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 toss.240.14a-11(c) orss.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
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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):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee if offset as provided by
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the offsetting fee was paid previously. Identify the previous
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Schedule and the date of its filing.
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[GCI Logo]
LETTER TO SHAREHOLDERS
April 30, 2004
Re: 2004 Annual Meeting of Shareholders
of General Communication, Inc.
Dear Shareholder:
The board of directors of General Communication, Inc. cordially invites
and encourages you to attend our annual meeting of shareholders. The meeting
will be held at Josephine's Restaurant on the 15th floor in the Sheraton Hotel
at 401 East 6th Avenue in Anchorage, Alaska at 6:00 p.m. (Alaska Daylight Time)
on Thursday, June 10, 2004. Our board has chosen the close of business on April
12, 2004 as the record date for determining the shareholders entitled to notice
of, and to vote at, the meeting. Please join us for a reception preceding the
meeting, commencing at 5:00 p.m.
Copies of the Notice of Annual Meeting of Shareholders, Proxy and Proxy
Statement are enclosed covering the formal business to be conducted at the
meeting. Also enclosed for your information is a copy of our annual report to
shareholders in the form of our Form 10-K for the year ended December 31, 2003
as filed with the Securities and Exchange Commission.
At the meeting, our shareholders will be asked to elect individuals to
fill three positions on our classified board as required by our Bylaws, to
approve an increase in our common stock allocated to our Amended and Restated
1986 Stock Option Plan, and to conduct other business as described more fully in
the Proxy Statement and as may properly come before the meeting. Regardless of
the number of shares you own, your careful consideration of, and vote on, these
matters is important.
In order to ensure that we have a quorum and that your shares are voted
at the meeting, please complete, date and sign the enclosed Proxy and return it
promptly in the enclosed addressed and stamped envelope.
In addition to conducting the formal business at the meeting, we shall
also review our activities over the past year and our plans for the future. I
hope you will be able to join us.
Sincerely,
/s/
Ronald A. Duncan
President and Chief Executive Officer
[GCI LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 10, 2004
April 30, 2004
To the Shareholders of
General Communication, Inc.
You are cordially invited to attend the annual meeting of shareholders
of General Communication, Inc. ("Company", "we", "our", "us") The meeting will
be held at Josephine's Restaurant on the 15th floor in the Sheraton Hotel at 401
East 6th Avenue in Anchorage, Alaska at 6:00 p.m. (Alaska Daylight Time) on
Thursday, June 10, 2004. At the meeting, our shareholders will consider and vote
upon the following matters:
o Electing three directors, each for three-year terms, as part of
Class III of our seven-member classified board of directors;
o Approving an increase in the number of shares of our common stock
authorized and allocated to our Amended and Restated 1986 Stock
Option Plan by 2.5 million shares of Class A common stock
o Transacting such other business as may properly come before the
annual meeting and any adjournment or adjournments of it
The above matters are more fully described in the accompanying Proxy
Statement. Please join us for a reception preceding the annual meeting,
commencing at 5:00 p.m.
The close of business on April 12, 2004 has been fixed as the record
date for the annual meeting. Only holders of shares of our Class A common stock,
Class B common stock and Series B convertible, redeemable, accreting preferred
stock of record as of that date will be entitled to notice of and to vote at the
annual meeting or any adjournment or adjournments of it.
The accompanying form of Proxy is solicited by our board. The enclosed
Proxy Statement contains further information with regard to the business to be
transacted at the meeting. A list of our shareholders as of the record date will
be kept at the offices of the Company at 2550 Denali Street, Suite 1000,
Anchorage, Alaska 99503 for a period of 30 days prior to the meeting and will be
subject to inspection by any of our shareholders at any time during normal
business hours.
In order to ensure that we have a quorum and that your shares are voted
at the annual meeting, please sign and date the enclosed Proxy and mail it to
our transfer agent (Mellon Investor Services LLC) in the enclosed, addressed and
stamped envelope. If you send in your Proxy and later do attend the meeting, you
may then withdraw your Proxy should you desire to do so. However, in this case,
you must revoke your Proxy in writing and present the written revocation at the
meeting. Thereafter, you may vote in person if you wish. The Proxy may be
revoked at any time prior to its exercise.
BY ORDER OF THE BOARD OF DIRECTORS
/s/
John M. Lowber, Secretary
GENERAL COMMUNICATION, INC.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
907.868.5600
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 10, 2004
We are sending this Proxy Statement with the enclosed form Proxy and
Notice of Annual Meeting of Shareholders of General Communication, Inc. (unless
the context otherwise requires, includes its direct and indirect subsidiaries
and is referred to as "Company," "we," "us" or "our") in conjunction with the
2004 annual meeting of our shareholders. The meeting will be held at Josephine's
Restaurant on the 15th floor in the Sheraton Hotel at 401 East 6th Avenue in
Anchorage, Alaska at 6:00 p.m. (Alaska Daylight Time) on Thursday, June 10,
2004.
We invite you to attend the annual meeting and request that you vote on
the proposals described in this Proxy Statement. However, you do not need to
attend the meeting to vote your shares. Instead, you may simply complete, date,
sign and return the enclosed form Proxy.
This Proxy Statement, the Letter to Shareholders, Notice of Annual
Meeting, and the accompanying Proxy are first being sent or delivered to you and
other shareholders of the Company on or about April 30, 2004. A copy of the
Company's Annual Report, in the form of the Company's Form 10-K for the year
ended December 31, 2003 ("Annual Report"), accompanies this Proxy Statement.
See, "Annual Report."
DATED: April 30, 2004
TABLE OF CONTENTS
Page
COMPANY ANNUAL MEETING.........................................................3
CODE OF BUSINESS CONDUCT AND ETHICS...........................................14
MANAGEMENT OF COMPANY.........................................................15
CERTAIN TRANSACTIONS..........................................................38
OWNERSHIP OF COMPANY..........................................................48
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS..............................53
ANNUAL REPORT.................................................................55
SHAREHOLDER COMMUNICATIONS....................................................55
FUTURE SHAREHOLDER PROPOSALS AND RECOMMENDATIONS..............................56
AUDIT COMMITTEE CHARTER (Appendix I)..........................................60
Page 2
COMPANY ANNUAL MEETING
Voting Procedure
Overview. This Proxy Statement is furnished to you and our other
shareholders because our board of directors is soliciting shareholder proxies to
vote at our 2004 annual meeting of shareholders.
Time and Place. Our 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 10, 2004. A
reception for our shareholders will commence at 5 p.m. at that location.
Delivery The Proxy Statement, Letter to Shareholders, Notice of Annual
Meeting and accompanying board proxy ("Proxy") are first being sent or delivered
to our shareholders on or about April 30, 2004. A copy of our Annual Report for
2003 accompanies this Proxy Statement.
Exhibits to that Form 10-K are not enclosed. However, that form
includes a list briefly describing all of those exhibits. In addition, we will
furnish a copy of an exhibit to a shareholder upon written request to us and
payment of a fee to cover our expenses in furnishing that exhibit.
Purpose. As indicated in the Notice of Annual Meeting, the following
matters will be considered and voted upon at our annual meeting:
o Electing three directors in Class III of our classified board for
three-year terms.
o Approving an increase in the number of shares of our common stock
authorized and allocated to our Amended and Restated 1986 Stock
Option Plan ("Stock Option Plan") by 2.5 million shares of Class A
common stock ("Plan Amendment").
o Transacting such other business as may properly come before the
meeting and any adjournment or adjournments of it.
Outstanding Voting Securities. Only holders of our Class A and Class B
common stock and Series B preferred stock as of the record date for our annual
meeting will be entitled to notice of, and to vote at, that meeting. Our board
has chosen the close of business on April 12, 2004 as the record date for our
annual meeting ("Record Date"). As of the Record Date and under our current
Restated Articles of Incorporation ("Articles"), our outstanding stock was
divided into four categories:
Page 3
o Class A common stock, for which the holder of a share is entitled
to one vote.
o Class B common stock, for which the holder of a share is entitled
to ten votes.
o Series B convertible, redeemable, accreting preferred stock, for
which the holder has limited voting rights.
o Series C preferred stock, for which the holder has no voting
rights.
On the Record Date, there were 53,439,888 shares of our Class A common
stock and 3,866,775 shares of our Class B common stock outstanding and entitled
to be voted at our annual meeting. In addition, there were, as of that date,
12,637 shares of our Series B preferred stock outstanding. Under the terms of
issuance of the shares of our 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 our Class A common stock into which our
Series B preferred stock may be converted. As of the Record Date, that number of
equivalent shares of our Class A common stock (excluding equivalent shares, if
any, of our Class A common stock representing dividends accrued through that
date) was 2,276,937 shares.
Voting Rights, Votes Required for Approval. At our annual meeting, a
simple majority of our issued and outstanding common stock and preferred stock
entitled to be voted as of the Record Date, represented in person or by proxy,
will constitute a quorum. As an example, since there were a total of 53,439,888
shares of our Class A common stock, 3,866,775 shares of our Class B common stock
and 12,637 shares of our 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 6,078,475
shares of our Class A common stock, all 3,866,775 shares of our Class B common
stock, and all 12,637 shares of our Series B preferred stock. See "Certain
Transactions: Series B Agreement."
Because of the ten-for-one voting power of our 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 our annual meeting. The total number of
votes to which our Class A common stock (including our issued and outstanding
Series B preferred stock on an as-converted basis) and our Class B common stock
were entitled as of the Record Date were 55,378,571 and 38,667,750 respectively.
With a quorum present, adoption of our annual meeting proposals
pertaining to electing directors and approving the Plan Amendment will each
require an affirmative vote by the holders of at least a simple majority of the
voting power of our issued and outstanding Class A common stock (including the
issued and outstanding Series B
Page 4
preferred stock on an as-converted basis) and our Class B common stock entitled
to vote as of the Record Date and represented in person or by proxy at the
meeting. Under the Articles, voting on these items must be by our Class A and
Class B common stock and our Series B preferred stock, all voting as a group.
The Articles expressly provide for non-cumulative voting in the
election of directors.
As of the Record Date, the number and percentage of outstanding shares
entitled to vote held by our directors and executive officers and their
affiliates were 6,536,811 shares of our Class A common stock (not including our
issued and outstanding Series B preferred stock on an as-converted basis),
constituting approximately 12.3% of our outstanding stock in that class,
2,043,788 shares of our Class B common stock, constituting approximately 52.9%
of the outstanding stock in that class, and all 12,637 shares of our outstanding
Series B preferred stock.
Proxies. The accompanying form Proxy is being solicited on behalf of
our board for use at our annual meeting.
Subject to the conditions described in this section, the shares
represented by each Proxy executed in the accompanying form of Proxy will be
voted at our annual meeting in accordance with the instructions in that Proxy.
The Proxy will be voted for our board'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 our shareholders, directly or by Proxy completed and
executed in accordance with the instructions on the Proxy, will be counted at
our annual meeting. A Proxy having no clear indication of a vote on one or both
of the two proposals to be addressed at our annual meeting will be voted "for"
the corresponding proposals, as the case may be. A proxy having conflicting
indications or more than one selection on a proposal to be addressed at our
annual meeting will not be voted on that matter but will be used for purposes of
establishing a quorum.
A Proxy clearly marked as withholding authority to elect a nominee or
otherwise as abstaining on a proposal to be addressed at our annual meeting will
be honored and not voted (although present and entitled to vote). Similarly, a
broker holding shares of record for their beneficial owner generally is not
entitled to vote on matters before our annual meeting unless the owner gives
that broker specific voting instructions. The votes that the broker would have
cast should that owner have given those specific instructions (commonly called
"broker non-votes") are not considered as votes cast for purposes of the two
proposals and other matters addressed at our meeting. However,
Page 5
such withholding of, or abstaining from, voting and broker non-votes will be
counted as present for purposes of establishing a quorum for our meeting, and
they will have the effect of votes against approval of the two proposals and
other matters addressed at our meeting.
Voting by Employees Participating in Our Stock Purchase Plan. Our
Qualified Employee Stock Purchase Plan ("Stock Purchase Plan") provides that
each participant in the plan is entitled to vote the pro rata portion of shares
of our common stock held by the plan and allocated to the participant. Should a
participant in the Stock Purchase Plan decline or otherwise not respond to an
opportunity to vote those shares, the plan provides that the shares are to be
voted by the Plan Committee, which administers the Stock Purchase Plan. These
shares would also be counted for purposes of establishing a quorum.
Revocability of Proxies. 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 our board at the principal executive offices of the Company as identified on
the cover page of this Proxy Statement. The notice may also be delivered to the
Secretary at our annual Meeting prior to a vote using the Proxy. Thereafter, a
shareholder revoking the Proxy may vote in person or by other proxy as provided
by our Bylaws, as revised and in effect as of the Record Date ("Bylaws"). A
shareholder wishing to revoke the Proxy may do so by executing another valid
proxy bearing a later date.
Cost of the Proxy Solicitation. The expenses of the Proxy solicitation
made by our board for our 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, are to be paid by us. In
addition to the mailing of these proxy materials, solicitation may be made in
person or by telephone, telecopy, telegraph, or electronic mail by our officers,
directors, or regular employees, none of whom are to receive additional
compensation for that effort.
Director Elections
Overview. Our board is composed of seven directors classified into the
following three classes with the number of members as indicated: Class I (one
member), Class II (three members), and Class III (three members).
At our annual Meeting, three individuals will be elected to positions
in Class III of our board for three-year terms. The individuals so elected will
serve subject to the provisions of the Bylaws and until the election and
qualification of their respective successors.
Page 6
Our Nominating and Corporate Governance Committee ("Nominating and
Corporate Governance Committee") has as one of its responsibilities to seek out,
from time to time, candidates as prospective Board members. These candidates may
be identified through the efforts of individual members of the Nominating and
Corporate Governance Committee, members of our board, generally, shareholder
recommendations accepted by the committee, and, in the committee's discretion,
through consultants as otherwise provided in our Nominating and Corporate
Governance Committee Charter ("Nominating and Corporate Governance Committee
Charter"). See "Future Shareholder Proposals and Recommendations:
Recommendations."
Prospective candidates must meet the minimum criteria set forth in the
Nominating and Corporate Governance Committee Charter taking into consideration
the appropriate size of our board, the committee's understanding of our
strategic direction requirements, and the specific compositional needs of our
board. In addition, in reviewing and making recommendations regarding existing
board members, the committee takes into consideration results of evaluations of
existing board members and the wishes of an affected existing board member to be
re-nominated.
The minimum criteria set forth in the Nominating and Corporate
Governance Committee Charter for selection as a committee-recommended nominee
for a position on the board are as follows:
o Be between and including 21 and 70 years of age.
o Possess basic skills and characteristics required as prerequisites
for each member, unless otherwise specified, on the board which
must include, but are not limited to, the following -
o Knowledge, skills and experience in at least one of the
primary industries in which we operate.
o Ability to read and understand fundamental financial
statements, including our balance sheet, income statement and
cash flow statement, and have at least familiarity with the
underlying accounting rules and practices.
o Ability to understand our key business and financial risks.
o Appreciation of the relationship of our business to changing
needs of society.
Page 7
o With respect to at least one member of our board, skills,
attributes, and financial sophistication of an audit committee
financial expert as the term is defined in the charter.
o With respect to at least a simple majority of the authorized
members of our board, each be an independent director as the
term is defined in the Nasdaq Stock Market corporate
governance listing standards (to which we are subject) and
incorporated into the charter, i.e., an individual other than
one of our officers or employees or any other individual
having a relationship which in the opinion of our board would
interfere with the exercise of independent judgment in
carrying out the responsibilities of a director ("Independent
Director").
o Other skills and characteristics specifically identified and
approved by the committee.
We believe that the nominees proposed for election as directors are
willing to serve as such. Our board intends 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, in the
event any nominee at the time of the election shall be unable or unwilling or
shall otherwise be unavailable for election and as a consequence, other nominees
shall be designated, those proxyholders or their substitutes will have
discretion and authority to vote or refrain from voting in accordance with their
judgment with respect to other nominees.
Director Independence. Mr. Mooney is an officer of MCI WorldCom, Inc.
("MCI"), a holder, as of the Record Date, of in excess of 5% of both the
Company's outstanding shares of Class A and Class B common stock. Mr.
Reinstadtler is an officer of an affiliate of Toronto Dominion Investments, Inc.
("Toronto Dominion"), a holder of 100% of the Company's outstanding shares of
Series B preferred stock, immediately convertible into shares of Class A common
stock constituting, as of the Record Date, 4.1% of the outstanding shares of
that stock after that conversion. Mr. Fisher, our Chairman of the Board, while
in that capacity an officer under our Bylaws and responsible for the conduct of
our board meetings and shareholder meetings when present, is considered by our
board to have no greater influence on our affairs or authority to act on behalf
of us than any other non-executive director on our board.
Our board believes each of its members satisfies that definition of an
Independent Director, with the exception of Mr. Duncan who is an officer and
employee of the Company. That is, in the case of all other board members, our
board believes each of them is an individual having a relationship which would
not interfere with the exercise of independent judgment in carrying out the
member's responsibilities to us.
Page 8
Rights of Holders of Series B Preferred Stock in Nomination To, or
Observer Status Regarding, the Board. Under the terms of the issuance and sale
of our Series B preferred stock, so long as any shares of that stock remain
outstanding, we must cause our board to include one seat, the nominee for which
is to be designated under terms of that sale. As of the Record Date, those
specific terms were not effective, although they could in the future become
effective with the issuance of additional shares of our Series B preferred stock
to another holder or should the present holder of the outstanding Series B
preferred stock, Toronto Dominion, not be prohibited from participation in the
designation of that board member by law or regulation, including the federal
Bank Holding Company Act.
The Series B Agreement provides that, upon designation of an individual
by the holders of our Series B preferred stock, our board must cause that
individual to be nominated for approval by the holders of our common stock at
each meeting of our shareholders at which directors are to be elected. Our board
is then expected, upon that nomination, to recommend approval of that designated
individual. In the event the holders of the our common stock shall fail to elect
that designated individual, the holders of Series B preferred stock will have
the right to appoint an observer to attend the meetings of our board.
Independent of that observer right, if at any time the designee to our board is
not an employee of Toronto Dominion or its affiliates, then that investor would
have an additional right to appoint an observer to attend all meetings of our
board. See also, "Certain Transactions:
Series B Agreement."
Recommendation of Board. Our board recommends to our shareholders a
vote "FOR" the slate of three individuals as directors in the positions up for
election at our annual meeting, i.e., a vote for proposal number 1 of the Proxy.
This slate of individuals is as follows:
o Donne F. Fisher.
o William P. Glasgow.
o James M. Schneider.
Each of these three nominees has been recommended by the Nominating and
Corporate Governance Committee. Background and other information on each of the
nominees is provided elsewhere in this Proxy Statement. See, "Management of
Company."
Plan Amendment
Overview. The proposed Plan Amendment consists of increasing the number
of shares authorized and allocated to our Stock Option Plan by 2.5 million
shares of our Class A common stock.
Page 9
Plan. The terms, history and purpose of our 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 our Stock Option Plan, our key employees (including officers and
directors who are employees) and non-employee directors of, and consultants or
advisers to, us are eligible for option grants. The selection of optionees is
made by our Compensation Committee ("Compensation Committee"). In selecting an
optionee, as well as in determining the number of shares subject to each option,
our Compensation Committee takes into consideration such factors as it deems
relevant in connection with accomplishing the purpose of the plan.
Our Stock Option Plan provides that payment upon exercise of an option
may be in the form of money or shares of our Class A common stock. The plan
further provides, notwithstanding other restrictions on transferability of
options, that an optionee, with approval of our Compensation Committee, may
transfer an option for no consideration to, or for the benefit of, the
optionee's immediate family. There is no restriction in the Stock Option Plan
that an option granted under the plan must be held by the optionee for a minimum
period of time.
Under the plan, our board's authority to modify or amend the plan is
subject to prior approval of our shareholders only in the cases of increasing
the number of shares of our stock allocated to, and available and reserved for,
issuance under the plan, or implementing the provisions of Section 162(m) of the
Internal Revenue Code of 1986, as amended ("Internal Revenue Code") relating to
employee remuneration in excess of $1 million. Under our Stock Option Plan,
Compensation Committee members are to consist only of our board members, or
solely of two or more "non-employee directors" as defined in federal securities
regulation, or, in the context of implementing the provisions of Section 162(m),
solely of two or more "outside directors" when options are granted to "covered
employees" as those terms are defined in that section. The plan provides that an
option granted to a person may be terminated for cause as defined in the plan.
With limited exception, 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. At the 2002 annual meeting, shareholders approved an amendment to the plan
placing a limitation on accumulated grants of options of not more than 500,000
shares of Class A common stock per optionee per year. This limitation was made a
part of the plan to enable us to take advantage of the provisions of Section
162(m) of the Internal Revenue Code should we choose to do so. With this
exception, there are no fixed limitations on the
Page 10
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, 12 executive officers, including all
of the Named Executive Officers, 6 current directors (including their affiliated
companies), who are not executive officers, and 521 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 12 eligible executive
officers, 5 Named Executive Officers (as defined elsewhere, see "Management:
Executive Compensation"), 6 current directors who are not executive officers,
and 1,246 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 our Compensation Committee.
As of the Record Date, the closing sales price on the Nasdaq Stock
Market was $9.51 per share for our Class A common stock.
The federal income tax consequences of an optionee's participation in
our 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. We assume 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.
Options granted under our Stock Option Plan are characterized for
federal income tax purposes as non-qualified stock options. 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
constitutes ordinary income to the optionee, and that ordinary income is subject
to federal income tax withholding by us.
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 with exercise
of the option will be the amount paid for such shares, plus any ordinary income
recognized as a result of the exercise.
Page 11
Generally, there will be no federal income tax consequence to us 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 by the optionee, we are entitled to claim a
deduction against our gross income, for federal income tax purposes, equal to
the amount of ordinary income the optionee is required to recognize as a result
of the exercise, with two limitations. These limitations are that the cost to us
of the options must constitute an ordinary and necessary business expense and
that we must have satisfied our withholding obligations under the Internal
Revenue Code.
Pending Options. As of the Record Date, our Compensation Committee had
granted options to purchase an additional 616,500 shares at exercise prices of
$5.00-$9.25 per share, subject to approval of the Plan Amendment by our
shareholders ("Pending Options"). These options are allocated to the Named
Executive Officers and others as follows:
Name and Position (1) Dollar Value (2) ($) Number of Shares
- --------------------- -------------------- ----------------
Ronald A. Duncan
President and Chief Executive Officer 277,500 250,000
G. Wilson Hughes
Executive Vice President and General Manager - - - -0-
John M. Lowber
Senior Vice President, Chief Financial Officer and 111,000 100,000
Secretary/Treasurer
Dana L. Tindall
Senior Vice President - Legal, Regulatory and Governmental - - - -0-
Affairs
Richard D. Westlund
Vice President and General Manager Long Distance & Wholesale
Services - - - -0-
All Current Executive Officers As a Group (12 Persons) 388,500 350,000
All Current Non-Executive Directors As a Group (6 persons) - - - -0-
All Current Non-Executive Officer Employees As a Group (54 82,584 166,500
persons)
- -------------------
1 In addition, we granted options, subject to shareholder approval of the
Plan Amendment, to one of our vendors (not one of our affiliates or an
affiliate of, or otherwise related to, any of the persons identified in
this table) in the amount of 100,000 shares for a total dollar value of
$451,000, based upon the exercise price in the stock option granted for the
shares as of the Record Date.
2 Based upon the exercise price in the stock option granted for the shares
indicated and the closing price of the Class A common stock on the Record
Date.
- -------------------
With the exception of the anticipated grants of options as shown in the above
table, it is impossible to determine the benefits which may be received by, or
allocated to, each of the Named Executive Officers or any other of our officers,
directors or employees, directly or as a group, as a result of the Plan
Amendment.
Page 12
Amendment. The proposed Plan Amendment increases the number of shares
authorized and allocated to our Stock Option Plan. As of the Record Date, the
plan had 10.7 million shares of our Class A common stock authorized and
allocated to it, of which only 34,357 shares were available for granting of new
options. The Plan Amendment would increase the total number of shares allocated
to our Stock Option Plan to 13.2 million shares of Class A common stock. As of
the Record Date, the Plan Amendment would result in 2,534,357 shares of that
stock being available for grant of new options under the plan, including
satisfaction of the Pending Options. We have, under our Articles, sufficient
shares of Class A common stock authorized and unissued to satisfy the proposed
increased allocation of common stock to our plan.
Our Stock Option Plan provides for its continued existence for so long
as our board believes the plan provides an incentive to our officers and
employees and for so long as there remain shares of our Class A common stock
allocated to the plan which are not subject to outstanding options. In the
future, should our Stock Option Plan have no more shares of Class A common stock
allocated to it, our board would have the choice of seeking approval from our
shareholders for another allocation of shares to the plan, discontinuing further
granting of options under the plan, or suspending or terminating the plan.
Our shareholders have shown their support of our Stock Option Plan in
the past through approval of increased share allocations to the plan on several
occasions. Most recently, at the 2002 annual meeting our shareholders approved
an increase in the number of shares authorized and allocated to the plan in the
amount of 2.0 million shares of Class A common stock.
Our board believes that the Stock Option Plan has proven to be useful
and beneficial to us as a special incentive to our officers, non-employee
directors, and other key employees, especially when we recruit and retain new
personnel. It has provided a means for these persons to acquire an equity
interest in us. The plan has been in operation for approximately 18 years. Our
business expansion during the past several years has increased the number of
persons to whom we may wish to grant options under the plan. For these reasons,
our board believes that the allocation of shares to the plan must continue to
increase so that we may continue to provide the special incentive of stock
options to our expanded cadre of officers, non-employee directors, and key
employees.
Recommendation of Board. Our board has passed a resolution expressly
adopting the Plan Amendment. As a further step in the adoption of the amendment,
the following resolution will be offered at our annual meeting for consideration
by our shareholders:
RESOLVED, that the shareholders of General Communication, Inc. hereby approve
the amendment to the General Communication, Inc.
Page 13
Amended and Restated 1986 Stock Option Plan adopted by the board of directors of
the Company at its December 4, 2003 meeting, increasing the number of shares
authorized and allocated to the plan by 2.5 million shares for a total
allocation of 13.2 million shares of Company Class A common stock.
Our board, through this Proxy Statement, recommends to our shareholders
a vote "FOR" the adoption of the proposed Plan Amendment, i.e., proposal number
2 of the Proxy. The voting rights of our shareholders on this proposal are set
forth elsewhere in this section. See, "Company Annual Meeting: Voting Procedure
- - Voting Rights, Votes Required for Approval."
Other Business
Other matters, beyond the election of directors and the Plan Amendment,
which may be addressed at our annual meeting consist of approval (but not the
ratification) of the minutes of our past annual shareholder meeting held on June
5, 2003, matters incident to the conduct of our annual meeting, and other
business as may properly come before our 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 we
were, as of the Record Date, unaware of other matters of business to come before
the meeting, they could include election of a person to our board for which a
bona fide nominee is named in this Proxy Statement and where that nominee is
unable to serve or for good cause refuses to serve, and matters proposed by our
shareholders for which we have not received timely notice.
Our board intends to use discretionary voting authority given it under
the Bylaws and in compliance with Rule 14a-4(c) adopted under the Securities
Exchange Act of 1934 ("Exchange Act") should any other matter come before our
annual meeting.
Other than these matters, our board does not intend to bring other
business before our annual meeting and does not know of any other matter which
anyone else proposes to present for action at our annual meeting. However, in
the event any other matters shall properly come before our annual meeting, the
persons named in the accompanying form Proxy or their duly constituted
substitutes acting at the meeting will be deemed authorized to vote or otherwise
act upon those matters in accordance with their judgment.
CODE OF BUSINESS CONDUCT AND ETHICS
In December 2003 our board adopted our Code of Business Conduct and
Ethics ("Ethics Code"). The Ethics Code applies to all of our officers,
directors and
Page 14
employees. The Ethics Code takes as its basis a set of business principles
adopted by our board several years ago. It also builds upon the basic
requirements for a code of ethics as required by federal securities law and
rules adopted by the SEC.
In adopting the Ethics Code, our board reestablished the course of
business conduct and ethics for us, infusing it with certain key values and
characteristics and providing adherence to a clear code of ethical conduct. The
Ethics Code promotes honest and ethical conduct, including ethical handling of
actual or apparent conflicts of interest between personal and professional
relationships of our employees. It also promotes full, fair, accurate, timely
and understandable disclosure in our reports and documents filed with, or
submitted to, the SEC and other public communications made by us. The Ethics
Code further promotes compliance with applicable governmental laws, rules and
regulations, internal reporting of violations of the code to appropriate persons
as identified in the code and accountability for adherence to the code.
A copy of the Ethics Code is displayed on our Internet website at
www.gci.com. Also, a copy of the Ethics Code may be obtained at no charge and
upon written request to us at the following address:
ATTN: Chief Financial Officer (Ethics Code)
General Communication, Inc.
2500 Denali Street, Suite 1000
Anchorage, Alaska 99503
MANAGEMENT OF COMPANY
Directors and Executive Officers
Our board currently consists of seven director positions, divided into
three classes of directors serving staggered three-year terms. A director on our
board is elected at an annual meeting of shareholders and serves until the
earlier of his or her resignation or removal, or his or her successor is elected
and qualified. Our executive officers generally are appointed at our board's
first meeting after each annual meeting of shareholders and serve at the
discretion of the board.
The following table sets forth certain information about the our
directors and executive officers as of the Record Date.
Name Age Position
---- --- --------
Donne F. Fisher (1,2,3,4,5) 65 Chairman, Director, and Nominee
Ronald A. Duncan (2,4) 51 President, Chief Executive Officer, and Director
John M. Lowber (1) 54 Senior Vice President, Chief Financial Officer, Secretary, and
Treasurer
G. Wilson Hughes 58 Executive Vice President and General Manager
Page 15
Name Age Position
---- --- --------
William C. Behnke 46 Senior Vice President - Strategic Initiatives
Gina R. Borland 40 Vice President - General Manager, Local Services
Marsha E. Burns 51 Vice President - General Manager, Network Solutions
Richard P. Dowling 60 Senior Vice President - Corporate Development
Paul E. Landes 46 Vice President - Marketing and Sales, Chief Marketing Officer
Terry J. Nidiffer 43 Vice President - General Manager, Internet Services
William R. Snell 54 Vice President - General Manager, Cable and Entertainment Services
Dana L. Tindall 42 Senior Vice President - Legal, Regulatory and Governmental Affairs
Richard D. Westlund 60 Vice President - General Manager, Long Distance and Wholesale
Services
Stephen M. Brett (2,3,5) 63 Director
William P. Glasgow (1,2,3,4,5) 45 Director and Nominee
Stephen R. Mooney (2,3,4,5,6) 44 Director
Stephen A. 37 Director
Reinstadtler (1,2,3,5,6)
James M. Schneider (2,3,5,6) 51 Director and Nominee
- -------------------
1 Member of Finance Committee.
2 The present classification of our board is as follows: (1) Class I - Mr.
Reinstadtler, whose present term expires at the time of the 2005 annual
meeting; (2) Class II - Messrs. Brett, Duncan and Mooney whose present
terms expire at the time of the 2006 annual meeting; and (3) Class III -
Messrs. Fisher, Glasgow, and Schneider, whose present terms expire at the
time of the present annual meeting.
3 Member of the Compensation Committee.
4 Member of the Executive Committee.
5 Member of the Nominating and Corporate Governance Committee.
6 Member of the Audit Committee.
- -------------------
Donne F. Fisher. Nominee. Mr. Fisher has served as Chairman of our
board since June 2002 and has served as a director on our board since 1980. Mr.
Fisher had been a consultant to Tele-Communications, Inc. ("TCI") since January
1996, and a director of TCI from 1980, to March 1999 when TCI merged into AT&T
Corp. From 1982 until 1996, he held various executive officer positions with TCI
and its subsidiaries. Mr. Fisher had served on the board of directors of most of
TCI's subsidiaries through the years. He has served on the Compensation
Committees and the Audit Committees of both Liberty Media and Sorrento Networks,
Inc. Since 1999 he has managed his personal assets.
Ronald A. Duncan. Mr. Duncan is a co-founder of the Company and has
served as a director on our board since 1979. Mr. Duncan has served as our
President and Chief Executive Officer since January 1, 1989. From 1979 through
December
Page 16
1988 he was our Executive Vice President. His present term as a director on our
board expires in 2006.
John M. Lowber. Mr. Lowber has served as our Chief Financial Officer
since January 1987, as our Secretary and Treasurer since July 1988 and as our
Senior Vice President - Administration since December 1989. He was our Vice
President - Administration from 1985 to December 1989. Prior to joining the
Company, Mr. Lowber was a senior manager and certified public accountant at Peat
Marwick Mitchell and Co. (presently named KPMG LLP).
G. Wilson Hughes. Mr. Hughes has served as our Executive Vice President
and General Manager since June 1991. He previously held engineering or
management positions with Northern Air Cargo, Enserch, Ebasco, Frank Moolin and
Associates and Alascom, Inc. Mr. Hughes has served as Chairman of the Anchorage
Economic Development Corporation and the Alaska Industrial Development and
Export Authority.
William C. Behnke. Mr. Behnke has served as our Senior Vice President -
Strategic Initiatives since January 2001 and, prior to that, had served as our
Senior Vice President - Marketing and Sales from January 1994. He was one of our
Vice Presidents and was President of GCI Network Systems, Inc., one of our
former subsidiaries, from February 1992 to January 1994. From June 1989 to
February 1992, Mr. Behnke was one of our Vice Presidents and General Manager of
GCI Network Systems, Inc. From August 1984 to June 1989, he was Senior Vice
President for TransAlaska Data Systems, Inc.
Richard P. Dowling. Mr. Dowling has served as our Senior Vice President
- - Corporate Development since December 1990. He was our Senior Vice President -
Operations and Engineering from December 1989 to December 1990. From 1981 to
December 1989, Mr. Dowling served as our Vice President - Operations and
Engineering.
Dana L. Tindall. Ms. Tindall has served as our Senior Vice President -
Legal, Regulatory, and Governmental Affairs since January 1994. She was our Vice
President - Regulatory Affairs from January 1991 to January 1994. From October
1989 through December 1990, Ms. Tindall was our Director of Regulatory Affairs,
and she served as our Manager of Regulatory Affairs 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.
Gina R. Borland. Ms. Borland has served as our Vice President-General
Manager, Local Services since January 2001. Prior to that, she was a member of
our Corporate Development Department serving in various capacities generally
involving
Page 17
business development from September 1996 through December 2000. She
has been employed by us since 1988 serving in various capacities.
Marsha E. Burns. Ms. Burns has served as our Vice President - General
Manager, Network Solutions since 1998. From 1997 to 1998 she served as our Vice
President - Enterprise Services. Prior to joining us, Ms. Burns held several
management positions with IBM.
Paul E. Landes. Mr. Landes has served as our Vice President - Marketing
and Sales, Chief Marketing Officer since 2002. Prior to that, he was our Vice
President - Marketing from 1999 to 2002. Prior to joining us, he was part of the
management team at Carr Gottstein Foods, an Alaska based retail food and
merchandise company, from 1992 to 1999. Previous to that work, he was a part of
the management team at Pay n Save Drug Store, a retail merchandise company, from
1987 to 1992.
Terry J. Nidiffer. Mr. Nidiffer has served as our Vice President -
General Manager, Internet Services since February 2000. Prior to that he was our
Director, Internet Network Services, from July 1999 to January 2000.
William R. Snell. Mr. Snell has served as our Vice President - General
Manager, Cable and Entertainment Services since November 1996. Prior to that, he
was Executive Director for the Alaska Industrial Development and Export
Authority from July 1992 until November 1996. Mr. Snell has served as a trustee
(including acting as the chair) of the Alaska State Pension Investment Board
from July 1999 until September 2003.
Richard D. Westlund. Mr. Westlund has served as our Vice
President-General Manager, Long Distance and Wholesale Services since January
2001. Prior to that he was our Vice President - General Manager, Wholesale and
Carrier Services from January 1999 through December 2000. Prior to that, Mr.
Westlund was our Vice President - Director, Carrier Relations and Marketing from
April 1988 to December 1998.
Stephen M. Brett. Mr. Brett has served as a director on our board since
January 2001. He has been of counsel to Sherman and Howard, a law firm, since
January 2001. He served as Senior Executive Vice President for AT&T Broadband
from March 1999 to April 2000. Prior to that Mr. Brett served as Executive Vice
President, General Counsel and Secretary to TCI from 1991 to March 1999. His
present term as a director on our board expires in 2006.
William P. Glasgow. Nominee. Mr. Glasgow has served as a director on
our board since 1996. From 1999 to the present, he has been President/CEO of
Security Broadband Corp. From 2000 to the present Mr. Glasgow has been President
of Diamond Ventures, L.L.C., a Texas limited liability company and sole general
partner of
Page 18
Prime II Management, L.P., and Prime II Investments, L.P., both of which are
Delaware limited partnerships. Since 1996, he has been President of Prime II
Management, Inc., a Delaware corporation, which was formerly the sole general
partner of Prime II Management, L.P. From 1989 to 1996, he held positions of
Vice President - Finance and Senior Vice President - Finance with Prime II
Management, Inc. Mr. Glasgow is presently a managing director of the general
partner of Prime VIII, L.P. He is also managing director of Prime New Ventures.
He 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., Infrasafe, Inc.
and Security Broadband Corp., none of which are publicly held.
Stephen R. Mooney. Mr. Mooney has served as a director on our board
since January 1999. Since 2002, Mr. Mooney has served as Vice President of
Treasury Services at MCI, Inc. From 1999 to 2002, he was Vice President of
WorldCom Ventures Fund, Inc. Prior to that, he held various corporate
development positions with MCI Communications Corporation and MCImetro, Inc. His
present term as a director on our board expires in 2006.
Stephen A. Reinstadtler. Mr. Reinstadtler has served as a director on
our board since December 2002. From January 2002 to the present, he has been
Managing Director of TD Capital, an affiliate of Toronto-Dominion Bank Financial
Group. He has held various positions with TD Capital since July 1995. Prior to
joining TD Capital, he was a member of Toronto-Dominion Bank's media,
telecommunications and technology group from April 1994 to June 1995 where he
was responsible for executing highly leveraged debt transactions for leading
media and communications companies. Mr. Reinstadtler has 10 years of private
equity and investment banking experience. His present term as a director on our
board expires in 2005.
James M. Schneider. Nominee. Mr. Schneider has served as a director on
our board 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. From September 1993 to September
1996, he was Senior Vice President for MCI Communications Corporation in
Washington, D.C. Mr. Schneider was with the accounting firm of Price Waterhouse
from 1973 to September 1993 and was a partner in that firm from October 1983 to
September 1993.
Board and Committee Meetings
During 2003 and as of the Record Date, our board had five committees:
Page 19
o Audit Committee.
o Compensation Committee (previous Option Committee merged into this
committee in February, 2004).
o Executive Committee.
o Finance Committee.
o Nominating and Corporate Governance Committee (previous Nominating
Committee reorganized and renamed as this committee in December
2003).
Audit Committee. Our Audit Committee is composed of Messrs. Mooney,
Reinstadtler and Schneider. All three members are considered by our board to be
Independent Directors. In addition, Messrs. Mooney and Schneider are considered
by our board to be audit committee financial experts ("Audit Committee Financial
Experts").
The Nasdaq Stock Market corporate governance listing standards require
that at least one member of our Audit Committee must have past employment
experience in finance or accounting, requisite professional certification in
accounting, or comparable experience or background which results in the
individual's "financial sophistication." This financial sophistication may
derive from the person being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. Our board believes that Messrs. Mooney and Schneider, as Audit
Committee Financial Experts, also meet the Nasdaq Stock Market requirements for
financial sophistication.
Under rules of the Securities and Exchange Commission ("SEC"), an Audit
Committee Financial Expert is defined as a person who has all of the following
attributes:
o Understanding of generally accepted accounting principles and
financial statements.
o Ability to assess the general application of such principles in
connection with accounting for estimates, accruals and reserves.
o Experience in preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of
complexity of accounting issues that are generally comparable to
the breadth and complexity of issues that can reasonably be
expected to be raised by our financial
Page 20
statements, or experience actively supervising one or more persons
engaged in such activities.
o Understanding of internal control over financial reporting.
o Understanding of audit committee functions.
Our Audit Committee acts on behalf of our board and generally carries
out specific duties including the following, all of which are described in
detail in our Audit Committee Charter, last revised in December 2003 ("Audit
Committee Charter"):
o Independent Auditor Selection, Qualification - Is directly
responsible for appointment, compensation, retention, oversight,
qualifications and independence of our independent certified
public accountants ("External Auditor").
o Financial Statements - Assists in our board's oversight of
integrity of the Company financial statements.
o Financial Reports, Internal Control - Is directly responsible for
oversight of audit by the External Auditor of our financial
reports and the reports on internal control.
o Annual Reports - Prepares reports required to be included in our
annual proxy statement (see within this section "- Audit Committee
Report").
o Complaints - Receives and responds to certain complaints relating
to internal accounting controls, and auditing matters,
confidential, anonymous submissions by our employees regarding
questionable accounting or auditing matters, and certain alleged
illegal acts or behavior-related conduct in violation of our
Ethics Code as described in our Audit Committee Charter.
o External Auditor Disagreements - Resolves disagreements, if any,
between our External Auditor and us regarding financial reporting.
o Non-Audit Services - Reviews and pre-approves any non-audit
services offered to us by our External Auditor ("Non-Audit
Services").
o Attorney Reports - Addresses certain attorney reports, if any,
relating to violation of securities law or fiduciary duty by one
of our officers, directors, employees or agents.
Page 21
o Related Party Transactions - Reviews certain related party
transactions as described elsewhere in this Proxy Statement (see
"Certain Transactions").
o Other - Carries out other assignments as designated by our board.
The Audit Committee Charter sets forth parameters for the operation of
the Audit Committee incorporating recent changes in federal securities law and
SEC rules which impact the responsibilities of the committee. The revised
charter sets forth the purpose of the Audit Committee and its membership
prerequisites, operating principles, relationship with the External Auditor, and
primary responsibilities. A copy of the revised charter is enclosed as Appendix
I.
The Audit Committee met seven times during 2003. See within this
section," - Audit Committee Report."
Compensation Committee. Our Compensation Committee is composed of
Messrs. Brett, Fisher, Glasgow, Mooney, Reinstadtler and Schneider. All six
members are considered by our board to be Independent Directors. This committee
establishes compensation policies regarding the Chief Executive Officer and
other executive officers of the Company, makes recommendations to the Board
regarding such compensation, including establishing an overall cap on executive
compensation and setting performance standards for executive officer
compensation and administers our Stock Option Plan and approves grants of
options pursuant to the plan. The Compensation Committee met three times during
2003.
Executive Committee. Our Executive Committee is composed of Messrs.
Fischer, Duncan, Glasgow and Mooney. The committee was established to manage and
operate the affairs of the Company between our board meetings, except to the
extent shareholder authorization is required by law, the Articles or Bylaws. The
Executive Committee has the power to perform or authorize any act that could be
done or accomplished by majority action of all the directors of our board,
except as set forth in Section 5(b) of the Bylaws. Those exceptions are
responsibilities expressly reserved to our board by state law. The Executive
Committee met one time during 2003.
Finance Committee. Our Finance Committee is composed of Messrs. Fisher,
Glasgow, Reinstadtler 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 met one time during 2003.
Nominating and Corporate Governance Committee. Our Nominating and
Corporate Governance Committee is composed of Messrs. Brett, Fisher, Glasgow,
Mooney, Reinstadtler and Schneider. All six members are considered by our board
to be Independent Directors. The committee (previously known as our Nominating
Page 22
Committee and reorganized in December 2003 to its present form) acts on behalf
of our board and generally carries out its responsibilities as set forth in our
Nominating and Corporate Governance Committee Charter adopted by our board in
February 2004. Our Nominating and Corporate Governance Committee is principally
responsible for carrying out the following, all of which are described in detail
in the Nominating and Corporate Governance Committee Charter:
o Nominations - Identifies and recommends nominees for our board and
its committees.
o Corporate Governance - Reviews and recommends to our board, or
independently takes, action on various Company corporate
governance issues.
o Complaints - Receives and responds to certain complaints raised by
our employees, and not otherwise addressed by the Audit Committee,
regarding alleged illegal acts or behavior-related conduct by our
board members in violation of the Ethics Code.
o Supervision - Supervises our Chief Financial Officer in the
context of the Ethics Code.
o Other - Carries-out other assignments as designated by our board.
In addition to setting forth the purpose of the committee, as
previously outlined, the Nominating and Corporate Governance Committee Charter
establishes committee membership qualifications, terms, definition of
Independent Director (same as that described in the previous discussion of the
Audit Committee), and operating principles. In the context of its corporate
governance responsibilities, our committee is to develop and recommend to our
board, from time to time, a set of corporate governance principles applicable to
us, review and recommend changes, if any, to our Ethics Code, review on an
annual basis our board's committee structure and recommend changes, if any, to
it, establish criteria and processes for, and lead our board and each of its
committees in, its annual performance self-evaluation, and work with the chair
of the Compensation Committee on issues of management objectives, Chief
Executive Officer evaluation and management development and succession.
A copy of the Nominating and Corporate Governance Committee Charter is
available to our shareholders on our Internet website: www.gci.com.
The Nominating and Corporate Governance Committee met one time during
2003.
Page 23
Board, Committee Attendance. Our board held five meetings during 2003.
All incumbent directors, as disclosed in this Proxy Statement, attended 75% or
more of the meetings of our 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. Fisher (73%); and Mr. Schneider (72%).
Meetings of Independent Directors. The Independent Directors seek to
meet at least two times per year. The Independent Director meetings are held
without any of our management directors or employees present. The presiding
director at this meeting is the Chairman of the Board. This procedure was
implemented with the board's meeting in December 2003 and, as of the Record
Date, the Independent Directors had met twice, once in conjunction with the
December 2003 board meeting and once in 2004 in conjunction with the February
2004 board meeting.
Director Compensation
Effective commencing January 1, 2003, director fees were set at $2,000
per director per quarter pro-rated based upon attendance at our board meetings
during the quarter. However, directors who serve on the Audit Committee each
receive an additional director fee of $2,000 per director per quarter pro-rated
based upon attendance at committee meetings. Directors affiliated with the
Company through a business interest do not receive any director fees. During
2003, the directors on our board received no other 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. This director fee structure continued
unchanged through the Record Date.
Executive Compensation
Summary Compensation. The following table sets forth certain
information concerning the cash and non-cash compensation earned during fiscal
years 2001, 2002 and 2003 by our Chief Executive Officer and by each of our four
other most highly compensated executive officers whose individual combined
salary and bonus each exceeded $100,000 during 2003 (collectively, "Named
Executive Officers").
Page 24
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
---------------------------------------------- ------------------------------
Restricted
Other Annual Stock Securities All Other
Name and Principal Salary Bonus Compensation Awards Underlying Compensation
Position Year ($) ($) ($) ($) Options/SARs(#) ($) (1,2)
- -------- ---- ------- ------- ------------ ---------- --------------- ------------
Ronald A. Duncan 2003 295,000 105,000 -0- -0- -0- 21,338
President and Chief Executive 2002 295,000 99,750 -0- -0- 450,000 21,338
Officer 2001 295,000 105,000 -0- -0- 250,000 (3) 18,790
G. Wilson Hughes 2003 175,000 53,682 -0- -0- -0- 162,773
Executive Vice President and 2002 173,959 75,177 -0- -0- 200,000 155,957
General Manager 2001 150,000 129,162 -0- -0- -0- 128,226
John M. Lowber
Senior Vice President, Chief 2003 222,050 53,682 -0- -0- -0- 129,257
Financial Officer and 2002 220,090 75,177 -0- -0- 200,000 116,245
Secretary/Treasurer 2001 175,000 64,162 -0- -0- -0- 103,087
Dana L. Tindall
Senior Vice President- 2003 250,000 63,682 -0- -0- -0- 21,521
Regulatory, Legal and 2002 247,917 75,177 -0- -0- 200,000 25,792
Governmental Affairs 2001 200,000 54,162 -0- -0- -0- 76,629
Richard D. Westlund
Senior Vice President and 2003 135,000 388,894 -0- -0- -0- 68,641
General Manager Long 2002 135,000 90,141 -0- -0- -0- 58,171
Distance & Wholesale Services 2001 134,792 194,881 -0- -0- 100,000 63,898
- -------------------
1 The amounts reflected in this column include accruals under deferred
compensation agreements between us and the named individuals as follows:
Mr. Hughes, $108,074 in 2001, $132,932 in 2002 and $137,474 in 2003; Mr.
Lowber, $73,775 in 2001, $84,274 in 2002, and $95,912 in 2003; and Mr.
Westlund, $43,164 in 2001, $43,637 in 2002 and $44,148 in 2003. Mr. Hughes
received a partial distribution of his deferred compensation account during
2002 and 2003. The distribution in 2002 included $132,932 which was
credited to his account during 2002 plus an additional $10,961 which had
been credited and included under the "All Other Compensation" column in
2001. Does not include bonus agreement granted to Mr. Hughes in 2002. See,
within this section, "-Hughes Bonus Agreement." The distribution in 2003
included $60,720 of the $137,474 which was credited to his account during
2003.
2 The amounts reflected in this column also include matching contributions
under the Stock Purchase Plan as follows: Mr. Duncan, $20,000, $20,000, and
$17,500, in 2003, 2002, and 2001, respectively; Mr. Hughes, $20,000,
$20,000, $17,500, in 2003, 2002, and 2001, respectively; Mr.
Lowber,$20,000, $18,625, and $15,000 in 2003, 2002, and 2001 respectively;
Ms. Tindall, $20,000, $20,000, and $17,500 in 2003, 2002, and 2001,
respectively; and Mr. Westlund, $20,000, $11,000 and $17,500 in 2003, 2002,
and 2001, respectively. Amounts shown for Mr. Duncan include premiums of
$138, $138, and $90 under a term life insurance, policy paid in 2003, 2002,
and 2001, respectively. Amounts shown for Mr. Westlund include premiums of
$3,293, $2,334, and $2,034, under a life insurance policy paid in 2003,
2002, and 2001, respectively. Amounts shown for Mr. Hughes include premiums
of $258, $1,825, and $1,452, under life insurance policies paid in each of
2003, 2002, and 2001, respectively. Amounts for Mr. Lowber include premiums
of $138, $138, and $1,073, under life insurance policies paid in each of
2003, 2002, and 2001, respectively. Amounts shown for Ms. Tindall include
premiums of $60 under a term life insurance policy paid in each of 2003,
2002, and 2001. Includes a waiver of accrued interest on January 1, 2003 on
notes owed to us by Mr. Lowber in the amounts of $12,007 on January 1, 2003
and 2002, and $12,039, on January 1, 2001. Includes a waiver of accrued
interest of $1,419 and $7,869 on January 1, 2003 and 2002, respectively, on
notes owed to us by Ms. Tindall. Includes $361 and $261 in 2002 and 2003,
respectively for Ms. Tindall and $3,841 in 2003 for Mr. Hughes,
respectively, for the personal use of our leased aircraft. Includes $50,000
of deferred compensation paid to Ms. Tindall during 2001. Amounts in this
column further include $1,200 of credit applied to services purchased from
us by each of the Named Executive Officers for each year for their
participation in our quality assurance program extended to employees,
generally. Amounts in this column do not include the cash surrender value
of a life insurance policy in the amount of $603,509 which was distributed
to Mr. Lowber during 2002. The policy premiums were paid out of proceeds
credited to Mr. Lowber's deferred compensation account during the years
1992 through 1999 and had been included under the "All Other Compensation"
column during those years.
3 Options were granted to a company owned by Mr. Duncan.
- -------------------
Page 25
Option/SAR Grants
We did not grant individual stock options or stock appreciation rights
to the Named Executive Officers during 2003, other than the contingent amount to
Messrs. Duncan and Lowber as discussed elsewhere in this Proxy Statement. See,
"Company Annual Meeting: Plan Amendment - Pending Options."
Option Exercise and Fiscal Year-End Values
The following table sets forth information concerning each exercise of
stock options during 2003 by each of the Named Executive Officers and the fiscal
year-end value of unexercised options held by each of them.
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-the-Money Options/SARs
at Fiscal Year-End (#) at Fiscal Year-End ($) (1)
---------------------------- ----------------------------
Shares
Acquired
on
Exercise Value
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --- ----------- ----------- ------------- ----------- -------------
Ronald A. Duncan -0- -0- 250,000 (2) 150,000 578,750 234,750
G. Wilson Hughes -0- -0- 100,000 300,000 231,500 544,500
John M. Lowber -0- -0- 355,425 300,000 1,040,440 544,500
Dana L. Tindall -0- -0- 165,787 240,000 352,605 405,600
Richard D. Westlund -0- -0- 57,366 100,000 195,492 181,500
- -------------------
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, 2003.
2 Options owned by a company owned by Mr. Duncan.
- -------------------
Non-Qualified, Unfunded Deferred Compensation Plan
In February 1995, we established a non-qualified, unfunded, deferred
compensation plan to provide a means by which certain of our employees may elect
to defer receipt of designated percentages or amounts of their compensation and
to provide a means for certain other deferrals of compensation. Employees
eligible to participate in the plan are determined by our board. We may, at our
discretion, contribute matching deferrals in amounts as we select.
Page 26
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 us. 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 of the participant, or change of control of us or our insolvency.
Participants become our general unsecured creditors with respect to deferred
compensation benefits of the plan.
During 2003 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 the end of 2003 and
the Record Date, there were no compensatory plans or arrangements, including
payments to be received from us, with respect to the Named Executive Officers
for that year. This statement is limited to situations where such a plan or
arrangement resulted in or may result from the resignation, retirement, or any
other termination of a Named Executive Officer's employment with us, or from a
change of control of us or a change in that officer's responsibilities following
such a change in control, and where the amount involved, including all periodic
payments or installments, exceeded $100,000.
Long-Term Incentive Plan Awards
We had no long-term incentive plan in operation during 2003.
Performance Based EBITDA Incentive Compensation Plan
In 2002, we adopted a Performance Based EBITDA (earnings before
interest, taxes, depreciation, and amortization) Incentive Compensation Plan
("Incentive Compensation Plan") to encourage increasing EBITDA, i.e., earnings
before income taxes, depreciation and amortization (as defined in the plan), of
our Alaska operations to a specified target by the end of 2006. Participants are
granted units which are valued in terms of a share of our Class A common stock.
If the target EBITDA is achieved on or before the end of 2006, the awards vest.
In this instance, each participant will be entitled to receive, for each unit,
the market value of a share of our Class A common stock on the date that such
payment is made. Under the Incentive Compensation Plan, 40% of the payment will
be made in cash. The remaining 60% may, at our option, be paid either in cash or
in our restricted Class A common stock. However, if stock is to be issued in
payment to participants, we are required to obtain shareholder approval of the
Incentive Compensation Plan prior to any such payment. Participants must be
employed by us on the date of payment in order to receive any compensation
pursuant to the plan. The EBITDA target will be adjusted for any material
acquisitions within the Alaska market. The award may be paid out earlier if we
are sold prior to the earlier of the end of 2006 or achievement of the EBITDA
target.
Page 27
Specified individuals of three groups of employees are eligible to
participate in the plan. They are our Chief Executive Officer, our general
managers and our senior officers. Any payments to the general manager group
pursuant to the plan are included in EBITDA for purposes of determining whether
the EBITDA target for the senior officer group has been met. One-half of the
vested amount is valued and paid on the last day of the first quarter of the
year following vesting, with the balance paid one year later.
The provisions of the Incentive Compensation Plan pertaining to the
chief executive officer are the same as for the other two groups, except any
payments to the general manager and senior officer groups under the plan are
included in EBITDA for purposes of determining whether the EBITDA target for the
chief executive officer has been met. One-half of the total amount earned will
be valued and paid on the last day of the first quarter of the year following
achievement of the target EBITDA goal. The remaining one-half will be paid as
deferred compensation. This amount will vest one-half on each of the first and
second anniversaries of the initial award. However, in the case of our Chief
Executive Officer, the individual must be employed by us on such dates for
vesting to be effective. We charged $682,559 to expense during 2003 under the
Incentive Compensation Plan.
During 2003 Messrs. Hughes and Westlund and Ms. Tindall were the only
Named Executive Officers who participated in the Incentive Compensation Plan.
For that year and as of the Record Date, units with respect to approximately
245,000 shares of our Class A common stock were to be granted pursuant to the
Incentive Compensation Plan, of which were allocated 100,000 units to Mr.
Hughes, 10,000 units to Mr. Westlund and 50,000 units to Ms. Tindall.
Stock Purchase Plan
In December 1986, we adopted a Qualified Employee Stock Purchase Plan
which has been subsequently amended from time to time and is in its present form
the Stock Purchase Plan. The plan is qualified under Section 401 of the Internal
Revenue Code. All of our employees 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 12% of such
compensation for employees earning more than $90,000 per year and up to 50% of
such compensation, both up to a maximum per employee of $13,000 for 2004.
Employees may contribute up to an additional 10% of their compensation with
after-tax dollars. Starting in 2002, participants over the age of fifty may make
additional elective contributions to their accounts in the plan pursuant to a
schedule set forth in the Internal Revenue Code.
Subject to certain limitations, we may make matching contributions of
common stock for the benefit of employees. Such a contribution will vest in
increments over the first six years of employment. Thereafter, they are fully
vested when made. No more
Page 28
than 10% of any one employee's compensation will be matched in any year. Except
for additional elective contributions made by participants over age 50, the
combination of salary reductions, after-tax contributions and our matching
contributions for any employee cannot exceed the lesser of $41,000 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 common stock of the
Company, AT&T Corp., AT&T Wireless Services, Inc., and Comcast Corporation, and
shares of various identified mutual funds.
The Stock Purchase Plan, on our behalf, may each year pay to the plan's
trust fund an amount up to 100% of each participating eligible employee's
elective deferral and voluntary contributions to the plan as determined by our
board. This employer contribution on behalf of the participating eligible
employee is to equal a stated percentage of each employee's contributions (both
voluntary contributions and elective deferrals) during any payroll period.
However, no such employee's elective deferral or voluntary contribution is to be
matched in an amount exceeding 10% of that employee's compensation during any
payroll period the employee participates in the plan. With limited exception,
the amount of our contribution under the plan must not exceed either 10% of the
aggregate compensation of all participating eligible employees under the plan in
the year for which the contribution is being determined or the annual addition
limitations of the Internal Revenue Code as provided in the plan.
The Stock Purchase Plan is administered through a plan administrator
(currently Alfred J. Walker, one of our Vice Presidents and our Chief Accounting
Officer), and the plan's committee is appointed by our 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. The plan
administrator and members of the plan's committee are all our employees. The
plan's committee has broad administrative discretion under the terms of the
plan.
As of the Record Date, there remained 2,683,138 shares of Class A and
464,036 shares of Class B common stock allocated to the plan and available for
issuance by us or otherwise acquisition by the plan for the benefit of
participants in the plan.
Stock Option Plan
In December 1986, we adopted a stock option plan which has been amended
from time to time and presently is the Stock Option Plan, i.e., our Amended and
Restated 1986 Stock Option Plan.
Page 29
Under the Stock Option Plan, we are authorized to grant non-qualified
options to purchase shares of Class A common stock to selected officers,
directors and other employees of, and consultants or advisors to, the Company
and its subsidiaries. The number of shares of Class A common stock allocated to
the Stock Option Plan was last increased by 2 million shares to 10.7 million
shares at our 2002 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, 6,476,064 shares were subject to outstanding
options under the Stock Option Plan, 4,189,579 shares had been issued upon the
exercise of options under the plan and 34,357 shares remained available for
additional grants under the plan.
As of the Record Date, the Stock Option Plan was administered by the
Compensation Committee composed of six members of our board. The members of that
committee are identified elsewhere in this Proxy Statement. See, "Management of
Company: Board and Committee Meetings."
The Compensation 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.
Equity Compensation Plan Information
The Stock Option Plan was initially approved by our shareholders in
1986. We do not have any current equity compensation plans approved by our
shareholders other than the Stock Option Plan.
The following table sets forth information regarding the number of
shares of our common stock that may be issued pursuant to our equity
compensation plans or arrangements as of December 31, 2003. The recipients of
these grants are selected officers, directors and employees of, and consultants
or advisors to, us in exchange for consideration in the form of goods or
services (as described in Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation).
Page 30
EQUITY COMPENSATION PLAN INFORMATION
AS OF DECEMBER 31, 2003
Number of Securities
Remaining Available for
Number of Securities To Be Weighted-Average Exercise Future Issuance under
Issued Upon Exercise of Price of Outstanding Equity Compensation Plans
Outstanding Options, Options, Warrants and (excluding securities
Plan Category Warrants and Rights (a) Rights ($) (b) reflected in column (a)(c)
-------------- ----------------------- -------------- ------------------------
Equity compensation plans
approved by security
holders (1) 6,476,064 6.46 34,357
Equity compensation plans
not approved by security
holders (2) 250,000 6.50 -0-
Total: (3) 6,726,064 6.46 34,357
- -------------------
1 Stock Option Plan.
2 Grant made in January 2001 separate from the Stock Option Plan of options
to a company owned by Mr. Duncan to acquire 250,000 shares of our Class A
common stock at $6.50 per share, exercisable up through March 10, 2010.
See, "Ownership of Company: Principal Shareholders."
3 Messrs. Duncan, Hughes, Westlund and Dowling and one other of our employees
have accumulated deferred compensation account balances that have been
denominated in shares of our Class A common stock. We have acquired shares
of our Class A common stock in the open market or in private transactions
over the years to fund the ultimate payment of the deferred amounts. A
total of 338,254 shares, of which all but 26,189 shares have vested, are
owned in our name and are being held in treasury pending distribution.
- -------------------
Hughes Bonus Agreement
In consideration for agreeing to continue his employment until December
31, 2004, in December 2002 we granted Mr. Hughes the right to use certain of our
real estate for two weeks each year from January 1, 2005 to December 31, 2034.
Mr. Hughes may elect at any time to receive a cash bonus in lieu of the
foregoing equal to $275,000 plus interest accrued at the rate of 3% per annum
for the period between January 1, 2002 and the date on which the option to elect
such cash payment is exercised. The bonus vests on December 31, 2004, provided
Mr. Hughes has continued full-time employment with us until that date or should
he die, become disabled or terminate his employment for health reasons prior to
that date. Should we intend to convey such real estate to a third party, Mr.
Hughes would have the right to acquire certain property adjoining that real
estate or, unless he should exercise the cash option previously described, be
paid an amount equal to $275,000 plus accrued interest at the rate of 3% per
annum for the period from January 1, 2002 to the date on which that option is
exercised. During 2003, $137,500 was accrued pursuant to this agreement.
Page 31
Report on Repricing of Options/SARs
During 2003, we did not adjust or amend the exercise price of stock
options or SARs previously awarded to any of the Named Executive Officers,
whether through amendment, cancellation or replacement grants, or any other
means.
Compensation Committee Interlocks and Insider Participation
Our Compensation Committee is composed of six members of our board as
identified elsewhere in this Proxy Statement. See, "Management: Board and
Committee Meetings - Compensation Committee." The relationships of them to us
are described elsewhere in this Proxy Statement. See, "Management of Company:
Directors and Executive Officers"; "Ownership of Company"; and "Certain
Transactions." Prior to his leaving the committee in December 2003, Mr. Duncan
(a Named Executive Officer) participated in deliberations of our Compensation
Committee concerning executive officer compensation other than deliberations
concerning his own compensation.
Compensation Committee Report on Executive Compensation
The duties of our Compensation Committee are as follows:
o Prepare, on an annual basis for the review of and action by our
board, a statement of policies, goals, and plans for executive
officer and board member compensation, if any --
o 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 of our
executive officers as our board may designate for this
purpose.
o Monitor the effect of ongoing events on and the effectiveness of
existing compensation policies, goals, and plans--
o Events specifically include but are not limited to the status
of the premise that all pay systems correlate with our
compensation goals and policies.
o Report from time to time, its findings to our board.
o Monitor compensation-related publicity and public and private
sector developments on executive compensation.
Page 32
o Familiarize itself with, and monitor the tax, accounting,
corporate, and securities law ramifications of, our compensation
policies, including but not limited to --
o Comprehending a senior executive officer's total compensation
package.
o Comprehending the package's total cost to us and its total
value to the recipient.
o Paying close attention to salary, bonuses, individual
insurance and health benefits, perquisites, historical loans
made by us, special benefits to specific executive officers,
individual pensions, and other retirement benefits.
o Establish the overall cap on executive compensation and the
measure of performance for executive officers, either by
predetermined measurement or by a subjective evaluation.
o Strive to make our compensation plans simple, fair, and structured
so as to maximize shareholder value.
For 2003, the duties of our 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 our performance and available resources.
Our compensation policy as established by our Compensation Committee is
that a portion of our annual compensation of our senior executive officers
relates to and is contingent upon our performance. In addition, executive
officers participating in deferred compensation agreements established by us
become, under those agreements, our unsecured creditors.
In February 2003, our Compensation Committee, using as a guide the
Incentive Compensation Plan, established compensation levels for 2003 for all
senior corporate officers, including certain of the Named Executive Officers.
Also at that time, our Compensation Committee established annual incentive bonus
agreements with Mr. Duncan and with each of several of its senior and other
executive officers, including Messrs. Behnke, Dowling, Hughes and Lowber, and
Ms. Tindall.
These agreements included the premise that our performance, or that of
a division or subsidiary, as the case may be, for purposes of compensation would
be measured by our Compensation Committee against goals established at that time
and
Page 33
were reviewed and approved by our board. The goals included our targets for
revenues and cash flow standards of the relevant division or subsidiary of our
business. Targeted objectives were set and measured from time to time by our
Compensation Committee. Our other business achievements obtained through the
efforts of an executive officer were also taken into consideration in the
evaluation of performance. Performances were evaluated and bonuses were issued
as described elsewhere in this section. See, within this section, "- Executive
Compensation."
During 2003, our Compensation Committee monitored and provided
direction for the Stock Purchase Plan and Stock Option Plan. In addition, our
Compensation Committee reviewed compensation levels of members of management,
evaluated the performance of management, and considered management succession
and related matters. Our Compensation Committee reviewed in detail all aspects
of compensation for the Named Executive Officers and our other executive
officers.
The practice of our Compensation Committee in future years will likely
be to continue to review directly the compensation and performance of Mr. Duncan
as chief executive officer. While our Compensation Committee may review
recommendations by Mr. Duncan for the compensation of other senior executive
officers, the committee in accordance with Nasdaq Stock Market corporate
governance listing standards rules has responsibility for recommending
compensation of such officers directly to our board for its determination.
Compensation Committee
Stephen M. Brett, Chair
Donne F. Fisher
William P. Glasgow
Stephen R. Mooney
Stephen A. Reinstadtler
James M. Schneider
Audit Committee Report
Our Audit Committee has reviewed and discussed with management our
audited financial statements for 2003. In addition, the committee has discussed
with KPMG LLP, our External Auditor for that year, the matters required to be
discussed by Statement of Accounting Standard 61. Those matters consisted of our
External Auditor discussing with the committee the External Auditor's judgment
about the quality, not just acceptability, of our financial reporting.
Our Audit Committee has received a letter dated March 8, 2004 from KPMG
LLP, as required by Independence Standards Board Standard No. 1, and discussed
with those auditors their independence from us. The letter addressed all
relationships with us that could affect KPMG LLP's independence and stated that,
for the period from
Page 34
January 1, 2003 through March 8, 2004, KPMG LLP considered itself as independent
accountants with respect to us. Our Audit Committee has concluded that the
services provided by KPMG LLP other than for the audit of our annual financial
statement for 2003 and reviews of financial statements included in our Forms
10-Q for that year, are compatible with maintaining the External Auditor's
independence regarding us.
Based upon these reviews and discussions, our Audit Committee has
recommended to our board that the audited financial statements for 2003 should
be included in our annual Report on Form 10-K.
Audit Committee
James M. Schneider, Chair
Stephen R. Mooney
Stephen A. Reinstadtler
Performance Graph
The following graph includes a line graph comparing the yearly
percentage change in our cumulative total shareholder return on our Class A
common stock during the five-year period 1999 through 2003. 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 our 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 Price 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 Price
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 our Class A common
stock (or in the stock represented by a given index, in the cases of the two
comparison indexes), with cumulative returns for each subsequent fiscal year
measured as a change from that investment. Data for each succeeding fiscal year
during the five-year measurement period are plotted with points showing the
cumulative total return as of that point. The
Page 35
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.
Our 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 us.
Page 36
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 (2,3,4,5)
- --------------------------------------------------------------------------------------------------------------------
Nasdaq Stock Market Nasdaq
Measurement Period Index for U.S. Telecommunications
(Fiscal Year Covered) Company ($) Companies ($) Stock ($)
- ----------------------------- ------------------------ --------------------------- ---------------------------------
FYE 12/31/98 100.0 100.0 100.0
FYE 12/31/99 107.7 185.4 178.7
FYE 12/31/00 172.3 111.8 76.1
FYE 12/31/01 210.0 88.8 51.0
FYE 12/31/02 165.2 61.4 23.5
FYE 12/31/03 214.2 91.8 39.0
- -------------------
2 The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
3 The indexes are reweighted daily, using the market capitalization on the
previous trading day.
4 If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
5 The index level for all series was set to $100.00 on December 31, 1998.
- -------------------
Page 37
Legal Proceedings
As of the Record Date, our board was unaware of any legal proceedings
which may have occurred during the past five years in which one or more of our
directors, director nominees or executive officers were a party adverse to us,
or any legal proceeding which would be material to an evaluation of the ability
or integrity of one or more of our directors or executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
During 2003, there were no failures to file with the SEC Forms 3
(Initial Statement of Beneficial Ownership of Securities) and 4 (Change in
Beneficial Ownership Report) on a timely basis as required under Section 16(a)
of the Exchange Act.
CERTAIN TRANSACTIONS
Series B Agreement
On April 30, 1999, we issued and sold the Series B preferred stock for
$20 million, i.e., a total of 20,000 convertible, redeemable, accreting shares
of our preferred stock. Prior to that issuance, our board, by resolution,
approved the Statement of Stock Designation for the issuance of Series B
preferred stock and a Series B preferred stock agreement in anticipation of the
issuance and sale of the stock (that designation and agreement are referred to
collectively as, "Series B Agreement").
As of the Record Date, Toronto Dominion was the sole holder of
outstanding Series B preferred stock. In April 2002 we agreed with Toronto
Dominion to several amendments to, or waiver of rights in, the Series B
Agreement. These changes are noted in the following description of the Series B
Agreement ("Amended Series B Agreement"). The Amended Series B Agreement
expressly provides that, except for the amendments set forth in that amendment,
the Series B Agreement remains unchanged and in full force and effect.
The Series B Agreement includes specific rights of holders of the
Series B preferred stock, including dividend rights, liquidation rights,
redemption rights, voting rights, and conversion rights. It also 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 Series B Agreement provides that the shares of Series B preferred
stock must be ranked senior to all other of our classes of equity securities.
Under that agreement, as amended, the holders of the Series B preferred stock
will receive dividends at the rate of 8.5% of a liquidation preference payable
semiannually, in cash,
Page 38
or, prior to May 1, 2003, in additional fully-paid shares of Series B preferred
stock. The Series B Agreement also includes that, should we be permitted to
issue equity redeemable at the option of the holder, the parties to the
agreement 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. The liquidation preference
specified in the Series B Agreement is $1,000 per share, plus accrued but unpaid
dividends and fees. In 2000, the Alaska legislature enacted revisions to the
Alaska Corporations Code to allow an Alaska corporation, e.g., the Company, to
issue such redeemable equity. As of the Record Date, the Series B Agreement had
not been amended to include these redemption provisions.
The Series B Agreement provides 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 of our
obligations having an outstanding balance in excess of $5 million, a change in
control of us, commencement of bankruptcy or insolvency proceedings against us,
a breach of the limitations on certain of our long term debt set forth in the
offering, a liquidation or dissolution of us, or a merger, consolidation or sale
of all or substantially all of our assets 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 our option
any time after the fourth anniversary of the closing. The redemption price is
the amount paid plus accrued and unpaid dividends. The Amended Series B
Agreement provides that we are not obligated to provide notice to the holders of
Series B preferred stock upon the occurrence of a triggering event which results
from a change of control caused by any change in ownership of us resulting in
MCI owning our voting stock with less than 18% but at least 15% of the total
combined voting power of our outstanding stock.
The Series B Agreement provides that the Series B preferred stock is
convertible at any time into shares of our Class A common stock with a
conversion price of $5.55 per share. The terms include, in the event we shall be
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 our 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 our option into subordinated debt with terms and conditions
comparable to those governing the Series B preferred stock.
The Series B Agreement provides that holders of the Series B preferred
stock will have the right to vote on all matters presented for vote to holders
of common stock on an as-converted basis. Additionally, the agreement requires,
as long as shares of Series B preferred stock are outstanding and unconverted,
that its holders have the right to vote, as a class, and we 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:
Page 39
o 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.
o Issue additional shares of our preferred stock except as may be
required under the terms and conditions of the issuance of the
Series B preferred stock.
o Merge or consolidate us with another entity or sell all or
substantially all of our 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.
o Liquidate or dissolve us.
o Declare or pay any dividends on our capital stock, other than to
the holders of the Series B preferred stock, or set aside any sum
for any such purpose.
o Purchase, redeem or otherwise acquire for value, or pay into or
set aside as a sinking fund for such purpose, any of our capital
stock 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.
o 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 these seven specific actions, the Alaska Corporations Code, to which
we are subject, generally requires shareholder approval of actions one (article
amendment), three (merger and other reorganization), and four (dissolution). The
Alaska Corporations Code requires an affirmative 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 (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
Page 40
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 our 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 our board has authority to act.
At the 2000 annual meeting, our shareholders approved an amendment to
the Articles, allowing us to enter into agreements for the sale of preferred
stock with no restriction on voting rights by class. These amendments to the
Articles were subsequently filed with the State of Alaska and became effective
July 31, 2000. With this change, we could call-in and reissue the Series B
preferred stock to eliminate from the triggering events a reorganization of us.
As of the Record Date, we had not yet negotiated such terms with the present
holders of Series B preferred stock.
The holders of Series B preferred stock have other rights with respect
to membership on our board or observing status at board meetings as described
elsewhere in this Proxy Statement. See, "Management of Company: Rights of
Holders of Series B Preferred Stock in Nomination To or Observer Status
Regarding the Board."
The Series B Agreement provides 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 we might choose to initiate.
The Series B preferred stock is convertible at any time into our Class
A common stock with registration rights. See "Certain Transactions: Registration
Rights Agreements."
MCI Agreements
As of the Record Date, we continued to have a significant business
relationship with MCI, including the following:
o Under the MCI Traffic Carriage Agreement, we agreed to terminate
all Alaska-bound MCI long distance traffic, to handle its
toll-free 800 traffic originating in Alaska and terminating in the
lower 49 states, its calling card customers when they are in
Alaska, and its Alaska toll-free 800 traffic, and to provide data
circuits to MCI as required.
o Under a separate Company Traffic Carriage Agreement, MCI agreed to
terminate all of our long-distance traffic terminating in the
lower 49 states, excluding Washington, Oregon and Hawaii, to
originate calls for our
Page 41
calling card customers when they are in the lower 49 states, to
provide toll-free 800 service for our customer requirements
outside of Alaska, and to provide certain Internet access
services.
o In June 2001 we acquired MCI's 85% interest in GCI Fiber
Communication Co., Inc., f/k/a Kanas Telecom, Inc., an Alaska
corporation (see below, "Kanas Transaction"), a company that owns
and operates an 800-mile fiber optic cable system constructed
along the trans-Alaska oil pipeline corridor extending from
Prudhoe Bay to Valdez, Alaska, and, in exchange for that interest,
we issued 10,000 shares of our Series C preferred stock to MCI
(directly or to its subsidiaries).
o An officer and employee of MCI (Mr. Mooney) serves as one of our
directors. See, "Management of Company: Directors and Executive
Officers."
o In June 2000 we granted stock options to certain of our directors
or the company for which each may have been employed (options to
Mr. Mooney were granted to WorldCom Ventures, Inc., a wholly-owned
indirect subsidiary of MCI). See, "Management of Company: Director
Compensation."
o We are a party to registration rights agreements with MCI
regarding our Class A and Class B common stock and Series C
preferred stock. See, "Certain Transactions: Registration Rights
Agreements."
On July 21, 2002 MCI and substantially all of its active U.S.
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the U.S. Bankruptcy Code in the U.S. Bankruptcy Court. Chapter 11 allows a
company to continue operating in the ordinary course of business in order to
maximize recovery for the company's creditors and shareholders. The filings have
enabled MCI to continue to conduct business while it develops a reorganization
plan. Payments by MCI to us under these agreements are subject to those
bankruptcy proceedings. We established a bad debt reserve for uncollected
balances due from MCI as of July 21, 2002. On July 22, 2003 the United States
Bankruptcy Court approved the settlement of pre-petition amounts owed to us by
MCI and affirmed all of our existing contracts with MCI. As a part of that
settlement, a portion of the pre-petition accounts receivable balance owed by
MCI to us is to be used as a credit against amounts payable for future services
purchased from MCI. The MCI settlement and release agreement are further
discussed in our annual Report. As of the Record Date, MCI was current on
payments under those agreements subsequent to that date.
The stock issued by us in the Kanas Transaction is convertible,
redeemable accreting Series C preferred stock valued at $10 million. The Series
C preferred stock
Page 42
is convertible at $12 per share into our Class A common stock, is non-voting and
pays a 6% per annum quarterly cash dividend. Each share of the Series C
preferred stock is convertible into a number of shares of Class A common stock
equal to the liquidation preference divided by the conversion price. We may
redeem the Series C preferred stock at any time in whole but not in part.
Redemption is required at any time after the fourth anniversary date at the
option of holders of 80% of the outstanding shares of the Series C preferred
stock. The redemption price is $1,000 per share plus the amount of all accrued
and unpaid dividends, whether earned or declared, through the redemption date.
In the event of a liquidation of us, the holders of Series C preferred stock are
entitled to be paid an amount equal to the redemption price before any
distribution or payment is made upon our common stock or shares of preferred
stock issued subsequent to the issuance of the Series C preferred stock which by
the terms of its issuance is junior to the Series C preferred stock. Our Series
B preferred stock is senior to the Series C preferred stock. As of the Record
Date, the redemption amount for the Series C preferred stock was $1,001.97 per
share.
Revenues attributed to the MCI Traffic Carriage Agreement in 2003 were
approximately $82 million, or approximately 21% of total revenues. Payments by
us to MCI under the Company Traffic Carriage Agreement in 2003 were
approximately $5.1 million, or approximately 4.1% of total cost of sales and
services. The MCI Traffic Carriage Agreement provides for a term to July 2008.
Duncan Leases
We entered into a long-term capital lease agreement ("Duncan Lease") in
1991 with a partnership in which Mr. Duncan, our President and Chief Executive
Officer and one of our directors, 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 us. The original
Duncan Lease term was 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 $18,400 plus $1,600 as
described below. The Duncan Lease provided that if the property was not sold
prior to the end of the tenth year of the lease, the partnership would pay to us
the greater of one-half of the appreciated value of the property over
$1,035,000, or $500,000. We received payment of $500,000 in the form of a note
in February 2002. 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."
Page 43
On September 11, 1997, we 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 our 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, we 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. The lease was
further amended in February 2002 to provide for additional monthly rents of
$1,600 per month beginning on October 1, 2001 and through the end of the lease
term.
In January 2001 we entered into an aircraft operating lease agreement
with a company owned by Mr. Duncan. The lease agreement is month-to-month and
may be terminated at any time upon 120 days written notice. Upon executing the
lease agreement, the lessor was granted an option to purchase 250,000 shares of
our Class A common stock at $6.50 per share, all of which were fully exercisable
as of the Record Date. We paid a deposit of $1.5 million to the lessor in
connection with the lease agreement. The deposit will be repaid to us upon the
earlier of six months after the lease terminates or nine months after the date
of a termination notice as provided in the lease agreement. Effective in January
2002 the lease payment was increased to $50,000 per month and the lessor agreed
to repay the deposit upon termination of the lease. We agreed to allow the
lessor, at its option, to repay the deposit with Company common stock, assuming
such repayment did not violate any covenants in our preferred stock agreements
or credit facilities.
Indebtedness of Management
Federal securities law prohibits public companies, e.g., the Company,
from extending, maintaining or arranging credit to, for, or on behalf of its
executive officers and directors. Loans made before July 29, 2002 are
grandfathered, i.e., allowed to remain effective. However, material
modifications of grandfathered loans are prohibited. The several existing loans
to the Named Executive Officers are subject to these provisions of the act and
must be paid off in accordance with their terms.
A significant portion of the compensation paid to our executive
officers is in the form of stock options. Because insider sales of our capital
stock upon exercise of such options might have a negative impact on the price of
our common stock, our board had encouraged our executive officers not to
exercise stock options and sell the underlying stock to meet personal financial
requirements. We had instead extended loans to such executive officers. As of
the Record Date, total indebtedness of management was $9,728,025 (including
accrued interest of $1,463,526), $1,069,861 in principal amount
Page 44
of which was secured by shares or options, $531,115 of which was otherwise
secured by collateral of the borrowers, and $6,663,523 of which was unsecured.
The largest aggregate principal amount of indebtedness owed by
executive officers since the beginning of 2003 through the Record Date, and the
amount of principal and accrued interest that remained outstanding as of the
Record Date were as follows (executive officers not listed had no indebtedness
to us during that period):
Largest Aggregate Principal Amount Interest Amount
Principal Amount Outstanding as of Outstanding as of
Name Outstanding ($) Record Date ($) Record Date ($)
---- --------------- --------------- ---------------
Ronald A. Duncan 4,922,500 4,333,278 576,044
G. Wilson Hughes 1,486,763 1,486,763 195,408
William C. Behnke 933,426 933,426 213,754
Richard P. Dowling 1,275,981 760,859 304,386
John M. Lowber 369,058 369,058 66,440
Richard D. Westlund 621,381 381,115 107,494
Mr. Duncan's loans were made for his personal use and to exercise
rights under stock option agreements. The loans accrue interest at the prime
rate as published in the Wall Street Journal and are unsecured. The first
repayment installment became due on December 31, 2003 in the amount of $750,000.
Subsequent installments become due in that amount on each of December 31, 2004
through 2007, with any remaining balance due on February 8, 2007, together with
accrued interest. The loan agreement included a provision that allowed a
$500,000 payment, that would otherwise have been due on December 31, 2002, to be
extended to February 8, 2007 in exchange for a payment of $25,000. The payment
date was extended in return for Mr. Duncan's payment of $25,000 to us on
December 31, 2002. The amounts due may be paid in either cash or stock. Payments
in stock will be valued at the closing price of the stock on the date of
payment. Payments in stock are subject to the covenants in our preferred stock
agreements and credit facilities.
In addition to the previously described indebtedness of Mr. Duncan,
during 2001 and 2002 we made payments to others on behalf of Mr. Duncan in the
amount of $348,605 and $6,373, respectively. The cumulative amount of these
payments by us during 2003 and through the Record Date totaled $3,077. The
payments bear no interest, and we were reimbursed by Mr. Duncan for them. A
credit balance of $9,929 due Mr. Duncan remained outstanding as of the Record
Date.
Mr. Hughes' loans were made for his personal use and to exercise rights
under stock option agreements with us. The loans accrue interest at our variable
rate under
Page 45
our senior credit facility, are unsecured, and become due together with accrued
interest through December 3, 2006.
Mr. Behnke's loans were made for his personal use and to exercise
rights under stock option agreements with us. Mr. Behnke's notes in the amount
of $474,424 are unsecured, while the balance of the notes are secured by Class A
common stock held by Mr. Behnke. Mr. Behnke's loans bear interest at our
variable rate under our senior credit facility and, in one case, at 9% per
annum. The notes are due, together with accrued interest, in November and
December 2006.
Should we elect to terminate Mr. Behnke's employment, other than for
cause, prior to November 1, 2004, we would forgive any remaining balance of
principal and interest associated with the September and November 1999
borrowings totaling $300,000 in principal amount.
Of the amount owed by Mr. Dowling at the Record Date, all but $150,000
in principal amount is secured by 160,297 shares of Class A common stock and
74,028 shares of Class B common stock. On May 17, 2000, we advanced $150,000 to
Mr. Dowling for his personal requirements. The loan was secured by a second deed
of trust on real property. Mr. Dowling's loans are payable in full through
December 31, 2006 and bear interest at our variable rate under our senior credit
facility.
The loans to Mr. Lowber were made for his personal use and to exercise
rights under stock option agreements with us. Notes in the principal amount of
$184,058 bear interest at our variable rate under our senior credit facility,
and the remaining principal amount of $185,000 bears interest at a rate of 6.49%
per annum. So long as Mr. Lowber remains in our employ, the accrued interest on
the $185,000 note is to be waived at the beginning of each year. The loans are
unsecured and are due through June 30, 2006.
Mr. Westlund's loans were made for his personal use and to exercise
rights under stock option agreements with us. The loans accrue interest at our
variable rate under our senior credit facility. One note was paid off at the end
of last year, and the other is secured by proceeds under a life insurance
policy. The note is due, together with accrued interest, on December 31, 2004.
Registration Rights Agreements
We are a party to registration rights agreements ("Registration Rights
Agreements") with the following:
o MCI (including subsidiaries) regarding all shares it holds in our
Class A and Class B common stock and Series C preferred stock
Page 46
o Toronto Dominion regarding all shares it holds in our Series B
preferred stock
o Several holders of our new senior notes ("New Senior Notes")
MCI and Toronto Dominion are significant shareholders of the indicated
classes or series of Company stock. For example, Toronto Dominion is the holder
of all 12,637 shares outstanding of the Series B preferred stock. For holdings
of other classes and series see, "Ownership of Company - Principal
Shareholders." As of the Record Date, none of these persons or their affiliates,
other than those identified elsewhere in this Proxy Statement, were our
directors, officers, nominees for election as directors, or members of the
immediate family of such directors, officers, or nominees.
The terms of the Registration Rights Agreements with MCI and Toronto
Dominion share several common terms. The basic terms are as follows. In the case
of either agreement, we propose to register any of our securities under the
Securities Act of 1933, as amended ("Securities Act") for our own account or for
the account of one or more of our shareholders, we must notify all of the
holders under the agreement of that intent. In addition, we must allow the
holders an opportunity to include their shares ("Registerable Shares") in that
registration.
Under both the MCI and Toronto Dominion Registration Rights Agreements,
each holder also has the right, under certain circumstances, to require us to
register all or any portion of such holder's Registerable Shares under the
Securities Act. These agreements are both subject to certain limitations and
restrictions, including, in cases other than the Series B preferred stock, our
right to limit the number of Registerable Shares included in the registration.
Generally, we are required to pay all registration expenses in connection with
each registration of Registerable Shares pursuant to these agreements.
The Registration Rights Agreement between MCI and us, dated June 30,
2001, specifically requires us to effect no more than four demand registrations
at the request of MCI and an unlimited number of opportunities to include its
Registerable Shares in other of our security registrations. However, each
registration request by MCI must include Registerable Shares having an aggregate
market value equal to or more than $1.5 million. The agreement between Toronto
Dominion and us, dated April 30, 1999 pertains to Class A common stock which is
issued by us upon the holder's exercise of rights to convert the preferred stock
to Class A common stock. The agreement specifically requires us to effect no
more than two registrations at the request of holders of at least 15% of the
registerable securities.
As a part of the transaction involving issuance of our New Senior Notes
(see elsewhere in this Proxy Statement - "Ownership of Company: Change of
Control - New Senior Notes"), we entered into a Registration Rights Agreement
with the holders of the
Page 47
notes. Under the terms of this agreement, we are to make reasonable best efforts
to file with the SEC not later than 120 days after the February 17, 2004
issuance date for the notes a registration statement under the Securities Act
allowing an exchange of the new notes, which were issued not pursuant to a
registration under that federal securities law, for ones through which their
offering is registered under that law. The registered notes are essentially to
be the same as the unregistered notes, except that the registered notes are not
to have a restrictive legend and the interest on the registered notes is to
accrue from a date as defined in the agreement. With limited exception, we are
not required to register the offering of the New Senior Notes beyond the initial
exchange offering as previously described. A holder of the unregistered notes
falling within the exception may be entitled to require one additional shelf
registration of the notes continuously effective under the Securities Act for up
to two years from the initial issue date of the notes. We are to bear all fees
and expenses incurred in performance of, or compliance with, the agreement.
OWNERSHIP OF COMPANY
Principal Shareholders
The following table sets forth, as of the Record Date, certain
information regarding the beneficial ownership of our Class A common stock and
Class B common stock and our Series B preferred stock (Series C preferred stock
is not included in the table in that it did not as of the Record Date have
voting rights exercisable at our annual meeting) by each of the following:
o Each person known by us 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.
o Each of our directors.
o Each of the Named Executive Officers.
o All of our executive officers and directors as a group.
All information with respect to beneficial ownership has been furnished to us by
the respective shareholders.
Page 48
Amount and
Nature of % Combined
Beneficial % of Total Shares Voting
Name and Address of Title of Ownership (2) Outstanding Power
Beneficial Owner (1) Class (2) (#) % of Class (2) (Class A & B) (2) (Class A & B) (2)
- ------------------------ -------- ------------- -------------- ----------------- ----------------
I II I II
--- ---- --- ----
Stephen M. Brett Class A 25,000 (3) * * * * *
Class B - - - - - -
Series B - - - - - -
Ronald A. Duncan Class A 1,425,032 (4) 2.7 3.3 3.2 6.6 6.4
Class B 460,021 (4) 11.9
Series B - - - - - -
Donne F. Fisher Class A 62,135 (3,5) * * 2.4 * 2.3
Class B 212,688 (5) 5.5
Series B - - - - - -
William P. Glasgow Class A 99,944 (6) * * * * *
Class B - - - - - -
Series B - - - - - -
G. Wilson Hughes Class A 721,012 (7) 1.4 1.3 1.2 * *
Class B 2,765 (7) *
Series B - - - - - -
John M. Lowber Class A 617,411 (8) 1.2 1.1 1 * *
Class B 6,286 (8) *
Series B - - - - - -
Stephen R. Mooney Class A - - - - - - - - - - - - - - - - - -
Class B - - - - - -
Series B - - - - - -
Stephen A. Reinstadtler Class A - - - - - - - - - - - - - - - - - -
Class B - - - - - -
Series B - - - - - -
James M. Schneider Class A 55,000 (3) * * * * *
Class B - - - - - -
Series B - - - - - -
Dana L. Tindall Class A 307,611 (9) * * * * *
Class B 3,835 (9) *
Series B - - - - - -
Richard D. Westlund Class A 229,560 (10) * * * * *
Class B 3,618 - - -
Series B - - - - - -
GCI Qualified Employee Class A 5,937,259 11.1 10.6 10.2 7.7 7.5
Stock Purchase Plan Class B 109,063 2.8
2550 Denali St., Ste. 1000 Series B - - - - - -
Anchorage, AK 99503
Estate of Kim Magness Class A 170,330 (11) * 1.6 1.5 8.3 8.1
c/o Raymond L. Sutton, Jr. Class B 745,628 (11) 19.3
303 East 17th Ave., Ste. 1100 Series B - - - - - -
Denver, CO 80203-1264
Gary Magness Class A 176,330 (12) * 1.6 1.6 8.3 8.1
c/o Raymond L. Sutton, Jr. Class B 744,228 (12) 19.3
303 East 17th Ave., Ste. 1100 Series B - - - - - -
Denver, CO 80203-1264
Page 49
Amount and
Nature of % Combined
Beneficial % of Total Shares Voting
Name and Address of Title of Ownership (2) Outstanding Power
Beneficial Owner (1) Class (2) (#) % of Class (2) (Class A & B) (2) (Class A & B) (2)
- ------------------------ -------- ------------- -------------- ----------------- ----------------
I II I II
--- ---- --- ----
Toronto Dominion Class A 19,176 (13) * * 3.9 * 2.4
Investments, Inc. Class B - - - - - -
31 West 52nd Street Series B 12,637 (13) 100
New York, NY 10019-6101
Robert M. Walp Class A 294,767 (14) * 1 1 3.6 3.5
804 P St., Apt. 4 Class B 303,457 (14) 7.9
Anchorage, AK 99501 Series B - - - - - -
Westport Asset Management, Inc. Class A 3,032,351 5.7 5.3 5.1 3.3 3.2
253 Riverside Avenue Class B - - - - - -
Westport, CT 06880 Series B - - - - - -
MCI Class A 4,622,342 (15) 8.5 10.1 9.8 18.8 18.3
2201 Loudoun County Parkway Class B 1,275,791 33.0
Ashburn, VA 20147 Series B - - - - - -
All Directors and Executive Class A 4,744,083 (16) 8.6 9.3 8.9 13.3 13.0
Officers As a Group Class B 767,997 (16) 19.9
(18 Persons) Series B - - - (16) - - -
- -------------------
* 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 our stock 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. Addresses are provided only for persons other
than management who own beneficially more than 5% of the outstanding shares
of Class A or B common stock or Series B preferred stock.
2 "Title of Class" includes our 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 as set
in the Series B Agreement, i.e., $5.55 per share. As of the Record Date,
the 12,637 shares of Series B preferred stock outstanding (excluding
accrued dividends payable in cash or in Class A common stock to that date)
would convert to 2,276,937 shares of Class A common stock.
3 Includes 25,000 shares of our Class A common stock subject to stock options
granted under the Stock Option Plan to each of Messrs. Brett, Fisher, and
Schneider in February 1997 which they each respectively have the right to
acquire within 60 days of the Record Date by exercise of the respective
stock options. The exercise price for each option is $7.50 per share.
4 Includes 131,674 shares of Class A common stock and 6,270 shares of Class B
common stock allocated to Mr. Duncan under the Stock Purchase Plan. Does
not include 195,331 shares of Class A common stock held by us in treasury
pursuant to deferred compensation agreements with us. Does not include
29,453 shares of Class A common stock held by Amanda Miller, Mr. Duncan's
daughter, of which Mr. Duncan disclaims beneficial ownership. 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 50,650 shares of
Class A common stock or 27,020 shares of Class B common stock held by Dani
Bowman, Mr. Duncan's wife, of which Mr. Duncan disclaims beneficial
ownership. Includes 250,000 shares of Class A common stock which a company
owned by Mr. Duncan has the right to acquire within 60 days of the Record
Date by the exercise of stock options.
5 Does not include 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 affiliated with Mr. Fisher's spouse. Mr. Fisher
disclaims any beneficial ownership of these shares.
Page 50
6 Does not include (i) 5,259 shares owned by Diamond Ventures, LLC of which
Mr. Glasgow is President; (ii) 158 shares beneficially owned by minor
children of Mr. Glasgow; and (iii) 12,500 remaining shares of an option to
acquire 25,000 shares of Class A common stock issued to SKA Management,
Inc. The options vest in four equal annual installments, are exercisable at
$7.50 per share, and expire if not exercised within 10 years of their grant
in June 2000. Mr. Glasgow disclaims any beneficial ownership of the shares
held by these entities or held by his children.
7 Includes 150,000 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 67,012 shares of Class A common stock and
2,765 shares of Class B common stock allocated to Mr. Hughes under the
Stock Purchase Plan. Does not include 67,437 shares of Class A common stock
held in treasury by us to fund vested deferred compensation. See,
"Management of Company: Employment Agreements."
8 Includes 405,425 shares which Mr. Lowber has the right to acquire within 60
days of the Record Date by the exercise of vested stock options. Includes
54,328 shares of Class A common stock and 6,016 shares of Class B common
stock allocated to Mr. Lowber under the Stock Purchase Plan.
9 Includes 235,787 shares which Ms. Tindall has the right to acquire within
60 days of the Record Date by the exercise of vested stock options.
Includes 71,565 shares of Class A common stock and 3,835 shares of Class B
common stock allocated to Ms. Tindall under the Stock Purchase Plan.
10 Includes 78,333 shares which Mr. Westlund has the right to acquire within
60 days of the Record Date by the exercise of vested stock options.
Includes 58,704 shares of Class A common stock and 3,618 shares of Class B
common stock allocated to Mr. Westlund under the Stock Purchase Plan. Does
not include 31,469 shares of our Class A common stock of which 12,022
shares are held in treasury by us to fund Mr. Westlund's vested deferred
compensation.
11 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 the estate of
Mr. Magness owns a 50% interest.
12 Includes 76,688 shares of Class A and 620,608 shares of Class B common
stock by Magness FT Investment Company, LLC of which Mr. Magness owns a 50%
interest.
13 Includes 18,750 shares of Class A common stock which Toronto Dominion
Investments has the right to acquire within 60 days of the Record Date by
the exercise of vested stock options. Excludes accrued dividends on Series
B shares.
14 Includes 38,231 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
20,920 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.
15 Includes 833,333 shares of Class A common stock issuable upon conversion of
1,000 shares of Series C preferred stock and 37,500 shares of Class A
common stock MCI has a right to acquire within 60 days of the Record Date
by the exercise of vested stock options.
16 Includes 1,927,738 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 493,028 shares of Class A common stock
and 27,260 shares of Class B common stock allocated to such persons under
the Stock Purchase Plan. Excludes, as of the Record Date, all of the
outstanding Series B preferred stock (on an as-converted basis to our Class
A common stock) owned by an affiliate of Mr. Reinstadtler, i.e., Toronto
Dominion.
- -------------------
Changes in Control
Series B Preferred Stock. The Series B Agreement provides that the
holders of the Series B preferred stock have the right to vote on all matters
presented for vote to the holders of our 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 us to request its
consent on specific actions which might be taken including amending the
Articles, restructuring the Company, paying dividends, and redeeming stock.
Under the present Articles, the Class A common stock and Class B common stock
vote for directors and on such specific actions, as one class, with limited
exceptions as set forth in the Alaska Corporations Code. These exceptions
Page 51
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.
The holders of outstanding Series B preferred stock have the right to
convert their shares into our Class A common stock at a specified conversion
price, as adjusted. As of the Record Date, Toronto Dominion remained as the sole
holder of Series B preferred stock.
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 of the remaining holder of the Series B preferred stock
as of the Record Date, the stock could be converted into 2,276,937 shares of our
Class A common stock (excluding dividends accrued through that date) which would
constitute approximately 4.1% of our then outstanding Class A common stock.
As a part of the terms of the issuance of the Series B preferred stock,
our board increased its size by one director. The selection and nomination of
that director is subject to certain terms of the Series B Agreement. See,
"Management of Company: Rights of Holders of Series B Preferred Stock in
Nomination To, or Observer Status Regarding, the Board."
Pledged Assets and Securities. Our obligations under our credit
facilities are secured by substantially all of our assets. Should there be a
default by us under such agreements, our lenders could gain control of our
assets. We have been at all times since January 1, 2003 and up through the
Record Date, in compliance with all material terms of these credit facilities.
These obligations and pledges are further described in our Annual Report. See,
"Annual Report."
New Senior Notes. In February 2004 GCI, Inc., our wholly-owned
subsidiary, sold our New Senior Notes, i.e., $250 million in aggregate principal
amount of senior debt securities due in 2014. The net proceeds from the New
Senior Notes were primarily used to repay our then existing $180 million in
senior notes, and to repay term and revolving portions of our senior credit
facility totaling $53.8 million. The New Senior Notes were offered only to
qualified institutional buyers pursuant to Rule 144A and non-U.S. persons
pursuant to Regulation S adopted pursuant to the Securities Act. The New Senior
Notes had not as of the Record Date been registered under the Securities Act
and, unless registered, may not be offered or sold except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. See
"Certain Transactions: Registration Rights Agreements."
The New 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
Page 52
Indenture, GCI, Inc. is required to offer to purchase the New Senior Notes at a
price equal to 101% of their principal amount, plus accrued and unpaid interest.
The Indenture provides that the New Senior Notes are redeemable at the
option of GCI, Inc. at specified redemption prices commencing in 2009. The terms
of the New 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 New Senior Notes, the restricted
subsidiaries consist of all of our direct or indirect subsidiaries, with the
exception of the unrestricted subsidiaries, none of which existed as of the
Record Date. Under the terms of Indenture an unrestricted subsidiary is a
subsidiary of GCI, Inc. so designated from time to time in accordance with
procedures as set forth in the Indenture.
We and GCI, Inc. were, throughout 2003 and up through the repayment of
the previous senior notes in February 2004, fully in compliance with the
material terms of the previous corresponding indenture. In addition, we and GCI,
Inc. have since the issuance of the New Senior Notes 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.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Overview
Our Audit Committee has retained KPMG LLP as the External Auditor,
i.e., independent certified public accountants for us, during 2003. It is
anticipated that the Audit Committee will appoint KPMG LLP as the External
Auditor for 2004. A representative of KPMG LLP is expected to be present at our
annual meeting. The representative will have the opportunity to make a
statement, if so desired, and will be able to respond to appropriate questions.
Pre-Approval Policies and Procedures
We have established as policy, through the adoption of the Audit
Committee Charter that, before our External Auditor is engaged by us to render
audit services, the engagement must be approved by the Audit Committee.
While our Audit Committee may, in the alternative, establish specific
additional pre-approval policies and procedures to be followed in selection and
engagement of an
Page 53
External Auditor and which are detailed as to the particular service, require
that the Audit Committee is informed of each service and require that such
policies and procedures do not include delegation of the committee's
responsibilities under the Exchange Act to our management, the committee has not
established such alternative to its direct pre-approval of the External Auditor.
Our pre-approval policies and procedures with respect to Non-Audit
Services include as a part of the Audit Committee Charter that the Audit
Committee may choose any of the following options for approving such services:
o Full Audit Committee - The full Audit Committee can consider each
Non-Audit Service.
o Designee - The Audit Committee can designate one of its members to
approve a Non-Audit Service, with that member reporting approvals
to the full committee.
o Pre-Approval of Categories - The Audit Committee can pre-approve
categories of Non-Audit Services. Should this option be chosen,
the categories must be specific enough to ensure both of the
following -
o The Audit Committee knows exactly what it is approving and can
determine the effect of such approval on auditor independence.
o Management will not find it necessary to decide whether a
specific service falls within a category of pre-approved
Non-Audit Service.
The Audit Committee's pre-approval of Non-Audit Services may be waived
under specific provisions of the Audit Committee Charter. The prerequisites for
waiver are as follows: (1) the aggregate amount of all Non-Audit Services
constitutes not more than 5% of the total amount of revenue paid by us to the
External Auditor during the fiscal year in which those services are provided;
(2) the service is originally thought to be a part of an audit by the External
Auditor; (3) the service turns out to be a Non-Audit Service; and (4) the
service is promptly brought to the attention of the Audit Committee and approved
prior to completion of the audit by the committee or by one or more members of
the committee who are members of our board to whom authority to grant such
approvals has been delegated by the committee.
Fees and Services
KPMG LLP has provided certain audit, audit-related, and tax services,
the aggregate fees billed in each of these categories for each of the past two
fiscal years are as follows:
Page 54
o Audit Fees - Were $225,128 and $205,046 for 2003 and 2002,
respectively. Included in this category are fees for our annual
financial statement audit, quarterly financial statement reviews,
and reviews of other filings by us with the SEC.
o Audit-Related Fees - Were $14,500 and $11,500 for 2003 and 2002,
respectively. Included in this category are fees for the audit of
the Stock Purchase Plan and review of the related annual report on
Form 11-K filed with the SEC.
o Tax Fees - Were $24,375 and $17,205 for 2003 and 2002,
respectively. Included in this category are fees for review of our
state and federal income tax returns and consultation on various
tax matters.
o All Other Fees -$25,676 for 2003 and none for 2002.
During 2003, there were no waivers of our Audit Committee pre-approval
policy.
ANNUAL REPORT
The Annual Report to our shareholders in the form of Form 10-K for 2003
is enclosed with this Proxy Statement, subject to the delivery provisions
described elsewhere in this Proxy Statement. See, "Company Annual Meeting:
Voting Procedure - Delivery." In addition, our Internet website provides a link
to the SEC website containing copies of our filings with the SEC, including our
Annual Report, recent quarterly reports on Form 10-Q and current reports on Form
8-K.
SHAREHOLDER COMMUNICATIONS
Our board follows a process of open communication with our
shareholders. We file various reports with the SEC and issue public releases to
the media through our board, from time to time, on matters relating to our
business and our shareholders.
In addition, our shareholders are encouraged to contact our board with
their questions, concerns, and comments. This communication can most efficiently
be accomplished by writing to our board, generally, or to specific board
members, individually, at the following mailing address or email address:
ATTN: Shareholder - Board Communication
General Communication, Inc.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
Page 55
A copy of each shareholder communication will be forwarded to all
members of our board within no more than five business days of receipt. In the
event a shareholder communication shall be to one or more but not all of our
board members, copies of it shall be distributed to all board members for their
review or information, as the case may be. Each shareholder communication must
include the shareholder's full name and address as they appear in our records,
as well as an identification of the number of shares registered or beneficially
owned by the shareholder. A shareholder communication not containing this
information may, in the sole discretion of our board, not require a response by
it.
As a part of its open communication policy with our shareholders, our
board encourages shareholders to attend annual and special, if any, shareholder
meetings and to voice their questions, concerns and comments to management and
the board. A portion of each such meeting is set aside for such dialogue. Our
board members are encouraged to attend annual shareholder meetings to respond
directly to shareholder inquiries. Because of scheduling conflicts, other
commitments and selection of board members having requisite skills and
characteristics to promote our business but residing outside of Alaska, only one
of our board members (Mr. Duncan) was present at the 2003 annual shareholder
meeting.
FUTURE SHAREHOLDER PROPOSALS AND RECOMMENDATIONS
Proposals
Certain matters are required to be considered at an annual meeting of
our shareholders, e.g., the election of directors. In addition, from time to
time, our board may wish to submit to those shareholders other matters for
consideration. Furthermore, our shareholders may be asked to consider and take
action on a proposal of business submitted by other of our shareholders who are
not members of management and where the proposal covers a matter deemed proper
under SEC rules and applicable state law.
Under our Bylaws, should one or more of our shareholders wish to have a
proposal of business included in management's proxy statement and form proxy for
our 2005 annual meeting of shareholders, the proposal must be received by us at
the following address not earlier than December 2, 2004 and not later than
January 2, 2005:
ATTN: Secretary (2005 Annual Meeting Proposal)
General Communication, Inc.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
Page 56
Under our Bylaws, a shareholder of ours wishing to make a proposal of a
nomination for director or wishing to introduce a proposal of any business at
our 2005 annual meeting must give us timely advance notice as described in our
Bylaws. To be timely, we must receive the nomination or other shareholder
proposal for the 2005 meeting at our offices as identified above not earlier
than December 2, 2004 and not later than January 2, 2005. Nominations for
director must describe various matters as specified in our Bylaws, including the
name and address of each nominee, his or her occupation and number of shares
held, and certain other information. The nomination must also be accompanied by
written consent by the nominee to being named in the proxy statement as a
nominee and to serving as a director if elected.
In addition to the timely submission of advance notice, a shareholder
of ours wishing to make a proposal at our 2005 annual meeting must include in
that notice a statement describing the proposal (which must otherwise be a
proper subject for action by our shareholders), the reasons for that other
business and other matters as specified in our Bylaws. Our 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. Our Articles and Bylaws
also set forth specific requirements and limitations applicable to nominations
and other shareholder proposals at special meetings of our shareholders.
A shareholder of ours making a nomination or other shareholder proposal
of business for the 2005 annual meeting must be a person who is 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. In addition, such a shareholder must be
a person who has continuously held at least $2,000 in market value, or at least
1%, of our outstanding 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 us
for inclusion on the agenda of the meeting. Any such notice must be given to our
Secretary at the address identified above. Any shareholder of ours who shall
desire a copy of our Articles or Bylaws will be furnished a copy without charge
upon written request to the Secretary at the above given address.
For any proposal by a shareholder of ours that is not submitted for
inclusion in the management proxy statement for our 2005 annual meeting but is
instead sought to be presented directly at that meeting, the SEC rules permit
our board to vote proxies in its discretion if we (i) receive notice of the
proposal during the time interval December 2, 2004 through January 2, 2005 and
we advise shareholders in the 2005 proxy statement about the nature of the
matter and how our board intends to vote on that matter, or (ii) do not receive
notice of the proposal during the time interval December 2, 2004 through January
2, 2005. Our board intends to exercise this authority, if necessary, in
conjunction with the 2005 meeting.
Our board carefully considers all proposals from our shareholders. When
adoption of a proposal is clearly in the best interest of us and our
shareholders
Page 57
generally and does not require approval of our shareholders, it is usually
adopted by our board, if appropriate, rather than being included in management's
proxy statement.
Recommendations
As our policy the Nominating and Corporate Governance Committee will,
for our 2005 shareholder annual meeting, consider director candidates
recommended by certain of our shareholders, subject to the shareholder
recommendation procedure set forth in the Nominating and Corporate Governance
Committee Charter. A copy of the charter is available as described elsewhere in
this Proxy Statement. See, "Management of Company: Board and Committee Meetings
- - Nominating and Corporate Governance Committee."
A shareholder of ours recommending such a candidate must submit the
recommendation to the Nominating and Corporate Governance Committee timely in
order to ensure committee consideration of it. To be timely, the recommendation
must be received at the following address not earlier than December 2, 2004 and
not later than January 2, 2005:
ATTN: Chair, Nominating and Corporate Governance Committee
(2005 Annual Meeting Recommendation)
General Communication, Inc.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
The shareholder recommendation must be accompanied by a written
statement in support of it. The statement must describe various matters as
specified in the Nominating and Corporate Governance Committee Charter,
including the name and address of the recommended candidate, his or her
occupation and certain other information about him or her as well as about the
shareholder recommending the candidate. The recommendation and statement must
also be accompanied by written consents by the recommending shareholder and
recommended candidate, should the committee and our board accept the shareholder
recommendation, to being named in our 2005 management proxy statement as a
nominee and to serving as a director if elected.
Our Nominating and Corporate Governance Committee is only required to
consider a shareholder recommendation made by a shareholder of ours who, as of
the date of the shareholder recommendation and the record date for the 2005
annual meeting, is a beneficial owner of at least one share of our voting
securities. That is, the shareholder must be the holder of at least one share of
Class A common stock, one share of Class B common stock, or one share of
preferred stock which either has voting rights directly or indirectly on an
equivalent as-converted basis in our common stock.
Page 58
Upon timely receipt of a recommendation and statement in support of it
satisfying the requirements of the Nominating and Corporate Governance Committee
Charter, our Nominating and Corporate Governance Committee shall review the
recommendation, subject to minimum qualifications, skills and characteristics
and other requirements of our board as set forth in the charter and as generally
described elsewhere in this Proxy Statement. See, "Management of Company: Board
and Committee Meetings - Nominating and Corporate Governance Committee." The
shareholder recommendation will be evaluated by the committee and the
committee's determination on that recommendation will be subject to those
criteria the same as will be the case for a determination by the committee on
existing board members standing for re-election.
With regard to each nominee, if any, approved by our Nominating and
Corporate Governance Committee for inclusion in our 2005 proxy (other than
executive officers or directors standing for re-election), the persons or
entities who recommended the nominee will be identified in the proxy statement
for that meeting as falling within one of the following categories: security
holder, non-management director, chief executive officer, other executive
officer, third-party search firm, or other specified source.
In the event our Nominating and Corporate Governance Committee shall
receive by a date not later than December 31, 2004 a shareholder recommendation
from a shareholder or group of shareholders that beneficially owned more than 5%
of our voting common stock for at least one year as of the date of the
recommendation, the committee shall identify in our 2005 proxy statement, the
recommended candidate and the shareholder or shareholder group recommending the
candidate, and disclose whether the committee chose to nominate the candidate,
with one limitation. Should those persons not give us written consent to
identify them, we would not be required to identify them in that proxy
statement.
Page 59
AUDIT COMMITTEE CHARTER
(Appendix I)
Page 60
GENERAL COMMUNICATION, INC.
AUDIT COMMITTEE CHARTER*
Purpose
The purpose of the Audit Committee is to act on behalf of the board of
directors ("Board") of General Communication, Inc. ("Company") and generally to
carry out the following and as further described in this charter:
o Independent Auditor Selection, Qualifications - Directly
responsible for appointment, compensation, retention,
oversight, qualifications and independence of the Company's
independent certified public accountants ("External Auditor").
o Internal Audit - To the extent the Company has an internal
audit operation, assist in Board oversight of its performance.
o Financial Statements - Assist in Board oversight of integrity
of the Company's financial statements.
o Financial Reports, Internal Control - Directly responsible for
oversight of audit by the External Auditor of the Company's
financial reports and the Company's reports on internal
control.
o Annual Reports - Prepare reports required to be included in
the Company's annual proxy statement.
o External Auditor Reports - Accept certain reports from the
External Auditor ("External Auditor Reports").
o Complaints - Receive and respond to certain complaints
("Complaints") relating to internal accounting controls and
auditing matters; confidential, anonymous submissions by
Company employees regarding questionable accounting or
auditing matters and performance of the Company's internal
audit operation, if any; or alleged illegal acts or
behavior-related conduct in violation of the Company's Code of
Business Conduct and Ethics ("Ethics Code"), all as described
in this charter.
o External Auditor Disagreements - Resolve disagreements between
the Company and the External Auditor regarding financial
reporting ("Auditor Disagreements").
- -------------------
* As revised by the board of directors of General Communication, Inc., effective
as of February 24, 2004.
Page A-1
o Non-Audit Services - Review and pre-approve all non-audit
services offered to the Company by the External Auditor
("Non-Audit Services").
o Attorney Reports - Address certain attorney reports ("Attorney
Reports").
o Related Party Transactions - Review certain related party
transactions ("Related Party Transactions").
o Shareholder Reports - Prepare certain shareholder reports
("Shareholder Reports").
o Annual Plan - Prepare an annual plan for Company audit-related
matters ("Annual Plan").
o Other - Carry-out other assignments as designated by the
Board.
Membership
The following are prerequisites for, and conditions on, membership on
the Audit Committee:
o Number, Qualifications - The Audit Committee shall consist of
at least three, and no more than six, Board members meeting
the following qualifications -
o Independent - Each member of the Audit Committee must
be an independent director as the term is defined in
this charter ("Independent Director").
o General Knowledge and Ability - Each Audit Committee
member shall have the following knowledge and
abilities -
|X| Knowledge of the primary industries in which
the Company operates.
|X| Ability to read and understand fundamental
financial statements, including a company's
balance sheet, income statement, and cash
flow statement.
|X| Ability to understand key business and
financial risks and related controls and
control processes.
Page A-2
o Audit Committee Financial Expert, Attributes - At
least one Audit Committee member must meet the
prerequisites for an audit committee financial expert
("Audit Committee Financial Expert"), i.e., a person
who has all of the following attributes -
|X| Understanding of generally accepted
accounting principles and financial
statements.
|X| Ability to assess the general application of
such principles in connection with
accounting for estimates, accruals and
reserves.
|X| Experience in preparing, auditing, analyzing
or evaluating financial statements that
present a breadth and level of complexity of
accounting issues that are generally
comparable to the breadth and complexity of
issues that can reasonably be expected to be
raised by the Company's financial
statements, or experience actively
supervising one or more persons engaged in
such activities.
|X| Understanding of internal control over
financial reporting.
|X| Understanding of audit committee functions.
o Acquiring Attributes of Audit Committee Financial
Expert - Examples of how one may determine whether a
person has acquired the attributes of an Audit
Committee Financial Expert are through any one or
more of the following -
|X| Education and experience as a principal
financial officer, principal accounting
officer, controller, public accountant or
auditor or experience in one or more
positions that involve the performance of
similar functions.
|X| Experience actively supervising a principal
financial officer, principal accounting
officer, controller, public accountant,
auditor or person performing similar
functions.
|X| Experience overseeing or assessing the
performance of companies or public
accountants with respect to the preparation,
auditing or evaluation of financial
statements.
|X| Other relevant experience.
Page A-3
o Financial Sophistication - At least one member of the
Audit Committee must have past employment experience
in finance or accounting, requisite professional
certification in accounting, or comparable experience
or background which results in the individual's
"financial sophistication," including being or having
been a chief executive officer, chief financial
officer or other senior officer with financial
oversight responsibilities. The Board may presume
that a person who meets the requirements for an Audit
Committee Financial Expert qualifies as a financially
sophisticated Audit Committee member.
o No Consulting Fee, Not an Affiliate - On an ongoing
basis, a member of the Audit Committee must not
accept any consulting, advisory, or other
compensatory fee from the Company other than for
Board service and must not be an affiliated person of
the Company.
|X| The term "affiliated person" as applied to
the Company means a person that directly, or
indirectly through one or more
intermediaries, controls, or is controlled
by, or is under common control with, the
Company.
|_| An executive officer of an affiliate
of the Company or a director of an
affiliate who also is an employee of
the affiliate is deemed to be an
affiliate of the Company.
|_| A person is deemed not to be in
control of the Company for these
purposes if the person is not the
beneficial owner, directly or
indirectly, of more than 10% of any
class of voting securities of the
Company and is not an executive
officer of the Company.
o Term - Subject to the terms of this charter -
o Member Appointment - Members of the Audit Committee
shall be appointed by the Board and shall serve at
the pleasure of the Board for such term as the Board
may determine, taking into account the
recommendations of the committee.
o Chair Selection - The Audit Committee chair shall be
selected by committee members or, if the Board
directs, by the Board, taking into account the
recommendations of the committee.
Page A-4
o Effect of Designation As Audit Committee Financial Expert -
Designation or identification of a person as an Audit
Committee Financial Expert under this charter does not impose
on that person any duties, obligations or liability that are
greater than the duties, obligations, and liability imposed on
another person as a member of the Audit Committee and the
Board in the absence of that designation or identification.
The designation or identification of a person as an Audit
Committee Financial Expert under this charter does not affect
the duties, obligations or liability of any other member of
the Audit Committee or the Board.
o Independent Director - An Independent Director is one that
meets the definition of "independent director" as prescribed
by Nasdaq Stock Market Rule 4200(a)(15) ("Nasdaq Independence
Rule") which reads as follows -
"means a person other than an officer or employee of
the company or its subsidiaries or any other
individual having a relationship, which, in the
opinion of the company's board of directors, would
interfere with the exercise of independent judgment
in carrying out the responsibilities of a director.
The following persons shall not be considered
independent:
(A) a director who is, or at any time during
the past three years was, employed by the company or
by any parent or subsidiary of the company;
(B) a director who accepted or who has a
Family Member who accepted any payments from the
company or any parent or subsidiary of the company in
excess of $60,000 during the current or any of the
past three fiscal years, other than the following:
(i) compensation for board or board
committee service; (ii) payments arising
solely from investments in the company's
securities;
(iii) compensation paid to a Family
Member who is a non-executive employee of
the company or a parent or subsidiary of the
company;
(iv) benefits under a tax-qualified
retirement plan, or non-discretionary
compensation; or
(v) loans permitted under Section
13(k) of the . . . [Securities Exchange Act
of 1934 ("Exchange Act")]. Provided,
however, that audit committee members are
subject to additional, more stringent
requirements under [Nasdaq Stock Market
("Nasdaq")] Rule 4350(d).
Page A-5
(C) a director who is Family Member of an
individual who is, or at any time during the past
three years was, employed by the company or by any
parent or subsidiary of the company as an executive
officer;
(D) a director who is, or has a Family
Member who is, a partner in, or a controlling
shareholder or an executive officer of, any
organization to which the company made, or from which
the company received, payments for property or
services in the current or any of the past three
fiscal years that exceed 5% of the recipient's
consolidated gross revenues for that year, or
$200,000, whichever is more, other than the
following:
(i) payments arising solely from
investments in the company's securities; or
(ii) payments under
non-discretionary charitable contribution
matching programs.
(E) a director of the listed company who is,
or has a Family Member who is, employed as an
executive officer of another entity where at any time
during the past three years any of the executive
officers of the listed company serve on the
compensation committee of such other entity; or
(F) a director who is, or has a Family
Member who is, a current partner of the company's
outside auditor, or was a partner or employee of the
company's outside auditor who worked on the company's
audit at any time during any of the past three years.
(G) In the case of an investment company, in
lieu of paragraphs (A)-(F), a director who is an
"interested person" of the company as defined in
section 2(a)(19) of the Investment Company Act of
1940, other than in his or her capacity as a member
of the board of directors or any board committee."
o Lack of Independence - The following conditions are
incompatible with a director being independent under the
Nasdaq Independence Rule, unless they have been absent for
three years -
o Company Employment, Family Member - Being employed by
the Company, any parent, or any subsidiary of the
Company, or having a "Family Member" who is employed
as an executive officer of any of those entities.
|X| The Nasdaq Independence Rule defines "Family
Member" as "a person's spouse, parents,
children and siblings,
Page A-6
whether by blood, marriage or adoption, or
anyone residing in such person's home."
o Company Payments - Receiving more than $60,000 in
payments from the Company (including any parent or
subsidiary of the Company) or having a Family Member
who received payments in that amount. The payments
referred to here exclude director and committee fees,
payments from investments in the Company's
securities, compensation to a family member who is
not an executive officer of the Company (or a parent
or subsidiary of the Company), loans permitted under
Section 13(k) of the Exchange Act, and pension or
other deferred compensation for prior service that is
not contingent on continued service.
o Service on Compensation Committee - Being an
executive officer of another entity that has had any
of the Company's executive officers serve on its
compensation committee or having a family member who
was an executive officer of another entity under such
conditions.
o External Auditor Partner - Being a current partner of
the External Auditor or partner or employee of the
External Auditor who worked on the Company's audit
any time in the past three years or having a family
member who has such a relationship.
o Principal of Service Provider - Being a partner,
controlling shareholder, or executive officer of
another company that pays or receives from the
Company, in any single year, amounts exceeding the
greater of $200,000 or 5% of the recipient company's
consolidated gross revenues (or having a family
member that makes or receives such payments). The
requirement excludes payments from investments in the
Company's securities and payments under
non-discretionary charitable contribution matching
programs.
o Removal and Replacement - An Audit Committee member may be
removed or replaced by, and any vacancies on the committee may
be filled by, the Board, taking into account recommendations
of the committee.
Operating Principles
The Audit Committee shall fulfill its responsibilities within the
context of the following overriding principles:
Page A-7
o Meetings - The Chair of the Audit Committee, in consultation
with committee members, shall determine the frequency and
schedule of committee meetings, provided the committee will
meet at least two times per year. The Audit Committee meetings
and matters relating to them are subject to the provisions of
the Company's Bylaws ("Bylaws"). The Audit Committee may ask
members of management or others whose advice and counsel are
relevant to the issues then being considered by the committee
to attend any meetings and to provide such information as the
committee may request.
o Agenda - The Chair of the Audit Committee shall develop the
committee's agenda, in consultation with other committee
members. Each member of the Board and members of management
are free to suggest the inclusion of items on the agenda. The
agenda and information concerning the business which shall be
conducted at each Audit Committee meeting shall, to the extent
practicable, be distributed to committee members sufficiently
in advance of each meeting to permit meaningful review.
o Quorum - A majority of the authorized number of Audit
Committee members, regardless of possible vacancies, shall
constitute a quorum. The Audit Committee may act by a majority
of the members present at a meeting of the committee at which
at least a quorum is present.
o Delegation - The Chair of the Committee may, through the
Committee by resolution, delegate authority to act on behalf
of the Chair. The Committee may, by resolution, delegate
authority to subcommittees or individual members of the
Committee as it deems appropriate.
o Communications - The chair and others on the Audit Committee
shall, to the extent appropriate, have contact throughout the
year with senior management, other committee chairs, other key
committee advisors, the External Auditor, etc., as applicable,
to strengthen the committee's knowledge of relevant current
and prospective business issues.
o Committee Education and Orientation - The Audit Committee,
with management, shall develop and participate in a process
for review of important financial and operating topics that
present potential significant risk to the Company.
Additionally, individual Audit Committee members are
encouraged to participate in relevant and appropriate
self-study education to assure understanding of the business
and environment in which the Company operates.
Page A-8
o Committee Meeting Attendees - The Audit Committee shall
request members of management, counsel, and the External
Auditor, as applicable, to participate in committee meetings,
as necessary to carry out committee responsibilities. The
External Auditor or counsel may, at any time, request a
meeting with the Audit Committee or its chair, with or without
management in attendance. In any case, the Audit Committee
shall meet separately with the External Auditor, at least
annually.
o Reporting to the Board of Directors - The Audit Committee,
through the committee chair, shall report periodically, as
deemed necessary, but at least annually, to the full Board. In
addition, summarized minutes from Audit Committee meetings
shall be available to each Board member at least one week
prior to the subsequent meeting of the Board.
o Committee Expectations and Informational Needs - The Audit
Committee shall communicate its expectations and the nature,
timing, and extent of its informational needs to management,
and external parties, including the External Auditor. Written
materials, including key performance indicators and measures
related to key business and financial risks, if not previously
distributed to the full Board, shall be received from
management, auditors, and others at least one week in advance
of meeting dates.
o Authority to Hire Legal Counsel and Others - The Audit
Committee shall have authority to engage an administrative
staff and outside advisors in such areas as law, accounting,
internal control, and information systems, and other advisors
necessary to carry out the committee's duties.
o Funding - The Company shall adequately fund the budget of the
Audit Committee, including funding to cover paying the
External Auditor for services in connection with preparing or
issuing audit reports, performing other audit functions,
reviewing and attesting services and providing other services
to the Company, paying Audit Committee member salaries or
fees, if any, paying committee staff and advisors, if any, and
paying ordinary administrative expenses of the committee.
Relationship with External Auditor
The following apply in the relationship between the Audit Committee and
the External Auditor:
o External Auditor Responsible To Audit Committee and Board -
The External Auditor, in its capacity as an independent public
accountant, shall
Page A-9
be responsible to the Audit Committee and the Board as
representatives of the shareholders.
o Audit Committee Oversight - In executing its oversight of the
External Auditor, the Audit Committee shall review the work of
the External Auditor. The External Auditor shall review
Company financial reports and shall report to the Audit
Committee. The External Auditor shall report all relevant
issues to the Audit Committee responsive to agreed-upon
committee expectations.
o Annual Performance Review - The Audit Committee shall annually
review the performance (effectiveness, objectivity, and
independence) of the External Auditor. The Audit Committee
shall obtain a formal written statement from the External
Auditor delineating all relationships between the External
Auditor and the Company consistent with standards set by the
Independence Standards Board. Additionally, the Audit
Committee shall discuss with the External Auditor
relationships or services that may affect auditor objectivity
and independence. In the event the Audit Committee shall not
be satisfied with the External Auditor's assurances of
independence, the committee shall take, or recommend to the
full Board, appropriate action which shall ensure the
independence of the External Auditor.
o Significant Issues Not Adequately Addressed - If the External
Auditor identifies significant issues relative to the overall
Board responsibility that have been communicated to management
but, in the External Auditor's judgment, have not been
adequately addressed, the External Auditor should communicate
these issues to the chair of the Audit Committee.
Primary Responsibilities
The Audit Committee shall have primary responsibility for the
following:
o Oversight - Exercising oversight of External Auditor and of
Internal Audit.
o Non-Audit Services - Addressing Non-Audit Services.
o Financial Reporting - Monitoring financial reporting and risk
control related matters.
o Complaints - Addressing Complaints on certain alleged illegal
acts and unethical behavior in violation of the Ethics Code,
and other matters.
Page A-10
o Attorney Reports - Addressing Attorney Reports.
o Related Party Transactions - Reviewing Related Party
Transactions.
o Annual Plans - Preparing Annual Plans.
o Shareholder Reports - Preparing Shareholder Reports.
o External Auditor Reports - Accepting External Auditor Reports.
o Performance Evaluations - Conducting Audit Committee
performance evaluations ("Audit Committee Performance
Evaluations").
Exercising Oversight of External Auditors, Internal Audit
The Audit Committee is directly responsible for appointment,
compensation, retention, oversight, qualifications and independence of the
External Auditor. All audit services provided by the External Auditor must be
preapproved by the Audit Committee. To the extent the Company shall have, at any
time, an internal audit operation, the Audit Committee shall assist in the Board
oversight of the performance of that operation. The relationship between the
External Auditor and the Audit Committee is further described under
"Relationship with External Auditor."
Addressing Non-Audit Services
All Non-Audit Services, including tax services but excluding those
prohibited by federal securities law, must be pre-approved by the Audit
Committee, subject to the following:
o Limitations on Approval - A Non-Audit Service may be approved
by the Audit Committee only if it does not compromise
independence of the External Auditor.
o Audit Committee Judgment - The Audit Committee must use its
judgment to decide whether a service can be performed by the
External Auditor without impairing, either in fact or in
appearance, the independence of the External Auditor and
subject to the following -
o Starting Point - The starting point for rendering a
determination whether independence may be impaired
shall be the following three principles -
|X| An auditor cannot function in the role of
management.
Page A-11
|X| An auditor cannot audit the auditor's own work.
|X| An auditor cannot serve in an advocacy role for
the auditor's client.
o Factors To Consider - When approving Non-Audit
Services, the following factors shall be considered -
|X| Whether the service is being performed
principally for the Audit Committee.
|X| The effects of the service, if any, on audit
effectiveness or on the quality and
timeliness of the Company's financial
reporting process.
|X| Whether the service would be performed by
specialists, e.g., technology specialists,
who ordinarily also provide recurring audit
support.
|X| Whether the service would be performed by
audit personnel and, if so, whether it will
enhance their knowledge of the entity's
business and operations.
|X| Whether the role of those performing the
service, e.g., a role where neutrality,
impartiality, and auditor skepticism are
likely to be subverted, would be
inconsistent with the auditor's role.
|X| Whether the audit firm's personnel would be
assuming a management role or creating a
mutuality of interest with management.
|X| Whether the auditors, in effect, would be
"auditing their own numbers."
|X| Whether the project must be started and
completed very quickly.
|X| Whether the audit firm has unique expertise
in the service.
|X| The size of the fee for the service.
o Optional Approval Procedures - The Audit Committee has the
following options for approving Non-Audit Services -
Page A-12
o Full Audit Committee - The full Audit Committee can consider
each Non-Audit Service.
o Designee - The Audit Committee can designate one of
its members to approve a Non-Audit Service, with that
member reporting approvals to the full committee.
o Pre-Approval of Categories - The Audit Committee can
pre-approve categories of Non-Audit Services. Should
this option be chosen, the categories must be
specific enough to ensure that -
|X| The Audit Committee knows exactly what it is
approving and can determine the effect of
such approval on auditor independence.
|X| Management will not find it necessary to
decide whether a specific service falls
within a category of pre-approved Non-Audit
Service.
o Prohibited Services - The nine services specifically
prohibited by federal securities law are as follows -
o Bookkeeping - Bookkeeping or other services related
to the accounting records or financial statements of
the Company.
o Financial Information Systems - Financial information
systems design and implementation.
o Appraisal and Related Services - Appraisal or
valuation services, opinions, or contribution-in-kind
reports.
o Actuarial Services - Actuarial reports.
o Internal Audit - Internal audit outsourcing services.
o Human Resources - Management functions or human
resources.
o Broker-Dealer and Related Services - Broker or dealer
investment adviser, or investment banking services.
o Legal Services - Legal services and expert services
unrelated to the audit.
Page A-13
o Other Services - Any other service that the federally
established Public Company Accounting Oversight Board
determines is impermissible.
o Limited Waiver - The pre-approval requirement as applied to a
Non-Audit Service may be waived for the Company should all of
the following be satisfied -
o Limit on Aggregate Amount - The aggregate amount of
all Non-Audit Services constitutes not more than 5%
of the total amount of revenues paid by the Company
to the External Auditor during the fiscal year in
which the Non-Audit Services are provided.
o Original Intent - The service is originally thought
to be a part of an audit by the External Auditor.
o Resulting Service - The service turns out to be a
Non-Audit Service.
o Notification of Audit Committee - The Non-Audit
Service is promptly brought to the attention of the
Audit Committee and approved prior to completion of
the audit by the Audit Committee or by one or more
members of the Audit Committee who are members of the
Board to whom authority to grant such approvals has
been delegated by the Audit Committee.
o Disclosure to Shareholders - Approval by the Audit Committee
of Non-Audit Services shall be disclosed to Company investors
in periodic reports required by Section 13(a) of the Exchange
Act.
o Limited Delegation - The Audit Committee may delegate to one
or more designated members of the committee, who are
Independent Directors of the Board, the authority to grant
pre-approvals as described in this section. The decisions of
any member to whom such authority is delegated is to be
presented to the full Audit Committee at each of its scheduled
meetings.
Monitoring Financial Reporting and Risk Control Related Matters
The Audit Committee shall review and assess the following:
o Risk Management - The Company's business risk management
process, including the adequacy of the Company's overall
control environment and
Page A-14
controls in selected areas representing significant financial
and business risk.
o Annual Reports and Other Major Regulatory Filings - All major
financial reports in advance of filing or distribution.
o Internal Controls and Regulatory Compliance - The Company's
system of internal controls for detecting accounting and
reporting financial errors, fraud and defalcations, legal
violations and noncompliance with the Ethics Code pertaining
to accounting, internal controls on accounting or audit
matters.
o Regulatory Examinations - Inquiries from the Securities and
Exchange Commission ("SEC") and the results of examinations by
other regulatory authorities in terms of important findings,
recommendations, and management's response.
o External Audit Responsibilities - External Auditor
independence and the overall scope and focus of the annual or
interim audits, including the scope and level of involvement
with unaudited quarterly or other interim-period information.
o Financial Reporting and Controls - Key financial statement
issues and risks, their impact or potential effect on reported
financial information, the processes used by management to
address such matters, related External Auditor views, the
bases for audit conclusions and important conclusions on
interim and year-end audit work in advance of the public
release of financials.
o Auditor Recommendations - Important External Auditor
recommendations on financial reporting, controls, other
matters, and management's response; and the views of
management and the External Auditor on the overall quality of
annual and interim financial reporting.
Addressing Complaints on Certain Illegal Acts, Unethical Behavior, Other Matters
The Audit Committee shall have the following special duties:
o Complaints - The Audit Committee, from time to time, when it
shall receive a Complaint, i.e., an inquiry or complaint or
when the committee independently shall decide in accordance
with this charter, shall review and make a determination and
recommend appropriate action to be taken by the Board on the
Complaint, subject to the following -
Page A-15
o Specific Meaning - In this context, "Complaint" shall
mean any one or more of the following involving an
officer, director, or employee of the Company or any
of its directly or indirectly wholly-owned
subsidiaries ("Employee" or, where the subject of the
Complaint is limited to a director on the board of
directors of one or more of those entities,
"Director") -
|X| Allegation of illegal activity or unethical
behavior-related violation of the Ethics
Code by an Employee pertaining to a Company
accounting, internal control on accounting,
or audit matter ("Accounting Violation").
|X| A confidential, anonymous or other
submission by an Employee of concern
regarding an alleged Company questionable
accounting or audit practice ("Questionable
Accounting Practice").
|X| Allegation of illegal activity or unethical
behavior-related violation of the Ethics
Code by an Employee pertaining to a matter
other than an Accounting Violation
("Unethical Conduct").
o Procedure - The following shall constitute the Company's
procedure for receipt, retention and treatment of Complaints
regarding Accounting Violations, Questionable Accounting
Practices or Unethical Conduct -
o Specific Allegations - Topics that may be addressed
in Complaints must relate to specific alleged
Accounting Violations, Questionable Accounting
Practices or Unethical Conduct.
o Accounting Violations and Questionable Accounting
Practices - A Complaint regarding Accounting
Violations or Questionable Accounting Practices must
be directed to the Audit Committee for response or
investigation. Topics that may be addressed in such
Complaints include, but are not limited to the
following -
|X| Allegations of fraud or deliberate error in
the preparation of the Company financial
statements.
|X| Allegations of fraud or deliberate error in
the review or audit of Company financial
statements.
Page A-16
|X| Allegations of fraud or deliberate error in
maintaining Company financial records.
|X| Deficiencies in internal control, or
violations of internal control policies.
|X| False statements by a senior officer or
accountant regarding matters included in
financial reports or records.
|X| False statements made to independent
auditors.
|X| Other information that can have a material
impact on the fairness of the Company's
financial statements.
o Director Unethical Conduct Complaint - A Complaint
regarding Unethical Conduct by a Director must be
directed to the following committee for response and
investigation, if any, as conditioned -
|X| Audit Committee, should the Complaint relate
to an Accounting Violation by an Employee,
with a copy of the Complaint delivered to
the chair of the Nominating and Corporate
Governance Committee.
|X| Nominating and Corporate Governance
Committee, should the Complaint relate to
Unethical Conduct by the Director which does
not involve an Accounting Violation, with a
copy of the Complaint delivered to the chair
of the Audit Committee.
|X| Audit Committee and Nominating and Corporate
Governance Committee, should the Complaint
relate to both an Accounting Violation by an
Employee, and Unethical Conduct by the
Director which does not involve an
Accounting Violation.
o Employee (Not Director) Unethical Conduct - A
Complaint regarding Unethical Conduct by an Employee
who is not a Director must be directed to the
Employee's supervisor or the Chief Financial Officer
for response or investigation. Should the Complaint
be submitted to the Employee's supervisor, a copy
must be directed to the Chief Financial Officer,
unless the Complaint pertains to that officer, in
which case the copy must be directed to the Company's
Chief Executive Officer ("Chief Executive Officer").
Page A-17
o Written Complaint - A Complaint must be in writing,
contain sufficient detail to provide a basis for the
investigator to make an independent determination as
to whether an Accounting Violation, Questionable
Accounting Practice or Unethical Conduct has
occurred.
o Signature, Date - A Complaint must be signed and
dated by the complainant-Employee in the case of an
Accounting Violation or Unethical Conduct-related
Complaint.
o Signature Not Required on Confidential or Anonymous
Questionable Accounting Practice Complaint - A
Questionable Accounting Practice-related Complaint
need not be signed, should the complainant be seeking
confidential or anonymous treatment of the Complaint.
However, it must be dated.
o Delivery of a Complaint To a Committee - A Complaint
directed to the Audit Committee or the Nominating and
Corporate Governance Committee must be addressed and
mailed or otherwise delivered to the chair of the
appropriate committee at the Company's corporate
offices as follows -
CONFIDENTIAL CONFIDENTIAL
ATTN: Chair, Audit or ATTN: Chair, Nominating
Committee (Complaint) and Corporate
General Communication, Governance
Inc. Committee(Complaint)
2500 Denali Street, General Communication,
Suite 1000 Inc.
Anchorage, Alaska 2500 Denali Street,
99503 Suite 1000
Anchorage, Alaska
99503
o Delivery of a Complaint To the Chief Financial
Officer - A Complaint directed to the Chief Financial
Officer must be addressed and mailed or otherwise
delivered to that officer at the Company's corporate
offices as follows -
CONFIDENTIAL
ATTN: Chief Financial Officer (Complaint)
General Communication, Inc.
2500 Denali Street, Suite 1000
Anchorage, Alaska 99503
o Other Forms of Delivery - The Chief Financial
Officer, in conjunction with the chairs of the Audit
Committee and the Nominating and Corporate Governance
Committee, shall review and, in the event they shall
reach consensus, recommend to the Board other
possible means by which a complainant shall deliver a
Page A-18
Complaint to the Company, including, but not limited
to, an internet address or a toll-free telephone
number.
o Complaint Filing System - The Chief Financial
Officer, in conjunction with the chairs of the Audit
Committee and the Nominating and Corporate Governance
Committee, shall establish a procedure compatible
with the charters of both committees and the Ethics
Code and providing for the corresponding investigator
of a Complaint to log the Complaint into a filing
system specifically established to retain, process,
and otherwise provide for the treatment of Complaints
("Complaint Filing System").
|X| The Complaint Filing System will be used by
each of these three investigators in the
separate duties of each in addressing a
Complaint.
o Processing of a Complaint - The recipient
(investigator) of the Complaint will log the
Complaint into the Complaint Filing System, subject
to the following -
|X| Should the Complaint be in the nature of an
allegation of an Accounting Violation, a
Questionable Accounting Practice or
Unethical Conduct, the investigator must
determine, based upon the information
provided in the Complaint and independent
investigation which the investigator, in the
investigator's sole discretion, deems
appropriate given the nature of the
Complaint, whether there is a reasonable
basis for the allegation made in the
Complaint, investigate the Complaint, decide
whether to hold a hearing on the matter and,
should the investigator choose to hold such
a hearing, give notice of, and hold the
hearing on, the Complaint, request witnesses
to appear at the hearing, and otherwise
gather evidence necessary for the
investigator to render a determination on
the Complaint and submit a written
determination to, and recommend appropriate
action by, the Board.
|X| Should the Complaint be in the nature of a
Questionable Accounting Practice where the
Complaint is unsigned or where the
complainant has otherwise indicated the
Complaint is presented as a confidential,
anonymous submission to the investigator,
the investigator must determine, based upon
the information provided in the Complaint
and independent investigation which the
Page A-19
investigator, in the investigator's sole
discretion, deems appropriate given the
nature of the Complaint, whether there is a
reasonable basis for the allegation made in
the Complaint, render a determination on the
Complaint and submit a written determination
to, and recommend appropriate action by, the
Board.
|X| Should the Complaint be in the nature of an
inquiry without allegation of an Accounting
Violation, Questionable Accounting Practice
or Unethical Conduct, the recipient may
either respond directly to the complainant
or, in the recipient's sole discretion,
recommend to the Board appropriate action.
|X| The investigator will, regardless of the
nature of the Complaint, seek to process it
in a timely manner.
|X| The investigator shall be informed of the
receipt of Complaints at least on a weekly
basis. In the event the Complaint shall be
directed to a committee, the chair of the
committee shall be informed of the receipt
of the Complaint within not more than two
business days.
|X| A Complaint pertaining to one or more
executive officers or Directors must receive
especially timely review by the
corresponding investigator.
|X| Each investigator will decide, upon initial
review of a Complaint, whether a formal
investigation shall be initiated and the
extent of it, including who shall carry out
the investigation, and the resources which
shall be deemed necessary to carry it out.
|X| All signed Complaints will be acknowledged
as received by the investigator. In the
event the signed Complaint shall be directed
to a committee, the chair of the committee,
or the chair's designee shall acknowledge
receipt of the Complaint.
|X| In the event the investigator shall conclude
a Complaint as not one subject to the scope
of the investigator's responsibilities under
a committee charter or otherwise but as one
raising legitimate issues, the investigator
shall forward the matter to the Chief
Financial Officer for direct action or
referral to the appropriate person for
review and action.
Page A-20
o Annual Status Report - The Audit Committee, the
Nominating and Corporate Governance Committee, and
the Chief Financial Officer as investigators of
Complaints, will at least annually each provide
reports to the Board on the status of Complaints
received during the year, including, but not limited
to, a brief description of each, the status of each,
and recommended action, if any, on each by the Board
(affirmative relief or closure of a file on a
Complaint for which the investigator has not received
additional requested information from the complainant
within a reasonable time which the investigator deems
necessary to make a determination in the matter).
o Retention of Closed File - A Complaint file, once
closed, will be retained for a time period of 10
years and in accordance with the Company's
appropriate records retention policy, after which it
will be destroyed. Unless specifically provided
otherwise in that policy, the Chief Financial Officer
or the officer's designee is the custodian of a
closed Complaint file.
o Confidential Treatment - An investigator will be
particularly sensitive to the confidential nature of
Complaints, especially ones where the complainant has
made the Complaint through a confidential or
anonymous submission. Complaint files will not be
available generally to Employees except with the
permission of the investigator and only in accordance
with the Company's policy on confidential records, if
any, pertaining to the subject matter of the
Complaint.
o Committee Review - In the event the investigator
shall be the Audit Committee or the Nominating and
Corporate Governance Committee, a Complaint shall be
reviewed initially by the chair, or the chair's
designee, and an initial analysis submitted to the
committee. Any formal action taken by the committee
on the Complaint must be at a duly scheduled meeting
at which at least a quorum of its members is present,
and a determination on the Complaint must be by vote
of at least a majority of the committee present,
subject further to the procedural requirements of the
Bylaws.
o Other Procedures - The Audit Committee shall adopt
such other procedures, subject to prior Board
approval, as may be necessary to carry out the
committee's responsibilities in addressing
Complaints, Auditor Disagreements, and other matters
addressed in this section.
Page A-21
o Other Complaint-Related Matters - The Audit Committee shall
address other Complaint-related matters as designated by the
Board.
o Disagreements - The Audit Committee, when it shall receive
notice of, or when the committee independently shall become
aware of, an Auditor Disagreement, i.e., a disagreement
between Company management and the External Auditor regarding
financial reporting, shall, in accordance with this charter,
review and resolve the Auditor Disagreement.
o Timely Review - In this context, the Audit Committee
shall review the Auditor Disagreement in a timely
fashion and provide a written determination with
supporting argument for it, and the determination of
the Audit Committee regarding the Auditor
Disagreement shall be final.
Addressing Attorney Reports
The Audit Committee shall address an Attorney Report, i.e., a report of
evidence of a securities violation or other infraction involving the Company
subject to the following:
o Report Required - An attorney retained by, or otherwise
employed by, the Company and appearing and practicing before
the SEC on behalf of the Company who becomes aware of evidence
of a suspected material violation of securities law
("Reporting Attorney") is required to submit an Attorney
Report to the Company's Senior Vice President-Regulatory
Affairs ("Chief Legal Counsel"), or if the matter relates to
the Chief Legal Counsel, to the Company's Chief Executive
Officer ("Chief Executive Officer") for appropriate response
(collectively, the Chief Legal Counsel or the Chief Executive
Officer, "recipient") and subject to the following -
o Appearing and Practicing - An attorney is deemed to
be "appearing and practicing before the SEC" in the
representation of the Company, and therefore subject
to the provisions of this section on Attorney
Reports, if the attorney performs specific services
(representing the Company before the SEC, transacting
business with the SEC including communications in any
form filed with the SEC, or advising the Company on a
filing with the SEC), but only if the attorney
provides those services in an attorney-client
capacity.
o Material Violation - A "material violation" includes
a material violation of federal or state securities
law, a material breach of fiduciary duty arising
under federal or state law, or a similar
Page A-22
violation of any federal or state law by an officer,
director, employee or agent of the Company.
o Content - The Attorney Report must contain details of
the suspected material violation and the relevant
evidence regarding the material violation.
o Appropriate Response - The recipient of the Attorney Report
must inquire into evidence contained in the report, and,
unless the recipient reasonably believes no material violation
has occurred, is ongoing, or is about to occur, the recipient
must take steps to initiate an appropriate response, i.e.,
take all reasonable steps to cause the Company to adopt an
appropriate response and subject further to the following -
o Referral To Audit Committee - The recipient may
choose not to make a determination on the matter or
refer the Attorney Report to the Audit Committee, in
which case the committee is responsible to inquire
into the evidence and, if necessary, formulate an
appropriate response.
o Notice To Reporting Attorney - The recipient must
within a reasonable time advise the Reporting
Attorney as to what the recipient has done regarding
the report.
o Receipt of Appropriate Response - Should the
Reporting Attorney receive what that attorney
believes to be an appropriate response within a
reasonable time, the responsibility of that attorney
as to the Attorney Report is complete.
o No Appropriate Response - Should the Reporting
Attorney not receive an appropriate response within a
reasonable time, that attorney must report the
evidence directly to the Audit Committee. Once that
report is made to that committee, the responsibility
of the Reporting Attorney is complete.
o Specific Meaning - The "appropriate response"
requirement is met if, after receiving a response,
the Reporting Attorney reasonably believes that no
material violation occurred, is ongoing, or is about
to occur, the Company has adopted appropriate
preventative or remedial measures, or the matter has
been referred to an attorney with the consent of the
Board, the Audit Committee, or the Chief Legal
Officer, who has investigated the evidence and the
Company has implemented any remedial recommendations
made by the attorney, or the Company has been advised
by that
Page A-23
attorney that the attorney may assert a colorable
defense with regard to the evidence of a material
violation.
o Other Procedures - The Audit Committee shall adopt such other
procedures, subject to prior Board approval, as may be
necessary to carry out the committee's responsibilities in
addressing Attorney Reports.
Reviewing Related-Party Transactions
The Audit Committee shall be responsible, in the context of Related
Party Transactions, for the following:
o Review - The Audit Committee shall review all Related Party
Transactions for possible conflict of interest situations on
an ongoing basis.
o Scope of Related Party Transactions - A Related Party
Transaction is a transaction required to be disclosed
pursuant to Item 404 of Regulation S-K adopted by the
SEC.
o Approval - All Related Party Transactions must be approved by
the Audit Committee.
Preparing Annual Plans
The Audit Committee, with responses from management and other key
committee advisors, shall develop an Annual Plan, i.e., a plan for Company
audit-related matters addressing the Primary Responsibilities detailed in this
charter. The Annual Plan shall be reviewed and approved by the full Board.
Preparing Shareholder Reports
The Audit Committee shall make available to shareholders a Shareholder
Report, i.e., a summary report on the scope of its activities. The Shareholder
Report may be identical to the report that appears in the Company's annual
report.
Accepting External Auditor Reports
External Auditor Reports shall be subject to the following:
o Receipt of Report - The Audit Committee shall receive External
Auditor Reports directly from the External Auditor. The
External Auditor Reports shall be submitted at least annually
as shall be requested by the Audit Committee.
Page A-24
o Content of Report - The External Auditor Report shall include the
following:
o Staffing, Scope - Audit staffing and supervision, and
scope of audit.
o Critical Accounting Policies - Critical accounting
policies and practices, alternative accounting
treatments, the reasons for selecting such policies,
and their impact on the fairness of the Company's
financial statements.
o Significant Estimates - Significant estimates made by
management in the preparation of financial reports.
o Communications - Nature and content of communications
between the External Auditor and Company management.
o Off-Balance Sheet Transactions - Off-balance sheet
transactions, joint ventures, contingent liabilities,
or derivative transactions, and their impact on the
fairness of financial statements.
o External Auditor Proposed Adjustments - External
Auditor proposed adjustments, including those
recorded by management and those not recorded by
management.
o Difficulties with Management - Difficulties
encountered with management during the audit.
o Disagreements with Management - Disagreements with
management regarding accounting and reporting issues.
o Legal Matters - Material legal matters that may
impact the financial statements.
o Overall Fairness - External Auditor's opinion on the
overall fairness of the financial statements.
o Written Record - The Audit Committee shall keep a written
record of all communications with the External Auditor. The
Audit Committee may request that the External Auditor put its
comments in writing.
Page A-25
o Deadline for Report - The Audit Committee must receive a
complete report from the External Auditor on the matters
addressed in the External Auditor Report prior to completion
of the annual audit.
o Regular Communications - The Audit Committee shall maintain
regular communications with the External Auditor on the topics
addressed in the External Auditor Report in connection with
Company quarterly reports and other Company financial reports.
Conducting Audit Committee Performance Evaluations
The Audit Committee shall each year conduct an Audit Committee
Performance Evaluation, i.e., it shall review, discuss, and assess its own
performance as well as the committee's purpose and responsibilities, seeking
responses from senior management, the full Board, and others. Changes, if any,
in the Audit Committee's purpose or responsibilities or, generally, changes to
this charter shall be recommended to the full Board for approval.
Other Matters
The foregoing provisions of this charter are not intended to be
exhaustive. The Audit Committee may, in addition, perform such other functions
as may be necessary or appropriate for the performance of its purposes and
responsibilities.
Nothing in this charter is intended to, and must not be construed as,
creating any responsibility or liability of the members of the Audit Committee
except to the extent otherwise provided under applicable Alaska law which
continues to set the legal standard for the conduct of the committee members.
ADOPTED by the board of directors of General Communication, Inc. as of
this 24th day of February, 2004.
/s/
John M. Lowber
Secretary
Page A-26
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 10, 2004
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated April 30, 2004 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, 2004,
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 10, 2004 and any adjournment or adjournments of that meeting. The
undersigned further directs those holders of this Proxy to vote at that annual
meeting, as specified in this Proxy, all of the shares of stock of the
undersigned in the Company, which the undersigned would be entitled to vote if
personally present, as follows:
(1) To elect three directors, each for three-year terms, as part
of Class III of the seven-member classified board of
directors, as identified in this Proxy:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary) listed below
Class III: Donne F. Fisher
William P. Glasgow
James M. Schneider
INSTRUCTIONS:
To withhold authority under this Proxy to vote for one
or more individual nominees, draw a line through the name of
the nominee for which you wish the authority to be withheld.
(2) To approve an increase in the number of shares of the
Company's common stock authorized and allocated to the
Company's Amended and Restated 1986 Stock Option Plan by 2.5
million shares of Class A common stock:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) 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 5, 2003 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.
Should the undersigned choose to mark this Proxy as withholding
authority to vote for one or more nominees as listed above or otherwise as
abstaining from a vote on a proposal set forth above, this Proxy will,
nevertheless, be used for purposes of establishing a quorum at the annual
meeting of shareholders.
A proxy having conflicting indications of more than one selection on a
vote on a nominee or otherwise on a proposal to be addressed at the annual
meeting will not be voted on that matter but will be used for purposes of
establishing a quorum at the meeting. Voting by proxy is subject to other
conditions as set forth in the Proxy Statement. See within the Proxy Statement
"Company Annual Meeting: Voting Procedure."
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) and (2). This Proxy,
when properly executed, will be voted as directed. If no clear direction is
made, it will be voted "for" proposal nos. (1) and (2). 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.