPENDIX I
GENERAL COMMUNICATION, INC.
AUDIT COMMITTEE CHARTER
Role
The role of the Audit Committee is to act on behalf of the board of
directors of General Communication, Inc. ("Company") and to oversee all material
aspects of the Company's report, control, and audit functions, except those
specifically related to the responsibilities of another standing committee of
the board. The committee's role includes a particular focus on the qualitative
aspects of financial reporting to shareholders and on Company processes for the
management of business and financial risks and for compliance with significant
applicable legal, ethical, and regulatory requirements.
The role of the Audit Committee includes coordination with other board
committees and maintenance of strong, positive working relationships with
management, external auditors, counsel, and other committee advisors.
Membership
The Audit Committee shall consist of at least three and no more than
six independent, nonexecutive board members as defined under the Operating
Principles of this charter.
Audit Committee members shall have the following knowledge and
abilities:
- Knowledge of the primary industries in which the Company operates
- Ability to read and understand fundamental financial statements,
including a company's balance sheet, income statement, statement
of cash flow, and key performance indicators
- Ability to understand key business and financial risks and related
controls and control processes
The committee shall have access to its own counsel and other advisors upon
request to the board.
One member of the Audit Committee, preferably the chair, must be
literate in business and financial reporting and control, including knowledge of
regulatory requirements, and must have past employment experience in finance or
accounting or
General Communication, Inc. Audit Committee Charter Page 1
other comparable experience or background. Committee appointments shall be
approved annually by the full board. The committee chair shall be selected by
the committee members or, if the board directs, by the board.
Operating Principles
The Audit Committee shall fulfill its responsibilities within the
context of the following overriding principles:
- Communications - The chair and others on the committee shall, to
the extent appropriate, have contact throughout the year with
senior management, other committee chairs and other key committee
advisors, external auditors, etc., as applicable, to strengthen
the committee's knowledge of relevant current and prospective
business issues.
- Committee Education and Orientation - The committee, with
management, shall develop and participate in a process for review
of important financial and operating topics that present potential
significant risk to the Company. Additionally, individual
committee members are encouraged to participate in relevant and
appropriate self-study education to assure understanding of the
business and environment in which the Company operates.
- Annual Plan - The committee, with input from management and other
key committee advisors, shall develop an annual plan responsive to
the "primary committee responsibilities" detailed in this charter.
The annual plan shall be reviewed and approved by the full board.
- Meeting Agenda - Committee meeting agendas shall be the
responsibility of the committee chair with input from committee
members. It is expected that the chair would also ask for
management and key committee advisors, and perhaps others, to
participate in this process.
- Committee Expectations and Informational Needs - The committee
shall communicate its expectations and the nature, timing, and
extent of its informational needs to management, and external
parties, including external auditors. Written materials, including
key performance indicators and measures related to key business
and financial risks, shall be received from management, auditors,
and others at least one week in advance of meeting dates. Meeting
conduct will assume board members have reviewed written materials
in sufficient depth to participate in dialogue between the
committee and the board.
General Communication, Inc. Audit Committee Charter Page 2
- External Resources - The committee shall be authorized to access
internal and external resources, as the committee requires, to
carry out its responsibilities, subject to prior approval of such
expenditures by the board.
- Committee Meeting Attendees - The committee shall request members
of management, counsel, and external auditors, as applicable, to
participate in committee meetings, as necessary to carry out
committee responsibilities. It shall be understood that external
auditors or counsel, may, at any time, request a meeting with the
committee or its chair, with or without management attendance. In
any case, the committee shall meet separately with external
auditors, at least annually.
- Reporting to the Board of Directors - The committee, through the
committee chair, shall report periodically, as deemed necessary,
but at least annually, to the full board. In addition, summarized
minutes from committee meetings, separately identifying monitoring
activities from approvals, shall be available to each board member
at least one week prior to the subsequent meeting of the board of
directors.
- Committee Self Assessment - The committee shall review, discuss,
and assess its own performance as well as the committee's role and
responsibilities, seeking input from senior management, the full
board, and others. Changes, if any, in the committee's role and
responsibilities shall be recommended to the full board for
approval.
- Independent Directors - The board shall be composed of executive
and nonexecutive members. Independent members, i.e., independent
directors, are nonexecutive members who have no relationship to
the Company or its subsidiaries, directly or indirectly, that may
interfere with the exercise of their independence from management
and the Company. The term "independent director" shall
specifically have the meaning ascribed to it under Nasdaq Stock
Market Rule 4200(a)(15) which reads as follows:
"Independent director" means a person other than an officer or
employee of the company or its subsidiaries or any other
individual having a relationship which, in the opinion of the
company's board of directors, would interfere with the exercise
of independent judgment in carrying out the responsibilities of
a director. The following persons shall not be considered
independent:
(a) a director who is employed by the corporation or any of its
affiliates for the current year or any of the past three years;
General Communication, Inc. Audit Committee Charter Page 3
(b) a director who accepts any compensation from the
corporation or any of its affiliates in excess of $60,000
during the previous fiscal year, other than compensation for
board service, benefits under a tax-qualified retirement plan,
or non-discretionary compensation;
(c) a director who is a member of the immediate family of an
individual who is, or has been in any of the past three years,
employed by the corporation or any of its affiliates as an
executive officer. Immediate family includes a person's spouse,
parents, children, siblings, mother-in-law, father-in-law,
brother-in-law, sister-in-law, son-in-law, daughter-in-law, and
anyone who resides in such person's home;
(d) a director who is a partner in, or a controlling
shareholder or an executive officer of, any for-profit business
organization to which the corporation made, or from which the
corporation received, payments (other than those arising solely
from investments in the corporation's securities) that exceed
5% of the corporation's or business organization's consolidated
gross revenues for that year, or $200,000, whichever is more,
in any of the past three years;
(e) a director who is employed as an executive of another
entity where any of the company's executives serve on that
entity's compensation committee.
Meeting Frequency
The Audit Committee shall meet at least annually. Additional meetings
shall be scheduled as considered necessary by the committee or chair of the
committee.
Reporting to Shareholders
The Audit Committee shall make available to shareholders a summary
report on the scope of its activities. This report may be identical to the
report that appears in the Company's annual report.
General Communication, Inc. Audit Committee Charter Page 4
Relationship with External Auditors
- The external auditors, in their capacity as independent public
accountants, shall be responsible to the board of directors and
the Audit Committee as representatives of the shareholders.
- As the external auditors review financial reports, they will be
reporting to the Audit Committee. They shall report all relevant
issues to the committee responsive to agreed-on committee
expectations. In executing its oversight role, the board or
committee shall review the work of external auditors.
- The Audit Committee shall annually review the performance
(effectiveness, objectivity, and independence) of the external
auditors. The committee shall ensure receipt of a formal written
statement from the external auditors consistent with standards set
by the Independence Standards Board. Additionally, the committee
shall discuss with the auditor relationships or services that may
affect auditor objectivity or independence. If the committee is
not satisfied with the auditors' assurances of independence, it
shall take or recommend to the full board appropriate action to
ensure the independence of the external auditor.
- If the external auditors identify significant issues relative to
the overall board responsibility that have been communicated to
management but, in their judgment, have not been adequately
addressed, they should communicate these issues to the chair of
the Audit Committee.
Primary Responsibilities
Monitor Financial Reporting and Risk Control Related Matters
The Audit Committee shall review and assess the following:
- Risk Management - The Company's business risk management process,
including the adequacy of the Company's overall control
environment and controls in selected areas representing
significant financial and business risk.
- Annual Reports and Other Major Regulatory Filings - All major
financial reports in advance of filing or distribution.
- Internal Controls and Regulatory Compliance - The Company's system
of internal controls for detecting accounting and reporting
financial errors, fraud and defalcations, legal violations and
noncompliance with its Declaration of Principles.
General Communication, Inc. Audit Committee Charter Page 5
- Regulatory Examinations - Inquiries from the Securities and
Exchange Commission and the results of examinations by other
regulatory authorities in terms of important findings,
recommendations, and management's response.
- External Audit Responsibilities - Auditor independence and the
overall scope and focus of the annual or interim audits, including
the scope and level of involvement with unaudited quarterly or
other interim-period information.
- Financial Reporting and Controls - Key financial statement issues
and risks, their impact or potential effect on reported financial
information, the processes used by management to address such
matters, related auditor views, the bases for audit conclusions
and important conclusions on interim and year-end audit work in
advance of the public release of financials.
- Auditor Recommendations - Important external auditor
recommendations on financial reporting, controls, other matters,
and management's response; and the views of management and
auditors on the overall quality of annual and interim financial
reporting.
Other Matters
The Audit Committee should review, assess, and approve the following:
- Changes in important accounting principles and the application of
them in both interim and annual financial reports.
- Significant conflicts of interest and related-party transactions.
- External auditor performance and changes in external audit firm,
subject to ratification by the full board.
- Internal auditor performances and changes in internal audit
leadership or key financial management, if applicable.
APPROVED by the board of directors of General Communication, Inc. this
10th day of May, 2000.
/s/
John M. Lowber,
Secretary
General Communication, Inc. Audit Committee Charter Page 6
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. n/a)
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