Document:

exv10w1

 

EXECUTION COPY

Exhibit 10.1

IOWA TELECOMMUNICATIONS SERVICES, INC.

EMPLOYMENT AGREEMENT

     THIS AGREEMENT is made and entered into this 3rd day of August, 2005, by and between IOWA
TELECOMMUNICATIONS SERVICES, INC., an Iowa corporation (the “Company”) and ALAN L. WELLS, an Iowa
resident (“Executive”).

WITNESSETH:

     WHEREAS, the Company is engaged in providing telecommunications services to residential and
business customers; and

     WHEREAS, Executive has been employed as President and CEO of the Company pursuant to an
Employment Agreement dated September 27, 1999, as amended January 1, 2000, June 29, 2000 and
November 5, 2004 (the “Existing Agreement”); and

     WHEREAS, Section 19 of the Existing Agreement provides that the Company and Executive shall
carry out good faith negotiations regarding the terms of a new agreement to replace the Existing
Agreement.

     NOW, THEREFORE, in consideration of the mutual promises herein contained, Executive and the
Company agree as follows:

     1. Employment. The Company hereby employs Executive and Executive hereby accepts
employment for a term commencing on the date hereof (the “Effective Date”), and ending December 31,
2010, at which time this Agreement shall be automatically extended for successive terms of one year
each unless terminated effective at the end of the then current term by either party upon at least
one hundred twenty (120) days advance written notice to the other party prior to the end of the
then current term (as so extended, the “Term”); provided, however, that either
Executive or the Company may terminate the employment of Executive during the Term in accordance
with Section 6 and subject to the right of Executive to receive payments and other benefits that
may be due pursuant to Section 8. This Agreement shall supersede and replace the Existing
Agreement as of the Effective Date.

     2. Duties. Executive shall serve as President and Chief Executive Officer of the
Company and shall have ultimate responsibility to the Company’s Board of Directors (the “Board of
Directors”) for the strategic position of the Company in the telecommunications industry.
Executive agrees to devote his full time and best efforts to the Company’s business and affairs and
to the performance of the following services and such other services as may be assigned to him from
time to time by the Board of Directors:

	 	(a)	 	provide direction, oversight and general management to the
staff of the Company and the Company’s subsidiaries;

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	 	(b)	 	assist the Board of Directors in development of the Company’s
strategic planning through evaluation of opportunities, analysis of operational
methodologies and competitive analysis;
	 
	 	(c)	 	identify, research and quantify new products and services which
will assist in expanding the Company’s strategic position;
	 
	 	(d)	 	communicate regularly and effectively to the Board of Directors
regarding the Company’s economic, operational and strategic position in the
telecommunications industry;
	 
	 	(e)	 	the Executive shall fully comply with all applicable laws,
rules and regulations, the failure to fully comply with which could reasonably
be expected to have a material adverse effect upon the Company; and
	 
	 	(e)	 	perform such other duties as may be assigned by the Board of
Directors which are consistent with the position of President/CEO.

Notwithstanding the above, Executive shall be free to devote reasonable time and attention to
personal, public and charitable affairs so long as such activities do not interfere with his
full-time employment hereunder and which do not violate any other provision of this Agreement.
Executive, at all times during his employment with the Company, shall comply with the Company’s
reasonable standards, regulations and policies as determined or set forth by the Board of Directors
from time to time and as applicable and communicated to all employees and/or executive employees of
the Company.

     3. Compensation. As compensation for all services rendered under this Agreement,
Executive shall be paid the following:

	 	(a)	 	Base Salary. Executive shall receive an annual base
salary of not less than $350,000, retroactively effective as of February 28,
2005, subject to review at least annually by the Compensation Committee for
possible increases but not reductions as provided in Section 3(d) (as so
adjusted, the “Base Salary”). The Base Salary shall be payable bi-weekly or
semi-monthly in accordance with the Company’s normal payroll processes and
procedures.
	 
	 	(b)	 	Bonus. Executive shall receive an annual bonus equal
to a percentage of Executive’s Base Salary contingent upon Executive’s
attainment of at least the “threshold” level of performance goals as
established by the Compensation Committee (the “Compensation Committee”) of the
Board of Directors in its sole and absolute discretion. The “target” bonus
shall be 100% of Executive’s Base Salary and the “maximum” bonus shall be 200%
of Executive’s Base Salary (i.e. in no event shall Executive’s bonus exceed
200% of Executive’s Base Salary). One-half of such potential bonus shall be
based on Company “Adjusted EBITDA” (as defined below)

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	 	 	 	performance goals to be determined by the Compensation Committee on an
annual basis. If the Company’s Adjusted EBITDA is between the “threshold”
and “target” levels, the Adjusted EBITDA-based portion of Executive’s bonus
shall equal a pro-rated portion (on a straight line basis) of between 0% and
50% of Executive’s Base Salary. If the Company’s Adjusted EBITDA is between
the “target” and “maximum” levels, the Adjusted EBITDA-based portion of
Executive’s bonus shall equal a pro-rated portion (on a straight line basis)
of between 50% and 100% of Executive’s Base Salary. The other half of such
potential bonus shall be determined by the Compensation Committee in its
sole and absolute discretion. For purposes of this Agreement, “Adjusted
EBITDA” shall mean the Company’s earnings before income taxes, depreciation
and amortization, as adjusted pursuant to the same formula used by the
Company in connection with the bonus compensation plans of the other senior
executives of the Company. The Adjusted EBITDA thresholds required to earn
a bonus at each given level shall be provided to Executive no later than the
first ninety (90) days of the fiscal year to which such formula relates,
except that the thresholds for 2005 shall be as previously provided to
Executive. The bonus for any fiscal year will be earned and accrued if
Executive is employed by the Company on the last day of such fiscal year,
regardless of whether Executive’s employment terminates thereafter for
Disability, Good Reason or the Executive’s death.
	 
	 	 	 	Bonus amounts in excess of 100% of Executive’s Base Salary may, in the sole
and absolute discretion of the Compensation Committee be paid in Company
restricted stock valued at then current fair market value in accordance with
the Company’s 2005 Equity Incentive Plan, or other equity compensation plans
which may be adopted in the future, and vesting over three years as follows:
50% on the second anniversary and 50% on the third anniversary of the date
of grant, subject to accelerated vesting immediately upon any of the
following events: (i) if Executive’s employment with the Company is
terminated by the Company without “Cause” (as defined in Section 6), (ii) if
Executive’s employment with the Company is terminated due to Executive’s
death or “Disability” (as defined in Section 7), (iii) if Executive’s
employment with the Company is terminated by Executive for “Good Reason,” or
(iv) if the Term shall expire because the Company has given notice of
nonrenewal pursuant to Section 1 hereof. The date of grant of each such
restricted stock grant will be the last day of the fiscal year of the
Company to which the bonus amount in excess of 100% of Base Salary relates.
Unless and until such shares of restricted stock are forfeited, dividends
payable to common shareholders of record of the Company on or after the
grant date of such restricted stock shall be paid to Executive whether or
not such shares are vested.

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	 	(c)	 	Restricted Stock. Executive shall receive, upon the
Effective Date, a one-time grant of 100,000 shares of restricted stock under
the Company’s 2005 Stock Incentive Plan (the “2005 Plan”) vesting over five
years as follows: 25% on April 1, 2007; 25% on April 1, 2008; 25% on April 1,
2009; and 25% on April 1, 2010, subject to accelerated vesting immediately upon
any of the following events: (i) if Executive’s employment with the Company is
terminated by the Company without Cause in connection with a “Change of
Control” (as defined below), or (ii) if Executive’s employment is terminated by
Executive for Good Reason in connection with a Change of Control; provided
that, if another Company executive receives a restricted stock grant under the
2005 Plan that accelerates upon such executive’s death or disability, then
Executive’s restricted stock grant under this Section 3(c) shall also
accelerate upon the occurrence of the same such event(s) with respect to
Executive.
	 
	 	 	 	For purposes of this Agreement, a “Change of Control” of the Company shall
be deemed to have occurred if (1) any “person” (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”)) is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power (with respect
to the election of directors) of the Company’s then outstanding securities;
(2) at any time after the execution of this Agreement, individuals who as of
the date of the execution of this Agreement constitute the Board of
Directors (and any new director whose election to the Board or nomination
for election to the Board by the Company’s shareholders was approved by a
vote of at least two-thirds (2/3) of the members of the Board of Directors
then still in office) cease for any reason to constitute a majority of the
Board; (3) the consummation of a merger or consolidation of the Company with
or into any other corporation, other than a merger or consolidation
which results in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or a parent company of the surviving entity) more than 50% of the
combined voting power (with respect to the election of directors) of the
securities of the Company or of such surviving entity or parent company
thereof outstanding immediately after such merger or consolidation; or (4)
the consummation of a plan of complete liquidation of the Company or of an
agreement for the sale or disposition by the Company of all or substantially
all of the Company’s business or assets. For purposes of this Agreement,
termination of Executive’s employment shall be considered “in connection
with” a Change of Control if such termination occurs (i) upon or within 12
months after a Change of Control, (ii) after the Company enters into an
agreement for a transaction, the consummation of which would result in a
Change of Control, and before termination or expiration of such agreement,
or (iii) after a third party announces a tender or exchange offer or proxy
contest that, if

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	 	 	 	completed, would result in a Change of Control and before expiration or
termination of such offer or contest.
	 
	 	(d)	 	Review of Base Salary and Restricted Stock. The
Compensation Committee will review and evaluate, in its sole and absolute
discretion, increases to the Executive’s Base Salary and potential additional
grants to Executive under the Company’s 2005 Stock Incentive Plan, or other
equity compensation plans which may be adopted in the future, on an annual
basis. Without limitation of the Compensation Committee’s discretion, such
review is expected to consider factors including Executive’s contributions to
the success and prosperity of the Company during the previous year, the then
current and projected financial condition of the Company, general economic and
market conditions, and the need to remain competitive with regard to
compensation for senior executives within the telecommunications industry.

     4. Business Expense Reimbursement. During the term of this Agreement, Executive shall
be entitled to prompt reimbursement by the Company for all reasonable, ordinary and necessary
travel, entertainment and other business related expenses incurred by Executive (in accordance with
the policies and procedures established by the Company from time to time) in the performance of his
duties and responsibilities under this Agreement, including expenditures for professional meetings,
seminars, training, business travel and membership at the Embassy Club or similar business luncheon
club; provided, however, that Executive shall properly account for such expenses in
accordance with federal, state and local tax requirements and the Company’s policies and
procedures.

     5. Employee Benefits. The Company shall provide such pension, life insurance,
disability insurance, health insurance and other benefits, including a deferred compensation plan,
to Executive as the Company provides for the Company’s senior executive officers generally,
including the following:

	 	(a)	 	Vacation. Executive shall receive five weeks’ paid
vacation each year, plus all holidays in accordance with the Company’s policies
in effect from time to time. Executive shall not be entitled to carry unused
vacation forward from one Employment Year to the next. Executive shall not be
entitled to compensation in any form in lieu of use of vacation and/or holiday
time off.
	 
	 	(b)	 	Vehicle. Executive shall be entitled to the use of a
leased or Company-owned vehicle. Executive may select a new car not more
frequently than every three years. Any new car selected by Executive shall
have a cost not materially greater than the then current cost of a new car that
is of comparable make and model to Executive’s current car provided by the
Company. Executive may use the vehicle for personal as well as business
purposes, and Executive’s spouse may also use and operate the vehicle.
Executive shall assume any tax liability arising from non-business use.

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	 	 	 	Executive shall maintain the vehicle in accord with the manufacturer’s or
lessor’s maintenance schedule, and the Company shall pay all costs
associated with required maintenance, repair and use of the vehicle.
	 
	 	(c)	 	401(k) Plan. Executive shall be entitled to
participate in the Company’s 401(k) defined contribution pension plan up to the
amounts permitted by applicable laws.
	 
	 	(d)	 	Deferred Compensation Plan. In accordance with the
Company’s Deferred Compensation Plan, for each calendar year during the Term,
the Company will credit Executive’s deferred compensation account with the
difference between 3% of Executive’s base salary and annual cash bonus
compensation for that calendar year, and the amount of the Company’s
contributions (other than matching contributions and elective deferrals) made
to Executive’s account under the Iowa Telecom Savings Plan for that calendar
year. In addition, the Company shall also credit Executive’s deferred
compensation account with the matching contribution that Executive would have
received if Executive’s deferrals under the Company’s Deferred Compensation
Plan had instead been made to the Iowa Telecom Savings Plan, without regard to
the annual compensation limits then in effect under Code section 401(a)(17) or
any other Code section or rule. Furthermore, the Company will also credit
Executive’s deferred compensation account in a dollar amount equal to five
percent (5%) of the sum of Executive’s base salary and annual cash bonus. Such
deferrals shall all be credited to Executive’s deferred compensation account
during the year in accordance with the Company’s payroll cycles, and shall vest
immediately. The Company will use reasonable efforts to modify the foregoing
features of the Deferred Compensation Plan as may be necessary to comply with
Section 409A of the Internal Revenue Code and authorities promulgated pursuant
thereto, provided, however, that no such amendment shall make the economic
benefits of the plan less favorable to Executive except as required by law.
	 
	 	(e)	 	Limit on Other Compensation. Notwithstanding the
foregoing, the amount of the Company’s matching or discretionary contributions
for Executive’s account under the Company’s defined contribution pension plans
and deferred compensation plans shall not exceed $100,000 per year.

     6. Termination.

               (a) Termination for Cause. The Company shall have the right to terminate Executive’s
employment for “Cause,” effective upon approval by the Company’s Board of Directors pursuant to
Section 20 and upon thirty (30) days written notice to Executive. Such notice shall state in
reasonable detail the nature of the Cause, and, if such stated Cause is of the type described in
clauses (iii) or (vi) below, during such thirty day period Executive shall have the opportunity to
cure the stated Cause. Unless Executive cures such stated Cause described in clauses (iii) or (vi)
below, Executive’s employment shall terminate at the end of such thirty-day

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period, but without prejudice to Executive’s right to contest the existence of such Cause or to
contest the fact that the Cause has not been cured. For the purposes of this Agreement, “Cause”
shall mean only:

	 	(i)	 	a conviction of Executive of, or a guilty or
nolo contendere plea by Executive with respect to, any crime punishable
as a felony or involving moral turpitude, or any bar against Executive
from serving as a director, officer or employee of any publicly-traded
company;
	 
	 	(ii)	 	any act of dishonesty either involving his
employment or which is harmful to the Company or any subsidiary, or to
employees of the Company or any subsidiary;
	 
	 	(iii)	 	any failure of Executive to materially comply
with this Agreement or with the reasonable policies, regulations and
directives of the Company as in effect from time to time;
	 
	 	(iv)	 	any act or omission on the part of Executive
which is clearly and materially harmful to the reputation or business
of the Company, including, but not limited to, conduct which is
inconsistent with federal and state laws respecting harassment of, or
discrimination against, one or more of the Company’s employees;
	 
	 	(v)	 	any material violation by Executive of the
provisions of any confidentiality and/or non-compete agreement between
the Company and Executive; or
	 
	 	(vi)	 	any willful failure to perform the duties
described in Section 2 hereof, unless occasioned by illness, injury or
“Disability” as defined in Section 7.

          (b) Termination for Convenience. The Company shall have the right to terminate
Executive’s employment for convenience and without Cause, effective upon thirty (30) days written
notice to Executive.

          (c) Resignation for Good Reason. Executive shall have the right to terminate his
employment with the Company for “Good Reason,” effective upon thirty (30) days written notice to
the Company. Such notice shall state in reasonable detail the nature of the Good Reason and,
during such thirty-day period, the Company shall have the opportunity to cure the stated Good
Reason. Unless the Company cures such stated Good Reason, Executive’s employment shall terminate
at the end of such thirty-day period, but without prejudice to the Company’s right to contest the
existence of such Good Reason or to contest the fact that the Good Reason has not been cured. Any
such resignation shall be for “Good Reason” only if due to one or more of the following
circumstances:

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	 	(i)	 	failure by the Company to pay any amount that
is due under this Agreement or to take any action that is required
under this Agreement;
	 
	 	(ii)	 	any action that materially diminishes
Executive’s position, authority, duties or responsibilities as Chief
Executive Officer of the Company (or of the ultimate parent company in
an unbroken chain of companies ending with the Company, each company
other than the ultimate parent owning stock possessing fifty percent or
more of the total combined power of all classes of stock in one of the
other companies in the chain);
	 
	 	(iii)	 	any requirement that Executive regularly
render his services at a location other than one that is within
forty-five (45) miles of Des Moines, Iowa, other than necessary
business travel occasioned by the performance of the duties described
in Section 2; provided, however, that Executive may refuse to render
his services from such other location and need not actually render his
services from such other location in order to invoke the protection of
this clause (iii), it being sufficient that the Company has required
the Executive to perform his services from such other location; or
	 
	 	(iv)	 	any reduction in Executive’s Base Salary or in
the bonus plan described in Section 3(b) of this Agreement, or any
substantial reduction in the aggregate value of the Company’s non-stock
related benefit plans provided to Executive.

Any of the foregoing reasons may be waived by Executive. If Executive does not resign for Good
Reason within three (3) months after the later of the date Executive acquires actual knowledge of
the occurrence of any of the foregoing reasons or the effective date of the change giving rise to
Good Reason (e.g. in the case of clause (ii), the effective date of a diminishment in
responsibilities, or in the case of clause (iii), the date as of which Executive is required to
actually begin performing his services from another location), such Good Reason, but only as to
such specific event, shall be deemed waived.

          (d) Resignation for Convenience. Executive shall have the right to terminate his
employment for convenience and without Good Reason, effective upon thirty (30) days written notice
to the Company.

          (e) Death. This Agreement shall terminate immediately upon Executive’s death.

          (f) Return of the Company Property. In the event of termination of Executive’s
employment with the Company, all corporate documents, records, files, credit cards, computer disks
and tapes, computer access cards, codes and keys, file access codes and keys, building and office
access cards, codes and keys, materials, equipment and other property of the Company which is in

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Executive’s possession (and any copies thereof) shall be returned to the Company at its principal
business office on the date of termination of Executive’s employment, or within five days
thereafter if termination occurs without notice.

          (g) Effect of Termination of Employment. Upon any termination of employment
(regardless of the reason including by way of death or Disability), Executive shall be entitled to
prorated Base Salary earned and unpaid to the effective date of such termination and reimbursement
of expenses incurred to the date of termination pursuant to Section 4 hereof. Any rights to which
Executive may be entitled under any compensation or benefit plans maintained by the Company shall
be governed by such plans. If such termination is by the Company without “Cause” or by Executive
for “Good Reason,” Executive shall also receive (i) any earned, accrued, and unpaid bonus for a
prior completed fiscal year, and (ii) a bonus for the year of termination based on actual results
for the year, but prorated based on days of employment during the year. Except for any other
rights specifically provided in this Agreement, Executive shall have no further rights to any
compensation whatsoever under this Agreement from and after the effective date of such termination
of employment.

     7. Disability.

          (a) Subject to Subsection 7(f) below, if Executive is unable to substantially perform the
majority of the duties of the President/CEO for more than one hundred eighty (180) consecutive
calendar days at any one time, by reason of physical or mental illness or injury, as determined by
an examining physician or mental health professional selected by the Executive and reasonably
acceptable to the Company, then Executive shall be deemed “Disabled” and subject to a Disability
for the purposes of this Agreement. In such event, Executive’s employment shall be terminated.
Notwithstanding anything herein to the contrary, such 180 calendar day period shall begin to run
from the date such disability is determined to have occurred, regardless of whether Executive has
any unused vacation. Executive shall not be entitled to any payments for unused vacation in
conjunction with the application of this Section 7, except to the extent any leave taken by
Executive under this Section 7 qualifies as a leave under the Family and Medical Leave Act, 29
U.S.C. Section 2601, et seq., in which event Executive may choose to use unused vacation instead of
disability under this Section 7. If Executive exercises such right, any unused vacation taken
shall offset any period of disability leave that otherwise would have been paid under this Section
7.

          (b) If prior to any termination of Executive’s employment under this Section 7 Executive is
able to resume performance of his duties under this Agreement, and if within one hundred eighty
(180) calendar days of the resumption of such duties Executive is again unable to substantially
perform the majority of the duties of the President/CEO by reason of physical or mental illness or
injury for a period of more than thirty (30) consecutive calendar days, then such subsequent
disability period shall be deemed to be a continuation of the immediately preceding disability
period.

          (c) Any disability period commencing after Executive has returned to his employment hereunder
and has given reasonable and proper attention to his duties for a continuous period of 180 calendar
days shall be deemed a new period of disability for purposes of this Section 7.

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          (d) Any disability compensation payable under this Section 7 shall be reduced by:

	 	(i)	 	any amount which is paid to Executive under any
private disability benefit plan or arrangement to which the Company
contributes or has contributed;
	 
	 	(ii)	 	any benefits paid or payable to Executive on
account of the disability of Executive under any worker’s compensation
law, occupational disease law, or similar legislation of any state or
of the federal government; and
	 
	 	(iii)	 	50% of the amount of any related benefit which
Executive would be entitled to receive under the Federal Social
Security Act as in effect at the time the payment hereunder is made.

          (e) In the event of Executive’s partial disability (physical or mental, or both), as
determined by a reasonable standard to be set by the Company, if Executive is able to perform a
substantial portion of Executive’s duties, Executive may, if Executive so desires, with the consent
of the Company, work part-time on a basis of compensation and other terms mutually acceptable to
the Company and Executive. In considering any request by Executive to work part-time, the Company
may require information from Executive’s treating physician and/or mental health professional
and/or a physician and/or mental health professional chosen by the Company.

          (f) The Company shall comply with all applicable state and federal laws relating to the
disability of an employee, including laws regarding reasonable accommodation requirements and laws
governing the granting of medical leaves of absence.

     8. Severance. In the event of Executive’s Severance during the Term, in consideration
of Executive’s obligations under Section 11 (Non-Compete), Executive shall continue to receive his
Base Salary plus “target” bonus pursuant to Section 3(b) for a period of twenty-four (24) months
and be provided COBRA coverage for two years after the date of such Severance. Notwithstanding the
foregoing, payments hereunder for the first six (6) months following such Severance shall be
deferred until the completion of such six month period and then shall be paid in an immediate lump
sum, if and to the extent required to avoid a failure under Section 409A(a)(1)(a)(i) of the
Internal Revenue Code and authorities promulgated pursuant thereto. For purposes of this
Agreement, “Severance” shall mean Executive’s resignation for “Good Reason” or discharge from
employment by the Company for any reason other than “Cause”, death or “Disability”. “Severance”
shall not include Executive’s resignation without “Good Reason” or expiration of the Term. All
payments made to Executive under this Section 8 shall be reduced by amounts (i) required to be
withheld in accordance with federal, state and local laws and regulations in effect at the time of
payment, or (ii) owed to the Company by Executive for any amounts advanced, loaned or
misappropriated.

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     9. Inventions, Plans and Ideas.

          (a) “Inventions, plans and ideas” as used in this Section 9 means any discoveries, ideas,
plans and improvements (whether or not they are in writing or reduced to writing or embodied solely
in practices of the Company) or works of authorship (whether or not they are or can be patented or
copyrighted) that Executive makes, authors or conceives (either alone or with others) and that:

	 	(i)	 	concern the Company’s business or the Company’s
research or development or planning that can be demonstrated to relate
to the Company’s then-current business or any planned business which
the Company is actively exploring; or
	 
	 	(ii)	 	result from and relate to any work Executive
performs for the Company; or
	 
	 	(iii)	 	use the Company’s trade secret information.

          (b) Executive agrees that all “inventions, plans and ideas” he makes during the term of this
Agreement will be the Company’s sole and exclusive property. Executive will, with respect to any
such “invention, plan or idea”:

	 	(i)	 	keep current, accurate and complete records
which will belong to the Company and be kept and stored on the
Company’s premises while Executive is employed by the Company.
	 
	 	(ii)	 	promptly and fully disclose the existence and
describe the nature of the invention, plan or idea to the Company in
writing (upon request).
	 
	 	(iii)	 	assign, and Executive hereby does assign, to
the Company all of his rights to any such “invention, plan or idea” and
any applications which he may make for patents, copyrights, trademarks
or service marks in any country.
	 
	 	(iv)	 	acknowledge and deliver promptly to the Company
any written instruments, and perform any other acts necessary in the
Company’s reasonable opinion, to preserve property rights in any
invention, plan or idea against forfeiture, abandonment or loss, and to
obtain and maintain letters patent and/or copyrights and/or marks on
any invention, plan or idea and to vest the entire right and title to
such “invention, plan or idea” in the Company.

          (c) Executive does not have, and will not assert, any claims to or rights under any
“inventions, plans or ideas” as having been made, conceived, offered or acquired by Executive prior
to his employment by the Company. Further, and without limiting the foregoing, Executive

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has contributed and assigned, and hereby does contribute and assign, to the Company all
“inventions, plans and ideas” within the meaning of this Section 9.

     10. Confidentiality and Non-Disclosure. Executive agrees to keep confidential, except
as may be required by his job responsibilities or as the Company may otherwise consent in writing,
and not to make any use of, except for the benefit of the Company, at any time either during or
subsequent to Executive’ employment, any trade secrets or other confidential information of the
Company that Executive may produce, obtain or otherwise acquire during the course of his
employment. Upon termination of Executive’s employment with the Company, Executive shall return to
the Company all records of such trade secrets or confidential information, including copies thereof
in Executive’ possession, whether prepared by Executive or others. The provisions of this Section
10 shall not apply to any of the following: (a) information that, at the time it was disclosed by
the Company, was in the general public knowledge; (b) information that, after being disclosed by
the Company, becomes in the general public knowledge other than through Executive’s unauthorized
disclosures; (c) information in Executive’s possession at the time the information was disclosed by
the Company; (d) information received in good faith by Executive independently from a third party;
and (e) information independently developed by Executive other than in the course of Executive’s
employment.

     11. Non-Compete.

          (a) Executive agrees that during his employment with the Company and for a period of
twenty-four months after the termination of Executive’s employment for any reason, Executive will
not, directly or indirectly:

	 	(i)	 	engage in any manner or capacity (e.g., as an
advisor, principal, agent, partner, officer, director, stockholder,
employee, member of any association or otherwise) in the business of
providing local exchange telecommunications services, long distance or
Internet access in the State of Iowa or any local telephone exchange
area in which the Company provides local exchange services;
	 
	 	(ii)	 	in any way interfere or attempt to interfere
with the Company’s relationships with any of the Company’s then-current
customers with the Company has had material contact within the last
year, suppliers, vendors or investors; or
	 
	 	(iii)	 	employ or attempt to employ any of the
Company’s employees, or the employees of any enterprise managed or
owned by the Company, on behalf of any other entity competing with the
Company;

Notwithstanding the foregoing, (A) if Executive’s employment is terminated upon expiration of the
Term, then the restriction in clause (i) above shall apply for a period of six months after
termination of Executive’s employment and the restrictions in clause (ii) and (iii) above shall
apply for a period of twenty-four months after termination of Executive’s employment, and (B) if
Executive’s

12

 

employment continues on an “at-will” basis following expiration of the Term, the restrictions in
clause (i), (ii) and (iii) above shall apply for a period of six months after termination of
Executive’s employment.

          (b) If it is determined by a final non-appealable judgment of a court of law or equity that
Executive has breached this Section 11, the Company shall be relieved of further severance payments
to Executive pursuant to Section 8, and Executive shall repay to the Company all severance payments
previously received pursuant to Section 8.

          (c) Executive will, prior to accepting employment with any new employer, inform that employer
of this Agreement and provide that employer with a copy of this Section 11 if Section 11 remains in
effect pursuant to the terms of this Agreement as of the first day of Executive’s employment with
the new employer.

     12. Enforcement of Confidentiality and Non-Compete Covenants. The parties acknowledge
that the Company will suffer irreparable harm if the Executive breaches Sections 9, 10 or 11 of
this Agreement, either during or after its term. Accordingly, the Company shall be entitled to any
right or remedy it may have, under this Agreement or otherwise, at law or equity, including but not
limited to an injunction, enjoining or restraining Executive from any violation of Sections 9, 10
or 11 of this Agreement, without any requirement that the Company post a bond or other security.
However, such right of equitable relief shall not be construed to be in lieu of any other rights,
including, but not limited to, the right to seek a remedy at law for damages plus costs and
reasonable attorney fees.

     13. Survival of Obligations. Executive’s obligations under Sections 6(f), 9, 10 and
11 shall not be terminated upon termination or expiration of this Agreement or of Executive’s
employment for any reason. The Company’s obligations under Sections 6(g), 8, 14 and 21 shall not
be terminated upon termination or expiration of this Agreement or of Executive’s employment for any
reason.

     14. Director and Officer Insurance and Indemnification. The Company shall procure and
maintain in force during the Term of this Agreement Director and Officer liability insurance in
such amount or amounts as the Company may determine, which insurance shall include coverage of the
office of the President/CEO. The Company shall indemnify Executive to the maximum extent
authorized by the provisions of the Iowa Business Corporation Act. In the event that the Company
and Executive enter into a separate agreement relating to indemnification, during the period of
time that such agreement remains in effect the provisions of this Section shall be superseded
thereby to the extent such agreement gives Executive greater rights; provided, however there shall
be no obligation of the Company to enter into such separate indemnification agreement.

     15. Notices. Any notice required or permitted to be given under this Agreement shall
be in writing and (i) hand delivered, (ii) sent by registered or certified mail, return receipt
requested, or (iii) sent by overnight courier requiring signature for delivery to the Company or
Executive, as appropriate, at the following addresses:

13

 

	 	 	 	 	 
	 

	 	If to the Company:
	 	General Counsel
	 

	 	 	 	Iowa Telecommunications Services, Inc.
	 

	 	 	 	115 S. Second Avenue West
	 

	 	 	 	Newton, IA 50208
	 
	 	 	 	 
	 

	 	If to Executive:
	 	Alan L. Wells
	 

	 	 	 	8000 Tiburon Place
	 

	 	 	 	Johnston, Iowa 50131

The parties shall notify each other in writing of any changes in the notification addresses at the
time such changes occur.

     16. Assignment. This Agreement shall inure to the benefit of any be binding upon the
Company, and the Company’s legal successors. Executive shall not have any right to assign or
delegate his obligations under this Agreement.

     17. Modification. This Agreement shall not be changed, modified or amended in any
respect except by a written instrument signed by both parties. All prior employment discussions,
negotiations and employment agreements between the Company and Executive, whether written or oral,
are hereby terminated and superseded in their entirety by this Agreement.

     18. Choice of Law. This Agreement shall be governed by the applicable laws of the
State of Iowa.

     19. Savings Clause. Any provision of this Agreement which is held by any court having
jurisdiction of the Parties and this subject matter to be unlawful shall be modified and made
lawful by such court to the extent permitted by law, and in accordance with the decisions of Iowa
courts.

     20. Action by Board of Directors. Any action required by the Company’s Board of
Directors under this Agreement may be taken by the affirmative vote of a majority of the members of
the Board, or of a duly authorized committee having authority over the matter in question, present
at a meeting thereof, not counting Executive; provided that termination for “Cause” pursuant to
Section 6(a) shall require the approval of two-thirds of the members of the Board of Directors
present at a meeting thereof, not counting Executive.

     21. Legal Fees. The Company shall reimburse Executive’s reasonable legal fees and
expenses incurred in negotiating and documenting this Agreement. In the event of any dispute
between Executive and the Company following a Change of Control of the Company, the Company shall
reimburse Executive for attorney’s fees and expenses reasonably incurred by Executive in such
dispute in connection with those issues upon which Executive is determined to have prevailed upon
the merits.

14

 

     IN WITNESS WHEREOF, this Employment Agreement has been executed by the parties effective as of
the day and year first above written.

	 	 	 	 	 
	 	 	IOWA TELECOMMUNICATIONS SERVICES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Its:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 	 	ALAN L. WELLS

15exv10w2

 

EXECUTION COPY

Exhibit 10.2

RESTRICTED STOCK AGREEMENT

IOWA TELECOMMUNICATIONS SERVICES, INC.

2005 STOCK INCENTIVE PLAN

     THIS AGREEMENT, made effective as of this 3rd day of August, 2005, by and between Iowa
Telecommunications Services, Inc., an Iowa corporation (the “Company”), and Alan L. Wells
(“Participant”).

WITNESSETH:

     WHEREAS, Participant on the date hereof is an employee, officer, consultant, advisor or
director providing services to the Company or an Affiliate (as defined in the Plan) of the Company;
and

     WHEREAS, the Company wishes to grant a restricted stock award to Participant for shares of the
Company’s Common Stock pursuant to the Company’s 2005 Stock Incentive Plan (the “Plan”); and

     WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock award to
Participant;

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
the parties hereto agree as follows:

     1. Grant of Restricted Stock Award. The Company hereby grants to Participant on the
date set forth above a restricted stock award (the “Award”) for One Hundred Thousand (100,000)
shares of Common Stock on the terms and conditions set forth herein, and subject to adjustment
pursuant to Section 4(c) of the Plan. The Company shall cause to be issued one or more stock
certificates representing such shares of Common Stock in Participant’s name, and shall hold each
such certificate until such time as the risk of forfeiture and other transfer restrictions set
forth in this Agreement have lapsed with respect to the shares represented by the certificate. The
Company may also place a legend on such certificates describing the risks of forfeiture and other
transfer restrictions set forth in this Agreement providing for the cancellation of such
certificates if the shares of Common Stock are forfeited as provided in Section 2 below. Until
such risks of forfeiture have lapsed or the shares subject to this Award have been forfeited
pursuant to Section 2 below, Participant shall be entitled to vote the shares represented by such
stock certificates and shall receive all dividends attributable to such shares, but Participant
shall not have any other rights as a shareholder with respect to such shares.

     2. Vesting of Restricted Stock.

          (a) The shares of Stock subject to this Award shall remain forfeitable until the risks of
forfeiture lapse according to the following vesting schedule:

 

 

	 	 	 	 	 
	 	 	Cumulative Percentage
	Vesting Date	 	of Shares Vested
	April 1, 2007
	 	 	25	%
	April 1, 2008
	 	 	50	%
	April 1, 2009
	 	 	75	%
	April 1, 2010
	 	 	100	%

Except as expressly provided in subsection (b) below, if Participant’s employment or other
relationship with the Company or any Affiliate ceases at any time prior to a Vesting Date for any
reason, including Participant’s voluntary resignation or retirement or termination by the Company
or such Affiliate with or without cause, Participant shall immediately forfeit all shares of Stock
subject to this Award which have not yet vested and for which the risks of forfeiture have not
lapsed.

     (b) Notwithstanding subsection (a) above, if Participant’s employment or other relationship
with the Company or any Affiliate ceases or is terminated under any of the following circumstances:

	 	•	 	by the Company without “Cause” in connection with a “Change of Control”
of the Company; or
	 
	 	•	 	by Participant for “Good Reason” in connection with a “Change of
Control” of the Company;

then, upon such cessation or termination of Participant’s employment or other relationship with the
Company or such Affiliate, the risk of forfeiture shall lapse with respect to all shares of Stock
subject to this Award and all such shares shall become vested. Notwithstanding the foregoing, if
prior to the forfeiture of any unvested shares of Stock subject to this Award, another Company
executive receives a restricted stock grant under the Plan that provides for the lapse of the risk
of forfeiture with respect thereto upon such executive’s death or disability, then the risk of
forfeiture with respect to the shares of Stock subject to this Award shall lapse (and such shares
shall vest) upon the occurrence of the same such event(s) (i.e. death or disability) with respect
to Participant.

     For purposes of this Section 2, the terms “Cause”, “Good Reason”, “Change of Control” and “in
connection with a Change of Control” shall mean as set forth in Participant’s Employment Agreement
dated August 3, 2005 between Participant and the Company.

     3. Miscellaneous.

          (a) Employment-at-Will. This Agreement shall not confer on Participant any right with
respect to continuance of employment by or other relationship with the Company or any of its
Affiliates, nor will it interfere in any way with the right of the Company or any of its Affiliates
to terminate such employment or other relationship. Nothing in this Agreement shall be construed
as creating an employment contract for any specified term between Participant and the Company or
any of its Affiliates.

2

 

          (b) Securities Law Compliance. Participant shall not transfer or otherwise dispose of
the shares of Stock received pursuant to this Agreement until such time as counsel to the Company
shall have determined that such transfer or other disposition will not violate any state or federal
securities laws. Participant may be required by the Company, as a condition of the effectiveness
of this restricted stock award, to agree in writing that all Stock subject to this Agreement shall
be held, until such time that such Stock is registered and freely tradable under applicable state
and federal securities laws, for Participant’s own account without a view to any further
distribution thereof, that the certificates for such shares shall bear an appropriate legend to
that effect and that such shares will be not transferred or disposed of except in compliance with
applicable state and federal securities laws.

          (c) Mergers, Recapitalizations, Stock Splits, Etc. Pursuant and subject to Section 4
of the Plan, certain changes in the number or character of the Common Stock of the Company (through
sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off),
liquidation, recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Participant’s rights with respect to any
shares of Common Stock for which the risks of forfeiture have not lapsed (i.e., Participant shall
have such “anti-dilution” rights under the Award with respect to such events, but shall not have
“preemptive” rights). For example, if the Company is involved in a merger in which the outstanding
Common Stock is converted into the right to receive cash, stock of another company or other
consideration, then the shares of Common Stock for which the risks of forfeiture have not lapsed at
the time of such merger shall be converted into the right to receive such cash , stock or other
merger consideration, but such cash, stock or other merger consideration shall remain subject to
the risks of forfeiture pursuant to Section 2(a), subject to potential acceleration of the vesting
thereof pursuant to Section 2(b).

          (d) Withholding Taxes. In order to permit the Company to comply with all applicable
federal or state income tax laws or regulations, the Company may take such action as it deems
appropriate to insure that, if necessary, all applicable federal or state payroll, income or other
taxes are withheld from any amounts payable by the Company to Participant. If the Company is
unable to withhold such federal and state taxes, for whatever reason, Participant hereby agrees to
pay to the Company an amount equal to the amount the Company would otherwise be required to
withhold under federal or state law.

          (e) 2005 Stock Incentive Plan. The Award evidenced by this Agreement is granted
pursuant to the Plan, a copy of which Plan has been made available to Participant and is hereby
incorporated into this Agreement. This Agreement is subject to and in all respects limited and
conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning
when used in this Agreement. The Plan governs this Agreement and, in the event of any questions as
to the construction of this Agreement or in the event of a conflict between the Plan and this
Agreement, the Plan shall govern, except as the Plan otherwise provides. Participant acknowledges
and agrees that the Plan and this Agreement may be amended as reasonably necessary to comply with,
or avoid adverse consequences to the Company and/or Participant under, future tax laws and
regulations.

3

 

          (f) Stock Legend. In addition to the legend described in Section 2, the Company may
require that the certificates for any shares of Common Stock issued to Participant hereunder shall
bear an appropriate legend to reflect the restrictions set forth in this Agreement.

          (g) Scope of Agreement. This Agreement shall bind and inure to the benefit of the
Company, its Subsidiaries and its successors and assigns and Participant and any successor or
successors of Participant permitted by this Agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day
and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	IOWA TELECOMMUNICATIONS SERVICES, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Participant’s Signature	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Alan L. Wells	 	 
	 	 	 	 	 
	 	 	Participant’s Name	 	 

4

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