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, ▇▇▇▇▇▇▇▇, charges, surcharges and costs (including
all third party fees, ▇▇▇▇▇▇▇▇, 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 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, 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 ▇▇▇▇ 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, ▇▇▇▇▇▇▇▇, charges,
surcharges and costs (including all third party fees, charges, ▇▇▇▇▇▇▇▇,
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 ▇▇▇▇▇▇▇▇ 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.
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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/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Commissioner of Administration Title: Chairman of the Board of Directors
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Dated: 14 Oct 03 Dated: 10-10-03
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