CREDIT AND SECURITY AGREEMENT

                          Dated as of January 27, 1998

                                      among

                     ALASKA UNITED FIBER SYSTEM PARTNERSHIP
                                   as Borrower

                                       and

                         THE LENDERS REFERRED TO HEREIN

                                       and

                         CREDIT LYONNAIS NEW YORK BRANCH
                             as Administrative Agent

                                       and

                           NATIONSBANK OF TEXAS, N.A.
                              as Syndication Agent

                                       and

                            TD SECURITIES (USA), INC.
                             as Documentation Agent






<PAGE>
<TABLE>
                                            TABLE OF CONTENTS
<CAPTION>
                                                                                                      Page
<S> <C>                                                                                               <C>
1.  DEFINITIONS                                                                                          2

2.  THE LOANS                                                                                           24
         SECTION 2.1.    Construction Loans                                                             24
         SECTION 2.2.    Term Loan                                                                      24
         SECTION 2.3.    Making of Loans                                                                24
         SECTION 2.4.    Notes; Repayment of the Term Loan.                                             27
         SECTION 2.5.    Interest.                                                                      28
         SECTION 2.6.    Commitment Fees and Other Fees.                                                29
         SECTION 2.7.    Mandatory Termination or Reduction of Commitments.                             30
         SECTION 2.8.    Default Interest; Alternate Rate of Interest.                                  30
         SECTION 2.9.    Continuation and Conversion of Loans.                                          31
         SECTION 2.10.   Prepayment of Loans.                                                           32
         SECTION 2.11.   Reimbursement of Loss.                                                         34
         SECTION 2.12.   Change in Circumstances.                                                       35
         SECTION 2.13.   Change in Legality.                                                            37
         SECTION 2.14.   Manner of Payments.                                                            38
         SECTION 2.15.   United States Withholding.                                                     38
         SECTION 2.16.   Interest Adjustments.                                                          40
         SECTION 2.17.   Extension of the Final Maturity Date.                                          40

3.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER                                                      41
         SECTION 3.1.    Existence and Power.                                                           41
         SECTION 3.2.    Authority and No Violation.                                                    41
         SECTION 3.3.    Governmental Approval; Permits.                                                42
         SECTION 3.4.    Binding Agreements.                                                            42
         SECTION 3.5.    Financial Statements.                                                          43
         SECTION 3.6.    No Material Adverse Change.                                                    43
         SECTION 3.7.    Subsidiaries; Joint Ventures.                                                  43
         SECTION 3.8.    Copyrights, Patents, Software and Other Rights.                                43
         SECTION 3.9.    Fictitious Names.                                                              43
         SECTION 3.10.   Title to Properties; Right of Way.                                             44
         SECTION 3.11.   Places of Business.                                                            44
         SECTION 3.12.   Litigation.                                                                    44
         SECTION 3.13.   Federal Reserve Regulations.                                                   45
         SECTION 3.14.   Investment Company Act.                                                        45
         SECTION 3.15.   Taxes.                                                                         45
         SECTION 3.16.   Compliance with ERISA.                                                         45





                                      (i)
<PAGE>
         SECTION 3.17.   Security Interest; Other Security.                                             45
         SECTION 3.18.   Disclosure.                                                                    46
         SECTION 3.19.   Agreements.                                                                    46
         SECTION 3.20.   Environmental Liabilities.                                                     47
         SECTION 3.21.   Compliance with Laws.                                                          47
         SECTION 3.22.   Projections; Construction Budget; Operating Budget; Plans
                                    and Specifications.                                                 47
         SECTION 3.23.   Start Date; Project Costs; Project Assets.                                     48
         SECTION 3.24.   Sponsor Equity.                                                                49
         SECTION 3.25.   Bank Accounts.                                                                 49
         SECTION 3.26.   Utility Availability.                                                          49
         SECTION 3.27.   Operation of the Facility.                                                     49
         SECTION 3.28.   Nature of Business.                                                            49

4.  CONDITIONS OF LENDING                                                                               49
         SECTION 4.1.    Conditions Precedent to Initial Construction Loans.                            49
         SECTION 4.2.    Conditions Precedent to Term Loans.                                            54
         SECTION 4.3.    Conditions Precedent to Each Loan.                                             55

5.  AFFIRMATIVE COVENANTS                                                                               56
         SECTION 5.1.    Financial Statements and Reports.                                              56
         SECTION 5.2.    Existence; Compliance.                                                         59
         SECTION 5.3.    Maintenance of Properties.                                                     59
         SECTION 5.4.    Notice of Material Events.                                                     59
         SECTION 5.5.    Insurance.                                                                     60
         SECTION 5.6.    Books and Records.                                                             61
         SECTION 5.7.    Observance of Agreements; Copies of Amendments.                                61
         SECTION 5.8.    Taxes and Charges; Indebtedness in Ordinary Course of Business.                61
         SECTION 5.9.    Liens.                                                                         62
         SECTION 5.10.   Government Approval.                                                           62
         SECTION 5.11.   Further Assurances; Security Interests.                                        62
         SECTION 5.12.   ERISA Compliance and Reports.                                                  62
         SECTION 5.13.   Environmental Laws.                                                            63
         SECTION 5.14.   Construction; Operation.                                                       64
         SECTION 5.15.   Final Cost Statement; Bank Account Statements                                  65
         SECTION 5.16.   Minimum Satisfactory Capacity Agreements.                                      65
         SECTION 5.17.   Interest Rate Protection Agreements.                                           65
         SECTION 5.18.   Local Bank Account.                                                            65
         SECTION 5.19.   Use of Proceeds; Use of certain Funds Transferred to the
                                    Local Bank Account                                                  66
         SECTION 5.20.   Operating Logs; Standby Ship Arrangements.                                     66





                                      (ii)
<PAGE>
         SECTION 5.21.   Permits; Right of Way.                                                         66
         SECTION 5.22.   Survey.                                                                        66
         SECTION 5.23.   Amendments to the Deed of Trust.                                               67
         SECTION 5.24.   Title Insurance.                                                               67
         SECTION 5.25.   Proprietary Rights.                                                            67

6.  NEGATIVE COVENANTS                                                                                  67
         SECTION 6.1.    Limitations on Indebtedness.                                                   67
         SECTION 6.2.    Limitations on Liens.                                                          68
         SECTION 6.3.    Limitations on Investments.                                                    69
         SECTION 6.4.    Restricted Payments.                                                           69
         SECTION 6.5.    Consolidation, Merger, Sale or Purchase of Assets, etc.                        69
         SECTION 6.6.    Receivables.                                                                   70
         SECTION 6.7.    Sale and Leaseback.                                                            70
         SECTION 6.8.    Places of Business; Change of Name.                                            70
         SECTION 6.9.    Transactions with Affiliates.                                                  70
         SECTION 6.10.   Prohibition of Amendments or Waivers.                                          71
         SECTION 6.11.   No Change in Business                                                          71
         SECTION 6.12.   ERISA Compliance.                                                              71
         SECTION 6.13.   Hazardous Materials.                                                           71
         SECTION 6.14.   Interest Rate Protection Agreements, etc.                                      71
         SECTION 6.15.   Subsidiaries.                                                                  71
         SECTION 6.16.   Prohibition regarding Joint Ventures and Partnerships.                         72
         SECTION 6.17.   Bank Accounts.                                                                 72
         SECTION 6.18.   Capacity Agreements; Sales of Fiber; Non-Disturbance
                                    Agreements.                                                         72
         SECTION 6.19.   Repairs and Improvements.                                                      72
         SECTION 6.20.   Change Orders.                                                                 72
         SECTION 6.21.   Location.                                                                      72
         SECTION 6.22.   No Further Negative Pledges.                                                   72
         SECTION 6.23.   Accounting Practices.                                                          73
         SECTION 6.24.   Interest Rate Protection Agreements.                                           73
         SECTION 6.25.   Use of Proceeds of Loans.                                                      73
         SECTION 6.26.   The Portion of the System from the Washington landing
                                    station site to the Seattle Distribution Center.                    73

7.  EVENTS OF DEFAULT                                                                                   73

8.  GRANT  OF  SECURITY INTEREST; REMEDIES                                                              76  
         SECTION 8.1.    Security Interests.                                                            76 
         SECTION 8.2.    Use of Collateral.                                                             76





                                     (iii)
<PAGE>
         SECTION 8.3.    Direct Payment to Alaska Depositary Account or
                                    Disbursement Account.                                               77
         SECTION 8.4.    Borrower to Hold in Trust.                                                     77
         SECTION 8.5.    Collections, etc.                                                              77
         SECTION 8.6.    Possession, Sale of Collateral, etc.                                           78
         SECTION 8.7.    Application of Proceeds on Default.                                            79
         SECTION 8.8.    Power of Attorney.                                                             79
         SECTION 8.9.    Financing Statements, Direct Payment, Confirmation of
                                    Receivables.                                                        80
         SECTION 8.10.   Termination.                                                                   80
         SECTION 8.11.   Remedies Not Exclusive.                                                        80
         SECTION 8.12.   Quiet Enjoyment.                                                               80
         SECTION 8.13.   Release of Collateral.                                                         81
         SECTION 8.14.   Continuation and Reinstatement.                                                81
         SECTION 8.15.   Regulatory Approvals.                                                          81

9.  CASH COLLATERAL ACCOUNT                                                                             82
         SECTION 9.1.    Cash Collateral Account.                                                       82
         SECTION 9.2.    Investment of Funds.                                                           82
         SECTION 9.3.    Grant of Security Interest.                                                    83
         SECTION 9.4.    Remedies.                                                                      83

10.  THE ADMINISTRATIVE AGENT                                                                           84
         SECTION 10.1.    Administration by Administrative Agent.                                       84
         SECTION 10.2.    Payments.                                                                     84
         SECTION 10.3.    Sharing of Setoffs and Cash Collateral.                                       85
         SECTION 10.4.    Notice to the Lenders.                                                        85
         SECTION 10.5.    Liability of Administrative Agent.                                            86
         SECTION 10.6.    Reimbursement and Indemnification.                                            86
         SECTION 10.7.    Rights of Administrative Agent.                                               87
         SECTION 10.8.    Independent Investigation by Lenders.                                         87
         SECTION 10.9.    Agreement of Required Lenders.                                                87
         SECTION 10.10.   Notice of Transfer.                                                           87
         SECTION 10.11.   Successor Administrative Agent                                                88

11.  MISCELLANEOUS                                                                                      88
         SECTION 11.1.    Notices.                                                                      88
         SECTION 11.2.    Survival of Agreement, Representations and Warranties, etc.                   89
         SECTION 11.3.    Successors and Assigns; Syndications; Loan Sales; Participations.             89
         SECTION 11.4.    Expenses; Documentary Taxes.                                                  92
         SECTION 11.5.    Indemnification of the Administrative Agent and the Lenders.                  93





                                      (iv)
<PAGE>
         SECTION 11.6.    CHOICE OF LAW.                                                                94
         SECTION 11.7.    WAIVER OF JURY TRIAL.                                                         94
         SECTION 11.8.    No Waiver.                                                                    95
         SECTION 11.9.    Extension of Payment Date                                                     95
         SECTION 11.10.   Amendments, etc.                                                              95
         SECTION 11.11.   Severability.                                                                 96
         SECTION 11.12.   SERVICE OF PROCESS.                                                           96
         SECTION 11.13.   Headings.                                                                     97
         SECTION 11.14.   Execution in Counterparts.                                                    97
         SECTION 11.15.   Confidentiality.                                                              97
         SECTION 11.16.   Entire Agreement.                                                             97

Testimonium                                                                                             99

Signatures                                                                                              99
</TABLE>





                                      (v)
<PAGE>
Schedules

1                 Schedule of Commitments
1A                Description of the Right of Way and a List of Permits
1B                Construction Budget
1C                Form of Operating Budget
1D                Plans and Specifications
3.9               Fictitious Names
3.10              Rights owned on the Closing Date with respect to the Right of 
                  Way
3.11              Chief Executive Office, Location of books and records and 
                  goods included in the
                  Collateral
3.12              Litigation
3.17              Filing Offices
3.19              Agreements
3.20              Environmental Liabilities
3.22(a)           Copy of the Projections
3.22(c)           Proposed Operating Budget for first year after the Completion
                  Date
3.23              Project assets previously owned by Affiliates of GCI 
                  (other than the Borrower)
5.5               Insurance
6.2               Existing Liens





<PAGE>
Exhibits

A-1               Form of Construction Note
A-2               Form of Term Note
B-1               Form of Opinion of Sherman & Howard L.L.C., counsel to the 
                  Borrower, the General Partners and the other Transaction 
                  Parties
B-2               Form of Opinion of Mark R. Moderow, corporate counsel of GCI
B-3               Form of Opinion of Hartig, Rhodes, Norman, Mahoney & Edwards,
                  P.C., Alaska counsel to the Borrower, the General Partners and
                  the other Transaction Parties
B-4               Form of  Opinion  of Foster,  Pepper &  Shefelman,  Washington
                  counsel to the  Borrower,  the General  Partners and the other
                  Transaction Parties
B-5               Form of Opinion of Drinker, Biddle & Reath LLP, FCC counsel 
                  to the Borrower and GCI
B-6               Form of Opinion of Guess & Rudd P.C., Alaska counsel to the 
                  Administrative Agent
C                 Form of Assignment Agreement
D                 Form of Transport Pledge Agreement
E                 Form of Fiber Security Agreement
F                 Form of Subordination Agreement
G                 Form of Depositary Agreement
H                 Form of Sponsor Undertaking
I                 Form of Assignment and Acceptance
J                 Form of Borrowing Certificate
K                 Form of Engineer's Certificate
L                 Form of Transport Keep-Well Agreement
M                 Form of Holdings Keep-Well Agreement
N                 Form of Completion Guaranty
O                 Form of GCI Lease Contract
P                 Form of Holdings Lease Guaranty Agreement
Q                 Form of O&M Contract
R                 Form of Compliance Certificate
S                 Form of Interest Rate Protection Agreement
T                 Form of Confidentiality Letter
U                 Form of GCI Fiber Exchange Agreement
V                 Form of GCI Construction Contract
W                 Form of Non-Disturbance Agreement
X                 Form of GCI Cable Subordination Agreement
Y                 Form of AU Subordination Agreement
Z                 Form of Instruction Letter



<PAGE>
                                CREDIT  AND  SECURITY   AGREEMENT  dated  as  of
                           January  27,  1998  (as  amended,   supplemented   or
                           otherwise modified,  renewed or replaced from time to
                           time,  the  "Credit  Agreement"),  among  (i)  ALASKA
                           UNITED FIBER SYSTEM  PARTNERSHIP,  an Alaska  general
                           partnership  (the   "Borrower"),   (ii)  the  Lenders
                           referred to herein,  (iii)  CREDIT  LYONNAIS NEW YORK
                           BRANCH, as administrative agent for the Lenders, (iv)
                           NATIONSBANK OF TEXAS,  N.A., as Syndication Agent and
                           (v)  TD  SECURITIES  (USA),  INC.,  as  Documentation
                           Agent.


                             INTRODUCTORY STATEMENT


                  All terms not otherwise  defined above or in this Introductory
Statement are as defined in Article 1 hereof or as defined elsewhere herein.

                  The  Borrower  has  requested  that  the  Lenders   provide  a
construction  and term loan facility in the amount of $75,000,000  which will be
used to finance the  development,  construction,  testing and  operation  of the
System.

                  To provide  assurance  for the  repayment of the Loans and all
other  Obligations of the Borrower  hereunder,  the Borrower  will,  among other
things,  provide or cause to be provided to the  Administrative  Agent,  for the
benefit of the Lenders, the following (each as more fully described herein):

                  (i)      a first priority  security interest from the Borrower
                           in the Collateral pursuant to Article 8 hereof;

                  (ii)     a guarantee of Completion (as such term is defined in
                           the Completion Guaranty) of the Project from Holdings
                           on the terms set forth in the Completion Guaranty;

                  (iii)    an   agreement   with   respect  to  payment  of  the
                           Obligations  from each of GCI  Transport and Holdings
                           pursuant to the Transport Keep-Well Agreement and the
                           Holdings Keep-Well Agreement respectively;

                  (iv)     a direct  assignment of the  Borrower's  rights under
                           each Project Agreement;

                  (v)      a first  priority  pledge by GCI  Transport of all of
                           the  issued  and  outstanding  shares of the  capital
                           stock of GCI  Fiber and Fiber  Hold  pursuant  to the
                           Transport Pledge Agreement; and





<PAGE>
                  (vi)     a first priority security interest from GCI Fiber and
                           Fiber Hold in all of the partnership interests of the
                           Borrower pursuant to the Fiber Security Agreement.

                  Subject  to the terms and  conditions  set forth  herein,  the
Administrative  Agent is willing to act as agent for the Lenders and each Lender
is willing to make Loans to the Borrower in an aggregate amount not in excess of
its Construction Commitment or Term Loan Commitment (as applicable) set forth on
the Schedule of Commitments.

                  Accordingly, the parties hereto hereby agree as follows:


1.  DEFINITIONS
                  For the purposes hereof unless the context otherwise requires,
all  Section  references  herein  shall be deemed to  correspond  with  Sections
herein,  the following terms shall have the meanings  indicated,  all accounting
terms not otherwise  defined herein shall have the respective  meanings accorded
to them under GAAP and all terms  defined in the UCC and not  otherwise  defined
herein shall have the respective  meanings accorded to them therein.  Unless the
context  otherwise  requires,  any of the  following  terms  may be  used in the
singular or the plural, depending on the reference:

                  "Acceptable  Right" shall mean good and marketable  title to a
fee simple interest,  a valid leasehold  interest or a valid easement,  right of
way, license or permit; provided that any such interest,  easement, right of way
or license  acquired from an Alaska Native  Corporation (as defined in 43 U.S.C.
ss.1602(m))  shall  be  acquired  only  as an  interest  in fee  simple  or as a
leasehold  interest  unless such  corporation  waives its statutory  immunity by
written agreement satisfactory to the Administrative Agent.

                  "Acceptable  Title  Company"  shall mean (i) for real property
located in the State of Alaska,  TransAlaska  Summit Title  Insurance  Agency of
Alaska  L.L.C.  and (ii) for real property  located in the State of  Washington,
First American Title Insurance Company.

                  "Acceptable Title Insurance Policy" shall mean a lenders' paid
policy of title  insurance  issued by an Acceptable  Title Company,  in form and
substance  satisfactory to the Administrative  Agent, with such endorsements and
affirmative   coverages  as  the  Administrative  Agent  shall  reasonably  deem
appropriate.

                  "Adequate  Coverage"  shall  be as  defined  in  Section  2.17
hereof.

                  "Administrative  Agent"  shall mean Credit  Lyonnais  New York
Branch, in its capacity as Administrative  Agent for the Lenders  hereunder,  or
such  successor  Administrative  Agent as may be  appointed  pursuant to Section
10.11 of this Credit Agreement.



                                      -2-
<PAGE>
                  "Affiliate"   shall  mean  any  Person   which,   directly  or
indirectly,  is in control of, is controlled by or is under common control with,
another Person. For purposes of this definition,  a Person shall be deemed to be
"controlled  by" another  Person if such latter  Person  possesses,  directly or
indirectly,  power either to direct or cause the direction of the management and
policies of such controlled Person whether by contract or otherwise.

                  "Agents" shall mean the Administrative  Agent,  NationsBank of
Texas,  N.A., in its capacity as Syndication  Agent  hereunder and TD Securities
(USA) Inc., in its capacity as Documentation Agent hereunder.

                  "Alaska Depositary  Account" shall mean Account No. 1510-562-0
entitled "Alaska  Depositary  Account" in the name of the Borrower at the office
of The First National Bank of Anchorage,  201 West 36th Avenue, P.O. Box 200628,
Anchorage, Alaska 99520.

                  "Alaska United Fiber System" shall mean the entire fiber optic
telecommunications  cable network comprised of approximately 2,331 statute route
miles connecting PSMS, Glen Alps, Whittier,  Valdez, Lena Point, Norma Beach and
SDC,   which  network  shall  have  an  initial   equipped   capacity  of  OC-48
(approximately  2.5 gigabits per second data rate).  The undersea portion of the
network shall connect landing  stations between four sites. The proposed landing
station sites are located at Whittier,  Valdez,  Lena Point and Norma Beach.  An
undersea  branching  unit shall connect the three  undersea fiber cable segments
originating at Whittier, Lena Point and Norma Beach, whereas Valdez is connected
through a separate undersea extension  originating at Whittier.  The terrestrial
portion of the network  shall consist of inland  extensions  from 1) Whittier to
Glen Alps, 2) Norma Beach to SDC, and 3) Valdez to PSMS. The Alaska United Fiber
System  shall  be  installed  along  the  Right  of  Way  and  include  (without
limitation) the following:  (i) the fiber optic cable,  branching unit,  optical
amplifiers,  and terminal station equipment  (whether supplied by the Contractor
or another Person) and included in the network, (ii) all cable ducts or conduits
through which the cable runs, (iii) the associated  splice boxes,  splice vaults
and other associated concrete structures  constructed by or for the Borrower and
used to protect,  or provide  splicing  space for, the cable,  together with all
manhole and handhole covers relating thereto,  (iv) electrical power facilities,
including  electrical  distribution panels,  lighting,  wiring and other related
apparatus  attached to or within the cable  (excluding any meters owned by other
Persons), (v) heating,  ventilating and air conditioning  equipment,  (vi) metal
enclosures  (sometimes  referred  to as the  regeneration  stations)  containing
certain  of the  Electronics  together  with the  concrete  slabs  to which  the
enclosures are attached,  (vii) all fixtures  included in the network and (viii)
auxiliary generators, batteries, battery-charging equipment, telephone equipment
and other related  equipment used by the Borrower on the Right of Way (the items
referred to in the foregoing  clauses (i) through  (viii) are referred to herein
as "Equipment").

                  "Alternate  Base  Rate"  shall  mean,  for any day, a rate per
annum  equal  to the  rate of  interest  per  annum  publicly  announced  by the
Administrative  Agent as its prime  rate in effect on such day at its  principal
office in New York City.




                                      -3-
<PAGE>
                  "Alternate  Base Rate  Loan"  shall  mean a Loan  based on the
Alternate Base Rate in accordance with the provisions of Article 2 hereof.

                  "Applicable Law" shall mean all provisions of statutes, rules,
regulations  and orders of the United States or foreign  governmental  bodies or
regulatory  agencies  applicable  to the Person in question,  and all orders and
decrees of all courts and  arbitrators  in  proceedings  or actions in which the
Person in question is a party.

                  "Applicable  Margin"  shall mean (i) in the case of  Alternate
Base Rate Loans, 1.75% per annum, and (ii) in the case of Eurodollar Loans, 3.0%
per annum, in each case, as such margin may be decreased pursuant to, and to the
amounts set forth in, Section 2.5(c) hereof.

                  "Assignment  and  Acceptance"  shall mean an  agreement in the
form of  Exhibit I hereto,  executed  by the  assignor,  assignee  and any other
parties as contemplated thereby.

                  "Assignment  Agreement"  shall  mean an  Assignment  Agreement
substantially  in the form of  Exhibit C hereto or in such  other form as may be
satisfactory to the Administrative  Agent, as any such agreement may be amended,
supplemented or otherwise modified, renewed or replaced from time to time.

                  "AU  Subordination  Agreement"  shall  mean the  Subordination
Agreement substantially in the form of Exhibit Y hereto, among the Borrower, the
Administrative  Agent and NationsBank of Texas,  N.A., as  administrative  agent
under  the  Holdings  Credit  Agreements,  as  such  agreement  may be  amended,
supplemented or otherwise modified, renewed or replaced from time to time.

                  "Authorized Officer" shall mean, with respect to the Borrower,
the President,  any Vice President,  the Treasurer or the Secretary of a General
Partner.

                  "Bank Charges" shall mean charges for interest hereunder,  the
Commitment Fees, any fees payable  pursuant to the Commitment  Letter or the Fee
Letter  and all other fees and  expenses  payable by the  Borrower  pursuant  to
Section 11.4 or 11.5 hereof.

                  "Board"  shall  mean the  Board of  Governors  of the  Federal
Reserve System of the United States of America.

                  "Borrowing"  shall mean a group of Loans of a single  interest
rate type made by the Lenders on a single date and as to which a single Interest
Period is in effect.

                  "Borrowing  Certificate"  shall mean a borrowing  certificate,
substantially  in the form of Exhibit J hereto,  to be delivered by the Borrower
to the Administrative Agent in connection with each Borrowing.





                                      -4-
<PAGE>
                  "Business  Day"  shall  mean any day  other  than a  Saturday,
Sunday or other day on which  banks are  required or  permitted  to close in the
State of New  York;  provided,  however,  that when  used in  connection  with a
Eurodollar  Loan,  the term  "Business  Day" shall also exclude any day on which
banks are not open for  dealings  in Dollar  deposits  on the  London  Interbank
Market.

                  "Cable"  shall mean the  Alaska  United  Fiber  System and the
fiber pairs in the Kanas Cable and the GCI Cable  Facility to which the Borrower
has been granted exclusive use pursuant to the Kanas Agreement and the GCI Fiber
Exchange Agreement, respectively.

                  "Capacity Agreement" shall mean any lease,  capacity agreement
or other contract or agreement  pursuant to which the Borrower leases,  licenses
or  otherwise  grants to any  other  Person  the right to use the  System or any
portion  thereof,  or sells to any other  Person  capacity  on the System or any
portion thereof, or agrees to provide telecommunications  services utilizing the
System or any  portion  thereof,  including,  without  limitation,  any  option,
standby  or  back-up  arrangement  with  respect  to any of the  foregoing,  any
Satisfactory Capacity Agreement, the GCI Lease Contract, the Kanas Agreement and
the GCI Fiber Exchange Agreement.

                  "Capital  Lease" shall mean,  with respect to any Person,  any
lease of any property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.

                  "Cash  Collateral  Account"  shall have the meaning given such
term in Section 9.1 hereof.

                  "Cash Equivalents" shall mean (i) marketable securities issued
or directly and fully  guaranteed  or insured by the United States of America or
any agency or  instrumentality  thereof (provided that the full faith and credit
of the United States of America is pledged in support thereof) having maturities
of not  more  than  twelve  months  from the date of  acquisition,  (ii)  Dollar
denominated   time  deposits,   demand   deposits,   certificates   of  deposit,
acceptances,  prime  commercial  paper or repurchase  obligations for underlying
securities of the types described in clause (i), in each case, entered into with
a Lender or a commercial bank having a short-term deposit rating of at least A-2
or the equivalent thereof by Standard & Poor's or at least P-2 or the equivalent
thereof by Moody's  Investors  Service,  Inc.  and having a maturity of not more
than twelve  months from the date of  acquisition,  or (iii) Dollar  denominated
commercial  paper  with a  rating  of A-1 or A-2 or the  equivalent  thereof  by
Standard & Poor's or P-1 or P-2 or the equivalent  thereof by Moody's  Investors
Service, Inc. and maturing within twelve months after the date of acquisition.

                  "Change in Control"  shall mean either (i) the failure for any
reason of GCI and/or  AT&T to own  directly  or  indirectly  at least 25% of the
aggregate  partnership interests of the Borrower or (ii) GCI and/or AT&T ceasing
to have the  power to  direct  or cause  the  direction  of 




                                      -5-
<PAGE>
the management and policies of the Borrower whether by reason of GCI and/or AT&T
ceasing to have voting control of more than 50% of the partnership  interests of
the Borrower or otherwise.

                  "Closing  Date"  shall  mean the  earliest  date on which  all
conditions precedent to the making of the initial Construction Loan as set forth
in Section 4.1 hereof have been satisfied or waived by all the Lenders.

                  "Code"  shall mean the  Internal  Revenue Code of 1986 and the
rules and regulations issued thereunder,  as heretofore  amended, as codified at
26 U.S.C. ss.1 et seq or any successor provision thereto.

                  "Collateral" shall mean all of the Borrower's right, title and
interest in and to both real and personal  property,  tangible  and  intangible,
wherever  located or  situated  and  whether  now owned,  presently  existing or
hereafter  acquired or created,  including but not limited to, goods,  accounts,
intercompany  obligations,  partnership  and joint venture  interests,  contract
rights, documents,  instruments, chattel paper, general intangibles,  investment
property,  goodwill,  equipment,  machinery (including,  without limitation, any
spare parts), inventory, copyrights, trademarks, trade names, patents, insurance
proceeds, FCC Licenses, Project Agreements,  Capacity Agreements,  cash and bank
accounts (including,  without limitation,  the Construction  Account, the Alaska
Depositary Account,  the Disbursement  Account,  the Insurance Proceeds Account,
the Holding  Account,  the Interest  Reserve  Account,  the SSI Cash  Collateral
Account,  the  Local  Bank  Account  and any funds on  deposit  in any such bank
account at any time) and any  proceeds or products  of any of the  foregoing  or
income from any of the  foregoing,  including,  without  limitation,  the Alaska
United Fiber System and rights under and pursuant to the Kanas Agreement and the
GCI Fiber Exchange  Agreement;  provided that,  Collateral shall not include any
FCC License to the extent the Borrower is  prohibited  from  granting a security
interest therein pursuant to Applicable Law.

                  "Commencement  Date"  shall  mean the  earlier of (i) the date
which is six (6) months  after the  Closing  Date and (ii) the date on which the
first Borrowing is made hereunder.

                  "Commitment  Fees" shall have the  meaning  given such term in
Section 2.6 hereof.

                  "Commitment  Letter" shall mean that certain letter  agreement
dated as of July 3, 1997  between  GCI, on the one hand and Credit  Lyonnais New
York Branch,  NationsBank  of Texas,  N.A. and TD Securities  (USA) Inc., on the
other  hand,  as such  agreement  has  been  amended  by  those  certain  letter
agreements  dated as of July 8,  1997,  August 14,  1997,  September  26,  1997,
November 21, 1997 and December 24, 1997.

                  "Commitments" shall mean the Construction  Commitments and the
Term Loan Commitments.





                                      -6-
<PAGE>
                  "Completed"  or  "Completion"  shall  be  as  defined  in  the
Completion Guaranty.

                  "Completion  Date"  shall mean the  earlier of (i) the date on
which the System is Completed and (ii) January 1, 1999; provided,  however, that
if such date is not a Business Day, then the  Completion  Date shall be the next
succeeding Business Day.

                  "Completion  Guaranty"  shall  mean  the  Completion  Guaranty
substantially  in the  form  of  Exhibit  N  hereto,  between  Holdings  and the
Administrative Agent as such agreement may be amended, supplemented or otherwise
modified, renewed or replaced from time to time.

                  "Construction  Account"  shall mean Account No.  0139787000105
entitled "Alaska United  Construction  Account" at the office of Credit Lyonnais
New York Branch, 1301 Avenue of the Americas, New York, New York 10019.

                  "Construction  Budget" shall mean with respect to the Project,
the construction  budget dated January 24, 1998,  attached hereto as Schedule 1B
(which budget is satisfactory to all the Lenders), as such budget may be revised
in accordance with the provisions of Section 5.14(a) hereof.

                  "Construction  Commitment"  shall mean the  commitment of each
Lender  to make  Construction  Loans  to the  Borrower  from  the  Initial  Date
applicable  to  such  Lender  to  but  excluding  the  Construction   Commitment
Termination  Date up to an aggregate  amount,  at any one time, not in excess of
the  amount  set forth (i)  opposite  the name of such  Lender  under the column
entitled  "Construction  Commitment" in the Schedule of Commitments,  or (ii) in
any applicable  Assignment and  Acceptance(s) to which it may be a party, as the
case may be, as such amount may be reduced from time to time in accordance  with
the terms of this Credit Agreement.

                  "Construction  Commitment  Termination  Date"  shall  mean the
earlier to occur of (i) the Completion  Date and (ii) such earlier date on which
the Construction  Commitments  shall terminate in accordance with Section 2.7 or
Article 7 hereof.

                  "Construction   Contract"   shall  mean  that  certain  Supply
Contract  dated as of July 11, 1997  between the  Borrower  (as  assignee of GCI
Communication)  and  the  Contractor,  as such  agreement  has  been  and may be
amended,  supplemented or otherwise  modified,  renewed or replaced from time to
time.

                  "Construction  Loans"  shall mean the loans made  hereunder in
accordance with the provisions of Section  2.1(a),  whether made as a Eurodollar
Loan or an Alternate Base Rate Loan, as permitted hereby.

                  "Construction Notes" shall have the meaning given such term in
Section 2.4(a) hereof.





                                      -7-
<PAGE>
                  "Contractor"  shall mean Tyco Submarine Systems Ltd. (formerly
known as (Submarine Systems International Ltd.), a Delaware corporation.

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

                  "Conversion  Date"  shall  mean the date  which  occurs on the
fifth anniversary of the Commencement Date.

                  "Credit  Exposure"  shall  mean,  without  duplication,   with
respect to any Lender,  (i) at any time on or prior to the Completion  Date, the
sum of such  Lender's (A)  aggregate  outstanding  Loans  hereunder  and (B) the
amount,  if any,  by  which  the sum of such  Lender's  Construction  Commitment
exceeds the amount of its outstanding Loans hereunder and (ii) at any time after
the Completion Date, such Lender's aggregate outstanding Loans hereunder.

                  "Deeds of Trust" shall mean (i) that certain Deed of Trust and
Assignment  dated  as of  January  27,  1998  among  the  Borrower  as  Grantor,
TransAlaska  Summit Title  Insurance  Agency of Alaska L.L.C. as Trustee and the
Administrative Agent as Beneficiary, which Deed of Trust and Assignment is to be
recorded in various recording  districts in the State of Alaska, as such Deed of
Trust and Assignment may be amended, supplemented or otherwise modified, renewed
or  replaced  from  time to time  and (ii)  those  certain  Deeds  of Trust  and
Assignment  dated as of January  27, 1998 among the  Borrower as Grantor,  First
American Title Insurance Company as Trustee and the  Administrative  Agent which
Deeds of Trust and  Assignment are to be recorded in the office of the Snohomish
County Auditor and the King County  Records and Election  Office in the State of
Washington, as such Deed of Trust and Assignment may be amended, supplemented or
otherwise modified, renewed or replaced from time to time.

                  "Default"  shall mean any event,  act or condition  which with
notice or lapse of time, or both, would constitute an Event of Default.

                  "Depositary  Agreement"  shall mean the  Depositary  Agreement
substantially  in the form of Exhibit G hereto,  between  the  Borrower  and the
Administrative  Agent,  as  such  agreement  may  be  amended,  supplemented  or
otherwise modified, renewed or replaced from time to time.

                  "Disbursement  Account"  shall mean Account No.  0139787000100
entitled "Alaska United  Disbursement  Account" at the office of Credit Lyonnais
New York Branch, 1301 Avenue of the Americas, New York, New York 10019.

                  "Dollars" and "$" shall mean lawful money of the United States
of America.





                                      -8-
<PAGE>
                  "Electronics"  shall  mean  the  transceivers,   regenerators,
multiplexers  and other electronic  equipment,  together with all racks to which
the same are affixed, located at the regenerator sites and points of presence on
the Right of Way or at the network  operations  center, or owned by the Borrower
and  located  at points  of  presence  along  the  Kanas  Cable or the GCI Cable
Facility, including all equipment replacing any of the foregoing.

                  "Engineer's  Certificate"  shall  mean  a  certificate  of the
Independent  Engineer in the form of Exhibit K hereto,  to be  delivered  by the
Independent  Engineer  to the  Administrative  Agent  in  connection  with  each
Borrowing.

                  "Environmental  Laws" shall mean any and all  federal,  state,
local or municipal  laws,  rules,  orders,  regulations,  statutes,  ordinances,
codes,  decrees  or  requirements  of  any  Governmental  Authority  regulating,
relating  to or  imposing  liability  or  standards  of conduct  concerning  any
Hazardous  Material or environmental  protection or health and safety, as now or
may at any time hereafter be in effect, including without limitation,  the Clean
Water Act also known as the Federal Water  Pollution  Control Act ("FWPCA"),  33
U.S.C.  ss. 1251 et seq., the Clean Air Act ("CAA"),  42 U.S.C.  ss.ss.  7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C.
ss.ss. 136 et seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30
U.S.C.   ss.ss.  1201  et  seq.,  the  Comprehensive   Environmental   Response,
Compensation  and  Liability  Act  ("CERCLA"),  42 U.S.C.  ss.9601 et seq.,  the
Superfund  Amendments  and  Reauthorization  Act of 1986  ("SARA"),  Public  Law
99-499,  100 Stat. 1613, the Emergency  Planning and Community Right to Know Act
("EPCRKA"),  42 U.S.C.  ss.11001 et seq., the Resource Conservation and Recovery
Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the Occupational Safety and Health Act
as amended ("OSHA"), 29 U.S.C. ss. 655 and ss. 657, together, in each case, with
any amendment thereto, and the regulations adopted pursuant thereto.

                  "Equipment"  shall  have the  meaning  given  such term in the
definition of "Alaska United Fiber System" set forth herein.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as heretofore and hereafter amended,  as codified at 29 U.S.C. ss. 1001
et seq. and the regulations promulgated
thereunder.

                  "Eurodollar  Loan" shall mean a Loan based on the LIBO Rate in
accordance with the provisions of Article 2 hereof.

                  "Event of Default"  shall have the meaning  given such term in
Article 7 hereof.

                  "Event  of Loss"  shall  mean any of the  following  events or
conditions:





                                      -9-
<PAGE>
                  (i)      all or  substantially  all of the Cable shall  become
                           destroyed  or damaged  beyond  repair or  permanently
                           rendered  unfit  for  commercial   operation,   as  a
                           consequence of any event whatsoever;

                  (ii)     any  damage to or loss of all or any  portion  of the
                           Cable occurring through any cause  whatsoever,  which
                           results in the  receipt of  insurance  proceeds  with
                           respect  to the  Cable on the  basis of an  actual or
                           constructive total loss of the Cable; or

                  (iii)    the  condemnation,  confiscation  or  seizure  of, or
                           other  requisition  of title  to,  or use of,  all or
                           substantially  all of the  Cable or the  Right of Way
                           (including  the taking of title to, or use of, all or
                           substantially  all of the  Cable or the  Right of Way
                           under  power  of  eminent  domain  or  by  forfeiture
                           pursuant  to  any  proceeding   commenced  under  any
                           provision   of  law   provided   for  escheat)  by  a
                           Governmental Authority.

                  The date of  occurrence of any Event of Loss shall be the date
                  of the  casualty or other  occurrence  specified  above giving
                  rise to such Event of Loss.

                  "FCC" shall mean the Federal Communications  Commission or any
Governmental Authority which succeeds to the powers and functions thereof.

                  "FCC Licenses"  shall mean any license or permit issued by the
FCC,  including,  without  limitation,  licenses  issued to the Borrower for the
landing and the  operation  of the Alaska  United Fiber System or for the use of
the fiber pairs in the Kanas Cable or the GCI Cable Facility.

                  "FDC" shall mean GCI  Communication's  Fairbanks  Distribution
Center located at 520 5th Avenue, Suite 407, Fairbanks, Alaska.

                  "Fee Letter" shall mean that certain letter agreement dated as
of July 3, 1997 between GCI and the Administrative Agent relating to the payment
of certain  fees, as such  agreement  has been amended by those  certain  letter
agreements  dated as of August 14, 1997,  September 26, 1997,  November 21, 1997
and December 24, 1997.

                  "Fiber  Hold"  shall  mean  Fiber  Hold Co.,  Inc.,  an Alaska
corporation.

                  "Fiber Security  Agreement" shall mean the Security  Agreement
substantially in the form of Exhibit E hereto,  between GCI Fiber and Fiber Hold
on the one  hand,  and the  Administrative  Agent  on the  other  hand,  as such
agreement  may be  amended,  supplemented  or  otherwise  modified,  renewed  or
replaced from time to time.





                                      -10-
<PAGE>
                  "Final  Construction  Loan" shall have the meaning  given such
term in Section 2.3(c).

                  "Final  Maturity  Date" shall mean the date which is the tenth
anniversary of the Commencement  Date provided that such date may be extended by
the Borrower pursuant to, and in accordance with, the provisions of Section 2.17
hereof, to the date which is the twelfth anniversary of the Commencement Date.

                  "Fundamental Documents" shall mean this Credit Agreement,  the
Notes, the Transport Pledge Agreement,  the Fiber Security Agreement,  the Deeds
of  Trust,  each  Assignment  Agreement  relating  to a Project  Agreement,  the
Subordination Agreement, the Depositary Agreement, the Intercreditor Agreements,
the Instruction Letter, the Sponsor Undertaking, each of the Project Agreements,
UCC-1  Financing  Statements  and any  other  ancillary  documentation  which is
required to be, or is otherwise,  executed by any of the Transaction Parties and
delivered to the  Administrative  Agent in connection with this Credit Agreement
or any other Fundamental Document.

                  "GAAP" shall mean generally accepted accounting  principles in
the United States of America consistently applied (except for accounting changes
in response to FASB releases, or other authoritative pronouncements).

                  "GCI"  shall  mean  General  Communication,  Inc.,  an  Alaska
corporation.

                  "GCI Cable" shall mean GCI Cable, Inc., an Alaska corporation.

                  "GCI Cable Facility"  shall mean those fiber optic  facilities
owned, leased and/or to be constructed by GCI Cable (i) in the Anchorage, Alaska
area,  connecting  SADC,  Glen Alps and  AT&T's  primary  point of  presence  in
Anchorage which is located at 210 East Bluff Road, Anchorage, Alaska and (ii) in
the  Fairbanks,  Alaska area,  connecting  NPMS, FDC and AT&T's primary point of
presence in Fairbanks which is located at 200 Gaffney Road, Fairbanks, Alaska.

                  "GCI   Cable   Subordination   Agreement"   shall   mean   the
Subordination Agreement substantially in the form of Exhibit X hereto, among GCI
Cable,   the   Administrative   Agent  and   NationsBank  of  Texas,   N.A.,  as
administrative agent under the Holdings Credit Agreements, as such agreement may
be amended, supplemented or otherwise modified, renewed or replaced from time to
time.

                  "GCI  Communication"  shall mean GCI  Communication  Corp., an
Alaska corporation.

                  "GCI Construction  Contract" shall mean the General Contractor
Agreement  substantially  in the form of Exhibit V hereto,  between the Borrower
and GCI  Communication,  as  




                                      -11-
<PAGE>
such agreement may be amended,  supplemented or otherwise  modified,  renewed or
replaced from time to time.

                  "GCI  Fiber"  shall  mean  GCI  Fiber  Co.,  Inc.,  an  Alaska
corporation.

                  "GCI Fiber Exchange  Agreement"  shall mean the Fiber Exchange
Agreement substantially in the form of Exhibit U hereto, among the Borrower, GCI
Cable and GCI Communication,  as such agreement may be amended,  supplemented or
otherwise modified, renewed or replaced from time to time.

                  "GCI  Lease   Contract"   shall   mean  the  Lease   Agreement
substantially in the form of Exhibit O hereto,  between the Borrower,  as lessor
and GCI Communication, as lessee, as such agreement may be amended, supplemented
or otherwise modified, renewed or replaced from time to time.

                  "GCI Transport"  shall mean GCI Transport Co., Inc., an Alaska
corporation.

                  "General Partner" shall mean GCI Fiber and/or Fiber Hold.

                  "Glen Alps" shall mean GCI Communication's  leased location at
Lot 5, Block 1, Tower Estates Subdivision, Anchorage, Alaska.

                  "Governmental   Authority"  shall  mean  any  federal,  state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality,  or any court,  in each case whether of the United  States or a
foreign jurisdiction.

                  "Guaranty"  shall  mean,  as to  any  Person,  any  direct  or
indirect  obligation  of such Person  guaranteeing  or intended to guarantee any
Indebtedness,  Capital Lease,  dividend or other monetary  obligation  ("primary
obligation") of any other Person (the "primary obligor") in any manner,  whether
directly or indirectly, by contract, as general partner or otherwise, including,
without  limitation,  any obligation of such Person,  whether or not contingent,
(i) to purchase any such primary obligation or any property  constituting direct
or  indirect  security  therefor,  (ii) to advance  or supply  funds (a) for the
purchase or payment of any such primary  obligation  or (b) to maintain  working
capital or equity  capital of the primary  obligor or  otherwise to maintain the
net worth or  solvency  of the  primary  obligor,  (iii) to  purchase  property,
securities or services,  in each case, primarily for the purpose of assuring the
performance  by the obligor of any such primary  obligation or (iv) as a general
partner of a  partnership  or a joint  venturer of a joint venture in respect of
Indebtedness  of such  partnership  or such joint  venture which is treated as a
general partnership for purposes of Applicable Law; provided,  however, that the
term Guaranty shall not include  endorsements  for collection or collections for
deposit,  in either case, in the ordinary course of business.  The amount of any
Guaranty  shall be deemed to be an amount equal to the lesser of (x) the maximum
liability  under the terms of such  Guaranty  or (y) the stated or  determinable
amount of the primary  obligation  in respect of which such Guaranty is made or,
if 




                                      -12-
<PAGE>
not stated or  determinable,  the maximum  reasonably  anticipated  liability in
respect thereof (assuming such Person is required to perform thereunder).

                  "Hazardous  Materials"  shall  mean any  flammable  materials,
explosives,   radioactive  materials,  hazardous  materials,  hazardous  wastes,
hazardous or toxic substances, or similar materials defined in any Environmental
Law.

                  "Holding  Account"  shall  be as  defined  in  the  Depositary
Agreement.

                  "Holdings"   shall  mean  GCI   Holdings,   Inc.,   an  Alaska
corporation.

                  "Holdings  Bank  Credit   Facility"   shall  mean  the  credit
facilities of Holdings under the Holdings Credit Agreements.

                  "Holdings Credit Agreements" shall mean the Long Term Holdings
Credit Agreement and the Short Term Holdings Credit Agreement.

                  "Holdings  Keep-Well   Agreement"  shall  mean  the  Operating
Keep-Well  Agreement  substantially  in the  form of  Exhibit  M  hereto,  among
Holdings,  the  Borrower  and the  Administrative  Agent for the  benefit of the
Lenders,  as such agreement may be amended,  supplemented or otherwise modified,
renewed or replaced from time to time.

                  "Holdings  Lease  Guaranty  Agreement"  shall  mean the  Lease
Guaranty  Agreement  substantially  in the  form  of  Exhibit  P  hereto,  among
Holdings,  the  Borrower  and the  Administrative  Agent for the  benefit of the
Lenders,  as such agreement may be amended,  supplemented or otherwise modified,
renewed or replaced from time to time.

                  "Indebtedness"  shall mean (without double  counting),  at any
time and with  respect  to any  Person,  (i)  indebtedness  of such  Person  for
borrowed money (whether by loan or the issuance and sale of debt  securities) or
for the deferred  purchase price of property or services  purchased  (other than
amounts  constituting  trade payables payable within 120 days and arising in the
ordinary  course of  business);  (ii)  obligations  of such Person in respect of
letters  of credit,  acceptance  facilities,  or drafts or  similar  instruments
issued or accepted by banks and other financial  institutions for the account of
such  Person;  (iii)  obligations  of such Person  under  Capital  Leases;  (iv)
deferred  payment  obligations of such Person resulting from the adjudication or
settlement of any  litigation  to the extent not already  reflected as a current
liability on the balance sheet of such Person and (v)  Indebtedness of others of
the type described in clauses (i), (ii), (iii) and (iv) hereof which such Person
has (a)  directly or  indirectly  assumed or  guaranteed  in  connection  with a
Guaranty or (b) secured by a Lien on the assets of such  Person,  whether or not
such Person has assumed such indebtedness.

                  "Independent  Engineer" shall mean (i) Arthur D. Little,  (ii)
Stone & Webster  or (iii) a Person  appointed  by the  Required  Lenders  who is
engaged in the engineering profession 




                                      -13-
<PAGE>
(who shall be duly licensed as an engineer in a State of the United  States) and
is familiar with engineering and operational matters relating to the System, the
Cable or facilities similar thereto.

                  "Initial   Date"   shall   mean   (i)  in  the   case  of  the
Administrative  Agent, the date hereof, (ii) in the case of each Lender which is
an  original  party to this Credit  Agreement,  the date hereof and (iii) in the
case of any other Lender,  the effective  date of the  Assignment and Acceptance
pursuant to which it became a Lender.

                  "Instruction   Letter"   shall  mean  the   letter   agreement
substantially in the form of Exhibit Z hereto between the Borrower and The First
National Bank of Anchorage (as accepted by the  Administrative  Agent),  as such
letter agreement may be amended,  supplemented or otherwise modified, renewed or
replaced  from time to time or such  other  form as may be  satisfactory  to the
Administrative Agent.

                  "Insurance   Proceeds   Account"   shall  mean   Account   No.
0139787000101, entitled "Alaska United Insurance Proceeds Account" at the office
of Credit Lyonnais New York Branch,  1301 Avenue of the Americas,  New York, New
York 10019.

                  "Intercreditor  Agreements"  shall  mean  the  Non-Disturbance
Agreement,  the GCI  Cable  Subordination  Agreement  and  the AU  Subordination
Agreement.

                  "Interest  Deficit"  shall have the meaning given such term in
Section 2.16.

                  "Interest  Payment  Date" shall mean (i) as to any  Eurodollar
Loan having an Interest Period of one, two or three months, the last day of such
Interest  Period,  (ii) as to any Eurodollar  Loan having an Interest  Period of
more than three months,  the last day of such Interest  Period and, in addition,
each date during such Interest  Period that would be the last day of an Interest
Period  commencing on the same day as the first day of such Interest  Period but
having a duration of three months or any integral multiple  thereof,  (iii) with
respect to Alternate Base Rate Loans, the last Business Day of each March, June,
September and December (commencing the last Business Day of March 1998) and (iv)
with respect to any Loan, the Completion Date.

                  "Interest  Period" shall mean as to any  Eurodollar  Loan, the
period  commencing  on the date of such  Loan or the  last day of the  preceding
Interest Period and ending on the numerically  corresponding day (or if there is
no  corresponding  day,  the last day) in the calendar  month that is one,  two,
three,  six,  nine or  twelve  months  thereafter  as the  Borrower  may  elect;
provided,  however,  that (i) if any  Interest  Period  would end on a day which
shall not be a Business Day, such Interest  Period shall be extended to the next
succeeding  Business Day, unless such next succeeding Business Day would fall in
the next calendar  month,  in which case,  such Interest Period shall end on the
next preceding Business Day, (ii) no Interest Period may be selected which would
end later than the Completion Date (in the case of any Construction Loan) or the
Final Maturity Date (in the case of the Term Loan),  (iii) no Interest Period of
nine or 




                                      -14-
<PAGE>
twelve months may be selected  unless  available and consented to by all Lenders
in their sole discretion and (iv) no Interest Period with respect to any portion
of the Term Loan may be selected  which would result in the aggregate  amount of
Eurodollar  Loans  having  Interest  Periods  ending  after any date on which an
installment of principal of the Term Loan is scheduled to mature being in excess
of the aggregate principal installments scheduled to mature after such date.

                  "Interest Rate Protection  Agreement"  shall mean any interest
rate swap agreement,  interest rate cap agreement,  synthetic caps,  collars and
floors or other  financial  agreement  or  arrangement  designed  to protect the
Borrower against fluctuations in interest rates.

                  "Interest   Reserve  Account"  shall  be  as  defined  in  the
Depositary Agreement.

                  "Investment" shall mean any stock, evidence of indebtedness or
other  securities of any Person,  any loan,  advance,  contribution  of capital,
extension of credit or commitment  therefor,  including  without  limitation the
guarantee  of  loans or  obligations  of  others,  and any  purchase  of (i) any
securities of another  Person or (ii) any business or  undertaking of any Person
or any commitment or option to make any such purchase.

                  "Kanas" shall mean Kanas Telecom,  Inc., an Alaska corporation
or if  applicable,  any  successor  thereof or any  permitted  assignee of Kanas
Telecom, Inc. under the Kanas Agreement.

                  "Kanas  Agreement"  shall  mean that  certain  Fiber  Exchange
Agreement  dated as of November  21, 1997  between  Kanas and GCI  Communication
(certain  rights  and  obligations   under  which  have  been  assigned  by  GCI
Communication to the Borrower),  as such agreement may be amended,  supplemented
or otherwise modified, renewed or replaced from time to time.

                  "Kanas  Cable"  shall mean the fiber optic  telecommunications
cable  constructed  and  owned  by  Kanas  between  PSMS  and  NPMS,  along  the
right-of-way for the Trans-Alaska Pipeline.

                  "Land Right of Way" shall mean (i) the real property  which is
located  landward  from the seaward  limit of the  jurisdiction  of the State of
Alaska and from the seaward limit of the jurisdiction of the State of Washington
and on which the terrestrial portion Alaska United Fiber System (as described in
the fifth  sentence of the  definition of "Alaska United Fiber System" set forth
herein)  will be located,  (ii) the real  property on which any  Electronics  or
Equipment  used by the Borrower in the operation of the fiber pairs in the Kanas
Cable or in the GCI Cable Facility are or will be located,  and the interests of
the Borrower in or with respect to any such real property, whether by way of fee
ownership,  leasehold,  easement, license or otherwise, which interests and real
property are more fully described in Schedule 1A hereto.





                                      -15-
<PAGE>
                  "Lena Point" shall mean the Borrower's  cable landing  station
at or near 17103 Pt. Lena Loop Road, Juneau, Alaska.

                  "Lender" and "Lenders"  shall mean the financial  institutions
whose names  appear at the foot  hereof as lenders and any  assignee of a Lender
pursuant to Section 11.3(b).

                  "Lending  Office" shall mean, with respect to any Lender,  the
branch or  branches  (or  affiliate  or  affiliates)  from which  such  Lender's
Eurodollar  Loans or Alternate Base Rate Loans,  as the case may be, are made or
maintained  and for the  account  of which all  payments  of  principal  of, and
interest on, such  Lender's  Eurodollar  Loans or Alternate  Base Rate Loans are
made, as notified to the Administrative Agent from time to time.

                  "LIBO Rate" shall mean,  with respect to the  Interest  Period
for a Eurodollar Loan, an interest rate per annum equal to the quotient (rounded
upwards to the next 1/100 of 1%) of (A) the average of the rates at which Dollar
deposits  approximately equal in principal amount to the Administrative  Agent's
portion  of such  Eurodollar  Loan and for a  maturity  equal to the  applicable
Interest Period are offered to the Lending Office of the Administrative Agent in
immediately  available funds in the London  Interbank  Market for Eurodollars at
approximately   11:00  a.m.,  London  time,  two  Business  Days  prior  to  the
commencement  of such Interest  Period  divided by (B) one minus the  applicable
statutory  reserve  requirements  of the  Administrative  Agent,  expressed as a
decimal  (including  without  duplication  or limitation,  basic,  supplemental,
marginal and emergency reserves), from time to time in effect under Regulation D
or similar  regulations  of the Board.  It is agreed  that for  purposes of this
definition,  Eurodollar  Loans  made  hereunder  shall be deemed  to  constitute
Eurocurrency  Liabilities  as defined in  Regulation  D and to be subject to the
reserve requirements of Regulation D.

                  "Lien" shall mean any  mortgage,  pledge,  security  interest,
encumbrance,  lien, lease,  easement or charge of any kind whatsoever (including
any conditional sale or other title retention agreement, any lease in the nature
thereof or the agreement to grant a security interest at a future date).

                  "Loans" shall mean the Construction Loans and the Term Loan.

                  "Local  Bank  Account"  shall  mean  Account  No.   1511-174-3
established  by the  Borrower  at the  office  of The  First  National  Bank  of
Anchorage, 201 West 36th Avenue, P.O. Box 200628, Anchorage, Alaska 99520.

                  "Long Term Holdings Credit  Agreement" shall mean that certain
Amended  and  Restated  Credit  Agreement  dated as of  November  14, 1997 among
Holdings,  the lenders  referred  to therein,  NationsBank  of Texas,  N.A.,  as
Administrative  Agent,  Credit Lyonnais New York Branch, as Documentation  Agent
and TD Securities (USA), Inc., as Syndication Agent, which agreement,  as of the
Closing Date,  provides for a reducing revolving credit facility in an amount 




                                      -16-
<PAGE>
up to $200,000,000,  as such agreement may be amended, supplemented or otherwise
modified, renewed or replaced from time to time.

                  "Margin  Stock"  shall be as  defined in  Regulation  U of the
Board.

                  "Material  Adverse  Effect"  shall mean any event or condition
that (a) has a material  adverse  effect on the  business,  assets,  properties,
operations, condition (financial or otherwise) or prospects of the Borrower, (b)
materially impairs the ability of the Borrower or any other Transaction Party to
perform any of their respective  obligations  under any Fundamental  Document to
which it is or will be a party,  (c) materially  and adversely  affects the Lien
granted to the  Administrative  Agent for the benefit of the  Lenders  under any
Fundamental Document or materially impairs the validity or enforceability of, or
materially  impairs the rights or remedies  available to the Lenders under,  any
Fundamental Document or (d) materially adversely affects the Project, the use by
the Borrower of the fiber pairs in the Kanas Cable as  contemplated by the Kanas
Agreement or the fiber pairs in the GCI Cable  Facility as  contemplated  by the
GCI  Fiber  Exchange  Agreement,  any  Permit,  the  Right  of Way or any of the
Collateral;  provided,  however,  that any event or condition  will be deemed to
have a "Material Adverse Effect", if such event or condition when taken together
with all other  events or  conditions  occurring  or in  existence  at such time
(including  all other  events and  conditions  which,  but for the fact that any
representation  or warranty  contained herein is subject to a "Material  Adverse
Effect"  exception,  would cause such  representation  or warranty to be untrue)
would result in a "Material  Adverse Effect",  even though,  individually,  such
event or condition would not do so.

                  "Multiemployer  Plan" shall mean a plan  described  in Section
4001(a)(3) of ERISA.

                  "Newly  Acquired Right" shall have the meaning given such term
in Section 5.23 hereof.

                  "Non-Disturbance  Agreement"  shall  mean the  Non-Disturbance
Agreement   substantially  in  the  form  of  Exhibit  W  hereto,   between  the
Administrative  Agent and NationsBank of Texas,  N.A., as  administrative  agent
under  the  Holdings  Credit  Agreements,  as  such  agreement  may be  amended,
supplemented or otherwise modified, renewed or replaced from time to time.

                  "Norma Beach" shall mean the Borrower's  cable landing station
at or near 14725 Norma Beach Road, Edmonds, Washington.

                  "Notes" shall mean the Construction Notes and the Term Notes.

                  "NPMS" shall mean Kanas' North Pole Metering  Station facility
located at 3624 Frosty Avenue, North Pole, Alaska.





                                      -17-
<PAGE>
                  "O&M  Contract"  shall  mean  the  Operation  and  Maintenance
Contract substantially in the form of Exhibit Q hereto, between the Borrower and
GCI  Communication,  as such contract may be amended,  supplemented or otherwise
modified, renewed or replaced from time to time.

                  "Obligations"  shall mean the  obligation  of the  Borrower to
make due and punctual  payment of  principal  of and interest on the Loans,  the
Commitment Fees, and all other monetary  obligations of the Borrower owed to the
Administrative  Agent or any Lender under this Credit Agreement,  the Notes, any
other  Fundamental  Document,  the  Commitment  Letter or the Fee Letter and all
amounts payable by the Borrower to any Lender under any Interest Rate Protection
Agreement  which (i) is in the form of Exhibit S hereto or in such other form as
is   acceptable  to  the   Administrative   Agent  and  (ii)  as  to  which  the
Administrative  Agent  shall have  received  written  notice  thereof  within 10
Business Days after execution of such Interest Rate Protection Agreement.

                  "Operating  Budget" shall mean an annual  budget,  prepared by
the Borrower and approved by the Administrative Agent, which budget shall (i) be
substantially  in the form of Schedule 1C hereto and (ii) specify each principal
item  and  contain  fair  and  reasonable  projections  of the  projected  gross
revenues, projected operating costs and projected debt service for each month of
the applicable  year and shall also include a periodic  inspection,  maintenance
and repair schedule (including provisions for annual maintenance).

                  "Partnership  Agreement" shall mean the Partnership  Agreement
dated as of July 29,  1997 by and  between  GCI Fiber and  Fiber  Hold,  as such
agreement may be amended from time to time.

                  "Payor" shall mean any Person with the  obligation to make any
payment to the Borrower pursuant to a Capacity Agreement.

                  "PBGC" shall mean the Pension Benefit Guaranty  Corporation or
any successor thereto.

                  "Percentage"  shall mean,  with respect to any Lender,  (i) at
any  time  before  the  Completion  Date,  its  ratable  share  (expressed  as a
percentage) equal to the amount obtained by dividing the Construction Commitment
of such Lender by the aggregate Construction  Commitments of all the Lenders and
(ii) at any time on or after the Completion  Date, its ratable share  (expressed
as a  percentage)  equal  to the  amount  obtained  by  dividing  the  aggregate
outstanding  principal  amount of all Loans owed to such Lender by the aggregate
outstanding principal amount of all Loans owed to all of the Lenders.

                  "Permits"   shall  mean  the  FCC  Licenses,   and  all  other
approvals,  consents,  waivers,  notices,  filings,  recordings,  registrations,
exemptions,  variances, franchises, orders, permits, authorizations,  rights and
licenses  required to be taken,  given, made or obtained (as the 




                                      -18-
<PAGE>
case  may be) by or from  any  Governmental  Authority  or any  Person  that are
necessary or required for the Project.

                  "Permitted  Encumbrances"  shall  mean Liens  permitted  under
Section 6.2 hereof.

                  "Person"   shall  mean  any   natural   person,   corporation,
partnership,  limited  liability  company,  trust,  joint venture,  association,
company,  estate,  unincorporated  organization  or  government or any agency or
political subdivision thereof.

                  "Plan" shall mean an employee  benefit plan within the meaning
of Section 3(2) of ERISA,  other than a  Multiemployer  Plan,  maintained by the
Borrower or any member of the Controlled  Group, or to which the Borrower or any
member of the Controlled  Group  contributes or is required to contribute or any
other plan covered by Title IV of ERISA that cover any employees of the Borrower
or any member of the Controlled Group.

                  "Plans   and   Specifications"   shall   mean  the  plans  and
specifications listed on Schedule 1D hereto.

                  "Prepayment  Date" shall have the  meaning  given such term in
Section 2.10(h) hereof.

                  "Project" shall mean the development,  construction,  testing,
operation and maintenance of the System.

                  "Project  Agreements"  shall mean the GCI Lease Contract,  the
Holdings Lease Guaranty Agreement,  the Kanas Agreement, the Transport Keep-Well
Agreement,  the Holdings Keep-Well Agreement, the Construction Contract, the SSI
Cash Collateral Agreement,  the Completion Guaranty, the O&M Contract, GCI Fiber
Exchange  Agreement,  GCI Construction  Contract and any other contract to which
the  Borrower is a party that  provides  for  aggregate  payments of one million
dollars ($1,000,000) or more.

                  "Project   Costs"   shall   mean  (i)  all   development   and
construction  costs  of the  Project  and  all  other  amounts  included  in the
Construction  Budget  (including,  without  limitation,  $1,000,000  of  working
capital and the payment in the amount of $500,000 to Kanas pursuant to the Kanas
Agreement)  and  (ii)  all  other  payments  to be made by the  Borrower  to the
Lenders, whether or not included in the Construction Budget.

                  "Projections"  shall  mean the  financial  projections  of the
Borrower referred to in Section 3.22(a) hereof.

                  "Proprietary Rights" shall have the meaning given such term in
Section 3.8 hereof.





                                      -19-
<PAGE>
                  "Pro Rata Share" shall mean, with respect to any Obligation or
other amount,  each  Lender's pro rata share of such  Obligation or other amount
determined in accordance with such Lender's Percentage.

                  "PSMS" shall mean Kanas' PetroStar Metering Station located at
2.5 Mile Dayville Road, Valdez, Alaska.

                  "Quiet  Enjoyment"  shall have the meaning  given such term in
Section 8.12 hereof.

                  "Reportable  Event" shall mean any reportable event as defined
in Section 4043(c) of ERISA, other than a reportable event as to which provision
for 30-day notice to the PBGC would be waived under  applicable  regulations had
the  regulations  in  effect on the  Closing  Date been in effect on the date of
occurrence of such reportable event.

                  "Required  Lenders" shall mean the Lenders holding 66% or more
of the aggregate Credit Exposure of all Lenders.

                  "Restricted Payment" shall mean (i) any distribution, dividend
or other direct or indirect  payment on account of any  partnership  interest or
other equity interest in the Borrower, (ii) any redemption or other acquisition,
re-acquisition or retirement by the Borrower of any of its partnership interests
or  of  any  equity  interest  in  any  of  its  Affiliates,  now  or  hereafter
outstanding,  (iii) any payment made to retire,  or obtain the  surrender of any
outstanding warrants, puts or options or other rights to purchase or acquire any
partnership  interest  in the  Borrower,  or any equity  interest  in any of its
Affiliates, now or hereafter outstanding and (iv) any payment by the Borrower of
principal  of,  premium,  if any, or interest on, or any  redemption,  purchase,
retirement,  defeasance,  sinking  fund or similar  payment with respect to, any
Subordinated Debt now or hereafter outstanding.

                  "Right  of Way"  shall  mean  the  Land  Right  of Way and the
Undersea Right Way.

                  "SADC"  shall  mean  GCI   Communication's   South   Anchorage
Distribution Center located at 6831 Arctic Boulevard, Anchorage, Alaska.

                  "Satisfactory Capacity Agreement" shall mean (i) the GCI Lease
Contract,  (ii) a binding  Capacity  Agreement  between the Borrower and a third
party which is not an Affiliate of the Borrower and whose senior  unsecured debt
obligations  are  rated at least  BBB by  Standard  & Poor's  Ratings  Group,  a
division of McGraw-Hill,  or its successor (or the equivalent  rating by Moody's
Investors  Service)  or is  otherwise  approved  in writing by all the  Lenders,
pursuant to which fixed minimum payments are required to be made to the Borrower
on or before dates certain,  or (iii) a binding Capacity  Agreement  between the
Borrower  and  Holdings  or a  Subsidiary  of  Holdings  pursuant to which fixed
minimum  payments  are  required to be made to the  Borrower on or before  dates
certain;  provided,  however,  that a  Capacity  Agreement  entered  




                                      -20-
<PAGE>
into by the Borrower and a Subsidiary of Holdings shall only be a  "Satisfactory
Capacity  Agreement"  hereunder if all the obligations of such Subsidiary  under
such contract are unconditionally  guaranteed by Holdings on terms, and pursuant
to documentation, which is satisfactory to the Required Lenders.

                  "Schedule  of  Commitments"  shall  mean the  schedule  of the
Commitments of the Lenders set forth in Schedule 1 hereto.

                  "SDC"  shall  mean  GCI   Communication's   existing   Seattle
Distribution Center located at 2001 6th Avenue, Suite 2900, Seattle, Washington

                  "Short Term Holdings Credit Agreement" shall mean that certain
Amended  and  Restated  Credit  Agreement  dated as of  November  14, 1997 among
Holdings,  the lenders  referred  to therein,  NationsBank  of Texas,  N.A.,  as
Administrative  Agent,  Credit Lyonnais New York Branch, as Documentation  Agent
and TD Securities (USA), Inc., as Syndication Agent, which agreement,  as of the
Closing Date, provides for a revolving credit facility up to a maximum amount of
$50,000,000 (which revolving credit facility may convert to a term loan, subject
to the  terms  and  conditions  set  forth  therein,  on the 364th day after the
original  closing  of  such  facility),   as  such  agreement  may  be  amended,
supplemented or otherwise modified, renewed or replaced from time to time.

                  "Significant  Permits"  shall have the meaning given such term
in Section 5.21 hereof.

                  "Specified Amount" shall mean $50,000,000.

                  "Specified  Date"  shall  mean the  earlier of (i) the date on
which the Borrower  fulfills its obligations  under Section 5.21 hereof and (ii)
July 31, 1998.

                  "Sponsor" shall mean GCI.

                  "Sponsor  Equity  Funds"  shall  mean  the  $50,000,000  to be
contributed to the Borrower by GCI.

                  "Sponsor  Undertaking"  shall mean the undertaking letter from
GCI  substantially in the form of Exhibit H hereto,  as such undertaking  letter
may be amended,  supplemented  or otherwise  modified,  renewed or replaced from
time to time in accordance with the terms thereof.

                  "SSI Cash Collateral  Agreement"  shall mean that certain Cash
Collateral and Security  Agreement  dated effective as of December 1, 1997 among
the  Borrower,  the  Contractor,  Credit  Lyonnais New York Branch and The First
National Bank of Anchorage,  as such agreement may be amended,  supplemented  or
otherwise modified, renewed or replaced from time to time.





                                      -21-
<PAGE>
                  "SSI  Cash   Collateral   Account"   shall  mean  Account  No.
50-1150-00  0180-803-9  in the name of the  Contractor  and the  Borrower at the
office of The First National Bank of Anchorage, 101 West 36th Avenue, Suite 419,
P.O. Box 100720,  Anchorage,  Alaska 99520 which account is the Cash  Collateral
Account referred to in the SSI Cash Collateral Agreement.

                  "Subordinated  Debt"  shall  mean all  Indebtedness  and other
obligations  of the  Borrower  owing  to  Holdings  or GCI  Transport  which  is
subordinated to the Obligations pursuant to the Subordination Agreement.

                  "Subordination   Agreement"   shall  mean  the   Subordination
Agreement  substantially  in the form of Exhibit F hereto,  among the  Borrower,
Holdings,  GCI Transport and the Administrative  Agent, as such agreement may be
amended,  supplemented or otherwise  modified,  renewed or replaced from time to
time.

                  "Subsidiary"  shall  mean  with  respect  to any  Person,  any
corporation,  association,  joint venture,  partnership or other business entity
(whether now existing or  hereafter  organized)  of which at least a majority of
the voting stock or other ownership  interests  having ordinary voting power for
the election of directors  (or the  equivalent)  is, at the time as of which any
determination  is being made,  owned or controlled by such Person or one or more
subsidiaries  of such Person or by such Person and one or more  subsidiaries  of
such Person.

                  "System"  shall mean the SONET OC-48 fiber optic cable network
connecting the cities of Anchorage,  Whittier, Valdez, Fairbanks and Lena Point,
Alaska, and Norma Beach and Seattle, Washington, which System shall be comprised
of the Alaska United Fiber System, the Electronics, the fiber pairs in the Kanas
Cable to which the Borrower has been granted exclusive use pursuant to the Kanas
Agreement,  the fiber pairs in the GCI Cable  Facility to which the Borrower has
been granted exclusive use pursuant to the GCI Fiber Exchange  Agreement and all
other  equipment or rights  necessary to operate the Alaska  United Fiber System
and the fiber pairs in the Kanas Cable and the GCI Cable  Facility (to which the
Borrower has been granted  exclusive  use) as an  integrated  telecommunications
network.  The undersea  portion of the network shall connect landing stations to
be  located  at  Whittier,  Valdez,  Lena  Point and Norma  Beach.  An  undersea
branching unit shall connect the three undersea fiber cable segments originating
at Whittier,  Lena Point and Norma Beach. A separate  undersea  extension  shall
directly  connect  landing  stations at Whittier  and  Valdez.  The  terrestrial
portion of the System  consists of inland  extensions  from Whittier to SADC and
AT&T's  principal point of presence in Anchorage,  from Valdez to FDC and AT&T's
principal point of presence Fairbanks , and from Norma Beach to SDC.

                  "Term  Loan  Commitment"  shall  mean the  commitment  of each
Lender to make a Term Loan to the Borrower on the  Completion  Date in an amount
not in excess of the  amount  set forth (i)  opposite  its name under the column
entitled "Term Loan  Commitment" in the Schedule of Commitments,  or (ii) in any
applicable  Assignment and Acceptance(s) to which it may be a 




                                      -22-
<PAGE>
party,  as the case may be, as such  amount may be reduced  from time to time in
accordance with the terms of this Credit Agreement.

                  "Term Loan" shall mean the loan made  hereunder in  accordance
with the provisions of Section  2.2(a),  whether made as a Eurodollar Loan or an
Alternate Base Rate Loan, as permitted hereby.

                  "Term Notes" shall have the meaning given such term in Section
2.4(b) hereof.

                  "Total  Debt"  shall  mean  the  amount  of  all   outstanding
Indebtedness  of the Borrower  less the amount of all  outstanding  Subordinated
Debt.

                  "Transaction  Party"  shall  mean each of GCI,  Holdings,  GCI
Transport,  GCI  Communication,  GCI Cable, GCI Fiber,  Fiber Hold and any other
Affiliate of Holdings that becomes a party to a Satisfactory  Capacity Agreement
or a Fundamental Document.

                  "Transport  Keep-Well  Agreement"  shall  mean  the  Operating
Keep-Well  Agreement  substantially  in the form of Exhibit L hereto,  among GCI
Transport,  the Borrower and the Administrative  Agent, as such agreement may be
amended,  supplemented or otherwise  modified,  renewed or replaced from time to
time.

                  "Transport  Pledge  Agreement" shall mean the Pledge Agreement
substantially  in the form of Exhibit D hereto,  between GCI  Transport  and the
Administrative  Agent,  as  such  agreement  may  be  amended,  supplemented  or
otherwise modified, renewed or replaced from time to time.

                  "UCC" shall mean the Uniform  Commercial  Code as in effect in
the State of New York.

                  "UCC-1 Financing  Statements" shall mean a financing statement
on Form UCC-1  which  statement  is in  appropriate  form for  filing  under the
Uniform  Commercial Code in effect in the applicable  jurisdiction in which such
statement is to be filed.

                  "Undersea  Right of Way" shall mean the real  property  or sea
bed on or in which the  undersea  portion of the Alaska  United Fiber System (as
described in the second and third  sentence of the  definition of "Alaska United
Fiber System" set forth  herein) is to be built and located,  and the rights and
interests  of the  Borrower  which  permit such  undersea  portion of the Alaska
United Fiber  System to be so located,  which rights and interest are more fully
described in Schedule 1A hereto.

                  "Valdez" shall mean the Borrower's cable landing station to be
built at or near 200 South Harbor, Valdez, Alaska.





                                      -23-
<PAGE>
                  "Whittier"  shall mean the Borrower's cable landing station at
or near Lot #16, First Addition to the Port of Whittier, Alaska.



2.  THE LOANS

                  SECTION 2.1. Construction Loans. (a). Each Lender,  severally
and not jointly, agrees, upon the terms and subject to the conditions hereof, to
make loans to the  Borrower,  on any Business Day and from time to time from the
Closing Date to but excluding the Construction  Commitment Termination Date, for
use in paying  Project  Costs each in an aggregate  principal  amount which when
added to the aggregate  principal amount of all Construction  Loans  theretofore
made to the Borrower by such Lender, does not exceed such Lender's  Construction
Commitment.

                  (b)  Once  repaid,   amounts   constituting  the  Construction
Commitments  may not be reborrowed  and the  Construction  Commitments  shall be
automatically and permanently reduced accordingly.

                  (c)  Subject to Section  2.3,  the Loans shall be made at such
times as the Borrower shall request.

                  (d)  Notwithstanding  anything to the contrary above, a Lender
shall not be obligated to make any  Construction  Loan if, as a result  thereof,
(i) the aggregate  principal amount of all  Construction  Loans then outstanding
would exceed the aggregate amount of the Construction Commitments then in effect
or (ii) at any time on or prior to the Specified  Date, the aggregate  amount of
outstanding Obligations would exceed the Specified Amount.

                  SECTION  2.2 Term Loan.  (a) Each  Lender,  severally  and not
jointly,  agrees, upon the terms and subject to the conditions hereof, to make a
loan to the Borrower on the  Completion  Date in the  principal  amount equal to
such  Lender's  Pro  Rata  Share  of  the  aggregate  principal  amount  of  all
Construction Loans outstanding on the Completion Date, provided,  however,  that
in no event shall the amount of any such loan to be made by such  Lender  exceed
such Lender's Term Loan Commitment.

                  (b)  Once   repaid,   amounts   constituting   the  Term  Loan
Commitments may not be reborrowed.

                  SECTION  2.3.  Making  of  Loans.  (a) Each  Loan  shall be an
Alternate  Base Rate  Loan or a  Eurodollar  Loan as the  Borrower  may  request
subject to, and in accordance with, this Section 2.3.





                                      -24-
<PAGE>
                  (b) The Borrower shall give the Administrative  Agent at least
ten Business Days' prior written, facsimile or telephonic (promptly confirmed in
writing) notice of each Borrowing which is to consist of Eurodollar  Loans,  and
at least eight Business Days' prior written,  facsimile or telephonic  (promptly
confirmed in writing)  notice of each Borrowing which is to consist of Alternate
Base Rate Loans.  Each such notice in order to be effective  must be received by
the  Administrative  Agent not later than 1:00 p.m.,  New York City time, on the
day required and shall specify the date (which shall be a Business Day) on which
such Loan is to be made,  the amount of the  requested  Borrowing,  whether  the
Borrowing  then being  requested is to consist of  Alternate  Base Rate Loans or
Eurodollar  Loans and in the case of Eurodollar  Loans,  the Interest  Period or
Interest Periods with respect thereto. Each such notice shall be irrevocable. If
no election of an Interest Period is specified in any such notice in the case of
a Borrowing  consisting of Eurodollar Loans, such notice shall be deemed to be a
request  for an Interest  Period of one month.  If no election is made as to the
type of Loan,  such notice shall be deemed a request for a Borrowing  consisting
of Alternate Base Rate Loans. No Borrowing shall consist of Eurodollar  Loans if
after  giving  effect  thereto  an  aggregate  of more  than  four (4)  separate
Eurodollar  Loans would be  outstanding  hereunder  with respect to a Lender (as
determined in accordance with Section 2.9(c)  hereof).  The Lenders shall not be
required  to make  Construction  Loans  hereunder  more  often  than  twice each
calendar  month.  The  Borrower  hereby  agrees  that  for  each  Interest  Rate
Protection  Agreement  entered into by the Borrower  (whether in order to comply
with the provisions of Section 5.17 hereof or  otherwise),  it will use its best
efforts to  maintain  one or more  Eurodollar  Loans in an  aggregate  principal
amount equal to the notional amount of such Interest Rate  Protection  Agreement
which  Eurodollar  Loans shall have  Interest  Periods  which  correspond to the
payment dates set forth in such Interest Rate Protection Agreement.

                  (c) The  Borrower  shall not  request  any  Construction  Loan
hereunder  in an amount  greater than the amount of Project  Costs  incurred and
then  due and  payable  or if such  Loan is to fund  the  working  capital  item
included in the Construction Budget, greater than $1,000,000; provided, however,
that  the  Borrower  may  request  a  Construction  Loan  on  the  Business  Day
immediately  preceding  the  Construction   Commitment  Termination  Date  in  a
principal  amount (i) equal to or less than the amount of Project Costs incurred
but not yet due and payable and (ii) which when added to the aggregate principal
amount of all Construction Loans then outstanding, does not exceed the aggregate
Construction  Commitments  (any such  loan  shall be  referred  to herein as the
"Final  Construction  Loan"). At any time on or prior to the Specified Date, the
Borrower shall not request any Construction  Loan in an amount which would cause
the amount of outstanding Obligations to exceed the Specified Amount.

                  (d) The  Administrative  Agent shall promptly (but in no event
later than two (2) days prior to the date of any proposed  Borrowing which is to
consist  of  Eurodollar  Loans),  notify  each  Lender  (by  telecopier)  of its
proportionate  share of each Borrowing  under this Section 2.3, the date of such
Borrowing, the type of Loans being requested and the Interest Period or Interest
Periods applicable thereto. On the borrowing date specified in such notice, each
Lender shall make its share of the Borrowing  available at the offices of Credit
Lyonnais 




                                      -25-
<PAGE>
New York Branch,  ABA #026-008073,  Attention:  Loan Servicing  Department,  for
credit to Holdover Account No. 01-88179-2145-00  (Reference:  Alaska United), no
later  than  1:00  p.m.  New York  City  time in  Federal  or other  immediately
available  funds.  Upon receipt of the funds to be made available by the Lenders
to fund any  Construction  Loan  hereunder to pay Project Costs (other than Bank
Charges),  the Administrative  Agent shall disburse such funds by depositing the
proceeds of such Loans directly into the Construction Account provided, however,
that with respect to the Final Construction Loan, the Administrative Agent shall
disburse the  applicable  funds by  depositing  the proceeds of such Loan into a
segregated  account  under the sole  dominion and control of the  Administrative
Agent and upon receipt by the Administrative Agent of a written request from the
Borrower,  the Administrative  Agent shall arrange for the deposit of such funds
into the  Construction  Account  (provided  such  request is  accompanied  by an
Engineer's  Certificate)  or shall  apply  such  funds to the  repayment  of the
outstanding  principal  amount of the Loans in accordance with the terms hereof.
With regard to any  Borrowing  (or portion  thereof)  to pay Bank  Charges,  the
Administrative  Agent shall disburse such funds to the Lenders in payment of the
Bank Charges in respect of which such Borrowing is being made.

                  (e) Each Lender may at its option  fulfill its  obligation  to
make  Eurodollar  Loans by causing a foreign  branch or  affiliate  to make such
Eurodollar Loans, provided that any exercise of such option shall not affect the
obligation  of the Borrower to repay Loans in  accordance  with the terms hereof
and the  relevant  Note.  Subject to the other  provisions  of this Section 2.3,
Section  2.8(b) and Section 2.13,  Loans of more than one interest rate type may
be outstanding at the same time.

                  (f) Each Loan requested hereunder on any date shall be made by
each Lender in accordance with its respective Percentage.

                  (g) On the date  requested  by the Borrower for the funding of
each Loan, the  Administrative  Agent shall be authorized (but not obligated) to
advance,  for the account of each of the  Lenders,  the amount of the Loan to be
made by such Lender in accordance  with its  Percentage  hereunder.  Each of the
Lenders hereby authorizes and requests the  Administrative  Agent to advance for
its account,  pursuant to the terms hereof, the amount of the Loan to be made by
it, and each of the Lenders  agrees  forthwith to reimburse  the  Administrative
Agent in immediately available funds for the amount so advanced on its behalf by
the  Administrative  Agent. If any such reimbursement is not made in immediately
available  funds on the same day on which the  Administrative  Agent  shall have
made any such amount  available  on behalf of any Lender,  such Lender shall pay
interest to the Administrative Agent equal to the Administrative Agent's cost of
obtaining  overnight  funds in the New York Federal Funds Market.  If and to the
extent   that  any  such   reimbursement   shall  not  have  been  made  to  the
Administrative  Agent, the Borrower agrees to repay to the Administrative  Agent
forthwith on demand a  corresponding  amount with interest  thereon for each day
from the date such amount is made  available to the Borrower until the date such
amount is repaid to the Administrative Agent at the Alternate Base Rate plus the
Applicable Margin for Alternate Base Rate Loans.





                                      -26-
<PAGE>
                  (h) The amount of any  Borrowing  of new funds  shall be in an
aggregate principal amount of at least $1,000,000 (or if applicable, such lesser
amount as shall  equal the  available  but unused  portion  of the  Construction
Commitments).

                  (i)  Notwithstanding the provisions of clause (b) above and/or
the absence of a request from the Borrower  that the Lenders make a Loan, at any
time prior to the Completion  Date, the Required  Lenders may direct the Lenders
to make Loans and apply the proceeds thereof as follows:

                  (i)      if  Holdings  shall have taken over  construction  or
                           operation of the Project  pursuant to the  Completion
                           Guaranty,  the Lenders may make Loans for the account
                           of the Borrower with respect to the  construction  of
                           the Project and pay the proceeds  thereof directly to
                           Holdings,  as the completion  guarantor to be used to
                           finance   the   construction   and   achievement   of
                           Completion  of the  Project  pursuant to the terms of
                           the Completion Guaranty; and

                  (ii)     if an Event of  Default  shall have  occurred  and be
                           continuing,  the  Lenders  may  make  Loans  for  the
                           account of the Borrower and pay the proceeds  thereof
                           directly to Holdings,  as the completion guarantor or
                           to Persons providing  services in connection with the
                           construction   of  the   Project   so  as  to  ensure
                           Completion of the Project.

                  SECTION  2.4.  Notes;  Repayment  of the  Term  Loan.  (a) The
Construction  Loans made by each Lender hereunder shall be evidenced by a single
promissory  note  substantially  in the  form  of  Exhibit  A-1  hereto  (each a
"Construction  Note" and  collectively,  the  "Construction  Notes") in the face
amount of such Lender's  Construction  Commitment,  payable to the order of such
Lender,  duly  executed by the  Borrower  and dated as of the date  hereof.  The
principal  amount of the  Construction  Loans as evidenced  by the  Construction
Notes shall be payable in full on the Completion Date.

                  (b) The  Term  Loan  made by each  Lender  hereunder  shall be
evidenced by a single  promissory note  substantially in the form of Exhibit A-2
hereto  (each a "Term  Note" and  collectively,  the "Term  Notes")  in the face
amount equal to the principal  amount of the Term Loan to be made by such Lender
on the Completion  Date,  payable to the order of such Lender,  duly executed by
the Borrower and dated as of the date hereof.  The principal  amount of the Term
Loan as  evidenced  by the Term Notes  shall be  payable  in equal  installments
payable on the last  Business Day of each March,  June,  September  and December
commencing on the first such date occurring after the Conversion  Date, with the
last  installment  due on the Final Maturity Date. The balance of the Term Loans
shall be payable in full on the Final Maturity Date.

                  (c) Each of the Notes shall bear  interest on the  outstanding
principal  balance  thereof as set forth in Section 2.5 hereof.  Each Lender and
the Administrative Agent on its 




                                      -27-
<PAGE>
behalf is hereby  authorized by the Borrower,  but not  obligated,  to enter the
amount of each Loan and the amount of each payment or prepayment of principal or
interest  thereon  in  the  appropriate  spaces  on  the  reverse  of,  or on an
attachment to, such Lender's Notes. The entries made on the reverse of, or on an
attachment  to, any Note shall be prima  facie  evidence  of the  existence  and
amount of the Loans evidenced by such Note; provided,  however, that the failure
of any Lender or the Administrative  Agent to make any such entries shall not in
any  manner  affect  the  obligations  of the  Borrower  to repay  the  Loans in
accordance with terms hereof and the Notes.

                  SECTION 2.5.  Interest.  (a) In the case of a Eurodollar Loan,
interest  shall be payable by the  Borrower  to the  Lenders at a rate per annum
(computed  on the basis of the actual  number of days elapsed over a year of 360
days) equal to the LIBO Rate plus the Applicable  Margin for  Eurodollar  Loans.
Interest shall be payable by the Borrower to the Lenders on each Eurodollar Loan
on each  applicable  Interest  Payment  Date,  at maturity  and on the date of a
conversion  of  such  Eurodollar  Loan  to an  Alternate  Base  Rate  Loan.  The
Administrative  Agent shall determine the applicable LIBO Rate for each Interest
Period as soon as practicable on the date when such  determination is to be made
in respect of such Interest Period and shall notify the Borrower and the Lenders
of the  applicable  interest rate so  determined.  Such  determination  shall be
conclusive absent manifest error.

                  (b) In the case of an Alternate Base Rate Loan, interest shall
be payable by the  Borrower to the Lenders at a rate per annum  (computed on the
basis of the actual  number of days elapsed over a year of 365/366  days, as the
case may be) equal to the  Alternate  Base Rate plus the  Applicable  Margin for
Alternate  Base Rate  Loans.  Interest  shall be payable by the  Borrower to the
Lenders in arrears on each Alternate Base Rate Loan on each applicable  Interest
Payment Date and at maturity.

                  (c) The Applicable  Margin is subject to reduction at any time
following the  Completion  Date as follows:  in the event that (i) Total Debt of
the Borrower is equal to or less than  $60,000,000  and (ii) no Default or Event
of Default  shall have  occurred and then be  continuing,  then after and for so
long as such  conditions  are satisfied,  the  Applicable  Margin for Eurodollar
Loans and for  Alternate  Base Rate  Loans  hereunder  shall be  reduced  to the
applicable  amounts  set  forth  below  under  column  (b)  or  column  (c)  (as
applicable)  opposite the category in column (a) which corresponds to the amount
of the Borrower's Total Debt:





                                      -28-
<PAGE>
<TABLE>
<CAPTION>
                  (a)                                    (b)                                   (c)
                                                                                        Reduced Applicable
                                                  Reduced Applicable                   Margin for Alternate
              Total Debt                     Margin for Eurodollar Loans                 Base Rate Loans
---------------------------------------- ------------------------------------- -------------------------------------
<S>                                                     <C>                                   <C>   
greater than $40,000,000 but less than                  2.75%                                 1.50%
or equal to $60,000,000
---------------------------------------- ------------------------------------- -------------------------------------
$40,000,000 or less                                     2.50%                                 1.25%
---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>

Any such reduction in the Applicable  Margin shall be prospective and shall take
effect  on  the  fifth  Business  Day  following  receipt  by the  Lenders  of a
certificate  signed by an  Authorized  Officer of the  Borrower on behalf of the
Borrower  demonstrating that Total Debt of the Borrower is less than or equal to
$40,000,000 or $60,000,000 (as applicable) and requesting the Applicable  Margin
be reduced in  accordance  with this  Section  2.5(c) to the amount set forth in
such  certificate.  If during any period  when the  Borrower  is  entitled  to a
reduced  Applicable  Margin  as  provided  for  in  this  paragraph,  any of the
conditions  which  were the basis  for such  eligibility  ceases  to exist,  the
Borrower shall immediately notify the Administrative  Agent that such conditions
no longer  exist and the  Applicable  Margin  shall  increase to the  Applicable
Margin which is otherwise applicable as a result of such change in circumstances
in  accordance  with this  paragraph  (c).  If such  increase is the result of a
Default or Event of Default,  then such increase  shall be effective on the date
of such Default or Event of Default;  and if such  increase is the result of the
Total Debt of the Borrower exceeding $40,000,000 or $60,000,000 (as the case may
be),  then such  increase  shall be effective on the date on which Total Debt of
the Borrower first exceeded $40,000,000 or $60,000,000 (as the case may be).

                  (d)  Anything  in this  Credit  Agreement  or the Notes to the
contrary notwithstanding, the interest rate on the Loans shall in no event be in
excess of the maximum permitted by Applicable Law.

                  SECTION 2.6.  Commitment Fees and Other Fees. (a) The Borrower
agrees to pay to the Administrative  Agent for the account of each Lender on the
last  Business  Day of each March,  June,  September  and  December in each year
(commencing  on the last  Business Day of March 1998) prior to the  Construction
Commitment Termination Date and on the Construction Commitment Termination Date,
an aggregate fee (the "Commitment Fees") of 3/8 of 1% per annum, computed on the
basis of the  actual  number of days  elapsed  during  the  preceding  period or
quarter  over a year of 360 days,  on the  average  daily  amount by which  such
Lender's Construction Commitment (as such Construction Commitment may be reduced
in  accordance  with  the  provisions  of this  Credit  Agreement)  exceeds  the
principal  balance of such Lender's  outstanding  Construction  Loans during the
preceding period or quarter.





                                      -29-
<PAGE>
                  (b) The  Commitment  Fees shall commence to accrue on the date
this Credit Agreement is fully executed.

                  (c)  In  addition,   the   Borrower   agrees  to  pay  to  the
Administrative  Agent and any of the other  Lenders on the Closing  Date any and
all other fees that are then due and payable  pursuant to the Commitment  Letter
or the Fee Letter.

                  SECTION   2.7.   Mandatory   Termination   or   Reduction   of
Commitments.   (a)  The  Term  Loan   Commitments   of  all  the  Lenders  shall
automatically  terminate  at 5:00 p.m.,  New York City time,  on the  Completion
Date.

                  (b) The Construction  Commitments shall be permanently reduced
pursuant to, and as provided in, Section 2.1(b).

                  (c) At any time prior to the  Completion  Date,  the  Borrower
may,  upon five (5)  Business  Days' prior  written or  facsimile  notice to the
Administrative  Agent,  permanently  reduce the Construction  Commitments by the
minimum aggregate amount of $1,000,000; provided, however, that the Construction
Commitments  may not be reduced to an amount less than the  aggregate  principal
amount of all Construction  Loans then outstanding and provided,  further,  that
the Borrower shall have demonstrated to the satisfaction of the Required Lenders
(which shall be evidenced by a written  instrument)  that the Borrower will have
sufficient  funds  (after  giving  effect  to  the  proposed  reduction  of  the
Construction  Commitments)  to  Complete  the System by  January  1,  1999.  Any
reduction of the Construction  Commitments pursuant to this Section 2.7(c) shall
be  made  among  the  Lenders  ratably  in  accordance  with  their   respective
Percentages.

                  (d) The Borrower may at any time prior to the Completion Date,
upon  five  (5)  Business  Days'  prior  written  or  facsimile  notice  to  the
Administrative Agent, terminate the Construction  Commitments in their entirety,
provided that the principal  amount of all  Construction  Loans then outstanding
are repaid in full either prior to, or simultaneously with, such termination.

                  (e)  Simultaneously  with each termination or reduction of the
Construction Commitments, the Borrower shall pay to the Administrative Agent for
the benefit of each Lender all accrued and unpaid  Commitment Fees on the amount
of the  Construction  Commitments  so terminated or reduced  through the date of
such termination or reduction.

                  SECTION 2.8. Default Interest; Alternate Rate of Interest. (a)
Upon the  occurrence  and during the  continuance  of an Event of  Default,  the
Borrower  shall on demand in  writing  from  time to time pay  interest,  to the
extent permitted by Applicable Law, on all Loans and overdue amounts outstanding
up to the date of  actual  payment  of such  amounts  (after  as well as  before
judgment)  (i) for the  remainder of the then current  Interest  Period for each
Eurodollar  Loan,  at 2% in  excess  of the rate  then in  effect  for each such
Eurodollar Loan and (ii) for all periods subsequent to the then current Interest
Period for each  Eurodollar  Loan, for all Alternate 




                                      -30-
<PAGE>
Base Rate Loans and for all other overdue amounts hereunder,  at 2% in excess of
the rate then in effect for Alternate Base Rate Loans.

                  (b) In the event, and on each occasion,  that on or before the
day on which  the LIBO Rate for a  Eurodollar  Loan is to be  determined  as set
forth herein, (i) the  Administrative  Agent shall have received notice from any
Lender of such Lender's  determination  (which  determination,  absent  manifest
error,  shall be conclusive) that Dollar deposits in the amount of the principal
amount of such  Lender's  Eurodollar  Loan are not  generally  available  in the
London Interbank Market or that the rate at which such Dollar deposits are being
offered will not adequately and fairly reflect the cost to such Lender of making
or maintaining the principal amount of such Lender's Eurodollar Loan during such
Interest  Period or (ii) the  Administrative  Agent shall have  determined  that
reasonable  means do not exist for  ascertaining  the applicable  LIBO Rate, the
Administrative Agent shall, as soon as practicable  thereafter,  give written or
facsimile notice of such determination to the Borrower and the Lenders,  and any
request by the Borrower for a Eurodollar  Loan (or conversion to or continuation
as a Eurodollar Loan pursuant to Section 2.9 hereof), made after receipt of such
notice,  shall be deemed to be a request for an Alternate Base Rate Loan.  After
such  notice  shall have been given and until the  circumstances  giving rise to
such notice no longer exist,  each request (or portion thereof,  as the case may
be) for a Eurodollar  Loan shall be deemed to be a request for an Alternate Base
Rate Loan.

                  SECTION  2.9.   Continuation  and  Conversion  of  Loans.  The
Borrower shall have the right,  at any time, (i) to convert any Eurodollar  Loan
or portion thereof to an Alternate Base Rate Loan or to continue such Eurodollar
Loan or a portion thereof for a successive  Interest Period,  or (ii) to convert
any Alternate Base Rate Loan or a portion thereof to a Eurodollar Loan,  subject
to the following:

                  (a) the  Borrower  shall give the  Administrative  Agent prior
written,  facsimile or telephonic (promptly confirmed in writing) notice of each
continuation  or  conversion  hereunder  of at  least  three  Business  Days for
continuation as or conversion to a Eurodollar Loan and at least one Business Day
for conversion to an Alternate Base Rate Loan;  such notice shall be irrevocable
and to be  effective,  must be received by the  Administrative  Agent on the day
required not later than 1:00 p.m., New York City time;

                  (b) no Event of Default or Default  shall have occurred and be
continuing at the time of any conversion to a Eurodollar Loan or continuation of
any such Eurodollar Loan into a subsequent Interest Period;

                  (c)  no  Alternate  Base  Rate  Loan  may  be  converted  to a
Eurodollar Loan and no Eurodollar Loan may be continued as a Eurodollar Loan if,
after such conversion or continuance,  and after giving effect to any concurrent
prepayment  of Loans,  an aggregate  of more than four (4)  separate  Eurodollar
Loans would be  outstanding  hereunder with respect to each Lender (for purposes
of  determining  the number of such  Loans  outstanding,  Loans  with  different
Interest  Periods  shall be counted as different  Loans even if made on the same
date);





                                      -31-
<PAGE>
                  (d) if fewer than all Loans at the time  outstanding  shall be
continued or converted,  such  continuation or conversion shall be made pro rata
among the Lenders in accordance  with the  respective  principal  amount of such
Loans held by the Lenders immediately prior to such continuation or conversion;

                  (e) the aggregate  principal  amount of Loans  continued as or
converted to Eurodollar  Loans as part of the same  Borrowing  shall be at least
$1,000,000;

                  (f)  accrued  interest  on the  Eurodollar  Loans (or  portion
thereof) being  continued or converted shall be paid by the Borrower at the time
of continuation or conversion (as applicable);

                  (g) the Interest  Period with respect to a new Eurodollar Loan
effected by a  continuation  or  conversion  shall  commence on the date of such
continuation or conversion;

                  (h) if a Eurodollar  Loan is  converted  to an Alternate  Base
Rate  Loan  other  than on the  last day of the  Interest  Period  with  respect
thereto,  the  amounts  required  by  Section  2.11  shall  be  paid  upon  such
conversion; and

                  (i) each  request for a  continuation  as or  conversion  to a
Eurodollar  Loan which fails to state an  applicable  Interest  Period  shall be
deemed to be a request for an Interest Period of one month.

In the event that the Borrower  shall not give notice to continue or convert any
Eurodollar Loan as provided above, such Loan (unless repaid) shall automatically
be  converted  to an  Alternate  Base  Rate Loan at the  expiration  of the then
current  Interest  Period.  The  Administrative  Agent shall,  after it receives
notice  from the  Borrower,  promptly  (but in no event  later than two (2) days
prior  to the  date  of any  proposed  conversion  to,  or  continuation  as,  a
Eurodollar Loan) give the Lenders notice of any continuation or conversion.  The
Borrower shall exercise its rights pursuant to this Section 2.9 in such a manner
so as to comply with its  obligations  set forth in the last sentence of Section
2.3(b) hereof.

                  SECTION 2.10. Prepayment of Loans. (a) The Borrower shall have
the right at its  option  at any time and from  time to time to  prepay  without
penalty or premium  except as  otherwise  provided  herein  (including,  without
limitation,  pursuant to Section 2.11 hereof) (i) any Alternate  Base Rate Loan,
in whole or in part, upon at least one Business Day's prior written,  telephonic
(promptly confirmed in writing) or facsimile notice to the Administrative Agent,
in the minimum principal amount of $500,000 if prepaid in part, or the remaining
balance of such Loan if prepaid in full and (ii) any  Eurodollar  Loan, in whole
or in  part,  upon at least  three  Business  Days'  prior  written,  telephonic
(promptly  confirmed in writing) or facsimile  notice,  in the minimum principal
amount of $1,000,000  if prepaid in part, or the remaining  balance of such Loan
if prepaid in full. Each notice of prepayment shall specify the prepayment date,
each Loan to be prepaid and the principal  amount thereof,  shall be irrevocable
and shall  commit the 




                                      -32-
<PAGE>
Borrower to prepay such Loan in the amount and on the date stated  therein.  All
prepayments of Eurodollar  Loans under this Section 2.10(a) shall be accompanied
by accrued but unpaid interest on the principal amount being prepaid to (but not
including) the date of prepayment.

                  (b) Outstanding  Loans shall be prepaid in accordance with the
other provisions of this Section 2.10 at least once during each calendar quarter
to the extent there are sufficient funds available for such purpose pursuant to,
and in accordance with, the terms of the Depositary Agreement.

                  (c) The Borrower  shall prepay the Loans in an amount equal to
(i) any balance in the  Construction  Account  remaining after all Project Costs
shall have been paid or after the  abandonment of the Project and (ii) any funds
released to the Borrower from the SSI Cash Collateral Account in accordance with
the terms of the SSI Cash Collateral Agreement.

                  (d) Except as  explicitly  provided in the second  sentence of
this Section 2.10(d),  the Borrower shall prepay the Loans in an amount equal to
any amount  deposited  in the  Insurance  Proceeds  Account in  accordance  with
Section  5.5(d)  hereof  within  sixty  (60) days  after  such  amount  has been
deposited in such account, unless the Required Lenders consent in writing to the
use of such amount by the Borrower to restore,  refurbish,  replace or otherwise
repair  the  System or any  portion  thereof.  So long as no Default or Event of
Default shall have occurred and then be continuing,  any amount equal to or less
than $2,000,000  deposited in the Insurance  Proceeds Account in accordance with
Section  5.5(d) hereof shall,  upon the request of the Borrower,  be released by
Credit  Lyonnais  New  York  Branch  to the  Borrower  to be  used  to  restore,
refurbish,  replace or otherwise repair that portion of the System whose damage,
destruction, loss, condemnation, confiscation, seizure or other requisition gave
rise to the applicable recovery.

                  (e) The outstanding principal amount of the Construction Loans
shall be repaid  immediately  to the extent that the  aggregate  amount  thereof
exceeds the aggregate amount of the Construction Commitments then in effect.

                  (f) All prepayments of Loans shall,  as regards  interest rate
type, be applied first to Alternate Base Rate Loans and then to Eurodollar Loans
in order of the scheduled expiry of Interest Periods with respect thereto.

                  (g) All  prepayments of Eurodollar  Loans shall be accompanied
by accrued but unpaid interest on the principal  amount being prepaid to but not
including the date of prepayment.

                  (h) If on any day on which Loans would  otherwise  be required
to be repaid or prepaid in accordance with this Credit Agreement, the Depositary
Agreement  or any other  Fundamental  Document,  but for the  operation  of this
Section  2.10(h)  (each a  "Prepayment  Date"),  the  amount  of  such  required
prepayment  exceeds  the  aggregate  principal  amount  of the 




                                      -33-
<PAGE>
then  outstanding  Alternate Base Rate Loans, and no Default or Event of Default
is then continuing, then on such Prepayment Date and upon the written request of
the  Borrower,   the  Administrative  Agent  shall  transfer  Dollars  from  the
Disbursement Account or otherwise to the Cash Collateral Account in an aggregate
amount equal to such excess.  If the Borrower  requests  that such a transfer be
made by the  Administrative  Agent then (i) only the outstanding  Alternate Base
Rate Loans shall be required to be prepaid on such  Prepayment  Date and (ii) on
the last day of each Interest Period in effect with respect to a Eurodollar Loan
after such Prepayment Date, the Administrative  Agent is irrevocably  authorized
and  directed to apply funds from the Cash  Collateral  Account  (and  liquidate
investments  held  in the  Cash  Collateral  Account  as  necessary)  to  prepay
Eurodollar  Loans for which the  Interest  Period is then  ending to the  extent
funds are available in the Cash Collateral Account.

                  SECTION 2.11.  Reimbursement  of Loss.  (a) The Borrower shall
reimburse  each Lender on demand for any loss  incurred or to be incurred by any
such Lender in the reemployment of the funds released (i) by any prepayment (for
any reason) of any Eurodollar  Loan if such Loan is repaid prior to the last day
of the  Interest  Period  for such  Loan or (ii) in the  event  that  after  the
Borrower  delivers a notice of  borrowing  under  Section  2.3(b) or a notice of
continuation or conversion under Section 2.9(a) in respect of Eurodollar  Loans,
such Loan is not made,  converted to or  continued  as a Eurodollar  Loan on the
first day of the Interest  Period  specified in such notice for any reason other
than (A) a suspension  or limitation  under  Section  2.8(b) of the right of the
Borrower to select a  Eurodollar  Loan or (B) a breach by any such Lender of its
obligation  to fund  such  borrowing  when  it is  otherwise  required  to do so
hereunder. Such loss shall be the amount as reasonably determined by such Lender
as the excess, if any, of (I) the amount of interest which would have accrued to
such Lender on the amount so paid or not  borrowed,  continued or converted at a
rate of interest equal to the interest rate  applicable to such Loan pursuant to
Section  2.5, for the period from the date of such payment or failure to borrow,
continue  or convert  to the last day (x) in the case of a payment  prior to the
last day of the  Interest  Period for such Loan,  of the then  current  Interest
Period for such Loan or (y) in the case of such  failure to borrow,  continue or
convert,  of the Interest Period for such Loan which would have commenced on the
date of such  failure  to  borrow,  continue  or  convert,  over (II) the amount
realized or to be realized by such Lender in reemploying  the funds not advanced
or the funds  received in  prepayment or realized from the Loan not so continued
or converted  during the period referred to above.  Each Lender shall deliver to
the Borrower from time to time one or more certificates setting forth the amount
of such loss (and in  reasonable  detail the manner of  computation  thereof) as
determined  by such  Lender,  which  certificates  shall  be  conclusive  absent
manifest error. The Borrower shall pay such Lender the amounts shown on any such
certificate within ten (10) days of the Borrower's receipt of such certificate.

                  (b) In the event the Borrower  fails to prepay any Loan on the
date specified in any prepayment  notice delivered  pursuant to Section 2.10(a),
the  Borrower  shall  pay to the  Administrative  Agent for the  account  of the
applicable  Lender any amounts required to compensate such Lender for any actual
loss  incurred by such Lender as a result of such failure to prepay,  including,
without  limitation,  any  loss,  cost or  expenses  incurred  by  reason of the





                                      -34-
<PAGE>
acquisition  of  deposits  or other  funds by such  Lender  to  fulfill  deposit
obligations  incurred in  anticipation  of such  prepayment.  Each Lender  shall
deliver to the  Borrower and the  Administrative  Agent from time to time one or
more  certificates  setting  forth the  amount  of such loss (and in  reasonable
detail the manner of  computation  thereof) as determined by such Lender,  which
certificates  shall be conclusive  absent manifest error. The Borrower shall pay
such Lender the amounts  shown on any such  certificate  within ten (10) days of
the Borrower's receipt of such certificate.

                  SECTION 2.12. Change in  Circumstances.  (a) In the event that
after  the  date  hereof  any  change  in  Applicable  Law  or in  the  official
interpretation or administration  thereof (including,  without  limitation,  any
request,  guideline  or policy  not  having  the force of law) by any  authority
charged with the  administration or  interpretation  thereof or, with respect to
clause  (ii),  (iii) or (iv) below any change in  conditions,  shall occur which
shall:

                       (i) subject a Lender to, or increase  any net tax,  levy,
                  impost,  duty,  charge,  fee,  deduction or  withholding  with
                  respect to any  Eurodollar  Loan (other than  withholding  tax
                  imposed  by the  United  States of  America  or any  political
                  subdivision  or taxing  authority  thereof  or any other  tax,
                  levy, impost,  duty, charge, fee, deduction or withholding (A)
                  that is  measured  with  respect to the  overall net income of
                  such Lender or of a Lending Office of such Lender, and that is
                  imposed  by  the  United   States  of   America,   or  by  the
                  jurisdiction  in  which  such  Lender  or  Lending  Office  is
                  incorporated, in which such Lending Office is located, managed
                  or controlled or in which such Lender has its principal office
                  (or any political  subdivision or taxing authority  thereof or
                  therein),  or (B) that is  imposed  solely  by  reason of such
                  Lender  failing  to make a  declaration  of, or  otherwise  to
                  establish,  non-residence,  or to make  any  other  claim  for
                  exemption,  or  otherwise  to comply  with any  certification,
                  identification,   information,   documentation   or  reporting
                  requirements   prescribed  under  the  laws  of  the  relevant
                  jurisdiction,  in those cases  where such Lender may  properly
                  make such  declaration or claim or so establish  non-residence
                  or otherwise comply); or

                       (ii)  change the basis of  taxation  of any  payment to a
                  Lender of  principal  or  interest on any  Eurodollar  Loan or
                  other fees and amounts  payable to such Lender  hereunder,  or
                  any combination of the foregoing;  other than  withholding tax
                  imposed  by the  United  States of  America  or any  political
                  subdivision  or taxing  authority  thereof  or any other  tax,
                  levy, impost, duty, charge, fee, deduction or withholding that
                  is  measured  with  respect to the  overall net income of such
                  Lender or of a  Lending  Office  of such  Lender,  and that is
                  imposed  by  the  United   States  of   America,   or  by  the
                  jurisdiction  in  which  such  Lender  or  Lending  Office  is
                  incorporated, in which such Lending Office is located, managed
                  or controlled or in which such Lender has its principal office
                  (or any political  subdivision or taxing authority  thereof or
                  therein); or





                                      -35-
<PAGE>
                       (iii)  impose,  modify or deem  applicable  any  reserve,
                  deposit or similar  requirement  against  any assets  held by,
                  deposits  with or for the account of, or loans or  commitments
                  by, an office of a Lender with respect to any Eurodollar Loan;
                  or

                       (iv) impose upon a Lender or the London  Interbank Market
                  any other  condition with respect to Eurodollar  Loans or this
                  Credit Agreement;

and the result of any of the  foregoing  shall be to increase the actual cost to
such Lender of making or maintaining  any Eurodollar Loan hereunder or to reduce
the amount of any payment (whether of principal, interest or otherwise) received
or receivable by such Lender in connection  with any Eurodollar  Loan hereunder,
or to require such Lender to make any payment in connection  with any Eurodollar
Loan  hereunder,  in each case by or in an amount  which such Lender in its sole
judgment shall deem  material,  then and in each case, the Borrower shall pay to
the  Administrative  Agent  for the  account  of such  Lender,  as  provided  in
paragraph  (c) below,  such  amounts as shall be necessary  to  compensate  such
Lender for such cost, reduction or payment.

                  (b) If any Lender shall have determined that the applicability
of any law, rule,  regulation or guideline  regarding  capital  adequacy adopted
after the date  hereof or any  change  after the date  hereof in any law,  rule,
regulation or guideline  regarding capital adequacy or in the  interpretation or
administration  of any of the foregoing by any Governmental  Authority,  central
bank or comparable  agency  charged with the  interpretation  or  administration
thereof,  or compliance by such Lender (or any Lending Office of such Lender) or
such Lender's  holding company with any request or directive  regarding  capital
adequacy  issued or adopted  after the date  hereof  (whether  or not having the
force of law) of any such authority,  central bank or comparable  agency, has or
would have the effect of reducing the rate of return on such Lender's capital or
on the capital of such Lender's  holding  company,  if any, as a consequence  of
this  Credit  Agreement  or the Loans made by such Lender  pursuant  hereto to a
level below that which such Lender or such Lender's  holding  company could have
achieved but for such applicability, adoption, change or compliance (taking into
consideration  such Lender's  policies and the policies of such Lender's holding
company with respect to capital  adequacy) by an amount deemed by such Lender to
be material,  then from time to time the Borrower  shall pay to such Lender such
additional  amount or amounts as will  compensate  such Lender or such  Lender's
holding  company for any such  reduction  suffered  with  respect to this Credit
Agreement or the Loans made by such Lender hereunder.

                  (c)  Each  Lender  shall  deliver  to  the  Borrower  and  the
Administrative  Agent from time to time, one or more certificates  setting forth
the amounts due to such Lender under  paragraphs (a) and (b) above,  the changes
as a result of which  such  amounts  are due and the  manner of  computing  such
amounts.  Each such  certificate  shall be conclusive in the absence of manifest
error.  The Borrower  shall pay to the  Administrative  Agent for the account of
each such Lender the  amounts  shown as due on any such  certificate  within ten
(10)  Business Days after its receipt of the same. No failure on the part of any
Lender  to  demand  compensation  under  




                                      -36-
<PAGE>
paragraph (a) or (b) above on any one occasion shall  constitute a waiver of its
rights to demand  compensation  on any other  occasion.  The  protection of this
Section  2.12 shall be  available  to each  Lender  regardless  of any  possible
contention of the invalidity or inapplicability of any law,  regulation or other
condition  which shall give rise to any demand by such  Lender for  compensation
hereunder.

                  (d) Each  Lender  agrees  that after it  becomes  aware of the
occurrence of an event or the  existence of a condition  that (i) would cause it
to incur any  increased  cost  hereunder  or render  it  unable to  perform  its
agreements hereunder for the reasons specifically set forth in Section 2.8(b) or
this Section  2.12 or Section 2.15 or (ii) would  require the Borrower to pay an
increased  amount under Section  2.8(b) or this Section 2.12 or Section 2.15, it
will use  reasonable  efforts to notify the  Borrower of such event or condition
and, to the extent not inconsistent with such Lender's internal  policies,  will
use its reasonable  efforts to make, fund or maintain the affected Loans of such
Lender through  another  Lending Office of such Lender if, as a result  thereof,
the  additional  monies  which  would  otherwise  be  required to be paid or the
reduction  of amounts  receivable  by such Lender  hereunder  in respect of such
Loans would be materially  reduced,  or such inability to perform would cease to
exist,  or the increased  costs which would  otherwise be required to be paid in
respect of such Loans pursuant to Section 2.8(b) or this Section 2.12 or Section
2.15 would be materially reduced or the taxes or other amounts otherwise payable
under  Section  2.8(b) or this Section 2.12 or Section 2.15 would be  materially
reduced,  and if, as determined by such Lender,  in its discretion,  the making,
funding or maintaining of such Loans through such other Lending Office would not
otherwise materially adversely affect such Loans or such Lender.

                  SECTION 2.13. Change in Legality. (a) Notwithstanding anything
to the  contrary  contained  elsewhere in this Credit  Agreement,  if any change
after  the  date  hereof  in  Applicable  Law,  guideline  or  order,  or in the
interpretation   thereof  by  any  Governmental   Authority   charged  with  the
administration  thereof,  shall  make  it  unlawful  for any  Lender  to make or
maintain  any  Eurodollar   Loan  or  to  give  effect  to  its  obligations  as
contemplated  hereby with respect to a Eurodollar  Loan, then, by written notice
to the Borrower and the  Administrative  Agent, such Lender may (i) declare that
Eurodollar  Loans will not  thereafter be made by such Lender  hereunder  and/or
(ii) require that,  subject to Section 2.11 hereof,  all outstanding  Eurodollar
Loans made by it be  converted to Alternate  Base Rate Loans,  whereupon  all of
such Eurodollar  Loans shall  automatically  be converted to Alternate Base Rate
Loans,  as of the  effective  date of such notice as provided in  paragraph  (b)
below.  Such Lender's pro rata portion of any subsequent  Eurodollar Loan shall,
instead,  be an Alternate Base Rate Loan unless such declaration is subsequently
withdrawn.

                  (b) A  notice  to the  Borrower  by  any  Lender  pursuant  to
paragraph (a) above shall be effective  for purposes of clause (ii) thereof,  if
lawful,  on the last day of the  current  Interest  Period for each  outstanding
Eurodollar  Loan; and in all other cases,  on the date of receipt of such notice
by the Borrower.





                                      -37-
<PAGE>
                  SECTION  2.14.  Manner of Payments.  All payments of principal
and  interest  by the  Borrower  in respect of any Loans to it shall be pro rata
among the Lenders  holding such Loans in  accordance  with the then  outstanding
principal  amounts of such  Loans held by them.  All  payments  by the  Borrower
hereunder and under the Notes shall be made without  offset or  counterclaim  in
Dollars in Federal or other immediately  available funds at the office of Credit
Lyonnais   New  York   Branch,   for  credit  to  the   Holdover   Account   No.
01-88179-2145-00  (Reference:  Alaska United), no later than 1:00 P.M., New York
City time, on the date on which such payment shall be due. Any payment  received
at such  office  after  such time  shall be  deemed  received  on the  following
Business Day.  Interest in respect of any Loan  hereunder  shall accrue from and
including  the date of such Loan to but excluding the date on which such Loan is
paid or converted to a Loan of a different type.

                  SECTION 2.15. United States Withholding. (a) Prior to the date
of the initial Construction Loan hereunder,  and prior to the effective date set
forth in the  Assignment and  Acceptance  with respect to any Lender  becoming a
Lender after the date hereof,  and from time to time  thereafter if requested by
the Borrower or the Administrative  Agent or required because,  as a result of a
change in law or a change in circumstances or otherwise,  a previously delivered
form or statement becomes incomplete or incorrect in any material respect,  each
Lender  organized  under the laws of a  jurisdiction  outside the United  States
shall provide,  if applicable,  the  Administrative  Agent and the Borrower with
complete, accurate and duly executed forms or other statements prescribed by the
Internal Revenue Service of the United States certifying such Lender's exemption
from,  or  entitlement  to a reduced rate of, United  States  withholding  taxes
(including backup  withholding taxes) with respect to all payments to be made to
such Lender hereunder and under the Notes.

                  (b)  The  Borrower  and  the  Administrative  Agent  shall  be
entitled  to  deduct  and  withhold  any and all  present  or  future  taxes  or
withholdings,  and all liabilities with respect thereto, from payments hereunder
or under the Notes, if and to the extent that the Borrower or the Administrative
Agent in good faith determines that such deduction or withholding is required by
the law of the United  States,  including,  without  limitation,  any applicable
treaty  of  the  United   States.   In  the  event  that  the  Borrower  or  the
Administrative  Agent shall so determine  that deduction or withholding of taxes
is  required,  it shall  advise  the  affected  Lender  as to the  basis of such
determination  prior to actually  deducting and  withholding  such taxes. In the
event the Borrower or the Administrative Agent shall so deduct or withhold taxes
from  amounts  payable  hereunder,  it (i)  shall  pay to or  deposit  with  the
appropriate  taxing authority in a timely manner the full amount of taxes it has
deducted or withheld;  (ii) shall provide  evidence of payment of such taxes to,
or the deposit  thereof with, the appropriate  taxing  authority and a statement
setting forth the amount of taxes deducted or withheld, the applicable rate, and
any other information or documentation  reasonably  requested by the Lender from
whom the taxes were deducted or withheld; and (iii) shall forward to such Lender
any official tax receipts or other  documentation with respect to the payment or
deposit of the deducted or withheld  taxes as may be issued from time to time by
the appropriate  taxing  authority.  Unless the Borrower and the  Administrative
Agent have received forms or other  documents  satisfactory  to them  indicating
that  payments  




                                      -38-
<PAGE>
hereunder or under the Notes are not subject to United States withholding tax or
are  subject to such tax at a rate  reduced by an  applicable  tax  treaty,  the
Borrower or the  Administrative  Agent may withhold  taxes from such payments at
the  applicable  statutory  rate in the case of  payments  to or for any  Lender
organized under the laws of a jurisdiction outside the United States.

                  (c) Each Lender agrees (i) that as between it and the Borrower
or the  Administrative  Agent,  such  Lender  shall be the  Person to deduct and
withhold  taxes,  and to the extent required by law it shall deduct and withhold
taxes, on amounts that such Lender may remit to any other Person(s) by reason of
any undisclosed  transfer or assignment of an interest in this Credit  Agreement
to such other  Person(s)  pursuant  to Section  11.3 and (ii) to  indemnify  the
Borrower and the Administrative  Agent and any officers,  directors,  agents, or
employees of the Borrower or the Administrative  Agent against, and to hold them
harmless  from,  any tax,  interest,  additions  to tax,  penalties,  reasonable
counsel  and  accountants'  fees,  disbursements  or payments  arising  from the
assertion by any appropriate taxing authority of any claim against them relating
to a failure  to  withhold  taxes as  required  by law with  respect  to amounts
described  in clause (i) of this  paragraph  (c) or arising from the reliance by
the Borrower or the Administrative Agent on any form or other document furnished
by such Lender and purporting to establish a basis for not  withholding,  or for
withholding at a reduced rate, taxes with respect to payments hereunder.

                  (d)  Each  assignee  of a  Lender's  interest  in this  Credit
Agreement in  conformity  with Section 11.3 shall be bound by this Section 2.15,
so that such  assignee will have all of the  obligations  and provide all of the
forms  and  statements  and  all  indemnities,  representations  and  warranties
required to be given under this Section 2.15.

                  (e)  Notwithstanding  the  foregoing,  in the  event  that any
additional  withholding  taxes shall  become  payable  solely as a result of any
change in any statute,  treaty,  ruling,  determination or regulation  occurring
after the date hereof in respect of any sum payable hereunder or under any other
Fundamental  Document  to any  Lender  or the  Administrative  Agent (i) the sum
payable by the  Borrower  shall be  increased  as may be necessary so that after
making all required deductions  (including  deductions  applicable to additional
sums payable under this Section 2.15), such Lender or the  Administrative  Agent
(as the case may be) receives an amount equal to the sum it would have  received
had no such withholding  deductions been made, (ii) the Borrower shall make such
deductions,  (iii)  the  Borrower  shall  pay the full  amount  deducted  to the
relevant taxation authority or other authority in accordance with Applicable Law
and (iv) the Borrower shall forward to such Lender or the  Administrative  Agent
(as the case may be) the official tax receipts or other  documentation  pursuant
to Section  2.15(b).  In addition,  the Borrower shall indemnify each Lender and
the  Administrative  Agent for any  additional  withholding  taxes  paid by such
Lender  or the  Administrative  Agent,  as the  case  may be,  or any  liability
(including  penalties and interest)  arising  therefrom or with respect thereto,
whether  or not such  additional  withholding  taxes were  correctly  or legally
asserted.

                  (f) In the event that a Lender  receives a refund of or credit
for taxes  withheld or paid pursuant to clause (e) of this Section  2.15,  which
credit  or  refund  is  identifiable  by such  




                                      -39-
<PAGE>
Lender as being a result  of taxes  withheld  in  connection  with sums  payable
hereunder or under any other  Fundamental  Document,  such Lender shall promptly
notify the Administrative Agent and the Borrower and shall remit to the Borrower
the amount of such refund or credit  allocable  to payments  made  hereunder  or
under the other Fundamental Documents.

                  SECTION 2.16. Interest Adjustments.  If the provisions of this
Credit  Agreement or any Note would at any time require  payment by the Borrower
to a Lender of any  amount of  interest  in excess of the  maximum  amount  then
permitted  by the law  applicable  to any Loan,  the  interest  payments to that
Lender  shall be reduced to the extent  necessary  so that such Lender shall not
receive  interest  in  excess  of such  maximum  amount.  If, as a result of the
foregoing, a Lender shall receive interest payments hereunder or under a Note in
an amount  less than the  amount  otherwise  provided  hereunder,  such  deficit
(hereinafter  called  the  "Interest  Deficit")  will,  to  the  fullest  extent
permitted  by  Applicable  Law,  cumulate and will be carried  forward  (without
interest) until the  termination of this Credit  Agreement.  Interest  otherwise
payable to a Lender  hereunder and under a Note for any subsequent  period shall
be increased by the maximum amount of the Interest  Deficit that may be so added
without causing such Lender to receive  interest in excess of the maximum amount
then  permitted by the law  applicable to the Loans.  The amount of any Interest
Deficit  relating to a particular Loan and Note shall be treated as a prepayment
penalty and shall, to the fullest extent permitted by Applicable Law, be paid in
full at the time of any  optional  prepayment  by the Borrower to the Lenders of
all the Loans at that time outstanding  pursuant to Section 2.10(a) hereof.  The
amount of any Interest  Deficit  relating to a  particular  Loan and Note at the
time of any complete payment of the Loans at that time  outstanding  (other than
an optional  prepayment  thereof  pursuant to Section  2.10(a)  hereof) shall be
canceled and not paid.

                  SECTION  2.17.  Extension of the Final  Maturity  Date. At the
request of the  Borrower  made at any time  during  the  period  from the second
anniversary  of the  Commencement  Date to the fifth  anniversary  thereof,  the
Lenders  hereby agree to extend the Final  Maturity  Date from the date which is
ten (10) years from the Commencement Date to the date which is twelve (12) years
from  the  Commencement  Date  provided  that on the date of such  request,  the
Borrower  demonstrates  to the  satisfaction  of all of the Lenders  that it has
Adequate  Coverage (as defined  below).  As used in this Section 2.17,  the term
"Adequate Coverage" shall mean that projected net revenues to be received by the
Borrower  during  the  period  commencing  on the  date of such  request  by the
Borrower  and ending on the  extended  maturity  date solely  from  Satisfactory
Capacity Agreements, will be sufficient to pay all of the Borrower's anticipated
expenditures during such period (including,  without limitation,  the payment as
and  when  due of all  operating  expenses,  interest  and  scheduled  principal
payments (based on the extended  amortization  schedule) and taking into account
any voluntary loan prepayments actually made prior to the date of such request).
Within 90 days of receipt of the Borrower's  request,  the Administrative  Agent
shall respond to the Borrower in writing as to whether or not all of the Lenders
are satisfied that there is Adequate Coverage.  If all the Lenders are satisfied
that  there is  Adequate  Coverage,  they agree to consent in writing to (x) the
extension of the Final Maturity Date and (y) to an amendment to the amortization
schedule for the Term Loan in order to provide that the principal  




                                      -40-
<PAGE>
amount of the Term Loan  outstanding on the date of such consent as evidenced by
the Term  Notes,  shall be  payable  in equal  installments  payable on the last
Business  day of each  March,  June,  September  and  December,  with  the  last
installment  due on the extended  maturity  date.  The balance of the Term Loans
shall be payable in full on the extended  maturity  date. If the Final  Maturity
Date is extended  pursuant to, and in accordance  with,  the  provisions of this
Section 2.17,  the Borrower  hereby agrees to deliver to each Lender within five
(5) Business Days after receipt of the Lenders' written consent described in the
preceding sentence, a replacement Term Note payable to the order of such Lender,
in the face  amount  equal  to the then  outstanding  principal  amount  of such
Lender's Term Loan,  duly  executed on behalf of the  Borrower,  dated as of the
date  hereof  and  substantially  in the form of the Term Note then held by such
Lender,  but with such changes as may be necessary or appropriate to reflect the
extended Final Maturity Date and the extended amortization schedule.


3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.

                  In order to induce the Administrative Agent and the Lenders to
enter into this Credit Agreement and to make the Loans provided for herein,  the
Borrower makes the following  representations  and warranties to, and agreements
with, the Administrative  Agent and the Lenders,  all of which shall survive the
execution and delivery of this Credit  Agreement,  the issuance of the Notes and
the making of the Loans.

                  SECTION 3.1.  Existence  and Power.  The Borrower is a general
partnership duly organized, validly existing and in good standing under the laws
of the State of Alaska  and is duly  qualified  to do  business  in the State of
Alaska, the State of Washington and all other  jurisdictions  where both (i) the
nature of its  properties  or business  so  requires  and (ii) the failure to be
qualified to do business could cause a Material  Adverse Effect.  The Borrower's
only general partners are the General Partners. The Borrower has the partnership
power  and  authority  to own its  respective  properties  and to  carry  on its
respective  business as now being conducted and as intended to be conducted,  to
execute,  deliver and perform, as applicable,  its obligations under this Credit
Agreement,  the Notes and the other  Fundamental  Documents and other  documents
contemplated  hereby and  thereby to which it is or will be a party and to grant
to the Administrative  Agent for the benefit of the Lenders, a security interest
in the Collateral as contemplated hereby and by the other Fundamental Documents.

                  SECTION  3.2.  Authority  and  No  Violation.  The  execution,
delivery and performance by the Borrower of this Credit  Agreement and the other
Fundamental  Documents to which it is a party,  the  Borrowings  hereunder,  the
execution  and delivery of the Notes and the grant to the  Administrative  Agent
for the benefit of the Lenders of the  security  interest in the  Collateral  as
contemplated  hereby and by the other  Fundamental  Documents (i) have been duly
authorized by all necessary partnership action on the part of the Borrower, (ii)
will not  constitute a violation by the Borrower of any  provision of Applicable
Law or any order of any court or other agency of the United  States or any state
thereof  applicable to the Borrower or any of its  




                                      -41-
<PAGE>
properties or assets,  (iii) will not violate any  provision of the  Partnership
Agreement or any  provision of any  indenture,  agreement,  bond,  note or other
similar  instrument to which the Borrower is a party or by which the Borrower or
its properties or assets are bound, (iv) will not be in conflict with, result in
a breach of or  constitute  (with due notice or lapse of time or both) a default
under, or create any right to terminate,  any such indenture,  agreement,  bond,
note or other  instrument  and (v) will not result in the creation or imposition
of any Lien,  charge or  encumbrance  of any nature  whatsoever  upon any of the
properties  or  assets  of the  Borrower  other  than  pursuant  to this  Credit
Agreement or the other Fundamental Documents.

                  SECTION  3.3.   Governmental   Approval;   Permits.   (a)  All
authorizations,  approvals,  registrations  or filings with any  governmental or
public regulatory body or authority of the United States or any state thereof or
any foreign jurisdiction (other than UCC-1 Financing Statements and the Deeds of
Trust, all of which will be delivered to the  Administrative  Agent prior to the
making  of the  initial  Construction  Loan  hereunder,  in  form  suitable  for
recording  or  filing  with the  appropriate  filing  office)  required  for the
execution, delivery and performance by the Borrower of this Credit Agreement and
the other Fundamental  Documents to which it is a party, have been duly obtained
or made,  or duly applied for and are in full force and effect,  and if any such
further  authorizations,  approvals,  registrations  or filings should hereafter
become  necessary,  the Borrower  shall obtain or make all such  authorizations,
approvals, registrations or filings.

                  (b) Attached  hereto as Schedule 1A is a complete  list of all
the  Permits.  Those  Permits  listed on Schedule 1A and marked with an asterisk
have been  obtained  by the  Borrower  and are in full  force and  effect on the
Closing Date.  All other  Permits  listed on Schedule 1A will be obtained by the
Borrower no later than July 31,  1998.  The  Borrower (i) is (or, in the case of
Permits that have not yet been obtained, will be) the sole holder or licensee of
each of the Permits,  (ii) except as expressly  disclosed in the opinion of Mark
R.  Moderow or the opinion of Drinker,  Biddle & Reath LLP which  opinions  were
delivered to the Administrative  Agent pursuant to Section 4.1(c) hereof, has no
knowledge of any  complaints,  objections  or appeals  filed with the FCC or any
other  Governmental  Authority with respect to any of the Permits or the Project
or of any other  matter which could,  if adversely  determined,  have a Material
Adverse  Effect or  materially  adversely  affect the  Borrower's  authority  to
construct,  test,  operate and maintain the System, or of any action pending or,
to the best knowledge of the Borrower,  threatened, orally or in writing, before
or  by  the  FCC,  any  other  Governmental  Authority  or  otherwise,  for  the
cancellation, modification or nonrenewal of any of the Permits, and (iii) is not
in  default  in any  material  respect  with  respect  to any  condition,  term,
provision,  order, rule,  regulation,  policy,  writ or decree of the FCC or any
other  agency,  court or  governmental  body with  respect  to any Permit or the
Borrower's operation of the System.

                  SECTION 3.4. Binding Agreements. This Credit Agreement and the
other  Fundamental  Documents to which the Borrower is a party when  executed by
the Borrower will  constitute  the legal,  valid and binding  obligations of the
Borrower,  enforceable in accordance with their respective terms,  subject only,
as to the  enforcement  of remedies,  to applicable  




                                      -42-
<PAGE>
bankruptcy,  insolvency and similar laws affecting creditors' rights and general
principles of equity.

                  SECTION 3.5. Financial Statements. The unaudited balance sheet
of the Borrower at September 30, 1997,  together with the related  statements of
income, cash flows and partnership equity and the related notes and supplemental
information  for such  statements,  in the  forms  which  have  previously  been
provided to the Lenders,  have been prepared in accordance with GAAP,  except as
otherwise  indicated  in the  notes to such  financial  statements.  All of such
financial  statements  fairly  present in all material  respects  the  financial
condition or the results of  operations  of the Borrower at the dates or for the
periods  indicated,  subject to changes resulting from normal year-end and audit
adjustments,  and (in the case of balance sheets)  reflect  (including the notes
thereto)  all known  liabilities,  contingent  or  otherwise,  as of such  dates
required in accordance with GAAP to be shown or reserved  against,  or disclosed
in the notes to the financial statements.

                  SECTION  3.6. No Material  Adverse  Change.  There has been no
material adverse change with respect to the business,  operations,  performance,
assets,  properties,  condition  (financial  or  otherwise)  or prospects of the
Borrower since July 29, 1997.

                  SECTION 3.7.  Subsidiaries;  Joint Ventures.  (a) The Borrower
has no Subsidiaries and does not own,  directly or indirectly,  any voting stock
or other beneficial interest in any Person.

                  (b) The Borrower is not a general  partner in any  partnership
or a joint venturer in any joint venture.

                  SECTION 3.8. Copyrights,  Patents,  Software and Other Rights.
(a) On the Closing  Date,  the  Borrower  does not possess any  patents,  patent
rights or  licenses,  trademarks,  trademark  rights and  licenses,  tradenames,
tradename rights,  copyrights,  copyright rights and licenses,  software, rights
and licenses to software and any other similar rights (collectively "Proprietary
Rights") other than Proprietary  Rights which are readily available at a nominal
cost or are transferable with the services,  products or equipment in respect of
which they are expected to be used.

                  (b) There is no claim, suit, action or proceeding  pending, or
to the Borrower's  knowledge,  threatened,  against the Borrower that involves a
claim of infringement of any Proprietary Right.

                  SECTION 3.9. Fictitious Names. Except as disclosed on Schedule
3.9,  the Borrower is not doing  business nor intends to do business  other than
under its full partnership name, including,  without limitation, under any trade
name or other doing business name.





                                      -43-
<PAGE>
                  SECTION 3.10. Title to Properties; Right of Way. (a) As of the
Closing Date,  the Borrower has good title to each of the  properties and assets
reflected  on the  balance  sheet  referred  to in  Section  3.5  and,  all such
properties   and  assets  are  free  and  clear  of  Liens,   except   Permitted
Encumbrances.

                  (b) The Alaska  United  Fiber System and any  Electronics  and
Equipment  used by the Borrower in the operation of the fiber pairs in the Kanas
Cable or the fiber pairs in the GCI Cable  Facility will be located on the Right
of Way.

                  (c) On the Closing Date (i) with  respect to land  included in
the Right of Way which land is owned by a Governmental  Authority,  the Borrower
has applied  for all  necessary  rights to such land for the  Project  except as
otherwise  indicated  by the  underlining  in  Schedule  1A hereto and (ii) with
respect  to land  included  in the Right of Way which  land is owned by a Person
other than a Governmental Authority,  the Borrower has good and marketable title
to a fee simple  interest in, a valid  leasehold  interest in, valid  easements,
rights of way or  licenses  with  respect  to, or a valid  option for a lease or
title  in fee  simple  to,  such  land  except  as  otherwise  indicated  by the
underlining in Schedule 1A hereto.

                  (d) Schedule 3.10 hereto sets forth rights with respect to the
Right of Way which the Borrower owns as of the Closing Date.

                  (e) The Undersea Right of Way will be located outside the area
which lies within twelve (12) nautical  miles from the  low-waterline  along the
coast of Canada (the  "Territorial  Sea of Canada") but within two hundred (200)
nautical miles from the Territorial Sea of Canada.

                  SECTION 3.11.  Places of Business.  The chief executive office
of the Borrower is, on the Closing  Date,  as set forth on Schedule 3.11 hereto.
All of the places where the Borrower keeps any books and records  concerning the
Collateral or any goods  included in the Collateral on the Closing Date are also
listed on Schedule 3.11 hereto.

                  SECTION 3.12. Litigation. Except as set forth on Schedule 3.12
hereto, there are no actions,  suits or other proceedings at law or in equity by
or before any arbitrator or arbitration  panel,  or any  Governmental  Authority
(including, but not limited to, matters relating to environmental liability) or,
any  investigation  by any  Governmental  Authority of the affairs of, or to the
knowledge of the Borrower,  any  threatened  action,  suit or other  proceedings
against or affecting,  the Borrower or of any of its  properties or rights which
either (A) if adversely determined,  could have a Material Adverse Effect or (B)
involve  the  Project,  the  use of  the  fiber  pairs  in the  Kanas  Cable  as
contemplated by the Kanas Agreement, the use of the fiber pairs in the GCI Cable
Facility  as  contemplated  by the GCI Fiber  Exchange  Agreement,  this  Credit
Agreement,  any of the other  Fundamental  Documents or any of the  transactions
contemplated  hereby or thereby.  The Borrower is not in default with respect to
any order,  writ,  injunction,  




                                      -44-
<PAGE>
decree, rule or regulation of any Governmental  Authority binding upon it, which
default could have a Material Adverse Effect.

                  SECTION 3.13. Federal Reserve Regulations. The Borrower is not
engaged  principally or as one of its important  activities,  in the business of
extending  credit for the purpose of purchasing or carrying any Margin Stock. No
part of the proceeds of the Loans will be used, directly or indirectly,  whether
immediately,  incidentally  or  ultimately  (i) to  purchase or carry any Margin
Stock or to extend  credit to others for the purpose of  purchasing  or carrying
any Margin Stock, or (ii) for any other purpose,  in each case,  violative of or
inconsistent  with  any  of  the  provisions  of any  regulation  of the  Board,
including, without limitation, Regulations G, T, U and X thereto.

                  SECTION 3.14. Investment Company Act. The Borrower is not, and
will not  during  the  term of this  Credit  Agreement  be,  (i) an  "investment
company",  within the meaning of the Investment Company Act of 1940, as amended,
or (ii) subject to regulation  under the Public Utility  Holding  Company Act of
1935,  the Federal  Power Act or any  foreign,  federal or local  statute or any
other Applicable Law of the United States of America or any other  jurisdiction,
in each case limiting its ability to incur  indebtedness  for money  borrowed as
contemplated hereby or by any other Fundamental Document.

                  SECTION  3.15.  Taxes.  The Borrower has filed or caused to be
filed all federal, state, local and foreign tax returns which are required to be
filed with any Governmental Authority, and has paid or has caused to be paid all
taxes as shown on said returns or on any  assessment  received by it in writing,
to the extent that such taxes have become due,  except as  permitted  by Section
5.8 hereof. The Borrower does not have any knowledge of any material  additional
assessments or any basis  therefor.  The Borrower  reasonably  believes that the
charges,  accrual  and  reserves  on its  books  in  respect  of  taxes or other
governmental charges are adequate.

                  SECTION  3.16.  Compliance  with  ERISA.  The  Borrower  is in
compliance in all material  respects  with the  provisions of ERISA and the Code
applicable  to  Plans,   and  the  regulations  and  published   interpretations
thereunder,  if any,  which are  applicable to it. As of the Closing  Date,  the
Borrower has not, with respect to any Plan, engaged in a prohibited  transaction
which would subject it to a material tax or penalty on  prohibited  transactions
imposed by ERISA or Section 4975 of the Code. No material  liability to the PBGC
has been or is expected to be incurred with respect to the Plans (other than for
premiums not yet due) and there has been no Reportable  Event and no other event
or condition that presents a material risk of termination of a Plan by the PBGC.
The  Borrower  has not  engaged  in a  transaction  which  would  result  in the
incurrence  by the Borrower of any liability  under  Section 4069 of ERISA.  The
Borrower has not taken any action and no event has occurred  with respect to any
Multiemployer  Plan which would subject the Borrower to material liability under
either Section 4201 or 4204 of ERISA.

                  SECTION 3.17. Security Interest;  Other Security.  This Credit
Agreement and the other Fundamental Documents,  when executed and delivered and,
upon the making of the  




                                      -45-
<PAGE>
initial Construction Loan hereunder, will create and grant to the Administrative
Agent  for the  benefit  of the  Lenders  (upon  (i) the  timely  filing  of the
appropriate  UCC-1  Financing  Statements  with the  filing  offices  listed  on
Schedule  3.17 and (ii) the  timely  recording  of the  Deeds of Trust  with the
recording  offices listed on Schedule  3.17) valid and first priority  perfected
security interests in the Collateral subject only to Permitted Encumbrances.

                  SECTION 3.18.  Disclosure.  Neither this Credit  Agreement nor
any other  Fundamental  Document nor any  agreement,  document,  certificate  or
statement  furnished to the Administrative  Agent for the benefit of the Lenders
by the Borrower in connection with the transactions  contemplated hereby, at the
time it was furnished or delivered, contained any untrue statement of a material
fact regarding the Borrower or omitted to state a material fact necessary, under
the  circumstances  under which it was made,  to make the  statements  contained
herein  or  therein  not  misleading  (considered  in the  context  of all other
information  provided to the  Lenders).  There is no fact known to the Borrower,
other than matters relating to general industry  conditions,  which could now or
in the future cause a Material Adverse Effect to occur,  which fact has not been
disclosed to the Lenders in writing.

                  SECTION  3.19.  Agreements.  (a) The Borrower is not in breach
of, or default with respect to, the  performance,  observance or  fulfillment of
any of the  obligations,  covenants or conditions  contained in any agreement or
instrument  (including,  without  limitation,  this Credit Agreement,  the other
Fundamental  Documents,  the Project  Agreements,  any agreement relating to the
Right  of Way and any  Capacity  Agreement)  to  which  it is a  party,  and the
Borrower  does not have any  knowledge  of any  breach,  default or  anticipated
breach by any other parties  thereto,  which breach or default,  in either case,
either  individually  or when  aggregated  with all other  breaches or defaults,
could have a Material Adverse Effect.

                  (b)  Schedule  3.19 is a true and  complete  listing as of the
Closing  Date of (i) all credit  agreements,  indentures,  and other  agreements
related to any Indebtedness  for borrowed money of the Borrower,  other than the
Fundamental  Documents,  (ii)  all  Project  Agreements,  (iii)  all  agreements
relating to the Right of Way,  (iv) all  Capacity  Agreements  and (v) all other
contractual  arrangements which are material to the Borrower,  including but not
limited to, guarantees and employment agreements.  The Borrower has delivered or
made  available to the  Administrative  Agent a true and  complete  copy of each
agreement described on Schedule 3.19, including all exhibits and schedules.

                  (c) Based on facts and  circumstances  existing on the Closing
Date,  the  services to be  performed,  the  materials  to be  supplied  and the
easements,  licenses  and other  rights  granted or to be  granted  to  Borrower
pursuant to the terms of the Project  Agreements  will provide the Borrower with
all rights and property  interests required to enable the Borrower to obtain all
services,  materials  or rights  (including  access)  required  for the  design,
construction,  startup,  operation and maintenance of the System,  including the
Borrower's  full and prompt  performance of its  obligations  under all Capacity
Agreements,  other than those services,  




                                      -46-
<PAGE>
materials or rights that reasonably can be expected to be obtainable in a timely
manner in due course at a cost consistent with the  Construction  Budget and the
Projections.

                  SECTION  3.20.  Environmental  Liabilities.  (a) Except as set
forth on Schedule  3.20  hereto,  the Borrower  has not used,  stored,  treated,
transported,  manufactured,  refined, handled, produced or disposed of, and does
not expect in the future to use, store, treat, transport,  manufacture,  refine,
handle, produce or dispose of, any Hazardous Materials on, under, at or from any
of the  properties or assets owned,  leased or used by the Borrower  (including,
without  limitation,  the Right of Way),  in any manner  which  violated or will
violate  any   Environmental   Law  governing  the  use,   storage,   treatment,
transportation,  manufacture,  refinement,  handling,  production or disposal of
Hazardous Materials in any respect and to the best of the Borrower's  knowledge,
no prior owner of such property or asset or any tenant, subtenant,  prior tenant
or  prior  subtenant  thereof  has used or will use  Hazardous  Materials  on or
affecting such property or asset, or otherwise,  in any manner which violated or
will  violate any  Environmental  Law  governing  the use,  storage,  treatment,
transportation,  manufacture,  refinement,  handling,  production or disposal of
Hazardous Materials in any respect.

                  (b) To the best of the  Borrower's  knowledge (i) the Borrower
does not have any obligations or liabilities,  matured or not matured,  absolute
or contingent, assessed or unassessed, and (ii) no claims have been made against
the Borrower and no presently  outstanding citations or notices have been issued
against the Borrower, which in either case have been or are imposed by reason of
or  based  upon any  provision  of any  Environmental  Law,  including,  without
limitation, any such obligations or liabilities relating to or arising out of or
attributable, in whole or in part, to the manufacture, processing, distribution,
use, treatment,  storage, disposal,  transportation or handling of any Hazardous
Materials by the Borrower, or any of its employees,  agents,  representatives or
predecessors  in  interest  in  connection  with or in any way  arising  from or
relating to the  Borrower  or any of its owned,  leased or used  properties,  or
relating  to or  arising  from or  attributable,  in whole  or in  part,  to the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transportation  or handling of any such substance,  by any other Person at or on
or under any of the real  properties  owned or used by the Borrower or any other
location.

                  (c) The  Construction  of the  System in  accordance  with the
Plans and  Specifications  and the Project will not violate any provision of any
Environmental Law.

                  SECTION  3.21.  Compliance  with Laws.  The Borrower is not in
violation of any  Applicable  Law except for such  violations  in the  aggregate
which could not have a Material Adverse Effect. The Borrowings hereunder and the
intended use of the proceeds of the Loans as  contemplated  by Section 5.19 will
not violate any Applicable Law.

                  SECTION  3.22.  Projections;  Construction  Budget;  Operating
Budget;  Plans and Specifications.  (a) The Borrower has delivered to the Lender
the financial projections (together with the appropriate  supporting details and
a statement of the underlying assumptions) attached




                                      -47-
<PAGE>
hereto as Schedule 3.22(a).  Such projections cover a period commencing  January
1, 1998 and ending on December  31,  2013 and are based on good faith  estimates
and  assumptions  believed to be  reasonable  at the time made and represent the
good faith  opinion  of the senior  management  of the  Borrower  as to the most
probable course of the Borrower's  business,  it being recognized by the Lenders
that such projections as to future events are not to be viewed as facts and that
actual  results  during  the  period  or  periods  covered  by  any  such  other
projections may differ from the projected results.

                  (b) The  Construction  Budget  contains  reasonable good faith
estimates of all costs necessary in order to develop and construct the System in
accordance with the Plans and  Specifications  and all other Project Costs to be
incurred   through  and  including  the  Completion  Date,   including   without
limitation,  (i)  all  payments  to  be  made  to  the  Contractor,  Kanas,  GCI
Communication and/or GCI Cable, (ii) all Bank Charges, reasonably anticipated to
be  payable  on or before  the  Completion  Date and  (iii)  all other  expenses
anticipated by Borrower incident to the Construction  Loans, the Project and the
design,  construction,  testing, startup and operation of the System during such
period.

                  (c) The proposed  Operating  Budget prepared for each month of
the twelve  month period  commencing  on the  anticipated  Completion  Date,  is
attached hereto as Schedule 3.22(c).

                  (d) Schedule 1D hereto is a true and complete  list of all the
plans and  specifications  relating  to the  Project  or any part  thereof.  The
Borrower has delivered to the Administrative  Agent and the Independent Engineer
a true and  complete  copy of each of the  plans  and  specifications  listed on
Schedule 1D.

                  SECTION 3.23. Start Date;  Project Costs;  Project Assets. (a)
As of the date  hereof,  work has  commenced by the  Contractor  pursuant to the
Construction Contract and by GCI Communication  pursuant to the GCI Construction
Contract.

                  (b) As of January 1, 1998, an aggregate  amount of $11,777,068
has been expended or incurred for Project Costs.

                  (c) As of  January  1,  1998  there  is $0 on  deposit  in the
Construction  Account,  $0 on  deposit  in the  Alaska  Depositary  Account  and
$39,570,412 on deposit in the SSI Cash Collateral Account.

                  (d) Schedule  3.23 hereto is a true and  complete  list of all
agreements  originally  entered  into by an  Affiliate  of GCI  (other  than the
Borrower)  and all  assets  or other  property  at any time  held or owned by an
Affiliate  of GCI  (other  than the  Borrower),  which  agreements,  assets  and
property relate to the Project.





                                      -48-
<PAGE>
                  SECTION 3.24.  Sponsor Equity.  As of the Closing Date, all of
the Sponsor Equity Funds have been contributed to the Borrower and have been (i)
used to pay Project Costs (including,  without limitation, Project Costs owed to
the Contractor),  (ii) deposited in the Construction  Account or (iii) deposited
in the  SSI  Cash  Collateral  Account  pursuant  to  the  SSI  Cash  Collateral
Agreement.

                  SECTION 3.25. Bank Accounts.  The  Construction  Account,  the
Alaska Depositary  Account,  the Disbursement  Account,  the Insurance  Proceeds
Account,  the Holding  Account,  the Interest  Reserve  Account and the SSI Cash
Collateral  Account and the Local Bank Account,  are the only bank accounts held
by the Borrower or in which the Borrower may have any interest.

                  SECTION 3.26. Utility Availability. Subject only to payment of
fees, costs and expenses to be paid from the Construction  Budget, all utilities
required for the  construction and operation of the System  (including,  but not
limited to, electrical facilities) are, or when necessary will be, available for
use in reasonable  proximity to the System and  satisfactory  arrangements  will
have been made for the  provision  when  necessary  of all such  services to the
System.

                  SECTION  3.27.   Operation  of  the  Facility.   Assuming  due
performance by the parties (other than the Borrower) to the Project  Agreements,
to the best of  Borrower's  knowledge  and  belief,  the  System,  on and  after
Completion,  will be able to be operated on a safe basis and in accordance  with
sound  practices  in the  telecommunications  industry  in  compliance  with all
Project  Agreements  and  currently   existing   Applicable  Law  (except  where
noncompliance  could not have a Material Adverse  Effect),  so that the Borrower
will be able to (i) duly and punctually meet its material  obligations under all
Capacity  Agreements and the Fundamental  Documents in accordance with the terms
thereof  and  (ii)  maintain  System  availability  (excluding  outages  due  to
earthquake,  flood or other  natural  disaster,  war or  insurrection,  external
aggression,  action or inaction by Kanas, or which require  deployment of a ship
to make repairs to the undersea portion of the System) of at least 99.95%.

                  SECTION 3.28. Nature of Business. The Borrower has not engaged
in any business other than the acquisition, development,  construction, testing,
operation or maintenance of the System.

4.  CONDITIONS OF LENDING

                  SECTION  4.1.  Conditions  Precedent  to Initial  Construction
Loans.  The obligation of each Lender to make its initial  Construction  Loan is
subject to the following conditions precedent:

                  (a) Partnership and Corporate  Documents.  The  Administrative
Agent shall have received, with copies for each of the Lenders:





                                      -49-
<PAGE>
                           (i) a  certificate  of a General  Partner,  dated the
                  Closing Date,  certifying that attached  thereto is a true and
                  complete copy of the Partnership Agreement;

                           (ii) a certificate  of the Secretary of State (or the
                  equivalent  thereof) of Alaska dated as of a recent date as to
                  the good standing of the  Borrower;  provided,  however,  that
                  such a  certificate  shall not be required if the Secretary of
                  State (or the  equivalent  thereof) of Alaska does not provide
                  such a certificate with respect to general partnerships;

                           (iii) a  certificate  dated as of a recent date as to
                  the good  standing  and/or  authority  to do  business  of the
                  Borrower  issued by the Secretary of State (or the  equivalent
                  thereof)  of  each  jurisdiction  in  which  the  Borrower  is
                  qualified  to do  business;  provided,  however,  that  such a
                  certificate  shall not be required if the  Secretary  of State
                  (or the  equivalent  thereof) of the  applicable  jurisdiction
                  does not provide  such a  certificate  with respect to general
                  partnerships;

                           (iv)  a  copy  of  the  articles  or  certificate  of
                  incorporation  of each  General  Partner and each  Transaction
                  Party, certified as of a recent date by the Secretary of State
                  (or the equivalent thereof) of Alaska;

                           (v) a certificate  of such Secretary of State (or the
                  equivalent thereof) and of the franchise tax entity of Alaska,
                  if  available,  dated  as of a  recent  date  as to  the  good
                  standing of, and payment of taxes by, each General Partner and
                  each Transaction Party;

                           (vi) a  certificate  dated as of a recent  date as to
                  the good standing of each General Partner and each Transaction
                  Party  issued by the  Secretary  of State  (or the  equivalent
                  thereof) of each jurisdiction in which such party is qualified
                  as a foreign corporation;

                           (vii) a certificate  of the Secretary of each General
                  Partner and each Transaction  Party dated the Closing Date and
                  certifying  (A) that  attached  thereto is a true and complete
                  copy of the  by-laws of such party as in effect on the date of
                  such certification, (B) in the case of a General Partner, that
                  attached  thereto is a true and complete  copy of  resolutions
                  adopted  by the Board of  Directors  of such  General  Partner
                  authorizing  the  Borrowings  by the Borrower  hereunder,  the
                  execution,   delivery  and  performance  by  the  Borrower  in
                  accordance with its respective terms of this Credit Agreement,
                  the  Notes,  the other  Fundamental  Documents,  and any other
                  documents required or contemplated hereunder or thereunder and
                  that such  resolutions  have not been  amended,  rescinded  or
                  supplemented  and are currently in effect,  (C) in the case of
                  each of the Transaction  Parties,  that attached  thereto is a
                  true and complete copy of resolutions  adopted by the Board of
                  Directors of such party  authorizing  the 




                                      -50-
<PAGE>
                  execution,   delivery  and   performance  of  the  Fundamental
                  Documents  to  which  it is a party  and any  other  documents
                  required or contemplated hereunder or thereunder and that such
                  resolutions  have not been amended,  rescinded or supplemented
                  and are currently in effect,  (D) that  attached  thereto is a
                  true and complete copy of the certificate of  incorporation of
                  such party as in effect on the date of such  certification and
                  (E)  as to the  incumbency  and  specimen  signature  of  each
                  officer of such party  executing (as  applicable)  this Credit
                  Agreement,  the Notes, any other  Fundamental  Document or any
                  other  document  delivered  by it in  connection  herewith  or
                  therewith  (such  certificate  to contain a  certification  by
                  another  officer  of  such  party  as to  the  incumbency  and
                  signature of the officer signing the  certificate  referred to
                  in this clause (vii)); and

                           (viii) such  additional  supporting  documents as the
                  Administrative   Agent  or  its  counsel  or  any  Lender  may
                  reasonably request.

                  (b) Credit Agreement;  Construction  Notes. The Administrative
Agent shall have received this Credit Agreement and the Construction  Notes, all
duly executed on behalf of the Borrower.

                  (c) Opinions of Counsel.  The Administrative  Agent shall have
received  the  written  opinions  dated  the  Closing  Date,  addressed  to  the
Administrative  Agent and the Lenders and in form and substance  satisfactory to
the Agents  and their  counsel of (i)  Sherman & Howard  L.L.C.,  counsel to the
Borrower, the General Partners and the other Transaction Parties,  substantially
in the form  attached  as Exhibit B-1 hereto,  (ii) Mark R.  Moderow,  corporate
counsel of GCI,  substantially in the form attached as Exhibit B-2 hereto, (iii)
Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., Alaska counsel to the Borrower,
the General  Partners and the other  Transaction  Parties,  substantially in the
form attached as Exhibit B-3 hereto, (iv) Foster, Pepper & Shefelman, Washington
counsel to the Borrower, the General Partners and the other Transaction Parties,
substantially in the form attached as Exhibit B-4 hereto, (v) Drinker,  Biddle &
Reath  LLP,  FCC  counsel to the  Borrower  and GCI,  substantially  in the form
attached as Exhibit B-5 hereto and (vi) Guess & Rudd P.C., Alaska counsel to the
Administrative Agent, substantially in the form attached as Exhibit B-6 hereto.

                  (d) No Material  Adverse  Change.  No material  adverse change
shall have  occurred  with  respect to the  business,  operations,  performance,
assets,  properties,  condition  (financial  or  otherwise)  or prospects of the
Borrower  since July 29, 1997 or any of the  Transaction  Parties since June 30,
1997;  and neither  AT&T nor any of its  Affiliates  shall have  entered  into a
contract with a Person who is a competitor of the Borrower which contract (i) is
for the  lease,  license  or other  acquisition  by AT&T or such  Affiliate  (as
applicable)  of the  right to use such  Person's  telecommunications  system  or
portion  thereof or capacity on such system or portion  thereof or whereby  such
Person agrees to provide  telecommunications  services to AT&T or such Affiliate
(as applicable) utilizing such Person's system or portion thereof, (ii) provides





                                      -51-
<PAGE>
AT&T or such Affiliate (as applicable) with  telecommunications  service between
Alaska  and the  contiguous  United  States  and (iii) has a term of one year or
more.

                  (e)   Insurance.   The  Borrower   shall  have  furnished  the
Administrative Agent with (i) a summary of all existing insurance coverage, (ii)
evidence  acceptable to the  Administrative  Agent that the  insurance  policies
required by Section 5.5 have been  obtained and are in full force and effect and
(iii)  Certificates of Insurance with respect to all existing insurance coverage
which certificates shall name Credit Lyonnais New York Branch, as Administrative
Agent,  as the Certificate  holder and shall evidence the Borrower's  compliance
with Section  5.5(c) with respect to all insurance  coverage  existing as of the
Closing Date.

                  (f)  Security  and  Other  Documentation.  On or  prior to the
Closing Date, the Administrative Agent shall have received fully executed copies
of (i) an  Assignment  Agreement  with respect to each Project  Agreement;  (ii)
appropriate  UCC-1 Financing  Statements  relating to the Collateral;  (iii) the
Transport  Pledge  Agreement  executed  by  GCI  Transport,  together  with  the
certificates  representing  the  pledged  securities  referred  to  therein  and
appropriate  undated  stock powers  executed in blank;  (iv) the Fiber  Security
Agreement executed by GCI Fiber and Fiber Hold,  together with appropriate UCC-1
Financing  Statements relating to the collateral referred to therein and (v) the
Deeds of Trust.

                  (g)  Security  Interests  in  Collateral.  On or  prior to the
Closing Date, the Administrative  Agent shall have received evidence  reasonably
satisfactory  to it that the Borrower,  GCI Transport,  GCI Fiber and Fiber Hold
have  sufficient  right,  title and interest in and to the  collateral and other
applicable assets which it purports to own (including  appropriate licenses with
respect to Proprietary  Rights), as set forth in its financial statements and/or
in the other  documents  presented  to the  Lenders to enable each such party to
grant to the  Administrative  Agent for the benefit of the Lenders the  security
interests  contemplated  by  the  Fundamental  Documents,  and  that  all  UCC-1
Financing Statements and other filings under Applicable Law necessary to provide
the  Administrative  Agent for the benefit of the Lenders with a first  priority
perfected security interest in the collateral under any Fundamental Document (in
each case subject to Permitted Encumbrances) have been filed or delivered to the
Administrative Agent in satisfactory form for filing.

                  (h)  Payment  of  Fees.  All fees  and  expenses  then due and
payable  by the  Borrower  or GCI to the  Administrative  Agent and the  Lenders
pursuant to the  Commitment  Letter or the Fee Letter or otherwise in connection
with the transactions contemplated hereby shall have been paid.

                  (i) Searches. The Administrative Agent shall have received UCC
and tax liens  searches  satisfactory  to it  indicating  that no other  filings
(other  than in  connection  with  Permitted  Encumbrances)  with  regard to any
collateral  referred  to in  any  Fundamental  Document  are  of  record  in any
jurisdiction in which it shall be necessary or desirable for the  Administrative





                                      -52-
<PAGE>
Agent to make a UCC filing in order to provide the Administrative Agent (for the
benefit of the Lenders) with a perfected security interest in such collateral.

                  (j) Financial  Statements.  The  Administrative  Agent and the
Lenders  shall have received and be satisfied  with true and complete  copies of
(i) all of the financial  statements  referred to in Section 3.5 hereof and (ii)
the unaudited balance sheet of each of GCI Fiber, Fiber Hold, GCI Transport, GCI
Communication,  Holdings,  GCI, Inc., an Alaska corporation and GCI at September
30,  1997,  together  with the  related  statements  of  income,  cash flows and
stockholders' equity and the related notes and supplemental information, each of
which shall have been  prepared in  accordance  with GAAP  (except as  otherwise
indicated in the notes to such financial statements).

                  (k) Delivery of Project Agreements.  The Administrative  Agent
shall have received copies of the following  executed  agreements  (certified by
the Borrower) and the Lenders shall be satisfied  with the terms and  provisions
thereof:  (i) the  Construction  Contract  and  the  assignment  thereof  by GCI
Communication to the Borrower,  (ii) any Capacity  Agreement in existence on the
Closing Date,  including,  without  limitation,  the GCI Lease Agreement and the
Kanas Agreement  (together with the assignment  thereof by GCI  Communication to
the Borrower),  (iii) the O&M Contract,  (iv) the GCI Fiber Exchange  Agreement,
(v) the GCI  Construction  Contract  and (vi) all  other  agreements  listed  on
Schedule  3.19 hereto.  The  Administrative  Agent shall have received a copy of
each of the following  agreements,  duly executed by all parties thereto and the
Lenders shall be satisfied with the terms and provisions thereof:  (1) Transport
Keep-Well  Agreement,  (2) Holdings  Keep-Well  Agreement,  (3)  Holdings  Lease
Guaranty Agreement, (4) Subordination  Agreement,  (5) Sponsor Undertaking,  (6)
Completion Guaranty and (7) SSI Cash Collateral Agreement.

                  (l)  Reports/Studies.  The Lenders  shall have received and be
satisfied  with the scope,  form and results of the  following:  (i) a technical
feasibility  study of the Project to be performed  by Arthur D. Little,  (ii) an
environmental  review to be  conducted by Stone & Webster and (iii) an insurance
report to be delivered by Sedgwick James of Tennessee, Inc.

                  (m) Depositary  Agreement and  Intercreditor  Agreements.  The
Administrative Agent shall have received a fully executed copy of the Depositary
Agreement and the Intercreditor Agreements.

                  (n)  Permits.  The  Administrative  Agent shall have  received
copies  (certified by the  Borrower) of those Permits  listed on Schedule 1A and
marked with an asterisk.

                  (o)  Assignment  of  Assets  relating  to  the  Project.   Any
agreement  originally  entered  into by an  Affiliate  of GCI  (other  than  the
Borrower)  and any  asset or  other  property  at any  time  held or owned by an
Affiliate of GCI (other than the Borrower),  which agreement,  asset or property
(as  applicable)  relates to the Project  (including,  without  limitation,  the
Construction  Contract and the survey of the undersea route of the Alaska United
Fiber System) shall be




                                      -53-
<PAGE>
unconditionally  and  irrevocably  assigned  to the  Borrower  in a  manner  and
pursuant to documentation which is satisfactory to the Lenders.

                  (p)  Letter of Credit  under the  Construction  Contract.  The
Administrative Agent shall have received the original letter of credit delivered
by the Contractor to GCI Communication or the Borrower (as applicable)  pursuant
to the Construction Contract.

                  (q) Compliance  with Laws. The  Administrative  Agent shall be
satisfied that the transactions contemplated hereby and by the other Fundamental
Documents will not violate any provision of Applicable Law.

                  (r)  Required  Consents  and  Approvals.  The Agents  shall be
satisfied  that all required  consents and  approvals  have been  obtained  with
respect  to the  loan  transaction  contemplated  hereby  and  the  transactions
contemplated  by  the  other   Fundamental   Documents  from  all   Governmental
Authorities  with   jurisdiction   over  the  business  and  activities  of  the
Transaction  Parties,  and any other entity whose consent or approval the Agents
in their reasonable discretion deem necessary to such transactions.

                  (s) Holdings Credit Agreements. The Administrative Agent shall
have received a copy of an amendment or consent for each of the Holdings  Credit
Agreements to permit the execution,  delivery and performance of the Fundamental
Documents,  which  amendments  or  consents  shall  be  in  form  and  substance
satisfactory to the Lenders.

                  (t) Approval of Counsel to the Administrative Agent. All legal
matters  incident to this Credit  Agreement  and the  transactions  contemplated
hereby shall be reasonably satisfactory to counsel to the Administrative Agent.

                  (u) Other  Documents.  The  Administrative  Agent  shall  have
received such other  documentation  as the  Administrative  Agent may reasonably
request.

                  SECTION  4.2.   Conditions   Precedent  to  Term  Loans.   The
obligation  of the  Lenders to make the Term Loan is  subject  to the  following
condition  precedent  (in addition to those  conditions  precedent  set forth in
Section 4.3):

                  (a) Term Notes. The  Administrative  Agent shall have received
the Term Notes, each duly executed on behalf of the Borrower.

                  (b) Completion. The System shall be Completed.

                  (c) Opinions. The Administrative Agent shall have received the
written opinion,  addressed to the  Administrative  Agent and the Lenders and in
form and substance  satisfactory to the Administrative  Agent and its counsel of
(i) Foster, Pepper & Shefelman,  Washington counsel to the Borrower, the General
Partners and the other  Transaction  Parties  




                                      -54-
<PAGE>
covering  matters in respect of the final  Acceptable  Rights  relating  to that
portion  of the  Right  of  Way  located  in  the  State  of  Washington  as the
Administrative  Agent or its counsel  shall  reasonably  request and (ii) either
Hartig, Rhodes, Norman, Mahoney & Edwards, P.C., Alaska counsel to the Borrower,
the General  Partners  and the other  Transaction  Parties or Guess & Rudd P.C.,
Alaska counsel to the  Administrative  Agent covering  matters in respect of the
final Acceptable  Rights relating to that portion of the Right of Way located in
the State of Alaska as the Administrative  Agent or its counsel shall reasonably
request.

                  SECTION 4.3. Conditions Precedent to Each Loan. The obligation
of the Lenders to make each Loan  (including the initial  Construction  Loan and
the Term Loan) is subject to the following conditions precedent:

                  (a) Notice.  The  Administrative  Agent shall have  received a
notice with respect to such Borrowing as required by Article 2 hereof.

                  (b) Borrowing  Certificate.  Except in the case of the initial
Construction  Loan,  the  Administrative  Agent shall have  received a Borrowing
Certificate  with  respect to such  Borrowing,  duly  executed by an  Authorized
Officer.

                  (c) Sponsor Equity Funds. The Borrower shall have received the
full  amount of the Sponsor  Equity  Funds and all of such funds shall have been
(i) used for the  payment  of Project  Costs,  (including,  without  limitation,
Project  Costs  owed to the  Contractor)  or  (ii)  deposited  in the  SSI  Cash
Collateral Account pursuant to the SSI Cash Collateral Agreement.

                  (d)  Compliance  with Section  5.21.  The Borrower  shall have
represented  and warranted that (i) it has no reason to believe that it will not
be able to  fulfill  its  obligations  under  Section  5.21  hereof and (ii) the
outstanding Obligations at July 31, 1998 will not exceed the Specified Amount.

                  (e) Engineer's Certificate.  Except in the case of the initial
Construction  Loan, the  Administrative  Agent shall have received an Engineer's
Certificate dated the date of the proposed Borrowing.

                  (f)  Representations  and Warranties.  The representations and
warranties set forth in Article 3 hereof and in the other Fundamental  Documents
shall be true and correct in all material respects on and as of the date of each
Borrowing  hereunder  (except  to  the  extent  that  such  representations  and
warranties  expressly relate to an earlier date) with the same effect as if made
on and as of such date.

                  (g) No Material  Adverse  Change.  No material  adverse change
shall have  occurred  with  respect to the  business,  operations,  performance,
assets,  properties,  condition  (financial  or  otherwise)  or prospects of the
Borrower  since July 29, 1997 or any of the  Transaction  Parties since June 30,
1997.




                                      -55-
<PAGE>
                  (h) No Event of Default.  On the date of each  Borrowing,  the
Borrower and each Transaction Party shall be in compliance with all of the terms
and  provisions  set forth herein and in the other  Fundamental  Documents to be
observed  or  performed  by it and no Event of  Default  or  Default  shall have
occurred and be continuing.

                  (i) Additional Documents. The Lenders shall have received from
the Borrower on the date of each  Borrowing,  such documents and  information as
they may reasonably  request  relating to the  satisfaction of the conditions in
this Section 4.3.

Each  request  for a Borrowing  shall be a  representation  and  warranty by the
Borrower on the date of such Borrowing as to the matters specified in paragraphs
(c), (d), (f), (g) and (h) of this Section.


5.  AFFIRMATIVE COVENANTS

                  From the date hereof and for so long as the Commitments  shall
be in  effect  or  any  amount  remains  outstanding  under  the  Notes  or  any
Obligations  remain unpaid or unsatisfied,  the Borrower agrees that, unless the
Required Lenders shall otherwise consent in writing, it will:

                  SECTION 5.1.  Financial  Statements  and  Reports.  Furnish or
cause to be furnished to the  Administrative  Agent (with sufficient  copies for
the Lenders):

                  (a) Within 120 days after the end of each  fiscal  year of the
Borrower the audited  balance sheet of the  Borrower,  as at the end of, and the
related statements of income,  partnership equity and cash flows for, such year,
and the  corresponding  figures as at the end of, and for, the preceding  fiscal
year,  accompanied by an unqualified report and opinion of KPMG Peat Marwick LLP
or such other independent public accountants of recognized  standing as shall be
retained by the Borrower and be reasonably satisfactory to the Required Lenders,
which report and opinion shall be prepared in accordance with generally accepted
auditing  standards  relating to reporting  and which  report and opinion  shall
contain no  material  exceptions  or  qualifications  except for  qualifications
relating to accounting  changes (with which such independent  public accountants
concur) in response to FASB releases or other authoritative pronouncements;

                  (b)  Within 60 days  after the end of each of the first  three
fiscal quarters of each of its fiscal years, the unaudited  balance sheet of the
Borrower  as at the end of,  and the  related  unaudited  statements  of income,
partnership  equity and cash flow for, such quarter,  and for the portion of the
fiscal year through the end of such quarter, and the corresponding figures as at
the end of, and for, the  corresponding  periods in the  preceding  fiscal year,
together with a certificate signed by an Authorized Officer of the Borrower,  on
behalf of the Borrower, to the effect that such financial statements,  while not
examined  by  independent  public  accountants,  reflect,  in the opinion of the
Borrower,  all adjustments necessary to present fairly the financial position of
the  Borrower  as at the  end of the  fiscal  quarter  and  the  results  of its
operations for the 




                                      -56-
<PAGE>
quarter then ended in conformity  with GAAP,  subject to normal  year-end  audit
adjustments and the absence of footnotes;

                  (c)  Simultaneously   with  the  delivery  of  the  statements
referred to in paragraphs  (a) and (b) of this Section 5.1, a certificate  of an
Authorized Officer of the Borrower,  on behalf of the Borrower, in substantially
the form of Exhibit R hereto (i) stating  that in the course of the  performance
of his or her duties,  he or she would  normally have knowledge of any condition
or event  which  would  constitute  a Default  or Event of Default  and  stating
whether or not he or she has knowledge, after due inquiry, of any such condition
or event and,  if so,  specifying  each such  condition  or event and the nature
thereof,  and (ii) setting forth the amount of Total Debt of the Borrower and if
applicable,  stating  that the  Borrower is still  entitled to the same  reduced
Applicable Margin pursuant to, and in accordance with, Section 2.5(c) hereof;

                  (d)  Together  with each set of audited  financial  statements
required by paragraph  (a) above,  a  certificate  from the  independent  public
accountants  rendering the report and opinion  thereon (i) stating  whether,  in
connection  with their audit  examination,  any condition or event,  at any time
during  or at  the  end of the  accounting  period  covered  by  such  financial
statements,  which  constitutes an Event of Default under covenants  relating to
accounting matters has come to their attention, and if such a condition or event
has come to their  attention,  specifying  the nature and period,  if known,  of
existence  thereof and (ii) stating  that,  insofar as they relate to accounting
matters, the matters set forth in the compliance certificate delivered therewith
pursuant to clause (ii) of paragraph (c) above at the end of the fiscal year are
stated in accordance with the terms of this Credit Agreement;

                  (e)  Promptly  upon their  becoming  available,  copies of all
audits or reports  prepared  for or  submitted  to the  Borrower  by any outside
professional firm or service, including,  without limitation, any comment letter
submitted by the Borrower's  accountants  to management in connection  with such
accountant's annual audit;

                  (f) Promptly upon their becoming available,  copies of (i) all
registration statements, proxy statements, and all reports which the Borrower or
any Transaction Party shall file with the Securities and Exchange  Commission or
any successor agency and (ii) all reports, financial statements,  press releases
and other information which the Borrower or any Transaction Party shall release,
send or make available to its partners or stockholders generally;

                  (g) Within 30 days after the end of each calendar month, until
the System is  Completed,  (i) the budgeted and actual cost of  development  and
construction  of the System and the  estimated  cost  remaining  to Complete the
System  and the  estimated  date for the  Completion  thereof,  (ii) a cash flow
summary for the Project, (iii) copies of all periodic financial reports prepared
by or for the Borrower with respect to the Project or any other reports required
by Holdings pursuant to the Completion  Guaranty and (iv) a description (in such
form as the  Administrative  Agent  shall  reasonably  request) of any Permit or
right  relating to the Right of




                                      -57-
<PAGE>
Way  obtained  by the  Borrower  in such  calendar  month and a report as to the
status of any Permit and right  relating to the Right of Way not yet obtained by
the Borrower;

                  (h)  Simultaneously  with the delivery thereof,  copies of all
notices, reports and statements (including,  without limitation,  invoices) sent
by or on behalf of the Borrower to the Contractor,  Kanas, GCI  Communication or
GCI Cable;  and  promptly  following  receipt  thereof,  copies of all  notices,
reports and statements (including,  without limitation,  invoices) sent by or on
behalf of the Contractor,  Kanas, GCI  Communication,  GCI Cable or any of their
respective Affiliates to the Borrower, in each case whether sent pursuant to the
Construction Contract,  the Kanas Agreement,  the GCI Construction Contract, the
GCI Fiber Exchange Agreement or otherwise;

                  (i) Within 30 days after the end of each calendar quarter, (i)
a schedule listing all Capacity  Agreements  specifying as to each such Capacity
Agreement,  the parties to such agreement  (other than the  Borrower),  the date
thereof,  the amount of capacity sold, leased or otherwise  disposed of pursuant
thereto,  a  description  of any amounts  remaining  to be paid to the  Borrower
thereunder  and the  expiration  date  thereof and (ii) a certified  copy of any
Capacity Agreement not theretofore delivered to the Lenders;

                  (j) Promptly upon execution of any Project Agreement after the
date hereof, an Assignment Agreement with respect to such Project Agreement duly
executed by the Borrower and all other Persons party to such Project Agreement;

                  (k)  Within 90 days after the end of each  fiscal  year of the
Borrower  (commencing  with the first  fiscal year ending  after the  Completion
Date) financial projections (together with appropriate  supporting details and a
statement  of  underlying   assumptions)   substantially  in  the  form  of  the
Projections,  which  projections  shall cover the period commencing on the first
day of the fiscal year in which such  projections are being delivered and ending
on the Final  Maturity  Date,  and shall have been prepared in  accordance  with
GAAP;

                  (l) Not less than thirty (30) days prior to (i) the Completion
Date and  (ii) the  commencement  of each  calendar  year  occurring  after  the
Completion  Date, the Operating Budget proposed by the Borrower for the calendar
year in which  the  Completion  Date  occurs  or for such  year  thereafter  (as
applicable);

                  (m)  Within  30 days  after the end of each  calendar  quarter
after the  Completion  Date,  an  operating  report  (in such form and with such
detail as shall be reasonably  satisfactory to the  Administrative  Agent) which
shall contain the following  information  with respect to such quarter:  (i) the
operating  performance level of the System,  (ii) the availability  level on the
System, (iii) the date, time and duration of any outages,  (iv) a description of
any equipment repairs or problems and (v) the bit error rate; and





                                      -58-
<PAGE>
                  (n) From time to time such  additional  information  regarding
the  Borrower,  the  Project,  the  Cable,  the Right of Way,  any Permit or any
portion  of the  Collateral,  as any Lender may  reasonably  request  including,
without limitation, copies of any management projections, studies or evaluations
prepared by consultants for or presented to the Borrower.

                  SECTION 5.2. Existence; Compliance. (a) Do or cause to be done
all things  necessary to  preserve,  renew and keep in full force and effect its
existence,   rights,  licenses,  permits  and  franchises  (including,   without
limitation, the Permits) for the maximum possible term.

                  (b) Comply with all (i) applicable  statutes,  regulations and
orders  of,  and  all  applicable  restrictions  imposed  by,  any  Governmental
Authority,  (ii) the terms and  conditions of all insurance  policies in effect,
and (iii) all  operating,  repair and  maintenance  standards as are required to
permit the  enforcement of warranty claims against  manufacturers,  contractors,
suppliers and materialmen with respect to the System or any part thereof.

                  SECTION 5.3.  Maintenance  of  Properties.  Keep the System in
good repair,  working order and condition (ordinary wear and tear excepted) and,
from time to time (i) subject to the provisions of Section 6.19 hereof, make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto  and (ii)  comply  at all  times  with the  provisions  of all  Capacity
Agreements and other material agreements to which it is a party so as to prevent
any loss or forfeiture thereof or thereunder.

                  SECTION 5.4. Notice of Material Events. (a) Promptly upon any
executive  officer of the Borrower or a General Partner  obtaining  knowledge of
(i) any Default or Event of Default,  (ii) any Event of Loss, (iii) any Material
Adverse Effect,  (iv) any material adverse change in the condition or operations
of any Transaction Party, financial or otherwise,  (v) the opening of any office
of the Borrower or the change of the executive  office or the principal place of
business of the Borrower or of the location of the Borrower's  books and records
or any portion of the  Collateral,  (vi) any change in the name of the Borrower,
(vii) any other event  which  could  materially  and  adversely  impact upon the
amount or  collectibility  of amounts payable to the Borrower under any Capacity
Agreement or otherwise  materially decrease the value of the Collateral,  (viii)
any  Person  giving  any notice to the  Borrower  or taking any other  action to
enforce  remedies with respect to a claimed default or event or condition of the
type  referred to in  paragraph  (e) of Article 7 or (ix) the  inability  of the
Borrower  to fulfill all of its  obligations  under  Section  5.21  hereof,  the
Borrower shall promptly give written notice thereof to the Administrative  Agent
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken and the nature of such claimed Event
of Default or condition and what action the Borrower (or such Transaction Party,
if applicable) has taken, is taking and proposes to take with respect thereto.

                  (b) Promptly upon any  executive  officer of the Borrower or a
General Partner obtaining knowledge of (i) the institution of, or threat of, any
action,  suit,  proceeding,  




                                      -59-
<PAGE>
investigation  or  arbitration  by any  Governmental  Authority  or other Person
against or affecting the Borrower,  a Transaction Party, any of their respective
assets,  the  Project,  the  Cable  or the  Right of Way,  or (ii) any  material
development in any such action, suit,  proceeding,  investigation or arbitration
(whether or not previously disclosed to the Administrative Agent), which, in the
case of (i) or (ii), could, if adversely  determined,  have a materially adverse
effect on the Borrower, a Transaction Party, the Project, the Cable or the Right
of Way, the Borrower shall  promptly give notice  thereof to the  Administrative
Agent and provide such other information as may be available to it to enable the
Lenders to evaluate such matters; and, in addition to the requirements set forth
in clauses (i) and (ii) of this  subsection (b), the Borrower upon request shall
promptly   give  notice  of  the  status  of  any  action,   suit,   proceeding,
investigation or arbitration covered by a report delivered to the Administrative
Agent  pursuant to clause (i) and (ii) above to the  Lenders  and  provide  such
other information as may be reasonably  available to it to enable the Lenders to
evaluate such matters.

                  SECTION 5.5.  Insurance.  (a) Cause its assets which are of an
insurable character  (including,  without  limitation,  the System but excluding
buried  cable and wet plant) to be insured by  financially  sound and  reputable
insurers (which shall be satisfactory to the Lenders)  against loss or damage by
fire, explosion, theft or other hazards, casualties, risks and damages which are
included  under  extended  coverage  or which  shall be  consistent  with normal
industry  practices (and shall include earthquake and flood coverage) in amounts
not less  than  the  insurable  value of the  property  insured  or such  lesser
amounts,  and with such self-insured  retention or deductible levels, as are set
forth in and otherwise in accordance with Schedule 5.5.

                  (b)  Cause  to  be  maintained  with  financially   sound  and
reputable carriers,  rated A-, IX or higher by A.M. Best rating guide, insurance
against  other  hazards and risks and  liability  to Persons and property to the
extent and in the manner set forth in and otherwise in accordance  with Schedule
5.5.

                  (c)  Cause  all  such  above-described   insurance  (excluding
worker's compensation insurance and insurance carried by the Contractor pursuant
to the Construction Contract) to (i) provide for the benefit of the Lenders that
30 days' prior written notice of cancellation, termination, non-renewal or lapse
or material change of coverage shall be given to the Administrative  Agent; (ii)
name the  Administrative  Agent for the  benefit of the  Lenders as a loss payee
(except  for third  party  liability  insurance);  and (iii) to the extent  that
neither the Administrative Agent nor the Lenders shall be liable for premiums or
calls,  name the  Administrative  Agent (for the  benefit of the  Lenders) as an
additional insured.

                  (d) In the event of a recovery of any insurance  loss relating
to the Project or any amount  relating to an Event of Loss,  cause such recovery
or  amount  to be  deposited  into the  Insurance  Proceeds  Account  for use in
accordance with the terms hereof.





                                      -60-
<PAGE>
                  (e) Upon the request of the Administrative Agent, the Borrower
will  render  to the  Administrative  Agent a  statement  in such  detail as the
Administrative Agent may request as to all such insurance coverage.

                  SECTION 5.6.  Books and  Records.  (a) Maintain or cause to be
maintained  at all times true and  complete  books and records of its  financial
operations  and provide the  Lenders  and their  representatives  access to such
books and records and to any of its  properties  or assets  (including,  without
limitation,  the Cable and the Land  Right of Way) upon  reasonable  notice  and
during  regular  business  hours in order that a Lender may make such audits and
examinations and make copies and extracts from such books, accounts, records and
other papers pertaining to the Collateral and may discuss the affairs,  finances
and  accounts  with,  and be  advised  as to the  same  by,  officers  and  upon
notification to the Borrower,  independent accountants, all as a Lender may deem
appropriate  for the purpose of  inspecting  the Project,  the Cable or the Land
Right of Way, verifying the accuracy of reports delivered by the Borrower to the
Administrative Agent and/or the Lenders pursuant to this Credit Agreement or for
otherwise  ascertaining  compliance  with  this  Credit  Agreement  or any other
Fundamental Document.

                  (b) If, prior to an Event of Default, the Administrative Agent
wishes to confirm with any Payor, the amounts owed to the Borrower by such Payor
pursuant  to  a  Capacity  Agreement  and  the  terms  of  such  agreement,  the
Administrative  Agent will notify the Borrower.  The Administrative Agent agrees
to have such  confirmation  made  through the  Borrower's  auditors.  If for any
reason such auditors fail to proceed with the confirmations,  the Administrative
Agent may  proceed  to make such  confirmations  directly  with any  Payor.  The
Borrower  hereby agrees that,  upon the occurrence and during the continuance of
an Event of  Default,  the  Administrative  Agent  shall be  entitled to confirm
directly  with any Payor the amounts  owed to the  Borrower and the terms of any
Capacity Agreement.

                  SECTION 5.7.  Observance of Agreements;  Copies of Amendments.
(a) Duly  observe  and  perform  all  terms  and  conditions  of the  Depositary
Agreement  and all Project  Agreements  and  diligently  protect and enforce the
rights of the Borrower under all Project Agreements.

                  (b)   Promptly   after   execution   thereof,    provide   the
Administrative  Agent and the Lenders with a copy of any amendment or waiver of,
or consent relating to, any Project Agreement to which the Administrative  Agent
is not a party.

                  SECTION  5.8.  Taxes and  Charges;  Indebtedness  in  Ordinary
Course of Business.  Duly pay and discharge, or cause to be paid and discharged,
before  the same shall  become in arrears  (after  giving  effect to  applicable
extensions),  all taxes,  assessments,  levies and other  governmental  charges,
imposed upon the Borrower or its properties,  sales and activities,  or any part
thereof,  or upon the  income or  profits  therefrom,  as well as all claims for
labor,  materials,  or supplies  which if unpaid might by law become a Lien upon
any property of the Borrower;  provided, however, that any such tax, assessment,
charge,  levy or claim need not be paid if the 




                                      -61-
<PAGE>
validity  or amount  thereof  shall  currently  be  contested  in good  faith by
appropriate  proceedings  and if the Borrower  shall have set aside on its books
reserves (the  presentation  of which is  segregated  to the extent  required by
GAAP) adequate with respect thereto if reserves shall be deemed  necessary;  and
provided,  further,  that the  Borrower  will pay all such  taxes,  assessments,
charges,  levies or claims  forthwith  upon the  commencement  of proceedings to
foreclose  any Lien which may have  attached as security  therefor  unless fully
bonded or  effectively  stayed within ten (10) days.  The Borrower will promptly
pay when due, or in conformance with customary trade terms, all Indebtedness and
other obligations incident to its operations.

                  SECTION 5.9. Liens.  Defend the Collateral against any and all
Liens,  claims and other  impediments  howsoever  arising,  other than Permitted
Encumbrances, and in any event defend against any attempted foreclosure.

                  SECTION  5.10.  Government  Approval.  If any  authorizations,
approvals,  registrations or filings with any governmental or public  regulatory
body  or  authority  of the  United  States,  any  state  thereof  or any  other
jurisdiction  required in connection  with the Project or the performance by the
Borrower of this Credit Agreement or the other Fundamental Documents to which it
is  a  party  should  hereafter  become  necessary,  obtain  or  make  all  such
authorizations, approvals, registrations or filings.

                  SECTION 5.11. Further Assurances; Security Interests. (a) Upon
the request of the Administrative  Agent, duly execute and deliver,  or cause to
be duly executed and  delivered,  at the cost and expense of the Borrower,  such
further  instruments  as may be  necessary  in the  reasonable  judgment  of the
Administrative  Agent to carry out the  provisions  and  purposes of this Credit
Agreement and the other Fundamental Documents to which the Borrower is a party.

                  (b) Upon the  request of the  Administrative  Agent,  promptly
execute  and  deliver or cause to be  executed  and  delivered,  at the cost and
expense of the Borrower,  such further  instruments as may be appropriate in the
reasonable  judgment of the Administrative  Agent, to provide the Administrative
Agent (for the benefit of the Lenders) a first  perfected Lien in the Collateral
and  any  and all  documents  (including,  without  limitation,  the  execution,
amendment or supplementation of any financing statement,  continuation statement
or other  statement) for filing under the  provisions of the uniform  commercial
code of any  jurisdiction,  or any  other  statute,  rule or  regulation  of any
applicable federal,  state, local or foreign jurisdiction,  and perform or cause
to be performed such other acts which are necessary, from time to time, in order
to grant and maintain in favor of the  Administrative  Agent (for the benefit of
the Lenders) the security interest in the Collateral  contemplated hereunder and
under the other Fundamental Documents, subject only to Permitted Encumbrances.

                  (c) Promptly  undertake to deliver or cause to be delivered to
the  Administrative  Agent  and  the  Lenders  from  time  to  time  such  other
documentation,  consents,  authorizations  and  approvals in form and  substance
reasonably satisfactory to the Administrative 




                                      -62-
<PAGE>
Agent, as the Administrative  Agent shall deem reasonably necessary or advisable
to perfect or maintain the Liens of the Administrative  Agent for the benefit of
the Lenders.

                  SECTION 5.12.  ERISA  Compliance  and Reports.  Furnish to the
Administrative  Agent (a) as soon as  possible,  and in any event within 30 days
after the Borrower knows that (i) any Reportable  Event with respect to any Plan
has occurred,  a statement of an executive  officer of the Borrower or a General
Partner,  setting forth on behalf of the Borrower  details as to such Reportable
Event and the action  which it proposes to take with respect  thereto,  together
with a copy of the notice,  if any, required to be filed by the Borrower of such
Reportable Event given to the PBGC or (ii) an accumulated funding deficiency has
been incurred or an  application  has been made to the Secretary of the Treasury
for a waiver or modification of the minimum funding  standard or an extension of
any amortization  period under Section 412 of the Code with respect to a Plan, a
Plan  or  Multiemployer   Plan  has  been  or  is  proposed  to  be  terminated,
reorganized,  partitioned  or  declared  insolvent  under  Title  IV  of  ERISA,
proceedings  have been  instituted  to terminate a Plan,  a proceeding  has been
instituted pursuant to Section 515 of ERISA to collect a delinquent contribution
to a Multiemployer Plan, or the Borrower will incur any liability (including any
contingent  or secondary  liability) to or on account of the  termination  of or
withdrawal from a Plan or Multiemployer  Plan under Sections 4062, 4063, 4201 or
4204 of ERISA, if the occurrence of any of the foregoing  events would result in
a  liability  which is  materially  adverse to the  financial  condition  of the
Borrower or would materially and adversely affect the ability of the Borrower to
perform its  obligations  under this Credit  Agreement or the other  Fundamental
Documents,  a statement  of an  executive  officer of the  Borrower or a General
Partner,  setting  forth  details as to such  event and the action the  Borrower
proposes to take with respect thereto,  (b) promptly upon reasonable  request of
the Administrative Agent, copies of each annual and other report with respect to
each Plan and (c)  promptly  after  receipt  thereof,  a copy of any  notice the
Borrower may receive from the PBGC relating to the PBGC's intention to terminate
any Plan or to appoint a trustee to administer any Plan.

                  SECTION  5.13.  Environmental  Laws.  (a) Promptly  notify the
Administrative  Agent  upon the  Borrower  becoming  aware of any  violation  or
potential violation or non-compliance  with, or liability or potential liability
under, any Environmental Law, and promptly furnish to the  Administrative  Agent
all notices of any nature which the  Borrower may receive from any  Governmental
Authority or other Person with respect to any violation,  or potential violation
or  non-compliance   with,  or  liability  or  potential  liability  under,  any
Environmental Law.

                  (b)  Comply  with  and  use   reasonable   efforts  to  ensure
compliance by all tenants and subtenants with all Environmental Laws, and obtain
and comply in all respects with and maintain and use best efforts to ensure that
all tenants and  subtenants  obtain and comply in all respects with and maintain
any  and  all  licenses,   approvals,   registrations  or  permits  required  by
Environmental Laws.





                                      -63-
<PAGE>
                  (c) Conduct and complete all investigations, studies, sampling
and testing,  and all  remedial,  removal and other actions  required  under all
Environmental  Laws and promptly  comply in all respects  with all lawful orders
and directives of all  Governmental  Authorities.  Any order or directive  whose
lawfulness is being contested in good faith by appropriate  proceedings shall be
considered a lawful  order or directive  when such  proceedings,  including  any
judicial review of such proceedings, have been finally concluded by the issuance
of a final non-appealable order; provided, however, that the Borrower shall have
set aside on its books reserves (the  presentation of which is segregated to the
extent  required by GAAP)  adequate  with respect  thereto if reserves  shall be
deemed necessary.

                  (d) Defend,  indemnify  and hold  harmless the  Administrative
Agent and the Lenders,  and their  respective  employees,  agents,  officers and
directors, from and against any claims, demands,  penalties, fines, liabilities,
settlements,  damages,  costs and expenses of whatever kind or nature,  known or
unknown,  contingent or otherwise,  arising out of, or in any way related to the
violation of or non-compliance  by the Borrower with any Environmental  Laws, or
any orders, requirements or demands of Governmental Authorities related thereto,
including,   without  limitation,   reasonable  attorney  and  consultant  fees,
reasonable  investigation  and  laboratory  fees,  court  costs  and  litigation
expenses,  but  excluding  therefrom  all  claims,  demands,  penalties,  fines,
liabilities,  settlements,  damages,  costs  and  expenses  arising  out  of  or
resulting  from (i) the gross  negligence  or  willful  misconduct  of the party
seeking  indemnification  hereunder  or (ii) any acts or  omissions of the party
seeking  indemnification  hereunder  occurring after such party is in possession
of, or controls the operation of, any property or asset.

                  SECTION 5.14.  Construction;  Operation. (a) Cause the Project
to be diligently developed, constructed, operated and maintained in all material
respects in accordance with the Plans and Specifications,  and the standards set
forth,  and within the time period  established,  in all Capacity  Agreements or
other  material   agreements  with  respect  to  the  System.   Subject  to  the
Administrative   Agent's  prior  written   consent   (which  will  be  based  on
consultations  with  the  Independent  Engineer  and  will  not be  unreasonably
withheld),  the Borrower may revise the Construction Budget from time to time by
increasing  the amount  allocated  for any  category or  categories  by applying
thereto  any savings  from any other  category or  categories  (except  that the
Borrower  shall not decrease  amount  allocated to the  contingency  without the
prior written  approval of  Administrative  Agent,  which  approval shall not be
unreasonably  withheld)  provided,  however,  that the sum total of all costs on
such  revised  budget  shall not exceed the sum total of all costs  shown on the
Construction Budget.

                  (b) Cause a complete  set of the current and (when  available)
as-built  plans  (and all  supplements  thereto)  relating  to the  System to be
maintained at the Borrower's chief executive office and available for inspection
by the Independent Engineer and the Administrative Agent.

                  (c) Give the Administrative Agent and the Independent Engineer
notice of the exact date on which any  acceptance  testing of any portion of the
System (including, without 




                                      -64-
<PAGE>
limitation,  any Acceptance  Testing (as defined in the  Construction  Contract)
under the  Construction  Contract or any total System testing is to be conducted
promptly upon the  Borrower's  knowledge  thereof and permit the  Administrative
Agent and the Independent Engineer to witness each such testing.

                  (d) Cause the System, on and after Completion,  to be operated
on a safe basis and in accordance with sound practices in the telecommunications
industry  in  compliance  with all Project  Agreements  and  currently  existing
Applicable  Law (except where  noncompliance  could not have a Material  Adverse
Effect),  so that (i) the Borrower will be able to duly and punctually  meet its
material obligations under all Capacity Agreements and the Fundamental Documents
in  accordance  with the terms thereof and (ii) System  availability  (excluding
outages due to earthquake, flood or other natural disaster, war or insurrection,
external aggression, action or inaction by Kanas, or which require deployment of
a ship to make repairs to the undersea portion of the System) of at least 99.95%
will be maintained.  The System shall be operated in a prudent manner,  with the
Borrower taking all  commercially  reasonable  precautions so as to minimize the
likelihood of system  outages due to external  aggression or which would require
deployment of a ship to make repairs to the undersea portion of the System.

                  SECTION 5.15. Final Cost Statement;  Bank Account  Statements.
(a)  Deliver  to the  Administrative  Agent,  within 30 days after the System is
Completed, a final cost statement.

                  (b)  Arrange  for a copy of the monthly  bank  statement  with
respect to the Local Bank Account,  the SSI Cash Collateral Account,  the Alaska
Depositary  Account and each other bank account  maintained by the Borrower with
any Person (other than Credit Lyonnais New York Branch) to be sent by the Person
with whom such account is maintained directly to the Administrative Agent.

                  SECTION 5.16. Minimum Satisfactory Capacity Agreements. At all
times  on and  after  the  Conversion  Date,  cause to be in  effect  sufficient
Satisfactory  Capacity  Agreements  (excluding the GCI Lease  Contract) so that,
without double  counting,  the sum of (a) the aggregate  fixed minimum  payments
remaining to be made to the Borrower under all Satisfactory  Capacity Agreements
(excluding the GCI Lease Contract), which payments are required to be made on or
before dates  certain  occurring  prior to the Final  Maturity Date plus (b) all
cash  revenues  theretofore  actually  received by the  Borrower  from  Capacity
Agreements  (excluding  the GCI Lease  Contract),  is  greater  than or equal to
$15,000,000.

                  SECTION 5.17. Interest Rate Protection  Agreements.  If at any
time prior to the Conversion Date, the yield on the U.S.  Treasury Bond maturing
closest to December 31, 2002 is greater than or equal to 6.97%, then maintain or
cause to be  maintained,  Interest  Rate  Protection  Agreements  (on  terms and
conditions  satisfactory to the Administrative Agent) to the extent necessary so
that until the Conversion  Date,  interest on Indebtedness in a principal amount
equal to at least 50% of the Total Debt of the Borrower, is effectively fixed or
capped at rates which are acceptable to the Required Lenders.





                                      -65-
<PAGE>
                  SECTION 5.18. Local Bank Account.  Maintain a prudent level of
working capital on deposit in the Local Bank Account.

                  SECTION   5.19.   Use  of  Proceeds;   Use  of  certain  Funds
Transferred to the Local Bank Account.  (a) Use the proceeds of the Construction
Loans  solely to finance  the  Project  Costs  (including,  without  limitation,
accrued  interest on the  Construction  Loans and $1,000,000 of working capital)
and use the  proceeds of the Term Loan solely to repay in full the  Construction
Loans outstanding on the Completion Date.

                  (b) Use all of the funds transferred to the Local Bank Account
pursuant to Sections  3(a) and 3(e) of the  Depositary  Agreement  solely to pay
operating and maintenance expenses incurred by the Borrower.

                  SECTION 5.20.  Operating Logs; Standby Ship Arrangements.  (a)
At its sole cost and expense (i) maintain at its chief executive  office,  daily
operating logs showing,  among other things, the through-put of the System, (ii)
keep maintenance and repair reports in sufficient  detail to indicate the nature
and date of all work done,  (iii)  maintain or cause to be  maintained a current
operating  manual  and  a  complete  set  of  plans,   accounting   records  and
specifications  reflecting  all  alterations,  and (iv)  maintain or cause to be
maintained  all other  records,  logs and other  materials  required  by the O&M
Agreement or any Applicable Law.

                  (b)  maintain,  or cause to be  maintained,  arrangements  (on
terms  reasonably  satisfactory  to the  Administrative  Agent) for standby ship
coverage to effect  repairs on the undersea  portion of the Alaska  United Fiber
System.

                  SECTION  5.21.  Permits;  Right of Way. No later than July 31,
1998,  obtain in the name of the Borrower,  all Significant  Permits (as defined
below) and Acceptable Rights relating to all of the Right of Way and ensure that
such Significant  Permits and Acceptable Rights are assignable to the Lenders to
the extent possible under applicable law. As used in this Section 5.21, the term
"Significant  Permits"  shall mean those  Permits (a) the absence of which could
reasonably  be  expected  to  prevent  the  timely  Completion  of the System in
accordance  with the  Construction  Budget  or the  operation  of the  System in
accordance  with the  Plans and  Specifications  and (b) the  granting  of which
involves  any  discretion  on the part of any  Governmental  Authority  or other
Person.

                  SECTION  5.22.  Survey.  As soon as is  practicable  after the
Completion  Date,  deliver  to the  Administrative  Agent  four (4) prints of an
"as-built"  ALTA  Class A  certified  survey  of the  Land  Right of Way and all
easements  benefitting  and burdening the Land Right of Way certified by a State
of Alaska or a State of Washington (as applicable)  licensed  surveyor,  in form
and  substance  satisfactory  to the  Administrative  Agent  and the  applicable
Acceptable  Title  Company,  showing that the Alaska United Fiber System and all
Electronics  and  Equipment  used by the Borrower in the  operation of the fiber
pairs in the  Kanas  Cable and the fiber  pairs in the GCI  Cable  Facility  are
within  lot and  building  lines (as  applicable)  and  showing  all  easements,





                                      -66-
<PAGE>
improvements,  utilities  and rights of way located on, under or above ground as
of the date of  certification,  and showing such  details as the  Administrative
Agent may reasonably require.

                  SECTION 5.23.  Amendments to the Deed of Trust. Within 30 days
after the acquisition of any Newly Acquired Right (as defined below), deliver to
the  Administrative  Agent an amendment or supplement to each applicable Deed of
Trust which  amendment  or  supplement  (a) shall amend the  description  of the
mortgaged property in such Deed of Trust in order to more specifically  describe
the Acceptable  Rights with respect to the Right of Way which have been acquired
by the  Borrower  (any such  right  shall be  referred  to as a "Newly  Acquired
Right")  and  (b)  shall  be  in  form  and   substance   satisfactory   to  the
Administrative Agent.

                  SECTION  5.24.  Title  Insurance.  (a)  Within  30 days of the
Closing Date, deliver to the Administrative Agent, an Acceptable Title Insurance
Policy with respect to the parcels of land and the  Acceptable  Rights listed on
Schedule 3.10 hereto and marked with an asterisk.

                  (b) Simultaneously with the delivery of an amendment to a Deed
of Trust as contemplated by Section 5.23 hereof,  deliver to the  Administrative
Agent an Acceptable  Title  Insurance  Policy with respect to any Newly Acquired
Right which  relates to either (i) a landing  site or (ii) land  included in the
Right of Way which land is owned by a Person other than the United  States,  the
State of Alaska  (excluding  the Alaska  Railroad  Corporation)  or the State of
Washington.

                  SECTION 5.25.  Proprietary Rights.  Promptly upon the Borrower
acquiring any Proprietary Right (other than a Proprietary Right which is readily
available at a nominal cost or is  transferable  with the services,  products or
equipment  in  respect  of which  they are  expected  to be used) (i) notify the
Administrative  Agent of such  acquisition  and (ii)  upon  the  request  of the
Administrative  Agent,  execute and deliver such instruments or documents as may
be  appropriate  in the  reasonable  judgment of the  Administrative  Agent,  to
provide  the  Administrative  Agent  (for the  benefit  of the  Lenders) a first
perfected Lien in such Proprietary Right and/or to be filed under the provisions
of any statute,  rule or regulation in order to grant or perfect in favor of the
Administrative  Agent (for the  benefit of the  Lenders) a security  interest in
such Proprietary Right.


6.  NEGATIVE COVENANTS

                  From the date hereof and for so long as the Commitments  shall
be in  effect  or  any  amount  remains  outstanding  under  the  Notes  or  any
Obligations  remain unpaid or unsatisfied,  the Borrower agrees that, unless the
Required Lenders shall otherwise consent in writing, it will not:

                  SECTION  6.1.  Limitations  on  Indebtedness.  Incur,  create,
assume or suffer to exist any Indebtedness other than:





                                      -67-
<PAGE>

                  (a) the  Indebtedness  represented  by the Notes and the other
         Obligations;

                  (b)   Indebtedness  in  respect  of  secured   purchase  money
         financing, including Capital Leases, provided that (i) any Lien granted
         with respect to such Indebtedness is permitted by Section 6.2(a) hereof
         and (ii) the aggregate amount thereof does not exceed $2,000,000 at any
         one time outstanding;

                  (c)  intercompany  loans and  advances  to the  Borrower  from
         Holdings  or  GCI  Transport  in  connection   with  their   respective
         obligations  under the  Holdings  Keep-Well  Agreement,  the  Transport
         Keep-Well   Agreement  or  the  Completion  Guaranty  (as  applicable);
         provided that any such  intercompany loan or advance is subject to, and
         is in compliance with, the Subordination Agreement; and

                  (d) deferred  payment  obligations  of the Borrower  resulting
         from the adjudication or settlement of any claim or litigation.

                  SECTION 6.2.  Limitations on Liens. Incur,  create,  assume or
suffer to exist any Lien on its revenue stream,  property or assets, whether now
owned or hereafter acquired, except:

                  (a)  Liens  granted  in  connection  with  the  incurrence  of
         Indebtedness  permitted by Section  6.1(b) to the Person  financing the
         acquisition of property,  plant or equipment or other property acquired
         by the Borrower,  including  Liens related to Capital Leases if (i) the
         Lien  is  limited  to  the  particular   assets   acquired;   (ii)  the
         Indebtedness secured by the Lien does not exceed the unpaid acquisition
         cost of the particular  asset for which the Lien is granted;  and (iii)
         such transaction does not otherwise violate this Credit Agreement;

                  (b)  deposits   under  worker's   compensation,   unemployment
         insurance, old-age pensions and other social security laws or to secure
         statutory obligations or surety or appeal bonds or performance or other
         similar bonds incurred in the ordinary course of business;

                  (c) Liens for taxes, assessments or other governmental charges
         or levies  which are not yet due and payable or the  validity or amount
         of which is  currently  being  contested  in good faith by  appropriate
         proceedings pursuant to the terms of Section 5.8 hereof and as to which
         foreclosure  or other  enforcement  proceedings  shall  not  have  been
         commenced (unless fully bonded or effectively stayed);

                  (d) Liens  incurred in the  ordinary  course of business  with
         regard to goods  provided  or  services  rendered  by common  carriers,
         landlords,  warehousemen,  mechanics,  and  suppliers of materials  and
         equipment  which  secure  outstanding  trade  payables  in amounts  not
         exceeding $2,000,000 in the aggregate;





                                      -68-
<PAGE>
                  (e) Liens arising out of  attachments,  judgments or awards as
         to which an appeal or other  appropriate  proceedings  for  contest  or
         review  are  timely  commenced  (and as to which  foreclosure  or other
         enforcement  proceedings  shall not have been  commenced  (unless fully
         bonded or otherwise  effectively  stayed)) and as to which  appropriate
         reserves have been established in accordance with GAAP;

                  (f) the Liens of the  Administrative  Agent for the benefit of
         the  Lenders  under  this  Credit  Agreement  or any other  Fundamental
         Document;

                  (g) existing Liens set forth on Schedule 6.2 hereto;

                  (h) possessory Liens which (i) occur in the ordinary course of
         business,  (ii)  secure  normal  trade  debt  which  is not yet due and
         payable and (iii) do not secure Indebtedness for borrowed money;

                  (i) Liens  arising  by virtue of any  statutory  or common law
         provision  relating  to  banker's  liens,  rights of setoff or  similar
         rights with respect to deposit accounts of the Borrower; and

                  (j) easements,  rights of way, restrictions,  minor defects or
         irregularities in title and other similar encumbrances on real property
         which do not materially  detract from the value of the property subject
         thereof or interfere with the Project or the conduct of business of the
         Borrower.

                  SECTION 6.3.  Limitations on Investments.  Create, make, incur
or suffer to exist any Investment,  except (i) Investments in Cash  Equivalents;
(ii) Investments  (including debt  obligations)  received in connection with the
bankruptcy  or  reorganization  of  suppliers,  customers or other debtors or in
settlement of delinquent obligations arising in the ordinary course of business,
and (iii) loans or  advances to  employees  in the  ordinary  course of business
(such as travel advances).

                  SECTION 6.4. Restricted Payments.  Declare,  make or incur any
liability to make any  Restricted  Payments,  except  Restricted  Payments in an
aggregate  amount  over the term of this  Credit  Agreement  not  exceeding  the
aggregate amount theretofore  distributed to the Borrower from funds held in the
Disbursement Account pursuant to Section 3(f) and Section 3(g) of the Depositary
Agreement;  and  provided  that no  Restricted  Payment of a type  described  in
clauses (i), (ii) or (iii) of the  definition of  "Restricted  Payment" shall be
permitted  to be made unless all  Subordinated  Debt has been paid in full;  and
provided,  further  that  at the  time  and  after  giving  effect  to any  such
Restricted  Payment,  no  Default  or  Event  of  Default  has  occurred  or  is
continuing.
                  SECTION  6.5.  Consolidation,  Merger,  Sale  or  Purchase  of
Assets,  etc. Whether in one transaction or a series of  transactions,  wind up,
liquidate or dissolve its affairs,  or enter 




                                      -69-
<PAGE>
into any transaction of merger or consolidation, or sell or otherwise dispose of
all or any part of its  property  or assets,  or  purchase,  lease or  otherwise
acquire all or any part of the property or assets of any Person,  or agree to do
or suffer any of the foregoing, except:

                  (a) entering into Capacity  Agreements in the ordinary  course
of business;

                  (b)  Restricted  Payments  permitted by Section 6.4 hereof and
Investments permitted by Section 6.3 hereof;

                  (c) purchases or other  acquisitions of inventory,  materials,
equipment and the like in the ordinary course of business;

                  (d) the  acquisition of the exclusive right to use fiber pairs
in the Kanas Cable and the GCI Cable  Facility  pursuant  to, and in  accordance
with, the Kanas  Agreement and the GCI Fiber Exchange  Agreement,  respectively;
and

                  (e) leases in connection with the Right of Way.

                  SECTION 6.6. Receivables.  Sell, discount or otherwise dispose
of notes,  accounts receivable or other obligations owing to the Borrower except
for the purpose of collection in the ordinary course of business.

                  SECTION 6.7. Sale and  Leaseback.  Enter into any  arrangement
with any Person or Persons, whereby in contemporaneous transactions the Borrower
sells  essentially  all of its  right,  title  and  interest  in an asset and in
connection therewith, the Borrower acquires or leases back the right to use such
asset.

                  SECTION 6.8.  Places of Business;  Change of Name.  Change the
location of its chief executive  office or principal place of business or any of
the  locations  where it keeps any  portion of the  Collateral  or its books and
records  with respect to the  Collateral  or its legal name without in each case
(i) giving the  Administrative  Agent thirty (30) days'  written  notice of such
change and (ii) filing any additional UCC-1 Financing  Statements and such other
documents  requested by the Administrative  Agent to maintain  perfection of the
security interest of the Administrative  Agent for the benefit of the Lenders in
the Collateral.

                  SECTION  6.9.  Transactions  with  Affiliates.  Except for the
transactions  pursuant to the Project  Agreements  in  existence  on the Closing
Date,  effect any transaction with an Affiliate on a basis less favorable to the
Borrower than would have been the case if such  transaction had been effected on
an arms-length  basis (and if involving more than $500,000  without a resolution
approving  each such  transaction  from the Board of Directors of either General
Partner).





                                      -70-
<PAGE>
                  SECTION 6.10.  Prohibition of Amendments or Waivers. Agree to,
or permit, any amendment, alteration,  modification,  cancellation,  termination
suspension or other change of any kind to any of the terms or provisions of:

                  (a)  any Project Agreement; or

                  (b)  the Partnership Agreement.

                  SECTION  6.11.  No Change in Business . Engage in any business
activities  other than (a) the Project,  (b) the  acquisition  of the  exclusive
right to use fiber pairs in the Kanas Cable pursuant to the Kanas Agreement, (c)
the  acquisition  of the  exclusive  right to use  fiber  pairs in the GCI Cable
Facility pursuant to the GCI Fiber Exchange  Agreement and (d) the entering into
of Capacity Agreements in compliance with Section 6.18.

                  SECTION  6.12.  ERISA  Compliance.  Engage  in  a  "prohibited
transaction",  as defined in Section  406 of ERISA or Section  4975 of the Code,
with respect to any Plan or Multiemployer Plan or knowingly consent to any other
"party in interest" or any "disqualified  person",  as such terms are defined in
Section  3(14)  or ERISA  and  Section  4975(e)(2)  of the  Code,  respectively,
engaging  in  any  "prohibited  transaction",   with  respect  to  any  Plan  or
Multiemployer  Plan;  or  permit  any Plan to  incur  any  "accumulated  funding
deficiency",  as  defined in  Section  302 of ERISA or Section  412 of the Code,
unless such incurrence shall have been waived in advance by the Internal Revenue
Service;  or terminate any Plan in a manner which could result in the imposition
of a Lien on any property of the Borrower  pursuant to Section 4068 of ERISA; or
breach  or  knowingly   permit  any  employee  or  officer  or  any  trustee  or
administrator of any Plan to breach any fiduciary  responsibility  imposed under
Title I of ERISA with respect to any Plan; engage in any transaction which would
result in the incurrence of a liability  under Section 4069 of ERISA; or fail to
make  contributions  to a  Plan  or  Multiemployer  Plan  which  results  in the
imposition of a Lien on any property of the Borrower  pursuant to Section 302(f)
of  ERISA  or  Section  412(n)  of the  Code,  if the  occurrence  of any of the
foregoing  events (alone or in the aggregate) could result in a Material Adverse
Effect.

                  SECTION 6.13. Hazardous Materials.  Cause or permit any of its
properties  or assets to be used to generate,  manufacture,  refine,  transport,
treat, store, handle, dispose, transfer, produce or process Hazardous Materials,
except in compliance in all respects with all applicable Environmental Laws, nor
release, discharge,  dispose or of permit or suffer any release or disposal as a
result of any  intentional  act or omission on its part of  Hazardous  Materials
onto any such property or asset in violation of any Environmental Law.

                  SECTION 6.14. Interest Rate Protection Agreements,  etc. Enter
into any Interest  Rate  Protection  Agreement  for other than bona fide hedging
purposes or as required by Section 5.17 hereof.

                  SECTION 6.15. Subsidiaries. Acquire or create any Subsidiary.





                                      -71-
<PAGE>
                  SECTION  6.16.   Prohibition   regarding  Joint  Ventures  and
Partnerships. Be a joint venturer or a general partner of any Person.

                  SECTION 6.17.  Bank Accounts.  After the date hereof,  open or
maintain  any bank account  other than the accounts  referred to in Section 3.25
hereof.

                  SECTION   6.18.   Capacity   Agreements;   Sales   of   Fiber;
Non-Disturbance  Agreements.  Without obtaining the prior written consent of the
Administrative Agent, enter into:

                  (a) any  Capacity  Agreement  which  (i)  has a term  (whether
initially,  through the exercise of renewals or  otherwise) of one year or more,
(ii)  involves  the sale of any  fiber  in the  Cable,  (iii) is on a  protected
capacity  basis or (iv) would  obligate  the  Borrower  to make a payment to any
Person or provide  alternative  service or  facilities,  in either case,  if the
System  failed to be  Completed  and/or  any  portion  of the  System  failed to
commence  service  on or  before  January  1,  1999,  other  than the GCI  Lease
Contract, the Kanas Agreement and the GCI Fiber Exchange Agreement.

                  (b) any  non-disturbance  or similar agreement with any Person
who is a direct competitor of the Borrower.

                  SECTION 6.19. Repairs and Improvements.  Make, or permit to be
made,  any renewal,  replacement,  addition or  improvement  to the System which
would adversely affect the System or which has a cost of $2,000,000 or more.

                  SECTION  6.20.  Change  Orders.  Authorize  or  permit  to  be
effective any change order or contract variation under the Construction Contract
or the GCI  Construction  Contract  without  the prior  written  approval of the
Administrative  Agent (which will be based on consultations with the Independent
Engineer and will not be unreasonably withheld), except for changes which do not
(i)  increase  Project  Costs by more  than  $100,000  as to any one  change  or
$250,000 in the aggregate, (ii) postpone or cause a postponement of the date for
achieving  any  milestone as set forth in the  Construction  Contract or the GCI
Construction  Contract or change the Plans and  Specifications  or the  material
procedures for any acceptance testing (including, without limitation, Acceptance
Testing  (as  defined  in the  Construction  Contract)  under  the  Construction
Contract.

                  SECTION 6.21.  Location.  Remove, or permit to be removed from
the Right of Way, any part of the Alaska United Fiber System or any  Electronics
or  Equipment  used by the  Borrower in the  operation of the fiber pairs in the
Kanas Cable or the fiber pairs in the GCI Cable Facility.

                  SECTION 6.22. No Further Negative Pledges. Except with respect
to prohibitions  against other  encumbrances on specific property  encumbered to
secure payment of particular  Indebtedness (which Indebtedness relates solely to
such  specific  property  and is  




                                      -72-
<PAGE>
otherwise permitted hereby), enter into any agreement (other than this Agreement
and the other  Fundamental  Documents (i) prohibiting the creation or assumption
of any Lien upon the  properties  or  assets,  whether  now  owned or  hereafter
acquired,  of the Borrower or (ii) requiring an obligation to be secured if some
other obligation is secured.

                  SECTION   6.23.   Accounting   Practices.   Modify  or  change
accounting  treatments or reporting  practices,  except as otherwise required or
permitted by changes in GAAP.

                  SECTION 6.24. Interest Rate Protection  Agreements.  Terminate
or otherwise unwind any Interest Rate Protection Agreement to which the Borrower
is a party;  provided,  however,  that the Borrower  may  terminate or otherwise
unwind  an  Interest  Rate  Protection  Agreement  if (a)  such  termination  or
unwinding  does not  require  any  payment  by the  Borrower  to the  applicable
counterparty and (b) the Borrower is simultaneously  entering into a replacement
Interest Rate Protection Agreement which contains terms reasonably acceptable to
the Administrative Agent.

                  SECTION  6.25.  Use of Proceeds of Loans.  Use the proceeds of
Loans  hereunder  other than for the  purposes set forth in, and as required by,
Section 5.19(a) hereof.

                  SECTION  6.26.  The Portion of the System from the  Washington
landing station site to the Seattle  Distribution Center. To the extent that any
portion of the System  connecting  the  landing  station  located at 14725 Norma
Beach Road,  Edmonds,  Washington to GCI  Communication's  Seattle  Distribution
Center located at 2001 6th Avenue, Suite 2900, Seattle, Washington, is not owned
by the  Borrower  and  constructed  by GCI  Communication  pursuant  to the  GCI
Construction Contract,  enter into any fiber exchange agreement,  lease or other
agreement pursuant to which the Borrower is granted the right to use fiber pairs
or other  telecommunications  facilities  for such portion of the System without
the Required Lenders' prior written consent.


7.  EVENTS OF DEFAULT

                  In the case of the happening and during the continuance of any
of the following events (herein called "Events of Default"):

                  (a) any representation or warranty made by the Borrower or any
Transaction Party in this Credit Agreement or any other Fundamental  Document or
in connection with this Credit  Agreement or any other  Fundamental  Document or
with the execution and delivery of the Notes or the Borrowings hereunder, or any
statement or representation made in any report, financial statement, certificate
or other document  furnished by or on behalf of the Borrower or any  Transaction
Party to the Administrative Agent or any Lender under or in connection with this
Credit  Agreement or any Fundamental  Document shall prove to have been false or
misleading in any material respect when made, deemed to be made or delivered;





                                      -73-
<PAGE>
                  (b) default  shall be made in the payment of any principal of,
or  interest  on,  the  Notes  or of any fees or other  amounts  payable  by the
Borrower  hereunder  or under the Fee  Letter  or an  Interest  Rate  Protection
Agreement  to which a Lender is a party,  when and as the same shall  become due
and payable,  whether at the due date thereof or at a date fixed for  prepayment
thereof or by acceleration  thereof or otherwise and such default shall continue
unremedied  for more than five (5) days after  demand for such  payment has been
made to Holdings under and in accordance with the Holdings Keep-Well Agreement;

                  (c) default shall be made in the due observance or performance
of any covenant,  condition or agreement contained in Sections 5.1(j), 5.2, 5.4,
5.5,  5.7(a),  5.14,  5.16,  5.19,  5.20(b) or 5.21 or Article 6 of this  Credit
Agreement;

                  (d) default shall be made by the Borrower, GCI Transport,  GCI
Fiber or Fiber Hold in the due observance or performance of any covenant  (other
than as set forth in  paragraphs  (b) and (c) of this  Article 7),  condition or
agreement  to be  observed  or  performed  pursuant  to the terms of this Credit
Agreement or any other  Fundamental  Document,  and such default shall  continue
unremedied for ten (10) consecutive days after the Borrower, GCI Transport,  GCI
Fiber or Fiber Hold (as applicable) obtains knowledge of such occurrence;

                  (e) default  shall be made with  respect to any payment of any
Indebtedness of the Borrower,  GCI Transport,  GCI Fiber or Fiber Hold when due,
or in the  performance of any other  obligation  incurred in connection with any
such  Indebtedness,  if the effect of such default is to accelerate the maturity
of such  Indebtedness or to permit the holder thereof to cause such Indebtedness
to  become  due  prior to its  stated  maturity  and such  default  shall not be
remedied,  cured,  waived or  consented  to by the  holder of such  Indebtedness
within the period of grace with respect thereto;

                  (f) the Borrower or any Transaction  Party shall generally not
pay its debts as they become due or shall admit in writing its  inability to pay
its debts, or shall make a general  assignment for the benefit of creditors;  or
the Borrower or any  Transaction  Party shall  commence any case,  proceeding or
other action seeking to have an order for relief entered on its behalf as debtor
or  to  adjudicate  it a  bankrupt  or  insolvent,  or  seeking  reorganization,
arrangement,  adjustment,  liquidation,  dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors or seeking  appointment  of a receiver,  trustee,  custodian or other
similar  official for it or for all or any  substantial  part of its property or
shall file an answer or other  pleading  in any such case,  proceeding  or other
action admitting the material allegations of any petition,  complaint or similar
pleading  filed against it or consenting  to the relief sought  therein;  or the
Borrower  or any  Transaction  Party shall take any action to  authorize,  or in
contemplation of, any of the foregoing;

                  (g) any involuntary  case,  proceeding or other action against
the  Borrower or any  Transaction  Party shall be  commenced  seeking to have an
order for relief entered  against it as debtor or to adjudicate it a bankrupt or
insolvent,  or seeking  reorganization,  arrangement,  




                                      -74-
<PAGE>
adjustment, liquidation, dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency,  reorganization or relief of debtors, or
seeking appointment of a receiver,  trustee, custodian or other similar official
for it or for  all or any  substantial  part of its  property,  and  such  case,
proceeding  or other  action  (i)  results  in the entry of any order for relief
against it or (ii) shall remain undismissed for a period of sixty (60) days;

                  (h) final  judgment(s)  for the  payment of money in excess of
$2,000,000  (which  judgment(s) are not covered by insurance)  shall be rendered
against the Borrower or any Transaction Party (other than GCI) and within thirty
(30) days  from the entry of such  judgment  shall not have been  discharged  or
stayed pending appeal or which shall not have been  discharged or bonded in full
within thirty (30) days from the entry of a final order of affirmance on appeal;

                  (i) a Reportable  Event  relating to a failure to meet minimum
funding  standards or an inability to pay benefits  when due shall have occurred
with  respect to any Plan under the control of the  Borrower or any  Transaction
Party and  shall  not have  been  remedied  within  thirty  (30) days  after the
occurrence of such Reportable Event; or a trustee shall be appointed by a United
States  District  Court to  administer  such Plan,  or the PBGC shall  institute
proceedings  to terminate  such Plan,  and the  Administrative  Agent shall have
notified the Borrower that the Required  Lenders have made a determination  that
on the basis of such Reportable Event, appointment of trustee or commencement of
proceedings,  there are reasonable grounds to believe that such occurrence would
have a Material Adverse Effect;

                  (j) any Fundamental  Document shall, for any reason, not be or
shall cease to be in full force and effect except as provided  herein or therein
or shall be declared null and void or any of the Fundamental Documents shall not
give or shall cease to give the Administrative Agent the Liens,  rights,  powers
and  privileges  with respect to the  Collateral  or the  collateral  thereunder
purported  to be created  thereby in favor of the  Administrative  Agent for the
benefit of the Lenders, superior to and prior to the rights of all third Persons
(except to the extent  expressly  permitted herein or therein) and subject to no
other Liens (except to the extent  expressly  permitted herein or therein) other
than by actions of the  Administrative  Agent or any Lender,  or the validity or
enforceability of the Liens granted,  to be granted, or purported to be granted,
by any of the  Fundamental  Documents  shall be contested by the  Borrower,  GCI
Transport, GCI Fiber, Fiber Hold or any of their respective Affiliates;

                  (k) any change,  event or circumstance shall occur (including,
without limitation,  an act of a Governmental  Authority, a natural disaster, or
any  amendment,  alteration,  modification  or waiver  (made  without  the prior
written consent of the Required Lenders) to any of the documentation relating to
the Holdings Bank Credit  Facility) that could  reasonably be expected to have a
Material Adverse Effect;

                  (l)  the  Borrower,  any  Transaction  Party or any other
Person  shall have  breached or  disaffirmed  any of its  obligations  under any
Project  Agreement or a default,  event of 




                                      -75-
<PAGE>
default  or  termination  event (as such  terms may be  defined  in any  Project
Agreement) shall have occurred and be continuing under a Project Agreement;

                  (m) the  failure  of the System to be  Completed  on or before
January 1, 1999;

                  (n) at any time after the  termination  of the  Holdings  Bank
Credit Facility in its entirety, (i) the failure of Holdings to duly observe and
perform any covenant,  condition or agreement  contained in Sections 7.02, 7.03,
7.04,  7.05, 7.06, 7.07 or 7.10 of the Long Term Holdings Credit Agreement as in
effect  immediately  prior  to such  termination  or (ii) an  event  of  default
described in Section  8.01(p) of the Long Term Holdings  Credit  Agreement as in
effect immediately prior to such termination; or

                  (o) a Change in Control or an Event of Loss shall occur;

then, in every such event and at any time  thereafter  during the continuance of
such event, the Administrative Agent may, or if directed by the Required Lenders
shall,  take either or both of the following  actions,  at the same or different
times:  terminate  forthwith the Commitments and/or declare the principal of and
the interest on the Loans and the Notes and all other amounts payable  hereunder
or thereunder  to be forthwith due and payable,  whereupon the same shall become
and be forthwith due and payable, without presentment, demand, protest, or other
notice of any kind, all of which are hereby expressly  waived,  anything in this
Credit Agreement or in the Notes to the contrary notwithstanding. If an Event of
Default  specified  in  paragraphs  (f) or (g) above  shall have  occurred,  the
Commitments  shall  automatically  terminate  and the Loans and the Notes  shall
automatically become due and payable, both as to interest and principal, without
presentment,  demand,  protest,  or other  notice of any kind,  all of which are
hereby expressly  waived,  anything in this Credit Agreement or the Notes to the
contrary notwithstanding. Such remedies shall be in addition to any other remedy
available to the Administrative Agent and the Lenders pursuant to Applicable Law
or otherwise.


8.  GRANT OF SECURITY INTEREST; REMEDIES

                  SECTION 8.1. Security  Interests.  As security for the due and
punctual  payment and  performance of the Obligations  (including  post-petition
interest  to the extent  permitted  by  Applicable  Law),  the  Borrower  hereby
mortgages,  pledges, assigns,  transfers, sets over, conveys and delivers to the
Administrative  Agent  (for  the  benefit  of the  Lenders)  and  grants  to the
Administrative Agent (for the benefit of the Lenders) a security interest in the
Collateral.

                  SECTION 8.2. Use of Collateral. So long as no Event of Default
shall  have  occurred  and be  continuing,  and  subject  always to the  various
provisions of this Credit  Agreement and the other  Fundamental  Documents,  the
Borrower may use the Collateral in any lawful manner permitted hereunder.





                                      -76-
<PAGE>
                  SECTION 8.3.  Direct Payment to Alaska  Depositary  Account or
Disbursement  Account. (a) The Borrower shall (i) cause each of the Payors to be
notified  of the  assignment  to the  Administrative  Agent  (on  behalf  of the
Lenders) of the proceeds of each Capacity Agreement and cause each such Payor to
accept and  acknowledge  such assignment and agree to pay directly to the Alaska
Depositary  Account (or if such Payor is an  Affiliate of the  Borrower,  to the
Disbursement  Account) all amounts  payable to the Borrower under the applicable
Capacity Agreement.

                  (b)  The  Borrower  will  execute  documentation   (including,
without  limitation,  assignment  agreements,   instruction  letters  and  other
documentation) as may now or hereafter be required by the  Administrative  Agent
in order to provide for the deposit  into the Alaska  Depositary  Account or the
Disbursement Account (as applicable) of the monies referred to in Section 8.3(a)
and to otherwise  effectuate  the provisions of this Section 8.3. In particular,
the Borrower shall deliver to the Administrative  Agent within 90 days after the
Closing Date a fully executed original of the Instruction Letter.

                  (c) In the event the Borrower receives payment from any Payor,
which  payment  should  have been  remitted  directly  to the Alaska  Depositary
Account or the  Disbursement  Account,  the Borrower  shall  promptly remit such
payment or proceeds to the Disbursement Account to be applied in accordance with
the terms of this Credit Agreement.

                  (d) The Borrower will provide in all Capacity  Agreements  for
payment  directly  to the  Alaska  Depositary  Account  (or if such  Payor is an
Affiliate of the Borrower,  to the Disbursement Account) as contemplated by this
Section 8.3.

                  (e) Subject to Section 8.7 hereof, all amounts received in the
Disbursement  Account shall be held therein,  pending  application in accordance
with the Depositary Agreement.

                  SECTION 8.4.  Borrower to Hold in Trust.  Upon the  occurrence
and during the  continuance  of an Event of Default,  the  Borrower  will,  upon
receipt by it of any revenue,  income, profits or other sums in which a security
interest is granted by this  Article 8,  payable  pursuant to any  agreement  or
otherwise,  or of any check,  draft,  note, trade acceptance or other instrument
evidencing  an  obligation  to pay any such sum,  hold the sum or  instrument in
trust for the Lenders, and forthwith, without any notice, demand or other action
on the part of the Lenders whatsoever (all notices, demands, or other actions on
the part of the Lenders being expressly waived),  endorse,  transfer and deliver
any such sums or instruments or both, to the Administrative  Agent to be applied
to the repayment of the Obligations in accordance with the provisions of Section
8.7 hereof.

                  SECTION 8.5. Collections,  etc. Upon the occurrence and during
the  continuance of an Event of Default,  the  Administrative  Agent may, in its
sole  discretion,  in its  name or in the  name of the  Borrower  or  otherwise,
demand, sue for, collect or receive any money or property at any time payable or
receivable  on  account  of or in  exchange  for,  or  make  any  compromise  or





                                      -77-
<PAGE>
settlement deemed desirable with respect to, any of the Collateral, but shall be
under no obligation so to do, or the Administrative Agent may extend the time of
payment, arrange for payment in installments,  or otherwise modify the terms of,
or release, any of the Collateral,  without thereby incurring responsibility to,
or  discharging  or  otherwise  affecting  any  liability of the  Borrower.  The
Administrative  Agent will not be  required  to take any steps to  preserve  any
rights  against prior parties to the  Collateral.  If Borrower fails to make any
payment  or to take any  action  required  hereunder  or under  any  Fundamental
Document,  the  Administrative  Agent may make such  payments  and take all such
actions as the  Administrative  Agent  reasonably deems necessary to protect the
Lenders'  Liens  and  security  interests  in the  Collateral  and/or  the value
thereof, and the Administrative Agent is hereby authorized (without limiting the
general nature of the authority hereinabove conferred) to pay, purchase, contest
or compromise any Liens which in the judgment of the Administrative Agent appear
to be equal to, prior to or superior to the Liens and security  interests of the
Lenders in the Collateral  and any Liens not expressly  permitted by this Credit
Agreement.

                  SECTION 8.6.  Possession,  Sale of  Collateral,  etc. Upon the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may enter upon the premises of the Borrower or wherever the Collateral may
be, and take  possession  of the  Collateral,  and may demand and  receive  such
possession from any Person who has possession  thereof,  and the  Administrative
Agent may take such measures as it may deem  necessary or proper for the care or
protection  thereof,  including  the right to remove  all or any  portion of the
Collateral,  and with or without taking such possession, may sell or cause to be
sold,  whenever the  Administrative  Agent shall decide, in one or more sales or
parcels, at such prices as the Administrative  Agent may deem best, and for cash
or on credit or for future delivery,  without assumption of any credit risk, all
or any  portion  of the  Collateral,  at any  broker's  board or at a public  or
private sale,  without any demand of  performance or notice of intention to sell
or of the time or place of sale (except 10 days' written  notice to the Borrower
of the time and place of any such sale or sales and such other notices as may be
required  by  Applicable  Law and cannot be  waived),  and any Person may be the
purchaser of all or any portion of the  Collateral so sold and  thereafter  hold
the same  absolutely,  free (to the fullest extent  permitted by Applicable Law)
from any claim or right of whatever kind, including any equity of redemption, of
the  Borrower,  any such  demand,  notice,  claim,  right or equity being hereby
expressly waived and released to the fullest extent permitted by Applicable Law.
At any sale or sales made pursuant to this Article 8, the  Administrative  Agent
may bid for or purchase,  free (to the fullest  extent  permitted by  Applicable
Law)  from any  claim or  right  of  whatever  kind,  including  any  equity  of
redemption,  of the  Borrower,  any such  claim,  right or equity  being  hereby
expressly waived and released,  any part of or all of the Collateral offered for
sale, and may make any payment on account  thereof by using any claim for moneys
then due and payable to the Administrative Agent and the Lenders (subject to the
provisions of Article 10 hereof) by the Borrower  hereunder as a credit  against
the  purchase  price.  The  Administrative  Agent shall in any such sale make no
representations  or  warranties  with  respect  to the  Collateral  or any  part
thereof, and neither the Administrative Agent nor any Lender shall be chargeable
with any of the obligations or liabilities of the Borrower.  The Borrower hereby
agrees  (i) that it will  indemnify  and hold the  Administrative  Agent and the





                                      -78-
<PAGE>
Lenders  harmless  from and  against  any and all  claims  with  respect  to the
Collateral  asserted  before the taking of actual  possession  or control of the
relevant  Collateral by the Administrative  Agent pursuant to this Article 8, or
arising out of any act of, or omission to act on the part of, any Person  (other
than  the  Administrative  Agent or  Lenders)  prior to such  taking  of  actual
possession or control by the Administrative  Agent, or arising out of any act on
the part of any of the Borrower, its Affiliates, or their agents before or after
the  commencement  of such actual  possession  or control by the  Administrative
Agent; and (ii) neither the  Administrative  Agent nor any Lender shall have any
liability or obligation to the Borrower arising out of any such claim except for
acts of willful  misconduct or gross  negligence or not taken in good faith.  In
any  action  hereunder,  the  Administrative  Agent  shall  be  entitled  to the
appointment  of a receiver,  without  notice,  to take  possession of all or any
portion of the  Collateral and to exercise such powers as the court shall confer
upon the receiver.  Notwithstanding  the  foregoing,  upon the  occurrence of an
Event of Default,  and during the  continuation  of such Event of  Default,  the
Administrative  Agent shall be entitled to apply,  without  prior  notice to the
Borrower  except as may be required by  Applicable  Law,  any cash or cash items
constituting Collateral in the possession of the Administrative Agent to payment
of the Obligations.

                  SECTION  8.7.  Application  of Proceeds  on Default.  Upon the
occurrence and during the  continuance  of an Event of Default,  the balances in
the  Disbursement  Account  or in any other  account  of the  Borrower  with any
Lender,  all other income on the  Collateral,  and all proceeds from any sale of
the  Collateral  pursuant  hereto  shall  be  applied  in  accordance  with  the
provisions of Section 10.2 hereof;  provided,  however, that, the Administrative
Agent may, with the consent of the Required Lenders in their  discretion,  apply
funds  comprising  the  Collateral to pay the cost (i) of Completing the Project
and (ii) fulfilling any obligation under any Fundamental  Document.  Any amounts
remaining  after such  payment in full shall be remitted to the Borrower or as a
court of competent jurisdiction may otherwise direct.

                  SECTION 8.8. Power of Attorney. Upon the occurrence and during
the continuance of an Event of Default, (a) the Borrower does hereby irrevocably
make,  constitute and appoint the Administrative Agent or any of its officers or
designees  its true and lawful  attorney-in-fact  with full power in the name of
the  Administrative  Agent or the  Borrower to receive,  open and dispose of all
mail addressed to the Borrower,  and to endorse any notes, checks, drafts, money
orders or other  evidences of payment  relating to the Collateral  that may come
into the possession of the  Administrative  Agent,  with full power and right to
cause the mail of the Borrower to be transferred to the  Administrative  Agent's
own offices or otherwise,  and to do any and all other acts  necessary or proper
to carry  out the  intent of this  Credit  Agreement  and the other  Fundamental
Documents and the grant of the Liens and security interests  hereunder and under
the other Fundamental  Documents,  and the Borrower hereby ratifies and confirms
all that the Administrative Agent or its substitutes shall properly do by virtue
thereof;  (b) the Borrower does hereby further irrevocably make,  constitute and
appoint the Administrative  Agent or any of its officers or designees their true
and  lawful  attorney-in-fact  in the  name of the  Administrative  Agent or the
Borrower (i) to enforce all of the  Borrower's  rights under and pursuant to all
agreements with respect to the Collateral  (including,  without limitation,  the
Project  Agreements),  




                                      -79-
<PAGE>
all for the sole  benefit  of the  Administrative  Agent for the  benefit of the
Lenders,  (ii) to enter into and perform such  agreements as may be necessary in
order to carry  out the  terms,  covenants  and  conditions  of the  Fundamental
Documents  that are required to be observed or performed by the Borrower,  (iii)
to execute  such other and further  mortgages,  pledges and  assignments  of the
Collateral,  and related instruments or agreements,  as the Administrative Agent
may reasonably require for the purpose of perfecting, protecting, maintaining or
enforcing the Liens and security interests granted to the  Administrative  Agent
for the  benefit  of the  Lenders  hereunder  and under  the  other  Fundamental
Documents,  and (iv) to do any and all other things necessary or proper to carry
out the  intention  of this  Credit  Agreement  and the  grant of the  Liens and
security interests  hereunder and under the other Fundamental  Documents and the
Borrower  hereby  ratifies and  confirms in advance all that the  Administrative
Agent as such attorney-in-fact or its substitutes shall properly do by virtue of
this power of attorney.

                  SECTION   8.9.   Financing    Statements,    Direct   Payment,
Confirmation of Receivables.  The Borrower hereby authorizes the  Administrative
Agent  to  file  UCC-1  Financing  Statements  and  any  amendments  thereto  or
continuations   thereof  and  any  other  appropriate   security   documents  or
instruments  (including,   without  limitation,  the  Deeds  of  Trust  and  any
amendments  thereto)  and to give any notices  necessary or desirable to perfect
the Lien and security interests of the  Administrative  Agent for the benefit of
the  Lenders  on the  Collateral,  in all cases  without  the  signature  of the
Borrower or to execute  such items as  attorney-in-fact  for the  Borrower.  The
Borrower further authorizes the  Administrative  Agent upon the occurrence of an
Event of  Default,  and during the  continuation  of such Event of  Default,  to
notify any account debtor that all sums payable to the Borrower  relating to the
Collateral  shall be paid directly to the  Administrative  Agent, and to confirm
directly with account  debtors the amounts  payable by them to the Borrower with
regard to the Collateral and the terms of all accounts receivable.

                  SECTION  8.10.  Termination.  The security  interests  granted
under this Article 8 shall terminate when all of the Obligations shall have been
fully  and  indefeasibly  paid and  performed  and the  Commitments  shall  have
terminated; at such time all rights to the Collateral pledged or assigned by the
Borrower  shall  revert  to  the  Borrower.  Upon  any  such  termination,   the
Administrative Agent will, at the Borrower's expense, execute and deliver to the
Borrower   such   documents  (in  form  and   substance   satisfactory   to  the
Administrative  Agent) as the Borrower shall reasonably request to evidence such
termination.

                  SECTION 8.11. Remedies Not Exclusive.  The rights and remedies
conferred  upon or reserved to the  Administrative  Agent in this  Article 8 are
intended  to be in  addition  to, and not in  limitation  of, any other right or
remedy available to the Administrative Agent. Without limiting the generality of
the foregoing,  the  Administrative  Agent and the Lenders shall have all rights
and  remedies  of a  secured  party  under  Article  9 of the UCC and any  other
Applicable Law.

                  SECTION 8.12.  Quiet Enjoyment.  The Lenders  acknowledge that
their security interest hereunder is subject to the rights of Quiet Enjoyment of
various  licensees,  lessees  or  




                                      -80-
<PAGE>
purchasers  (which are not Affiliates of the Borrower or any of the  Transaction
Parties)  under  Capacity  Agreements,  whether  existing  on the date hereof or
hereafter  executed.  For the purpose hereof,  "Quiet  Enjoyment"  shall mean in
connection  with the rights of licensees,  lessees or purchasers  (which are not
Affiliates of the Borrower or any of the  Transaction  Parties)  under  Capacity
Agreements, the Lenders' agreement that their rights under this Credit Agreement
and the other  Fundamental  Documents and in the  Collateral  are subject to the
rights of such licensees, lessees or purchasers to use the capacity on the Cable
licensed,  leased or sold to them and that even if the Lenders  shall become the
owner of the Collateral in case of an Event of Default,  the Lenders'  ownership
rights shall be subject to the rights of said  licensees,  lessees or purchasers
under such Capacity Agreements,  provided,  however, that such licensee, lessees
or  purchasers  shall not be in material  default  under the  relevant  Capacity
Agreement and, provided,  further, that the Lenders shall not be responsible for
any  liability  or  obligation  of the  Borrower or any other  Person  under any
Capacity  Agreement.  The  Administrative  Agent agrees that upon the reasonable
request of the  Borrower,  it will provide  written  confirmation  to licensees,
lessees  and  purchasers  of the Quiet  Enjoyment  rights  contemplated  by this
Section 8.12.

                  SECTION 8.13. Release of Collateral. Unless a Default or Event
of Default shall have occurred and be  continuing,  upon request by the Borrower
to the Administrative  Agent in writing,  the Administrative Agent shall release
its security  interest in any Collateral sold by the Borrower in compliance with
the terms of this Credit Agreement and the other Fundamental Documents.

                  SECTION 8.14.  Continuation  and  Reinstatement.  The Borrower
further agrees that the security interest granted hereunder shall continue to be
effective  or be  reinstated,  as the case may be, if at any time payment or any
part thereof,  of any  Obligation is rescinded or must  otherwise be restored by
the Administrative Agent or the Lenders upon the bankruptcy or reorganization of
the Borrower or otherwise.

                  SECTION 8.15. Regulatory Approvals.  During the continuance of
an Event of Default,  the Borrower  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 the
Administrative  Agent may reasonably request or as may be required by applicable
law in  connection  with the obtaining of any consent,  approval,  registration,
qualification or authorization of the FCC or of any other Governmental Authority
or Person  necessary or  appropriate  for the  effective  exercise of any rights
under this Credit Agreement or any other Fundamental Document.  Without limiting
the generality of the foregoing,  if an Event of Default shall have occurred and
be continuing, the Borrower shall take any action which the Administrative Agent
may  reasonably  request in order to transfer  and assign to the  Administrative
Agent,  or to such one or more  third  parties as the  Administrative  Agent may
designate,  or to a combination  of the foregoing,  each FCC License,  Permit or
other similar right or license.  To enforce the provisions of this Section,  the
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 or other  Governmental  Authority  or  Person  (as  




                                      -81-
<PAGE>
applicable) an involuntary transfer of control of each such FCC License,  Permit
or similar right or license for the purpose of seeking a bona fide  purchaser to
whom control will  ultimately  be  transferred.  The Borrower  hereby  agrees to
authorize  such an  involuntary  transfer  of  control  upon the  request of the
receiver so  appointed  and,  if the  Borrower  shall  refuse to  authorize  the
transfer,  its approval may be required by the court.  Upon the  occurrence  and
continuance  of an Event of Default,  the  Borrower  shall  further use its best
efforts  to  assist  in  obtaining  approval  of the FCC or  other  Governmental
Authority or Person, if required, for any action or transactions contemplated by
this Credit  Agreement  or any other  Fundamental  Document  including,  without
limitation,  the  preparation,  execution  and  filing  with  the  FCC or  other
Governmental  Authority or Person of the assignor's or  transferor's  portion of
any  application  or  applications  for  consent  to the  assignment  of any FCC
License, Permit or similar right or license or the transfer of control necessary
or appropriate under the rules and regulations of the FCC or other  Governmental
Authority or otherwise  for the  approval of the transfer or  assignment  of any
portion of the  Collateral,  together  with any FCC  License,  Permit or similar
right or license.  The Borrower  acknowledges that the assignment or transfer of
each FCC  License,  Permit  or  similar  right or  license  is  integral  to the
Administrative  Agent's and Lenders' realization of the value of the Collateral,
that there is no adequate  remedy at law for  failure by the  Borrower to comply
with  the  provisions  of  this  Section  and  that  such  failure  would  cause
irreparable injury not adequately  compensable in damages,  and therefore agrees
that each and every  covenant  contained  in this  Section  may be  specifically
enforced,  and the Borrower  hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants.


9.  CASH COLLATERAL ACCOUNT

                  SECTION 9.1. Cash Collateral  Account. On or prior to the date
on  which  the  System  is  Completed,  there  shall  be  established  with  the
Administrative  Agent a  collateral  account  in the name of the  Administrative
Agent (the "Cash Collateral  Account"),  into which the Borrower shall from time
to time deposit (or arrange for the deposit of) amounts  pursuant to the express
provisions  of this Credit  Agreement  requiring or  permitting  such  deposits.
Except to the extent  otherwise  provided in this Article 9, the Cash Collateral
Account  shall be under the sole  dominion  and  control  of the  Administrative
Agent.

                  SECTION 9.2. Investment of Funds. (a) The Administrative Agent
is hereby  authorized and directed to invest and reinvest the funds from time to
time deposited in the Cash  Collateral  Account,  so long as no Event of Default
has occurred and is continuing,  on the  instructions of the Borrower  (provided
that such instructions may be given verbally to be confirmed promptly in writing
by  facsimile  or  otherwise)  or,  if the  Borrower  shall  fail to  give  such
instructions,  in the sole discretion of the Administrative Agent, provided that
in no event may the Borrower give instructions to the  Administrative  Agent to,
or may the Administrative  Agent in its discretion,  invest or reinvest funds in
the Cash Collateral  Account in other than Cash Equivalents  described in clause
(i) of the  definition  of Cash  Equivalents,  or  described in clauses (ii) and
(iii) of the  definition  of Cash  Equivalents  to the  extent  issued by Credit
Lyonnais New 




                                      -82-
<PAGE>
York Branch or Credit Lyonnais  Nassau Branch.  The  Administrative  Agent shall
have no  obligation  to invest or  reinvest  any of the funds  from time to time
deposited in the Cash Collateral Account if the Borrower shall not have provided
the instructions contemplated by this Section 9.2(a).

                  (b) Any net  income or gain on the  investment  of funds  from
time to time  held in the  Cash  Collateral  Account  shall be  retained  by the
Administrative  Agent as a part of the Cash Collateral  Account and any net loss
on any investment shall be charged against the Cash Collateral Account.

                  (c) Neither the Administrative  Agent nor the Lenders shall be
a trustee for the Borrower,  or shall have any obligations or  responsibilities,
or shall be liable for anything done or not done,  in  connection  with the Cash
Collateral  Account,  except as  expressly  provided  herein and except that the
Administrative Agent (for the benefit of the Lenders) shall have the obligations
of a secured party under the UCC. The Administrative Agent and the Lenders shall
not have any obligation or  responsibilities  and shall not be liable in any way
for  any  investment  decision  made  pursuant  to this  Section  9.2 or for any
decrease in the value of the investments held in the Cash Collateral Account.

                  SECTION 9.3.  Grant of Security  Interest.  For value received
and to induce the Lenders to make the Loans from time to time to the Borrower as
provided  for in this Credit  Agreement,  as security  for the due and  punctual
payment and performance of all of the  Obligations,  the Borrower hereby assigns
to the Administrative Agent (for the benefit of the Lenders),  and grants to the
Administrative  Agent (for the benefit of the  Lenders),  a first and prior Lien
upon all the Borrower's rights in and to the Cash Collateral Account,  all cash,
documents,  instruments and securities  from time to time held therein,  and all
rights pertaining to investments of funds in the Cash Collateral Account and all
products  and  proceeds  of, or income  from,  any of the  foregoing.  All cash,
documents,  instruments  and securities from time to time on deposit in the Cash
Collateral  Account,  and all rights  pertaining to  investments of funds in the
Cash Collateral  Account shall  immediately and without any need for any further
action on the part of the  Borrower,  any  Lender or the  Administrative  Agent,
become  subject to the Lien set forth in this Section 9.3, be deemed  Collateral
for all  purposes  hereof  and be  subject  to the  provisions  of  this  Credit
Agreement and the other Fundamental Documents.

                  SECTION 9.4. Remedies.  At any time during the continuation of
an  Event  of  Default,   the  Administrative  Agent  may  sell  any  documents,
instruments  and  securities  held  in  the  Cash  Collateral  Account  and  may
immediately  apply the  proceeds  thereof  and any  other  cash held in the Cash
Collateral Account in accordance with Section 8.7 hereof.





                                      -83-
<PAGE>
10.  THE ADMINISTRATIVE AGENT

                  SECTION 10.1.  Administration by Administrative Agent. (a) The
general  administration  of the  Fundamental  Documents and any other  documents
contemplated by this Credit  Agreement shall be by the  Administrative  Agent or
its  designees.  Except as  otherwise  expressly  provided  herein,  each of the
Lenders  hereby  irrevocably   authorizes  the  Administrative   Agent,  at  its
discretion,  to take or refrain from taking such actions as Administrative Agent
on its behalf and to exercise or refrain from  exercising  such powers under the
Fundamental  Documents,  the Notes and any other documents  contemplated by this
Credit Agreement or any other Fundamental Document as are expressly delegated to
the  Administrative  Agent by the  terms  hereof  or  thereof,  as  appropriate,
together with all powers reasonably incidental thereto. The Administrative Agent
shall have no duties or responsibilities  except as set forth in the Fundamental
Documents.

                  (b) The Lenders hereby authorize the Administrative  Agent (in
its sole discretion):

                           (i) in connection with the sale or other  disposition
                  of any  asset  included  in  the  Collateral,  to  the  extent
                  undertaken  in  accordance  with  the  terms  of  this  Credit
                  Agreement, to release a Lien granted to it (for the benefit of
                  the Lenders ) on such asset;

                           (ii) to determine  that the cost to the Borrower or a
                  Transaction  Party is  disproportionate  to the  benefit to be
                  realized  by the  Administrative  Agent  and  the  Lenders  by
                  perfecting a Lien in a given asset or group of assets included
                  in the collateral under any Fundamental  Document and that the
                  Borrower  or  Transaction  Party  should  not be  required  to
                  perfect  such Lien in favor of the  Administrative  Agent (for
                  the benefit of the Lenders);

                           (iii) to appoint subagents to be the holder of record
                  of a Lien to be granted to the  Administrative  Agent (for the
                  benefit  of  the   Lenders)  or  to  hold  on  behalf  of  the
                  Administrative  Agent such collateral or instruments  relating
                  thereto;

                           (iv) to grant in writing the right of Quiet Enjoyment
                  to licensees,  lessees or purchasers  pursuant to the terms of
                  Section 8.12 hereof; and

                           (v) to enter into and perform its  obligations  under
                  the   Intercreditor   Agreements  and  the  other  Fundamental
                  Documents.

                  SECTION   10.2.   Payments.   Any  amounts   received  by  the
Administrative Agent in connection with this Credit Agreement,  the Notes or the
other Fundamental Documents,  the application of which is not otherwise provided
for, shall be applied,  first, to pay any unpaid costs and expenses  incurred by
the Administrative Agent which costs and expenses are to be paid by 




                                      -84-
<PAGE>
the Borrower pursuant to Section 11.4 hereof (including, without limitation, the
costs  and  expenses  of the  Administrative  Agent  in  enforcing  this  Credit
Agreement or any other Fundamental  Document,  in realizing on or protecting any
Collateral  and in enforcing or collecting any Obligation or any obligation of a
third  party  in  connection  therewith),  second,  to pay  accrued  but  unpaid
Commitment  Fees in accordance  with each  Lender's  Percentage,  third,  to pay
accrued  but  unpaid  interest  on the Notes in  accordance  with the  amount of
outstanding Loans owed to each Lender,  fourth, to pay amounts outstanding under
Interest Rate Protection Agreements with any Lender, fifth, to pay the principal
balance  outstanding  on the Notes in accordance  with the amount of outstanding
Loans  owed  to  each  Lender,  sixth,  to  pay  other  amounts  payable  to the
Administrative  Agent,  and seventh,  to pay other amounts payable to any of the
Lenders.  All  amounts to be paid to any of the  Lenders  by the  Administrative
Agent shall be credited to the Lenders after  collection  by the  Administrative
Agent,  in immediately  available  funds,  either by wire transfer or deposit in
such Lender's  correspondent  account with the Administrative  Agent, or as such
Lender and the Administrative Agent shall from time to time agree.

                  SECTION 10.3. Sharing of Setoffs and Cash Collateral.  Each of
the Lenders agrees that if it shall, through the exercise of a right of banker's
lien, setoff or counterclaim  against the Borrower,  including,  but not limited
to, a secured  claim under  Section 506 of Title 11 of the United States Code or
any other  security or interest  arising from, or in lieu of, such secured claim
and received by such Lender under any applicable bankruptcy, insolvency or other
similar law, or otherwise, obtain payment in respect of its Loans as a result of
which the unpaid  portion of its Loans is  proportionately  less than the unpaid
portion of the Loans of any of the other Lenders (a) it shall promptly  purchase
at par (and shall be deemed to have thereupon purchased) from such other Lenders
a participation in the Loans of such other Lenders, so that the aggregate unpaid
principal amount of each of the Lenders' Loans and its participation in Loans of
the  other  Lenders  shall be in the same  proportion  to the  aggregate  unpaid
principal  amount of all Loans then  outstanding as the principal  amount of its
Loans prior to the obtaining of such payment was to the principal  amount of all
Loans  outstanding  prior to the  obtaining  of such  payment and (b) such other
adjustments shall be made from time to time as shall be equitable to ensure that
the Lenders  share such  payment pro rata.  If all or any portion of such excess
payment is thereafter  recovered from the Lender which originally  received such
excess  payment,  such purchase (or portion  thereof)  shall be canceled and the
purchase price restored to the extent of such recovery.  The Borrower  expressly
consents  to the  foregoing  arrangements  and agrees that any Lender or Lenders
holding (or deemed to be holding) a participation in a Note may exercise any and
all rights of banker's lien,  setoff or counterclaim with respect to any and all
moneys  owing by the  Borrower  to such  Lender or  Lenders  as fully as if such
Lender or  Lenders  held a Note and was the  original  obligee  thereon,  in the
amount of such participation.

                  SECTION  10.4.  Notice to the  Lenders.  Upon  receipt  by the
Administrative  Agent from the  Borrower  of any  communication  calling  for an
action on the part of the Lenders, or upon notice to the Administrative Agent of
any Event of Default,  the Administrative Agent will in turn promptly inform the
other Lenders in writing (which shall include facsimile  




                                      -85-
<PAGE>
communications)  of the nature of such communication or of the Event of Default,
as the case may be.

                  SECTION  10.5.  Liability  of  Administrative  Agent.  (a) The
Administrative  Agent, when acting on behalf of the Lenders,  may execute any of
its duties under this Credit Agreement or the other Fundamental  Documents by or
through its officers,  agents, or employees and neither the Administrative Agent
nor its officers,  agents or employees  shall be liable to the Lenders or any of
them  for any  action  taken  or  omitted  to be  taken  in good  faith,  nor be
responsible  to the  Lenders  or to any of  them  for  the  consequences  of any
oversight  or error of judgment,  or for any loss,  unless the same shall happen
through its gross negligence or willful misconduct. The Administrative Agent and
its directors,  officers,  agents,  and employees shall in no event be liable to
the Lenders or to any of them for any action  taken or omitted to be taken by it
pursuant to instructions received by it from the Required Lenders or in reliance
upon the advice of counsel selected by it with reasonable care. Without limiting
the  foregoing,  neither  the  Administrative  Agent  nor any of its  directors,
officers,  employees,  or agents shall be  responsible to any of the Lenders for
the  due  execution,  validity,  genuineness,  effectiveness,   sufficiency,  or
enforceability of, or for any statement,  warranty, or representation in, or for
the  perfection of any Lien or security  interest  contemplated  by, this Credit
Agreement, any Fundamental Document or any related agreement, document or order,
or for freedom of any of the  collateral  under any  Fundamental  Document  from
prior Liens or security interests,  or shall be required to ascertain or to make
any inquiry  concerning  the  performance  or  observance by the Borrower or any
Transaction  Party of the terms,  conditions,  covenants,  or agreements of this
Credit Agreement, any Fundamental Document or any related agreement or document.

                  (b)  The  Administrative  Agent,  as  agent  for  the  Lenders
hereunder, any Lender or any of their respective directors, officers, employees,
or agents shall have no  responsibility to the Borrower or any Transaction Party
on account of the failure or delay in  performance or breach by any other Lender
of any of such Lender's obligations under this Credit Agreement,  the Notes, any
Fundamental  Document or any  related  agreement  or  document or in  connection
herewith or therewith.

                  (c)  The  Administrative  Agent,  as  agent  for  the  Lenders
hereunder,  shall  be  entitled  to rely on any  communication,  instrument,  or
document  reasonably  believed  by it to be genuine or correct  and to have been
signed or sent by a Person or Persons  believed by it to be the proper Person or
Persons,  and it  shall  be  entitled  to  rely  on  advice  of  legal  counsel,
independent  public  accountants,  and other  professional  advisers and experts
selected by it.

                  SECTION 10.6  Reimbursement and  Indemnification.  Each of the
Lenders agrees (i) to reimburse the Administrative Agent in accordance with such
Lender's  Percentage,  for any expenses and fees incurred for the benefit of the
Lenders under the Fundamental Documents,  including, without limitation, counsel
fees and  compensation  of agents and  employees  paid for services  rendered on
behalf of the Lenders,  and any other expense  incurred in  connection  with the
operations or enforcement thereof not reimbursed by the Borrower and (ii) to





                                      -86-
<PAGE>
indemnify and hold harmless the  Administrative  Agent and any of its directors,
officers,  employees,  or agents,  on demand,  in accordance  with each Lender's
Percentage,  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, it or any of them in any way relating to or arising out of the
Fundamental  Documents or any related  agreement or document or any action taken
or omitted by it or any of them under the  Fundamental  Documents or any related
agreement or document to the extent not  reimbursed by the Borrower or any other
Transaction  Party  (except  such as shall result from the gross  negligence  or
willful  misconduct of the Person to be  indemnified or held  harmless).  To the
extent  indemnification  payments  made by the Lenders  pursuant to this Section
10.6 are subsequently recovered by the Administrative Agent from the Borrower or
a  Transaction  Party,  the  Administrative  Agent  will  promptly  refund  such
previously paid indemnity payments to the Lenders.

                  SECTION 10.7. Rights of Administrative Agent. It is understood
and agreed that the  Administrative  Agent shall have the same rights and powers
hereunder (including,  without limitation,  the right to give such instructions)
as any of the other Lenders and may exercise such rights and powers,  as well as
its rights and powers under other  agreements and  instruments to which it is or
may be  party,  and  engage  in  other  transactions  with the  Borrower  or any
Transaction  Party (or any affiliate of either  thereof),  as though it were not
the Administrative Agent of the Lenders under this Credit Agreement.

                  SECTION 10.8.  Independent  Investigation by Lenders.  Each of
the  Lenders  (i)  acknowledges  that it has  decided to enter into this  Credit
Agreement  and to make the  Loans  hereunder  based on its own  analysis  of the
transactions contemplated hereby and of the creditworthiness of the Borrower and
the  Transaction  Parties  and has not relied on any  representation,  warranty,
statement or information made or provided by the  Administrative  Agent and (ii)
agrees  that the  Administrative  Agent  shall  bear no  responsibility  for any
Lender's  decision  to enter into this  Credit  Agreement  and to make the Loans
hereunder.

                  SECTION 10.9. Agreement of Required Lenders. Upon any occasion
requiring or permitting an approval,  consent,  waiver, election or other action
on the part of the Required Lenders, action shall be taken by the Administrative
Agent  for and on  behalf  of,  or for the  benefit  of,  all  Lenders  upon the
direction  of the  Required  Lenders and any such action shall be binding on all
Lenders. No amendment, modification, consent or waiver shall be effective except
in accordance with the provisions of Section 11.10 hereof.

                  SECTION 10.10.  Notice of Transfer.  The Administrative  Agent
may deem and treat any Lender  which is a party to this Credit  Agreement as the
owner of such Lender's respective portions of the Loans for all purposes, unless
and until a written  notice of the  assignment or transfer  thereof  executed by
such  Lender  shall have been  received by the  Administrative  Agent and become
effective in accordance with Section 11.3 hereof.





                                      -87-
<PAGE>
                  SECTION   10.11.   Successor   Administrative   Agent   .  The
Administrative  Agent  may  resign at any time by  giving  ten (10)  days  prior
written  notice  thereof to the Lenders and the Borrower,  but such  resignation
shall  not  become  effective  until  acceptance  by a  successor  agent  of its
appointment   pursuant  hereto.   Upon  any  such   resignation,   the  retiring
Administrative  Agent shall  promptly  appoint a successor  agent from among the
Lenders,  provided that such successor is reasonably acceptable (as evidenced in
writing)  to the  Required  Lenders.  If no  successor  agent shall have been so
appointed by the retiring agent and shall have accepted such appointment  within
30  days  after  the  retiring   Administrative  Agent's  giving  of  notice  of
resignation,  the Borrower may appoint a successor agent (which successor may be
replaced by the Required  Lenders;  provided that such replacement is reasonably
acceptable  to the  Borrower),  which shall be either a Lender,  or 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 $250,000,000. Upon
the acceptance of any appointment as agent hereunder by a successor agent,  such
successor  agent  shall  thereupon  succeed  to and become  vested  with all the
rights, powers,  privileges and duties of the retiring Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations under this Credit Agreement, the other Fundamental Documents and any
other  credit   documentation.   After  any  retiring   Administrative   Agent's
resignation hereunder as Administrative Agent, the provisions of this Article 10
shall inure to its benefit as to any actions  taken or omitted to be taken by it
while it was Administrative Agent under this Credit Agreement.


11.  MISCELLANEOUS

                  SECTION  11.1.  Notices.   Notices  and  other  communications
provided  for herein shall be in writing and shall be delivered or mailed (or if
by telegram, delivered to the telegraph company and, if by telecopier, delivered
by such equipment) addressed,  if to the Administrative Agent or Credit Lyonnais
New York Branch, to it at 1301 Avenue of the Americas, New York, New York 10019,
Attn:  Project  Finance  Group,  facsimile  no.:  (212)  261-3421  or if to  the
Borrower,  to it at c/o GCI Fiber Co.,  Inc.,  2550 Denali  Street,  Suite 1000,
Anchorage,  Alaska 99503,  Attn: Chief Financial  Officer,  facsimile no.: (907)
265-5676  or if to a Lender,  to it at its  address  set forth on the  signature
page,  or such other  address as such party may from time to time  designate  by
giving  written  notice to the  other  parties  hereunder.  Any  failure  of the
Administrative Agent or a Lender giving notice pursuant to this Section 11.1, to
provide a  courtesy  copy to a party as  provided  herein,  shall not affect the
validity of such  notice.  All notices  and other  communications  (other than a
notice of a Default or Event of Default) given to any party hereto in accordance
with the provisions of this Credit  Agreement shall be deemed to have been given
on the tenth  Business Day after the date when sent by  registered  or certified
mail, postage prepaid,  return receipt requested,  if by mail, or when delivered
to the telegraph company,  charges prepaid,  if by telegram,  or when receipt is
acknowledged if by telecopier,  in each case addressed to such party as provided
in  this  Section  11.1 or in  accordance  with  the  latest  unrevoked  written
direction  from such party.  Any notice of Default or Event of Default  given to
any party hereto in  accordance  with the  provisions  of this Credit  Agreement
shall be deemed to 




                                      -88-
<PAGE>
have been given on the tenth Business Day after the date when sent by registered
or certified mail,  postage prepaid,  return receipt  requested,  if by mail, or
when delivered to the telegraph  company,  charges prepaid,  if by telegram,  or
when receipt is acknowledged by telephonic  confirmation with the recipient,  if
by telecopier,  in each case addressed to such party as provided in this Section
11.1 or in accordance  with the latest  unrevoked  written  direction  from such
party.

                  SECTION  11.2.  Survival  of  Agreement,  Representations  and
Warranties,  etc. All  warranties,  representations  and  covenants  made by the
Borrower or any of the Transaction  Parties herein, in any Fundamental  Document
or in any  certificate or other  instrument  delivered by it or on its behalf in
connection with this Credit Agreement or any other Fundamental Document shall be
considered to have been relied upon by the Administrative  Agent and the Lenders
and, except for any terminations,  amendments,  modifications or waivers thereof
in  accordance  with the terms  hereof,  shall  survive  the making of the Loans
herein  contemplated and the execution and delivery to the Administrative  Agent
of the Notes regardless of any investigation made by the Administrative Agent or
the  Lenders or on their  behalf and shall  continue in full force and effect so
long as any amount due or to become due hereunder is outstanding  and unpaid and
so long as the Commitments have not been terminated.  All statements in any such
certificate or other instrument shall constitute  representations and warranties
by the Borrower hereunder or by a Transaction Party under a Fundamental Document
(as applicable).

                  SECTION  11.3.  Successors  and  Assigns;  Syndications;  Loan
Sales; Participations.  (a) Whenever in this Credit Agreement any of the parties
hereto is referred to, such reference  shall be deemed to include the successors
and assigns of such party;  provided,  however, that the Borrower may not assign
any of its rights or obligations  hereunder without the prior written consent of
the Administrative Agent and all of the Lenders, and all covenants, promises and
agreements  by or on behalf of the Borrower  which are  contained in this Credit
Agreement  shall  inure to the  benefit  of the  successors  and  assigns of the
Administrative Agent and any of the Lenders.

                  (b) Each of the Lenders  may (but only with the prior  written
consent  of the  Administrative  Agent)  assign  to one or more  banks  or other
entities all or a portion of its interests,  rights and  obligations  under this
Credit  Agreement  (including,  without  limitation,  all  or a  portion  of its
Commitments  and the same  portion  of all Loans at the time owing to it and the
Notes held by it);  provided,  however,  that (i) each assignment  shall be of a
constant,  and not a varying,  percentage of the assigning  Lender's  interests,
rights and  obligations  under this  Credit  Agreement,  (ii)  without the prior
written consent of the Borrower and the Required Lenders, upon the effectiveness
of such assignment and any other assignment of a Lender's interests,  rights and
obligations  pursuant to this Section 11.3 with the same  effective  date as the
applicable  assignment,  no Lender (A) shall at any time prior to the Completion
Date,  have  a  Construction  Commitment  which  is  less  than  the  lesser  of
$15,000,000 and one-fifth (1/5) of the aggregate Construction Commitments of all
the Lenders  then in effect or (B) shall at any time on or after the  Completion
Date, hold outstanding Loans in a principal amount which is less than the lesser





                                      -89-
<PAGE>
of  $15,000,000  or  one-fifth  (1/5)  of the  aggregate  amount  of  all  Loans
outstanding on such effective date and (iii) the parties to each such assignment
shall execute and deliver to the  Administrative  Agent,  for its acceptance and
recording in the Register (as defined  below),  an  Assignment  and  Acceptance,
together with the original Note subject to such  assignment and a processing and
recordation  fee of  $2,500  to be  paid  to  the  Administrative  Agent  by the
assigning Lender. Upon such execution,  delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance,  which
effective  date shall be not earlier than five  Business  Days after the date of
acceptance  and  recording  by  the  Administrative   Agent,  (x)  the  assignee
thereunder  shall  be a  party  hereto  and,  to the  extent  provided  in  such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and under the other  Fundamental  Documents and shall be bound by the provisions
hereof and thereof and (y) the assigning Lender  thereunder shall, to the extent
provided  in such  Assignment  and  Acceptance,  relinquish  its  rights  and be
released from its obligations  under this Credit  Agreement (and, in the case of
an  Assignment  and  Acceptance  covering  all or the  remaining  portion of the
assigning  Lender's   interests,   rights  and  obligations  under  this  Credit
Agreement,  such assigning Lender shall cease to be a party hereto), except that
notwithstanding  such  assignment,  any rights  and  remedies  available  to the
Borrower for any breaches by such assigning Lender of its obligations  hereunder
while a Lender,  shall be preserved  after such assignment and such Lender shall
not be relieved of any liability to the Borrower due to any such breach.

                  (c) By executing and delivering an Assignment and  Acceptance,
the assigning Lender thereunder and the assignee thereunder confirm to and agree
with each  other and the other  parties  hereto as  follows:  (i) other than the
representation  and warranty  that it is the legal and  beneficial  owner of the
interest  being  assigned  thereby  free and  clear of any  adverse  claim,  the
assigning   Lender   makes  no   representation   or  warranty  and  assumes  no
responsibility  with respect to any  statements,  warranties or  representations
made in or in  connection  with this Credit  Agreement or the other  Fundamental
Documents or the execution,  legality,  validity,  enforceability,  genuineness,
sufficiency  or value of the  Fundamental  Documents or any other  instrument or
document furnished pursuant hereto or thereto;  (ii) such assigning Lender makes
no representation or warranty and assumes no responsibility  with respect to the
financial  condition  of the Borrower or any of the  Transaction  Parties or the
performance or observance by the Borrower or any of the  Transaction  Parties of
any of their obligations under the Fundamental Documents or any other instrument
or document furnished pursuant thereto; (iii) such assignee confirms that it has
received  a copy of this  Credit  Agreement,  together  with  copies of the most
recent financial statements delivered pursuant to Sections 5.1(a) and 5.1(b) (or
if none of such financial statements shall have then been delivered, then copies
of the  financial  statements  referred to in Section 3.5 hereof) and such other
documents and  information  as it has deemed  appropriate to make its own credit
analysis and decision to enter into such  Assignment and  Acceptance;  (iv) such
assignee  agrees  that it will,  independently  and  without  reliance  upon the
Administrative Agent, the assigning Lender 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 Credit
Agreement or the other  Fundamental  Documents;  (v) such assignee  appoints and
authorizes  the  Administrative  Agent to take  such  




                                      -90-
<PAGE>
action as the agent on its behalf and to exercise  such powers under this Credit
Agreement  or  the  other   Fundamental   Documents  as  are  delegated  to  the
Administrative  Agent by the terms hereof or thereof,  together with such powers
as are reasonably incidental thereto; and (vi) such assignee agrees that it will
be bound by the  provisions  of this  Credit  Agreement  and it will  perform in
accordance  with its  terms  all of the  obligations  which by the terms of this
Credit Agreement are required to be performed by it as a Lender.

                  (d) The Administrative  Agent shall maintain at its address at
which  notices  are to be given to it  pursuant  to Section  11.1 a copy of each
Assignment and  Acceptance  and a written or electronic  record of the names and
addresses of the Lenders and the  Commitments  of, and  principal  amount of the
Loans owing to, each Lender from time to time (the  "Register").  The entries in
the Register  shall be  conclusive,  in the absence of manifest  error,  and the
Borrower,  the Administrative  Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender  hereunder  for all purposes of the
Fundamental  Documents.  The Register  shall be available for  inspection by the
Borrower  or any  Lender  at any  reasonable  time  and from  time to time  upon
reasonable prior notice.

                  (e)  Subject  to  the  foregoing,   upon  its  receipt  of  an
Assignment  and  Acceptance  executed  by an  assigning  Lender and an  assignee
together with the original Note subject to such  assignment  and the  processing
and  recordation  fee, the  Administrative  Agent shall,  if such Assignment and
Acceptance has been completed and is in the form of Exhibit I hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the  Register  and (iii) give prompt  written  notice  thereof to the  Borrower.
Within five (5) Business Days after receipt of the notice, the Borrower,  at its
own expense,  shall execute and deliver to the Administrative Agent, in exchange
for the surrendered  Note, a new Note to the order of such assignee in an amount
equal to the Commitments and/or Loans (as applicable)  assumed by it pursuant to
such  Assignment  and  Acceptance  and if the  assigning  Lender has  retained a
Commitments and/or Loans (as applicable)  hereunder,  a new Note to the order of
the  assigning  Lender in an amount  equal to the  Commitments  and/or Loans (as
applicable)  retained by it  hereunder.  Such new Notes shall be in an aggregate
principal  amount equal to the principal  amount of the surrendered  Note or the
amount of outstanding  Loans then due to the assigning  Lender (as  applicable),
shall be dated  the date of the  surrendered  Note  and  shall  otherwise  be in
substantially the form of Exhibit A-1 or A-2 hereto (as applicable). In addition
the Borrower will promptly,  at its own expense,  execute such amendments to the
Fundamental  Documents to which each is a party and such  additional  documents,
and take such other actions as the  Administrative  Agent or the assignee Lender
may reasonably request in order to give such assignee Lender the full benefit of
the Liens contemplated by the Fundamental Documents.

                  (f)  Each of the  Lenders  may,  without  the  consent  of the
Borrower, sell participations to one or more banks or other entities in all or a
portion of its interests,  rights and  obligations  under this Credit  Agreement
(including,  without  limitation,  all or a portion of its  Commitments  and the
Loans owing to it and the Note held by it); provided, however, that (i) any such
Lender's  obligations under this Credit Agreement shall remain  unchanged,  (ii)
such 




                                      -91-
<PAGE>
participant  shall not be granted any voting  rights or any right to control the
vote of such Lender under this Credit Agreement, except with respect to proposed
changes to  interest  rates,  amount of  Commitments,  final  maturity of Loans,
releases of all or  substantially  all the Collateral and fees (as applicable to
such participant),  (iii) any such Lender shall remain solely responsible to the
other  parties  hereto  for  the  performance  of  such  obligations,  (iv)  the
participating  banks or other entities shall be entitled to the cost  protection
provisions contained in Sections 2.11, 2.12 and 2.15(e) hereof but a participant
shall not be entitled to receive  pursuant to such  provisions  an amount larger
than its share of the amount to which the  Lender  granting  such  participation
would have been  entitled to receive and (v) the  Borrower,  the  Administrative
Agent and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's interests,  rights and obligations under
this Credit Agreement.

                  (g) Any Lender  may,  in  connection  with any  assignment  or
participation or proposed  assignment or participation  pursuant to this Section
11.3,   disclose  to  the  assignee  or  participant  or  proposed  assignee  or
participant,  any information relating to the Borrower or any of the Transaction
Parties furnished to the Administrative  Agent or such Lender by or on behalf of
the Borrower or any of the Transaction Parties;  provided that prior to any such
disclosure,   each  such  assignee  or  participant  or  proposed   assignee  or
participant shall agree, by executing a confidentiality  letter substantially in
the  form  of  Exhibit  T  hereto,  to  preserve  the   confidentiality  of  any
confidential  information  relating to the  Borrower  or any of the  Transaction
Parties received from such Lender.

                  (h) Any  assignment  pursuant to paragraph  (a) or (b) of this
Section 11.3 shall  constitute an amendment of the Schedule of Commitments as of
the effective date of such assignment.

                  (i) The Borrower  consents that any Lender may at any time and
from time to time pledge or otherwise  grant a security  interest in any Loan or
in any of the Notes  evidencing  the Loans (or any part  thereof) to any Federal
Reserve Bank.

                  SECTION 11.4. Expenses;  Documentary Taxes. Whether or not the
transactions  hereby  contemplated shall be consummated,  the Borrower agrees to
pay all reasonable  out-of-pocket  expenses incurred by the Administrative Agent
in connection  with, or growing out of, the  performance of due  diligence,  the
syndication  of  the  credit  facility  contemplated  hereby,  the  negotiation,
preparation,  execution,  delivery, waiver or modification and administration of
this Credit  Agreement  and any other  documentation  contemplated  hereby,  the
Notes,  the making of the Loans,  the Collateral or the  Fundamental  Documents,
including but not limited to, the reasonable  out-of-pocket costs and internally
allocated  charges  of audit  or field  examinations,  the  reasonable  fees and
disbursements of any counsel that the Administrative Agent shall retain, and the
reasonable  fees and expenses of technical or other  consultants  engaged by the
Administrative  Agent.  Such payments  shall be made on the date of execution of
this Credit Agreement and thereafter on demand. In addition, the Borrower agrees
to pay all reasonable  out-of-pocket  expenses and reasonable allocated costs of
in-house  counsel  incurred  by the  Administrative  




                                      -92-
<PAGE>
Agent or the Lenders in the enforcement or protection of the rights and remedies
of the Lenders in connection with this Credit Agreement,  the Notes or the other
Fundamental Documents, and with respect to any action which may be instituted by
any Person  other than the  Borrower or any Lender  against  the  Administrative
Agent or any Lender,  or as a result of any  transaction,  action or  non-action
arising from any of the  foregoing,  including but not limited to the reasonable
fees  and  disbursements  of any  counsel  for the  Administrative  Agent or the
Lenders.  Such  payments  shall be made on demand after the date of execution of
this  Credit  Agreement.  The  Borrower  agrees  that  it  shall  indemnify  the
Administrative  Agent and the Lenders  from and hold them  harmless  against any
documentary taxes,  assessments or charges made by any Governmental Authority by
reason of the execution and delivery of this Credit  Agreement or the Notes. The
obligations   of  the  Borrower  under  this  Section  11.4  shall  survive  the
termination of this Credit Agreement and/or the payment of the Loans.

                  SECTION 11.5.  Indemnification of the Administrative Agent and
the  Lenders.  The  Borrower  agrees  (a) to  indemnify  and hold  harmless  the
Administrative Agent and the Lenders and their respective  directors,  officers,
employees and agents (each an "Indemnified Party") (to the full extent permitted
by  Applicable  Law)  from and  against  any and all  claims,  demands,  losses,
judgments,   damages  and  liabilities  (including  liabilities  for  penalties)
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation,  litigation or other proceeding (whether
or not any Lender or the Administrative Agent is a party thereto) related to the
entering into and/or  performance of any Fundamental  Document or the use of the
proceeds of any Loans  hereunder or the  consummation  of any other  transaction
contemplated in any Fundamental  Document,  including,  without limitation,  the
reasonable  fees and  disbursements  of counsel  incurred in connection with any
such  investigation,  litigation  or other  proceeding  (but  excluding any such
losses, liabilities,  claims, damages or expenses of an Indemnified party to the
extent incurred by reason of the gross negligence or willful  misconduct of such
Indemnified Party). If any proceeding, including any governmental investigation,
shall be  instituted  involving  any  Indemnified  Party,  in  respect  of which
indemnity  may be sought  against the  Borrower,  such  Indemnified  Party shall
promptly  notify the  Borrower in writing,  and the  Borrower  shall  assume the
defense thereof on behalf of such Indemnified  Party including the employment of
counsel  (reasonably  satisfactory to such Indemnified Party) and payment of all
reasonable  expenses.  Any  Indemnified  Party  shall  have the  right to employ
separate  counsel in any such proceeding and participate in the defense thereof,
but the fees and expenses of such  separate  counsel  shall be at the expense of
such  Indemnified  Party unless (i) the employment of such separate  counsel has
been  specifically  authorized  by the Borrower or (ii) the named parties to any
such action (including any impleaded parties) include such Indemnified Party and
the  Borrower and such  Indemnified  Party shall have been advised by counsel to
the Administrative  Agent that there may be one or more legal defenses available
to such  Indemnified  Party which are  different  from or in additional to those
available to the  Borrower (in which case the Borrower  shall not have the right
to assume the defense of such action on behalf of such  Indemnified  Party).  At
any time after the Borrower has assumed the defense of any proceeding  involving
any Indemnified  Party in respect of which indemnity has been sought against the
Borrower,  such Indemnified  Party may elect, by written notice to the Borrower,
to  withdraw  its  




                                      -93-
<PAGE>
request for indemnity and  thereafter  the defense of such  proceeding  shall be
maintained by counsel of the Indemnified Party's choosing and at the Indemnified
Party's expense. The foregoing indemnity agreement includes any reasonable costs
incurred by an  Indemnified  Party in  connection  with any action or proceeding
which may be instituted in respect of the foregoing by the Administrative  Agent
or by any other Person either against the Administrative Agent or the Lenders or
in connection with which any officer or employee of the Administrative  Agent or
the Lenders is called as a witness or deponent,  including,  but not limited to,
the reasonable fees and disbursements of any counsel to the Administrative Agent
and any out-of-pocket costs incurred by the Administrative  Agent or the Lenders
in appearing as a witness or in otherwise  complying  with legal process  served
upon them.

                  If the Borrower or any Transaction  Party shall fail to do any
act or thing which it has  covenanted  to do  hereunder  or under a  Fundamental
Document,  or any  representation or warranty of the Borrower or any Transaction
Party  shall  be  breached,  the  Administrative  Agent  may (but  shall  not be
obligated  to) do the same or cause it to be done or remedy any such  breach and
if the  Administrative  Agent does the same or causes it to be done, there shall
be added  to the  Obligations  hereunder  the cost or  expense  incurred  by the
Administrative  Agent  in so  doing,  and any and all  amounts  expended  by the
Administrative Agent in taking any such action shall be repayable to it upon its
demand  therefor and shall bear interest at 4% in excess of the  Alternate  Base
Rate  from  time to  time in  effect  from  the  date  advanced  to the  date of
repayment.

                  All  indemnities  contained in this Section 11.5 shall survive
the expiration or earlier  termination  of this Credit  Agreement and payment of
the  Loans  and  shall  inure  to the  benefit  of any  Person  who was a Lender
notwithstanding  such  Person's  assignment  of all its  Loans  and  Commitments
hereunder.

                  SECTION  11.6.  CHOICE OF LAW.  THIS CREDIT  AGREEMENT AND THE
NOTES SHALL IN ALL RESPECTS BE CONSTRUED IN  ACCORDANCE  WITH,  AND GOVERNED BY,
THE LAWS OF THE STATE OF NEW YORK WHICH ARE  APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS RELATING TO
INTEREST RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.

                  SECTION  11.7.  WAIVER  OF  JURY  TRIAL.  TO  THE  EXTENT  NOT
PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE BORROWER HEREBY WAIVES,
AND  COVENANTS  THAT IT WILL NOT ASSERT  (WHETHER  AS  PLAINTIFF,  DEFENDANT  OR
OTHERWISE),  ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN  RESPECT  OF ANY  ISSUE,
CLAIM,  DEMAND,  ACTION,  OR CAUSE OF ACTION  ARISING  OUT OF OR BASED UPON THIS
CREDIT  AGREEMENT,  THE SUBJECT MATTER HEREOF,  ANY FUNDAMENTAL  DOCUMENT OR THE
SUBJECT MATTER THEREOF,  IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER  ARISING
AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.  THE BORROWER ACKNOWLEDGES THAT IT
HAS BEEN INFORMED BY THE LENDERS 




                                      -94-
<PAGE>
THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL  INDUCEMENT UPON WHICH
THE LENDERS HAVE RELIED,  ARE RELYING AND WILL RELY IN ENTERING INTO THIS CREDIT
AGREEMENT AND ANY OTHER FUNDAMENTAL  DOCUMENT.  THE ADMINISTRATIVE  AGENT OR ANY
LENDER MAY FILE AN ORIGINAL  COUNTERPART OR A COPY OF THIS SECTION 11.7 WITH ANY
COURT AS WRITTEN  EVIDENCE OF THE  CONSENT OF THE  BORROWER TO THE WAIVER OF ITS
RIGHTS TO TRIAL BY JURY.

                  SECTION  11.8.  No  Waiver.  No  failure  on the  part  of the
Administrative Agent or any Lender to exercise, and no delay in exercising,  any
right, power, privilege or remedy hereunder,  under the Notes or under any other
Fundamental  Document shall operate as a waiver thereof, nor shall any single or
partial  exercise of any such right,  power,  privilege  or remedy  preclude any
other or further  exercise  thereof or the exercise of any other  right,  power,
privilege  or remedy and no course of dealing  shall  operate as a waiver of any
right,  power,  privilege or remedy of the  Administrative  Agent.  All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.

                  SECTION 11.9. Extension of Payment Date. Should any payment or
prepayment  of  principal  of or interest  on the Notes or any other  amount due
hereunder  become due and  payable on a day other than a Business  Day,  the due
date of such  payment or  prepayment  shall be extended  to the next  succeeding
Business Day and, in the case of a payment or prepayment of principal,  interest
shall be payable  thereon at the rate per annum  herein  specified  during  such
extension.

                  SECTION 11.10. Amendments, etc. No modification,  amendment or
waiver  of any  provision  of  this  Credit  Agreement,  and no  consent  to any
departure  by the Borrower  from the  provisions  hereof,  shall in any event be
effective unless the same shall be in writing and signed by the Required Lenders
and then such waiver or consent shall be effective only in the specific instance
and  for  the  purpose  for  which  given;  provided,   however,  that  no  such
modification, waiver, consent or amendment shall, without the written consent of
all of the  Lenders,  (i) change the  Commitment  of any  Lender,  (ii) amend or
modify any provision of this Credit  Agreement  which provides for the unanimous
consent  or  approval  of the  Lenders,  (iii)  release  any  Collateral  or any
collateral under any other Fundamental  Document (except as contemplated herein)
or  release  any  Transaction  Party  from any  monetary  obligation  under  any
Fundamental  Document,  (iv) alter the fixed  scheduled  maturity  or  principal
amount of any Loan,  or the rate of  interest  payable  thereon,  or the rate at
which the Commitment  Fees accrue or the fixed  scheduled  maturity or amount of
any other payment required to be made under this Credit Agreement, (v) amend the
definition  of "Required  Lenders," or (vi) amend this  Section  11.10.  No such
amendment or modification may adversely affect the rights and obligations of the
Administrative  Agent hereunder without its prior written consent.  No notice to
or demand on the  Borrower  shall  entitle the  Borrower to any other or further
notice or demand in the same, similar or other  circumstances.  Each holder of a
Note shall be bound by any amendment, modification, waiver or consent authorized
as provided herein,  whether or not such Note shall have been 




                                      -95-
<PAGE>
marked to  indicate  such  amendment,  modification,  waiver or consent  and any
consent by any holder of Note shall bind any Person subsequently  acquiring such
Note whether or not such Note is so marked.

                  SECTION  11.11.  Severability.  Any  provision  of this Credit
Agreement  or  of  the  Notes  which  is  prohibited  or  unenforceable  in  any
jurisdiction  shall,  as to such  jurisdiction,  be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

                  SECTION  11.12.   SERVICE  OF  PROCESS.  THE  BORROWER  HEREBY
IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK  AND TO THE  JURISDICTION  OF THE  UNITED  STATES  DISTRICT  COURT  FOR THE
SOUTHERN  DISTRICT  OF NEW YORK FOR THE  PURPOSES  OF ANY SUIT,  ACTION OR OTHER
PROCEEDING  ARISING  OUT OF OR BASED UPON THIS  CREDIT  AGREEMENT,  THE  SUBJECT
MATTER HEREOF, ANY FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF BROUGHT BY
THE  ADMINISTRATIVE  AGENT OR A LENDER OR ANY OF THEIR  SUCCESSORS OR ASSIGNS IN
EITHER OF THE  ABOVE-REFERENCED  FORUMS AT THE SOLE OPTION OF THE ADMINISTRATIVE
AGENT OR A LENDER.  THE BORROWER TO THE EXTENT  PERMITTED BY APPLICABLE  LAW (A)
HEREBY  WAIVES,  AND AGREES NOT TO ASSERT,  BY WAY OF MOTION,  AS A DEFENSE,  OR
OTHERWISE,  IN ANY SUCH SUIT, ACTION OR PROCEEDING  BROUGHT IN SUCH COURTS,  ANY
CLAIM THAT IT IS NOT SUBJECT  PERSONALLY TO THE  JURISDICTION OF THE ABOVE-NAMED
COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT
THE SUIT,  ACTION OR PROCEEDING IS BROUGHT IN AN  INCONVENIENT  FORUM,  THAT THE
VENUE OF THE  SUIT,  ACTION  OR  PROCEEDING  IS  IMPROPER  OR THAT  THIS  CREDIT
AGREEMENT,  THE SUBJECT MATTER HEREOF,  ANY FUNDAMENTAL  DOCUMENT OR THE SUBJECT
MATTER  THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT,  (B) HEREBY  WAIVES THE
RIGHT  TO  REMOVE  ANY  SUCH  ACTION,  SUIT  OR  PROCEEDING  INSTITUTED  BY  THE
ADMINISTRATIVE AGENT OR A LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY
WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR
COUNTERCLAIMS  EXCEPT  COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM
THE SAME SUBJECT  MATTER.  THE BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS BY
MAIL AT ITS ADDRESS TO WHICH  NOTICES ARE TO BE GIVEN  PURSUANT TO SECTION  11.1
HEREOF.  THE BORROWER AGREES THAT ITS SUBMISSION TO JURISDICTION  AND CONSENT TO
SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE ADMINISTRATIVE
AGENT AND THE LENDERS.  FINAL JUDGMENT  AGAINST THE BORROWER IN ANY SUCH ACTION,
SUIT OR  PROCEEDING  SHALL  BE  CONCLUSIVE,  AND MAY BE  ENFORCED  IN ANY  OTHER
JURISDICTION (X) BY SUIT,  ACTION OR PROCEEDING ON THE JUDGMENT,  




                                      -96-
<PAGE>
A CERTIFIED OR TRUE COPY OF WHICH SHALL BE  CONCLUSIVE  EVIDENCE OF THE FACT AND
THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF THE BORROWER THEREIN DESCRIBED OR (B)
IN ANY  OTHER  MANNER  PROVIDED  BY,  OR  PURSUANT  TO,  THE LAWS OF SUCH  OTHER
JURISDICTION,  PROVIDED,  HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A LENDER MAY
AT ITS OPTION BRING SUIT, OR INSTITUTE  OTHER JUDICIAL  PROCEEDINGS  AGAINST THE
BORROWER OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES
OR OF ANY COUNTRY OR PLACE WHERE THE BORROWER OR SUCH ASSETS MAY BE FOUND.

                  SECTION 11.13. Headings.  Section headings used herein and the
table  of  contents  are  for  convenience  only  and  are  not  to  affect  the
construction of, or be taken into  consideration  in  interpreting,  this Credit
Agreement.

                  SECTION  11.14.   Execution  in   Counterparts.   This  Credit
Agreement  may be  executed in any number of  counterparts,  each of which shall
constitute an original,  but all of which taken together,  shall  constitute one
and the same instrument.

                  SECTION   11.15.   Confidentiality.   Each   of  the   Lenders
understands  that  certain  information  furnished to it pursuant to this Credit
Agreement will be received by it prior to the time that such  information  shall
have been made public,  and each of the Lenders hereby agrees that it will keep,
and will direct its officers and employees to keep, all the information provided
to it pursuant  to this  Credit  Agreement  confidential  prior to its  becoming
public except that Lenders shall be permitted to disclose such  information  (i)
to  officers,   directors,   employees,   representatives,   agents,   auditors,
accountants,  consultants,  advisors,  lawyers and affiliates of such Lender, in
the  ordinary  course of business  who have been made aware of the  confidential
nature of the  information;  (ii) to prospective  assignees or participants  and
their respective officers,  directors,  employees, agents and representatives in
accordance with Section 11.3(g) herein;  (iii) as required by Applicable Law, or
pursuant to subpoenas or other legal  process,  or as requested by  governmental
agencies and examiners;  (iv) in proceedings to enforce the Lenders'  rights and
remedies hereunder or under any other Fundamental  Document or in any proceeding
against the Lenders in connection with this Credit  Agreement or under any other
Fundamental Document or the transactions  contemplated  hereunder or thereunder;
(v) to the extent such information (A) becomes publicly  available other than as
a result of a breach of this Agreement or (B) becomes available to a Lender or a
participant on a non-confidential basis, not in breach of any agreement or other
obligation to Borrower, from a source other than Borrower; or (vi) to the extent
Borrower shall have consented to such disclosure in writing.

                  SECTION  11.16.   Entire  Agreement.   This  Credit  Agreement
including the Exhibits and Schedules  hereto  represents the entire agreement of
the  parties  with  regard to the subject  matter  hereof,  and the terms of any
letters and other  documentation  entered into between any of the parties hereto
(other  than the Fee Letter)  prior to the  execution  of this Credit  




                                      -97-
<PAGE>
Agreement  which relate to Loans to be made  hereunder  shall be replaced by the
terms of this Credit Agreement.







                                      -98-
<PAGE>
                  IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed as of the day and the year first written.


                                  BORROWER:

                                  ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                       By GCI Fiber Co., Inc., a General Partner


                                       By /s/   
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                       By  Fiber  Hold  Co.,   Inc.,  a  General
                                       Partner


                                       By /s/   
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                  LENDERS:

                                  CREDIT  LYONNAIS NEW YORK BRANCH  
                                   individually and as Administrative Agent


                                       By /s/
                                       Name: Michael F.G. Pepe
                                       Title:  Vice President
                                       Address:  1301 Avenue of the Americas
                                                 New York, NY  10019
                                       Attention: Project Finance Group
                                       Facsimile: (212) 261-3421



                                      -99-
<PAGE>
                                  NATIONSBANK OF TEXAS,  N.A., 
                                    individually and as Syndication Agent


                                        By /s/
                                        Name:        Whitney L. Busse
                                        Title:       Vice President
                                        Address:     901 Main Street, 64th Floor
                                                     Dallas, TX  75202
                                        Facsimile:   (214) 508-9390

                                                      with a copy to:
                                             Elaine Harrison
                                             Donohoe, Jameson & Carroll, P.C.
                                             3400 Renaissance Tower
                                             1201 Elm Street
                                             Dallas, TX  75270
                                             Facsimile:  (214) 744-0231


                                  TD SECURITIES (USA), INC.,
                                    as Documentation Agent


                                        By /s/
                                        Name: David G. Parker
                                        Title: Vice President
                                        Address: 909 Fannin Suite 1700
                                                 Houston, TX  77010
                                        Facsimile: (713) 951-9921


                                        TORONTO DOMINION (TEXAS), INC.


                                        By /s/
                                        Name: Neva Nesbitt
                                        Title: Vice President
                                        Address: 909 Fannin
                                                 Houston, TX 77010
                                        Facsimile: (713) 951-9921




                                      -100-
<PAGE>
                                                                      Schedule 1

                            Schedule of Commitments

        Lender              Construction Commitment      Term Loan Commitment
        ------              -----------------------      --------------------
Credit Lyonnais New
 York Branch                      $25,000,000                  $25,000,000
NationsBank of Texas, N.A.         25,000,000                   25,000,000
Toronto-Dominion (Texas), 
 Inc.                              25,000,000                   25,000,000
                                  -----------                  -----------
           Total                  $75,000,000                  $75,000,000
                                  ===========                  ===========


<PAGE>
                                 SCHEDULE 3.12
                                   LITIGATION

     On November 7, 1997, the FCC granted GCI authority, under the Cable Landing
License Act, 47 U.S.C.  section 34-039, to land and operate a non-common carrier
submarine fiber optic cable system between the Pacific  Northwest  United States
and Alaska. See DA 97-2357, FCC File NO. SCL-97-003 (the "Order"). (1) These are
no  complaints  or appeals  filed  before  the FCC with  respect to grant of the
license except three applications for review of the International Bureau's Order
by the full Federal  Communications  Commission  filed on December 8, 1997:  (1)
Application for Review jointly filed by TelAlaska Long Distance,  Inc. and ASTAC
Long Distance, Inc., (2) Application for Review filed by Alaska Network Systems,
Inc., and (3) Application for Review filed by ATU Long Distance, Inc.





-------------------
     (1) On  December  10,  1997,  the  International  Bureau of the FCC granted
consent to the pro forma assignment of the license to Alaska United.




<PAGE>
                                 SCHEDULE 3.20
                 ENVIRONMENTAL LIABILITIES ON THE CLOSING DATE

                                     None.


<PAGE>
                                 SCHEDULE 3.23
                       PROJECT AGREEMENTS AND ASSIGNMENTS
                       PREVIOUSLY OWNED BY GCI AFFILIATES
                           (Other than the Borrower)

     Supply Contract between Submarine Systems International Ltd., k/n/a as Tyco
Submarine Systems Ltd.  ("Tyco"),  and GCI Communication  Corp ("GCICC"),  dated
effective  as of July 11,  1997,  as assigned to the Alaska  United Fiber System
Partnership  ("Alaska United"),  effective as of October 3, 1997, as "Purchaser"
thereunder.

     Survey of the undersea  route of the Alaska United Fiber System,  conducted
for GCICC.

     Purchase Order dated July 30, 1997, with David Evans & Associated, Inc. and
General Communication, Inc.

     Construction  Agreement  with Schenck  Communications,  Inc. and GCI Cable,
Inc., dated May 16, 1997.

     Fiber  Exchange  Agreement  dated as of  November  21, 1997  between  Kanas
Telecom, Inc. and GCICC, as assigned to Alaska United on January 6 , 1998.

     Cable Landing License issued by the Federal Communications  Commision, File
No.  SCL-97-003,  issued to General  Communication,  Inc., as assigned to Alaska
United on January 26, 1998.


<PAGE>
                         Schedule 5.5 - Insurance Requirements

Construction - Offshore
      -  Marine Cargo including transportation, laying/installation of submarine
         cable  system 
      -  Seabed  Cover  Included  
      -  Limit  equal to 125% of maximum expected physical damage loss
      -  All risk forms including but not limited to:
         -    Earthquake and flood
         -    Testing and startup
      -  Replacement costs with no coinsurance penalties
      -  Transit and Off-Site
         -    in an amount equal to values at risk
      -  Insurance as primary and not contributory
      -  Thirty (30) day notice of cancellation - 10 days for nonpayment of 
         premiums
      -  Reasonable deductibles

Construction - Onshore
      -  Installation, Builders Risk
      -  Limit  equal to  insurable  values  at risk 
      -  Replacement cost with no coinsurance penalties 
       - Transit and Off-site
         -    in an amount equal to values at risk
      -  Insurance as primary and not contributory
      -  Thirty (30) day notice of cancellation - 10 days for nonpayment of 
         premiums
      -  Reasonable deductibles
         -    Property damage        $50,000
         -    Earthquake             5% of Values at Risk
         -    Flood                  5% of Values at Risk

Property (Operational)
      -  All risk forms
         -    Replacement cost
         -    Earthquake and flood
      -  Comprehensive boiler/machinery
         - full  replacement cost of objects subject to loss at any one location
         - joint loss agreement if written on separate policy from property
      -  Debris removal - 25% of policy limit or $5,000,000
      -  Inland transit and off-site
         -    in an amount equal to values at risk
      -  No coinsurance penalties
      -  Insurance as primary and not contributory
      -  Thirty (30) day notice of cancellation - 10 days for nonpayment of 
         premiums
<PAGE>


      -  Reasonable deductibles:
         -    Property damage             $50,000
         -    Earthquake                  5% of Values at Risk
         -    Flood                       5% of Values at Risk

Commercial General Liability
      -  $1,000,000 per occurrence and $2,000,000 in the aggregate
      -  Occurrence forms
      -  Explosion, collapse and underground
      -  Broad form property damage
      -  Contractual liability
      -  Premises liability & products/completed operations
      -  Personal injury
      -  Independent contractors
      -  Sudden and accidental pollution (Construction Period)
      -  Cross liability, if multiple named insureds and severability of 
         interest
      -  Additional insured as required by contract

Automobile Liability
      -  Owned, hired and non-owned
      -  Statutory provisions

Workers Compensation
      -  Statutory benefits
         -    applicable laws
         -    maritime, USL&R
      -  Employers liability
         -    $500,000 limit

Aircraft Liability
      -  Owned Aircraft, subject to exposure
      -  Hired and non-owned craft
         -    rotary
         -    fixed wing
         -    $5,000,000  limit  plus  $5,000,000  of  additional  coverage  if
              available at  commercially  reasonable  rates (annual  premium on
              additional coverage not to exceed $10,000)
      -  Physical damage for owned aircraft
<PAGE>
Umbrella/Excess
      -  Excess  of  third  party  liability  policies  
         -  general liability 
         -  auto liability 
         -  employers liability
      -  Occurrence forms
      -  Coverage as broad as primary
      -  $20,000,000 limit per occurrence and in the aggregate


General Terms And Conditions
      -  Carriers approved  by  Administrative  Agent 
      -  Waiver of subrogation  to  benefit  Administrative  Agent  
      -  Copies of policies to Administrative Agent for review and approval
      -  The  Administrative   Agent  shall  be  additional  named insured as  
         respects  property  during  construction and operation of the Project.
      -  The  Administrative  Agent shall be additional insured as respects  
         liability  policies,   with  the  exception  of workers compensation.
      -  The insurer  shall waive all rights of  subrogation  against the 
         Administrative  Agent 
      -  Insurance  supplied by the  Borrower  shall be primary as respects  any
         other insurance carried by or on behalf of the Administrative Agent.
      -  Insurance  carried  protecting  Project assets (property, boiler, etc.)
         shall  contain a  standard  Lenders  Loss Payable endorsement and name 
         the Administrative  Agent as first  loss  payee as  respects  assets  
         owned by  Alaska United Fiber System Partnership
      -  Certified  copies  of  insurance  policies  shall be made available to 
         the Administrative Agent upon request.
      -  Annually on the anniversary of financial closing, Borrower is to 
         furnish to the Administrative Agent evidence of insurance for all 
         coverage in place and certify 1) premiums are paid or current to date 
         and 2) that insurance materially complies with credit agreement 
         requirements.
      -  Invalidation Clause
         -   The interests of the Administrative  Agent shall not
             be  invalidated  by any  action or  inaction  of the
             Owner,  Contractor  or  Subcontractors  or any other
             Person or by any breach or  violation  by the Owner,
             Contractor or  Subcontractor  or any other Person or
             any  warranties,  declarations or conditions in such
             policies
<PAGE>
                                  SCHEDULE 6.2
                                 EXISTING LIENS

     Cash  Collateral and Security  Agreement  dated effective as of December 1,
1997, among Alaska United, Tyco, the Administrative Agent and The First National
Bank of Anchorage,  as Account Bank.  Thereunder,  Alaska United  granted (i) to
Tyco a  first  lien on the  Collateral  (as  therein  defined)  and  (ii) to the
Adminstrative Agent a second lien on the Collateral.

     Under the Fiber  Exchange  Agreement  dated as of January 27,  1998,  among
Alaska United, GCI Cable, Inc ("GCI Cable"), and GCI Communication Corp., Alaska
United  granted to GCI Cable a security  interest in the AU Facility (as defined
therein).


<PAGE>
                                CONSTRUCTION NOTE


$25,000,000                                              New York, New York
                                                         as of January 27, 1998


                  FOR VALUE RECEIVED, ALASKA UNITED FIBER SYSTEM PARTNERSHIP, an
Alaska general  partnership (the  "Obligor"),  DOES HEREBY PROMISE TO PAY to the
order of CREDIT  LYONNAIS NEW YORK BRANCH (the "Lender") at the office of Credit
Lyonnais  New York Branch at 1301  Avenue of the  Americas,  New York,  New York
10019, in lawful money of the United States of America in immediately  available
funds, the principal amount of TWENTY FIVE MILLION DOLLARS ($25,000,000), or the
aggregate unpaid  principal amount of all Construction  Loans (as defined in the
Credit  Agreement  referred to below) made by the Lender to the Obligor pursuant
to said  Credit  Agreement,  whichever  is  less,  on such  date or  dates as is
required by said Credit  Agreement,  and to pay interest on the unpaid principal
amount from time to time outstanding  hereunder,  in like money, at such office,
at such rate or rates per  annum and at such  times as set forth in said  Credit
Agreement.

                  The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other  parties now or  hereafter  liable  hereon  severally
waive  grace,  demand,  presentment  for  payment,  protest,  notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice of
intention to accelerate or notice of  acceleration)  and diligence in collecting
and bringing suit against any party hereto and agree to the extent  permitted by
applicable  law (i) to all  extensions  and  partial  payments,  with or without
notice, before or after maturity, (ii) to any substitution,  exchange or release
of any security now or  hereafter  given for this Note,  (iii) to the release of
any party primarily or secondarily  liable hereon,  and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's  remedies against the Obligor or any
other party liable hereon or against any security for this Note. The nonexercise
by the holder of any of its rights  hereunder in any  particular  instance shall
not constitute a waiver thereof in that or any subsequent instance.

                  This Note is one of the Construction Notes referred to in that
certain Credit and Security  Agreement dated as of January 27, 1998 (as the same
may be amended,  supplemented  or otherwise  modified,  renewed or replaced from
time to time, the "Credit Agreement") among the Obligor, the lenders referred to
therein, Credit Lyonnais New York Branch as Administrative Agent, NationsBank of
Texas,  N.A. as Syndication  Agent and TD Securities (USA) Inc. as Documentation
Agent,  and is  entitled  to the  benefits  of, and is  secured by the  security
interests  granted in, the Credit  Agreement and the other  security  documents,
guarantees and other agreements referred to and described therein,  which Credit
Agreement,  among other things,  contains  provisions for optional and mandatory
prepayment and for  acceleration  of the maturity  hereof upon the occurrence of
certain events, all as provided in the Credit Agreement.
<PAGE>
                  The Obligor is  personally  obligated and fully liable for the
amount due under this Note.  Credit  Lyonnais New York Branch as  Administrative
Agent or the  Lender  has the  right to sue on this Note and  obtain a  personal
judgment  against the Obligor for satisfaction of the amount due under this Note
either before or after a judicial  foreclosure  of any mortgage or deed of trust
which has been granted by the Obligor, under AS 09.45.170 - 09.45.220. (ss. 2 ch
44 SLA 1988).

                  THIS NOTE SHALL IN ALL  RESPECTS BE  CONSTRUED  IN  ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.


                               ALASKA UNITED FIBER
                               SYSTEM PARTNERSHIP

                                By: GCI Fiber Co., Inc., its General Partner


                                By: /s/
                                Name: John M. Lowber
                                Title: Secretary/Treasurer

                                By:  Fiber Hold Co., Inc., its General Partner


                                By: /s/
                                Name: John M. Lowber
                                Title: Secretary/Treasurer





                                      -2-
<PAGE>


                               [LAST PAGE OF NOTE]

                                                           Unpaid      Name of
                                                          Principal     Person
                                 Payments                  Balance      Making
Date          Amount of Loan    Principal      Interest    of Note     Notation






                                      -3-
<PAGE>
                                CONSTRUCTION NOTE


$25,000,000                                              New York, New York
                                                         as of January 27, 1998


                  FOR VALUE RECEIVED, ALASKA UNITED FIBER SYSTEM PARTNERSHIP, an
Alaska general  partnership (the  "Obligor"),  DOES HEREBY PROMISE TO PAY to the
order of  NATIONSBANK  OF TEXAS,  N.A.  (the  "Lender")  at the office of Credit
Lyonnais  New York Branch at 1301  Avenue of the  Americas,  New York,  New York
10019, in lawful money of the United States of America in immediately  available
funds, the principal amount of TWENTY FIVE MILLION DOLLARS ($25,000,000), or the
aggregate unpaid  principal amount of all Construction  Loans (as defined in the
Credit  Agreement  referred to below) made by the Lender to the Obligor pursuant
to said  Credit  Agreement,  whichever  is  less,  on such  date or  dates as is
required by said Credit  Agreement,  and to pay interest on the unpaid principal
amount from time to time outstanding  hereunder,  in like money, at such office,
at such rate or rates per  annum and at such  times as set forth in said  Credit
Agreement.

                  The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other  parties now or  hereafter  liable  hereon  severally
waive  grace,  demand,  presentment  for  payment,  protest,  notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice of
intention to accelerate or notice of  acceleration)  and diligence in collecting
and bringing suit against any party hereto and agree to the extent  permitted by
applicable  law (i) to all  extensions  and  partial  payments,  with or without
notice, before or after maturity, (ii) to any substitution,  exchange or release
of any security now or  hereafter  given for this Note,  (iii) to the release of
any party primarily or secondarily  liable hereon,  and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's  remedies against the Obligor or any
other party liable hereon or against any security for this Note. The nonexercise
by the holder of any of its rights  hereunder in any  particular  instance shall
not constitute a waiver thereof in that or any subsequent instance.

                  This Note is one of the Construction Notes referred to in that
certain Credit and Security  Agreement dated as of January 27, 1998 (as the same
may be amended,  supplemented  or otherwise  modified,  renewed or replaced from
time to time, the "Credit Agreement") among the Obligor, the lenders referred to
therein, Credit Lyonnais New York Branch as Administrative Agent, NationsBank of
Texas,  N.A. as Syndication  Agent and TD Securities (USA) Inc. as Documentation
Agent,  and is  entitled  to the  benefits  of, and is  secured by the  security
interests  granted in, the Credit  Agreement and the other  security  documents,
guarantees and other agreements referred to and described therein,  which Credit
Agreement,  among other things,  contains  provisions for optional and mandatory
prepayment and for  acceleration  of the maturity  hereof upon the occurrence of
certain events, all as provided in the Credit Agreement.
<PAGE>
                  The Obligor is  personally  obligated and fully liable for the
amount due under this Note.  Credit  Lyonnais New York Branch as  Administrative
Agent or the  Lender  has the  right to sue on this Note and  obtain a  personal
judgment  against the Obligor for satisfaction of the amount due under this Note
either before or after a judicial  foreclosure  of any mortgage or deed of trust
which has been granted by the Obligor, under AS 09.45.170 - 09.45.220. (ss. 2 ch
44 SLA 1988).

                  THIS NOTE SHALL IN ALL  RESPECTS BE  CONSTRUED  IN  ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.


                               ALASKA UNITED FIBER
                               SYSTEM PARTNERSHIP

                                By: GCI Fiber Co., Inc., its General Partner


                                By: /s/
                                Name: John M. Lowber
                                Title: Secretary/Treasurer

                                By:  Fiber Hold Co., Inc., its General Partner


                                By: /s/
                                Name: John M. Lowber
                                Title: Secretary/Treasurer





                                      -2-
<PAGE>


                               [LAST PAGE OF NOTE]

                                                           Unpaid      Name of
                                                          Principal     Person
                                 Payments                  Balance      Making
Date          Amount of Loan    Principal      Interest    of Note     Notation






                                      -3-
<PAGE>
                                CONSTRUCTION NOTE


$25,000,000                                              New York, New York
                                                         as of January 27, 1998


                  FOR VALUE RECEIVED, ALASKA UNITED FIBER SYSTEM PARTNERSHIP, an
Alaska general  partnership (the  "Obligor"),  DOES HEREBY PROMISE TO PAY to the
order of TORONTO-DOMINION  (TEXAS),  INC. (the "Lender") at the office of Credit
Lyonnais  New York Branch at 1301  Avenue of the  Americas,  New York,  New York
10019, in lawful money of the United States of America in immediately  available
funds, the principal amount of TWENTY FIVE MILLION DOLLARS ($25,000,000), or the
aggregate unpaid  principal amount of all Construction  Loans (as defined in the
Credit  Agreement  referred to below) made by the Lender to the Obligor pursuant
to said  Credit  Agreement,  whichever  is  less,  on such  date or  dates as is
required by said Credit  Agreement,  and to pay interest on the unpaid principal
amount from time to time outstanding  hereunder,  in like money, at such office,
at such rate or rates per  annum and at such  times as set forth in said  Credit
Agreement.

                  The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other  parties now or  hereafter  liable  hereon  severally
waive  grace,  demand,  presentment  for  payment,  protest,  notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice of
intention to accelerate or notice of  acceleration)  and diligence in collecting
and bringing suit against any party hereto and agree to the extent  permitted by
applicable  law (i) to all  extensions  and  partial  payments,  with or without
notice, before or after maturity, (ii) to any substitution,  exchange or release
of any security now or  hereafter  given for this Note,  (iii) to the release of
any party primarily or secondarily  liable hereon,  and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's  remedies against the Obligor or any
other party liable hereon or against any security for this Note. The nonexercise
by the holder of any of its rights  hereunder in any  particular  instance shall
not constitute a waiver thereof in that or any subsequent instance.

                  This Note is one of the Construction Notes referred to in that
certain Credit and Security  Agreement dated as of January 27, 1998 (as the same
may be amended,  supplemented  or otherwise  modified,  renewed or replaced from
time to time, the "Credit Agreement") among the Obligor, the lenders referred to
therein, Credit Lyonnais New York Branch as Administrative Agent, NationsBank of
Texas,  N.A. as Syndication  Agent and TD Securities (USA) Inc. as Documentation
Agent,  and is  entitled  to the  benefits  of, and is  secured by the  security
interests  granted in, the Credit  Agreement and the other  security  documents,
guarantees and other agreements referred to and described therein,  which Credit
Agreement,  among other things,  contains  provisions for optional and mandatory
prepayment and for  acceleration  of the maturity  hereof upon the occurrence of
certain events, all as provided in the Credit Agreement.
<PAGE>
                  The Obligor is  personally  obligated and fully liable for the
amount due under this Note.  Credit  Lyonnais New York Branch as  Administrative
Agent or the  Lender  has the  right to sue on this Note and  obtain a  personal
judgment  against the Obligor for satisfaction of the amount due under this Note
either before or after a judicial  foreclosure  of any mortgage or deed of trust
which has been granted by the Obligor, under AS 09.45.170 - 09.45.220. (ss. 2 ch
44 SLA 1988).

                  THIS NOTE SHALL IN ALL  RESPECTS BE  CONSTRUED  IN  ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.


                               ALASKA UNITED FIBER
                               SYSTEM PARTNERSHIP

                                By: GCI Fiber Co., Inc., its General Partner


                                By: /s/
                                Name: John M. Lowber
                                Title: Secretary/Treasurer

                                By:  Fiber Hold Co., Inc., its General Partner


                                By: /s/
                                Name: John M. Lowber
                                Title: Secretary/Treasurer





                                      -2-
<PAGE>


                               [LAST PAGE OF NOTE]

                                                           Unpaid      Name of
                                                          Principal     Person
                                 Payments                  Balance      Making
Date          Amount of Loan    Principal      Interest    of Note     Notation






                                      -3-
<PAGE>
                                                                     EXHIBIT A-2

                                FORM OF TERM NOTE


$                                                            New York, New York
                                                      as of              , 199


                  FOR VALUE RECEIVED, ALASKA UNITED FIBER SYSTEM PARTNERSHIP, an
Alaska general  partnership (the  "Obligor"),  DOES HEREBY PROMISE TO PAY to the
order of [insert name of Lender] (the "Lender") at the office of Credit Lyonnais
New York Branch at 1301 Avenue of the  Americas,  New York,  New York 10019,  in
lawful money of the United States of America in immediately available funds, the
principal  amount of                DOLLARS  ($         ),  (i) in  twenty  (20)
quarterly  installments  due on the  last  Business  Day of  each  March,  June,
September  and December  commencing on the first such date  occurring  after the
Conversion  Date (as defined in the Credit  Agreement),  and continuing  through
December, 2007*, in accordance with the following schedule:

                    Installment Due on the
                    Last Business Day of        Amount of Principal Installment
                    ----------------------      -------------------------------
                         March 2003*                   $
                         June 2003                     $
                         September 2003                $
                         December 2003                 $
                         March 2004                    $
                         June 2004                     $
                         September 2004                $
                         December 2004                 $
                         March 2005                    $
                         June 2005                     $
                         September 2005                $
                         December 2005                 $
                         March 2006                    $
                         June 2006                     $
                         September 2006                $
                         December 2006                 $
                         March 2007                    $



-------------------
*        Assumes the Commencement Date occurs in January, 1998.
<PAGE>
                    Installment Due on the
                    Last Business Day of        Amount of Principal Installment
                    ----------------------      -------------------------------
                         June 2007                     $
                         September 2007                $
                         December 2007                 $

and (ii) in a final installment  payable on the Final Maturity Date in an amount
equal to the unpaid principal amount of the outstanding Term Loans.

                  In addition,  the Obligor  hereby  promises to pay interest on
the unpaid  principal amount from time to time  outstanding  hereunder,  in like
money, at such office,  at such rate or rates per annum and at such times as set
forth in said  Credit  Agreement.  All  capitalized  terms  used  herein but not
defined herein shall have the meanings set forth in the Credit Agreement.

                  The Obligor and any and all sureties, guarantors and endorsers
of this Note and all other  parties now or  hereafter  liable  hereon  severally
waive  grace,  demand,  presentment  for  payment,  protest,  notice of any kind
(including, but not limited to, notice of dishonor, notice of protest, notice of
intention to accelerate or notice of  acceleration)  and diligence in collecting
and bringing suit against any party hereto and agree to the extent  permitted by
applicable  law (i) to all  extensions  and  partial  payments,  with or without
notice, before or after maturity, (ii) to any substitution,  exchange or release
of any security now or  hereafter  given for this Note,  (iii) to the release of
any party primarily or secondarily  liable hereon,  and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's  remedies against the Obligor or any
other party liable hereon or against any security for this Note. The nonexercise
by the holder of any of its rights  hereunder in any  particular  instance shall
not constitute a waiver thereof in that or any subsequent instance.

                  This Note is one of the Term Notes referred to in that certain
Credit and Security  Agreement  dated as of January 27, 1998 (as the same may be
amended,  supplemented or otherwise  modified,  renewed or replaced from time to
time,  the  "Credit  Agreement")  among the  Obligor,  the  lenders  referred to
therein, Credit Lyonnais New York Branch as Administrative Agent, NationsBank of
Texas,  N.A. as Syndication  Agent and TD Securities (USA) Inc. as Documentation
Agent,  and is  entitled  to the  benefits  of, and is  secured by the  security
interests  granted in, the Credit  Agreement and the other  security  documents,
guarantees and other agreements referred to and described therein,  which Credit
Agreement,  among other things,  contains  provisions for optional and mandatory
prepayment and for  acceleration  of the maturity  hereof upon the occurrence of
certain events, all as provided in the Credit Agreement.

                  The Obligor is  personally  obligated and fully liable for the
amount due under this Note.  Credit  Lyonnais New York Branch as  Administrative
Agent or the  Lender  has the  right to sue on this Note and  obtain a  personal
judgment  against the Obligor for satisfaction of the 



                                      -2-
<PAGE>
amount due under this Note either before or after a judicial  foreclosure of any
mortgage  or deed of trust  which  has been  granted  by the  Obligor,  under AS
09.45.170 - 09.45.220. (ss. 2 ch 44 SLA 1988).

                  THIS NOTE SHALL IN ALL  RESPECTS BE  CONSTRUED  IN  ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.



                                               ALASKA    UNITED   FIBER   SYSTEM
                                               PARTNERSHIP

                                               By:  GCI  Fiber  Co.,  Inc.,  its
                                               General Partner


                                               By:
                                                  Name: 
                                                  Title:


                                               By:  Fiber  Hold Co.,  Inc.,  its
                                               General Partner


                                               By:
                                                  Name: 
                                                  Title:




                                      -3-
<PAGE>
                               [LAST PAGE OF NOTE]

                                               Unpaid               Name of
                                               Principal            Person
                        Payments               Balance              Making
Date           Principal        Interest       of Note              Notation





                                      -4-
<PAGE>
                          DEED OF TRUST AND ASSIGNMENT

THIS DEED OF TRUST AND ASSIGNMENT  (herein  referred to as "this Deed of Trust")
is entered into effective as of the 27th day of January,  1998, by ALASKA UNITED
FIBER SYSTEM PARTNERSHIP ("Grantor"),  an Alaska general partnership the address
of which is c/o GCI Fiber Co., Inc.,  Attention:  Chief Financial Officer,  2550
Denali St., Suite 1000,  Anchorage,  Alaska 99503,  to TRANSALASKA  SUMMIT TITLE
INSURANCE  AGENCY OF ALASKA L.L.C.  ("Trustee"),  the address of which is 400 W.
Tudor Road,  Anchorage,  Alaska 99503, and CREDIT LYONNAIS NEW YORK BRANCH,  the
address  of which is  Attention:  Project  Finance  Group,  1301  Avenue  of the
Americas,  New York, New York 10019, as  Administrative  Agent (under the Credit
Agreement described below) for the Lenders (as defined below) ("Beneficiary").

                                   WITNESSETH:

                                    ARTICLE I
                                   Definitions

Section 1.1.  Definitions.  As used herein,  the following  terms shall have the
following meanings:

         Alaska United Fiber System:  The entire fiber optic  telecommunications
         cable  network  comprising  approximately  2,331  statute  route  miles
         connecting  Glen Alps,  the Whittier  LS, the Valdez LS, the PSMS,  the
         Juneau LS, the Norma Beach LS, and the SDC, which network shall have an
         initial  equipped  capacity of OC-48  (approximately  2.5  gigabits per
         second data rate or 32,256 voice channels). The undersea portion of the
         network shall connect landing stations between four sites. The proposed
         landing  station  sites are the  Whittier LS, the Valdez LS, the Juneau
         LS, and the Norma Beach LS. An undersea  branching  unit shall  connect
         the three undersea fiber cable segments originating at the Whittier LS,
         the Juneau LS, and the Norma Beach LS; the Valdez LS shall be connected
         through a separate undersea  extension  originating at the Whittier LS.
         The  terrestrial  portion  of  the  network  shall  consist  of  inland
         extensions  from the Whittier LS to Glen Alps,  from the Norma Beach LS
         to the SDC, and from the Valdez LS to the PSMS. The Alaska United Fiber
         System shall be installed  on, in, or under the Lands and shall include
         (without  limitation)  the  following:   (i)  the  fiber  optic  cable,
         branching unit,  optical  amplifiers,  and terminal  station  equipment
         supplied and included in the network,  (ii) all cable ducts or conduits
         through which the cable runs, (iii) the associated splice boxes, splice
         vaults and other associated concrete  structures  constructed by or for
         Grantor and used to protect,  or provide splicing space for, the cable,
         together with all manhole and handhole  covers relating  thereto,  (iv)
         electrical power facilities,  including electrical distribution panels,
         lighting,  wiring and other related apparatus attached to or within the
         cable  (excluding  any meters  owned by other  Persons),  (v)  heating,
         ventilating,  and air  conditioning  equipment,  (vi) metal  enclosures
         (sometimes referred to as the regeneration stations) containing certain
         of the  Electronics  together  with the  concrete  slabs  to which  the
<PAGE>
         enclosures  are attached,  (vii) all fixtures  included in the network,
         and (viii) auxiliary generators, batteries, battery-charging equipment,
         telephone equipment, and other related equipment used by Grantor on the
         Lands (the items  referred  to in the  foregoing  clauses  (i)  through
         (viii) are referred to herein as "Equipment").

         Beneficiary:  Credit Lyonnais New York Branch, as Administrative  Agent
         (under the Credit Agreement described below) for the Lenders.

         Cable: The Alaska United Fiber System, the fiber pairs in the GCI Cable
         Facility to which  Grantor has been granted  exclusive  use pursuant to
         the GCI Fiber  Exchange  Agreement,  and the  fiber  pairs in the Kanas
         Facility to which  Grantor has been granted  exclusive  use pursuant to
         the Kanas Fiber Exchange Agreement.

         Capacity Agreement: Any lease, capacity agreement, or other contract or
         agreement  pursuant to which  Grantor  leases,  licenses,  or otherwise
         grants to any other  Person the right to use the System or any  portion
         thereof,  or sells to any other  Person  capacity  on the System or any
         portion  thereof,  or agrees  to  provide  telecommunications  services
         utilizing  the  System  or  any  portion  thereof,  including,  without
         limitation, any option, standby, or back-up arrangement with respect to
         any of the foregoing,  any  Satisfactory  Capacity  Agreement,  the GCI
         Lease Contract,  the GCI Fiber Exchange Agreement,  and the Kanas Fiber
         Exchange Agreement.

         Code:  The Uniform  Commercial  Code,  as amended from time to time, in
         effect in the state in which the Mortgaged Property is located.

         Constituent  Party:  Any  signatory to this Deed of Trust that signs on
         Grantor's behalf that is a general partner in Grantor.

         Contracts:  All rights,  titles,  and  interests now owned or hereafter
         acquired by or for  Grantor in, to, or under (i) any and all  contracts
         providing  for or  effecting  the purchase of all or any portion of the
         Mortgaged  Property,  whether  such  contracts  are  now  or  hereafter
         existing,  including all amendments and supplements to and all renewals
         and  extensions  of such  contracts at any time made;  (ii) any and all
         other   contracts,   licenses,   easements,   rights-of-way,   permits,
         approvals, authorizations, variances, non-objections, certificates, and
         other rights in, to,  under,  relating  directly or  indirectly  to, or
         obtained,  issued,  or received in  connection  with the Project or the
         development,  construction,   installation,  testing,  occupancy,  use,
         enjoyment,    operation,    maintenance,    alteration,    repair,   or
         reconstruction of the System, whether executed, granted, or issued by a
         private person or entity or a Governmental Authority,  and whether such
         contracts,  licenses,  easements,  rights-of-way,  permits,  approvals,
         authorizations,  variances,  non-objections,  certificates,  and  other
         rights are now or hereafter existing; (iii) any and all other contracts
         which in any way relate to the  ownership,  development,  construction,
         installation,    testing,   occupancy,   use,   enjoyment,   operation,
         maintenance,  alteration,  repair,  or reconstruction by Grantor of the
         System;  (iv) to the extent not  included in the  foregoing,  the Fiber



DEED OF TRUST - Page 2
<PAGE>
         Exchange  Agreements;  and  (v)  to  the  extent  not  included  in the
         foregoing,  any  and all  Capacity  Agreements  and  any and all  other
         agreements or contracts  authorizing  or providing for the exclusive or
         non-exclusive use, leasing, licensing, operation,  possession, or other
         enjoyment all or any portion of the System by others.

         Credit  Agreement:  That certain Credit and Security  Agreement of even
         date   herewith  by  and  among   Grantor  (as  Borrower   thereunder),
         Beneficiary  (as  Administrative  Agent  thereunder  for the  Lenders),
         NationsBank of Texas,  N.A. (as Syndication Agent  thereunder),  and TD
         Securities  (USA), Inc. (as Documentation  Agent  thereunder),  as said
         agreement as may be amended from time to time hereafter.

         Default Rate: The rate of interest specified in each Note or the Credit
         Agreement  to be paid by the  maker of the  Note  from  and  after  the
         occurrence of a default in payment under the provisions of the Note and
         Loan Documents but not in excess of the Maximum Lawful Rate.

         Disposition:  Any  sale,  lease,  exchange,   assignment,   conveyance,
         transfer,  trade,  or other  disposition  of all or any  portion of the
         Mortgaged  Property (or any interest therein) or all or any part of the
         partnership interest held by any Constituent Party in Grantor.

         Electronics: The transceivers,  regenerators,  multiplexers,  and other
         electronic  equipment,  together  with all  racks to which the same are
         affixed,  now owned or hereafter  acquired by or for Grantor and now or
         at any time hereafter  located at the  regenerator  sites and points of
         presence on the Lands or at the network  operations center or along the
         GCI Cable  Facility  or the Kanas  Facility,  including  all  equipment
         replacing any of the foregoing.

         Equipment:  The term "Equipment" shall have the meaning given such term
         in the definition of "Alaska United Fiber System" set forth herein.

         Event of Default:  Any happening or occurrence  described in Article VI
         hereof.

         Environmental Law: Any and all federal, state, or local laws, statutes,
         ordinances,  rules, regulations,  permits,  approvals,  authorizations,
         variances, codes, standards,  guidelines,  decisions, decrees, rulings,
         orders, or other requirements of any Governmental Authority relating to
         or imposing  liability or standards of conduct concerning any Hazardous
         Material, environmental protection, health, safety, industrial hygiene,
         or the  environmental  conditions  on,  under,  or about the  Mortgaged
         Property,  including but not limited to the Clean Water Act (also known
         as 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  Federal
         Insecticide,  Fungicide, and Rodenticide Act, 7 U.S.C. ss. 136 et seq.,
         the Comprehensive Environmental Response,  Compensation,  and Liability
         Act of 1980  ("CERCLA"),  42 U.S.C.  ss.  9601 et seq.,  the  Superfund
         Amendments and  Reauthorization  Act of 1986, Pub. L. 99-499, 100 Stat.
         1613, 



DEED OF TRUST - Page 3
<PAGE>
         the Emergency  Planning and Community Right To Know Act, 42 U.S.C.  ss.
         11001 et seq., the Resource  Conservation and Recovery Act ("RCRA"), 42
         U.S.C.  ss. 6901 et seq.,  the  Occupational  Safety and Health Act, 29
         U.S.C.  ss.ss. 656 and 657, Title 46 of the Alaska Statutes ("AS"), and
         rules,   regulations,   codes,  standards,  or  guidelines  promulgated
         pursuant  to such laws,  as such  laws,  statutes,  ordinances,  rules,
         regulations,  codes, standards, and guidelines are amended from time to
         time.

         FDC: GCICC's Fairbanks  Distribution Center, located at 520 5th Avenue,
         Suite 407, Fairbanks, Alaska 99701.

         Fiber Exchange  Agreements:  The GCI Fiber  Exchange  Agreement and the
         Kanas Fiber Exchange Agreement.

         Fixtures:  All  materials,   supplies,  equipment  (including  but  not
         necessarily limited to Equipment),  systems, apparatus, and other items
         now owned or hereafter  acquired by or for Grantor and now or hereafter
         attached to,  installed in, or used in connection with  (temporarily or
         permanently)  any of the Lands or the  Improvements,  together with all
         accessions,   additions,   alterations,   betterments,    replacements,
         substitutions, and appurtenances to or for any of the foregoing and the
         proceeds thereof.

         GCI Cable: GCI Cable, Inc., an Alaska corporation, and its wholly-owned
         subsidiaries.

         GCI Cable Facility: The fiber optic facilities owned, leased, and/or to
         be constructed by GCI Cable (i) in the Anchorage  area,  connecting the
         SADC,  Glen Alps,  and the AT&T POP  (located  at 210 East Bluff  Road,
         Anchorage,  Alaska 99501),  and (ii) in the Fairbanks area,  connecting
         the  NPMS,  FDC,  and  the  AT&T  POP  (located  at 200  Gaffney  Road,
         Fairbanks, Alaska 99701).

         GCI Fiber Exchange  Agreement:  That certain Fiber  Exchange  Agreement
         among Grantor, GCI Cable, and GCICC, substantially in the form attached
         to the Credit Agreement as Exhibit U, as such agreement may be amended,
         supplemented,  or otherwise modified, renewed, or replaced from time to
         time.

         GCI Lease Contract:  The Lease Agreement  between Grantor as lessor and
         GCICC as  lessee,  substantially  in the form  attached  to the  Credit
         Agreement as Exhibit O, as such agreement may be amended, supplemented,
         or otherwise modified, renewed, or replaced from time to time.

         GCICC:  GCI Communication Corp., an Alaska corporation.

         GCICC Facility:  The locations owned or leased by GCICC in Anchorage at
         the SADC and Glen Alps,  in Fairbanks at the FDC, and in Seattle at the
         SDC.

         Glen Alps:  GCICC's  leased  location at Lot 5, Block 1, Tower  Estates
         Subdivision, Anchorage, Alaska 99516.



DEED OF TRUST - Page 4
<PAGE>
         Governmental   Authority:   Any  federal,   state,   local,   or  other
         governmental  entity,  department,  agency,  authority,  board, bureau,
         commission, office, officer, or instrumentality,  or any court, in each
         case whether in the United States or a foreign jurisdiction and whether
         now or hereafter in existence.

         Grantor:  The  individual or entity  described on the first page and in
         the initial  paragraph of this Deed of Trust and any and all subsequent
         owners of the Mortgaged  Property or any part thereof  (without  hereby
         implying  Beneficiary's  consent to any  Disposition  of the  Mortgaged
         Property).

         Hazardous Material:  Any substance,  product,  waste, or other material
         which  is or  becomes  listed,  regulated,  or  addressed  as  being  a
         explosive,  flammable,  hazardous,  polluting,  radioactive,  toxic, or
         similarly harmful  substance,  product,  waste, or other material under
         any Environmental  Law,  including but not limited to (i) any substance
         included within the definition of "hazardous waste" pursuant to Section
         1004 of RCRA;  (ii) any  substance  included  within the  definition of
         "hazardous  substance"  pursuant  to Section  101 of CERCLA;  (iii) any
         substance  included in the definition of "hazardous  waste" pursuant to
         AS  46.03.900;  (iv)  any  substance  included  in  the  definition  of
         "hazardous  substance"  pursuant to AS 46.03.826;  (v)  asbestos;  (vi)
         polychlorinated biphenyls; and (vii) petroleum products.

         Impositions:  (i) All real estate and personal property taxes, charges,
         assessments, standby fees, excises, and levies and any interest, costs,
         or penalties with respect  thereto,  general and special,  ordinary and
         extraordinary,   foreseen  and  unforeseen,  of  any  kind  and  nature
         whatsoever which at any time prior to or after the execution hereof may
         be  assessed,  levied,  or imposed upon the  Mortgaged  Property or the
         ownership,  use,  occupancy,  or  enjoyment  thereof,  or  any  portion
         thereof;  (ii) any  charges,  fees,  license  payments,  or other  sums
         payable  for or under any  Contract  maintained  for the benefit of the
         Mortgaged  Property;  (iii) water, gas, sewer,  electricity,  and other
         utility charges and fees relating to the Mortgaged  Property;  and (iv)
         assessments  and charges  arising under any  subdivision,  condominium,
         planned unit development, or other declarations, restrictions, regimes,
         or agreements affecting the Mortgaged Property.

         Improvements:   Any   and  all   buildings,   structures,   and   other
         improvements,  and  any and all  additions,  alterations,  betterments,
         replacements,  substitutions,  and appurtenances  thereto, now owned or
         hereafter  acquired by or for Grantor and now or at any time  hereafter
         situated, placed, or constructed upon the Lands or any part thereof.

         Indebtedness:  (i) The  principal  of,  interest on, and all other sums
         evidenced by or as are or may become due and owing under or pursuant to
         the  Notes or the Loan  Documents;  (ii)  such  additional  sums,  with
         interest thereon, as may hereafter be borrowed from Beneficiary (or its
         successors  or  assigns)  by the then  record  owner  of the  Mortgaged
         Property,  when evidenced by a promissory  note which, by its terms, is
         secured hereby (it being  contemplated by Grantor and Beneficiary  that
         such future indebtedness may be incurred);  and (iii) any 



DEED OF TRUST - Page 5
<PAGE>
         and all other indebtedness, obligations, and liabilities of any kind or
         character  of  Grantor  to  Beneficiary,  now  or  hereafter  existing,
         absolute or contingent,  due or not due, arising by operation of law or
         otherwise,  direct or indirect,  primary or secondary,  joint, several,
         joint  and  several,  fixed or  contingent,  secured  or  unsecured  by
         additional or different security or securities, including indebtedness,
         obligations,  and  liabilities to Beneficiary of Grantor as a member of
         any  partnership,  joint  venture,  trust,  or other  type of  business
         association,  or other  group,  and  whether  incurred  by  Grantor  as
         principal,   surety,  endorser,   guarantor,   accommodation  party  or
         otherwise,  it being  contemplated  by  Grantor  and  Beneficiary  that
         Grantor may hereafter  become indebted to Beneficiary in further sum or
         sums.

         Juneau LS:  Grantor's  cable landing  station at or near 17103 Pt. Lena
         Loop Road, Juneau, Alaska.

         Kanas: Kanas Telecom, Inc., an Alaska corporation,  or any successor or
         transferee thereof under the Kanas Fiber Exchange Agreement.

         Kanas Facility:  The fiber optic  telecommunications  cable constructed
         and owned by Kanas between the PSMS and the NPMS.

         Kanas Fiber Exchange  Agreement:  That certain Fiber Exchange Agreement
         between  Kanas and GCICC dated  November 21, 1997  (certain  rights and
         obligations  under which have been  assigned by GCICC to  Grantor),  as
         such  agreement may be amended,  supplemented,  or otherwise  modified,
         renewed, or replaced from time to time.

         Lands: Any and all rights, titles,  interests, and privileges now owned
         or hereafter  acquired by or for Grantor in, to,  under,  or respecting
         the real  property  (i)  described  in  Exhibit A  attached  hereto and
         incorporated herein by this reference or (ii) otherwise along the route
         of the System,  together  with any and all rights  appurtenant  thereto
         (including but not limited to access rights).

         Legal  Requirements:  (i) Any  and all  present  and  future  statutes,
         ordinances,  regulations,  rules, permits,  approvals,  authorizations,
         variances,  guidelines,  standards,  decisions,  rulings,  notices,  or
         orders of any  Governmental  Authority in any way applicable to Grantor
         or the Mortgaged Property,  including,  without limiting the generality
         of   the   foregoing,   the   ownership,   development,   construction,
         installation,    testing,   occupancy,   use,   enjoyment,   operation,
         maintenance,  alteration,  repair,  or  reconstruction of the Mortgaged
         Property,  (ii) any and all  covenants,  conditions,  and  restrictions
         contained  in any deeds,  other  forms of  conveyance,  or in any other
         instruments  of any nature that relate in any way or are  applicable to
         the Mortgaged  Property or the  ownership,  development,  construction,
         installation,    testing,   occupancy,   use,   enjoyment,   operation,
         maintenance,  alteration,  repair, or reconstruction thereof, (iii) all
         presently  or   subsequently   effective   agreements  or  articles  of
         incorporation, partnership, limited partnership, joint venture, limited
         liability company,  trust, or other form of business  association,  and
         the  bylaws of any such  entity  or  association  established  thereby,
         adopted by or for Grantor or any  Constituent  



DEED OF TRUST - Page 6
<PAGE>
         Party, (iv) any and all Contracts,  and (v) any and all other contracts
         (written or oral) of any nature that relate in any way to the Mortgaged
         Property and to which  Grantor may be or become  bound.  Lenders:  Such
         persons as from time to time may be Lenders under the Credit Agreement.
         The initial  Lenders are  identified on Schedule 1 attached  hereto and
         incorporated herein by this reference.

         Loan Documents:  The Credit  Agreement,  the Notes, this Deed of Trust,
         and any and all other documents now or hereafter executed by Grantor or
         any other person or party in connection with the loans evidenced by the
         Notes or in  connection  with the  payment of the  Indebtedness  or the
         performance and discharge of the Obligations.

         Material Adverse Effect:  The term "Material Adverse Effect" shall have
         the meaning given such term in the Credit Agreement.

         Maximum Lawful Rate: The maximum  interest rate permitted by applicable
         law.

         Mortgaged  Property:  Any  and  all  rights,  titles,   interests,  and
         privileges  now owned or  hereafter  acquired by or for Grantor in, to,
         under, or respecting the Lands,  the  Improvements,  the Fixtures,  the
         Contracts, and the Personalty, together with any and all other security
         and collateral of any nature whatsoever, now or hereafter given for the
         repayment of the  Indebtedness  or the performance and discharge of the
         Obligations,  whether  obtained for,  from,  or in connection  with the
         Project  or  otherwise.  As used  in  this  Deed  of  Trust,  the  term
         "Mortgaged  Property"  shall be  expressly  defined as meaning  all or,
         where the context permits or requires, any portion of the above and all
         or, where the context permits or requires, any interest therein.

         Norma Beach LS:  Grantor's cable landing station at or near 14725 Norma
         Beach Road, Edmonds, Washington 98026.

         Note: Each and every Note (as defined in the Credit Agreement) executed
         by Grantor pursuant to the Credit Agreement and secured by, among other
         things,  this Deed of Trust,  and any and all renewals,  modifications,
         rearrangements,      reinstatements,      enlargements,     extensions,
         substitutions, or replacements thereof or therefor, from time to time.

         NPMS:  Kanas's North Pole  Metering  Station  facility  located at 3624
         Frosty Avenue, North Pole, Alaska 99705.

         Obligations: Any and all of the covenants, conditions, representations,
         warranties,   and   other   obligations   (other   than  to  repay  the
         Indebtedness) made or undertaken by Grantor to Beneficiary, Trustee, or
         others as set forth in the Loan Documents or in any Contract.



DEED OF TRUST - Page 7
<PAGE>
         Person: Any natural person, corporation, partnership, limited liability
         company,   trust,   joint  venture,   association,   company,   estate,
         unincorporated  organization,  or government or any agency or political
         subdivision thereof.

         Personalty:  Any and all rights, titles,  interests, and privileges now
         owned or  hereafter  acquired  by or for  Grantor  in or to any and all
         personal  property  of every  kind and  character  (whether  movable or
         immovable and including but not limited to goods,  equipment (including
         but  not  necessarily  limited  to  Equipment),  machinery,  inventory,
         documents of title,  instruments,  chattel paper,  accounts,  insurance
         proceeds,  contract rights,  Rents,  trademarks,  trade names,  general
         intangibles,  and  deposit  accounts),  together  with all  accessions,
         additions, alterations, betterments,  replacements,  substitutions, and
         appurtenances to or for any of the foregoing and the proceeds thereof.

         POP:  A party's primary point of presence at a designated location.

         Permitted  Encumbrances:  The term "Permitted  Encumbrances" shall have
         the meaning given such term in the Credit Agreement.

         Project:  The  acquisition,   ownership,   development,   construction,
         installation,    testing,   occupancy,   use,   enjoyment,   operation,
         maintenance, alteration, repair, and reconstruction of the System.

         Project  Agreements:  The  term  "Project  Agreements"  shall  have the
         meaning given such term in the Credit Agreement.

         PSMS: Kanas's PetroStar Metering Station,  located at 2.5 Mile Dayville
         Road, Valdez, Alaska 99686.

         Release: The terms "release", "removal",  "environment", and "disposal"
         shall  have the  meanings  given  such  terms in  CERCLA,  and the term
         "disposal" shall also have the meaning given it in RCRA;  provided that
         in the event  either  CERCLA or RCRA is amended  so as to  broaden  the
         meaning of any term defined  thereby,  such broader meaning shall apply
         subsequent  to the  effective  date of  such  amendment,  and  provided
         further that to the extent the laws of the State of Alaska  establish a
         meaning for "release", "removal", "environment", or "disposal" which is
         broader  than that  specified in either  CERCLA and RCRA,  such broader
         meaning shall apply.

         Remedial  Work:  Any  investigation,   site  monitoring,   containment,
         cleanup,  removal,  restoration,  or other  work of any kind or  nature
         reasonably  necessary or desirable  under any applicable  Environmental
         Law in  connection  with the  current  or  future  presence,  suspected
         presence,  release,  or suspected release of a Hazardous Material in or
         into the air, soil, ground water,  surface water, or soil vapor at, on,
         about, under, or within the Mortgaged Property.



DEED OF TRUST - Page 8
<PAGE>
         Rents: All of the rents, revenues, income, proceeds,  profits, security
         and other types of deposits (after Grantor acquires title thereto), and
         other  benefits  paid or payable to Grantor by parties to the Contracts
         for using,  leasing,  licensing,  operating,  possessing,  or otherwise
         enjoying all or any portion of the Mortgaged Property.

         SADC:  GCICC's South  Anchorage  Distribution  Center,  located at 6831
         Arctic Boulevard, Anchorage, Alaska 99518.

         Satisfactory  Capacity  Agreement:   The  term  "Satisfactory  Capacity
         Agreement"  shall  have  the  meaning  given  such  term in the  Credit
         Agreement.

         SDC: GCICC's Seattle Distribution  Center,  located at 2001-6th Avenue,
         Suite 2900, Seattle, Washington 98121.

         Subordinate  Mortgage:  Any  deed  of  trust,  mortgage,  pledge,  lien
         (constitutional,   statutory,   or  contractual),   security  interest,
         encumbrance  or charge,  or conditional  sale or other title  retention
         agreement  (except for  Permitted  Encumbrances),  covering  all or any
         portion of the  Mortgaged  Property  executed and delivered by Grantor,
         the lien of which is subordinate  and inferior to the lien of this Deed
         of Trust.

         System: The SONET OC-48 fiber optic cable network connecting the cities
         of Anchorage, Whittier, Valdez, Fairbanks, and Juneau (via Lena Point),
         Alaska, and Norma Beach and Seattle,  Washington.  The system comprises
         the Alaska United Fiber System, the Electronics, the fiber pairs in the
         Kanas Facility to which Grantor has been granted exclusive use pursuant
         to the Kanas Fiber Exchange Agreement, the fiber pairs in the GCI Cable
         Facility to which  Grantor has been granted  exclusive  use pursuant to
         the GCI Fiber Exchange  Agreement,  and all other equipment  (including
         but not necessarily limited to Equipment) and rights (including but not
         limited  to  rights  in or to the  GCICC  Facility  under the GCI Fiber
         Exchange  Agreement)  necessary  to  operate  the Alaska  United  Fiber
         System, the fiber pairs in the Kanas Facility to which Grantor has been
         granted exclusive use, and the fiber pairs in the GCI Cable Facility to
         which  Grantor  has  been  granted   exclusive  use  as  an  integrated
         telecommunications  network.  The undersea  portion of the System shall
         connect  the  Whittier  LS, the Valdez LS, the Juneau LS, and the Norma
         Beach LS. An undersea  branching  unit shall connect the three undersea
         fiber cable segments originating at the Whittier LS, the Juneau LS, and
         the Norma Beach LS; the Valdez LS shall be connected through a separate
         undersea  extension  originating  at the Whittier  LS. The  terrestrial
         portion  of the System  shall  consist  of inland  extensions  from the
         Whittier LS to the SADC and the AT&T POP in  Anchorage,  from Valdez to
         the FDC and the AT&T POP in  Fairbanks,  from the Norma Beach LS to the
         SDC.

         Trustee:  The person  described as Trustee on the first page and in the
         initial  paragraph of this Deed of Trust and any  successor  Trustee or
         Trustees hereunder.



DEED OF TRUST - Page 9
<PAGE>
         Valdez LS:  Grantor's cable landing station at or near 200 South Harbor
         Drive, Valdez, Alaska 99686.

         Whittier LS:  Grantor's cable landing station at or near Lot #16, First
         Addition to the Port of Whittier, Alaska.

Section 1.2. Additional  Definitions:  As used herein, the following terms shall
have the following meanings:

         "Hereby",  "herein",  "hereto",  "hereunder",  "herewith",  and similar
         terms mean by, in, to, under, and with respect to this Deed of Trust or
         the other document or matter being referenced.

         "Heretofore"  means before,  "hereafter"  means after,  and  "herewith"
         means concurrently with, the date of this Deed of Trust.

         All pronouns,  whether in masculine,  feminine or neuter form, shall be
         deemed  to  refer  to the  object  of  such  pronoun  whether  same  is
         masculine,  feminine or neuter in gender, as the context may suggest or
         require.

         All terms used  herein,  whether or not  defined in Section 1.1 hereof,
         and whether used in singular or plural  form,  shall be deemed to refer
         to the  object  of such  term  whether  such is  singular  or plural in
         nature, as the context may suggest or require.

                                   ARTICLE II
                                      Grant

Section 2.1.  Grant.  To secure the full and timely payment of the  Indebtedness
and the full and  timely  performance  and  discharge  of the  Obligations,  (a)
Grantor by these presents does GRANT, BARGAIN, SELL, and CONVEY unto Trustee, in
trust,  with  power of sale,  the  Mortgaged  Property,  TO HAVE AND TO HOLD the
Mortgaged  Property  unto  Trustee,  for  the use and  benefit  of  Beneficiary,
forever,  and (b) Grantor on behalf of itself,  its  successors and assigns does
hereby  WARRANT AND COVENANT TO DEFEND the title to the Mortgaged  Property unto
Trustee and Beneficiary  against every person lawfully claiming or attempting to
claim the same or any part thereof; provided, however, that if Grantor shall pay
(or cause to be paid) the Indebtedness as and when the same shall become due and
payable and shall fully perform and  discharge  (or cause to be fully  performed
and  discharged)  the  Obligations  on or  before  the  date  the same are to be
performed and  discharged,  then the liens,  security  interests,  estates,  and
rights granted by the Loan Documents  shall  terminate,  in accordance  with the
provisions thereof,  otherwise the same shall remain in full force and effect. A
certificate  or other  written  statement  executed  on  behalf  of  Trustee  or
Beneficiary  confirming  that the  Indebtedness  has not been  fully paid or the
Obligations  have not been fully  performed or  discharged  shall be  sufficient
evidence thereof for the purpose of reliance by third parties on such fact.



DEED OF TRUST - Page 10
<PAGE>
                                   ARTICLE III
                         Representations and Warranties

Grantor hereby unconditionally represents and warrants to Beneficiary, as of the
date hereof and at all times during the term of this Deed of Trust, as follows:

Section  3.1.   Representations   and  Warranties  in  Credit   Agreement.   The
representations  and  warranties  made by Grantor in the  Credit  Agreement  are
hereby incorporated by reference into this Deed of Trust.

Section 3.2. No Reliance by Beneficiary.  Grantor and  Beneficiary  have and are
relying solely upon Grantor's expertise and business plan in connection with the
ownership  and operation of the  Mortgaged  Property.  Grantor is not relying on
Beneficiary's  expertise or business  acumen in  connection  with the  Mortgaged
Property.

Section 3.3. Title and Lien. Grantor has or will acquire, no later than July 31,
1998, such good and  indefeasible  title (free and clear of any liens,  charges,
encumbrances,  security interests,  claims,  restrictions,  covenants,  or other
rights,  titles, or interests of third parties of any nature  whatsoever,  other
than Permitted  Encumbrances) to the Mortgaged  Property and such other real and
personal  property as is  necessary or  desirable,  and the  Mortgaged  Property
together  with such other  real and  personal  property  is  sufficient,  in the
reasonable  opinion of  Beneficiary,  to carry out the Project,  to complete the
construction and installation of the System,  and to test,  occupy,  use, enjoy,
operate,  maintain,  alter,  repair,  and reconstruct the System during the term
hereof. This Deed of Trust constitutes (a) a valid, subsisting first lien on the
Lands, the Improvements, the Fixtures, and the Contracts (to the extent the same
constitute  rights,  titles,  or  interests  in  real  property),  (b) a  valid,
subsisting  first  priority  security  interest in and to the  Fixtures  (to the
extent the same constitute  rights,  titles,  or interests in personal  property
covered by the Code), and (c) a valid,  subsisting first priority  assignment of
the Contracts and the Rents, all in accordance with the terms hereof and subject
to any Permitted Encumbrances.

Section 3.4. Mailing  Address.  Grantor's  mailing address,  as set forth in the
opening  paragraph  hereof or as changed pursuant to the provisions  hereof,  is
true and correct.

Section 3.5.  Environmental Laws and Hazardous Materials.

         (a) To the best of Grantor's knowledge, no property under consideration
for acquisition and addition to the Mortgaged Property, no operations conducted,
being conducted,  or to be conducted on any such property, and no transportation
to or from  any  such  property  (i)  violated,  violate,  or will  violate  any
applicable  law,  statute,   ordinance,  rule,  regulation,   permit,  approval,
authorization,  variance,  code,  standard,  decree,  ruling,  or  order  of any
Governmental Authority or any covenant,  condition,  or restriction (recorded or
otherwise),  including but not limited to all applicable Environmental Laws, all
building,   fire,  and  other  safety  codes,  and  all  zoning  ordinances  and
restrictions (including restrictions  applicable to avalanche,  earthquake,  and
flood  zones),  or (ii) are  subject to any  existing,  pending,  or  threatened
action,  suit,  investigation,   inquiry,  or  proceeding  by  any  Governmental
Authority  or  nongovernmental  Person  under  any  Environmental  Law or to any
remedial  obligations under any Environmental  Law, except such (in either case)
as is set forth on Schedule 3.20 of the 



DEED OF TRUST - Page 11
<PAGE>
Credit  Agreement or as does not and will not have (as determined by Beneficiary
after notice thereto) a Material Adverse Effect.

         (b) No Mortgaged Property,  no operations conducted (either prior to or
after the acquisition thereof by Grantor),  being conducted,  or to be conducted
thereon,  and no  transportation  thereto or therefrom (either prior to or after
the acquisition  thereof by Grantor) (i) violated,  violate, or will violate any
applicable  law,  statute,   ordinance,  rule,  regulation,   permit,  approval,
authorization, variance, code, standard, guideline, decision, decree, ruling, or
order of any Governmental Authority or any covenant,  condition,  or restriction
(recorded  or   otherwise),   including  but  not  limited  to  all   applicable
Environmental  Laws, all building,  fire, and other safety codes, and all zoning
ordinances and  restrictions  (including  restrictions  applicable to avalanche,
earthquake,  and flood zones) or (ii) are subject to any existing,  pending,  or
threatened  action,   suit,   investigation,   inquiry,  or  proceeding  by  any
Governmental  Authority or nongovernmental Person under any Environmental Law or
to any remedial  obligations under any Environmental Law, except such (in either
case) as is set forth on Schedule  3.20 of the Credit  Agreement  or as does not
and will not have (as determined by Beneficiary after notice thereto) a Material
Adverse Effect.

         (c) Grantor has taken all steps reasonably necessary to determine that,
has no evidence that, and has reasonably  determined that no Hazardous  Material
has been used, generated, handled,  transported,  treated, placed, held, stored,
located, buried, discharged, or otherwise released on, in, under, from, or about
the  Mortgaged  Property and that the Mortgaged  Property  contains no Hazardous
Material, except (i) as is set forth on Schedule 3.20 of the Credit Agreement or
(ii) as does not and will not have (as  determined by  Beneficiary  after notice
thereto) a Material Adverse Effect.

         (d) Grantor has not received any notice, and has no knowledge, that any
Governmental  Authority or any  employee or agent  thereof has  determined,  has
threatened to determine,  or is  investigating  any allegation  that a Hazardous
Material has been, is being,  or is threatened to be used,  generated,  handled,
transported,  treated,  placed, held, stored, located,  buried,  discharged,  or
otherwise released on, in, under, from, or about the Mortgaged Property,  except
as is set forth on Schedule 3.20 of the Credit Agreement.

                                   ARTICLE IV
                              Affirmative Covenants

Grantor hereby unconditionally covenants and agrees with Beneficiary,  until the
entire  Indebtedness  shall  have been  paid in full and all of the  Obligations
shall have been fully performed and discharged, as follows:

Section 4.1. Payment and  Performance.  Grantor will pay the Indebtedness as and
when specified in the Loan Documents,  and will perform and discharge all of the
Obligations, in full and on or before the dates the same are to be performed.

Section  4.2.  Compliance  with  Loan  Documents.   Grantor  will  promptly  and
faithfully  comply with,  conform to, act or refrain  from acting in  accordance
with, and satisfy and 



DEED OF TRUST - Page 12
<PAGE>
discharge  all  obligations  arising  under  any and all of the  Loan  Documents
(including any and all obligations  which, in accordance with their terms or the
intent of the parties thereto,  survive the expiration or earlier termination of
Credit Agreement and thus survive the reconveyance, foreclosure, or other action
terminating this Deed of Trust).

Section 4.3. First Lien Status. Grantor will protect the first lien and security
interest  status of this Deed of Trust and the other Loan Documents and will not
permit to be created or to exist in respect  of the  Mortgaged  Property  or any
part thereof any lien or security  interest  superior  to, on a parity with,  or
inferior to any of the liens or security interests hereof,  except for Permitted
Encumbrances.

Section 4.4.  Payment of  Impositions.  Grantor will duly pay and discharge,  or
cause to be paid and  discharged,  the Impositions not later than the earlier to
occur of (i) the due date thereof, (ii) the day any fine, penalty,  interest, or
cost may be added thereto or imposed, or (iii) the day any lien may be filed for
the  nonpayment  thereof (if such day is used to  determine  the due date of the
respective item).

Section 4.5.  Payment for Labor and  Materials.  Grantor  will  promptly pay all
bills for labor,  materials,  and specifically  fabricated materials incurred in
connection  with the Mortgaged  Property and never permit to exist in respect of
the Mortgaged  Property or any part thereof any lien or security interest (other
than  Permitted  Encumbrances),  even though  inferior to the liens and security
interests hereof, for any such bill, and in any event never permit to be created
or exist in respect of the  Mortgaged  Property or any part thereof any other or
additional  lien  or  security  interest  (other  than  Permitted  Encumbrances)
superior  to, on a parity  with,  or  inferior  to any of the liens or  security
interests hereof.

Section 4.6.  Repair.  Grantor will keep the Mortgaged  Property in  first-class
order and condition and make all repairs, additions,  alterations,  betterments,
improvements,  renewals,  and  replacements  thereof and  thereto,  interior and
exterior, structural and nonstructural, ordinary and extraordinary, foreseen and
unforeseen,  which are necessary or reasonably  appropriate  to keep the same in
such order and condition.  Grantor will prevent any act, occurrence,  or neglect
which might impair the value or  usefulness  of the  Mortgaged  Property for its
intended usage. In instances where repairs, additions, alterations, betterments,
improvements,  renewals,  and  replacements are required in and to the Mortgaged
Property on an emergency  basis to prevent loss,  damage,  waste, or destruction
thereof, Grantor shall proceed to repair, add to, alter, better, improve, renew,
or  replace  the same,  or cause  the same to be  repaired,  added to,  altered,
bettered,  improved,  renewed,  or  replaced,  notwithstanding  anything  to the
contrary contained in Section 5.2 hereof;  provided,  however, that in instances
where such emergency  measures are to be taken,  Grantor will notify Beneficiary
in writing of the  commencement  of the same and the measures to be taken,  and,
when same are completed, the completion date and the measures actually taken.

Section  4.7.  Insurance.  Grantor will obtain and maintain (or will cause to be
obtained and maintained)  insurance upon and relating to the Mortgaged  Property
with such  insurer,  in such amounts and covering  such risks as are required by
the Credit Agreement.

Section 4.8. Inspection.  Grantor will permit Trustee and Beneficiary, and their
agents, representatives, and employees, to inspect the Mortgaged Property at all
reasonable times.



DEED OF TRUST - Page 13
<PAGE>
Section 4.9. Tax on Deed of Trust. At any time any law shall be enacted imposing
or authorizing  the  imposition of any tax upon this Deed of Trust,  or upon any
rights,  titles,  liens,  or  security  interests  created  hereby,  or upon the
Indebtedness or any part thereof;  Grantor will  immediately pay all such taxes,
provided  that if such law as enacted  makes it unlawful for Grantor to pay such
taxes Grantor shall not pay nor be obligated to pay such tax.

Section  4.10.  Expenses.  Subject to the  provision  of Section  12.11  hereof,
Grantor will pay on demand all  reasonable  and bona fide  out-of-pocket  costs,
fees,  and  expenses  and  other  expenditures,  including  but not  limited  to
reasonable attorneys' fees and costs, paid or incurred by Beneficiary or Trustee
to third  parties  incident  to this  Deed of Trust or any other  Loan  Document
(including but not limited to reasonable attorneys' fees and costs in connection
with the negotiation,  preparation,  and execution of any amendment hereto,  any
release hereof, or any consent,  approval or waiver hereunder, and in connection
with any suit to which  Beneficiary or Trustee is a party involving this Deed of
Trust  or  the  Mortgaged  Property)  or  incident  to  the  enforcement  of the
Indebtedness  or the exercise of any right or remedy of  Beneficiary  under this
Deed of Trust.

Section 4.11.  Statement of Unpaid  Balance.  At any time and from time to time,
Grantor  will  furnish  promptly,  upon the  request of  Beneficiary,  a written
statement or affidavit, in form satisfactory to Beneficiary,  stating the unpaid
balance of the  Indebtedness  and that there are no offsets or defenses  against
full payment of the Indebtedness and the terms hereof,  or if there are any such
offsets or defenses, specifying them.

Section 4.12.  Address.  Grantor shall give written  notice to  Beneficiary  and
Trustee  of any  change of  address  of  Grantor  in the manner set forth in the
Credit Agreement. Absent such official written notice of a change in address for
Grantor,  Beneficiary  and Trustee shall be entitled for all purposes  under the
Loan  Documents  to rely upon  Grantee's  address  as set  forth in the  initial
paragraph of this Deed of Trust, as the same may have been heretofore changed in
accordance with the provisions hereof.

Section 4.13.  Further  Amendments,  Assurances,  and Corrections.  From time to
time,  as  provided  in the Loan  Documents  or at the  request of  Beneficiary,
Grantor will (i) execute, acknowledge,  deliver, record and/or file such further
instruments  (including but not limited to additional or amended deeds of trust,
security  agreements,   financing  statements,   continuation  statements,   and
assignments  of  contracts  or rents) and perform  such further acts and provide
such  further  assurances  as  may  be  necessary,   desirable,  or  proper,  in
Beneficiary's  opinion,  to carry out more effectively the purposes of this Deed
of Trust  and the Loan  Documents  and to  subject  to the  liens  and  security
interests  hereof and  thereof  any  property  intended  by the terms  hereof or
thereof  to be  covered  hereby or  thereby,  including  but not  limited to any
accessions,  additions,  alterations,  betterments,  renewals, replacements, and
substitutions to, of, or for the Mortgaged Property; (ii) execute,  acknowledge,
deliver,  procure,  record and/or file any document or instrument (including but
not limited to any  financing  statement)  deemed  advisable by  Beneficiary  to
protect the liens and the security  interests  herein granted against the rights
or interests of third persons;  (iii)  promptly  correct any defect,  error,  or
omission which may be discovered in the contents of this Deed of Trust or in any
other Loan Document or in the execution or acknowledgment  thereof; and (iv) pay
all costs connected with any of the foregoing.



DEED OF TRUST - Page 14
<PAGE>
Section 4.14.  Environment Laws and Hazardous Materials.

         (a) Grantor will consider for acquisition and addition to the Mortgaged
Property only that property with respect to which it is and will be, to the best
of its knowledge, capable of making the representations and warranties set forth
in Article III hereof.

         (b) Grantor will acquire and add to the  Mortgaged  Property  only that
property with respect to which it is capable of making the  representations  and
warranties set forth in Article III hereof.

         (c) Before acquiring and adding any property to the Mortgaged Property,
Grantor  will  determine  that no Hazardous  Material has been used,  generated,
handled,   transported,   treated,   placed,  held,  stored,  located,   buried,
discharged,  or otherwise  released on, in, under,  from, or about the Mortgaged
Property and that the Mortgaged Property contains no Hazardous Material,  except
as is set forth on Schedule 3.20 of the Credit Agreement or as does not and will
not have (as determined by Beneficiary  after notice thereto) a Material Adverse
Effect.

         (d)  Grantor  will  promptly  notify  Beneficiary  in writing  whenever
Grantor receives any notice or otherwise acquires knowledge of (i) any existing,
pending, or threatened action,  suit,  investigation,  inquiry, or proceeding by
any Governmental Authority or nongovernmental Person under any Environmental Law
or (ii) any occurrence or condition  that could cause the Mortgaged  Property or
any part thereof to be subject to such an action, suit, investigation,  inquiry,
or proceeding,  except such (in either case) as is set forth on Schedule 3.20 of
the Credit Agreement.

         (e) Grantor will duly obtain or file all licenses,  permits, approvals,
authorizations,  variances,  non-objections,  certificates,  and  notices as are
required to be obtained or filed in connection with the acquisition,  ownership,
development,  construction,  installation,  testing,  occupancy, use, enjoyment,
operation, maintenance,  alteration, repair, and reconstruction of the Mortgaged
Property and the Project,  including but not limited to all  licenses,  permits,
approvals, authorizations, variances, non-objections,  certificates, and notices
required  to be  obtained  or filed  in  connection  with  the use,  generation,
handling, transporting,  treating, placing, holding, storing, locating, burying,
discharging, or otherwise releasing a Hazardous Material into the environment.

         (f) Grantor will comply with,  and will keep and maintain the Mortgaged
Property in compliance with, all applicable Environmental Laws.

         (g) Grantor will permit  Beneficiary to join and  participate  in, as a
party if it so elects,  any legal  proceedings or actions initiated with respect
to the Mortgaged  Property in connection with any Environmental Law or Hazardous
Material.

         (h) In the event that any  Remedial  Work is  reasonably  necessary  or
desirable,  Grantor shall commence, within thirty (30) days after written demand
by  Beneficiary  (or such  shorter  period of time as may be required  under any
Legal Requirement),  and thereafter  diligently prosecute to completion all such
Remedial Work.  All Remedial Work shall be performed by contractors  approved in
advance by  Beneficiary,  and under the  supervision  of a  consulting  engineer
approved by  Beneficiary.  All costs and expenses of such Remedial Work shall be
paid by Grantor including but not limited to Beneficiary's reasonable attorneys'
fees 



DEED OF TRUST - Page 15
<PAGE>
and costs  incurred in  connection  with  monitoring  or review of such Remedial
Work.  In the  event  Grantor  shall  fail to  timely  commence,  or cause to be
commenced,  or fail to prosecute  diligently to completion,  such Remedial Work,
Beneficiary  may, but shall not be required to, cause such  Remedial  Work to be
performed,  and all  costs  and  expenses  thereof  or  incurred  in  connection
therewith shall become part of the Indebtedness.

                                    ARTICLE V
                               Negative Covenants

Grantor hereby unconditionally covenants and agrees with Beneficiary,  until the
entire  Indebtedness  shall  have been  paid in full and all of the  Obligations
shall have been fully performed and discharged, as follows:

Section  5.1.  Use  Violations;  Hazardous  Materials.  Grantor  will  not  use,
maintain,  operate, or occupy, or authorize the use, maintenance,  operation, or
occupancy of, the Mortgaged  Property in any manner which (i) violates any Legal
Requirement, (ii) constitutes a public or private nuisance, or (iii) makes void,
voidable,  or  cancelable,  or increases the premium of, any  insurance  then in
force with respect  thereto.  In addition to and without limiting the generality
of the foregoing,  Grantor will not use,  generate,  handle,  transport,  treat,
place, hold, store, locate, bury, discharge,  or otherwise release any Hazardous
Material,  or authorize any other Person to do so, on, in, under, from, or about
the  Mortgaged  Property,  in a manner which results in a violation or breach of
any Legal Requirement or any covenant or representation hereunder.

Section 5.2. Waste; Alterations.  Grantor will not commit or permit any waste or
impairment of the Mortgaged  Property and will not (subject to the provisions of
Section 4.6 hereof),  without the prior written consent of Beneficiary,  make or
permit to be made any  alterations or additions to the Mortgaged  Property which
has or would have a Material Adverse Effect.

Section 5.3.  Replacement of Fixtures and Personalty.  Grantor will not, without
the  prior  written  consent  of  Beneficiary,  permit  any of the  Fixtures  or
Personalty to be removed at any time from the Lands or  Improvements  unless the
removed item is removed  temporarily  for  maintenance and repair or, if removed
permanently,  is replaced by an item of equal  suitability  and value,  owned by
Grantor  free and  clear  of any  lien or  security  interest  except  Permitted
Encumbrances;  provided,  however,  that Grantor shall not make, or permit to be
made,  any renewal,  replacement,  addition,  or improvement to the System which
would adversely affect the System or which has a cost of $200,000 or more.

Section  5.4.  Change in Zoning.  Grantor will not seek or acquiesce in a zoning
reclassification  of all or any portion of the Mortgaged  Property,  or grant or
consent to any covenant,  condition,  or restriction covering all or any portion
of the Mortgaged Property, without Beneficiary's prior written consent.

Section 5.5. No Relocation.  Except as authorized in the Loan Documents, Grantor
will not  relocate  or allow any  relocation  of the  Improvements  or  Fixtures
without the prior written consent of Beneficiary.

Section 5.6. No Disposition. Except as authorized in the Loan Documents, Grantor
will not make a Disposition without the prior written consent of Beneficiary.



DEED OF TRUST - Page 16
<PAGE>
Section 5.7. No Subordinate Mortgages. Grantor will not create, place, or permit
to be created or placed, or through any act or failure to act,  acquiesce in the
placing of, or allow to remain any  Subordinate  Mortgage  regardless of whether
such  Subordinate  Mortgage is  expressly  subordinate  to the liens or security
interests of the Loan Documents with respect to the Mortgaged Property.

                                   ARTICLE VI
                                Events of Default

The term  "Event  of  Default"  as used  herein  shall  mean the  occurrence  or
happening,  at any  time  and  from  time  to  time,  of any  one or more of the
following:

Section 6.1.  Default Under Other Loan Document.  If Grantor shall default or if
an event of  default--including  but not limited to (i) a default in the payment
of any principal of, or interest on, the Notes that continues unremedied for the
period set forth in the Credit  Agreement and (ii) any other Event of Default as
defined in the  Credit  Agreement--shall  exist  under or  pursuant  to any Loan
Document other than this Deed of Trust.

Section 6.2. Payment of Indebtedness Arising Hereunder. If Grantor shall fail or
refuse to fully and timely perform and discharge any Indebtedness arising solely
under  this Deed of Trust as and when  called  for and such  failure  or refusal
continues  for a period of five (5) days after  demand for such payment has been
made in writing upon Grantor.

Section 6.3.  Performance  of  Obligations.  If Grantor  shall fail or refuse to
fully and timely perform and discharge any of the Obligations as and when called
for and such failure or refusal shall either be uncurable or, if curable,  shall
remain uncured for a period of either (i) ten (10) consecutive days after demand
for such  performance  has been made upon Grantor or (ii) such shorter period as
may be provided in the Credit Agreement.

Section 6.4. False Representation. If any representation, warranty, or statement
made by Grantor or others in,  under,  or pursuant to the Loan  Documents or any
affidavit or other  instrument  executed in connection  with the Loan  Documents
shall be false or misleading in any material respect as of the date made.

Section 6.5.  Default Under Other Lien Document.  If Grantor shall default or if
an event of default  shall  exist  under or pursuant to any other deed of trust,
mortgage,  or  security  agreement  which  covers  or  affects  any  part of the
Mortgaged Property.

Section  6.6.  Abandonment.  If  Grantor  abandons  all  or any  portion  of the
Mortgaged  Property  and such  abandonment  has or could be  expected  to have a
Material Adverse Effect.

Section 6.7. Material Adverse Effect. If Beneficiary  reasonably determines that
any event shall have  occurred  that has or could be expected to have a Material
Adverse Effect.

                                   ARTICLE VII
                                    Remedies

Section 7.1.  Beneficiary's  Remedies  Upon Default.  Upon the  occurrence of an
Event of Default or any event or circumstance  which,  with the lapse of time or
the giving of notice or 



DEED OF TRUST - Page 17
<PAGE>
both,  would  constitute an Event of Default,  Beneficiary may, at Beneficiary's
option, and by or through Trustee,  by Beneficiary  itself or otherwise,  do any
one or more of the following:

         (a) Right to Perform Grantor's Covenants. If Grantor has failed to keep
or perform any covenant whatsoever  contained in this Deed of Trust or the other
Loan Documents,  Beneficiary may, but shall not be obligated to any person to do
so, perform or attempt to perform said covenant, and any payment made or expense
incurred in the performance or attempted  performance of any such covenant shall
be and become a part of the Indebtedness,  and Grantor promises, upon demand, to
pay to Beneficiary, at the place where the relevant Note is payable, all sums so
advanced  or paid by  Beneficiary,  with  interest  from the date  when  paid or
incurred by  Beneficiary  at the Default  Rate.  No such payment by  Beneficiary
shall constitute a waiver of any Event of Default.  In addition to the liens and
security  interests  hereof,  Beneficiary  shall be  subrogated  to all  rights,
titles,  liens, and security  interests securing the payment of any debt, claim,
tax, or assessment for the payment of which Beneficiary may make an advance,  or
which Beneficiary may pay.

         (b)  Right  of  Entry.  Beneficiary  may,  prior or  subsequent  to the
institution of any foreclosure  proceedings,  enter upon the Mortgaged Property,
or any part thereof, and take exclusive possession of the Mortgaged Property and
of all books,  records,  and accounts  relating  thereto and to exercise without
interference  from Grantor any and all rights which  Grantor has with respect to
the  management,  possession,  operation,  protection,  or  preservation  of the
Mortgaged Property,  including but not limited to the right to rent the same for
the account of Grantor and to deduct  from such Rents all costs,  expenses,  and
liabilities of every character  incurred by Beneficiary in collecting such Rents
and in managing, operating, maintaining, protecting, or preserving the Mortgaged
Property and to apply the  remainder of such Rents to the  Indebtedness  in such
manner as  Beneficiary  may elect.  All such costs,  expenses,  and  liabilities
incurred by  Beneficiary  in collecting  such Rents and in managing,  operating,
maintaining,  protecting,  or preserving the Mortgaged Property, if not paid out
of Rents as hereinabove provided,  shall constitute a demand obligation owing by
Grantor and shall bear interest from the date of  expenditure  until paid at the
Default Rate, all of which shall  constitute a portion of the  Indebtedness.  If
necessary to obtain the possession  provided for above,  Beneficiary  may invoke
any and all legal remedies to dispossess Grantor,  including specifically one or
more actions for  forcible  entry and  detainer,  ejectment,  quiet  title,  and
restitution. In connection with any action taken by Beneficiary pursuant to this
subsection,  Beneficiary  shall not be liable for any loss  sustained by Grantor
resulting from any failure to rent the Mortgaged Property,  or any part thereof,
or from any other act or  omission of  Beneficiary  in  managing  the  Mortgaged
Property  unless such loss is caused by the willful  misconduct of  Beneficiary,
nor shall Beneficiary be obligated to perform or discharge any obligation, duty,
or liability under any Contract or under or by reason hereof or by reason of the
exercise of rights or remedies  hereunder.  Grantor  hereby  agrees to indemnify
Beneficiary for, and to hold  Beneficiary  harmless from, any and all liability,
loss, or damage,  which may or might be incurred by  Beneficiary  under any such
Contract or under or by reason  hereof or by reason of the exercise of rights or
remedies hereunder, and from any and all claims and demands whatsoever which may
be  asserted  against  Beneficiary  by  reason  of any  alleged  obligations  or
undertakings on its part to perform or discharge any of the terms, covenants, or
agreements  contained in any such Contract.  Should  Beneficiary  incur any such
liability, the amount thereof, including but not limited to costs, expenses, and
reasonable  attorneys'  fees,  together  with  interest  hereon from the date of
expenditure until paid at the Default Rate, shall be secured hereby, and Grantor
shall reimburse  Beneficiary therefor  immediately upon demand.  Nothing in this
subsection shall 



DEED OF TRUST - Page 18
<PAGE>
impose any duty, obligation, or responsibility upon Beneficiary for the control,
care,  management,  leasing,  or repair of the Mortgaged  Property,  nor for the
carrying out of any of the terms and  conditions of any  Contract;  nor shall it
operate to make Beneficiary  responsible or liable for any Hazardous Material on
or under the Mortgaged Property,  or for any dangerous or defective condition of
the Mortgaged Property or for any negligence in the management, leasing, upkeep,
repair,  or control of the  Mortgaged  Property  resulting  in loss or injury or
death to any  licensee,  employee,  or  stranger.  Grantor  hereby  assents  to,
ratifies,  and confirms any and all actions of  Beneficiary  with respect to the
Mortgaged Property taken under this subsection.

                  The  remedies  in this  subsection  are in  addition  to other
remedies  available  to  Beneficiary  and the  exercise of the  remedies in this
subsection  shall not be deemed to be an  election  of  nonjudicial  or judicial
remedies  otherwise  available to Beneficiary.  The remedies in this Article VII
are available under and governed by the real property laws of Alaska and are not
governed by the personal property laws of Alaska,  including but not limited to,
except as described in Section 7.1(g)  hereof,  the power to dispose of personal
property in a commercially reasonable manner under Section 9.504 of the Code. No
action by Beneficiary,  taken pursuant to this subsection, shall be deemed to be
an election to dispose of personal property under Section 9.505 of the Code. Any
receipt of  consideration  received by Beneficiary  pursuant to this  subsection
shall be immediately  credited against the Indebtedness (in the inverse order of
maturity)  and the value of said  consideration  shall be treated like any other
payment against the Indebtedness.

         (c) Right to  Accelerate.  Beneficiary  may,  without  notice,  demand,
presentment, notice of nonpayment or nonperformance, protest, notice of protest,
notice of intent to accelerate,  notice of acceleration,  or any other notice or
any other action, all of which are hereby waived by Grantor,  declare the entire
unpaid balance of the  Indebtedness  immediately due and payable,  and upon such
declaration,  the entire unpaid balance of the Indebtedness shall be immediately
due and  payable.  The failure to exercise any remedy  available to  Beneficiary
shall  not be deemed to be a waiver of any  rights or  remedies  of  Beneficiary
under the Loan Documents, at law or in equity.

         (d)  Foreclosure--Power  of Sale.  Beneficiary  may request  Trustee to
proceed with foreclosure under the power of sale which is hereby conferred, such
foreclosure to be accomplished in accordance with the following provisions:

                  (i) Public Sale.  Trustee is hereby  authorized and empowered,
         and  it  shall  be  Trustee's   special  duty,  upon  such  request  of
         Beneficiary,  to sell the Mortgaged  Property,  or any part thereof, at
         public  auction  conducted  in the city of  Anchorage,  Alaska  (if the
         designation  of such site hereby is lawful),  to the highest bidder for
         cash with or without  having taken  possession  of same.  Any such sale
         (including   notice   thereof)   shall   comply  with  the   applicable
         requirements,  at  the  time  of  the  sale,  of  AS  34.20.70  through
         34.20.135,  as amended,  or, if and to the extent  such  statute is not
         then in force,  with the  applicable  requirements,  at the time of the
         sale, of the successor statute or statutes,  if any, governing sales of
         Alaska real property  under powers of sale conferred by deeds of trust.
         If there is no statute in force at the time of the sale governing sales
         of Alaska real  property  under  powers of sale  conferred  by deeds of
         trust,  such sale shall comply with  applicable  law at the time of the
         sale.



DEED OF TRUST - Page 19
<PAGE>
                  (ii) Right To Require Proof of Financial  Ability  and/or Cash
         Bid.  At any time  during the  bidding,  Trustee  may require a bidding
         party (1) to  disclose  its full  name,  state  and city of  residence,
         occupation,  and specific  business office  location,  and the name and
         address  of  the  principal  the  bidding  party  is  representing  (if
         applicable),  and (2) to demonstrate reasonable evidence of the bidding
         party's financial ability (or, if applicable,  the financial ability of
         the  principal  of such bidding  party),  as a condition to the bidding
         party  submitting  bids at the  foreclosure  sale.  If any such bidding
         party   ("Questioned   Bidder")   declines  to  comply  with  Trustee's
         requirement in this regard,  or if such Questioned  Bidder does respond
         but Trustee,  in  Trustee's  sole and  absolute  discretion,  deems the
         information or the evidence of the financial  ability of the Questioned
         Bidder (or, if  applicable,  the principal of such bidding party) to be
         inadequate, then Trustee may continue the bidding with reservation; and
         in such event (A) Trustee shall be authorized to caution the Questioned
         Bidder  concerning  the legal  obligations to be incurred in submitting
         bids, and (B) if the Questioned Bidder is not the highest bidder at the
         sale, or if having been the highest bidder the Questioned  Bidder fails
         to deliver the cash  purchase  price payment  promptly to Trustee,  all
         bids by the Questioned  Bidder shall be null and void.  Trustee may, in
         Trustee's sole and absolute discretion, determine that a credit bid may
         be in the best interest of Grantor and  Beneficiary,  and elect to sell
         the  Mortgaged  Property  for credit or for a  combination  of cash and
         credit;  provided,  however,  that Trustee  shall have no obligation to
         accept any bid except an all cash bid. In the event Trustee  requires a
         cash  bid and cash is not  delivered  within a  reasonable  time  after
         conclusion of the bidding process,  as specified by Trustee,  but in no
         event  later than 3:45 p.m.  local  time on the day of sale,  then said
         contingent  sale shall be null and void,  the  bidding  process  may be
         recommenced,  and any  subsequent  bids or sale  shall be made as if no
         prior bids were made or accepted.

                  (iii) Sale Subject To Unmatured  Indebtedness.  In addition to
         the rights and powers of sale granted under the preceding provisions of
         this  subsection,  if default is made in the payment of any installment
         of the Indebtedness,  Beneficiary may, at Beneficiary's option, at once
         or at any time thereafter while any matured installment remains unpaid,
         without declaring the entire Indebtedness to be due and payable, orally
         or in writing  direct  Trustee  to  enforce  this trust and to sell the
         Mortgaged  Property  subject to such unmatured  Indebtedness and to the
         rights, powers, liens, security interests,  and assignments securing or
         providing recourse for payment of such unmatured  Indebtedness,  in the
         same  manner,  all as  provided  in the  preceding  provisions  of this
         subsection.  Sales made without  maturing the  Indebtedness may be made
         hereunder whenever there is a default in the payment of any installment
         of the  Indebtedness,  without  exhausting  the  power of sale  granted
         hereby,  and  without  affecting  in any way the power of sale  granted
         under this subsection, the unmatured balance of the Indebtedness or the
         rights, powers, liens, security interests,  and assignments securing or
         providing recourse for payment of the indebtedness.



DEED OF TRUST - Page 20
<PAGE>
                  (iv)  Partial  Foreclosure.  Sale of a part  of the  Mortgaged
         Property  shall not  exhaust  the power of sale,  but sales may be made
         from time to time until the  Indebtedness  is paid and the  Obligations
         are  performed  and  discharged  in full. It is intended by each of the
         foregoing  provisions of this  subsection  that Trustee may,  after any
         request or  direction by  Beneficiary,  sell not only the Lands and the
         Improvements  but also the Fixtures and Personalty and other  interests
         constituting  a part of the  Mortgaged  Property  or any part  thereof,
         along with the Lands and the  Improvements  or any part  thereof,  as a
         unit  and as a part of a single  sale,  or may sell at any time or from
         time to time any part or parts  of the  Mortgaged  Property  separately
         from the remainder of the Mortgaged Property. It shall not be necessary
         to  have  present  or to  exhibit  at any  sale  any  of the  Mortgaged
         Property.

                  (v)  Trustee's  Deeds.  After any sale under this  subsection,
         Trustee shall make good and sufficient  deeds,  assignments,  and other
         conveyances  to the purchaser or  purchasers  thereunder in the name of
         Grantor,  conveying the Mortgaged  Property or any part thereof so sold
         to the  purchaser  or  purchasers  with  general  warranty  of title by
         Grantor.  It is  agreed  that  in  any  deeds,  assignments,  or  other
         conveyances  given by Trustee,  any and all statements of fact or other
         recitals therein made as to the identity of Beneficiary, the occurrence
         or  existence  of any Event of  Default,  the  notice of  intention  to
         accelerate,  or acceleration of, the maturity of the Indebtedness,  the
         request to sell, notice of sale, time, place, terms and manner of sale,
         and  receipt,  distribution,  and  application  of the  money  realized
         therefrom,  the due and proper appointment of a substitute trustee, and
         without being limited by the  foregoing,  any other act or thing having
         been duly done by or on  behalf  of  Beneficiary  or by or on behalf of
         Trustee,  shall be taken by all courts of law and equity as  conclusive
         (to the extent  authorized  by law) or prima facie  evidence  that such
         statements or recitals state true, correct,  and complete facts and are
         without  further  question to be so  accepted,  and Grantor does hereby
         ratify and confirm any and all acts that Trustee may lawfully do in the
         premises by virtue hereof.

         (e) Beneficiary's  Judicial  Remedies.  Beneficiary,  or Trustee,  upon
written  request of  Beneficiary,  may  proceed  by suit or suits,  at law or in
equity,  to enforce  the payment of the  Indebtedness  and the  performance  and
discharge of the Obligations in accordance with the terms hereof,  of each Note,
and the other Loan Documents,  to foreclose the liens and security  interests of
this Deed of Trust as against all or any part of the Mortgaged Property,  and to
have all or any part of the Mortgaged Property sold under the judgment or decree
of a court of competent  jurisdiction.  This remedy shall be  cumulative  of any
other  nonjudicial  remedies  available to Beneficiary  with respect to the Loan
Documents.  Proceeding  with a request or  receiving a judgment for legal relief
shall not be or be deemed to be an election  of  remedies  or bar any  available
nonjudicial remedy of Beneficiary.

         (f) Beneficiary's Right to Appointment of Receiver.  Beneficiary,  as a
matter of right  and  without  regard to the  sufficiency  of the  security  for
repayment of the  Indebtedness and performance and discharge of the Obligations,
without  notice to Grantor  and without any  showing of  insolvency,  fraud,  or
mismanagement  on the part of Grantor,  and without the  necessity of filing any
judicial or other  proceeding  other than the  proceeding  for  appointment of a
receiver, shall be entitled to the appointment of a receiver or receivers of the



DEED OF TRUST - Page 21
<PAGE>
Mortgaged  Property or any part thereof,  and of the Rents,  and Grantor  hereby
irrevocably consents to the appointment of a receiver or receivers. Any receiver
appointed  pursuant to the  provisions of this  subsection  shall have the usual
powers and duties of receivers in such matters.

         (g)  Beneficiary's  Uniform  Commercial Code Remedies.  Beneficiary may
exercise its rights of enforcement under the Code with respect to Fixtures.

         (h) Rights  Relating to Rents.  Grantor has,  pursuant to Article IX of
this Deed of Trust,  assigned, as collateral,  to Beneficiary all Rents received
for all or any portion of the  Mortgaged  Property.  Beneficiary,  or Trustee on
Beneficiary's  behalf, may at any time, and without notice, either in person, by
agent,  or by receiver to be appointed by a court,  enter and take possession of
the  Mortgaged  Property or any part  thereof,  and in its own name,  sue for or
otherwise  collect the Rents.  Grantor hereby agrees that  Beneficiary may, upon
notice from Trustee or  Beneficiary  to Grantor of the occurrence of an Event of
Default, terminate the limited license granted to Grantor in Section 9.2 hereof,
and  thereafter  direct  the  persons  obligated  to pay Rent  under  any of the
Contracts to pay direct to Beneficiary the Rents due and to become due under the
Contracts and attorn in respect of all other  obligations  thereunder  direct to
Beneficiary, or Trustee on Beneficiary's behalf, without any obligation on their
part to determine  whether an Event of Default does in fact exist or has in fact
occurred. All Rents collected by Beneficiary, or Trustee acting on Beneficiary's
behalf,  shall be applied as provided  for in Section 7.4 of this Deed of Trust;
provided, however, that if the costs, expenses, and attorneys' fees shall exceed
the amount of Rents  collected,  the excess shall be added to the  Indebtedness,
shall bear  interest  at the  Default  Rate,  and shall be  immediately  due and
payable. The entering upon and taking possession of the Mortgaged Property,  the
collection of Rents, and the application  thereof as aforesaid shall not cure or
waive  any  Event of  Default  or  notice  of  default,  if any,  hereunder  nor
invalidate  any act done pursuant to such notice,  except to the extent any such
default is fully cured. Failure or discontinuance by Beneficiary,  or Trustee on
Beneficiary's  behalf,  at any time or from time to time,  to collect said Rents
shall not in any manner impair the  subsequent  enforcement by  Beneficiary,  or
Trustee on  Beneficiary's  behalf,  of the  right,  power and  authority  herein
conferred  upon it.  Nothing  contained  herein,  nor the exercise of any right,
power, or authority  herein granted to Beneficiary,  or Trustee on Beneficiary's
behalf,  shall be, or shall be  construed  to be,  an  affirmation  by it of any
tenancy,  lease,  or option,  nor an  assumption  of  liability  under,  nor the
subordination of, the lien or charge of this Deed of Trust, to any such tenancy,
lease,  or option,  nor an election of  judicial  relief,  if any such relief is
requested or obtained as to Contracts  or Rents,  with respect to the  Mortgaged
Property or any other collateral  given by Grantor to Beneficiary.  In addition,
from time to time, Beneficiary may elect to subordinate the lien of this Deed of
Trust to any Contract by  unilaterally  executing and recording an instrument of
subordination,  and upon such  election  the lien of this Deed of Trust shall be
subordinate  to the Contract  identified in such  instrument  of  subordination;
provided,  however,  in each instance such  subordination  will not affect or be
applicable to, and expressly  excludes any lien, charge,  encumbrance,  security
interest,  claim,  easement,  restriction,  option,  covenant, and other rights,
titles, interests or estates of any nature whatsoever with respect to all or any
portion of the Mortgaged Property to the extent that the same may have arisen or
intervened  during the period between the  recordation of this Deed of Trust and
the execution of the Contract identified in such instrument of subordination.

         (i) Other Rents.  Except to the extent provided otherwise in the Credit
Agreement,  Beneficiary  (i) may  surrender the  insurance  policies  maintained
pursuant to Section 



DEED OF TRUST - Page 22
<PAGE>
4.7  hereof or any part  thereof,  and upon  receipt  shall  apply the  unearned
premiums as a credit on the  Indebtedness,  in accordance with the provisions of
Section 7.4 hereof,  and,  in  connection  therewith,  Grantor  hereby  appoints
Beneficiary as agent and attorney-in-fact (which is coupled with an interest and
is therefore  irrevocable) for Grantor to collect such premiums;  and (ii) apply
the reserve for  Impositions  and insurance  premiums,  if any,  required by the
provisions of this Deed of Trust, toward payment of the Indebtedness;  and (iii)
shall  have  and may  exercise  any and all  other  rights  and  remedies  which
Beneficiary  may have at law or in equity,  or by virtue of any Loan Document or
under the Code, or otherwise.

         (j)  Beneficiary as Purchaser.  Beneficiary may be the purchaser of the
Mortgaged Property or any part thereof,  at any sale thereof,  whether such sale
be  under  the  power  of sale  herein  vested  in  Trustee  or upon  any  other
foreclosure  of the liens and  security  interests  hereof,  or  otherwise,  and
Beneficiary  shall, upon any such purchase,  acquire good title to the Mortgaged
Property so purchased,  free of the liens and security interests hereof,  unless
the  sale  was  made  subject  to an  unmatured  portion  of  the  Indebtedness.
Beneficiary,  as  purchaser,  shall be treated  in the same  manner as any third
party purchaser and the proceeds of  Beneficiary's  purchase shall be applied in
accordance with Section 7.4 of this Deed of Trust.

Section  7.2.  Other  Rights of  Beneficiary.  Should any part of the  Mortgaged
Property  come  into the  possession  of  Beneficiary,  whether  before or after
default,  Beneficiary may (for itself or by or through other persons,  firms, or
entities) hold, lease,  manage,  use, or operate the Mortgaged Property for such
time and upon such terms as Beneficiary may deem prudent under the circumstances
(making such  repairs,  alterations,  additions,  and  improvements  thereto and
taking such other action as Beneficiary  may from time to time deem necessary or
desirable)  for the purpose of preserving  the Mortgaged  Property or its value,
pursuant to the order of a court of  appropriate  jurisdiction  or in accordance
with any other rights held by Beneficiary in respect of the Mortgaged  Property.
Grantor covenants to promptly reimburse and pay to Beneficiary on demand, at the
place  where the Notes  are  payable,  the  amount  of all  reasonable  expenses
(including but not limited to the cost of any insurance,  Impositions,  or other
charges)  incurred by  Beneficiary  in connection  with  Beneficiary's  custody,
preservation,  use,  or  operation  of the  Mortgaged  Property,  together  with
interest  thereon from the date incurred by Beneficiary at the Default Rate; and
all such expenses, costs, taxes, interest, and other charges shall be and become
a part of the  Indebtedness.  It is  agreed,  however,  that the risk of loss or
damage to the Mortgaged  Property is on Grantor,  and Beneficiary  shall have no
liability whatsoever for decline in value of the Mortgaged Property, for failure
to obtain or maintain  insurance,  or for failure to determine whether insurance
in force is  adequate  as to amount or as to the risks  insured.  Possession  by
Beneficiary  shall not be deemed an  election of  judicial  relief,  if any such
possession is requested or obtained,  with respect to any Mortgaged  Property or
collateral not in Beneficiary's possession.

Section 7.3.  Possession After  Foreclosure.  If the liens or security interests
hereof shall be foreclosed by power of sale granted herein,  by judicial action,
or otherwise,  the purchaser at any such sale shall  receive,  as an incident to
purchaser's  ownership,  immediate possession of the property purchased,  and if
Grantor or Grantor's  successors  shall hold  possession of (or other rights in,
to, or respecting) said property or any part thereof  subsequent to foreclosure,
Grantor and Grantor's  successors shall (unless otherwise  provided in a writing
executed by said  purchaser  either before or after said purchase) be considered
as  tenants  at  sufferance  of  the  purchaser  at  foreclosure  sale  (without
limitation of other rights or remedies,  at a reasonable rental per day, due and
payable daily,  based upon the value of the portion of the Mortgaged 



DEED OF TRUST - Page 23
<PAGE>
Property so occupied and sold to such  purchaser),  and anyone so occupying  (or
exercising  other rights in, to, or  respecting)  such portion of the  Mortgaged
Property,  after  demand  is made for  possession  thereof,  shall be  guilty of
forcible  detainer  and shall be subject to eviction  and  removal,  forcible or
otherwise, with or without process of law, and all damages by reason thereof are
hereby expressly waived.

Section 7.4. Application of Proceeds.  Except as may be provided to the contrary
in Sections 8.7, 10.2, and 11.4 of the Credit  Agreement,  the proceeds from any
sale,  lease,  or other  disposition  made  pursuant to this  Article VII or the
proceeds from the surrender of any insurance  policies  pursuant hereto,  or any
Rents collected by Beneficiary from the Mortgaged  Property,  or the reserve for
Impositions and insurance  premiums,  if any, required by the provisions of this
Deed of Trust or sums received  pursuant to Section 8.1 hereof, or proceeds from
insurance  which  Beneficiary  elects to apply to the  Indebtedness  pursuant to
Section 8.2 hereof, shall be applied by Trustee, or by Beneficiary,  as the case
may be, to the  Indebtedness  in the following  order and  priority:  (i) to the
payment of all expenses of  advertising,  selling,  and  conveying the Mortgaged
Property or part thereof,  and/or  prosecuting  or otherwise  collecting  Rents,
proceeds, premiums, or other sums including reasonable attorneys' fees and costs
and a reasonable fee or commission to Trustee, not to exceed five percent of the
proceeds thereof or sums so received;  (ii) to the remainder of the Indebtedness
as follows; first, to the remaining accrued but unpaid interest,  second, to the
matured  portion of principal of the  Indebtedness,  and third, to prepayment of
the  unmatured  portion,  if any, of  principal of the  Indebtedness  applied to
installments of principal in inverse order of maturity; and (iii) the balance if
any, and to the extent applicable, remaining after the full and final payment of
the  Indebtedness  and full  performance and discharge of the Obligations to the
holder of any inferior liens covering the Mortgaged  Property,  if any, in order
of the priority of such inferior liens (Trustee and Beneficiary  shall hereby be
entitled to rely  exclusively  upon a commitment for title  insurance  issued to
determine such  priority);  and (iv) the cash balance,  if any, to Grantor.  The
application of proceeds of sale or other proceeds as otherwise  provided  herein
shall be deemed to be a payment of the Indebtedness like any other payment.  The
balance of the Indebtedness remaining unpaid, if any, shall remain fully due and
owing in accordance with the terms of the Notes or the other Loan Documents.

Section  7.5.  Abandonment  of Sale.  In the event a  foreclosure  hereunder  is
commenced by Trustee in  accordance  with  Section  7.1(d)  hereof,  at any time
before the sale Trustee may abandon the sale, and Beneficiary may then institute
suit for the collection of the Indebtedness and for the foreclosure of the liens
and security  interests hereof and of the Loan Documents.  If Beneficiary should
institute a suit for the collection of the Indebtedness and for a foreclosure of
the liens and security interests,  Beneficiary may, at any time before the entry
of a final judgment in said suit,  dismiss the same and require  Trustee to sell
the Mortgaged  Property or any part thereof in accordance with the provisions of
this Deed of Trust.

Section 7.6.  Payment of Fees. If any Note or any other part of the Indebtedness
shall be  collected  or if any of the  Obligations  shall be  enforced  by legal
proceedings,  whether  through a probate or bankruptcy  court or  otherwise,  or
shall be placed in the  hands of an  attorney  for  collection  after  maturity,
whether  matured by the  expiration of time or by an option given to Beneficiary
to  accelerate  same, or if  Beneficiary  becomes a party to any suit where this
Deed of Trust or the Mortgaged Property or any part thereof is involved, Grantor
agrees to pay Beneficiary's  reasonable  attorneys' fees and expenses  incurred,
and such fees  shall be and  



DEED OF TRUST - Page 24
<PAGE>
become a part of the  Indebtedness  and shall bear  interest  from the date such
costs are incurred at the Default Rate.

Section 7.7.  Miscellaneous.

         (a) In case  Beneficiary  shall  have  proceeded  to invoke  any right,
remedy,  or recourse  permitted  under the Loan  Documents and shall  thereafter
elect to discontinue or abandon same for any reason,  Beneficiary shall have the
unqualified right to do so and, in such event,  Grantor and Beneficiary shall be
restored to their former  positions with respect to the  Indebtedness,  the Loan
Documents,  the  Mortgaged  Property or  otherwise,  and the  rights,  remedies,
recourses  and powers of  Beneficiary  shall  continue as if same had never been
invoked.

         (b) In addition to the remedies set forth in this Article VII, upon the
occurrence of an Event of Default,  Beneficiary  and Trustee shall, in addition,
have all other  remedies  available to them under any other Loan  Document or at
law or in equity.

         (c) All rights,  remedies,  and recourses of Beneficiary granted in the
Notes,  this  Deed of Trust,  the  other  Loan  Documents,  any other  pledge of
collateral,  or otherwise available at law or equity (i) shall be cumulative and
concurrent;  (ii)  may be  pursued  separately,  successively,  or  concurrently
against Grantor, the Mortgaged Property, or any one or more of them, at the sole
discretion of Beneficiary;  (iii) may be exercised as often as occasion therefor
shall arise, it being agreed by Grantor that the exercise or failure to exercise
any of same shall in no event be construed as a waiver or release  thereof or of
any other right, remedy, or recourse; (iv) shall be nonexclusive;  (v) shall not
be conditioned upon Beneficiary exercising or pursuing any remedy in relation to
the  Mortgaged  Property  prior to  Beneficiary  bringing  suit to  recover  the
Indebtedness  or suit on the  Obligations;  and  (vi) in the  event  Beneficiary
elects to bring suit on the  Indebtedness  and/or the  Obligations and obtains a
judgment  against  Grantor  prior to  exercising  any  remedies  in  relation to
Mortgaged Property, all liens and security interests, including the lien of this
Deed of Trust,  shall  remain in full force and effect and may be  exercised  at
Beneficiary's option.

         (d) Beneficiary may release,  regardless of consideration,  any part of
the Mortgaged  Property  without,  as to the  remainder,  in any way  impairing,
affecting,  subordinating, or releasing the lien or security interests evidenced
by this Deed of Trust or the other Loan  Documents or affecting the  obligations
of Grantor to pay the  Indebtedness or to perform and discharge the Obligations.
For payment of the Indebtedness, Beneficiary may resort to any of the collateral
therefor in such order and manner as Beneficiary may elect.

         (e) Grantor hereby irrevocably and unconditionally  waives and releases
(i) all benefits that might accrue to Grantor by virtue of any present or future
law exempting the Mortgaged Property from attachment, levy, or sale on execution
or providing for any appraisement,  valuation, stay of execution, exemption from
civil process,  redemption, or extension of time for payment; and (ii) any right
to a marshaling of assets or a sale in inverse order of alienation.

         (f) Grantor and Beneficiary  mutually agree that all agreed contractual
duties  are set forth in this  Deed of  Trust,  the  Notes,  and the other  Loan
Documents and that, consistent with AS 34.15.080, there are no 



DEED OF TRUST - Page 25
<PAGE>
implied covenants other than the implied covenant of good faith and fair dealing
required by Section 1.203 of the Code.

         (g) The remedies in this Article VII are  available  under and governed
by the  real  property  laws of  Alaska  and are not  governed  by the  personal
property  laws of Alaska,  including  but not limited to the power to dispose of
personal property in a commercially reasonable manner under Section 9.504 of the
Code.

Section 7.8. Power of Attorney.  Upon the occurrence and during the  continuance
of an Event of Default,  (a) Grantor does hereby  irrevocably make,  constitute,
and appoint Beneficiary,  acting through any of Beneficiary's  officers or other
designees, the true and lawful attorney-in-fact of Grantor (which appointment is
coupled with an interest and therefore  irrevocable) with full power in the name
of Beneficiary or Grantor to receive, open, and dispose of all mail addressed to
Grantor,  and to endorse  any notes,  checks,  drafts,  money  orders,  or other
evidence of payment  relating to the  Mortgaged  Property that may come into the
possession  of  Beneficiary,  with  full  power  and  right to cause the mail of
Grantor to be transferred to Beneficiary's  own offices or otherwise,  and to do
any and all other acts  necessary or proper to carry out the intent of this Deed
of Trust and the other Loan  Documents  and the grant of the Liens (as described
in the Credit  Agreement) and security  interests  hereunder and under the other
Loan Documents, and Grantor hereby ratifies and confirms all that Beneficiary or
its  substitutes  shall  properly  do by virtue of this power of  attorney;  (b)
Grantor  does  hereby  further   irrevocably  make,   constitute,   and  appoint
Beneficiary,  acting through any of  Beneficiary's  officers or other designees,
the true and lawful  attorney-in-fact  of Grantor (which  appointment is coupled
with an  interest  and  therefore  irrevocable)  with full  power in the name of
Beneficiary or Grantor (i) to enforce all of Grantor's rights under and pursuant
to all Contracts respecting the Mortgaged Property,  all for the sole benefit of
Beneficiary,  (ii) to enter into and perform such agreements as may be necessary
in order to carry out the terms, covenants, and conditions of the Loan Documents
that are required to be observed or performed by Grantor,  (iii) to execute such
other and further deeds of trust,  mortgages,  pledges,  and  assignments of the
Mortgaged Property,  and related  instruments or agreements,  as Beneficiary may
reasonably require for the purpose of perfecting,  protecting,  maintaining,  or
enforcing  the  Liens  (as  described  in the  Credit  Agreement)  and  security
interests  granted or intended to be granted to Beneficiary  hereunder and under
the other Loan Documents,  and (iv) to do any and all other things  necessary or
proper  to carry  out the  intention  of this Deed of Trust and the grant of the
Liens (as described in the Credit  Agreement) and security  interests  hereunder
and under the other Loan Documents, and Grantor hereby ratifies and confirms all
that Beneficiary or its substitutes shall properly do by virtue of this power of
attorney.

                                  ARTICLE VIII
                               Special Provisions

Section 8.1. Condemnation Proceeds. Beneficiary shall be entitled to receive any
and all sums which may be awarded and become payable to Grantor for condemnation
of the Mortgaged  Property or any part thereof,  for public or quasi-public use,
or by virtue of private sale in lieu thereof,  and any sums which may be awarded
or become payable to Grantor for damages caused by public works or  construction
on or near  the  Mortgaged  Property.  All  such  sums are  hereby  assigned  to
Beneficiary,  and Grantor shall,  upon request of  Beneficiary,  make,  execute,
acknowledge, and deliver any and all additional assignments and documents as may
be necessary from time to time to enable  Beneficiary to collect and receipt for
any such sums.  



DEED OF TRUST - Page 26
<PAGE>
Beneficiary  shall not be, under any  circumstances,  liable or responsible  for
failure to collect,  or exercise  diligence  in the  collection  of, any of such
sums.  Beneficiary shall have the option, in Beneficiary's  sole discretion,  to
apply all  proceeds so  collected  either to the  restoration  of the  Mortgaged
Property,  in the amounts,  manner, method and pursuant to such requirements and
documents as Beneficiary may require,  or to the liquidation of the Indebtedness
in accordance  with the  provisions of Section 7.4 hereof.  If there shall occur
any condemnation of a part of the Mortgaged Property and if and so long as there
is no  default  hereunder,  Beneficiary  will (to the  extent  and in the manner
provided  in  the  Credit   Agreement)   make  available  to  Grantor  for  such
restoration,  proceeds of condemnation, if any, collected by Beneficiary because
of the act or  occurrence  and not  restricted  by any adverse  claim thereto in
accordance with the provisions of Section 8.3 below.

Section 8.2.  Insurance  Proceeds.  Except as may be  otherwise  provided in the
Credit  Agreement,  the  proceeds of any and all  insurance  upon the  Mortgaged
Property  shall be  collected by  Beneficiary,  and  Beneficiary  shall have the
option,  in Beneficiary's  sole  discretion,  to apply all proceeds so collected
either to the  restoration of the Mortgaged  Property,  in the amounts,  manner,
method and  pursuant to such  requirements  and  documents  as  Beneficiary  may
require,  or to the  liquidation  of the  Indebtedness  in  accordance  with the
provisions of Section 7.4 hereof.  If there shall occur any insured damage to or
destruction  of the Mortgaged  Property or any part hereof and if and so long as
there is no default hereunder, Beneficiary will (to the extent and in the manner
provided  in  the  Credit   Agreement)   make  available  to  Grantor  for  such
restoration,  proceeds of insurance, if any, collected by Beneficiary because of
the act or  occurrence  and not  restricted  by any  adverse  claim  thereto  in
accordance with the provisions of Section 8.3 below.

Section 8.3. Provisions Applicable to Restoration. In the event that proceeds of
insurance or  condemnation,  if any,  shall be made available to Grantor for the
restoring,  repairing,  replacing,  or  rebuilding  of the  Mortgaged  Property,
Grantor hereby covenants to restore,  repair,  replace or rebuild the same to be
of at least equal value and of substantially the same character as prior to such
damage, destruction, or taking, all to be effected in accordance with applicable
law and plans and  specifications  approved  in advance by  Beneficiary.  In the
event  Grantor is entitled to  reimbursement  out of insurance  or  condemnation
proceeds held by Beneficiary, such proceeds shall be disbursed from time to time
upon  Beneficiary  being  furnished with (1) evidence  satisfactory to it of the
estimated  cost of  completion  of the  restoration,  repair,  replacement,  and
rebuilding,  (2) funds, or, at Beneficiary's option,  assurances satisfactory to
Beneficiary  that such  funds  are  available,  sufficient  in  addition  to the
proceeds of insurance or  condemnation  (as applicable) to complete the proposed
restoration,  repair,  replacement and rebuilding,  and (3) such  architect's or
engineer's certificates,  waivers of lien, contractor's sworn statements,  title
insurance  endorsements,  bonds,  plats of survey,  and such other  evidences of
cost,  payment,  and  performance  as  Beneficiary  may  reasonably  require and
approve;  and  Beneficiary  may,  in any  event,  require  that  all  plans  and
specifications  for such  restoration,  repair,  replacement,  and rebuilding be
submitted to and approved by Beneficiary  prior to commencement of work.  Unless
otherwise  provided in the Credit Agreement,  no payment made prior to the final
completion of the restoration,  repair,  replacement and rebuilding shall exceed
ninety percent of the value of the work performed from time to time; funds other
than  proceeds of insurance  shall be disbursed  prior to  disbursement  of such
proceeds; and at all times the undisbursed balance of such proceeds remaining in
the hands of  Beneficiary,  together  with funds  deposited  for that purpose or
irrevocably  committed to the  satisfaction  of  Beneficiary  by or on behalf of
Grantor  for  that  purpose,  shall  be at least  



DEED OF TRUST - Page 27
<PAGE>
sufficient  in the  reasonable  judgment of  Beneficiary  to pay for the cost of
completion of the restoration, repair, replacement or rebuilding, free and clear
of all  liens  or  claims  for  lien  (except  Permitted  Encumbrances).  Unless
otherwise provided in the Credit Agreement,  Grantor shall pay all costs (and if
required  by   Beneficiary,   Grantor  shall  deposit  the  total  thereof  with
Beneficiary in advance) of such restoring,  repairing,  replacing, or rebuilding
in excess of the net  proceeds  of  insurance  or  condemnation  made  available
pursuant to the terms  hereof.  Any surplus which may remain out of insurance or
condemnation  proceeds (as applicable) held by Beneficiary after payment of such
costs of restoration,  repair,  replacement,  or rebuilding shall be paid to any
party entitled thereto.

Section 8.4. Subrogation.  Except to the extent otherwise provided in the Credit
Agreement,  Grantor waives any and all right to claim,  recover,  or subrogation
against Beneficiary or its officers, directors, employees, agents, attorneys, or
representatives for loss or damage to Grantor, the Mortgaged Property, Grantor's
property,  or the  property of others  under  Grantor's  control  from any cause
insured  against or required to be insured against by the provisions of the Loan
Documents.

Section 8.5. Waiver of Setoff.  Except to the extent  otherwise  provided in the
Credit  Agreement,  the  Indebtedness,  or any  part  thereof,  shall be paid by
Grantor without notice, demand, counterclaim,  setoff, deduction, or defense and
without abatement, suspension,  deferment, diminution, or reduction by reason of
(i) any damage to,  destruction of, or any condemnation or similar taking of the
Mortgaged  Property;  (ii) any restriction or prevention of or interference with
any use of the Mortgaged Property;  (iii) any title defect or encumbrance or any
eviction from the Mortgaged  Property by superior  title or otherwise;  (iv) any
bankruptcy, insolvency,  reorganization,  composition,  adjustment, dissolution,
liquidation.  or other like  proceeding  relating  to Trustee,  Beneficiary,  or
Grantor,  or any action  taken with respect to this Deed of Trust by any trustee
or receiver of Beneficiary or Grantor,  or by any court, in any such proceeding;
(v) any claim which  Grantor has or might have against  Trustee or  Beneficiary;
(vi) any default or failure on the part of Beneficiary to perform or comply with
any of the terms hereof or of any other  agreement  with  Grantor;  or (vii) any
other  occurrence  whatsoever,  whether  similar or dissimilar to the foregoing,
whether or not Grantor  shall have notice or knowledge of any of the  foregoing.
Except as expressly  provided herein or in the Credit Agreement,  Grantor waives
all rights now or hereafter  conferred by statute or otherwise to any abatement,
suspension, deferment, diminution, or reduction of the Indebtedness.

Section 8.6. Contest of Certain  Impositions and  Encumbrances.  Notwithstanding
the provisions of Section 4.4 or 4.5 hereof, Grantor shall not be in default for
failure to pay or discharge any Imposition or mechanic's or  materialman's  lien
(excluding Permitted  Encumbrances)  asserted against the Mortgaged Property if,
and so long as,  Grantor  complies with the  provisions of the Credit  Agreement
relating to the same.

                                   ARTICLE IX
                        Assignment of Contracts and Rents

Section 9.1.  Assignment.  For Ten Dollars  ($10.00) and other good and valuable
consideration,  including the  indebtedness  evidenced by the Notes, the receipt
and sufficiency of which are hereby acknowledged and confessed, Grantor by these
presents does GRANT,  BARGAIN,  SELL, and CONVEY unto  Beneficiary the Contracts
and  the  Rents,  as  security  for  the  payment  of the  Indebtedness  and the
performance  and  discharge of the  Obligations,  subject 



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only to the "License"  (hereinafter  defined), TO HAVE AND TO HOLD the Contracts
and the Rents unto Beneficiary,  forever,  and Grantor on behalf of itself,  its
successors  and assigns does hereby  WARRANT AND COVENANT TO DEFEND the title to
the  Contracts  and the Rents unto  Beneficiary  against  every person  lawfully
claiming or attempting to claim the same or any part thereof; provided, however,
that if Grantor shall pay (or cause to be paid) the Indebtedness as and when the
same shall  become due and  payable and shall fully  perform and  discharge  (or
cause to be fully  performed and  discharged)  the  Obligations on or before the
date the same are to be performed and  discharged,  then this  assignment  shall
terminate,  in accordance with the provisions  hereof,  otherwise the same shall
remain in full force and effect.

Section 9.2.  Limited  License.  Beneficiary  hereby grants to Grantor a limited
license  ("License")  to exercise and enjoy all  incidences  of the status of an
obligee  under the  Contracts  and all Rents,  including  but not limited to the
right to collect, demand, sue for, attach, levy, recover, and receive the Rents,
and to give proper receipts,  releases,  and acquittances  therefor. The License
shall be  automatically  revoked during the  continuance of an Event of Default.
Grantor  hereby agrees to receive all Rents and hold the same as a trust fund to
be applied,  and to apply the Rents so collected,  in accordance with the Credit
Agreement.

Section 9.3. Enforcement of Contracts.  So long as the License is in effect, and
unless otherwise provided in the Credit Agreement,  Grantor shall (i) submit any
and all Project  Agreements to  Beneficiary  for approval prior to the execution
thereof,  (ii)  duly  and  punctually  perform  and  comply  with  any  and  all
representations, warranties, covenants, and agreements expressed as binding upon
the obligee  under any  Contract,  (iii)  maintain each of the Contracts in full
force and effect during the term  thereof,  (iv) appear in and defend any action
or proceeding in any manner connected with any of the Contracts,  (v) deliver to
Beneficiary  copies  of  all  Contracts  as  and  to  the  extent  requested  by
Beneficiary,  and (vi)  deliver to  Beneficiary  such further  information,  and
execute and deliver to Beneficiary such further assurances and assignments, with
respect to the Contracts as Beneficiary may from time to time request. Except to
the  extent  permitted  in the Credit  Agreement,  Grantor  shall  not,  without
Beneficiary's  prior  written  consent,  (1) do or  knowingly  permit to be done
anything to impair the value of any of the Contracts, (2) except for security or
similar deposits,  collect any of the Rent more than one month in advance of the
time when the same becomes due under the terms of any Contract, (3) discount any
future  accruing  Rents,  (4) amend,  modify,  or  terminate  any of the Project
Agreements or any other Contract the amendment,  modification, or termination of
which would have a Material  Adverse  Effect,  or (5) assign or grant a security
interest in or to the License or any of the Contracts or Rents.

Section 9.4. No Merger of Estates.  So long as any part of the  Indebtedness  or
the Obligations  secured hereby remains unpaid and unperformed or  undischarged,
the fee, leasehold,  and other possessory and non-possessory rights, titles, and
interests  constituting the Mortgaged  Property shall not merge but rather shall
remain separate and distinct,  notwithstanding the union of such rights, titles,
and interests in Grantor,  Beneficiary, any lessee, or any third party purchaser
or otherwise.

                                    ARTICLE X
                                 Fixture Filing

Section 10.1.  Fixture  Filing.  Grantor by these presents does GRANT,  BARGAIN,
CONVEY,  ASSIGN,  TRANSFER  and SET  OVER,  unto  Beneficiary  a first and prior
security  



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<PAGE>
interest in all of Grantor's  right,  title and interest in, to, under, and with
respect  to  the  Fixtures,  to  secure  the  full  and  timely  payment  of the
Indebtedness  and  the  full  and  timely   performance  and  discharge  of  the
Obligations.  This Deed of Trust thus shall also  constitute a "fixture  filing"
for the purposes of the Code.  All or part of the Mortgaged  Property are or are
to become fixtures.  Information concerning the security interest herein granted
may be  obtained  from the  parties at the  addresses  of the  parties set forth
herein.  For purposes of the security interest herein granted,  the addresses of
both the debtor (Grantor) and the secured party  (Beneficiary)  are set forth in
the first paragraph of this Deed of Trust.

                                   ARTICLE XI
                               Concerning Trustee

Section  11.1.  No Required  Action.  Trustee  shall not be required to take any
action toward the execution and  enforcement  of the trust hereby  created or to
institute,  appear  in, or defend  any  action,  suit,  or other  proceeding  in
connection  therewith  where,  in its  opinion,  such action  would be likely to
involve it in  expense  or  liability,  unless  requested  so to do by a written
instrument signed by Beneficiary and, if Trustee so requests,  unless Trustee is
tendered  security and  indemnity  satisfactory  to Trustee  against any and all
cost, expense, and liability arising therefrom. Trustee shall not be responsible
for the execution, acknowledgment, or validity of the Loan Documents, or for the
proper  authorization  thereof,  or for the sufficiency of the lien and security
interest  purported to be created hereby, and Trustee makes no representation in
respect  thereof  or in  respect  of the  rights,  remedies,  and  recourses  of
Beneficiary.

Section 11.2.  Certain Rights.  With the approval of Beneficiary,  Trustee shall
have the  right to take any and all of the  following  actions:  (i) to  select,
employ,  and  consult  with  counsel  (who may be, but need not be,  counsel for
Beneficiary)  upon any matters  arising  hereunder,  including the  preparation,
execution,  and  interpretation  of the  Loan  Documents,  and  shall  be  fully
protected  in relying as to legal  matters  on the  advice of  counsel,  (ii) to
execute any of the trusts and powers  hereof and to perform  any duty  hereunder
either directly or through its agents or attorneys,  (iii) to select and employ,
in and  about the  execution  of its  duties  hereunder,  suitable  accountants,
engineers, and other experts, agents, and attorneys-in-fact, either corporate or
individual,  not  regularly in the employ of Trustee,  and Trustee  shall not be
answerable  for  any  act,  default,  negligence,  or  misconduct  of  any  such
accountant,  engineer, or other expert, agent, or attorney-in-fact,  if selected
with  reasonable  care,  or for any error of  judgment or act done by Trustee in
good faith, or be otherwise  responsible or accountable  under any circumstances
whatsoever, except for Trustee's gross negligence or bad faith, and (iv) any and
all other lawful action as Beneficiary  may instruct  Trustee to take to protect
or enforce  Beneficiary's  rights  hereunder.  Trustee  shall not be  personally
liable in case of entry by Trustee,  or anyone  entering by virtue of the powers
herein granted to Trustee,  upon the Mortgaged Property for debts contracted for
or liability or damages incurred in the management or operation of the Mortgaged
Property.  Trustee shall have the right to rely on any instrument,  document, or
signature  authorizing or supporting any action taken or proposed to be taken by
Trustee  hereunder,  believed  by Trustee in good faith to be  genuine.  Trustee
shall be  entitled  to  reimbursement  for  expenses  incurred by Trustee in the
performance of Trustee's  duties  hereunder and to reasonable  compensation  for
such of Trustee's  services  hereunder as shall be rendered.  Grantor will, from
time to time,  pay the  compensation  due to  Trustee  hereunder  and  reimburse
Trustee  for, and save  Trustee  harmless  against,  any and all  liability  and
expenses  which may be  incurred  by Trustee  in the  performance  of  Trustee's
duties.



DEED OF TRUST - Page 30
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Section 11.3.  Retention of Money.  All moneys received by Trustee shall,  until
used or applied as herein provided,  be held in trust for the purposes for which
they were  received,  but need not be  segregated  in any manner  from any other
moneys  (except to the extent  required by applicable  law) and Trustee shall be
under no liability for interest on any moneys received by Trustee hereunder.

Section 11.4. Successor Trustees.  Trustee may resign by the giving of notice of
such  resignation in writing or verbally to  Beneficiary.  If Trustee shall die,
resign,  or become  disqualified  from acting in the execution of this trust, or
if, for any reason,  Beneficiary shall prefer to appoint a substitute Trustee or
multiple substitute  trustees,  or successive  substitute trustees or successive
multiple  substitute  Trustees,  to  act  instead  of  the  aforenamed  Trustee,
Beneficiary  shall have full  power to  appoint a  substitute  Trustee  (or,  if
preferred, multiple substitute trustees) in succession who shall succeed (and if
multiple  substitute  trustees are appointed,  each of such multiple  substitute
trustees shall succeed) to all the estates,  rights,  powers,  and duties of the
aforenamed Trustee.  Such appointment may be executed by any authorized agent of
Beneficiary,  and if such  Beneficiary be a corporation and such  appointment be
executed  in its behalf by any  officer of such  corporation,  such  appointment
shall be conclusively  presumed to be executed with authority and shall be valid
and  sufficient  without  proof of any action by the board of  directors  or any
superior  officer of the  corporation.  Grantor hereby ratifies and confirms any
and all acts which the  aforenamed  Trustee,  or its  successor or successors in
this trust, shall do lawfully by virtue hereof. If multiple  substitute Trustees
are appointed,  each of such multiple substitute Trustees shall be empowered and
authorized  to act alone  without  the  necessity  of the  joinder  of the other
multiple  substitute  trustees,  whenever  any  action  or  undertaking  of such
substitute  trustees is requested or required  under or pursuant to this Deed of
Trust or applicable law.

Section  11.5.  Perfection  of  Appointment.  Should  any deed,  conveyance,  or
instrument  of any nature be required  from Grantor by any Trustee or substitute
Trustee to more fully and certainly vest in and confirm to Trustee or substitute
Trustee such estates,  rights, powers, and duties, then, upon request by Trustee
or substitute Trustee, any and all such deeds, conveyances and instruments shall
be made,  executed,  acknowledged,  and  delivered  and  shall be  caused  to be
recorded and/or filed by Grantor.

Section 11.6. Succession Instruments.  Any substitute Trustee appointed pursuant
to any of the  provisions  hereof  shall,  without any  further  act,  deed,  or
conveyance, become vested with all the estates, properties,  rights, powers, and
trusts  of its  predecessor  in the  rights  hereunder  with  like  effect as if
originally named as Trustee herein;  but nevertheless,  upon the written request
of  Beneficiary  or of the  substitute  Trustee,  Trustee  ceasing  to act shall
execute and deliver any instrument transferring to such substitute Trustee, upon
the trusts herein expressed,  all the estates,  properties,  rights, powers, and
trusts of  Trustee  so ceasing to act,  and shall  duly  assign,  transfer,  and
deliver any of the property  and moneys held by such  Trustee to the  substitute
Trustee so appointed in Trustee's place.

Section  11.7.  No  Representation  by Trustee or  Beneficiary.  By accepting or
approving  anything  required to be observed,  performed,  or fulfilled or to be
given to Trustee or Beneficiary  pursuant to the Loan  Documents,  including but
not limited to any officer's certificate, balance sheet, statement of profit and
loss or other  financial  statement,  survey,  appraisal,  or insurance  policy,
neither Trustee nor Beneficiary shall be deemed to have warranted, consented to,
or affirmed the  sufficiency,  legality,  effectiveness,  or legal effect of 



DEED OF TRUST - Page 31
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the same, or of any term,  provision,  or condition thereof, and such acceptance
or approval  thereof shall not be or constitute any warranty or affirmation with
respect thereto by Trustee or Beneficiary.

                                   ARTICLE XII
                                  Miscellaneous

Section 12.1.  Release.  If the  Indebtedness is paid in full in accordance with
the terms of this Deed of Trust, the Notes, and the other Loan Documents, and if
Grantor shall well and truly perform each and every one of the Obligations to be
performed and discharged in accordance with the terms of this Deed of Trust, the
Notes and the other Loan Documents,  then this conveyance  shall become null and
void and be released at Grantor's  request and expense,  and  Beneficiary  shall
have no further obligation to make advances under and pursuant to the provisions
hereof or the other Loan Documents.

Section 12.2.  Performance  at Grantor's  Expense.  Subject to the provisions of
Section 12.11 hereof,  Grantor shall (i) pay all reasonable  legal fees incurred
by  Beneficiary  in  connection  with  the  preparation  of the  Loan  Documents
(including  any amendments  thereto or consents,  releases,  or waivers  granted
thereunder);  (ii) reimburse Beneficiary,  promptly upon demand, for all amounts
expended,  advanced,  or incurred by  Beneficiary  to satisfy any  obligation of
Grantor under the Loan  Documents,  which amounts shall include all court costs,
reasonable attorneys' fees (including but not limited to fees for trial, appeal,
or other proceedings), fees of auditors and accountants, and other investigation
expenses reasonably incurred by Beneficiary in connection with any such matters;
and (iii) any and all other costs and expenses of performing  or complying  with
any and all of the Obligations. Except to the extent that costs and expenses are
included within the definition of "Indebtedness",  the payment of such costs and
expenses  shall  not be  credited,  in any way and to any  extent,  against  any
installment on or portion of the Indebtedness.

Section 12.3.  Survival of Obligations.  Each and all of the  Obligations  shall
survive the execution and delivery of the Loan Documents and the consummation of
the loan called for therein  and shall  continue in full force and effect  until
the Indebtedness shall have been paid in full; provided,  however,  that nothing
contained  in this  Section  12.3  shall  limit the  obligations  of  Grantor as
otherwise set forth herein.

Section 12.4.  Recording and Filing.  Grantor will cause the Loan  Documents and
all  amendments  and  supplements  thereto  and  substitutions  therefor  to  be
recorded, filed,  re-recorded,  and refiled in such manner and in such places as
Trustee  or  Beneficiary  shall  reasonably  request,  and  will  pay  all  such
recording,  filing,  re-recording,  and refiling taxes, documentary stamp taxes,
fees, and other charges.

Section 12.5. Notices. All notices or other communications required or permitted
to be given  pursuant  to this Deed of Trust  shall be in  writing  and shall be
considered  as properly  given if (i) mailed by first class United  States mail,
postage prepaid,  registered or certified with return receipt requested, (ii) by
delivering  same in person to the  intended  addressee,  (iii) by delivery to an
independent  third party  commercial  delivery  service for same day or next day
delivery  and  providing  for  evidence of receipt at the office of the intended
addressee, or (iv) by prepaid telegram or facsimile to the addressee.  Notice so
mailed  shall be  effective  ten (10)  business  days after its deposit with the
United States Postal Service or any successor thereto;  notice 



DEED OF TRUST - Page 32
<PAGE>
given by personal  delivery  shall be effective only if and when received by the
addressee;  notice sent by such a commercial delivery service shall be effective
upon the first  business  day  following  delivery to such  commercial  delivery
service;  and notice  given by other means shall be  effective  only if and when
received  at the  office or  designated  place of the  intended  addressee.  For
purposes of notice,  the  addresses of the parties  shall be as set forth in the
Credit Agreement;  provided,  however, that either party shall have the right to
change its address for notice  hereunder to any other location within the United
States in the manner provided in the Credit Agreement.

Section 12.6.  Covenants  Running With the Lands.  All Obligations  contained in
this  Deed of Trust  and the other  Loan  Documents  are  intended  by  Grantor,
Beneficiary,  and Trustee to be, and shall be construed  as,  covenants  running
with the Mortgaged  Property until the lien of this Deed of Trust has been fully
released by Beneficiary.

Section 12.7.  Successors  and Assigns.  All of the terms of the Loan  Documents
shall  apply to,  be  binding  upon,  and inure to the  benefit  of the  parties
thereto, their permitted successors,  assigns,  heirs, and legal representatives
and all other persons claiming by, through, or under them.

Section 12.8. No Waiver; Severability.  Any failure by Trustee or Beneficiary to
insist,  or any election by Trustee or  Beneficiary  not to insist,  upon strict
performance by Grantor or others of any of the terms, provisions,  or conditions
of the Loan Documents shall not be deemed to be a waiver of same or of any other
terms, provisions,  or conditions thereof, and Trustee or Beneficiary shall have
the right at any time or times  thereafter to insist upon strict  performance by
Grantor or others of any and all of such terms, provisions,  and conditions. The
Loan Documents are intended to be performed in accordance  with, and only to the
extent permitted by, all applicable Legal Requirements.  If any provision of any
of the Loan Documents or the  application  thereof to any person or circumstance
shall,  for any reason and to any  extent,  be  invalid or  unenforceable,  then
neither the remainder of the instrument in which such provision is contained nor
the  application  of such  provision to other persons or  circumstances  nor the
other instruments referred to herein shall be affected thereby, but rather shall
be enforced to the greatest extent permitted by law.

Section 12.9. Counterparts.  To facilitate execution,  this Deed of Trust may be
executed in as many counterparts as may be convenient or required.  It shall not
be necessary that the signature and  acknowledgment  of each party,  or that the
signature and  acknowledgment of all persons required to bind any party,  appear
on each counterpart.  All counterparts  shall  collectively  constitute a single
instrument.  It shall not be  necessary in making proof of this Deed of Trust to
produce or account for more than a single  compiled  counterpart  containing the
respective  signatures and  acknowledgment  of each of the parties  hereto.  Any
signature and  acknowledgment  page to any counterpart may be detached from such
counterpart   without   impairing  the  legal  effect  of  the   signatures  and
acknowledgments thereon and thereafter attached to another counterpart identical
thereto  except having  attached to it additional  signature and  acknowledgment
pages.

Section 12.10. Applicable Law. All of Grantor's obligations to Beneficiary under
the Notes and the other Loan Documents were  negotiated,  created,  executed and
delivered in New York.  The Credit  Agreement and the Notes shall be governed by
and construed in accordance  with the internal laws of the State of New York and
the laws of the United  States  applicable to  



DEED OF TRUST - Page 33
<PAGE>
transactions in the State of New York. This Deed of Trust shall also be governed
by and construed in  accordance  with the internal laws of the State of New York
(without  regard to choice of law or  conflict of law rules) and the laws of the
United States applicable to transactions in the State of New York, except to the
extent  that  the  laws  of  the  State  of  Alaska,  including  laws  governing
foreclosure  and laws pertaining to  environmental  matters,  shall  necessarily
govern.

Section 12.11.  Controlling Agreement.  It is expressly stipulated and agreed to
be the intent of Grantor,  Trustee,  and Beneficiary at all times to comply with
applicable  New York law or applicable  United States federal law (to the extent
that it permits Beneficiary to contract for, charge, take, reserve, or receive a
greater  amount of interest than under New York law) and that this section shall
control  every other  covenant and agreement in this Deed of Trust and the other
Loan Documents.  If the applicable law is ever  judicially  interpreted so as to
render  usurious any amount  called for under any Note or under any of the other
Loan Documents,  or contracted for, charged,  taken,  reserved, or received with
respect  to the  Indebtedness,  or if  Beneficiary's  exercise  of the option to
accelerate the maturity of any Note, or if any prepayment by Grantor  results in
Grantor having paid any interest in excess of that permitted by applicable  law,
then it is  Grantor's,  Trustee's,  and  Beneficiary's  express  intent that all
excess amounts  theretofore  collected by  Beneficiary  shall be credited on the
principal  balance of the relevant Note and all other  Indebtedness  (or, if the
Notes and all other  Indebtedness  have been or would  thereby  be paid in full,
refunded  to  Grantor),  and the  provisions  of the Notes  and the  other  Loan
Documents immediately be deemed reformed and the amounts thereafter  collectible
hereunder and thereunder reduced,  without the necessity of the execution of any
new documents,  so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid or  agreed  to be paid to  Beneficiary  for the use,  forbearance,  or
detention of the Indebtedness  shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full stated term of
the Indebtedness until payment in full so that the rate or amount of interest on
account of the Indebtedness does not exceed the Maximum Lawful Rate from time to
time  in  effect  and  applicable  to  the  Indebtedness  for  so  long  as  the
Indebtedness is outstanding.  Notwithstanding anything to the contrary contained
herein or in any of the other Loan Documents, it is not the intention of Trustee
or  Beneficiary  to accelerate the maturity of any interest that has not accrued
at the time of such  acceleration or to collect unearned interest at the time of
such acceleration.

Section 12.12. Subrogation.  If any or all of the proceeds of any Note have been
used to  extinguish,  extend,  or renew  any  indebtedness  heretofore  existing
against  the  Mortgaged  Property,  then,  to the  extent of such funds so used,
Beneficiary shall be subrogated to all of the rights, claims, liens, titles, and
interests  existing  against the Mortgaged  Property  heretofore  held by, or in
favor of, the holder of such indebtedness and such former rights, claims, liens,
titles,  and  interests if any, are not waived but rather are  continued in full
force  and  effect  in favor of  Beneficiary  and are  merged  with the lien and
security interest created herein as cumulative security for the repayment of the
Indebtedness and the performance and discharge of the Obligations.

Section 12.13. Rights Cumulative.  Beneficiary shall have all rights,  remedies,
and  recourses  granted in the Loan  Documents and available at law or in equity
(including  but not limited to those  granted by the Code and  applicable to the
Mortgaged Property or any portion thereof), and the same (i) shall be cumulative
and concurrent,  (ii) may be pursued separately,  successively,  or concurrently
against Grantor or others obligated for the Indebtedness or any 



DEED OF TRUST - Page 34
<PAGE>
part  hereof,  or  against  any one or more of them,  or against  the  Mortgaged
Property, at the sole discretion of Beneficiary, (iii) may be exercised as often
as occasion  therefor shall arise,  it being agreed by Grantor that the exercise
of,  discontinuance  of the  exercise of, or failure to exercise any of the same
shall in no event be  construed  as a waiver or release  thereof or of any other
right,  remedy,  or  recourse,  and (iv)  are  intended  to be,  and  shall  be,
nonexclusive.  All rights and remedies of  Beneficiary  hereunder  and under the
other  Loan  Documents  shall  extend  to any  period  after the  initiation  of
foreclosure  proceedings,  judicial or otherwise,  with respect to the Mortgaged
Property.

Section 12.14. Payments.  Remittances in payment of any part of the Indebtedness
other than in the required  amount in funds  immediately  available at the place
where the Notes are  payable  shall  not,  regardless  of any  receipt or credit
issued  therefor,  constitute  payment  until the  required  amount is  actually
received by  Beneficiary in funds  immediately  available at the place where the
Notes are payable (or such other place as  Beneficiary,  in  Beneficiary's  sole
discretion,  may have  established  by  delivery  of written  notice  thereof to
Grantor) and shall be made and accepted  subject to the condition that any check
or draft may be handled for  collection in  accordance  with the practice of the
collecting bank or banks.  Acceptance by Beneficiary of any payment in an amount
less than the amount then due shall be deemed an acceptance on account only, and
the  failure to pay the entire  amount  then due shall be and  continue to be an
Event of Default.

Section  12.15.  Exceptions  to  Covenants.  Grantor  shall  not be deemed to be
permitted  to take any action or to fail to take any action with  respect to any
particular  covenant  or  condition  contained  herein  or in any  of  the  Loan
Documents  if the  action or  omission  would  result in the breach of any other
covenant or condition contained herein or in any of the Loan Documents which has
not  been  specifically  waived  or  consented  to  by  Beneficiary,  nor  shall
Beneficiary  be deemed to have consented to any such act or omission if the same
would  provide cause for  acceleration  of the  Indebtedness  as a result of the
breach of any other covenant or condition contained herein or in any of the Loan
Documents which has not been specifically waived or consented to by Beneficiary.

Section 12.16.  Reliance.  Grantor  recognizes and acknowledges that in entering
into the loan  transaction  evidenced by the Loan  Documents and accepting  this
Deed of Trust,  Beneficiary is expressly and primarily  relying on the truth and
accuracy of the foregoing  warranties and  representations  set forth in Article
III hereof  without any  obligation to  investigate  the Mortgaged  Property and
notwithstanding any investigation of the Mortgaged Property by Beneficiary; that
such  reliance  exists  on the  part of  Beneficiary  prior  hereto;  that  such
warranties  and  representations  are a material  inducement to  Beneficiary  in
making the loan  evidenced by the Loan  Documents and in accepting  this Deed of
Trust; and that  Beneficiary  would not be willing to make the loan evidenced by
the Loan  Documents  and accept this Deed of Trust in the absence of any of such
warranties and representations.

Section  12.17.  Change of Security.  Any part of the Mortgaged  Property may be
released, regardless of consideration,  by Beneficiary from time to time without
impairing,  subordinating,  or affecting in any way the lien, security interest,
and other rights hereof against the remainder.  The lien, security interest, and
other rights  granted  hereby shall not be affected by any other  security taken
for the  Indebtedness  or  Obligations,  or any  part  thereof.  The  taking  of
additional collateral, or the amendment, extension, renewal, or rearrangement of
the  Indebtedness  or  Obligations,  or any part  thereof,  shall not release or
impair the lien,  security interest,  and other 



DEED OF TRUST - Page 35
<PAGE>
rights granted  hereby,  or affect the liability of any endorser or guarantor or
improve the right of any junior  lienholder;  and this Deed of Trust, as well as
any  instrument  given  to  secure  any  amendment.   extension,   renewal,   or
rearrangement of the  Indebtedness or Obligations,  or any part thereof shall be
and remain a first and prior lien,  except as otherwise  provided herein, on all
of the Mortgaged Property not expressly released until the Indebtedness is fully
paid and the Obligations are fully performed and discharged.

Section 12.18.  Headings.  The Article,  Section,  and  subsection  entitlements
hereof are inserted for convenience of reference only and shall in no way alter,
modify, or define, or be used in construing the text of such Articles, Sections,
or subsections.

Section 12.19.  Credit  Agreement.  Reference is hereby made for all purposes to
the  Credit  Agreement.  In the  event  of a  conflict  between  the  terms  and
provisions hereof and the Credit Agreement, the Credit Agreement shall govern.

Section 12.20.  Entire  Agreement;  Amendment.  THIS DEED OF TRUST AND THE OTHER
LOAN DOCUMENTS  EMBODY THE FINAL  EXPRESSION OF THE ENTIRE  AGREEMENT  AMONG THE
PARTIES  HERETO  AND  SUPERSEDE  ANY  AND  ALL  PRIOR  COMMITMENTS,  AGREEMENTS,
REPRESENTATIONS,  AND  UNDERSTANDINGS,  WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT  MATTER  HEREOF  AND  THEREOF.  THERE ARE NO ORAL  AGREEMENTS  AMONG THE
PARTIES  HERETO.  The  provisions  of this  Deed of  Trust  and the  other  Loan
Documents may be amended or waived only by an  instrument  in writing  signed by
the respective parties to such documents.




ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY,  EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.












                      [this space left intentionally blank]









DEED OF TRUST - Page 36
<PAGE>
EXECUTED to be effective as of the date first above written.


                                       ALASKA  UNITED FIBER SYSTEM  PARTNERSHIP,
                                       an Alaska general partnership




                                       By:  FIBER  HOLD  CO.,  INC.,  an  Alaska
                                       corporation, general partner



                                       By: 
                                       Name:
                                       Title:




                                       By:  GCI  FIBER  CO.,   INC.,  an  Alaska
                                       corporation, general partner



                                       By:
                                       Name:
                                       Title:




DEED OF TRUST - Page 37
<PAGE>
STATE OF ALASKA            )
                           )   ss:
THIRD JUDICIAL DISTRICT    )

         THIS CERTIFIES that the foregoing instrument was acknowledged before me
this        day of January,  1998, by (name) , (title) of FIBER HOLD CO.,  INC.,
an Alaska  corporation  that is a general  partner in ALASKA UNITED FIBER SYSTEM
PARTNERSHIP,  on behalf of said corporation  acting in its capacity as a general
partner  in  ALASKA  UNITED  FIBER  SYSTEM   PARTNERSHIP,   an  Alaska   general
partnership, on behalf of said partnership.

         Dated this        day of January, 1998.


                                       Notary  Public  in and for the  State  of
                                       Alaska,   residing   at   the   following
                                       address: 


                                       My commission expires






STATE OF ALASKA            )
                           )   ss:
THIRD JUDICIAL DISTRICT    )

         THIS CERTIFIES that the foregoing instrument was acknowledged before me
this        day of January, 1998, by (name) , (title) of GCI FIBER CO., INC., an
Alaska  corporation  that is a general  partner in ALASKA  UNITED  FIBER  SYSTEM
PARTNERSHIP,  on behalf of said corporation  acting in its capacity as a general
partner  in  ALASKA  UNITED  FIBER  SYSTEM   PARTNERSHIP,   an  Alaska   general
partnership, on behalf of said partnership.

         Dated this        day of January, 1998.


                                       Notary  Public  in and for the  State  of
                                       Alaska,   residing   at   the   following
                                       address: 


                                       My commission expires







DEED OF TRUST - Page 38
<PAGE>
                                    EXHIBIT A

         Legal Description (Alaska and Adjacent Outer Continental Shelf)

                                (to be inserted)
<PAGE>
                                   SCHEDULE 1

                                 Initial Lenders



Credit Lyonnais New York Branch
NationsBank of Texas, N.A.
Toronto-Dominion (Texas), Inc.

<PAGE>
                             ASSIGNMENT AGREEMENT
                              (GCICC AND GCI CABLE)

                  THIS  ASSIGNMENT  AGREEMENT  dated effective as of January 27,
1998 (as amended,  supplemented or otherwise modified,  renewed or replaced from
time to time,  "Assignment  Agreement")  is among (i) ALASKA UNITED FIBER SYSTEM
PARTNERSHIP, an Alaska general partnership ("Borrower"),  (ii) GCI COMMUNICATION
CORP.,  an Alaska  corporation  ("GCICC"),  (iii)  GCI  CABLE,  INC.,  an Alaska
corporation  ("GCI  Cable"),  and  (iv)  CREDIT  LYONNAIS  NEW YORK  BRANCH,  as
administrative  agent for the Lenders  referred to in the Credit  Agreement  (as
hereinafter defined) (in such capacity, "Administrative Agent").

                  WHEREAS,  the Borrower,  GCICC and GCI Cable entered into that
Fiber Exchange Agreement dated effective as of January 27, 1998 ("Fiber Exchange
Agreement");

                  WHEREAS,  the  Borrower  and GCICC  entered  into that General
Contractor Agreement dated effective as of January 27, 1998 ("General Contractor
Agreement");

                  WHEREAS,  the Borrower and GCICC  entered into that  Operation
and Maintenance Agreement dated effective as of January 27, 1998 ("Operation and
Maintenance Agreement");

                  WHEREAS, the Fiber Exchange Agreement,  the General Contractor
Agreement, and the Operation and Maintenance Agreement are collectively referred
to  herein  as  "Covered  Agreements,"  and  each  individually  as  a  "Covered
Agreement;"

                  In order to finance the Project, the Borrower has entered into
a Credit and  Security  Agreement  dated as of January 27, 1998 with the lenders
referred to therein ("Lenders"), the Administrative Agent, NationsBank of Texas,
N.A. as Syndication  Agent and TD Securities (USA) Inc. as  Documentation  Agent
(as such agreement may be amended,  supplemented or otherwise modified,  renewed
or  replaced  from time to time,  "Credit  Agreement").  Capitalized  terms used
herein  and not  otherwise  defined  are used  herein as  defined  in the Credit
Agreement. Pursuant to the Credit Agreement and the other Fundamental Documents,
the Lenders have agreed,  subject to the terms and  conditions  set forth in the
Credit Agreement,  to make Loans to the Borrower,  and the Administrative  Agent
for the benefit of the Lenders  has been  granted a security  interest in all of
the  Borrower's  right,  title and  interest  in and to both  real and  personal
property, including without limitation, the Covered Agreements.

                  Accordingly, the parties hereto hereby agree as follows:

                  1. The  Borrower  hereby  confirms  that for good and valuable
consideration,  as security for the due and punctual  payment and performance of
the Obligations,  it has mortgaged,  pledged, assigned,  transferred,  set over,
conveyed and
<PAGE>
delivered  to the  Administrative  Agent (for the benefit of the  Lenders),  and
granted to the Administrative  Agent (for the benefit of the Lenders) a security
interest  in, all of the  Borrower's  right,  title and  interest  in and to the
Covered Agreements  (including,  without  limitation,  the Borrower's rights and
benefits under and pursuant thereto and all of the Borrower's  right,  title and
interest in and to any and all  payments due or to become due from GCICC and GCI
Cable,  respectively,  pursuant to the Covered Agreements).  GCICC and GCI Cable
each hereby  acknowledge  that the  Borrower has assigned and granted a security
interest  in  all  of its  right,  title  and  interest  in  and to the  Covered
Agreements  (including,  without limitation,  the Borrower's rights and benefits
under and pursuant thereto and all of the Borrower's  right,  title and interest
in and to any and all  payments  due or to become  due from  GCICC or GCI Cable,
respectively,  thereunder) to the  Administrative  Agent (for the benefit of the
Lenders) as security for the due and  punctual  payment and  performance  of the
Obligations  and GCICC and GCI Cable each hereby consent to such  assignment and
grant of the security interest.

                  2. GCICC and GCI Cable  each  hereby  agree  that any  amounts
payable by it, respectively,  to the Borrower pursuant to the Covered Agreements
shall be made in cash without offset or counterclaim  (except as arises directly
from the Covered  Agreements),  directly into the Alaska Depositary  Account (as
defined below) or in such other manner as the  Administrative  Agent may specify
from  time to time by  notice  to GCICC  and GCI  Cable,  respectively,  and the
Borrower hereby specifically  authorizes and directs GCICC and GCI Cable to make
payment of all amounts due and to become due to the  Borrower  under the Covered
Agreements  into the  Alaska  Depositary  Account  (or such  other  manner)  and
irrevocably  authorizes and empowers the  Administrative  Agent to ask, command,
receive or give a discharge  for any and all such amounts.  As used herein,  the
term "Alaska  Depositary  Account" shall mean Account No.  1510-562-0,  entitled
"Alaska  Depositary  Account"  at the  office  of The  First  National  Bank  of
Anchorage, 201 West 36th Avenue, P.O. Box 200628, Anchorage,  Alaska 99520-0628,
ABA No. 125200060.

                  3. GCICC and GCI Cable each hereby agree that  notwithstanding
any provision to the contrary contained in the Covered  Agreements,  the Covered
Agreements may be assigned or otherwise transferred (a) from the Borrower to the
Administrative  Agent and (b) with the  consent of GCICC or GCI Cable (not to be
unreasonably withheld), from the Administrative Agent to a third party.

                  4. Until such time as GCICC or GCI Cable has received  written
notice from the  Administrative  Agent stating that the  assignment and security
interest  described herein has terminated,  each of the Borrower,  GCICC and GCI
Cable hereby agrees and acknowledges  that upon receipt by GCICC or GCI Cable of
a notice  from the  Administrative  Agent that a Default or Event of Default has
occurred and is continuing,  the  Administrative  Agent shall have the exclusive
right to exercise all rights,  and shall have all the  benefits,  granted to the
Borrower under the Covered Agreements including,  without limitation,  the right
to give consents, approvals, waivers, notices or the like, to make



                                       2
<PAGE>
elections, demands or the like or to take other discretionary action thereunder.
GCICC and GCI Cable hereby agree to deliver directly to the Administrative Agent
copies of all notices, certificates, opinions or other documents delivered by it
to the Borrower under or pursuant to the Covered Agreements and upon the request
of the  Administrative  Agent at a time when a Default or Event of  Default  has
occurred and is continuing,  to deal directly with the Administrative Agent with
respect to all matters arising under, or relating to, the Covered Agreements.

                  5.  Neither  the  Administrative  Agent nor any of the Lenders
shall have any obligation or liability under the Covered Agreements by reason of
this Assignment  Agreement or the assignment and grant of the security  interest
described herein, nor shall the Administrative  Agent or any Lender be obligated
to perform any of the  obligations  or duties of the Borrower  under the Covered
Agreements  or to take any action to collect  or enforce  any claim for  payment
assigned  hereunder,  except  that  if the  Administrative  Agent  or any of the
Lenders or their  successors  or assigns  shall,  following an uncured  Event of
Default, become a successor-in-interest to the Borrower under any of the Covered
Agreements,  such  successor  shall not be  entitled  to GCICC's or GCI  Cable's
applicable  continued  performance under such Covered Agreements unless GCICC or
GCI  Cable,  respectively,  shall  be  compensated  for the Work  thereunder  in
accordance with the terms of the Covered Agreements.

                  6.  GCICC and GCI Cable  each  hereby  agree  that it will not
terminate the Covered Agreements for any reason (including,  without limitation,
any  bankruptcy  proceeding  relating to the  Borrower)  without  providing  the
Administrative  Agent thirty (30) days' prior written notice, which notice shall
specify the reason for the termination.

                  7. The Borrower, GCICC and GCI Cable each hereby agree that it
will execute, or cause to be executed, such additional documentation (including,
without limitation,  assignment agreements, letters of instruction,  consents or
other  documentation)  as may now or  hereafter  be  reasonably  required by the
Administrative  Agent  in order  to  provide  for the  deposit  into the  Alaska
Depositary  Account of all amounts due and to become due to the  Borrower  under
the Covered  Agreements  as  contemplated  by Section 2 above,  and to otherwise
effectuate the provisions of this Assignment Agreement.

                  8. GCICC and GCI Cable each  hereby  agree  that  without  the
Administrative  Agent's  prior  written  consent  (which  consent  will  not  be
unreasonably  withheld),  it will  not  agree  to,  or  permit,  any  amendment,
alteration, modification,  cancellation,  suspension or other change of any kind
to any of the terms and provisions of the Covered  Agreements except for changes
which do not (i) increase the contract price by more than $100,000 as to any one
change or $250,000 in the aggregate,  (ii) postpone or cause a  postponement  of
the date for  achieving  any  milestone  as set forth in the General  Contractor
Agreement or change the Specifications or the material procedures for any of the
acceptance testing or performance requirements.


                                       3
<PAGE>
                  9. Each of the Borrower,  GCICC and GCI Cable hereby represent
and warrant that attached  hereto as Annex A are true and complete copies of the
Covered Agreements as in effect on the date hereof.

                  10. Notices and other communications provided for herein shall
be in writing and shall be delivered or mailed (or if by telegram,  delivered to
the  telegraph  company  and, if by  telecopier,  delivered  by such  equipment)
addressed,  (i) if to the  Administrative  Agent  or  Credit  Lyonnais  New York
Branch,  to it at 1301 Avenue of the Americas,  New York, New York 10019,  Attn:
Project Finance Group,  facsimile no.: (212) 261-3421,  (ii) if to the Borrower,
to it at c/o GCI Fiber Co.,  Inc.,  2550 Denali Street,  Suite 1000,  Anchorage,
Alaska 99503,  Attn:  Chief  Financial  Officer,  facsimile no.: (907) 265-5676,
(iii) if to GCICC, to it at 2550 Denali Street,  Suite 1000,  Anchorage,  Alaska
99503, Attn: Chief Financial Officer,  facsimile no.: (907) 265-5676 and (iv) if
to GCI Cable,  to it at 5151 Fairbanks  Street  Anchorage,  Alaska 99503,  Attn:
Riley Snell, facsimile no.: (907) 786-9270. All notices and other communications
given to any party hereto in accordance  with the provisions of this  Assignment
Agreement  shall be deemed to have been given on the tenth  (10th)  Business Day
after the date when sent by  registered  or  certified  mail,  postage  prepaid,
return  receipt  requested,  if by  mail,  or when  delivered  to the  telegraph
company,  charges prepaid, if by telegram, or when receipt is acknowledged if by
telecopier,  in each case addressed to such party as provided in this Section 10
or in accordance with the latest unrevoked written direction from such party.

                  11.  All  references  herein  to any of the  parties  to  this
Agreement  shall be deemed to include the  successors and assigns of such party;
provided,  however, that the Borrower, GCICC and GCI Cable may not assign any of
their  respective  rights or  obligations  hereunder  without the prior  written
consent of the Administrative  Agent and all of the Lenders,  and all covenants,
promises and  agreements  by or on behalf of the  Borrower,  GCICC and GCI Cable
which are  contained  herein  shall inure to the benefit of the  successors  and
assigns of the Administrative Agent and any of the Lenders.

                  12. This Agreement may be amended,  modified or  supplemented,
and the terms  hereof may be waived,  in each case only by a written  instrument
executed by the parties to this  Agreement.  The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent or other breach, whether or not similar.

                  13. Any provision  hereof which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such  prohibition  or  unenforceability  without  invalidating  the remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other  jurisdiction.  To the extent  permitted  by  Applicable  Law, the parties
hereby  waive any  provision  of law  which  may  render  any  provision  hereof
prohibited or unenforceable in any respect.


                                       4
<PAGE>
                  14. This  Agreement  may be executed by the parties  hereto in
separate counterparts,  each of which when so executed and delivered shall be an
original,  but all such counterparts shall together  constitute one and the same
agreement, and all signatures need not appear on any one counterpart.

                  15. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND  CONSTRUED  AND
ENFORCED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW YORK,  WITHOUT REGARD
TO ANY  CHOICE-OF-LAW  RULES  THEREOF  WHICH  MIGHT  APPLY THE LAWS OF ANY OTHER
JURISDICTION.

                  16. No failure on the part of the Administrative  Agent or any
Lender to exercise,  and no delay in exercising,  any right, power, privilege or
remedy  hereunder  or under the  Covered  Agreements  shall  operate as a waiver
thereof,  nor shall any single or partial  exercise  of any such  right,  power,
privilege  or remedy  preclude  any other or  further  exercise  thereof  or the
exercise of any other right, power,  privilege or remedy. All remedies hereunder
are cumulative and are not exclusive of any other remedies provided by law.

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Assignment  Agreement  to be duly  executed  as of the date and year first above
written.

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


                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer

                                       GCI COMMUNICATION CORP.


                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer



                                       5
<PAGE>
                                       GCI CABLE, INC.


                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer

Executed in                            CREDIT LYONNAIS NEW YORK BRANCH,
New York, New York                     as Administrative Agent


                                       By: /s/
                                       Name: Michael F.G. Pepe
                                       Title: Vice President


                                       6
<PAGE>



                                                                      Annex A to
                                                            Assignment Agreement




                  Attach true and complete copies of:

                  -        Fiber Exchange Agreement

                  -        General Contractor Agreement

                  -        Operation and Maintenance Agreement
<PAGE>
                                                                      EXHIBIT D

                           TRANSPORT PLEDGE AGREEMENT


                  PLEDGE  AGREEMENT,  dated as of January 27, 1998 (as  amended,
supplemented or otherwise  modified,  renewed or replaced from time to time, the
"Pledge  Agreement") between GCI TRANSPORT CO., INC., an Alaska corporation (the
"Pledgor") and CREDIT LYONNAIS NEW YORK BRANCH, as administrative  agent for the
Lenders referred to in the Credit Agreement referred to below (in such capacity,
the "Administrative Agent").

                  Pursuant  to a  Credit  and  Security  Agreement  dated  as of
January  27,  1998 among  Alaska  United  Fiber  System  Partnership,  a general
partnership  organized  under the laws of Alaska (the  "Borrower"),  the lenders
referred  to  therein  (the  "Lenders"),  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 the same may be  amended,
supplemented or otherwise  modified,  renewed or replaced from time to time, the
"Credit  Agreement"),  the  Lenders  have  agreed  (subject  to  the  terms  and
conditions set forth therein) to make Loans to the Borrower.

                  The Pledgor owns  beneficially and of record all of the issued
and  outstanding  shares  of  the  capital  stock  of  each  of  its  respective
Subsidiaries  listed  on  Schedule  1 hereto  (being  referred  to herein as the
"Pledged Affiliates").

                  Each of the Pledged Affiliates owns fifty percent (50%) of the
partnership interests in the Borrower.

                  In order to  induce  the  Lenders  to  enter  into the  Credit
Agreement  and  make  the  Loans  to the  Borrower  pursuant  to the  terms  and
conditions set forth therein and in order to secure the Obligations, the Pledgor
is pledging to the Administrative Agent (for the benefit of the Lenders), all of
the issued and outstanding capital stock of the Pledged Affiliates,  all as more
fully set forth herein.

                  Accordingly, the parties hereto hereby agree as follows:

                  1.   Definitions.   Capitalized  terms  used  herein  and  not
otherwise defined shall have the meanings set forth in the Credit Agreement.

                  2. Pledge.

                  (a)  As  security  for  the  due  and  punctual   payment  and
performance in full of the Obligations (including  post-petition interest to the
extent permitted by Applicable  Law), the Pledgor hereby pledges,  hypothecates,
assigns,  transfers,  sets over and delivers unto the Administrative  Agent, for
the benefit of the Lenders,  and hereby grants to the  Administrative  Agent for
the benefit of the Lenders,  a security interest in (i) all the capital stock of
each  of  the  
<PAGE>
Pledged  Affiliates which the Pledgor now or hereafter owns  beneficially and of
record,  and (ii) all proceeds of such capital stock and all other securities or
other  property  at any time  and  from  time to time  receivable  or  otherwise
distributed  in respect of, or in exchange for, any or all of such capital stock
or additional securities.  All items referred to in clauses (i) and (ii) of this
Section  2(a)  are   hereinafter   referred  to  collectively  as  the  "Pledged
Securities".

                  (b) The Pledgor shall deliver to the Administrative Agent, the
certificates  representing,  the Pledged Securities accompanied by undated stock
powers  executed  in blank and by such other  instruments  or  documents  as the
Administrative Agent or its counsel shall reasonably request.

                  3.   Registration   in  Nominee   Name;   Denominations.   The
Administrative  Agent shall have the right (in its sole and absolute discretion)
to hold the certificates  representing any of the Pledged  Securities in its own
name,  the  name of its  nominee  or in the  name of the  Pledgor,  endorsed  or
assigned in blank or in favor of the  Administrative  Agent,  for the benefit of
the Lenders.  Upon the  occurrence  and during the  continuation  of an Event of
Default,  the  Administrative  Agent  shall  have  the  right  to  exchange  the
certificates  representing the Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Pledge Agreement.

                  4. Pledgor's  Representations,  Warranties and Covenants.  The
Pledgor hereby  represents and warrants to and/or  covenants and agrees with the
Administrative Agent for the benefit of the Lenders as follows:

                  (i) the  Pledged  Securities  described  on  Schedule 1 hereto
constitute 100% of the issued and outstanding  equity  securities of each of the
Pledged Affiliates;

                  (ii)  the  Pledged  Securities  are duly  authorized,  validly
issued,  fully paid and non-assessable and are subject to no options to purchase
or similar rights of any Person;

                  (iii) there are no restrictions on the transfer of the Pledged
Securities  other  than  under  applicable  securities  laws or the  regulations
promulgated thereunder;

                  (iv) the Pledgor has good title to the Pledged Securities;

                  (v) the Pledged Securities are not subject to any prior Liens,
encumbrances or security interests;

                  (vi)  the   Pledgor  has  the  right  to  pledge  the  Pledged
Securities  hereunder  free and clear of any  Liens,  encumbrances  or  security
interests  (except  the Lien  created  hereby)  and  without  the consent of the
creditors  of the Pledgor or the Pledged  Affiliates  or any other Person or any
government agency whatsoever;



                                      -2-
<PAGE>
                  (vii) the Pledgor is a  corporation  duly  organized,  validly
existing and in good standing  under the laws of the State of Alaska and is duly
qualified to do business in all jurisdictions where the nature of its properties
or business so requires.  The Pledgor has the corporate  power and authority (a)
to own its respective  properties and to carry on its respective business as now
being conducted and as intended to be conducted, to execute, deliver and perform
its obligations under this Pledge Agreement and the other Fundamental  Documents
to which it is a party and any other documents  contemplated  hereby and thereby
to which  it is or will be a party  and (b) to  pledge  the  Pledged  Securities
hereunder;

                  (viii) the execution, delivery, and performance of this Pledge
Agreement  and the other  Fundamental  Documents  to which it is a party and the
pledge of the Pledged Securities  hereunder (A) have been duly authorized by all
necessary corporate action on the part of the Pledgor,  (B) will not violate any
provision of the  Certificate of  Incorporation  or By-Laws of the Pledgor,  (C)
will not  constitute a violation by the Pledgor of any  provision of  Applicable
Law or any order of any court or other agency of the United  States or any state
thereof  applicable to the Pledgor or any of its properties or assets,  (D) will
not violate any  provision  of any  indenture,  agreement,  bond,  note or other
similar  instrument  to which the  Pledgor is a party or by which the Pledgor or
its properties or assets are bound, (E) will not be in conflict with,  result in
a breach of or  constitute  (with due notice or lapse of time or both) a default
under, or create any right to terminate,  any such indenture,  agreement,  bond,
note or other  instrument  and (F) will not result in the creation or imposition
of any Lien,  security interest,  charge or encumbrance of any nature whatsoever
upon any of the  properties or assets of the Pledgor other than pursuant to this
Pledge Agreement;

                  (ix)  the  Pledgor  will  not take  any  action  to allow  any
additional equity  securities of any of the Pledged  Affiliates to be issued, or
to grant any  options or  warrants,  unless such  securities  are pledged to the
Administrative  Agent, for the benefit of the Lenders,  on terms satisfactory to
the  Administrative  Agent for the benefit of the  Lenders,  as security for the
Obligations;

                  (x) all  authorizations,  approvals,  registrations or filings
with any  governmental  or public  regulatory  body or  authority  of the United
States  or any  state  thereof  or any  foreign  jurisdiction  required  for the
execution,  delivery and performance by the Pledgor of this Pledge Agreement and
the other Fundamental  Documents to which it is a party, have been duly obtained
or made,  or duly applied for and are in full force and effect,  and if any such
further  authorizations,  approvals,  registrations  or filings should hereafter
become  necessary,  the Pledgor  shall  obtain or make all such  authorizations,
approvals, registrations or filings;

                  (xi) upon the delivery of the  certificates  representing  the
Pledged  Securities to the  Administrative  Agent in  accordance  with Section 2
hereof,  the  Administrative  Agent for the benefit of the  Lenders  will have a
valid and perfected  security interest in the Pledged  Securities  subject to no
prior Lien, encumbrance or security interest. Neither the Pledgor nor any of its
Subsidiaries  has  performed  or will  perform any acts which might  prevent the
Administrative  


                                      -3-
<PAGE>
Agent from enforcing any of the terms and conditions of this Pledge Agreement or
which would limit the Administrative Agent in any such enforcement;

                  (xii)  this  Pledge   Agreement  and  the  other   Fundamental
Documents  to which the Pledgor is a party when  executed  by the  Pledgor  will
constitute the legal, valid and binding obligations of the Pledgor,  enforceable
in accordance with their respective  terms,  subject only, as to the enforcement
of remedies,  to applicable  bankruptcy,  insolvency  and similar laws affecting
creditors' rights and general principles of equity;

                  (xiii) the Pledgor will realize a direct economic benefit as a
result of the Loans being made to the Borrower under the Credit Agreement;

                  (xiv)  there  are  no  pending  or,  to the  knowledge  of the
Pledgor,  threatened actions, suits, proceedings or investigations against it or
affecting it or its properties that, individually or in the aggregate,  would if
adversely  determined  be  likely  to  have a  material  adverse  effect  on the
performance by the Pledgor of its  obligations  under this Pledge  Agreement and
the  other  Fundamental  Documents  to  which  it  is a  party  or  its  assets,
operations, business or financial condition; and

                  (xv) no sales,  use,  documentation or similar taxes,  fees or
other  charges are payable  with  respect to the  execution  and delivery by the
Pledgor of this Pledge Agreement and the other Fundamental Documents to which it
is a party.

                  5. Voting  Rights;  Dividends;  etc.  17.  Unless and until an
Event of Default shall have occurred and be continuing:

                             (i) The Pledgor  shall be entitled to exercise  any
and all voting and/or  consensual rights and powers accruing to the owner of the
Pledged Securities or any part thereof for any purpose not inconsistent with the
terms hereof.

                             (ii) Any  dividends  or  distributions  of any kind
whatsoever  made  by  a  Pledged   Affiliate   (other  than  cash  dividends  or
distributions made by a Pledged Affiliate from funds distributed by the Borrower
to such Pledged Affiliate as expressly permitted and contemplated by Section 6.4
of the Credit  Agreement) and received by the Pledgor,  whether resulting from a
subdivision, combination or reclassification of the outstanding capital stock of
a Pledged  Affiliate or received in exchange for the Pledged  Securities  or any
part thereof or as a result of any merger,  consolidation,  acquisition or other
exchange of assets to which a Pledged  Affiliate  may be a party,  or otherwise,
shall be and become part of the Pledged  Securities  pledged hereunder and shall
immediately be delivered to the  Administrative  Agent to be held subject to the
terms of this Pledge Agreement.

                             (iii) The  Administrative  Agent shall  execute and
deliver to the Pledgor,  or cause to be executed  and  delivered to the Pledgor,
all such proxies,  powers of attorney and 


                                      -4-
<PAGE>
other  instruments  as the  Pledgor  may  reasonably  request for the purpose of
enabling the Pledgor to exercise the voting and/or  consensual rights and powers
which it is entitled to exercise pursuant to clause (i) above.

                  (b) Upon the occurrence and during the continuance of an Event
of  Default,  all  rights of the  Pledgor  to (i)  exercise  the  voting  and/or
consensual  rights and powers  which it is  entitled  to  exercise  pursuant  to
Section 5(a)(i) hereof and (ii) receive and retain  dividends and  distributions
which the Pledgor  would be  entitled to receive and retain  pursuant to Section
5(a)(ii),  if any, shall cease and all such rights shall thereupon become vested
in the Administrative Agent for the benefit of the Lenders, which shall have the
sole and exclusive right and authority to exercise such voting and/or consensual
rights and to receive and retain such  dividends  and  distributions;  provided,
however,  that to the extent any  governmental  consents or filings are required
for the exercise by the Administrative  Agent of any of the foregoing rights and
powers,  the  Administrative  Agent shall refrain from exercising such rights or
powers until the making of such required  filings,  the receipt of such consents
and the expiration of all related waiting periods.

                  6. Remedies Upon Default. 5. If an Event of Default shall have
occurred and be continuing,  the Administrative Agent, on behalf of the Lenders,
may sell the Pledged  Securities,  or any part  thereof,  at a public or private
sale or at any broker's  board or on any  securities  exchange,  for cash,  upon
credit or for future delivery as the Administrative Agent shall deem appropriate
subject to the terms  hereof or as  otherwise  provided in the New York  Uniform
Commercial Code. The  Administrative  Agent shall be authorized at any such sale
(if it deems it advisable to do so) (i) to restrict the  prospective  bidders or
purchasers to persons who will  represent and agree that they are purchasing the
Pledged  Securities  for their own account for investment and not with a view to
the distribution or sale thereof and/or (ii) to impose such other limitations or
conditions in connection  with any such sale as the  Administrative  Agent deems
necessary or advisable in order to comply with the Securities Act of 1933 or any
other law. Upon  consummation  of any such sale the  Administrative  Agent shall
have the right to assign,  transfer,  and deliver to the purchaser or purchasers
thereof the Pledged  Securities  so sold.  Each such  purchaser at any such sale
shall hold the  property  sold  absolutely,  free from any claim or right on the
part of the Pledgor.

                  (b) The Administrative  Agent  shall give the Pledgor not less
than 10 days' written notice of the Administrative Agent's intention to make any
such  public  or  private  sale,  or sale at any  broker's  board or on any such
securities  exchange,  or of any other disposition of the Pledged Securities (it
being  acknowledged  by the  Pledgor  that such  notice  constitutes  reasonable
notification). Such notice, in the case of public sale, shall state the time and
place  for  such  sale  and,  in the  case of sale at a  broker's  board or on a
securities exchange,  shall state the board or exchange at which such sale is to
be made and the day on which the Pledged  Securities,  or portion thereof,  will
first be offered for sale at such board or exchange.  Any such public sale shall
be held at such time or times within  ordinary  business hours and at such place
or places as the  Administrative  Agent may fix and shall state in the notice of
such sale. At any such sale, the 


                                      -5-
<PAGE>
Pledged Securities,  or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels,  as the  Administrative  Agent may (in its sole
and  absolute  discretion)  determine.  The  Administrative  Agent  shall not be
obligated to make any sale of the Pledged  Securities if it shall  determine not
to do so,  regardless of the fact that notice of sale of the Pledged  Securities
may  have  been  given.  The   Administrative   Agent  may,  without  notice  or
publication,  adjourn  any  public  or  private  sale or  cause  the  same to be
adjourned  from time to time by  announcement  at the time and  place  fixed for
sale, and such sale may,  without further notice,  be made at the time and place
to which the same was so  adjourned.  In case the sale of all or any part of the
Pledged  Securities  is made on  credit  or for  future  delivery,  the  Pledged
Securities so sold shall be retained by the Administrative  Agent until the sale
price is paid by the purchaser or  purchasers  thereof,  but the  Administrative
Agent shall not incur any  liability in case any such  purchaser  or  purchasers
shall fail to take up and pay for the Pledged Securities so sold and, in case of
any such failure, such Pledged Securities may be sold again upon like notice. At
any sale or sales made pursuant to this Section 6, the Administrative  Agent, on
behalf of the Lenders, may bid for or purchase,  free from any claim or right of
whatever  kind,  including any equity of  redemption,  of the Pledgor,  any such
demand,  notice,  claim,  right or equity  being  hereby  expressly  waived  and
released,  any or all of the Pledged  Securities  offered for sale, and may make
any  payment on the  account  thereof by using any claim for moneys then due and
payable to the  Lenders by the Pledgor or the  Borrower as a credit  against the
purchase price; and the Administrative  Agent, upon compliance with the terms of
sale, may hold,  retain and dispose of the Pledged  Securities  without  further
accountability  therefor to the Pledgor or any third party.  The  Administrative
Agent shall in any such sale make no  representations or warranties with respect
to the Pledged  Securities or any part  thereof,  and the  Administrative  Agent
shall  not be  chargeable  with any of the  obligations  or  liabilities  of the
Pledgor  with  respect  thereto.  The  Pledgor  hereby  agrees  that (i) it will
indemnify and hold the  Administrative  Agent  harmless from and against any and
all claims with respect to the Pledged Securities  asserted before the taking of
actual  possession or control of the Pledged  Securities  by the  Administrative
Agent  pursuant  to this  Pledge  Agreement  or  arising  out of any act of,  or
omission  to act on the part of, any party other than the  Administrative  Agent
prior to such  taking of actual  possession  or  control  by the  Administrative
Agent, or arising out of any act on the part of the Pledgor or its agents before
or  after  the  commencement  of  such  actual  possession  or  control  by  the
Administrative  Agent; and (ii) the Administrative Agent shall have no liability
or obligation arising out of any such claim. As an alternative to exercising the
power of sale herein conferred upon it, the Administrative  Agent may proceed by
a suit or suits at law or in equity to foreclose  this Pledge  Agreement and the
pledge  hereunder and to sell the Pledged  Securities,  or any portion  thereof,
pursuant  to a  judgment  or  decree  of a  court  or  courts  having  competent
jurisdiction.

                  7.  Application  of Proceeds.  Upon  the occurrence and during
the continuance of an Event of Default, all income on the Pledged Securities and
all proceeds from any sale of the Pledged  Securities  pursuant  hereto shall be
applied by the  Administrative  Agent in the manner set forth in Section  8.7 of
the Credit Agreement.




                                      -6-
<PAGE>
                  8. Administrative Agent  Appointed Attorney-in-Fact.  Upon the
occurrence  of an Event of Default  and during  the  continuance  of an Event of
Default,   the   Pledgor   hereby   appoints   the   Administrative   Agent  its
attorney-in-fact  for the purpose of carrying out the  provisions of this Pledge
Agreement  and the pledge of the  Pledged  Securities  hereunder  and taking any
action and  executing any  instrument  which the  Administrative  Agent may deem
necessary or advisable to accomplish the purposes hereof,  which  appointment is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing,  the Administrative  Agent shall have the right and power to receive,
endorse,  and collect all checks and other  orders for the payment of money made
payable to the Pledgor  representing any dividend or other distribution  payable
in  respect  of the  Pledged  Securities  or any part  thereof  and to give full
discharge for the same.

                  9.  Securities  Act,  etc.  In  view  of the  position  of the
Pledgor in relation to the Pledged  Securities,  or because of other  present or
future circumstances,  a question may arise under the Securities Act of 1933, as
amended, as now or hereafter in effect, or any similar statute hereafter enacted
analogous in purpose or effect  (such Act and any such  similar  statute as from
time to time in effect being hereinafter called the "Federal  Securities Laws"),
with respect to any disposition of the Pledged Securities  permitted  hereunder.
The Pledgor  understands  that compliance  with the Federal  Securities Laws may
very  strictly  limit the course of conduct of the  Administrative  Agent if the
Administrative  Agent  were to  attempt  to  dispose  of all or any  part of the
Pledged  Securities,  and may also  limit the  extent to which or the  manner in
which any  subsequent  transferee of any Pledged  Securities  may dispose of the
same. Similarly,  there may be other legal restrictions or limitations affecting
the  Administrative  Agent in any  attempt  to dispose of all or any part of the
Pledged  Securities  under applicable "Blue Sky" or other state securities laws,
or similar laws  analogous in purpose or effect.  Under  Applicable  Law, in the
absence of an agreement to the contrary, the Administrative Agent may perhaps be
held to have certain  general duties and obligations to the Pledgor to make such
effort  towards  obtaining  a fair price  even  though  the  Obligations  may be
discharged  or  reduced  by the  proceeds  of a sale at a lesser  price.  To the
maximum extent  permitted by applicable  law, the Pledgor hereby agrees that the
Administrative  Agent shall not have any such general duty or  obligation to it,
and the Pledgor will not attempt to hold the  Administrative  Agent  responsible
for selling all or any part of the Pledged  Securities at an  inadequate  price,
even if the  Administrative  Agent shall accept the first offer received or does
not approach more than one possible  purchaser.  Without limiting the generality
of the foregoing,  the provisions of this Section 9 would apply if, for example,
the Administrative Agent were to place all or any part of the Pledged Securities
for private  placement by an  investment  banking  firm,  or if such  investment
banking firm  purchased  all or any part of the Pledged  Securities  for its own
account,  or if the  Administrative  Agent placed all or any part of the Pledged
Securities privately with a purchaser or purchasers.

                  10. Regulatory  Approvals.  During the continuance of an Event
of Default,  the Pledgor 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 the
Administrative  Agent may reasonably request or as may be required by applicable
law in  connection  with the obtaining of any consent,  approval,  registration,
qualification or 


                                      -7-
<PAGE>
authorization  of the  FCC or of any  other  Governmental  Authority  or  Person
necessary or  appropriate  for the  effective  exercise of any rights under this
Pledge  Agreement  or any  other  Fundamental  Document.  Without  limiting  the
generality of the  foregoing,  if an Event of Default shall have occurred and be
continuing, the Pledgor shall take any action which the Administrative Agent may
reasonably request in order to transfer and assign to the Administrative  Agent,
or to such one or more third parties as the Administrative  Agent may designate,
or to a combination of the foregoing,  each FCC License,  Permit,  other similar
right or license or other agreement.  To enforce the provisions of this Section,
the  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 or other  Governmental  Authority or Person (as applicable) an
involuntary transfer of control of each such FCC License,  Permit, similar right
or license or other  agreement for the purpose of seeking a bona fide  purchaser
to whom control will  ultimately be  transferred.  The Pledgor  hereby agrees to
authorize  such an  involuntary  transfer  of  control  upon the  request of the
receiver  so  appointed  and,  if the  Pledgor  shall  refuse to  authorize  the
transfer,  its approval may be required by the court.  Upon the  occurrence  and
continuance  of an Event of  Default,  the  Pledgor  shall  further use its best
efforts  to  assist  in  obtaining  approval  of the FCC or  other  Governmental
Authority or Person, if required, for any action or transactions contemplated by
this Pledge  Agreement  or any other  Fundamental  Document  including,  without
limitation,  the  preparation,  execution  and  filing  with  the  FCC or  other
Governmental  Authority or Person of the assignor's or  transferor's  portion of
any  application  or  applications  for  consent  to the  assignment  of any FCC
License,  Permit, similar right or license or other agreement or the transfer of
control  necessary or appropriate  under the rules and regulations of the FCC or
other  Governmental  Authority or otherwise  for the approval of the transfer or
assignment  of any portion of the  Collateral,  together  with any FCC  License,
Permit,  similar right or license or other agreement.  The Pledgor  acknowledges
that the  assignment or transfer of each FCC License,  Permit,  similar right or
license  or other  agreement  is  integral  to the  Administrative  Agent's  and
Lenders'  realization of the value of the Collateral,  that there is no adequate
remedy at law for failure by the Pledgor to comply with the  provisions  of this
Section and that such  failure  would cause  irreparable  injury not  adequately
compensable  in  damages,  and  therefore  agrees  that each and every  covenant
contained in this Section may be specifically  enforced,  and the Pledgor hereby
waives  and agrees not to assert  any  defenses  against an action for  specific
performance of such covenants.

                  11. Continuation and Reinstatement. The Pledgor further agrees
that its pledge  hereunder  shall continue to be effective or be reinstated,  as
the case may be, if at any time payment or any part thereof,  of any  Obligation
is rescinded or must  otherwise be restored by the  Administrative  Agent or any
Lender upon the  bankruptcy or  reorganization  of the Pledgor,  the Borrower or
otherwise.

                  12. Termination. The pledge hereunder shall terminate when all
of the Obligations shall have been fully and indefeasibly paid and performed and
the Commitments shall have terminated.  At such time, the  Administrative  Agent
shall,  at the sole cost and expense of the  Pledgor,  assign and deliver to the
Pledgor, or to such Person or Persons as the Pledgor 


                                      -8-
<PAGE>
shall designate in writing,  against receipt, such of the Pledged Securities (if
any) as shall not have  been sold or  otherwise  applied  by the  Administrative
Agent  pursuant  to the terms  hereof and shall  still be held by it  hereunder,
together with  appropriate  instruments of  reassignment  and release.  Any such
reassignment  shall be without  recourse upon or warranty by the  Administrative
Agent.

                  13. Further Assurances.  The Pledgor, at its own expense, will
execute  and  deliver,  from  time  to  time,  any and all  further,  or  other,
instruments,  and perform such acts, as the Administrative  Agent may reasonably
request to effect the  purposes  of this Pledge  Agreement  and to secure to the
Administrative Agent for the benefit of the Lenders, the benefits of all rights,
authorities,  and remedies conferred upon the Administrative  Agent by the terms
of this Pledge Agreement.

                  14.  Notices.  Notices and other  communication  provided  for
herein  shall be in writing and shall be delivered or mailed (or if by telegram,
delivered  to the  telegraph  company and, if by  telecopier,  delivered by such
equipment) to the parties at the following respective addresses:

                  (1)      If to the Administrative Agent:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York 10019
                           Attn:  Project Finance Group
                           Facsimile No.:  (212) 261-3421

                  (2)      If to the Pledgor:

                           GCI Transport Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn:  Chief Financial Officer
                           Facsimile No.: (907) 265-5676

or such other  address as such party may from time to time  designate  by giving
written  notice  to  the  other  parties   hereunder.   All  notices  and  other
communications  given to any party hereto in accordance  with the  provisions of
this Pledge  Agreement  shall be deemed to have been given on the tenth Business
Day after the date when sent by registered or certified mail,  postage  prepaid,
return  receipt  requested,  if by  mail,  or when  delivered  to the  telegraph
company,  charges prepaid, if by telegram, or when receipt is acknowledged if by
telecopier,  in each case addressed to such party as provided in this Section 14
or in accordance with the latest unrevoked written direction from such party.



                                      -9-
<PAGE>
                  15.  No  Waiver.  No  delay  or  failure  on the  part  of the
Administrative  Agent in the exercise of any right,  power,  privilege or remedy
hereunder  or under any other  Fundamental  Document  shall  operate as a waiver
thereof, nor shall any single or partial exercise of any right, power, privilege
or remedy by the  Administrative  Agent  preclude any other or further  exercise
thereof or the  exercise of any other right,  power,  privilege or remedy and no
course of dealing  between the parties  shall  operate as a waiver of any right,
power,  privilege or remedy of the Administrative  Agent. All remedies hereunder
are cumulative and are not exclusive of any other remedies provided by law.

                  16. Governing Law. THIS PLEDGE AGREEMENT AND ANY INSTRUMENT OR
AGREEMENT REQUIRED HEREUNDER SHALL BE DEEMED TO BE MADE UNDER, SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

                  17.  Severability.  This Pledge Agreement shall be interpreted
in such manner as to be  effective  and valid under  Applicable  Law, but if any
provision of this Pledge  Agreement shall be prohibited by or invalidated  under
the  Applicable  Law of any  jurisdiction,  such  provision  shall,  as to  such
jurisdiction,  be ineffective  to the extent of such  prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of  this  Pledge  Agreement  and  any  such  prohibition  or  invalidity  in any
jurisdiction shall not invalidate such provision in any other jurisdiction.  The
parties  hereto  agree to  negotiate  in good faith a  provision  to replace any
ineffective  provision,  such provision to be as similar in effect and intent as
the ineffective provision as permissible.  To the extent permitted by Applicable
Law,  the  parties  hereby  waive any  provision  of law which  may  render  any
provision hereof prohibited or unenforceable in any respect.

                  18. Amendments. This Pledge Agreement may be amended, modified
or  supplemented,  and the terms  hereof may be  waived,  in each case only by a
written instrument executed by the parties to this Pledge Agreement.  The waiver
by any party hereto of a breach of any provision of this Pledge  Agreement shall
not  operate or be  construed  as a waiver of any  subsequent  or other  breach,
whether or not  similar.  No notice  to, or demand  on, the  Pledgor in any case
shall entitle the Pledgor to any other or further  notice or demand in the same,
similar or other circumstances.

                  19.   Survival  of   Representations   and   Warranties.   All
warranties,  representations  and covenants  made by the Pledgor herein shall be
considered to have been relied upon by the Administrative  Agent and the Lenders
and shall survive the making of the Loans  contemplated by the Credit  Agreement
and  the  issuance  and  delivery  to the  Administrative  Agent  of the  Notes,
regardless of any investigation made by the Administrative  Agent or the Lenders
or on their  behalf and shall  continue  in full force and effect so long as any
Obligation  that is due or could  become due, is  outstanding  and unpaid and so
long as the Commitments have not been terminated.




                                      -10-
<PAGE>
                  20.  Successors and Assigns.  All references  herein to any of
the parties to this Pledge  Agreement  shall be deemed to include the successors
and assigns of such party;  provided,  however,  that the Pledgor may not assign
any of its rights or obligations  hereunder without the prior written consent of
the  Administrative  Agent, and all covenants,  promises and agreements by or on
behalf of the Pledgor which are  contained  herein shall inure to the benefit of
the successors and assigns of the Administrative Agent and any of the Lenders.

                  21.  Waiver of Jury  Trial.  TO THE EXTENT NOT  PROHIBITED  BY
APPLICABLE LAW WHICH CANNOT BE WAIVED,  THE PLEDGOR HEREBY WAIVES, AND COVENANTS
THAT IT WILL NOT ASSERT  (WHETHER AS  PLAINTIFF,  DEFENDANT OR  OTHERWISE),  ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN  RESPECT  OF ANY  ISSUE,  CLAIM,  DEMAND,
ACTION,  OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS PLEDGE  AGREEMENT,
THE  SUBJECT  MATTER  HEREOF OR ANY  PROJECT  AGREEMENT,  ANY OTHER  FUNDAMENTAL
DOCUMENT OR THE SUBJECT  MATTER  THEREOF,  IN EACH CASE  WHETHER NOW EXISTING OR
HEREAFTER  ARISING AND WHETHER IN  CONTRACT  OR TORT OR  OTHERWISE.  THE PLEDGOR
ACKNOWLEDGES  THAT IT HAS BEEN  INFORMED  BY THE  ADMINISTRATIVE  AGENT THAT THE
PROVISIONS  OF THIS  SECTION  CONSTITUTE  A MATERIAL  INDUCEMENT  UPON WHICH THE
ADMINISTRATIVE  AGENT AND THE LENDERS HAVE RELIED,  ARE RELYING AND WILL RELY IN
ENTERING INTO THIS PLEDGE  AGREEMENT  AND ANY OTHER  PROJECT  AGREEMENT OR OTHER
FUNDAMENTAL  DOCUMENT.  THE  ADMINISTRATIVE  AGENT  OR ANY  LENDER  MAY  FILE AN
ORIGINAL  COUNTERPART  OR A COPY OF THIS  SECTION  21 WITH ANY COURT AS  WRITTEN
EVIDENCE  OF THE  CONSENT OF THE PLEDGOR TO THE WAIVER OF ITS RIGHTS TO TRIAL BY
JURY.

                  22.  Submission  to  Jurisdiction;  Service  of  Process.  THE
PLEDGOR HEREBY  IRREVOCABLY  SUBMITS TO THE  JURISDICTION OF THE STATE COURTS OF
THE STATE OF NEW YOUR AND TO THE  JURISDICTION  OF THE  UNITED  STATES  DISTRICT
COURT FOR THE SOUTHER DISTRICT OF NEW YOURK FOR THE PURPOSES OF ANY SUIT, ACTION
OR OTHER  PROCEEDING  ARISING  OUT OF OR BASED UPON THIS PLEDGE  AGREEMENT,  THE
SUBJECT MATTER HEREOF OR ANY PROJECT AGREEMENT,  ANY OTHER FUNDEMTAL DOCUMENT OR
THE SUBJECT MATTER THEREOF  BROUGHT BY THE  ADMINISTRATIVE  AGENT OR A LENDER OR
FORUMS AT THE SOLE OPTION OF THE  ADMINISTRATIVE  AGENT OR A LENDER. THE PLEDGOR
TO THE EXTENT  PERMITTED BY APPLICABLE  LAW (A) HEREBY WIVES,  AND AGREES NOT TO
ASSET, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR
PROCEEDING  BROUGHT IN SUCH COURTS,  ANY CLAIM THAT IS IS NOT SUBJECT PERSONALLY
TO THE  JURISDICTION OF THE ABOVE-NAMED  COURTS,  THAT ITS PROPERTY IS EXEMPT OR
IMMUNE FROM  ATTACHMENT  OR  EXECUTION,  THAT THE SUIT,  ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF 


                                      -11-
<PAGE>
THE SUIT,  ACTION OR PROCEEDING IS IMPROPER OR THAT THIS PLEDGE  AGREEMENT,  THE
SUBJECT MATTER HEREOF OR ANY PROJECT AGREEMENT OR ANY OTHER FUNDAMENTAL DOCUMENT
OR THE SUBJECT  MATTER  THEREOF  MAY NOT BE  ENFORCED  IN OR BY SUCH COURT,  (B)
HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED
BY THE ADMINISTRATIVE AGENT OR A LENDER IN STATE COURT TO FEDERAL COURT, AND (C)
HEREBY  WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION,  SUIT OR  PROCEEDING  ANY
OFFSETS OR COUNTERCLAIMS  EXCEPT  COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE
ARISE FROM THE SAME SUBJECT  MATTER.  THE PLEDGOR HEREBY  CONSENTS TO SERVICE OF
PROCESS BY MAIL AT ITS  ADDRESS TO WHICH  NOTICES  ARE TO BE GIVEN  PURSUANT  TO
SECTION 13 HEREOF.  THE PLEDGOR AGREES THAT ITS SUBMISSION TO  JURISDICTION  AND
CONSENT TO SERVICE  OF  PROCESS BY MAIL IS MADE FOR THE  EXPRESS  BENEFIT OF THE
ADMINISTRATIVE AGENT AND THE LENDERS.  FINAL JUDGMENT AGAINST THE PLEDGOR IN ANY
SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE,  AND MAY BE ENFORCED IN ANY
OTHER  JURISDICTION  (X) BY  SUIT,  ACTION  OR  PROCEEDING  ON THE  JUDGMENT,  A
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF INDEBTEDNESS  OR LIABILITY OF THE PLEDGOR THEREIN  DESCRIBED OR (Y) IN
ANY  OTHER  MANNER  PROVIDED  BY,  OR  PURSUANT  TO,  THE  LAWS  OF  SUCH  OTHER
JURISDICTION,  PROVIDED,  HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A LENDER MAY
AT ITS OPTION BRING SUIT, OR INSTITUTE  OTHER JUDICIAL  PROCEEDINGS  AGAINST THE
PLEDGOR OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL  COURT OF THE UNITED STATES
OR OF ANY COUNTRY OR PLACE WHERE THE PLEDGOR OR SUCH ASSETS MAY BE FOUND.

                  23. Counterparts. This Pledge Agreement may be executed by the
parties  hereto in separate  counterparts,  each of which when so  executed  and
delivered shall be an original for all purposes, but all such counterparts shall
together  constitute one and the same  agreement,  and all  signatures  need not
appear on any one counterpart.

                  24.  Headings.  The  headings  and  captions  in  this  Pledge
Agreement are for  convenience of reference only and shall not define,  limit or
otherwise affect any of the terms or provisions hereof.

                  25. This Pledge  Agreement  represents the entire agreement of
the parties with regard to the subject matter  hereof,  and supersedes all prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter of this Pledge Agreement.



                                      -12-
<PAGE>
                  IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the day and year first above written.


                             GCI TRANSPORT CO., INC.


                             By: /s/
                                 Name: John M. Lowber
                                 Title: Secretary/Treasurer


                             CREDIT LYONNAIS NEW YORK BRANCH,
                              as Administrative Agent


                             By: /s/
                                 Name: Michael F. G. Pepe
                                 Title: Vice President
<PAGE>
                                                                     SCHEDULE 1



                               Pledged Securities



Subsidiary                        Stock Certificate No.           No. of Shares
----------                        ---------------------           -------------
GCI Fiber Co., Inc.                        1                           100

Fiber Hold Co., Inc.                       1                           100
<PAGE>
                            FIBER SECURITY AGREEMENT


                  THIS  SECURITY  AGREEMENT  dated as of  January  27,  1998 (as
amended,  supplemented or otherwise  modified,  renewed or replaced from time to
time,  the  "Security  Agreement")  is by and among (i) GCI FIBER CO.,  INC., an
Alaska  corporation  and FIBER HOLD CO.,  INC.,  an Alaska  corporation  (each a
"Debtor" and  collectively,  the  "Debtors")  and (ii) CREDIT  LYONNAIS NEW YORK
BRANCH,  as  administrative  agent for the  Lenders  referred  to in the  Credit
Agreement referred to below (in such capacity, the "Administrative Agent").

                  Pursuant  to a  Credit  and  Security  Agreement  dated  as of
January  27,  1998 among  Alaska  United  Fiber  System  Partnership,  a general
partnership  formed  under  the laws of Alaska  (the  "Borrower"),  the  lenders
referred  to  therein  (the  "Lenders"),  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 the same may be  amended,
supplemented,  or otherwise modified, renewed or replaced from time to time, the
"Credit  Agreement"),  the  Lenders  have  agreed  (subject  to  the  terms  and
conditions set forth therein) to make Loans to the Borrower.

                  The Debtors each own fifty  percent  (50%) of the  partnership
interests in the Borrower.

                  In order to  induce  the  Lenders  to  enter  into the  Credit
Agreement  and  make  the  Loans  to the  Borrower  pursuant  to the  terms  and
conditions set forth therein and in order to secure the Obligations, each of the
Debtors  is  pledging  to the  Administrative  Agent  (for  the  benefit  of the
Lenders),  and granting a security interest to the Administrative Agent (for the
benefit of the Lenders) in, all of its respective  partnership  interests in the
Borrower.

                  Accordingly, the parties hereto hereby agree as follows:

                  SECTION  1.  (a)  Definitions.  When  used  in  this  Security
Agreement  the term  "Collateral"  shall mean with respect to each Debtor,  such
Debtor's  partnership and other ownership  rights and interests in the Borrower,
all of such Debtor's contract rights,  powers,  privileges,  claims and remedies
and all  other  interests  and  benefits  arising  under  or in  respect  of the
Partnership  Agreement  dated as of July 29, 1997 by and between the Debtors (as
the same may be amended from time to time, the "Partnership  Agreement") and any
proceeds or products of any of the foregoing or any income therefrom.

                  (b) All  capitalized  terms used herein but not defined herein
shall have the respective meanings set forth in the Credit Agreement.  Terms not
otherwise   defined  herein  or  in  the  Credit  Agreement  shall  have,  where
appropriate, their respective definitions as set forth in the Uniform Commercial
Code as in effect in the State of New York.
<PAGE>
                  SECTION 2. Grant of Security Interest. As security for the due
and punctual payment and performance of the Obligations (including post-petition
interest  to the  extent  permitted  by  Applicable  Law),  each  Debtor  hereby
mortgages,  pledges, assigns,  transfers, sets over, conveys and delivers to the
Administrative  Agent  (for  the  benefit  of the  Lenders)  and  grants  to the
Administrative Agent (for the benefit of the Lenders) a security interest in all
of its right, title and interest in and to the Collateral.

                  SECTION 3. Representations and Warranties of the Debtors. Each
Debtor  hereby  represents  and  warrants to the  Administrative  Agent (for the
benefit of the Lenders) that:

                  (i) it is a corporation  duly organized,  validly existing and
in good standing  under the laws of the State of Alaska and is duly qualified to
do business in all jurisdictions  where the nature of its properties or business
so requires.  Such Debtor has the  corporate  power and authority (a) to own its
respective  properties  and to carry on its  respective  business  as now  being
conducted and as intended to be conducted,  to execute,  deliver and perform its
obligations under this Security Agreement and the other Fundamental Documents to
which it is a party and any other documents  contemplated  hereby and thereby to
which it is or will be a party and (b) to grant to the Administrative  Agent for
the  benefit  of  the  Lenders,   a  security  interest  in  the  Collateral  as
contemplated hereby;

                  (ii) it is a general  partner of the  Borrower,  holding a 50%
interest in the Borrower,  and except for the other Debtor, no other Person owns
or holds any partnership or other ownership rights or interests in the Borrower;

                  (iii)  the  execution,   delivery,  and  performance  of  this
Security  Agreement and the other  Fundamental  Documents to which it is a party
and the grant to the  Administrative  Agent (for the benefit of the  Lenders) of
the Liens and the security interests  hereunder (A) have been duly authorized by
all necessary  corporate action on the part of such Debtor, (B) will not violate
any provision of the Certificate of Incorporation or By-Laws of such Debtor,  or
the Partnership Agreement, (C) will not constitute a violation by such Debtor of
any provision of Applicable Law or any order of any court or other agency of the
United  States  or any state  thereof  applicable  to such  Debtor or any of its
properties  or assets,  (D) will not violate  any  provision  of any  indenture,
agreement,  bond,  note or other  similar  instrument  to which such Debtor is a
party or by which such Debtor or its  properties  or assets are bound,  (E) will
not be in conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default  under,  or create any right to terminate,  any
such  indenture,  agreement,  bond,  note or other  instrument  and (F) will not
result in the creation or imposition of any Lien,  security interest,  charge or
encumbrance  of any nature  whatsoever  upon any of the  properties or assets of
such Debtor other than pursuant to this Security Agreement;

                  (iv)  no  consent  of any  other  Person  (including,  without
limitation,  creditors of such Debtor) is required to be obtained by such Debtor
in connection  with the  execution,  delivery and  performance  of this Security
Agreement;


                                      -2-
<PAGE>
                  (v) all  authorizations,  approvals,  registrations or filings
with any  governmental  or public  regulatory  body or  authority  of the United
States or any state  thereof  or any  foreign  jurisdiction  (other  than  UCC-1
Financing  Statements)  required for the execution,  delivery and performance by
such Debtor of this Security  Agreement and the other  Fundamental  Documents to
which it is a party,  have been duly  obtained or made,  or duly applied for and
are in full force and effect, and if any such further authorizations, approvals,
registrations or filings should hereafter  become  necessary,  such Debtor shall
obtain or make all such authorizations, approvals, registrations or filings;

                  (vi) no financing statement, mortgage, notice of Lien, deed of
trust,  security  agreement,  or any other  agreement or instrument  creating or
giving notice of a Lien against any of the Collateral is in existence or on file
in any public office other than those created or filed  pursuant to the terms of
this Security Agreement in favor of the Administrative Agent (for the benefit of
the Lenders);

                  (vii) this Security  Agreement,  when executed and  delivered,
will  create  and grant to the  Administrative  Agent  (for the  benefit  of the
Lenders), upon the filing of the appropriate UCC-1 Financing Statements, a valid
Lien on and a perfected security interest in favor of the  Administrative  Agent
(for the benefit of the Lenders) in, all right, title or interest of such Debtor
in or to the Collateral,  subject to no prior pledge,  Lien,  security interest,
charge or encumbrance or to any agreement  purporting to grant any third party a
security interest in or Lien on the Collateral;

                  (viii)  this  Security  Agreement  and the  other  Fundamental
Documents  to which such  Debtor is a party when  executed  by such  Debtor will
constitute the legal, valid and binding obligations of such Debtor,  enforceable
in accordance with their respective  terms,  subject only, as to the enforcement
of remedies,  to applicable  bankruptcy,  insolvency  and similar laws affecting
creditors' rights and general principles of equity;

                  (ix) it is not  doing  business  and  does  not  intend  to do
business  other  than  under  its  full  corporate  name,   including,   without
limitation, under any trade name or other doing business name;

                  (x) it has good title to the Collateral  owned by it, free and
clear of Liens;

                  (xi) the chief executive office of such Debtor is as set forth
on Schedule 1 hereto,  and such office is the place where such Debtor  keeps any
books and records concerning the Collateral;

                  (xii) it will realize a direct economic benefit as a result of
the Loans being made to the Borrower under the Credit Agreement;



                                      -3-
<PAGE>
                  (xiii)  there  are no  pending  or, to the  knowledge  of such
Debtor,  threatened actions, suits,  proceedings or investigations against it or
affecting it or its properties that, individually or in the aggregate,  would if
adversely  determined  be  likely  to  have a  material  adverse  effect  on the
performance by such Debtor of its obligations under this Security  Agreement and
the  other  Fundamental  Documents  to  which  it  is a  party  or  its  assets,
operations, business or financial condition; and

                  (xiv) no sales,  use,  documentation or similar taxes, fees or
other  charges are payable  with respect to the  execution  and delivery by such
Debtor of this Security  Agreement and the other Fundamental  Documents to which
it is a party.

                  SECTION  4.  Covenants  of the  Debtors.  Each  Debtor  hereby
covenants  and agrees  with the  Administrative  Agent  (for the  benefit of the
Lenders) that:

                  (a) Such Debtor will keep the Collateral free and clear of all
security  interests,  Liens and claims other than the security interest and Lien
herein  granted  and will not sell,  assign,  transfer,  exchange  or  otherwise
dispose of, or grant any option with respect to, any of the Collateral.

                  (b) Such Debtor will defend the  Administrative  Agent's  (for
the benefit of the Lenders)  right,  title and  security  interest in and to the
Collateral against claims and demands of all Persons whomsoever.

                  (c) Such Debtor will not take any action,  including,  without
limitation, any action under or in accordance with the Partnership Agreement, to
allow any additional partners of the Borrower.

                  SECTION 5. The Administrative  Agent's Rights Exclusive of the
Debtors' Default. Each of the Debtors hereby agrees to permit representatives of
the Administrative Agent, upon reasonable notice to such Debtor, to discuss such
Debtor's  records in connection with the Collateral at such reasonable times and
as  often  as may be  reasonably  requested  by the  Administrative  Agent.  The
Administrative Agent, from time to time, at its option may perform any agreement
of a Debtor  which such Debtor  shall fail to perform and take any other  action
which the  Administrative  Agent reasonably deems necessary or advisable for the
maintenance or  preservation  of any of the Collateral or its interest  therein,
and the Debtors  agree to reimburse the  Administrative  Agent on demand for all
reasonable  expenses  of  the  Administrative   Agent  in  connection  with  the
foregoing.  The  Administrative  Agent  shall  have the right to  designate  any
officer,  employee or attorney to execute,  sign, endorse,  assign,  transfer or
deliver in the name of a Debtor or in their names any documents or  certificates
necessary to evidence,  perfect and realize upon the security  interest  granted
herein.  

                  SECTION 6. The Administrative Agent's Rights and Remedies Upon
an Event of Default.



                                      -4-
<PAGE>
                  (a) Debtors to Hold in Trust.  Upon the  occurrence and during
the continuance of an Event of Default,  each Debtor will, upon receipt by it of
any  revenue,  income,  profits or other sums in which a  security  interest  is
granted  by this  Security  Agreement,  payable  pursuant  to any  agreement  or
otherwise,  or of any check,  draft,  note, trade acceptance or other instrument
evidencing  an  obligation  to pay any such sum,  hold the sum or  instrument in
trust for the Lenders, and forthwith, without any notice, demand or other action
on the part of the  Administrative  Agent or any Lender whatsoever (all notices,
demands,  or other  actions  on the  part of the  Administrative  Agent  and the
Lenders being expressly waived),  endorse, transfer and deliver any such sums or
instruments or both to the  Administrative  Agent to be applied to the repayment
of the Obligations in accordance with the provisions of Section 6(d) hereof.

                  (b)  Collections,  etc.  Upon the  occurrence  and  during the
continuance of an Event of Default,  the  Administrative  Agent may, in its sole
discretion, in its name or in the names of the Debtors or otherwise, demand, sue
for,  collect or receive any money or property at any time payable or receivable
on account of or in exchange for, or make any  compromise  or settlement  deemed
desirable with respect to, the  Collateral,  but shall be under no obligation so
to do, or the Administrative  Agent may extend the time of payment,  arrange for
payment in installments,  or otherwise  modify the terms of, or release,  any of
the Collateral,  without thereby incurring  responsibility to, or discharging or
otherwise  affecting any liability of either of the Debtors.  The Administrative
Agent will not be  required  to take any steps to  preserve  any rights  against
prior  parties to the  Collateral.  If a Debtor  fails to make any payment or to
take any  action  required  hereunder,  the  Administrative  Agent may make such
payments and take all such actions as the Administrative  Agent reasonably deems
necessary to protect the Lenders' Liens and security interests in the Collateral
and/or the value  thereof,  and the  Administrative  Agent is hereby  authorized
(without limiting the general nature of the authority hereinabove  conferred) to
pay,  purchase,  contest or  compromise  any Liens which in the  judgment of the
Administrative Agent appear to be equal to, prior to or superior to the security
interests of the Lenders in the Collateral.

                  (c) Possession,  Sale of Collateral,  etc. Upon the occurrence
and during the continuance of an Event of Default,  the Administrative Agent may
take such measures as it may deem necessary or proper for the care or protection
of the Administrative Agent's rights and remedies hereunder,  including, without
limitation,  the right to sell or cause to be sold,  whenever the Administrative
Agent  shall  decide,  in one or more sales or  parcels,  at such  prices as the
Administrative  Agent may deem  best,  and for cash or on  credit or for  future
delivery,  without  assumption  of any credit  risk,  all or any  portion of the
Collateral,  at any broker's  board or at a public or private sale,  without any
demand of  performance or notice of intention to sell or of the time or place of
sale (except 10 days' written  notice to the  applicable  Debtor of the time and
place of any such sale or sales and such  other  notices as may be  required  by
Applicable Law and cannot be waived), and any Person may be the purchaser of all
or  any  portion  of the  Collateral  so  sold  and  thereafter  hold  the  same
absolutely,  free (to the fullest extent  permitted by Applicable  Law) from any
claim or right of whatever  kind,  including  any equity of  redemption,  of any
Debtor, any such demand,  notice,  claim, right or equity being hereby expressly
waived and released to the fullest  extent  permitted by Applicable  Law. At any
sale or sales made pursuant to 


                                      -5-
<PAGE>
this Section 6, the Administrative  Agent may bid for or purchase,  free (to the
fullest extent  permitted by Applicable Law) from any claim or right of whatever
kind, including any equity of redemption, of any Debtor any such demand, notice,
claim,  right or equity being hereby expressly waived and released,  any part of
or all of the  Collateral  offered for sale, and may make any payment on account
thereof by using any claim for moneys then due and payable to the Administrative
Agent and the  Lenders  (subject to the  provisions  of Article 10 of the Credit
Agreement) by the Borrower  under the Credit  Agreement as a credit  against the
purchase  price.  The  Administrative  Agent  shall  in any  such  sale  make no
representations  or  warranties  with  respect  to the  Collateral  or any  part
thereof,  and the  Administrative  Agent shall not be chargeable with any of the
obligations  or  liabilities  of any of the Debtors.  Each of the Debtors hereby
agrees,  on a joint and several  basis,  (i) that it will indemnify and hold the
Administrative  Agent and the  Lenders  harmless  from and  against  any and all
claims with respect to the Collateral  asserted before the taking control of the
relevant  Collateral by the Administrative  Agent pursuant to this Section 6, or
arising out of any act of, or omission to act on the part of, any Person  (other
than the  Administrative  Agent or the  Lenders)  prior to such taking of actual
control by the  Administrative  Agent,  or arising out of any act on the part of
the Debtors,  their  Affiliates or their  respective  agents before or after the
commencement  of such  actual  control  by the  Administrative  Agent;  and (ii)
neither the  Administrative  Agent nor any Lender  shall have any  liability  or
obligation  to any of the Debtors  arising out of any such claim except for acts
of willful  misconduct or gross  negligence  or not taken in good faith.  In any
action hereunder,  the Administrative Agent shall be entitled to the appointment
of a receiver,  without notice,  to take possession of all or any portion of the
Collateral  and to  exercise  such  powers as the court  shall  confer  upon the
receiver.  Notwithstanding  the  foregoing,  upon the  occurrence of an Event of
Default,   and  during  the   continuation   of  such  Event  of  Default,   the
Administrative  Agent shall be entitled to apply,  without  prior  notice to the
Debtors  except as may be required  by  Applicable  Law,  any cash or cash items
constituting Collateral in the possession of the Administrative Agent to payment
of the Obligations.

                  (d)  Application  of Proceeds on Default.  Upon the occurrence
and during the continuance of an Event of Default,  all income on the Collateral
and all  proceeds  from  any sale of the  Collateral  pursuant  hereto  shall be
applied  in  accordance  with  the  provisions  of  Section  8.7 of  the  Credit
Agreement.

                  (e) Power of  Attorney.  Upon the  occurrence  and  during the
continuance  of an  Event  of  Default  (i)  each  of the  Debtors  does  hereby
irrevocably make,  constitute and appoint the Administrative Agent or any of its
officers or designees their true and lawful  attorney-in-fact with full power in
the name of the Administrative Agent or such Debtor to receive, open and dispose
of all mail addressed to such Debtor and to endorse any notes,  checks,  drafts,
money orders or other  evidences of payment  relating to the Collateral that may
come into the possession of the Administrative  Agent, with full power and right
to cause the mail of such Debtor to be 


                                      -6-
<PAGE>
transferred to the  Administrative  Agent's own offices or otherwise,  and to do
any and all other  acts  necessary  or  proper  to carry out the  intent of this
Security Agreement and the grant of the Liens and security interests  hereunder,
and each of the Debtors hereby ratifies and confirms all that the Administrative
Agent or its  substitutes  shall properly do by virtue hereof;  (ii) each of the
Debtors  hereby  further   irrevocably  makes,   constitutes  and  appoints  the
Administrative  Agent or any of its  officers or  designees  its true and lawful
attorney-in-fact  in the name of the Administrative  Agent or such Debtor (A) to
enforce all of such Debtor's  rights under and pursuant to all  agreements  with
respect to the Collateral,  all for the sole benefit of the Administrative Agent
for the benefit of the Lenders, (B) to enter into and perform such agreements as
may be necessary in order to carry out the terms,  covenants  and  conditions of
this Security  Agreement or any other Fundamental  Document that are required to
be observed or performed  by such Debtor,  (C) to execute such other and further
mortgages, pledges and assignments of the Collateral, and related instruments or
agreements,  as the Administrative  Agent may reasonably require for the purpose
of  perfecting,  protecting,  maintaining  or  enforcing  the Liens and security
interests  granted to the  Administrative  Agent for the  benefit of the Lenders
hereunder  and (D) to do any and all other  things  necessary or proper to carry
out the  intention  of this  Security  Agreement  and the grant of the Liens and
security interests  hereunder.  Each of the Debtors hereby ratifies and confirms
in advance all that the  Administrative  Agent as such  attorney-in-fact  or its
substitutes shall properly do by virtue of this power of attorney.

                  SECTION 7.  Financing  Statements.  Each of the Debtors hereby
authorizes the Administrative  Agent to file UCC-1 Financing  Statements and any
amendments thereto or continuations  thereof, and any other appropriate security
documents  or  instruments,  and to give any notices  necessary  or desirable to
perfect the Lien and  security  interests  of the  Administrative  Agent for the
benefit of the Lenders on the Collateral,  in all cases without the signature of
such Debtor or to execute such items as attorney-in-fact for such Debtor.

                  SECTION 8. Further Assurances.  (a) Each of the Debtors agrees
that such Debtor will from time to time, on request of the Administrative  Agent
(i) duly execute and deliver, or cause to be duly executed and delivered, at the
cost and expense of the Debtors,  such further instruments as may be appropriate
in the  reasonable  judgment  of the  Administrative  Agent  to  carry  out  the
provisions and purposes of this Security  Agreement;  (ii) promptly  execute and
deliver or cause to be executed  and  delivered,  at the cost and expense of the
Debtors,  such  further  instruments  as may be  appropriate  in the  reasonable
judgment of the  Administrative  Agent,  to provide the  Administrative  Agent a
first  perfected Lien in the  Collateral  and any and all documents  (including,
without limitation, the execution, amendment or supplementation of any financing
statement and  continuation  statement or other  statement) for filing under the
provisions of the Uniform  Commercial  Code of any  jurisdiction or any statute,
rule  or  regulation  of  any  applicable  foreign,   federal,  state  or  local
jurisdiction,  and  perform or cause to be  performed  such other acts which are
necessary  or  advisable,  from time to time,  in order to grant and maintain in
favor of the Administrative  Agent (for the benefit of the Lenders) the Lien and
security interest in the Collateral contemplated hereunder,  subject to no other
Liens or security interests; and (iii) promptly undertake to deliver or cause to
be delivered to the Administrative Agent and the Lenders from time to time, such
other  documentation,   consents,  authorizations  and  approvals  in  form  and
substance   reasonably   satisfactory  to  the  Administrative   Agent,  as  the



                                      -7-
<PAGE>
Administrative  Agent shall deem reasonably necessary or advisable to perfect or
maintain the Liens of the Administrative Agent (for the benefit of the Lenders).

                  (b) The  Debtors  hereby  agree  to pay  any  and  all  stamp,
registration,  recordation and similar taxes,  fees or charges,  reasonable fees
and expenses of the  Administrative  Agent's  counsel and of any agents therefor
and to indemnify  the  Administrative  Agent and its agents  against any and all
liabilities  with  respect  to or  resulting  from any delay in the  payment  or
omission  to pay any such  taxes,  fees or  charges,  which  may be  payable  or
determined to be payable in connection with the execution, delivery, performance
or enforcement  of this Security  Agreement and any other document or instrument
executed  in  connection  herewith or the  perfection  of any rights or security
interests hereunder.

                  SECTION 9. Regulatory Approvals.  During the continuance of an
Event of  Default,  each  Debtor  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 the
Administrative  Agent may reasonably request or as may be required by applicable
law in  connection  with the obtaining of any consent,  approval,  registration,
qualification or authorization of the FCC or of any other Governmental Authority
or Person  necessary or  appropriate  for the  effective  exercise of any rights
under  this  Security  Agreement  or any  other  Fundamental  Document.  Without
limiting the  generality  of the  foregoing,  if an Event of Default  shall have
occurred  and be  continuing,  each  Debtor  shall  take any  action  which  the
Administrative  Agent may reasonably  request in order to transfer and assign to
the  Administrative  Agent,  or to  such  one  or  more  third  parties  as  the
Administrative Agent may designate,  or to a combination of the foregoing,  each
FCC License,  Permit,  other  similar  right or license or other  agreement.  To
enforce the provisions of this Section, the 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 or other  Governmental
Authority or Person (as  applicable) an involuntary  transfer of control of each
such FCC License,  Permit,  similar right or license or other  agreement for the
purpose of seeking a bona fide  purchaser  to whom control  will  ultimately  be
transferred. Each Debtor hereby agrees to authorize such an involuntary transfer
of control upon the request of the receiver so appointed  and, if a Debtor shall
refuse to  authorize  the  transfer,  its approval may be required by the court.
Upon the  occurrence and  continuance of an Event of Default,  each Debtor shall
further use its best efforts to assist in obtaining approval of the FCC or other
Governmental  Authority or Person,  if required,  for any action or transactions
contemplated  by this  Security  Agreement  or any  other  Fundamental  Document
including,  without limitation,  the preparation,  execution and filing with the
FCC or other Governmental  Authority or Person of the assignor's or transferor's
portion of any application or applications  for consent to the assignment of any
FCC License, Permit, similar right or license or other agreement or the transfer
of control  necessary or appropriate  under the rules and regulations of the FCC
or other Governmental Authority or otherwise for the approval of the transfer or
assignment  of any portion of the  Collateral,  together  with any FCC  License,
Permit,  similar right or license or other agreement.  Each Debtor  acknowledges
that the  assignment or transfer of each FCC License,  Permit,  similar right or
license  or other  agreement  is  



                                      -8-
<PAGE>
integral to the Administrative  Agent's and Lenders' realization of the value of
the Collateral,  that there is no adequate remedy at law for failure by a Debtor
to comply with the  provisions of this Section and that such failure would cause
irreparable injury not adequately  compensable in damages,  and therefore agrees
that each and every  covenant  contained  in this  Section  may be  specifically
enforced,  and each Debtor  hereby  waives and agrees not to assert any defenses
against an action for specific performance of such covenants.

                  SECTION 10. The rights and remedies conferred upon or reserved
to the  Administrative  Agent in this  Security  Agreement are intended to be in
addition to, and not in  limitation  of, any other right or remedy  available to
the Administrative Agent. Without limiting the generality of the foregoing,  the
Administrative  Agent and the  Lenders  shall have all rights and  remedies of a
secured party under Article 9 of the UCC or any other Applicable Law.

                  SECTION  11.  Continuation  and  Reinstatement.  Each  of  the
Debtors  further  agrees that the  security  interest  granted  hereunder  shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
payment or any part thereof, of any Obligation is rescinded or must otherwise be
restored  by the  Administrative  Agent or any  Lender  upon the  bankruptcy  or
reorganization of any Debtor, the Borrower or otherwise.

                  SECTION 12. Termination.  The security interests granted under
this Security Agreement shall terminate when all the Obligations shall have been
fully  and  indefeasibly  paid and  performed  and the  Commitments  shall  have
terminated.  At such time, all rights to the Collateral pledged or assigned by a
Debtor shall revert to such Debtor. Upon any such termination the Administrative
Agent will,  at the  Debtor's  expense,  execute and deliver to such Debtor such
documents (in form and substance  satisfactory to the  Administrative  Agent) as
such Debtor shall reasonably request to evidence such termination.

                  SECTION 13. Notice.  Notices and other communication  provided
for  herein  shall be in  writing  and shall be  delivered  or mailed  (or if by
telegram, delivered to the telegraph company and, if by telecopier, delivered by
such equipment) to the parties at the following respective addresses:

                  (1)      If to the Administrative Agent:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York 10019
                           Attn:  Project Finance Group
                           Facsimile No.:  (212) 261-3421

                  (2)      If to the Debtors:



                                      -9-
<PAGE>
                           GCI Fiber Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn: Chief Financial Officer
                           Facsimile No.: (907) 265-5676

                                         and

                           Fiber Hold Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn: Chief Financial Officer
                           Facsimile No.: (907) 265-5676

or such other  address as such party may from time to time  designate  by giving
written   notice  to  the  other   party   hereunder.   All  notices  and  other
communications  given to any party hereto in accordance  with the  provisions of
this Security Agreement shall be deemed to have been given on the tenth Business
Day after the date when sent by registered or certified mail,  postage  prepaid,
return  receipt  requested,  if by  mail,  or when  delivered  to the  telegraph
company,  charges prepaid, if by telegram, or when receipt is acknowledged if by
telecopier,  in each case addressed to such party as provided in this Section 13
or in accordance with the latest unrevoked written direction from such party.

                  SECTION 14. No Waiver.  No delay or failure on the part of the
Administrative  Agent in the exercise of any right,  power,  privilege or remedy
hereunder  or under any other  Fundamental  Document  shall  operate as a waiver
thereof, nor shall any single or partial exercise of any right, power, privilege
or remedy by the  Administrative  Agent  preclude any other or further  exercise
thereof or the  exercise of any other right,  power,  privilege or remedy and no
course of dealing  between the parties shall operate as a waiver of any right or
remedy of the  Administrative  Agent. All remedies  hereunder are cumulative and
are not exclusive of any other remedies provided by law.

                  SECTION 15.  Governing  Law. THIS  SECURITY  AGREEMENT AND ANY
INSTRUMENT  OR AGREEMENT  REQUIRED  HEREUNDER  SHALL BE DEEMED TO BE MADE UNDER,
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

                  SECTION 16.  Severability.  This Security  Agreement  shall be
interpreted  in such manner as to be effective and valid under  Applicable  Law,
but if any  provision  of this  Security  Agreement  shall be  prohibited  by or
invalidated under the Applicable Law of any jurisdiction,  such provision shall,
as to such  jurisdiction,  be ineffective  to the extent of such  prohibition or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining  


                                      -10-
<PAGE>
provisions of this Security  Agreement and any such prohibition or invalidity in
any jurisdiction shall not invalidate such provision in any other  jurisdiction.
The parties  hereto  agree to negotiate in good faith a provision to replace the
ineffective  provision,  such provision to be as similar in effect and intent as
the ineffective provision as permissible.  To the extent permitted by Applicable
Law,  the  parties  hereby  waive any  provision  of law which  may  render  any
provision hereof prohibited or unenforceable in any respect.

                  SECTION  17.  Amendments.   This  Security  Agreement  may  be
amended,  modified or supplemented,  and the terms hereof may be waived, in each
case only by a written  instrument  executed  by the  parties  to this  Security
Agreement.  The waiver by any party hereto of a breach of any  provision of this
Security  Agreement  shall  not  operate  or be  construed  as a  waiver  of any
subsequent or other breach,  whether or not similar. No notice to, or demand on,
the Debtors in any case shall entitle the Debtors to any other or further notice
or demand in the same, similar or other circumstances.

                  SECTION 18. Survival of  Representations  and Warranties.  All
warranties,  representations  and covenants  made by the Debtors herein shall be
considered to have been relied upon by the Administrative  Agent and the Lenders
and shall survive the making of the Loans  contemplated by the Credit  Agreement
and  the  issuance  and  delivery  to the  Administrative  Agent  of the  Notes,
regardless of any investigation made by the Administrative  Agent or the Lenders
or on their  behalf and shall  continue  in full force and effect so long as any
Obligation  that is due or could  become due, is  outstanding  and unpaid and so
long as the Commitments have not been terminated.

                  SECTION 19.  Successors and Assigns.  All references herein to
any of the  parties to this  Security  Agreement  shall be deemed to include the
successors  and  assigns  of such  party;  provided,  however,  that none of the
Debtors  may assign any of their  rights or  obligations  hereunder  without the
prior written consent of the Administrative  Agent, and all covenants,  promises
and  agreements by or on behalf of the Debtors which are contained  herein shall
inure to the benefit of the successors and assigns of the  Administrative  Agent
and any of the Lenders.

                  SECTION 20. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED
BY  APPLICABLE  LAW WHICH CANNOT BE WAIVED,  EACH OF THE DEBTORS,  RESPECTIVELY,
HEREBY  WAIVES,  AND  COVENANTS  THAT IT WILL NOT ASSERT  (WHETHER AS PLAINTIFF,
DEFENDANT OR  OTHERWISE),  ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE,  CLAIM,  DEMAND,  ACTION,  OR CAUSE OF ACTION ARISING OUT OF OR BASED
UPON  THIS  SECURITY  AGREEMENT,  THE  SUBJECT  MATTER  HEREOF  OR  ANY  PROJECT
AGREEMENT, ANY OTHER FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF, IN EACH
CASE WHETHER NOW  EXISTING OR HEREAFTER  ARISING AND WHETHER IN CONTRACT OR TORT
OR OTHERWISE.  EACH OF THE DEBTORS ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE
ADMINISTRATIVE  AGENT THAT THE PROVISIONS OF THIS SECTION  CONSTITUTE A MATERIAL
INDUCEMENT UPON 


                                      -11-
<PAGE>
WHICH THE ADMINISTRATIVE AGENT AND THE LENDERS HAVE RELIED, ARE RELYING AND WILL
RELY IN ENTERING INTO THIS SECURITY AGREEMENT AND ANY OTHER PROJECT AGREEMENT OR
OTHER FUNDAMENTAL  DOCUMENT.  THE ADMINISTRATIVE AGENT OR ANY LENDER MAY FILE AN
ORIGINAL  COUNTERPART  OR A COPY OF THIS  SECTION  20 WITH ANY COURT AS  WRITTEN
EVIDENCE OF THE CONSENT OF THE DEBTORS TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY
JURY.

                  SECTION 21.  Submission to  Jurisdiction;  Service of Process.
EACH  OF  THE  DEBTORS,   RESPECTIVELY,   HEREBY  IRREVOCABLY   SUBMITS  TO  THE
JURISDICTION  OF  THE  STATE  COURTS  OF  THE  STATE  OF  NEW  YORK  AND  TO THE
JURISDICTION  OF THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF
NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
OR BASED UPON THIS SECURITY AGREEMENT,  THE SUBJECT MATTER HEREOF OR ANY PROJECT
AGREEMENT,  ANY OTHER FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF BROUGHT
BY THE ADMINISTRATIVE AGENT OR A LENDER OR ANY OF THEIR SUCCESSORS OR ASSIGNS IN
EITHER OF THE  ABOVE-REFERENCED  FORUMS AT THE SOLE OPTION OF THE ADMINISTRATIVE
AGENT OR A LENDER. EACH OF THE DEBTORS, RESPECTIVELY, TO THE EXTENT PERMITTED BY
APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS
A DEFENSE, OR OTHERWISE,  IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH
COURTS,  ANY CLAIM THAT IT IS NOT SUBJECT  PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAMED  COURTS,  THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM  ATTACHMENT  OR
EXECUTION,  THAT THE SUIT,  ACTION OR PROCEEDING  IS BROUGHT IN AN  INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
SECURITY  AGREEMENT,  THE SUBJECT MATTER HEREOF OR ANY PROJECT  AGREEMENT OR ANY
OTHER FUNDAMENTAL  DOCUMENT OR THE SUBJECT MATTER THEREOF MAY NOT BE ENFORCED IN
OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR
PROCEEDING  INSTITUTED BY THE ADMINISTRATIVE AGENT OR A LENDER IN STATE COURT TO
FEDERAL  COURT,  AND (C) HEREBY  WAIVES THE RIGHT TO ASSERT IN ANY SUCH  ACTION,
SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS  EXCEPT  COUNTERCLAIMS  THAT ARE
COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER.  EACH OF THE DEBTORS
HEREBY  CONSENTS TO SERVICE OF PROCESS BY MAIL AT ITS  ADDRESS TO WHICH  NOTICES
ARE TO BE GIVEN  PURSUANT TO SECTION 12 HEREOF.  EACH OF THE DEBTORS AGREES THAT
ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE
FOR THE  EXPRESS  BENEFIT OF THE  ADMINISTRATIVE  AGENT AND THE  LENDERS.  FINAL
JUDGMENT  AGAINST  A DEBTOR  IN ANY SUCH  ACTION,  SUIT OR  PROCEEDING  SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR
PROCEEDING  ON THE  JUDGMENT,  A  


                                      -12-
<PAGE>
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF INDEBTEDNESS  OR LIABILITY OF SUCH DEBTOR THEREIN  DESCRIBED OR (Y) IN
ANY  OTHER  MANNER  PROVIDED  BY,  OR  PURSUANT  TO,  THE  LAWS  OF  SUCH  OTHER
JURISDICTION,  PROVIDED,  HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A LENDER MAY
AT ITS OPTION BRING SUIT,  OR INSTITUTE  OTHER  JUDICIAL  PROCEEDINGS  AGAINST A
DEBTOR OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL  COURT OF THE UNITED  STATES
OR OF ANY COUNTRY OR PLACE WHERE THE DEBTOR OR SUCH ASSETS MAY BE FOUND.

                  SECTION  22.  Counterparts.  This  Security  Agreement  may be
executed by the parties hereto in separate  counterparts,  each of which when so
executed  and  delivered  shall be an original  for all  purposes,  but all such
counterparts  shall  together  constitute  one and the same  agreement,  and all
signatures need not appear on any one counterpart.

                  SECTION  23.  Headings.  The  headings  and  captions  in this
Security  Agreement are for  convenience of reference only and shall not define,
limit or otherwise affect any of the terms or provisions hereof.

                  SECTION  24.  Entire   Agreement.   This  Security   Agreement
represents the entire agreement of the parties with regard to the subject matter
hereof, and supersedes all prior agreements and understandings, both written and
oral,  among the parties  with  respect to the subject  matter of this  Security
Agreement.



                                      -13-
<PAGE>
                  IN WITNESS WHEREOF,  the Debtors and the Administrative  Agent
have caused this  Security  Agreement  to be duly  executed on the date and year
first written above.


                                       GCI FIBER CO., INC.


                                       By: /s/     
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                       FIBER HOLD CO., INC.


                                       By: /s/     
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                       CREDIT  LYONNAIS  NEW  YORK  BRANCH,   as
                                       Administrative Agent

                                       By: /s/      
                                       Name: Michael F.G. Pepe
                                       Title: Vice President


<PAGE>
                                   Schedule 1
                           Chief Executive Office 
                           (Fiber Security Agreement)

1. Each Debtor's chief executive office is, on the Closing Date, at:

                 2550 Denali Stree Suite 1000
                 Anchorage, Alaska 99503


2. Each Debtor keeps all of its books and records  concerning  the Collateral at
   the above  address.  Additional  sets of documents  regarding the System will
   also be kept at each of the landing stations.
<PAGE>
                                                                      EXHIBIT F

                             SUBORDINATION AGREEMENT


                                SUBORDINATION  AGREEMENT dated as of January 27,
                           1998 (as amended, supplemented or otherwise modified,
                           renewed   or   replaced   from  time  to  time,   the
                           "Subordination  Agreement")  among (i) ALASKA  UNITED
                           FIBER  SYSTEM  PARTNERSHIP,   a  general  partnership
                           organized  under the laws of Alaska (the  "Obligor"),
                           (ii)  GCI  HOLDINGS,  INC.,  an  Alaskan  corporation
                           ("Holdings"),  (iii)  GCI  TRANSPORT  CO.,  INC.,  an
                           Alaska  corporation ("GCI Transport") and (iv) CREDIT
                           LYONNAIS NEW YORK BRANCH, as administrative agent for
                           the Lenders referred to below (in such capacity,  the
                           "Administrative Agent").


                             Introductory Statement

                  Pursuant to the terms of a Credit and Security Agreement dated
as of January 27, 1998 (as amended,  supplemented or otherwise modified, renewed
or replaced from time to time, the "Credit  Agreement")  among the Obligor,  the
lenders referred to therein (the "Lenders"),  Credit Lyonnais New York Branch as
Administrative  Agent,  NationsBank of Texas,  N.A. as Syndication  Agent and TD
Securities (USA) Inc. as Documentation  Agent, the Lenders have agreed,  subject
to the terms and conditions  thereof,  to make Loans (as such term is defined in
the Credit  Agreement) to the Obligor.  In addition,  one or more of the Lenders
may from time to time enter into  interest rate swap  agreements,  interest rate
cap agreements, synthetic caps, collars and floors or other financial agreements
or arrangements designed to protect the Obligor against fluctuations in interest
rates (each an "Interest Rate Protection Agreement").  The Credit Agreement, the
Notes referred to therein,  any Interest Rate  Protection  Agreement,  the other
Fundamental  Documents  and any  other  documents,  instruments  and  agreements
contemplated  by any of the  foregoing as they may be amended,  supplemented  or
otherwise modified,  renewed or replaced from time to time, shall hereinafter be
referred to as the "Senior  Obligation  Documents".  All  capitalized  terms not
otherwise  defined  herein  shall  have the  meanings  given  them in the Credit
Agreement.

                  Holdings  and  GCI  Transport  shall  be  referred  to  herein
individually,   as  a   "Subordinated   Creditor"  and   collectively,   as  the
"Subordinated  Creditors".  Any loan or advance from a Subordinated  Creditor to
the  Obligor,  whether in  existence  on the date  hereof or  hereafter  made or
incurred,  shall be referred to herein  individually,  as an "Intercompany Loan"
and  collectively,  as the  "Intercompany  Loans." An  Intercompany  Loan may be
evidenced by any promissory note(s).  The obligation of the Obligor to repay the
principal  amount of any  Intercompany  Loan and all interest  thereon,  and any
other  Indebtedness  (as  such  term is  defined  in the  Credit  Agreement)  or
obligation  of the  Obligor  owing to a  Subordinated  Creditor,  and all  other
amounts  payable  to a  Subordinated  Creditor  in  connection  with  any of the
foregoing  is  hereinafter   referred  to   individually,   as  a  "Subordinated
Obligation" and collectively, as the 
<PAGE>
"Subordinated  Obligations".  Any promissory note(s) evidencing any Subordinated
Obligation, any replacement or substitute for any such note, any promissory note
issued  in  satisfaction  of any  obligation  to pay  interest  thereon  and any
purchase  agreement,  security  agreement or any other agreement relating in any
way to any Intercompany Loan or other  Indebtedness or obligation of the Obligor
owing to a Subordinated  Creditor are  hereinafter  collectively  referred to as
"Junior Obligation Documents".

                  In order to induce the Administrative Agent and the Lenders to
enter into the Credit Agreement, the Subordinated Creditors have agreed, subject
to the  provisions  of  this  Subordination  Agreement,  that  the  Subordinated
Obligations  shall be  subordinate  to the Senior  Obligations  (as  hereinafter
defined).

                  NOW,  THEREFORE,  in  consideration  of the premises and other
good and valuable  consideration,  receipt of which is hereby acknowledged,  the
parties hereto hereby agree as follows:


                  1. Agreement to Subordinate. Each Subordinated Creditor agrees
that the Subordinated  Obligations  owed from time to time to such  Subordinated
Creditor,  are and shall be subordinate and subject in right of payment,  to the
extent and in the manner  hereinafter set forth, to the prior payment in full of
the  Senior  Obligations  (as  hereinafter  defined)  and that  any  guarantees,
security interests,  mortgages and other Liens securing payment of, or otherwise
relating to, any of the  Subordinated  Obligations are and shall be subordinate,
to the fullest  extent  permitted by law and as  hereinafter  set forth,  to the
Senior  Obligations,  notwithstanding  the  perfection,  order of  perfection or
failure to perfect,  any such security  interest or other Lien, or the filing or
recording,  order of filing or  recording,  or  failure  to file or record  this
Subordination  Agreement or any  instrument  or other  document in any filing or
recording office in any jurisdiction.  The term "Senior  Obligations" shall mean
all monetary  obligations of the Obligor under the Senior  Obligation  Documents
including,  without  limitation,  whether  outstanding  at the  date  hereof  or
hereafter  incurred or created,  all obligations to pay principal,  premium,  if
any,  interest  (including,  without  limitation,  interest  accruing  after the
commencement  of  any   bankruptcy,   insolvency,   reorganization   or  similar
proceedings  with respect to the  Obligor,  whether or not  determined  to be an
allowed  claim  in any  such  proceeding),  charges,  costs,  expenses  and fees
(including,  without  limitation,  the  disbursements and fees of counsel to the
Administrative   Agent),   all   obligations   to  reimburse  or  indemnify  the
Administrative Agent in any way, and all renewals,  extensions,  restructurings,
refinancings  or refunding of any  indebtedness  or obligation  under the Senior
Obligation Documents in the nature of a "workout" or otherwise.

                  The  expressions  "prior payment in full",  "payment in full",
"paid in full" or any other similar  term(s) or phrase(s)  when used herein with
respect to the Senior  Obligation  Documents  shall mean the payment in full, in
cash  or  other  property  satisfactory  to the  Lenders,  of all of the  Senior
Obligations.



                                      -2-
<PAGE>
                  2.  Restrictions on Payment of the  Subordinated  Obligations,
etc.  No  Subordinated  Creditor  will ask,  demand,  sue for,  take or receive,
directly or indirectly, from the Obligor, in cash or other property, by set-off,
by  realizing  upon  collateral,  foreclosing  on  any  Lien  or  otherwise,  by
exercising  any  remedies or rights under any Junior  Obligation  Document or by
executions, garnishments, levies, attachments or by any other action relating to
any of the  Subordinated  Obligations,  or in any other  manner,  payment of, or
security for, all or any part of the Subordinated  Obligations  unless and until
the Senior Obligations shall have been paid in full; provided,  however,  that a
Subordinated  Creditor  may  receive,  and the Obligor may make,  payments  with
respect to the Subordinated  Obligations owed to such  Subordinated  Creditor to
the extent the Obligor is  permitted to make such  payments  pursuant to Section
6.4 of the Credit Agreement; provided, further, however, that if at any time the
payment of cash interest on any Subordinated  Obligation is otherwise prohibited
by the terms hereof,  then the outstanding  principal amount of the Subordinated
Obligations  in respect of which such interest is payable may be increased by an
amount equal to such prohibited interest payment.  The Obligor will not make any
payment of any of the  Subordinated  Obligations,  or take any other action,  in
contravention  of  the  provisions  of  this   Subordination   Agreement.   Each
Subordinated  Creditor  expressly agrees that, unless and until such time as the
Loans under the Credit  Agreement  shall have been  accelerated,  any payment in
respect of any Subordinated  Obligation owed to such Subordinated Creditor which
is not made in a timely manner by reason of the operation of this  Subordination
Agreement shall be deemed to be deferred and the Obligor shall not be in default
under any of the Junior Obligation Documents by reason thereof.

                  Each  Subordinated  Creditor  further  acknowledges and agrees
that it will not take any collateral of the Obligor unless and until the Lenders
have been paid in full.

                  3. Additional Provisions Concerning Subordination. Each of the
Subordinated Creditors and the Obligor hereby agrees as follows:

                  (a)  In  the  event  of  (i)  any  dissolution,   winding  up,
liquidation or other similar reorganization of the Obligor (whether voluntary or
involuntary and whether in bankruptcy,  insolvency or receivership  proceedings,
or upon an assignment for the benefit of creditors or proceedings  for voluntary
or  involuntary  liquidation,  dissolution  or other  winding up of the Obligor,
whether or not involving  insolvency or bankruptcy,  or any other  marshaling of
the assets and liabilities of the Obligor or otherwise);  or (ii) any Default or
Event of Default which is in effect and continuing,  or any default,  demand for
payment or acceleration of maturity regarding any Subordinated Obligation:

                  (1)      all  Senior  Obligations  shall  first be paid to the
                           Administrative  Agent for the  benefit of the Lenders
                           in full  before any payment or  distribution  is made
                           upon the  principal  of or  interest  on or any fees,
                           costs,  charges or expenses in connection with any of
                           the Subordinated Obligations, and before any remedial
                           action   is  taken  by  any   Subordinated   Creditor
                           including,  without limitation,  any action described
                           in  Section 2 or 7 hereof  





                                   -3-
<PAGE>
                           (it being  understood  and agreed that nothing herein
                           shall   prevent  any   Subordinated   Creditor   from
                           exercising  rights which might otherwise be available
                           to it to take any action to  preserve  or protect the
                           validity of any claim it may have with respect to any
                           Subordinated  Obligation or its security  interest in
                           any collateral securing any Subordinated  Obligation,
                           so long as such action would not adversely affect any
                           claim of the  Administrative  Agent or any  Lender or
                           the security interest of the Administrative Agent (on
                           behalf of the Lenders) in the Collateral or the value
                           of any thereof); and

                  (2)      any payment or  distribution of assets of the Obligor
                           with  respect  to  any  Subordinated   Obligation  or
                           pursuant to any Junior Obligation  Document,  whether
                           in cash,  property or  securities  (other than equity
                           securities or debt securities  which are subordinated
                           to the Senior Obligations at least to the same extent
                           as  the   Subordinated   Obligations)  to  which  any
                           Subordinated  Creditor would be entitled with respect
                           to any  Subordinated  Obligation  or  pursuant to any
                           Junior Obligation  Document except for the provisions
                           hereof, shall be paid or delivered by the Obligor, or
                           any  receiver,  trustee  in  bankruptcy,  liquidating
                           trustee,  disbursing  agent,  agent or  other  Person
                           making such payment or distribution,  directly to the
                           Administrative  Agent for the benefit of the Lenders,
                           to the  extent  necessary  to pay in full all  Senior
                           Obligations  remaining unpaid, after giving effect to
                           any  concurrent   payment  or   distribution  to  the
                           Administrative  Agent for the benefit of the Lenders,
                           before  any  payment or  distribution  is made to any
                           Subordinated Creditor;

                  (b) In any proceeding referred to, or resulting from any event
referred  to, in  subsection  (a) of this  Section 3 commenced by or against the
Obligor:

                  (1)      The   Administrative   Agent   may,   and  is  hereby
                           irrevocably authorized and empowered (in its own name
                           or in the name of any of the  Subordinated  Creditors
                           or otherwise)  to, but shall have no  obligation  to,
                           (i)  demand,  sue  for,  collect  and  receive  every
                           payment or distribution referred to in subsection (a)
                           of this Section 3 and give acquittance therefor, (ii)
                           file  claims and proofs of claim in respect of any of
                           the   Subordinated   Obligations  if  the  applicable
                           Subordinated  Creditor  has not  done so by the  date
                           which  is  ten  (10)   Business  Days  prior  to  any
                           applicable  bar date and (iii) take such other action
                           as the  Administrative  Agent may deem  necessary  or
                           advisable for the exercise or  enforcement  of any of
                           the rights or interests of the  Administrative  Agent
                           and/or the Lenders hereunder; and

                  (2)      Each Subordinated Creditor hereby agrees that it will
                           duly  and   promptly   take   such   action   as  the
                           Administrative   Agent  may  reasonably   request  to
                           


                                      -4-
<PAGE>
                           collect the Subordinated  Obligations  which are owed
                           to such Subordinated  Creditor for the account of the
                           Lenders,  file appropriate  claims or proofs of claim
                           with  respect  thereto,  execute  and  deliver to the
                           Administrative   Agent  such   powers  of   attorney,
                           assignments    or    other    instruments    as   the
                           Administrative  Agent may  request in order to enable
                           it to enforce any and all claims with  respect to the
                           Subordinated  Obligations  which  are  owed  to  such
                           Subordinated Creditor and collect and receive any and
                           all payments or distributions which may be payable or
                           deliverable  upon or with respect to the Subordinated
                           Obligations  which  are  owed  to  such  Subordinated
                           Creditor;

                  (c) All payments or distributions  upon or with respect to any
of the Subordinated  Obligations  which are received by a Subordinated  Creditor
contrary to the provisions of this Subordination Agreement shall be deemed to be
the property of the  Lenders,  shall be received in trust for the benefit of the
Lenders,  shall  be  segregated  from  other  funds  and  property  held by such
Subordinated  Creditor  and shall be forthwith  paid over to the  Administrative
Agent for the benefit of the  Lenders in the same form as so received  (with any
necessary  endorsement) to be applied to the payment or prepayment of the Senior
Obligations until the Senior Obligations shall have been paid in full;

                  (d) Each  Subordinated  Creditor hereby waives any requirement
for  marshaling  of  assets  by  the  Administrative  Agent  or the  Lenders  in
connection with any foreclosure of any Lien of the  Administrative  Agent or the
Lenders under the Senior Obligation Documents;

                  (e) None of the  Subordinated  Creditors shall take any action
to impair or otherwise adversely affect the foreclosure of, or other realization
of,  the  Administrative  Agent's  or  the  Lenders'  rights  under  the  Senior
Obligation Documents; and

                  (f) The  Administrative  Agent is hereby  authorized to demand
specific  performance  of  this  Subordination  Agreement  at  any  time  when a
Subordinated  Creditor shall have failed to comply with any of the provisions of
this  Subordination  Agreement,  and each of the  Subordinated  Creditors hereby
irrevocably  waives any defense  based on the  adequacy of a remedy at law which
might be asserted as a bar to such remedy of specific performance.

                  4.  Subrogation.  Each  Subordinated  Creditor  agrees that no
payment or distribution to the Administrative  Agent and/or the Lenders pursuant
to  the  provisions  of  this   Subordination   Agreement   shall  entitle  such
Subordinated  Creditor to exercise any rights of subrogation in respect  thereof
until the Senior Obligations shall have been paid in full.

                  5.  Legend.   Notwithstanding  any  other  provision  of  this
Subordination  Agreement,  the applicable  Subordinated Creditor and the Obligor
will cause any promissory  note  evidencing  any  Subordinated  Obligation,  any
replacement  thereof and any mortgage or security  document  relating thereto to
include the following provision:




                                      -5-
<PAGE>
                           "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 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."

                  6. Negative Covenants of the Subordinated  Creditors.  So long
as  any  of  the  Senior  Obligations  shall  remain  outstanding,  none  of the
Subordinated   Creditors  will,   without  the  prior  written  consent  of  the
Administrative Agent:

                  (a) Sell, assign, pledge, encumber or otherwise dispose of any
instrument  evidencing the  Indebtedness or other obligation of the Obligor owed
to such  Subordinated  Creditor  or any  collateral  securing  the  Subordinated
Obligations  unless  such  sale,  assignment,   pledge,   encumbrance  or  other
disposition is made expressly  subject to this  Subordination  Agreement and the
other party to such sale, assignment,  pledge,  encumbrance or other disposition
consents in writing to be bound by the terms hereof;

                  (b) Permit the terms of any of the Junior Obligation Documents
or collateral  securing the  Subordinated  Obligations  to be changed in any way
which would limit or impair these subordination  provisions,  change any payment
date thereunder or accept any collateral therefor;

                  (c) Declare all or any portion of the Subordinated Obligations
due and  payable  prior to the date fixed  therefor  unless the Loans  under the
Credit Agreement shall have first been accelerated;

                  (d) Realize  upon,  or otherwise  exercise  any remedies  with
respect to, any collateral securing the Subordinated  Obligations or any portion
thereof or take any other  action  described in Section 2 hereof with respect to
any of the Subordinated Obligations; or

                  (e)  Commence,  or join  with  any  creditor  other  than  the
Administrative  Agent or the Lenders in commencing any proceeding referred to in
subsection (a) of Section 3 hereof.

                  7. Obligations Unconditional. All rights and interests of the
Administrative  Agent  and  the  Lenders  hereunder,   and  all  agreements  and
obligations  of the  Subordinated  Creditors  and the Obligor  hereunder,  shall
remain in full force and effect irrespective of:

                  (a) Any  lack of  validity  or  enforceability  of any  Senior
Obligation Document or any other agreement or instrument relating thereto;



                                      -6-
<PAGE>
                  (b) Any change in the time,  manner or place of payment of, or
in any  other  term  of,  all or any of the  Senior  Obligations,  or any  other
amendment or waiver of, or any consent to departure from, any Senior  Obligation
Document;
                  (c) Any exchange,  release or nonperfection of any collateral,
or any  release  or  amendment  or waiver of or consent  to  departure  from any
guaranty, for all or any of the Senior Obligations; or

                  (d) Any other circumstances which might otherwise constitute a
defense  available  to, or a discharge  of, either (i) the Obligor in respect of
the Senior  Obligations  or (ii) any  Subordinated  Creditor  or the  Obligor in
respect of this Subordination Agreement.

                  8. Additional  Agreement by the Subordinated  Creditors.  Each
Subordinated  Creditor  agrees  that  neither the  Administrative  Agent nor any
Lender shall have any liability or obligation to such  Subordinated  Creditor on
account of  exercise  of the rights and  remedies  of the  Administrative  Agent
and/or the Lenders under any Senior Obligation Document.

                  9.  Further  Assurances.  Each  Subordinated  Creditor and the
Obligor will, at its own expense and at any time and from time to time, promptly
execute and deliver all further instruments and documents,  and take all further
action that the Administrative Agent may reasonably request, in order to protect
any right or interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies hereunder.

                  10. Expenses.  The Obligor agrees to pay to the Administrative
Agent, upon demand, the amount of any and all reasonable expenses, including the
reasonable fees and expenses of counsel for the Administrative  Agent, which the
Administrative Agent may incur in connection with the exercise or enforcement of
any of the  rights  or  interests  of the  Administrative  Agent or the  Lenders
hereunder.

                  11.  Notice.  All  demands,  notices and other  communications
which any party  hereto may desire or may be required to give to any other party
hereunder  shall be in writing and shall be delivered or mailed (or if telegram,
delivered  to the  telegraph  company and, if by  telecopier,  delivered by such
equipment) to such other party at its address as follows:

                  (a)      to the Administrative Agent at:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, NY  10019
                           Attn:  Project Finance Group
                           Facsimile No.: (212) 261-3421



                  -7-
<PAGE>
                  (b) to the Obligor at:

                           Alaska United Fiber System Partnership
                           c/o GCI Fiber Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn:  Chief Financial Officer
                           Telecopier:  (907) 265-5676

                  (c) to Holdings at:

                           GCI Holdings, Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn:  Chief Financial Officer
                           Telecopier:  (907) 265-5676

                  (d) to GCI Transport at:

                           GCI Transport Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn:  Chief Financial Officer
                           Telecopier:  (907) 265-5676

or to any such party at such other  address as shall be designated by such party
in a written  notice to each other party  hereto,  complying as to delivery with
the  terms  of  this  Section  11.  All  such   demands,   notices,   and  other
communications  given to any party  hereto  in  accordance  with the  provisions
hereof  shall be deemed to have been given on the tenth  Business  Day after the
date when sent by registered or certified mail, postage prepaid,  return receipt
requested,  if by mail,  or when  delivered to the  telegraph  company,  charges
prepaid,  if by telegram,  or when receipt is acknowledged if by telecopier,  in
each  case  addressed  to  such  party  as  provided  in this  Section  11 or in
accordance with the latest unrevoked written direction from such party.

                  12. Service of Process. EACH OF THE SUBORDINATED CREDITORS AND
THE OBLIGOR (A) HEREBY  IRREVOCABLY  SUBMITS ITSELF TO THE  JURISDICTION  OF THE
STATE COURTS OF THE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION
OF THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK, FOR
THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON
THIS  SUBORDINATION  AGREEMENT,  THE  SUBJECT  MATTER  HEREOF,  ANY  FUNDAMENTAL
DOCUMENT OR THE SUBJECT MATTER THEREOF  BROUGHT BY THE  ADMINISTRATIVE  AGENT, A
LENDER OR ANY OF THEIR  RESPECTIVE  


                                      -8-
<PAGE>
SUCCESSORS OR ASSIGNS AND (B) TO THE EXTENT  PERMITTED BY LAW, HEREBY WAIVES AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,  IN ANY SUCH
SUIT,  ACTION OR  PROCEEDING  BROUGHT IN SUCH  COURTS,  ANY CLAIM THAT IT IS NOT
SUBJECT  PERSONALLY TO THE  JURISDICTION  OF THE  ABOVE-NAMED  COURTS,  THAT ITS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT  FORUM,  THAT THE VENUE OF THE SUIT,
ACTION OR  PROCEEDING  IS IMPROPER  OR THAT THIS  SUBORDINATION  AGREEMENT,  THE
SUBJECT MATTER HEREOF,  ANY  FUNDAMENTAL  DOCUMENT OR THE SUBJECT MATTER THEREOF
MAY NOT BE  ENFORCED  IN OR BY SUCH  COURT,  AND (C)  HEREBY  WAIVES IN ANY SUCH
ACTION,  SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS  (EXCEPT FOR COMPULSORY
COUNTERCLAIMS).  EACH  OF THE  SUBORDINATED  CREDITORS  AND THE  OBLIGOR  HEREBY
CONSENTS  TO  SERVICE  OF PROCESS  BY  REGISTERED  MAIL AT THE  ADDRESS TO WHICH
NOTICES ARE TO BE GIVEN PURSUANT HERETO. EACH OF THE SUBORDINATED  CREDITORS AND
THE  OBLIGOR  AGREES  THAT ITS  SUBMISSION  TO  JURISDICTION  AND ITS CONSENT TO
SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE ADMINISTRATIVE
AGENT AND THE LENDERS.  FINAL JUDGMENT AGAINST ANY SUBORDINATED  CREDITOR OR THE
OBLIGOR IN ANY SUCH ACTION,  SUIT OR PROCEEDING SHALL BE CONCLUSIVE,  AND MAY BE
ENFORCED  IN  OTHER  JURISDICTIONS  (X) BY SUIT,  ACTION  OR  PROCEEDING  ON THE
JUDGMENT,  A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE
FACT AND OF THE AMOUNT OF ANY  INDEBTEDNESS  OR LIABILITY  OF SUCH  SUBORDINATED
CREDITOR OR THE OBLIGOR THEREIN DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED BY
OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION;  PROVIDED, HOWEVER, THAT THE
ADMINISTRATIVE  AGENT AND/OR A LENDER MAY AT ITS OPTION BRING SUIT, OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST A SUBORDINATED CREDITOR OR THE OBLIGOR OR ANY
OF THEIR RESPECTIVE ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR
OF ANY COUNTRY OR PLACE WHERE SUCH SUBORDINATED  CREDITOR,  THE OBLIGOR OR THEIR
RESPECTIVE ASSETS MAY BE FOUND.

                  13.  Waiver of Jury  Trial.  TO THE EXTENT NOT  PROHIBITED  BY
APPLICABLE LAW WHICH CANNOT BE WAIVED,  EACH OF THE  SUBORDINATED  CREDITORS AND
THE OBLIGOR  HEREBY WAIVES,  AND COVENANTS  THAT IT WILL NOT ASSERT  (WHETHER AS
PLAINTIFF,  DEFENDANT OR OTHERWISE),  ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND,  ACTION, OR CAUSE OF ACTION ARISING OUT OF,
OR BASED UPON,  THIS  SUBORDINATION  AGREEMENT,  THE SUBJECT MATTER HEREOF,  ANY
FUNDAMENTAL  DOCUMENT OR THE SUBJECT  MATTER  THEREOF,  IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE.  EACH
OF THE  SUBORDINATED  CREDITORS  AND THE 


                                      -9-
<PAGE>
OBLIGOR  ACKNOWLEDGES  THAT IT HAS BEEN  INFORMED  THAT THE  PROVISIONS  OF THIS
SECTION 13 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE ADMINISTRATIVE  AGENT
AND THE LENDERS  HAVE  RELIED,  ARE RELYING AND WILL RELY IN ENTERING  INTO THIS
SUBORDINATION   AGREEMENT,  THE  CREDIT  AGREEMENT  AND  THE  OTHER  FUNDAMENTAL
DOCUMENTS.  THE  ADMINISTRATIVE  AGENT  AND THE  LENDERS  MAY  FILE AN  ORIGINAL
COUNTERPART  OR A COPY OF THIS SECTION 13 WITH ANY COURT AS WRITTEN  EVIDENCE OF
THE CONSENT OF THE SUBORDINATED CREDITORS AND THE OBLIGOR TO THE WAIVER OF THEIR
RIGHTS TO TRIAL BY JURY.

                  14. Termination.  This Subordination Agreement shall terminate
when  the  Senior  Obligations  have  been  indefeasibly  paid in  full  and the
Commitments shall have terminated.

                  15. Consent by the  Administrative  Agent. The  Administrative
Agent,  on behalf of the Lenders,  hereby  consents to the pledge and grant of a
security  interest by Holdings to NationsBank of Texas,  N.A. as  administrative
agent for the lenders  referred to in the Holdings  Credit  Agreements  (in such
capacity,  the  "Holdings  Administrative  Agent"),  in and to the  Subordinated
Obligations  owed by the Obligor to Holdings and in any note  evidencing  any of
such  Subordinated  Obligations in order to secure the Obligations (as such term
is defined in each of the Holdings  Credit  Agreements).  The provisions of this
Section  15  shall  not  become   effective   unless  and  until  the   Holdings
Administrative  Agent  executes the  acknowledgment,  agreement  and consent set
forth below the signature lines of this Subordination Agreement.

                  16.      Miscellaneous.

                  (a)  No  amendment  of any  provision  of  this  Subordination
Agreement  shall  be  effective   unless  it  is  in  writing,   signed  by  the
Administrative  Agent and all the other  parties  hereto and consented to by the
Required Lenders.  No waiver of any provision of this  Subordination  Agreement,
and no consent to any  departure  herefrom,  shall be effective  unless it is in
writing,  signed by the  Administrative  Agent and  consented to by the Required
Lenders,  and any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

                  (b) No failure on the part of the Administrative  Agent or any
Lender to exercise,  and no delay in exercising,  any right, power, privilege or
remedy  hereunder or under any other  Fundamental  Document  shall  operate as a
waiver  thereof,  nor shall any single or partial  exercise  of any such  right,
power, privilege or remedy preclude any other or further exercise thereof or the
exercise of any other right, power,  privilege or remedy. All remedies hereunder
are cumulative and are not exclusive of any other remedies provided by law.

                  (c) Any  provision of this  Subordination  Agreement  which is
prohibited or unenforceable in any jurisdiction, shall, as to such jurisdiction,
be ineffective to the extent of 


                                      -10-
<PAGE>
such prohibition or unenforceability without invalidating the remaining portions
hereof, and any such prohibition or  unenforceability  in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
To the  extent  permitted  by  applicable  law,  the  parties  hereto  waive any
provision  of  law  which  may  render  any  provision   hereof   prohibited  or
unenforceable in any respect.

                  (d)  All  references  herein  to any of the  parties  to  this
Subordination Agreement shall be deemed to include the successors and assigns of
such party;  provided,  however, that the Obligor and the Subordinated Creditors
may not assign any of their rights or  obligations  hereunder  without the prior
written  consent of the  Administrative  Agent and all of the  Lenders,  and all
covenants,  promises,  and  agreements  by or on behalf of the  Obligor  and the
Subordinated  Creditors which are contained herein shall inure to the benefit of
the successors and assigns of the Administrative Agent and any of the Lenders.

                  (e)  This  Subordination  Agreement  may  be  executed  by the
parties  hereto in separate  counterparts,  each of which when so  executed  and
delivered shall be an original for all purposes, but all such counterparts shall
together  constitute one and the same  agreement,  and all  signatures  need not
appear on any one counterpart.

                  (f) THIS  SUBORDINATION  AGREEMENT  SHALL BE GOVERNED  BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,  WITHOUT REGARD
TO ANY  CHOICE-OF-LAW  RULES  THEREOF  WHICH  MIGHT  APPLY THE LAWS OF ANY OTHER
JURISDICTION.



                                      -11-
<PAGE>
                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Subordination Agreement to be duly executed as of the day and year first written
above.


                                     ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                     By:  GCI  Fiber  Co.,   Inc.,  its  General
                                     Partner


                                     By: /s/ 
                                     Name: John M. Lowber
                                     Title: Secretary/Treasurer

                                     By:  Fiber  Hold  Co.,  Inc.,  its  General
                                     Partner


                                     By: /s/ 
                                     Name: John M. Lowber
                                     Title: Secretary/Treasurer


                                     GCI HOLDINGS, INC.


                                     By: /s/ 
                                     Name: John M. Lowber
                                     Title: Secretary/Treasurer


                                     GCI TRANSPORT CO., INC.


                                     By: /s/  
                                     Name: John M. Lowber
                                     Title: Secretary/Treasurer


Executed in
New York, New York
                                     CREDIT   LYONNAIS  NEW  YORK   BRANCH,   as
                                     Administrative Agent


                                     By: /s/ 
                                     Name : Michael F.G. Pepe
                                     Title: Vice President
<PAGE>


            ACKNOWLEDGMENT, AGREEMENT AND CONSENT

                  In   accordance   with  Section  6(a)  of  the   Subordination
Agreement,  NationsBank of Texas,  N.A. as  administrative  agent (the "Holdings
Administrative  Agent")  for the  lenders  referred  to in the  Holdings  Credit
Agreements (the "Holdings Lenders"),  on behalf of the Holdings Lenders,  hereby
(i) acknowledges and agrees that the pledge and grant of a security  interest by
Holdings  to the  Holdings  Administrative  Agent,  in  and to the  Subordinated
Obligations  owed by the Obligor to Holdings and in any note  evidencing  any of
such  Subordinated  Obligations in order to secure the Obligations (as such term
is defined in each of Holdings Credit  Agreements),  is subject to the terms and
provisions of the foregoing Subordination Agreement and (ii) consents and agrees
to be bound by the terms and provisions of such Subordination Agreement as if it
were a Subordinated Creditor.


Date: 1/26, 1998                     NATIONSBANK OF TEXAS, N.A.,
                                     as administrative agent



                                     By: /s/
                                     Name: Whitney Busse
                                     Title: Vice President
<PAGE>
                                                                       EXHIBIT G

                              DEPOSITARY AGREEMENT


                  DEPOSITARY  AGREEMENT (as amended,  supplemented  or otherwise
modified,  renewed or replaced from time to time,  the  "Depositary  Agreement")
dated  as of  January 27,  1998  by  and  between  Alaska  United  Fiber  System
Partnership,  a general  partnership  organized  under  the laws of Alaska  (the
"Borrower") and Credit Lyonnais New York Branch, as administrative agent for the
Lenders referred to below (in such capacity, the "Administrative Agent").

                  Pursuant to that certain Credit and Security  Agreement  dated
as of January 27, 1998 among the Borrower,  the lenders referred to therein (the
"Lenders"), 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 such agreement may be amended, supplemented or otherwise
modified,  renewed or replaced from time to time, the "Credit  Agreement"),  the
Lenders have agreed to make loans to the  Borrower on the terms,  and subject to
the conditions, set forth therein.

                  The  Lenders   require  that  the  Borrower  enter  into  this
Depositary  Agreement in order to set forth the order of priority of withdrawals
from the  Disbursement  Account (as such term is hereinafter  defined) and other
matters relating thereto.

                  Accordingly,  in  consideration  of  the  premises  and of the
mutual agreements herein contained and other good and valuable consideration the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
hereby agree as follows:

                  1. Definitions.

                  (a) All  capitalized  terms used herein but not defined herein
shall have the meanings set forth in the Credit Agreement.

                  (b) As  used  herein,  the  following  terms  shall  have  the
meanings set forth below:

                           "Adequate Debt Service  Coverage"  shall mean for any
                  date at which it is to be  determined,  that the Debt  Service
                  Coverage Ratio as of such date equals or exceeds 1.20:1.00.

                           "Alaska  Depositary  Account"  shall mean Account No.
                  1510-562-0,  entitled "Alaska Depositary Account", in the name
                  of the  Borrower at the office of The First  National  Bank of
                  Anchorage,  201 West 36th Avenue, P.O. Box 200628,  Anchorage,
                  Alaska 99520.
<PAGE>
                           "Budgeted  O&M" shall be as  defined in Section  3(a)
                  hereof.

                           "Cash   Receipts"   shall  mean  the  cash  receipts,
                  revenues or income actually  received by the Borrower pursuant
                  to the terms of any Capacity Agreement,  any Project Agreement
                  or otherwise,  including, without limitation, (a) interest and
                  other  income  earned  on  the  amounts  in  the  Disbursement
                  Account, (b) interest and other income earned on any amount in
                  the  Interest  Reserve  Account  or the  Holding  Account  and
                  withdrawn therefrom for deposit into the Disbursement  Account
                  and (c) any  payments,  rebates  or  refunds  to the  Borrower
                  pursuant  to any of the  Capacity  Agreements,  other  Project
                  Agreements  or  otherwise   including,   without   limitation,
                  payments  for   services   provided  by  the   Borrower,   but
                  specifically  excluding  any  recovery of any  insurance  loss
                  relating to the Project or any amount  relating to an Event of
                  Loss  (which   recoveries  and  amounts  are  required  to  be
                  deposited in the Insurance Proceeds Account in accordance with
                  the terms of the Credit Agreement).

                           "Debt Service Coverage Ratio" shall mean for any date
                  at  which  it is to be  determined,  the  ratio  of  (i)  Cash
                  Receipts actually received by the Borrower during the Trailing
                  Four Quarters less the amount of  operating,  maintenance  and
                  other expenses (but excluding  interest  expense)  incurred by
                  the Borrower  during the Trailing Four  Quarters,  to (ii) all
                  scheduled  principal,  interest  and fees paid or accrued with
                  respect to all  outstanding  Indebtedness  of the Borrower and
                  all amounts paid or accrued with respect to all Interest  Rate
                  Protection Agreements of the Borrower in each case, during the
                  Trailing  Four  Quarters  less the amount of any payments with
                  respect  to  Interest  Rate  Protection   Agreements  actually
                  received by the Borrower during the Trailing Four Quarters.

                           "Disbursement   Account"   shall  mean   Account  No.
                  0139787000100 entitled "Alaska United Disbursement Account" at
                  the office of Credit Lyonnais New York Branch,  1301 Avenue of
                  the Americas, New York, New York 10019.

                           "Holding    Account"    shall   mean    Account   No.
                  0139787000102, entitled "Alaska United Holding Account" at the
                  office of Credit Lyonnais New York Branch,  1301 Avenue of the
                  Americas, New York, New York 10019.

                           "Holdover  Funds" shall be as defined in Section 5(b)
                  hereof.

                           "Interest  Reserve  Account"  shall mean  Account No.
                  0139787000103   entitled   "Alaska  United  Interest   Reserve
                  Account"  at the office of Credit  Lyonnais  New York  Branch,
                  1301 Avenue of the Americas, New York, New York 10019.



                                      -2-
<PAGE>
                           "Local   Bank   Account"   shall  mean   Account  No.
                  1511-174-3  established  by the  Borrower at the office of The
                  First National Bank of Anchorage,  201 West 36th Avenue,  P.O.
                  Box 200628, Anchorage, Alaska 99520.

                           "Trailing Four  Quarters"  shall mean with respect to
                  any date at which it is to be  determined,  the fiscal quarter
                  then  ended  and  the  three   immediately   preceding  fiscal
                  quarters,  considered as a single period;  provided,  however,
                  that for each of the first three (3) fiscal quarters following
                  the Completion  Date,  "Trailing Four Quarters" shall mean the
                  period from the Completion Date to the last day of such fiscal
                  quarter.

                  2. Disbursement Account; Direct Payment.

                  (a) The Borrower hereby agrees that the  Disbursement  Account
shall be under the sole dominion and control of the Administrative Agent.

                  (b) The Borrower hereby agrees that all Cash Receipts received
by the Borrower after the Closing Date shall be deposited directly in the Alaska
Depositary  Account (or if such Cash Receipt is to be received from an Affiliate
of the Borrower, in the Disbursement  Account).  The Borrower shall instruct all
Persons  party to any agreement  (including,  without  limitation,  any Capacity
Agreement or any Project  Agreement)  whether now existing or hereafter  entered
into,  which  requires  or  provides  for a payment of any Cash  Receipts to the
Borrower,  to make such payments directly into the Alaska Depositary  Account or
the  Disbursement  Account (as  applicable)  and shall cause all such Persons to
agree to make such payments directly into the Alaska  Depositary  Account or the
Disbursement  Account (as  applicable).  The Borrower shall promptly  notify the
Administrative  Agent if the Borrower becomes aware that any such Person refuses
or fails to make such payments  directly into the Alaska  Depositary  Account or
the Disbursement Account (as applicable).

                  (c) The Borrower  hereby  specifically  authorizes and directs
all Persons party to any agreement  which  requires or provides for a payment of
any Cash Receipts to the Borrower to make such payments directly into the Alaska
Depositary  Account or the Disbursement  Account (as  applicable).  The Borrower
further acknowledges and agrees that all payments made by a Person directly into
the Alaska Depositary Account or the Disbursement Account in accordance with the
instructions of the Borrower (or the Administrative  Agent) shall constitute and
be deemed to be payments to the Borrower  under the  applicable  agreement,  and
shall  discharge  the  obligations  of such Person to make such  payments to the
Borrower  under the  applicable  agreement to the extent of such  payments  made
directly into the Alaska Depositary Account or the Disbursement Account.

                  (d) In the event the Borrower  receives any Cash Receipts from
any Person, which Cash Receipts should have been remitted directly to the Alaska
Depositary  Account or the 


                                      -3-
<PAGE>
Disbursement  Account (as  applicable),  the Borrower  shall promptly remit such
Cash Receipts to the  Disbursement  Account to be applied in accordance with the
terms of this Depositary Agreement.

                  3.  Withdrawals from the  Disbursement  Account.  The Borrower
hereby irrevocably  authorizes the Administrative  Agent to make withdrawals and
transfers and/or applications of funds on deposit in the Disbursement Account on
and after the date on which the System is  Completed,  on the  applicable  dates
indicated below, in the following order of priority:

                  (a) first,  on the last Business Day of each  calendar  month,
the Administrative  Agent shall withdraw funds from the Disbursement  Account in
an amount not exceeding the amount of the  operating  and  maintenance  expenses
budgeted  for  such  month  as set  forth  in the  applicable  Operating  Budget
delivered to the  Administrative  Agent pursuant to Section 5.1(l) of the Credit
Agreement  (such  expenses shall be referred to herein as the "Budgeted O&M" for
such month) and shall  transfer such funds to the Local Bank Account;  provided,
however,  that any  withdrawal or transfer of funds to the Borrower  pursuant to
this paragraph (a) shall only be made if, on the date of the proposed withdrawal
and  transfer,  no Default or Event of Default  shall have  occurred and then be
continuing  or any  Default  or Event of Default  shall have been  waived by the
Required Lenders;

                  (b) second,  on the last Business Day of each calendar  month,
if any funds  remain on deposit in the  Disbursement  Account  after  making the
withdrawal specified in paragraph (a) above, then the Administrative Agent shall
withdraw funds from the Disbursement  Account in an amount not exceeding the sum
of (i) any accrued  interest,  fees or other amounts that will become payable in
the next  succeeding  month to the  Administrative  Agent or any of the  Lenders
pursuant to the Credit Agreement or any of the other Fundamental  Documents plus
(ii) any  periodic net payments  with  respect to any Interest  Rate  Protection
Agreement  that will  become  payable in the next  succeeding  month,  and shall
transfer such funds to the Interest Reserve Account;

                  (c) third, on the last Business Day of each calendar month, if
any funds  remain on  deposit  in the  Disbursement  Account  after  making  the
withdrawals  specified in paragraphs (a) and (b) above, then the  Administrative
Agent  shall  withdraw  funds  from the  Disbursement  Account  in an amount not
exceeding any  termination  payment with respect to an Interest Rate  Protection
Agreement  (the  termination  of which  has been  consented  to by the  Required
Lenders as required by the Credit  Agreement)  which payment will become payable
in the next  succeeding  month and shall  transfer  such  funds to the  Interest
Reserve Account;

                  (d) fourth, on the last Business Day of each calendar quarter,
if any funds  remain on deposit in the  Disbursement  Account  after  making the
withdrawals   specified  in  paragraphs  (a),  (b)  and  (c)  above,   then  the
Administrative  Agent shall withdraw funds from the  Disbursement  Account in an
amount not exceeding any  scheduled  amortization  payment due to the Lenders at
the end of such quarter pursuant to the Credit Agreement and/or the Term Notes



                                      -4-
<PAGE>
and shall apply such funds to the repayment of the outstanding  principal amount
of the Loans in accordance with the terms of the Credit Agreement;

                  (e) fifth, on the last Business Day of each calendar  quarter,
if any funds  remain on deposit in the  Disbursement  Account  after  making the
withdrawals  specified  in  paragraphs  (a),  (b),  (c) and (d) above,  then the
Administrative  Agent shall withdraw funds from the  Disbursement  Account in an
amount not  exceeding  the amount (if any) by which the amount of operating  and
maintenance  expenses  actually  incurred by the  Borrower  during such  quarter
exceeded  the amount of Budgeted O&M for such  quarter and shall  transfer  such
funds to the Local Bank Account;  provided,  however,  that any  withdrawal  and
transfer of funds to the Borrower  pursuant to this  paragraph (e) shall only be
made if, on the date of the  proposed  withdrawal  and  transfer,  no Default or
Event of Default  shall have  occurred and then be  continuing or any Default or
Event of Default shall have been waived by the Required Lenders;

                  (f) sixth, on the last Business Day of each calendar  quarter,
if any funds  remain on deposit in the  Disbursement  Account  after  making the
withdrawals  specified in paragraphs (a), (b), (c), (d) and (e) above,  then the
Administrative  Agent shall withdraw such funds and shall transfer such funds to
the Local Bank Account;  provided,  however,  that any withdrawal or transfer of
funds to the Borrower  pursuant to this  paragraph  (f) shall only be made if on
the date of the proposed  withdrawal  and  transfer,  (i) no Default or Event of
Default  shall have  occurred and then be  continuing or any Default or Event of
Default shall have been waived by the Required  Lenders and (ii) the Borrower is
able to  demonstrate  to the  Administrative  Agent that there is Adequate  Debt
Service  Coverage;  and provided,  further,  however,  that over the term of the
Credit  Agreement,  the  Administrative  Agent shall only transfer an aggregate,
cumulative  amount of up to ten million  dollars  ($10,000,000)  to the Borrower
pursuant to this paragraph (f);

                  (g)  seventh,  on  the  last  Business  Day of  each  calendar
quarter, if any funds remain on deposit in the Disbursement Account after making
the  withdrawals  specified in paragraphs (a), (b), (c), (d), (e) and (f) above,
then the  Administrative  Agent shall  withdraw  all such funds (the  "Remaining
Funds") and shall apply the Remaining  Funds to the repayment of the outstanding
principal  amount  of the  Loans  in  accordance  with the  terms of the  Credit
Agreement;  provided,  however,  that  with  respect  to  any  calendar  quarter
occurring after the Conversion Date, if (i) no Default or Event of Default shall
have  occurred and then be  continuing  or any Default or Event of Default shall
have been  waived  by the  Required  Lenders  and (ii) the  Borrower  is able to
demonstrate  to the  Administrative  Agent that there is Adequate  Debt  Service
Coverage,  then upon the request of the Borrower, the Administrative Agent shall
transfer  fifty percent  (50%) of the Remaining  Funds to the Local Bank Account
and shall  apply the other fifty  percent  (50%) of the  Remaining  Funds to the
repayment of the  outstanding  principal  amount of the Loans in accordance with
the terms of the Credit Agreement.

                  The  parties  hereto  hereby  agree that any  withdrawals  and
transfers and/or  applications of funds pursuant to this Section 3 shall be made
after the time any transfer of funds 


                                      -5-
<PAGE>
from the Alaska Depositary Account to the Disbursement  Account should have been
made in accordance with the Instruction Letter.

                  4. Interest  Reserve  Account;  Withdrawals  from the Interest
Reserve Account.

                  (a) The  Borrower  hereby  agrees  that the  Interest  Reserve
Account  shall be under the sole  dominion  and  control  of the  Administrative
Agent.

                  (b)  The  Administrative  Agent  shall  make  withdrawals  and
transfers of funds on deposit in the Interest  Reserve Account from time to time
in each  month as and when  necessary  in  order to duly and  timely  pay to the
Administrative  Agent and/or any of the Lenders any accrued but unpaid interest,
fees, payments with respect to any Interest Rate Protection  Agreements to which
a Lender is a party or other amounts  becoming due in such month;  provided that
any such  withdrawal  and  transfer  shall only be made on the date on which the
applicable payment is due.

                  (c) On the  last  Business  Day of each  month  (after  giving
effect to any  withdrawals  to be made on such  Business Day pursuant to Section
4(b) above), the Administrative Agent shall withdraw all funds on deposit in the
Interest  Reserve  Account  and shall  transfer  such funds to the  Disbursement
Account.  Any such transfer shall be made prior to any withdrawals to be made on
such Business Day from the Disbursement Account pursuant to Section 3 hereof.

                  (d)   The   Borrower   hereby   irrevocably   authorizes   the
Administrative Agent to make the withdrawals and transfers  contemplated by this
Section 4.

                  5.  Holding  Account;  Failure to have  Adequate  Debt Service
Coverage.

                  (a) The Borrower  hereby agrees that the Holding Account shall
be under the sole dominion and control of the Administrative Agent.

                  (b) In the event that on the last Business Day of any calendar
quarter,  any funds on deposit in the Disbursement Account are not withdrawn and
transferred  as provided in paragraphs  (f) and (g) of Section 3 hereof  because
the Borrower is unable to demonstrate to the Administrative  Agent that there is
Adequate Debt Service Coverage (such funds being referred to herein as "Holdover
Funds"),  the  Administrative  Agent shall  withdraw the Holdover Funds from the
Disbursement  Account  and shall  transfer  the  Holdover  Funds to the  Holding
Account.

                  (c) If (i) funds have been  transferred  and are being held in
the  Holding  Account  pursuant to the  provisions  hereof and (ii) on the fifth
Business Day prior to the end of any calendar  quarter  occurring after the date
any  such  funds  were  transferred  to  the  Holding   Account,   the  Borrower
demonstrates  to the  Administrative  Agent  that there  will be  Adequate  Debt
Service  Coverage as of the last Business Day of such quarter,  then on the last
Business Day 




                                      -6-
<PAGE>
of such  quarter,  the  Administrative  Agent shall  withdraw  all funds then on
deposit in the Holding Account and shall transfer such funds to the Disbursement
Account. Such transfer shall be made prior to any withdrawals to be made on such
Business Day from the Disbursement Account pursuant to Section 3 hereof.

                  (d) The Borrower hereby authorizes the Administrative Agent to
make the withdrawals and transfers and/or to apply funds as contemplated by this
Section 5.

                  6. Certificates by the Borrower.

                  (a)  The   Borrower   hereby   agrees   to   deliver   to  the
Administrative  Agent at least three (3) Business  Days prior to the end of each
calendar month, a certificate  signed by an Authorized Officer setting forth the
amount  of any  payment  becoming  due in the  immediately  succeeding  month in
respect of any Interest Rate Protection Agreement, the date such payment becomes
due and the Person to which such payment is owed.

                  (b)  The   Borrower   hereby   agrees   to   deliver   to  the
Administrative  Agent at least five (5)  Business  Days prior to the end of each
calendar   quarter,   a  certificate   signed  by  an  Authorized   Officer  (i)
demonstrating  in reasonable  detail  whether or not there will be Adequate Debt
Service  Coverage as of the last  Business  Day of such quarter and (ii) setting
forth the  amount  (if any) by which the  amount of  operating  and  maintenance
expenses  actually  incurred by the Borrower  during such  quarter  exceeded the
amount of Budgeted O&M for such quarter.

                  7. Investment of Funds.

                  (a) The Administrative Agent is hereby authorized and directed
to invest and reinvest the funds from time to time deposited in the Disbursement
Account,  the Interest  Reserve  Account or the Holding  Account,  so long as no
Default or Event of Default has occurred and is continuing,  on the instructions
of the Borrower  (provided that if such  instructions  are given verbally,  they
shall be confirmed  promptly in writing by facsimile  or  otherwise)  or, if the
Borrower  shall fail to give such  instructions,  in the sole  discretion of the
Administrative   Agent,  provided  that  in  no  event  may  the  Borrower  give
instructions to the Administrative  Agent to, or may the Administrative Agent in
its  discretion,  invest or  reinvest  funds in the  Disbursement  Account,  the
Interest  Reserve Account or the Holding Account in other than Cash  Equivalents
described in clause (i) of the  definition of Cash  Equivalents  or described in
clauses  (ii) and (iii) of the  definition  of Cash  Equivalents  to the  extent
issued by Credit Lyonnais New York Branch or Credit Lyonnais Nassau Branch.  The
Administrative  Agent shall have no  obligation to invest or reinvest any of the
funds from time to time  deposited  in the  Disbursement  Account,  the Interest
Reserve  Account or the Holding  Account if the Borrower shall not have provided
the instructions contemplated by this Section 7(a).

                  (b) Any net  income or gain on the  investment  of funds  from
time to time held in the Disbursement  Account,  the Interest Reserve Account or
the Holding Account,  shall be 


                                      -7-
<PAGE>
retained by the Administrative Agent as a part of the Disbursement  Account, the
Interest Reserve Account or the Holding Account (as the case may be) and any net
loss on any such investment shall be charged against the  Disbursement  Account,
the Interest Reserve Account or the Holding Account (as the case may be).

                  (c) Neither the Administrative  Agent nor the Lenders shall be
a trustee for the Borrower,  or shall have any obligations or  responsibilities,
or shall be  liable  for  anything  done or not  done,  in  connection  with the
Disbursement  Account,  the  Interest  Reserve  Account or the Holding  Account,
except as expressly  provided  herein and except that the  Administrative  Agent
(for the benefit of the Lenders)  shall have the  obligations of a secured party
under  the UCC.  The  Administrative  Agent and the  Lenders  shall not have any
obligation  or  responsibilities  and  shall  not be  liable  in any way for any
investment  decision  made pursuant to this Section 7 or for any decrease in the
value of the investments held in the Disbursement  Account, the Interest Reserve
Account or the Holding Account.

                  (d) The Borrower  acknowledges  and agrees that no  investment
loss or other decrease in the value of any investments or cash or other property
held in the  Disbursement  Account,  the Interest Reserve Account or the Holding
Account  shall in any way affect  the  Borrower's  obligations  under the Credit
Agreement or the other Fundamental Documents.

                  8.  Grant of  Security  Interest.  For value  received  and to
induce  the  Lenders  to make the  Loans  from time to time to the  Borrower  as
provided  for in the Credit  Agreement,  as  security  for the due and  punctual
payment and performance of all of the  Obligations,  the Borrower hereby assigns
to the Administrative Agent (for the benefit of the Lenders),  and grants to the
Administrative  Agent (for the benefit of the  Lenders),  a first and prior Lien
upon all the  Borrower's  right,  title and interest in and to the  Disbursement
Account,  the  Interest  Reserve  Account  and the  Holding  Account,  all cash,
documents, instruments and securities from time to time held in the Disbursement
Account,  the  Interest  Reserve  Account  or the  Holding  Account,  all rights
pertaining to investments  of funds in the  Disbursement  Account,  the Interest
Reserve  Account or the Holding  Account and all  products  and  proceeds of, or
income  from,  any  of the  foregoing.  All  cash,  documents,  instruments  and
securities  from  time to time  on  deposit  in the  Disbursement  Account,  the
Interest  Reserve Account or the Holding Account,  and all rights  pertaining to
investments of funds in the Disbursement  Account,  the Interest Reserve Account
and the Holding  Account shall  immediately and without any need for any further
action on the part of the  Borrower,  any  Lender or the  Administrative  Agent,
become subject to the Lien set forth in this Section 8, be deemed Collateral for
all purposes and be subject to the provisions of this  Depositary  Agreement and
the other Fundamental Documents.

                  9. Remedies.  At any time during the  continuation of an Event
of Default,  the  Administrative  Agent may sell any  documents,  instruments or
securities held in the Disbursement Account, the Interest Reserve Account or the
Holding  Account and may  immediately  apply the proceeds  thereof and any other
cash held in the  Disbursement  Account,  


                                      -8-
<PAGE>
the Interest  Reserve  Account or the Holding Account in accordance with Section
8.7 of the Credit Agreement.

                  10. Further Assurances.  The Borrower hereby agrees to execute
documentation (including, without limitation, assignment agreements, instruction
letters  and other  documentation)  as may now or  hereafter  be required by the
Administrative  Agent in order  (a) to  reflect  the  security  interest  of the
Administrative  Agent  (for the  benefit  of the  Lenders)  in the  Disbursement
Account,  the Interest Reserve Account and the Holding  Account,  (b) to provide
for the deposit into the Alaska Depositary  Account or the Disbursement  Account
of all Cash  Receipts as  contemplated  by Section 2 hereof and (c) to otherwise
effectuate the provisions of this Depositary Agreement.

                  11.  No  Obligation.  The  Administrative  Agent  shall not be
obligated to perform any of the  obligations or duties of the Borrower under any
Project Agreement or any other agreement to which the Borrower is a party, or to
take any  action  to  collect  or  enforce  any claim  for  payment  of any Cash
Receipts.  The Borrower hereby agrees that the neither  Administrative Agent nor
any of its Affiliates,  directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them  hereunder  except for
its or their own gross negligence or willful misconduct.

                  12. Term. This Depositary Agreement shall remain in full force
and effect until all of the Obligations  shall have been fully and  indefeasibly
paid and performed and the Commitments shall have terminated.

                  13.  Notices.  Notices and other  communications  provided for
herein or otherwise  given  hereunder shall be in writing and shall be delivered
or mailed (or if by  telegram,  delivered  to the  telegraph  company and, if by
telecopier,  delivered  by  such  equipment)  to the  parties  at the  following
respective addresses:

                  (1)      If to the Administrative Agent:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York  10019
                           Attn:  Project Finance Group, Portfolio
                           Facsimile No.:  (212) 261-3421



                                      -9-
<PAGE>
                  (2)      If to the Borrower:

                           Alaska United Fiber System Partnership
                           c/o GCI Fiber Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska 99503
                           Attn: Chief Financial Officer
                           Facsimile No.:  (907) 265-5676

or such other  address as such party may from time to time  designate  by giving
written notice to the other party hereto.  All notices and other  communications
given to any party  hereto in  accordance  with the  provisions  hereof shall be
deemed to have been given on the tenth  Business Day after the date when sent by
registered or certified mail, postage prepaid,  return receipt requested,  if by
mail,  or when  delivered  to the  telegraph  company,  charges  prepaid,  if by
telegram,  or when  receipt  is  acknowledged  if by  telecopier,  in each  case
addressed to such party as provided in this Section 13 or in accordance with the
latest unrevoked written direction from such party.

                  14.  Successors and Assigns.  All references  herein to any of
the  parties  to this  Depositary  Agreement  shall be  deemed  to  include  the
successors and assigns of such party;  provided,  however, that the Borrower may
not assign any of its rights or obligations  hereunder without the prior written
consent of the Administrative  Agent and all of the Lenders,  and all covenants,
promises  and  agreements  by or on behalf of the Borrower  which are  contained
herein  shall  inure  to  the  benefit  of the  successors  and  assigns  of the
Administrative Agent and any of the Lenders.

                  15.  Amendments.  This  Depositary  Agreement  may be amended,
modified or supplemented,  and the terms hereof may be waived, in each case only
by a written instrument  executed by the Borrower and the  Administrative  Agent
and consented to by the Required Lenders; provided, however, that any amendment,
modification,  supplement or waiver of the  provisions of Section 3 hereof shall
require  the  consent of all the Lenders  except as  expressly  provided in such
Section 3. The waiver by any party  hereto of a breach of any  provision of this
Depositary  Agreement  shall  not  operate  or be  construed  as a waiver of any
subsequent or other breach,  whether or not similar. No notice to, or demand on,
the  Borrower  in any case shall  entitle  the  Borrower to any other or further
notice or demand in the same, similar or other circumstances.

                  16. Severability.  Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other  jurisdiction.  To the extent  permitted  by  Applicable  Law, the parties
hereby  waive 


                                      -10-
<PAGE>
any  provision  of law which may  render  any  provision  hereof  prohibited  or
unenforceable in any respect.

                  17. Counterparts. This Depositary Agreement may be executed by
the parties hereto in separate counterparts,  each of which when so executed and
delivered  shall  be an  original,  but all  such  counterparts  shall  together
constitute one and the same agreement, and all signatures need not appear on any
one counterpart.

                  18.  Headings.  The headings  and captions in this  Depositary
Agreement are for  convenience of reference only and shall not define,  limit or
otherwise affect any of the terms or provisions hereof.

                  19. Governing Law. THIS DEPOSITARY AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW
YORK,  WITHOUT  REGARD TO ANY CHOICE OF LAW RULES  THEREOF WHICH MIGHT APPLY THE
LAWS OF ANY OTHER JURISDICTION.

                  20. No Waiver.  No  failure on the part of the  Administrative
Agent or any Lender to exercise,  and no delay in exercising,  any right, power,
privilege  or  remedy  hereunder  or  under  any  other  Project   Agreement  or
Fundamental  Document shall operate as a waiver thereof, nor shall any single or
partial  exercise of any such right,  power,  privilege  or remedy  preclude any
other or further  exercise  thereof or the exercise of any other  right,  power,
privilege or remedy. All remedies hereunder are cumulative and are not exclusive
of any other remedies provided by law.

                  21. Entire Agreement. This Depositary Agreement represents the
entire  agreement of the parties with regard to the subject matter  hereof,  and
supersedes  all prior  agreements  and  understandings,  both  written and oral,
between  the  parties  with  respect to the  subject  matter of this  Depositary
Agreement.




                                      -11-
<PAGE>
                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Depositary  Agreement to be executed and delivered by their respective  officers
thereunto duly authorized as of the day and year first above written.

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


                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                       By:  Fiber Hold Co.,  Inc.,  its  General
                                       Partner



                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer

                                       CREDIT  LYONNAIS  NEW  YORK  BRANCH,   as
                                       Administrative Agent



                                       By: /s/      
                                       Name: Michael F.G. Pepe
                                       Title: Vice President
<PAGE>
                                                                       EXHIBIT H

                               SPONSOR UNDERTAKING

                  UNDERTAKING   made  as  of  January  27,  1998  (as   amended,
supplemented or otherwise  modified,  renewed or replaced from time to time, the
"Undertaking") by General Communication, Inc., an Alaska corporation ("GCI") for
the benefit of Credit Lyonnais New York Branch, as Administrative  Agent for the
Lenders referred to below.

                  Reference is hereby made to that  certain  Credit and Security
Agreement  dated as of  January  27,  1998  among  Alaska  United  Fiber  System
Partnership (the  "Borrower"),  the lenders referred to therein (the "Lenders"),
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 such agreement may be amended,  supplemented or otherwise modified,  renewed
or replaced from time to time, the "Credit  Agreement").  Pursuant to the Credit
Agreement,  the Lenders have  agreed,  subject to the terms and  conditions  set
forth in the Credit Agreement, to make loans to the Borrower.

                  GCI is the ultimate  indirect owner of all of the  partnership
interests in the Borrower.

                  It is a  condition  precedent  to the  initial  loan under the
Credit Agreement that GCI deliver this Undertaking to the Lenders.

                  Accordingly,  for good and valuable  consideration the receipt
and sufficiency of which are hereby acknowledged, GCI hereby agrees as follows:

                  1.  Definitions.  All  capitalized  terms used  herein but not
defined herein shall have the meanings set forth in the Credit Agreement.

                  2. Representations and Warranties.

                  (a) GCI has contributed $50,000,000 in cash, and certain other
           property to the Borrower.

                  (b) (i) The audited, consolidated balance sheet of GCI and its
           consolidated   Subsidiaries   at  December  31,  1996  and  (ii)  the
           unaudited,  consolidated  balance  sheet of GCI and its  consolidated
           Subsidiaries  at  September  30,  1997,  together  with  the  related
           statements  of income,  cash flows and  stockholders'  equity and the
           related notes and supplemental  information for such  statements,  in
           the forms which have  previously  been provided to the Lenders,  have
           been prepared in accordance with GAAP, except as otherwise  indicated
           in the  notes to such  financial  statements.  All of such  financial
           statements  fairly present in all material  respects the consolidated
           financial  condition  or the  results  of  operations  of GCI and its
           consolidated  Subsidiaries at the dates or for the periods indicated,
           subject in the case of  unaudited  statements,  to changes  resulting
           from  
<PAGE>
           normal  year-end and audit  adjustments,  and (in the case of balance
           sheets) reflect  (including the notes thereto) all known liabilities,
           contingent or otherwise, as of such dates required in accordance with
           GAAP to be shown or reserved  against,  or  disclosed in the notes to
           the financial statements.

                  (c) There has been no material  adverse change with respect to
           the business, operations,  performance, assets, properties, condition
           (financial   or  otherwise)  or  prospects  of  GCI  or  any  of  its
           consolidated Subsidiaries since December 31, 1996.

                  (d) This  Undertaking when executed by GCI will constitute the
           legal, valid and binding obligation of GCI, enforceable in accordance
           with its terms,  subject only, as to the enforcement of remedies,  to
           applicable   bankruptcy,   insolvency   and  similar  laws  affecting
           creditors' rights and general principles of equity.

                  3.  Covenants.  GCI agrees that,  unless the Required  Lenders
           shall otherwise consent in writing, it will:

                  (a)  furnish or cause to be  furnished  to the  Administrative
           Agent (with sufficient  copies for the Lenders) within 120 days after
           the end of each fiscal year of GCI, the audited, consolidated balance
           sheet of GCI and its consolidated  Subsidiaries as at the end of, and
           the related statements of income, cash flow and stockholders'  equity
           for, such year, and the  corresponding  figures as at the end of, and
           for, the preceding fiscal year,  accompanied by an unqualified report
           and opinion of KPMG Peat Marwick LLP or such other independent public
           accountants of recognized standing as shall be retained by GCI and be
           reasonably  satisfactory  to the Required  Lenders,  which report and
           opinion  shall be  prepared in  accordance  with  generally  accepted
           auditing standards relating to reporting and which report and opinion
           shall  contain no material  exceptions or  qualifications  except for
           qualifications  relating  to  accounting  changes  (with  which  such
           independent public  accountants  concur) in response to FASB releases
           or other authoritative pronouncements;

                  (b)  furnish or cause to be  furnished  to the  Administrative
           Agent (with  sufficient  copies for the Lenders) within 60 days after
           the end of each of the first  three  fiscal  quarters  of each of its
           fiscal years,  the unaudited,  consolidated  balance sheet of GCI and
           its  consolidated  Subsidiaries  as at the  end of,  and the  related
           unaudited  statements of income,  cash flow and stockholders'  equity
           for, such quarter, and for the portion of the fiscal year through the
           end of such quarter, and the corresponding  figures as at the end of,
           and for,  the  corresponding  periods in the  preceding  fiscal year,
           together with a certificate  signed by the President,  Vice President
           or  Treasurer  of GCI,  on behalf  of GCI,  to the  effect  that such
           financial  statements,  while  not  examined  by  independent  public
           accountants,   reflect,  in  the  opinion  of  GCI,  all  adjustments
           necessary to present  fairly the financial  position of GCI as at the
           end of the fiscal  quarter and the results of its  operations for the
           quarter  then  ended in  conformity  with  GAAP,  subject  to  normal
           year-end audit adjustments and the absence of footnotes;




                                      -2-
<PAGE>
                  (c) not permit a Change in Control to occur; and

                  (d) in the event  that GCI or any of its  Affiliates  sells or
           otherwise transfers to AT&T any partnership interests in the Borrower
           or any equity  interests  in any  Affiliate of GCI and as a result of
           such   transaction,   AT&T  either  (i)  owns  (whether  directly  or
           indirectly)  a greater  amount of the  partnership  interests  in the
           Borrower  than  GCI or (ii)  has  (whether  directly  or  indirectly)
           greater power to direct or cause the direction of the  management and
           policies of the Borrower than GCI,  cause AT&T to sign an undertaking
           letter substantially similar to this Undertaking.

                  4.  Term.  This  Undertaking  shall  remain  in full force and
effect until all of the Obligations  shall have been fully and indefeasibly paid
and performed and the Commitments shall have terminated.

                  5.  Remedies.  It is expressly  understood  and  agreed by GCI
that its failure to perform its obligations  under Sections 3(c) and 3(d) hereof
will cause irreparable injury to the Administrative Agent and the Lenders,  that
the  Administrative  Agent and the  Lenders  have no  adequate  remedy at law in
respect of such failure and, as a consequence,  agrees that each such obligation
shall be specifically  enforceable against GCI, and GCI hereby waives and agrees
not to assert any defenses  against an action for specific  performance  of such
obligations.

                  6. Notices.  Notices and other  communications  to  GCI or the
Administrative Agent in connection with this Undertaking shall be in writing and
shall be  delivered or mailed (or if by  telegram,  delivered  to the  telegraph
company and, if by  telecopier,  delivered by such  equipment) to the parties at
the following respective addresses:

                           (1)      If to GCI:

                                    General Communication, Inc.
                                    2550 Denali Street, Suite 1000
                                    Anchorage, Alaska  99503
                                    Attn:   Chief Financial Officer
                                    Facsimile No.: (907) 265-5676

                           (2)      If to the Administrative Agent:

                                    Credit Lyonnais New York Branch
                                    1301 Avenue of the Americas
                                    New York, New York  10019
                                    Attn:  Project Finance Group
                                    Facsimile No.:  (212) 261-3421


                                      -3-
<PAGE>
or such other  address as such party may from time to time  designate  by giving
written   notice  to  the  other   party   hereunder.   All  notices  and  other
communications given to any party in accordance with the provisions hereof shall
be deemed to have been given on the tenth  Business Day after the date when sent
by registered or certified mail, postage prepaid,  return receipt requested,  if
by mail, or when  delivered to the telegraph  company,  charges  prepaid,  if by
telegram,  or when  receipt  is  acknowledged  if by  telecopier,  in each  case
addressed to such party as provided in this Section 6 or in accordance  with the
latest unrevoked written direction from such party.

                  7.  Successors and Assigns.  All references  herein  to any of
the parties to this  Undertaking  shall be deemed to include the  successors and
assigns of such  party;  provided,  however,  that GCI may not assign any of its
rights or  obligations  hereunder  without  the  prior  written  consent  of the
Administrative  Agent and all of the Lenders,  and all  covenants,  promises and
agreements by or on behalf of GCI which are contained  herein shall inure to the
benefit of the successors and assigns of the Administrative Agent and any of the
Lenders.

                  8.  Amendment;  Waiver;  Consent.  This  Undertaking  may   be
amended,  modified or supplemented,  and the terms hereof may be waived, in each
case only by a written instrument  executed by GCI and the Administrative  Agent
and consented to by the Required Lenders. The waiver by the Administrative Agent
and the Required Lenders of a breach by GCI of any provision of this Undertaking
shall not operate or be construed as a waiver of any subsequent or other breach,
whether or not similar.

                  9. Severability.  Any provision hereof  which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other  jurisdiction.  To the extent  permitted  by  Applicable  Law, the parties
hereby  waive any  provision  of law  which  may  render  any  provision  hereof
prohibited or unenforceable in any respect.

                  10. Counterparts. This Undertaking may be  executed by GCI and
the  Administrative  Agent  in  separate  counterparts,  each of  which  when so
executed and delivered  shall be an original,  but all such  counterparts  shall
together  constitute one and the same  agreement,  and all  signatures  need not
appear on any one counterpart.

                  11.  Headings.  The headings and captions in this  Undertaking
are for  convenience of reference only and shall not define,  limit or otherwise
affect any of the terms or provisions hereof.

                  12. Governing Law. THIS UNDERTAKING SHALL  BE GOVERNED BY, AND
CONSTRUED  AND ENFORCED IN ACCORDANCE  WITH,  THE LAWS OF THE 


                                      -4-
<PAGE>
STATE OF NEW YORK, WITHOUT REGARD TO ANY CHOICE-OF-LAW RULES THEREOF WHICH MIGHT
APPLY THE LAWS OF ANY OTHER JURISDICTION.

                  13.  Waiver of Jury Trial.  TO  THE EXTENT NOT  PROHIBITED  BY
APPLICABLE LAW WHICH CANNOT BE WAIVED,  GCI HEREBY WAIVES, AND COVENANTS THAT IT
WILL NOT ASSERT  (WHETHER AS PLAINTIFF,  DEFENDANT OR  OTHERWISE),  ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,  CLAIM,  DEMAND,  ACTION, OR
CAUSE OF ACTION  ARISING  OUT OF OR BASED  UPON THIS  UNDERTAKING,  THE  SUBJECT
MATTER HEREOF OR ANY PROJECT  AGREEMENT OR  FUNDAMENTAL  DOCUMENT,  IN EACH CASE
WHETHER  NOW  EXISTING OR  HEREAFTER  ARISING AND WHETHER IN CONTRACT OR TORT OR
OTHERWISE.  GCI  ACKNOWLEDGES  THAT IT HAS BEEN  INFORMED BY THE  ADMINISTRATIVE
AGENT THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL  INDUCEMENT UPON
WHICH THE ADMINISTRATIVE AGENT AND THE LENDERS HAVE RELIED, ARE RELYING AND WILL
RELY  IN  ENTERING  INTO  THE  FUNDAMENTAL  DOCUMENTS  AND  ANY OF  THE  PROJECT
AGREEMENTS.  THE  ADMINISTRATIVE  AGENT  OR ANY  LENDER  MAY  FILE  AN  ORIGINAL
COUNTERPART  OR A COPY OF THIS SECTION 13 WITH ANY COURT AS WRITTEN  EVIDENCE OF
THE CONSENT OF GCI TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

                  14. No Waiver.  No failure on  the part of the  Administrative
Agent or any Lender to exercise,  and no delay in exercising,  any right, power,
privilege  or  remedy  hereunder  or  under  any  other  Project   Agreement  or
Fundamental  Document shall operate as a waiver thereof, nor shall any single or
partial  exercise of any such right,  power,  privilege  or remedy  preclude any
other or further  exercise  thereof or the exercise of any other  right,  power,
privilege or remedy. All remedies hereunder are cumulative and are not exclusive
of any other remedies provided by law.

                  15. Submission to Jurisdiction; Service of Process. GCI HEREBY
IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK  AND TO THE  JURISDICTION  OF THE  UNITED  STATES  DISTRICT  COURT  FOR THE
SOUTHERN  DISTRICT  OF NEW YORK FOR THE  PURPOSES  OF ANY SUIT,  ACTION OR OTHER
PROCEEDING  ARISING OUT OF OR BASED UPON THIS  UNDERTAKING,  THE SUBJECT  MATTER
HEREOF  OR  ANY  PROJECT  AGREEMENT  OR  FUNDAMENTAL  DOCUMENT  BROUGHT  BY  THE
ADMINISTRATIVE AGENT OR A LENDER OR ANY OF THEIR SUCCESSORS OR ASSIGNS IN EITHER
OF THE ABOVE-REFERENCED FORUMS AT THE SOLE OPTION OF THE ADMINISTRATIVE AGENT OR
A LENDER.  GCI TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES,  AND
AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE,  IN ANY SUCH
SUIT,  ACTION OR  PROCEEDING  BROUGHT IN SUCH  COURTS,  ANY CLAIM THAT IT IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS


                                      -5-
<PAGE>
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT  FORUM,  THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR THAT THIS  UNDERTAKING,  THE SUBJECT  MATTER
HEREOF OR ANY PROJECT  AGREEMENT OR FUNDAMENTAL  DOCUMENT MAY NOT BE ENFORCED IN
OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR
PROCEEDING  INSTITUTED BY THE ADMINISTRATIVE AGENT OR A LENDER IN STATE COURT TO
FEDERAL  COURT,  AND (C) HEREBY  WAIVES THE RIGHT TO ASSERT IN ANY SUCH  ACTION,
SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS  EXCEPT  COUNTERCLAIMS  THAT ARE
COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER.  GCI HEREBY CONSENTS
TO SERVICE OF PROCESS BY MAIL AT ITS  ADDRESS TO WHICH  NOTICES  ARE TO BE GIVEN
PURSUANT TO SECTION 6 HEREOF. GCI AGREES THAT ITS SUBMISSION TO JURISDICTION AND
CONSENT TO SERVICE  OF  PROCESS BY MAIL IS MADE FOR THE  EXPRESS  BENEFIT OF THE
ADMINISTRATIVE  AGENT AND THE LENDERS.  FINAL  JUDGMENT  AGAINST GCI IN ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION (X) BY SUIT,  ACTION OR PROCEEDING ON THE JUDGMENT,  A CERTIFIED OR
TRUE COPY OF WHICH  SHALL BE  CONCLUSIVE  EVIDENCE OF THE FACT AND THE AMOUNT OF
INDEBTEDNESS  OR LIABILITY  OF GCI THEREIN  DESCRIBED OR (Y) IN ANY OTHER MANNER
PROVIDED  BY, OR  PURSUANT  TO, THE LAWS OF SUCH OTHER  JURISDICTION,  PROVIDED,
HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A LENDER MAY AT ITS OPTION BRING SUIT,
OR INSTITUTE OTHER JUDICIAL  PROCEEDINGS AGAINST GCI OR ANY OF ITS ASSETS IN ANY
STATE OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE GCI
OR SUCH ASSETS MAY BE FOUND. 



                                      -6-
<PAGE>
                  IN WITNESS  WHEREOF,  GCI has caused  this  Undertaking  to be
executed and delivered by its officer  thereunto  duly  authorized as of the day
and year first above written.


                                       GENERAL COMMUNICATION, INC.




                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Senior Vice President, Chief 
                                              Financial Officer


Accepted:

CREDIT LYONNAIS NEW YORK BRANCH,
  as Administrative Agent


By: /s/
      Name: Michael F.G. Pepe
      Title: Vice President
<PAGE>
                                                                       EXHIBIT I


                 FORM OF ASSIGNMENT AND ACCEPTANCE


                        Dated 


                  Reference is hereby made to the Credit and Security  Agreement
dated as of  January  27,  1998 (as the same  may be  amended,  supplemented  or
otherwise  modified,  renewed  or  replaced  from  time  to  time,  the  "Credit
Agreement") among Alaska United Fiber System  Partnership (the "Borrower"),  the
lenders referred to therein (the "Lenders"),  Credit Lyonnais New York Branch as
Administrative Agent (in such capacity, the "Administrative Agent"), NationsBank
of  Texas,   N.A.  as  Syndication   Agent  and  TD  Securities  (USA)  Inc.  as
Documentation  Agent.  Capitalized  terms used herein and not otherwise  defined
shall have the meanings set forth in the Credit Agreement.

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

                  1. The Assignor  hereby  irrevocably  sells and assigns to the
Assignee without recourse to the Assignor,  and the Assignee hereby  irrevocably
purchases and assumes from the Assignor  without  recourse to the Assignor,  the
interests set forth below in and to all the  Assignor's  rights and  obligations
under the Credit Agreement,  effective as of the Effective Date (such term being
used herein as hereinafter defined) (including,  without limitation, the amounts
and  percentages  set forth below in (a) the  Commitments of the Assignor on the
Effective  Date  (if  applicable)  and (b) the  outstanding  Loans  owing to the
Assignor on the Effective Date, together with all unpaid interest accrued to the
Effective Date);  provided,  however, it is expressly understood and agreed that
(x) the Assignor is not assigning to the Assignee and the Assignor  shall retain
(i) all of the  Assignor's  rights under Section 2.12 the Credit  Agreement with
respect  to any  cost,  reduction  or  payment  incurred  or made  prior  to the
Effective Date including,  without limitation, the rights to indemnification and
to reimbursement for taxes, costs and expenses and (ii) any and all amounts paid
to the Assignor  prior to the Effective  Date and (y) both Assignor and Assignee
shall be  entitled  to the  benefits  of  Sections  11.4 and 11.5 of the  Credit
Agreement:
<PAGE>
   (1) (1)            (2)                    (3)                   (4)
                 Amount Held            Amount being         Percentage of the
                 by Assignor (2)        assigned pursuant    Commitment and
                                        hereto (2)           Outstanding Loans
                                                             assigned pursuant
                                                             hereto
------------   ------------------      ------------------    ------------------

[Construction 
Commitment] (3)

[Term Loan 
Commitment] (3)

Outstanding Loans

                  2. The  Assignor (i) makes no  representation  or warranty and
assumes  no  responsibility  with  respect  to  any  statements,  warranties  or
representations  made in or in connection with the Credit Agreement or any other
Fundamental  Document  or the  execution,  legality,  validity,  enforceability,
genuineness,  sufficiency  or value of the  Credit  Agreement,  the  Fundamental
Documents or any other instrument or document furnished pursuant thereto,  other
than that it is the legal and beneficial owner of the interest being assigned by
it hereby and that such  interest is free and clear of any adverse  claim;  (ii)
makes no representation  or warranty and assumes no responsibility  with respect
to the financial  condition of the Borrower or any of the Transaction Parties or
the performance or observance by the Borrower or any of the Transaction  


-------------------
(1)      Pursuant  to Section  11.3(b) of the  Credit  Agreement,  no Lender may
         assign its rights and obligations  under the Credit  Agreement  without
         the prior written consent of the Borrower and the Required  Lenders if,
         upon the effectiveness of such assignment and any other assignment of a
         Lender's interests,  rights and obligations pursuant to Section 11.3 of
         the Credit  Agreement with the same effective date as such  assignment,
         any Lender (A) shall at any time prior to the Completion  Date,  have a
         Construction  Commitment  which is less than the lesser of  $15,000,000
         and one-fifth  (1/5) of the aggregate  Construction  Commitments of all
         the  Lenders  then in  effect  or (B) shall at any time on or after the
         Completion Date, hold outstanding  Loans in a principal amount which is
         less than the lesser of $15,000,000 or one-fifth (1/5) of the aggregate
         amount of all Loans outstanding on such effective date.

(2)      Calculated  after giving effect to all  assignments of Commitments  and
         Loans that will be effective prior to the Effective Date.

(3)      Only applicable for assignments with an Effective Date on or before the
         Completion Date.



                                      -2-
<PAGE>
Parties of any of their obligations under the Credit Agreement,  the Fundamental
Documents or any other instrument or document  furnished  pursuant thereto;  and
(iii)  attaches the Note held by it and requests that the  Administrative  Agent
exchange  such Note for a new Note  payable to the Assignor (if the Assignor has
retained a Commitment or holds any outstanding Loans under the Credit Agreement)
and a new Note  payable  to the  Assignee,  in the  respective  amount(s)  which
reflect the  assignment  being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).

                  3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and  Acceptance;  (ii) confirms that it
has received a copy of the Credit  Agreement,  together  with copies of the most
recent  financial  statements  delivered  pursuant to Section 5.1(a) and Section
5.1(b)  thereof (or if no such  statements  have been  delivered  as of the date
hereof,  then  copies of the  financial  statements  referred  to in Section 3.5
thereof) 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;  (iii) agrees that it will,  independently and without reliance upon
the  Administrative  Agent,  the  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 or any other  Fundamental  Document;  (iv) appoints and authorizes the
Administrative  Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement or any other Fundamental  Document as are
delegated to the Administrative  Agent by the terms thereof,  together with such
powers as are reasonably incidental thereto; (v) agrees that it will be bound by
the provisions of the Credit Agreement and will perform in accordance with their
terms  all the  obligations  which by the  terms  of the  Credit  Agreement  are
required  to be  performed  by it as a  Lender;  (vi)  agrees  that it will keep
confidential  all  information  with respect to the Borrower and the Transaction
Parties  furnished to it by the Borrower,  any of the Transaction  Parties,  the
Assignor or the Administrative Agent (other than information generally available
to the public or  otherwise  available  to the  Assignor  on a  non-confidential
basis);  (vii) if the  Assignee is  organized  under the laws of a  jurisdiction
outside the United States, attaches the forms prescribed by the Internal Revenue
Service of the United States  certifying  as to the  Assignee's  exemption  from
United States  withholding  taxes with respect to all payments to be made to the
Assignee under the Credit  Agreement or such other documents as are necessary to
indicate that all such payments are subject to such tax at a rate reduced by any
applicable tax treaty and (viii) has supplied the  information  requested on the
administrative questionnaire attached hereto as Exhibit A.

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


-------------------
(4)      See  Section  11.3(b) of the Credit  Agreement.  Such date shall be not
         earlier than five (5) Business  Days after the date of  acceptance  and
         recording by the Administrative Agent of the Assignment and Acceptance.




                                      -3-
<PAGE>
Acceptance  by the  Assignee  and the  Assignor,  it will  be  delivered  to the
Administrative  Agent,  together with the processing and recording fee of $2,500
to be paid to the  Administrative  Agent by the  Assignor,  for  acceptance  and
recording  by the  Administrative  Agent  pursuant to Section 11.3 of the Credit
Agreement, effective as of the Effective Date.

                  5.  Upon such  acceptance  and  recording,  from and after the
Effective  Date, (i) the 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 under the other Fundamental Documents and
shall be bound by the  provisions  thereof and (ii) the Assignor  shall,  to the
extent provided in this Assignment and Acceptance,  relinquish its rights and be
released from its obligations under the Credit Agreement (and if this Assignment
and Acceptance covers all or the remaining portion of the Assignor's  interests,
rights and obligations under the Credit  Agreement,  the Assignor shall cease to
be a party thereto).

                  6. Upon the  acceptance  and  recording by the  Administrative
Agent,  from and after the Effective Date, the  Administrative  Agent shall make
all payments in respect of the interest assigned hereby  (including  payments of
principal,  interest,  fees and other  amounts)  to the  Assignee  whether  such
amounts have accrued  prior to the  Effective  Date or accrue  subsequent to the
Effective Date. The Assignor and Assignee shall make all appropriate adjustments
in payments made by the Administrative  Agent for periods prior to the Effective
Date  or  with  respect  to the  making  of  this  assignment  directly  between
themselves.

                  7.  THIS  ASSIGNMENT  AND  ACCEPTANCE  SHALL BE  CONSTRUED  IN
ACCORDANCE  WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK  APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.

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




                                      -4-
<PAGE>
                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Assignment  and  Acceptance  to  be  duly  executed  by  their  respective  duly
authorized officers.

                                       [NAME OF ASSIGNOR], as Assignor



                                       By      
                                       Name:
                                       Title:


                                       [NAME OF ASSIGNEE], as Assignee



                                       By      
                                       Name:
                                       Title:


Accepted this     day
of          , 199 

CREDIT LYONNAIS NEW YORK BRANCH,
as Administrative Agent



By: 
  Name:
  Title:




                                      -5-
<PAGE>


                                       Exhibit A to  Assignment  and  Acceptance
                                       dated                between 
                                       (Assignor) and             (Assignee)


        [Attach a copy of the Administrative Questionnaire]
<PAGE>
                                                                       EXHIBIT J


                   FORM OF BORROWING CERTIFICATE


                  The undersigned hereby certifies, represents and warrants with
respect to the Borrowing to be made on the date indicated below pursuant to, and
on the terms and conditions  stated in, the Credit and Security  Agreement dated
as of January  27,  1998 among  Alaska  United  Fiber  System  Partnership  (the
"Borrower"),  the lenders referred to therein (the  "Lenders"),  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 the
same may be amended,  supplemented  or otherwise  modified,  renewed or replaced
from  time  to  time,  the  "Credit  Agreement")  and  the  related  Notes  that
(capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Credit Agreement):

                           (a) The  representations  and warranties set forth in
                  the Credit  Agreement and in the other  Fundamental  Documents
                  are and will be true and correct in all  material  respects on
                  and as of the date  hereof  and on the  date of the  Borrowing
                  requested   hereunder   (except  to  the   extent   that  such
                  representations and warranties  expressly relate to an earlier
                  date) with the same effect as if made on and as of such date.

                           (b)  On  the  date  hereof  and on  the  date  of the
                  Borrowing   requested   hereunder,   the   Borrower  and  each
                  Transaction Party is and will be in compliance with all of the
                  terms and provisions set forth in the Credit Agreement and the
                  other Fundamental Documents and no Default or Event of Default
                  has occurred or is continuing,  nor shall any such event occur
                  by reason of the making of the Loan(s) requested herein.

                           (c) No  material  adverse  change has  occurred  with
                  respect  to the  business,  operations,  performance,  assets,
                  properties, condition (financial or otherwise) or prospects of
                  the  Borrower  since July 29,  1997 or any of the  Transaction
                  Parties since June 30, 1997.

                           (d) The  Borrower has received the full amount of the
                  Sponsor  Equity Funds and all of such funds have been (i) used
                  for  the  payment  of  Project   Costs   (including,   without
                  limitation,  Project  Costs  owed to the  Contractor)  or (ii)
                  deposited in the SSI Cash Collateral  Account  pursuant to the
                  SSI Cash Collateral Agreement.
<PAGE>
                           (e) (i) The Borrower has no reason to believe that it
                  will not be able to fulfill its obligations under Section 5.21
                  of the Credit Agreement.

                           (f) The outstanding Obligations at July 31, 1998 will
                  not exceed the Specified Amount.

                           (g) The  Borrower  hereby  irrevocably  requests  [a]
                  Loan(s)  on the terms and  conditions  as stated in the Credit
                  Agreement  and the related Notes and in that  connection  sets
                  forth below the terms on which such  Borrowing is requested to
                  be made:

                           (i)        the   Loan(s)   being   requested   is   a
                                      [Construction Loan or the Term Loan].

                           (ii)       the requested  Business Day of the Loan(s)
                                      is       , 199 ;

                           (iii)      the  type  of  Loan(s)   requested  is  [a
                                      Alternate  Base Rate Loan or a  Eurodollar
                                      Loan],  the  amount(s)   thereof  and  the
                                      Interest  Period(s) [if a Eurodollar  Loan
                                      is requested] are as follows:

                                    Type       [Interest Period]        Amount
                                    ----       -----------------        ------

                           (h) [If a Construction  Loan is being  requested] The
                  proceeds of the Construction Loan(s) requested hereby shall be
                  used  solely to pay  Project  Costs  previously  incurred  and
                  currently  due  and  payable  (or in  the  case  of the  Final
                  Construction Loan, incurred but not yet due and payable). Such
                  Project  Costs do not exceed  the sum of the  amount  budgeted
                  therefor  (given  the  amount  of the  work  completed  on the
                  Project)  as set  forth in the  Construction  Budget  plus the
                  amount of the contingency set forth in the Construction Budget
                  which has not  previously  been used to pay Project Costs (the
                  "Unused  Contingency").  The amount of the Unused  Contingency
                  (after giving effect to the Borrowing  requested  hereby) will
                  be $        .

                           (i) Upon  disbursement  by the  Borrower of the funds
                  advanced by the Lenders as requested in this Certificate,  all
                  Project Costs heretofore  incurred and due and payable will be
                  fully paid and satisfied.

                           (j) The actual cost  required to complete all matters
                  of a type included in any line item in the Construction Budget
                  does not exceed the amount  allocated to that line item in the
                  Construction Budget, except as follows (if any): [describe]



                                      -2-
<PAGE>
                           (k) All Permits  required to be obtained on or before
                  the date hereof have been  obtained and the same are valid and
                  in full  force and  effect  and not  subject  to any appeal or
                  other unsatisfied requirements that may allow modifications or
                  revocation thereof, except as follows: [describe]

                  The  Borrower  has no  reason  to  believe  that  any  Permits
                  remaining  to be  obtained  cannot  be  obtained  in a  timely
                  manner.  The Project has been conducted in compliance with all
                  Permits.

                           (l) There does not exist,  and after giving effect to
                  the  Borrowing  requested in this  Certificate  there will not
                  exist, any Event of Loss.

                           (m) The  Project  is  progressing  in a  satisfactory
                  manner so as to assure  Completion  of the System on or before
                  January 1, 1999.

                           (n)  There  are no  Liens  on any of the  Collateral,
                  other than Permitted Encumbrances.

                           (o) Each  Fundamental  Document remains in full force
                  and effect.

                           (p) The statements,  calculations,  amounts and other
                  information  set  forth  in  this  Certificate  are  true  and
                  correct.

                           (q) The Borrower has  undertaken  all  investigations
                  necessary to make all of the foregoing statements.

                           (r)  The  Borrower   hereby   agrees  to  notify  the
                  Administrative  Agent  in  writing  immediately  if any of the
                  matters  certified  herein  will not be true and correct as of
                  the  date  of  the   Borrowing   requested   hereby   and  the
                  certifications  herein shall be deemed made and ratified as of
                  the  time of such  Borrowing  unless  the  Borrower  otherwise
                  notifies the Administrative Agent.

                           (s)   The   Borrower    hereby    agrees   that   the
                  Administrative  Agent's acceptance of this Certificate will in
                  no way operate as a waiver by the Administrative  Agent or any
                  Lender of any term, condition, covenant or agreement contained
                  in the  Credit  Agreement  or any  of  the  other  Fundamental
                  Documents  or of the  Administrative  Agent's or any  Lender's
                  right to enforce any term,  condition,  covenant or  agreement
                  therein.

                           (t)  The  Borrower  hereby   acknowledges  that  this
                  Certificate  is  submitted  for the  purpose of  inducing  the
                  Lenders  to  advance  funds to the  Borrower  and that,  in so
                  lending such funds, the Lenders will rely upon the accuracy of
                  matters stated in this Certificate.



                                      -3-
<PAGE>
                           (u) Attached  hereto is the most recent  construction
                  progress report.

                           (v) The Person  executing this  Certificate on behalf
                  of the General  Partner (on behalf of the  Borrower) is a duly
                  authorized  officer of the  General  Partner  and he or she is
                  authorized  to  execute  this  Certificate  on  behalf  of the
                  General Partner (on behalf of the Borrower).




                                      -4-
<PAGE>
                  IN  WITNESS   WHEREOF,   the   undersigned   has  caused  this
certificate to be executed as of this     day of        , 199 .


                                       ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                       By:  GCI Fiber  Co.,  Inc.,  its  General
                                       Partner



                                       By: 
                                       Name: 
                                       Title:

                                       By:  Fiber Hold Co.,  Inc.,  its  General
                                       Partner



                                       By:       
                                       Name:
                                       Title:



                                      -5-
<PAGE>


       [Attach the most recent construction progress report]
<PAGE>
                                                                       EXHIBIT K


                  FORM OF ENGINEER'S CERTIFICATE


                  The undersigned, being the            of 
(the  "Independent  Engineer")  DO HEREBY  CERTIFY on behalf of the  Independent
Engineer that:

                  1. This  Certificate  is being  delivered  pursuant to Section
4.3(e) of the Credit and  Security  Agreement  dated as of January  27, 1998 (as
such agreement may be amended,  supplemented or otherwise  modified,  renewed or
replaced from time to time,  the "Credit  Agreement")  among Alaska United Fiber
System Partnership, an Alaska general partnership (the "Borrower"),  the lenders
referred  to  therein  (the  "Lenders"),  Credit  Lyonnais  New York  Branch  as
Administrative  Agent,  NationsBank of Texas,  N.A. as Syndication  Agent and TD
Securities (USA) Inc. as Documentation Agent in connection with the Borrowing in
the amount of $           requested by the Borrower to be made by the Lenders on
         ,  199  (a copy of the Borrowing  Certificate delivered by the Borrower
to the  Administrative  Agent in  connection  with such  proposed  Borrowing  is
attached hereto as Annex 1). Unless otherwise defined herein,  capitalized terms
used in this  Certificate  have the  meanings  given to such terms in the Credit
Agreement.

                  2. All Project Costs incurred by the Borrower through the date
of this  Certificate  are reasonable and do not exceed the sum of (A) the amount
budgeted for such costs  (given the amount of work  completed on the Project) as
set forth in the Construction  Budget plus (B) the amount of the contingency set
forth  in  the  Construction  Budget  (the  "Contingency").  The  amount  of the
Contingency which has not been used to pay Project Costs (after giving effect to
the Borrowing requested in the attached Borrowing Certificate) is $          .

                  3. To the best of the Independent  Engineer's  knowledge after
due inquiry and examination, Completion should be achieved by the dates required
under all agreements relating to the Project including,  without limitation, the
Credit Agreement, all Project Agreements and all Capacity Agreements.

                  4. The  amount  of the  Borrowing  requested  in the  attached
Borrowing  Certificate,  plus amounts on deposit in the Construction Account and
the Local Bank  Account,  plus  amounts  on  deposit in the SSI Cash  Collateral
Account,  plus the proceeds of Loans in an aggregate  amount equal to the unused
Revolving Credit Commitments,  will be sufficient to pay all Project Costs which
are  necessary for  Completion of the Project and which are either  incurred but
not yet paid or have yet to be incurred.

                  5. Except as set forth on Annex 2 hereto,  no information  has
come  to  the  attention  of the  Independent  Engineer  that  would  cause  the
Independent  Engineer to conclude 
<PAGE>
that  the  information  set  forth  in the  attached  Borrowing  Certificate  is
inaccurate in any material respect.

                  IN WITNESS  WHEREOF,  the  undersigned  has duly executed this
Certificate on behalf of the Independent Engineer.

Date:  [to be dated the date                  [                   ]
        of the proposed
        Borrowing]

                                       By:       
                                       Name:
                                       Title:



                                      -2-
<PAGE>
                              Annex 1

      [Attach a copy of the applicable Borrowing Certificate]
<PAGE>
                              Annex 2


          [See paragraph 5 of the Engineer's Certificate]
<PAGE>
                                                                       EXHIBIT L

                      FORM OF OPERATING KEEP-WELL AGREEMENT
                            (GCI Transport Co., Inc.)


         OPERATING  KEEP-WELL  AGREEMENT (as amended,  supplemented or otherwise
modified,  renewed or replaced from time to time,  the  "Agreement")  made as of
           , 1998 by and among GCI Transport  Co.,  Inc., an Alaska  corporation
("GCI Transport"), Alaska United Fiber System Partnership, a general partnership
organized under the laws of Alaska (the "Borrower") and Credit Lyonnais New York
Branch, as Administrative Agent.

         Pursuant to that  certain  Credit and  Security  Agreement  dated as of
January  27, 1998 among the  Borrower,  the  lenders  referred  to therein  (the
"Lenders"), 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 such agreement may be amended, supplemented or otherwise
modified,  renewed or replaced from time to time, the "Credit  Agreement"),  the
Lenders have agreed to make loans to the  Borrower on the terms,  and subject to
the conditions, set forth therein.

         Fiber Hold Co.,  Inc.,  an Alaska  corporation  ("Fiber  Hold") and GCI
Fiber  Co.,  Inc.,  an Alaska  corporation  ("GCI  Fiber"),  each own fifty (50)
percent of the partnership interests in the Borrower.

         GCI Transport owns all the issued and outstanding capital stock of each
of Fiber Hold and GCI Fiber.

         The Lenders require that GCI Transport provide the Lenders with certain
assurances  in  connection  with  the  Borrower's  operating  expenses  and  its
obligations under and pursuant to the Credit Agreement.

         Accordingly,  in  consideration  of the  premises  and  of  the  mutual
agreements  herein  contained  and other  good and  valuable  consideration  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
hereby agree as follows:

         1.       Definitions.  All capitalized terms used herein
but not defined herein shall have the meanings set forth in the
Credit Agreement.

         2.       Subordinated Loans and Capital Contributions.

         (a) Subject to the terms and conditions set forth herein, GCI Transport
hereby  agrees  that upon  receipt  of a notice and  request  for funds from the
Borrower  or  the  Administrative  Agent  given  at any  time  on or  after  the
Completion Date, it shall make subordinated loans or cash 
<PAGE>
capital  contributions,  as it may elect,  to the  Borrower  in order to provide
sufficient funds for the Borrower to pay:

                  (i)  all  of the  Borrower's  operating  expenses  (including,
         without limitation,  interest and principal on any Loan), to the extent
         necessary in order to prevent a payment  default by the Borrower  under
         any  agreement to which the  Borrower is or may be a party,  including,
         without limitation, the Credit Agreement or any Project Agreement; and

                  (ii) the entire amount of the Obligations,  if any,  remaining
         unpaid at the Final Maturity Date or upon any acceleration of the Loans
         by reason of an Event of Default (each of the expenses and  Obligations
         of the Borrower  described in clauses (i) and (ii) of this Section 2(a)
         shall be referred to herein as a "Supported Obligation").

         (b) Promptly  upon  knowledge of any  anticipated  need of funds by the
Borrower to pay any Supported  Obligation,  but in any event no later than seven
(7)  Business  Days prior to the date the  applicable  Supported  Obligation  in
respect of which such funds are needed  becomes  due,  the  Borrower  shall give
notice and request for funds to GCI Transport setting forth (x) a description of
the Supported  Obligation  becoming due, (y) the date such Supported  Obligation
becomes  due and (z) the  amount of funds  required  from GCI  Transport  by the
Borrower in order to pay such Supported  Obligation in full. The Borrower agrees
that it shall cause a copy of any notice given by it to GCI Transport  hereunder
to be  delivered  to the  Administrative  Agent at the same time such  notice is
delivered to GCI Transport.

         (c) The Administrative  Agent shall at all times have the right to give
a notice and request for funds hereunder to GCI Transport.

         (d) If GCI  Transport  receives  a notice  and  request  for funds from
either the Borrower or the  Administrative  Agent,  GCI Transport agrees that it
will  make a  subordinated  loan or  capital  contribution  to the  Borrower  in
accordance with Section 2(a) above, in an amount in cash no less than the amount
requested by the Borrower or the  Administrative  Agent (as applicable) no later
than five (5)  Business  Days after GCI  Transport's  receipt of the  applicable
notice and request for funds or the date the applicable  Supported Obligation is
due and payable, whichever is later.

         3.       Obligations Absolute.

         (a) The  obligations of GCI Transport  under this Agreement are direct,
absolute and  unconditional  and shall not be affected or impaired in any way by
reason  of  (i)  the  lack  of (or  the  extent  of)  prior  enforcement  by the
Administrative   Agent  or  the  Lenders  or  any  other   Person  or  (ii)  any
modification,  limitation  or discharge of any  obligation  arising out of or by
virtue of any bankruptcy, arrangement,  reorganization or similar proceeding for
relief of debtors under federal 



                                      -2-
<PAGE>
or state law hereinafter  initiated by or against the Borrower.  The obligations
of GCI  Transport  hereunder  are in addition to any liability it may have under
any other Project Agreement.

         (b) The obligations of GCI Transport  hereunder shall not be subject to
any reduction, limitation,  impairment or termination for any reason, including,
without  limitation,  any claim of waiver,  release,  surrender,  alteration  or
compromise,  and shall not be subject to any  defense  (other  than  payment) or
set-off,  counterclaim,  recoupment or termination whatsoever,  by reason of the
invalidity,  illegality or unenforceability of any of the Supported  Obligations
or otherwise.  Without limiting the generality of the foregoing, the obligations
of GCI  Transport  hereunder  shall not be  discharged  or impaired or otherwise
affected by the failure of the  Borrower or the  Administrative  Agent to assert
any claim or demand or to  enforce  any  remedy  hereunder  or under the  Credit
Agreement,  any  Fundamental  Document,  any  Project  Agreement  or  any  other
agreement,  by any waiver or delay, willful or otherwise,  in the performance of
the  Obligations,  or by any other act or thing or  omission  or delay to do any
other act or thing  which may or might in any manner or to any  extent  vary the
risk of GCI Transport or would otherwise operate as a discharge of GCI Transport
as a matter of law.

         (c) GCI Transport further agrees that any of the Supported  Obligations
may be  extended  or  renewed,  in whole or in part,  without  notice or further
assent from it, and it will remain bound hereunder notwithstanding any extension
or renewal of any Supported Obligation.

         (d) The obligations of GCI Transport hereunder shall not be affected by
(i) the failure of the Administrative  Agent to assert any claim or demand or to
enforce any right or remedy  against the Borrower or any other Person  providing
credit  support  for  the  Obligations  under  the  provisions  of  any  Project
Agreement,  any Fundamental  Document or any other agreement or otherwise;  (ii)
any extension or renewal of any provision hereof or of any Fundamental  Document
or any other agreement; (iii) any rescission, waiver, compromise,  acceleration,
amendment  or  modification  of any of the  terms or  provisions  of the  Credit
Agreement,  any  Project  Agreement,  any  Fundamental  Document  or  any  other
agreement; or (iv) the release,  exchange, waiver or foreclosure of any security
held by the  Administrative  Agent or any Lender for the  Obligations  or any of
them.

         (e) The obligations of GCI Transport hereunder shall not be affected by
any lack of due execution,  validity or enforceability  of the Obligations,  the
Credit  Agreement,  any  Project  Agreement,  any  Fundamental  Document  or any
instrument or document  evidencing any of the Supported  Obligations,  or by the
existence,  validity,  enforceability,  perfection,  or extent of any collateral
therefor  or by  any  other  circumstance  relating  to  any  of  the  Supported
Obligations  (other than payment) which might otherwise  constitute a defense to
GCI Transport's obligations hereunder.  Neither the Administrative Agent nor any
Lender makes any representation or warranty in respect to any such circumstances
or has any duty or responsibility  whatsoever to GCI Transport in respect to the
management and maintenance of the Obligations or any collateral  securing any of
the Obligations.




                                      -3-
<PAGE>
         (f) GCI Transport  further agrees that its obligations  hereunder shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
payment,  or any part thereof,  of any Obligation is rescinded or must otherwise
be restored by the  Administrative  Agent or any Lender upon the  bankruptcy  or
other reorganization of the Borrower, GCI Holdings,  Inc.  ("Holdings"),  or any
guarantor of the Obligations or otherwise.

         4. Payment of Dividends or Cash. During the term of this Agreement, GCI
Transport shall not pay dividends or otherwise  transfer any cash to Holdings or
any  other  Affiliate  of  GCI  Transport,  except  for  (a)  loans  or  capital
contributions  to the  Borrower  (all  such  loans  to  the  Borrower  shall  be
subordinate   to  the   Obligations   pursuant  to,  in  accordance   with,  the
Subordination Agreement),  (b) the assignment or other transfer to GCI Satellite
Company  ("Satco")  of the  $9,100,000  deposit  made to  Hughes  Communications
Galaxy,  Inc.  ("Hughes") in connection with the Transponder  Purchase Agreement
for Galaxy X dated August 24, 1995 between Holdings and Hughes, which assignment
or other transfer will be characterized  as a loan or a capital  contribution to
Satco,  (c) cash  distributions to Holdings in an aggregate amount over the term
of this Agreement not exceeding the aggregate amount theretofore  distributed to
the Borrower  from funds held in the  Disbursement  Account  pursuant to Section
3(f) and Section 3(g) of the  Depositary  Agreement,  provided that, at the time
and after  giving  effect  to such cash  distribution,  no  Default  or Event of
Default has occurred or is continuing and (d) cash  distributions to Holdings in
an aggregate  amount not exceeding the  aggregate  amount of cash  distributions
theretofore actually made to GCI Transport by Satco,  provided that, at the time
and after giving  effect to any such cash  distribution,  no Default or Event of
Default has occurred or is continuing.

         5.  Assignment to the  Administrative  Agent.  (a) The Borrower  hereby
confirms that for good and valuable consideration it has assigned,  transferred,
conveyed  and  set  over  to  the  Administrative  Agent  as  security  for  the
Obligations,  all of the Borrower's  rights under this Agreement (which include,
without  limitation,  all of the Borrower's right,  title and interest in and to
any payment due or to become due from GCI Transport under this Agreement).

         (b)  Each of the  Borrower  and  Holdings  hereby  agrees  that it will
execute,  or cause to be executed,  such  additional  documentation  (including,
without  limitation,  assignment  agreements  or other  consents)  as may now or
hereafter  be  reasonably  required  by the  Administrative  Agent  in  order to
otherwise  effectuate the provisions of the assignment  pursuant to this Section
5.

         (c) Until such time as GCI Transport has received  written  notice from
the Administrative Agent stating that the assignment referred to in this Section
5 has terminated,  the Administrative Agent shall have the right to exercise all
rights,  and shall have all the  benefits,  granted to the  Borrower  under this
Agreement and GCI Transport shall deliver directly to the  Administrative  Agent
copies of all documents,  instruments or other items required to be delivered to
the Borrower under this Agreement.




                                      -4-
<PAGE>
         (d) The Administrative Agent shall not have any obligation or liability
under  this  Agreement  or  any  other  Project  Agreement  by  reason  of  this
assignment,  and the Administrative  Agent shall not be obligated to perform any
of  the  obligations  or  duties  of the  Borrower  under  any of the  foregoing
agreements  or to take any action to collect  or enforce  any claim for  payment
assigned hereunder.

         (e) GCI Transport  hereby agrees that the proceeds of any  subordinated
loans or any capital  contributions  made by it to the Borrower pursuant to this
Agreement shall be deposited in cash directly into the Disbursement Account, and
the Borrower hereby specifically authorizes and directs GCI Transport to deposit
the proceeds of all such loans and capital  contributions  to the Borrower under
this  Agreement into the  Disbursement  Account and  irrevocably  authorizes and
empowers the Administrative  Agent to ask, command,  receive or give a discharge
for any and all such amounts.

         6. Term. This Agreement shall remain in full force and effect until all
of the Obligations  shall have been fully and indefeasibly paid and performed by
the Borrower and the Commitments shall have terminated.

         7. Not a Guaranty.  This Agreement is not, and nothing herein contained
and nothing done pursuant hereto by GCI Transport shall be deemed to constitute,
a guaranty by GCI Transport of the payment of any  obligation,  indebtedness  or
liability of any kind or character whatsoever of the Borrower.

         8. Notices.  Notices and other communications provided for herein shall
be in writing and shall be delivered or mailed (or if by telegram,  delivered to
the telegraph company and, if by telecopier, delivered by such equipment) to the
parties at the following respective addresses:

                  (1)      If to the Administrative Agent:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York  10019
                           Attn:  Project Finance Group
                           Facsimile No.:  (212) 261-3421

                  (2)      If to GCI Transport:

                           GCI Transport Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn:  Chief Financial Officer
                           Facsimile No.:  (907) 265-5676





                                      -5-
<PAGE>
                  (3)      If to the Borrower:

                           Alaska United Fiber System Partnership
                           c/o GCI Fiber Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska 99503
                           Attn: Chief Financial Officer
                           Facsimile No.:  (907) 265-5676

or such other  address as such party may from time to time  designate  by giving
written  notice  to  the  other  parties   hereunder.   All  notices  and  other
communications  given to any party  hereto  in  accordance  with the  provisions
hereof  shall be deemed to have been given on the tenth  Business  Day after the
date when sent by registered or certified mail, postage prepaid,  return receipt
requested,  if by mail,  or when  delivered to the  telegraph  company,  charges
prepaid,  if by telegram,  or when receipt is acknowledged if by telecopier,  in
each case addressed to such party as provided in this Section 8 or in accordance
with the latest  unrevoked  written  direction  from such  party.  If either GCI
Transport or the Borrower  gives the other any notice  hereunder  for any reason
whatsoever,  each of GCI  Transport  and the Borrower  agrees to  simultaneously
deliver a copy of such notice to the Administrative Agent.

         9. Successors and Assigns.  All references herein to any of the parties
to this Agreement  shall be deemed to include the successors and assigns of such
party; provided, however, that GCI Transport may not assign any of its rights or
obligations  hereunder  without the prior written consent of the  Administrative
Agent and all of the Lenders,  and all covenants,  promises and agreements by or
on behalf of GCI Transport which are contained herein shall inure to the benefit
of the  successors  and  assigns  of the  Administrative  Agent  and  any of the
Lenders.

         10. Amendment; Waiver; Consent. This Agreement may be amended, modified
or  supplemented,  and the terms  hereof may be  waived,  in each case only by a
written  instrument  executed by all the parties to this Agreement and consented
to by all of the  Lenders.  The  waiver by any  party  hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent or other breach, whether or not similar.

         11.   Severability.   Any  provision  hereof  which  is  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other  jurisdiction.  To the extent  permitted  by  Applicable  Law, the parties
hereby  waive any  provision  of law  which  may  render  any  provision  hereof
prohibited or unenforceable in any respect.




                                      -6-
<PAGE>
         12. Counterparts.  This Agreement may be executed by the parties hereto
in separate counterparts,  each of which when so executed and delivered shall be
an original,  but all such  counterparts  shall together  constitute one and the
same agreement, and all signatures need not appear on any one counterpart.

         13.      Headings.  The headings and captions in this
Agreement are for convenience of reference only and shall not
define, limit or otherwise affect any of the terms or provisions
hereof.

         14.  Governing Law. THIS AGREEMENT  SHALL BE GOVERNED BY, AND CONSTRUED
AND  ENFORCED IN  ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK,  WITHOUT
REGARD TO ANY  CHOICE-OF-LAW  RULES  THEREOF  WHICH  MIGHT APPLY THE LAWS OF ANY
OTHER JURISDICTION.

         15.  Waiver of Jury Trial.  TO THE EXTENT NOT  PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED,  GCI TRANSPORT HEREBY WAIVES,  AND COVENANTS THAT IT
WILL NOT ASSERT  (WHETHER AS PLAINTIFF,  DEFENDANT OR  OTHERWISE),  ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,  CLAIM,  DEMAND,  ACTION, OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT,  THE SUBJECT MATTER
HEREOF OR ANY PROJECT  AGREEMENT OR FUNDAMENTAL  DOCUMENT,  IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER  ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.
GCI TRANSPORT ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE ADMINISTRATIVE AGENT
THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL  INDUCEMENT UPON WHICH
THE ADMINISTRATIVE  AGENT AND THE LENDERS HAVE RELIED, ARE RELYING AND WILL RELY
IN ENTERING INTO THIS  AGREEMENT AND ANY OTHER PROJECT  AGREEMENT OR FUNDAMENTAL
DOCUMENT.   THE  ADMINISTRATIVE  AGENT  OR  ANY  LENDER  MAY  FILE  AN  ORIGINAL
COUNTERPART  OR A COPY OF THIS SECTION 15 WITH ANY COURT AS WRITTEN  EVIDENCE OF
THE CONSENT OF GCI TRANSPORT TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

         16. No Waiver.  No failure on the part of the  Administrative  Agent or
any Lender to exercise, and no delay in exercising,  any right, power, privilege
or remedy hereunder or under any other Project Agreement or Fundamental Document
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such  right,  power,  privilege  or remedy  preclude  any  other or  further
exercise thereof or the exercise of any other right, power, privilege or remedy.
All  remedies  hereunder  are  cumulative  and are not  exclusive  of any  other
remedies provided by law.

         17.  Submission  to  Jurisdiction;  Service of Process.  GCI  TRANSPORT
HEREBY IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK AND TO THE  JURISDICTION OF THE UNITED STATES



                                      -7-
<PAGE>
DISTRICT  COURT FOR THE  SOUTHERN  DISTRICT OF NEW YORK FOR THE  PURPOSES OF ANY
SUIT, ACTION OR OTHER PROCEEDING  ARISING OUT OF OR BASED UPON THIS UNDERTAKING,
THE SUBJECT  MATTER  HEREOF OR ANY PROJECT  AGREEMENT  OR  FUNDAMENTAL  DOCUMENT
BROUGHT BY THE  ADMINISTRATIVE  AGENT OR A LENDER OR ANY OF THEIR  SUCCESSORS OR
ASSIGNS  IN EITHER  OF THE  ABOVE-REFERENCED  FORUMS  AT THE SOLE  OPTION OF THE
ADMINISTRATIVE  AGENT OR A LENDER.  GCI  TRANSPORT  TO THE EXTENT  PERMITTED  BY
APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS
A DEFENSE, OR OTHERWISE,  IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH
COURTS,  ANY CLAIM THAT IT IS NOT SUBJECT  PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAMED  COURTS,  THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM  ATTACHMENT  OR
EXECUTION,  THAT THE SUIT,  ACTION OR PROCEEDING  IS BROUGHT IN AN  INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
UNDERTAKING,  THE SUBJECT MATTER HEREOF OR ANY PROJECT  AGREEMENT OR FUNDAMENTAL
DOCUMENT OR THE SUBJECT  MATTER THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT,
(B)  HEREBY  WAIVES  THE RIGHT TO REMOVE  ANY SUCH  ACTION,  SUIT OR  PROCEEDING
INSTITUTED  BY THE  ADMINISTRATIVE  AGENT OR A LENDER IN STATE  COURT TO FEDERAL
COURT,  AND (C) HEREBY  WAIVES THE RIGHT TO ASSERT IN ANY SUCH  ACTION,  SUIT OR
PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY
OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER.  GCI TRANSPORT  HEREBY CONSENTS
TO SERVICE OF PROCESS BY MAIL AT ITS  ADDRESS TO WHICH  NOTICES  ARE TO BE GIVEN
PURSUANT  TO SECTION 8 HEREOF.  GCI  TRANSPORT  AGREES  THAT ITS  SUBMISSION  TO
JURISDICTION  AND  CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS.  FINAL JUDGMENT AGAINST GCI
TRANSPORT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE
ENFORCED IN ANY OTHER  JURISDICTION  (X) BY SUIT,  ACTION OR  PROCEEDING  ON THE
JUDGMENT,  A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE
FACT AND THE  AMOUNT OF  INDEBTEDNESS  OR  LIABILITY  OF GCI  TRANSPORT  THEREIN
DESCRIBED  OR (Y) IN ANY OTHER  MANNER  PROVIDED BY, OR PURSUANT TO, THE LAWS OF
SUCH OTHER JURISDICTION,  PROVIDED,  HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A
LENDER MAY AT ITS OPTION BRING SUIT,  OR INSTITUTE  OTHER  JUDICIAL  PROCEEDINGS
AGAINST GCI  TRANSPORT OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE
UNITED  STATES OR OF ANY COUNTRY OR PLACE WHERE GCI TRANSPORT OR SUCH ASSETS MAY
BE FOUND. 

         18. Entire Agreement. This Agreement represents the entire agreement of
the parties with regard to the subject matter  hereof,  and supersedes all prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter of this Agreement.



                                      -8-
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first above written.


                                       GCI TRANSPORT CO., INC.




                                       By:      
                                       Name:
                                       Title:

                                       CREDIT  LYONNAIS  NEW  YORK  BRANCH,   as
                                       Administrative Agent



                                       By:      
                                       Name:
                                       Title:


                                       ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                       By:  GCI Fiber  Co.,  Inc.,  its  General
                                       Partner



                                       By:      
                                       Name:
                                       Title:


                                       By:  Fiber Hold Co.,  Inc.,  its  General
                                       Partner



                                       By:      
                                       Name:
                                       Title:
<PAGE>
                                                                       EXHIBIT M


                      FORM OF OPERATING KEEP-WELL AGREEMENT
                              (GCI Holdings, Inc.)


         OPERATING  KEEP-WELL  AGREEMENT (as amended,  supplemented or otherwise
modified,  renewed or replaced from time to time,  the  "Agreement")  made as of
            ,  1998 by and  among GCI  Holdings,  Inc.,  an  Alaska  corporation
("Holdings"),  Alaska  United Fiber System  Partnership,  a general  partnership
organized under the laws of Alaska (the "Borrower") and Credit Lyonnais New York
Branch, as Administrative Agent.

         Pursuant to that  certain  Credit and  Security  Agreement  dated as of
January  27, 1998 among the  Borrower,  the  lenders  referred  to therein  (the
"Lenders"), 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 such agreement may be amended, supplemented or otherwise
modified,  renewed or replaced from time to time, the "Credit  Agreement"),  the
Lenders have agreed to make loans to the  Borrower on the terms,  and subject to
the conditions, set forth therein.

         Fiber Hold Co.,  Inc.,  an Alaska  corporation  ("Fiber  Hold") and GCI
Fiber  Co.,  Inc.,  an Alaska  corporation  ("GCI  Fiber"),  each own fifty (50)
percent of the partnership interests in the Borrower.

         GCI Transport Co., Inc., an Alaska corporation ("GCI Transport"),  owns
all the  issued  and  outstanding  capital  stock of each of Fiber  Hold and GCI
Fiber,  and Holdings  owns all the issued and  outstanding  capital stock of GCI
Transport.

         The Lenders  require  that  Holdings  provide the Lenders  with certain
assurances  in  connection  with  the  Borrower's  operating  expenses  and  its
obligations under and pursuant to the Credit Agreement.

         Accordingly,  in  consideration  of the  premises  and  of  the  mutual
agreements  herein  contained  and other  good and  valuable  consideration  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
hereby agree as follows:

         1.       Definitions.  All capitalized terms used herein
but not defined herein shall have the meanings set forth in the
Credit Agreement.
<PAGE>
         2.  Subordinated  Loans.  (a) Subject to the terms and  conditions  set
forth herein,  Holdings  hereby agrees that upon receipt of a notice and request
for funds from the Borrower or the Administrative  Agent given at any time on or
after the Completion Date, it shall make  subordinated  loans to the Borrower in
order to provide sufficient funds for the Borrower to pay:

                  (i)  all  of the  Borrower's  operating  expenses  (including,
         without limitation,  interest and principal on any Loan), to the extent
         necessary in order to prevent a payment  default by the Borrower  under
         any  agreement to which the  Borrower is or may be a party,  including,
         without  limitation,  the Credit  Agreement  or any Project  Agreement;
         provided,  however,  that no notice and  request  for funds to Holdings
         under  this  clause  (i) of  Section  2(a)  shall  be made  unless  GCI
         Transport  has failed to provide the  requisite  funds to the  Borrower
         within  five (5)  Business  Days  after  demand for such funds has been
         received  by  GCI  Transport  or  the  date  the  applicable  Supported
         Obligation (as defined below) of the Borrower  becomes due and payable,
         whichever is later,  pursuant to, and in accordance with, the Transport
         Keep-Well Agreement; and

                  (ii) the entire amount of the Obligations,  if any,  remaining
         unpaid at the Final Maturity Date or upon any acceleration of the Loans
         by reason of an Event of Default (each of the expenses and  Obligations
         of the Borrower  described in clauses (i) and (ii) of this Section 2(a)
         shall be referred  to herein as a  "Supported  Obligation");  provided,
         however,  that no notice and request  for funds to Holdings  under this
         clause  (ii) of  Section  2(a)  shall  be made  unless  and  until  the
         Administrative   Agent  on  behalf  of  the   Lenders   has  (x)  taken
         commercially  reasonable  efforts to exhaust its  remedies  against the
         partnership interests of the Borrower and the Collateral,  (y) demanded
         payment from GCI Transport under the Transport  Keep-Well Agreement and
         (z) filed a claim for payment against GCI Transport under the Transport
         Keep-Well Agreement.

         (b) The Administrative  Agent shall at all times have the right to give
a notice and request for funds hereunder to Holdings.

         (c) If Holdings receives a notice and request for funds from either the
Borrower  or the  Administrative  Agent,  Holdings  agrees  that it will  make a
subordinated  loan to the  Borrower in  accordance  with  Section 2(a) above and
Section 3 below,  in an amount in cash no less than the amount  requested by the
Borrower  or the  Administrative  Agent (as  applicable)  no later  than two (2)
Business Days after Holdings'  receipt of the applicable  notice and request for
funds.

         (d) Any notice and request for funds  hereunder  by the Borrower or the
Administrative  Agent  shall  set  forth  (i) a  description  of  the  Supported
Obligation that became due, (ii) the date such Supported  Obligation  became due
and (iii) the amount of funds required from Holdings by the Borrower in order to
pay such Supported Obligation in full. The Borrower agrees that it shall 


                                      -2-
<PAGE>
cause a copy of any notice given by it to Holdings  hereunder to be delivered to
the Administrative Agent at the same time such notice is delivered to Holdings.

         3. Subordination.  All payments by Holdings to the Borrower pursuant to
this  Agreement  will be in the  form  of  subordinated  loans  which  shall  be
subordinated to the Obligations in accordance with the Subordination  Agreement.
Holdings  shall not be required to make any loans pursuant to Section 2 above in
excess of the maximum amount  permitted  under (i) Sections 4.13 and 4.20 of the
Indenture dated as of August 1, 1997 between GCI, Inc. and The Bank of New York,
as Trustee,  as in effect on the date  hereof,  relating to the Senior Notes due
2007 of GCI,  Inc.  and  (ii)  Section  7.09  of  each  of the  Holdings  Credit
Agreements  as in effect on the date hereof,  so long as any of the  obligations
under such agreements are not paid in full.

         4.       Obligations Absolute.

         (a) The  obligations  of  Holdings  under this  Agreement  are  direct,
absolute and  unconditional  and shall not be affected or impaired in any way by
reason  of  (i)  the  lack  of (or  the  extent  of)  prior  enforcement  by the
Administrative   Agent  or  the  Lenders  or  any  other   Person  or  (ii)  any
modification,  limitation  or discharge of any  obligation  arising out of or by
virtue of any bankruptcy, arrangement,  reorganization or similar proceeding for
relief of debtors under federal or state law hereinafter initiated by or against
the  Borrower.  The  obligations  of Holdings  hereunder  are in addition to any
liability it may have under any other Project Agreement.

         (b) The  obligations of Holdings  hereunder shall not be subject to any
reduction,  limitation,  impairment or  termination  for any reason,  including,
without  limitation,  any claim of waiver,  release,  surrender,  alteration  or
compromise,  and shall not be subject to any  defense  (other  than  payment) or
set-off,  counterclaim,  recoupment or termination whatsoever,  by reason of the
invalidity,  illegality or unenforceability of any of the Supported  Obligations
or otherwise.  Without limiting the generality of the foregoing, the obligations
of Holdings  hereunder shall not be discharged or impaired or otherwise affected
by the failure of the Borrower or the  Administrative  Agent to assert any claim
or demand or to enforce any remedy hereunder or under the Credit Agreement,  any
Fundamental  Document,  any Project  Agreement  or any other  agreement,  by any
waiver or delay, willful or otherwise, in the performance of the Obligations, or
by any  other  act or thing or  omission  or delay to do any  other act or thing
which may or might in any manner or to any extent  vary the risk of  Holdings or
would otherwise operate as a discharge of Holdings as a matter of law.

         (c) Holdings  further agrees that any of the Supported  Obligations may
be extended or renewed,  in whole or in part,  without  notice or further assent
from it, and it will remain bound  hereunder  notwithstanding  any  extension or
renewal of any Supported Obligation.

         (d) The obligations of Holdings  hereunder shall not be affected by (i)
the  failure  of the  Administrative  Agent to assert  any claim or demand or to
enforce any right or remedy  against the Borrower or any other Person  providing
credit  support  for  the  Obligations  under  the  provisions  


                                      -3-
<PAGE>
of any Project  Agreement,  any  Fundamental  Document or any other agreement or
otherwise, except as explicitly provided in Section 2 hereof; (ii) any extension
or renewal of any provision  hereof or of any Fundamental  Document or any other
agreement; (iii) any rescission, waiver, compromise,  acceleration, amendment or
modification  of any of the terms or  provisions  of the Credit  Agreement,  any
Project Agreement,  any Fundamental Document or any other agreement; or (iv) the
release,   exchange,   waiver  or  foreclosure  of  any  security  held  by  the
Administrative Agent or any Lender for the Obligations or any of them.

         (e) The obligations of Holdings  hereunder shall not be affected by any
lack of due execution, validity or enforceability of the Obligations, the Credit
Agreement,  any Project Agreement, any Fundamental Document or any instrument or
document  evidencing  any of the  Supported  Obligations,  or by the  existence,
validity, enforceability, perfection, or extent of any collateral therefor or by
any other circumstance  relating to any of the Supported Obligations (other than
payment) which might  otherwise  constitute a defense to Holdings's  obligations
hereunder.   Neither  the   Administrative   Agent  nor  any  Lender  makes  any
representation or warranty in respect to any such  circumstances or has any duty
or  responsibility  whatsoever  to  Holdings  in respect to the  management  and
maintenance  of  the   Obligations  or  any  collateral   securing  any  of  the
Obligations.

         (f)  Holdings  further  agrees  that its  obligations  hereunder  shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
payment,  or any part thereof,  of any Obligation is rescinded or must otherwise
be restored by the  Administrative  Agent or any Lender upon the  bankruptcy  or
other  reorganization  of the  Borrower,  GCI  Transport or any guarantor of the
Obligations or otherwise.

         5.       Assignment to the Administrative Agent.

         (a)  The  Borrower   hereby   confirms   that  for  good  and  valuable
consideration  it has  assigned,  transferred,  conveyed  and  set  over  to the
Administrative  Agent as security  for the  Obligations,  all of the  Borrower's
rights under this  Agreement  (which  include,  without  limitation,  all of the
Borrower's right,  title and interest in and to any payment due or to become due
from Holdings under this Agreement).

         (b)  Each of the  Borrower  and  Holdings  hereby  agrees  that it will
execute,  or cause to be executed,  such  additional  documentation  (including,
without  limitation,  assignment  agreements  or other  consents)  as may now or
hereafter  be  reasonably  required  by the  Administrative  Agent  in  order to
otherwise  effectuate the provisions of the assignment  pursuant to this Section
5.

         (c) Until such time as Holdings  has received  written  notice from the
Administrative  Agent stating that the assignment  referred to in this Section 5
has terminated,  the  Administrative  Agent shall have the right to exercise all
rights,  and shall have all the  benefits,  granted to the  Borrower  under this
Agreement and Holdings shall deliver directly to the Administrative Agent 



                                      -4-
<PAGE>
copies of all documents,  instruments or other items required to be delivered to
the Borrower under this Agreement.

         (d) The Administrative Agent shall not have any obligation or liability
under  this  Agreement  or  any  other  Project  Agreement  by  reason  of  this
assignment,  and the Administrative  Agent shall not be obligated to perform any
of  the  obligations  or  duties  of the  Borrower  under  any of the  foregoing
agreements  or to take any action to collect  or enforce  any claim for  payment
assigned hereunder.

         (e) Holdings hereby agrees that the proceeds of any subordinated  loans
made by it to the Borrower pursuant to this Agreement shall be deposited in cash
directly into the  Disbursement  Account,  and the Borrower hereby  specifically
authorizes and directs Holdings to deposit the proceeds of all such loans to the
Borrower  under this  Agreement into the  Disbursement  Account and  irrevocably
authorizes and empowers the  Administrative  Agent to ask,  command,  receive or
give a discharge for any and all such amounts.

         6. Term. This Agreement shall remain in full force and effect until all
of the Obligations  shall have been fully and indefeasibly paid and performed by
the Borrower and the Commitments shall have terminated.

         7. Not a Guaranty.  This Agreement is not, and nothing herein contained
and nothing done pursuant  hereto by Holdings shall be deemed to  constitute,  a
guaranty by Holdings of the payment of any obligation, indebtedness or liability
of any kind or character whatsoever of the Borrower.

         8. Notices.  Notices and other communications provided for herein shall
be in writing and shall be delivered or mailed (or if by telegram,  delivered to
the telegraph company and, if by telecopier, delivered by such equipment) to the
parties at the following respective addresses:

                  (1)      If to the Administrative Agent:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York  10019
                           Attn:  Project Finance Group
                           Facsimile No.:  (212) 261-3421

                  (2)      If to Holdings:

                           GCI Holdings, Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn:  Chief Financial Officer




                                      -5-
<PAGE>
                           Facsimile No.:  (907) 265-5676

                  (3)      If to the Borrower:

                           Alaska United Fiber System Partnership
                           c/o GCI Fiber Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska 99503
                           Attn: Chief Financial Officer
                           Facsimile No.:  (907) 265-5676

or such other  address as such party may from time to time  designate  by giving
written  notice  to  the  other  parties   hereunder.   All  notices  and  other
communications  given to any party  hereto  in  accordance  with the  provisions
hereof  shall be deemed to have been given on the tenth  Business  Day after the
date when sent by registered or certified mail, postage prepaid,  return receipt
requested,  if by mail,  or when  delivered to the  telegraph  company,  charges
prepaid,  if by telegram,  or when receipt is acknowledged if by telecopier,  in
each case addressed to such party as provided in this Section 8 or in accordance
with the latest unrevoked  written direction from such party. If either Holdings
or the Borrower gives the other any notice hereunder for any reason  whatsoever,
each of Holdings and the  Borrower  agrees to  simultaneously  deliver a copy of
such notice to the Administrative Agent.

         9. Successors and Assigns.  All references herein to any of the parties
to this Agreement  shall be deemed to include the successors and assigns of such
party;  provided,  however,  that  Holdings  may not assign any of its rights or
obligations  hereunder  without the prior written consent of the  Administrative
Agent and all of the Lenders,  and all covenants,  promises and agreements by or
on behalf of Holdings  which are contained  herein shall inure to the benefit of
the successors and assigns of the Administrative Agent and any of the Lenders.

         10. Amendment; Waiver; Consent. This Agreement may be amended, modified
or  supplemented,  and the terms  hereof may be  waived,  in each case only by a
written  instrument  executed by all the parties to this Agreement and consented
to by all of the  Lenders.  The  waiver by any  party  hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent or other breach, whether or not similar.

         11.   Severability.   Any  provision  hereof  which  is  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other  jurisdiction.  To the extent  permitted  by  Applicable  Law, the parties
hereby  waive any  provision  of law  which  may  render  any  provision  hereof
prohibited or unenforceable in any respect.




                                      -6-
<PAGE>
         12. Counterparts.  This Agreement may be executed by the parties hereto
in separate counterparts,  each of which when so executed and delivered shall be
an original,  but all such  counterparts  shall together  constitute one and the
same agreement, and all signatures need not appear on any one counterpart.

         13.      Headings.  The headings and captions in this
Agreement are for convenience of reference only and shall not
define, limit or otherwise affect any of the terms or provisions
hereof.

         14.  Governing Law. THIS AGREEMENT  SHALL BE GOVERNED BY, AND CONSTRUED
AND  ENFORCED IN  ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK,  WITHOUT
REGARD TO ANY  CHOICE-OF-LAW  RULES  THEREOF  WHICH  MIGHT APPLY THE LAWS OF ANY
OTHER JURISDICTION.

         15.  Waiver of Jury Trial.  TO THE EXTENT NOT  PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED,  HOLDINGS HEREBY WAIVES,  AND COVENANTS THAT IT WILL
NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,  CLAIM,  DEMAND,  ACTION, OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE SUBJECT MATTER HEREOF OR
ANY PROJECT AGREEMENT OR FUNDAMENTAL DOCUMENT, IN EACH CASE WHETHER NOW EXISTING
OR  HEREAFTER  ARISING AND WHETHER IN  CONTRACT OR TORT OR  OTHERWISE.  HOLDINGS
ACKNOWLEDGES  THAT IT HAS BEEN  INFORMED  BY THE  ADMINISTRATIVE  AGENT THAT THE
PROVISIONS  OF THIS  SECTION  CONSTITUTE  A MATERIAL  INDUCEMENT  UPON WHICH THE
ADMINISTRATIVE  AGENT AND THE LENDERS HAVE RELIED,  ARE RELYING AND WILL RELY IN
ENTERING  INTO THIS  AGREEMENT AND ANY OTHER  PROJECT  AGREEMENT OR  FUNDAMENTAL
DOCUMENT.   THE  ADMINISTRATIVE  AGENT  OR  ANY  LENDER  MAY  FILE  AN  ORIGINAL
COUNTERPART  OR A COPY OF THIS SECTION 15 WITH ANY COURT AS WRITTEN  EVIDENCE OF
THE CONSENT OF HOLDINGS TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

         16. No Waiver.  No failure on the part of the  Administrative  Agent or
any Lender to exercise, and no delay in exercising,  any right, power, privilege
or remedy hereunder or under any other Project Agreement or Fundamental Document
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such  right,  power,  privilege  or remedy  preclude  any  other or  further
exercise thereof or the exercise of any other right, power, privilege or remedy.
All  remedies  hereunder  are  cumulative  and are not  exclusive  of any  other
remedies provided by law.

         17.  Submission  to  Jurisdiction;  Service of Process.  HOLDINGS
HEREBY IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK AND TO THE  JURISDICTION OF THE UNITED STATES



                                      -7-
<PAGE>
DISTRICT  COURT FOR THE  SOUTHERN  DISTRICT OF NEW YORK FOR THE  PURPOSES OF ANY
SUIT, ACTION OR OTHER PROCEEDING  ARISING OUT OF OR BASED UPON THIS UNDERTAKING,
THE SUBJECT  MATTER  HEREOF OR ANY PROJECT  AGREEMENT  OR  FUNDAMENTAL  DOCUMENT
BROUGHT BY THE  ADMINISTRATIVE  AGENT OR A LENDER OR ANY OF THEIR  SUCCESSORS OR
ASSIGNS  IN EITHER  OF THE  ABOVE-REFERENCED  FORUMS  AT THE SOLE  OPTION OF THE
ADMINISTRATIVE  AGENT OR A LENDER.  GCI  TRANSPORT  TO THE EXTENT  PERMITTED  BY
APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS
A DEFENSE, OR OTHERWISE,  IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH
COURTS,  ANY CLAIM THAT IT IS NOT SUBJECT  PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAMED  COURTS,  THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM  ATTACHMENT  OR
EXECUTION,  THAT THE SUIT,  ACTION OR PROCEEDING  IS BROUGHT IN AN  INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
UNDERTAKING,  THE SUBJECT MATTER HEREOF OR ANY PROJECT  AGREEMENT OR FUNDAMENTAL
DOCUMENT OR THE SUBJECT  MATTER THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT,
(B)  HEREBY  WAIVES  THE RIGHT TO REMOVE  ANY SUCH  ACTION,  SUIT OR  PROCEEDING
INSTITUTED  BY THE  ADMINISTRATIVE  AGENT OR A LENDER IN STATE  COURT TO FEDERAL
COURT,  AND (C) HEREBY  WAIVES THE RIGHT TO ASSERT IN ANY SUCH  ACTION,  SUIT OR
PROCEEDING ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY
OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER.  HOLDINGS  HEREBY CONSENTS
TO SERVICE OF PROCESS BY MAIL AT ITS  ADDRESS TO WHICH  NOTICES  ARE TO BE GIVEN
PURSUANT  TO SECTION 8 HEREOF.  HOLDINGS  AGREES  THAT ITS  SUBMISSION  TO
JURISDICTION  AND  CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF THE ADMINISTRATIVE AGENT AND THE LENDERS.  FINAL JUDGMENT AGAINST GCI
TRANSPORT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE
ENFORCED IN ANY OTHER  JURISDICTION  (X) BY SUIT,  ACTION OR  PROCEEDING  ON THE
JUDGMENT,  A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE
FACT AND THE  AMOUNT OF  INDEBTEDNESS  OR  LIABILITY  OF HOLDINGS  THEREIN
DESCRIBED  OR (Y) IN ANY OTHER  MANNER  PROVIDED BY, OR PURSUANT TO, THE LAWS OF
SUCH OTHER JURISDICTION,  PROVIDED,  HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A
LENDER MAY AT ITS OPTION BRING SUIT,  OR INSTITUTE  OTHER  JUDICIAL  PROCEEDINGS
AGAINST HOLDINGS OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE
UNITED  STATES OR OF ANY COUNTRY OR PLACE WHERE HOLDINGS OR SUCH ASSETS MAY
BE FOUND. 

         18. Entire Agreement. This Agreement represents the entire agreement of
the parties with regard to the subject matter  hereof,  and supersedes all prior
agreements  and  understandings,  both written and oral,  among the parties with
respect to the subject matter of this Agreement.



                                      -8-
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the day and year first above written.


                                       GCI HOLDINGS, INC.




                                       By:      
                                       Name:
                                       Title:


                                       CREDIT LYONNAIS NEW YORK BRANCH,
                                       as Administrative Agent



                                       By:      
                                       Name:
                                       Title:


                                       ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                       By:  GCI Fiber  Co.,  Inc.,  its  General
                                       Partner



                                       By:      
                                       Name:
                                       Title:

                                       By:  Fiber Hold Co.,  Inc.,  its  General
                                       Partner



                                       By:      
                                       Name:
                                       Title:
<PAGE>
                                                                       EXHIBIT N


                           FORM OF COMPLETION GUARANTY


                  COMPLETION  GUARANTY  dated  as  of              ,  1998  (the
"Guaranty") by GCI Holdings,  Inc. (the "Guarantor") in favor of Credit Lyonnais
New York Branch, as Administrative Agent for the Lenders referred to herein.

                  Pursuant to that certain Credit and Security  Agreement  dated
as of January 27, 1998 among Alaska United Fiber System  Partnership,  a general
partnership  organized  under  the laws of  Alaska,  as  Borrower,  the  lenders
referred  to therein  (the  "Lenders"),  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 such  agreement  may be
amended,  supplemented or otherwise  modified,  renewed or replaced from time to
time,  the "Credit  Agreement"),  the  Lenders  have agreed to make Loans to the
Borrower on the terms, and subject to the conditions,  set forth therein,  which
Loans  will  be used to  finance  the  development,  construction,  testing  and
operation of the System, as defined therein.

                  The Guarantor owns all of the issued and outstanding  stock in
GCI  Transport  Co.,  Inc., an Alaska  corporation  ("GCI  Transport"),  and GCI
Transport  owns all of the  issued and  outstanding  stock in each of Fiber Hold
Co.,  Inc., an Alaska  corporation  ("Fiber  Hold") and GCI Fiber Co.,  Inc., an
Alaska corporation ("GCI Fiber"). Fiber Hold and GCI Fiber each own a fifty (50)
percent partnership interest in the Borrower.

                  The  Guarantor  also owns all of the  issued  and  outstanding
stock in GCI Communication  Corp., an Alaska  corporation ("GCI  Communication")
which,  pursuant to that certain  Lease  Agreement  dated as of January 27, 1998
between the  Borrower,  as Lessor,  and GCI  Communication,  as Lessee,  will be
leasing a major portion of the System capacity.

                  It is a condition  precedent to the obligations of the Lenders
under the Credit Agreement to make the Loans to the Borrower, that the Guarantor
execute this Completion  Guaranty in favor of the  Administrative  Agent for the
benefit of the Lenders.

                  Accordingly,  in  consideration  of the  premises,  the mutual
covenants  and  agreements   contained   herein  and  other  good  and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

                  1.  Definitions.  Capitalized  terms not otherwise  defined in
this  Guaranty  shall have the  meanings  set forth for such terms in the Credit
Agreement,  and such definitions are referred to and  incorporated  herein as if
fully set forth in this Guaranty.


                  2. Guaranty.
<PAGE>
                  (a) Completion Guaranty.  The Guarantor hereby unconditionally
and irrevocably  guarantees to the Administrative Agent and the Lenders that the
Project  will be  Completed  (as  defined in  Schedule A hereto)  not later than
January  1,  1999  (the  "Outside  Completion  Date").  In  furtherance  of  the
foregoing, and not in limitation thereof, the Guarantor agrees as follows:

                           (i) The  Guarantor  guarantees  that  all  costs  and
                  expenses  of  development,  construction  and  testing  of the
                  System and the timely Completion thereof  (including,  without
                  limitation, all costs and expenses of the Contractor under the
                  Construction  Contract) shall be paid in full and when due. In
                  the event that such costs and  expenses  exceed the sum of the
                  Sponsor Equity Funds and funds available to the Borrower under
                  the Credit  Agreement,  the Guarantor shall pay in full and on
                  demand  by notice  from the  Administrative  Agent the  entire
                  amount of such  costs and  expenses  which are due and  unpaid
                  either by direct payment or by advances of additional funds to
                  the Borrower;

                           (ii) The  Guarantor  guarantees  that all  costs  and
                  expenses to fulfill the conditions  precedent to the making of
                  the Loans as set forth in  Article 4 of the  Credit  Agreement
                  shall  be paid in full as and  when  due,  including,  without
                  limitation, all costs and expenses to fulfill legal conditions
                  or to obtain  governmental  approvals  and the Permits for the
                  Project and all costs and expenses  relating to the discharge,
                  release or  termination  of any Liens in respect of the System
                  other than Permitted  Liens.  In the event that such costs and
                  expenses  exceed the sum of the Sponsor Equity Funds and funds
                  available  to the  Borrower  under the Credit  Agreement,  the
                  Guarantor  shall pay in full and on demand by notice  from the
                  Administrative  Agent  the  entire  amount  of such  costs and
                  expenses  which are due and unpaid either by direct payment or
                  by advances of additional funds to the Borrower;

                           (iii) The Guarantor  further consents and agrees that
                  the Lenders or the  Administrative  Agent may take all actions
                  and incur any costs  reasonably  necessary or desirable in the
                  judgment of the Administrative Agent or the Lenders to achieve
                  Completion by the Outside  Completion  Date and to fulfill the
                  conditions   precedent   to  the  making  of  the  Loans.   In
                  furtherance  thereof,  the Administrative Agent or the Lenders
                  may employ any architects,  engineers or other  consultants on
                  construction  or any attorneys,  accountants or consultants in
                  relation to Permits,  Liens or other  matters and may contract
                  with any supplier or other  Persons to achieve  Completion  by
                  the  Outside  Completion  Date and to fulfill  the  conditions
                  precedent to the making of the Loans,  and the  Administrative
                  Agent or the Lenders  may repair or replace any work,  cure or
                  correct  any  damaged  



                                       2
<PAGE>
                  portions  of the  System  and  award  any  contracts  or rebid
                  contracts in relation to any work required,  in the reasonable
                  judgment of the  Administrative  Agent or the  Lenders,  to be
                  performed; and

                           (iv) The  Guarantor  consents  and agrees (A) that in
                  the event that any cost or expense  referred to in  subsection
                  (i),  (ii) or (iii) above shall not be paid by the Borrower or
                  paid  directly or advanced to the  Borrower by the  Guarantor,
                  then the Administrative  Agent and/or the Lenders may pay such
                  cost or expense  directly,  and the Guarantor  shall on demand
                  reimburse the Administrative  Agent and/or the Lenders for the
                  full amount of any such  payments  and (B) that the  Guarantor
                  shall on demand reimburse the Administrative  Agent and/or the
                  Lenders  for  the  full  amount  of any  reasonable  costs  or
                  expenses incurred by the  Administrative  Agent or the Lenders
                  pursuant to subsection  (iv) above, in all cases together with
                  interest  accrued  thereon  computed at the interest rate then
                  applicable  to overdue  amounts  payable to the Lenders  under
                  Section 2.8 of the Credit Agreement.

                  (b)   Guaranty  of   Contractor's   and  GCI   Communication's
Obligations.

                           (i)  The   Guarantor   hereby   unconditionally   and
                  irrevocably  guarantees  to the  Administrative  Agent and the
                  Lenders  the  full  and  timely  performance  when  due of all
                  covenants,  terms and  agreements to be performed and observed
                  by  the   Contractor   under  and  in   connection   with  the
                  Construction  Contract and by GCI  Communication  under and in
                  connection  with  the  GCI  Construction  Contract  including,
                  without limitation, the work to be performed by the Contractor
                  and  by  GCI   Communication,   the   Contractor's   and   GCI
                  Communication's  warranty and indemnity  obligations,  and any
                  obligation  of  the  Contractor  or  GCI  Communication  which
                  survives    Completion    (collectively,    the   "Performance
                  Obligations").  Whenever the  Contractor or GCI  Communication
                  shall be in default in the performance  when due or observance
                  when due of any of the  Performance  Obligations or shall have
                  otherwise  committed  a  breach  of  any  of  the  Performance
                  Obligations,  the Administrative  Agent may give the Guarantor
                  notice of such  default or  breach,  whereupon  the  Guarantor
                  shall  promptly  remedy  the  default  or  breach,   or  shall
                  promptly, upon the consent of the Administrative Agent and the
                  Lenders:

                           (x)       complete the  Construction  Contract or the
                                     GCI  Construction  Contract (as applicable)
                                     in accordance with its terms and conditions
                                     including,    without    limitation,    the
                                     Performance Obligations; or



                                       3
<PAGE>
                           (y)       cause the  completion of the portion of the
                                     System to be  constructed by the Contractor
                                     or GCI  Communication  (as  applicable)  in
                                     accordance with the terms and conditions of
                                     the   Construction   Contract  or  the  GCI
                                     Construction Contract by another contractor
                                     reasonably acceptable to the Administrative
                                     Agent  and the  Lenders.  If the  Guarantor
                                     elects  this  alternative,   the  Guarantor
                                     shall  be  responsible  hereunder  for such
                                     other   contractor's   performance  of  the
                                     Performance  Obligations to the same extent
                                     that  it  would   have   been   responsible
                                     hereunder  for  the  Contractor's  and  GCI
                                     Communication's    performance    of    the
                                     Performance Obligations.

                           (ii)  The  Guarantor   hereby   unconditionally   and
                  irrevocably  guarantees  to the  Administrative  Agent and the
                  Lenders  the   punctual   payment  when  due  of  all  payment
                  obligations  of the  Contractor  to  the  Borrower  under  the
                  Construction Contract and of GCI Communication to the Borrower
                  under  the  GCI  Construction  Contract,   including,  without
                  limitation,  payment of warranty  and  indemnity  claims,  the
                  payment  of  damages  for  delay or  non-performance,  and the
                  payment of  liquidated  damages if the System  fails to become
                  commercially   operational  by  the  Outside  Completion  Date
                  (collectively, the "Payment Obligations"). The Guarantor shall
                  pay in full and on demand by  notice  from the  Administrative
                  Agent the entire amount of any Payment  Obligations  which are
                  due and  unpaid  either by direct  payment or by  advances  of
                  additional funds to the Borrower.

                           (iii)   In   addition   to  the   Guarantor's   other
                  obligations  hereunder,  the  Guarantor  shall be  required to
                  perform  its   obligations   under  this   Guaranty  upon  the
                  occurrence of any of the following events:  (A) the Contractor
                  or GCI Communication is adjudged as bankrupt or insolvent; (B)
                  the Contractor or GCI Communication makes a general assignment
                  for  the  benefit  of  creditors;  (C) the  Contractor  or GCI
                  Communication  dissolves  or  liquidates;  (D)  a  trustee  or
                  receiver is appointed for the Contractor or GCI  Communication
                  or for any of their respective property; (E) the Contractor or
                  GCI  Communication  files a petition to take  advantage of any
                  debtor's  act or to  reorganize  under  bankruptcy  or similar
                  laws;  or (F) the  Contractor  or GCI  Communication  fails to
                  obtain  a  vacation  or  stay  of any  involuntary  bankruptcy
                  proceedings within thirty (30) days after the filing thereof.




                                       4
<PAGE>
                  (c)   Guaranty  of  GCI   Communication's   and  GCI  Cable's
Obligations under the GCI Fiber Exchange Agreement.

                           (i)  The   Guarantor   hereby   unconditionally   and
                  irrevocably  guarantees  to the  Administrative  Agent and the
                  Lenders the full and timely  Substantial  Completion  (as such
                  term is defined in the GCI Fiber  Exchange  Agreement) of that
                  portion of the System to be  provided  to the  Borrower by GCI
                  Communication and GCI Cable, Inc., an Alaska corporation ("GCI
                  Cable") under and pursuant to the GCI Fiber Exchange Agreement
                  (collectively, the "Fiber Exchange Obligations"). Whenever GCI
                  Communication  or  GCI  Cable  shall  be  in  default  in  the
                  performance  when  due or  observance  when  due of any of the
                  Fiber Exchange Obligations or shall have otherwise committed a
                  breach  of  any  of  the  Fiber  Exchange   Obligations,   the
                  Administrative  Agent  may give the  Guarantor  notice of such
                  default or breach,  whereupon  the  Guarantor  shall  promptly
                  remedy  the  default or breach,  or shall  promptly,  upon the
                  consent of the Administrative Agent and the Lenders:

                           (x)       complete the Fiber Exchange  Obligations in
                                     accordance with the terms and conditions of
                                     the Fiber Exchange Agreement; or

                           (y)       cause  the  Substantial  Completion  of the
                                     portion of the System to be provided by GCI
                                     Communication    and/or    GCI   Cable   in
                                     accordance with the terms and conditions of
                                     the GCI Fiber Exchange Agreement by another
                                     Person   reasonably   acceptable   to   the
                                     Administrative  Agent and the  Lenders.  If
                                     the Guarantor elects this alternative,  the
                                     Guarantor  shall be  responsible  hereunder
                                     for such other Person's  performance of the
                                     Fiber  Exchange  Obligations  to  the  same
                                     extent that it would have been  responsible
                                     hereunder  for GCI  Communication's  or GCI
                                     Cable's  performance  of the Fiber Exchange
                                     Obligations.

                           (ii) In addition to the Guarantor's other obligations
                  hereunder,  the  Guarantor  shall be  required  to perform its
                  obligations  under this Guaranty upon the occurrence of any of
                  the following  events:  (A) GCI  Communication or GCI Cable is
                  adjudged as bankrupt or insolvent;  (B) GCI  Communication  or
                  GCI  Cable  makes a  general  assignment  for the  benefit  of
                  creditors;  (C) GCI  Communication  or GCI Cable  dissolves or
                  liquidates;  (D) a trustee or  receiver is  appointed  for GCI
                  Communication or GCI Cable or for any of its property; (E) GCI
                  Communication  or GCI 



                                       5
<PAGE>
                  Cable files a petition to take  advantage  of any debtor's act
                  or to reorganize  under bankruptcy or similar laws; or (F) GCI
                  Communication  or GCI Cable fails to obtain a vacation or stay
                  of any involuntary  bankruptcy  proceedings within thirty (30)
                  days after the filing thereof.

                  3. Subordination;  Limitation on Payments. All payments by the
Guarantor  to the  Borrower  pursuant  to this  Guaranty  will be in the form of
subordinated  loans which shall be subordinated to the Obligations in accordance
with the Subordination  Agreement.  Notwithstanding  any other provision of this
Guaranty,  the  Guarantor  shall not be  required  to make any loans or payments
hereunder in excess of the maximum amount  permitted under (i) Sections 4.13 and
4.20 of the Indenture  dated as of August 1, 1997 between GCI, Inc. and The Bank
of New York, as Trustee, as in effect on the date hereof, relating to the Senior
Notes due 2007 of GCI, Inc. and (ii) Section 7.09 of each of the Holdings Credit
Agreements  as in effect on the date hereof,  in each case so long as any of the
obligations under such agreements are not paid in full.

                  4.  Obligations  Absolute.  The  Guarantor  agrees  that  this
Guaranty  constitutes an  irrevocable  and  unconditional  obligation to perform
hereunder and to pay all amounts due and/or guaranteed  hereunder on demand. The
Guarantor  agrees to perform and make payment  strictly in  accordance  with the
terms hereof  regardless of any law,  regulation  or equitable  principle now or
hereafter  in effect  which  would  modify or  restrict  either the  Guarantor's
obligations  hereunder or the rights of the Administrative  Agent or the Lenders
with respect to this Guaranty, and the Guarantor confirms the absolute nature of
its  obligations  hereunder and waives defenses to the payment or performance by
the Guarantor hereunder as further provided in Section 5 of this Guaranty.

                  5. Waiver of Defenses

                  (a)  Invalidity.  The  Guarantor  agrees that its  obligations
under this Guaranty shall be absolute (i)  irrespective of any lack or defect in
relation to the legality,  validity or  enforceability of the obligations of the
Borrower  or any other  Person  under the Credit  Agreement  or any of the other
Fundamental Documents (including,  without limitation,  the Project Agreements);
(ii) irrespective of any inaccuracy or breach of any  representation or warranty
made by the Borrower or any other  Person in the Credit  Agreement or any of the
other Fundamental Documents or the inaccuracy or breach of any representation or
warranty made by the Guarantor in this Guaranty or any of the other  Fundamental
Documents; and (iii) irrespective of the failure to file or to file properly any
financing  statement or continuation  statement (or any other failure to perfect
or record) with respect to any security  interest  under any of the  Fundamental
Documents.

                  (b)  Protest.   The  Guarantor   hereby  waives  any  protest,
diligence,  demand or notice with  respect to any breach by the  Borrower or any
other Person of its obligations  under the Credit  Agreement or any of the other
Fundamental  Documents except for demand by notice for payment or performance of
this  Guaranty  as provided in Section 2, and the  Guarantor  hereby  



                                       6
<PAGE>
waives the  filing of any proof of claim or any  diligence  with  respect to any
proceeding of bankruptcy,  receivership or reorganization of the Borrower or any
other Person.

                  (c)  Modification.  The Guarantor  agrees that its obligations
under this Guaranty shall be absolute (i) irrespective of any amendment,  waiver
or consent of the  Administrative  Agent,  the Lenders or any other Persons with
respect  to the  Credit  Agreement  or any of the other  Fundamental  Documents,
whether or not the Guarantor has received  notice  thereof or have given consent
thereto, including, without limitation, any change in the time, manner, place or
currency  of  payment  or any  change in the  amount of any  payment  obligation
thereunder  or any  postponement  or  indulgence  granted by the  Administrative
Agent, the Lenders or any other Person with respect to any payment obligation or
the  performance  of  any  term  of the  Credit  Agreement  or any of the  other
Fundamental  Documents;  and (ii)  irrespective of any amendment,  modification,
release or termination of any rights of the Administrative Agent, the Lenders or
any  other  Person  pursuant  to the  Credit  Agreement  or  any  of  the  other
Fundamental Documents or any amendment, modification, release, or termination of
any rights or lien created  pursuant to the Credit Agreement or any of the other
Fundamental  Documents  notwithstanding  that any such amendment,  modification,
release or  termination  may diminish the value of collateral  against which the
Administrative  Agent and/or the Lenders can realize value as an  alternative to
demand for payment under this Guaranty.

                  (d)  Collection.  The  Guarantor  agrees that its  obligations
under this Guaranty shall be absolute,  and the Administrative  Agent and/or the
Lenders  shall have the right to demand and receive  payment or  performance  of
such  obligations  without any prior attempt or undertaking  to collect  amounts
past due from the Borrower, the Contractor, GCI Communication,  GCI Cable or any
other Person or to enforce  performance  by the Borrower,  the  Contractor,  GCI
Communication,  GCI  Cable or any  other  Person  and  without  any  attempt  or
undertaking  to foreclose on or to realize  value from  collateral  or foreclose
under any of the Fundamental  Documents.  The Guarantor  further agrees that the
election  of any remedy by the  Administrative  Agent or the  Lenders  shall not
preclude the  Administrative  Agent and/or the Lenders from the right to payment
under this  Guaranty,  and this Guaranty shall continue in full force and effect
and constitute the enforceable  obligation of the Guarantor  notwithstanding the
dismissal, compromise or abandonment of any proceeding against the Borrower, the
Contractor, GCI Communication,  GCI Cable or any other Person or pursuant to any
of the Fundamental Documents.  In the event that the Administrative Agent or the
Lenders do elect to undertake collection from the Borrower, the Contractor,  GCI
Communication,  GCI Cable or any other  Person or do elect to enforce any of the
Fundamental  Documents,  any  deficiency or remaining  amount due following such
collection proceeding is guaranteed hereunder and shall be paid by the Guarantor
without  limitation.  If the Administrative  Agent or the Lenders, by taking any
action or  commencing  any  proceeding  were to forfeit  or  release  the rights
against  the  Guarantor  because  of the  application  of any laws or  equitable
principles  relating to the "election of remedies",  then, to the fullest extent
permitted by law,  the  Guarantor  hereby  waives and consents to such action or
proceeding  by  the  Administrative  Agent  or  the  Lenders  constituting  such
"election of remedies",  and such waiver and consent shall be effective  even if
that  results  in a full or  partial  loss by the  Guarantor  of any  



                                       7
<PAGE>
rights of subrogation,  contribution or reimbursement  which the Guarantor might
otherwise have had.

                  (e)  Bankruptcy.  The  Guarantor  agrees that its  obligations
under this Guaranty shall be absolute  notwithstanding  the  commencement of any
proceeding in bankruptcy,  receivership or  reorganization  under the Bankruptcy
Code or any laws similar  thereto with respect to the Borrower,  the Contractor,
GCI  Communication,  GCI  Cable or any  other  Person.  The  obligations  of the
Guarantor  hereunder shall not be modified or affected by reason of any election
by the Administrative Agent or the Lenders in any such bankruptcy  proceeding of
the application of ss.  1111(b)(2) of the Bankruptcy Code or by the disallowance
under  the  Bankruptcy  Code  of  all  or  any  portion  of  the  claims  of the
Administrative  Agent  and/or the  Lenders  for  payment or  performance  by the
Borrower  of its  obligations  under the  Credit  Agreement  or any of the other
Fundamental  Documents or any other claims.  The  Guarantor  consents and agrees
that the  Administrative  Agent and the Lenders  shall be under no obligation to
marshall  any assets or property of the Borrower or any other Person in order to
protect the interest of the Guarantor with respect to any claims, by subrogation
or  otherwise,   for  reimbursement  after  payment  by  the  Guarantor  to  the
Administrative Agent or the Lenders hereunder.

                  (f)  Disclosure.  The  Guarantor  agrees that its  obligations
under  this  Guaranty  shall  be  absolute  irrespective  of any  change  in the
financial condition or results of operations of the Borrower or any other Person
or any adverse changes affecting the Project.  The Guarantor consents and agrees
that the  Administrative  Agent and the  Lenders  shall  have no  obligation  to
provide  information  or  to  disclose  any  documents,   reports  or  financial
statements  relating to the Borrower,  the Contractor,  GCI  Communication,  GCI
Cable,  any other  Person or the Project.  In the event that the  Administrative
Agent or the Lenders  furnish any such  information or disclose any such reports
at any time to the Guarantor,  the Administrative  Agent or the Lenders shall be
under no  obligation  to give any other  information  or to  disclose  any other
reports at any other time.

                  (g) Defenses.  The Guarantor  hereby waives the benefit of any
statute  of  limitation  applicable  to  the  Borrower,   the  Contractor,   GCI
Communication,  GCI Cable or any other Person under the Credit  Agreement or any
other   Fundamental   Document  (which  might  absent  such  waiver  affect  the
Guarantor's obligations under this Guaranty),  and the Guarantor, to the fullest
extent  permitted  by law,  waives  the  benefit of any  statute  of  limitation
applicable to the Guarantor with respect to enforcement of this Guaranty and any
legal or equitable  defense to the enforcement of its  obligations  hereunder so
that its obligations hereunder shall not be affected or discharged by any act or
circumstance   except  for  the  payment  and  performance  of  all  obligations
guaranteed hereunder.




                                       8
<PAGE>
                  6. Taxes.

                  (a) All sums payable by the Guarantor  hereunder shall be paid
in full, free and clear of any deduction or  withholding.  In the event that the
Guarantor is prohibited by any  applicable  law from making  payments  hereunder
free and clear of deduction or  withholding,  then the Guarantor  shall pay such
additional  amounts as may be necessary in order that the actual amount received
after  deduction  or  withholding  (and after  deduction or  withholding  of any
additional taxes or charges due as a consequence of a payment of such additional
amount) shall equal the amount that would have been received if such  deductions
or withholdings were not required.

                  (b) The  Guarantor  shall pay  directly  any present or future
stamp, court or documentary taxes or other charges due under applicable law with
respect to the  execution and delivery of this  Guaranty or the  enforcement  or
admission of this Guaranty in any court,  except taxes or other charges  imposed
on the Administrative Agent and/or the Lenders in respect of amounts received by
the  Administrative  Agent and/or the Lenders under this Guaranty by reason of a
tax  imposed  on the  overall  net  income  of the  Administrative  Agent or the
applicable  Lender assessed in or by the jurisdiction of its incorporation or of
the office  from which it has  advanced or in which it has booked the loans made
to the Borrower under the Credit Agreement.

                  (c) The Guarantor shall indemnify and hold the  Administrative
Agent and the Lenders harmless from all  consequences  arising from any delay or
failure by the Guarantor to pay any taxes or charges required in this Section to
be paid by the  Guarantor.  In the event  that the  Administrative  Agent or the
Lenders pay or any Lender pays such taxes or other  charges  directly,  together
with any penalties and expenses  related  thereto,  irrespective  of whether the
Administrative  Agent or the Lenders have  protested,  defended,  compromised or
settled the  assessment of such taxes or charges or have pursued any  applicable
procedure for protest or defense against such  assessments,  the Guarantor shall
reimburse the  Administrative  Agent and/or the Lenders upon demand for any such
taxes or other charges paid by any of them.

                  (d) If the Guarantor  pays any tax or other charge as provided
herein,  or makes any deduction or withholding from amounts paid hereunder,  the
Guarantor shall forthwith deliver to the Administrative Agent or the Lenders (or
to the affected Lender),  official tax receipts or other evidence  acceptable to
the Administrative Agent or the Lenders establishing payment of such amounts.

                  7. Remedies.

                  (a) It is expressly  understood  and agreed by the  Guarantor
that its failure to timely perform any of its obligations  hereunder (time being
of the essence) will cause irreparable  injury to the  Administrative  Agent and
the  Lenders,  that the  Administrative  Agent and the Lenders  have no adequate
remedy at law in respect of such failure and, as a consequence, agrees that each
and every  obligation  hereunder shall be specifically  enforceable  against the
Guarantor, 



                                       9
<PAGE>
and the Guarantor hereby waives and agrees not to assert any defenses against an
action for specific  performance  of such  obligations.  The  Guarantor  further
acknowledges the impossibility of ascertaining the amount of damages which would
be suffered by the  Administrative  Agent and the Lenders by reason of any delay
in Completion  and,  consequently,  agrees that, (i) in the event  Completion is
delayed until after the Outside  Completion Date, then in addition to paying all
costs of Completion and other amounts  required to be paid pursuant to Section 2
above,  the  Guarantor  shall  pay  directly  into  the  Operating  Account,  as
liquidated  damages  and not as a  penalty,  an amount in cash for each day that
Completion  is not  attained  (beyond  the  Outside  Completion  Date)  equal to
$32,084.00  per day and (ii) subject to the  provisions of Section 3 hereof,  if
the Borrower does not fulfill all of its  obligations  under Section 5.21 of the
Credit  Agreement  in a timely  manner,  then on August 1, 1998,  the  Guarantor
hereby agrees to pay to the  Administrative  Agent (on behalf of the Lenders and
as the assignee of the Borrower),  as liquidated damages, an amount equal to the
then outstanding Obligations.

                  (b) All sums  payable by the  Guarantor to the  Borrower,  the
Administrative  Agent and/or the Lenders,  as the case may be,  pursuant to this
Guaranty,  shall be made in immediately available funds in United States Dollars
and shall be paid within five (5) days after  receipt of notice by the Guarantor
from the Administrative Agent or the Lenders demanding such payment.

                  (c) In addition,  the Guarantor shall pay all costs,  expenses
and damages incurred (including, without limitation,  reasonable attorneys' fees
and expenses) in connection with the enforcement of the Guarantor's  obligations
hereunder.

                  8.  Survival.  This  Guaranty  shall  remain in full force and
effect  until  indefeasible  payment  in  full  and  performance  in full of the
Guarantor's obligations hereunder. The Guarantor agrees that this Guaranty shall
be automatically reinstated if and to the extent that for any reason any payment
by or on behalf of the Borrower, the Contractor, GCI Communication, GCI Cable or
any other Person is rescinded or must be otherwise restored, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise.

                  9.       No Waiver; Cumulative Rights.

                  No  failure  on the  part of the  Administrative  Agent or the
Lenders to  exercise,  and no delay in  exercising,  any right  hereunder  shall
operate as a waiver  thereof  nor shall any single or  partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any other right.  The rights and remedies  herein provided are cumulative and
not  alternative  or  exclusive,  and such  rights and  remedies  shall exist in
addition to all other  rights and remedies of the  Administrative  Agent and the
Lenders  in  relation  to this  Guaranty,  the  Credit  Agreement  and the other
Fundamental  Documents in accordance with the provisions  thereof and applicable
law.  Failure by the  Administrative  Agent or the  Lenders at any time or times
hereafter to require strict  performance  by the Borrower,  the Guarantor or any
other  Person of any of the  terms and  conditions  of this  Guaranty  or of the
Credit Agreement or of any other Fundamental  



                                       10
<PAGE>
Document  shall not waive,  release or diminish any right of the  Administrative
Agent or the Lenders at any other time to demand strict performance thereof, and
such  right  shall not be deemed to have  been  waived or  released  by any act,
course of conduct or knowledge of the Administrative Agent or the Lenders, their
respective  agents,  officers  or  employees,  unless  such waiver or release is
contained in an instrument in writing signed by the  Administrative  Agent,  the
Required  Lenders  and/or  the  Lenders  (as  applicable).   No  waiver  by  the
Administrative  Agent or the Lenders of any default shall operate as a waiver of
any other default or the same default on a future occasion. Any determination by
a court of  competent  jurisdiction  of the  amount  of the  obligations  of the
Guarantor   hereunder   shall  be  conclusive   and  binding  on  the  Guarantor
irrespective of whether the Guarantor was a party to the suit or action in which
such determination was made.

                  10.  Amendments.  This Guaranty may be amended,  supplemented,
waived or modified only by an instrument in writing  signed by the Guarantor and
consented to by the Administrative Agent and the Lenders.

                  11. Counterparts. This Guaranty may be signed in any number of
counterparts.  Any single  counterpart or set of counterparts  signed, in either
case, by the Guarantor and the Administrative  Agent shall constitute a full and
original Guaranty for all purposes.

                  12.  Assignments.  This  Guaranty  shall be  binding  upon the
Guarantor and enforceable by the Administrative  Agent and the Lenders as stated
herein.  The  Administrative  Agent or the  Lenders or each of them may  assign,
transfer or participate  all or any part of its interest in this Guaranty to any
other party at any time. The Guarantor shall have no right to assign or transfer
its rights or obligations  under this Guaranty without the prior written consent
of the Administrative Agent and the Lenders.

                  13.  Notices.  Any notice  required or  permitted  to be given
hereunder  (each such notice being referred to herein as a "Notice") shall be in
writing  and shall be (i)  personally  delivered,  (ii)  transmitted  by postage
prepaid  mail,  return  receipt  requested,   or  (iii)  transmitted  by  telex,
telecopier or facsimile, as elected by the party giving such Notice, as follows:

                  To the Guarantor:

                           GCI Holdings, Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn.:Chief Financial Officer
                           Facsimile No.(907) 265-5676




                                       11
<PAGE>
                  To the Administrative Agent:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, NY  10019
                           Attn:  Project Finance Group
                           Facsimile No.:  (212) 261-3421

                  All Notices and other communications shall be effective on (i)
the date of receipt if  personally  delivered,  (ii) on the tenth  Business  Day
after mailing if mailed and (iii) on transmission  with confirmed  answerback if
transmitted by telex, telecopier or facsimile.  Any party may change its address
for the purposes hereof by notice to the parties.

                  14.  GOVERNING  LAW. THIS  GUARANTY  SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                  15.  SUBMISSION  TO  JURISDICTION;  SERVICE  OF  PROCESS.  THE
GUARANTOR HEREBY IRREVOCABLY  SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF
THE STATE OF NEW YORK AND TO THE  JURISDICTION  OF THE  UNITED  STATES  DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION
OR OTHER  PROCEEDING  ARISING  OUT OF OR BASED UPON THIS  GUARANTY,  THE SUBJECT
MATTER HEREOF,  THE CREDIT  AGREEMENT OR ANY OTHER  FUNDAMENTAL  DOCUMENT OR THE
SUBJECT MATTER THEREOF BROUGHT BY THE ADMINISTRATIVE AGENT OR A LENDER OR ANY OF
THEIR SUCCESSORS OR ASSIGNS IN EITHER OF THE ABOVE-REFERENCED FORUMS AT THE SOLE
OPTION OF THE  ADMINISTRATIVE  AGENT OR A LENDER.  THE  GUARANTOR  TO THE EXTENT
PERMITTED BY APPLICABLE LAW (A) HEREBY WAIVES,  AND AGREES NOT TO ASSERT, BY WAY
OF MOTION,  AS A DEFENSE,  OR OTHERWISE,  IN ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH  COURTS,  ANY CLAIM  THAT IT IS NOT  SUBJECT  PERSONALLY  TO THE
JURISDICTION  OF THE ABOVE-NAMED  COURTS,  THAT ITS PROPERTY IS EXEMPT OR IMMUNE
FROM ATTACHMENT OR EXECUTION,  THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN  INCONVENIENT  FORUM,  THAT THE VENUE OF THE SUIT,  ACTION OR  PROCEEDING  IS
IMPROPER OR THAT THIS GUARANTY,  THE SUBJECT MATTER HEREOF, THE CREDIT AGREEMENT
OR ANY OTHER  FUNDAMENTAL  DOCUMENT  OR THE  SUBJECT  MATTER  THEREOF MAY NOT BE
ENFORCED  IN OR BY SUCH  COURT,  (B) HEREBY  WAIVES THE RIGHT TO REMOVE ANY SUCH
ACTION, SUIT OR PROCEEDING INSTITUTED BY THE ADMINISTRATIVE AGENT OR A LENDER IN
STATE COURT TO FEDERAL  COURT,  AND (C) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY
SUCH  ACTION,   SUIT  OR  PROCEEDING   ANY  OFFSETS  OR   COUNTERCLAIMS   EXCEPT
COUNTERCLAIMS  THAT ARE  COMPULSORY  OR  OTHERWISE  ARISE FROM THE SAME  SUBJECT




                                       12
<PAGE>
MATTER.  THE  GUARANTOR  HEREBY  CONSENTS  TO  SERVICE OF PROCESS BY MAIL AT ITS
ADDRESS TO WHICH  NOTICES  ARE TO BE GIVEN  PURSUANT  TO SECTION 13 HEREOF.  THE
GUARANTOR  AGREES THAT ITS SUBMISSION TO JURISDICTION  AND CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE ADMINISTRATIVE  AGENT AND
THE LENDERS.  FINAL JUDGMENT  AGAINST THE GUARANTOR IN ANY SUCH ACTION,  SUIT OR
PROCEEDING  SHALL BE CONCLUSIVE,  AND MAY BE ENFORCED IN ANY OTHER  JURISDICTION
(X) BY SUIT,  ACTION OR PROCEEDING ON THE JUDGMENT,  A CERTIFIED OR TRUE COPY OF
WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF INDEBTEDNESS OR
LIABILITY OF THE GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER MANNER PROVIDED
BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT
THE ADMINISTRATIVE  AGENT OR A LENDER MAY AT ITS OPTION BRING SUIT, OR INSTITUTE
OTHER  JUDICIAL  PROCEEDINGS  AGAINST THE  GUARANTOR OR ANY OF ITS ASSETS IN ANY
STATE OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE THE
GUARANTOR OR SUCH ASSETS MAY BE FOUND. 

                  16.  WAIVER OF JURY  TRIAL.  TO THE EXTENT NOT  PROHIBITED  BY
APPLICABLE  LAW  WHICH  CANNOT BE  WAIVED,  THE  GUARANTOR  HEREBY  WAIVES,  AND
COVENANTS  THAT  IT  WILL  NOT  ASSERT  (WHETHER  AS  PLAINTIFF,   DEFENDANT  OR
OTHERWISE),  ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN  RESPECT  OF ANY  ISSUE,
CLAIM,  DEMAND,  ACTION,  OR CAUSE OF ACTION  ARISING  OUT OF OR BASED UPON THIS
GUARANTY,  THE  SUBJECT  MATTER  HEREOF,  THE  CREDIT  AGREEMENT  OR  ANY  OTHER
FUNDAMENTAL  DOCUMENT OR THE SUBJECT  MATTER  THEREOF,  IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE.  THE
GUARANTOR  ACKNOWLEDGES  THAT IT HAS BEEN INFORMED BY THE  ADMINISTRATIVE  AGENT
THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL  INDUCEMENT UPON WHICH
THE ADMINISTRATIVE  AGENT AND THE LENDERS HAVE RELIED, ARE RELYING AND WILL RELY
IN ENTERING INTO THIS GUARANTY,  THE CREDIT AGREEMENT AND ANY OTHER  FUNDAMENTAL
DOCUMENT.   THE  ADMINISTRATIVE  AGENT  OR  ANY  LENDER  MAY  FILE  AN  ORIGINAL
COUNTERPART  OR A COPY OF THIS SECTION 16 WITH ANY COURT AS WRITTEN  EVIDENCE OF
THE CONSENT OF THE GUARANTOR TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.




                                       13
<PAGE>
                  IN WITNESS WHEREOF,  the Guarantor has caused this Guaranty to
be executed by its duly  authorized  officer or other  representative  as of the
date first set forth above.


                                       GUARANTOR:

                                       GCI HOLDINGS, INC.


                                       By: 
                                       Name:
                                       Title:

Accepted and Agreed:

CREDIT LYONNAIS NEW YORK BRANCH,
as Administrative Agent


By:
Name:
Title:
<PAGE>
                                                                      SCHEDULE A


                     DEFINITIONS OF COMPLETION AND COMPLETED

                  "Completion"  shall mean delivery by the Independent  Engineer
of a certificate in form and substance  satisfactory to the Administrative Agent
certifying that:

                  a. the System  has been  fully  constructed  and  equipped  in
         strict conformity with the Plans and Specifications;

                  b. the System is fully and properly  interconnected to a local
         loop telephone  system at each point of presence within Alaska and to a
         long distance system at the System's Seattle, Washington terminus;

                  c. the System has satisfactorily completed the testing program
         set forth in Article 9 of the Construction  Contract,  Exhibit A to the
         Kanas  Agreement,  Exhibit A to the GCI Fiber  Exchange  Agreement  and
         Schedule II to the GCI  Construction  Contract (with all matters stated
         therein as being  subject to the  agreement of the Borrower also having
         been approved by the Independent Engineer);

                  d. no known  defective  or  uncompleted  work  exists that can
         reasonably  be expected to result in a significant  degradation  of the
         performance  of the System  which has not been  compensated  for by the
         warranty of, or the payment of liquidated damages by, the Contractor as
         contemplated in the  Construction  Contract or by GCI  Communication as
         contemplated in the GCI Construction Contract;

                  e. the System as constructed complies in all material respects
         with all  requirements  of Applicable  Law and with all of the Permits,
         all of which have been obtained and are in full force and effect; and

                  f. all  acceptance  tests set forth in any Capacity  Agreement
         then in existence have been met.

         "Completed" shall mean that Completion has been achieved.
<PAGE>
                                                                       EXHIBIT O

                           FORM OF GCI LEASE CONTRACT



                                 LEASE AGREEMENT


                          Dated as of January 27, 1998


                                     between


                Alaska United Fiber System Partnership, as Lessor

                                       and

                       GCI Communication Corp., as Lessee








         As set forth in Section 21 hereof,  Lessor has  assigned as  collateral
         security  to the  Agent  (as  defined  herein),  its  right,  title and
         interest in and to this Lease Agreement.  To the extent that this Lease
         Agreement  constitutes  chattel  paper (as such term is  defined in the
         Uniform  Commercial Code), no security interest in this Lease Agreement
         may be created by the transfer or possession of any counterpart  hereof
         other than the counterpart  marked as the "Original" and containing the
         receipt therefor executed by the Agent on or immediately  following the
         signature page hereof.
<PAGE>
                                 LEASE AGREEMENT

                  LEASE  AGREEMENT  dated as of January 27, 1998 between  Alaska
United Fiber System Partnership, a general partnership (herein called "Lessor"),
and GCI Communication Corp., an Alaska corporation (herein called "Lessee").

                  The parties hereto agree as follows:

SECTION 1.      DEFINITIONS.

                  For all purposes of this Lease,  capitalized  terms shall have
the  respective  meanings  assigned  thereto  in  Exhibit  A  hereto.  The words
"hereto", "hereof",  "hereunder" and words of similar import shall refer to this
Lease (including all annexes and schedules hereto),  as the same may be amended,
modified or supplemented from time to time in accordance with the terms hereof.

SECTION 2.      LEASE OF FACILITY.

                  Lessor  hereby  agrees to lease  the  Facility  to Lessee  and
Lessee  hereby  agrees to lease the  Facility  from Lessor  commencing  upon the
Completion  Date and ending  upon  expiration  of the Term as  evidenced  by the
execution and delivery by Lessor and Lessee of this Lease.

SECTION 3.      TERM; RENT; PAYMENTS, ETC.

                  (a) Lease Term.  This Lease is  effective as of the date first
written above.  Lessee shall have the right to commence using the Facility,  and
Lessee shall be obligated to commence  paying Rent, on the Completion  Date. The
term of this Lease (the "Term")  shall  commence on the date first written above
and shall continue for a period ending on the day preceding the eleventh  (11th)
anniversary  of the  Completion  Date  subject  to  renewal at the option of the
Lessee in accordance with Section 10 hereof.

                  (b) Rent.  Commencing on the Completion Date, and on the first
(1st) day of every month  throughout the Term (the "Rent Payment Date"),  Lessee
shall pay rental  ("Rent")  for the  Facility at the rate of Three  Million Nine
Hundred  Thousand  and No/100  Dollars  ($3,900,000.00)  per year.  Each monthly
payment of Rent shall be in the amount of  one-twelfth  (1/12) of the  aforesaid
annual  rental rate.  If the  Completion  Date is not the first (1st) day of the
month,  the Rent payment due on the Completion Date shall be prorated,  as shall
the payment for the last partial month of the Term.

                  (c)  Payments;  Calculations.  Subject  to the  provisions  of
Section 21 hereof,  all Rent payable to Lessor hereunder shall be paid to Lessor
at the office of Credit  Lyonnais New York Branch,  1301 Avenue of the Americas,
New York,  New York 10019 for  deposit in Account  
<PAGE>
No. 0139787000100,  entitled "Alaska United Disbursement Account" in the name of
the  Administrative  Agent (or to such other Person or at such other  address as
Lessor may from time to time  specify  in writing to Lessee) in lawful  money of
the United States of America and in immediately  available  funds,  on or before
1:00 p.m., New York, New York time, on the due date of such payment. Any payment
hereunder  which is due on a date which is not a  Business  Day shall be paid on
the next  succeeding  Business Day together  with an amount equal to interest on
such  payment  at the Past Due  Rate  for the  period  from the due date of such
payment to the date of payment; provided,  however, that if such next succeeding
Business Day shall be in a different  calendar year,  then such payment shall be
made on the next  preceding  Business Day. All interest,  fees and other amounts
provided  for under this Lease  which are to be  calculated  on an annual  basis
shall be computed on the basis of a 360-day  year for the actual  number of days
elapsed (including the first day but excluding the last day).

                  (d) Net Lease; No Set-Off, Counterclaims, etc. This Lease is a
net lease,  and Lessee's  obligation  to pay all Rent  hereunder is absolute and
unconditional  and  shall  not  be  affected  by  any  circumstance  whatsoever,
including, without limitation, (i) any abatement,  reduction,  set-off, defense,
counterclaim  or recoupment  whatsoever or any right to any thereof  (including,
without limitation,  abatements,  reductions,  set-offs, defenses, counterclaims
and  recoupments  for or on account of any past,  present or future claims which
Lessee  may have  against  Lessor,  the  Agent or other  Person  for any  reason
whatsoever),  (ii)  any  insolvency,   bankruptcy,   reorganization  or  similar
proceedings by or against Lessee, or (iii) any other circumstance,  happening or
event whatsoever, whether or not similar to any of the foregoing; nor, except as
otherwise expressly provided herein,  shall this Lease terminate,  nor shall any
of the  obligations  of Lessee to pay Rent hereunder be otherwise  affected,  by
reason of any defect in the title to, or any  defect in or lack or  fitness  for
use of, or any damage to, or loss of, or loss of the use of, or  destruction  or
theft of, all or any part of the Facility or all or any part of the Right of Way
from any cause  whatsoever,  the  prohibition of the use or possession by Lessee
of, or any ouster or  dispossession  by paramount  title or otherwise of, all or
any part of the Facility or the Right of Way, the interference  with such use or
possession  by any  governmental  agency or  authority or other  Person,  or the
invalidity or  unenforceability  or the  disaffirmance of this Lease, any of the
other Project  Agreements or any agreement related thereto,  or by reason of any
failure by Lessor or any other Person to perform any of its  obligations  herein
or  therein  contained,  or by  reason  of any  Liens  on all or any part of the
Facility  or the  Right  of Way,  or for any  other  cause  whether  similar  or
dissimilar to the  foregoing,  it being the intention of the parties hereto that
all Rent payable by Lessee  hereunder shall continue to be payable in all events
in the manner and at the times herein  provided unless the obligation to pay the
same shall be terminated  pursuant to the express  provisions of this Lease.  In
that  connection,  Lessee hereby waives,  to the extent  permitted by Applicable
Law, any and all rights which it may now have or which may at any time hereafter
be conferred  upon it, by statute or otherwise,  to terminate,  cancel,  quit or
surrender  this Lease  except in  accordance  with the express  terms hereof and
agrees that if, for any reason  whatsoever,  this Lease shall be  terminated  in
whole  or in  part by  operation  of law or  otherwise  except  as  specifically
provided  herein,  Lessee will nonetheless pay to Lessor (or to whomsoever shall
be entitled  thereto as expressly  provided in accordance with Section 21 below)
an aggregate  



                                      -2-
<PAGE>
amount equal to each Rent payment at the time such payment would have become due
and  payable  in  accordance  with the terms  hereof  had such  termination  not
occurred. Each payment of Rent made by Lessee shall be final and Lessee will not
seek or have any right to recover all or any part of such  payment  from Lessor,
the Agent or any Lender for any reason whatsoever.

SECTION 4.      INSPECTION.

                  During the Term, the Lessor or the Agent and their  respective
authorized  representatives may inspect, subject to Lessee's normal requirements
regarding health, safety and security, the Facility and the Right of Way and the
books and records of Lessee with respect  thereto,  and make copies and extracts
therefrom,  and may discuss Lessee's affairs,  finances and accounts relating to
the Facility and the Right of Way with its officers, and Lessee shall furnish to
the Lessor and the Agent statements  accurate in all material respects regarding
the condition and state of repair of the Facility and the Right of Way, all upon
such reasonable notice and at such reasonable times during normal business hours
and as often as may be reasonably requested and all at the expense of the Lessor
(or at the  expense of Lessee if a Lease Event of Default  has  occurred  and is
continuing).  Lessor and the Agent shall have no duty to make any  inspection or
inquiry and shall not incur any  liability or obligation by reason of not making
any such inspection or inquiry.

SECTION 5.      DISCLAIMER OF WARRANTIES.

                  THE LESSEE TAKES THE FACILITY AND THE PROPERTY RIGHTS "AS-IS",
"WHERE-IS".  NEITHER  LESSOR NOR THE AGENT MAKES OR SHALL BE DEEMED TO HAVE MADE
(1) ANY WARRANTY OR REPRESENTATION,  EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN
OR CONDITION OF, OR AS TO THE QUALITY OF THE MATERIAL,  EQUIPMENT OR WORKMANSHIP
IN, OR AS TO THE  SUITABILITY  FOR ANY  PURPOSE  OF,  THE  FACILITY  OR ANY PART
THEREOF OR AS TO THE ABILITY OF THE FACILITY TO PERFORM ANY FUNCTION, OR (2) ANY
WARRANTY OF  MERCHANTABILITY  OR FITNESS OF THE FACILITY OR ANY PART THEREOF FOR
ANY  PARTICULAR  PURPOSE  OR AS TO THE  TITLE  TO OR  LESSOR'S  INTEREST  IN THE
FACILITY OR ANY PART THEREOF OR AS TO ANY OTHER MATTER  RELATING TO THE FACILITY
OR ANY PART THEREOF,  IT BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN LESSOR AND
THE AGENT,  ON THE ONE HAND,  AND LESSEE ON THE OTHER  HAND,  ARE TO BE BORNE BY
LESSEE, AND THE BENEFITS OF ANY AND ALL IMPLIED  WARRANTIES AND  REPRESENTATIONS
OF LESSOR ARE HEREBY WAIVED BY LESSEE.

                  LESSEE  CONFIRMS  THAT IT HAS  SELECTED  THE FACILITY AND EACH
PART THEREOF ON THE BASIS OF ITS OWN JUDGMENT AND EXPRESSLY  DISCLAIMS  RELIANCE
UPON ANY STATEMENTS,  REPRESENTATIONS OR WARRANTIES MADE BY LESSOR OR THE AGENT,
AND LESSEE  ACKNOWLEDGES  



                                      -3-
<PAGE>
THAT NEITHER LESSOR NOR THE AGENT IS A MANUFACTURER OR VENDOR OF ANY PART OF THE
FACILITY.

SECTION 6.      MAINTENANCE; OPERATION; COMPLIANCE WITH LAWS.

                  Lessee will use the Facility in a careful and proper manner in
the conduct of its lawful business.

                  Lessee  shall  not  in  its  use  of  the  Facility  or in its
operation of any equipment  supplied by Lessee and associated  with the Facility
interfere with or impair the service over the whole or any section of the System
or cause any damage to any equipment or facilities of Lessor or any other Person
or create hazards to the public or the servants,  agents, or employees of Lessor
or of  any  other  Person.  Lessee  shall  undertake  in any  tariff,  contract,
agreement or other  arrangement  whatsoever  concerning or arising in connection
with the use of the  Facility by its  customers,  to extend to and make  binding
upon its customers the provisions of this Section.

                  During the Term,  Lessee shall,  at its sole cost and expense,
conform to and comply or cause compliance with:

                           (i) all Applicable Law with respect to the use of the
Facility  and each  part  thereof  except  (i) to the  extent  valid  variances,
waivers,  exemptions or similar  exceptions that will be available to the Lessor
on the termination of this Lease or on its exercise of remedies under Section 15
hereof have been obtained therefrom;  (ii) where noncompliance would (A) have no
material adverse effect on the ownership,  use,  operation or maintenance of the
Facility  or on  the  business,  operations,  property  or  financial  or  other
condition  of Lessee,  and (B) not make Lessor or Agent  subject to any criminal
liability or penalty or,  unless  indemnified  or bonded by Lessee in manner and
form  satisfactory to Lessor or Agent, any civil liability or any other penalty,
fine or cost of any kind whatsoever; and (iii) for violations of any such law or
requirement  the validity of which is being contested by Lessee in good faith by
appropriate  proceedings diligently prosecuted and violations of any such law or
requirement (other than violations  involving criminal penalties with respect to
Lessor or the Agent) which Lessee is diligently proceeding to correct; provided,
however,  that no violation  referred to in this clause (iii) shall  involve any
danger of the foreclosure,  sale, forfeiture or loss of any part of the Facility
or of the  impairment of the  operation of the Facility or of the  impairment of
Lessee's ability to perform its obligations  hereunder or under any of the other
Project Agreements; and

                           (ii)  the  terms  and  conditions  of  all  insurance
policies in effect with respect to the  Facility or any part  thereof  which are
required to be maintained under Section 19 hereof.




                                      -4-
<PAGE>
SECTION 7.      EVENT OF LOSS, ETC.

                  (a) Event of Loss.  If an Event of Loss shall occur during the
Term, Lessee shall promptly give Lessor and the Agent written notice thereof and
Lessee shall pay to Lessor, on the Rent Payment Date next succeeding the date on
which  such  Event of Loss  occurred  the sum of (i) the  Stipulated  Loss Value
determined  as of such Rent  Payment  Date,  and (ii) all Rent due on such date;
provided,  however, that (x) for purposes of this Section 7(a), an Event of Loss
which  occurs 20 or fewer  Business  Days prior to a Rent  Payment Date shall be
deemed to have  occurred on such Rent  Payment  Date and (y) if an Event of Loss
occurs on the last  scheduled day of the Term or 20 or fewer Business Days prior
to the last scheduled day of the Term,  Lessee shall make all payments  required
pursuant to clauses (i) and (ii) of this Section 7(a) on the last  scheduled day
of the Term.  Lessee shall  continue to pay Rent when due from and including the
date on which the Event of Loss  occurs  to and  including  the date on which it
pays Stipulated Loss Value. Upon payment of all Rent payable hereunder to Lessor
to and including the date on which Lessee pays  Stipulated Loss Value and of all
other  amounts  then due and owing by Lessee  hereunder,  the Term shall end and
Lessor shall  transfer  title to the Facility to Lessee on an "as-is,  where-is"
basis, without any representation or warranty, express or implied, by Lessor and
without recourse to Lessor.

                  (b)  Application  of Other  Payments  with Respect to Event of
Loss. Any payments received at any time by Lessor,  Lessee or the Agent from any
Governmental Authority,  insurer (other than payments of liability insurance and
other than  payments on account of  insurance  carried by the Agent  pursuant to
Section  9(f)  hereof) or other Person with respect to an Event of Loss shall be
applied in reduction of Lessee's obligation to pay the Stipulated Loss Value and
all amounts of Rent  payable  pursuant to Section  7(a) hereof to the extent not
already  paid by Lessee,  and,  after the  Stipulated  Loss Value and such other
amounts shall have been paid by Lessee, the balance, if any, remaining shall, be
paid to, or  retained  by,  the Lessee  and the  Lessor as their  interests  may
appear.

                  (c) Application of Payments Not Relating to Event of Loss. Any
payments  received  at any  time by  Lessor  or  Lessee  from  any  Governmental
Authority,   insurer  or  other  Person  with   respect  to  any   condemnation,
confiscation  or seizure of, or  requisition of title to or use of, or theft of,
or loss of use of, or damage to, any part of the  Facility not  constituting  an
Event of Loss or a Lease Event of Default shall (i) if such payments shall be in
the aggregate in excess of $50,000,  be paid over to or retained by Lessor,  and
(ii) if such payments shall be in the aggregate of $50,000 or less, be paid over
to or retained by Lessee, unless a Lease Default or Lease Event of Default shall
have occurred and be continuing,  in which event all such payments under (i) and
(ii) of this  subsection  shall be paid over to or retained  by the  Lessor.  In
either case,  such payments shall be applied  directly in payment of repairs to,
or for  replacement  of, such  property in  accordance  with the  provisions  of
Section 6 hereof if the cost of such repairs or replacement has not already been
paid by Lessee,  and any balance  remaining after compliance with the provisions
of said Section 6 shall,  unless a Lease Default or Lease Event of Default shall



                                      -5-
<PAGE>
have  occurred and be  continuing,  be paid over to, or retained by,  Lessee and
Lessor as their interests may appear.

                  (d) Disposition of Payments Not Payable to Lessee. Any amounts
that would be payable to Lessee,  or which  Lessee  would be entitled to retain,
pursuant  to this  Section 7 but which are not so payable or  retainable  solely
because a Lease  Default or Lease Event of Default  shall have  occurred  and be
continuing,  shall be retained  by, or paid to,  Lessor and held as security for
the  obligations  of Lessee  under this Lease,  and shall be paid over to Lessee
when no Lease Default or Lease Event of Default shall be continuing  unless this
Lease shall have been  declared to be in default  pursuant to Section 15 hereof,
in which case such amounts shall be retained by Lessor and applied to reduce the
obligations of Lessee under this Lease.

SECTION 8.      LIMITATION ON CLAIMS.

                  Lessee  shall have no claim,  demand,  action or suit  against
Lessor,  Agent,  any  Lender  or any of their  respective  servants,  agents  or
employees  for any injury,  including  injury  resulting  in death or loss of or
damage to any property,  suffered or sustained by it or its servants,  agents or
employees or by any other  Person which  directly or  indirectly  results  from,
arises  out of or is,  in any way,  connected  with the use of the  Facility  by
Lessee, except to the extent that such injury, loss or damage,  including injury
resulting  in  death  or loss of or  damage  to  property,  is due to the  gross
negligence of the Person causing such injury.

SECTION 9.      INSURANCE

                  (a)  Insurance  Against  Loss or Damage to  Facility.  Each of
Lessor and Lessee, at its sole cost and expense,  shall maintain  throughout the
Term and thereafter until the Facility is returned to Lessor pursuant to Section
12(a)  hereof,  physical  damage  insurance  with  respect  to their  respective
interests  in the  Facility  with  insurers  rated  "A-" or  better  and  with a
financial rating IX or better, by A.M. Best & Co. (or other insurers  reasonably
satisfactory  to Lessor and the Agent),  such insurance to be all-risk  physical
damage insurance, including earthquake and flood coverage, in amounts sufficient
to prevent  Lessee,  Lessor or the Agent from being a co-insurer  of any partial
loss  under  the  applicable  policies,  in such  scope as  shall be  reasonably
acceptable to Lessee, Lessor and the Agent and in such form, amounts and against
such  insurable  hazards,  casualties,  risks and damages as shall be consistent
with large, creditworthy corporate insureds' practices;  provided, however, that
in any event the amount of such insurance shall not at any time be less than the
then applicable  Stipulated Loss Value of the Facility and provided further that
Lessor and Lessee shall  indemnify and hold each other harmless from any loss or
damage  caused  to each of their  interests  by the  other to the  extent of the
insurance  coverage  required  to  be  maintained  by  such  indemnifyng  party.
Notwithstanding  the  provisions of this  paragraph  Lessee may self insure,  by
means of  deductibles  or  otherwise,  against  the  risks  referred  to in this
paragraph in an annual  aggregate  (or, if such  policies  containing  aggregate
annual  deductibles  are not  commercially  available on reasonable  terms,  per
occurrence)  amount 



                                      -6-
<PAGE>
not in excess of $250,000 for all perils except earthquake and flood which shall
be subject to a maximum deductible of 5% of values at risk at the time of loss.

                  (b) Insurance  Against Public  Liability and Property  Damage.
Lessee,  at its sole cost and expense,  shall  maintain  throughout the Term and
thereafter  until the Facility is returned to Lessor  pursuant to Section  12(a)
hereof,  comprehensive  general  liability  insurance  against claims for bodily
injury or death or property damage arising out of the use, possession, operation
or condition of the Facility in such scope as shall be reasonably  acceptable to
the  Lessor and the Agent and in such form,  such  amounts  (but in any event at
least  $5,000,000)  and against  such risks as shall be  consistent  with large,
creditworthy  corporate  insureds'  practices  and with  insurers  rated "A-" or
better and with a financial  rating of IX or better by A.M. Best & Co. (or other
insurer reasonably  satisfactory to Lessor and the Agent).  Notwithstanding  the
provisions of this paragraph the Lessee may self insure, by means of deductibles
or  otherwise,  against  the risks  referred to in this  paragraph  in an annual
aggregate (or, if such policies containing  aggregate annual deductibles are not
commercially available on reasonable terms, per occurrence) amount not in excess
of $100,000.

                  (c) Workers' Compensation  Coverage.  Lessee, at its sole cost
and  expense,  shall  maintain  throughout  the Term and  thereafter  until  the
Facility is  returned  to Lessor  pursuant  to Section  12(a)  hereof,  workers'
compensation  coverage  complying with the provisions of all Applicable Law with
respect  thereto  and  employer's  liability  insurance  in a minimum  amount of
$5,000,000 per loss. Notwithstanding the provisions of this paragraph Lessee may
self insure, by means of deductibles or otherwise, against the risks referred to
in this  paragraph  in an annual  aggregate  (or,  if such  policies  containing
aggregate annual deductibles are not commercially available on reasonable terms,
per occurrence) amount not in excess of $100,000.

                  (d)  Provisions  of Policies.  Lessee will use all  reasonable
efforts to cause all  insurance  policies  referred to in Sections 9(a) and 9(b)
hereof to (i) in the case of the  insurance  referred to in Section 9(a) hereof,
be payable to Lessor and the Agent,  as their  respective  interests may appear;
provided,  however, that until the insurance company has received written notice
that the Credit  Agreement has been  satisfied and discharged all such insurance
proceeds shall be payable to the Agent, provided, further, however, that payment
of less than $250,000 in respect of any single  casualty may be paid directly to
Lessee  and  Lessor  as  their  interests  may  appear;  (ii) in the case of the
insurance  referred  to in Section  9(b)  hereof,  name  Lessor and the Agent as
additional  insureds  and be  payable  to the  Person  or  Persons  to whom  the
liability  covered by such  insurance has been  incurred;  (iii) provide that no
cancellation,  termination  or  material  change  in  such  insurance  shall  be
effective  until at least 30 days  after  receipt  by  Lessor  and the  Agent of
written  notice  thereof;  (iv)  insure  the  interests  of Lessor and the Agent
regardless  of any  breach or  violation  by  Lessee or any other  Person of any
warranties,  declarations or conditions  contained in such insurance policies or
any action or inaction of Lessee or any other interests insured thereunder;  (v)
provide that neither Lessor nor the Agent shall be liable for the payment of any
premiums,  commissions,  assessments or calls in connection with such insurance;
(vi) contain a waiver of any rights of subrogation of the insurer against Lessor
or the Agent; and 



                                      -7-
<PAGE>
(vii) provide that all provisions thereof, except the limits of liability (which
shall be  applicable  to all  insureds as a group) and  liability  for  premiums
(which,  except as provided  in Section  9(a),  shall be solely a  liability  of
Lessee),  shall  operate in the same  manner as if there were a separate  policy
covering  each  such  insured,  without  right of  contribution  from any  other
insurance which may be carried by an any insured.

                  (e)  Delivery  of  Insurance  Certificates,  etc.  Lessee will
deliver to Lessor and the Agent,  on or prior to the  Completion  Date and on or
prior to each expiration date thereof  certificates,  executed by the insurer or
its duly authorized agent, of all insurance  policies that Lessee is required to
maintain  pursuant  to this  Section 9. In the event  policies of the Lessee are
utilized by the Lessor to satisfy  insurance  requirements of Section 5.5 of the
Credit  Agreement,  copies of such policies  shall be supplied to the Lessor and
the Agent upon request.

                  (f)  Insurance  by Lessor or Agent.  Nothing in this Section 9
shall prohibit Lessor or the Agent from maintaining,  at its expense, additional
insurance for its own account with respect to the Facility.

                  (g) General.  The inclusion of insurance  requirements in this
Section 9 does not restrict the  liability of the Lessee under the terms of this
Agreement.

SECTION 10.               RENEWAL OPTION.

                  Lessee  may at its  option  renew  the  lease of the  Facility
hereunder  (i) at the end of the Primary  Term or Fixed Rate  Renewal Term for a
Renewal Term or Terms that, in the aggregate, consist of not more than three (3)
three year  renewal  periods  (each such three year term being  herein  called a
"Fixed Rate Renewal Term"),  ending not later than December 31, 2024 and (ii) at
the end of the  Primary  Term,  any Fixed Rate  Renewal  Term or any Fair Market
Value Renewal Term,  for  successive  Renewal Terms (each such term being herein
called a "Fair Market Value Renewal Term") of no less than two years;  provided,
however,  that (i) Lessee shall give Lessor notice of each such  renewal,  which
shall be  irrevocable,  at least twelve  months and no more than fifteen  months
prior to the  expiration  of, as the case may be, the Primary  Term,  any of the
Fixed Rate Renewal  Terms or any of the Fair Market Value  Renewal  Terms,  (ii)
such renewal shall not be prohibited by any Applicable Law, (iii) no Lease Event
of Default  shall have occurred and be continuing on the day preceding the first
day of such Renewal Term and (iv) the final Fair Market Renewal Term in the Term
shall end on or before  December 31, 2024.  All of the  provisions of this Lease
shall be applicable  during such Renewal Term,  except that (x) the Rent payable
on each Rent  Payment  Date during each Fixed Rate  Renewal  Term shall be in an
amount  determined by multiplying .50 by the amount of Rent payable on each Rent
Payment  Date  during the  Primary  Term,  and (y) the Rent for each Fair Market
Value Renewal Term shall be the Fair Market Rental Value of the Facility,  as of
the first day of such Fair Market Value Renewal Term, for a period equal to such
Fair  Market  Value  Renewal  Term,  and  shall be  payable  in equal  quarterly
installments,  in  arrears,  on each Rent  Payment  Date during such Fair Market
Value Renewal Term.




                                      -8-
<PAGE>
SECTION 11.      LOCATION; POSSESSION; OPERATION; LIENS; QUIET ENJOYMENT; ETC.

                  (a) Location. Lessee will not remove, or permit to be removed,
any part of the Facility from the Right of Way without the prior written consent
of Lessor and the Agent.

                  (b)  Assignment;   Sublease,  Possession.  Lessee  shall  not,
without the prior consent of Lessor or the Agent,  assign or sublease all or any
part of the Facility to any Person,  unless such sublease shall be with a Person
who is not one of Lessor's target  customers and shall be expressly  subject and
subordinate  to this  Lease  and to the  rights  of the  Lessor  and  the  Agent
hereunder.  In no event shall any such  sublease  impair or diminish  any of the
rights of Lessor and the Agent or the  obligations of Lessee under this Lease or
of  the  Guarantor  under  the  Lease  Guaranty  Agreement,   which  rights  and
obligations shall continue in full force and effect as though no such assignment
or sublease had been  effected,  it being  understood  that the  obligations  of
Lessee hereunder shall continue in full force and effect as the obligations of a
principal and not of a guarantor or surety.

                  (c) Operation. No provision hereof shall restrict the Lessee's
rights to enter into  contracts  for the sale of capacity of the Facility in the
ordinary  course of business or for  services  based upon use of the Facility so
long as such  contracts  are not binding upon the Lessor and do not encumber the
Facility and are not with Persons who are among Lessor's target customers.

                  (d)  Restriction  on  Liens.   Lessee  will  not  directly  or
indirectly create,  incur, assume or suffer to exist any Lien on or with respect
to the Facility or the Right of Way, or any part  thereof,  title thereto or any
interest  therein or in this Lease except the following  (herein  referred to as
"Permitted  Liens"):  (i) the respective rights and interests of Lessee,  Lessor
and the Agent as provided in the Project Agreements, (ii) Liens for taxes either
not  yet  due or  being  contested  by  Lessee  in  good  faith  by  appropriate
proceedings and as to which adequate reserves are being maintained in accordance
with generally accepted  accounting  principles,  so long as such proceedings do
not  involve  any  danger  of the  sale,  forfeiture  or loss of any part of the
Facility  or the Right of Way, or any  interest  therein or  interfere  with the
payment of Rent,  (iii)  materialmen's,  mechanics',  workmen's,  repairmen's or
other like Liens  arising in the  ordinary  course of  business  for amounts the
payment  of which is either  not yet  delinquent  or is  bonded,  and (iv) Liens
arising out of judgments or awards  against  Lessee with respect to which at the
time an appeal or proceeding for review is being  diligently  prosecuted in good
faith and there shall have been secured a stay of execution  pending such appeal
or  proceeding  for review and for the payment of which  adequate  reserves have
been provided.

                  (e)  Quiet  Enjoyment.  So long as no Lease  Event of  Default
shall have  occurred  and be  continuing,  Lessor shall not take any action that
interferes  with the peaceful and quiet  enjoyment and the exclusive  possession
and control of the Facility by Lessee.



                                      -9-
<PAGE>
SECTION 12.               RETURN OF FACILITY; PURCHASE OPTION.

                  (a) Return. Upon expiration of the Term (unless the Term shall
end  pursuant to Section  7(a) hereof or pursuant to Section  12(b)  hereof upon
Lessee's  exercise  of its  purchase  option),  Lessee  shall  comply  with  its
obligations  under  Section  6(a)  hereof and return the  Facility  to Lessor by
surrendering  the same into the possession of Lessor at its then location on the
Right of Way. At the time of such  return,  the  Facility  and each part thereof
shall be free and clear of all Liens  (other than Lessor  Liens) and shall be in
the condition and repair required to be maintained during the Term under Section
6 hereof.  At the time of such return,  the Facility shall not be deemed to have
been  returned to Lessor  until (i) it is  surrendered  into the  possession  of
Lessor  and (ii) the  provisions  of the  preceding  sentence  shall  have  been
complied  with and Lessee shall have given Lessor  written  notice of such fact,
and, until such time, all of the provisions of this Lease shall continue in full
force and effect.

                  (b)  Purchase  Option.  Provided  that this Lease has not been
terminated  and no Lease Event of Default shall have occurred and be continuing,
Lessee shall have the right,  at its option,  upon not less than six months' and
not more than twelve months' written notice to Lessor and the Agent, to purchase
the Facility on any Rent Payment Date or on the last day of the Term, for a cash
purchase  price  equal to the  greater  of the  Fair  Market  Sale  Value of the
Facility and the Stipulated Loss Value determined as of the date of purchase. In
the event that Lessee  elects to purchase the Facility in  accordance  with this
Section 12(b),  on the last day of the Term or on such Rent Payment Date, as the
case may be, Lessee shall pay to Lessor the purchase price specified above. Upon
receipt of such amount, Lessor shall transfer title to the Facility to Lessee on
an "as-is,  where-is" basis, without any representation or warranty,  express or
implied,  by Lessor  (except as to the  absence of  Lessor's  Liens) and without
recourse to Lessor.

SECTION 13.      TAXES; GENERAL INDEMNITY; OTHER COVENANTS; PERSONAL PROPERTY.

                  (a) Taxes.  All taxes levied upon Lessor's receipt of the Rent
paid  hereunder  shall be the  responsibility  of  Lessor.  All other  taxes and
assessments  of  any  kind  whatsoever  incidental  to the  use of the  Facility
(including,  without limitation, any consumption type taxes which may be charged
or imposed in any way by any  authority  incidental  to  Lessee's  communication
transmission  over the Facility) shall be the sole  responsibility of Lessee and
Lessee shall  indemnify and hold Lessor harmless from and against all such taxes
(and any penalties, fines and interest thereon).

                  (b) General Indemnity.  Lessee shall assume liability for, and
shall indemnify,  protect, save and keep harmless the Agent and Lessor and their
respective directors,  officers,  shareholders,  employees,  agents and servants
from and against,  all liabilities,  obligations,  losses,  damages,  penalties,
claims,  actions,  suits, costs,  expenses and disbursements of whatever name or
nature (including liabilities for penalties) incurred by any of them as a result
of, or arising  out of, or in any way related to, or by reason of, any breach by
Lessee of any of its obligations  



                                      -10-
<PAGE>
hereunder, including without limitation the reasonable fees and disbursements of
counsel  incurred in  connection  with any  investigation,  litigation  or other
proceedings in any way involving any of the foregoing.

                  (c) Personal Property.  It is the intent of the parties hereto
that the Facility  shall at all times be deemed to be personal  property and not
real property under the laws of the States of Alaska and Washington.

SECTION 14.               EVENTS OF DEFAULT.

                  The following  events shall constitute Lease Events of Default
under this Lease.

                           (i) Lessee  shall  default in the  payment of Rent or
Stipulated  Loss Value when and as the same shall become due and payable and the
continuance of such default unremedied for a period of 30 days, or

                           (ii)  Lessee  or  Guarantor   shall  default  in  the
observance  or  performance  of any other  covenant  or  agreement  of Lessee or
Guarantor  contained  herein  or  in  the  Lease  Guaranty  Agreement,  and  the
continuance  of such  default  unremedied  for a period of 30 days after  notice
thereof shall be given by Lessor to Lessee or Guarantor; or

                           (iii)  This  Lease  shall at any time for any  reason
cease to be in full force and effect or shall  become,  or shall be  declared to
be, null and void; or

                           (iv) Any representation or warranty made by Lessee or
the  Guarantor  in this  Lease or in the  Lease  Guaranty  Agreement,  or in any
document or  certificate  furnished  by Lessee or the  Guarantor  in  connection
herewith or therewith or pursuant hereto or thereto, shall prove to be incorrect
in any material respect on the date as of which made; or

                           (v) Lessee,  Guarantor or any parent entity of either
shall default in the payment of, or there shall be an  acceleration  for payment
of, any portion of any Indebtedness  aggregating  $15,000,000 or more, including
interest thereon, for which it is liable directly or as guarantor,  in each case
beyond the period of grace, if any, provided with respect thereto; or

                           (vi) The merger of the Guarantor with, or transfer of
all or  substantially  all its  assets  to,  any  Person  other  than one of its
Restricted Subsidiaries; or

                           (vii) The incurrence of any  indebtedness  by Lessor,
Guarantor or any  Restricted  Subsidiary of the  Guarantor  which results in the
Senior  Leverage Ratio at the time of such  incurrence to be in excess of 5 to 1
at any time on or before December 31, 1999 or 3.75 to 1 at any time  thereafter;
or




                                      -11-
<PAGE>
                           (viii) The entry of a decree or order for relief by a
court having jurisdiction in respect of Lessee or Guarantor, adjudging Lessee or
Guarantor a bankrupt or  insolvent,  or approving  as properly  filed a petition
seeking  a  reorganization,  arrangement,  adjustment  or  composition  of or in
respect of Lessee or Guarantor in an  involuntary  proceeding  or case under the
federal  bankruptcy  laws,  as  now  or  hereafter  constituted,  or  any  other
applicable  federal,  state or foreign  bankruptcy,  insolvency or other similar
law, or  appointing  a receiver,  liquidator,  assignee,  custodian,  trustee or
sequestrator  (or other  similar  official)  of Lessee  or  Guarantor  or of any
substantial  part of its property,  or ordering the winding-up or liquidation of
the affairs of Lessee or Guarantor,  and the  continuance  of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or

                           (ix)  The  institution  by  Lessee  or  Guarantor  of
proceedings to be adjudicated a bankrupt or insolvent,  or the consent by Lessee
or Guarantor to the institution of bankruptcy or insolvency  proceedings against
Lessee or Guarantor,  or the  commencement by Lessee or Guarantor of a voluntary
proceeding  or case  under the  federal  bankruptcy  laws,  as now or  hereafter
constituted,  or any other  applicable  federal,  state or  foreign  bankruptcy,
insolvency  or other  similar  law, or the consent by Lessee or Guarantor to the
filing of any petition  seeking a  reorganization,  arrangement,  adjustment  or
composition of or in respect of Lessee or Guarantor or to the  appointment of or
taking possession by a receiver,  liquidator,  assignee,  trustee,  custodian or
sequestrator  (or other  similar  official)  of Lessee  or  Guarantor  or of any
substantial  part of its  property,  or the making by Lessee or  Guarantor of an
assignment for the benefit of creditors, or the admission by Lessee or Guarantor
of its  inability  to pay  its  debts  generally  as they  become  due or of its
willingness  to be  adjudicated  a  bankrupt,  or the  failure  of Lessee or the
Guarantor  generally  to pay its  debts as they  become  due,  or the  taking of
corporate  action  by  Lessee  or the  Guarantor  in  furtherance  of any of the
foregoing; or

                           (x)  Final  judgment  or  judgments  for more than an
aggregate of  $15,000,000  shall be rendered  against  Lessee or Guarantor,  and
within 30 days after entry  thereof such  judgment or  judgments  shall not have
been discharged or execution  thereof stayed pending  appeal,  or within 60 days
after the expiration of any such stay such judgment or judgments  shall not have
been discharged; or

                           (xi) Any  other  event or  circumstance  shall  occur
(including,  without limitation, an act of any Governmental Authority or natural
disaster) that could reasonably be expected to have a material adverse effect on
the  ability  of the  Lessee to  satisfy  its  obligations  hereunder  or of the
Guarantor to satisfy its obligations under the Lease Guaranty Agreement; or

                           (xii)  Any  of  the  Lease   Guaranty   Agreement  by
Guarantor, the Holdings Keep-Well Agreement or the Transport Keep-Well Agreement
shall at any time for any reason cease to be in full force and effect, except as
a result of  indefeasible  payment or performance of the  Obligations  under the
Credit Agreement.

SECTION 15.               REMEDIES.




                                      -12-
<PAGE>
                  Upon the  occurrence  of any Lease Event of Default and at any
time  thereafter  so long as the same shall be  continuing,  Lessor  may, at its
option, by notice to Lessee, the Guarantor and the Agent,  declare this Lease to
be in default.  Lessor may, either directly or through its agent, do one or more
of the  following as Lessor in its sole  discretion  shall elect,  to the extent
permitted by, and subject to  compliance  with any  mandatory  requirements  of,
Applicable Law then in effect:

         (a)      demand that Lessee,  and Lessee  shall at its sole risk,  cost
                  and expense upon such demand,  return  and/or  relinquish  the
                  Facility or any part thereof  designated by Lessor promptly to
                  Lessor or its agent in the manner and  condition  required by,
                  and otherwise in accordance  with the  provisions  of, Section
                  12(a)  hereof  (as  specified  by  Lessor) as if the same were
                  being returned at the end of the Term; or Lessor or its agent,
                  at  Lessor's  option,  may enter upon the  premises  where the
                  Facility  or any part  thereof is located  and take  immediate
                  possession  of and remove the same by summary  proceedings  or
                  otherwise,  all without liability on the part of Lessor or its
                  agent for or by reason of such entry or taking of  possession,
                  whether for the  restoration  of damage to property  caused by
                  such taking or otherwise;

         (b)      sell  the  Facility  or any  part  thereof  in a  commercially
                  reasonable  manner at public or  private  sale,  as Lessor may
                  determine,  upon at least 15 days'  prior  written  notice  to
                  Lessee, free and clear of any rights of Lessee and without any
                  duty to account to Lessee with respect to such sale or for the
                  proceeds  thereof  (except to the extent  required  by Section
                  15(e)   hereof  if  Lessor   elects  to  exercise  its  rights
                  thereunder);

         (c)      hold, keep idle, use,  operate or lease to others the Facility
                  or any part thereof,  as Lessor may determine,  free and clear
                  of any  rights of Lessee  and  without  any duty to account to
                  Lessee with  respect to any such action or inaction or for any
                  proceeds with respect thereto, except that Lessee's obligation
                  to pay Rent for the  Facility  for Rental  Periods  commencing
                  after  Lessee  shall  have  been  deprived  of the  possession
                  thereof pursuant to this Section 15(c) shall be reduced by the
                  net  proceeds,  if any,  received  by  Lessor  from  using  or
                  operating the  Facility,  or leasing the Facility or such part
                  to any Person other than Lessee for such Rental Periods or any
                  portion thereof;

         (d)      by notice to Lessee  specifying  a payment  date  which is not
                  earlier  than 10 days  after the date of such  notice,  demand
                  that Lessee pay to Lessor and Lessee  shall pay to Lessor,  on
                  the payment  date  specified  in such  notice,  as  liquidated
                  damages for loss of a bargain and not as a penalty, the sum of




                                      -13-
<PAGE>
                  any unpaid Rent payable in  accordance  with the terms of this
                  Lease  on or  prior  to the  payment  date  specified  in such
                  notice, plus whichever of the following amounts Lessor, in its
                  sole  discretion,  shall specify in such notice (together with
                  interest  on such amount at the Past Due Rate from the payment
                  date specified in such notice to the date of actual payment):

                  (i)      the Stipulated  Loss Value of the Facility,  computed
                           as  of  the  Rent  Payment   Date   occurring  on  or
                           immediately  preceding the payment date  specified in
                           such notice; or

                  (ii)     an amount equal to the excess,  if any, of the amount
                           determined in accordance with clause (i) above,  over
                           the Fair Market Sale Value of the Facility determined
                           as of the  Rent  Payment  Date  occurring  on or next
                           preceding the payment date specified in such notice;

                  provided, however, that if Lessor elects to receive the amount
                  referred  to in clause (i) above of this  paragraph  (d),  and
                  such amount and all other amounts payable by Lessee under this
                  Section  15  are   received   by  Lessor  (or  the  Agent  for
                  application  pursuant to the Credit  Agreement),  Lessor shall
                  not be entitled to exercise any remedy  pursuant to paragraphs
                  (a), (b), (c) or (e) of this Section 15 and shall be required,
                  after discharge and satisfaction of the Credit  Agreement,  to
                  promptly  convey the  Facility  to Lessee  "as-is,  where-is",
                  without any representation or warranty, express or implied, by
                  Lessor  (other than that the Facility  shall be free and clear
                  of Lessor Liens) and without recourse to Lessor,  the expenses
                  of such  discharge  and  conveyance  being for the  account of
                  Lessee;

         (e)      if Lessor  shall have sold the  Facility  or any part  thereof
                  pursuant  to  Section  15(b)  hereof,   Lessor,   in  lieu  of
                  exercising  its rights under Section 15(d) hereof with respect
                  thereto,  may, if it shall so elect, demand that Lessee pay to
                  Lessor and Lessee shall pay to Lessor,  as liquidated  damages
                  for loss of a bargain  and not as a penalty,  any unpaid  Rent
                  due for periods up to and including the Rental Period in which
                  such sale occurs plus an amount equal to the  Stipulated  Loss
                  Value of the  Facility  or such part,  computed as of the Rent
                  Payment Date next  preceding  the date of such sale,  together
                  with  interest  at the Past Due Rate on such  amount  from the
                  Rent  Payment Date as of which such  Stipulated  Loss Value is
                  computed  to the date of actual  payment;  provided,  however,
                  that  the  amount  so  payable  shall  be  reduced  by the net
                  proceeds,  if any, theretofore received by Lessor with respect
                  to the  Facility or such part from the use,  operation or sale
                  of, or the leasing by Lessor to a Person other than Lessee of,
                  the Facility or such part  pursuant to Section  15(b) or 15(c)
                  hereof;



                                      -14-
<PAGE>
         (f)      terminate or rescind this Lease; or

         (g)      exercise  any other right or remedy that may be  available  to
                  Lessor under  Applicable Law or proceed by  appropriate  court
                  action to enforce the terms  hereof or to recover  damages for
                  the breach  hereof or to rescind this Lease as to the Facility
                  or any part thereof.

                  In addition (but without duplication), Lessee shall be liable,
except as otherwise provided above, for any and all unpaid installments of Rent,
whether or not then due,  which are  payable  in  respect  of any Rental  Period
ending  before or during the exercise of any of the  foregoing  remedies and for
all reasonable  legal fees and other costs and expenses  incurred or suffered by
reason of the  occurrence  of any Lease Default or Lease Event of Default or the
exercise of any Lessor's or Agent's  rights and remedies  with respect  thereto,
including all costs and expenses  incurred in connection  with the return of the
Facility or any part thereof or any disconnection,  disassembly, preparation for
shipment, storage and delivery of the Facility or any part thereof or in placing
the  Facility or any part  thereof in the  condition  required by Section  12(a)
hereof.

                  At any sale of the  Facility or any part  thereof  pursuant to
this  Section 15,  Lessor,  the Agent or any Lender may bid for and purchase the
same.

                  No right or remedy  referred to in this Section 15 is intended
to be exclusive, but each shall be cumulative and in addition to any other right
or remedy referred to above or otherwise  available to Lessor or the Agent under
any of the  Project  Agreements  or at law or in  equity;  and the  exercise  or
beginning  of  exercise by Lessor or the Agent of any one or more of such rights
or remedies shall not preclude the  simultaneous  or later exercise by Lessor or
the Agent of any or all such other rights and remedies.  To the extent permitted
by Applicable Law, Lessee hereby waives any rights now or hereafter conferred by
statute or  otherwise  which may require  Lessor or the Agent to sell,  lease or
otherwise  use the  Facility or any part  thereof in  mitigation  of Lessor's or
Agent's  damages  or which may  otherwise  limit or modify  any of  Lessor's  or
Agent's  rights and  remedies  in this  Section  15 or under any of the  Project
Agreements. No express or implied waiver by Lessor or Agent of any Lease Default
or Lease Event of Default  shall in any way be, or be  construed to be, a waiver
of any other Lease Default or Lease Event of Default.

                  If it should  become  necessary  for the purpose of any of the
foregoing  provisions of this Section 15 to allocate to any part of the Facility
a portion of the Rent or a portion of the Stipulated Loss Value of the Facility,
such  allocation  shall be in the same  proportion  as the then Fair Market Sale
Value of such part bears to the then Fair Market Sale Value of the Facility.

SECTION 16.      ENFORCEMENT.




                                      -15-
<PAGE>
                  Without  limiting the effect of any provision of this Lease or
any  provision  of  any of  the  other  Project  Agreements,  including  without
limitation,  Section 10.4 and 10.5 of the Credit Agreement,  Lessee will pay all
costs and expenses,  including reasonable attorneys' fees and expenses, incurred
by Lessor or the Agent in enforcing  their  respective  rights or remedies under
this Lease.  In the event that Lessor or the Agent shall bring any suit  against
Lessee to enforce any rights  hereunder and shall be entitled to judgment,  then
in such suit it may recover expenses,  including reasonable attorneys' fees, and
the amount thereof shall be included in such judgment.

SECTION 17.      LESSOR'S RIGHT TO PERFORM FOR LESSEE.

                  If Lessee fails to make any payment  required to be paid by it
hereunder  or fails to  perform  or  comply  with  any of its  other  agreements
contained herein,  Lessor may itself make such payment or perform or comply with
such agreement,  and the amount of such payment and the amount of the reasonable
expenses of Lessor  incurred in  connection  with such payment or in  connection
with the performance of or compliance  with such agreement,  as the case may be,
together with interest thereon at the Past Due Rate, shall be deemed  additional
Rent, payable by Lessee upon demand.

SECTION 18.      FURTHER ASSURANCES.

                  Lessee will promptly and duly execute and deliver to Lessor or
the Agent such  documents and  assurances and take such further action as Lessor
or the Agent may from time to time reasonably request in order to carry out more
effectively  the intent and purpose of this Lease and to establish,  protect and
preserve the rights,  interests and remedies created, or intended to be created,
in favor  of  Lessor  and the  Agent  hereunder  and  under  any  other  Project
Agreement,  including,  without limitation, if requested by Lessor or the Agent,
at the expense of Lessee, the recording or filing of counterparts  hereof and of
such other documents (including, without limitation,  financing statements) with
respect hereto, in accordance with the laws of such jurisdictions,  as Lessor or
the Agent may from time to time reasonably request.

SECTION 19.      NOTICES.

                  Notices,  requests,  demands and other communications provided
for  herein  shall be in  writing  and shall be  delivered  or mailed  (or if by
telegram, delivered to the telegraph company and, if by telecopier, delivered by
such  equipment)  addressed,  if to  the  Agent,  to it at  1301  Avenue  of the
Americas,  New York, New York 10019, Attn: Project Finance Group, facsimile no.:
(212)  261-3421,  if to the  Lessor,  to it at 2550 Denali  Street,  Suite 1000,
Anchorage,  Alaska 99503,  Attn: Chief Financial  Officer,  facsimile  no.:(907)
265-5676,  or if to  the  Lessee,  to it at  2550  Denali  Street,  Suite  1000,
Anchorage,  Alaska 99503,  Attn:Chief  Financial  Officer,  facsimile  no.:(907)
265-5676, or such other address as such party may from time to time designate by
giving  written  notice to the other  parties  hereunder.  All notices and other
communications  given to any party  hereto  in  accordance  with the  provisions
hereof  shall be deemed to have been given on the tenth  Business  Day after the
date when sent by registered or 



                                      -16-
<PAGE>
certified mail, postage prepaid,  return receipt requested,  if by mail, or when
delivered to the telegraph  company,  charges prepaid,  if by telegram,  or when
receipt is acknowledged  if by telecopier,  in each case addressed to such party
as  provided  in this  Section 19 or in  accordance  with the  latest  unrevoked
written direction from such party.

         If either the Lessor or the Lessee gives the other any notice hereunder
for  any  reason   whatsoever,   the  Lessor  and  the  Lessee  each  agrees  to
simultaneously deliver a copy of such notice to the Agent.

SECTION 20.      BINDING EFFECT; SUCCESSORS AND ASSIGNS.

                  The  terms and  provisions  of this  Lease and the  respective
rights and obligations of Lessor,  Lessee, the Guarantor and the Agent hereunder
shall be binding upon, and inure to the benefit of, their respective  successors
and assigns;  provided,  however, that Lessee shall not assign any of its rights
or  obligations  hereunder  except in accordance  with the provisions of Section
11(b)  hereof,  and any  attempted  assignment  by Lessee in  violation  of such
provisions shall be void.

SECTION 21.      SECURITY FOR LESSOR'S OBLIGATIONS TO AGENT.

                  In order to secure the indebtedness of Lessor under the Credit
Agreement and the payment of certain other obligations as provided in the Credit
Agreement, the Credit Agreement provides, among other things, for the assignment
by Lessor to the Agent (for the benefit of the Lenders) of its right,  title and
interest  in, to and under this Lease,  and for the  creation of a first lien on
and prior perfected security interest in the Facility in favor of the Agent (for
the benefit of the Lenders. Lessee hereby consents to such assignment and to the
creation  of such lien and  security  interest,  and  consents  to the terms and
provisions of the Credit Agreement. Lessee and Lessor agree and acknowledge that
so long as any  Obligation  (as such term is defined  in the  Credit  Agreement)
remains  outstanding,  the Agent shall have the exclusive  right to exercise all
rights of Lessor hereunder to give consents,  approvals, waivers, notices or the
like,  to make  elections,  demands or the like and to take other  discretionary
action hereunder.  Lessee will furnish to the Agent counterparts of all notices,
certificates,  opinions or other documents required to be delivered hereunder by
Lessee to Lessor.  Until Lessee  receives notice from the Agent stating that the
Credit  Agreement  has been  terminated,  Lessee will make all payments  payable
hereunder strictly in accordance with Section 3(c) hereof for the benefit of the
Agent and the Lenders or in such other manner as the Agent may specify from time
to time by notice to  Lessee,  and the  right of the Agent to  receive  all such
payments  shall not be subject to any  defense,  counterclaim,  set-off or other
right or claim of any kind which Lessee may be able to assert  against Lessor in
any action brought by it on this Lease.

SECTION 22.      THE AGENT




                                      -17-
<PAGE>
                  The  provisions  of this Lease which  require or permit action
by, the consent or approval of, the  furnishing of any instrument or information
to,  or the  performance  of any other  obligation  to,  the Agent  shall not be
effective,  and the Sections hereof  containing such provisions shall be read as
though there were no such  requirements or  permissions,  at all times after all
the  Obligations  (as such term is defined in the  Credit  Agreement)  have been
fully and  indefeasibly  paid and performed and the Commitments (as such term is
defined in the Credit Agreement) shall have terminated.

SECTION 23.      SERVICE OF PROCESS.

                  THE LESSOR AND THE LESSEE,  RESPECTIVELY,  HEREBY  IRREVOCABLY
SUBMIT TO THE  JURISDICTION  OF THE STATE COURTS OF THE STATE OF NEW YORK AND TO
THE  JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN  DISTRICT
OF NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF OR BASED UPON THIS LEASE,  THE SUBJECT MATTER HEREOF OR ANY PROJECT  DOCUMENT
BROUGHT  BY THE  AGENT OR ANY OF ITS  SUCCESSORS  OR  ASSIGNS  IN  EITHER OF THE
ABOVE-REFERENCED  FORUMS AT THE SOLE  OPTION OF THE  AGENT.  THE  LESSOR AND THE
LESSEE,  RESPECTIVELY,  TO THE EXTENT  PERMITTED  BY  APPLICABLE  LAW (A) HEREBY
WAIVE, AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN
ANY SUCH SUIT, ACTION OR PROCEEDING  BROUGHT IN SUCH COURTS, ANY CLAIM THAT THEY
ARE NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED  COURTS,  THAT
THEIR PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION,  THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT  FORUM, THAT THE VENUE OF THE
SUIT,  ACTION OR PROCEEDING IS IMPROPER OR THAT THIS LEASE,  THE SUBJECT  MATTER
HEREOF OR ANY PROJECT  DOCUMENT  MAY NOT BE  ENFORCED  IN OR BY SUCH COURT,  (B)
HEREBY WAIVE THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING  INSTITUTED
BY THE AGENT IN STATE COURT TO FEDERAL COURT,  AND (C) HEREBY WAIVE THE RIGHT TO
ASSERT IN ANY SUCH  ACTION,  SUIT OR  PROCEEDING  ANY  OFFSETS OR  COUNTERCLAIMS
EXCEPT  COUNTERCLAIMS  THAT ARE  COMPULSORY  OR  OTHERWISE  ARISE  FROM THE SAME
SUBJECT  MATTER.  THE LESSOR AND THE LESSEE HEREBY CONSENT TO SERVICE OF PROCESS
BY MAIL AT THEIR RESPECTIVE  ADDRESSES TO WHICH NOTICES ARE TO BE GIVEN PURSUANT
TO SECTION 19 HEREOF.  THE LESSOR AND THE LESSEE AGREE THAT THEIR  SUBMISSION TO
JURISDICTION  AND  CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF THE AGENT.  FINAL  JUDGMENT  AGAINST  THE LESSOR OR THE LESSEE IN ANY
SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE,  AND MAY BE ENFORCED IN ANY
OTHER  JURISDICTION  (X) BY  SUIT,  ACTION  OR  PROCEEDING  ON THE  JUDGMENT,  A
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT  OF  INDEBTEDNESS  OR  LIABILITY  OF THE  LESSOR  OR 


                                      -18-
<PAGE>
THE LESSEE THEREIN DESCRIBED OR (B) IN ANY OTHER MANNER PROVIDED BY, OR PURSUANT
TO, THE LAWS OF SUCH OTHER JURISDICTION,  PROVIDED,  HOWEVER, THAT THE AGENT MAY
AT ITS OPTION BRING SUIT, OR INSTITUTE  OTHER JUDICIAL  PROCEEDINGS  AGAINST THE
LESSOR OR THE LESSEE OR ANY OF THEIR ASSETS IN ANY STATE OR FEDERAL COURT OF THE
UNITED  STATES OR OF ANY  COUNTRY  OR PLACE  WHERE THE  LESSOR OR LESSEE OR SUCH
ASSETS MAY BE FOUND.

SECTION 24.      WAIVER OF JURY TRIAL.

                  TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE
WAIVED, THE LESSEE HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER
AS PLAINTIFF,  DEFENDANT OR OTHERWISE),  ANY RIGHT TO TRIAL BY JURY IN ANY FORUM
IN RESPECT OF ANY ISSUE, CLAIM,  DEMAND,  ACTION, OR CAUSE OF ACTION ARISING OUT
OF OR BASED UPON THIS LEASE  AGREEMENT OR THE SUBJECT  MATTER  THEREOF,  IN EACH
CASE WHETHER NOW  EXISTING OR HEREAFTER  ARISING AND WHETHER IN CONTRACT OR TORT
OR OTHERWISE.  THE LESSEE  ACKNOWLEDGES  THAT IT HAS BEEN INFORMED BY THE LESSOR
THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL  INDUCEMENT UPON WHICH
THE LESSOR HAS  RELIED,  IS RELYING  AND WILL RELY IN  ENTERING  INTO THIS LEASE
AGREEMENT.  AN ORIGINAL  COUNTERPART  OR A COPY OF THIS  SECTION 24 MAY BE FILED
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE LESSEE TO THE WAIVER OF
ITS RIGHTS TO TRIAL BY JURY.

SECTION 25.      EXECUTION IN COUNTERPARTS.

                  This  Lease may be  executed  in any  number of  counterparts.
However,  to the extent, if any, that this Lease  constitutes  chattel paper (as
such  term  is  defined  in the  Uniform  Commercial  Code as in  effect  in any
applicable  jurisdiction),  no  security  interest  in this Lease may be created
through the transfer or possession of any counterpart other than the counterpart
identified by marking as the "Original" and containing a receipt therefor signed
by the Agent on or immediately  following the signature  page hereof.  All other
counterparts of this Lease shall be marked as "Duplicates";  provided,  however,
that any such Duplicates shall be valid evidence of this Lease.

SECTION 26.      MISCELLANEOUS.

                  (a)  Severability.   Any  provision  of  this  Lease  that  is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by  Applicable  



                                      -19-
<PAGE>
Law, Lessee hereby waives any provision of law that renders any provision hereof
prohibited or unenforceable in any respect.

                  (b)  Modifications.  No term or provision of this Lease may be
changed,  waived,  discharged or terminated orally, but only by an instrument in
writing  signed by the party against which  enforcement  of the change,  waiver,
discharge or  termination  is sought.  Furthermore,  so long as any  obligations
remain outstanding under the Credit Agreement,  no such modification,  amendment
or waiver shall be effective unless consented to by the Agent.

                  (c) No  Conveyance  of Title.  This Lease shall  constitute an
agreement  of lease only and nothing  herein  shall be construed as conveying to
Lessee any right,  title or interest in the Facility or any part thereof  except
as lessee only.

                  (d)  Captions.  The  captions  in this  Lease and the table of
contents are for convenience of reference only and shall not define or limit any
of the terms or  provisions  hereof.  Except to the extent  provided  for in the
definition of  "Appraisal  Procedure",  none of the  provisions of this Lease is
subject to arbitration.

                  (e)  Governing  Law.  This  Lease  shall be  governed  by, and
construed in accordance with, the laws of the State of New York.




                                      -20-
<PAGE>
                  IN WITNESS  WHEREOF,  Lessor and Lessee  have each caused this
Lease  to be duly  executed  and  delivered  by  their  respective  officers  or
representatives  hereunto  duly  authorized  as of the date and year first above
written.


                                       ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                       By:  GCI Fiber  Co.,  Inc.,  its  General
                                       Partner


                                       By:      
                                       Name:
                                       Title:

                                       By:  Fiber Hold Co.,  Inc.,  its  General
                                       Partner


                                      By:      
                                       Name:
                                       Title:


                                       GCI COMMUNICATION CORP.


                                      By:      
                                       Name:
                                       Title:
<PAGE>
STATE OF NEW YORK  )
                   :       ss:
COUNTY OF NEW YORK )


                  Before me personally  appeared                   ,  personally
known  to me to be  the  person  whose  name  is  subscribed  to  the  foregoing
instrument  as  the  designated  officer  of                    ,   one  of  the
corporations  named in said  instrument,  and personally  known to me to be such
officer  of said  corporation,  and  acknowledged  to me that he  executed  said
instrument  for the  purposes and  consideration  therein  expressed  and in the
capacity  therein  stated,  for and on behalf of and as the act and deed of said
corporation.

                  IN WITNESS of which I have  hereunto  set my hand and official
seal, this     day of            , 199 .



                                       -----------------------------      
                                       Notary Public


[NOTARIAL STAMP AND SEAL]
<PAGE>
STATE OF NEW YORK  )
                   :       ss:
COUNTY OF NEW YORK )


                  Before me personally  appeared                   ,  personally
known  to me to be  the  person  whose  name  is  subscribed  to  the  foregoing
instrument  as  the  designated  officer  of                    ,   one  of  the
corporations  named in said  instrument,  and personally  known to me to be such
officer  of said  corporation,  and  acknowledged  to me that he  executed  said
instrument  for the  purposes and  consideration  therein  expressed  and in the
capacity  therein  stated,  for and on behalf of and as the act and deed of said
corporation.

                  IN WITNESS of which I have  hereunto  set my hand and official
seal, this     day of             , 199 .



                                       -----------------------------      
                                       Notary Public


[NOTARIAL STAMP AND SEAL]
<PAGE>



Receipt of this original  counterpart  of this Lease is hereby  acknowledged  on
this     day of January, 1998.*


                                       CREDIT LYONNAIS NEW YORK BRANCH, as Agent
                                       for the benefit of the Lenders


                                       By:     
                                       Name:
                                       Title:




-------------------
*    This  acknowledgment  of  receipt  to appear in the  original  only;  other
     originals to bear the legend "duplicate original".
<PAGE>
                                    EXHIBIT A

                                   Definitions


         "Affiliate"  of the  specified  Person  shall  mean  any  other  Person
directly or  indirectly  controlling,  controlled by or under direct or indirect
common control with, such specified Person. For purposes of this definition, the
term "control"  (including the correlative meanings of the terms "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction of the  management  and policies of such Person,  whether  through the
ownership of voting securities or by contract or otherwise.

         "Agent" shall mean Credit  Lyonnais New York Branch and its  successors
as Administrative Agent under the Credit Agreement.

         "Applicable  Law" shall mean all applicable  laws  (including,  without
limitation, federal and state securities laws), ordinances,  judgments, decrees,
injunctions, writs and orders of any court, arbitrator or governmental agency or
authority and rules, regulations, orders, interpretations,  licenses and permits
of any federal, state, county,  municipal,  regional or other governmental body,
instrumentality, agency or authority.

         "Appraisal   Procedure"   shall  mean  the   following   procedure  for
determining  Fair Market Sale Value or Fair Market Rental Value if either Lessor
or Lessee  shall  request by notice (the  "Appraisal  Request") to the other the
determination  of either of such Values by the Appraisal  Procedure.  Lessor and
Lessee shall, within 15 days after the Appraisal Request, appoint an independent
appraiser mutually satisfactory to them, who shall determine such Value and such
determination  shall be final and  binding on Lessor and  Lessee.  If Lessor and
Lessee are unable to agree on a mutually acceptable appraiser within such 15-day
period,  Fair Market Sale Value or Fair Market Rental Value, as the case may be,
shall be  determined  by a panel of three  independent  appraisers,  one of whom
shall be appointed  by Lessor,  another by Lessee and the third of whom shall be
appointed by the other two  appraisers  or, if such two appraisers are unable to
agree on a third appraiser  within 45 days after the Appraisal  Request,  by the
American Arbitration Association (or its successor);  provided, however, that if
Lessor or Lessee shall not have appointed its appraiser within 30 days after the
Appraisal  Request,  such  Value  shall be  determined  solely by the  appraiser
selected by the other party. The appraiser or appraisers  appointed  pursuant to
the foregoing  procedure shall be instructed to determine Fair Market Sale Value
or Fair  Market  Rental  Value,  as the case may be,  within 45 days  after such
appointment,  and such  determination  shall be final and  binding on Lessor and
Lessee.  If three appraisers are appointed,  the  determination of the appraiser
that shall  differ  most from the  second  highest  determinations  of all three
appraisers shall be excluded, the remaining two determinations shall be averaged
and such average shall constitute the  determination  of the appraisers.  In the
event that a single appraiser is appointed,  the fees of such appraiser shall be
divided equally between 
<PAGE>
Lessee and Lessor.  In the event that more than a single appraiser is appointed,
the fees and  expenses of the  appraiser  appointed  by Lessee  shall be paid by
Lessee, the fees and expenses of the appraiser appointed by Lessor shall be paid
by Lessor  and the fees and  expenses  of the third  appraiser  shall be divided
equally between Lessee and Lessor.  Notwithstanding the foregoing,  all fees and
expenses of each  appraiser  shall be paid by Lessee in the case of an appraisal
or determination under Section 15 of the Lease and the Lessee shall pay all such
fees and expenses in the circumstances provided in Section 12(b) of the Lease.

         "Business  Day" shall mean any day except a  Saturday,  Sunday or other
day on  which  commercial  banks in New York  City are  authorized  by law to be
closed.

         "Completion Date" shall be as defined in the Credit Agreement.

         "Credit  Agreement" shall mean the Credit and Security  Agreement dated
as of January 27, 1998 among the Lessor, the Lenders referred to therein, 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 such
agreement  may be  amended,  supplemented  or  otherwise  modified,  renewed  or
replaced from time to time.

         "Event of Loss" shall mean any of the following events or conditions:

                  (i) all or  substantially  all of the  Facility  shall  become
         destroyed or damaged  beyond repair or  permanently  rendered unfit for
         commercial operation, as a consequence of any event whatsoever;

                  (ii)  any  damage  to or  loss  of all or any  portion  of the
         Facility  occurring through any cause whatsoever,  which results in the
         receipt of insurance proceeds with respect to the Facility on the basis
         of an actual or constructive total loss of the Facility; or

                  (iii) the  condemnation,  confiscation or seizure of, or other
         requisition  of title to, or use of,  all or  substantially  all of the
         Facility or the Right of Way  (including the taking of title to, or use
         of, all or substantially  all of the Facility or the Right of Way under
         power of eminent  domain or by  forfeiture  pursuant to any  proceeding
         commenced  under any  provision  of law  providing  for  escheat)  by a
         Governmental  Authority;  provided,  however,  that,  in the  case of a
         requisition of use of all or  substantially  all of the Facility or the
         Right of Way such requisition  shall be for an indefinite  period which
         shall have continued for at least one year or for a definite  period of
         at least three years'  duration or that  extends  beyond the end of the
         Term or, if such requisition  shall occur during a Renewal Term, beyond
         the end of such Renewal Term.

                  Subject to the  proviso in Section  17(a) of this  Lease,  the
date of occurrence of any of the Events of Loss specified in clause (i), (ii) or
(iii) above  shall be the date of the  casualty  or other  occurrence  specified
above giving rise to such Event of Loss.




                                      -2-
<PAGE>
         "Facility"  shall  mean the  exclusive  use of 22 STS-1's of the Alaska
United Fiber System (as defined in the Credit  Agreement) which is equivalent to
1.14048 Gb/s.

         "Fair Market Rental Value" shall mean at any time,  with respect to the
Facility or any part thereof,  the fair market rental value thereof at such time
as determined by agreement  between Lessor and Lessee or, if requested by either
of such parties, by the Appraisal  Procedure.  Fair Market Rental Value shall be
equal to the rental value of the Facility or such part, as the case may be, that
would be obtained in an arm's-length transaction between an informed and willing
lessor under no  compulsion to lease and an informed and willing  lessee,  which
determination shall be made on the assumption that the Facility or such part, as
the case may be,  is free and clear of all  Liens  and is in the  condition  and
repair required under Section 6 of this Lease.

         "Fair  Market Sale Value"  shall mean at any time,  with respect to the
Facility or any part thereof, the fair market sale value thereof at such time as
determined by agreement  between Lessor and Lessee or, if requested by either of
such parties, by the Appraisal Procedure.  Fair Market Sale Value shall be equal
to the sale value of the  Facility or such part,  as the case may be, that would
be  obtained in an  arm's-length  transaction  between an  informed  and willing
seller under no compulsion to sell and an informed and willing buyer-user (other
than a buyer currently in possession),  which determination shall be made on the
assumption that the Facility or such part, as the case may be, is free and clear
of all Liens and is in the condition and repair required under Section 6 of this
Lease,  and shall be  calculated at the higher of (i) the fair market sale value
thereof at its existing location,  on the assumption that the buyer-user has the
full and  unfettered  right to use the  Facility  and (ii) the fair  market sale
value thereof at any place other than at its existing location,  after deduction
of all costs and expenses of dismantling,  removal,  delivery and reconstruction
thereof;  provided,  however,  that  notwithstanding the foregoing provisions of
this definition,  the determination of Fair Market Sale Value for the purpose of
Section  12(b) or 15(d) of the Lease shall be based on the actual  condition  of
the  Facility or part thereof at the time of such  determination  and shall take
into  account  any legal  impediments  to the  prompt  transfer  of title to the
Facility or such part.

         "GCI" shall be as defined in the Credit Agreement.

         "Governmental   Authority"  shall  mean  any  federal,  state,  county,
municipal,  local,  territorial,   or  other  governmental  department,   court,
commission, board, bureau, agency, taxing authority or instrumentality, domestic
or foreign.

         "Guarantor" shall mean GCI Holdings,  Inc., an Alaska corporation,  and
its successors and, to the extent permitted by the Lease Guaranty Agreement, its
assigns.

         "Highest  Lawful  Rate" shall mean the  maximum  legal rate of interest
permitted  to be  contracted  for,  charged or received  under  applicable  law,
against which one could not successfully assert a claim or defense of usury.




                                      -3-
<PAGE>
         "Holdings  Credit   Agreement"  shall  be  as  defined  in  the  Credit
Agreement.

         "Holdings  Keep-Well  Agreement"  shall  be as  defined  in the  Credit
Agreement.

         "Indebtedness" shall be as defined in the Credit Agreement.

         "Lease" shall mean this Lease  Agreement  dated as of January 27, 1998,
between the Lessor and the Lessee,  pertaining to the leasing of the Facility by
the Lessor to Lessee, as the same may be amended,  modified or supplemented from
time to time in accordance with the provisions thereof.

         "Lease  Default"  shall mean a Lease  Event of Default or an event or a
condition that, with notice or lapse of time or both,  would become such a Lease
Event of Default.

         "Lease  Event of  Default"  shall be as  defined  in Section 14 of this
Lease.

         "Lease  Guaranty  Agreement"  shall mean the Lease  Guaranty  Agreement
dated as of January 27, 1998, by the Guarantor for the benefit of the Lessor and
the Agent,  as the same may be amended,  modified or  supplemented  from time to
time in accordance with the provisions thereof.

         "Lender" shall be as defined in the Credit Agreement.

         "Lessee" shall mean GCI Communication Corp., an Alaska corporation, and
its successors and, to the extent permitted by the Lease, its assigns thereunder
and sublessees.

         "Lessor" shall mean Alaska United Fiber System  Partnership,  a general
partnership  organized under the laws of Alaska and, to the extent  permitted by
the Lease, its successors and assigns.

         "Lien"  shall  mean any lien,  mortgage,  deed of  trust,  encumbrance,
pledge,  charge, lease, easement,  servitude,  or other security interest of any
kind.

         "Past Due Rate"  shall mean the lesser of (a) the  Highest  Lawful Rate
and (b) a rate per annum equal to 4% plus the Prime Rate.

         "Permitted Liens" shall be as defined in Section 11(d) of this Lease.

         "Person" shall mean any  individual,  corporation,  partnership,  joint
venture, association, joint-stock company, trust, non-incorporated organization,
or government, or any agency or political subdivision thereof.



                                      -4-
<PAGE>
         "Primary  Term"  shall  mean the  fixed  minimum  Term as set  forth in
Section 3(a) of this Lease,  without  giving  effect to any renewal or extension
pursuant to Section 10 of this Lease or otherwise.

         "Prime Rate shall mean the  interest  rate per annum  (computed  on the
basis of actual days elapsed in a year of 360 days) announced by Credit Lyonnais
New York Branch in New York City from time to time as its stated rate. The Prime
Rate shall be a  fluctuating  rate and shall change  automatically  from time to
time  effective  as of the  opening of business  on the  effective  date of each
change in such stated rate.

         "Project Agreements" shall be as defined in the Credit Agreement.

         "Renewal  Term"  shall  mean each of the  periods  after the end of the
Primary Term with respect to which the Lessee shall exercise its option to renew
the Lease  pursuant to Section 13 of this Lease,  or such shorter  period as may
result from the termination of the Lease.

         "Rent" shall be as defined in Section 3(b) of this Lease.

         "Rent Payment Date" shall be as defined in Section 3(b) of this Lease.

         "Rental Period" shall mean the period commencing on (and including) the
Completion  Date and ending on (and  including)  the first Rent Payment Date and
each of the subsequent  one-month  periods  throughout the Term, such subsequent
periods  commencing on the first day of each month and ending on the last day of
each month.

         "Restricted  Subsidiary"  shall be as  defined in the  Holdings  Credit
Agreement.

         "Right of Way" shall be as defined in the Credit Agreement.

         "Senior  Leverage  Ratio" shall be as defined in the Long Term Holdings
Credit Agreement.

         "Stipulated  Loss Value" shall mean, as of any particular  Rent Payment
Date,  the amount equal to the Fair Market Sale Value of the Facility as of such
Rent Payment Date; provided, however, that Stipulated Loss Value shall be, under
any  circumstances  and in any event, in an amount which is no less than the net
present  value  (determined  using  a  discount  rate  of 5% per  annum)  of all
remaining  Rent  payments  that would have  become due if the Lease had not been
terminated,  but rather,  had been renewed for an additional eight (8) year term
at the same Rent.

         "System" shall be as defined in the Credit Agreement.

         "Taxes" shall be as defined in the Credit Agreement.




                                      -5-
<PAGE>
         "Term" shall be as defined in Section 3(a) of this Lease.

         "Transport  Keep-Well  Agreement"  shall be as  defined  in the  Credit
Agreement.



         -6-
<PAGE>
                                                                       EXHIBIT P


                    FORM OF HOLDINGS LEASE GUARANTY AGREEMENT







                            LEASE GUARANTY AGREEMENT


                          dated as of            , 1998

                                     between

                               GCI HOLDINGS, INC.

                                  as Guarantor,

                                       and

                     ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                   as Lessor,

                                       and

                        CREDIT LYONNAIS NEW YORK BRANCH,

                                    as Agent
<PAGE>
                            LEASE GUARANTY AGREEMENT


                           LEASE GUARANTY AGREEMENT, dated as of          , 1998
                           (as  amended,  supplemented  or  otherwise  modified,
                           renewed   or   replaced   from  time  to  time,   the
                           "Guaranty"),  between GCI  Holdings,  Inc., an Alaska
                           corporation  (the  "Guarantor"),  Alaska United Fiber
                           System Partnership,  a general partnership  organized
                           under  the  laws  of  Alaska  ("Lessor")  and  Credit
                           Lyonnais New York  Branch,  as  Administrative  Agent
                           (the "Agent") under the Credit Agreement  referred to
                           below.



                  The  Guarantor is the owner of all the issued and  outstanding
capital stock of GCI Communication  Corp. GCI Communication  Corp. is the lessee
("Lessee")  under that  certain  Lease  Agreement  dated as of January  27, 1998
between  Lessor and Lessee (as such  agreement may be amended,  supplemented  or
otherwise modified,  renewed or replaced from time to time, the "Lease"),  which
provides for,  among other things,  the leasing of the Facility by the Lessor to
the Lessee.

                  In order to finance  the  construction  of the  Facility,  the
Lessor has entered into a Credit and Security  Agreement dated as of January 27,
1998 (as such  agreement  may be amended,  supplemented  or otherwise  modified,
renewed or replaced from time to time, the "Credit  Agreement") with the Lenders
referred to therein,  Credit Lyonnais New York Branch as  Administrative  Agent,
NationsBank of Texas,  N.A., as Syndication  Agent and TD Securities (USA) Inc.,
as Documentation Agent.

                  In order to induce the Lessor to enter into the Lease,  and to
induce the Lenders to enter into the Credit  Agreement  and to make loans to the
Lessor pursuant thereto, the Guarantor has agreed to enter into this Guaranty.

                  Accordingly, the parties agree as follows:


                                    SECTION 1

                                  DEFINITIONS.

                  Unless otherwise defined herein, capitalized terms used herein
shall have their defined meanings set forth in Exhibit A to the Lease.
<PAGE>
                                    SECTION 2

                                    GUARANTY.

                  The Guarantor hereby guarantees to the Lessor and to the Agent
(for the benefit of the Lenders),  and their respective  successors and assigns,
that (A) the Lessee  will pay (when  due,  by  acceleration  or  otherwise)  all
amounts  from time to time  payable  by the Lessee  under the  Lease,  including
(without limitation) all Rent, Stipulated Loss Value and all indemnity payments,
all payments of costs, fees, expenses and all other amounts however denominated,
and all damages  (whether  provided for in the Lease or  otherwise  allowable by
law) in  respect of the  failure  or the  refusal by the Lessee to make any such
payment,  all in accordance with the terms of the Lease,  and agrees that if for
any reason whatsoever the Lessee shall fail to pay (when due, by acceleration or
otherwise) any of said amounts,  the Guarantor will pay the same forthwith,  and
(B) each of the terms,  conditions,  covenants and agreements under the Lease to
be performed or observed by the Lessee will be duly and punctually performed and
observed  strictly in accordance with the terms of the Lease, and agrees that if
for any reason  whatsoever  the Lessee shall fail to do so, the Guarantor  shall
duly and punctually  perform and observe the same (all of the aforesaid amounts,
payments, obligations, terms, conditions,  covenants and agreements being herein
called the  "Guaranteed  Obligations").  This Guaranty is a guaranty of payment,
performance and compliance and not of collectibility.  The Guarantor agrees that
its obligations hereunder are absolute and unconditional and irrevocable without
regard to the genuineness,  validity, legality or enforceability of the Lease or
any of the  Project  Agreements  or of any  term  thereof  or lack of  power  or
authority of any party to enter into the Lease or any of the Project  Agreements
or of any  assignment  or  termination  of  the  Lease  or  any  of the  Project
Agreements,  or any assignment of any property thereunder,  or any substitution,
release or exchange  of any other  guaranty  of or any  security  for any of the
Guaranteed   Obligations  or  any  other  circumstances  which  might  otherwise
constitute a legal or equitable  discharge of a surety or  guarantor,  and shall
not be subject to any  withholding by any  Governmental  Authority of whatsoever
nature or any right of set-off  or  counterclaim  and are in no way  conditioned
upon any attempt to enforce performance or compliance by the Lessee or any other
event or contingency.  Without  limiting the generality of the foregoing,  it is
agreed that the occurrence of any one or more of the following  shall not affect
the liability of the Guarantor hereunder:  (a) at any time or from time to time,
without  notice  to  the  Guarantor,  the  time  for  the  Lessee's  payment  or
performance  of or compliance  with any of the  Guaranteed  Obligations or other
obligations  of the Lessee under the Lease or any of the Project  Agreements may
be extended or renewed, or such performance or compliance may be waived; (b) any
of the acts  mentioned  in any of the Project  Agreements  may be done;  (c) the
Lease or any of the Project Agreements may be modified,  amended or supplemented
in any respect or renewed or replaced from time to time; (d) any other guarantee
of the  Guaranteed  Obligations  or any  security  therefor  may be  released or
exchanged  in  whole  or in part or  otherwise  dealt  with;  and (e) any of the
Guaranteed  Obligations  may be settled or  compromised or  subordinated  to the
claims of others. The



                                      -2-
<PAGE>
Guarantor  hereby expressly waives  diligence,  presentment,  demand of payment,
protest and all notices  whatsoever and any requirements  that the Lessor or the
Agent proceed against the Lessee or any security for, or any other guarantor of,
any of the Guaranteed Obligations, or exercise any other right or remedy against
the Lessee or any other Person before proceeding  directly against the Guarantor
(and without having to join the Lessee,  any other  guarantor or other Person in
any such  action).  The  Guarantor  also waives  notice of the  reliance on this
Guaranty by the Lessor and the Agent. Each of the Guaranteed Obligations (now or
hereafter  in  effect)  shall  be  deemed  conclusively  to have  been  created,
contracted or incurred in reliance upon this Guaranty.

                  In case the Lease or any of the  Project  Agreements  shall be
terminated as a result of the rejection or disaffirmance thereof by any trustee,
receiver,  liquidator, agent or other representative of the Lessee or any of its
property in any  assignment  for the benefit of creditors or in any  bankruptcy,
insolvency, reorganization,  arrangement, readjustment, liquidation, dissolution
or similar proceeding,  the Guarantor's  obligations hereunder shall continue to
the same extent as if such Lease or Project  Agreement  had not been so rejected
or  disaffirmed.  The  Guarantor  shall and does  hereby  waive all  rights  and
benefits that might accrue to it by reason of any such  assignment or proceeding
and the  Guarantor  agrees  that it shall be liable  for the full  amount of the
Guaranteed Obligations irrespective of, and without regard to, any modification,
limitation  or  discharge  of liability of the Lessee that may result from or in
connection with any such assignment or proceeding.

                  The Guarantor agrees that this Guaranty shall be automatically
reinstated  if and to the extent that for any reason any payment by or on behalf
of the Lessee is rescinded  or must be  otherwise  restored by the Lessor or the
Agent, whether as a result of any proceedings in bankruptcy or reorganization or
otherwise.

                  The  Guarantor  shall  pay all  costs,  expenses  and  damages
incurred by the Lessor or the Agent (including,  without limitation,  reasonable
attorneys' fees and expenses) in connection with any action or appeal to enforce
the  obligations of the Lessee under the Lease or any of the Project  Agreements
to the extent that such costs,  expenses  and damages are not paid by the Lessee
pursuant to the Lease or the Project Agreements or otherwise,  and in connection
with any action to enforce the obligations of the Guarantor under this Guaranty.


                                    SECTION 3

                                  SUBROGATION.

                  The Guarantor  shall be  subrogated to the rights  against the
Lessee  of the  Lessor  and the  Agent to which a  payment  shall be made by the
Guarantor; provided, however, that in any case under the Federal Bankruptcy Code
involving the Lessee as the debtor,  the claim  therein of the  Guarantor  based
upon such  subrogation or otherwise  shall be limited (and the 



                                      -3-
<PAGE>
Guarantor  hereby agrees so to limit such claim) to the amount  allowable  under
such Code as a claim in respect of the  Guaranteed  Obligations;  and  provided,
further,  however,  that the Guarantor  shall not be entitled to receive payment
from the Lessee in  respect  of any claim  against  the  Lessee  arising  from a
payment  by the  Guarantor,  and any  such  payment  from  the  Lessee  shall be
subordinate and junior in right of payment to the Guaranteed Obligations, in the
following circumstances:

                  (a) while a Lease Event of Default  shall have occurred and be
         continuing,  no such payment in respect of a claim by the Guarantor may
         be made by the Lessee; and

                  (b) in the event of any insolvency,  bankruptcy,  liquidation,
         reorganization or other similar proceedings  relating to the Lessee, or
         in the event of any proceedings for voluntary liquidation,  dissolution
         or other winding up of the Lessee,  whether or not involving insolvency
         or bankruptcy  proceedings,  then the Guaranteed  Obligations  shall be
         paid in full before any payment in respect of a claim by the  Guarantor
         shall be made by or on behalf of the Lessee.


                                    SECTION 4

                REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.

                  The  Guarantor  represents  and warrants to the Lessor and the
Agent that:

                  (a) the  Guarantor  and each of its  Subsidiaries  (such  term
         being used herein as defined in the Credit  Agreement) which is a party
         to any of the Project  Agreements or any of the  Fundamental  Documents
         (collectively,  the "GCI  Parties") is a  corporation  duly  organized,
         validly  existing and in good  standing  under the laws of its state of
         incorporation and has full power, authority and legal right to carry on
         its business as presently conducted, to own its properties and to enter
         into and perform its obligations  under each Project Agreement and each
         Fundamental  Document to which it is a party,  and is duly qualified to
         do business and is in good standing in each  jurisdiction  in which the
         failure to be so  qualified  could  reasonably  be  expected  to have a
         material  adverse  effect  on  its  financial  condition,  business  or
         operations or its ability to perform its  obligations  under any of the
         Project Agreements or any of the Fundamental Documents to which it is a
         party;

                  (b) the execution,  delivery and performance by each GCI Party
         of each Project Agreement and each Fundamental  Document to which it is
         a party have been duly authorized by all necessary corporate action, do
         not require any  stockholder  approval,  do not and will not contravene
         any  presently  existing law or any  governmental  rule,  regulation or
         order  applicable  to such GCI Party or its  properties  and do not and
         will not  contravene  the provisions of, or constitute a default under,
         the  certificate of  


                                      -4-
<PAGE>
         incorporation or by-laws of such GCI Party or any indenture,  mortgage,
         contract or other  agreement or instrument to which such GCI Party is a
         party or by which such GCI Party is bound;

                  (c) the execution,  delivery and performance by each GCI Party
         of each Project Agreement and each Fundamental  Document to which it is
         a party do not require the  consent or  approval  or  authorization  or
         order of,  the giving of notice to, or the  registration  with,  or the
         taking of any other action in respect of, any  Federal,  state or other
         governmental authority or agency, foreign or domestic,  other than such
         as have been duly obtained, given or taken;

                  (d) each Project  Agreement and each Fundamental  Document has
         been duly authorized, executed and delivered by each GCI Party which is
         a party thereto and constitutes the legal, valid and binding obligation
         of each  such GCI  Party,  enforceable  against  each such GCI Party in
         accordance  with their  respective  terms except as the  enforceability
         hereof may be limited by (i) any applicable bankruptcy, reorganization,
         insolvency  and  other  similar  rights   generally  and  (ii)  general
         principles  of  equity  (whether  considered  at a  suit  at  law or in
         equity);

                  (e) the audited financial statements of General Communication,
         Inc., an Alaska corporation  ("GCI") and its consolidated  Subsidiaries
         for the  fiscal  year  ended  December  31,  1996,  and  the  unaudited
         financial  statements of GCI and its consolidated  Subsidiaries for the
         9-month  period ended  September  30,  1997,  copies of which have been
         delivered by the  Guarantor  to the Lessor and the Agent,  are complete
         and correct in all material  respects and present  fairly the financial
         condition  of GCI and its  consolidated  Subsidiaries  as at the  dates
         thereof and the results of operations and changes in financial position
         of GCI and  its  consolidated  Subsidiaries  for  the  periods  covered
         thereby,   all  in  conformity  with  generally   accepted   accounting
         principles  consistently  applied  (except as stated  therein or in the
         notes thereto). Since June 30, 1997, there has been no material adverse
         change in the consolidated financial condition,  business or operations
         of the Guarantor or of GCI and its consolidated Subsidiaries;

                  (f)  there  are  no  pending  or,  to  the  knowledge  of  the
         Guarantor,  threatened  actions,  suits,  proceedings or investigations
         against  any GCI  Party  or  affecting  any GCI  Party  or any of their
         respective properties that, individually or in the aggregate,  would if
         adversely  determined  be likely to  materially  adversely  affect  the
         performance  by any GCI  Party of its  obligations  under  any  Project
         Agreement  or any  Fundamental  Document  to which it is a party or its
         assets, operations, business or financial condition;

                  (g) no sales,  use,  documentation  or similar taxes,  fees or
         other charges are payable with respect to the execution and delivery by
         any GCI Party of any Project  Agreement or any Fundamental  Document to
         which it is a party;




                                      -5-
<PAGE>
                  (h) the  representations  and  warranties of the Guarantor set
         forth in Article 5 of each of the Holdings  Credit  Agreements are true
         and correct; and

                  (i)  the  Guarantor  is not  in  default  in the  performance,
         observance  or  fulfillment  of any  material  obligation,  covenant or
         condition  contained  in, and no event of default has  occurred  and is
         continuing  under,  any  bond,  debenture,  note or other  evidence  of
         indebtedness,  or in any mortgage,  deed of trust,  trust  indenture or
         loan  agreement  to which it is a party or by  which  its  property  is
         bound;  nor has any act,  omission or event  occurred  which,  with the
         giving of notice  and/or the passing of time,  would become an event of
         default under any such instrument or document.


                                    SECTION 5

                           COVENANT OF THE GUARANTOR.

                  The  Guarantor  covenants  that it will  not  merge  with,  or
transfer all or substantially all of its assets to, any Person other than one of
its  Restricted  Subsidiaries;  provided that in the case of any such  permitted
transfer or if the  Guarantor  is not the  surviving  entity in any such merger,
then the survivor or transferee  shall  expressly  assume all obligations of the
Guarantor  hereunder by a written instrument in form and substance  satisfactory
to the Lessor and the Agent.


                                    SECTION 6

                              FINANCIAL STATEMENTS.

         The Guarantor agrees that it will deliver to the Lessor and the Agent:

                  (a)  all  financial  statements  and  reports  required  to be
          delivered  pursuant to Section 6.05 of the Holdings Credit  Agreement,
          as and when required to be delivered by the Guarantor thereunder; and

                  (b) from time to time, such other information as the Lessor or
          the Agent may reasonably request.


                                      -6-
<PAGE>
                                    SECTION 7

                                 MISCELLANEOUS.

                  (a) In the event of the  acquisition  of the Lessee by, or the
          consolidation or merger of the Lessee with or into, or the sale of the
          Lessee to,  another  corporation,  this Guaranty  shall remain in full
          force and effect unless and until the Lessee shall have obtained,  for
          the  benefit  of Lessor  and the  Agent,  (i) a  replacement  guaranty
          substantially  in the form of this  Guaranty  covering the  Guaranteed
          Obligations  issued by a guarantor  satisfactory to the Lessor and the
          Agent in their sole discretion  and/or (ii) a letter of credit in form
          and  substance  satisfactory  to Lessor  and the  Agent in their  sole
          discretion from a bank or other financial institution  satisfactory to
          Lessor and the Agent in their sole discretion.

                  (b) No  failure  on the part of either the Lessor or the Agent
          to  exercise,  no delay in  exercising,  and no course of dealing with
          respect  to, any right or remedy  hereunder  will  operate as a waiver
          thereof;  nor will any  single  or  partial  exercise  of any right or
          remedy  hereunder  preclude  any other  further  exercise of any other
          right or remedy.  This Guaranty may not be amended or modified  except
          by written  agreement of the Guarantor on the one hand, and the Lessor
          and the Agent or the other hand.

                  (c) All notices required under the terms and provisions hereof
          shall be in writing,  shall be deemed given and shall become effective
          when  delivered  by hand or  courier  service  or  received  by telex,
          telecopier,  facsimile,  telegram,  cable or  registered  or certified
          first-class  mail,  postage prepaid,  addressed as follows:  if to the
          Guarantor, at 2550 Denali Street, Suite 1000, Anchorage, Alaska 99503,
          Attention: Chief Financial Officer; if to the Lessor, at c/o GCI Fiber
          Co., Inc., 2550 Denali Street,  Suite 1000,  Anchorage,  Alaska 99503,
          Attention: Chief Financial Officer; if to the Agent, at its offices at
          1301 Avenue of the  Americas,  New York,  New York  10019,  Attention:
          Project  Finance Group;  and if to the Lessee,  at 2550 Denali Street,
          Suite  1000,  Anchorage,  Alaska  99503,  Attention:  Chief  Financial
          Officer;  or at such  other  address as any of the  foregoing  Persons
          shall from time to time designate in writing.  If either the Lessor or
          the Guarantor gives any notice  hereunder (for any reason  whatsoever)
          to the other or to the  Lessee,  the  Lessor  and the  Guarantor  each
          agrees to simultaneously deliver a copy of such notice to the Agent.

                  (d) The  Guarantor  acknowledges  that the Lessor is assigning
          the Lessor's right, title and interest in and to this Guaranty and all
          moneys due or to become due hereunder to the Agent (for the benefit of
          the  Lenders) as security  for all  obligations  secured by the Credit
          Agreement  and the  other  Fundamental  Documents;  and the  Guarantor
          consents to such assignment and agrees to make all payments  hereunder
          in the same manner as would be required of the Lessee under the Lease.
          The Guarantor hereby acknowledges  receipt of a copy of the Lease. The
          Guarantor  hereby  waives the 


                                      -7-
<PAGE>
          right to assert  against the Agent,  as  assignee  of the Lessor,  any
          claim,  defense,  counterclaim or set off that it could assert against
          the  Lessor in an action  brought by the  Lessor  upon this  Guaranty.
          Unless the Agent  shall  otherwise  direct in writing,  the  Guarantor
          hereby agrees that it will make payment of all moneys due or to become
          due to the Lessor to the Agent for application  pursuant to the Credit
          Agreement.

                  (e) The  terms  of this  Guaranty  shall be  binding  upon the
          Guarantor  and its  successors  and  assigns,  and shall  inure to the
          benefit of, and be enforceable  by, the Lessor and the Agent and their
          respective  successors  and  assigns;  provided,   however,  that  the
          Guarantor shall not assign any of its rights or obligations under this
          Guaranty  without  the prior  written  consent  of the  Lessor and the
          Agent,  and any attempted  assignment by the Guarantor in violation of
          this provision shall be void.

                  (f) THIS GUARANTY  SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND
          GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.

                  (g) If any term of this  Guaranty  and any  other  application
          thereof  shall be  invalid or  unenforceable,  the  remainder  of this
          Guaranty and any other application of such terms shall not be affected
          thereby.

                  (h)  The  Guarantor  hereby  submits  to the  jurisdiction  of
          certain  courts on the same terms as are provided in Section 23 of the
          Lease for the Lessee.



                                      -8-
<PAGE>
                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Guaranty to be executed and  delivered by their  respective  officers  thereunto
duly authorized as of the date first set forth above.


                                       GCI HOLDINGS, INC.



                                       By 
                                       Name:
                                       Title:


                                       ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                       By:  GCI Fiber  Co.,  Inc.,  its  General
                                       Partner


                                       By 
                                       Name:
                                       Title:

                                       By:  Fiber Hold Co.,  Inc.,  its  General
                                       Partner


                                       By 
                                       Name:
                                       Title:


                                       CREDIT  LYONNAIS  NEW  YORK  BRANCH,   as
                                       Administrative Agent



                                       By 
                                       Name:
                                       Title:


<PAGE>
                                                                       EXHIBIT R

                         FORM OF COMPLIANCE CERTIFICATE


                     THE UNDERSIGNED HEREBY CERTIFIES THAT:


                  1. I am the duly elected [President, Vice President, Treasurer
or  Secretary]  of GCI Fiber  Co.,  Inc.,  an Alaska  corporation  and a general
partner of Alaska United Fiber System  Partnership (the  "Borrower"),  a general
partnership organized under the laws of Alaska;

                  2. I have  reviewed  the  terms  of the  Credit  and  Security
Agreement dated as of January 27, 1998, among the Borrower, the lenders referred
to therein, 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 such agreement may be amended, supplemented or otherwise
modified,  renewed  or  replaced  from  time to time,  the  "Credit  Agreement";
capitalized  terms used herein  without  definition  shall have the meanings set
forth  in  the  Credit  Agreement),  and  the  Notes  and I have  conducted,  in
reasonable  detail,  a review of the  transactions and condition of the Borrower
during the accounting period covered by the attached  financial  statements.  In
the course of the  performance of my duties,  I would normally have knowledge of
any condition or event which would constitute a Default or Event of Default;

                  3.  The  examinations  described  in  paragraph  (2)  did  not
disclose 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;  and as of
the date of this  Certificate,  I have no  knowledge  of any  condition or event
which would constitute a Default or Event of Default, except as set forth below:

                  Described   below  (or  in  a  separate   attachment  to  this
Certificate)  the  exceptions,  if any, to  paragraph  (3) above by listing,  in
detail,  the nature of each  condition or event,  the period during which it has
existed and any action which the Borrower or any Transaction Party has taken, is
taking, or proposes to take, with respect to each such condition or event:

------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------

                  4.  As  of              ,   Total  Debt  of  the  Borrower  is
$          . [if applicable insert the following sentence: The Borrower is still
entitled  to the same  reduced  
<PAGE>
Applicable  Margin  (which is set forth below)  pursuant  to, and in  accordance
with, Section 2.5(c) of the Credit Agreement.

                  Reduced Applicable Margin for Alternate Base Rate Loans:    

                  Reduced Applicable Margin for Eurodollar Loans:              

                  The  foregoing  certifications,  together  with the  financial
statements  delivered  with this  Certificate  in support  hereof,  are made and
delivered  this       day of          ,        pursuant to Section 5.1(c) of the
Credit Agreement.


                                       GCI FIBER CO., INC., a General Partner of
                                       Alaska United Fiber System Partnership


                                       By:       
                                       Name:
                                       Title:



                                      -2-
<PAGE>



                                                                       EXHIBIT S
                                                FORM OF SCHEDULE TO THE INTEREST
                                                       RATE PROTECTION AGREEMENT


                                    SCHEDULE
                                     to the
                                MASTER AGREEMENT

                          dated as of 

                                     between

                   CREDIT LYONNAIS NEW YORK BRANCH ("PARTY A")

                                       and

               ALASKA UNITED FIBER SYSTEM PARTNERSHIP ("PARTY B")


Part 1.  Termination Provisions.

                  (a)  "Specified  Entity"  means in relation to Party A for the
purpose of:

                  Section 5(a)(v),   None
                  Section 5(a)(vi),  None
                  Section 5(a)(vii), None
                  Section 5(b)(iv),  None

                           and in relation to Party B for the purpose of:

                  Section 5(a)(v),   None
                  Section 5(a)(vi),  None
                  Section 5(a)(vii), None
                  Section 5(b)(iv),  None

                  (b) "Specified Transaction" will have the meaning specified in
Section 14 of this Agreement.

                  (c) The "Cross Default" provisions of Section 5(a)(vi) of this
Agreement will apply to both parties. For such purpose, Section 5(a)(vi) of this
Agreement is hereby amended by deleting  subclauses (1) and (2) thereof in their
entirety and replacing them with the following:
<PAGE>
                                    "an  Event of  Default  (as  defined  in the
                           Credit  Agreement  dated as of January 27, 1998 among
                           Alaska United Fiber System Partnership,  as Borrower,
                           Credit  Lyonnais New York Branch,  as  Administrative
                           Agent,  Nationsbank  of Texas,  N.A.,  as  Sydication
                           Agent, and TD Securities (USA) Inc., as Documentation
                           Agent,  and  The  Lenders  signatory  thereto,  as in
                           effect from time to time,  "Credit  Agreement") which
                           has  resulted in the  Obligations  (as defined in the
                           Credit Agreement) becoming due and payable".

                           If such provisions apply:

                           "Specified   Indebtedness"   will  have  the  meaning
specified  in  Section  14 of this  Agreement,  except  that such term shall not
include any obligation in respect of deposits received in the ordinary course of
Party A's banking business.

                  (d) "Termination Currency" means United States Dollars.

                  (e) The  "Credit  Event  Upon  Merger"  provisions  of Section
5(b)(iv) of this Agreement will apply to Party A and to Party B.

                  (f) The  "Automatic  Early  Termination"  provision of Section
6(a) of this Agreement will not apply to Party A and will not apply to Party B.

                  (g) Payments on Early Termination.  For the purpose of Section
6(e) of this Agreement:

                  Market Quotation will apply.
                  The Second Method will apply.

                  (h) Additional Termination Event will not apply.

                  (i) Additional Event of Default will not apply.

Part 2.  Tax Representations

                  (a) Payer Representations.  For the purpose of Section 3(e) of
this Agreement, each of Party A and Party B represent that it is not required by
any  applicable  law, as modified by the practice of any  relevant  governmental
revenue  authority,  of any  Relevant  Jurisdiction  to make  any  deduction  or
withholding  for or on account of any Tax from any payment  (other than interest
under Section 2(e),  6(d)(ii) or 6(e) of this Agreement) to be made by it to the
other party under this Agreement. In making this representation,  it may rely on
(i) the  accuracy  of any  representation  made by the other  party  pursuant to
Section 3(f) of this  Agreement;  (ii) the  



                                      -2-
<PAGE>
satisfaction of the agreement of the other party contained in Section 4(a)(i) or
4(a)(iii) of this Agreement and the accuracy and  effectiveness  of any document
provided by the other party  pursuant to Section  4(a)(i) or  4(a)(iii)  of this
Agreement;  and (iii)  the  satisfaction  of the  agreement  of the other  party
contained in Section 4(d) of this  Agreement;  provided,  that it shall not be a
breach of this  representation  where  reliance is placed on clause (ii) and the
other party does not deliver a form or document under Section  4(a)(iii) of this
Agreement by reason of material prejudice to its legal or commercial position.

                  (b)      Payee Representations

                           (i)      Party A / Payee Tax Representation.  For the
                                    purpose of Section  3(f) of this  Agreement,
                                    Party  A   represents   that  each   payment
                                    received   or  to  be   received  by  it  in
                                    connection   with  this  Agreement  will  be
                                    effectively  connected with its conduct of a
                                    trade or  business  in the United  States of
                                    America.

                           (ii)     Party B / Payee Tax Representation.  For the
                                    purpose of Section  3(f) of this  Agreement,
                                    Party  B  represents  that  it is a  general
                                    partnership  organized under the laws of the
                                    state of Alaska.

Part 3.  Agreement to Deliver Documents

                  For  the  purpose  of  Sections   4(a)(i)  and  (ii)  of  this
Agreement:

                  (a) Tax forms, documents or certificates to be delivered are:

                           (i)      Party A agrees to  execute  and  deliver  to
                                    Party B, a United  States  Internal  Revenue
                                    Service Form 4224,  or any  successor  form,
                                    (i) upon execution of this  Agreement,  (ii)
                                    promptly upon reasonable  demand by Party B,
                                    and (iii)  promptly  upon  learning that any
                                    such form previously provided by Party A has
                                    become obsolete or incorrect.

                  Other documents to be delivered are:



                                      -3-
<PAGE>
<TABLE>
<CAPTION>
                                                                                     Covered by 
Party Required to                                             Date by Which          Section  3(d) 
Deliver Document            Form/Document/Certificate         to Be Delivered        Representation
-----------------           -------------------------         ----------------       --------------
<S>                         <C>                               <C>                    <C>   
Party B                     Certified copies of all           Upon execution         Yes
                            documents evidencing necessary    of Agreement
                            corporate and other
                            authorizations and approvals
                            with   respect  to  the   
                            execution,   delivery  and
                            performance  by the  party 
                            of this  Agreement,  each
                            Confirmation  and  any  
                            applicable   Credit  Support
                            Document.

Party A and Party B         A certificate of an authorized    Upon execution of the  Yes
                            officer of the party certifying   Agreement
                            the names,  true  signatures 
                            and  authority  of the
                            officers of the party signing 
                            this  Agreement,  each
                            Confirmation  and  any  
                            applicable   Credit  Support
                            Document.

Party A and Party B         A duly  executed  Credit          Upon execution of      No
                            Support Document.                 Agreement

Party B                     An opinion of counsel to Party    Upon execution of      No
                            B in form and substance           this Agreement
                            satisfactory to Party A.
</TABLE>
Part 4.  Miscellaneous

                  (a) Addresses for Notices. For the purpose of Section 12(a) of
this Agreement:

                  Address for notices or communications to Party A:

                  Address: 1301 Avenue of the Americas, New York, New York 10019
                  Attention:        Treasury Department
                  Telex No.:        62410   
                  Answerback:  CREDW
                  Telephone No.:    (212) 261-7290
                  Facsimile No.:    (212) 459-3167



                                      -4-
<PAGE>
                  Electronic Messaging System Details:  None

                  Address for notices or communications to Party B:

                  Address:          c/o GCI Fiber Co., Inc.
                                    2550 Denali Street, Suite 1000
                                    Anchorage, Alaska 99503
                  Attention:        Chief Financial Officer
                  Telex No.:        None             
                  Answerback:       None
                  Telephone No.:
                  Facsimile No.:    (907) 265-5676
                  Electronic Messaging System Details:  None

                  (b) Process  Agent.  For the purpose of Section  13(c) of this
Agreement, Party B appoints as its Process Agent: CT Corporation.

                  (c) Offices.  The  provisions  of Section  10(a) will apply to
Party A and Party B.

                  (d) Multibranch  Party.  For the purpose of Section 10(c), (i)
Party A is not a Multibranch Party, and (ii) Party B is not a Multibranch Party.

                  (e) Calculation Agent. The Calculation Agent shall be Party A.

                  (f) Credit Support Document.  The Credit Support Documents are
the Fundamental Documents as defined in the Credit Agreement.

                  (g) Credit Support  Provider.  Credit Support  Provider means:
(i) in  relation  to Party A: Not  Applicable;  (ii) in relation to Party B, the
Transaction Parties.

                  (h)  GOVERNING  LAW.  THIS  AGREEMENT  WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.

                  (i)  Netting of  Payments.  As of the date of this  Agreement,
subparagraph  (ii) of  Section  2(c) of this  Agreement  will  not  apply to any
Transaction.

                  (j) "Affiliate" will have the meaning  specified in Section 14
of this Agreement,  except that for purposes of Section 3(c),  "Affiliate" means
with respect to Party A, any entity controlled,  directly or indirectly by Party
A. For this  purpose,  "control of a majority of person"  means  ownership  of a
majority of the voting power of the entity or person.

Part 5.  Other Provisions




                                      -5-
<PAGE>
                  (a) Procedures for Entering into Transactions. With respect to
each  Transaction  entered into pursuant to this Agreement,  Party A will, on or
promptly  after the Trade Date  thereof  (by mail,  telex,  telecopier  or other
electronic means),  send Party B a Confirmation of each Transaction between them
on the standard form used by Party A or in such other form as is mutually agreed
upon by the parties. Party B will promptly thereafter confirm the accuracy of or
request  the  correction  of such  Confirmation.  If Party B fails to  accept or
dispute  the  Confirmation  in the manner set forth  above  within  three  Local
Business  Days after  receipt  from Party A, its  failure  shall  constitute  it
acknowledgment  that the Confirmation  correctly reflects the parties' agreement
on the terms of the  Transaction  referenced  therein.  The  requirement of this
Agreement  that the parties  exchange  Confirmations  shall for all  purposes be
deemed satisfied by a Confirmation  sent and an  acknowledgment  deemed given as
provided herein.

                  (b) Definitions.  This Agreement,  each  Confirmation and each
Transaction are subject to the 1991 ISDA  Definitions  (the "1991  Definitions")
published by the International Swap and Derivatives Association,  Inc. ("ISDA"),
and will be governed in all  respects  by the  provisions  set forth in the 1991
Definitions.  The  provisions  of  the  1991  Definitions  are  incorporated  by
reference in, and made part of, this Agreement and each  Confirmation  as if set
forth in full in this Agreement and each Confirmation.  For these purposes,  all
references in the 1991  Definitions to a "Swap  Transaction"  shall be deemed to
apply to each  Transaction  under this  Agreement.  The  provisions  of the 1991
Definitions relating to Market Disruption Events and Adjustments to Indices (and
their effects as well) will apply to a Transaction  under this Agreement only to
the extent not inconsistent  with the provision of the applicable  Confirmation.
In the event of any inconsistency between 1991 Definitions and any provisions of
this Agreement,  the provisions of this Agreement will prevail.  The definitions
incorporated  into a  Confirmation  shall  prevail over the  provisions  of this
Agreement and the 1991 Definitions.

                  (c) Affected  Parties in Termination  Events.  For purposes of
Section  6(e) of this  Agreement,  both  parties  shall be deemed to be Affected
Parties in  connection  with any  Illegality  or Tax Event,  so that payments in
connection  with early  termination  shall be  calculated as provided in Section
6(e)(ii) of this Agreement.

                  (d) Deferral of Payments in Connection with  Illegality.  If a
party gives a notice of Illegality, the due date for any payment scheduled to be
made by either party pursuant to Section 2 of this Agreement in connection  with
any Affected  Transaction  at any time after that notice is  effective  shall be
deferred  to the  earliest  to occur of (i) the  date  for  settlement  payments
pursuant  to  Section  6(e) of  this  Agreement  in  connection  with  an  Early
Termination  Date,  (ii) the  final  Scheduled  Payment  Date  for the  Affected
Transactions and (iii) the date on which  arrangements  made pursuant to Section
6(b)(ii) of this Agreement to avoid the  Illegality  are effected.  Any payments
deferred  pursuant to this provision shall be made on the deferred  payment date
together  with interest  accrued on each deferred  amount from and including its
originally  scheduled due date to but excluding the deferred due date (or, if an
Early Termination Date is designated, to but excluding the day it is designated)
at the Non-default Rate.





                                      -6-
<PAGE>
                  (e) Conditions  Precedent.  The condition precedent in Section
2(a)(iii)(1)  of this Agreement  shall not apply to a payment and delivery owing
by a party if the other party has  satisfied in full all its payment or delivery
obligations under Section 2(a)(i) of this Agreement and has at the relevant time
no future payment or delivery obligations, whether absolute or contingent, under
Section 2(a)(i) of this Agreement.

                  (f)  Indemnifiable  Tax.  For  purposes  of Section 14 of this
Agreement,  the  following  shall  be  added  as the  end of the  definition  of
"Indemnifiable Tax":

                  "Notwithstanding the foregoing, "Indemnifiable Tax" also means
                  any Tax imposed in respect of payment under this  Agreement by
                  reason  of a  Change  in Tax  Law by a  government  or  taxing
                  authority of a Relevant Jurisdiction with respect to the party
                  making such payment,  unless the other party is  incorporated,
                  organized,  managed and  controlled  or considered to have its
                  seat in such  jurisdiction,  or is acting for purposes of this
                  Agreement   through   a   branch   office   located   in  such
                  jurisdiction."

                  (g) Additional Agreement. For purposes of Section 4(a)(iii) of
this Agreement,  the following shall be added  immediately prior to the existing
text: "upon learning that such form or document is required or".

                  (h) Right of  Set-off . Any  amount  (the  "Early  Termination
Amount")  payable to one party (the  "Payee") by the other  party (the  "Payer")
under Section 6(e), in  circumstances  where there is (i) a Defaulting  Party or
(ii) one  Affected  Party in the case where a  Termination  Event under  Section
5(b)(iv)  has  occurred,  will,  at the option of the party ("X)" other than the
Defaulting  Party  or the  Affected  Party  (and  without  prior  notice  to the
Defaulting Party or the Affected  Party),  be reduced by its set-off against any
amount(s) (the "Other Agreement Amount") payable (whether at such time or in the
future  or upon the  occurrence  of a  contingency)  by the  Payee to the  Payer
(irrespective  of the  currency,  place of  payment  or  booking  office  of the
obligation)  under any  other  agreement(s)  between  the Payee and the Payer or
instrument(s) or undertaking(s)  issued or executed by one party to, or in favor
of,  the  other  party  except as  otherwise  specified  in those  agreement(s),
instrument(s),  or undertaking(s) or separately agreed between the Payer and the
Payee (and the Other  Agreement  Amount will be  discharged  promptly and in all
respects to the extent it is so set-off).  X will give notice to the other party
of any set-off so effected.

                  For this purpose,  either the Early Termination  Amount or the
Other  Agreement  Amount  (or  the  relevant  portion  of such  amounts)  may be
converted by X into the currency in which the other is  denominated  at the rate
of exchange at which such party would be able, acting in a reasonable manner and
in good faith, to purchase the relevant amount of such currency.




                                      -7-
<PAGE>
                  If an  obligation  is  unascertained,  X  may  in  good  faith
estimate that obligation and set-off in respect of the estimate,  subject to the
relevant party accounting to the other when the obligation is ascertained.

                  Nothing  herein shall be effective to create a charge or other
security interest.  This provision shall be without prejudice and in addition to
any right of set-off,  combination of accounts, lien or other right to which any
party is at any time otherwise  entitled  (whether by operation of law, contract
or otherwise).

                  (i)  Escrow.  If  either  party  in  its  reasonable  judgment
determines  at any time that there has been a material  adverse  change  that is
likely to affect  the other  party's  ability  to perform  its  ensuing  payment
obligation in connection with a Transaction or Transactions  involving  payments
due from each of the parties on the same day in different currencies,  the party
that has formed that judgment may notify the other that the payments due on that
day in connection with that Transaction or those  Transactions are to be made in
escrow, to a major commercial bank selected by that party in good faith and that
has  offices  in the cities in which both  payments  are to be made.  If such an
election  is made,  each party shall make the payment due from it on that day by
deposit  into  escrow  with that  escrow  agent,  for  value on that  day,  with
irrevocable  instructions  (i) to release the payment to the intended payee upon
receipt by the escrow agent of the required  counter payment due from that payee
on the same day in connection with that  Transaction  accompanied by irrevocable
instructions  to the same effect,  or (ii) if the required  deposit in escrow of
the counter  payment due is not so made on the same day,  for value on that day,
to return  the  payment  deposited  in escrow to the party  that made the escrow
deposit.  The party that elects to have  payments  made in escrow  shall pay the
costs of the escrow  arrangements  and cause those  arrangements to provide that
the escrow agent will pay interest on each amount deposited in escrow with it in
either of the relevant  cities,  for each day such amount remains in escrow past
5:00 p.m. local time in the city, at the same rate per annum,  and calculated in
the same  way,  as it would  pay on  overnight  deposits  placed  with it in the
relevant currency and city for value on such day. The escrow  arrangements shall
also provide that such  interest on any amount in escrow shall be payable to the
intended  payee of that  amount,  provided  that it has  deposited  the  counter
payment due from it into escrow as contemplated  herein, and that, if it has not
done so, such interest shall be payable to the other party.

                  (j) The following paragraph shall be added to the Agreement as
a new Section 15:

                           Jury Trial.  Each party hereby waives its  respective
                           right to jury  trial with  respect to any  litigation
                           arising under, or in connection  with, this Agreement
                           or any Transaction.

                  (k) Representations.  Section 3 is hereby amended by adding at
the end thereof the following Subparagraphs (g), (h) and (i):




                                      -8-
<PAGE>
                           Line of Business.  It has entered into this Agreement
                           (including  each  Transaction  evidenced  hereby)  in
                           conjunction  with  its  line of  business  (including
                           financial  intermediation  services) or the financing
                           of its business.

                           Eligible  Swap   Participant.   It   constitutes   an
                           "eligible swap  participant"  as such term is defined
                           in Rule 35.1 (b) (2) of the Commodity Futures Trading
                           Commission, 17 C.F.R. 35.1 (b) (2) (1993).

                  Relationship  Between Parties.  Absent a written  agreement to
the contrary:

                  Either party is not relying on any advice (whether  written or
oral)  of  the  other  party   regarding   any   Transaction,   other  than  the
representations  expressly made by that other party in this Agreement and in the
Confirmation in respect of that Transaction;

                  In respect of each Transaction under this Agreement,

                  Either  party has the  capacity  to  evaluate  (internally  or
through independent  professional  advice) that Transaction and has made its own
decisions to enter into that Transaction; and

                  Either party understands the terms,  conditions,  and risks of
that  Transaction  and is willing to accept  those terms and  conditions  and to
assume (financially and otherwise) those risks.

                  (l) Monitoring  and Recording.  Each party (i) consents to the
monitoring or  recording,  at any time and from time to time, by the other party
of any and all communications between officers or employees of the parties, (ii)
waives any further  notice of such  monitoring  or  recording,  (iii)  agrees to
notify its officers and employees of such  monitoring  and  recording,  and (iv)
agrees that any such  recordings may be submitted in evidence to any court or in
any proceeding relating to this Agreement.

                  (m)  Severability.  Any provision of this  Agreement  which is
prohibited,  unenforceable  or not authorized in any  jurisdiction  shall, as to
such   jurisdiction,   be  ineffective  to  the  extent  of  such   prohibition,
unenforceability  or   non-authorization   without  invalidating  the  remaining
provisions hereof or affecting the validity,  enforceability or legality of such
provision in any other jurisdiction.

                  (n) Scope of Agreement.  Notwithstanding  any contained in the
Agreement to the contrary, if the parties enter into any Specified  Transaction,
such  Specified  Transaction  shall be subject to,  governed by and construed in
accordance  with the terms of this Agreement  unless the  Confirmation  relating
thereto  shall  specifically   state  to  the  contrary.   Each  such  Specified
Transaction  shall be a Transaction  for the purposes of this Agreement and each
confirmation  



                                      -9-
<PAGE>
with respect thereto will constitute a "Confirmation"  subject,  governed by and
form part of this Agreement.

                  (o) Outstanding Specified Transactions. Upon the effectiveness
of the Agreement,  unless  otherwise agreed to in writing by the parties to this
Agreement  with  respect  to  specific  Specified  Transactions,  all  Specified
Transactions  then outstanding shall be subject to, governed by and construed in
accordance  with  this  Agreement.  Each  confirmation  governing  any  Specific
Transaction  entered into prior to the date hereof shall constitute a supplement
to, and form a part of, this  Agreement,  and will be read and  construed as one
with this Agreement.

Part 6.  Additional Terms for FX Transactions and Currency Option Provisions.

                  (a) FX  Definitions.  The  1992  ISDA FX and  Currency  Option
Definitions,   as  published  by  the   International   Swaps  and   Derivatives
Association, Inc. (the "FX Definitions") are incorporated by reference into this
Agreement.  Any terms used and not otherwise  defined in this Agreement that are
contained in the FX  Definitions  shall have the respective  meanings  specified
therein,  in the event of any  inconsistency  between the FX Definitions and the
1991  Definitions,  the FX  Definitions  shall  prevail  with  respect  to an FX
Transaction or a Currency Option. In the event of any inconsistency  between the
FX Definitions and the provisions  otherwise contained in this Agreement,  those
provisions otherwise contained in this Agreement shall prevail.

                  The following amendments are made to the FX Definitions:

                  Section 1.2 of the FX  Definitions  is amended by the addition
of the following definitions with respect to the FX Transactions:

                  "Currency   Obligation"  means  the  undertaking  of  a  party
hereunder  to  receive  or deliver  an amount of  currency,  including  a netted
Currency  Obligation,  and including any Currency Obligation  previously entered
into by the parties.

                  Section 2.2 of the FX  Definitions  is amended by the addition
of the following definitions with respect to Currency Options:

                  "Call".  "Call"  means a Currency  Option  entitling,  but not
obligating,  the  Buyer  to  purchase  from the  seller  at the  Strike  Price a
specified quantity of the Call Currency;

                  "Put".  "Put"  means  a  Currency  Option  entitling,  but not
obligating,  the Buyer to sell to the  Seller at the  Strike  Price a  specified
quantity of the Put Currency;

                  Section  2.2(k) is hereby  amended by deleting in its entirety
the final  sentence  thereof and adding the  following  two sentences at the end
thereof:  "An  Option  may be  exercised  in whole or in part.  If an  Option is
exercised in part, the unexercised portion shall not be 



                                      -10-
<PAGE>
extinguished  thereby  but  shall  remain  an  Option  to  the  extent  of  such
unexercised  portion  until the earlier of (i) the  expiration  of the Option or
(ii) an  exercise of the Option that  leaves no  remaining  unexercised  portion
thereof."

                  (b)  FX  Transaction  Novation  Netting.  In  addition  to the
settlement  netting  provisions  of  Section  2(c)  of  this  Agreement,  unless
otherwise agreed,  if the parties enter into an FX Transaction  giving rise to a
Currency  Obligation  for the same Value Date in and the same Currency as a then
existing  Currency  Obligation,  then  immediately  upon  entering  into such FX
Transaction,  each such  Currency  Obligation  shall  automatically  and without
further action be  individually  canceled and  simultaneously  replaced by a new
Currency  Obligation  for such Value Date  determined as follows:  the amount of
such Currency that would otherwise have been payable by each party on such Value
Date shall be aggregated  and the party with the larger  aggregate  amount shall
have a new  Currency  Obligation  to pay to the other  party the  amount of such
currency  by which its  aggregate  amount  exceeds the other  party's  aggregate
amount,  provided  that if the  aggregate  amounts  are equal,  no new  Currency
Obligation  shall arise.  This paragraph (c) shall not affect any other Currency
Obligation of a party to pay any different Currency on the same Value Date. This
provision shall apply notwithstanding that either party (i) may fail to send out
a Confirmation in respect of any such novation, or (ii) may fail to make changes
in any of its books as a result of any such novation.

                  (c)  Currency  Option   Discharge  and   Termination.   Unless
otherwise  agreed,  any Call  Option or any Put  Option  written by a party will
automatically be terminated and discharged,  in whole or in part, as applicable,
against a Call Option or a Put Option, respectively, written by the other party,
such termination and discharge to occur  automatically  upon the payment in full
of the last Premium payable in respect of such Currency  Options;  provided that
such termination and discharge may only occur in respect of Currency Options:

                  each being with  respect to the same Put Currency and the same
                  Call  Currency  each  having  the  same  Expiration  Date  and
                  Expiration  Time;  each being of the same style,  i.e.  either
                  both being American Style Options or both being European Style
                  Options;  each having the same Strike Price;  neither of which
                  shall have been exercised by delivery of a Notice of Exercise;

and, upon occurrence of such termination and discharge, neither party shall have
any further  obligation  to the other party in respect of the relevant  Currency
Options or, as the case may be, parts thereof so terminated and  discharged.  In
the case of a  partial  termination  and  discharge  (i.e.  where  the  relevant
Currency Options are for different  amounts of the Currency Pair), the remaining
portion of the  Currency  Option which is partially  discharged  and  terminated
shall continue to be a Currency Option for all purposes of this Agreement.  This
provision shall apply notwithstanding that either party (i) may fail to send out
a  Confirmation  in respect of any such discharge and  termination,  or (ii) may
fail to make changes in any of its books as a result of any such  discharge  and
termination.




                                      -11-
<PAGE>
                  (d)  Confirmations.  Any FX  Transaction  and Currency  Option
shall be promptly  confirmed by the parties by Confirmations  exchanged by mail,
telex,  facsimile or other electronic means.  Unless either party objects to the
terms of an FX  Transaction  or Currency  Option  contained in any  Confirmation
within  ten (10)  Local  Business  Days of  receipt  thereof,  the terms of such
Confirmation shall be deemed correct and accepted absent manifest error,  unless
a corrected Confirmation is sent by a party within such ten (10) day period. The
requirement of this Agreement that the parties exchange  Confirmations shall for
all purposes be deemed  satisfied by a Confirmation  sent and an  acknowledgment
deemed given as provided herein.

                  Please  confirm your  agreement to the terms of the  foregoing
Schedule by signing below.

                                       CREDIT LYONNAIS NEW YORK BRANCH


                                       By:
                                       Name: 
                                       Title:


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


                                       By:
                                       Name: 
                                       Title:

                                       By:  Fiber  Hold  Co.,  Inc.,  a  General
                                       Partner


                                       By:
                                       Name: 
                                       Title:




                                      -12-
<PAGE>
                                                                       EXHIBIT T


                         FORM OF CONFIDENTIALITY LETTER




                                                 [Date]




[Addressed to Assigning Lender]



Dear Sirs:

                  In connection with the undersigned's proposed participation in
the credit  facility (the  "Facility")  which has been extended to Alaska United
Fiber System Partnership (the "Borrower"), you, Credit Lyonnais New York Branch,
NationsBank of Texas,  N.A., TD Securities  (USA) Inc.  and/or their  respective
affiliates,  are furnishing to the  undersigned  certain  nonpublic  information
relating to the Borrower,  one or more of its affiliates and/or their respective
businesses.  The  information  which  you,  Credit  Lyonnais  New  York  Branch,
NationsBank  of Texas,  N.A., TD Securities  (USA) Inc.,  the Borrower or any of
their respective  affiliates may furnish to us in connection with our evaluation
of the  Borrower,  one  or  more  of  its  affiliates  and/or  their  respective
businesses and of the Facility is collectively called the "Information".

                  We agree to keep  confidential  (and to  cause  our  officers,
directors,  employees,  agents and representatives to keep confidential) and, at
your or the Borrower's request (except as provided below), to promptly return to
you or the Borrower (as  applicable) or destroy,  the Information and all copies
thereof,  extracts  therefrom  and analyses or other  materials  based  thereon,
except that we shall be  permitted  to disclose  Information  (i) to such of our
officers, directors,  employees, agents and representatives as need to know such
Information in connection with our evaluation of a possible participation in the
Facility (who will be informed of the confidential nature of the material); (ii)
to the extent  required by applicable laws and regulations or by any subpoena or
similar legal process or requested by any bank or other regulatory authority (in
any which event we will notify Credit  Lyonnais New York Branch and the Borrower
to the  extent not  prohibited  by  applicable  law);  (iii) to the extent  such
Information (A) becomes publicly available other than as a result of a breach of
this  confidentiality  letter,  (B) becomes available to us on a nonconfidential
basis from a source other than you, Credit Lyonnais 
<PAGE>
New York Branch,  NationsBank  of Texas,  N.A.,  TD Securities  (USA) Inc.,  the
Borrower or any of their  respective  affiliates or (C) was available to us on a
nonconfidential  basis prior to its disclosure to us by you, Credit Lyonnais New
York Branch,  NationsBank of Texas, N.A., TD Securities (USA) Inc., the Borrower
or any of their  respective  affiliates;  (iv) to the extent the Borrower  shall
have  consented  to such  disclosure  in  writing;  or (v)  pursuant to the last
paragraph of this confidentiality letter.

                  We further agree that we will use the  Information  (except to
the extent the conditions  referred to in subclauses  (A), (B) and (C) of clause
(iii) above have been met) only with regard to our possible participation in the
Facility.

                  We further agree that in the event we elect to  participate in
the  Facility,  we will  not  disclose  any of the  Information  to any  further
participant  or assignee or proposed  participant or assignee until such further
participant  or assignee  or  proposed  participant  or  assignee  executes  and
delivers a confidentiality letter substantially in the form hereof.

                  Our obligations under this confidentiality  letter are for the
benefit of you, Credit Lyonnais New York Branch,  NationsBank of Texas, N.A., TD
Securities (USA) Inc., the Borrower and their respective  affiliates and each of
them may pursue remedies  against us for the breach hereof,  either in equity or
at law.

                  Notwithstanding  anything to the contrary  contained above, if
we participate in the Facility,  we shall be entitled to retain all  Information
and to use it in servicing the credit and in  protecting  our rights with regard
thereto.




                                       -----------------------------    
                                       Proposed Participant's or Assignee's Name


                                       By [Authorized Officer] 
                                       Name:
                                       Title:



                                      -2-
<PAGE>
                                    EXHIBIT U

                            FIBER EXCHANGE AGREEMENT

         THIS FIBER EXCHANGE AGREEMENT ("Agreement"),  dated effective as of the
27th day of January,  1998 ("Effective  Date"), is among the ALASKA UNITED FIBER
SYSTEM PARTNERSHIP,  an Alaska general  partnership,  2550 Denali Street,  Suite
1000,  Anchorage,  Alaska 99503 ("AU"), GCI CABLE, INC., an Alaska  corporation,
2550 Denali Street, Suite 1000,  Anchorage,  Alaska 99503 ("GCI CABLE"), and GCI
COMMUNICATION  CORP.,  an Alaska  corporation,  2550 Denali Street,  Suite 1000,
Anchorage, Alaska 99503 ("GCICC").

         WHEREAS,  AU is  constructing  and will own and/or  lease a fiber optic
telecommunications  cable System as defined in that General Contractor Agreement
between AU and GCICC of even date;

         WHEREAS,  GCI Cable desires to obtain certain fiber and facilities from
AU;

         WHEREAS, GCICC desires to obtain space and power from AU;

         WHEREAS,  AU  desires to obtain  space and power from GCICC  under this
Agreement at FDC, SADC and SDC (all as defined below);

         WHEREAS, AU desires to include in that network the fiber to be acquired
pursuant to this Agreement from GCI Cable,  which, with the network described at
(i) and (ii)  above,  collectively  shall be known as the  Alaska  United  Fiber
System ("System"); and

         WHEREAS,  AU's  lenders  for the  financing  of the  System  under that
certain Credit and Security Agreement dated as of January 27, 1998, among AU, as
Borrower,  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, and the lenders named therein ("Credit  Agreement") are
requiring that AU grant a security  interest in the entire System,  including an
assignment of this Agreement,  to the Administrative  Agent on behalf of all the
lenders under the Credit Agreement;

         WITNESSETH,   that  in   consideration  of  the  mutual  covenants  and
agreements hereinafter contained, the parties hereto mutually covenant and agree
as follows:


1.       Definitions and General Provisions.

         1.1  Definitions.  The following terms shall,  for all purposes of this
Agreement, have the following meanings:


Fiber Exchange Agreement              1
<PAGE>
                  "Agreement"  means this Fiber Exchange  Agreement,  as amended
from time to time.

                  "AU" means Alaska United Fiber System  Partnership,  an Alaska
general partnership.

                  "AU  Facility"  means the fiber  optic  cable  network  owned,
leased and/or to be constructed by AU, connecting the NPMS, Glen Alps, Whittier,
Valdez, and Lena Point, Alaska, and Norma Beach, through to the SDC, Washington.

                  "AU  Fibers"  means the  pairs of Dark  Fiber in the GCI Cable
Facility,  the right to  exclusive  use of which GCI Cable has granted to AU, as
described in Section 3.1.

                  "Award"  means all  compensation,  sums,  or anything of value
awarded, paid, or received on a total or partial Condemnation.

                  "Business Day" means any day other than a Saturday,  Sunday or
holiday when federal or State of Alaska government offices are closed.

                  "Condemnation"  means  (a) the  exercise  of any  governmental
power,  whether by legal  proceedings  or  otherwise,  by a Condemnor,  or (b) a
voluntary sale or transfer to any Condemnor, either under threat of Condemnation
or while legal proceedings for Condemnation are pending.

                  "Condemnor"  means any public or  quasi-public  authority,  or
private corporation or individual, having the power of eminent domain.

                  "Dark  Fiber" means an  identified  fiber  contained  within a
fiber optic cable, which has been installed with all required splicing completed
and terminated to an intermediate  fiber  distribution  panel,  but which has no
light source present and has not been terminated to any electronic system.

                  "Date of Taking" means the date the Condemnor has the right to
possession of the property being condemned.

                  "Event of  Default"  means any of the events  specified  as an
event of default in Section 10.1, or elsewhere in this Agreement.

                  "Exchange  Date" means the single  date on which each  party's
right to use Dark Fiber on each other party's Facility  commences as provided in
Section 3.2.


Fiber Exchange Agreement              2
<PAGE>
                  "Facility"  means when  reference is made to the Facility of a
party, (i) the GCICC Facility if the party is GCICC, (ii) the AU Facility if the
party is AU, or (iii) the GCI Cable Facility if the party is GCI Cable.

                  "FDC" means GCICC's Fairbanks  Distribution Center, located at
520 5th Avenue, Suite 407, Fairbanks, Alaska 99701.

                  "Force Majeure" means, without limitation, the following: acts
of God;  strikes,  lockouts,  or other industrial  disturbances;  acts of public
enemies; orders or restraints of any kind of the government of the United States
or of the State of Alaska or any other governmental  authority,  or any of their
departments,  agencies,  subdivisions,  or  officials,  or any civil or military
authority  (including  any  orders  or  restraints  exercised  pursuant  to  any
agreement  to  which  GCI  Cable,  GCICC  or  AU is a  party);  war  or  warlike
operations, civil war or commotions, mobilizations or military call-up, and acts
of  similar  nature;  revolution,   rebellions,   sabotage,  and  insurrections;
epidemics or quarantine restrictions; landslides; icebergs; typhoons; tornadoes;
adverse weather conditions;  tidal waves; earthquakes;  fires; storms; droughts;
floods;  explosions;  breakage,  malfunction,  or accident to cable, facilities,
machinery,  transmission  pipes,  or  canals;  provided  that no event  which is
reasonably in the control of a party or which the party, through the exercise of
reasonable  maintenance  or  management,  could have  reasonably  prevented from
occurring, shall be considered "force majeure."

                  "GCI Cable" means GCI Cable, Inc., an Alaska corporation,  and
its wholly-owned subsidiaries.

                  "GCI Cable Facility" means those fiber optic facilities owned,
leased  and/or  to be  constructed  by GCI  Cable  (i) in  the  Anchorage  area,
connecting the SADC, Glen Alps and the AT&T POP (located at 210 East Bluff Road,
Anchorage,  Alaska 99501), and (ii) in the Fairbanks area,  connecting the NPMS,
FDC and the AT&T POP (located at 200 Gaffney Road, Fairbanks,  Alaska 99701) all
consisting of buried or aerial optic cable.

                  "GCI  Cable  Fibers"  means the pairs of Dark  Fiber in the AU
Facility,  the right to exclusive  use of which AU has granted to GCI Cable,  as
described in Section 3.1.

                  "GCICC" means GCI Communication Corp., an Alaska corporation.
                  "GCICC Facility" means the locations owned or leased by GCICC,
at SADC and Glen Alps,  in  Anchorage,  the FDC,  in  Fairbanks  and the SDC, in
Seattle.

                  "Glen Alps" means GCICC's  leased  location at Lot 5, Block 1,
Tower Estates Subdivision, Anchorage, Alaska 99516.


Fiber Exchange Agreement              3
<PAGE>
                  "Norma Beach" means AU's cable landing  station at 14725 Norma
Beach Road, Edmonds, Washington 98026.

                  "NPMS"  means  Kanas  Telecom,  Inc.'s  ("Kanas")  North  Pole
Metering  Station  facility  located at 3624 Frosty Avenue,  North Pole,  Alaska
99705.

                  "OLT" means optical line termination equipment.

                  "POP"  means  a  party's   primary  point  of  presence  at  a
designated location.

                  "PSMS" means Kanas's PetroStar  Metering  Station,  located at
2.5 Mile Dayville Road, Valdez, Alaska 99686.

                  "SADC" means  GCICC's  South  Anchorage  Distribution  Center,
located at 6831 Arctic Boulevard, Anchorage, Alaska.

                  "SDC" means GCICC's Seattle  Distribution  Center,  located at
2001-6th Avenue, Suite 2900, Seattle, Washington 98121.

                  "Substantial  Completion" or  "Substantially  Complete" means,
with  respect to Dark  Fiber,  that (i) the fiber has been  installed,  with all
required splicing completed,  (ii) the fiber transports light in accordance with
the  standards  in  Exhibit  A, as  demonstrated  under  the  testing  procedure
described  in Exhibit A,  (iii)  space,  power and  equipment  access  have been
provided to the extent required by the terms of this Agreement; and the owner of
the Facility  containing  the fiber has  acquired all permits and  rights-of-way
that are required for its operation of that Facility.

                  "Term"  means  the  term of this  Agreement,  which  shall  be
determined as provided in Section 13.1.

                  "Valdez"  means AU's cable landing  station to be built at 200
South Harbor Drive, Valdez, Alaska 99686.

                  "Whittier"  means AU's cable landing station at Lot #16, First
Addition to the Port of Whittier, Alaska.

         1.2      General Definitions.

                  Authority.  Every "approval,"  "request,"  "order,"  "demand,"
"application,"  "appointment," "notice," "statement,"  "certificate," "consent,"
or similar  action  hereunder  shall,  unless the form  thereof is  specifically
provided,  be in writing,  signed by a duly  authorized  officer or agent of the
party or other person with a duly authorized signature.


Fiber Exchange Agreement              4
<PAGE>
                  GAAP. All accounting  terms not otherwise  defined herein have
meanings  assigned to them in  accordance  with  generally  accepted  accounting
practices, consistently applied, in effect from time to time.

                  General  Words of  Reference.  The words  "herein,"  "hereof,"
"hereto,"  "hereby," and  "hereunder" and other words of similar import refer to
this Agreement as a whole and not any particular section or other subdivisions.

                  Sections.  All  references  in this  Agreement  to  designated
"Sections"  and  other  subdivisions  are  to  designated   sections  and  other
subdivisions of this Agreement.

                  Singular/Plural. The terms specifically defined in Section 1.1
have the  meanings  ascribed  to them in that  Section and include the plural as
well as the singular.

2.       Representations and Warranties.

                  2.1  AU's  Representations  and  Warranties.  As of  the  date
hereof, AU hereby represents and warrants as follows:

                  2.1.1 Formation.  AU is a general partnership formed under the
laws of the State of Alaska.  Each of its general  partners is a corporation  in
good standing under the laws of Alaska.

                  2.1.2 Authorization.  AU has full power and authority to carry
on its business as now conducted and to enter into this Agreement. The execution
and delivery of this Agreement has been authorized by proper partnership action,
and this Agreement constitutes AU's valid and legally binding obligation.

                  2.1.3  Consent,  Approval.  Except  as may have  already  been
obtained, no consent or approval of any trustee or holder of any indebtedness or
obligation of AU, and no consent, approval, permission, authorization, order, or
license of any governmental  authority, is required to be obtained by AU for the
execution  and delivery of this  Agreement or any other  instrument or agreement
required of AU under this Agreement.

                  2.1.4  No  Insolvency.  AU is not  insolvent  as of  the  date
hereof.

                  2.1.5 No Defaults. To its knowledge,  AU is not in default nor
has any event or  circumstance  occurred  which,  but for the  expiration of any
applicable  grace period or the giving of notice,  or both,  would  constitute a
default by AU under any material  agreement or instrument to which AU is a party
or by which AU is bound which  default would have a material  adverse  effect on
AU's performance under this Agreement.

                  2.1.6  No  Conflicts  with  Other   Agreements.   Neither  the
execution  and  delivery  


Fiber Exchange Agreement              5
<PAGE>
of this Agreement, and the consummation of the transactions contemplated hereby,
nor the  fulfillment  of or compliance  with the provisions  hereto,  materially
conflicts with, violates, or breaches any partnership agreement provision of AU,
any  of  the  material  terms,  conditions,  or  provisions  of  any  indenture,
instrument,  or  agreement  to which AU is a party or by which AU is bound,  any
statute, rule or regulation,  or any judgment,  decree, or order of any court or
agency binding on AU, or constitutes a default under any of the foregoing  which
has not been  waived or  consented  to in  writing by the  appropriate  party or
parties.

                  2.1.7 Litigation. To AU's knowledge, there is no action, suit,
proceeding,  inquiry,  or  investigation  by or before any  court,  governmental
agency, or public board or body pending or threatened against AU which (i) seeks
to prohibit,  restrain,  or enjoin the execution and delivery of this Agreement,
(ii)  questions  the  validity or  enforceability  of this  Agreement,  or (iii)
questions  the  power  or  authority  of  AU  to  carry  out  the   transactions
contemplated by, or to perform its obligations under, this Agreement.

                  2.1.8 Enforceability.  When duly executed, this Agreement will
be  enforceable  against AU according to its terms,  except as may be limited by
bankruptcy,  insolvency,  reorganization,  or other  laws  affecting  creditors'
rights generally as amended from time to time.

                  2.1.9  Effect  of  Certificate.  Any  certificate  signed by a
general partner of AU duly authorized to execute such  certificate and delivered
pursuant to this Agreement shall be deemed to be a  representation  and warranty
by AU as to the statements made therein.

                  2.1.10  Title;  Right to Use. AU has, or will have by the date
provided  herein for  Substantial  Completion  of the AU Facility,  title or the
right to use all  property  necessary  to  fulfill  its  obligations  under this
Agreement.

         2.2 GCICC's  Representations  and  Warranties.  As of the date  hereof,
GCICC hereby represents and warrants as follows:

                  2.2.1 Good  Standing.  GCICC is a corporation in good standing
under the laws of the State of Alaska.

                  2.2.2  Authorization.  GCICC  has  full  corporate  power  and
authority  to carry on its  business  as now  conducted  and to enter  into this
Agreement.  The execution and delivery of this Agreement has been  authorized by
proper  corporate  action,  and this  Agreement  constitutes a valid and legally
binding obligation of GCICC.

                  2.2.3  Consent,  Approval.  Except  as may have  already  been
obtained, no consent or approval of any trustee or holder of any indebtedness or
obligation of GCICC, and no consent, approval, permission, authorization, order,
or license of any  governmental  authority,  is required to be obtained by GCICC
for the  execution  and delivery of this  Agreement or any other  instrument  or
agreement required of GCICC under this Agreement.


Fiber Exchange Agreement              6
<PAGE>
                  2.2.4 No  Insolvency.  GCICC is not  insolvent  as of the date
hereof.

                  2.2.5 No Defaults.  To its knowledge,  GCICC is not in default
nor has any event or circumstance  occurred which, but for the expiration of any
applicable  grace period or the giving of notice,  or both,  would  constitute a
default by GCICC under any material  agreement or instrument to which GCICC is a
party or by which GCICC is bound  which  default  would have a material  adverse
effect on GCICC's performance under this Agreement.

                  2.2.6  No  Conflicts  with  Other   Agreements.   Neither  the
execution  and  delivery  of  this  Agreement,   and  the  consummation  of  the
transactions  contemplated hereby, nor the fulfillment of or compliance with the
provisions hereto, materially conflicts with, violates, or breaches any charter,
bylaw, or stock provision of GCICC,  any of the material terms,  conditions,  or
provisions of any indenture,  instrument, or agreement to which GCICC is a party
or by which GCICC is bound, any statute,  rule or regulation,  or any decree, or
order of any court or agency  binding on GCICC,  or  constitutes a default under
any of the foregoing which has not been waived or consented to in writing by the
appropriate party or parties.

                  2.2.7 Litigation.  To GCICC's  knowledge,  there is no action,
suit, proceeding, inquiry, or investigation by or before any court, governmental
agency,  or public board or body pending or  threatened  against GCICC which (i)
seeks to  prohibit,  restrain,  or enjoin the  execution  and  delivery  of this
Agreement,  (ii) questions the validity or enforceability of this Agreement,  or
(iii)  questions  the power or authority of GCICC to carry out the  transactions
contemplated by, or to perform its obligations under, this Agreement.

                  2.2.8 Enforceability.  When duly executed, this Agreement will
be enforceable against GCICC according to its terms, except as may be limited by
bankruptcy,  insolvency,  reorganization,  or other  laws  affecting  creditors'
rights generally as amended from time to time.
                  2.2.9  Effect of  Certificate.  Any  certificate  signed by an
officer of GCICC duly  authorized  to execute  such  certificate  and  delivered
pursuant to this Agreement shall be deemed to be a  representation  and warranty
by GCICC as to the statements made therein.

                  2.2.10  Title;  Right to Use.  GCICC has,  or will have by the
date provided herein for Substantial  Completion of the GCICC Facility,  or will
have title or the right to use all property necessary to fulfill its obligations
under this Agreement.

         2.3 GCI Cable's Representations and Warranties.  As of the date hereof,
GCI Cable hereby represents and warrants as follows:

                  2.3.1  Good  Standing.  GCI  Cable  is a  corporation  in good
standing under the laws of the State of Alaska.

                  2.3.2  Authorization.  GCI Cable has full corporate  power and
authority  to carry 


Fiber Exchange Agreement              7
<PAGE>
on its business as now conducted and to enter into this Agreement. The execution
and delivery of this Agreement has been authorized by proper  corporate  action,
and this  Agreement  constitutes a valid and legally  binding  obligation of GCI
Cable.

                  2.3.3  Consent,  Approval.  Except  as may have  already  been
obtained, no consent or approval of any trustee or holder of any indebtedness or
obligation of GCI Cable, and no consent,  approval,  permission,  authorization,
order, or license of any governmental  authority,  is required to be obtained by
GCI  Cable  for the  execution  and  delivery  of this  Agreement  or any  other
instrument or agreement required of GCI Cable under this Agreement.

                  2.3.4 No Insolvency. GCI Cable is not insolvent as of the date
hereof.

                  2.3.5  No  Defaults.  To its  knowledge,  GCI  Cable is not in
default nor has any event or circumstance occurred which, but for the expiration
of any  applicable  grace  period  or the  giving  of  notice,  or  both,  would
constitute a default by GCI Cable under any material  agreement or instrument to
which GCI Cable is a party or by which GCI Cable is bound  which  default  would
have a material adverse effect on GCI Cable's performance under this Agreement.

                  2.3.6  No  Conflicts  with  Other   Agreements.   Neither  the
execution  and  delivery  of  this  Agreement,   and  the  consummation  of  the
transactions  contemplated hereby, nor the fulfillment of or compliance with the
provisions hereto, materially conflicts with, violates, or breaches any charter,
bylaw, or stock provision of GCI Cable,  any of the material terms,  conditions,
or provisions of any indenture, instrument, or agreement to which GCI Cable is a
party or by which GCI Cable is bound,  any statute,  rule or regulation,  or any
decree,  or order of any court or agency binding on GCI Cable,  or constitutes a
default under any of the foregoing  which has not been waived or consented to in
writing by the appropriate party or parties.

                  2.3.7  Litigation.  To  GCI  Cable's  knowledge,  there  is no
action,  suit,  proceeding,  inquiry,  or  investigation by or before any court,
governmental  agency, or public board or body pending or threatened  against GCI
Cable  which (i)  seeks to  prohibit,  restrain,  or enjoin  the  execution  and
delivery of this  Agreement,  (ii) questions the validity or  enforceability  of
this Agreement,  or (iii) questions the power or authority of GCI Cable to carry
out the transactions  contemplated by, or to perform its obligations under, this
Agreement.

                  2.3.8 Enforceability.  When duly executed, this Agreement will
be  enforceable  against  GCI Cable  according  to its  terms,  except as may be
limited by  bankruptcy,  insolvency,  reorganization,  or other  laws  affecting
creditors' rights generally as amended from time to time.

                  2.3.9  Effect of  Certificate.  Any  certificate  signed by an
officer of GCI Cable duly  authorized to execute such  certificate and delivered
pursuant to this Agreement shall be deemed to be a  representation  and warranty
by GCI Cable as to the statements made therein.


Fiber Exchange Agreement              8
<PAGE>
                  2.3.10 Title; Right to Use. GCI Cable has, or will have by the
date provided  herein for Substantial  Completion of the GCI Cable Facility,  or
will have  title or the  right to use all  property  necessary  to  fulfill  its
obligations under this Agreement.

3.       Exclusive Use of Dark Fiber; Grant of Certain Facilities.

         3.1 Grants of Exclusive  Use of Dark Fiber.  GCI Cable hereby grants to
AU the  exclusive  right to use Dark  Fibers in the GCI Cable  Facility,  and AU
hereby  grants  to GCI Cable the  exclusive  right to use Dark  Fibers in the AU
Facility, as described below and as set forth on Exhibit B hereto:

         -        Between SADC and Glen Alps,  GCI Cable shall provide  16fibers
                  to AU. (1)
         -        Between  AT&T's  Anchorage POP and Glen Alps,  GCI Cable shall
                  provide 10 fibers to AU.
         -        Between SADC and AT&T's Anchorage POP, GCI Cable shall provide
                  10 fibers to AU.
         -        Between Kanas's NPMS and FDC, GCI Cable shall provide 8 fibers
                  to AU.
         -        Between FDC and AT&T's  Fairbanks POP, GCI Cable shall provide
                  4 fibers to AU on each side of a diversely routed ring.
         -        Between Glen Alps and Whittier,  AU shall provide 18 fibers to
                  GCI Cable.
         -        Between Whittier and Valdez, AU shall provide 10 fibers to GCI
                  Cable.
         -        Between Valdez and Kanas's PSMS, AU shall provide 22 fibers to
                  GCI Cable.

The specific  locations and points of termination of the AU Fibers are described
in Exhibit B-1.  The specific  locations  and points of  termination  of the GCI
Cable Fibers are  described  in Exhibit C. The rights to  exclusive  use granted
under this Section  shall  commence on the  Exchange  Date,  and shall  continue
thereafter until the end of the Term of this Agreement.

         3.2 Exchange Date.  Each party's right granted under Section 3.1 to the
exclusive use of Dark Fiber in the other party's facility shall each commence on
the  Exchange  Date,  which  shall  occur not later than  January  1, 1999.  The
Exchange Date is the first  Business Day after each of the following  conditions
has been satisfied:

                  3.2.1 Substantial  Completion of AU Facility. AU has given GCI
Cable written notice that the AU Facility is Substantially Complete.

                  3.2.2 Substantial  Completion of GCI Cable Facility. GCI Cable
has  given AU  written  notice  that the GCI  Cable  Facility  is  Substantially
Complete.

-------------------
     1 This  number is  inclusive  of the 6 fibers to be provided to Kanas under
that Fiber  Exchange  Agreement  dated as of November 21, 1997 between Kanas and
GCICC, which Agreement GCICC assigned to AU on January 6, 1998.


Fiber Exchange Agreement              9
<PAGE>
Notwithstanding any other provision of this Agreement, the requirement that each
of the foregoing conditions occur before the Exchange Date shall not be affected
by any act or event of Force Majeure.

         3.3 Notice of Substantial  Completion.  GCI Cable shall give AU written
notice of the  Substantial  Completion of the GCI Cable Facility within ten (10)
days after its Substantial Completion. AU shall give GCI Cable written notice of
the  Substantial  Completion  of the AU Facility  within ten (10) days after its
Substantial  Completion.  Each party  shall  have ten (10) days to perform  such
reasonable  testing  as it may  desire,  prior to its  acceptance  of the  other
party's Facility.

         3.4 Title to  Facilities.  Notwithstanding  the grants of exclusive use
under Section 3.1, each party shall retain title to all of its Facility,  except
as set forth in Section 3.5.

         3.5  Grant of  Certain  Facilities.  Notwithstanding  Section  3.4,  in
consideration  of the overall  connectivity  granted  under this  Agreement,  AU
hereby grants title to GCI Cable to those certain facilities  described as "new"
on  Exhibit  E hereto.  AU agrees to  execute  any  documentation  necessary  or
desirable to evidence such transfer, including a bill of sale.

4.       Electronic Equipment; Interconnection.

         4.1  Installation of Electronic  Equipment on AU Fibers.  AU shall bear
the  expense  of  acquiring  and  installing  its own OLT,  repeater  and  other
electronic  equipment to operate the AU Fibers.  Subject to AU's  obtaining  any
required third party consent, GCICC and GCI Cable, as applicable, shall allow AU
reasonable  access  to the  GCICC  Facility  and  the  GCI  Cable  Facility,  as
applicable, for the purpose of installing AU's electronic equipment.

         4.2 Installation of Electronic Equipment on GCI Cable Fibers. GCI Cable
shall bear the expense of acquiring  and  installing  its own OLT,  repeater and
other  electronic  equipment  to operate  the GCI Cable  Fibers.  Subject to GCI
Cable's  obtaining any required  third party  consent,  AU shall allow GCI Cable
reasonable  access to the AU Facility for the purpose of installing  GCI Cable's
electronic equipment.

         4.3 Space and Power on AU Facility. AU shall charge GCICC for the space
and power for GCICC's electronic  equipment  installed on the AU Facility.  Such
space and power shall be charged at $8.50 per square foot per month,  which rate
shall be annually  adjusted at an amount equal to the  percentage  increase,  if
any, in the U.S.  Consumer Price Index,  as published by the U.S.  Department of
Labor,  Bureau of Labor  Statistics  for  Anchorage,  Alaska using the preceding
December  as the base  period.  The  rate  shall  not be  decreased  because  of
decreases in the Consumer Price Index. The locations at which GCICC will require
space and power  for such  electronic  equipment,  and  GCICC's  space and power
requirements  for 


Fiber Exchange Agreement              10
<PAGE>
each  location,  are specified in Exhibit D. Upon  request,  but subject to AU's
sole  approval,  which  shall not be  reasonably  withheld,  GCICC  may  request
modifications to Exhibit D.

         4.4 Space and Power on GCICC  Facility.  GCICC shall  charge AU for the
space  and power for AU's  electronic  equipment  installed  to  operate  the AU
Fibers.  Such space and power  shall be  charged  at $8.50 per  square  foot per
month,  which  rate  shall  be  annually  adjusted  at an  amount  equal  to the
percentage  increase,  if any, in the U.S. Consumer Price Index, as published by
the U.S. Department of Labor,  Bureau of Labor Statistics for Anchorage,  Alaska
using the preceding December as the base period. The rate shall not be decreased
because of decreases in the Consumer Price Index. The locations at which AU will
require space and power for such electronic equipment,  and AU's space and power
requirements  for each location,  are specified in Exhibit D. Upon request,  but
subject to GCICC's sole approval,  which shall not be unreasonably  withheld, AU
may request modifications to Exhibit D.

         4.5  Modifications  of  Electronic  Equipment.  Each party,  at its own
expense,  may modify or replace electronic equipment that it has installed under
Sections 4.1 or 4.2,  subject to any limitations  imposed by the space and power
that the other party is obligated to provide for the equipment at that location.
If  a  party  requires  an  increase  in  space  or  power  to  accommodate  the
modification  or replacement  of its  equipment,  it shall notify the applicable
party in writing of its  increased  requirements.  The  recipient  of the notice
shall  use its best  efforts  to  accommodate  the  request  subject  to its own
operating  requirements  and contractual  arrangements  with third parties.  The
recipient of the request need not make any  modifications  to its  facilities to
accommodate the request until the requesting  party has agreed in writing to pay
the cost thereof.

         4.6  Relocation of  Electronic  Equipment.  AU may relocate  electronic
equipment installed for the operation of the GCI Cable Fibers, and GCI Cable may
relocate  electronic  equipment  installed  for the  operation of the AU Fibers,
provided that, before the relocation:

         A.       The  relocating  party  gives  forty-five  (45) days'  written
                  notice to the applicable party of the relocation;

         B.       The   relocating   party   demonstrates   to  the   reasonable
                  satisfaction and written approval of the applicable party that
                  the  relocation  will  not  adversely  affect  either  (i) the
                  quality   or   reliability    of   the   applicable    party's
                  telecommunications  service,  or (ii) access by the applicable
                  party for maintenance of its equipment; and

         C.       The relocating party has agreed in writing to pay all costs of
                  relocating the applicable party's equipment.

The  relocating  party shall  conduct the  relocation  in a manner that does not
interrupt or degrade the quality of the  applicable  party's  telecommunications
service,  in  accordance  with  the  standards  in that  certain  Operation  and
Maintenance  Contract dated  effective as of January


Fiber Exchange Agreement              11
<PAGE>
   , 1998, between AU and GCICC ("Operation and Maintenance Contract").

         4.7 Electronic  Equipment at Additional  Locations.  AU may, at its own
expense,  install  electronic  equipment at locations on the GCI Cable  Facility
and/or GCICC Facility other than the locations  described in Exhibit B, provided
that any such location is one where GCI Cable or GCICC,  as applicable,  already
maintains its own  electronic  equipment,  and AU shall be  responsible  for all
costs and arrangements required to accommodate its equipment. GCI Cable or GCICC
may, at its own expense, respectively, install electronic equipment at locations
on the AU Facility  other than the  locations  described in Exhibit B,  provided
that any such location is one where AU has ready access to the GCI Cable Fibers,
and GCI Cable or GCICC,  as applicable,  shall be responsible  for all costs and
arrangements required to accommodate its equipment.

         4.8      Interconnection with Other Telecommunications Facilities.

                  4.8.1  Interconnection  by GCI Cable.  Subject to GCI  Cable's
obtaining any required third party  consent,  GCI Cable may, at its own expense,
connect  the GCI  Cable  Fibers  with  other  telecommunications  facilities  at
intermediate  points on the AU Facility.  AU shall have the right to approve how
such work is done,  but shall  have no  obligations,  and shall be subject to no
expense, with respect to the interconnection.

                  4.8.2  Interconnection  by AU.  Subject to AU's  obtaining any
required third party consent, AU may, at its own expense,  connect the AU Fibers
with other telecommunications facilities at intermediate points on the GCI Cable
Facility  and/or the GCICC Facility.  GCI Cable and GCICC, as applicable,  shall
have the right to approve how such work is done,  but each  respectively,  shall
have no  obligations,  and shall be subject to no expense,  with  respect to the
interconnection.

5.       Maintenance; Risk of Loss.

         5.1      Electronic Equipment.

                  5.1.1  Maintenance.  Each  party  shall  provide,  at its  own
expense, for the routine and non-routine maintenance of the electronic equipment
that it has caused to be installed for its use under Section 4.

                  5.1.2 Risk of Loss.  Each party  shall bear the risk of damage
or loss to the  electronic  equipment that it has caused to be installed for its
use under Section 4, except that each other party shall be  responsible  to such
loss or damage that is caused by its own negligence or intentional misconduct.

         5.2      Fiber.


Fiber Exchange Agreement              12
<PAGE>
                  5.2.1  Maintenance.  Each party shall maintain its Facility in
accordance  with the standards in the Operation and Maintenance  Contract.  Each
party  shall bear all  operations  and  maintenance  costs  associated  with its
Facility,  subject  to the  terms of this  Agreement  and of the  Operation  and
Maintenance  Contract.  Such  operations  and  maintenance  costs shall  include
without limitation all labor, training, contracts, materials, transportation and
all other related maintenance expenses.

                  5.2.2 Risk of Loss.  Each party  shall bear the risk of damage
or loss to its Facility,  except that each other party shall be responsible  for
such  loss  or  damage  that is  caused  by its own  negligence  or  intentional
misconduct.

         5.3 Access for  Equipment  Maintenance.  Subject to AU's  obtaining any
required third party consent, GCI Cable and GCICC, as applicable, shall grant AU
reasonable   access  to  the  GCI  Cable   Facility  and  the  GCICC   Facility,
respectively, for the purpose of maintaining AU's electronic equipment on the AU
Fibers.  Subject to GCI  Cable's  and  GCICC's,  as  applicable,  obtaining  any
required third party consent,  AU shall grant GCI Cable reasonable access to the
AU Facility for the purpose of maintaining GCI Cable's  electronic  equipment on
the GCI Cable Fibers.

6. Access to Facilities. Each party understands that each other party's Facility
may be located on private  property of  rights-of-way  to which the former party
presently  has no right of  access.  Each  party  understands  that it is solely
responsible for obtaining such access from third parties as may be necessary for
it to  install,  operate,  maintain,  remove,  repair or replace  its  equipment
located on another  party's  Facility.  Each party will use its best  efforts to
assist each other party in obtaining  such access,  but no party is obligated to
incur any expense or liability in providing  such  assistance.  Each party shall
bear all costs of complying with conditions required by third parties for access
to each other party's Facility.

7. Destruction/Restoration.

         7.1 Total or Partial Destruction; Obligation to Restore. If, during the
Term,  any party's  Facility is totally or partially  destroyed,  rendering  the
Facility totally or partially  inaccessible or unusable, the party that owns the
Facility  shall restore the Facility to  substantially  the same condition as it
was in immediately before destruction,  except as provided in Sections 7.1.1 and
7.1.2.

                  7.1.1  Excessive Cost to Restore.  If the cost of repairing or
restoring the Facility,  net of any available  insurance proceeds not reduced by
applicable  deductibles and  coinsurance,  exceeds ten percent (10%) of the then
replacement cost of the Facility,  the party that owns the Facility can elect to
(i)  restore  the  Facility  as set  forth in  Section  7.1 or (ii)  provide  an
equivalent, alternative facility.

                  7.1.2 Restoration Contrary to Law. If the existing laws do not
permit the  


Fiber Exchange Agreement              13
<PAGE>
restoration, any party can terminate this Agreement immediately by giving notice
to the other party.

8.       Condemnation.

         8.1 Rights and Obligations of Parties  Governed by this Agreement.  If,
during  the  Term,  there  is any  taking  of all or any part of a  Facility  by
Condemnation,  the rights and  obligations  of the parties  shall be  determined
pursuant to this Section 8.

         8.2 Total Taking.  If the Premises are totally  taken by  Condemnation,
this Agreement shall terminate on the Date of Taking.

         8.3  Partial  Taking.  If  any  portion  of  a  Facility  is  taken  by
Condemnation,  this Agreement shall remain in effect,  except that any party may
elect to terminate  this  Agreement if the remaining  portion of the Facility is
rendered unsuitable for that party's continued use of the Facility.

         8.4  Payment of Award.  The Award  shall be payable to the owner of the
Condemned  Facility;  except that each other party shall  receive from the Award
the amount  attributable  to the value of its right under this  Agreement to use
any fibers in the Facility that were Condemned.

9. Regulatory  Matters.  Each party shall obtain all permits,  authorizations or
approvals that are required by any regulatory authority to operate its Facility.
By entering into this  Agreement,  no party waives any exclusion or exemption of
its facilities or services from common carrier or public utility regulation. The
parties  will  cooperate in obtaining  any  required  governmental  approvals or
consents.

10. Default.

         10.1 Events of Default.  The  occurrence of any of the following  shall
constitute a Default under this Agreement:

                  10.1.1  Payment  Default.  Any party fails to pay when due any
sum of money owed to another , and such failure continues for more than ten (10)
Business Days after notice from the applicable party;

                  10.1.2 Failure to Perform. Any party fails to observe, perform
and keep the  covenants,  agreements,  provisions,  stipulations  and conditions
herein  contained to be observed,  performed and kept by such party and persists
in such failure after thirty (30) days' written  notice by the party  requesting
that such party  remedy,  correct,  desist or comply (or if any such  failure to
comply would  reasonably  require more than thirty (30) days to rectify,  unless
such  party  commences  a cure  within the  thirty  (30) day  notice  period and
thereafter promptly,  


Fiber Exchange Agreement              14
<PAGE>
effectively and continuously proceeds with the cure of the failure to comply);

                  10.1.3  Breach  of  Representations  or  Warranties.   If  any
representation  or warranty by a party  contained in this  Agreement is false in
any  material  respect as of the date of the making or  furnishing  thereof  and
would have a material adverse effect on another party;

                  10.1.4 Insolvency,  Bankruptcy. If a party shall (i) apply for
or consent to the  appointment  of a receiver,  trustee or liquidator  (or other
officer having powers,  under  applicable  law,  similar to those of a receiver,
trustee or liquidator) of it or of all or the major portion of its assets,  (ii)
be unable,  or admit in writing its inability,  to pay its debts as they mature,
(iii)  make  a  general  assignment  for  the  benefit  of  creditors,  (iv)  be
adjudicated  a  bankrupt  or  insolvent  or  (v)  institute  proceedings  to  be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
on  insolvency  proceedings  against  it, or file a  petition  or an answer or a
consent seeking reorganization or relief under any bankruptcy, reorganization or
insolvency  law of any  jurisdiction,  or any other law analogous in purpose and
effect,  or  consent  to  the  filing  of any  such  petition  or  the  material
allegations thereof, or corporate action shall be taken by it for the purpose of
effecting any of the foregoing; or

                  10.1.5 Order Appointing  Receiver,  Trustee or Liquidator.  If
any  order,  judgment  or decree  shall be  entered,  without  the  application,
approval  or  consent  of a  party,  by any  court  of  competent  jurisdiction,
approving  a  petition  seeking  reorganization  of the  party or  appointing  a
receiver,   trustee  or  liquidator  (or  other  officer  having  powers,  under
applicable law, similar to those of a receiver,  trustee or liquidator) of it or
of all or a major  portion of its  assets,  and such  order,  judgment or decree
shall continue  unstayed and in effect for any period of sixty (60)  consecutive
days.

         10.2 Remedies on Default.  Upon the occurrence and  continuation  of an
Event of Default,  any non-defaulting  party,  following thirty (30) days' prior
written  notice of such  Default to the  defaulting  party,  in  addition to all
remedies  available at law, may do any one or more of the following with respect
to the defaulting party:

                  10.2.1  Termination.  Terminate  this Agreement and the rights
created herein by giving notice of such election to the defaulting party.

                  10.2.2 Specific Performance.  Seek specific performance of any
term or provision of this Agreement.

                  10.2.3 Force  Majeure.  Except where this  Agreement  provides
otherwise,  if by reason of Force Majeure, a party is unable in whole or in part
to perform  its  obligations  under this  Agreement,  the party  shall not be in
default under this Agreement during the continuance of such inability.  However,
that  party  shall use all  reasonable  efforts  to remedy  with all  reasonable
dispatch the cause or causes of its failure to carry out its  obligations  under
this  


Fiber Exchange Agreement              15
<PAGE>
Agreement;  provided  that  the  settlement  of  strikes,  lockouts,  and  other
industrial  disturbances shall be entirely within the discretion of the party or
its contractors, as the case may be, and the party and its contractors shall not
be  required  to make  settlement  of  strikes,  lockouts,  or other  industrial
disturbances  by acceding to demands of opposing  parties when such course is in
the judgment of the party unfavorable to it.

                  10.2.4 No Remedy Exclusive. No remedy herein conferred upon or
reserved to a party is intended to be exclusive of any other available remedy or
remedies  but each and every such  remedy  shall be  cumulative  and shall be in
addition to every other remedy  herein or now or  hereafter  existing at law, in
equity  or by  statute.  No delay or  omission  to  exercise  any right or power
accruing  upon an Event or Default shall impair any such right or power ro shall
be construed to be a waiver thereof (unless expressly waived by AU, GCI Cable or
GCICC, as applicable), but any such right or power may be exercised from time to
time and as often as may be  deemed  expedient.  Notwithstanding  the  forgoing,
under  no  circumstances  may any  party  recover  incidental  or  consequential
damages, or damages for loss of business, under this Agreement.

Security Interest.

         11.1 Security  Interest in Favor of AU. As security for the performance
by GCI  Cable of its  obligations  hereunder,  GCI Cable  hereby  grants to AU a
security  interest  in all of its  right,  title and  interest  in the GCI Cable
Facility,  whether now existing or hereafter constructed or acquired. If for any
reason AU shall at any time be  deprived  of the  exclusive  right to use the AU
Fibers as contemplated by this Agreement, then in addition to the other remedies
provided for in Section 10.2 hereof, AU shall be entitled to exercise any of the
remedies provided to secured creditors under the Uniform Commercial Code.

         11.2  Security  Interest  in Favor of GCI Cable.  As  security  for the
performance by AU of its obligations hereunder,  AU hereby grants to GCI Cable a
security  interest in all of its right,  title and  interest in the AU Facility,
whether now existing or hereafter constructed or acquired. If for any reason GCI
Cable shall at any time be deprived of the exclusive  right to use the GCI Cable
Fibers as contemplated by this Agreement, then in addition to the other remedies
provided for in Section 10.2 hereof, GCI Cable shall be entitled to exercise any
of the remedies as provided to secured  creditors  under the Uniform  Commercial
Code.

12.      Confidentiality; Media Relations.

         12.1  Confidentiality.  The  parties  agree  that  the  terms  of  this
Agreement, and information furnished by any party to each other in contemplation
or  pursuant  to  this  Agreement  (including,  without  limitation,   technical
specifications,  operating data and customer  information)  are confidential and
may not be disclosed without all applicable parties' written consent,  except as
may be  required by law or as  contemplated  by this  Agreement,  and except for
disclosure to the parties' applicable shareholders,  partners,  agents, advisors
and  financial   


Fiber Exchange Agreement              16
<PAGE>
institutions.  Notwithstanding  the foregoing,  the parties acknowledge that the
general terms and  conditions of this  Agreement are required to be disclosed in
reports, filings and offering documents under state and federal securities laws.

         12.2 Media  Relations.  The  parties  shall agree on the content of all
releases to, and conferences  with, the news media concerning the subject matter
of this  Agreement;  provided that each party shall  approve or disapprove  each
other party's  release within three (3) days after receipt or it shall be deemed
approved.

13.      Term; Duties Upon Termination.

         13.1 Term.  Unless  earlier  terminated  under the terms  hereof,  this
Agreement  shall  continue  in effect  for a period of  twenty-five  (25)  years
commencing on the Effective Date hereof.  The Term shall continue  automatically
thereafter until the end of the last of three subsequent  consecutive periods of
five (5) years each,  unless a written notice of  termination  has been given by
any party hereto thirty (30) days prior to the end of the then- applicable Term.

         13.2  Duties  upon  Termination.  Within  sixty  (60)  days  after  the
termination  of this  Agreement for any reason after the Exchange Date, (i) each
party shall remove its  electronic  equipment and other  personal  property from
each other party's  Facility,  and perform all restoration of each other party's
premises made necessary by the removal, and (ii) each party shall return in good
condition,  ordinary wear and tear excepted, each other party's premises that it
occupied in its use of fibers, space and/or power on the other party's Facility.

14.  Exhibits.  The  following  Exhibits  and  any  others  referred  to in this
Agreement as attached are incorporated in this Agreement in their entirety:

         Exhibit A:        Light Transmission Standards and Testing Procedure 
                           for Substantial Completion
         Exhibit B:        Exchange of Dark Fibers and Space and Power Between 
                           GCI Cable, GCICC, AU and Kanas
         Exhibit B-1:      Locations and Points of  Termination  of AU Fibers;  
                           Locations of Electronic  Equipment on AU Fibers
         Exhibit C:        Locations and Points of  Termination of GCI Cable 
                           Fibers;  Locations of Electronic  Equipment on GCI 
                           Cable Fibers
         Exhibit D:        AU Space and Power Requirements; GCICC Space and 
                           Power Requirements
         Exhibit E :       AU's Grant of Certain Facilities to  GCI Cable

15.      Miscellaneous.

         15.1 No  Implied  Waiver.  In the event  any  agreement,  covenant,  or
condition  


Fiber Exchange Agreement              17
<PAGE>
contained  in this  Agreement  should be  breached  by any party and  thereafter
waived by the applicable  party,  such waiver shall be limited to the particular
breach so waived  and shall not be deemed to waive any other  breach  hereunder.
Notwithstanding  any such waiver,  all the  provisions of this  Agreement  shall
remain in full force and effect.

         15.2  Successors in Interest.  Each party may,  upon written  notice to
each other,  assign its rights and delegate  its duties under this  Agreement to
any subsidiary,  affiliate or joint venture partner,  provided that the assignor
or its parent entity retains at least 50% ownership, or voting control, directly
or  indirectly,  of the assignee.  The foregoing  restrictions  on free transfer
shall  not  apply  following  an  uncured  Event of  Default  under  the  Credit
Agreement.  This Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto.

         15.3 Notices.  All statements,  notices or  communications  to be given
under the terms of this Agreement  shall be in writing and delivered by hand, or
sent by  certified  mail,  registered  mail or overnight  service,  with postage
prepaid and return receipt requested, and addressed as follows:

         If to AU:                     2550 Denali Street
                                       Suite 1000
                                       Anchorage, Alaska 99503
                                       Fax Number: (907) 265-5676
                                       Attention: Director of Finance

         If to GCI Cable:              5151 Fairbanks Street
                                       Anchorage, Alaska 99503
                                       Fax Number (907) 786-9270
                                       Attention:   Vice   President  &  General
                                       Manager
                                       Cable Television & Entertainment

         If to GCICC:                  2500 Denali Street
                                       Suite 1000
                                       Anchorage, Alaska 99503
                                       Fax Number: (907) 265-5676
                                       Attention: Senior Vice President &
                                       Chief Financial Officer

or at such other  address  as from time to time  designated  by notice  pursuant
hereto by the party  receiving  the notice.  The date of service of such notices
shall be the date such notices are  received or refused,  as the case may be, as
evidenced  by  addressee's  registry  or  certification  receipt.  Additionally,
notices  may be given by  telephone  facsimile  transmission,  provided  that an
original copy of said  transmission  shall be delivered to the addressee by hand
or by  nationally  utilized  overnight  delivery  services on the  business  day
following such transmission.  


Fiber Exchange Agreement              18
<PAGE>
Telephone facsimiles shall be deemed delivered on the date of such transmission,
with telephonic confirmation of their receipt by the recipient.

         15.4  Parties in  Interest.  Nothing  in this  Agreement  expressed  or
implied is intended or shall be  construed to confer upon any person,  firm,  or
corporation, other than the parties hereto, any right, remedy or claim, legal or
equitable,  under or by reason of this Agreement,  this Agreement being intended
to be and being for the sole and exclusive benefit of the parties hereto.

         15.5  Relationship of Parties.  Nothing in this Agreement  expressed or
implied is intended or shall be construed to establish any relationship  between
the parties other than that of independent contractors,  and neither party shall
be  considered  thereby  to  be  the  partner,   co-venturer  or  in  any  other
relationship with the other.

         15.6 Time of  Essence.  Time shall be of the  essence of each and every
term of this Agreement.

         15.7  Headings.   The  Section   headings   contained  herein  are  for
convenience  and  reference and are not intended to define or limit the scope of
any provision of this Agreement.

         15.8 Law Governing  Construction of Agreement.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Alaska.

         15.9  Exclusive  Forum and Venue.  Any actions or judicial  proceedings
arising out of this  Agreement  shall be filed and  prosecuted  in the  Superior
Court for the State of  Alaska,  Third  Judicial  District,  at  Anchorage.  The
parties hereto each affirmatively waive the right to trial by jury.

         15.10 Severability.  In the event any provision of this Agreement shall
be held invalid or  unenforceable by any court of competent  jurisdiction,  such
holding shall not invalidate or render unenforceable any other provision hereof.

         15.11 Integration and  Modification.  This document contains the entire
agreement   of  the   parties   hereto.   All   negotiations,   statements,   or
representations,  warranties, and assurances, whether oral or written, which are
in any way related to the subject matter of this Agreement,  and the performance
of each party hereto, are merged and integrated into the terms of this document.
This  Agreement may not be modified or amended except by a writing signed by all
parties  hereto,  and any proposed  amendment or  modification is without effect
until reduced to a writing signed by all parties.

         15.12 Additional Documents. The parties agree to execute any additional
documents  which  may be  necessary  in order to  effectuate  the  terms of this
Agreement.


Fiber Exchange Agreement              19
<PAGE>
         15.13 No Claims. No party shall have any claim, demand,  action or suit
against any other, its servants,  agents or employees for any injury,  including
injury  resulting  in death or loss of or damage to any  property,  suffered  or
sustained by it or its  servants,  agents or employees or by any other person or
corporation  which directly or indirectly  results from, arises out of or is, in
any way,  connected  with the use of the  System  by the  another  except to the
extent that such injury, loss or damage,  including injury resulting in death or
loss of or damage to property,  is due to the gross negligence of another party,
its servants, agents or employees.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]






Fiber Exchange Agreement              20
<PAGE>
         IN WITNESS WHEREOF,  the parties hereto, in consideration of the mutual
covenants set forth herein and intending to be legally  bound,  have caused this
Agreement to be executed and delivered as of the date first written above.


                                       GCI COMMUNICATION CORP.



                                       By:





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


                                       By:


                                       GCI CABLE, INC.



                                       By:




Fiber Exchange Agreement              21
<PAGE>
                                   EXHIBIT A
 Light Transmission Standards and Testing Procedure for Substantial Completion


I.       Testing Procedure

         1.       Ensure  that  all  fibers  to be  tested  have  been  properly
                  terminated.

         2.       Clean all connectors.

         3.       Turn on the power meter and light  source test  equipment  and
                  allow them to warm up and stabilize.

         4.       Before the facility  can be tested,  the power meter should be
                  calibrated to 0 dB as follows:

                  a) Using a test patch cord,  connect  the light  source to the
                     power meter.

                  b) Set the power meter to the dBm scale.

                  c) Make  sure  that  the  light  source  is on,  and  read the
                     received  optical  power at the  power  meter in dBm.  This
                     value  should be close to the light  source  manufacturer's
                     output power specification.

                  d) Set the power  meter to the dB scale and  adjust to 0.0 dB.
                     This 0-dB  calibration  will be used as the light  source's
                     reference power level.

                  e) Disconnect this test assembly but do not adjust or turn off
                     the power meter.

         5.       Disconnect  the existing  patch cord from the FDP for the link
                  under test.  Do not disturb the power  meter's zero  reference
                  calibration  performed in the previous step. Connect the light
                  source  using  the  test  patch  cord to one end of the  fiber
                  section and power meter  using a second  tested  patch cord to
                  the other end of the fiber section.

         6.       Ensure that the configuration is connected properly,  and turn
                  on the light  source.  Read the optical power meter and record
                  the optical power level.

         7. Repeat the procedure to test all fibers in the facility.


Fiber Exchange Agreement              22
<PAGE>
II.      Light Transmission Standards

Attenuation  on a fiber  shall be 0.30  dB/km on land  cables  and 0.22 dB/km on
undersea  cables.  Dispersion  on  land  cable  shall  be 18  ps/(nm)(km).  Both
attenuation and dispersion are specified for a nominal 1550 nm wavelength.

The estimated  Fiber Route  distances  between sites and calculated loss budgets
for the AU Facility are:

Site                         Miles          Kilometers        Loss Budget
----                         -----          ----------        -----------
Glen Alps to Whittier        52.0           83.7              25.1 dB
Whittier to Valdez           96.3           154.9             34.1 dB
Valdez to PSMS               10.0           16.1               4.8 dB
Norma Beach to SDC           tbd            tbd                0.3dB/km

The estimated  Fiber Route  distances  between sites and calculated loss budgets
for the GCI Cable Facility are:

Site                         Miles          Kilometers        Loss Budget
----                         -----          ----------        -----------
SADC to Glen Alps            16.4           26.4               7.9
AT&T Anchorage to Glen Alps  23.7           38.1              11.4
SADC to AT&T POP Anchorage   7.2            11.6               3.5
FDC to NPMS                  tbd            tbd               0.3dB/km
AT&T POP Fairbanks to NPMS   tbd            tbd               0.3dB/km
FDC to AT&T POP Fairbanks    tbd            tbd               0.3dB/km


Fiber Exchange Agreement              23
<PAGE>
                                  EXHIBIT B-1
                Locations and Points of Termination of AU Fibers
                 Locations of Electronic Equipment on AU Fibers

1. Location of AU Fibers shall be at the following facilities:  Glen Alps, SADC,
FDC, and AT&T POPs in Anchorage and Fairbanks.

2. Point of Termination of AU Fibers shall be at the fiber termination panel.

3.  Locations of  electronic  equipment  on AU Fibers shall be at the  following
facilities: SADC, FDC, and AT&T POPs in Anchorage and Fairbanks.


Fiber Exchange Agreement              24
<PAGE>
                                   EXHIBIT C
            Locations and Points of Termination of GCI Cable Fibers
             Locations of Electronic Equipment on GCI Cable Fibers


1. Location of GCI Cable Fibers shall be at the following facilities:  Whittier,
Valdez and PSMS.

2. Point of  Termination  of GCI Cable Fibers shall be at the fiber  termination
panels.

3.  Locations  of  electronic  equipment  on GCI  Cable  Fibers  shall be at the
following facilities: Whittier, Valdez, and PSMS.


Fiber Exchange Agreement              25
<PAGE>
                                   EXHIBIT D
                        AU Space and Power Requirements

Space Requirements:       SADC             (2) 23-inch wide equipment racks
                          FDC              (2) 23-inch wide equipment racks
                          AT&T POPs        To be negotiated

Power Requirements:       SADC             1250 Watts @ 48 Volts DC
                          FDC              1250 Watts @ 48 Volts DC
                          AT&T POPs        To be negotiated


                       GCICC Space and Power Requirements

Space Requirements:       Whittier         (2) 23-inch wide equipment racks
                          Valdez           (2) 23-inch wide equipment racks
                          PSMS             (1) 23-inch wide equipment rack

Power Requirements:       Whittier         1250 Watts @ 48 Volts DC
                          Valdez           1250 Watts @ 48 Volts DC
                          PSMS             750 Watts @ 48 Volts DC


Fiber Exchange Agreement              26
<PAGE>
                                   EXHIBIT E
                 AU's Grant of Certain Facilities to GCI Cable

         In accordance with the attached key map and related narrative  (below),
Alaska  United will utilize  fibers in the  existing and proposed  GCI-Anchorage
Metropolitan Area Network ("MAN") commencing from Glen Alps.

Location                    Existing/New      No. of Fibers     Buffer Tube
--------                    ------------      -------------     -----------
                                              (each)            (assigned)

A. Glen Alps
         to                     New                10                5/6
B. O'Malley Wire Center
         to                     Existing           10                5
C. Node 61 - O'Malley Road
         to                     New                10                5/6
D. Tudor & Bragaw OCC
         to                     Existing           10                8
E. AT&T Alascom
         to                     Existing           10                8
F. GCI North (ADC)
         to                     Existing           10                8
G. GCI South (SADC)
         to                     Existing           16                5
H. Rabbit Creek Wire Center
         to                     Existing           16                5
I.  Node 72 - Birch Road OCC
         to                     New                16                5/6
A. Glen Alps


Fiber Exchange Agreement              27
<PAGE>
General Contractor Agreement
                                    EXHIBIT V

                               GENERAL CONTRACTOR
                                    AGREEMENT


         THIS GENERAL CONTRACTOR AGREEMENT ("Agreement"),  dated effective as of
the 27th day of January,  1998 ("Effective  Date"), is between the ALASKA UNITED
FIBER SYSTEM  PARTNERSHIP,  an Alaska general  partnership,  2550 Denali Street,
Suite 1000,  Anchorage,  Alaska 99503  ("AU") and GCI  COMMUNICATION  CORP.,  an
Alaska  corporation,  2550 Denali Street,  Suite 1000,  Anchorage,  Alaska 99503
("GCICC").

         WHEREAS,  AU desires that GCICC act as the general  contractor  for the
construction of the terrestrial portions of that fiber optic  telecommunications
cable network which will be comprised of:

         (i)      the network  connecting the Petro Star Metering Station,  Glen
                  Alps,  Whittier,  Valdez, and Lena Point, Alaska, and Edmonds,
                  through to the Seattle  Distribution Center,  Washington,  and
                  other intermediate regeneration sites;

         (ii)     the  fiber to be  acquired  pursuant  to that  Fiber  Exchange
                  Agreement  dated  as  of  November  21,  1997,  between  Kanas
                  Telecom,  Inc.  ("Kanas"),  and  GCICC,  which  Agreement  was
                  assigned by GCICC to AU on January 6, 1998; and

         (iii)    the  fiber to be  acquired  pursuant  to that  Fiber  Exchange
                  Agreement dated as of January 27th,  1998,  between GCI Cable,
                  Inc., GCICC and AU;

collectively, with the Work described below, to be known as the "System";

         WITNESSETH,   that  in   consideration  of  the  mutual  covenants  and
agreements hereinafter contained, the parties hereto mutually covenant and agree
as follows:

         1.  CONSTRUCTION.  GCICC shall  construct  those portions of the System
described  in the scope of work  attached  as  Schedule  I and the  Gantt  chart
attached  thereto as Attachment 2 ("Work") and in material  conformity with AU's
budget for the Work, except to the extent specifically indicated on Attachment 2
to be the responsibility of others.

         2.       COMMENCEMENT DATE AND SUBSTANTIAL COMPLETION.



General Contractor Agreement             1
<PAGE>
                  2.1 The  commencement  date for  construction of the System is
the Effective Date.

                  2.2 GCICC shall achieve  Substantial  Completion of the entire
Work not later than December 31, 1998. "Substantial Completion" shall mean ready
to be placed  into  service,  following  satisfactory  completion  of the System
commissioning and acceptance tests set forth in Schedule II.

         3. PAYMENT TERMS. In consideration of the services to be provided under
this  Agreement,  AU shall pay to GCICC the  amount of GCICC's  direct,  actual,
necessary and reasonable  costs incurred in connection with the  construction of
the System,  plus GCICC's  general and  administrative  overhead costs which are
allocable to the  construction  of the System,  which  overhead  costs shall not
exceed five (5%) percent of the direct costs ("Contract Sum").

         4.  PAYMENTS.  AU shall make payments on account of the Contract Sum to
GCICC as provided below:

                  4.1 The period  covered by each invoice  shall be one calendar
month ending on the last day of the month, or as follows:

                  4.2 AU shall pay all such  amounts  within  sixty (60) days of
its receipt of each of GCICC's invoices for such charges.

                  4.3  Each  invoice  shall be based  upon  the  invoiced  costs
submitted by GCICC.

         5.        WARRANTY.

                  5.1 GCICC warrants that the overall  performance of the System
(other  than the  portion of the System  constructed  by Tyco  Submarine  System
Limited) (the  "Terrestrial  System") shall be in accordance with the acceptance
standards  contemplated by Schedule II hereto,  and the Terrestrial System shall
be free from defects due to faulty design or engineering for a period of one (1)
year from the date of  Substantial  Completion  (the "Basic  Warranty  Period").
During  the  Basic  Warranty  Period,  GCICC  shall  make  good,  by  repair  or
replacement, at its sole cost and expense, any defects in the Terrestrial System
which may become  apparent or be discovered  due to faulty design or engineering
or any act,  negligence or omission by GCICC,  its agents,  or  representatives.
GCICC shall make every reasonable  effort to effect such repairs or replacements
in a timely  manner so as to minimize  the period of time that the System is out
of service.  If GCICC fails to timely make any required repair or replacement or
to make every reasonable effort to minimize  out-of-service  time, AU may repair
the System and collect the reasonable costs of such



General Contractor Agreement             2
<PAGE>
repair  from  GCICC.  However,  any  repair by AU shall not in any way  diminish
GCICC's warranty obligations hereunder.

                  5.2 With  respect to any portion of the Work  performed by any
subcontractor and any supplies,  materials or equipment obtained from any person
other than GCICC which are used in the Work or incorporated  in the System,  (i)
GCICC shall assign to AU any warranty provided by such third-party subcontractor
or vendor,  and (ii) if and to the extent that for any reason any such  warranty
is not assigned by GCICC to AU, then GCICC shall provide warranty  protection to
AU to the  same  extent,  on  such  terms  and for  such  period,  as each  such
third-party subcontractor or vendor provides warranty protection to GCICC.

         6. NOTICES. All statements, notices or communications to be given under
the terms of this  Agreement  shall be in writing and delivered by hand, or sent
by certified  mail,  registered  mail,  with postage  prepaid and return receipt
requested, or, overnight courier service, and addressed as follows:

         If to GCICC:                  2500 Denali Street
                                       Suite 1000
                                       Anchorage, Alaska 99503
                                       Fax Number: (907) 265-5676
                                       Attention: John M. Lowber,
                                       Senior Vice President &
                                       Chief Financial Officer

         If to AU:                     2550 Denali Street
                                       Suite 1000
                                       Anchorage, Alaska 99503
                                       Fax Number: (907) 265-5676
                                       Attention: Bruce L. Broquet,      
                                       Director of Finance

or at such other  address  as from time to time  designated  by notice  pursuant
hereto by the party  receiving  the notice.  The date of service of such notices
shall be the date such notices are  received or refused,  as the case may be, as
evidenced  by  addressee's  registry  or  certification  receipt.  Additionally,
notices  may be given by  telephone  facsimile  transmission,  provided  that an
original copy of said  transmission  shall be delivered to the addressee by hand
or by  nationally  utilized  overnight  delivery  services on the  business  day
following such transmission.  Telephone  facsimiles shall be deemed delivered on
the date of such transmission,  with telephonic confirmation of their receipt by
the recipient.



General Contractor Agreement             3
<PAGE>
         7. DEFAULT.  The occurrence of either of the following shall constitute
a Default under this Agreement:

                  7.1 AU fails to pay when due any  undisputed sum of money owed
to GCICC, and such failure  continues for more than ten (10) business days after
notice from GCICC to AU; or

                  7.2 GCICC  fails to observe,  perform and keep the  covenants,
agreements,  provisions,  stipulations  and  conditions  herein  contained to be
observed,  performed  and kept it and  persists in such  failure for thirty (30)
days after written notice by AU that GCICC remedy, correct, desist or comply (or
if any such  failure to comply  would  reasonably  require more than thirty (30)
days to rectify,  then GCICC does not commence a cure within the thirty (30) day
period and thereafter  promptly,  effectively and continuously  proceed with the
cure of the failure to comply).

         8. REMEDIES.  Upon a default by GCICC of its obligations  under Section
1, AU may,  at its  option,  assume,  perform  or pay  such  obligations  and/or
withhold  payment of invoices on the uncompleted or  unsatisfactory  Work. If AU
fails to pay any  undisputed  charges due under Section 3 within sixty (60) days
following the receipt of the invoice therefor, GCICC may, upon ten (10) business
days' written notice to AU, terminate this Agreement; provided, however, that AU
may cure the default prior to the end of the notice period.  Upon the occurrence
of a Default,  unless cured as provided  herein,  the  non-defaulting  party may
exercise  any and all  remedies  available  at law and/or in  equity,  including
termination  of this  Agreement,  following any  applicable  cure period if such
Default has not been timely cured.  Any exercise of one particular  remedy shall
not  bar  the  exercise  of  other  available  remedies,  the  remedies  of  the
non-defaulting party hereunder being cumulative rather than mutually exclusive.

         9. INDEMNIFICATION.  GCICC, at its expense, shall defend, indemnify and
hold harmless AU, its agents,  subcontractors  and employees against any and all
claims,  demands,  and  judgments  for  losses or  damages  to real or  tangible
property or for bodily injury or death to any person due to any act or omission,
arising out of, or in connection  with this Agreement to the extent such damage,
injury or death was caused by the negligence or willful misconduct of GCICC, its
subcontractors,  employees  or agents.  The  defense,  indemnification  and save
harmless  obligations  is  specifically  conditioned  on the  following:  (i) AU
providing prompt notification in writing of any such claim or demand; (ii) GCICC
having  control of the  defense of any such  action,  claim or demand and of all
negotiations  for its  settlement or  compromise;  and (iii) AU cooperating in a
reasonable  way to  facilitate  the  defense  of such  claim  or  demand  or the
negotiations for its settlement, provided however, that any failure to so notify
GCICC shall not relieve GCICC of its indemnity  obligations  hereunder except to
the extent GCICC's ability to defend such claim shall be prejudiced thereby.



General Contractor Agreement             4
<PAGE>
         10.  INSPECTION  RIGHT.  Throughout the term hereof,  AU shall have the
right to inspect the Work at any time and may require all necessary or desirable
corrections  to the Work so that it conforms to Section 1 of this  Agreement and
the requirements of the Credit and Security  Agreement dated as of January 27th,
1998, among AU as Borrower, 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 (as
amended,  supplemented,  or otherwise modified, renewed or replaced from time to
time, the "Credit Agreement").

         11.      MISCELLANEOUS.

                  11.1 NO CLAIMS. GCICC shall have no claim,  demand,  action or
suit against AU, its  servants,  agents or employees  for any injury,  including
injury  resulting  in death or loss of or damage to any  property,  suffered  or
sustained by it or its  servants,  agents or employees or by any other person or
corporation  which directly or indirectly  results from, arises out of or is, in
any way, connected with GCICC's construction of the System, except to the extent
that such injury, loss or damage, including injury resulting in death or loss of
or damage to  property,  is due to the gross  negligence  of AU,  its  servants,
agents or employees.

                  11.2 NO WAIVER. The failure of any party to enforce any of the
provisions of this  Agreement or the waiver thereof in any instance shall not be
construed as a general  waiver or  relinquishment  on its part of any provision,
and,  notwithstanding  such  failure  or  waiver,  all  the  provisions  of this
Agreement shall be and remain in full force and effect.

                  11.3  GOVERNING  LAW.  The  construction,  interpretation  and
performance  of this  Agreement  and all  causes of action  arising  out of this
Agreement  shall  be  governed  by the  laws  of the  State  of  Alaska  and any
applicable  federal  statutes.  Any  action  concerning  or  arising  from  this
Agreement,  in whole or in part, shall be brought and maintained in the Superior
Court of Alaska, Third Judicial District at Anchorage, Alaska.

                  11.4 ASSIGNMENTS.  GCICC shall not assign, transfer, convey or
part with the  whole or any  portion  of the  System or any  rights  and  duties
assumed  hereunder  during the term hereof  without AU's prior written  consent,
which consent  shall not be  unreasonably  withheld.  AU shall have the right to
freely  assign,  transfer,  convey or part with the whole or any  portion of the
System or any rights or duties  hereunder  without  the prior  consent of GCICC,
provided that GCICC's rights and  liabilities  under this Agreement shall not be
materially affected thereby.

                  11.5 BINDING  AGREEMENT.  This Agreement shall be binding upon
the parties hereto and upon their respective successors and assigns.



General Contractor Agreement             5
<PAGE>
                  11.6 WAIVERS,  AMENDMENTS AND  MODIFICATIONS.  No provision of
this  Agreement  shall be deemed  waived,  amended or modified  by either  party
unless such waiver,  amendment or  modification is in writing and signed by both
parties.

            [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]



General Contractor Agreement             6
<PAGE>
                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be executed as of the Effective Date.

ALASKA UNITED FIBER                         GCI COMMUNICATION CORP.
SYSTEM PARTNERSHIP
By: GCI Fiber Co., Inc.,
a General Partner and its
General Manager


By:                                         By:
Title:                                      Title:



General Contractor Agreement             7
<PAGE>
                                   SCHEDULE I
                                 SCOPE OF WORK
                                   [Attached]






General Contractor Agreement             8
<PAGE>
                           Alaska United Cable System


                                  Scope of Work
                                       for
                     Management, Engineering & Construction














CONTENTS:

       A.     General
       B.     Safety
       C.     Management
       D.     Engineering
       E.     Construction
       F.     Schedule
       G.     Attachment
<PAGE>
A.  GENERAL

1.0

This Specification outlines the requirement for the management,  engineering and
construction  deliverables to be provided by GCICC to AU, to complete the System
by Dec. 31, 1998.

2.0

Attachment 1 describes the Alaska United OC-48 SONET System.

3.0

The  maintenance  and operation  activities  are addressed in that Operation and
Maintenance Contract dated January 27th, 1998 between the parties hereto.

4.0

Management of AU includes all services  required to ensure the  construction  is
coordinated,  controlled,  recorded and  contrived  in an  effective  and timely
manner to ensure the System is provided to AU in a secure manner.

5.0

Engineering of AU includes all System design,  interface  issues,  and equipment
specifications.  System test criteria and compliance to this criteria is also an
engineering function.

6.0

Construction  includes  all  outside  plant  activities,  building  of  required
structures,  installation  of all auxiliary  equipment,  securing of materials &
equipment, and the installation of all required equipment.

B.  SAFETY

"NO JOB IS SO IMPORTANT AND NO SERVICE SO URGENT THAT WE CANNOT TAKE THE TIME TO
PERFORM OUR WORK SAFELY."

All  work  operations  of GCICC  and of all  subcontractors  shall be  carefully
planned,  organized, and controlled to reduce hazardous working conditions to an
absolute minimum.

Adequate  protection  in the form of  warning  signs,  barricades,  flagmen,  or
otherwise required by local ordinances shall be provided to minimize the hazards
of injury to personnel and property.



Contractor Agreement         Page 2 of 10
<PAGE>
All equipment and building  designs shall be  constructed  an design within OSHA
standards  for  safety.  Local  environmental  concerns  will be included in all
design and engineering considerations.

C.  MANAGEMENT.  GCICC shall  provide all of the following  management  services
under this Agreement:

1.0

Acquire all permits and closely  monitor all  right-of-ways  to ensure  securing
them  in  a  timely  manner.   Coordinate  between  obtaining  all  permits  and
construction activities. Employ subject matter expertise through subcontracts to
David  Evans  and  Associates  Inc.  and  New  Horizons  Telecom  Inc.  Organize
subcontractors to most effectively utilize their resources.

-    David Evans and Associates  environmental permitting services from undersea
     route to cable landing point based on DEA Scope of Work documents  assuming
     all four  landing  sites  are  included.  DEA is also  responsible  for ROW
     acquisition,  beach to building site and  including  building site at Norma
     Beach.
-    New Horizons  Telecom Inc.  ("NHTI") cable landing  station parcel surveys,
     Juneau, Valdez, Whittier

-    NHTI ROW acquisition, beach to building site, Juneau, Valdez, & Whittier

-    NHTI  Engineering  and Design  Package  for Beach  Manhole  and Cable Duct,
     Juneau, Valdez, & Whittier

-    DEA Engineering and Design Package for Beach Manhole and Cable Duct,  Norma
     Beach site.

-    Misc.   professional  land  and  title  research  services   primarily  for
     pipeline-route sites.

2.0

Oversight of the Tyco Submarine Systems Ltd. ("TSSL") Supply Contract dated July
11, 1997 ("Supply  Contract"),  as amended by the Contract Variation No. 1 dated
effective as of December 1, 1997, and milestone scheduling thereunder, including
all performance and acceptance tests thereunder.  Quality  assurance  monitoring
and  recording  program with be conducted.  Quarterly  meeting will be scheduled
with TSSL to review status and address any concerns.

3.0

Maintain System schedule and plan of work to ensure deponent tasks are completed
as scheduled.  Identify all critical path tasks and closely  manage to avoid any
program delay.



Contractor Agreement         Page 3 of 10
<PAGE>
4.0

Supervision   and   oversight  of  all  outside   plant   activities,   building
construction,  submarine cable  installation,  equipment  installation and fiber
installation.  Maintain records of all installation and construction  activities
and quality assurance.

5.0

Conduct all accounting and account payable  functions to contracted and approved
vendor and suppliers.

6.0

Maintain  financial  oversight  of  project  relative  to terms  and  conditions
pursuant to AU credit agreements. Maintain communications and documentation flow
with System lenders.

D.  ENGINEERING. GCICC shall:

1.0

Design the System to be a complete OC-48 SONET System between the four points of
presence in Fairbanks,  Anchorage,  Juneau, and Seattle. All telephony equipment
not  provided in the Supply  Contract  will be  engineered,  ordered,  received,
staged and installed by GCICC.  In general,  Lucent  FT-2000  terminals  will be
utilized throughout the System.

2.0

Ensure  interface  between  the wet plant and dry plant is  engineered  to allow
design  capacity and SONET  structure  throughout the System.  Review the Supply
Contract and design to match the remainder of the System network and established
effective SONET visibility throughout the System.

3.0

Ensure a thorough submarine route study and survey are conducted  utilizing TSSL
as  prime  subcontractor  to  perform  survey  activities.   Review  all  survey
information  and ensure  routing  provides for safe and secure  placement of the
cable and cable  types  produced  by TSSL  conform  to the  seafloor  conditions
encountered.

-    Desktop Study of preliminary undersea cable route and landings at Whittier,
     Lena Point, and Puget Sound

-    Marine Survey during fourth quarter 1996, to determine  exact cable routing
     and to minimize external aggressions and costs

-    Desktop  Study of  preliminary  Whittier to Valdez  cable route and landing
     sites

-    Marine Survey  during third quarter 1997, to determine  exact cable routing
     between Whittier and Valdez



Contractor Agreement         Page 4 of 10
<PAGE>
-    Marine Survey between Norma Beach and previous survey

-    Additional  Marine Survey within Puget Sound and at the Norma Beach landing
     site

4.0

Develop test and acceptance  criteria for the System and perform these tests for
the  acceptance of the System.  All tests shall be recorded and  documented  for
future baseline  comparisons.  The System is to operate at satisfactory  meeting
standard transmission performance of SONET network,  including error performance
over time, automatic protection  switching,  and high network visibility through
embedded overheads.

5.0

Conduct  installation tests as components of the System are installed.  Commence
component repair or change out as needed. Document all tests for future baseline
comparisons.  An  Engineer  will  be  on  site  coordinating  installations  and
inspecting installation to ensure installation meets GCICC standards.

6.0

Engineer and design all buildings and structures.  The structures will be design
to withstand the rigorous  environment for the System's life span. All buildings
shall have backup emergency power systems  including battery plant and generator
set with automatic switching capabilities.

E.  CONSTRUCTION GCICC shall:
1.0  Cable Landing Stations

Construct  cable  landing  stations  consisting  of  block  building,   concrete
foundation, site and parking improvements, ground field, chain link fence, cable
entrance,  building conduits,  AC and water utility extensions,  HVAC, lighting,
fire  suppression  system,  relay  rack,  cable  tray  superstructure,  120  VAC
distribution,  - 48 VDC  plant and  distribution,  emergency  generator  system,
restroom and other according to GCICC engineering design. Cable landing stations
will be constructed at the following locations:

         1.    Whittier, Alaska  36'X 52' floor plan

         2.    Valdez, Alaska   24' X 48' floor plan

         3.    Norma Beach, Washington  36' X 52' floor plan

2.0  Cable Landing Station Support

Acquire sites either  through fee simple  purchases or long term leases.  Secure
building  site permit.  Procure VSAT system and install at three truck leg cable
landing stations.  Secure and provide equipment cabinets, patch and distribution
equipment, test equipment, office equipment,  furnishings.  The above items will
be performed at the following sites:

         1.    Whittier, Alaska

         2.    Valdez, Alaska (no VSAT at site)



Contractor Agreement         Page 5 of 10
<PAGE>
         3.    Norma Beach, Washington

         4.    Juneau, Alaska (lease space, provide emergency power plant, space
               improvements)

3.0  Outside Plant Engineering

Outside plant  engineering  consisting of route selection,  route survey,  route
staking, detail design drawings,  agency permit preparation,  permit submission,
and permit acquisition.

         1.    Whittier to Anchorage - approximately 52.5 miles

         2.    Valdez Landing site to Petrostar Metering Station - approximately
               10 miles

         3.    Norma Beach to Cable Landing Station to Seattle area Interconnect
               points

4.0  Outside Plant Construction

Construction of all outside plant facilities shall be completed under the direct
supervision  of  a  GCICC  employee  to  ensure  compliance  with  GCICC's  high
installation  standards and best industry  practices for long distance networks.
Minimum standards to be met at each site are listed below:

         1.    Whittier to Anchorage (approx. 51 miles)

         Conduit consisting of 1 1/4" schedule 40 innerduct shall be buried at a
         minimum  of  36" by  plowing,  trenching,  solid  rock  trenching,  and
         directional boring. Within the POL tunnel, the cable shall be installed
         within a 2" plastic  conduit  that will be  transferred  to the utility
         protection  tray at such time the tray is made  available by ADOT.  Any
         bridge crossing will consist of hanging fiberglass conduit in protected
         areas  such  as  between  bridge  girders.  Cable  vaults,  30" X  48",
         strategically  placed  approximately  every  3,000'  along  the  route.
         Warning signs will be placed every 500' on route. A buried caution tape
         will be placed 12" below the surface directly above the innerducts. All
         construction  will  conform  to  detail  route  drawings  as  close  as
         possible,  any changes will be reviewed and agreed by GCICC supervisor.
         Upon completion of the above civil works, the fiber cable will be blown
         through the innerduct.

         Option A  - Utilizing Powerline Pass.

         -     38,000' Wetland Construction

         -     15,000' Rock Trenching

         -     216,280' Trenching, Plowing, Boring, Hanging

         Option B

         -     38,000' Wetland Construction

         -     110,000' Rock Trenching

         -     121,280' Trenching, Plowing, Boring, Hanging



Contractor Agreement         Page 6 of 10
<PAGE>
         2.    Valdez  Cable  Landing  Station  to  Petrostar  Metering  Station
               (approx. 9 miles)

         Conduit consisting of 1 1/4" schedule 40 innerduct shall be buried at a
         minimum of 36" by  plowing,  trenching,  and  directional  boring.  Any
         bridge crossing will consist of hanging fiberglass conduit in protected
         areas such as between bridge girders. Cable vaults, 30" X 48", shall be
         strategically  placed  approximately  every  3,000'  along  the  route.
         Warning  signs shall be placed  every 500' on route.  A buried  caution
         tape  will  be  placed  12"  below  the  surface   directly  above  the
         innerducts.  All construction  will conform to detail route drawings as
         closely as  possible.  Any changes  must be reviewed and agreed to by a
         GCICC  supervisor.  Upon completion of the above civil works, the fiber
         cable will be blown through the innerduct.

         -     52,380' Trenching, Plowing, Boring

         -     1000' Hanging on Richardson Highway Bridge

         3.    Valdez Landing Site to Valdez Cable Landing Station (approx.  .75
               mile)

         Conduit consisting of 1 1/4" schedule 40 innerduct shall be buried at a
         minimum of 36" by plowing,  trenching,  and directional  boring.  Cable
         vaults, 30" X 48", shall be strategically  placed  approximately  every
         2,000'  along the route.  Warning  signs  will be placed  every 500' on
         route.  A buried  caution  tape shall be placed  12" below the  surface
         directly  above  cement cap over  innerducts.  All  construction  shall
         conform to detail route  drawings as closely as  possible.  Any changes
         must be reviewed and agreed to by a GCICC  supervisor.  The fiber cable
         will be installed by TSSL.

         4.    Norma Beach Interconnect to SDC Acquisition

         Fiber will be acquired  between the Norma Beach area and GCICC and AT&T
         Seattle  facilities in a diverse ring. GCICC will by preference  obtain
         dark fiber rights on this route with a long term agreement on lit fiber
         as a fall back scenario.  GCICC will negotiate for this fiber access on
         the behalf of AUFS.

         5.    Norma Beach Landing to AUFS Cable Landing Station

         Installation  of 4 - 4" PVC  conduits  at a  minimum  depth  of 36" for
         approximately  3 miles along 148 Street.  The conduits will be concrete
         encased for protection.  Approximately 15 cable vaults  consisting of a
         mix of manholes and pull boxes will be strategically  placed 1,200 feet
         apart  along  the  route  including  a  manhole  at the  landing  point
         appropriately  designed  to  accommodate  submarine  cables.  A  buried
         caution  tape will be  placed  12" below  the  surface  directly  above
         conduits. The interduct and fiber cable will be installed by TSSL.

         6.    Norma Beach AU Cable Landing Station to Interconnect Point



Contractor Agreement         Page 7 of 10
<PAGE>
         A completely  diverse route  (assumed to be aerial) will be constructed
         from the AU Cable  Landing  Station to a  interconnect  point  along an
         existing  fiber  ring.  This  route  can  be  placed   underground  for
         additional  protection  but in either case the route must be completely
         diverse for invulnerability of the route.

         7.   Augmentation of GCICC MANs

         AU requires  fully  diversified  routing of  terrestrial  cables within
         metropolitan  area net works ("MAN's").  AU needs exceeds GCICC current
         fiber availability in outlying metropolitan areas. Therefore GCICC will
         undertake to augment its internal MAN facilities to accommodate  AU. In
         Anchorage  AU requires  24 fibers from Glen Alps to SADC,  10 fibers to
         AT&T and 10 fibers  back to Glen Alps.  This  augmentation  is shown in
         chart form on Exhibits A and E to the Fiber Exchange  Agreement of even
         date, among AU, GCICC and GCI Cable, Inc..

         8.   Lena Pt., Juneau Cable Landing Station to Landing Point

         Installation  of 2 - 4" PVC  conduits  at a  minimum  depth  of 36" for
         approximately  1466'  within  existing  AT&T  utility  right of way.  A
         manhole  will be  installed at the cable  landing  point  appropriately
         designed to accommodate  submarine cables with two 4" stub PVC conduits
         facing the water.  A buried  caution  tape will be placed 12" below the
         surface  directly  above  conduits.  Interduct  and fiber cable will be
         installed by TSSL.

         9.  Whittier Cable Landing Station to Landing Point
         Installation  of 2 - 4" PVC  conduits  at a  minimum  depth  of 36" for
         approximately  1 mile within  Alaska  railroad  right of way. A manhole
         will be installed at the cable landing point appropriately  designed to
         accommodate submarine. Approximately 3 cable vaults consisting of a mix
         of  manholes  and pull boxes will be  strategically  placed  1,300 feet
         apart along the route.  A concrete  cap 12" above  conduits  and buried
         caution tape 12" below the surface above conduits  concrete cap will be
         placed. The interduct and fiber cable will be installed by TSSL.

         5.0  Outside Plant Materials

                  All materials  required to complete  tasks within  Section 4.0
                  and  materials  required to  complete  cable  splices  will be
                  secured  by GCICC  for the  System.  These  materials  will be
                  ordered, received, staged, transported and assembled by GCICC.
                  These material will be purchased  using direct AU accounts and
                  will be the property of AU. The  materials  shall  include the
                  following:

              -    Tubestar single-armor fiber cable

              -    1 1/4" innerduct

              -    4" PVC conduit

              -    Splice enclosures and splicing consumables



Contractor Agreement         Page 8 of 10
<PAGE>
              -    Splicing labor

              -    Warning tape

              -    Concrete mix

              -    Bridge hangers and Fiberglass conduit

              -    Cable vaults and manholes

              -    Aerial installation hardware

              -    Pull line and cable blowing materials

6.0  Communication Equipment

         All materials required to complete tasks as engineered within section D
         and materials  required to complete  equipment  interconnects and power
         feed will be secured by GCICC for the System.  These  materials will be
         ordered,  received,  staged,  transported and assembled by GCICC. These
         materials will be purchased using direct AU accounts, purchased in AU's
         name  and  will  be  the  property  of AU.  The  material  include  the
         following:


         1.    SADC, AT&T Gov't Hill, and one spare unit

         Lucent FT-2000 OC-48  Add/Drop/Ring  SONET Terminal,  dual-node  D-bay,
         equipped with 1500nm optics,  all common  equipment,  low-speed  shelf,
         without low-speed drop cards.

         2. FDC, SDC, and AT&T POPs in Seattle and Fairbanks

         FT-2000 OC-48 Add/Drop/Ring SONET Terminal, single-node E-bay, equipped
         with 1500nm optics,  without  low-speed  drop cards.  

         3. Lucent FT-2000 3xSTS1 Circuit Packs for terminating dropped capacity
         between sites, equipping 9xSTS1s,12xSTS1s at SADC, 3xSTS1s each at FDC,
         SDC, and AT&T sites, 1:N equipment protection, and associated low-speed
         cabling.

         4. Glennallen and Delta Junction sites and one spare.

         Lucent FT-2000 OC-48  Regenerator,  R-bay,  equipped with 1550nm optics
         and all common equipment.

         5.  Valdez,  PS-12,  Glennallen,  PS-10,  Delta  Junction,  North Pole,
         Whittier, and one spare unit

         Ditech STAR Erbium Doped Fiber  Amplifiers and Dispersion  Compensation
         Fiber as required by optical  engineering to overcome  attenuation  and
         dispersion on 0.30dB/km  18ps/nm-km  fiber between  Petrostar  Metering
         Station and North Pole Metering Station.



Contractor Agreement         Page 9 of 10
<PAGE>
         6.  Monitor  and  Control  Equipment  for  Cable  Landing  Sites,  SDC,
         Glennallen, Delta Junction, and one additional Pipeline route site.

7.0   Terrestrial Communication Sites

         Intermediate pipeline route sites near PS-12, Glennallen,  PS-10, Delta
         Junction,  and  North  Pole  will be  engineered,  designed,  built and
         installed.  The building  enclosures will include HVAC, fire detection,
         AC and DC power System,  and emergency  generator set. The installation
         will include site pad preparation and cable lateral installation.

         The equipment  design will allow for either  placement  within existing
         facilities  or within  the  separate  enclosures  outlined  above.  The
         closures will be fabricated  in Anchorage  and  transported  to pre-set
         foundation pads. On site installation will be minimal.

F.    SCHEDULE

The above scheduled Work shall be performed in a timely manner as  characterized
in  Attachment  2, the Gantt  chart.  The  schedule  shall  ensure  the  overall
completion of the System on December 31, 1998.

G.   ATTACHMENTS

1. Alaska United OC-48 SONET System Chart.

2. Gantt Chart.

3. Schedule II - System Commissioning and Acceptance.



Contractor Agreement         Page 10 of 10
<PAGE>
                                                                    Exhibit W to
                                                   Credit and Security Agreement



                            NON-DISTURBANCE AGREEMENT


                  This  NON-DISTURBANCE  AGREEMENT (as the same may from time to
time be amended,  supplemented or otherwise modified,  renewed or replaced, this
"Agreement")  is made as of January 27,  1998,  between (i) Credit  Lyonnais New
York Branch, as  administrative  agent under the AU Credit Agreement (as defined
below) (in such capacity,  the "AU Agent"), and (ii) NationsBank of Texas, N.A.,
as  administrative  agent under the Holdings Credit Agreement (as defined below)
(in such capacity, the "Holdings Agent").

                  WHEREAS, GCI Holdings,  Inc. ("GCI Holdings") as borrower, the
Holdings  Agent,  Credit  Lyonnais New York Branch as  documentation  agent,  TD
Securities (USA), Inc. as syndication  agent, and the lenders party thereto have
entered  into two  amended  and  restated  credit  agreements  each  dated as of
November 14, 1997  (collectively,  the "Holdings Credit Agreement")  pursuant to
which,  inter alia,  the Holdings  Agent,  for the benefit of the lenders  party
thereto,  has a  security  interest  in  "Collateral"  as defined  therein  (the
"Holdings Collateral"),  including the GCI Cable Facility, to secure the payment
and  performance of all of GCI Holdings'  obligations  under the Holdings Credit
Agreement (the "Holdings Credit Obligations").

                  WHEREAS,  Alaska  United  Fiber System  Partnership  ("AU") as
borrower,  the AU Agent,  NationsBank of Texas,  N.A. as syndication  agent,  TD
Securities  (USA) Inc. as  documentation  agent,  and the lenders party thereto,
have  entered  into a credit  agreement  dated as of January  27,  1998 (the "AU
Credit  Agreement")  pursuant to which, inter alia, the AU Agent for the benefit
of the  lenders  party  thereto,  has been  granted a security  interest  in the
"Collateral" as defined therein (the "AU Lender  Collateral"),  including the AU
Facility, to secure the payment and performance of all of AU's obligations under
the AU Credit Agreement (the "AU Credit Obligations").

                  WHEREAS,   AU,  GCI  Cable,   Inc.   ("GCI   Cable")  and  GCI
Communication Corp. have entered into a Fiber Exchange Agreement dated effective
as of January  27,  1998 (the "Fiber  Exchange  Agreement"),  pursuant to which,
inter alia,  (1) GCI Cable has granted to AU the exclusive  right to use certain
specified  Dark Fibers (as defined in the Fiber  Exchange  Agreement) in the GCI
Cable  Facility  (the "AU Fibers") and AU has granted to GCI Cable the exclusive
right to use certain  specified  Dark Fibers in the AU Facility  (the "GCI Cable
Fibers")  and (2) GCI Cable  has  granted  to AU a  security  interest  (the "AU
Security  Interest")  in all of its right,  title and  interest in the GCI Cable
Facility (the "AU Collateral,"  which AU Collateral is also part of the Holdings
Collateral)  to  secure  the  obligation  of GCI  Cable  to make  the AU  Fibers
<PAGE>
available to AU in  accordance  with the terms of the Fiber  Exchange  Agreement
(such obligation is hereinafter referred to as the "AU Secured Obligations") and
AU has  granted  to GCI  Cable a  security  interest  (the "GCI  Cable  Security
Interest") in all of its right,  title and interest in the AU Facility (the "GCI
Cable  Collateral,"  which  GCI Cable  Collateral  is also part of the AU Lender
Collateral)  to  secure  the  obligation  of AU to  make  the GCI  Cable  Fibers
available  to GCI  Cable in  accordance  with the  terms of the  Fiber  Exchange
Agreement (such obligation is hereinafter  referred to as the "GCI Cable Secured
Obligations").

                  WHEREAS,  all right, title and interest of AU in, to and under
the Fiber Exchange Agreement (including without limitation,  the benefits of the
AU Security Interest) is included as part of the AU Lender Collateral.

                  WHEREAS, all right, title and interest of GCI Cable in, to and
under the Fiber Exchange Agreement  (including without limitation,  the benefits
of the GCI  Cable  Security  Interest)  is  included  as  part  of the  Holdings
Collateral.

                  WHEREAS,  the Holdings Agent, the AU Agent and AU have entered
into that  certain AU  Subordination  Agreement  dated the date  hereof (the "AU
Subordination Agreement").

                  WHEREAS,  the AU Agent,  the Holdings Agent and GCI Cable have
entered  into that  certain  GCI Cable  Subordination  Agreement  dated the date
hereof (the "GCI Cable Subordination Agreement").

                  NOW,  THEREFORE,  for  good  and  valuable  consideration  the
receipt and adequacy of which are hereby  acknowledged the parties hereto hereby
agree as follows:

                  1.  Definitions.  All  capitalized  terms used  herein and not
otherwise  defined  herein shall have the respective  meanings  ascribed to such
terms in the Fiber Exchange Agreement.

                  2. Quiet  Enjoyment of AU Fibers.  The  Holdings  Agent hereby
acknowledges  and agrees that, so long as GCI Cable or its successor or assignee
continues to enjoy the exclusive right to use the GCI Cable Fibers, the Holdings
Agent will not  foreclose  or  otherwise  realize upon all or any portion of the
Holdings  Collateral which consists of the AU Fibers,  except in compliance with
the following provisions:

                                (i) if the  Holdings  Agent  sells the AU Fibers
                  and/or any or all rights  therein by private sale  pursuant to
                  the Holdings Credit Agreement or otherwise, the Holdings Agent
                  shall  cause the buyer to enter into (A) a novation  agreement
                  with AU or its  successor  as owner of the AU  Facility on the
                  same  terms and  conditions  as those  contained  in the Fiber
                  Exchange  Agreement and (B) 



                                      -2-
<PAGE>
                  a  subordination  agreement for the benefit of the AU Agent on
                  substantially  the same  terms as the GCI Cable  Subordination
                  Agreement;

                                (ii) if the AU Fibers and/or any rights  therein
                  shall be sold as a result of a judicial foreclosure proceeding
                  (i.e.  an  execution  sale) or by or on behalf of the Holdings
                  Agent at a public sale under the Uniform  Commercial Code, the
                  Holdings Agent shall use its reasonable  commercial efforts to
                  cause the buyer at any such sale to enter  into (A) a novation
                  agreement with AU or its successor as owner of the AU Facility
                  on the same terms and  conditions  as those  contained  in the
                  Fiber Exchange Agreement and (B) a subordination agreement for
                  the benefit of the AU Agent on substantially the same terms as
                  the GCI Cable Subordination Agreement;

                                (iii) if the Holdings  Agent is the buyer at any
                  such  public  sale  or  judicial  foreclosure   proceeding  or
                  otherwise  acquires rights in the AU Fibers upon a disposition
                  thereof,  it will enter into (A) a novation  agreement with AU
                  or its successor as owner of the AU Facility on the same terms
                  and  conditions  as  those  contained  in the  Fiber  Exchange
                  Agreement and (B) a subordination agreement for the benefit of
                  the AU Agent on substantially  the same terms as the GCI Cable
                  Subordination Agreement; and

                                (iv) the Holdings Agent agrees that in the event
                  it shall  conduct a private  sale, it will not accept an offer
                  from a third  party on terms less  favorable  to the  Holdings
                  Agent than the last offer for the AU Fibers  made by AU or the
                  AU Agent (as the case may be) to the  Holdings  Agent prior to
                  the Holdings  Agent's receipt of such third party offer unless
                  the Holdings  Agent first notifies AU and the AU Agent of such
                  less  favorable  offer and  within  five  business  days after
                  receiving such notice,  neither AU nor the AU Agent shall have
                  notified the Holdings  Agent that AU or the AU Agent wishes to
                  purchase the AU Fibers on the same terms offered by such third
                  party.

                  3. Quiet Enjoyment of GCI  Cable Fibers.  The AU  Agent hereby
acknowledges  and  agrees  that,  so long  as AU or its  successor  or  assignee
continues to enjoy the exclusive  right to use the AU Fibers,  the AU Agent will
not  foreclose  or  otherwise  realize  upon all or any portion of the AU Lender
Collateral which consists of the GCI Cable Fibers, except in compliance with the
following provisions:

                                (i) if the AU Agent  sells the GCI Cable  Fibers
                  and/or any or all rights  therein by private sale  pursuant to
                  the AU Credit Agreement or otherwise, the AU Agent shall cause
                  the  buyer to enter  into (A) a  novation  agreement  with GCI
                  Cable or its  successor as owner of the GCI Cable  Facility on
                  the same terms and conditions as those  contained in the Fiber
                  Exchange  Agreement and (B) a 



                                      -3-
<PAGE>
                  subordination  agreement for the benefit of the Holdings Agent
                  on  substantially  the  same  terms  as the  AU  Subordination
                  Agreement;

                                (ii) if the GCI Cable  Fibers  and/or any rights
                  therein  shall be sold as a result of a  judicial  foreclosure
                  proceeding  (i.e. an execution sale) or by or on behalf of the
                  AU Agent at a public sale under the Uniform  Commercial  Code,
                  the AU Agent shall use its  reasonable  commercial  efforts to
                  cause the buyer at any such sale to enter  into (A) a novation
                  agreement  with GCI Cable or its successor as owner of the GCI
                  Cable  Facility  on the same  terms  and  conditions  as those
                  contained  in  the  Fiber   Exchange   Agreement   and  (B)  a
                  subordination  agreement for the benefit of the Holdings Agent
                  on  substantially  the  same  terms  as the  AU  Subordination
                  Agreement;

                                (iii) if the AU  Agent is the  buyer at any such
                  public sale or judicial  foreclosure  proceeding  or otherwise
                  acquires  rights in the GCI Cable  Fibers  upon a  disposition
                  thereof,  it will enter into (A) a novation agreement with GCI
                  Cable or its  successor as owner of the GCI Cable  Facility on
                  the same terms and conditions as those  contained in the Fiber
                  Exchange  Agreement and (B) a subordination  agreement for the
                  benefit of the Holdings Agent on substantially  the same terms
                  as the AU Subordination Agreement; and

                                (iv) the AU Agent  agrees  that in the  event it
                  shall conduct a private sale, it will not accept an offer from
                  a third party on terms less favorable to the AU Agent than the
                  last offer for the GCI Cable  Fibers  made by GCI Cable or the
                  Holdings  Agent (as the case may be) to the AU Agent  prior to
                  the AU Agent's receipt of such third party offer unless the AU
                  Agent first  notifies GCI Cable and the Holdings Agent of such
                  less  favorable  offer and  within  five  business  days after
                  receiving  such  notice,  neither  GCI Cable nor the  Holdings
                  Agent shall have  notified  the AU Agent that GCI Cable or the
                  Holdings  Agent wishes to purchase the GCI Cable Fibers on the
                  same terms offered by such third party.



                  4.     Assignments.

                  (a) All of the terms and provisions of this Agreement shall be
binding  upon and inure to the  benefit of, and be  enforceable  by, the parties
hereto and their respective transferees, successors and assigns.

                  (b) The Holdings  Agent agrees that other than  assignments or
participations  pursuant to Section 10.04 of the Holdings Credit  Agreement,  it
shall not at any time voluntarily sell (including, 


                                      -4-
<PAGE>
without limitation,  pursuant to a public or private sale),  assign,  license or
otherwise  transfer or dispose of any or all of the Holdings  Agent's  rights or
interests (including,  without limitation, any lien or security interest) in any
or all of the AU Fibers to any person or entity  unless  and until the  Holdings
Agent has  notified  the AU Agent in  writing  and such third  party  transferee
expressly  assumes in writing for the benefit of the AU Agent and its successors
and assigns all of the Holdings  Agent's  covenants,  agreements and obligations
hereunder.

                  (c)  The AU  Agent  agrees  that  other  than  assignments  or
participations pursuant to Section 11.3 of the AU Credit Agreement, it shall not
at any time  voluntarily  sell  (including,  without  limitation,  pursuant to a
public or private sale), assign, license or otherwise transfer or dispose of any
or all of the AU Agent's rights or interests (including, without limitation, any
lien or security  interest)  in any or all of the GCI Cable Fibers to any person
or entity  unless  and until the AU Agent has  notified  the  Holdings  Agent in
writing and such third  party  transferee  expressly  assumes in writing for the
benefit of the  Holdings  Agent and its  successors  and  assigns  all of the AU
Agent's covenants, agreements and obligations hereunder.

                  (d) If requested by the Holdings Agent, in connection with any
assignment of GCI Cable's rights under the Fiber Exchange  Agreement to a person
or entity which is not a  subsidiary  of GCI  Holdings,  the AU Agent will enter
into  a   non-disturbance   agreement  for  the  benefit  of  such  assignee  on
substantially  the same  terms set forth  herein;  provided  that such  assignee
simultaneously  enters into a subordination  agreement for the benefit of the AU
Agent on substantially the same terms as the GCI Cable Subordination Agreement.

                  (e) If  requested  by the AU  Agent,  in  connection  with any
assignment  of AU's rights  under the Fiber  Exchange  Agreement  to a person or
entity which is not a subsidiary of GCI Holdings,  the Holdings Agent will enter
into  a   non-disturbance   agreement  for  the  benefit  of  such  assignee  on
substantially  the same  terms set forth  herein;  provided  that such  assignee
simultaneously  enters  into a  subordination  agreement  for the benefit of the
Holdings  Agent  on  substantially  the  same  terms  as  the  AU  Subordination
Agreement.

                  5. Other  Collateral  Not Affected.  Nothing in this Agreement
shall prevent the Holdings  Agent from  exercising  any remedies with respect to
any of the  Holdings  Collateral  other  than  the AU  Fibers,  so  long as such
exercise  does not prevent the use of the AU Fibers and access  thereto by AU or
its successor or assignee.  Nothing in this Agreement shall prevent the AU Agent
from  exercising  any remedies  with respect to any of the AU Lender  Collateral
other than the GCI Cable  Fibers,  so long as such exercise does not prevent the
use of the GCI Cable Fibers and access  thereto by GCI Cable or its successor or
assignee.

                  6. Modifications. No modification,  amendment or waiver of any
provision of this Agreement shall be enforceable against any party hereto unless
the same shall be in writing and signed by such party.

                  7. Further  Assurances.  Each of the parties  hereto agrees to
execute and deliver such further  instruments  and  agreements  and to take such
further  actions as any other 



                                      -5-
<PAGE>
party hereto may at any time or times  reasonably  request in order to carry out
the provisions and intent of this Agreement.

                  8.   Notices.   All  notices,   requests,   demands  or  other
communications  hereunder  shall  be in  writing  and  shall be sent by telex or
telecopier,  delivered by messenger or courier delivery, or sent by certified or
registered U.S. mail, postage prepaid, to the address set forth below or at such
other address as may be furnished in writing:

If to the AU Agent:                 1301 Avenue of the Americas
                                    New York, New York  10019
                                    Fax Number:  212-261-3421
                                    Attention:  Project Finance Group

If to the Holdings Agent:           NationsBank of Texas, N.A.
                                    901 Main Street, 64th Floor
                                    Dallas, TX  75202
                                    Fax Number:  (214) 508-9390
                                    Attention:  Vice President

Such notices,  requests,  demands or other  communications given by messenger or
courier  delivery as provided herein shall be deemed given when  delivered;  any
such  notices,  requests,  demands  or  other  communications  given by telex or
telecopier  as provided  herein  shall be deemed  delivered  on the business day
following  the date such notice is  received;  and any such  notices,  requests,
demands and other communications sent by U.S. certified or registered U.S. mail,
postage prepaid, as provided herein shall be deemed given ten (10) Business Days
after the date of  mailing.  Either  party  may by  notice to the other  made in
accordance herewith change the address at which such notices,  requests, demands
or other communications may be given to it.

                  9. Effect on Third  Parties.  The provisions of this Agreement
are not  intended to give,  nor shall they be construed to confer upon any other
person  owning or holding any rights or security  interests in the AU Collateral
or the GCI Cable Collateral (including any person who acquires any rights to the
AU  Collateral or the GCI Cable  Collateral  upon a sale,  realization  or other
disposition  of the AU  Collateral  or the GCI Cable  Collateral),  or any other
person or entity other than the parties hereto and their  respective  successors
and assigns, any rights, remedies or claims under or by reason hereof.

                  10.  Counterparts.  This  Agreement may be  executed in one or
more  counterparts,  each of which shall constitute an original and all of which
when taken together shall constitute one and the same instrument.

                  11.  Severability.  Each provision of this  Agreement shall be
interpreted in such manner as to make such provision valid and enforceable under
applicable  law, but if any  provision  hereof shall be or become  prohibited or
invalid under any  applicable  law, such  



                                      -6-
<PAGE>
provision  shall be ineffective to the extent of such  prohibition or invalidity
only, without thereby invalidating the remainder of such provision or any of the
remaining provisions hereof.

                  12.  Headings;  Interpretation.  Paragraph or other  headings
contained in this Agreement are for reference  purpose only and shall not affect
in any way the meaning or interpretation of this Agreement.

                  13.  No  Waiver.  No breach of  any  provision  hereof  may be
waived unless in writing and the waiver of any one breach shall not be deemed to
be a waiver of any other breach of the same or any other provision hereof.

                  14.  GOVERNING LAW.  THIS  AGREEMENT  SHALL BE GOVERNED BY AND
CONSTRUED  AND  ENFORCED  IN  ACCORDANCE  WITH THE LAWS OF THE  STATE OF  ALASKA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND
THE LAWS OF THE UNITED STATES.

                  15.  Termination.  This  Agreement  shall  terminate  upon the
earlier to occur of (i) the satisfaction of the Holdings Credit  Obligations and
termination  of  the  Holdings  Agent's   security   interest  in  the  Holdings
Collateral,  and  (ii)  the  satisfaction  of  the  AU  Credit  Obligations  and
termination of the AU Agent's security interest in the AU Lender Collateral.

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the day and year first above written.



                                       CREDIT   LYONNAIS   NEW  YORK  BRANCH  as
                                       administrative  agent under the AU Credit
                                       Agreement

                                       By:
                                       Name: 
                                       Title:


                                       NATIONSBANK    OF   TEXAS,    N.A.,    as
                                       administrative  agent under the  Holdings
                                       Credit Agreement

                                       By:
                                       Name: 
                                       Title:
<PAGE>
                                                                       EXHIBIT X




                    FORM OF GCI CABLE SUBORDINATION AGREEMENT


                  This  SUBORDINATION  AGREEMENT  (as the same may from  time to
time be amended,  supplemented or otherwise modified,  renewed or replaced, this
"Agreement")  is made as of January 27, 1998,  among (i) GCI Cable,  Inc.  ("GCI
Cable"), (ii) Credit Lyonnais New York Branch, as administrative agent under the
AU Credit Agreement (as defined below) (in such capacity, the "AU Agent"), (iii)
NationsBank of Texas,  N.A., as  administrative  agent under the Holdings Credit
Agreement (as defined below) (in such capacity, the "Holdings Agent").

                  WHEREAS, GCI Holdings,  Inc. ("GCI Holdings") as borrower, the
Holdings  Agent,  Credit  Lyonnais New York Branch as  documentation  agent,  TD
Securities (USA), Inc. as syndication  agent, and the lenders party thereto have
entered  into two  amended  and  restated  credit  agreements  each  dated as of
November 14, 1997  (collectively,  the "Holdings Credit Agreement")  pursuant to
which,  inter alia,  the Holdings  Agent,  for the benefit of the lenders  party
thereto,  has a  security  interest  in  "Collateral"  as defined  therein  (the
"Holdings Collateral"),  including the GCI Cable Facility, to secure the payment
and  performance of all of GCI Holdings'  obligations  under the Holdings Credit
Agreement (the "Holdings Credit Obligations").

                  WHEREAS,  Alaska  United  Fiber System  Partnership  ("AU") as
borrower,  the AU Agent,  NationsBank of Texas,  N.A. as syndication  agent,  TD
Securities  (USA) Inc. as  documentation  agent,  and the lenders party thereto,
have  entered  into a credit  agreement  dated as of January  27,  1998 (the "AU
Credit  Agreement")  pursuant to which, inter alia, the AU Agent for the benefit
of the  lenders  party  thereto,  has been  granted a security  interest  in the
"Collateral" as defined therein (the "AU Lender  Collateral"),  including the AU
Facility, to secure the payment and performance of all of AU's obligations under
the AU Credit Agreement (the "AU Credit Obligations").

                  WHEREAS,  AU,  GCI  Cable  and GCI  Communication  Corp.  have
entered into a Fiber Exchange  Agreement  dated effective as of January 27, 1998
(the "Fiber Exchange  Agreement"),  pursuant to which, inter alia, (1) GCI Cable
has granted to AU the exclusive  right to use certain  specified Dark Fibers (as
defined in the Fiber  Exchange  Agreement)  in the GCI Cable  Facility  (the "AU
Fibers")  and AU has  granted to GCI Cable the  exclusive  right to use  certain
specified  Dark Fibers in the AU Facility  (the "GCI Cable  Fibers") and (2) GCI
Cable has granted to AU a security interest (the "AU Security  Interest") in all
of its right, title and interest in the GCI Cable Facility (the "AU Collateral,"
which AU  Collateral  is also part of the  Holdings  Collateral)  to secure  the
obligation of GCI Cable to make the AU Fibers available to AU in accordance with
the  terms of the Fiber  Exchange  Agreement  (such  obligation  is  hereinafter
<PAGE>
referred to as the "AU Secured  Obligations")  and AU has granted to GCI Cable a
security interest (the "GCI Cable Security Interest") in all of its right, title
and  interest in the AU Facility  (the "GCI Cable  Collateral,"  which GCI Cable
Collateral is also part of the AU Lender Collateral) to secure the obligation of
AU to make the GCI Cable Fibers  available to GCI Cable in  accordance  with the
terms of the Fiber Exchange  Agreement (such obligation is hereinafter  referred
to as the "GCI Cable Secured Obligations").

                  WHEREAS,  all right, title and interest of AU in, to and under
the Fiber Exchange Agreement (including without limitation,  the benefits of the
AU Security Interest) is included as part of the AU Lender Collateral.

                  WHEREAS, all right, title and interest of GCI Cable in, to and
under the Fiber Exchange Agreement  (including without limitation,  the benefits
of the GCI  Cable  Security  Interest)  is  included  as  part  of the  Holdings
Collateral.

                  WHEREAS,  AU, the Holdings Agent and the AU Agent have entered
into that certain AU Subordination Agreement dated the date hereof.

                  NOW,  THEREFORE,  for  good  and  valuable  consideration  the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:

                  1.  Definitions.  All  capitalized  terms used  herein and not
otherwise  defined  herein shall have the respective  meanings  ascribed to such
terms in the Fiber Exchange Agreement.

                  2. Acknowledgments and Consents.

                  (a) The AU Agent hereby  acknowledges that AU has entered into
the Fiber Exchange Agreement and has granted to GCI Cable a continuing  security
interest in the GCI Cable  Collateral  and certain  remedies with respect to the
GCI Cable  Collateral  pursuant to the Fiber Exchange  Agreement.  However,  GCI
Cable and the Holdings Agent  acknowledge  that the GCI Cable Security  Interest
shall be  subordinated  to the AU  Agent's  security  interest  in the AU Lender
Collateral as provided in Section 3 of this Agreement.  Subject to the terms and
conditions of this  Agreement,  the AU Agent  acknowledges  and agrees that AU's
grant to GCI Cable of the GCI Cable  Security  Interest  and its grant of rights
and  remedies to GCI Cable with  respect to the GCI Cable  Collateral  shall not
constitute a breach of or a default under the AU Credit Agreement.

                  (b) GCI Cable  acknowledges and consents that (i) the terms of
this  Agreement,  and (ii) the inclusion of all right,  title and interest of AU
in, to and under the Fiber Exchange Agreement  (including the benefits of the AU
Security Interest) as part of the AU Lender  Collateral,  shall not constitute a
breach or a default under the Fiber Exchange Agreement.



                                      -2-
<PAGE>
                  3. Priority of Security Interests.

                  Notwithstanding  (i)  any  contrary  provision  of  the  Fiber
Exchange Agreement or (ii) any priority in time of creation of any lien or other
encumbrance on the GCI Cable  Collateral by either GCI Cable or the AU Agent, or
(iii) any provision  of, or filing or recording  under,  the Uniform  Commercial
Code of any state or any other  applicable  statute,  rule or  regulation of the
United States,  the states  thereof,  their  counties,  municipalities  or other
subdivision,  or any other applicable  jurisdiction,  GCI Cable and the Holdings
Agent hereby agree that any security interest,  pledge,  mortgage, lien or other
encumbrance  granted  to the AU Agent by AU in all or any part of the GCI  Cable
Collateral in order to secure the AU Credit Obligations is and shall be superior
and  prior in right of claim  and  payment  to any  security  interest,  pledge,
mortgage,  lien or other encumbrance granted to GCI Cable,  whether now existing
or hereafter vested,  in any of the GCI Cable Collateral  regardless of the time
(x) when GCI Cable or the AU Agent shall acquire  rights to any of the GCI Cable
Collateral or (y) when AU incurs any obligations to GCI Cable. GCI Cable and the
Holdings Agent agree that GCI Cable's and the Holdings Agent's  subordination of
the GCI Cable  Security  Interest  shall  continue  until the full  payment  and
performance  of the AU Credit  Obligations  and said  subordination  shall apply
without limitation with respect to any security interest, pledge, mortgage, lien
or other encumbrance  heretofore or hereafter granted to the AU Agent, in all or
any part of the AU Lender Collateral whether now owned or hereafter acquired.

                  4. Forbearance; Notice; Right to Cure.

                  (a) Without the written  consent of the AU Agent,  each of GCI
Cable and the  Holdings  Agent agrees that until all AU Credit  Obligations  are
paid and  performed it will not in its capacity as a secured  party with respect
to the GCI Cable Collateral (A) exercise any of its rights, remedies and options
or assert any claim with respect to the GCI Cable  Collateral,  (B) seek to sell
or  otherwise  dispose  of the GCI  Cable  Collateral,  or (C) take any  action,
directly  or  indirectly,  with  respect to any of the  foregoing  described  in
clauses (A) and (B) above;  provided,  however,  it being  understood and agreed
that  nothing  herein  shall  prevent  GCI  Cable  or the  Holdings  Agent  from
exercising  rights  which might  otherwise  be  available  to it to (i) take any
action to preserve or protect the validity of the GCI Cable Security Interest so
long as such action would not adversely  affect the AU Lender  Collateral,  (ii)
take any action to seek  equitable  relief or to sue for  damages in  connection
with the enforcement of the GCI Cable Secured  Obligations,  or (iii) subject to
compliance with Section 5 hereof,  assign the GCI Cable Security Interest to any
person  who  acquires  any  of GCI  Cable's  rights  under  the  Fiber  Exchange
Agreement.  The AU Agent agrees to give GCI Cable and the  Holdings  Agent prior
written notice of any exercise by the AU Agent of any of its rights as a secured
creditor  under the AU Credit  Agreement  with respect to the GCI Cable  Fibers;
provided,  however,  that such prior notice may be eliminated if required by the
exigencies of the situation  (provided that the AU Agent gives GCI Cable and the
Holdings Agent notice promptly after taking action);  and provided  further that
any  failure of the AU Agent to give  notice to GCI Cable  and/or  the  Holdings
Agent  pursuant to this  Section  4(a) 



                                      -3-
<PAGE>
shall not affect the AU Agent's right to exercise its rights in connection  with
the AU Lender Collateral.

                  (b) If there is a default  on the part of AU under  the  Fiber
Exchange  Agreement,  prior to  exercising  its  right to  terminate  the  Fiber
Exchange  Agreement,GCI  Cable shall provide the AU Agent written  notice of its
intention  to exercise  such  termination  right and the AU Agent shall have ten
(10)  Business  Days from the receipt of such notice to cure such default  under
the Fiber Exchange  Agreement  before GCI Cable shall exercise such  termination
right.  Exercise  of such  cure  right  by the AU  Agent  shall  be at its  sole
discretion and under no  circumstances  will the AU Agent have any obligation to
cure any default under the Fiber Exchange Agreement

                  5. Assignments.

                  (a) All of the terms and provisions of this Agreement shall be
binding  upon and inure to the  benefit of, and be  enforceable  by, the parties
hereto and their respective transferees, successors and assigns.

                  (b) The  AU  Agent  agrees  that  other  than  assignments  or
participations pursuant to Section 11.3 of the AU Credit Agreement, it shall not
at any time  voluntarily  sell  (including,  without  limitation,  pursuant to a
public or private sale), assign, license or otherwise transfer or dispose of any
or all of the AU Agent's rights or interests (including, without limitation, any
lien or  security  interest)  in any or all of the GCI Cable  Collateral  to any
person or entity  unless and until the AU Agent has  notified  GCI Cable and the
Holdings Agent in writing and such third party transferee  expressly  assumes in
writing for the benefit of GCI Cable and the Holdings Agent and their successors
and  assigns  all  of the  AU  Agent's  covenants,  agreements  and  obligations
hereunder.

                  (c) GCI Cable  agrees  that GCI  Cable  shall  not at any time
voluntarily sell (including, without limitation, pursuant to a public or private
sale),  assign,  or  otherwise  transfer or dispose of any or all of GCI Cable's
rights under the Fiber  Exchange  Agreement  to any person or entity  unless and
until  GCI Cable has  notified  the AU Agent in  writing  and such  third  party
transferee  expressly assumes in writing for the benefit of the AU Agent and its
successors and assigns all of GCI Cable's covenants,  agreements and obligations
hereunder.

                  (d) The Holdings  Agent agrees that other than  assignments or
participations  pursuant to Section 10.04 of the Holdings Credit  Agreement,  it
shall not at any time voluntarily sell (including, without limitation,  pursuant
to a public or private sale),  assign,  license or otherwise transfer or dispose
of any or all of the Holdings  Agent's rights or interests  (including,  without
limitation,  any lien or security  interest) in any or all of GCI Cable's rights
under the Fiber Exchange  Agreement to any person or entity unless and until the
Holdings  Agent  has  notified  the AU Agent in  writing  and such  third  party
transferee  expressly assumes in writing for 



                                      -4-
<PAGE>
the benefit of the AU Agent and its  successors  and assigns all of the Holdings
Agent's covenants, agreements and obligations hereunder.

                  6. Modifications. No modification,  amendment or waiver of any
provision of this Agreement shall be enforceable against any party hereto unless
the same shall be in writing and signed by such party.

                  7. Further Assurances.  Each  of  the parties hereto agrees to
execute and deliver such further  instruments  and  agreements  and to take such
further  actions as any other party  hereto may at any time or times  reasonably
request in order to carry out the provisions and intent of this Agreement.

                  8.   Notices.   All  notices,   requests,   demands  or  other
communications  hereunder  shall  be in  writing  and  shall be sent by telex or
telecopier,  delivered by messenger or courier delivery, or sent by certified or
registered U.S. mail, postage prepaid, to the address set forth below or at such
other address as may be furnished in writing:

If to GCI Cable:                    2550 Denali Street
                                    Suite 1000
                                    Anchorage, Alaska  99503
                                    Fax Number:  (907) 265-5676
                                    Attention:  Director of Finance

and if to the AU Agent:             1301 Avenue of the Americas
                                    New York, New York  10019
                                    Fax Number:  212-261-3421
                                    Attention:  Project Finance Group

If to the Holdings Agent:           NationsBank of Texas, N.A.
                                    901 Main Street, 64th Floor
                                    Dallas, TX  75202
                                    Fax Number:  (214) 508-9390
                                    Attention:  Vice President

Such notices,  requests,  demands or other  communications given by messenger or
courier  delivery as provided herein shall be deemed given when  delivered;  any
such  notices,  requests,  demands  or  other  communications  given by telex or
telecopier  as provided  herein  shall be deemed  delivered  on the business day
following  the date such notice is  received;  and any such  notices,  requests,
demands and other communications sent by U.S. certified or registered U.S. mail,
postage prepaid, as provided herein shall be deemed given ten (10) Business Days
after the date of  mailing.  Either  party  may by  notice to the other  made in
accordance herewith change the address at which such notices,  requests, demands
or other communications may be given to it.




                                      -5-
<PAGE>
                  9. Effect on Third Parties. The  provisions  of this Agreement
are not  intended to give,  nor shall they be construed to confer upon any other
person  owning or holding  any  rights or  security  interests  in the GCI Cable
Collateral  (including  any  person  who  acquires  any  rights to the GCI Cable
Collateral  upon a sale,  realization  or  other  disposition  of the GCI  Cable
Collateral,  or any other  person or entity  other than the  parties  hereto and
their respective successors and assigns, any rights, remedies or claims under or
by reason hereof.

                  10.  Counterparts.  This  Agreement  may be executed in one or
more  counterparts,  each of which shall constitute an original and all of which
when taken together shall constitute one and the same instrument.

                  11.  Severability.  Each  provision of this Agreement shall be
interpreted in such manner as to make such provision valid and enforceable under
applicable  law, but if any  provision  hereof shall be or become  prohibited or
invalid under any  applicable  law, such  provision  shall be ineffective to the
extent of such prohibition or invalidity only, without thereby  invalidating the
remainder of such provision or any of the remaining provisions hereof.

                  12.  Headings;  Interpretation.  Paragraph  or other  headings
contained in this Agreement are for reference  purpose only and shall not affect
in any way the meaning or interpretation of this Agreement.

                  13.  No  Waiver.  No breach  of any  provision  hereof  may be
waived unless in writing and the waiver of any one breach shall not be deemed to
be a waiver of any other breach of the same or any other provision hereof.

                  14.  GOVERNING LAW. THIS  AGREEMENT  SHALL  BE GOVERNED BY AND
CONSTRUED  AND  ENFORCED  IN  ACCORDANCE  WITH THE LAWS OF THE  STATE OF  ALASKA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND
THE LAWS OF THE UNITED STATES.

                  15.  Termination.  This  Agreement  shall  terminate  upon the
earlier  to occur  of (i) the  satisfaction  of the AU  Credit  Obligations  and
termination of the AU Agent's security interest in the AU Lender Collateral, and
(ii)  termination  of the  Fiber  Exchange  Agreement,  the GCI  Cable  Security
Interest and the AU Security Interest.




                                      -6-
<PAGE>
                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the day and year first above written.


                                       GCI CABLE, INC.


                                       By: 
                                       Name:
                                       Title:



                                       CREDIT   LYONNAIS   NEW  YORK  BRANCH  as
                                       administrative  agent under the AU Credit
                                       Agreement

                                       By: 
                                       Name:
                                       Title:


                                       NATIONSBANK    OF   TEXAS,    N.A.,    as
                                       administrative  agent under the  Holdings
                                       Credit Agreement

                                       By: 
                                       Name:
                                       Title:
<PAGE>
                                                                       EXHIBIT Y




                       FORM OF AU SUBORDINATION AGREEMENT


                  This  SUBORDINATION  AGREEMENT  (as the same may from  time to
time be amended,  supplemented or otherwise modified,  renewed or replaced, this
"Agreement")  is made as of January  27,  1998,  among (i) Alaska  United  Fiber
System   Partnership   ("AU"),   (ii)  Credit  Lyonnais  New  York  Branch,   as
administrative  agent under the AU Credit  Agreement (as defined below) (in such
capacity,  the "AU Agent"),  (iii) NationsBank of Texas, N.A., as administrative
agent under the Holdings Credit  Agreement (as defined below) (in such capacity,
the "Holdings Agent").

                  WHEREAS, GCI Holdings,  Inc. ("GCI Holdings") as borrower, the
Holdings  Agent,  Credit  Lyonnais New York Branch as  documentation  agent,  TD
Securities (USA), Inc. as syndication  agent, and the lenders party thereto have
entered  into two  amended  and  restated  credit  agreements  each  dated as of
November 14, 1997  (collectively,  the "Holdings Credit Agreement")  pursuant to
which,  inter alia,  the Holdings  Agent,  for the benefit of the lenders  party
thereto,  has a  security  interest  in  "Collateral"  as defined  therein  (the
"Holdings Collateral"),  including the GCI Cable Facility, to secure the payment
and  performance of all of GCI Holdings'  obligations  under the Holdings Credit
Agreement (the "Holdings Credit Obligations").

                  WHEREAS, AU as borrower,  the AU Agent,  NationsBank of Texas,
N.A. as syndication agent, TD Securities (USA) Inc. as documentation  agent, and
the lenders  party  thereto,  have entered into a credit  agreement  dated as of
January 27, 1998 (the "AU Credit Agreement")  pursuant to which, inter alia, the
AU Agent for the  benefit  of the  lenders  party  thereto,  has been  granted a
security  interest  in the  "Collateral"  as  defined  therein  (the "AU  Lender
Collateral"),  including the AU Facility,  to secure the payment and performance
of all of AU's  obligations  under  the AU  Credit  Agreement  (the  "AU  Credit
Obligations").

                  WHEREAS,   AU,  GCI  Cable,   Inc.   ("GCI   Cable")  and  GCI
Communication Corp. have entered into a Fiber Exchange Agreement dated effective
as of January  27,  1998 (the "Fiber  Exchange  Agreement"),  pursuant to which,
inter alia,  (1) GCI Cable has granted to AU the exclusive  right to use certain
specified  Dark Fibers (as defined in the Fiber  Exchange  Agreement) in the GCI
Cable  Facility  (the "AU Fibers") and AU has granted to GCI Cable the exclusive
right to use certain  specified  Dark Fibers in the AU Facility  (the "GCI Cable
Fibers")  and (2) GCI Cable  has  granted  to AU a  security  interest  (the "AU
Security  Interest")  in all of its right,  title and  interest in the GCI Cable
Facility (the "AU Collateral,"  which AU Collateral is also part of the Holdings
Collateral)  to  secure  the  obligation  of GCI  Cable  to make  the AU  Fibers
available to AU in  accordance  with the terms of the Fiber  Exchange  Agreement
(such obligation
<PAGE>
is hereinafter  referred to as the "AU Secured  Obligations") and AU has granted
to GCI Cable a security  interest (the "GCI Cable Security  Interest") in all of
its right,  title and interest in the AU Facility  (the "GCI Cable  Collateral,"
which GCI Cable  Collateral is also part of the AU Lender  Collateral) to secure
the  obligation  of AU to make the GCI Cable  Fibers  available  to GCI Cable in
accordance with the terms of the Fiber Exchange  Agreement  (such  obligation is
hereinafter referred to as the "GCI Cable Secured Obligations").

                  WHEREAS,  all right, title and interest of AU in, to and under
the Fiber Exchange Agreement (including without limitation,  the benefits of the
AU Security Interest) is included as part of the AU Lender Collateral.

                  WHEREAS, all right, title and interest of GCI Cable in, to and
under the Fiber Exchange Agreement  (including without limitation,  the benefits
of the GCI  Cable  Security  Interest)  is  included  as  part  of the  Holdings
Collateral.

                  WHEREAS,  GCI Cable,  the Holdings Agent and the AU Agent have
entered  into that  certain  GCI Cable  Subordination  Agreement  dated the date
hereof.

                  NOW,  THEREFORE,  for  good  and  valuable  consideration  the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:

                  1.  Definitions.  All  capitalized  terms used  herein and not
otherwise  defined  herein shall have the respective  meanings  ascribed to such
terms in the Fiber Exchange Agreement.

                  2. Acknowledgments and Consents.

                  (a) The Holdings Agent hereby  acknowledges that GCI Cable has
entered  into the Fiber  Exchange  Agreement  and has granted to AU a continuing
security  interest in the AU Collateral and certain remedies with respect to the
AU Collateral pursuant to the Fiber Exchange  Agreement.  However, AU and the AU
Agent  acknowledge  that the AU Security  Interest shall be  subordinated to the
Holdings  Agent's  security  interest in the Holdings  Collateral as provided in
Section  3 of this  Agreement.  Subject  to the  terms  and  conditions  of this
Agreement,  the Holdings Agent acknowledges and agrees that GCI Cable's grant to
AU of the AU Security  Interest  and its grant of rights and remedies to AU with
respect to the AU Collateral shall not constitute a breach of or a default under
the Holdings Credit Agreement.

                  (b) AU  acknowledges  and consents  that (i) the terms of this
Agreement,  and (ii) the inclusion of all right, title and interest of GCI Cable
in, to and under the Fiber Exchange Agreement (including the benefits of the GCI
Cable  Security  Interest)  as  part  of  the  Holdings  Collateral,  shall  not
constitute a breach or a default under the Fiber Exchange Agreement.

                  3. Priority of Security Interests.




                                      -2-
<PAGE>
                  Notwithstanding  (i)  any  contrary  provision  of  the  Fiber
Exchange Agreement or (ii) any priority in time of creation of any lien or other
encumbrance  on AU Collateral by either AU or the Holdings  Agent,  or (iii) any
provision of, or filing or recording under,  the Uniform  Commercial Code of any
state or any other applicable statute,  rule or regulation of the United States,
the states thereof, their counties,  municipalities or other subdivision, or any
other  applicable  jurisdiction,  AU and the AU  Agent  hereby  agree  that  any
security interest,  pledge,  mortgage,  lien or other encumbrance granted to the
Holdings  Agent by GCI Cable in all or any part of the AU Collateral in order to
secure the  Holdings  Credit  Obligations  is and shall be superior and prior in
right of claim and payment to any security interest,  pledge,  mortgage, lien or
other  encumbrance  granted to AU, whether now existing or hereafter  vested, in
any of the AU  Collateral  regardless  of the time  (x) when AU or the  Holdings
Agent shall  acquire  rights to any of the AU  Collateral  or (y) when GCI Cable
incurs  any  obligations  to AU. AU and the AU Agent  agree that AU's and the AU
Agent's  subordination of the AU Security Interest shall continue until the full
payment  and   performance  of  the  Holdings   Credit   Obligations   and  said
subordination  shall  apply  without  limitation  with  respect to any  security
interest,  pledge,  mortgage,  lien or other encumbrance heretofore or hereafter
granted to the Holdings  Agent,  in all or any part of the  Holdings  Collateral
whether now owned or hereafter acquired.

                  4. Forbearance; Notice; Right to Cure.

                  (a) Without the written consent of the Holdings Agent, each of
AU and the AU Agent agrees that until all Holdings  Credit  Obligations are paid
and performed it will not in its capacity as a secured party with respect to the
AU Collateral (A) exercise any of its rights, remedies and options or assert any
claim  with  respect  to the AU  Collateral  granted  to it, (B) seek to sell or
otherwise  dispose of the AU  Collateral,  or (C) take any  action,  directly or
indirectly,  with respect to any of the  foregoing  described in clauses (A) and
(B) above; provided, however, it being understood and agreed that nothing herein
shall prevent AU or the AU Agent from exercising rights which might otherwise be
available  to it to (i) take any action to preserve  or protect the  validity of
the AU Security  Interest so long as such action would not adversely  affect the
Holdings Collateral, (ii) take any action to seek equitable relief or to sue for
damages in connection  with the  enforcement of the AU Secured  Obligations,  or
(iii)  subject to  compliance  with  Section 5 hereof,  assign  the AU  Security
Interest to any person who acquires any of AU's rights under the Fiber  Exchange
Agreement.  The Holdings  Agent agrees to give AU and the AU Agent prior written
notice of any exercise by the  Holdings  Agent of any of its rights as a secured
creditor  under the  Holdings  Credit  Agreement  with respect to the AU Fibers;
provided,  however,  that such prior notice may be eliminated if required by the
exigencies of the situation  (provided  that the Holdings Agent gives AU and the
AU Agent notice  promptly after taking  action);  and provided  further that any
failure of the Holdings  Agent to give notice to AU and/or the AU Agent pursuant
to this Section 4(a) shall not affect the Holdings Agent's right to exercise its
rights in connection with the Holdings Collateral.




                                      -3-
<PAGE>
                  (b) If there is a default on the part of GCI  Cable  under the
Fiber Exchange  Agreement,  prior to exercising its right to terminate the Fiber
Exchange  Agreement,  AU shall provide the Holdings  Agent written notice of its
intention to exercise such  termination  right and the Holdings Agent shall have
ten (10)  Business  Days from the  receipt of such  notice to cure such  default
under the Fiber Exchange  Agreement  before AU shall  exercise such  termination
right.  Exercise of such cure right by the  Holdings  Agent shall be at its sole
discretion and under no circumstances will the Holding Agent have any obligation
to cure any default under the Fiber Exchange Agreement

                  5. Assignments.

                  (a) All of the terms and provisions of this Agreement shall be
binding  upon and inure to the  benefit of, and be  enforceable  by, the parties
hereto and their respective transferees, successors and assigns.

                  (b) The Holdings Agent agrees that other than  assignments  or
participations  pursuant to Section 10.04 of the Holdings Credit  Agreement,  it
shall not at any time voluntarily sell (including, without limitation,  pursuant
to a public or private sale),  assign,  license or otherwise transfer or dispose
of any or all of the Holdings  Agent's rights or interests  (including,  without
limitation, any lien or security interest) in any or all of the AU Collateral to
any person or entity unless and until the Holdings Agent has notified AU and the
AU Agent in writing and such third party transferee expressly assumes in writing
for the benefit of AU and the AU Agent and their  successors  and assigns all of
the Holdings Agent's covenants, agreements and obligations hereunder.

                  (c) AU agrees  that AU shall not at any time  voluntarily sell
(including,  without limitation,  pursuant to a public or private sale), assign,
or  otherwise  transfer or dispose of any or all of AU's rights  under the Fiber
Exchange  Agreement to any person or entity unless and until AU has notified the
Holdings Agent in writing and such third party transferee  expressly  assumes in
writing for the benefit of the Holdings Agent and its successors and assigns all
of AU's covenants, agreements and obligations hereunder.

                  (d)  The AU  Agent  agrees  that  other  than  assignments  or
participations pursuant to Section 11.3 of the AU Credit Agreement, it shall not
at any time  voluntarily  sell  (including,  without  limitation,  pursuant to a
public or private sale), assign, license or otherwise transfer or dispose of any
or all of the AU Agent's rights or interests (including, without limitation, any
lien or security interest) in any or all of AU's rights under the Fiber Exchange
Agreement to any person or entity unless and until the AU Agent has notified the
Holdings Agent in writing and such third party transferee  expressly  assumes in
writing for the benefit of the Holdings Agent and its successors and assigns all
of the AU Agent's covenants, agreements and obligations hereunder.




                                      -4-
<PAGE>
                  6. Modifications. No modification,  amendment or waiver of any
provision of this Agreement shall be enforceable against any party hereto unless
the same shall be in writing and signed by such party.

                  7. Further Assurances.  Each  of  the parties hereto agrees to
execute and deliver such further  instruments  and  agreements  and to take such
further  actions as any other party  hereto may at any time or times  reasonably
request in order to carry out the provisions and intent of this Agreement.

                  8.   Notices.   All  notices,   requests,   demands  or  other
communications  hereunder  shall  be in  writing  and  shall be sent by telex or
telecopier,  delivered by messenger or courier delivery, or sent by certified or
registered U.S. mail, postage prepaid, to the address set forth below or at such
other address as may be furnished in writing:

If to AU:                           2550 Denali Street
                                    Suite 1000
                                    Anchorage, Alaska  99503
                                    Fax Number:  (907) 265-5676
                                    Attention:  Director of Finance

and if to the AU Agent:             1301 Avenue of the Americas
                                    New York, New York  10019
                                    Fax Number:  212-261-3421
                                    Attention:  Project Finance Group

If to the Holdings Agent:           NationsBank of Texas, N.A.
                                    901 Main Street, 64th Floor
                                    Dallas, TX  75202
                                    Fax Number:  (214) 508-9390
                                    Attention:  Vice President

Such notices,  requests,  demands or other  communications given by messenger or
courier  delivery as provided herein shall be deemed given when  delivered;  any
such  notices,  requests,  demands  or  other  communications  given by telex or
telecopier  as provided  herein  shall be deemed  delivered  on the business day
following  the date such notice is  received;  and any such  notices,  requests,
demands and other communications sent by U.S. certified or registered U.S. mail,
postage prepaid, as provided herein shall be deemed given ten (10) Business Days
after the date of  mailing.  Either  party  may by  notice to the other  made in
accordance herewith change the address at which such notices,  requests, demands
or other communications may be given to it.

                  9. Effect on Third  Parties.  The provisions of this Agreement
are not  intended to give,  nor shall they be construed to confer upon any other
person  owning or holding any rights or security  interests in the AU Collateral
(including any person who acquires any rights to the 



                                      -5-
<PAGE>
AU  Collateral  upon  a  sale,  realization  or  other  disposition  of  the  AU
Collateral,  or any other  person or entity  other than the  parties  hereto and
their respective successors and assigns, any rights, remedies or claims under or
by reason hereof.

                  10.  Counterparts.  This  Agreement  may be executed in one or
more  counterparts,  each of which shall constitute an original and all of which
when taken together shall constitute one and the same instrument.

                  11.  Severability.  Each provision  of this Agreement shall be
interpreted in such manner as to make such provision valid and enforceable under
applicable  law, but if any  provision  hereof shall be or become  prohibited or
invalid under any  applicable  law, such  provision  shall be ineffective to the
extent of such prohibition or invalidity only, without thereby  invalidating the
remainder of such provision or any of the remaining provisions hereof.

                  12.  Headings;  Interpretation.  Paragraph  or other  headings
contained in this Agreement are for reference  purpose only and shall not affect
in any way the meaning or interpretation of this Agreement.

                  13.  No  Waiver.  No  breach of any  provision  hereof  may be
waived unless in writing and the waiver of any one breach shall not be deemed to
be a waiver of any other breach of the same or any other provision hereof.

                  14.  GOVERNING LAW. THIS  AGREEMENT  SHALL  BE GOVERNED BY AND
CONSTRUED  AND  ENFORCED  IN  ACCORDANCE  WITH THE LAWS OF THE  STATE OF  ALASKA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND
THE LAWS OF THE UNITED STATES.

                  15.  Termination.  This  Agreement  shall  terminate  upon the
earlier to occur of (i) the satisfaction of the Holdings Credit  Obligations and
termination  of  the  Holdings  Agent's   security   interest  in  the  Holdings
Collateral,  and  (ii)  termination  of the  Fiber  Exchange  Agreement,  the AU
Security Interest and the GCI Security Interest.



                                      -6-
<PAGE>
                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the day and year first above written.


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


                                       By: 
                                       Name:
                                       Title:

                                       By  Fiber  Hold  Co.,   Inc.,  a  General
                                       Partner


                                       By: 
                                       Name:
                                       Title:


                                       CREDIT   LYONNAIS   NEW  YORK  BRANCH  as
                                       administrative  agent under the AU Credit
                                       Agreement

                                       By: 
                                       Name:
                                       Title:


                                       NATIONSBANK    OF   TEXAS,    N.A.,    as
                                       administrative  agent under the  Holdings
                                       Credit Agreement

                                       By: 
                                       Name:
                                       Title:



<PAGE>

                                                                       EXHIBIT Z



                           FORM OF INSTRUCTION LETTER




                             as of           , 1998




[insert name of contact person]
The First National Bank of Anchorage
201 West 36th Avenue
P.O. Box 200628
Anchorage, Alaska  99520

                  Re:      Alaska United Fiber System Partnership
                           Account No.  1510-562-0

Gentlemen:

                  The undersigned,  Alaska United Fiber System  Partnership (the
"Depositor")  presently  maintains  with you (the  "Depositary  Bank")  the bank
account identified above (the "Alaska Depositary Account"). The Depositor hereby
irrevocably  notifies  and  instructs  the  Depositary  Bank with respect to the
Alaska  Depositary  Account as set forth herein below,  and hereby  requests the
Depositary Bank to indicate its acceptance of, and agreement to be bound by, the
terms hereof by signing in the space provided at the foot hereof.

                  1. In order  to  provide  security for the  obligations of the
Depositor  pursuant to the terms of that certain  Credit and Security  Agreement
dated as of January 27, 1998 (as such agreement may be amended,  supplemented or
otherwise  modified,  renewed  or  replaced  from  time  to  time,  the  "Credit
Agreement")   among  the  Depositor,   the  lenders  referred  to  therein  (the
"Lenders"),  Credit  Lyonnais  New York Branch as  administrative  agent for the
Lenders (in such capacity,  the "Administrative  Agent"),  NationsBank of Texas,
N.A. as Syndication Agent and TD Securities (USA), Inc. as Documentation  Agent,
the Depositor has, among other things,  granted to the Administrative Agent (for
the benefit of the  Lenders) a security  interest  in (a) the Alaska  Depositary
Account, (b) all items now or from time to time in the Alaska Depositary Account
and (c) any proceeds of any of the foregoing.
<PAGE>
                                                                               2


                  2. The Depositary  Bank is hereby  irrevocably  authorized and
directed  not to  permit  the  withdrawal  or  transfer  (by  the  Depositor  or
otherwise)  of any amounts on deposit in the Alaska  Depositary  Account,  other
than pursuant to, and in accordance with, this letter agreement.

                  3. The Depositary  Bank is hereby  irrevocably  authorized and
directed on each  business  day to wire  transfer  all amounts on deposit in the
Alaska  Depositary  Account to the account of the  Depositor  maintained  at the
office of the Administrative Agent at 1301 Avenue of the Americas, New York, New
York 10019 (ABA#:  026008073),  designated  as the "Alaska  United  Disbursement
Account",  Account No. 0139787000100 or such other account as the Administrative
Agent  may  specify  in  writing.  If  either  the  Administrative  Agent or the
Depositary  Bank is not open for business on any day, then such transfers  shall
be made on the next  succeeding day on which both the  Administrative  Agent and
the Depositary Bank are open for business.  The Depositary Bank hereby agrees to
make any such  transfer  no later  than  [        ]  (New York City time) on the
applicable business day.

                  4.  The  Depositary   Bank  is  hereby   further   irrevocably
authorized and directed to promptly forward to the  Administrative  Agent copies
of each daily  statement  pertaining to the Alaska  Depositary  Account and each
telex,  telecopy or other  correspondence  which  accompanies  or indicates  the
source any payment deposited in the Alaska Depositary Account.

                  5.  By  its  acceptance  hereof  and  agreement  hereto,   the
Depositary  Bank hereby  waives,  with  respect to all its  existing  and future
claims against the Depositor or any affiliate  thereof,  all existing and future
rights of  set-off,  banker's  liens and  rights of pledge  against  the  Alaska
Depositary  Account  and all items  from time to time in the  Alaska  Depositary
Account and all proceeds of any of the foregoing  that come into the  possession
of the  Depositary  Bank in  connection  with  the  Alaska  Depositary  Account,
provided,  however,  that the  Depositary  Bank  retains the right to charge the
Alaska  Depositary  Account  for (a) items  deposited  in the Alaska  Depositary
Account and  subsequently  returned unpaid to the Depositary Bank and (b) unpaid
fees and expenses  pertaining  to the Alaska  Depositary  Account or any related
lockboxes.

                  6. The  Depositary  Bank  further  agrees (i) to  provide  the
Administrative  Agent with written notice if any fees and expenses pertaining to
the Alaska Depositary Account or any related lockboxes have not been paid by the
Depositor,  and agrees not to discontinue any services  pertaining to the Alaska
Depositary  Account  or such  lockboxes  unless 30 days have  elapsed  from such
notice being given by the Depositary Bank to the  Administrative  Agent and such
fees and  expenses  shall not have been  paid;  (ii)  agrees to  provide  to the
Administrative  Agent written notice if any changes or discontinuations  are for
any reason  contemplated  with 
<PAGE>
                                                                               3


respect to the Alaska Depositary  Account or any related  lockboxes,  and agrees
not to alter,  change or  discontinue  any  services  pertaining  to the  Alaska
Depositary  Account  or such  lockboxes  unless 30 days have  elapsed  from such
notice being given by the  Depositary  Bank to the  Administrative  Agent or the
Administrative  Agent shall have consented in writing;  and (iii) agrees that in
the event any  services  pertaining  to the  Alaska  Depositary  Account or such
lockboxes  are  discontinued  after  notice  to  the  Administrative   Agent  as
aforesaid,  the Depositary Bank will (subject to being furnished with reasonable
assurance  regarding  payment of its  related  fees and  expenses)  comply  with
reasonable  instructions of the Administrative Agent regarding the forwarding of
any payment or items subsequently  deposited in the Alaska Depositary Account or
delivered to any related lockboxes.

                  7. The Depositor and the Depositary Bank confirm that attached
hereto  are true and  correct  copies of all  existing  agreements  between  the
Depositor and the Depositary Bank with respect to the Alaska Depositary  Account
or any related lockboxes or otherwise  relating to the collection of receivables
of the Depositor.

                  8. This letter agreement (a) shall be effective as of the date
first above written; (b) shall to the extent inconsistent  therewith,  supersede
any other agreement or instruction  letter  relating to the matters  referred to
herein,  including,  without limitation,  any bank account agreement between the
Depositor and the  Depositary  Bank relating to collection of receivables of the
Depositor;  (c)  is  binding  upon  the  parties  hereto  and  their  respective
successors  and assigns and shall inure to their  benefit;  (d) shall not in any
way or to any extent be changed,  amended,  modified or waived without the prior
written  consent of the  Administrative  Agent;  (e) shall be  governed  by, and
interpreted  in accordance  with, the laws of the State of New York; and (f) may
be executed in any number of  counterparts  each of which  shall  constitute  an
original but all of which when taken together shall  constitute one and the same
instrument.  Any provision hereof that may prove  unenforceable under any law or
regulation shall not affect the validity of any other provisions hereof.
<PAGE>
                  9. This letter  agreement  shall  terminate  upon the full and
indefeasible  payment of all the Loans and the other  Obligations (as such terms
are defined in the Credit  Agreement)  and the  termination  of the  Commitments
(such  term  being  used  herein  as  defined  in  the  Credit  Agreement).  The
Administrative  Agent shall notify the Depositary Bank in writing once such full
and indefeasible repayment has occurred and the Commitments have terminated.


                                       Very truly yours,

                                       ALASKA UNITED FIBER SYSTEM PARTNERSHIP

                                       By: GCI Fiber Co., Inc. a General Partner


                                       By: 
                                       Name:
                                       Title:

                                       By:  Fiber  Hold  Co.,  Inc.,  a  General
                                       Partner


                                        By: 
                                       Name:
                                       Title:



ACCEPTED AND AGREED,
  AS AFORESAID,

THE FIRST NATIONAL BANK
  OF ANCHORAGE, as Depositary Bank


By:
      Name:
      Title:
<PAGE>
ACCEPTED,

CREDIT LYONNAIS NEW YORK BRANCH,
  as Administrative Agent


By:
      Name:
      Title:
<PAGE>

         [Attach true and correct copies of all existing  agreements between the
         Depositor and the  Depositary  Bank  relating to the Alaska  Depositary
         Account,  any related lockboxes or otherwise relating to the collection
         of the Depositor's receivables]

<PAGE>
                             BORROWER'S CERTIFICATE
                                (KANAS CONSENT)

     I am the  Secretary/Treasurer of GCI Fiber Co., Inc., a General Partner and
the General Manager of Alaska United Fiber System Partnership, an Alaska general
partnership ("Borrower").

     1. This Certificate is being delivered  pursuant to the credit and Security
Agreement dated as of January 27, 1998 ("Credit  Agreement") among the Borrower,
the lenders named therein,  Credit Lyonnais New Your Branch,  as  Administrative
Agent,  Nationsbank of Teas, N.A., as Syndication  Agent and TD Securities (USA)
Inc., as Documentation Agent. Unless otherwise defined herein, capitalized terms
in this  Certificate  shall  have  the  meanings  given  to  them in the  Credit
Agreement.

     2.  Attached  hereto  is a  correct  and  complete  copy  of  that  certain
Acknowledgment and Consent between GCI Communication Corp., the Borrower,  Kanas
Telecom, Inc., Credit Lyonnais New Your Branch,  NationsBank of Texas, N.A., and
TD Securities (USA) Inc., dated as of January 8, 1998.

     In witness  whereof,  the undersigned has duly executed this Certificate on
behalf of the Borrower as of January 27, 1998.


                                            ALASKA     UNITED    FIBER    SYSTEM
                                            PARTNERSHIP by a General Partner and
                                            its General Manager,  GCI Fiber Co.,
                                            Inc.


                                            By /s/
                                            John M. Lowber, Secretary/Treasurer

<PAGE>
                           ACKNOWLEDGMENT AND CONSENT


                  THIS  ACKNOWLEDGMENT  AND CONSENT (this "Consent") dated as of
January 8, 1998 is by and among GCI COMMUNICATION  CORP., an Alaska  corporation
("GCICC"), ALASKA UNITED FIBER SYSTEM PARTNERSHIP, an Alaska general partnership
(the "Borrower"),  KANAS TELECOM,  INC., an Alaska  corporation (the "Company"),
CREDIT LYONNAIS NEW YORK BRANCH, ("Credit Lyonnais"), NATIONSBANK OF TEXAS, N.A.
("NationsBank") and TD SECURITIES (USA) INC. ("Toronto Dominion";  together with
Credit Lyonnais and NationsBank, the "Banks").


                                   WITNESSETH:

                  WHEREAS,  the Company and GCICC have entered into that certain
Fiber Exchange Agreement dated as of November 21, 1997 (as amended,  modified or
supplemented from time to time, the "Assigned Agreement"); and

                  WHEREAS,  GCICC has  assigned  certain of its rights under and
pursuant to the Assigned Agreement to the Borrower; and

                  WHEREAS,  General  Communication,  Inc.  and  the  Banks  have
entered  into a  Commitment  Letter  dated  as of July 3,  1997  (as  heretofore
amended,  the "Commitment Letter") pursuant to which the Banks have committed to
provide a construction and term loan facility to the Borrower a portion of which
will be used to finance the construction, ownership and operation of an undersea
fiber optic  telecommunications cable connecting certain cities in Alaska to the
lower 48 states (the "Alaska  United  System") (any such loan facility which may
be made in the future  shall be referred to herein as the  "Facility"  and shall
only be made upon  execution of  definitive  documentation  which is in form and
substance satisfactory to the Banks; Credit Lyonnais would be the administrative
agent for the  lenders  under the credit  agreement  for the  Facility  (in such
capacity, the "Administrative Agent")); and

                  WHEREAS,  in connection with the Facility,  the Borrower would
be required to  collaterally  assign its rights under the Assigned  Agreement to
the   Administrative   Agent  (on  behalf  of  certain   lenders)   pursuant  to
documentation  which is in form and  substance  satisfactory  to the Banks  (the
"Security  Instruments"),  as security for the Borrower's obligations related to
the Facility (the "Secured Obligations").

                  NOW,  THEREFORE,  in  consideration  of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
                  Section  1.  Payments  under  the  Assignment  Agreement.  The
parties  hereto agree that the Company shall make all payments due and to become
due to the Borrower or GCICC under the  Assigned  Agreement,  without  offset or
counterclaim  except as arises directly from the Assigned  Agreement,  in lawful
money of the United States of America,  in immediately  available  funds by wire
transfer,  directly to such account and/or address as the  Administrative  Agent
shall specify from time to time to the Company in writing.  Any and all payments
made  by the  Company  pursuant  to the  provisions  of  this  Consent  and  any
performance by the Company of its  obligations  under the Assigned  Agreement at
the request of the  Administrative  Agent  pursuant to this Consent  shall fully
satisfy and  discharge  the  Company's  obligations  to make such  payment to or
perform such obligations at the request of the Borrower or GCICC pursuant to the
Assigned  Agreement.  The Borrower and GCICC each hereby irrevocably  authorizes
and  directs  the Company to make such  payments  as set forth  herein,  and the
Borrower and GCICC each hereby releases and agrees to hold the Company  harmless
from any and all  liability  for making  payments as  provided  for herein or as
directed by the Administrative Agent.

                  Section 2.        Agreement of the Company.

                  (a) The Company  acknowledges and consents to an assignment by
the Borrower to the Administrative Agent (for the benefit of certain lenders) of
all of the Borrower's  right,  title and interest in, to, and under the Assigned
Agreement as collateral security for the Secured Obligations.

                  (b)  The   Company   acknowledges   and   consents   that  the
Administrative Agent or its designee shall have the right to exercise its rights
and remedies with respect to such  assignment or under the Security  Instruments
and agrees that,  upon the  occurrence  of an event of default  under the credit
agreement  or  any  other   applicable   document  for  the  Facility,   if  the
Administrative   Agent  shall  elect  to  exercise  rights  under  the  Security
Instruments  and if the  Administrative  Agent  notifies the  Company,  then the
Company will accept the Administrative Agent's exercise of any and all rights of
the Borrower under the Assigned Agreement.

                  (c) The Company  agrees that the  Administrative  Agent or its
designee  shall have the right to  enforce  directly  against  the  Company  all
obligations of the Company under the Assigned  Agreement to the same extent that
the Borrower could  exercise all rights and remedies  thereunder.  Further,  any
exercise of remedies under the Assigned  Agreement shall not require the further
consent of the Company  except as may be expressly  required  under the terms of
the Assigned Agreement.

                  (d) The Company agrees that neither the  Administrative  Agent
nor its designee  shall be subject to any duty or obligation  under the Assigned
Agreement,  unless and until the  Administrative  Agent shall have  notified the
Company  that it has elected to  exercise  its rights  pursuant to the  Security
Instruments  and to have itself or its  



                                      -2-
<PAGE>
designee  substituted  for the Borrower under the Assigned  Agreement,  in which
case the  Administrative  Agent  or its  designee,  as the  case  may be,  shall
thereafter  become liable to the Company to perform such duties and  obligations
of the Borrower as the Assigned Agreement requires.

                  (e) The  Company  agrees  that it will not take any  action to
sell,  assign,  or dispose (by operation of law or otherwise) of any part of its
interest in the Assigned  Agreement without making such transfer subject to this
Consent.

                  (f) The Company  agrees that it will not exercise any right it
may have to suspend  performance under or terminate the Assigned Agreement until
it (i) gives  written  notice to the  Borrower  and the Banks (or if  definitive
documentation for the Facility has been executed,  the Administrative  Agent) of
all then-existing  defaults of which it has knowledge,  specifying in reasonable
detail the nature (and in the case of monetary  defaults,  the amount)  thereof,
and (ii) affords the Banks or the  Administrative  Agent (as applicable) a total
period of ten (10) days to cure such default or breach, from the date of receipt
of such notice.

                  (g) The Company  acknowledges  that it will not have the right
to be named as an additional  insured or loss payee on any property insurance of
the Borrower or GCICC.

                  (h)  The  Company   agrees   that  it  will   deliver  to  the
Administrative Agent, in the manner set forth in Section 6 hereof,  concurrently
with the  delivery  thereof to the  Borrower or GCICC,  a copy of each  material
notice,  request,  or  demand  given by the  Company  pursuant  to the  Assigned
Agreement.

                  Section 3.        Agreement of the Borrower and GCICC.

                  (a) The  Borrower  and GCICC each  agrees  that the Company is
authorized  to act  in  accordance  with  the  Administrative  Agent's  (or  its
designee,  as the case may be)  instructions  or its exercise of the  Borrower's
rights  under the  Assigned  Agreement  and shall  release  and hold the Company
harmless from all liability to the Borrower and GCICC in connection therewith.

                  (b) The Borrower agrees that it will not exercise any right it
may have to  suspend  performance  under or  terminate  the  Assigned  Agreement
without the prior written  consent of the Banks (or if definitive  documentation
for the  Facility  has been  executed,  the  required  lenders  under the credit
agreement for the Facility).

                  Section 4. Consent of the Banks;  Agreement of  Administrative
Agent.

                  (a) The Banks hereby  consent to the execution by the Borrower
of the  Acknowledgment  and  Consent  dated as of  January  8, 1998 by and among
GCICC,  the  Borrower,  the  Company  and Credit  Lyonnais,  New York  Branch as
administrative agent provided such document is in substantially the same form as
this  Consent  (such   document   shall  be  referred  to  herein  as  the  "GCI
Acknowledgment  and  Consent").  The Banks  hereby  further  (i)  consent to the




                                      -3-
<PAGE>
execution of the  Assigned  Agreement  by GCICC and the  assignment  by GCICC of
certain of its rights under the Assigned  Agreement to the Borrower provided the
administrative  agent  and  the  lenders  referred  to in  that  certain  Credit
Agreement dated November 1, 1996 among the Company,  Credit  Lyonnais,  New York
Branch, as administrative  agent and the financial  institutions parties thereto
(as amended,  the "Kanas Credit  Agreement") (A) acknowledge in writing that any
assignment by the Company to any of them of any part of the  Company's  interest
in the Assigned Agreement is subject to this Consent, (B) acknowledge in writing
that their  rights are subject to the rights of  exclusive  use of the  Borrower
under the  Assigned  Agreement  (which shall be in the same form as Section 4(b)
below) and (C) consent to the Assigned  Agreement  (which consent is in form and
substance  satisfactory to the Banks) and do not require  anything from GCICC or
the Borrower other than an Acknowledgment and Consent  substantially in the form
hereof and (ii) acknowledge and agree that any assignment by the Borrower to the
Administrative  Agent or any of the Banks of any part of the Borrower's interest
in the Assigned Agreement is subject to the GCI Acknowledgment and Consent.

                  (b) The Banks hereby acknowledge that any security interest of
the Administrative Agent (on behalf of certain lenders) in the Borrower's assets
pursuant  to the  Security  Instruments  would be  subject  to the rights of the
Company to use the fiber pairs in the Alaska  United System to which the Company
has  been  granted  exclusive  use  pursuant  to  the  Assigned  Agreement.   In
particular,  the  lenders'  rights under the credit  agreement  for the Facility
and/or the Security Instruments and in the Borrower's assets (including, without
limitation,  the  Alaska  United  System)  would be  subject to the right of the
Company to use the fiber pairs in the Alaska  United System to which the Company
has been granted exclusive use pursuant to the Assigned Agreement, and that even
if the lenders shall exercise any rights that they have as secured parties under
the credit  agreement  for the  Facility  and/or the Security  Instruments,  the
lenders'  rights  shall be  subject  to such  rights of the  Company;  provided,
however,  that the Borrower (or its assignee) is still entitled to use the fiber
pairs to which  the  Borrower  has been  granted  exclusive  use by the  Company
pursuant to the Assigned Agreement and, provided, further, that the lenders make
no  representation  or warranty of any kind  whatsoever  regarding the Company's
rights under the Assigned  Agreement and except as specifically set forth herein
shall not be responsible  for any liability or obligation of the Borrower or any
other person.

                  (c) The  Administrative  Agent  acknowledges  that its  rights
hereunder shall terminate and be of no further force or effect following written
notification  by the  Administrative  Agent  to the  Company  that  the  Secured
Obligations  have been repaid in full and that all commitments of any lenders to
make loans or to extend credit have terminated or expired.

                  Section 5. Representations and Warranties.  The Company hereby
represents and warrants that:

                  (a) The  Company  is a  corporation  duly  organized,  validly
existing,  and in good  standing  under  the laws of the  State of  Alaska.  The
Company  has full  corporate  power,  



                                      -4-
<PAGE>
authority, and legal right to conduct its business as presently conducted and to
execute,  deliver,  and perform its obligations under the Assigned Agreement and
this Consent.

                  (b) The execution, delivery, and performance by the Company of
the Assigned  Agreement  and this Consent (i) have been duly  authorized  by all
necessary corporate action, and (ii) do not and will not (A) require any further
consents or approvals  which have not been obtained,  (B) violate any provisions
of any law,  regulation,  order,  judgment,  injunction or similar matters,  (C)
result in the breach of or  constitute  a material  default  under any  material
agreement  presently in effect with respect to or binding on the Company, or (D)
result in, or require,  the  creation or  imposition  of any  mortgage,  deed of
trust,  pledge,  lien,  security  interest or other charge or encumbrance of any
nature  (other  than as may be  contemplated  by this  Consent  or the  Assigned
Agreement)  upon or with  respect  to any of the  properties  or  assets  of the
Company now owned or hereafter acquired.

                  (c) Each of this Consent and the Assigned Agreement are legal,
valid, and binding  obligations of the Company,  enforceable against the Company
in full in accordance with their respective terms.

                  (d)  No  approval,   authorization  or  other  action  by  any
governmental  authority  or filing  with any such  authority  which has not been
obtained or accomplished is required in connection with the execution,  delivery
and performance of this Consent or the Assigned Agreement.

                  (e) There are no  actions,  suits or  proceedings  pending  or
overtly threatened against the Company before any court or administrative agency
that would materially impair the Company's  performance of its obligations under
this Consent or the Assigned Agreement.

                  (f)  All  conditions  precedent  to the  effectiveness  of the
Assigned Agreement have been satisfied by the parties thereto,  and the Assigned
Agreement is in full force and effect and has not been amended, supplemented, or
modified.

                  (g) The Company is not in default of any material  covenant or
obligation under the Assigned  Agreement.  To the knowledge of the Company as of
the date hereof,  there are no breaches under the Assigned  Agreement that would
allow the Company to terminate the Assigned Agreement.

                  (h) As of the date  hereof,  the Company has no  knowledge  of
existing counterclaims, offsets or defenses against the Borrower.

                  (i) Attached hereto as Exhibit A is a true and correct copy of
the Assigned Agreement as in effect on the date hereof.




                                      -5-
<PAGE>
                  Section 6. Notices.  Notices hereunder shall be in writing and
may be given by hand delivery or nationally recognized overnight courier. Notice
to any party  hereto  shall be deemed to be  delivered  on the date of  personal
delivery and shall be addressed as follows:

                  Credit Lyonnais or the             CREDIT LYONNAIS, NEW YORK 
                  Administrative Agent               BRANCH
                                                     1301 Avenue of the Americas
                                                     New York, New York  10019
                                                     Attn: Project Finance Group

                  NationsBank                        NATIONSBANK OF TEXAS, N.A.
                                                     901 Main Street, 64th Floor
                                                     Dallas, Texas  75202
                                                     Attn: Whitney L. Busse

                  Toronto Dominion                   TD SECURITIES (USA) INC.
                                                     31 West 52nd Street
                                                     New York, New York 
                                                     10019-6101
                                                     Attn:  Tom Westdyk

                  GCICC                              GCI COMMUNICATION CORP.
                                                     2550 Denali Street
                                                     Anchorage, Alaska  99503
                                                     Attn:  General Manager

                  Company                            KANAS TELECOM, INC.
                                                     4041 B Street, Suite 102
                                                     Anchorage, Alaska
                                                     99503-4196
                                                     Attn:  Vice President/Chief
                                                     Operating Officer

                  Borrower                           ALASKA UNITED FIBER SYSTEM
                                                     PARTNERSHIP
                                                     C/O GCI FIBER CO., INC.
                                                     2550 Denali Street, 
                                                     Suite 1000
                                                     Anchorage, Alaska  99503
                                                     Attn: Chief Financial 
                                                     Officer

                  Section 7.  Counterparts.  This Consent may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same agreement.

                  Section 8.  Governing  Law. This Consent shall be governed by,
and construed in accordance with, the laws of the State of New York.





                                      -6-
<PAGE>
                  Section 9. Successors and Assigns. This Consent shall inure to
the benefit of the Company,  GCICC, the Borrower,  the Administrative Agent, the
Banks and the lenders under the credit  agreement  for the  Facility,  and their
respective successors,  transferees, and assigns (including, without limitation,
any entity  that  refinances  all or any  portion of any loans  extended  to the
Borrower).

                  Section 10. Protection of  Administrative  Agent. In the event
that either (i) the Borrower's interest in the Assigned Agreement shall be sold,
assigned, or otherwise transferred pursuant to the exercise of any right, power,
or remedy by the Administrative  Agent or pursuant to judicial  proceedings,  or
(ii) the Borrower  rejects the Assigned  Agreement under 11 U.S.C.  Section 365,
and such  rejection is approved by the  appropriate  bankruptcy  court,  and, in
either case, (a) no funds payable under the Assigned Agreement shall then be due
and payable to the Company at the time of such  transfer or  rejection,  (b) the
Administrative  Agent  shall  have  arranged  for  the  curing  of  any  default
susceptible of being corrected by the Administrative  Agent or by a purchaser at
any judicial or no-judicial sale, and (c) the Assigned Agreement shall have been
terminated  pursuant to the terms thereof by reason of default or a rejection by
the Borrower or a trustee in bankruptcy under 11 U.S.C. Section 365, the Company
shall,  within  fifteen  (15) days after  receipt of written  request  therefor,
execute and deliver a fiber exchange  agreement to the  Administrative  Agent or
its  permitted  designee (or the assignee of either of them, as the case may be)
for the remainder of the term of the Assigned  Agreement and with the same terms
as are contained in the Assigned  Agreement  and with respect to all  facilities
that were subject to the Assigned Agreement.

                  [Remainder of page intentionally left blank]




                                      -7-
<PAGE>
                  IN WITNESS  WHEREOF,  the parties  have by the  signatures  of
their duly  authorized  officers  entered into this Consent as of the date first
set forth above.

CREDIT LYONNAIS                        CREDIT LYONNAIS NEW YORK BRANCH


                                       By: /S/
                                       Name: Michael F.G. Pepe
                                       Title: Vice President


NATIONSBANK                            NATIONSBANK OF TEXAS, N.A.


                                       By: /s/
                                       Name: Whitney Busse
                                       Title: Vice President


TORONTO DOMINION                       TD SECURITIES (USA) INC.


                                       By: /s/
                                       Name: Michael Bandzierz
                                       Title: Managing Director


GCICC                                  GCI COMMUNICATION CORP.


                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Chief Financial Officer

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


                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                       By:  Fiber  Hold  Co.,   Inc.  a  General
                                       Partner


                                       By: /s/
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer

COMPANY                                KANAS TELECOM, INC.


                                       By: /s/
                                       Name: Michael F.G. Williams
                                       Title: Vice President


<PAGE>
                                                                       EXHIBIT A
                                                                              TO
                                                      ACKNOWLEDGMENT AND CONSENT





                            FIBER EXCHANGE AGREEMENT

                                 by and between

                              KANAS TELECOM, INC.,
                        an Alaska corporation ("KANAS")

                                      and

                            GCI COMMUNICATION CORP.,
                        an Alaska corporation ("GCICC")

                               November 21, 1997



<PAGE>
                                TABLE OF CONTENTS


1.       Definitions and General Provisions................................  1
         1.1      Definitions..............................................  1
         1.2      General Definitions......................................  3

2.       Representations and Warranties....................................  4
         2.1      Representations and Warranties of Kanas..................  4
                  2.1.1    Good Standing...................................  4
                  2.1.2    Authorization...................................  4
                  2.1.3    Consent, Approval...............................  4
                  2.1.4    No Insolvency...................................  4
                  2.1.5    No Defaults.....................................  4
                  2.1.6    No Conflicts with Other Agreements..............  4
                  2.1.7    Litigation......................................  5
                  2.1.8    Enforceability..................................  5
                  2.1.9    Effect of Certificate...........................  5
                  2.1.10 Title; Right to Use...............................  5
         2.2      Representations and Warranties of GCICC..................  5
                  2.2.1    Good Standing...................................  5
                  2.2.2    Authorization...................................  5
                  2.2.3    Consent, Approval...............................  5
                  2.2.4    No Insolvency...................................  5
                  2.2.5    No Defaults.....................................  5
                  2.2.6    No Conflicts with Other Agreements..............  6
                  2.2.7    Litigation......................................  6
                  2.2.8    Enforceability..................................  6
                  2.2.9    Effect of Certificate...........................  6
                  2.2.10 Title; Right to Use...............................  6

3.       Exclusive Use of Dark Fiber.......................................  6
         3.1      Grants of Exclusive Use of Dark Fiber....................  6
         3.2      Exchange Date............................................  6
                  3.2.1    Substantial Completion of Kanas Facility........  7
                  3.2.2    Substantial Completion of GCICC Facility........  7
                  3.2.3    Liquidated Damages..............................  7
         3.3      Notice of Substantial Completion.........................  7
         3.4      Title to Facilities......................................  7

4.       Optional Interim Exchange of Circuits.............................  7
         4.1      Kanas' Option for Interim Exchange.......................  7
         4.2      Interim Exchange of Circuits.............................  7

5.       Consent for Kanas.................................................  7
         5.1      Consent by Alyeska.......................................  7
         5.2      Consent by Majority Lenders..............................  8
<PAGE>

6.       Milestone Requirements for GCICC Facility.........................  8
         6.1      GCICC Facility Construction Milestones...................  8
         6.2      Effect of Failure to Meet GCICC Facility Construction 
                  Milestones...............................................  9

7.       Rights-of-Way and Permits for GCICC Facility......................  9

8.       Liquidated Damages................................................  9

9.       GCICC Payments to Kanas...........................................  9

10.      Electronic Equipment; Interconnection.............................  9
         10.1     Installation of Electronic Equipment on Kanas Fibers.....  9
         10.2     Installation of Electronic Equipment on GCICC Fibers..... 10
         10.3     Space and Power on Kanas Facility........................ 10
         10.4     Space and Power on GCICC Facility........................ 10
         10.5     Modifications of Electronic Equipment.................... 10
         10.6     Relocation of Electronic Equipment....................... 10
         10.7     Electronic Equipment at Additional Locations............. 11
         10.8     Interconnection with Other Telecommunications Facilities. 11
                  10.8.1   Interconnection by GCICC........................ 11
                  10.8.2   Interconnection by Kanas........................ 11

11.      Maintenance; Risk of Loss......................................... 11
         11.1     Electronic Equipment...................................... 11
         11.2     Fiber.................................................... 12
         11.3     Access for Equipment Maintenance......................... 12

12.      Access to Facilities.............................................. 12

13.      Destruction/Restoration........................................... 12
         13.1     Total or Partial Destruction; Obligation to Restore...... 12
                  13.1.1   Excessive Cost to Restore....................... 12
                  13.1.2   Restoration Contrary to Law..................... 12

14.      Condemnation...................................................... 13
         14.1     Rights and Obligations of Parties Governed by this
                  Agreement................................................ 13
         14.2     Total Taking............................................. 13
         14.3     Partial Taking........................................... 13
         14.4     Payment of Award......................................... 13

15.      Management Meetings............................................... 13

16.      Regulatory Matters................................................ 13



                                      -ii-
<PAGE>
17.      Default and Remedies.............................................. 13
         17.1     Events of Default........................................ 13
                  17.1.1   Failure to Pay.................................. 13
                  17.1.2   Default of Covenants or Conditions.............. 13
                  17.1.3   Breach of Representations or Warranties......... 13
                  17.1.4   Insolvency, Bankruptcy.......................... 14
                  17.1.5   Order Appointing Receiver, Trustee or Liquidator 14
         17.2     Remedies on Default...................................... 14
                  17.2.1   Termination..................................... 14
                  17.2.2   Specific Performance............................ 14
                  17.2.3   Force Majeure................................... 14
         17.3     No Remedy Exclusive...................................... 15

18.      Confidentiality; Media Relations.................................. 15
         18.1     Confidentiality.......................................... 15
         18.2     Media Relations.......................................... 15

19.      Term; Duties Upon Termination..................................... 15
         19.1     Term..................................................... 15
         19.2     Duties upon Termination.................................. 15

21.      Exhibits.......................................................... 16

22.      Miscellaneous..................................................... 16
         22.1     No Implied Waiver........................................ 16
         22.2     Successors in Interest................................... 16
         22.3     Notices.................................................. 16
         22.4     Parties in Interest...................................... 17
         22.5     Relationship of Parties.................................. 17
         22.6     Time of Essence.......................................... 17
         22.7     Headings................................................. 17
         22.8     Law Governing Construction of Agreement.................. 17
         22.9     Exclusive Forum and Venue................................ 17
         22.10    Severability............................................. 17
         22.11    Integration and Modification............................. 17
         22.12    Additional Documents..................................... 18



                                     -iii-
<PAGE>
                            FIBER EXCHANGE AGREEMENT

         THIS FIBER EXCHANGE AGREEMENT (the "Agreement") is dated as of the 21st
day of November 1997, and is entered into by and between KANAS TELECOM, INC., an
Alaska corporation ("Kanas"), and GCI COMMUNICATION CORP., an Alaska corporation
("GCICC").

                  WHEREAS,  Kanas is  constructing,  and will own,  operate  and
maintain, a fiber optic  telecommunications  facility between Valdez, Alaska and
Prudhoe Bay, Alaska, along the right-of-way for the Trans-Alaska Pipeline; and

                  WHEREAS,  GCICC intends to construct,  and to own, operate and
maintain, a fiber optic  telecommunications  facility between Anchorage,  Alaska
and Valdez,  consisting  of buried or aerial  cable from  Anchorage to Whittier,
Alaska, and a submarine cable from Whittier to Valdez; and

                  WHEREAS,  both  Kanas  and GCICC  desire to obtain  the use of
fiber optic facilities necessary to provide telecommunications  services between
Anchorage and Fairbanks, Alaska;

                  NOW,  THEREFORE,  IN  CONSIDERATION OF THE PREMISES and of the
mutual  covenants  herein set forth,  the parties  hereto  agree and covenant as
follows:

1.       Definitions and General Provisions.

         1.1  Definitions.  The following terms shall,  for all purposes of this
Agreement, have the following meanings:

                  1.1.1  "Agreement"  means this Fiber  Exchange  Agreement,  as
amended from time to time.

                  1.1.2  "Alyeska" means Alyeska  Pipeline  Service  Company,  a
Delaware Corporation.

                  1.1.3 "Alyeska Agreement" means Contract TAPS/6220 dated as of
May 31, 1996 between Kanas and Alyeska, as amended from time to time.

                  1.1.4  "Award"  means all  compensation,  sums, or anything of
value awarded, paid, or received on a total or partial Condemnation.

                  1.1.5  "Business  Day"  means any day other  than a  Saturday,
Sunday or holiday when federal or State of Alaska government offices are closed.

                  1.1.6   "Condemnation"   means   (a)  the   exercise   of  any
governmental power,  whether by legal proceedings or otherwise,  by a Condemnor,
or (b) a voluntary  sale or transfer




                                                                    PAGE 1 OF 18
<PAGE>
to any Condemnor, either under threat of Condemnation or while legal proceedings
for Condemnation are pending.

                  1.1.7 "Condemnor" means any public or quasi-public  authority,
or private corporation or individual, having the power of eminent domain.

                  1.1.8 "Dark Fiber" means an identified  fiber contained within
a fiber  optic  cable,  which  has been  installed  with all  required  splicing
completed and terminated to an intermediate fiber distribution  panel, but which
has no light  source  present  and has not  been  terminated  to any  electronic
system.

                  1.1.9 "Date of Taking"  means the date the  Condemnor  has the
right to possession of the property being condemned.

                  1.1.10 "Event of Default" means any of the events specified as
an event of default in Section 17.1, or elsewhere in this Agreement.

                  1.1.11  "Exchange  Date"  means the single  date on which each
party's  right to use Dark  Fiber on the other  party's  Facility  commences  as
provided in Section 3.2.

                  1.1.12  "Facility"  means,  when  reference  is  made  to  the
Facility of a party,  (i) the GCICC Facility if the party is GCICC,  or (ii) the
Kanas Facility if the party is Kanas.

                  1.1.13  "Force  Majeure"  means,   without   limitation,   the
following:  acts of God; strikes,  lockouts,  or other industrial  disturbances;
acts of public  enemies;  orders or restraints of any kind of the  government of
the United States or of the State of Alaska or any other governmental authority,
or any of their departments,  agencies, subdivisions, or officials, or any civil
or military authority  (including any orders or restraints exercised pursuant to
any  agreement to which GCICC or Kanas is a party);  war or warlike  operations,
civil war or commotions,  mobilizations or military call-up, and acts of similar
nature;  revolution,  rebellions,  sabotage,  and  insurrections;  epidemics  or
quarantine restrictions;  landslides;  icebergs;  typhoons;  tornadoes;  adverse
weather conditions;  tidal waves; earthquakes;  fires; storms; droughts; floods;
explosions; breakage, malfunction, or accident to cable, facilities,  machinery,
transmission pipes, or canals; provided that no event which is reasonably in the
control  of a party or which the  party,  through  the  exercise  of  reasonable
maintenance or management, could have reasonably prevented from occurring, shall
be considered "force majeure."

                  1.1.14  "GCICC" means GCI  COMMUNICATION  CORP., a corporation
organized under the laws of the State of Alaska.

                  1.1.15  "GCICC  Facility"  means the fiber  optic  cable to be
constructed by GCICC between the SADC and the Petro Star Metering Station in the
vicinity  of  Valdez,  consisting  of buried or aerial  fiber  optic  cable from
Anchorage to Whittier,  a submarine  fiber optic cable from  Whittier to Valdez,
and buried or aerial  fiber optic  cable from Valdez to the Petro Star  Metering
Station.



                                                                    PAGE 2 OF 18
<PAGE>
                  1.1.16  "GCICC  Fibers" means the three pairs of Dark Fiber in
the Kanas  Facility,  the right to  exclusive  use of which Kanas has granted to
GCICC under Section 3.1.

                  1.1.17  "Kanas"  means  KANAS  TELECOM,   INC.  a  corporation
organized under the laws of the State of Alaska.

                  1.1.18  "Kanas  Facility"  means the fiber  optic  cable to be
constructed by Kanas between the Petro Star Metering  Station and the North Pole
Metering Station, along the right-of-way for the Trans-Alaska Pipeline.

                  1.1.19  "Kanas  Fibers" means the three pairs of Dark Fiber in
the GCICC  Facility,  the right to  exclusive  use of which GCICC has granted to
Kanas under Section 3.1.

                  1.1.20  "Majority  Lenders"  means  the  Majority  Lenders  as
defined in the Credit Agreement dated as of November 1, 1996 among Kanas, Credit
Lyonnais,  New York Branch,  individually and as  Administrative  Agent, and the
Lenders (as defined therein).

                  1.1.21 "OLT" means optical line termination equipment.

                  1.1.22  "POP" means a party's  primary  point of presence at a
designated location.

                  1.1.23  "SADC"  means  GCICC's  South  Anchorage  Distribution
Center, located at 6831 Arctic Boulevard, Anchorage, Alaska.

                  1.1.24  "Substantial  Completion" or "Substantially  Complete"
means, with respect to Dark Fiber,  that (i) the fiber has been installed,  with
all required splicing  completed,  (ii) the fiber transports light in accordance
with the  standards in Exhibit A, as  demonstrated  under the testing  procedure
described  in Exhibit A,  (iii)  space,  power and  equipment  access  have been
provided to the extent required by the terms of this Agreement; and the owner of
the Facility  containing  the fiber has  acquired all permits and  rights-of-way
that are required for its operation of that Facility.

                  1.1.25 "Term" means the term of this Agreement, which shall be
determined as provided in Section 19.1.

         1.2      General Definitions.

                  1.2.1 Sections. All references in this Agreement to designated
"Sections"  and  other  subdivisions  are  to  designated   sections  and  other
subdivisions of this Agreement.

                  1.2.2  General  Words  of  Reference.   The  words   "herein,"
"hereof,"  "hereto," "hereby," and "hereunder" and other words of similar import
refer to this  Agreement  as a whole  and not any  particular  section  or other
subdivisions.

                  1.2.3  Singular/Plural.  The  terms  specifically  defined  in
Section 1.1 have the  meanings  ascribed to them in that Section and include the
plural as well as the singular.




                                                                    PAGE 3 OF 18
<PAGE>
                  1.2.4 GAAP. All accounting terms not otherwise  defined herein
have  the  meanings  assigned  to them in  accordance  with  generally  accepted
accounting practices, consistently applied, in effect from time to time.

                  1.2.5  Authority.   Every  "approval,"   "request,"   "order,"
"demand," "application,"  "appointment,"  "notice," "statement,"  "certificate,"
"consent,"  or  similar  action  hereunder  shall,  unless  the form  thereof is
specifically  provided,  be in writing,  signed by a duly authorized  officer or
agent of the party or other person with a duly authorized signature.

                  1.2.6  Fiber Pair.  The term  "fiber  pair," or "pair" used in
reference to fiber, means two fibers in a fiber optic cable.

2.       Representations and Warranties.

         2.1  Representations  and  Warranties of Kanas.  As of the date hereof,
Kanas hereby represents and warrants as follows:

                  2.1.1 Good  Standing.  Kanas is a corporation in good standing
under the laws of the State of Alaska.

                  2.1.2  Authorization.  Kanas  has  full  corporate  power  and
authority  to carry on its  business  as now  conducted  and to enter  into this
Agreement.  The execution and delivery of this Agreement has been  authorized by
proper  corporate  action,  and this  Agreement  constitutes a valid and legally
binding obligation of Kanas.

                  2.1.3  Consent,  Approval.  Except  as may have  already  been
obtained,  and  except for the  consents  of Alyeska  and the  Majority  Lenders
required  in Section 5, no consent or approval of any  trustee,  shareholder  or
holder of any  indebtedness  or obligation of Kanas,  and no consent,  approval,
permission,  authorization,  order, or license of any governmental authority, is
required  to be  obtained  by  Kanas  for the  execution  and  delivery  of this
Agreement  or any other  instrument  or  agreement  required of Kanas under this
Agreement.

                  2.1.4 No  Insolvency.  Kanas is not  insolvent  as of the date
hereof.

                  2.1.5 No Defaults.  To its knowledge,  Kanas is not in default
nor has any event or circumstance  occurred which, but for the expiration of any
applicable  grace period or the giving of notice,  or both,  would  constitute a
default by Kanas under any material  agreement or instrument to which Kanas is a
party or by which Kanas is bound  which  default  would have a material  adverse
effect on Kanas' performance under this Agreement.

                  2.1.6  No  Conflicts  with  Other   Agreements.   Neither  the
execution  and  delivery  of  this  Agreement,   and  the  consummation  of  the
transactions  contemplated hereby, nor the fulfillment of or compliance with the
provisions hereto, materially conflicts with, violates, or breaches any charter,
bylaw, or stock provision of Kanas,  any of the material terms,  conditions,  or
provisions of any indenture,  instrument, or agreement to which Kanas is a party
or by which Kanas is bound,  any statute,  rule or regulation,  or any judgment,
decree,  or order of any court 



                                                                    PAGE 4 OF 18
<PAGE>
or agency binding on Kanas,  or constitutes a default under any of the foregoing
which has not been waived or consented to in writing by the appropriate party or
parties.

                  2.1.7  Litigation.  To the  knowledge  of  Kanas,  there is no
action,  suit,  proceeding,  inquiry,  or  investigation by or before any court,
governmental agency, or public board or body pending or threatened against Kanas
which (i) affects or seeks to prohibit,  restrain,  or enjoin the  execution and
delivery  of  this  Agreement,   (ii)  affects  or  questions  the  validity  or
enforceability  of this Agreement,  or (iii) questions the power or authority of
Kanas  to  carry  out  the  transactions  contemplated  by,  or to  perform  its
obligations under, this Agreement.

                  2.1.8 Enforceability.  When duly executed, this Agreement will
be enforceable against Kanas according to its terms, except as may be limited by
bankruptcy,  insolvency,  reorganization,  or other  laws  affecting  creditors'
rights generally as amended from time to time.

                  2.1.9  Effect of  Certificate.  Any  certificate  signed by an
officer of Kanas duly  authorized  to execute  such  certificate  and  delivered
pursuant to this Agreement shall be deemed to be a  representation  and warranty
by Kanas as to the statements made therein.

                  2.1.10  Title;  Right to Use.  Kanas has,  or will have by the
date provided herein for Substantial Completion of the Kanas Facility,  title or
the right to use all property  necessary to fulfill its  obligations  under this
Agreement.

         2.2  Representations  and  Warranties of GCICC.  As of the date hereof,
GCICC hereby represents and warrants as follows:

                  2.2.1 Good  Standing.  GCICC is a corporation in good standing
under the laws of the State of Alaska.

                  2.2.2  Authorization.  GCICC  has  full  corporate  power  and
authority  to carry on its  business  as now  conducted  and to enter  into this
Agreement.  The execution and delivery of this Agreement has been  authorized by
proper  corporate  action,  and this  Agreement  constitutes a valid and legally
binding obligation of GCICC.

                  2.2.3  Consent,  Approval.  Except  as may have  already  been
obtained, or will be obtained as provided in Section 6.1, no consent or approval
of any trustee or holder of any  indebtedness  or  obligation  of GCICC,  and no
consent,  approval,  permission,   authorization,   order,  or  license  of  any
governmental  authority,  is required to be obtained by GCICC for the  execution
and delivery of this Agreement or any other instrument or agreement  required of
GCICC under this Agreement.

                  2.2.4 No  Insolvency.  GCICC is not  insolvent  as of the date
hereof.

                  2.2.5 No Defaults.  To its knowledge,  GCICC is not in default
nor has any event or circumstance  occurred which, but for the expiration of any
applicable  grace period or the giving of notice,  or both,  would  constitute a
default by GCICC under any material  agreement 



                                                                    PAGE 5 OF 18
<PAGE>
or instrument to which GCICC is a party or by which GCICC is bound which default
would  have  a  material  adverse  effect  on  GCICC's  performance  under  this
Agreement.

                  2.2.6  No  Conflicts  with  Other   Agreements.   Neither  the
execution  and  delivery  of  this  Agreement,   and  the  consummation  of  the
transactions  contemplated hereby, nor the fulfillment of or compliance with the
provisions hereto, materially conflicts with, violates, or breaches any charter,
bylaw, or stock provision of GCICC,  any of the material terms,  conditions,  or
provisions of any indenture,  instrument, or agreement to which GCICC is a party
or by which GCICC is bound,  any statute,  rule or regulation,  or any judgment,
decree,  or order of any court or agency  binding  on GCICC,  or  constitutes  a
default under any of the foregoing  which has not been waived or consented to in
writing by the appropriate party or parties.

                  2.2.7  Litigation.  To the  knowledge  of  GCICC,  there is no
action,  suit,  proceeding,  inquiry,  or  investigation by or before any court,
governmental agency, or public board or body pending or threatened against GCICC
which (i) affects or seeks to prohibit,  restrain,  or enjoin the  execution and
delivery  of  this  Agreement,   (ii)  affects  or  questions  the  validity  or
enforceability  of this Agreement,  or (iii) questions the power or authority of
GCICC  to  carry  out  the  transactions  contemplated  by,  or to  perform  its
obligations under, this Agreement.

                  2.2.8 Enforceability.  When duly executed, this Agreement will
be enforceable against GCICC according to its terms, except as may be limited by
bankruptcy,  insolvency,  reorganization,  or other  laws  affecting  creditors'
rights generally as amended from time to time.

                  2.2.9  Effect of  Certificate.  Any  certificate  signed by an
officer of GCICC duly  authorized  to execute  such  certificate  and  delivered
pursuant to this Agreement shall be deemed to be a  representation  and warranty
by GCICC as to the statements made therein.

                  2.2.10  Title;  Right to Use.  GCICC has,  or will have by the
date provided herein for Substantial Completion of the GCICC Facility,  title or
the right to use all property  necessary to fulfill its  obligations  under this
Agreement.

3.       Exclusive Use of Dark Fiber.

         3.1 Grants of Exclusive Use of Dark Fiber. GCICC hereby grants to Kanas
the  exclusive  right to use three Dark Fiber pairs in the GCICC  Facility,  and
Kanas hereby grants to GCICC the  exclusive  right to use three Dark Fiber pairs
in the Kanas  Facility.  The rights to exclusive  use granted under this Section
shall commence on the Exchange Date, and shall continue thereafter until the end
of the Term of this Agreement.  The specific locations and points of termination
of the Kanas  Fibers are  described  in Exhibit B. The  specific  locations  and
points of termination of the GCICC Fibers are described in Exhibit C.

                  3.2 Exchange  Date.  Each party's  right granted under Section
3.1 to the  exclusive  use of Dark  Fiber in the other  party's  facility  shall
commence on the same date, i.e., the



                                                                    PAGE 6 OF 18
<PAGE>
Exchange  Date.  The Exchange  Date is the first  Business Day after each of the
following conditions has been satisfied:

                  3.2.1  Substantial  Completion  of Kanas  Facility.  Kanas has
given GCICC written notice that the Kanas Facility is Substantially Complete.

                  3.2.2  Substantial  Completion  of GCICC  Facility.  GCICC has
given Kanas written notice that the GCICC Facility is Substantially Complete.

                  3.2.3 Liquidated  Damages.  Each party has paid any liquidated
damages that are due the other party under Section 8.

Notwithstanding any other provision of this Agreement, the requirement that each
of the foregoing conditions occur before the Exchange Date shall not be affected
by any act or event of Force Majeure.

         3.3 Notice of  Substantial  Completion.  GCICC shall give Kanas written
notice of the Substantial  Completion of the GCICC Facility within 10 days after
its  Substantial  Completion.  Kanas  shall  give  GCICC  written  notice of the
Substantial   Completion  of  the  Kanas  Facility  within  10  days  after  its
Substantial Completion.

         3.4 Title to  Facilities.  Notwithstanding  the grants of exclusive use
under Section 3.1, each party shall retain title to all of its Facility.

4.  Optional Interim Exchange of Circuits.

         4.1 Kanas' Option for Interim  Exchange.  If the Exchange Date does not
occur upon Kanas'  written  notification  to GCICC under  Section 3.2.1 that the
Kanas Facility is Substantially  Complete,  Kanas, in its sole  discretion,  may
exercise the option to make the interim exchange of telecommunications  circuits
described in Section 4.2. Kanas shall  exercise the option by providing  written
notice to GCICC of its  election to  exercise  the option not later than 30 days
after Substantial Completion of the Kanas Facility.

         4.2 Interim  Exchange of Circuits.  The following  interim  exchange of
telecommunications  circuits shall be made for a period  commencing  with Kanas'
exercise of the option as provided in Section  4.1,  and ending on the  Exchange
Date.  GCICC  shall  provide at no cost to Kanas six  terrestrial  T-1  circuits
between Fairbanks and Anchorage, and Kanas shall provide at no cost to GCICC two
T-1 circuits  between  Fairbanks  and Prudhoe Bay, and two T-1 circuits  between
Valdez and Fairbanks.

5.       Consent for Kanas.

         5.1 Consent by Alyeska.  Kanas will use its best  efforts to obtain the
consent of  Alyeska  to this  Agreement.  If Kanas  fails to obtain the  written
consent of Alyeska to this Agreement on or before November 26, 1997, GCICC shall
have the option to terminate this Agreement by written notice to Kanas. Upon the
exercise of this option by GCICC,  this 



                                                                    PAGE 7 OF 18
<PAGE>
Agreement shall terminate,  and neither party shall have any further  obligation
to the other under this Agreement.

         5.2 Consent by  Majority  Lenders.  Kanas will use its best  efforts to
obtain the consent of the Majority  Lenders to this  Agreement.  This  Agreement
shall become  effective  only upon the receipt by Kanas on or before  January 1,
1998 of the written  consent of the Majority  Lenders to this  Agreement,  which
consent shall be either  unconditional or subject only to such conditions as are
acceptable to Kanas.

6.       Milestone Requirements for GCICC Facility.
<TABLE>
         6.1 GCICC Facility Construction Milestones. GCICC shall accomplish each
of the following tasks for  construction of the GCICC Facility no later than the
deliverable due date stated below.
<CAPTION>
                   Task                     Deliverable Date                 Deliverable
                   ----                     ----------------                 -----------
<S>                                         <C>                              <C> 
Award of Submarine Cable Construction       December 10, 1997                Executed Submarine Cable Construction
Contract                                                                     Contract
Approval of this Agreement by GCICC Lead    December 15, 1997                Written Approval of Lead Bank
Lender Bank
Completion of Preliminary Survey            January 8, 1998                  Preliminary Survey Report for
                                                                             Complete System between GCICC SADC
                                                                             and Valdez
Completion of Preliminary Detailed Design   March 1, 1998                    Preliminary Design Documents for all
                                                                             Outside Plant
Completion of Survey                        June 1, 1998                     Final Survey Report for Complete
                                                                             System Between GCICC SADC and Petro
                                                                             Star Metering Station
Completion of Detailed Design               July 1, 1998                     Construction Drawings For All Outside
                                                                             Plant
</TABLE>
Each task described above shall be considered  complete for the purposes of this
Agreement on the date of Kanas' written notice to GCICC of Kanas'  acceptance of
the deliverable. Kanas will inspect each deliverable with reasonable promptness,
and respond to GCICC in writing  within 10 business days either  stating that it
accepts  the  deliverable,  or  giving  notice  of  any  defects  therein.  Such
acceptance shall not be unreasonably withheld. It shall be the responsibility of
GCICC to complete each deliverable, including curing any deficiencies identified
by Kanas, and obtain Kanas'  acceptance  thereof,  no later than the deliverable
due date stated above. Notwithstanding any other provision of this Agreement, no
deliverable  due date in this  Section  shall be affected by any act or event of
Force Majeure.




                                                                    PAGE 8 OF 18
<PAGE>
         6.2 Effect of Failure to Meet GCICC Facility  Construction  Milestones.
If GCICC  fails to  complete  any of the tasks  described  in Section  6.1 on or
before the  deliverable  due date for that task in Section 6.1, Kanas shall have
the option to terminate this Agreement by written notice  delivered to GCICC not
later than 15 days after the deliverable due date. Upon  termination  under this
Section, neither party shall have any further obligation to the other under this
Agreement.

7.  Rights-of-Way  and  Permits  for GCICC  Facility.  Within ten days after the
execution  of  this  Agreement,  GCICC  shall  prepare  and  submit  for  Kanas'
information a schedule of the permits and rights-of-way  that GCICC then expects
to  acquire  to effect  construction  and  Substantial  Completion  of the GCICC
Facility.  Not later than the second Business Day of each month commencing after
the execution of this Agreement,  and until Substantial  Completion of the GCICC
Facility,  GCICC  shall  provide to Kanas a written  report on the status of all
permits  and  rights-of-way  that  GCICC  then  expects to acquire to effect the
construction  or  Substantial  Completion  of the GCICC  Facility.  Each monthly
report shall contain a comparison of actual progress with the estimated progress
of the  acquisition  each such permit and  right-of-way,  and in the case of the
acquisition of any permit or  right-of-way  whose actual  progress does not meet
the  estimate,  a narrative  description  of the means and  methods  which GCICC
intends to employ to  expedite  the  progress  of  acquisition  of the permit or
right-of-way to ensure timely Substantial Completion of the GCICC Facility.

8. Liquidated Damages. If one party's Facility is Substantially Complete and the
other party's Facility is not Substantially  Complete,  the party whose Facility
is not Substantially  Complete shall pay to the other liquidated  damages in the
amount of $200,000 for each calendar  month (i) commencing on or after the later
of the date the first party's Facility is Substantially complete, or December 1,
1998,  and (ii) ending on or before the Exchange  Date. The parties hereby agree
in advance that this amount  reflects  their  estimation of actual  damages that
will be suffered  from a delay in the  Exchange  Date.  The  affected  party may
institute an action to recover such liquidated damages from the defaulting party
as  compensation  for its failure to receive the  exclusive  use of the pairs of
Dark Fiber described in Section 3.1, not as a penalty.  Liquidated damages shall
be  available  as provided in this Section  whether on not Kanas  exercises  the
option for interim exchange of circuits under Section 4.

9. GCICC  Payments to Kanas.  GCICC will pay to Kanas the sum of $500,000 in two
installments of $250,000 each. GCICC shall pay the first installment of $250,000
to Kanas  within 10 days after the  Exchange  Date.  GCICC  shall pay the second
installment  of $250,000  to Kanas on the date that is 12 months  after the date
when the first installment is due.

10.      Electronic Equipment; Interconnection.

         10.1 Installation of Electronic  Equipment on Kanas Fibers. Kanas shall
bear the expense of acquiring  and  installing  its own OLT,  repeater and other
electronic  equipment to operate the Kanas Fibers.  The  locations  where Kanas'
electronic  equipment is to be installed  are described in Exhibit B. Subject to
Kanas'  obtaining  any  required  third party  consent,  GCICC shall allow Kanas
reasonable  access to the GCICC  Facility for the purpose of  installing  Kanas'
electronic equipment.




                                                                    PAGE 9 OF 18
<PAGE>
         10.2 Installation of Electronic  Equipment on GCICC Fibers. GCICC shall
bear the expense of acquiring  and  installing  its own OLT,  repeater and other
electronic  equipment to operate the GCICC Fibers.  The locations  where GCICC's
electronic  equipment is to be installed  are described in Exhibit C. Subject to
GCICC's  obtaining  any required  third party  consent,  Kanas shall allow GCICC
reasonable  access to the Kanas  Facility for the purpose of installing  GCICC's
electronic equipment.

         10.3 Space and Power on Kanas Facility.  GCICC will pay the incremental
cost of  providing  space and power for the  electronic  equipment  that it will
install to operate the GCICC Fibers. GCICC understands that it cannot obtain any
space for GCICC electronic  equipment  within  facilities owned or controlled by
Alyeska.  Upon the request and at the expense of GCICC,  Kanas shall  extend the
GCICC  Fibers  and any  power  conductors  from  the  Alyeska  perimeter  to the
interconnect  with the Kanas  Facility and any power made  available to GCICC by
Alyeska.  Kanas will use its best  efforts  to assist  GCICC in  obtaining  from
Alyeska  access  to  power  for  GCICC's  electronic  equipment,  and  Alyeska's
permission  to extend the GCICC Fibers and power supply cable to the  facilities
that GCICC  constructs to house its  electronic  equipment;  provided that Kanas
shall not be obligated to incur any expense or liability for this purpose.

         10.4 Space and Power on GCICC Facility. Kanas shall pay the incremental
cost of  providing  space and power for the  electronic  equipment  that it will
install to operate the Kanas  Fibers.  The locations at which Kanas will require
space  and power  for such  electronic  equipment,  and  Kanas'  space and power
requirements for each location, are specified in Exhibit D.

         10.5  Modifications  of Electronic  Equipment.  Each party,  at its own
expense,  may modify or replace electronic equipment that it has installed under
Sections 10.1 or 10.2, subject to any limitations imposed by the space and power
that the other party is obligated to provide for the equipment at that location.
If  a  party  requires  an  increase  in  space  or  power  to  accommodate  the
modification or replacement of its equipment, it shall notify the other party in
writing of its increased requirements. The recipient of the notice shall use its
best  efforts  to  accommodate   the  request   subject  to  its  own  operating
requirements and contractual  arrangements with third parties.  The recipient of
the request need not make any modifications to its facilities to accommodate the
request  until the  requesting  party  has  agreed  in  writing  to pay the cost
thereof.

         10.6 Relocation of Electronic Equipment.  Kanas may relocate electronic
equipment  installed  for the  operation  of the  GCICC  Fibers,  and  GCICC may
relocate  electronic  equipment installed for the operation of the Kanas Fibers,
provided that, before the relocation:

         A.       The relocating party gives 45 days written notice to the other
                  party of the relocation;

         B.       The   relocating   party   demonstrates   to  the   reasonable
                  satisfaction  and written approval of the other party that the
                  relocation will not adversely effect either (i) the quality or
                  reliability of the other party's  telecommunications  service,
                  or (ii)  



                                                                   PAGE 10 OF 18
<PAGE>
                  access by the other party for  maintenance  of its  equipment;
                  and

         C.       The relocating party has agreed in writing to pay all costs of
                  relocating the other party's equipment.

The  relocating  party shall  conduct the  relocation  in a manner that does not
interrupt  or  degrade  the  quality  of the  other  party's  telecommunications
service, in accordance with the standards in Exhibit E.

         10.7 Electronic  Equipment at Additional  Locations.  Kanas may, at its
own expense,  install  electronic  equipment at locations on the GCICC  Facility
other than the locations described in Exhibit B, provided that any such location
is one where GCICC already  maintains its own  electronic  equipment,  and Kanas
shall be responsible for all costs and arrangements  required to accommodate its
equipment.  GCICC may,  at its own  expense,  install  electronic  equipment  at
locations on the Kanas Facility other than the locations described in Exhibit C,
provided that any such location is one where Kanas has ready access to the GCICC
Fibers,  and GCICC shall be responsible for all costs and arrangements  required
to accommodate its equipment.

         10.8     Interconnection with Other Telecommunications Facilities.

                  10.8.1  Interconnection by GCICC. Subject to GCICC's obtaining
any required  third party  consent,  GCICC may, at its own expense,  connect the
GCICC Fibers with other telecommunications  facilities at intermediate points on
the Kanas Facility. Kanas shall have the right to approve how such work is done,
but shall have no obligations,  and shall be subject to no expense, with respect
to the interconnection.

                  10.8.2  Interconnection by Kanas.  Subject to Kanas' obtaining
any required  third party  consent,  Kanas may, at its own expense,  connect the
Kanas Fibers with other telecommunications  facilities at intermediate points on
the GCICC Facility. GCICC shall have the right to approve how such work is done,
but shall have no obligations,  and shall be subject to no expense, with respect
to the interconnection.

11.      Maintenance; Risk of Loss.

         11.1     Electronic Equipment.

                  11.1.1  Maintenance.  Each  party  shall  provide,  at its own
expense, for the routine and non-routine maintenance of the electronic equipment
that it has caused to be installed for its use under Section 10.

                  11.1.2 Risk of Loss.  Each party shall bear the risk of damage
or loss to the  electronic  equipment that it has caused to be installed for its
use under Section 10, except that the other party shall be responsible  for such
loss or damage that is caused by its own negligence or intentional misconduct.



                                                                   PAGE 11 OF 18
<PAGE>
         11.2     Fiber.

                  11.2.1 Maintenance.  Each party shall maintain its Facility in
accordance with the standards in Exhibit E. Each party shall bear all operations
and maintenance costs associated with its Facility, subject to the terms of this
Agreement.   Such  operations  and  maintenance   costs  shall  include  without
limitation all labor,  training,  contracts,  materials,  transportation and all
other related maintenance expenses.

                  11.2.2 Risk of Loss.  Each party shall bear the risk of damage
or loss to its Facility,  except that the other party shall be  responsible  for
such  loss  or  damage  that is  caused  by its own  negligence  or  intentional
misconduct.

         11.3 Access for Equipment Maintenance.  Subject to Kanas' obtaining any
required third party consent,  GCICC shall grant Kanas reasonable  access to the
GCICC Facility for the purpose of maintaining Kanas' electronic equipment on the
Kanas Fibers.  Subject to GCICC's  obtaining any required  third party  consent,
Kanas shall grant GCICC reasonable  access to the Kanas Facility for the purpose
of maintaining GCICC's electronic equipment on the GCICC Fibers.

12. Access to Facilities. Each party understands that the other party's Facility
may be located on private  property or  rights-of-way  to which the former party
presently  has no right of  access.  Each  party  understands  that it is solely
responsible for obtaining such access from third parties as may be necessary for
it to  install,  operate,  maintain,  remove,  repair or replace  its  equipment
located on the other party's  Facility.  Each party will use its best efforts to
assist the other party in obtaining such access,  but neither party is obligated
to incur any expense or liability in providing such assistance. Each party shall
bear all costs of complying with conditions required by third parties for access
to the other party's Facility.

13. Destruction/Restoration.

         13.1 Total or Partial  Destruction;  Obligation to Restore.  If, during
the Term, either party's Facility is totally or partially  destroyed,  rendering
the Facility totally or partially  inaccessible or unusable, the party that owns
the Facility shall restore the Facility to  substantially  the same condition as
it was in immediately before destruction,  except as provided in Sections 13.1.1
and 13.1.2.

                  13.1.1 Excessive Cost to Restore.  If the cost of repairing or
restoring the Facility,  net of any available  insurance proceeds not reduced by
applicable  deductibles and  coinsurance,  exceeds ten percent (10%) of the then
replacement cost of the Facility,  the party that owns the Facility can elect to
terminate this Agreement by giving notice to the other party within fifteen (15)
days after  determining the restoration  cost and  replacement  value,  and this
Agreement shall terminate.

                  13.1.2  Restoration  Contrary to Law. If the existing  laws do
not  permit  the   restoration,   either  party  can  terminate  this  Agreement
immediately by giving notice to the other party.




                                                                   PAGE 12 OF 18
<PAGE>
14.      Condemnation.

         14.1 Rights and Obligations of Parties Governed by this Agreement.  If,
during  the  Term,  there  is any  taking  of all or any part of a  Facility  by
Condemnation,  the rights and  obligations  of the parties  shall be  determined
pursuant to this Section 14.

         14.2 Total Taking.  If the Premises are totally taken by  Condemnation,
this Agreement shall terminate on the Date of Taking.

         14.3  Partial  Taking.  If  any  portion  of a  Facility  is  taken  by
Condemnation,  this Agreement  shall remain in effect,  except that either party
may elect to terminate this  Agreement if the remaining  portion of the Facility
is rendered unsuitable for that party's continued use of the Facility.

         14.4  Payment of Award.  The Award shall be payable to the owner of the
Condemned Facility; except that the other party shall receive from the Award the
amount  attributable  to the value of its right under this  Agreement to use any
fibers in the Facility that were Condemned.

15.  Management  Meetings.  Designated  representatives  of a  majority  of  the
shareholders  of Kanas and GCICC senior  management  shall meet  semiannually to
review the performance of the facilities that are the subject of this Agreement.

16. Regulatory Matters.  Each party shall obtain all permits,  authorizations or
approvals that are required by any regulatory authority to operate its Facility.
By entering into this Agreement, neither party waives any exclusion or exemption
of its facilities or services from common carrier or public utility  regulation.
The parties will cooperate in obtaining any required  governmental  approvals or
consents.

17.      Default and Remedies.

         17.1 Events of Default. The following events shall constitute an "Event
of Default" under this Agreement:

                  17.1.1  Failure to Pay.  The failure of a party to pay any sum
of money due under  this  Agreement  within  ten (10) days after the same is due
hereunder.

                  17.1.2 Default of Covenants or Conditions.  Default by a party
in the  performance or observance of any covenant or condition of this Agreement
(other  than a default  involving  the  payment of money  under  Section  17.1.1
hereof),  which default is not cured within thirty (30) days after the giving of
notice  thereof by the other  party,  unless such default is of a nature that it
cannot be cured  within such  thirty (30) day period,  in which case no Event of
Default  shall be declared so long as the  defaulting  party shall  commence the
curing of the default  within  such thirty (30) day period and shall  thereafter
diligently prosecute the curing of same.

                  17.1.3  Breach  of  Representations  or  Warranties.   If  any
representation  or warranty by a party  contained in this  Agreement is false in
any  material  respect as of the date 




                                                                   PAGE 13 OF 18
<PAGE>
of the making or  furnishing  thereof  and which  would have a material  adverse
effect on the other party.

                  17.1.4 Insolvency,  Bankruptcy. If a party shall (i) apply for
or consent to the  appointment  of a receiver,  trustee or liquidator  (or other
officer having powers,  under  applicable  law,  similar to those of a receiver,
trustee or liquidator) of it or of all or the major portion of its assets,  (ii)
be unable,  or admit in writing its inability,  to pay its debts as they mature,
(iii)  make  a  general  assignment  for  the  benefit  of  creditors,  (iv)  be
adjudicated  a  bankrupt  or  insolvent  or  (v)  institute  proceedings  to  be
adjudicated a bankrupt or insolvent, or consent to the institution of bankruptcy
or  insolvency  proceedings  against  it, or file a  petition  or an answer or a
consent seeking reorganization or relief under any bankruptcy, reorganization or
insolvency  law of any  jurisdiction,  or any other law analogous in purpose and
effect,  or  consent  to  the  filing  of any  such  petition  or  the  material
allegations thereof, or corporate action shall be taken by it for the purpose of
effecting any of the foregoing.

                  17.1.5 Order Appointing Receiver, Trustee or Liquidator. If an
order, judgment or decree shall be entered, without the application, approval or
consent of a party, by any court of competent jurisdiction, approving a petition
seeking  reorganization  of the  party or  appointing  a  receiver,  trustee  or
liquidator  (or other officer having  powers,under  applicable  law,  similar to
those of a receiver,  trustee or  liquidator) of it or of all or a major portion
of its assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of 60 consecutive days.

         17.2 Remedies on Default.  Upon the occurrence and  continuation  of an
Event of Default,  the  non-defaulting  party,  without notice to the defaulting
party in any instance (except where expressly  provided for below),  in addition
to all remedies  available at law, may do any one or more of the following  with
respect to the defaulting party:

                  17.2.1  Termination.  Terminate  this Agreement and the rights
created herein by giving notice of such election to the defaulting party.

                  17.2.2 Specific Performance.  Seek specific performance of any
term or provision of this Agreement.

                  17.2.3 Force  Majeure.  Except where this  Agreement  provides
otherwise,  if by reason of Force Majeure, a party is unable in whole or in part
to perform  its  obligations  under this  Agreement,  the party  shall not be in
default under this Agreement during the continuance of such inability.  However,
that  party  shall use all  reasonable  efforts  to remedy  with all  reasonable
dispatch the cause or causes of its failure to carry out its  obligations  under
this  Agreement;  provided that the settlement of strikes,  lockouts,  and other
industrial  disturbances shall be entirely within the discretion of the party or
its contractors, as the case may be, and the party and its contractors shall not
be  required  to make  settlement  of  strikes,  lockouts,  or other  industrial
disturbances  by acceding to demands of opposing  parties when such course is in
the judgment of the party unfavorable to it.



                                                                   PAGE 14 OF 18
<PAGE>
         17.3 No Remedy  Exclusive.  No remedy herein conferred upon or reserved
to a party is intended to be exclusive of any other available remedy or remedies
but each and every such remedy shall be  cumulative  and shall be in addition to
every other remedy  herein or now or hereafter  existing at law, in equity or by
statute.  No delay or omission to exercise any right or power  accruing  upon an
Event of Default  shall  impair any such right or power or shall be construed to
be a waiver thereof (unless  expressly  waived by Kanas or GCICC),  but any such
right or power may be exercised  from time to time and as often as may be deemed
expedient.

18.      Confidentiality; Media Relations.

         18.1  Confidentiality.  The  parties  agree  that  the  terms  of  this
Agreement,   and  information   furnished  by  either  party  to  the  other  in
contemplation  or  pursuant  to this  Agreement  (including  without  limitation
technical   specifications,   operating  data  and  customer   information)  are
confidential  and may not be disclosed  without both parties'  written  consent,
except as may be  required  by law or as  contemplated  by this  Agreement,  and
except  for  disclosure  to the  parties'  shareholders,  agents,  advisors  and
financial institutions.  Notwithstanding the foregoing,  the parties acknowledge
that the general  terms and  conditions  of this  Agreement  are  required to be
disclosed  in reports,  filings and offering  documents  under state and federal
securities laws.

         18.2 Media  Relations.  The  parties  shall agree on the content of all
releases to, and conferences  with, the news media concerning the subject matter
of this  Agreement;  provided that each party shall  approve or  disapprove  the
other  party's  release  within five  Business Days after receipt or it shall be
deemed approved.

19.      Term; Duties Upon Termination.

         19.1 Term.  Unless  earlier  terminated  under the terms  hereof,  this
Agreement  shall  continue in effect for a period of 15 years  commencing on the
date hereof. The Term shall continue automatically  thereafter until the earlier
of (i) the end of the last of three subsequent consecutive periods of five years
each,  and (ii) the  termination  of the Alyeska  Agreement by Alyeska,  and the
shutdown of the Kanas Facility.

         19.2 Duties upon  Termination.  Within 60 days after the termination of
this  Agreement  for any reason  after the Exchange  Date,  (i) each party shall
remove its  electronic  equipment  and other  personal  property  from the other
party's Facility, and perform all restoration of the other party's premises made
necessary  by the removal,  and (ii) each party shall return in good  condition,
ordinary wear and tear excepted,  the other party's premises that it occupied in
its use of fibers on the other party's Facility.

20.      Indemnity.

         20.1  GCICC  shall  indemnify,  defend  and hold  harmless  Kanas,  its
officers,  agents, employees and contractors from liability,  suits and damages,
arising  from death or injury to any person or damage to  property  by virtue of
any  act or  omission  of  GCICC  or  GCICC's  officers,  agents,  employees  or
contractors in  constructing,  installing,  operating or  maintaining  the GCICC
Facility or any electronic  equipment  under this  Agreement,  except that Kanas
shall  be  liable  to  



                                                                   PAGE 15 OF 18
<PAGE>
GCICC for damages  resulting from the  negligence or  intentional  misconduct of
Kanas or its officers, agents, employees or contractors.

         20.2  Kanas  shall  indemnify,  defend  and hold  harmless  GCICC,  its
officers,  agents, employees and contractors from liability,  suits and damages,
arising  from death or injury to any person or damage to  property  by virtue of
any  act  or  omission  of  Kanas  or  Kanas'  officers,  agents,  employees  or
contractors in  constructing,  installing,  operating or  maintaining  the Kanas
Facility or any electronic  equipment  under this  Agreement,  except that GCICC
shall  be  liable  to  Kanas  for  damages  resulting  from  the  negligence  or
intentional  misconduct  of  GCICC  or  its  officers,   agents,   employees  or
contractors.

21.  Exhibits.  The  following  Exhibits  and  any  others  referred  to in this
Agreement as attached are incorporated in this Agreement in their entirety:

         Exhibit A:        Light Transmission Standard and Testing Procedure for
                           Substantial Completion
         Exhibit B:        Locations and Points of Termination of Kanas Fibers;
                           Locations of Electronic  Equipment on Kanas Fibers
         Exhibit C:        Locations and Points of Termination of GCICC Fibers;
                           Locations of Electronic  Equipment on GCICC Fibers
         Exhibit D:        Kanas Space and Power Requirements
         Exhibit E:        Fiber Maintenance Standards

22.      Miscellaneous.

         22.1 No  Implied  Waiver.  In the event  any  agreement,  covenant,  or
condition  contained  in this  Agreement  should be breached by either party and
thereafter  waived by the other  party,  such  waiver  shall be  limited  to the
particular  breach so waived  and shall not be deemed to waive any other  breach
hereunder.

         22.2 Successors in Interest. Each party may, upon written notice to the
other,  assign its rights and delegate  its duties  under this  Agreement to any
subsidiary,  affiliate or joint venture  partner,  provided that the assignor or
its parent entity retains at least 50% ownership, or voting control, directly or
indirectly,  of the assignee.  This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto.

         22.3  Notices.  Any and all notices  required or  permitted  under this
Agreement,  unless  otherwise  specified  in writing by the party whose  address
changes, shall be addressed as follows:

                  Kanas:            Kanas Telecom, Inc.
                                            4041 B Street, Suite 102
                                            Anchorage, Alaska 99503-4196
                                            tel: (907) 562-7793
                                            fax: (907) 562-7794
                                            attn: Vice President/Chief Operating
                                            Officer



                                                                   PAGE 16 OF 18
<PAGE>
                  GCICC:            GCI Communication Corp.
                                            2550 Denali Street
                                            Anchorage, Alaska 99503
                                            tel: (907) 265-5600
                                            fax: (907) 265-5676
                                            attn: General Manager

All notices  permitted or required to be made under this  Agreement  shall be in
writing  and shall be deemed  made at the time  mailed to the  address  provided
above by  certified  mail,  delivered  by  overnight  express  service,  or hand
delivered.  Failure of an  addressee  to receive  said  notice  will not nullify
and/or  void a notice as long as such  notice was sent  pursuant to the terms of
this Agreement.

         22.4  Parties in  Interest.  Nothing  in this  Agreement  expressed  or
implied is intended or shall be  construed to confer upon any person,  firm,  or
corporation, other than the parties hereto, any right, remedy or claim, legal or
equitable,  under or by reason of this Agreement,  this Agreement being intended
to be and being for the sole and exclusive benefit of the parties hereto.

         22.5  Relationship of Parties.  Nothing in this Agreement  expressed or
implied is intended or shall be construed to establish any relationship  between
the parties other than that of independent contractors,  and neither party shall
be  considered  thereby  to  be  the  partner,   co-venturer  or  in  any  other
relationship with the other.

         22.6 Time of  Essence.  Time shall be of the  essence of each and every
term of this Agreement.

         22.7  Headings.   The  Section   headings   contained  herein  are  for
convenience  and  reference and are not intended to define or limit the scope of
any provision of this Agreement.

         22.8 Law Governing  Construction of Agreement.  This Agreement shall be
governed by and construed in accordance with the laws of the State of Alaska.

         22.9  Exclusive  Forum and Venue.  Any actions or judicial  proceedings
arising out of this  Agreement  shall be filed and  prosecuted  in the  Superior
Court for the State of  Alaska,  Third  Judicial  District,  at  Anchorage.  The
parties hereto affirmatively waive the right to trial by jury.

         22.10 Severability.  In the event any provision of this Agreement shall
be held invalid or  unenforceable by any court of competent  jurisdiction,  such
holding shall not invalidate or render unenforceable any other provision hereof.

         22.11 Integration and  Modification.  This document contains the entire
agreement   of  the   parties   hereto.   All   negotiations,   statements,   or
representations,  warranties, and assurances, whether oral or written, which are
in any way related to the subject matter of this Agreement,  and the performance
of  either  party  hereto,  are  merged  and  integrated  into the terms of this



                                                                   PAGE 17 OF 18
<PAGE>
document.  This  Agreement  may not be modified  or amended  except by a writing
signed by both parties  hereto,  and any proposed  amendment or  modification is
without effect until reduced to a writing signed by both parties.

         22.12 Additional Documents. The parties agree to execute any additional
documents  which  may be  necessary  in order to  effectuate  the  terms of this
Agreement.

                  IN WITNESS  WHEREOF,  the parties hereto,  in consideration of
the mutual  covenants set forth herein and intending to be legally  bound,  have
caused this  Agreement to be executed and delivered as of the date first written

KANAS:                                 KANAS TELECOM, INC., an Alaska 
                                       corporation



                                       By: /s/ Michael F.G. Williams


GCICC:                                 GCI COMMUNICATION CORP., an Alaska
                                       corporation



                                       By: /s/ Wilson Hughes



                                                                   PAGE 18 OF 18
<PAGE>
                                    EXHIBIT A

               LIGHT TRANSMISSION STANDARDS AND TESTING PROCEDURE
                           FOR SUBSTANTIAL COMPLETION

I.       TESTING PROCEDURE

         1. Ensure that all fibers to be tested have been properly terminated.

         2. Clean all connectors.

         3. Turn on the power meter and light  source test  equipment  and allow
them to warm up and stabilize.

         4.  Before  the  facility  can be  tested,  the power  meter  should be
calibrated to 0 dB as follows:

                  a)       Using a test patch cord,  connect the light source to
                           the power meter.

                  b)       Set the power meter to the dBm scale.

                  c)       Make sure that the light  source is on,  and read the
                           received  optical  power at the  power  meter in dBm.
                           This  value  should  be  close  to the  light  source
                           manufacturer's output power specification.

                  d)       Set the power meter to the dB scale and adjust to 0.0
                           dB. This 0-dB  calibration  will be used as the light
                           source's reference power level.

                  e)       Disconnect  this test  assembly  but do not adjust or
                           turn off the power meter.

         5.       Disconnect  the existing  patch cord from the FDP for the link
                  under test.  Do not disturb the power  meter's zero  reference
                  calibration  performed in the previous step. Connect the light
                  source  using  the  test  patch  cord to one end of the  fiber
                  section and power meter  using a second  tested  patch cord to
                  the other end of the fiber section.

         6.       Ensure that the configuration is connected properly,  and turn
                  on the light  source.  Read the optical power meter and record
                  the optical power level.

         7. Repeat the procedure to test all fibers in the facility.


II.      LIGHT TRANSMISSION STANDARDS

Attenuation and dispersion on a fiber shall be 0.30 dB/km and 18 ps/(nm)(km) for
a nominal 1550 nm wavelength, respectively.
<PAGE>
The actual Fiber Route distances between sites and calculated loss budgets for
the Kanas Facility are:

Site                         Miles             Kilometers           Loss Budget
----                         -----             ----------           -----------
Petrostar to PS-12           70.1                112.16              33.65 dB
PS-12 to PS-11               52                   83.2               24.96 dB
PS-11 to RGV 97              39.5                 63.2               18.96 dB
RGV 97 to PS-10              63.9                102.24              30.67 dB
PS-10 to PS-9                38                   60.8               18.24 dB
PS-9 to PS-8                 61.7                 98.72              29.62 dB
PS-8 to NPMS                 21.1                 33.76              10.13 dB


The estimated  Fiber Route  distances  between sites and calculated loss budgets
for the GCICC facility are:

Site                         Miles             Kilometers           Loss Budget
----                         -----             ----------           -----------
SADC to Whittier             63                  101.4               30.42 dB
Whittier to Valdez           96                  154.5               46.35 dB
Valdez to Petro Star          9                   14.5               43.50 dB
<PAGE>
                                    EXHIBIT B

              LOCATIONS AND POINTS OF TERMINATION OF KANAS FIBERS;
                LOCATIONS OF ELECTRONIC EQUIPMENT ON KANAS FIBERS


1.  Locations of Kanas Fibers:

   SADC: fiber termination panel.  
   Whittier:  fiber termination  panel.  
   Valdez:  fiber termination panel.

2. Points of Termination of Kanas Fibers:

   The Kanas Fibers will be terminated on the GCICC fiber termination panels.

3. Locations of electronic equipment on Kanas Fibers:

   To be negotiated in Space and Power Agreement.
<PAGE>
                                    EXHIBIT C

              LOCATIONS AND POINTS OF TERMINATION OF GCICC FIBERS;
                LOCATIONS OF ELECTRONIC EQUIPMENT ON GCICC FIBERS


1.  Locations of GCICC Fibers:

    North Pole Metering  Station:  Kanas  equipment  building fiber  termination
    panel.  
    PS8: Pump Station  communication  room fiber  termination panel 
    PS9: Pump Station  communication  room fiber termination panel 
    PS10: Pump Station communication room fiber termination panel 
    PS11: Pump Station  communication room fiber  termination  panel  
    RGV97:  Kanas  regeneration  site  equipment building fiber termination 
      panel 
    PS12: Pump Station communication room fiber termination  panel Petro Star 
      Metering  Station:  Kanas  equipment  building fiber termination panel.


2. Points of Termination of GCICC Fibers:

   The GCICC fibers will be  terminated on the Kanas fiber  termination  panels.
   These  panels are  located  either in the pump  station  communication  room,
   metering  station  Kanas  equipment  building,  or remote  gate  valve  Kanas
   regeneration equipment building.

3. Locations of Electronic Equipment on GCICC Fibers:

   GCICC  electronic  equipment is to be installed  within GCICC owned equipment
   buildings located in close proximity to the following locations,  exterior to
   Kanas or Alyeska right-of ways, easements, or fee simple land:

   Pump Station #8, Pump Station #9, Pump Station #10, Pump Station #11,  Remote
   Gate Valve 97, and Pump Station #12 and Petro Star Metering Station.
<PAGE>
                                    EXHIBIT D

                       KANAS SPACE AND POWER REQUIREMENTS


Space Requirement:         Valdez GCICC POP          (2) 23-inch racks
                           Whittier                  (2) 23-inch racks
                           Anchorage GCICC POP       (3) 23-inch racks


Power Requirement:         Valdez GCICC POP          1250 watts @ 48 volts DC
                           Whittier                  1050 watts @ 48 volts DC
                           Anchorage GCICC POP       1250 watts @ 48 volts DC
<PAGE>
                                    EXHIBIT E

                           FIBER MAINTENANCE STANDARDS

1.       TIMES FOR REPAIRING FIBER AND ASSOCIATED EQUIPMENT:

         1.       Terrestrial Cable.

                           Mobilization and Travel                     4 hours
                           Repair                                      4 hours

         2.       Undersea Cable.

                           Ship and Crew Mobilization                  2 days
                           Transit                                     4 days
                           Recovery and Splicing                      10 days

         Times are estimates subject to force majeure.


2.       MAINTENANCE PROCEDURES.

         1.       Kanas:

                  a.       Kanas'  maintenance  contractor  will have  personnel
                           stationed  in  Fairbanks,  Valdez,  and at least  one
                           other  location  along the route  from  Fairbanks  to
                           Valdez.

                  b.       Kanas' maintenance contractor will maintain a 24 hour
                           per day, 7 days per week Network Operations Control.

                  c.       The Network  Control Center will initiate  technician
                           call  out if  required  to  respond  to any  critical
                           service  affecting issue. This dispatching will occur
                           within 30 minutes of  identified  equipment  failure.
                           Personnel safety will be a primary consideration when
                           responding   to  a  failure.   In   extreme   weather
                           conditions  response will be delayed until it is safe
                           to proceed.

                  d.       Routine  maintenance  will be performed on a periodic
                           basis according to manufacturer recommendations.

                  e.       All Facility  repairs will be performed  according to
                           manufacturer      recommendations      and     normal
                           telecommunications industry standards.
<PAGE>
         2.       GCI:

                  a.       GCICC's  maintenance  contractor  will have personnel
                           stationed  in  Anchorage,  Valdez,  and at least  one
                           other  location  along the route  from  Anchorage  to
                           Valdez.

                  b.       GCICC's  maintenance  contractor  will  maintain a 24
                           hour per day,  7 days  per  week  Network  Operations
                           Control.

                  c.       GCICC will monitor  periodically  its submarine cable
                           route for  activities  that may pose a risk including
                           fishing  and  shipping.  GCICC  will  participate  in
                           meetings of fishermen  and contact  vessels  known to
                           fish near the cable  route to  promote  avoidance  of
                           harm.

                  d.       The Network  Control Center will initiate  technician
                           call  out if  required  to  respond  to any  critical
                           service  affecting issue. This dispatching will occur
                           within 30 minutes of  identified  equipment  failure.
                           Personnel safety will be a primary consideration when
                           responding   to  a  failure.   In   extreme   weather
                           conditions  response will be delayed until it is safe
                           to proceed.

                  e.       Routine  maintenance  will be performed on a periodic
                           basis according to manufacturer recommendations.

                  f.       All Facility  repairs will be performed  according to
                           manufacturer      recommendations      and     normal
                           telecommunications industry standards.
<PAGE>
                            FIBER SECURITY AGREEMENT


                  THIS  SECURITY  AGREEMENT  dated as of  January  27,  1998 (as
amended,  supplemented or otherwise  modified,  renewed or replaced from time to
time,  the  "Security  Agreement")  is by and among (i) GCI FIBER CO.,  INC., an
Alaska  corporation  and FIBER HOLD CO.,  INC.,  an Alaska  corporation  (each a
"Debtor" and  collectively,  the  "Debtors")  and (ii) CREDIT  LYONNAIS NEW YORK
BRANCH,  as  administrative  agent for the  Lenders  referred  to in the  Credit
Agreement referred to below (in such capacity, the "Administrative Agent").

                  Pursuant  to a  Credit  and  Security  Agreement  dated  as of
January  27,  1998 among  Alaska  United  Fiber  System  Partnership,  a general
partnership  formed  under  the laws of Alaska  (the  "Borrower"),  the  lenders
referred  to  therein  (the  "Lenders"),  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 the same may be  amended,
supplemented,  or otherwise modified, renewed or replaced from time to time, the
"Credit  Agreement"),  the  Lenders  have  agreed  (subject  to  the  terms  and
conditions set forth therein) to make Loans to the Borrower.

                  The Debtors each own fifty  percent  (50%) of the  partnership
interests in the Borrower.

                  In order to  induce  the  Lenders  to  enter  into the  Credit
Agreement  and  make  the  Loans  to the  Borrower  pursuant  to the  terms  and
conditions set forth therein and in order to secure the Obligations, each of the
Debtors  is  pledging  to the  Administrative  Agent  (for  the  benefit  of the
Lenders),  and granting a security interest to the Administrative Agent (for the
benefit of the Lenders) in, all of its respective  partnership  interests in the
Borrower.

                  Accordingly, the parties hereto hereby agree as follows:

                  SECTION  1.  (a)  Definitions.  When  used  in  this  Security
Agreement  the term  "Collateral"  shall mean with respect to each Debtor,  such
Debtor's  partnership and other ownership  rights and interests in the Borrower,
all of such Debtor's contract rights,  powers,  privileges,  claims and remedies
and all  other  interests  and  benefits  arising  under  or in  respect  of the
Partnership  Agreement  dated as of July 29, 1997 by and between the Debtors (as
the same may be amended from time to time, the "Partnership  Agreement") and any
proceeds or products of any of the foregoing or any income therefrom.

                  (b) All  capitalized  terms used herein but not defined herein
shall have the respective meanings set forth in the Credit Agreement.  Terms not
otherwise   defined  herein  or  in  the  Credit  Agreement  shall  have,  where
appropriate, their respective definitions as set forth in the Uniform Commercial
Code as in effect in the State of New York.
<PAGE>
                  SECTION 2. Grant of Security Interest. As security for the due
and punctual payment and performance of the Obligations (including post-petition
interest  to the  extent  permitted  by  Applicable  Law),  each  Debtor  hereby
mortgages,  pledges, assigns,  transfers, sets over, conveys and delivers to the
Administrative  Agent  (for  the  benefit  of the  Lenders)  and  grants  to the
Administrative Agent (for the benefit of the Lenders) a security interest in all
of its right, title and interest in and to the Collateral.

                  SECTION 3. Representations and Warranties of the Debtors. Each
Debtor  hereby  represents  and  warrants to the  Administrative  Agent (for the
benefit of the Lenders) that:

                  (i) it is a corporation  duly organized,  validly existing and
in good standing  under the laws of the State of Alaska and is duly qualified to
do business in all jurisdictions  where the nature of its properties or business
so requires.  Such Debtor has the  corporate  power and authority (a) to own its
respective  properties  and to carry on its  respective  business  as now  being
conducted and as intended to be conducted,  to execute,  deliver and perform its
obligations under this Security Agreement and the other Fundamental Documents to
which it is a party and any other documents  contemplated  hereby and thereby to
which it is or will be a party and (b) to grant to the Administrative  Agent for
the  benefit  of  the  Lenders,   a  security  interest  in  the  Collateral  as
contemplated hereby;

                  (ii) it is a general  partner of the  Borrower,  holding a 50%
interest in the Borrower,  and except for the other Debtor, no other Person owns
or holds any partnership or other ownership rights or interests in the Borrower;

                  (iii)  the  execution,   delivery,  and  performance  of  this
Security  Agreement and the other  Fundamental  Documents to which it is a party
and the grant to the  Administrative  Agent (for the benefit of the  Lenders) of
the Liens and the security interests  hereunder (A) have been duly authorized by
all necessary  corporate action on the part of such Debtor, (B) will not violate
any provision of the Certificate of Incorporation or By-Laws of such Debtor,  or
the Partnership Agreement, (C) will not constitute a violation by such Debtor of
any provision of Applicable Law or any order of any court or other agency of the
United  States  or any state  thereof  applicable  to such  Debtor or any of its
properties  or assets,  (D) will not violate  any  provision  of any  indenture,
agreement,  bond,  note or other  similar  instrument  to which such Debtor is a
party or by which such Debtor or its  properties  or assets are bound,  (E) will
not be in conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default  under,  or create any right to terminate,  any
such  indenture,  agreement,  bond,  note or other  instrument  and (F) will not
result in the creation or imposition of any Lien,  security interest,  charge or
encumbrance  of any nature  whatsoever  upon any of the  properties or assets of
such Debtor other than pursuant to this Security Agreement;

                  (iv)  no  consent  of any  other  Person  (including,  without
limitation,  creditors of such Debtor) is required to be obtained by such Debtor
in connection  with the  execution,  delivery and  performance  of this Security
Agreement;


                                      -2-
<PAGE>
                  (v) all  authorizations,  approvals,  registrations or filings
with any  governmental  or public  regulatory  body or  authority  of the United
States or any state  thereof  or any  foreign  jurisdiction  (other  than  UCC-1
Financing  Statements)  required for the execution,  delivery and performance by
such Debtor of this Security  Agreement and the other  Fundamental  Documents to
which it is a party,  have been duly  obtained or made,  or duly applied for and
are in full force and effect, and if any such further authorizations, approvals,
registrations or filings should hereafter  become  necessary,  such Debtor shall
obtain or make all such authorizations, approvals, registrations or filings;

                  (vi) no financing statement, mortgage, notice of Lien, deed of
trust,  security  agreement,  or any other  agreement or instrument  creating or
giving notice of a Lien against any of the Collateral is in existence or on file
in any public office other than those created or filed  pursuant to the terms of
this Security Agreement in favor of the Administrative Agent (for the benefit of
the Lenders);

                  (vii) this Security  Agreement,  when executed and  delivered,
will  create  and grant to the  Administrative  Agent  (for the  benefit  of the
Lenders), upon the filing of the appropriate UCC-1 Financing Statements, a valid
Lien on and a perfected security interest in favor of the  Administrative  Agent
(for the benefit of the Lenders) in, all right, title or interest of such Debtor
in or to the Collateral,  subject to no prior pledge,  Lien,  security interest,
charge or encumbrance or to any agreement  purporting to grant any third party a
security interest in or Lien on the Collateral;

                  (viii)  this  Security  Agreement  and the  other  Fundamental
Documents  to which such  Debtor is a party when  executed  by such  Debtor will
constitute the legal, valid and binding obligations of such Debtor,  enforceable
in accordance with their respective  terms,  subject only, as to the enforcement
of remedies,  to applicable  bankruptcy,  insolvency  and similar laws affecting
creditors' rights and general principles of equity;

                  (ix) it is not  doing  business  and  does  not  intend  to do
business  other  than  under  its  full  corporate  name,   including,   without
limitation, under any trade name or other doing business name;

                  (x) it has good title to the Collateral  owned by it, free and
clear of Liens;

                  (xi) the chief executive office of such Debtor is as set forth
on Schedule 1 hereto,  and such office is the place where such Debtor  keeps any
books and records concerning the Collateral;

                  (xii) it will realize a direct economic benefit as a result of
the Loans being made to the Borrower under the Credit Agreement;



                                      -3-
<PAGE>
                  (xiii)  there  are no  pending  or, to the  knowledge  of such
Debtor,  threatened actions, suits,  proceedings or investigations against it or
affecting it or its properties that, individually or in the aggregate,  would if
adversely  determined  be  likely  to  have a  material  adverse  effect  on the
performance by such Debtor of its obligations under this Security  Agreement and
the  other  Fundamental  Documents  to  which  it  is a  party  or  its  assets,
operations, business or financial condition; and

                  (xiv) no sales,  use,  documentation or similar taxes, fees or
other  charges are payable  with respect to the  execution  and delivery by such
Debtor of this Security  Agreement and the other Fundamental  Documents to which
it is a party.

                  SECTION  4.  Covenants  of the  Debtors.  Each  Debtor  hereby
covenants  and agrees  with the  Administrative  Agent  (for the  benefit of the
Lenders) that:

                  (a) Such Debtor will keep the Collateral free and clear of all
security  interests,  Liens and claims other than the security interest and Lien
herein  granted  and will not sell,  assign,  transfer,  exchange  or  otherwise
dispose of, or grant any option with respect to, any of the Collateral.

                  (b) Such Debtor will defend the  Administrative  Agent's  (for
the benefit of the Lenders)  right,  title and  security  interest in and to the
Collateral against claims and demands of all Persons whomsoever.

                  (c) Such Debtor will not take any action,  including,  without
limitation, any action under or in accordance with the Partnership Agreement, to
allow any additional partners of the Borrower.

                  SECTION 5. The Administrative  Agent's Rights Exclusive of the
Debtors' Default. Each of the Debtors hereby agrees to permit representatives of
the Administrative Agent, upon reasonable notice to such Debtor, to discuss such
Debtor's  records in connection with the Collateral at such reasonable times and
as  often  as may be  reasonably  requested  by the  Administrative  Agent.  The
Administrative Agent, from time to time, at its option may perform any agreement
of a Debtor  which such Debtor  shall fail to perform and take any other  action
which the  Administrative  Agent reasonably deems necessary or advisable for the
maintenance or  preservation  of any of the Collateral or its interest  therein,
and the Debtors  agree to reimburse the  Administrative  Agent on demand for all
reasonable  expenses  of  the  Administrative   Agent  in  connection  with  the
foregoing.  The  Administrative  Agent  shall  have the right to  designate  any
officer,  employee or attorney to execute,  sign, endorse,  assign,  transfer or
deliver in the name of a Debtor or in their names any documents or  certificates
necessary to evidence,  perfect and realize upon the security  interest  granted
herein.  

                  SECTION 6. The Administrative Agent's Rights and Remedies Upon
an Event of Default.



                                      -4-
<PAGE>
                  (a) Debtors to Hold in Trust.  Upon the  occurrence and during
the continuance of an Event of Default,  each Debtor will, upon receipt by it of
any  revenue,  income,  profits or other sums in which a  security  interest  is
granted  by this  Security  Agreement,  payable  pursuant  to any  agreement  or
otherwise,  or of any check,  draft,  note, trade acceptance or other instrument
evidencing  an  obligation  to pay any such sum,  hold the sum or  instrument in
trust for the Lenders, and forthwith, without any notice, demand or other action
on the part of the  Administrative  Agent or any Lender whatsoever (all notices,
demands,  or other  actions  on the  part of the  Administrative  Agent  and the
Lenders being expressly waived),  endorse, transfer and deliver any such sums or
instruments or both to the  Administrative  Agent to be applied to the repayment
of the Obligations in accordance with the provisions of Section 6(d) hereof.

                  (b)  Collections,  etc.  Upon the  occurrence  and  during the
continuance of an Event of Default,  the  Administrative  Agent may, in its sole
discretion, in its name or in the names of the Debtors or otherwise, demand, sue
for,  collect or receive any money or property at any time payable or receivable
on account of or in exchange for, or make any  compromise  or settlement  deemed
desirable with respect to, the  Collateral,  but shall be under no obligation so
to do, or the Administrative  Agent may extend the time of payment,  arrange for
payment in installments,  or otherwise  modify the terms of, or release,  any of
the Collateral,  without thereby incurring  responsibility to, or discharging or
otherwise  affecting any liability of either of the Debtors.  The Administrative
Agent will not be  required  to take any steps to  preserve  any rights  against
prior  parties to the  Collateral.  If a Debtor  fails to make any payment or to
take any  action  required  hereunder,  the  Administrative  Agent may make such
payments and take all such actions as the Administrative  Agent reasonably deems
necessary to protect the Lenders' Liens and security interests in the Collateral
and/or the value  thereof,  and the  Administrative  Agent is hereby  authorized
(without limiting the general nature of the authority hereinabove  conferred) to
pay,  purchase,  contest or  compromise  any Liens which in the  judgment of the
Administrative Agent appear to be equal to, prior to or superior to the security
interests of the Lenders in the Collateral.

                  (c) Possession,  Sale of Collateral,  etc. Upon the occurrence
and during the continuance of an Event of Default,  the Administrative Agent may
take such measures as it may deem necessary or proper for the care or protection
of the Administrative Agent's rights and remedies hereunder,  including, without
limitation,  the right to sell or cause to be sold,  whenever the Administrative
Agent  shall  decide,  in one or more sales or  parcels,  at such  prices as the
Administrative  Agent may deem  best,  and for cash or on  credit or for  future
delivery,  without  assumption  of any credit  risk,  all or any  portion of the
Collateral,  at any broker's  board or at a public or private sale,  without any
demand of  performance or notice of intention to sell or of the time or place of
sale (except 10 days' written  notice to the  applicable  Debtor of the time and
place of any such sale or sales and such  other  notices as may be  required  by
Applicable Law and cannot be waived), and any Person may be the purchaser of all
or  any  portion  of the  Collateral  so  sold  and  thereafter  hold  the  same
absolutely,  free (to the fullest extent  permitted by Applicable  Law) from any
claim or right of whatever  kind,  including  any equity of  redemption,  of any
Debtor, any such demand,  notice,  claim, right or equity being hereby expressly
waived and released to the fullest  extent  permitted by Applicable  Law. At any
sale or sales made pursuant to 


                                      -5-
<PAGE>
this Section 6, the Administrative  Agent may bid for or purchase,  free (to the
fullest extent  permitted by Applicable Law) from any claim or right of whatever
kind, including any equity of redemption, of any Debtor any such demand, notice,
claim,  right or equity being hereby expressly waived and released,  any part of
or all of the  Collateral  offered for sale, and may make any payment on account
thereof by using any claim for moneys then due and payable to the Administrative
Agent and the  Lenders  (subject to the  provisions  of Article 10 of the Credit
Agreement) by the Borrower  under the Credit  Agreement as a credit  against the
purchase  price.  The  Administrative  Agent  shall  in any  such  sale  make no
representations  or  warranties  with  respect  to the  Collateral  or any  part
thereof,  and the  Administrative  Agent shall not be chargeable with any of the
obligations  or  liabilities  of any of the Debtors.  Each of the Debtors hereby
agrees,  on a joint and several  basis,  (i) that it will indemnify and hold the
Administrative  Agent and the  Lenders  harmless  from and  against  any and all
claims with respect to the Collateral  asserted before the taking control of the
relevant  Collateral by the Administrative  Agent pursuant to this Section 6, or
arising out of any act of, or omission to act on the part of, any Person  (other
than the  Administrative  Agent or the  Lenders)  prior to such taking of actual
control by the  Administrative  Agent,  or arising out of any act on the part of
the Debtors,  their  Affiliates or their  respective  agents before or after the
commencement  of such  actual  control  by the  Administrative  Agent;  and (ii)
neither the  Administrative  Agent nor any Lender  shall have any  liability  or
obligation  to any of the Debtors  arising out of any such claim except for acts
of willful  misconduct or gross  negligence  or not taken in good faith.  In any
action hereunder,  the Administrative Agent shall be entitled to the appointment
of a receiver,  without notice,  to take possession of all or any portion of the
Collateral  and to  exercise  such  powers as the court  shall  confer  upon the
receiver.  Notwithstanding  the  foregoing,  upon the  occurrence of an Event of
Default,   and  during  the   continuation   of  such  Event  of  Default,   the
Administrative  Agent shall be entitled to apply,  without  prior  notice to the
Debtors  except as may be required  by  Applicable  Law,  any cash or cash items
constituting Collateral in the possession of the Administrative Agent to payment
of the Obligations.

                  (d)  Application  of Proceeds on Default.  Upon the occurrence
and during the continuance of an Event of Default,  all income on the Collateral
and all  proceeds  from  any sale of the  Collateral  pursuant  hereto  shall be
applied  in  accordance  with  the  provisions  of  Section  8.7 of  the  Credit
Agreement.

                  (e) Power of  Attorney.  Upon the  occurrence  and  during the
continuance  of an  Event  of  Default  (i)  each  of the  Debtors  does  hereby
irrevocably make,  constitute and appoint the Administrative Agent or any of its
officers or designees their true and lawful  attorney-in-fact with full power in
the name of the Administrative Agent or such Debtor to receive, open and dispose
of all mail addressed to such Debtor and to endorse any notes,  checks,  drafts,
money orders or other  evidences of payment  relating to the Collateral that may
come into the possession of the Administrative  Agent, with full power and right
to cause the mail of such Debtor to be 


                                      -6-
<PAGE>
transferred to the  Administrative  Agent's own offices or otherwise,  and to do
any and all other  acts  necessary  or  proper  to carry out the  intent of this
Security Agreement and the grant of the Liens and security interests  hereunder,
and each of the Debtors hereby ratifies and confirms all that the Administrative
Agent or its  substitutes  shall properly do by virtue hereof;  (ii) each of the
Debtors  hereby  further   irrevocably  makes,   constitutes  and  appoints  the
Administrative  Agent or any of its  officers or  designees  its true and lawful
attorney-in-fact  in the name of the Administrative  Agent or such Debtor (A) to
enforce all of such Debtor's  rights under and pursuant to all  agreements  with
respect to the Collateral,  all for the sole benefit of the Administrative Agent
for the benefit of the Lenders, (B) to enter into and perform such agreements as
may be necessary in order to carry out the terms,  covenants  and  conditions of
this Security  Agreement or any other Fundamental  Document that are required to
be observed or performed  by such Debtor,  (C) to execute such other and further
mortgages, pledges and assignments of the Collateral, and related instruments or
agreements,  as the Administrative  Agent may reasonably require for the purpose
of  perfecting,  protecting,  maintaining  or  enforcing  the Liens and security
interests  granted to the  Administrative  Agent for the  benefit of the Lenders
hereunder  and (D) to do any and all other  things  necessary or proper to carry
out the  intention  of this  Security  Agreement  and the grant of the Liens and
security interests  hereunder.  Each of the Debtors hereby ratifies and confirms
in advance all that the  Administrative  Agent as such  attorney-in-fact  or its
substitutes shall properly do by virtue of this power of attorney.

                  SECTION 7.  Financing  Statements.  Each of the Debtors hereby
authorizes the Administrative  Agent to file UCC-1 Financing  Statements and any
amendments thereto or continuations  thereof, and any other appropriate security
documents  or  instruments,  and to give any notices  necessary  or desirable to
perfect the Lien and  security  interests  of the  Administrative  Agent for the
benefit of the Lenders on the Collateral,  in all cases without the signature of
such Debtor or to execute such items as attorney-in-fact for such Debtor.

                  SECTION 8. Further Assurances.  (a) Each of the Debtors agrees
that such Debtor will from time to time, on request of the Administrative  Agent
(i) duly execute and deliver, or cause to be duly executed and delivered, at the
cost and expense of the Debtors,  such further instruments as may be appropriate
in the  reasonable  judgment  of the  Administrative  Agent  to  carry  out  the
provisions and purposes of this Security  Agreement;  (ii) promptly  execute and
deliver or cause to be executed  and  delivered,  at the cost and expense of the
Debtors,  such  further  instruments  as may be  appropriate  in the  reasonable
judgment of the  Administrative  Agent,  to provide the  Administrative  Agent a
first  perfected Lien in the  Collateral  and any and all documents  (including,
without limitation, the execution, amendment or supplementation of any financing
statement and  continuation  statement or other  statement) for filing under the
provisions of the Uniform  Commercial  Code of any  jurisdiction or any statute,
rule  or  regulation  of  any  applicable  foreign,   federal,  state  or  local
jurisdiction,  and  perform or cause to be  performed  such other acts which are
necessary  or  advisable,  from time to time,  in order to grant and maintain in
favor of the Administrative  Agent (for the benefit of the Lenders) the Lien and
security interest in the Collateral contemplated hereunder,  subject to no other
Liens or security interests; and (iii) promptly undertake to deliver or cause to
be delivered to the Administrative Agent and the Lenders from time to time, such
other  documentation,   consents,  authorizations  and  approvals  in  form  and
substance   reasonably   satisfactory  to  the  Administrative   Agent,  as  the



                                      -7-
<PAGE>
Administrative  Agent shall deem reasonably necessary or advisable to perfect or
maintain the Liens of the Administrative Agent (for the benefit of the Lenders).

                  (b) The  Debtors  hereby  agree  to pay  any  and  all  stamp,
registration,  recordation and similar taxes,  fees or charges,  reasonable fees
and expenses of the  Administrative  Agent's  counsel and of any agents therefor
and to indemnify  the  Administrative  Agent and its agents  against any and all
liabilities  with  respect  to or  resulting  from any delay in the  payment  or
omission  to pay any such  taxes,  fees or  charges,  which  may be  payable  or
determined to be payable in connection with the execution, delivery, performance
or enforcement  of this Security  Agreement and any other document or instrument
executed  in  connection  herewith or the  perfection  of any rights or security
interests hereunder.

                  SECTION 9. Regulatory Approvals.  During the continuance of an
Event of  Default,  each  Debtor  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 the
Administrative  Agent may reasonably request or as may be required by applicable
law in  connection  with the obtaining of any consent,  approval,  registration,
qualification or authorization of the FCC or of any other Governmental Authority
or Person  necessary or  appropriate  for the  effective  exercise of any rights
under  this  Security  Agreement  or any  other  Fundamental  Document.  Without
limiting the  generality  of the  foregoing,  if an Event of Default  shall have
occurred  and be  continuing,  each  Debtor  shall  take any  action  which  the
Administrative  Agent may reasonably  request in order to transfer and assign to
the  Administrative  Agent,  or to  such  one  or  more  third  parties  as  the
Administrative Agent may designate,  or to a combination of the foregoing,  each
FCC License,  Permit,  other  similar  right or license or other  agreement.  To
enforce the provisions of this Section, the 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 or other  Governmental
Authority or Person (as  applicable) an involuntary  transfer of control of each
such FCC License,  Permit,  similar right or license or other  agreement for the
purpose of seeking a bona fide  purchaser  to whom control  will  ultimately  be
transferred. Each Debtor hereby agrees to authorize such an involuntary transfer
of control upon the request of the receiver so appointed  and, if a Debtor shall
refuse to  authorize  the  transfer,  its approval may be required by the court.
Upon the  occurrence and  continuance of an Event of Default,  each Debtor shall
further use its best efforts to assist in obtaining approval of the FCC or other
Governmental  Authority or Person,  if required,  for any action or transactions
contemplated  by this  Security  Agreement  or any  other  Fundamental  Document
including,  without limitation,  the preparation,  execution and filing with the
FCC or other Governmental  Authority or Person of the assignor's or transferor's
portion of any application or applications  for consent to the assignment of any
FCC License, Permit, similar right or license or other agreement or the transfer
of control  necessary or appropriate  under the rules and regulations of the FCC
or other Governmental Authority or otherwise for the approval of the transfer or
assignment  of any portion of the  Collateral,  together  with any FCC  License,
Permit,  similar right or license or other agreement.  Each Debtor  acknowledges
that the  assignment or transfer of each FCC License,  Permit,  similar right or
license  or other  agreement  is  



                                      -8-
<PAGE>
integral to the Administrative  Agent's and Lenders' realization of the value of
the Collateral,  that there is no adequate remedy at law for failure by a Debtor
to comply with the  provisions of this Section and that such failure would cause
irreparable injury not adequately  compensable in damages,  and therefore agrees
that each and every  covenant  contained  in this  Section  may be  specifically
enforced,  and each Debtor  hereby  waives and agrees not to assert any defenses
against an action for specific performance of such covenants.

                  SECTION 10. The rights and remedies conferred upon or reserved
to the  Administrative  Agent in this  Security  Agreement are intended to be in
addition to, and not in  limitation  of, any other right or remedy  available to
the Administrative Agent. Without limiting the generality of the foregoing,  the
Administrative  Agent and the  Lenders  shall have all rights and  remedies of a
secured party under Article 9 of the UCC or any other Applicable Law.

                  SECTION  11.  Continuation  and  Reinstatement.  Each  of  the
Debtors  further  agrees that the  security  interest  granted  hereunder  shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
payment or any part thereof, of any Obligation is rescinded or must otherwise be
restored  by the  Administrative  Agent or any  Lender  upon the  bankruptcy  or
reorganization of any Debtor, the Borrower or otherwise.

                  SECTION 12. Termination.  The security interests granted under
this Security Agreement shall terminate when all the Obligations shall have been
fully  and  indefeasibly  paid and  performed  and the  Commitments  shall  have
terminated.  At such time, all rights to the Collateral pledged or assigned by a
Debtor shall revert to such Debtor. Upon any such termination the Administrative
Agent will,  at the  Debtor's  expense,  execute and deliver to such Debtor such
documents (in form and substance  satisfactory to the  Administrative  Agent) as
such Debtor shall reasonably request to evidence such termination.

                  SECTION 13. Notice.  Notices and other communication  provided
for  herein  shall be in  writing  and shall be  delivered  or mailed  (or if by
telegram, delivered to the telegraph company and, if by telecopier, delivered by
such equipment) to the parties at the following respective addresses:

                  (1)      If to the Administrative Agent:

                           Credit Lyonnais New York Branch
                           1301 Avenue of the Americas
                           New York, New York 10019
                           Attn:  Project Finance Group
                           Facsimile No.:  (212) 261-3421

                  (2)      If to the Debtors:



                                      -9-
<PAGE>
                           GCI Fiber Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn: Chief Financial Officer
                           Facsimile No.: (907) 265-5676

                                         and

                           Fiber Hold Co., Inc.
                           2550 Denali Street, Suite 1000
                           Anchorage, Alaska  99503
                           Attn: Chief Financial Officer
                           Facsimile No.: (907) 265-5676

or such other  address as such party may from time to time  designate  by giving
written   notice  to  the  other   party   hereunder.   All  notices  and  other
communications  given to any party hereto in accordance  with the  provisions of
this Security Agreement shall be deemed to have been given on the tenth Business
Day after the date when sent by registered or certified mail,  postage  prepaid,
return  receipt  requested,  if by  mail,  or when  delivered  to the  telegraph
company,  charges prepaid, if by telegram, or when receipt is acknowledged if by
telecopier,  in each case addressed to such party as provided in this Section 13
or in accordance with the latest unrevoked written direction from such party.

                  SECTION 14. No Waiver.  No delay or failure on the part of the
Administrative  Agent in the exercise of any right,  power,  privilege or remedy
hereunder  or under any other  Fundamental  Document  shall  operate as a waiver
thereof, nor shall any single or partial exercise of any right, power, privilege
or remedy by the  Administrative  Agent  preclude any other or further  exercise
thereof or the  exercise of any other right,  power,  privilege or remedy and no
course of dealing  between the parties shall operate as a waiver of any right or
remedy of the  Administrative  Agent. All remedies  hereunder are cumulative and
are not exclusive of any other remedies provided by law.

                  SECTION 15.  Governing  Law. THIS  SECURITY  AGREEMENT AND ANY
INSTRUMENT  OR AGREEMENT  REQUIRED  HEREUNDER  SHALL BE DEEMED TO BE MADE UNDER,
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

                  SECTION 16.  Severability.  This Security  Agreement  shall be
interpreted  in such manner as to be effective and valid under  Applicable  Law,
but if any  provision  of this  Security  Agreement  shall be  prohibited  by or
invalidated under the Applicable Law of any jurisdiction,  such provision shall,
as to such  jurisdiction,  be ineffective  to the extent of such  prohibition or
invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining  


                                      -10-
<PAGE>
provisions of this Security  Agreement and any such prohibition or invalidity in
any jurisdiction shall not invalidate such provision in any other  jurisdiction.
The parties  hereto  agree to negotiate in good faith a provision to replace the
ineffective  provision,  such provision to be as similar in effect and intent as
the ineffective provision as permissible.  To the extent permitted by Applicable
Law,  the  parties  hereby  waive any  provision  of law which  may  render  any
provision hereof prohibited or unenforceable in any respect.

                  SECTION  17.  Amendments.   This  Security  Agreement  may  be
amended,  modified or supplemented,  and the terms hereof may be waived, in each
case only by a written  instrument  executed  by the  parties  to this  Security
Agreement.  The waiver by any party hereto of a breach of any  provision of this
Security  Agreement  shall  not  operate  or be  construed  as a  waiver  of any
subsequent or other breach,  whether or not similar. No notice to, or demand on,
the Debtors in any case shall entitle the Debtors to any other or further notice
or demand in the same, similar or other circumstances.

                  SECTION 18. Survival of  Representations  and Warranties.  All
warranties,  representations  and covenants  made by the Debtors herein shall be
considered to have been relied upon by the Administrative  Agent and the Lenders
and shall survive the making of the Loans  contemplated by the Credit  Agreement
and  the  issuance  and  delivery  to the  Administrative  Agent  of the  Notes,
regardless of any investigation made by the Administrative  Agent or the Lenders
or on their  behalf and shall  continue  in full force and effect so long as any
Obligation  that is due or could  become due, is  outstanding  and unpaid and so
long as the Commitments have not been terminated.

                  SECTION 19.  Successors and Assigns.  All references herein to
any of the  parties to this  Security  Agreement  shall be deemed to include the
successors  and  assigns  of such  party;  provided,  however,  that none of the
Debtors  may assign any of their  rights or  obligations  hereunder  without the
prior written consent of the Administrative  Agent, and all covenants,  promises
and  agreements by or on behalf of the Debtors which are contained  herein shall
inure to the benefit of the successors and assigns of the  Administrative  Agent
and any of the Lenders.

                  SECTION 20. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED
BY  APPLICABLE  LAW WHICH CANNOT BE WAIVED,  EACH OF THE DEBTORS,  RESPECTIVELY,
HEREBY  WAIVES,  AND  COVENANTS  THAT IT WILL NOT ASSERT  (WHETHER AS PLAINTIFF,
DEFENDANT OR  OTHERWISE),  ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF
ANY ISSUE,  CLAIM,  DEMAND,  ACTION,  OR CAUSE OF ACTION ARISING OUT OF OR BASED
UPON  THIS  SECURITY  AGREEMENT,  THE  SUBJECT  MATTER  HEREOF  OR  ANY  PROJECT
AGREEMENT, ANY OTHER FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF, IN EACH
CASE WHETHER NOW  EXISTING OR HEREAFTER  ARISING AND WHETHER IN CONTRACT OR TORT
OR OTHERWISE.  EACH OF THE DEBTORS ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE
ADMINISTRATIVE  AGENT THAT THE PROVISIONS OF THIS SECTION  CONSTITUTE A MATERIAL
INDUCEMENT UPON 


                                      -11-
<PAGE>
WHICH THE ADMINISTRATIVE AGENT AND THE LENDERS HAVE RELIED, ARE RELYING AND WILL
RELY IN ENTERING INTO THIS SECURITY AGREEMENT AND ANY OTHER PROJECT AGREEMENT OR
OTHER FUNDAMENTAL  DOCUMENT.  THE ADMINISTRATIVE AGENT OR ANY LENDER MAY FILE AN
ORIGINAL  COUNTERPART  OR A COPY OF THIS  SECTION  20 WITH ANY COURT AS  WRITTEN
EVIDENCE OF THE CONSENT OF THE DEBTORS TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY
JURY.

                  SECTION 21.  Submission to  Jurisdiction;  Service of Process.
EACH  OF  THE  DEBTORS,   RESPECTIVELY,   HEREBY  IRREVOCABLY   SUBMITS  TO  THE
JURISDICTION  OF  THE  STATE  COURTS  OF  THE  STATE  OF  NEW  YORK  AND  TO THE
JURISDICTION  OF THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF
NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
OR BASED UPON THIS SECURITY AGREEMENT,  THE SUBJECT MATTER HEREOF OR ANY PROJECT
AGREEMENT,  ANY OTHER FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF BROUGHT
BY THE ADMINISTRATIVE AGENT OR A LENDER OR ANY OF THEIR SUCCESSORS OR ASSIGNS IN
EITHER OF THE  ABOVE-REFERENCED  FORUMS AT THE SOLE OPTION OF THE ADMINISTRATIVE
AGENT OR A LENDER. EACH OF THE DEBTORS, RESPECTIVELY, TO THE EXTENT PERMITTED BY
APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS
A DEFENSE, OR OTHERWISE,  IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH
COURTS,  ANY CLAIM THAT IT IS NOT SUBJECT  PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAMED  COURTS,  THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM  ATTACHMENT  OR
EXECUTION,  THAT THE SUIT,  ACTION OR PROCEEDING  IS BROUGHT IN AN  INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
SECURITY  AGREEMENT,  THE SUBJECT MATTER HEREOF OR ANY PROJECT  AGREEMENT OR ANY
OTHER FUNDAMENTAL  DOCUMENT OR THE SUBJECT MATTER THEREOF MAY NOT BE ENFORCED IN
OR BY SUCH COURT, (B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR
PROCEEDING  INSTITUTED BY THE ADMINISTRATIVE AGENT OR A LENDER IN STATE COURT TO
FEDERAL  COURT,  AND (C) HEREBY  WAIVES THE RIGHT TO ASSERT IN ANY SUCH  ACTION,
SUIT OR PROCEEDING ANY OFFSETS OR COUNTERCLAIMS  EXCEPT  COUNTERCLAIMS  THAT ARE
COMPULSORY OR OTHERWISE ARISE FROM THE SAME SUBJECT MATTER.  EACH OF THE DEBTORS
HEREBY  CONSENTS TO SERVICE OF PROCESS BY MAIL AT ITS  ADDRESS TO WHICH  NOTICES
ARE TO BE GIVEN  PURSUANT TO SECTION 12 HEREOF.  EACH OF THE DEBTORS AGREES THAT
ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE
FOR THE  EXPRESS  BENEFIT OF THE  ADMINISTRATIVE  AGENT AND THE  LENDERS.  FINAL
JUDGMENT  AGAINST  A DEBTOR  IN ANY SUCH  ACTION,  SUIT OR  PROCEEDING  SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR
PROCEEDING  ON THE  JUDGMENT,  A  


                                      -12-
<PAGE>
CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF INDEBTEDNESS  OR LIABILITY OF SUCH DEBTOR THEREIN  DESCRIBED OR (Y) IN
ANY  OTHER  MANNER  PROVIDED  BY,  OR  PURSUANT  TO,  THE  LAWS  OF  SUCH  OTHER
JURISDICTION,  PROVIDED,  HOWEVER, THAT THE ADMINISTRATIVE AGENT OR A LENDER MAY
AT ITS OPTION BRING SUIT,  OR INSTITUTE  OTHER  JUDICIAL  PROCEEDINGS  AGAINST A
DEBTOR OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL  COURT OF THE UNITED  STATES
OR OF ANY COUNTRY OR PLACE WHERE THE DEBTOR OR SUCH ASSETS MAY BE FOUND.

                  SECTION  22.  Counterparts.  This  Security  Agreement  may be
executed by the parties hereto in separate  counterparts,  each of which when so
executed  and  delivered  shall be an original  for all  purposes,  but all such
counterparts  shall  together  constitute  one and the same  agreement,  and all
signatures need not appear on any one counterpart.

                  SECTION  23.  Headings.  The  headings  and  captions  in this
Security  Agreement are for  convenience of reference only and shall not define,
limit or otherwise affect any of the terms or provisions hereof.

                  SECTION  24.  Entire   Agreement.   This  Security   Agreement
represents the entire agreement of the parties with regard to the subject matter
hereof, and supersedes all prior agreements and understandings, both written and
oral,  among the parties  with  respect to the subject  matter of this  Security
Agreement.



                                      -13-
<PAGE>
                  IN WITNESS WHEREOF,  the Debtors and the Administrative  Agent
have caused this  Security  Agreement  to be duly  executed on the date and year
first written above.


                                       GCI FIBER CO., INC.


                                       By: /s/     
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                       FIBER HOLD CO., INC.


                                       By: /s/     
                                       Name: John M. Lowber
                                       Title: Secretary/Treasurer


                                       CREDIT  LYONNAIS  NEW  YORK  BRANCH,   as
                                       Administrative Agent

                                       By: /s/      
                                       Name: Michael F.G. Pepe
                                       Title: Vice President


<PAGE>
                                   Schedule 1
                           Chief Executive Office 
                           (Fiber Security Agreement)

1. Each Debtor's chief executive office is, on the Closing Date, at:

                 2550 Denali Stree Suite 1000
                 Anchorage, Alaska 99503


2. Each Debtor keeps all of its books and records  concerning  the Collateral at
   the above  address.  Additional  sets of documents  regarding the System will
   also be kept at each of the landing stations.