Document:

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                                                                    EXHIBIT 10.3

                                                                    CONFIDENTIAL

               ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ("ACS")
                       MS. LIANE PELLETIER ("EXECUTIVE")
              AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

POSITIONS & TITLES:     President and Chief Executive Officer of ACS beginning
                        October 6, 2003 (the "Employment Date"). Executive will
                        also be elected to the Board of Directors of ACS (the
                        "Board") as well as to the Executive Committee of the
                        Board beginning on the Employment Date. Executive will
                        be offered the position of Chairman of the Board of
                        Directors as of January 1, 2004.

RESPONSIBILITIES:       Executive shall be responsible for the general oversight
                        and management of ACS, including overall business
                        strategy, all operating units, operating plans and
                        financial performance.

REPORTING:              Executive will report to the Board and will have all
                        other members of executive management of ACS reporting
                        to her.

LOCATION:               Anchorage, Alaska

TERM:                   Through October 6, 2008.

SIGNING BONUS:          $500,000 CASH BONUS/200,000 SHARES STOCK: (i) $150,000
                        cash signing bonus will be paid in cash on January 1,
                        2004, provided that Executive is employed by ACS in good
                        standing on that date. (ii) $350,000 cash signing bonus
                        will be paid in cash on October 7, 2003. (iii) Executive
                        will be granted 200,000 shares of ACS stock on the
                        Employment Date.

ANNUAL CASH
COMPENSATION:           $1,000,000+: Base Salary of $500,000 ("Base Salary")
                        beginning on the Employment Date, plus a target annual
                        bonus of $500,000 based on achieving 100% of targeted
                        performance objectives. The actual bonus paid for any
                        fiscal year (see below) could range from zero to 200% of
                        Base Salary based on the achievement of performance
                        objectives determined by the Board or a designated
                        committee of the Board in consultation with Executive
                        for each fiscal year and subject to the terms of the
                        applicable annual bonus plan. Executive will have the
                        option to receive up to 50% of her annual bonus in ACS
                        stock based on the fair market value on the date of
                        bonus determination. Executive must be actively employed
                        by ACS and in good standing on the date ACS's auditors
                        approve the prior fiscal year's financial statements to
                        be eligible for a bonus in respect of such prior fiscal
                        year. Executive's bonus for 2003 will be $144,000
                        (subject to the prior sentence). For 2004 and each
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                        subsequent fiscal year, the Board or a designated
                        committee of the Board will work with Executive to
                        approve an annual bonus program for the senior
                        management and other employees of ACS; provided,
                        however, that Executive's minimum bonus for any
                        subsequent fiscal year shall be $200,000.

EQUITY PACKAGE:         1,000,000 ACS STOCK OPTIONS with an exercise price equal
                        to the fair market value of ACS stock on the Employment
                        Date, and having a term of 10 years, to vest 20% per
                        year, i.e., 200,000 options for every 12 months of
                        employment (calculated from the Employment Date) or on a
                        Change of Control, whichever is earlier. Except as
                        provided below, vesting ceases and the term of unvested
                        options lapse upon termination of employment for any
                        reason. Vested options may be exercised for the
                        applicable period provided upon termination of
                        employment in the applicable plan.

RELOCATION EXPENSES:    ACS will reimburse Executive for all reasonable and
                        documented relocation and moving expenses from Kansas
                        City to the Anchorage area (the "Relocation Expenses")
                        in accordance with the Company's relocation policy
                        provided to the Executive; provided, that the Executive
                        will receive reasonable temporary housing costs until
                        July 1, 2004. ACS will "gross up" the Executive for any
                        tax liability incurred with respect to such
                        reimbursement of relocation expenses.

ADDITIONAL BENEFITS:    Executive will participate, beginning on the Employment
                        Date, in ACS's health and other benefit plans and
                        programs for senior executives and be covered under
                        ACS's D&O insurance and corporate indemnification
                        policies. Executive will be entitled to four (4) weeks
                        of paid vacation each calendar year (prorated for any
                        partial calendar years). ACS will reimburse Executive
                        for her reasonable legal and other professional fees
                        incurred in connection with the negotiation and
                        documentation of this Agreement, up to a maximum of
                        $10,000.

SEVERANCE:              In the event ACS terminates Executive's employment for
                        reasons other than a Board determination of Cause (as
                        defined) or a termination for death or Disability
                        (Disability shall mean that for 180 days in any 365-day
                        period Executive is incapable of substantially
                        fulfilling the duties of her position because of
                        physical, mental or emotional incapacity resulting from
                        injury, sickness or disease)), or Executive terminates
                        her employment for Good Reason (as defined), Executive
                        shall be entitled to receive the following severance
                        benefits from ACS:

                        (i)   $1,000,000 if termination occurs on or before
                              December 31, 2004;

                        (ii)  $750,000 if termination occurs after December 31,
                              2004 and on or before December 31, 2005; or

                        (iii) $500,000 if termination occurs after December 31,
                              2005 and on or before October 6, 2008.

                        The Severance Amount shall be paid to Executive in
                        periodic installments equal to the periodic Base Salary
                        payments Executive was

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                        otherwise receiving from ACS prior to the termination
                        until the full Severance Amount is paid. Severance
                        Amount payments will and shall be subject to all
                        applicable tax and other withholdings. In addition,
                        Executive shall (i) receive any unpaid bonus from the
                        previously completed fiscal year, payable when bonuses
                        are paid to other senior executives of ACS for such
                        fiscal year, (ii) receive a pro rata bonus (of the
                        amount actually earned) for the year of termination,
                        payable when bonuses are paid to other senior executives
                        of ACS for such year, (iii) receive the signing bonus
                        (both cash and equity) described above, if the
                        termination occurs prior to the date on which such
                        signing bonus is paid, (iv) become fully vested in the
                        next 200,000 unvested option shares, (v) receive ACS
                        subsidized COBRA health insurance coverage reimbursed
                        for herself and her eligible dependents for the eighteen
                        (18) month period following such termination, and (vi)
                        be fully reimbursed (including any tax gross-up) on the
                        same basis as she was reimbursed for her relocation to
                        Anchorage, Alaska, for the costs of any relocation back
                        to the Lower 48 states if such relocation takes place
                        within twelve (12) months of the date of termination
                        (collectively with the Severance Amount, "Severance
                        Benefits"). Executive understands that her entitlement
                        to the Severance Benefits provided above is conditioned
                        upon Executive's execution, timely delivery and
                        non-revocation of a general release in favor of ACS and
                        its affiliates as well as Executive's compliance with
                        the provisions of the Agreement on Confidentiality,
                        Trade Secrets and Restrictive Covenants attached hereto
                        as Exhibit A ("Exhibit A") and her provision of
                        transition assistance as reasonably requested by the
                        Board. The Severance Amount due the Executive hereunder
                        shall be the only payment to which the Executive is
                        entitled, and the Executive shall not be eligible for
                        any severance payments under any other plan or
                        arrangement or any other damages. ACS may offset against
                        the Severance Payment any amounts then owed by
                        Executive. Executive understands that no Severance
                        Benefits (other than the relocation benefits described
                        in (vi) above) are payable if her employment terminates
                        at the close of business on October 6, 2008, because of
                        the expiration of the term. ACS may repurchase any ACS
                        stock acquired through the exercise of stock options or
                        otherwise received by Executive at the lower of the
                        price paid by Executive, the price on the date of grant
                        (in the case of any stock grant) or the then fair market
                        value of the stock, in the event Executive is not in
                        compliance with the provisions of Exhibit A or Executive
                        has been terminated for Cause.

NO CONFLICTS:           Executive represents and warrants that she is not a
                        party to any agreement or arrangement that would limit
                        in any manner her ability to perform her duties for ACS.

CERTAIN DEFINITIONS:    For purposes of this Agreement, the following
                        definitions will apply: (a) "Cause" shall mean that the
                        Executive: (i) willfully fails to comply with lawful
                        directions of the Board (including compliance with
                        Exhibit B) after written notice from the Board, (ii)
                        willfully makes a material misrepresentation to the
                        Board, (iii) commits fraud, misappropriation or
                        embezzlement against ACS or engages in willful
                        misconduct materially adverse to ACS, (iv) is charged
                        with or convicted of (or pleads guilty or

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                        no contest to) a felony or other crime involving moral
                        turpitude; provided that if the Executive has been
                        terminated ostensibly for Cause because she has been
                        charged with a crime described above, and she is not
                        convicted of, or does not plead guilty or no contest to,
                        such crime or a lesser offense (based on the same
                        operative facts), such termination shall be deemed to be
                        a termination without Cause, or (v) commits a material
                        breach of this Agreement (other than due to physical or
                        mental illness) that is not cured, to the extent deemed
                        capable of cure by the Board in its reasonable
                        discretion, within thirty (30) days after receiving
                        written notice from the Board (for purposes of this
                        clause (a) (and the "Severance" paragraph above) "Board"
                        shall include the Executive Committee of the Board or
                        such other committee or Board members designated by the
                        Board); (b) "Good Reason" shall mean: (i) the assignment
                        of the Executive by the Company to any duties materially
                        inconsistent with, or a material diminution of, her
                        position, including duties, title, offices, or
                        responsibilities (except as required by applicable law
                        or regulation); (ii) the failure to offer Executive the
                        position of Chairman of the Board as of January 1, 2004;
                        or (iii) the transfer, without the Executive's
                        concurrence, of her principal place of employment to a
                        geographic location more than 100 miles from her
                        principal place of employment; (c) "Change of Control"
                        shall mean (i) the acquisition by any person or group
                        other than Fox Paine & Company, LLC or any of its
                        affiliates of a majority or more of ACS' outstanding
                        voting securities or (ii) any sale, lease, exchange or
                        other transfer in one transaction or a series of related
                        transactions, other than to an entity that is majority
                        controlled by Fox Paine & Company, LLC or any affiliate
                        thereof or an entity with substantially the same equity
                        holders as immediately prior to such transfer, of all or
                        substantially all of the assets of ACS or its operating
                        subsidiaries, or any plan for the liquidation or
                        dissolution of ACS. (d) "Powers Reserved to the Board"
                        shall mean actions that require Board approval for
                        management to undertake as delineated in the attached
                        Exhibit B and as it is amended by the Board from time to
                        time.

MISCELLANEOUS:          Executive's employment by ACS is "at will" and nothing
                        in this Executive Employment Agreement (including
                        Exhibit A attached hereto, the "Agreement") shall be
                        interpreted to imply otherwise. This Agreement is to be
                        governed by and construed in accordance with the laws of
                        the State of Delaware, without reference to principles
                        of conflict of laws. All disputes between ACS and
                        Executive (whether contractual or otherwise, including,
                        without limitation, disputes relating to or arising
                        under or by reason of this Agreement or the other
                        agreements referred to herein) must be resolved by
                        binding confidential arbitration held in a major
                        metropolitan location (selected by the Board) in
                        proximity to ACS's then headquarters. Such arbitration
                        shall be conducted in accordance with the rules of the
                        Commercial Panel of the American Arbitration Association
                        (the "AAA") and not in accordance with the Employment
                        Dispute Resolution Rules of the AAA, and judgment on the
                        award rendered in such arbitration may be entered in any
                        court having jurisdiction. The arbitrator shall have no
                        authority to award punitive or exemplary damages and the
                        parties waive, to the full extent permitted by law, any
                        right to recover such damages in such arbitration.
                        Nothing in

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                        this Agreement shall restrict the right of ACS or its
                        affiliates to seek injunctive relief arising out of any
                        violation by the Executive of Exhibit A. This Agreement
                        is intended by ACS and Executive to be a binding and
                        completely integrated agreement superseding all prior
                        and contemporaneous promises, representations, offers,
                        contracts, and agreements among ACS and Executive. This
                        Agreement may not be amended except in a writing
                        executed by Executive and the Chairman of the Board of
                        ACS (or other Board authorized designee). This Agreement
                        shall only be binding on ACS and Executive if and when
                        both ACS and Executive execute the Agreement by signing
                        below, or when both parties have executed the Agreement
                        in counterparts. Executive agrees to execute and abide
                        by the provisions of Exhibit A. For purposes of this
                        "Miscellaneous" paragraph and the general release
                        referred to in the "Severance" paragraph above, the term
                        "ACS" includes Alaska Communications Systems Group,
                        Inc., its subsidiaries, affiliates and related entities,
                        Fox Paine & Company, LLC ("FPC"), its subsidiaries,
                        affiliates and related entities (including without
                        limitation Fox Paine Capital, LLC, Fox Paine Capital
                        Fund, L.P., Fox Paine Capital Fund II GP, LLC, Fox Paine
                        Capital Fund II, L.P., and all persons and entities that
                        are partners, shareholders, members or agents of any
                        such related entities) (collectively, the "Related
                        Entities"), and all partners, members, directors,
                        employees, shareholders, affiliates and agents of ACS,
                        FPC or any other Related Entities. Absent any such other
                        agreements that shall be entered into, this Agreement
                        shall be binding. All payments hereunder shall be
                        subject to Executive satisfying all applicable
                        withholding requirements, and the Company may withhold
                        such amounts from any such payments.

IN WITNESS WHEREOF, the parties executed this Agreement as of September 14,
2003.

                                  ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.

/S/ LIANE PELLETIER                    BY:  /S/ LEONARD STEINBERG
-------------------                       -----------------------
    LIANE PELLETIER                         LEONARD A. STEINBERG
                                            CORPORATE SECRETARY
                                            EXECUTED ON BEHALF OF THE ACS BOARD
                                            OF DIRECTORS

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                                                                    EXHIBIT 10.4

                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE

      THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Settlement Agreement") is
made effective as of October 14, 2003 (the "Effective Date"), by and between THE
STATE OF ALASKA ("SOA") and ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ("ACS"),
sometimes referred to together as "the Parties."

      NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth below, the Parties hereto, intending to be legally bound, hereby agree as
follows:

I.    RECITALS

      In December 2001, the SOA and ACS entered into the Comprehensive
Telecommunications Service Agreement; Contract No. 99-123-A ("the Contract"), an
agreement under which ACS would provide the SOA with statewide
telecommunications services. The Parties intend by this Settlement Agreement to
recognize that the Contract is terminated except for certain provisions related
to disentanglement specifically set forth below. The Parties enter into this
Settlement Agreement in order to fully and completely settle all actual or
possible claims and disputes, and to avoid the cost, uncertainty, and effort
associated with litigating actual or possible claims between them, arising out
of the Contract. Further, the Parties desire to disentangle from the Contract in
a cooperative manner, and to provide for a sum certain to be paid to the SOA by
ACS in full settlement, upon the terms and conditions set forth below.

II.   MUTUAL RELEASE

      Except as expressly provided otherwise in this Settlement Agreement, the
SOA on behalf of its agencies, including the University of Alaska, and ACS, on
behalf of its parent companies, subsidiaries, affiliates,
predecessors-in-interest, successors-in-interest, agencies, assigns, as well as
past and present directors, officers, trustees, shareholders, employees,
independent

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contractors, partners, associates, agents, representatives, principals,
attorneys and all persons acting through, under or in concert with them, hereby
forever release and discharge each other and their respective agencies, parent
companies, subsidiaries, affiliates, predecessors-in-interest,
successors-in-interest, agencies, assigns, as well as past and present
directors, officers, trustees, shareholders, employees, independent contractors,
partners, associates, agents, representatives, principals, attorneys and all
persons acting through, under, or in concert with them, from any and all
demands, claims, causes of action, counterclaims, suits, damages, punitive
damages, exemplary damages, damages of any other kind, costs, attorney's fees,
and proceedings in law or in equity of any nature whatsoever (whether known or
unknown, suspected or unsuspected, asserted or unasserted, matured or unmatured)
arising from, and/or relating to the Contract, including but not limited to its
termination, all ACS fees, billings, charges, surcharges and costs (including
all third party fees, billings, charges, surcharges and costs) incurred or
accrued for services rendered under the Contract prior to September 11, 2003,
and not heretofore paid by SOA (regardless of whether billed by ACS), Fee
Reductions and unamortized capital.

      The Parties are familiar with the decisions of the Alaska Supreme Court in
the cases of WITT V. WATKINS, 579 P.2d 1065 (Alaska 1978); ALASKA AIRLINES, INC.
V. SWEAT, 568 P.2d 916 (Alaska 1977); and YOUNG V. STATE OF ALASKA, 455 P.2d 889
(Alaska 1969), and hereby acknowledge and assume all risk that they may be
incurred injuries or damages which are neither known or anticipated as of this
date, and that known injuries or damages may become progressive or more
extensive than currently anticipated. This waiver is effective whether the
claims are known at this time or are discovered subsequently, even if the claims
are different in character or based on injuries different in extent from the
injuries of which the Parties are aware at this date.

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      Each of the Parties represents and warrants to the other that it is and at
all times has been the owner of all the claims, demand and causes of action that
it is releasing hereby and, further, that no portion of any claim, right, demand
or cause of action it is releasing hereby, nor any portion of any recover or
settlement to which it might be entitled from the other and which it is
releasing hereby, has been assigned or transferred to any person, firm or
entity. In the event that any claim, demand or suit shall be made or instituted
against any released party because of any purported assignment or transfer, the
party alleged to have made the assignment or transfer shall indemnify, defend,
protect and hold harmless the released party from and against any such claim,
demand or suit.

III.  COVENANT NOT TO COMMENCE AN ACTION

      Except with respect to the respective obligations of the Parties set forth
in this Settlement Agreement and the respective obligations of the Parties under
the Contract specifically described in Paragraph V of this Settlement Agreement,
the SOA and ACS hereby covenant and agree not to commence a legal action, or any
other proceeding arising from or based, in whole or in part, on the Contract,
including any claims, administrative claims, causes of action, suits, injuries,
damages, losses and rights released in this Settlement Agreement. Provided the
terms and conditions set forth herein are satisfied, the SOA and ACS expressly
agree that this Settlement Agreement may be pled as a full and complete defense
to any action or other proceeding released in this Settlement Agreement, and as
a basis for abatement of, or injunction against, such actions.

IV.   TERMS OF SETTLEMENT

      The Parties to this Settlement Agreement and their representatives, in the
spirit of compromise, settlement and resolution of the Contract and in full
settlement, agree as follows:

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      1. All capitalized terms used but not defined in this Settlement Agreement
shall have the meaning set forth in the Contract.

      2. ACS shall pay the SOA the sum of $3,447,647.00 (the "Settlement Sum").
One-half of the Settlement Sum shall be due and paid concurrently with execution
of this Settlement Agreement, and receipt of such payment is a condition
precedent to the effectiveness of this Settlement Agreement. The balance shall
be due and payable upon completion of transition of all Services Bundles from
ACS. The balance due is payable without notice or demand, and without any right
of offset or reduction whatsoever, and regardless of the existence of any breach
or dispute under this Settlement Agreement. If the balance due is not paid when
due, it shall thereafter bear interest until paid at the maximum lawful rate.

      3. In addition to the Settlement Sum, ACS shall deliver to the SOA title
to and possession of the capital equipment and other capital items identified on
EXHIBIT A, attached to this Settlement Agreement and hereby incorporated into
and made a part of this Settlement Agreement, without charge and free and clear
of all claims, liens and encumbrances. Delivery shall occur, by item, upon the
SOA's request and in any event not later than completion of cutover of services
during Disentanglement. ACS shall provide to the State or its designee a bill of
sale for each piece of capital equipment and item identified on EXHIBIT A.

      4. The parties will cooperatively complete Disentanglement according to
the plan agreed upon by SOA and ACS (Disentanglement Plan), the terms of which
are incorporated herein and attached hereto as EXHIBIT B. The SOA has
established a target date of December 31, 2003, to complete Disentanglement and
cutover of all Service Bundles. The parties will use diligent efforts to
complete Disentanglement by December 14, 2003, ahead of the target date. Such
dates are subject to extension as SOA, in its sole discretion, may deem

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necessary or advisable to assure uninterrupted service, however such extension
by the SOA may not exceed one year from the effective date of this Settlement
Agreement.

      5. In full and complete satisfaction and liquidation of any and all
amounts owing or claimed to be owing to ACS for all services rendered under the
Contract prior to September 11, 2003, including all ACS fees, billings, charges,
surcharges and costs (including all third party fees, charges, billings,
surcharges and costs) and not previously paid by the SOA, whether previously
billed or not billed to the SOA, the SOA shall pay to ACS the sum of
$1,900,000.00. ACS shall receive such sum by payment from SOA following SOA's
receipt of the first half of the Settlement Sum from ACS as provided for
paragraph IV. (2). It is further agreed by the Parties that the effect of the
SOA having paid the sum of $1,900,000 as provided for in this paragraph results
in the SOA having an account balance of "0" (zero) with ACS beginning September
11, 2003.

      6. The SOA shall pay for services rendered by ACS from and after September
11, 2003, to and including December 31, 2003, at the applicable rates set forth
in the Contract, and after December 31, 2003, until completion of
Disentanglement at prevailing market rates that ACS or its applicable affiliate
charges for like services; provided that (a) there shall be no fees or charges
for any extra or additional labor or materials ACS provides in order to perform
Disentanglement, (b) there shall be no billing by ACS for the types of items
that were disputed by the SOA prior to this Settlement Agreement, including
disputed surcharges and disputed bandwidth charges, and (c) if completion of
Disentanglement is delayed beyond December 31, 2003, due to the fault, failure
or neglect of ACS, then in no event shall the market rates that ACS charges for
services after such date exceed the applicable rates set forth in the Contract.
If there exists any uncertainty whether a fee or cost is within subsection (a)
above, the

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fee or cost shall not be chargeable to the SOA if the SOA would not have
normally incurred it had there been no need to proceed with Disentanglement. ACS
shall have no obligation to reimburse the State or any replacement provider of
Services for costs any of them incur to implement Disentanglement.

      7. ACS will provide regular billings and invoices for Services rendered
after the date hereof according to the same procedures as provided in the
Contract.

      8. The SOA shall have the immediate right to cease encumbering SOA funds
relating to the Contract.

      9. ACS and its Affiliates will be eligible to compete for the SOA's new
contracts for telecommunication services. The SOA waives its right to disqualify
ACS and its Affiliates from bidding on or undertaking any telecommunications
related contracts with the SOA, including replacement provider contracts
procured by the SOA during Disentanglement, on account of any actual or alleged
prior default under the Contract. ACS shall not be entitled to any special
treatment in connection with the procurement of such new contracts resulting
from Disentanglement or afterward; rather, ACS shall be subject to the same
eligibility and evaluation criteria as the SOA, in its sole discretion,
establishes for the procurement of such new contracts. The foregoing does not
waive the SOA's right to disqualify ACS or its Affiliates in the event of
default under this Settlement Agreement.

      10A. Notwithstanding the cancellation of the Contract by the SOA on
September 10, 2003, and notwithstanding the mutual release set forth in Article
II of this Settlement Agreement, the following provisions of the Contract are
and shall remain in full force and effect and shall survive the termination of
the Contract and until this Settlement Agreement terminates:

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            Section 18. Insurance

            Section 17.1 Force Majeure Events

            Section 20.1.1 Recordkeeping Related to Disentanglement

            Section 23.1.6 Proprietary Rights Infringement

            Section 23.3 Warranties Disclaimer

      10B. Notwithstanding the cancellation of the Contract by the SOA on
September 10, 2003, and notwithstanding the mutual release set forth in Article
II of this Settlement Agreement, the following provisions of the Contract are
and shall remain in full force and effect and shall survive the termination of
the Contract and the termination of the Settlement Agreement:

            Section 24 Indemnification

            Section 20.1 (but not Section 20.1.1), and Section 20.3, but only
            with respect to amount paid or payable by the SOA under this
            Agreement

            Section 21 Confidentiality

V.    MANAGEMENT OF DISENTANGLEMENT

      1. Each party shall establish a team (Disentanglement Team) and notify the
other party of its team's members on or before October 10, 2003. Each
Disentanglement Team will designate an individual as a point of contact (POC).
The POC for each party shall act as the

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primary liaison for the Disentanglement Team it represents and shall have
overall responsibility for the day-to-day oversight, management, and
implementation of the Disentanglement Plan (Exhibit B).

      2. The SOA is responsible for notifying all Departments affected by
Disentanglement and for communicating the schedule for Disentanglement as it
relates to the affected Department.

      3. ACS shall cooperate with the SOA and the SOA's other service providers
to ensure a smooth Disentanglement with no interruption of services. ACS shall
cooperate with the SOA and its replacement provider(s) in transitioning services
under Disentanglement. In the event the parties are unable to resolve a
disagreement as to an operational issue related to Disentanglement, either party
may seek resolution of the disagreement under AS 36.30.620.

      4. ACS shall use diligent efforts, subject to the terms of third-party
contracts affected by Disentanglement, to procure for the SOA any third-party
authorizations necessary to grant the SOA the use and benefit of the contracts,
pending their assignment to the SOA.

      5. During Disentanglement, ACS shall continue such security and protection
measures as were in place on the date of this Settlement Agreement with respect
to the security, protection and confidentiality of private and confidential
information that is subject to constitutional and protection, including, but not
limited to, confidential data with respect to health and social services and
public safety. ACS shall not use or access any State Data or State Confidential
Information, except as required to accomplish Disentanglement.

      6. ACS shall maintain in effect the property insurance required by Section
18.6 of the Contract on the Managed Assets and the assets to be transferred to
the SOA under EXHIBIT A, until title to and possession of the same are
transferred the SOA. ACS hereby absolutely assigns and transfer to the SOA all
right, title and interest in and to insurance proceeds paid or payable

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by reason of loss, damage or destruction of any such assets. ACS shall promptly
notify the SOA of the occurrence of any such loss, damage or destruction prior
to transfer and fully cooperate with the SOA in filing and processing insurance
claims. At the SOA's request, ACS shall repair or replace such lost, damaged or
destroyed asset at market rates. ACS shall use the same care to protect, secure
and preserve such assets prior to the date of transfer that ACS uses for its
other capital assets. Except for the foregoing obligations, ACS shall have no
liability for loss, damage or destruction of any such assets, unless caused by
the negligence or intentional misconduct of ACS or any of its employees, agents,
contractors, subcontractors or other parties for which ACS is legally or
contractually responsible.

      7. The SOA POC shall provide a written, dated notice to the ACS POC of the
transition cutover date of a Service Bundle as transition is completed for each
Service Bundle. The date of the written notice provided by the SOA POC under
this subsection is evidence that Disentanglement of that Service Bundle has been
completed.

VI.   NO ADMISSION OF LIABILITY

      This Settlement Agreement does not constitute an admission of liability
and/or wrongdoing, all of which is expressly denied, by or on the part of the
State and ACS.

VII.  SETTLEMENT - MATER OF PUBLIC RECORD

      The Parties acknowledge that this Settlement Agreement is a matter of
public record and must be disclosed by the SOA upon request.

VIII. WARRANTY OF AUTHORITY

      The Parties represent and warrant that each of the persons signing this
Settlement Agreement on behalf of an entity is duly authorized to enter into
this Settlement Agreement and has the authority to bind such entity.

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IX.   ACKNOWLEDGEMENT OF COUNSEL

      The Parties to this Settlement Agreement each acknowledge that (a) they
have been, or have had the opportunity, to be represented by counsel of their
own choosing with respect to the negotiation and signing of this Settlement
Agreement, (b) they have had the opportunity to review and reflect on the terms
of this Settlement Agreement, and (c) they have not been the subject of any
undue or improper influence that would interfere with the exercise of their
understanding and will to sign this Settlement Agreement.

X.    ENTIRE AGREEMENT

      This Settlement Agreement constitutes the entire agreement among the
Parties respecting the subject matter hereof, and supersedes the certain Term
Sheet, and EXHIBIT A included with the Term Sheet, between the Parties dated
September 26, 2003, and all contrary or conflicting provisions of the Contract.
This Settlement Agreement may not be altered, amended, or modified, unless such
alteration, amendment or modification shall be in writing and duly executed by
the party whose rights are affected by such alteration, amendment or
modification.

XI.   GOVERNING LAW

      This Settlement Agreement shall be governed by, and construed in
accordance with, the laws of the State of Alaska. Any disputes relating to the
interpretation or enforcement of this Settlement Agreement shall be resolved in
the Superior Court for the Third Judicial District at Anchorage.

XII.  COUNTERPARTS

      This Settlement Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.

SETTLEMENT AGREEMENT AND MUTUAL RELEASE                            Page 10 of 11
<PAGE>
      IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, have executed this Settlement Agreement to be effective as of the
Effective Date set forth herein.

ACKNOWLEDGED AND AGREED TO:            ACKNOWLEDGED AND AGREED TO:

     STATE OF ALASKA                      ALASKA COMMUNICATIONS
                                           SYSTEMS GROUP, INC.

Name:  /s/ Michael Miller              Name:  /s/ Charles E. Robinson
      -------------------------------         ----------------------------------

Title: Commissioner of Administration  Title: Chairman of the Board of Directors
      -------------------------------         ----------------------------------

Dated: 14 Oct 03                       Dated: 10-10-03
      -------------------------------         ----------------------------------

SETTLEMENT AGREEMENT AND MUTUAL RELEASE                            Page 11 of 11

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