SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 of 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-15279
GENERAL COMMUNICATION, INC.
(Exact name of registrant as specified in its charter)
Alaska 92-0072737
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
2550 Denali Street Suite 1000 Anchorage, Alaska 99503
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (907) 265-5600
Securities Registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Class A common stock Class B common stock
(Title of class) (Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the average bid and asked prices of such
stock as of the close of trading on April 23, 1999 was approximately
$161,104,000.
The number of shares outstanding of the registrant's common stock as of
April 23, 1999, was:
Class A common stock - 45,952,747 shares; and
Class B common stock - 4,054,488 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Form 10-K/A
Page 1
GENERAL COMMUNICATION, INC.
1998 ANNUAL REPORT ON FORM 10-K/A
TABLE OF CONTENTS
-----------------
INTRODUCTION.................................................................3
PART III.....................................................................3
Item 10, Part III. Directors and Executive Officers of the Registrant....3
Item 11, Part III. Executive Compensation................................8
Item 12, Part III. Security Ownership of Certain Beneficial Owners and
Management...........................................22
Item 13, Part III. Certain Relationships and Related Transactions.......30
SIGNATURES..................................................................42
INTRODUCTION
General Communication, Inc. ("Company") hereby amends the following
items, financial statements, exhibits or other portions of its Annual Report for
the year ended December 31, 1998 ("Annual Report") on Form 10-K as set forth in
the following pages. Specifically, the information required by Part III of Form
10-K which the Company had in its Annual Report included by incorporation by
reference to certain portions of the Company's definitive Proxy Statement for
its annual shareholder meeting to be held in 1999 ("Proxy Statement") and which
Proxy Statement is to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended, is expressly filed with the Commission as an
amendment to and expressly made a part of the Annual Report, i.e., Item 10, Part
III, Item 11, Part III, Item 12, Part III, and Item 13, Part III of Form 10-K.
PART III
(1) Item 10, Part III. Directors and Executive Officers of the Registrant.
The following text is extracted from the draft Proxy Statement. The
record date for purposes of this amendment to the Annual Report has been set as
April 14, 1999 ("Record Date"):
MANAGEMENT OF COMPANY
Directors and Executive Officers
The following table sets forth certain information about the Company's
directors and executive officers as of the Record Date.
Name Age Position
---- --- --------
Carter F. Page (1,2,3) 67 Chairman and Director
Ronald A. Duncan (1,3) 46 President, Chief Executive Officer and Director
Robert M. Walp (1,3) 71 Vice Chairman and Director
John M. Lowber (2) 49 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
G. Wilson Hughes 53 Executive Vice President and General Manager
Form 10-K/A
Page 3
Name Age Position
---- --- --------
William C. Behnke 41 Senior Vice President-Marketing and Sales
Richard P. Dowling 55 Senior Vice President-Corporate Development
Dana L. Tindall 37 Senior Vice President-Regulatory Affairs
Ronald R. Beaumont (1,3,4) 50 Director
Donne F. Fisher (1,2,3) 60 Director
William P.Glasgow (1,3,4) 40 Director
Stephen R. Mooney (1,4) 39 Director
Larry E. Romrell (1,3,4) 59 Director
James M. Schneider (1,3) 46 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.
Beaumont, Page, and Walp, whose present terms expire at the time of the Annual
Meeting; (2) Class II -- Messrs. Duncan, Mooney 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 2001 annual shareholder meeting.
4 Member of Option Committee.
- ------------------------
Carter F. Page. Nominee. Mr. Page has served as Chairman and a director
of the Company since 1980. From December 1987 to December 1989, he served as a
consultant to WestMarc Communications, Inc. ("WestMarc") in matters related to
the Company. Mr. Page served as President and director of WestMarc from 1972 to
December 1987. Since then and as of the Record Date, he has been managing
general partner of Semaphore Partners, a general partnership and investment
vehicle in the communications industry.
Form 10-K/A
Page 4
Ronald A. Duncan. Mr. Duncan is a co-founder of the Company and has
been a director of the Company since 1979. Mr. Duncan has served as President
and Chief Executive Officer of the Company since January 1, 1989. From 1979
through December 1988 he was the Executive Vice President of the Company. Mr.
Duncan's term as director expires in 2000. He is his own nominee to the Board
pursuant to the Voting Agreement. See, "Certain Transactions: Voting Agreement."
Robert M. Walp. Nominee. Mr. Walp is a co-founder of the Company and
has been a director of the Company since 1979. Mr. Walp has served as Vice
Chairman of the Company since January 1, 1989 and is an employee of the Company.
From 1979 through 1988, he served as President and Chief Executive Officer of
the Company. Mr. Walp is his own nominee to the Board pursuant to the Voting
Agreement. "Certain Transactions: Voting Agreement."
John M. Lowber. Mr. Lowber has served as Chief Financial Officer of the
Company since January 1987, as Secretary and Treasurer since July 1988 and as
Senior Vice President since December 1989. He was Vice President-Administration
for the Company from 1985 to December 1989. Prior to joining the Company, Mr.
Lowber was a senior manager at KPMG Peat Marwick.
G. Wilson Hughes. Mr. Hughes has served as Executive Vice President and
General Manager of the Company since June 1991. He was President and a member of
the board of directors of Northern Air Cargo, Inc. from March 1989 to June 1991.
From June 1984 to December 1988, Mr. Hughes was President and a member of the
board of directors of Enserch Alaska Services, Inc.
William C. Behnke. Mr Behnke has served as Senior Vice
President-Marketing and Sales for the Company since January 1994. He was Vice
President of the Company and President of GCI Network Systems, Inc., a former
subsidiary of the Company, from February 1992 to January 1994. From June 1989 to
February 1992, Mr. Behnke was Vice President of the Company and General Manager
of GCI Network Systems, Inc. From August 1984 to June 1989, he was Senior Vice
President for TransAlaska Data Systems, Inc.
Richard P. Dowling. Mr. Dowling has served as Senior Vice
President-Corporate Development for the Company since December 1990. He was
Senior Vice President-Operations and Engineering for the Company from December
1989 to December 1990. From 1981 to December 1989, Mr. Dowling served as Vice
President-Operations and Engineering for the Company.
Dana L. Tindall. Ms. Tindall has served as Senior Vice
President-Regulatory Affairs since January 1994. She was Vice
President-Regulatory Affairs for the Company from January 1991 to January 1994.
From October 1989 through December 1990, Ms. Tindall was Director of Regulatory
Affairs for the Company, and she
Form 10-K/A
Page 5
served as Manager of Regulatory Affairs for the Company from 1985 to October
1989. In addition, Ms. Tindall was an adjunct professor of telecommunications
economics at Alaska Pacific University from September through December 1995.
Ronald R. Beaumont. Nominee. Mr. Beaumont has served as a director of
the Company since his appointment by the Board in February 1999. He has more
than 25 years experience in the telecommunications industry. Mr. Beaumont has
been President of Operations and Technology at MCI WorldCom since September
1998. Prior to that, he was President of WorldCom Network Services from its
formation, after the merger of WorldCom and MFS Communications in December 1996,
to September 1998. Prior to that, he was President and Chief Executive Officer
of MFS North America, Inc. from October 1994 to December 1996. Mr. Beaumont is
one of MCI WorldCom's nominees to the Board pursuant to the Voting Agreement.
"Certain Transactions: Voting Agreement."
Donne F. Fisher. Mr. Fisher has served as a director of the Company
since 1980. Mr. Fisher had been a consultant to Tele-Communications, Inc.
("TCI") from January 1996 to and a director of TCI from 1980 to March 1999 when
TCI merged into AT&T. From 1982 until 1996, he held various executive officer
positions with TCI and its subsidiaries. Mr. Fisher had served on the board of
directors of most of TCI's subsidiaries through the years and continues to serve
on the board of TCI Music, Inc. He presently manages his personal assets and is
involved in the management of Fisher Capital Partners, Ltd. His term as director
of the Company expires in 2001.
William P. Glasgow. Mr. Glasgow has served as a director of the Company
since 1996. Since July 1996, he 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. His term as director of the Company expires in 2001. In the
past, he has been a nominee recommended by the parties to the Voting Agreement
in accordance with the terms of that agreement and at the request of Prime
Management as described elsewhere in this section. "Certain Transactions: Voting
Agreement."
Stephen R. Mooney. Nominee. Mr. Mooney has served as a director of the
Company since his appointment by the Board in January 1999. He has been Vice
President of MCI WorldCom Venture Fund, Inc. since February 1999. Prior to that,
he held various corporate development positions with MCI Communications
Corporation and MCImetro, Inc. Mr. Mooney is one of MCI WorldCom's nominees to
the Board pursuant to the Voting Agreement. See, within this section, "-- Voting
Agreement."
Form 10-K/A
Page 6
Larry E. Romrell. Mr. Romrell has served as a director of the Company
since 1980. He has served as consultant for AT&T since March 1999. Prior to
that, from 1994 to March 1999, he was 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. He 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. His term as director of
the Company expires in 2000.
James M. Schneider. Mr. Schneider has served as a director of the
Company since July 1994. He has been Senior Vice President - Finance for Dell
Computer Corporation since September 1998. Prior to that, from September 1996 to
September 1998 he was Vice President-Finance for that corporation. Prior to
that, from September 1993 to September 1996, he was Senior Vice President for
MCI Communications Corporation in Washington, D.C. Mr. Schneider was with the
accounting firm of Price Waterhouse from 1973 to September 1993 and was a
partner in that firm from October 1983 to September 1993. His term as director
of the Company expires in 2001.
Legal Proceedings
The Board is unaware of any legal proceedings which may have occurred
during the past five years and which would be material to an evaluation of the
ability or integrity of any director or executive officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of Forms 3, 4, and 5 adopted pursuant to the
Exchange Act and completed and furnished to the Company by its shareholders and
any amendments to those forms furnished to the Company, the Company is unaware
of any director, officer, or beneficial owner of more than 10% of any class of
common stock of the Company who failed to file on a timely basis, as provided in
those forms, reports required under Section 16(a) of that act during the year
ended December 31, 1998.
Form 10-K/A
Page 7
(2) Item 11, Part III. Executive Compensation.
The following text is extracted from the Proxy Statement:
Director Compensation
Board members waived and did not receive director fees for the period
from July 1998 through June 1999. During the year ended December 31, 1998, the
directors on the Board received no direct compensation for serving on the Board
and its committees. However, they were reimbursed for travel and out-of-pocket
expenses incurred in connection with attendance at meetings of the Board and its
committees.
In February 1997, the Company made contingent grants, pursuant to the
Stock Option Plan, to each of Messrs. Fisher, Page, and Schneider. The
corresponding option agreements were issued in February 1998. Each option was
for 25,000 shares with an exercise price of $7.50 per share. The options vest in
25% increments for each year that the optionee participates in at least 50% of
Board meetings. As of the Record Date, options for 12,500 shares had separately
vested for each of these individuals.
Executive Compensation
Summary Compensation. The following table sets forth certain
information concerning the cash and non-cash compensation earned during fiscal
years 1996, 1997, and 1998 by the Company's Chief Executive Officer and by each
of the four other most highly compensated executive officers of the Company or
its subsidiaries whose individual combined salary and bonus each exceeded
$100,000 during the fiscal year ended December 31, 1998 (collectively, "Named
Executive Officers").
Form 10-K/A
Page 8
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------- ---------------------
All Other
Other Annual Securities Underlying Compen-
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Options (#) sation ($) (1,2)
- --------------------------- ---- ---------- --------- ---------------- --------------------- ----------------
Ronald A. Duncan 1998 195,000 (3) -0- -0- 200,000 15,642
President and Chief 1997 216,649 (4) 20,400 -0- -0- 167,354
Executive Officer 1996 120,000 (5) 3,000 -0- -0- 178,633
William C. Behnke 1998 149,381 3,442 -0- 5,425 372
Senior Vice President- 1997 148,336 30,960 -0- 100,000 4,503
Marketing and Sales 1996 110,000 5,363 -0- -0- 22,066
G. Wilson Hughes 1998 150,006 -0- -0- -0- 21,341
Executive Vice President 1997 150,004 29,600 -0- -0- 106,434
and General Manager 1996 150,000 6,040 -0- -0- 100,920
John M. Lowber 1998 149,381 -0- -0- 5,425 90,847
Senior Vice President, 1997 148,962 72,200 -0- 100,000 87,073
Chief Financial Officer 1996 125,000 5,860 -0- -0- 78,842
and Secretary/Treasurer
Dana L. Tindall 1998 159,340 -0- -0- 5,787 21,813
Senior Vice President- 1997 157,921 21,600 -0- 100,000 19,168
Regulatory Affairs 1996 110,000 34,630 -0- -0- 10,203
- ------------------------
1 The amounts reflected in this column include accruals under deferred
compensation agreements between the Company and the named individuals as
follows: Mr. Duncan, $60, $150,000, and $161,551 in 1998, 1997, and 1996,
respectively; Mr. Behnke, $114, $4,200, and $22,000 in 1998, 1997 and 1996,
respectively; Mr. Hughes, $4,894, $90,113, and $85,128 in 1998, 1997, and 1996
respectively; and Mr. Lowber, $65,000 in each of 1998, 1997, and 1996. 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 $15,000 in 1998, 1997, and 1996, respectively; Mr. Hughes,
$15,000, $14,868, and $14,475 in 1998, 1997, and 1996, respectively; Mr.
Lowber, $12,857, $12,305, and $12,857 in 1998, 1997, and 1996, respectively;
and Ms. Tindall, $15,000, $9,500, and $10,137 in 1998, 1997, and 1996,
respectively. Amounts shown for Mr. Duncan include premiums of $174 under a
term life insurance policy paid in 1998, $174 under a term life insurance
policy paid in 1997 and $82 under a term life insurance policy paid in 1996;
$2,000 paid to Mr. Duncan in each of 1997 and 1996 for serving on the Board.
Amounts shown for Mr. Behnke include premiums of $102 under a term life
insurance policy paid in 1998, $102 under a term life insurance policy paid in
1997 and $66 paid under a term life insurance policy in 1996. Amounts shown
for Mr. Hughes include premiums of $1,447, $1,317, and $1,317 under life
insurance policies paid in each of 1998, 1997 and 1996, respectively. Amounts
shown for Mr. Lowber include premiums of $983, $985, and $985 under life
insurance policies paid in each of 1998, 1997 and 1996, respectively. Amounts
shown for Ms. Tindall include premiums of $66, $66, and $66 under a term life
insurance policy paid in 1998, 1997 and 1996, respectively. Includes a waiver
of accrued interest on January 1, 1999 on notes owed to the Company by Ms.
Tindall and Mr. Lowber in the amounts of $6,639 and $12,007, respectively and
on January 1, 1998 of $9,552 and $8,783, respectively.
3 Does not include $50,000 of Mr. Duncan's 1999 salary that was paid in advance
during 1998.
4 Does not include $50,000 of Mr. Duncan's 1998 salary that was paid in advance
during 1997.
5 Does not include $50,000 of Mr. Duncan's 1997 salary that was paid in advance
during 1996.
- ------------------------
Form 10-K/A
Page 9
Option/SAR Grants
The following table sets forth information on the individual grants of
stock options (whether or not in tandem with stock appreciation rights
("SARs")), and freestanding SARs made during the Company's fiscal year ended
December 31, 1998 to its Named Executive Officers. There were no tandem SARs or
freestanding SARs associated with the Company during this period.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value of Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------------ -----------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or
Option/SARs Employees Base
Granted (1) in Fiscal Year Price (2) Expiration
Name (#) (%) ($/Sh) Date 5%($) (3) 10%($) (3)
- ---- ----------- -------------- --------- ---------- --------- ----------
Ronald A. Duncan 200,000 12.6 7.25 1/30/08 820,272 2,165,028
William C. Behnke 5,425 0.3 3.25 12/01/08 15,507 35,135
G. Wilson Hughes --- --- --- --- --- ---
John M. Lowber 5,425 0.3 3.25 12/01/08 15,507 35,135
Dana L. Tindall 5,787 0.4 3.25 12/01/08 16,541 37,479
- ------------------------
1 Options in Class A common stock.
2 The exercise price of the options was in excess of the market price of the
Class A common stock at the time of grant.
3 The potential realizable dollar value of a grant is calculated as the product
of (a) the difference between (i) the product of the per-share market price at
the time of grant and the sum of 1 plus the adjusted stock price appreciation
rate (the assumed rate of appreciation compounded annually over the term of
the option or SAR) and (ii) the per-share exercise price of the option or SAR
and (b) the number of securities underlying the grant at fiscal year end.
- ------------------------
Form 10-K/A
Page 10
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, 1998 by each of the Named
Executive Officers and the fiscal year-end value of unexercised options held by
each of the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SAR at Fiscal Year-End (#) at Fiscal Year-End ($) (1)
---------------------------------- --------------------------
Shares
Acquired on Value
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
Ronald A. Duncan 200,000 --- --- 200,000 --- ---
William C. Behnke --- --- 105,000 150,425 106,563 7,220
G. Wilson Hughes --- --- 370,000 140,000 585,625 8,750
John M. Lowber 50,000 146,875 210,000 195,425 325,625 10,033
Dana L. Tindall 6,400 42,400 150,000 105,787 109,375 4,702
- ------------------------
1 Represents the difference between the fair market value of the securities
underlying the options/SAR and the exercise price of the options/SAR based
upon the last trading price on December 31, 1998.
- ------------------------
Employment and Deferred Compensation Agreements
On April 30, 1991, the Company entered into a deferred compensation
agreement with Mr. Hughes (as amended in 1996, "Hughes Agreement"). Under the
terms of the Hughes Agreement, Mr. Hughes is entitled to an annual base salary
of $150,000 and customary benefits. Mr. Hughes' salary was reduced to $135,000
effective December 1, 1998. Pursuant to the agreement, Mr. Hughes was granted
stock options in 1991 for 250,000 shares of Class A common stock at an exercise
price of $1.75 per share, all of which are fully vested and exercisable. The
Hughes Agreement also provides for Mr. Hughes to receive deferred compensation,
with interest compounded annually at 10% of $50,000 in each of 1992, 1993, and
1994, $65,000 in 1995 and $75,000 in 1996 and each year thereafter, to 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. Mr. Hughes did not receive a
contribution
Form 10-K/A
Page 11
during the year ended December 31, 1998. 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 $10,128,
$15,113, and $4,894 during the years ended December 31, 1996, 1997 and 1998,
respectively. 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. In May 1998, again at the
request of Mr. Hughes, the Company purchased an additional 30,000 shares of
Company Class A common stock in the open market at a price of $6.63 per share to
fund the remaining balance of the vested portion of his deferred compensation
balance. Mr. Hughes' interest in 10,165 of these shares had not yet vested as of
the Record Date. The stock is held in treasury by the Company for the benefit of
Mr. Hughes, is not voted and may not be disposed of by the Company or Mr.
Hughes.
The Company entered into an employment and deferred compensation
agreement with Mr. Lowber in July 1992. Under the terms of the agreement, as
amended in 1996, Mr. Lowber is entitled to an annual base salary of $150,000
effective January 1, 1997 and customary benefits. Mr. Lowber's salary was
reduced to $135,000 effective December 1, 1998. 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. The interest accrued under
this
Form 10-K/A
Page 12
deferred compensation plan was $2,000, $4,200, and $114 during the years ended
December 31, 1996, 1997 and 1998, respectively. Effective January 1, 1997, the
Company and Mr. Behnke entered into a compensation agreement ("Behnke
Agreement") which provides for 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. Mr. Behnke's compensation was reduced to $135,000
effective December 1, 1998.
Pursuant to the Behnke Agreement, the Company agreed to grant Mr.
Behnke an option to purchase 100,000 shares of Class A common stock at an
exercise price of $7.00 per share, which will vest in equal amounts on January
1, 2000, 2001 and 2002. Pursuant to the Behnke Agreement, the Company has
created a deferred compensation account for Mr. Behnke in the amount of
$285,000, of which $64,149 plus accrued interest of $6,314 was vested December
31, 1998 and the rest of which will vest as earned under the incentive
compensation provision of the Behnke Agreement. Mr. Behnke may direct the
Company to invest the entire $285,000 in the Company's common stock. The vested
portions of the deferred compensation account will be paid to Mr. Behnke upon
termination of his employment with the Company. At the request of Mr. Behnke,
effective October 1997, the Company purchased from him 23,786 shares of Company
Class A common stock at a price of $7.78 per share to fund a portion of his
deferred compensation account. As of the Record Date, Mr. Behnke had a vested
interest in 9,055 of those shares held for his benefit.
Non-Qualified, Unfunded Deferred Compensation Plan
In February 1995, the Company established a non-qualified, unfunded,
deferred compensation plan to provide a means by which certain employees of the
Company may elect to defer receipt of designated percentages or amounts of their
compensation and to provide a means for certain other deferrals of compensation.
Employees eligible to participate in the plan are determined by the Board. The
Company may, at its discretion, contribute matching deferrals in amounts
selected by the Company. Participants immediately vest in all elective deferrals
and all income and gain attributable to that participation. Matching
contributions and all income and gain attributable to them vest on a
case-by-case basis as determined by the Company. Participants may elect to be
paid in either a single lump-sum payment or annual installments over a period
not to exceed ten years. Vested balances are payable upon termination of
employment, unforeseen emergencies, death or total disability and change of
control or insolvency of the Company. Participants are general unsecured
creditors of the Company with respect to deferred compensation benefits of the
plan.
Form 10-K/A
Page 13
During the year ended December 31, 1998 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, 1998
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, 1998. This statement is limited to
situations where such a plan or arrangement resulted in or will result from the
resignation, retirement, or any other termination of a Named Executive Officer's
employment with the Company or its subsidiaries or from a change of control of
the Company or a change in that officer's responsibilities following a change in
control and where the amount involved, including all periodic payments or
installments, exceeded $100,000.
Long-Term Incentive Plan Awards
The Company had no long-term incentive plan in operation during the
year ended December 31, 1998.
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 1999. Employees may contribute up to an additional 10% of their compensation
with after-tax dollars. Subject to certain limitations, the Company may make
matching contributions of common stock for the benefit of employees. Such a
contribution will vest in increments over the first six years of employment.
Thereafter, they are fully vested when made. No more than 10% of any one
employee's compensation will be matched in any year. In addition, the
combination of salary reductions, after-tax contributions and Company matching
contributions for any employee cannot exceed the lesser of $30,000 or 25% of
such employees' compensation (determined after salary reduction) for any year.
With the merger in September 1998 of MCI Communications Corporation
into WorldCom, Inc., the plan now offers investment in the surviving corporation
MCI WorldCom. With the announcement in July 1998 of a proposed merger of TCI and
AT&T with AT&T to become the surviving corporation and subsequent completion of
the merger in March 1999, the Stock Purchase Plan no longer allows investments
in
Form 10-K/A
Page 14
TCI. Under the terms of the Stock Purchase Plan, employees can direct their
contributions to be invested in MCI WorldCom common stock and various identified
mutual funds, as well as the common stock of the Company.
As of the Record Date, the Stock Purchase Plan was considering
alternatives to these mutual fund investments and investments in MCI WorldCom.
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, for
the purchase by or otherwise issuance to the Plan of additional shares of common
stock of the Company. All contributions are invested in the name of the plan for
the benefit of the respective participants in the plan. The participants
generally do not have voting or disposition power with respect to the Company
shares allocated to their accounts. Those shares are voted by a committee for
the plan.
The Stock Purchase Plan is administered through a plan administrator
(currently Alfred J. Walker), and the plan's committee is appointed by the
Board. The assets of the plan are invested from time to time by the trustee at
the direction of the plan's committee, except that participants have the right
to direct the investment of their contributions to the Stock Purchase Plan
(although an election to invest in Company common stock is generally
irrevocable). The plan administrator and members of the plan's committee are all
employees of the Company or its subsidiaries. The plan's committee has broad
administrative discretion under the terms of the plan.
At its October 31, 1998 meeting, the Board approved an allocation to
the Stock Purchase Plan of an additional 2,000,000 shares of Class A and 400,000
shares of Class B common stock of the Company. The new allocation was subject to
prior plan commitments for the issuance or otherwise acquisition of Company
stock. That is, as of the date of and immediately subsequent to the board
approval, 1,295,013 shares of Class A and 464,320 shares of Class B common stock
remained allocated to the plan and available for issuance by the Company or
otherwise acquisition by the plan for the benefit of participants in the plan.
Stock Option Plan
In December 1986, the Company adopted the 1986 Stock Option Plan, which
has been subsequently amended from time to time. Its present form is the Stock
Option Plan.
Form 10-K/A
Page 15
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, 4,254,934 shares were subject to outstanding
options under the Stock Option Plan, 967,624 shares had been issued upon the
exercise of options under the plan and 477,442 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 four members of the Board i.e., the Option
Committee. The members of that committee are identified elsewhere in this Proxy
Statement. See, "Management of Company: Board and Committee Meetings." The
Option Committee was established by the Board in July 1997. Prior to that date,
the entire Board administered the plan.
The Option Committee selects optionees and determines the terms of each
option, including the number of shares covered by each option, the exercise
price and the option exercise period which, under the Stock Option Plan, may be
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.
Report on Repricing of Options/SARs
During the year ended December 31, 1998, 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.
Form 10-K/A
Page 16
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is composed of all members of the Board, and
the identity and relationships of the Board members to the Company are described
elsewhere in this Proxy Statement. See, "Management of Company: Directors and
Executive Officers"; "Ownership of Company"; and "Certain Transactions." During
the year ended December 31, 1998, Messrs. Duncan (a Named Executive Officer) and
Walp participated in deliberations of the Compensation Committee concerning
executive officer compensation other than deliberations concerning their own
compensation.
Compensation Committee Report on Executive Compensation
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 --
- 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 --
- Events specifically include but are not limited to
the status of the premise that all pay systems
correlate with the compensation goals and policies of
the Company
- Report from time to time, its findings to the Board
- Monitoring compensation-related publicity and public and
private sector developments on executive compensation
- Familiarizing itself with and monitoring the tax, accounting,
corporate, and securities law ramifications of the
compensation policies of the Company, including but not
limited to --
Form 10-K/A
Page 17
- Comprehending a senior executive officer's total
compensation package
- Comprehending the package's total cost to the Company
and its total value to the recipient
- Paying close attention to salary, bonuses, individual
insurance and health benefits, perquisites, loans
made or guaranteed by the Company, special benefits
to specific executive officers, individual pensions,
and other retirement benefits
- 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, 1998, 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 no bonuses were issued as
Form 10-K/A
Page 18
described elsewhere in this section. See, within this section, "-- Executive
Compensation."
During the year ended December 31, 1998 the Compensation Committee
monitored and provided direction for the Stock Purchase Plan and Stock Option
Plan. In addition, the Compensation Committee reviewed compensation levels of
members of management, evaluated the performance of management, and considered
management succession and related matters. The Compensation Committee reviewed
in detail all aspects of compensation for the Named Executive Officers and other
executive officers of the Company and its subsidiaries.
The practice of the Compensation Committee in future years will likely
be to continue to review directly the compensation and performance of Mr. Duncan
as chief executive officer and to review recommendations by Mr. Duncan for the
compensation of other senior executive officers.
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, 1993 through
December 31, 1998. 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
Form 10-K/A
Page 19
investment. Data for each succeeding fiscal year during the five-year
measurement period are plotted with points showing the cumulative total return
as of that point. The value of a shareholder's investment as of each point
plotted on a given line graph is the number of shares held at that point
multiplied by the then prevailing share price.
The Company's Class B common stock is traded over-the-counter on a more
limited basis. Therefore, comparisons similar to those previously described for
the Class A common stock are not directly available. However, the performance of
Class B common stock may be analogized to that of the Class A common stock in
that the Class B common stock is readily convertible into Class A common stock
by request to the Company.
Form 10-K/A
Page 20
Comparison of Five-Year Cumulative Return
Performance Graph for General Communication, Inc.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS PERFORMANCE GRAPH FOR GENERAL
COMMUNICATION, INC., NASDAQ STOCK MARKET INDEX FOR
UNITED STATES COMPANIES, AND NASDAQ TELECOMMUNICATIONS STOCK (1,2,3,4)
- -----------------------------------------------------------------------------------------------------------
Nasdaq Stock Market Nasdaq
Measurement Period Index for U.S. Telecommunication
(Fiscal Year Covered) Company ($) Companies ($) Stock ($)
- -----------------------------------------------------------------------------------------------------------
FYE 12/31/93 100.0 100.0 100.0
FYE 12/31/94 81.6 97.8 83.5
FYE 12/31/95 107.9 138.3 109.3
FYE 12/31/96 171.1 170.0 111.7
FYE 12/31/97 139.5 208.3 163.8
FYE 12/31/98 85.5 293.5 270.0
- ------------------------
1 The lines represent monthly index levels derived from compounded daily returns
that include all dividends.
2 The indexes are reweighted daily, using the market capitalization on the
previous trading day.
3 If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
4 The index level for all series was set to $100.00 on 12/31/1993.
- ------------------------
Form 10-K/A
Page 21
(3) Item 12, Part III. Security Ownership of Certain Beneficial Owners and
Management
The following text is extracted from the Proxy Statement:
OWNERSHIP OF COMPANY
Principal Shareholders
The following table sets forth, as of the Record Date, certain
information regarding the beneficial ownership of Company Class A common stock
and Class B common stock 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.
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 WorldCom (2) Class A 8,251,509 18.0 19.1 24.3
515 East Amite Street Class B 1,275,791 31.5
Jackson, MS 39201-2702
Ronald A. Duncan (2) Class A 967,887 (3) 2.1 2.9 6.5
Class B 460,002 (3) 11.4
Form 10-K/A
Page 22
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) (%)
- ------------------------ -------- ---------------- -------------- ----------------- -----------------
Robert M. Walp (2) Class A 373,845 (4) * 1.4 4.0
Class B 303,457 (4) 7.5
Aggregate Shares Subject Class A 9,448,587 (5) 20.1 (5) 23.0 (5) 34.5 (5)
to Voting Agreement Class B 2,030,591 (5) 50.1 (5)
GCI Qualified Employee Stock Class A 2,806,748 6.1 5.9 4.9
Stock Purchase Plan Class B 137,782 3.4
2550 Denali St., Ste. 1000
Anchorage, AK 99503
Kim Magness Class A 258,992 (6,7) * 2.2 10.1
c/o Raymond L. Sutton, Jr. Class B 844,848 (6,7) 20.8
303 East 17th Ave., Ste. 1100
Denver, CO 80203-1264
Gary Magness Class A 264,317 (6,7) * 2.2 10.1
c/o Raymond L. Sutton, Jr. Class B 843,448 (6,7) 20.8
303 East 17th Ave., Ste. 1100
Denver, CO 80203-1264
William C. Behnke Class A 146,488 (8) * * *
Class B --- ---
Ronald R. Beaumont Class A --- --- --- ---
Class B --- ---
Donne F. Fisher Class A 349,835 (9,10) * 1.6 5.5
Class B 437,688 (9,10) 10.8
William P. Glasgow Class A 22,0852 (11) * * *
Class B --- ---
G. Wilson Hughes Class A 513,046 (12) 1.1 1.0 *
Class B 2,763 (12) *
John M. Lowber Class A 331,003 (13) * * *
Class B 6,287 (13) *
Stephen R. Mooney Class A --- --- --- ---
Class B --- ---
Form 10-K/A
Page 23
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) (%)
- ------------------------ -------- ---------------- -------------- ----------------- -----------------
Carter F. Page Class A 83,987 (9,14) * * 2.5
Class B 198,246 5.2
Larry E. Romrell Class A --- --- * *
Class B 328 *
James M. Schneider Class A 42,500 (9) * * *
Class B --- ---
Dana L. Tindall Class A 196,044 (15) * * *
Class B 3,820 (15) *
All Directors and Executive Class A 3,376,970 (16) 7.2 9.5 21.0
Officers As a Group Class B 1,489,772 (16) 37.0
(14 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 is a party to Voting Agreement and can be deemed a
beneficial owner of all of the 2,030,591 shares of Class A common stock and
9,448,587 shares of Class B common stock that are subject to the Voting
Agreement. See, within this section, "--Changes in Control." MCI WorldCom
reported shared voting and investment power with respect to shares held by it
that are subject to the Voting Agreement. Messrs. Duncan and Walp reported
shared voting power with respect to shares held by each of them that were
subject to the Voting Agreement.
3 Includes 106,425 shares of Class A common stock and 6,251 shares of Class B
common stock allocated to Mr. Duncan under the Stock Purchase Plan. Does not
include 195,331 shares of Class A common stock held by the Company in
treasury pursuant to deferred compensation agreements with the Company. See,
"Management of Company: Executive Compensation." Does not include 18,560
shares of Class A common stock or 8,242 shares of Class B common stock held
by the Amanda Miller Trust, with respect to which Mr. Duncan has no voting or
investment power. Does not include 5,760 shares of Class A common stock or
27,020 shares of Class B common stock held by Dani Bowman, Mr. Duncan's wife,
of which Mr. Duncan disclaims beneficial ownership.
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.
Form 10-K/A
Page 24
6 Includes 76,688 shares of Class A and 620,608 shares of Class B common stock
owned by Magness FT Investment Company, LLC of which Mr. Magness owns a 50%
interest.
7 Includes 177,324 shares of Class A and 198,440 shares of Class B common stock
owned by Magness Securities, LLC of which Mr. Magness owns a 50% interest.
8 Includes 120,000 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.
9 Includes 12,500 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.
10 Includes 300,200 shares of Class A and 225,000 shares of Class B common stock
owned by Fisher Capital Partners, Ltd., the corporate general partner of
which is controlled by Mr. Fisher.
11 Does not include shareholdings of Prime II Management, Inc. and its affiliate
Prime Management, whose shareholdings included 278,031 shares of Company
Class A common stock and a warrant to purchase 425,000 shares of Class A
common stock, and does not include 158 shares beneficially owned by minor
children of Mr. Glasgow. Mr. Glasgow claims not to have or share investment
control of the shares held by these entities, and he disclaims any beneficial
ownership of the shares held by these entities or held by his children.
12 Includes 430,000 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 39,046 shares of Class A common stock and 2,763
shares of Class B common stock allocated to Mr. Hughes under the Stock
Purchase Plan. Does not include 37,437 shares of Class A common stock held in
treasury by the Company pursuant to the Hughes Agreement. See, "Management of
Company: Employment and Deferred Compensation Agreements."
13 Includes 190,000 shares which Mr. Lowber has the right to acquire within 60
days of the Record Date by the exercise of vested stock options. Includes
33,358 shares of Class A common stock and 6,017 shares of Class B common
stock allocated to Mr. Lowber under the Stock Purchase Plan.
14 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.
15 Includes 150,000 shares which Ms. Tindall has the right to acquire within 60
days of the Record Date by the exercise of vested stock options. Includes
45,785 shares of Class A common stock and 3,820 shares of Class B common
stock allocated to Ms. Tindall under the Stock Purchase Plan.
16 Includes 1,077,500 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 287,601 shares of Class A common stock and
24,412 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.
- ------------------------
Form 10-K/A
Page 25
Changes in Control
Preferred Stock Offering. With the Company's anticipated issuance and
sale of the Preferred Stock Shares pursuant to the Preferred Stock Offering
(see, "Certain Transactions: Preferred Stock Offering"), the purchasers of those
shares would have the right to vote on all matters presented for vote to the
holders of common stock of the Company on an as-converted basis. In addition,
the holders of the Preferred Stock Shares would have limited voting rights as a
class or otherwise to require the Company to request their consent on specific
actions which might be taken including amending the Restated Articles of
Incorporation of the Company ("Articles"), restructuring the Company, paying
dividends, and redeeming stock. Under the present Articles and the Article
Amendments (proposed in part to allow the effectiveness of certain terms of the
issuance of the Preferred Stock Shares), the Class A common stock and Class B
common stock must vote for directors and on those specific actions as one class,
with limited exceptions as set forth in the Alaska Corporations Code. These
exceptions center on action to amend the articles of incorporation of a
corporation in certain specific areas including changes in the designations,
preferences, limitations, or relative rights of shares of the class.
Furthermore, under the terms of the proposed Preferred Stock Offering, the
investors in the Preferred Stock Shares would have the right to convert their
shares into common stock of the Company. In addition, as a part of the terms of
the Preferred Stock Offering, the Board would increase its size from the present
nine directors to ten directors and would fill the vacancy with an individual to
be recommended by the holders of those shares. Should the holders of common
stock of the Company not elect that individual, the holders of the Preferred
Stock Shares would have the right to appoint an observer at the meetings of the
board. The Preferred Stock Offering further provided that these rights of the
holders of Preferred Stock Shares relating to the Board seat and observer are to
remain effective so long as any of the Preferred Stock Shares remain
outstanding.
Voting Agreement. As of the Record Date, the Voting Agreement provided,
in part, that the voting stock of the parties to it will each be voted at
shareholder meetings as a block in favor of two nominees proposed by MCI
WorldCom (succeeding to the rights of MCI Telecommunications Corporation) and
one nominee each for Messrs. Duncan and Walp. In addition, these parties to the
agreement agreed under certain conditions, to vote for one nominee to the Board
recommended by Prime Management. As of the Record Date and since Mr. Glasgow
(Prime Management's nominee in past annual meetings) was not up for election at
the Annual Meeting, the Company did not expect that Prime Management would
submit a nominee for the Annual Meeting. See, within this section, "-- Changes
in Control -- MCI Merger into WorldCom" and "Certain Transactions: 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
Form 10-K/A
Page 26
direct and indirect subsidiaries. Upon a default by the Company under such
agreements, the Company's lenders could gain control of the assets of the
Company, including the capital stock of the Company's subsidiaries. The Company
has been at all times since January 1, 1998 and up through the Record Date, in
compliance with all material terms of these credit facilities. Briefly, these
obligations and pledges are as follows.
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 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, "-- Senior Notes." The aggregate principal amount available to be
borrowed under the Credit Facility is $200 million (a portion of which is a
separate $50 million tranche. 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
Form 10-K/A
Page 27
The Credit Facility matures 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 Fiber Lease Facility as
described elsewhere in this section. See, within this section, "-- Fiber Lease
Facility."
As of December 31, 1998, the Company had outstanding indebtedness of
approximately $106.7 million under the Credit Facility. The total indebtedness
under the facility, as of the Record Date, was approximately $106.7 million.
Fiber Facility. In January 1998, the Company entered into a separate
credit facility to finance the construction of its new undersea fiber optic
cable ("Fiber Facility"). As of the Record Date, the total indebtedness incurred
under the facility was $75 million. Indebtedness incurred under the Fiber
Facility matures ten years after the initial closing of the facility and accrues
interest at a rate selected by the Company 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, an indirect wholly-owned subsidiary of the Company and an
unrestricted subsidiary under the Credit Facility and the Indenture associated
with the Senior Notes. See, within this section, "-- Senior Notes." Indebtedness
under the Fiber Facility is secured by substantially all assets of the
partnership. Other subsidiaries of the Company, including GCI Holdings and GCI,
Inc. have entered into various agreements intended to assure the ability of that
partnership to meet its obligations under the Fiber Facility, including leases
of capacity, keep-well agreements, and a completion guarantee.
As of December 31, 1998, the Company had outstanding indebtedness of
approximately $61.2 million under the Fiber Facility. The total indebtedness
under the facility, as of the Record Date, was approximately $75 million.
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 ("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 Communications Corporation, 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 Communications Corporation were pledged
as primary security for the financing. The 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 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
Form 10-K/A
Page 28
fiber capacity and a security interest in all of its outstanding stock. MCI
WorldCom (succeeding to the rights of MCI Communications Corporation) has a
second position security interest in the assets of Leasing Company. See, within
this section, "-- Changes in Control -- MCI Merger into WorldCom."
As of December 31, 1998, the Company had outstanding indebtedness of
approximately $3.7 million under the Fiber Lease Facility. The total
indebtedness under that facility, as of the Record Date, was $3.2 million.
TCI Merger into AT&T. TCI, i.e., Tele-Communications, Inc., a former
signatory to the Voting Agreement, announced in June 1998 its pending merger
with AT&T Corp ("AT&T"), with the latter corporation being the surviving
corporation, subject to approval of their respective shareholders. In March
1999, AT&T announced that the merger had been approved by the shareholders of
both corporations and that the Federal Communications Commission had imposed no
major conditions on the merger. Prior to the merger announcement, Kearns-Tribune
Corporation, a subsidiary of TCI, held 300,200 shares of Company Class A and
225,000 shares of Company Class B common stock. These shares were sold prior to
consummation of that merger. The Company expects that the two individuals
formerly identified as TCI's allocation to the Company's board through the
Voting Agreement, (Messrs. Fisher and Romrell) will continue as directors of the
Company. See, "Ownership of Company: Principal Shareholders."
MCI Merger into WorldCom. On September 14, 1998, MCI Communications
Corporation was acquired by WorldCom, Inc. through a merger with the surviving
corporation called MCI WorldCom, Inc., i.e., MCI WorldCom. It is the Company's
understanding that the contract rights of MCI Communications Corporation
directly or through its subsidiaries in its agreements with the Company have
been acquired by MCI WorldCom. Similarly, the stock ownership by MCI
Telecommunications Corporation has become ownership by MCI WorldCom.
Senior Notes
On August 1, 1997, GCI, Inc., an Alaska corporation and wholly-owned
subsidiary of the Company, publicly sold $180 million of unsecured 9.75% senior
notes ("Senior Notes"). The Senior Notes are due in the year 2007. GCI, Inc. was
formed specifically to issue the Senior Notes. The Senior Notes are subject to
the terms of an indenture ("Indenture") entered into by GCI, Inc. Upon the
occurrence of a change of control, as defined in the Indenture, GCI, Inc. is
required to offer to purchase the Senior Notes at a price equal to 101% of their
principal amount, plus accrued and unpaid interest.
Form 10-K/A
Page 29
The Indenture provides that the Senior Notes are redeemable at the
option of GCI, Inc. at specified redemption prices commencing in 2002. In
addition, prior to August 1, 2000, GCI, Inc. is permitted to redeem up to
33-1/3% of the Senior Notes out of the net cash proceeds of one or more public
equity offerings. The terms of the Senior Notes contain limitations on the
ability of GCI, Inc. and its restricted subsidiaries to incur additional
indebtedness, limitations on investments, payment of dividends and other
restricted payments and limitations on liens, asset sales, mergers, transactions
with affiliates and operation of unrestricted subsidiaries. The Indenture also
limits the ability of GCI, Inc. and its restricted subsidiaries to enter into or
allow to exist specified restrictions on the ability of GCI, Inc. to receive
distributions from restricted subsidiaries.
For purposes of the Indenture and the Senior Notes, the restricted
subsidiaries consist of all direct or indirect subsidiaries of the Company, with
the exception of the unrestricted subsidiaries. As of the Record Date, the
unrestricted subsidiaries were entities formed by the Company in conjunction
with its 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 Alaska United Fiber
System Partnership. See, within this section, "-- Changes in Control -- Pledged
Assets and Securities -- Fiber Facility" and "-- Pledged Assets and Securities
- -- Fiber Lease Facility."
Both the Company and GCI, Inc. have since January 1, 1998 and up
through the Record Date been in compliance with all material terms of the
Indenture including making timely payments on the obligations of GCI, Inc.
(4) Item 13, Part III. Certain Relationships and Related Transactions
The following text is extracted from the Proxy Statement:
CERTAIN TRANSACTIONS
Preferred Stock Offering
In March 1999, the Company entered into a letter of intent to issue and
sell 20,000 convertible, redeemable, accreting shares of its Preferred Stock
("Preferred Stock Shares") in an offering to certain prospective investors
("Preferred Stock Offering"). The proposed offering is conditioned on a summary
description of specific terms and conditions which the parties are to use as the
basis to prepare the formal terms of the offer and sale of the Preferred Stock
Shares. The prospective investors under the Preferred Stock Offering are Toronto
Dominion Investments, Inc. with
Form 10-K/A
Page 30
offices in the State of Delaware, and Prime VIII, L.P., a Delaware limited
partnership with offices in the State of Texas, or affiliates of these persons.
Under the terms of the letter, unless extended in writing, at the sole
discretion of Toronto Dominion, all obligations of Toronto Dominion under the
letter will expire automatically if definitive documentation is not executed and
delivered and the investment closed on or before April 30, 1999.
The term sheet provides that the purchase price for the Preferred Stock
Shares is $20 million, and those shares must be ranked senior to all other
classes of equity securities of the Company. The holders of the Preferred Stock
are to receive dividends at the rate of 8.5% of a liquidation preference payable
semiannually, in cash, or in additional fully paid shares of Preferred Stock.
The liquidation preference specified in the term sheet is $1,000 per share, plus
accrued but unpaid dividends and fees. The term sheet provides for mandatory
redemption twelve years from the date of closing on the sale of stock or upon
the occurrence of certain events. These events include an acceleration of
certain obligations of the Company or its subsidiaries having an outstanding
balance in excess of $5 million, a change in control of the Company,
commencement of bankruptcy or insolvency proceedings against the Company, a
breach of the agreement for the issuance of the Preferred Stock Shares, a
liquidation or dissolution of the Company, or a merger, consolidation or sale of
assets of the Company which would significantly and adversely affect the rights
and preferences of the Preferred Stock Shares.
The term sheet provides that the Preferred Stock Shares are convertible
at any time into shares of Class A common stock of the Company with a conversion
price which is the lesser of $6.00 per share or 120% of the average closing
price of the Company's common stock for the ten trading days prior to the
closing. The term sheet further provides for mandatory conversion, in the
discretion of the Company, at any time subsequent to the third anniversary of
the closing at a price equal to two times the conversion price previously
described, assuming the stock is trading at no less than two times the
conversion price. The term sheet includes in the event the Company is unable or
unwilling to redeem the Preferred Stock Shares subject to the terms of the
mandatory or optional redemption, the investors will have the option to convert
their Preferred Stock Shares into Class A common stock of the Company. The term
sheet further provides that the Preferred Stock Shares are exchangeable, in
whole but not in part, at the Company's option into subordinated debt with terms
and conditions comparable to those governing the Preferred Stock.
The term sheet provides that the holders of the Preferred Stock Shares
will have the right to vote on all matters presented for vote to the holders of
common stock on an as-converted basis. Additionally, the Preferred Stock
Offering requires as long as the Preferred Stock Shares remain outstanding and
unconverted, the holders of it will have the right to vote, as a class, and the
Company must obtain the
Form 10-K/A
Page 31
written consent of holders of a majority (or higher as required by Alaska law)
of that stock to take any of the following actions:
- Amend the Articles or amend or repeal the Bylaws in a way
which significantly and adversely affects the rights or
preferences of holders of the Preferred Stock Shares
- Merge or consolidate the Company with another entity or sell
all or substantially all of its assets, in any case where the
terms of that action would significantly and adversely affect
the rights, privileges, and preferences of those Preferred
Stock Shares
- Liquidate or dissolve the Company
- Declare or pay any dividends on capital stock of the Company
other than to the holders of the Preferred Stock Shares or set
aside any sum for any such purpose
- Purchase, redeem or otherwise acquire for value, or pay into
or set aside as a sinking fund for such purpose, any capital
stock of the Company, other than those Preferred Stock Shares,
or any warrant, option or right to purchase any such capital
stock, other than those Preferred Stock Shares
- Issue additional shares of Preferred Stock except as may be
required under the terms and conditions of the issuance of
those Preferred Stock Shares
Of these six specific actions, the Alaska Corporations Code, generally,
requires shareholder approval of the first three. However, the code allows a
corporation to specify in its articles of incorporation that its board shall
have the exclusive right to adopt, alter, amend or repeal its bylaws. The
Articles provide that the Board has that exclusive right with respect to the
Bylaws. The last three specific actions, typically, do not require shareholder
approval. That is, under the present Articles, the last three actions, normally,
are matters upon which the Board has authority to act.
With the issuance of the Preferred Stock Shares, the holders of that
stock may recommend one individual to the Board. The Board has agreed to expand
the size of the Board from the present nine to ten seats and, upon
qualification, appoint that individual to that new seat to serve until the next
shareholder meeting. At that shareholder meeting, the individual would be
required to stand for election to complete the term of the class of directors to
which the individual was assigned. The Board has also agreed to include the
individual recommended by those holders on the subsequent Board slate for
election of directors and actively to seek the election
Form 10-K/A
Page 32
of that individual to the Board. The Board has further agreed that, should the
holders of common stock of the Company not elect that individual, the holders of
Preferred Stock Shares will have the right to appoint an observer at the
meetings of the Board. The Board has also agreed that these rights of the
holders of Preferred Stock Shares relating to the Board seat and observer are to
remain effective so long as any of the Preferred Stock Shares remain
outstanding.
The term sheet provides that the holders of the Preferred Stock Shares
will have a right of first refusal to acquire up to a total of $5 million in the
next private financing that the Company might choose to initiate.
There are a number of conditions precedent to the Toronto Dominion's
investment in the Preferred Stock Shares, including a $5 million investment in
the Preferred Stock Shares by Prime VIII to complement the $15 million
investment by Toronto Dominion. In addition, the Company must seek and obtain
amendments to its senior credit facilities to the satisfaction of Toronto
Dominion. The term sheet provides that the Preferred Stock Shares shall be
convertible at any time into freely tradeable Class A common stock of the
Company. It is possible that this term will be accommodated through the
Company's entering to a registration rights agreement with the holders of the
Preferred Stock.
As of the Record Date, the Company was seriously considering making the
Preferred Stock Offering, i.e., complying with the requirements of the term
sheet, to the extent allowed by its present Articles. Subsequently, on April 21,
1999, the Board by resolution, approved the Statement of the Stock Designation
for the issuance of Series B Preferred Stock ("1999 Designation") in the
Preferred Stock Offering and the Series B Preferred Stock Agreement.
The 1999 Designation is in the form of a resolution adopted by the
Board. The designation sets forth the specific rights of holders of the
Preferred Stock Shares, i.e., the Series B Preferred Stock, including dividend
rights, liquidation rights, redemption rights, voting rights, and conversion
rights. The Series B Preferred Stock Agreement sets forth the terms of the sale
of the stock and representations and warranties of the parties, and includes
other rights of the holders of the stock, e.g., and registration rights of the
investors. Both documents generally fall within the scope of the term sheet as
previously outlined.
The Board filed the 1999 Designation with the Alaska Department of
Commerce and Economic Development in accordance with the Alaska Corporations
Code. Under the code, that filing constitutes an amendment to the Articles.
Management expects that, should the transaction go forward, the Company should
receive $20 million in return for the issuance of the Preferred Stock Shares.
Form 10-K/A
Page 33
Management of the Company is aware of certain limitations in the
present Articles which conflict with the voting rights sought by the investors.
Management has informed the investors of these limitations and has assured them
that the Board would adopt a resolution to amend the Articles to accommodate the
Preferred Stock Offering and would submit such an amendment to a vote of and
recommend its adoption by the Shareholders at the Annual Meeting. The Board
intends to complete these tasks.
MCI WorldCom Agreements
As of the Record Date, MCI WorldCom owned 19.1% of the outstanding
combined common stock of the Company, representing 24.3% of the total voting
power of that common stock. See "Ownership of Company: Changes in Control -- MCI
Merger into WorldCom." As the successor to MCI Communications Corporation, MCI
WorldCom has a significant business relationship with the Company, including the
following:
- Under the MCI WorldCom Traffic Carriage Agreement, the Company
agrees to terminate all Alaska-bound MCI WorldCom long
distance traffic and MCI WorldCom agrees to terminate all of
the Company's long distance traffic terminating in the lower
49 states, excluding Washington, Oregon and Hawaii
- MCI WorldCom licenses certain service marks to the Company for
use in Alaska
- MCI WorldCom, 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 leases from the Company all of the capacity owned by
the Company on the undersea fiber optic cable and the Company
leases such capacity back from MCI WorldCom
- MCI WorldCom has purchased certain service marks of the
Company
- The parties agree to share some communications network
resources and various marketing, engineering and operating
resources
The Company handles MCI WorldCom's 800 traffic originating in Alaska
and terminating in the lower 49 states and handles traffic for MCI WorldCom's
calling card customers when they are in Alaska, while MCI WorldCom originates
calls for the Company's calling card customers when they are in the lower 49
states. Revenues
Form 10-K/A
Page 34
attributed to the MCI WorldCom Traffic Carriage Agreement in 1998 were
approximately $35.9 million, or approximately 15% of total revenues.
WestMarc Agreements
The Company purchases services and uses certain facilities of WestMarc,
a wholly-owned subsidiary of TCI, now AT&T, 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, 1997
and 1998 were approximately $588,000 and $70,000, respectively. The Company
expects to continue purchasing services from WestMarc at levels comparable to
past purchases. See, "Ownership of Company: Change of Control -- TCI Merger into
AT&T."
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. 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 several cable systems in 1996,
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 those 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. The Company is unaware of the total shareholdings in the
Company by Prime Management and its affiliates. See, "Certain Transactions:
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 Company's cable systems in the
amount of $1,000,000 for the year ending October 31, 1997. The Company will pay
to Prime Management fees for similar services in the amount of $200,000 for the
nine-month period ended October 31, 1999 and $400,000 for the year ended October
31, 2000. For services under the Prime Management Agreement Prime II Management,
LP agreed to accept $125,000 and a stock warrant which provides for the purchase
of 425,000 shares of GCI Class A common stock at a price of $3.25 per share. The
warrant expires December 2003. Any portion of the management fee which is past
due shall bear interest at a rate per annum equal to 17.5% until paid.
Form 10-K/A
Page 35
In addition, the Company is required to reimburse Prime Management for any costs
and expenses incurred by it in connection with managing the Company's cable
systems, including travel and entertainment expenses (the 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, 2000.
Voting Agreement
The Voting Agreement was entered into in 1996 in connection with the
Company's acquisition of Prime Cable of Alaska, L.P., a Delaware limited
partnership, and other cable television systems in Alaska. It was amended in
December 1997 and presently provides that each party to the agreement must vote
the party's common stock for the nominees of the other parties in the election
of directors to the Board. As of the Record Date, the parties to the agreement
and the number of directors which each party may nominate under these terms were
as follows:
- Two directors nominated by MCI WorldCom
- One director nominated by Mr. Duncan
- One director nominated by Mr. Walp
In addition, through the 1997 amendment to the Voting Agreement, the
parties agreed to allow Prime II Management, L.P., a Delaware limited
partnership ("Prime Management") and a former party to the agreement, 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 earlier terminated, the Voting
Agreement will continue until
Form 10-K/A
Page 36
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.
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.
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.
Form 10-K/A
Page 37
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 under the Hughes Agreement. The Company is holding the shares in
treasury until they are distributed to Mr. Hughes. While in that status, the
shares are not voted and may not be disposed of by the Company or Mr. Hughes. In
May 1998, again at the request of Mr. Hughes, the Company purchased an
additional 30,000 shares of Company Class A common stock in the open market at a
price of $6.63 per share to fund the remaining balance of the vested portion of
Mr. Hughes' deferred compensation balance. Mr. Hughes' interest in 10,165 of
these shares had not yet vested as of the Record Date. See, "Management of
Company: Executive Compensation" and "-- Employment and Deferred Compensation
Agreements."
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. See,
"Management of Company: Executive Compensation" and "-- Employment and Deferred
Compensation Agreements."
Indebtedness of Management
A significant portion of the compensation paid to executive officers of
the Company is in the form of stock options. Because insider sales of capital
stock of the Company upon exercise of such options may have a negative impact on
the price of the Company's common stock, the Board has encouraged executive
officers of the Company not to exercise stock options and sell the underlying
stock to meet personal financial requirements. The Company has instead extended
loans to such executive officers secured by their shares or options. As of the
Record Date, total indebtedness of management was $2,226,000 (including accrued
interest of $252,391), $654,860 in principal amount of which was secured by
shares or options, $369,058 of which was otherwise secured by collateral of the
borrowers, and $950,000 of which was unsecured.
As of the Record Date, Mr. Duncan was indebted to the Company in the
aggregate principal amount of $950,000 plus accrued interest of $74,199
("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, an additional loan of
$150,000 made in December 1997 and an additional loan of $600,000 made in
October 1998. These loans accrue interest at the Company's variable rate under
the Company's
Form 10-K/A
Page 38
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.
The largest aggregate principal amount of indebtedness owed by Mr.
Duncan to the Company at any time since January 1, 1998 was $950,000, all 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,
$335,858, and $120,000, plus accrued interest of $23,161, $131,561, and $2,236
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 $48,000 loan entered into in
April 1993) borrowed for his personal requirements, which
amount bears interest at 9% per annum
- $50,000 borrowed in September 1995 for his personal
requirements, which amount bears interest at the Company's
variable rate under its senior credit facility
- $50,000 borrowed in January 1997 for his personal
requirements, which amount bears interest at the Company's
variable rate under the Company's senior credit facility
The $335,858 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, and an additional $5,500 in June
1998, all for his personal requirements. Mr. Dowling's loans are payable in full
on August 26, 2004.
Form 10-K/A
Page 39
The Company loaned Ms. Tindall $70,000 in January 1996 and an
additional $50,000 in May 1998, both for her personal requirements, which
amounts bear interest at the rate of 6.54% per annum, are secured by options to
purchase 150,000 shares of Class A common stock and are due and payable,
together with accrued interest, on January 1, 2001. So long as Ms. Tindall
remains in the employ of the Company, the accrued interest payment will be
waived at the beginning of each year. Interest forgiven for the year ended
December 31, 1998 was $6,639. Interest accrued as of the Record Date totaled
$2,236.
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, 1998 and through the Record Date was $148,000, $335,858, and
$120,000, 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 ("Hughes
Collateral"). The principal is due, together with accrued interest, on June 30,
2000. In August 1996 and April 1999, Mr. Hughes received advances of $25,000 and
$20,000, respectively, from the Company which bear interest at the Company's
variable rate under its senior credit facility. This indebtedness is secured by
the Hughes Collateral. The $25,000 advance is to be repaid by Mr. Hughes on June
30, 2000. The $20,000 advance is to be paid by him in June 1999. As of the
Record Date, the accrued interest under the advances was $13,640.
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 forgiven
for the year ended December 31, 1998 was $12,007. In July 1998, September 1998,
and February 1999, the Company loan Mr. Lowber, $46,819, $33,935, and $103,303,
respectively. The proceeds of the loans were used to exercise a stock option
agreement and pay income taxes resulting from exercise. The notes are secured by
the cash surrender value of a life insurance policy, bear interest at the
Company's variable rate under its senior credit facility and are due on June 30,
2000. Interest accrued as of the Record Date totalled $7,594.
Form 10-K/A
Page 40
Registration Rights Agreements
The Company is a party to registration rights agreements ("Registration
Rights Agreements") with MCI WorldCom (succeeding to the rights of MCI
Telecommunications Corporation) and certain other persons. Since January 1, 1998
and up through the Record Date, the Company believed the only party to those
agreements who owned of record or beneficially more than five percent of any
class of the Company's common stock was MCI WorldCom. None of these persons,
other than those identified elsewhere in this Proxy Statement, were directors,
officers, nominees for election as directors, or members of the immediate family
of such directors, officers, or nominees of the Company. All of the MCI WorldCom
shareholdings of the Company are subject to its Registration Rights Agreement
with the Company. See, "Management of Company: Directors and Executive Officers"
and "Ownership of Company."
The terms of the Registration Rights Agreements vary, although they
generally share several common terms. The basic terms are as follows.
If the Company proposes to register any of its securities under the
Securities Act of 1933, as amended ("Securities Act") for its own account or for
the account of other shareholders, the Company must notify all of the holders
under the Registration Rights Agreements of the Company's intent to register
such common stock. In addition, the Company must allow the holders an
opportunity to include their shares ("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 Agreement between the Company and MCI WorldCom,
dated March 31, 1993, specifically requires the Company to effect no more than
two registrations at the request of MCI WorldCom. However, each registration
request by MCI WorldCom must include Registrable Shares having an aggregate
market value of more than $500,000. MCI WorldCom executed a second Registration
Rights Agreement with the Company dated October 31, 1996, pursuant to which the
Company is required to effect no more than two registrations at the request of
MCI WorldCom, each request to cover Registrable Shares having an aggregate
market value of at least $1.5 million.
Form 10-K/A
Page 41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GENERAL COMMUNICATION, INC.
By:/s/
Ronald A. Duncan, President
(Chief Executive Officer)
Date: April 30, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
Signature Title Date
- ------------------------------------ ---------------------------------- --------------
/s/ Chairman of the Board and Director April 28, 1999
- ------------------------------------
Carter F. Page
/s/ Vice Chairman of the Board and April 28, 1999
- ------------------------------------ Director
Robert M. Walp
/s/ President and Director, (Chief April 28, 1999
- ------------------------------------ Executive Officer)
Ronald A. Duncan
Director April , 1999
- ------------------------------------
Ronald R. Beaumont
/s/ Director April 28, 1999
- ------------------------------------
Donne F. Fisher
Form 10-K/A
Page 42
Signature Title Date
- ------------------------------------ ---------------------------------- --------------
/s/ Director April 28, 1999
- ------------------------------------
William P. Glasgow
/s/ Director April 29, 1999
- ------------------------------------
Stephen R. Mooney
/s/ Director April 29, 1999
- ------------------------------------
Larry E. Romrell
/s/ Director April 28, 1999
- ------------------------------------
James M. Schneider
/s/ Senior Vice President, Chief April 28, 1999
- ------------------------------------ Financial Officer, Secretary and
John M. Lowber Treasurer (Principal Financial
Officer)
/s/ Vice President and Chief April 28, 1999
- ------------------------------------ Accounting Officer (Principal
Alfred J. Walker Accounting Officer)
Form 10-K/A
Page 43