M & T Bank

88 Exchange Street

Binghamton, NY 13901

 

September 9, 2015

 

 

Mr. Michael German, President

Corning Natural Gas Holding Corporation

330 West Williams Street

Corning, NY 14830

 

 

Re: Financing Request for Pike County Opportunity

 

 

Dear Mike:

 

I am pleased to inform you that your request for financing the stock purchase of
Pike County Light & Power Company from Orange & Rockland Utilities has been
approved. Attached with this letter is a list of terms and conditions of the
respective credit facilites.

 

This Commitment Letter is not intended to set forth each and every requirement
of the Bank with respect to this loan transaction. This loan shall be further
contingent upon (i) the execution and delivery to the Bank of all agreements,
instruments and other writings that the Bank or its counsel deems necessary or
appropriate in connection with this loan; and (ii) there not having occurred or
existed on or after the date of this letter and before the loan is closed any
event or condition that we reasonably believe would or might have a material
adverse affect on you or on your business, render any collateral less valuable
than we had previously determined it to be or would cause us to deem ourselves
insecure in making the loan.

 

This Commitment Letter constitutes the entire agreement and understanding
between you and M&T Bank with respect to the Commitment and supersedes all prior
negotiations, understandings and agreements between such parties with respect to
this Commitment, including, without limitation, those expressed in any prior
proposal or commitment letter delivered by us to you. No modification,
recission, waiver, release or amendment of any provision of this Commitment
Letter shall be made, except by a written agreement signed by you and a duly
authorized officer of M&T Bank.

 

This Commitment Letter, which is not assignable by you, shall automatically
expire and be null and void if (i) we have not received an original of this
letter executed by you, along with the fee set forth in Attachment A , executed
by you on or before September 15, 2015 (ii) prior to any such receipt, we,
orally or in writing, give notice of withdrawal hereof; or (iii) if this loan
has not closed on or before August 30, 2016 (the “Closing Date”). We may extend
the Closing Date, in our sole discretion, provided such extension is in writing
and, if so extended, the interest rate may be adjusted to market conditions.

 

Kindly acknowledge your approval of this Commitment by signing and returning
this letter along with the referenced fee. Thank you for the opportunity to
provide this financing. I am confident that you will be pleased with the quality
service provided by M&T Bank. If you have any questions, please contact me at
(607) 779-5909.

 

 

 

 

Very truly yours,

 

MANUFACTURERS AND TRADERS TRUST COMPANY

 

By:/s/ Edgar B Parson III

Edgar B. Parsons III, Vice President

 

 

 

Acknowledged, agreed and accepted this 9th day of September , 2015.

 

 

 

Corning Natural Gas Holding Corporation.

 

 

 

 

By: /s/ Michael I. German

Name: Michael I. German

Title: President and CEO

 

 

 

1

 

Attachment A

Pike County Acquisition

 

 

Terms and Conditions:

Borrower:

Pike County Light & Power Company (collectively known as the "Borrower")

 

Purpose: Partially finance the purchase of Pike County Light & Power Company
from Orange & Rockland Utilities.       Credit Facilities:

1.       Up to $12,000,000 Term loan.

2.       $2,000,000 in Line of Credit for short term working capital purposes.

    Facility Term/Amortization:

1.       The Term Loan will mature Five (5) years from the date of closing.
Billed interest only for 6 months, then commence monthly payments of principal
and interest based on an amortization not to exceed 10 years.

2.       The Line of Credit will be a Demand facility billed Interest only
monthly.

 

Pricing:

 

Facility 1 will price on a variable interest based on 1 Month LIBOR plus 300
basis points.

Facility 2 will price on a variable interest based on 1 Month LIBOR plus 275
basis points.

 

Interest Rate Hedging The Borrower may elect to hedge the interest rate risk of
variable pricing on the Term Loan through an interest rate derivative at any
point in the amortization of the loan.

 

Commitment Fee:

A 50 basis point fee on the term loan amount. The $60,000 fee is considered
earned and is due upon issuance of the Commitment.

        Corporate Guarantor: All loans shall have an unlimited corporate
guaranty of the parent entity, Corning Natural Gas Holding Corporation.        
Collateral: Perfected First lien Uniform Commercial Code Financing statements
covering all business assets now owned or hereafter acquired related to the
Borrower.            

2

 

 

    Covenants, Reporting and Other Terms: Covenants:

 

Customary and normal for this type of transaction to include, at a minimum, debt
service coverage, liquidity, and leverage. Covenants shall be set at levels
mutually acceptable to Borrower and M&T Bank.

 

Financial Reporting:

Customary reporting including, but not limited to the following:

1.       Borrower’s and Guarantor’s annual audited financial statements within
120 days of fiscal year end.

2.       Operating and capital budget for the following fiscal year to be
delivered prior to 12/31 of the current year.

3.       Quarterly submission of management prepared financial statements, and
covenant compliance certificate.

 

 

Other Terms and Conditions:

Existing Mortgage Bond in approximate amount of $3,200,000 to be paid off at
closing. M&T Bank agrees to work with Corning and Woodmen to seek a waiver of
the notice provision so that closing, redemption and our new loan could occur
concurrently. If this proved unsuccessful, we would accept a second security
position on all of Pike’s assets as well as a guarantee of the debt by Corning
Natural Gas Holding Corporation (“CNGHC”). We would loan Pike County Light and
Power Company $8.8 million to close the transaction with Orange & Rockland and
approximately 30 days later an additional $3.2 million to retire the first
mortgage bonds. At that time we would have a first priority security interest in
all of Pike’s assets.

 

Any existing debt, including Intercompany short and long term payables, to be
paid off at closing.

 

Borrower shall have delivered to M&T, sufficiently in advance of closing, all
information and documentation required by M&T to evidence or facilitate both the
Borrower’s and M&T’s compliance with all applicable laws and regulations,
including, without limitation, all “know your customer” rules in effect from
time to time pursuant to the Bank Secrecy Act, USA PATRIOT Act and other
applicable laws. Any failure by Borrower or any necessary third party to deliver
to M&T, in a timely manner, any material information or documentation requested,
or any misrepresentation or inaccuracy with respect to such information or
documentation, or if M&T reasonably determines that opening any account
contemplated herein would potentially violate M&T’s regulatory compliance
policies or applicable law, shall permit M&T to withdraw or cancel this
financing offer, without liability.

 

Representations

and Warranties, Permits
and Licenses:

Customary, including, but not limited to, corporate existence, due
authorization, execution, delivery, validity and enforceability of
documentation, no violation of law or any agreement or instrument, financial
information, solvency, litigation and compliance with law, agreements and
instruments.

 

3

 

 

    Equity Raise: Evidence that the required equity portion of the transaction
has been raised and is available for closing.     Fees and Expenses: All costs
associated with this transaction, including but not limited to, the costs of
preparation of documents, Bank's counsel's fees and all other out of pocket
expenses of M&T Bank shall be the responsibility of the Corning Natural Gas
Holding Company regardless of whether the transaction closes.