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: May 07, 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 May 7, 2010, Corning Natural Gas Corporation ("Corning") entered agreements with Community Bank N.A. ("Community Bank") pursuant to a Term Loan Agreement, Commercial Promissory Note and Commercial Security Agreements (together, the "Note") in the amount of $1,050,000. The Note will be payable monthly for five years at the fixed interest rate of 6.250% per annum with a balloon payment due at the end of the period in an amount equal to the then unpaid principal and interest. The purpose of this Note is to fund construction projects in our new franchise area located in Virgil, New York.

Any amounts due under the Note will become immediately due and payable in the event of default, as defined in the Note, and are secured by agreements dated March 31, 2010. The Note also contains customary representations, warranties and covenants made by the parties.

The foregoing description of the Note is not complete and is qualified in its entirety by the full and complete terms, is attached as Exhibits 10.2, 10.3, 10.4 and 10.5 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		Term Loan Agreement by and between Corning Natural Gas Corporation and Community Bank N.A.
	10.3		Commercial Promissory Note by and between Corning Natural Gas Corporation and Community Bank N.A.
	10.4		Commercial Security Agreement by and between Corning Natural Gas Corporation and Community Bank N.A.
	10.5		Commercial Security Agreement 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: April 07, 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		Term Loan Agreement by and between Corning Natural Gas Corporation and Community Bank N.A.
10.3		Commercial Promissory Note by and between Corning Natural Gas Corporation and Community Bank N.A.
10.4		Commercial Security Agreement by and between Corning Natural Gas Corporation and Community Bank N.A.
10.5		Commercial Security Agreement by and between Corning Natural Gas Corporation and Community Bank N.A.

　

EX-10

7279 Seneca Road, North, Hornell, NY 14843 Phone: 607-324-0223

March 11, 2010

Michael German, President

Corning Natural Gas Corp.

330 West William Street

Corning, NY 14830

Dear Mr. German:

I am pleased to inform you that Community Bank, N.A. has approved the request for a term loan (the "Loan"). This approval is subject to the following terms and conditions:

LOAN TERMS

BORROWER: Corning Natural Gas Corp.

AMOUNT OF LOAN: Up to $1,050,000.00.

USE OF PROCEEDS:

The Loan will be used to refinance the construction of a gas pipeline into the Village of Virgil and the Greek Peak Resort.

INTEREST RATE:

Interest will be charged on the outstanding principal balance at a fixed rate of six and one-quarter percent (6.25%).

LOAN PAYMENTS:

Monthly loan payments are to be established for principal and interest based on a ten (10) year amortization schedule

MATURITY:

The maturity of the Loan will be five (5) years from the date of closing ("Maturity Date").

LOAN FEE:

A non-refundable commitment fee in the amount equal to one percent (1%) of the Loan amount is due upon acceptance of this letter.

LATE CHARGE:

In the event that any payment shall be past due in excess of 10 days, a late charge equal to 5% of the total payment or $25.00, whichever is greater, shall be imposed.

COLLATERAL:

With respect to the Loan, the Bank will require:

1. A first security interest on any purchased equipment, accounts, inventory, contract rights and the franchise rights associated with the Virgil gas pipeline project.
2. A first security interest in Rabbi Trust Account #89151111309.

GUARANTEES:

No Guaranty of the Loan is required to be furnished by the borrower.

OTHER:

The following items need to be addressed prior to closing of the Loan:

1. Documentation of an equity injection of $350,000.00 by Michael German concurrent with this loan closing.
2. Estoppel letters from M&T Bank and Great West to ensure against conflicts with their term loans arising from closing upon this loan.
3. Confirmation by M&T that the proposed repayment of the $500,000 demand note by year-end 2010 is acceptable to them.
4. Confirmation of PSC approval of the long-term debt of which this loan is a part.

RELATED BORROWING:

This commitment is contingent upon the existing $8,000,000 operating line of credit being reduced to $7,000,000.

PREPAYMENT:

There shall be no prepayment charge unless such prepayment is made, directly or indirectly, as a part of, or in anticipation of, any refunding operation involving the incurring of indebtedness by Borrower or your subsidiary or affiliate to any financial institution other than the Bank, in which case the prepayment charge shall be as follows:

Year of Loan Amount Prepaid

1. 3%
2. 2%

GENERAL REQUIREMENTS

FINANCIAL STATEMENTS/REPORTING REQUIREMENTS:

Subsequent to the consummation of this transaction and for so long as any indebtedness hereunder 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. 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.

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.

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.

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.

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.

FINANCIAL COVENENTS:

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 9/30/10 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 9/30/10 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 income or loss + depr. and amort. + int. - div. and dist.)

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

LOAN DOCUMENTS:

A new Loan Agreement will be required at closing.

MISCELLANEOUS

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 26, 2010.

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.

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.

FURTHER ACTIONS:

Borrower agrees to execute and/or deliver to us further documentation, covenants, and items as our counsel or we may reasonably require or as may become necessary to effect the consummation of this transaction.

CONTINGENCY:

This commitment is contingent upon there being no detrimental or adverse change in the financial condition of the Borrower.

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

TERM LOAN AGREEMENT

This Agreement dated as of the 31st day of March, 2010 by and between Community Bank, N.A., a national banking association, having its principal office and place of business at 240 South Hamilton Street, Painted Post, New York 14870 ("Bank") and Corning Natural Gas Corporation, a New York business corporation organized and existing under the laws of New York State having its principal office and place of business at 330 West William Street, Corning, New York ("Borrower").

WITNESSETH:

WHEREAS, the parties hereto desire to arrange for a term loan in the amount of $1,050,000.00 from Bank to Borrower subject to the terms and conditions hereinafter set forth;

NOW, THEREFORE, it is agreed as follows:

1. Definitions. The following terms shall have the following meanings in this Agreement:

1. Accounting Terms. All accounting terms not specifically defined in the Agreement shall be construed in accordance with generally accepted accounting principles ("GAAP").
2. Loan Documents. The Commitment Letter from the Bank to the Borrower dated March 11, 2010, this Agreement, 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 (together, the "Security Agreement"), and all documents herein or therein defined as Loan Documents, any and all corporate resolutions and consents, and other documents delivered at or in connection with the closing of the Loan by Borrower, and any and all future modifications, renewals, extensions, restatements or novations of any Loan Document.

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

1. 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.
0. 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.
1. 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.
2. 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.

2. Amount and Terms of Credit. Subject to all of the terms and conditions of this Agreement, Bank agrees to lend to Borrower, and Borrower agrees to borrow from Bank, the principal sum of $1,050,000.00 (the "Term Loan"). The Term Loan shall be evidenced by Borrower's Promissory Note (the "Term Note") substantially in the form set forth in Exhibit "A" hereto annexed, and shall bear interest and be repayable in accordance with the terms and conditions set forth therein.
3. Use of Loan. Borrowers shall use the proceeds of the Term Loan to refinance the construction of a gas pipeline into the Village of Virgil and the property of Peak Resorts, Inc. located in the Town of Virgil, Cortland County, New York.

4. Prepayments. There shall be no prepayment charge unless such prepayment is made, directly or indirectly, as a part of, or in anticipation of, any refunding operation involving the incurring of indebtedness by Borrower or your subsidiary or affiliate to any financial institution other than the Bank, in which case the prepayment charge shall be as follows:

Year of Loan Amount Prepaid

1 3%

2 2%

5. Conditions of Lending. Bank shall have no obligation to make the Term Loan pursuant to this Agreement except upon fulfillment of each of the following conditions:

1. All instruments, certificates and agreements to be furnished to Bank hereunder shall be of such form and content as Bank shall reasonably require, and Borrower shall furnish such consents, authorizations and other instruments and agreements as Bank shall reasonably deem necessary to effectuate the intent of this Agreement.
2. No event of default specified in Section 9 hereof and no event which with notice or lapse of time or both would become such an event of default shall have occurred and be continuing; and the representations and warranties of Borrower in Section 6 hereof shall be true on and as of the date of the making of the Term Loan with the same force and effect as if made on and as of such date.
0. Borrower shall have taken appropriate corporate action to authorize the execution and delivery of this Agreement and the taking of all action called for by this Agreement, and Borrower shall have furnished to Bank certified copies of all such corporate action and such other related documents as Bank may reasonably request.
0. Borrower shall have executed and delivered to Bank the Term Note.

(e) As further collateral security for the payment and performance of all of Borrower's obligations under this Agreement, the Term Note and any other obligations of Borrower to Bank now existing or hereafter arising, Borrower shall have executed and

delivered to Bank the new restated Security Agreement referred to above, in form and content satisfactory to Bank, granting to Bank a first security interest in (i) all interests of the Borrower in fixtures, equipment and inventory used by the Borrower in the exercise of its gas distribution franchise in the Town of Virgil, Cortland County, New York pursuant to an Order Granting A Certificate Of Public Convenience And Necessity issued by the New York State Public Service Commission on June 18, 2009 in Case Number 09-G- 0252; and (ii) the Rabbi Trust.

1. Bank shall have received evidence satisfactory to it that the insurance required by Section 7(d) hereof is in effect with endorsements designating Bank as loss payee and a notice of cancellation provision satisfactory to Bank.
2. Bank shall have received documentation of an injection of equity into the Borrower by Michael I. German of cash in the amount of not less than $350,000.00 concurrently with the Loan closing.
3. Bank shall have received documentary evidence of timely filing by the Borrower of its acceptance of the terms of approval by the Public Service Commission of the incursion by the Borrower of long-term debt [PSC Case 09-G-0488; Order dated September 17, 2009, page 5, paragraph number 3].
4. Bank shall have received an estoppel letter from Great-West Life & Annuity Insurance Company acknowledging

• that it asserts no claim adverse to the security interests in the assets of the Borrower held by and to be conferred upon the Bank pursuant to this Agreement; and
• that the execution and delivery of the Loan Documents by the Borrower and the performance of its obligations thereunder do not and will not constitute a violation of any term, covenant, or condition of any agreement between the Borrower and Great-West Life & Annuity Insurance Company.

(j) Bank shall have received an estoppel letter from Manufacturers and Traders Trust Company acknowledging

• that it asserts no claim adverse to the security interests in the assets of the Borrower held by and to be conferred upon the Bank pursuant to this Agreement; and
• that the execution and delivery of the Loan Documents by the Borrower and the performance of its obligations thereunder do not and will not constitute a violation of any term, covenant, or condition of any agreement between the Borrower and Manufacturers and Traders Trust Company.

(k) Bank shall have received the opinion of Borrower's counsel, in form and content satisfactory to the Bank, opining as to the due authorization and execution of the Loan Documents, the compliance of the Loan Documents with the terms of the above-referenced PSC Order dated September 17, 2009, and related matters.

6. Representations and Warranties. Borrower makes the following representations and warranties to Bank:

1. Borrower is duly formed, validly existing and in good standing under the laws of New York State.
2. Borrower has the requisite power and authority to transact the business in which it is engaged and is duly licensed or qualified and in good standing in each jurisdiction in which it is required to be so licensed or qualified.
3. Borrower has full power and authority to enter into this Agreement, to borrow hereunder, to execute and deliver the Loan Documents and to take all action required of it under this Agreement, all of which has been duly authorized by all proper and necessary corporate action.
4. The Loan Documents, when executed and delivered by Borrower pursuant hereto, will constitute legal, valid and binding obligations enforceable in accordance with their respective terms.

(e) Except as set forth on Schedule 6.e hereto attached, no consent, approval or authorization of, or registration, declaration or filing with, any governmental body or authority or other person or entity is required in connection with the valid execution,

delivery or performance of any Loan Document or in connection with any other transactions contemplated hereby.

1. Except as set forth on Schedule 6.f hereto attached, there are no actions, suits, or proceedings pending or threatened against Borrower hereunder.
2. Borrower is not in default under any indenture, mortgage, deed of trust, agreement, or other instrument to which the Borrower is a party or by which the property of the Borrower may be bound. The execution and delivery of the Loan Documents and the consummation of the transactions herein and therein contemplated, and compliance with the provisions hereof or thereof will not violate any law or regulation, or any order or decree of any court or governmental instrumentality, and will not conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, agreement or other instrument to which Borrower is a party, or by which the property of Borrower is bound, or, will not violate any provision of the Certificate of Incorporation or bylaws of Borrower.

1. Borrower has duly filed all tax returns required to be filed in any jurisdiction, if any, including, without limitation, all federal income tax returns, and has duly paid all taxes shown as being due thereon. All other taxes, assessments and governmental charges on the assets and income of Borrower which are due and payable, if any, have been paid.
2. To its best knowledge Borrower has duly complied with, and its business, operations, assets, equipment, property, leaseholds, or other facilities are in compliance with, the provisions of all applicable federal, state, and local environmental, health, and safety laws, codes and ordinances, and all rules and regulations promulgated thereunder in all material respects.

7. Affirmative Covenants. During the term of this Agreement and so long as the Term Note or any other indebtedness created pursuant to this Agreement shall remain unpaid:

(a) Borrower shall make payments when due of principal and interest on all indebtedness incurred by it pursuant to this Agreement in the manner set forth in the Loan Documents.

1. Borrower shall 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 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; (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.
2. Borrower shall during the term of the Term Loan promptly pay all of its taxes, assessments and other governmental charges prior to the date on which penalties are attached thereto and make all required withholding and other tax deposits.
3. Borrower shall keep all of its property that is insurable insured at all times with responsible insurance carriers against fire, theft and other hazards in such manner and to the extent required by the provisions of the Security Agreement, and be adequately insured at all times with responsible insurance carriers against liability on account of damage to persons or property and under all applicable workers' compensation laws.
4. Borrower shall maintain itself in existence and good standing in the State of New York.

(f) Borrower shall permit any persons designated by Bank at such times as Bank may reasonably request to visit and inspect any of the properties, books and financial records of the Borrower and to make extracts from and copies of such books and financial records.

8. Negative Covenants. During the term of this Agreement and so long as the Term Note or any other indebtedness of the Borrower created pursuant to this Agreement shall remain unpaid:

(a) Borrower shall not change its name or the general character of its business as it is presently conducted.

(b) Borrower shall not (i) convey, lease or sell all or any substantial portion of its property, assets or business to any other person, firm or corporation, or sell and lease back any substantial portion of its property or assets, except that it may sell the stock or assets of one or more of its subsidiaries, or (ii) enter into a merger transaction with any other entity without the prior written consent of the Bank having first been obtained, which consent shall not unreasonably be withheld.

.

1. Borrower shall not become a guarantor, surety or otherwise liable for the debts or other obligations of any other person, firm or corporation, other than with respect to debts or obligations owing to Bank.
2. Borrower shall not lend to, invest in, or otherwise advance funds to any person, firm or corporation.

9. Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default:

1. Nonpayment, within fifteen (15) days after its due date, of any installment of principal of, or interest on, the Term Note, or nonperformance upon any other obligation of Borrower under the Loan Documents which, following written notice of default furnished by the Lender to the Borrower, remains uncured after the later of the expiration of any grace period thereto relating or ten (10) days; or
2. Any Event of Default as defined in the Security Agreement or any other Loan Document; or

(c) If the subject matter of any certificate, statement, representation, warranty or audit heretofore or hereafter furnished by or on behalf of Borrower pursuant to, in inducement of, or in connection with this Agreement (including, without limitation, the representations and warranties contained herein) shall prove to be untrue or misleading in any material respect or to have omitted any substantial contingent or unliquidated liability or claim against Borrower; or

1. There occurs any substantial change in the ownership of the Borrower, by merger with another entity or otherwise, without the prior written consent of the Lender having first been obtained.
2. The occurrence of any default or event of default that, under any other loan agreement, note, indenture, mortgage, security agreement or other agreement evidencing or securing other indebtedness of Borrower or any subsidiary of Borrower to Bank, creates in Bank a right to require immediate payment in full of such indebtedness; or
3. Default by Borrower in the performance of the terms or conditions of any other agreement, whether now existing or hereafter arising relating to the indebtedness, with Bank; or
4. The Security Agreement shall at any time after execution and delivery and for any reason cease (i) to create or sustain a valid first security interest in and to the property purported to be subject to such Security Agreement; or (ii) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by Borrower or any party claiming under or through Borrower.

10. Rights of Bank on Default. Upon the occurrence of any of the Events of Default enumerated in Section 9 hereof, all obligations of Bank under this Agreement may be immediately terminated, and all indebtedness evidenced by the Term Note and any other indebtedness of Borrower to Bank not otherwise then due and payable or payable on demand shall immediately become due and payable, at the option of Bank. Further, upon the occurrence of an Event of Default, Borrower agrees to furnish promptly to Bank such security as Bank may reasonably request and to execute such agreements or documents deemed reasonably necessary by Bank to accomplish same. Borrower agrees that the foregoing rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which Bank may or would otherwise have at law or in equity, or by an instrument evidencing terms of deposit of any fund, or by an assignment or transfer of collateral or by any other instrument signed or assented to by Borrowe r.
11. Expenses. Borrower shall reimburse Bank promptly for all costs and expenses, including reasonable counsel fees, incurred by Bank in connection with this Agreement and any indebtedness created hereunder; and for costs and expenses, including reasonable counsel fees, of Bank incident to the enforcement of any provision of the Loan Documents.

12. Miscellaneous.

1. The Loan Documents together represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof; supersede all prior negotiations between the parties with respect to the subject matter hereof; cannot be amended, supplemented, modified or terminated orally (or by any course of conduct or usage of trade) and may be amended only by an agreement in writing duly executed by authorized officers of the parties hereto.
2. No course of dealing and no failure on the part of Bank to exercise and no delay by Bank in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Bank of any right or power hereunder preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies herein expressed are cumulative and not exclusive of any other right or remedy which Bank may have.
3. Any notice or demand to be given under any Loan Document shall be duly given and mailed by registered or certified mail to each of the parties below and shall be effective on the date of Mailing:

To Bank At: Community Bank, N.A.

ATTN: Commercial Banking Group 240 South Hamilton Street

Painted Post, NY 14870

To Borrower At: 330 West William Street

Corning, New York 14830

4. This Agreement and the acts and obligations of the parties hereunder shall be construed and interpreted in accordance with the laws of the State of New York. In the event of any inconsistency between the terms and conditions of this Agreement and terms and conditions of any agreement or document executed and delivered in connection herewith, the terms and conditions of the Security Agreement shall control in the first instance and the terms and conditions of this agreement shall control in the second instance to the extent not inconsistent with the terms and conditions of the Security Agreement.

1. 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.
2. 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 Term Note, or any matters whatsoever arising out of or in connection with this Agreement, the Term Note, or any of the Loan Documents. The foregoing waiver shall survive the termination or expiration of this Agreement.

(g) This Agreement and all documents executed pursuant hereto are binding upon and for the benefit of the respective successors and assignees of the parties.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized officers as of the day and year first above written.

COMMUNITY BANK, N.A.

By: _______________________________

THOMAS F. BEERS, Vice President

CORNING NATURAL GAS CORPORATION

By: _______________________________

MICHAEL I. GERMAN, President

EX-10

COMMERCIAL PROMISSORY NOTE

Community Bank N.A.

331 West Pulteney Street

Corning, New York 14830

(607)937&45;5471

LOAN NUMBER	NOTE DATE	PRINCIPAL AMOUNT	LOAN TERM	MATURITY DATE
C&45;10&45;03&45;088178	March 31, 2010	$1,050,000.00	60 months	April 1, 2015
LOAN PURPOSE: Refinancing

BORROWER INFORMATION

Corning Natural Gas Corporation

330 William Street, P.0. Box 58

Corning, NY 14830&45;0058

NOTE. This Commercial Promissory Note will be referred to in this document as the "Note."

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

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

PROMISE TO PAY. For value received, receipt of which is hereby acknowledged, on or before the Maturity Date, the Borrower promises to pay the principal amount of One Million Fifty Thousand and 00/100 Dollars ($1,050,000.00) 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 loan will be paid according to the following schedule: 59 consecutive payments of principal and interest in the amount of $11,837.59 beginning on May 1, 2010 and continuing on the same day of each month thereafter. One final balloon payment shall be due on the Maturity Date in an amount equal to the then unpaid principal and accrued and unpaid interest. All payments received by the Lender from the Borrower for application to the Loan may be applied to the Borrower's obligations under the Loan in such order as determined by the Lender.

INTEREST RATE AND SCHEDULED PAYMENT CHANGES. The interest rate on this Note will be fixed at 6.250% per annum.

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. Interest on this Note is calculated on a 365/360 day basis. The unpaid balance of this loan after Maturity, whether by acceleration or otherwise, shall be subject to a post&45;maturity rate of interest equal to the same fixed or variable rate basis in effect before maturity.

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.

PREPAYMENT PENALTY. This Note may be prepaid, in full or in part, at any time, without penalty

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

* Security Agreement dated March 31, 2010 evidencing security interest in "all interests of the Borrower in fixtures, equipment and inventory used by the Borrower in the exercise of its gas distribution franchise in the Town of Virgil, Cortland County, New York pursuant to an Order Granting a Certificate Of Public Convenience and Necessity issued by the New York State Public Service Commission on June 18, 2009 in Case Number 09&45;G&45; 0252." Security Agreement dated March 31, 2010 evidencing security interest in Rabbi Trust Account, Community Bank, N. A. # 89151111309.

RIGHT OF SET&45;OFF. To the extent permitted by law, Borrower agrees that Lender has the right to set&45;off any amount due and payable under this Note, 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&45;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&45;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, appointment or application for the appointment of a receiver, or issuance of execution, subpoena or order or warrant.

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 Note to be immediately due and payable without further notice of any kind notwithstanding anything to the contrary in this Note or any other agreement: (a) Borrower's failure to make any payment on time or in the amount due; (b) any default by

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Borrower under the terms of this Note or any other agreement or security instrument executed in connection with this Note (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 termination 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 B orrower 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 favor 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 Note 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 Note is jointly and severally

SEVERABILITY. If a court of competent jurisdiction determines any term or provision of this Note 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 Note without invalidating the remainder of either the affected provision or this Note.

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

ASSIGNABILITY. Lender may assign, pledge or otherwise transfer this Note or any of its rights and powers under this Note 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 Note or any benefit accruing to it hereunder without the express written consent of the Lender.

ORAL AGREEMENTS DISCLAIMER. This Note 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 Note is governed by the laws of the state of New York except to the extent that federal law

HEADING AND GENDER. The headings preceding text in this Note 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 Note 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 Note, Borrower agrees to pay all costs of the Lender in connection therewith, including reasonable attorneys' fees, to the extent permitted by

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 Note 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 Note or any other instrument, document or agreement executed or delivered in connection with this Note or the related transactions.

By signing this Note, Borrower acknowledges reading, understanding, and agreeing to all its provisions and receipt hereof.

Corning Natural Gas Corporation

________________________________________
By: Michael German	Date
Its: President

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LENDER: Community Bank N.A.

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

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EX-10

COMMERCIAL SECURITY AGREEMENT

Community Bank N.A.

331 West Pulteney Street

Corning, New York 14830

(607)937-5471

LOAN NUMBER	AGREEMENT DATE
C-10-03-088178	March 31, 2010

  

 

 

BORROWER INFORMATION

Corning 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

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, chooses 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 interest which a re 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 witho ut the Lender's prior written consent; the Debtor will 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 power, 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& #45;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 incurred, shall become a part of the Obligations and shall be payable on demand.

DEPOSIT ACCOUNTS. Debtor shall immediately deliver to Lender all certificate 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, notation 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 regulated as such unde r 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 additional 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 any Obligor or Debtor al leging 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 corporation 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, failure 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, including the right to imm ediate 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, leasing, 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, overnight delivery or othe r 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 default without waiving t he 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

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identified in this Agreement that the Debtor acquires after this Agreement is executed, except that no security interest attaches to after-acquired consumer goods unless the Debtor acquires rights in such goods within 10 days of Lender giving value. In anticipation of future advances by Lender, the Obligor or Debtor authorize Lender to file any necessary financing statements to protect Lender's security interest.

EXERCISE OF LENDER'S RIGHTS. Any delay on the part of the Lender in exercising any power, privilege, or right hereunder, or under any other document executed by Obligor or Debtor to the Lender in connection herewith, shall not operate as a waiver thereof, and no single or partial exercise thereof or any other power, privilege, or right shall preclude other or further exercise thereof. The waiver by the Lender of any default of the Obligor or Debtor shall not constitute a waiver of subsequent default.

CONTINUING AGREEMENT. This is a continuing agreement, and shall remain in full force and effect until the Obligations are paid in full. In the event that Lender should take additional Collateral, or enter into other security agreements, mortgages, guarantees, assignments, or similar documents with respect to the Obligations, or should Lender enter into other such agreements with respect to other obligations of Obligor or Debtor, such agreements shall not discharge this Agreement, which shall be construed as cumulative and continuing and not alternative and exclusive.

The security interest (and pledge and assignment as applicable), hereby granted and all of the terms and provisions of this Agreement shall be deemed a continuing agreement and shall continue in full force and effect until the Obligations are paid in full. Any such revocation or termination shall only be effective if explicitly confirmed in a signed writing issued by Lender to such effect and shall in no way impair or affect any transactions entered into or rights created or liabilities incurred or arising prior to such revocation or termination, as to which this Agreement shall be truly operative until same are repaid and discharged in full. Unless otherwise required by applicable law, Lender shall be under no obligation to issue a termination statement or similar document unless Debtor requests same in writing, and providing further, that all Obligations have been repaid and discharged in full and there are no commitments to make advances, incur any obligations, or otherwise give value.

ABSENCE OF CONDITIONS OF LIABILITY. This Agreement is unconditional. Lender shall not be required to exhaust its remedies against Debtor, other collateral, or guarantors, or pursue any other remedies within Lender's power before being entitled to exercise its remedies hereunder. Lender's rights to the Collateral shall not be altered by the lack of validity or enforceability of the Obligations against Obligor, and this Agreement shall be fully enforceable irrespective of any counterclaim which the Obligor may assert on the underlying debt and notwithstanding any stay, modification, discharge, or extension of Obligor's Obligation arising by virtue of Debtor's insolvency, bankruptcy, or reorganization, whether occurring with or without Lender's consent.

NOTICES. Any notice or demand given by Lender to Obligor or Debtor in connection with this Agreement, the Collateral, or the Obligations, shall be deemed given and effective upon deposit in the United States mail, postage prepaid, electronic mail, facsimile, overnight delivery or other commercially reasonable means addressed to Obligor or Debtor at the address designated at the beginning of this Agreement, or such other address as Obligor or Debtor may provide to Lender in writing from time to time for such purposes. Actual notice to Obligor or Debtor shall always be effective no matter how such notice is given or received.

WAIVERS. Debtor waives notice of Lender's acceptance of this Agreement, defenses based on suretyship, and to the fullest extent permitted by law, any defense arising as a result of any election by Lender under the Bankruptcy Code or the Uniform Commercial Code. Debtor and any maker, endorser, guarantor, surety, third-party pledgor, and other party executing this Agreement that is liable in any capacity with respect to the Obligations hereby waive demand, notice of intention to accelerate, notice of acceleration, notice of nonpayment, presentment, protest, notice of dishonor, and any other similar notice whatsoever.

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.

JOINT AND SEVERAL LIABILITY. If this Agreement is executed by more than one Party, it is understood and agreed that each such Party to this Agreement shall be jointly and severally bound and the word "Obligor" or "Debtor" as used herein shall be construed to be of such number as circumstances required.

SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law; but, in the event any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity and shall be severed from the rest of this Agreement without invalidating the remainder of such provision or the remaining provisions of 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 Obligor or Debtor.

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, and in such event the assignee shall have the same rights as if originally named herein in place of Lender. Obligor or Debtor may not assign this Agreement or any benefit accruing to it hereunder without the express written consent of the Lender.

AUTHORIZATIONS. Debtor authorizes Lender, without notice or demand and without altering Debtor's liability or Lender's rights hereunder, from time to time to take acts which may alter the Obligation of Obligor to Lender or Debtor's or Obligor's right to restitution or subrogation or both, including to the extent allowed by law:

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1. Renewing, compromising, extending, or otherwise changing the time for payment of, or otherwise changing the terms of the Obligations or any part thereof, including increasing the rate of interest;
2. Extending additional credit to Obligor in any manner for any purpose;
3. Incurring costs, including attorneys' fees, with respect to enforcing Lender's rights with respect to the Obligations, and collateral securing the Obligations;
4. Exchanging, enforcing, waiving, or releasing (whether intentionally or unintentionally) any security for the Obligations or any part thereof or purchase such security at private or public sale and to file any financing statements necessary for Lender to perfect or protect Lender's security interest;
5. Settling, releasing, compromising with, or substituting any one or more endorsers, guarantors, or other obligors or the Obligations;
6. Impairing the value of Lender's interest in Collateral through failure to obtain or maintain protection, failure to obtain or maintain recordation of an interest, or through failure to perform a duty owed to Debtor to preserve the Collateral; and
7. Applying all monies received from Debtor and others or from Collateral in Lender's discretion without in any way being required to marshal assets.

\

GOVERNING LAW. This Agreement has been delivered in the state of New York and shall be construed in accordance with the laws of that state.\

HEADINGS 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.

MISCELLANEOUS. Time is of the essence of this Agreement. Except as otherwise defined in this Agreement, all terms herein shall have the meanings provided by the Uniform Commercial Code as it has been adopted in the state of New York. All rights, remedies, and powers of the Lender hereunder are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all rights, remedies, and powers given hereunder or in or by any other instruments or by the provision of the Uniform Commercial Code as adopted in the state where the Lender is located, or any other laws, now existing or hereafter enacted. The Obligor specifically agrees that, if it has heretofore or hereafter executed any loan agreement in conjunction with the Agreement, any ambiguities between this Agreement and any such loan agreement shall be construed under the provisions of the loan agreement, to the extent that it may be necessary to eliminate any such ambiguity. Obligor and Debtor release Lender from any liabili ty which might otherwise exist for any act or omission of Lender related to the collection of any debt secured by this Agreement or the disposal of any Collateral, except for the Lender's willful misconduct.

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.

ACKNOWLEDGMENT. Debtor acknowledges agreeing to all of the provisions in this Agreement, and further acknowledges receipt of a true and complete copy of this Agreement.

IN WITNESS WHEREOF, Debtor has executed this Agreement on the date and year shown below.

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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EX-10

COMMERCIAL SECURITY AGREEMENT

Community Bank N.A.

331 West Pulteney Street

Corning, New York 14830

(607)937-5471

LOAN NUMBER	AGREEMENT DATE
C-10-03-088178	March 31, 2010

 

 

 

BORROWER INFORMATION

Corning 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

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, chooses 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 interest which a re 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.

Specific Collateral "Specific" refers to the specific property, together with all related rights, described below

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SPECIFIC COLLATERAL DESCRIPTION: "all interests of the Borrower in fixtures, equipment and inventory used by the Borrower in the exercise of its gas distribution franchise in the Town of Virgil, Cortland County, New York pursuant to an Order Granting a Certificate Of Public Convenience and Necessity issued by the New York State Public Service Commission on June 18, 2009 in Case Number 09-G- 0252."

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.

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

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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 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 any Obligor or Debtor al leging 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 corporation 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

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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, failure 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, including the right to imm ediate 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, leasing, 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, overnight delivery or othe r 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 default without waiving t he 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) identified in this Agreement that the Debtor acquires after this Agreement is executed, except that no security interest attaches to after-acquired consumer goods unless the Debtor acquires rights in such goods within 10 days of Lender giving value. In anticipation of future advances by Lender, the Obligor or Debtor authorize Lender to file any necessary financing statements to protect Lender's security interest.

EXERCISE OF LENDER'S RIGHTS. Any delay on the part of the Lender in exercising any power, privilege, or right hereunder, or under any other document executed by Obligor or Debtor to the Lender in connection herewith, shall not operate as a waiver thereof, and no single or partial exercise thereof or any other power, privilege, or right shall preclude other or further exercise thereof. The waiver by the Lender of any default of the Obligor or Debtor shall not constitute a waiver of subsequent default.

CONTINUING AGREEMENT. This is a continuing agreement, and shall remain in full force and effect until the Obligations are paid in full. In the event that Lender should take additional Collateral, or enter into other security agreements, mortgages, guarantees, assignments, or similar documents with respect to the Obligations, or should Lender enter into other such agreements with respect to other obligations of Obligor or Debtor, such agreements shall not discharge this Agreement, which shall be construed as cumulative and continuing and not alternative and exclusive.

The security interest (and pledge and assignment as applicable), hereby granted and all of the terms and provisions of this Agreement shall be deemed a continuing agreement and shall continue in full force and effect until the Obligations are paid in full. Any such revocation or termination shall only be effective if explicitly confirmed in a signed writing issued by Lender to such effect and shall in no way impair or affect any transactions entered into or rights created or liabilities incurred or arising prior to such revocation or termination, as to which this Agreement shall be truly operative until same are repaid and discharged in full. Unless otherwise required by applicable law, Lender shall be under no obligation to issue a termination statement or similar document unless Debtor requests same in writing, and providing further, that all Obligations have been repaid and discharged in full and there are no commitments to make advances, incur any obligations, or otherwise give value.< /P>

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ABSENCE OF CONDITIONS OF LIABILITY. This Agreement is unconditional. Lender shall not be required to exhaust its remedies against Debtor, other collateral, or guarantors, or pursue any other remedies within Lender's power before being entitled to exercise its remedies hereunder. Lender's rights to the Collateral shall not be altered by the lack of validity or enforceability of the Obligations against Obligor, and this Agreement shall be fully enforceable irrespective of any counterclaim which the Obligor may assert on the underlying debt and notwithstanding any stay, modification, discharge, or extension of Obligor's Obligation arising by virtue of Debtor's insolvency, bankruptcy, or reorganization, whether occurring with or without Lender's consent.

NOTICES. Any notice or demand given by Lender to Obligor or Debtor in connection with this Agreement, the Collateral, or the Obligations, shall be deemed given and effective upon deposit in the United States mail, postage prepaid, electronic mail, facsimile, overnight delivery or other commercially reasonable means addressed to Obligor or Debtor at the address designated at the beginning of this Agreement, or such other address as Obligor or Debtor may provide to Lender in writing from time to time for such purposes. Actual notice to Obligor or Debtor shall always be effective no matter how such notice is given or received.

WAIVERS. Debtor waives notice of Lender's acceptance of this Agreement, defenses based on suretyship, and to the fullest extent permitted by law, any defense arising as a result of any election by Lender under the Bankruptcy Code or the Uniform Commercial Code. Debtor and any maker, endorser, guarantor, surety, third-party pledgor, and other party executing this Agreement that is liable in any capacity with respect to the Obligations hereby waive demand, notice of intention to accelerate, notice of acceleration, notice of nonpayment, presentment, protest, notice of dishonor, and any other similar notice whatsoever.

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.

JOINT AND SEVERAL LIABILITY. If this Agreement is executed by more than one Party, it is understood and agreed that each such Party to this Agreement shall be jointly and severally bound and the word "Obligor" or "Debtor" as used herein shall be construed to be of such number as circumstances required.

SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law; but, in the event any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity and shall be severed from the rest of this Agreement without invalidating the remainder of such provision or the remaining provisions of 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 Obligor or Debtor.

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, and in such event the assignee shall have the same rights as if originally named herein in place of Lender. Obligor or Debtor may not assign this Agreement or any benefit accruing to it hereunder without the express written consent of the Lender.

AUTHORIZATIONS. Debtor authorizes Lender, without notice or demand and without altering Debtor's liability or Lender's rights hereunder, from time to time to take acts which may alter the Obligation of Obligor to Lender or Debtor's or Obligor's right to restitution or subrogation or both, including to the extent allowed by law:

1. Renewing, compromising, extending, or otherwise changing the time for payment of, or otherwise changing the terms of the Obligations or any part thereof, including increasing the rate of interest;
2. Extending additional credit to Obligor in any manner for any purpose;
3. Incurring costs, including attorneys' fees, with respect to enforcing Lender's rights with respect to the Obligations, and collateral securing the Obligations;
4. Exchanging, enforcing, waiving, or releasing (whether intentionally or unintentionally) any security for the Obligations or any part thereof or purchase such security at private or public sale and to file any financing statements necessary for Lender to perfect or protect Lender's security interest;
5. Settling, releasing, compromising with, or substituting any one or more endorsers, guarantors, or other obligors or the Obligations;

6. Impairing the value of Lender's interest in Collateral through failure to obtain or maintain protection, failure to obtain or maintain recordation of an interest, or through failure to perform a duty owed to Debtor to preserve the Collateral; and
7. Applying all monies received from Debtor and others or from Collateral in Lender's discretion without in any way being required to marshal assets.

\ GOVERNING LAW. This Agreement has been delivered in the state of New York and shall be construed in accordance with the laws of that state.

HEADINGS 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.

MISCELLANEOUS. Time is of the essence of this Agreement. Except as otherwise defined in this Agreement, all terms herein shall have the meanings provided by the Uniform Commercial Code as it has been adopted in the state of New York. All rights, remedies, and powers of the Lender hereunder are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all rights, remedies, and powers

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given hereunder or in or by any other instruments or by the provision of the Uniform Commercial Code as adopted in the state where the Lender is located, or any other laws, now existing or hereafter enacted. The Obligor specifically agrees that, if it has heretofore or hereafter executed any loan agreement in conjunction with the Agreement, any ambiguities between this Agreement and any such loan agreement shall be construed under the provisions of the loan agreement, to the extent that it may be necessary to eliminate any such ambiguity. Obligor and Debtor release Lender from any liability which might otherwise exist for any act or omission of Lender related to the collection of any debt secured by this Agreement or the disposal of any Collateral, except for the Lender's willful misconduct.

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.

ACKNOWLEDGMENT. Debtor acknowledges agreeing to all of the provisions in this Agreement, and further acknowledges receipt of a true and complete copy of this Agreement.

IN WITNESS WHEREOF, Debtor has executed this Agreement on the date and year shown below.

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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