UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


          (X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
                   For the fiscal year ended December 31, 1995

                                       or

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934 (No Fee Required) 

                        For the transition period from    to

                           Commission File No. 0-15279

                           GENERAL COMMUNICATION, INC.
                           ---------------------------
             (Exact name of registrant as specified in its charter)

           ALASKA                                                 92-0072737
- -------------------------------                              ------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

              2550 Denali Street Suite 1000 Anchorage, Alaska 99503
         ---------------------------------------------------------------
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (907) 265-5600

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

            Class A common stock                  Class B common stock
            --------------------                  --------------------
              (Title of class)                      (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months,  and (2) has been subject to such filing  requirements
for the past 90 days. Yes X   No .

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  computed by  reference  to the average bid and asked prices of such
stock  as of the  close of  trading  on  February  29,  1996  was  approximately
$38,439,000.

The number of shares outstanding of the registrant's common stock as of February
29, 1996, was:
                 Class A common stock - 19,681,207 shares; and
                    Class B common stock - 4,175,434 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE
Certain  portions of the  registrant's  definitive  Proxy  Statement to be filed
pursuant to Regulation 14A of the  Securities  Exchange Act of 1934, as amended,
in connection  with the Annual Meeting of  Stockholders  of the registrant to be
held on or after June 5, 1996 are  incorporated  by  reference  into Part III of
this report.

                           GENERAL COMMUNICATION, INC.

                         1995 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS


                                                                            PAGE
PART I.........................................................................1
     Item 1.    BUSINESS.......................................................1
     Item 2.    PROPERTIES....................................................13
     Item 3.    LEGAL PROCEEDINGS.............................................14
     Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........14
PART II.......................................................................15

     Item 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED 
                STOCKHOLDER MATTERS...........................................15
     Item 6.    SELECTED FINANCIAL DATA.......................................16
     Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS...........................17
     Item 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
                DATA..........................................................22
     Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                ACCOUNTING AND FINANCIAL DISCLOSURE...........................45

PART III

     Incorporated by reference from the Company's Proxy Statement for its 
     1996 Annual Shareholders' Meeting

PART IV.......................................................................46

     Item 14.   EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES,
                AND REPORTS ON FORM 8-K.......................................46

                                     PART I

Item 1.  BUSINESS

Background and Description of Business

     General  Communication,  Inc.  ("GCI") is an Alaska-based  corporation that
supplies common-carrier  long-distance and other telecommunication  products and
services to  residential,  commercial  and government  users.  Telecommunication
services that GCI and its subsidiaries ("the Company") provides are carried over
facilities that are owned by the Company or are leased from other companies.

     GCI began  commercial  operations in November 1982 in competition  with the
former monopoly carrier,  Alascom,  Inc.  ("Alascom").  In many respects,  GCI's
entry  into the  market  parallels  that of MCI  Telecommunications  Corporation
("MCI") which,  in the contiguous  United States,  entered the market to compete
with the former  monopoly  carrier  American  Telephone  and  Telegraph  Company
("AT&T"). GCI followed in MCI's footsteps approximately a decade later.
MCI acquired an approximate 30 percent ownership interest in GCI during 1993.

Industry

    The  U.S.  telecommunication  industry  remains  in a state  of  flux,  with
companies faced with the challenges of new technologies and rapid changes in the
competitive  and regulatory  environment.  Growing  competition  has resulted in
lower prices,  which should stimulate  ongoing volume gains, even in the heavily
saturated U.S. market. The policies of President Clinton's  Administration,  the
Telecommunications  Act  of  1996,  emerging  technologies,  and a  blurring  of
distinctions  among industry sectors all portend new revenue  possibilities  for
the  industry.  Where  the  focus was once on  regulation  of a closely  guarded
monopoly, regulators are now ushering the telecommunication industry into an era
of  competition  and reduced  regulation.  Decisions made now will influence the
industry's  future in ways  difficult  to foresee,  as  technology  continues to
catapult the industry forward.

    What once was a $94 billion telephone service industry before divestiture of
the  Bell  System  in 1984  has  evolved  into an  estimated  $200  billion-plus
communications marketplace, comprised of the following:

       (1) $40 billion --  digitally  priced  long  distance  services;  
       (2) $97 billion -- analog-priced local services;
       (3) $25 billion -- analog-priced cable TV services;
       (4) $15 billion -- analog-priced cellular services;
       (5) $4 billion -- digitally priced messaging/paging services; and
       (6) $20 billion -- digital private data and value-added services.

     Industry  analysts in trade journals  estimate that long distance  revenues
received by U.S. based  interexchange  carriers for public network services will
grow to $77  billion  in the year  2000 at a 5  percent  compound  annual  rate.
International  revenues  for these  carriers  are  expected  to continue to pace
market growth,  growing more than twice as fast as the mature  domestic  market,
growing to $16.5  billion in 2000 at a better  than 10 percent  compound  annual
rate.  International revenues for these carriers are roughly divided into thirds
in terms of the region of the world from which they are  generated:  the Western
Hemisphere,  Europe and the remainder of the world, with the latter growing most
rapidly, paced by traffic with the Pacific Rim.

     Expanding  voice  markets  such  as  computer-telephony   integration,  and
wireline   and   wireless   PBXs,   are   expected   to  drive   growth  in  the
telecommunications  market in 1996. These newer market segments contributed to a
15 percent overall  increase in U.S.  telecommunications  revenues.  The revenue
growth is attributed to businesses'  greater need for communications  equipment,
software and

                                       1

services.  Telecommuting,  Private Branch Exchanges ("PBXs") and internetworking
are among the market forces pushing the growth.

     Trade journal analysts predicted that sales of wireless  PBXs--systems that
interface  a wireless  controller  with an  existing  PBX--would  grow from $394
million in 1995 to $3.3 billion in 1998.  Wireless PBXs give employees  wireless
capabilities at their desktops.  Improvements in high-speed wireline networking,
such as  building  asynchronous  transfer  mode  local area  networks,  also are
allowing powerful messaging  capabilities to connect workers. Video conferencing
and unified messaging are two applications  analysts expect to become popular in
1996. Data  communications  and  internetworking  revenue increased 19.4 percent
last year as a result of added demand for enterprise networking.

     Sudden,  widespread use of the Internet  caused the modem market to grow by
50 percent, while integrated services digital network ("ISDN") lines became both
widely available and desired,  expanding 126 percent last year. Industry players
expect the Internet  phenomenon to spark growing interest in ISDN. Major vendors
now are looking at linking  voice mail  systems  through use of  internetworking
techniques  over the  Internet,  such as  standardized  protocols  and messaging
features similar to E-mail.

     Communication   sectors  not   traditionally   competitive  with  telephone
companies, such as cable and wireless services, are projected to grow an average
10.9% per year. This compares with the 3% average per year growth in revenue for
traditional  local telephone  service from 1993 to 1998.  Cable TV companies may
gain a competitive  advantage through marketing of cable modems.  Computer-based
services  likely will be a strong  market for cable TV firms.  Cable  modems may
give them the ability to offer a competitive alternative to the second telephone
line into the home,  providing  high-speed  access to data services.  Content is
expected  be the  ultimate  driver of Cable TV profits and may  determine  which
companies gain the most market share.

     The  emergence  of new  services  --  especially  digital  cellular  radio,
personal communications services ("PCS"), interactive TV, and video dial tone --
has created  opportunities for significant growth in local loop services.  These
opportunities  are also laying the foundation for a  restructuring  of the newly
competitive  local loop services market.  Not only are competitors  entering the
core business of the local telephone companies, but they are beginning to pursue
the  fast-growing  markets that previously were closed to them, such as consumer
video.   Competition   between  telephony,   cable  TV,  and  PCS  markets  will
increasingly  overlap in the 1990s. As opportunities  for new wireless and video
services  arise  and  competitors  expand  beyond  their  traditional   markets,
competition  between existing telephone  companies and these major industries is
expected to intensify.

     Future  mergers are expected  throughout  the  telecommunications  industry
aimed at creating geographic clustering and expansion of the breadth of services
offered to customers  (i.e.,  local,  long  distance,  cable and  wireless).  In
addition,  interexchange  carriers are poised to enter the local service market.
At the core of several of currently  existing  ventures are the  integration  of
wireless and wireline technology. The ventures plan to provide services in which
customers would use a phone similar to a portable  cordless device linked to the
existing wired infrastructure of the partners.  When customers leave their homes
or offices,  the phones  would become  mobile and would be serviced  through the
wireless network that would be created by the venture.  Moreover,  the venture's
local  telephone  services will be packaged with cable and multimedia  services,
long-distance  service and  entertainment  services.  Customers  will be able to
select  the mix of  services  and  products  that  fit  their  needs.  Increased
competition in 1996 may result in fewer players providing more expanded services
- -- growth by acquisition will be a key component of the survivors' strategy.

     On  September,  23, 1993,  the Federal  Communications  Commission  ("FCC")
adopted a broad set of rules for the  licensing  of PCS.  The FCC  concluded  an
auction of  spectrum to be used for the  provision  of PCS in March,  1995.  PCS
systems  are  expected  to make an  individual  carrying  a  pocket-

                                       2

sized phone available at the same number, whether at home, at work or traveling.
Unlike cellular  systems,  a caller using PCS will not need to know the location
of the  person  he or she is  trying to  reach.  The  difference  in the way PCS
systems are  configured  as compared to cellular  systems means that PCS systems
could be less  costly to  operate  than  cellular  systems  and  therefore  less
expensive  for  users.  Rapid  growth of  cellular  telephone  services  and the
anticipation  of PCS services  has  generated  substantial  interest in wireless
communications.  The FCC's  efforts  are  expected  to  encourage  reduction  of
communication  prices  and put the  technology  within  financial  reach of most
American homes and businesses.

     It  is  predicted  that  PCS  will  grow  rapidly,  reaching  17.9  million
subscribers by 2005. By then, PCS services will be generating annual revenues of
nearly $8 billion. PCS's success is expected to occur even with competition from
other wireless services such as cellular, paging and enhanced specialized mobile
radio.  Increases in services are expected to be fueled by declining usage rates
and expanded coverage.

     PCS licensees  will be required to offer  service to at least  one-third of
their market population within five years or risk losing their licenses. Service
must be extended to  two-thirds  of the  population  within seven years and must
reach 90% population coverage within 10 years.

     The  Telecommunications  Act of 1996  ("Act")  was signed  into law Feb. 8,
1996.  It is  expected  to  have a  dramatic  impact  on the  telecommunications
industry,  resulting in even  greater  changes than the 1984 breakup of the Bell
System.  Bell Operating  Companies (BOCs) can immediately  begin  manufacturing,
research and development;  GTE Corp. can begin providing  interexchange services
through its telephone  companies  nationwide;  laws in 27 states that  foreclose
competition are knocked down;  co-carrier  status for competitive local exchange
carriers is ratified;  and the concept of "physical collocation" of competitors'
facilities in Local Exchange Carriers ("LECs") central offices, which an appeals
court rejected, is resurrected.

     The legislation breaks down the old barriers that prevented three groups of
companies--the  LECs,  including the BOCs, the long distance  carriers,  and the
cable TV operators--from competing head-to-head with each other.

     The Act requires LECs to let new competitors  into their business.  It also
requires the LECs to open up their  networks to ensure that new market  entrants
have a fair  chance of  competing.  The bulk of the  legislation  is  devoted to
establishing  the terms under which the LECs,  and more  specifically  the BOCs,
must open up their networks.

     The principal  beneficiaries  of this  "unbundling"  are expected to be the
interexchange carriers ("IXCs"), however the new regime offers opportunities for
other service providers,  particularly  commercial mobile radio service ("CMRS")
providers. Within the local exchange market, estimated to be worth more than $90
billion  annually,  consumers  likely will be presented with an array of choices
for local telephone service.

     The new  legislation  sets up four classes of carriers,  with an increasing
number of  obligations  placed on each one. The first group,  telecommunications
carriers, includes any provider that offers subscription-based telecommunication
services.

     The second group includes LECs, which have five specific duties:
       (1)   Resale:   LECs   cannot   prohibit   or  impose   unreasonable   or
             discriminatory  conditions  or  limitations  on the resale of their
             services.
       (2)   Number  portability:  LECs must  provide to the extent  technically
             feasible number portability,  which would permit LEC subscribers to
             switch to another  carrier  without  losing  their  existing  phone
             numbers.

                                       3

       (3)   Dialing  parity:  LECs must  provide  dialing  parity to  competing
             providers  so that  their  customers  can access  the  services  of
             another without special dialing requirements or delays.
       (4)   Access:  LECs must provide competing  carriers with access to their
             rights-of-way, including poles, ducts, and conduits.
       (5)   Reciprocal  compensation:  LECs must pay other carriers,  including
             CMRS providers,  the same fee to terminate calls originating on the
             LEC's  network as the  competing  carrier  has to pay to  terminate
             calls on the LEC's network.

     The next class of carriers  includes  incumbent  local  exchange  carriers,
which are tasked with six duties. These include a duty
       (1)    to negotiate interconnection agreements;
       (2)    to provide  interconnection  on request  that is at least equal in
              quality to the services it provides itself;
       (3)    to  provide  unbundled  access  to  network  elements,  so  that a
              competitor  can buy only those LEC services that it needs (such as
              unbundled access to the local loop);
       (4)    to offer its services at wholesale rates for resale;
       (5)    to provide notice of changes in its network; and
       (6)    to offer  co-location  of  competing  carriers'  equipment  in its
              switching offices.

     The final  classification  includes the BOCs,  which are given authority to
enter the intercity  market,  but only after they have  satisfied a long list of
requirements,  including a  fourteen-point  checklist  of specific  actions--all
aimed at easing the lot of the competing carrier.

     The Act is expected to require the  Federal  Communications  Commission  to
begin no fewer than 50 rulemaking  proceedings.  The  legislation  calls for the
establishment of a new federal-state  joint board on universal service within 30
days of  enactment.  That  board will have to  develop  proposals  to revamp the
universal  service subsidy system that has evolved over the years which could be
among the most far-reaching provisions of the Act.

     Enactment  of the  bill  affects  local  exchange  service  markets  almost
immediately  by requiring  states to authorize  local exchange  service  resale.
Resellers  will be able to  market  new  bundled  service  packages  to  attract
customers.  Over the long term, the  requirement  that local  exchange  carriers
unbundle access to their networks may lead to increased price competition. Local
exchange   service   competition   may  not  take   hold   immediately   because
interconnection arrangements are not in place in most areas.

General

     GCI was  incorporated  under the laws of the State of Alaska in 1979.  From
1980  to  January,   1987,  GCI  was  a  wholly-owned   subsidiary  of  WestMarc
Communications, Inc. ("WSMC"), formerly Western Tele-Communications,  Inc., then
a microwave  communication common carrier. On January 23, 1987, WSMC distributed
all of the outstanding  shares of the Class A and Class B common stock of GCI to
its   shareholders.   This  distribution  was  made  as  a  dividend  to  WSMC's
shareholders  of record at the close of business on December  29,  1986,  on the
basis of one share of GCI Class A common  stock  for each  outstanding  share of
WSMC Class A common  stock,  and one share of GCI Class B common  stock for each
outstanding  share of WSMC Class B common stock.  Following the distribution GCI
became an independent publicly-held company.

     Effective  November  30, 1990,  GCI  transferred  substantially  all of its
operating  assets  to its  wholly  owned  subsidiary,  GCI  Communication  Corp.
("GCC"),  an Alaska  corporation,  which  assumed all of GCI's  liabilities  and
became the operating company. GCI serves as a holding company and remains liable
as a  guarantor  on  certain  of  GCC's  obligations.  All  of  the  issued  and
outstanding  shares of GCC were pledged as security under GCC's credit agreement
with its senior lenders.

                                       4

     The Company was authorized to and began  providing  intrastate  services on
May 15, 1991 on its own  facilities  in the areas  where it provided  interstate
service and through resale of others' services where it has no facilities.

     GCI Communication  Services,  Inc.  ("Communication  Services"),  an Alaska
corporation,  is a wholly-owned  subsidiary of GCI and was incorporated in 1992.
Communication  Services provides private network  point-to-point  data and voice
transmission  services between Alaska,  Hawaii and the western contiguous United
States. Communication Services products are marketed directly by GCC.

     GCI Leasing Co., Inc.  ("Leasing  Company"),  an Alaska  corporation,  is a
wholly-owned  subsidiary of Communication Services and was incorporated in 1992.
Leasing Company owns and leases undersea fiber optic cable capacity for carrying
a majority of the Company's  interstate  switched  message and private line long
distance services between Alaska and the remaining United States.

Products

      The  Company  offers a broad  spectrum  of  telecommunication  services to
residential,  commercial and government  customers primarily  throughout Alaska.
The Company  operates in two industry  segments and offers five primary  product
lines.  The message  and data  transmission  services  industry  segment  offers
message toll,  private line and private network  services,  and the system sales
and service  industry  segment  offers data  communication  equipment  sales and
technical services.

      The Company's message and data  transmission  services industry segment is
engaged in the  transmission of interstate and intrastate  switched message toll
service  ("MTS") and  private  line and private  network  communication  service
between the major  communities  in Alaska,  and the remaining  United States and
foreign countries.  GCI's message toll services include  intrastate,  interstate
and  international  direct  dial,  800,  calling  card,  operator  and  enhanced
conference  calling,  as well as termination of northbound toll service for MCI,
U.S. Sprint ("Sprint") and several large resellers without facilities in Alaska.
GCI also provides  origination of southbound calling card and 800 toll services.
Private line and private network  services  utilize voice and data  transmission
circuits,  dedicated  to  particular  subscribers,  which  link a device  in one
location to another in a different location.  Regulated telephone relay services
for the deaf,  hard-of-hearing  and  speech  impaired  are  provided  though the
Company's  operator  service center.  The Company offers its message services to
commercial and  residential  subscribers.  Subscribers may cancel service at any
time. Toll related  services account for  approximately  93%, 90% and 90% of the
Company's 1995, 1994 and 1993 total revenues, respectively.

      GCI  has   positioned   itself   as  the  price   leader  in  the   Alaska
telecommunication   market  and,  as  such,  rates  charged  for  the  Company's
telecommunication  services  are  designed  to be equal to or  below  those  for
comparable  services  provided by the only other  significant  competitor in the
Alaska telecommunications market, AT&T Alascom.

      In addition to providing  communication  services, GCC sells, services and
operates, on behalf of certain customers,  dedicated  communication and computer
networking equipment and provides field/depot,  third party,  technical support,
consulting  and  outsourcing  services  through  its  systems  sales and service
industry segment.

      The Company also supplies integrated voice and data communication  systems
incorporating  interstate and intrastate  digital private lines,  point-to-point
and multipoint  private  network and small earth station  services  operating at
data rates up to 1.544 mbs. In  addition,  the  Company  designs,  installs  and
maintains data  communication  systems for  commercial and government  customers
throughout Alaska.  Presently,  there are five companies in Alaska that actively
sell and maintain data and voice  communication  systems.  The Company's  unique
ability to integrate telecommunication 

                                       5

networks  and data  communication  equipment  has  allowed  it to  maintain  its
dominant market position on the basis of "value added" support rather than price
competition.

      GCI has expanded its technical  services business to include  outsourcing,
onsite technical  contract services and  telecommunication  consulting.  GCI was
awarded a five year  contract,  effective  April 1, 1992,  to assume  management
responsibility for all of BP Exploration (Alaska) ("BP")  telecommunication  and
computer  networking  assets in Alaska.  BP is the largest oil company presently
operating in Alaska. GCI was awarded a five year contract, effective October 31,
1995,  to assume  management  responsibility  for all of National Bank of Alaska
telecommunication and computer networking assets in Alaska.

      Expenditures  of  approximately  $2.5 million were made in 1994 developing
new demand assigned multiple access ("DAMA") satellite communication technology.
A four-module  demonstration  system was  constructed in 1994 and was integrated
into  the  Company's  telecommunication  network  in  1995.  Existing  satellite
technology relies on fixed channel assignments to a central hub. DAMA technology
assigns satellite capacity on an as needed basis. The digital DAMA system allows
calls to be made between  remote  villages  using only one satellite hop thereby
reducing satellite delay and capacity requirements while improving quality.

      The Company obtained the necessary APUC and FCC approvals  waiving current
prohibitions  against  construction  of competitive  facilities in rural Alaska,
allowing  for  deployment  of DAMA  technology  in 56 sites in rural Alaska on a
demonstration  basis.  Construction  and  deployment  will  occur in 1996,  with
services  expected  to be  provided  during  the fourth  quarter of 1996.  Total
construction and deployment costs are expected to total $18 to $20 million.

      The FCC  concluded an auction of spectrum to be used for the  provision of
PCS in March,  1995. The Company was named by the FCC as the high bidder for one
of the two 30 megahertz  blocks of  spectrum,  with Alaska  statewide  coverage.
Acquisition  of the  license  for a cost of  $1.65  million  will  allow  GCI to
introduce new PCS services in Alaska. The Company began developing plans for PCS
deployment in 1995 with technology service trials expected to take place in 1996
and service to be offered as early as 1997 or 1998.

      Neither GCI or any of its  subsidiaries  has revenues that are  materially
affected by seasonality.  The Company has not expended  material  amounts during
the last three fiscal years on customer-sponsored research activities.

Facilities

      Currently,  GCI's  facilities  comprise  earth  stations  at Eagle  River,
Fairbanks,  Juneau, Prudhoe Bay, Valdez, Kodiak, Sitka, Ketchikan,  Unalaska and
Cordova, all in Alaska and at Issaquah,  Washington,  serving the communities in
their  vicinity.  The Eagle River and  Fairbanks  earth  stations  are linked by
digital microwave facilities to distribution centers in Anchorage and Fairbanks,
respectively.   The  Issaquah  earth  station  is  connected  with  the  Seattle
distribution  center by means of diversely routed fiber optic cable transmission
systems,  each  having  the  capability  to  restore  the  other in the event of
failure.  The Juneau earth station and distribution  center are co-located.  The
Ketchikan,   Prudhoe  Bay,   Valdez,   Kodiak,   Sitka,   Unalaska  and  Cordova
installations  consist  only of an  earth  station.  GCI  constructed  microwave
facilities  serving  the  Kenai  Peninsula  communities  and  owns a 49  percent
interest in an earth station located on Adak Island in Alaska.  GCI maintains an
operator service center in Wasilla,  Alaska.  Each of the  distribution  centers
contains electronic switches to route calls to and from local exchange companies
and, in Seattle,  to obtain access to MCI and other facilities to distribute GCI
southbound traffic to the remaining 49 states and international destinations.

      Leasing  Company  owns a portion of an  undersea  fiber  optic cable which
allows the Company to carry its Anchorage,  Eagle River, Wasilla,  Palmer, Kenai
Peninsula, Glenallen and approximately one-

                                       6

half of its Fairbanks  area traffic to and from the  contiguous  lower 48 states
over a terrestrial circuit,  eliminating the one-quarter second delay associated
with a satellite  circuit.  The Company's  preferred routing for this traffic is
via the undersea fiber optic cable which makes available  satellite  capacity to
carry the Company's intrastate traffic.

     The Company employs  satellite  transmission for certain other major routes
and uses advanced digital  transmission  technology  throughout its system.  The
Company leases C-band  transponders  on AT&T's Telstar 303 satellite.  The lease
expires June 1996 and may be renewed,  at the Company's option,  through the end
of the satellite's useful life, currently projected to be 1998. The Company will
redirect  its earth  stations  toward the  Hughes  Communications  Galaxy,  Inc.
("Hughes")  Galaxy IX satellite upon its successful  delivery by Hughes expected
to occur in June 1996.

      GCI  employs  advanced  transmission  technologies  to carry as many voice
circuits as possible through a satellite  transponder  without sacrificing voice
quality.  Other  technologies such as terrestrial  microwave  systems,  metallic
cable, and fiber optics tend to be favored more for point-to-point  applications
where the volume of traffic is substantial. With a sparse population spread over
a  wide  geographic  area,  neither   terrestrial   microwave  nor  fiber  optic
transmission  technology  will be  economically  feasible in rural Alaska in the
foreseeable future.

Customers

      The Company had  approximately  85,600,  73,100 and 73,600  active  Alaska
subscribers  to its message  telephone  service at December 31,  1995,  1994 and
1993, respectively.  Approximately 9,500, 9,300 and 9,500 of these were business
users at December 31, 1995, 1994 and 1993, respectively,  and the remainder were
residential customers. MTS revenues currently amount to approximately $9,050,000
per month.

      Substantially all service areas,  except Bethel,  Alaska, in which GCI has
facilities have completed the equal access balloting process. GCI carries 33% to
49% of the  southbound  interstate  MTS traffic and 21% to 48% of the intrastate
MTS traffic originating in those service areas.

      In January, 1993 GCI entered into a five-year contract with MCI to provide
facilities for MCI's Alaska message toll and 800 service  traffic.  The contract
supplanted a previous  contract and provides for expanded  usage by MCI of GCI's
facilities  and usage by GCI of MCI's  facilities.  Revenues  attributed  to the
contract in 1995, 1994 and 1993 totaled approximately  $23,939,000,  $19,512,000
and  $16,068,000,  or approximately  18.5%,  16.7%, and 15.7% of total revenues,
respectively.  The contract was amended in March 1996  extending  its term three
years to March 31, 2001.

      Services  provided pursuant to a contract with Sprint resulted in revenues
in 1995, 1994 and 1993 of approximately $14,885,000, $12,412,000 and $10,123,000
or approximately 11.5%, 10.6%, and 9.9% of total revenues, respectively.

      Both MCI and Sprint are major  customers of the Company in its message and
data  transmission  services  industry  segment.  Loss of one or  both of  these
customers would have a significant  detrimental effect on the Company's revenues
and  contribution.  There are no other individual  customers,  the loss of which
would have a material impact on the Company's revenues or gross profit.

      The  Company  provided  private  line and  private  network  communication
products and services to approximately 566 commercial and government accounts in
1995.  Private  line and private  network  communication  products  and services
currently generate approximately $1,050,000 in monthly, revenues.

                                       7


     A summary of switched MTS traffic minutes follows:
Interstate Minutes ------------------------------------------------- For Calling Intrastate Quarter Ended Southbound Northbound Card Minutes ------------- ---------- ---------- ---- ------- (amounts in thousands) March 31, 1993 47,100 34,713 3,947 16,178 June 30, 1993 49,928 34,651 3,811 17,283 September 30, 1993 54,403 36,282 4,043 18,770 December 31, 1993 56,549 39,348 4,459 17,989 ------- ------- ------ ------ Total 1993 207,980 144,994 16,260 70,220 ======= ======= ====== ====== March 31, 1994 56,118 39,664 4,431 18,910 June 30, 1994 58,809 38,293 4,220 20,534 September 30, 1994 61,715 39,678 4,210 21,253 December 31, 1994 59,902 40,424 4,605 19,786 ------- ------- ------ ------ Total 1994 236,544 158,059 17,466 80,483 ======= ======= ====== ====== March 31, 1995 60,140 41,600 4,351 21,208 June 30, 1995 65,031 43,721 4,113 23,051 September 30, 1995 71,918 45,027 4,233 23,883 December 31, 1995 72,319 46,545 5,518 25,228 ------- ------- ------ ------ Total 1995 269,408 176,893 18,215 93,370 ======= ======= ====== ======
All minutes data were taken from GCC's billing statistics reports. Markets The dominant carrier and GCI's primary competition in the Alaska market for interstate and intrastate MTS, private line and private network telecommunication services continues to be AT&T Alascom. Other carriers, such as MCI and Sprint can enter the market by constructing their own facilities in Alaska. At the present time, however, MCI, Sprint and several other carriers interconnect with GCC in Seattle and Dallas for delivery of their Alaska bound interstate traffic. Sprint and MCI also originate 800 services in Alaska on GCI's facilities. Five companies in Alaska actively sell and service data and voice communication systems. Other companies can enter the market at any time. Financial Information About Industry Segments For financial information with respect to industry segments of GCI, reference is made to the information set forth in Note 8 of the Notes to Consolidated Financial Statements included in Part II of this Report, which Note is included herein by reference. 8 History of Telecommunication in Alaska The first telecommunication facilities in Alaska were telegraph lines operated by the U.S. Army. Later, telephone service was added, and the Alaska Communications System ("the ACS") grew to cover much of the state. Wherever military communication was not hampered, the Army allowed its circuits to be used for civilian purposes. Control of the ACS was transferred to the U.S. Air Force and eventually, the ACS supplied long distance trunks to local exchanges in the state's growing communities. As the civilian population increased, the need for a transition to commercial operation became apparent. In 1969, ten years after Alaska statehood, the Alaska Communications Disposal Act ("the Act") was passed by Congress. The RCA Corporation was the successful bidder under the Act and purchased the ACS. RCA formed a subsidiary, RCA Alaska Communications, later Alascom, to own and operate the system. Through its purchase of the ACS, Alascom became the sole long lines carrier in Alaska. In the lower 48 states, Alascom interconnected with AT&T. In Alaska, it interconnected with the telephone companies providing local exchange service. Additionally, Alascom was required to maintain a number of thin-line links to remote areas of the state. Under the terms of the ACS purchase agreement, Alascom was required to expand service to the less developed areas of Alaska. In 1979 Alascom was acquired by Pacific Power and Light, Inc., a utility holding company, which has since transferred Alascom to its publicly-traded subsidiary, Pacific Telecom, Inc. ("PTI"). Rates initially charged for Alaska telecommunication services had been substantially higher than interstate rates in the contiguous states. In 1972 the FCC established a policy of rate integration intended to equalize all domestic interstate rates. This policy was used to support a subsidy mechanism to help Alascom cover higher costs associated with rural operations. When GCI began operations in 1982, AT&T provided almost all of the telecommunication services in the lower 48 states and Alascom provided almost all of the long distance telecommunication services in Alaska and between Alaska and the lower 48 states, Hawaii, and foreign countries. Although Alascom's business was highly subsidized, GCI competed with Alascom with no subsidy whatsoever. In 1983 the State of Alaska petitioned the FCC to initiate a rule making to determine how to rationalize the policies of rate integration and competition in the Alaska market in light of the rapid changes in the telecommunication industry brought on by the AT&T divestiture and changing FCC competition policies. This led the FCC to initiate a rule making proceeding ("the Alaska rule making proceeding") in 1984. Issues involved in the Alaska rule making proceeding, namely the harmonizing of the FCC's policies of competition and rate integration for the Alaska market and the implementation of a permanent structure for that market, were referred to a Federal-State Joint Board ("Joint Board"). Joint Board activity, including the consideration of several alternative market structures, continued through the adoption of a recommended transition mechanism in 1993, which was later adopted by the full FCC in 1994. This FCC action led to a negotiated buyout of Alascom by AT&T, as further described in Part I, History of Regulatory Affairs and Recent Developments below. History of Regulatory Affairs The Company's activities in the telecommunication market are regulated by two agencies. The Communications Act of 1934 gives the FCC the authority to certificate market entry and regulate rates for interstate telecommunication. Intrastate telecommunication services are regulated by the Alaska Public Utilities Commission ("APUC"). 9 The Company's entry into the intrastate telecommunication market had been hampered because the APUC had no policy on intrastate competition. In May 1990 the Alaska legislature passed legislation mandating competition in the Alaska intrastate telecommunication market. The legislature further directed the APUC to adopt regulations governing a competitive telecommunication market and to begin accepting applications for service on February 15, 1991. On February 15, 1991 GCI, through its wholly-owned operating subsidiary GCC, filed an application to provide competitive intrastate telecommunication services. The Company was authorized to and began providing intrastate services on May 15, 1991 on its own facilities in the areas where it provided interstate service and through resale of others' services where it has no facilities. In the first quarter of 1992 the APUC granted GCC a Certificate of Public Convenience and Necessity to provide telephone relay services ("TRS") for the deaf, hard-of-hearing and speech impaired though the Company's operator service center in Wasilla, Alaska. GCC commenced its regulated TRS operations on June 21, 1992. Intrastate TRS operating costs, capital costs and a rate of return are being funded through a universal access surcharge billed by all local telephone companies in the state of Alaska. Under an FCC decision, starting in 1993, a portion of the TRS operating costs are recovered through an interstate pool administered by the National Exchange Carrier Association ("NECA"). The FCC regulates dominant interstate carriers, such as the Company's only interstate competitor, AT&T/Alascom. Company's only interstate competitor, Alascom. Because, under the terms of the AT&T acquisition of Alascom, Alascom rates and services must "mirror" those offered by AT&T, changes in AT&T prices indirectly affect the rates and services of the Company. AT&T's prices, and thus those of Alascom, are regulated under a price cap plan whereby AT&T's rate of return is no longer regulated or restricted. AT&T is allowed to raise and lower prices for three groups of services within pre-established floor and ceiling levels with little regulatory oversight. These services include products offered to: 1) small businesses or residential customers; 2) users of 800 services and 3) large business customers. Price increases by AT&T generally improve the Company's ability to raise its prices while price decreases pressure the Company to follow. The Company has, so far, successfully adjusted its pricing and marketing strategies to respond to AT&T pricing practices. In 1983 the State of Alaska petitioned the FCC to commence a rulemaking proceeding to determine how to harmonize the FCC's policies of rate integration and competition in the Alaska market in light of the rapid changes in the telecommunications industry brought on by the AT&T divestiture and changing FCC competition policies. In 1984 the FCC initiated the Alaska rulemaking proceeding in response to the State's request. Issues involved in the Alaska rulemaking proceeding, namely the harmonizing of the FCC's policies of competition and rate integration for the Alaska market and the implementation of a permanent structure for that market, were referred to a Federal-State Joint Board ("Joint Board"), consisting of state utility commissioners and FCC commissioners. On May 17, 1993 the Joint Board issued a Tentative Recommendation and Order Inviting Comments. Comments were filed by the various parties, with the Company supporting this Tentative Recommendation. On October 26, 1993, the Joint Board made its Final Recommended Decision, rejecting the market structure plans previously advanced by Alascom and AT&T and, instead, recommended a market structure based on that set forth in the Tentative Recommendation. The Final Recommended Decision proposes to end the AT&T/Alascom Joint Services Arrangement ("JSA") on September 1, 1995, subject to the adoption and implementation of certain transition mechanisms. These include requiring AT&T to provide interstate MTS/WATS between Alaska and the other 49 states at integrated rates and under terms and conditions applicable to AT&T's services in the rest of the country. After the JSA is terminated, Alascom could offer interstate MTS/WATS independently from AT&T, under its own tariff and with no obligation to charge AT&T's integrated rates. During a four year transition, AT&T would be required to purchase services from Alascom to meet its MTS/WATS obligations. For the first one and one-half years AT&T would obtain 10 such services under the continued JSA. For the remaining two and one-half years, after the termination of the JSA, AT&T would be required to purchase a declining amount of service from Alascom, with this obligation declining to zero at the end of this second phase. Final FCC action on the Joint Board's Final Recommended Decision, took place on May 19, 1994, and is contained in its Memorandum Opinion and Order, released May 19, 1994. In the Memorandum Opinion and Order, the FCC adopted the provisions of the Final Recommended Decision and set the termination of the JSA to be effective January 1, 1996. AT&T/Alascom has filed an appeal of the Memorandum Opinion and Order. On October 17, 1994, Pacific Telecom, Inc. ("PTI") announced a definitive agreement to sell the stock of Alascom to AT&T, subject to certain conditions, including state and federal regulatory approvals. AT&T, PTI and Alascom filed for such approvals before the FCC and the APUC on December 15, 1994, alleging that the buyout would further the Joint Board objectives and fulfill the provisions of the FCC Order. The Company participated fully in both transfer proceedings. The buyout was approved, with conditions, by the APUC on March 31, 1995 and the FCC on August 2, 1995. In the normal course of the Company's operations, it is involved in legal and regulatory matters before the FCC and the APUC. While management does not anticipate abrupt changes in the competitive structure of the Alaska market, no assurances can be given that such changes will not occur and that such changes would not be materially adverse to the Company. Recent Developments The Company announced March 15, 1996 that it has signed letters of intent to acquire three Alaska cable companies that offer cable television service to more than 101,000 subscribers serving 74 percent of households throughout the state of Alaska. The Company intends to acquire Prime Cable of Alaska, Alaska Cablevision, Inc. of Kirkland, Washington and Alaskan Cable Network. Prime Cable operates the state's largest cable television system including stations in Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision owns and operates cable stations in Petersburg, Wrangell, Cordova, Valdez, Kodiak, Homer, Seward, Nome and Kotzebue, Alaska. Alaskan Cable Network operates stations in Fairbanks, Juneau, Ketchikan and Sitka, Alaska. This acquisition will allow the Company to integrate cable services to bring more information not only to more customers, but in a manner that is quicker, more efficient and more cost effective than ever before. The purchase will facilitate consolidation of the cable operations and will provide a platform for developing new customer products and services over the next several years. The total purchase price is $280.7 million. According to terms of the letters of intent, GCI will issue 16.3 million shares of Class A Common stock to the owners of the three cable companies valued at $105.7 million. The balance of the purchase will be provided by approximately $175 million of bank financing. Additional capital will be provided from the sale of 2 million shares of GCI's Class A Common Stock to MCI Telecommunications Corporation for $6.50 per share. Definitive agreements are expected to be finalized in April 1996 at which time GCI will apply to the APUC to transfer the licenses of the cable companies. Once all regulatory approvals are granted, the cable companies will be consolidated into a single organization owned by the Company. 11 Employees GCC and affiliated companies employ approximately 435 persons as of February 20, 1996 in operations, engineering, marketing, network services, customer and operator services, data processing, billing, accounting, and administration. GCC and affiliated companies are not parties to any union contracts with their employees. In general, relations with employees have been satisfactory. Environmental Regulations The Company and its subsidiaries may undertake activities which, under certain circumstances may affect the environment. Accordingly, they are subject to federal, state, and local regulations designed to preserve or protect the environment. The FCC, the Bureau of Land Management, the U.S. Forest Service, and the National Park Service are required by the National Environmental Policy Act of 1969 to consider the environmental impact prior to the commencement of facility construction. Management believes that compliance with such regulations has no material effect on the Company's consolidated operations. The principal effect of Company facilities on the environment would be in the form of construction of the facilities at various locations in Alaska. Company facilities have been constructed in accordance with federal, state, and local building codes and zoning regulations whenever and wherever applicable. Some of the facilities may be on lands which may be subject to state and federal wetland regulation. Uncertainty as to the applicability of environmental regulations is caused in major part by the federal government's decision to consider a change in the definition of wetlands, however, none of the Company's facilities has been constructed in areas which are subject to flooding, tsunami's, etc. and as such are most likely to fall outside any new wetland designation. Most of the Company's facilities are on lands leased by the Company, and, with respect to all of these facilities, the Company is unaware of any violations of lease terms or federal, state or local regulations pertaining to preservation or protection of the environment. Foreign and Domestic Operations and Export Sales Although the Company has several agreements to facilitate the origination and termination of international toll traffic, it has neither foreign operations nor export sales. The Company conducts operations throughout the western contiguous United States, Alaska and Hawaii and believes that any subdivision of its operations into distinct geographic areas would not be meaningful. Revenues associated with international toll traffic were $5,643,000, $4,427,000 and $3,734,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Backlog of Orders and Inventory As of December 31, 1995 and 1994, the Company's systems sales and service industry segment had a backlog of equipment sales orders of approximately $258,000 and $608,000, respectively. The decrease in backlog as of December 31, 1995 can be attributed primarily to faster completion of outstanding sales orders in 1995. The Company expects that all of the orders in backlog at the end of 1995 will be delivered during 1996. Patents, Trademarks and Licenses Neither GCI nor its affiliates hold patents, trademarks, franchises or concessions. The Communications Act of 1934 gives the FCC the authority to license and regulate the use of the electromagnetic spectrum for radio communication. The Company through its message and data transmission services industry segment holds licenses for its satellite and microwave transmission facilities for provision of its telecommunication services. The Company acquired a license for use of a 12 30 megahertz block of spectrum for provision of PCS services in Alaska. The Company's operations may require additional licenses in the future. Other GCC has filed FCC tariffs for its international service, interstate domestic services, and domestic operator services. Each tariff contains the rates and other contractual terms applicable to customers who purchase the services covered by the tariff. In accord with the FCC's deregulatory approach with respect to non-dominant carriers, tariffs and tariff revisions filed by such carriers routinely become effective without intervention by the FCC or third parties. The State of Alaska has the authority to regulate telecommunications that originate and terminate within the state. In 1990 the State legislature introduced intrastate competition in Alaska. Subsequently, the APUC developed regulations that allow for the certification of additional carriers for such intrastate telecommunications and, to varying degrees, requires filing of tariffs and regulation of the rates for such services. Under the APUC's current policy and regulations, all certified carriers are required to file tariffs for the provision of intrastate services. When filing for a rate increase, the dominant carrier is required to file an accompanying rate case. Non-dominant carriers are not rate regulated. Tariff revisions filed by non-dominant carriers routinely become effective without intervention by the APUC or third parties. Tariffs can be filed or revised on 30 days notice. On March 15, 1996 the Company filed a tariff with the APUC requesting approval for provision of local services based on the terms of the Telecommunications Act of 1996 which, in part, requires local exchange carriers to open up their networks and allow resale of their services. Once APUC approval is obtained, the Company intends to offer local services through its facilities or resale of local exchange carrier facilities. No material portion of the businesses of the Company is subject to renegotiation of profits or termination of contracts at the election of the federal government. Item 2. PROPERTIES The Company leases its message and data transmission services industry segment's executive, corporate and administrative facilities in Anchorage, Fairbanks and Juneau, Alaska. GCC owns a 49 percent interest in an earth station located on Adak Island in Alaska. GCC's message and data transmission services segment owns properties and facilities including satellite earth stations, and distribution, transportation and office equipment. Additionally, GCC acquired in December 1992, access to capacity on an undersea fiber optic cable from Seward, Alaska to Pacific City, Oregon. The Company's systems sales and service industry segment occupies space in the buildings housing its executive offices and operating facilities in Anchorage, Fairbanks and Juneau, Alaska, and Seattle, Washington. Facilities in Fairbanks and Juneau, Alaska, and Seattle, Washington are occupied under short-term operating lease agreements. The Anchorage property is leased pursuant to a 15 year capital lease agreement. The undersea fiber optic cable capacity is owned subject to an outstanding mortgage. Substantially all of the Company's properties secure its senior credit agreement. See Note 5 to the Consolidated Financial Statements in Item 8 for further discussion. The two wideband transponders the Company owned reached the end of their expected useful life in August, 1994, at which time the Company leased temporary replacement capacity. The Company leased replacement transponder capacity subsequent to a transition period utilizing four C band 13 transponders on AT&T's Telstar 303 satellite. The lease expires June 1996. The Company entered into a purchase and lease-purchase option agreement in August 1995 for the acquisition of satellite transponders to meet its long-term satellite capacity requirements. The agreement provides for interim the interim lease of transponder capacity from June 1996 through the delivery of the purchased transponders as early as the fourth quarter of 1997. The amount of the down payment required in 1996 and the balance payable upon delivery of the transponders are dependent upon a number of factors including the number of transponders required and the timing of their delivery and acquisition. The Company does not expect the down payment to exceed $10.1 million and the remaining balance payable coinciding with a staged delivery to exceed $46 million. The Company amended its existing senior credit facility and provided a letter of credit to accommodate the payment in 1996 and expects to further amend or refinance its credit agreement to fund its remaining commitment. The Company's operating, executive, corporate and administrative properties are in good condition. The Company considers its properties suitable and adequate for its present needs and are being fully utilized. Item 3. LEGAL PROCEEDINGS Neither the Company or any if its subsidiaries is a party to any material pending legal proceedings. Neither the Company's property nor that of any if its subsidiaries is subject to any material pending legal proceedings. The Company and its subsidiaries are a party to various claims and pending litigation as part of the normal course of business. In the opinion of management, the disposition of these matters is not expected to have a material adverse effect on the Company's financial statements. Neither the Company's property nor that of any if its subsidiaries is subject to any material pending legal proceedings. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of stockholders of the Company during the fourth quarter of 1995. 14 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information for Common Stock Shares of the Company's Class A common stock are traded on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol GNCMA. Shares of the Company's Class B common stock are traded on the Over-the-Counter market. The Company's Class B common stock is convertible into the Company's Class A common stock. The following table sets forth the high and low sales price for the above-mentioned common stock for the periods indicated. The prices, rounded up to the nearest eighth, represent prices between dealers, do not include retail markups, markdowns, or commissions, and do not necessarily represent actual transactions.
Class A Class B ----------------------------------- ----------------------------------- High Low High Low ---- --- ---- --- 1994: First Quarter 5 7/8 4 1/8 5 7/8 4 1/8 Second Quarter 4 5/8 3 1/8 4 5/8 3 1/8 Third Quarter 5 3 1/2 5 3 1/2 Fourth Quarter 5 4 1/8 5 4 1/8 1995: First Quarter 4 5/8 3 3/4 4 5/8 3 3/4 Second Quarter 4 1/4 3 7/8 4 1/4 3 7/8 Third Quarter 4 1/8 3 1/4 4 1/8 3 1/4 Fourth Quarter 5 1/8 3 3/4 5 1/8 3 3/4
Holders As of March 5, 1996 there were approximately 1,830 holders of record of the Company's Class A common stock and approximately 750 holders of record of the Company's Class B common stock (amounts do not include the number of shareholders whose shares are held of record by brokers, but do include the brokerage house as one shareholder). Dividends The Company has never paid cash dividends on its Class A or Class B common stock and has no present intention of doing so. Payment of cash dividends in the future, if any, will be determined by the Company's Board of Directors in light of the Company's earnings, financial condition and other relevant considerations. GCC's existing bank loan agreements contain provisions that prohibit payment of dividends, other than stock dividends (see note 5(a) to the financial statements included in Part II of this Report). 15 Item 6. SELECTED FINANCIAL DATA The following table presents selected historical information relating to financial condition and results of operations over the past five years.
Years ended December 31, ------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (Amounts in thousands except per share amounts) Revenues $129,279 116,981 102,213 96,499 75,522 Net earnings (loss) before income taxes $12,601 11,681 6,715 1,524 (1,422) Net earnings (loss) $7,502 7,134 3,951 890 (1,092) Earnings (loss) per share $0.31 0.30 0.17 0.02 (0.12) Total assets $84,765 74,249 71,610 72,351 70,167 Long-term debt, including current portion 1 $9,980 12,554 20,823 37,235 24,850 Obligations under capital leases, including current portion 2 $1,047 1,297 1,522 1,720 10,975 Preferred stock 3 $0 0 0 3,282 3,282 Total stockholders' equity 4 $43,016 35,093 27,210 14,870 13,554 Dividends declared per Common share 5 $0.00 0.00 0.00 0.00 0.00 Dividends declared per Preferred share 6 $0.00 0.00 0.44 1.78 1.69 1 The Company exercised the purchase option described in footnote (2) below in December 1992 to acquire capacity on a fiber optic undersea cable from Seward, Alaska to Pacific City, Oregon. Long term debt associated with this purchase is recorded in long-term debt and current portion of long-term debt in the Consolidated Financial Statements included in Part II of this Report. 2 The Company entered into a capital lease agreement in May 1991 for access to capacity on an undersea fiber optic cable from Seward, Alaska to Pacific City, Oregon. The lease term was ten years with monthly payments including maintenance of approximately $230,000 per month commencing August 22, 1991, the date the fiber optic cable became operational. The Company had an option expiring December 31, 1992 to purchase the leased capacity for $10.12 million, less the prior six month's lease payments, excluding maintenance. The lease was capitalized in 1991 at the underlying asset's fair market value and the related obligation was recorded in the Company's Consolidated Financial Statements. 3 In January, 1991, the Company sold 347,047 shares of non-voting Series A 15% Convertible Cumulative Preferred Stock to WestMarc Communications, Inc. for $9.5088 per share. The preferred stock accrued dividends on each share in cash or stock at the Company's discretion. The accrued dividends were payable semi-annually at the rate of 15% per annum if paid in cash or at the rate of 18.75% if paid in Class B Common Stock. Pursuant to an agreement with WestMarc Communications, Inc. the Company acquired and retired the preferred stock in 1993. 4 The 1993 increase in stockholders' equity is primarily attributed to the Company's issuance of common stock to MCI. 5 The Company has never paid a cash dividend on its common stock and does not anticipate paying any dividends in the foreseeable future. The Company intends to retain its earnings, if any, for the development of its business. Payment of cash dividends in the future, if any, will be determined by the board of directors of the Company in light of the Company's earnings, financial condition, credit agreements and other relevant considerations. The Company's existing bank loan agreements contain provisions that prohibit payment of dividends, other than stock dividends, as further described in Note (5)(a) to the financial statements included in Part II of this Report. 6 The Company declared and issued stock dividends of approximately 304,000 and 286,000 shares of Class B Common Stock in 1992 and 1991, respectively, and paid dividends totaling $153,000 in 1993 on its non-voting Series A 15% Convertible Cumulative Preferred Stock.
16 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Year ended December 31, 1995 ("1995"), compared with year ended December 31, 1994 ("1994"), compared with year ended December 31, 1993 ("1993"). The Company's liquidity (ability to generate adequate amounts of cash to meet the Company's need for cash) was affected by a net increase in the Company's cash and cash equivalents of $2.4 million from 1994 to 1995. Sources of cash in 1995 included the Company's operating activities which generated positive cash flow of $14.3 million net of changes in the components of working capital, proceeds from the sale of investment securities held for sale totaling $832,000, repayments of notes receivable totaling $184,000, and proceeds from the issuance of common stock of $82,000. Uses of cash during 1995 included repayment of $2.8 million of long-term borrowings and capital lease obligations, investment of $8.9 million in distribution and support equipment, and payment of the final installment for a PCS spectrum license totaling approximately $521,000. Net receivables increased $4.8 million from 1994 to 1995 resulting from increased sales and receipt of a payment from a major customer in January 1996, beyond the cutoff date for recording in the current year. Payments of approximately $1.9 million of accrued payroll and payroll related obligations resulted in reduced balances at 1995 as compared to 1994. Working capital totaled $5.1 million and $1.8 million at December 31, 1995 and 1994, respectively. Working capital generated by operations exceeded expenditures for property, equipment and other assets, repayment of long-term borrowings and capital lease obligations, and the additional investment in the PCS license resulting in the $3.3 million increase at December 31, 1995 as compared to 1994. Cash flow from operating activities, as depicted in the Consolidated Statements of Cash Flows, decreased $4.2 million in 1995 as compared 1994. Cash flow generated from operating activities was reduced by payment of current obligations. Cash flow from operating activities increased $6.8 million during 1994 as compared to 1993 primarily as a result of revenue growth and decreased distribution costs as a percentage of revenues as further described below. The Company's expenditures and other additions to property and equipment totaled $8.9 million, $10.6 million, and $5.7 million during 1995, 1994 and 1993, respectively. Management's capital expenditures plan for 1996 includes approximately $30 to $50 million in capital necessary to pursue strategic initiatives, to maintain the network and to enhance transmission capacity to meet projected traffic demands. The two wideband transponders the Company owned reached the end of their expected useful life in August, 1994, at which time the Company leased replacement capacity. The cost of the leased capacity contributed to an increase in distribution costs during 1995 as compared to 1994. The existing leased capacity is expected to meet the Company's requirements until such time that capacity is available pursuant to the terms of a new long-term agreement described below. The Company entered into a purchase and lease-purchase option agreement in August 1995 for the acquisition of satellite transponders to meet its long-term satellite capacity requirements. The amount of the down payment required in 1996 and the balance payable upon delivery of the transponders as early as the fourth quarter of 1997 are dependent upon a number of factors including the number of transponders required and the timing of their delivery and acquisition. The Company 17 does not expect the down payment to exceed $10.1 million and the remaining balance payable coinciding with a staged delivery to exceed $46 million. The Company amended its existing senior credit facility to provide a letter of credit to accommodate the required down payment in 1996 and expects to further amend or refinance its credit agreement to fund its remaining commitment. The Company continues to evaluate the most effective means to integrate its telecommunications network with that of MCI. Such integration will require capital expenditures by the Company in an amount yet to be determined. Any investment in such capital expenditures is expected to be recovered by increased revenues from expanded service offerings and reductions in costs resulting from integration of the networks. The FCC concluded an auction of spectrum to be used for the provision of PCS in March, 1995. The Company was named by the FCC as the high bidder for one of the two 30 megahertz blocks of spectrum, with Alaska statewide coverage. Acquisition of the license for a cost of $1.65 million will allow GCI to introduce new PCS services in Alaska. The Company began developing plans for PCS deployment in 1995 with limited technology service trials planned for 1996 and service to be offered as early as 1997 or 1998. Expenditures for PCS deployment could total $50 to $100 million over the next 10 year period. The estimated cost for PCS deployment is expected to be funded through income from operations and additional debt and perhaps, equity financing. The Company expects to arrange additional debt financing capacity in 1996. The Company's ability to deploy PCS services will be dependent on its available resources. Expenditures of approximately $2.5 million were made in 1994 developing new DAMA satellite communication technology. A four-module demonstration system was constructed in 1994 and was integrated into the Company's telecommunication network in 1995. Existing satellite technology relies on fixed channel assignments to a central hub. DAMA technology assigns satellite capacity on an as needed basis. The digital DAMA system allows calls to be made between remote villages using only one satellite hop thereby reducing satellite delay and capacity requirements while improving quality. The Company obtained the necessary APUC and FCC approvals waiving current prohibitions against construction of competitive facilities in rural Alaska, allowing for deployment of DAMA technology in 56 sites in rural Alaska on a demonstration basis. Construction and deployment will occur in 1996, with services expected to be provided during the fourth quarter of 1996. Construction and deployment costs are expected to total $18 to $20 million, and are expected to be funded through a combination of cash generated from operations and bank financing. The Company announced March 15, 1996 that it has signed letters of intent to acquire three Alaska cable companies that offer cable television service to more than 101,000 subscribers serving 74 percent of households throughout the state of Alaska. The Company intends to acquire Prime Cable of Alaska, Alaska Cablevision, Inc. of Kirkland, Washington and Alaskan Cable Network. Prime Cable operates the state's largest cable television system including stations in Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision owns and operates cable stations in Petersburg, Wrangell, Cordova, Valdez, Kodiak, Homer, Seward, Nome and Kotzebue, Alaska. Alaskan Cable Network operates stations in Fairbanks, Juneau, Ketchikan and Sitka, Alaska. This acquisition will allow the Company to integrate cable services to bring more information not only to more customers, but in a manner that is quicker, more efficient and more cost effective than ever before. The purchase will facilitate consolidation of the cable operations and will provide a platform for developing new customer products and services over the next several years. The total purchase price is $280.7 million. According to terms of the agreements, GCI will issue 16.3 million shares of Class A Common stock to the owners of the three cable companies valued at $105.7 million. The balance of the purchase will be provided by approximately $175 million of bank financing. Additional capital will be provided from the sale of 2 million shares of GCI's Class A Common Stock to MCI Telecommunications Corporation for $6.50 per share. 18 Definitive agreements are expected to be executed in April 1996 at which time GCI will apply to the APUC to transfer the licenses of the cable companies. Once all regulatory approvals are granted, the cable companies will be consolidated into a single organization owned by the Company. Management expects that cash flow generated by the Company will be sufficient to meet no less than the minimum required for maintenance level capital expenditures and scheduled debt repayment. The Company's ability to invest in discretionary capital and other projects will depend upon its future cash flows and access to additional debt and/or equity financing. Results of Operations Year ended December 31, 1995 ("1995"), compared with year ended December 31, 1994 ("1994"), compared with year ended December 31, 1993 ("1993"). The Company's message data and transmission services industry segment provides interstate and intrastate long distance telephone service to all communities within the state of Alaska through use of its facilities and interconnect agreements with other carriers. The Company's average rate per minute for message transmission during 1995, 1994, and 1993 was 19.1(cent), 18.6(cent), and 18.2(cent), respectively. Total revenues for 1995 were $129.3 million, an approximate 10.5 percent increase over 1994 revenues of $117.0 million, which revenues increased 14.4 percent over 1993 revenues of $102.2 million. Revenue growth is attributed to the increase in the average rate per minute and to four fundamental factors, as follows: (1) Growth in interstate telecommunication services which resulted in billable minutes of traffic carried totaling 465, 415 and 365 million minutes in 1995, 1994 and 1993, respectively, or 83.2, 83.9 and 83.9 percent of total 1995, 1994 and 1993 minutes, respectively. (2) Provision of intrastate telecommunication services which resulted in billable minutes of traffic carried totaling 93.4, 79.6 and 70.1 million minutes in 1995, 1994 and 1993, respectively, or 16.8, 16.1, and 16.1 percent of total 1995, 1994 and 1993 minutes, respectively. (3) Increases in revenues derived from other common carriers ("OCC") including MCI and Sprint. OCC traffic accounted for $38.8 million or 30.0 percent, $31.9 million or 27.3 percent, $26.2 million or 25.6 percent of total revenues in 1995, 1994 and 1993, respectively. Both MCI and Sprint are major customers of the Company. Loss of one or both of these customers would have a significant detrimental effect on revenues and on contribution. There are no other individual customers, the loss of which would have a material impact on the Company's revenues or gross profit. (4) Increased revenues associated with private line and private network transmission services, which increased 8 percent in 1995 as compared to 1994, increased 6 percent in 1994 as compared to 1993, and increased 8 percent in 1993 as compared to 1992. System sales and service revenues totaled $7.2 million, $9.1 million and $8.3 million in 1995, 1994 and 1993, respectively. The decrease in system sales and service revenues is attributed to fewer larger dollar equipment sales orders received during 1995 as compared to 1994 as well as a reduction of the company's outsourcing services provided to the oil field services industry. Transmission access and distribution costs, which represent cost of sales for transmission services, amounted to approximately 56.5 percent, 55.4 percent, 58.9 percent of transmission revenues during 1995, 1994 and 1993, respectively. The increase in distribution costs as a percentage of transmission revenues for 1995 as compared to 1994 results primarily from increases in costs associated with the Company's lease of transponder capacity as previously described. The decrease in distribution costs as a percentage of transmission revenues during 1994 as compared to 1993 results from proportionate increases in revenues as compared to costs and decreases in access tariff charges commencing July 1993, offset by increases in costs associated with the Company's lease of 19 replacement transponder capacity as previously described. Changes in distribution costs as a percentage of revenues will occur as the Company's traffic mix changes. The Company is unable to predict if or when access charge rates will change in the future and the impact of such changes on the Company's distribution costs. Sales and service cost of sales as a percentage of sales and service revenues amounted to approximately 73.3 percent, 70.4 percent and 65.7 percent during 1995, 1994 and 1993, respectively. Increases in cost of sales as a percentage of sales and service revenues result from reduced margins associated with equipment sales and service contracts. Contribution increased 5.3 percent during 1995 as compared to 1994, and increased 22.5 percent during 1994 as compared to 1993. Increases in distribution costs associated with the Company's lease of transponder capacity as previously described reduced the rate of growth in 1995 contribution as compared to 1994. Proportionate decreases in distribution costs during 1994 as compared to 1993 coupled with proportionate increases in revenues during the same period resulted in the 1994 increase. Total operating costs and expenses increased 5.7 percent during 1995 as compared to the same period in 1994, and increased 16.5 percent during 1994 as compared to the same period in 1993. 1995 and 1994 increases in operating and engineering, service, sales and communications, and general and administrative costs were necessary to support the Company's expansion efforts and the increase in minutes of traffic carried. During 1995 the Company incurred approximately $450,000 for what is expected to be nonrecurring costs related to breaks in the undersea fiber optic cable and promotion of its new DAMA technology. Additional costs were incurred during the fourth quarter of 1995 attributed to the promotion of the Company's calling plans. Significant marketing, telemarketing, and promotional expenditures were incurred in 1994 to promote the Company's introduction of new services and programs resulting from its strategic alliance with MCI, including MCI's Friend's and Family calling plan, 1-800-COLLECT, PhoneCash prepaid calling cards, and an Amway distributor resale program. Additional general and administrative costs were incurred in 1994 resulting from the Company's performance based bonus and incentive compensation plans which are funded from incremental operating cash flow. Increases in 1994 expenses were offset in part by reductions in bad debt and depreciation and amortization costs. In general, the Company has dedicated additional resources in certain areas to pursue longer term opportunities. It must balance the desire to pursue such opportunities with the need to continue to improve current performance. Continuing legal and regulatory costs are, in large part, associated with regulatory matters involving the FCC, the APUC, and the Alaska Legislature. Interest expense decreased 25.5 percent during 1995 as compared to 1994 and decreased 31.7 percent during 1994 as compared to 1993. The decreases in interest expense result primarily from reduction in the Company's outstanding indebtedness. Income tax expense totaled $5,099,000, $4,547,000 and $2,764,000 in 1995, 1994 and 1993, respectively, resulting from the application of statutory income tax rates to net earnings before income taxes The Company has capital loss carryovers totaling approximately $56,000 which expire in 1997. Tax benefits associated with recorded deferred tax assets, net of valuation allowances, are considered to be more likely than not realizable through taxable income earned in carryback years, future reversals of existing taxable temporary differences, and future taxable income exclusive of reversing temporary differences and carryforwards. The Alaska economy is supported in large part by the oil and gas industry. ARCO announced a 715 person downsizing in July 1994. Similar downsizing was announced in 1994 by other companies operating in the oil and gas industry in Alaska for 1995. 20 The Alaska economy is also supported by the United States armed services and the United States Coast Guard which maintain bases in Anchorage, Fairbanks, Adak, Kodiak, and other communities in Alaska. The military presence in the state of Alaska provides a significant source of revenues to the economy of the state. The Company provides message telephone services in a variety of ways to the United States government and its armed forces personnel. The Company provides private lines for secured point-to-point data and voice transmission services and long distance services individually to military personnel. A reduction in federal military spending or closure of a major facility in Alaska would have a substantial adverse impact on the state and would both directly and indirectly affect the Company. A reduction in the number of military personnel served by the Company and a reduction in the number of private lines required by the armed forces would have a direct effect on revenues. Indirect effects would include a reduction of services provided across the state in support of the military community and as a result, a reduction in the number of customers served by the Company and volume of traffic carried. On July 13, 1995, the president approved and Congress subsequently accepted the independent Defense Base Closure and Realignment Commission report to close 79 military bases and downsize 26 others. The commission estimates its list would save $19.3 billion over 20 years, at a cost nationwide of 43,742 military and civilian jobs and 49,823 indirect jobs. Since its first round of action in 1991, the Defense Base Closure and Realignment Commission has claimed more than $5 billion in savings by closing or realigning military bases. The following military installations located in Alaska were recommended for closure or realignment in the 1995 report: Fort Greely (realign, estimated loss of 438 military and 286 civilian jobs), Fort Wainwright (realign, estimated gain of 205 military and 56 civilian jobs), NAF Adak (closure, estimated loss of 540 military and 138 civilian jobs). The loss of jobs and associated revenues attributed to oil and gas industry and military workforce reductions is not expected to have a material effect on the Company's operations. No assurance can be given that funding for existing military installations in Alaska will not be adversely affected by reprioritization of needs for military installations or federal budget cuts in the future. In October 1994, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instrument" ("SFAS No. 119"). SFAS No. 119 requires disclosures regarding amount, nature and terms of derivative financial instruments, for instance futures, forward, swap and option contracts and other instruments with similar characteristics. The Company anticipates that the adoption of SFAS No. 119 in 1996 will not have a material effect on its consolidated financial statements. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121"). This statement sets forth new standards for determining when long-lived assets are impaired and requires such impaired assets to be written down to fair value. The Company anticipates that the adoption of SFAS No. 121 in 1996 will not have a material effect on its consolidated financial statements. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. Those plans include all arrangements by which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to employees in amounts based on the price of the employer's stock. This statement also applies to transactions in 21 which an entity issues its equity instruments to acquire goods or services from nonemployees. The Company anticipates that the adoption of SFAS No. 123 in 1996 will not have a material effect on its consolidated financial statements. The Company generally has experienced increased costs in recent years due to the effect of inflation on the cost of labor, material and supplies, and plant and equipment. A portion of the increased labor and material and supplies costs directly affects income through increased maintenance and operating costs. The cumulative impact of inflation over a number of years has resulted in higher depreciation expense and increased costs for current replacement of productive facilities. However, operating efficiencies have partially offset this impact, as have price increases, although the latter have generally not been adequate to cover increased costs due to inflation. Competition and other market factors limit the Company's ability to price services and products based upon inflation's effect on costs. Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company are filed under this Item, beginning on Page 23. The financial statement schedules required under Regulation S-X are filed pursuant to Item 14 of this Report. 22 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors and Stockholders General Communication, Inc.: We have audited the accompanying consolidated balance sheets of General Communication, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of General Communication, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. /s/KPMG PEAT MARWICK LLP Anchorage, Alaska March 15, 1996 23 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1995 and 1994
ASSETS 1995 1994 --------------------------------------- ---- ---- (Amounts in thousands) Current assets: Cash and cash equivalents ........................................................................... $ 4,017 1,649 ------- ------ Receivables: Trade ....................................................................................... 21,737 17,036 Other ....................................................................................... 253 221 ------- ------ 21,990 17,257 Less allowance for doubtful receivables ............................................................. 295 409 ------- ------ Net receivables ............................................................................. 21,695 16,848 ------- ------ Prepaid and other current assets .................................................................... 1,566 1,344 Deferred income taxes, net (note 6) ................................................................. 746 884 Inventory ........................................................................................... 991 674 Notes receivable (note 3) ........................................................................... 167 200 ------- ------ Total current assets ........................................................................ 29,182 21,599 ------- ------ Property and equipment, at cost (notes 5, 8 and 9) Land ................................................................................................ 73 73 Distribution systems ................................................................................ 67,434 63,272 Support equipment ................................................................................... 11,610 10,223 Property and equipment under capital leases ......................................................... 2,030 2,030 ------- ------ 81,147 75,598 Less amortization and accumulated depreciation ...................................................... 33,789 28,085 ------- ------ Net property and equipment in service ....................................................... 47,358 47,513 Construction in progress ............................................................................ 3,096 -- ------- ------ Net property and equipment .................................................................. 50,454 47,513 Notes receivable (note 3) ............................................................................. 904 767 Investment securities available for sale (note 4) ..................................................... -- 785 Other assets, at cost, net of amortization ............................................................ 4,225 3,585 ------- ------ Total assets ................................................................................ $ 84,765 74,249 ======= ======
See accompanying notes to consolidated financial statements. 24 (Continued) GENERAL COMMUNICATION, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 --------------------------------------------------- ---- ---- (Amounts in thousands) Current liabilities: Current maturities of long-term debt (note 5) ....................................................... $ 1,689 1,585 Current maturities of obligations under capital leases (note 9) .......................................................................... 282 249 Accounts payable .................................................................................... 16,861 11,841 Accrued payroll and payroll related obligations ..................................................... 2,108 4,036 Accrued liabilities ................................................................................. 1,134 711 Accrued income taxes (note 6) ....................................................................... 547 217 Accrued interest .................................................................................... 132 101 Deferred revenues ................................................................................... 1,317 1,097 -------- ------ Total current liabilities ................................................................... 24,070 19,837 Long-term debt, excluding current maturities (note 5) ................................................. 8,291 10,969 Obligations under capital leases, excluding current maturities (note 9) ........................................................................ 26 257 Obligations under capital leases due to related parties, excluding current maturities (note 9) .............................................................. 739 791 Deferred income taxes, net (note 6) ................................................................... 7,004 6,522 Other liabilities ..................................................................................... 1,619 780 -------- ------ Total liabilities ........................................................................... 41,749 39,156 -------- ------ Stockholders' equity (notes 2, 6 and 7): Common stock (no par): Class A. Authorized 50,000,000 shares; issued and outstanding 19,680,199 and 19,616,614 shares at December 31, 1995 and 1994, respectively ....................................................................... 13,912 13,830 Class B. Authorized 10,000,000 shares; issued and outstanding 4,175,434 and 4,179,019 shares at December 31, 1995 and 1994, respectively ....................................................................... 3,432 3,432 Less cost of 122,611 and 105,111 Class A common shares held in treasury at December 31, 1995 and 1994, respectively ........................................................................... (389) (328) Paid-in capital ..................................................................................... 4,041 3,641 Retained earnings ................................................................................... 22,020 14,518 -------- ------ Total stockholders' equity .................................................................. 43,016 35,093 -------- ------ Commitments, contingencies and subsequent event (notes 9, 11 and 12) Total liabilities and stockholders' equity .................................................. $ 84,765 74,249 ======== ======
See accompanying notes to consolidated financial statements 25 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 1995, 1994 and 1993
1995 1994 1993 ---- ---- ---- (Amounts in thousands except per share amounts) Revenues (note 8): Transmission services ..................................................................... $ 120,005 105,789 91,838 Systems sales and service ................................................................. 7,193 9,138 8,299 Other ..................................................................................... 2,081 2,054 2,076 -------- ------- ------- Total revenues ..................................................................... 129,279 116,981 102,213 Cost of sales ............................................................................... 70,221 60,896 56,437 -------- ------- ------- Contribution ....................................................................... 59,058 56,085 45,776 -------- ------- ------- Operating costs and expenses: Operating and engineering ................................................................ 9,182 7,607 5,588 Service .................................................................................. 2,793 4,751 3,798 Sales and communications ................................................................. 9,865 7,040 4,992 General and administrative ............................................................... 14,492 14,788 13,037 Legal and regulatory ..................................................................... 1,540 1,334 1,372 Bad debt ................................................................................. 1,459 829 1,207 Depreciation and amortization ............................................................ 6,223 6,739 6,978 -------- ------- ------- Total operating costs and expenses ................................................. 45,554 43,088 36,972 -------- ------- ------- Operating income (note 8) .......................................................... 13,504 12,997 8,804 -------- ------- ------- Other income (expense): Interest expense (notes 2 and 5) ......................................................... (1,146) (1,539) (2,254) Interest income .......................................................................... 243 223 165 -------- ------- ------- Total other income (expense) ....................................................... (903) (1,316) (2,089) -------- ------- ------- Earnings before income taxes ........................................................ 12,601 11,681 6,715 Income tax expense (notes 2 and 6) .......................................................... (5,099) (4,547) (2,764) -------- ------- ------- Net earnings ........................................................................ $ 7,502 7,134 3,951 ========= ======== ======== Net earnings per common share ...................................................... $ .31 .30 .17 ========= ======== ========
See accompanying notes to consolidated financial statements. 26 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Years ended December 31, 1995, 1994 and 1993
Shares of Class A Class B Class A Common Stock Preferred Common Common Shares Held Paid-in Retained Class A Class B Stock Stock Stock in Treasury Capital Earnings (Amounts in thousands) (Amounts in thousands) Balances at December 31, 1992 ......................... 12,639 2,853 $3,282 2,430 1,210 (328) 4,690 3,586 Net earnings .......................................... -- -- -- -- -- -- -- 3,951 Class B shares converted to Class A ................... 15 (15) -- -- -- -- -- -- Tax effect of excess stock compensation expense for tax purposes over amounts recognized for financial reporting purposes ......... -- -- -- -- -- 514 -- -- Retirement of shares .................................. (562) (3,282) (359) -- -- (1,987) -- Preferred stock dividend paid ......................... -- -- -- -- -- -- -- (153) Shares issued under stock option plan ................. 118 -- -- 124 -- -- -- -- Shares issued and issuable under officer stock option agreements .................... 539 -- -- 385 -- -- 35 -- Shares issued, net of associated costs ................ 6,252 1,276 -- 10,890 2,222 -- -- -- ------ ----- ----- ------ ----- ------ ----- ------ Balances at December 31, 1993 ......................... 19,001 4,114 -- 13,470 3,432 (328) 3,252 7,384 Net earnings .......................................... -- -- -- -- -- -- -- 7,134 Class B shares converted to Class A ................... 9 (9) -- -- -- -- -- -- Tax effect of excess stock compensation expense for tax purposes over amounts recognized for financial reporting purposes ......... -- -- -- -- -- 371 -- -- Shares issued under stock option plan ................. 37 -- -- 96 -- -- -- -- Shares issued under warrant agreement, net ............ 254 -- -- 185 -- -- -- -- Shares issued and issuable under officer stock option agreements ..................... 316 74 -- 79 -- -- 18 -- ------ ----- ----- ------ ----- ------ ----- ------ Balances at December 31, 1994 ......................... 19,617 4,179 $ -- 13,830 3,432 (328) 3,641 14,518 Net earnings .......................................... -- -- -- -- -- -- -- 7,502 Class B shares converted to Class A ................... 3 (3) -- -- -- -- -- -- Tax effect of excess stock compensation expense for tax purposes over amounts recognized for financial reporting purposes ......... -- -- -- -- -- 397 -- -- Shares purchased and held in Treasury ................. -- -- -- -- -- (61) -- -- Shares issued under stock option plan ................. 40 -- -- 82 -- -- -- -- Shares issued and issuable under officer stock option agreements ..................... 20 -- -- -- -- -- 3 -- ------ ----- ----- ------ ----- ------ ----- ------ Balances at December 31, 1995 ......................... 19,680 4,176 $ -- 13,912 3,432 (389) 4,041 22,020 ====== ===== ===== ====== ===== ======= ====== =======
See accompanying notes to consolidated financial statements. 27 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1995, 1994 and 1993
1995 1994 1993 ---- ---- ---- (Amounts in thousands) Cash flows from operating activities: Net earnings ......................................... $ 7,502 7,134 3,951 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization .................. 6,223 6,739 6,978 Deferred income tax expense .................... 1,017 1,588 1,136 Deferred compensation and compensatory stock options ................................ 433 343 183 Disposals of property and equipment ............ 170 -- -- Bad debt expense, net of write-offs ............ (114) (312) 46 Other noncash income and expense items ......... 354 (36) 7 Change in operating assets and liabilities (note 2) ............................... (1,307) 3,063 (591) -------- ------- ------ Net cash provided by operating activities ...... 14,278 18,519 11,710 -------- ------- ------ Cash flows from investing activities: Purchases of property and equipment ................... (8,938) (10,604) (5,744) Cash received from disposal of property and equipment . -- -- 105 Purchases of other assets including long-term deposits (934) (1,110) (303) Proceeds from the sale of available for sale security 832 -- -- Notes receivable issued .............................. (251) (339) (602) Payments received on notes receivable ................ 184 10 964 Restricted cash investments .......................... -- 684 2,268 -------- ------- ------ Net cash used in investing activities .......... (9,107) (11,359) (3,312) -------- ------- ------ Cash flows from financing activities: Long-term borrowings ................................. -- -- 10,000 Repayments of long-term borrowings and capital lease obligations .......................... (2,824) (8,494) (26,610) Proceeds from common stock issuance .................. 82 360 13,641 Purchase of treasury stock ........................... (61) -- -- Disbursements to retire common and preferred stock ................................... -- -- (5,627) Dividends paid on preferred stock .................... -- -- (153) -------- ------- ------ Net cash used by financing activities .......... (2,803) (8,134) (8,749) -------- ------- ------ Net increase (decrease) in cash and cash equivalents . 2,368 (974) (351) Cash and cash equivalents at beginning of year ......... 1,649 2,623 2,974 -------- ------- ------ Cash and cash equivalents at end of year ............... $ 4,017 1,649 2,623 ======== ======= ======
See accompanying notes to consolidated financial statements. 28 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (l) Summary of Significant Accounting Principles (a) General General Communication, Inc. ("GCI"), an Alaska corporation, was incorporated in 1979. GCI Communication Corp. ("GCC") , an Alaska corporation, is a wholly owned subsidiary of GCI and was incorporated in 1990. GCI Network Systems, Inc. ("Network Systems"), formerly Transalaska Network Systems, Inc., an Alaska corporation, was a wholly-owned subsidiary of GCC and was incorporated in 1988. Effective December 31, 1993 Network Systems operations were merged into GCC. Both GCC and Network Systems operations continue to be provided by the surviving corporation, GCC, subsequent to the merger. GCI Communication Services, Inc. ("Communication Services"), an Alaska corporation, is a wholly-owned subsidiary of GCI and was incorporated in 1992. GCI Leasing Co., Inc. ("Leasing Company"), an Alaska corporation, is a wholly-owned subsidiary of Communication Services and was incorporated in 1992. GCI and GCC are engaged in the transmission of interstate and intrastate private line and switched message long distance telephone service between Anchorage, Fairbanks, Juneau, and other communities in Alaska and the remaining United States and foreign countries. GCC also provides northbound services to certain common carriers terminating traffic in Alaska and sells and services dedicated communications systems and related equipment. Communication Services provides private network point-to-point data and voice transmission services between Alaska, Hawaii and the western contiguous United States. Leasing Company owns and leases capacity on an undersea fiber optic cable used in the transmission of interstate private line and switched message long distance services between Alaska and the remaining United States and foreign countries. (b) Principles of Consolidation The consolidated financial statements include the accounts of GCI, its wholly-owned subsidiaries GCC and Communication Services, and Communication Services wholly owned subsidiary Leasing Company. All significant intercompany balances and transactions have been eliminated in consolidation. (c) Net Earnings Per Common Share Primary earnings per common share are determined by dividing net earnings (after deducting preferred stock dividends of $153,000 in 1993) by the weighted number of common and common equivalent shares outstanding:
1995 1994 1993 ---- ---- ---- (in thousands) Weighted average common shares outstanding 23,723 23,199 21,085 Common equivalent shares outstanding 703 884 1,243 ------ ------ ------ 24,426 24,083 22,328 ====== ====== ======
The difference between shares for primary and fully diluted earnings per share was not significant in any period presented. 29 (Continued) (d) Cash and Cash Equivalents Cash equivalents consist of short-term, highly liquid investments which are readily convertible into cash. (e) Inventory Inventory of merchandise for resale and parts is stated at the lower of cost or market. Cost is determined using the first-in, first-out method for parts and the specific identification method for equipment held for resale. (f) Property and Equipment Property and equipment is stated at cost. Construction costs of transmission facilities are capitalized. Equipment financed under capital leases is recorded at the lower of fair market value or the present value of future minimum lease payments. Construction in progress represents distribution systems and support equipment not placed in service at December 31, 1995; management intends to place this equipment in service during 1996. Depreciation and amortization is computed on a straight-line basis based upon the shorter of the lease term or the estimated useful lives of the assets ranging from 3 to 20 years for distribution systems and 5 to 10 years for support equipment. Amortization of equipment financed under capitalized leases is included in depreciation expense. Repairs and maintenance are charged to operations, and renewals and additions are capitalized. Gains or losses are recognized at the time of ordinary retirements, sales or other dispositions of property. (g) Marketable Securities Effective January 1, 1994, GCI and subsidiaries ("the Company") adopted Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"), Accounting for Certain Investments in Debt and Equity Securities. Under SFAS No. 115, securities when purchased, are classified in either the trading account securities portfolio, the securities available for sale portfolio, or the securities held to maturity portfolio. Securities are classified as trading account securities when the intent is profit maximization through market appreciation and resale. Securities are classified as available for sale when management intends to hold the securities for an indefinite period of time. Securities are classified as held to maturity when it is management's intent to hold these securities until maturity. Unrealized gains or losses on securities available for sale are excluded from earnings and reported as a net amount in a separate component of stockholders' equity. There was no cumulative effect on the financial statements from the adoption of SFAS No. 115. Securities available for sale are stated at fair market value which approximates cost. (h) Other Assets Other assets, excluding deferred loan costs and goodwill, are recorded at cost and are amortized on a straight-line basis over 2 to 15 years. Deferred loan costs are recorded at cost and are amortized on a straight-line basis over the life of the associated loan. Goodwill totaled approximately $1,286,000 and $1,387,000 at December 31, 1995 and 1994, respectively, net of amortization of approximately $697,000 and $596,000, 30 (Continued) respectively. Goodwill represents the excess of cost over fair value of net assets acquired and is being amortized on a straight-line basis over twenty years. (i) Revenue From Services and Products Revenues generated from long distance telecommunication services are recognized when the services are provided. Revenues from the sale of equipment are recognized at the time the equipment is delivered or installed. Service revenues are derived primarily from maintenance contracts on equipment and are recognized on a prorated basis over the term of the contract. Other revenues are recognized when the service is provided. (j) Interest Expense Interest costs incurred during the construction period of significant capital projects are capitalized. Interest capitalized by the Company totaled $112,000 during the year ended December 31, 1995. (k) Income Taxes In February, 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes". SFAS No. 109 requires a change from the deferred method of accounting for income taxes of APB Opinion 11 to the asset and liability method of accounting for income taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable earnings in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. Effective January 1, 1993, the Company adopted SFAS No. 109. The adjustment required for this change in accounting for income taxes was recorded in the first quarter of 1993 and resulted in increases in current deferred tax assets and net long-term deferred tax liabilities, and provision of a valuation allowance for deferred tax assets. No cumulative effect adjustment to the Company's consolidated statement of operations was required. (l) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (m) Reclassifications Reclassifications have been made to the 1994 financial statements to make them comparable with the 1995 presentation. 31 (Continued) (2) Consolidated Statements of Cash Flows Supplemental Disclosures For purposes of the Statement of Cash Flows, the Company's cash equivalents includes cash and all invested assets with original maturities of less than three months. Changes in operating assets and liabilities consist of (in thousands):
Year ended December 31, 1995 1994 1993 ---- ---- ---- (Increase) decrease in trade receivables $ (4,701) 63 (2,287) (Increase) decrease in other receivables (32) (91) 535 (Increase) decrease in prepaid and other current assets (222) 312 (477) (Increase) decrease in inventory (317) (38) 70 Decrease in income taxes receivable --- --- 17 Increase in accounts payable 5,020 1,434 621 Increase (decrease) in accrued liabilities 423 195 (64) Increase (decrease) in accrued payroll and payroll related obligations (1,928) 1,238 857 Increase in accrued income taxes 330 163 54 Increase (decrease) in accrued interest 31 14 (43) Increase (decrease) in deferred revenues 220 (90) 126 Decrease in components of other liabilities (131) (137) --- -------- ----- ------ $ (1,307) 3,063 (591) ========= ===== ======
Income taxes paid totaled $3,752,000, $2,796,000 and $1,558,000 during 1995, 1994 and 1993, respectively. Interest paid totaled approximately $1,227,000, $1,525,000 and $2,297,000 during 1995, 1994 and 1993, respectively. The Company recorded $397,000, $371,000 and $514,000 in 1995, 1994 and 1993, respectively, in paid-in capital in recognition of the income tax effect of excess stock compensation expense for tax purposes over amounts recognized for financial reporting purposes. 32 (Continued) (3) Notes Receivable A summary of notes receivable follows:
December 31, 1995 1994 ---- ---- (Amounts in thousands) Note receivable from officer bearing interest at the rate paid by the Company on its senior indebtedness, secured by GCI Class A common stock, due on the 90th day after termination of employment or July 30, 1998,whichever is earlier. $ 500 500 Note receivable from officer bearing interest at 10%, secured by Company stock; payable in equal annual installments of $36,513 through August 26, 2004. 224 224 Notes receivable from officers and others bearing interest at 7% to 10%, unsecured and secured by Company common stock, shares of other common stock and equipment; due September 20, 1996 through August 26, 2004. 261 194 ------ ----- Total notes receivable 985 918 Less current portion (167) (200) Plus long-term accrued interest 86 49 ------ ----- $ 904 767 ====== =====
(4) Investment Securities Available for Sale As of January 1, 1994 the Company adopted SFAS No. 115. Accordingly, the Company's marketable equity securities have been classified as available for sale securities and are reported at fair market value which approximate cost at December 31, 1994. The Company held no trading account investment securities or available for sale securities at December 31, 1995. 33 (Continued) (5) Long-term Debt Long-term debt is summarized as follows:
December 31, -------------------- 1995 1994 ---- ---- (Amounts in thousands) Credit Agreement (a) $ 1,000 2,000 Undersea Fiber and Equipment Loan Agreement (b) 8,271 9,500 Financing Obligation (c) 709 1,054 ------- ------ 9,980 12,554 Less current maturities 1,689 1,585 ------- ------ Long-term debt, excluding current maturities $ 8,291 10,969 ======= ======
(a) GCI completed a refinancing of its senior indebtedness on May 14, 1993. The facility was amended on October 31, 1995 to provide financing for the initial letter of credit and subsequent down payment required pursuant to the terms of the Company's transponder purchase agreement with Hughes. The facility is comprised of two components, the first of which is a $15,750,000 reducing revolver requiring payments or reductions of $650,000 per quarter through December 31, 1996, and $812,500 thereafter through its expiration on December 31, 1997. $2.65 million of this component has been used to provide a letter of credit to secure payment of certain access charges associated with the Company's provision of telecommunications services within the state of Alaska. $4.6 million of this portion of the facility was available for additional borrowings at December 31, 1995, $3.3 million of which was drawn down in March 1996. The other component totals $10.08 million, and has been used to provide a $9.1 million letter of credit to Hughes. The letter of credit is expected to be drawn down by Hughes after delivery of transponder capacity scheduled for May or June of 1996. Once drawn upon, the facility will be repaid in quarterly installments of $455,000 beginning September 30, 1996, with all remaining outstanding principal due on December 31, 1997. The Credit agreement provides for interest (8.18% at December 31, 1995), among other options, at LIBOR plus two and one-quarter to two and three-quarters percent depending on the Company's leverage ratio as defined in the Agreement. A fee of .50% per annum is assessed on the unused portion of the facility. The credit agreement contains, among others, covenants requiring maintenance of specific levels of operating cash flow to indebtedness, to interest expense, to fixed charges, and to pro forma debt service. The credit agreement includes limitations on acquisitions and additional indebtedness, and prohibits payment of dividends, other than stock dividends. The Company was in compliance with all credit agreement covenants during the period commencing May 14, 1993 (date of the refinancing) through December 31, 1995. 34 (Continued) Security for the credit agreement includes a pledge of the stock of GCC and Communication Services, and a first lien on substantially all of GCC's assets. GCI and its subsidiaries, Communication Services and Leasing Company, are liable as guarantors. In June, 1993, the Company entered into a two-year interest rate swap agreement with a bank whereby the rate on $18,200,000 of debt (reduced by $422,500 per quarter beginning July 1, 1993) was fixed at 4.45 percent plus applicable margins. The interest effect of the difference between the fixed rate and the three-month LIBOR rate was either added to or served to reduce interest expense depending on the relative interest rates. The agreement expired June 30, 1995. (b) On December 31, 1992, Leasing Company entered into a $12,000,000 loan agreement, of which approximately $9,000,000 of the proceeds were used to acquire capacity on the undersea fiber optic cable linking Seward, Alaska and Pacific City, Oregon. Concurrently, Leasing Company leased the capacity under a ten year all events, take or pay, contract to MCI, who subleased the capacity back to the Company. The lease and sublease agreements provide for equivalent terms of 10 years and identical monthly payments of $200,000. The proceeds of the lease agreement with MCI were pledged as primary security for the financing. The loan agreement provides for monthly payments of $170,000 including principal and interest through the earlier of January 1, 2003, or until repaid. The loan agreement provides for interest at the prime rate plus one-quarter percent. Additional collateral includes substantially all of the assets of Leasing Company including the fiber capacity and a security interest in all of its outstanding stock. MCI has a second position security interest in the assets of Leasing Company. (c) As consideration for MCI's role in enabling Leasing Company to finance and acquire the undersea fiber optic cable capacity described at note 5(b) above, Leasing Company agreed to pay MCI $2,040,000 in sixty monthly payments of $34,000. For financial statement reporting purposes, the obligation has been recorded at its remaining present value, using a discount rate of 10% per annum. The agreement is secured by a second position security interest in the assets of Leasing Company. As of December 31, 1995 maturities of long-term debt were as follows (in thousands): Year ending December 31, 1996 $ 1,689 1997 2,882 1998 1,631 1999 1,780 2000 1,942 2001 and thereafter 56 ------- $ 9,980 ======= 35 (Continued) (6) Income Taxes Total income tax expense (benefit) for the years ended December 31, 1995, 1994 and 1993 were allocated as follows (amounts in thousands):
Years ended December 31, ------------------------ 1995 1994 1993 ---- ---- ---- Earnings from continuing operations $5,099 4,547 2,764 Stockholders' equity, for stock option compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes (397) (371) (514) ----- ----- ----- $4,702 4,176 2,250 ===== ===== =====
Income tax expense consists of the following:
Years ended December 31, ------------------------ 1995 1994 1993 ---- ---- ---- (Amounts in thousands) Current tax expense: Federal taxes $3,077 2,604 1,615 State taxes 1,005 355 13 ----- ----- ----- 4,082 2,959 1,628 ----- ----- ----- Deferred tax expense: Federal taxes 780 816 508 State taxes 237 772 628 ----- ----- ----- 1,017 1,588 1,136 ----- ----- ----- $5,099 4,547 2,764 ===== ===== =====
Total income tax expense differed from the "expected" income tax expense determined by applying the statutory federal income tax rate of 34% as follows:
Years ended December 31, ------------------------ 1995 1994 1993 ---- ---- ---- (Amounts in thousands) "Expected" statutory tax expense $4,284 3,971 2,283 State income taxes, net of federal benefit 820 742 424 Income tax effect of goodwill amortization, nondeductible expenditures and other items, net (5) (166) 57 ----- ----- ----- $5,099 4,547 2,764 ===== ===== =====
36 (Continued) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1995 and 1994 are presented below.
December 31, 1995 1994 ---- ---- (Amounts in thousands) Net current deferred tax assets: Accounts receivable, principally due to allowance for for doubtful accounts ................................................................ $ 119 199 Compensated absences, accrued for financial reporting purposes ......................... 400 333 Federal and state alternative minimum tax credit carryforwards ......................... -- 330 Workers compensation and self insurance health reserves, principally due to accrual for financial reporting purposes .......................... 183 185 Other .................................................................................. 133 36 ------- ----- Total gross current deferred tax assets ......................................... 835 1,083 Less valuation allowance ........................................................ (89) (199) ------- ----- Net current deferred tax assets ................................................. $ 746 884 ======= ===== Net long-term deferred tax assets: Deferred compensation expense for financial reporting purposes in excess of amounts recognized for tax purposes ..................................................................... $ 587 511 Employee stock option compensation expense for financial reporting purposes in excess of amounts recognized for tax purposes ..................................................................... 206 234 Capital loss carryforwards ............................................................. 23 168 Other .................................................................................. 453 311 ------- ----- Total gross long-term deferred tax assets ....................................... 1,269 1,224 Less valuation allowance ........................................................ (136) (226) ------- ----- Net long-term deferred tax assets ............................................... 1,133 998 ------- ----- Net long-term deferred tax liabilities: Plant and equipment, principally due to differences in depreciation ......................................................................... 7,997 7,507 Other .................................................................................. 140 13 ------- ----- Total gross long-term deferred tax liabilities .................................. 8,137 7,520 ------- ----- Net combined long-term deferred tax liabilities ................................. $ 7,004 6,522 ======= =====
The valuation allowance for deferred tax assets was $225,000, $425,000 and $425,000 as of December 31, 1995, 1994 and 1993, respectively. Tax benefits associated with recorded deferred tax assets, net of valuation allowances, are considered to be more likely than not realizable through taxable income earned in carryback years, future reversals of existing taxable temporary differences, and future taxable income exclusive of reversing temporary differences and carryforwards. The amount of deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. For income tax reporting purposes, the Company has available capital loss carryovers totaling approximately $56,000 which expire in 1997. The Company's U.S. income tax return for 1993 was selected for examination by the Internal Revenue Service during 1995. The examination commenced during the fourth 37 (Continued) quarter of 1995. Management believes this examination will not adversely affect the consolidated financial statements. (7) Stockholders' Equity Common Stock GCI's Class A common stock and Class B common stock are identical in all respects, except that each share of Class A common stock has one vote per share and each share of Class B common stock has ten votes per share. In addition, each share of Class B common stock outstanding is convertible, at the option of the holder, into one share of Class A common stock. MCI owns a total of 6,251,509 shares of GCI's Class A and 1,275,791 shares of GCI's Class B common stock which on a fully diluted basis represented approximately 31 and 30 percent of the issued and outstanding shares of the respective class. Stock Warrants On May 18, 1994 an officer of the Company exercised warrants. In exchange for $114, the Company issued 160,297 and 74,028 shares of GCI Class A and Class B common stock, respectively. Pursuant to the terms of a stock appreciation right granted in 1988, the Company issued to its former senior lender warrants to acquire 1,021,373 shares of GCI Class A common stock for $.85669 per share. Warrants to purchase 600,000 shares of Class A common stock were exercised in April and May, 1991, an additional 168,085 were exercised in September, 1991 and the remaining warrants to purchase 253,288 shares were exercised in September and October, 1994. Stock Option Plan In December 1986, GCI adopted a Stock Option Plan (the "Option Plan") in order to provide a special incentive to officers, non-employee directors, and employees by offering them an opportunity to acquire an equity interest in GCI. The Option Plan provides for the grant of options for a maximum of 3,200,000 shares of GCI Class A common stock, subject to adjustment upon the occurrence of stock dividends, stock splits, mergers, consolidations or certain other changes in corporate structure or capitalization. If an option expires or terminates, the shares subject to the option will be available for further grants of options under the Option Plan. The Option Plan is administered by GCI's Board of Directors or a committee of disinterested persons. Employees of GCI (including officers and directors), employees of affiliated companies and non-employee directors of GCI are eligible to participate in the Option Plan. Options granted under the Option Plan must expire not later than ten years after the date of grant. The exercise price may be less than, equal to, or greater than the fair market value of the shares on the date of grant. Options granted pursuant to the Option Plan are only exercisable if at the time of exercise the option holder is an employee or non-employee director of GCI. 38 (Continued) Information for the years 1993, 1994 and 1995 with respect to the Plan follows:
Shares Option Price ------ ------------ Outstanding at December 31, 1992 1,660,677 $0.75-$3.00 --------- Granted 298,500 $4.00 Exercised (129,519) $0.75-$2.25 Forfeited (6,000) $4.00 --------- Outstanding at December 31, 1993 1,823,658 $0.75-$4.00 --------- Granted --- --- Exercised (72,459) $0.75-$3.00 Forfeited (21,500) $4.00 --------- Outstanding at December 31, 1994 1,729,699 $0.75-$4.00 Granted 610,000 $4.00 Exercised (40,000) $1.87-$2.25 Forfeited (11,500) $4.00 --------- Outstanding at December 31, 1995 2,288,199 $0.75-$4.00 ========= Available for grant at December 31, 1995 349,553 ========= Exercisable at December 31, 1995 986,999 =========
The options expire at various dates through October 2005. Stock Options Not Pursuant to a Plan In June 1989, officer John Lowber was granted options to acquire 100,000 Class A common shares at $.75 per share. The options vested in equal annual increments over a five-year period and expire February, 1999. The Company entered into an incentive agreement in June 1989 with Mr. Behnke, an officer of the Company. The incentive agreement provides for the acquisition of 85,190 remaining shares of Class A common stock of the Company for $.001 per share exercisable through June 16, 1997. The shares under the incentive agreement vested in equal annual increments over a three-year period. Class A Common Shares Held in Treasury The Company acquired 105,111 shares of its Class A common stock in 1989 for approximately $328,000 to fund a deferred bonus agreement with Mr. Duncan, an officer of the Company. The agreement provides that the balance is payable after the later of a) termination of employment or b) six months after the effective date of the agreement. In September 1995, the Company acquired an additional 17,500 shares of Class A common stock for approximately $61,000 to fund additional deferred compensation agreements for two of its officers, including Mr. Duncan. 39 (Continued) Employee Stock Purchase Plan In December 1986, GCI adopted an Employee Stock Purchase Plan (the "Plan") qualified under Section 401 of the Internal Revenue Code of 1986 (the "Code"). The Plan provides for acquisition of the Company's Class A and Class B common stock at market value. The Plan permits each employee of GCI and affiliated companies who has completed one year of service to elect to participate in the Plan. Eligible employees may elect to reduce their compensation in any even dollar amount up to 10 percent of such compensation up to a maximum of $9,240 in 1995; they may contribute up to 10 percent of their compensation with after-tax dollars, or they may elect a combination of salary reductions and after-tax contributions. GCI may match employee salary reductions and after tax contributions in any amount, elected by GCI each year, but not more than 10 percent of any one employee's compensation will be matched in any year. The combination of salary reductions, after tax contributions and GCI matching contributions cannot exceed 25 percent of any employee's compensation (determined after salary reduction) for any year. GCI's contributions vest over six years. Prior to July 1, 1995 employee and GCI contributions were invested in GCI common stock and employee contributions received up to 100% matching, as determined by the Company each year, in GCI common stock. Beginning July 1, 1995 employee contributions may be invested in GCI common stock, MCI common stock, Tele-Communications, Inc. common stock or various mutual funds. Beginning July 1, 1995 employee contributions invested in GCI common stock receive up to 100% matching, as determined by the Company each year, in GCI common stock. Employee contributions invested in other than GCI common stock receive up to 50% matching, as determined by the Company each year, in GCI common stock. The Company's matching contributions allocated to participant accounts totaled approximately $864,000, $792,000 and $485,000 for the years ended December 31, 1995, 1994, and 1993, respectively. The Plan may, at its discretion, purchase shares of common stock from the Company at market value or may purchase GCI common stock on the open market. 40 (Continued) (8) Industry Segments Data The Company is engaged in the design, development, sale and service of telecommunication services and products in two principal industries: (1) message and data transmission services and (2) telecommunication systems sales and service.
1995 1994 1993 ---- ---- ---- (Amounts in thousands) Net sales Message and data transmission svcs. $122,086 107,843 93,914 Systems sales and service 7,193 9,138 8,299 ------- ------- ------- Total net sales $129,279 116,981 102,213 ======= ======= ======= Operating income Message and data transmission svcs. $ 25,183 24,952 18,707 System sales and service 1,847 2,112 428 Corporate (13,526) (14,067) (10,331) ------- ------- ------- Total operating income $ 13,504 12,997 8,804 ======= ======= ======= Identifiable assets Message and data transmission svcs. $ 69,715 60,335 59,277 Systems sales and service 2,554 2,838 4,306 Corporate 12,496 11,076 8,027 ------- ------- ------- Total identifiable assets $ 84,765 74,249 71,610 ======= ======= ======= Capital expenditures Message and data transmission svcs. $ 5,946 10,003 4,457 Systems sales and service --- --- 369 Corporate 2,992 601 918 ------- ------- ------- Total capital expenditures $ 8,938 10,604 5,744 ======= ======= ======= Depreciation and amortization expense Message and data transmission svcs. $ 5,385 6,194 6,572 Systems sales and service 84 103 132 Corporate 754 442 274 ------- ------- ------- Total depreciation and amortization expense $ 6,223 6,739 6,978 ======= ======= =======
Intersegment sales approximate market and are not significant. Identifiable assets are assets associated with a specific industry segment. General corporate assets consist primarily of cash, temporary cash investments and other assets and investments which are not specific to an industry segment. Goodwill and the related amortization associated with the acquisition of Network Systems is allocated to the message and data telephone services segment. Goodwill and the related amortization related to the acquisition of the Transalaska Data Systems, Inc. assets is allocated to the systems sales and service segment. Revenues derived from leasing operations are allocated to the message and data transmission services segment. The Company provides message telephone service to MCI and Sprint, major customers. Pursuant to the terms of a contract with MCI, the Company earned revenues of approximately $23,939,000, $19,512,000 and $16,068,000 for the years ended December 31, 1995, 1994 and 1993, respectively. Amounts receivable from MCI totaled $4,256,000 41 (Continued) and $3,257,000 at December 31, 1995 and 1994, respectively. The Company earned revenues pursuant to a contract with Sprint totaling approximately $14,885,000, $12,412,000 and $10,123,000 for the years ended December 31, 1995, 1994 and 1993 respectively. Amounts receivable from Sprint totaled $2,362,000 and $981,000 at December 31, 1995 and 1994, respectively. (9) Leases The Company leases business offices, has entered into site lease agreements and uses certain equipment and satellite transponder capacity pursuant to operating lease arrangements. Rental costs under such arrangements amounted to approximately $4,353,000, $4,258,000 and $4,029,000 for the years ended December 31, 1995, 1994 and 1993, respectively. A summary of future minimum lease payments for all leases as of December 31, 1995 follows:
Year ending December 31: Operating Capital ------------------------ --------- ------- (Amounts in thousands) 1996 $ 6,343 435 1997 7,493 221 1998 1,441 202 1999 1,343 204 2000 1,247 211 2001 and thereafter 778 1,301 ------- ------ Total minimum lease payments $ 18,645 2,574 ======= Less amount representing interest (1,527) Less current maturities of obligations under capital leases (282) Subtotal - long-term obligations under capital leases 765 Less long-term obligations under capital leases due to related parties, excluding current maturities (739) ------ Long-term obligations under capital leases, excluding current maturities $ 26 ======
The Company entered into a long-term capital lease agreement in 1991 with the wife of the Company's president for property occupied by the Company. The lease term is 15 years with monthly payments of $14,400, increasing in $800 increments at each two year anniversary of the lease. Monthly lease costs increased to $15,200 effective October 1993 and $16,000 effective October 1995. Monthly lease costs will increase to $16,800 in October 1997. If the owner sells the premises prior to the end of the tenth year of the lease, the owner will rebate to the Company one-half of the net sales price received in excess of $900,000. If the property is not sold prior to the tenth year of the lease, the owner will pay the Company the greater of one-half of the appreciated value of the property over $900,000, or $500,000. The leased asset was capitalized in 1991 at the owner's cost of $900,000 and the related obligation was recorded in the accompanying financial statements. The leases generally provide that the Company pay the taxes, insurance and maintenance expenses related to the leased assets. It is expected that in the normal course of business, leases that expire will be renewed or replaced by leases on other properties. 42 (Continued) (10) Disclosure about Fair Value of Financial Instruments Statement of Financial Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS No. 107") requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. SFAS No. 107 specifically excludes certain items from its disclosure requirements. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts at December 31, 1995 for the Company's assets and liabilities approximate their fair values. (11) Commitments and Contingencies During 1995, the Company adopted a non-qualified, unfunded deferred compensation plan to provide a means by which certain 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. The Company may, at its discretion, contribute matching deferrals equal to the rate of matching selected by the Company. Participants immediately vest in all elective deferrals and all income and gain attributable thereto. Matching contributions and all income and gain attributable thereto vest over a six-year period. Participants may elect to be paid in either a single lump sum payment or annual installments over a period not to exceed 10 years. Vested balances are payable upon termination of employment, unforeseen emergencies, death and total disability. Participants are general creditors of the Company with respect to deferred compensation plan benefits. Compensation deferred pursuant to the plan totaled $340,000 as of December 31, 1995. The Company entered into a purchase and lease-purchase option agreement in August 1995 for the acquisition of satellite transponders to meet its long-term satellite capacity requirements. The amount of the down payment required in 1996 and the balance payable upon delivery of the transponders as early as the fourth quarter of 1997 are dependent upon a number of factors. The Company does not expect the down payment to exceed $10.1 million and the remaining balance payable at delivery to exceed $46 million. In the normal course of the Company's operations, it is involved in various legal and regulatory matters before the FCC and the APUC. While the Company does not anticipate that the ultimate disposition of such matters will result in abrupt changes in the competitive structure of the Alaska market or of the business of the Company, no assurances can be given that such changes will not occur and that such changes would not be materially adverse to the Company. (12) Subsequent Event Subsequent to year-end, the Company announced that it has signed letters of intent to acquire three Alaska cable companies that offer cable television service to more than 101,000 subscribers serving 74 percent of households throughout the state of Alaska. The Company intends to acquire Prime Cable of Alaska, Alaska Cablevision, Inc. of Kirkland, Washington and Alaskan Cable Network. Prime Cable operates the state's largest cable television system including stations in Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision owns and operates cable stations in Petersburg, Wrangell, Cordova, Valdez, Kodiak, Homer, Seward, Nome and Kotzebue, Alaska. Alaskan Cable Network operates stations in Fairbanks, Juneau, Ketchikan and Sitka, Alaska. This acquisition will allow the Company to integrate cable services to bring more information not only to more customers, but in a manner that is quicker, more efficient and more cost effective than ever before. The purchase 43 (Continued) will facilitate consolidation of the cable operations and will provide a platform for developing new customer products and services over the next several years. Upon closing and after all approvals are obtained, the cable companies will be consolidated into a single organization owned by the Company. The total purchase price is $280.7 million. According to terms of the letters of intent, GCI will issue 16.3 million shares of Class A Common stock to the owners of the three cable companies valued at $105.7 million. The balance of the purchase will be provided by approximately $175 million of bank financing. Additional capital will be provided from the sale of 2 million shares of GCI's Class A Common Stock to MCI Telecommunications Corporation for $6.50 per share. The more significant contingencies which must be resolved include negotiation and execution of definitive agreements with the owners of the cable companies and MCI, approval of the transactions and transfer of licenses by the APUC and the FCC, and approval of the transactions by the Company's shareholders and senior lender and the cable companies' shareholders, partners and lenders. Management is confident that once the contingencies are resolved, the transactions will be financed through modification or assumption of an existing or negotiation of a new bank credit agreement facility. Although the Company has held discussions with existing lenders regarding such a facility, no agreement exists concerning the amounts or terms of such a facility. (13) Selected Quarterly Information (Unaudited)
Three months ended ------------------------------------------------------------- Dec. 31, 1995 Sept. 30, 1995 June 30, 1995 Mar. 31, 1995 ------------- -------------- ------------- ------------- (Amounts in thousands, except per share amounts) Total revenues $34,363 33,363 31,860 29,693 Contribution $15,808 15,548 14,026 13,676 Net earnings $1,807 2,252 1,836 1,607 Net earnings per share $.07 .09 .08 .07
Three months ended ------------------------------------------------------------- Dec. 31, 1994 Sept. 30, 1994 June 30, 1994 Mar. 31, 1994 ------------- -------------- ------------- ------------- (Amounts in thousands, except per share amounts) Total revenues $29,143 30,685 28,962 28,191 Contribution $14,061 14,740 14,387 12,897 Net earnings $1,320 1,994 2,122 1,698 Net earnings per share $.06 .08 .09 .07
44 (Continued) Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 45 PART IV Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(l) Consolidated Financial Statements Page No. Included in Part II of this Report: Independent Auditors' Report ...............................23 Consolidated Balance Sheets, December 31, 1995 and 1994 .............................................24 -- 25 Consolidated Statements of Operations, Years ended December 31, 1995, 1994 and 1993 ............26 Consolidated Statements of Stockholders' Equity, Years ended December 31, 1995, 1994 and 1993 ............27 Consolidated Statements of Cash Flows, Years ended December 31, 1995, 1994 and 1993 ............28 Notes to Consolidated Financial Statements ...........29 -- 44 (a)(2) Consolidated Financial Statement Schedules Included in Part IV of this Report: Independent Auditors' Report................................51 Schedule VIII - Valuation and Qualifying Accounts, Years ended December 31, 1995, 1994 and 1993 ............52 Other schedules are omitted as they are not required or are not applicable, or the required information is shown in the applicable financial statements or notes thereto. 46 (b) Exhibits Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K): 3 - Articles of Incorporation and By-laws: Restated Articles of Incorporation of General Communication, Inc. dated August 16, 1993. Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1994 Bylaws of General Communication, Inc., as amended and restated dated March 24, 1993 Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1994 4 - Instruments defining the rights of security holders: Registration Rights Agreement, dated as of January 18, 1991, between General Communication, Inc. and WestMarc Communications, Inc. Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1990. Employee stock option agreements issued to individuals Spradling, O'Hara, Strid, Behnke, Lewkowski and Snyder. Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1991. Lease agreement between GCI Communication Services, Inc. and National Bank of Alaska Leasing Corporation dated January 15, 1992. Incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992. Stock Purchase Agreement between MCI Telecommunications Corporation and General Communication, Inc. dated March 31, 1993. Incorporated herein by reference to the Company's Current Report on Form 8-K dated June 4, 1993. Voting Agreement by and between MCI Telecommunications Corporation, Ronald A. Duncan, Robert M. Walp, and WestMarc Communications, Inc., dated March 31, 1993. Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1994 47 10 - Material Contracts: Denali Towers Lease MCI Telecommunications Corporation Carrier Agreement Westin Building Lease All the above incorporated herein by reference to the Company's Registration Statement on Form 10 (File No. 0-15279), mailed to the Securities and Exchange Commission on December 30, 1986. Denali Towers Lease, Suites 1000 and 1105 Denali Towers Lease, Suites 910 and 1110 Denali Towers Lease, Suite 400 Hughes Transponder Lease Agreement Duncan and Hughes Deferred Bonus Agreements All of the above incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1989. Service Agreement dated January 1, 1990 between General Communication, Inc. and US Sprint Communications Company Limited Partnership of Delaware Incorporated herein by reference to the Company's Annual Report on Form 10-K dated December 31, 1990. Order approving Application for a Certificate of Public Convenience and Necessity to operate as a Telecommunications (Intrastate Interexchange Carrier) Public Utility within Alaska. Incorporated herein by reference to the Company's Annual Report on Form 10-K dated December 31, 1991. 1986 Stock Option Plan, as amended Loan agreement between National Bank of Alaska and GCI Leasing Co., Inc. dated December 31, 1992. Pledge and Security Agreement between National Bank of Alaska and GCI Communication Services, Inc. dated December 31, 1992. Lease Agreement between MCI Telecommunications Corporation and GCI Leasing Co., Inc. dated December 31, 1992. Sublease Agreement between MCI Telecommunications Corporation and General Communication, Inc. dated December 31, 1992. Financial Assistance Agreement between MCI Telecommunications Corporation and GCI Leasing Co., Inc. dated December 31, 1992. All of the above incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992. Letter of intent between MCI Telecommunications Corporation and General Communication, Inc. dated December 31, 1992. Incorporated herein by reference to the Company's Current Report on Form 8-K dated January 13, 1993. MCI Carrier Agreement between MCI Telecommunications Corporation and General Communication, Inc. dated January 1, 1993. Contract for Alaska Access Services Agreement between MCI Telecommunications Corporation and General Communication, Inc. dated January 1, 1993. All of the above incorporated herein by reference to the Company's Current Report on Form 8-K dated June 4, 1993. Promissory Note Agreement between General Communication, Inc. and Ronald A. Duncan, dated August 13, 1993. Deferred Compensation Agreement between General Communication, Inc. and Ronald A. Duncan, dated August 13, 1993. Pledge Agreement between General Communication, Inc. and Ronald A. Duncan, dated August 13, 1993. 48 Amended and Restated Credit Agreement between General Communication, Inc. and Nationsbank of Texas, N.A., dated April 30, 1993. All of the above incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1993. Revised Qualified Employee Stock Purchase Plan of General Communication, Inc. Summary Plan Description pertaining to the Revised Qualified Employee Stock Purchase Plan of General Communication, Inc. All of the above incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Company's press release on the letters of intent, dated March 15, 1996 Amendments to Contract for Alaska Access, effective April 1, 1996 Amendments to MCI Carrier Agreement: Sixth Amendment, effective April 1, 1996 (there was no fifth amendment as of the date of this report) Fourth Amendment, dated September 24, 1995 Third Amendment, dated October 1, 1994 MCI Carrier Addendum MCI 800 DAL Service (First Amendment), dated April 20, 1994 All of the above incorporated herein by reference to the Company's Current Report on Form 8-K dated March 14, 1996, filed March 28, 1996. 10.1 - The GCI Special Non-Qualified Deferred Compensation Plan 10.2 - Second Amendment to the Amended and Restated Credit Agreement between General Communication, Inc. and Nationsbank of Texas, N.A., dated October 31, 1995. 10.3 - Equipment Purchase Agreement between GCI Communication Corporation and Scientific-Atlanta, Inc. Licenses: 214 Authorization International Resale Authorization Digital Electronic Message Service Authorization Fairbanks Earth Station License Fairbanks (Esro) Construction Permit for P-T-P Microwave Service Fairbanks (Polaris) Construction Permit for P-T-P Microwave Service Anchorage Earth Station Construction Permit License for Eagle River P-T-P Microwave Service License for Juneau Earth Station Issaquah Earth Station Construction Permit All the above incorporated herein by reference to the Company's Registration Statement on Form 10 (File No. 0-15279), mailed to the Securities and Exchange Commission on December 30, 1986. 49 21 - Subsidiary of Registrant: GCI Communication Corp. State of Incorporation: Alaska Subsidiary of Registrant: GCI Communication Services, Inc. State of Incorporation: Alaska Subsidiary of Subsidiary of Registrant: GCI Leasing Co., Inc. State of Incorporation: Alaska 27 - Financial Data Schedule 28 - Additional Exhibits: The Articles of Incorporation of GCI Communication Corp. The By-laws of GCI Communication Corp. All of the above incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 1990 The By-laws of GCI Communication Services, Inc. The Articles of Incorporation of GCI Communication Services, Inc. The By-laws of GCI Leasing Co., Inc. The Articles of Incorporation of GCI Leasing Co., Inc. All of the above incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1992. (c) Reports on Form 8-K None filed during the quarter ended December 31, 1995. 50 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors and Stockholders General Communication, Inc.: Under date of March 15, 1996, we reported on the consolidated balance sheets of General Communication, Inc. and Subsidiaries ("Company") as of December 31, 1995 and 1994 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995, which are included in the Company's 1995 Annual Report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule in the consolidated financial statements, which is listed in the index in Item 14(a)(2) of the Company's 1995 Annual Report on Form 10-K. This consolidated financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this consolidated financial statement schedule based on our audits. In our opinion this consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects the information set forth therein. /s/KPMG PEAT MARWICK LLP Anchorage, Alaska March 15, 1996 51 Schedule VIII ------------- GENERAL COMMUNICATION, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended December 31, 1995, 1994 and 1993
Additions Deductions -------------------- ----------- Balance at Charged Write-offs Balance beginning to profit net of at end Description of year and loss Other recoveries of year - ---------------------------------------- ---------- --------- ----- ---------- ------- (Amounts in thousands) Year ended December 31, 1995: Allowance for doubtful receivables $ 409 1,459 --- 1,573 295 ===== ===== === ===== === Year ended December 31, 1994: Allowance for doubtful receivables $ 721 829 --- 1,141 409 ===== ===== === ===== === Year ended December 31, 1993: Allowance for doubtful receivables $ 675 1,207 --- 1,161 721 ===== ===== === ===== ===
52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL COMMUNICATION, INC. By: /s/ Ronald A. Duncan Ronald A. Duncan, President (Chief Executive Officer) Date: March 15, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title Date ---------------------- ------------------------- -------------- /s/ Carter F. Page Chairman of Board March 15, 1996 Carter F. Page and Director /s/ Robert M. Walp Vice Chairman of Board and March 15, 1996 Robert M. Walp Director /s/ Ronald A. Duncan President and Director, March 15, 1996 Ronald A. Duncan (Chief Executive Officer) /s/ Donne F. Fisher Director March 15, 1996 Donne F. Fisher /s/ John W. Gerdelman Director March 15, 1996 John W. Gerdelman /s/ Larry E. Romrell Director March 15, 1996 Larry E. Romrell /s/ James M. Schneider Director March 15, 1996 James M. Schneider /s/ John M. Lowber Senior Vice President, March 15, 1996 John M. Lowber Chief Financial Officer, Secretary and Treasurer /s/ Alfred J. Walker Vice President and Chief March 15, 1996 Alfred J. Walker Accounting Officer 53

                          THE GCI SPECIAL NON-QUALIFIED
                           DEFERRED COMPENSATION PLAN


ARTICLE 1 - INTRODUCTION

1.1      Purpose of Plan

The  Employer  has adopted the Plan set forth herein to provide a means by which
certain  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.

1.2      Status of Plan

The Plan is  intended to be "a plan which is unfunded  and is  maintained  by an
employer  primarily  for the purpose of providing  deferred  compensation  for a
select group of management or highly  compensated  employees" within the meaning
of Sections 201(2) and 301(a)(3) of the Employee  Retirement Income Security Act
of 1974  ("ERISA"),  and shall be  interpreted  and  administered  to the extent
possible in a manner consistent with that intent.

ARTICLE 2 - DEFINITIONS

Wherever  used herein,  the  following  terms have the meanings set forth below,
unless a different meaning is clearly required by the context:

2.1 Account means for each Participant,  the account  established for his or her
benefit under Section 5.1.

2.2 Adoption Agreement means the GCI Special Non-Qualified Deferred Compensation
Plan for Select Employees Adoption Agreement signed by the Employer to establish
the Plan and  containing all the options  selected by the Employer,  as the same
may be amended from time to time.

2.3 Change of Control means (a) the purchase or other acquisition in one or more
transactions other than from the Employer, by any individual, entity or group of
persons,  within  the  meaning of section  13(d)(3)  or 14(d) of the  Securities
Exchange  Act of 1934 or any  comparable  successor  provisions,  of  beneficial
ownership (within the meaning of Rule 13d-3 of Securities  Exchange Act of 1934)
of 50.01 percent or more of either the outstanding shares of common stock or the
combined  voting power of the  Employer's  then  outstanding  voting  securities
entitled  to vote  generally,  or (b) the  approval by the  stockholders  of the
Employer of a  reorganization,  merger,  or  consolidation,  in each case,  with
respect to which persons who were stockholders of the Employer immediately prior
to such  reorganization,  merger or consolidation do not immediately  thereafter
own more than 50 percent of the combined voting power of the reorganized, merged
or consolidated Employer's then outstanding securities that are entitled to vote
generally in the election of directors or (c) the sale of  substantially  all of
the Employer's assets.

2.4 Code means the Internal  Revenue Code of 1986, as amended from time to time.
Reference to any section or  subsection  of the Code  includes  reference to any
comparable or succeeding provisions of any legislation which amends, supplements
or replaces such section or subsection.

2.5  Compensation  has the  meaning  elected  by the  Employer  in the  Adoption
Agreement.

2.6 Effective  Date means the date chosen in the Adoption  Agreement as of which
the Plan first becomes effective.

2.7  Election  Form  means  the  participation  election  form as  approved  and
prescribed by the Plan Administrator.

2.8 Elective  Deferral means the portion of Compensation  which is deferred by a
Participant under Section 4.1.

2.9  Eligible  Employee  means,  on the  Effective  Date  or on any  Entry  Date
thereafter, each employee of the Employer who satisfies the criteria established
in the Adoption Agreement.

2.10 Employer means the corporation  referred to in the Adoption Agreement,  any
successor to all or a major portion of the  Employer's  assets or business which
assumes  the  obligations  of the  Employer,  and  each  other  entity  that  is
affiliated  with the  Employer  which  adopts  the Plan with the  consent of the
Employer,  provided  that the Employer that signs the Adoption  Agreement  shall
have the sole power to amend this plan and shall be the Plan Administrator if no
other person or entity is so serving at any time.

2.11 ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time.  Reference  to any section or  subsection  of ERISA  includes
reference to any comparable or succeeding  provisions of any  legislation  which
amends, supplements or replaces such section or subsection.

2.12 Incentive Contribution means a discretionary  additional  contribution made
by the Employer as described in Section 4.3.

2.13 Insolvent  means either (i) the Employer is unable to pay its debts as they
become due, or (ii) the Employer is subject to a pending  proceeding as a debtor
under the United States Bankruptcy Code.

2.14  Matching  Deferral  means a deferral for the benefit of a  Participant  as
described in Section 4.2.

2.15 Participant means any individual who participates in the Plan in accordance
with Article 3.

2.16 Plan means the Employer's plan in the form of the GCI Special Non-Qualified
Deferred  Compensation Plan for Select Employees and the Adoption  Agreement and
all amendments thereto.

2.17 Plan  Administrator  means the person,  persons or entity designated by the
Employer in the Adoption  Agreement to  administer  the Plan and to serve as the
agent  for the  "Company"  with  respect  to the  Trust as  contemplated  by the
agreement  establishing  the Trust. If no such person or entity is so serving at
any time, the Employer shall be the Plan Administrator.

2.18 Plan Year means the 12-month period chosen in the Adoption Agreement.

2.19 Total and Permanent  Disability  means the  inability of a  Participant  to
engage  in  any  substantial   gainful  activity  by  reason  of  any  medically
determinable  physical or mental  impairment  which can be expected to result in
death or which has lasted or can be expected to last for a continuous  period of
not less  that 12  months,  and the  permanence  and  degree  of which  shall be
supported by medical evidence satisfactory to the Plan Administrator.

2.20 Trust means the trust  established by the Employer that identifies the Plan
as a plan with respect to which assets are to be held by the Trustee.

2.21 Trustee means the trustee or trustees under the Trust.

2.22 Year of  Service  means the  computation  period  and  service  requirement
elected in the Adoption Agreement.

ARTICLE 3 - PARTICIPATION

3.1      Commencement of Participation

Any individual who elects to defer part of his or her Compensation in accordance
with  Section  4.1 shall  become a  Participant  in the Plan as of the date such
deferrals  commence in accordance  with Section 4.1. Any  individual  who is not
already  a  Participant   and  whose  Account  is  credited  with  an  incentive
Contribution shall become a Participant as of the date such amount is credited.

3.2      Continued Participation

A  Participant  in the Plan shall  continue to be a  Participant  so long as any
amount remains credited to his or her Account.

ARTICLE 4 - ELECTIVE AND MATCHING DEFERRALS

4.1      Elective Deferrals

An  individual  who is an  Eligible  Employee  on the  Effective  Date  may,  by
completing an Elections Form and filing it with the Plan Administrator within 30
days following the Effective Date,  elect to defer a percentage or dollar amount
of one or more payments of Compensation, on such terms as the Plan Administrator
may  permit,  which are payable to the  Participant  after the date on which the
individual  files the  Election  form.  Any  individual  who becomes an Eligible
Employee after the Effective Date may, by completing an Election Form and filing
it with the Plan  Administrator  within 30 days  following the date on which the
Plan  Administrator  gives such individual written notice that the individual is
an Eligible  Employee,  elect to defer a percentage  or dollar  amount of one or
more  payments  of  Compensation,  on such terms as the Plan  Administrator  may
permit,  which  are  payable  to the  Participant  after  the date on which  the
individual files the Election Form. Any Eligible  Employee who has not otherwise
initially  elected to defer  Compensation  in accordance with this paragraph 4.1
may elect to defer a  percentage  of dollar  amount of one or more  payments  of
Compensation,  on such terms as the Plan  Administrator  may permit,  commencing
with  Compensation  paid in the next  succeeding  Plan Year,  by  completing  an
Election form prior to the first day of such  succeeding Plan Year. In addition,
a  Participant  may defer all or part of the amount of any elective  deferral or
matching  contribution  made on his or her behalf to the Employer's  401(k) plan
for the prior  Plan year but  treated  as an excess  contribution  or  otherwise
limited by the application of the limitations of sections 401(k), 401(m), 415 or
402(q) of the Code, so long as the Participant so indicates on an Election Form.
A Participant's  Compensation  shall be reduced in accordance with Participant's
election  hereunder and amounts deferred hereunder shall be paid by the Employer
to  the  Trust  as  soon  as  administratively  feasible  and  credited  to  the
Participant's Account as of the date the amounts are received by the Trustee.

An election to defer a percentage or dollar amount of Compensation  for any Plan
Year  shall  apply for  subsequent  Plan years  unless  changed  or  revoked.  A
Participant  may change or revoke his or her  deferral  election as of the first
day of any Plan Year by giving written notice to the Plan  Administrator  before
such  first  day  (or  any  such  earlier  date as the  Plan  Administrator  man
prescribe).

4.2      Matching Deferrals

After each payroll period,  monthly,  quarterly,  or annually, at the Employer's
discretion,  the Employer shall contribute to the Trust Matching Deferrals equal
to the rate of Matching  Contribution  selected  by the  Employer,  if any,  and
multiplied by the amount of the Elective Deferrals credited to the Participants'
Accounts  for such period under  Section 4.1.  Each  Matching  Deferral  will be
credited,  as of the later of the date it is received by the Trustee or the date
The  Trustee  receives  from the Plan  Administrator  such  instructions  as the
Trustee may reasonably  require to allocate the amount  received among the asset
accounts  maintained by the Trustee,  to the  Paricipants'  Accounts pro rata in
accordance with the amount of Elective  Deferrals of each Participant  which are
taken into account in calculating the Matching Deferral.

4.3      Incentive  Contributions

In addition to other  contributions  provided  for under the Plan,  the Employer
may, in its sole discretion, select one or more Eligible Employees to receive an
Incentive Contribution to his or her Account on such terms as the Employer shall
specify at the time it makes the  contribution.  For  example,  the Employer may
contribute  an amount to a  Participant's  Account and  condition the payment of
that amount and accrued earnings thereon upon the Participant remaining employed
by the Employer for an additional  specified period of time. The terms specified
by the  Employer  shall  supersede  any other  provision of this Plan as regards
Incentive Contributions and earnings with respect thereto,  provided that if the
Employer does not specify a method of distribution,  the Incentive  Contribution
shall be distributed in a manner  consistent  with the election last made by the
particular  Participant prior to the year in which the Incentive Contribution is
made. The Employer, in its discretion, may permit the Participant to designate a
distribution schedule for a particular Incentive Contribution provided that such
designation is made prior to the time that the Employer finally  determines that
the Participant will receive the Incentive Contribution.

ARTICLE 5 - ACCOUNTS

5.1      Accounts

The  plan  Administrator   shall  establish  an  Account  for  each  Participant
reflecting  Elective Deferrals,  Matching Deferrals and Incentive  Contributions
made for the  Participant's  benefit  together with any  adjustments for income,
gain or loss and any payments from the Account. The Plan Administrator may cause
the Trustee to maintain and invest separate asset accounts corresponding to each
Participant's  Account. The Plan Administrator shall establish  sub-accounts for
each Participant that has more than one election in effect under Section 7.1 and
such other  sub-accounts as are necessary for the proper  administration  of the
Plan.  As  of  the  last  business  day  of  each  calendar  quarter,  the  Plan
Administrator  shall  provide the  Participant  with a  statement  of his or her
Account  reflecting  the income,  gains and losses  (realized  and  unrealized),
amounts  of  deferrals,  and  distributions  of such  Account  since  the  prior
statement.

5.2      Investments

The assets of the Trust  shall be invested  in such  investments  as the Trustee
shall  determine.  The  Trustee  may  (but  is not  required  to)  consider  the
Employer's or a Participant's  investment  preferences when investing the assets
attributable to a Participant's Account.

ARTICLE 6 - VESTING

6.1      General

A Participant shall be immediately  vested in, i.e., shall have a nonforfeitable
right to, all Elective Deferrals,  and all income and gain attributable thereto,
credited to his or her Account. A Participant shall become vested in the portion
of his or her Account  attributable  to Matching  Deferrals  and income and gain
attributable thereto in accordance with the schedule selected by the Employer in
the Adoption  Agreement,  subject to earlier vesting in accordance with Sections
6.3, 6.4, and 6.5.

6.2      Vesting Service

For  purposes of applying  the vesting  schedule in the  Adoption  Agreement,  a
Participant  shall be  considered  to have  completed a Year of Service for each
complete year of full-time  service with the Employer of an Affiliate,  measured
from the Participant's  first date of such employment,  unless the Employer also
maintains a 401(k) plan that is qualified  under section  401(a) of the Internal
Revenue  Code in which the  Participant  participates,  in which  case the rules
governing  vesting service under that plan shall also be controlling  under this
Plan.

6.3      Change of Control

A Participant shall become fully vested in his or her Account  immediately prior
to a Change of Control of the Employer.

6.4      Death or Disability

A Participant shall become fully vested in his or her Account  immediately prior
to termination of the  Participant's  employment by reason of the  Participant's
death or Total and Permanent Disability.  Whether a Participant's termination of
employment  is by reason of the  Participant's  Total and  Permanent  Disability
shall be determined by the Plan Administrator in its sole discretion.

6.5      Insolvency

A Participant shall become fully vested in his or her Account  immediately prior
to the Employer becoming insolvent,  in which case the Participant will have the
same rights as a general  creditor of the  Employer  with  respect to his or her
Account balance.

ARTICLE 7 - PAYMENTS

7.1      Election  as to Time and Form of Payment

A  Participant  shall  elect  (on the  Election  Form  used to  elect  to  defer
Compensation  under  Section 4.1) the date at which the Elective  Deferrals  and
vested Matching  Deferrals  (including any earnings  attributable  thereto) will
commence to be paid to the Participant.
The Participant shall also elect thereon for payments to be paid in either:

a.       a single lump-sum payment; or

b.       annual  installments  over a period elected by the Participant up to 10
         years,  the amount of each  installment  to equal the balance of his or
         her Account  immediately prior to the installment divided by the number
         of installments remaining to be paid.

Each such  election will be effective for the Plan Year for which it is made and
succeeding  Plan Years,  unless changed by the  Participant.  Any change will be
effective only for Elective  Deferrals and Matching Deferrals made for the first
Plan Year  beginning  after the date on which the Election Form  containing  the
change is filed with the Plan Administrator. Except as provided in Sections 7.2,
7.3, 7.4, or 7.5, payment of a Participant's Account shall be made in accordance
with the Participant's elections under this Section 7.1.

7.2      Change of Control

As soon as  possible  following  a  Change  of  Control  of the  Employer,  each
Participant  shall be paid his or her  entire  Account  balance  (including  any
amount vested pursuant to Section 6.3) in a single lump sum.

7.3      Termination of Employment

Upon  termination of a Participant's  employment for any reason other than death
and prior to the  attainment  of the  Retirement  Age  specified in the Adoption
Agreement,  the  vested  portion of the  Participant's  Account  (including  any
portion  vested  pursuant to Section 6.4 as a consequence  of the  Participant's
Total and Permanent  Disability)  shall be paid to the  Participant  in a single
lump  sum as soon  as  practicable  following  the  date  of  such  termination;
provided,  however, that the Plan Administrator in its sole discretion,  may pay
out a Participant's  Account balance in annual installments if the Participant's
employment  terminates  by  reason  of the  Participant's  Total  and  Permanent
Disability.

7.4      Death

If a Participant dies prior to the complete  distribution of his or her Account,
the  balance  of the  Account  shall  be  paid as  soon  as  practicable  to the
Participant's  designated  beneficiary or beneficiaries,  in the form elected by
the Participant under either of the following options:

a.       a single lump-sum payment; or

b.       annual  installments  over a period elected by the Participant up to 10
         years,  the  amount of each  installment  to equal the  balance  of the
         Account  immediately prior to the installment  divided by the number of
         installments remaining to be paid.

Any designation of beneficiary and form of payment to such beneficiary  shall be
made by the  Participant  on an Election Form filed with the Plan  Administrator
and may be changed by the  Participant  at any time by filing  another  Election
Form containing the revised instructions.  If no beneficiary is designated or no
designated  beneficiary  survives the Participant,  payment shall be made to the
Participant's surviving spouse, or, if none, to his or her issue per stirpes, in
a single payment. If no spouse or issue survives the Participant,  payment shall
be made in a single lump sum to the Participant's estate.

7.5      Unforeseen Emergency

If a Participant  suffers an unforeseen  emergency,  as defined herein, the Plan
Administrator,  in its sole  discretion,  may pay to the  Participant  only that
portion,  if any,  of the vested  portion of his or her  Account  which the Plan
Administrator  determines is necessary to satisfy the emergency need,  including
any amounts necessary to pay any federal, state or local income taxes reasonably
anticipated  to  result  from the  distribution.  A  Participant  requesting  an
emergency  payment  shall apply for the payment in writing in a form approved by
the Plan Administrator and shall provide such additional information as the Plan
Administrator  may  require.   For  purposes  of  this  paragraph,   "unforeseen
emergency" means an immediate and heavy financial need resulting from any of the
following:

a.       expenses  which are not covered by insurance and which the  Participant
         or his or  spouse  or  dependent  has  incurred  as a result  of, or is
         required to incur in order to receive, medical care;

b.       the need to prevent eviction of a Participant from his or her principal
         residence or foreclosure on the mortgage of the Participant's principal
         residence; or

c.       any other  circumstance that is determined by the Plan Administrator in
         its sole discretion to constitute an unforeseen  emergency which is not
         covered by  insurance  and which cannot  reasonably  be relieved by the
         liquidation of the Participant's assets.

7.6      Forfeiture of Non-vested Amounts

To the extent  that any  amounts  credited  to a  Participant's  Account are not
vested at the time such amounts are otherwise payable under Sections 7.1 or 7.3,
such  amounts  shall be  forfeited  and shall be used to satisfy the  Employer's
obligation to make contributions to the Trust under the Plan.

7.7      Taxes

All federal,  state or local taxes that the Plan  Administrator  determines  are
required to be withheld  from any payments made pursuant to this Article 7 shall
be withheld.

7.8      Limitation on Distributions

The total amount of  distributions  from the Plan to any  individual  during any
Plan  year  when  added  to all  other  taxable  compensation  received  by that
individual  from the Company during that Plan year shall be limited so the total
amount of  compensation  for that  individual  can be deducted by the Company as
compensation  expense  during that same period for Federal  Income Tax reporting
purposes.

ARTICLE 8 - PLAN ADMINISTRATOR

8.1      Plan Administration and Interpretation

The Plan  Administrator  shall oversee the  administration of the Plan. The Plan
Administrator  shall have complete control and authority to determine the rights
and benefits and all claims,  demands and actions  arising out of the provisions
of the Plan of any  Participant,  beneficiary,  deceased  Participant,  or other
person  having  or  claiming  to have any  interest  under  the  Plan.  The Plan
Administrator shall have complete discretion to interpret the Plan and to decide
all matters under the Plan.  Such  interpretation  and decision  shall be final,
conclusive  and binding on all  Participants  and any person  claiming  under or
through any  Participant,  in the absence of clear and convincing  evidence that
the Plan  Administrator  acted arbitrarily and  capriciously.  Any individual(s)
serving as Plan  Administrator  who is a Participant will not vote or act on any
matter  relating solely to himself or herself.  When making a  determination  or
calculation,  the Plan  Administrator  shall be entitled to rely on  information
furnished by a Participant, a beneficiary, the Employer or the Trustee. The Plan
Administrator shall have the responsibility for complying with any reporting and
disclosure requirements of ERISA.

8.2      Powers, Duties, Procedures, Etc.

The Plan  Administrator  shall have such powers and duties, may adopt such rules
and  tables,  may act in  accordance  with such  procedures,  may  appoint  such
officers  or agents,  may  delegate  such powers and  duties,  may receive  such
reimbursements  and  compensation,  and shall  follow  such  claims  and  appeal
procedures with respect to the Plan as it may establish.

8.3      Information

To enable the Plan  Administrator  to perform its functions,  the Employer shall
supply  full and timely  information  to the Plan  Administrator  on all matters
relating to the  compensation of  Participants,  their  employment,  retirement,
death,  termination of employment,  and such other  pertinent  facts as the Plan
Administrator may require.

8.4      Indemnification of Plan Administrator

The Employer  agrees to indemnify and to defend to the fullest extent  permitted
by law any officer(s) or employee(s) who serve as Plan Administrator  (including
any such  individual  who  formerly  served as Plan  Administrator)  against all
liabilities,  damages, costs and expenses (including attorney's fees and amounts
paid in settlement of any claims approved by the Employer) occasioned by any act
or omission to act in  connection  with the Plan,  if such act or omission is in
good faith.

ARTICLE 9 - AMENDMENTS AND TERMINATION

9.1      Amendments

The Employer  shall have the right to amend the Plan from time to time,  subject
to Section  9.3,  by an  instrument  in writing  which has been  executed on the
Employer's behalf by its duly authorized officer.

9.2      Termination of Plan

This Plan is strictly a voluntary  undertaking  on the part of the  Employer and
shall not be deemed to  constitute  a  contract  between  the  Employer  and any
Eligible  Employee  (or  any  other  employee)  or a  consideration  for,  or an
inducement or condition of employment  for, the  performance  of the services by
any Eligible  Employee (or other employee).  The Employer  reserves the right to
terminate  the Plan at any time,  subject to Section  9.3, by an  instrument  in
writing which has been executed on the Employer's  behalf by its duly authorized
officer.  Upon  termination,  the Employer may (a) elect to continue to maintain
the Trust to pay  benefits  hereunder  as they become due as if the Plan had not
terminated or (b) direct the Trustee to pay promptly to  Participants  (or their
beneficiaries)  the  vested  balance  of their  Accounts.  For  purposes  of the
preceding  sentence,  in the event the Employer chooses to implement clause (b),
the Account  balances of all  Participants who are in the employ of the Employer
at the time the Trustee is  directed to pay such  balances  shall  become  fully
vested and  nonforfeitable.  After Participants and their beneficiaries are paid
all Plan benefits to which they are entitled,  all remaining assets of the Trust
attributable to Participants  who terminated  employment with the Employer prior
to termination of the Plan and who were not fully vested in their Accounts under
Article 6 at that time shall be returned to the Employer.

9.3      Existing Rights

No amendment or termination of the Plan shall adversely affect the rights of any
Participant  with  respect  to  amounts  that have been  credited  to his or her
Account prior to the date of such amendment or termination.

ARTICLE 10 - MISCELLANEOUS

10.1     No Funding

The  Plan  constitutes  a mere  promise  by the  Employer  to make  payments  in
accordance with the terms of the Plan and Participants and  beneficiaries  shall
have the status of general unsecured  creditors of the Employer.  Nothing in the
Plan will be construed  to give any  employee or any other person  rights to any
specific assets of the Employer or of any other person. In all events, it is the
intent of the Employer that the Plan be treated as unfunded for tax purposes and
for purposes of Title I of ERISA.

10.2     Non-assignability

None of the  benefits,  payments,  proceeds  or  claims  of any  Participant  or
beneficiary  shall be subject to any claim of any creditor of any Participant or
beneficiary  and, in particular,  the same shall not be subject to attachment or
garnishment  or other  legal  process by any  creditor  of such  Participant  or
beneficiary,  nor  shall  any  Participant  or  beneficiary  have  any  right to
alienate, anticipate, commute, pledge, encumber or assign any of the benefits or
payments or  proceeds  which he or she may expect to  receive,  contingently  or
otherwise, under the Plan.

10.3     Limitation of Participants' Rights

Nothing  contained  in the  Plan  shall  confer  upon  any  person a right to be
employed or to continue in the employ of the  Employer,  or interfere in any way
with the right of the Employer to terminate the  employment of a Participant  in
the Plan at any time, with or without cause.

10.4     Participants Bound

Any  action  with  respect to the Plan  taken by the Plan  Administrator  or the
Employer or the Trustee or any action authorized by or taken at the direction of
the Plan Administrator, the Employer or the Trustee shall be conclusive upon all
Participants and beneficiaries entitled to benefits under the Plan.

10.5     Receipt and Release

Any payment to any  Participant or beneficiary in accordance with the provisions
of the Plan shall, to the extent thereof,  be in full satisfaction of all claims
against the Employer, the Plan Administrator and the Trustee under the Plan, and
the Plan  Administrator  may  require  such  Participant  or  beneficiary,  as a
condition  precedent to such  payment,  to execute a receipt and release to such
effect.   If  any   Participant   or  beneficiary  is  determined  by  the  Plan
Administrator  to be  incompetent  by reason of  Physical  or mental  disability
(including minority) to give a valid receipt and release, the Plan Administrator
may cause the  payment or  payments  becoming  due to such  person to be made to
another person for his or her benefit without  responsibility on the part of the
Plan  Administrator,  the Employer or the Trustee to follow the  application  of
such funds.

10.6     Governing Law

The Plan shall be construed,  administered,  and governed in all respects  under
and by the laws of the state in which the Employer  maintains  its primary place
of business. If any provision shall be held by a court of competent jurisdiction
to be invalid or unenforceable,  the remaining  provisions hereof shall continue
to be fully effective.

10.7     Headings and Subheadings

Headings and subheadings in this Plan are inserted for convenience  only and are
not to be considered in the construction of the provisions hereof.


               THE GCI SPECIAL NON-QUALIFIED DEFERRED COMPENSATION
                             PLAN ADOPTION AGREEMENT



1.       EMPLOYER INFORMATION


A.       Name of Plan: The GCI Special Non-Qualified Deferred Compensation Plan


B.       Name and  Address  of  employer  sponsoring  the Plan.  Please  provide
         employer's business name.

         General Communication, Inc.
         Business Name

         2550 Denali Street, Suite 1000
         Address

         Anchorage
         City

         Alaska            99503
         State             Zip Code

C.       Provide employer's primary contact for the Plan and telephone and FAX
         numbers.  Also include the employer's Tax Identification Number.

         John M. Lowber
         Primary Contact

         Sr. V.P. & CFO
         Title

         907-265-5628
         Telephone

         907-265-5676
         FAX

         92-0072737
         Employer Tax Identification Number

D.       Give the first day of the 12-month  period for which the employer  pays
         taxes: January 1

2.       PLAN INFORMATION

A.       What is the effective date of the Plan?
         February 9, 1995

B.       Plan Years Ends.  Your "Plan Year" is the 12  consecutive-month  period
         for which you credit  elective  and  matching  deferrals  and keep Plan
         records. Enter the last day of your Plan Year. December 31

3.       ELIGIBLE EMPLOYEES

         Those  key  employees  of the  Company  selected  by  the  Compensation
         Committee of the Board of Directors.

4.       COMPENSATION

         Compensation  is used to determine  the amount of Elective  Deferrals a
         Participant  can elect.  Compensation  under the Plan is defined as the
         Participant's wages, salaries, fees for professional services and other
         amounts received (without regard to whether or not an amount is paid in
         cash)  for  personal  services  actually  rendered  in  the  course  of
         employment  with the  Employer or an  Affiliate  to the extent that the
         amounts are  includable in gross  income,  including but not limited to
         commissions  paid to  salespersons,  compensation  for  services on the
         basis of a percentage of profits and bonuses,  but not including  those
         items excludable from the definition of compensation  under Treas. Reg.
         section 1.415-2(d)(3).  For purposes of the Plan,  Compensation will be
         determined before giving effect to Elective  Deferrals and other salary
         reduction  amounts  which are not included in the  Participant's  gross
         income under Code section 125, 401(k), 402(h) or 403(b).

5.       CONTRIBUTIONS

A.       Elective Deferrals. Participants may elect to reduce their Compensation
         and to have Elective  Deferrals credited to their Accounts by making an
         election  under the Plan (which may be changed each year for later Plan
         Years as described in the plan), but no Participant may defer more than
         100% of his or her Compensation for a Plan Year.

B.       Matching Deferrals.  The Employer will decide from year to year whether
         Matching Deferrals will be made and will notify  Participants  annually
         of the manner in which Matching  Deferrals,  if any, will be calculated
         for the subsequent year.

C.       Discretionary   Incentive    Contributions.  The  Employer   may   make
         Discretionary  Incentive  Contributions  in any  amounts  the  Employer
         selects.  These  contributions  will be subject to the vesting schedule
         selected in Item 6C.

6.       VESTING OF MATCHING DEFERRALS AND DISCRETIONARY INCENTIVE CONTRIBUTIONS

A.       Vesting Schedule for Matching Deferrals.  Matching Deferrals shall vest
         on a case by case basis as specified by the Employer.

B.       Vesting  Service.  Service  with a  predecessor  employer  will  not be
         considered.

C.       Vesting   Schedule   for   Discretionary    Incentive    Contributions.
         Discretionary   Incentive  Contributions  vest  in  accordance  with  a
         schedule adopted by the Employer on a case by case basis.

7.       ACCOUNTS

         The Trustee can either invest each  Participant's  Account balance as a
         separate  account (in which case the Trustee,  could,  but would not be
         required to, take into consideration the investment  preferences of the
         Participants)  or invest the Account  balances of all Participants as a
         single fund (in which case the Trustee could, but would not be required
         to, take into consideration the investment  preference of the Employer)
         Account balances are to be invested separately.

8.       RETIREMENT AGE

         The Retirement Age under the Plan is age 60.

9.       WITHDRAWALS WHILE WORKING

         Withdrawals for Unforeseen Emergency. Participants may make withdrawals
         while working in the event they encounter an unforeseen emergency. They
         generally can withdraw the vested portions of their Accounts.

         NOTE:  Withdrawals  are  strictly  limited as described in Plan Section
         7.5. It is the Plan  Administrator's  responsibility to ensure that the
         limits are being followed. Excess withdrawals may result in loss of the
         tax deferral on all amounts  credited under the Plan for the benefit of
         all Participants.

         Withdrawals  of the  vested  portion  of a  Participant's  Account  for
         unforeseen emergencies are permitted to the full extent allowable under
         the plan.

10.      ADMINISTRATION

         Plan  Administrator.  The Plan Administrator is legally responsible for
         the operation of the Plan, including:

         - Keeping track of which  employees are eligible to  participate in the
         Plan and the date each employee becomes eligible to participate.

         -  Maintaining  Participants'  Accounts,   including  all  sub-accounts
         required for different  contribution types and payment  elections,  and
         keeping track of all elections made by Participants  under the Plan and
         any other relevant information.

         -  Transmitting  important  communications  to  the  Participants,  and
         obtaining  relevant  information from  Participants  such as changes in
         investment selections:

         - Filing  important  reports  required to be submitted to  governmental
         agencies.

         The Plan Administrator will be the person identified below:

         John M. Lowber
         Name

         Sr. Vice President & Chief Financial Officer
         Title


11.      SIGNATURES

         After reviewing the Adoption Agreement, enter the name of the Employer.
         The  signature of the Employer or person  signing for the Employer must
         be witnessed.

         General Communication, Inc.
         Name of Employer



         By:

         /s/ Ronald A. Duncan
         Authorized Signature

         Ronald A. Duncan, President
         Print Name and Title

         WITNESS:

         /s/ John M. Lowber
         John M. Lowber, SVP & CFO
         Print Name and Title




                      SECOND AMENDMENT TO CREDIT AGREEMENT
                      ------------------------------------
 
         THIS SECOND  AMENDMENT TO AMENDED AND RESTATED  CREDIT  AGREEMENT (this
"Amendment")  is dated as of the 31st day of October,  1995,  and  entered  into
among GCI Communication Corp., an Alaskan corporation (herein, together with its
successors  and  assigns,  called the  "Company"),  the Banks (as defined in the
Credit  Agreement  as defined  below),  NATIONSBANK  OF TEXAS,  N.A., a national
banking  association,  as  Administrative  Agent for  itself  and the Banks (the
"Administrative Agent").

                                   WITNESSETH:
                                   ---------- 

         WHEREAS,  the Company,  the Banks, and the Administrative Agent entered
  into an Amended  and  Restated  Credit  Agreement,  dated April 30,  1993,  as
  amended by that  certain  First  Amendment  to Credit  Agreement,  dated as of
  October 3, 1994 (as further amended,  restated or otherwise modified from time
  to time, the "Credit Agreement");

         WHEREAS, the Company has requested that the Credit Agreement be amended
to provide  for an  increase  and  changes  in the letter of credit  provisions,
changes in certain financial covenants and certain other changes;

         WHEREAS,  the Banks,  the  Administrative  Agent and the  Company  have
  agreed to modify the Credit  Agreement upon the terms and conditions set forth
  below;

         NOW, THEREFORE,  for valuable  consideration hereby  acknowledged,  the
  Company, the Banks and the Administrative Agent agree as follows:

          SECTION 1. Definitions.

         (a)  In  General.  Unless  specifically  defined  or  redefined  below,
  capitalized  terms used herein shall have the meanings ascribed thereto in the
  Credit Agreement.

         (b)  Definition of Aggregate  Commitment . The definition of "Aggregate
  Commitment"  on page 2 of the Credit  Agreement is hereby amended and restated
  in its entirety as follows:

                "Aggregate Commitment" means the aggregate of the Commitments of
         all the Banks  hereunder,  as such Aggregate  Commitment may be reduced
         pursuant to Section 2.1(f) of this Agreement.

         (c) Definition of Commitment.  The definition of "Commitment" on page 5
  of the Credit  Agreement  is hereby  amended and  restated in its  entirety as
  follows:

                "Commitment" means, for each Bank, the obligation of the Bank to
          make Loans and issue Facility  Letters of Credit not exceeding its pro
          rata part of $15,750,000,  as such amount may be modified from time to
          time,  as specified  and set forth in any  Assignment  and  Acceptance
          Agreement, or any amendment to this Agreement.

         (d) Definition of Facility Letter of Credit Commitment . The definition
  of "Facility Letter of Credit Commitment" on page 7 of the Credit Agreement is
  hereby amended and restated in its entirety as follows:

                "Facility Letter of Credit  Commitment" means an amount equal to
           $3,000,000, as such amount may be reduced by the Company from time to
           time.

         (e) Definition of Fixed Charges.  The definition of "Fixed  Charges" on
  page 8 of the Credit  Agreement is hereby amended and restated in its entirety
  as follows:

                "Fixed Charges" means,  for any period,  the sum of (A) interest
          expense  on all  Indebtedness  of the  Parent,  the  Company  and  the
          Subsidiaries,  (B) scheduled principal payments on all Indebtedness of
          the  Parent,  the  Company  and its  Subsidiaries,  plus  (C)  Capital
          Expenditures  paid by the  Company or any  Subsidiary,  minus the cash
          balance in the Company and its Subsidiaries as of any such quarter end
          upon which such determination is made.

         (f) Definition of Loan Documents. The definition of "Loan Documents" on
  page 11 of the Credit Agreement is hereby amended and restated in its entirety
  as follows:

                "Loan  Documents"  means this Agreement,  the Notes,  the Second
          Facility  Loan Notes,  the Pledge and Security  Agreement,  the Parent
          Pledge Agreement,  the Assignment and Security  Agreement  executed by
          the Company,  any Guaranties of the Obligations,  the Fee Letter, Rate
          Hedging  Agreements  executed by the Company with any Bank,  any other
          fee letter, the Facility Letters of Credit, the Second Facility Letter
          of Credit and all Applications  and other  agreements  relating to the
          Facility  Letters of Credit and the Second  Facility Letter of Credit,
          notes, instruments, documents and other items executed or delivered by
          any Person in connection herewith, as any such documents, instruments,
          notes or items may be  amended,  substituted,  modified,  replaced  or
          extended from time to time.

         (g) Definition of Obligations.  The definition of "Obligations" on page
  12 of the Credit  Agreement is hereby  amended and restated in its entirety as
  follows:

                    "Obligations"  means all unpaid principal of and accrued and
          unpaid  interest  on  the  Notes,  all  obligations   under  the  Loan
          Documents, including, without limitation, all accrued and unpaid fees,
          all  Reimbursement  Obligations,   Second  Reimbursement  Obligations,
          Facility  Letter  of Credit  Obligations,  Second  Facility  Letter of
          Credit  Obligations  and all other  obligations  of the  Company,  the
          Parent  and  the  Subsidiaries  to the  Banks  or to any  Bank  or the
          Administrative  Agent arising under or in connection with the Facility
          Letters  of  Credit,   the  Second  Facility  Letter  of  Credit,  the
          Applications,   the  Notes,  the  Second  Facility  Loan  Notes,  this
          Agreement,  any Guaranties of the Obligations,  the Loan Documents and
          Rate Hedging Obligations which are owed to any Bank, including without
          limitation,  interest,  fees and other  charges  that would  accrue or
          become  owing  both  prior  to and  subsequent  to  and  but  for  the
          commencement of any proceeding against or with respect to the Company,
          the  Parent,  or any of their  Subsidiaries  under any  chapter of the
          Bankruptcy  Code of 1978, 11 U.S.C.  Sec. 101 et. seq whether or not a
          claim is  allowed  for the same in any such  proceeding  to the extent
          permitted by law.

         (h)  Definition of Note. The definition of "Note" on pages 11 and 12 of
  the Credit  Agreement  is hereby  amended  and  restated  in its  entirety  as
  follows:

                "Note" means (a) a promissory note in substantially  the form of
          Exhibit "A" hereto,  duly executed and delivered to the Administrative
          Agent by the  Company and payable to the order of a Bank in the amount
          of its  Commitment,  or (b) any Second Facility Loan Note, or both, as
          applicable  in the context,  including  any  amendment,  modification,
          extension, renewal or replacement of all of such promissory notes.

         (i) Definition of Required Banks. The definition of "Required Banks" on
  page 14 of the Credit Agreement is hereby amended and restated in its entirety
  as follows:

            "Required  Banks"  means  Banks in the  aggregate  holding  at least
          66-2/3% of the sum of (a) the aggregate unpaid principal amount of the
          outstanding  Advances  and  (b) the  aggregate  unpaid  amount  of the
          Reimbursement  Obligations plus the Second Reimbursement  Obligations,
          or, if no  Advances,  Facility  Letter of  Credit  Obligations  or the
          Second  Facility  Letter  of  Credit  are  outstanding,  Banks  in the
          aggregate having least 66-2/3% of the Aggregate Commitment.

         (j)  Definition of Second  Facility  Letter of Credit  Commitment.  The
  definition of "Second Facility Letter of Credit  Commitment" shall be added in
  its  entirety  to page 14 of the Credit  Agreement  in  alphabetical  order as
  follows:

                "Second  Facility Letter of Credit  Commitment"  means an amount
           equal to  $10,080,000,  as such  amount may be reduced by the Company
           from time to time.

         (k) Definition of Second Facility  Letter of Credit.  The definition of
  "Second  Facility  Letter of Credit" shall be added in its entirety to page 14
  of the Credit Agreement in alphabetical order as follows:

                    "Second  Facility  Letter  of  Credit"  means  that  certain
          irrevocable  stand-by  NationsBank  of  Texas,  N.A.  Letter of Credit
          issued  or to be  issued  for the  benefit  of  Hughes  Communications
          Galaxy,  Inc. for the account of the Company,  in the original maximum
          face amount of $9,100,000.

         (1) Definition of Second  Facility  Letter of Credit  Obligations.  The
  definition of "Second Facility Letter of Credit Obligations" shall be added in
  its  entirety  to page 14 of the Credit  Agreement  in  alphabetical  order as
  follows:

                 "Second Facility Letter of Credit Obligations" means, as at the
          time of  determination  thereof,  all  liabilities,  whether actual or
          contingent,  of the  Company  to  the  Banks  with  respect  to  their
          interests  in the  Second  Facility  Letter  of  Credit  as  Issuer or
          participant,  including  the sum of (a)  unpaid  Second  Reimbursement
          Obligations  and  (b)  the  aggregate   undrawn  face  amount  of  the
          outstanding Second Facility Letter of Credit.

         (m)  Definition  of Second  Facility  Loan.  The  definition of "Second
  Facility  Loan"  shall  be  added  in its  entirety  to page 14 of the  Credit
  Agreement in alphabetical order as follows:

                "Second  Facility  Loan" has the  meaning  ascribed  thereto  in
          Section 2.1(a)(ii) of this Agreement.

         (n) Definition of Second  Facility Loan Note. The definition of "Second
  Facility  Loan Note"  shall be added in its  entirety to page 14 of the Credit
  Agreement in alphabetical order as follows:

                "Second  Facility  Loan  Note"  means  promissory  notes in form
          acceptable to the Administrative  Agent evidencing the Second Facility
          Loan, duly executed and delivered to the Administrative Agent and each
          Bank in the amount of each  Bank's pro rata  percentage  of the Second
          Facility  Loan,  including  any  amendment,  modification,  extension,
          renewal or replacement of any of such promissory notes.

         (o) Definition of Second Reimbursement  Obligations.  The definition of
  "Second  Reimbursement  Obligations" shall be added in its entirety to page 14
  of the Credit Agreement in alphabetical order as follows:

                "Second  Reimbursement  Obligations"  means,  at any  time,  the
          aggregate of the obligations of the Company to the Banks in respect of
          all unreimbursed  payments or disbursements made by the Banks under or
          pursuant to the Second Facility Letter of Credit.

          SECTION 2.  Heading on Page 1. The  number  $15,000,000  on the top of
  page 1 of the Credit  Agreement is hereby amended and restated in its entirety
  to read $25,830,000.

         SECTION 3. Sections  2.1,  2.2.,  2.3, 2.4 and 2.5.  Sections 2.1, 2.2,
  2.3,  2.4 and 2.5 on pages 15 through 22 of the  Credit  Agreement  are hereby
  amended and restated in their entirety to read as follow:

          2.1. Loans.

          (a) (i) Loans Prior to Maturity  Date.  From and including the date of
          this  Agreement and prior to the Maturity  Date,  each Bank  severally
          agrees,  subject  to the  terms  and  conditions  set  forth  in  this
          Agreement,  to make Loans to the Company  from time to time in amounts
          not to exceed in the aggregate at any one time  outstanding the amount
          of its Available  Commitment.  Subject to the terms of this Agreement,
          the  Company may  borrow,  repay and  reborrow up to the amount of the
          Aggregate Available Commitment at any time prior to the Maturity Date.

          (ii) Loans Upon Draws Under the Second Facility  Letter of Credit.  So
          long as (A) there  exists no Unmatured  Default or Default  under this
          Agreement both before and immediately  after giving effect to any such
          loan, (B) the Second  Facility  Letter of Credit has been  terminated,
          (C) there has been a draw under the Second  Facility Letter of Credit,
          and (D) each Bank has received a duly  completed  and executed  Second
          Facility Loan Note, and subject to the terms of this  Agreement,  each
          Bank severally  agrees to make a term Loan to the Company in an amount
          not to exceed in the  aggregate,  the draw under the  Second  Facility
          Letter of Credit (the "Second Facility  Loan").  Amounts repaid by the
          Company  under  the  Second  Facility  Loan  are  not  entitled  to be
          reborrowed by the Company.

         (b) Ratable Loans.  Each Advance  hereunder shall consist of Loans made
  from  the  several  Banks  ratably  in  proportion  to the  ratio  that  their
  respective Commitments bear to the Aggregate Commitment.

         (c) Rate Options;  Interest  Period  Payments.  Each Advance shall bear
  interest  at either the  Floating  Rate,  the Fixed CD Rate or the  Eurodollar
  Rate, as the Company may select in accordance with the terms of Section 2.l(h)
  of this  Agreement.  Each Advance  shall be paid in full by the Company on the
  last day of the Interest Period applicable thereto.

          (d) Interest Recapture. If at any time the applicable rate of interest
  under the Agreement on any portion of the Obligations (the "Designated  Rate")
  exceeds the Highest  Lawful Rate, the rate of interest on any Advance shall be
  limited to the Highest  Lawful  Rate,  but any  subsequent  reductions  in the
  Designated  Rate  shall not  reduce  the rate of  interest  thereon  below the
  Highest  Lawful  Rate  until the total  amount of  interest  paid and  accrued
  thereon equals the amount of interest which would have accrued  thereon if the
  Designated Rate had at all times been in effect. In the event that at maturity
  (stated  or  by  acceleration  or  otherwise),  or at  final  payment  of  the
  Obligations,  the total  amount of interest  paid and accrued is less than the
  amount of interest which would have accrued if the Designated  Rate had at all
  times been in effect,  then, at such time and to the extent  permitted by law,
  the Company shall pay to the Banks an amount equal to the  difference  between
  (i) the  lesser of the amount of  interest  which  would  have  accrued if the
  Designated  Rate had at all times been in effect  and the  amount of  interest
  which would have  accrued if the Highest  Lawful Rate had at all times been in
  effect, and (ii) the amount of interest actually paid on the Obligations.

          (e) Mandatory Principal Payments.

                (i) If the  Company  shall grant or  implement a material  price
           decrease in MTS Service and the Company shall fail to  demonstrate to
           the  satisfaction  of the Required  Banks,  by projections  employing
           revised revenue  forecasts based upon such price decrease that, after
           giving effect  thereto,  the Company will be in  compliance  with the
           provisions of Section 7.4 for the remaining  term of this  Agreement,
           then the Company shall either (i) make a mandatory  prepayment on the
           Advances  outstanding in such amount as the Required Banks shall deem
           necessary to accomplish compliance with the provisions of Section 7.4
           or (ii) furnish the Banks with cash  collateral in such amount as the
           Required  Banks  shall deem  satisfactory.  Mandatory  payments  made
           pursuant to this Section 2.1.(e)(i) may not be reborrowed.

                (ii)  Upon  any  reduction  in  the   Aggregate   Commitment  in
           accordance with the terms of Section 2.1(f) below,  the Company shall
           immediately  pay any  amount  necessary  to  reduce  the  outstanding
           Obligations  to an  amount  equal  to or  less  than  the  sum of the
           Aggregate  Available  Commitment  plus the Second  Facility Letter of
           Credit or Second  Reimbursement  Obligations,  together with interest
           and fees accrued through such date on such amount repaid.

                (iii) All  outstanding  Obligations  shall be due and payable in
           full on the Maturity Date.

                (iv)  The  Company  may from  time to time  pay all  outstanding
           Floating  Rate  Advances,  or,  in  a  minimum  aggregate  amount  of
           $100,000,  or any  integral  multiple  thereof,  any  portion  of the
           outstanding  Floating  Rate  Advances  upon one Business  Day's prior
           notice  to the  Administrative  Agent  without  penalty  or  premium.
           Subject to the terms of Section  4.3,  the  Company  may from time to
           time pay all Fixed Rate Advances,  or, in a minimum  aggregate amount
           of  $1,000,000,  or any  integral  multiple  of  $100,000  in  excess
           thereof,  any portion of the  outstanding  Fixed Rate  Advances  upon
           three Business Days' prior written notice.

                (v)  All  Reimbursement  Obligations  and  Second  Reimbursement
           Obligations  shall  be due  and  payable  on the  earlier  of (A) the
           Maturity Date or (B) demand by the Administrative Agent.

                (vi) If at any time the Company or any  Subsidiary  sells assets
           or properties not in the ordinary  course of business,  which, in the
           aggregate  for any fiscal year of the Company,  exceeds a gross sales
           price of $500,000, the Company shall immediately make a prepayment on
           the Second Facility Loan (or, if the Second Facility Letter of Credit
           shall not have been drawn upon,  the Company  shall  establish a cash
           collateral  account  with the  Administrative  Agent to secure a draw
           against the Second  Facility  Loan) in an amount equal to 100% of the
           net  proceeds  of each such sale until the Second  Facility  Loan has
           been repaid in full (or is 100% cash collateralized).

         (f) Reduction of Commitment

           (i)  Optional.  The  Company  may  permanently  reduce the  Aggregate
         Commitment in whole,  or in part ratably  among the Banks,  in integral
         multiples of $500,000,  upon at least ten Business Days' written notice
         to the Administrative Agent, which shall specify the amount of any such
         reduction,   provided,  however,  that  the  amount  of  the  Aggregate
         Commitment may not be reduced below the outstanding principal amount of
         the Advances  outstanding  thereunder.  No  reduction in the  Aggregate
         Commitment shall reduce the Facility Letter of Credit Commitment unless
         (A) there are no outstanding Facility Letters of Credit and (B) (I) the
         Company shall designate such Aggregate  Commitment reduction in writing
         to  apply to the  Facility  Letter  of  Credit  Commitment  or (II) the
         Facility  Letter  of  Credit  Commitment  shall be the only part of the
         Aggregate  Commitment  that has not been  reduced to zero.  All accrued
         fees shall be payable on the effective  date of any  termination of the
         Aggregate Commitment.

           (ii) Mandatory.

                (A) Scheduled Reduction.  Notwithstanding any other provision of
         this  Agreement   reducing  the  Aggregate   Commitment  or  otherwise,
         commencing  June 30,  1993 and on each  Payment  Date  thereafter,  the
         Aggregate  Commitment  shall be  permanently  reduced by the amount set
         forth  opposite the  applicable  Payment Date below until the Aggregate
         Commitment is reduced to zero. the Aggregate  Commitment shall never be
         less  than  zero.  Once  reduced,  the  Aggregate  Commitment  (or  the
         Commitment of any Bank) may not be reinstated.

                                                           Amount of Commitment 
          Payment Dates                                             Reduction 

          June 30, 1993                                              $650,000
          September 30, 1993                                         $650,000
          December 31, 1993                                          $650,000
          March 31, 1994                                             $650,000
          June 30, 1994                                              $650,000
          September 30, 1994                                         $650,000
          December 31, 1994                                          $650,000
          March 31, 1995                                             $650,000
          June 30, 1995                                              $650,000
          September 30, 1995                                         $650,000
          December 31, 1995                                          $650,000
          March 31, 1996                                             S650,000
          June 30, 1996                                              $650,000
          September 30, 1996                                         $650,000
          December 31, 1996                                          $650,000
          March 31, 1997                                             $812,500
          June 30, 1997                                              $812,500
          September 30, 1997                                         $812,500
          December 31, 1997                            All remaining amounts in
                                                       excess of zero

                    (B) Asset Sales. After the Second Facility Loan is repaid in
          full,  if at any time the Company or any  Subsidiary  sells  assets or
          properties  not in the  ordinary  course of  business,  which,  in the
          aggregate  for any fiscal year of the  Company,  exceeds a gross sales
          price of  $500,000,  the  Aggregate  Commitment  shall be  immediately
          reduced by an amount  equal to 100% of the net  proceeds  of each such
          sale until the Aggregate Commitment is zero.

                    (C) Expiration of Facility  Letters of Credit.  At such time
          as the  Company  permits  all of the  Facility  Letters  of  Credit to
          terminate according to their terms (or such Facility Letters of Credit
          are  replaced  or  substituted  by  Letters  of  Credit  issued  by an
          institution other than  Administrative  Agent), the Facility Letter of
          Credit Commitment shall be reduced to zero.

                    (D) Maturity  Date. The Aggregate  Commitment,  the Facility
          Letter  of  Credit  Commitment  and each  Bank's  Commitment  shall be
          reduced immediately to zero on the Maturity Date.

                    (E)  Expiration  of Second  Facility  Letter of Credit.  The
          Second  Facility  Letter of  Credit  Commitment  shall be  immediately
          reduced to zero on June 30, 1996.

          (g)  Method of  Borrowing.  Not later  than noon  Dallas  time on each
  Borrowing  Date,  each Bank  shall make  available  its Loan or Loans in funds
  immediately  available in Dallas, to the  Administrative  Agent at its address
  specified  on  the   signature   pages  or  to  such  other   address  as  the
  Administrative  Agent requests in writing.  The Administrative Agent will make
  the  funds  so  received  from  the  Banks  available  to the  Company  at the
  Administrative   Agent's   address   set  forth  in   Section   11.18   below.
  Notwithstanding the foregoing provisions of this Section, to the extent that a
  Loan made by a Bank matures on the Borrowing  Date of a requested  Loan,  such
  Bank shall apply the  proceeds of the Loan it is then making to the  repayment
  of the maturing Loan.

          (h) Method of Selecting Rate Options and Interest Periods. The Company
  shall select the Rate Option and Interest  Period  applicable  to each Advance
  from time to time. The Company shall give the Administrative Agent irrevocable
  notice (a  "Borrowing  Notice") to Ms.  Linda  Brown,  telephone  number (214)
  508-3044  (facsimile number (214) 508-2020),  not later than 10:00 a.m. Dallas
  time at least one Business Day before the Borrowing Date of each Floating Rate
  Advance,  two Business  Days before the  Borrowing  Date of each Fixed CD Rate
  Advance and three Business Days before the Borrowing  Date of each  Eurodollar
  Advance, specifying:

           (i) the  Borrowing  Date,  which  shall be a  Business  Day,  of such
               Advance,

           (ii)the aggregate  amount of such Advance and whether such Advance is
               made under the Aggregate Commitment or the Second Facility Loan,

           (iii) the Rate Option selected for such Advance, and

           (iv)in the case of each  Fixed  Rate  Advance,  the  Interest  Period
               applicable thereto.

  Each Fixed Rate Advance  shall bear  interest from and including the first day
  of the Interest Period applicable  thereto to (but not including) the last day
  of such Interest  Period at the interest rate determined as applicable to such
  Fixed Rate Advance.  The Company may not select a Fixed Rate for an Advance if
  there exists a Default or Unmatured Default. The Company shall select Interest
  Periods with respect to Fixed Rate Advances so that it is not necessary to pay
  a Fixed Rate Advance prior to the last day of the applicable  Interest  Period
  in order to repay Advances  because of a mandatory  reduction of the Aggregate
  Commitment pursuant to Section 2.1(f) of this Agreement, or a repayment of the
  Second Facility Loan as provided in Section 2.l(n) hereof.

           (i) Minimum Amount of Each Advance.  Each Fixed Rate Advance shall be
  in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess
  thereof),  and each Floating  Rate Advance  shall be in the minimum  amount of
  $100,000  (and in  multiples  of  $100,000  if in excess  thereof),  provided,
  however,  that any  Floating  Rate  Advance may be in the amount of the unused
  Aggregate Available Commitment.

           (j) Rate after  Default.  Except as  provided  in the next  sentence,
  after the occurrence and during the  continuance of any Default,  all Advances
  outstanding  hereunder  shall bear  interest  until paid in full at a rate per
  annum equal to the lesser of (i) the  Highest  Lawful Rate and (ii) the sum of
  the  Eurodollar  Rate,  the  Fixed  CD Rate  or the  Floating  Rate  otherwise
  applicable  thereto,  plus two percent per annum. No Fixed Rate Advance may be
  selected by the Company after the occurrence and during the continuance of any
  Default.  In the  case of a Fixed  Rate  Advance  the  maturity  of  which  is
  accelerated,  such Fixed Rate Advance shall bear interest for the remainder of
  the applicable  Interest Period,  at the lesser of (i) the Highest Lawful Rate
  and (ii) the higher of (A) the sum of the rate  otherwise  applicable  to such
  Interest Period plus two percent per annum or (B) the Floating Rate plus three
  percent per annum.

           (k) Notes;  Telephonic  Notices.  Each Bank is hereby  authorized  to
  record the  principal  amount of each of its Loans and each  repayment  on the
  schedule attached to its Note provided, however, that the failure to so record
  shall not affect the Company's obligations under such Note. The Company hereby
  authorizes  the Banks and the  Administrative  Agent to  extend  Advances  and
  effect Rate Option  selections based on telephonic  notices made by any person
  or persons the  Administrative  Agent or any Bank in good faith believes to be
  an Authorized  Officer acting on behalf of the Company.  The Company agrees to
  deliver promptly to the  Administrative  Agent a written  confirmation of each
  telephonic notice signed by an Authorized Officer. If the written confirmation
  differs in any material  respect  from the action taken by the  Administrative
  Agent and the Banks,  the  records of the  Administrative  Agent and the Banks
  shall govern absent manifest error.

          (l) Interest Payment Dates;  Interest Basis.  Interest accrued on each
  Advance shall be payable on the last day of its applicable Interest Period and
  on any date on which the Advance is prepaid,  whether due to  acceleration  or
  otherwise.  Interest  accrued on each Fixed Rate  Advance  having an  Interest
  Period  longer than three months shall also be payable on the last day of each
  three-month  interval during such Interest  Period.  Interest on Floating Rate
  Advances shall be calculated for actual days elapsed on the basis of a 365, or
  when appropriate 366, day year; interest on Fixed Rate Advances and fees shall
  be calculated for actual days elapsed on the basis of a 360-day year. Interest
  shall be  payable  for the day an  Advance  is made but not for the day of any
  payment on the amount paid if payment is received  prior to noon (Dallas time)
  at the place of  payment.  If any  payment of  principal  of or interest on an
  Advance  shall become due on a day which is not a Business  Day,  such payment
  shall  be made on the  next  succeeding  Business  Day  and,  in the case of a
  principal  payment,  such  extension  of time shall be included  in  computing
  interest in connection  with such payment,  provided  that, if any  Eurodollar
  Loan extension shall be payable in the next calendar month,  then such payment
  shall be made on the next preceding Business Day.

           (m)  Notification  of  Advances,   Interest  Rates,  Prepayments  and
  Commitment  Reductions.  Promptly after receipt  thereof,  the  Administrative
  Agent will  notify  each Bank of the  contents  of each  Aggregate  Commitment
  reduction  notice,  Borrowing  Notice  and  repayment  notice  received  by it
  hereunder. The Administrative Agent will notify each Bank of the interest rate
  applicable  to each Fixed Rate Advance  promptly  upon  determination  of such
  interest  rate and will  give each Bank  prompt  notice of each  change in the
  Corporate Base Rate.

          (n) Repayment of the Second  Facility Loan.  The Second  Facility Loan
  shall be repaid in  installments  on the  following  dates in the  amounts set
  forth opposite such dates:

                  Date                                 Amount Due
                  ----                                 ----------
           September 30, 1996                5% of Initial Amount of Second
                                                Facility Loan
           December 31, 1996                 5% of Initial Amount of Second
                                                Facility Loan
           March 31, 1997                    5% of Initial Amount of Second
                                                Facility Loan
           June 30, 1997                     5% of Initial Amount of Second
                                                Facility Loan
           September 30, 1997                5% of Initial Amount of Second
                                                Facility Loan
           December 31, 1997                75% of Initial Amount of Second 
                                                Facility Loan and all other 
                                                Obligations

          (o) Lending Installations. Each Bank may book its Loans at any Lending
  Installation  selected  by such Bank and may change its  Lending  Installation
  from time to time. All terms of this Agreement shall apply to any such Lending
  Installation  and the Notes  shall be deemed held by each Bank for the benefit
  of such Lending  Installation.  Each Bank may, by written,  telex, or telecopy
  notice  to the  Administrative  Agent  and the  Company,  designate  a Lending
  Installation through which Loans will be made by it and for whose account Loan
  payments are to be made.

                   2.2.  Participation  in Facility Letters of Credit and Second
          Facility Letter of Credit.  Each Bank severally  agrees,  on the terms
          and conditions set forth in this Agreement and pursuant to Article III
          hereof,  to  purchase  on the date  hereof  (or on the date  such Bank
          became  a party  to this  Agreement)  participations  in the  Facility
          Letter of Credit  Commitment and the Second Facility Letters of Credit
          Commitment and in each of the Facility  Letters of Credit,  the Second
          Facility  Letters  of  Credit,  Reimbursement  Obligations  and Second
          Reimbursement  Obligations  in an  aggregate  amount not to exceed its
          ratable portion (based upon the ratio such Bank's  Commitment bears to
          the Aggregate Commitment) of the aggregate undrawn face amount of each
          of the  Facility  Letters  of Credit  and  Second  Facility  Letter of
          Credit.

                   2.3. Fees.  The Company  agrees to pay to the  Administrative
          Agent the following fees:

                  (a) subject to Section 11.17  hereof,  for the account of each
                      Bank, a commitment fee equal to 1/2 of 1% per annum on the
                      daily unused  portion of such Bank's  Commitment  from the
                      date hereof to and  including the Maturity  Date,  payable
                      hereafter as it accrues on each Payment Date hereafter and
                      on the Maturity Date;

                  (b) subject to Section 11.17 hereof,  for the ratable  account
                      of each Bank, a per annum fee on each  Facility  Letter of
                      Credit  equal to 2% of the face  amount  of each  Facility
                      Letter of Credit,  payable in accordance  with Section 3.2
                      below;

                  (c) subject to Section  11.17 hereof,  for the  Administrative
                      Agent's  own  account,  such other fees as the Company and
                      the Administrative Agent shall have heretofore agreed upon
                      in writing, dated the date hereof (the "Fee Letter"), and

                  (d) subject to Section 11.17 hereof,  for the ratable  account
                      of each  Bank,  a per  annum  fee on the  Second  Facility
                      Letter  of  Credit  equal to 2% of the face  amount of the
                      Second  Facility  Letter of Credit,  payable in accordance
                      with Section 3.2 below.

                   2.4. Method of Payment. All payments of principal,  interest,
          and fees hereunder shall be made in immediately available funds to the
          Administrative  Agent at the  Administrative  Agent's  address  on the
          signature pages hereto or as otherwise  specified  pursuant to Section
          11.18   hereof  or  at  any   other   Lending   Installation   of  the
          Administrative  Agent specified in writing by the Administrative Agent
          to the Company,  by noon (Dallas  time) on the date when due and shall
          be made  ratably  among  the  Banks.  Each  payment  delivered  to the
          Administrative  Agent for the  account of any Bank shall be  delivered
          promptly by the Administrative  Agent to such Bank in the same type of
          funds which the Administrative Agent received at its address specified
          pursuant  to  Section  11.18  hereof  or at any  Lending  Installation
          specified in a notice received by the  Administrative  Agent from such
          Bank.  The  Administrative  Agent is hereby  authorized  to charge the
          account of the Company maintained with NationsBank for each payment of
          principal, interest and fees as it becomes due hereunder.

                   2.5 Non-Receipt of Funds by the Administrative  Agent. Unless
          the Company or a Bank, as the case may be, notifies the Administrative
          Agent prior to the date on which it is  scheduled  to make  payment to
          the Administrative Agent of (a) in the case of a Bank, the proceeds of
          a Loan or (b) in the case of the  Company,  a  payment  of  principal,
          interest  or fees to the  Administrative  Agent for the account of the
          Banks,   that  it  does  not   intend  to  make  such   payment,   the
          Administrative  Agent may assume that such payment has been made.  The
          Administrative  Agent  may,  but  shall not be  obligated  to make the
          amount of such payment available to the intended recipient in reliance
          upon such assumption. If such Bank or the Company, as the case may be,
          has not in fact made such  payment to the  Administrative  Agent,  the
          recipient  of such  payment  shall,  on demand  by the  Administrative
          Agent, repay to the Administrative  Agent the amount so made available
          together  with  interest  thereon  in  respect  of each day during the
          period commencing on the date such amount was so made available by the
          Administrative  Agent until the date the Administrative Agent recovers
          such amount at a rate per annum equal to (a) in the case of payment by
          a Bank,  the  federal  funds rate for such day (as  determined  by the
          Administrative  Agent) or (b) in the case of payment  by the  Company,
          the interest rate applicable to the relevant Loan.

         SECTION  4.  ARTICLE  III.  ARTICLE  III on pages 23  through 27 of the
  Credit  Agreement  is hereby  amended and  restated in its entirety to read as
  follows:

         3.1. Issuance of Letters of Credit

         (a) Issuance of Facility Letters of Credit.  The Company shall give the
  Issuer not less than three Business Days prior written notice of a request for
  the issuance of a Facility  Letter of Credit.  Until the Maturity  Date,  upon
  receipt of the Company's properly completed and duly executed Applications and
  subject to the terms of such  Applications and to the terms of this Agreement,
  the Issuer agrees to issue Facility Letters of Credit on behalf of the Company
  in an  aggregate  face  amount  not in  excess  of  Facility  Letter of Credit
  Commitment  at any one time  outstanding.  No Facility  Letter of Credit shall
  have a maturity  extending  beyond the earliest of (i) the Maturity  Date,  or
  (ii) such earlier date as may be required to enable the Company to satisfy its
  repayment  obligations  under Section 2.1(e) hereof.  Subject to such maturity
  limitations and so long as no Default or Unmatured Default has occurred and is
  continuing  or would  result from the renewal of a Facility  Letter of Credit,
  the Facility Letters of Credit may be renewed by the Issuer in its discretion.
  The Banks shall  participate  in any liability  under the Facility  Letters of
  Credit and in any unpaid Reimbursement Obligations of the Company with respect
  to any Facility  Letter of Credit ratably  according to the  percentage  their
  Commitment  bears to the  Aggregate  Commitment.  The  amount of the  Facility
  Letters  of  Credit  issued  and  outstanding  and  the  unpaid  Reimbursement
  Obligations  of the Company for such  Facility  Letters of Credit shall reduce
  the amount of  Aggregate  Commitment  available,  so that at no time shall the
  aggregate   outstanding  Advances  together  with  the  sum  of  Reimbursement
  Obligations plus the face amount of all outstanding Facility Letters of Credit
  exceed an amount equal to the Aggregate  Commitment,  and at no time shall the
  sum of all Loans by any Bank,  plus its ratable share of amounts  available to
  be drawn under the  Facility  Letters of Credit and its  ratable  share of the
  unpaid  Reimbursement  Obligations  of the Company in respect of such Facility
  Letters of Credit, exceed its ratable percentage of the Aggregate Commitment.

         (b) Issuance of Second  Facility  Letter of Credit.  The Company  shall
  give the Issuer not less than three  Business Days prior  written  notice of a
  request  for the  issuance  of the  Second  Facility  Letter  of Credit or any
  increase  thereto.  Until  October 31,  1995,  upon  receipt of the  Company's
  properly  completed and duly executed  Application and subject to the terms of
  such  Application  and to the terms of this  Agreement,  the Issuer  agrees to
  issue the  Second  Facility  Letter of Credit on behalf of the  Company  in an
  aggregate face amount not in excess of $9,100,000 at any one time outstanding.
  Until June 20, 1996, upon receipt of the Company's properly completed and duly
  executed  Application and subject to the terms of such  Application and to the
  terms of this  Agreement,  the  Issuer  agrees to  replace or amend the Second
  Facility Letter of Credit on behalf of the Company to an aggregate face amount
  not in excess of Second Facility  Letter of Credit  Commitment at any one time
  outstanding.  The Second  Facility  Letter of Credit shall not have a maturity
  extending  beyond  June  30,  1996 and may not be  renewed.  The  Banks  shall
  participate in any liability under the Second Facility Letter of Credit and in
  any unpaid Second Reimbursement Obligations of the Company with respect to the
  Second  Facility  Letter of Credit ratably  according to the percentage  their
  Commitment bears to the Aggregate Commitment.

         3.2. Letter of Credit Fee.

         (a) Facility Letter of Credit Fees. In  consideration  for the issuance
  of each Facility Letter of Credit and any renewal  thereof,  the Company shall
  pay to the  Administrative  Agent for the account of the Issuer and the Banks,
  ratably in accordance with the percentage that their  Commitment  bears to the
  Aggregate  Commitment,  a letter of credit fee as set forth in Section  2.3(b)
  hereof.  The letter of credit fee shall  accrue  from the date of  issuance of
  each  Facility  Letter of Credit and shall be payable  quarterly in arrears on
  each Payment Date and on the date of  termination  of such Facility  Letter of
  Credit, and upon the Issuer's demand pursuant to Section 3.3 hereof.

         (b) Second  Facility  Letter of Credit  Fee. In  consideration  for the
  issuance of the Second Facility Letter of Credit and any renewal thereof,  the
  Company  shall pay to the  Administrative  Agent for the account of the Issuer
  and the Banks, ratably in accordance with the percentage that their Commitment
  bears to the  Aggregate  Commitment,  a letter of  credit  fee as set forth in
  Section 2.3(d) hereof.  The letter of credit fee shall accrue from the date of
  issuance  of the  Second  Facility  Letter  of  Credit  and  shall be  payable
  quarterly in arrears on each Payment  Date and on the date of  termination  of
  the Second Facility Letter of Credit, and upon the Issuer's demand pursuant to
  Section 3.3 hereof.

          3.3.  Reimbursement   Obligations  and  Second  Reimbursement
          Obligations.

         (a) The Company hereby agrees to reimburse the Issuer, immediately upon
 demand by the Issuer,  and in immediately  available  funds, for any payment or
 disbursement  made by the  Issuer  under any  Facility  Letter of Credit or the
 Second  Facility  Letter of Credit.  Payment  shall be made by the Company with
 interest on the amount so paid or  disbursed  by the Issuer from and  including
 the date  payment  is made  under any  Facility  Letter of Credit or the Second
 Facility Letter of Credit to and including the date of payment, at the Floating
 Rate in effect  from time to time  plus  three  percent  per  annum;  provided,
 however, that (a) with respect to any draw under any Facility Letter of Credit,
 if the  Company  would be  permitted  under the terms of Section  2.1 to borrow
 Advances  in  amounts  at least  equal to its  reimbursement  obligation  for a
 drawing under any Facility Letter of Credit, a Floating Rate Loan by each Bank,
 ratably in an amount equal to the percentage that such Bank's  Commitment bears
 to the Aggregate Commitment,  shall automatically be deemed made on the date of
 any such  payment  or  disbursement  made by the  Issuer in the  amount of such
 obligation and subject to the terms of this Agreement,  and (b) with respect to
 any draw under the Second  Facility  Letter of Credit,  subject to the terms of
 this  Agreement,  the Company  may be  entitled to borrow a term-loan  from the
 Banks in the form of a Second  Facility  Loan in  accordance  with the terms of
 this Agreement.

          (b) The Company  hereby also agrees to pay to the Issuer,  immediately
  upon demand by the Issuer and in immediately  available funds, as security for
  its reimbursement obligations in respect of the Facility Letters of Credit and
  Second  Facility  Letter of Credit under  Section  3.3(a) hereof and any other
  amounts  payable  hereunder and under the Notes, an amount equal to the sum of
  the aggregate  amount  available to be drawn under Facility  Letters of Credit
  and  the  Second  Facility  Letter  of  Credit  then   outstanding   plus  any
  Reimbursement Obligations and Second Reimbursement  Obligations,  irrespective
  of whether any of the Facility Letters of Credit or the Second Facility Letter
  of Credit has been drawn upon,  at the  occurrence  of a Default or  Unmatured
  Default. Any such payments shall be deposited in a separate account designated
  "GCIC Special  Account" or such other  designation  as the Issuer shall elect.
  All such amounts  deposited with the Issuer shall be and shall remain funds of
  the  Company on deposit  with the Issuer and may be  invested by the Issuer as
  the Issuer shall determine.  Such amounts may not be used by the Issuer to pay
  the  drawings  under the  Facility  Letters of Credit and the Second  Facility
  Letter  of  Credit;  however,  such  amounts  may be  used  by the  Issuer  as
  reimbursement  for  Facility  Letter of Credit  or Second  Facility  Letter of
  Credit  drawings which the Issuer has paid.  During the existence of a Default
  or an Unmatured  Default but after the expiry of any Facility Letter of Credit
  or Second  Facility  Letter of Credit that was not drawn upon, the Company may
  direct  the  Administrative  Agent  to use any  cash  collateral  for any such
  expired Facility Letter of Credit or Second Facility Letter of Credit, if any,
  to prepay  Advances in accordance  with Section 2.1. Any amounts  remaining in
  the GCIC Special Account after the date of the expiry of all Facility  Letters
  of Credit and the Second  Facility  Letter of Credit and after all Obligations
  have been paid in full,  shall be repaid to the  Company  promptly  after such
  expiry and such payment in full.

         (c) The obligations of the Company under this Section 3.3 will continue
  until all Facility  Letters of Credit and the Second Facility Letter of Credit
  have  expired  and all  Reimbursement  Obligations  and  Second  Reimbursement
  Obligations  with  respect  thereto  have been paid in full by the Company and
  until all of the other Obligations shall have been paid in full.

         (d) The Company  shall be obligated to reimburse the Issuer upon demand
  for all amounts paid under the Facility  Letters of Credit and Second Facility
  Letter of Credit as set forth in Section 3.3(a) hereof; provided,  however, if
  the Company for any reason fails to reimburse  the Issuer in full upon demand,
  whether by borrowing  Advances to pay such Reimbursement  Obligations,  Second
  Reimbursement  Obligations or otherwise,  the Banks shall reimburse the Issuer
  ratably in accordance with  percentage that each Bank's ratable  percentage of
  the Commitment bears to the Aggregate  Commitment,  for amounts due and unpaid
  from the Company as set forth in Section 3.4 hereof;  provided,  however, that
  no  such  reimbursement  made  by the  Banks  shall  discharge  the  Company's
  obligations to reimburse the Issuer.

         (e) The Company shall  indemnify  and hold the Issuer or any Bank,  its
  officers, directors,  representatives and employees harmless from loss for any
  claim,  demand or liability  which may be asserted  against the Issuer or such
  indemnified  party in connection with actions taken under the Facility Letters
  of Credit or the Second  Facility  Letter of  Credit,  or in  connection  with
  either thereof  (including  losses resulting from the negligence of the Issuer
  or such  indemnified  party),  and shall pay the Issuer for reasonable fees of
  attorneys  (who may be  employees  of the  Issuer)  and  legal  costs  paid or
  incurred by the Issuer in connection  with any matter  related to the Facility
  Letters of Credit or the Second Facility  Letter of Credit,  except for losses
  and liabilities incurred as a direct result of the gross negligence or willful
  misconduct  of the Issuer or such  indemnified  party.  If the Company for any
  reason fails to indemnify or pay the Issuer or such  indemnified  party as set
  forth  herein in full,  the Banks  shall  indemnify  and pay the  Issuer  upon
  demand,  ratably in  accordance  with each Bank's  percentage of the Aggregate
  Commitment,  such amounts due and unpaid from the Company.  The  provisions of
  this Section 3.3(e) shall survive the termination of this Agreement.

         3.4.  Banks'  Obligations.   Each  Bank  agrees,   unconditionally  and
         irrevocably  to  reimburse  the Issuer (to the extent the Issuer is not
         otherwise  reimbursed by the Company in accordance  with Section 3.3(a)
         hereof) on demand for such Bank's ratable  percentage  according to the
         percentage  that  such  Bank's   Commitment   bears  to  the  Aggregate
         Commitment of each draw paid by the Issuer under any Facility Letter of
         Credit or the Second Facility Letter of Credit.  All amounts payable by
         any Bank under this subsection  shall include  interest  thereon at the
         Federal Funds  Effective  Rate, from the date of the applicable draw to
         the date of reimbursement by such Bank. No Bank shall be liable for the
         performance  or  nonperformance  of the  obligations  of any other Bank
         under this  Section.  The  obligations  of the Banks under this Section
         shall continue after the Maturity Date and shall survive termination of
         any Loan Documents.

         3.5. The Issuer's Obligations.

         (a) The Issuer  makes no  representation  or  warranty,  and assumes no
   responsibility  with  respect  to  the  validity,  legality,  sufficiency  or
   enforceability of any Application or any document relative thereto, or to the
   collectibility  thereunder.  The  Issuer  assumes no  responsibility  for the
   financial  condition of the Company or for the  performance of any obligation
   of the Company.  The Issuer may use its discretion with respect to exercising
   or refraining from exercising any rights, or taking or refraining from taking
   any action  which may be vested in it or which it may '  entitled  to take or
   assert with respect to any  Facility  Letter of Credit,  the Second  Facility
   Letter of Credit or any Application.

         (b) The Issuer shall be under no liability to any Bank, with respect to
   anything  the Bank  may do or  refrain  from  doing  in the  exercise  of its
   judgment, the sole liability and responsibility of the Issuer being to handle
   each Bank's share on as favorable a basis as the Issuer handles its own share
   and to  promptly  remit to each  Bank its share of any sums  received  by the
   Issuer   under  any   Application.   The  Issuer  shall  have  no  duties  or
   responsibilities except those expressly set forth herein and those duties and
   liabilities shall be subject to the limitations and  qualifications set forth
   herein.

         (c) Neither the Issuer nor any of its directors, officers, or employees
   shall be liable for any action  taken or omitted  (whether or not such action
   taken or omitted is expressly set forth herein,  is negligent,  or otherwise)
   under or in  connection  herewith  or any other  instrument  or  document  in
   connection herewith,  except for gross negligence or willful misconduct.  The
   Issuer shall incur no liability to any Bank or the Company in acting upon any
   notice, document,  order, consent,  certificate,  warrant or other instrument
   believed  by the Issuer to be genuine  or  authentic  and to be signed by the
   proper party.

         SECTION 5.  Section  5.2.  Section 5.2 on pages 32 and 33 of the Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

                   5.2.  Each Advance or the Issuance of any Facility  Letter of
          Credit or the Second Facility Letter of Credit. The Banks shall not be
          required to make any Advance, and the Issuer shall not be obligated to
          issue any Facility  Letter of Credit or the Second  Facility Letter of
          Credit,  unless  on the  applicable  Borrowing  Date  or the  date  of
          issuance of such Facility  Letter of Credit or Second  Facility Letter
          of Credit:

                   (a) There exists no Default or Unmatured Default.

                   (b) The representations  and warranties  contained in Article
                       VI and in any  Application and Loan Document are true and
                       correct as of such Borrowing Date.

                   (c) In the event the Company shall have theretofore  granted,
                       implemented  or given  notice  of its  intent to grant or
                       implement a material price  decrease in MTS Service,  the
                       Company  shall  demonstrate  to the  satisfaction  of the
                       Required  Banks that the Company  shall be in  compliance
                       with the provisions of Section 7.4.

                   (d) A duly completed and executed  Application  acceptable to
                       the Issuer for each and every  Facility  Letter of Credit
                       or  for  the  Second  Facility   Letter  of  Credit,   as
                       applicable.

                   (e) All legal matters  incident to the making of such Advance
                       shall be satisfactory  to the Banks and their  respective
                       counsel.

                   Each Borrowing Notice with respect to each such Advance shall
          constitute  a  representation  and  warranty by the  Company  that the
          conditions   contained  in  Sections   5.2(a)  and  5.2(b)  have  been
          satisfied.   Any  Bank  may  require  a  duly   completed   Compliance
          Certificate as a condition to making an Advance.

         SECTION  6.  Section  7.4(a).  Section  7.4(a) on page 41 of the Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

                   (a) Leverage  Ratio.  The Company will  maintain at all times
                       during the time periods set forth below, a Leverage Ratio
                       not greater than the ratio set forth below  opposite each
                       such period:

                        Period                             Ratio
                        ------                             -----
         Date hereof through and including 6/29/93      3.50 to 1.00
         6/30/93 through and including 9/29/93          3.20 to 1.00
         9/30/93 through and including 12/30/93         2.75 to 1.00
         12/31/93 through and including 6/30/94         2.40 to 1.00
         7/01/94 through and including 9/30/96          2.00 to 1.00
         10/01/96 and thereafter                        1.50 to 1.00

         SECTION  7.  Section  7.4(c).  Section  7.4(c) on page 41 of the Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

                   (c) Fixed  Charge  Coverage.  At all  times  during  the time
                       periods set forth below,  the Company will not permit the
                       ratio of (i) Annualized Operating Cash Flow to (ii) Fixed
                       Charges for the four fiscal  quarters  then most recently
                       ended  for  the  Company  and  the   Subsidiaries   on  a
                       consolidated  basis, to be less than the following ratios
                       set forth below opposite each such period:

                        Period                             Ratio
                        ------                             -----
         Date hereof through and including 6/30/94      1.00 to 1.00
         7/01/94 through and including 6/30/95          1.10 to 1.00
         7/01/9S through and including 12/31/95         1.20 to 1.00
         1/01/96 and thereafter                         1.00 to 1.00

         SECTION  8.  Section  7.4(d).  Section  7.4(d) on page 41 of the Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

                   (d) Pro Forma Debt Service  Coverage Ratio.  The Company will
                       not permit  the ratio of (i)  Annualized  Operating  Cash
                       Flow to (ii) Pro Forma Debt  Service  for the Company and
                       the Subsidiaries on a consolidated basis, to be less than
                       the following  ratios set forth below  opposite each such
                       period:

                        Period                             Ratio
                        ------                             -----
         Date hereof through and including 6/30/96      1.50 to 1.00
         7/01/96 and thereafter                         1.15 to 1.00

         SECTION  9.  Section  7.12.  Section  7.12  on  page  43 of the  Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

               7.12.  Dividends  and Stock  Repurchases.  The  Company  will not
          declare or pay (or set aside any funds or  establish  any sinking fund
          for such  purpose)  any  dividends  on its capital  stock  (other than
          dividends payable in its own capital stock), and the Company will not,
          nor will it permit any Subsidiary to, redeem,  repurchase or otherwise
          acquire or retire any of its  capital  stock at any time  outstanding,
          provided  that,  so long as (a) both before and after giving effect to
          such repurchase,  there exists no Default or any event or circumstance
          which, with the giving of notice or the passing of time could become a
          Default,  (b) such  repurchase is prior to December 31, 1997,  and (c)
          the Company  may  declare or pay (or set aside any funds or  establish
          any sinking fund for such  purpose) any dividends on its capital stock
          to the Parent to enable the Parent to repurchase  its capital stock up
          to the lesser of (i) 1,000,000  shares or (ii) an amount of shares for
          which the purchase  price is less than or equal to  $5,000,000  in the
          aggregate.  No  Subsidiary  may  declare or pay any  dividends  on its
          capital stock (other than dividends payable in its own capital stock),
          except that Wholly-Owned Subsidiaries may declare or pay any dividend.

         SECTION  10.  Section  7.21.  Section  7.21 on  page  46 of the  Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

               7.21. Letters of Credit. The Company will not, nor will it permit
          any  Subsidiary  to,  apply for or become  liable  upon any  Letter of
          Credit except the Facility  Letters of Credit and the Second  Facility
          Letter of Credit.

         SECTION  11.  Section  8.12.  Section  8.12 on  page  51 of the  Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

               8.12.  Nonpayment by the Parent, the Company or any Subsidiary of
          any Reimbursement Obligations or Second Reimbursement Obligations when
          due,  or the  occurrence  of any  "default"  as  defined  in any  Loan
          Document  (other than this  Agreement or the Notes),  or the breach of
          any term or provision in any  Application  for any Facility  Letter of
          Credit or Second  Facility  Letter of Credit,  or the breach of any of
          the  terms  or  provisions  of any  Loan  Document  (other  than  this
          Agreement or the Notes),  which default or breach continues beyond any
          period of grace therein provided.

         SECTION 12.  Section 9.1.  Section 9.1 on pages 52 and 53 of the Credit
  Agreement is hereby amended and restated in its entirety to read as follows:

               9.1. Acceleration and Other Remedies. If any Default described in
          Section 8.6 or 8.7 occurs,  the obligations of the Banks to make Loans
          hereunder  shall  automatically  terminate and the  Obligations  shall
          immediately  become due and payable  without any election or action on
          the part of the Administrative Agent or any Bank. If any other Default
          occurs,  Fixed Rate Loans shall no longer be  available to the Company
          and the Required Banks may, and at the direction of the Required Banks
          the   Administrative   Agent  shall,  (a)  terminate  or  suspend  the
          obligations of the Banks to make Loans hereunder, terminate any or all
          of the  Facility  Letter of Credit  Commitment,  the  Second  Facility
          Letter  of  Credit  Commitment,   the  Aggregate   Commitment  or  any
          Commitment,  or  declare  the  Obligations  to  be  due  and  payable,
          whereupon the  Obligations  shall become  immediately due and payable,
          without  presentment,  demand,  protest or notice of any kind,  all of
          which the  Company  hereby  expressly  waives,  and (b) demand and the
          Company  shall  pay to the  Issuer,  immediately  upon  demand  and in
          immediately  available funds, the amount equal to the aggregate amount
          of the sum of the Facility  Letters of Credit plus the Second Facility
          Letter  of Credit  then  outstanding,  irrespective  of  whether  such
          Facility  Letters of Credit or Second  Facility  Letter of Credit have
          been drawn upon, all as set forth and in accordance  with the terms of
          provisions of Article III hereof. The Issuer shall promptly advise the
          Company of any such  declaration  or demand but failure to do so shall
          not   impair   the  effect  of  such   declaration   or  demand.   The
          Administrative   Agent  and  the  Banks  may   exercise   all  of  the
          post-default  rights granted to them under the Loan Documents or under
          Applicable  Law. The rights and remedies of the  Administrative  Agent
          and the Banks hereunder shall be cumulative, and not exclusive.

         SECTION  13.  Section  11.18.  Section  11.18 on pages 62 and 63 of the
  Credit  Agreement  is hereby  amended and  restated in its entirety to read as
  follows:

               11.18.  Giving  Notice.  Any notice  required or  permitted to be
          given  under this  Agreement  may be, and shall be deemed,  given when
          deposited in the United States mail, postage prepaid,  or by facsimile
          when transmitted to the Company, the Banks or the Administrative Agent
          at the addresses  indicated  below,  or at such other addresses as any
          party shall request by notice to the other parties:

         If to the Administrative Agent:

                  NationsBank of Texas, N.A.
                  901 Main Street
                  64th Floor
                  Dallas, Texas 75202

                  Attn:             W. Hutchinson McClendon, IV
                                    Whitney L. Busse
                                    Telephone: (214) 508-0996 (Mr. McClendon)
                                               (214) 508-0950 (Ms. Busse)
                                    Telecopy:  (214) 508-9390
         With a copy to:

                  Donohoe, Jameson & Carroll, P.C.
                  3400 Renaissance Tower
                  1201 Elm Street
                  Dallas, Texas 75270

                  Attn:             Melissa Ruman Stewart, Esq.
                                    Telephone: (214) 698-3814
                                    Telecopy: (214) 744-0231

         If to the Company:

                  GCI Communication Corp.
                  2550 Denali Street, Suite 1000
                  Anchorage, Alaska 99503-2781

                  Attn: Mr. John M. Lowber
                  Telephone: (907) 265-5600
                  Telecopy: (907) 265-5676

         With a copy to:

                  Hartig, Rhodes, Norman, Mahoney & Edwards
                  717 K Street
                  Anchorage, Alaska

                  Attn: Robert B. Flint, Esq.
                  Telephone: (907) 276-1592
                  Telecopy: (907) 277-4352

         SECTION 14. Conditions Precedent. This Amendment shall not be effective
  until the  Administrative  Agent shall have  determined in its sole discretion
  that all  proceedings  of the Company taken in connection  with this Amendment
  and the  transactions  contemplated  hereby shall be  satisfactory in form and
  substance to the Administrative Agent:

               (a) a loan  certificate  of the Company  certifying (i) as to the
          accuracy of its representations and warranties set forth in Article VI
          of the Credit Agreement, as amended by this Amendment,  the other Loan
          Documents and in this Amendment, (ii) that there exists no Default, or
          event  which but for the  giving of notice or  passage of time or both
          would   constitute  a  Default,   and  the  execution,   delivery  and
          performance  of this Amendment will not cause a Default or event which
          but for  the  giving  of  notice  or  passage  of  time or both  would
          constitute a Default, (iii) as to resolutions  authorizing the Company
          to execute,  deliver and perform this Amendment and all Loan Documents
          and  other  documents  and   instruments   delivered  or  executed  in
          connection with this Amendment, and (iv) that it has complied with all
          agreements  and  conditions to be complied with by it under the Credit
          Agreement,  the other Loan  Documents  and this  Amendment by the date
          hereof;

               (b)  an  opinion  of  counsel  of  Company   acceptable   to  the
          Administrative  Agent with  respect to this Second  Amendment  and all
          other Loan  Documents  executed  in  connection  herewith,  including,
          without  limitation,  an  opinion  with  respect to the  validity  and
          enforceability of the Loan Documents before and after giving effect to
          this  Second  Amendment   (including  with  respect  to  all  security
          interests and liens securing the increased Obligations";

               (c) the  Company  shall  have paid in full to the  Administrative
          Agent for the account of the Banks,  a one-time  facility  fee for the
          increase in the loan facility provided to the Company in the amount of
          $81,225;

               (d) new Notes for each Bank;

               (e)  the  Company  shall  have  executed  and  delivered  to  the
          Administrative  Agent that certain  Assignment and Security  Agreement
          dated  the date  hereof,  and the  Administrative  Agent and the Banks
          shall have a valid first perfected  security interest in all rights of
          the Company in and to that certain Transponder  Purchase Agreement for
          Galaxy X, dated August 24, 1995, by and between the Company and Hughes
          Communications  Galaxy, Inc. (and Hughes  Communications  Galaxy, Inc.
          shall have  consented  thereto in form and substance  satisfactory  to
          Administrative Agent);

               (f) a new  compliance  certificate  executed and completed  after
          giving effect to the facility increases and covenant changes set forth
          herein; and

               (g) such other documents,  instruments, and certificates, in form
          and  substance  satisfactory  to  the  Administrative  Agent,  as  the
          Administrative Agent shall deem necessary or appropriate in connection
          with this Amendment and the transactions contemplated hereby.

         SECTION 15. Representations and Warranties.  The Company represents and
  warrants  to the Banks and the  Administrative  Agent  that (a) the  Aggregate
  Commitment  under the Credit  Agreement as of the date hereof,  as  previously
  reduced  and after  giving  effect to this  Amendment,  is  $9,250,000  (which
  includes  the  $3,000,000  Facility  Letter  of Credit  Commitment),  (b) this
  Amendment constitutes its legal, valid, and binding obligation, enforceable in
  accordance with the terms hereof (subject as to enforcement of remedies to any
  applicable bankruptcy, reorganization, moratorium, or other laws or principles
  of equity affecting the enforcement of creditors' rights generally), (c) there
  exists no  Default  or event  which but for the giving of notice or passage of
  time or both would constitute a Default,  under the Credit Agreement,  (d) its
  representations  and  warranties  set forth in the Credit  Agreement and other
  Loan  Documents  are true and correct on the date hereof,  (e) it has complied
  with all  agreements and conditions to be complied with by it under the Credit
  Agreement and the other Loan Documents by the date hereof,  and (f) the Credit
  Agreement,  as amended  hereby,  and the other Loan  Documents  remain in full
  force and effect.

         SECTION 16. Entire  Agreement;  Ratification.  THE CREDIT AGREEMENT AND
  THE LOAN DOCUMENTS  REPRESENT THE FINAL AGREEMENT  BETWEEN THE PARTIES AND MAY
  NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS  OR SUBSEQUENT ORAL
  AGREEMENT OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS  BETWEEN THE
  PARTIES. EXCEPT AS MODIFIED OR SUPPLEMENTED HEREBY, THE CREDIT AGREEMENT,  THE
  OTHER LOAN  DOCUMENTS  AND ALL OTHER  DOCUMENTS  AND  AGREEMENTS  EXECUTED  IN
  CONNECTION THEREWITH SHALL CONTINUE IN FULL FORCE AND EFFECT.

         SECTION 17. Counterparts.  This Amendment may be executed in any number
  of counterparts, all of which taken together shall constitute one and the same
  instrument.  In making proof  hereof,  it shall not be necessary to produce or
  account for any  counterpart  other than one signed by the party against which
  enforcement is sought.

         SECTION  18.  GOVERNING  LAW.  THIS  AMENDMENT  SHALL BE  CONSTRUED  IN
  ACCORDANCE  WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
  OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS.

         SECTION 19. CONSENT TO  JURISDICTION.  THE COMPANY  HEREBY  IRREVOCABLY
  SUBMITS TO THE  NON-EXCLUSIVE  JURISDICTION  OF ANY UNITED  STATES  FEDERAL OR
  TEXAS STATE COURT SITTING IN DALLAS IN ANY ACTION OR PROCEEDING ARISING OUT OF
  OR RELATING TO ANY LOAN DOCUMENTS AND THE COMPANY  IRREVOCABLY AGREES THAT ALL
  CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY BE HEARD AND DETERMINED IN
  ANY SUCH COURT AND  IRREVOCABLY  WAIVES ANY  OBJECTION IT MAY NOW OR HEREAFTER
  HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING  BROUGHT IN SUCH A
  COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT
  THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST
  THE COMPANY IN THE COURTS OF ANY OTHER  JURISDICTION.  ANY JUDICIAL PROCEEDING
  BY THE COMPANY AGAINST THE  ADMINISTRATIVE  AGENT OR ANY BANK OR ANY AFFILIATE
  OF THE ADMINISTRATIVE AGENT OR ANY BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY
  MATTER IN ANY WAY  ARISING  OUT OF,  RELATED  TO, OR  CONNECTED  WITH ANY LOAN
  DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN DALLAS, TEXAS.

         SECTION 20. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE AGENT
  AND  EACH  BANK  HEREBY  WAIVES  TRIAL  BY  JURY  IN ANY  JUDICIAL  PROCEEDING
  INVOLVING,  DIRECTLY  OR  INDIRECTLY,  ANY MATTER  (WHETHER  SOUNDING IN TORT,
  CONTRACT OR  OTHERWISE)  IN ANY WAY ARISING OUT OF,  RELATED TO, OR  CONNECTED
  WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

  IN WITNESS  WHEREOF,  this Second Amendment to Credit Agreement is executed as
of the date first set forth above.

                                   GCI COMMUNICATION CORP.

                                   /s/ John M. Lowber
                                   By:
                                   Its:SVP & CAO



                                   NATIONSBANK OF TEXAS, N.A.,
                                   Individually and as Administrative Agent

                                   /s/ Whitney L. Busse
                                   By:Whitney L. Busse
                                   Its:Vice President




                                    EXHIBIT A

                                      NOTE

                                  Dallas, Texas
$
 -------------                                                   --------------

     GCI Communication  Corp., an Alaskan corporation  ("Company"),  promises to
pay to the  order of  NationsBank  of Texas,  N.A.  ("Bank")  the  lesser of the
principal  sum  of  NO\ONE-HUNDREDTHS  DOLLARS  ($ )  or  the  aggregate  unpaid
principal  amount of all Loans made by Bank to Company  pursuant  to Section 2.1
(a)(i) of the Agreement (as hereinafter defined) in immediately  available funds
at the principal office of NationsBank of Texas, N.A., as Administrative  Agent,
together with interest on the unpaid principal amount hereof at the rates and on
the dates set forth in the Agreement. The Company shall pay each Loan in full on
the last day of such  Loan's  applicable  Interest  Period  and shall  make such
mandatory payments and prepayments as are required to be made under the terms of
Article II of the Agreement.

     The Bank  shall,  and is  hereby  authorized  to,  record  on the  schedule
attached  hereto,  or to otherwise record in accordance with its usual practice,
the date and  amount  of each  Loan and the date and  amount  of each  principal
payment hereunder.

     THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE  WITH THE INTERNAL LAWS (AND NOT
THE LAW OF  CONFLICTS)  OF THE STATE OF TEXAS BUT GIVING  EFFECT TO THE  FEDERAL
LAWS APPLICABLE TO NATIONAL BANKS.

     This Note is one of the Notes  issued  pursuant  to, and is entitled to the
benefits of, the Amended and Restated  Credit  Agreement,  dated as of April 30,
1993 (as amended or modified and in effect from time to time, the  "Agreement"),
among  Company,  the banks named  therein and  NationsBank  of Texas,  N.A.,  as
Administrative  Agent,  to  which  Agreement  reference  is  hereby  made  for a
statement  of the terms and  conditions  under which this Note may be prepaid or
its maturity date  accelerated.  This Note is secured pursuant to certain pledge
and security  agreements,  all as more specifically  described in the Agreement,
and  reference  is made  thereto  for a  statement  of the terms and  provisions
thereof. Capitalized terms used herein and not otherwise defined herein are used
with the meanings attributed to them in the Agreement.

     This  Note is a  renewal,  extension,  increase  and  modification  of that
certain Note dated May 14, 1993 (the  "Original  Note")  executed by the Company
and made payable to the Administrative Agent.

                                                       GCI COMMUNICATION CORP.

                                                       By:

                               EQUIPMENT PURCHASE

                                    AGREEMENT


                                     between


                          GCI Communication Corporation

                                       and


                            Scientific-Atlanta, Inc.





                          EQUIPMENT PURCHASE AGREEMENT

                                TABLE OF CONTENTS

    SECTION 1                  DEFINITIONS
    SECTION 2                  SCOPE OF THE AGREEMENT
    SECTION 3                  PRICE AND PAYMENT
    SECTION 4                  DELIVERY SCHEDULE
    SECTION 5                  TITLE AND RISK OF LOSS
    SECTION 6                  INTERNATIONAL SALES
    SECTION 7                  REPRESENTATIONS
    SECTION 8                  INSPECTION, TEST AND ACCEPTANCE
    SECTION 9                  WARRANTY
    SECTION 10                 TERM AND TERMINATION
    SECTION 11                 LICENSED SOFTWARE
    SECTION 12                 NO RIGHTS IN TRADEMARKS
    SECTION 13                 OTHER INTELLECTUAL PROPERTY
    SECTION 14                 INJUNCTION
    SECTION 15                 PROPRIETARY RIGHTS INDEMNIFICATION
    SECTION 16                 INDEMNIFICATION AND LIMITATION OF LIABILITY
    SECTION 17                 FORCE MAJEURE
    SECTION 18                 NOTICES
    SECTION 19                 AMENDMENTS AND CHANGES
    SECTION 20                 ASSIGNMENT AND SUBCONTRACTING
    SECTION 21                 INDEPENDENT CONTRACTOR
    SECTION 22                 PUBLIC RELEASE OF INFORMATION
    SECTION 23                 MISCELLANEOUS
    SECTION 24                 ARBITRATION

  EXHIBITS

   EXHIBIT A                   PRICES
   EXHIBIT B                   SCHEDULE
   EXHIBIT C                   SOFTWARE LICENSE
   EXHIBIT D                   FEATURE GROUP B/1 800 950 XXX SPECIFICATION





                          EQUIPMENT PURCHASE AGREEMENT

This Equipment Purchase  Agreement (the  "Agreement"),  effective as of the 20th
day of December,  1995(the "Agreement Date"), is entered into by and between GCI
Communication  Corporation,  a corporation organized and existing under the laws
of Alaska (hereinafter referred to as "GCI' or "Buyer"), and Scientific-Atlanta,
Inc.,  a  corporation  organized  and  existing  under  the laws of the State of
Georgia (hereinafter referred to as "S-A").

                                   WITNESSETH:

     WHEREAS,  S-A is  engaged  in  the  design  and  manufacture  of  satellite
communication equipment and the related software which resides therein; and

     WHEREAS,  Buyer  is a  financially  responsible  and  independent  business
organization  engaged in the sale,  installation and service of products similar
to those  manufactured  by S-A, and desires to purchase  from S-A the  satellite
communication  equipment and license from S-A the related software which resides
therein; and

     WHEREAS, S-A is willing to sell such equipment and deliver such software to
Buyer under the terms and conditions of this Agreement.

     NOW,  THEREFORE,  in consideration of the foregoing premises and the mutual
covenants  set  forth  in  this  Agreement  and  for  other  good  and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1. Definitions

       "Acceptance" is defined as the  satisfactory  resolution  of all hardware
           and software Specification  deficiencies by S-A as identified by GCI.
           GCI shall notify S-A of any  deficiencies  within thirty (30) days of
           receipt of the last contract deliverable. Satisfaction of the list of
           deficiencies  will be the  sole  determinant  of final  payment.  Not
           withstanding  any other remedies for latent defects,  this list maybe
           amended by mutual agreement of both parties.

       "Agreement Date" is used as defined in the preamble.

       "Equipment" means the items set forth on Exhibit A hereto,  but expressly
           excluding the Licensed software.

       "Extreme  Environment  Mount" is defined as Model No. 8009AE.  This mount
           constitutes  S-A's standard 11 Meter Mount and Actuators when used in
           conjunction with S-A's standard 9.15 Meter Reflector.

       "Licensed Software" is used herein as defined in the Software License.

       "Remote Terminals" shall mean,  collectively and as a combined operation,
           the Equipment  purchased by the Buyer and the Licensed  software used
           thereon, functioning as a DAMA satellite communications terminal.

       "Proprietary  Documentation" means any user manuals,  training materials,
           installation,  repair or maintenance manuals, drawings, schematics or
           any related documents provided by S-A to the Buyer.

       "Prices"  means  the  prices  applicable  to the  Equipment  set forth in
           Exhibit  A as  adjusted  from  time to time in  accordance  with this
           Agreement.

       "Proprietary Information" shall mean any and all information,  whether or
           not in tangible form, of a confidential, proprietary or secret nature
           belonging  to, or  licensed  by S-A which is  material to S-A and not
           generally known by the public, other than Trade Secrets.

       "Software License" means a Software License  substantially in the form of
           Exhibit C hereto.

       "Specifications"  shall  mean the  specifications  as defined in the "GCI
           ALASKA  RURAL  DEMONSTRATION  PROJECT  EQUIPMENT  SUPPLY AND SERVICES
           AGREEMENT ", dated June 21, 1994.

       "Term" is used as defined in Section 10.1.

       "Trademarks" shall mean the trademarks, trade names and logotypes used by
           S-A to  identify or in  connection  with the  Equipment  from time to
           time,   including  without   limitation,   "Scientific-Atlanta"   and
           "SkyRelay (TM)".

       "Trade  Secrets"  shall mean any and all  information,  whether or not in
           tangible form, belonging to S-A or licensed by it including,  but not
           limited to,  technical or  non-technical  data,  formulae,  patterns,
           compilations,   programs,  devices,  methods,  techniques,  drawings,
           processes,  financial data, financial plans, product plans, marketing
           plans, and lists of actual or potential  customers or suppliers which
           derive economic value, actual or potential,  from not being generally
           known to, and not being  readily  ascertainable  by proper  means by,
           other persons who can obtain economic value from their  disclosure or
           use and are the  subjects of efforts  that are  reasonable  under the
           circumstances to maintain their secrecy. Specifically included in the
           definition of Trade Secrets,  but not by way of  limitation,  are (a)
           marketing  information  obtained or derived during the term hereof on
           existing and anticipated markets of S-A; (b) pricing,  product costs,
           product cost  structures  (ie.,,  breakdown of cost among  materials,
           labor  and   overhead),   and  bills  of  materials  for  current  or
           anticipated  product;  (c)  information on S-A's program  strategies,
           product  features  and  performance  for  products  under  design  or
           anticipated  for design;  and (d) specific  limitations and actual or
           perceived   deficiencies   in  existing  or  planned   products   and
           technologies of S-A

       "DAMA" shall mean "demand assigned multiple access."

2. Scope of the Agreement

The  equipment  specified  in Exhibit A will be  delivered  in  accordance  with
Section 4 "Delivery  Schedule".  During the first  thirty (30) days of the Term,
the Buyer may adjust the equipment  quantities down by not more than ten percent
(10%). During the Term, the Buyer may order additional Equipment by submitting a
purchase  order to S-A  requesting  delivery  not sooner than ninety 90 days nor
longer than one hundred  eighty  (180) days from the date thereof or as mutually
agreed to by S-A and GCI. S-A will sell and deliver such  Equipment on or before
the requested  delivery  date.  S-A shall convey the Equipment free and clear of
all liens, claims and encumbrances.

     Any terms, conditions or provisions in any purchase order received from the
Buyer  inconsistent  with this Agreement shall be deemed null and void unless an
authorized  representative  of S-A signs a document that contains such different
or  additional  provisions  and  conspicuously  states an intention to amend the
terms and conditions of this Agreement.

     Any Licensed Software  residing in Equipment  delivered to Buyer is subject
to the Software  License as set forth in Section 11. S-A shall place into escrow
all source code for all  software  and  firmware  supplied to GCI as part of the
DAMA  network;  to include all future  revisions.  All initial  escrow costs and
maintenance costs will be the responsibility of GCI.

     The  performance  of each of S-A and the Buyer under this  Agreement  shall
comply  with all  applicable  federal,  state and local  laws,  regulations  and
ordinances.

     Buyer agrees that it shall not purchase any equipment which, in the opinion
of S-A, are  competitive  with the Equipment  during the term of this  Agreement
unless prior written consent of the S-A is first obtained.

     The equipment described in Exhibit A comprises two projects, a DAMA network
expansion and the purchase and installation of six, 9.15M antennas.  Termination
of one project will not automatically imply termination of the other.

3. Price and Payment

     The  prices for the  Equipment  and  Services  are listed in Exhibit A. The
total price for all  Equipment  and Services is:  $7,688,447  (Contract  Price),
increased or decreased by any amendment or change order made in accordance  with
the Terms of this contract.

     .1 The price shall be paid in United Stated  Dollar  currency in accordance
Section 3.2 below:

     .2 Payment milestones are mutually agreed to be as follows:

         Upon Contract Signature                                    $1,013,603

         Each subsequent calendar month for six months              $984,813
         (due upon the day of the month this agreement
         is signed)

         At successful completion of 9.15M install
         and testing.                                               $106,417

         Final payment upon Acceptance                              $659,549*

* - When S-A meets  each of the seven  equipment  delivery  milestones,  for the
months of February through July, 1996 for (equipment excluding the 9.15M antenna
systems), as set forth in Exhibit B, Buyer agrees to pay an incentive of $47,111
for each monthly milestone met. This amount would be added to the subsequent mid
month  payment.  Each time such  payment is made the final  payment of  $659,549
shown above  would be reduced by the  corresponding  amount.  If; at the time of
delivery  compliance with a milestone,  the previous  months' delivery has still
not been met, the incentive payment will not be applicable.

     .3 Any amounts not paid when due shall bear  interest at the rate of 1-1/2%
per month from the date such payment was due until the date payment is received.

     .4  The  Prices  include  all  costs  for  the  performance  by  S-A of its
responsibilities  in accordance with the provisions of this Agreement but do not
include any amounts for duties, customs, shipping, federal, state or local taxes
imposed on the sale or use of such items or on the basis of the amounts  paid or
the value of the items or  services  delivered  or located  at the  installation
sites or on the basis of gross receipts (collectively, the "Shipping Charges and
Taxes"). The Buyer shall reimburse S-A for any of the Shipping Charges and Taxes
that S-A is required to pay.  The Buyer  shall not be  responsible  for taxes on
S-A's income or gross receipts from its overall business activities.

     .5 The  Statement  of Work  (SOW) for the  installation  of the 9.15  Meter
antenna installation at GCI's sites located at Barrow, Bethel, Dillingham,  King
Salmon, Kotzebue, and Nome, Alaska is outlined below.

GCI will be responsible for providing the following:

         Design and installation of the  foundations.  
         Staging of antenna at the build site.  
         Provide forklift and crane as necessary. 
         Provide power to the  outdoor  antenna  controller.  
         Provide a shelter and power for the indoor controller.  
         Provide test equipment for performing Antenna Tests
         Install the RF.

S-A will be responsible for providing the following:

         Provide 2  installation  teams,  
         Will  install the antennas and mounts.
         Provide a list of required test equipment.
         Perform antenna  patterns to demonstrate that the antenna patterns meet
         Code of Federal  Regulations  47, Part 25 ss.  25.209,  dated,  October
         1995.

Installation  Sites and Schedule:- The installation  window for a given site may
be changed by mutual agreement

         Site               Earliest Start Date           Latest Start Date
1        Barrow             June 12th, 1996               July 3rd, 1996
2        Bethel             June 24th, 1996               July 24th, 1996
3        Dillingham         July 3rd, 1996                August 14th, 1996
4        King Salmon        June 12th, 1996               July 3rd, 1996
5        Kotzebue           June 24th, 1996               July 24th, 1996
6        Nome               July 3rd, 1996                August 14th, 1996

4. Delivery Schedule

              The Buyer and S-A mutually agree to delivery  schedule  milestones
         for equipment.  The delivery  schedule is attached to this Agreement as
         Exhibit B.

              Feature Group B/1800950  software  specification are as defined in
         Exhibit D.

5. Title and Risk of Loss

              Title and risk of loss to all Equipment  sold by S-A shall pass to
         the Buyer upon delivery by S-A to a common  carrier for shipment to the
         Buyer.

6. International Sales

              In no event shall the Buyer export any Equipment without the prior
         written  consent of S-A.  If Buyer  exports any  Equipment  outside the
         United  States,  or  such  Equipment  is  re-exported  from  a  foreign
         destination,   the  Buyer  shall  insure  that  the   distribution  and
         export/re-export  of the  Equipment  is in  compliance  with all  laws,
         regulations,   orders,  or  other   restrictions  of  the  U.S.  Export
         Administration   regulations.   Neither  the  Buyer,  nor  any  of  its
         subsidiaries,  will export or re-export  any technical  data,  process,
         product, or service,  directly or indirectly,  to any country for which
         the United States  government or any agency thereof  requires an export
         license or other  governmental  approval  without first  obtaining such
         license or approval.

7. Representations

         .1 The Buyer  represents and warrants to S-A that (a) all  information,
         technical  drawings,  blueprints  summaries  and  data  of  every  kind
         provided by the Buyer and its agents to S-A is in all material respects
         accurate and correct as of the Agreement  Date,  and (b) no information
         is known to the Buyer which, if disclosed to S-A, would have a material
         impact on the technical requirements of and Specifications  relating to
         the Equipment and the Licensed Software.

         .2  The  Buyer  covenants  and  agrees  to  cooperate  with  S-A by (i)
         providing  S-A access to the  Buyer's  premises,  (ii)  making  Buyer's
         technical personnel available to S-A on a timely basis, (iii) providing
         additional  information to S-A from time to time at S-A's request,  and
         (iv)  taking  such  further  actions as S-A may  reasonably  request in
         connection  with the  efforts of S-A to fulfill its  obligations  under
         this Agreement.

         .3 The Buyer  acknowledges  and agrees that in order to preserve  S-A's
         image for high quality Equipment and thereby enhance its own sales, and
         in consideration  for S-A's making available to the Buyer the Equipment
         at favorable  prices,  the Buyer agrees that it shall not engage in any
         activities  or sell or  offer  for  sale  any  product  which  in S-A's
         reasonable  opinion would be  competitive  with the  Equipment  without
         S-A's former written approval.

8. Inspection, Test and Acceptance

         .1 S-A shall  test and  inspect  the  Equipment  during  production  in
         accordance with S-A's standard procedures.

         .2 GCI shall notify S-A of any Specification deficiencies within thirty
         (30) days of receipt of the last  deliverable  milestone  as defined in
         Exhibit B. Satisfactory resolution of the list of hardware and software
         deficiencies  will be the sole determinant of final payment.  S-A shall
         investigate  such claims  within  fifteen (15) days of S-A's receipt of
         the  Buyer's  written  explanation  and  remedy  any  failure  of  such
         Equipment to comply with the Specifications  within thirty (30) days of
         the completion of S-A's  investigation.  If the Buyer does not,  within
         ten  (10)  days of the  expiration  of the  foregoing  thirty  (30) day
         period,  indicate in writing  that it believes the  Equipment  does not
         comply  with the  Specifications,  the  Buyer  shall be  deemed to have
         Accepted  the  applicable  Equipment.  Any dispute  between the parties
         shall be resolved either by (i) mutual  agreement or (ii) in accordance
         with the arbitration procedures set forth in this Agreement.

9. Warranty

         .1 Not  withstanding  the Acceptance  terms stated above,  S-A warrants
         that the  Equipment  will comply with the  Specifications,  and will be
         free from defects in materials and  workmanship for a period of one (1)
         year after date of Acceptance (the "Warranty Period").

         .2  Except  as  provided  in  the  Software  License,  S-A  extends  no
         representations or warranties with respect to the Licensed Software.

         .3 With respect to the Equipment, during the Warranty Period, S-A will,
         following  written notice of any breach of warranty from the Buyer,  at
         S-A's option, either (i) repair or replace any nonconforming  Equipment
         at Buyer's site or at the site where the Equipment is otherwise located
         or (ii) request the Buyer to ship any  nonconforming  Equipment to S-A,
         and S-A will  either  repair or  replace  and  return to the Buyer such
         nonconforming Equipment. Title to nonconforming Equipment being shipped
         to S-A shall pass to S-A when  delivered to the shipping  carrier,  and
         title to the repaired or replacement  Equipment shall pass to the Buyer
         when delivered by S-A to the shipping  carrier for return to the Buyer.
         If any Equipment is shipped to S-A or S-A dispatches its personnel to a
         Buyer's  site and the  applicable  Equipment  is  determined  either to
         comply with the Specifications or to have been damaged or misused other
         than through the fault of S-A, the Buyer shall pay S-A's normal charges
         in connection therewith.

         .4 S-A MAKES NO  WARRANTIES  OTHER THAN THE EXPRESS  WARRANTIES IN THIS
         SECTION AND IN THE SOFTWARE LICENSE AND NONE SHALL BE IMPLIED. THERE IS
         NO WARRANTY OF  MERCHANTABlLlTY,  FITNESS FOR A  PARTICULAR  PURPOSE OR
         NONINFRINGEMENT  PROVIDED  HEREUNDER.  THE ENTIRE OBLIGATION OF S-A FOR
         EQUIPMENT OR LICENSED SOFTWARE MALFUNCTIONS OR DEFECTIVE  INSTALLATIONS
         AFTER  ACCEPTANCE  IS AS  EXPRESSLY  STATED IN THIS  SECTION  OR IN THE
         SOFTWARE LICENSE.

10. Terms and Termination

         .1 The "Term" of this Agreement  shall commence on the Agreement  Date,
         and, unless sooner terminated  pursuant to Sections 10.2 or 10.3 below,
         shall end upon completion of obligations of the parties.

         .2 The  non-defaulting  party may terminate this Agreement  immediately
         upon written notice of the occurrence of any of the following events:

              a. Either party shall  default in any of its material  obligations
              hereunder and fail to cure the default  within  fifteen (15) days,
              or as mutually agreed to by both parties, after the non defaulting
              party has given written notice of such default,  such  termination
              to be effective as of the day of such  notice.  Written  notice of
              cure shall be delivered  to  non-defaulting  party within  fifteen
              (15) days of notice of default: or

              b. Either party shall become insolvent or shall seek protection in
              bankruptcy  or the  appointment  of a receiver  or a  petition  in
              bankruptcy or seeking the appointment of a receiver shall be filed
              against such party and such petition shall not be dismissed within
              thirty  (30)  days  of  its  filing,  such  termination  shall  be
              effective as of the date of such notice.

         .3 The Buyer shall further have the right to terminate  this  Agreement
         for convenience,  through March 1, 1996. The parties agree that S-A has
         no means to  determine  actual  cost impact and  therefore  the parties
         agree that the costs  associated with this  termination for convenience
         shall be liquidated as follows:

                  December 1st, 1995                        10%
                  January 1st, 1996                         20%
                  February 1st, 1996                        30%
                  March 1st, 1996                           40%

         where % is  defined  as the  percentage  of the  price of the  canceled
         portion of the agreement.

              The liquidated  termination  costs shall be due S-A within 30 days
         of date of notice of termination by the Buyer.

              In the event of  Termination  of the  agreement and payment of the
         appropriate  liquidation  costs detailed above, GCI would  subsequently
         have the right to repurchase some or all of the canceled  equipment.  A
         percentage of the liquidated  costs  previously paid by GCI as a result
         of termination would be credited to GCI as follows:

                  If reordered by:

                  March 31st, 1996                                     50%
                  April 1st - May 31st, 1996                           35%
                  June 1st - July 31st, 1996                           30%
                  August lst- Sept. 30th, 1996                         25%
                  Oct. 1st - Dec. 31st, 1996                           20%

         Said credit will be applied to the  repurchased  products on a prorated
         basis.

         .4 Except as set  forth in  subsection  10.3,  immediately  above,  the
         termination  or expiration of this  Agreement by either party shall not
         affect the rights and obligations of the parties that have vested prior
         to the  effective  date of such  termination  with  respect  to  orders
         accepted by S-A. Final  settlement for such orders shall be on the same
         basis as though the Agreement were  continuing,  and any obligations of
         one party to the other with respect to such orders shall remain in full
         force and effect  until  fully paid or  discharged.  In addition to the
         foregoing,  the provisions of Sections 6, 7, 9, 10, 11, 12, 13, 14, 15,
         21, 22 and 23 shall survive the termination of this Agreement.

11. Licensed Software

              All copies of the  Licensed  Software  residing  in the  Equipment
         purchased by the Buyer under this  Agreement  shall remain the property
         of S-A and Buyer shall be required to execute the Software License, the
         terms and conditions of which are incorporated  herein by reference and
         made a part hereof. In the event, however, that terms of this Agreement
         conflict  with  terms  of the  Software  License,  the  terms  of  this
         Agreement shall prevail over the Software License.

                a. S-A  grants  to Buyer  during  the Term of this  Agreement  a
                royalty-free,  non-exclusive  license to use the  Trademarks  in
                connection  with  the  promotion  and sale of the  Equipment  as
                provided  for  herein.  Buyer shall not use or  incorporate  the
                Trademarks  on any  other  products  or in or as part of a trade
                name,  corporate name, or business name. Buyer acknowledges that
                considerable  time and money  has been  expended  to create  the
                goodwill associated with the Trademarks.  Buyer shall always act
                in a  manner  that  would  maintain  the  quality  and  goodwill
                associated with the Trademarks.  Nothing  contained herein shall
                give Buyer any interest or right in the Trademarks, except as is
                expressly granted herein.

                b. Buyer further agrees that it will not in any manner represent
                that it has  ownership  of the  Trademarks  and that it will not
                register or attempt to register any Trademarks under the laws of
                any  jurisdiction,  and will not at any time do,  or cause to be
                done,  any act or thing  contesting,  or in any way impairing or
                tending to impair, any part of S-A's right,  title, and interest
                in the  Trademarks,  whether or not they are  registered  in the
                jurisdictions  in  which  Buyer  is  located  or does  business;
                provided,  however,  that Buyer may  register  Trademarks  where
                expressly   required   by  law,   solely  for  the   purpose  of
                establishing its  distributorship  status.  Buyer shall promptly
                notify  S-A of any  unauthorized  use or  infringement  of S-A's
                Trademarks, licenses or rights thereto.

                c. Buyer agrees not to obscure, alter, modify or remove from the
                Equipment any of the Trademarks or other product identification.

12. No Rights in Trademarks

              S-A  grants  to  Buyer  during  the  Term  of  this   Agreement  a
         royalty-free, non-exclusive license to use the Trademarks in connection
         with the  promotion  and sale of the  Equipment as provided for herein.
         Buyer shall not use or incorporate the Trademarks on any other products
         or in or as part of a trade name,  corporate  name,  or business  name.
         Buyer  acknowledges  that considerable time and money has been expended
         to create  the  goodwill  associated  with the  Trademarks.  Buyer will
         always act in a manna that would  maintain  the  quality  and  goodwill
         associated with the  Trademarks.  Nothing  contained  herein shall give
         Buyer any interest or right in the  Trademarks,  except as is expressly
         granted herein.

              Buyer further agrees that it will not in any manner represent that
         it has  ownership  of the  Trademarks  and that it will not register or
         attempt to register any Trademarks under the laws of any  jurisdiction,
         and  will not at any  time  do,  or cause to be done,  any act or thing
         contesting,  or in any way impairing or tending to impair,  any part of
         S-A's right, title, and interest in the Trademarks, whether or not they
         are registered in the  jurisdictions  in which Buyer is located or does
         business;  provided,  however, that Buyer may register Trademarks where
         expressly  required by law, solely for the purpose of establishing  its
         distributorship   status.  Buyer  shall  promptly  notify  S-A  of  any
         unauthorized  use or  infringement  of S-A's  Trademarks,  licenses  or
         rights thereto.

              Buyer  agrees not to  obscure,  alter,  modify or remove  from the
         Equipment any of the Trademarks or other product identification..

13. Other Intellectual Property

         .1 The Buyer  acknowledges  that as an integral part of S-A's business,
         S-A has developed,  at a  considerable  investment of time and expense,
         Trade Secrets and Proprietary  Information,  and acknowledges  that S-A
         has a legitimate  business interest in protecting the Trade Secrets and
         Proprietary  Information.  Buyer acknowledges that it and its employees
         will be entrusted with such Trade Secrets and Proprietary  Information.
         Pursuant  therewith,  the  Buyer  agrees  to  that  it  will  treat  as
         confidential  and will not,  without the prior written approval of S-A,
         use (other than in the performance of its duties  hereunder),  publish,
         disclose,  copyright or authorize anyone else to use, publish, disclose
         or copyright, (a) any information that constitutes Trade Secrets either
         during the term hereof or subsequent  thereto;  or (b) any  information
         that constitutes  Proprietary Information either during the term hereof
         or for two (2) years after  expiration or termination,  with or without
         cause.

         .2 All  records,  notes,  files,  drawings,  documents,  plans and like
         items, and all copies thereof,  relating to or containing or disclosing
         Trade Secrets or Proprietary  Information of S-A which are made or kept
         by the Buyer or which are  disclosed to or come into the  possession of
         the Buyer,  shall be and remain the sole and exclusive  property of S-A
         and shall be returned to S-A upon  expiration  or  termination  of this
         Agreement.

         .3  The  Buyer  further  agrees  that  it  will  require  each  of  its
         shareholders,  officers,  directors and employees who act on its behalf
         with respect to this Agreement to be bound by the  requirements of this
         Agreement  and  that,  upon  request  of S-A,  the Buyer  will  provide
         evidence of such requirement to S-A.

14. Injunction

              The Buyer agrees that its (or anyone acting on its behalf)  actual
         or threatened  breach of the  provisions of Sections 10, 11 or 12 shall
         constitute  irreparable  harm to S-A, and S-A, in addition to all other
         rights,  shall be entitled to seek an injunction  restraining the Buyer
         or  such  person  therefrom.  Nothing  herein  shall  be  construed  as
         prohibiting  S-A from  pursuing  any other  available  remedy  for such
         breach or threatened breach, including the recovery of damages from the
         Buyer or such  person.  This  provision  shall remain in full force and
         effect  in the event the Buyer or such  person  should  claim  that S A
         violated any of the terms of this Agreement.  In such event,  the Buyer
         or such person agrees to pursue such claim against S-A independently of
         the covenants set forth in this section.

15. Proprietary Rights Indemnification

         .1  Indemnification.  S-A shall settle, at its sole cost, or defend and
         pay costs and damages  finally awarded in any suit against the Buyer to
         the extent based upon a finding that the design, construction or use of
         the Equipment,  including  Licensed  Software (either  separately or in
         combination),  furnished under this Agreement, as furnished and used in
         accordance  with  S-A  instructions,  infringes  a  patent,  trademark,
         copyright or other intellectual property right of a third party (except
         infringement  which is  directly  caused by  incorporating  a  specific
         design or modification at the Buyer's request). S-A shall not indemnify
         the  Buyer's  for that  portion  of any  final  award  that is based on
         revenue  derived from use of the Equipment and that is in excess of the
         maximum liability of S-A provided in Section 15.5 below.

         .2 Procedures.  In the event of any allegation of  infringement  of the
         type  described in Section  15.1 or a claim or suit based  thereon (the
         "Allegation"),  the Buyer shall promptly  notify S-A of such Allegation
         in writing.  S-A shall promptly commence efforts to settle or to defend
         against such Allegation and the Buyer shall  reasonably  cooperate with
         S-A at the expense of S-A in such settlement or defense.

         .3  Injunction.  In the event that the use of the  Equipment  delivered
         under this  Agreement  is  enjoined  or, in the  discretion  of S-A, is
         likely to be enjoined,  S-A shall do one or more of the  following,  at
         S-A's option:

              (a) obtain for the Buyer the right to use the  infringing  item at
              no cost to the Buyer;

              (b) modify the  infringing  item so that it becomes  noninfringing
              while  remaining  in  compliance  with the  Specifications  in all
              material respects;

              (c)  replace  the  item  with a  noninfringing  item  which  is in
              compliance with the Specifications in all material respects; or

              (d) if (a), (b) or (c) cannot be effected by S-A's  reasonable and
              diligent  efforts,  and  further  subject  to the Notice of Refund
              Option,  below,  refund  the  amount  paid  by the  Buyer  for the
              applicable   Equipment,   less   depreciation   calculated   on  a
              straight-line basis over a five (5) year period, provided that the
              payment of any such  refund  shall not become due until  return by
              the Buyer of the applicable Equipment.

              (e)  Notice of  Refund  Option.  In the  event S-A shall  elect to
              exercise the provisions of subsection  15.3(d),  above,  S-A shall
              give Buyer 90 days written  notice of such  election.  Buyer shall
              have the option,  during such 90 day period,  to  negotiate on its
              own behalf a license or other agreement with the Plaintiff so that
              such  item  is  no  longer  infringing.  In  the  event  Buyer  is
              successful,  S-A shall under Section 15.1 above,  pay on behalf of
              Buyer any royalties  and other costs  related to such  settlement,
              including  attorney's  fees, up to the amount set forth in Section
              15.5, below.

         .4 Combinations and Modifications.  Notwithstanding any other provision
         of this  section,  S-A shall  have no  liability  for any  infringement
         arising  from (i) use of  delivered  items in  combination  with  other
         items, unless S-A sold, made or specifically  recommended them all as a
         combination, or the specific combination would be necessary for the use
         in the normal  course of events in connection  with the Equipment  sold
         hereunder,  or (ii)  modification of items after  delivery,  unless S-A
         made or specifically recommended the modification,  or the modification
         constitutes  normal  repair,   replacement  or  implementation  of  S-A
         provided options and enhancements for the Equipment sold hereunder.

         .5 Limitation. Notwithstanding any other provision of this Agreement to
         the  contrary,  this Section 15 states the entire  liability of S-A and
         the sole and exclusive remedy of the Buyer for any alleged infringement
         of a third party's intellectual  property right arising out of the sale
         or use of the  Equipment  supplied  under this  Agreement  or a process
         practiced by such item,  and S-A shall not be liable under this Section
         15 in the  aggregate  for any amount  exceeding  the total price of the
         Equipment purchased hereunder.

16. Indemnification and Limitation of Liability

         .1 The  Buyer  agrees  to  indemnify  and  hold  S-A and its  officers,
         directors and employees harmless from any loss,  damage,  liability and
         expense on account of bodily  injuries or  physical  damage to tangible
         property,  including the property of S-A,  arising from any  occurrence
         caused by a  negligent  or willful  act or omission of the Buyer or any
         employee or agent of the Buyer (other than S-A),  or of an  independent
         contractor of the Buyer (other than S-A), which indemnity shall survive
         this Agreement.

         .2 S-A  agrees  to  indemnify  and hold  the  Buyer  and its  officers,
         directors and employees harmless from any loss,  damage,  liability and
         expense on account of bodily  injuries or  physical  damage to tangible
         property,  including  the  property  of the  Buyer,  arising  from  any
         occurrence  caused by a negligent or willful act or omission of S-A, or
         any  employee or agent of S-A or of any  subcontractor  or  independent
         contractor of S-A, which indemnity shall survive this Agreement.

         .3  UNDER NO  CIRCUMSTANCES  SHALL  S-A BE  RESPONSIBLE  FOR  INDIRECT,
         SPECIAL,  INCIDENTAL,  CONSEQUENTIAL,  PUNITIVE,  OR EXEMPLARY  DAMAGES
         ARISING  OUT OF OR IN  CONNECTION  WITH  THIS  AGREEMENT  OR ANY  OTHER
         RELATED  AGREEMENTS  OR ANY ACTS OR OMISSIONS  ASSOCIATED  THEREWITH OR
         RELATING  TO THE USE OF ANY  EQUIPMENT,  LICENSED  SOFTWARE OR SERVICES
         FURNISHED, WHETHER SUCH CLAIM IS BASED ON BREACH OF WARRANTY, CONTRACT,
         TORT OR OTHER LEGAL THEORY AND REGARDLESS OF THE CAUSES OF SUCH LOSS OR
         DAMAGES OR WHETHER ANY OTHER REMEDY  PROVIDED  HEREIN FAILS,  NOR SHALL
         S-A'S  TOTAL  LIABILITY  EXCEED AN AMOUNT  EQUAL TO THE TOTAL  PURCHASE
         PRICE PAID BY THE BUYER TO S-A UNDER THIS AGREEMENT, MEASURED AS OF THE
         DATE SUCH LIABILITY OF S-A SHALL FIRST EXIST.

17. Force Majeure

              S-A shall  not be  responsible  for  delays  caused by  conditions
         beyond the reasonable control of S-A, including without limitation such
         conditions as acts of God, civil insurrections,  wars, sabotage, fires,
         floods, sun outages,  atmospherics and externally caused  interference,
         accidents,   labor  disputes,  acts  or  requirements  of  governmental
         authorities or governmental  laws,  ordinances,  rules and regulations,
         transportation  delays,  unusually severe weather,  or other similar or
         different  conditions  beyond the reasonable  control of S-A including,
         without  limitation,  limitations  and  restrictions  imposed  by third
         parties.  In  the  event  of  delay  due  to any  such  condition,  any
         performance  obligation  shall be  adjusted  equitably.  Any  orders in
         purchase  orders  to the  Buyer  which  contains  a  penalty  clause or
         liquidated  damage  clause  accepted  by the  Buyer  shall be wholly at
         Buyer's risk unless S-A has given prior written consent to such clause.

18. Notices

              All notices given pursuant to this  Agreement  shall be in writing
         and  either  delivered  in person or by  telegram,  telex or  facsimile
         transmission  or mailed by certified  mail,  return receipt  requested,
         postage prepaid,  to each party at the following  address or such other
         address as such party may direct by similar notice to the other:

      To S-A:              Scientific-Atlanta, Inc.
                           4356 Communications Drive
                           Norcross, GA 30093
                           ATTN: Bob Roseman
                           Telephone: (770) 903 6684
                           Facsimile: (770) 903 5524

      To Buyer:
                           GCI Communication Corp.
                           2550 Denali Street Suite 1000
                           Anchorage AK USA 99503
                           ATTN: Jimmy R Sipes
                           Telephone: (907) 265-5557
                           Facsimile: (907) 265-5673

      Any notice given pursuant to this  Agreement  shall be deemed to have been
given upon receipt.

19. Amendments and Changes

              This  Agreement  may not be  amended,  modified  or  waived in any
         material  respect  except in a written  amendment  signed by authorized
         representatives of both parties.

20. Assignment and Subcontracting

         .1 This Agreement  will be bring upon,  inure to the benefit of, and be
         enforceable  by,  the  parties  hereto  and  their   respective   legal
         representatives,   successors  and  assigns;  provided,  however,  that
         neither  this  Agreement  nor any rights  hereunder  may be assigned by
         either  party  without the prior  written  consent of the other  party,
         except that this  Agreement  may be assigned to a parent or  associated
         corporation or to an entity that acquires all or  substantially  all of
         the capital stock,  business, or assets of a party hereto and agrees in
         writing to assume the rights and obligations.

         .2 S-A may engage one or more  subcontractors  to perform any or all of
         the obligations of S-A hereunder. Any such assignment or subcontracting
         shall not,  unless the  parties  otherwise  agree in  writing,  relieve
         either party hereto from any obligations hereunder.

21. Independent Contractor

     Each party hereto is an independent  contractor and shall not be deemed the
agent or employee of the other party  hereto.  The Buyer  acknowledges  that the
Specifications  and the other matters set forth herein are the only  limitations
and  restrictions  on the  source  quality  and  performance  of  the  Equipment
hereunder.

22. Public Release of Information

     Neither party may issue any press release or circular or otherwise disclose
the existence or terms of this Agreement or the relationship contemplated hereby
without the prior  written  approval of the other  party  unless  required by an
APUC, FCC or other governmental reporting requirement.

23. Miscellaneous

         .1 This  Agreement  expresses the entire  understanding  of the parties
         with reference to the subject  matter hereof,  and supersedes any prior
         or  contemporaneous  representations,  understandings  and  agreements,
         whether oral or written, and no representations or agreements modifying
         or  supplementing  the terms of this Agreement shall be valid unless in
         writing and signed by the parties hereto.

         .2 This Agreement  shall be interpreted in accordance with and governed
         by the laws of the State of Georgia,  excluding its rules or principles
         regarding conflicts of law.

         .3 Except as set forth in Sections 10.3 and 24, the enumeration  herein
         of the  rights  and  remedies  of the  parties  is not  intended  to be
         exclusive,  and such rights and  remedies are in addition to and not by
         way of limitation of any other rights or remedies that either party may
         have under applicable law.

         .4 No act,  failure or delay by either party hereto shall  constitute a
         waiver of any of such party's rights and remedies. No single or partial
         waiver by either party hereto of any provision of this Agreement, or of
         any breach or default  hereunder,  or of any right or remedy which such
         party  may have,  shall  operate  as a waiver  of any other  provision,
         breach,  default,  right or  remedy or of the same  provision,  breach,
         default, right or remedy on a future occasion.

         .5 If any  provision of this  Agreement  shall be prohibited or invalid
         under  applicable  law,  such  provision  shall be invalid only to such
         extent, without invalidating the remainder of this Agreement.

         .6 This Agreement may be executed in any number of counterparts, and by
         S-A and the Buyer in separate  counterparts,  each of which shall be an
         original,  but all of which shall together  constitute one and the same
         Agreement.

         .7 The captions  contained in this Agreement are for convenience  only,
         are without  substantive meaning and should not be construed to modify,
         enlarge, or restrict any provision.

24. Arbitration

         .1  Except  as  otherwise   provided  in  the  Software  License,   any
         controversy  or claim  between or among the parties,  including but not
         limited to those  arising out of or relating to this  Agreement  or any
         agreements or  instruments  relating  hereto or delivered in connection
         herewith and any claim based on or arising from an alleged tort,  shall
         if  incapable  of  resolution  by mutual  agreement  in good faith,  be
         determined by arbitration as provided in this Section 24.

         .2 The  arbitration  shall be conducted in  accordance  with the United
         States  Arbitration  Act  (Title 9, U. S.  Code),  notwithstanding  any
         choice of law  provision in this  Agreement,  and under the  Commercial
         Arbitration Rules of the American Arbitration  Association ("AAA"). The
         arbitration shall be conducted in the City of Seattle, Washington . The
         arbitrator  shall give effect to statutes of limitation in  determining
         any claim.  Any controversy  concerning  whether an issue is arbitrable
         shall be determined by the  arbitrator.  The decision of the arbitrator
         shall  be  final  and  binding  on  the  parties.   Judgment  upon  the
         arbitration award may be entered in any court having  jurisdiction.  In
         rendering any decision or making findings of fact the arbitrator  shall
         apply the express intentions of the parties set forth in this Agreement
         and the laws of the State of Georgia,  including without limitation any
         applicable  statutes,  regulations and binding judicial  decisions,  as
         such would be  applied  by the  courts of the State of Georgia  and the
         United States District Court for the Northern District of Georgia.

         .3 In connection with any  arbitration  having an amount in controversy
         of less than  $1,000,000,  such  arbitration  shall be  conducted  by a
         single  arbitrator,  chosen by the AAA.  The AAA shall be guided by any
         applicable  rules with  respect to the  choosing of an  arbitrator  for
         arbitrations  conducted pursuant to the Commercial Arbitration Rules of
         the AAA,  and,  in  addition,  thereto,  (i) the AAA shall  attempt  to
         appoint an arbitrator having a technical  background,  where available,
         consistent  with the  technical  issues  and  procedures  which are the
         subject  matter  of this  Agreement  and (ii) the AAA  shall  prefer an
         arbitrator who is an attorney in good standing and licensed to practice
         law within the State of Georgia.  In  connection  with any  arbitration
         where the amount in controversy is equal to or greater than $1,000,000,
         the  arbitration  shall be  conducted  of a panel of three  (3) or more
         arbitrators  chosen  by the AAA,  giving  preference  to those  factors
         identified in subsections (i) and (ii) in the foregoing sentence.

         4 Notwithstanding any of the foregoing provisions, nothing contained in
         this Section 24 shall  prohibit  either  party from seeking  injunctive
         relief in any court having jurisdiction thereof and each party consents
         to such jurisdiction.

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be duly
executed and delivered by their respective authorized  representatives as of the
date first above written.

GCI Communication Corp:                         Scientific-Atlanta, Inc.:



By: /s/ Ron Duncan                              By:/s/ David A. Berger

Ron Duncan                                      David A. Berger
(Typed Name)                                    (Typed Name)

President                                       President-Networks Division
(Title)                                         (Title)

December 20, 1995                               December 28, 1995
(Date)                                          (Date)





                               Exhibit A - Prices
- ----------------------------------------------------------------------------------------------------------------- GCI C-BAND 3.6 METER ANTENNA REMOTE DAMA STATIONS MFR OR PRICE ITEM DESCRIPTION QTY EQUIV. (U.S.$) - ----------------------------------------------------------------------------------------------------------------- I. EQUIPTMENT This quote is excluding the following items: 1- ISDN Interface and Equipment 2- Single unit LNB 3- Shipping 4- Integration 5- Transceiver IFL 1. 3.6-Meter Non-Deiced Antenna (51 Sites) consisting of: a. Non-motorizable mount 1 S-A b. Non heated panels 1 S-A c. Spars and feed boom 1 S-A d. GCI Mount pipe 1 S-A e. Cross-pol heated feed 1 S-A f. Raven protection kit 1 S-A g. Feed boom electric deice kit 1 S-A 3.6-Meter Non-Deiced Antenna Unit Price $10,561 3.6-Meter Non-Deiced Antenna Total Price (Qty-51) $538,611 2. Model 7890B Tranceiver subsystem (55 Sites) consisting of: Note: Excludes IFL & Mounting Hardware a. Model 7890 C-Band 20 watt Outdoor RF Unit 1 S-A (5.85-6.425 GHz) b. Model CLNA-35-60-N Low Noise Amplifier 1 EF DATA c. Model 7792B Tranceiver Indoor Unit, -48VDC 1 S-A d. Block Downconverter (3.625-4.2 GHz) 1 S-A e. Temperature Sensor Remote Assy. (P/N 482439) 1 S-A Model 7890B Tranceiver Unit Price $20,572 Model 7890B Tranceiver Unit Price (Qty-55) $1,131,460 3. Baseband Equipment consisting of: a. Model 7800 DAMA Eight channel chassis 86 S-A $688,000 -48 VDC Multi Transponder IF Input/Output b. Model 7802 Channel Unit, Voice and Data, 128kbps 550 S-A $2,722,500 Fax Relay option, Switchless c. Remote Signaling Channel Unit, Switchless 56 S-A $252,000 d. Remote Signaling Channel Unit, Switchless System Spares 6 S-A e. DAMA Standby Power Supply for 7800 Chassis, 62 S-A $458,986 -48 VDC, Panel Mount Subtotal: $5,791,557 4. Monitor & Control Subsystem consisting of: a. Alarm/Status Sense inputs (28 points) 53 S-A b. Outdoor Temperature Meter 53 S-A c. Indoor Temperature Meter 53 S-A d. Power Module Temperature Meter 53 S-A e. DC Current Meter 53 S-A f. DC Voltage Meter 53 S-A g. (3) Temperature Probes 53 S-A h. RSCU/Modern/PMT Port enhancement 53 S-A i. Modem addition to 4.h 53 S-A Subtotal; $426,650 5. Optional 2 ft. Mount Pipe Extension 51 S-A $ 42,330 6. Optional Elevation Drill Drive Adapter 3 S-A $ 6,905 FOB ATLANTA PRICE: $6,267,442 II. SERVICES 1. Freight and Insurance (Customer Responsibility) 0 Lot 2. Site Survey 0 Lot 3. Civil Works (Customer Responsibility) 0 Lot 4. Installation, Test & Commissioning 0 Lot 5. Training Programs 0 Lot 6. Progrm Management & Engineering Services 1 Lot $218,047 7. Feature Group B, 1800950 Development 1 Lot $25,000 8. 64Kbps PCM Development 1 Lot $85,000 TOTAL DAMA EXPANSION NETWORK $6,595,489 9 METER ANTENNA PROJECT 1. Model 8009A 9.15 M Antenna 6 Reflector, motorized polarization, non deiced S-A Extreme Mount, galvanized and painted S-A Foundation Kit, 120 deg. S-A 4 port C-Band Linear Feed S-A Extreme Environment Radome/Raven Protection Kit S-A Motorized Single Speed actuators, 120* Azimuth S-A Travel, 208 VAC Transmit Waveguide Kit S-A Lightning Protection Kit S-A Work Platform and Ladder Kit S-A 2. Antenna Controls Subsystem: 6 Model 8861 Antenna Motor Controller S-A Model 8860-2 Adaptrack Indoor Unit S-A AZ/EI Kits, 208 VAC S-A Feed Kits 208 VAC/60 HZ Phase 3 S-A Installation Kits S-A Deice Control System 5 S-A Main Reflector, Feed and Sub-Reflector 5 S-A Electric De-Ice Hardware Subtotal: $856,258 3. Installation 6 $236,700 Note: i) GCI to provide test equipment ii) GCI to install the RF system prior to antenna testing TOTAL 9M ANTENNA PROJECT $1,092,958 TOTAL CONTRACT DAMA EXPANSION AND 9M ANTENNA PROJECTS $7,688,447
I.EQUIPMENT QTY 1-Jan 1-Feb 1-Mar 1-Apr 1-May 15-May 1-Jun 15-Jun 1-Jul 1-Aug -96 -96 -96 -96 -96 -96 -96 -96 -96 -96 1 3.6 Meter non-Deiced Antenna, consisting of: 51 1 18 18 14 a. Non-motorized mount b. Non heated panels c. Spars and feed boom d. GCI mount pipe e. Cross-pol heated feed f. Raven protection g. Feed boom electric deice kit 2 Model 7890B Transceiver Subsystem, consisting of: 55 19 18 18 a. Model 6610 C-band 20 W ORU b. Model CLNA-35-60-N LNA c. Model 7792B Transceiver IDU, -48 VDC d. Block Downconverter e. IFL and Hardware including - ORU TX and RX Coaxial Cabling, 40' - ORU power and Control Cabling, 40' - OD Temp Sensor Cabling, 25' - ORU/LNA/LNB/Feed Cabling - Mounting Hardware 3 Baseband Equipment, consisting of: a. Model 7800 DAMA Eight channel chassis, -48 VDC 86 8 8 19 18 17 16 Multi Transponder IF Input/Output b. Model 7802 Channel Unit, Voice and Data, 128 550 30 30 140 150 100 100 kb/s,Fax Relay option, Switchless c. Remote Signaling Channel Unit, Switchless 62 4 4 20 18 16 d. DAMA Standby Power Supply for 7800 chassis, 62 4 3 19 18 18 -48 VDC, Panel Mount
I. EQUIPMENT QTY 1-Jan 1-Feb 1-Mar 1-Apr 1-May 15-May 1-Jun 15-Jun 1-Jul 1-Aug -96 -96 -96 -96 -96 -96 -96 -96 -96 -96 4 Monitor & Control Subsystem consisting of: 53 19 18 16 a. Alarm/Status Sense Inputs (28 points) b. Outdoor Temperature Meter c. Indoor Temperature Meter d. Power Module Temperature Meter e. DC Current Meter f. DC Voltage g. (3) Temperature Probes 5 Feature Group-B Software/Hardware lot 6 1-800-950-XXXX Software/Hardware lot 7 9.15 Meter Antenna 6 a. Reflector, motorized polarization, non-deiced 2 2 2 b. Extreme Mount, 120 azimuth, galvanized and 2 2 2 painted c. Foundation Kit, 120 2 2 2 d. 4 port C-band Linear Feed 2 2 2 e. Motorized Single Speed Actuators 2 2 2 120 Azimuth travel, 208 VAC, 60 Hz f. Model 8861 Antenna Motor Controller 2 2 2 g. Model 8860-2 Adaptrack Indoor Unit, -48 VDC 2 2 2 primary input power h. Antenna Control Cable and Installation Kits 2 2 2 i. Lightning Protection Kit 2 2 2 j. Work Platform and Ladder Kit 2 2 2 k. Transmit Waveguide Interface Kit 2 2 2 l. Feed Deice 2 2 2 m. Extreme Environment Radome/Raven Protection Kit 2 2 2
Exhibit C - Software License SOFTWARE LICENSE AGREEMENT SCIENTIFIC-ATLANTA END USER SOFTWARE LICENSE AGREEMENT FOR USE WITH DESIGNATED EQUIPMENT Customer: GCI Communication Corporation Address: 2550 Denali St, Anchorage. AK. 99503-2781 Scientific-Atlanta, Inc. ("S-A") by its acceptance agrees to grant to Customer, and Customer accepts on the following terms and conditions a license to the identified Licensed Software for use only with the Designated Equipment set out below. This Agreement covers all Software provided by S-A to GCI for the purpose of operating the S-A DAMA Network equipment, purchased by GCI from S-A pursuant the Equipment Purchase Agreement of even date. 1.LICENSE GRANT 1.1 "Licensed Software" means a computer program, including any modifications, updates or additions which may be supplied by S-A to Customer, in object code or executable form in any medium, such as magnetic tape, disks, or optical media; and related materials such as flow charts, logic diagrams, manuals, and other documentation which are provided to Customer by S-A with or for use in Designated Equipment. Licensed Software may reside within Designated Equipment at the time of delivery to Customer in which case identification of such equipment shall also constitute identification of the corresponding software; or it may be provided separately for installation on Designated Equipment. 1.2 Subject to these terms and conditions, S-A grants to Customer, subject to the limitations herein, a personal, nonexclusive, nontransferable license to use Licensed Software in and for the Designated Equipment and not otherwise. This license may be assigned to any bona fide successor in interest to Designated Equipment who first agrees in writing to be bound by the terms of this Agreement. Should the Licensed Software include a unique implementation of a security algorithm, Customer shall have the exclusive right to use such unique Customer security algorithm implementation in and for use with the Designated Equipment and not otherwise. 1.3 Customer may make one (1) copy of Licensed Software (but not including read-only memories or similar devices) for archival purposes only and shall reproduce and attach all copyright and proprietary notices. Customer shall not otherwise copy or allow to be copied Licensed Software except to install Licensed Software on the Designated Equipment. Customer agrees that S-A shall have the right to have an independent accounting firm conduct an audit at Customer's premises during normal business hours to verify the number of copies of Licensed Software in use by Customer. 1.4 Customer shall not make any modifications to Licensed Software or remove any proprietary notices of S-A or third parties found in or on the Licensed Software. Customer agrees not to reverse engineer, decompile, or reverse assemble Licensed Software except to the extent that such prohibition may be unenforceable under applicable law. 1.5 Licensed Software is and shall remain the exclusive property of S-A. No license other than that specifically stated herein is granted to Customer, and Customer shall have no right to sublicense Licensed Software nor any right under any patent, trademark, copyright, trade secret or other intellectual property of S-A other than that granted by this Agreement. 2. PROTECTION AND SECURITY 2.1 Customer agrees not to disclose, release, or make available in any form any portion of Licensed Software to any person other than Customer's own employees or contractors. Customer represents that its employees and contractors having access to Licensed Software are or shall be party to written agreements acknowledging a duty to protect Customer's confidential materials, including the Licensed Software. 2.2 Customer shall keep Licensed Software (including archival copies, if any), in a secure environment and shall take all steps reasonably necessary to protect Licensed Software or any part thereof from unauthorized disclosure or release. Customer may not export or reexport the Licensed Software in any form except in compliance with all applicable laws and regulations. 2.3 Customer expressly agrees that a breach of this Agreement will cause irreparable harm to S-A and that S-A shall have the right to obtain injunctive relief against any unauthorized use, disclosure, copying or transfer of any part of Licensed Software. Licensed Software may contain software from third parties who are intended to be third party beneficiaries of this Agreement. 3. WARRANTY AND LIABILITY 3.1 S-A warrants that Licensed Software, as provided, shall conform to the Specifications as that term is defined in the Equipment Purchase Agreement of even date or if not covered by such Specification, the published specification of S-A. During the first one (1) year after the date of delivery of Licensed Software, S-A shall use reasonable commercial efforts to correct errors detected in Licensed Software after receiving notification of such errors from Customer. This paragraph sets forth the entire obligation of S-A with respect to Licensed Software and in no event shall S-A be liable to Customer for loss of profit, indirect, special, or consequential damages arising out of its provision of the Licensed Software to Customer under tort, contract, or any other legal theory. In no event shall S-A be liable to Customer for any damages, however based, in excess of ten thousand United States dollars (US$10,000.00). S-A MAKES NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED WITH RESPECT TO ANY PRODUCTS OR SERVICES PROVIDED UNDER THIS AGREEMENT INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OTHER THAN COMPLIANCE WITH THE SPECIFICATIONS S-A DOES NOT WARRANT THAT THE FUNCTIONS CONTAINED IN Licensed Software WILL MEET THE CUSTOMER'S REQUIREMENTS, OR THAT THE OPERATION OF Licensed Software WILL BE UNINTERRUPTED OR ERROR-FREE. S-A MAKES NO WARRANTY OF NONINFRINGEMENT, EXPRESS OR IMPLIED. ANY THIRD PARTY SOFTWARE SUPPLIED WITH OR INCORPORATED IN Licensed Software IS PROVIDED "AS-IS" WITHOUT WARRANTIES OF ANY KIND. IF ANY ADDITIONAL WARRANTIES ARE SUPPLIED BY A THIRD PARTY, SUCH WARRANTIES WILL BE OFFERED DIRECTLY BY SUCH THIRD PARTY TO Customer. 3.3 Customer acknowledges its responsibility to use all reasonable methods to prove out and thoroughly test the operation of and output from Licensed Software prior to its use in Customer's operations. 3.4 Unless otherwise provided in a separate writing, and subject only to the warranty of this Section, S-A is under no obligation to provide Customer with any modifications, updates, additions or revisions to Licensed Software, nor to maintain Licensed Software in any manner. 3.5 In the event that any modifications are made to Licensed Software, any and all warranty and other obligations of S-A shall immediately cease with respect to such software. 4.INDEMNIFICATION 4.1 S-A shall provide defense and indemnification to the Customer under terms set forth in Section 15 of the Equipment Purchase Agreement of even date herewith. 5. TERM AND TERMINATION This Agreement shall continue indefinitely unless terminated by one of the parties. This Agreement may be terminated by Customer upon thirty (30) days' notice to S-A and by S-A upon breach of any term of this Agreement, which breach is not cured within thirty (30) days after notice by S-A, or should Customer be adjudged a bankrupt or become a party to a similar proceeding for the benefit of its creditors. Immediately after such termination, Customer will deliver to S-A Licensed Software and any and all copies and modifications thereof (except copies which reside within the Designated Equipment and which shall be erased) and will, if requested, provide S-A with its written certification that it has retained no copies. 6. TAXES Except for taxes based on S-A's income, S-A shall not be responsible for any federal, state or local taxes based upon Customer's purchase, possession or use of Licensed Software or upon any charges payable or services performed hereunder. 7. APPLICABLE LAW, INTEGRATION AND MODIFICATION 7.1 This Agreement shall be construed and enforced in accordance with the laws of the State of Georgia, United States of America, not including any conflicts of laws provisions thereof. The UN Convention on Contracts for the Sale of Goods shall not apply. 7.2 This Agreement comprises the full and final understanding between S-A and Customer, and merges and supersedes any and all other agreements, understandings or representations, written or oral, with respect to the subject matter hereof. It may not be modified except by a writing signed by authorized representatives of both S-A and Customer, and referring specifically to this Agreement. 7.3 Any attempt by Customer to assign this Agreement shall be void unless the assignment is incidental to the sale of the Designated Equipment. 7.4 Waiver by any party of the breach of a provision of this Agreement by the other party shall not be construed as a continuing waiver of such provision or waiver of any other breach of any other provision of this Agreement. AGREED: ACCEPTED AND APPROVED: CUSTOMER SCIENTIFIC-ATLANTA, INC. /s/Ron Duncan /s/Gregory Taylor By By Ron Duncan Greg Taylor Printed Name Printed Name President VP Operations, Systems Integ Title Title December 20, 1995 December 28, 1995 Date Date Exhibit D - Feature Group B/ 1 800 950 XXX Specification S-A DAMA Features for FGB and 800 950 1077 Dec. 12, 1995, Rev. 4 FGB (Feature Group B) FGB is a trunk class offered by a Local Exchange Carrier (LEC) to an Inter Exchange Carrier (IXC) before the advent of FGD equal access trunking was available. In such a non equal access LEC office FGC signaling also exists but historically is only grandfathered to AT&T as they were the original and only IXC. (There have been exceptions in Alaska where GCI has received FGC from a LEC for payphone access and 800 number lookup). FGB can coexist with FGD when that service is available. There are two types of FGB signaling; one with ANI and one without. FGB with ANI is a NECA offering without any additional charges over and above FGB without ANI. The following will be a description of how it functions and what S-A will have to incorporate into the DAMA product to provide this FGB requirement for GCI. Drawings are also included showing the signaling protocol exchanges for both types. S-A shall design the DAMA product for the following two FGB trunking signaling protocol. GCI's FGB Carrier Identification Code (CIC) is 1077. FGB access NXX is 950 so the access number is 950 1077. There will be a new file to be downloaded to the CUs called the "Parameter File". The CIC will be placed in the new downloadable file. Format of the new file is TBD. FGB with ANI and FGB without ANI will be selectable from the same field in the parameter screen where FGC, FGD, IMT, and PBX are currently selected. The new entries will be FGBANI and FGBNOANI. FGB with ANI and FGB without ANI and IMT protocols will reside within the same state machine FGB###.BIN The first described is FGB with ANI. FGB with ANI Customer phone number is 907 265 5650 Customer dials GCI FGB Access number 950 1077 Customer wants to call 1+213+554+1212 LEC DAMA Seize ------------------------------------- -----------------------------------------Wink KP+950+1077+ST -------------------------- -----------------------------------------Off hook seizure ANI Request KP+0+265+5650+ST ------------------------- -----------------------------------------400 Hz Dial tone ------------------------------------------- Customer then enters the called number as 1+213+554+1212 from their DTMF phone. (No MF tones or rotary phones) The customer with local LEC line will dial 950 1077. The LEC, at the LEC GCI FGB trunk, will then send an off hook seizure to the DAMA channel unit. The DAMA channel unit will then send an approximate 200 ms off hook wink to the LEC when the DAMA is ready to receive digits in MF. The LEC will spill KP9501077ST important digression -- In most all cases the LEC when asked will suppress all digits of the called number and just spill KP ST. This shortens post dial delay. The DAMA must be able to just recognize KP ST for this trunk type). The DAMA then returns an off hook seizure to the LEC. The LEC recognizes this as the request for ANI and then sends the ANI as KP 0 2655650 ST. This ends the LEC trunking signalling protocol, (with the exception of ultimate on hook disconnect). The DAMA then shall return a single frequency 400 Hz dial tone. (If it hasn't been observed already this signalling protocol is identical to FGC originating previously designed for DAMA). The similarity ends however at this point where the DAMA returns dial tone. The originator of the call who first dialed 950 1077 to access GCI DAMA (who will continue the signalling addressing) must now at the DAMA dial tone enter the 1+10 digit called number. This 10 digit destination number must replace the previous called number 9501077, if spilled, with the new 10 digit called number for the purpose of call routing and completion. The ANI will be used for billing. The DAMA channel unit must have the filed 907 NPA for purpose of completing the ANI with the prefacing of the 907 to the seven digit ANI spill. Presently the DAMA NMS has ANI validation to the extent that if an ANI is to be turned off for non payment it is entered into the system to be blocked. If an ANI is to route normal it is not entered. S-A shall provide the capability to reverse this based on a CU basis so that an ANI must be entered to be allowed to route and that if no ANI is present in the NMS database then it will block the call and go to recording. Next will be described the second scenario of FGB without ANI. FGB without ANI Customer phone number is 907 265 5650 Customer dials GCI FGB Access number 950 1077 Customer wants to call 1+213+554+1212 Customer has GCI authorization code number 123456 LEC DAMA Seize -------------------------------- -------------------------------------Wink KP+950+1077+ST------------------------- --------------------------------------Off hook seizure 400 Hz Dial tone --------------------------------------- Customer then enters a 6 digit authorization code and the called number as 123456 +1+213+554+1212 from their DTMF phone. (No MF tones or rotary phones) The customer with local LEC line will dial 950 1077. The LEC, at the LEC GCI FGB trunk, will then send an off hook seizure to the DAMA channel unit. The DAMA channel unit will then send an approximate 200 ms off hook wink to the LEC when the DAMA is ready to receive digits in MF. The LEC will spill KP9501077ST Important digression -- In most all cases the LEC when asked will suppress all digits of the called number and just spill KP ST. This shortens post dial delay. The DAMA must be able to just recognize KP ST for this trunk type). The DAMA then returns an off hook seizure to the LEC along with single frequency 400 Hz. dial tone. This ends the LEC trunking signalling protocol, (with the exception of ultimate on hook disconnect). The user, in continuing the addressing signalling, must enter at the tone a 6 digit authorization code and then the 1 + 10 digit called number from their DTMF phone. The authorization code will replace the ANI for billing purposes only but will not replace the ANI for any other purpose such as FGD repeat. Where FGB does not provide an actual ANI the NS will use the telephone number entered in the routing table of the originating CU as the ANI for FGC and FGD repeat. This scheme is the same as what FGC and FGD do for an IMT originating call which has no ANI. If no telephone number is used an ANI of KP+ST will be output by the FGC or FGD repeat terminating trunk. This 6 digit authcode (Called the Hometown authcode feature by GCI Mktg when going to non equal access areas) must be validated in the NMS in a database of 6 digit authcodes stored. S-A shall provide memory for up to 20 thousand 6 digit authorization codes. Bellcore standards documents are available for FGB signalling and function. Compatibility Information for Feature Group B Switched Access Service - TR-NPL-000175 Issue 1, July 1985 $16.50. Feature Group B FSD 20-24-0300 -- TR-TSY-000698 Issue 1, June 1989 $30.00; Rev 1, July 1990 $N/A. 800 950 1077 This feature can be best described as 800 950 1077 "peel out". S-A shall provide the following set of feature requirements. In the case where an originating DAMA FGC or FGD channel unit receives the GCI 800 950 1077 number, regardless of whether the channel unit trunk group is an 800 query or route as is one, the DAMA NMS or channel unit will recognize this number and "peel it out" and keep it temporarily within the originating channel unit for the following additional call processing. All LEC trunking signalling to DAMA channel unit has already taken place once the 800 950 1077 and ANI have been received. Once the 800 950 1077 number is received and recognized S-A shall design the DAMA product so that the channel unit will return a single frequency 400Hz. dial tone. Then the user, from a DTMF phone, will dial a 0+10 digit destination number. Then the DAMA channel unit will return a "Bong tone" to the user followed by a recording that says "Enter your GCI calling card number now". Then the customer, from their DTMF phone, will enter a 14 digit GCI Big Dipper calling card number. The 14 digit GCI Big Dipper calling card number will replace the ANI sent to the NS for billing purposes. Then the return link will send all this information to the NMS. The NMS will validate the 14 digit number. If validated then the call will route and terminate to a destination channel unit based on the 0+10 digit called number. At the same time a recording to the originator will say "Thank you for using GCI". S-A shall provide memory for up to 100,000 14 digit calling card numbers. In the event where the customer originated the call from a rotary phone S-A shall provide for the following. At the point where the DAMA channel unit has returned the single frequency 400 Hz. dial tone and the customer cannot enter the DTMF 0+10 number as they are at a rotary phone there needs to be incorporated a default timer value where the call can be routed to the operator trunking should no DTMF digits be received before the expiration of the timer. This timer needs to be programmable within the range of 1 second to 15 seconds. If no DTMF digits are received within the programmed default range then the call will be routed as a 0- FGD repeat call to the terminating channel unit designated for 0- operator calls. That is the FGD repeat trunk group will repeat the originating ANI and insert 0- as the called number. This will allow an operator to handle the call verbally.
 


5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 30, 1995 AND THE CONSOLIDATED BALANCE SHEET AS OF DECEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000808461 GENERAL COMMUNICATION, INC. 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 4,017 0 21,737 295 991 29,182 84,243 33,789 84,765 24,070 9,056 0 0 16,955 26,061 84,765 0 129,279 0 70,221 19,738 1,459 1,146 12,601 5,099 7,502 0 0 0 7,502 .31 .31