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
February 27, 2012
(Date of earliest event reported)
Corning Natural Gas Corporation
(Exact name of registrant as specified in its charter)
|
New York |
000-00643 |
16-0397420 |
||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
|
330 West William Street, Corning, New York |
14830 |
|
(Address of principal executive offices) |
(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 February 27, 2012, Corning Natural Gas Corporation ("Corning") renewed its commitment with Community Bank N.A. ("Community Bank") with respect to its revolving line of credit pursuant to a Commercial Line of Credit Agreement and Note ("Credit Agreement"). This line of credit replaces Corning's $7 million revolving line with Community Bank that expires on February 28, 2012. The new line of credit contains similar terms and conditions as the expiring line except that the aggregate borrowings limit is no longer dependent on balances in certain current asset accounts. The principal conditions include that the line of credit will be due and payable in full on the earlier to occur of (1) February 28, 2012, or (2) the date of demand by Community Bank, or (3) the date of an Event of Default (collectively, the "Expiration Date") unless extended by Community Bank. The principal change is that the line of credit bears interest annually at a fluctuating rate equal to the greater of 3.25% or the 30-day Libor Rate plus 2.25%. The expired line had a minimum interest rate of 3.5%.
Any amounts due under the Credit Agreement will become immediately due and payable in the event of default, as defined in the Credit Agreement, and are secured by agreements dated August 4, 2005, November 28, 2005, and March 31, 2010. The Credit Agreement also contains customary representations, warranties and covenants made by the parties.
The foregoing description of the Credit Agreement is not complete and is qualified in its entirety by the full and complete terms of the Credit Agreement, which is attached as Exhibits 10.1 and 10.2 to this current report and is incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
10.1 Letter of Commitment dated February 15, 2012 by and between Corning Natural Gas Corporation and Community Bank N.A.
10.2 Commercial Line of Credit Agreement and Note as of February 27, 2012 by and between Corning Natural Gas Corporation and Community Bank N.A.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Corning Natural Gas Corporation
By: /s/ Michael I. German
President and Chief Executive Officer
Dated: February 27, 2012
-2-
COMMUNITY BANK, N.A.
Bank and trust in us.
Community Bank, N.A. (the "Bank") is pleased to advise you that the Bank has renewed the credit accommodation for Corning Natural Gas (the "Borrower") in the form of a Working Capital Line of Credit ("WC-LOC"). This commitment is subject to all of the terms and conditions contained herein.
LOAN TERMS
1. Purpose: The WC-LOC shall be used to fund working capital.
2. Amount: Under the WC-LOC, the Borrower may borrow from time to time up to an aggregate maximum amount of $7,000,000.
3. Interest Rate: Interest will be charged on outstanding principal balances at the 30-day Libor Rate, as published in the Wall Street Journal, plus 2.25% with changes to occur monthly with changes to the 30-day Libor Rate. However at no time will the interest rate go below 3.25%.
4. Interest Payments: Payments of all interest accrued on outstanding principal balances hereunder shall be due on the first day of every month.
5. Expiration: The WC-LOC shall expire February 28, 2013 unless extended in writing by the Bank. All advances under the WC-LOC shall be payable upon demand.
6. Late Charges: Payments made more than ten days after the date due shall be subject to a late payment charge equal to 5% of the payment due or $25.00, whichever is greater.
7. Prepayments: Prepayments of principal and interest may be made at any time without premium or penalty. All prepayments shall be applied first to accrued interest and then to principal.
8. Collateral: With respect to the WC-LOC, the Bank will require a continued first security interest in all accounts, inventory, chattel paper, documents, instruments, and general intangibles, together with a first security interest in Rabbi Trust Account #89151111309.
9. Guarantees: No Guaranty of the WC-LOC obligation is required to be furnished by the borrower.
GENERAL REQUIREMENTS
1. Financial Statements/Reporting Requirements: Subsequent to the consummation of this transaction and for so long as any indebtedness thereunder shall remain unpaid, the Borrower shall deliver to the Bank, without expense to the Bank:
a. 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.
b. Quarterly SEC form 10-Q financial statement within 60 days after the close of each quarter.
c. Monthly internally prepared financial statements within 45 days of each month-end.
d. Monthly reconciliation of accounts receivable with agings, inventory and WC-LOC borrowings in form and substance reasonably satisfactory to the Bank, within 30 days of each month-end.
e. The Borrower will provide the Bank with such other information and allow such inspections by the Bank as the Bank may from time to time reasonably request.
2. Default: The maturity of all obligations of Borrower shall be accelerated upon the occurrence of an Event of Default as defined in the Loan Documents.
3. Insurance: The Borrower shall maintain insurance (including without limitation hazard, liability and workers' compensation) in form and amount satisfactory to the Bank. Such policies shall provide for thirty days prior written notice of cancellation to the Bank and shall name the Bank as loss payee as its interest appears.
4. Organization: The Borrower shall maintain its due organization and authority, and shall comply with all governmental requirements and the terms of all corporate restrictions on it.
5. New Third-Party Debt: The Borrower shall not incur new indebtedness after the loan closing exceeding $2,500,000 without furnishing advance notice to the Bank.
6. Financial Covenants: During the tem]. of WC-LOC, the Borrower shall at all times maintain the following covenants and restrictions:
a. Maintain a tangible net worth of not less than $11,000,000.00. Tangible net worth is defined as the total value of all assets excluding goodwill and intangible assets less total liabilities. Measured at fiscal year 9/30/2012 with information provided in the audited financial statement.
b. Maintain a Debt to Tangible Net Worth ratio of less then 3.5 to 1.0. Measured at fiscal year 9/30/2012 with information provided in the audited financial statement.
c. Maintain a debt service coverage ratio of 1.10 to 1. Measured at fiscal year 9/30/2012 with information provided in the audited financial statement. The debt service coverage ratio is defined as:
(Net income, excluding other comprehensive income or loss, + depreciation, amortization and interest - cash dividends & distributions divided by (Current maturity of term loan debt from the prior period financial statement + interest)
7. Line Usage: It is agreed that the WC-LOC shall be used exclusively for working capital. It is further understood per the statement presented in the February 8, 2012 filing with the New York State Public Service Commission that new capital projects will be funded with 50 percent long-term debt and 50 percent equity.
8. Loan Documents: A new Line of Credit Agreement will be required to effect the line of credit renewal.
MISCELLANEOUS
1. Assignability: This commitment is not assignable and will expire in the event that it is not accepted and returned to the bank on or before February 28, 2012.
2. Fees/Costs: By acceptance of this commitment, Borrower agrees to pay all costs in connection with preparation of updated loan documents and all charges for UCC searches and filing fees.
3. Warranty: Borrower warrants that all matters, documents and instruments furnished to the Bank and upon which this commitment is based, including without limitation, financial statements, are complete and that there has been no material omission therefrom.
Further Actions: Borrower agrees to execute and/or deliver to us further documentation, covenants, and items as we or our counsel may reasonably require or as may become necessary to effect the consummation of this transaction.
|
COMMUNITY BANK, N.A. |
|
/S/ Stephen H. Rich |
|
Stephen H. Rich |
|
Vice President |
|
Commercial Banking Team Leader |
ACCEPTED AND AGREED:
|
CORNING NATURAL GAS |
|
|
By: /S/ Michael German |
2/27/2012 |
|
Michael German, President |
Date |
|
COMMERCIAL LINE OF CREDIT AGREEMENT AND NOTE |
|
||
|
LOAN NUMBER |
AGREEMENT DATE |
LOAN TERM |
LINE OF CREDIT LIMIT |
|
C-12-02-126276 |
February 27, 2012 |
On Demand |
$7,000,000.00 |
|
LOAN PURPOSE: Line of Credit Renewal & Rate Reduction |
|||
LINE OF CREDIT AGREEMENT AND NOTE. This Commercial Line of Credit Agreement and Note will be referred to in this document as the "Agreement."
LENDER. "Lender" means Community Bank N.A. whose address is 5 Seneca Street, Geneva, New York 14456 , its successors and assigns.
BORROWER. "Borrower" means each person or legal entity who signs this Agreement.
PROMISE TO PAY. For value received, receipt of which is hereby acknowledged, the Borrower promises to pay, on demand by Lender, the principal amount of Seven Million and 00/100 Dollars ($7,000,000.00) or such lesser amount as shall have been advanced by Lender, from time to time, to or on behalf of Borrower under the terms of this Agreement, and all interest and any other charges, including service charges, to the order of Lender at its office at the address noted above or at such other place as Lender may designate in writing. The Borrower will make all payments in lawful money of the United States of America.
PAYMENT SCHEDULE. This Agreement will be paid according to the following required payment schedule: Beginning on April 1, 2012, monthly payments of accrued and unpaid interest. The unpaid principal balance of this Note, together with all accrued interest and charges owing in connection therewith, shall be due and payable on demand. All payments received by the Lender from the Borrower for application to the Line of Credit may be applied to the Borrower's obligations under the Line of Credit in such order as determined by the Lender.
INTEREST RATE AND SCHEDULED PAYMENT CHANGES. The initial variable interest rate on this Agreement will be 3.250% per annum. This interest rate may change on February 28, 2012, and every day thereafter. Each date on which the interest rate may change is called the "Change Date." Beginning with the first Change Date, Lender will calculate the new interest rate based on One Month Libor Rate in effect on the Change Date (the "Index") plus 2.250 percentage points (the "Margin"). If the Index is not available at that time, Lender will choose a new Index which is based on comparable information. The Index is used solely to establish a base from which the actual rate of interest payable under this Agreement will be calculated, and is not a reference to any actual rate of interest charged by any lender to any particular borrower. The interest rate will never be less than 3.250%.
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. A change in the interest rates may result in a change in your payment amount. Interest on this Agreement is calculated on a 365/360 day basis. The unpaid balance of this loan shall, after an Event of Default exists under this Agreement or any other agreement related to the loan, be subject to a Default Rate of interest equal to 4.000 percentage points over the applicable variable interest rate in effect from time to time, calculated as described above in the section "Interest Rate."
LATE PAYMENT CHARGE. If any required payment is more than 10 days late, then at Lender's option, Lender will assess a late payment charge of $25.00 or 5% of the amount past due, whichever is greater.
LINE OF CREDIT TERMS. This Agreement is discretionary. The Borrower acknowledges and agrees that although the Borrower may from time to time request an advance under this Agreement up to a maximum amount equal to the Line of Credit Limit, the Lender in no way is obligated to make such advance and all advances will be made by Lender in its sole and absolute discretion and subject to the terms and conditions of this Agreement.
Advances.
Suspension and Termination
. Advances under this Agreement will be available until the earlier to occur of (a) demand by the Lender, (b) the Line of Credit is cancelled by Borrower, or (c) the occurrence of an Event of Default.(C) 2004-2010 Compliance Systems, Inc 9FDE-A660 - 2010.11.340 Page 1 of 3 www.compliancesystems.com
Commercial Line of Credit Agreement and Note - DL4006
SECURITY TO NOTE.
Security (the "Collateral") for this Agreement is granted pursuant to the following security document(s):RIGHT OF SET-OFF. To the extent permitted by law, Borrower agrees that Lender has the right to set-off any amount due and payable under this Agreement, whether matured or unmatured, against any amount owing by Borrower to Lender including any or all of Borrower's accounts with Lender. This shall include all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. Such right of set-off may be exercised by Lender against Borrower or against any assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor of Borrower, or against anyone else claiming through or against Borrower or such assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off has not been exercised by Lender prior to the making, filing or issuance or service upon Lender of or of notice of, assignment for the benefit of creditors, appointment or application for the appointment of a receiver, or issuance of execution, subpoena or order or warrant.
PAYABLE ON DEMAND. This is a demand note. Payment is due upon Lender's demand.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes, security agreements, mortgages, deeds of trust, business loan agreements, construction loan agreements, resolutions, guaranties, environmental agreements, subordination agreements, assignments and any other documents or agreements executed in connection with this Agreement whether now or hereafter existing. The Related Documents are hereby made a part of this Agreement by reference thereto, with the same force and effect as if fully set forth herein.
DEFAULT. Upon the occurrence of any one of the following events (each, an "Event of Default" or "default" or "event of default"). Lender's obligations, if any, to make any advances will, at Lender's option, immediately terminate and Lender, at its option, may declare all indebtedness of Borrower to Lender under this Agreement immediately due and payable without further notice of any kind notwithstanding anything to the contrary in this Agreement or any other agreement: (a) Borrower's failure to make any payment on time or in the amount due; (b) any default by Borrower under the terms of this Agreement or any other Related Documents executed in connection with this Agreement; (c) any default by Borrower under the terms of any Related Documents 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 Borrower or any guarantor; (i) any part of Borrower's business is sold to or merged with any other business, individual, or entity; (j) any representation or warranty made by Borrower to Lender in any of the Related 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 Related Documents in favor of Lender entered into or delivered in connection with this Agreement terminates, attempts to terminate or defaults under any such Related Documents; (I) 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.
GENERAL WAIVERS. To the extent permitted by law, the Borrower severally waives any required notice of presentment, demand, acceleration, intent to accelerate, protest and any other notice and defense due to extensions of time or other indulgence by Lender or to any substitution or release of collateral. No failure or delay on the part of Lender, and no course of dealing between Borrower and Lender, shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof or the exercise of any other power or right.
JOINT AND SEVERAL LIABILITY. If permitted by law, each Borrower executing this Agreement is jointly and severally bound.
SEVERABILITY. If a court of competent jurisdiction determines any term or provision of this Agreement is invalid or prohibited by applicable law, that terns or provision will be ineffective to the extent required. Any term or provision that has been determined to be invalid or prohibited will be severed from the rest of this Agreement without invalidating the remainder of either the affected provision or this Agreement.
SURVIVAL. The rights and privileges of the Lender hereunder shall inure to the benefits of its successors and assigns, and this Agreement shall be binding on all heirs, executors, administrators, assigns and successors of Borrower.
ASSIGNABILITY. Lender may assign, pledge or otherwise transfer this Agreement or any of its rights and powers under this Agreement without notice, with all or any of the obligations owing to Lender by Borrower, and in such event the assignee shall have the same rights as if originally named herein in place of Lender. Borrower may not assign this Agreement or any benefit accruing to it hereunder without the express written consent of the Lender.
ORAL AGREEMENTS DISCLAIMER. This Agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.
GOVERNING LAW. This Agreement is governed by the laws of the state of New York except to the extent that federal law controls.
HEADING AND GENDER. The headings preceding text in this Agreement are for general convenience in identifying subject matter, but have no limiting impact on the text which follows any particular heading. All words used in this Agreement shall be construed to be of such gender or number as the circumstances require.
ATTORNEYS' FEES AND OTHER COSTS. If legal proceedings are instituted to enforce the terms of this Agreement, Borrower agrees to pay all costs of the Lender in connection therewith, including reasonable attorneys' fees, to the extent permitted by law.
ADDITIONAL PROVISIONS. The Commitment Letter from Lender to Borrower dated February 15, 2012, and any future, restatement, renewal or modification thereof, and its terms and conditions 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 conflict in whole or in part with the provisions contained in this Commercial Line of Credit Agreement and Note (excluding the incorporated by reference provisions of the Commitment Letter). the provisions contained in this Commercial Line of Credit Agreement and Note shall control.
(C) 2004-2010 Compliance Systems, Inc 9FDE-A660 - 2010.11.340 Page 2 of 3 www.compliancesystems.com
Commercial Line of Credit Agreement and Note - DL4006
WAIVER OF' JURY TRIAL
. All parties to this Agreement hereby knowingly and voluntarily waive, to the fullest extent permitted by law, any right to trial by jury of any dispute. whether in contract, tort, or otherwise, arising out of, in connection with, related to, or incidental to the relationship established between them in this Agreement or any other instrument, document or agreement executed or delivered in connection with this Agreement or the related transactions.By signing this Agreement, Borrower acknowledges reading, understanding, and agreeing to all its provisions and receipt hereof.
|
Corning Natural Gas Corporation |
|
/S/ Michael German 2/27/2012 |
|
By: Michael German Date |
|
It's President |
|
LENDER: Community Bank N.A. |
|
/S/ Stephen Rich 2/27/2012 |
|
By: Stephen Rich Date |
(C) 2004-2010 Compliance Systems, Inc 9FDE-A660 - 2010.11.340 Page 3 of 3 www.compliancesystems.com
Commercial Line of Credit Agreement and Note - DL4006
,%F?99:=-<'N"<YU*QL_N1.<*Q/!8D#GZ?
MUKJ;.TALK9(($"H@QP.ON:`.?T_6M.O+X17>FI:W3-M#.@/S#L3@$&NF``&`
M,#T%<]'%!+I^N"\VB,74IW$