Exhibit 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of
June 4, 2008 (the “Effective Date”), by and between WARWICK VALLEY TELEPHONE
COMPANY (the “Company”) and KENNETH H. VOLZ (“Executive”).

1.   Employment.

The Company hereby agrees to employ Executive, and Executive hereby agrees to be
employed by the Company, upon the terms and subject to the conditions set forth
in this Agreement.

2.   Term of Employment.

(a)   The period of Executive’s employment under this Agreement shall begin as
of the Effective Date and shall continue until June 3, 2010 (the “Initial
Term”), and shall be renewed automatically for successive one-year periods
thereafter (each, a “Renewal Period”), unless Executive or the Company gives
written notice of nonrenewal to the other at least sixty (60) days before the
expiration of the Initial Term or any subsequent Renewal Period.   (b)  
Notwithstanding the foregoing, Executive’s employment may be terminated by the
Company or by Executive at any time for any reason.   (c)   As used in this
Agreement, the term “Employment Term” refers to Executive’s period of employment
from the Effective Date until the date his employment terminates.   3.   Duties
and Responsibilities.   (a)   The Company will employ Executive as its Executive
Vice President, Chief Financial Officer and Treasurer. In such capacity,
Executive shall perform the customary duties and have the customary
responsibilities of such positions and such other duties as may be assigned to
Executive from time to time by the President and Chief Executive Officer (the
“President”) of the Company. Executive will exercise his judgment in accordance
with the highest ethical standards.   (b)   Executive agrees to faithfully serve
the Company, devote his full working time, attention and energies to the
business of the Company, its subsidiaries and affiliated entities, and perform
the duties under this Agreement to the best of his abilities.   (c)   Executive
agrees (i) to comply with all applicable laws, rules and regulations; (ii) to
comply with the Company’s rules, procedures, policies, requirements, and
directions; and (iii) not to engage in any other business or employment without
the written consent of the Company except as otherwise specifically provided
herein.   4.   Compensation and Benefits.   (a)   Base Salary. During the
Employment Term, the Company shall pay Executive a base salary at the annual
rate of $250,000 per year or such higher rate as may be determined annually by
the Company (“Base Salary”). Such Base Salary, less applicable withholdings,
shall be paid in accordance with the Company’s standard payroll practice

 

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    for executives. The Base Salary set forth in this Agreement shall be
retroactive to January 1, 2008; the difference between the base salary paid from
January 1, 2008 and the Base Salary set forth in this Agreement will be paid,
less applicable withholdings, in the first pay period following execution of
this Agreement unless previously paid.   (b)   Annual Bonus. During the
Employment Term, Executive will be eligible to receive an Annual Bonus each
year, as determined in accordance with the Applicable Plan approved by the
Company for executives for such year. The Company has the right to change or
eliminate the Applicable Plan at any time. The Annual Bonus to be paid to
Executive in 2009 shall be based on the Company’s financial performance in 2008,
continuing in like progression with the Annual Bonus to be paid in any year
based on the Company’s prior year’s performance. Such Annual Bonus, less
applicable withholdings, shall be paid within 2.5 months of the end of the
taxable fiscal year during which it was earned. Except as otherwise provided by
Section 7, in order to be eligible to receive payment of any portion of an
Incentive Bonus, Executive must be actively employed by the Company on the
payment date. Notwithstanding the foregoing, Executive acknowledges that whether
any Annual Bonus is to be paid for a given year and the amount of that Annual
Bonus is completely at the discretion of the Company.   (c)   Incentive
Compensation. Executive shall be eligible to participate in and receive
incentive compensation under the Company’s incentive compensation plans
generally made available to other executives at a level commensurate with his
position and in accordance with and subject to the terms of such plans.
Notwithstanding the foregoing, Executive acknowledges that the grant of awards
under the Company’s incentive compensation plans is completely at the discretion
of the Company.   (d)   Benefit Plans, Fringe Benefits and Vacation. Executive
shall be eligible to participate in any 401(k) savings plan generally made
available by the Company to other executives in accordance with the eligibility
requirements of such plans and subject to the terms and conditions set forth in
such plans, except for any pension benefit. Executive shall be eligible to
participate in any health and welfare plans made available to other executives,
including, but not limited to, any medical and dental benefits plan, life
insurance plan, short-term and long-term disability plans, or other executive
benefit or fringe benefit plan. Executive will also be eligible to receive at
least four (4) weeks of vacation per calendar year, accrued and earned on a
daily basis, as well as other types of paid time-off (e.g., holidays, personal
days, absence due to illness, etc.) according to the Company’s vacation and paid
time-off policy.   (e)   Housing and Travel Allowance. The Company will provide
Executive with a Housing and Travel Allowance of $4,800 per month (which
includes a gross up to defray tax consequences) for the duration of his
employment under this agreement. The Housing and Travel Allowance and tax-gross
up benefit for a given month shall be paid to Executive on the first day of such
month, or as soon as administratively practicable thereafter, but in no event
later than the end of that month.   (f)   Expense Reimbursement. The Company
shall promptly reimburse Executive for the ordinary and necessary business
expenses incurred by Executive in the performance of the duties under this
Agreement in accordance with the Company’s customary practices

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    applicable to executives, provided that such expenses are incurred and
accounted for in accordance with the Company’s expense reimbursement policy.
Reimbursement shall be made as soon as administratively practicable following
Executive’s submission of the necessary documents and receipts required under
the Company’s expense reimbursement policy, but in no event later than
December 31st of the calendar year following the calendar year in which the
expense was incurred.   (g)   Concession. Executive will be provided with paid
PDA or mobile phone service for one electronic device, as well as concession
Telephone and Toll Service, DSL Internet Service and in territory Digital TV
service benefits consistent with those available to other executives.   (h)  
Indemnification. Executive will be covered by the Company’s standard Director’s
and Officer’s Indemnification Agreement, providing for indemnification
consistent with the New York Business Corporation Law and the Company’s by-laws.
  5.   Termination of Employment.

Executive’s employment may be terminated by the Company or by Executive at any
time for any reason. Upon termination, Executive shall be entitled to receive
the compensation and benefits described in Section 7. Executive’s employment
will terminate under the following conditions:

(a)   Death. Executive’s employment shall terminate upon Executive’s death.  
(b)   Total Disability. The Company may terminate Executive’s employment upon
his becoming Totally Disabled. For purposes of this Agreement, Executive shall
be “Totally Disabled” if Executive is physically or mentally incapacitated so as
to render Executive incapable of performing his usual and customary duties under
this Agreement without reasonable accommodation. Executive’s receipt of
disability benefits under the Company’s long-term disability plan, if any, or
receipt of Social Security disability benefits shall be deemed conclusive
evidence of Total Disability for purpose of this Agreement; provided, however,
that in the absence of Executive’s receipt of such long-term disability benefits
or Social Security benefits, the Company may, in its reasonable discretion (but
based upon appropriate medical evidence), determine that Executive is Totally
Disabled.   (c)   Termination by the Company for Cause.

  (i)   The Company may terminate Executive’s employment for Cause at any time
after providing written notice to Executive.     (ii)   For purposes of this
Agreement, the term “Cause” shall mean any of the following: (A) conviction of a
crime or a nolo contendere plea involving the alleged commission by Executive of
a felony or of a criminal act involving, in the good faith judgment and sole
discretion of the Board, fraud, dishonesty, or moral turpitude; (B) deliberate
and continual refusal to perform employment duties reasonably requested by the
Board after fifteen (15) days’ written notice by certified mail of such failure
to perform, specifying that the failure constitutes

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      cause (other than as a result of vacation, sickness, illness or injury);
(C) fraud or embezzlement as determined by the Board; (D) gross misconduct or
gross negligence in connection with the business of the Company or an affiliate
which has a substantial adverse effect on the Company or the affiliate; or
(E) breach of the terms of the confidentiality, non-solicitation and
non-competition provisions of Section 9.     (iii)   Regardless of whether
Executive’s employment initially was considered to be terminated for any reason
other than Cause, Executive’s employment will be considered to have been
terminated for Cause for purposes of this Agreement if the Board subsequently
determines that Executive engaged in an act constituting Cause during the
Employment Period or Executive breached the terms of the terms of the
confidentiality, non-solicitation and non-competition provisions of Section 9
after his termination.

(d)   Termination by the Company Without Cause. The Company may terminate
Executive’s employment at any time under this Agreement without Cause after
providing written notice to Executive.   (e)   Termination by Executive.
Executive may terminate his employment under this Agreement after providing
thirty (30) days’ written notice to the Company.   (f)   Expiration of Initial
Term or Renewal Period. In the event that either party gives written notice of
non-renewal of the Initial Term or a Renewal Period, as applicable, pursuant to
Section 2, Executive’s employment shall terminate upon the expiration of the
Initial Term or Renewal Period.   6.   Return of Property and Information.

Executive agrees that when his employment with the Company ends, he will
immediately return to the Company all property, data, information and knowledge
which are in his possession or under his control, including without limitation
all documents, forms, correspondence, financial records and forecasts, operation
manuals, notebooks, reports, proposals, computer programs, software, software
documentation, employee handbooks, supervisor’s manuals, lists of clients and
referral sources, client data, and all copies thereof, relating in any way to
the business of the Company, whether relating to the Company directly or to a
client of the Company, made or obtained by Executive during his employment with
the Company, whether or not such data, information, or knowledge constitute
confidential or trade secret information.

7.   Compensation Following Termination of Employment.   (a)   Termination for
Any Reason. Upon termination of Executive’s employment for any reason under this
Agreement, Executive (or his designated beneficiary or estate, as the case may
be) shall be entitled to receive the following compensation:

  (i)   Earned but Unpaid Compensation. The Company shall pay Executive any
accrued but unpaid Base Salary for services rendered through the date of
termination, any appropriately documented and accrued but unpaid expenses

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      required to be reimbursed under this Agreement, and any unused vacation
accrued to the date of termination.     (ii)   Other Compensation and Benefits.
Except as may be provided under this Agreement, any benefits to which Executive
may be entitled through the date of Executive’s termination pursuant to the
plans, policies and arrangements referred to in Section 4(d) shall be determined
and paid in accordance with the terms of such plans, policies and arrangements,
and except as otherwise provided by this Agreement, Executive shall have no
right to receive any other compensation, or to participate in any other plan,
arrangement or benefit, with respect to future periods after such termination or
resignation.

(b)   Termination by the Company Without Cause not in Connection With a Change
in Control. In the event Executive’s employment is terminated without Cause
before a Change in Control (as defined by Section 7(c)(iii)) or more than
twenty-four (24) months after a Change in Control, if Executive executes the
Release and Waiver required by Section 8 and such Release and Waiver is not
revoked on or before the expiration of the revocation period thereof, and
Executive has complied with the return of property and information provision set
forth in Section 6, then in addition to the payments to be made pursuant to
Section 7(a), the Company shall also:

  (i)   Severance Pay. Pay to Executive severance pay in an amount equal to 100%
of his Base Salary in effect as of the date of his termination of employment.
Payment of such Severance Pay shall be made in a lump sum as soon as
administratively practicable after the date of Executive’s termination (or if
required by Section 409A, on the six (6) month anniversary of his termination),
but no later than ninety (90) days thereafter, and not before the expiration of
the revocation period for the Release and Waiver.     (ii)   Annual Bonus. Pay
to Executive the target amount of the Annual Bonus under the Applicable Plan for
the year in which the termination of Executive’s employment occurs. Payment of
such Annual Bonus shall be made in a lump sum as soon as administratively
practicable after the date of Executive’s termination (or if required by
Section 409A, on the six (6) month anniversary of his termination), but no later
than ninety (90) days thereafter, and not before the expiration of the
revocation period for the Release and Waiver.     (iii)   Benefits Continuation.
Continue to provide Executive and his family for the one-year period following
Executive’s termination with the health and welfare benefits, including, but not
limited to, benefits under any medical and dental benefits plan, life insurance
plan, short-term and long-term disability plans, or other executive benefit or
fringe benefit plan, which Executive and his family were receiving as of the
date of Executive’s termination. The Company shall provide such benefits at the
same cost to Executive as the cost, if any, charged to Executive for those
benefits at the time of his termination. To the extent that the provision of
such benefits at the Company’s expense during the six (6) month period following
Executive’s termination would violate the requirements of Section 409A, then
Executive shall be required to pay to the Company the

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      Company portion of the cost of such benefits during such six (6) month
period, and the Company shall reimburse Executive for the amounts so paid by
Executive on the six (6) month anniversary of his termination, or as soon as
administratively practicable thereafter, but no later than ninety (90) days
thereafter.

(c)   Termination by the Company Without Cause or by Executive for Good Reason
in Connection With a Change in Control.

  (i)   In the event Executive’s employment is terminated by the Company without
Cause, or by Executive for Good Reason, within the twenty-four (24) month period
following a Change in Control, if Executive executes the Release and Waiver
required by Section 8 and such Release and Waiver is not revoked on or before
the expiration of the revocation period thereof, and Executive has complied with
the return of property and information provision set forth in Section 6, then in
addition to the payments to be made pursuant to Section 7(a), but subject to
Section 7(c)(iv), the Company shall also:

  (A)   Severance Pay. Pay to Executive severance pay in an amount equal to 150%
of his Base Salary at its highest level in effect from the date of the Change in
Control through his termination of employment. Payment of such Severance Pay
shall be made in a lump sum as soon as administratively practicable after the
date of Executive’s termination (or if required by Section 409A, on the six
(6) month anniversary of his termination), but no later than ninety (90) days
thereafter, and not before the expiration of the revocation period for the
Release and Waiver.     (B)   Annual Bonus. Pay to Executive 150% of the target
amount of the Annual Bonus under the Applicable Plan for the year in which the
termination of Executive’s employment occurs. Payment of such Annual Bonus shall
be made in a lump sum as soon as administratively practicable after the date of
Executive’s termination (or if required by Section 409A, on the six (6) month
anniversary of his termination), but no later than ninety (90) days thereafter,
and not before the expiration of the revocation period for the Release and
Waiver.     (C)   Equity Vesting Acceleration. Accelerate the vesting of and the
lapsing of restrictions on any unvested or restricted equity compensation (e.g.,
stock options, restricted stock, etc.).     (D)   Benefits Continuation.
Continue to provide Executive and his family for the one-year period following
Executive’s termination with the health and welfare benefits, including, but not
limited to, benefits under any medical and dental benefits plan, life insurance
plan, short-term and long-term disability plans, or other executive benefit or
fringe benefit plan, which Executive and his family were receiving as of the
date of Executive’s termination. The Company shall provide such benefits at the
same cost to Executive as the cost, if any, charged to Executive for those
benefits at the time of his termination. To the extent that the provision of
such benefits at

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      the Company’s expense during the six (6) month period following
Executive’s termination would violate the requirements of Section 409A, then
Executive shall be required to pay to the Company the Company portion of the
cost of such benefits during such six (6) month period, and the Company shall
reimburse Executive for the amounts so paid by Executive on the six (6) month
anniversary of his termination, or as soon as administratively practicable
thereafter, but no later than ninety (90) days thereafter.

  (ii)   “Good Reason.” For purposes of this Agreement, the term “Good Reason”
shall mean the occurrence of any of the following in connection with a Change in
Control, without Executive’s express written consent: (A) the assignment of
duties to Executive materially inconsistent with Executive’s current
authorities, duties, responsibilities and status; (B) any reduction in
Executive’s title, position, or reporting lines; (C) the relocation of Executive
to an office or location more than seventy-five (75) miles from the office or
location of Executive’s work as of the date of the Change in Control;
(D) requiring Executive to travel on Company business to a substantially greater
extent than required as of the date of the Change in Control; or (E) the
reduction in Executive’s Base Salary as in effect on the date of the Change in
Control.     (iii)   “Change in Control.” For purposes of this Agreement, the
term “Change in Control” shall mean the happening of any of the following:

  (A)   Any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (a “Person”) becomes the beneficial owner (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (1) the
then outstanding common shares of the Company (the “Outstanding Company Common
Shares”) or (2) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
such beneficial ownership shall not constitute a Change in Control if it occurs
as a result of any of the following acquisitions of securities: (I) any
acquisition directly from the Company, (II) any acquisition by the Company or
any corporation, partnership, trust or other entity controlled by the Company (a
“Subsidiary”), (III) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary, (IV) any
acquisition by an underwriter temporarily holding Company securities pursuant to
an offering of such securities, (V) any acquisition by an individual, entity or
group that is permitted to, and actually does, report its beneficial ownership
on Schedule 13-G (or any successor schedule); provided that, if any such
individual, entity or group subsequently becomes required to or does report its
beneficial ownership on Schedule 13D (or any successor schedule), then, for
purposes of this paragraph, such individual, entity or group shall be deemed to
have first acquired, on the first date on which such individual, entity or group

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      becomes required to or does so report, beneficial ownership of all of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
beneficially owned by it on such date, or (VI) any acquisition by any
corporation pursuant to a reorganization, merger or consolidation, if, following
such reorganization, merger or consolidation, the conditions described in
clauses (1), (2) and (3) of Section 7(c)(iii)(C) are satisfied. Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject Person”) became the beneficial owner of 25% or more of
the Outstanding Company Common Shares or Outstanding Company Voting Securities
as a result of the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company which, by reducing the
number of Outstanding Company Common Shares or Outstanding Company Voting
Securities, increases the proportional number of shares beneficially owned by
the Subject Person; provided, that if a Change in Control would be deemed to
have occurred (but for the operation of this sentence) as a result of the
acquisition of Outstanding Company Common Shares or Outstanding Company Voting
Securities by the Company, and after such share acquisition by the Company, the
Subject Person becomes the beneficial owner of any additional Outstanding
Company Common Shares or Outstanding Company Voting Securities which increases
the percentage of the Outstanding Company Common Shares or Outstanding Company
Voting Securities beneficially owned by the Subject Person, then a Change in
Control shall then be deemed to have occurred; or     (B)   Individuals who, as
of the date of this Agreement, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board, including
by reason of agreement intended to avoid or settle any such actual or threatened
contest or solicitation; or     (C)   The consummation of a reorganization,
merger, statutory share exchange, consolidation, or similar corporate
transaction involving the Company or any of its direct or indirect Subsidiaries
(each a “Business Combination”). in each case, unless, following such Business
Combination, (1) the Outstanding Company Common Shares and the Outstanding
Company Voting Securities immediately prior to such Business Combination,
continue to represent (either by remaining outstanding or being converted into
voting securities of the resulting or surviving entity or any parent

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      thereof) more than 50% of the then-outstanding shares of common stock and
the combined voting power of the then-outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from Business Combination (including, without limitation,
a corporation that, as a result of such transaction, owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries), (2) no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company, a Subsidiary or such corporation resulting
from such Business Combination or any parent or a subsidiary thereof, and any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of the Outstanding Company
Common Shares or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination (or any parent thereof) or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and (3) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination (or any parent thereof) were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the Board
providing for such Business Combination; or     (D)   The consummation of the
sale, lease, exchange or other disposition of all or substantially all of the
assets of the Company, unless such assets have been sold, leased, exchanged or
disposed of to a corporation with respect to which following such sale, lease,
exchange or other disposition (1) more than 50% of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation (or any
parent thereof) entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Shares and Outstanding Company Voting Securities
immediately prior to such sale, lease, exchange or other disposition in
substantially the same proportions as their ownership immediately prior to such
sale, lease, exchange or other disposition of such Outstanding Company Common
Shares and Outstanding Company Voting Shares, as the case may be, (2) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or a Subsidiary of such corporation or a subsidiary thereof and any
Person beneficially owning, immediately prior to such sale, lease, exchange or
other disposition, directly or indirectly, 25% or more of the Outstanding
Company Common Shares or Outstanding Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 25% or more of, respectively, the
then outstanding shares of common stock of such

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      corporation (or any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors, and (3) at least a
majority of the members of the board of directors of such corporation (or any
parent thereof) were members of the Incumbent Board at the time of the execution
of the initial agreement or action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company; or     (E)   Approval by
the shareholders of the Company of a complete liquidation or dissolution of the
Company.

  (iv)   Potential Section 280G Adjustment. In the event that any amount or
benefit to be paid or provided to Executive pursuant to Section 7(c)(i), taken
together with any amounts or benefits otherwise paid or provided to Executive by
the Company or any affiliated company (collectively, the “Covered Payments”),
would be an “excess parachute payment,” as defined in Section 280G of the Code
and the related Treasury Regulations and other guidance issued thereunder, and
would thereby subject Executive to the tax imposed under Section 4999 of the
Code (the “Excise Tax”), then the Company shall either (A) make the Covered
Payment to Executive without adjustment and subject to the Excise Tax, or
(B) reduce the Covered Payments to the maximum amount that may be paid without
Executive becoming subject to the Excise Tax (such reduced amount, the “Payment
Cap”), whichever provides the greater net after-tax benefit to Executive. In the
event that the reduction of the Covered Payments will provide Executive with the
greater net after-tax benefit, Executive shall have the right to designate which
of the payments and benefits otherwise provided for in Section 7(c)(i) that he
will receive in connection with the application of the Payment Cap.

(d)   Termination of Employment. For purposes of this Section 7, the term
“termination of employment” and words of similar import shall mean a “separation
from service” as defined by Section 409A, and this Section 7 shall be
interpreted and administered consistent with such definition.   (e)   No
Mitigation; No Set-Off Against Severance Benefits. Executive shall not be
required to mitigate damages or the amount of any payment or benefits provided
for under Section 7 by seeking other employment or otherwise, nor shall the
amount of any payment or benefits provided for in Section 7 be reduced by any
compensation earned by Executive as a result of employment by another employer
after the date of termination of Executive’s employment with the Company, except
as otherwise provided by the confidentiality, non-solicitation and
non-competition provisions of Section 9. In addition, the Company’s obligations
under this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against Executive.

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8.   Release and Waiver.   (a)   In exchange for the additional consideration
under Section 7 to which Executive would not otherwise be entitled, Executive
shall generally and completely release the Company, its subsidiaries and
affiliates, and its directors, officers, executives, shareholders, partners,
agents, attorneys, predecessors, successors, insurers and assigns from any and
all claims, liabilities and obligations, both known and unknown, that arise out
of or are in any way related to events, acts, conduct, or omissions occurring at
any time prior to or at Executive’s termination. Such general release shall
include, but shall not be limited to: (i) all claims arising out of or in any
way related to Executive’s employment with the Company or the termination of
that employment; (ii) all claims related to Executive’s compensation or benefits
from the Company, including salary, bonuses, incentive compensation, vacation
pay, expense reimbursements, severance pay, fringe benefits, stock, stock
options, restricted stock, or any other ownership or equity interests in the
Company, or its subsidiaries or affiliates under all State and federal statutes
such as the Fair Labor Standards Act, the Family and Medical Leave Act, the
Employee Retirement and Income Security Act, the New York Labor Law and any
similar State or local statute, regulation or order; (iii) all claims for breach
of contract, wrongful termination, and breach of the implied covenant of good
faith and fair dealing; (iv) all tort claims, including claims for fraud,
defamation, emotional distress, and discharge in violation of public policy; and
(v) all federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims
arising under, for example, the Age Discrimination in Employment Act (the
“ADEA”), Title VII of the Civil Rights Act of 1964, as amended, the
Rehabilitation Act of 1973, the Americans With Disabilities Act, the Equal Pay
Act, the Family Medical Leave Act, the New York Human Rights Law and any similar
State or local statute, regulation or order. Notwithstanding the foregoing,
Executive shall not be required to release the Company or its subsidiaries or
affiliates from: (A) any obligation to indemnify Executive pursuant to the
articles and bylaws of the Company, any valid fully executed indemnification
agreement with the Company, any applicable directors and officers liability
insurance policy, and applicable law; or (B) any obligations to make payments to
Executive under Section 7. Executive shall be required to represent that he has
no lawsuits, claims or actions pending in his name, or on behalf of any other
person or entity, against the Company or its subsidiaries or affiliates, or any
other person or entity subject to the release to be granted under this Section.
  (b)   Executive shall acknowledge that: (i) he is knowingly and voluntarily
waiving and releasing any rights he may have under the ADEA; (ii) that the
consideration given for the waiver and release (i.e., the additional
consideration to be provided under Section 7) is in addition to anything of
value to which he is already entitled; and (iii) that he has been advised, as
required by the ADEA, that: (A) his waiver and release does not apply to any
rights or claims that may arise after the date that he signs such release;
(B) he should consult with an attorney prior to signing the release (although he
may choose voluntarily not to do so); (C) he has twenty-one (21) days from the
date he receives the proposed release to consider the release (although he may
choose voluntarily to sign it earlier); (D) he has seven (7) days following the
date he signs the release to revoke the release by providing written notice of
his revocation to the Board; and (E) the release will

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    not be effective until the date upon which the revocation period has
expired, which will be the eighth day after the date that the release is signed
by Executive.   (c)   The claims included in this release and waiver do not
include vested rights, if any, under any qualified retirement plan in which
Executive participates, and his COBRA, unemployment compensation and worker’s
compensation rights, if any. Nothing in this release shall be construed to
constitute a waiver of: (i) any claims Executive may have against the Company
that arise from acts or omissions that occur after the effective date of this
Release; (ii) Executive’s right to file an administrative charge with any
governmental agency concerning the termination of that employment; or
(iii) Executive’s right to participate in any administrative or court
investigation, hearing or proceeding. Executive agrees, however, to waive and
release any right to receive any individual remedy or to recover any individual
monetary or non-monetary damages as a result of any such administrative charge
or proceeding. In addition, this release does not affect Executive’s rights as
expressly created by this Agreement, and does not limit his ability to enforce
this Agreement.   9.   Executive Covenants.   (a)   Non-Disclosure of
Confidential Information and Trade Secrets.

  (i)   During the course of Executive’s employment with the Company, Executive
will acquire and have access to Confidential Information and Trade Secrets
belonging to the Company, its affiliates, subsidiaries, divisions and joint
ventures (collectively referred to as the “Company” throughout and for purposes
of this Section 9). Such Confidential Information and Trade Secrets include,
without limitation, business and technical information, whatever its nature and
form and whether obtained orally, by observation, from written materials or
otherwise, as for example: (A) financial and business information, such as
information with respect to costs, commissions, fees, profits, profit margins,
sales, markets, mailing lists, accounts receivables and accounts payables,
pricing strategies, strategies and plans for future business, new business,
product or other development, potential acquisitions or divestitures, and new
marketing ideas; (B) marketing information, such as information on markets, end
users and applications, the identity of the Company’s customers, vendors,
suppliers, and distributors, their names and addresses, the names of
representatives of the Company’s customers, vendors, distributors or suppliers
responsible for entering into contracts with the Company, the Company’s
financial arrangements with its distributors and suppliers, the amounts paid by
such customers to the Company, specific customer needs and requirements, leads
and referrals to prospective customers; and (C) personnel information, such as
the identity and number of the Company’s employees, personal information such as
social security numbers, skills, qualifications, and abilities. Executive
acknowledges and agrees that the Confidential Information and Trade Secrets are
not generally known or available to the general public, but have been developed,
complied or acquired by the Company at its great effort and expense and for
commercial advantage and, therefore, takes every reasonable precaution to
prevent the use or disclosure of any part of it by or to unauthorized

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      persons. Confidential Information and Trade Secrets can be in any form or
media, whether oral, written or machine readable, including electronic files.  
  (ii)   Executive agrees he will not, while associated with the Company and for
so long thereafter as the pertinent information or documentation remains
confidential, directly or indirectly use, disclose or disseminate to any other
person, organization or entity or otherwise use any Confidential Information and
Trade Secrets, except as specifically required in the performance of Executive’s
duties on behalf of the Company or with prior written authorization from the
Board.

(b)   Non-Solicitation of Customers. Executive acknowledges and agrees that
during the course of and solely as a result of employment with the Company, he
will come into contact with some, most or all of the Company’s customers and
will have access to Confidential Information and Trade Secrets regarding the
Company’s customers, distributors and suppliers. Consequently, Executive
covenants and agrees that in the event of the termination of his employment,
whether such termination is voluntary or involuntary, Executive will not, for a
period of twelve (12) months following such termination, directly or indirectly,
solicit or initiate contact with any customer, former customer or prospective
customer of the Company for the purpose of selling products or services to the
customer competitive with the products or services purchased by the customer
from the Company. This restriction shall apply to any customer, former customer
or prospective customer of the Company with whom Executive had contact or about
whom Executive obtained Confidential Information or Trade Secrets during his
employment with the Company. For the purposes of this Section, “contact” means
interaction between Executive and the customer or then prospective customer
which takes place to further the business relationship, or making sales to our
performing services for the customer or prospective customer on behalf of the
Company. This restriction will not apply when a former employee who is not
working in a competitive capacity responds to a request for proposal on behalf
of his new employer who is not engaged in the same or similar businesses as the
Company.   (c)   Non-Compete. Executive acknowledges that his services are
special and unique, and compensation is partly in consideration of and
conditioned upon Executive not competing with Company, and that a covenant on
Executive’s part not to compete is essential to protect the business and good
will of the Company. Accordingly, except as hereinafter provided, Executive
agrees that for twelve (12) months after the termination of his employment,
Executive shall not be engaged or interested as a director, officer, stockholder
(except as provided herein), employee, partner, individual proprietor, lender or
in any other capacity, in any business, which competitive with the business of
the Company as conducted at the time of Executive’s termination and which
involves Executive’s knowledge, actions or assistance within the counties of
Westchester, Rockland, Ulster, Orange, Duchess and Sullivan in New York and
Sussex, Bergen and Passaic in New Jersey; however, this restriction will not
apply to new kinds of business in which Executive may engage in the future,
after such termination, unless Executive has been actively engaged in the
development or otherwise involved in such business while an employee of the
Company. In addition, Executive agrees that for this same twelve (12) months, he
shall not recruit or recommend any other person who is or was an employee of the
Company while Executive was also an employee, to any business which

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    is competitive with the business of Executive as conducted at the time of
Executive’s termination and which involves Executive’s knowledge, actions or
assistance within the counties of Westchester, Rockland, Ulster, Orange, Duchess
and Sullivan in New York and Sussex, Bergen and Passaic in New Jersey. Nothing
herein shall prohibit Executive from investing in any securities of any
corporation which is in competition with the Company, whose securities are
listed on a national exchange or traded in the over-the-counter market if
Executive shall own less than 5% of the outstanding securities of such
operation.   (d)   Enforcement of Covenants. Executive acknowledges and agrees
that compliance with the covenants set forth in this Section 9 is necessary to
protect the Confidential Information and Trade Secrets, business and goodwill of
the Company, and that any breach of this Section 9 will result in irreparable
and continuing harm to the Company, for which money damages may not provide
adequate relief. Accordingly, in the event of any breach or anticipatory breach
of Section 9 by Executive, the Company and Executive agree that the Company
shall be entitled to the following particular forms of relief as a result of
such breach, in addition to any remedies otherwise available to it at law or
equity: (i) injunctions, both preliminary and permanent, enjoining or
restraining such breach or anticipatory breach, and Executive hereby consents to
the issuance thereof forthwith and without bond; and (ii) recovery of all
reasonable sums and costs, including attorneys’ fees, incurred by the Company to
enforce the provisions of this Section 9.   10.   Withholding of Taxes

The Company shall withhold from any compensation and benefits payable under this
Agreement all applicable federal, state, local or other taxes.

11.   No Claim Against Assets.

Nothing in this Agreement shall be construed as giving Executive any claim
against any specific assets of the Company or as imposing any trustee
relationship upon the Company in respect of Executive. The Company shall not be
required to establish a special or separate fund or to segregate any of its
assets in order to provide for the satisfaction of its obligations under this
Agreement. Executive’s rights under this Agreement shall be limited to those of
an unsecured general creditor of the Company and its affiliates.

12.   Executive Acknowledgement.

Executive acknowledges that he has had the opportunity to discuss this Agreement
with and obtain advice from his private attorney, has had sufficient time to and
has carefully read and fully understands all of the provisions of this
Agreement, and is knowingly and voluntarily entering into this Agreement.

13.   Successors and Assignment.   (a)   Except as otherwise provided in this
Agreement, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, representatives, successors and
assigns.

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(b)   The Company shall require any successor or successors (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance satisfactory to Executive, to acknowledge expressly that this
Agreement is binding upon and enforceable against the Company in accordance with
the terms hereof, and to become jointly and severally obligated with the Company
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession or successions had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement by the
Company.   (c)   The rights and benefits of Executive under this Agreement are
personal to him and no such right or benefit shall be subject to voluntary or
involuntary alienation, assignment or transfer; provided, however, that nothing
in this Section 13 shall preclude Executive from designating a beneficiary or
beneficiaries to receive any benefit payable on his death.   14.   Entire
Agreement; Amendment.

This Agreement shall supersede any and all existing oral or written agreements,
representations, or warranties between Executive and the Company (or any of its
subsidiaries or affiliated entities) relating to the terms of Executive’s
employment, except for the Company’s Code of Ethics and the Director’s and
Officer’s Indemnification Agreement. This Agreement may not be amended except by
a written agreement signed by both parties.

15.   Governing Law.

This Agreement shall be governed by and construed in accordance with the
domestic substantive laws of the State of New York, without giving effect to any
conflicts or choice of laws rule or provision that would result in the
application of the domestic substantive laws of any other jurisdiction.

16.   Section 409A.

The parties intend that this Agreement and the payments and benefits to be
provided hereunder satisfy the requirements of Section 409A, and this Agreement
shall be administered and interpreted consistent with such intention.

17.   Notices.

Any notice, consent, request or other communication made or given in connection
with this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by registered or certified mail, return receipt
requested, or by facsimile or by hand delivery, to those listed below at their
following respective addresses or at such other address as each may specify by
notice to the others:
To the Company:
Warwick Valley Telephone Company
Attention: Director of Human Resources

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47 Main Street
Warwick, New York 10990
To Executive:
At the address set forth below

18.   Miscellaneous.   (a)   Waiver. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver thereof or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.  
(b)   Severability. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot be
modified to be enforceable, such term or provision shall immediately become null
and void, leaving the remainder of this Agreement in full force and effect.  
(c)   Headings. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this Agreement.   (d)
  Rules of Construction. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.   (e)   Authority
to Enter into this Agreement. The officer of the Company whose signature appears
below has been authorized to enter into this Agreement on behalf of the Company.
  (f)   Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
such counterparts will together constitute but one agreement.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year set forth below.

                          WARWICK VALLEY TELEPHONE COMPANY       EXECUTIVE  
 
                        By:   /s/ Duane W. Albro       By:   /s/ Kenneth H. Volz
                     
 
  Printed Name:   Duane W. Albro           Printed Name:   Kenneth H. Volz
 
  Title:   President and Chief Executive Officer Duly Authorized Officer        
  Address:                           Date: May 28, 2008       Date: May 28, 2008

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2008 Annual Bonus and Long Term Incentive Plan — CFO
Annual Bonus
Target Amount: 50% of base salary ($125,000)
Actual Bonus Payout = Target Bonus ($125,000) x Total Payout
Factor
Methodology:

                                          Financial Metric   Weighting   Result
  Target   Actual / Target   Payout Factor     A   B   C   (B / C)   A x (B / C)
Revenue
    0.25     TBD   $ 26,406,000     TBD   TBD
EBITDA
    0.25     TBD   $ 4,832,000     TBD   TBD
FCF
    0.25     TBD   $ 1,479,000     TBD   TBD
NI
    0.25     TBD   $ 5,363,000     TBD   TBD
Total
    1.00                             Total Payout Factor

Long Term Incentive Plan

         
Stock Options:
Restricted Shares:
  25,000
5,000    

For calculating Incentive Compensation under the Long-Term Incentive Plan for
the CEO, the same methodology used above to calculate the Annual Bonus is to be
used. However, the Board of Directors retains sole discretion to award
compensation under this Appendix A.

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