8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: March 30, 2010 (Date of earliest event reported)
Corning Natural Gas Corporation (Exact name of registrant as specified in its charter)
New York (State or other jurisdiction of incorporation)	000-00643 (Commission File Number)	16-0397420 (I.R.S. Employer Identification No.)

330 West William Street, Corning, New York (Address of principal executive offices)	14830 (Zip Code)

(607) 936-3755

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01		Entry into a Material Definitive Agreement.

　

On March 30, 2010, Corning Natural Gas Corporation ("Corning") entered agreements with Community Bank N.A. ("Community Bank") with respect to its revolving line of credit pursuant to a Line of Credit Agreement and Commercial Line of Credit Agreement and Note and Commercial Security Agreement (together, the "Credit Agreement") in the amount of $7 million. This line of credit replaces Corning's $8 million revolving line with Community Bank that expires on March 31, 2010. The new line of credit contains similar terms and conditions as the expiring line. The principal conditions include that the line of credit will be due and payable in full on the earlier to occur of (1) February 28, 2011, or (2) the date of demand by Community Bank, or (3) the date of an event of default as defined in the Credit Agreement unless extended by Community Bank. The line of credit bears interest annually at a fluctuating rate equal to the greater of 4% or the 30-day Libor Rate plus 2.25%.

　

Any amounts due under the Credit Agreement will become immediately due and payable in the event of default, as defined in the Credit Agreement, and are secured by agreements dated August 4, 2005 and November 28, 2005. The Credit Agreement also contains customary representations, warranties and covenants made by the parties.

　

The foregoing description of the Credit Agreement is not complete and is qualified in its entirety by the full and complete terms of the Credit Agreement, which is attached as Exhibits 10.1, 10.2 and 10.3 to this current report and is incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

	10.1		Letter of Commitment by and between Corning Natural Gas Corporation and Community Bank N.A.
	10.2		Line of Credit Agreement dated March 30, 2010 by and between Corning Natural Gas Corporation and Community Bank N.A.
	10.3		Commercial Line of Credit Agreement and Note and Commercial Security Agreement dated March 30, 2010 by and between Corning Natural Gas Corporation and Community Bank N.A.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Corning Natural Gas Corporation
	/s/ Firouzeh Farhangi
Dated: March 30, 2010	By Firouzeh Sarhangi, Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description
10.1		Letter of Commitment by and between Corning Natural Gas Corporation and Community Bank N.A.
10.2		Line of Credit Agreement dated March 30, 2010 by and between Corning Natural Gas Corporation and Community Bank N.A.
10.3		Commercial Line of Credit Agreement and Note and Commercial Security Agreement dated March 30, 2010 by and between Corning Natural Gas Corporation and Community Bank N.A.

　

　

EX-10

240 S. Hamilton Street, Painted Post, New York 14870-9791 (607) 936-2827

March 11, 2010

Mr. Michael German, President

Corning Natural Gas

330 West William Street

Corning, NY 14830

Dear Mr. German:

Community Bank, N.A. (the "Bank") is pleased to advise you that the Bank has approved a new credit accommodation for Corning Natural Gas (the "Borrower") in the form of a Working Capital Line of Credit ("WC-LOC"). This commitment is subject to all of the terms and conditions contained herein.

　

LOAN TERMS

1. Purpose: The WC-LOC shall be used to fund working capital.
2. Amount: Under the WC-LOC, the Borrower may borrow from time to time up to an aggregate maximum amount of $7,000,000.

Beginning March 31, 2010, aggregate borrowings at any one time on the WC-LOC may not exceed the sum then available according to the following formula: (a) 100% of all Borrower eligible accounts receivable plus (b) 100% of all Borrower gas inventory and 50% of all Borrower miscellaneous eligible inventories plus (c) 100% of the value of the Rabbi Trust minus (d) the balance of existing term loan #4280406-9001.

Eligible accounts receivable are defined as: (i) all trade accounts receivable less than 90 days beyond date of invoice minus all (ii) contra accounts receivable, affiliate company accounts receivable and employee accounts receivable. Eligible inventories are defined as all inventories owned by the Borrower valued at cost. Eligible accounts receivable and eligible inventories must arise from the Borrower's ordinary course of business, as it exists on the date hereof. The Rabbi Trust is investment account #89151111309 held by Community Bank, NA.

3. Interest Rate: Interest will be charged on outstanding principal balances at the 30-day Libor Rate, as published in the Wall Street Journal, plus 2.25% with changes to occur monthly with changes to the 30-day Libor Rate. However at no time will the interest rate go below 4%.
4. Interest Payments: Payments of all interest accrued on outstanding principal balances hereunder shall be due on the first day of every month.
5. Expiration: The WC-LOC shall expire February 28, 2011 unless extended in writing by the Bank. All advances under the WC-LOC shall be payable upon demand.
6. Late Charges: Payments made more than ten days after the date due shall be subject to a late payment charge equal to 5% of the payment due or $25.00, whichever is greater.
7. Prepayments: Prepayments of principal and interest may be made at any time without premium or penalty. All prepayments shall be applied first to accrued interest and then to principal.
8. Collateral: With respect to the WC-LOC, the Bank will require a continued first security interest in all accounts, inventory, chattel paper, documents, instruments, and general intangibles, together with a first security interest in Rabbi Trust Account #89151111309.
9. Guarantees: No Guaranty of the WC-LOC obligation is required to be furnished by the borrower.

　

GENERAL REQUIREMENTS

1. Financial Statements/Reporting Requirements: Subsequent to the consummation of this transaction and for so long as any indebtedness thereunder shall remain unpaid, the Borrower shall deliver to the Bank, without expense to the Bank:
1. Annual audited financial statements and SEC form 10-K prepared by an independent certified public accountant, satisfactory to the Bank, within 120 days after the close of each fiscal year.
2. Quarterly SEC form 10-Q financial statement within 60 days after the close of each quarter.
3. Monthly internally prepared financial statements within 45 days of each month-end.
4. Monthly reconciliation of accounts receivable with agings, inventory and WC-LOC borrowings in form and substance reasonably satisfactory to the Bank, within 30 days of each month-end.
5. The Borrower will provide the Bank with such other information and allow such inspections by the Bank as the Bank may from time to time reasonably request.
2. Default: The maturity of all obligations of Borrower shall be accelerated upon the occurrence of an Event of Default as defined in the Loan Documents.
3. Insurance: The Borrower shall maintain insurance (including without limitation hazard, liability and workers' compensation) in form and amount satisfactory to the Bank. Such policies shall provide for thirty days prior written notice of cancellation to the Bank and shall name the Bank as loss payee as its interest appears.
4. Organization: The Borrower shall maintain its due organization and authority, and shall comply with all governmental requirements and the terms of all corporate restrictions on it.
5. New Third-Party Debt: The Borrower shall not incur new indebtedness after the loan closing exceeding $2,500,000 without furnishing advance notice to the Bank.
6. Financial Covenants: During the term of the Loans, the Borrower shall at all times maintain the following covenants and restrictions:
1. Maintain a tangible net worth of not less then $9,000,000.00. Tangible net worth is defined as the total value of all assets excluding goodwill and intangible assets less total liabilities. Measured at fiscal year end starting with the 9/30/09 financial statement.
2. Maintain a Debt to Tangible Net Worth ratio of less then 3.5 to 1.0. Measured at fiscal year end starting with the 9/30/09 financial statement.
3. Maintain a debt service coverage ratio of 1.10 to 1. Measured at fiscal year end starting with the 9/30/10 financial statement. The debt service coverage ratio is defined as:

(net inc. excluding other comprehensive inc. or loss+depr. & amort.+int.-div. & dist.)

(current maturity loan term debt from the prior period financial statement + interest)

7. Loan Documents: A new Line of Credit Agreement will be required at closing.

MISCELLANEOUS

1. Assignability: This commitment is not assignable and will expire in the event that it is not accepted and returned to the bank on or before March 31, 2010.
2. Fees/Costs: By acceptance of this commitment, Borrower agrees to pay all costs in connection with preparation of updated loan documents and all charges for UCC searches and filing fees.
3. Warranty: Borrower warrants that all matters, documents and instruments furnished to the Bank and upon which this commitment is based, including without limitation, financial statements, are complete and that there has been no material omission therefrom.
4. Further Actions: Borrower agrees to execute and/or deliver to us further documentation, covenants, and items as we or our counsel may reasonably require or as may become necessary to effect the consummation of this transaction.
5. Contingency: This commitment is contingent upon there being no detrimental or adverse change in the financial condition of the Borrower.
6. Survival: The terms and conditions of this letter shall survive the consummation of this transaction.

Very truly yours,

COMMUNITY BANK, N.A.

　

　

Thomas Beers

Vice President

ACCEPTED AND AGREED:

　

Corning Natural Gas

　

　

By:

Michael German, President Date

　

EX-10

COMMUNITY BANK, N.A.

LINE OF CREDIT AGREEMENT

As of: March 31, 2010

Mr. Michael I. German, President Corning Natural Gas Corp.

330 West William Street

Corning, NY 14830

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, 2010 (the "Commitment Letter"), the contents of which are herein incorporated by reference.

Definitions

As used herein, the following terms shall have the following meanings:

"Eligible accounts receivable" shall be all trade accounts of the Borrower less than 90 days beyond the date of invoice (and originating in the ordinary course of business) minus all contra accounts receivable, affiliate company accounts receivable and employee accounts receivable.

"Miscellaneous eligible inventories" shall be all ordinary-course non-gas inventories of the Borrower valued at cost.

"Rabbi Trust" refers to the assets held in the investment account of the Borrower numbered 89151111309 held by Community Bank, N.A.

"Third Party Borrowing Notice Event" means the acceptance by the Borrower of a new indebtedness financing commitment from a party other than the Bank which, upon closing thereof, would result in the Borrower having incurred aggregate indebtedness exceeding $2,500,000.00 to one or more parties, other than the Bank, following the effective date of this

agreement. Commitments for refinancing indebtedness that exists at the time of the Term Loan closing do not count against this Event threshold.

"Tangible Net Worth" means the total value of all assets excluding goodwill and intangible assets, less total liabilities, as determined by reference to the year-end audited financial statements of the Borrower, commencing with those for the fiscal year ending September 30, 2009.

"Debt to Tangible Net Worth Ratio" is defined as the dividend ratio of all Debt of the Borrower divided by its Tangible Net Worth, as determined by reference to the year-end audited financial statements of the Borrower commencing with those for the fiscal year ending September 30, 2009.

"Debt Service Coverage Ratio is defined as the dividend ratio of

[(net income, excluding other comprehensive income, + depreciation and amortization + interest) minus (dividends + distributions), divided by [current maturity loan term debt from the prior period financial statement + interest], as determined by reference to the year-end audited financial statements of the Borrower, commencing with those for the fiscal year ending September 30, 2009.

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. Notwithstanding the foregoing, beginning March 31, 2010, aggregate borrowings at any one time under the Revolving Line may not exceed the sum then available according to the following formula:

100% of all "eligible accounts receivable" of the Borrower;

Plus 100% of all gas inventory of the Borrower;

Plus 50% of all "miscellaneous eligible inventories" of the Borrower;

Plus 100% of the value of the "Rabbi Trust";

Minus the balance of term loan #4280406-9001.

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 greater of 4% or the 30-day Libor Rate plus 2.25%, 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) February 28, 2011, 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 monthly payment 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:

• A continued first security interest in accounts receivable, inventory, chattel paper, documents, instruments and general intangibles; and
• A continued first security interest in the Rabbi Trust,

both as evidenced by a Security Agreement between the Borrower and the Bank dated August 4, 2005, as modified by a Collateral Security Spreader Agreement dated November 28, 2005, and as restated by a new Security Agreement between the parties hereto of even date herewith..

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:

1. 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;
2. 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 fmancial 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 120 days after the end of its fiscal year; (ii) quarterly SEC Form 10-Q within 60 days following the end of each calendar quarter; (iii) within 45 days following the close of each month, monthly financial statements prepared by the Borrower; and (iii) a monthly report within 30 days following each month end, in form and substance satisfactory of the reasonable requirements of the Bank, setting forth reconciliation of accounts receivable with agings, inventory, and borrowings under

the Revolving Line; (iv) immediately upon the occurrence of a Third Party Borrowing Notice Event, written notice thereof; and (v) such other information as the Bank may from time to time reasonably request.

1. 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.
0. 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.
1. Maintain a Tangible Net Worth of not less than $9,000,000
2. Maintain a Debt to Tangible Net Worth Ratio of less than 3.5 to 1.0. H. Maintain a Debt Service Coverage Ratio of not less than 1.10 to 1. 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:

1. 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.
2. 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;

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:

1. 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;
2. 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;
3. 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;
4. 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 Bank 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.

COMMUNITY BANK, N.A.

____________________________

by:
Thomas F. Beers, Vice President

CORNING NATURAL GAS CORP.

____________________________

by:
Michael I. German, President

EX-10

COMMERCIAL LINE OF CREDIT	Community Bank N.A.
AGREEMENT AND NOTE	331 West Pulteney Street
	Corning, New York 14830
	(607)937-5471

LOAN NUMBER	AGREEMENT DATE	LOAN TERM	LINE OF CREDIT LIMIT
C-10-03-088174	March 31, 2010	On Demand	$7,000,000.00
LOAN PURPOSE: Working Capital

BORROWER INFORMATION

Coming Natural Gas Corporation

330 William Street, P. 0. Box 58

Corning, NY 14830-0058

LINE OF CREDIT AGREEMENT AND NOTE. This Commercial Line of Credit Agreement and Note will be referred to in this document as the "Agreement."

LENDER. "Lender" means Community Bank N.A. whose address is 331 West Pulteney Street, Coming, New York 14830 , its successors and assigns.

BORROWER. "Borrower" means each person or legal entity who signs this Agreement.

PROMISE TO PAY. For value received, receipt of which is hereby acknowledged, the Borrower promises to pay, on demand by Lender, the principal amount of Seven Million and 00/100 Dollars ($7,000,000.00) or such lesser amount as shall have been advanced by Lender, from time to time, to or on behalf of Borrower under this Agreement, and all interest and any other charges, including service charges, to the order of Lender at its office at the address noted above or at such other place as Lender may designate in writing. The Borrower will make all payments in lawful money of the United States of America.

PAYMENT SCHEDULE. This Agreement will be paid according to the following required payment schedule: Beginning on May 1, 2010, monthly payments of accrued and unpaid interest. The unpaid principal balance of this Note, together with all accrued interest and charges owing in connection therewith, shall be due and payable on demand. All payments received by the Lender from the Borrower for application to the Line of Credit may be applied to the Borrower's obligations under the Line of Credit in such order as determined by the Lender.

INTEREST RATE AND SCHEDULED PAYMENT CHANGES. The initial variable interest rate on this Agreement will be 4.000% per annum. This interest rate may change on May 1, 2010, and on the same day of each month thereafter. Each date on which the interest rate may change is called the "Change Date." Beginning with the first Change Date, Lender will calculate the new interest rate based on One Month Libor Rate in effect on the Change Date (the "Index") plus 2.250 percentage points (the "Margin"). If the Index is not available at that time, Lender will choose a new Index which is based on comparable information. The Index is used solely to establish a base from which the actual rate of interest payable under this Agreement will be calculated, and is not a reference to any actual rate of interest charged by any lender to any particular borrower. The interest rate will never be less than 4.000%.

Nothing contained herein shall be construed as to require the Borrower to pay interest at a greater rate than the maximum allowed by law. If, however, from any circumstances, Borrower pays interest at a greater rate than the maximum allowed by law, the obligation to be fulfilled will be reduced to an amount computed at the highest rate of interest permissible under applicable law and if, for any reason whatsoever, Lender ever receives interest in an amount which would be deemed unlawful under applicable law, such interest shall be automatically applied to amounts owed, in Lender's sole discretion, or as otherwise allowed by applicable law. An increase in the interest rates will result in a higher payment amount. Interest on this Agreement is calculated on a 365/360 day basis. The unpaid balance of this loan shall, after an Event of Default exists under this Agreement or any other agreement related to the loan, be subject to a Default Rate of interest equal to 2.000 percentage points ov er the applicable variable interest rate in effect from time to time, calculated as described above in the section "Interest Rate."

LATE PAYMENT CHARGE. If any required payment is more than 10 days late, then at Lender's option, Lender will assess a late payment charge of $25.00 or 5% of the amount past due, whichever is greater.

LINE OF CREDIT TERMS. This Agreement is discretionary. The Borrower acknowledges and agrees that although the Borrower may from time to time request an advance under this Agreement up to a maximum amount equal to the Line of Credit Limit, the Lender in no way is obligated to make such advance and all advances will be made by Lender in its sole and absolute discretion and subject to the terms and conditions of this Agreement.

Advances.

* Advances under this Agreement may be requested orally or in writing by the Borrower or by an authorized person.

* The total of all advances requested and unpaid principal cannot exceed Seven Million and 00/100 Dollars ($7,000,000.00).

* All advances made will be charged to a loan account in Borrower's name on Lender's books, and the Lender shall debit such account the amount of each advance made to, and credit to such account the amount of each repayment made by Borrower.

Suspension and Termination. Advances under this Agreement will be available until the earlier to occur of (a) demand by the Lender; (b) the Line of Credit is cancelled by Borrower; or (c) the occurrence of an Event of Default.

2004-2009 Compliance Systems, Inc. 1A60-07B1 - 2009.09.279

Commercial Line of Credit Agreement and Note - DL4006 Page 1 of 3 www.compliancesystems.com

Loan Type Conversion. Provided no default or event of default shall have occurred, the Borrower may, at its option, apply for conversion of this Agreement into a Term loan 30 days prior to the Maturity Date. However, the Lender shall have no obligation to approve the Borrower's application.

SECURITY TO NOTE. Security (the "Collateral") for this Agreement is granted pursuant to the following security document(s):

* Security Agreement dated March 31, 2010.

* Security Agreement dated March 31, 2010 evidencing security interest in Rabbi Trust Account, Community Bank, N. A. # 89151111309.

RIGHT OF SET-OFF. To the extent permitted by law, Borrower agrees that Lender has the right to set-off any amount due and payable under this Agreement, whether matured or unmatured, against any amount owing by Borrower to Lender including any or all of Borrower's accounts with Lender. This shall include all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. Such right of set-off may be exercised by Lender against Borrower or against any assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor of Borrower, or against anyone else claiming through or against Borrower or such assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off has not been exercised by Lender prior to the making, filing or issuance or service upon Lender of, or of notice of, assignment for the benefit of creditors, appoi ntment or application for the appointment of a receiver, or issuance of execution, subpoena or order or warrant.

PAYABLE ON DEMAND. This is a demand note. Payment is due upon Lender's demand.

DEFAULT. Upon the occurrence of any one of the following events (each, an "Event of Default" or "default" or "event of default"), Lender's obligations, if any, to make any advances will, at Lender's option, immediately terminate and Lender, at its option, may declare all indebtedness of Borrower to Lender under this Agreement to be immediately due and payable without further notice of any kind notwithstanding anything to the contrary in this Agreement or any other agreement: (a) Borrower's failure to make any payment on time or in the amount due; (b) any default by Borrower under the terms of this Agreement or any other agreement or security instrument executed in connection with this Agreement (such documents hereafter identified individually as "Loan Document" and collectively as "Loan Documents"); (c) any default by Borrower under the terms of any other note, loan agreement, security agreement, mortgage or other document in favor of Lender; (d) the death, dissolution, or ter mination of existence of Borrower or any guarantor; (e) Borrower is not paying Borrower's debts as such debts become due; (f) the commencement of any proceeding under bankruptcy or insolvency laws by or against Borrower or any guarantor or the appointment of a receiver; (g) any default under the terms of any other indebtedness of Borrower to any other creditor; (h) any writ of attachment, garnishment, execution, tax lien or similar instrument is issued against any collateral securing the loan, if any, or any of Borrower's property or any judgment is entered against Borrower or any guarantor; (i) any part of Borrower's business is sold to or merged with any other business, individual, or entity; (j) any representation or warranty made by Borrower to Lender in any of the Loan Documents or any financial statement delivered to Lender proves to have been false in any material respect as of the time when made or given; (k) if any guarantor, or any other party to any agreement or instrument with or in f avor of Lender entered into or delivered in connection with the Loan terminates, attempts to terminate or defaults under any such agreement or instrument; (1) Lender has deemed itself insecure or there has been a material adverse change of condition of the financial prospects of Borrower or any collateral securing the obligations owing to Lender by Borrower. Upon the occurrence of an event of default, Lender may pursue any remedy available under any Related Document, at law or in equity.

RELATED DOCUMENTS. If this Agreement is secured by a security agreement, mortgage, deed of trust, trust deed, security deed or loan agreement of even or previous date, it is subject to all the terms thereof.

GENERAL WAIVERS. To the extent permitted by law, the Borrower severally waives any required notice of presentment, demand, acceleration, intent to accelerate, protest and any other notice and defense due to extensions of time or other indulgence by Lender or to any substitution or release of collateral. No failure or delay on the part of Lender, and no course of dealing between Borrower and Lender, shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right.

JOINT AND SEVERAL LIABILITY. If permitted by law, each Borrower executing this Agreement is jointly and severally bound.

SEVERABILITY. If a court of competent jurisdiction determines any term or provision of this Agreement is invalid or prohibited by applicable law, that term or provision will be ineffective to the extent required. Any term or provision that has been determined to be invalid or prohibited will be severed from the rest of this Agreement without invalidating the remainder of either the affected provision or this Agreement.

SURVIVAL. The rights and privileges of the Lender hereunder shall inure to the benefits of its successors and assigns, and this Agreement shall be binding on all heirs, executors, administrators, assigns and successors of Borrower.

ASSIGNABILITY. Lender may assign, pledge or otherwise transfer this Agreement or any of its rights and powers under this Agreement without notice, with all or any of the obligations owing to Lender by Borrower, and in such event the assignee shall have the same rights as if originally named herein in place of Lender. Borrower may not assign this Agreement or any benefit accruing to it hereunder without the express written consent of the Lender.

ORAL AGREEMENTS DISCLAIMER. This Agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.

GOVERNING LAW. This Agreement is governed by the laws of the state of New York except to the extent that federal law controls.

HEADING AND GENDER. The headings preceding text in this Agreement are for general convenience in identifying subject matter, but have no limiting impact on the text which follows any particular heading. All words used in this Agreement shall be construed to be of such gender or number as the circumstances require.

ATTORNEYS' FEES AND OTHER COSTS. If legal proceedings are instituted to enforce the terms of this Agreement, Borrower agrees to pay all costs of the Lender in connection therewith, including reasonable attorneys' fees, to the extent permitted by law.

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ADDITIONAL PROVISIONS. The Commitment Letter from Lender to Borrower dated April 29, 2009, and its terms and conditions, together with the Line of Credit Agreement dated June 5, 2009, are incorporated by reference and made a part hereof with the same force and effect as if it were set forth herein. In the event that any of the provisions contained in the Commitment Letter or the Line of Credit Agreement conflict in whole or in part with the provisions contained in this Commercial Line of Credit Agreement and Note, the provisions contained in the Commitment Letter and Line of Credit Agreement shall control.

WAIVER OF JURY TRIAL. All parties to this Agreement hereby knowingly and voluntarily waive, to the fullest extent permitted by law, any right to trial by jury of any dispute, whether in contract, tort, or otherwise, arising out of, in connection with, related to, or incidental to the relationship established between them in this Agreement or any other instrument, document or agreement executed or delivered in connection with this Agreement or the related transactions.

By signing this Agreement, Borrower acknowledges reading, understanding, and agreeing to all its provisions and receipt hereof. Corning Natural Gas Corporation

__________________________________________

By: Michael German Date
Its: President

LENDER: Community Bank N.A.

__________________________________________

By: Thomas Beers Date
Its: Commercial Loan Officer/Vice President

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COMMERCIAL SECURITY AGREEMENT	Community Bank N.A.
	331 West Pulteney Street
	Corning, New York 14830
	(607)937-5471

LOAN NUMBER	AGREEMENT DATE
C-10-03-088174	March 31, 2010

BORROWER INFORMATION

Coming Natural Gas Corporation

330 William Street, P. 0. Box 58

Corning, NY 14830-0058

COLLATERAL OWNER INFORMATION

Corning Natural Gas Corporation

330 William Street, P. 0. Box 58

Corning, NY 14830-0058

AGREEMENT. For purposes of this document, the term "Agreement" is used when reference is made to this Commercial Security Agreement.

LENDER. "Lender" means Community Bank N.A. whose address is 331 West Pulteney Street, Corning, New York 14830 , its successors and assigns.

DEBTOR. For purposes of this Agreement, the term "Debtor" refers to any party who has an interest in the Collateral defined in the "DESCRIPTION OF COLLATERAL" provision below. The Debtor includes each party (Borrower) identified above. Throughout this Agreement, references to Debtor are to be construed as specifically defined by Article 9 (or equivalent) of the Uniform Commercial Code.

OBLIGOR. For purposes of this Agreement, the term "Obligor" refers to any party, with respect to an obligation secured by a security interest in the collateral, that: (i) owes payment or other performance of the obligation, or (ii) is otherwise accountable in whole or in part for payment or other performance of the obligation. Throughout this Agreement, references to Obligor are to be construed as specifically defined by Article 9 (or equivalent) of the Uniform Commercial Code.

SECURITY INTEREST GRANT. Debtor, in consideration of the Obligations to Lender, as defined in the "OBLIGATIONS" provision below, hereby agrees to all of the terms of this Agreement and further hereby specifically grants Lender a continuing security interest in the collateral described in the "DESCRIPTION OF COLLATERAL" provision below. Debtor further grants Lender a security interest in the proceeds of said collateral; the proceeds of hazard insurance and eminent domain or condemnation awards involving the collateral; all products of, and accessions to, such collateral or interests therein; any and all deposits or other sums at any time credited by or due from Lender to Debtor; and any and all instruments, documents, policies, and certificates of insurance, securities, goods, accounts receivable, choses in action, chattel paper, cash, property, and the proceeds thereof (whether or not the same are Collateral or proceeds thereof hereunder), owned by Debtor or in which Debtor has an i nterest which are now or at any time hereafter in possession or control of Lender, or in transit by mail or carrier to or from Lender, or in possession of any third party acting on Lender's behalf, without regard to whether Lender received the same in pledge, for safekeeping, as agent or otherwise, or whether Lender has conditionally released the same. Debtor's grant of a continuing security interest in the foregoing described collateral secures to Lender the payment of all loans, advances, and extensions of credit from Lender to Borrower, including all renewals and extensions thereof, and any and all obligations of every kind whatsoever, whether heretofore, now, or hereafter existing or arising between Lender and Borrower and howsoever incurred or evidenced, whether primary, secondary, contingent, or otherwise.

OBLIGATIONS. As used in this Agreement, the term "Obligations" shall mean any and all of Obligor's or Debtor's obligations to Lender, whether they arise under this Agreement or the note, loan agreement, guaranty, or other evidence of debt executed in connection with this Agreement, or under any other mortgage, trust deed, deed of trust, security deed, security agreement, note, lease, instrument, contract, document, or other similar writing heretofore, now, or hereafter executed by the Obligor or Debtor to Lender, including any renewals, extensions and modifications thereof, and including oral agreements and obligations arising by operation of law. The Obligations shall also include all expenditures that Lender may make under the terms of this Agreement or for the benefit of Obligor or Debtor, all interest, costs, expenses, and attorneys' fees accruing to or incurred by Lender in enforcing the Obligations or in the protection, maintenance, preservation, or liquidation of the Collateral, and any of the foregoing that may arise after the filing of any petition by or against Obligor or Debtor under the Bankruptcy Code, irrespective of whether the obligations do not accrue because of the automatic stay under Bankruptcy Code Section 362 or otherwise.

DESCRIPTION OF COLLATERAL. The collateral covered by this Agreement (the "Collateral") is all of the Debtor's property described below which the Debtor now owns or may hereafter acquire or create and all proceeds and products thereof, whether tangible or intangible, including proceeds of insurance and which may include, but shall not be limited to, any items listed on any schedule or list attached hereto. The Collateral described has the meanings contained in the Uniform Commercial Code as adopted in the state where the Lender is located.

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Deposit Accounts. "Deposit Accounts" shall consist of all demand, time, savings, passbook, and similar deposit accounts more particularly described below, which are held by the Debtor in Lender's institution, or maintained in another bank ("Bank") and for which Debtor, Lender and Bank have entered into a duly executed Control Agreement (as used herein, the term "Bank" means an organization that is engaged in the business of banking, and includes banks, savings banks, savings and loan associations, credit unions, and trust companies). Deposit Accounts are not a type of qualifying tax-deferred account as defined in the Internal Revenue Code, as currently in effect and amended from time to time (e.g. Individual Retirement Arrangements, qualified retirement plans, Health Savings Accounts, etc.).

DEPOSIT ACCOUNTS DESCRIPTION: Rabbi Trust Account, Community Bank, N. A. # 89151111309

WARRANTIES. The Debtor warrants the following: Debtor has or will acquire free and clear title to all of the Collateral, unless otherwise provided herein; the security interest granted to the Lender shall be a first security interest, and the Debtor will defend same to the Lender against the claims and demands of all persons; the Debtor will fully cooperate in placing or maintaining Lender's lien or security interest; the Debtor agrees not to allow or permit any lien, security interest, adverse claim, charge, or encumbrance of any kind against the collateral or any part thereof, without the Lender's prior written consent; all of the Collateral is located in the state of the Debtor's address specified at the beginning of this Agreement, unless otherwise certified to and agreed to by the Lender, or, alternatively, is in possession of the Lender; the Debtor will not remove or change the location of any Collateral without the Lender's prior written consent; the Debtor wi ll use the Collateral only in the conduct of its own business, in a careful and proper manner; the Debtor will not use the Collateral or permit it to be used for any unlawful purpose; except as otherwise provided in this Agreement with respect to inventory, Debtor will not, without the Lender's prior written consent, sell, assign, transfer, lease, charter, encumber, hypothecate, or dispose of the Collateral, or any part thereof, or any interest therein, nor will Debtor offer to sell, assign, transfer, lease, charter, encumber, hypothecate, or dispose of the Collateral, or any part thereof, or any interest therein; the Debtor will not conduct business under any name other than that given at the beginning of this Agreement, nor change, nor reorganize the type of business entity as described, except upon the prior written approval of the Lender, in which event the Debtor agrees to execute any documentation of whatsoever character or nature demanded by the Lender for filing or recording, at the Debtor's expense, before such change occurs; the information regarding Debtor's state of organization or formation as set forth in the Resolution is correct, and Debtor further warrants that Debtor will not change Debtor's state of organization or formation without Lender's prior written consent and will assist Lender with any changes to any documents, filings, or other records resulting or required therefrom; the Debtor will keep all records of account, documents, evidence of title, and all other documentation regarding its business and the Collateral at the address specified at the beginning of this Agreement, unless notice thereof is given to the Lender at least ten (10) days prior to the change of any address for the keeping of such records; the Debtor will, at all times, maintain the Collateral in good condition and repair and will not sell or remove same except as to inventory in the ordinary course of business; the Debtor is a legally created business entity, as described before, and it has the pow er, and the person signing is duly authorized, to enter into this Agreement; the execution of this Agreement will not create any breach of any provision of the Debtor's organizational documents (Articles of Incorporation and By-Laws if the Debtor is a corporation, Articles of Organization and Operating Agreement if the Debtor is a limited liability company, or Certificate of Limited Partnership (if applicable) or Partnership Agreement if the Debtor is a partnership), or any other agreement to which the Debtor is or may become a party; all financial information and statements delivered by the Debtor to the Lender to obtain loans and extensions of credit are true and correct and are prepared in accordance with generally accepted accounting principles; there has been no material adverse change in the financial condition of the Debtor since it last submitted any financial information to the Lender; there are no actions or proceedings, including set-off or counterclaim, which are threatened or pending against the Debtor which may result in any material adverse change in the Debtor's financial condition or which might materially affect any of the Debtor's assets; and the Debtor has duly filed all federal, state, municipal, and other governmental tax returns, and has obtained all licenses, permits, and the like which the Debtor is required by law to file or obtain, and all such taxes and fees for such licenses and permits required to be paid, have been paid in full.

INSURANCE. The Debtor agrees that it will, at its own expense, fully insure the Collateral against all loss or damage for any risk of whatsoever nature in such amounts, with such companies, and under such policies as shall be satisfactory to the Lender. All policies shall expressly provide that the Lender shall be the loss payee or, alternatively, if requested by Lender, mortgagee. The Lender is granted a security interest in the proceeds of such insurance and may apply such proceeds as it may receive toward the payment of the Obligations, whether or not due, in such order as the Lender may in its sole discretion determine. The Debtor agrees to maintain, at its own expense, public liability and property damage insurance upon all its other property, to provide such policies in such form as the Lender may approve, and to furnish the Lender with copies of other evidence of such policies and evidence of the payments of the premiums thereon. All policies of insurance shall provide for a minimum 10 days' written notice of cancellation to Lender. At the request of Lender, such policies of insurance shall be delivered to and held by Lender. Debtor agrees that Lender is authorized to act as attorney for Debtor in obtaining, adjusting, settling, and canceling such insurance and endorsing any drafts or instruments issued or connected with such insurance. Debtor specifically authorizes Lender to disclose information obtained in conjunction with this Agreement and from policies of insurance to prospective insurers of the Collateral. If the Debtor at any time fails to obtain or to maintain any of the insurance required above or pay any premium in whole or in part relating thereto, the Lender, without waiving any default hereunder, may make such payment or obtain such policies as the Lender, in its sole discretion, deems advisable to protect the Debtor's property. All costs incurred by the Lender, including reasonable attorneys' fees, court costs, expenses, and other charges thereby incur red, shall become a part of the Obligations and shall be payable on demand.

DEPOSIT ACCOUNTS. Debtor shall immediately deliver to Lender all certificated certificates of deposit included in the Collateral. Negotiable certificates of deposit shall be endorsed to the order of Lender. Debtor shall execute any and all other documents necessary to provide an appropriate security interest in any account with Lender. With respect to deposit accounts held in another Bank, Debtor shall deliver to Lender a control agreement ("Control Agreement") in a form and content satisfactory to Lender assigning the Debtor's rights in the deposit account to Lender, and the Bank shall acknowledge receipt of the Control Agreement. The Control Agreement must be in a form that provides that the Bank will comply with any instruction originated by the Lender directing disposition of funds in the Deposit Account without further

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consent of the Debtor. The form of Control Agreement must be in a form satisfactory to the Lender, and must provide that said Bank will comply with a directive originated by the Lender and will not comply with any directive of the Debtor without the additional written consent of the Lender.

Debtor agrees that Lender may, at any time (whether before or after default) and in its sole discretion, surrender for payment and obtain payment of any portion of the Collateral, whether such have matured or the exercise of the Lender's rights results in a loss of interest or principal or other penalty on such deposits, and, in connection therewith, cause payments to be made directly to Lender.

Any and all replacement or renewal certificates and other benefits and proceeds related to the Collateral that are received by the Debtor shall be held by Debtor in trust for Lender and immediately delivered to Lender to be held as part of the Collateral.

Without limiting the foregoing, it is specifically understood and agreed that Lender shall have no responsibility for ascertaining any maturities or similar matters relating to any of the Collateral or for informing Debtor with respect to any such matters (irrespective of whether lender actually has, or may be deemed to have, knowledge thereof).

ADDITIONAL COLLATERAL. In the event that Lender should, at any time, determine that the Collateral or Lender's security interest in the Collateral is impaired, insufficient, or has declined or may decline in value, or if Lender should deem that payment of the Obligations is insecure, time being of the very essence, then Lender may require, and Debtor agrees to furnish, additional Collateral that is satisfactory to Lender. Lender's request for additional collateral may be oral or in writing delivered by United States mail addressed to Debtor and shall not affect any other subsequent right of the Lender to request additional Collateral.

FINANCING STATEMENT(S) AND LIEN PERFECTION. Lender is authorized to file a conforming financing statement or statements to perfect its security interest in the Collateral, as provided in Revised Article 9, Uniform Commercial Code - Secured Transactions. Debtor agrees to provide such information, supplements, and other documents as Lender may from time to time require to supplement or amend such financing statement filings, in order to comply with applicable state or federal law and to preserve and protect the Lender's rights in the Collateral. The Debtor further grants the Lender a power of attorney to execute any and all documents necessary for the Lender to perfect or maintain perfection of its security interest in the Collateral, and to change or correct any error on any financing statement or any other document necessary for proper placement of a lien on any Collateral which is subject to this Agreement.

LANDLORD'S WAIVER. Upon request, Debtor shall furnish to Lender, in a form and upon such terms as are acceptable to Lender, a landlord's waiver of all liens with respect to any Collateral covered by this Agreement that is or may be located upon leased premises.

RELATIONSHIP TO OTHER AGREEMENTS. This Agreement and the security interests (and pledges and assignments, as applicable) herein granted are in addition to (and not in substitution, novation or discharge of) any and all prior or contemporaneous security agreements, security interest, pledges, assignments, mortgages, liens, rights, titles, or other interests in favor of Lender or assigned to Lender by others in connection with the Obligations. All rights and remedies of Lender in all such agreements are cumulative.

TAXES, LIENS, ETC. The Debtor agrees to pay all taxes, levies, judgments, assessments, and charges of any nature whatsoever relating to the Collateral or to the Debtor's business. If the Debtor fails to pay such taxes or other charges, the Lender, at its sole discretion, may pay such charges on behalf of the Debtor; and all sums so dispensed by the Lender, including reasonable attorneys' fees, court costs, expenses, and other charges relating thereto, shall become a part of the Obligations and shall be payable on demand.

ENVIRONMENTAL HAZARDS. Debtor certifies that as to any real estate which has been, is now, or will be in the future owned or occupied by Debtor, that such real estate has not in the past, nor will now or in the future be allowed in any manner to be exposed to or contain hazardous or environmentally harmful substances as may be defined or regulated by any state or federal law or regulation which impacts, in any way, such substances, except to the extent the existence of such substances has been presently disclosed in writing to Lender, and Debtor will immediately notify Lender in writing of any assertion made by any party to the contrary. Debtor indemnifies and holds Lender and Lender's directors, officers, employees, and agents harmless from any liability or expense of whatsoever nature, including reasonable attorneys' fees, incurred directly or indirectly as a result of Debtor's involvement with hazardous or environmentally harmful substances as may be defined or regula ted as such under any state or federal law or regulation.

PROTECTION OF COLLATERAL. Debtor agrees that Lender may, at Lender's sole option, whether before or after any event of default, and without prior notice to Debtor, take the following actions to protect Lender's interest in the Collateral: (a) pay for the maintenance, preservation, repair, improvement, or testing of the Collateral; (b) pay any filing, recording, registration, licensing, certification, or other fees and charges related to the Collateral; or (c) take any other action to preserve and protect the Collateral or Lender's rights and remedies under this Agreement, as Lender may deem necessary or appropriate from time to time. Debtor agrees that Lender is not obligated and has no duty whatsoever to take the foregoing actions. Debtor further agrees to reimburse Lender promptly upon demand for any payment made or any expenses incurred by Lender pursuant to this authorization. Payments and expenditures made by Lender under this authorization shall constitute addition al Obligations, shall be secured by this Agreement, and shall bear interest thereon from the date incurred at the maximum rate of interest, including any default rate, if one is provided, as set forth in the notes secured by this obligation.

INFORMATION AND REPORTING. The Debtor agrees to supply to the Lender such financial and other information concerning its affairs and the status of any of its assets as the Lender, from time to time, may reasonably request. The Debtor further agrees to permit the Lender, its employees, and agents, to have access to the Collateral for the purpose of inspecting it, together with all of the Debtor's other physical assets, if any, and to permit the Lender, from time to time, to verify Accounts as well as to inspect, copy, and to examine the books, records, and files of the Debtor.

CROSS-COLLATERALIZATION. Obligor and Debtor agree that any security interest provided in Collateral under this Agreement or any collateral provided in connection with any and all other indebtedness of Obligor or Debtor to Lender, whether or not such indebtedness is

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related by class or claim and whether or not contemplated by the parties at the time of executing each evidence of indebtedness, shall act as collateral for all said indebtedness. This cross-collateralization provision shall not apply to any Collateral that is/are household goods or a principal dwelling.

CROSS-DEFAULT.Any default of the Obligor or Debtor in the terms of any obligations to Lender shall constitute a default under this Agreement.

DEFAULT.The occurrence of any of the following events shall constitute a default of this Agreement: (a) the non-payment, when due (whether by acceleration of maturity or otherwise), of any amount payable on any of the Obligations or any extension or renewal thereof; (b) the failure to perform any agreement of the Obligor or Debtor contained herein or in any other agreement Obligor or Debtor has or may have with Lender; (c) the publication of any statement, representation, or warranty, whether written or oral, by the Obligor or Debtor to the Lender, which at any time is untrue in any respect as of the date made; (d) the condition that any Obligor or Debtor becomes insolvent or unable to pay debts as they mature, or makes an assignment for the benefit of the Obligor's or Debtor's creditors, or conveys substantially all of its assets, or in the event of any proceedings instituted by or against a ny Obligor or Debtor alleging that such Obligor or Debtor is insolvent or unable to pay debts as they mature (failure to pay being conclusive evidence of inability to pay); (e) Debtor or Obligor makes application for appointment of a receiver or any other legal custodian, or in the event that a petition of any kind is filed under the Federal Bankruptcy Code by or against such Obligor or Debtor and the resulting proceeding is not discharged within thirty days after filing; (f) the entry of any judgment against any Obligor or Debtor, or the issue of any order of attachment, execution, sequestration, claim and delivery, or other order in the nature of a writ levied against the Collateral; (g) the death of any Obligor or Debtor who is a natural person, or of any partner of the Obligor or Debtor which is a partnership; (h) the dissolution, liquidation, termination of existence, business failure, merger, and consolidation or transfer of a substantial part of the property of any Obligor or Debtor which is a corpora tion or partnership; (i) the Collateral or any part of the Collateral declines in value in excess of normal wear, tear, and depreciation or becomes, in the judgment of Lender, impaired, unsatisfactory, or insufficient in character or value, including but not limited to the filing of a competing financing statement; breach of warranty that the Debtor is the owner of the Collateral free and clear of any encumbrances (other than those encumbrances disclosed by Debtor or otherwise made known to Lender, and which were acceptable to Lender at the time); sale of the Collateral (except in the ordinary course of business) without Lender's express written consent; failure to keep the Collateral insured as provided herein; failure to allow Lender to inspect the Collateral upon demand or at reasonable time; failure to make prompt payment of taxes on the Collateral; loss, theft, substantial damage, or destruction of the Collateral; and, when Collateral includes inventory, accounts, chattel paper, or instruments, fail ure of account debtors to pay their obligations in due course; or (j) the Lender in good faith, believes the Obligor's ability to repay the Obligor's indebtedness secured by this Agreement, any Collateral, or the Lender's ability to resort to any Collateral, is or soon will be impaired, time being of the very essence.

REMEDY.Upon the occurrence of an event of default, Lender, at its option, shall be entitled to exercise any one or more of the remedies described in this Agreement, in all documents evidencing the Obligations, in any other agreements executed by or delivered by Obligor or Debtor for benefit of Lender, in any third-party security agreement, mortgage, pledge, or guaranty relating to the Obligations, in the Uniform Commercial Code of the state in which Lender is located, and all remedies at law and equity, all of which shall be deemed cumulative. The Obligor agrees that, whenever a default exists, all Obligations may (notwithstanding any provision in any other agreement), at the sole option and discretion of the Lender and without demand or notice of any kind, be declared, and thereupon immediately shall become due and payable; and the Lender may exercise, from time to time, any rights and remedies, inc luding the right to immediate possession of the Collateral, available to it under applicable law. The Debtor agrees, in the case of default, to assemble, at its own expense, all Collateral at a convenient place acceptable to the Lender. The Lender shall, in the event of any default, have the right to take possession of and remove the Collateral, with or without process of law, and in doing so, may peacefully enter any premises where the Collateral may be located for such purpose. Debtor waives any right that Debtor may have, in such instance, to a judicial hearing prior to such retaking. The Lender shall have the right to hold any property then in or upon said Collateral at the time of repossession not covered by the security agreement until return is demanded in writing by Debtor. Obligor and Debtor agree to pay all reasonable costs of the Lender in connection with the collecting of the Obligations and enforcement of any rights connected with retaking, holding, testing, repairing, improving, selling, leasin g, or disposing of the Collateral, or like expenses. These expenses, together with interest thereon from the date incurred until paid by Obligor or Debtor at the maximum post-default rate stated in the notes secured hereby, which Obligor and Debtor agree to pay, shall constitute additional Obligations and shall be secured by and entitled to the benefits of this Agreement. The Lender may sell, lease, or otherwise dispose of the Collateral, by public or private proceedings, for cash or credit, without assumption of credit risk. Unless the Collateral is perishable or threatens to decline speedily in value or of a type customarily sold on a recognized market, Lender will send Debtor reasonable notice of the time and place of any public sale or of the time after which any private sale or other disposition will be made. Any notification of intended disposition of the Collateral by the Lender shall be deemed to be reasonable and proper if sent United States mail, postage prepaid, electronic mail, facsimile, ove rnight delivery or other commercially reasonable means to the Debtor at least ten (10) days before such disposition, and addressed to the Debtor either at the address shown herein or at any other address provided to Lender in writing for the purpose of providing notice. Proceeds received by Lender from disposition of the Collateral may be applied toward Lender's expenses and other obligations in such order or manner as Lender may elect. Debtor shall be entitled to any surplus if one results after lawful application of the proceeds. If the proceeds from a sale of the Collateral are insufficient to extinguish the Obligations of the Obligor hereunder, Obligor shall be liable for a deficiency. Lender shall have the right, whether before or after default, to collect and receipt for, compound, compromise, and settle, and give releases, discharges, and acquittances with respect to, any and all amounts owed by any person or entity with respect to the Collateral. Lender may remedy any default and may waive any de fault without waiving the default remedied and without waiving any other prior or subsequent default. The rights and remedies of the Lender are cumulative, and the exercise of any one or more of the rights or remedies shall not be deemed an election of rights or remedies or a waiver of any other right or remedy.

FUTURE ADVANCES AND AFTER-ACQUIRED PROPERTY. Future advances may be made at any time by the Lender under this Agreement to the extent allowed by law. The security interest grant contained in this Agreement also applies to any Collateral of the type(s)