Exhibit 10.2

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LOAN AGREEMENT

9531668488

 

Account Number

This Loan Agreement (the “Agreement”) is made this 31st day of October, 2008 by
and between BRANCH BANKING AND TRUST COMPANY, a North Carolina banking
corporation (“Bank”), and:

Roanoke Gas Company a Virginia corporation (“Borrower”), having its chief
executive office at Roanoke.

RGC Resources Inc. (individually “Guarantor”).

The Borrower has applied to Bank for and the Bank has agreed to make, subject to
the terms of this Agreement, the following loan (hereinafter referred to, as
“Loan”):

Term Loan (“Term Loan”) in the principal amount of $5,000,000.00 for the purpose
of refinancing existing debt which shall be evidenced by the Borrower’s
Promissory Note dated of even date herewith payable in 29 consecutive quarterly
installments and shall bear interest at a rate as described more particularly in
such note, the terms of which are incorporated herein by reference. The Term
Loan shall mature on December 1,2015, when the entire unpaid principal balance
then outstanding plus accrued interest thereon shall be paid in full.

Section 1 Conditions Precedent

The Bank shall not be obligated to make any disbursement of Loan proceeds until
all of the following conditions have been satisfied by proper evidence,
execution, and/or delivery to the Bank of the following items in addition to
this Agreement, all in form and substance satisfactory to the Bank and the
Bank’s counsel in their sole discretion:

USA Patriot Act Verification Information: Information or documentation,
including but not limited to the legal name, address, tax identification number,
driver’s license, and date of birth (if the Borrower is an individual) of the
Borrower sufficient for the Bank to verify the identity of the Borrower in
accordance with the USA Patriot Act. Borrower shall notify Bank promptly of any
change in such information.

Note: The Note evidencing the Loans duly executed by the Borrower.

Commitment Fee: A commitment fee of $10,000.00 payable to the Bank on the date
of execution of the Loan Documents.

Corporate Resolution: A Corporate Resolution duly adopted by the Board of
Directors of the Borrower authorizing the execution, delivery, and performance
of the Loan Documents on or in a form provided by or acceptable to Bank.

Articles of Incorporation: A copy of the Articles of Incorporation and all other
charter documents of the Borrower, all filed with and certified by the Secretary
of State of the State of the Borrower’s incorporation.

By-Laws: A copy of the By-Laws of the Borrower, certified by the Secretary of
the Borrower as to their completeness and accuracy.

Certificate of Incumbency: A certificate of the Secretary of the Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign the Loan Documents.

Certificate of Existence: A certification of the Secretary of State (or other
government authority) of the State of the Borrower’s Incorporation or
Organization as to the existence or good standing of the Borrower and its
charter documents on file.

Guaranty: Guaranty Agreement duly executed by the Guarantor.

Additional Documents: Receipt by the Bank of other approvals, opinions, or
documents as the Bank may reasonably request.

Section 2 Representations and Warranties

The Borrower and Guarantor represent and warrant to Bank that:

2.01. Financial Statements. The balance sheet of the Borrower and its
subsidiaries, if any, and the related Statements of Income and Retained Earnings
of the Borrower and its subsidiaries, the accompanying footnotes together with
the accountant’s opinion thereon, and all other financial information previously
furnished to the Bank, are true and correct and fairly reflect the financial
condition of the Borrower and its subsidiaries as of the dates thereof,
including all contingent liabilities of every type, and the financial condition
of the Borrower and its subsidiaries as stated therein has not changed
materially and adversely since the date thereof. Each Guarantor further
represents and warrants that all financial statements provided by such Guarantor
to Bank concerning such Guarantor’s financial condition are true and correct and
fairly represent such Guarantor’s financial condition as of the dates thereof

2.02. Name, Capacity and Standing. The Borrower’s exact legal name is correctly
stated in the initial paragraph of the Agreement. If the Borrower and/or any
Guarantor is a corporation, general partnership, limited partnership, limited
liability partnership, or limited liability company, each warrants and
represents that it is duly organized and validly existing under the laws of its
respective state of incorporation or organization; that it and/or its
subsidiaries, if any, are duly qualified and in good standing in every other
state in which the nature of their business shall require such qualification,
and are each duly authorized by their board of directors, general partners or
member/manager(s), respectively, to enter into and perform the obligations under
the Loan Documents.

2.03. No Violation of Other Agreements. The execution of the Loan Documents, and
the performance by the Borrower, by any and all pledgors (whether the Borrower
or other owners of collateral property securing payment of the Loan (hereinafter
sometimes referred to as the “Pledgor”)) or by the Guarantor thereunder will not
violate any provision, as applicable, of its articles of incorporation, by-laws,
articles of organization, operating agreement, agreement of partnership, limited
partnership or limited liability partnership, or, of any law, other agreement,
indenture, note, or other instrument binding upon the Borrower, Pledgor or
Guarantor, or give cause for the acceleration of any of the respective
obligations of the Borrower or Guarantor.

2.04. Authority. All authority from and approval by any federal, state, or local
governmental body, commission or agency necessary to the making, validity, or
enforceability of this Agreement and the other Loan Documents has been obtained.

2.05. Asset Ownership. The Borrower and each Guarantor have good and marketable
title to all of the properties and assets reflected on the balance sheets and
financial statements furnished to the Bank, and all such properties and assets
are free and clear of mortgages, deeds of trust, pledges, liens, and all other
encumbrances except as otherwise disclosed by such financial statements. In
addition, each other owner of collateral has good and marketable title to such
collateral, free and clear of any liens, security interests and encumbrances,
except as otherwise disclosed to Bank.

2.06. Discharge of Liens and Taxes- The Borrower and its subsidiaries, if any,
and each Guarantor have filed, paid, and/or discharged all taxes or other claims
which may become a lien on any of their respective properties or assets,
excepting to the extent that such items are being appropriately contested in
good faith and for which an adequate reserve (in an amount acceptable to Bank)
for the payment thereof is being maintained.

2.07. Regulations U and X. None of the Loan proceeds shall be used directly or
indirectly for the purpose of purchasing or carrying any margin stock in
violation of the provisions of Regulation U and Regulation X of the Board of
Governors of the Federal Reserve System.

2.08. ERISA. Each employee benefit plan, as defined by the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), maintained by the Borrower or
by any subsidiary of the Borrower or Guarantor(s) meets, as of the date hereof,
the minimum funding standards of Section 302 of ERISA, all applicable
requirements of ERISA and of the Internal Revenue Code of 1986, as amended, and
no “Reportable Event” nor “Prohibited Transaction” (as defined by ERISA) has
occurred with respect to any such plan.

 

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LOAN AGREEMENT

2.09. Litigation. There is no claim, action, suit or proceeding pending,
threatened or reasonably anticipated before any court, commission,
administrative agency, whether State or Federal, or arbitration which will
materially adversely affect the financial condition, operations, properties, or
business of the Borrower or its subsidiaries, if any, or the Guarantor(s), or
the ability of the Borrower or the Guarantor(s) to perform their obligations
under the Loan Documents.

2.10. Other Agreements. The representations and warranties made by Borrower to
Bank in the other Loan Documents are true and correct in all respects on the
date hereof.

2.11. Binding and Enforceable. The Loan Documents, when executed, shall
constitute valid and binding obligations of the Borrower and Guarantor
respectively, the execution of such Loan Documents has been duly authorized by
the parties thereto, and are enforceable in accordance with their terms, except
as may be limited by bankruptcy, insolvency, moratorium, or similar laws
affecting creditors’ rights generally.

2.12. Commercial Purpose. The Loan is not a “consumer transaction”, as defined
in the Virginia Uniform Commercial Code, and none of the collateral was or will
be purchased or held primarily for personal, family or household purposes.

Section 3 Affirmative Covenants

The Borrower covenants and agrees that from the date hereof and until payment in
full of all indebtedness and performance of all obligations owed under the Loan
Documents, Borrower shall:

3.01. Maintain Existence and Current Legal Form of Business. (a) Maintain its
existence and good standing in the state of its incorporation or organization,
(b) maintain its current legal form of business indicated above, and, (c) as
applicable, qualify and remain qualified as a foreign corporation, general
partnership, limited partnership, limited liability partnership or limited
liability company in each jurisdiction in which such qualification is required.

3.02. Maintain Records. Keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Borrower.

3.03. Maintain Properties. Maintain, keep, and preserve all of its properties
(tangible and intangible) including the collateral necessary or useful in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted.

3.04. Conduct of Business. Continue to engage in an efficient, prudent, and
economical manner in a business of the same general type as now conducted.

3.05. Maintain Insurance. Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or a similar
business, and business interruption insurance if required by Bank, which
insurance may provide for reasonable deductible(s). The Bank shall be named as
loss payee (Long Form) on all policies which apply to the Bank’s collateral, and
the Borrower shall deliver certificates of insurance at closing evidencing same.
All such insurance policies shall provide, and the certificates shall state,
that no policy will be terminated without 20 days prior written notice to Bank.

3.06. Comply With Laws. Comply in all respects with all applicable laws, rules,
regulations, and orders including, without limitation, paying before the
delinquency of all taxes, assessments, and governmental charges imposed upon it
or upon its property, and all Environmental Laws.

3.07. Right of Inspection. Permit the officers and authorized agents of the
Bank, at any reasonable time or times in the Bank’s sole discretion, to examine
and make copies of the records and books of account of, to visit the properties
of the Borrower, and to discuss such matters with any officers, directors,
managers, members or partners, limited or general of the Borrower, and the
Borrower’s independent accountant as the Bank deems necessary and proper.

3.08. Reporting Requirements. Furnish to the Bank:

Quarterly Financial Statements: As soon as available and not more than Forty
Five (45) days after the end of each quarter balance sheets, statements of
income, cash flow, and retained earnings for the period ended and a statement of
changes in the financial position, all in reasonable detail, and all prepared in
accordance with GAAP consistently applied and certified as true and correct by
an officer, general partner or manager (or member(s)) of the Borrower, as
appropriate.

Annual Financial Statements: As soon as available and not more than One Hundred
Twenty (120) days after the end of each fiscal year, balance sheets, statements
of income, and retained earnings for the period ended and a statement of changes
in the financial position, all in reasonable detail, and all prepared in
accordance with GAAP consistently applied. The financial statements must be of
the following quality or better: Company prepared.

Notice of Litigation: Promptly after the receipt by the Borrower, or by any
Guarantor of which Borrower has knowledge, of notice or complaint of any action,
suit, and proceeding before any court or administrative agency of any type
which, if determined adversely, could have a material adverse effect on the
financial condition, properties, or operations of the Borrower or Guarantor, as
appropriate.

Notice of Default: Promptly upon discovery or knowledge thereof, notice of the
existence of any event of default under this Agreement or any other Loan
Documents.

USA Patriot Act Verification Information: Information or documentation,
including but not limited to the legal name, address, tax identification number,
driver’s license, and date of birth (if the Borrower is an individual) of the
Borrower sufficient for the Bank to verify the identity of the Borrower in
accordance with the USA Patriot Act. Borrower shall notify Bank promptly of any
change in such information.

Other Information: Such other information as the Bank may from time to time
reasonably request.

3.09. Affirmative Covenants from other Loan Documents. All affirmative covenants
contained in any Deed of Trust, Security Agreement, Assignment of Leases and
Rents, or other security document executed by the Borrower which are described
in Section I hereof are hereby incorporated by reference herein.

Section 4 Guarantor Covenants

Guarantor covenants and agrees that from the date hereof and until payment in
full of all indebtedness and performance of all obligations owed under the Loan
Documents, Guarantor shall:

4.01. Maintain Existence and Current Legal Form of Business. If Guarantor is a
corporation, partnership, limited partnership, limited liability partnership or
limited liability company, (a) maintain its existence and good standing in the
state of its incorporation or organization, (b) maintain its current legal form
of business as shown on the guaranty agreement provided by Guarantor to Bank in
connection with the Loan, (c) without the Bank’s prior written consent, change
Guarantor’s name, or enter into any merger, consolidation, reorganization or
exchange of stock, ownership interests or assets, and (d) as applicable,
qualify’ and remain qualified as a foreign corporation, general partnership,
limited partnership, limited liability partnership or limited liability company
in each jurisdiction in which such qualification is required.

4.02.Maintain Properties. Not, without the prior written consent of Bank, sell,
transfer or otherwise dispose of all or substantially all of Guarantor’s
properties (tangible and intangible), except in the ordinary course of business.

4.03.Comply With Laws. Comply in all respects with all applicable laws, rules,
regulations, and orders including, without limitation, paying before the
delinquency of all taxes, assessments, and governmental charges imposed or
assessed upon Guarantor or upon Guarantor’s property, and all Environmental
Laws.

4.04. Reporting Requirements. Furnish to the Bank:

Annual Financial Statement(s): as soon as available and not more than One
Hundred Twenty (120) days after the end of each fiscal year of Guarantor,
balance sheets, statements of income, and retained earnings for the period ended
and a statement of changes in financial position, on form(s) to be provided by
the Bank, all in reasonable detail, and all prepared in accordance with GAAP
consistently applied; and, such financial statements must be of the following
quality or better: Audited.

 

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LOAN AGREEMENT

Quarterly Financial Statements: As soon as available and not more than Forty
Five (45) days after the end of each quarter balance sheets, statements of
income, cash flow, and retained earnings for the period ended and a statement of
changes in the financial position, all in reasonable detail, and all prepared in
accordance with GAAP consistently applied and certified as true and correct by
an officer, general partner or manager (or member(s)) of the Borrower, as
appropriate

Notice of Litigation: Promptly after the receipt by Guarantor, or by Borrower of
which Guarantor has knowledge, of notice of any action, suit, and proceeding
before any court or governmental agency of any type which, if determined
adversely, could have a material adverse effect on the financial condition,
properties, or operations of the Guarantor or Borrower, as appropriate.

4.05.Transfer of Ownership. Not, without the prior written consent of the Bank:
If Guarantor is a corporation, (a) issue, transfer or sell any new class of
stock, or (b) issue, transfer or sell, in the aggregate, from its treasury stock
and/or currently authorized but unissued shares of any class of stock, more than
10% of the total number of all such issued and outstanding shares as of the date
of this Agreement; or, if Guarantor is a general partnership, limited
partnership, limited liability partnership or limited liability company, issue,
transfer or sell any interest in Guarantor.

4.06.Tax Returns: As soon as available each year, furnish complete copies
(including all schedules) of all state and federal tax returns filed by
Guarantor.

4.07.Other Information: Furnish such other information as the Bank may from time
to time reasonably request.

Section 5 Financial Covenants

The Guarantor covenants and agrees that from the date hereof until payment in
full of all indebtedness and the performance of all obligations under the Loan
Documents, the Guarantor shall at all times maintain the following financial
covenants and ratios all in accordance with GAAP unless otherwise specified:

Retained earnings shall exceed Six Million Five Hundred Thousand dollars
($6,500,000) at all times.

Ratio of Long Term Debt to Total Capitalization shall not exceed Sixty-five
percent (65%).

Covenant Compliance Certificate shall be prepared and submitted to Bank
annually.

Section 6 Negative Covenants

The Borrower covenants and agrees that from the date hereof and until payment in
full of all indebtedness and performance of all obligations under the Loan
Documents, the Borrower shall not, without the prior written consent of the
Bank:

6.01. Liens. Create, incur, assume, or suffer to exist any lien upon or with
respect to the Mortgaged Property, any of Borrower’s properties, or the
properties of any Pledgor securing payment of the Loan, now owned or hereafter
acquired, except:

 

  (a) Liens and security interests in favor of the Bank;

 

  (b) Liens for taxes not yet due and payable or otherwise being contested in
good faith and for which appropriate reserves are maintained;

 

  (c) Other liens imposed by law not yet due and payable, or otherwise being
contested in good faith and for which appropriate reserves are maintained;

 

  (d) purchase money security interests on any property hereafter acquired,
provided that such lien shall attach only to the property acquired.

6.02. Change of Legal Form of Business; Purchase of Assets. Change Borrower’s
name or the legal form of Borrower’s business as shown above, whether by merger,
consolidation, conversion or otherwise, and Borrower shall not purchase all or
substantially all of the assets or business of any Person.

6.03. Disposition of Assets. Sell, lease, or otherwise dispose of any of its
assets or properties except in the ordinary and usual course of its business.

6.04. Transfer of Ownership. If Borrower is a corporation, (a) issue, transfer
or sell any new class of stock, or (b) issue, transfer or sell, other than
through the Borrower’s Dividend Reinvestment Plan, in the aggregate, from its
treasury stock and/or currently authorized but unissued shares of any class of
stock, more than 10% of the total number of all such issued and outstanding
shares as of the date of this Agreement. If Borrower is a general partnership,
limited partnership, limited liability partnership or limited liability company,
issue, transfer or sell any interest in Borrower.

6.05. Negative Covenants from other Loan Documents. All negative covenants
contained in any Deed of Trust, Security Agreement, Assignment of Leases or
Rents, or other security document executed by the Borrower which are described
in Section I hereof are hereby incorporated by reference herein.

Section 7 Hazardous Materials and Compliance with Environmental Laws

7.01. Investigation. Borrower hereby certifies that it has exercised due
diligence to ascertain whether its real property, including without limitation
the Mortgaged Property, is or has been affected by the presence of asbestos,
oil, petroleum or other hydrocarbons, urea formaldehyde, PCBs, hazardous or
nuclear waste, toxic chemicals and substances, or other hazardous materials
(collectively, “Hazardous Materials”), as defined in applicable Environmental
Laws. Borrower represents and warrants that there are no such Hazardous
Materials contaminating its real property, nor have any such materials been
released on or stored on or improperly disposed of on its real property during
its ownership, occupancy or operation thereof. Borrower hereby agrees that,
except in strict compliance with applicable Environmental Laws, it shall not
knowingly permit any release, storage or contamination as long as any
indebtedness or obligations to Bank under the Loan Documents remains unpaid or
unfulfilled. In addition, Borrower does not have or use any underground storage
tanks on any of its real property, including the Mortgaged Property which are
not registered with the appropriate Federal and/or State agencies and which are
not properly equipped and maintained in accordance with all Environmental Laws.
If requested by Bank, Borrower shall provide Bank with all necessary and
reasonable assistance required for purposes of determining the existence of
Hazardous Materials on the Mortgaged Property, including allowing Bank access to
the Mortgaged Property, and access to Borrower’s employees having knowledge of,
and to files and records within Borrower’s control relating to the existence,
storage, or release of Hazardous Materials on the Mortgaged Property.

7.02. Compliance. Borrower agrees to comply with all applicable Environmental
Laws, including, without limitation, all those relating to Hazardous Materials.
Borrower further agrees to provide Bank, and all appropriate Federal and State
authorities, with immediate notice in writing of any release of Hazardous
Materials on the Mortgaged Property and to pursue diligently to completion all
appropriate and/or required remedial action in the event of such release.

7.03. Remedial Action. Bank shall have the right, but not the obligation, to
undertake all or any part of such remedial action in the event of a release of
Hazardous Materials on the Mortgaged Property and to add any expenditures so
made to the principal indebtedness secured by the Deed(s) of Trust. Borrower
agrees to indemnify and hold Bank harmless from any and all loss or liability
arising out of any violation of the representations, covenants, and obligations
contained in this Section 7, or resulting from the recording of the Deed(s) of
Trust.

Section 8 Events of Default

The following shall be “Events of Default” by Borrower or any Guarantor:

8.01. Thc failure to make prompt payment of any installment of principal or
interest on any of the Note(s) when due or payable.

8.02. Should any representation or warranty made in the Loan Documents prove to
be false or misleading in any material respect.

8.03. Should any report, certificate, financial statement, or other document
furnished prior to the execution of or pursuant to the terms of this Agreement
prove to be false or misleading in any material respect.

 

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LOAN AGREEMENT

8.04. Should the Borrower or any Guarantor default on the performance of any
other obligation of indebtedness when due or in the performance of any
obligation incurred in connection with money borrowed.

8.05. Should the Borrower, any Guarantor or any Pledgor breach any covenant,
condition, or agreement made under any of the Loan Documents.

8.06. Should a custodian be appointed for or take possession of any or all of
the assets of the Borrower or any Guarantor, or should the Borrower or any
Guarantor either voluntarily or involuntarily become subject to any insolvency
proceeding, including becoming a debtor under the United States Bankruptcy Code,
any proceeding to dissolve the Borrower or any Guarantor, any proceeding to have
a receiver appointed, or should the Borrower or any Guarantor make an assignment
for the benefit of creditors, or should there be an attachment, execution, or
other judicial seizure of all or any portion of the Borrower’s or any
Guarantor’s assets, including an action or proceeding to seize any funds on
deposit with the Bank, and such seizure is not discharged within 30 days.

8.07. Should final judgment for the payment of money be rendered against the
Borrower or any Guarantor which is not covered by insurance and shall remain
undischarged for a period of 30 days unless such judgment or execution thereon
be effectively stayed.

8.08. Upon the death of, or termination of existence of, or dissolution of, any
Borrower, Pledgor or Guarantor.

8.09. Should the Bank in good faith deem itself, its liens and security
interests, if any, or any debt thereunder unsafe or insecure, or should the Bank
believe in good faith that the prospect of payment of any debt or other
performance by the Borrower or any Guarantor is impaired.

8.10. Should any lien or security interest granted to Bank to secure payment of
the Note(s) terminate, fail for any reason to have the priority agreed to by
Bank on the date granted, or become unperfected or invalid for any reason.

Section 9 Remedies Upon Default

Upon the occurrence of any of the above listed Events of Default, the Bank may
at any time thereafter, at its option, take any or all of the following actions,
at the same or at different times:

9.01. Declare the balance(s) of the Note(s) to be immediately due and payable,
both as to principal and interest, late fees, and all other amounts/expenditures
without presentment, demand, protest, or notice of any kind, all of which are
hereby expressly waived by Borrower and each Guarantor, and such balance(s)
shall accrue interest at the Default Rate as provided herein until paid in full;

9.02. Require the Borrower or Guarantor(s) to pledge additional collateral to
the Bank from the Borrower’s or any Guarantor’s assets and properties, the
acceptability and sufficiency of such collateral to be determined in the Bank’s
sole discretion;

9.03. Take immediate possession of and foreclose upon any or all collateral
which may be granted to the Bank as security for the indebtedness and
obligations of Borrower or any Guarantor under the Loan Documents;

9.04. Exercise any and all other rights and remedies available to the Bank under
the terms of the Loan Documents and applicable law, including the Virginia
Uniform Commercial Code;

9.05. Any obligation of the Bank to advance funds to the Borrower or any other
Person under the terms of under the Note(s) and all other obligations, if any,
of the Bank under the Loan Documents shall immediately cease and terminate
unless and until Bank shall reinstate such obligation in writing.

Section 10 Miscellaneous Provisions

10.01. Definitions.

“Default Rate” shall mean a rate of interest equal to Bank’s Prime Rate plus
five percent (5%) per annum (not to exceed the legal maximum rate) from and
after the date of an Event of Default hereunder which shall apply, in the Bank’s
sole discretion, to all sums owing, including principal and interest, on such
date.

“Environmental Laws” shall mean all applicable federal and state laws and
regulations which affect or may affect the Mortgaged Property, including without
limitation the Comprehensive Environmental Response, Compensation, and Liability
Act (42 U.S.C. Sections 9601 et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. Sections 6901 et seq.), the Federal Water Pollution Control Act
(33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Virginia Waste Management Act (Sections 10.1-1400 through 1457 of the Code of
Virginia, The Chesapeake Bay Preservation Act (Sections 10.1-2100 through
10.1-2115), Storage Tanks Section 62.4-44.34:8 et seq., and all other state and
local laws protecting the environment and dealing with the release and disposal
of hazardous waste and materials, as such laws or regulations have been amended
or may be amended. “Loan Documents” shall mean this Agreement including any
schedule attached hereto, the Note(s), the Deed(s) of Trust, the Mortgage(s),
the Security Agreement(s), the Assignment(s) of Leases and Rents, all UCC
Financing Statements, the Guaranty Agreement(s), and all other documents,
certificates, and instruments executed in connection therewith, and all
renewals, extensions, modifications, substitutions, and replacements thereto and
therefore.

“Person” shall mean an individual, partnership, corporation, trust,
unincorporated organization, limited liability company, limited liability
partnership, association, joint venture, or a government agency or political
subdivision thereof.

“GAAP” shall mean generally accepted accounting principles as established by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants, as amended and supplemented from time to time.

“Prime Rate” shall mean the rate of interest per annum announced by the Bank
from time to time and adopted as its Prime Rate, which is one of several rate
indexes employed by the Bank when extending credit, and may not necessarily be
the Bank’s lowest lending rate.

10.02. Non-impairment. If any one or more provisions contained in the Loan
Documents shall be held invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
therein shall not in any way be affected or impaired thereby and shall otherwise
remain in full force and effect.

10.03. Applicable Law. The Loan Documents shall be construed in accordance with
and governed by the laws of the Commonwealth of Virginia.

10.04. Waiver. Neither the failure or any delay on the part of the Bank in
exercising any right, power or privilege granted in the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise of any other right, power, or privilege
which may be provided by law.

10.05. Modification. No modification, amendment, or waiver of any provision of
any of the Loan Documents shall be effective unless in writing and signed by the
Borrower and Bank.

10.06. Payment Amount Adjustment. In the event that any Loan(s) referenced
herein has a variable (floating) interest rate and the interest rate increases,
Bank, at its sole discretion, may at any time adjust the Borrower’s payment
amount(s) to prevent the amount of interest accrued in a given period to exceed
the periodic payment amount or to cause the Loan(s) to be repaid within the same
period of time as originally agreed upon.

10.07 Stamps and Fees. The Borrower shall pay all federal or state stamps,
taxes, or other fees or charges, if any are payable or are determined to be
payable by reason of the execution, delivery, or issuance of the Loan Documents
or any security granted to the Bank; and the Borrower and Guarantor agree to
indemnify and hold harmless the Bank against any and all liability in respect
thereof.

10.08. Attorneys’ Fees. In the event the Borrower or any Pledgor or Guarantor
shall default in any of its obligations hereunder and the Bank believes it
necessary to employ an attorney to assist in the enforcement or collection of
the indebtedness of the Borrower to the Bank, to enforce the terms and
provisions of the Loan Documents, to modify the Loan Documents, or in the event
the Bank voluntarily or otherwise should become a party to any suit or legal
proceeding (including a proceeding conducted under the Bankruptcy Code), the
Borrower and Guarantors agree to pay the reasonable attorneys’ fees of the Bank
and all related costs of collection or enforcement that may be incurred by the
Bank. The Borrower and Guarantor shall be liable for such attorneys’ fees and
costs whether or not any suit or proceeding is actually commenced.

 

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LOAN AGREEMENT

10.09. Bank Making Required Payments. In the event Borrower shall fail to
maintain insurance, pay taxes or assessments, costs and expenses which Borrower
is, under any of the terms hereof or of any Loan Documents, required to pay, or
fail to keep any of the properties and assets constituting collateral free from
new security interests, liens, or encumbrances, except as permitted herein, Bank
may at its election make expenditures for any or all such purposes and the
amounts expended together with interest thereon at the Default Rate, shall
become immediately due and payable to Bank, and shall have benefit of and be
secured by the collateral; provided, however, the Bank shall be under no duty or
obligation to make any such payments or expenditures.

10.10. Right of Offset. Any indebtedness owing from Bank to Borrower may be set
off and applied by Bank on any indebtedness or liability of Borrower to Bank, at
any time and from time to time after maturity, whether by acceleration or
otherwise, and without demand or notice to Borrower. Bank may sell
participations in or make assignments of any Loan made under this Agreement, and
Borrower agrees that any such participant or assignee shall have the same right
of setoff as is granted to the Bank herein.

10.11. UCC Authorization. Borrower authorizes Bank to file such UCC Financing
Statements describing the collateral in any location deemed necessary and
appropriate by Bank.

10.12. Modification and Renewal Fees. Bank may, at its option, charge any fees
for modification, renewal, extension, or amendment of any terms of the Note(s)
permitted by law.

10.13. Conflicting Provisions. If provisions of this Agreement shall conflict
with any terms or provisions of any of the Note(s) or security document(s) or
any schedule attached hereto, the provisions of such Note(s) or security
document(s) or any schedule attached hereto, as appropriate, shall take priority
over any provisions in this Agreement.

10.14. Notices. Any notice permitted or required by the provisions of this
Agreement shall be deemed to have been given when delivered in writing to the
City Executive or any Vice President of the Bank at its offices in Roanoke,
Virginia, and to the Vice President and Secretary of the Borrower at its offices
in Roanoke, Virginia when sent by certified mail and return receipt requested.

10.15. Consent to Jurisdiction. Borrower hereby irrevocably agrees that any
legal action or proceeding arising out of or relating to this Agreement may be
instituted in the Circuit Court of Fairfax County, Virginia, or the United
States District Court for the Eastern District of Virginia, or in such other
appropriate court and venue as Bank may choose in its sole discretion. Borrower
consents to the jurisdiction of such courts and waives any objection relating to
the basis for personal or in rem jurisdiction or to venue which Borrower may now
or hereafter have in any such legal action or proceedings.

10.16. Counterparts. This Agreement may be executed by one or more parties on
any number of separate counterparts and all of such counterparts taken together
shall be deemed to constitute one and the same instrument.

10.17. Entire Agreement. The Loan Documents embody the entire agreement between
Borrower and Bank with respect to the Loans, and there are no oral or parol
agreements existing between Bank and Borrower with respect to the Loans which
are not expressly set forth in the Loan Documents.

10.18. Indemnification. The Borrower and the Guarantor hereby jointly and
severally agree to and do hereby indemnify and defend the Bank, its affiliates,
their successors and assigns and their respective directors, officer, employees
and shareholders, and do hereby hold each of them harmless from and against, any
loss, liability, lawsuit, proceeding, cost expense or damage (including
reasonable in-house and outside counsel fees, whether suit is brought or not)
arising from or otherwise relating to the closing, disbursement, administration,
or repayment of the Loans, including without limitation: (i) the failure to make
any payment to the Bank promptly when due, whether under the Notes evidencing
the Loans or otherwise; (ii) the breach of any representations or warranties to
the Bank contained in this agreement or in any other loan documents now or
hereafter executed in connection with the Loans; or (iii) the violation of any
covenants or agreements made for the benefit of the Bank and contained in any of
the loan documents; provided, however, that the foregoing indemnification shall
not be deemed to cover any loss which is finally determined by a court of
competent jurisdiction to result solely from the Bank’s gross negligence or
willful misconduct.

10.19. WAIVER OF JURY TRIAL. UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW, THE
UNDERSIGNED HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS OR CLAIMS
ARISING OUT OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS EXECUTED IN
CONNECTION HEREWITH OR OUT OF THE CONDUCT OF THE RELATIONSHIP BETWEEN THE
UNDERSIGNED AND BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO MAKE
THE LOAN AND ENTER INTO THIS AGREEMENT. FURTHER, THE UNDERSIGNED HEREBY CERTIFY
THAT NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT SEEK TO ENFORCE THIS WAIVER OR RIGHT
TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL,
HAS THE AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.

[SIGNATURES ON FOLLOWING PAGE]

 

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LOAN AGREEMENT

SIGNATURE PAGE

IN WITNESS WHEREOF, the Bank, Borrower and Guarantor(s) have caused this
Agreement to be duly executed under seal all as of the date first above written.

Borrower is a Corporation:

 

Witness:                

Roanoke Gas Company

         Name of Corporation   /s/ Amanda Minton      By:  

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  (SEAL)        Enter Name        Title:   Chairman, President, & CEO   /s/
Amanda Minton      By:  

/s/ Dale P. Lee

  (SEAL)        Enter Name        Title:   Vice President & Corp Secretary  
       Enter Name   Additional Co-Borrowers or Guarantors: WITNESS:          /s/
Amanda Minton       

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  (SEAL)        RGC Resources Inc.   /s/ Amanda Minton       

/s/ Dale P. Lee

  (SEAL)        Enter Name         

 

  (SEAL)        Enter Name         

 

  (SEAL)        Enter Name   WITNESS:     

BRANCH BANKING AND TRUST COMPANY

  /s/ Amanda Minton      By:  

/s/ J. Graham Leonard, III

       J. Graham Leonard, III      Title:   Senior Vice President

 

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