Document:

exv10w1

Exhibit 10.1

EXECUTION COPY

EMPLOYMENT AGREEMENT

BETWEEN

LY ACQUISITION LLC

AND

J. SHERMAN HENDERSON, III

July 30, 2003

 

TABLE OF CONTENTS

	 	 	 	 	 
	Section	 	Page	 
	1. Employment
	 	 	2	 
	2. Term of Agreement
	 	 	2	 
	3. Employment
	 	 	2	 
	3.1 Title, Authority and Duties
	 	 	2	 
	4. Salary and Fringe Benefits
	 	 	3	 
	4.1 Salary
	 	 	3	 
	4.2 Bonuses
	 	 	3	 
	4.3 Benefit Plans
	 	 	3	 
	4.4 Vacation, Holidays & Leave
	 	 	4	 
	4.5 Business Expenses
	 	 	4	 
	4.6 Other Benefits
	 	 	4	 
	5. Confidentiality, Noncompetition and Other Covenants
	 	 	4	 
	5.1 Confidentiality Covenant
	 	 	4	 
	5.2 Nonsolicitation of Customers and Employees Covenant; Non-Competition
	 	 	5	 
	5.3 Property of the Company
	 	 	6	 
	5.4 Cumulative Remedies; Enforceability
	 	 	6	 
	5.5 Reasonableness of Scope and Duration
	 	 	7	 
	5.6 Definitions
	 	 	7	 
	6. Termination of Employment
	 	 	8	 
	6.1 Termination
	 	 	8	 
	6.2 Termination Benefits
	 	 	9	 
	6.3 Return of Company Property
	 	 	10	 
	7. Mediation of Claims
	 	 	10	 
	7.1 Qualification of Mediator
	 	 	10	 
	7.2 Selection of Mediator
	 	 	10	 
	7.3 Mediation Session
	 	 	11	 
	7.4 Confidentiality of Mediation
	 	 	11	 
	7.5 Obligation to Mediate
	 	 	11	 
	7.6 Failure to Settle in Mediation
	 	 	12	 
	8. Miscellaneous Provisions
	 	 	12	 
	8.1 Binding Effect; Delegation of Duties Prohibited
	 	 	12	 
	8.2 Amendment; Waiver
	 	 	12	 
	8.3 Entire Agreement
	 	 	12	 
	8.4 Governing Law
	 	 	13	 
	8.5 Headings; Section References; Construction
	 	 	13	 
	8.6 Notices
	 	 	13	 
	8.7 Policies, Regulations and Guidelines for Executives
	 	 	14	 
	8.8 Severability of Provisions
	 	 	14	 

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EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”)
is entered into as of July 30, 2003, by and
between LY Acquisition LLC, a Kentucky limited liability company (the “Company”) and J. Sherman
Henderson, III, an individual residing in Louisville, Kentucky (“Executive”).

     Recitals:

     A. Lightyear Communications, LLC, Lightyear Communications, Inc. and Lightyear
Communications of Virginia, Inc. (“Lightyear”) have heretofore been engaged in the business of
marketing, selling and providing telecommunications products and services, including long
distance voice and data services to customers (the “Business”).

     B. Each of the Sellers has filed a voluntary petition in bankruptcy and is a debtor and
debtor in possession in certain bankruptcy cases (the “Bankruptcy Cases”) pending before the
United States Bankruptcy Court for the Western District of Kentucky, Louisville Division
(“Bankruptcy Court”).

     C. The Company was formed for purposes of acquiring substantially all of the assets in
Lightyear used in the Business, and in connection therewith, the Company has filed various
pleadings with the Bankruptcy Court to effect such Acquisition in accordance with Sections
105, 363 and 365 and other applicable provisions of Chapter 11 of the Bankruptcy Code, including
that certain Asset Purchase Agreement dated as of July 30, 2003.

     D. Executive has heretofore served as President and Chief Executive Officer of
Lightyear and has extensive knowledge and expertise with respect to the Business.

     E. Company desires to secure the services of Executive as its President and Chief
Executive Officer, and Executive desires to render such services to the Company.

 

     F. The parties hereto desire to set forth the terms and conditions of the employment
relationship between the Executive and the Company.

     Agreement:

     Now, Therefore, the parties hereby agree as follows:

1. Employment. The Company hereby employs Executive for the “Term” (as defined in
Section 2), and Executive accepts employment by the Company and agrees to serve the
Company during the Term, upon the terms and conditions hereinafter set forth.

2. Term of Agreement. Executive’s employment shall commence on the date of the closing
of the Acquisition [i.e. 2nd closing] and continue in effect until December 31, 2008
(“Initial
Term”), unless sooner terminated as provided in Section 6 or Section 7. At the end of the Initial
Term, this Agreement shall be automatically renewed for successive additional one-year terms
(“Additional Terms”), unless within 180 days prior to the end of the Initial Term or any
Additional Term either party gives the other written notice of Company’s or Executive’s intent
not to renew this Agreement. The Initial Term and any Additional Term are referred to
collectively as the “Term.”

	3.	 	Employment.

     3.1 Title, Authority and Duties. During the Term, Executive shall be employed as an
officer of the Company with the title of President and Chief Executive Officer. In such capacities,
Executive shall have responsibility for implementing the strategies of the Company, as determined
by the Managers of the Company (“Managers”), and the responsibility and authority for administering
the day to day operations of the Company’s business and affairs, including, without limitation, all
personnel and financial matters, subject to the direction of the Chairman of the Managers.
Additionally, Executive shall perform such other reasonable duties as may be assigned him from time
to time by the Chairman of the Managers, consistent with his position as President and Chief
Executive Officer of the Company. So long as Executive is

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employed hereunder, Executive agrees (a) to perform Executive’s duties diligently and to the best
of Executive’s ability, and (b) to use Executive’s best efforts, skill and ability to promote the
interests of the Company. With the exception of a reasonable number of hours devoted to (i) the
management of personal investments, (ii) service on corporate and industry related boards, civic
or charitable boards not interfering with or detracting from Executive’s duties hereunder, and
(iii) vacations, periods of disability or incapacity and sick leave, Executive shall devote
Executive’s substantially full business time and attention to the faithful performance of such
duties. During the Term, Executive shall not be required to relocate from Louisville, Kentucky.

4. Salary and Fringe Benefits.

          4.1 Salary. Company shall pay Executive a salary of $450,000 per year, or such higher salary
as may be established by the Managers from time to time (“Salary”), which shall be payable in
equal installments in such payment intervals as are the usual custom of the Company, but not less
often than bi-monthly (“Salary”). Executive’s Salary shall be increased annually consistent with
increases given to other executives of the Company; provided however, Executive shall abstain from
any vote of the Managers and/or Members of the Company with respect to any change in Executive’s
Salary, Bonuses, or other benefits.

          4.2 Bonuses. In addition to his Salary, the Company shall pay to Executive bonuses as
described on Exhibit A attached hereto (“Bonuses”).

          4.3 Benefit Plans. Executive shall participate, to the extent he may be eligible, in all
“Executive benefit plans” (as defined in Section 3(3) of the Executive Retirement Income Security
Act of 1974, as amended) maintained by the Company or other executive benefit plans maintained by
the Company for its executives. Executive shall be required to comply with the conditions attendant
to coverage by such plans and shall comply with and be entitled to benefits only in accordance with
the terms and conditions of such plans as they may be amended from time to time.

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          4.4 Vacation, Holidays & Leave. Executive shall be entitled to four weeks of paid vacation
each year. Further, it is understood that the Company follows the standard national holidays and
Executive will be entitled to take such normal holidays.

          4.5 Business Expenses. Company shall pay or reimburse the Executive for the reasonable and
necessary business expenses of the Executive in performing Executive’s duties for the Company, in
accordance with reasonable policies adopted by the Company from time to time.

          4.6 Other Benefits. In addition to the other benefits described in this Section 4, the
Company shall provide Executive the use of a luxury automobile at least equal to the quality and
level of the automobile presently provided by Lightyear to Executive, to be replaced every three
(3) years. Additionally, at its expense, the Company shall obtain, maintain and pay for life
insurance covering Executive, of which Executive’s family or trusts shall be the beneficiary, in
the total face amount of $6,000,000, consisting of the whole life policy in the face amount of
$3,000,000 and the term life policy in the face amount of $3,000,000 presently provided by
Lightyear for the benefit of Executive (in addition to any key-man insurance the Company elects to
maintain on Executive’s life for the Company’s benefit). This insurance policy shall be assigned
(without payment to the Company) to Executive should he ever leave the employment of the Company,
whatever the reason or cause.

5. Confidentiality, Noncompetition and Other Covenants. In consideration of
Company’s employment of Executive hereunder, Executive does hereby covenant and agree with
the Company as follows:

          5.1 Confidentiality Covenant. Executive and the Company recognize that due to the nature of
Executive’s association with the Company and its “Affiliates” (as defined in Section 5.6(a)),
Executive will have access to and will acquire confidential and proprietary information relating to
the business and operations of the Company and its Affiliates (collectively, “Confidential
Information”), including, without limiting the generality of the foregoing, (i) any and all trade
secrets concerning the business and affairs of the Company, data, know-how, and

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ideas, past, current and planned, development, subscription lists, current and
anticipated customer requirements, customer, circulation or subscription
lists or information, advertiser lists or information, price lists, market
studies, business plans, computer software and programs and any other
information, however documented, of the Business and the Acquired Assets that is a
trade secret; (ii) any and all information concerning the business and affairs of
the Company, however documented; and (iii) any and all notes, compilations,
studies, summaries, and other material prepared by or for the Company.
Executive acknowledges that the Confidential Information is of central
importance to the business of the Company and its Affiliates and that
disclosure of it to or its use by others would cause substantial loss to the
Company and its Affiliates. Executive shall keep the Confidential Information
confidential and shall not disclose any Confidential Information to any
Person (as defined in Section 5.6(b)), firm or corporation, or use the same
in any other way except in connection with and to promote the business and
activities of the Company and its Affiliates and as required by law. Further,
any and all data, written materials, records or documents made or obtained by
Executive during the Term, or after the termination of this Agreement,
concerning the business or affairs of the Company and its Affiliates shall be
the property of the Company and its Affiliates, and will be promptly delivered
by Executive to the Company upon Executive’s termination of employment for any
reason.

          5.2 Nonsolicitation of Customers and Employees Covenant; Non-Competition.
Provided the Company is not and has never been in default of its payment obligations described in
the last sentence of this Section 5.2, Executive shall not, for a period of eighteen months after
termination of Executive’s employment with the Company, regardless of the reason for such
termination, directly or indirectly, individually or on behalf of any other Person (except the
Company or an Affiliate), (i) solicit or divert any business, activity or service of the type then
being conducted by the Company or an Affiliate from any Person (a) who is then a customer of the
Company or an Affiliate, or (b) who was such a customer during the eighteen-month period
immediately prior to such solicitation or diversion, or (c) who the Company or an Affiliate has
made a presentation to become a customer during the eighteen-month period immediately prior to such
solicitation or diversion and (ii) hire, retain, or
attempt to hire or retain any employee, officer, director, manager, agent, or sales agent of the
Company, or in any way interfere with the relationship between the Company and any of its
employees, officers, directors, managers,

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agents, or sales agents. Provided the Company is not and has never been in default of its payment
obligations described in the last sentence of this Section 5.2, for a period of eighteen months
after termination of Executive’s employment with the Company, regardless of the reason for such
termination, Executive shall not, anywhere in the United States of America, directly or
indirectly invest in, own, manage, operate, finance, control, advise, render services to, enter
into the employ of, or guarantee the obligations of, any Person engaged in or planning to become
engaged in the Business.

          As consideration for the covenants set forth in this Section 5.2, the Company shall continue
Executive’s Salary for the eighteen-month period following termination of Executive’s employment
for a reason other than for death or “Cause” as hereinafter defined, provided no such amount under
this Section 5.2 shall be payable if Executive is terminated for death or Cause or if the
Executive also receives “Termination Benefits,” as hereinafter defined.

          5.3 Property of the Company. At no time shall Executive remove or cause to be removed from
the premises of the Company or any Affiliate any memorandum, note, list, record, file, disk,
document or other paper, electronic data, intellectual property, equipment or any like item
relating to the business of the Company (“Company Property”) except in the furtherance of the
performance of Executive’s duties on behalf of the Company or an Affiliate. All Company Property
made or compiled by the Executive or made available to Executive shall be and remain the property
of the Company or an Affiliate, as the case may be, and shall be delivered to the Company promptly
upon the termination of the Executive’s employment with the Company or at any other time upon
written request by the Managers of the Company.

          5.4 Cumulative Remedies; Enforceability.

               (a) In the event of Executive’s breach or threatened breach of the covenants set forth in this
Section 5, the parties acknowledge that the Company will suffer irreparable harm and the Company
will be entitled to an injunction restraining Executive from committing such breach. Executive
hereby affirmatively waives any requirement that the Company post any bond, demonstrate the
likelihood of irreparable harm to the Company, or demonstrate that any

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actual damages will be suffered by the Company or any other entity seeking enforcement hereof as
a result of Executive’s breach of any of the covenants set forth in this Section 5.

               (b) The covenants and agreements contained in this Section 5 will be construed as
independent of each other, and the existence of any claim or cause of action by Executive against
the Company, whether predicated on this Agreement or otherwise, will not constitute a defense to
the Company’s enforcement of such covenants, and they shall be construed as separate covenants
and agreements. If any court shall finally determine that the restraints provided for in any
such covenants and agreements exceed the maximum area, activity or time such court deems
reasonable and enforceable, said area, activity or time shall be deemed to become and thereafter
shall be the maximum area, activity or time which such court deems reasonable and enforceable,
and such covenants and agreements shall be enforced as to such reduced area, activity or time.

               (c) Nothing herein contained will be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach, including the recovery of
money damages.

          5.5 Reasonableness of Scope and Duration. Executive understands and agrees that the covenants
and agreements contained in this Section 5 are, taken as a whole, reasonable in their geographic
scope and duration, and Executive will not raise any issue of the reasonableness of the scope or
duration of any such covenants in any proceeding to enforce any such covenants. Executive
understands that the provisions of this Agreement have been carefully designed to restrict
Executive’s activities to the minimum extent which is consistent with the Company’s requirements.
Executive has carefully considered these restrictions, and Executive confirms that they will not
unduly restrict Executive’s ability to obtain a livelihood.

          5.6 Definitions. The following terms, when used herein, shall have the meanings set forth
below:

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               (a) Affiliate. Any Person controlled by, controlling or under common control with
such Person. For the purposes of this definition, “control” of a Person means the power, direct
or indirect, to direct or cause the direction of the management and policies of such Person,
whether by ownership of securities, contract, law or otherwise; and the terms “controlling” and
“controlled” shall have meanings correlative to the foregoing.

               (b) Person. Any individual, corporation, partnership, limited liability company or
partnership, joint venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof and any syndicate or group deemed to
be a “person” under Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934.

6. Termination of Employment.

          6.1 Termination. Executive’s employment with the Company shall terminate prior to the
expiration of the Term, upon the first occurrence of the following events:

               (a) Death. Upon the death of Executive.

               (b) Disability. The Managers may, in their good faith discretion, determine that the Executive
has a “Disability” if: (i) Executive has been declared legally incompetent by a final court decree
for a period of six (6) consecutive months (the date that is six (6) months after the date of such
court decree being deemed the date on which the Disability occurred); or (ii) Executive has
qualified to receive benefits under a long-term disability insurance policy held by the Company and
has been declared to be totally disabled by the insurer for a period of six consecutive months; or
(iii) because of a medically determinable disease, injury, or other mental or physical disability,
Executive is unable to perform the essential functions of Executive’s duties under this Agreement
for a period of six consecutive months in any 12-month period. In making the determination that
Executive has a Disability the Managers shall take into consideration the applicable provisions of
the Americans with Disabilities Act.

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          (c) Cause. Executive is discharged for “Cause,” which, for the purposes of this
Agreement, shall mean:

          (1) a breach of any material provision of this Agreement; or

          (2) a determination by the Managers that Executive has been grossly negligent in the
performance of Executive’s duties and responsibilities hereunder or Executive has refused,
after receiving notice from the Managers, to serve and carry out in all material respects,
Executive’s primary duties and responsibilities hereunder; or

          (3) theft by the Executive affecting the Company or an Affiliate or affecting
customers of the Company or an Affiliate; or

          (4) conviction of any criminal offense of the Executive involving a felony or a crime
involving moral turpitude;

	 	 	provided, that upon the occurrence of any of the events described in (1) or (2) above, Executive
shall be given a written notice by the Company which describes such breach or negligence or
neglect, in detail, and Executive shall have a 30-day period within which to cure same. In such
event, Cause shall exist only if Executive shall fail to cure such default within such 30-day
period after written notice by the Company.

6.2 Termination Benefits.

          (a) Death or Disability. Upon the Disability of Executive prior to the end of the Term, the
Company shall pay Executive (or his estate) a severance benefit equal to his Salary then in effect
multiplied by the greater of (i) 2 or (ii) the number of years (and fractions thereof) remaining
in the Term (such amount being referred to as “Termination Benefits”). The Termination Benefits
shall be paid in equal bi-monthly installments over a period of 12 months following his
Disability.

          (b) Cause. If Executive’s employment is terminated for Cause, Executive shall be entitled only
to Executive’s Salary accrued through the date of termination at the rate in effect

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on that date and any other benefits due Executive under the Company’s executive benefit plans,
executive pension benefit plans and other contracts, plans or agreements which provide benefits
or compensation for him then in effect, and shall be entitled to no other compensation or
benefits under this Agreement.

     6.3 Return of Company Property. Executive shall, upon the termination of Executive’s
employment, immediately surrender to the Company all of the Company’s property, including,
without limitation, equipment, funds, lists, manuals, books, records or other Confidential
Information (including all copies of the foregoing) in the possession
of, or provided to,
Executive.

7. Mediation of Claims. In the event that a claim (“Claim”) is asserted by a party hereto
(“Claimant”) that the other party (“Recipient”) has breached or failed to perform any provision of
this Agreement, the Claimant shall give a detailed written notification to Recipient (“Claims
Notice”) of the alleged breach or failure to perform. Within 10 days after receipt of the Claims
Notice, Recipient shall submit to Claimant a written response. The response shall describe the
specific facts and circumstances in reasonable detail as to why Recipient disputes the Claim. At
that time either party shall institute mediation of the Claim in accordance with the Commercial
Mediation Rules of the American Arbitration Association then in effect in accordance with the
following procedures and provisions:

     7.1 Qualification of Mediator. Unless the parties agree otherwise, the mediator shall be a
lawyer with excellent academic and professional credentials who (a) is or has been a partner in or
counsel to a highly respected law firm for at least 10 years as a practicing attorney specializing
in employment law, (b) has had both training and experience as a mediator, and (3) is impartial,
and who has never represented Executive or the Company or any of its Managers or other owners or
related parties.

     7.2 Selection of Mediator. The party initiating mediation of the Claim shall give the other
party a notice setting forth the list of the names and resumes of three persons who that party
(“Initiating Party”) believes would be qualified as a mediator. Within 15 days after

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delivery of this notice, the other party (“Recipient Party”) shall give a counter-notice to the
Initiating Party in which the Recipient Party may designate a person to serve as the mediator
from among the three persons listed by the Initiating Party, or if no such selection is made,
the Recipient Party may set forth a list of names and resumes of three persons who the Recipient
Party believes to be qualified as a mediator. Within 10 days after delivery of the
counter-notice the Initiating Party may designate a person to serve as mediator from among the
three persons listed by the Recipient Party. If the parties cannot agree on a mediator from the
three nominees submitted by each party, the mediator shall be selected by the Regional Vice
President of the American Arbitration Association where the mediation is to be held.

     7.3 Mediation Session. Within 30 days after the mediator has been selected, both parties and
their respective attorneys shall meet with the mediator for one mediation session of at least four
hours. Efforts to reach a settlement will continue until the conclusion of the proceeding, which
is deemed to occur when: (a) a written settlement is reached, or (b) the mediator concludes and
informs the parties in writing that further efforts would not be useful, or (c) the parties agree
in writing that an impasse has been reached. Neither party may withdraw before the conclusion of
the proceeding, provided, that if a party breaches this duty, such party shall pay all of the
costs and expenses of the mediator. Except as provided in the immediately preceding sentence, each
party shall pay its or Executive’s costs and expenses of the mediation, including attorneys’ fees,
and the costs and expenses of the mediator shall be shared equally by the parties.

     7.4 Confidentiality of Mediation. All conferences and discussions which occur in connection
with the mediation conducted pursuant to this Agreement shall be deemed settlement discussions and
nothing said or disclosed nor any document produced which is not otherwise independently
discoverable shall be offered or received as evidence or used for impeachment or for any other
purpose in any current or future arbitration or litigation.

     7.5 Obligation to Mediate. The parties regard the obligation to mediate an essential provision
of this Agreement and one that is legally binding on them. In case of a violation of such
obligation by either party, the other may bring an action to seek enforcement of such obligation in
any court of law having jurisdiction thereof.

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     7.6 Failure to Settle in Mediation. If the Claim cannot be settled as a result of the
mediation sessions, the mediation process shall end.

8. Miscellaneous Provisions.

     8.1 Binding Effect; Delegation of Duties Prohibited. This Agreement shall inure to the
benefit of, and shall be binding upon, the parties hereto and their respective successors,
assigns, heirs and legal representatives, including any entity with which the Company may merge or
consolidate, or to which all or substantially all of its assets may be transferred. The duties and
covenants of Executive under this Agreement, being personal, may not be delegated.

     8.2 Amendment; Waiver. This Agreement may be amended, modified or superseded only by a
written instrument signed by all of the parties to this Agreement. No party shall be deemed to
have waived compliance by another party of any provision of this Agreement unless such waiver is
contained in a written instrument signed by the waiving party and no waiver that may be given by a
party will be applicable except in the specific instance for which it is given. The failure of any
party to enforce at any time any of the provisions of this Agreement or to exercise any right or
option contained in this Agreement or to require at any time performance of any of the provisions
of this Agreement, by any of the other parties shall not be construed to be a waiver of such
provisions and shall not affect the validity of this Agreement or any of its provisions or the
right of such party thereafter to enforce each provision of this Agreement. No course of dealing
shall operate as a waiver or modification of any provision of this Agreement or otherwise
prejudice such party’s rights, powers and remedies.

     8.3 Entire Agreement. This Agreement embodies the entire agreement and understanding of the
parties related to the subject matter and supersedes all prior proposals, understandings,
agreements, correspondence, arrangements and contemporaneous oral agreements relating to subject
matter of this Agreement. No representation, promise, inducement or statement of intention has been
made by any party which has not been embodied in this Agreement.

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     8.4 Governing Law. This Agreement shall be governed by, and shall be construed and enforced
in accordance with, the laws of the Commonwealth of Kentucky, applicable to contracts to be wholly
performed within such state without giving effect to any conflict of law, rule or principle of
such state.

     8.5 Headings; Section References; Construction. Section headings or captions contained in this
Agreement are inserted only as a matter of convenience and reference and in no way define, limit,
extend or describe the scope of this Agreement, or the intent of any provision hereof. All
references herein to Sections shall refer to Sections of this Agreement unless the context clearly
otherwise requires. Unless the context clearly states otherwise, the use of the singular or plural
in this Agreement shall include the other and the use of any gender shall include all others. The
parties have participated jointly in the negotiation and drafting of this Agreement. If any
ambiguity or question of intent or interpretation arises, no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.

     8.6 Notices. All notices, requests, consents, approvals, waivers, demands and other
communications required or permitted to be given or made under this Agreement shall be in writing
and shall be deemed delivered to the parties (a) on the date of personal delivery against a
written receipt, or (b) on the date sent by confirmed telephonic facsimile transmission, or (c) on
the first business day following the date of delivery to a nationally recognized overnight courier
service, or (d) or the third business day following the date of deposit in the United States Mail,
postage prepaid, by certified mail, in each case addressed as follows, or to such other address,
person or entity as any party may designate by notice to the others in accordance herewith:

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	 	To Executive:
	 	J. Sherman Henderson, III
	 

	 	 	 	1901 Eastpoint Parkway
	 

	 	 	 	Louisville, KY 40223
	 
	 	 	 	 
	 

	 	With copy to:
	 	Michael M. Fleishman
	 

	 	 	 	Greenebaum Doll & McDonald PLLC
	 

	 	 	 	3300 National City Tower
	 

	 	 	 	Louisville, Kentucky 40202
	 
	 	 	 	 
	 

	 	To Company:
	 	LY Acquisition LLC
	 

	 	 	 	c/o McBrayer, McGinnis, Leslie & Kirkland PLLC
	 

	 	 	 	201 E. Main Street, Suite 1000
	 

	 	 	 	Lexington, Kentucky 40507
	 

	 	 	 	Attn: W. Brent Rice, Esq.
	 
	 	 	 	 
	 

	 	With copy to:
	 	Sawyer & Glancy PLLC
	 

	 	 	 	3120 Wall Street, Suite 310
	 

	 	 	 	Lexington, Kentucky 40513
	 

	 	 	 	Attn: Robert V. Sartin, Esq.

     8.7 Policies, Regulations and Guidelines for Executives. The company may, from time to time,
issue policies, rules, regulations, guidelines, procedures or other informational material,
whether in the form of handbooks, memoranda or otherwise, relating to the Company’s Executives.
Executive acknowledges and agrees that such material are general guidelines for Executive’s
information and shall not be construed to alter, modify or amend this Agreement for any purpose
whatsoever.

     8.8 Severability of Provisions. If a court in any final, unappealable proceeding holds any
provision of this Agreement or its application to any person or circumstance invalid, illegal or
unenforceable, the remainder of this Agreement, or the application of such provision to

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persons or circumstances other than those to which it was held to be invalid, illegal or
unenforceable, shall not be affected, and shall be valid, legal and enforceable to the fullest
extent permitted by law, but only if and to the extent such enforcement would not materially and
adversely frustrate the parties’ essential objectives as expressed in this Agreement. Furthermore, in lieu
of any such invalid or unenforceable term or provision, the parties intend that the court add to this Agreement a provision as similar in
terms to such invalid or unenforceable provision as may be valid and enforceable, so as to effect the original intent of the parties to the greatest extent possible.

[SIGNATURES ON FOLLOWING PAGE]

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     In Witness Whereof, the parties have entered into this Agreement as of the date
first written above.

	 	 	 	 	 	 	 
	 	 	LY ACQUISITION LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ W. Brent Rice
 

	 	 
	 

	 	Title:
	 	Interim CEO
 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	     (“Company”)	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ J. Sherman Henderson, III	 	 
	 	 	   	 	 
	 	 	J. SHERMAN HENDERSON, III	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	     (“Executive”)	 	 

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Exhibit A

Bonuses

	 	 	For each of the Company’s fiscal years during the Term, commencing with fiscal year 2003, the
Company shall pay to Executive a bonus in amounts computed as described herein.

     Attached hereto is the Company’s Projected Income Statement for the Company’s fiscal years
2004 through 2008 prepared on July 7, 2003 (“Projections”). Reflected on such Projections is the
Company’s projected (i) EBITDA (computed without regard to the bonuses paid hereunder) for each of
such fiscal years (for each of such fiscal years individually, the “Projected EBITDA”) and (ii)
amortization of the Company’s indebtedness for each of such fiscal years (for each of such fiscal
years individually, the “Projected Amortization”).

	 	1.	 	For any fiscal year that the Company achieves at least 75% of such
Projected EBITDA (pro-rated for less than any fiscal year), the Company shall pay to
Executive a Bonus for performance in an amount equal to Executive’s Salary in effect
for such year multiplied by the percentage of Projected EBITDA actually
achieved for that fiscal year, up to and including 110% (the “First Tier Bonus”). The
First Tier Bonus shall be paid in quarterly installments, within 20 days following the
end of each calendar quarter during each fiscal year, in an amount equal to 75% of the
bonus calculated on the actual EBITDA achieved in that calendar quarter, as compared to
Projected EBITDA for that quarter, with the remainder of the First Tier Bonus for that
quarter, if any, being paid within 20 days following the end of each fiscal year.
	 
	 	2.	 	In addition to the First Tier Bonus, in the event the Company during a fiscal
year achieves more than 110% of Projected EBITDA (pro-rated for less than any fiscal
year), then the Company shall pay to Executive an additional bonus for performance (the
“Second Tier Bonus”) in an amount equal to 10% of the amount of EBITDA achieved by the
Company in that fiscal year in excess of 110%, up to and including 120%, of Projected
EBITDA for that fiscal year.
	 
	 	3.	 	For any fiscal year during which the Company achieves more than 120% of Projected
EBITDA (pro-rated for less than any fiscal year), then, in addition to the First Tier
and Second Tier Bonuses, the Company shall pay to Executive an additional bonus for
performance (“Third Tier Bonus”) in an amount equal to 15% of the amount of EBITDA
achieved by the Company in such fiscal year in excess of 120% of Projected EBITDA for
that fiscal year.
	 
	 	4.	 	Such Second Tier and Third Tier Bonuses shall be paid to Executive within 60 days
following the expiration of each fiscal year of the Company during the Term.
	 
	 	5.	 	All of the First, Second and Third Tier Bonuses shall be based upon the Company’s
actual EBITDA calculated prior to and without any deduction for

 

 

	 	 	 	such First, Second and Third Tier Bonuses. Additionally, all of such Bonuses shall be
cumulative and not in lieu of another.
	 
	 	6.	 	The effects of any merger, purchase of assets or other acquisition that is consummated
without Executive’s written consent, shall be excluded in all respects from the actual EBITDA
of the Company for purposes of calculating the Executive’s First, Second and Third Tier
Bonuses.
	 
	 	7.	 	Notwithstanding anything in this Exhibit A or in the Agreement to the contrary, the amount of
all bonuses actually paid to the employees of the Company, including but not limited to any
First, Second and Third Tier Bonuses, shall not exceed for any quarter or fiscal year for
which such bonuses are based, twenty-five percent (25%) of the following sum for such period:
(i) the actual EBITDA of the Company (calculated after deduction for the bonuses scheduled to
be paid) plus (ii) the amount of such bonuses scheduled to be paid (the “Limitation”). If the
bonuses scheduled to be paid exceed the Limitation, Executive shall reduce the individual
bonuses, including but not limited to any First, Second and Third Tier Bonuses, on a
case-by-case base in his own discretion so that the total amount of the bonuses actually paid
shall not exceed the Limitation.
	 
	 	8.	 	Notwithstanding anything in this Exhibit A or in the Agreement to the contrary, the bonuses
to be paid to the employees of the Company, including but not limited to any First, Second and
Third Tier Bonuses to be paid to the Executive, shall be deferred until such time as the
Projected Amortization has been paid on schedule.
	 
	 	9.	 	Executive shall be paid a performance bonus in the maximum amount of $466,000.00. Such bonus
shall be paid in the three years after the second closing in proportion to the principal
payments made to the members of the Company (for example, if in the three year period the
investors have been paid $6,000,000.00 of the $8,000,000.00 principal due to them, then
Executive will receive only 75% of the $466,000.00 bonus (i.e., $349,500.00)). Payments of
this performance bonus shall be made at such times as the principal payments are made.
	 
	 	 	 	This performance bonus amount of $466,000.00 was calculated based on the assumption that
the second closing would occur on March 31, 2004. If the second closing does not occur on
March 31, 2004, this performance bonus amount will be adjusted accordingly by the mutual
agreement of the Company and Executive.

 

 

January 27, 2010

John J. Greive

General Counsel

Lightyear Network Solutions, LLC

1901 Eastpoint Parkway

Louisville, KY 40223

      Re: Confirmation on Salary Reductions

Dear John:

     As you are aware my Employment Agreement dated July 30, 2003 provides for me to receive an
annual salary of $450,000.00. I have voluntarily taken the following salary reductions over the
last few years: January 8, 2007 – changed to $360,000 annually; July 19, 09 – changed to $324,000
annually; and December 6, 2009 – changed to $294,000 annually. The purpose of this letter is to
confirm that I do not expect to receive back pay or any other amounts in the future to make up for
the salary reductions.

	 	 	 	 	 
	 	Sincerely,

 	 
	 	/s/ J. Sherman Henderson
 	 
	 	J. Sherman Hendersonexv10w2

Exhibit 10.2

LETTER AGREEMENT 

Regarding Wireless Revenue Payment from

LY Holdings, LLC and Lightyear Network Solutions, LLC

July 1, 2008

     This Letter Agreement (“Agreement”) certifies that, for good and valuable
consideration received on the date hereof,                     (“Lender”), is entitled to receive
each month from LY Holdings, LLC, a Kentucky limited liability company (“LYH”), and
Lightyear Network Solutions, LLC, a Kentucky limited liability company (“LNS”);
collectively with LYH, “Lightyear”),       percent (     %) (the “Wireless Percentage”) of the Monthly
Revenue (as defined herein) from the sales of wireless service offerings (excluding equipment and
accessories, but including service activations), as determined from the wireless product codes in
Lightyear’s billing system and revenue reports; all as subject to the terms and conditions set
forth herein (the “Wireless Revenue Payment”). For purposes of this Agreement, “Monthly Revenue”
means all revenue from the immediately preceding monthly billings excluding taxes, LNP charges,
termination charges, USF charges, PICC charges, sales taxes and other similar charges. Lender
understands that Lightyear may reduce the Wireless Percentage as additional funds are raised to
launch Lightyear’s wireless products. The Wireless Percentage will not be reduced below                     
(     %).

     1. Wireless Revenue Payment.

          1.1 Generally. Pursuant to, and in consideration for, a loan from Lender to Lightyear
in the amount of $                     evidenced by a promissory note executed by Lightyear to the Lender
contemporaneously with the issuance of this Letter Agreement and made pursuant to a Loan Agreement
(the “Loan Agreement”) by and among Lightyear, Lender and certain other parties dated as of June
30, 2004, and as amended by the First Amendment to Loan Agreement dated April 20, 2005, the Second
Amendment to Loan Agreement dated October 24, 2007, and the Third Amendment to Loan Agreement dated
July 1, 2008, Lightyear agrees, for the Term (as defined in Section 2 below) to pay Lender
on or before the twentieth (20th) day of each month an amount equal to the Wireless
Revenue Payment.

     2. Term; Termination Fee.

          2.1 Term. The term (“Term”) of this Agreement shall commence as of the date of this
Agreement and continue until the sooner to occur of (a) 120 months, or (b) a Sale Transaction (as
defined hereafter) unless the Successor-in-Interest (as defined hereafter) consents to the
continued payment of the Wireless Revenue Payment pursuant to this Agreement (Lightyear shall use
its best efforts to obtain such consent); provided, however, if the Wireless
Revenue Payment is terminated pursuant to clause (b) of this Section 2.1 because the
Successor-in-Interest does not consent to the continued payment of the Wireless Revenue Payment (an
“Early Termination Event”), Lightyear shall immediately pay to Lender a termination fee (the
“Termination Fee”) calculated as set forth in Section 2.2 of this Agreement. For purposes
of this Section 2.1, “Sale Transaction” means any sale of all or substantially all of the
membership interests in LYH or LNS, any binding exchange of all or substantially all of the
membership

 

 

interests in LYH or LNS, any merger involving LYH or LNS where LYH or LNS is not the surviving
entity, any sale of all or substantially all of the assets of LYH or LNS, any similar transaction
or any transaction having a similar effect. For purposes of this Section 2.1,
“Successor-in-Interest” means any party that acquires all or substantially all of the membership
interests in LYH or LNS or all or substantially all of the assets of LYH or LNS pursuant to a Sale
Transaction or is the surviving entity in a merger.

          2.2 Termination Fee. Immediately upon an Early Termination Event, Lightyear shall pay
Lender the Termination Fee in the amount of the sum of the Wireless Revenue Payments for the
immediately preceding twelve full months.

     3. Audit Rights of Lender. Lightyear shall maintain complete and accurate
records which are relevant to the determination of the Wireless Revenue Payment due Lender under
this Agreement, and such records shall be open during reasonable business hours for a period of two
(2) years from creation of individual records for examination and audit by Lender not more often
than once each year by a certified public accountant selected by Lender (subject to consent of
Lightyear, such consent not to be unreasonably withheld or delayed). Each party shall bear its own
costs related to such audit; provided, that, for any underpayments greater than five (5) percent by
Lightyear, Lightyear shall pay Lender the amount of underpayment and Lender’s out-of-pocket
expenses. For any underpayments less than five (5) percent by Lightyear found under this Section,
Lightyear shall pay Lender the amount of underpayment. Any overpayments by Lightyear will be
refunded to Lightyear or credited to future payments due from Lightyear to Lender, at Lightyear’s
election. Results of any such audit shall be provided to Lightyear and Lender.

     4. Miscellaneous.

          4.1 Amendment. This Agreement may be changed, modified, or amended only in writing,
which writing shall set forth provisions of such change, modification, or amendment and which shall
be executed by all of the parties hereto.

          4.2 Binding Effect. This Agreement shall inure to and be valid and binding upon each
of the parties hereto, and their respective successors and assigns.

          4.3 Entire Agreement. This Agreement contains the entire agreement of the parties
pertaining to its subject matter and supersedes all prior written and oral agreements pertaining to
its subject matter.

          4.4 Time is of the Essence. Time shall be of the essence in the performance of all
duties and obligations hereunder.

          4.5 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Kentucky.

          4.6 No Assignment. Neither this Agreement nor any interest herein or right or
obligation hereunder may be assigned by the Lender in any manner, by operation of law or otherwise,
without the prior written consent of Lightyear.

2

 

          4.7 Captions. All captions in this Agreement are intended solely for the convenience
of the parties, and none shall be deemed to affect the meaning and construction of any provision
hereof.

          4.8 Severability. The parties agree that each provision to this Agreement shall be
construed independent of any other provision of this Agreement. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect the other provisions hereof. This
Agreement shall be construed in all respects as if such invalid or unenforceable provision were
omitted.

          4.9 Cumulative Remedies. No right or remedy conferred upon or reserved to any of the
parties under the terms of this Agreement is intended to be, nor shall it be deemed, exclusive of
any other right or remedy provided herein or by law or equity, but each shall be cumulative of
every other right or remedy.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

3

 

     In Witness Whereof, the parties hereto have caused this Agreement to be signed and
attested by their duly authorized officers the date written below.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	LY Holdings, llc
	 
	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	J. Sherman Henderson, President
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Lightyear Network Solutions, llc
	 
	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	J. Sherman Henderson, President
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	LANJK, LLC
	 
	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	 	 	 	 		 	 
	 
	 	 	 	 	 	Its:	 	 
	 

	 	 	 	 	 	 	 	 

S-1

 

Schedule to Exhibit 10.2 to Current Report on Form 8-K

Letter Agreement Lenders

Lenders executing Wireless Letter Agreements with Lightyear of the form attached, including
Percentage of Monthly Revenue paid, Threshold Percentage and amount loaned.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lender	 	Percentage of Monthly Revenue	 	Threshold Percentage	 	Loaned Amount
	Rigdon O. Dees, III
	 	 	0.50	%	 	 	0.30	%	 	$	150,000.00	 
	Rice Realty Company, LLC
	 	 	0.50	%	 	 	0.30	%	 	$	150,000.00	 
	LANJK, LLC
	 	 	1.00	%	 	 	0.60	%	 	$	300,000.00	 
	CTS Equities Limited Partnership
	 	 	0.50	%	 	 	0.30	%	 	$	150,000.00	 
	Ron Carmicle
	 	 	0.50	%	 	 	0.30	%	 	$	150,000.00	 

S-2

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