<PAGE>

                                                                    EXHIBIT 10.5

                             EMPLOYMENT AGREEMENT
                             --------------------

EMPLOYMENT AGREEMENT, dated as of April 17, 1996 by and among Madison River
Telephone Company LLC, a Delaware limited liability company ("Holdings"), and J.
Stephen Vanderwoude ("Executive").

                                   RECITALS
                                   --------

Holdings is being formed to identify for acquisition rural telephone companies
and, if identified, to raise capital sufficient to consummate an acquisition of
such companies.

Holdings has two classes of equity, Class A equity and Class B equity, and the
Class A equity will be entitled to distributions prior to the Class B equity.

The parties have agreed that the aggregate fair market value of all Class B
equity to be distributed is $10,000 as of the date hereof.

In order to induce Executive to agree to serve as Chief Executive Officer and
Executive Manager of Holdings, Holdings desires to provide Executive with
compensation and other benefits (including the right to purchase Class B equity
of Holdings) on the terms and conditions set forth in this Agreement.

Executive is willing to enter into such employment and perform services for
Holdings on the terms and conditions set forth in this Agreement.


It is therefore hereby agreed by the parties as follows:

          1. Employment.
             ----------

(a)  Subject to the terms and conditions of this Agreement, Holdings agrees to
employ Executive during the term hereof as Chief Executive Officer and Executive
Manager.  In his capacity as Chief Executive Officer and Executive Manager of
Holdings, Executive shall have the customary powers, responsibilities and
authorities of Chief Executive Officer and Executive Manager of corporations of
the size, type and nature of Holdings, as they exist from time to time.
Executive shall also be Chief Executive Officer and Executive Manager of all of
Holdings' subsidiaries unless otherwise agreed by Executive.

(b) Holdings shall, as long as Executive is employed in his capacity as Chief
Executive Officer and Executive Manager, use its best efforts to cause the
election and retention of Executive to the Board of Members of Holdings (the
"Board") as its Chairman of the Board.  Holdings shall, as long as Executive is
employed in his capacity as Chief Executive Officer and Executive Manager, cause
Executive to be elected Chairman of the Board of all of Holdings' subsidiaries
unless otherwise agreed by Executive.

(c)  Subject to the terms and conditions of this Agreement, Executive hereby
accepts employment as Chief Executive Officer and Executive Manager of Holdings
and agrees to devote his full working time and efforts, to the best of his
ability, experience and talent, to the performance of services, duties and
responsibilities in connection therewith.  Nothing in this Agreement shall
preclude Executive from

                                       1
<PAGE>

engaging, consistent with his duties and responsibilities hereunder, in
charitable and community affairs, from managing his personal investments,
including Secret Keel Farm, LLC or, except as otherwise provided in Section 12
hereof, from serving as a member of boards of directors or as a trustee of other
companies, associations or entities.

             2. Term of Employment.
                ------------------

Executive's term of employment under this Agreement shall commence on the date
(the "Approval Date") that the business plan for Holdings was approved by
Madison Dearborn Capital Partners, L.P. ("Madison Dearborn") (as contemplated by
the Agreement in Principle and Summary of Preliminary Terms, dated April 17,
1996 (as amended or otherwise modified from time to time, the "LOI"), among
Executive, Madison Dearborn, James D. Ogg, Terry E. Troughton and, if
applicable, certain other investors in Holdings) and, subject to the terms
hereof, shall terminate on the fourth anniversary of the First Acquisition
Closing Date (as defined herein) (unless and until extended from time to time by
mutual written agreement of the parties, the "Termination Date"); provided that,
notwithstanding the foregoing, the Termination Date shall be the date that the
enterprise contemplated by the LOI is abandoned or otherwise terminated in
accordance with the terms of the LOI, if the Termination Date has not previously
occurred.

             3.  Compensation.
                 ------------

     3.1  Initial Base Salary. Beginning on the Approval Date and continuing
          -------------------
until the closing of the Company's first acquisition of a business (in any form)
(the "First Acquisition Closing Date") Holdings shall pay Executive a base
salary ("Base Salary") at the annual rate of $100,000. The Base Salary shall be
payable in accordance with the ordinary payroll practices of Holdings but in no
event less often than monthly in arrears.

     3.2  Adjustments to Base Salary. Beginning on the First Acquisition Closing
          --------------------------
Date, the Base Salary shall be increased from time to time as the Board shall
determine taking into account the success of Holdings, the performance of
Executive, the size, revenues, and earnings of the businesses held or operated,
or contemplated to be held or operated, by Holdings and other market factors.
Once so increased, the increased amount shall constitute Executive's Base Salary
hereunder.

     3.3  Compensation Plans and Programs. Executive shall participate in any
          -------------------------------
compensation plan or program, annual or long-term, maintained by Holdings and
participated in by senior executives of the Company generally on terms taking
into account Executive's title and position with the Company.

     3.4  Expenses. Executive is authorized to incur reasonable expenses in
          --------
carrying out his duties and responsibilities on behalf of the Company under this
Agreement, including, without limitation, expenses for travel and similar items
related to such responsibilities which are consistent with Holdings' policies in
effect from time to time with respect to travel and other business expenses.
Holdings will reimburse Executive for all such expenses upon presentation by
Executive from time to time of an itemized account of such expenditures;
provided that such expenses are in compliance with any other Holdings' policies
in effect from time to time with respect to reporting and documentation of such
expenses; it being understood, furthermore, that the cost of commuting between
Executive's residence and Holdings' prinipal place of business shall not be
reimbursed.  Notwithstanding anything contained herein to the contrary (except
for (i) the legal fees referred to in Section 8 hereof which shall not require
further approval and (ii) the costs of the directors and officers insurance
referred to in Section 13(b) hereof and other insurance (including property and
casualty) which is reasonably deemed necessary by Executive and is approved by
the Board (which approval shall not be unreasonably withheld)), prior to

                                       2
<PAGE>

the First Acquisition Closing Date, Executive is authorized to incur, and shall
be reimbursed, only for items approved by Madison Dearborn, and prior to the
Approval Date, Executive is authorized to incur, and shall be reimbursed, only
for his out-of-pocket costs described in Section 14(b) of the LOI and only to
the extent separately approved by Madison Dearborn (it being understood that the
listing of such costs in a budget attached to the LOI that has been approved by
Madison Dearborn constitutes approval by Madison Dearborn).

             4.   Employee Benefits.
                  -----------------

     4.1  Employee Benefit Programs, Plans and Practices. During the term of his
          ----------------------------------------------
employment hereunder, Holdings shall provide to Executive coverage under any
employee benefit programs, plans and practices (commensurate with his position
in Holdings and to the extent possible under any employee benefit plan), in
accordance with the terms hereof, which Holdings makes available to its senior
executive officers generally, including but not limited to (i) retirement,
pension and profit-sharing, and (ii) medical, dental, hospitalization, life
insurance, short-and long-term disability, accidental death and dismemberment
and travel accident coverage.

     4.2  Vacation and Fringe Benefits.
          ----------------------------

(a)  Executive shall be entitled to paid vacation each calendar year of no less
than 20 working days.  Holdings may grant additional vacation time to Executive.

(b) In addition, Executive shall be entitled to all of the other perquisites and
fringe benefits accorded the senior officers of Holdings generally.


             5.   Incentive Equity.
                  ----------------

     5.1  Purchase Rights; Vesting.
          ------------------------

(a)  As of the date hereof, Executive shall have the right to purchase at any
time from Holdings Class B equity of Holdings ("Incentive Equity") equal to 30%
of the total Incentive Equity of Holdings for an aggregate purchase price of
$3,000.  Within 30 days after each time that Executive exercises its right to
purchase Incentive Equity, the Executive will make an effective election with
the Internal Revenue Service under Section 83(b) of the Internal Revenue Code
and the regulations promulgated thereunder.  The parties hereto agree that the
fair market value of the Incentive Equity allocated to Executive as of the date
hereof and for a period of at least five business days thereafter is $3,000 and
that they shall use that value for all Federal income tax purposes.

(b)  Twenty percent (20%) of Executive's Incentive Equity will vest on the First
Acquisition Closing Date and, provided that (except in the case of vesting
pursuant to Section 5.3(a)) Executive is still employed by Holdings, the
remainder on a daily basis over a four-year period beginning with the First
Acquisition Closing Date.  All unvested Incentive Equity will become fully
vested immediately prior to the occurrence of a Liquidity Event.  "Liquidity
Event" means (i) any sale of all or substantially all of the assets of Holdings
on a consolidated basis in one transaction or series of related transactions
(but excluding sales to affiliates) for cash or marketable securities, (ii) any
sale of 50% or more of the Investor Equity (as defined in the LOI) in one
transaction or series of related transactions (but excluding sales to affiliates
and, with respect to individuals, related persons) for cash or marketable
securities or (iii) a merger, share exchange or similar transaction which
accomplishes one of the foregoing.

     5.2  Distributions.  Executive's unvested Incentive Equity outstanding at
          -------------
the time of any dividend or other distribution to Incentive Equity will be
entitled to receive the same distributions per

                                       3
<PAGE>

unit as vested Incentive Equity.

     5.3  Repurchase.
          ----------

(a)  Executive's unvested Incentive Equity will be subject to repurchase in
whole by Holdings, at its option (which option to repurchase must be elected in
writing by Holdings within ten days of termination and, subject to such
repurchase option being suspended as provided below, consummation of such
repurchase must be effected within 80 days thereafter), at the lower of its
original cost (less all amounts distributed in respect of Executive's unvested
Incentive Equity) or its Fair Market Value at the time of termination if
Executive ceases to be employed by Holdings for any reason.  Notwithstanding
anything in this agreement to the contrary, in the event that Executive's
employment is terminated for any reason including due to death or Disability
(but other than by the Executive without Good Reason) and (i) at or prior to
such termination Holdings has entered into an agreement or agreements regarding
a transaction or has publicly announced its intention to consummate a
transaction (including, but not limited to, a public announcement of an
intention to seek to consummate a transaction), which upon consummation would
trigger a Liquidity Event (as defined in the LOI), or (ii) at or within six
months prior to such termination is or was in active negotiations regarding a
transaction, which upon consummation would trigger a Liquidity Event, then in
either case Holdings' repurchase right pursuant to the foregoing sentence will
be suspended and if any such transaction is consummated then Executive's
unvested Incentive Equity shall immediately prior to the consummation of such
transaction become fully vested and all distributions that would have been
payable to Executive on account of such unvested Incentive Equity subsequent to
Executive's termination and prior to such vesting shall be made to Executive,
with interest on each such distribution at a rate per annum equal to the prime
rate in effect at the time of each such distribution, at such time (and any
repurchase by Holdings of such Incentive Equity in connection with Executive's
termination of employment shall be governed by Section 5.3(b)), it being
understood and agreed that, upon exercise of the repurchase option, during such
suspension and prior to any such vesting hereunder, distributions that would
have been payable to Executive on account of such unvested Incentive Equity
shall not be for the account of Executive unless and until such Incentive Equity
shall become vested; provided that if none of such transactions is consummated
within two years after Executive's termination of employment, or within such
two-year period another transaction is consummated which constitutes a Liquidity
Event, then Holdings' above repurchase rights shall be reinstated.  "Fair Market
Value" shall mean, with respect to any security, the amount that would be paid
to the holder thereof with respect to such security if all of the assets of
Holdings were sold for fair value to a willing buyer in exchange for cash, all
of the debt and other liabilities not assumed by the buyer were paid in full,
all of the convertible debt and other convertible securities were repaid or
converted (whichever yields more cash to the holders), and then Holdings were
completely liquidated.

(b)  Executive's vested Incentive Equity will be subject to repurchase in whole
or in part by Holdings, at its option, at its Fair Market Value at the time of
termination if Executive ceases to be employed by Holdings for any reason other
than due to death or Disability (with repurchase being mandatory in the case of
death or Disability).  If Executive's employment is terminated by Holdings
without Cause (as defined herein) or by Executive for Good Reason (as defined
herein), and Holdings exercises this repurchase option, then, at Holdings
option, the purchase price will be paid (i) in cash, (ii) by a promissory note
bearing interest at a rate per annum equal to the prime rate in effect at the
time Holdings exercises this repurchase option, having a two-year maturity and
payable in two equal annual installments of principal, together with accrued
interest thereon, or (iii) by a combination of cash and a promissory note having
the terms described above.  Notwithstanding the foregoing, if Holdings does not
exercise this repurchase option within 90 days after Executive's employment is
terminated by Holdings without Cause or by Executive for Good Reason (or, if
applicable, 90 days after the Liquidity Event under circumstances described in
Section 5.3(a) above), then Executive shall retain such vested Incentive Equity
and such vested Incentive Equity shall not be subject to Holdings' repurchase
option.  If

                                       4
<PAGE>

Executive's employment is terminated by Holdings for Cause, or by Executive
without Good Reason, and Holdings elects to exercise this repurchase option, or
if Executive's employment is terminated due to death or Disability, the purchase
price will be paid by a Holdings promissory note bearing interest at a rate per
annum equal to the prime rate in effect at the time Holdings exercises this
repurchase option, or at the time that the holder's employment is terminated due
to death or Disability (due, on a pro rata basis, at such times as distributions
are made on other Incentive Equity; provided that, in the case of death,
payments on such promissory note to cover income and estate taxes due with
respect to such repurchase will also be due at the time such taxes are due).
Notwithstanding the foregoing, any notes that are issued by Holdings pursuant to
this Section 5.3(b) shall be subject to (and may be modified to conform with)
any restrictive covenants to which Holdings is subject at the time of such
repurchase.

     5.4   Investors' Agreement.  Holdings shall enter into an investors'
           --------------------
agreement (the "Investors' Agreement"), registration agreement, and certain
other agreements with Executive and the other members of Holdings (collectively,
the "Investors") embodying the relevant terms set forth in the LOI.

     5.5   Restrictions on Transfer of Incentive Equity. Other than pursuant to
           --------------------------------------------
Tag-Along Rights, Registration Rights, and Other Exit Rights (as such terms are
defined in the LOI and as such concepts may be incorporated in the agreements
referred to in Section 5.4), Executive may not transfer its Incentive Equity at
any time (subject to the LLC Agreement as contemplated by the LOI (the "LLC
Agreement"), other than transfers of Incentive Equity for estate-planning
purposes to immediate family members and trusts and/or other vehicles for the
benefit of immediate family members) without the approval of a majority of the
members of the Board who do not have a pecuniary interest in such transfer,
which majority shall include, if provided for pursuant to the Investors'
Agreement or LLC Agreement, a majority of the Madison Dearborn members of the
Board.

              6.  Termination of Employment.
                  -------------------------

     6.1   Termination Not for Cause or Termination for Good Reason.
           --------------------------------------------------------

(a)  (i)  Holdings may terminate Executive's employment at any time, and
Executive may terminate his employment at any time. If Executive's employment is
terminated by Holdings other than for Cause (as defined herein) or due to
Executive's death or Disability (as defined herein) or Executive terminates his
employment for Good Reason prior to the Termination Date, Executive shall be
entitled to receive from Holdings continued Base Salary (payable in accordance
with the last sentence of Section 3.1 hereof) for three months after date of the
termination plus, on the sixtieth day following the end of the fiscal year
during which the termination of Executive's employment pursuant to this Section
6.1(a) occurs, an amount in respect of any bonus for the period employed for the
fiscal year in which Executive's employment is terminated calculated on a pro
rata basis.

     (ii) In addition, Executive shall (1) be entitled to receive, within a
reasonable period of time after the date of termination, a cash lump sum equal
to (A) any compensation payments deferred by Executive, together with any
applicable interest or other accruals thereon; and (B) any unpaid amounts, as of
the date of such termination, in respect of any bonus for the fiscal year ending
before the fiscal year in which such termination occurs; (2) for the period from
the date of termination of Executive's employment until the one year anniversary
of the Termination Date (as then in effect), continue to be covered under and
participate in Holdings' employee benefit programs, plans and practices with
respect to medical, dental, hospitalization, life insurance and disability
benefits described in Section 4.1 hereof or under such other plans of Holdings
which provide for equivalent coverage to the extent and on the terms in effect
on the Executive's last day of employment; and (3) have such rights to payments
under applicable plans or programs, accrued to Executive on date of termination
including, without limitation, those described in Section 3.3 hereof as may be
determined pursuant to the terms of such plans or

                                       5
<PAGE>

programs.

(b) For purposes of this Agreement, "Good Reason" shall mean the occurrence of
    any of the following events without Executive's express prior written
    consent:

       (i)   the assignment to Executive by Holdings of duties not appropriate
to Executive's positions, responsibilities, titles and offices as set forth in
Section 1 hereof, or any material reduction by Holdings of Executive's duties or
responsibilities or any removal of Executive as the Chief Executive Officer and
Executive Manager, except in connection with the termination of Executive's
employment;

       (ii)  a reduction by Holdings in Executive's Base Salary as in effect at
the commencement of employment hereunder or as the same may be increased from
time to time during the terms of this Agreement;

       (iii) any material breach by Holdings of any provision of this Agreement
(not cured after 15 days' prior notice);

       (iv)  requiring Executive to relocate his primary residence or locating
the principal executive office of the Company outside the United States of
America.

       6.2   Disability.  If (i) Executive shall fail for a period of six
             ----------
consecutive months during the term of his employment hereunder, because of
illness, physical or mental disability or other similar incapacity, to
effectively and actively render the services provided for by this Agreement or
(ii) at such earlier time as Executive submits satisfactory medical evidence
that he has or the Board in its reasonable judgment determines that Executive
has an illness, physical or mental disability or other incapacity which is
expected to prevent him from returning to the performance of his work duties for
six months or longer ("Disability"), Holdings or Executive may terminate
Executive's employment upon written notice thereof, setting forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
Executive's employment under this Section 6.2, and Executive shall receive or
continue to receive, as the case may be:

     (a)     as soon as practicable after the date of termination of Executive's
employment pursuant to this Section 6.2, a cash lump sum equal to any
compensation payments deferred by Executive, together with any applicable
interest or other accruals thereon;

     (b)     any unpaid amounts, as of the date of such termination, in respect
of any bonus for the fiscal year ending before such termination, which shall be
payable on the date on which such bonus would otherwise be payable;

     (c)     on the sixtieth day following the end of the fiscal year during
which the termination of Executive's employment pursuant to this Section 6.2
occurs, an amount in respect of any bonus for the period employed for such
fiscal year calculated on a pro rata basis;

     (d)     for a period of one year after termination for Disability, amounts,
payable on Holdings' regular payroll schedule, equal to no less than 60% of
Executive's then annual Base Salary, reduced by any amounts received by
Executive under any disability insurance policies with respect to which Holdings
paid the premiums;

     (e)     such rights to payments under applicable plans or programs, accrued
to Executive on the date of termination including, without limitation, those
described in Section 3.3 hereof, as may be appropriate pursuant to the terms of
such plans or programs.

                                       6
<PAGE>

     6.3  Death.  In the event of Executive's death during the term of his
          -----
employment hereunder, Executive's estate or designated beneficiaries shall
receive:

     (a)  payments of Base Salary for a period of three months after his date of
death;

     (b)  as soon as practicable after the date of Executive's death, a cash
lump sum equal to any compensation payments deferred by Executive, together with
any applicable interest or other accruals thereon;

     (c)  any unpaid amounts, as of the date of Executive's death, in respect of
any bonus for the fiscal year ending before his death, which shall be payable on
the date on which such bonus would otherwise be payable;

     (d)  on the sixtieth day following the end of the fiscal year during which
Executive's death occurs, an amount in respect of any bonus during period
employed for such fiscal year calculated on a pro rata basis;

     (e)  any death benefits provided under the employee benefit programs, plans
and practices described in Section 4.1 hereof, in accordance with their terms;
and

     (f)  such other payments under applicable plans or programs accrued to
Executive on date of termination, including, but not limited to those described
in Section 3.3 hereof, as may be appropriate pursuant to the terms of such plans
or programs.

     6.4  Voluntary Termination by Executive; Discharge for Cause.
          -------------------------------------------------------

     (a)  In the event that Executive's employment is terminated by Holdings for
Cause, as hereinafter defined, or by Executive other than for Good Reason or
other than as a result of Disability or death, prior to the Termination Date,
Executive shall be entitled to receive all salary and benefits to which
Executive is entitled up to and including the date of Executive's termination of
employment hereunder.  The obligations of Holdings under this Agreement to make
any further payments, or provide any benefits specified herein, to Executive
shall cease and terminate on the date on which Executive's employment is
terminated by Holdings for Cause or by Executive other than for Good Reason or
other than as a result of Permanent Disability or death.  Termination of
Executive in accordance with this Section 6.4 shall be communicated to Executive
pursuant to a notice of a resolution of a majority of the Board determining that
Executive is subject to discharge for Cause as defined herein.

     (b)  As used herein, the term "Cause" shall mean commission of a felony or
crime involving moral turpitude, repeated failure to comply with the Board's
instructions (after 30 days' prior notice), and any other material breach of
this Agreement by Executive (after 30 days' prior notice).

     6.5 Termination Prior to First Acquisition Closing Date.  Notwithstanding
         ---------------------------------------------------
anything in this Agreement to the contrary, in the event that the LOI is
terminated in accordance with the terms thereof prior to the First Acquisition
Closing Date (such date being referred to herein as the "LOI Termination Date"),
then Executive shall not be entitled to any amounts pursuant to Section 3 (other
than accrued and unpaid amounts through the LOI Termination Date pursuant to
Section 3.4), Section 4 or this Section 6, other than salary and benefits
accrued but unpaid as of the date of the termination of the LOI.


     7.  Notices.   All notices or communications hereunder shall be in
         -------
writing, addressed as

                                       7
<PAGE>

follows:

To Holdings:   Madison River Telephone Company LLC
               2316 Youngs Road
               Southern Pines, NC 28387
               Attn: Board of Members
               Facsimile: (910) 695-2221
               Confirmation: (910) 695-2222

To Executive:  J. Stephen Vanderwoude

Any such notice or communication shall be sent certified or registered mail,
return receipt requested, postage prepaid, or by facsimile (with confirmation of
receipt) addressed as above (or to such other address as such receiving party
may have designated in a notice duly delivered as described above), and the
actual date of mailing shall constitute the time at which notice was given
(except, in the case of facsimile, the time and date of confirmation shall be
the time at which notice was given).

     8.  Separability; Legal Fees; Arbitration.  If any provision of this
         -------------------------------------
Agreement shall be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining provisions
hereof, which shall remain in full force and effect.  In addition, Holdings
shall bear or reimburse Executive up to a maximum amount of $60,000 for all
legal fees and expenses incurred in connection with entering into this Agreement
and any other agreements being simultaneously entered into by Holdings and
Executive.  Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement (other than Section 12 hereof) that
cannot be resolved by Executive on the one hand and Holdings on the other,
including any dispute as to the calculation of Executive's benefits or any
payments hereunder, shall be submitted to arbitration in Chicago, Illinois in
accordance with Illinois law and the procedures of the American Arbitration
Association.  The determination of the arbitrators shall be conclusive and
binding on Holdings and Executive, and judgment may be entered on the
arbitrators' award in any court having jurisdiction.  The expense of such
arbitration including reasonable legal fees in connection therewith shall be
borne in accordance with the direction of the arbitrators.

     9.  No Obligation to Mitigate Damages.  Executive shall not be required to
         ---------------------------------
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise.

     10.  Assignment.  This contract shall be binding upon and inure to the
          ----------
benefit of the heirs and representatives of Executives and the assigns and
successors of Holdings, but neither this Agreement nor any rights hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by Holdings,
except that Holdings may assign this Agreement to any successor (whether by
merger, purchase or otherwise) to all or substantially all of the stock, assets
or businesses of Holdings.

     11.  Amendment.  This Agreement may only be amended by written agreement of
          ---------
the Board and Executive.

     12.  Nondisclosure of Confidential Information; Non-Competition.
          ----------------------------------------------------------

                                       8
<PAGE>

     (a)  From and after the date hereof and at all times thereafter (except as
otherwise provided in Section 12(e)), Executive shall not, without the prior
written consent of Holdings, at any time divulge, disclose, use to the detriment
of Holdings or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information, except (i) while
employed by Holdings, in the business of and for the benefit of Holdings and to
the extent such use or disclosure is required or deemed advisable by Executive
in the performance of his assigned duties (provided that any Confidential
Information disclosed pursuant to this clause (i) shall remain Confidential
Information hereunder, except as provided below), or (ii) when required to do so
by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of Holdings, or by any administrative
body or legislative body (including a committee thereof) with purported or
apparent jurisdiction to order Executive to divulge, disclose or make accessible
such information.  Executive agrees to notify Holdings if Executive discloses
such information and to take reasonable efforts to preserve the confidential
nature of such information.  For purposes of this Section 12(a), "Confidential
Information" shall mean information concerning Holdings' and its subsidiaries'
financial data, strategic business plans, business development (or other
proprietary product data), marketing plans, know-how, customer lists,
information about potential acquisition targets, acquisition strategies and
targets and other non-public, proprietary and confidential information of
Holdings, provided that Confidential Information shall not include information
if and solely to the extent that such information is or has become publicly
available through no wrongful act or breach of confidentiality by Executive.

     (b)  Executive agrees that he shall not directly or indirectly, either as
principal, manager, agent, consultant, officer, stockholder, partner, member,
investor, lender or employee or in any other capacity, carry on, be engaged in
or have any financial interest in, (i) during the time that Executive is
employed hereunder and for a period of three months thereafter, any business
that is engaged in the telephone or telecommunications industry and (ii) for a
period of 12 months after such three-month period, any business which is in
competition with the business of Holdings and/or its subsidiaries in a
geographic market where Holdings and/or its subsidiaries do business.  In
addition, during the time that Executive is employed hereunder and for a period
of 15 months thereafter, Executive agrees that, without the prior written
consent of Holdings, he shall not solicit for employment any person who at any
time during Executive's employment hereunder was an employee of Holdings or any
of its subsidiaries.

     (c)  For purposes of Section 12(b)(ii) hereof, a business shall be deemed
in competition with Holdings and/or its subsidiaries if at the time of
Executive's proposed relationship with such business, such business is rendering
services being rendered by Holdings and/or its subsidiaries in one or more areas
that, at the time of Executive's termination hereunder, in the aggregate
accounted for more than 5% of operating gross annual sales of Holdings and its
subsidiaries. Nothing in this Section 12 shall be construed so as to preclude
Executive from investing in publicly traded securities of any company provided
Executive's beneficial ownership of any class of such company's securities does
not exceed 5% of the outstanding securities of such class.

     (d)  Executive and Holdings agree that the foregoing covenant not to
compete is a reasonable covenant under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of such covenant as to the
court shall appear not reasonable and to enforce the remainder of the covenant
as so amended. Executive agrees that any breach of the covenants contained in
this Section 12 would irreparably injure Holdings. Accordingly, Holdings may, in
addition to pursuing any other remedies it may have in law or in equity, obtain
an injunction against Executive from any court having jurisdiction over the
matter, restraining any further violation of this Section 12 by Executive.

                                       9
<PAGE>

     (e)  Executive hereby assigns and from time to time assigns to Holdings all
right, title and interest in and to any Intellectual Property conceived,
contributed to or made by Executive at any time prior to or during his
employment with Holdings (whether alone or jointly with others) to the extent
such Intellectual Property is not owned by Holdings as a matter of law.
Executive shall thereafter promptly and fully communicate to Holdings all such
Intellectual Property and shall cooperate with Holdings to protect Holdings'
interests in such Intellectual Property.  Any copyrightable work prepared in
whole or in part by Executive in the course of his employment with Holdings
shall be deemed "a work made for hire" under the copyright laws, and Holdings
shall own all of the rights comprised in the copyright therein.  This
cooperation shall include providing assistance in securing patent protection and
copyright registrations and signing all documents reasonably requested by
Holdings, even if such request occurs after termination of his employment with
Holdings.  Executive understands that this Agreement does not apply to an
invention for which no equipment, supplies, facilities or trade secret
information of Holdings was used and which was developed entirely on his own
time, unless: (a) the invention relates (i) to the business (actual or
reasonably proposed) of Holdings or its subsidiaries, or (ii) to Holdings' or
its subsidiaries' research or development (actual or reasonably proposed); or
(b) the invention results from any work performed by Executive for Holdings or
its subsidiaries.  "Intellectual Property" shall mean patent applications,
copyrightable works, mask works and applications for registration related
thereto, all Confidential Information, and all other intellectual property
rights created, conceived or owned by, Holdings or any of its subsidiaries or
for the benefit of an enterprise similar to Holdings or any of its subsidiaries.
Notwithstanding anything in this Agreement to the contrary, if the LOI is
terminated in accordance with its terms or the transactions contemplated thereby
are otherwise abandoned by Holdings, Holdings acknowledges and agrees that it
shall have no right to the Intellectual Property and the Intellectual Property
may be used by Executive and each of the other Investors in pursuit of an
enterprise similar to Holdings in accordance with Section 14(ii) of the LOI and,
further, Executive shall have no further obligations pursuant to this Section
12.

     (f)  Executive shall deliver to Holdings and, if the First Acquisition
Closing Date has not occurred prior to Executive's termination, each of the
other Investors upon request at the termination of his employment, or at any
other time Holdings may request, all Intellectual Property in his possession and
control, and all copies thereof, in whatever form or medium. If the First
Acquisition Closing Date has occurred prior to Executive's termination and if
Holdings requests, Executive shall sign a written confirmation that Executive
has returned all such materials. Executive agrees that the limitations in this
Section 12 are reasonable and necessary to protect the legitimate business
interests of Holdings and its affiliates.

                                       10
<PAGE>

     13.  Indemnification; Director and Officer Insurance.
          -----------------------------------------------

     (a)  Holdings hereby agrees, commencing on the date hereof, to indemnify
and hold harmless Executive to the same extent as the fullest extent permitted
under Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL"), excluding subsection (f) thereof, as the same now exists or may
hereafter be amended, substituted or replaced (but, in the case of any such
amendment, only to the extent that such amendment permits Holdings to provide
broader indemnification rights than DGCL permitted prior to such amendment),
against all expenses, liabilities and losses (including attorneys' fees,
judgments, fines, excise taxes or penalties) reasonably incurred or suffered by
Executive in connection with serving as an officer, director, employee or agent
of Holdings or for serving at the request of Holdings as an officer, director,
employee or agent of another corporation, partnership, joint venture, limited
liability company, trust or other enterprise. Expenses, including attorneys'
fees, incurred by Executive in defending a proceeding shall be paid by Holdings
in advance of the final disposition of such proceeding, including any appeal
therefrom, upon receipt of an undertaking by or on behalf of Executive to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by Holdings. This Section 13(a) shall survive termination of this
Agreement.

     (b)  Holdings agrees that commencing as soon as practicable after the date
hereof it will maintain director and officer liability insurance for the purpose
of covering all actions taken by Executive as an officer, director, employee or
agent of Holdings which insurance is reasonably deemed necessary by Executive
and is approved by the Board (which approval shall not be unreasonably
withheld).

     14.  Beneficiaries; References.  Executive shall be entitled to select (and
          -------------------------
change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder in
accordance with the terms hereof following Executive's death, and may change
such election, in either case by giving Holdings written notice thereof.  In the
event of Executive's death or a judicial determination of his incompetence,
reference in this Agreement to Executive shall be deemed, where appropriate, to
refer to his beneficiary, estate or other legal representative.  Prior to
Madison Dearborn or an affiliate thereof becoming a party to the LLC Agreement,
(i) all references to an action, decision, determination or approval of the
Board shall only be made with the prior consent of Madison Dearborn and (ii)
Madison Dearborn shall be a third party beneficiary under this Agreement.

     15.  Survivorship.  The respective rights and obligations of the parties
          ------------
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.  The
provisions of this Section 15 are in addition to the survivorship provisions of
any other section of this Agreement.

     16.  Governing Law.  This Agreement shall be construed, interpreted and
          -------------
governed in accordance with the laws of the State of Delaware, without reference
to rules relating to conflict of laws.

     17.  Withholding.  Holdings shall be entitled to withhold from any payment
          -----------
hereunder any amount required by law to be withheld.

     18.  Counterparts.  This Agreement may be executed in two or more
          ------------
counterparts, each of which shall be deemed an original.

     19.  Executive Representations.  Executive hereby represents and warrants
          -------------------------
to Holdings that (i)

                                       11
<PAGE>

the Incentive Equity will be acquired for the Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act of 1933, as amended (the "Securities Act"), or any applicable
state securities laws, and the Incentive Equity will not be disposed of in
contravention of the Securities Act or any applicable state securities laws,
(ii) the Executive is an executive officer of Holdings, is sophisticated in
financial matters and is able to evaluate the risks and benefits of the
investment in the Incentive Equity, (iii) the Executive is able to bear the
economic risk of his investment in the Incentive Equity for an indefinite period
of time and the Executive understands that the Incentive Equity has not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available and all other applicable restrictions on transfer have
been satisfied, (iv) the Executive has participated significantly in the
structuring of the equity of Holdings, has had an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering of the
Incentive Equity and has had full access to such other information concerning
Holdings as he has requested, (v) the execution, delivery, and performance of
this Agreement by Executive does not and will not conflict with, breach, violate
or cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (vi) Executive is
not a party to or bound by any employment agreement, non-compete agreement or
confidentiality agreement with any other Person and (vii) upon the execution and
delivery of this Agreement by the Company, this Agreement shall be the valid and
binding obligation of Executive, enforceable in accordance with its terms.
Executive hereby acknowledges and represents that he has consulted with
independent legal counsel regarding his rights and obligations under this
Agreement and that he fully understands the terms and conditions contained
herein.

     20.  Executive agrees that (i) in the event that any of Executive's equity
interest in Holdings is evidenced by a certificate, such certificate shall
contain an appropriate legend referring to this Agreement and (ii) no transfers
of any equity interest or portion thereof in Holdings shall be made except in
compliance with applicable securities laws.

     21.  Complete Agreement.  This Agreement, those documents expressly
          ------------------
referred to herein (including, without limitation, the LOI) and other documents
of even date herewith embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or
representations by or among Holdings and Executive, written or oral, which may
have related to the subject matter hereof in any way. No waiver of this
Agreement or of any of the terms or provisions hereof shall be binding upon
either party hereto unless confirmed by a written instrument signed by such
party. No waiver by Executive or Holdings of any term or provision of this
Agreement or of any default hereunder, nor any failure or delay in exercising
any right, option, power or privilege hereunder, shall affect Executive's or
Holdings' respective rights hereafter to enforce such term or provision or to
exercise any such right, option, power or privilege, or to exercise any right or
remedy in the event of any other default, whether or not similar.

                                       12
<PAGE>

IN WITNESS WHEREOF, Executive and Holdings have caused this Employment Agreement
to be executed as of the date first written above.

                                            MADISON RIVER TELEPHONE  COMPANY LLC

                                            By: JAMES D. OGG
                                               ---------------------------------

                                                J. STEPHEN VANDERWOUDE
                                            ------------------------------------
                                                       Executive

                                       13