Exhibit 10.1
Mr. Herbert Gareiss, Jr.
President and Chief Executive Officer
Warwick Valley Telephone Company
47 Main Street
Warwick, NY 10990
               Re: Retention Agreement
Dear Herb:
As you know, Warwick Valley Telephone Company (“WVT” or the “Company”) has
announced that it has decided to explore all strategic alternatives available to
it and that it has engaged Stifel, Nicolaus (“SN”) to help it in doing so.
1. Basis of Letter
This Letter Agreement (the “Agreement”) reflects our mutual understanding
concerning the continuation of your employment with the Company (“Company
Employment”) and shall be effective as of the date it has been signed by you and
the Company. It is based also in part on several other mutual understandings,
namely:

  a.   The Company’s exploration of its strategic alternatives may not result in
the taking of any action whatsoever by the Company, with the consequence that no
particular event can necessarily serve as the natural termination of this Letter
Agreement; and     b.   It is in the best interests of all parties that the
Company continue during this exploration and through any transaction that may
arise out of it to have the uninterrupted services of a chief executive officer
experienced in the management and direction of the overall operations of the
Company and knowledgeable about the history of the Company’s operations and its
current needs.

2. Salary and Benefits
From the effective date hereof (as defined in paragraph 1 hereof) through the
earliest to occur of (A) the date on which your Company Employment is terminated
for Cause (as defined below in paragraph 4), and (B) the date you voluntarily
terminate your Company Employment, (C) you are terminated without cause or
resign for good reason, you will continue to receive (i) salary payments at no
less than your current annual base salary rate of $200,000 per year (less
applicable withholdings and deductions subject to increases per the normal
performance review process), paid in accordance with the Company’s payroll
practices in the ordinary course, (ii) bonuses payable at the discretion of the

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Company; and (iii) the level and type of benefits you are currently entitled to
receive, and subject to the terms of the applicable plans and any changes
thereto.
3. Retention Award
(a) Subject to paragraph 3(b) below, upon the occurrence of the Retention Award
Date (as defined below) you or your beneficiaries or guardian in the event of
death or debilitating disability, shall be entitled to receive an additional
lump sum cash payment of $200,000 (the “Retention Award”), to be paid at any
closing whose occurrence constitutes a Retention Award Date, or if no such
closing occurs, no later that five business days after the Retention Award Date.
The Retention Award Date shall be the earliest date on which any one of the
following occurs: (i) The closing of a sale or merger of the Company; (ii) the
closing of any acquisition effected by the Company on the basis of SN’s
engagement; (iii) the closing of a sale of the Company’s entire interest in
Orange County – Poughkeepsie LP, but only if no further sale or merger of the
Company or sale of a substantial portion of its assets is contemplated;
(iv) written notification by the Company or SN that SN’s engagement is
terminated; (v) termination of your Company Employment by the Company without
Cause (as Cause is defined below in paragraph 4); (vi) termination of your
Company Employment as a result of your death or disability (as such term is
defined in the Company’s long-term disability policy applicable to you);
(vii) your resignation from your Company Employment for Good Reason (as defined
below in paragraph 4); and (viii) the 18-month anniversary of the effectiveness
of this Agreement.
(b) Your entitlement to receive the Retention Award is subject to your
diligently carrying out your duties as Chief Executive Officer in connection
with the overall management and direction of the Company’s business.
4. Definition for Purposes of this Agreement
(a) “Cause” is defined as your engaging in conduct that (i) is in competition
with the Company during Company Employment, (ii) violates a material provision
of Company code of ethics, (iii) breaches any material provision of this
Agreement, (iv) through your negligence results, without that being the
intention or desire of the Company, in the loss of any required or material
Company licenses or regulatory approvals, (v) constitutes a crime or violation
of any applicable law or regulation, or (vi) constitutes gross negligence and
results in material injury to the Company, monetary or otherwise.
(b) “Good Reason” is defined as the occurrence of any of the following:
(i) reduction of your base salary; (ii) a material breach by Company of any term
or provision of this Agreement; or (iii) ) relocation of your workplace to a
location more than 30 miles from your current work location.

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(c) If the existence of Cause or Good Reason is based on a claim of a material
breach of this Agreement and such breach is curable, the relevant party shall
have thirty (30) days to cure such event after receipt of written notice
specifying such breach in specific detail.
5. No Entitlement to Additional or Further Payments
(a) The Retention Award shall not be treated as compensation for purposes of
calculating the benefits, if any, to which you may be entitled to receive
pursuant to any compensatory plan, program or arrangement of the Company.
(b) If your Company Employment is terminated for Cause (as defined above in
paragraph 4) or if you terminate your Company Employment for any reason, then
notwithstanding anything herein to the contrary, the Company shall have no
further obligations to make any payments or provide any benefits under this
Agreement other than to pay to you your base salary and other accumulated
benefits (such as unused vacation, personal days, etc.) through the date of such
termination of employment, unless the Retention Award Date has already occurred
or your termination of your Company Employment constitutes the Retention Award
Date, in which case you shall also be entitled to receive the Retention Award.
6. Restrictive Covenants
For the period commencing on the date your Company Employment terminates for any
reason and ending on the date 12 months thereafter, you will not, directly or
indirectly, for yourself or on behalf of a third party, hire, solicit, recruit,
employ, retain, engage or co-invest with (i) person who is an employee or
Director of the Company on the date this Agreement has been signed by both
parties, or (ii) any individual who was an employee of the Company during the
12 months preceding the date this Agreement has been signed by both parties.
Nothing in this paragraph 6(a) shall limit your ability to hire, solicit,
recruit, employ, engage or co-invest with any former employee of the Company who
has been involuntarily terminated by the Company. Notwithstanding the above if
the Retention Award is granted solely as a result of the expiration of the Term,
the Company will waive the restrictive covenants in this paragraph 2(a).
7. Remedies: Severability: Arbitration
(a) You and the Company acknowledge and agree that given your role and the
opportunities you have enjoyed with the Company, the covenants contained in
paragraph 6 above are reasonable, constitute an important part of the
consideration provided under this Agreement and will not unnecessarily or
unreasonably restrict your professional opportunities. You and the Company also
acknowledge and agree that for the purpose of any injunction, restraining order
or other equitable relief that you or the Company may seek, it is deemed that
the Company and you would suffer significant and irreparable harm if you or the
Company breached or threatened to breach any of such covenants.

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(b) The invalidity or unenforceability of any provision of this Agreement shall
have no effect upon, and shall not impair, the validity or enforceability of any
other provision of this Agreement.
(c) In the event of any dispute with respect to any provision of this Agreement,
including without limitation that any of the covenants contained in paragraph 6
above is claimed to be invalid or unenforceable for any reason, or if you breach
or threaten to breach any covenant contained in paragraph 6 above, you and the
Company agree to first attempt to resolve the dispute through mediation using
the services of JAMS, the Resolution Experts, in New York City If such mediation
fails to resolve the dispute , the dispute shall be settled by arbitration in
New York City administered by the American Arbitration Association under its
National Rules for the Resolution of Employment Disputes and judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.. Notwithstanding the provisions for arbitration in this
paragraph, you acknowledge and agree that for any breach or threatened breach of
any covenant contained in paragraph 6 above, the Company may apply for an
injunction, restraining order, or other equitable relief that may be granted,
without the necessity of posting a bond, restraining you from committing or
continuing to commit such breach until such time as the matter is resolved by a
final award in arbitration. You acknowledge and agree that proof shall not be
required that monetary damages for such breach would be difficult to calculate
or that a remedy at law or in arbitration would be inadequate.
8. Cooperation
You agree that, at all times during and following your Company Employment, you
will assist and cooperate with the Company (or its designee) by providing
truthful and accurate information concerning any past, present or future legal
matters that relate to or arise out of your Company Employment including, but
not limited to, the defense or prosecution of any claim that may be made against
or by the Company, any of its affiliates or any of their current or former
employees. or in connection with any ongoing or future investigation or dispute
or claim of any kind involving the Company or any of its affiliates or any of
their current or former employees, including any formal or informal proceeding
before the SEC or any competent court (including responding to any formal or
informal requests for documents or testimony) to the extent such claims,
investigations or proceedings arise out of or are in connection with your
Company Employment or termination of your Company Employment. Company’s request
for your “reasonable cooperation” shall take into consideration your personal
and business commitments and the amount of notice provided to you by the
Company. You further agree to execute and deliver any documents that may be
reasonably necessary for, and customarily associated with, carrying out the
provisions of this paragraph 8. The Company shall reimburse you for any
necessary and reasonable fees and expenses incurred by you in connection with
your cooperation hereunder (including your, travel and accommodations); it being
understood that the Company shall not reimburse you for any expenses relating to
separate counsel unless it reasonably determines that separate representation is
necessary.
9. Attorneys’ Fees and Expenses

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The Company has agreed to pay your legal fees of up to $4,000 in connection with
the review and negotiation of this Agreement.
10. Non-disparagement
You and the Company (for purposes hereof, the Company shall mean only the
executive officers and directors thereof and not any other employees) agrees not
to make any public statements that disparage the other party or, in the case of
the Company, its respective Affiliates, employees, officers, directors, products
or services. Notwithstanding the foregoing, statements made in the course of
sworn testimony in administrative, judicial or arbitral proceedings (including,
without limitation, depositions in connection with such proceedings) shall not
be subject to this paragraph 10.
11. 409A Compliance
Company represents and warrants that this Agreement and all payments and
benefits associated with it are intended to comply with Section 409A of the
Internal Revenue Code. Notwithstanding the above, in the event of a
determination that any payment or benefit associated with this Agreement is not
compliant with the provisions of Section 409A of the Internal Revenue Code, the
Company agrees that it will modify this Agreement to make it compliant with
Section 409A and that it will make a good faith effort to maintain the value of
the payments and benefits under this Agreement.
12. Indemnification
To the extent the Company contractually indemnifies other officers or directors
with respect to litigation relating to their service with or on behalf of the
Company, the Company shall provide equivalent indemnification to you.
13. Governing Law
This Agreement shall be governed by the local law of the State of New York as to
all matters, including without limitation validity, construction, effect,
performance and remedies, except to the extent that such laws are preempted by
federal law.
14. Ability to Understand Agreement
You acknowledge that: (a) you have read and understand each of the provisions of
this Agreement; (b) you have been advised to consult with an attorney prior to
executing this Agreement: and(c) you are entering into this Agreement of your
own free will.
15. Notices

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All notices, requests and other communications under this Agreement will be in
writing (including facsimile or similar writing) to the applicable address (or
to such other address as to which notice is given in accordance with this
paragraph 14).
If to you:
Herbert Gareiss, Jr.
267 Bellvale Lakes Road
Warwick, NY 10990
If to the Company:
Robert DeValentino
Director
Warwick Valley Telephone Company
47 Main Street
Warwick, NY 10990
Facsimile: 845-986-6699
Each such notice, request or other communication will be effective only when
received by the receiving party.
16. Entire Agreement
This Agreement sets forth the entire agreement and understanding relating to
your Company Employment and supersedes all prior discussions, negotiations,
agreements, memoranda, charts, and communications concerning your employment and
the termination thereof, other than prior or contemporaneous, as applicable,
confidentiality, trade secret, non-competition, non- solicitation or arbitration
agreement. You hereby acknowledge and agree that you are subject to certain
obligations as set forth in the WVT Code of Ethics.
17. Counterparts
This Agreement may be executed by the parties in any number of counterparts, and
all such counterparts taken together shall be deemed to constitute one and the
same document.
18. Headings

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The section headings continued in this Agreement are for convenience of
reference only and shall not define, interpret or limit this Agreement.
19. At -Will Employment
You acknowledge and agree that your Company Employment is at will and, subject
to the terms of this Agreement, either you or the Company can terminate your
employment at any time for any reason or for no reason at all not otherwise
prohibited by law.
20. Outplacement Services
If it has been established that a Retention Award Date has occurred and your
Company Employment is terminated on or after that date either by you or by the
Company, the Company shall pay up to twenty-thousand ($20,000) dollars for
outplacement services from an outplacement or executive search firm of your
choice that specializes in placing senior executives and/or CEO’s.
21. Binding Effect; Amendment
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, heirs, executors and administrators. Neither party
may assign its rights or delegate its obligations hereunder. This Agreement may
be amended only by a writing signed by both parties hereto. The provisions of
paragraphs 5, 6, 7, 8, 10 and 11 hereof shall survive any termination of this
Agreement and the payment of any Retention Award and of any amounts payable
under paragraph 20.

                  WARWICK VALLEY TELEPHONE COMPANY
 
           
Date: 5/11/06
            By   /s/Wisner H. Buckbee    
 
     
 
   
 
            Name:   Wisner H. Buckbee   (Authorized Signatory)
 
     
 
   

I HAVE READ THIS AGREEMENT AND UNDERSTAND ALL OF ITS TERMS. I SIGN AND ENTER
THIS AGREEMENT KNOWINGLY AND VOLUNTARILY WITH FULL KNOWLEDGE OF WHAT IT MEANS.

                Date: 5/11/06   /s/Herbert Gareiss, Jr.             Herbert
Gareiss, Jr.