EXHIBIT 10.85

                                   $50,000,000



                      AMENDED AND RESTATED CREDIT AGREEMENT


                          Dated as of November 14, 1997



                                     BETWEEN



                               GCI HOLDINGS, INC.


                                       and


                           NATIONSBANK OF TEXAS, N.A.
                             As Administrative Agent


                         CREDIT LYONNAIS NEW YORK BRANCH
                             As Documentation Agent

                            TD SECURITIES(USA), INC.
                              As Syndication Agent





100\269\91946
<PAGE>
<TABLE>
                                TABLE OF CONTENTS
<CAPTION>
         ARTICLE I.  DEFINITIONS
         <S>      <C>                                                                                            <C>
         1.01.    Definitions...................................................................................  1
         1.02.    Accounting and Other Terms.................................................................... 26

         ARTICLE II.  AMOUNTS AND TERMS OF ADVANCES

         2.01.    The Facility.................................................................................. 27
         2.02.    Making Advances Under the Revolver/Term Loan.................................................. 27
         2.03.    Evidence of Indebtedness...................................................................... 29
         2.04.    Reduction of Commitments...................................................................... 29
         2.05.    Prepayments................................................................................... 31
         2.06.    Mandatory Repayment........................................................................... 34
         2.07.    Interest...................................................................................... 35
         2.08.    Default Interest.............................................................................. 36
         2.09.    Continuation and Conversion Elections......................................................... 36
         2.10.    Fees.......................................................................................... 38
         2.11.    Funding Losses................................................................................ 38
         2.12.    Computations and Manner of Payments........................................................... 38
         2.13.    Yield Protection.............................................................................. 39
         2.14.    Use of Proceeds............................................................................... 42
         2.15.    Collateral and Collateral Call................................................................ 42

         ARTICLE III.  INTENTIONALLY OMITTED


         ARTICLE IV.  CONDITIONS PRECEDENT

         4.01.    Conditions Precedent to the Initial Advance................................................... 43
         4.02.    Conditions Precedent to All Advances.......................................................... 45

         ARTICLE V.  REPRESENTATIONS AND WARRANTIES

         5.01.    Organization and Qualification................................................................ 46
         5.02.    Due Authorization; Validity................................................................... 47
         5.03.    Conflicting Agreements and Other Matters...................................................... 47
         5.04.    Financial Statements.......................................................................... 47
         5.05.    Litigation.................................................................................... 47
         5.06.    Compliance With Laws Regulating the Incurrence of Debt........................................ 48
         5.07.    Licenses, Title to Properties, and Related Matters............................................ 48
         5.08.    Outstanding Debt and Liens.................................................................... 49
         5.09.    Taxes......................................................................................... 49
         5.10.    ERISA......................................................................................... 49
         5.11.    Environmental Laws............................................................................ 50


100\269\91946                    i
<PAGE>
         5.12.    Disclosure.................................................................................... 50
         5.13.    Investments; Restricted Subsidiaries.......................................................... 51
         5.14.    Certain Fees.................................................................................. 51
         5.15.    Intellectual Property......................................................................... 51
         5.16.    Due Authorization; Validity of the AUSP Financing Agreements and the Project Agreements....... 51
         5.17.    Conflicting  Agreements  and  Other  Matters  with the  AUSP  Financing  Agreements  and
                  Project Agreements............................................................................ 52
         5.18.    Survival of Representations and Warranties, etc............................................... 52

         ARTICLE VI.  AFFIRMATIVE COVENANTS

         6.01.    Compliance with Laws and Payment of Debt...................................................... 52
         6.02.    Insurance..................................................................................... 53
         6.03.    Inspection Rights............................................................................. 53
         6.04.    Records and Books of Account; Changes in GAAP................................................. 53
         6.05.    Reporting Requirements........................................................................ 53
         6.06.    Use of Proceeds............................................................................... 56
         6.07.    Maintenance of Existence and Assets........................................................... 56
         6.08.    Payment of Taxes.............................................................................. 57
         6.09.    Indemnity..................................................................................... 57
         6.10.    Interest Rate Hedging......................................................................... 58
         6.11.    Management Fees Paid and Earned............................................................... 58
         6.12.    Authorizations and Material Agreements........................................................ 58
         6.13.    Further Assurances............................................................................ 58
         6.14.    AUSP Financing................................................................................ 59
         6.15.    Subsidiaries and Other Obligors............................................................... 59
         6.16.    CoBank Participation Certificates............................................................. 59

         ARTICLE VII.  NEGATIVE COVENANTS

         7.01.    Financial Covenants........................................................................... 60
         7.02.    Debt.......................................................................................... 61
         7.03.    Contingent Liabilities........................................................................ 61
         7.04.    Liens......................................................................................... 62
         7.05.    Dispositions of Assets........................................................................ 62
         7.06.    Distributions and Restricted Payments......................................................... 62
         7.07.    Merger; Consolidation......................................................................... 63
         7.08.    Business...................................................................................... 63
         7.09.    Transactions with Affiliates.................................................................. 63
         7.10.    Loans and Investments......................................................................... 64
         7.11.    Fiscal Year and Accounting Method............................................................. 65
         7.12.    Issuance of Partnership Interest and Capital Stock; Amendment of Articles and By-Laws......... 65
         7.13.    Change of Ownership........................................................................... 65
         7.14.    Sale and Leaseback............................................................................ 66


100\269\91946                    ii
<PAGE>
         7.15.    Compliance with ERISA......................................................................... 66
         7.16.    Rate Swap Exposure............................................................................ 66
         7.17.    Restricted Subsidiaries and Other Obligors.................................................... 66
         7.18.    Amendments to Material Agreements............................................................. 66
         7.19.    Limitation on Restrictive Agreements.......................................................... 67

         ARTICLE VIII.  EVENTS OF DEFAULT

         8.01.    Events of Default............................................................................. 67
         8.02.    Remedies Upon Default......................................................................... 72
         8.03.    Cumulative Rights............................................................................. 73
         8.04.    Waivers....................................................................................... 73
         8.05.    Performance by Administrative Agent or any Lender............................................. 73
         8.06.    Expenditures.................................................................................. 73
         8.07.    Control....................................................................................... 73

         ARTICLE IX.  THE ADMINISTRATIVE AGENT

         9.01.    Authorization and Action...................................................................... 74
         9.02.    Administrative Agent's Reliance, Etc.......................................................... 74
         9.03.    NationsBank of Texas, National Association and Affiliates..................................... 74
         9.04.    Lender Credit Decision........................................................................ 75
         9.05.    Indemnification by Lenders.................................................................... 75
         9.06.    Successor Administrative Agent................................................................ 75

         ARTICLE X.  MISCELLANEOUS

         10.01.   Amendments and Waivers........................................................................ 76
         10.02.   Notices   76
         10.03.   Parties in Interest........................................................................... 79
         10.04.   Assignments and Participations................................................................ 79
         10.05.   Sharing of Payments........................................................................... 80
         10.06.   Right of Set-off.............................................................................. 80
         10.07.   Costs, Expenses, and Taxes.................................................................... 80
         10.08.   Indemnification by the Borrower............................................................... 81
         10.09.   Rate Provision................................................................................ 82
         10.10.   Severability.................................................................................. 82
         10.11.   Exceptions to Covenants....................................................................... 82
         10.12.   Counterparts.................................................................................. 82
         10.13.   GOVERNING LAW; WAIVER OF JURY TRIAL........................................................... 83
         10.14.   ENTIRE AGREEMENT.............................................................................. 83


100\269\91946                    iii
<PAGE>
                         TABLE OF SCHEDULES AND EXHIBITS



                                    SCHEDULES

         Schedule 1.01A    Systems
         Schedule 1.01B    AUSP Financing Agreements; Project Agreements
         Schedule 1.02     Prior Stock Lien on Capital Stock of GCI Leasing
         Schedule 3.23     Project Agreements
         Schedule 5.01     Organization and Qualification of the GCI Entities
         Schedule 5.03     Consents under Material Agreements
         Schedule 5.05     Litigation
         Schedule 5.07a    Authorizations
         Schedule 5.07b    County and State Locations of Assets
         Schedule 5.08a    Debt, Contingent  Liabilities and Liens of the
                           Borrower and each other GCI Entity in Existence on
                           the Closing Date
         Schedule 5.11     Environmental Liabilities of the GCI Entities on the
                           Closing Date
         Schedule 5.13     Investments and GCI Entities
         Schedule 5.14     Fees Payable
         Schedule 7.02     Subordination Terms





                                    EXHIBITS


         Exhibit A       -       Form of Revolver/Term Note
         Exhibit B       -       Assignment and Acceptance
         Exhibit C       -       Form of Pledge and Security Agreement
         Exhibit D       -       Form of Compliance Certificate
         Exhibit E       -       Form of Conversion/Continuation Notice
         Exhibit F       -       Form of Borrowing Notice
         Exhibit G       -       Form of Intercompany Note
         Exhibit H       -       Form of Certificate


</TABLE>
100\269\91946                    iv
<PAGE>


                               GCI HOLDINGS, INC.

                                   $50,000,000

                      AMENDED AND RESTATED CREDIT AGREEMENT

         THIS AMENDED AND RESTATED CREDIT  AGREEMENT is dated as of November 14,
1997 and is between GCI HOLDINGS, INC., an Alaska corporation, (the "Borrower"),
the Lenders from time to time party hereto or to an Assignment  and  Acceptance,
and NATIONSBANK OF TEXAS, N.A., a national banking association  ("NationsBank"),
as a Lender  and  Administrative  Agent  (the  "Administrative  Agent"),  CREDIT
LYONNAIS  NEW YORK BRANCH  ("Credit  Lyonnais")  as  Documentation  Agent and TD
SECURITIES  (USA),  INC.  ("TD"),  as Syndication  Agent,  (NationsBank,  Credit
Lyonnais and TD being collectively referred to herein as the "Managing Agents").


                                   BACKGROUND

         1. The Borrower,  the Administrative Agent and the Lenders entered into
a Credit Agreement dated as of August 1, 1997 (the "Original Credit  Agreement")
which provides for a 364 day revolving credit facility up to a maximum amount of
$50,000,000, which converts to a term loan on the 364th day after closing.

         2. The Borrower,  the Administrative Agent and the Lenders party hereto
agree to amend and restate the Original Credit Agreement as follows:


                                    AGREEMENT

         NOW, THEREFORE,  for valuable  consideration hereby  acknowledged,  the
parties hereto agree as follows:

                             ARTICLE I. DEFINITIONS

         1.01. Definitions.  As used in this Agreement, the following terms have
the respective  meanings indicated below (such meanings to be applicable equally
to both the singular and plural forms of such terms):

         "Administrative   Agent"   means   NationsBank   of   Texas,   National
Association, in its capacity as Administrative Agent hereunder, or any successor
Administrative Agent appointed pursuant to Section 9.06 hereof.



100\269\91946
<PAGE>
         "Advance" means an advance made by a Lender to the Borrower pursuant to
Section 2.01 hereof.

         "Affiliate" means a Person that directly,  or indirectly through one or
more  intermediaries,  Controls or is Controlled  By or is Under Common  Control
with another  Person,  and with  respect to the  Borrower,  "Affiliate"  means a
Person that directly, or indirectly through one or more intermediaries, Controls
or is  Controlled  By or is Under  Common  Control with GCI, the Borrower or any
Subsidiary of the Borrower or GCI.

         "Agreement"  means  this  Credit  Agreement,   as  hereafter   amended,
modified, or supplemented in accordance with its terms.

         "Annualized   Operating   Cash   Flow"   means,   as  of  any  date  of
determination,  the  product of two times  Operating  Cash Flow for the two most
recently ended fiscal quarters;  provided that notwithstanding the preceding and
any  other  provision  in  this  Agreement  or in the  Loan  Papers,  Annualized
Operating Cash Flow for any period prior to the Closing Date shall be determined
by using the relevant financial information of the Restricted Subsidiaries.

         "Applicable Law" means (a) in respect of any Person,  all provisions of
Laws  applicable  to such  Person,  and all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a party
and (b) in  respect  of  contracts  made or  performed  in the  State of  Texas,
"Applicable  Law"  shall  also mean the laws of the  United  States of  America,
including, without limiting the foregoing, 12 USC Sections 85 and 86, as amended
to the date  hereof  and as the same may be amended at any time and from time to
time hereafter,  and any other statute of the United States of America now or at
any time  hereafter  prescribing  the  maximum  rates of  interest  on loans and
extensions  of credit,  and the laws of the State of Texas,  including,  without
limitations,  Articles 5069-1H, Title 79, Revised Civil Statutes of Texas, 1925,
as amended ("Art. 1H"), if applicable, and if Art. 1H is not applicable, Article
5069-1D,  Title 79,  Revised  Civil  Statutes  of Texas,  1925 ("Art.  1D"),  as
amended,  and any  other  statute  of the  State  of  Texas  now or at any  time
hereafter  prescribing  maximum  rates of  interest on loans and  extensions  of
credit,  provided  however,  that pursuant to Article  5069-15.10(b),  Title 79,
Revised Civil Statutes of Texas, 1925, as amended,  the Borrower agrees that the
provisions of Chapter 15, Title 79,  Revised Civil  Statutes of Texas,  1925, as
amended, shall not apply to the Advances hereunder.

         "Applicable  Margin"  means (i) with respect to the Base Rate  Advances
under the  Facility,  1.125% per annum and (ii) with  respect to LIBOR  Advances
under the Facility, 2.250% per annum.  Notwithstanding the foregoing,  effective
three Business Days after receipt by the Administrative  Agent from the Borrower
of a  Compliance  Certificate  delivered  to the  Lenders  for  any  reason  and
demonstrating  a change in the Total Leverage Ratio to an amount so that another
Applicable  Margin should be applied  pursuant to the table set forth below, the
Applicable  Margin for each type of Advance shall mean the respective amount set
forth below  opposite  such  relevant  Total  Leverage  Ratio in Columns A and B
below, in each case until the first succeeding  Quarterly Date which is at least
three Business Days after receipt by the


100\269\91946                    2
<PAGE>
Administrative   Agent  from  the   Borrower   of  a   Compliance   Certificate,
demonstrating  a change in the Total Leverage Ratio to an amount so that another
Applicable Margin shall be applied;  provided that, if there exists a Default or
if the Total  Leverage  Ratio shall at any time be greater than or equal to 6.50
to 1.00, the Applicable  Margin shall again be the respective  amounts first set
forth in this definition; provided further, that the Applicable Margin in effect
on the Closing Date shall be  determined  pursuant to a  Compliance  Certificate
delivered on the Closing Date, provided,  further, that if the Borrower fails to
deliver any financial statements to the Administrative Agent within the required
time  periods set forth in Sections  6.05(a) and  Section  6.05(b)  hereof,  the
Applicable Margin shall again be the respective  amounts first set forth in this
definition until the date which is three Business Days after the  Administrative
Agent receives  financial  statements from the Borrower which  demonstrate  that
another  Applicable  Margin  should be applied  pursuant  to the table set forth
below;  and  provided  further,  that the  Applicable  Margin  shall  never be a
negative number.
<TABLE>
<CAPTION>
                                                                      Column A         Column B

Total Leverage Ratio                                                  Base Rate         LIBOR
--------------------                                                  ---------         -----
<S>                                                                    <C>              <C>
Greater than or equal to
6.50 to 1.00                                                           1.125%           2.250%

Greater than or equal to
6.00 to 1.00 but less than
6.50 to 1.00                                                           0.750%           1.875%

Greater than or equal to
5.50 to 1.00 but less than
6.00 to 1.00                                                           0.500%           1.625%

Greater than or equal to
5.00 to 1.00 but less than
5.50 to 1.00                                                           0.250%           1.375%

Greater than or equal to
4.50 to 1.00 but less than
5.00 to 1.00                                                           0.000%           1.125%

Greater than or equal to
4.00 to 1.00 but less than
4.50 to 1.00                                                           0.000%           1.000%

Less than                                                              0.000%           0.750%
4.00 to 1.00
</TABLE>

         "Art.  1H"  has the  meaning  specified  in the  definition  herein  of
"Applicable Law".



100\269\91946                    3
<PAGE>
         "Art.  1D"  has the  meaning  specified  in the  definition  herein  of
"Applicable Law".

         "Asset Sale" means any sale,  disposition,  liquidation,  conveyance or
transfer by the  Borrower  or any  Restricted  Subsidiary  of any  Property  (or
portion thereof) or an interest (other than Permitted Dispositions and Permitted
Liens or a Lien  granted to the  Administrative  Agent on behalf of the Lenders)
therein, other than in the ordinary course of business.

         "Assignment and Acceptance" means an assignment and acceptance  entered
into by a Lender and an Eligible Assignee, and accepted by Administrative Agent,
in the  form of  Exhibit  B  hereto,  as each  such  agreement  may be  amended,
modified,  extended,  restated,  renewed,  substituted  or replaced from time to
time.

         "Auditor"  means  KPMG  Peat  Marwick,  L.L.P.,  or  other  independent
certified  public  accountants  selected  by  the  Borrower  and  acceptable  to
Administrative Agent.

         "AUSP" means Alaska United Fiber System Partnership,  an Alaska general
partnership  and  Unrestricted  Subsidiary,  which  is a wholly  owned  indirect
Subsidiary of the Borrower.

         "AUSP Closing Date" means the closing date for the AUSP Financing,  but
in no event later than March 31, 1998.

         "AUSP Credit  Agreement" means the Credit and Security  Agreement among
AUSP, the lenders referred to therein,  Credit Lyonnais as administrative agent,
NationsBank as syndication agent, and TD as documentation  agent,  substantially
similar in all  material  respects in form and  substance  to the draft  thereof
dated November 5, 1997, as amended,  restated or otherwise modified from time to
time (it  being  understood  that  nothing  herein  shall be  deemed  to  permit
amendments contrary to Section 7.18 hereof).

         "AUSP  Financing"  means that certain credit  facility for AUSP, in the
maximum amount of $75,000,000 pursuant to the AUSP Credit Agreement.

         "AUSP Financing Agreements" means those certain credit,  collateral and
other  agreements  described on Schedule 1.01B hereto  evidencing and related to
the AUSP Financing,  and such other  agreements as may hereafter be entered into
from time to time which  materially and adversely  affect the obligations of the
Borrower or the Restricted  Subsidiaries  in connection with the AUSP Financing;
such AUSP  Financing  Agreements  to be  substantially  similar in all  material
respects in form and  substance to drafts  thereof dated  November 4, 1997,  and
which may be amended, restated or otherwise modified from time to time.

         "Authorizations" means all filings,  recordings and registrations with,
and all validations or exemptions, approvals, orders, authorizations,  consents,
Licenses,  certificates and permits from, the FCC,  applicable  public utilities
and other  federal,  state and  local  regulatory  or  governmental  bodies  and
authorities or any  subdivision  thereof,  including,  without  limitation,  FCC
Licenses.



100\269\91946                    4
<PAGE>
         "Authorized   Officer"  means  any  of  the   President,   Senior  Vice
President-Chief Financial Officer, Vice President-Chief Accounting Officer, Vice
President-Finance,  Secretary-Treasurer,  or any other officer authorized by the
Borrower from time to time of which the  Administrative  Agent has been notified
in writing.

         "Bank Affiliate" means the holding company of any Lender, or any wholly
owned direct or indirect subsidiary of such holding company or of such Lender.

         "Base Rate Advance" means an Advance bearing interest at the Base Rate.

         "Base  Rate" means a  fluctuating  rate per annum as shall be in effect
from time to time equal to the lesser of (a) the Highest Lawful Rate and (b) the
sum of the  Applicable  Margin plus the greater of (i) the sum of Federal  Funds
Rate in effect from time to time plus .50% and (ii) the rate of interest as then
in effect announced publicly by NationsBank of Texas, N.A. in Dallas, Texas from
time to time as its U.S. dollar prime commercial  lending rate (such rate may or
may not be the  lowest  rate of  interest  charged by  NationsBank  from time to
time).  The Base Rate  shall be  adjusted  automatically  as of the  opening  of
business on the  effective  date of each change in the prime rate to account for
such change.

         "Borrower" means GCI Holdings, Inc., an Alaska corporation.

         "Borrowing"  means a borrowing under the Facility of the same Type made
on the same day.

         "Borrowing Notice" has the meaning set forth in Section 2.02(a) hereof.

         "Business  Day" means a day of the year on which banks are not required
or authorized to close in Dallas,  Texas and, if the  applicable  day relates to
any notice, payment or calculation related to a LIBOR Advance, London, England.

         "Capital  Expenditures"  means the aggregate amount of all purchases or
acquisitions  of items  considered  to be capital  items under GAAP,  and in any
event  shall  include the  aggregate  amount of items  leased or acquired  under
Capital  Leases at the cost of the item, and the  acquisition of realty,  tools,
equipment,  and fixed assets,  and any deferred costs associated with any of the
foregoing.

         "Capital  Leases" means  capital  leases and  subleases,  as defined in
accordance with GAAP.

         "Capital Stock" means, as to any Person,  the equity  interests in such
Person, including, without limitation, the shares of each class of capital stock
of any Person  that is a  corporation  and each class of  partnership  interests
(including  without  limitation,  general,  limited and preference units) in any
Person that is a partnership.



100\269\91946                    5
<PAGE>
         "Cash  Equivalents"  means  investments  (directly  or  through a money
market fund) in (a)  certificates of deposit and other interest bearing deposits
or accounts with United States  commercial  banks having a combined  capital and
surplus of at least  $250,000,000,  which certificates,  deposits,  and accounts
mature within one year from the date of  investment  and are fully insured as to
principal by the FDIC, (b) obligations issued or  unconditionally  guaranteed by
the United States  government,  or issued by an agency thereof and backed by the
full faith and credit of the United States government,  which obligations mature
within one year from the date of investment,  (c) direct  obligations  issued by
any state or political subdivision of the United States, which mature within one
year from the date of investment  and have the highest  rating  obtainable  from
Standard & Poor's Ratings Group or Moody's Investors Services,  Inc. on the date
of  investment,  and (d)  commercial  paper  which has one of the three  highest
ratings  obtainable  from Standard & Poor's  Ratings Group or Moody's  Investors
Services, Inc.

         "Change  of  Control"  means  the  occurrence  of  one or  more  of the
following  events:  (a) any  change  in the  ownership  of the  Borrower  or any
Restricted  Subsidiary  (except  any change  due to any merger or  consolidation
among the  Wholly-Owned  Subsidiaries) or (b) any change in the ownership of GCI
resulting in MCI or any of its wholly-owned  Subsidiaries,  owning less than 18%
of the total  combined  voting  power of GCI,  or (c) MCI shall at any time have
less than two representatives sitting on the GCI's Board of Directors.

         "Closing Date" means August 1, 1997.

         "Code" means the Internal  Revenue  Code of 1986,  as amended,  and the
rules and regulations issued thereunder, as from time to time in effect.

         "Collateral"  means all "collateral"  referred to in any Loan Paper and
all  other  property  which is or may be  subject  to a Lien in favor or for the
benefit of Administrative Agent on behalf of Lenders or any Lender to secure the
Obligations,  including, without limitation,  "Collateral" as defined in Section
2.15(a) hereof.

         "Commitment  Fees" means each of the fees described in Sections 2.10(a)
and 2.10(b) hereof.

         "Completion  Guaranty" means that certain completion  guaranty from the
Borrower  that  is a  Project  Agreement  and is  substantially  similar  in all
material  respects in form and substance to the draft thereof dated  November 4,
1997, as such guaranty may be amended,  restated or otherwise modified from time
to time.

         "Compliance  Certificate"  means a certificate of an Authorized Officer
of the Borrower  acceptable to  Administrative  Agent,  in the form of Exhibit D
hereto,  (a) certifying  that such individual has no knowledge that a Default or
Event of Default has  occurred  and is  continuing,  or if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof and
the action  being taken or proposed to be taken with  respect  thereto,  and (b)
setting  forth  detailed  calculations  with  respect  to each of the  covenants
described in Section 7.01 hereof.



100\269\91946                    6
<PAGE>
         "Consequential Loss," with respect to (a) the Borrower's payment of all
or any portion of the then-outstanding  principal amount of a LIBOR Advance on a
day other than the last day of the related Interest Period,  including,  without
limitation,  payments made as a result of the  acceleration of the maturity of a
Note, (b) (subject to  Administrative  Agents' prior  consent),  a LIBOR Advance
made on a date other than the date on which the Advance is to be made  according
to Section  2.02(a)  or Section  2.09  hereof,  or (c) any of the  circumstances
specified  in Section  2.04,  Section  2.05 and  Section  2.06 hereof on which a
Consequential Loss may be incurred,  means any loss, cost or expense incurred by
any  Lender  as a  result  of  the  timing  of  the  payment  or  Advance  or in
liquidating,  redepositing,  redeploying or reinvesting the principal  amount so
paid or affected by the timing of the Advance or the circumstances  described in
Section 2.04,  Section 2.05, and Section 2.06 hereof,  which amount shall be the
sum of (i) the  interest  that,  but for the payment or timing of Advance,  such
Lender would have earned in respect of that principal amount,  reduced,  if such
Lender is able to redeposit,  redeploy, or reinvest the principal amount, by the
interest  earned  by such  Lender as a result of  redepositing,  redeploying  or
reinvesting  the principal  amount plus (ii) any expense or penalty  incurred by
such Lender by reason of liquidating,  redepositing,  redeploying or reinvesting
the principal  amount.  Each  determination by each Lender of any  Consequential
Loss is, in the absence of manifest error, conclusive and binding.

         "Contingent  Liability"  means,  as  to  any  Person,  any  obligation,
contingent  or  otherwise,  of such Person  guaranteeing  or having the economic
effect of guaranteeing any Debt or obligation of any other Person in any manner,
whether directly or indirectly,  including without  limitation any obligation of
such Person,  direct or  indirect,  (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt, (b)
to purchase  Property or services  for the purpose of assuring the owner of such
Debt of its payment, or (c) to maintain the solvency,  working capital,  equity,
cash  flow,  fixed  charge  or other  coverage  ratio,  or any  other  financial
condition of the primary  obligor so as to enable the primary obligor to pay any
Debt or to comply with any  agreement  relating to any Debt or  obligation,  and
shall,  in any event,  include  any  contingent  obligation  under any letter of
credit, application for any letter of credit or other related documentation.

         "Continue,"   "Continuation"   and   "Continued"   each  refer  to  the
continuation  pursuant  to  Section  2.09  hereof  of a LIBOR  Advance  from one
Interest Period to the next Interest Period.

         "Control" or "Controlled By" or "Under Common Control" mean possession,
direct or indirect,  of power to direct or cause the  direction of management or
policies  (whether  through  ownership  of voting  securities,  by  contract  or
otherwise);  provided  that,  in any event (a) it shall include any director (or
Person holding the equivalent  position) or executive officer (or Person holding
the equivalent  position) of such Person or of any Affiliate of such Person, (b)
any  Person  which  beneficially  owns 5% or more (in  number  of  votes) of the
securities  having  ordinary  voting  power for the  election of  directors of a
corporation shall be conclusively presumed to control such corporation,  (c) any
general  partner of any partnership  shall be  conclusively  presumed to control
such  partnership,  (d) any other Person who is a member of the


100\269\91946                    7
<PAGE>
immediate  family  (including  parents,  spouse,  siblings and  children) of any
general partner of a partnership,  and any trust whose principal  beneficiary is
such  individual or one or more members of such immediate  family and any Person
who is controlled by any such member or trust, or is the executor, administrator
or other personal  representative of such Person, shall be conclusively presumed
to control such Person,  and (e) no Person shall be deemed to be an Affiliate of
a  corporation  solely by reason of his being an  officer  or  director  of such
corporation.

         "Controlled Group" means, as to any Person, all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
which are under common  control with such Person and which,  together  with such
Person,  are treated as a single employer under Section 414(b),  (c), (m) or (o)
of the Code.

         "Conversion  Date"  means the date that is 364 days  after the  Closing
Date.

         "Conversion or Continuance Notice" has the meaning set forth in Section
2.09(b) hereof.

         "Debt"  means  all  obligations,  contingent  or  otherwise,  which  in
accordance  with GAAP are  required to be  classified  on the  balance  sheet as
liabilities,  and in any event including Capital Leases,  Contingent Liabilities
that are  required  to be  disclosed  and  quantified  in notes to  consolidated
financial  statements in accordance  with GAAP, and  liabilities  secured by any
Lien on any Property,  regardless  of whether such secured  liability is with or
without recourse.

         "Debt for Borrowed Money" means, as to any Person, at any date, without
duplication,  (a) all  obligations  of such Person for borrowed  money,  (b) all
obligations of such Person  evidenced by bonds,  debentures,  notes,  letters of
credit (or applications for letters of credit) or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services,  except  trade  accounts  payable  arising in the  ordinary  course of
business and (d) all  obligations of such Person secured by a Lien on any assets
or property of any Person.

         "Debtor  Relief  Laws"  means  applicable  bankruptcy,  reorganization,
moratorium,  or similar Laws, or principles of equity  affecting the enforcement
of creditors' rights generally.

         "Default" means any event specified in Section 8.01 hereof,  whether or
not any  requirement  in  connection  with such  event for the giving of notice,
lapse of time, or happening of any further condition has been satisfied.

         "Distribution"  means, as to any Person, (a) any declaration or payment
of any  distribution or dividend (other than a stock dividend) on, or the making
of any pro rata distribution,  loan,  advance, or investment to or in any holder
(in its  capacity  as a partner,  shareholder  or other  equity  holder) of, any
partnership interest or shares of capital stock or other equity interest of such
Person, or (b) any purchase,  redemption, or other acquisition or retirement for
value of any shares of  partnership  interest or capital  stock or other  equity
interest of such Person.



100\269\91946                    8
<PAGE>
         "Eligible Assignee" means (a) any Bank Affiliate, (b) a commercial bank
organized under the laws of the United States, or any state thereof,  and having
total assets in excess of  $500,000,000;  (c) a commercial  bank organized under
the laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having total assets in excess of $500,000,000, provided that such bank is acting
through a branch or agency  located in the country in which it is  organized  or
another  country which is described in this clause;  and (d) the central bank of
any country which is a member of the Organization  for Economic  Cooperation and
Development.

         "Environmental  Laws" means the Comprehensive  Environmental  Response,
Compensation,  and Liability  Act (42 U.S.C.  ss.9601 et seq.)  ("CERCLA"),  the
Hazardous Material  Transportation Act (49 U.S.C. ss.1801 et seq.), the Resource
Conservation  and Recovery  Act (42 U.S.C  ss.6901 et seq.),  the Federal  Water
Pollution Control Act (33 U.S.C.  ss.1251 et seq.), the Clean Air Act (42 U.S.C.
ss.7401 et seq.), the Toxic Substances Control Act (15 U.S.C.  ss.2601 et seq.),
and the Occupational  Safety and Health Act (29 U.S.C. ss.651 et seq.) ("OSHA"),
as such laws have been or hereafter may be amended or supplemented,  and any and
all analogous future federal, or present or future state or local, Laws.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, and the rulings and regulations issued thereunder, as from time to time
in effect.

         "ERISA  Affiliate"  means any Person  that for  purposes of Title IV of
ERISA is a member of the controlled group of GCI, the Borrower or any Subsidiary
of GCI or the Borrower, or is under common control with GCI, the Borrower or any
Subsidiary of GCI or the Borrower,  within the meaning of Section  414(c) of the
Code.

         "ERISA  Event"  means (a) a  reportable  event,  within the  meaning of
Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto
has been waived by the PBGC, (b) the issuance by the  administrator  of any Plan
of a notice of intent to terminate such Plan in a distress  situation,  pursuant
to Section  4041(a)(2)  and  4041(c) of ERISA  (including  any such  notice with
respect to a plan amendment  referred to in Section  4041(e) of ERISA),  (c) the
cessation of operations at a facility in the circumstances  described in Section
4062(e) of ERISA,  (d) the  withdrawal  by the Borrower,  any  Subsidiary of the
Borrower or GCI, or an ERISA  Affiliate  from a Multiple  Employer Plan during a
Plan  year for  which it was a  substantial  employer,  as  defined  in  Section
4001(a)(2)  of ERISA,  (e) the failure by the  Borrower,  any  Subsidiary of the
Borrower or either  Parent,  or any ERISA  Affiliate to make a payment to a Plan
required under Section 302 of ERISA,  (f) the adoption of an amendment to a Plan
requiring  the  provision  of security to such Plan,  pursuant to Section 307 of
ERISA,  or (g) the  institution  by the PBGC of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA,  or the  occurrence of any event or condition
that constitutes  grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, a Plan.



100\269\91946                    9
<PAGE>
         "Event of Default"  means any of the events  specified  in Section 8.01
hereof,  provided  there  has  been  satisfied  any  requirement  in  connection
therewith  for the giving of notice,  lapse of time, or happening of any further
condition.

         "Excess Cash Flow" means, for the most recently  completed fiscal year,
the  difference  between  Operating Cash Flow for such year minus the sum of (a)
Total Interest Expense for such year, plus (b) scheduled repayments of principal
of Total Debt (whether by installment or as a result of a scheduled reduction in
a revolving commitment, or otherwise) for such year, plus (c) permitted payments
or loans  made to AUSP with  cash from the  operations  of the  Borrower  or its
Restricted  Subsidiaries during such year, (d) Capital  Expenditures made during
such  year and  financed  with  cash  from  operations  of the  Borrower  or its
Restricted Subsidiaries, plus (e) not more than $2,000,000 in working capital of
the  Borrower,  plus (f) cash taxes for GCII,  the Borrower  and its  Restricted
Subsidiaries with respect to such year, whether accrued or paid.

         "Facility" means the Revolver/Term Loan.

         "FCC" means the Federal  Communications  Commission  and any  successor
thereto.

         "FCC License"  means any community  antenna  relay  service,  broadcast
auxiliary  license,  earth station  registration,  business radio,  microwave or
special  safety  radio  service  license  issued  by  the  FCC  pursuant  to the
Communications  Act of 1934, as amended,  and any other FCC license from time to
time necessary or advisable for the operation of the Parent's, the Borrower's or
any of their Subsidiaries' business.

         "Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the  weighted  average of the
rates on  overnight  federal  funds  transactions  with  members of the  Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next  preceding  Business Day) by the
Federal Reserve Bank of Dallas, or, if such rate is not so published for any day
which is a Business  Day,  the average of the  quotations  for such date on such
transactions  received by Administrative  Agent from three federal funds brokers
of recognized standing selected by it.

         "Fee Letters" means that certain letter agreement, dated June 30, 1997,
addressed to the Borrower  and  acknowledged  by the  Borrower,  and  describing
certain  fees  payable  to the  Administrative  Agent in  connection  with  this
Agreement  and the  Facility,  and such  other fee letter  agreements  as may be
executed  from time to time among the  parties  hereto,  as each may be amended,
modified, substituted or replaced by the parties thereto.

         "Fiber  Lease" means that certain lease  agreement  entered into by GCI
Communication  Corp.  with AUSP, for lease of a portion of AUSP's fiber network,
which lease constitutes a Project Agreement and is substantially  similar in all
material  respects in form and substance to the draft thereof dated  November 4,
1997, as such  agreement may be amended,  restated,  or otherwise  modified from
time to time.



100\269\91946                    10
<PAGE>
         "Fixed  Charges"  means,  for the most recently  completed  four fiscal
quarters,  the sum of (a) cash Total Interest Expense paid or accrued,  plus (b)
scheduled  repayments of principal of Total Debt (whether by installment or as a
result of a scheduled reduction in a revolving commitment,  or otherwise),  plus
(c) cash  taxes  paid or  accrued  for GCII,  the  Borrower  and its  Restricted
Subsidiaries,  plus (d) cash  payments  (in the form of  capital  contributions,
loans,  advances or otherwise)  made to  Unrestricted  Subsidiaries  (including,
without  limitation,  AUSP, except scheduled lease payments made pursuant to the
Fiber Lease, payments under the Lease Guaranty, and scheduled payments under the
O&M Contract that is a Project Agreement), plus (e) Capital Expenditures made by
any of the Borrower and its Restricted Subsidiaries.

         "Fixed Charges Coverage Ratio" means the ratio of Annualized  Operating
Cash Flow to Fixed Charges.

         "Funded Debt" means, without  duplication,  with respect to any Person,
all Debt of such  Person,  determined  on a  consolidated  basis and measured in
accordance with GAAP that is either (a) Debt for Borrowed Money, (b) Debt having
a final  maturity  (or  extendable  at the  option of the  obligor  for a period
ending) more than one year after the date of creation  thereof,  notwithstanding
the fact that  payments  are  required  to be made less than one year after such
date, (c) Capital Lease  obligations  (without  duplication),  (d) reimbursement
obligations relating to letters of credit,  without duplication,  (e) Contingent
Liabilities  relating  to  any  of  the  foregoing  (without  duplication),  (f)
Withdrawal  Liability,   (g)  Debt,  if  any,  associated  with  Interest  Hedge
Agreements, (h) payments due under Non-Compete Agreements, plus (i) payments due
for the deferred  purchase price of property and services (but  excluding  trade
payables that are less than 90 days old and any thereof that are being contested
in good faith).

         "GAAP" means  generally  accepted  accounting  principles  applied on a
consistent  basis.  Application  on a  consistent  basis  shall  mean  that  the
accounting  principles  observed  in a  current  period  are  comparable  in all
material  respects  to those  applied  in a  preceding  period,  except  for new
developments  or statements  promulgated by the Financial  Accounting  Standards
Board.

         "GCI" means General  Communication,  Inc., an Alaska  corporation,  and
immediate parent and holder of 100% of the Capital Stock of GCII.

         "GCI  Entities"  means  the  Borrower,  the  Parents,  each  Restricted
Subsidiary  and each  Guarantor  from time to time in  existence,  and any other
Person from time to time  constituting  a Subsidiary of Parents or the Borrower,
except the Unrestricted Subsidiaries.

         "GCII" means GCI, Inc., an Alaska corporation, and immediate parent and
holder of 100% of the Capital Stock of the Borrower.



100\269\91946                    11
<PAGE>
         "Guarantors" means GCII, GCI Communication Services,  Inc., GCI Leasing
Co., Inc., GCI Communication  Corp.  (including,  without  limitation,  the Long
Distance  Division and the Local & Wireless  Division),  GCI Cable,  Inc.,  each
Subsidiary of GCI Cable,  Inc., each other Restricted  Subsidiary and each other
Person  from  time  to  time  guaranteeing  payment  of the  Obligations  to the
Administrative Agent and Lenders.

         "Guaranty"  of a  Person  means  any  agreement  by which  such  Person
assumes, guarantees,  endorses, contingently agrees to purchase or provide funds
for the payment of, or otherwise  becomes  liable upon,  the  obligation  of any
other  Person,  or agrees to maintain the net worth or working  capital or other
financial  condition of any other Person,  or otherwise  assures any creditor or
such other Person against loss,  including,  without  limitation,  any agreement
which assures any creditor or such other Person  payment or  performance  of any
obligation,  or any take-or-pay  contract and shall include without  limitation,
the contingent liability of such Person in connection with any application for a
letter of credit  (without  duplication  of any amount  already  included in its
Debt).

         "Hazardous  Materials" means all materials subject to any Environmental
Law,  including  without  limitation  materials listed in 49 C.F.R. ss. 172.101,
Hazardous  Substances,  explosive or radioactive  materials,  hazardous or toxic
wastes or substances, petroleum or petroleum distillates,  asbestos, or material
containing asbestos.

         "Hazardous  Substances"  means  hazardous waste as defined in the Clean
Water Act, 33 U.S.C. ss. 1251 et seq., the Comprehensive  Environmental Response
Compensation  and  Liability  Act as amended  by the  Superfund  Amendments  and
Reauthorization  Act, 42 U.S.C.  ss.  9601 et seq.,  the  Resource  Conservation
Recovery Act, 42 U.S.C. ss. 6901 et seq., and the Toxic Substances  Control Act,
15 U.S.C. ss. 2601 et seq.

         "Highest  Lawful  Rate" means at the  particular  time in question  the
maximum rate of interest which,  under Applicable Law,  Administrative  Agent is
then  permitted  to charge on the  Obligations.  If the maximum rate of interest
which,  under  Applicable  Law,  such  Lender  is  permitted  to  charge  on the
Obligations shall change after the date hereof, the Highest Lawful Rate shall be
automatically  increased or decreased,  as the case may be, from time to time as
of the effective  time of each change in the Highest  Lawful Rate without notice
to the  Borrower.  For  purposes of  determining  the Highest  Lawful Rate under
Applicable  Law, the  applicable  rate ceiling shall be (a) the  indicated  rate
ceiling  described in and computed in accordance with the provisions of Art. lH;
or (b) either the annualized  ceiling or quarterly  ceiling computed pursuant to
 .008 of Art. 1D; provided, however, that at any time the indicated rate ceiling,
the annualized  ceiling or the quarterly ceiling,  as applicable,  shall be less
than 18% per  annum or more  than 24% per  annum,  the  provisions  of  Sections
 .009(a)  and  .009(b)  of said  Art.  lD  shall  control  for  purposes  of such
determination, as applicable.

         "Indemnitees" has the meaning ascribed thereto in Section 6.09 hereof.



100\269\91946                    12
<PAGE>
         "Indenture"  means the  Indenture  dated as of August 1, 1997,  between
GCII and The Bank of New York, as Trustee, providing for the Senior Notes.

         "Initial Advance" means the initial Advance made in accordance with the
terms hereof,  which shall only be after the Borrower has satisfied  each of the
conditions  set forth in  Section  4.01 and  Section  4.02  hereof  (or any such
condition shall have been waived by each Lender).

         "Installment  Percentage"  means, with respect to Advances  outstanding
under the  Revolver/Term  Loan,  a  percentage  of the  aggregate  Revolver/Term
Advances outstanding on the Conversion Date.

         "Insufficiency" means, with respect to any Plan, the amount, if any, of
its unfunded benefit  liabilities  within the meaning of Section  4001(a)(18) of
ERISA.

         "Intercompany  Notes" means those notes,  substantially  in the form of
Exhibit G hereto,  evidencing loans and/or advances made by the Borrower to AUSP
under the Keepwell Agreement or the Completion Guaranty,  and made in accordance
with the terms of Section 7.10(g) hereof.

         "Interest  Coverage Ratio" means as of any date of  determination,  the
ratio of (a) Annualized  Operating  Cash Flow to (b) Total Interest  Expense for
the most recently completed four fiscal quarters, provided that, notwithstanding
the preceding and any other  provision in this  Agreement or in the Loan Papers,
for the first three  fiscal  quarters  after the Closing  Date only,  Annualized
Operating  Cash  Flow  and  Total  Interest   Expense  shall  be  determined  by
annualizing  the relevant  financial  information  of GCII, the Borrower and the
Restricted Subsidiaries from the Closing Date through the date of determination;
and provided further that  notwithstanding the preceding and any other provision
in this  Agreement or in the Loan  Papers,  Annualized  Operating  Cash Flow and
Total  Interest  Expense  for any  period  prior to the  Closing  Date  shall be
determined  by  using  the  relevant  financial  information  of the  Restricted
Subsidiaries.

         "Interest Hedge  Agreements"  means any interest rate swap  agreements,
interest  cap  agreements,  interest  rate  collar  agreements,  or any  similar
agreements or arrangements  designed to hedge the risk of variable interest rate
volatility,  or foreign currency hedge, exchange or similar agreements, on terms
and  conditions  reasonably  acceptable to  Administrative  Agent  (evidenced by
Administrative  Agent's consent in writing),  as such agreements or arrangements
may  be  modified,   supplemented,   and  in  effect  from  time  to  time,  and
notwithstanding the above, fixed rate Debt for Borrowed Money shall be deemed an
Interest Hedge Agreement.

         "Interest Period" means, with respect to any LIBOR Advance,  the period
beginning on the date an Advance is made or  continued  as or  converted  into a
LIBOR  Advance  and ending  one,  two,  three or six months  thereafter  (as the
Borrower shall select) provided, however, that:



100\269\91946                    13
<PAGE>
                  (a) the Borrower may not select any Interest  Period that ends
         after any principal repayment date unless,  after giving effect to such
         selection,  the aggregate  principal  amount of LIBOR  Advances  having
         Interest Periods that end on or prior to such principal repayment date,
         shall be at least equal to the  principal  amount of  Advances  due and
         payable on and prior to such date;

                  (b)  whenever  the  last  day of  any  Interest  Period  would
         otherwise  occur on a day other  than a Business  Day,  the last day of
         such Interest  Period shall be extended to occur on the next succeeding
         Business Day, provided, however, that if such extension would cause the
         last  day of such  Interest  Period  to  occur  in the  next  following
         calendar month, the last day of such Interest Period shall occur on the
         next preceding Business Day; and

                  (c) whenever the first day of any Interest  Period occurs on a
         day of an  initial  calendar  month for which  there is no  numerically
         corresponding  day in the  calendar  month that  succeeds  such initial
         calendar month by the number of months equal to the number of months in
         such  Interest  Period,  such  Interest  Period  shall  end on the last
         Business Day of such succeeding calendar month.

         "Investment"  means any acquisition of all or substantially  all assets
of any Person,  or any direct or indirect purchase or other acquisition of, or a
beneficial  interest in, capital stock or other  securities of any other Person,
or any direct or indirect  loan,  advance  (other than advances to employees for
moving and travel expenses,  drawing accounts,  and similar  expenditures in the
ordinary  course of business),  or capital  contribution to or investment in any
other Person,  including without limitation the incurrence or sufferance of Debt
or accounts receivable of any other Person that are not current assets or do not
arise from sales to that other Person in the ordinary course of business.

         "Keepwell  Agreement" means that certain operating  keepwell  agreement
among the Borrower,  AUSP, and Credit Lyonnais as administrative agent under the
AUSP  Credit  Agreement,  which such  agreement  is a Project  Agreement  and is
substantially  similar in all  material  respects in form and  substance  to the
draft  thereof  dated  November  4,  1997,  as such  agreement  may be  amended,
restated, or otherwise modified from time to time.

         "Law" means any  constitution,  statute,  law,  ordinance,  regulation,
rule, order, writ, injunction, or decree of any Tribunal.

         "Lease Guaranty" means that certain lease guaranty  agreement among the
Borrower,  AUSP,  and Credit  Lyonnais  as  administrative  agent under the AUSP
Credit   Agreement,   which  such  agreement  is  a  Project  Agreement  and  is
substantially  similar in all  material  respects in form and  substance  to the
draft  thereof  dated  November  4,  1997,  as such  agreement  may be  amended,
restated, or otherwise modified from time to time.



100\269\91946                    14
<PAGE>
         "Lenders"  means  the  lenders  listed on the  signature  pages of this
Agreement,  and each Eligible  Assignee which hereafter  becomes a party to this
Agreement  pursuant to Section 10.04  hereof,  for so long as any such Person is
owed any portion of the  Obligations or obligated to make any Advances under the
Revolver/Term Loan.

         "Lending  Office"  means,  with respect to each  Lender,  its branch or
affiliate,  (a)  initially,  the  office of such  Lender,  branch  or  affiliate
identified as such on the signature  pages hereof,  and (b)  subsequently,  such
other office of such Lender, branch or affiliate as such Lender may designate to
the Borrower and  Administrative  Agent as the office from which the Advances of
such  Lender  will be made and  maintained  and for the  account  of  which  all
payments of principal and interest on the Advances and the Commitment  Fees will
thereafter  be made.  Lenders  may have more  than one  Lending  Office  for the
purpose of making Base Rate Advances and LIBOR Advances.

         "LIBOR Advance" means an Advance bearing interest at the LIBOR Rate.

         "LIBOR Rate" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate, and (b) the sum of the LIBOR Rate Basis plus the
Applicable  Margin. The LIBOR Rate shall, with respect to LIBOR Advances subject
to reserve or deposit requirements,  be subject to premiums assessed therefor by
each Lender,  which are payable directly to each Lender.  Once  determined,  the
LIBOR Rate shall remain unchanged during the applicable Interest Period.

         "LIBOR Rate Basis" means, for any LIBOR Advance for any Interest Period
therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/100 of 1%)  appearing  on Telerate  Page 3750 (or any  successor  page) as the
London  interbank  offered rate for deposits in Dollars at  approximately  11:00
a.m.  (London  time) two Business  Days prior to the first day of such  Interest
Period for a term  comparable  to such Interest  Period.  If for any reason such
rate is not  available,  the term "LIBOR Rate Basis"  shall mean,  for any LIBOR
Advance for any Interest Period therefor,  the rate per annum (rounded  upwards,
if necessary,  to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London  interbank  offered rate for deposits in Dollars at  approximately
11:00  a.m.  (London  time)  two  Business  Days  prior to the first day of such
Interest  Period  for a term  comparable  to  such  Interest  Period;  provided,
however,  if more than one rate is  specified on Reuters  Screen LIBO Page,  the
applicable rate shall be the arithmetic mean of all such rates.

         "License" means, as to any Person, any license, permit,  certificate of
need, authorization, certification, accreditation, franchise, approval, or grant
of rights by any Tribunal or third  person  necessary  or  appropriate  for such
Person to own,  maintain,  or operate its  business or Property,  including  FCC
Licenses.

         "Lien" means any  mortgage,  pledge,  security  interest,  encumbrance,
lien, or charge of any kind,  including without limitation any agreement to give
or not to  give  any of the  foregoing,  any  conditional  sale or  other  title
retention  agreement,  any lease in the  nature  thereof,  and the


100\269\91946                    15
<PAGE>
filing of or agreement to give any financing  statement or other similar form of
public  notice  under the Laws of any  jurisdiction  (except for the filing of a
financing statement or notice in connection with an operating lease).

         "Litigation" means any proceeding, claim, lawsuit, arbitration,  and/or
investigation  conducted  or  threatened  by or before any  Tribunal,  including
without limitation proceedings, claims, lawsuits, and/or investigations under or
pursuant  to any  environmental,  occupational,  safety and  health,  antitrust,
unfair competition,  securities,  Tax, or other Law, or under or pursuant to any
contract, agreement, or other instrument.

         "Loan  Papers"  means this  Agreement;  the Notes;  Interest Rate Hedge
Agreements  executed among any GCI Entity and any Lender or Bank Affiliate;  all
Pledge Agreements; all Guaranties executed by any Person guaranteeing payment of
any portion of the Obligations; all Fee Letters; each Assignment and Acceptance;
all promissory  notes  evidencing any portion of the  Obligations;  assignments,
security  agreements and pledge  agreements  granting any interest in any of the
Collateral;  stock certificates and partnership agreements  constituting part of
the Collateral;  mortgages,  deeds of trust,  financing  statements,  collateral
assignments,  and other  documents and  instruments  granting an interest in any
portion of the  Collateral,  or related to the  perfection  and/or the  transfer
thereof,  all collateral  assignments or other agreements granting a Lien on any
intercompany note, including without limitation, the Intercompany Notes; and all
other documents,  instruments,  agreements or certificates executed or delivered
by the  Borrower  or any  other  GCI  Entity,  as  security  for the  Borrower's
obligations  hereunder,  in  connection  with  the  loans  to  the  Borrower  or
otherwise; as each such document shall, with the consent of the Lenders pursuant
to the terms hereof,  be amended,  revised,  renewed,  extended,  substituted or
replaced from time to time.

         "Local  Telephone  Business" means the local telephone  business of the
Borrower and its Restricted Subsidiaries in (i) Anchorage, Alaska, for which GCI
Communication  Corp.  received its authority to operate from the Alaskan  Public
Utilities  Commission on February 4, 1997 and (ii) elsewhere in Alaska for which
Borrower or any  Restricted  Subsidiary  receives  authority to operate from the
Alaska Public Utilities Commission.

         "Majority  Lenders"  means any  combination  of Lenders having at least
66.67%  of the  aggregate  amount of  Advances  under  the  Facility;  provided,
however,  that if no Advances are outstanding  under this  Agreement,  such term
means any combination of Lenders having a Specified Percentage equal to at least
66.67% of the Facility.

         "Management  Fees"  means  all  fees  from  time  to time  directly  or
indirectly  (including  any payments  made  pursuant to guarantees of such fees)
paid or  payable  by the  Borrower,  any  GCI  Entity  or any of the  Restricted
Subsidiaries  to any Person for management  services for managing any portion of
any System.

         "Managing Agents" means NationsBank, Credit Lyonnais and TD.



100\269\91946                    16
<PAGE>
         "Material  Adverse Change" means any circumstance or event that (a) can
reasonably be expected to cause a Default or an Event of Default,  (b) otherwise
can  reasonably  be  expected to (i) be  material  and adverse to the  continued
operation of the Borrower and the  Restricted  Subsidiaries  taken as a whole or
any  other  GCI  Entity,  or (ii)  be  material  and  adverse  to the  financial
condition, business operations,  prospects or Properties of the Borrower and the
Restricted  Subsidiaries taken as a whole or any other GCI Entity, or (c) in any
manner whatsoever does or can reasonably be expected to materially and adversely
affect the validity or enforceability of any of the Loan Papers.

         "Maturity  Date" means July 31,  2005,  or such earlier date all of the
Obligations become due and payable (whether by acceleration, prepayment in full,
scheduled reduction or otherwise).

         "Maximum  Amount"  means the maximum  amount of interest  which,  under
Applicable Law, Administrative Agent or any Lender is permitted to charge on the
Obligations.

         "MCI"  means  (i)  prior to the  effective  date of the  merger  of MCI
Telecommunications   Corporation  into  British  Telecommunications,   PLC,  MCI
Telecommunications  Corporation  and (ii) on and after the effective date of the
merger of MCI  Telecommunications  Corporation into British  Telecommunications,
PLC, British Telecommunications, PLC.

         "Multiemployer  Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA,  to which the Borrower,  any  Subsidiary of the Borrower or
GCI or any  ERISA  Affiliate  is  making  or  accruing  an  obligation  to  make
contributions,  or has  within  any of the  preceding  five plan  years  made or
accrued an obligation to make contributions, such plan being maintained pursuant
to one or more collective bargaining agreements.

         "Multiple  Employer  Plan" means a single  employer plan, as defined in
Section  4001(a)(15)  of ERISA,  that (a) is  maintained  for  employees  of the
Borrower,  any Subsidiary of the Borrower or GCI, or any ERISA  Affiliate and at
least one Person other than the Borrower, any Subsidiary of the Borrower or GCI,
and any ERISA  Affiliate,  or (b) was so maintained  and in respect of which the
Borrower,  any Subsidiary of the Borrower or GCI, or any ERISA  Affiliate  could
have  liability  under  Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.

         "Net Proceeds" means the gross proceeds received by the Borrower or any
Restricted Subsidiary in connection with or as a result of any Asset Sale, minus
(so  long as each of the  following  are  estimated  in good  faith  by the Vice
President  -  Chief  Financial  Officer  of  the  Borrower  or  such  Restricted
Subsidiary  and certified to the Lenders in  reasonable  detail by an Authorized
Officer) (a) amounts paid or reserved in good faith,  if any, for taxes  payable
with respect to such Asset Sale in an amount  equal to the tax  liability of the
Borrower  or any  Restricted  Subsidiary  in respect of such sale  (taking  into
account all other tax benefits of each of the parties)  and (b)  reasonable  and
customary transaction costs payable by the Borrower or any Restricted Subsidiary
related to such sale.



100\269\91946                    17
<PAGE>
         "Net Total Interest  Expense" means as of any date of determination for
any period of calculation,  all the Borrower's and the Restricted  Subsidiaries'
consolidated  interest  expense  included  in a  consolidated  income  statement
(without deduction of interest income) on Senior Debt for such period calculated
on a consolidated basis in accordance with GAAP, including without limitation or
duplication  (or, to the extent not so  included,  with the addition of) for the
Borrower  and  the  Restricted  Subsidiaries:   (a)  the  amortization  of  Debt
discounts;  (b) any  commitment  fees or agency fees related to any Senior Debt,
but specifically  excluding any one-time  facility and/or  arrangement fees; (c)
any fees or expenses with respect to letters of credit,  bankers' acceptances or
similar facilities;  (d) fees and expenses with respect to interest rate swap or
similar  agreements or foreign currency hedge,  exchange or similar  agreements,
other than fees or charges  related to the  acquisition or  termination  thereof
which are not  allocable  to  interest  expense in  accordance  with  GAAP;  (e)
preferred stock  Distributions for the Borrower and the Restricted  Subsidiaries
declared and payable in cash; and (f) interest  capitalized  in accordance  with
GAAP.

         "Non-Compete   Agreement"   means  any  agreement  or  related  set  of
agreements under which the Borrower or any Restricted  Subsidiary  agrees to pay
money  in one or  more  installments  to one or more  Persons  in  exchange  for
agreements from such Persons to refrain from competing with the Borrower or such
Restricted  Subsidiary in a certain line of business in a specific  geographical
area for a certain time period,  or pursuant to which any Person agrees to limit
or restrict its right to engage, directly or indirectly,  in the same or similar
industry for any period of time for any geographic location.

         "Notes" means all Revolver/Term  Notes in effect from time to time, and
"Note" means any of such notes, as applicable.

         "Obligations"  means all present and future  obligations,  indebtedness
and liabilities,  and all renewals and extensions of all or any part thereof, of
the  Borrower  and each  other GCI Entity to Lenders  and  Administrative  Agent
arising from, by virtue of, or pursuant to this Agreement, any of the other Loan
Papers and any and all renewals and extensions  thereof or any part thereof,  or
future amendments thereto,  all interest accruing on all or any part thereof and
reasonable  attorneys' fees incurred by Lenders and Administrative Agent for the
administration, execution of waivers, amendments and consents, and in connection
with any restructuring,  workouts or in the enforcement or the collection of all
or any part thereof, whether such obligations,  indebtedness and liabilities are
direct,  indirect,  fixed,  contingent,  joint,  several  or joint and  several.
Without  limiting the  generality of the foregoing,  "Obligations"  includes all
amounts which would be owed by the Borrower, each other GCI Entity and any other
Person (other than Administrative  Agent or Lenders) to Administrative  Agent or
Lenders under any Loan Paper,  but for the fact that they are  unenforceable  or
not allowable due to the  existence of a bankruptcy,  reorganization  or similar
proceeding  involving  the  Borrower,  any other GCI Entity or any other  Person
(including  all such amounts  which would become due or would be secured but for
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization  or like proceeding of the Borrower,  any other GCI Entity or any
other Person under any Debtor Relief Law).



100\269\91946                    18
<PAGE>
         "O&M Contract"  means the Operation and  Maintenance  Contract  between
AUSP and GCI Communication  Corp., which agreement is a Project Agreement and is
substantially  similar in all  material  respects in form and  substance  to the
draft thereof dated October 30, 1997, as such contract may be amended, restated,
or otherwise modified from time to time.

         "Operating  Cash  Flow"  means,  for the  Borrower  and the  Restricted
Subsidiaries,   for  any  period,   determined  in  accordance  with  GAAP,  the
consolidated  net income  (loss) for such  period  taken as a single  accounting
period,  excluding extraordinary gains and losses, plus the sum of the following
amounts for such  period to the extent  included  in the  determination  of such
consolidated net income: (a) depreciation  expense, (b) amortization expense and
other non-cash charges reducing income, (c) Net Total Interest Expense, (d) cash
income  tax  expense  for the  Borrower  and  Restricted  Subsidiaries  plus (e)
deferred  income Taxes for the Borrower and Restricted  Subsidiaries;  provided,
the calculation is made after giving effect to acquisitions  and dispositions of
assets of the  Borrower or any  Restricted  Subsidiary  during such period as if
such transactions had occurred on the first day of such period.

         "Operating  Leases" means  operating  leases,  as defined in accordance
with GAAP.

         "Parents" means, collectively, GCI and GCII.

         "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
agency or entity performing substantially the same functions.

         "Permitted  Dispositions"  means  any  sale,  assignment,  disposition,
conveyance  or  transfer  of  any  agreements,  licenses,  permits,  franchises,
contract  rights,  documents,  instruments  or other  Property  or any  interest
therein,  related to the construction,  operation or maintenance of AUSP's fiber
network including, without limitation, the agreements listed on Schedule 3.23 to
this Agreement.

         "Permitted Liens" means

                  (a) those imposed by the Loan Papers and the Revolving  Credit
Agreement;

                  (b)   Liens  in   connection   with   workers'   compensation,
unemployment  insurance or other social security obligations (which phrase shall
not be construed to refer to ERISA);

                  (c) deposits,  pledges or liens to secure the  performance  of
bids,  tenders,  contracts  (other  than  contracts  for the payment of borrowed
money), leases, statutory obligations,  surety, customs, appeal, performance and
payment  bonds and other  obligations  of like  nature  arising in the  ordinary
course of business;



100\269\91946                    19
<PAGE>
                  (d)   mechanics',    worker's,    carriers,    warehousemen's,
materialmen's, landlords', or other like Liens arising in the ordinary course of
business  with  respect  to  obligations  which  are not due or which  are being
contested in good faith and by appropriate proceedings diligently conducted;

                  (e) Liens for taxes, assessments, fees or governmental charges
or levies  not  delinquent  or which are being  contested  in good  faith and by
appropriate  proceedings diligently conducted,  and in respect of which adequate
reserves shall have been established in accordance with GAAP on the books of the
Borrower or such GCI Entity;

                  (f) Liens or  attachments,  judgments  or awards  against  the
Borrower or any other GCI Entity with  respect to which an appeal or  proceeding
for review shall be pending or a stay of execution shall have been obtained, and
which are otherwise being contested in good faith and by appropriate proceedings
diligently conducted,  and in respect of which adequate reserves shall have been
established  in accordance  with GAAP on the books of the Borrower or such other
GCI Entity;

                  (g)  Liens in  existence  on the  Closing  Date  described  on
Schedule 5.08(a) hereto;

                  (h)  statutory  Liens in favor of CoBank  with  respect to the
Participation  Certificates  (as defined in Section 6.16) and of lessors arising
in connection with Property leased to the Borrower or any other GCI Entity; and

                  (i) easements, rights of way, restrictions, leases of Property
to others, easements for installations of public utilities,  title imperfections
and  restrictions,  zoning ordinances and other similar  encumbrances  affecting
Property which in the aggregate do not materially  adversely affect the value of
such Property or materially  impair its use for the operation of the business of
the Borrower or such GCI Entity.

         "Person" means an individual,  partnership, joint venture, corporation,
trust, Tribunal, unincorporated organization, and government, or any department,
agency, or political subdivision thereof.

         "Plan" means a Single Employer Plan or a Multiple Employer Plan.

         "Pledge  Agreement"  means each Security  Agreement and each Pledge and
Security Agreement,  whereby the Pledged Interests are pledged to Administrative
Agent and a security  interest  is granted  in the  assets of the  Borrower  and
Restricted  Subsidiaries to secure the  Obligations,  each  substantially in the
form of  Exhibit C hereto,  as each such  agreement  may be  amended,  modified,
extended, renewed, restated, substituted or replaced from time to time.




100\269\91946                    20
<PAGE>
         "Pledged  Interests" means (a) a first perfected  security  interest in
100% of the  Capital  Stock  of the  Borrower;  (b) a first  perfected  security
interest in 100% of the Capital Stock of GCI Communication  Services,  Inc., and
GCI Communication  Corp.; (c) subject to the Prior Stock Lien, a first perfected
security interest in 100% of the Capital Stock of GCI Leasing Co., Inc.; and (d)
a first perfected  security  interest in 100% of the Capital Stock of GCI Cable,
Inc. each Subsidiary of GCI Cable,  Inc., and each other Restricted  Subsidiary,
if any, now existing or hereafter formed or acquired.

         "Prior  Stock  Lien"  means  those  certain  Liens in the  stock of GCI
Leasing Co., Inc. and such other Liens as are listed on Schedule 1.02 hereto.

         "Prime Management  Agreement" means that certain Management  Agreement,
between GCI Cable, Inc. and Prime II Management, L.P., dated October 31, 1996.

         "Pro  Forma  Debt  Service"  means,  for  GCII,  the  Borrower  and its
Restricted  Subsidiaries for the four full fiscal quarters immediately following
the date of determination, the sum of (a) cash Total Interest Expense (using the
interest rates in effect on the date of  determination to project interest rates
for any Total Debt  subject to a floating  interest  rate),  plus (b)  scheduled
repayments of principal of Total Debt (whether by  installment or as a result of
a scheduled reduction in a revolving commitment, or otherwise).

         "Pro Forma Debt Service  Coverage  Ratio" means the ratio of Annualized
Operating Cash Flow to Pro Forma Debt Service.

         "Prohibited  Transaction" has the meaning specified therefor in Section
4975 of the Code or Section 406 of ERISA.

         "Project  Agreements"  means those "Projects  Agreements" as defined in
the AUSP Credit  Agreement and as described on Schedule  1.01B hereto,  and such
other  agreements  as may  hereafter  be  entered  into from time to time  which
materially  and  adversely  affect  the  obligations  of  the  Borrower  or  the
Restricted  Subsidiaries  with  respect  to the  AUSP  Financing;  such  Project
Agreements  to be  substantially  similar in all  material  respects in form and
substance  to  drafts  thereof  dated  November  4,  1997  (except  for  the O&M
Contract), as amended, restated, or otherwise modified from time to time.

         "Property" means all types of real, personal, tangible,  intangible, or
mixed property, whether owned in fee simple or leased.

         "Quarterly  Date"  means the last  Business  Day of each  March,  June,
September  and  December  during  the  term of  this  Agreement,  commencing  on
September 30, 1997.

         "Ratable"  means,  as to any Lender,  in accordance  with its Specified
Percentage.



100\269\91946                    21
<PAGE>
         "Refinancing  Advance"  means  an  Advance  that  is  used  to pay  the
principal amount of an existing Advance (or any performance  thereof) at the end
of its Interest Period and which, after giving effect to such application,  does
not result in an increase in the aggregate amount of outstanding Advances.

         "Regulatory  Change" means any change after the date hereof in federal,
state,  or  foreign  Laws  (including  the  introduction  of any new Law) or the
adoption  or making  after  such  date of any  interpretations,  directives,  or
requests of or under any federal,  state, or foreign Laws (whether or not having
the  force  of  Law)  by  any  Tribunal  charged  with  the   interpretation  or
administration  thereof,  applying  to a class of  financial  institutions  that
includes any Lender,  excluding,  however,  any such change which  results in an
adjustment of the LIBOR Reserve  Percentage and the effect of which is reflected
in a change in the LIBOR Rate as provided in the definition of such term.

         "Reportable  Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section,  with respect to a Plan,
excluding,  however,  such events as to which the PBGC by regulation  waived the
requirement  of Section  4043(a) of ERISA that it be notified  within 30 days of
the  occurrence  of such  event,  provided  that a failure  to meet the  minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable  Event regardless of the issuance of any such waivers in accordance
with either Section 4043(a) of ERISA or Section 412(d) of the Code.

         "Restricted  Payments"  means (a) any direct or indirect  distribution,
Distribution  or other payment on account of any general or limited  partnership
interest  in (or the  setting  aside of funds  for,  or the  establishment  of a
sinking fund or analogous  fund with respect to), or shares of Capital  Stock or
other securities of, the Borrower or any Restricted Subsidiary; (b) any payments
of principal  of, or interest on, or fees related to, or any other  payments and
prepayments  with  respect to, or the  establishment  of, or any payment to, any
sinking fund or analogous  fund for the purpose of making any such  payments on,
Funded Debt of GCII,  the Borrower or any Restricted  Subsidiary  (excluding the
Obligations and the obligations under the Revolving Credit  Agreement);  (c) any
Management  Fee or any  management,  consulting  or other  similar  fees, or any
interest  thereon,  payable by the Borrower or any Restricted  Subsidiary to any
Affiliate  of  the  Borrower  or  Parents  or  to  any  other  Person;  (d)  any
administration fee or any  administration,  consulting or other similar fees, or
any interest  thereon,  payable by the Borrower or any Restricted  Subsidiary to
any Affiliate of Parents or the Borrower or to any other Person  (excluding  the
payment of compensation  (including,  amounts paid pursuant to employee  benefit
plans) in the ordinary course of business for the personal services of officers,
directors  and  employees  of Parents,  the  Borrower  or any of its  Restricted
Subsidiaries,  so long as the Board of  Directors of Parents and the Borrower in
good faith  shall  have  approved  the terms  thereof  and  deemed the  services
therefore or thereafter to be performed for such compensation or fees to be fair
consideration  therefor);  (e) any  payments  of any  amounts  owing  under  any
Non-Compete Agreements; and (f) fees, loans or other payments or advances by the
Borrower or any  Restricted  Subsidiary  to any  Unrestricted  Subsidiary or any
other  Affiliate  of the  Parents or the


100\269\91946                    22
<PAGE>
Borrower,  except to the extent such payments are  permitted in accordance  with
the terms of Section 7.09 hereof.

         "Restricted  Subsidiaries" means GCI Communication Services,  Inc., GCI
Leasing Co., Inc., GCI Communication Corp. (including,  without limitation,  the
Long Distance Division and the Local & Wireless Division), GCI Cable, Inc., each
Subsidiary  of GCI  Cable,  Inc.,  and any other  Subsidiary,  now or  hereafter
created or acquired,  of the Borrower or the  Parents,  other than  Unrestricted
Subsidiaries,  in each case that engages in either the operation of (a) switched
message long distance  telephone systems and ancillary  services including DAMA,
cellular resale and PCS systems, (b) cable distribution  operations,  or (c) the
Local Telephone  Business and "Restricted  Subsidiary" means any one of them, as
applicable in the context.

         "Revolver/Term  Commitment"  means,  with respect to the  Revolver/Term
Loan, $50,000,000, as such amount may be reduced from time to time in accordance
with the terms of Section 2.04 hereof.

         "Revolver/Term Loan" means that certain  Revolver/Term Loan made to the
Borrower on the Closing Date in accordance with Section 2.01 hereof.

         "Revolver/Term  Notes"  means  the  promissory  notes  of the  Borrower
evidencing the Advances and obligations owing hereunder to each Lender under the
Revolver/Term  Loan, in substantially the form of Exhibit A hereto, each payable
to the  order  of each  Lender,  as each  such  note may be  amended,  extended,
restated, renewed, substituted or replaced from time to time.

         "Revolver/Term  Unused Commitment" means, on any date of determination,
the  Revolver/Term  Commitment as in effect on such date,  minus all outstanding
Advances made under the Revolver/Term Loan on such date.

         "Revolving  Commitment" has the meaning ascribed to it in the Revolving
Credit Agreement.

         "Revolving  Credit  Agreement"  means,  the  $200,000,000  Amended  and
Restated  Credit  Agreement,  of even date herewith,  between the Borrower,  the
Administrative Agent and the Lenders, as amended, restated or otherwise modified
from time to time.

         "Rights" means rights, remedies, powers, and privileges.

         "Senior Debt" means, without duplication,  with respect to the Borrower
and the Restricted Subsidiaries,  the sum of all Funded Debt of the Borrower and
the Restricted  Subsidiaries,  calculated on a consolidated  basis in accordance
with GAAP.



100\269\91946                    23
<PAGE>
         "Senior  Leverage  Ratio"  means as of any date of  determination,  the
ratio  of (a)  Senior  Debt on  such  date of  determination  to (b)  Annualized
Operating  Cash  Flow,  all  calculated  for the  Borrower  and  the  Restricted
Subsidiaries  on a  consolidated  basis in  accordance  with  GAAP  consistently
applied.

         "Senior Notes" means those certain $180,000,000 9-3\4% Senior Notes due
2007 issued by GCII, pursuant to and in accordance with the Indenture.

         "Single  Employer  Plan" means a single  employer  plan,  as defined in
Section  4001(a)(15)  of ERISA,  other than a Multiple  Employer  Plan,  that is
maintained for employees of the Borrower or any ERISA Affiliate.

         "Solvent" means, with respect to any Person,  that on such date (a) the
fair value of the  Property of such Person is greater  than the total  amount of
liabilities, including without limitation Contingent Liabilities of such Person,
(b) the present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such Person on
its debts as they become  absolute and matured,  (c) such Person does not intend
to, and does not believe that it will,  incur debts or  liabilities  beyond such
Person's  ability  to pay as such  debts and  liabilities  mature,  and (d) such
Person is not engaged in business or a  transaction,  and is not about to engage
in business or a transaction,  for which such Person's Property would constitute
an unreasonably small capital.

         "Special  Counsel"  means the law firm of  Donohoe,  Jameson & Carroll,
P.C.,  Dallas,  Texas,  special counsel to  Administrative  Agent, or such other
counsel selected by the Administrative Agent from time to time.

         "Specified   Percentage"  means,  as  to  any  Lender,  the  percentage
indicated  beside its name on the  signature  pages  hereof,  or as  adjusted or
specified in any Assignment and Acceptance, or amendment to this Agreement.

         "Subordinated  Debt" means  subordinated  indebtedness  of the Borrower
incurred in accordance with the terms of Section 7.02(f)(ii) hereof.

         "Subordination  Agreement" means the Subordination  Agreement among the
Borrower,  AUSP, GCI Transport Co., Inc. and Credit  Lyonnais as  administrative
agent under the AUSP Credit Agreement,  which agreement is substantially similar
in all  material  respects  in form and  substance  to the draft  thereof  dated
November  4, 1997,  as such  agreement  may be amended,  restated  or  otherwise
modified from time to time.

         "Subsidiary" of any Person means any corporation,  partnership, limited
liability  company,  joint venture,  trust or estate of which (or in which) more
than 50% of:



100\269\91946                    24
<PAGE>
                  (a) the outstanding Capital Stock having voting power to elect
         a majority  of the Board of  Directors  of such  corporation  (or other
         Persons  performing  similar functions of such entity, and irrespective
         of whether at the time  Capital  Stock of any other class or classes of
         such  corporation  shall or might have voting power upon the occurrence
         of any contingency),

                  (b) the interest in the capital or profits of such partnership
         or joint venture, or

                  (c) the beneficial interest of such trust or estate,

         is at the time  directly or indirectly  owned by (i) such Person,  (ii)
         such Person and one or more of its Subsidiaries or (iii) one or more of
         such Person's Subsidiaries.

         "System" or "Systems"  means the Borrower's and the other GCI Entities'
(a) switched  message long distance  telephone  systems and  ancillary  services
including  DAMA,  cellular  resale  and  PCS  systems  between  Alaska  and  the
contiguous states and the foreign countries listed on Schedule 1.01A hereto, and
any and all other  switched  message  long  distance  telephone  systems,  DAMA,
cellular resale and PCS systems acquired or owned by the Parents,  the Borrower,
any of the Restricted  Subsidiaries  and any of the other GCI Entities from time
to time, (b) cable distribution systems owned or acquired by the Borrower or any
of its Restricted  Subsidiaries  which receives  audio,  video,  digital,  other
broadcast  signals  or  information  or  telecommunications  by cable,  optical,
antennae,  microwave or satellite transmission and which amplifies and transmits
such  signals to  persons  who pay to receive  such  signals,  and (c) the Local
Telephone  Business,  and all other such  systems  owned by the  Borrower or any
other GCI Entity from time to time.

         "Taxes" means all taxes,  assessments,  imposts, fees, or other charges
at any time imposed by any Laws or Tribunal.

         "Total  Debt" means,  without  duplication,  with respect to GCII,  the
Borrower and the Restricted Subsidiaries, the sum of all Funded Debt, calculated
on a consolidated basis in accordance with GAAP.

         "Total Interest  Expense" means as of any date of determination for any
period of calculation,  GCII's, the Borrower's and the Restricted  Subsidiaries'
consolidated  interest  expense  included  in a  consolidated  income  statement
(without  deduction of interest income) on Total Debt for such period calculated
on a consolidated basis in accordance with GAAP, including without limitation or
duplication (or, to the extent not so included,  with the addition of) for GCII,
the Borrower  and the  Restricted  Subsidiaries:  (a) the  amortization  of Debt
discounts;  (b) any  commitment  fees or agency fees related to any Funded Debt,
but specifically  excluding any one-time  facility and/or  arrangement fees; (c)
any fees or expenses with respect to letters of credit,  bankers' acceptances or
similar facilities;  (d) fees and expenses with respect to interest rate swap or
similar  agreements or foreign currency hedge,  exchange or similar  agreements,
other than


100\269\91946                    25
<PAGE>
fees or charges related to the acquisition or termination  thereof which are not
allocable to interest  expense in  accordance  with GAAP;  (e)  preferred  stock
Distributions  for GCII, the Borrower and the Restricted  Subsidiaries  declared
and payable in cash; and (f) interest capitalized in accordance with GAAP.

         "Total Leverage Ratio" means as of any date of determination, the ratio
of (a) Total Debt of GCII, the Borrower and the Restricted  Subsidiaries on such
date of determination to (b) Annualized Operating Cash Flow, all calculated on a
consolidated basis in accordance with GAAP consistently applied.

         "Tribunal"   means   any   state,   commonwealth,   federal,   foreign,
territorial, or other court or government body, subdivision, agency, department,
commission, board, bureau, or instrumentality of a governmental body.

         "Type" refers to the distinction  between  Advances bearing interest at
the Base Rate and LIBOR Rate.

         "UCC"  means the  Uniform  Commercial  Code as  adopted in the State of
Texas.

         "Unrestricted  Subsidiary" means GCI Transport Co., Inc., GCI Satellite
Co.,  Inc., GCI Fiber Co.,  Inc.,  Fiber Hold Co., Inc. and AUSP,  and, with the
prior  written  consent of the Majority  Lenders,  any other  Subsidiary  of the
Parents  designated as a "Unrestricted  Subsidiary" by the Borrower from time to
time.

         "Wholly-Owned  Subsidiary" means any Subsidiary of the Borrower that is
owned 100% by the  Borrower or either of the  Parents,  directly or  indirectly,
except any Unrestricted Subsidiary.

         "Withdrawal  Liability" has the meaning given such term under Part I of
Subtitle E of Title IV of ERISA.

         1.02.  Accounting and Other Terms.  All  accounting  terms used in this
Agreement  which  are  not  otherwise  defined  herein  shall  be  construed  in
accordance with GAAP consistently  applied on a consolidated  basis for Borrower
and the  Restricted  Subsidiaries,  unless  otherwise  expressly  stated herein.
References  herein to one gender  shall be deemed to include all other  genders.
Except where the context otherwise  requires,  all references to time are deemed
to be Central Standard time.

100\269\91946                    26
<PAGE>
                    ARTICLE II. AMOUNTS AND TERMS OF ADVANCES


         2.01.  The Facility.  Each Lender  severally  agrees,  on the terms and
subject to the conditions hereinafter set forth, from the Closing Date until the
Conversion Date, to make Advances under the  Revolver/Term  Loan to the Borrower
on any Business  Day during the period from the Closing  Date of this  Agreement
until the Conversion Date, in an aggregate principal amount not to exceed at any
time  outstanding  such  Lender's  Specified  Percentage  of  the  Revolver/Term
Commitment.  Subject to the terms and  conditions of this  Agreement,  until the
Conversion Date, the Borrower may borrow,  repay and reborrow the Advances under
the  Revolver/Term  Loan.  On the  Conversion  Date,  the  aggregate  amount  of
outstanding  Advances under the Revolver/Term Loan shall convert to a term loan,
at which point the  Borrower  may not borrow,  repay and  reborrow  the Advances
under the Revolver/Term  Loan, all Advances under the  Revolver/Term  Loan being
Refinancing  Advances  on and after the  Conversion  Date.  In  addition  to the
installment  repayments due on the  Revolver/Term  Loan as set forth below,  the
aggregate amount of all outstanding  Revolver/Term  Advances are due and payable
on the Maturity Date.

         2.02 Making Advances Under the Revolver/Term Loan.

         (a) Each Borrowing of Advances shall be made upon the written notice of
the  Borrower,  received by  Administrative  Agent not later than (i) 12:00 noon
three Business Days prior to the proposed date of the Borrowing,  in the case of
LIBOR Advances and (ii) not later than 10:00 a.m. on the date of such Borrowing,
in the case of Base Rate Advances. Each such notice of a Borrowing (a "Borrowing
Notice") shall be by telecopy,  promptly  confirmed by letter,  in substantially
the form of Exhibit F hereto specifying therein:

                   (i) the date of such  proposed  Borrowing,  which  shall be a
         Business Day;

                  (ii) the amount of such proposed Borrowing which, (A) prior to
         the Conversion Date, shall not when aggregated  together with all other
         outstanding   Advances   under  the   Revolver/Term   Loan  exceed  the
         Revolver/Term Commitment,  and (B) shall, in the case of a Borrowing of
         LIBOR  Advances,  be in an  amount of not less  than  $1,000,000  or an
         integral  multiple of $500,000 in excess  thereof and, in the case of a
         Borrowing  of Base  Rate  Advances,  be in an  amount  of not less than
         $500,000 or an integral multiple of $100,000 in excess thereof;

                  (iii) the Type of  Advances  of which the  Borrowing  is to be
         comprised; and

                  (iv) if the  Borrowing is to be  comprised of LIBOR  Advances,
         the  duration  of  the  initial  Interest  Period  applicable  to  such
         Advances.



100\269\91946                    27
<PAGE>
         If the  Borrowing  Notice  fails to specify the duration of the initial
Interest  Period for any Borrowing  comprised of LIBOR  Advances,  such Interest
Period shall be three months. Each Lender shall, before 1:00 p.m. on the date of
each Advance under the  Revolver/Term  Loan prior to the Conversion  Date (other
than a Refinancing Advance), make available to

                              Administrative Agent
                                NationsBank Plaza
                                 901 Main Street
                                   14th Floor
                               Dallas, Texas 75202

such  Lender's  Specified   Percentage  of  the  aggregate  Advances  under  the
Revolver/Term Loan, to be made on that day in immediately available funds.

         (b) Unless any applicable  condition specified in Article IV hereof has
not been satisfied,  Administrative  Agent will make the funds on Advances under
the Facility  promptly  available to the Borrower  (other than with respect to a
Refinancing  Advance)  at such  account  as shall  have  been  specified  by the
Borrower.

         (c) After giving effect to any  Borrowing,  (i) there shall not be more
than eight  different  Interest  Periods in the  aggregate  in effect  under the
Facility  and  under the  Revolving  Credit  Agreement  and (ii) if prior to the
Conversion  Date,  the aggregate  principal of  outstanding  Advances  under the
Revolver/Term Loan shall not exceed the Revolver/Term Commitment.

         (d) No Interest  Period for a Borrowing under the Facility shall extend
beyond the Maturity Date.

         (e) Unless a Lender shall have notified  Administrative  Agent prior to
the date of any Advance that it will not make available its Specified Percentage
of any  Advance,  Administrative  Agent may assume that such Lender has made the
appropriate   amount   available  in  accordance  with  Section   2.02(a),   and
Administrative  Agent may, in reliance upon such  assumption,  make available to
the Borrower a corresponding  amount.  If and to the extent any Lender shall not
have made such amount  available to  Administrative  Agent,  such Lender and the
Borrower severally agree to repay to Administrative  Agent immediately on demand
such  corresponding  amount together with interest  thereon,  from the date such
amount is made available to the Borrower until the date such amount is repaid to
Administrative  Agent,  at (i) in the case of the Borrower,  the Base Rate,  and
(ii) in the case of such Lender, the Federal Funds Rate.

         (f)  The  failure  by  any  Lender  to  make  available  its  Specified
Percentage  of any Advance  hereunder  shall not relieve any other Lender of its
obligation,  if any, to make available its Specified  Percentage of any Advance.
In no event,  however,  shall any Lender be  responsible  for the failure of any
other Lender to make available any portion of any Advance.



100\269\91946                    28
<PAGE>
         (g) The Borrower shall indemnify each Lender against any  Consequential
Loss  incurred by each  Lender as a result of (i) any failure to fulfill,  on or
before the date  specified  for the Advance,  the  conditions to the Advance set
forth herein or (ii) the  Borrower's  requesting  that an Advance not be made on
the date specified in the Borrowing Notice.

         2.03 Evidence of Indebtedness.

         (a) The  obligations of the Borrower with respect to all Advances under
the Revolver/Term Loan made by each Lender shall be evidenced by a Revolver/Term
Note in the  form  of  Exhibit  A  hereto  and in the  amount  of such  Lender's
Specified  Percentage  of the  Revolver/Term  Commitment  (as  the  same  may be
modified pursuant to Section 10.04 hereof).

         (c) Absent  manifest  error,  Administrative  Agent's and each Lender's
records  shall be conclusive  as to amounts owed  Administrative  Agent and such
Lender under the Notes and this Agreement.

         2.04 Reduction of Commitments.

         (a) Voluntary Commitment  Reduction.  The Borrower shall have the right
from time to time upon notice by the  Borrower to the  Administrative  Agent not
later than 1:00 p.m.,  three  Business  Days in advance,  to reduce prior to the
Conversion Date, the Revolver/Term  Commitment,  in whole or in part;  provided,
however, that the Borrower shall pay the accrued commitment fee on the amount of
each such reduction,  if any, and any partial reduction shall be in an aggregate
amount which is not less than  $1,000,000 and an integral  multiple of $500,000.
Such notice shall  specify the amount of reduction and the proposed date of such
reduction.

         (b)  Mandatory Commitment Reductions.

                   (i) Scheduled Reductions in the Revolver/Term Commitment. The
         Revolver/Term  Commitment  shall be reduced  to zero on the  Conversion
         Date.

                  (ii) Asset Sales.  On the date of any Asset Sale by any of the
         GCI Entities (this provision not permitting such Asset Sales),

                      (A) if there  exists no Default or Event of Default  prior
                  to the Conversion Date, the  Revolver/Term  Commitment and the
                  Revolving  Commitment shall be  automatically  and permanently
                  reduced by an amount  equal to 100% of the Net  Proceeds  from
                  any Asset Sales  received by any of the GCI Entities in excess
                  of  $10,000,000  in  the  aggregate  over  the  term  of  this
                  Agreement  (or  $20,000,000  if before and  immediately  after
                  giving effect to any Asset Sale,  the Total  Leverage Ratio is
                  equal to or less than 4.50 to 1.00),  applied  pro rata to the
                  obligations as specified under the Revolving  Credit Agreement
                  and the Advances  outstanding under Revolver/Term  Commitment,
                  and



100\269\91946                    29
<PAGE>
                      (B) if there  exists  a  Default  or an Event of  Default,
                  prior to the Conversion Date, the Revolver/Term Commitment and
                  the   Revolving   Commitment   shall  be   automatically   and
                  permanently  reduced  by an  amount  equal  to 100% of the Net
                  Proceeds  from  any  Asset  Sales  received  by any of the GCI
                  Entities  applied  pro rata to the  obligations  as  specified
                  under the Revolving  Credit  Agreement  and the  Revolver/Term
                  Commitment, and

                      (C) on each such date set forth in (A) and (B) above,  the
                  Borrower   shall  deliver  to  the   Administrative   Agent  a
                  certificate  of an  Authorized  Officer  certifying  as to the
                  amount of (including the  calculation of) the reduction of the
                  Revolver/Term Commitment,  and, with respect to the Asset Sale
                  giving rise thereto,  the gross proceeds thereof and the costs
                  and expenses  payable as a result  thereof which were deducted
                  in determining the amount of Net Proceeds.

                  (iii) Debt Issuance.  On the date of any issuance of public or
         private   Subordinated   Debt  by  the  Borrower  (this  provision  not
         permitting such Debt issuance),

                      (A) if there exists a Default or an Event of Default or if
                  the Total  Leverage  Ratio  equals or is greater  than 5.00 to
                  1.00,  prior  to  the  Conversion   Date,  the   Revolver/Term
                  Commitment and the Revolving Commitment shall be automatically
                  and permanently  reduced by an amount equal to 100% of the net
                  proceeds from any issuances of  Subordinated  Debt received by
                  the Borrower, applied pro rata to the obligations as specified
                  under the Revolving  Credit  Agreement  and the  Revolver/Term
                  Commitment, and

                      (B) on  such  date,  the  Borrower  shall  deliver  to the
                  Administrative  Agent a certificate  of an Authorized  Officer
                  certifying as to the amount of (including the  calculation of)
                  such  reduction in the  Revolver/Term  Commitment,  and,  with
                  respect to the Debt issuance  giving rise  thereto,  the gross
                  proceeds  thereof  and the costs  and  expenses  payable  as a
                  result thereof which were deducted in  determining  the amount
                  of net proceeds of such Debt issuance.

                  (iv) Change of  Control.  If a Change of Control  occurs,  the
         Revolver/Term Commitment shall be automatically and permanently reduced
         to zero.

                  (v) Equity Issuances. On the date of any issuance of equity by
         the GCI  Entities  other  than  the  Closing  Date and  other  than the
         issuance of common stock or options or rights to purchase  common stock
         of any GCI Entity to employees and directors pursuant to stock purchase
         plans or grant plans,  or otherwise (this provision not permitting such
         equity issuances),

                      (A) if there  exists  a  Default  or an Event of  Default,
                  prior to the Conversion Date, the Revolver/Term Commitment and
                  the   Revolving   Commitment   shall  be   automatically   and
                  permanently  reduced  by an  amount  equal  to 100% of the net



100\269\91946                    30
<PAGE>
                  proceeds from any such equity issuances received by any of the
                  GCI Entities  applied pro rata to the obligations as specified
                  under  the  Revolving  Credit   Agreement,   and  to  Advances
                  outstanding under the Revolver/Term Commitment, and

                      (B) on each such date set forth in (A) and (B) above,  the
                  Borrower   shall  deliver  to  the   Administrative   Agent  a
                  certificate  of an  Authorized  Officer  certifying  as to the
                  amount of (including the  calculation of) the reduction of the
                  Revolver/Term  Commitment,  and,  with  respect  to the equity
                  issuance giving rise thereto,  the gross proceeds  thereof and
                  the costs and expenses  payable as a result thereof which were
                  deducted  in  determining  the amount of net  proceeds of such
                  equity issuance.

                  (vi)   Distributions  from  AUSP  or  any  other  Unrestricted
         Subsidiary.  On the date that any  distribution  is received by any GCI
         Entity from AUSP or any Unrestricted Subsidiary,

                      (A) if there  exists  a  Default  or an Event of  Default,
                  prior to the Conversion Date, the Revolver/Term Commitment and
                  the   Revolving   Commitment   shall  be   automatically   and
                  permanently  reduced  by  an  amount  equal  to  100%  of  the
                  distribution received by any GCI Entity from AUSP or any other
                  Unrestricted  Subsidiary,  applied pro rata to the obligations
                  as specified  under the  Revolving  Credit  Agreement  and the
                  Revolver/Term Commitment, and

                      (B) on each such date set forth above,  the Borrower shall
                  deliver  to  the  Administrative  Agent  a  certificate  of an
                  Authorized  Officer  certifying as to the amount of (including
                  the  calculation  of)  the  reduction  of  the   Revolver/Term
                  Commitment.

         (c)  Commitment  Reductions,  Generally.  To the  extent the sum of the
aggregate   outstanding   Advances  under  the  Revolver/Term  Loan  exceed  the
Revolver/Term  Commitment  after  any  reduction  thereof,  prior  to or on  the
Conversion  Date,  the  Borrower  shall  immediately  repay  on the date of such
reduction,  any such excess amount and all accrued  interest  thereon,  together
with any amounts constituting any Consequential Loss. Once reduced or terminated
pursuant to this Section 2.04, the Revolver/Term Commitment may not be increased
or reinstated.

         2.05 Prepayments.

         (a)  Optional  Prepayments.  The  Borrower  may,  upon at  least  three
Business Days prior written notice to Administrative  Agent stating the proposed
date and aggregate  principal  amount of the prepayment,  prepay the outstanding
principal  amount of any  Advances in whole or in part,  together  with  accrued
interest to the date of such prepayment on the principal  amount prepaid without
premium or penalty other than any Consequential Loss; provided, however, that


100\269\91946                    31
<PAGE>
in the case of a prepayment of a Base Rate Advance, the notice of prepayment may
be given by  telephone  by 11:00 a.m. on the date of  prepayment.  Each  partial
prepayment  shall,  in the  case  of  Base  Rate  Advances,  be in an  aggregate
principal  amount of not less than  $500,000  or a larger  integral  multiple of
$100,000  in  excess  thereof  and,  in the  case of  LIBOR  Advances,  be in an
aggregate  principal  amount of not less than  $1,000,000  or a larger  integral
multiple of $500,000 in excess  thereof.  If any notice of  prepayment is given,
the principal  amount  stated  therein,  together  with accrued  interest on the
amount prepaid and the amount,  if any, due under Sections 2.11 and 2.13 hereof,
shall be due and payable on the date specified in such notice.

         (b)      Mandatory Prepayments.

                   (i) Asset Sales.  (A) Prior to the  Conversion  Date,  on the
         date of any Asset Sale of any GCI Entity,  the Borrower shall repay the
         Obligations and the obligations under the Revolving Credit Agreement by
         an amount  equal to 100% of the Net  Proceeds,  applied pro rata to the
         obligations  as specified  under the  Revolving  Credit  Agreement  and
         Advances  outstanding under the  Revolver/Term  Loan, and (B) after the
         Conversion Date, (I) if there exists no Default or Event of Default, on
         the date of any Asset Sale of any GCI Entity,  the Borrower shall repay
         the obligations by an amount equal to 100% of the Net Proceeds, applied
         to the obligations as specified under the Revolving  Credit  Agreement,
         and (II) if there exists a Default or Event of Default,  on the date of
         any  Asset  Sale  of any GCI  Entity,  the  Borrower  shall  repay  the
         Obligations and the obligations under the Revolving Credit Agreement by
         an amount  equal to 100% of the Net  Proceeds,  applied pro rata to the
         obligations  as specified  under the  Revolving  Credit  Agreement  and
         Advances outstanding under the Revolver/Term Loan. Any amounts repaying
         the Revolver/Term Loan on and after the Conversion Date will be applied
         in the inverse  order of maturity  and may not be  reborrowed.  On such
         date,  the  Borrower  shall  deliver  to  the  Administrative  Agent  a
         certificate  of an  Authorized  Officer  certifying as to the amount of
         (including the  calculation of) such repayment and, with respect to the
         Asset Sale  giving rise  thereto,  the gross  proceeds  thereof and the
         costs and expenses  payable as a result  thereof which were deducted in
         determining the amount of Net Proceeds.

                  (ii) Debt Issuances.  (A) Prior to the Conversion Date, on the
         date of any  issuance  of public or  private  Subordinated  Debt by the
         Borrower  (this  provision  not  permitting  such Debt  issuance),  the
         Borrower  shall repay the  Obligations  and the  obligations  under the
         Revolving  Credit  Agreement  by an  amount  equal  to  100% of the net
         proceeds from such  issuance,  applied pro rata to the  obligations  as
         specified  under the  Revolving  Credit  Agreement  and to  outstanding
         Advances  under the  Revolver/Term  Loan,  and (B) after the Conversion
         Date, (I) if there exists no Default or Event of Default (and the Total
         Leverage Ratio is less than 5.00 to 1.00),  on the date of any issuance
         of any  private  or  public  Subordinated  Debt  by the  Borrower,  the
         Borrower  shall  repay  the  obligations  under  the  Revolving  Credit
         Agreement  by an  amount  equal  to 100% of the  net  proceeds  of such
         Subordinated  Debt  issuance,  applied to the  obligations as


100\269\91946                    32
<PAGE>
         specified  under  the  Revolving  Credit  Agreement,  and (II) if there
         exists a Default or Event of Default or if the Total  Leverage Ratio is
         equal to or greater than 5.00 to 1.00, on the date of any such issuance
         by the  Borrower,  the  Borrower  shall repay the  Obligations  and the
         obligations  under the Revolving Credit Agreement by an amount equal to
         100% of the net  proceeds  of such  issuance,  applied  pro rata to the
         obligations   outstanding   under  the  Revolving   Loan  and  Advances
         outstanding  under the  Revolver/Term  Loan.  Any amounts  repaying the
         Revolver/Term  Loan on and after the Conversion Date will be applied in
         the inverse order of maturity and may not be reborrowed.  On such date,
         the Borrower shall deliver to the Administrative Agent a certificate of
         an Authorized  Officer  certifying  as to the amount of (including  the
         calculation  of) such  repayment and, with respect to the Debt issuance
         giving  rise  thereto,  the gross  proceeds  thereof  and the costs and
         expenses payable as a result thereof which were deducted in determining
         the amount of net proceeds of such Debt issuance.

                  (iii)  Equity  Issuances.  (A)  Prior to the  Conversion  Date
         (unless there exists a Default or an Event of Default),  on the date of
         any  issuance of equity by any GCI Entity  other than the Closing  Date
         and other  than the  issuance  of common  stock or options or rights to
         purchase  common  stock of any GCI Entity to  employees  and  directors
         pursuant to stock  purchase  plans or grant plans,  or otherwise  (this
         provision not  permitting  such equity  issuances),  the Borrower shall
         repay the obligations under the Revolving Credit Agreement by an amount
         equal to 50% of the net proceeds of such equity  issuances in excess of
         $50,000,000 in the aggregate over the term of this  Agreement,  applied
         pro rata to the  obligations  as specified  under the Revolving  Credit
         Agreement and Advances  outstanding under the  Revolver/Term  Loan, and
         (B) (I) after the Conversion  Date, if there exists no Default or Event
         of  Default,  on the date of any  issuance of equity by any GCI Entity,
         the Borrower  shall repay the  obligations  under the Revolving  Credit
         Agreement  by an amount equal to 50% of the net proceeds of such equity
         issuances in excess of  $50,000,000  in the aggregate  over the term of
         this  Agreement,  applied to the  obligations  as  specified  under the
         Revolving Credit Agreement, and (II) if there exists a Default or Event
         of Default,  on the date of any such equity issuance by any GCI Entity,
         the Borrower shall repay the Obligations and the obligations  under the
         Revolving  Credit  Agreement  by an  amount  equal  to  100% of the net
         proceeds of such equity issuances,  applied pro rata to the obligations
         as  specified  under  the  Revolving   Credit  Agreement  and  Advances
         outstanding  under the  Revolver/Term  Loan.  Any amounts  repaying the
         Revolver/Term  Loan on and after the Conversion Date will be applied in
         the inverse order of maturity and may not be reborrowed.  On such date,
         the Borrower shall deliver to the Administrative Agent a certificate of
         an Authorized  Officer  certifying  as to the amount of (including  the
         calculation of) such repayment and, with respect to the equity issuance
         giving  rise  thereto,  the gross  proceeds  thereof  and the costs and
         expenses payable as a result thereof which were deducted in determining
         the amount of net proceeds of such equity issuance.



100\269\91946                    33
<PAGE>
                  (iv)   Distributions  from  AUSP  or  any  other  Unrestricted
         Subsidiaries.  (A)  Prior to the  Conversion  Date,  on the date of any
         receipt by the Borrower or any Restricted  Subsidiary of a distribution
         from AUSP or any other  Unrestricted  Subsidiary,  the  Borrower  shall
         repay the Obligations and the  obligations  under the Revolving  Credit
         Agreement by an amount equal to 100% of such distribution,  applied pro
         rata to Advances  outstanding  under the  Revolving  Loan and  Advances
         outstanding under the Revolver/Term  Loan, and (B) after the Conversion
         Date,  (I) if there exists no Default or Event of Default,  on the date
         of any  receipt  by the  Borrower  or any  Restricted  Subsidiary  of a
         distribution  from  AUSP  or any  other  Unrestricted  Subsidiary,  the
         Borrower  shall  repay  the  obligations  under  the  Revolving  Credit
         Agreement by an amount equal to 100% of such  distribution,  applied to
         the obligations as specified under the Revolving Credit Agreement,  and
         (II) if there exists a Default or Event of Default,  on the date of any
         such  receipt  by  the  Borrower  or  any  Restricted  Subsidiary  of a
         distribution  from  AUSP  or any  other  Unrestricted  Subsidiary,  the
         Borrower  shall repay the  Obligations  and the  obligations  under the
         Revolving  Credit  Agreement  by  an  amount  equal  to  100%  of  such
         distribution,  applied pro rata to the  obligations as specified  under
         the  Revolving  Credit  Agreement  and Advances  outstanding  under the
         Revolver/Term  Loan. Any amounts repaying the Revolver/Term Loan on and
         after the  Conversion  Date will be  applied  in the  inverse  order of
         maturity and may not be  reborrowed.  On such date,  the Borrower shall
         deliver to the  Administrative  Agent a  certificate  of an  Authorized
         Officer  certifying as to the amount of (including the  calculation of)
         such repayment.

                  (v)  Change of  Control.  If a Change of Control  occurs,  the
         Borrower shall repay the Obligations in full.

         (c) Prepayments, Generally. Any prepayment of Advances pursuant to this
Section  2.05  shall  be  applied  first to Base  Rate  Advances,  if any,  then
outstanding  under the Facility,  second to LIBOR Advances for which the date of
prepayment  is  the  last  day  of  the  applicable  Interest  Period,  if  any,
outstanding  under the  Facility and third to LIBOR  Advances  with the shortest
remaining Interest Periods outstanding under the Facility.

         2.06 Mandatory Repayment.

         (a) Revolver/Term Loan Installment Repayments. Commencing September 30,
2000, the aggregate  outstanding  Advances under the Revolver/Term Loan shall be
repaid  by the  Borrower  in  installments  thereafter  from time to time by the
Installment  Percentage  set forth below on such dates as are set forth below of
the aggregate Revolver/Term Advances outstanding on the Conversion Date:



100\269\91946                    34
<PAGE>
                           Date of Reduction         Installment Percentage
                           -----------------         ----------------------

                           September 30, 2000                 3.750%
                           December 31, 2000                  3.750%

                           March 31, 2001                     3.750%
                           June 30, 2001                      3.750%
                           September 30, 2001                 3.750%
                           December 31, 2001                  3.750%

                           March 31, 2002                     5.000%
                           June 30, 2002                      5.000%
                           September 30, 2002                 5.000%
                           December 31, 2002                  5.000%

                           March 31, 2003                     5.000%
                           June 30, 2003                      5.000%
                           September 30, 2003                 5.000%
                           December 31, 2003                  5.000%

                           March 31, 2004                     5.625%
                           June 30, 2004                      5.625%
                           September 30, 2004                 5.625%
                           December 31, 2004                  5.625%

                           March 31, 2005                     7.500%
                           July 31, 2005                      7.500% and all
                                                              remaining
                                                              outstanding
                                                              Advances  all
                                                              other Obligations
                                                              shall be due and
                                                              payable in full

         (b) Final Maturity.  The Borrower agrees that all Advances  outstanding
under the Revolver/Term Loan, and all other outstanding  Obligations are due and
payable in full on the Maturity Date.

         2.07  Interest.  Subject to Section 2.08 below,  the Borrower shall pay
interest on the unpaid  principal  amount of each  Advance from the date of such
Advance until such principal  shall be paid in full, at the following  rates, as
selected by the  Borrower in  accordance  with the  provisions  of Section  2.02
hereof:

                  (a) Base Rate Advances. Base Rate Advances shall bear interest
         at a rate per  annum  equal to the  lesser  of (i) the Base  Rate as in
         effect  from  time to time and (ii) the  Highest  Lawful  Rate.  If the
         amount of  interest  payable  in respect  of any  interest  computation
         period  is  reduced  to  the  Highest   Lawful  Rate  pursuant  to  the
         immediately


100\269\91946                    35
<PAGE>
         preceding sentence and the amount of interest payable in respect of any
         subsequent  interest  computation period would be less than the Maximum
         Amount,  then  the  amount  of  interest  payable  in  respect  of such
         subsequent interest computation period shall be automatically increased
         to Maximum Amount;  provided that at no time shall the aggregate amount
         by which  interest  paid has been  increased  pursuant to this sentence
         exceed the aggregate amount by which interest has been reduced pursuant
         to the immediately preceding sentence.

                  (b) LIBOR Advances.  LIBOR Advances shall bear interest at the
         rate per annum  equal to the LIBOR  Rate  applicable  to such  Advance,
         which at no time shall exceed the Highest Lawful Rate.

                  (c) Payment  Dates.  Accrued and unpaid  interest on Base Rate
         Advances  shall be paid quarterly in arrears on each Quarterly Date and
         on the appropriate maturity,  repayment or prepayment date. Accrued and
         unpaid  interest on LIBOR Advances shall be paid on the last day of the
         appropriate  Interest  Period  and on the  date  of any  prepayment  or
         repayment  of such  Advance;  provided,  however,  that if any Interest
         Period for a LIBOR Advance exceeds three months, interest shall also be
         paid on each date  occurring  during the  Interest  Period which is the
         three month anniversary date of the first day of the Interest Period.

         Default Interest.  During the continuation of any Event of Default, the
Borrower shall pay, on demand, interest (after as well as before judgment to the
extent permitted by Law) on the principal amount of all Advances outstanding and
on all other Obligations due and unpaid hereunder equal to the lesser of the (a)
the Highest  Lawful Rate and (b) the Base Rate  (whether or not in effect)  plus
2.00% per annum.

         2.09 Continuation and Conversion Elections.

         (a) The Borrower may upon irrevocable  written notice to Administrative
Agent and subject to the terms of this Agreement:

                   (i) elect to convert, on any Business Day, all or any portion
         of outstanding Base Rate Advances (in an aggregate amount not less than
         $1,000,000 or a larger integral multiple of $500,000 in excess thereof)
         into LIBOR Advances.

                  (ii)  elect  to  convert  at the  end of any  Interest  Period
         therefor, all or any portion of outstanding LIBOR Advances comprised in
         the same Borrowing (in an aggregate  amount not less than $500,000 or a
         larger integral  multiple of $100,000 in excess thereof) into Base Rate
         Advances; or

                  (iii) elect to  continue,  at the end of any  Interest  Period
         therefor, any LIBOR Advances;



100\269\91946                    36
<PAGE>
         provided,  however,  that if the aggregate amount of outstanding  LIBOR
Advances  comprised in the same Borrowing shall have been reduced as a result of
any payment,  prepayment  or  conversion  of part thereof to an amount less than
$1,000,000,  the LIBOR Advances comprised in such Borrowing shall  automatically
convert into Base Rate Advances at the end of each respective Interest Period.

         (b) The Borrower  shall deliver a notice of conversion or  continuation
(a "Notice of Conversion/Continuation"),  in substantially the form of Exhibit E
hereto,  to  Administrative  Agent not later than (i) 12:00 noon three  Business
Days prior to the proposed date of conversion or  continuation,  if the Advances
or any portion  thereof are to be converted into or continued as LIBOR Advances;
and (ii) not later  than  10:00  a.m.  on the  proposed  date of  conversion  or
continuation,  if the Advances or any portion  thereof are to be converted  into
Base Rate Advances.

         Each such  Notice of  Conversion/Continuation  shall be by  telecopy or
telephone, promptly confirmed in writing, specifying therein:

                  (i)      the proposed date of conversion or continuation;

                  (ii)     the  aggregate  amount of Advances to be converted or
                           continued;

                  (iii)    the   nature   of   the   proposed    conversion   or
                           continuation; and

                  (iv)     the duration of the applicable Interest Period.

         (c) If, upon the expiration of any Interest Period  applicable to LIBOR
Advances,  the Borrower shall have failed to select a new Interest  Period to be
applicable  to such LIBOR  Advances  or if an Event of  Default  shall then have
occurred  and be  continuing,  the  Borrower  shall be deemed to have elected to
convert  such  LIBOR  Advances  into  Base  Rate  Advances  effective  as of the
expiration date of such current Interest Period.

         (d) Upon receipt of a Notice of Conversion/Continuation, Administrative
Agent  shall  promptly   notify  each  Lender   thereof.   All  conversions  and
continuations  shall be made pro rata  among  Lenders  based on their  Specified
Percentage of the respective  outstanding principal amounts of the Advances with
respect to which such notice was given held by each Lender.

         (e)  Notwithstanding  any other provision  contained in this Agreement,
after giving effect to any  conversion or  continuation  of any Advances,  there
shall  not be  outstanding  Advances  with more than  eight  different  Interest
Periods in the  aggregate  under the  Facility  and under the  Revolving  Credit
Agreement.



100\269\91946                    37
<PAGE>
         2.10 Fees.

         (a) Subject to Section 10.09 hereof,  the Borrower agrees to pay to the
Administrative  Agent,  for the account of the Lenders in accordance  with their
Specified  Percentages,  a  commitment  fee on the average  daily  amount of the
Revolver/Term  Unused  Commitment,  from the Closing Date through the Conversion
Date,  at the rate of .125% per  annum,  payable  quarterly  in  arrears on each
Quarterly Date occurring  after the Closing Date, with the last such payment due
and owing on the Conversion Date.

         (b) Subject to Section 10.09 hereof,  the Borrower agrees to pay to the
Administrative   Agent  for  its  own  account  as  administrative   lender  and
underwriter,  and  to  NationsBanc  Montgomery  Securities,  Inc.,  as  arranger
hereunder,  such  fees as  agreed  to in  writing  among  the  Borrower  and the
Administrative Agent and NationsBanc Montgomery Securities, Inc., payable as set
forth in that certain Fee Letter executed among the Borrower, the Administrative
Agent and NationsBanc Montgomery  Securities,  Inc. in accordance with the terms
of the Fee Letter.

         2.11 Funding Losses. If the Borrower makes any payment or prepayment of
principal with respect to any LIBOR Advance  (including  payments made after any
acceleration  thereof) or converts any Advance  from a LIBOR  Advance on any day
other  than the last day of an  Interest  Period  applicable  thereto  or if the
Borrower fails to prepay, borrow, convert, or continue any LIBOR Advance after a
notice of prepayment,  borrowing,  conversion or continuation has been given (or
is deemed to have been given) to Administrative Agent, the Borrower shall pay to
each Lender on demand (subject to Section 10.09 hereof) any Consequential  Loss.
The Borrower  agrees that each Lender is not obligated to actually  reinvest the
amount  prepaid in any  specific  obligation  as a condition  to  receiving  any
Consequential Loss, or otherwise.

         2.12 Computations and Manner of Payments.

         (a) The Borrower shall make each payment  hereunder and under the other
Loan  Papers not later  than 1:00 p.m.  on the day when due in same day funds to
Administrative  Agent,  for the  Ratable  account  of Lenders  unless  otherwise
specifically provided herein, at

                              Administrative Agent
                                NationsBank Plaza
                                 901 Main Street
                                   14th Floor
                               Dallas, Texas 75202

for further credit to the account of GCI Holdings, Inc. No later than the end of
each day when each  payment  hereunder is made,  the  Borrower  shall notify the
Administrative  Agent,  telephone (800) 880-5537,  facsimile (214) 508-2515,  or
such other Person as Administrative Agent may from time to time specify.



100\269\91946                    38
<PAGE>
         (b) Unless  Administrative  Agent shall have  received  notice from the
Borrower  prior to the date on  which  any  payment  is due  hereunder  that the
Borrower  will not make  payment in full,  Administrative  Agent may assume that
such payment is so made on such date and may, in reliance upon such  assumption,
make distributions to Lenders.  If and to the extent the Borrower shall not have
made such  payment in full,  each  Lender  shall repay to  Administrative  Agent
forthwith on demand the applicable  amount  distributed,  together with interest
thereon at the Federal Funds Rate, from the date of distribution  until the date
of repayment.  The Borrower hereby  authorizes each Lender, if and to the extent
payment is not made when due hereunder,  to charge the amount so due against any
account of the Borrower with such Lender.

         (c) Subject to Section 10.09 hereof,  interest on LIBOR  Advances shall
be  calculated  on the basis of actual days elapsed but computed as if each year
consisted of 360 days.  Subject to Section 10.09  hereof,  interest on Base Rate
Advances,  the Commitment Fees and other amounts due under the Loan Papers shall
be  calculated  on the basis of actual days elapsed but computed as if each year
consisted  of 365 or 366 days,  as the case may be. Such  computations  shall be
made  including the first day but excluding the last day occurring in the period
for  which  such  interest,   payment  or  Commitment  Fees  is  payable.   Each
determination  by  Administrative  Agent or a Lender of an interest rate, fee or
commission  hereunder  shall be conclusive and binding for all purposes,  absent
manifest  error.  All  payments  under the Loan  Papers  shall be made in United
States dollars, and without setoff, counterclaim, or other defense.

         (d) Except as specifically  set forth in Sections 2.04 and 2.05 hereof,
so long as there exists no Default or Event of Default all payments  made by the
Borrower shall be applied as designated by the Borrower,  and, if there exists a
Default or Event of Default,  or if the Borrower fails to designate  application
of payments,  all payments made by the Borrower  shall be applied pro rata among
the obligations under the Revolving Credit Agreement and the Revolver/Term Loan.
Notwithstanding  anything  herein  or in any  Loan  Paper to the  contrary,  any
payment  made by the  Borrower  in excess  of the  Revolver/Term  Commitment  or
outstanding   Advances  under  the  Revolver/Term  Loan,  shall  be  applied  to
outstanding  amounts  (or to reduce  the  commitment)  of any other  outstanding
Obligations.

         (e) Reference to any particular index or reference rate for determining
any applicable interest rate under this Agreement is for purposes of calculating
the  interest due and is not intended as and shall not be construed as requiring
any Lender to actually  fund any Advance at any  particular  index or  reference
rate.

         2.13 Yield Protection.

         (a) If any Lender  determines  that either (i) the adoption,  after the
date hereof,  of any  Applicable  Law, rule,  regulation or guideline  regarding
capital  adequacy and applicable to commercial  banks or financial  institutions
generally or any change therein,  or any change,  after the date hereof,  in the
interpretation  or  administration  thereof  by any  Tribunal,  central  bank or
comparable agency charged with the interpretation or administration  thereof, or
(ii) compliance by any Lender (or Lending Office of any Lender) with any request
or  directive  made after the


100\269\91946                    39
<PAGE>
date hereof applicable to commercial banks or financial  institutions  generally
regarding  capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency has the effect of reducing the rate
of return on such Lender's capital as a consequence of its obligations hereunder
to a level  below that  which  such  Lender  could  have  achieved  but for such
adoption, change or compliance (taking into consideration such Lender's policies
with respect to capital  adequacy (but excluding  consequences  of such Lender's
negligence  or  intentional  disregard  of  law  or  regulation))  by an  amount
reasonably deemed by such Lender to be material,  then from time to time, within
fifteen days after demand by such Lender,  the Borrower shall pay to such Lender
such additional amount or amounts as will adequately  compensate such Lender for
such  reduction.  Each Lender will  notify the  Borrower of any event  occurring
after the date of this Agreement  which will entitle such Lender to compensation
pursuant to this Section  2.13(a) as promptly as  practicable  after such Lender
obtains actual knowledge of such event;  provided, no Lender shall be liable for
its failure or the failure of any other Lender to provide such  notification.  A
certificate of such Lender  claiming  compensation  under this Section  2.13(a),
setting forth in reasonable  detail the calculation of the additional  amount or
amounts to be paid to it hereunder and certifying  that such claim is consistent
with such Lender's  treatment of similar  customers  having  similar  provisions
generally  in their  agreements  with such  Lender  shall be  conclusive  in the
absence of manifest error. Each Lender shall use reasonable  efforts to mitigate
the effect upon the Borrower of any such increased  costs payable to such Lender
under this Section 2.13(a).

         (b) If,  after the date  hereof,  any  Tribunal,  central bank or other
comparable  authority,  at any time imposes,  modifies or deems  applicable  any
reserve (including, without limitation, any imposed by the Board of Governors of
the Federal  Reserve  System),  special deposit or similar  requirement  against
assets  of,  deposits  with or for the  amount  of, or credit  extended  by, any
Lender, or imposes on any Lender any other condition  affecting a LIBOR Advance,
the Notes,  or its obligation to make a LIBOR Advance;  and the result of any of
the  foregoing is to increase  the cost to such Lender of making or  maintaining
LIBOR  Advances,  or to reduce the amount of any sum received or  receivable  by
such Lender under this Agreement or under the Notes or reimbursement obligations
by an amount deemed by such Lender, to be material, then, within five days after
demand by such  Lender,  the Borrower  shall pay to such Lender such  additional
amount or amounts as will  compensate  such  Lender for such  increased  cost or
reduction.  Each Lender will (i) notify the Borrower and Administrative Agent of
any event  occurring  after the date of this Agreement that entitles such Lender
to  compensation  pursuant to this Section  2.13(b),  as promptly as practicable
after such Lender obtains  actual  knowledge of the event;  provided,  no Lender
shall be liable for its  failure or the  failure of any other  Lender to provide
such notification and (ii) use good faith and reasonable  efforts to designate a
different  Lending Office for LIBOR  Advances of such Lender if the  designation
will avoid the need for, or reduce the amount of, the compensation and will not,
in the sole  opinion  of such  Lender,  be  disadvantageous  to such  Lender.  A
certificate of such Lender  claiming  compensation  under this Section  2.13(b),
setting forth in reasonable  detail the computation of the additional  amount or
amounts to be paid to it hereunder and certifying  that such claim is consistent
with such Lender's  treatment of similar  customers  having  similar  provisions
generally  in their  agreements  with such  Lender  shall be  conclusive  in the
absence of  manifest  error.  If such  Lender  demands


100\269\91946                    40
<PAGE>
compensation  under this Section  2.13(b),  the Borrower may at any time,  on at
least five Business Days' prior notice to such Lender (i) repay in full the then
outstanding  principal amount of LIBOR Advances,  of such Lender,  together with
accrued  interest  thereon,  or (ii)  convert  the LIBOR  Advances  to Base Rate
Advances in accordance with the provisions of this Agreement; provided, however,
that the Borrower shall be liable for the Consequential Loss arising pursuant to
those actions.

         (c)  Notwithstanding  any other  provision  of this  Agreement,  if the
introduction of or any change in or in the  interpretation  or administration of
any Law shall make it  unlawful,  or any central  bank or other  Tribunal  shall
assert that it is unlawful, for a Lender to perform its obligations hereunder to
make LIBOR Advances or to continue to fund or maintain LIBOR Advances hereunder,
then, on notice thereof and demand therefor by such Lender to the Borrower,  (i)
each LIBOR  Advance will  automatically,  upon such demand,  convert into a Base
Rate  Advance,  and (ii) the  obligation  of such Lender to make,  or to convert
Advances  into,  LIBOR Advances  shall be suspended  until such Lender  notifies
Administrative  Agent and the Borrower that such Lender has determined  that the
circumstances causing such suspension no longer exist.

         (d) Upon the  occurrence  and during the  continuance of any Default or
Event of Default, (i) each LIBOR Advance will automatically,  on the last day of
the then existing Interest Period therefor, convert into a Base Rate Advance and
(ii) the obligation of each Lender to make, or to convert  Advances into,  LIBOR
Advances shall be suspended.

         (e)  Failure on the part of any Lender to demand  compensation  for any
increased  costs,   increased  capital  or  reduction  in  amounts  received  or
receivable or reduction in return on capital  pursuant to this Section 2.13 with
respect to any period shall not  constitute  a waiver of any  Lender's  right to
demand  compensation  with respect to such period or any other period,  subject,
however, to the limitations set forth in this Section 2.13.

         (f) The  obligations  of the  Borrower  under this  Section  2.13 shall
survive any termination of this Agreement.

         (g)  Determinations  by Lenders for purposes of this Section 2.13 shall
be conclusive,  absent manifest error. Any certificate delivered to the Borrower
by a Lender pursuant to this Section 2.13 shall include in reasonable detail the
basis for such Lender's demand for additional  compensation  and a certification
that the claim for  compensation is consistent  with such Lender's  treatment of
similar customers having similar  provisions  generally in their agreements with
such Lender.

         (h) If any Lender notifies Administrative Agent that the LIBOR Rate for
any Interest Period for any LIBOR Advances will not adequately  reflect the cost
to such  Lender of  making,  funding  or  maintaining  LIBOR  Advances  for such
Interest  Period,  Administrative  Agent shall  promptly so notify the Borrower,
whereupon (i) each such LIBOR Advance will automatically, on the last day of the
then existing  Interest  Period  therefor,  convert into a Base Rate Advance


100\269\91946                    41
<PAGE>
and (ii) the  obligation  of such Lender to make, or to convert  Advances  into,
LIBOR  Advances  shall be suspended  until such Lender  notifies  Administrative
Agent that such  Lender  has  determined  that the  circumstances  causing  such
suspension  no longer exist and  Administrative  Agent  notifies the Borrower of
such fact.

         2.14 Use of Proceeds.  The proceeds of the Advances  shall be available
(and the Borrower shall use such proceeds) to (a) refinance existing Funded Debt
of the Borrower and its Restricted  Subsidiaries,  (b) fund Capital Expenditures
of the Borrower and the Restricted  Subsidiaries  permitted by the terms of this
Agreement, (c) contribute $50,000,000 to the capitalization of AUSP, and (d) use
for general working capital purposes.

         2.15 Collateral and Collateral Call.

         (a) Collateral. Payment of the Obligations is secured by (i) subject to
the Prior Stock Lien, a first perfected security interest in 100% of the Capital
Stock the Borrower and the Restricted Subsidiaries and 100% of the Capital Stock
of the Guarantors  (other than GCII),  (ii) subject to Permitted  Liens, a first
perfected  security  interest  in  all of the  accounts,  equipment,  inventory,
chattel  paper,  general  intangibles,  and other  assets of the  Borrower,  the
Restricted  Subsidiaries and the Guarantors (except Parents) including,  without
limitation,  a perfected Lien on all Intercompany Notes, including those payable
by AUSP or any other  Unrestricted  Subsidiary  to the Borrower or any other GCI
Entity,  subject  to no other  Lien,  and (iii) a  Guaranty  of the  Obligations
executed by each Guarantor (collectively,  together with all other Properties or
assets of the Borrower,  the Restricted  Subsidiaries and other Persons securing
the Obligations from time to time, the  "Collateral").  The Borrower agrees that
it will, and will cause the Restricted Subsidiaries,  the other GCI Entities and
Affiliates  (except the Unrestricted  Subsidiaries) to, execute and deliver,  or
cause to be executed and delivered,  such documents as the Administrative  Agent
may from time to time  reasonably  request  to create  and  perfect a first Lien
(except  with respect to the stock of GCI Leasing  Co.,  Inc.,  which shall be a
second Lien behind the Prior Stock Lien),  and subject to Permitted  Liens,  for
the benefit of the Administrative Agent and the Lenders in the Collateral.

         (b) Collateral  Call. The Borrower  agrees that it will, and will cause
any  other  Person  owning  any  interest  in the  Borrower  or  any  Restricted
Subsidiary  or other GCI Entity  from time to time to  immediately  pledge  such
interest  (other than with  respect to a pledge of the Capital  Stock of Parents
and to the  extent  permitted  by the  Indenture)  to  secure  the  Obligations,
pursuant  to a  pledge  agreement  substantially  in  the  form  of  the  Pledge
Agreements.  The  Borrower  agrees  to,  and  agrees  to  cause  the  Restricted
Subsidiaries  and each other GCI Entity to,  promptly  grant the  Administrative
Agent and the Lenders  from time to time at the request of the Lenders a Lien on
any of the  Property of the  Borrower  or other GCI Entity  (other than GCI) not
already constituting  Collateral,  to the extent permitted by the Indenture.  In
that regard,  the Borrower shall,  and shall cause each other GCI Entity to, use
best efforts to assist the Administrative  Agent and the Lenders in creating and
perfecting  a first Lien for the  benefit of  Administrative  Agent and  Lenders
securing the Obligations in any such Property of the Borrower and each other GCI
Entity,  subject to Permitted Liens (except for the Lien on the Capital Stock of
GCI  Leasing


100\269\91946                    42
<PAGE>
Co, Inc., which shall be a second Lien to the Prior Stock Lien)(other than GCI),
including,  without  limitation,  providing the Administrative  Agent with title
commitments,  appraisals,  surveys (with flood plain  certification),  mortgagee
title  insurance,  evidence  of  insurance  including  flood  hazard  insurance,
environmental  audits,  UCC-11  searches,  Tax and Lien searches,  recorded real
estate documents, intellectual property documentation and registration and other
similar types of documents, consents, Authorizations, instruments and agreements
relating to all Property of the  Borrower and each other GCI Entity  (other than
GCI) as reasonably requested by the Administrative Agent from time to time.


                       ARTICLE III. INTENTIONALLY OMITTED


                        ARTICLE IV. CONDITIONS PRECEDENT

         4.01 Conditions  Precedent to the Initial  Advance.  The obligations of
each Lender under this  Agreement and the  obligation of each Lender to make the
Initial Advance shall be subject to the following  conditions  precedent that on
the Closing Date:

         (a) All terms,  conditions and  documentation  in connection  with this
Credit Agreement shall be acceptable to the Lenders.

         (b) The making of the Revolver/Term Commitment shall not contravene any
Law applicable to the Administrative Agent or any Lender.

         (c) Each Lender shall have  received a  Certificate  from an Authorized
Officer stating that no Material  Adverse Change,  as determined by the Lenders,
shall  have  occurred  and be  continuing  in  the  Systems,  business,  assets,
prospects, or financial condition of the businesses of the Borrower (as operated
by the Restricted Subsidiaries) since December 31, 1996.

         (d) All proceedings of the Borrower,  the Restricted  Subsidiaries  and
each other GCI Entity taken in  connection  with the  transactions  contemplated
hereby, and all documents incidental thereto,  shall be reasonably  satisfactory
in form and substance to the Lenders.  Each Lender shall have received copies of
all  documents or other  evidence that it may  reasonably  request in connection
with such transactions.

         (e) Each Lender shall have received an executed copy of this Agreement,
the  Revolving  Credit  Agreement,  and all  documents  required to be delivered
pursuant  thereto,  and its respective  Notes,  duly completed and correct.  The
Lenders shall have received copies of the Fee Letters signed by the Borrower, as
applicable.   Each  of  the   following   shall  have  been   delivered  to  the
Administrative Agent on behalf of Lenders, in form and substance satisfactory to
the Administrative Agent, Special Counsel and each Lender to the extent required
by  the   Administrative   Agent:   Each  other  Loan  Paper  requested  by  the
Administrative  Agent,  including,


100\269\91946                    43
<PAGE>
without  limitation,  all guarantees,  pledge agreements,  security  agreements,
mortgages,  deeds of trust, collateral assignments and other agreements granting
any interest in any collateral.

         (f) The Borrower  shall have  delivered  to each Lender a  Certificate,
dated the Closing Date,  executed by an Authorized Officer on behalf of each GCI
Entity,  certifying  that (i) no Default or Event of Default has occurred and is
continuing,  (ii) the  representations  and  warranties  set forth in  Article V
hereof are true and correct,  (iii) each of the GCI  Entities has complied  with
all agreements and conditions to be complied with by it under the Loan Papers by
such date, (iv) that the attached  resolutions for each GCI Entity are the true,
accurate and complete resolutions authorizing the corporate  restructuring,  the
incurrence  and  performance  of the Facility and the Loan Papers,  (v) that the
attached  copies of certified  articles of  incorporation,  or other articles of
organization,  certificates  of good  standing,  certificates  of existence  and
incumbency  certificates  for each GCI  Entity are (A) not more than 30 days old
and  certified  by the  appropriate  secretary  of state  of other  governmental
organization  and (B) represent the true and accurate  certificate for each such
entity,  and  (vi) the  attached  copies  of  by-laws  or  other  organizational
documents  represent  the  true and  accurate  by-laws  or other  organizational
documents for each GCI Entity in effect on the Closing Date.

         (g) Each Lender shall have  received  opinions of (i) Sherman & Howard,
L.L.C. corporate counsel to the Borrower,  the Restricted  Subsidiaries and each
other  GCI  Entity,  dated the  Closing  Date,  acceptable  to the  Lenders  and
otherwise in form and substance satisfactory to the Lenders and Special Counsel,
with  respect  to  this  loan  transaction  and  otherwise,  including,  without
limitation, opinions (A) to the valid and binding nature of the Loan Papers, (B)
to the  enforceability of the Loan Papers,  (C) to the power,  authorization and
corporate  matters of each such Person taken in connection with the transactions
contemplated  by  the  Loan  Papers,  (D)  that  the  execution,   delivery  and
performance by the GCI Entities,  as  applicable,  of the Agreement and the Loan
Papers  does not  violate  any of the terms of the  Borrower's,  the  Restricted
Subsidiaries' or any other GCI Entities' agreements,  (E) regarding the issuance
and related  opinions to the Senior Notes,  (F) the corporate  restructuring  in
order to effectuate  this  Agreement  and the issuance of the Senior Notes,  (G)
regarding the equity issuance  required by Section  4.01(j)  hereof,  and (H) to
such other matters as are reasonably requested by Special Counsel, and (ii) such
local counsel opinions  relating to the Collateral and such other matters as are
requested  by the  Administrative  Agent  and  Special  Counsel.  Copies  of all
opinions  delivered in connection with the equity  issuance  required by Section
4.01(j)  hereof and the Senior Notes shall be  delivered  to the  Administrative
Agent together with a reliance letter thereon.

         (h) Each Lender  shall have  received an opinion of inhouse  counsel to
the  Borrower  and to each  other  GCI  Entity,  dated as of the  Closing  Date,
acceptable to the Lenders and otherwise in form and  substance  satisfactory  to
the Lenders and Special  Counsel,  with respect to this  transaction,  and final
approval shall have been received from the FCC regarding any transfer of any FCC
license.



100\269\91946                    44
<PAGE>
         (i) GCII shall  have (i) issued the Senior  Notes in an amount not less
than  $180,000,000,  on terms and  conditions,  and  subject  to  documentation,
satisfactory to the Administrative  Agent and each Lender, and (ii) downstreamed
the net proceeds of the debt issuance  described in (i) above to the Borrower as
equity.

         (j) GCI shall have raised not less than  $50,750,000 in equity on terms
and  conditions  acceptable  to the  Administrative  Agent and the  Lenders  and
downstreamed  the net proceeds of the equity issuance to the Borrower as equity,
and the  Borrower  shall have  received not less than  $47,133,000  as an equity
contribution  from such  proceeds,  on terms and  conditions  acceptable  to the
Administrative Agent and each Lender.

         (k) No  management  agreement  with any Person shall be in existence at
the  Parents,  the  Borrower or any  Restricted  Subsidiaries,  except the Prime
Management Agreement.

         (l) All proceedings of the Parents,  the Borrower and the  Subsidiaries
of the  Parents  and the  Borrower  taken in  connection  with the  transactions
contemplated hereby, and all documents incidental thereto, shall be satisfactory
in form and substance to each Lender. The  Administrative  Agent and each Lender
shall  have  received  copies of all  documents  or other  evidence  that it may
reasonably  request in connection with such  transactions.  No Material  Adverse
Change,  as determined by the Lenders,  shall have occurred and be continuing in
the financial markets.

         (m) All Obligations outstanding under the existing credit facilities of
GCI Cable,  Inc. and GCI  Communication  Corp.  shall have been paid in full and
released.

         4.02  Conditions  Precedent to All  Advances.  The  obligation  of each
Lender to make each Advance, except for Refinancing Advances,  which constitutes
an increase,  shall be subject to the further  conditions  precedent that on the
date of such Advance the following statements shall be true:

                  (i) The representations and warranties  contained in Article V
         hereof are true and  correct on such date,  as though made on and as of
         such date (and the  delivery of each  Borrowing  Notice  under  Section
         2.02(a),  and each  Conversion  or  Continuation  Notice under  Section
         2.09(b),  or the failure to deliver a Conversion or Continuation Notice
         under Section 2.09(b),  shall  constitute a representation  that on the
         disbursement  date  such   representations   are  true  (except  as  to
         representations and warranties which (i) refer to a specific date, (ii)
         have been modified by transactions permitted pursuant to this Agreement
         or any  other  Loan  Paper or (iii)  have been  specifically  waived in
         writing by Administrative Agent));

                  (ii) No event has occurred and is continuing,  or would result
         from such Advance  (including the intended  application of the proceeds
         of such Advance),  that does or could  constitute a Default or Event of
         Default;



100\269\91946                    45
<PAGE>
                  (iii) There shall have  occurred no Material  Adverse  Change,
         and the making of such Advance, shall not cause or result in a Material
         Adverse Change;

                  (iv) After giving  effect to each such  Advance,  prior to the
         Conversion   Date,  the  aggregate   outstanding   Advances  under  the
         Revolver/Term Loan does not exceed the Revolver/Term Commitment; and

                  (v) After giving  effect to each such  Advance,  the aggregate
         outstanding  Advances  under the  Revolving  Loan does not  exceed  the
         Revolving Commitment;

and  (b)  Administrative  Agent  shall  have  received,  in form  and  substance
acceptable to it, such other approvals, documents,  certificates,  opinions, and
information  as  it  may  deem  necessary  or  appropriate,  including,  without
limitation,  a  certificate  from an Authorized  Officer,  in form and substance
satisfactory to the Administrative  Agent, that the Advances are permitted to be
incurred pursuant to the terms of the Indenture providing for the Senior Notes.


                    ARTICLE V. REPRESENTATIONS AND WARRANTIES

         The Borrower  represents  and warrants  that the following are true and
correct:

         5.01 Organization and  Qualification.  Each GCI Entity is a corporation
or partnership duly organized,  validly existing, and in good standing under the
Laws of its state of incorporation or formation, as applicable.  Each GCI Entity
is  qualified  to do  business  in all  jurisdictions  where  the  nature of its
business or Properties  require such  qualification.  Set forth on Schedule 5.01
attached hereto is a complete and accurate  listing with respect to the Borrower
and each other GCI Entity,  showing (a) the jurisdiction of its organization and
its mailing  address,  which is the  principal  place of business and  executive
offices of each unless otherwise indicated, (b) the classes of Capital Stock and
shares of Capital  Stock  issued and  outstanding  in each GCI  Entity,  and the
numbers  or  amounts  of  each  GCI  Entity's   Capital  Stock   authorized  and
outstanding,  (c) other than with  respect to GCI,  each  record and  beneficial
owner of outstanding Capital Stock on the date hereof,  indicating the ownership
percentage,  and (d) all outstanding  options,  rights,  rights of conversion or
purchase,  repurchase,  rights of first refusal,  and similar rights relating to
the  Capital  Stock of each GCI  Entity.  Except as set forth on  Schedule  5.01
hereto,  neither the Borrower,  nor any Restricted  Subsidiary nor any other GCI
Entity  (other than GCI) has agreed to grant or issue any  options,  warrants or
similar  rights to any Person to acquire any Capital Stock of the Borrower,  any
Restricted  Subsidiary  or any other GCI Entity.  All  Capital  Stock is validly
issued and fully paid.  The  Borrower  has no  knowledge of any share of Capital
Stock of any GCI Entity  (other than GCI) being  subject to any Lien,  including
any  restrictions  on  hypothecation  or  transfer,  except  Liens  described on
Schedule 5.08a hereto and the Prior Stock Lien.



100\269\91946                    46
<PAGE>
         5.02  Due  Authorization;  Validity.  The  board  of  directors  of the
Borrower and each other GCI Entity, or of its partners, as applicable, have duly
authorized the  execution,  delivery,  and  performance of the Loan Papers to be
executed by the Borrower  and each other GCI Entity,  as  appropriate.  Each GCI
Entity has full legal  right,  power,  and  authority to execute,  deliver,  and
perform  under the Loan  Papers to be  executed  and  delivered  by it. The Loan
Papers constitute the legal,  valid, and binding obligations of the Borrower and
each other GCI Entity,  as  appropriate,  enforceable  in accordance  with their
terms (subject as to  enforcement  of remedies to any  applicable  Debtor Relief
Laws).

         5.03  Conflicting  Agreements  and  Other  Matters.  The  execution  or
delivery of any Loan Papers, and performance thereunder, does not conflict with,
or result in a breach of the terms, conditions,  or provisions of, or constitute
a default under, or result in any violation of, or result in the creation of any
Lien (other than in favor of  Administrative  Agent) upon any  Properties of the
Borrower  or any other GCI Entity  under,  or require  any  consent  (other than
consents described on Schedule 5.03 hereto and the Prior Stock Lien),  approval,
or other action by, notice to, or filing with any Tribunal or Person pursuant to
any organizational document,  bylaws, award of any arbitrator, or any agreement,
instrument,  or Law to which the  Borrower  or any other GCI  Entity,  or any of
their Properties is subject.

         5.04 Financial Statements.  The audited financial statements of GCI and
its Subsidiaries dated December 31, 1996 and delivered to Administrative  Agent,
fairly  present its  financial  position and the results of operations as of the
dates and for the periods  shown,  all in accordance  with GAAP.  Such financial
statements reflect all material liabilities,  direct and contingent,  of GCI and
its  Subsidiaries  that are required to be disclosed in accordance with GAAP. As
of the date of such financial statements,  there were no Contingent Liabilities,
liabilities  for Taxes,  forward or  long-term  commitments,  or  unrealized  or
anticipated  losses from any  unfavorable  commitments  that are  substantial in
amount and that are not  reflected  on such  financial  statements  or otherwise
disclosed in writing to Administrative Agent. Since December 31, 1996, there has
been no  Material  Adverse  Change.  The  Borrower  and each other GCI Entity is
Solvent.  The  projections  of the  Borrower  dated May 20,  1997  delivered  to
Administrative Agent were prepared in good faith and management believes them to
be based on reasonable  assumptions (each of which are stated in such statement)
and to provide reasonable  estimations of future performance as of the dates and
for the periods  shown for the Parents,  the  Borrower  and their  Subsidiaries,
subject to the uncertainty and  approximation  inherent in any projections.  The
Borrower's fiscal year ends on December 31.

         5.05  Litigation.  Shown on  Schedule  5.05 is all  Litigation  that is
pending and, to the Borrower's best knowledge,  threatened  against the Borrower
or any other GCI Entity,  any of their  Properties or assets on the date hereof.
There is no pending or, to the Borrower's best knowledge,  threatened Litigation
against the Borrower,  any other GCI Entity,  any of their Properties that could
cause a Material Adverse Change.




100\269\91946                    47
<PAGE>
         5.06  Compliance  With  Laws  Regulating  the  Incurrence  of Debt.  No
proceeds  of any Advance  will be used  directly  or  indirectly  to acquire any
security  in any  transaction  which is  subject  to  Sections  13 and 14 of the
Securities  Exchange  Act of 1934,  as amended.  The Borrower is not, nor is any
other GCI Entity, engaged in the business of extending credit for the purpose of
purchasing  or carrying  margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System), and no proceeds of any
Advance will be used to purchase or carry any margin  stock or to extend  credit
to others for the purpose of purchasing or carrying any margin stock.  Following
the Borrower's  intended use of the proceeds of each Advance,  not more than 25%
of the value of the assets of the  Borrower  will be "margin  stock"  within the
meaning of  Regulation  U. The Borrower is not subject to  regulation  under the
Public  Utility  Holding  Company  Act of  1935,  the  Federal  Power  Act,  the
Investment  Company  Act of 1940,  the  Interstate  Commerce  Act (as any of the
preceding acts have been  amended),  or any other Law that the incurring of Debt
by the  Borrower  would  violate  in any  material  respect,  including  without
limitation  Laws  relating  to  common  or  contract  carriers  or the  sale  of
electricity,  gas, steam,  water, or other public utility services.  None of the
Borrower and its Restricted Subsidiaries,  nor any agent acting on their behalf,
have taken or will knowingly take any action which might cause this Agreement or
any Loan  Papers to violate  any  regulation  of the Board of  Governors  of the
Federal  Reserve  System or to violate the  Securities  Exchange Act of 1934, in
each case as in effect now or as the same may hereafter be in effect.

         5.07 Licenses,  Title to  Properties,  and Related  Matters.  Except as
listed on Schedule 5.07a hereto,  the Borrower and each other GCI Entity possess
all  material  Authorizations  necessary  and  appropriate  to own,  operate and
construct the Systems or otherwise for the operation of their businesses and are
not in violation thereof in any material respect. All such Authorizations are in
full force and effect,  are listed on Schedule  5.07a  hereto,  and no event has
occurred  that  permits,  or after  notice or lapse of time  could  permit,  the
revocation,  termination  or  material  and  adverse  modification  of any  such
Authorization,  except  those which in the  aggregate  could not  reasonably  be
expected to cause a Material Adverse Change. Schedule 5.07a shows the expiration
date  and/or  termination  date  for  each  Authorization  (including,   without
limitation,  FCC Licenses) in effect on the Closing  Date.  The Borrower is not,
nor is any  Subsidiary  of the  Borrower or the  Parents,  in  violation  of any
material  duty or  obligation  required by the  Communications  Act of 1934,  as
amended,  or any FCC  rule or  regulation  applicable  to the  operation  of any
portion of any of the Systems. There is not pending or, to the best knowledge of
the Borrower,  threatened,  any action by the FCC to revoke,  cancel, suspend or
refuse to renew any FCC License relating to any System. There is not pending or,
or to the best knowledge of the Borrower,  threatened,  any action by the FCC to
modify  adversely,  revoke,  cancel,  suspend  or  refuse  to  renew  any  other
Authorization  relating to any System. There is not issued or outstanding or, to
the best  knowledge  of the  Borrower,  threatened,  any notice of any  hearing,
violation or material complaint against the Borrower,  the Parents or any of the
Restricted  Subsidiaries  with  respect to the  operation  of any portion of the
Systems and the  Borrower has no  knowledge  that any Person  intends to contest
renewal  of any  Authorization  relating  to any  System.  Each GCI  Entity  has
requisite  corporate or partnership power (as applicable) and legal right to own
and  operate  its  Property  and to  conduct  its  business.


100\269\91946                    48
<PAGE>
Each has good and  indefeasible  title (fee or leasehold,  as applicable) to its
Property,  subject to no Lien of any kind,  except  Permitted  Liens. All of the
assets of the  Borrower  and each  other  GCI  Entity  are  located  within  the
municipalities and borough locations  described on Schedule 5.07b. No GCI Entity
is in violation of its respective  articles of organization or incorporation (as
applicable)  or bylaws.  None of the GCI Entities is in violation of any Law, or
material  agreement  or  instrument  binding  on or  affecting  it or any of its
Properties, the effect of which could reasonably be expected to cause a Material
Adverse  Change.  No business or Properties of the Parents,  the Borrower or any
Restricted  Subsidiary  is  affected  by any  strike,  lock-out  or other  labor
dispute.  No  business  or  Properties  of  the  Parents,  the  Borrower  or any
Restricted Subsidiary is affected by any drought,  storm,  earthquake,  embargo,
act of God or  public  enemy,  or other  casualty,  the  effect  of which  could
reasonably be expected to cause a Material Adverse Change.

         5.08  Outstanding  Debt and Liens. The GCI Entities have no outstanding
Debt,  Contingent  Liabilities or Liens, except Permitted Liens, except as shown
on Schedule  5.08a hereto.  No breach,  default or event of default exists under
any document,  instrument or agreement  evidencing or otherwise  relating to any
Funded Debt of any GCI Entity,  which  could  reasonably  be expected to cause a
Material Adverse Change.

         5.09 Taxes.  The  Parents,  the  Borrower  and each  Subsidiary  of the
Parents and the Borrower has filed all federal, state, and other Tax returns (or
extensions  related  thereto)  which are required to be filed,  and has paid all
Taxes as shown on said  returns,  as well as all other Taxes,  to the extent due
and  payable,  except to the extent  payment is  contested in good faith and for
which adequate reserves have been established  therefor in accordance with GAAP.
All Tax  liabilities  of the Parents,  the Borrower and each  Subsidiary  of the
Parents and the Borrower  are  adequately  provided for on its books,  including
interest and penalties,  and adequate reserves have been established therefor in
accordance  with GAAP.  No income Tax  liability  of a material  nature has been
asserted by taxing authorities for Taxes in excess of those already paid, and no
taxing authority has notified the Parents, the Borrower or any Subsidiary of the
Parents or the Borrower of any deficiency in any Tax return.

         5.10 ERISA. Each Plan of the Parents,  the Borrower and each Subsidiary
of the Parents and the  Borrower has  satisfied  the minimum  funding  standards
under  all  Laws  applicable  thereto,  and no Plan has an  accumulated  funding
deficiency thereunder. The Borrower has not, and neither has the Parents, or any
Subsidiary of the Borrower or the Parents incurred any material liability to the
PBGC with respect to any Plan.  No ERISA Event has occurred  with respect to any
Plan for which an Insufficiency in excess of $100,000 exists on the date of such
occurrence.  None of the Parents, the Borrower, or any Subsidiary of the Parents
or the Borrower has participated in any non-exempt  Prohibited  Transaction with
respect  to any Plan or trust  created  thereunder.  None of the  Borrower,  the
Parents  or any  Subsidiary  of the  Borrower  and the  Parents,  nor any  ERISA
Affiliate,  has incurred any Withdrawal Liability to any Multiemployer Plan that
has not been satisfied.  None of the Borrower,  the Parents or any Subsidiary of
the Parents or the  Borrower,  nor any ERISA  Affiliate has been notified by the



100\269\91946                    49
<PAGE>
sponsor  of  a   Multiemployer   Plan  that  such   Multiemployer   Plan  is  in
reorganization or has been terminated, within the meaning of Title IV of ERISA.

         5.11  Environmental  Laws.  The  Borrower and each other GCI Entity has
obtained all material  environmental,  health and safety  permits,  licenses and
other material authorizations  required under all Applicable  Environmental Laws
to carry on its business as being  conducted.  On the Closing Date, there are no
environmental  liabilities of the Borrower or any other GCI Entity (with respect
to any fee owned or leased  Properties),  except as disclosed  and  described in
detail  on  Schedule   5.11  hereto.   Each  of  such   permits,   licenses  and
authorizations  is in full force and effect and the  Borrower and each other GCI
Entity is in compliance  with the terms and conditions  thereof,  and is also in
compliance  with all other  limitations,  restrictions,  conditions,  standards,
prohibitions,  requirements,  obligations, schedules and timetables contained in
any  applicable  Environmental  Law or in any  regulation,  code,  plan,  order,
decree,  judgment,   injunction,   notice  or  demand  letter  issued,  entered,
promulgated or approved thereunder,  except to the extent failure to comply with
any thereof could not reasonably be expected to cause a Material Adverse Change.
In addition, no written notice,  notification,  demand, request for information,
citation, summons or order has been issued, no written complaint has been filed,
no penalty has been  assessed and no  investigation  or review is pending or, to
the best knowledge of the Borrower or any other GCI Entity,  threatened,  by any
Tribunal or other entity with respect to any alleged  failure by the Borrower or
any other GCI Entity to have any environmental, health or safety permit, license
or other  authorization  required  under  any  Applicable  Environmental  Law in
connection  with the conduct of the  business  of the  Borrower or any other GCI
Entity  or  with  respect  to any  generation,  treatment,  storage,  recycling,
transportation, discharge, disposal or release of any Hazardous Materials by the
Borrower or any other GCI Entity. To the best knowledge of the Borrower and each
other  GCI  Entity,  there  are no  material  environmental  liabilities  of the
Borrower or any other GCI Entity,  except as previously  disclosed in writing to
the  Lenders.  To the best  knowledge of the Borrower and each other GCI Entity,
there are no  environmental  liabilities of the Borrower or any other GCI Entity
which  could  reasonably  be expected to cause a Material  Adverse  Change.  The
Borrower has delivered to the  Administrative  Agent copies of all environmental
studies and  reports  conducted  or  received  by the  Borrower or any other GCI
Entity in connection  with real Property.  Such studies cover all real Property,
if any,  owned in fee by the  Borrower  and each other GCI Entity.  No Hazardous
Materials are generated or produced at or in connection  with the Properties and
operations of any of the Borrower or any of the other GCI Entities, nor have any
Hazardous Materials been disposed of or otherwise released on or to any Property
on which any operations of the Borrower or any other GCI Entities are conducted,
except in compliance with Applicable Environmental Laws.

         5.12 Disclosure. Neither the Borrower nor any other GCI Entity has made
a  material  misstatement  of fact,  or failed to  disclose  any  material  fact
necessary  to  make  the  facts  disclosed  not  misleading,  in  light  of  the
circumstances under which they were made, to Administrative  Agent or any Lender
during the  course of  application  for and  negotiation  of any Loan  Papers or
otherwise  in  connection  with  any  Advances.  There  is no fact  known to the
Borrower or any other GCI Entity that  materially  adversely  affects any of the
Borrower's  or any of the other GCI


100\269\91946                    50
<PAGE>
Entity's  Properties or business,  or that could  constitute a Material  Adverse
Change, and that has not been set forth in the Loan Papers or in other documents
furnished to Administrative Agent or any Lender.

         5.13  Investments;  Restricted  Subsidiaries.  The GCI Entities have no
Investments  except as  described  on Schedule  5.13 hereto and as  permitted by
Section 7.10 hereof.  Schedule  5.13 is a complete and accurate  listing of each
GCI Entity, showing (a) its complete name, (b) its jurisdiction of organization,
(c) its  capital  structure,  (d) its street and mailing  address,  which is its
principal  place of business and executive  office and (e) all interests in such
GCI Entity.

         5.14 Certain Fees. No broker's,  finder's,  management fee or other fee
or commission  will be payable by the Borrower with respect to the making of the
Revolver/Term  Commitment or Advances  hereunder  (other than to  Administrative
Agent,   NationsBanc  Montgomery  Securities,   Inc.,  Credit  Lyonnais  and  TD
hereunder),  except as set forth in Schedule 5.14 hereof.  The Borrower and each
other GCI Entity hereby  agrees to indemnify  and hold  harmless  Administrative
Agent  and  each  Lender  from  and  against  any  claims,  demand,   liability,
proceedings, costs or expenses asserted with respect to or arising in connection
with any such fees or commissions.

         5.15 Intellectual  Property. The Borrower and each other GCI Entity has
obtained  all  patents,  trademarks,  service-marks,  trade  names,  copyrights,
licenses and other rights, free from material restrictions,  which are necessary
for the operation of their respective  businesses as presently  conducted and as
proposed to be  conducted.  Nothing has come to the attention of the Borrower or
any other GCI Entity to the effect that (a) any process,  method,  part or other
material presently  contemplated to be employed by the Borrower or any other GCI
Entity may or could  reasonably  be alleged to infringe  any patent,  trademark,
service-mark, trade name, license or other right (except copyright) owned by any
other Person, or (b) except as shown on Schedule 5.05 attached hereto,  there is
pending or threatened any claim or litigation  against or affecting the Borrower
or any other GCI Entity  contesting  its right to sell or use any such  process,
method,  part or  other  material.  Nothing  has  come to the  attention  of the
Borrower  or any other GCI  Entity to the  effect  that any  material  presently
contemplated to be employed by the Borrower or any other GCI Entity may or could
reasonably  be alleged to  infringe  any  copyright  owned by any other  Person,
except to the extent that any such infringement,  when aggregated with all other
copyright  infringements,  could not  reasonably be expected to cause a Material
Adverse Change.

         5.16 Due Authorization;  Validity of the AUSP Financing  Agreements and
the Project Agreements.  On or before the AUSP Closing Date, the general partner
of AUSP and each other  Affiliate  of AUSP which is party to the AUSP  Financing
Agreements or the Project  Agreements  will have duly  authorized the execution,
delivery,  and  performance  of the AUSP  Financing  Agreements  and the Project
Agreements to be executed by AUSP or each such Affiliate, as appropriate.  On or
before the AUSP Closing  Date,  each of AUSP and its  Affiliates  will have full
legal right,  power,  and authority to execute,  deliver,  and perform under the
Project  Agreements  and  the  AUSP  Financing  Agreements  to be  executed  and
delivered  by  it.  Each  of


100\269\91946                    51
<PAGE>
the AUSP Financing Agreements and the Project Agreements, upon execution thereof
on the AUSP  Closing  Date,  will  constitute  the  legal,  valid,  and  binding
obligations  of  AUSP  and  its  Affiliates,  as  appropriate,   enforceable  in
accordance  with their  terms  (subject  as to  enforcement  of  remedies to any
applicable Debtor Relief Laws).  Each AUSP Financing  Agreement and each Project
Agreement to be delivered to the  Administrative  Agent on the AUSP Closing Date
will be a true and complete  copy of such  agreement as executed by AUSP and its
Affiliates.

         5.17.  Conflicting Agreements and Other Matters with the AUSP Financing
Agreements  and  Project  Agreement.  The  execution  or  delivery  of any  AUSP
Financing Agreements and the Project Agreements and performance thereunder, upon
the execution thereof on the AUSP Closing Date will not conflict with, or result
in a breach of the terms, conditions,  or provisions of, or constitute a default
under,  or result in any  violation  of, or result in the  creation  of any Lien
(other  than  in  favor  of   Administrative   Agent  and  Credit   Lyonnais  as
administrative  agent under the AUSP Credit Agreement with respect solely to the
Intercompany   Notes  from  AUSP  payable  to  the  Borrower   pursuant  to  the
Subordination  Agreement)  upon any  Properties of the Borrower or any other GCI
Entity, under, or require any consent (other than consents described on Schedule
5.03 hereto and consents obtained on or before the AUSP Closing Date), approval,
or other action by,  notice to, or filing with any  Tribunal or Person  pursuant
to,  any  organizational  document,  bylaws,  award  of any  arbitrator,  or any
agreement,  instrument, or Law to which the Borrower or any other GCI Entity, or
any of their Properties is subject.

         5.18   Survival   of   Representations   and   Warranties,   etc.   All
representations  and warranties  made under this Agreement shall be deemed to be
made at and as of the  Closing  Date and at and as of the date of each  Advance,
except for Refinancing  Advances,  and each shall be true and correct when made,
except to the extent  (a)  previously  fulfilled  in  accordance  with the terms
hereof,  (b) subsequently  inapplicable,  or (c) previously waived in writing by
Administrative  Agent  and  Lenders  with  respect  to  any  particular  factual
circumstance. The representations and warranties made under this Agreement shall
be deemed  applicable  to each  Restricted  Subsidiary  as of the  formation  or
acquisition  of  such  Restricted  Subsidiary  and at and as of  each  date  the
representations  and  warranties  are remade  pursuant  to this  provision.  All
representations and warranties made under this Agreement shall survive,  and not
be waived by, the execution hereof by the Administrative  Agent and Lenders, any
investigation or inquiry by the  Administrative  Agent or any Lender,  or by the
making of any Advance under this Agreement.

                        ARTICLE VI. AFFIRMATIVE COVENANTS

         So long as the Revolver/Term Commitment, any Advance, or any portion of
the Obligations is outstanding, or the Borrower or any other GCI Entity owes any
other amount hereunder or under any other Loan Paper:

         6.01 Compliance with Laws and Payment of Debt. The Borrower shall,  and
shall cause each of the Parents and all  Subsidiaries  of the  Borrower  and the
Parents to,  comply  with all  Applicable  Laws,  including  without  limitation
compliance with ERISA and all applicable  federal


100\269\91946                    52
<PAGE>
and state  securities  Laws. The Borrower shall,  and shall cause each other GCI
Entity and Affiliates to, pay its (a) Funded Debt as and when due (or within any
applicable  grace  period),  unless payment  thereof is being  contested in good
faith by appropriate  proceedings  and adequate  reserves have been  established
therefor,  and (b) trade debt in accordance with its past practices,  and in any
event,   before  any  trade   creditor   takes  any  action  or  terminates  any
relationship,  except those disputes  diligently  contested in good faith by the
Borrower and/or such GCI Entity or Affiliate, and for which appropriate reserves
have been established in accordance with GAAP.

         6.02  Insurance.  The Borrower  shall,  (a) and shall cause each of the
Restricted  Subsidiaries  to, keep its offices  and other  insurable  Properties
adequately insured at all times by reputable insurers to such extent and against
such risks, including fire and other risks insured against by extended coverage,
as what is  customary  with  companies  similarly  situated  and in the  same or
similar  businesses,  (b) and shall cause each other GCI Entity to,  maintain in
full force and effect public liability  (including  liability  insurance for all
vehicles and other insurable Property) and worker's compensation  insurance,  in
amounts  customary for such similar companies to cover normal risks, by insurers
satisfactory to the  Administrative  Agent,  (c) and shall cause each Restricted
Subsidiary  to,  maintain  business  interruption  insurance  for each System in
amounts  satisfactory to the Lenders,  (d) and shall cause each other GCI Entity
to, maintain other  insurance as may be required by Law or reasonably  requested
by the Administrative Agent, provided that such insurance policies will show the
Administrative  Agent, on behalf of the Lenders,  as additional  insured or loss
payee,  as appropriate.  The Borrower shall deliver  evidence of renewal of each
insurance policy on or before the date of its expiration,  and from time to time
shall  deliver  to  the  Administrative  Agent,  upon  demand,  evidence  of the
maintenance of such insurance.

         6.03 Inspection  Rights. The Borrower shall, and shall cause each other
GCI Entity to,  permit the  Administrative  Agent or any  Lender,  upon one days
notice or such  lesser  notice as is  reasonable  under  the  circumstances,  to
examine  and make  copies  of and  abstracts  from  their  records  and books of
account,  to visit and inspect their  Properties  and to discuss their  affairs,
finances,  and  accounts  with  any of  their  directors,  officers,  employees,
accountants,  attorneys  and other  representatives,  all as the  Administrative
Agent or any Lender may reasonably request.

         6.04 Records and Books of Account; Changes in GAAP. The Borrower shall,
and shall cause the Parents and each  Subsidiary of the Parents and the Borrower
to, keep  adequate  records and books of account in  conformity  with GAAP.  The
Borrower shall not, nor shall the Borrower  permit the Parents or any Restricted
Subsidiary of the Borrower or the Parents to change its fiscal year,  nor change
its method of financial accounting except in accordance with GAAP. In connection
with any such change  after the date  hereof,  the  Borrower  and Lenders  shall
negotiate in good faith to make  appropriate  alterations  to the  covenants set
forth in Section 7.01 hereof, reflecting such change.

         6.05 Reporting Requirements.  The Borrower shall furnish to each Lender
and the Administrative Agent:



100\269\91946                    53
<PAGE>
         (a) As soon as available  and in any event within 60 days after the end
of the Borrower's  fiscal quarters,  (i) consolidated  balance sheets of GCI and
consolidating balance sheets of the Borrower and its Subsidiaries, as of the end
of such quarter,  and  consolidated  statements of income and statements of cash
flows of GCI, and  consolidating  statements  of income and  statements  of cash
flows of the Borrower and its  Subsidiaries,  for the portion of the fiscal year
ending with such quarter,  setting forth, in comparative  form,  figures for the
corresponding periods in the previous fiscal year, all in reasonable detail, and
certified by an  Authorized  Officer as prepared in  accordance  with GAAP,  and
fairly  presenting the financial  position and results of operations of GCI, the
Borrower  and  their  Subsidiaries,  (ii) for the  Borrower  and its  Restricted
Subsidiaries,  comparisons and  reconciliations  of actual results to the budget
delivered pursuant to Section 6.05(e) below for the fiscal quarter most recently
ended, in reasonable  detail and satisfactory to the  Administrative  Agent, and
(iii)  for the  Parents,  the  Borrower  and the  Restricted  Subsidiaries,  all
information set forth in (i) and (ii) above in a separate presentation;

         (b) As soon as available and in any event within 120 days after the end
of each fiscal year, (i) consolidated  balance sheets of GCI, and  consolidating
balance  sheets  of the  Borrower  and its  Subsidiaries,  as of the end of such
fiscal year,  and  consolidated  statements of income and cash flows of GCI, and
consolidating  statements  of  income  and cash  flows of the  Borrower  and its
Subsidiaries,  for such  fiscal  year,  all in  reasonable  detail,  prepared in
accordance with GAAP, and accompanied by an unqualified  opinion of the Auditor,
which  opinion  shall  state that such  financial  statements  were  prepared in
accordance  with GAAP,  that the  examination by the Auditor in connection  with
such  financial  statements  was  made in  accordance  with  generally  accepted
auditing  standards,  and that such  financial  statements  present  fairly  the
financial  position  and results of  operations  of GCI,  the Borrower and their
Subsidiaries,  and each other GCI Entity, and (ii) for GCI, the Borrower and the
Restricted  Subsidiaries,  all  information set forth in (i) above in a separate
presentation;

         (c) Promptly upon receipt  thereof,  (i) copies of all material reports
or letters  submitted  to the  Borrower,  the Parents or any  Subsidiary  of the
Borrower or the Parents by the Auditor or any other  accountants  in  connection
with any annual,  interim,  or special audit,  including without  limitation the
comment letter  submitted to management in connection with any such audit,  (ii)
each financial statement,  report,  notice or proxy statement sent by GCI, GCII,
the Borrower or any Restricted Subsidiary in writing to stockholders  generally,
(iii)  each  regular  or  periodic  report  and any  registration  statement  or
prospectus (or material  written  communication in respect of any thereof) filed
by the Parents,  the Borrower or any Restricted  Subsidiary  with any securities
exchange,  with the Securities and Exchange  Commission or any successor agency,
and (iv)  all  press  releases  concerning  material  financial  aspects  of the
Parents, the Borrower or any Restricted Subsidiary;

         (d) Together with each set of financial  statements  delivered pursuant
to  subsections  (a) and (b) above,  a  Compliance  Certificate  executed  by an
Authorized  Officer,  which such  Compliance  Certificate  must (i) certify that
there has occurred no Default or Event of Default,


100\269\91946                    54
<PAGE>
(ii)  compute  the  Applicable   Margin,   and  (iii)  set  forth  the  detailed
calculations  with respect to the financial  covenants  required by Section 7.01
hereof;

         (e) As soon as available  and in any event not later than 30 days after
the  beginning of each fiscal year of the  Borrower,  the annual  operating  and
Capital Expenditure budgets of the Borrower and the Restricted  Subsidiaries for
such fiscal year;

         (f)(i)  Promptly upon knowledge by the Borrower or any other GCI Entity
of the  occurrence  of any  Default  or  Event  of  Default,  a  notice  from an
Authorized  Officer,  setting  forth the  details  of such  Default  or Event of
Default,  and the  action  being  taken or  proposed  to be taken  with  respect
thereto; (ii) promptly upon knowledge by the Borrower or any other GCI Entity of
the  occurrence  of any  breach,  default or event of default  under any Project
Agreement or any AUSP Financing Agreement,  a notice from an Authorized Officer,
setting forth the details of such breach,  default or event of default,  and the
action  being  taken or  proposed to be taken with  respect  thereto;  and (iii)
promptly  upon  knowledge  by  the  Borrower  or any  other  GCI  Entity  of the
occurrence of any material  adverse  change  regarding the financial  condition,
business,  operations  or prospects of AUSP or GCI Transport  Company,  a notice
from an Authorized  Officer,  setting forth the details of such material adverse
change and the action being taken or proposed to be taken with respect thereto;

         (g) As soon as  possible  and in any event  within five  Business  Days
after knowledge  thereof by the Borrower or any other GCI Entity,  notice of any
Litigation  pending or  threatened  against the Borrower or any other GCI Entity
which,  if  determined  adversely,  could  reasonably be expected to result in a
judgment,  penalties,  or  damages  in  excess  of  $1,000,000  together  with a
statement  of  an  Authorized   Officer   describing  the  allegations  of  such
Litigation,  and the action  being taken or  proposed  to be taken with  respect
thereto;

         (h) Promptly  following notice or knowledge  thereof by the Borrower or
any other GCI Entity,  notice of any actual or threatened loss or termination of
any  material  Authorization  of the  Borrower  or any other  GCI  Entity or any
Unrestricted  Subsidiary,  together  with a statement of an  Authorized  Officer
describing the circumstances surrounding the same, and the action being taken or
proposed to be taken with respect thereto;

         (i) Promptly after filing or receipt thereof, copies of all reports and
notices that the Borrower or any other GCI Entity or Unrestricted Subsidiary (i)
files or  receives  in  respect  of any Plan with or from the  Internal  Revenue
Service,  the PBGC, or the United States  Department of Labor, or (ii) furnishes
to or  receives  from any  holders of any Debt or  Contingent  Liability,  if in
either case,  any  information  or dispute  referred to therein  either causes a
Default or Event of Default,  or could reasonably be expected to cause or result
in a Default or an Event of Default;

         (j) Within 30 days after  renewal or  issuance  of any  hazard,  public
liability,  business  interruption,  or other insurance policy maintained by the
Borrower or any other GCI Entity, a


100\269\91946                    55
<PAGE>
copy of the binder or insurance  certificate (showing  Administrative  Agent, on
behalf of the Borrower or such GCI Entity, as loss payee or additional  insured,
as appropriate);

         (k) As soon as  possible  and in any  event  within  10 days  after the
Borrower or any other GCI Entity  knows that any  Reportable  Event has occurred
with  respect  to any  Plan,  a  statement,  signed  by an  Authorized  Officer,
describing said  Reportable  Event and the action which the such Person proposes
to take with respect thereto;

         (l) As soon as possible,  and in any event within 10 days after receipt
by the  Borrower or any other GCI  Entity,  a copy of (a) any notice or claim to
the effect that the  Borrower or any other GCI Entity is or may be liable to any
Person as a result of the release by the  Borrower,  any other GCI Entity or any
other Person of any toxic or hazardous waste or substance into the  environment,
and (b) any  notice  alleging  any  violation  of any  federal,  state  or local
environmental,  health or safety law or  regulation by the Borrower or any other
GCI Entity,  which could  reasonably  be expected  to, in either  case,  cause a
Material Adverse Change;

         (m)  Promptly  upon  the  filing   thereof,   copies  of  all  material
registration  statements  and all annual,  quarterly,  monthly or other  regular
reports which the Parents,  the Borrower or any Subsidiary of the Parents or the
Borrower or any other GCI Entity or Unrestricted  Subsidiary  files with the FCC
or the Securities and Exchange Commission;

         (n) Promptly  upon the sending or receiving  thereof by any GCI Entity,
AUSP,  GCI Transport  Co.,  Inc.,  GCI Fiber Co., Inc. or Fiber Hold Co.,  Inc.,
copies of all material notices,  and other material  information required by, or
sent in connection with, any Project Agreement or any AUSP Financing  Agreement,
including,  without  limitation,  notices  of  defaults  or events  of  default,
waivers,  consents,  amendments  or other  modifications  to any of the  Project
Agreements or AUSP Financing Agreements, as well as requests therefor;

         (o) Copies of all financial information provided to the lenders by AUSP
in accordance with the terms of the Project Agreements; and

         (p)  Promptly  upon  request,  such other  information  concerning  the
condition or  operations  of the  Borrower,  any other GCI Entity,  Unrestricted
Subsidiary  and  any  of  their  Affiliates,  financial  or  otherwise,  as  the
Administrative Agent or any Lender may from time to time reasonably request.

         6.06 Use of Proceeds.  The proceeds of the Advances  shall be available
(and the Borrower shall use such proceeds) to (a) refinance existing Funded Debt
of the Borrower and its Restricted  Subsidiaries,  (b) fund Capital Expenditures
of the Borrower and the Restricted  Subsidiaries  permitted by the terms of this
Agreement, (c) contribute $50,000,000 to the capitalization of AUSP, and (d) use
for general working capital purposes.

         6.07 Maintenance of Existence and Assets. Except as provided by Section
7.07 of this Agreement,  the Borrower shall maintain, and shall cause each other
GCI Entity to maintain, its


100\269\91946                    56
<PAGE>
corporate  existence,  authority to do business in the jurisdictions in which it
is  necessary   for  the  Borrower  or  such  GCI  Entity  to  do  so,  and  all
Authorizations  necessary  for the  operation  of any of their  businesses.  The
Borrower shall maintain,  and shall cause each other GCI Entity to maintain, the
assets necessary for use in their respective businesses in good repair,  working
order  and  condition,  and make all such  repairs,  renewals  and  replacements
thereof as may be reasonably required.

         6.08 Payment of Taxes. The Borrower will and will cause the Parents and
all  Subsidiaries of the Parents and the Borrower to, promptly pay and discharge
all  lawful  Taxes  imposed  upon it or upon its  income  or  profit or upon any
Property  belonging  to it,  unless  such Tax  shall  not at the time be due and
payable,  or if the validity  thereof  shall  currently be contested on a timely
basis in good faith by appropriate proceedings (provided that the enforcement of
any Liens  arising out of any such  nonpayment  shall be stayed or bonded during
the proceedings) and adequate  reserves with respect to such Tax shall have been
established in accordance with GAAP.

         6.09 Indemnity.

         (a) The Borrower agrees to defend, protect, indemnify and hold harmless
the Administrative  Agent and each Lender, each of their respective  Affiliates,
and each of their respective (including such Affiliates')  officers,  directors,
employees, agents, attorneys,  shareholders and consultants (including,  without
limitation,  those  retained in connection  with the  satisfaction  or attempted
satisfaction of any of the conditions set forth herein) of each of the foregoing
(collectively,   "Indemnitees")  from  and  against  any  and  all  liabilities,
obligations,  losses, damages,  penalties,  actions,  judgments,  suits, claims,
costs,  expenses and disbursements of any kind or nature whatsoever  (including,
without  limitation,  the reasonable fees and  disbursements of counsel for such
Indemnitees in connection  with any  investigative,  administrative  or judicial
proceeding,  whether or not such Indemnitees shall be designated a party thereto
or such proceeding  shall have actually been  instituted),  imposed on, incurred
by,  or  asserted  against  such  Indemnitees   (whether  direct,   indirect  or
consequential  and  whether  based on any  federal,  state,  or  local  laws and
regulations,  under common law or at equitable  cause,  or on contract,  tort or
otherwise),  arising  from  or  connected  with  the  past,  present  or  future
operations of the Parents,  the Borrower,  any Subsidiary of the Borrower or the
Parents, any other GCI Entity, any Affiliate or any predecessors in interest, or
the past, present or future environmental  condition of property of the Parents,
the Borrower,  any Subsidiary of the Borrower or Parents,  any other GCI Entity,
any  Affiliate  or any  predecessors  in interest,  in each case  relating to or
arising out of this Agreement, the Loan Papers, or any act, event or transaction
or alleged  act,  event or  transaction  relating or  attendant  thereto and the
management of the Advances by the Administrative Agent,  including in connection
with, or as a result,  in whole or in part, of any negligence of  Administrative
Agent or any Lender (other than those matters involving a claim by a participant
purchaser  against any Lender and not the Borrower),  or the use or intended use
of  the  proceeds  of  the  Advances  hereunder,   or  in  connection  with  any
investigation of any potential matter covered hereby, but excluding any claim or
liability


100\269\91946                    57
<PAGE>
that arises as the result of the gross  negligence or willful  misconduct of any
Indemnitee,   as  finally   judicially   determined  by  a  court  of  competent
jurisdiction (collectively, "Indemnified Matters").

         (b)  In  addition,  the  Borrower  shall  periodically,  upon  request,
reimburse each Indemnitee for its reasonable  legal and other actual  reasonable
expenses  (including the cost of any investigation and preparation)  incurred in
connection  with  any  Indemnified  Matter.  If for  any  reason  the  foregoing
indemnification  is unavailable to any  Indemnitee or  insufficient  to hold any
Indemnitee harmless with respect to Indemnified Matters, then the Borrower shall
contribute to the amount paid or payable by such  Indemnitee as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
not only the relative  benefits  received by the Borrower and the holders of the
Capital  Stock of the Borrower on the one hand and such  Indemnitee on the other
hand but also the relative fault of the Borrower and such Indemnitee, as well as
any other relevant equitable  considerations.  The reimbursement,  indemnity and
contribution  obligations  under  this  Section  shall  be in  addition  to  any
liability  which the Borrower  may  otherwise  have,  shall extend upon the same
terms and conditions to each Indemnitee,  and shall be binding upon and inure to
the benefit of any successors,  assigns,  heirs and personal  representatives of
the Borrower,  the Administrative  Agent, the Lenders and all other Indemnitees.
The  obligations  of the Borrower  under this Section 6.09 shall survive (i) the
execution of this  Agreement  and (ii) any  termination  of this  Agreement  and
payment of the Obligations.

         6.10 Interest Rate Hedging.  By no later than 60 days after the Closing
Date, the Borrower or GCII will enter into an Interest Hedge  Agreement on terms
acceptable to the  Administrative  Agent  providing for interest rate protection
for not less than three  years for 50% of Total Debt on such date.  If  Borrower
enters into an interest rate cap  agreement,  the interest rate related  thereto
shall not exceed 2% per annum in excess of the then  current  treasury  rate for
the applicable hedge period.

         6.11  Management  Fees Paid and  Earned.  The  Borrower  agrees that no
Management  Fees will be paid by the Borrower,  or any Restricted  Subsidiary to
any  Person  at any  time,  except  in  accordance  with the  terms of the Prime
Management Agreement.

         6.12  Authorizations and Material  Agreements.  The Borrower shall, and
shall cause the Parents and the Restricted Subsidiaries to, obtain and comply in
all material respects with all FCC Licenses relating to any System. The Borrower
shall,  and shall cause the Parents and the Restricted  Subsidiaries  to, obtain
and comply in all  material  respects  with all  Authorizations  relating to the
Systems,  except to the extent failure to do so could not reasonably be expected
to cause or result in a Material  Adverse Change.  The Borrower shall, and shall
cause all other GCI  Entities to,  maintain and comply in all material  respects
with all agreements  necessary or appropriate for any of them to own,  maintain,
or operate any of their businesses or Properties.

         6.13 Further Assurances. The Borrower shall, and shall cause each other
GCI Entity to, make, execute or endorse,  and acknowledge and deliver or file or
cause the same to be done,


100\269\91946                    58
<PAGE>
all such vouchers, invoices, notices,  certifications and additional agreements,
undertakings,  conveyances,  deeds of  trust,  mortgages,  security  agreements,
transfers,  assignments,  financing statements or other assurances, and take any
and all such other action, as Administrative  Agent may, from time to time, deem
reasonably  necessary or proper in connection with any GCI Entity's  obligations
under any of the Loan Papers and the obligations of the Borrower thereunder,  or
for better assuring and confirming unto Administrative  Agent all or any part of
the security for any of the Obligations.

         6.14 AUSP Financing.  No later than the AUSP Closing Date, the Borrower
shall  have  delivered  to  the  Administrative  Agent  in  form  and  substance
satisfactory  to it (a) a certificate (in the form attached hereto as Exhibit H)
dated the AUSP Closing Date certifying as to the fact that attached thereto is a
copy of each AUSP  Financing  Agreement  and each Project  Agreement and stating
that each AUSP  Financing  Agreement  and  Project  Agreement  attached  thereto
represents  the true,  accurate and complete  agreement as in effect on the AUSP
Closing Date, and as to the true, accurate and complete resolutions  authorizing
the incurrence and performance of the Project Agreements,  and (b) an opinion of
counsel to AUSP regarding the Intercompany Notes. In addition, no later than the
AUSP Closing Date, (a) the AUSP Financing  shall have been  consummated on terms
and conditions  satisfactory to the Administrative Agent, (b) the AUSP Financing
Agreements and Project  Agreements shall be in form and substance  acceptable to
the  Administrative  Agent,  and (c) the  undersea  fiber  survey  owned  by the
Borrower shall have been sold to AUSP for fair value (not less than $1,000,000).

         6.15 Subsidiaries and Other Obligors.  The Borrower shall cause each of
the  Restricted   Subsidiaries,   other  GCI  Entities  and  Affiliates  (as  to
Affiliates,  with respect solely to those  covenants set forth in Sections 6.01,
6.05, and 6.08 hereof) to comply with each provision of this Article VI.

         6.16 CoBank  Participation  Certificates.  The Borrower  shall,  at all
times during which CoBank,  ACB  ("CoBank") is a Lender  hereunder,  acquire and
maintain  non-voting  participation  certificates in CoBank (the  "Participation
Certificates") in such amounts and at such times as CoBank may from time to time
require in  accordance  with its bylaws and capital plan (as each may be amended
from time to time); provided,  however, that the maximum amount of Participation
Certificates  that the  Borrower  may be required to purchase may not exceed the
lesser of the maximum  amount  permitted by CoBank's  bylaws as in effect on the
date hereof or $1,000.00,  which amount, if not previously  purchased,  shall be
purchased  on or before  the date  hereof.  The rights  and  obligations  of the
parties with respect to the  Participation  Certificates and any other patronage
or other distributions shall be governed by CoBank's bylaws.



100\269\91946                    59
<PAGE>
                         ARTICLE VII. NEGATIVE COVENANTS

         So long as the Revolver/Term Commitment, any Advance, or any portion of
the Obligations is outstanding, or the Borrower or any other GCI Entity owes any
other amount hereunder or under any other Loan Paper:

         7.01 Financial Covenants.  The Borrower and the Restricted Subsidiaries
shall comply with the following covenants:
<TABLE>
         (a) Total  Leverage  Ratio.  At all times during the term  hereof,  the
Total Leverage Ratio shall not be greater during the following time periods than
the ratio set forth opposite such time periods:
<CAPTION>
                      Time Period                                               Maximum Ratio
                      -----------                                               -------------
         <S>                                                                    <C>
         From the Closing Date through March 31, 1998                           7.00 to 1.00
         April 1, 1998 through March 31, 1999                                   6.50 to 1.00
         April 1, 1999 through December 31, 1999                                6.00 to 1.00
         January 1, 2000 and thereafter                                         5.50 to 1.00
</TABLE>
<TABLE>
         (b) Senior  Leverage  Ratio.  At all times during the term hereof,  the
Senior  Leverage  Ratio shall not be greater  during the following  time periods
than the ratio set forth opposite such time periods:
<CAPTION>
                      Time Period                                               Maximum Ratio
                      -----------                                               -------------
         <S>                                                                    <C>
         From the Closing Date through March 31, 1999                           3.50 to 1.00
         April 1, 1999 through December 31, 1999                                3.00 to 1.00
         January 1, 2000 through December 31, 2000                              2.50 to 1.00
         January 1, 2001 and thereafter                                         2.00 to 1.00
</TABLE>
<TABLE>
         (c) Interest  Coverage Ratio. At all times during the term hereof,  the
Interest Coverage Ratio shall not be less during the following time periods than
the ratio set forth opposite such time periods:
<CAPTION>
                      Time Period                                               Maximum Ratio
                      -----------                                               -------------
         <S>                                                                    <C>
         From the Closing Date through December 31, 1998                        1.50 to 1.00
         January 1, 1999 and thereafter                                         2.00 to 1.00
</TABLE>
<TABLE>
         (d) Pro Forma Debt Service Coverage Ratio. At all times during the term
hereof,  the Pro Forma Debt Service  Coverage Ratio shall not be less during the
following time periods than the ratio set forth opposite such time periods:


100\269\91946                    60
<PAGE>
<CAPTION>
                      Time Period                                               Maximum Ratio
                      -----------                                               -------------
         <S>                                                                    <C>
         From the Closing Date and thereafter                                   1.25 to 1.00
</TABLE>
<TABLE>
         (e) Fixed Charges  Coverage Ratio.  Commencing  January 1, 2000, and at
all times  thereafter  during the term hereof,  the Fixed Charges Coverage Ratio
shall not be less during the  following  time  periods  than the ratio set forth
opposite such time periods:
<CAPTION>
                      Time Period                                               Maximum Ratio
                      -----------                                               -------------
         <S>                                                                    <C>
         From January 1, 2000 through March 31, 2003                            1.00 to 1.00
         April 1, 2003 and thereafter                                           1.05 to 1.00
</TABLE>
<TABLE>
         (f) Capital Expenditures.  Capital Expenditures paid or incurred by the
Borrower and the Restricted Subsidiaries shall not exceed, in the aggregate, the
following amounts during the following years,  provided that, any unused portion
for any such year may be used  during the  following  fiscal  year only (but not
thereafter):
<CAPTION>
                      Fiscal Year                                               Maximum Amount
                      -----------                                               --------------
                      <S>                                                       <C>
                      Partial year - Closing Date through 1997                  $55,000,000
                      1998                                                      $90,000,000
                      1999                                                      $65,000,000
                      2000 and thereafter                                       N/A
</TABLE>
         7.02 Debt.  The  Borrower  shall  not,  and shall not permit any of the
other GCI Entities to, create,  incur, assume, become or be liable in any manner
in  respect  of, or suffer to exist,  any Debt,  except  (a) Debt under the Loan
Papers and the Revolving Credit  Agreement,  (b) Debt under the Senior Notes and
other Debt in  existence on the date hereof as shown on Schedule  5.08a  hereto,
and renewals,  extensions (but not increases), and refinancings thereof on terms
substantially  similar  thereto  and on terms  no more  restrictive,  (c)  trade
payables  incurred  and  paid in the  ordinary  course  of  business,  (d)  Debt
permitted  to be incurred as  Contingent  Liabilities  pursuant to Section  7.03
hereof,  (e) Debt between the Borrower and its Restricted  Subsidiaries,  (f) so
long as there  exists no Default or Event of  Default in  existence  at the time
incurred and none is caused thereby, (i) $5,000,000 in Debt constituting Capital
Leases  outstanding  in the  aggregate  at any  one  time,  and  (ii)  unsecured
subordinated  Debt of the  Borrower on terms and  conditions  acceptable  to the
Administrative  Agent and each Lender,  subordinated to the Facility pursuant to
the subordination language set forth on Schedule 7.02 hereto, and (g) Debt under
the Project Agreements.

         7.03  Contingent  Liabilities.  The  Borrower  shall not, and shall not
permit any of the other GCI Entities to,  create,  incur,  assume,  become or be
liable  in any  manner in  respect  of,  or  suffer  to  exist,  any  Contingent
Liabilities,  except (a)  Contingent  Liabilities  under or relating to the Loan
Papers  and the  Revolving  Credit  Agreement,  (b)  Contingent  Liabilities  in
existence


100\269\91946                    61
<PAGE>
on the  Closing  Date,  as  shown  on  Schedule  5.08a  hereto,  (c)  Contingent
Liabilities  resulting  from  the  endorsement  of  negotiable  instruments  for
collection  in the  ordinary  course  of  business,  (d)  obligations  under the
Completion  Guaranty,  Keepwell Agreement,  and Lease Guaranty,  and (e) utility
bonds and other similar bonds entered into in the ordinary course of business.

         7.04 Liens.  The  Borrower  shall not,  and shall not permit any of the
other  GCI  Entities  to,  create  or  suffer  to exist any Lien upon any of its
Properties, except the Lien of Credit Lyonnais as administrative agent under the
AUSP Credit  Agreement  to secure  payment of the  Intercompany  Note payable by
AUSP, Permitted Liens and Liens securing Debt permitted under Section 7.02(f)(i)
hereof. It is specifically  acknowledged and agreed that the Borrower shall not,
and shall not permit any of the other GCI Entities to,  hereafter agree with any
Person  (other  than  Administrative  Agent)  not to  grant a Lien on any of its
assets, except as specifically provided in the Indenture on the Closing Date.

         7.05  Dispositions  of Assets.  The  Borrower  shall not, and shall not
permit any of the other GCI  Entities  to,  sell,  lease,  assign,  or otherwise
dispose of any assets of the Borrower or any Restricted Subsidiary, or otherwise
consummate  any Asset  Sale,  except  (a)  Permitted  Dispositions  and sales or
dispositions   of  assets  in  the  ordinary   course  of  business,   including
dispositions of obsolete or useless  assets,  and (b) so long as there exists no
Default  or Event of  Default  both  before  and  after  giving  effect  to such
disposition,  Asset Sales in an aggregate amount over the term of this Agreement
not to exceed $10,000,000 (or $20,000,000 if before and immediately after giving
effect to any Asset Sale, the Total Leverage Ratio is equal to or less than 4.50
to 1.00),  so long as any amounts  received by the Borrower  and the  Restricted
Subsidiaries  in the  aggregate  over  $10,000,000  in any  fiscal  year  of the
Borrower  and  its  Restricted   Subsidiaries  (or  $20,000,000  if  before  and
immediately  after giving effect to any Asset Sale,  the Total Leverage Ratio is
equal  to or less  than  4.50 to  1.00)  are  immediately  used  to  reduce  the
obligations as specified under the Revolving  Credit  Agreement  and/or Advances
outstanding under the Reolver/Term  Commitment,  in accordance with Section 2.04
hereof,  and repay the  outstanding  Obligations in accordance with the terms of
Section 2.05 hereof, as applicable.

         7.06 Distributions and Restricted Payments. The Borrower shall not, and
shall  not  permit  the  Parents  or any  Restricted  Subsidiary  to,  make  any
Restricted  Payments,  other  than  any  Restricted  Payment  in the  form  of a
Distribution  made  by  any  Restricted   Subsidiary  to  any  other  Restricted
Subsidiary or to the Borrower, and other than (a) so long as (i) there exists no
Default or Event of Default  both  before  and after  giving  effect to any such
Restricted Payment, (ii) the Total Leverage Ratio is less than 5.00 to 1.00 both
before and after giving effect to any such Restricted Payment and (iii) the date
of such Restricted Payment is after September 30, 2000, Restricted Payments made
exclusively  out of Excess  Cash Flow up to a maximum  amount of the  difference
between $15,000,000 in the aggregate over the term of this Agreement,  minus the
aggregate  amount of  Investments  made in accordance  with the terms of Section
7.10(e) hereof over the term of this  Agreement,  (b) so long as there exists no
Default or Event of Default  both  before  and after  giving  effect to any such
Restricted  Payment,  the Borrower may make  Restricted  Payments in the form of
Distributions  to  GCII  in an  amount  not  in  excess  of


100\269\91946                    62
<PAGE>
cash income Taxes  attributable  to income from the Borrower and its  Restricted
Subsidiaries (and GCII may make Restricted  Payments in such amounts in the form
of  Distributions to GCI), and scheduled cash interest  payments  required to be
paid by GCII under the Senior Notes,  and GCII may make  Restricted  Payments in
the form of (and not in excess of) scheduled cash interest  payments required to
be paid by GCII under the Senior Notes, provided that, the Lenders agree that in
no event shall the opening phrase of this subsection (b) prohibit the payment of
any such  Distribution  by the  Borrower  or payment of  interest by GCII on the
Senior  Notes  for more than 180  consecutive  days in any  consecutive  360-day
period,  unless there exists an Event of Default  under Section  8.01(a)  hereof
(whether by acceleration  or otherwise),  (c) so long as there exists no Default
or Event of Default both before and after giving effect to the payment  thereof,
payment  of  Management  Fees and  amounts  due under the  Transponder  Purchase
Agreement  for Galaxy X referred to in Section 7.18  hereof,  and (d) so long as
there exists no Default or Event of Default both before and after giving  effect
to any such  Restricted  Payment,  the  Borrower or any other GCI Entity (i) may
make Restricted Payments on Funded Debt incurred in accordance with the terms of
Sections  7.02(b)(but  with respect to the Senior  Notes,  only payments of cash
interest which accrues thereon),  7.02(d),  and 7.02(f)(i),  and 7.02(g) hereof,
and (ii) may make payments of income Taxes.

         7.07  Merger;  Consolidation.  The  Borrower  shall not,  and shall not
permit any of the other GCI  Entities  to,  merge into or  consolidate  with any
Person except any  Wholly-Owned  Subsidiary other than the Borrower may merge or
consolidate with another Wholly-Owned Subsidiary,  provided that the Borrower or
the Wholly-Owned Subsidiary is the surviving entity, as the case may be.

         7.08 Business.  The Borrower shall not, and shall not permit any of the
other GCI Entities to, change the nature of its business as now  conducted.  The
Borrower  shall not conduct any business  except the  ownership and operation of
its Systems.

         7.09  Transactions  with Affiliates.  The Borrower shall not, and shall
not  permit  any of the  other  GCI  Entities  to,  enter  into or be party to a
transaction with any Affiliate,  except on terms no less favorable than could be
obtained  on an  arm's-length  basis  with a  Person  that is not an  Affiliate.
Notwithstanding  the  foregoing  limitation,  the  Borrower  and the  other  GCI
Entities may enter into or suffer to exist the  following:  (i) any  transaction
pursuant to any  contract in  existence on the Closing Date on the terms of such
contract as in effect on the Closing  Date;  (ii) any  transaction  or series of
transactions between the Borrower and one or more of its Restricted Subsidiaries
or between  two or more of its  Restricted  Subsidiaries;  (iii) any  Restricted
Payment  permitted  to be made  pursuant  to Section  7.06;  (iv) the payment of
compensation  by Parents,  the  Borrower or any of its  Restricted  Subsidiaries
(including,  amounts paid  pursuant to employee  benefit  plans) in the ordinary
course  of  business  for the  personal  services  of  officers,  directors  and
employees of Parents,  the Borrower or any of its  Restricted  Subsidiaries,  so
long as the Board of  Directors  of Parents and the Borrower in good faith shall
have  approved  the  terms  thereof  and  deemed  the  services  theretofore  or
thereafter  to  be  performed  for  such   compensation   or  fees  to  be  fair
consideration  therefor;  (v) loans and  advances by Parents,  the Borrower or a
Restricted  Subsidiary  to  employees  of Parents,  the


100\269\91946                    63
<PAGE>
Borrower or a  Restricted  Subsidiary  made in ordinary  course of business  and
consistent  with past  practice of  Parents,  the  Borrower  or such  Restricted
Subsidiary,  as the case may be,  provided,  that such loans and advances do not
exceed  in the  aggregate  $4,000,000  at any one  time  outstanding;  (vi)  any
transaction between the Borrower and its Restricted Subsidiaries pursuant to the
Transponder  Purchase Agreement for Galaxy X referred to in Section 7.18 hereof;
(vii) the  assignment or other transfer to GCI Transport Co., Inc. or any of its
Subsidiaries  of the $9,100,000  deposit made in connection with the Transponder
Purchase Agreement for Galaxy X referred to in Section 7.18 hereof (provided the
Borrower  provides  the  Administrative   Agent  with  a  Pro  Forma  Compliance
Certificate  evidencing no Default or Event of Default both before and after the
assignment);  (viii)  the Fiber  Lease and the Lease  Guaranty,  provided  that,
notwithstanding  anything  to  the  contrary  in  any  Project  Agreement,  AUSP
Financing Agreement,  in this Agreement, or in any other Loan Paper, in no event
shall the  aggregate  amount of all lease  payments  made by the  Borrower,  its
Restricted Subsidiaries, or GCI Communication Corp. pursuant to the Fiber Lease,
the Lease  Guaranty,  or any other lease or Project  Agreement  with AUSP exceed
$28,000,000  in the  aggregate  over  the term of this  Agreement;  (ix) the O&M
Contract, provided that, notwithstanding anything to the contrary in any Project
Agreement,  AUSP  Financing  Agreement,  in this  Agreement or in any other Loan
Paper,  in no event  shall  the  aggregate  amount of all  payments  made by the
Borrower  or any of its  Restricted  Subsidiaries  pursuant  to any and all such
operating and maintenance  contracts  exceed  $17,000,000  over the term of this
Agreement;  (x) the Completion Guaranty and the Keepwell Agreement, and provided
that,  notwithstanding  anything to the contrary in any Project Agreement,  AUSP
Financing  Agreement,  in this Agreement or in any other Loan Paper, in no event
shall the  aggregate  amount  of all  payments  made  pursuant  to the  Keepwell
Agreement,  the  Completion  Guaranty  and any other  Project  Agreement  by the
Borrower or any of its  Restricted  Subsidiaries  (except the Fiber  Lease,  the
Lease Guaranty,  and the O&M Contract) exceed  $73,000,000 over the term of this
Agreement,  (xi)  loans  and/or  advances  to  AUSP as may be  evidenced  by the
Intercompany Notes to the extent permitted by Section 7.10(g) hereof,  (xii) the
Subordination Agreement, and (xiii) Permitted Dispositions. Neither the Borrower
nor  any  Restricted  Subsidiary  shall  enter  into  any  agreement  with  AUSP
obligating the Borrower or any Restricted Subsidiary to purchase excess capacity
pursuant to any Project  Agreement or any other agreement  exceeding the amounts
set forth above with respect to the Fiber Lease and the Lease Guaranty.  Nothing
herein shall  prevent the Borrower or any  Restricted  Subsidiary  from entering
into an agreement with AUSP pursuant to any Project  Agreement  whereby each may
purchase  excess  capacity from time to time as needed in the ordinary course of
business.

         7.10 Loans and  Investments.  The  Borrower  shall  not,  and shall not
permit any of the other GCI  Entities to, make any loan,  advance,  extension of
credit or  capital  contribution  to,  or make or have any  Investment  in,  any
Person,  or make  any  commitment  to make  any  such  extension  of  credit  or
Investment, or make any acquisition,  except (a) Investments on the Closing Date
constituting a $50,000,000  capital  contribution to AUSP and other  Investments
existing on the date  hereof and  contemplated  by the terms of this  Agreement,
each as shown on Schedule 5.13 hereto, (b) Investments in Cash Equivalents,  (c)
Investments in advances or loans in the ordinary  course of business to officers
and employees in an amount in the aggregate not to exceed $4,000,000 outstanding
at any one time, (d) Investments in accounts  receivable arising


100\269\91946                    64
<PAGE>
in the ordinary  course of business,  (e) so long as (i) there exists no Default
or Event of Default,  both before and after giving  effect to the making of such
Investments, (ii) the Total Leverage Ratio is less than 5.00 to 1.00 both before
and  after  giving  effect  to any such  Investment  and  (iii) the date of such
Investment is after  September 30, 2000,  Investments  made  exclusively  out of
Excess Cash Flow up to a maximum amount of the difference between $15,000,000 in
the aggregate  over the term of this  Agreement,  minus the aggregate  amount of
Restricted  Payments made in accordance with the terms of Section 7.06(a) hereof
over the term of this Agreement,  (f) loans,  advances,  extensions of credit or
capital  contributions  to,  or  among,  Wholly-Owned  Subsidiaries  and  to GCI
Transport Co., Inc. and its  Subsidiaries  in connection  with the assignment or
other transfer to GCI Transport Co., Inc. or its  Subsidiaries of the $9,100,000
deposit made in connection with the Transponder  Purchase Agreement for Galaxy X
referred  to  in  Section  7.18  hereof  (provided  the  Borrower  provides  the
Administrative  Agent  with a Pro Forma  Compliance  Certificate  evidencing  no
Default or Event of Default  both before and after the  assignment),  and (g) so
long as there exists no Default or Event of Default both before and after giving
effect to the making of each such  Investment,  Investments  constituting  loans
and/or advances to AUSP in accordance  with the terms of the Keepwell  Agreement
and the  Completion  Guaranty  as may be  evidenced  by the  Intercompany  Notes
(collaterally assigned to the Administrative Agent on a first Lien basis), which
Investments in an aggregate amount over the term of this Agreement do not exceed
$73,000,000,  and (h) investments in Participation Certificates of CoBank to the
extent required pursuant to Section 6.16.

         7.11 Fiscal Year and  Accounting  Method.  The Borrower  shall not, and
shall not permit any of the other GCI  Entities  to,  change its fiscal  year or
method of accounting, except as may be required by GAAP.

         7.12 Issuance of Partnership  Interest and Capital Stock;  Amendment of
Articles and By-Laws. Except in connection with the transactions  consummated on
or prior to the Closing  Date,  and except as  permitted in Section 7.07 hereof,
the  Borrower  shall not,  and shall not  permit  any of the other GCI  Entities
(other than GCI) to,  issue,  sell or otherwise  dispose of any Capital Stock in
such Person,  or any options or rights to acquire such  partnership  interest or
capital stock not issued and outstanding on the Closing Date. The Borrower shall
not amend its  articles of  organization  or bylaws and the  Borrower  shall not
permit any of the other GCI  Entities to amend its articles of  organization  or
bylaws or partnership agreement, as applicable,  except, so long as there exists
no  Default or Event of Default  both prior to and after  giving  effect to such
amendment, and after written notice to the Administrative Agent, the Borrower or
any of the other GCI Entities may make (i) changes to comply with applicable Law
and (ii) changes immaterial in nature.

         7.13 Change of  Ownership.  Except as permitted by Section 7.07 hereof,
the Borrower  shall not,  and shall not permit any other GCI Entity  (other than
GCI) to, permit any change in the  ownership of the Borrower and each  Guarantor
from the  ownership  thereof as of the date hereof as disclosed on Schedule 5.01
hereto.



100\269\91946                    65
<PAGE>
         7.14 Sale and  Leaseback.  The Borrower shall not, and shall not permit
any of the other GCI Entities to, enter into any arrangement whereby it sells or
transfers any of its assets, and thereafter rents or leases such assets.

         7.15  Compliance  with ERISA.  The  Borrower  shall not,  and shall not
permit  the  Parents or any  Subsidiary  of the  Borrower  and the  Parents  to,
directly or indirectly,  or permit any member of such Person's  Controlled Group
to  directly  or  indirectly,  (a)  terminate  any Plan so as to  result  in any
material  (in the  opinion  of  Administrative  Agent)  liability  to any of the
Borrower,  the Parents or any Subsidiary of the Borrower or the Parents,  or any
member of their  Controlled  Group,  (b) permit to exist any ERISA Event, or any
other  event or  condition,  which  presents  the risk of any  material  (in the
opinion of Administrative  Agent) liability of any of the Parents,  the Borrower
or any  Subsidiary  of the  Parents  or the  Borrower,  or any  member  of their
Controlled Group, (c) make a complete or partial  withdrawal (within the meaning
of Section  4201 of ERISA)  from any  Multiemployer  Plan so as to result in any
material  (in the  opinion  of  Administrative  Agent)  liability  to any of the
Borrower,  the Parents, or any Subsidiary of the Parents or the Borrower, or any
member of their  Controlled  Group,  (d) enter  into any new Plan or modify  any
existing  Plan so as to  increase  its  obligations  thereunder  (except  in the
ordinary course of business consistent with past practice) which could result in
any material (in the opinion of  Administrative  Agent)  liability to any of the
Parents,  the Borrower or any Subsidiary of the Parents or the Borrower,  or any
member of their Controlled Group, or (e) permit the present value of all benefit
liabilities,  as  defined  in Title IV of ERISA,  under each Plan of each of the
Parents,  the Borrower or any Subsidiary of the Parents or the Borrower,  or any
member of their  Controlled Group (using the actuarial  assumptions  utilized by
the  PBGC  upon  termination  of a  Plan)  to  materially  (in  the  opinion  of
Administrative  Agent) exceed the fair market value of Plan assets  allocable to
such benefits all determined as of the most recent  valuation date for each such
Plan.

         7.16 Rate Swap  Exposure.  The Borrower  shall not enter into or become
liable  in  respect  of any  Interest  Hedge  Agreement  pursuant  to which  the
aggregate  amount  exceeds the  aggregate  principal  amount of all Advances and
amounts outstanding under the Revolving Credit Agreement.

         7.17 Restricted Subsidiaries and Other Obligors. The Borrower shall not
permit any of its Restricted Subsidiaries or any other GCI Entity to violate any
provision of this Article VII.

         7.18  Amendments to Material  Agreements.  The Borrower  shall not, nor
shall the  Borrower  permit any other GCI Entity to, amend or change any Project
Agreement  or any AUSP  Financing  Agreement  in any manner that is material and
adverse to the interests of the Lenders except with the prior written consent of
Majority  Lenders or any Loan Paper other than with the prior written consent of
the Lenders  pursuant to Section  10.01  hereof,  nor shall the  Borrower or any
other GCI Entity  change or amend (or take any action or fail to take any action
the result of which is an effective amendment or change) or accept any waiver or
consent  with  respect  to (a)  any  Non-Compete  Agreement,  (b)  that  certain
Transponder  Purchase  Agreement for Galaxy X, dated August 24, 1995,  among the
Borrower and Hughes Communications


100\269\91946                    66
<PAGE>
Galaxy,  Inc.,  now held by  PanAmSat  Corp.,  as  assignee,  (c)  that  certain
Transponder   Service   Agreement,   dated  August  24,  1995,   among   General
Communication Corp. and Hughes Communications Satellite Services, Inc., now held
by PanAmSat Corp., as assignee,  (d) the Senior Notes and all  documentation and
agreements  relating to the Senior  Notes,  other than  changes that result in a
decrease in interest  rate,  extension of maturity,  or deletion of covenants or
obligations  to  repay,  and  changes  anticipated  by  Section  9.01(1)  of the
Indenture, (e) the Prime Management Agreement, and (f) all documentation related
to any Funded Debt of any GCI Entity.

         7.19 Limitation on Restrictive Agreements.  The Borrower shall not, and
shall not permit the  Parents or any  Restricted  Subsidiary  to,  other than in
connection with the Senior Notes and the Revolving  Credit Agreement or the AUSP
Financing  Agreements  or the  Project  Agreements,  enter  into any  indenture,
agreement,  instrument,  financing document or other arrangement which, directly
or  indirectly,  prohibits or  restrains,  or has the effect of  prohibiting  or
restraining,  or imposes  materially adverse conditions upon: (a) the incurrence
of Debt, (b) the granting of Liens (except for  provisions  contained in Capital
Leases of property  that are  permitted  hereunder  that limit Liens only on the
specific property subject to the Capital Lease, except for Liens in favor of the
Administrative Agent and the Lenders), (c) the making or granting of Guarantees,
(d) the payment of dividends or Distributions,  (e) the purchase,  redemption or
retirement  of any  Capital  Stock,  (f) the  making of loans or  advances,  (g)
transfers  or sales of  property  or  assets  (including  Capital  Stock) by the
Parents, the Borrower or any of the Restricted  Subsidiaries,  (h) the making of
Investments or acquisitions, or (i) any change of control or management.


                         ARTICLE VIII. EVENTS OF DEFAULT

         8.01 Events of Default.  Any one or more of the  following  shall be an
"Event of Default" hereunder, if the same shall occur for any reason whatsoever,
whether voluntary or involuntary, by operation of Law, or otherwise:

         (a) The Borrower  shall fail to pay (i) any  principal on any Note when
due; or (ii) any  interest on any Note within  three days after the same becomes
due; or (iii) any Commitment  Fees,  other fees, or other amounts  payable under
any Loan Paper within five days after the same becomes due;

         (b) Any  representation or warranty made or deemed made by the Borrower
or any other GCI Entity (or any of its officers or representatives)  under or in
connection with any Loan Papers shall prove to have been incorrect or misleading
in any material respect when made or deemed made;

         (c) The  Borrower  or any other GCI  Entity  shall  fail to  perform or
observe any term or  condition  contained in Article VI hereof  (except  Section
6.05(f)  hereof)  which is not remedied  within thirty days after the earlier of
(i) actual  knowledge of such breach by the Parents,  the


100\269\91946                    67
<PAGE>
Borrower or any of the Restricted  Subsidiaries  of such breach and (ii) written
notice from the Administrative Agent or any Lender of such breach;

         (d) The  Borrower  or any other GCI  Entity  shall  fail to  perform or
observe  any term or  covenant  contained  in  Article  VII hereof or in Section
6.05(f) hereof;

         (e) Any GCI Entity  shall fail to perform or observe  any other term or
covenant  contained  in any Loan Paper,  other than those  described in Sections
8.01(a),  (b), (c) and (d) hereof which is not remedied within thirty days after
the earlier of (i) actual knowledge of such breach by the Parents,  the Borrower
or any of the  Restricted  Subsidiaries  of such breach and (ii) written  notice
from the Administrative Agent or any Lender of such breach;

         (f) Any Loan Paper or material provision thereof shall, for any reason,
not be valid and binding on the GCI Entity signatory thereto,  or not be in full
force and  effect,  or shall be declared  to be null and void;  the  validity or
enforceability  of any Loan Paper shall be contested by any GCI Entity;  any GCI
Entity shall deny that it has any or further  liability or obligation  under its
respective Loan Papers; or any default or breach under any provision of any Loan
Papers shall continue after the applicable  grace period,  if any,  specified in
such Loan Paper;

         (g) Any of the  following  shall  occur:  (i) any of the  Parents,  the
Borrower or any  Subsidiary  of the Parents or the Borrower  (including  without
limitation,  AUSP,  GCI Transport  Co., Inc., GCI Satellite Co., Inc., GCI Fiber
Co., Inc. and Fiber Hold Co.,  Inc.) shall make an assignment for the benefit of
creditors or be unable to pay its debts  generally as they become due;  (ii) any
of the Parents,  the Borrower or any  Subsidiary  of the Parents or the Borrower
(including without limitation, AUSP, GCI Transport Co., Inc., GCI Satellite Co.,
Inc.,  GCI Fiber Co., Inc., and Fiber Hold Co., Inc.) shall petition or apply to
any Tribunal for the appointment of a trustee, receiver, or liquidator of it, or
of any  substantial  part of its  assets,  or  shall  commence  any  proceedings
relating to any of the Parents, the Borrower or any Subsidiary of the Parents or
the Borrower (including without  limitation,  AUSP, GCI Transport Co., Inc., GCI
Satellite  Co.,  Inc.,  GCI Fiber Co., Inc., and Fiber Hold Co., Inc.) under any
Debtor Relief Law,  whether now or hereafter in effect;  (iii) any such petition
or  application  shall be filed,  or any such  proceedings  shall be  commenced,
against any of the Parents, the Borrower or any Subsidiary of the Parents or the
Borrower  (including  without  limitation,  AUSP,  GCI Transport  Co., Inc., GCI
Satellite  Co., Inc.,  GCI Fiber Co.,  Inc.,  and Fiber Hold Co.,  Inc.),  or an
order,  judgment  or  decree  shall be  entered  appointing  any  such  trustee,
receiver,  or liquidator,  or approving the petition in any such proceedings and
such petition, application or proceedings shall continue undismissed for 30 days
or such order,  judgment or decree shall continue  unstayed and in effect for 30
days;  (iv) any  final  order,  judgment,  or  decree  shall be  entered  in any
proceedings  against any of the Parents,  the Borrower or any  Subsidiary of the
Parents or the Borrower (including without limitation,  AUSP, GCI Transport Co.,
Inc.,  GCI Satellite  Co.,  Inc., GCI Fiber Co., Inc., and Fiber Hold Co., Inc.)
decreeing its  dissolution;  (v) any final order,  judgment,  or decree shall be
entered in any  proceedings  against any of the Parents,  the  Borrower,  or any
Subsidiary of the Parents or the Borrower (including without  limitation,  AUSP,
GCI Transport Co., Inc., GCI Satellite Co., Inc., GCI Fiber Co., Inc., and Fiber
Hold


100\269\91946                    68
<PAGE>
Co.,  Inc.)   decreeing  its  split-up  which  requires  the  divestiture  of  a
substantial part of its assets; or (vi) any of the Parents,  the Borrower or any
Subsidiary of the Parents or the Borrower (including without  limitation,  AUSP,
GCI Transport Co., Inc., GCI Satellite Co., Inc., GCI Fiber Co., Inc., and Fiber
Hold Co., Inc.) shall petition or apply to any Tribunal for the appointment of a
trustee,  receiver,  or  liquidator  of it,  or of any  substantial  part of its
assets,  or shall commence any proceedings  relating to any of the Parents,  the
Borrower or any  Subsidiary  of the Parents or the Borrower  (including  without
limitation,  AUSP,  GCI Transport  Co., Inc., GCI Satellite Co., Inc., GCI Fiber
Co., Inc., and Fiber Hold Co., Inc.) under any Debtor Relief Law, whether now or
hereafter in effect;

         (h) Any GCI Entity shall fail to pay any Debt or  Contingent  Liability
of  $1,000,000  or more  when  due  (whether  by  scheduled  maturity,  required
prepayment, acceleration, demand, or otherwise), and such failure shall continue
after the  applicable  grace  period,  if any,  specified  in the  agreement  or
instrument  relating  to such Debt or  Contingent  Liability;  or any GCI Entity
shall fail to perform or observe any term or covenant contained in any agreement
or instrument relating to any such Debt or Contingent  Liability,  when required
to be  performed  or  observed,  and  such  failure  shall  continue  after  the
applicable grace period, if any, specified in such agreement or instrument,  and
can result in acceleration of the maturity of such Debt or Contingent Liability;
or any  such  Debt or  Contingent  Liability  shall  be  declared  to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;

         (i) Any GCI Entity shall have any  judgment(s)  outstanding  against it
for the  payment  of  $1,000,000  or more,  and such  judgment(s)  shall  remain
unstayed, in effect, uncontested and unpaid for a period of 30 days;

         (j) (i) Any Authorization  necessary for the ownership or essential for
the operation of any of the interstate or intrastate  telecommunications systems
or networks operated by the Parents,  the Borrower or any Restricted  Subsidiary
or any other System, shall expire, and on or prior to such expiration,  the same
shall not have been  renewed or  replaced by another  Authorization  authorizing
substantially  the same  operations  of such System;  or (ii) any  Authorization
necessary  for the  ownership  or essential  for the  operation of any of System
shall be  canceled,  revoked,  terminated,  rescinded,  annulled,  suspended  or
modified in a materially  adverse  respect,  or shall no longer be in full force
and effect,  or the grant or the  effectiveness  thereof shall have been stayed,
vacated,  reversed or set aside,  and such action shall be no longer  subject to
further  administrative  or judicial review; or (iii) the FCC shall have issued,
on its own initiative and not upon the complaint of or at the request of a third
party,  any hearing  designation  order in any  non-comparative  license renewal
proceeding  or any  license  revocation  proceeding  involving  any  License  or
Authorization  necessary for the ownership or essential for the operation of any
System;  or (iv) in any  non-comparative  license renewal  proceeding or license
revocation  proceeding  initiated  by the FCC  upon the  complaint  of or at the
request of a third party or any comparative (i.e.,  multiple  applicant) license
renewal  proceeding,  in  each  case  involving  any  License  or  Authorization
necessary for the  ownership or essential  for the operation of any System;  any
administrative  law  judge  of the  FCC (or  successor  to the  functions


100\269\91946                    69
<PAGE>
of an administrative law judge of the FCC) shall have issued an initial decision
to the effect that the Parents, the Borrower or any Restricted  Subsidiary lacks
the basic  qualifications  to own or operate any System or is not deserving of a
renewal  expectancy,  and such  initial  decision  shall  not have  been  timely
appealed  or shall  otherwise  have  become an order that is final and no longer
subject to further  administrative or judicial review (provided,  however,  that
none of the foregoing  events  described in clauses (i), (ii),  (iii) or (iv) of
this Section  8.01(j) shall  constitute an Event of Default if such  expiration,
cancellation, revocation or other loss would not materially adversely affect the
value of any of the  Collateral  or the ability of the Parents,  the Borrower or
any Restricted  Subsidiary to perform its  obligations  under the Loan Papers to
which it is a party);

         (k) Any of the Parents, the Borrower,  or any Subsidiary of the Parents
or the  Borrower,  or any  ERISA  Affiliate,  shall  have  committed  a  failure
described in Section 302(f)(l) of ERISA, and the amount determined under Section
302(f)(3) of ERISA is equal to or greater than $1,000,000;

         (l) The Parents,  the  Borrower,  any  Subsidiary of the Parents or the
Borrower,  or any ERISA Affiliate,  shall have been notified by the sponsor of a
Multiemployer  Plan that such Plan is in  reorganization or is being terminated,
within the meaning of Title IV of ERISA,  if as a result  thereof the  aggregate
annual  contributions  to all  Multiemployer  Plans in  reorganization  or being
terminated  is  increased  over the  amounts  contributed  to such Plans for the
preceding Plan year by an amount exceeding $1,000,000;

         (m)  The  Borrower  or any GCI  Entity  shall  be  required  under  any
Environmental   Law  (i)  to  implement   any   remedial,   neutralization,   or
stabilization  process or program, the cost of which could constitute a Material
Adverse  Change,  or (ii) to pay any penalty,  fine,  or damages in an aggregate
amount of $1,000,000 or more;

         (n) Any Property  (whether  leased or owned) of any GCI Entity,  or the
operations  conducted  thereon by any of them or any  current or prior  owner or
operator thereof (in the case of real Property),  shall violate or have violated
any applicable  Environmental Law, if such violation could constitute a Material
Adverse  Change;  or any GCI Entity  shall not obtain or  maintain  any  License
required to be obtained or filed under any  Environmental Law in connection with
the use of such  Property  and  assets,  including  without  limitation  past or
present treatment, storage, disposal, or release of Hazardous Materials into the
environment,  if the failure to obtain or maintain  the same could  constitute a
Material Adverse Change;

         (o) Any  Collateral  Document shall for any reason (other than pursuant
to the terms thereof) cease to create a valid and perfected  first priority Lien
in the Collateral (subject to Permitted Liens) (except for the Lien on the stock
of GCI  Leasing  Co.,  Inc.  which shall be a second Lien behind the Prior Stock
Lien) purported to be covered thereby and the value of such  Collateral,  singly
or in the aggregate, equals or exceeds $1,000,000;




100\269\91946                    70
<PAGE>
         (p) The occurrence of any Change of Control;  or (i) two or more of the
following three senior executive managers of the Borrower shall not be employees
of the  Borrower for 60  consecutive  days:  John  Lowber,  Ron Duncan or Wilson
Hughes and (ii) the  Borrower  shall have not  replaced  such  senior  executive
managers with new employees acceptable to the Majority Lenders, such consent not
to be unreasonably withheld;

         (q) At any time,  less than 100% of the Capital  Stock of the Borrower,
the Restricted  Subsidiaries and the Guarantors (except the Capital Stock of GCI
does not have to be  pledged)  shall be  pledged  to the  Lenders  to secure the
Obligations  pursuant to a first and prior  perfected  Lien (subject to inchoate
tax  liens),  except with  respect to the Lien on the stock of GCI Leasing  Co.,
Inc.; at any time,  less than 100% of the Capital Stock of GCI Leasing Co., Inc.
shall be pledged to the Lenders to secure the  Obligations  pursuant to a second
perfected Lien (behind the Prior Tax Lien and subject to inchoate tax Liens); or
all or any portion of the  Collateral  constituting  any System or systems which
service  5% or  more  of  the  customers  of the  Borrower  and  the  Restricted
Subsidiaries  ("Significant  Segment"),  or all or any  portion  of the  Pledged
Interests  or the  Pledge  Agreements  shall be the  subject  of any  proceeding
instituted  by any  Person,  or there  shall  exist any  litigation  or  overtly
threatened  litigation  with  respect to all or any  portion  of the  Collateral
constituting  Significant Segment or all or any portion of the Pledged Interests
or the Pledge Agreement;  or all or any portion of the Collateral constituting a
Significant  Segment shall be the subject of any legal proceeding  instituted by
any Person other than a Lender or  Administrative  Agent  (except in  connection
with any  Lender's  exercise  of any  remedies  under the Loan  Papers);  or any
document or instrument  creating or granting a security  interest or Lien in any
Collateral  shall for any reason fail to create a valid first priority  security
interest (subject to Permitted Liens and the Prior Stock Lien) in any collateral
purported to be covered thereby; or any material portion of the Collateral shall
not be subject to a prior  perfected  security  interest  (subject to  Permitted
Liens),  or be  subject  to  attachment,  levy  or  replenishment,  unless  such
attachment,  levy or  replenishment  shall be  stayed,  or  bonded  in an amount
substantially  equal to the fair market  value of such  Property and only for so
long as such stay or bond exists;

         (r) (i) A petition or complaint is filed before or by the Federal Trade
Commission, the United States Justice Department, or any other Tribunal, seeking
to cause the Borrower or any other GCI Entity to divest a significant portion of
its assets or the Capital Stock of any GCI Entity or the  Borrower,  pursuant to
any antitrust,  restraint of trade, unfair competition or similar Laws, and such
petition or  complaint  is not  dismissed  or  discharged  within 60 days of the
filing thereof,  which such divestiture  could reasonably be expected to cause a
Material  Adverse Change or (ii) A warrant of attachment or execution or similar
process shall be issued or levied against  Property of the Borrower or any other
GCI Entity which,  together with all other such Property of the Borrower and the
other GCI Entities subject to other such process, exceeds in value $1,000,000 in
the  aggregate,  and if such judgment or award is not insured or, within 60 days
after the entry, issue or levy thereof, such judgment,  warrant or process shall
not have been paid or discharged,  bonded or stayed pending appeal, or if, after
the  expiration of any such stay,  such  judgment,  warrant or process shall not
have been paid or discharged;



100\269\91946                    71
<PAGE>
         (s) Any civil action, suit or proceeding shall be commenced against any
GCI Entity under any federal or state racketeering  statute (including,  without
limitation,   the  Racketeer   Influenced  and  Corrupt   Organization   Act  of
1970)("RICO")  and  such  suit  shall  be  adversely  determined  by a court  of
applicable  jurisdiction  resulting  in a  judgment  against  such GCI Entity in
excess of $1,000,000;  or any criminal  action or proceeding  shall be commenced
against  any  GCI  Entity  under  any  federal  or  state  racketeering  statute
(including, without limitation, RICO);

         (t) There shall exist any breach or default under any Project Agreement
or any  other  agreement  relating  to a loan  facility  benefitting  any of the
Unrestricted  Subsidiaries,  in each case after giving effect to any  applicable
period of grace in connection therewith;

         (u) There  shall  exist any  breach or default  under any  intercompany
promissory note or related agreement  executed by AUSP or any other Unrestricted
Subsidiary  in favor of the  Borrower or any  Restricted  Subsidiary,  including
without limitation, the Intercompany Notes;

         (v) There shall exist any Event of Default relating to the Senior Notes
or under the Indenture; or

         (w) There  shall  exist any Event of  Default  under the  Revolver/Term
Credit Agreement.

         8.02 Remedies Upon Default. If an Event of Default described in Section
8.01(g)  hereof  shall occur with  respect to the  Parents,  the Borrower or any
Subsidiary of the Parents or the Borrower, the Revolver/Term Commitment shall be
immediately terminated and the aggregate unpaid principal balance of and accrued
interest on all  Advances  shall,  to the extent  permitted by  applicable  Law,
thereupon become due and payable concurrently  therewith,  without any action by
Administrative Agent or any Lender, and without diligence,  presentment, demand,
protest, notice of protest or intent to accelerate, or notice of any other kind,
all of which are hereby expressly waived.  Subject to the foregoing sentence, if
any Event of Default shall occur and be continuing, then no LIBOR Advances shall
be available to the Borrower and Administrative  Agent may at its election,  and
shall at the direction of Majority Lenders, do any one or more of the following:

         (a) Declare the entire unpaid balance of all Advances  immediately  due
and  payable,   whereupon  it  shall  be  due  and  payable  without  diligence,
presentment,  demand,  protest,  notice of protest or intent to  accelerate,  or
notice of any other kind (except notices specifically provided for under Section
8.01),  all of which are hereby expressly waived (except to the extent waiver of
the foregoing is not permitted by applicable Law);

         (b) Terminate the Revolver/Term Commitment;

         (c) Reduce any claim of  Administrative  Agent and Lenders to judgment;
or



100\269\91946                    72
<PAGE>
         (d)  Exercise  any  Rights  afforded  under  any Loan  Papers,  by Law,
including but not limited to the UCC, at equity, or otherwise.

         8.03 Cumulative  Rights.  All Rights available to Administrative  Agent
and Lenders  under the Loan Papers shall be cumulative of and in addition to all
other Rights granted  thereto at Law or in equity,  whether or not amounts owing
thereunder shall be due and payable,  and whether or not Administrative Agent or
any Lender  shall have  instituted  any suit for  collection  or other action in
connection with the Loan Papers.

         8.04 Waivers.  The acceptance by Administrative  Agent or any Lender at
any time and from time to time of partial  payment of any amount owing under any
Loan  Papers  shall  not be deemed  to be a waiver  of any  Default  or Event of
Default then existing.  No waiver by  Administrative  Agent or any Lender of any
Default  or Event of  Default  shall be deemed to be a waiver of any  Default or
Event of  Default  other  than such  Default  or Event of  Default.  No delay or
omission by Administrative Agent or any Lender in exercising any Right under the
Loan Papers shall  impair such Right or be  construed as a waiver  thereof or an
acquiescence therein, nor shall any single or partial exercise of any such Right
preclude other or further exercise  thereof,  or the exercise of any other Right
under the Loan Papers or otherwise.

         8.05  Performance  by  Administrative  Agent or any Lender.  Should any
covenant of any GCI Entity fail to be performed in accordance  with the terms of
the Loan Papers,  Administrative Agent may, at its option, perform or attempt to
perform  such  covenant  on  behalf  of such  GCI  Entity.  Notwithstanding  the
foregoing,  it is expressly understood that neither Administrative Agent nor any
Lender  assumes,  and shall not ever have,  except by express written consent of
Administrative  Agent or such Lender,  any liability or  responsibility  for the
performance of any duties or covenants of any GCI Entity.

         8.06 Expenditures.  The Borrower shall reimburse  Administrative  Agent
and each Lender for any sums spent by it in connection  with the exercise of any
Right  provided  herein.  Such sums shall bear interest at the lesser of (a) the
Base Rate in  effect  from time to time,  plus 2.0% and (b) the  Highest  Lawful
Rate, from the date spent until the date of repayment by the Borrower.

         8.07 Control.  None of the covenants or other  provisions  contained in
this Agreement  shall, or shall be deemed to, give  Administrative  Agent or any
Lender any Rights to exercise control over the affairs and/or  management of any
GCI Entity,  the power of Administrative  Agent and each Lender being limited to
the Rights to exercise the remedies provided in this Article; provided, however,
that if Administrative Agent or any Lender becomes the owner of any partnership,
stock or other equity  interest in any Person,  whether  through  foreclosure or
otherwise,  it shall be entitled to exercise such legal Rights as it may have by
being an owner of such stock or other equity interest in such Person.


100\269\91946                    73
<PAGE>
                      ARTICLE IX. THE ADMINISTRATIVE AGENT

         9.01  Authorization  and  Action.   Each  Lender  hereby  appoints  and
authorizes  Administrative  Agent to take such action as Administrative Agent on
its behalf and to exercise  such powers under this  Agreement and the other Loan
Papers as are  delegated  to the  Administrative  Agent by the terms of the Loan
Papers,  together with such powers as are reasonably  incidental  thereto. As to
any matters not  expressly  provided  for by this  Agreement  and the other Loan
Papers (including  without  limitation  enforcement or collection of the Notes),
Administrative  Agent shall not be required to exercise any  discretion  or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
Majority  Lenders (or all Lenders,  if required under Section  10.01),  and such
instructions  shall  be  binding  upon  all  Lenders;  provided,  however,  that
Administrative  Agent  shall not be required  to take any action  which  exposes
Administrative  Agent to  personal  liability  or which is  contrary to any Loan
Papers or  applicable  Law.  Administrative  Agent agrees to give to each Lender
notice of each notice given to it by the Borrower  pursuant to the terms of this
Agreement, and to distribute to each applicable Lender in like funds all amounts
delivered to Administrative  Agent by the Borrower for the Ratable or individual
account of any Lender.

         9.02  Administrative  Agent's  Reliance,  Etc.  Neither  Administrative
Agent, nor any of its directors, officers, agents, employees, or representatives
shall be liable for any action  taken or omitted to be taken by it or them under
or in connection with this Agreement or any other Loan Paper,  except for its or
their own gross  negligence  or willful  misconduct.  Without  limitation of the
generality of the foregoing, Administrative Agent (a) may treat the payee of any
Note as the holder thereof until Administrative Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form satisfactory
to Administrative  Agent; (b) may consult with legal counsel  (including counsel
for the  Borrower or any of the  Restricted  Subsidiaries),  independent  public
accountants,  and other experts  selected by it, and shall not be liable for any
action taken or omitted to be taken in good faith by it in  accordance  with the
advice of such  counsel,  accountants,  or  experts;  (c) makes no  warranty  or
representation  to any Lender and shall not be responsible to any Lender for any
statements,  warranties,  or representations  made in or in connection with this
Agreement or any other Loan Papers;  (d) shall not have any duty to ascertain or
to inquire as to the  performance or observance of any of the terms,  covenants,
or conditions of this  Agreement or any other Loan Papers on the part of any GCI
Entity or the Restricted  Subsidiaries or to inspect the Property (including the
books and records) of any GCI Entity or the Restricted  Subsidiaries;  (e) shall
not be  responsible  to any Lender for the due  execution,  legality,  validity,
enforceability,  genuineness, sufficiency, or value of this Agreement, any other
Loan Papers, or any other instrument or document  furnished pursuant hereto; and
(f) shall incur no liability  under or in respect of this Agreement or any other
Loan Papers by acting upon any notice, consent, certificate, or other instrument
or writing  believed by it to be genuine and signed or sent by the proper  party
or parties.

         9.03 NationsBank of Texas,  National  Association and Affiliates.  With
respect to its Revolver/Term Commitment,  its Advances, its Specified Percentage
of the Revolver/Term  Loan


100\269\91946                    74
<PAGE>
and any Loan Papers,  NationsBank of Texas,  National  Association  has the same
Rights  under this  Agreement  as any other  Lender and may exercise the same as
though  it  were  not  Administrative  Agent.  NationsBank  of  Texas,  National
Association  and its  Affiliates  may accept  deposits  from,  lend money to and
generally  engage in any kind of business  with,  any GCI Entity,  any Affiliate
thereof, and any Person who may do business therewith,  all as if NationsBank of
Texas,  National  Association were not Administrative Agent and without any duty
to account therefor to any Lender.

         9.04 Lender  Credit  Decision.  Each Lender  acknowledges  that it has,
independently  and  without  reliance  upon  Administrative  Agent or any  other
Lender, and based on the financial statements referred to in Section 5.04 hereof
and such other documents and information as it has deemed appropriate,  made its
own credit analysis and decision to enter into this Agreement.  Each Lender also
acknowledges   that  it  will,   independently   and   without   reliance   upon
Administrative  Agent  or any  other  Lender  and  based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions in taking or not taking  action under this  Agreement  and the
other Loan Papers.

         9.05 Indemnification by Lenders. Lenders shall indemnify Administrative
Agent, pro rata, from and against any and all liabilities,  obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or disbursements
of any kind or  nature  whatsoever  which may be  imposed  on,  incurred  by, or
asserted against  Administrative  Agent in any way relating to or arising out of
any  Loan  Papers  or any  action  taken  or  omitted  by  Administrative  Agent
thereunder, including any negligence of Administrative Agent; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses,  damages,  penalties,  actions,  judgments,  suits, costs,  expenses, or
disbursements  resulting from Administrative Agent's gross negligence or willful
misconduct.  Without  limitation  of  the  foregoing,  Lenders  shall  reimburse
Administrative  Agent,  pro rata,  promptly  upon  demand for any  out-of-pocket
expenses (including reasonable attorneys' fees) incurred by Administrative Agent
in  connection  with  the  preparation,   execution,  delivery,  administration,
modification,  amendment,  or enforcement  (whether through  negotiation,  legal
proceedings  or otherwise) of, or legal and other advice in respect of rights or
responsibilities  under, the Loan Papers. The indemnity provided in this Section
9.05 shall survive the termination of this Agreement.

         9.06 Successor Administrative Agent. Administrative Agent may resign at
any time by giving written  notice thereof to Lenders and the Borrower,  and may
be removed at any time with or without cause by the action of all Lenders (other
than  Administrative  Agent,  if it is a  Lender).  Upon any  such  resignation,
Majority  Lenders  shall  have the right to appoint a  successor  Administrative
Agent.  If no successor  Administrative  Agent shall have been so appointed  and
shall have  accepted  such  appointment  within  thirty days after the  retiring
Administrative  Agent's  giving  of  notice of  resignation,  then the  retiring
Administrative   Agent  may,   on  behalf  of   Lenders,   appoint  a  successor
Administrative  Agent, which shall be a commercial bank organized under the Laws
of the United  States of America or of any State  thereof  and having a combined
capital  and  surplus  of at  least  $50,000,000.  Upon  the  acceptance  of any
appointment  as  Administrative  Agent  hereunder by a successor  Administrative
Agent, such successor


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<PAGE>
Administrative  Agent shall thereupon  succeed to and become vested with all the
Rights  and  duties  of the  retiring  Administrative  Agent,  and the  retiring
Administrative  Agent shall be discharged from its duties and obligations  under
the Loan Papers,  provided that if the retiring or removed  Administrative Agent
is unable to appoint a  successor  Administrative  Agent,  Administrative  Agent
shall,  after the  expiration of a sixty day period from the date of notice,  be
relieved of all obligations as Administrative  Agent hereunder.  Notwithstanding
any Administrative  Agent's resignation or removal hereunder,  the provisions of
this Article  shall  continue to inure to its benefit as to any actions taken or
omitted  to be  taken  by it  while  it  was  Administrative  Agent  under  this
Agreement.


                            ARTICLE X. MISCELLANEOUS

         10.01  Amendments and Waivers.  No amendment or waiver of any provision
of this Agreement, the Revolving Credit Agreement, or any other Loan Papers, nor
consent to any  departure  by the  Borrower  or any other GCI Entity  therefrom,
shall  be  effective  unless  the  same  shall  be  in  writing  and  signed  by
Administrative  Agent with the  consent of Majority  Lenders,  and then any such
waiver or consent shall be effective  only in the specific  instance and for the
specific purpose for which given; provided, however, that no amendment,  waiver,
or consent  shall (and the result of action or failure to take action shall not)
unless in writing and signed by all of Lenders  and  Administrative  Agent,  (a)
increase the Revolving  Commitment  (except in accordance with the provisions of
Section 2.16 of the  Revolving  Credit  Agreement),  increase the  Revolver/Term
Commitment  or the  Letter of  Credit  Commitment,  (b)  reduce  any  principal,
interest,  fees, or other amounts payable  hereunder,  or waive or result in the
waiver  of  any  Event  of  Default  under  Section  8.01(a)  hereof  or of  the
Revolver/Term Credit Agreement,  or change the pro rata sharing of payments, (c)
postpone any date fixed for any payment of principal,  interest,  fees, or other
amounts  payable  hereunder or under the  Revolver/Term  Credit  Agreement,  (d)
release any  Collateral  or  Guaranties  securing any GCI  Entity's  obligations
hereunder,  other than releases specifically contemplated hereby and by the Loan
Papers, including without limitation,  releases of assets that have been sold or
transferred  as  specifically  permitted  hereby or by the Loan  Papers,  or (e)
change the meaning of Specified  Percentage or the number of Lenders required to
take any action  hereunder.  No amendment,  waiver,  or consent shall affect the
Rights or duties of Administrative Agent under any Loan Papers,  unless it is in
writing and signed by  Administrative  Agent in addition to the requisite number
of Lenders.

         10.02 Notices.

         (a) Manner of Delivery.  All notices communications and other materials
to be given or  delivered  under the Loan  Papers  shall,  except in those cases
where giving notice by telephone is expressly  permitted,  be given or delivered
in writing.  All written notices,  communications and materials shall be sent by
registered or certified mail,  postage  prepaid,  return receipt  requested,  by
telecopier,  or delivered  by hand.  In the event of a  discrepancy  between any
telephonic   notice  and  any  written   confirmation   thereof,   such  written
confirmation  shall  be


100\269\91946                    76
<PAGE>
deemed the  effective  notice  except to the extent  Administrative  Agent,  any
Lender or the Borrower has acted in reliance on such telephonic notice.

         (b) Addresses. All notices, communications and materials to be given or
delivered  pursuant  to this  Agreement  shall  be  given  or  delivered  at the
following  respective  addresses and telecopier and telephone numbers and to the
attention of the following individuals or departments:

If to the Borrower:

                  GCI Holdings, Inc.
                  2550 Denali Street, Suite 1000
                  Anchorage, Alaska  99503-2781

                  Attention:        Mr. John M. Lowber
                  Telephone No.:    (907) 265-5628
                  Facsimile No.:    (907) 265-5676

         With a Copy to:

                  Hartig, Rhodes, Norman, Mahoney & Edwards, P.C.
                  717 K Street
                  Anchorage, Alaska 99501

                  Attention:        Bonnie J.  Paskvan

                  Telephone No.:    (907) 276-1592
                  Facsimile No.:    (907) 277-4352


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<PAGE>
If to Administrative Agent:

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

                  Attention:        Whitney L. Busse
                                    Vice President
                  Telephone No.:    (214) 508-0950
                  Facsimile No.:    (214) 508-9390

         With a Copy to:

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

                  Attention:        Melissa Ruman Stewart
                  Telephone No.:    (214) 698-3814
                  Facsimile No.:    (214) 744-0231

         (c) If to any  Lender,  to its address  set forth  below  opposite  its
signature or on any Assignment and Acceptance or amendment to this Agreement.

or at such other address or,  telecopier or telephone number or to the attention
of such other  individual or  department as the party to which such  information
pertains  may  hereafter  specify  for the  purpose  in a  notice  to the  other
specifically captioned "Notice of Change of Address".

         (d)  Effectiveness.  Each notice,  communication and any material to be
given or delivered to any party pursuant to this Agreement shall be effective or
deemed  delivered or furnished  (i) if sent by mail,  on the fifth  Business Day
after such notice, communication or material is deposited in the mail, addressed
as above provided, (ii) if sent by telecopier,  when such notice,  communication
or  material  is  transmitted  to the  appropriate  number  determined  as above
provided  in this  Section  10.02 and the  appropriate  receipt is  received  or
otherwise  acknowledged,  (iii) if sent by hand  delivery or overnight  courier,
when left at the address of the addressee addressed as above provided,  and (iv)
if given by telephone,  when communicated to the individual or any member of the
department specified as the individual or department to whose attention notices,
communications and materials are to be given or delivered except that notices of
a change of address,  telecopier or telephone number or individual or department
to whose  attention  notices,  communications  and  materials are to be given or
delivered shall not be effective until received; provided, however, that notices
to Administrative Agent pursuant to



100\269\91946                    78
<PAGE>
Article  II  shall  be  effective  when  received.   The  Borrower  agrees  that
Administrative  Agent shall have no duty or  obligation  to verify or  otherwise
confirm telephonic notices given pursuant to Article II, and agrees to indemnify
and hold harmless  Administrative Agent and Lenders for any and all liabilities,
obligations,  losses, damages,  penalties,  actions,  judgments,  suits, claims,
costs, and expenses resulting, directly or indirectly, from acting upon any such
notice.

         10.03 Parties in Interest.  All covenants and  agreements  contained in
this  Agreement and all other Loan Papers shall bind and inure to the benefit of
the  respective  successors and assigns of the parties  hereto.  Each Lender may
from time to time assign or transfer its interests hereunder pursuant to Section
10.04  hereof.  No GCI Entity may assign or transfer  its Rights or  obligations
under any Loan Paper without the prior written consent of Administrative Agent.

         10.04 Assignments and Participations.

         (a) Subject to the following sentence,  each Lender (an "Assignor") may
assign its Rights and  obligations  as a Lender  under the Loan Papers to one or
more Eligible Assignees pursuant to an Assignment and Acceptance, so long as (i)
each  assignment  shall be of a constant,  and not a varying  percentage  of all
Rights and obligations thereunder,  (ii) each Assignor shall obtain in each case
the prior written consent of  Administrative  Agent,  which consent shall not be
unreasonably  withheld,  (iii)  each  Assignor  shall in each  case pay a $3,000
processing fee to Administrative Agent, (iv) no such assignment is for an amount
less than the  lesser of the total  amount of the  Revolver/Term  Commitment  or
$5,000,000,  and (v) no  assignment  shall be made unless an  assignment is also
made of the Rights  and  obligations  on a pro rata basis as a Lender  under the
Revolving Credit Agreement. Within five Business Days after Administrative Agent
receives notice of any such  assignment,  the Borrower shall execute and deliver
to Administrative Agent, in exchange for the Notes issued to Assignor, new Notes
to the  order  of such  Assignor  and its  assignee  in  amounts  equal to their
respective Specified Percentages of the Revolver/Term Commitment. Such new Notes
shall  be  dated  the  effective  date  of the  assignment.  It is  specifically
acknowledged and agreed that on and after the effective date of each assignment,
the assignee  shall be a party hereto and shall have the Rights and  obligations
of a Lender under the Loan Papers.

         (b) Each Lender may sell  participations  to one or more Persons in all
or any of its Rights and obligations under the Loan Papers;  provided,  however,
that (i) such Lender's obligations under the Loan Papers shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such  obligations,  (iii) such Lender shall remain the holder
of its Notes for all purposes of the Loan Papers,  (iv) the participant shall be
granted  the Right to vote on or  consent  to only those  matters  described  in
Sections 10.01(a), (b), (c) and (d), (v) each GCI Entity,  Administrative Agent,
and other Lenders shall continue to deal solely and directly with such Lender in
connection  with its Rights and  obligations  under the Loan  Papers and (vi) no
such  participation is for an amount less than the lesser of the total amount of
the Revolver/Term Commitment or $5,000,000.



100\269\91946                    79
<PAGE>
         (c) Any Lender may, in connection with any assignment or participation,
or  proposed   assignment  or   participation,   disclose  to  the  assignee  or
participant,  or proposed assignee or participant,  any information  relating to
any GCI Entity furnished to such Lender by or on behalf of any GCI Entity.

         (d)  Notwithstanding  any other  provision set forth in this Agreement,
each Lender may at any time create a security  interest in all or any portion of
its Rights under this Agreement  (including,  without  limitation,  the Advances
owing to it and the Note or Notes  held by it) in favor of any  Federal  Reserve
Bank in  accordance  with  Regulation A of the Board of Governors of the Federal
Reserve System.

         10.05  Sharing of  Payments.  If any Lender  shall  obtain any  payment
(whether voluntary,  involuntary,  through the exercise of any Right of set-off,
or  otherwise)  on  account of its  Advances  in excess of its pro rata share of
payments  made  by  the   Borrower,   such  Lender  shall   forthwith   purchase
participations  in Advances  made by the other  Lenders as shall be necessary to
share the excess payment pro rata with each of them; provided,  however, that if
any of such excess payment is thereafter  recovered from the purchasing  Lender,
its purchase from each Lender shall be rescinded and each Lender shall repay the
purchase price to the extent of such recovery  together with a pro rata share of
any interest or other amount paid or payable by the purchasing Lender in respect
of the  total  amount so  recovered.  The  Borrower  agrees  that any  Lender so
purchasing a  participation  from another Lender  pursuant to this Section 10.05
may, to the fullest extent permitted by Law,  exercise all its Rights of payment
(including the Right of set-off) with respect to such  participation as fully as
if such  Lender were the direct  creditor of the  Borrower in the amount of such
participation.

         10.06 Right of Set-off.  Upon the occurrence and during the continuance
of any Event of Default,  each Lender is hereby  authorized at any time and from
time to time, to the fullest  extent  permitted by Law, to set-off and apply any
and all deposits (general or special,  time or demand,  provisional or final) at
any time held and other  indebtedness at any time owing by such Lender to or for
the credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter  existing  under this  Agreement  and the other
Loan Papers,  whether or not Administrative  Agent or any Lender shall have made
any demand  under this  Agreement  or the other  Loan  Papers,  and even if such
obligations are unmatured.  Each Lender shall promptly notify the Borrower after
any such set-off and application,  provided that the failure to give such notice
shall not affect the  validity of such  set-off and  application.  The Rights of
each Lender under this Section 10.06 are in addition to other Rights (including,
without limitation, other Rights of set-off) which such Lender may have.

         10.07 Costs, Expenses, and Taxes.nd Taxes

         (a) The Borrower  agrees to pay on demand (i) all costs and expenses of
Administrative  Agent in connection  with the preparation and negotiation of all
Loan Papers,  including without limitation the reasonable fees and out-of-pocket
expenses  of  Special  Counsel  and  (ii)  all  costs  and  expenses  (including
reasonable attorneys' fees and expenses) of


100\269\91946                    80
<PAGE>
Administrative   Agent  and  each  Lender  in  connection  with  administration,
interpretation,  modification,  amendment, waiver, or release of any Loan Papers
and any restructuring, work-out, or collection of any portion of the Obligations
or the enforcement of any Loan Papers.

         (b) In addition,  the Borrower  shall pay any and all stamp,  debt, and
other Taxes payable or  determined to be payable in connection  with any payment
hereunder (other than Taxes on the overall net income of Administrative Agent or
any  Lender or  franchise  Taxes or Taxes on  capital  or  capital  receipts  of
Administrative Agent or any Lender), or the execution,  delivery, or recordation
of any Loan  Papers,  and agrees to save  Administrative  Agent and each  Lender
harmless from and against any and all liabilities  with respect to, or resulting
from any delay in paying or  omission to pay any Taxes in  accordance  with this
Section 10.07,  including any penalty,  interest, and expenses relating thereto.
All payments by the Borrower or any Restricted  Subsidiary under any Loan Papers
shall be made free and clear of and without  deduction for any present or future
Taxes (other than Taxes on the overall net income of Administrative Agent or any
Lender  of any  nature  now or  hereafter  existing,  levied,  or  withheld,  or
franchise Taxes or Taxes on capital or capital receipts of Administrative  Agent
or any  Lender),  including  all  interest,  penalties,  or similar  liabilities
relating  thereto.  If the  Borrower  shall be  required  by Law to deduct or to
withhold any Taxes from or in respect of any amount payable  hereunder,  (i) the
amount so payable  shall be  increased to the extent  necessary  so that,  after
making all required  deductions  and  withholdings  (including  Taxes on amounts
payable  to  Administrative  Agent or any  Lender  pursuant  to this  sentence),
Administrative  Agent or any Lender receives an amount equal to the sum it would
have  received  had no such  deductions  or  withholdings  been  made,  (ii) the
Borrower  shall make such  deductions  or  withholdings,  and (iii) the Borrower
shall pay the full amount deducted or withheld to the relevant taxing  authority
in accordance  with  applicable  Law.  Without  prejudice to the survival of any
other agreement of the Borrower hereunder, the agreements and obligations of the
Borrower  contained in this Section  10.07 shall  survive the  execution of this
Agreement,  termination  of  the  Revolver/Term  Commitment,  repayment  of  the
Obligations, satisfaction of each agreement securing or assuring the Obligations
and termination of this Agreement and each other Loan Paper.

         10.08  Indemnification  by the Borrower.  The Borrower shall indemnify,
defend, and hold harmless Administrative Agent, each Lender and their respective
Affiliates,  directors,  officers, agents, employees, and representatives,  from
and against any and all liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits, claims, costs,  expenses,  and disbursements of any
kind or nature  whatsoever  which may be imposed  on,  incurred  by or  asserted
against  any of them in any way  relating  to or arising  out of any Loan Papers
(including  in  connection  with or as a  result,  in whole  or in part,  of the
negligence of any of them),  any transaction  related hereto or thereto,  or any
act,  omission,  or transaction of the Borrower,  any other GCI Entity and their
respective Affiliates, or any of their directors,  partners,  officers,  agents,
employees,  or representatives;  provided,  however, that neither Administrative
Agent nor any Lender shall be indemnified,  defended, and held harmless pursuant
to this Section  10.08 to the extent of any losses or damages which the Borrower
proves  were  caused by the  indemnified  party's  willful  misconduct  or gross
negligence.



100\269\91946                    81
<PAGE>
         10.09 Rate Provision.  It is not the intention of any party to any Loan
Papers to make an agreement violative of the Laws of any applicable jurisdiction
relating  to usury.  In no event  shall  the  Borrower  or any  other  Person be
obligated to pay any amount in excess of the Maximum Amount.  If  Administrative
Agent or any Lender ever receives,  collects or applies,  as interest,  any such
excess,  such amount which would be excessive interest shall be deemed a partial
repayment of principal and treated  hereunder as such;  and if principal is paid
in full, any remaining  excess shall be paid to the Borrower or the other Person
entitled  thereto.  In determining  whether or not the interest paid or payable,
under any specific  contingency,  exceeds the Maximum  Amount,  each GCI Entity,
Administrative  Agent and each Lender  shall,  to the maximum  extent  permitted
under Applicable Law, (a)  characterize any nonprincipal  payment as an expense,
fee or premium rather than as interest,  (b) exclude  voluntary  prepayments and
the effect  thereof,  and (c)  amortize,  prorate,  allocate and spread in equal
parts, the total amount of interest  throughout the entire  contemplated term of
the Obligations so that the interest rate is uniform  throughout the entire term
of the  Obligations;  provided that if the Obligations are paid and performed in
full prior to the end of the full contemplated term thereof, and if the interest
received for the actual period of existence  thereof exceeds the Maximum Amount,
Administrative  Agent or Lenders,  as appropriate,  shall refund to the Borrower
the amount of such excess or credit the amount of such excess  against the total
principal amount owing, and, in such event, neither Administrative Agent nor any
Lender shall be subject to any  penalties  provided by any Laws for  contracting
for,  charging  or  receiving  interest in excess of the  Maximum  Amount.  This
Section 10.09 shall control every other  provision of all  agreements  among the
parties to the Loan Papers  pertaining to the  transactions  contemplated  by or
contained in the Loan Papers.

         10.10  Severability.  If any provision of any Loan Papers is held to be
illegal,  invalid, or unenforceable under present or future Laws during the term
thereof,  such provision shall be fully  severable,  the appropriate  Loan Paper
shall be construed and enforced as if such illegal,  invalid,  or  unenforceable
provision  had never  comprised a part  thereof,  and the  remaining  provisions
thereof  shall  remain in full force and effect and shall not be affected by the
illegal,  invalid,  or  unenforceable  provision or by its severance  therefrom.
Furthermore,  in lieu of such illegal, invalid, or unenforceable provision there
shall be added  automatically  as a part of such Loan Paper a legal,  valid, and
enforceable  provision  as  similar  in  terms  to  the  illegal,   invalid,  or
unenforceable provision as may be possible.

         10.11  Exceptions  to  Covenants.  No GCI Entity  shall be deemed to be
permitted  to take any action or to fail to take any action that is permitted as
an  exception  to any  covenant  in any  Loan  Papers,  or  that is  within  the
permissible limits of any covenant, if such action or omission would result in a
violation of any other covenant in any Loan Papers.

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



100\269\91946                    82
<PAGE>
         10.13 GOVERNING LAW; WAIVER OF JURY TRIAL.

         (a) THIS  AGREEMENT  AND ALL OTHER  LOAN  PAPERS  SHALL BE DEEMED TO BE
CONTRACTS  MADE IN DALLAS,  TEXAS,  AND SHALL BE  GOVERNED BY AND  CONSTRUED  IN
ACCORDANCE  WITH  THE  LAWS OF THE  STATE OF TEXAS  (WITHOUT  GIVING  EFFECT  TO
CONFLICT OF LAWS) AND THE UNITED STATES OF AMERICA.  WITHOUT EXCLUDING ANY OTHER
JURISDICTION  AND NOT AS A  LIMITATION  OF SECTION  10.14  HEREOF,  THE BORROWER
AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS, TEXAS, WILL
HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH. TO THE MAXIMUM EXTENT
PERMITTED  BY LAW, THE  BORROWER  HEREBY  WAIVES ANY RIGHT THAT IT MAY HAVE TO A
TRIAL BY JURY OF ANY  DISPUTE  (WHETHER A CLAIM IN TORT,  CONTRACT,  EQUITY,  OR
OTHERWISE)  ARISING UNDER OR RELATING TO THIS AGREEMENT,  THE OTHER LOAN PAPERS,
OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A
JUDGE SITTING WITHOUT A JURY.

         (b) THE BORROWER  HEREBY WAIVES  PERSONAL  SERVICE OF ANY LEGAL PROCESS
UPON IT. THE  BORROWER  AGREES  THAT  SERVICE OF PROCESS  MAY BE MADE UPON IT BY
REGISTERED  MAIL  (RETURN  RECEIPT  REQUESTED)  DIRECTED TO THE  BORROWER AT ITS
ADDRESS  DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED  FIVE  BUSINESS  DAYS AFTER  DEPOSIT IN THE UNITED STATES
MAIL.  NOTHING IN THIS SECTION  10.13 SHALL  AFFECT THE RIGHT OF  ADMINISTRATIVE
AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

         10.14.  ENTIRE  AGREEMENT.  THIS  AGREEMENT  AND THE OTHER LOAN  PAPERS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR,  CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

         10.15  Amendment  and   Restatement.   This  Agreement  is  a  renewal,
extension,  amendment, and restatement of the Original Credit Agreement, and, as
such,  except for the  "Obligations" as defined in the Original Credit Agreement
(which shall survive,  be renewed,  extended,  and restated by the terms of this
Agreement),  all other terms and  provisions  supersede  in their  entirety  the
Original  Credit  Agreement;   provided,   however,  this  Agreement  shall  not
extinguish the obligations  under the Original Credit  Agreement or be construed
as a substitution  or novation of the  "Obligations"  as defined in the Original
Credit  Agreement,  except as modified  hereby or the other Loan Papers executed
concurrently herewith. All subordination agreements, security agreements, pledge
agreements,  mortgages,  and deeds of trust executed and delivered in connection
with this  Agreement  shall  supersede the  subordination  agreements,  security
agreements,  pledge  agreements,  mortgages,  and  deeds of trust  executed  and
delivered  in


100\269\91946                    83
<PAGE>
connection   with  the  Original  Credit   Agreement  (the  "Original   Security
Documents"),  except for the Liens created under the Original Security Documents
which shall remain valid, binding and enforceable Liens against the Borrower and
the Subsidiaries and each of the other Persons which granted such Liens.

===============================================================================
                   REMAINDER OF PAGE LEFT BLANK INTENTIONALLY
===============================================================================

100\269\91946                    84
<PAGE>


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

THE BORROWER:
                               GCI HOLDINGS, INC.




                               By:      /s/ John M. Lowber
                               Its:     Senior Vice President and Chief
                                        Financial Officer




100\269\91946                    85
<PAGE>


ADMINISTRATIVE AGENT:
                               NATIONSBANK OF TEXAS, N.A., as Administrative
                               Agent




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



100\269\91946                    86
<PAGE>


DOCUMENTATION AGENT:
                               CREDIT LYONNAIS NEW YORK BRANCH, as
                               Documentation Agent




                               By:      /s/Mark D. Thorsheim
                               Its:     Vice President



100\269\91946                    87
<PAGE>


SYNDICATION AGENT:
                               TD SECURITIES (USA), INC., as Syndication Agent




                               By:  /s/ A.L. Miller
                               Its:  Managing Director

100\269\91946                    88
<PAGE>


LENDERS:

Specified Percentage:          NATIONSBANK OF TEXAS, N.A., Individually, as a
                               Lender
10.0000%

Address:
901 Main, 64th Floor
Dallas, Texas  75202
                               By:      /s/ Whitney L. Busse
                               Its:     Vice President
Attention:        Whitney L. Busse
Telephone:        (214) 508-0950
Facsimile:        (214) 508-9390






100\269\91946                    89
<PAGE>


Specified Percentage:          TORONTO DOMINION (TEXAS), INC., Individually as
                               a Lender
10.0000%

Address:
909 Fannin, Suite 1700
Houston, Texas 77010
                               By:  /s/Neva Nesbitt
                               Its:  Vice President
Attention:        David Parker
Telephone:        (713) 653-8248
Facsimile:        (713) 951-9921

100\269\91946                    90
<PAGE>


Specified Percentage:          CREDIT LYONNAIS NEW YORK BRANCH, Individually as
                               a Lender
10.0000%

Address:
1301 Avenue of the Americas
New York, New York  10019
                               By:  /s/ Mark D. Thorsheim
                               Its:  Vice President
Attention:        Mark Thorsheim
Telephone:        (212) 261-7852
Facsimile:        (212) 261-3288

100\269\91946                    91
<PAGE>


Specified Percentage:          COBANK, ACB, Individually as a Lender

8.0000%

Address:
5500 South Quebec Street
Englewood, Colorado  80111
                               By:  /s/ John McFarlane
                               Its:  Vice President
Attention:        John McFarlane
Telephone:        (303) 740-4332
Facsimile:        (303) 740-6496

                               By:
                               Its:

100\269\91946                    92
<PAGE>


Specified Percentage:          BANQUE PARIBAS, Individually as a Lender

6.0000%

Address:
2029 Century Park East, Suite 3900
Los Angeles, California  90067
                               By: /s/ Thomas Brandt
                               Its: Director
Attention:        Todd Rodgers
Telephone:        (310) 551-7394
Facsimile:        (310) 556-3762

                               By: /s/ Darlynn Ernst
                               Its: Assistant Vice President

100\269\91946                    93
<PAGE>


Specified Percentage:          GENERAL ELECTRIC CAPITAL CORPORATION,
                               Individually as a Lender

6.0000%

Address:
120 Long Ridge Road
Stamford, Connecticut  06927
                               By: /s/ Molly S. Fergusson
                               Its: Manager - Operations
Attention:        Manager - Operations
Telephone:        (203) 961-2275
Facsimile:        (203) 961-2017

100\269\91946                    94
<PAGE>


Specified Percentage:          THE LONG-TERM CREDIT BANK OF JAPAN,  LTD., LOS
                               ANGELES AGENCY,  Individually as a Lender

6.0000%

Address:
350 South Grand Avenue, Suite 3000
Los Angeles, California  90071
                               By: /s/ T. Morgan Edwards II
                               Its: Deputy General Manager
Attention:        Hiro Negi
Telephone:        (213) 689-6344
Facsimile:        (213) 689-6294

100\269\91946                    95
<PAGE>


Specified Percentage:          UNION BANK OF CALIFORNIA, N.A., Individually as
                               a Lender

6.0000%

Address:
445 S. Figueroa Street, 15th Floor
Los Angeles, California  90071
                               By: /s/ Christine P. Ball
                               Its: Vice President
Attention:        Sonia Isaacs
Telephone:        (213) 236-7834
Facsimile:        (213) 236-5747

100\269\91946                    96
<PAGE>


Specified Percentage:          BANK OF HAWAII, Individually as a Lender

4.2500%

Address:
1850 N. Central Avenue, Suite 400
Phoenix, Arizona  85004
                               By: /s/ Elizabeth O. MacLean
                               Its: Vice President
Attention:        Elizabeth O. MacLean
Telephone:        (602) 257-2437
Facsimile:        (602) 257-2235

100\269\91946                    97
<PAGE>


Specified Percentage:          THE BANK OF NEW YORK, Individually as a Lender

4.2500%

Address:
1 Wall Street
New York, New York  10286
                               By: /s/ Edward F. Ryan, Jr.
                               Its: Senior Vice President
Attention:        Ted Ryan
Telephone:        (212) 635-8608
Facsimile:        (212) 635-8593

100\269\91946                    98
<PAGE>


Specified Percentage:          BANQUE NATIONALE DE PARIS, Individually as a
                               Lender

4.2500%

Address:
499 Park Avenue
New York, New York  10022
                               By: /s/ Serge Desrayaud
                               Its: Vice President
Attention:        Marcus C. Jones
Telephone:        (212) 415-4632
Facsimile:        (212) 418-8269

                               By: /s/ Marcus C. Jones
                               Its: Vice President

100\269\91946                    99
<PAGE>


Specified Percentage:          CITY NATIONAL BANK, Individually as a Lender

4.2500%

Address:
400 N. Roxbury Drive, 3rd Floor
Beverly Hills, California  90210
                               By: /s/ David C. Burdge
                               Its: Senior Vice President
Attention:        Rod Bollins
Telephone:        (310) 888-6149
Facsimile:        (310) 888-6152

100\269\91946                    100
<PAGE>


Specified Percentage:          FIRST NATIONAL BANK OF MARYLAND,
                               Individually as a Lender

4.2500%

Address:
25 South Charles Street
18th Floor, Mail Stop 101-511
Baltimore, Maryland  21201
                               By: /s/ Christopher L. Smith
                               Its: Vice President
Attention:        Christopher Smith
Telephone:        (410) 244-4798
Facsimile:        (410) 244-4920

100\269\91946                    101
<PAGE>


Specified Percentage:          FLEET NATIONAL BANK, Individually as a Lender

4.2500%

Address:
One Federal Street
MAOFD03D
Boston, Massachusetts  02110
                               By: /s/ Chris Swindell
                               Its: VP
Attention:        Christopher Swindell
Telephone:        (617) 346-5579
Facsimile:        (617) 346-4345

100\269\91946                    102
<PAGE>


Specified Percentage:          THE FUJI BANK, LIMITED, LOS ANGELES AGENCY,
                               Individually as a Lender

4.2500%

Address:
333 South Hope Street, 39th Floor
Los Angeles, California  90071
                               By: /s/ Masahito Fukuda
                               Its: Joint General Manager
Attention:        Fred Caparoso
Telephone:        (213) 253-4148
Facsimile:        (213) 253-4178

100\269\91946                    103
<PAGE>


Specified Percentage:          THE SUMITOMO BANK, LIMITED, Individually as a
                               Lender

4.2500%

Address:
1201 Third Avenue, Suite 5320
Seattle, Washington  98101
                               By: /s/ Goro Hirai
                               Its: Joint General Manager
Attention:        Bob Granfelt
Telephone:        (206) 223-4050
Facsimile:        (206) 623-8551


Original to:

777 S. Figueroa Street
Suite 2600
Los Angeles, California  90017

100\269\91946                    104
<PAGE>


Specified Percentage:          NATIONAL BANK OF ALASKA, Individually as a Lender

4.0000%

Address:
301 W. Northern Lights Blvd.
Commercial Loan Department
Anchorage, Alaska  99503
                               By: /s/ Patricia Jelley Benz
                               Its: Vice President
Attention:        Pita Jelley Benz
Telephone:        (907) 265-2916
Facsimile:        (907) 265-2141


100\269\91946                    105
<PAGE>
                                  SCHEDULE 7.02


                          SUBORDINATED DEBT PROVISIONS

         A.       Definition  of  Subordinated   Debt  and  Senior  Debt  -  all
                  inclusive,   i.e.  Subordinated  Debt  defined  as  all  debt,
                  principal,   interest  (including   postbankruptcy  interest),
                  indemnitees,  liabilities,  fees,  costs,  and expenses now or
                  hereafter  existing,  etc.  subordinated  to all  Senior  Debt
                  defined   as  all   debt,   principal,   interest   (including
                  postbankruptcy  interest),  indemnitees,   liabilities,  fees,
                  costs,  and expenses now or  hereafter  existing,  as renewed,
                  extended,  increased,  etc.  (and all other  "Obligations"  as
                  defined in the Credit Agreement)

         B.       Payment Terms Prebankruptcy

                  1.       no payment of interest,  except  payment in kind;  no
                           amortization or defeasance or mandatory redemption of
                           principal  (other than  change of control  provisions
                           subject to the subordination provisions)
                  2.       fixed maturity date no sooner than one year after the
                           fully extended  maturity date of the Senior Debt; the
                           maturity of Senior Debt may be extended  from time to
                           time  without  the consent of the  Subordinated  Debt
                           Holders

         C.       Covenants

                  1.       limitation   on  covenants  to   limitation  of  debt
                           incurrence  (other than  Senior  Debt and  guarantees
                           thereof) and other  affirmative  type  covenants;  no
                           financial covenants
                  2.       Any  change of  control  provision  which  triggers a
                           redemption of the  Subordinated  Debt must be subject
                           to payment of Senior Debt in full
                  3.       No  dividend   restrictions   or  other   restrictive
                           covenants

         D.       Defaults; Remedies Upon Default

                  1.       only  defaults in  Subordinated  Debt  documents  are
                           payment  defaults,   affirmative  covenant  defaults,
                           bankruptcy defaults, and cross acceleration to Senior
                           Debt
                  2.       may have right to sue and to  accelerate,  subject to
                           standstill  provisions,   on  the  direction  of  the
                           trustee by 51% of the Subordinated Debt holders

         E.       Terms  Post  Bankruptcy  -  assignment  of claims and power of
                  attorney given Senior Debt holders



<PAGE>

         F.       Standstill    Provisions   -   typical   industry   standstill
                  provisions, including, without limitation:

                  1.       if a payment  default  occurs  under the Senior  Debt
                           documents, an absolute standstill by the Subordinated
                           Debt  holders is required  regardless  of whether the
                           Senior Debt holders have accelerated
                  2.       360 day  standstill  required for all defaults  under
                           the  Subordinated  Debt  documents,  subject  to  the
                           absolute standstill if a payment default has occurred
                           under the Senior Debt documents as described above

         G.       UNSECURED - no liens permitted to secure the Subordinated Debt

         H.       Senior Debt may be  increased,  and all Senior Debt  documents
                  may be amended  without the consent of the  Subordinated  Debt
                  holders



90658


                                      -2-
<PAGE>
                                 SCHEDULE 1.01B

                  AUSP FINANCING AGREEMENTS; PROJECT AGREEMENTS


         Credit and  Security  Agreement  dated as of January  27,  1998,  among
Alaska United Fiber System Partnership as Borrower,  and the Lenders referred to
therein,   and  Credit  Lyonnais  New  York  Branch  as  Administrative   Agent,
NationsBank of Texas,  N.A. as Syndication Agent and TD Securities (USA) Inc. as
Documentation Agent.

         Completion  Guaranty  dated as of January 27,  1998,  by GCI  Holdings,
Inc., as Guarantor in favor of Credit Lyonnais New York Branch as Administrative
Agent for the Lenders referred to therein.

         Subordination  Agreement  dated as of January 27,  1998,  among  Alaska
United Fiber System  Partnership,  GCI Holdings,  Inc., GCI Transport Co., Inc.,
and Credit  Lyonnais  New York  Branch as  Administrative  Agent for the Lenders
referred to therein.

         Operation  and  Maintenance  Contract  dated as of  January  27,  1998,
between Alaska United Fiber System Partnership and GCI Communication Corp.

         Depositary  Agreement  dated as of January  27,  1998,  between  Alaska
United  Fiber  System  Partnership  and  Credit  Lyonnais  New  York  Branch  as
Administrative Agent for the Lenders referred to therein.

         Intercompany Notes by Alaska United Fiber System Partnership to the GCI
Holdings, Inc.

         Lease Agreement dated as of January 27, 1998, between GCI Communication
Corp. as Lessee, and Alaska United Fiber System Partnership as Lessor.

         Lease  Guaranty  Agreement  dated as of  January  27,  1998,  among GCI
Holdings,  Inc., Alaska United Fiber System  Partnership and Credit Lyonnais New
York Branch as Administrative Agent.

         Operating Keep Well Agreement  dated as of January 27, 1998,  among GCI
Holdings, Inc., Alaska United Fiber System Partnership,  and Credit Lyonnais New
York Branch as Administrative Agent.

         GCI Subordination  Agreement dated as of January 27, 1998,  between GCI
Cable,  Inc.,  Credit Lyonnais New York Branch,  as  Administrative  Agent,  and
NationsBank  of Texas,  N.A.,  as  Administrative  Agent  under the AUSP  Credit
Agreement.


         AU Subordination Agreement dated as of January 27, 1998, between Alaska
United  Fiber  System   Partnership,   Credit  Lyonnais  New  York  Branch,   as
Administrative Agent, and NationsBank of Texas, N.A., as Administrative Agent.



100/269/99522
<PAGE>
                                    EXHIBIT A

                                      NOTE

$                                 Dallas, Texas                     DATE


         GCI Holdings,  Inc., an Alaskan corporation  ("Borrower"),  promises to
pay to the order of                   ("Lender") the lesser of the principal sum
of                    DOLLARS ($           )or the  aggregate  unpaid  principal
amount of all  Advances  made by Lender to Borrower  pursuant to Section 2.01 of
the Credit Agreement (as hereinafter defined) in immediately  available funds at
the principal office of NationsBank of Texas,  N.A. as  Administrative  Agent at
901 Main Street, 14th Floor, Dallas, Texas 75202,  together with interest on the
unpaid  principal  amount  hereof at the rates and on the dates set forth in the
Credit Agreement. The Borrower shall pay each Advance in full on the last day of
such Advance's applicable Interest Period and shall make such mandatory payments
as are  required  to be made  under  the  terms of  Section  2.05 of the  Credit
Agreement.

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

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

         This Note is one of the Notes  issued  pursuant  to, and is entitled to
the benefits of, the Credit  Agreement,  dated as of August 1, 1997 (as amended,
restated or  otherwise  modified  and in effect  from time to time,  the "Credit
Agreement"),  among Borrower,  the banks named therein and NationsBank of Texas,
N.A.,  Administrative  Agent, to which Agreement  reference is hereby made for a
statement  of the terms and  conditions  under which this Note may be prepaid or
its maturity date  accelerated.  Capitalized terms used herein and not otherwise
defined  herein  are used with the  meanings  attributed  to them in the  Credit
Agreement.


                                                     GCI HOLDINGS, INC.


                                                     By:
                                                     Its:



<PAGE>
                SCHEDULE OF ADVANCES AND PAYMENTS OF PRINCIPAL TO
                                     NOTE OF
                                GCI HOLDINGS, INC
                           DATED


               Principal          Maturity           Principal
               Amount of         of Interest           Amount            Unpaid
  Date          Advance            Period               Paid             Balance
  ----          -------            ------               ----             -------








88001
0100.0269
<PAGE>
                                    EXHIBIT B


                            ASSIGNMENT AND ACCEPTANCE

                              Dated

         Reference is made to the Amended and Resated Credit  Agreement dated as
of November    , 1997, (as amended, restated, or otherwise modified from time to
time, the "Credit  Agreement") among GCI Holdings,  Inc., an Alaskan corporation
(the  "Borrower"),  NationsBank  of Texas,  N.A., as  Administrative  Agent (the
"Administrative  Agent"), and the Lenders parties thereto.  Terms defined in the
Credit Agreement are used herein with the same meaning.

                    ("Assignor") and              ("Assignee") agree as follows:

         1. Assignor  hereby sells and assigns to Assignee  without  recourse or
warranty,  and Assignee hereby purchases and assumes from Assignor, a %
interest in and to all of  Assignor's  rights and  obligations  under the Credit
Agreement  as of the  Effective  Date (as defined  below),  with respect to such
percentage   interest  in  Assignor's   portion  of  the  Revolving   Commitment
[Revolver/Term  Commitment]  as in effect on the Effective  Date,  the principal
amount of Advances  owing to Assignor on the Effective  Date, and the Notes held
by  Assignor,  subject  to the  terms  and  conditions  of this  Assignment  and
Acceptance.

         2. Assignor (a)  represents and warrants that (i) as of the date hereof
the aggregate amount of its portion of the Revolving  Commitment  [Revolver/Term
Commitment]  (without  giving effect to  assignments  thereof which have not yet
become  effective) is $            and, as of the date hereof,  the  outstanding
principal  amount  of  the  Advances  owing  to it  (without  giving  effect  to
assignments  thereof which have not yet become  effective) is $       , and (ii)
it is the  legal and  beneficial  owner of the  interest  being  assigned  by it
hereunder; (b) makes no representation or warranty and assumes no responsibility
with respect to (i) any statements, warranties, or representations made in or in
connection  with the Credit  Agreement  or the  execution,  legality,  validity,
enforceability,  genuineness, sufficiency, or value of the Credit Agreement, the
Loan Papers, or any other instrument or document  furnished  pursuant thereto or
(ii) the financial condition of the Borrower or the performance or observance by
the  Borrower of any of its  obligations  under the Credit  Agreement,  the Loan
Papers, or any other instrument or document furnished pursuant thereto;  and (c)
attaches the Note  referred to in  Paragraph 1 above to exchange  such Notes for
new Note as follows:                      .

         3.  Assignee  (a)  confirms  that it has  received a copy of the Credit
Agreement  and the other Loan  Papers,  together  with  copies of the  financial
statements  referred to in Section 6.05 of the Credit  Agreement  and such other
documents and  information  as it has deemed  appropriate to make its own credit
analysis and decision to enter into this Assignment and  Acceptance;  (b) agrees
that it will,  independently and without reliance upon the Administrative Agent,
Assignor, or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not  taking  action  under the  Credit  Agreement  and the other  Loan
Papers; (c) appoints and authorizes the Administrative Agent to



<PAGE>
take such  action as agent on its behalf and to exercise  such powers  under the
Credit Agreement,  the other Loan Papers,  and this Assignment and Acceptance as
are  delegated  to the  Administrative  Agent by the terms  thereof  and hereof,
together with such powers as are reasonably  incidental  thereto and hereto; (d)
agrees that it will perform in accordance  with its terms all of the obligations
which by the terms of the  Credit  Agreement,  the other Loan  Papers,  and this
Assignment and  Acceptance  are required to be performed by it as a Lender;  (e)
specifies the  addresses set forth in Schedule I attached  hereto as its address
for the  receipt  of  notices;  and  (f) if it is not a  United  States  Person,
attaches the forms prescribed by the Internal  Revenue Service  certifying as to
Assignee's  status for  purposes of  determining  exception  from United  States
withholding  taxes with respect to all payments to be made to Assignee under the
Credit Agreement,  the other Loan Papers,  and this Assignment and Acceptance or
such other  documents as are  necessary to indicate  that all such  payments are
subject to such taxes at a rate reduced by an applicable tax treaty.

         4. The effective date for this Assignment and Acceptance shall be
(the "Effective Date").

         5. Upon remittance of the $3,500  processing fee to the  Administrative
Agent on behalf of the Administrative Agent and the Effective Date, (a) Assignee
shall be a party to the Credit  Agreement  and,  to the extent  provided in this
Assignment  and  Acceptance,  have  the  rights  and  obligations  of  a  Lender
thereunder and (b) Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Credit Agreement.

         6. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of Texas and the United States of America.
Without  excluding any other  jurisdiction,  Assignee  agrees that the courts of
Texas will have jurisdiction over proceedings in connection herewith.

         7. Assignee's Specified Percentage ("Specified Percentage") shall be %.



                                      -2-
<PAGE>


         8. This  Assignment  and  Acceptance  may be  executed in any number of
counterparts,  each of which  shall be  deemed to be an  original,  but all such
separate counterparts shall together constitute but one and the same instrument.

                                             [ASSIGNOR]


                                             By:
                                             Name:
                                             Title:

                                             [ASSIGNEE]


                                             By:
                                             Name:
                                             Title:



                                      -3-
<PAGE>



Accepted this      day of

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


By:
Name:
Title:



                                      -4-
<PAGE>


                                   Schedule I

                               ASSIGNEE'S ADDRESS



1.       Address for the Loans and Receipt of Notices








2.       Initial Eurodollar Lending Office






                                      -5-
89718
0100.0269
<PAGE>

                                    EXHIBIT C

               AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

         This Pledge and Security Agreement (as amended,  restated, or otherwise
modified  from  time to time,  this  "Security  Agreement")  is  executed  as of
November     ,  1997, by and between the  undersigned  Company  ("Company")  and
NationsBank of Texas, N.A., as Administrative Agent ("Administrative Agent") for
the lenders referred to below.

                                   BACKGROUND

         GCI Holdings, Inc. has entered into a $200,000,000 Amended and Restated
Credit  Agreement  dated as of November    , 1997 and a $50,000,000  Amended and
Restated Credit  Agreement dated as of November    , 1997 (as amended,  restated
or otherwise modified and in effect from time to time, collectively, the "Credit
Agreement"),   which  Credit   Agreement  is  a  restatement  of  those  certain
$200,000,000 and $50,000,000 Credit Agreements,  each dated as of August 1, 1997
among GCI  Holdings,  Inc.,  Administrative  Agent and the lenders named therein
(collectively, the "Original Credit Agreement"). In connection with the Original
Credit  Agreement,  the Company has also entered  into that  certain  Pledge and
Security   Agreement,   dated  as  of  August  1,  1997,   for  the  benefit  of
Administrative  Agent  and the  lenders  named  therein.  The  Credit  Agreement
requires that the Obligations (as defined in the Credit Agreement) be secured by
the Collateral (as  hereinafter  defined) and Company desires to enter into this
Security  Agreement to satisfy such terms. The board of directors of the Company
has determined that the Company will benefit,  directly or indirectly,  from the
Advances (as defined in the Credit Agreement) made under the Credit Agreement.

                                    AGREEMENT

         The parties hereto agree as follows:

1.       DEFINITIONS.

         As used in this Security Agreement:

         "Accounts"  means  rights to  payment  for goods  sold or leased or for
services  rendered,  whether or not  earned by  performance,  together  with all
security interests securing such rights to payment.

         "Collateral" means all of the following property,  wherever located, in
which Company now has or hereafter  acquires any right or interest,  and any and
all proceeds,  insurance proceeds and products thereof,  together with all cash,
bank accounts,  special collateral  accounts,  books,  records,  customer lists,
credit files,  computer files,  programs,  printouts and other computer  records
related thereto:


<PAGE>
         (a)      Accounts                  (e) Pledged Stock
         (b)      Equipment                 (f) Stock Rights
         (c)      Fixtures                  (g) Inventory
         (d)      General Intangibles

         "Default"  means an event  described  in  Section 5 whether  or not any
requirement  in  connection  with such event for the giving of notice,  lapse of
time, or happening of any further condition has been satisfied.

         "Event of Default" means an event described in Section 5.

         "Equipment" means all equipment, machinery, furniture and goods used or
usable by Company  in its  business  and all other  tangible  personal  property
(other than  Inventory and motor  vehicles),  and all  accessions  and additions
thereto, including, without limitation, the Fixtures.

         "FCC"  means  the  Federal  Communications   Commission  or  any  other
regulatory  body which  succeeds to the functions of the Federal  Communications
Commission.

         "FCC License"  means any community  antenna  relay  service,  broadcast
auxiliary license,  earth station,  business radio,  microwave or special safety
radio service  license issued by the FCC pursuant to the  Communications  Act of
1934, as amended.

         "Fixtures" means all goods of Company, which have been attached to real
property in such a manner that their  removal  would cause  damage to the realty
and which have  therefore  taken on the character of real  property,  including,
without limitation, all trade fixtures.

         "General Intangibles" means all intangible personal property including,
without  limitation,  all contract rights,  rights to receive payments of money,
chooses in action,  judgments,  tax  refunds  and tax  refund  claims,  patents,
trademarks,  trade names, copyrights,  licenses (including,  without limitation,
all FCC  Licenses  except to the extent  that it is unlawful to grant a security
interest therein and that the grant of any such security  interest therein would
result in a default thereunder or forfeiture thereof),  franchises,  partnership
interests,  joint  venture  interests,  leasehold  interests in real or personal
property,  rights to receive rentals of real or personal  property and guarantee
claims.

         "Government  Claim"  means any  Receivable  which  constitutes  a claim
against the federal  government,  any state government or any instrumentality or
agency of any of the foregoing.

         "Inventory"  means  all  inventory,  raw  materials,  work in  process,
finished  goods,  returned or repossessed  goods,  goods held for sale or lease,
goods furnished or to be furnished under contracts of service.




100/269/87988                     -2-
<PAGE>
         "Lien" means any security interest,  mortgage,  pledge,  hypothecation,
lien, claim, charge, encumbrance, title retention agreement or lessor's interest
in, of or on the Collateral or any portion thereof.

         "Person" means any  corporation,  natural person,  firm, joint venture,
partnership, trust, unincorporated organization,  enterprise,  government or any
department or agency of any government.

         "Pledged Stock" means all of the outstanding shares of capital stock of
each Person currently or hereafter owned by Company,  other than, in the case of
GCI Holdings, Inc., GCI Transport Company.

         "Receivables" means the Accounts and General Intangibles.

         "Section" means a numbered section of this Security  Agreement,  unless
another document is specifically referenced.

         "Security  Agreement" means this Pledge and Security  Agreement,  as it
may be amended or modified and in effect from time to time.

         "Stock Rights" means any securities,  dividends or other  distributions
and any other right or property  which  Company  shall  receive or shall  become
entitled to receive for any reason  whatsoever  with respect to, in substitution
for or in exchange  for any or all of the Pledged  Stock and any other  property
substituted or exchanged  therefor and any stock, any right to receive stock and
any right to receive  earnings,  in which Company now has or hereafter  acquires
any right, issued by an issuer of the Pledged Stock.

         The  foregoing  definitions  shall be  equally  applicable  to both the
singular and plural forms of the defined  terms.  Capitalized  terms used herein
and not otherwise defined herein shall have the meanings set forth in the Credit
Agreement.

2.       GRANT OF SECURITY INTEREST.

         Company hereby pledges,  assigns and grants to Administrative Agent for
the  benefit of the  Lenders,  equally and  ratably in  proportion  to the total
Obligations  owing at any time to the Lenders,  a  continuing  Lien and security
interest in and right of setoff  against the  Collateral  to secure the full and
complete payment and performance of the Obligations.

3.       REPRESENTATIONS AND WARRANTIES.

         Company represents and warrants to Administrative Agent that:



100/269/87988                     -3-
<PAGE>
         3.1.  Existence and  Standing.  Company is duly  incorporated,  validly
existing  and  in  good  standing  under  the  laws  of  its   jurisdiction   of
incorporation  and has all  requisite  authority to conduct its business in each
jurisdiction in which its business is conducted.

         3.2.  Authorization,  Validity and  Enforceability.  The  execution and
delivery  by Company of this  Security  Agreement  has been duly  authorized  by
proper corporate  proceedings and this Security  Agreement  constitutes a legal,
valid and binding obligation of Company and creates a security interest which is
enforceable against Company in all now owned and hereafter acquired  Collateral,
except as  enforceability  may be limited by  bankruptcy,  insolvency or similar
laws affecting the enforcement of creditors' rights generally.

         3.3. Conflicting Laws and Contracts. Neither the execution and delivery
by Company of this Security  Agreement,  nor the creation and  perfection of the
security interest in the Collateral granted  hereunder,  nor compliance with the
terms and provisions hereof will violate any law, rule, regulation, order, writ,
judgment,  injunction,  decree or award binding on Company or Company's articles
or certificate  of  incorporation  or by-laws,  the provisions of any indenture,
instrument or agreement to which  Company is a party or is subject,  or by which
it or  its  property  is  bound,  or  conflict  with  or  constitute  a  default
thereunder,  or result in the creation or imposition of any Lien pursuant to the
terms of any  such  indenture,  instrument  or  agreement.  No  order,  consent,
approval,  license,  authorization,  or validation  of, or filing,  recording or
registration  with,  or  exemption  by,  any  governmental  or  public  body  or
authority, or any subdivision thereof, which has not heretofore been obtained or
made, is required to authorize, or is required in connection with the execution,
delivery  and  performance  of, or the  legality,  validity,  binding  effect or
enforceability  of this  Security  Agreement  other than the filing,  within the
period established by applicable law, of this Security Agreement with the FCC.

         3.4.  Principal   Location.   Company's  mailing  address  for  notices
hereunder,  the location of its chief  executive  office and principal  place of
business  and of its books  and  records  relating  to the  Receivables  are all
disclosed in Exhibit A. Company has no other places of business except those set
forth in Exhibits A and B.

         3.5. Property Locations.  The Equipment and Fixtures are located solely
at the  locations  described  in Exhibit B. All of said  locations  are owned by
Company except those listed in Part B of Exhibit B.

         3.6. No Other Names.  Company has not conducted business under any name
except the name in which it has executed this  Security  Agreement and the trade
names listed in Exhibit A.

         3.7. No Default. No Default or Event of Default exists.

         3.8. Receivables.  The names of the obligors,  amounts owing, due dates
and other  information  with respect to the Receivables are correctly  stated in
all  material  respects  in all



100/269/87988                     -4-
<PAGE>
records of Company relating thereto and in all invoices and reports with respect
thereto furnished to Administrative Agent by Company from time to time.

         3.9.  Filing  Requirements.  None of the  Collateral is of a type where
security  interests or liens may be filed under any federal statute,  except for
patents  and  copyrights  held by  Company  described  in  Exhibit  C. The legal
description and street address of the property on which any Fixtures are located
is set forth in Exhibit B,  together  with the names and addresses of the record
owner of each such property.

         3.10. No Financing Statements. No financing statement describing all or
any portion of the  Collateral  which has not lapsed or been  terminated  naming
Company  as debtor  has been  filed in any  jurisdiction  except  (a)  financing
statements  naming  Administrative  Agent as  secured  party  and (b)  financing
statements described in Exhibit D.

         3.11.  Ownership of Pledged Stock.  Company is the holder of record and
the sole  beneficial  owner of each share of the  Pledged  Stock and the Pledged
Stock  constitutes  100% of the issued and outstanding  stock of each Subsidiary
owned by the Company.  Exhibit E sets forth a complete and accurate  list of the
Pledged  Stock and Stock  Rights.  No Person other than Company is the holder of
record or the beneficial owner of any Stock Rights. All of the shares of Pledged
Stock have been duly and validly issued,  are fully paid and  non-assessable and
are  owned by  Company  free and clear of any  Liens,  except  Permitted  Liens,
options,   warrants,   puts,  calls  or  other  rights  of  third  persons,  and
restrictions,  other than (a) the security  interest  granted to  Administrative
Agent hereunder and (b)  restrictions on  transferability  imposed by applicable
state and  Federal  Securities  laws or which  may arise as a result of  Company
being subject to the Communications  Act of 1934, as amended,  and the rules and
regulations of the FCC thereunder.

4.       COVENANTS.

         From the date of this Security  Agreement,  and  thereafter  until this
Security Agreement is terminated:

         4.1.     General.

                  (a) Applications, Approvals and Consents. Company will, at its
         expense,  promptly  execute and  deliver,  or cause the  execution  and
         delivery of, all applications,  certificates, instruments, registration
         statements, and all other documents and papers Administrative Agent may
         reasonably  request in  connection  with the  obtaining of any consent,
         approval,  registration,  qualification, or authorization of the FCC or
         of any other Person necessary or appropriate for the effective exercise
         of any rights  under this  Security  Agreement.  Without  limiting  the
         generality  of  the  foregoing,   Company  agrees  that  in  the  event
         Administrative  Agent shall  exercise its right to sell,  transfer,  or
         otherwise dispose of or take any other action in connection with any of
         the  Pledged  Stock  or  other  Collateral  pursuant  to this  Security
         Agreement,   Company  shall  execute  and  deliver  all   applications,
         certificates,  and other documents  Administrative Agent may



100/269/87988                     -5-
<PAGE>
         reasonably request and shall otherwise promptly,  fully, and diligently
         cooperate  with  Administrative   Agent,  the  Lenders  and  any  other
         necessary  Persons,  in making any application for the prior consent or
         approval  of  the  FCC  or  any  other   Person  to  the   exercise  by
         Administrative  Agent or the Lenders of any of such rights  relating to
         all or any part of the Pledged Stock or other Collateral.  Furthermore,
         because  Company  agrees that  Administrative  Agent's and the Lenders'
         remedy at law for failure of Company to comply with the  provisions  of
         this Section 4.1(a) would be inadequate and that such failure would not
         be adequately compensable in damages, Company agrees that the covenants
         of this Section 4.1(a) may be specifically enforced.

                  (b) Inspection.  Company will permit  Administrative Agent, by
         its representatives  and agents, to inspect the Collateral,  to examine
         and make  copies of the  records of Company  relating  thereto,  and to
         discuss the Collateral, and the records of Company with respect thereto
         with,  and to be  advised  as to the same by,  Company's  officers  and
         employees and, in the case of any Receivable,  with any Person which is
         or may be obligated thereon, all at such reasonable times and intervals
         as Administrative Agent may determine, all at Company's expense.

                  (c) Taxes.  Company  will pay when due all taxes,  assessments
         and governmental  charges and levies upon the Collateral,  except those
         which are being contested in good faith by appropriate proceedings.

                  (d) Records and Reports.  Company will  maintain  complete and
         accurate books and records with respect to the Collateral,  and furnish
         to  Administrative  Agent such reports  relating to the  Collateral  as
         Administrative Agent may from time to time request.

                  (e) Notice of  Default.  Company  will give  prompt  notice in
         writing to  Administrative  Agent of the  occurrence  of any Default or
         Event of Default and of any other development,  financial or otherwise,
         which might  materially  adversely affect the Collateral or the ability
         of Company to perform  the  Obligations  hereunder  and under the other
         Loan Papers to which it is a party.

                  (f)  Financing  Statements  and Other  Actions.  Company  will
         execute and deliver to  Administrative  Agent all financing  statements
         and other documents from time to time requested by Administrative Agent
         in  order  to  maintain  a first  perfected  security  interest  in the
         Collateral.

                  (g) Further  Assurances.  Company agrees to warrant and defend
         title to and  ownership  of the Pledged  Stock and Stock Rights and the
         lien  created  by this  Security  Agreement  against  the claims of all
         Persons and  maintain  and  preserve  such lien at all times during the
         term of this Security Agreement.  Company,  at its expense,  shall from
         time to time execute and deliver to Administrative Agent all such other
         assignments,   certificates,   supplemental  documents,  and  financing
         statements,  and  shall do all other  acts



100/269/87988                     -6-
<PAGE>
         or things as  Administrative  Agent may reasonably  request in order to
         more fully  create,  evidence,  perfect,  continue,  and  preserve  the
         priority of the lien herein created. Without limiting the generality of
         the foregoing,  (i) Company shall,  upon the request of  Administrative
         Agent or  Majority  Lenders  at such time as (A) a Default  or Event of
         Default  shall  have  occurred  and  be  continuing  or (B)  the  total
         aggregate  amount  of all  Government  Claims  shall  exceed  7% of all
         Receivables  owing to Company,  execute  and deliver to  Administrative
         Agent,  at Company's  expense,  such  assignments  of claims or similar
         documents as shall be necessary or  appropriate  to continue or perfect
         the priority of the lien herein created in such Government Claims.

                  (h) Disposition of Collateral. Company will not lease, sell or
         otherwise dispose of the Collateral except as permitted by the terms of
         the Credit Agreement.

                  (i) Liens. Company will not create,  incur, or suffer to exist
         any Lien except (i) the Lien  created by this  Security  Agreement  and
         (ii) those Liens permitted by the terms of the Credit Agreement.

                  (j) Change in Location or Name. Without giving  Administrative
         Agent at least 30 days' prior written notice, Company will not (i) have
         any Equipment or Fixtures or proceeds or products  thereof  (other than
         Equipment,  Fixtures or proceeds  thereof  disposed of as  permitted by
         Section  4.1(h)) at a  location  other  than a  location  specified  in
         Exhibit B, (ii)  maintain  records  relating  to the  Receivables  at a
         location  other  than at the  location  specified  on  Exhibit A, (iii)
         maintain  a place of  business  at a  location  other  than a  location
         specified  on  Exhibits A and B, or (iv) change its name or its mailing
         address or adopt a trade or assumed name.

                  (k)  Other  Financing  Statements.  Company  will  not sign or
         authorize the signing on its behalf of any financing  statement  naming
         it as debtor  covering  all or any  portion of the  Collateral,  except
         financing  statements  in  respect  of the Liens  permitted  by Section
         4.1(i).

         4.2.     Receivables.

                  (a) Certain  Agreements on Receivables.  Company will not make
         or agree to make any discount, credit, rebate or other reduction in the
         original  amount owing on a Receivable or accept in  satisfaction  of a
         Receivable less than the original amount thereof, except that, prior to
         the occurrence of an Event of Default, Company may reduce the amount of
         Accounts in  accordance  with its present  policies and in the ordinary
         course of business.

                  (b)  Collection  of  Receivables.  Subject  to the  rights  of
         Administrative  Agent under this  Security  Agreement  and as a secured
         party under  applicable  law,  Company  will  collect and  enforce,  at
         Company's  sole  expense,  all amounts due or hereafter  due to Company
         under the Receivables.




100/269/87988                     -7-
<PAGE>
                  (c) Delivery of Invoices.  Upon the request of  Administrative
         Agent after the  occurrence  and during the  continuance of an Event of
         Default,   Company  will  deliver  to  Administrative  Agent  duplicate
         invoices  with  respect  to  each  Account  bearing  such  language  of
         assignment as Administrative Agent shall specify.

                  (d)  Disclosure  of  Counterclaims  on  Receivables.   If  any
         discount,  credit,  agreement to make a rebate or to  otherwise  reduce
         (collectively,  a "Reduction") the amount owing on a Receivable  exists
         or if,  to the  knowledge  of  Company,  any  dispute,  setoff,  claim,
         counterclaim  or defense  (collectively,  a "Claim") exists or has been
         asserted or threatened with respect to a Receivable, which Reduction or
         Claim may, singly or in the aggregate,  materially adversely affect the
         value of the  Collateral  or the  ability of  Company  to  fulfill  its
         obligations  under the Loan Papers,  Company will disclose such fact to
         Administrative  Agent in writing in connection  with the  inspection by
         Administrative  Agent  of  any  record  of  Company  relating  to  such
         Receivable  and in connection  with any invoice or report  furnished by
         Company to Administrative Agent relating to such Receivable.

         4.3.     Equipment and Fixtures.

                  (a) Maintenance of Goods. Company will do all things necessary
         to maintain,  preserve,  protect and keep the Equipment and Fixtures in
         good repair and working condition.

                  (b)  Insurance.  Company will (i)  maintain  fire and extended
         coverage insurance on the Equipment and Fixtures  containing a lender's
         loss payable and breach of warranty  clause in favor of  Administrative
         Agent and providing that said  insurance will not be terminated  except
         after at least 30 days' written  notice from the  insurance  company to
         Administrative  Agent,  (ii)  maintain  such  other  insurance  on  the
         Equipment  and  Fixtures  for the  benefit of  Administrative  Agent as
         Administrative  Agent shall from time to time reasonably  request,  and
         (iii)   furnish   to   Administrative   Agent   upon  the   request  of
         Administrative Agent from time to time the originals of all policies of
         insurance on the Equipment and Fixtures and  certificates  with respect
         to such insurance.

         4.4.     Pledged Stock.

                  (a)  Delivery  of  Pledged  Stock.  Company  will  deliver  to
         Administrative  Agent  concurrently with the execution of this Security
         Agreement  the  certificates   representing  the  Pledged  Stock  which
         constitutes certificated  securities,  endorsed in blank or accompanied
         by  appropriate  instruments  of  transfer or  assignments  executed in
         blank.  If Company shall at any time acquire any  additional  shares of
         the capital stock of any class of the Pledged  Stock or any  instrument
         evidencing Stock Rights, whether such acquisition shall be by purchase,
         exchange,  reclassification,  dividend,  or  otherwise,  Company  shall
         forthwith  (and  without  the  necessity  for any  request or demand by
         Administrative   Agent  or  any  Lender)   deliver   the   certificates
         representing such shares which constitutes



100/269/87988                     -8-
<PAGE>
         certificated   securities   and   such   instrument   or   writing   to
         Administrative   Agent,   in  the  same  manner  as  described  in  the
         immediately preceding sentence.

                  (b) Changes in Capital Structure of Issuers.  Company will not
         permit or suffer the issuer of any of the Pledged Stock or Stock Rights
         to dissolve,  liquidate,  retire any of its capital stock, authorize or
         issue any stock or rights to acquire stock not  outstanding in the name
         of  Company  on the  date  hereof,  reduce  its  capital  or  merge  or
         consolidate  with any  other  Person  other  than  Company  or  another
         Wholly-Owned Subsidiary,  and Company will not in any event vote any of
         the Pledged Stock or any Stock Rights in favor of any of the foregoing.

                  (c) Stock  Rights.  Company  will  deliver  to  Administrative
         Agent,  promptly upon receipt, all Stock Rights (other than, unless and
         until a Default  shall have occurred and be  continuing,  ordinary cash
         dividends  received with respect to the Pledged  Stock) and agrees that
         such Stock Rights shall be held in trust by Company for  Administrative
         Agent until delivery thereof to Administrative Agent.

                  (d)  Voting  Rights.   Upon  the  occurrence  and  during  the
continuance of an Event of Default, Administrative Agent may, upon prior written
notice to the Company of the Administrative Agent's intention to do so, exercise
all  voting  rights  and all other  ownership  or  consensual  rights of or with
respect to the Pledged Stock, but under no circumstances is Administrative Agent
obligated  to  exercise  such  rights.  Until  the  occurrence  and  during  the
continuance  of an Event of Default  and the giving of the  aforesaid  notice by
Administrative  Agent, the Company shall retain all voting rights to the Pledged
Stock.


         4.5. Government Claims. Company will, promptly upon a request therefor,
notify Administrative Agent of any Government Claim.

5.       DEFAULT.

         5.1. The  occurrence of any one or more of the  following  events shall
constitute an Event of Default:

                  (a) Any  material  representation  or  warranty  made by or on
         behalf of Company  to  Administrative  Agent or any Lender  under or in
         connection with this Security  Agreement  shall be materially  false on
         the date as of which made.

                  (b) The breach by Company of any of the terms or provisions of
         Sections  4.1(a),  (e),  (f),  (g),  (h), (j) and (k), 4.4 or 7; or the
         breach by Company of any of the terms or provisions of Sections  4.1(b)
         and (i) of this Security Agreement which is not remedied within 10 days
         after the giving of written notice by Administrative Agent.




100/269/87988                     -9-
<PAGE>

                  (c)  The  breach  by  Company   (other  than  a  breach  which
         constitutes a Default under Section  5.1(a) or (b)) of any of the terms
         or provisions of this Security  Agreement  which is not remedied within
         30 days after the giving of written notice by Administrative Agent.

                  (d)  Any  material   portion  of  the   Collateral   shall  be
         transferred  or  otherwise  disposed of in any manner not  permitted by
         Section  4.1(h) or shall be lost,  damaged or destroyed and not covered
         by  insurance  naming  Administrative  Agent as loss payee  (subject to
         reasonable deductibles).

                  (e) The  occurrence  of any "Event of Default"  under,  and as
         defined in, the Credit Agreement.

         5.2.  Acceleration and Remedies.  If any Event of Default occurs,  then
upon the  election of Majority  Lenders  (or,  automatically  in the case of the
occurrence  of a Default  under  Section  8.01(g) of the Credit  Agreement)  the
Obligations  shall  automatically  become  immediately  due and payable  without
notice or demand of any kind. If any other Event of Default  occurs,  then, upon
the election of Majority Lenders,  the Obligations shall immediately  become due
and payable without presentment,  demand,  protest or notice of any kind, all of
which are hereby expressly waived, and Administrative  Agent may exercise any or
all of  the  rights  and  remedies  provided  (i) in  this  Security  Agreement,
including,  without  limitation,  Sections  5.2(a) and  5.2(b),  (ii) to secured
parties  under the Uniform  Commercial  Code as enacted in the State of Texas or
other applicable jurisdiction, as amended and (iii) any other rights afforded at
law in equity or otherwise.

                  (a) Exercise of Rights in Pledged Stock and Stock Rights. Upon
         the  occurrence  and  continuation  of an Event of Default,  subject to
         compliance  with  applicable  law,  Administrative  Agent, on behalf of
         Lenders,  shall have, subject to Section 8, the right (i) to consent in
         advance to any vote  proposed to be cast by Company with respect to any
         merger, consolidation,  liquidation or reorganization of any Subsidiary
         and, in connection therewith, to join in and become a party to any plan
         of recapitalization, reorganization, or readjustment (whether voluntary
         or  involuntary)  as shall seem desirable to  Administrative  Agent, on
         behalf of Lenders,  to protect or further their interests in respect of
         the Pledged Stock and Stock  Rights,  (ii) to deposit the Pledged Stock
         and Stock Rights under any such plan,  and (iii) to make any  exchange,
         substitution, cancellation, or surrender of the Pledged Stock and Stock
         Rights  required by any such plan and to take such action with  respect
         to the  Pledged  Stock and Stock  Rights as may be required by any such
         plan  or  for  the  accomplishment  thereof  and no  such  disposition,
         exchange,  substitution,  cancellation, or surrender shall be deemed to
         constitute  a release of the  Pledged  Stock and Stock  Rights from the
         lien pursuant to this Security Agreement.

                  (b) Right of Sale of  Pledged  Stock and  Stock  Rights  after
         Default.  Upon the occurrence and during the continuance of an Event of
         Default,  subject to compliance  with



100/269/87988                     -10-
<PAGE>
         applicable  law,  Administrative  Agent,  on  behalf of  Lenders,  may,
         subject to Section 8, sell,  without recourse to judicial  proceedings,
         with the right to bid for and buy the Pledged Stock and Stock Rights or
         any part  thereof,  upon ten days' notice (which notice is agreed to be
         reasonable  notice for the purposes  hereof) to Company of the time and
         place of sale,  for  cash,  upon  credit  or for  future  delivery,  at
         Administrative  Agent's option and in  Administrative  Agent's complete
         discretion:

                           (i) At public sale,  including a sale at any broker's
                  board or exchange;

                           (ii) At private sale in any  commercially  reasonable
                  manner  which will not  require  the  Pledged  Stock and Stock
                  Rights,  or any part  thereof,  to be registered in accordance
                  with the Securities Act of 1933, as amended,  or the rules and
                  regulations  promulgated  thereunder,  or  any  other  law  or
                  regulation.  Administrative  Agent and Lenders are also hereby
                  authorized, but not obligated, to take such actions, give such
                  notices,  obtain such  consents,  and do such other  things as
                  they may deem required or  appropriate in the event of sale or
                  disposition  of any of the  Pledged  Stock and  Stock  Rights.
                  Company  understands that  Administrative  Agent, on behalf of
                  Lenders, may in its discretion approach a restricted number of
                  potential  purchasers and that a sale under such circumstances
                  may  yield a lower  price  for the  Pledged  Stock  and  Stock
                  Rights,  or any  portion  thereof,  than  would  otherwise  be
                  obtainable  if the same were  registered  and sold in the open
                  market.  Company agrees that in the event Administrative Agent
                  shall so sell the  Pledged  Stock  and  Stock  Rights,  or any
                  portion thereof, at such private sale or sales, Administrative
                  Agent and Lenders shall have the right to rely upon the advice
                  and opinion of any Person who regularly  deals in or evaluates
                  stock of the type  constituting  the  Pledged  Stock and Stock
                  Rights as to the price obtainable in a commercially reasonable
                  manner upon such a private sale thereof.

         In the case of any sale by Administrative Agent on behalf of Lenders of
the Pledged Stock and Stock Rights on credit or for future delivery, the Pledged
Stock and Stock  Rights sold may be retained by  Administrative  Agent until the
selling price is paid by the purchaser, but neither Administrative Agent nor any
Lender shall incur  liability in case of failure of the purchaser to take up and
pay for the Pledged Stock and Stock Rights so sold.

         In  connection  with the sale of any of the  Pledged  Stock  and  Stock
Rights,  Administrative Agent and Lenders are authorized,  but not obligated, to
limit  prospective  purchasers  to the extent  deemed  necessary or desirable by
Administrative   Agent  and   Lenders  to  render  such  sale  exempt  from  the
registration  requirements  of the Securities  Act of 1933, as amended,  and any
applicable  state  securities  laws.  In  the  event  that,  in the  opinion  of
Administrative  Agent and  Lenders,  it is  necessary  or advisable to have such
securities  registered  under the  provisions  of such Act,  or any  similar law
relating to the registration of securities,  Company agrees, at its own expense,
to (i)  execute and deliver all such  instruments  and  documents,  and to do or
cause to be done such  other acts and  things,  as may be  necessary  or, in the
opinion of Administrative Agent,



100/269/87988                     -11-
<PAGE>
advisable to register such  securities  under the  provisions of such Act or any
applicable  similar law relating to the registration of securities,  and Company
will use its best efforts to cause the registration  statement  relating thereto
to become  effective and to remain  effective for such period as  Administrative
Agent shall reasonably request, and to make all amendments thereof and/or to the
related prospectus which, in the opinion of Administrative  Agent, are necessary
or desirable,  all in conformity with the requirements of such Act and the rules
and regulations of the Securities and Exchange  Commission  applicable  thereto;
(ii) use its best efforts to qualify such  securities  under state "blue sky" or
securities laws, all as reasonably  requested by the  Administrative  Agent; and
(iii) at the request of the  Administrative  Agent,  indemnify and hold harmless
Lenders,  the Administrative  Agent, any underwriters and accountants (and their
respective  employees,   officers,   agents,   attorneys)   (collectively,   the
"Indemnified Parties") from and against any loss, liability,  claim, damage, and
expense (including,  without limitation,  reasonable fees of counsel incurred in
connection  therewith)  under  such  Act or  otherwise,  insofar  as such  loss,
liability,  claim,  damage, or expense arises out of or is based upon any untrue
statement or alleged untrue  statement of any material fact furnished by Company
contained  in any  registration  statement  under  which  such  securities  were
registered under such Act or other  securities laws, any preliminary  prospectus
or final  prospectus  contained  therein,  or arise out of or are based upon any
omission  or  alleged  omission  by Company  to state  therein a  material  fact
required  to  be  stated  or  necessary  to  make  the  statements  therein  not
misleading,   such   indemnification  to  remain  operative  regardless  of  any
investigation made by or on behalf of any Indemnified Party; provided,  however,
that  Company  shall not be liable in any case to the extent that any such loss,
liability,  claim,  damage,  or expense arises out of or is based upon an untrue
statement or an omission made in reliance  upon and in  conformity  with written
information furnished to Company by an Indemnified Party specifically for use in
such registration statement or preliminary or final prospectus and the providing
of such untrue statement or such omission  resulted from the gross negligence or
willful misconduct of an Indemnified Party.

         5.3.  Company's  Obligations  Upon  Default.  Upon the  request  of the
Administrative  Agent after the occurrence of an Event of Default and during the
continuance thereof, Company will:

                  (a) Assembly of Collateral. Assemble and make available to the
Administrative  Agent the  Collateral  and all records  relating  thereto at any
place or places specified by the Administrative Agent.

                  (b) The Administrative Agent Access. Permit the Administrative
Agent, by the Administrative  Agent's  representatives  and agents, to enter any
premises  where all or any part of the  Collateral,  or the  books  and  records
relating thereto, or both, are located, to take possession of all or any part of
the Collateral and to remove all or any part of the Collateral.

         5.4.  Governance.  All rights and  remedies  available  to Lenders with
respect to the grant,  foreclosure and enforcement of the security  interest and
lien granted  hereby and with respect to any action  permitted  hereunder may be
exercised solely by the Administrative  Agent acting with the concurrence of the
Majority Lenders provided, however, that no release of all



100/269/87988                     -12-
<PAGE>
or any portion of the Collateral from the lien created hereby shall be effective
without the consent of all Lenders.

6.       WAIVERS, AMENDMENTS AND REMEDIES.

         No delay or omission of the Administrative  Agent to exercise any right
or remedy  granted under this Security  Agreement or under  applicable law shall
impair  such right or remedy or be  construed  to be a waiver of any  Default or
Event of Default or an acquiescence  therein, and any single or partial exercise
of any such right or remedy shall not preclude other or further exercise thereof
or the exercise of any other right or remedy, and no waiver,  amendment or other
variation of the terms,  conditions or  provisions  of this  Security  Agreement
whatsoever shall be valid unless in writing signed by the Administrative  Agent,
and then only to the extent in such writing  specifically  set forth. All rights
and remedies  contained in this Security  Agreement or by law afforded  shall be
cumulative  and all shall be  available  to the  Administrative  Agent until the
Obligations have been finally paid in full.

7.       PROCEEDS; COLLECTION OF RECEIVABLES.

         7.1.  Collection of Receivables.  The  Administrative  Agent may at any
time after the occurrence and during the continuance of an Event of Default,  by
giving Company  written  notice,  elect to require that the  Receivables be paid
directly to the  Administrative  Agent.  In such event Company shall,  and shall
permit the  Administrative  Agent to,  promptly  notify the  account  debtors or
obligors under the Receivables of the  Administrative  Agent's  interest therein
and direct such account  debtors or obligors to make payment of all amounts then
or thereafter due under the Receivables  directly to the  Administrative  Agent.
Upon  receipt  of any such  notice  from  Administrative  Agent,  Company  shall
thereafter  hold in trust for  Administrative  Agent all  amounts  and  proceeds
received  by it  with  respect  to the  Receivables  and  other  Collateral  and
immediately and at all times thereafter deliver to Administrative Agent all such
amounts and  proceeds in the same form as so received,  whether by cash,  check,
draft or otherwise, with any necessary endorsements.  Administrative Agent shall
hold and apply funds so  received  as provided by the terms of Sections  7.3 and
7.4.

         7.2. Lockboxes.  Upon request of Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default,  Company shall
execute and deliver to Administrative Agent Administrative Agent's standard form
of irrevocable  lockbox  agreement and notify the obligors on the Receivables to
make payments thereon to such lockbox.

         7.3. Special Collateral  Account.  At any time after the occurrence and
during the continuance of an Event of Default,  Administrative Agent may require
all cash  proceeds  of the  Collateral  (whether  collected  through  a  lockbox
pursuant to Section 7.2 or otherwise) to be deposited in a special  non-interest
bearing  cash  collateral  account with  Administrative  Agent and held there as
security for the Obligations.  Company hereby authorizes Administrative Agent in
Administrative  Agent's  sole  discretion  to establish  such a cash  collateral
account and acknowledges that Company shall have no control whatsoever over said
account.  Administrative



100/269/87988                     -13-
<PAGE>
Agent may, at its option,  and will (to the extent permitted by applicable law),
at  Company's  written  request,  apply  the  collected  balances  in said  cash
collateral  account  to  the  payment  of the  Obligations  whether  or not  the
Obligations  shall then be due,  or hold the  balances  in said cash  collateral
account as Collateral hereunder.

         7.4.  Application  of  Proceeds.  Administrative  Agent shall apply the
proceeds  of the  Collateral,  including  the  proceeds  of any  sales  or other
disposition  of the  Collateral,  or any part  thereof,  under this Section 7 or
Section 5.2(b), in the following order unless a court of competent  jurisdiction
shall otherwise direct:

                  (a) First, to payment of all reasonable  costs and expenses of
         Administrative  Agent  incurred in connection  with the  collection and
         enforcement of the Obligations or of the security  interest  granted to
         Administrative  Agent  for the  benefit  of  Lenders  pursuant  to this
         Security Agreement;

                  (b)  Second,  to  payment of that  portion of the  Obligations
         constituting  accrued and unpaid  interest  and fees,  pro rata amongst
         Lenders in accordance  with the proportion  which the accrued  interest
         and fees  constituting  Obligations  owing to each such Lender bears to
         the  aggregate  amount  of  accrued  interest  and  fees   constituting
         Obligations owing to all of Lenders;

                  (c) Third,  to payment of the principal of the Obligations and
         net termination  amounts  payable in respect of the  Obligations  under
         Interest  Hedge  Agreements  owing to Lenders or any  Lender,  pro rata
         among Lenders in  accordance  with the  proportion  which the principal
         amount of Obligations and net termination amounts payable in respect of
         the  Obligations  under  Interest Hedge  Agreements  owing to each such
         Lender bears to the aggregate  principal  amount of Obligations and net
         termination  amounts  payable in respect of Obligations  under Interest
         Hedge Agreements owing to all of Lenders; and

                  (d) Fourth, the balance,  if any, after all of the Obligations
         have been satisfied, shall be remitted to Company.

8.       CONTROL; LIMITATION OF RIGHTS.

         8.1.  License.  Notwithstanding  anything herein to the contrary,  this
Security  Agreement,  the other Loan  Papers and the  transactions  contemplated
hereby  and  thereby  (i) do not and will not  constitute,  create,  or have the
effect of constituting or creating, directly or indirectly,  actual or practical
ownership of any  Subsidiary  by  Administrative  Agent or Lenders,  or control,
affirmative or negative,  direct or indirect, by Administrative Agent or Lenders
over the  management  or any other aspect of the  operation  of any  Subsidiary,
which  ownership  and  control  remain  exclusively  and at all  times  in  such
Subsidiary  and Company,  and (ii) do not and will not  constitute the transfer,
assignment, or disposition in any manner, voluntarily or involuntarily, directly
or  indirectly,  of any license at any time issued by the FCC to any



100/269/87988                     -14-
<PAGE>
Subsidiary ("License"), or the transfer of control of any such Subsidiary within
the meaning of Section 310(d) of the Communications Act of 1934, as amended.

         8.2.  Communications  Act.  Notwithstanding any other provision of this
Security Agreement,  any foreclosure on, sale, transfer or other disposition of,
or the  exercise  of any right to vote or consent  with  respect  to, any of the
Collateral as provided  herein or any other action taken or proposed to be taken
by   Administrative   Agent  and  Lenders   hereunder  which  would  affect  the
operational,  voting,  or other control of any Subsidiary,  shall be pursuant to
Section 310(d) of the Communications Act of 1934, as amended,  to any applicable
state laws and to the applicable rules and regulations thereunder and, if and to
the extent required thereby, subject to the prior approval of the FCC.

         8.3.  Assignment.  Subject to Section 8.5, if an Event of Default shall
have  occurred  and  be   continuing,   Company  shall  take  any  action  which
Administrative  Agent, on behalf of Lenders,  may reasonably request in order to
transfer  and  assign  to  Administrative  Agent,  or to such one or more  third
parties  as  Administrative  Agent may  designate,  or to a  combination  of the
foregoing,   each  License.  To  enforce  the  provisions  of  this  Section  8,
Administrative  Agent is empowered to request the appointment of a receiver from
any court of competent  jurisdiction.  Such receiver shall be instructed to seek
from the FCC an  involuntary  transfer  of control of each such  License for the
purpose of seeking a bona fide  purchaser  to whom control  will  ultimately  be
transferred.  Company hereby agrees to authorize such an involuntary transfer of
control  upon the request of the  receiver so  appointed  and, if Company  shall
refuse to  authorize  the  transfer,  its approval may be required by the court.
Upon the  occurrence  and  continuance  of an Event of  Default,  Company  shall
further  use its best  efforts to assist in  obtaining  approval  of the FCC, if
required, for any action or transactions contemplated by this Security Agreement
including,  without limitation,  the preparation,  execution and filing with the
FCC of the assignor's or transferor's portion of any application or applications
for consent to the assignment of any License or transfer of control necessary or
appropriate  under the FCC's rules and  regulations for approval of the transfer
or assignment of any portion of the Collateral, together with any License.

         8.4. Specific Enforcement.  Company acknowledges that the assignment or
transfer  of each  License is integral to  Administrative  Agent's and  Lenders'
realization of the value of the Collateral,  that there is no adequate remedy at
law for failure by Company to comply with the  provisions  of this Section 8 and
that such failure would not be adequately  compensable in damages, and therefore
agrees  that the  agreements  contained  in this  Section 8 may be  specifically
enforced.

         8.5. Prior Approval. Notwithstanding anything to the contrary contained
in this Security  Agreement or in any other Loan Paper,  neither  Administrative
Agent nor any Lender  shall,  without  first  obtaining the approval of the FCC,
take any action pursuant to this Security  Agreement  which would  constitute or
result in any assignment of a License or any change of control of any Subsidiary
if such  assignment or change in control would require,  under then



100/269/87988                     -15-
<PAGE>
existing law  (including  the written rules and  regulations  promulgated by the
FCC), the prior approval of the FCC.


9.       GENERAL PROVISIONS.

         9.1. Notice of Disposition of Collateral.  Company hereby waives notice
of the time and place of any  public  sale or the time after  which any  private
sale or other  disposition of all or any part of the  Collateral.  To the extent
such notice may not be waived  under  applicable  law,  any notice made shall be
deemed  reasonable if sent to Company,  addressed as set forth in Section 11, at
least ten days prior to any such  public  sale or the time after  which any such
private sale or other disposition may be made.

         9.2.   Compromises   and   Collection   of   Collateral.   Company  and
Administrative Agent recognize that setoffs,  counterclaims,  defenses and other
claims may be asserted by obligors  with respect to certain of the  Receivables,
that certain of the  Receivables may be or become  uncollectible  in whole or in
part and that the expense and  probability  of success in  litigating a disputed
Receivable may exceed the amount that reasonably may be expected to be recovered
with respect to a  Receivable.  In view of the  foregoing,  Company  agrees that
Administrative  Agent  may at any  time and  from  time to time,  if an Event of
Default  has  occurred  and is  continuing,  compromise  with the obligor on any
Receivable,   accept  in  full  payment  of  any   Receivable   such  amount  as
Administrative  Agent in its sole  discretion  shall  determine  or abandon  any
Receivable,  and any such action by  Administrative  Agent shall be commercially
reasonable  so  long  as  Administrative  Agent  acts in  good  faith  based  on
information known to it at the time it takes any such action.

         9.3.  Administrative Agent Performance of Company Obligations.  Without
having any  obligation  to do so,  Administrative  Agent may  perform or pay any
obligation in this Security Agreement which Company has agreed to perform or pay
but which it has failed to so perform or pay in a timely  manner after a request
therefor from  Administrative  Agent and Company shall reimburse  Administrative
Agent for any amounts paid by Administrative Agent pursuant to this Section 9.3.
Company's obligation to reimburse Administrative Agent pursuant to the preceding
sentence shall be part of the Obligation and is payable on demand.

         9.4.  Authorization  for  Administrative  Agent to Take Certain Action.
Company irrevocably authorizes Administrative Agent at any time and from time to
time in the sole discretion of Administrative Agent and appoints  Administrative
Agent as its  attorney  in fact to act on behalf of  Company  (a) to  execute on
behalf of  Company  as debtor  and to file  financing  statements  necessary  or
desirable in  Administrative  Agent's sole discretion to perfect and to maintain
the perfection and priority of  Administrative  Agent's security interest in the
Collateral,  (b) in  accordance  with the terms of this Security  Agreement,  to
indorse and collect any cash proceeds of the  Collateral,  (c) to file a carbon,
photographic or other  reproduction of this Security  Agreement or any financing
statement  with  respect to the  Collateral  as a  financing  statement  in such
offices  as  Administrative  Agent in its sole  discretion  deems  necessary  or




100/269/87988                     -16-
<PAGE>
desirable   to  perfect  and  to  maintain  the   perfection   and  priority  of
Administrative  Agent's  security  interest  in the  Collateral,  (d)  after the
occurrence of an Event of Default and during the continuance thereof, to enforce
payment of the Receivables in the name of Administrative  Agent or Company,  and
(e) to apply the proceeds of any Collateral received by Administrative  Agent to
the Obligations as provided in Section 7. The power of attorney provided in this
Section 9.4, and each other  appointment by Company of  Administrative  Agent or
any Lender as  Company's  attorney-in-fact,  is coupled  with an interest and is
irrevocable prior to final payment in full of the Obligation.

         9.5. Specific  Performance of Certain Covenants.  Company  acknowledges
and agrees  that a breach of any of the  covenants  contained  herein will cause
irreparable  injury to Administrative  Agent, that  Administrative  Agent has no
adequate remedy at law in respect of such breaches and therefore agrees, without
limiting  the  right  of  Administrative  Agent  to  seek  and  obtain  specific
performance  of  other   obligations  of  Company  contained  in  this  Security
Agreement,  that the covenants of Company  contained in the Sections referred to
in this Section 9.5 shall be specifically enforceable against Company.

         9.6. Use and Possession of Certain Premises.  Upon the occurrence of an
Event of Default and during the continuance thereof,  Administrative Agent shall
be entitled to occupy and use any premises  owned or leased by Company where any
of the  Collateral or any records  relating to the  Collateral are located until
the Obligations are paid or the Collateral is removed therefrom, whichever first
occurs, without any obligation to pay Company for such use and occupancy.

         9.7. Dispositions Not Authorized.  Company is not authorized to sell or
otherwise  dispose of the  Collateral  except as set forth in Section 4.1(h) and
notwithstanding  any course of dealing between Company and Administrative  Agent
or other conduct of Administrative  Agent, no authorization to sell or otherwise
dispose  of the  Collateral  (except as set forth in  Section  4.1(h))  shall be
binding upon Administrative Agent unless such authorization is in writing signed
by Administrative Agent.

         9.8. Care of Collateral.  Administrative  Agent shall not have any duty
to  assure  that all  certificates  representing  the  Pledged  Stock  have been
delivered to it or any obligation  whatsoever with respect to the care,  custody
or  protection of any  certificates  which may be delivered to it except only to
exercise the same care in physically  safekeeping such  certificates as it would
exercise in the  ordinary  course of its own  business.  Neither  Administrative
Agent nor any Lender  shall be  obligated to preserve or protect any rights with
respect to the  Pledged  Stock or to receive  or give any  notice  with  respect
thereto  whether  or not  Administrative  Agent or any  Lender is deemed to have
knowledge of such matters.

         9.9.  Definition  of Certain  Terms.  Terms defined in the Article 9 of
Texas  Business  and  Commerce  Code  which are not  otherwise  defined  in this
Security Agreement are used in this Security Agreement as defined in the Article
9 of Texas Business and Commerce Code as in effect on the date hereof.




100/269/87988                     -17-
<PAGE>
         9.10.  Benefit of Agreement.  The terms and provisions of this Security
Agreement   shall  be  binding  upon  and  inure  to  the  benefit  of  Company,
Administrative  Agent and Lenders and their  respective  successors and assigns,
except that Company shall not have the right to assign its rights or obligations
under this Security Agreement or any interest herein,  without the prior written
consent of Administrative Agent.

         9.11. Survival of  Representations.  All representations and warranties
of Company contained in this Security  Agreement shall survive the execution and
delivery of this Security Agreement.

         9.12. Taxes and Expenses. Any taxes (including income taxes) payable or
ruled  payable  by  federal  or state  authority  in  respect  of this  Security
Agreement  shall be paid by Company,  together with interest and  penalties,  if
any. Company shall reimburse  Administrative Agent for any and all out-of-pocket
expenses and internal charges (including  reasonable  attorneys',  auditors' and
accountants' fees and reasonable time charges of attorneys, paralegals, auditors
and accountants who may be employees of  Administrative  Agent) paid or incurred
by Administrative Agent in connection with the preparation, execution, delivery,
administration, collection and enforcement of this Security Agreement and in the
audit,  analysis,  administration,  collection,  preservation  or  sale  of  the
Collateral  (including the expenses and charges  associated with any periodic or
special audit of the Collateral).  The obligations of Company under this Section
9.12 shall survive termination of this Security Agreement.

         9.13.  Headings.  The title of and section  headings  in this  Security
Agreement  are for  convenience  of  reference  only,  and shall not  govern the
interpretation of any of the terms and provisions of this Security Agreement.

         9.14. Term. This Security  Agreement and the Lien arising hereunder (a)
shall become effective as of the date hereof upon the execution hereof,  and (b)
shall  continue  in force  (and  shall be  reinstated  if at any time all or any
portion of any  amounts in respect of  Obligations  received  by  Administrative
Agent or any Lender are  required to be returned or paid over to any Person) for
so long as any  Obligations,  or  commitment to extend any  Obligations,  remain
outstanding.

         9.15.  PRIOR  AGREEMENTS.  THIS  AGREEMENT  AND THE OTHER  LOAN  PAPERS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR,  CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

         THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

         9.16.  CHOICE OF LAW;  CONSENT TO  JURISDICTION;  WAIVER OF JURY TRIAL.
THIS SECURITY  AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH THE LAWS OF THE
STATE OF TEXAS  WITHOUT  APPLYING  THE LAW OF



100/269/87988                     -18-
<PAGE>
CONFLICTS OF TEXAS OR ANY OTHER  JURISDICTION.  COMPANY  HEREBY  CONSENTS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN DALLAS COUNTY,
TEXAS AND WAIVES ANY OBJECTION WHICH COMPANY MAY HAVE BASED ON IMPROPER VENUE OR
FORUM NON  CONVENIENS  TO THE  CONDUCT OF ANY  PROCEEDING  IN ANY SUCH COURT AND
CONSENTS  THAT ALL SERVICE OF PROCESS MAY BE MADE BY MAIL OR MESSENGER  DIRECTED
TO IT AT THE  ADDRESS  SET FORTH IN EXHIBIT  A. AT THE OPTION OF  Administrative
Agent, COMPANY WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVES
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT,  BUT FOR THIS WAIVER,
BE REQUIRED OF  ADMINISTRATIVE  AGENT.  NOTHING  CONTAINED  IN THIS SECTION 9.16
SHALL  AFFECT THE RIGHT OF  ADMINISTRATIVE  AGENT TO SERVE LEGAL  PROCESS IN ANY
OTHER  MANNER  PERMITTED BY LAW OR AFFECT THE RIGHT OF  ADMINISTRATIVE  AGENT OR
LENDER TO BRING ANY ACTION OR PROCEEDING  AGAINST COMPANY OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION.

         9.17. Distribution of Reports. Company authorizes Administrative Agent,
as  Administrative  Agent may elect in its sole discretion,  to discuss with and
furnish to any other  Person or entity  having an  interest  in the  Obligations
(whether  as a  guarantor,  pledgor of  collateral,  participant,  purchaser  or
otherwise)  all  financial  statements,  audit  reports  and  other  information
pertaining to Company and the  Subsidiaries if any, whether such information was
provided by Company or prepared or obtained by Administrative Agent.

         9.18.  Indemnity.  Company  hereby agrees to assume  liability for, and
does hereby agree to indemnify and keep harmless  Administrative  Agent and each
Lender, and their respective successors, assigns, agents and employees, from and
against any and all liabilities,  damages, penalties, suits, costs, and expenses
of  any  kind  and  nature,   imposed  on,  incurred  by  or  asserted   against
Administrative Agent and each Lender, or their respective  successors,  assigns,
agents and  employees,  in any way  relating to or arising out of this  Security
Agreement,  or the  manufacture,  purchase,  acceptance,  rejection,  ownership,
delivery, lease, possession,  use, operation,  condition,  sale, return or other
disposition of any Collateral (including,  without limitation,  latent and other
defects,  whether or not  discoverable by  Administrative  Agent,  any Lender or
Company, and any claim for patent,  trademark or copyright  infringement and any
acts or omissions which result from such Person's negligence).

         9.19.  Releases.  Any cash dividends  received by Company in accordance
with the terms of Section 4.4(c) shall be deemed  released from the lien of this
Security  Agreement and shall be held by Company (or any  transferee of Company)
free and clear of the lien created by this  Security  Agreement.  Upon the sale,
lease or other  disposition of assets  permitted by the terms of Section 4.1(h),
Administrative Agent and Lenders shall, at Company's request and expense execute
such partial releases as Company may reasonably  request, in form and upon terms
acceptable to Administrative Agent and Lenders in all respects. Upon termination
of this Security  Agreement in accordance  with the  provisions of Section 9.14,
Administrative  Agent and Lenders



100/269/87988                     -19-
<PAGE>
shall, at Company's  request and expense and subject to the foregoing  sentence,
execute such releases as Company may reasonably  request, in form and upon terms
acceptable  to  Administrative  Agent and  Lenders  in all  respects,  and shall
deliver all certificates  representing the Pledged Stock and other property held
in respect thereof  hereunder  which is in  Administrative  Agent's  possession,
together  with all stock  powers or other  instruments  of  transfer  reasonably
required to effect delivery to Company.

         9.20. Waivers. Except to the extent expressly otherwise provided herein
or in any Loan Paper, Company waives, to the extent permitted by applicable law,
(a) any right to require  either  Administrative  Agent or any Lender to proceed
against any other Person, to exhaust their rights in any other collateral, or to
pursue any other right which either Administrative Agent or any Lender may have,
(b) with  respect  to the  Obligations,  presentment  and  demand  for  payment,
protest,  notice of protest  and  non-payment,  and notice of the  intention  to
accelerate,  and (c) all rights of  marshalling in respect of any and all of the
Collateral.

         9.21.  Counterparts.  This  Security  Agreement  may be executed in any
number  of  counterparts,  all of which  taken  together  shall  constitute  one
agreement,  and any of the parties hereto may execute this Security Agreement by
signing any such counterpart. This Security Agreement shall be effective when it
has been executed by Company and Administrative Agent.

10.      Administrative Agent.

         NationsBank of Texas, N.A. has been appointed  Administrative  Agent of
Lenders  hereunder  pursuant  to  Article  IX  of  the  Credit  Agreement,   and
Administrative  Agent has agreed to act (and any successor  Administrative Agent
shall act) as such  hereunder only on the express  conditions  contained in such
Article IX. Any successor  Administrative Agent appointed pursuant to Article IX
of the Credit  Agreement  shall be  entitled to all the  rights,  interests  and
benefits of Administrative Agent hereunder.

11.      NOTICES.

         11.1.  Sending  Notices.  Any notice  required or permitted to be given
under this  Security  Agreement  may be, and shall be deemed,  given and sent as
provided in the Credit Agreement.

         11.2. Change in Address for Notices. Each of Company and Administrative
Agent or any Lender may change the  address  for  service of notice upon it by a
notice in writing to the other.

12.      SETOFF.

         In addition to, and without limitation of, any rights of Administrative
Agent and Lenders under  applicable law, if Company becomes  insolvent,  however
evidenced,  or any Event of Default occurs and is continuing,  any  indebtedness
from Administrative Agent or Lenders to Company (including,  without limitation,
funds of Company on deposit with Administrative  Agent



100/269/87988                     -20-
<PAGE>
or Lenders  which have not yet been  collected or which are not yet available in
accordance with Administrative  Agent's or Lenders' availability  schedules from
time to time in effect)  may be offset  and  applied  toward the  payment of the
Obligations,  for the ratable benefit of Lenders whether or not the Obligations,
or any part hereof, shall then be due.

         This Security Agreement is an amendment and restatement of that certain
Pledge and Security Agreement dated as of August 1, 1997 executed by the Company
for the benefit of  Administrative  Agent and the  lenders  named  therein  (the
"Original  Security  Agreement"),  and as  such,  except  for the  Lien  created
thereby, amends and supersedes the Original Security Agreement in its entirety.

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100/269/87988                     -21-
<PAGE>



         IN  WITNESS  WHEREOF,  the  undersigned  have  executed  this  Security
Agreement as of the date first above written.







                                            By:
                                            Its:



100/269/87988                     -22-
<PAGE>

                                   EXHIBIT D


                             COMPLIANCE CERTIFICATE

To:      The Lenders parties to the
         Credit Agreement Described Below

         This  Compliance  Certificate  is  furnished  pursuant to that  certain
Credit Agreement (as amended, restated, or otherwise modified from time to time,
the  "Agreement")  dated as of November      , 1997,  among GCI  Holdings,  Inc.
(the  "Borrower"),  the banks party thereto and  NationsBank  of Texas,  N.A. as
Administrative Agent for the Lenders. Unless otherwise defined herein, the terms
used in this Compliance  Certificate  have the meanings  ascribed thereto in the
Agreement.


         THE UNDERSIGNED HEREBY CERTIFIES THAT:

         1.       I am the duly elected                       of the Borrower;

         2. I have  reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision,  a detailed  review of the  transactions
and  conditions  of the Parent,  the  Borrower and the  Restricted  Subsidiaries
during the accounting period covered by the attached financial statements, dated
as of                  ;

         3. The  examinations  described in paragraph 2 did not disclose,  and I
have no knowledge of, the existence of any condition or event which  constitutes
a Default  or Event of  Default  during or at the end of the  accounting  period
covered  by  the  attached  financial  statements  or as of  the  date  of  this
Certificate, except as set forth below; and

         4.  Schedule  I  attached   hereto  sets  forth   financial   data  and
computations  evidencing the Borrower's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct.

         Listed below are the exceptions,  if any, to paragraph 3 describing, in
detail,  the nature of the  condition or event,  the period  during which it has
existed and the action which the Borrower has taken,  is taking,  or proposes to
take with respect to each such condition or event:





<PAGE>
         The foregoing certifications,  together with the computations set forth
in  Schedule  I  hereto  and  the  financial   statements  delivered  with  this
Certificate in support hereof, are made and delivered this      day of   , 19  .

                                                     GCI HOLDINGS, INC.


                                                     By:
                                                     Its:



0100.0269\89091                -2-
<PAGE>
                      SCHEDULE I TO COMPLIANCE CERTIFICATE

                      Schedule of Compliance as of           with
                          Provisions of Section 7.01 of
                                  the Agreement

1.       Section 7.01(a) - Total Leverage Ratio
         A.       Total Debt (for the fiscal quarter ended
                        ,19   ) of GCII, the Borrower, and
                  Restricted Subsidiaries

                  (i)      Debt for Borrowed Money             $

                  (ii)     Debt having a final maturity of
                           more than one year                  $

                  (iii)    Capitalized Lease obligations       $

                  (iv)     reimbursement obligations
                           relating to Letters of Credit
                           (without duplication)               $

                  (v)      Contingent Liabilities
                           (without duplication)               $

                  (vi)     Withdrawal Liabilities              $

                  (vii)    Debt, if any, associated with
                           Hedge Agreements                    $

                  (viii)   payments due under Non-Compete
                           Agreements                          $

                  (ix)     payments due for the deferred
                           purchase price of property and
                           services that are less than 90
                           days old                            $



0100.0269\89091                     3
<PAGE>

                  (x)      Total Debt                          $

                  (i) plus (ii) plus (iii) plus (iv) plus
                  (v) plus (vi) plus (vii) plus (viii) plus
                  (ix)                                         $

         B.       Annualized Operating Cash Flow (for the
                  two fiscal quarters ended       , 19    )
                  of the Borrower, and the Restricted
                  Subsidiaries
                  (i)      consolidated net income (loss)      $

                  (ii)     depreciation expense                $

                  (iii)    amortization expense and other
                           non-cash charges reducing income    $

                  (iv)     Net Total Interest Expense          $

                  (v)      cash income tax expense             $

                  (vi)     deferred income Taxes               $

                  (vii)    (i) plus the sum of (ii) plus
                           (iii) plus (iv) plus (v) plus (vi)  $

                  (viii)   Annualized Operating Cash Flow
                           (Product of two times item (vii))   $

         C.       The ratio of A to B                              :1.0
<TABLE>
<CAPTION>
                  <S>                                          <C>
         D.       Permitted ratio                              From Closing Date-3/31/987.00 to 1.00
                                                               4/1/98 - 3/31/99           6.50 to 1.00
                                                               4/1/99 - 12/31/99          6.00 to 1.00
                                                               1/1/00 and thereafter      5.50 to 1.00
</TABLE>
2.       Section 7.01(b) - Senior Leverage Ratio
         A.       Senior Debt (for the fiscal quarter ended
                       , 19   ) of the Borrower and
                  Restricted Subsidiaries



0100.0269\89091                     4
<PAGE>
                  (i)      Debt for Borrowed Money             $

                  (ii)     Debt having a final maturity of
                           more than one year                  $

                  (iii)    Capitalized Lease obligations       $

                  (iv)     reimbursement obligations
                           relating to Letters of Credit
                           (without duplication)               $

                  (v)      Contingent Liabilities
                           (without duplication)               $

                  (vi)     Withdrawal Liabilities              $

                  (vii)    Debt, if any, associated with
                           Interest Hedge Agreements           $

                  (viii)   payments due under Non-Complete
                           Agreements                          $

                  (ix)     payments due for the deferred
                           purchase price of property and
                           services that are less than 90
                           days old                            $

                  (x)      Senior Debt (i) plus (ii) plus
                           (iii) plus (iv) plus (v) plus
                           (vi) plus (vii) plus (viii) plus
                           (ix)                                $

         B.       Annualized Operating Cash Flow (for the
                  two fiscal quarters ended        , 19   )
                  of the Borrower and the Restricted
                  Subsidiaries (see 1.B. viii above)
                                                               $
         C.       The ratio of A to B                              :1.00



0100.0269\89091                     5
<PAGE>
<TABLE>
<CAPTION>
                  <S>                                          <C>
         D.       Permitted ratio                              Closing Date - 3/31/99     3.50 to 1.00
                                                               4/1/99 - 12/31/99          3.00 to 1.00
                                                               1/1/00 - 12/31/00          2.50 to 1.00
                                                               1/1/01 and thereafter      2.00 to 1.00
</TABLE>
3.       Section 7.01(c) - Interest Coverage Ratio (1)
         A.       Annualized Operating Cash Flow (for
                  quarters ended       , 19   ) of the
                  Borrower and the Restricted Subsidiaries
                  (see 1.B. viii above)                        $

         B.       Total Interest Expense (for the four
                  fiscal quarters ended       , 19   ) of
                  GCII, the Borrower, and the Restricted
                  Subsidiaries

                  (i)      consolidated interest expense       $

                  (ii)     amortization of Debt discounts      $

                  (iii)    commitment fees                     $

                  (iv)     agency fees related to Funded
                           Debt (excluding one-time facility
                           fees)                               $

                  (v)      fees or expenses with respect to
                           letters of credit                   $

                  (vi)     fees, if any, associated with
                           interest hedge agreements
                                                               $
                  (vii)    preferred stock distributions for
                           GCII, the Borrower and Restricted
                           Subsidiaries                        $


----------------------------
     1 For the  first  three  fiscal  quarters  after  the  Closing  Date  only,
Annualized Operating Cash Flow and Total Interest Expense shall be determined by
annualizing  the  relevant  financial  information  of GCII,  the  Borrower  and
Restricted Subsidiaries from the Closing Date to the date of determination



0100.0269\89091                     6
<PAGE>

                  (viii)   capitalized interest                $

                  (ix)     Total Interest Expense (i) plus
                           (ii) plus (iii) plus (iv) plus
                           (v) plus (vi) plus (vii) plus
                           (viii)                              $

         C.       The ratio of A to B                              :1.00
<TABLE>
<CAPTION>
                  <S>                                          <C>
         D.       Permitted ratio:                             Closing Date-12/31/98      1.50 to 1.00
                                                               1/1/99 and thereafter      2.00 to 1.00
</TABLE>

4.       Section 7.01(d) Pro Forma Debt Service Coverage
         Ratio
         A.       Annualized Operating Cash Flow (see 1.B.
                  viii above)                                  $

         B.       Pro Forma Debt Service for GCII, the
                  Borrower and its Restricted Subsidiaries     $

                  (i)      Cash Total Interest Expense for
                           the immediately succeeding four
                           full quarters                       $

                  (ii)     Scheduled repayments of principal
                           of Total Debt for the immediately
                           succeeding four full quarters       $


         C.       The ratio of A to B                              :1.00

         D.       Permitted ratio                              1.25 to 1.00

5.       Section 7.01(e) Fixed Charges Coverage Ratio
         A.       Annualized Operating Cash Flow (see 1.B.
                  viii above)                                  $



0100.0269\89091                     7
<PAGE>
         B.       Fixed Charges for the most recently
                  completed four fiscal quarters

                  (i)      cash Total Interest Expense         $

                  (ii)     scheduled repayments of principal
                           of Total Debt                       $

                  (iii)    cash Taxes paid by GCII, the
                           Borrower and Restricted
                           Subsidiaries                        $

                  (iv)     cash capital contributions loans
                           or advances to Unrestricted
                           Subsidiaries                        $

                  (v)      Capital Expenditures                $

                  (iv)     Fixed Charges (i) plus (ii) plus
                           (iii) plus (iv) plus (v)            $

         C.       The ratio of A to B                             :1.00
<TABLE>
<CAPTION>
                  <S>                                          <C>
         D.       Permitted ratio                              1/1/00 - 3/31/03           1.00 to 1.00
                                                               4/1/93 and thereafter      1.05 to 1.00
</TABLE>



0100.0269\89091                     8
<PAGE>


6.       Section 7.01(f) Capital Expenditures incurred by
         the Borrower and the Restricted Subsidiaries

         A.       Actual                                       $
<TABLE>
<CAPTION>
                  <S>                                          <C>
         B.       Permitted Maximum                            Closing through 1997                $55,000,000
                                                               1998                                $90,000,000
                                                               1999                                $65,000,000
                                                               2000 and thereafter                 N/A

</TABLE>



0100.0269\89091                     9
<PAGE>
                                    EXHIBIT E



                        CONVERSION OR CONTINUANCE NOTICE

                                     [Date]



NationsBank of Texas, National Association,
Administrative Agent
NationsBank Plaza
901 Main Street
64th Floor
Dallas, Texas  75202

         Re:      GCI Holdings, Inc.

Ladies and Gentlemen:

                  The  undersigned  refers to the  Amended and  Restated  Credit
Agreement dated as of November , 1997 (the "Credit Agreement", the terms defined
therein being used herein as therein  defined)  between GCI  Holdings,  Inc. and
NationsBank  of  Texas,  National  Association,   as  Administrative  Agent  for
NationsBank of Texas, National Association and each lender, and each Lender, and
hereby gives you notice pursuant to Section 2.09(b) of the Credit Agreement that
the undersigned  hereby requests                    Advance[s]  under the Credit
Agreement,  and in that connection sets forth below the information  relating to
[each] such Advance (a "Proposed  Borrowing") as required by Section  2.09(b) of
the Credit Agreement:

                  Proposed Borrowing:

         (i) The principal  amount of existing  LIBOR Advance to be  [converted]
         [continued] is $              .

         (ii) The Business Day of such Proposed Borrowing is          , 199  .

         (iii) The Type of  Advance[s]  comprising  such  Proposed  Borrowing is
         [are]  LIBOR  Advance  [to  the  extent  of  an  aggregate   amount  of
         $               ].

         [(iv) The initial  Interest  Period for each LIBOR Advance made as part
         of such Proposed Borrowing is         months.]



<PAGE>
                  The undersigned hereby certifies that the following statements
are  true on the  date  hereof,  and  will be true on the  date of the  Proposed
Borrowing,  before and after giving effect thereto and to the application of the
proceeds therefrom:

                  (A) the  conditions  precedent  specified in Sections 4.01 and
         4.02 of the Credit  Agreement  have been  satisfied with respect to the
         Proposed  Borrowing  and  will  remain  satisfied  on the  date of such
         Proposed Borrowing;

                  (B) the representations and warranties  specified in Article V
         of the Credit  Agreement are true and correct in all material  respects
         as though made on and as of such date; and

                  (C) no event has  occurred and is  continuing  or would result
         from such Proposed  Borrowing,  which constitutes a Default or Event of
         Default.

                                                     Very truly yours,

                                                     GCI HOLDINGS, INC.



                                                     By:
                                                                     , President






50443
0100.0269
                                      -2-
<PAGE>
                                    EXHIBIT F

                                BORROWING NOTICE


                                     [Date]



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

         Re:      GCI Holdings, Inc.

Ladies and Gentlemen:

                  The  undersigned  refers to the  Amended and  Restated  Credit
Agreement dated as of November , 1997 (the "Credit Agreement", the terms defined
therein  being used herein as therein  defined)  among GCI  Holdings,  Inc.  and
NationsBank of Texas,  N.A., as  Administrative  Agent for NationsBank of Texas,
N.A. and each lender,  and each Lender,  and hereby gives you notice pursuant to
Section  2.02(a) of the Credit  Agreement that the  undersigned  hereby requests
                 Borrowing[s] under the Credit Agreement, and in that connection
sets forth below the  information  relating to [each] such  Advance (a "Proposed
Borrowing") as required by Section 2.02(a) of the Credit Agreement:

                  Proposed Borrowing:

         (i) The Business Day of such Proposed Borrowing is             , 19  .

         (ii) The Type of Advance[s] comprising such Proposed Borrowing is [are]
         [Base  Advance  [to the  extent of an  aggregate  amount of $ ]] [LIBOR
         Advance [to the extent of an aggregate amount of
         $               ]].

         (iii) The aggregate amount of such Proposed Borrowing is $          .

         (iv) The initial Interest Period for each LIBOR Advance made as part of
         such Proposed Borrowing is                 .




<PAGE>
                  The undersigned hereby certifies that the following statements
are  true on the  date  hereof,  and  will be true on the  date of the  Proposed
Borrowing,  before and after giving effect thereto and to the application of the
proceeds therefrom:

                  (A) the  conditions  precedent  specified in Sections 4.01 and
         4.02 of the Credit  Agreement  have been  satisfied with respect to the
         Proposed  Borrowing  and  will  remain  satisfied  on the  date of such
         Proposed Borrowing;

                  (B) the representations and warranties  specified in Article V
         of the Credit  Agreement are true and correct in all material  respects
         as though made on and as of such date; and

                  (C) the Advances are permitted to be incurred  pursuant to the
         terms of the Indenture providing for the Senior Notes; and

                  (D) no event has  occurred and is  continuing  or would result
         from such Proposed  Borrowing,  which constitutes a Default or Event of
         Default.

                                                     Very truly yours,

                                                     GCI HOLDINGS, INC.


                                                     By:
                                                                     , President





50448
0100.0269




                                      -2-
<PAGE>

                                    EXHIBIT G

THE  INDEBTEDNESS  EVIDENCED OR SECURED BY THIS  INSTRUMENT IS  SUBORDINATED  TO
OTHER INDEBTEDNESS  PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE
SUBJECT TO THE TERMS OF THE SUBORDINATION AGREEMENT DATED AS OF
              , 1997 AMONG ALASKA UNITED FIBER SYSTEM PARTNERSHIP, GCI HOLDINGS,
INC.,  GCI  TRANSPORT  CO.,  INC.,  AND  CREDIT  LYONNAIS  NEW  YORK  BRANCH  AS
ADMINISTRATIVE AGENT

                          INTERCOMPANY PROMISSORY NOTE



         FOR VALUE RECEIVED, ALASKA UNITED FIBER SYSTEM PARTNERSHIP,  an Alaskan
general partnership (hereinafter called "Maker"), promises to pay on [demand (if
this Note is executed after the Final Maturity Date)\the Final Maturity Date (if
this Note is executed  before the Final  Maturity Date] (as that term is defined
in the Credit and  Security  Agreement  dated as of November  14,  1997  between
Maker, Credit Lyonnais New York Branch, as Administrative Agent,  NationsBank of
Texas,   N.A.,  as  Syndication   Agent,  and  TD  Securities  (USA),  Inc.,  as
Documentation  Agent (as amended,  restated,  or otherwise modified from time to
time,  the  "AUSP  Credit  Agreement"))  or  such  earlier  date  as  all of the
Obligations  (as  defined in the AUSP Credit  Agreement)  become due and payable
(whether by acceleration,  prepayment in full, scheduled reduction or otherwise)
(the  "Maturity  Date"),  to  the  order  of  GCI  HOLDINGS,  INC.,  an  Alaskan
corporation ("Payee"),  at its principal offices at Anchorage,  Alaska in lawful
money of the United  States of America,  the  principal  sum of
DOLLARS AND NO/100 ($           ) or such lesser sum as shall be due and payable
from time to time  hereunder.  The unpaid  principal  balance of this Note, from
time to time outstanding, shall bear interest from the date hereof until payment
in full at the per  annum  rate  equal to the per  annum  interest  rate then in
effect with respect to Payee under its credit  facilities  with  NationsBank  of
Texas,  N.A.,  as  Administrative  Agent,  Credit  Lyonnais New York Branch,  as
Documentation  Agent, and TD Securities (USA),  Inc., as Syndication  Agent, and
other lenders party to the Amended and Restated Credit  Agreements,  dated as of
November 14, 1997 (as amended, restated or otherwise modified from time to time,
the  "Holdings  Credit  Agreement"),  but shall never exceed the maximum rate of
interest  permitted  from time to time by applicable  law,  including  Tex. Civ.
Stat. Ann. Article  5069--1.04 (and as the same may be incorporated by reference
in other  Texas  statutes)  (hereinafter  designated  "Maximum  Rate").  Accrued
interest  hereunder  shall be due and  payable  together  with  the  outstanding
principal amount of this Note on the Maturity Date.

         All past due  principal  shall bear  interest at the Maximum Rate until
paid.  Interest paid or agreed to be paid shall not exceed the Maximum Rate, and
in any contingency whatsoever,  if Payee shall receive anything of value paid or
agreed to be paid to exceed the Maximum Rate,  the excessive  interest  shall be
applied  to the  reduction  of the  unpaid  principal  balance  of this  Note or
refunded  to  Maker.  Maker  acknowledges  that  Payee  has no  intent to charge
usurious  rates of interest  and that any such charge is  accidental  and a bona
fide error.




<PAGE>
         Each Maker,  surety,  endorser  and  guarantor  of this Note hereby (i)
waives all notices, presentment,  protest and diligence in collection, including
but not limited to demand and presentation for payment, notice of nonpayment and
notice of  acceleration  of  maturity,  protest and motion of  protest,  and the
diligence  of bringing  suit against any party  hereto;  (ii)  consents  without
further  notice to any  renewals,  extensions,  deferrals  or partial  payments,
either before or after  maturity;  and (iii) agrees to pay jointly and severally
to the holder of this Note reasonable  attorney's fees and collection fees, plus
interest on such amount at the rate then and as it thereafter  may be applicable
to the  principal  of this  Note,  if this  Note is  placed  in the  hands of an
attorney for  collection,  or if it is  collected  through  bankruptcy  or other
judicial proceedings.

         Upon the occurrence of the following events,  Payee or a holder of this
Note may declare the entirety of this Note, principal and interest,  immediately
due and payable  without  demand,  notice of default,  notice of acceleration or
notice of intent to accelerate the maturity hereof:

         (a) Failure of Maker to pay  principal or interest  when due under this
Note; or

         (b) The  occurrence  of an Event of  Default  (as  defined  in the AUSP
Credit Agreement); or

         (c) The  creation or  incurrence  by Maker of any Debt or Liens  (other
than  Permitted  Liens (as  defined in the AUSP  Credit  Agreement))  other than
pursuant to the Project Agreements and AUSP Financing Agreements (as those terms
are  defined in the  Holdings  Credit  Agreement)  and  secured  purchase  money
indebtedness in an aggregate  amount  outstanding at any one time of $2,000,000;
or

         (d) the making by Maker of any Investment, Restricted Payment (as those
terms are  defined in the AUSP  Credit  Agreement)  or other  investment,  loan,
advance,  distribution  or  dividend,  other  than  (i)  payments  of  interest,
principal  and  fees of the  Debt  incurred  under  the  Project  Agreements  in
accordance with the terms of the Project Agreements, (ii) payments on $2,000,000
of purchase money  indebtedness  permitted by (c) above, (iii) up to $10,000,000
distributed over the term of the Project  Agreements to Maker in accordance with
the terms of the Project  Agreements and (iv)  distributions  from 50% of excess
cash flow in accordance with the terms of the Project Agreements.

         Payee's  failure to declare the  entirety of the Note due,  pursuant to
this  paragraph,  shall not constitute a waiver of Payee's right to do so at any
other time.

         This Note  shall be  construed  under and  governed  by the laws of the
State of Texas and any applicable federal law.

         Maker  agrees  that  during  the full term  hereof the  maximum  lawful
interest  rate for this Note  determined  under Texas law shall be the indicated
rate  ceiling as  specified in Article  5069-1.04  of V.A.T.S.  Further,  to the
extent  that  any  other  lawful  rate  ceiling  exceeds  the  rate



                                      -2-
<PAGE>

ceiling so determined,  then the higher rate ceiling shall apply.  Chapter 15 of
the Texas Credit Code does not apply to this Note.

         THIS NOTE  REPRESENTS THE FINAL  AGREEMENT  BETWEEN THE PARTIES AND MAY
NOT BE  CONTRADICTED BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS,  OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL  AGREEMENTS  BETWEEN THE
PARTIES.

         Dated this      day of              ,        .

                                                     ALASKA UNITED FIBER SYSTEM
                                                     PARTNERSHIP
                                                     By: GCI Fiber Co., Inc., a
                                                         General Partner



                                                     By:
                                                     Its:


Pay to the order of NationsBank of Texas, N.A., as Administrative Agent.


                                                     GCI HOLDINGS, INC.



                                                     By:
                                                     Its:


98800
0100.0269


                                      -3-
<PAGE>

                                    EXHIBIT H

                               GCI HOLDINGS, INC.

                              Officer's Certificate


         The  undersigned  hereby  certifies  that  he  is  the  duly  appointed
                    of GCI Holdings,  Inc., an Alaskan corporation  ("Company"),
and that he is authorized to execute this  Certificate  on behalf of the Company
in connection with the $200,000,000 and $50,000,000  Amended and Restated Credit
Agreements of even date  herewith,  between the Company,  NationsBank  of Texas,
N.A.,  individually and as  Administrative  Agent, and the lenders named therein
(collectively,  the "Credit Agreement"). Terms are used herein as defined in the
Credit Agreement. The undersigned further certifies as follows:

         1. Attached hereto as Exhibit A are true,  accurate and complete copies
of the resolutions  duly adopted by the Company's  Board of Directors  approving
and  authorizing  that certain credit  facility among Alaska United Fiber System
Partnership,   Credit  Lyonnais  New  York  Branch  as   Administrative   Agent,
NationsBank of Texas, N.A. as Syndication Agent and TD Securities (USA), Inc. as
Syndication Agent, dated              , 1997 (the "AUSP Financing").

         2. Attached hereto as Exhibit B are true,  accurate and complete copies
of the  agreements  set forth below in effect as of the closing date of the AUSP
Financing:

         a.       Credit and Security Agreement dated as of              , 1997,
                  among Alaska United Fiber System Partnership as Borrower,  and
                  the Lenders referred to therein,  and Credit Lyonnais New York
                  Branch as Administrative Agent,  NationsBank of Texas, N.A. as
                  Syndication   Agent   and  TD   Securities   (USA)   Inc.   as
                  Documentation Agent.

         b.       Completion  Guaranty dated as of               ,  1997, by GCI
                  Holdings,  Inc., as Guarantor in favor of Credit  Lyonnais New
                  York Branch as  Administrative  Agent for the Lenders referred
                  to therein.

         c.       Subordination Agreement dated as of              , 1997, among
                  Alaska United Fiber System  Partnership,  GCI Holdings,  Inc.,
                  GCI Transport Co.,  Inc., and Credit  Lyonnais New York Branch
                  as Administrative Agent for the Lenders referred to therein.

         d.       Operation and Maintenance  Contract dated as of              ,
                  1997,  between Alaska United Fiber System  Partnership and GCI
                  Communication Corp.



<PAGE>
         e.       Depositary Agreement dated as of              ,  1997, between
                  Alaska United Fiber System Partnership and Credit Lyonnais New
                  York Branch as  Administrative  Agent for the Lenders referred
                  to therein.

         f.       Form of  Intercompany  Notes by  Alaska  United  Fiber  System
                  Partnership to the GCI Holdings, Inc.

         g.       Lease Agreement dated as of              ,  1997,  between GCI
                  Communication  Corp. as Lessee, and Alaska United Fiber System
                  Partnership as Lessor.

         h.       Lease  Guaranty  Agreement  dated as of               ,  1997,
                  among  GCI   Holdings,   Inc.,   Alaska  United  Fiber  System
                  Partnership   and   Credit   Lyonnais   New  York   Branch  as
                  Administrative Agent.

         i.       Operating Keep Well Agreement dated as of              , 1997,
                  among  GCI   Holdings,   Inc.,   Alaska  United  Fiber  System
                  Partnership,   and  Credit   Lyonnais   New  York   Branch  as
                  Administrative Agent.

         IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
the      day of               , 1997.

                                                     GCI HOLDINGS, INC.



                                                     By:
                                                     Name:
                                                     Title:


99542
100.269

                                      -2-