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CIO Employment Agreement - M. Schuh

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100 W. 11Th STREET

February 6, 1999

Mr. Michael L. Schuh 215 NE 299th Street Ridgefield, Washington 98642

Re: Employment Agreement

Dear Mr. Schuh:

This letter agreement (this "Agreement") sets forth the terms and conditions of your employment with ALEC Acquisition Corporation ("ALEC" or the "Company"), effective as of the first to occur of the date of consummation of (a) the transactions contemplated by the Purchase Agreement, by and among ALEC Acquisition Sub Corp, which is a subsidiary of ALEC, CenturyTel of the Northwest, Inc. and CenturyTel Wireless, Inc., dated as of August 14, 1998 and (b) the transactions contemplated by the Asset Purchase Agreement, by and among Alaska Communications Systems, Inc. ("ACS") and the Municipality of Anchorage, dated as of October 20, 1998 (the "Effective Date"); provided that, if neither transaction is consummated, this Agreement shall be void ab initio

1. Employment and Services. ALEC hereby employs you as Vice President of Information Technology and Chief Information Officer, for the period beginning on the Effective Date and ending upon termination pursuant to paragraph 4 (the "Employment Period"). During the Employment Period, you shall render such services to the Company and its affiliates and subsidiaries as the Boards of Directors of ALEC shall reasonably designate from time to time, and you shall devote your best efforts and full time and attention to the business of the Company.

2. Compensation. The Company shall pay you an annual base salary ("Annual Base Salary") of $130,000 during the first year of the Employment Period, subject to annual review in each year of the Employment Period thereafter (for any partial year during the Employment Period, the Annual Base Salary shall be prorated based on the number of days during such year on which you are employed by the Company). Your Annual Base Salary may be increased in years following the first year of employment but may not be decreased. As used herein, the term "Annual Base Salary" refers to the Annual Base Salary as so increased. Such Annual Base Salary shall be payable in installments in accordance with the Company's regular payroll practices.

In addition, you will be eligible to receive an annual bonus to be awarded ninety (90) days after the end of each fiscal year, to be paid as soon as practicable but not later than one hundred twenty (120) days after the end of the fiscal year. In order to determine the amount of such bonus, the Company, acting in good faith, shall determine appropriate business targets for each fiscal year and your annual bonus shall be based upon attainment of such targets. As a


benchmark for such bonuses, the Company agrees that if the Company attains the mutually determined business targets, you shall receive a bonus equal to forty percent (40%) of your Annual Base Salary as in effect with respect to any such fiscal year, and in the event that the Company exceeds or does not exceed the business targets, there shall be appropriate adjustments in the amount of your annual bonus. The determination of appropriate business targets shall take place not later than sixty (60) days subsequent to the commencement of the Company's fiscal year.

The Company, acting in good faith, shall also establish a special bonus program for you based upon milestones and timeframes ("Implementation Timelines") for the scheduled installation of the information technology systems set forth on Schedule A, attached hereto. You will be paid the bonus amount established for each milestone after satisfying the acceptance criteria associated with the Implementation Timelines, within thirty (30) days following acceptance by the Company.

3. Benefits. During the Employment Period, you shall be entitled to participate in the Company's fringe benefit plans, subject to and in accordance with applicable eligibility requirements, such as life and disability insurance plans and all other benefit plans (other than severance plans or arrangements) generally available to the Company's executive officers, including relocation of personal residence benefits and stock options plan, in accordance with the terms of any such plans or policies as in effect from time to time during the Employment Period. In addition, the Company will reimburse your reasonable out-of-pocket expenses incurred in connection with the performance of your services hereunder, in each case consistent with Company policy. In addition, during the Employment Period, you shall be entitled to annual vacation of not less than two (2) weeks.

In lieu of relocation benefits under the applicable policy, you may elect to have company-paid housing provided in Anchorage, Alaska during the Employment Period. The selection of such housing shall be subject to Company approval and will be consistent with housing provided to others similarly situated.

4. Termination and Severance. The Employment Period shall terminate on the first to occur of (i) ninety (90) days following written notice by you to the Company of your resignation without Good Reason, (it being understood that you will continue to perform your services hereunder during such ninety (90) day period), (ii) thirty (30) days following written notice by you to the Company of your resignation with Goad Reason during the Employment Period or following a Change in Control (it being understood that you will continue to perform your services hereunder during such thirty (30) day period), (iii) your death or Disability, (iv) a vote of the Board of ALEC directing such termination for Cause, (v) a vote of the Board of ALEC directing such termination without Cause, or (vi) the second anniversary of the Effective Date (the "Scheduled Expiration Date"); provided, however, that if termination of employment has not been effected on or before the Scheduled Expiration Date, employment shall thereafter continue at will ("At-will Period").

In the event of termination of the Employment Period pursuant to clause (ii) or (v) above, the Company shall concurrently with such termination make a lump-sum payment to you equal to the sum of (x) one times your Annual Base Salary plus (y) in the event such termination


occurs on or after December 31, 1999, one times your most recent annual bonus payment, if any, paid pursuant to paragraph 2 hereof. In addition, you shall be entitled to reimbursement of the cost of continuing your health insurance coverage under COBRA for the twelve (12) month period following such a termination. Except as otherwise set forth in this paragraph 4 or pursuant to the terms of employee benefit plans in which you participate pursuant to paragraph 3, you shall not be entitled to any compensation or other payment from the Company in connection with termination of your employment hereunder. However, in the event you elect to resign effective as of the Scheduled Expiration Date, after having given not less than thirty (30) days written notice, or, if after you successfully meet the Implementation Timelines set forth in Schedule A you resign upon ninety (90) days written notice, you shall receive six (6) months of your Annual Base Salary, as well as reimbursement for the cost of continuing your health insurance coverage under COBRA for such period, in a lump sum within thirty (30) days after your termination from employment. If you elect to relocate to the lower 48 states in connection with such voluntary resignation, or following a termination of employment pursuant to clause (ii) or (v), the Company will also provide for relocation of personal and household goods, subject to applicable limits set forth in the Company's relocation policy, and travel for you and your household to your new residence in the lower 48 states.

For purpose of this agreement, the following definitions will apply: (a) "Good Reason" shall mean: (i) the assignment of you by the Company to any duties materially inconsistent with, or a material diminution of, your position, including duties, title, offices, or responsibilities; or (ii) the transfer, without your concurrence, of your principal place of employment to a geographic location more than 100 miles from both your current personal residence and from the location of your current principal place of employment (but shall not include any transfer to Anchorage, Alaska); (b) "Cause" shall mean: (i) your willful failure to comply with lawful directions of the Boards of the Company after written notice; (ii) fraud, misappropriation or embezzlement by you; or (iii) a material breach of this Agreement (other than due to physical or mental illness) that is not cured within thirty (30) days after receiving written notice from either the Board of the Company or of the Subsidiary of your specific failure to perform your duties; (c) "Change in Control" shall mean: (i) the acquisition by any person or group (as that term is used in Regulation 13D under the Securities Exchange Act of 1934, as amended), other than Fox Paine & Company, LLC or any of its affiliates, of beneficial ownership of a majority or more of the Company's outstanding voting securities; or (ii) any sale, lease, exchange or other transfer in one transaction or a series of selected transactions, other than a transfer to an entity which 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 the Company or its operating subsidiaries (taken together), or any plan for the liquidation or dissolution of the Company; and (d) "Disability" shall mean that for a period of six (6) consecutive months in any twelve (12) month period you are incapable of substantially fulfilling t
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