COMMUNITY BANK, N.A. LINE OF CREDIT AGREEMENT
Exhibit 10.1
COMMUNITY BANK, N.A.
LINE OF CREDIT AGREEMENT
LINE OF CREDIT AGREEMENT
March 19, 2008
Dear Mr. German:
This letter sets forth the governing terms of our agreement between Community Bank, N.A. (the
“Bank”) and Corning Natural Gas Corp. (the “Borrower”) concerning a revolving line of credit (the
“Revolving Line”) in the aggregate maximum amount outstanding at any one time of $7,000,000.00,
subject to the terms of this letter. This Revolving Line was committed by the provisions of a
commitment letter from the Bank to the Borrower dated March 11, 2008 (the “Commitment Letter”),
the contents of which are herein incorporated by reference.
General Terms of Revolving Line
Proceeds of the Revolving Line shall be used for Borrower’s working capital purposes
needs. So long as no Event of Default exists under this Agreement or under the terms of any
other agreement or loan document between the Borrower or any Guarantor hereunder and the Bank,
the Borrower may borrow, repay, and reborrow under the Revolving Line from time to time so long
as the aggregate principal amount outstanding at any one time does
not exceed $7,000,000.00 and the Bank has not demanded payment in full.
The Borrower shall execute a Demand Grid Note (the “Revolving Line Note”) evidencing
obligations related to the Revolving Line in a form acceptable to the Bank.
All outstanding amounts under the Revolving Line shall bear interest until paid in full. The
rate of interest payable hereunder shall be a fluctuating rate per annum (the “Stated Rate”) equal
to the 30-day Libor Rate plus 1.35%, with changes to occur automatically with changes in the 30-day
Libor Rate from time to time in effect. Each change in the Stated Rate shall take effect
simultaneously with the corresponding change in such Libor Rate. The “30-day Libor Rate “ shall
mean the 30-day Libor Rate as published by the Wall Street Journal from time to time during
the period that any portion of the principal hereunder remains unpaid. Interest shall be calculated
based on actual days elapsed divided by a year of 360 days. Changes in the rate of interest
applicable to the Revolving Line Note shall become effective automatically and without notice at
the time of changes in the 30-day Libor Rate. The Bank, shall, however, provide the Borrower with
notice of changes which have occurred in the rate applicable to the Revolving Line during the
preceding billing period in its regular billing statements.
Unless sooner demanded, payments of all accrued interest under the Revolving Line are due and
payable on the first day of each month. All remaining outstanding principal and accrued interest
under the Revolving Line shall be due and payable in full on the earlier of (i) February
28, 2009, or (ii) the date of a demand by the Bank, or (iii) the date of an Event of Default
(collectively, the “Expiration Date”) unless the Revolving Line is extended by the Bank in its
sole discretion. The Revolving Line will terminate on, and the Bank shall have no further
obligation to make credit available after, the Expiration Date.
Any amount due not fully paid within ten (10) days after the date due shall be subject to a
late payment charge of the greater of $25.00 or five percent (5%) of the total payment due.
Fees and Expenses
The Borrower shall pay any fees, expenses and disbursements, including reasonable legal fees,
of the Bank related to the Revolving Line and the transactions contemplated by this letter. Such
payments shall be due from time to time upon the Bank giving the Borrower notice of the amount of
such expenses.
At the request of the Bank, the Borrower shall promptly pay any expenses, reasonable
attorney’s fees, costs, or disbursements in connection with collection of any of the obligations
related to the Revolving Line or enforcement of any of the Bank’s rights hereunder or under any
note, guaranty, or other agreement related hereto. This obligation shall survive the payment of the
Revolving Line Note. The Bank may apply any payments of any nature received by it first to the
payment of obligations under this paragraph, notwithstanding any conflicting provision contained in
this letter or any other agreement with the Borrower.
Upon the occurrence of an Event of Default and acceleration by the Bank of the Revolving Line
Note such that it becomes immediately due and payable in full, the rate of interest on each of the
obligations related thereto shall be increased to a rate at all times equal to two percent (2%)
above the rate of interest which would be in effect absent such Event of Default, such increased
rate to remain in effect through and including payment in full of all of the Obligations, or
written waiver of such Event of Default by the Bank.
Collateral and Guarantees
The Revolving Line obligation shall be secured by the following:
| • | Those financial assets of the Borrower now held by the Bank pursuant to a “Collateral Assignment” dated November 28, 2005; | ||
| • | A security interest in accounts receivable, inventory and equipment arising under a Security Agreement between the Borrower and the Bank dated August 4, 2005 and spread to cover the credit line facility hereby renewed, accomplished by “Collateral Security Spreader Agreement” dated November 28, 2005; and |
No Guaranty of the Revolving Line obligation is required to be furnished by the Borrower.
Affirmative Covenants
So long as this agreement remains in effect or there exists any indebtedness owing to the
Bank by the Borrower hereunder, it is agreed that the Borrower shall:
A. Keep proper books of account in a manner satisfactory to Bank. The Bank acknowledges that
the accounting system, procedures, and forms in use as of the date hereof are satisfactory;
B. Permit, at Borrower’s expense, inspections and audits by Bank or by its agents of all
books, records and papers in the custody or control of the Borrower or of others relating to the
financial business condition of the Borrower, including the making of copies thereof and
abstracts therefrom, and inspection and appraisal of any of their assets, with reasonable notice
and during regular business hours;
C. Deliver to the Bank the following financial information: (i) annual financial statement of
the Borrower audited by a Certified Public Accountant in accordance with standards established by
the American Institute of Certified Public Accountants within 90 days after the end of its fiscal
year; (ii) within 30 days following the close of each month, a monthly financial statement
prepared by the Borrower; and (iii) at all times when the outstanding principal balance owing on
the Revolving Line exceeds $4,000,000.00, a monthly report on or before the 15th day of
the month which reports the Borrower’s natural gas inventory volumes and the cost and market
values thereof.
D. Promptly pay all taxes, assessments and other governmental charges due from the
Borrower, provided, however, that nothing herein contained shall be interpreted to require the
payment of any such tax so long as its validity is being contested in good faith.
E. Promptly inform the Bank of the commencement of any material action, suit, proceeding or
investigation against the Borrower, or the making of any counterclaim against it in any action,
suit or proceeding, and of all liens against any property of either. An action, suit, proceeding,
investigation, or lien shall be deemed material when in the aggregate the face amount of all such
pending claims, reduced by the amounts (excluding deductibles and retained limit self-insurances)
of indemnity insurance coverages acknowledged by the insurers as applicable thereto, exceeds
$100,000.00.
F. Borrower is to maintain a net worth of $7,000,000 as determined by reference to the audited
financial statements of the Borrower commencing with those for the fiscal year ending September 30,
2008.
G. Borrower is to maintain a leverage ratio of less than four to one as determined by
reference to the audited financial statements of the Borrower commencing with those for the
fiscal year ending September 30, 2008.
Negative Covenants
So long as this agreement remains in effect or there exists any indebtedness owing to the
Bank by the Borrower hereunder, it is agreed that the Borrower shall not:
A. without the prior written consent of the Bank having first been obtained, create, incur,
assume or suffer to exist any security interest, mortgage, pledge, lien or other encumbrance upon
any of your accounts receivable and inventory, whether now owned or hereafter acquired, except in
our favor and except liens of taxes not in default or being contested in good faith; provided,
however, that if any proceeding before the United States Tax Court, Borrower is adjudged liable for
unpaid taxes and wish to appeal from such adjudication, it shall promptly take appropriate steps to
stay assessment of any lien of such taxes.
B. sell, convey, lease or transfer any of its assets other than in the ordinary course of
business, or merge or consolidate with or into any other company or corporation;
C. make or incur any liability to make any distributions until and while its actual
regulated capital structure has an equity to debt ratio of less than 30% equity to 70% debt, or
make any distributions which would reduce the equity percentage below 30%.
Events of Default
All of obligations of the Bank hereunder to the Borrower may be immediately terminated and the
entire unpaid balance of all indebtedness hereunder owing to the Bank may be declared to be
immediately due and payable at the sole election of the Bank upon the happening of any one of the
following specific events of default:
A. Nonpayment of any principal of or interest on any indebtedness created hereunder within
fifteen (15) days after its due date, or default by the Borrower in the performance of any of
other material terms or conditions of this agreement or of any other agreement of the Borrower
with the Bank, which default remains uncured fifteen (15) days after written notice thereof has
been furnished by the Bank to the Borrower;
B. The adjudication of the Borrower as a bankrupt, or the making by the Borrower of any
general assignment for the benefit of creditors, or the institution by it of any type of insolvency
proceeding or of any proceeding for the liquidation or the winding-up of its affairs, or the
appointment of a receiver or trustee for the Borrower of its assets, or the approval as properly
filed of a petition for the reorganization of it under the Bankruptcy Act of otherwise, or its
filing of any petition for an arrangement under Chapter XI of the Bankruptcy Act or under any
similar statute;
C. If any certificate, statement, representation, warranty or audit furnished by the Borrower
or on its behalf in connection with this arrangement (including those contained herein) or as an
inducement to the Bank to enter into this agreement shall prove to have been false in any material
respect at the time as of which the facts therein set forth were certified or stated, or to have
omitted any substantial contingent or unliquidated liability or claim against the Borrower, or if
on the date of the execution of this agreement, there shall have been any materially adverse change
in any of the facts disclosed by any such certificate, statement, representation, warranty or
audit, which change shall not have been disclosed by the Borrower to the Bank at or prior to the
time of such execution;
D. Nonpayment by the Borrower of any other indebtedness to the Bank within fifteen (15)
days after the date when due; and
E. There occurs any substantial change in the ownership of the Borrower, by merger with
another entity or otherwise, or operating control of the business of the Borrower, without the
prior written consent of the Lender having first been obtained.
Miscellaneous Terms
The Bank shall have a right of set-off, in the full amount of all of Borrower’s obligations
to the Bank, against any deposits, assets held by, or other amounts owed by the Bank to or held
by the Bank for, the Borrower as well as a lien on any and all property of the Borrower which is
or may be in the Bank’s possession.
No delay or omission by the Bank in exercising any right or remedy hereunder or with respect
to any indebtedness created hereunder shall operate as a waiver thereof or of any of other right
or remedy, and no single or partial exercise thereof shall preclude any other or further exercise
thereof of any other right or remedy.
The parties hereto expressly waive all rights to trial by jury on any cause of action
directly or indirectly involving the terms or conditions of this Agreement, the Revolving Line
Note, or any matters whatsoever arising out of or in connection with this Agreement, the Revolving
Line Note, or any document executed or delivered in connection with this Agreement or the
Revolving Line Note. The foregoing waiver shall survive the termination or expiration of this
Agreement.
This Agreement and the documents referred to herein embody the entire agreement and
understanding among the parties and supersede all prior agreements and understandings relating to
the subject matter hereof. This Agreement shall not be changed or amended without the written
agreement of all parties hereto.
All
the terms and provisions of this Agreement shall inure to the benefit of and be binding upon and be enforceable by the parties and their successors and assigns and shall inure to
the benefit of and be enforceable by any holder of notes executed hereunder. No assignment of the
rights of the Borrower under this Agreement may be made without the prior written consent of the
Bank.
This letter and the notes and agreements related hereto, together with all of the rights and
obligations of the parties hereto, shall be construed, governed and enforced in accordance with
the laws of the State of New York. It represents the joint agreement of the parties following
negotiation resulting in the issuance of the Commitment Letter, and accordingly shall not be
strictly construed against any particular party.
Please sign the enclosed duplicate original of this letter to evidence your agreement to the
terms contained herein. We appreciate the opportunity to do business with you.
[signatures on next page]
COMMUNITY BANK, N.A. |
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