|
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES EXCHANGE ACT OF 1934
|
|
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
SECURITIES EXCHANGE ACT OF 1934
|
GENERAL COMMUNICATION, INC.
|
||
(Exact name of registrant as specified in its charter)
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State of Alaska
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92-0072737
|
|||
(State or other jurisdiction of
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(I.R.S Employer
|
|||
incorporation or organization)
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Identification No.)
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2550 Denali Street
|
||||
Suite 1000
|
||||
Anchorage, Alaska
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99503
|
|||
(Address of principal
executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (907) 868-5600
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Not Applicable
|
||
Former name, former address and former fiscal year, if changed since last report
|
Large accelerated filer o
|
Accelerated filer x
|
Non-accelerated filer o (Do not check if a smaller reporting company)
|
Smaller reporting company o
|
Page No.
|
|||||||||||
Cautionary Statement Regarding Forward-Looking Statements
|
3 | ||||||||||
Part I. FINANCIAL INFORMATION
|
|||||||||||
Item I.
|
Financial Statements
|
||||||||||
Consolidated Balance Sheets (unaudited) as of June 30, 2012
and December 31, 2011
|
4 | ||||||||||
Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2012 and 2011
|
6 | ||||||||||
Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended June 30, 2012 and 2011
|
7 | ||||||||||
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2012 and 2011
|
8 | ||||||||||
Condensed Notes to Interim Consolidated Financial Statements (unaudited)
|
9 | ||||||||||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition
|
||||||||||
and Results of Operations
|
29 | ||||||||||
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
47 | |||||||||
Item 4.
|
Controls and Procedures
|
47 | |||||||||
Part II. OTHER INFORMATION
|
|||||||||||
Item 1.
|
Legal Proceedings
|
48 | |||||||||
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
48 | |||||||||
Item 6.
|
Exhibits
|
49 | |||||||||
Other items are omitted, as they are not applicable.
|
|||||||||||
SIGNATURES
|
50 |
|
|
|
||||||
PART I. FINANCIAL INFORMATION
|
||||||||
ITEM I. FINANCIAL STATEMENTS
|
||||||||
|
|
|
||||||
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
(Unaudited)
|
||||||||
|
|
|
||||||
(Amounts in thousands)
|
|
|
||||||
|
June 30,
|
December 31,
|
||||||
ASSETS
|
2012
|
2011
|
||||||
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$ | 22,116 | 29,387 | |||||
|
||||||||
Receivables
|
161,840 | 141,827 | ||||||
Less allowance for doubtful receivables
|
3,199 | 5,796 | ||||||
Net receivables
|
158,641 | 136,031 | ||||||
|
||||||||
Deferred income taxes
|
15,555 | 15,555 | ||||||
Prepaid expenses
|
9,302 | 7,899 | ||||||
Inventories
|
16,023 | 7,522 | ||||||
Other current assets
|
3,366 | 3,631 | ||||||
Total current assets
|
225,003 | 200,025 | ||||||
|
||||||||
Property and equipment in service, net of depreciation
|
822,859 | 849,121 | ||||||
Construction in progress
|
71,668 | 42,918 | ||||||
Net property and equipment
|
894,527 | 892,039 | ||||||
|
||||||||
Cable certificates
|
191,635 | 191,635 | ||||||
Goodwill
|
74,883 | 74,883 | ||||||
Wireless licenses
|
25,967 | 25,967 | ||||||
Restricted cash
|
14,804 | 15,910 | ||||||
Other intangible assets, net of amortization
|
16,344 | 15,835 | ||||||
Deferred loan and senior notes costs, net of amortization
of $3,697 and $2,880 at June 30, 2012 and December
31, 2011, respectively
|
11,917 | 12,812 | ||||||
Other assets
|
14,777 | 17,214 | ||||||
Total other assets
|
350,327 | 354,256 | ||||||
Total assets
|
$ | 1,469,857 | 1,446,320 | |||||
|
||||||||
See accompanying condensed notes to interim consolidated financial statements.
|
||||||||
|
||||||||
|
||||||||
|
||||||||
|
(Continued)
|
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
(Unaudited)
|
||||||||
(Continued)
|
||||||||
|
|
|
||||||
|
|
|
||||||
(Amounts in thousands)
|
|
|
||||||
|
June 30,
|
December 31,
|
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
2012
|
2011
|
||||||
|
|
|
||||||
Current liabilities:
|
|
|
||||||
Current maturities of obligations under long-term debt and
capital leases
|
$ | 7,612 | 8,797 | |||||
Accounts payable
|
39,382 | 41,353 | ||||||
Deferred revenue
|
25,018 | 22,003 | ||||||
Accrued payroll and payroll related obligations
|
21,533 | 22,126 | ||||||
Accrued interest
|
6,753 | 6,680 | ||||||
Accrued liabilities
|
15,216 | 11,423 | ||||||
Subscriber deposits
|
1,346 | 1,250 | ||||||
Total current liabilities
|
116,860 | 113,632 | ||||||
|
||||||||
Long-term debt, net
|
874,505 | 858,031 | ||||||
Obligations under capital leases, excluding current maturities
|
75,777 | 78,605 | ||||||
Obligation under capital lease due to related party, excluding
current maturity
|
1,893 | 1,893 | ||||||
Deferred income taxes
|
119,350 | 114,234 | ||||||
Long-term deferred revenue
|
86,096 | 81,822 | ||||||
Other liabilities
|
24,082 | 24,456 | ||||||
Total liabilities
|
1,298,563 | 1,272,673 | ||||||
|
||||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Common stock (no par):
|
||||||||
Class A. Authorized 100,000 shares; issued 38,843 and
|
||||||||
39,296 shares at June 30, 2012 and December 31, 2011, respectively; outstanding 38,650 and 39,043 shares at June 30, 2012 and December 31, 2011, respectively
|
25,909 | 26,179 | ||||||
Class B. Authorized 10,000 shares; issued and
|
||||||||
outstanding 3,171 shares each at June 30, 2012 and December 31, 2011; convertible on a share-per-share basis into Class A common stock
|
2,678 | 2,679 | ||||||
Less cost of 193 and 253 Class A common shares held
|
||||||||
in treasury at June 30, 2012 and December 31, 2011, respectively
|
(1,707 | ) | (2,225 | ) | ||||
Paid-in capital
|
25,138 | 32,795 | ||||||
Retained earnings
|
103,322 | 97,911 | ||||||
Total General Communication, Inc. stockholders' equity
|
155,340 | 157,339 | ||||||
Non-controlling interest
|
15,954 | 16,308 | ||||||
Total stockholders’ equity
|
171,294 | 173,647 | ||||||
Total liabilities and stockholders’ equity
|
$ | 1,469,857 | 1,446,320 | |||||
|
||||||||
See accompanying condensed notes to interim consolidated financial statements.
|
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
|
||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
|
|
|
|
|
||||||||||||
|
|
|
|
|
||||||||||||
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
|
June 30,
|
June 30,
|
||||||||||||||
(Amounts in thousands, except per share amounts)
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Revenues
|
$ | 176,104 | 168,089 | 348,011 | 332,866 | |||||||||||
Cost of goods sold (exclusive of depreciation and
|
||||||||||||||||
amortization shown separately below)
|
58,073 | 57,314 | 114,933 | 111,070 | ||||||||||||
Selling, general and administrative expenses
|
60,048 | 57,697 | 123,030 | 116,590 | ||||||||||||
Depreciation and amortization expense
|
33,350 | 30,779 | 65,730 | 62,645 | ||||||||||||
Operating income
|
24,633 | 22,299 | 44,318 | 42,561 | ||||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense (including amortization
|
||||||||||||||||
of deferred loan fees)
|
(16,948 | ) | (17,294 | ) | (34,103 | ) | (34,746 | ) | ||||||||
Loss on extinguishment of debt
|
- | (9,111 | ) | - | (9,111 | ) | ||||||||||
Interest income
|
4 | 4 | 6 | 8 | ||||||||||||
Other
|
84 | (9 | ) | (47 | ) | (33 | ) | |||||||||
Other expense, net
|
(16,860 | ) | (26,410 | ) | (34,144 | ) | (43,882 | ) | ||||||||
Income (loss) before income tax (expense) benefit
|
7,773 | (4,111 | ) | 10,174 | (1,321 | ) | ||||||||||
Income tax (expense) benefit
|
(3,968 | ) | 2,067 | (5,117 | ) | 676 | ||||||||||
Net income (loss)
|
3,805 | (2,044 | ) | 5,057 | (645 | ) | ||||||||||
Net loss attributable to non-controlling interest
|
177 | - | 354 | - | ||||||||||||
Net income (loss) attributable to General
Communication, Inc.
|
$ | 3,982 | (2,044 | ) | 5,411 | (645 | ) | |||||||||
Basic net income (loss) attributable to General
Communication, Inc. common stockholders per Class A
common share
|
$ | 0.10 | (0.04 | ) | 0.13 | (0.01 | ) | |||||||||
Basic net income (loss) attributable to General
Communication, Inc. common stockholders per Class B
common share
|
$ | 0.10 | (0.04 | ) | 0.13 | (0.01 | ) | |||||||||
Diluted net income (loss) attributable to General
Communication, Inc. common stockholders per Class A
common share
|
$ | 0.09 | (0.04 | ) | 0.13 | (0.02 | ) | |||||||||
Diluted net income (loss) attributable to General
Communication, Inc. common stockholders per Class B
common share
|
$ | 0.09 | (0.04 | ) | 0.13 | (0.02 | ) | |||||||||
|
||||||||||||||||
See accompanying condensed notes to interim consolidated financial statements.
|
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||
SIX MONTHS ENDED JUNE 30, 2012 AND 2011
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||
(Amounts in thousands)
|
Class A
Common
Stock
|
Class B
Common
Stock
|
Class A
and B
Shares
Held in
Treasury
|
Paid-in
Capital
|
Retained
Earnings
|
Non-
controlling
Interest
|
Total
Stockholders’
Equity
|
|||||||||||||||||||||
Balances at January 1, 2011
|
$ | 69,396 | 2,677 | (2,249 | ) | 37,075 | 92,200 | - | 199,099 | |||||||||||||||||||
Net loss
|
- | - | - | - | (645 | ) | - | (645 | ) | |||||||||||||||||||
Common stock repurchases and
retirements
|
(21,390 | ) | - | - | - | - | - | (21,390 | ) | |||||||||||||||||||
Share-based
compensation expense
|
- | - | - | 2,968 | - | - | 2,968 | |||||||||||||||||||||
Shares issued under stock
option plan
|
285 | - | - | - | - | - | 285 | |||||||||||||||||||||
Issuance of restricted stock awards
|
511 | - | - | (511 | ) | - | - | - | ||||||||||||||||||||
Other
|
(6 | ) | 6 | 9 | - | - | - | 9 | ||||||||||||||||||||
Balances at June 30, 2011
|
$ | 48,796 | 2,683 | (2,240 | ) | 39,532 | 91,555 | - | 180,326 | |||||||||||||||||||
|
||||||||||||||||||||||||||||
Balances at January 1, 2012
|
$ | 26,179 | 2,679 | (2,225 | ) | 32,795 | 97,911 | 16,308 | 173,647 | |||||||||||||||||||
Net income (loss)
|
- | - | - | - | 5,411 | (354 | ) | 5,057 | ||||||||||||||||||||
Common stock repurchases and
retirements
|
(12,184 | ) | - | - | - | - | - | (12,184 | ) | |||||||||||||||||||
Share-based compensation
expense
|
- | - | - | 2,831 | - | - | 2,831 | |||||||||||||||||||||
Shares issued under stock
option plan
|
1,356 | - | - | - | - | - | 1,356 | |||||||||||||||||||||
Issuance of restricted stock
awards
|
10,557 | - | - | (10,557 | ) | - | - | - | ||||||||||||||||||||
Issuance of treasury shares
related to deferred compensation
payout
|
- | - | 511 | 69 | - | - | 580 | |||||||||||||||||||||
Other
|
1 | (1 | ) | 7 | - | - | - | 7 | ||||||||||||||||||||
Balances at June 30, 2012
|
$ | 25,909 | 2,678 | (1,707 | ) | 25,138 | 103,322 | 15,954 | 171,294 | |||||||||||||||||||
|
||||||||||||||||||||||||||||
See accompanying condensed notes to interim consolidated financial statements.
|
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
SIX MONTHS ENDED JUNE 30, 2012 AND 2011
|
||||||||
(Unaudited)
|
||||||||
|
||||||||
|
|
|
||||||
(Amounts in thousands)
|
|
|
||||||
|
2012
|
2011
|
||||||
Cash flows from operating activities:
|
|
|
||||||
Net income (loss)
|
$ | 5,057 | (645 | ) | ||||
Adjustments to reconcile net income (loss) to net cash
|
||||||||
provided by operating activities:
|
||||||||
Depreciation and amortization expense
|
65,730 | 62,645 | ||||||
Deferred income tax expense (benefit)
|
5,117 | (676 | ) | |||||
Share-based compensation expense
|
2,595 | 2,840 | ||||||
Loss on extinguishment of debt
|
- | 9,111 | ||||||
Other noncash income and expense items
|
3,695 | 4,563 | ||||||
Change in operating assets and liabilities
|
(29,054 | ) | (27,996 | ) | ||||
Net cash provided by operating activities
|
53,140 | 49,842 | ||||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
(59,950 | ) | (71,892 | ) | ||||
Purchases of other assets and intangible assets
|
(3,274 | ) | (3,247 | ) | ||||
Restricted cash
|
1,106 | - | ||||||
Other
|
- | 233 | ||||||
Net cash used in investing activities
|
(62,118 | ) | (74,906 | ) | ||||
Cash flows from financing activities:
|
||||||||
Borrowing on Senior Credit Facility
|
30,000 | 68,000 | ||||||
Repayment of debt and capital lease obligations
|
(20,790 | ) | (348,873 | ) | ||||
Purchase of treasury stock to be retired
|
(12,184 | ) | (21,390 | ) | ||||
Borrowing of other long-term debt
|
3,249 | 2,841 | ||||||
Proceeds from stock options
|
1,356 | - | ||||||
Issuance of 2021 Notes
|
- | 325,000 | ||||||
Payment of Senior Notes call premiums
|
- | (4,728 | ) | |||||
Payment of debt issuance costs
|
- | (3,272 | ) | |||||
Other
|
76 | 285 | ||||||
Net cash provided by financing activities
|
1,707 | 17,863 | ||||||
Net decrease in cash and cash equivalents
|
(7,271 | ) | (7,201 | ) | ||||
Cash and cash equivalents at beginning of period
|
29,387 | 33,070 | ||||||
Cash and cash equivalents at end of period
|
$ | 22,116 | 25,869 | |||||
|
||||||||
See accompanying condensed notes to interim consolidated financial statements.
|
||||||||
|
|
(a)
|
Business
|
·
|
Postpaid and prepaid wireless telephone services and sale of wireless telephone handsets and accessories,
|
·
|
Video services throughout Alaska,
|
·
|
Internet access services,
|
·
|
Wireless roaming for certain wireless carriers and origination and termination of wireline traffic in Alaska for certain common carriers,
|
·
|
Competitive and incumbent local access services throughout Alaska,
|
·
|
Long-distance telephone service,
|
·
|
Data network services,
|
·
|
Broadband services, including our SchoolAccess® offering to rural school districts, our ConnectMD® offering to rural hospitals and health clinics, and managed video conferencing,
|
·
|
Managed services to certain commercial customers,
|
·
|
Sales and service of dedicated communications systems and related equipment, and
|
·
|
Lease, service arrangements and maintenance of capacity on our fiber optic cable systems used in the transmission of voice and data services within Alaska and between Alaska and the remaining United States and foreign countries.
|
|
(b)
|
Principles of Consolidation
|
|
(c)
|
Non-controlling Interest
|
|
(e)
|
Regulatory Accounting
|
|
(f)
|
Earnings per Common Share
|
|
Three Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
||||||||||||
Basic net income (loss) per share:
|
|
|
|
|
||||||||||||
Numerator:
|
|
|
|
|
||||||||||||
Allocation of undistributed earnings (loss)
|
$ | 3,679 | 303 | $ | (1,904 | ) | (140 | ) | ||||||||
|
||||||||||||||||
Denominator:
|
||||||||||||||||
Weighted average common shares
outstanding
|
38,516 | 3,171 | 43,098 | 3,178 | ||||||||||||
Basic net income (loss) attributable to GCI
common stockholders per common share
|
$ | 0.10 | 0.10 | $ | (0.04 | ) | (0.04 | ) | ||||||||
|
||||||||||||||||
Diluted net income (loss) per share:
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Allocation of undistributed earnings (loss) for
basic computation
|
$ | 3,679 | 303 | $ | (1,904 | ) | (140 | ) | ||||||||
Reallocation of undistributed earnings (loss) as a
result of conversion of Class B to Class A
shares
|
303 | - | (140 | ) | - | |||||||||||
Effect of share based compensation that may
be settled in cash or shares
|
(33 | ) | - | - | - | |||||||||||
Reallocation of undistributed earnings (loss) as a
result of conversion of Class B to Class A
shares outstanding
|
- | (4 | ) | - | 1 | |||||||||||
Net income (loss) adjusted for allocation of
undistributed earnings (loss) and effect of
share based compensation that may be settled
in cash or shares
|
$ | 3,949 | 299 | $ | (2,044 | ) | (139 | ) | ||||||||
|
||||||||||||||||
Denominator:
|
||||||||||||||||
Number of shares used in basic computation
|
38,516 | 3,171 | 43,098 | 3,178 | ||||||||||||
Conversion of Class B to Class A common
shares outstanding
|
3,171 | - | 3,178 | - | ||||||||||||
Unexercised stock options
|
304 | - | - | - | ||||||||||||
Effect of share based compensation that may
be settled in cash or shares
|
158 | - | - | - | ||||||||||||
Number of shares used in per share computations
|
42,149 | 3,171 | 46,276 | 3,178 | ||||||||||||
Diluted net income (loss) attributable to GCI
common stockholders per common share
|
$ | 0.09 | 0.09 | $ | (0.04 | ) | (0.04 | ) |
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
||||||||||||||
|
Class A
|
Class B
|
Class A
|
Class B
|
||||||||||||
Basic net income (loss) per share:
|
|
|
|
|
||||||||||||
Numerator:
|
|
|
|
|
||||||||||||
Allocation of undistributed earnings (loss)
|
$ | 5,001 | 410 | $ | (601 | ) | (44 | ) | ||||||||
|
||||||||||||||||
Denominator:
|
||||||||||||||||
Weighted average common shares
outstanding
|
38,629 | 3,171 | 43,536 | 3,178 | ||||||||||||
Basic net income (loss) attributable to GCI
common stockholders per common share
|
$ | 0.13 | 0.13 | $ | (0.01 | ) | (0.01 | ) | ||||||||
|
||||||||||||||||
Diluted net income (loss) per share:
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Allocation of undistributed earnings (loss) for
basic computation
|
$ | 5,001 | 410 | $ | (601 | ) | (44 | ) | ||||||||
Reallocation of undistributed earnings (loss) as a
result of conversion of Class B to Class A
shares
|
410 | - | (44 | ) | - | |||||||||||
Effect of share based compensation that may
be settled in cash or shares
|
(118 | ) | - | (75 | ) | - | ||||||||||
Reallocation of undistributed earnings (loss) as a
result of conversion of Class B to Class A
shares outstanding
|
- | (10 | ) | - | (5 | ) | ||||||||||
Net income (loss) adjusted for allocation of
undistributed earnings (loss) and effect of
share based compensation that may be settled
in cash or shares
|
$ | 5,293 | 400 | $ | (720 | ) | (49 | ) | ||||||||
|
||||||||||||||||
Denominator:
|
||||||||||||||||
Number of shares used in basic computation
|
38,629 | 3,171 | 43,536 | 3,178 | ||||||||||||
Conversion of Class B to Class A common
shares outstanding
|
3,171 | - | 3,178 | - | ||||||||||||
Unexercised stock options
|
272 | - | - | - | ||||||||||||
Effect of share based compensation that may
be settled in cash or shares
|
158 | - | - | - | ||||||||||||
Number of shares used in per share computations
|
42,230 | 3,171 | 46,714 | 3,178 | ||||||||||||
Diluted net income (loss) attributable to GCI
common stockholders per common share
|
$ | 0.13 | 0.13 | $ | (0.02 | ) | (0.02 | ) |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Shares associated with anti-dilutive
unexercised stock options
|
35 | 36 | 13 | 14 | ||||||||||||
Share based compensation that may
be settled in cash or shares, the effect
of which is anti-dilutive
|
- | 515 | - | 524 |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Shares associated with contingent awards
|
58 | 50 | 58 | 50 |
|
(g)
|
Common Stock
|
|
|
Class A
|
Class B
|
||||||
Balances at December 31, 2010
|
44,213 | 3,178 | |||||||
Class B shares converted to Class A
|
2 | (2 | ) | ||||||
Shares issued upon stock option exercises
|
37 | - | |||||||
Share awards issued
|
416 | - | |||||||
Shares retired
|
(1,881 | ) | - | ||||||
Other
|
(25 | ) | - | ||||||
|
Balances at June 30, 2011
|
42,762 | 3,176 | ||||||
|
|
||||||||
Balances at December 31, 2011
|
39,296 | 3,171 | |||||||
Shares issued upon stock option exercises
|
188 | - | |||||||
Share awards issued
|
520 | - | |||||||
Shares retired
|
(869 | ) | - | ||||||
Shares acquired to settle minimum statutory tax
withholding requirements
|
(291 | ) | - | ||||||
Other
|
|
(1 | ) | - | |||||
|
Balances at June 30, 2012
|
38,843 | 3,171 |
|
(h)
|
Revenue Recognition
|
|
(i)
|
Use of Estimates
|
|
(j)
|
Classification of Taxes Collected from Customers
|
|
|
|
|
|
||||||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Surcharges reported gross
|
$ | 1,399 | 1,376 | 2,880 | 2,800 | |||||||||||
|
(k)
|
Immaterial Error Correction
|
Consolidated Balance Sheet as of
December 31, 2011:
|
As Previously Reported
|
Adjustment
|
As Revised
|
|||||||||
Property and equipment in service, net of
depreciation
|
$ | 851,705 | (2,584 | ) | 849,121 | |||||||
Net property and equipment
|
894,623 | (2,584 | ) | 892,039 | ||||||||
Total assets
|
1,448,904 | (2,584 | ) | 1,446,320 | ||||||||
Deferred income taxes
|
115,296 | (1,062 | ) | 114,234 | ||||||||
Total liabilities
|
1,273,735 | (1,062 | ) | 1,272,673 | ||||||||
Retained earnings
|
99,433 | (1,522 | ) | 97,911 | ||||||||
Total GCI stockholders' equity
|
158,861 | (1,522 | ) | 157,339 | ||||||||
Total stockholders' equity
|
175,169 | (1,522 | ) | 173,647 | ||||||||
Total liabilities and stockholders' equity
|
1,448,904 | (2,584 | ) | 1,446,320 |
|
||||||||||||
Consolidated Statements of Operations
for the Three Months Ended
June 30, 2011:
|
As Previously Reported | Adjustment | As Revised | |||||||||
Depreciation and amortization expense
|
30,632 | 147 | 30,779 | |||||||||
Operating income
|
22,446 | (147 | ) | 22,299 | ||||||||
Loss before income tax benefit
|
(3,964 | ) | (147 | ) | (4,111 | ) | ||||||
Income tax benefit
|
(2,007 | ) | (60 | ) | (2,067 | ) | ||||||
Net loss
|
(1,957 | ) | (87 | ) | (2,044 | ) | ||||||
|
||||||||||||
Consolidated Statements of Operations
for the Six Months Ended June 30, 2011:
|
||||||||||||
Depreciation and amortization expense
|
62,352 | 293 | 62,645 | |||||||||
Operating income
|
42,854 | (293 | ) | 42,561 | ||||||||
Loss before income tax benefit
|
(1,028 | ) | (293 | ) | (1,321 | ) | ||||||
Income tax benefit
|
(556 | ) | (120 | ) | (676 | ) | ||||||
Net loss
|
(472 | ) | (173 | ) | (645 | ) | ||||||
Diluted net loss attributable to General
|
||||||||||||
Communication, Inc. common stockholders
|
||||||||||||
per Class A common share
|
(0.01 | ) | (0.01 | ) | (0.02 | ) | ||||||
Diluted net loss attributable to General
|
||||||||||||
Communication, Inc. common stockholders
|
||||||||||||
per Class B common share
|
(0.01 | ) | (0.01 | ) | (0.02 | ) | ||||||
|
||||||||||||
Consolidated Statement of Stockholders'
Equity for the Six Months Ended
June 30, 2011:
|
||||||||||||
Retained earnings, balance at January 1, 2011
|
93,607 | (1,407 | ) | 92,200 | ||||||||
Net loss
|
(472 | ) | (173 | ) | (645 | ) | ||||||
Retained earnings, balance at June 30, 2011
|
93,135 | (1,580 | ) | 91,555 | ||||||||
Total stockholders' equity, balance at
January 1, 2011
|
200,506 | (1,407 | ) | 199,099 | ||||||||
Total stockholders' equity, balance at
June 30, 2011
|
181,906 | (1,580 | ) | 180,326 | ||||||||
|
||||||||||||
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2011:
|
||||||||||||
Net loss
|
(472 | ) | (173 | ) | (645 | ) | ||||||
Depreciation and amortization expense
|
62,352 | 293 | 62,645 | |||||||||
Income tax benefit
|
(556 | ) | (120 | ) | (676 | ) | ||||||
|
(2)
|
Consolidated Statements of Cash Flows Supplemental Disclosures
|
|
Changes in operating assets and liabilities consist of (amounts in thousands):
|
Six Months Ended June 30,
|
2012
|
2011
|
||||||
Increase in accounts receivable, net
|
$ | (24,272 | ) | (27,245 | ) | |||
Increase in prepaid expenses
|
(1,403 | ) | (3,191 | ) | ||||
Increase in inventories
|
(8,501 | ) | (719 | ) | ||||
Decrease in other current assets
|
265 | 206 | ||||||
Decrease in other assets
|
2,768 | 1,857 | ||||||
Increase (decrease) in accounts payable
|
(7,084 | ) | 2,361 | |||||
Increase in deferred revenues
|
3,015 | 864 | ||||||
Decrease in accrued payroll and
payroll related obligations
|
(889 | ) | (1,559 | ) | ||||
Increase in accrued liabilities
|
4,304 | 134 | ||||||
Increase (decrease) in accrued interest
|
73 | (6,130 | ) | |||||
Increase (decrease) in subscriber deposits
|
96 | (49 | ) | |||||
Increase in long-term deferred revenue
|
4,274 | 7,470 | ||||||
Decrease in components of other
long-term liabilities
|
(1,700 | ) | (1,995 | ) | ||||
|
$ | (29,054 | ) | (27,996 | ) |
Net cash paid or received:
|
2012
|
2011
|
||||||
Interest paid, net of amounts capitalized
|
$ | 34,671 | 40,614 |
|
2012
|
2011
|
||||||
Non-cash additions for purchases of property and
equipment
|
$ | 12,680 | 9,388 | |||||
Deferred compensation distribution denominated in
shares
|
$ | 511 | - | |||||
Asset retirement obligation additions to property and
equipment
|
$ | 132 | 123 | |||||
Asset retirement obligation reductions to property and
equipment for revisions to previous estimates
|
$ | - | 294 | |||||
Write-off of original issue discount on 2014 Notes
|
$ | - | 1,530 |
(3)
|
Intangible Assets
|
|
Three Months Ended June 30
|
Six Months Ended June 30,
|
||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Amortization expense
|
$ | 1,324 | 1,583 | 2,625 | 3,156 |
Years Ending December 31,
|
|
|||
2012
|
$ | 4,722 | ||
2013
|
3,808 | |||
2014
|
3,036 | |||
2015
|
1,835 | |||
2016
|
670 |
(4)
|
Financial Instruments
|
|
June 30,
|
December 31,
|
||||||||||||||
|
2012
|
2011
|
||||||||||||||
|
Carrying Amount
|
Fair Value
|
Carrying Amount
|
Fair Value
|
||||||||||||
Current and long-term debt and
capital lease obligations
|
$ | 959,787 | 989,096 | 947,326 | 942,895 | |||||||||||
Other liabilities
|
109,785 | 108,893 | 106,002 | 105,173 |
|
Current and long-term debt and capital lease obligations: The fair values of the $325.0 million in aggregate principal amount of 6.75% Senior Notes due 2021 (“2021 Notes”) issued by GCI, Inc., our wholly owned subsidiary, the $425.0 million in aggregate principal amount of 8.63% Senior Notes due 2019 (“2019 Notes”) issued by GCI, Inc., Rural Utilities Service debt, CoBank mortgage note payable, and capital leases are based upon quoted market prices for the same or similar issues or on the current rates offered to us for the same remaining maturities. The fair value of our $50.0 million term loan and $40.0 million revolving credit facility is estimated to approximate the carrying value because this instrument is subject to variable interest rates.
|
|
Other Liabilities: Lease escalation liabilities are valued at the discounted amount of future cash flows using quoted market prices on current rates offered to us. Deferred compensation liabilities are carried at fair value, which is the amount payable as of the balance sheet date. Asset retirement obligations are recorded at their fair value and, over time, the liability is accreted to its present value each period. Our non-employee share-based compensation awards are reported at their fair value at each reporting period.
|
|
Fair Value Measurement at Reporting Date Using
|
|||||||||||
June 30, 2012 Assets
|
Quoted Prices in Active Markets for Identical Assets (Level 1)
|
Significant Other Observable Inputs (Level 2)
|
Significant Unobservable Inputs (Level 3)
|
|||||||||
Deferred compensation plan assets
(mutual funds)
|
$ | 1,662 | - | - | ||||||||
Total assets at fair value
|
$ | 1,662 | - | - | ||||||||
|
||||||||||||
December 31, 2011 Assets
|
||||||||||||
Deferred compensation plan assets
(mutual funds)
|
$ | 1,600 | - | - | ||||||||
Total assets at fair value
|
$ | 1,600 | - | - |
(5)
|
Stockholders’ Equity
|
|
|
|
Weighted
|
|
||||||
|
|
Weighted
|
Average
|
Aggregate
|
||||||
|
|
Average
|
Remaining
|
Intrinsic
|
||||||
|
|
Exercise
|
Contractual
|
Value
|
||||||
|
Shares
|
Price
|
Term
|
(in thousands)
|
||||||
Outstanding at January 1, 2012
|
1,087 | $ | 7.27 |
|
|
|||||
Exercised
|
(188 | ) | $ | 7.26 |
|
|
||||
Forfeited
|
(5 | ) | $ | 6.93 |
|
|
||||
Expired
|
(11 | ) | $ | 6.14 |
|
|
||||
Outstanding at June 30, 2012
|
883 | $ | 7.29 |
3.76 years
|
$ 1,124
|
|||||
Exercisable at June 30, 2012
|
810 | $ | 7.33 |
3.50 years
|
$ 1,008
|
|
|
Weighted
|
||||||
|
|
Average
|
||||||
|
|
Grant Date
|
||||||
|
Shares
|
Fair Value
|
||||||
Nonvested at January 1, 2012
|
1,556 | $ | 6.89 | |||||
Granted
|
420 | $ | 10.53 | |||||
Vested
|
(984 | ) | $ | 4.87 | ||||
Forfeited
|
(2 | ) | $ | 8.80 | ||||
Nonvested at June 30, 2012
|
990 | $ | 10.42 |
|
2012
|
2011
|
||||||
Employee share-based compensation expense
|
$ | 2,831 | 2,968 | |||||
Adjustment to fair value of liability classified awards
|
(236 | ) | (128 | ) | ||||
Total share-based compensation expense
|
$ | 2,595 | 2,840 |
(6)
|
Industry Segments Data
|
Three months ended June 30,
|
Consumer
|
Network Access
|
Commercial
|
Managed Broadband
|
Regulated Operations
|
Total Reportable Segments
|
||||||||||||||||||
2012
|
|
|
|
|
|
|
||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
||||||||||||||||||
Intersegment
|
$ | (168 | ) | 82 | 1,426 | - | 59 | 1,399 | ||||||||||||||||
External
|
88,495 | 26,017 | 34,466 | 21,717 | 5,409 | 176,104 | ||||||||||||||||||
Total revenues
|
88,327 | 26,099 | 35,892 | 21,717 | 5,468 | 177,503 | ||||||||||||||||||
Adjusted EBITDA
|
$ | 24,008 | 13,442 | 8,625 | 12,063 | 1,283 | 59,421 | |||||||||||||||||
|
||||||||||||||||||||||||
2011
|
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Intersegment
|
$ | - | - | 1,416 | - | 44 | 1,460 | |||||||||||||||||
External
|
88,554 | 25,151 | 34,216 | 14,639 | 5,529 | 168,089 | ||||||||||||||||||
Total revenues
|
88,554 | 25,151 | 35,632 | 14,639 | 5,573 | 169,549 | ||||||||||||||||||
Adjusted EBITDA
|
$ | 28,258 | 12,344 | 7,401 | 5,709 | 1,221 | 54,933 | |||||||||||||||||
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||
Six months ended June 30,
|
Consumer
|
Network Access
|
Commercial
|
Managed Broadband
|
Regulated Operations
|
Total Reportable Segments
|
||||||||||||||||||
2012
|
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Intersegment
|
$ | 356 | 165 | 2,811 | - | 98 | 3,430 | |||||||||||||||||
External
|
176,307 | 51,205 | 68,807 | 40,746 | 10,946 | 348,011 | ||||||||||||||||||
Total revenues
|
176,663 | 51,370 | 71,618 | 40,746 | 11,044 | 351,441 | ||||||||||||||||||
Adjusted EBITDA
|
$ | 48,802 | 25,852 | 17,066 | 20,312 | 2,218 | 114,250 | |||||||||||||||||
|
||||||||||||||||||||||||
2011
|
||||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Intersegment
|
$ | - | - | 2,825 | - | 113 | 2,938 | |||||||||||||||||
External
|
176,971 | 50,248 | 66,045 | 28,634 | 10,968 | 332,866 | ||||||||||||||||||
Total revenues
|
176,971 | 50,248 | 68,870 | 28,634 | 11,081 | 335,804 | ||||||||||||||||||
Adjusted EBITDA
|
$ | 56,651 | 24,224 | 14,063 | 11,420 | 1,921 | 108,279 |
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Reportable segment revenues
|
$ | 177,503 | 169,549 | 351,441 | 335,804 | |||||||||||
Less intersegment revenues eliminated in
consolidation
|
1,399 | 1,460 | 3,430 | 2,938 | ||||||||||||
Consolidated revenues
|
$ | 176,104 | 168,089 | 348,011 | 332,866 |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
Reportable segment Adjusted EBITDA
|
$ | 59,421 | 54,933 | 114,250 | 108,279 | |||||||||||
Less depreciation and amortization expense
|
(33,350 | ) | (30,779 | ) | (65,730 | ) | (62,645 | ) | ||||||||
Less share-based compensation expense
|
(865 | ) | (1,670 | ) | (2,595 | ) | (2,840 | ) | ||||||||
Less non-cash contribution expense
|
(160 | ) | - | (960 | ) | - | ||||||||||
Less net loss attributable to non-controlling interest
|
(177 | ) | - | (354 | ) | - | ||||||||||
Plus net loss (income) attributable to equity investment
|
(84 | ) | 9 | 47 | 33 | |||||||||||
Less accretion expense
|
(152 | ) | (194 | ) | (340 | ) | (266 | ) | ||||||||
Consolidated operating income
|
24,633 | 22,299 | 44,318 | 42,561 | ||||||||||||
Less other expense, net
|
(16,860 | ) | (26,410 | ) | (34,144 | ) | (43,882 | ) | ||||||||
Consolidated income (loss) before income tax (expense) benefit
|
$ | 7,773 | (4,111 | ) | 10,174 | (1,321 | ) |
(7)
|
Non-controlling Interest
|
|
The following table summarizes the impact of the consolidated VIE as of June 30, 2012 (amounts in thousands):
|
Assets
|
Equity
|
|||||||
Carrying Value
|
Classification
|
Carrying Value
|
Classification
|
|||||
$ | 14,804 |
Restricted cash
|
$ | 15,954 |
Non-controlling interest
|
|||
1,742 |
Construction in progress
|
592 |
Retained earnings attributable to General Communication, Inc. common stockholders
|
|||||
$ | 16,546 |
|
$ | 16,546 |
|
(8)
|
Commitments and Contingencies
|
|
Litigation, Disputes, and Regulatory Matters
|
|
We are involved in various lawsuits, billing disputes, legal proceedings, and regulatory matters that have arisen from time to time in the normal course of business. While the ultimate results of these items cannot be predicted with certainty we do not expect, at this time, that the resolution of them will have a material adverse effect on our financial position, results of operations or liquidity. In addition we are involved in the following matters:
|
·
|
In September 2008, the FCC's Office of Inspector General ("OIG") initiated an investigation regarding Alaska DigiTel LLC’s (“Alaska DigiTel”) compliance with program rules and requirements under the Lifeline Program. The request covered the period beginning January 1, 2004 through August 31, 2008 and related to amounts received for Lifeline service. Alaska DigiTel was an Alaska based wireless communications company of which we acquired an 81.9% equity interest on January 2, 2007 and the remaining 18.1% equity interest on August 18, 2008 and was subsequently merged with one of our wholly owned subsidiaries in April 2009. Prior to August 18, 2008, our control over the operations of Alaska DigiTel was limited as required by the FCC upon its approval of our initial acquisition completed in January 2007. We responded to this request on behalf of Alaska DigiTel and the GCI companies as affiliates. On January 18, 2011 we reached an agreement with the FCC and the Department of Justice to settle the matter, which required us to contribute $1.6 million to the United States Treasury and granted us a broad release of claims including those under the False Claims Act. The $1.6 million contribution was recognized in our 2008 through 2010 income statements and was paid in January 2011; and
|
·
|
In August 2010, a GCI-owned aircraft was involved in an accident resulting in five fatalities and injuries to the remaining four passengers on board. We had aircraft and liability insurance coverage in effect at the time of the accident. As of June 30, 2012, all claims paid out have been covered by insurance and were recorded net of these recoveries in our Consolidated Statements of Operations. While most of the claims have been resolved, we cannot predict the likelihood or nature of the remaining potential environmental remediation claim related to the accident.
|
·
|
The order adopted on an interim basis a flat rate of $9.25 to replace the support previously available under Tier I through Tier III support mechanisms as defined by USAC. The replacement support reduces the wireless subscriber per line support $0.75 and will take effect in August 2012. This change will not have a material impact on our income statement, financial position or cash flows. The FCC intends to further investigate whether this support amount is reasonable over the long term in the further rulemaking.
|
·
|
The order adopted a requirement for annual recertification of all Lifeline subscribers enrolled as of June 1, 2012 to be completed by the end of 2012. We began the annual recertification process and continue to evaluate whether this new rule will have a material impact on our income statement, financial position or cash flows.
|
·
|
The order adopted a “one per household” rule with “household” defined as an “economic unit.” We do not expect this new rule to have a material impact on our income statement, financial position or cash flows.
|
|
Wireless Acquisition
|
|
The closing of the transactions is subject to the satisfaction of customary closing conditions, including the receipt of required governmental and third party consents and approvals and the expiration of any applicable waiting periods under competition laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transactions are expected to close by the second quarter of 2013.
|
(9)
|
Subsequent Event
|
|
|
Reportable Segments
|
||||
Services and Products
|
Consumer
|
Network Access
|
Commercial
|
Managed Broadband
|
Regulated Operations
|
|
Voice:
|
|
|
|
|
|
|
|
Long-distance
|
X
|
X
|
X
|
|
X
|
|
Local Access
|
X
|
X
|
X
|
|
X
|
|
|
|
|
|
|
|
Video
|
X
|
|
X
|
|
|
|
|
|
|
|
|
|
|
Data:
|
|
|
|
|
|
|
|
Internet
|
X
|
X
|
X
|
X
|
X
|
|
Data Networks
|
|
X
|
X
|
X
|
|
|
Managed Services
|
|
|
X
|
X
|
|
|
Managed Broadband Services
|
|
|
|
X
|
|
|
|
|
|
|
|
|
Wireless
|
X
|
X
|
X
|
|
|
|
|
|
|
Percentage
|
|
|
Percentage
|
||||||
|
|
Three Months Ended
|
Change1
|
Six Months Ended
|
Change1
|
||||||||
|
|
June 30,
|
2012
|
June 30,
|
2012
|
||||||||
|
|
2012
|
2011
|
vs. 2011
|
2012
|
2011
|
vs. 2011
|
||||||
|
|
|
|
|
|||||||||
Statements of Operations Data:
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|||||||||
|
Consumer segment
|
50%
|
53%
|
0%
|
51%
|
53%
|
0%
|
||||||
|
Network Access segment
|
15%
|
15%
|
3%
|
15%
|
15%
|
2%
|
||||||
|
Commercial segment
|
20%
|
20%
|
1%
|
20%
|
20%
|
4%
|
||||||
|
Managed Broadband segment
|
12%
|
9%
|
48%
|
11%
|
9%
|
42%
|
||||||
|
Regulated Operations segment
|
3%
|
3%
|
(2%)
|
3%
|
3%
|
0%
|
||||||
|
Total revenues
|
100%
|
100%
|
5%
|
100%
|
100%
|
5%
|
||||||
Selling, general and administrative expenses
|
34%
|
34%
|
4%
|
35%
|
35%
|
6%
|
|||||||
Depreciation and amortization expense
|
19%
|
18%
|
8%
|
19%
|
19%
|
5%
|
|||||||
Operating income
|
14%
|
13%
|
10%
|
13%
|
13%
|
4%
|
|||||||
Other expense, net
|
10%
|
16%
|
(36%)
|
10%
|
13%
|
(22%)
|
|||||||
Income (loss) before income tax
(expense) benefit
|
4%
|
(2%)
|
289%
|
3%
|
0%
|
870%
|
|||||||
Net income (loss)
|
2%
|
(1%)
|
286%
|
1%
|
0%
|
884%
|
|||||||
Net income (loss) attributable to GCI
|
2%
|
(1%)
|
295%
|
2%
|
0%
|
939%
|
|||||||
|
|
|
|
|
|
||||||||
|
1 Percentage change in underlying data
|
|
|
|
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 10,483 | 13,625 | (23 | %) | |||||||
Video
|
29,235 | 29,546 | (1 | %) | ||||||||
Data
|
21,523 | 17,257 | 25 | % | ||||||||
Wireless
|
27,254 | 28,126 | (3 | %) | ||||||||
Total Consumer segment revenue
|
$ | 88,495 | 88,554 | 0 | % |
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 2,294 | 2,711 | (15 | %) | |||||||
Video
|
12,739 | 13,453 | (5 | %) | ||||||||
Data
|
1,299 | 1,488 | (13 | %) | ||||||||
Wireless
|
14,255 | 10,359 | 38 | % | ||||||||
Total Consumer segment Cost of Goods Sold
|
$ | 30,587 | 28,011 | 9 | % |
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Consumer segment Adjusted EBITDA
|
$ | 24,008 | 28,258 | (15 | %) |
June 30,
|
Percentage
|
|||||||||||
2012
|
2011
|
Change
|
||||||||||
Voice:
|
|
|
|
|||||||||
Total local access lines in service1
|
74,400 | 82,300 | (10 | %) | ||||||||
Local access lines in service on GCI facilities1
|
69,300 | 75,900 | (9 | %) | ||||||||
Video:
|
||||||||||||
Basic subscribers2
|
122,500 | 126,900 | (3 | %) | ||||||||
Digital programming tier subscribers3
|
72,200 | 77,400 | (7 | %) | ||||||||
HD/DVR converter boxes4
|
88,400 | 87,700 | 1 | % | ||||||||
Homes passed
|
242,400 | 239,000 | 1 | % | ||||||||
Average monthly revenue per subscriber5
|
$ | 78.89 | $ | 76.47 | 3 | % | ||||||
Data:
|
||||||||||||
Cable modem subscribers6
|
111,700 | 105,400 | 6 | % | ||||||||
Wireless:
|
||||||||||||
Wireless lines in service7
|
124,800 | 126,400 | (1 | %) | ||||||||
Average monthly revenue per subscriber8
|
$ | 67.69 | $ | 70.52 | (4 | %) | ||||||
1 A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network.
|
||||||||||||
2 A basic subscriber is defined as one basic tier of service delivered to an address or separate subunits thereof regardless of the number of outlets purchased.
|
||||||||||||
3 A digital programming tier subscriber is defined as one digital programming tier of service delivered to an address or separate subunits thereof regardless of the number of outlets or digital programming tiers purchased. Digital programming tier subscribers are a subset of basic subscribers.
|
||||||||||||
4 A high-definition/digital video recorder ("HD/DVR") converter box is defined as one box rented by a digital programming or basic tier subscriber. A digital programming or basic tier subscriber is not required to rent an HD/DVR converter box to receive service.
|
||||||||||||
5 Average monthly consumer video revenues divided by the average of consumer basic subscribers at the beginning and end of each month in the period.
|
||||||||||||
6 A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber. Cable modem subscribers may also be video basic subscribers though basic video service is not required to receive cable modem service.
|
||||||||||||
7 A wireless line in service is defined as a revenue generating wireless device.
|
||||||||||||
8 Average monthly consumer wireless revenues divided by the average of consumer wireless subscribers at the beginning and end of each month in the period.
|
·
|
The order adopted on an interim basis a flat rate of $9.25 to replace the support previously available under Tier I through Tier III support mechanisms as defined by USAC. The replacement support reduces the wireless subscriber per line support $0.75 and will take effect in August 2012. This change will not have a material impact on our income statement. The FCC intends to further investigate whether this support amount is reasonable over the long term in further rulemaking.
|
·
|
The order adopted a requirement for annual recertification of all Lifeline subscribers enrolled as of June 1, 2012 to be completed by the end of 2012. We began the annual recertification process and continue to evaluate whether this new rule will have a material impact on our income statement, financial position or cash flows.
|
·
|
A 35% decrease in local service high cost support to $1.9 million due to the changes in the high cost support program as discussed above, changes in the variables used to calculate our estimate and a decrease in subscribers,
|
·
|
A 21% decrease in local service plan fee revenue to $4.1 million due to decreased subscribers and a rate decrease to one of our popular plans; and
|
·
|
A 44% decrease in long distance usage revenue to $617,000 due to the lower rates mandated by the Intrastate Access Reform Act (“Intrastate Access Reform”) which went into effect in the third quarter of 2011 along with our introduction of a popular new plan offering unlimited interstate and intrastate calling.
|
·
|
A 22% increase in cable modem revenue to $18.4 million due to increased subscribers, rate increases in May 2011 and our subscribers’ selection of plans that offer higher speeds; and
|
·
|
An 82% increase in excess usage revenue to $2.9 million due to customers moving from plans with unlimited usage to plans with limited usage.
|
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 5,962 | 5,441 | 10 | % | |||||||
Data
|
13,412 | 15,023 | (11 | %) | ||||||||
Wireless
|
6,643 | 4,687 | 42 | % | ||||||||
Total Network Access segment revenue
|
$ | 26,017 | 25,151 | 3 | % |
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 2,410 | 3,131 | (23 | %) | |||||||
Data
|
3,458 | 3,164 | 9 | % | ||||||||
Wireless
|
318 | 281 | 13 | % | ||||||||
Total Network Access segment Cost of Goods Sold
|
$ | 6,186 | 6,576 | (6 | %) |
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Network Access segment Adjusted EBITDA
|
$ | 13,442 | 12,344 | 9 | % |
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 6,804 | 7,340 | (7 | %) | |||||||
Video
|
3,236 | 2,936 | 10 | % | ||||||||
Data
|
21,917 | 21,518 | 2 | % | ||||||||
Wireless
|
2,509 | 2,422 | 4 | % | ||||||||
Total Commercial segment revenue
|
$ | 34,466 | 34,216 | 1 | % |
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 2,505 | 3,622 | (31 | %) | |||||||
Video
|
492 | 549 | (10 | %) | ||||||||
Data
|
10,784 | 11,681 | (8 | %) | ||||||||
Wireless
|
1,721 | 1,080 | 59 | % | ||||||||
Total Commercial segment Cost of Goods Sold
|
$ | 15,502 | 16,932 | (8 | %) |
|
Second Quarter of
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Commercial segment Adjusted EBITDA
|
$ | 8,625 | 7,401 | 17 | % |
June 30,
|
Percentage
|
|||||||||||
2012
|
2011
|
Change
|
||||||||||
Voice:
|
|
|
|
|||||||||
Total local access lines in service1
|
51,800 | 50,800 | 2 | % | ||||||||
Local access lines in service on GCI facilities1
|
30,200 | 27,000 | 12 | % | ||||||||
|
||||||||||||
Data:
|
||||||||||||
Cable modem subscribers2
|
11,800 | 11,000 | 7 | % | ||||||||
|
||||||||||||
Wireless:
|
||||||||||||
Wireless lines in service3
|
16,200 | 14,600 | 11 | % | ||||||||
1 A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network.
|
||||||||||||
2 A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber.
|
||||||||||||
3 A wireless line in service is defined as a revenue generating wireless device.
|
·
|
A $5.4 million increase in monthly contract revenue due to increased data network capacity purchased by our ConnectMD® and SchoolAccess® customers, and
|
·
|
Recognition of $1.6 million in previously denied funding from the USAC for one ConnectMD® customer for the funding year July 2008 to June 2009. We had appealed the funding denial and received notice during the second quarter of 2012 that our appeal was successful and the funding was reinstated.
|
June 30,
|
Percentage
|
|||||||||||
2012
|
2011
|
Change
|
||||||||||
Voice:
|
|
|
|
|||||||||
Total local access lines in service on GCI facilities1
|
8,700 | 9,400 | (7 | %) | ||||||||
1 A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network.
|
·
|
$1.8 million in transaction costs related to the AWN agreements as discussed in the General Overview section of this Item 2,
|
·
|
A $1.1 million increase in labor costs, and
|
·
|
An $849,000 increase in our company-wide success sharing bonus accrual.
|
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 21,763 | 27,377 | (21 | %) | |||||||
Video
|
58,257 | 59,885 | (3 | %) | ||||||||
Data
|
41,972 | 33,958 | 24 | % | ||||||||
Wireless
|
54,315 | 55,751 | (3 | %) | ||||||||
Total Consumer segment revenue
|
$ | 176,307 | 176,971 | 0 | % |
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 4,642 | 5,639 | (18 | %) | |||||||
Video
|
25,528 | 26,988 | (5 | %) | ||||||||
Data
|
2,846 | 2,914 | (2 | %) | ||||||||
Wireless
|
26,189 | 19,778 | 32 | % | ||||||||
Total Consumer segment Cost of Goods Sold
|
$ | 59,205 | 55,319 | 7 | % |
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Consumer segment Adjusted EBITDA
|
$ | 48,802 | 56,651 | (14 | %) |
June 30,
|
Percentage
|
|||||||||||
2012
|
2011
|
Change
|
||||||||||
Video:
|
|
|
|
|||||||||
Average monthly revenue per subscriber1
|
$ | 78.32 | $ | 77.10 | 2 | % | ||||||
Wireless:
|
||||||||||||
Average monthly revenue per subscriber2
|
$ | 68.13 | $ | 70.24 | (3 | %) | ||||||
1 Average monthly consumer video revenues divided by the average of consumer basic subscribers at the beginning and end of each month in the period.
|
||||||||||||
2 Average monthly consumer wireless revenues divided by the average of consumer wireless subscribers at the beginning and end of each month in the period.
|
·
|
A 28% decrease in local service high cost support to $4.2 million due to the changes in the high cost support program as discussed above, changes in the variables used to calculate our estimate and a decrease in subscribers,
|
·
|
A 19% decrease in local service plan fee revenue to $8.5 million due to decreased subscribers and a rate decrease to one of our popular plans; and
|
·
|
A 42% decrease in long distance usage revenue to $1.3 million due to the lower rates mandated by the Intrastate Access Reform which went into effect in the third quarter of 2011 along with our introduction of a popular new plan offering unlimited interstate and intrastate calling.
|
·
|
A 20% increase in cable modem revenue to $36.1 million due to increased subscribers, rate increases in May 2011 and our subscribers’ selection of plans that offer higher speeds; and
|
·
|
An 88% increase in excess usage revenue to $4.8 million due to customers moving from plans with unlimited usage to plans with limited usage.
|
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 11,526 | 11,911 | (3 | %) | |||||||
Data
|
27,765 | 29,995 | (7 | %) | ||||||||
Wireless
|
11,914 | 8,342 | 43 | % | ||||||||
Total Network Access segment revenue
|
$ | 51,205 | 50,248 | 2 | % |
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 4,683 | 6,381 | (27 | %) | |||||||
Data
|
6,954 | 6,358 | 9 | % | ||||||||
Wireless
|
572 | 502 | 14 | % | ||||||||
Total Network Access segment Cost of Goods Sold
|
$ | 12,209 | 13,241 | (8 | %) |
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Network Access segment Adjusted EBITDA
|
$ | 25,852 | 24,224 | 7 | % |
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 13,890 | 14,913 | (7 | %) | |||||||
Video
|
6,356 | 5,776 | 10 | % | ||||||||
Data
|
43,754 | 40,613 | 8 | % | ||||||||
Wireless
|
4,807 | 4,743 | 1 | % | ||||||||
Total Commercial segment revenue
|
$ | 68,807 | 66,045 | 4 | % |
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Voice
|
$ | 5,134 | 7,513 | (32 | %) | |||||||
Video
|
990 | 1,039 | (5 | %) | ||||||||
Data
|
22,145 | 21,138 | 5 | % | ||||||||
Wireless
|
2,933 | 2,108 | 39 | % | ||||||||
Total Commercial segment Cost of Goods Sold
|
$ | 31,202 | 31,798 | (2 | %) |
|
|
Percentage
|
||||||||||
|
2012
|
2011
|
Change
|
|||||||||
Commercial segment Adjusted EBITDA
|
$ | 17,066 | 14,063 | 21 | % |
·
|
A $9.8 million increase in monthly contract revenue due to increased data network capacity purchased by our ConnectMD® and SchoolAccess® customers, and
|
·
|
Recognition of $1.6 million in previously denied funding from the USAC for one ConnectMD® customer for the funding year July 2008 to June 2009. We had appealed the funding denial and received notice during the second quarter of 2012 that our appeal was successful and the funding was reinstated.
|
·
|
A $2.4 million increase in labor costs,
|
·
|
$2.0 million in transaction costs related to the AWN agreements as discussed in the General Overview section of this Item 2,
|
·
|
A $1.5 million increase in health benefit costs,
|
·
|
A $960,000 increase in contribution expense related to donated services to the University of Alaska, and
|
·
|
A $746,000 increase in employer-paid payroll taxes primarily due to a large number of restricted stock awards that vested in 2012 and increased labor costs.
|
|
2012
|
2011
|
||||||
Operating activities
|
$ | 53,140 | 49,842 | |||||
Investing activities
|
(62,118 | ) | (74,906 | ) | ||||
Financing activities
|
1,707 | 17,863 | ||||||
Net decrease in cash and cash equivalents
|
$ | (7,271 | ) | (7,201 | ) |
(c) The following table provides information about repurchases of shares of our Class A common stock during the quarter ended June 30, 2012:
|
(a) Total Number of Shares Purchased1
|
(b) Average Price Paid per Share
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs2
|
(d) Maximum Number (or approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Programs3
|
|||||||||||||
April 1, 2012 to April 30, 2012
|
- | $ | - | - | $ | 93,913,421 | ||||||||||
May 1, 2012 to May 31, 2012
|
- | $ | - | - | $ | 93,913,421 | ||||||||||
June 1, 2012 to June 30, 2012
|
6,400 | $ | 8.02 | 6,400 | $ | 93,862,059 | ||||||||||
Total
|
6,400 | |||||||||||||||
1Consists of 6,400 shares from open market purchases made under our publicly announced repurchase plan.
|
||||||||||||||||
2The repurchase plan was publicly announced on November 3, 2004. Our plan does not have an expiration date, however transactions pursuant to the plan are subject to periodic approval by our Board of Directors. We expect to continue the repurchases for an indefinite period dependent on leverage, liquidity, company performance, market conditions and subject to continued oversight by our Board of Directors.
|
||||||||||||||||
3The total amount approved by our Board of Directors for repurchase under our publicly announced repurchase plan was $305.2 million through June 30, 2012, consisting of $300.2 million through March 31, 2012, and an additional $5.0 million during the three months ended June 30, 2012. We have made total repurchases under the program of $211.4 million through June 30, 2012. If stock repurchases are less than the total approved quarterly amount the difference may be carried forward and used to repurchase additional shares in future quarters, subject to board approval.
|
Exhibit No.
|
Description
|
||
|
|
||
31.1
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302
|
||
|
|
of the Sarbanes-Oxley Act of 2002 by our President and Director *
|
|
31.2
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302
|
||
|
|
of the Sarbanes-Oxley Act of 2002 by our Senior Vice President,
|
|
|
|
Chief Financial Officer, Secretary and Treasurer *
|
|
32.1
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
|
||
|
|
of the Sarbanes-Oxley Act of 2002 by our President and Director *
|
|
32.2
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
|
||
|
|
of the Sarbanes-Oxley Act of 2002 by our Senior Vice President,
|
|
|
|
Chief Financial Officer, Secretary and Treasurer *
|
|
10.193
|
Asset Purchase and Contribution Agreement Dated as of June 4, 2012 By and Among
|
||
|
|
Alaska Communications Systems Group, Inc., ACS Wireless, Inc., General
|
|
|
|
Communication, Inc., GCI Wireless Holdings, LLC and The Alaska Wireless
|
|
|
|
Network, LLC * # (1)
|
|
10.194
|
Add-on Term Loan Supplement No. 3 *
|
||
101
|
The following materials from General Communication, Inc.'s Quarterly Report on Form
|
||
|
|
10-Q for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business
|
|
|
|
Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Income
|
|
|
|
Statements; (iii) Consolidated Statements of Stockholders' Equity; (iv) Consolidated
|
|
|
|
Statements of Cash Flows; and (v) Condensed Notes to Interim Consolidated
|
|
|
|
Financial Statements *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
# CONFIDENTIAL PORTION has been omitted pursuant to a request for confidential treatment by us to, and the material has been separately filed with, the SEC. Each omitted Confidential Portion is marked by three asterisks. | |||
* Filed herewith. | |||
|
|
|
|
|
|
|
|
Exhibit Reference
|
Description
|
||||
1
|
Pursuant to Regulation S-K, Item 601(b)(2), certain schedules (and similar attachments) to this exhibit have not been filed herewith. A list of omitted schedules is included in the agreement. The registrant agrees to furnish a supplemental copy of any such omitted schedule (or similar attachment) to the Securities and Exchange Commission upon request; provided, however, that the registrant may request confidential treatment of omitted items.
|
||||
|
|
|
|
Signature
|
Title
|
Date
|
||
/s/ Ronald A. Duncan |
President and Director
|
August 3, 2012 | ||
Ronald A. Duncan
|
(Principal Executive Officer)
|
|||
/s/ John M. Lowber |
Senior Vice President, Chief Financial
|
August 3, 2012 | ||
John M. Lowber
|
Officer, Secretary and Treasurer
(Principal Financial Officer)
|
|||
/s/ Lynda L. Tarbath |
Vice President, Chief Accounting
|
August 3, 2012 | ||
Lynda L. Tarbath
|
Officer (Principal Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of General Communication, Inc. for the period ended June 30, 2012;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Ronald A. Duncan | |
Date: August 3, 2012
|
Ronald A. Duncan
|
President and Director
General Communication, Inc.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of General Communication, Inc. for the period ended June 30, 2012;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ John M. Lowber | |
Date: August 3, 2012
|
John M. Lowber
|
Senior Vice President, Chief Financial Officer, Secretary and Treasurer
General Communication, Inc.
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date: August 3, 2012
|
/s/ Ronald A. Duncan |
Ronald A. Duncan
|
|
Chief Executive Officer
|
|
General Communication, Inc.
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date: August 3, 2012
|
/s/ John M. Lowber |
John M. Lowber
|
|
Chief Financial Officer
|
|
General Communication, Inc.
|
|
SECTION 1.
|
DEFINED TERMS
|
1
|
|
1.1
|
Terms Defined in this Section
|
1
|
|
1.2
|
Clarifications
|
13
|
|
SECTION 2.
|
CONTRIBUTION OF ASSETS BY THE MEMBERS
|
13
|
|
2.1
|
Agreement to Purchase and Sell
|
13
|
|
2.2
|
ACS Agreement to Contribute
|
14
|
|
2.3
|
GCI Agreement to Contribute
|
15
|
|
2.4
|
Excluded Assets
|
15
|
|
2.5
|
Assumed Liabilities
|
16
|
|
2.6
|
Excluded Liabilities
|
17
|
|
2.7
|
Issuance of Membership Interests
|
18
|
|
2.8
|
Working Capital Loan
|
18
|
|
2.9
|
Business Process Licenses
|
18
|
|
2.10
|
Prepaid Costs and Expenses
|
18
|
|
2.11
|
Effectiveness of Transactions
|
18
|
|
SECTION 3.
|
REPRESENTATIONS AND WARRANTIES REGARDING THE PARTIES
|
18
|
|
3.1
|
Organization, Standing and Authority
|
19
|
|
3.2
|
Authorization and Binding Obligation
|
19
|
|
3.3
|
Absence of Conflicting Agreements
|
19
|
|
3.4
|
Claims and Legal Actions
|
19
|
|
3.5
|
Compliance with Laws
|
20
|
|
3.6
|
Solvency
|
20
|
|
SECTION 4.
|
REPRESENTATIONS AND WARRANTIES REGARDING THE ASSETS
|
20
|
|
4.1
|
Sufficiency of Assets
|
21
|
|
4.2
|
Licenses and Contracts
|
21
|
|
4.3
|
Title to and Condition of Real and Personal Property
|
21
|
|
4.4
|
Intellectual Property
|
22
|
|
4.5
|
Consents
|
22
|
|
4.6
|
Licenses and FCC Matters
|
22
|
|
4.7
|
Insurance and Bonds
|
23
|
|
4.8
|
Environmental Law
|
23
|
|
4.9
|
Taxes and Tax Returns
|
23
|
|
4.10
|
Conduct of Activities in Ordinary Course
|
23
|
|
4.11
|
Unions
|
24
|
|
4.12
|
Financial Information
|
24
|
|
4.13
|
Software and Hardware
|
24
|
|
4.14
|
Assets and Liabilities of the Company
|
24
|
|
4.15
|
Full Disclosure
|
24
|
|
SECTION 5.
|
COVENANTS OF EACH PARTY
|
24
|
|
5.1
|
Pre-Closing Covenants
|
24
|
|
5.2
|
No Unauthorized Transfer of Control or Assignment of Licenses
|
28
|
|
5.3
|
Rationalization Plans
|
28
|
|
5.4
|
Further Assurances
|
28
|
|
5.5
|
Form 8-K Filing
|
28
|
|
5.6
|
Legacy GCI and ACS Wireless Plans
|
28
|
|
5.7
|
Asset List
|
29
|
|
SECTION 6.
|
SPECIAL COVENANTS AND AGREEMENTS
|
29
|
|
6.1
|
Consents
|
29
|
|
6.2
|
Cooperation
|
30
|
|
6.3
|
Taxes, Fees and Expenses
|
31
|
|
6.4
|
Brokers
|
31
|
|
6.5
|
Employee Matters
|
31
|
|
6.6
|
Title Policies
|
32
|
|
6.7
|
Risk of Loss
|
32
|
|
6.8
|
Post-Closing Access to Information
|
32
|
|
6.9
|
Post-Closing Consents and Subsequent Transfers
|
32
|
|
6.10
|
Confidentiality/Press Releases
|
33
|
|
6.11
|
Assignments to Members
|
34
|
|
6.12
|
Bulk Sales Law
|
34
|
|
6.13
|
HSR Act
|
34
|
|
6.14
|
Network Capacity and Maintenance
|
35
|
|
6.15
|
Payment of CETC Amounts
|
35
|
|
6.16
|
Agreed Tax Treatment; Allocation
|
36
|
|
6.17
|
Forwarding Inquiries and Payments; Collection of Accounts Receivable
|
36
|
|
6.18
|
ICA Order
|
37
|
|
6.19
|
Transaction Opinion
|
37
|
|
SECTION 7.
|
CONDITIONS TO THE OBLIGATIONS TO CLOSE
|
37
|
|
7.1
|
Conditions to Obligations of ACS Contributing Group
|
37
|
|
7.2
|
Conditions to Obligations of GCI Contributing Group
|
39
|
|
SECTION 8.
|
CLOSING AND CLOSING DELIVERIES
|
41
|
|
8.1
|
Time and Place of Closing
|
41
|
|
8.2
|
Deliveries by the Members
|
42
|
|
8.3
|
Deliveries by the Company
|
43
|
|
SECTION 9.
|
RIGHTS OF THE COMPANY AND THE MEMBERS ON TERMINATION OR BREACH
|
43
|
|
9.1
|
Termination Rights
|
43
|
|
9.2
|
Termination Fee
|
44
|
|
9.3
|
Specific Performance
|
45
|
|
SECTION 10.
|
SURVIVAL OF REPRESENTATIONS AND WARRANTIES, AND INDEMNIFICATION
|
45
|
|
10.1
|
Affiliates
|
45
|
|
10.2
|
Representations and Warranties
|
45
|
|
10.3
|
Indemnification by Each Parent
|
45
|
|
10.4
|
Indemnification by the Company
|
47
|
|
10.5
|
Procedure for Indemnification
|
47
|
|
10.6
|
Limitations
|
49
|
|
10.7
|
Recoupment and Deduction
|
50
|
|
10.8
|
Taxes
|
50
|
|
10.9
|
Treatment of Indemnification Payments
|
50
|
|
10.10
|
Exclusive Remedy
|
50
|
|
SECTION 11.
|
MISCELLANEOUS
|
51
|
|
11.1
|
Notices
|
51
|
|
11.2
|
Benefit and Binding Effect
|
52
|
|
11.3
|
Entire Agreement
|
52
|
|
11.4
|
Waiver of Compliance; Consents
|
52
|
|
11.5
|
Severability
|
52
|
|
11.6
|
Dispute Resolution
|
53
|
|
11.7
|
Prevailing Party
|
53
|
|
11.8
|
No Consequential or Indirect Damages
|
53
|
|
11.9
|
Governing Law
|
53
|
|
11.10
|
Selection of Forum; Venue; Service of Process
|
53
|
|
11.11
|
WAIVER OF JURY TRIAL
|
53
|
|
11.12
|
Counterparts
|
54
|
SECTION 1.
|
DEFINED TERMS
|
SECTION 2.
|
CONTRIBUTION OF ASSETS BY THE MEMBERS
|
SECTION 3.
|
REPRESENTATIONS AND WARRANTIES REGARDING THE PARTIES
|
SECTION 4.
|
REPRESENTATIONS AND WARRANTIES REGARDING THE ASSETS
|
SECTION 5.
|
COVENANTS OF EACH PARTY
|
SECTION 6.
|
SPECIAL COVENANTS AND AGREEMENTS
|
SECTION 7.
|
CONDITIONS TO THE OBLIGATIONS TO CLOSE
|
SECTION 8.
|
CLOSING AND CLOSING DELIVERIES
|
SECTION 9.
|
RIGHTS OF THE COMPANY AND THE MEMBERS ON TERMINATION OR BREACH
|
SECTION 10.
|
SURVIVAL OF REPRESENTATIONS AND WARRANTIES, AND INDEMNIFICATION
|
SECTION 11.
|
MISCELLANEOUS
|
|
If to the Company:
|
The Alaska Wireless Network, LLC
|
|
2550 Denali Street, Suite 1000
|
|
Anchorage, Alaska 99503
|
|
Attention: CEO
|
|
Facsimile: (907) 868-9501
|
|
If to GCI or GCI Member:
|
General Communication, Inc.
|
2550 Denali Street, Suite 1000
|
|
Anchorage, Alaska 99503
Attention: General Counsel
Facsimile: (907) 868-5676
|
|
If to ACS or ACS Member:
|
Alaska Communications Systems Group, Inc.
|
|
600 Telephone Avenue
|
|
Anchorage, Alaska 99503
|
|
Attention: General Counsel
|
|
Facsimile: (907) 297-3153
|
|
ARTICLE 1: FORMATION; DEFINITIONS; INTERPRETATION
|
1 |
|
1.1
|
Formation.
|
1
|
|
1.2
|
Name.
|
1
|
|
1.3
|
Members.
|
1
|
|
1.4
|
Equity Interests.
|
1
|
|
1.5
|
Registered Office and Agent.
|
2
|
|
1.6
|
Principal Office.
|
2
|
|
1.7
|
Foreign Qualification.
|
2
|
|
1.8
|
Term.
|
2
|
|
1.9
|
Definitions.
|
26
|
|
1.10
|
Interpretation.
|
26
|
|
1.11
|
General Appraisal Procedures.
|
27
|
|
1.12
|
Put Right/Call Right Appraisal Procedures.
|
28
|
|
ARTICLE 2: PURPOSES AND POWERS
|
28 |
|
2.1
|
Principal Purpose.
|
29
|
|
2.2
|
Powers.
|
29
|
|
ARTICLE 3: CAPITAL OF THE COMPANY
|
29 |
|
3.1
|
Capital Contributions.
|
29
|
|
3.2
|
Capital Accounts.
|
30
|
|
3.3
|
Transfer.
|
30
|
|
3.4
|
Adjustments.
|
31
|
|
3.5
|
Market Value Adjustments.
|
31
|
|
3.6
|
No Withdrawal of Capital.
|
31
|
|
3.7
|
No Interest on Capital.
|
31
|
|
3.8
|
No Drawing Accounts.
|
31
|
|
3.9
|
No Salary or Other Compensation.
|
31
|
|
3.10
|
Working Capital.
|
32
|
|
3.11
|
Member Cure Rights on GCI Working Capital Loan.
|
32
|
|
ARTICLE 4: INCOME AND LOSSES
|
33 |
|
4.1
|
Allocation of Net Income and Net Loss.
|
33
|
|
4.2
|
Company Minimum Gain Chargeback.
|
33
|
|
4.3
|
Minimum Gain Chargeback for Member Nonrecourse Debt.
|
33
|
|
4.4
|
Qualified Income Offset.
|
33
|
|
4.5
|
Limit on Net Loss Allocations.
|
33
|
|
4.6
|
Loss from Member Nonrecourse Debt.
|
33
|
|
4.7
|
Nonrecourse Deductions.
|
34
|
|
4.8
|
§ 754 Adjustments.
|
34
|
|
4.9
|
Reversal of Mandatory Allocations.
|
34
|
|
4.10
|
Compliance with Code.
|
34
|
|
4.11
|
Tax Allocations — § 704(c).
|
34
|
|
4.12
|
Special Allocation of Contributed Asset Depreciation.
|
34
|
|
4.13
|
Allocation on Transfer.
|
34
|
|
ARTICLE 5: DISTRIBUTIONS
|
34 |
|
5.1
|
Distributions Generally.
|
34
|
|
5.2
|
Payment.
|
35
|
|
5.3
|
Withholding.
|
35
|
|
5.4
|
Distribution Limitations.
|
36
|
|
ARTICLE 6: MANAGEMENT
|
36 |
|
6.1
|
Management; Consulting Fee.
|
36
|
|
6.2
|
CEO; Other Officers; GCI Services Agreement; Employee Matters.
|
37
|
|
6.3
|
Executive Board.
|
38
|
|
6.4
|
Unanimous Vote of Members.
|
39
|
|
6.5
|
Other Activities.
|
43
|
|
ARTICLE 7: ANNUAL BUDGETS AND FOUR YEAR PLANS
|
44 |
|
7.1
|
Operation in Accordance with Annual Budgets and Four Year Plans; Financial Objectives.
|
44
|
|
7.2
|
Initial Four Year Plan and First Year Budgets.
|
44
|
|
7.3
|
Adoption of Annual Budgets, Revised Four Year Plans and Subsequent Four Year Plans.
|
45
|
|
7.4
|
Circumstances Requiring Unanimous Board Approval of Annual Budgets, Four Year Plans and Revised Four Year Plans.
|
47
|
|
7.5
|
GCI Member Right to [***] FCF [***].
|
48
|
|
ARTICLE 8: MEETINGS OF MEMBERS; MEETINGS OF THE BOARD
|
50 |
|
8.1
|
Meetings of Members.
|
50
|
|
8.2
|
Board Meetings.
|
51
|
|
ARTICLE 9: OPERATIONAL MATTERS
|
52 |
|
9.1
|
Option to Accelerate Capital Investment.
|
52
|
|
9.2
|
Request for Wireless Device Approval.
|
53
|
|
9.3
|
Facilities and Network Use Agreement.
|
54
|
|
9.4
|
Connection Attrition Adjustments.
|
54
|
|
9.5
|
Connection Maintenance Adjustments.
|
57
|
|
9.6
|
Network Capacity Purchases.
|
59
|
|
9.7
|
Option Regarding Fixed Wireless Facilities.
|
60
|
|
ARTICLE 10: LIABILITY OF A MEMBER; STANDARD OF CARE; INDEMNIFICATION; AND EXCULPATION
|
61 |
|
10.1
|
Limited Liability.
|
61
|
|
10.2
|
Capital Contributions.
|
62
|
|
10.3
|
Capital Return.
|
62
|
|
10.4
|
Reliance.
|
62
|
|
10.5
|
Standard of Care.
|
62
|
|
10.6
|
Exculpation.
|
63
|
|
10.7
|
Indemnification.
|
63
|
|
10.8
|
Expense Advancement.
|
63
|
|
10.9
|
Insurance.
|
64
|
|
10.10
|
Indemnification of Others.
|
64
|
|
ARTICLE 11: ACCOUNTING AND REPORTING
|
64 |
|
11.1
|
Fiscal Year.
|
64
|
|
11.2
|
Accounting Method.
|
64
|
|
11.3
|
Tax Classification.
|
64
|
|
11.4
|
Tax Filings.
|
64
|
|
11.5
|
Company Reports.
|
65
|
|
11.6
|
Financial Statement Audit.
|
66
|
|
11.7
|
Books and Records.
|
67
|
|
11.8
|
Banking.
|
67
|
|
11.9
|
Tax Matters Partner.
|
68
|
|
11.10
|
No Partnership.
|
68
|
|
11.11
|
ACS Audit Rights.
|
68
|
|
11.12
|
Maintenance of Insurance.
|
69
|
|
ARTICLE 12: DISSOLUTION
|
69 |
|
12.1
|
Dissolution.
|
69
|
|
12.2
|
Events of Withdrawal.
|
69
|
|
12.3
|
Continuation.
|
69
|
|
ARTICLE 13: LIQUIDATION
|
70 |
|
13.1
|
Liquidation.
|
70
|
|
13.2
|
Priority of Payment.
|
70
|
|
13.3
|
Liquidating Distributions.
|
70
|
|
13.4
|
No Restoration Obligation.
|
71
|
|
13.5
|
Liquidating Reports.
|
71
|
|
13.6
|
Certificate of Cancellation.
|
71
|
|
ARTICLE 14: TRANSFER RESTRICTIONS
|
71 |
|
14.1
|
General Restrictions.
|
71
|
|
14.2
|
No Member Rights.
|
72
|
|
14.3
|
Permitted Transferees.
|
72
|
|
14.4
|
General Conditions on Transfers.
|
72
|
|
14.5
|
Rights of Transferees.
|
73
|
|
14.6
|
Admission.
|
73
|
|
14.7
|
Security Interest.
|
74
|
|
14.8
|
Tag Along Right; Drag Along Election.
|
74
|
|
14.9
|
Right of First Offer on Asset Sales.
|
77
|
|
14.10
|
Connection Termination Event.
|
79
|
|
ARTICLE 15: DISPUTE RESOLUTION
|
81 |
|
ARTICLE 16: GENERAL PROVISIONS
|
81 |
|
16.1
|
Amendment.
|
81
|
|
16.2
|
Representations.
|
82
|
|
16.3
|
Unregistered Interests.
|
82
|
|
16.4
|
Waiver of Dissolution Rights.
|
83
|
|
16.5
|
Waiver of Partition Right.
|
83
|
|
16.6
|
Waivers and Consents.
|
83
|
|
16.7
|
Equitable Relief.
|
83
|
|
16.8
|
Remedies for Breach; Limitation of Damages.
|
83
|
|
16.9
|
Costs.
|
84
|
|
16.10
|
Indemnification.
|
84
|
|
16.11
|
Counterparts.
|
84
|
|
16.12
|
Notice
|
84
|
|
16.13
|
Deemed Notice.
|
85
|
|
16.14
|
Partial Invalidity.
|
86
|
|
16.15
|
Entire Agreement.
|
86
|
|
16.16
|
Benefit.
|
86
|
|
16.17
|
Binding Effect.
|
86
|
|
16.18
|
Further Assurances.
|
86
|
|
16.19
|
Headings.
|
86
|
|
16.20
|
Confidentiality.
|
86
|
|
16.21
|
No Tax Advice.
|
87
|
|
16.22
|
Coordination With Contribution Agreement and Ancillary Agreements; Recoupment of Certain Claims from Distributions.
|
87
|
|
16.23
|
Governing Law.
|
88
|
Accelerated Capital Investment:
|
as defined in Section 9.1[a].
|
Accelerated Capital Investment Notice:
|
as defined in Section 9.1[a].
|
ACI Purchase Price:
|
as defined in Section 9.1[e].
|
ACS:
|
Alaska Communications Systems Group, Inc., a Delaware corporation, the ultimate parent company of the Initial ACS Member.
|
ACS [***] Connection Adjustment:
|
as defined in Section 9.4[c][i].
|
ACS Actual Average Connections:
|
as defined in Section 9.4[b].
|
ACS Annual Connection
|
Shortfall Adjustment:
|
as defined in Section 9.4[b].
|
ACS Connection Maintenance
|
Adjustment:
|
as defined in Section 9.5[a][iii].
|
ACS First Partial Preferred
|
Distribution:
|
if the Effective Date is not on the first day of a calendar quarter, an amount equal to $12,500,000 multiplied by a fraction [a] the numerator of which is the number of Preference Period Partial First Quarter Days and [b] the denominator of which is the number of days in the calendar quarter during which the first day of the Preference Period Partial First Quarter occurs.
|
ACS Forecast Average Connections:
|
as defined in Section 9.4[a].
|
ACS Forecast Reduction Connections:
|
an amount equal to the lesser of [a] [***] and [b] the amount, if any, by which the ACS Forecast Average Connections for Fiscal Year 2013 exceeds the ACS Actual Average Connections for Fiscal Year 2013.
|
ACS Full Quarter Preferred
|
Distributions:
|
if the Effective Date is not on the first day of a calendar quarter, the following amounts:
|
|
[a] an amount equal to $12,500,000 with respect to each of the first seven full calendar quarters in the Preference Period Full Quarters;
|
|
[b] with respect to the eighth full calendar quarter in the Preference Period Full Quarters, an amount equal to the sum of [i] $12,500,000 minus the amount of the ACS First Partial Preferred Distribution, and [ii] $11,250,000 multiplied by a fraction [A] the numerator of which is the number of Preference Period Partial First Quarter Days, and [B] the denominator of which is the number of days in the calendar quarter in which the Effective Date occurs; and
|
|
[c] an amount equal to $11,250,000 with respect to each of the last seven full calendar quarters in the Preference Period Full Quarters.
|
ACS Last Partial Preferred
|
Distribution:
|
if the Effective Date is not on the first day of a calendar quarter, an amount equal to $190,000,000 minus the sum of [a] the ACS First Partial Preferred Distribution, and [b] the aggregate amount of the ACS Full Quarter Preferred Distributions.
|
ACS Member:
|
initially, the Initial ACS Member, and shall include any successors thereto by merger or consolidation (or otherwise by operation of law), any assignees or transferees of all or substantially all the assets thereof, and any transferees of the Ownership Interests thereof, in each case upon such successor, assignee or transferee being admitted as a substitute Member in accordance with the terms of this Agreement.
|
ACS Preference Period Last
|
Quarter Distribution:
|
if the Effective Date is not on the first day of a calendar quarter, an amount equal to [a] the Equity Interest of the ACS Member, multiplied by [b] the product of [i] Adjusted FCF for the Preference Period Last Quarter, multiplied by [ii] a fraction [A] the numerator of which is the number of Preference Period Partial First Quarter Days, and [B] the denominator of which is the number of days in the Preference Period Last Quarter.
|
ACS Preferred Distributions:
|
an aggregate amount equal to [a] if the Effective Date is on the first day of a calendar quarter, an amount equal to $12,500,000 with respect to each of the first eight calendar quarters beginning on the Effective Date and $11,250,000 with respect to each of the next eight calendar quarters thereafter, or [b] if the Effective Date is not on the first day of a calendar quarter, the sum of [i] the ACS First Partial Preferred Distribution, [ii] the ACS Full Quarter Preferred Distributions, and [iii] the ACS Last Partial Preferred Distribution.
|
ACS Services Agreement:
|
the ACS Services Agreement between the Company and ACS Wireless, Inc. attached to this Agreement as Exhibit O.
|
ACS Transfer Date Connections:
|
as defined in Section 9.5[a][i].
|
Act:
|
the Delaware Limited Liability Company Act, as amended from time to time.
|
Additional Capital Contribution:
|
means any Capital Contribution made to the Company by a Member in accordance with the terms of this Agreement other than an Initial Capital Contribution.
|
Additional Capacity Purchase Agreement:
|
as defined in the Contribution Agreement.
|
Adjusted ACS Forecast Average
|
Connections:
|
as defined in Section 9.4[a].
|
Adjusted Capital Account Deficit:
|
with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant taxable year, after giving effect to the following adjustments:
|
Adjusted FCF:
|
FCF minus the sum of [a] the Consulting Fee and [b] payments required to be made in accordance with the terms of the Company Working Capital Loan or the GCI Working Capital Loan, other than, in the case of the GCI Working Capital Loan, payments financed pursuant to a refinancing of such loan.
|
Affiliate:
|
with respect to any Person, any other Person that directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such Person, except that the Company shall not be deemed to be an Affiliate of any Member.
|
Affiliate Contracts:
|
as defined in the Contribution Agreement.
|
Affiliate Transactions:
|
as defined in Section 6.4[n].
|
Aggregate Purchase Price:
|
as defined in Section 14.8[c].
|
Agreement:
|
this First Amended and Restated Operating Agreement, also known as a limited liability company agreement under the Act, as amended from time to time.
|
Ancillary Agreements:
|
as defined in the Contribution Agreement.
|
Annual Budgets:
|
the then current Annual Cap Ex Budget or Annual Operating Budget or both, as applicable.
|
Annual Cap Ex Budget:
|
the capital expenditures budget of the Company for a given Fiscal Year, each of which will be consistent with the Four Year Plan applicable for the given Fiscal Year and will be in the form of, and contain the same scope of information included in, the First Year Cap Ex Budget.
|
Annual Operating Budget:
|
the operating budget of the Company for a given Fiscal Year, each of which will be consistent with the Four Year Plan applicable for the given Fiscal Year and will be in the form of, and contain the same scope of information included in, the First Year Operating Budget.
|
Approved Affiliate Transactions:
|
the following agreements and transactions: [a] the Contribution Agreement, all Affiliate Contracts that are Assumed Contracts (as identified on the Schedules to the Contribution Agreement) to which the Company, on the one hand, and a Member or an Affiliate of a Member, on the other hand, are parties after the Effective Date, and all agreements entered into in connection with closing of the Contribution Agreement that are between a Member or an Affiliate of a Member and the Company, including all agreements related to the contribution of assets by the Members to the Company (and maintenance thereof) and the applicable Ancillary Agreements, [b] the GCI Services Agreement, subject to the terms of Section 6.4[n][x] and [y], respectively, in the case of Professional Services and Satellite Capacity Services provided under such agreement, [c] the ACS Services Agreement, [d] the Facilities and Network Use Agreement, [e] the GCI Working Capital Loan and [f] any other agreement or transaction that is approved by the unanimous Vote of the Members.
|
Arbitration Agreement:
|
that certain Arbitration Agreement between the Company and the Members set forth as the attached Exhibit E, as it may be amended from time to time, and which is hereby incorporated into and made a part of this Agreement.
|
Arbitrator:
|
as defined in the Arbitration Agreement.
|
Arbitrator’s Expenses:
|
as defined in the Arbitration Agreement.
|
ARPU:
|
average revenue per unit, with a unit for this purpose meaning a Connection.
|
Assumed Contracts:
|
as defined in the Contribution Agreement.
|
Bankruptcy Case:
|
as defined in Section 14.6.
|
Bankruptcy Code:
|
as defined in definition of Bankruptcy Event.
|
Bankruptcy Event:
|
means, with respect to a Person, the commencement of occurrence of any of the following:
|
Board:
|
as defined in Section 6.3[a].
|
Book Value:
|
with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:
|
Budget Objection Notice:
|
as defined in Section 7.3[f].
|
Business Day:
|
any day (other than a Saturday or Sunday) on which commercial banks are not required or authorized to close in New York City, New York or Anchorage, Alaska.
|
Capital Account:
|
the capital account of a Member established and maintained in accordance with Section 3.2.
|
Capital Contribution:
|
any contribution of money or property by a Member to the Company, which is either an Initial Capital Contribution or an Additional Capital Contribution.
|
Cause:
|
the CEO [i] commits any act of fraud (including securities fraud), theft or willful misconduct relating to the Company or any of its Subsidiaries or any Member, or [ii] is convicted of, or pleads guilty or no contest to, a misdemeanor involving fraud, deceit or embezzlement which is either in relation to the Company or is reasonably likely to have a material adverse effect on the business or reputation of the Company, or any felony or [iii] violates any material federal or state securities law or other applicable material law or regulation in connection with activities directly related to the Company and its Subsidiaries, which violation is reasonably likely to have a material adverse effect on the business or reputation of the Company or its Subsidiaries or [iv] breaches his or her duty of loyalty to the Company.
|
CEO:
|
as defined in Section 6.2[a].
|
Certificate:
|
the Certificate of Formation of the Company, as amended from time to time.
|
Challenged Aspects:
|
as defined in Section 7.3[g].
|
Changing Market Conditions:
|
includes material changes in market conditions that were not anticipated at the time the then-current Plans were adopted by the Company, including unanticipated (i) changes in subscriber demand, (ii) force majeure events, (iii) entrance of new competitors into the Wireless Business in Alaska and (iv) introduction of competitive technology.
|
Clawback Amount:
|
as defined in Section 7.5[c].
|
Code:
|
the Internal Revenue Code of 1986, as amended from time to time (including corresponding provisions of subsequent revenue laws).
|
Commercially Sensitive Information
|
Policies and Procedures:
|
as set forth on Exhibit L.
|
Company:
|
The Alaska Wireless Network, LLC, as formed under the Certificate and governed by this Agreement.
|
Company Asset Sale:
|
as defined in Section 14.9[a].
|
Company Minimum Gain:
|
the amount computed under Regulations § 1.704-2(d)(1) with respect to the Company’s Nonrecourse Liabilities.
|
Company Network:
|
as defined in the Facilities and Network Use Agreement.
|
Company Working Capital Loan:
|
as defined in Section 3.10[b].
|
Connection:
|
each Wireless Device having a discrete International Mobile Subscriber Identity (IMSI), including Wireless Devices provided by a Person [i] for use by its, or any of its Affiliate’s, directors, officers, employees or consultants for business or personal use, [ii] for demonstration purposes in such Person’s, (or its Affiliate’s) retail stores or [iii] for other internal uses or purposes of such Person or its Affiliates, that is connected to a network operated by the Company and covered by the Facilities and Network Use Agreement or an agreement between the Company and any other Person related to use of the Company’s network for the provision of Wireless services, as the context requires.
|
Connection Maintenance
|
Measurement Date:
|
as defined in Section 9.5[a][iii].
|
Connection Maintenance Transfer:
|
as defined in Section 9.5[a].
|
Connection Maintenance Transfer
|
Date:
|
as defined in Section 9.5[a].
|
Connection Termination Event:
|
as defined in Section 14.10[a].
|
Connection Termination Date:
|
the date on which a Connection Termination Event occurs.
|
Consulting Fee:
|
as defined in Section 6.1[c].
|
Contributed Assets:
|
as defined in the Contribution Agreement.
|
Contributed Asset Depreciation:
|
any Depreciation arising from the Company’s ownership of any Contributed Asset, provided, however, that Contributed Asset Depreciation shall not include any Depreciation attributable to an increase in the Book Value of any Contributed Asset pursuant to clause [b] of the definition of Book Value.
|
Contribution Agreement:
|
the Asset Purchase and Contribution Agreement entered into by GCI, the Initial GCI Member, ACS, the Initial ACS Member and the Company dated June __, 2012.
|
Control:
|
(including the terms “Controlled by” and “under common Control with”) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
|
CTE Call Right:
|
as defined in Section 14.10[b][ii].
|
CTE Notice:
|
as defined in Section 14.10[b].
|
CTE Put Right:
|
as defined in Section 14.10[b][iii].
|
Cure Date:
|
as defined in Section 3.11[b].
|
Cure Offer:
|
as defined in Section 3.11[a].
|
Cure Offer Period:
|
as defined in Section 3.11[b].
|
Current Assets:
|
the current assets of the Company, determined in accordance with GAAP.
|
Current Liabilities:
|
the current liabilities of the Company, determined in accordance with GAAP.
|
Departing Member:
|
as defined in Section 14.10[b].
|
Depreciation:
|
for each taxable year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for the year or other period, except that if the Book Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of the year or other period, Depreciation will be an amount that bears the same ratio to the beginning Book Value as the federal income tax depreciation, amortization or other cost recovery deduction for the year or other period bears to the beginning adjusted tax basis, but if the federal income tax depreciation, amortization, or other cost recovery deduction for the year or other period is zero, Depreciation will be determined with reference to the beginning Book Value using any reasonable method selected by the Tax Matters Partner and mutually agreed to by the Members; provided, however, that the Members will not unreasonably withhold approval of a reasonable method selected by the Tax Matters Partner so long as such method does not result in a disproportionate effect on any Member.
|
Designated Budget Dispute Arbitrator:
|
as defined in the Arbitration Agreement.
|
Disclosing Party:
|
as defined in Section 16.20.
|
Disputed Expense:
|
as defined in Section 7.3[i].
|
Dissolution:
|
the happening of any of the events set forth in Section 12.1.
|
Distribution:
|
the amount of any money or the Fair Market Value of any property distributed by the Company to the Members as an operating or liquidating distribution in accordance with this Agreement.
|
Drag Along Election:
|
as defined in Section 14.8[a].
|
Effective Date:
|
as defined in the preamble, which will be the Closing Date as defined in the Contribution Agreement.
|
End User Data:
|
as defined in the Facilities and Network Use Agreement.
|
Entire Company Assumed
|
Purchase Price:
|
as defined in Section 14.8[c][ii].
|
Equity Interests:
|
as defined in Section 1.4.
|
Exchange Offer:
|
as defined in Section 14.9[d].
|
Facilities and Network Use Agreement:
|
as defined in Section 9.3.
|
Facilities and Network Use CTE:
|
as defined in Section 14.10[b][iii].
|
Fair Market Value:
|
the cash price at which a willing seller would sell and a willing buyer would buy, both having full knowledge of the relevant facts and being under no compulsion to buy or sell, in an arm’s-length transaction without time constraints, as determined by:
|
Fair Market Value
|
Determination Date:
|
as defined in Section 1.11.
|
Final Adjusted ACS Forecast Average
|
Connections:
|
as defined in Section 9.4[a].
|
Financial Objectives:
|
as defined in Section 7.1[b].
|
First Year Budgets:
|
as defined in Section 7.2[b].
|
First Year Cap Ex Budget:
|
as defined in Section 7.2[b].
|
First Year Operating Budget:
|
as defined in Section 7.2[b].
|
Fiscal Year:
|
as defined in Section 11.1.
|
Fixed Wireless Facility Investment:
|
as defined in Section 9.7[a].
|
Fixed Wireless Facility Notice:
|
as defined in Section 9.7[a].
|
Four Year Plan:
|
the then current four year business plan of the Company, as the same may be revised pursuant to Article 7, each of which will be substantially in the form of, and contain the same scope of information included in, the Initial Four Year Plan.
|
FWF Option 2:
|
as defined in Section 9.7[b].
|
FWF Option 3:
|
as defined in Section 9.7[b].
|
FWF Purchase Price:
|
as defined in Section 9.7[e].
|
GAAP:
|
generally accepted accounting principles as in effect from time to time in the United States, consistently applied.
|
GCI:
|
means General Communication, Inc., an Alaska corporation, the parent company of the Initial GCI Member.
|
GCI [***] Connection Adjustment:
|
as defined in Section 9.4[c][ii].
|
GCI Connection Maintenance
|
Adjustment:
|
as defined in Section 9.5[a][iv].
|
GCI Member:
|
initially, the Initial GCI Member, and shall include any successors thereto by merger or consolidation (or otherwise by operation of law), any assignees or transferees of all or substantially all the assets thereof, and any transferees of the Ownership Interests thereof, in each case upon such successor, assignee or transferee being admitted as an additional or substitute Member in accordance with the terms of this Agreement.
|
GCI Preference Period Last
|
Quarter Distribution:
|
if the Effective Date is not on the first day of a calendar quarter, an amount equal to [a] 100% of Adjusted FCF for the Preference Period Last Quarter, minus [b] the sum of [i] the amount of any ACS Preferred Distributions made during the Preference Period Last Quarter, and [ii] the amount of the ACS Preference Period Last Quarter Distribution.
|
GCI Services Agreement:
|
as defined in Section 6.2[c].
|
GCI Transfer Date Connections:
|
as defined in Section 9.5[a][ii].
|
GCI Working Capital Loan:
|
as defined in Section 3.10[a].
|
Governmental Authority:
|
any government or any arbitrator, tribunal or court of competent jurisdiction, administrative agency, board, department or commission, legislative body or other governmental authority or instrumentality (in each case whether federal, state, local, foreign, international or multinational) or entity which lawfully assumes the powers and functions of the same (including any taxing or other revenue collecting authority or other body).
|
HSPA Services Agreement:
|
the HSPA Services Agreement dated as of June _-, 2012 by and between GCI and ACS.
|
Income:
|
for each Fiscal Year, each item of income and gain as determined, recognized and classified for federal income tax purposes, but [a] any income or gain that is exempt from federal income tax will be included as if it were an item of taxable income, [b] any income or gain attributable to the taxable disposition of any Company asset will be computed by the Company as if the adjusted basis of such asset as of the date of the disposition were equal in amount to the Company’s Book Value with respect to such asset as of such date, [c] in the event of a Distribution of any Company asset, whether or not in connection with a Liquidation of the Company, such event will for Capital Account purposes be a deemed taxable disposition of such Company asset immediately prior to such Distribution and income or gain will be computed and allocated among the Members in accordance with their Equity Interests as if such property were actually disposed of for an amount realized equal to the Fair Market Value of such asset and as if the adjusted basis of such asset was equal to its Book Value at such time, and [d] in the event the Book Value of any Company asset is adjusted upwards pursuant to the definition of Book Value, the amount of such adjustment will be taken into account for Capital Account purposes as income or gain from the disposition of such Company asset and allocated among the Members.
|
Indebtedness:
|
with respect to a Person, without duplication, [i] all indebtedness for borrowed money, [ii] all indebtedness for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business and other than expense accruals and deferred compensation items arising in the ordinary course of business), [iii] all obligations evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business in respect of which such Person’s liability remains contingent), [iv] all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), [v] all obligations under leases that have been or should be, in accordance with GAAP, recorded as capital leases, [vi] all reimbursement, payment or similar obligations, contingent or otherwise, under acceptance, letter of credit or similar facilities and [vii] any liability of others described in clauses [i] through [vi] above that the Person has guaranteed or that is otherwise its legal liability, and including in clauses [i] through [vi] above any accrued and unpaid interest or penalties thereon.
|
Indemnified Losses:
|
losses, damages, expenses (including fees and expenses of attorneys and other advisors and court costs) and liabilities.
|
Independent Appraiser:
|
a nationally recognized third-party appraiser which, as of the date of appointment (or consideration for appointment), [i] shall be qualified to appraise businesses in the Wireless industry; [ii] shall have been engaged in the appraisal or business valuation business for not less than five years; and [iii] unless the Members otherwise agree, shall not be, and shall not have been at any time during the previous three years, engaged by the Company or either Member, or any of their respective Affiliates, to provide services to the Company, such Member or such Affiliate.
|
Individual Fees and Expenses:
|
as defined in the Arbitration Agreement.
|
Initial ACS Member:
|
as defined in the preamble.
|
Initial Capital Contribution:
|
as defined in Section 3.1[a].
|
Initial Four Year Period:
|
the period consisting of Fiscal Years 2013 through 2016.
|
Initial Four Year Plan:
|
as defined in Section 7.2[a].
|
Initial GCI Member:
|
as defined in the preamble.
|
Intentional Service Area Elimination:
|
as defined in Section 9.4[d].
|
Investing Member:
|
as defined in Section 9.1[a].
|
Investing Member’s Cost:
|
as defined in Section 9.1[c].
|
LIBOR:
|
the three-month London Interbank Offered Rate of interest on the first day on which an applicable interest rate is to be determined, adjusted on the first day of each calendar quarter, for dollar deposits as published in The Wall Street Journal (Eastern Edition) under “Money Rates” from time to time, or if such rate does not so appear, in such other nationally recognized publication as the Members, by Majority Vote, may, from time to time, specify. On any day when such a rate is not reported, the most recently reported rate on a preceding day will be deemed the applicable rate.
|
Liquidation:
|
the process of winding up and terminating the Company after its Dissolution.
|
Loss:
|
for each Fiscal Year, each item of loss or deduction as determined, recognized and classified for federal income tax purposes, but [a] any Code § 705(a)(2)(B) expenditure will be included as if it were a deductible expenditure, [b] any loss attributable to the taxable disposition of any Company asset will be computed by the Company as if the adjusted basis of such asset as of the date of the disposition were equal to the Company’s Book Value with respect to such asset as of such date, [c] in the event of a Distribution of any Company asset, whether or not in connection with a Liquidation of the Company, such event will be a deemed taxable disposition of such asset immediately prior to such Distribution and any loss will be computed and allocated among the Members in accordance with their Equity Interests as if such property were actually disposed of for an amount realized equal to the Fair Market Value of such asset and as if the adjusted basis of such asset were equal to its Book Value at such time, [d] in the event the Book Value of any Company asset is adjusted downward pursuant to the definition of Book Value, the amount of such adjustment will be taken into account as a loss from the disposition of such asset and allocated among the Members, and [e] any deductions for Depreciation with respect to a Company asset will be determined as if the adjusted basis of such asset were equal to the Book Value of such asset pursuant to the methodology described in Regulations § 1.704-1(b)(2)(iv)(g)(3).
|
Majority Vote:
|
the affirmative Vote of Members holding a majority of the outstanding Equity Interests.
|
Material Indebtedness:
|
as defined in Section 6.4[c].
|
Maximum Rate:
|
the maximum lawful rate of interest permitted by the State of Alaska.
|
Member:
|
initially, each of the Initial GCI Member and the Initial ACS Member, and any other Person subsequently admitted to the Company as an additional or substitute member in accordance with the terms of this Agreement.
|
Member Approval Request:
|
as defined in Section 6.4.
|
Member Carrier:
|
as defined in the Facilities and Network Use Agreement.
|
Member Carrier Customer:
|
as defined in the Facilities and Network Use Agreement.
|
Member Network Capacity
|
Purchases:
|
as defined in Section 9.6[a].
|
Member Nonrecourse Debt:
|
any Nonrecourse Liability of the Company for which any Member or related Person bears the economic risk of loss under Regulations § 1.752-2 within the meaning of Regulations § 1.704-2(b)(4).
|
Member Nonrecourse Deductions:
|
Company losses, deductions or Code § 705(a)(2)(B) expenditures attributable to a particular Member Nonrecourse Debt. The amount of Member Nonrecourse Deductions for any Fiscal Year or other period will be determined in accordance with the provisions of Regulations § 1.704-2(i)(2).
|
Member’s Assumed Share:
|
as defined in Section 14.8[c][ii].
|
Minimum Gain:
|
the minimum gain attributable to Member Nonrecourse Debt as determined under Regulations § 1.704-2(i)(3).
|
Minimum Required FCF Projection:
|
the minimum threshold amount of FCF that must be projected to be achieved in a given Plan in order for such Plan not to be subject to unanimous Board approval pursuant to any paragraph of Section 7.4.
|
Minimum Required FCF Results:
|
the minimum threshold amount of FCF that must be achieved by the Company in a given period in order for a given Plan not to be subject to unanimous Board approval pursuant to any paragraph of Section 7.4.
|
Net ACS [***] Connection
|
Adjustment:
|
as defined in Section 9.4[c][iii].
|
Net ACS Connection Maintenance
|
Adjustment:
|
as defined in Section 9.5[a][v].
|
Net GCI [***] Connection
|
Adjustment:
|
as defined in Section 9.4[c][iv].
|
Net GCI Connection Maintenance
|
Adjustment:
|
as defined in Section 9.5[a][vi].
|
Net Income and Net Loss:
|
for each Fiscal Year, [i] the excess of the Income for such period over the Loss for such period, or [ii] the excess of the Loss for such period over the Income for such period, respectively, but Net Income and Net Loss for a Fiscal Year will be computed by excluding from such computation any Income or Loss specially allocated under Sections 4.2 through 4.12 (including, for the avoidance of doubt, Contributed Asset Depreciation), any Nonrecourse Deductions, and any Member Nonrecourse Deductions.
|
Non-Investing Member:
|
as defined in Section 9.1[d].
|
Nonrecourse Deductions:
|
Losses, deductions or Code § 705(a)(2)(B) expenditures attributable to Nonrecourse Liabilities of the Company. The amount of Nonrecourse Deductions for any Fiscal Year or other period will be determined in accordance with the provisions of Regulations § 1.704-2(c).
|
Nonrecourse Liability:
|
a nonrecourse liability as defined in Regulations § 1.752-1(a)(2) and referred to in Regulations § 1.704-2(b)(3).
|
Non-Requesting Member:
|
as defined in Section 9.7[d].
|
Notice:
|
as defined in Section 16.12.
|
Offer:
|
as defined in Section 14.9[b].
|
Officers:
|
as defined in Section 6.2[b].
|
Option 2:
|
as defined in Section 9.1[b].
|
Ownership Interest:
|
with respect to any Person, all of the limited liability company interests of the Company owned by such Person, including an interest in the Income and Losses of the Company, a Capital Account interest, and all management rights, voting rights, rights to consent and other rights of such Person in and to the Company as provided in this Agreement and the Act, together with all obligations of such Person to comply with the terms of this Agreement and the Act.
|
Permitted Transferee:
|
a Person described in Section 14.3 to whom an Ownership Interest may be Transferred.
|
Person:
|
an individual, corporation, partnership, limited liability company, trust, unincorporated organization, association or other entity.
|
Plan(s):
|
one or more of an Annual Budget, Four Year Plan or Revised Four Plan, as applicable.
|
Preference Period:
|
[a] if the Effective Date is on the first day of a calendar quarter, the 16 calendar quarters beginning on the Effective Date, and [b] if the Effective Date is not on the first day of a calendar quarter, the Preference Period Partial First Quarter, the Preference Period Full Quarters and the Preference Period Last Quarter, collectively.
|
Preference Period Full Quarters:
|
if the Effective Date is not on the first day of a calendar quarter, the 15 full calendar quarters beginning on (and including) the first day of the first full calendar quarter beginning after the Effective Date and ending on (but excluding) the first day of the Preference Period Last Quarter.
|
Preference Period Last Quarter:
|
if the Effective Date is not on the first day of a calendar quarter, the calendar quarter beginning on the first day of the calendar quarter after the end of the last Preference Period Full Quarter.
|
Preference Period Partial
|
First Quarter:
|
if the Effective Date is not on the first day of a calendar quarter, the period of time beginning on (and including) the Effective Date and ending on (but excluding) the first day of the first calendar quarter after the Effective Date.
|
Preference Period Partial
|
First Quarter Days:
|
the number of days in the Preference Period Partial First Quarter.
|
Private WiFi:
|
any WiFi service that is not Public WiFi.
|
Proceeding:
|
any suit, action, proceeding, arbitration, audit, hearing, or investigation (in each case, whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority.
|
Professional Services:
|
as defined in the GCI Services Agreement.
|
Professional Services Guidelines:
|
the terms and conditions on which GCI Communication Corp. is permitted to provide Professional Services to the Company, as set forth on Exhibit C to the GCI Services Agreement.
|
Public WiFi:
|
any WiFi service established and owned by the Company that is provided to the Member Carriers for use by the Member Carrier Customers on their Wireless Devices, and is password protected or has other secure authentication protocols established and managed by the Company.
|
Purchasing Member:
|
as defined in Section 14.9[c].
|
Reallocated Actual FCF Amount:
|
as defined in Section 7.5[b].
|
Reallocated Amount:
|
as defined in Section 7.5[b].
|
Reallocated Projected FCF Amount:
|
as defined in Section 7.5[a].
|
Receiving Party:
|
as defined in Section 16.20.
|
Recommended Changes:
|
as defined in the Arbitration Agreement.
|
Redetermined Recommended Changes:
|
as defined in the Arbitration Agreement.
|
Regulations:
|
the Treasury Regulations (including temporary or proposed regulations) promulgated under the Code, as amended from time to time (including corresponding provisions of succeeding regulations).
|
Related Party:
|
as defined in Section 7.3[d].
|
Remaining Member:
|
as defined in Section 14.10[b].
|
Requesting Member:
|
as defined in Section 9.7[a].
|
Requesting Member’s Cost:
|
as defined in Section 9.7[c].
|
Required 704(b) Adjustment Notice:
|
as defined in Section 3.4.
|
Restricted Wireless Business:
|
the business of [a] engineering, operating and maintaining competitive Wireless network(s) in Alaska, and [b] providing Wireless products (including Wireless Devices) and services in the State of Alaska on any basis, including entering into Wireless roaming agreements. For the avoidance of doubt, the Restricted Wireless Business does not include engineering, providing and maintaining competitive Wireless Backhaul and Transport services for the benefit of Wireless carriers serving the Alaska market, or providing competitive cell site leases.
|
Revised Four Year Plan:
|
as defined in Section 7.3[b][ii].
|
Right of First Offer:
|
as defined in Section 14.9[b].
|
ROFO Assets:
|
as defined in Section 14.9[a].
|
ROFO Notice:
|
as defined in Section 14.9[a].
|
ROFO Period:
|
as defined in Section 14.9[b].
|
SAE Cure Period:
|
as defined in Section 9.4[d].
|
Sale Notice:
|
as defined in Section 14.8[a].
|
Satellite Capacity Services:
|
as defined in the GCI Services Agreement.
|
Satellite Capacity Services Guidelines:
|
the terms and conditions on which GCI Communication Corp. is permitted to provide Satellite Capacity Services to the Company, as set forth on Exhibit D to the GCI Services Agreement.
|
Second Four Year Plan:
|
as defined in Section 7.3[c].
|
Service Area Elimination:
|
any Intentional Service Area Elimination or Unintentional Service Area Elimination.
|
Service Area Elimination
|
Company Notice:
|
as defined in Section 9.4[d].
|
Service Area Elimination
|
Member Notice:
|
as defined in Section 9.4[d].
|
Service Area Elimination Percentage:
|
as defined in Section 9.4[d].
|
Standard of Care:
|
as defined in Section 10.5[a].
|
Subsidiary:
|
of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person or by another Subsidiary of such first Person.
|
Tag Along Notice:
|
as defined in Section 14.8[a].
|
Tag Along Right:
|
as defined in Section 14.8[a].
|
Tag/Drag Sale:
|
as defined in Section 14.8[a].
|
Tax Matters Partner:
|
as defined in Section 11.9.
|
Third Party:
|
a Person that is not a Member, the Company, an Affiliate of either, or an officer or director of any of the foregoing.
|
Third Party Purchaser:
|
as defined in Section 14.8[a].
|
Third Party Purchaser Sale Period:
|
as defined in Section 14.9[d].
|
Transaction Agreements:
|
as defined in Section 16.22[a].
|
Transfer:
|
a direct or indirect sale, exchange, assignment, transfer, transfer upon or in lieu of foreclosure, or other disposition (whether voluntary, involuntary or by operation of law, including pursuant to a merger of the Company), and includes any transaction that results directly or indirectly in a change in Control of a Member or a transfer of more than 50% of the direct or indirect beneficial ownership of a Member to a Person that is not an Affiliate of such Member, including a spin-off or split-off, however structured; provided, however, that in no event shall any issuance, transfer, conversion or exchange of ACS or GCI securities (other than a tracking stock, spin-off or split-off that directly or indirectly separates the Equity Interests from any substantial portion of the other assets and liabilities of ACS or GCI) or any change in Control of ACS or GCI, in each case by merger, consolidation or otherwise, be a “Transfer” for purposes of this Agreement.
|
Transferee:
|
a Person to whom an Ownership Interest is Transferred in compliance with this Agreement, who will have the rights specified in Section 14.5.
|
Transferor:
|
a Person who Transfers an Ownership Interest in compliance with this Agreement.
|
Unintentional Service
|
Area Elimination:
|
as defined in Section 9.4[d].
|
Unpaid ACS Preferred
|
Distribution Amount:
|
as defined in Section 14.8[c][i].
|
Vote:
|
an action of the Company by the Members in accordance with Article 8.
|
WiFi:
|
any wireless local area network technology that is based on the Institute of Electrical and Electronics Engineers’ (IEEE) 8.02.11 standards.
|
Wireless:
|
[i] Commercial Mobile Radio Services (as defined by the Communications Act and the rules and regulations thereunder), [ii] Public WiFi and [iii] any additional mobile voice, text messaging and data products and services provided over wireless spectrum licensed or authorized for use by the FCC other than, in the case of clause [iii], any such products or services provided by satellite directly to Wireless Devices.
|
Wireless Backhaul and Transport:
|
capacity to carry and support voice and data traffic between [i] a cell site and [ii] a switch and a Wireless network (for voice) or the nearest Internet peering point (for data) to a carrier of Wireless service.
|
Wireless Business:
|
as defined in Section 2.1[a].
|
Wireless Device:
|
Wireless phones, Wireless iPads and similar Wireless tablet devices, Wireless routers and other devices used to transmit and receive voice, data and text by means of Wireless services.
|
Wireless Parent:
|
in relation to the Initial ACS Member, ACS, in relation to the Initial GCI Member, GCI, and in relation to any other Person, the Person that controls such Person’s and its Affiliates’ provision of Wireless products (including Wireless Devices) and services in the State of Alaska.
|
Withdrawal:
|
the occurrence of an event that terminates membership in the Company, as provided in Section 12.2.
|
Working Capital:
|
Current Assets minus Current Liabilities.
|
[a]
|
For purposes of determining Fair Market Value under subparagraph [a] of the definition of Fair Market Value, [***], within ten days following the end of the 15-day period specified in subparagraph [a] of the definition of Fair Market Value for the Members to agree on a determination of Fair Market Value (a “Fair Market Value Determination Date”), the Members shall appoint an Independent Appraiser mutually acceptable to the Members. If the Members are unable to mutually agree on an Independent Appraiser within ten days following a Fair Market Value Determination Date, then within five Business Days thereafter each of the GCI Member and the ACS Member shall submit a list of two names of qualified appraisers as such Member’s nominees for the Independent Appraiser. If either the GCI Member or the ACS Member does not submit a list of nominees for the Independent Appraiser within the required time period, then the Member that did not submit a list on a timely basis may select the Independent Appraiser from the list submitted by the other Member within five Business Days after such list is submitted and if that does not occur within the required time period, then the Member that submitted its list on a timely basis may select the Independent Appraiser from its list. If both the GCI Member and the ACS Member submit their lists within the required time period and the same name appears on both lists, that Person shall become the Independent Appraiser. If two names are common to both lists, and the Members are unable to agree as between such designees within five Business Days after such lists are submitted, the Members shall request that the Chief Executive Officer of the American Society of Appraisers (the “ASA”) make such selection, which will be binding on the Members. If no Person is named on both lists, either Member can notify the other Member within five Business Days after such lists are submitted that it is willing to select a Person named on the other’s list, in which case the first such Person selected becomes the Independent Appraiser. If no Independent Appraiser is selected by this process, each of the GCI Member and the ACS Member shall submit a new list of two names of qualified appraisers (without duplication of a name identified on the prior list submitted by such Member) as its nominees, which second list shall be submitted on the date that is not more than ten Business Days after the original submission date. If either the GCI Member or the ACS Member does not submit its second list within the required time period, then the same process shall apply as would apply if a Member did not submit its initial list in a timely manner. If no common name appears on such second lists and neither Member notifies the other that a name on the other’s list is acceptable to it within five Business Days after such second lists are submitted, each Member shall designate one name from the other Member’s list to be removed from consideration within five Business Days after such second lists are submitted and the Members shall request the ASA to select the Independent Appraiser from the remaining two names, which selection shall be binding on the Members. If the Independent Appraiser selected by this process is unwilling or unable to proceed, then the Members will repeat the foregoing process until an Independent Appraiser who is willing to act is selected.
|
[b]
|
Within 30 days following such appointment, the Independent Appraiser shall determine Fair Market Value utilizing commonly used valuation methods and practices. The decision of the Independent Appraiser shall be binding and conclusive on the Members and the Company. The GCI Member on the one hand, and the ACS Member, on the other hand, shall each pay 50% of the fees and expenses of the Independent Appraiser.
|
[a]
|
For purposes of determining Fair Market Value under this Agreement for purposes of determining the [***], within ten days following the end of the Fair Market Value Determination Date, each Member shall select an Independent Appraiser and notify the other Member of its selection. If a Member fails to so appoint an Independent Appraiser within such time period, the Independent Appraiser appointed by the other Member will determine Fair Market Value, utilizing commonly used valuation methods and practices, which determination will be binding and conclusive on the Members.
|
[b]
|
If both the GCI Member and the ACS Member timely appoint an Independent Appraiser pursuant to Section 1.12[a], each of the GCI Member and the ACS Member shall cause its selected Independent Appraiser to deliver to the parties within 30 days of its selection its determination of Fair Market Value utilizing commonly used valuation methods and practices. If the lower valuation is at least 90% of the higher valuation, then the Fair Market Value, which will be binding and conclusive on the Members, will be the average of the two valuations.
|
[c]
|
If the lower valuation is less than 90% of the higher valuation, and if neither Member objects in writing to the other’s valuation within 5 Business Days of delivery of the determination of Fair Market Value by each Independent Appraiser pursuant to Section 1.12[b], then the Fair Market Value will be the average of the two valuations. If the lower valuation is less than 90% of the higher valuation and if either Member objects in writing to the other’s valuation within the five Business Day period referenced in the preceding sentence, then the GCI Member and the ACS Member will request their respective Independent Appraiser to jointly appoint a third Independent Appraiser. If the first two Independent Appraisers cannot agree on a third Independent Appraiser within ten Business Days after being requested to do so, then either Member may request the ASA to make the selection, which will be binding on the Members.
|
[d]
|
Within 15 days after the appointment of the third Independent Appraiser, the third Independent Appraiser will deliver its determination of Fair Market Value, and the Fair Market Value will be the valuation determined by one of the first two Independent Appraisers that is closest to the valuation determined by the third Independent Appraiser, which will be binding and conclusive on the Members.
|
[e]
|
Each of the GCI Member, on the one hand, and the ACS Member, on the other hand, shall pay [i] all of the fees and expenses of the Independent Appraiser selected by it pursuant to Section 1.12[a] and [ii] 50% of the fees and expenses of the third Independent Appraiser selected pursuant to Section 1.12[c].
|
[a]
|
Subject to the provisions of this Agreement, the business and sole purpose of the Company is to [i] own and operate the assets contributed to the Company by the Initial GCI Member and the Initial ACS Member pursuant to the Contribution Agreement, [ii] engineer, operate and maintain competitive Wireless network(s) in Alaska, [iii] design and implement competitive plans for the provision of Wireless products (including procuring and reselling Wireless Devices) and services, and provide such plans to Wireless carriers on a wholesale basis as provided in this Agreement, that permit the Members to compete with other facilities-based Wireless carriers in providing voice, data and text services, [iv] engineer, provision and maintain competitive Wireless Backhaul and Transport services for the benefit of the Company and other Wireless carriers serving the Alaska market solely for Wireless Devices, [v] provide competitive cell site leases, [vi] enter into Wireless roaming agreements, [vii] support the Members in maintaining their respective eligible telecommunications carrier designations, and [viii] to the extent related to the foregoing, support the Members and their Affiliates in complying with their regulatory obligations (collectively, the “Wireless Business”). Except as otherwise provided in Section 2.1[b], the Company will not engage in any activity or business other than the Wireless Business.
|
[b]
|
The Company may engage in any business or investment activity not provided in Section 2.1[a] subject to [i] obtaining the affirmative Vote of all Members and unanimous approval of the Board, and [ii] any limitations in the Act on the businesses in which a limited liability company may engage.
|
[a]
|
On the Effective Date, the Members have made the Capital Contributions to the Company set forth on the attached Exhibit B (each, an “Initial Capital Contribution”).
|
[b]
|
No Member will be required, and no Member will have any right, except as provided in Section 3.11, to make any Additional Capital Contribution at any time, except as may be required by law [***].
|
[a]
|
Credited with [i] the amount of money contributed by the Member as an Initial Capital Contribution or Additional Capital Contribution, [ii] the Fair Market Value of property contributed by the Member as an Initial Capital Contribution or Additional Capital Contribution (net of liabilities that the Company assumes or takes property subject to), [iii] the Member’s allocable share of Net Income, and [iv] all other items properly credited to such Capital Account, including any Income or items thereof allocated to such Member under Sections 4.2 through 4.12;
|
[b]
|
Charged with [i] the amount of money distributed to the Member by the Company, [ii] the Fair Market Value of property distributed to the Member by the Company (net of liabilities that the Member assumes or takes subject to), [iii] the Member’s allocable share of Net Losses, and [iv] all other items properly charged to such Capital Account, including any Losses or deductions specially allocated to such Member under Sections 4.2 through 4.12; and
|
[c]
|
Otherwise adjusted as required by the § 704(b) Regulations.
|
[a]
|
On the Effective Date, GCI and the Company are entering into a Working Capital Loan Agreement in the form attached to the Contribution Agreement as Exhibit B (the “GCI Working Capital Loan”).
|
[b]
|
The Company shall, and ACS, GCI and the Members shall cause the Company to, use its reasonable best efforts to obtain a senior revolving credit facility from a third-party lender (that is not an Affiliate of any Member) to be in place at the start of the Amortization Period on commercially reasonable terms, in the principal amount of up to $50 million, which will be used solely to fund the Company’s ongoing Working Capital needs and to repay the GCI Working Capital Loan (the “Company Working Capital Loan”). Upon closing the Company Working Capital Loan, the Company will draw down funding on the Company Working Capital Loan in an amount sufficient to repay the GCI Working Capital Loan in full.
|
[a]
|
Upon delivery of any Exercise Notice (as defined in the GCI Working Capital Loan) to the Members, each Member may offer to make a capital contribution to the Company as set forth in Section 3.11[b] to cure the Event of Default (under and as defined in the GCI Working Capital Loan) by sending a written notice (a “Cure Offer”) to the Company and the Lender (under and as defined in the GCI Working Capital Loan) no later than 15 Business Days after receipt of the Exercise Notice (the “Cure Offer Period”). Cure Offers shall be irrevocable, and, to the extent such Cure Offers are accepted by the Company pursuant to Section 3.11[b], the Members shall be bound and obligated to make the capital contributions as set forth in Section 3.11[b].
|
[b]
|
If both Members deliver a Cure Offer during the Cure Offer Period, the Company will promptly provide written acceptance to the Members of the Cure Offers, and ACS Member will make a cash contribution to the Company on or prior to the twentieth Business Day following delivery of the Exercise Notice (the “Cure Date”) equal to one-third of the Company’s outstanding obligations under the GCI Working Capital Loan as of the Cure Date by paying such amount to the Lender on behalf of the Company by wire transfer of immediately available funds to the Lender. On the Cure Date, subject to receipt by the Lender of such payment by the ACS Member on behalf of the Company on or prior to the Cure Date, the remaining obligations of the Company under the GCI Working Capital Loan will be forgiven in a deemed capital contribution by the GCI Member equal to two thirds of the outstanding obligations under the GCI Working Capital Loan as of the Cure Date.
|
[c]
|
If one or both Members do not deliver a Cure Offer during the Cure Offer Period, the Company will promptly provide written rejection of any Cure Offer made, no capital contributions will be payable or permitted to be made by the Members under this Section 3.11, and the rights of the Members under this Section 3.11 to cure the related Event of Default under the GCI Working Capital Loan will be deemed waived. Nothing in this Section 3.11[c] shall be deemed to waive any of the ACS Member’s rights under Section 6.5(c) of the GCI Working Capital Loan.
|
[a]
|
Net Income for such Fiscal Year will be allocated as follows:
|
[i]
|
first, an amount of Net Income equal, and in proportion, to the Distributions made to each Member pursuant to Section 5.1 with respect to such Fiscal Year will be allocated to such Member; and
|
[ii]
|
second, any remaining Net Income will be allocated to the Members in proportion to their Equity Interests.
|
[b]
|
Net Loss for such Fiscal Year will be allocated to the Members in proportion to their Equity Interests.
|
[c]
|
Notwithstanding anything in this Agreement to the contrary, any Income or Loss arising from an adjustment to the Book Value of the Company assets under clause [b] of the definition of Book Value shall be allocated among the Members in accordance with Section 4.1[a][ii].
|
[a]
|
First, to the ACS Member, an amount equal to the excess of [i] the cumulative amount of the ACS Preferred Distributions for the period beginning on the Effective Date and ending on the last day of such calendar quarter over [ii] all Distributions previously made to the ACS Member pursuant to this Section 5.1[a], subject to adjustment pursuant to Section 9.4;
|
[b]
|
Second, to the GCI Member, an amount equal to 100% of Adjusted FCF for such calendar quarter in excess of amounts distributed to the ACS Member for such calendar quarter pursuant to Section 5.1[a] for each calendar quarter (including the Preference Period Partial First Quarter, if any) during the Preference Period (but excluding the Preference Period Last Quarter, if any), subject to adjustment pursuant to Section 9.4;
|
[c]
|
Third, for the Preference Period Last Quarter, if any (and, for the avoidance of doubt, after any Distributions for the Preference Period Last Quarter to be made to the ACS Member pursuant to Section 5.1[a] are made), an amount equal to the ACS Preference Period Last Quarter Distribution to the ACS Member and an amount equal to the GCI Preference Period Last Quarter Distribution to the GCI Member, in each case, if any, and subject to adjustment pursuant to Section 9.4;
|
[d]
|
Fourth, to the ACS Member, an amount equal to the excess of [i] the cumulative amount of the Reallocated Amount as of the date of such Distribution over [ii] all Distributions previously made to the ACS Member pursuant to this Section 5.1[d];
|
[e]
|
Fifth, to the GCI Member, an amount equal to the excess of [i] the excess of [x] the aggregate Clawback Amount over [y] [1] the Minimum Required FCF Results for such Fiscal Year divided by four, multiplied by [2] the Equity Interest of the ACS Member over [ii] all Distributions previously made to the GCI Member pursuant to this Section 5.1[e]; and
|
[f]
|
Sixth, to the Members in accordance with their respective Equity Interests, subject to adjustment pursuant to Section 9.4 or Section 9.5.
|
[a]
|
Except as otherwise expressly provided in this Agreement, the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Members.
|
[b]
|
Subject to the provisions of the Act and the obligations and limitations imposed upon it by this Agreement, and except as otherwise provided in this Agreement (including Sections 6.3 and 6.4) and in the applicable Plans adopted pursuant to this Agreement, the Members by Majority Vote have the right, power and authority to do (or cause to be done) any and all things necessary, proper, convenient or advisable to administer and carry on the business, properties and activities of the Company in their discretion. Except as otherwise provided in this Agreement, no Person dealing with the Company will be required to inquire into the authority of the Members by Majority Vote to take any action or make any decision. Except as specifically provided for in this Agreement, no Member will have the power to sign documents for or otherwise bind the Company, which power to sign documents for or otherwise bind the Company shall be vested solely in, and shall be exercised solely by, the CEO and the Officers.
|
[c]
|
The GCI Member shall cause its senior executive officers to provide consulting services to the CEO and other senior Officers of the Company with respect to high-level strategy decisions regarding legal, regulatory and finance matters. In exchange for such services (which, for the avoidance of doubt, will not be billed pursuant to the GCI Services Agreement), the Company will pay a consulting fee to the GCI Member (the “Consulting Fee”). The Consulting Fee will be paid quarterly, in arrears, in the following amounts (it being understood that the Consulting Fee will be pro rated for any calendar quarter in which the GCI Member does not own any Equity Interests or provide such services for the whole calendar quarter):
|
[i]
|
4% of FCF from the Effective Date through the second anniversary of the Effective Date;
|
[ii]
|
6% of FCF after the second anniversary of the Effective Date through the fourth anniversary of the Effective Date; and
|
[iii]
|
8% of FCF after the fourth anniversary of the Effective Date.
|
[d]
|
The Consulting Fee will be paid concurrently with the Distributions to the Members as provided in Section 5.1 and will be trued up each quarter to reflect any adjustments made to FCF with respect to any calendar quarter after the Consulting Fee related to such quarter has been paid. The Consulting Fee will be paid prior to making any Distributions to the Members pursuant to Article 5.
|
[e]
|
The Company will treat the Consulting Fee for federal income tax purposes as a guaranteed payment under § 707(c) of the Code.
|
[a]
|
The responsibility for the day-to-day operations of the Wireless Business is hereby delegated, subject to the ultimate control of the Members (including Sections 6.3 and 6.4), and in accordance with the applicable Plans adopted pursuant to this Agreement, to a Chief Executive Officer (the “CEO”). The initial CEO will be Wilson Hughes. The CEO will serve at the pleasure of the Members and may be removed at any time, with or without Cause, by Majority Vote. If the ACS Member reasonably believes that Cause to remove the CEO exists and the CEO has not been removed, the ACS Member may send written notice to the GCI Member specifying in reasonable detail the basis for which the ACS Member believes that Cause exists and the Members shall, by Majority Vote, remove the CEO if it is finally determined either by Majority Vote or pursuant to the dispute resolution provisions provided for in Article 15 that Cause to remove the CEO exists. As specified in Section 11 of the Arbitration Agreement, if the Arbitrator determines in a proceeding initiated by the ACS Member that [i] Cause to remove the CEO does not exist, the ACS Member will pay the Company’s and the GCI Member’s Individual Fees and Expenses and any Arbitrator’s Expenses paid by such Persons in connection with such claim or [ii] Cause to remove the CEO does exist, the GCI Member will pay the Company’s and the ACS Member’s Individual Fees and Expenses and any Arbitrator’s Expenses paid by such Persons in connection with such claim. Any successor CEO to be appointed as a result of the resignation or removal of the CEO will be appointed by Majority Vote, subject to the approval rights set forth in Section 6.4[k]. The CEO will devote the CEO’s full business time, attention and effort to the affairs of the Company and its Subsidiaries.
|
[b]
|
The CEO may from time to time appoint officers of the Company (the “Officers”) and delegate to them the authority and duties to manage the day-to-day operations of the Wireless Business under the supervision of the CEO, subject to Sections 6.3 and 6.4, in accordance with the applicable Plans. Each Officer shall have such duties that are delegated to the Officer by the CEO. Such Officers will take all actions that are necessary and appropriate to conduct the day-to-day operations of the Wireless Business under the supervision of the CEO, subject to the provisions of this Agreement. Each Officer will devote its full business time, attention and effort to the affairs of the Company and its Subsidiaries. Each Officer will serve at the pleasure of the CEO, until such Officer’s resignation or removal or until his or her successor has been duly appointed and qualified.
|
[c]
|
On the Effective Date, the Company will enter into a Services Agreement with GCI Communication Corp. (the “GCI Services Agreement”), substantially in the form of attached Exhibit I, pursuant to which GCI Communication Corp. will provide the Company with specified services.
|
[d]
|
Any performance based compensation for any Dedicated Employees (as defined in the GCI Services Agreement) shall be based solely on the performance of the Company, and not the performance of the GCI Member or any of their Affiliates except for any grants of GCI equity awards to Dedicated Employees for employee retention programs in accordance with the terms of the GCI Services Agreement. GCI shall provide to the ACS Member a written description of any such performance based compensation. The Company’s management incentive plan will be designed to maximize the Company’s competitiveness and meet the Company’s Financial Objectives, and any costs or expenses of the Company thereunder shall be set forth in the applicable Plans of the Company.
|
[e]
|
The Company shall be liable for any severance obligations owed by a Member to any employee of such Member who devotes all or substantially all of his or her business time to providing services to the Company and its Subsidiaries pursuant to an agreement between the Company and such Member; provided that with respect to any such employee who was employed by a Member or its Affiliates immediately prior to the Effective Date, any severance obligations to such employee that include service credit for any period prior to the Effective Date will be shared pro rata by such Member and the Company based on the number of days such Person was an employee of such Member prior to and after the Effective Date. The Company shall not be liable for any severance obligations owed by a Member to any other employee of such Member (regardless of whether such employee provides services to the Company or any of its Subsidiaries).
|
[a]
|
The Company will be governed by a three member executive board (the “Board”) consisting of the Chief Executive Officer of GCI or the GCI Member’s then current Wireless Parent, the Chief Executive Officer of ACS or the ACS Member’s then current Wireless Parent, and the CEO of the Company. By written notice to the Company and the other Member given at least one Business Day prior to a Board meeting, a Board member may designate an alternate Person to participate in a given Board meeting in such Board Member’s stead.
|
[b]
|
The primary function of the Board will be to review and approve the Plans in accordance with the provisions of Article 7 and the other business and technology plans of the Company and its Subsidiaries. In addition, the Board may consider other matters as specifically set forth in this Agreement or as requested by any member of the Board; provided, however, that it is intended that all day-to-day operations of the Company will be carried out by the CEO and the other Officers of the Company. Any member of the Board may request meetings of the Board; provided that the Board is not required to meet more frequently than once during each calendar quarter except in connection with the review and approval of the Plans. At any meeting of the Board, the CEO and other appropriate Officers shall notify and update the Board with respect to the business and affairs of the Company, including any material developments in the business and activities of the Company since the last Board meeting at which such an update was given, and shall notify and update the Board with respect to any major decisions under consideration or expected to be made by the Company.
|
[a]
|
A change in the lines of business of the Company or any of its Subsidiaries beyond, or the expansion of the business of the Company or any of its Subsidiaries beyond, the Wireless Business and related or incidental activities;
|
[b]
|
The admission of an additional Member to the Company, other than a Permitted Transferee of a Member in accordance with Article 14, or a change to the initial Members’ Equity Interests;
|
[c]
|
Incurring, or permitting to exist at any time, any Indebtedness in excess of $5 million in the aggregate (or in any amount from any Member) (“Material Indebtedness”), the granting of a mortgage, deed of trust, pledge or other lien on or security interest in all or any portion of the assets of the Company or any its Subsidiaries to secure the obligations of the Company and its Subsidiaries as debtor under any Material Indebtedness, or guaranteeing the obligations of any other Person other than in the ordinary course of business; provided, however, that [i] the GCI Working Capital Loan and the Company Working Capital Loan shall be deemed to have been approved by the affirmative Vote of all Members and shall not require any additional Vote of the Members (but any material amendments or modifications thereof and any termination thereof that is not in accordance with the terms of the applicable loan agreement shall require the affirmative Vote of all Members in accordance with this Section 6.4), [ii] incurrence of Indebtedness in the ordinary course of business (including vendor financing in connection with purchases of products or construction of facilities) not in excess of $10 million in the aggregate shall not be considered Material Indebtedness requiring the affirmative Vote of all Members, and [iii] incurrence of Indebtedness not in excess of $10 million in the aggregate with a term of less than one year and granting any liens or security interests on any of the Company’s assets in connection therewith shall not be considered Material Indebtedness requiring the affirmative Vote of all Members regardless of amount so long as [x] the Company does not enter into any borrowing arrangement with the intent or expectation that the term of such Indebtedness will be extended, and [y] the Company and its Subsidiaries shall not extend the term of any such Indebtedness beyond one year without obtaining the affirmative Vote of all Members with respect thereto;
|
[d]
|
The sale, exchange or other disposition of all or substantially all the consolidated assets of the Company and its Subsidiaries in any transaction or series of related transactions, or any sale of assets of the Company or any of its Subsidiaries, in one transaction or a series of related transactions, [i] having a Fair Market Value in excess of $5 million in the aggregate in any twelve month period or [ii] that would impair any Member’s ability to meet its carrier of last resort regulatory obligations applicable to local exchange carriers under Alaska law in those exchanges identified by community on Exhibit N-1, with respect to the ACS Member, or Exhibit N-2, with respect to the GCI Member, in the case of each of clauses [i] and [ii] other than the disposition of obsolete assets in the ordinary course of business and other than the sale of IRU and other network capacity, including for Wireless Backhaul and Transport, in the ordinary course of the Wireless Business, it being understood that separate sales of assets shall be aggregated and viewed as a single transaction for purposes of this clause [d] to the extent necessary to effectuate the intent and purpose of this clause [d];
|
[e]
|
The Company or any of its Subsidiaries entering into any [***] pursuant to which the Company or its Subsidiaries will provide [***] to [***], in each case other than the Members [***]; provided, that the consent of the ACS Member will not be unreasonably withheld, delayed or conditioned with respect to any of the foregoing;
|
[f]
|
Any action (including the filing of a U.S. Treasury Form 8832 Entity Classification Election) that would cause the Company to be characterized as an entity other than a partnership for federal income tax purposes or making any other tax elections that would have a material adverse effect on, or affect the tax status of, any Member;
|
[g]
|
The voluntary Dissolution of the Company or any of its Subsidiaries (other than a wholly-owned Subsidiary) or the Distribution of assets in kind to any Member upon Liquidation;
|
[h]
|
The filing of a voluntary petition that results in a Bankruptcy Event for the Company or any of its Subsidiaries;
|
[i]
|
Amending the Certificate or any organizational documents of any Subsidiary of the Company (other than to make any ministerial or administrative changes that would not have a material adverse effect on any Member, such as changing the registered agent or registered office of the Company);
|
[j]
|
The merger, conversion, consolidation or other combination of the Company or any of its Subsidiaries with another Person other than the merger of a wholly-owned Subsidiary of the Company with the Company or another wholly-owned Subsidiary of the Company;
|
[k]
|
The appointment of any successor CEO; provided, however, that the ACS Member agrees to approve at least one individual from a list of three or more qualified individuals with appropriate experience (any or all of whom may be GCI employees) proposed by the GCI Member to be appointed as the successor CEO;
|
[l]
|
Commencing or settling litigation or arbitration that individually, or together with any other related litigation or reasonably foreseeable claim, involves an amount in excess of $5 million, except with respect to a claim by the Company or any of its Subsidiaries against a Member, or entering any plea of guilty or nolo contendere on behalf of the Company or any of its Subsidiaries in any criminal matter;
|
[m]
|
Making any [***] that do not comply with [***];
|
[n]
|
[i] Entering into any agreement or transaction with GCI or ACS or any of their respective Affiliates (“Affiliate Transactions”), other than [v] as specifically set forth in this Agreement, [w] Approved Affiliate Transactions, [x] transactions involving the provision of Professional Services to the Company in accordance with the Professional Services Guidelines and capacity purchases made by the Company from GCI pursuant to the Additional Capacity Purchase Agreement, pursuant to which in the aggregate the Company will pay GCI or its Affiliates $10 million or less in the aggregate in any Fiscal Year; provided, that ACS will not unreasonably withhold its consent to the Company making any additional capacity purchases from GCI pursuant to the Additional Capacity Purchase Agreement, [y] transactions involving the provision of Satellite Capacity Services to the Company in accordance with the Satellite Capacity Services Guidelines, and [z] including the Company in a third-party master services agreement or master purchase agreement or similar contract to which GCI or an Affiliate thereof is also a party, but pursuant to which the Company is treated on an equal basis with GCI or its applicable Affiliates who are party thereto, or [ii] terminating any Affiliate Transaction except in accordance with the terms thereof, or modifying or waiving any material provision of any Affiliate Transaction in a manner that is adverse to the Company;
|
[o]
|
Making any decisions regarding major technology upgrade plans to be implemented by the Company or any of its Subsidiaries in connection with the Wireless Business; provided, however, that the consent of the ACS Member with respect to any major technology upgrade plan related to the Wireless Business of the Company and its Subsidiaries will not be unreasonably withheld, delayed or conditioned;
|
[p]
|
Authorizing, creating, allocating, reserving, issuing or selling any limited liability company interests or any other equity interests or securities, or requesting or accepting any capital contributions in respect of any limited liability company interests or any other equity interests or securities, other than as contemplated by Sections 1.4 and 3.1[a];
|
[q]
|
Redeeming or repurchasing any limited liability company interests or any other equity interests or securities of the Company;
|
[r]
|
Creating any Subsidiary of the Company other than a wholly-owned Subsidiary, or transferring any assets of the Company to any Subsidiary other than a wholly-owned Subsidiary, or entering into any joint venture arrangement;
|
[s]
|
Changing the name of the Company;
|
[t]
|
Lending by the Company, other than supplier and trade receivables in the ordinary course of business;
|
[u]
|
[Intentionally omitted];
|
[v]
|
As provided in the definition of Fair Market Value;
|
[w]
|
Entering into or terminating (except in accordance with the terms of the applicable contract or agreement), or waiving or modifying any material provision of, any contract or agreement to which the Company or any Subsidiary is (intends to become) a party (i) that is not consistent with the Plans in all material respects, or (ii) that includes a financial commitment by the Company or its Subsidiaries in excess of $10 million that would be payable during a period after the end of the current Four Year Plan, in each case excluding backhaul and roaming agreements;
|
[x]
|
Entering into or terminating (except in accordance with the terms thereof), or waiving or modifying any material provision of, the Company Working Capital Loan; provided that such consent shall not be required so long as the Company Working Capital Loan: [1] is secured only by collateral permitted by each Member’s lenders, [2] does not contain any provision that would reasonably be expected to affect the timing or amount of any ACS Preferred Distribution other than restrictions upon the payment of such Distributions upon an event of default under the Company Working Capital Loan; and [3] contains financial covenants that are commercially reasonable;
|
[y]
|
Declaring or paying any non-cash dividend or other Distribution to Members except as specifically set forth in this Agreement; and
|
[z]
|
As provided in Sections 1.6, 2.1[b], 4.13, 7.1[b], 8.1[a], 11.3, 12.1, 13.3 or 14.1[b].
|
[a]
|
Except as otherwise provided in Sections 6.5[a], [b] and [c], each Member, and any Affiliate of any Member may engage in (or own interests in) other business ventures of any nature and description, independently or with others, and neither the Company nor any other Member will have any right by virtue of this Agreement in such business venture or its profits, even if such business venture is in direct competition with the Wireless Business of the Company, and no Member or Affiliate of a Member will have any duty or obligation to bring any such opportunities to the Company or any Member or to inform the Company or any Member regarding any such business venture.
|
[b]
|
Each Member, ACS and GCI each agrees to [***], and ACS and GCI each agree to cause their respective controlled Affiliates to [***]. Unless earlier terminated pursuant to the last sentence of this Section 6.5[b], such obligation will continue in the case of the ACS Member, ACS and any controlled Affiliate of ACS, for so long as an Affiliate of ACS is a Member or Transferee. Unless earlier terminated pursuant to the last sentence of this Section 6.5[b], such obligation will continue in the case of the GCI Member, GCI and any controlled Affiliate of GCI, for so long as an Affiliate of GCI is a Member or Transferee. The obligations under this Section 6.5[b] will terminate as to both Members, ACS, GCI and their respective Affiliates [***]. This Section 6.5[b] shall not apply to ACS or any of its Affiliates with respect to any [***] in respect of which the Company has exercised [***].
|
[c]
|
Following the Transfer of a Member’s or Transferee’s Ownership Interest, such Member or Transferee agrees that neither it nor its Affiliates (which in the case of the Initial ACS Member includes ACS and its Affiliates and in the case of the Initial GCI Member includes GCI and its Affiliates) [***] in the State of Alaska for a period of [***] after the date of such Transfer (other than as required to meet [***] of such Person applicable to [***]). Notwithstanding the foregoing, if the Transfer of an Ownership Interest is made [i] pursuant to a [***] in which the GCI Member has exercised its [***], the foregoing restriction in this clause [c] shall apply for the lesser of [***] by such restrictions for the benefit of the [***] or [ii] pursuant to the exercise of a CTE Put Right, the foregoing restriction in this clause [c] shall not apply to either Member following exercise of such CTE Put Right.
|
[d]
|
Nothing in this Agreement, including this Section 6.5, shall prevent ACS or GCI, or any of their respective Affiliates, from providing Private WiFi or wireless internet service provider (WISP) services.
|
[a]
|
To the maximum extent feasible in light of Changing Market Conditions, the Company will be operated in accordance with its Annual Budgets and Four Year Plan or Revised Four Year Plan.
|
[b]
|
The Company will take into account the objectives described in this Section 7.1[b] (the “Financial Objectives”) in connection with its adoption of Annual Budgets, Four Year Plans and Revised Four Year Plans. The Company will seek to maximize the total value of the Company as measured by the [***] of its [***]. To the extent possible, the Company will strive to achieve this objective while providing [***] and [***] for [***] to [***] Members. The Company will recognize that the [***] of the Company’s [***] available for [***] Members is important and, while not an absolute requirement, the Company will seek to avoid making total [***] in any Fiscal Year that suppress the Company’s [***] by more than [***]% without the unanimous Vote of the Members. To the extent that alternative Four Year Plans would provide [***], the Company will prefer the Plan that provides the Company [***] and/or more [***] near term [***].
|
[a]
|
The Four Year Plan for Fiscal Years 2013 through 2016 is attached to this Agreement as Exhibit F (as the same may be revised pursuant to Article 7, the “Initial Four Year Plan”).
|
[b]
|
The Annual Cap Ex Budget for Fiscal Year 2013 is attached to this Agreement as Exhibit G (the “First Year Cap Ex Budget”), and the Annual Operating Budget for Fiscal Year 2013 is attached to this Agreement as Exhibit H (the “First Year Operating Budget” and, together with the First Year Cap Ex Budget, the “First Year Budgets”).
|
[c]
|
If the Effective Date occurs prior to January 1, 2013, the CEO will prepare operating and capital expenditures budgets for the remainder of Fiscal Year 2012, which budgets will be generally consistent with the Plans attached to this Agreement as Exhibits F, G and H, taking into account that the operations of the Company have been accelerated to start in Fiscal Year 2012.
|
[d]
|
If the Effective Date occurs after January 1, 2013 but during Fiscal Year 2013, the CEO will prepare a revised Initial Four Year Plan so that it covers the period from the Effective Date through December 31, 2016 and will prepare revised First Year Budgets so that they cover the period from the Effective Date through December 31, 2013, which revised Plans will be generally consistent with the Plans attached to this Agreement as Exhibits F, G and H, taking into account that Fiscal Year 2013 will be a partial year.
|
[a]
|
Not later than June 1 of each Fiscal Year, beginning with June 1, 2013, the Company will provide each Member with a projection of products and services it plans to provide in the next Fiscal Year, including any underlying assumptions. Not later than July 1 of each Fiscal Year, beginning with July 1, 2013, each Member will provide the Company with its projection determined in good faith and on a reasonable basis of its Connections and ARPUs for the following Fiscal Year in sufficient detail to allow the Company to incorporate such information into its Annual Budgets for the following Fiscal Year.
|
[b]
|
The Company will prepare, in consultation with the Board, and deliver to the Board not later than July 15 of each Fiscal Year beginning with July 15, 2013:
|
[i]
|
an Annual Operating Budget and an Annual Cap Ex Budget for the following Fiscal Year, based on the projections of Connections and ARPUs for such Fiscal Year submitted by the Members; and
|
[ii]
|
a revised Four Year Plan (including any revised Initial Four Year Plan, a “Revised Four Year Plan”) that reflects appropriate revisions based on such proposed Annual Budgets and Changing Market Conditions.
|
[c]
|
On July 15, 2016 and on each four year anniversary of such date, the Company will also prepare and deliver to the Board a new Four Year Plan that begins with the following Fiscal Year, which will be based on past performance of the Company, any projections of Connections and ARPUs submitted by the Members and market conditions. For example, on July 15, 2016 the Company will prepare and deliver to the Board a Four Year Plan that covers Fiscal Years 2017 through 2020 (the “Second Four Year Plan”) and on July 15, 2020, the Company will prepare and deliver to the Board a Four Year Plan that covers Fiscal Years 2021 through 2024.
|
[d]
|
Board members may consult with any employee or agent of their respective Affiliates (including such Affiliates, a “Related Party”) in connection with such Board member’s review and consideration of any proposed Plan and may request additional information from the Company in connection with such review and consideration. The provision by a Board member of Company information to a Related Party in connection with the Board member’s review and consideration of any proposed Plan is subject to the Commercially Sensitive Information Policies and Procedures and such Related Party must treat all information provided to it as confidential information that is subject to the provisions of Section 16.20. The GCI Member will be responsible for any breach of Section 16.20 by one of its Related Parties in relation to information provided to it pursuant to this Section 7.3[d], and the ACS Member will be responsible for any breach of Section 16.20 by one of its Related Parties in relation to information provided to it pursuant to this Section 7.3[d].
|
[e]
|
Except as provided in Section 7.4, no Plan (other than the Initial Four Year Plan and the First Year Budgets) will become effective unless and until it is approved by majority vote of the Board. The Board will hold a meeting no later than November 1 of each Fiscal Year for the purpose of voting on each Plan proposed by the Company during such Fiscal Year pursuant to Section 7.3[b] or Section 7.3[c].
|
[f]
|
If pursuant to Section 7.4 the unanimous approval of the Board is required with respect to any proposed Plan, any Board member may deliver Notice to the Company and each other Board member (a “Budget Objection Notice”) no later than August 1 of the Fiscal Year in which it received such Plan, which Notice will specify in reasonable detail the objections that such Board member has, including such Board member’s basis for determining that the disputed Plan does not meet the Financial Objectives. If no Budget Objection Notice is timely delivered with respect to a given Plan, such Plan will be deemed to have been unanimously approved by the Board.
|
[g]
|
If a Budget Objection Notice is timely delivered, the Board members (in consultation with any Officers of the Company as determined by the CEO) will negotiate in good faith to resolve any objections to the Plans specified in such Budget Objection Notice and to revise the disputed Plans in such manner so that they can be adopted by unanimous approval of the Board. If the Board members do not unanimously approve any Plan that is subject to a Budget Objection Notice by August 31 of the Fiscal Year during which such Budget Objection Notice was delivered, then on September 1 the Company will submit all Plans that remain in dispute to the Designated Budget Dispute Arbitrator for determination in accordance with the terms and procedures specified in the Arbitration Agreement with respect to each aspect of the disputed Plans challenged in a Budget Objection Notice (the “Challenged Aspects”) as to whether such Challenged Aspect is inconsistent with the Financial Objectives, taking into account the disputed Plans as a whole, with instructions to the Designated Budget Dispute Arbitrator to make its determination no later than December 1.
|
[h]
|
If the Designated Budget Dispute Arbitrator makes a final determination pursuant to the Arbitration Agreement that one or more Challenged Aspects are inconsistent with the Financial Objectives, taking into account the disputed Plans as a whole, and the Board by majority vote adopts the Designated Budget Dispute Arbitrator’s Recommended Changes, the disputed Plans that included such Challenged Aspects, as revised to fully reflect all the Recommended Changes, shall be deemed approved by unanimous vote of the Board for all purposes of this Agreement. To the extent the Recommended Changes are not made by the Company, then within 30 days following the Designated Budget Dispute Arbitrator’s final determination the Company will revise the disputed Plan and submit the revised Plan to the Board for unanimous approval; provided that if the basis on which a Budget Objection Notice was delivered no longer exists (e.g., a revised Plan meets the Minimum Required FCF Projection) and there exist no other circumstances that would require unanimous Board approval pursuant to Section 7.4, such revised Plan may be approved by majority vote of the Board. If the Designated Budget Dispute Arbitrator issues any Redetermined Recommended Changes pursuant to Section 10(f)(iii) of the Arbitration Agreement, the Company shall make such Redetermined Recommended Changes.
|
[i]
|
If an Annual Operating Budget, Four Year Plan or Revised Four Year Plan is not approved pursuant to this Section 7.3 on or before December 31 of the Fiscal Year during which it was provided to the Board, the Company will conduct operations during the following Fiscal Year in accordance with the Annual Operating Budget, Four Year Plan or Revised Four Year Plan, as applicable, proposed by the Company for such Fiscal Year until such time as a new Annual Operating Budget, Four Year Plan or Revised Four Year Plan, as applicable, is approved; provided, however, that any Member may request that the Designated Budget Dispute Arbitrator determine, within 14 days following such request, if any one-time expense item included in the proposed Annual Operating Budget, Four Year Plan or Revised Four Year Plan, as applicable (a “Disputed Expense”), that has not been approved is unreasonable. Pending the Designated Budget Dispute Arbitrator’s decision, the Company will not incur the Disputed Expense; following such decision, the Company will operate in accordance with the Designated Budget Dispute Arbitrator’s decision regarding the Disputed Expense until such time as a new Annual Operating Budget, Four Year Plan or Revised Four Year Plan, as applicable, is approved. If an Annual Cap Ex Budget is not approved pursuant to this Section 7.3 on or before December 31 of the Fiscal Year during which it was provided to the Board, then until such time as a new Annual Cap Ex Budget is approved, the Company will conduct operations during the following Fiscal Year in accordance with the Annual Cap Ex Budget for the prior Fiscal Year, less extraordinary one-time items.
|
[a]
|
Years 1-4 (Fiscal Years 2013-2016)
|
[i]
|
Unanimous approval of the Board is required with respect to any revised Initial Four Year Plan and any Annual Budget for Fiscal Years 2014 through 2016 if such revised Initial Four Year Plan or Annual Budget provides for a [***] of the Company of [***] in any single Fiscal Year covered by the Initial Four Year Plan or of [***] the [***] over the entire period covered by the Initial Four Year Plan.
|
[b]
|
Years 5-8 (Fiscal Years 2017-2020)
|
[i]
|
Subject to Section 7.5, unanimous approval of the Board is required with respect to an Annual Budget for any of Fiscal Years 2017 through 2020 if such Annual Budget forecasts [***] for such Fiscal Year that is [***] the [***] for the last [***] Fiscal Years of the Initial Four Year Period [***] by [***]% per year.
|
[ii]
|
Subject to Section 7.5, unanimous approval of the Board is required with respect to the Second Four Year Plan or any revised Second Four Year Plan if the Second Four Year Plan or such revised Second Four Year Plan forecasts [***] the [***] for the last [***] Fiscal Years of the Initial Four Year Period [***] by [***]% per year.
|
[iii]
|
Subject to Section 7.5, if [***] for any of Fiscal Years 2017 through 2020 is less than [***] for the last [***] years of the Initial Four Year Period [***] by [***]% per year, then the subsequent Fiscal Year’s Annual Budgets and any revisions to the Second Four Year Plan proposed in connection with such Annual Budgets will require unanimous Board approval.
|
[c]
|
Years 9 and Thereafter (Fiscal Years 2021 and Thereafter)
|
[i]
|
Subject to Section 7.5, if the Annual Budgets proposed by the Company for Fiscal Year 2021 or any Fiscal Year thereafter forecasts [***] that is less than [***]% of the [***] for the last [***] years of the most recent Four Year Plan that does not include such Fiscal Year (e.g., for the Fiscal Year 2021 the applicable Four Year Plan would be the Second Four Year Plan), then such Annual Budgets will require unanimous Board approval.
|
[ii]
|
Subject to Section 7.5, if the Four Year Plan (including any revised Four Year Plan) proposed by the Company for any four year period after the period covered by the Second Four Year Plan forecasts [***] that is less than [***]% of the[***] for the last [***] years of the period covered by the immediately preceding Four Year Plan (e.g., for the four year period from Fiscal Year 2012 through Fiscal Year 2024 the applicable Four Year Plan would be the Second Four Year Plan), then such Four Year Plan (including any revisions thereto) will require unanimous Board approval.
|
[iii]
|
Subject to Section 7.5, if actual FCF for Fiscal Year 2021 or any Fiscal Year thereafter is less than [***]% of the [***] for the last [***] years of the period covered by the immediately preceding Four Year Plan (e.g., for the four year period from Fiscal Year 2021 through Fiscal Year 2024 the applicable Four Year Plan would be the Second Four Year Plan), then the Annual Budgets for the following Fiscal Year and any revision to the then current Four Year Plan will be subject to unanimous Board approval.
|
[a]
|
If unanimous approval of the Board is required with respect to a proposed Plan on the basis that such Plan does not meet the [***], the GCI Member will have the option at any time prior to final approval of such Plan (including after such Plan has been submitted to the Designated Budget Dispute Arbitrator) to agree to [***] of its [***] for each Fiscal Year covered by such Plan that does not include the [***] to the [***] so that the [***] for each Fiscal Year covered by such Plan that does not meet the [***] will be not less than the [***] of [***] that the [***] would receive if FCF for such Fiscal Year were equal to [***] (the “[***]). However, the GCI Member may exercise this option only if the [***] for such Fiscal Year, [***] the [***], would be $[***] or [***] below the [***] of [***] that it would receive if the [***]. The option provided for in this Section 7.5[a] is exercisable by the GCI Member delivering to the ACS Member and the Company, at any time prior to final approval of such Plan, an instrument in writing setting forth in reasonable detail its agreement [***] the [***] the [***], and the Company shall honor and make Distributions consistent with such agreement. If the GCI Member exercises the option provided for in this Section 7.5[a], the Company will be deemed to have met the applicable [***] so that unanimous approval of the Board will not be required with respect to the proposed Plan and such Plan will be deemed to have been approved by majority vote of the Board.
|
[b]
|
If unanimous approval of the Board is required with respect to a proposed Plan on the basis that the Company did not meet the [***] for the preceding Fiscal Year, the GCI Member will have the option at any time prior to approval of such Plan (including after such Plan has been submitted to the Designated Budget Dispute Arbitrator) to agree to [***] a [***] of its [***] for the current Fiscal Year to the [***] so that the [***] for the current Fiscal Year will be increased by an amount equal to the [***] the [***] of the [***] the [***] for the preceding Fiscal Year and the [***] of [***] that the [***] would have received if [***] had been equal to the [***] for such preceding Fiscal Year (the “[***]” and together with the [***], the “[***]”). However, the GCI Member may exercise this option only if the [***] for the preceding Fiscal Year, [***] the [***], were $[***] or [***] below the [***] of [***] that it would have received if the [***] had[***]. The option provided for in this Section 7.5[b] is exercisable by the GCI Member delivering to the ACS Member and the Company, at any time prior to final approval of such Plan, an instrument in writing setting forth in reasonable detail its agreement [***] the ACS Member the applicable [***], and the Company shall honor and make [***] with such agreement. If the GCI Member exercises the option provided for in this Section 7.5[b], the Company will be deemed to have met the applicable [***] for the preceding Fiscal Year so that unanimous approval of the Board will not be required with respect to the proposed Plan and such Plan will be deemed to have been approved by majority vote of the Board.
|
[c]
|
To the extent [***] are [***] to the ACS Member pursuant to this Section 7.5, the [***] the [***] (“[***]”) the [***] of the [***] plus [***] at an [***] of [i] [***] and [ii] the [***] the [***] from [***] the date a [***] of [***] is made to the [***] to (but not including) the date a [***] to the [***] (the “[***]”) in [***] to the extent [***] the [***] that would be required with respect to such Fiscal Year in order for unanimous approval of the Board not to be required pursuant to Section 7.4.
|
[a]
|
The CEO may designate any place within Anchorage, Alaska, or such other city as the Members unanimously agree, as the place for any meeting of the Members.
|
[b]
|
Notice of any meeting of the Members must be given not less than five Business Days nor more than 30 days before the date of the meeting. Such Notice must state the place, day, and hour of the meeting and the purpose for which the meeting is called. Any Member may waive, in writing, any Notice of a meeting of the Members required to be given to such Member, whether before or after the time stated in such Notice. Any Member who signs minutes of action (or written consent or agreement) will be deemed to have waived any required Notice with respect to such action. For the purpose of determining Members entitled to Notice of or to Vote at any meeting of Members, the date on which Notice of the meeting is first given will be the record date for the determination of Members. Any such determination of Members entitled to Vote at any meeting of Members will apply to any adjournment of a meeting.
|
[c]
|
A quorum at any meeting of Members will consist of Members owning more than 75% of the Equity Interests held by all Members. Any meeting of Members at which a quorum is not present may adjourn the meeting to a place, day and hour without further Notice, provided that at such adjourned meeting, the only business that may be conducted are the matters that were set forth in the Notice for the original meeting.
|
[d]
|
If a quorum is present at any meeting of the Members, the affirmative Vote of Members holding a majority of the Equity Interests will be the act of the Members, except with respect to those matters set forth in this Agreement that specifically require the unanimous Vote of the Members; provided that in the case of actions requiring the unanimous Vote of the Members, such act is evidenced by a written consent describing the action taken, signed by all Members.
|
[e]
|
At any meeting of Members, a Member may Vote in person or by written proxy given to another Person. Such proxy must be signed by the Member or by a duly authorized attorney-in-fact and filed with the Company before or at the time of the meeting. No proxy will be valid after 11 months from the date of its signing unless otherwise provided in the proxy. Attendance at the meeting by the Member giving the proxy will revoke the proxy during the period of attendance.
|
[f]
|
The Members may participate in a meeting by means of conference telephone or similar communications equipment by which all Members participating in the meeting can hear each other at the same time. Such participation will constitute presence in person at the meeting and waiver of any required Notice, except when the Member so participates for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
|
[g]
|
Any action required or permitted to be taken at a meeting of Members may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by Members owning total Equity Interests sufficient for the particular action as set forth in Article 6 or as set forth elsewhere in this Agreement. Action so taken is effective when sufficient Members approving the action have signed the consent, unless the consent specifies a later effective date.
|
[h]
|
Except as expressly provided elsewhere in this Agreement, with respect to any action or decision with respect to the Company or its Subsidiaries that does not expressly require the unanimous Vote of the Members in accordance with this Agreement, the GCI Member may make such decision or Vote in favor of or cause such action to be taken without notice, without calling a meeting of the Members and without evidencing such action in a written consent or other writing.
|
[a]
|
Meetings of the Board will be held at the Company’s principal place of business or such other place as all of the members of the Board may agree.
|
[b]
|
Notice of any meeting must be given not less than five Business Days nor more than 30 days before the date of the meeting; provided that the Person calling the meeting reasonably takes into consideration the personal schedules of Board members when scheduling meetings. Such Notice must state the place, day, and hour of the meeting and the purpose for which the meeting is called.
|
[c]
|
Any member of the Board may waive, in writing, any Notice required to be given to such individual, whether before or after the time stated in such Notice. Any member of the Board who signs minutes of action (or written consent or agreement) will be deemed to have waived any required Notice with respect to such action.
|
[d]
|
A quorum at any meeting of the Board will consist of all three members of the Board. All members of the Board will act in good faith and use all reasonable efforts to attend meetings of the Board and to find alternative dates that would allow all members of the Board to participate in a meeting of the Board in order to meet the quorum requirement. Any meeting of the Board at which a quorum is not present may adjourn the meeting to a place, day and hour without further Notice, provided that at such adjourned meeting, the only business that may be conducted are the matters that were set forth in the Notice for the original meeting. If a quorum is present at any meeting of the Board, the affirmative vote of a majority of the members of the Board will be the act of the Board, provided that such act is evidenced by a written consent describing the action taken, signed by a majority of the members of the Board, unless unanimous approval of all members of the Board is required in Article 7 or elsewhere in this Agreement, in which case the affirmative vote of all of the members of the Board will be the act of the Board, provided that such act is evidenced by a written consent describing the action taken, signed by all members of the Board.
|
[e]
|
The members of the Board may participate in a meeting by means of conference telephone or similar communications equipment by which all members of the Board participating in the meeting can hear each other at the same time. Such participation will constitute presence in person at the meeting and waiver of any required Notice, except when the Board member so participates for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
|
[f]
|
Any action required or permitted to be taken at a meeting of the Board may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, signed by all members of the Board.
|
[a]
|
If a Member desires the Company to make a capital investment the cost of which is $[***] or less, such Member (the “Investing Member”) will have the option to send Notice to the Company and the other Member (an “Accelerated Capital Investment Notice”) that it desires the Company to make such capital investment (the “Accelerated Capital Investment”) and specifying its proposed time period and other material terms and conditions for the Accelerated Capital Investment to be made. In [***] a [***] Accelerated Capital Investment Notice [***].
|
[b]
|
Within 30 days following its receipt of an Accelerated Capital Investment Notice, the Company will send Notice to the Investing Member stating either [i] that the Company will make the Accelerated Capital Investment on its own behalf within the time period proposed and on the other material terms and conditions set forth in such Accelerated Capital Investment Notice, or [ii] that the Company will not make the Accelerated Capital Investment within the time period proposed in such Notice but consents to the Investing Member making such Accelerated Capital Investment in accordance with this Section 9.1 (“Option 2”), or [iii] that the Company will not make the Accelerated Capital Investment but does not consent to the Investing Member making such Accelerated Capital Investment; provided, that the Company’s consent pursuant to this Section 9.1[b][iii] may be not be unreasonably withheld; provided further that, without limitation, [x] it will not be unreasonable for the Company to withhold its consent to a proposed Accelerated Capital Investment if such investment is inconsistent with the technology standards or the manufacturer selections of the Company and [y] it will be unreasonable for the Company to withhold its consent to a proposed Accelerated Capital Investment solely on the basis that such investment is not provided in the Plan or has costs that are included in the Investing Member’s Cost.
|
[c]
|
If Option 2 is exercised by the Company, the Investing Member and the Company will enter into an agreement pursuant to which the Company will design, install, integrate and operate the Accelerated Capital Investment at the Investing Member’s expense (the amount so paid by the Investing Member, the “Investing Member’s Cost”), on the terms and conditions set forth in the Accelerated Capital Investment Notice.
|
[d]
|
At any time following completion of an Accelerated Capital Investment pursuant to Section 9.1[c], the non-investing Member (the “Non-Investing Member”) may send Notice to the Investing Member and the Company that the Non-Investing Member also desires to use the Accelerated Capital Investment. If the Non-Investing Member sends such a Notice, the Investing Member and the Non-Investing Member will negotiate in good faith to reach agreement on a reasonable monthly user fee and other terms for access by the Non-Investing Member to the Accelerated Capital Investment. For the avoidance of doubt, the use of any Accelerated Capital Investment by the Investing Member or the Non-Investing Member is subject to the provisions of Section 6.5.
|
[e]
|
The Company will have the exclusive option at any time, exercisable by sending Notice to both Members, to acquire the Accelerated Capital Investment at an amount equal to the [***] at [***] of the [***] of [i] [***] and [ii] the [***] or, if the Company and the Investing Member reach agreement on a different price within 15 days following the Company’s exercise of such option, at such agreed price (as applicable, the “ACI Purchase Price”); provided, that if the Investing Member and the Non-Investing Member enter into an agreement pursuant to Section 9.1[d], the Company will be obligated to acquire the Accelerated Capital Investment at the ACI Purchase Price within [***] years from the date the Accelerated Capital Investment is placed in service or the date that the Non Investing Member begins using the Accelerated Capital Investment, whichever is later, with the [***] period referenced above beginning on the date that the Company sends Notice it is acquiring the Accelerated Capital Investment.
|
[f]
|
A Member’s right to use an Accelerated Capital Investment for its individual benefit will terminate at such time as the Company acquires such investment.
|
[a]
|
At any time after the Effective Date, either Member may send Notice to the Company and the other Member requesting the Company to approve, in accordance with the Company’s reasonable written Wireless Device approval standards, a Wireless Device that the Company has otherwise elected not to consider for approval or has not yet approved.
|
[b]
|
The Company shall not be required to change its written Wireless Device approval standards when considering a request for Wireless Device approval; however, such approval shall not be unreasonably withheld.
|
[c]
|
The Member that makes a request pursuant to Section 9.2[a] will reimburse the Company for the Company’s reasonable costs associated with considering approval of the Wireless Device, whether or not the Wireless Device is approved, with the Company’s costs for this purpose being an amount equal to the Company’s direct out-of-pocket costs incurred in connection with such approval process plus the fully loaded labor costs per hour of those employees of the Company engaged in such approval process; provided, that if the Wireless Device is approved pursuant to this Section 9.2 and the non-requesting Member also subsequently sells such Wireless Device, it shall so notify the Company and the requesting Member, and the Company shall then reimburse the requesting Member for the approval costs it previously paid to the Company.
|
[a]
|
The forecast of the Average Connections of ACS covered by the Facilities and Network Use Agreement during each Fiscal Year in the Initial Four Year Period (the “ACS Forecast Average Connections”) is as follows:
|
Fiscal Year
|
Average Connections
|
2013
|
[***]
|
2014
|
[***]
|
2015
|
[***]
|
2016
|
[***]
|
[b]
|
If the actual Average Connections of ACS under the Facilities and Network Use Agreement for any Fiscal Year during the Initial Four Year Period (the “ACS Actual Average Connections”) are less than the Final Adjusted ACS Forecast Average Connections for such Fiscal Year, then the Distributions to be made to the ACS Member under Section 5.1 will be reduced by an amount (the “ACS Annual Connection Shortfall Adjustment”) equal to the [***] [i] $21,800,000 and [ii] [x] the difference between [A] [***] for such Fiscal Year, and [y] the ACS Actual Average Connections for such Fiscal Year, multiplied by [B] $[***]. [***] of the amount of any reduction to the Distributions to be made to the ACS Member pursuant to the immediately preceding sentence plus [***] on such amount at the [***] of the [***] will be made to the Distributions to be made under Section 5.1[a] or Section 5.1[c] for the next succeeding four quarters after the ACS Annual Connection Shortfall Adjustment is determined until the Distributions made to the ACS Member under Section 5.1[a] or Section 5.1[c] have been [***] the [***] of each ACS Annual Connection Shortfall Adjustment [***] the [***]. If, at the end of the Preference Period, the Distributions to be made to the ACS Member under Section 5.1[a] or Section 5.1[c] have not been reduced by the cumulative amount of all ACS Annual Connection Shortfall Adjustments, then any Distributions to be made to the ACS Member under Section 5.1[f] will be reduced by the remaining cumulative amount of all ACS Annual Connection Shortfall Adjustments.
|
[c]
|
In addition to any ACS Annual Connection Shortfall Adjustments made under Section 9.4[b], a [***] and [***] will be made with respect to ACS Average Connections and GCI Average Connections for [***] in accordance with the following provisions:
|
[i]
|
An amount (the “ACS [***] Connection Adjustment”) equal to the excess of [A] the Final Adjusted ACS Forecast Average Connections for Fiscal Year [***], over [B] the ACS Actual Average Connections for Fiscal Year [***], if any, will be multiplied by $[***], provided that (for the avoidance of doubt) if the excess of [A] over [B] is zero or a negative number, then the ACS [***] Connection Adjustment will be zero and provided further that if the aggregate amount of all ACS Annual Connection Shortfall Adjustments and the ACS [***] Connection Adjustment would exceed $21,800,000, then the ACS [***] Connection Adjustment will be an amount equal to $21,800,000 minus the sum of all ACS Annual Connection Shortfall Adjustments.
|
[ii]
|
An amount (the “GCI [***] Connection Adjustment”) equal to the excess of [A] an amount equal to [x] [1] [***] (which is the forecast of the Average Connections of GCI under the Facilities and Network Use Agreement for Fiscal Year [***]), minus [2] the aggregate number of ACS Forecast Reduction Connections, [***] [y] the applicable [***], over [B] the actual Average Connections of GCI under the Facilities and Network Use Agreement for Fiscal Year [***], if any, will be multiplied by $[***], provided that (for the avoidance of doubt) if the excess of [A] over [B] is zero or a negative number, then the GCI [***] Connection Adjustment will be zero and provided further that the maximum amount of the GCI [***] Connection Adjustment will be $21,800,000.
|
[iii]
|
If the ACS [***] Connection Adjustment is greater than the GCI [***] Connection Adjustment, then the Distributions to be made to the ACS Member under Section 5.1 will be reduced by an amount equal to the difference between the ACS [***] Connection Adjustment and the GCI [***] Connection Adjustment (the “Net ACS [***] Connection Adjustment”). Any reduction to the Distributions to be made to the ACS Member pursuant to the immediately preceding sentence will be made to the Distributions to be made under Section 5.1[a] or Section 5.1[c] for the next succeeding quarter or quarters after the Net ACS [***] Connection Adjustment is determined until the Distributions made to the ACS Member under Section 5.1[a] or Section 5.1[c] have been reduced by the full amount of the Net ACS [***] Connection Adjustment. If at the end of the Preference Period the Distributions to be made to the ACS Member under Section 5.1[a] or Section 5.1[c] have not been reduced by the full amount of the ACS [***] Connection Adjustment, then any Distributions to be made to the ACS Member under Section 5.1[f] will be reduced by the remaining amount of the ACS [***] Connection Adjustment, and any reduction to the Distributions to be made to the ACS Member under Section 5.1[f] will be added to and will increase the Distributions to be made to the GCI Member under Section 5.1[f].
|
[iv]
|
If the GCI [***] Connection Adjustment is greater than the ACS [***] Connection Adjustment, then the Distributions to be made to the GCI Member under Section 5.1 will be reduced by an amount equal to the difference between the GCI [***] Connection Adjustment and the ACS [***] Connection Adjustment (the “Net GCI [***] Connection Adjustment”). Any reduction to the Distributions to be made to the GCI Member pursuant to the immediately preceding sentence will be made to the Distributions to be made under Section 5.1[b] or Section 5.1[c] for the next succeeding quarter or quarters after the Net GCI [***] Connection Adjustment is determined until the Distributions made to the GCI Member under Section 5.1[b] or Section 5.1[c] have been reduced by the full amount of the Net GCI [***]Connection Adjustment, and any reduction to the Distributions to be made to the GCI Member under Section 5.1[b] or Section 5.1[c] will be added to and will increase the Distributions to be made to the ACS Member under Section 5.1[a] or Section 5.1[c]. If at the end of the Preference Period the Distributions to be made to the GCI Member under Section 5.1[b] or Section 5.1[c] have not been reduced by the full amount of the Net GCI [***] Connection Adjustment, then any Distributions to be made to the GCI Member under Section 5.1[f] will be reduced by the remaining amount of the Net GCI [***] Connection Adjustment, and any reduction to the Distributions to be made to the GCI Member under Section 5.1[f] will be added to and will increase the Distributions to be made to the ACS Member under Section 5.1[f].
|
[d]
|
If the Company intends to take any action in connection with managing its network (including any network integration or call site rationalization) that the Company knows or reasonably anticipates will result in Wireless service being permanently eliminated in a particular geographic service area that was served by any Connections to the Company’s network immediately prior to such action (an “Intentional Service Area Elimination”), the Company will notify each Member in writing at least 30 days prior to such Intentional Service Area Elimination (a “Service Area Elimination Company Notice”). Any Member may contact the Company to discuss potential alternatives to avoid any planned Intentional Service Area Elimination. If the Company and the Members do not mutually agree on an alternative to avoid any planned Intentional Service Area Elimination within 30 days, the Company will agree to extend the date on which the planned Intentional Service Area Elimination will occur for a period of up to ten Business Days if requested by any Member to provide such Member an opportunity to notify affected customers. If the Company takes any action in connection with managing its network that results in Wireless service being permanently eliminated in a particular geographic service area that was served by the Company’s network immediately prior to such action that results in Connections unintentionally losing Wireless service (an “Unintentional Service Area Elimination”), any Member may notify the Company in writing that such Unintentional Service Area Elimination has resulted in some of its Connections losing Wireless service (a “Service Area Elimination Member Notice”). The Company will have 30 days after receipt of a Service Area Elimination Member Notice to take actions necessary to restore Wireless service to all or any part of the geographic service area that was affected by an Unintentional Service Area Elimination (the “SAE Cure Period”). To the extent that the Company does not restore Wireless service to any geographic service area affected by an Unintentional Service Area Elimination during the SAE Cure Period or if the Company implements an Intentional Service Area Elimination, the Company will calculate the proportionate decrease in the population served by the Company’s network as a result of each Service Area Elimination, which will [***] [i] [***] will [***] [A] the reported population in all geographic service areas covered by the Company’s network immediately prior to such Service Area Elimination [***] [B] the reported population in any geographic service area to which Wireless service was eliminated as a result of such Service Area Elimination and not restored during the SAE Cure Period, if applicable, and [ii] [***] will be the reported population in all geographic service areas covered by the Company’s network immediately prior to such Service Area Elimination (the “Service Area [***]”). The Company will calculate the Service Area [***] on a cumulative basis on the date each Intentional Service Area Elimination occurs, or at the end of each SAE Cure Period, as applicable, if more than one Service Area Elimination occurs. The Company will notify each Member in writing of the applicable Service Area [***] within ten Business Days after the date on which any Intentional Service Area Elimination occurs or the end of each SAE Cure Period, as applicable. The Company will not be required to calculate a Service Area Elimination Percentage at any time after the later of [i] the Connection Maintenance Measurement Date, and [ii] [***].
|
[e]
|
From the Effective Date until the fourth anniversary of the Effective Date, each of ACS and GCI agrees that it will, and will cause its applicable Affiliates to, continue conducting reasonable marketing and sales efforts with respect to the operation of such Person’s retail Wireless service offerings in a manner consistent with the Four Year Plan.
|
[f]
|
Example calculations of the connection attrition adjustments set forth in this Section 9.4 are set forth on Exhibit M for illustrative purposes only.
|
[a]
|
If a Transfer of an Ownership Interest occurs prior to the [***] of the Effective Date other than a Transfer pursuant to Section 14.3[a] or [b] (such Transfer being a “Connection Maintenance Transfer” and the effective date of such Transfer as determined pursuant to Section 14.4 being the “Connection Maintenance Transfer Date”), a one-time calculation and adjustment will be made with respect to ACS Connections and GCI Connections in accordance with the following provisions; provided, however, that if more than one Transfer occurs that would constitute a Connection Maintenance Transfer, the provisions of this Section 9.5 will apply only with respect to the first Connection Maintenance Transfer that occurs.
|
[i]
|
The Connections of ACS under the Facilities and Network Use Agreement as of the last day of the calendar month immediately preceding the Connection Maintenance Transfer Date will be multiplied by [***]%, and such amount will then be multiplied by the applicable Service Area [***] (the “ACS Transfer Date Connections”).
|
[ii]
|
The Connections of GCI under the Facilities and Network Use Agreement as of the last day of the calendar month immediately preceding the Connection Maintenance Transfer Date will be multiplied by [***]%, and such amount will then be multiplied by the applicable Service Area [***] (the “GCI Transfer Date Connections”).
|
[iii]
|
The excess of [A] the ACS Transfer Date Connections, over [B] Connections of ACS under the Facilities and Network Use Agreement (which shall refer to the successor to the Connections of ACS under the Facilities and Network Use Agreement if the ACS Member is the Transferor in the Connection Maintenance Transfer) on the earlier of [X] the last day of the calendar month immediately preceding [***] of the [***] and [Y] the last day of the calendar month immediately preceding the [***] of the Effective Date (the earlier of [X] and [Y] being the “Connection Maintenance Measurement Date”), if any, will be multiplied by $[***] (the “ACS Connection Maintenance Adjustment”); provided that (for the avoidance of doubt) if the excess of [A] over [B] is zero or a negative number, then the ACS Connection Maintenance Adjustment will be zero and provided further that the maximum amount of the ACS Connection Maintenance Adjustment will be $[***].
|
[iv]
|
The excess of [A] the GCI Transfer Date Connections over [B] the Connections of GCI under the Facilities and Network Use Agreement (which shall refer to the successor to the Connections of GCI under the Facilities and Network Use Agreement if the GCI Member is the Transferor in the Connection Maintenance Transfer) on the Connection Maintenance Measurement Date, if any, will be multiplied by $[***] (the “GCI Connection Maintenance Adjustment”); provided that (for the avoidance of doubt) if the excess of [A] over [B] is zero or a negative number, then the GCI Connection Maintenance Adjustment will be zero and provided further that the maximum amount of the GCI Connection Maintenance Adjustment will be $[***].
|
[v]
|
If the ACS Connection Maintenance Adjustment is greater than the GCI Connection Maintenance Adjustment, then the Distributions to be made to the ACS Member (or the Transferee of the ACS Member, if applicable) under Section 5.1[f] will be reduced by an amount equal to the difference between the ACS Connection Maintenance Adjustment and the GCI Connection Maintenance Adjustment (the “Net ACS Connection Maintenance Adjustment”), and the amount of the Net ACS Connection Maintenance Adjustment will be added to and will increase the Distributions to be made to the GCI Member (or the Transferee of the GCI Member, if applicable) under Section 5.1[f]. Any reduction to the Distributions to be made to the ACS Member (or its Transferee, as applicable), and any corresponding increases to Distributions to be made to the GCI Member (or its Transferee, as applicable), pursuant to the immediately preceding sentence will be made to the Distributions to be made under Section 5.1[f] for the next succeeding quarter or quarters after the Net ACS Connection Maintenance Adjustment is determined until the Distributions made to the ACS Member (or its Transferee, as applicable) under Section 5.1[f] have been reduced by the full amount of the Net ACS Connection Maintenance Adjustment.
|
[vi]
|
If the GCI Connection Maintenance Adjustment is greater than the ACS Connection Maintenance Adjustment, then the Distributions to be made to the GCI Member (or the Transferee of the GCI Member, if applicable) under Section 5.1[f] will be reduced by an amount equal to the difference between the GCI Connection Maintenance Adjustment and the ACS Connection Maintenance Adjustment (the “Net GCI Connection Maintenance Adjustment”), and the amount of the Net GCI Connection Maintenance Adjustment will be added to and will increase the Distributions to be made to the ACS Member (or the Transferee of the ACS Member, if applicable) under Section 5.1[f]. Any reduction to the Distributions to be made to the GCI Member (or its Transferee, as applicable), and any corresponding increases to Distributions to be made to the ACS Member (or its Transferee, as applicable), pursuant to the immediately preceding sentence will be made to the Distributions to be made under Section 5.1[f] for the next succeeding quarter or quarters after the Net GCI Connection Maintenance Adjustment is determined until the Distributions made to the GCI Member (or its Transferee, as applicable) under Section 5.1[f] have been reduced by the full amount of the Net GCI Connection Maintenance Adjustment.
|
[a]
|
The Company will purchase network capacity from ACS and GCI as required for the operation of the Company’s network for its Wireless Business (“Member Network Capacity Purchases”). Member Network Capacity Purchases may be made at any time. All Member Network Capacity Purchases will be subject to the Acceptable Use Policy attached hereto as Exhibit K.
|
[b]
|
[***] will [***] the [***] with the [***] for [***] as [***] to any [***] that [***] from [***] of a [***] and [***]. ACS will provide to the Company, on June 30 and December 31 of each year, a certificate signed by its chief financial officer certifying that [***] at [***] it [***] to [***] with this [***] at [***] the [***].
|
[c]
|
[***] will [***] the [***] with the [***] for [***] as [***] to any [***] that [***] from [***] of a [***] and [***]. GCI will provide to the Company, on June 30 and December 31 of each year, a certificate signed by its chief financial officer certifying that [***] at [***] it [***] to [***] with this [***] at [***] the [***].
|
[d]
|
Member Network Capacity Purchases will be made by the Company in accordance with the terms and provisions of the Additional Capacity Purchase Agreement and will be subject to Section 6.4[n][x].
|
[e]
|
Either ACS or GCI can decline to accept a proposed Member Network Capacity Purchase available to the Company along a requested route due to network capacity limitations.
|
[a]
|
If a Member desires the Company to construct a fixed Wireless facility that would support a fixed Wireless service to qualify for [***] or [***] or [***], the cost of which is $[***] or [***], such Member (the “Requesting Member”) will have the option to send Notice to the Company and the other Member (a “Fixed Wireless Facility Notice”) that it desires the Company to construct such facility (the “ Fixed Wireless Facility Investment”) and specifying its proposed time period and other material terms and conditions for the Fixed Wireless Facility Investment to be made. In no event may a Member send more than [***] Fixed Wireless Facility Investment during any [***] period.
|
[b]
|
Within 30 days following its receipt of a Fixed Wireless Facility Notice, the Company will send Notice to the Requesting Member stating either [i] that the Company will make the Fixed Wireless Facility Investment on its own behalf within the time period proposed and on the other material terms and conditions set forth in such Fixed Wireless Facility Notice, or [ii] that the Company will not make the Fixed Wireless Facility Investment within the time period proposed in such Notice but consents to the Requesting Member making such Fixed Wireless Facility Investment in accordance with this Section 9.7 (“FWF Option 2”), or [iii] that the Company will not make the Fixed Wireless Facility Investment but does not consent to the Requesting Member making such Fixed Wireless Facility Investment (“FWF Option 3”); provided, that the Company’s consent pursuant to this Section 9.7[b][iii] may be not be unreasonably withheld; provided further that, without limitation, [x] it will not be unreasonable for the Company to withhold its consent to a proposed Fixed Wireless Facility Investment if such investment would be disruptive to the Company, is inconsistent with the technology standards or the manufacturer selections of the Company, or the services to be offered in connection with the Fixed Wireless Facility Investment would not allow the Company to recover its operating costs associated with the Fixed Wireless Facility Investment, and [y] it will be unreasonable for the Company to withhold its consent to a proposed Fixed Wireless Facility Investment solely on the basis that such investment is not provided in the Plan or has costs that are included in the Requesting Member’s Cost.
|
[c]
|
If FWF Option 2 is exercised by the Company, the Requesting Member and the Company will enter into an agreement pursuant to which the Company will design, install, integrate and operate the Fixed Wireless Facility Investment at the Requesting Member’s expense (the amount so paid by the Requesting Member, the “Requesting Member’s Cost”), on the terms and conditions set forth in the Fixed Wireless Facility Notice.
|
[d]
|
At any time following completion of a Fixed Wireless Facility Investment pursuant to Section 9.7[c], the non-requesting Member (the “Non-Requesting Member”) may send Notice to the Requesting Member and the Company that the Non-Requesting Member also desires to use the Fixed Wireless Facility Investment. If the Non-Requesting Member sends such a Notice, the Requesting Member and the Non-Requesting Member will negotiate in good faith to reach agreement on a reasonable monthly user fee and other terms for access by the Non-Requesting Member to the Fixed Wireless Facility Investment. For the avoidance of doubt, the use of any Fixed Wireless Facility Investment by the Requesting Member or the Non-Requesting Member is subject to the provisions of Section 6.5.
|
[e]
|
The Company will have the exclusive option at any time, exercisable by sending Notice to both Members, to acquire the Fixed Wireless Facility Investment at an amount equal to the [***] plus [***] at an [***] the [***] of [i] [***] and [ii] [***] or, if the Company and the Requesting Member reach agreement on a different price within 15 days following the Company’s exercise of such option, at such agreed price (as applicable, the “FWF Purchase Price”); provided, that if the Requesting Member and the Non-Requesting Member enter into an agreement pursuant to Section 9.7[d], the Company will be obligated to acquire the Fixed Wireless Facility Investment at the FWF Purchase Price within [***] from the date the Fixed Wireless Facility Investment is placed in service or the date that the Non Requesting Member begins using the Fixed Wireless Facility Investment, whichever is later, with the [***] period referenced above beginning on the date that the Company sends Notice it is acquiring the Fixed Wireless Facility Investment.
|
[f]
|
A Member’s right to use a Fixed Wireless Facility Investment for its individual benefit will terminate at such time as the Company acquires such investment.
|
[a]
|
The only duty owed by the GCI Member to the Company and the ACS Member is to refrain in managing the business and affairs of the Company (to the extent not delegated to the CEO or requiring approval by the unanimous Vote of the Members) and winding up the business and affairs of the Company from engaging in grossly negligent or reckless conduct, intentional misconduct, a knowing violation of the law or a transaction in which GCI or its Affiliates knowingly receive an improper benefit that is to the detriment of the Company and to refrain from breaching the implied contractual covenant of good faith and fair dealing (the “Standard of Care”). It is expressly acknowledged by the Company and the Members that all other express or implied fiduciary duties of the GCI Member to the Company and/or to the ACS Member are expressly disclaimed to the maximum extent permitted by law, and that the GCI Member does not violate the Standard of Care solely because the GCI Member’s conduct furthers the GCI Member’s own interest. Without limiting the foregoing, in no event will the following be deemed to be a violation of the Standard of Care by the GCI Member: [i] the good faith exercise by the GCI Member or any of its Affiliates of their rights under any Approved Affiliate Transaction or other transaction permitted by Section 6.4[n], or the performance by them of their obligations in relation to such agreements or transactions, or [ii] the good faith exercise by the GCI Member or any of its Affiliates of their rights under this Agreement (including the taking of any action that is permitted by Section 6.5), the Contribution Agreement or any Ancillary Agreement or [iii] any action that is authorized by the unanimous Vote of the Members following full disclosure.
|
[b]
|
No Member owes duties of any nature to any Transferee who is not admitted as a Member.
|
[c]
|
If the ACS Member reasonably believes that the GCI Member has breached the Standard of Care in relation to the Company and the Company has not brought a claim against the GCI Member with respect to such breach, the ACS Member may send written notice to the CEO specifying in reasonable detail the alleged breach of the Standard of Care and if the CEO does not subsequently agree to cause the Company to bring such claim, the ACS Member may, on behalf of the Company, bring such claim against the GCI Member pursuant to the dispute resolution provisions provided for in Article 15. As specified in Section 11 of the Arbitration Agreement, if the Arbitrator determines in a proceeding initiated by the ACS Member that [i] the GCI Member has not breached the Standard of Care, the ACS Member will pay the Company’s and the GCI Member’s Individual Fees and Expenses and any Arbitrator’s Expenses paid by such Persons in connection with such claim or [ii] the GCI Member has breached the Standard of Care, the GCI Member will pay the Company’s and the ACS Member’s Individual Fees and Expenses and any Arbitrator’s Expenses paid by such Persons in connection with such claim.
|
[d]
|
The CEO and each Officer shall be a fiduciary and shall have the same fiduciary duties to the Members and the Company as the chief executive officer and other officers of a Delaware corporation have to the corporation and its stockholders under the Delaware General Corporation Law.
|
[e]
|
Neither Member, in its capacity as such, shall exercise its voting rights pursuant to this Agreement in favor of any action that would reasonably be expected to result in the Company breaching any of its obligations under this Agreement; it being acknowledged that the foregoing is not intended to make either Member a guarantor of the Company’s obligations under this Agreement.
|
[a]
|
Annual Reports. As soon as practicable and in any event within 40 days after the end of each Fiscal Year, a preliminary consolidated balance sheet as of the end of such Fiscal Year and a preliminary consolidated statement of operations, preliminary consolidated statement of Members’ equity and a preliminary consolidated statement of cash flows of the Company for such Fiscal Year, all prepared in conformity with GAAP, and, as soon as practicable and in any event within 67 days after the end of each Fiscal Year, the final versions of such financial statements, together with a report on such financial statements from a nationally recognized independent registered public accounting firm stating that such statements are prepared and fairly stated in all material respects in conformity with GAAP;
|
[b]
|
Quarterly Reports. As soon as practicable and in any event within 15 Business Days after the end of each quarter close of the Company (except the last quarter of the Company’s Fiscal Year), a preliminary unaudited consolidated balance sheet as of the end of such fiscal quarter, and a preliminary unaudited consolidated statement of operations and a preliminary unaudited consolidated statement of cash flows of the Company and its Subsidiaries for such quarter, all prepared in conformity with GAAP with the final versions of such quarterly reports to be delivered within 37 days after the end of each such quarter close and to be accompanied by a certification from the chief financial officer of the Company as to the accuracy of such statements;
|
[c]
|
Certifications.
|
[i]
|
As soon as practicable and in any event within 70 days after the end of each Fiscal Year, any certifications, assessments, reports and attestations reasonably requested by a Member that are necessary for such Member to meet any obligations that it has under the Sarbanes-Oxley Act of 2002 in relation to its Ownership Interest in the Company;
|
[ii]
|
Within 90 days following the end of each Fiscal Year, a certificate signed by the Company’s chief financial officer certifying [w] the dollar amount of all Professional Services provided to the Company pursuant to the GCI Services Agreement and that any such Professional Services were provided in accordance with the Professional Services Guidelines, including the requirement that the Company determine that the estimate is fair and reasonable and [x] that any Satellite Capacity Services provided to the Company pursuant to the GCI Services Agreement were provided in accordance with the Satellite Capacity Services Guidelines.
|
[d]
|
Monthly Reports. As soon as practicable (but no later than 11 Business Days after the end of each month close), an unaudited detailed balance sheet as of the end of such month and an unaudited detailed statement of operations of the Company for such month, together with a statement of the number of the Company’s Connections during such month;
|
[e]
|
Budget and Plan Updates. As soon as practicable and in any event within 16 Business Days after the end of each month, budget reports with respect to the then-current Annual Operating Budget, Four Year Plan and Annual Cap Ex Budget, including comparisons of actual results to budgeted amounts and assumptions;
|
[f]
|
Asset Reports. As soon as practicable (but no later than 16 Business Days after the end of each quarter close), a schedule of all Contributed Assets retired, abandoned, sold or otherwise removed from service, together with the original cost and accumulated depreciation thereof.
|
[g]
|
Other Reports. Such additional reports as a Member may reasonably request from time to time.
|
[a]
|
The following books and records of the Company (which may be in electronic form) will be kept at the GCI Member’s principal place of business in Alaska: [i] a current list of the full name and last known business or mailing address of each Member, [ii] the original of the Certificate and of this Agreement, as the same may be amended from time to time (as well as any signed powers of attorney pursuant to which any such document was executed), [iii] a copy of the Company’s federal, state and local income tax returns and reports, and annual financial statements of the Company, for the six most recent years, and [iv] minutes, or minutes of action by written consent, of every annual and special meeting of the Members and of every meeting of the Board.
|
[b]
|
The Company will keep at the GCI Member’s principal place of business in Alaska separate books of account for the Company, which will show a true and accurate record of all costs and expenses incurred, all credits made and received and all income derived in connection with the operation of the Wireless Business by the Company in accordance with GAAP consistently applied as to the Company’s financial position and results of operations. The Company will maintain a system of internal accounting controls that complies with applicable law and that will provide reasonable assurance that: [i] transactions are executed in accordance with the general or specific authorization of the Members, the Board or the CEO, as applicable; [ii] transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP (or any other criteria applicable to the statements) and to maintain accountability for assets; [iii] access to assets is permitted only in accordance with the general or specific authorization of the Members, the Board or the CEO, as applicable; and [iv] the recorded accountability for inventory is compared with existing inventory at reasonable intervals and appropriate action is taken with respect to any differences.
|
[c]
|
Each Member will, at its sole expense, have the right, at any time upon reasonable Notice to the Company, to examine and copy, or cause its designee to examine and copy, the Company’s books and records (including financial books and records) during normal business hours for any proper purpose reasonably related to such Person’s Ownership Interest, subject to Section 16.20 and to the Commercially Sensitive Information Policies and Procedures.
|
[d]
|
All books, records (including bills and invoices), reports and returns of the Company required by this Article 11 will be maintained in a manner and form reasonably determined by the CEO.
|
[a]
|
With respect to any Member that is a corporation, upon filing of articles of dissolution of the corporation;
|
[b]
|
With respect to any Member that is a partnership, a limited liability company or a similar entity, upon dissolution and liquidation of such entity (but not solely by reason of a technical termination under § 708(b)(1)(B) of the Code);
|
[c]
|
A Bankruptcy Event with respect to any Member or its Wireless Parent, it being acknowledged that the Transferee in a Bankruptcy Case can be admitted as a Member in accordance with the provisions of Section 14.6.;
|
[d]
|
Any other event not otherwise defined in the preceding provisions of this Section 12.2 as being an event of Withdrawal that terminates the continued membership of a Member in the Company, including a voluntary resignation from the Company; or
|
[e]
|
With respect to any Member, upon the Transfer by such Member of any part of its Ownership Interest that is not permitted by or done in accordance with the requirements of Article 14.
|
[a]
|
First, to creditors by the payment or provision for payment of the debts and liabilities of the Company (other than any loans or advances that may have been made by any Member or any Affiliate of a Member) and the expenses of Liquidation;
|
[b]
|
Second, to the setting up of any reserves that are reasonably necessary for any contingent, conditional or unmatured liabilities or obligations of the Company (other than any loans made by any Member or any Affiliate of a Member);
|
[c]
|
Third, to the repayment of any loans or advances to the Company that were made by any Member or any Affiliate of a Member, including interest (including the GCI Working Capital Loan), according to the relative priority of repayment of such loans or advances and proportionally among loans of equal priority if the amount available for repayment is insufficient for payment in full;
|
[d]
|
Fourth, to the ACS Member and the GCI Member in accordance with Sections 5.1[d] and [e]; and
|
[e]
|
Fifth, to the Members in proportion to the remaining positive balances in their respective Capital Accounts after such Capital Accounts have been adjusted for [i] all allocations of Income, Net Income, Loss, Net Loss and items thereof for the Fiscal Year during which such Liquidation occurs and [ii] all Distributions pursuant to Sections 13.2[d].
|
[a]
|
No Person may Transfer all or any part of such Person’s Ownership Interest in any manner whatsoever except [a] a Transfer of all of its Ownership Interest to a Permitted Transferee as set forth in Section 14.3, and in such case only if the requirements of Section 14.1[b] and Section 14.4 also have been satisfied or [b] subject to Section 14.7, a Transfer that is a pledge of an Ownership Interest. Any other Transfer of all or any part of an Ownership Interest is null and void, and of no effect, but if any such Transfer is nonetheless given effect under applicable law and pursuant to the Arbitration Agreement, the transferee in such Transfer will have the limited rights of a Transferee as provided in Section 14.5. Any Member who makes a Transfer of all of such Person’s Ownership Interest will cease to be a Member on the effective date of such Transfer and will cease to have any Ownership Interest or other rights under this Agreement as of such date, but no Member will be released from any obligation that arose prior to the date it ceased to have an Ownership Interest or that is otherwise stated in this Agreement to survive a Person ceasing to be a Member. Any Member who makes a Transfer of part (but not all) of such Person’s Ownership Interest will continue as a Member (with respect to the Ownership Interest retained), and such partial Transfer will not constitute an event of Withdrawal of such Member. The rights and obligations of any resigning Member or of any Transferee of an Ownership Interest are also governed by other provisions of this Agreement.
|
[b]
|
No Person may Transfer all or any part of such Person’s Ownership Interest in any manner whatsoever unless [i] the Transferee’s Wireless Parent assumes the obligations of the Transferor’s Wireless Parent under the Facilities and Network Use Agreement (unless another arrangement with respect to the Transferor’s Connections is made with the Company that is approved by the unanimous Vote of the Members), and the Transferor’s Wireless Parent is fully released from such obligations to the extent such obligations relate to the period after the Transfer, and [ii] the Transferee’s Wireless Parent assumes on its own behalf and on behalf of its Affiliates, pursuant to an assumption agreement reasonably satisfactory to the other Member, the obligations of the Transferor’s Wireless Parent under Sections 6.5, 15, 16.8, 16.20, and 16.22.
|
[a]
|
To another Member;
|
[b]
|
To an Affiliate of such Person; or
|
[c]
|
At any time after the fourth anniversary of the Effective Date.
|
[a]
|
The Transferor signs and delivers to the Company an undertaking in form and substance reasonably satisfactory to the Company to pay all reasonable expenses incurred by the Company in connection with the Transfer (including reasonable fees of counsel and accountants and the costs to be incurred with any additional accounting required in connection with the Transfer, and the costs and fees attributable to preparing, filing and recording such amendments to the Certificate or other organizational documents or other filings as may be required by law);
|
[b]
|
The Transferor delivers to the Company an opinion of counsel for the Transferor in form and substance reasonably satisfactory to the Company to the effect that the Transfer of the Ownership Interest is in compliance with the applicable federal and state securities laws;
|
[c]
|
The Transferor signs and delivers to the Company a copy of the assignment of the Ownership Interest to the Transferee (substantially in the form of the attached Exhibit C);
|
[d]
|
The Transferee signs and delivers to the Company an agreement (substantially in the form of the attached Exhibit D) to be bound by this Agreement, including the Arbitration Agreement that is incorporated into and is a part of this Agreement; and
|
[e]
|
The Transfer is in compliance with the other provisions of this Article, including Section 14.1[b].
|
[a]
|
If the GCI Member at any time proposes to Transfer, in accordance with this Agreement, all of its Ownership Interests in the Company in any transaction or series of related transactions (a “Tag/Drag Sale”) to any Person that is not a Member or an Affiliate of the GCI Member (a “Third Party Purchaser”), then the GCI Member shall notify the ACS Member in writing at least 30 days prior to the date on which the GCI Member expects to consummate such Tag/Drag Sale (the “Sale Notice”), which notice shall specify the price that the Third Party Purchaser intends to pay for such Ownership Interests and all other material terms and conditions of such Transfer, including any terms of any other material transaction between GCI or any of its Affiliates and the Third Party Purchaser or any of its Affiliates that is to be entered into in connection with such Tag/Drag Sale. If the Sale Notice is delivered on or after the fifth anniversary of the Effective Date, the Sale Notice also may state that the GCI Member is electing to require the ACS Member to sell all of its Ownership Interests to the Third Party Purchaser in accordance with the provisions of this Section 14.8 (the “Drag Along Election”), unless GCI or any of its Affiliates would receive an improper benefit in connection with exercising such Drag Along Election, including as a result of GCI or any of its Affiliates entering into a transaction with the Third Party Purchaser or any of its Affiliates in connection with such Tag/Drag Sale that would reasonably be expected to decrease the price that the Third Party Purchaser would be willing to pay for such Ownership Interests. If the Sale Notice does not include a Drag Along Election, then the ACS Member shall have a right to require that the proposed Third Party Purchaser purchase from the ACS Member up to a pro rata portion of the ACS Member’s Ownership Interests (determined by multiplying the percentage of the Equity Interests proposed to be transferred in the Tag/Drag Sale by the percentage of the Equity Interests held by the ACS Member) on the terms and conditions set forth in this Section 14.8 (the “Tag Along Right”). The Tag Along Right may be exercised by the ACS Member by delivery of a written notice to the GCI Member (the “Tag Along Notice”) within 15 days following receipt of the Sale Notice from the GCI Member. The Tag Along Notice shall state the percentage of the Equity Interests represented by the Ownership Interests that the ACS Member proposes to include in such Transfer to the proposed Third Party Purchaser (which may be any percentage up to the pro rata portion determined in accordance with this Section 14.8[a]).
|
[b]
|
The purchase by the Third Party Purchaser of Ownership Interests from the ACS Member pursuant to Section 14.8[a] shall be on the same terms and conditions as apply to the GCI Member and the Ownership Interests proposed to be Transferred in the Tag/Drag Sale by the GCI Member; provided that [i] the ACS Member shall not be required to make any representations or warranties with respect to the GCI Member, the Company or any of its Subsidiaries, or any Ownership Interests not owned by the ACS Member, [ii] the ACS Member shall not be required to make any representations or warranties with respect to the ACS Member beyond its power and authority to sell, free and clear of all liens, encumbrances and rights of others, its Ownership Interests, its due authorization, execution, delivery and enforceability of the definitive documents entered into by the ACS Member in connection with the Tag/Drag Sale and its title to such Ownership Interests, [iii] the ACS Member shall not have any indemnification obligation with respect to its Ownership Interests sold in such Tag/Drag Sale other than with respect to the representations and warranties referred to in clause [ii] above, [iv] the ACS Member shall not have any indemnification obligation in excess of the net proceeds received by it in such Tag/Drag Sale, and [v] the portion of the consideration to be received by the GCI Member and the ACS Member shall be determined in accordance with Section 14.8[c].
|
[c]
|
If pursuant to a Drag Along Election or a Tag Along Right, the sale to a Third Party Purchaser by the GCI Member also includes Ownership Interests of the ACS Member, that portion of the consideration paid by the Third Party Purchaser for all Ownership Interests included in the Tag/Drag Sale (the “Aggregate Purchase Price”) that is payable to each Member participating in such sale will be determined in accordance with the following provisions of this Section 14.8[c].
|
[i]
|
If the sale to the Third Party Purchaser includes all of the Ownership Interests in the Company, the ACS Member will first receive from the Aggregate Purchase Price an amount equal to the full amount of the ACS Preferred Distributions, less the full amount of the ACS Preferred Distributions previously distributed to the ACS Member (the “Unpaid ACS Preferred Distribution Amount”), and then each Member will receive that portion of the balance of the Aggregate Purchase Price that it would have received if the Company were liquidated and proceeds equal to the balance of the Aggregate Purchase Price were distributed among the Members in accordance with the priorities set forth in Section 5.1 (assuming for this purpose that the full amount of the ACS Preferred Distributions shall be deemed to have been made previously under Section 5.1).
|
[ii]
|
If the sale to the Third Party Purchaser includes less than all of the Ownership Interests in the Company, the Aggregate Purchase Price will first be grossed up to determine the imputed price that would be paid for all of the Ownership Interests in the Company if all Ownership Interests were sold for the same price per Equity Interest implicit in the Aggregate Purchase Price (the “Entire Company Assumed Purchase Price”), and then the amount of the Entire Company Assumed Purchase Price that would be distributed to each Member if the Company were liquidated and proceeds equal to the Entire Company Assumed Purchase Price less an amount equal to the Unpaid ACS Preferred Distribution Amount were distributed among the Members in accordance with the priorities set forth in Section 5.1 (assuming for this purpose that the full amount of the ACS Preferred Distributions shall be deemed to have been made previously under Section 5.1) will be determined (a “Member’s Assumed Share”). The ACS Member will receive from the Aggregate Purchase Price an amount equal to the sum of the Unpaid ACS Preferred Distribution Amount, if any, and a percentage of its Member’s Assumed Share equal to the percentage of the ACS Member’s total Ownership Interests that are included in the Tag/Drag Sale to the Third Party Purchaser, and the GCI Member will receive the balance of the Aggregate Purchase Price.
|
[d]
|
If the GCI Member exercises its Drag Along Election or the ACS Member exercises its Tag Along Right pursuant to this Section 14.8, at the closing of the relevant Transfer to the Third Party Purchaser pursuant to this Section 14.8, the Third Party Purchaser shall remit to the GCI Member and the ACS Member the consideration to be paid to each for the Ownership Interests being purchased by the Third Party Purchaser from each, and the GCI Member and the ACS Member shall deliver to the Third Party Purchaser such transfer forms as are necessary to transfer the Ownership Interests being sold by each Member to the Third Party Purchaser.
|
[e]
|
The ACS Member and the GCI Member will cooperate in good faith and will take all actions and execute all documents reasonably required to effect any sale to a Third Party Purchaser in connection with a Drag Along Election or Tag Along Right in accordance with the provisions of this Section 14.8, including as provided in Section 14.8[f].
|
[f]
|
Notwithstanding any other provision of this Agreement providing that Members may only Transfer all of their Ownership Interests, the Members and the Company acknowledge and agree that a Tag/Drag Sale in which the ACS Member exercises its Tag Along Right but the Third Party Purchaser is not acquiring all of the Ownership Interests of all Members will result in a Transfer by the Members of only a portion of their respective Ownership Interests. In such event, the Members and the Company recognize that amendments to this Agreement will be required to reflect the addition of a new Member and the changes in the Ownership Interests of the ACS Member and the GCI Member, and the Members agree to negotiate in good faith and on a reasonable basis with each other and with the Third Party Purchaser to reach agreement on appropriate amendments to this Agreement that are necessary or advisable in connection with such Tag/Drag Sale.
|
[a]
|
If at any time the Company determines to sell or otherwise dispose of, in one transaction or a series of related transactions [i] all or substantially all the consolidated assets of the Company and its Subsidiaries, or [ii] any assets of the Company or any of its Subsidiaries having a Fair Market Value in excess of $500,000 or [iii] any Wireless Backhaul and Transport capacity or assets that were contributed to the Company by a Member or any of its Affiliates that the Company has decided to sell or dispose of that relate solely to a cell site that the Company has decided to sell or dispose of, and any cell site that was contributed to the Company by a Member or any of its Affiliates that the Company has decided to sell or dispose of (each of [i], [ii] and [iii], a “Company Asset Sale”), prior to consummating such Company Asset Sale, the Company first shall deliver to the Members a letter signed by it (the “ROFO Notice”), setting forth a description of the assets to be sold (the “ROFO Assets”) and an invitation for the Members to submit offers to acquire the ROFO Assets during the ROFO Period. For the avoidance of doubt, in no event will the sale by the Company of IRU and other network capacity, including for Wireless Backhaul and Transport, in the ordinary course of the Wireless Business constitute a Company Asset Sale.
|
[b]
|
Upon receipt of a ROFO Notice, each Member shall have a right, but not an obligation, exercisable for a period of up to 30 days after receipt of the ROFO Notice (the “ROFO Period”), to submit a binding, written offer (an “Offer”) to acquire all, but not less than all, of the ROFO Assets on the terms and conditions specified in the Offer (the right of the Members to make such an Offer is referred to as the “Right of First Offer”). Any Offer shall specify the cash purchase price at which the Member would be willing to acquire the ROFO Assets and all other material terms and conditions of such purchase; provided, that with respect to any ROFO Assets constituting Wireless Backhaul and Transport capacity or assets, the Member may propose an exchange of capacity or assets in lieu of a cash purchase price.
|
[c]
|
Upon receipt of an Offer, the Company shall have the right, but not the obligation, to accept the same by delivering written notice to the Member submitting such Offer (the “Purchasing Member”), which notice shall constitute a contract between the Company to sell, and the Purchasing Member to purchase, all of the ROFO Assets on the terms and conditions described in the Offer. If the Company receives more than one Offer, the Company may not accept an Offer if it contains terms and conditions that are less favorable to the Company than the terms and conditions of any other Offer timely received by the Company. The failure of a Member to deliver an Offer within the ROFO Period shall be deemed to be a rejection and waiver of the Right of First Offer.
|
[d]
|
If the Company accepts an Offer, then the purchase and sale of the ROFO Assets (or the exchange of the ROFO Assets, as applicable) contemplated thereby shall be consummated within 60 days after the receipt by Company of the Offer; provided, that if such purchase and sale is subject to any regulatory approvals or other material Third party consents, the period for completing such purchase and sale shall be extended for up to an additional 90 days if necessary to obtain such approvals and consents. If no Member delivers an Offer to the Company within the ROFO Period, or if the Company determines not to accept any Offer submitted, then the Company may, during the period beginning at the end of the ROFO Period and ending on the 180th day thereafter (provided, that if such sale is subject to any regulatory approvals or other material Third Party consents, the period for completing such sale shall be extended for up to an additional 90 days if necessary to obtain such approvals and consents, the 180 day period as the same may be extended being referred to as the “Third Party Purchaser Sale Period”), sell the ROFO Assets to a Third Party Purchaser for a purchase price and subject to other terms and conditions that are no more favorable to such Third Party Purchaser than the purchase price and terms and conditions contained in any Offer timely received by the Company; provided, that if any Offer includes an exchange offer related to ROFO Assets constituting Wireless Backhaul and Transport capacity or assets (an “Exchange Offer”), the provisions of Section 14.9[e] and [f] shall apply.
|
[e]
|
If the Company timely receives more than one Offer it does not accept with respect to ROFO Assets constituting Wireless Backhaul and Transport capacity or assets and only one of such Offers is an Exchange Offer, then the Company may, during the Third Party Purchaser Sale Period, sell the ROFO Assets to a Third Party Purchaser for a purchase price and subject to other terms and conditions that are no more favorable to such Third Party Purchaser than the purchase price and terms and conditions contained in the Offer that was not an Exchange Offer.
|
[f]
|
If all Offers that the Company receives with respect to ROFO Assets constituting Wireless Backhaul and Transport capacity or assets are Exchange Offers that it does not accept, then the Company may, during the Third Party Purchaser Sale Period, sell the ROFO Assets to a Third Party Purchaser for a purchase price that is not less than Fair Market Value. The Company will notify each Member of the determination of Fair Market Value within 30 days following the end of the ROFO Period. If a Member objects to the determination of Fair Market Value it may so notify the Company within 15 days following such Member’s receipt of the Fair Market Value determination, whereupon the Company and the disputing Member will negotiate in good faith for a period of five days to reach agreement on Fair Market Value. If no agreement is reached within such time period, the Company may hire an independent third-party appraiser to determine Fair Market Value and such appraiser’s determination shall be binding and non-appealable.
|
[g]
|
If the Company does not consummate a sale of the ROFO Assets within the Third Party Purchaser Sale Period, it may not thereafter sell any ROFO Assets except in full compliance with all the provisions of this Section 14.9.
|
[a]
|
The provisions of Section 14.10[b] shall apply upon the occurrence of any of the following with respect to a Member (a “Connection Termination Event”):
|
[i]
|
such Member Transfers its Ownership Interest in breach of Section 14.1[b];
|
[ii]
|
such Member’s Wireless Parent ceases to be a party to the Facilities and Network Use Agreement or otherwise can not be compelled in accordance with applicable law to perform its obligations under such agreement, including as a result of assignment or termination of the Facilities and Network Use Agreement other than an assignment that is made in accordance with the requirements of Section 14.1[b];
|
[iii]
|
a Member or an Affiliate of a Member materially breaches Section 6.5[b] and fails to cure such breach within 60 days following notice from the Company to cure such breach; or
|
[iv]
|
such Member and its Affiliates or a Transferee and its Affiliates are not or cease to be engaged in the retail provision of Wireless products and services in the Territory (as defined in the Facilities and Network Use Agreement).
|
[b]
|
If a Connection Termination Event occurs with respect to a Member (the “Departing Member”), the Departing Member shall notify the Company and the other Member (the “Remaining Member”) within ten days following the occurrence of such event (a “CTE Notice”) and the provisions set forth in Sections 14.10[b][i] through [v] shall apply.
|
[i]
|
To the extent it retains an Ownership Interest following such Connection Termination Event, the Departing Member shall become a [***] with the [***] of a [***] as set forth in Section [***]. If the Connection Termination Event occurs as the result of [***] but it does not exist [***] the [***] of the [***], the Departing Member or its Transferee may be readmitted as a Member upon compliance with Sections [***] as applicable.
|
[ii]
|
Unless the Connection Termination Event is a [***] and [***], the Remaining Member shall have the right (the “CTE Call Right”) to buy all, but not less than all, of the Ownership Interest of the Departing Member for an amount equal to the CTE Purchase Price, such right to be exercised by the Remaining Member, if at all, by sending notice to the Departing Member within 90 days following the Remaining Member’s receipt of the CTE Notice. The Departing Member and the Remaining Member shall negotiate in good faith for a period of 30 days following exercise of the CTE Call Right to agree on the price that the Remaining Member shall pay for the Departing Member’s Ownership Interest. If the Departing Member and the Remaining Member do not reach agreement on price during such 30-day period, the price payable by the Remaining Member for the Departing Member’s Ownership Interest shall be the [***] of such [***] as of the Connection Termination Date, as determined pursuant to [***]. The closing of the Transfer of Ownership Interest pursuant to the proper exercise of the CTE Call Right shall occur within 30 days after the Departing Member and the Remaining Member reach agreement on price or the [***] of the [***] is determined pursuant to [***], as applicable. At such closing: [w] the Departing Member shall deliver to the Remaining Member an instrument of transfer with respect to such Ownership Interests, duly executed on behalf of the Departing Member; [x] the Remaining Member or its Wireless Parent shall deliver or cause to be delivered to the Departing Member an amount equal to the CTE Purchase Price in immediately available funds to an account or accounts designated by the Departing Member; [y] the Departing Member shall not be required to make any representations or warranties beyond its power and authority to sell, free and clear of all liens, encumbrances and rights of others, its Ownership Interest, its due authorization, execution, delivery and enforceability of any definitive documents entered into by the Departing Member in connection with the exercise of the CTE Call Right and its title to such Ownership Interest, [z] the Departing Member shall not have any indemnification obligation with respect to its Ownership Interest other than with respect to the representations and warranties referred to in clause [y] above, nor shall it have any indemnification obligation in excess of the net proceeds received by it.
|
[iii]
|
If the ACS Member is the Departing Member and the Connection Termination Event is the result of a termination of the [***] and [***] by the ACS Member pursuant to Section [***] thereof (a “[***] and [***] CTE”), the ACS Member shall have the right (the “CTE Put Right”) to require the GCI Member to buy all, but not less than all, of the Ownership Interest of the ACS Member for an amount equal to the CTE Purchase Price, such right to be exercised by the ACS Member, if at all, by sending Notice to the GCI Member within 90 days following the occurrence of the Facilities and Network Use CTE. The Departing Member and the Remaining Member shall negotiate in good faith for a period of 30 days following exercise of the CTE Put Right to agree on the price that the Remaining Member shall pay for the Departing Member’s Ownership Interest. If the Departing Member and the Remaining Member do not reach agreement on price during such 30-day period, the price payable by the Remaining Member for the Departing Member’s Ownership Interest shall be the [***] of such [***] as of the Connection Termination Date, as determined pursuant to [***]. The closing of the Transfer of Ownership Interest pursuant to the proper exercise of the CTE Put Right shall occur within 30 days after the Departing Member and the Remaining Member reach agreement on price [***] or the [***] of the [***] is determined pursuant to Section [***], as applicable. At such closing: [w] the ACS Member shall deliver to the GCI Member an instrument of transfer with respect to such Ownership Interest, duly executed on behalf of the ACS Member; [x] the GCI Member or its Wireless Parent shall deliver or cause to be delivered to the ACS Member an amount equal to the CTE Alternate Purchase Price in immediately available funds to an account or accounts designated by the ACS Member; [y] the ACS Member shall not be required to make any representations or warranties beyond its power and authority to sell, free and clear of all liens, encumbrances and rights of others, its Ownership Interest, its due authorization, execution, delivery and enforceability of any definitive documents entered into by the ACS Member in connection with the exercise of the CTE Put Right and its title to such Ownership Interest, [z] the ACS Member shall not have any indemnification obligation with respect to its Ownership Interest other than with respect to the representations and warranties referred to in clause [y] above, nor shall it have any indemnification obligation in excess of the net proceeds received by it. Section 6.5[c] shall not apply to the ACS Member following consummation of the CTE Put Right.]
|
[iv]
|
If the ACS Member is the Departing Member, the amount of [***], if any and if not previously made, will be [***], and the amount of any [***], if applicable and if not previously made, will be [***]. If the GCI Member is the Departing Member, the amount of any remaining [***], if any and if not previously made, will be [***], the amount of [***], if any and if not previously made, will be [***], and the amount of any [***], if applicable and if not previously made, will be [***].
|
[v]
|
The provisions of Section 9.6 shall terminate.
|
[a]
|
Such Member or Transferee is duly organized, validly existing and in good standing under the laws of the jurisdiction where it purports to be organized, and is not (as such terms are defined in the Code and Regulations) a nonresident alien or a foreign corporation, foreign partnership, foreign trust, or foreign estate;
|
[b]
|
Such Member or Transferee has full power and authority to enter into and perform this Agreement;
|
[c]
|
All actions necessary to authorize the signing and delivery of this Agreement by such Member or Transferee, and the performance of its obligations under it, have been duly taken and are in full force and effect;
|
[d]
|
This Agreement has been duly signed and delivered by a duly authorized officer or other representative of such Member or Transferee and constitutes the legal, valid and binding obligation of such Member or Transferee enforceable in accordance with its terms (except as such enforceability may be affected by applicable bankruptcy, insolvency or other similar laws affecting creditors’ rights generally, and except that the availability of equitable remedies is subject to judicial discretion);
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[e]
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No consent or approval of any other Person is required in connection with the signing, delivery and performance of this Agreement by such Member or Transferee except for those approvals that have been obtained and are in full force and effect;
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[f]
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The signing, delivery and performance of this Agreement do not violate the organizational documents of such Member or Transferee, or any material agreement to which such Member or Transferee is a party or by which such Member or Transferee is bound; and
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[g]
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Such Member or Transferee has had an opportunity to perform any due diligence deemed necessary or desirable in connection with entering into this Agreement.
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[a]
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ACS, the ACS Member, GCI, the GCI Member and the Company acknowledge and agree that the transactions contemplated by the Contribution Agreement, the Ancillary Agreements and this Agreement (the “Transaction Agreements”) are integral parts of the same transaction and that the parties entered into each of the Transaction Agreements contingent on the parties thereto entering into all such Transaction Agreements. The parties desire to set forth the circumstances and the terms and conditions on which the Company shall be entitled to recoup certain amounts in accordance with the terms and conditions set forth in this Section 16.22 based on failure of such Member or its Parent (as defined in the Contribution Agreement) to perform its or their respective obligations under any of the Transaction Agreements by deducting such amounts from Distributions that otherwise would be made to a Member hereunder.
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[b]
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If a final, non-appealable determination is made that a Member (or its Parent (as defined in the Contribution Agreement)) has an indemnification obligation under the Contribution Agreement, and such obligation has not been paid, each Member hereby acknowledges and agrees that the Company shall, subject to the terms and conditions of this Section 16.22, and each Member authorizes the Company to, recoup an amount up to the full amount of such Member’s indemnification obligation under the Contribution Agreement by deducting such amount from any Distributions that otherwise would be made to such Member, and to pay such deducted amounts to the indemnified Member if the indemnification obligation is owed to such other Member; provided, however, that the Company will not be entitled to recoup by deducting from Distributions to be made to a Member an amount that is greater than 25% of the amount of any quarterly Distributions to be made to such Member pursuant to Section 5.1 and any remaining amount to be recouped will carry over to subsequent quarterly Distributions and will accrue simple interest at the annual rate of the lower of LIBOR plus 2.5% and the Maximum Rate until the full amount of the indemnification obligation (including accrued interest) is recouped by making deductions from the Distributions that otherwise would be made to the Member owing the indemnification obligation. Notwithstanding the preceding provisions of this Section 16.22[b], if requested in writing by the Member owing the indemnification obligation, the Company will forebear from recouping the amount of any such indemnification obligation by deducting all or any part of such amount from any Distributions to be made to such Member for a period of up to 90 days, and the parties will negotiate in good faith regarding an alternative method for satisfaction of all or any amount of such indemnification obligation in lieu of recouping by deducting such amount from Distributions to be made to such Member
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[c]
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Each Member hereby acknowledges and agrees that the Company has the right to, and authorizes the Company to, recoup any undisputed amounts owed by such Member or any of its Affiliates to the Company that are past due under any of the Ancillary Agreements by deducting such amounts from any Distributions to be made to such Member.
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[d]
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Any amounts that are recouped by deducting such amounts from Distributions that otherwise would be made to a Member (including any such amounts that are redirected from one Member to another Member) in accordance with the preceding provisions of this Section 16.22 will be deemed to be Distributions actually made to the Member from whose Distributions such amounts were recouped and deducted for all purposes of this Agreement.
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CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK
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$10,000,000
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COBANK, ACB
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$20,000,000
|
|
GCI HOLDINGS, INC.
|
|
By:
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/s/ John M. Lowber |
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Name:
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John M. Lowber |
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Title:
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Senior Vice President, Chief Financial Officer, Secretary and Treasurer |
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By:
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/s/ Amy Trapp |
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Name:
|
Amy Trapp |
|
Title:
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Managing Director |
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By:
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/s/ Jeffrey A. Ferrell |
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Name:
|
Jeff Ferrell |
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Title:
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Managing Director |
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By:
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/s/ Ted Koerner |
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Name:
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Ted Koerner |
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Title:
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Managing Director |
Date
|
Type of Series 3 Add-on Term Loan
|
Amount of Series 3 Add-on Term Loan
|
Amount of principal converted, paid or prepaid
|
Interest Rate on Eurodollar Loans
|
Interest Period for Eurodollar Loans
|
Notation Made By
|
Intangible Assets (5 year Future Amortization ) (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2012
|
---|---|
Finite-Lived Intangible Assets, Future Amortization Expense [Abstract] | |
2012 | $ 4,722 |
2013 | 3,808 |
2014 | 3,036 |
2015 | 1,835 |
2016 | $ 670 |
Industry Segments Data (Reconciliation of reportable segment revenues) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Reconciliation from Segment Totals to Consolidated [Abstract] | ||||
Reportable Segment Revenues | $ 177,503 | $ 169,549 | $ 351,441 | $ 335,804 |
Less intersegment revenues eliminated in consolidation | 1,399 | 1,460 | 3,430 | 2,938 |
External revenues | $ 176,104 | $ 168,089 | $ 348,011 | $ 332,866 |
Stockholders' Equity (Summary of share-based compensation expense) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||
Employee share-based compensation expense | $ 2,831 | $ 2,968 | ||
Adjustment to fair value of liability classified awards | (236) | (128) | ||
Total share-based compensation expense | $ 865 | $ 1,670 | $ 2,595 | $ 2,840 |
Business and Summary of Significant Accounting Principles (Shareholders Equity Statements Immaterial Error Correction) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2011
Scenario As Previously Reported [Member]
|
Jun. 30, 2011
Scenario As Previously Reported [Member]
|
Dec. 31, 2011
Scenario As Previously Reported [Member]
|
Jun. 30, 2011
Adjustment [Member]
|
Jun. 30, 2011
Adjustment [Member]
|
Dec. 31, 2011
Adjustment [Member]
|
|
Beginning balances, retained earnings | $ 97,911 | $ 92,200 | $ 93,607 | $ 99,433 | $ (1,407) | $ (1,522) | ||||
Net income (loss) | 3,805 | (2,044) | 5,057 | (645) | (1,957) | (472) | (87) | (173) | ||
Ending balances, retained earnings | 103,322 | 91,555 | 103,322 | 91,555 | 93,135 | 93,135 | 99,433 | (1,580) | (1,580) | (1,522) |
Beginning balances, total stockholders' equity | 173,647 | 199,099 | 200,506 | 175,169 | (1,407) | (1,522) | ||||
Ending balances, total stockholders' equity | $ 171,294 | $ 180,326 | $ 171,294 | $ 180,326 | $ 181,906 | $ 181,906 | $ 175,169 | $ (1,580) | $ (1,580) | $ (1,522) |
Business and Summary of Significant Accounting Principles (Basic EPS calculations) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Class of Stock [Line Items] | ||||
Allocation of undistributed earnings (loss) | $ 3,982 | $ (2,044) | $ 5,411 | $ (645) |
Common Stock - Class A [Member]
|
||||
Class of Stock [Line Items] | ||||
Allocation of undistributed earnings (loss) | 3,679 | (1,904) | 5,001 | (601) |
Weighted average common shares outstanding | 38,516 | 43,098 | 38,629 | 43,536 |
Basic net income (loss) attributable to GCI common sstockholders per common share | $ 0.10 | $ (0.04) | $ 0.13 | $ (0.01) |
Common Stock - Class B [Member]
|
||||
Class of Stock [Line Items] | ||||
Allocation of undistributed earnings (loss) | $ 303 | $ (140) | $ 410 | $ (44) |
Weighted average common shares outstanding | 3,171 | 3,178 | 3,171 | 3,178 |
Basic net income (loss) attributable to GCI common sstockholders per common share | $ 0.10 | $ (0.04) | $ 0.13 | $ (0.01) |
Non-controlling Interest (Narratives) (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2012
|
---|---|
Non-controlling Interest [Abstract] | |
Restricted Cash | $ 14.8 |
Financial Instruments (Assets measured at fair value on a recurring basics) (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred Compensation Plan Assets (mutual funds) | $ 1,662 | $ 1,600 |
Total Assets, at fair value | $ 1,662 | $ 1,600 |
Consolidated Statement of Cash Flows Supplemental Disclosures ( Non-cash investing and financing activities) (Details) (USD $)
In Thousands, unless otherwise specified |
6 Months Ended | |
---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Consolidated Statements of Cash Flows Supplemental Disclosures [Abstract] | ||
Non-cash additions for purchases of property and equipment | $ 12,680 | $ 9,388 |
Deferred compensation distribution denominated in shares | 511 | 0 |
Asset retirement obligation additions to property and equipment | 132 | 123 |
Asset retirement obligation reductions to property and equipment for revisions to previous estimates | 0 | 294 |
Write-off of original issue discount on 2014 Notes | $ 0 | $ 1,530 |
Commitments (Narratives) (Details) (USD $)
|
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
Dec. 31, 2011
|
|
Revenues | $ 176,104,000 | $ 168,089,000 | $ 348,011,000 | $ 332,866,000 | |
US Treasury Department Contribution | 1,600,000 | ||||
Lifeline Program Support [Member]
|
|||||
Revenues | $ 3,900,000 | $ 8,000,000 |
Industry Segments Data (Reportable segment revenues) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2012
|
Jun. 30, 2011
|
Jun. 30, 2012
|
Jun. 30, 2011
|
|
Segment Reporting Information [Line Items] | ||||
Intersegment | $ 1,399 | $ 1,460 | $ 3,430 | $ 2,938 |
External revenues | 176,104 | 168,089 | 348,011 | 332,866 |
Total Revenues | 177,503 | 169,549 | 351,441 | 335,804 |
Adjusted EBITDA | 59,421 | 54,933 | 114,250 | 108,279 |
Consumer [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Intersegment | (168) | 0 | 356 | 0 |
External revenues | 88,495 | 88,554 | 176,307 | 176,971 |
Total Revenues | 88,327 | 88,554 | 176,663 | 176,971 |
Adjusted EBITDA | 24,008 | 28,258 | 48,802 | 56,651 |
Network Access [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Intersegment | 82 | 0 | 165 | 0 |
External revenues | 26,017 | 25,151 | 51,205 | 50,248 |
Total Revenues | 26,099 | 25,151 | 51,370 | 50,248 |
Adjusted EBITDA | 13,442 | 12,344 | 25,852 | 24,224 |
Commercial [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Intersegment | 1,426 | 1,416 | 2,811 | 2,825 |
External revenues | 34,466 | 34,216 | 68,807 | 66,045 |
Total Revenues | 35,892 | 35,632 | 71,618 | 68,870 |
Adjusted EBITDA | 8,625 | 7,401 | 17,066 | 14,063 |
Managed Broadband [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Intersegment | 0 | 0 | 0 | 0 |
External revenues | 21,717 | 14,639 | 40,746 | 28,634 |
Total Revenues | 21,717 | 14,639 | 40,746 | 28,634 |
Adjusted EBITDA | 12,063 | 5,709 | 20,312 | 11,420 |
Regulated Operations [Member]
|
||||
Segment Reporting Information [Line Items] | ||||
Intersegment | 59 | 44 | 98 | 113 |
External revenues | 5,409 | 5,529 | 10,946 | 10,968 |
Total Revenues | 5,468 | 5,573 | 11,044 | 11,081 |
Adjusted EBITDA | $ 1,283 | $ 1,221 | $ 2,218 | $ 1,921 |
Intangible Assets
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2012
|
||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assetsl [Text Block] | (3) Intangible Assets Amortization expense for amortizable intangible assets was as follows (amounts in thousands):
Amortization expense for amortizable intangible assets for each of the five succeeding fiscal years is estimated to be (amounts in thousands):
|