COMMUNITY BANK, N.A. LINE OF CREDIT AGREEMENT
Exhibit
10.1
COMMUNITY
BANK, N.A.
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Mr.
Xxxxxxx Xxxxxx, President
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June
5, 2009
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000
Xxxx Xxxxxxx Xxxxxx
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Xxxxxxx,
XX 00000
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Dear Mr.
German:
This
letter sets forth the governing terms of our agreement between Community Bank,
N.A. (the “Bank”) and Coming 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 $8,000,000.00, 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 April 21, 2009 (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 $8,000,000.00 and the Bank has not demanded payment in full. Advances
in excess of $4,000,000.00 will be limited to an amount equal to 100% of the
outstanding natural gas inventory as evidenced by the monthly inventory report
described herein below.
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 great of 4% or the 30-day Libor Rate plus a 25%, 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) August 31, 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:
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Those
financial assets of the Borrower now held by the Bank pursuant to a
“Collateral Assignment” dated November 28,
2005;
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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
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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.
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]
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COMMUNITY
BANK, N.A.
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By:
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/s/ Xxxxxx X. Xxxxx
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Xxxxxx
X. Xxxxx, Vice President
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By:
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/s/ Xxxxxxx X. German
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Xxxxxxx
Xxxxxx, President
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