[GCI Logo]
LETTER TO SHAREHOLDERS
April 30, 1998
Re: 1998 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 at the Sheraton Anchorage
Hotel at 401 East 6th Avenue, 15th Floor in Anchorage, Alaska at 6:00 p.m.
(Alaska Daylight Time) on Thursday, June 4, 1998. The board has chosen the close
of business on April 6, 1998 as the record date for the determination of
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, Proxy
Statement, and Annual Report to Shareholders in the form of the Form 10-K for
the year ended December 31, 1997 are enclosed covering the formal business to be
conducted at the meeting.
At the meeting, the shareholders will be asked to elect individuals to
fill three 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 sincerely hope you will be able to join us.
Sincerely,
/s/
Ronald A. Duncan
President and Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1998
-------------------------
April 30, 1998
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 ("Board"), the annual meeting ("Annual Meeting") of shareholders of the
Company will be held at Josephine's Restaurant at the Sheraton Anchorage Hotel
at 401 East 6th Avenue, 15th Floor, in Anchorage, Alaska at 6:00 p.m. (Alaska
Daylight Time) on Thursday, June 4, 1998. At the meeting, shareholders will
consider and vote upon the following matters:
(1) Election of three directors, each for three-year terms, as
part of Class III of the ten-member classified Board; and
(2) Transaction of 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 6,
1998, has been fixed as the record date for the Annual Meeting ("Record Date").
Only holders of shares of Class A or Class B common stock of the Company of
record as of the Record 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 enclosd
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.
If you do not expect to attend the Annual Meeting in person, please
sign and date the enclosed Proxy and mail it to the secretary of the Board 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 then 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
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 4, 1998
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated April 30, 1998 and holding Class A common stock or Class B
common stock of General Communication, Inc. ("Company") of record determined as
of April 6, 1998, 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 the annual meeting ("Annual Meeting") of
shareholders, to be held at Josephine's Restaurant at the Sheraton Anchorage
Hotel, at 401 East 6th Avenue, 15th Floor, in Anchorage, Alaska at 6:00 p.m.
(Alaska Daylight Time) on Thursday, June 4, 1998 and any adjournment or
adjournments of the Annual Meeting. The undersigned further directs those
holders of this Proxy to vote at the Annual Meeting, as specified in this Proxy,
all of the shares of common 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 as identified in this Proxy:
( ) FOR all nominees ( ) WITHHOLD AUTHORITY
listed below (except as to vote for all nominees
marked to the contrary) listed below
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.
(2) To transact such other business as may properly come
before the Annual Meeting (including the adoption but
not the ratification of the minutes of the November
25, 1997 annual meeting of shareholders of the
Company) and any adjournment or adjournments of the
Annual Meeting. The Board at present knows of no
other business to be presented by or on behalf of the
Company or the Board at the Annual Meeting.
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 or any adjournments of the Annual
Meeting. The undersigned acknowledges receipt of the Notice of the Annual
Meeting and the Proxy Statement accompanying the Notice.
DATED:
Signature of Shareholder
Print Name:
Signature of Shareholder
Print Name:
Please date this Proxy, sign it above as your appears at the beginning
of 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, 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.
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 4, 1998
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 at the Sheraton
Anchorage Hotel, at 401 East 6th Avenue, 15th Floor, in Anchorage, Alaska at
6:00 p.m. (Alaska Daylight Time) on Thursday, June 4, 1998.
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, 1998. A copy of the Company's
Annual Report, in the form of a Form 10-K, for the year ended December 31, 1997
accompanies this Proxy Statement. See, "Annual Report".
DATED: April 30, 1998.
Page 1
TABLE OF CONTENTS
Page
COMPANY ANNUAL MEETING........................................................ 3
MANAGEMENT OF THE COMPANY..................................................... 7
CERTAIN TRANSACTIONS......................................................... 27
OWNERSHIP OF COMPANY......................................................... 34
LITIGATION AND REGULATORY MATTERS............................................ 40
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS............................. 40
ANNUAL REPORT................................................................ 41
SUBMISSION OF SHAREHOLDER PROPOSALS.......................................... 41
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 Class A and Class B common 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, 1998. A copy of the Company's
Annual Report, in the form of a Form 10-K, for the year ended December 31, 1997,
accompanies this Proxy Statement. See, "Annual Report."
Time and Place. The Annual Meeting will be held at Josephine's
Restaurant at the Sheraton Anchorage Hotel, at 401 East 6th Avenue, 15th Floor,
in Anchorage, Alaska at 6 p.m. (Alaska Daylight Time) on Thursday, June 4, 1998.
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:
- Election of three directors in Class III of the classified
Board for three-year terms; and
- Transaction of such other business as may properly come before
the meeting and any adjournment or adjournments of it.
Outstanding Voting Securities. The holders of common stock of the
Company as of the close of business on April 6, 1998 ("Record Date") will be
entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date
and under the Company's Restated Articles of Incorporation ("Articles"), the
common stock of the Company was divided into two classes:
- 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
On the Record Date, there were 45,108,694 shares of Class A common stock and
4,062,685 shares of Class B common stock outstanding and entitled to be voted at
the Annual Meeting.
Page 3
Voting Rights, Votes Required for Approval. Except as otherwise
provided by applicable law or the Articles, at any meeting of the shareholders,
a simple majority of the issued and outstanding common stock of the Company
entitled to be voted as of the record date for the meeting will constitute a
quorum. As an example, since there were a total of 45,108,694 shares of Class A
and 4,062,685 shares of Class B common stock issued and outstanding and entitled
to be voted as of the Record Date, a quorum would be established by the
presence, in person or by proxy, of at least 20,523,005 shares of Class A common
stock and all 4,062,685 shares of Class B common 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 and Class B common stock were entitled as of the Record Date were
45,108,694 and 40,626,850, respectively.
Adoption of the Annual Meeting agenda item pertaining to the election
of directors requires an affirmative vote of the holders of at least a simple
majority of voting power of the issued and outstanding Class A common stock and
Class B common stock of the Company entitled to be voted as of the Record Date.
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 2,720,532 shares of Company Class A common stock,
constituting approximately 5.8% of the outstanding stock in that class and
1,276,744 shares of Company Class B common stock, constituting approximately
31.4% of the outstanding stock in that class. As of the Record Date, 9,142,387
shares of Company Class A common stock, constituting approximately 20.2% of the
outstanding stock in that class, and 2,030,591 shares of Company Class B common
stock, constituting approximately 50.0% 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 34.3% of the effective voting power of the combined
outstanding Class A and Class B common stock of the Company. When combined, the
voting power held by management of the Company and the parties to the Voting
Agreement constituted approximately 42.2% of the outstanding voting power of
Class A and Class B common stock of the Company as of the Record Date. See,
"Management of the Company: Voting Agreement."
In past annual meetings, the parties to the Voting Agreement have voted
for management's slates 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 the Company: Voting Agreement"; "Ownership of the
Company: Principal Shareholders" and "--Changes in Control-Voting Agreement."
Page 4
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.
All votes cast by holders of common stock of the Company as of the
Record Date, in person or by Proxy completed and executed in accordance with the
instructions on the Proxy, will be counted at the Annual Meeting. A Proxy having
one or more clearly marked abstentions or having no indication of a vote on one
or more of the proposals to be addressed at the Annual Meeting will be honored
as an abstention or non-vote, respectively. However, such a Proxy will be
counted for purposes of establishing a quorum at the Annual Meeting.
A Proxy executed in the form enclosed may be revoked by the person
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. That notice
must be delivered to 2550 Denali Street, Suite 1000, Anchorage, Alaska or at the
Annual Meeting. Thereafter the person 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 person 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 classified into three classes: Class I, Class
II, and Class III, with three, four and three members per class, respectively.
At the Annual Meeting individuals will be elected to positions in Class
III of the Board for three-year terms. The individuals so elected will serve
subject to the
Page 5
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 proxy holders
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 consequence, other nominees are
designated, the proxy holders 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 of the Company a vote "FOR" the slate of three directors for the
positions up for election at the Annual Meeting, i.e., a vote for item number 1
on the Proxy. This slate of directors is for Class III as follows:
- Donne F. Fisher
- William P. Glasgow
- James M. Schneider
Background and other information on each of the nominees is provided elsewhere
in this Proxy Statement. See, "Management of the Company."
Mr. Glasgow is a nominee recommended by the parties to the Voting
Agreement in accordance with the terms of the agreement and at the request of
Prime Management, identified elsewhere in this Proxy Statement. See, "Management
of the Company: Voting Agreement."
Other Business
As part of such Other Business, the shareholders will be asked to
approve the minutes of the past annual meeting of shareholders of the Company
held on November 25, 1997. The Proxy will then also be used in the discretion of
the proxy holder to vote for the adoption of those minutes. 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.
Other than adoption of the minutes of that past annual meeting, the
Board does not intend to bring any other matter before the Annual Meeting and
does not know of any
Page 6
other matter which anyone else 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 THE 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) 66 Chairman and Director
Ronald A. Duncan(1)(3) 45 President, Chief Executive Officer and Director
Robert M. Walp(1)(3)(4) 70 Vice Chairman and Director
John M. Lowber(2) 48 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
G. Wilson Hughes 52 Executive Vice President and General Manager
William C. Behnke 40 Senior Vice President-Marketing and Sales
Richard P. Dowling 54 Senior Vice President-Corporate Development
Dana L. Tindall 36 Senior Vice President-Regulatory Affairs
Donne F. Fisher(1)(2)(3) 59 Director
Jeffrey C. Garvey(1)(3)(4) 49 Director
John W. Gerdelman(1)(3)(4) 45 Director
William P.Glasgow(1)(3)(4) 39 Director
Donald Lynch(1)(3)(4) 49 Director
Larry E. Romrell(1)(3)(4) 58 Director
James M. Schneider(1)(3) 45 Director
- ------------
(1) Member of Audit Committee and Compensation Committee.
(2) Member of Finance Committee.
(3) The present classification of the Board is as follows: (1) Class I --
Messrs. Gerdelman, Page, and Walp, whose present terms expire at the
time of the 1999 annual shareholder meeting; (2) Class
Page 7
II -- Messrs. Duncan, Garvey, Lynch and Romrell, whose present terms
expire at the time of the 2000 annual shareholder meeting; and (3)
Class III -- Messrs. Fisher, Glasgow, and Schneider, whose present
terms expire at the time of the Annual Meeting.
(4) Member of Stock Option Plan Committee.
- ------------
Carter F. Page. Mr. Page has served as Chairman and a director of the
Company since 1980. His term as director expires in 1999. From December 1987 to
December 1989, he served as a consultant to WestMarc Communications, Inc.
("WestMarc") in matters related to the Company. Mr. Page served as President and
director of WestMarc from 1972 to December 1987. Since then and to the present,
he has been managing general partner of Semaphore Partners, a general
partnership and investment vehicle in the communications industry.
Ronald A. Duncan. Mr. Duncan is a co-founder of the Company and has
been a director of the Company since 1979. His term as director expires in 2000.
Mr. Duncan is his own nominee to the Board for the Annual Meeting pursuant to
the Voting Agreement. 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.
Robert M. Walp. Mr. Walp is a co-founder of the Company. He has been a
director of the Company since 1979, has served as Vice Chairman of the Company
since January 1, 1989 and is also an employee of the Company. Mr. Walp is his
own nominee to the Board pursuant to the Voting Agreement. His term as director
expires in 1999. From 1979 through 1988, Mr. Walp served as President and Chief
Executive Officer of the Company.
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. Mr. Lowber 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 Peat Marwick.
G. Wilson Hughes. Mr. Hughes has served as Executive Vice President and
General Manager of the Company since June 1991. Mr. Hughes 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 he 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-Marketing and Sales for the Company since January 1994. Mr. Behnke was
Vice President of the Company and President of GCI Network Systems, Inc., a
former subsidiary of the
Page 8
Company, from February 1992 to January 1994. From June 1989 to February 1992 he
was Vice President of the Company and General Manager of GCI Network Systems,
Inc. From August 1984 to June 1989, Mr. Behnke 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. Mr. Dowling
was Senior Vice President-Operations and Engineering for the Company from
December 1989 to December 1990. From 1981 to December 1989 he 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. Ms. Tindall 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.
Donne F. Fisher. Mr. Fisher has served as a director of the Company
since 1980. His term as director expires in 1998. Mr. Fisher has been a
consultant to Tele-Communications, Inc. ("TCI") since January 1996 and a
director of TCI since 1980. From 1982 until 1996, he held various executive
officer positions with TCI and its subsidiaries. Mr. Fisher serves on the boards
of directors of most of TCI's subsidiaries and the boards of directors of TCI
Music, Inc. and United Video Satellite Group, Inc.
Jeffrey C. Garvey. Mr. Garvey has served as a director of the Company
since his appointment by the Board in December 1996 to fill a new seat created
in the expansion of the Board from seven to ten members. His term as director
expires in 2000. Since June 1989, Mr. Garvey has been general partner of Austin
Ventures, L.P. Mr. Garvey joined Austin Ventures in 1979, and, prior to that, he
was Senior Vice President in charge of the National and Specialized Lending
Divisions of PNC Bank (formerly Provident National Bank) in Philadelphia,
Pennsylvania. From 1971 to 1976 he held several positions with Pittsburgh
National Bank focusing on broadcast communications.
John W. Gerdelman. Mr. Gerdelman has served as a director of the
Company since July 1994 and is one of the nominees of MCI Telecommunications
Corporation ("MCI") to the Board pursuant to the Voting Agreement. His term as
director expires in 1999. Mr. Gerdelman has been President, Network Services,
for MCI, a wholly-owned subsidiary of MCI Communications Corporation, since
September 1994. He was Senior Vice President for MCI from July 1992 to September
1994. From July 1989 to July 1992 Mr. Gerdelman was President of MCI Services,
Inc., a subsidiary of MCI.
Page 9
William P. Glasgow. Mr. Glasgow has served as a director of the Company
since his appointment by the Board in December 1996 to fill a new seat created
in the expansion of the Board from seven to ten members. He is a nominee at the
Annual Meeting, recommended by the parties to the Voting Agreement in accordance
with the terms of that agreement and at the request of Prime Management
described elsewhere in this section. See, within this section, "-- Voting
Agreement." Since July 1996, Mr. Glasgow has been President of Prime II
Management, Inc., a Delaware corporation and sole general partner of Prime
Management. Prior to that, he was Senior Vice President-Finance from September
1991 and Vice President-Finance of Prime Cable Fund I, Inc. from February 1989
to September 1991. 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.
Donald Lynch. Mr. Lynch has served as a director of the Company since
his appointment by the Board in December 1996 to fill a new seat created in the
expansion of the Board from seven to ten members. He is one of MCI's nominees to
the Board pursuant to the Voting Agreement. His term as director expires in
2000. Mr. Lynch is a Senior Vice President of MCI and has been with MCI for over
15 years in various executive positions.
Larry E. Romrell. Mr. Romrell has served as a director of the Company
since 1980. His term as director expires in 2000. Since 1994, Mr. Romrell has
been an Executive Vice President of TCI and the President and a director of TCI
Technology Ventures, Inc. From 1991 to 1994, Mr. Romrell was a Senior Vice
President of TCI. Mr. Romrell is also a director of Teleport Communications
Group, Inc. and of United Video Satellite Group. He serves on the compensation
committee of United Video Satellite Group.
James M. Schneider. Mr. Schneider has served as a director of the
Company since July 1994. His term as director expires in 1998. Mr. Schneider has
been the Vice President - Finance for Dell Computer Corporation since September
1996. Prior to that he was Senior Vice President for MCI Communications
Corporation in Washington, D.C. since September 1993. 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 directors, divided into three
classes of directors serving staggered three-year terms. Directors of the
Company are elected at the annual meeting of shareholders and serve until they
resign or are removed or until their successors are elected and qualified.
Executive officers of the Company generally
Page 10
are appointed at the Board's first meeting after each annual meeting of
shareholders and serve at the discretion of the Board.
Voting Agreement
Five of the ten directors of the Company are nominated by the parties
to the 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 ("Prime"), and other cable television systems in
Alaska (collectively with Prime, "Cable Systems"). Initially, the parties to the
Voting Agreement were as follows: MCI, TCI, Messrs. Duncan and Walp, and Prime
II Management, L.P. a Delaware limited partnership ("Prime Management").
Initially, Prime Management entered into the Voting Agreement as the agent for
certain persons who became shareholders of the Company as the result of the
Company's acquisition of Prime. Many of those shareholders disposed of or
otherwise distributed those shares in 1997. In December 1997, the parties to the
Voting Agreement approved an amendment to it expressly removing TCI and Prime
Management as parties to the agreement.
Under the Voting Agreement, each party to the agreement will vote the
party's stock in the election of directors to the Board as follows:
- Two directors nominated by MCI
- One director nominated by Mr. Duncan
- One director nominated by Mr. Walp
In addition through the recent amendment to the Voting Agreement, the parties
agreed to allow Prime Management to recommend one nominee to the Board for so
long as the Prime Management Agreement is in full force and effect and to vote
for that nominee notwithstanding Prime Management's no longer being a party to
the agreement. The Prime Management Agreement is described elsewhere in this
Proxy Statement. See, "Certain Transactions: Prime Management Agreement" and
"Ownership of Company: Changes in Control -- Voting Agreement."
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. Unless
Page 11
earlier terminated, 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.
TCI sold all of its shares of the Company's common stock in 1997 in the
Stock Offering. However, through its acquisition of Kearns Tribune Corporation
in July 1997, TCI indirectly owns 300,200 shares of Company Class A and 225,000
shares of Company Class B common stock. The Company currently expects that TCI's
former nominees to the Board (Messrs. Fisher and Romrell) will continue as
directors of the Company. See "Ownership of the Company: 1997 Equity and Debt
Offerings."
Board and Committee Meetings
During the year ended December 31, 1997, the Board had four committees:
- Audit Committee
- Compensation Committee
- Finance Committee
- Stock Option Plan Committee
The Audit Committee is composed of all members of the Board. 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 met one time during the
year ended December 31, 1997.
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 two times during the year ended December 31, 1997.
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, 1997.
Page 12
The Stock Option Plan Committee is composed of Messrs. Garvey,
Gerdelman, Glasgow, Lynch, Romrell, and Walp. This committee administers the
Stock Option Plan and approves the issuance of options pursuant to the plan. The
Stock Option Plan Committee did not meet but took action twice in 1997 by
unanimous consent in lieu of meetings in accordance with the Company's Bylaws.
The Board held three meetings during the year ended December 31, 1997.
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 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. Fisher (67%); Mr. Gerdelman (33%); Mr. Lynch (67%); and
Mr. Romrell (33%).
Director Compensation
In December 1997, each person who was then a director of the Company
(other than the MCI representatives) received $2,000 in director fees for the
period from July 1997 through June 1998. It is MCI's policy that an MCI director
not accept remuneration for serving on a board of directors other than those of
MCI and its subsidiaries. During the year ended December 31, 1997, the directors
on the Board received no other direct compensation for serving on the Board.
However, they were reimbursed for travel and out-of-pocket expenses incurred in
connection with attendance at meetings of the Board.
During February 1997, the Company made contingent grants, pursuant to
the Stock Option Plan to each of Messrs. Fisher, Page, and Schneider. Each
option was for 25,000 shares with an exercise price of $7.50 per share. The
options are to vest in 25% increments for each year that the optionee
participates in at least 50% of Board meetings. The options were granted
subject, among other things, to the Company obtaining shareholder approval to
increase the number of shares of Class A common stock that it is authorized to
issue and the number of shares allocated to the Stock Option Plan. That
shareholder approval was obtained at the 1997 shareholder annual meeting. The
corresponding option agreements were issued in February 1998.
Executive Compensation
Summary Compensation. The following table sets forth certain
information concerning the cash and non-cash compensation earned during fiscal
years 1995, 1996 and 1997 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 exceeded $100,000
during the fiscal year ended December 31, 1997 (collectively, "Named Executive
Officers").
Page 13
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- -----------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options (#) Compensation($)(1)(2)
- --------------------------- ---- --------- -------- --------------- ----------- --------------------
Ronald A. Duncan 1997 216,649(5) 20,400 -0- -0- 167,354
President and Chief 1996 120,000(3) 3,000 -0- -0- 178,633
Executive Officer 1995 119,550(4) -0- -0- -0- 159,206
William C. Behnke 1997 148,336 30,960 -0- 100,000 4,503
Senior Vice President- 1996 110,000 5,363 -0- -0- 22,066
Marketing and Sales 1995 110,002 -0- -0- 50,000 20,066
G. Wilson Hughes 1997 150,004 29,600 -0- -0- 106,434
Executive Vice President 1996 150,000 6,040 -0- -0- 100,920
and General Manager 1995 150,002 -0- -0- 260,000 91,046
John M. Lowber 1997 148,962 72,200 -0- 100,000 87,073
Senior Vice President- 1996 125,000 5,860 -0- -0- 78,842
Administration, Chief 1995 125,000 -0- -0- 100,000 80,321
Financial Officer,
Secretary/Treasurer
Dana L. Tindall 1997 157,921 21,600 -0- 100,000 19,168
Senior Vice President- 1996 110,000 34,630 -0- -0- 10,203
Regulatory Affairs 1995 103,699 24,000 -0- -0- 14,949
- ------------
(1) The amounts reflected in this column include accruals under deferred
compensation agreements between the Company and the named individuals
as follows: Mr. Duncan, $150,000, $161,551, and $144,470 in 1997, 1996,
and 1995, respectively; Mr. Behnke, $4,200, $22,000, and $20,000 in
1997, 1996 and 1995, respectively; Mr. Hughes, $90,113, $85,128, and
$74,741 in 1997, 1996, 1995, respectively; and Mr. Lowber, $65,000 in
each of 1997, 1996 and 1995. See within this section "--Employment and
Deferred Compensation Agreements."
(2) The amounts reflected in this column also include matching
contributions by the Company under the Stock Purchase Plan as follows:
Mr. Duncan, $15,000, $15,000, and $10,756, in 1997, 1996 and 1995,
respectively; Mr. Hughes, $14,868, $14,475, and $12,750, in 1997, 1996
and 1995, respectively; Mr. Lowber, $12,305, $12,857, and $12,852, in
1997, 1996 and 1995, respectively; and Ms. Tindall, $9,500, $10,137,
and $12,802, in 1997, 1996 and 1995, respectively. Amounts shown for
Mr. Duncan include premiums of $174 under a term life insurance policy
paid in 1997 and $82 in each of 1996 and 1995; $2,000 paid to Mr.
Duncan in each of 1997, 1996 and 1995 for serving on the Board; and
$1,898 paid to Mr. Duncan in 1995 in lieu of a contribution by the
Company to the Stock Purchase Plan. Amounts shown for Mr. Behnke
include premiums of $102 under a term life insurance policy paid in
1997 and $66 in each of 1996 and 1995. Amounts shown for Mr. Hughes
include premiums of $1,317, $1,317 and $1,305 under life insurance
policies paid in each of 1997, 1996 and 1995, respectively; and $2,250
paid to Mr. Hughes in 1995 in lieu of a contribution by the Company to
the Stock Purchase Plan. Amounts shown for Mr. Lowber include premiums
of $985, $985, and $980 under life insurance policies paid in each of
1997, 1996 and 1995, respectively; and $1,489 paid to Mr. Lowber in
1995 in lieu of a contribution by the Company to the Stock Purchase
Plan. Amounts shown for Ms. Tindall include premiums of $66, $66 and
$54 under a term life insurance policy paid in 1997, 1996 and 1995,
respectively; and $2,093 paid to Ms. Tindall in 1995 in lieu of a
contribution by the Company to the Stock Purchase Plan.
Includes a waiver of accrued interest on January 1, 1998 on notes owed
to the Company by Ms. Tindall and Mr. Lowber in the amounts of $9,552
and $8,783, respectively.
(3) Does not include $50,000 of Mr. Duncan's 1997 salary that was paid in
advance during 1996.
Page 14
(4) Mr. Duncan received $30,000 of his 1995 salary as an advance in 1994.
The $30,000 advance payment is included in his 1995 salary.
(5) Does not include $50,000 of Mr. Duncan's 1998 salary that was paid in
advance during 1997.
- ------------
Option/SAR Grants
The following table sets forth information on the individual grants of
stock options (whether or not in tandem with stock appreciation rights
("SARs")), and freestanding SARs made during the Company's fiscal year ended
December 31, 1997 to its Named Executive Officers. There were no tandem SARs or
freestanding SARs associated with the Company during this period.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value of Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term
- -------------------------------------------------------------------------------- -------------------------
% of Total
Options/SARs Exercise
Granted to or
Option/SARs Employees Base
Granted(1) in Fiscal Year Price(2) Expiration
Name (#) ($) ($/Sh) Date 5%($)(3) 10%($)(3)
- ---- ----------- -------------- -------- ---------- -------- ---------
Ronald A. Duncan -0- --- --- --- --- ---
William C. Behnke 100,000 9.51 7.00 02/06/07 368,962 1,002,143
G. Wilson Hughes -0- --- --- --- --- ---
John M. Lowber 100,000 9.51 7.00 02/06/07 368,962 1,002,143
Dana L. Tindall 100,000 9.51 7.00 02/06/07 368,962 1,002,143
- ------------
(1) Options in Class A common stock.
(2) The exercise price of the options was equal to the market price of the
Class A comon stock at the time of grant.
(3) The potential realizable dollar value of a grant is calculated as the
product of (a) the difference between (i) the product of the per-share
market price at the time of grant and the sum of 1 plus the adjusted
stock price appreciation rate (the assumed rate of appreciation
compounded annually over the term of the option and (ii) the per-share
exercise price of the option and (b) the number of securities
underlying the grant at fiscal year end.
- ------------
Page 15
Option Exercise and Fiscal Year-End Values
The following table sets forth information concerning each exercise of
stock options during the year ended December 31, 1997 by each of the Named
Executive Officers and the fiscal year-end value of unexercised options held by
each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End (#) at Fiscal Year-End ($)(1)
Shares ------------------------------ -------------------------
Acquired on Value
Name Exercise(#) Realized($) Exercisable Unexercisable Excercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ------------ -------------
Ronald A. Duncan -0- --- 200,000 -0- 737,500 ---
William C. Behnke 85,190 628,191 100,000 150,000 368,750 134,375
G. Wilson Hughes -0- --- 310,000 200,000 1,395,625 537,500
John M. Lowber -0- --- 250,000 200,000 1,146,875 268,750
Dana L. Tindall -0- --- 146,400 110,000 512,650 26,875
- ------------
(1) Represents the difference between the fair market value of the
securities underlying the options and the exercise price of the options
based on the last trading price on December 31, 1997.
- ------------
Employment and Deferred Compensation Agreements
The Company entered into a Deferred Bonus Agreement with Mr. Duncan in
June 1989 ("First Duncan Agreement"). Under the First Duncan Agreement, the
Company credited $325,000 to Mr. Duncan as of June 12, 1989 as a deferred bonus
for Mr. Duncan's past service to the Company. Amounts in the account were to
accrue interest at 10% per annum unless there was an irrevocable investment
election by Mr. Duncan to have the balance in the account treated as though it
were invested in the common stock of the Company. In July 1989, Mr. Duncan made
such election, and the Company purchased a total of 105,111 shares of Class A
common stock in its name for the benefit of Mr. Duncan, which are held in
treasury and are not voted. The full amount of the deferred bonus, including the
distribution of any stock, will be due and payable to Mr. Duncan upon the
termination of his employment with the Company.
Page 16
The Company entered into a Deferred Compensation Agreement with Mr.
Duncan in August 1993 (as amended, "Second Duncan Agreement"). Under this
agreement, the Company was to pay Mr. Duncan deferred compensation in an amount
not to exceed $625,000, plus interest at the rate paid by the Company on it
senior debt in addition to his regular compensation. This deferred compensation
was to be credited to Mr. Duncan each July 1 that he was employed by the Company
from 1993 through 1997 in amounts as follows:
Year Amount($)
---- ---------
1993.........................................100,000
1994.........................................100,000
1995.........................................125,000
1996.........................................150,000
1997.........................................150,000
-------
Total........................................625,000
=======
All deferred compensation (including the present value of any
uncredited amounts) plus accrued interest will be due and payable in ten equal
annual payments to Mr. Duncan upon the termination of his employment with the
Company. However, should he voluntarily terminate his employment or if his
employment is terminated for cause, only that portion (with interest) of the
deferred compensation credited as of the December 31 immediately preceding his
termination will be due and payable. Under these circumstances, the remainder of
the deferred compensation will be forfeited.
In September 1995, the Company agreed with Mr. Duncan that the vested
and unvested portions of his deferred compensation under the Second Duncan
Agreement would be payable in shares of Class A common stock in lieu of cash. To
fund this obligation, the Company bought a total of 13,750 shares in the open
market during September 1995 and October 1995 at a weighted average price of
$3.48 per share. In July 1996, the Company purchased from Mr. Duncan an
additional 76,470 shares of Class A common stock at the then market price of
$8.125 per share. In lieu of the amount to be credited in 1997, Mr. Duncan's
deferred compensation account received credit for 18,462 shares of Class A
common stock. Accordingly, the balance owed Mr. Duncan pursuant to the Second
Duncan Agreement is denominated in 90,220 shares of Class A common stock. The
Company is holding the shares in treasury until the shares are distributed to
Mr. Duncan. The shares are not voted and may not be disposed of by the Company
or Mr. Duncan.
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
Page 17
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 accrue on December 31
of each year. Each contribution by the Company is accrued at the end of the year
in which the contribution is made. Upon termination of his employment with the
Company, Mr. Hughes may elect to 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 amounts of $9,741,
$10,128 and $15,113 during the years ended December 31, 1995, 1996 and 1997,
respectively. In September 1995, the Company bought 3,750 shares of Company
Class A common stock in the public market at a purchase price of $3.375 per
share to fund certain of the vested portions of Mr. Hughes' deferred
compensation. In addition in March 1997 at the request of Mr. Hughes, the
Company purchased 3,687 shares of Company Class A common stock from Mr. Hughes
at a purchase price of $7.75 per share to fund certain of the vested portions of
Mr. Hughes' deferred compensation under the Hughes Agreement. 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, Mr.
Lowber is entitled to an annual base salary of $125,000 and customary benefits.
Mr. Lowber's annual base salary was increased to $150,000 effective January 1,
1997. 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 $450,000 ($65,000
per year from July 1992 through July 1999).
If Mr. Lowber's employment or position with the Company is terminated,
or if he dies, the entire $450,000 will be immediately payable. If Mr. Lowber
voluntarily resigns, he will lose the unvested portion of his deferred
compensation. The deferred compensation has been 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 will be made each July 1 through 1999 and are fully vested when
made. At the earlier of termination of employment or upon election by Mr. Lowber
subsequent to the end of the seven-year term of the agreement, 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. Effective January 1, 1997,
the Company and Mr. Behnke entered into a compensation agreement ("Behnke
Agreement") which provides for
Page 18
compensation through December 31, 2001. The Behnke Agreement provides for base
compensation of $150,000 per year, increasing $5,000 annually for the years
ending December 31, 1999, 2000 and 2001. The Behnke Agreement provides for
target incentive compensation of $45,000 per year of which 78% will be deferred.
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
of 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 $40,000 plus accrued interest of $6,200 was vested December
31, 1996 and the rest of which will vest as earned under the incentive
compensation provision of the Behnke Agreement. In March 1998, an additional
$24,149 vested under the agreement. This amount represented 78% of Mr. Behnke's
incentive compensation payment earned during 1997. Mr. Behnke may direct the
Company to invest the entire $285,000 in the Company's common stock. The vested
portions of the deferred compensation account will be paid to Mr. Behnke upon
termination of his employment with the Company. Through the Stock Offering, Mr.
Behnke sold 35,000 shares of Class A common stock that he received upon exercise
of vested stock options. See, "Ownership of the Company: 1997 Equity and Debt
Offerings."
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, 1997 and up through the Record Date,
none of the Named Executive Officers had participated in this plan.
Except as disclosed in this Proxy Statement, as of December 31, 1997
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, 1997. 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
Page 19
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, 1997.
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 $10,000
for 1998. 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 over six years after being 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, employees can direct their
contributions to be invested in MCI common stock, TCI common stock, and various
identified mutual funds, as well as the common stock of the Company. 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 contributions of
up to 50%, as determined by the Company each year. 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. However, pursuant to the Stock Purchase Plan,
the Company offered all participants the opportunity to include in the Stock
Offering up to 50% of the Company common stock allocated to them under the Stock
Purchase Plan.
Page 20
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.
Stock Option Plan
In December 1986, the Company adopted the 1986 Stock Option Plan, which
has been subsequently amended from time to time ("Stock Option Plan"). 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 5.7 million shares upon approval by the
shareholders of the Company at its 1997 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, 3,811,400 shares were subject to outstanding
options under the Stock Option Plan, 757,824 shares had been issued upon the
exercise of options under the plan and 1,130,726 shares remained available for
additional grants under the plan.
As of the Record Date, the Stock Option Plan was administered by an
option committee composed of six members of the Board ("Stock Option Plan
Committee"): Messrs. Garvey, Gerdelman, Glasgow, Lynch, Romrell, and Walp). 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
from six months through 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.
Page 21
Report on Repricing of Options/SARs
During the year ended December 31, 1997, 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 the Company: Directors
and Executive Officers"; "Ownership of the Company"; and "Certain Transactions."
During the year ended December 31, 1997, Messrs. Walp and Duncan (a Named
Executive Officer), participated in deliberations of the Compensation Committee
concerning executive officer compensation other than deliberations concerning
their own compensation.
Compensation Committee Report on Executive Compensation
In January 1994, the Board established the Compensation Committee
composed of all of the members of the Board. The duties of the Compensation
Committee are as follows:
- Preparing, 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. The
statement is specifically to address expected performance and
compensation of and the criteria on which compensation is
based for the chief executive officer and such other executive
officers of the Company as the Board may designate for this
purpose.
- Monitoring the effect of ongoing events on and the
effectiveness of existing compensation policies, goals, and
plans. These events are specifically to include but not be
limited to the status of the premise that all pay systems
correlate with the compensation goals and policies of the
Company, and, at its own direction or at the direction of the
Board, to report from time to time, its findings to the Board.
- Monitoring compensation-related publicity and public and
private sector developments on executive compensation.
Page 22
- Familiarizing itself with and monitoring the tax, accounting,
corporate, and securities law ramifications of the
compensation policies of the Company. These ramifications
include, but are not limited to comprehending a senior
executive officer's total compensation package, its 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.
- Establishing the overall cap on executive compensation and the
measure of performance for executive officers, either by
predetermined measurement or by a subjective evaluation.
- Striving to make the compensation plans of the Company simple,
fair, and structured so as to maximize shareholder value.
For the year ended December 31, 1997, 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 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 February 1997, the Compensation Committee established compensation
levels 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 in March 1998 as described elsewhere in this
section. See, -- Executive Compensation."
Page 23
During the year ended December 31, 1997 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. Corresponding duties were carried out by the
boards of directors of the subsidiaries of the Company with respect to employees
of those entities.
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.
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, 1992 through
December 31, 1997. 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 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
Page 24
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.
Page 25
Performance Graph
[FOLLOWING TABLE IS USED IN EDGARIZED COPY OF THE PROXY STATEMENT FOR SUBMISSION
TO SEC (version distributed to shareholders has graph in place of table)]
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
- -----------------------------------------------------------------------------------------------------------
Nasdaq Stock Market Nasdaq
Measurement Period Index for U.S. Telecommunication
(Fiscal Year Covered) Company ($) Companies ($) Stock ($)
- -------------------------------- ------------------ ----------------------------- -------------------------
FYE 12/31/92 100 100 100
FYE 12/31/93 194.9 114.8 154.2
FYE 12/31/94 159.0 112.2 128.7
FYE 12/31/95 210.3 158.7 168.5
FYE 12/31/96 333.3 195.2 172.3
FYE 12/31/97 271.8 239.5 254.5
Page 26
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.
Compliance with Section 16(a) of the Exchange Act
Based upon a review of Forms 3, 4, and 5 adopted pursuant to the
Exchange Act and completed and furnished to the Company by shareholders, 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, 1997.
CERTAIN TRANSACTIONS
MCI Agreements
As of the Record Date, MCI owned 19.3% of the outstanding combined
common stock of the Company, representing 24.4% of the total voting power of
that common stock. In 1993, MCI entered into a significant business relationship
with the Company which includes the following agreements:
- Under the MCI Traffic Carriage Agreement, the Company agreed
to terminate all Alaska-bound MCI long distance traffic and
MCI agreed to terminate all of the Company's long distance
traffic terminating in the lower 49 states, excluding
Washington, Oregon and Hawaii
- MCI licensed certain service marks to the Company for use in
Alaska
- MCI, in connection with providing to the Company credit
enhancement to permit the Company to purchase a portion of an
undersea cable linking Seward, Alaska with Pacific City,
Oregon leased from the Company all of the capacity owned by
the Company on the undersea fiber optic cable and the Company
leased such capacity back from MCI
- MCI purchased certain service marks of the Company
- The parties agreed to share some communications network
resources and various marketing, engineering and operating
resources
Page 27
The Company handles MCI's 800 traffic originating in Alaska and
terminating in the lower 49 states and handles traffic for MCI's calling card
customers when they are in Alaska, while MCI originates calls for the Company's
calling card customers when they are in the lower 49 states. Revenues attributed
to the MCI Traffic Carriage Agreement in 1997 were approximately $34.3 million,
or approximately 15.3% of total revenues.
WestMarc Agreements
The Company purchased services and used certain facilities of WestMarc,
a wholly-owned subsidiary of TCI, to allow the Company to provide its
telecommunications services in certain of the lower 49 states. The total of such
purchases from WestMarc by the Company during the years ended December 31, 1996
and 1997 were approximately $244,000 and $588,324, respectively. The Company
expects to continue purchasing services from WestMarc at levels comparable to
past purchases. Until it sold all of its directly owned common stock in the
Company in August 1997, TCI controlled nominations to two seats on the Board
pursuant to the Voting Agreement. However, TCI acquired Kearns Tribune
Corporation in July 1997 and thereby indirectly holds common stock in the
Company as described elsewhere in this Proxy Statement. See, "Ownership of
Company: Principal Shareholders." While a party to the Voting Agreement, TCI's
nominees to the Board were Messrs. Fisher and Romrell. Management of the Company
currently expects that these former TCI nominees to the Board will continue as
directors of the Company.
Prime Management Agreement
In connection with its acquisition of the Cable Systems, the Company
entered into a management agreement ("Prime Management Agreement") with Prime
Management, i.e., Prime II Management, L.P., a Delaware limited partnership, to
manage the Cable Systems. Under the Voting Agreement, the parties to it agreed
to vote for the nominee of Prime Management in the election of directors to the
Board. As of the Record Date, affiliates of Prime Management owned 0.9% of the
total outstanding combined Company common stock, representing 0.5% of the total
voting power. As of the Record Date and with the votes of the parties to the
Voting Agreement, Prime Management may nominate one director for election to the
Board. See, "Management of the Company: Voting Agreement"; and "Ownership of
Company: Changes in Control -- Voting Agreement."
Under the Prime Management Agreement, the Company paid to Prime
Management a net annualized fee for managing the Cable Systems in the amount of
$1,000,000 for the year ending October 31, 1997. Also under that agreement, the
Company will pay to Prime Management fees for similar services in the amount of
$750,000 for the year ending October 31, 1998, and $500,000 for each year ending
October 31 thereafter that the Prime Management Agreement is in effect. Any
portion
Page 28
of the management fee which is past due shall bear interest at a rate per annum
equal to 17.5% until paid. In addition, the Company is required to reimburse
Prime Management for any costs and expenses incurred by it in connection with
the Cable Systems, including travel and entertainment expenses (the contract
states that such costs and expenses are not anticipated to exceed $200,000 on an
annualized basis). The Prime Management Agreement has a term of nine years but
either party may terminate the agreement in its discretion after October 31,
1998.
Duncan Lease
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 that 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. 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 $900,000. 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 (1) one-half of the
appreciated value of the property over $900,000 or (2) $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. The Company plans to exchange
a note receivable for the parcel and to lease the parcel at market rates from
Dani Bowman.
Hughes and Behnke Stock Sales
In March 1997, the Company purchased 3,687 shares of Class A common
stock from Mr. Hughes at the then market price of $7.75 per share. The shares
were purchased for the purpose of funding Mr. Hughes's deferred compensation
account
Page 29
under the Hughes Agreement. The Company is holding the shares in treasury until
they are distributed to Mr. Hughes. The shares are not voted and may not be
disposed of by the Company or Mr. Hughes. See, "Management of the Company:
Executive Compensation" and "--Employment and Deferred Compensation Agreements."
Through the Stock Offering, Mr. Behnke sold 35,000 shares of Class A
common stock that he had received upon exercise of vested stock options. The
proceeds of the sale were used for personal purposes. In addition, effective
October 24, 1997, the Company purchased 23,786 shares of Company Class A common
stock from Mr. Behnke at $7.78 per share to fund a portion of his deferred
compensation under the Behnke Agreement. The proceeds were used to repay debt
owned to the Company as described elsewhere in this section. See within this
section, "--Indebtedness of Management."
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, and has instead extended loans to
such executive officers secured by their shares or options. As of the Record
Date, total indebtedness of management was $1,270,920 (including accrued
interest of $156,560), $579,361 in principal amount of which was secured by
shares or options, $185,000 of which was otherwise secured by collateral of the
borrowers, and $350,000 of which was unsecured.
As of the Record Date, Mr. Duncan was indebted to the Company in the
aggregate principal amount of $350,000 plus accrued interest of $22,878
("Outstanding Duncan Loans"). The Outstanding Duncan Loans were made to Mr.
Duncan for his personal use. They consist of a loan of $150,000 made in December
1996, an additional loan of $50,000 made in January 1997 and an additional loan
of $150,000 made in December 1997. 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, on December 31, 2001.
Mr. Duncan borrowed $500,000 from the Company in August 1993 to repay a
portion of indebtedness to WestMarc that he assumed from others. The $500,000
loan accrued interest at the Company's variable rate under its senior credit
facility and was secured by 223,000 shares of Class A and Class B common stock
owned by Mr. Duncan pursuant to the Pledge Agreement between Mr. Duncan and the
Company dated August 13, 1993. The outstanding principal and accrued interest in
the total amount of $171,929 were repaid on March 31, 1998.
Page 30
The largest aggregate principal amount of indebtedness owed by Mr.
Duncan to the Company at any time since January 1, 1997 was $850,000, $350,000
of which remained outstanding as of the Record Date.
As of the Record Date, Mr. Behnke, Mr. Dowling and Ms. Tindall were
indebted to the Company in the respective principal amounts of $109,002,
$330,359 and $70,000, plus accrued interest of $14,938, $106,073 and $1,204,
respectively.
The $109,002 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, on June 30, 1999, and
consists of the following:
- $9,002 (remaining balance on a $45,000 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
On June 16, 1997, Mr. Behnke exercised an option to acquire 85,190 shares of
Class A common stock. The Company advanced to Mr. Behnke an additional $185,087
to cover income taxes due upon exercise of the option. Effective October 24,
1997, the Company purchased from Mr. Behnke, 23,786 shares of Company Class A
comon stock at $7.78 per share to fund a portion of his deferred compensation
under the Behnke Agreement. The proceeds were used to repay $185,097 owed to the
Company.
The $330,359 owed by Mr. Dowling bears interest at the Company's
variable rate under its Senior Credit Facility, 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, and
an additional $20,000 borrowed in June 1997 for his personal requirements. Mr.
Dowling's loans are payable in full on August 26, 2004.
The Company loaned Ms. Tindall $70,000 for her personal requirements in
January 1996, which amount bears interest at the rate of 6.54% per annum, is
secured by options to purchase 156,400 shares of Class A common stock and is due
and payable, together with accrued interest, on January 1, 2001. So long as Ms.
Tindall
Page 31
remains in the employ of the Company, the accrued interest payment will be
waived at the beginning of each year. Interest accrued as of the Record Date
totaled $1,204.
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, 1997 and through the Record Date was $198,000, $330,359, and $70,000,
respectively.
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, is secured by
options to purchase 250,000 shares of Class A common stock and by 3,000 shares
of Class A common stock owned by Mr. Hughes ("Hughes Collateral"). The principal
is due, together with accrued interest, on June 30, 2000. As of the Record Date,
accrued interest under the note totaled $8,108. In August 1996, Mr. Hughes
received an advance of $25,000 from the Company which bears interest at the
Company's variable rate under its senior credit facility. This indebtedness is
secured by the Hughes Collateral and is to be repaid on June 30, 2000. As of the
Record Date, the accrued interest under the advance was $200.
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, 2000. 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 accrued
as of the Record Date totalled $3,158.
Agreement Not to Exercise Options
Immediately prior to the Company's annual shareholder meeting held on
November 25, 1997, the number of authorized but unissued shares of Class A
common stock, net of shares reserved for issuance upon exercise of options and
conversion of outstanding shares of Class B common stock, was approximately 5.2
million. In consummating the Stock Offering, the Company issued approximately
7.0 million shares of Class A common stock. In order to make available for
issuance an additional 1.8 million shares of Class A common stock in addition to
the 5.2 million shares then available, certain holders of options to acquire an
aggregate of approximately 1.8 million shares of Class A common stock agreed not
to exercise those options until such time as the shareholders of the Company had
approved an increase in the amount of authorized but unissued Class A common
stock. At the 1997 annual shareholder meeting, the shareholders approved an
amendment to the Articles, i.e., the Company's Restated Articles of
Incorporation, to increase the amount of authorized shares of Class A common
stock and also approved an amendment to the Stock Option Plan to increase
Page 32
the allocation of shares to the plan. Subsequent to these shareholder actions,
the holders of the options were again free to exercise those options.
Registration Rights Agreement
The Company has entered into registration rights agreements
("Registration Rights Agreements") with MCI, the former shareholders of Alaska
Cablevision, Inc. (one of the companies whose cable television assets were
acquired by the Company as a part of the Cable Systems) and the former owners of
Prime (collectively, "Sellers"). Approximately 9,947,130 shares of Class A
common stock and 1,275,791 shares of Class B common stock were subject to the
Registration Rights Agreements as of the Record Date. The terms of the
Registration Rights Agreements vary, although they generally share several
common terms.
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 ("Registrable 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 Registrable Shares under
the Securities Act. The Registration Rights Agreements are subject to certain
limitations and restrictions including the right of the Company to limit the
number of Registrable Shares included in the registration. Generally, the
Company is required to pay all registration expenses in connection with each
registration of Registrable Shares pursuant to the Registration Rights
Agreements.
The Registration Rights Agreements between the Company and the Prime
Sellers require the Company to offer no more than two registrations at the
request of each holder. However, each registration request by the Prime Sellers
must include Registrable Shares having an aggregate market value of not less
than $2.5 million. The first demand registration under the Prime Registration
Rights Agreements may be requested only by the holders of a minimum of 25% of
the Registrable Shares.
The Registration Rights Agreement between the Company and the Alaska
Cablevision Sellers requires the Company to effect no more than 10 registrations
at the request of such sellers. However, each registration request must include
at least 150,000 Registrable Shares. The first demand registration under the
Alaska Cablevision Registration Rights Agreement may be requested only by the
holders of a minimum of 10% of the Registrable Shares.
The Registration Rights Agreement between the Company and MCI, dated
March 31, 1993, requires the Company to effect no more than two registrations at
the
Page 33
request of MCI. However, each registration request by MCI must include
Registrable Shares having an aggregate market value of more than $500,000. MCI
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 MCI, each request to cover Registrable Shares
having an aggregate market value of at least $1.5 million.
ARNAV GeoNet Datalink System
In September 1997, the Company installed electronic equipment in Mr.
Duncan's private airplane to allow him to participate in the ARNAV GeoNet
Datalink System. This system supports many aviation-related applications
including flight following, aircraft tracking, text messaging, cockpit weather
graphics and engine monitoring. The system, when used in conjunction with a VHF
ground based network, facilitates the exchange of this information between
aircraft or between aircraft and a system application control terminal. The
Company will likely seek to supply that network in Alaska. As of the Record
Date, the system was the leading contender for use by the Federal Aviation
Administration's Flight 2000 Demonstration Project. The project is anticipated
to be launched in Alaska in 1999. The installation of equipment in Mr. Duncan's
aircraft (at the cost of $22,292) will allow the Company to gain what management
believes will be valuable operating experience with the system prior to the
implementation of the FAA's demonstration project.
OWNERSHIP OF COMPANY
Principal Shareholders
The following table sets forth, as of the Record Date, certain
information regarding the beneficial ownership of Class A common stock and Class
B common stock by each of the following:
- Each person known by the Company to beneficially own 5% or
more of the outstanding shares of Class A common stock or
Class B common 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.
Page 34
Amount and Combined
Nature of % of Total Shares Voting
Name and Address of Title of Beneficial Outstanding Power
Beneficial Owner(1) Class Ownership (#) % of Class (%) (Class A & B) (%) (Class A & B) (%)
- -------------------------- -------- ---------------- -------------- ----------------- -----------------
Parties to Voting
Agreement:
MCI Telecommunications Class A 8,251,509 18.2 19.3 24.4
Corporation(2) Class B 1,275,791 31.4
1801 Pennsylvania Ave. NW
Washington, D.C. 20006
Ronald A. Duncan(2) Class A 856,632(3) 1.9 2.7 6.3
Class B 459,995(3) 11.3
Robert M. Walp(2) Class A 372,845(4) * 1.4 4.0
Class B 303,457(4) 7.5
Aggregate Shares Subject Class A 9,142,387(5) 20.2(5) 22.6(5) 34.3(5)
to Voting Agreement Class B 2,030,591(5) 50.0(5)
Kearns-Tribune Corporation(6) Class A 300,200 * 1.1 3.0
400 Tribune Building Class B 225,500 5.5
Salt Lake City, UT 84111
Estates of Class A 253,992 * 2.2 9.8
Bob and Betsy Magness Class B 815,048 20.1
(c/o Kim Magness)
4000 East Belleview
Greenwood Village, CO 80121
William C. Behnke Class A 131,488(7) * * *
Class B --- ---
Donne F. Fisher Class A 32,557(8) * * 2.5
Class B 212,688(8) 5.2
Jeffrey C. Garvey Class A 31,719(9) * * *
Class B --- ---
John W. Gerdelman Class A --- --- --- ---
Class B --- ---
William P. Glasgow Class A 21,204(10) * * *
Class B --- ---
G. Wilson Hughes Class A 406,324(11) * * *
Class B 2,756(11) *
John M. Lowber Class A 296,764(12) * * *
Class B 6,282(12) *
Donald Lynch Class A --- --- --- ---
Class B --- ---
Carter F. Page Class A * * 2.5
Class B 18,737(8)(13) 5.2
210,246
Page 35
Larry E. Romrell Class A --- --- * *
Class B 328 *
James M. Schneider Class A 6,250(8) * * *
Class B --- ---
Dana L. Tindall Class A 196,834(14) * * *
Class B 3,812(14) *
All Directors and Executive Class A 2,720,532(15) 5.8 7.9 17.8
Officers As a Group Class B 1,276,744(15) 31.4
(15 Persons)
- ------------
* Represents beneficial ownership of less than 1% of the corresponding
class of common stock.
(1) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act. Shares of common 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) Each of these persons was, as of the Record Date, a party to Voting
Agreement and could be deemed to be the beneficial owner of all of the
9,142,387 shares of Class A common stock and 2,030,591 shares of Class
B common stock that are subject to the Voting Agreement. See within
this section, "--Changes in Control." MCI 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.
(3) Includes 200,000 shares of Class A common stock which Mr. Duncan has
the right to acquire within 60 days of the Record Date by the exercise
of vested stock options. Includes 100,370 shares of Class A common
stock and 6,244 shares of Class B common stock allocated to Mr. Duncan
under the Stock Purchase Plan. Does not include 105,111 shares or
90,220 shares of Class A common stock held by the Company in treasury
pursuant to the First Duncan Agreement and the Second Duncan Agreement,
respectively. See, "Management of the Company: Executive Compensation"
and "--Employment and Deferred Compensation Agreements." 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.
(4) 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.
(5) Does not include shares allocated to Messrs. Duncan and Walp under the
Stock Purchase Plan or shares that Mr. Duncan has the right to acquire
by exercise of vested stock options. See, within this section,
"--Shares Eligible for Future Sale."
(6) Kearns-Tribune Corporation was merged into a wholly owned subsidiary of
TCI, effective July 31, 1997.
(7) Includes 105,000 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.
(8) Includes 6,250 shares of Company Class A common stock each to Messrs.
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.
(9) Mr. Garvey is a general partner of Austin Ventures, L.P. and disclaims
beneficial ownership of the shares held by that partnership and other
general partners of that partnership.
Page 36
(10) Does not include shareholdings of Prime II Management, Inc. and its
affiliate Prime Management, and Prime Venture Fund I, Inc., whose
shareholdings included 465,485 shares of Company Class A common stock
and does not include 158 shares beneficially owned by minor children of
Mr. Glasgow, as of the Record Date. Mr. Glasgow claims not to have or
share investment control of the shares held by these Prime entities,
and he disclaims any beneficial ownership of the shares held by these
Prime entities or held by his children.
(11) Includes 370,000 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 33,234 shares of Class A common stock
and 2,756 of Class B common stock allocated to Mr. Hughes under the
Stock Purchase Plan. Does not include 7,437 shares of Class A common
stock held in treasury by the Company pursuant to the Hughes Agreement.
See, "Management of the Company: Employment and Deferred Compensation
Agreements."
(12) Includes 260,000 shares which Mr. Lowber has the right to acquire
within 60 days of the Record Date by the exercise of vested stock
options. Includes 29,119 shares of Class A common stock and 6,012
shares of Class B common stock allocated to Mr. Lowber under the Stock
Purchase Plan.
(13) Does not include 8,550 shares of Class A 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.
(14) Includes 156,400 shares which Ms. Tindall has the right to acquire
within 60 days of the Record Date by the exercise of vested stock
options. Includes 40,175 shares of Class A common stock and 3,812
shares of Class B common stock allocated to Ms. Tindall under the Stock
Purchase Plan.
(15) Includes 1,260,150 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 264,633 shares of Class A
common stock and 24,384 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.
- ------------
Changes in Control
Voting Agreement. The Voting Agreement entered into in 1996 between
MCI, TCI, Messrs. Duncan and Walp, and Prime Management was amended in December
1997 to remove TCI and Prime Management as parties to the agreement. As of the
Record Date, the 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 MCI and one nominee each for Messrs. Duncan and Walp.
In addition, through the amendment, the parties agreed under certain conditions,
to vote for one nominee to the Board recommended by Prime Management. As of the
Record Date, the Company expected that the parties to the Voting Agreement would
vote for the nominee of Prime Management. See, "Management of the 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. These
obligations and pledges are briefly as follows.
The Credit Facility. On August 1, 1997, through a wholly owned
subsidiary, GCI Holdings, Inc. an Alaska corporation ("GCI Holdings"), the
Company entered into a new
Page 37
credit facility ("Credit Facility"). The Credit Facility was entered into in
part to refinance and pay off the then existing telephony and cable television
credit facilities of the Company and to provide longer term financing of the
development of telephony and cable services of the Company. GCI Holdings was
formed specifically to be the obligor under the Credit Facility. See within this
section, "-- 1997 Equity and Debt Offerings." The aggregate principal amount
available to be borrowed under the Credit Facility is $250 million (a portion of
which is a separate $50 million tranche which will cease to be available to the
extent not borrowed within one year). The Credit Facility is secured by
substantially all of the assets of the Company and provides for the following
restrictions and limitations:
- Restricts the payment of cash dividends
- Limits borrowings
- Limits the incurrence of additional long term indebtedness
- Limits the issuance of additional equity
- Requires the maintenance of certain financial ratios
- Limits liens
- Limits investments
- Limits changes of management
- Limits changes of control
- Limits transactions with affiliates
- Limits mergers and acquisitions
- Limits asset sales
- Limits changes in business
The Credit Facility is to mature on June 30, 2005, subject to required
reductions in the commitment amounts commencing September 30, 2000. The
obligations of GCI Holdings under the Credit Facility are secured by a lien on
substantially all its assets and its restricted subsidiaries, including the
stock of those subsidiaries, subject to the existing lien securing the Existing
Fiber Lease Facility as described elsewhere in this section.
See within this section, "--Existing Fiber Lease Facility."
Page 38
The Fiber Facility. The Company plans to incur up to $75 million in
additional indebtedness to finance the construction of an undersea fiber optic
cable ("Fiber Facility"). Indebtedness incurred under the Fiber Facility will
mature approximately ten years after the initial borrowings under the facility
and will accrue interest at rates equal to LIBOR plus 3.0% or the prime rate
plus 1.75%. The borrower under the Fiber Facility is Alaska United Fiber System
Partnership ("AUFS") an indirect wholly-owned subsidiary of the Company and an
unrestricted subsidiary under the Credit Facility and the Indenture associated
with the Debt Offering. See within this section, "--1997 Equity and Debt
Offerings." Indebtedness under the Fiber Facility is secured by substantially
all assets of AUFS. Other subsidiaries of the Company, including GCI Holdings
and GCI, Inc. have entered into various agreements intended to assure the
ability of AUFS to meet its obligations under the Fiber Facility, including
leases of capacity, keep-well agreements, and a completion guarantee.
The Existing Fiber Lease Facility. On December 31, 1992, GCI Leasing,
Co., Inc., an indirect wholly-owned subsidiary of the Company ("Leasing
Company"), entered into a $12 million loan agreement ("Existing Fiber Lease
Facility"), of which approximately $9 million of the proceeds were used to
acquire capacity on the undersea fiber optic cable linking Seward, Alaska and
Pacific City, Oregon. Concurrently, Leasing Company leased the capacity under a
ten year all events, take-or-pay contract to MCI, which subleased the capacity
back to the Company. The lease and sublease agreements provide for equivalent
terms of 10 years and identical monthly payments of $200,000. The proceeds of
the lease agreement with MCI were pledged as primary security for the financing.
The Existing Fiber Lease Facility provides for monthly payments of $170,000
including principal and interest through the earlier of January 1, 2003, or
until repaid. The Existing Fiber Lease Facility provides for interest at the
prime rate less one-quarter percent. Additional collateral includes
substantially all of the assets of Leasing Company including the fiber capacity
and a security interest in all of its outstanding stock.
MCI has a second position security interest in the assets of Leasing Company.
1997 Equity and Debt Offerings
On August 1, 1997, the Company sold 7,000,000 new shares of Class A
common stock and, on behalf of certain of its shareholders ("Selling
Shareholders"), sold 6,380,000 shares of Class A common stock (collectively,
"Stock Offering"). The Stock Offering was done concurrently with a debt offering
("Debt Offering"). Both the Stock Offering and the Debt Offering were
underwritten public offerings registered under the Securities Act. Shares in the
Stock Offering were sold at $7.25 per share. The Company did not receive any of
the proceeds from the sale of the shares by the Selling Shareholders. The Stock
Offering was subject to an over-allotment option granted to the underwriters in
the offering. On August 12, 1997, the underwriters exercised a portion of the
option and acquired 1,221,200 shares of Class A common stock for subsequent sale
pursuant to the Stock Offering.
Page 39
The Debt Offering was an offering of $180 million of unsecured 9.75%
Senior Notes of GCI, Inc., an Alaska corporation and wholly-owned subsidiary of
the Company ("Notes"). The Notes are due in the year 2007. GCI, Inc. was formed
specifically to issue the Notes. The 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 Notes at a price equal to 101% of their principal amount, plus
accrued and unpaid interest. The Indenture provides that the Notes are
redeemable at the option of GCI, Inc. at specified redemption prices commencing
in 2002. In addition, prior to a date to be specified in 2000, GCI, Inc. is
permitted to redeem up to 33-1/3% of the Notes out of the net cash proceeds of
one or more public equity offerings. The terms of the 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 Notes, the restricted subsidiaries consist of all direct or indirect
subsidiaries of the Company, with the exception of the unrestricted
subsidiaries. As of the Record Date, the unrestricted subsidiaries were entities
formed by the Company in conjunction with its proposed Fiber Facility as
described elsewhere in this section. These unrestricted subsidiaries consisted
of GCI Transport Co., Inc., GCI Satellite Co., Inc., GCI Fiber Co., Inc., Fiber
Hold Co., Inc. and AUFS. See within this section, "--The Fiber Facility" and
"--The Existing Fiber Lease Facility."
LITIGATION AND REGULATORY MATTERS
The Company was, as of the Record Date, involved in several
administrative 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
The Company Board retained KPMG Peat Marwick LLP as the independent
certified public accountants for the Company during the fiscal year ended
December 31, 1997. It is anticipated that the Board will appoint KPMG Peat
Marwick LLP as the Company's independent certified public accountants for the
fiscal year ending December 31, 1998. A representative of KPMG Peat Marwick 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.
Page 40
ANNUAL REPORT
The Annual Report to shareholders of the Company in the form of Form
10-K for the year ended December 31, 1997 is enclosed with this Proxy Statement.
SUBMISSION OF 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.
Shareholder eligibility to submit proposals, proper subjects and the
form of shareholder proposals are regulated by Rule 14a-8 under Section 14(a) of
the Exchange Act. Each proposal submitted should be sent to the Secretary of the
Company at the corporate offices of the Company. Such proposals should include
the full and correct registered name and address of the shareholders making the
proposal, the number of shares owned and their date of acquisition. If
beneficial ownership is claimed, proof of it should be submitted with the
proposal. Such shareholders or their representatives must appear in person at
the 1998 annual meeting and must present the proposal, unless they can show good
cause for not doing so.
Shareholder proposals must be received by the Secretary of the Company
not later than December 28, 1998 for such proposals to be included in proxy
materials for the 1998 annual meeting of shareholders of the Company.
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 the proxy statement.
Page 41
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
General Communication, Inc.
......................................................................
(Name of Registrant as Specified in Its Charter)
N/A
......................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
...................................................................
2) Aggregate number of securities to which transaction applies:
...................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fees is calculated and state how it was determined):
...................................................................
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
...................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee if offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
...................................................................
2) Form, Schedule or Registration Statement No.:
...................................................................
3) Filing Party:
...................................................................
4) Date Filed:
...................................................................