EXHIBIT 10.1

 

THIRD SUPPLEMENT

TO THE MASTER LOAN AGREEMENT

 

This THIRD SUPPLEMENT TO THE MASTER LOAN AGREEMENT (this “Third Supplement”), is
entered into as of August 2, 2012, by and between COBANK, ACB (“CoBank”) and
WARWICK VALLEY TELEPHONE COMPANY (the “Borrower”), and supplements the Master
Loan Agreement, dated as of February 18, 2003, by and between CoBank and the
Borrower (as the same has been amended on the date hereof and as the same may be
amended, modified, supplemented, extended or restated from time to time, the
(“MLA”)). Capitalized terms used and not otherwise defined in this Third
Supplement shall have the meanings assigned to them in the MLA.

 

SECTION 1. The Revolving Loan. On the terms and conditions set forth in the MLA
and this Third Supplement, CoBank agrees to make one or more advances
(collectively, the “Loan”) to the Borrower during the Availability Period (as
hereinafter defined in Section 3 hereof) in an aggregate principal amount
outstanding at any one time not to exceed $10,000,000 (the “Commitment”). The
Commitment shall expire at 11:00 am Mountain time on August 2, 2013 (the
“Maturity Date”). Under the Commitment, amounts borrowed and later prepaid may
be reborrowed during the Availability Period.

 

SECTION 2. Purpose. The proceeds of the Loan shall be used by the Borrower to
(A) finance capital expenditures, working capital and general corporate
expenditures of the Borrower, including acquisitions expressly permitted by
CoBank in writing, and (B) pay the expenses and fees incurred by the Borrower in
connection with the closing of the Loan. The Borrower agrees that the proceeds
of the Loan shall be used only for the purposes set forth in this Section 2.

 

SECTION 3. Availability. Subject to Sections 2 and 5 of the MLA and Section 9
hereof, during the period commencing on the date on which all conditions
precedent to the initial advance under the Loan were satisfied (the “Closing
Date”) and ending on the Business Day immediately preceding the Maturity Date
(the “Availability Period”), advances under the Loan shall be made as provided
in the MLA.

 

SECTION 4. Interest.

 

(A)         Rate Options; Etc. The unpaid principal balance of the Loan shall
accrue interest at the rate or rates determined or selected by the Borrower in
accordance with this Section 4(A).

 

 

 

 

(1)         Weekly Quoted Rate Option (Variable Rate Option). As to any portion
of the unpaid principal balance of the Loan selected by the Borrower (any such
portion, and any portion selected pursuant to Section 4(A)(2) hereof, is
hereinafter referred to as a “Portion” of the Loan), interest shall accrue
pursuant to this variable rate option at a variable annual interest rate (the
“Variable Rate”) equal at all times to the rate of interest established for the
Borrower by CoBank in CoBank’s sole and absolute discretion on the first
Business Day of each week. The rate of interest so established by CoBank will be
effective from and including the first Business Day of each week to and
excluding the first Business Day of the next week. Each change in the Variable
Rate shall be applicable to the Portion of the Loan subject to this option and
information about the then current Variable Rate shall be made available upon
telephonic request.

 

(2)         LIBOR Option. As to any Portion or Portions of the Loan selected by
the Borrower, interest shall accrue pursuant to this LIBOR option at a fixed
rate per annum equal to LIBOR (as hereinafter defined in this Section 4(A)(2))
plus 4.50%. Under this option: (i) rates may be fixed for Interest Periods (as
hereinafter defined in this Section 4(A)(2)) of one, two, three, or six months,
as selected by the Borrower; (ii) amounts fixed shall be in increments of
$100,000 or multiples thereof; and (iii) rates may only be fixed on a Banking
Day (as hereinafter defined in this Section 4(A)(2)) on three Banking Days’
prior written notice. “LIBOR” means the rate (rounded upward to the nearest
thousandth and adjusted for reserves required on Eurocurrency Liabilities (as
hereinafter defined in this Section 4(A)(2)) for banks subject to FRB Regulation
D (as hereinafter defined in this Section 4(A)(2)) or required by any other
federal law or regulation)), as quoted by the BBA at 11:00 a.m. London time and
published by Bloomberg, on the date the Borrower elects to fix a rate under this
option for the offering of U.S. dollar deposits in the London interbank market
for the Interest Period designated by the Borrower, as published by Bloomberg or
another major information vendor listed on BBA’s official website. “Banking Day”
shall mean a day on which CoBank is open for business, dealings in U.S. dollar
deposits are being carried out in the London interbank market, and banks are
open for business in New York City and London, England. “Interest Period” shall
mean the time period chosen by the Borrower during which the chosen fixed rate
is to apply to a Portion of the Loan, which period commences on the day a rate
fixed under Section 4(A)(4) hereof becomes effective. The Interest Period for
Portions accruing interest at the LIBOR option shall end on the day in the next
calendar month or in the month that is two, three or six months thereafter which
corresponds numerically with the day the Interest Period commences; provided,
however, that: (a) in the event such ending day is not a Banking Day, such
period shall be extended to the next Banking Day unless such next Banking Day
falls in the next calendar month, in which case it shall end on the preceding
Banking Day; and (b) if there is no numerically corresponding day in the month,
then such period shall end on the last Banking Day in the relevant month. No
Interest Period shall extend beyond the Maturity Date. “Eurocurrency
Liabilities” has the meaning as set forth in FRB Regulation D. “FRB Regulation
D” means Regulation D as promulgated by the Board of Governors of the Federal
Reserve System, 12 CFR Part 204, as amended from time to time.

 

Upon the occurrence and during the continuance of a Potential Default or an
Event of Default, as the Interest Periods for Portions of the Loan accruing
interest at a LIBOR option expire, at CoBank’s option in its sole and absolute
discretion and upon notice to the Borrower, such Portions of the Loan shall be
converted to the Variable Rate option and the LIBOR option will not be available
to the Borrower until all Potential Defaults or Events of Default are no longer
continuing.

 

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(3)         Rate Combinations. Notwithstanding the foregoing, at any one time
there may be no more than a total of five Portions of the Loan accruing interest
pursuant to any fixed rate option.

 

(4)         Selection and Changes of Rates. The Borrower shall select the rate
option or options applicable to any Portion of the Loan at the time it requests
such Portion of the Loan. Thereafter, with respect to Portions of the Loan
accruing interest at the Variable Rate, the Borrower may, on any Business Day,
subject to Section 4(A)(2) hereof, elect to have the LIBOR option apply to such
Portion. In addition, with respect to any Portion of the Loan accruing interest
pursuant to the LIBOR option, the Borrower may, subject to Section 4(A)(2)
hereof, on the last day of the Interest Period for such Portion, elect to fix
the interest rate accruing on such Portion for another Interest Period pursuant
to the LIBOR option. From time to time the Borrower may elect, on a Business Day
prior to the expiration of the Interest Period for any Portion of the Loan
accruing interest pursuant to the LIBOR option, and upon payment of the
applicable Surcharge (as defined in, and calculated pursuant to, Section 6
hereof) to convert all, but not part, of such Portion of the Loan so that it
accrues interest at the Variable Rate or a combination of the Variable Rate and
the LIBOR option, for a new Interest Period or Interest Periods selected in
accordance with Section 4(A)(2) hereof. Except for the initial selection, all
interest rate selections provided for herein shall be made by telephonic or
written request of an authorized employee of the Borrower by 12:00 noon, Eastern
time, on the relevant day; in the case of Loans under the LIBOR option, all such
elections must be made in writing. In taking actions upon telephonic requests,
CoBank shall be entitled to rely on (and shall incur no liability to the
Borrower in acting upon) any request made by a person identifying himself or
herself as one of the persons authorized by the Borrower to request the Loan or
select interest rates hereunder so long as any funds advanced are wired to an
account previously designated by the Borrower.

 

(5)         Accrual of Interest. Interest shall accrue pursuant to the LIBOR
option from and including the first day of the applicable Interest Period to but
excluding the last day of the Interest Period. If the Borrower elects to refix
the interest rate on any Portion of the Loan accruing interest pursuant to one
of the LIBOR option pursuant to Section 4(A)(4) hereof, the first day of the new
Interest Period shall be the last day of the preceding Interest Period. In the
absence of any such election, interest shall accrue on such Portion at the
Variable Rate from and including the last day of such Interest Period. If the
Borrower elects to convert from the LIBOR option to the Variable Rate option
pursuant to Section 4(A)(4) hereof upon payment of the applicable Surcharge as
provided in Section 6 hereof, interest at the applicable LIBOR shall accrue
through the day before such conversion and either (i) the first day of any new
Interest Period shall be the date of such conversion, or (ii) interest at the
Variable Rate shall accrue on the Portion of the Loan so converted from and
including the date of conversion.

 

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(B)         Payment and Calculation. The Borrower shall pay interest on the Loan
quarterly in arrears on the 20th day of each January, April, July and October,
commencing on October 20, 2012, upon any prepayment (whether due to acceleration
or otherwise) and on the Maturity Date; provided, however, in the event that the
Borrower elects to fix all or a portion of the Loan under the LIBOR option,
interest shall be payable at the maturity of the applicable Interest Period, or,
if such Interest Period exceeds three (3) months, interest on such Portion shall
be payable in arrears on each quarterly anniversary date of the date such
Portion was fixed under the LIBOR option. Interest shall be calculated on the
actual number of days the Loan, or any part thereof, is outstanding on the basis
of a year consisting of 360 days. In calculating accrued interest, the date the
Loan is made shall be included and the date any principal amount of the Loan is
repaid or prepaid shall be excluded as to such amount.

 

SECTION 5. Loan Fees.

 

(A)         Commitment Fee. During the period commencing on the date hereof and
ending on the Maturity Date, the Borrower shall pay to CoBank a commitment fee
on the average daily unused portion of the Commitment at a rate of 0.500% per
annum (calculated on a 360-day basis), payable quarterly in arrears on the 20th
day of each January, April, July and October, commencing on October 20, 2012.

 

(B)         Origination Fee. In consideration of the Commitment, the Borrower
shall pay to CoBank a non-refundable origination fee in the amount of $62,500,
which shall be paid in full on the date hereof.

 

SECTION 6. Prepayment and Surcharge. The Borrower may, (i) on any Business Day
prepay in full or in part any Portion of the Loan accruing interest at the
Variable Rate, and (ii) on two (2) Business Day’s prior written notice prepay in
full or in part any Portion of the Loan accruing interest at pursuant to the
LIBOR option. Notwithstanding the foregoing, the Borrower’s right to prepay any
amount accruing interest at pursuant to a fixed rate option (whether such
payment is made voluntarily, as a result of an acceleration, or otherwise) shall
be conditioned upon the payment of a prepayment Surcharge as defined and
calculated below. For purposes of calculating the Surcharge provided for in this
Section 6, early conversion of a Portion of the Loan accruing interest pursuant
to the LIBOR option so that it accrues interest at a different rate pursuant to
Section 4(A)(4) hereof shall be deemed a prepayment in full of that Portion of
the Loan. Upon any such early conversion or any prepayment of any Portion of the
Loan accruing interest pursuant to a fixed rate option, and as a condition to
any voluntary prepayment, the Borrower shall pay to CoBank, on the date of such
prepayment or early conversion, a surcharge (“Surcharge”) in an amount equal to
the greater of (a) the present value of any funding losses incurred or imputed
by CoBank to have been incurred as a result of such prepayment for the period
such amount was scheduled to have been outstanding at such LIBOR and (b) $300.
Such Surcharge, including the amount of any funding losses incurred by CoBank,
shall be determined and calculated in accordance with methodology established by
CoBank.

 

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SECTION 7. Mandatory Prepayment; Termination and Reduction of Commitment.

 

(A)         Mandatory Prepayments.

 

(1)         In the event that the Borrower exercises the put option with respect
to its ownership interest in O-P Partnership as described in Section 5 of the
Put Option Agreement, the net proceeds received by the Borrower from such
exercise (the “Put Option Net Proceeds”) shall be applied to prepay the Loan in
an amount equal to the lesser of (a) 100% of the Put Option Net Proceeds or (b)
the total amount outstanding with respect to the Loan (inclusive of accrued but
unpaid interest, fees and expenses related thereto). Any such prepayment shall
be without premium or penalty (subject, in the case of the prepayment of a loan
accruing interest at LIBOR, to payment of a prepayment Surcharge as defined and
calculated in Section 6). Such prepayment shall be applied as follows: first to
fees and expenses of CoBank, second to interest, fees, and the Surcharge, and
third to principal amounts outstanding under the Loan (first to outstanding
Portions of the Loan accruing interest at the Variable Rate, then to outstanding
Portions of the Loan accruing interest at LIBOR).

 

(2)         If at any time the aggregate outstanding amount of advances under
the Loan exceeds the Commitment, the Borrower shall prepay promptly the Loan in
an amount at least sufficient to reduce the aggregate principal balance of the
Loan then outstanding to the amount of the Commitment and until such repayment
is made CoBank shall not be obligated to make any additional advances under the
Loan.

 

(B)         Reduction of the Commitment. The Commitment will be permanently
reduced (whether or not any advances are then outstanding thereunder) to the
extent and in the amount of the Put Option Net Proceeds.

 

(C)         Termination. The Commitment will terminate in full on the Maturity
Date, provided that the reduction of the Commitment provided for in Section 7(B)
may result in the termination of the Commitment prior to the Maturity Date to
the extent that the Put Option Net Proceeds are equal to or greater than the
face principal amount of the Commitment on the date of the receipt by the
Borrower of the Put Option Net Proceeds. If not sooner required to be repaid,
all advances under the Loan and all other amounts due and owing hereunder and
under the Loan Documents relating to the Loan shall be due and payable on the
Maturity Date.

 

SECTION 8. Security. The Loan shall be unsecured, except with respect to the
equity of the Borrower in CoBank, as described in Section 4 of the MLA.

 

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SECTION 9. Additional Conditions Precedent.

 

(A)         In addition to the conditions precedent set forth in the MLA,
CoBank’s obligation to make the initial advance under the Loan is subject to the
satisfaction of the condition precedent on or before the date of such advance
that CoBank receive, in form and content acceptable to CoBank, opinions of
counsel (who shall be acceptable to CoBank) for the Borrower; provided, however,
such opinions may take exception for limitations imposed by or resulting from
bankruptcy, insolvency, moratorium, reorganization or other laws affecting
creditors’ rights generally and may conform to the generally recognized
principles of opinions among practicing counsel in the States of New York and
New Jersey or promulgated by a recognized national association of counsel.

 

(B)         In addition to the conditions precedent set forth in the MLA,
CoBank’s obligation to make an advance under the Loan, including the initial
advance, is subject to the satisfaction of each of the following conditions
precedent on or before the date of such advance:

 

(1)          No Material Adverse Change. That from December 31, 2011 to the date
of such advance there shall not have occurred any event which has had or could
reasonably be expected to have a Material Adverse Effect on the business or
prospects of the Borrower;

 

(2)          Representations and Warranties. That the representations and
warranties of the Borrower contained in the MLA, this Third Supplement and any
other Loan Document to which it is a party; be true and correct in all material
respects on and as of the date of such advance, as though made on and as of such
date; and

 

(3)          Other Information. That CoBank receive such other information
regarding the condition, financial or otherwise, and operations of the Borrower
as CoBank shall request and such other opinions, certificates or documents as
CoBank shall request.

 

(4)         Payment of the Existing Note. That the Borrower shall have repaid in
full all principal, interest, fees and other amounts outstanding with respect to
the revolving credit facility provided pursuant to the terms of that certain
Second Supplement to the Master Loan Agreement, dated as of August 3, 2011, by
and between CoBank and the Borrower (the “Second Supplement”).

 

SECTION 10. Existing Credit Facility. Upon the Closing Date, (a) each of the
Second Supplement and that certain Promissory Note made by the Borrower in favor
of CoBank in the face principal amount of $5,000,000, dated as of August 3, 2011
(the “Existing Note”) shall automatically terminate and be canceled, (b) all
obligations of the Borrower under the Second Supplement and the and the Existing
Note shall be fully satisfied, and (c) the obligation of CoBank to make advances
or otherwise extend any additional credit to or for the benefit of the Borrower
under the Second Supplement and the Existing Note shall automatically terminate.

 

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IN WITNESS WHEREOF, the Borrower has caused this Third Supplement to be executed
and delivered, and CoBank has caused this Third Supplement to be executed and
delivered, each by their respective duly authorized officer as of the date first
shown above.

 

  WARWICK VALLEY TELEPHONE COMPANY       By: /s/ Duane W. Albro       Duane W.
Albro     Chief Executive Officer

 

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  COBANK, ACB       By: /s/ Gary Franke     Gary Franke   Vice President