Document:

EXHIBIT 10.2

 

PROMISSORY NOTE

 

WARWICK VALLEY TELEPHONE COMPANY

 

	$10,000,000	Dated: August 2, 2012

 

FOR VALUE RECEIVED,
the undersigned promises to pay to COBANK, ACB (“Payee”), or its order, at the times and in the manner
set forth in that certain Master Loan Agreement, dated as of February 18, 2003 (as it may be amended, modified, supplemented, extended
or restated from time to time, the “MLA”), and in that certain Third Supplement to the Master Loan Agreement,
dated as of even date herewith, by and between the undersigned and Payee (as it may be amended, modified, supplemented, extended
or restated from time to time, the “Third Supplement”; the MLA and the Third Supplement, collectively, the “Loan
Agreement”), the principal sum of TEN MILLION DOLLARS AND 00/100 ($10,000,000) or such lesser amount as may be advanced
hereunder from time to time, together with interest on the unpaid principal balance hereof at the rate or rates provided for in
the Loan Agreement.

 

This note is given
for one or more advances to be made by the Payee to the undersigned pursuant to the Loan Agreement, all of the terms and provisions
of which (including, without limitation, provisions regarding acceleration of the maturity hereof and application of default interest
and of a surcharge to payments hereunder) are hereby incorporated by reference. The total of such advances may exceed the face
amount of this note, but the unpaid principal balance shall not at any time exceed such face amount. Advances, accrued interest,
and payments shall be posted by the Payee upon an appropriate accounting record, which record (and all computer printouts thereof)
shall constitute prima facie evidence of the outstanding principal and interest on the advances. Any amount of principal hereof
which is not paid when due, whether at stated maturity, by acceleration or otherwise, shall bear interest from the date when due
until said principal amount is paid in full, payable on demand, at a rate per annum set forth in Section 10(D) of the MLA.

 

The makers or endorsers
hereof hereby waive presentment for payment, demand, protest, and notice of dishonor and nonpayment of this note, and all defenses
on the ground of delay or of any extension of time for the payment hereof which may be hereafter given by the holder or holders
hereof to them or to anyone who has assumed the payment of this note, and it is specifically agreed that the obligations of said
makers or endorsers shall not be in anywise affected or altered to the prejudice of the holder or holders hereof by reason of the
assumption of payment of the same by any other person or entity.

 

    	 

    	 

    

 

Should this note
be placed in the hands of an attorney for collection or the services of any attorney become necessary in connection with
enforcing its provisions, the undersigned agrees to pay reasonable attorneys' fees, together with all costs and expenses
incident thereto, to the extent allowed by law. Except to the extent governed by applicable federal law, this note shall be
governed by and construed in accordance with the laws of the State of Colorado, without reference to choice of law doctrine.
Whenever possible each provision of this note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this note shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this note. Whenever in this note reference is made to the Payee or the undersigned, such
reference shall be deemed to include, as applicable, a reference to their respective successors and assigns. The provisions
of this note shall be binding upon and shall inure to the benefit of such successors and assigns. The undersigned’s
successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for the
undersigned.

 

    	 

    	 

    

 

IN WITNESS WHEREOF,
the Borrower has caused this note to be executed and delivered by its duly authorized officer as of the date first shown above.

 

	 	WARWICK VALLEY TELEPHONE
	 	COMPANY
	 	 
	 	By:	/s/ Duane W. Albro	 
	 	 	Duane W. Albro
	 	 	Chief Executive OfficerEXHIBIT 10.3
	 	 
		
	5500 South Quebec Street
	Greenwood Village, CO 80111
	Phone:  (303) 740-4307
	Fax:  (303) 224-2522

   

August 2, 2012

 

Warwick Valley Telephone Company

47 Main Street

Warwick, New York 10990

Attention: Chief Executive Officer

 

Subject: Amendments

 

Ladies and Gentlemen:

 

Reference is made to
that certain Master Loan Agreement, dated as of February 18, 2003 (the “MLA”), by and between Warwick Valley
Telephone Company (the “Borrower”) and CoBank, ACB (“CoBank”), and that certain Amended and
Restated Second Supplement to Master Loan Agreement, dated as of the date hereof (the “Second Supplement” and,
together with the MLA, as each may be amended, restated, modified or supplemented from time to time, the “Loan Agreement”).
Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Loan Agreement.

 

Amendment

 

In reliance on the
representations, warranties and agreements provided and made by the Borrower to CoBank herein and in connection with the request
for the following amendments, the Loan Agreement is hereby amended as follows:

 

1.     Section
7(I) of the MLA is hereby amended and restated in its entirety, as follows:

 

(I)         Total
Leverage Ratio. The Borrower shall maintain at all times, measured on a consolidated basis for the Borrower and its Subsidiaries
and reported as of the last day of each fiscal quarter of the Borrower (each a “Quarterly Date”), a Total Leverage
Ratio not exceeding 2.50:1.00.

 

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The term “Total
Leverage Ratio” shall mean the ratio of Indebtedness on the applicable Quarterly Date to Operating Cash Flow (as each
such term is hereinafter defined) for the then most recently completed four fiscal quarters. “Indebtedness”
shall mean (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services
other than accounts payable arising in connection with the purchase of goods or services on terms customary in the trade, (iii)
obligations, whether or not assumed, secured by liens or a pledge of or an encumbrance on the proceeds or production from property
now or hereafter owned or acquired, (iv) obligations which are evidenced by notes, acceptances or other instruments, (v) leases
of real or personal property which are required to be capitalized under GAAP or which are treated as operating leases under regulations
applicable to them but which otherwise would be required to be capitalized under GAAP (each a “Capital Lease”),
and (vi) fixed payment obligations under guarantees that are due and remain unpaid. For purposes of this Agreement, the term “Operating
Cash Flow” (i) shall mean the sum of (a) net income or deficit, as the case may be (excluding extraordinary gains and
losses and the write-up or down of any asset), plus (b) total interest expense (including non-cash interest), plus (c) depreciation
and amortization expense plus (d) cash taxes, federal and state, imposed on income, to the extent deducted in determining income
plus (e) for the relevant period, the excess, if any, of cash distributions received by the Borrower from Orange County-Poughkeepsie
Limited Partnership (the “O-P Partnership”) during such period over any net income of the O-P Partnership included
in net income under clause (a) of this definition plus (f) non-cash compensation paid in stock or other equity to employees of
the Borrower or any of its Subsidiaries, minus, (g) for the relevant period, the excess, if any, of any net income of the O-P Partnership
included in net income under clause (a) of this definition over cash distributions received by the Borrower from the O-P Partnership
during such period, and (ii) shall be adjusted to give effect to any acquisition, sale or other disposition, directly or through
a Subsidiary, of any business (or any portion thereof) during the period of calculation as if such acquisition, sale or other disposition
occurred on the first day of such period of calculation.

 

2.     Section
7(K) of the MLA is hereby amended and restated in its entirety, as follows:

 

(K)         Debt
Service Coverage Ratio. The Borrower shall maintain at all times, measured on a consolidated basis for the Borrower and its
Subsidiaries and reported as of each Quarterly Date, during the periods set forth below, a Debt Service Coverage Ratio greater
than or equal to 2.50:1:00.

 

The term “Debt
Service Coverage Ratio” shall mean, as of the date of calculation, the ratio derived by dividing (i) Operating Cash Flow
minus cash taxes measured by (ii) the sum of: (a) the difference of (x) all principal payments scheduled to be made on Indebtedness
(or scheduled reductions in commitments on lines of credit to the extent such reductions would cause the repayment of principal
amounts then outstanding under such lines) less (y) to the extent included in principal payments made on Indebtedness, all principal
payments scheduled to be made pursuant to Section 3.5 of that certain Asset Purchase Agreement, dated as of July 14, 2011, by and
among Warwick Valley Networks, Inc., the Borrower and Alteva, LLC (as the same has been amended, modified, supplemented and restated
from time to time), in an aggregate amount not to exceed $2,750,000 (the “Alteva Earn Out Amount”), plus (b)
cash interest expense, each measured in the same manner as Operating Cash Flow set forth in Subsection 7(I) above and for the then
most recently completed four fiscal quarters.

 

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3.     Section
7 of the MLA is hereby amended by adding a new Subsection 7(M) thereto, as follows:

 

(M)         Fixed
Charge Coverage Ratio. The Borrower shall maintain at all times, measured on a consolidated basis for the Borrower and its
Subsidiaries and reported as of each Quarterly Date, commencing on the Quarterly Date falling on March 31, 2013 and calculated
as set forth below, a Fixed Charge Coverage Ratio greater than or equal to 1.00:1:00.

 

The term “Fixed
Charge Coverage Ratio” shall mean, as of the date of calculation, the ratio derived by dividing (i) Operating Cash Flow
by (ii) Fixed Charges. The term “Fixed Charges” shall mean the sum of (i) scheduled principal payments made
on Indebtedness (or scheduled reductions in commitments on lines of credit to the extent such reductions caused the repayment of
principal amounts then outstanding under such lines), (ii) cash interest expense, (iii) cash income taxes, (iv) capital expenditures,
(v) management fees, and (vi) dividends and distributions. For the Quarterly Date occurring on March 31, 2013, the Fixed Charge
Coverage Ratio shall be calculated for the then most recently completed fiscal quarter. For the Quarterly Date occurring on June
30, 2013, the Fixed Charge Coverage Ratio shall be calculated for the then most recently completed two fiscal quarters. For the
Quarterly Date occurring on September 30, 2013, the Fixed Charge Coverage Ratio shall be calculated for the then most recently
completed three fiscal quarters. For the Quarterly Date occurring on December 31, 2013, and for each Quarterly Date occurring thereafter,
the Fixed Charge Coverage Ratio shall be calculated for the then most recently completed four fiscal quarters.

 

4.     Section
8(A) of the MLA is hereby amended and restated in its entirety, as follows:

 

(A)         Borrowings.
Create, incur, assume, or allow to exist, directly or indirectly, any Indebtedness except for (i) obligations to CoBank, (ii) unsecured
Indebtedness in an amount not to exceed $4,000,000, less any amount outstanding as permitted pursuant to Subsection 8(A)(iii),
in the aggregate for the Borrower and its Subsidiaries at any one time, (iii) Indebtedness under purchase money security agreements
and Capital Leases in an amount not to exceed $2,500,000, less any amount outstanding as permitted pursuant to Subsection 8(A)(ii)
in excess of $1,500,000, in the aggregate for the Borrower and its Subsidiaries at any one time, and (iv) Indebtedness with respect
to the Alteva Earn Out Amount (as defined in Subsection 7(K)).

 

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5.     Section
8(C) of the MLA is hereby amended by adding a new clause (v) thereto immediately following clause (iv) thereof, as follows:

 

, or (v) otherwise
engage in any restructuring or reorganization such that the Borrower or such Subsidiary of the Borrower becomes a holding company
rather than an operating company.

 

6.     Section
8(D) of the MLA is hereby amended by adding the following parenthetical after the phrase “any of its assets”:

 

(including,
without limitation, the sale, transfer, lease, pledge or other disposition by the Borrower of any interest held by it in the O-P
Partnership except as a result of the Borrower exercising its put option pursuant to that certain Agreement dated as of May 26,
2011 by and among Verizon Wireless of the East LP, Cellco Partnership and the Borrower (the “Put Option Agreement”))

 

7.     Section
8 of the MLA is hereby amended by adding a new Subsection 8(K) thereto as follows:

 

(K)         Modifications
of O-Partnership Agreements. Make any modification or change, or grant any consent or waiver, under or with respect to that
certain Agreement Establishing Poughkeepsie Limited Partnership Between Nynex Communications Company and Contel Cellular, Inc.,
Highland Telephone Company, Sylvan Lake Telephone Company, Taconic Telephone Corporation and the Borrower, dated as of April 21,
1987 (as the same has been amended, modified, supplemented and restated from time to time, the “O-P Partnership Agreement”)
or any agreements related to the O-P Partnership Agreement (including, without limitation, the Put Option Agreement). Any consent
of CoBank to such modification, change, consent or waiver shall be conditioned upon the acceptability to CoBank of the terms and
conditions of such modification, change, consent or waiver, to be determined by CoBank in its reasonable discretion.

General

 

Except as expressly
provided by this letter agreement, the terms and provisions of the Loan Agreement and the other Loan Documents are hereby ratified
and confirmed and shall continue in full force and effect. By agreeing to this letter agreement as acknowledged below, the Borrower
hereby certifies and warrants to CoBank that after giving effect to the amendments effected hereby, each of the representations
and warranties contained herein is true and correct, and each of the representations and warranties contained in the Loan Agreement
and in the other Loan Documents, is true and correct in all material respects, as of the effective date of this letter agreement
with the same effect as though made on such effective date (except for any representation or warranty limited by its terms to a
specific date). Without limiting any condition to effectiveness set forth above, the amendments contained herein are to be effective
only upon receipt by CoBank of an execution counterpart of this letter agreement signed by the Borrower, and shall apply for the
period commencing with the effective date hereof. The amendments contained herein shall not constitute a course of dealing between
the Borrower and CoBank and except as expressly set forth herein, shall not constitute an amendment of any provision of the Loan
Agreement or the other Loan Documents or a waiver, extension or forbearance of any Potential Default or Event of Default now or
hereafter arising. The Borrower agrees to pay to CoBank, on demand, all out-of-pocket costs and expenses incurred by CoBank, including,
without limitation, the reasonable fees and expenses of counsel retained by CoBank, in connection with the negotiation, preparation,
execution and delivery of this letter agreement and all other instruments and documents contemplated hereby. This letter agreement
shall be governed by, construed and enforced in accordance with all provisions of the Loan Agreement, including choice of law provisions,
and may be executed in multiple counterparts.

 

[Signatures begin on the next page.]

 

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	 	CoBank, ACB,
	 	as the Lender
	 	 
	 	By: /s/ Gary Franke	 
	 	Gary Franke
	 	Vice President

 

Acknowledged and agreed to:

 

WARWICK VALLEY TELEPHONE COMPANY, as the Borrower

 

	By:	/s/ Duane W. Albro	 
	 	Duane W. Albro	 
	 	Chief Executive Officer	 

 

[Signature Page to Amendment
Letter Agreement]

 

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