PROXY PROXY
GENERAL COMMUNICATION, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
June 8, 2000
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated May 4, 2000 and holding Class A common stock, Class B common
stock, or Series B convertible, redeemable, accreting preferred stock of General
Communication, Inc. ("Company") of record determined as of April 12, 2000,
hereby appoints Ronald A. Duncan, on behalf of the board of directors of the
Company, and each of them, the proxy of the undersigned, with full power of
substitution, to attend that annual meeting of shareholders, to be held at
Josephine's Restaurant on the 15th floor in the Sheraton Hotel at 401 East 6th
Avenue in Anchorage, Alaska at 6:00 p.m. (Alaska Daylight Time) on Thursday,
June 8, 2000 and any adjournment or adjournments of that meeting. The
undersigned further directs those holders of this Proxy to vote at that annual
meeting, as specified in this Proxy, all of the shares of stock of the
undersigned in the Company, which the undersigned would be entitled to vote if
personally present, as follows:
1. To elect three directors, each for three-year terms, as part of Class
II of the ten-member classified board of directors and to elect one
director to complete the remaining two years of the three-year term in
Class I of that board, as identified in this Proxy:
| | FOR all nominees listed | | WITHHOLD AUTHORITY to
below (except as marked vote for all nominees
to the contrary) listed below
(a) Class I: Paul S. Lattanzio
(b) Class II: Ronald A. Duncan
Stephen R. Mooney
Larry E. Romrell
INSTRUCTIONS:
To withhold authority under this Proxy to vote for one or more
individual nominees, draw a line through the name of the nominee for which you
wish authority to be withheld.
Should the undersigned choose to mark this Proxy as withholding
authority to vote for one or more nominees as listed above, this Proxy will,
nevertheless, be used for purposes of establishing a quorum at the annual
meeting of shareholders.
2. To approve amendments to the Company's Restated Articles of
Incorporation generally relating to the terms under which the
Company's board of directors may approve issuance of Company preferred
stock; and to ratify and otherwise approve action by the board
amending those articles through repealing and otherwise deleting a
statement of stock designation as issued and filed with the State of
Alaska, relating to a 1991 issuance of preferred stock which is no
longer outstanding:
| | FOR | | AGAINST | | ABSTAIN
3. To approve and otherwise ratify several amendments to the Company's
Revised 1986 Stock Option Plan, including increasing the number of
shares of the Company's common stock authorized and allocated to the
plan by 1.5 million shares of Class A common stock:
| | FOR | | AGAINST | | ABSTAIN
4. To transact in the proxyholder's discretion such other business as may
come before that annual meeting of shareholders, including the
approval (but not the ratification) of the minutes of the June 10,
1999 annual meeting of shareholders of the Company and other matters
as described in the Proxy Statement. As of the record date, the Board
was unaware of any other business to be brought at the meeting other
than the approval of those minutes.
The undersigned hereby ratifies and confirms all that the proxyholder
or the holder's substitute lawfully does or causes to be done by virtue of this
Proxy and hereby revokes any and all proxies given prior to this Proxy by the
undersigned to vote at the annual meeting of shareholders or any adjournments of
the meeting. The undersigned acknowledges receipt of the Notice of the Annual
Meeting and the Proxy Statement accompanying that notice.
DATED:
Signature of Shareholder
Print Name:
Signature of Shareholder
Print Name:
Please date this Proxy, sign it above as your name appears printed
elsewhere on this Proxy, and return it in the enclosed envelope which requires
no postage. Joint owners should each sign personally. When signing as attorney,
executor, trustee, guardian, administrator, or officer of a corporation or other
entity, please give that title.
The board recommends a vote "for" proposal nos. (1), (2) and (3). This
Proxy, when properly executed, will be voted as directed. If no direction is
made, it will be voted "for" proposal nos. (1), (2) and (3). If any other
business is properly presented at the annual meeting, this Proxy will be voted
in accordance with the best judgment and discretion of the proxyholder.
GENERAL COMMUNICATION, INC.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
(907) 265-5600
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 8, 2000
This Proxy Statement is submitted with the Notice of Annual Meeting of
Shareholders of General Communication, Inc. ("Company") where the annual meeting
("Annual Meeting") is to be held at Josephine's Restaurant on the 15th floor in
the Sheraton Hotel at 401 East 6th Avenue in Anchorage, Alaska at 6:00 p.m.
(Alaska Daylight Time) on Thursday, June 8, 2000.
This Proxy Statement, the Letter to Shareholders, Notice of Annual
Meeting, and the accompanying Proxy are first being sent or delivered to
shareholders of the Company on or about May 4, 2000. A copy of the Company's
Annual Report, in the form of the Company's Form 10-K (as amended by Form
10-K/A) for the year ended December 31, 1999, accompanies this Proxy Statement.
See, "Annual Report."
DATED: May 4, 2000
TABLE OF CONTENTS
Page
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COMPANY ANNUAL MEETING........................................................3
MANAGEMENT OF COMPANY........................................................25
CERTAIN TRANSACTIONS.........................................................47
OWNERSHIP OF COMPANY.........................................................59
LITIGATION AND REGULATORY MATTERS............................................66
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS.............................66
ANNUAL REPORT................................................................66
FUTURE SHAREHOLDER PROPOSALS.................................................67
Proxy Statement
Page 2
COMPANY ANNUAL MEETING
Voting Procedure
Overview. This Proxy Statement is furnished in connection with the
solicitation by the Company's board of directors ("Board") of proxies from the
holders of the Company's outstanding Class A and Class B common stock and
outstanding Series B convertible, redeemable, accreting preferred stock for use
at the Annual Meeting. The Proxy Statement, Letter to Shareholders, Notice of
Annual Meeting and accompanying Board proxy ("Proxy") are first being sent or
delivered to shareholders of the Company on or about May 4, 2000. A copy of the
Company's Annual Report, in the form of the Company's Form 10-K (as amended by
Form 10-K/A) for the year ended December 31, 1999, accompanies this Proxy
Statement. See, "Annual Report."
Time and Place. The Annual Meeting will be held at Josephine's
Restaurant on the 15th floor in the Sheraton Hotel at 401 East 6th Avenue in
Anchorage, Alaska at 6 p.m. (Alaska Daylight Time) on Thursday, June 8, 2000. A
reception for shareholders will commence at 5 p.m. at that location.
Purpose. As indicated in the Notice of Annual Meeting, the following
matters will be considered and voted upon at the Annual Meeting:
- Electing three directors in Class II of the classified Board for
three-year terms and electing one director to complete the
remaining two years of the three-year term in Class I of the board
- Approving certain amendments ("Article Amendments") to the
Company's Restated Articles of Incorporation ("Articles") and
ratifying and otherwise approving action of the Board amending the
Articles through repealing and otherwise deleting a statement of
stock designation as filed with the State of Alaska relating to a
1991 issuance of preferred stock no longer outstanding ("1991
Designation")
- Approving and otherwise ratifying certain amendments ("Plan
Amendments") to the Company's Restated 1986 Stock Option Plan
("Stock Option Plan")
- Transacting such other business as may properly come before the
meeting and any adjournment or adjournments of it
Proxy Statement
Page 3
Outstanding Voting Securities. Only holders of Class A and Class B
common stock and Series B preferred stock as of the record date for the Annual
Meeting ("Shareholders") will be entitled to notice of, and to vote at, the
Annual Meeting. The Board has chosen the close of business on April 12, 2000 as
the record date for the Annual Meeting ("Record Date"). As of the Record Date
and under the Articles, the outstanding stock of the Company was divided into
three categories:
- Class A common stock, for which the holder of a share is entitled
to one vote
- Class B common stock, for which the holder of a share is entitled
to ten votes
- Series B preferred stock, for which the holder has limited voting
rights
On the Record Date, there were 47,101,955 shares of Class A common
stock and 3,908,149 shares of Class B common stock outstanding and entitled to
be voted at the Annual Meeting. In addition, there were, as of that date, 20,000
shares of Series B preferred stock outstanding. Under the terms of issuance of
the shares of Series B preferred stock in April 1999, the shares are entitled,
with limited exception, to a number of votes at the meeting equal to the largest
number of full shares of Class A common stock into which the Series B preferred
stock may be converted. As of the Record Date, that number of equivalent shares
of Class A common stock (excluding equivalent shares of Class A common stock
representing dividends paid in Series B preferred stock accrued through that
date) was 3,603,603 shares.
Voting Rights, Votes Required for Approval. At the Annual Meeting, a
simple majority of the issued and outstanding Company common stock and preferred
stock entitled to be voted as of the Record Date will constitute a quorum. As an
example, since there were a total of 47,101,955 shares of Class A common stock,
3,908,149 shares of Class B common stock and 20,000 shares of Series B preferred
stock issued and outstanding and entitled to be voted as of the Record Date, a
quorum would be established by the presence of Shareholders, directly or by
proxy, holding at least 2,208,432 shares of Class A common stock, all 3,908,149
shares of Class B common stock, and all 20,000 shares of Series B Preferred
Stock. See "Certain Transactions: Series B Preferred Stock."
Because of the ten-for-one voting power of the Class B common stock,
shares of that stock have a substantial impact on the voting power for purposes
of taking votes on matters addressed at the Annual Meeting. The total number of
votes to which Class A common stock (including the issued and outstanding Series
B preferred stock on an as-
Proxy Statement
Page 4
converted basis) and Class B common stock were entitled as of the Record Date
were 50,705,558 and 39,081,490, respectively.
Adoption of the Annual Meeting agenda items pertaining to electing
directors and amending the Stock Option Plan each will require an affirmative
vote by the holders of at least a simple majority of the voting power of the
issued and outstanding Class A common stock (including the issued and
outstanding Series B preferred stock on an as-converted basis) and Class B
common stock entitled to vote as of the Record Date. Under the Articles, voting
on each of these items must be by the Class A and Class B common stock and the
Series B preferred stock voting as a group. The Articles limit the aggregate
voting rights allowed to holders of preferred stock of the Company, unless
otherwise provided by law, to no more than 5% of the aggregate voting rights of
all Class A and Class B common stock issued and outstanding at the time. As of
the Record Date, this limitation was 4,309,172 votes for the entire number of
shares of Series B preferred stock, issued and outstanding, as the only
outstanding preferred stock of the Company. This limitation applies to voting on
the election of directors and other business to come before the Annual Meeting
as previously described.
Adoption of the Article Amendments as set forth in the agenda for the
Annual Meeting will require an affirmative vote of the holders of at least a
simple majority of the voting power of the issued and outstanding Class A and
Class B common stock and the Series B preferred stock, voting as a group. In
addition, adoption of the Article Amendments will require a separate affirmative
vote by class or series of the holders of at least a simple majority of the
voting power of that issued and outstanding Class A common stock, Class B common
stock and Series B preferred stock. In this instance, the previously described
5% limitation on voting power of the holders of Series B preferred stock does
not apply.
Under the terms of issuance of the Series B preferred stock, written
consent of the holders of at least 80% of the shares outstanding of that stock
is required to amend the Articles. The Company will seek that consent prior to
holding the Annual Meeting.
The Articles expressly provide for non-cumulative voting in the
election of directors.
As of the Record Date, the number and percentage of outstanding shares
entitled to vote held by directors and executive officers of the Company and
their affiliates were 3,692,900 shares of Class A common stock (not including
the issued and outstanding Series B preferred stock on an as-converted basis),
constituting approximately 7.6% of the outstanding stock in that class,
1,502,248 shares of Company Class B common stock, constituting approximately
38.4% of the outstanding stock in that class, and all 20,000 shares of the
outstanding Series B preferred stock.
Proxy Statement
Page 5
As of the Record Date, 9,498,608 shares of Company Class A common
stock, constituting approximately 20.0% of the outstanding stock in that class,
and 2,030,591 shares of Company Class B common stock, constituting approximately
52.0% of the outstanding stock in that class, were subject to a voting agreement
("Voting Agreement"). Also as of the Record Date, the voting power of the common
stock of the Company subject to the Voting Agreement was approximately 34.6% of
the effective voting power of the combined outstanding Class A and Class B
common stock of the Company. As of the Record Date, when combined, the voting
power held by management of the Company and the parties to the Voting Agreement
constituted approximately 48.9% of the outstanding voting power of Class A and
Class B common stock and Series B preferred stock of the Company. See,
"Management of Company: Voting Agreement."
Messrs. Duncan and Mooney are Board nominees recommended by the parties
to the Voting Agreement in accordance with the terms of that agreement. In
particular, Mr. Mooney is recommended at the request of MCI Telecommunications
Corporation ("MCI"), an affiliate of MCI WorldCom, Inc. (together with its
subsidiaries, "MCI WorldCom"). Mr. Duncan, as a party to the Voting Agreement,
has recommended himself as a Board nominee. See, "Management of Company: Voting
Agreement."
Mr. Lattanzio, management's nominee for the Class I position on the
Board, is proposed by the Board at the request of the holders of Company Series
B preferred stock to fill the vacancy caused by the resignation of Christopher
Shipman just prior to the Record Date in April 2000. The holders of Company
Series B preferred stock had requested the Board to appoint Mr. Shipman as a
director in April 1999 pursuant to the terms of the Preferred Stock Offering.
The Board did appoint Mr. Shipman, and he did serve as a director of the Company
until his resignation for personal reasons unrelated to the Company. Management
has included Mr. Lattanzio in its proposed slate for the Board pursuant to the
terms of the Preferred Stock Offering. See, "Certain Transactions: Series B
Preferred Stock."
In past annual meetings, the parties to the Voting Agreement have voted
for management's slate of nominees for the Board. Management has no reason to
believe the parties to the present Voting Agreement will not vote for
management's slate of nominees for the Board as identified in this Proxy
Statement. See, "Management of Company: Voting Agreement"; "Ownership of
Company: Principal Shareholders" and "-- Changes in Control--Voting Agreement."
Proxies. The accompanying form of Proxy is being solicited on behalf of
the Board for use at the Annual Meeting.
Proxy Statement
Page 6
Subject to the conditions described in this section, the shares
represented by each Proxy executed in the accompanying form of Proxy will be
voted at the Annual Meeting in accordance with the instructions in that Proxy.
The Proxy will be voted for management's nominees for directors as a classified
board and as otherwise specified in the Proxy, unless a contrary choice is
specified.
The form Proxy also gives discretionary authority to the holder on
other matters. See, within this section, "--Other Business."
All votes cast by Shareholders, directly or by Proxy completed and
executed in accordance with the instructions on the Proxy, will be counted at
the Annual Meeting. A Proxy having one or more clearly marked abstentions on one
or more of the proposals to be addressed at the Annual Meeting will be honored
as an abstention. However, such a Proxy will be counted for purposes of
establishing a quorum at the Annual Meeting. A Proxy having no indication of a
vote on one or more of the proposals to be addressed at the Annual Meeting will
be voted "for" the corresponding proposals.
A Proxy executed in the form enclosed may be revoked by the Shareholder
signing the Proxy at any time before the authority granted under the Proxy is
exercised by giving written notice to the Secretary of the Board, whose address
is as follows: General Communication, Inc., 2550 Denali Street, Suite 1000,
Anchorage, Alaska, ATTN: Corporate Secretary. The notice may also be delivered
to the Secretary prior to a vote using the Proxy at the Annual Meeting.
Thereafter the Shareholder signing the Proxy may vote in person or by other
proxy as provided by the revised Bylaws of the Company in effect as of the
Record Date ("Bylaws"). The Shareholder signing the Proxy may also revoke that
proxy by a duly executed proxy bearing a later date.
The expenses of the Proxy solicitation made by the Board for the Annual
Meeting, including the cost of preparing, assembling and mailing the Notice of
Annual Meeting, Proxy, Proxy Statement, and return envelopes, the handling and
tabulation of proxies received, and charges of brokerage houses and other
institutions, nominees or fiduciaries for forwarding such documents to
beneficial owners, will be paid by the Company. In addition to the mailing of
these proxy materials, solicitation may be made in person or by telephone,
telecopy, telegraph, or electronic mail by officers, directors, or regular
employees of the Company, none of whom will receive additional compensation for
that effort.
Proxy Statement
Page 7
Director Elections
Overview. The Board is composed of ten directors classified into the
following three classes with the number of members as indicated: Class I (four
members), Class II (three members), and Class III (three members).
At the Annual Meeting, three individuals will be elected to positions
in Class II of the Board for three-year terms, and one individual will be
elected to a position in Class I of the Board to complete the remaining two
years of the three-year term in that class. The individuals so elected will
serve subject to the provisions of the Bylaws and until the election and
qualification of their respective successors.
Management believes that its proposed nominees for election as
directors are willing to serve as such. It is intended that the proxyholders
named in the accompanying form of Proxy or their substitutes will vote for the
election of these nominees unless specifically instructed to the contrary.
However, if any nominee at the time of the election is unable or unwilling or is
otherwise unavailable for election and as a consequence, other nominees are
designated, the proxyholders named in the Proxy or their substitutes will have
discretion and authority to vote or refrain from voting in accordance with their
judgment with respect to other nominees.
Recommendation of Board. Management and the Board recommend to the
Shareholders a vote "FOR" the slate of four individuals as directors in the
positions up for election at the Annual Meeting, i.e., a vote for item number 1
of the Proxy. This slate of individuals and the respective classes on the Board
for which they are nominated are as follows:
- Paul S. Lattanzio (Class I)
- Ronald A. Duncan (Class II)
- Stephen R. Mooney (Class II)
- Larry E. Romrell (Class II)
Background and other information on each of the nominees is provided elsewhere
in this Proxy Statement. See, "Management of Company."
Proxy Statement
Page 8
Article Amendments, Repeal of 1991 Designation
Article Amendments. The Article Amendments are proposed amendments to
the Company's Restated Articles of Incorporation and center on Article IV. That
article relates to the capital stock of the Company. Specifically, the
amendments revise Article IV, Section (c), dealing with authority of the Board
to establish the terms of issuance of preferred stock. The amendments also
repeal Article IV, Section (e), dealing with a limitation on that authority.
With these amendments, the Board will be given extended authority to fashion the
terms of an issuance of a series of preferred stock.
Management proposed the adoption of a portion of the Article Amendments
(revising Article IV, Section (c)) at the 1999 annual meeting of shareholders of
the Company. The proposal received an affirmative vote in excess of a simple
majority of the votes cast for Class A common stock, and separately for Class B
common stock, and for Classes A and B common stock voting as a group. In
addition, the proposal received an affirmative vote of more than a simple
majority of the outstanding Class B common stock. While a simple majority of the
Class A common stock represented at the meeting was voted in favor of the
proposal, not enough of the Class A common stock was voted such that more than a
simple majority of the outstanding Class A common stock was voted in favor of
the proposal, as required. Management believes that adoption of the Article
Amendments is in the best interest of the Company and is again placing the
matter before the Shareholders for adoption.
Under Article IV, the Company is authorized to issue, in addition to
Class A and Class B common stock, up to one million shares of preferred stock.
The terms and conditions under which the Company preferred stock may be issued
are set forth in Article IV of the Articles. Those terms and conditions do not
expressly include an exclusive right to elect additional directors to the Board,
except when the Company is in non-compliance with specific terms in the issuance
of the Company preferred stock. Furthermore, Article IV limits the voting power
of Company preferred stock to no more than 5% of the voting power of the
outstanding common stock of the Company.
Article IV, Section (c) includes a general authorization in the Board
to issue Company preferred stock, subject to rights, preferences and limitations
of the shares of each series as the Board may establish. The subsection also
includes a list of specific terms to which this authority extends. The Article
Amendments delete this specific list.
The specific terms included in the list are as follows:
- Number of shares initially constituting a series
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- Extent, if any, to which the series may have voting rights,
subject to a limitation on voting rights in preferred stock as
compared to outstanding common stock of the Company
- Dividend rights
- Rights in the event of liquidation or dissolution of the Company
or upon distribution of its assets
- Conversion privileges
- Redemption rights
- Voting rights in the election of directors under specific
circumstances
- Limited voting rights on other specific actions by the Company
- Other preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions on
such stock
This list has been in the Articles for a number of years and was last
amended in 1991. The list does not expand the authority of the Board otherwise
set forth in the preamble text of Article IV, Section (c). It merely sets forth
specific authority of the Board as including those items in the list. In so
doing, Article IV, Section (c) suggests ways that the Board may fashion the
terms and conditions of a specific series of Company preferred stock, with one
exception as set forth in Article IV, Subsection (c)(ii).
Under Subsection (c)(ii), a limitation in the voting rights of holders
of Company preferred stock relative to voting rights of holders of Company
common stock is set forth. It provides that the voting rights, if any, of the
Company preferred stock to be issued and any Company preferred stock which is
outstanding at the time must not exceed 5% of the aggregate voting rights for
all Company common stock issued and outstanding. The Article Amendments delete
this voting rights limitation in its entirety. With that elimination, the Board
may establish, as allowed by law, the extent, if any, to which a series of
Company preferred stock may have voting rights, regardless of the relative
voting strength compared to the outstanding Company common stock.
The Article Amendments also include deletion of Article IV, Section
(e). That section presently clarifies the limited authority of the board of
directors relating to issuance of preferred stock. That is, it presently
provides that the board is expressly authorized to vary the provisions on
preferred stock, subject to the specific limitations
Proxy Statement
Page 10
that shares of a series must be of equal rank and identical in all respects
except as to dates from which dividends are cumulated, if dividends are
provided. The itemization of authority in Section (e) is counter to the approach
taken in the proposed revision to Section (c) to extend to the Board more
general authority to fashion the terms and conditions of a series of preferred
stock. The Article Amendments, therefore, repeal Section (e) in deference to the
proposed revision of Section (c).
One of the terms of the Company's 1999 offer and sale of the Series B
preferred stock ("Preferred Stock Offering") would allow the holders of Series B
preferred stock the exclusive right to vote on certain specific actions of the
Company. See, "Certain Transactions: Series B Preferred Stock." That provision,
if implemented would be in conflict with the present voting rights limitation of
Article IV, Subsection (c)(ii). The deletion of the limitation will expressly
accommodate the intended terms of that offering.
The Board believes the Article Amendments will provide it greater
flexibility in fashioning terms and conditions of future issuances of Company
preferred stock, if any, as well as certain of the terms of the Preferred Stock
Offering, to meet the financial needs of the Company in an increasingly
competitive telecommunications industry.
While the Article Amendments are being made, in part, to accommodate
the requirements of the Preferred Stock Offering as discussed elsewhere in this
Proxy Statement, they can be used in the future for other offerings of Company
preferred stock authorized by the Board. See, within this section "--Preferred
Stock Offering" and elsewhere, "Certain Transactions: Series B Preferred Stock."
Ratification of Repeal of 1991 Designation. In April 1999, the Board
resolved to cancel and otherwise delete the 1991 Designation and, in preparation
for the Annual Meeting, reaffirmed that action on March 14, 2000. That
designation sets forth specific terms of and was used as the basis for the
issuance of Series A preferred stock in 1991. That stock was later retired, and
no other Company preferred stock has since been issued under that designation.
The Board seeks Shareholder ratification and otherwise approval of the repeal
and deletion of the 1991 Designation from the Articles.
Under the Alaska Corporations Code, if articles of incorporation
expressly vest authority in the corporation's board and to the extent that the
corporation's articles do not establish series and fix terms and determine
variations in relative rights and preferences between series, the board may
divide a class into series. Under that code and the corporation's articles, that
board may fix and determine the relative rights and preferences of the shares of
a series.
The Articles set forth general terms under which Company preferred
stock may be issued and expressly authorizes the Board to provide for the
issuance of Company
Proxy Statement
Page 11
preferred stock. However, the Articles do not specifically fix and determine the
relative rights and preferences between series. The Articles vest authority in
the Board to establish series and to fix and to determine variations in the
relative rights and preferences between series in accordance with guidelines set
forth in the Articles.
The Board adopted the 1991 Designation, filed it with the Alaska
Department of Commerce and Economic Development (presently named the Alaska
Department of Community and Economic Development) in accordance with the Alaska
Corporations Code, and issued Series A preferred stock. Under that code, the
effect of that filing constituted an amendment to the Articles. The stock issued
in the 1991 Designation was subsequently retired, and no other Company preferred
stock has been issued pursuant to that designation. The Board has chosen to
repeal and otherwise delete the 1991 Designation in that it has no further use
for the designation.
Shareholder approval of a statement of stock designation adopted by a
corporation's board in a manner as previously described is not required under
the Alaska Corporations Code. Once a designation has been made a part of the
corporation's articles of incorporation, the board has discretion whether or not
to issue stock pursuant to that designation. However, to repeal the designation
requires an amendment to the articles. Therefore, the Board seeks ratification
and otherwise approval from the Shareholders to repeal the 1991 Designation and
formally to delete it from the Articles.
Preferred Stock Offering. Certain terms of the Preferred Stock Offering
required the Board to seek at the 1999 annual meeting shareholder approval of
amendments to the Articles similar to the Article Amendments pertaining to
limitations on voting rights of holders of Company preferred stock. In
particular, the provision of Article IV, Subsection (c)(ii) limiting the voting
rights of Series B preferred stock prohibits the holders of that stock from
voting as a class or otherwise requiring the consent of those holders before the
Company may take specific action on matters normally requiring a vote of
shareholders.
The portion of the Article Amendments specifically eliminating
Subsection (c)(ii) would allow the Company to agree to inclusion of a portion of
the terms of issuance under the Preferred Stock Offering. These terms
specifically require that the Company obtain the consent of the holders of those
shares on any of the following actions:
- Merging or consolidating the Company with another entity or
selling all or substantially all of the Company assets, in any
case where the term of that action would significantly and
adversely affect the rights, privileges, and preferences of the
Series B preferred stock
- Liquidating or dissolving the Company
Proxy Statement
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In addition, the Article Amendments would allow the Company to agree to
inclusion of other terms permitting holders of that preferred stock to vote on
other matters brought before the shareholders of the Company, without being
subject to the 5% limitation on voting rights presently set forth in Article IV,
Subsection (c)(ii). Such matters may include voting for directors and amendments
to the Stock Option Plan.
The Preferred Stock Offering includes a provision that, should Alaska
law be changed to allow the Company to issue equity redeemable at the option of
the holder of that equity, the parties to the offering would agree to enter into
appropriate amendments to the offering to permit the holders to demand
redemption at any time after the fourth anniversary of the issuance of the
Series B preferred stock or upon occurrence of a "triggering event" and to
remove the provision of the Preferred Stock Offering which increases the
dividend rate on that stock to 17% per annum after that fourth anniversary. That
is, the terms of the offering subject the Company to immediate mandatory
redemption of the Series B preferred stock should any one or more of the
triggering events occur. Those events pertain to voting rights on merger,
consolidation or sale of assets, and liquidating or dissolving the Company. They
are further described elsewhere in this Proxy Statement. See, Certain
Transactions: Series B Preferred Stock."
The Company sought and obtained such an amendment to the Alaska
Corporations Code. In March 2000, the Alaska legislature enacted revisions to
that code to expand share redemption at the option of a corporation to include
share redemption, in the context of preferred stock, at the option of the
holder, to the extent and upon the happening of one or more specified events, or
upon the vote of at least majority of the outstanding shares of the class or
series to be redeemed. This revision to the code becomes effective on July 13,
2000.
Upon these revisions to the Alaska Corporations Code becoming
effective, the Company will seek revision of the present terms of the Preferred
Stock Offering as previously described or otherwise issue a new series of
preferred stock in exchange for all of the outstanding Series B preferred stock
which includes those revised terms. Assuming the Article Amendments are approved
by the Shareholders by at least the required majority, the Company intends to
seek revision of the present terms of the offering to include the expanded
voting rights to holders of that preferred stock. That is, the Company would
seek elimination of two events from the definition of triggering events
(previously descried) in negotiations with the holders of the Series B preferred
stock.
The terms of the Preferred Stock Offering are further described
elsewhere in this Proxy Statement. See, "Certain Transactions: Series B
Preferred Stock."
Proxy Statement
Page 13
Should the Shareholders not approve the Article Amendments
(specifically, elimination of the voting rights limitation), the Company will
continue to be subject to certain onerous terms of the Preferred Stock Offering.
Summary. The present Article IV, Section (c) of the Articles allows
some flexibility to the Board in fashioning the terms of issuance of Company
preferred stock. The Article Amendments eliminate the list of suggested terms
and conditions for use by the Board in authorizing the issuance of a series of
Company preferred stock. The Article Amendments do not reduce the authority of
the Board. With the deletion of Article IV, Subsection (c)(ii), specific
conditions on voting rights relative to the voting rights of the outstanding
common stock are eliminated. With the repeal of Article IV, Section (e),
specific limitations on the Board's authority are eliminated in favor of the
approach of the proposed revision to Section (c). With these changes, the Board
is given greater flexibility to accommodate timely negotiations with prospective
investors in Company preferred stock to satisfy ongoing capital needs in
operating in the highly competitive telecommunications industry, and to avoid
the expense of holding a shareholder's meeting to approve Company preferred
stock terms which would be restricted by such provisions.
It is the intent of the Board, subsequent to Shareholder approval of
the Article Amendments, to file with the Alaska Department of Community and
Economic Development completed Articles of Amendment and, separately, Restated
Articles of Incorporation for the Company ("Restated Articles").
The Articles of Amendment, when filed with the department, will
effectuate the changes to the Articles as set forth in the Article Amendments.
The Restated Articles will simply restate the Articles as amended through the
Articles of Amendment in a new sequence of subsections with the Article
Amendments integrated into Article IV and will expressly supersede all previous
versions of the articles of incorporation for the Company. Copies of the draft
Articles of Amendment and the Restated Articles are available free of charge to
a Shareholder upon request to the Company to the attention of the Secretary to
the Board.
The Board seeks ratification and otherwise approval of the Shareholders
of the cancellation and deletion from the Articles of the 1991 Designation
because the Board has no intention of using its terms for a future issuance of
preferred stock.
Recommendation of Board. The Board has passed a resolution expressly to
adopt the Articles of Amendment and, with Shareholder approval of those
amendments, to adopt the Restated Articles. As a further step in the adoption of
the Article Amendments, the following resolution will be offered at the Annual
Meeting for consideration by the Shareholders:
Proxy Statement
Page 14
RESOLVED, that the amendments to Article IV, revising Section
(c) and repealing Section (e) of that article within the
Restated Articles of Incorporation for General Communication,
Inc. ("Company"), adopted by the board of directors of the
Company at its March 14, 2000 meeting and as contained in the
Articles of Amendment to the Restated Articles of
Incorporation of the Company attached to this resolution and
generally relating to the terms under which the board may
approve the issuance of Company preferred stock are approved
by the shareholders of the Company; and RESOLVED FURTHER, that
the action by the board to cancel and otherwise delete a
statement of stock designation from the articles as filed with
the Alaska Department of Commerce and Economic Development on
or about January 17, 1991 pursuant to authority vested in the
board under the Alaska Corporations Code is hereby ratified
and otherwise approved by the shareholders of the Company.
The Board, through this Proxy Statement, recommends to the
Shareholders, a vote "FOR" the adoption of the proposed Article Amendments and
the ratification and otherwise approval of the repeal and deletion of the 1991
Designation from the Articles, i.e., a vote for item number 2 of the Proxy. The
voting rights of Shareholders on this proposal are set forth elsewhere in this
section. See, "--Voting Procedure -- Voting Rights, Votes Required for
Approval."
Plan Amendments
Overview. The proposed Plan Amendments include a number of changes
proposed by the Board which require shareholder approval. For example, they
include increasing the number of shares authorized and allocated to the Stock
Option Plan by 1.5 million shares of Class A common stock of the Company. In
addition, they include deletion of the present exceptions to Board authority to
amend the Stock Option Plan without shareholder approval and adding a new
exception to that authority. On March 14, 2000, the Board approved several
administrative amendments to the plan, e.g., composition of the Option Committee
and related matters. The Plan Amendments include these administrative
amendments, and the board seeks Shareholder ratification and otherwise approval
of them.
The Company has, under its Articles, sufficient shares of Class A
common stock authorized and unissued to satisfy the proposed increased
allocations of common stock to the Stock Option Plan. Management believes that a
number of the proposed Plan Amendments are administrative in nature and do not
require Shareholder approval.
Proxy Statement
Page 15
However, since the Board seeks Shareholder approval of a number of other changes
to the plan, it is taking the opportunity to seek Shareholder ratification and
otherwise approval of these administrative amendments as well.
The Plan. The terms, history and purpose of the Stock Option Plan are
discussed elsewhere in the Proxy Statement. Also disclosed elsewhere in this
statement, as of the Record Date, are the number of shares subject to
outstanding options under the plan, the number of shares issued upon exercise of
options under the plan and the number of shares remaining available for grant
under the plan. See, "Management of Company: Stock Option Plan."
Under the Stock Option Plan, 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 of those subsidiaries are eligible for grant of options. The
selection of optionees is made by the Option Committee. In selecting an
optionee, as well as in determining the number of shares subject to each option,
the committee is to take into consideration such factors as it deems relevant in
connection with accomplishing the purpose of the plan.
No maximum or minimum exists with regard to the amount, either in
dollars or in numbers, of options that may be exercised in any year, either by a
single optionee or by all optionees under the Stock Option Plan. That is, there
are no fixed limitations on the number or amount of securities being offered,
other than the practical limitations imposed by the number of employees eligible
to participate in the plan and the total number of shares of stock authorized
and available for granting under the plan. Shares covered by options which have
terminated or expired for any reason prior to their exercise are available for
grant of new options pursuant to the plan.
There were, as of the Record Date, seven executive officers, including
all of the Named Executive Officers, three current directors, who are not
executive officers, and 652 other employees (including officers who are not
executive officers), participating in the Stock Option Plan. This level of
participation is out of a total of seven eligible executive officers, five Named
Executive Officers, eight current directors who are not executive officers, and
957 employees (including officers who are not executive officers) of the
Company. The plan has been in place for many years. Options under the plan are
granted in the discretion of the Option Committee. As of the Record Date, the
committee had no specific plan to grant options to specific executive officers,
directors or employees of the Company or its subsidiaries or their subsidiaries.
As of the Record Date, the closing sales price on the Nasdaq Stock
Market was $5.125 per share for the Class A common stock of the Company.
Proxy Statement
Page 16
The federal income tax consequences of an optionee's participation in
the Stock Option Plan are complex and subject to change. The following
discussion is only a summary of the general rules applicable to the options
offered pursuant to the plan. The Company assumes no responsibility in
connection with the income tax liability of any optionee. Under the
administration of the plan, optionees are urged to obtain competent professional
advice regarding the applicability of federal, state, and local tax laws.
The options granted under the Stock Option Plan are characterized for
federal income tax purposes as non-qualified stock options. The options are not
actively traded on an established securities market. When granted, options under
the plan will not have a readily ascertainable fair market value. Accordingly,
an optionee will not be subject to federal income tax upon grant of that option.
However, upon exercise of the option, the excess of the then fair market value
of the shares purchased over the aggregate option exercise price for the shares
will constitute ordinary income to the optionee. To the extent that the optionee
realizes ordinary income (which ordinary income is subject to federal income tax
withholding by the Company), the Company is entitled to claim a deduction
against its gross income, provided that the cost to the Company constitutes an
ordinary and necessary business expense.
Upon resale of any shares acquired pursuant to the exercise of an
option, the difference between the sale price and the optionee's basis in the
shares will be treated as a capital gain or loss and will be characterized as
long-term capital gain or loss if the shares have been held for more than 12
months at the date of their disposition. The optionee's basis for determination
of gain or loss upon any subsequent disposition of shares acquired upon the
exercise of the option will be the amount paid for such shares, plus any
ordinary income recognized as a result of the exercise.
Generally, there will be no federal income tax consequence to the
Company upon the grant or termination of an option under the Stock Option Plan
or the sale or disposition of the shares acquired upon the exercise of the
option. However, upon the exercise of an option, the Company will be entitled to
a deduction, for federal income tax purposes, equal to the amount of ordinary
income the optionee is required to recognize as a result of the exercise,
provided the Company has satisfied its withholding obligations under the
Internal Revenue Code of 1986.
The Plan Amendments. The proposed Plan Amendments center on twelve
changes to the Stock Option Plan. The first eight of them require prior
shareholder approval, and the last four of them (administrative changes) do not
require Shareholder approval. They are as follows:
Proxy Statement
Page 17
- To increase the number of shares authorized and allocated to the
plan by 1.5 million shares of Company Class A common stock
- To expand the group of possible grantees to include consultants or
advisors to the Company
- To provide that payment upon exercise of an option may be in the
form of shares of Company Class A common stock
- To provide, notwithstanding other restrictions on transferability
of options, that an optionee, with approval of the committee, may
transfer an option for no consideration to or for the benefit of
the optionee's immediate family
- To delete the present restriction in the plan that an option
granted under it must be held by the optionee for at least six
months from the date of grant or acquisition to the date of
disposition of the option through exercise, conversion, or
assignment
- To delete two of the present three exceptions to the Board's
authority to modify or amend the plan without prior approval of
the shareholders of the Company, i.e., to delete the exceptions
where those changes materially increase the benefits accruing to
participants under the plan, or change the class of persons
eligible to receive options under the plan, and also to delete the
express description of the affirmative vote required by
shareholders in these matters (the third present exception,
relating to increasing the number of shares that will be available
and reserved for issuance under the plan remains unchanged)
- To add the exception to the Board's general authority to modify or
amend the plan without shareholder approval, to the extent such
approval is then required pursuant to Section 162(m) of the
Internal Revenue Code or otherwise provided by applicable legal
requirements
- To delete the express requirement in the plan of at least an
annual report to the Board from the committee
- To provide a number of administrative changes to the plan,
primarily centering on - -
- Revising the composition of the committee to consist of
either the entire board or to consist solely of two or more
"non-employee directors" as defined in Rule 16b-3, or, in the
context of the Com-
Proxy Statement
Page 18
pany seeking a special deduction under Section 162(m) of the
Internal Revenue Code, to limit the composition, solely to
two or more "outside directors" as defined in that section,
when the options are granted to "covered employees"
- To delete the definition of "officer" under the present plan
- To require specifically that each grant of an option under
the plan is evidenced by a stock option agreement
- To add "for cause" as a basis for termination of a right to
exercise an option and to define expressly the meaning of
that term
The first seven proposed changes relate to one or more of the present
three exceptions to the authority of the Board to modify or amend the Stock
Option Plan without prior shareholder approval. The eighth proposed change
relates to a basic procedural term for accountability of the committee to the
Board. The final four proposed changes relate to several administrative
adjustments to the plan.
The Company presently has the authority to pay consultants and advisors
in the form of options in Company stock. However, such a transaction typically
involves an offer which is made in reliance upon an exemption from securities
registration, and the stock may have to be held for a lengthy period of time or
otherwise transferred only after registration of the offer of the stock. By
expanding the group of possible grantees under the plan to include consultants
and advisors, these persons may be compensated by the Company with options in
Class A common stock offered through a registration under federal securities
law. Upon exercise of those options, the stock, when issued, may become freely
transferable under that law. The expansion of the group of possible grantees to
include consultants or advisors will allow the Company the flexibility to
compensate those persons in a form other than cash for services rendered.
Management does not have a plan to use and does not foresee a significant use of
this manner of payment for services which it receives.
Providing the opportunity for a participant in the Stock Option Plan to
exercise an option and pay in a form other than cash and to allow for transfer
of the option for no consideration to or for the benefit of the optionee's
immediate family are increased benefits to the optionee in the form of
accommodations which should not adversely affect the Company. The plan defines
"immediate family" as including the optionee's spouse, parents, children,
stepchildren, adoptive relationships, sisters, brothers and grandchildren.
Whatever the form of consideration or the proposed transfer to immediate family,
it would still have to be accomplished in accordance with law. For example, the
payment upon exercise of an option would still have to be in a form and amount
Proxy Statement
Page 19
constituting full payment to the Company and a securities transfer would have to
comply with law.
Deleting the requirement that an optionee must hold an option for at
least six months before exercising or assigning it provides greater flexibility
to the holder in managing the holder's investment in the Company. The six month
holding requirement was originally included in the plan because the term was
required to satisfy the provisions of the previous version of Rule 16b-3. That
rule, adopted by the SEC pursuant to the Securities Exchange Act of 1934, was
subsequently amended to eliminate from federal securities regulation the
mandatory holding period for options. Elimination of this holding period from
the plan is proposed to structure the terms of the plan to reflect the present
terms of Rule 16b-3. Management believes it is not in the best interest of the
Company or the participants in the plan to continue to require the holding
period.
The present exceptions to the Board's authority to amend the Stock
Option Plan without prior shareholder approval are based in a requirement of a
previous version of Rule 16b-3. That rule was subsequently amended to eliminate
from federal securities regulation the requirement that a company obtain
shareholder approval of actions within those excepted areas. Elimination of
these exceptions is proposed to structure the terms of the plan to reflect the
present terms of Rule 16b-3.
With the deletion of two of the present three exceptions from the Stock
Option Plan and the addition of a new exception, the Board will have the
discretion to modify or amend the plan as it may deem advisable, subject to that
new exception relating to Section 162(m) of the Internal Revenue Code or
otherwise provided by applicable legal requirements. Under the Plan Amendments,
any proposed increase in the number of shares which will be available and
reserved for issuance under the plan will continue to be subject to prior
approval by the shareholders of the Company.
Under Section 162(m), for a publicly-held company, no deduction from
income is allowed for "applicable employee remuneration" for a "covered
employee" to the extent the amount of that remuneration for that taxable year
exceeds $1 million for that employee. The term "covered employee" is defined in
Section 162(m) to mean an employee who, as of the close of that taxable year,
was a chief executive officer of the company or otherwise was one of the four
highest compensated officers of the company (other than the chief executive
officer) for that taxable year. The term "applicable employee remuneration" is
defined as not including, among other things, remuneration payable on account of
attainment of one or more performance goals if those goals are determined by a
compensation committee of the board comprised solely of two or more "outside
directors." In this instance, the material terms under which that remuneration
is paid, including the performance goals, must be disclosed to the shareholders
and
Proxy Statement
Page 20
approved by a majority vote of the shareholders and other requirements of the
section must be satisfied before the payment of that remuneration. The term
"outside director" is defined in regulations adopted under the code in terms
similar to but not identical to a "non-employee director" used under Rule 16b-3.
While the Company has no immediate interest in making use of Section
162(m), with this proposed change, the Stock Option Plan takes into
consideration possible use of the section in fashioning compensation packages
for the chief executive officer and four most highly compensated executive
officers of the Company. To take advantage of the previously outlined deduction
provisions of Section 162(m) and the exception for applicable employee
remuneration, the Company would, under the present provision of Section 162(m),
have to seek prior shareholder approval of the corresponding employee
performance goals.
With the deletion of the express annual report requirement from the
Stock Option Plan, management foresees the Board continuing to exercise its
authority over the Option Committee including required periodic reports from the
committee. The deletion of the report requirement from the plan is viewed by
management as merely an internal adjustment in the statement of procedures to be
followed by the committee and is subject to the overall authority of the Board
in its relationship to its committees, including the Stock Option Committee, to
require periodic reports from those committees. The deletion of the annual
report requirement from the Stock Option Plan does not prohibit the Board from
requiring such a report or otherwise posing questions to the Option Committee
from time to time. While putting the onus on the Board to maintain lines of
communication with the committee, management of the Company does not view this
change to the plan as undercutting the Board's authority to monitor the
committee and modify or amend the plan in accordance with its terms.
The Stock Option Plan provides for its continued existence for so long
as the Board believes the plan provides an incentive to officers and employees
of the Company and for so long as there remain shares of Class A common stock
allocated to the plan which are not subject to outstanding options. In the
future, should the plan have no more shares of Class A common stock allocated to
it, the Board would have the choice of seeking approval from the shareholders
for another allocation of shares to the plan, discontinuing further granting of
options under the plan, or suspending or terminating the plan. The shareholders
of the Company have shown their support of the plan in the past through approval
of increased share allocations to the plan on several occasions. Most recently,
the shareholders at the 1999 annual meeting approved an increase in the number
of shares authorized and allocated to the plan in the amount of 1.5 million
shares of Class A common stock.
Proxy Statement
Page 21
The proposed Plan Amendments dealing with administrative changes
pertaining to the membership eligibility on the committee and other matters as
previously outlined all relate to matters within the direct authority of the
Board to modify or amend. The Board believes these changes are necessary to
accommodate the eight non-administrative changes to the plan previously
described. Management does not believe that these administrative changes affect
the value of an option or the rights of an optionee under the plan. Therefore,
the Board believes it has authority to make these changes to the plan in
accordance with its present terms. Nevertheless, the Board seeks shareholder
ratification and otherwise approval of these administrative amendments.
With the implementation of the proposed Plan Amendments, the Board
believes the Stock Option Plan will continue to satisfy the provisions of Rule
16b-3 relating to certain stock transactions between the Company, as a
requirement under the Exchange Act, and a participant in the plan. Those
transactions should then continue to be exempt from limitations imposed by
Section 16(b) of the act by satisfying the requirements of Rule 16b-3 for
employee benefit plans. Section 16(b) provides, in order to prevent unfair use
of information which may have been obtained by a beneficial owner, director or
officer through the person's relationship to the registrant, that any profit
realized by the person from any purchase and sale or any sale and purchase of
common stock of the registrant within any period of less than six months, with
limited exceptions, must inure to and be recoverable by the registrant.
While the number of shares of Class A common stock allocated to but
unused by the plan has dwindled, management's policy of using incentive options
to urge key employees and officers to work diligently in the best interest of
the Company has not been curtailed or otherwise limited in the past. Management
does not believe the proposed Plan Amendments would have affected the level of
grants of options under the plan had the amendments been effective throughout
the year ended December 31, 1999.
Management believes that the Stock Option Plan has proven to be useful
and beneficial to the Company as a special incentive to officers, non-employee
directors, and other key employees, especially when recruiting and retaining new
personnel. It has provided a means for these persons to acquire an equity
interest in the Company. The plan has been in operation for approximately
fourteen years. Furthermore, the business expansion by the Company during the
past several years has increased the number of persons to whom management may
wish to grant options under the plan. For these reasons, management believes
that the allocation of shares to the plan must continue to increase so that the
Company may continue to provide the special incentive of stock options to its
expanded cadre of officers, non-employee directors, and key employees.
Proxy Statement
Page 22
Recommendation of Board. The Board has passed a resolution expressly
adopting the Plan Amendments. As a further step in the adoption of these
amendments, the following resolution will be offered at the Annual Meeting for
consideration by the Shareholders:
RESOLVED, that the amendments to the General Communication,
Inc. Revised 1986 Stock Option Plan adopted by the board of
directors of the Company at its March 14, 2000 meeting,
increasing the number of shares authorized and allocated to
the plan by 1.5 million shares for a total allocation of 8.7
million shares of Company Class A common stock and relating
to, among other things, the group of allowable grantees, and
exceptions from the board's authority to amend the plan
without shareholder approval and as generally contained in the
attached copy of the Amended and Restated 1986 Stock Option
Plan of the Company, are hereby approved and otherwise
ratified by the shareholders of the Company.
The Board, through this Proxy Statement, recommends to the Shareholders
a vote "FOR" the adoption of the proposed Plan Amendments, i.e., proposal number
3 of the Proxy. The voting rights of Shareholders on this proposal are set forth
elsewhere in this section. See, "--Voting Procedure: Voting Rights, Votes
Required for Approval."
Other Business
Other matters, beyond the Article Amendments and election of directors
identified in this proxy statement, which may be addressed at the Annual Meeting
consist of approval (but not the ratification) of the minutes of the past annual
shareholder meeting held on June 10, 1999, matters incident to the conduct of
the Annual Meeting, and other business as may properly come before the
Shareholders at that meeting. A vote for the adoption of those minutes will be
an affirmation that the minutes, as written, properly reflect the proceedings of
that meeting and the action taken at that meeting. However, such a vote will not
be an action constituting approval or disapproval of the matters referred to in
those minutes. While the Company was, as of the Record Date, unaware of other
business to come before the meeting, they could include election of a person to
the Board for which a bona fide nominee is named in the proxy statement and
where that nominee is unable to serve or for good cause will not serve, and
matters proposed by Shareholders for which the Company has not received timely
notice.
Proxy Statement
Page 23
The date for determining whether notice is timely for purposes of
federal Rule 14a-4(c)(i) adopted pursuant to the Securities Exchange Act of 1934
and relating to the exercise of discretionary voting authority for purposes of
the Annual Meeting is March 23, 2000. The Company intends to use its discretion
in voting proxies which it holds for the Annual Meeting on any matter submitted
by a Shareholder for the meeting after that date.
Other than these matters, the Board does not intend to bring other
business before the Annual Meeting and does not know of any other matter which
anyone else proposes to present for action at the Annual Meeting. However, if
any other matters properly come before the Annual Meeting, the persons named in
the accompanying form of Proxy or their duly constituted substitutes acting at
the Annual Meeting will be deemed authorized to vote or otherwise act upon those
matters in accordance with their judgment.
Proxy Statement
Page 24
MANAGEMENT OF COMPANY
Directors and Executive Officers
The following table sets forth certain information about the Company's
directors and executive officers as of the Record Date.
Name Age Position
---- --- --------
Carter F. Page (1,2,3,4) 68 Chairman and Director
Ronald A. Duncan (1,3) 47 President, Chief Executive Officer and Director
Robert M. Walp (1,3) 72 Vice Chairman and Director
John M. Lowber (2) 50 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
G. Wilson Hughes 54 Executive Vice President and General Manager
William C. Behnke 42 Senior Vice President-Marketing and Sales
Richard P. Dowling 56 Senior Vice President-Corporate Development
Dana L. Tindall 38 Senior Vice President-Regulatory Affairs
Ronald R. Beaumont (1,3) 51 Director
Donne F. Fisher (1,2,3,4,5) 61 Director
William P. Glasgow (1,3,5) 41 Director
Stephen R. Mooney (1,3,5) 40 Director
Larry E. Romrell (1,3,5) 60 Director
James M. Schneider (1,3,4,5) 47 Director
Paul S. Lattanzio (3) 36 Nominee
- ------------------------
1 Member of 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 2002 annual meeting (in addition, Mr. Lattanzio is nominated to
this class by management); (2) Class II -- Messrs. Duncan, Mooney and
Romrell whose present terms expire at the time of the Annual 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 Audit Committee.
5 Member of Option Committee.
- ------------------------
Proxy Statement
Page 25
Carter F. Page. Mr. Page has served as Chairman and a director of the
Company since 1980. From December 1987 to December 1989, he served as a
consultant to WestMarc Communications, Inc. ("WestMarc") a wholly-owned
subsidiary of AT & T Corp. in matters related to the Company. Mr. Page served as
President and director of WestMarc from 1972 to December 1987. 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. His
present term as a director of the Company expires in 2002.
Ronald A. Duncan. Nominee. 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, within this section, "-- Voting
Agreement."
Robert M. Walp. Mr. Walp is a co-founder of the Company and has been a
director of the Company since 1979. Mr. Walp has served as Vice Chairman of the
Company since January 1, 1989 and is an employee of the Company. From 1979
through 1988, he served as President and Chief Executive Officer of the Company.
Mr. Walp is his own nominee to the Board pursuant to the Voting Agreement. See,
within this section, "-- Voting Agreement." His present term as a director of
the Company expires in 2002.
John M. Lowber. Mr. Lowber has served as Chief Financial Officer of the
Company since January 1987, as Secretary and Treasurer since July 1988 and as
Senior Vice President since December 1989. He was Vice President-Administration
for the Company from 1985 to December 1989. Prior to joining the Company, Mr.
Lowber was a senior manager at KPMG LLP, formerly Peat Marwick Mitchell and Co.
G. Wilson Hughes. Mr. Hughes has served as Executive Vice President and
General Manager of the Company since June 1991. He was President and a member of
the board of directors of Northern Air Cargo, Inc. from March 1989 to June 1991.
From June 1984 to December 1988, Mr. Hughes was President and a member of the
board of directors of Enserch Alaska Services, Inc.
William C. Behnke. Mr Behnke has served as Senior Vice
President-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,
Proxy Statement
Page 26
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 served as Manager of Regulatory Affairs for the
Company from 1985 to October 1989. In addition, Ms. Tindall was an adjunct
professor of telecommunications economics at Alaska Pacific University from
September through December 1995.
Ronald R. Beaumont. Mr. Beaumont has served as a director of the
Company since his appointment by the Board in February 1999. He has more than 25
years experience in the telecommunications industry. Mr. Beaumont has been
President of Operations and Technology at MCI WorldCom, Inc. ("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 presently serves on the board of directors of Gemini Submarine
Cable Systems Limited. He is one of MCI WorldCom's nominees to the Board
pursuant to the Voting Agreement. See, within this section, "--Voting
Agreement." His present term as a director of the Company expires in 2002.
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 Corp. From 1982 until 1996, he held various executive
officer positions with TCI and its subsidiaries. Mr. Fisher had served on the
board of directors of most of TCI's subsidiaries through the years. He presently
manages his personal assets and is involved in the management of Fisher Capital
Partners, Ltd. His present term as director of the Company expires in 2001.
William P. Glasgow. Mr. Glasgow has served as a director of the Company
since 1996. He is a managing director of Prime New Ventures Management. Since
July 1996, he has been President of Prime II Management, Inc., a Delaware
corpora-
Proxy Statement
Page 27
tion and sole general partner of Prime II Management, L.P., a Delaware limited
partnership ("Prime Management"). Previously, he was Senior Vice
President-Finance from September 1991 and Vice President-Finance from February
1989 to September 1991 for that corporation. He is presently a managing director
of the general partner of Prime VIII, L.P. Mr. Glasgow joined Prime Cable Corp.
(an affiliate of Prime II Management, Inc.) in 1983 and served in various
capacities until that corporation was liquidated in 1987. He currently serves on
the boards of directors of Prime Cellular Corp., Prime II Management Group,
Inc., Prime Comm, Inc., SKA Management, Inc. and @Security Broadband Corp., none
of which corporations are publicly held. In the past, Mr. Glasgow 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. See, within this section, "-- Voting Agreement." His
present term as director of the Company expires in 2001.
Paul S. Lattanzio. Nominee. Mr. Lattanzio has been a director of
Administaff, Inc., a publicly traded company, since 1995. He has been a Managing
Director for Toronto Dominion Capital, the private equity arm for Toronto
Dominion Bank, since July 1999. From February 1998 to March 1999, he was a
co-founder and Senior Managing Director of NMS Capital Management, LLC, a $600
million private equity fund affiliated with NationsBanc Montgomery Securities.
Prior to NMS Capital, Mr. Lattanzio served in several positions with various
affiliates of Bankers Trust New York Corporation for over 13 years, most
recently as a Managing Director of BT Capital Partners, Inc. Mr. Lattanzio has
experience in a variety of investment banking disciplines, including mergers and
acquisitions, private placements and restructuring advisory areas. Mr. Lattanzio
also serves on the board of directors of Medical Logistics, Inc. Mr. Lattanzio
is included in management's slate of nominees to the Board at the request of
holders of Company Series B preferred stock and in accordance with the terms of
the Preferred Stock Offering. His term as director of the Company would expire
in 2002. See, "Certain Transactions: Series B Preferred Stock" and "Company
Annual Meeting: Voting Procedure -- Voting Rights, Votes Required for Approval."
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 presently serves on the board of
directors of Telecommute Solutions, Inc. He is one of MCI WorldCom's nominees to
the Board pursuant to the Voting Agreement. See, within this section, "-- Voting
Agreement."
Larry E. Romrell. Nominee. 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
Proxy Statement
Page 28
President and a director of TCI Technology Ventures, Inc. From 1991 to 1994, Mr.
Romrell was a Senior Vice President of TCI. He presently serves on the boards of
directors of TV Guide, Inc. and Liberty Media Group, both of which corporations
are publicly held. 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 and Chief Financial
Officer for Dell Computer Corporation since March 2000. Prior to that, he was
Senior Vice President - Finance for Dell Computer Corporation from September
1998 to March 2000. Prior to that, from September 1996 to September 1998 he was
Vice President-Finance for that corporation. Prior to that, from September 1993
to September 1996, he was Senior Vice President for MCI Communications
Corporation in Washington, D.C. Mr. Schneider was with the accounting firm of
Price Waterhouse from 1973 to September 1993 and was a partner in that firm from
October 1983 to September 1993. His present term as director of the Company
expires in 2001.
Board of Directors and Executive Officers
The Board currently consists of ten director positions, divided into
three classes of directors serving staggered three-year terms. That is, with the
issuance of the Series B preferred stock, the Board adopted a resolution to
increase the size of the Board from nine to ten directors. The resulting vacancy
on the Board was filled by unanimous approval by the Board of Mr. Shipman, the
nominee that in 1999 was recommended by the holders of Series B preferred stock
in accordance with the terms of the Preferred Stock Offering. In April 2000, Mr.
Shipman resigned from the Board leaving a vacancy which management proposes to
be filled through the election of Mr. Lattanzio. A director of the Company is
elected at an annual meeting of shareholders and serves until he or she resigns
or is removed or until his or her successor is elected and qualified. Executive
officers of the Company generally are appointed at the Board's first meeting
after each annual meeting of shareholders and serve at the discretion of the
Board.
Voting Agreement
The Voting Agreement was entered into in 1996 in connection with the
Company's acquisition of Prime Cable of Alaska, L.P., a Delaware limited
partnership, and other cable television systems in Alaska. It was amended in
December 1997 and presently provides that each party to the agreement must vote
the party's Company common stock for the nominees of the other parties in the
election of directors to the
Proxy Statement
Page 29
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 Telecommunications, Inc., an
affiliate of 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 Management, a former party to the agreement, to
recommend one nominee to the Board for so long as the cable management agreement
with Prime Management ("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 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.
Rights of Holders of Series B Preferred Stock in Nomination to or Observer
Status Regarding the Board
Under the terms of the Preferred Stock Offering, so long as any shares
of Series B preferred stock remain outstanding, the Company must cause its board
of directors to include one seat, the nominee for which is to be designated
under terms of the offering. This is, the nominee is to be designated by Prime
VIII, L.P. (as long as it is a holder of Series B preferred stock) and such
other holders of Series B preferred stock as are not prohibited from
participation in the designation of that board member by law or regulation,
including the federal Bank Holding Company Act.
Proxy Statement
Page 30
Under the terms of the Preferred Stock Offering, upon designation of an
individual by the holders of the Series B preferred stock, the Board must cause
such designated individuals to be nominated for approval by the holders of
Company common stock at each meeting of shareholders of the Company at which
directors are to be elected. The Board is then expected, upon that nomination,
to recommend approval of that designated individual. If the holders of the
Company common stock fail to elect that designated individual, the holders of
Series B preferred stock will have the right to appoint an observer to attend
the meetings of the Board.
The Preferred Stock Offering also provides, independent of this
observer right, that at any time that the designated individual is not an
employee of either investor in the Series B preferred stock, i.e., Prime VIII,
L.P. or Toronto Dominion Investments, Inc., or their respective affiliates, that
investor will have an additional right to appoint an observer to attend all
meetings of the Board. See also, "Certain Transactions: Series B Preferred
Stock."
Board and Committee Meetings
During the year ended December 31, 1999, the Board had four committees:
- Audit Committee
- Compensation Committee
- Finance Committee
- Option Committee
The Audit Committee is composed of Messrs. Fisher, Page and Schneider,
all considered by the Board to be independent directors of the Board. Under
Nasdaq Stock market rules, to which the Company is subject, an independent
director is an individual other than an officer or employee of a company or its
subsidiaries or any other individual having a relationship which the company's
board believes would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.
The Audit Committee acts on behalf of the Board and oversees all
material aspects of the Company's reporting, control and audit functions. Its
role includes a particular focus on the qualitative aspects of financial
reporting to shareholders and on Company processes for management of business
and financial risk and for compliance with significant applicable legal,
ethical, and regulatory requirements. The committee's
Proxy Statement
Page 31
role also includes coordination with other Board committees and maintenance of
strong, positive working relationships with management, external auditors, legal
counsel and other committee advisors. This committee is responsible for making
recommendations to the Board on conducting the annual audit of the Company and
its subsidiaries, including the selection of an external auditor to conduct the
annual audit and such other audits or accounting reviews of those entities as
the committee deems necessary. The committee is also responsible for reviewing
the plan or scope of an audit or review and the results of such audit or review
and carrying out other duties as delegated in writing by the Board.
On January 28, 2000 the Board reorganized the Audit Committee to be
composed only of independent directors as previously identified. Prior to that
reorganization, the committee was composed of all members of the Board. The
Audit Committee met one time during the year ended December 31, 1999.
The Compensation Committee is composed of all members of the Board.
This committee establishes compensation policies regarding executive officers
and directors and makes recommendations to the Board regarding such
compensation, including establishing an overall cap on executive compensation
and setting performance standards for executive officer compensation. The
Compensation Committee met twice during the year ended December 31, 1999.
The Finance Committee is composed of Messrs. Fisher, Page and Lowber.
It is responsible for reviewing Company finance matters from time to time and
providing guidance to the Chief Financial Officer regarding these matters. The
Finance Committee did not meet during the year ended December 31, 1999.
The Option Committee is composed of Messrs. Fisher, Glasgow, Mooney,
Romrell and Schneider. This committee administers the Stock Option Plan and
approves the grant of options pursuant to the plan. The Option Committee met
four times during the year ended December 31, 1999.
The Board has no separately designated nominating committee. Issues
relating to filling of vacancies on the Board and nominating persons for
election to the Board in conjunction with shareholder meetings are addressed by
the full Board.
The Board held ten meetings during the year ended December 31, 1999.
All incumbent directors, as disclosed in this Proxy Statement, attended 100% of
the meetings of the Board and of committees of the Board for which they
individually were seated as directors, with certain exceptions. Those exceptions
are the following directors who only attended a percentage of the meetings for
which they were seated as indicated: Mr. Beaumont (50%); Mr. Fisher (70%); Mr.
Glasgow (90%); Mr. Schnei-
Proxy Statement
Page 32
der (90%); Mr. Romrell (10%) and Mr. Walp (90%). In April 2000, Mr. Shipman
tendered his resignation from the Board for personal reasons unrelated to the
Company and its subsidiaries.
Director Compensation
Board members waived and did not receive director fees for the period
from July 1999 through June 2000. During the year ended December 31, 1999, 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 of Class A common stock with an exercise price of $7.50 per
share. The options vest in 25% increments for each year that the optionee
participates in at least 50% of Board meetings. As of the Record Date, options
for 18,750 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 1997, 1998 and 1999 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
$100,000 during the fiscal year ended December 31, 1999 (collectively, "Named
Executive Officers").
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Page 33
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
---------------------------------------- ---------------------------------
Restricted All Other
Other Annual Stock Securities Underlying Compen-
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) Options/SARs(#) sation ($)(1,2)
- --------------------------- ---- ---------- --------- ---------------- ---------- --------------------- ---------------
Ronald A. Duncan 1999 195,000 -0- -0- -0- 50,000 14,917
President and Chief 1998 195,000 (3) -0- -0- -0- 200,000 15,642
Executive Officer 1997 216,649 (4) 20,400 -0- -0- -0- 167,354
William C. Behnke 1999 140,004 1,883 -0- -0- -0- 496
Senior Vice President- 1998 149,381 3,442 -0- -0- 5,425 372
Marketing and Sales 1997 148,336 30,960 -0- -0- 100,000 4,503
G. Wilson Hughes 1999 150,006 1,883 -0- -0- 50,000 16,216
Executive Vice President 1998 150,006 -0- -0- -0- -0- 21,341
and General Manager 1997 150,004 29,600 -0- -0- -0- 106,434
John M. Lowber 1999 135,005 1,883 -0- -0- -0- 88,063
Senior Vice President, 1998 149,381 -0- -0- -0- 5,425 90,847
Chief Financial Officer 1997 148,962 72,200 -0- -0- 100,000 87,073
and Secretary/Treasurer
Dana L. Tindall 1999 144,006 1,883 -0- -0- -0- 21,022
Senior Vice President- 1998 159,340 -0- -0- -0- 5,787 21,813
Regulatory Affairs 1997 157,921 21,600 -0- -0- 100,000 19,168
- ------------------------------
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 and $150,000 in 1998 and 1997, respectively;
Mr. Behnke, $114 and $4,200 in 1998 and 1997, respectively; Mr. Hughes,
$4,894 and $90,113, in 1998 and 1997, respectively; and Mr. Lowber,
$65,000, in each of 1999, 1998, and 1997. 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,
$14,526, $15,000, and $15,000 in 1999, 1998 and 1997, respectively; Mr.
Hughes, $15,000, $15,000, and $14,868 in 1999, 1998 and 1997,
respectively; Mr. Lowber, $10,125, $12,857, and $12,305 in 1999, 1998
and 1997, respectively; and Ms. Tindall, $14,064, $15,000, and $9,500 in
1999, 1998 and 1997, respectively. Amounts shown for Mr. Duncan include
premiums of $132 under a term life insurance policy paid in 1999,
premiums of $174 under a term life insurance policy paid in 1998, and
$174 under a term life insurance policy paid in 1997; $2,000 paid to Mr.
Duncan in 1997 for serving on the Board. Amounts shown for Mr. Behnke
include premiums of $81 under a term life insurance policy paid in 1999,
premiums of $102 under a term life insurance policy paid in 1998 and
1997. Amounts shown for Mr. Hughes include premiums of $1,216, $1,447,
and $1,317 under life insurance policies paid in each of 1999, 1998 and
1997, respectively. Amounts shown for Mr. Lowber include premiums of
$931, $983, and $985 under life insurance policies paid in each of 1999,
1998 and 1997, respectively. Amounts shown for Ms. Tindall include
premiums of $60, $66 and $66 under a term life insurance policy paid in
1999, 1998 and 1997, respectively. Includes a waiver of accrued interest
on January 1, 2000 on notes owed to the Company by Ms. Tindall and Mr.
Lowber in the amounts of $6,639 and $12,007, respectively, on January 1,
1999 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 $50,000 of Mr. Duncan's 1998 salary that was paid in
advance during 1997.
- ------------------------
Proxy Statement
Page 34
Option/SAR Grants
The following table sets forth information on the individual grants of
stock options (whether or not in tandem with stock appreciation rights
("SARs")), and freestanding SARs made during the Company's fiscal year ended
December 31, 1999 to its Named Executive Officers. There were no tandem SARs or
freestanding SARs associated with the Company during this period.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term
- --------------------------------------------------------------------------------- --------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or
Option/SARs Employees Base
Granted (1) in Fiscal Year Price (2) Expiration
Name (#) (%) ($/Sh) Date 5%($) (3) 10%($) (3)
- ---- ----------- -------------- --------- ---------- --------- ----------
Ronald A. Duncan 50,000 5.6 3.25 10/29/09 310,897 591,306
William C. Behnke -0- -0- - - - - - - - - - - - -
G. Wilson Hughes 50,000 5.6 3.25 10/29/09 310,897 591,306
John M. Lowber -0- -0- - - - - - - - - - - - -
Dana L. Tindall -0- -0- - - - - - - - - - - - -
- ------------------------
1 Options in Class A common stock.
2 The exercise price of the options was less than 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.
- ------------------------
Proxy Statement
Page 35
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, 1999 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/SARs at Fiscal Year-End (#) at Fiscal Year-End ($) (1)
----------------------------------- --------------------------
Shares
Acquired on Value
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
Ronald A. Duncan 50,000 82,815 -0- 200,000 -0- -0-
William C. Behnke -0- -0- 121,808 131,617 147,034 15,319
G. Wilson Hughes 230,000 37,500 250,000 80,000 656,250 30,000
John M. Lowber 50,000 212,500 225,141 130,284 223,284 26,569
Dana L. Tindall -0- -0- 185,262 70,525 158,420 4,340
- ------------------------
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, 1999.
- ------------------------
Employment and Deferred Compensation Agreements
On April 30, 1991, the Company entered into a deferred compensation
agreement with Mr. Hughes (as amended in 1996, "Hughes Agreement"). Under the
terms of the Hughes Agreement, Mr. Hughes is entitled to an annual base salary
of $150,000 and customary benefits. Pursuant to the agreement, Mr. Hughes was
granted stock options in 1991 for 250,000 shares of Class A common stock at an
exercise price of $1.75 per share, all of which are fully vested and
exercisable. The Hughes Agreement also provides for Mr. Hughes to receive
deferred compensation, with interest compounded annually at 10% of $50,000 in
each of 1992, 1993, and 1994, $65,000 in 1995 and $75,000 in 1996, and each year
thereafter, to vest on December 31 of each year. Mr. Hughes did not receive a
contribution during the year ended December 31, 1999 or 1998. Upon termination
of his employment with the Company, Mr. Hughes may elect to
Proxy Statement
Page 36
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 $15,113,
$4,894, and $-0- during the years ended December 31, 1997, 1998 and 1999,
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. The Company is holding these
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 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. In April 2000, the Company
purchased an additional 10,000 shares of Class A common stock at an average cost
of $5.13 per share in the open market for the benefit of 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 and was reinstated to $150,000
effective January 1, 2000. In addition, Mr. Lowber is eligible to receive an
annual cash bonus of up to $30,000 based upon the Company's and his performance.
The agreement also provides for Mr. Lowber to receive deferred compensation of
$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. 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. Effective April 1, 2000, Mr. Lowber's base
compensation was adjusted to $175,000 per year, and his deferred compensation
agreement was extended to include a continued annual contribution of $65,000.
Proxy Statement
Page 37
In February 1995, the Company agreed to pay deferred compensation to
Mr. Behnke in the amount of $20,000 per year for each of 1995 and 1996, each
contribution by the Company to vest at the end of the calendar year during which
the allocation was made, and accruing interest at 10% per annum. The first
allocation under the plan was made in December 1995. The interest accrued under
this deferred compensation plan was $4,200, $114 and $-0- during the years ended
December 31, 1997, 1998, and 1999, 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. Mr. Behnke's base compensation was increased to
$175,000, and his incentive compensation reduced to $25,000, effective on
November 1, 1999.
Pursuant to the Behnke Agreement, the Company agreed to grant Mr.
Behnke an option to purchase 100,000 shares of Class A common stock at an
exercise price of $7.00 per share, which will vest in equal amounts on January
1, 2000, 2001 and 2002. Pursuant to the Behnke Agreement, the Company has
created a deferred compensation account for Mr. Behnke in the amount of
$285,000, of which $64,149 plus accrued interest of $6,314 was vested on
December 31, 1999 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.
Proxy Statement
Page 38
Participants immediately vest in all elective deferrals and all income
and gain attributable to that participation. Matching contributions and all
income and gain attributable to them vest on a case-by-case basis as determined
by the Company. Participants may elect to be paid in either a single lump-sum
payment or annual installments over a period not to exceed ten years. Vested
balances are payable upon termination of employment, unforeseen emergencies,
death or total disability and change of control or insolvency of the Company.
Participants are general unsecured creditors of the Company with respect to
deferred compensation benefits of the plan.
During the year ended December 31, 1999 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, 1999
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, 1999. 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, 1999.
Stock Purchase Plan
In December 1986, the Company adopted a Qualified Employee Stock
Purchase Plan which has been subsequently amended from time to time ("Stock
Purchase Plan"). The plan is qualified under Section 401 of the Internal Revenue
Code of 1986, as amended. All employees of the Company, who have completed at
least one year of service, are eligible to participate in the plan. Eligible
employees may elect to reduce their taxable compensation in any even dollar
amount up to 10% of such compensation up to a maximum per employee of $10,500
for 2000. 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.
Proxy Statement
Page 39
No more than 10% of any one employee's compensation will be matched in any year.
In addition, the combination of salary reductions, after-tax contributions and
Company matching contributions for any employee cannot exceed the lesser of
$30,000 or 25% of such employees' compensation (determined after salary
reduction) for any year.
Under the terms of the Stock Purchase Plan, participating eligible
employees may direct their contributions to be invested in Company common stock,
MCI WorldCom common stock, AT&T Corp. common stock, and various identified
mutual funds. As of the Record Date, the Stock Purchase Plan was considering
alternatives to these non-Company investments.
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.
As of the Record Date, there remained 72,790 shares of Class A and
464,318 shares of Class B common stock allocated to the plan and available for
issuance by the Company or otherwise acquisition by the plan for the benefit of
participants in the plan.
Stock Option Plan
In December 1986, the Company adopted the 1986 Stock Option Plan. The
plan has been subsequently amended from time to time.
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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 7.2 million
shares upon approval by the shareholders of the Company at its 1999 annual
meeting. The number of shares for which options may be granted is subject to
adjustment upon the occurrence of stock dividends, stock splits, mergers,
consolidations and certain other changes in corporate structure or
capitalization.
As of the Record Date, 5,507,803 shares were subject to outstanding
options under the Stock Option Plan, 1,537,654 shares had been issued upon the
exercise of options under the plan and 154,543 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
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, 1999, 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.
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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, 1999, Messrs. Duncan (a Named Executive Officer) and
Walp participated in deliberations of the Compensation Committee concerning
executive officer compensation other than deliberations concerning their own
compensation.
Compensation Committee Report on Executive Compensation
The duties of the Compensation Committee are as follows:
- Prepare, on an annual basis for the review of and action by the
Board, a statement of policies, goals, and plans for executive
officer and Board member compensation, if any --
- Statement is specifically to address expected performance and
compensation of and the criteria on which compensation is
based for the chief executive officer and such other
executive officers of the Company as the Board may designate
for this purpose
- Monitor the effect of ongoing events on and the effectiveness of
existing compensation policies, goals, and plans--
- Events specifically include but are not limited to the status
of the premise that all pay systems correlate with the
compensation goals and policies of the Company
- Report from time to time, its findings to the Board
- Monitor compensation-related publicity and public and private
sector developments on executive compensation
- Familiarize itself with and monitoring the tax, accounting,
corporate, and securities law ramifications of the compensation
policies of the Company, including but not limited to --
- Comprehending a senior executive officer's total compensation
package
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- Comprehending the package's total cost to the Company and its
total value to the recipient
- Paying close attention to salary, bonuses, individual
insurance and health benefits, perquisites, loans made or
guaranteed by the Company, special benefits to specific
executive officers, individual pensions, and other retirement
benefits
- Establish the overall cap on executive compensation and the
measure of performance for executive officers, either by
predetermined measurement or by a subjective evaluation
- Strive to make the compensation plans of the Company simple, fair,
and structured so as to maximize shareholder value
For the year ended December 31, 1999, 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 1999, the Compensation Committee established compensation
levels for 1999 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 described elsewhere in this section. See, within
this section, "-- Executive Compensation."
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During the year ended December 31, 1999 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, 1994 through
December 31, 1999. This return is measured by dividing (1) the sum of (a) the
cumulative amount of dividends for the measurement period (assuming dividend
reinvestment, if any) and (b) the difference between the Company's share price
at the end and the beginning of the measurement period, by (2) the share price
at the beginning of that measurement period. This line graph is compared in the
following graph with two other line graphs during that five-year period, i.e., a
market index and a peer index.
The market index is the Center for Research in Securities Prices Index
for the Nasdaq Stock Market for United States companies. It presents cumulative
total returns for a broad based equity market assuming reinvestment of dividends
and is based upon companies whose equity securities are traded on the Nasdaq
Stock Market. The peer index is the Center for Research in Securities Prices
Index for Nasdaq Telecommunications Stock. It presents cumulative total returns
for the equity market in the telecommunications industry segment assuming
reinvestment of dividends and is based upon companies whose equity securities
are traded on the Nasdaq Stock Market. The line graphs represent monthly index
levels derived from compounding daily returns.
In constructing each of the line graphs in the following graph, the
closing price at the beginning point of the five-year measurement period has
been converted into a fixed investment, stated in dollars, in the Company's
Class A common stock (or in the stock represented by a given index, in the cases
of the two comparison indexes), with cumulative returns for each subsequent
fiscal year measured as a change from that investment. Data for each succeeding
fiscal year during the five-year measurement
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period are plotted with points showing the cumulative total return as of that
point. The value of a shareholder's investment as of each point plotted on a
given line graph is the number of shares held at that point multiplied by the
then prevailing share price.
The Company's Class B common stock is traded over-the-counter on a more
limited basis. Therefore, comparisons similar to those previously described for
the Class A common stock are not directly available. However, the performance of
Class B common stock may be analogized to that of the Class A common stock in
that the Class B common stock is readily convertible into Class A common stock
by request to the Company.
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Comparison of Five-Year Cumulative Return
Performance Graph for General Communication, Inc.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS PERFORMANCE GRAPH FOR GENERAL COMMUNICATION, INC.,
NASDAQ STOCK MARKET INDEX FOR
UNITED STATES COMPANIES, AND NASDAQ TELECOMMUNICATIONS STOCK (1,2,3,4)
- -----------------------------------------------------------------------------------------------------------
Nasdaq Stock Market Nasdaq
Measurement Period Index for U.S. Telecommunications
(Fiscal Year Covered) Company ($) Companies ($) Stock ($)
- -----------------------------------------------------------------------------------------------------------
FYE 12/31/94 100.0 100.0 100.0
FYE 12/31/95 132.3 141.3 130.9
FYE 12/31/96 209.7 173.9 133.9
FYE 12/31/97 171.0 213.1 195.4
FYE 12/31/98 104.8 300.4 323.5
FYE 12/31/99 112.9 556.0 572.4
- ------------------------
1 The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
2 The indexes are reweighted daily, using the market capitalization on the
previous trading day.
3 If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
4 The index level for all series was set to $100.00 on 12/31/94.
- ------------------------
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Legal Proceedings
The Board is unaware of any legal proceedings which may have occurred
during the past five years and which would be material to an evaluation of the
ability or integrity of any director or executive officer of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of Forms 3, 4, and 5 adopted pursuant to the
Exchange Act and completed and furnished to the Company by its shareholders and
any amendments to those forms furnished to the Company, the Company is unaware
of any director, officer, or beneficial owner of more than 10% of any class of
common stock of the Company who failed to file on a timely basis, as provided in
those forms, reports required under Section 16(a) of that act during the year
ended December 31, 1999.
CERTAIN TRANSACTIONS
Series B Preferred Stock
On April 30, 1999, the Company issued and sold the Series B preferred
stock for $20 million, i.e., a total of 20,000 convertible, redeemable,
accreting shares of its preferred stock pursuant to the Preferred Stock
Offering. Prior to that issuance, the Board, by resolution, approved the
Statement of Stock Designation for the issuance of Series B preferred stock
("1999 Designation") and a Series B preferred stock agreement in anticipation of
the Preferred Stock Offering.
The 1999 Designation sets forth the specific rights of holders of the
Series B preferred stock, including dividend rights, liquidation rights,
redemption rights, voting rights, and conversion rights. The Series B agreement
sets forth the terms of the sale of the stock and representations and warranties
of the parties, and includes other rights of the holders of the stock, including
registration rights granted to the investors. The terms and conditions of the
1999 Designation and that agreement are generally referred to in this section as
the terms of the Preferred Stock Offering.
The Board filed the 1999 Designation with the Alaska Department of
Commerce and Economic Development (presently named the Alaska Department of
Community and Economic Development) in accordance with the Alaska Corporations
Code. Under the code, that filing constitutes an amendment to the Articles.
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The Preferred Stock Offering terms provide that the shares of Series B
preferred stock must be ranked senior to all other classes of equity securities
of the Company. The holders of the Series B preferred stock will receive
dividends through the fourth anniversary of issuance of the stock, i.e., April
30, 2003, at the rate of 8.5% of a liquidation preference payable semiannually,
in cash, or in additional fully-paid shares of Series B preferred stock. After
that fourth anniversary, the interest rate increases to 17% per annum. The terms
of the offering also include that, should the Company be permitted to issue
equity redeemable at the option of the holder, the parties to the offering would
agree to enter into appropriate amendments to the offering to permit the holders
to demand redemption at any time after the fourth anniversary of the issuance of
the Series B preferred stock and to remove the provision increasing the dividend
rate on that stock to 17% per annum after that fourth anniversary. The Alaska
legislature has enacted revisions to the Alaska Corporations Code to allow an
Alaska corporation, e.g., the Company, to issue such redeemable equity as
further described elsewhere in this Proxy Statement. See, "Company Annual
Meeting: Article Amendments, Repeal of 1991 Designation -- Preferred Stock
Offering." The liquidation preference specified in the offering is $1,000 per
share, plus accrued but unpaid dividends and fees.
The Preferred Stock Offering terms provide for mandatory redemption
twelve years from the date of closing on the sale of stock or upon the
occurrence of certain "triggering events." These events include an acceleration
of certain obligations of the Company or its subsidiaries having an outstanding
balance in excess of $5 million, a change in control of the Company,
commencement of bankruptcy or insolvency proceedings against the Company, a
breach of the limitations on certain Company long term debt set forth in the
offering, a liquidation or dissolution of the Company, or a merger,
consolidation or sale of all or substantially all of the assets of the Company
which would significantly and adversely affect the rights and preferences of the
outstanding Series B preferred stock. The terms also include redemption of those
shares at the option of the Company any time after the fourth anniversary of the
closing. The redemption price is the amount paid plus accrued and unpaid
dividends.
The Preferred Stock Offering terms include that the Series B preferred
stock is convertible at any time into shares of Company Class A common stock
with a conversion price of $5.55 per share. The terms further provide for
mandatory conversion, in the discretion of the Company, at any time subsequent
to the third anniversary of the closing at a price equal to two times the
conversion price previously described, assuming the stock is trading at no less
than two times the conversion price. The terms include, in the event the Company
is unable or unwilling to redeem the Series B preferred stock subject to the
terms of the mandatory redemption, the investors will have the option to convert
their Series B preferred stock into Company Class A common stock. The terms
further include that the shares of Series B preferred stock are exchangeable, in
whole but not in part, at the Company's option into subordinated
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debt with terms and conditions comparable to those governing the Series B
preferred stock.
The Preferred Stock Offering terms provide that the holders of the
Series B preferred stock will have the right to vote on all matters presented
for vote to the holders of common stock on an as-converted basis. Additionally,
the Preferred Stock Offering requires, as long as shares of Series B preferred
stock are outstanding and unconverted, that the holders will have the right to
vote, as a class, and the Company must obtain the written consent of holders of
a majority (at least 80% for the first three items) of that stock to take any of
the following actions:
- Amend the Articles or amend or repeal the Bylaws in a way which
significantly and adversely affects the rights or preferences of
holders of the outstanding Series B preferred stock
- Issue additional shares of Company preferred stock except as may
be required under the terms and conditions of the issuance of the
Series B preferred stock
- Merge or consolidate the Company with another entity or sell all
or substantially all of its assets, in any case where the terms of
that action would significantly and adversely affect the rights,
privileges, and preferences of the Series B preferred stock
- Liquidate or dissolve the Company
- Declare or pay any dividends on capital stock of the Company,
other than to the holders of the Series B preferred stock, or set
aside any sum for any such purpose
- Purchase, redeem or otherwise acquire for value, or pay into or
set aside as a sinking fund for such purpose, any capital stock of
the Company, other than the Series B preferred stock, or any
warrant, option or right to purchase any such capital stock, other
than that Series B preferred stock
- Take any action which would result in taxation of the holders of
the Series B preferred stock under Section 305 of the Internal
Revenue Code of 1986, as amended
Of these seven specific actions, the Alaska Corporations Code,
generally, requires shareholder approval of actions one (article amendment),
three (merger and
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other reorganization), and four (dissolution). The code requires an affirmation
vote by at least a simple majority of the outstanding shares to approve an
amendment to corporate articles. The code further provides that holders of
outstanding shares of a class may vote as a class on such proposed amendment
where the amendment addresses certain specific changes, including changes to the
designations, preferences, limitations or relative rights of the shares of the
class or changes which increase the rights and preference of a class having
rights and preferences prior or superior to the shares of the class. In this
instance at least a simple majority of the outstanding shares, by class, would
be required to approve the article amendment.
The Alaska Corporations Code further requires an affirmative vote by at
least two-thirds of the outstanding shares per class (and by at least two-thirds
of the outstanding shares per class, if a class of shares is entitled to vote)
to approve a merger, consolidation, sale of assets not in the regular course of
business, or dissolution of a corporation. The code allows a corporation to
specify in its articles of incorporation that its board shall have the exclusive
right to adopt, alter, amend or repeal its bylaws. The Articles provide that the
Board has that exclusive right with respect to the Bylaws. The other four
specific actions, i.e., two (issuance of additional shares), five (declaration
of dividends), six (purchase of capital stock), and seven (action adverse to
taxation position regarding the Series B preferred stock), typically do not
require shareholder approval. That is, under the present Articles, these four
actions, normally, are matters upon which the Board has authority to act.
In summary, under the present Articles and 1999 Designation, the
holders of Series B preferred stock have the right to vote as a class on
amendments to the Articles. At least a simple majority of the outstanding shares
of that class must approve such amendments, in addition to requisite approval by
the outstanding Company common stock. Furthermore, under the present Articles
and 1999 Designation those holders, in essence, do not have a right to require
an effective class vote on actions to merge, consolidate, sell substantial
assets not in the regular course of business, or dissolve the Company. However,
those holders do have the right to require their prior consent on the other four
actions previously outlined (issuing additional shares, declaring dividends,
purchase of capital stock, and taking action adverse to their taxation position
regarding the Series B preferred stock).
So long as shares of Series B preferred stock are outstanding, the
holders have the right under the terms of the Preferred Stock Offering to
recommend one individual to the Board. Under the terms of that offering, the
Board expanded its size from nine to ten seats and appointed an individual at
the recommendation of Prime VIII, L.P. to serve until that individual's name was
placed in nomination at the Annual Meeting and election of nominees to the Board
at that meeting. See "Management of Company: Board and Committee Meetings." The
terms of the offering also provide that the Board
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include the individual recommended by the holder of the outstanding Series B
preferred stock on subsequent Board slates for election of directors and
actively seek the election of that individual to the Board. The Company has been
informed that Mr. Lattanzio is the nominee of those holders, and his name has
been included in the slate of nominees proposed by the present Board.
The terms of the offering further provide that, should the holders of
Company common stock not elect the individual designated by the holder of Series
B preferred stock, those holders will have the right to appoint an observer at
the meetings of the Board. Those terms of the offering further provide,
independent of this observer right, that at any time that the designated
individual is not an employee of either of the investors in the Series B
preferred stock or their respective affiliates, that investor will have an
additional right to appoint an observer to attend all meetings of the Board. The
terms of the offering also provide that these rights of the holders of Series B
preferred stock relating to the Board seat and observers are to remain effective
so long as any of the Series B preferred stock remains outstanding.
The Preferred Stock Offering terms include that the holders of the
Series B preferred stock will have a right of first refusal to acquire up to a
total of $5 million in the next private financing that the Company might choose
to initiate.
The Series B preferred stock is convertible at any time into Class A
common stock of the Company with registration rights.
Management of the Company is aware of certain limitations in the
present Articles which conflict with the voting rights sought by the investors
in the Preferred Stock Offering. These limitations are discussed elsewhere in
this Proxy Statement. See, "Company Annual Meeting: Article Amendments."
Management has informed the investors of these limitations, and the Board has
adopted a resolution to amend the Articles to accommodate the Preferred Stock
Offering. That is, the Article Amendments include amendments to accommodate that
offering. The Company has agreed to use commercially reasonable efforts to
submit that amendment to a vote of and recommend its adoption by the
Shareholders at the Annual Meeting.
MCI WorldCom Agreements
As of the Record Date, the Company continued to have a significant
business relationship with MCI WorldCom, including the following:
- Under the MCI WorldCom Traffic Carriage Agreement, the Company
agrees to terminate all Alaska-bound MCI WorldCom long distance
traffic
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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 has purchased certain service marks of the Company
- The parties agree to share some communications network resources
and various marketing, engineering and operating resources
- Company manages Kanas Telecom, Inc., a company that owns and
operates a fiber optic cable system constructed along the
trans-Alaska oil pipeline corridor extending from Prudhoe Bay to
Valdez, Alaska
In addition, 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, had leased from the Company
all of the capacity owned by the Company on the undersea fiber optic cable and
the Company had leased such capacity back from MCI WorldCom. This agreement was
terminated in November 1999.
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 attributed to the MCI WorldCom Traffic Carriage Agreement in
1999 were approximately $40.5 million, or approximately 14.5% of total revenues.
Prime Management Agreement
In connection with its acquisition of several cable systems in 1996,
the Company entered into the Prime Management Agreement, a cable television
management agreement with Prime Management, i.e., Prime II Management, L.P., a
Delaware limited partnership, to manage those systems. Under the Voting
Agreement, the parties to it agreed to vote for the nominee designated by Prime
Management in the election of directors to the Board. The Company is unaware of
the total shareholdings in the Company of Prime Management and its affiliates.
See, "Management of Company: Voting Agreement"; and "Ownership of Company:
Changes in Control -- Voting Agreement."
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Under the Prime Management Agreement, the Company pays Prime Management
a fee for managing the Company's cable systems. For management services under
the agreement and subsequent to October 31, 1997, Prime Management agreed to
consideration in the form of $125,000 and a stock warrant which provides for the
purchase of 425,000 shares of Company Class A common stock at a price of $3.25
per share. The Company paid to Prime Management fees for similar services in the
amount of $200,000 for the nine-month period ended October 31, 1999. The Company
will pay fees for similar services in the amount of $400,000 for the year ended
October 31, 2000. The warrant expires December 2003.
Any portion of the management fee which is past due will bear interest
at a rate per annum equal to 17.5% until paid. In addition, the Company is
required to reimburse Prime Management for any costs and expenses incurred by it
in connection with 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 agreement has a term
of nine years but either party may terminate the agreement in its discretion
after October 31, 2000. The agreement is expected to be terminated during 2000
by mutual agreement of the parties.
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 which was used to finance the acquisition of the property subject to the
Duncan Lease. That property consists of a building presently occupied by the
Company. The Duncan Lease term is 15 years with monthly payments of $14,400,
increasing in $800 increments at each two-year anniversary of the lease,
beginning in 1993.
As of the Record Date, the monthly payments were $17,600. If the
partnership sells the property subject to the Duncan Lease prior to the end of
the tenth year of the Duncan Lease, the partnership will pay to the Company
one-half of the net proceeds in excess of $1,035,000. If that property is not
sold prior to the end of the tenth year of the lease, the partnership will pay
to the Company the greater of one-half of the appreciated value of the property
over $1,035,000, or $500,000. The property subject to the Duncan Lease was
capitalized in 1991 at the partnership's cost of $900,000, and the Duncan Lease
obligation was recorded in the consolidated financial statements of the Company.
See, "Annual Report."
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On September 11, 1997, the Company purchased for $150,000, a parcel of
property adjoining the property subject to the Duncan Lease. The parcel was
purchased to provide space for additional parking facilities for the Company's
use of the adjoining property under the Duncan Lease. A portion of the parcel,
valued at $87,900, was simultaneously deeded to Dani Bowman in order to
accommodate the platting requirements of the Municipality of Anchorage necessary
to allow use of the parcel for parking facilities. In June 1999, the Company
agreed, in exchange for a payment of $135,000, to extend the lease term for an
additional five-year term expiring September 30, 2011 at a rental rate of
$20,000 per month and to incorporate the adjoining property into the lease
agreement.
Hughes and Behnke Stock Sales
The Company has purchased shares of Class A common stock from Mr.
Hughes for the purpose of funding his deferred compensation account under the
Hughes Agreement. Similarly, the Company has purchased shares of Class A common
stock from Mr. Behnke for the purpose of funding his deferred compensation
account under the Behnke Agreement. These transactions are described further
elsewhere in this Proxy Statement. See, "Management of Company: Executive
Compensation" and "-- Employment and Deferred Compensation Agreements."
Indebtedness of Management
A significant portion of the compensation paid to executive officers of
the Company is in the form of stock options. Because insider sales of capital
stock of the Company upon exercise of such options may have a negative impact on
the price of the Company's common stock, the Board has encouraged executive
officers of the Company not to exercise stock options and sell the underlying
stock to meet personal financial requirements. The Company has instead extended
loans to such executive officers secured by their shares or options. As of the
Record Date, total indebtedness of management was $4,302,661 (including accrued
interest of $438,621), $2,382,482 in principal amount of which was secured by
shares or options, $369,058 of which was otherwise secured by collateral of the
borrowers, and $1,112,500 of which was unsecured.
As of the Record Date, Mr. Duncan was indebted to the Company in the
aggregate principal amount of $1,112,500 plus accrued interest of $153,120
("Outstanding Duncan Loans"). The Outstanding Duncan Loans were made to Mr.
Duncan for his personal use and to exercise stock option agreements. They
consist of a loan of $150,000 made in December 1996, an additional loan of
$50,000 made in January
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1997, an additional loan of $150,000 made in December 1997, an additional loan
of $600,000 made in October 1998, and $162,500 in November 1999. These loans
accrue interest at the Company's variable rate under the Company's senior credit
facility, are unsecured and become due and payable, together with accrued
interest through November 1, 2002.
The largest aggregate principal amount of indebtedness owed by Mr.
Duncan to the Company at any time since January 1, 1999 was $1,265,620, all of
which remained outstanding as of the Record Date.
The Company loaned $45,000 to Mr. Hughes in December 1995 for his
personal requirements. The principal under the promissory note bears interest at
the Company's variable rate under its senior credit facility, and is 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. As of the Record Date, the Company expected that the due date would be
extended. 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 was repaid in June 1999. On December 3, 1999, the
Company loaned Mr. Hughes an additional $882,500 to exercise stock options. The
loan is secured by the Hughes Collateral, bears interest at the Company's
variable rate under its senior credit facility and is due on December 3, 2002.
As of the Record Date, the accrued interest under these advances and loans were
$45,860.
As of the Record Date, Mr. Behnke, Mr. Dowling and Ms. Tindall were
indebted to the Company in the respective principal amounts of $459,002,
$850,981, and $120,000, plus accrued interest of $45,406, $169,087, and $2,206,
respectively.
The $459,002 owed by Mr. Behnke, is secured by an option to purchase
100,000 shares of Company Class A common stock ("Behnke Collateral"), all of
which is due and payable, together with accrued interest through November 1,
2004 and consists of the following:
- $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
Proxy Statement
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- $50,000 borrowed in January 1997 for his personal requirements,
which amount bears interest at the Company's variable rate under
the Company's senior credit facility
- $50,000 borrowed in June 1999 for this personal requirements,
which amount bears interest at the Company's variable rate under
its senior credit facility
- $50,000 borrowed in September 1999 for his personal requirements,
which amount bears interest at the Company's variable rate under
its senior credit facility
- $250,000 borrowed in November 1999 for his personal requirements,
which amount bears interest at the Company's variable rate under
its senior credit facility
Should the Company elect to terminate Mr. Behnke's employment, other than for
cause prior to November 1, 2004, the Company will forgive any remaining balance
of principal and interest associated with the September and November 1999
borrowings.
The $850,981 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, an
additional $20,000 borrowed in June 1997, and an additional $5,500 borrowed in
June 1998, all for his personal requirements, and an additional $515,122
borrowed on January 7, 2000 to exercise stock options. Mr. Dowling's loans are
payable in full through August 26, 2004.
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, 1999 was $6,639. Interest accrued as of the Record Date totaled
$2,206.
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, 1999 and through the Record Date was, as of the Record Date,
$504,408, $1,020,068, and $122,206, respectively.
Proxy Statement
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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, 1999 was $12,007.
In July 1998, September 1998, and February 1999, the Company loaned Mr.
Lowber, $46,819, $33,935, and $103,303, respectively. The proceeds of the loans
were used to exercise rights under a stock option agreement and pay income taxes
resulting from that exercise. These notes are secured by the cash surrender
value of a life insurance policy, bear interest at the Company's variable rate
under its senior credit facility and are due on June 30, 2000. As of the Record
Date, the Company expected that the due date would be extended. Interest accrued
as of the Record Date totaled $22,941.
Registration Rights Agreements
The Company is a party to registration rights agreements ("Registration
Rights Agreements") with MCI WorldCom (regarding Class A common stock and
succeeding to the rights of MCI Telecommunications Corporation), the holders of
Company Series B preferred stock (Toronto Dominion Investments, Inc. and Prime
VIII, L.P.) and certain other persons. Since January 1, 1999 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 (Class A common stock), and Toronto Dominion
Investments, Inc. and Prime VIII, L.P. (Series B preferred stock convertible to
Class A common stock). None of these persons, other than those identified
elsewhere in this Proxy Statement, were directors, officers, nominees for
election as directors, owners of 5% or more of the outstanding stock of the
Company, or members of the immediate family of such directors, officers, or
nominees of the Company. All of the MCI WorldCom shareholdings of the Company
and all of the shareholdings of Toronto Dominion Investments, Inc. and Prime
VIII, L.P. are subject to corresponding Registration Rights Agreements with the
Company. See, "Management of Company: Directors and Executive Officers" and
"Ownership of Company."
The terms of the Registration Rights Agreements vary, although they
generally share several common terms. The basic terms are as follows.
Proxy Statement
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If the Company proposes to register any of its securities under the
Securities Act of 1933, as amended ("Securities Act") for its own account or for
the account of other shareholders, the Company must notify all of the holders
under the Registration Rights Agreements of the Company's intent to register
such common stock. In addition, the Company must allow the holders an
opportunity to include their shares ("Registerable Shares") in that
registration.
Each holder also has the right, under certain circumstances, to require
the Company to register all or any portion of such holder's Registerable Shares
under the Securities Act. The Registration Rights Agreements are subject to
certain limitations and restrictions including, in cases other than the Series B
preferred stock, the right of the Company to limit the number of Registerable
Shares included in the registration. Generally, the Company is required to pay
all registration expenses in connection with each registration of Registerable
Shares pursuant to the Registration Rights Agreements.
The Registration Rights Agreement between the Company and 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 Registerable 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, with each request to cover Registerable Shares having an aggregate
market value of at least $1.5 million.
The Registration Rights Agreement between the Company and the holders
of the Series B preferred stock is contained within one of the documents
composing the Preferred Stock Offering, dated April 30, 1999. The registration
rights pertain to Class A common stock which is issued by the Company upon the
holders' exercise of rights to convert the Series B preferred stock. The
agreement specifically requires the Company to effect no more than two
registrations at the request of holders of at least 15% of the registerable
securities.
Proxy Statement
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OWNERSHIP OF COMPANY
Principal Shareholders
The following table sets forth, as of the Record Date, certain
information regarding the beneficial ownership of Company Class A common stock
and Class B common stock and Company Series B preferred stock by each of the
following:
- Each person known by the Company to own beneficially 5% or more of
the outstanding shares of Class A common stock or Class B common
stock, or Series B preferred stock
- Each director of the Company
- Each of the Named Executive Officers
- All current executive officers and directors of the Company as a
group
All information with respect to beneficial ownership has been furnished to the
Company by the respective shareholders of the Company.
Amount and Combined
Nature of % of Total Shares Voting
Name and Address of Title of Beneficial Outstanding Power
Beneficial Owner (1) Class (2) Ownership (2) (#) % of Class (2)(%) (Class A & B) (2) (%) (Class A & B) (2) (%)
- -------------------- --------- ----------------- ----------------- --------------------- ---------------------
I II I II
--- ---- --- ----
Parties to Voting
Agreement:
MCI WorldCom (3) Class A 8,251,509 17.4 18.6 17.4 24.4 23.4
515 East Amite Street Class B 1,275,791 32.6
Jackson, MS 39201-2702 Series B - - - - - -
Ronald A. Duncan (3) Class A 1,022,375 (4) 2.2 2.9 2.7 6.5 6.3
Class B 460,005 (4) 11.8
Series B - - - - - -
Robert M. Walp (3) Class A 374,589 (5) * 1.3 1.2 3.9 3.8
Class B 303,457 (5) 7.8
Series B - - - - - -
Aggregate Shares Subject Class A 9,498,608 (6) 20.0 (6) 22.5 (6) 21.0 (6) 34.6 (6) 33.2 (6)
to Voting Agreement Class B 2,030,591 (6) 52.0 (6)
Series B - - - - - -
Proxy Statement
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Amount and Combined
Nature of % of Total Shares Voting
Name and Address of Title of Beneficial Outstanding Power
Beneficial Owner (1) Class (2) Ownership (2) (#) % of Class (2)(%) (Class A & B) (2) (%) (Class A & B) (2) (%)
- -------------------- --------- ----------------- ----------------- --------------------- ---------------------
I II I II
--- ---- --- ----
GCI Qualified Employee Stock Class A 3,699,566 7.8 7.5 7.0 5.8 5.6
Stock Purchase Plan Class B 132,700 3.4
2550 Denali St., Ste. 1000 Series B - - - - - -
Anchorage, AK 99503
Kim Magness Class A 258,992 (7,8) * 2.2 2.0 10.1 9.7
c/o Raymond L. Sutton, Jr. Class B 844,848 (7,8) 21.6
303 East 17th Ave., Ste. 1100 Series B - - - - - -
Denver, CO 80203-1264
Gary Magness Class A 264,317 (7,8) * 2.2 2.0 10.1 9.7
c/o Raymond L. Sutton, Jr. Class B 843,448 (7,8) 21.6
303 East 17th Ave., Ste. 1100 Series B - - - - - -
Denver, CO 80203-1264
Dimensional Fund Advisors, Inc. Class A 3,637,100 7.7 7.1 6.6 4.2 4.1
1299 Ocean Ave., 11th Floor Class B - - - - - -
Santa Monica, CA 90401 Series B - - - - - -
Merrill Lynch Asset Class A 2,979,300 6.3 5.8 5.4 3.5 3.3
Management Group Class B - - - - - -
World Financial Center, Series B - - - - - -
North Tower
250 Vesey Street
New York, New York 10381
Prime VIII, L.P. Class A -0- (9) - - - - - - 1.6 - - - 1.0
3000 One American Center Class B - - - - - -
600 Congress Avenue Series B 5,000 25
Austin, Texas 78701
Toronto Dominion Class A -0- (9) - - - - - - 4.9 - - - 3.0
Investments, Inc. Class B - - - - - -
31 West 52nd Street Series B 15,000 75
New York, NY 10019-6101
William C. Behnke Class A 163,296 (10) * * * * *
Class B - - - - - -
Series B - - - - - -
Proxy Statement
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Amount and Combined
Nature of % of Total Shares Voting
Name and Address of Title of Beneficial Outstanding Power
Beneficial Owner (1) Class (2) Ownership (2) (#) % of Class (2)(%) (Class A & B) (2) (%) (Class A & B) (2) (%)
- -------------------- --------- ----------------- ----------------- --------------------- ---------------------
I II I II
--- ---- --- ----
Ronald R. Beaumont Class A - - - - - - - - - - - - - - - - - -
Class B - - - - - -
Series B - - - - - -
Donne F. Fisher Class A 356,085 (11,12) * 1.6 1.5 5.5 5.3
Class B 437,688 (11,12) 11.2
Series B - - - - - -
William P. Glasgow Class A 21,204 (13) * * * * *
Class B - - - - - -
Series B - - - - - -
G. Wilson Hughes Class A 637,092 (14) 1.3 1.2 1.2 * *
Class B 2,766 (14) *
Series B - - - - - -
John M. Lowber Class A 398,505 (15) * * * * *
Class B 6,289 (15) *
Series B - - - - - -
Stephen R. Mooney Class A - - - - - - - - - - - - - - - - - -
Class B - - - - - -
Series B - - - - - -
Carter F. Page Class A 82,049 (11,16) * * * 2.3 2.2
Class B 186,923 4.8
Series B - - - - - -
Larry E. Romrell Class A - - - - - - * * * *
Class B 328 *
Series B - - - - - -
James M. Schneider Class A 48,750 (11) * * * * *
Class B - - - - - -
Series B - - - - - -
Dana L. Tindall Class A 235,257 (17) * * * * *
Class B 3,823 (17) *
Series B - - - - - -
Proxy Statement
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Amount and Combined
Nature of % of Total Shares Voting
Name and Address of Title of Beneficial Outstanding Power
Beneficial Owner (1) Class (2) Ownership (2) (#) % of Class (2)(%) (Class A & B) (2) (%) (Class A & B) (2) (%)
- -------------------- --------- ----------------- ----------------- --------------------- ---------------------
I II I II
--- ---- --- ----
All Directors and Executive Class A 3,692,900 (18) 7.6 9.9 9.3 21.5 20.6
Officers As a Group Class B 1,502,248 (18) 38.4
(15 Persons) Series B 20,000 (18) 100
- ------------------------
* Represents beneficial ownership of less than 1% of the corresponding
class or series stock.
1 Beneficial ownership is determined in accordance with Rule 13d-3 of the
Exchange Act. Shares of stock of the Company that a person has the right
to acquire within 60 days of the Record Date are deemed to be
beneficially owned by such person and are included in the computation of
the ownership and voting percentages only of such person. Each person
has sole voting and investment power with respect to the shares
indicated, except as otherwise stated in the footnotes to the table.
2 "Title of Class" includes Company Class A common stock, Class B common
stock and Series B preferred stock. "Amount and Nature of Beneficial
Ownership" and "% of Class" are given for each class or series of stock.
"% of Total Shares Outstanding" and "Combined Voting Power" are given
(a) under column I as excluding Series B preferred stock outstanding and
(b) under column II as including Series B preferred stock outstanding
and on an as-converted to Class A common stock basis at the conversion
price set in the Preferred Stock Offering, i.e., $5.55 per share of
Series B preferred stock. Using this ratio and as of the Record Date,
the 20,000 shares of Series B preferred stock (excluding accrued
dividends payable in cash or in Class A common stock to that date) would
convert to 3,603,603 shares. Using this ratio, the 5,000 shares of
Series B preferred stock held by Prime VIII, L.P. are equivalent to
900,901 shares of Class A common stock, and the 15,000 shares of Series
B preferred stock held by Toronto Dominion Investments, Inc. are
equivalent to 2,702,702 shares of Class A common stock.
3 Each of these persons is a party to Voting Agreement and can be deemed a
beneficial owner of all of the 9,498,608 shares of Class A common stock
and 2,030,591 shares of Class B common stock that are subject to the
Voting Agreement. See, within this section, "--Changes in Control." MCI
WorldCom reported shared voting and investment power with respect to
shares held by it that are subject to the Voting Agreement. Messrs.
Duncan and Walp reported shared voting power with respect to shares held
by each of them that were subject to the Voting Agreement.
4 Includes 110,913 shares of Class A common stock and 6,254 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.
5 Includes 38,229 shares of Class A common stock and 2,408 shares of Class
B common stock allocated to Mr. Walp under the Stock Purchase Plan.
Includes 723 shares of Class A common stock which Mr. Walp has the right
to acquire within 60 days of the Record Date by the exercise of vested
stock options.
6 Does not include shares allocated to Messrs. Duncan and Walp under the
Stock Purchase Plan.
7 Includes 76,688 shares of Class A and 620,608 shares of Class B common
stock owned by Magness FT Investment Company, LLC of which Mr. Magness
owns a 50% interest.
8 Includes 177,324 shares of Class A and 198,440 shares of Class B common
stock owned by Magness Securities, LLC of which Mr. Magness owns a 50%
interest.
Proxy Statement
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9 Excludes accrued dividends.
10 Includes 136,808 shares which Mr. Behnke has the right to acquire within
60 days of the Record Date by the exercise of vested stock options. Does
not include 9,055 shares of Company Class A common stock held in
treasury by the Company pursuant to the Behnke deferred compensation
agreement.
11 Includes 18,750 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.
12 Includes 300,200 shares of Class A and 225,000 shares of Class B common
stock owned by Fisher Capital Partners, Ltd., the corporate general
partner of which is controlled by Mr. Fisher.
13 Does not include shareholdings of Prime II Management, Inc. and its
affiliate Prime 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, does not include 5,000 shares of Company Series
B preferred stock held by Prime VIII, L.P., and does not include 158
shares beneficially owned by minor children of Mr. Glasgow. Mr. Glasgow
claims not to have or share investment control of the shares held by
these entities, and he disclaims any beneficial ownership of the shares
held by these entities or held by his children.
14 Includes 330,000 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 43,092 shares of Class A common stock and
2,766 shares of Class B common stock allocated to Mr. Hughes under the
Stock Purchase Plan. Does not include 47,437 shares of Class A common
stock held in treasury by the Company pursuant to the Hughes Agreement.
See, "Management of Company: Employment and Deferred Compensation
Agreements."
15 Includes 255,141 shares which Mr. Lowber has the right to acquire within
60 days of the Record Date by the exercise of vested stock options.
Includes 35,719 shares of Class A common stock and 6,019 shares of Class
B common stock allocated to Mr. Lowber under the Stock Purchase Plan.
16 Does not include 8,550 shares of Class A and 21,825 shares of Class B
common stock held in trust for the benefit of Mr. Page's grandchildren
of which Mr. Page disclaims beneficial ownership. The trustee of the
trust is Keith Page, Mr. Page's son.
17 Includes 185,262 shares which Ms. Tindall has the right to acquire
within 60 days of the Record Date by the exercise of vested stock
options. Includes 49,736 shares of Class A common stock and 3,823 shares
of Class B common stock allocated to Ms. Tindall under the Stock
Purchase Plan.
18 Includes 965,992 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 303,206 shares of Class A
common stock and 24,425 shares of Class B common stock allocated to such
persons under the Stock Purchase Plan. Does not include ownership of
parties to the Voting Agreement other than Messrs. Duncan and Walp.
Excludes, as of the Record Date, all of the outstanding Series B
Preferred Stock (on an as-converted basis to Company Class A common
stock) owned by an affiliate of Mr. Lattanzio and the other party (Prime
VIII, L.P.) to the Preferred Stock Offering who recommended Mr.
Lattanzio to be on the Board under the terms of that offering.
- ------------------------
Changes in Control
Preferred Stock Offering. With the Company's sale of the Series B
preferred stock pursuant to the Preferred Stock Offering as described elsewhere
in this Proxy Statement, the purchasers of those shares now have the right to
vote on all matters presented for vote to the holders of Company Class A common
stock on an as-converted basis. In addition, the holders of the outstanding
Series B preferred stock have limited voting rights as a class or otherwise to
require the Company to request their
Proxy Statement
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consent on specific actions which might be taken including amending the
Articles, restructuring the Company (only becomes effective with the adoption of
the Article Amendments, their filing with the Alaska Department of Community and
Economic Development and the issuance of a certificate of amendment by that
department), paying dividends, and redeeming stock. Under the present Articles
and the Article Amendments, the Class A common stock and Class B common stock
vote for directors and on such specific actions, as one class, with limited
exceptions as set forth in the Alaska Corporations Code. These exceptions
include action to amend the articles of incorporation of a corporation in
certain specific areas including changes in the designations, preferences,
limitations, or relative rights of shares of the class.
Under the terms of the Preferred Stock Offering, holders of the
outstanding Series B preferred stock have the right to convert their shares into
Class A common stock of the Company at a specified conversion price, as
adjusted. As of the Record Date the conversion price was $5.55 per share. Using
that conversion price and assuming the conversion of all of the outstanding
Series B preferred stock as of the Record Date, the stock could be converted
into 3,603,603 shares of Class A common stock of the Company (excluding
dividends accrued through that date) which would constitute approximately 7.1%
of its outstanding Class A common stock.
As a part of the terms of the Preferred Stock Offering, the Board
increased its size by one director to ten directors and appointed Mr. Shipman to
fill that new position at the recommendation of the holders of the outstanding
Series B preferred stock. In April 2000, Mr. Shipman tendered his resignation
from the Board for personal reasons, unrelated to the Company. Later in that
month, the Board was requested by the holders of the Series B preferred stock to
nominate Mr. Lattanzio as a director. Under the terms of that offering, the
Board must take the recommendation of the holders in filling any subsequent
vacancy in that position. Should the holders of common stock of the Company in
subsequent shareholder meetings not elect that individual or another individual
proposed by the holders of the Series B preferred stock, those holders would
have the right to appoint an observer at the meetings of the Board and other
observer rights relating to the Board as described elsewhere in the Proxy
Statement.
The terms of the Preferred Stock Offering further provide that the
rights of holders of the Series B preferred stock relating to the Board seat and
observer are to remain effective so long as any of that stock remains
outstanding. See, "Company Annual Meeting: Article Amendments" and "Certain
Transactions: Series B Preferred Stock."
Voting Agreement. As of the Record Date, the Voting Agreement provided,
in part, that the voting stock of the parties to it will each be voted at
shareholder meetings as a block in favor of two nominees proposed by MCI
WorldCom (succeeding to the
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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, "Management of Company: Voting Agreement."
Pledged Assets and Securities. The obligations of the Company under its
credit facilities are secured by substantially all of the assets of the Company
and its direct and indirect subsidiaries. Upon a default by the Company under
such agreements, the Company's lenders could gain control of the assets of the
Company, including the capital stock of the Company's subsidiaries. The Company
has been at all times since January 1, 1999 and up through the Record Date, in
compliance with all material terms of these credit facilities. These obligations
and pledges are further described in the Annual Report. See, "Annual Report."
Senior Notes. On August 1, 1997, GCI, Inc., an Alaska corporation and
wholly-owned subsidiary of the Company, publicly sold $180 million of unsecured
9.75% senior notes ("Senior Notes"). The Senior Notes are due in 2007. GCI, Inc.
was formed specifically to issue the Senior Notes. The Senior Notes are subject
to the terms of an indenture ("Indenture") entered into by GCI, Inc. Upon the
occurrence of a change of control, as defined in the Indenture, GCI, Inc. is
required to offer to purchase the Senior Notes at a price equal to 101% of their
principal amount, plus accrued and unpaid interest.
The Indenture provides that the Senior Notes are redeemable at the
option of GCI, Inc. at specified redemption prices commencing in 2002. In
addition, prior to August 1, 2000, GCI, Inc. is permitted to redeem up to
33-1/3% of the Senior Notes out of the net cash proceeds of one or more public
equity offerings. The terms of the Senior Notes contain limitations on the
ability of GCI, Inc. and its restricted subsidiaries to incur additional
indebtedness, limitations on investments, payment of dividends and other
restricted payments and limitations on liens, asset sales, mergers, transactions
with affiliates and operation of unrestricted subsidiaries. The Indenture also
limits the ability of GCI, Inc. and its restricted subsidiaries to enter into or
allow to exist specified restrictions on the ability of GCI, Inc. to receive
distributions from restricted subsidiaries.
For purposes of the Indenture and the Senior Notes, the restricted
subsidiaries consist of all direct or indirect subsidiaries of the Company, with
the exception of the unrestricted subsidiaries. As of the Record Date, the
unrestricted subsidiaries were entities formed by the Company in conjunction
with its Fiber Facility as described in the Company's Annual Report. These
unrestricted subsidiaries consisted of GCI Transport
Proxy Statement
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Co., Inc., GCI Satellite Co., Inc., GCI Fiber Co., Inc., Fiber Hold Co., Inc.
and Alaska United Fiber System Partnership. See, "Annual Report."
Both the Company and GCI, Inc. have since January 1, 1999 and up
through the Record Date been in compliance with all material terms of the
Indenture including making timely payments on the obligations of GCI, Inc.
LITIGATION AND REGULATORY MATTERS
The Company was, as of the Record Date, involved in several
administrative and civil action matters primarily related to its
telecommunications markets in Alaska and the remaining 49 states and other
regulatory matters. These actions are discussed in the Company's Annual Report.
See, "Annual Report."
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company Board retained KPMG LLP as the independent certified public
accountants for the Company during the fiscal year ended December 31, 1999. It
is anticipated that the Board will appoint KPMG LLP as the Company's independent
certified public accountants for the fiscal year ending December 31, 2000. A
representative of KPMG LLP is expected to be present at the Annual Meeting. The
representative will have the opportunity to make a statement, if so desired, and
will be able to respond to appropriate questions.
ANNUAL REPORT
The Annual Report to shareholders of the Company in the form of Form
10-K (as amended by Form 10-K/A) for the year ended December 31, 1999 is
enclosed with this Proxy Statement. Exhibits to that Form 10-K, as amended, are
not enclosed. However, that form includes a list briefly describing all of those
exhibits. In addition, the Company will furnish a copy of an exhibit to a
Shareholder upon written request to the Company and payment of a fee to cover
the Company's expenses in furnishing that exhibit. Request for exhibits are to
be addressed to the Company as follows: General Communication, Inc., 2550 Denali
Street, Suite 1000, Anchorage, Alaska 99503, ATTN: Corporate Secretary.
Proxy Statement
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FUTURE SHAREHOLDER PROPOSALS
Certain matters are required to be considered at an annual meeting of
shareholders of the Company, e.g., the election of directors. From time to time,
the board of directors of the Company may wish to submit to those shareholders
other matters for consideration. Additionally, those shareholders may be asked
to consider and take action on proposals submitted by shareholders who are not
members of management that cover matters deemed proper under regulations of the
Securities and Exchange Commission and applicable state laws.
All proposals of shareholders of the Company intended to be presented
at the 2001 annual meeting of shareholders must be received by the Company not
later than December 29, 2000 for inclusion in the Company's 2001 proxy statement
and form proxy relating to the 2001 annual meeting. Upon timely receipt of such
a proposal, the Company will determine whether to include that proposal in the
proxy statement and proxy in accordance with applicable regulations and
provisions governing the solicitation of proxies.
The Company's Bylaws contain advance notice provisions relating to
proposals of business and nominations of directors at meetings of shareholders.
Under the Bylaws, in order for a shareholder to nominate a candidate for
director at an annual meeting, timely notice of the nomination must be given to
and received by the Company in advance of the meeting. Ordinarily, such notice
must be given and received not less than 120 nor more than 150 days before the
first anniversary of the preceding year's annual meeting (or between November
29, 2000 and December 29, 2000 for the Company's 2001 annual shareholder
meeting).
In the event that the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from that anniversary date, then
that notice must be given and received not earlier than 150 days prior to that
annual meeting and not later than the close of business on the later of the
120th day prior to such annual meeting or the 10th day following the day on
which public announcement of that meeting is first made. In certain cases,
notice may be delivered and received later if the number of directors to be
elected to the board of directors is increased.
The shareholder submitting the notice of nomination must describe
various matters as specified in the Bylaws, including the name and address of
each proposed nominee, his or her occupation and number of shares held, and
certain other information.
Proxy Statement
Page 67
In order for a shareholder to bring other business before an annual
meeting of shareholders, timely notice must be given to and received by the
Company within the time limits described. That notice must include a description
of the proposed business (which must otherwise be a proper subject for action by
the shareholders), the reasons for that other business and other matters
specified in the Bylaws. The Board or the presiding officer at the meeting may
reject any such proposals that are not made in accordance with these procedures
or that are not a proper subject for shareholder action in accordance with
applicable law. The Articles and Bylaws also set forth specific requirements and
limitations applicable to nominations and proposals at special meetings of
shareholders.
A shareholder making a nomination must be a person who was a
shareholder of record both at the time of giving of notice and at the time of
the meeting and who is entitled to vote at the meeting. A shareholder who wishes
to present a proposal of business at the meeting must, in addition to the
previous requirements, be a person who has continuously held at least $2,000 in
market value, or at least 1%, of the Company's securities entitled to be voted
on the matter at the meeting for at least one year by the date of submission of
the proposal to the Company for inclusion on the agenda of the meeting. Any such
notice must be given to the Secretary of the Company, whose address is as
follows: General Communication, Inc., 2550 Denali Street, Suite 1000, Anchorage,
Alaska 99503, ATTN: Corporate Secretary. Any shareholder desiring a copy of the
Articles or Bylaws will be furnished a copy without charge upon written request
to the Secretary.
The time limits described previously also apply in determining whether
notice is timely for purposes of Rule 14a-4(c)(1) under the Securities Exchange
Act of 1934 relating to exercise of discretionary voting authority, and are
separate from and in addition to the Securities and Exchange Commission's
requirements that a shareholder must meet to have a proposal included in the
Company's proxy statement for an annual meeting.
Management carefully considers all proposals and suggestions from
shareholders. When adoption of a suggestion or proposal is clearly in the best
interest of the Company and the shareholders generally and does not require
shareholder approval, it is usually adopted by the Board, if appropriate, rather
than being included in management's proxy statement.
Proxy Statement
Page 68
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. n/a)
Filed by the Registrant [X]
Filed by a Party other than Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
General Communication, Inc.
...........................................................................
(Name of Registrant as Specified in Its Charter)
N/A
...........................................................................
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:.......
2) Aggregate number of securities to which transaction applies:..........
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fees is calculated and state how it was determined):...........
4) Proposed maximum aggregate value of transaction:......................
5) Total fee paid:.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee if offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:...............................................
2) Form, Schedule or Registration Statement No.:.........................
3) Filing Party:.........................................................
4) Date Filed:...........................................................