Exhibit
      10.3

    


    

    


    SPECIFIC
      SECURITY AGREEMENT

    New
      York

    


    Debtor
      (Name):
      Corning
      Natural Gas Corporation

    (Organizational
      Structure): Corporation

    (State
      Law organized under):
      New York

    (Organizational
      Identification Number, if any; note that this is NOT a request for the Taxpayer
      Identification Number):

    (Address
      of residence/chief executive office): 330
      West William Street, Corning, New York 14830

    


    Bank/Secured
      Party: Manufacturers and Traders Trust Company,
      a New
      York banking corporation with its banking offices at One M&T Plaza, Buffalo,
      New York 14203 Attention: Office of General Counsel.

    


    For
      good
      and valuable consideration, the receipt and sufficiency of which is
      acknowledged, and intending to be legally bound, Debtor agrees with Secured
      Party as follows: 

    


    1. Security
      Interests.

    


    1.1 Grant.
      As
      security for the prompt and complete payment and performance when due of all
      of
      the Obligations, Debtor does hereby grant to Secured Party a continuing security
      interest (“Security Interest”) in all property of Debtor listed
      on Exhibit A hereto
      (or, if
      there is no Exhibit A or Exhibit A has not been completed, in all personal
      property and fixtures of Debtor, including, without limitation, all accounts,
      chattel paper, investment property, deposit accounts, documents, goods,
      equipment, farm products, general intangibles (including trademarks, service
      marks, trade names, patents, copyrights, licenses and franchises), instruments,
      contract
      rights, money,
      letter of credit rights, causes of action (including tort claims) and other
      personal property (including agreements and instruments not constituting chattel
      paper or a document, general intangible or instrument)), wherever located,
      whether now existing or owned or hereafter arising or acquired, whether or
      not
      subject to the Uniform Commercial Code, as the same may be in effect in the
      State of New York, as amended from time to time (“UCC”), and whether or not
      affixed to any realty, including (i) all additions to, accessions to,
      substitutions for, replacements of and supporting obligations of the foregoing;
      (ii) all proceeds and products of the foregoing, including, without limitation,
      insurance proceeds; and (iii) all business records and information relating
      to
      any of the foregoing and any software or other programs for accessing and
      manipulating such information (collectively, the “Collateral”). 

    


    1.2 Obligations.
      The
      term “Obligations” means any and all indebtedness or other obligations of Debtor
      to Secured Party in any capacity, now existing or hereafter incurred, however
      created or evidenced, regardless of kind, class or form, whether direct,
      indirect, absolute or contingent (including obligations pursuant to any
      guaranty, endorsement, other assurance of payment or otherwise), whether joint
      or several, whether from time to time reduced and thereafter increased, or
      entirely extinguished and thereafter reincurred, together with all extensions,
      renewals and replacements thereof, and all interest, fees, charges, costs or
      expenses which accrue on or in connection with the foregoing, including, without
      limitation, any indebtedness or obligations (i) not yet outstanding but
      contracted for, or with regard to which any other commitment by Secured Party
      exists; (ii) arising prior to, during or after any pendency of any bankruptcy,
      insolvency, receivership or other similar proceeding, regardless of whether
      allowed or allowable in such proceeding; (iii) owed by Debtor to others and
      which Secured Party obtained, or may obtain, by assignment or otherwise; or
      (iv)
      payable under this Agreement.

    


    2. Covenants.
      So long
      as this Agreement is in effect, Debtor covenants and agrees:

    


    2.1 Perfection
      of Security Interest.
      Debtor
      shall execute and deliver to Secured Party such financing statements, control
      agreements or other documents, in form and content satisfactory to Secured
      Party, as Secured Party may from time to time request to perfect and continue
      the Security Interest. Upon the request of Secured Party, Debtor shall deliver
      to Secured Party any and all instruments, chattel paper, negotiable documents
      or
      other documents evidencing or constituting any part of the Collateral properly
      endorsed or assigned, in a manner satisfactory to Secured Party. Until such
      delivery, Debtor shall hold such portion of the Collateral in trust for Secured
      Party. Debtor shall pay all expenses for the preparation, filing, searches
      and
      related costs in connection with the grant and perfection of the Security
      Interest. Debtor authorizes (both prospectively and retroactively) Secured
      Party
      to file financing statements, and any continuations and amendments thereof,
      with
      respect to the Collateral without Debtor’s signature. A photocopy or other
      reproduction of any financing statement or this Agreement shall be sufficient
      as
      a financing statement for filing in any jurisdiction.

    


    2.2 Negative
      Pledge; Disposition of Collateral.
      Debtor
      shall not grant or allow the imposition of any lien, security interest or
      encumbrance on, or assignment of, the Collateral unless consented to in writing
      by Secured Party. Debtor shall not make or permit to be made any sale, transfer
      or other disposition of the Collateral; provided, however, prior to the
      occurrence of an Event of Default, Debtor may in the ordinary course of business
      consistent with its past practices and with prudent and standard practices
      used
      in the industry that is the same or similar to that in which Debtor is engaged:
      (i) dispose of any Collateral consisting of equipment that is obsolete or
      worn-out; (ii) sell or exchange any Collateral consisting of equipment in
      connection with the acquisition of other equipment that is at least as valuable
      as such equipment, that Debtor intends to use for substantially the same
      purposes as such equipment and that is not subject to any security interest
      or
      other lien or encumbrance; or
      (iii)
      collect Collateral consisting of accounts or assign such Collateral for purposes
      of collection.

    


    2.3 Condition
      of Collateral; Impermissible Use.
      Debtor
      shall keep the Collateral consisting of goods in good condition and shall not
      commit or permit damage or destruction (other than ordinary wear and tear)
      to
      such Collateral. Debtor shall not permit any Collateral consisting of goods
      (i)
      to be used in such a manner that would violate any insurance policy or warranty
      covering the Collateral or that would violate any applicable law of any
      governmental authority (including any environmental law) now or hereafter in
      effect; (ii) to become fixtures on any real property on which Secured Party
      does
      not have a first priority mortgage lien (unless Secured Party has been provided
      with an acceptable landlord/mortgagee waiver) or become an accession to any
      goods not included in the Collateral; or (iii) to be placed in any warehouse
      that may issue a negotiable document with regard to such
      Collateral.

     

    
      
        ©Manufacturers
          and Traders Trust Company, 2008

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2.4 Modification
      to Collateral.
      Debtor
      shall not, without Secured Party’s prior written consent, grant any extension
      on, compound, settle for less than the full amount of, release (in whole or
      in
      part), modify, cancel, or allow for any substitution, credit or adjustment
      on
      Collateral consisting of accounts,
      chattel paper, general intangibles, instruments, documents or investment
      property, except that in the absence of an Event of Default, Debtor may grant
      to
      account debtors, or other persons obligated with respect to the Collateral,
      extensions, credits, discounts, compromises or settlements in the ordinary
      course of business consistent with its past practices and consistent with
      prudent and standard practices used in the industries that are the same or
      similar to those in which Debtor is engaged.

    


    2.5 Titled
      Goods.
      Debtor
      shall cause all goods included in the Collateral to be properly titled and
      registered to the extent required by applicable law. Upon the request of Secured
      Party, Debtor shall cause the interest of Secured Party to be properly indicated
      on any certificate of title relating to such goods and deliver to Secured Party
      each such certificate, and any additional evidence of ownership, certificates
      of
      origin or other documents evidencing any interest in such goods.

    


    2.6 Insurance.
      Debtor
      shall, at its own expense and at all times, maintain effective insurance
      policies covering damage to persons and against fire, flood, theft and all
      other
      risks to which the Collateral may be subject, all in such amounts, with such
      deductibles and issued by such insurance company as shall be satisfactory to
      Secured Party. Such insurance policies shall have all endorsements that Secured
      Party may require and shall further (i) name Secured Party, exclusively, as
      the
      additional insured on the casualty insurance and the lender’s loss payee and/or
      mortgagee on the hazard insurance; (ii) provide that Secured Party shall receive
      a minimum of thirty (30) days prior written notice of any amendment or
      cancellation; and (iii) insure Secured Party notwithstanding any act or neglect
      of Debtor or other owner of the property described in such insurance. If Debtor
      fails to obtain the required insurance as provided herein, Secured Party may,
      but is not obligated, to obtain such insurance as Secured Party may deem
      appropriate, including, without limitation, if Secured Party so chooses, “single
      interest insurance” which will cover only Secured Party’s interest in the
      Collateral. Debtor shall pay or reimburse to Secured Party the cost of such
      insurance. Secured Party shall have the option, in its sole discretion, to
      hold
      insurance proceeds as part of the Collateral, apply any insurance proceeds
      toward the Obligations or allow the Debtor to apply the insurance proceeds
      towards repair or replacement of the item of Collateral in respect of which
      such
      proceeds were received. Upon the request of Secured Party, Debtor shall from
      time to time deliver to Secured Party such insurance policies, or other evidence
      of such policies satisfactory to Secured Party, and such other related
      information Secured Party may request.

    


    2.7 Collateral
      Information.
      Debtor
      shall provide all information, in form and substance satisfactory to Secured
      Party, that Secured Party shall from time to time request to (i) identify the
      nature, extent, value, age and location of any of the Collateral, or (ii)
      identify any account debtor or other party obligated with respect to any chattel
      paper, general intangible, instrument, investment property, document or deposit
      account included in the Collateral.

    


    2.8 Financial
      Information.
      Debtor
      shall furnish to Secured Party financial statements in such form (e.g.,
      audited, reviewed, compiled) and at such intervals as Secured Party shall
      request from time to time plus any additional financial information that Secured
      Party may request. All such financial statements shall be in conformity with
      generally accepted accounting principles consistently applied.

    


    2.9 Taxes;
      Licenses; Compliance with Laws.
      Before
      the end of any applicable grace period, Debtor shall pay each tax, assessment,
      fee and charge imposed by any governmental authority upon the Collateral, the
      ownership, disposition or use of any of the Collateral, this Agreement or any
      instrument evidencing any of the Obligations. Debtor shall maintain in full
      force and effect each license, franchise or other authorization needed for
      any
      ownership, disposition or use of the Collateral and the conduct of its business,
      operations or affairs. Debtor shall comply with all applicable law of any
      governmental authority (including any environmental law), now or hereafter
      in
      effect, applicable to the ownership, disposition or use of the Collateral or
      the
      conduct of its business, operations or affairs.

    


    2.10 Records;
      Legend.
      Debtor
      shall maintain accurate and complete books and records relating to the
      Collateral in conformity with generally accepted accounting principles
      consistently applied. At Secured Party’s request, Debtor will legend, in form
      and manner satisfactory to Secured Party, its books and records to indicate
      the
      Security Interest.

    


    2.11 Additional
      Collateral.
      If at
      any time the liquidation value of any of the Collateral is unsatisfactory to
      Secured Party, then, on demand of Secured Party, Debtor shall immediately (i)
      furnish such additional collateral satisfactory to Secured Party to be held
      by
      Secured Party as if originally pledged hereunder and execute such additional
      security agreements, financing statements or other agreements as requested
      by
      Secured Party, or (ii) repay the Obligations to bring the outstanding amount
      of
      the Obligations to within a satisfactory relationship to the liquidation value
      of the Collateral.

    


    2.12 Notifications
      of Change.
      Immediately upon acquiring knowledge or reason to know of any of the following,
      Debtor shall notify Secured Party of the occurrence or existence of (i) any
      Event of Default; (ii) any event or condition that, after notice, lapse of
      time
      or after both notice and lapse of time, would constitute an Event of Default;
      (iii) any account or general intangible that arises out of a contract with
      any
      governmental authority (including the United States); (iv) any event or
      condition that has or (so far as can be foreseen) will or might have any
      material adverse effect on the Collateral (including a material loss destruction
      or theft of, or of any damage to, the Collateral, material decline in value
      of
      the Collateral or a material default by an account debtor or other party’s
      performance of obligations with respect to the Collateral), on Debtor or its
      business, operations, affairs or condition (financial or
      otherwise).

    


    2.13 Lien
      Law.
      If any
      account or general intangible included in the Collateral represents money owing
      pursuant to any contract for the improvement of real property or for a public
      improvement for purposes of the Lien Law of the State of New York (the “Lien
      Law”), Debtor shall (i) give Secured Party notice of such fact; (ii) receive and
      hold any money advanced by Secured Party with respect to such account or general
      intangible as a trust fund to be first applied to the payment of trust claims
      as
      such term is defined in the Lien Law (Section 71 or otherwise); and
      (iii) until such trust claim is paid, not use or permit the use of any such
      money for any purpose other than the payment of such trust claims.

    


    2.14 Protection
      of Collateral; Further Assurances.
      Debtor
      shall, at its own cost, faithfully preserve, defend and protect the Security
      Interest as a prior perfected security interest in the Collateral under the
      UCC
      and other applicable law, superior and prior to the rights of all third parties
      (other than those permitted pursuant to Section 3.1) and shall defend the
      Collateral against all setoffs, claims, counterclaims, demands and defenses.
      At
      the request of Secured Party, Debtor shall do, obtain, make, execute and deliver
      all such additional and further acts, things, deeds, assurances and instruments
      as Secured Party may deem necessary or advisable from time to time in order
      to
      attach, continue, preserve, perfect or protect the Security Interest and Secured
      Party’s rights hereunder including obtaining waivers (in form and content
      acceptable to Secured Party) from landlords, warehousemen and mortgagees. Debtor
      hereby irrevocably appoints Secured Party, its officers, employees and agents,
      or any of them, as attorneys-in-fact for Debtor with full power and authority in
      the place and stead of Debtor and in the name of Debtor or its own name from
      time to time in Secured Party’s discretion, to perform all acts which Secured
      Party deems appropriate to attach, continue, preserve or perfect and continue
      the Security Interest, including signing for Debtor (to the extent such
      signature may be required by applicable law) UCC-1 financing statements, UCC-3
      amendment or other instruments and documents to accomplish the purposes of
      this
      Agreement. This power of attorney, being coupled with an interest, is
      irrevocable and shall not be affected by the subsequent disability or
      incompetence of Debtor.

     

    
      
        ©Manufacturers
          and Traders Trust Company, 2008

        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    3. Representations
      and Warranties.
      Debtor
      represents, warrants and agrees as follows:

    


    3.1 Title.
      Debtor
      holds good and marketable title to the Collateral free and clear from any
      security interest or other lien or encumbrance of any party, other than the
      Security Interest or such liens, security interests or other liens or
      encumbrances specifically permitted by Secured Party and set forth on Exhibit
      A
      hereto (“Permitted Liens”). Debtor has not made any prior sale, pledge,
      encumbrance, assignment or other disposition of any of the Collateral except
      for
      the Permitted Liens.

    


    3.2 Authority.
      If
      Debtor is a business entity, it is duly organized, validly existing and in
      good
      standing under the laws of the above-named state of organization. Debtor has
      the
      full power and authority to grant the Security Interest and to execute, deliver
      and perform its obligations in accordance with this Agreement. The execution
      and
      delivery of this Agreement will not (i) violate any applicable law of any
      governmental authority or any judgment or order of any court, other governmental
      authority or arbitrator; (ii) violate any agreement governing Debtor or to
      which
      Debtor is a party; or (iii) result in a security interest or other lien or
      encumbrance on any of Debtor’s assets, except in favor of Secured Party.
      Debtor’s certificate of incorporation, by-laws or other organizational documents
      do not prohibit any term or condition of this Agreement. Each authorization,
      approval or consent from, each registration and filing with, each declaration
      and notice to, and each other act by or relating to, any party required as
      a
      condition of Debtor’s execution, delivery or performance of this Agreement
      (including any shareholder or board of directors or similar approvals) has
      been
      duly obtained and is in full force and effect. Debtor has the 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 the conduct
      of
      its business or ownership of property requires such licensing or such
      qualification.

    


    3.3 Judgments
      and Litigation.
      There
      is no pending or threatened claim, audit, investigation, action or other legal
      proceeding or judgment or order of any court, agency or other governmental
      authority or arbitrator which involves Debtor or the Collateral and which might
      have a material adverse effect upon the Collateral, the Debtor, its business,
      operations, affairs or condition (financial or otherwise), or threaten the
      validity of this Agreement or any related document or action. Debtor will
      immediately notify Secured Party upon acquiring knowledge of the
      foregoing.

    


    3.4 Enforceability
      of Collateral.
      Instruments, chattel paper, accounts or documents which constitute any part
      of
      the Collateral are genuine and enforceable in accordance with their terms,
      comply with the applicable law of any governmental authority concerning form,
      content, manner of preparation and execution, and all persons appearing to
      be
      obligated on such Collateral have authority and capacity to contract and are
      in
      fact obligated as they appear to be on such Collateral. There are no
      restrictions on any assignment or other transfer or grant of the Security
      Interest by Debtor. Each sum represented by Debtor from time to time as owing
      on
      accounts, instruments, deposit accounts, chattel paper and general intangibles
      constituting any part of the Collateral by account debtors and other parties
      with respect to such Collateral is the sum actually and unconditionally owing
      by
      account debtors and other parties with respect thereto at such time, except
      for
      applicable normal cash discounts. None of the Collateral is subject to any
      defense, set-off, claim or counterclaim of a material nature against Debtor
      except as to which Debtor has notified Secured Party in writing.

    


    3.5 Location
      of Chief Executive Office, Records, Collateral.
      The
      locations of the following are listed on page one of this Agreement or, if
      different or additional, on Exhibit A hereto: (i) Debtor’s residence, principal
      place of business and chief executive office; (ii) the office in which Debtor
      maintains its books or records relating to the Collateral; (iii) the facility
      (including any storage facility) at which now owned or subsequently acquired
      equipment and fixtures constituting any part of the Collateral shall be kept;
      and (iv) the real property on which any crop included in the Collateral is
      growing or is to be grown, or on which any timber constituting any part of
      the
      Collateral is or is to be standing. Debtor will not effect or permit any change
      in any of the foregoing locations (or remove or permit the removal of the
      records or Collateral therefrom, except for mobile equipment included in the
      Collateral which may be moved to another location for not more than 30 days)
      without 30 days prior written notice to Secured Party and all actions deemed
      necessary by Secured Party to maintain the Security Interest intended to be
      granted hereby at all times fully perfected and in full force and effect have
      been taken. All of the locations listed on page one or Exhibit A are owned
      by
      Debtor, of if not, by the party(ies) identified on Exhibit A.

    


    3.6 Structure;
      Name.
      Debtor’s organizational structure, state of registration and organizational
      identification number (if any) are stated accurately on page one of this
      Agreement, and its full legal name and any trade name used to identify it are
      stated accurately on page one of this Agreement, or if different or additional
      are listed on Exhibit A hereto. Debtor will not change its name, any trade
      names
      or its identity, its organizational structure, state of registration or
      organizational identification number without 30 days prior written notice to
      Secured Party. All actions deemed necessary by Secured Party to maintain the
      Security Interest intended to be granted hereby at all times fully perfected
      and
      in full force and effect have been taken.

    


    4. Performance
      and Expenditures by Secured Party.
      If
      Debtor fails to perform or comply with any of the terms hereof, Secured Party,
      at its option, but without any obligation so to do, may perform or comply,
      or
      otherwise cause performance or compliance, with such terms including the payment
      or discharge of all taxes, fees, security interest or other liens, encumbrances
      or claims, at any time levied or placed on the Collateral. An election to make
      expenditures or to take action or perform an obligation of Debtor under this
      Agreement, after Debtor’s failure to perform, shall not affect Secured Party’s
      right to declare an Event of Default and to exercise its remedies. Nor shall
      the
      provisions of this Section relieve Debtor of any of its obligations hereunder
      with respect to the Collateral or impose any obligation on Secured Party to
      proceed in any particular manner with respect to the Collateral.

    


    5. Duty
      of Secured Party.
      Secured
      Party’s sole duty with respect to the custody, safekeeping and physical
      preservation of the Collateral in its possession shall be to deal with it in
      the
      same manner as Secured Party deals with similar property for its own account.
      Neither Secured Party nor its directors, officers, employees or agents shall
      be
      liable for failure to demand, collect or realize upon the Collateral or for
      any
      delay in doing so or shall be under any obligation to sell or otherwise dispose
      of the Collateral upon the request of Debtor or any other person or to take
      any
      other action whatsoever with regard to the Collateral. The powers conferred
      on
      Secured Party hereunder are solely to protect Secured Party’s interests in the
      Collateral and shall not impose any duty upon any Secured Party to exercise
      any
      such powers. Secured Party shall be accountable only for amounts that it
      actually receives as a result of the exercise of its powers under this
      Agreement, and neither it nor its officers, directors, employees or agents
      shall
      be responsible to Debtor for any act or failure to act hereunder, except for
      its
      own gross negligence or willful misconduct.

    


    6. Certain
      Rights and Remedies.

    


    6.1 Inspection;
      Verification.
      Secured
      Party, and such persons as it may designate, shall have the right from time
      to
      time to (i) audit and inspect (a) the Collateral, (b) all books and records
      related thereto (and make extracts and copies from such records), and (c) the
      premises upon which any of the Collateral or books and records may be located;
      (ii) discuss Debtor’s business, operations, affairs or condition (financial or
      otherwise) with its officers, accountants; and (iii) verify the validity,
      amount, quality, quantity, value, condition and status of, or any other matter
      relating to the Collateral in any manner and through any medium Secured Party
      may consider appropriate (including contacting account debtors or third party
      possessing the Collateral for purpose of making such verification). Debtor
      shall
      furnish all assistance and information and perform any acts Secured Party may
      require regarding thereto. Debtor shall bear the cost and expense of any such
      inspection and verification.

     

    
      
        ©Manufacturers
          and Traders Trust Company, 2008

        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    6.2 Notification
      of Security Interest.
      Secured
      Party may notify any or all account debtors and other person obligated with
      respect to the Collateral of the Security Interest therein. Upon the request
      of
      Secured Party, Debtor agrees to enter into such warehousing, lockbox or other
      custodial arrangement with respect to any of the Collateral that Secured Party
      shall deem necessary or desirable.

    


    6.3 Application
      of Proceeds.
      Secured
      Party may apply the proceeds from the sale, lease or other disposition or
      realization upon the Collateral to the Obligations in such order and manner
      and
      at such time as Secured Party shall, in its sole discretion, determine. Debtor
      shall remain liable for any deficiency if the proceeds of any sale, lease or
      other disposition or realization upon the Collateral are insufficient to pay
      the
      Obligations. Any proceeds received by Debtor from the Collateral after an Event
      of Default shall (i) be held by Debtor in trust for Secured Party in the same
      medium in which received; (ii) not be commingled with any assets of Debtor;
      and
      (iii) be delivered to Secured Party in the form received, properly indorsed
      to
      permit collection. After an Event of Default, Debtor shall promptly notify
      Secured Party of the return to or repossession by Debtor of goods constituting
      part of the Collateral, and Debtor shall hold the same in trust for Secured
      Party and shall dispose of the same as Secured Party directs.

    


    6.4 Income
      and Proceeds of Instruments and Investment Property.
      Until
      the occurrence of an Event of Default, Debtor reserves the right to request
      to
      receive all cash income or cash distribution (whether in cash or evidenced
      by
      check) payable on account of any instrument or investment property constituting
      part of the Collateral (collectively, “Cash Distribution”). Until actually paid,
      all rights in the foregoing shall remain subject to the Security Interest.
      Any
      other income, dividend, distribution, increase in or profits (including any
      stock issued as a result of any stock split or dividend, any capital
      distributions and the like) on account of any instrument or investment property
      constituting part of the Collateral and, upon the occurrence of an Event of
      Default, all Cash Distributions, shall be delivered to Secured Party immediately
      upon receipt, in the exact form received and without commingling with other
      property which may be received by, paid or delivered to Debtor or for Debtor’s
      account, whether as an addition to, in discharge of, in substitution of, or
      in
      exchange of the Collateral. Until delivery, such Collateral shall be held in
      trust for Secured Party.

    


    6.5 Registered
      Holder of the Collateral.
      Secured
      Party shall have the right to transfer to or register (with or without reference
      to this Agreement) in the name of Secured Party or its nominee any investment
      property, general intangible, instrument or deposit account constituting part
      of
      the Collateral so that Secured Party or such nominee shall appear as the sole
      owner of record thereof; provided, however, that so long as no Event of Default
      has occurred, Secured Party shall deliver to Debtor all notices, statements
      or
      other communications received by it or its nominee as such registered owner,
      and
      upon demand and receipt of payment of necessary expenses thereof, shall give
      to
      Debtor or its designee a proxy or proxies to vote and take all action with
      respect to such Collateral. After the occurrence of any Event of Default, Debtor
      waives all rights to be advised of or to receive any notices, statements or
      communications received by Secured Party or its nominee as such record owner,
      and agrees that no proxy or proxies given by Secured Party to Debtor or its
      designee as aforesaid shall thereafter be effective.

    


    7. Default.

    


    7.1 Events
      of Default.
      Any of
      the following events or conditions shall constitute an “Event of Default”: (i)
      failure by Debtor to pay when due (whether at the stated maturity, by
      acceleration, upon demand or otherwise) the Obligations, or any part thereof,
      or
      there occurs any event or condition which after notice, lapse of time or after
      both notice and lapse of time will permit acceleration of any Obligation; (ii)
      default by Debtor in the performance of any obligation, term or condition of
      this Agreement or any other agreement with Secured Party or any of its
      affiliates or subsidiaries (collectively, “Affiliates”); (iii) failure by Debtor
      to pay when due (whether at the stated maturity, by acceleration, upon demand
      or
      otherwise) any indebtedness or obligation owing to any third party or any
      Affiliate, the occurrence of any event which could result in acceleration of
      payment of any such indebtedness or obligation or the failure to perform any
      agreement with any third party or any affiliate; (iv) Debtor is dissolved,
      becomes insolvent, generally fails to pay or admits in writing its inability
      generally to pay its debts as they become due; (v) Debtor makes a general
      assignment, arrangement or composition agreement with or for the benefit of
      its
      creditors or makes, or sends notice of any intended, bulk sale; the sale,
      assignment, transfer or delivery of all or substantially all of the assets
      of
      Debtor to a third party; or the cessation by Debtor as a going business concern;
      (vi) Debtor files a petition in bankruptcy or institutes any action under
      federal or state law for the relief of debtors or seeks or consents to the
      appointment of an administrator, receiver, custodian or similar official for
      the
      wind up of its business (or has such a petition or action filed against it
      and
      such petition action or appointment is not dismissed or stayed within forty-five
      (45) days); (vii) the reorganization, merger, consolidation or dissolution
      of
      Debtor (or the making of any agreement therefor); (viii) the death or judicial
      declaration of incompetency of Debtor, if an individual; (ix) the entry of
      any
      judgment or order of any court, other governmental authority or arbitrator
      against Debtor; (x) falsity, omission or inaccuracy of facts submitted to
      Secured Party or any Affiliate (whether in a financial statement or otherwise);
      (xi) an adverse change in the Collateral, Debtor, its business, operations,
      affairs or condition (financial or otherwise) from the status shown on any
      financial statement or other document submitted to Secured Party, and which
      change Secured Party determines will have a material adverse affect on (a)
      Debtor, its business, operations or condition (financial or otherwise), or
      (b)
      the ability of Debtor to pay or perform the Obligations; (xii) any pension
      plan
      of Debtor fails to comply with applicable law or has vested unfunded liabilities
      that, in the opinion of Secured Party, might have a material adverse effect
      on
      Debtor’s ability to repay its debts; (xiii) any indication or evidence received
      by Secured Party that Debtor may have directly or indirectly been engaged in
      any
      type of activity which, in Secured Party’s discretion, might result in the
      forfeiture of any property of Debtor to any governmental authority; (xiv) the
      occurrence of any event described in Section 7.1(i) through and including
      7.1(xiii) with respect to any endorser, guarantor or any other party liable
      for,
      or whose assets or any interest therein secures, payment of any of the
      Obligations; or (xv) Secured Party in good faith deems itself insecure with
      respect to payment or performance of the Obligations.

    


    7.2 Rights
      and Remedies Upon Default.
      Upon
      the occurrence of any Event of Default, Secured Party without demand of
      performance or other demand, presentment, protest, advertisement or notice
      of
      any kind (except any notice required by law) to or upon Debtor or any other
      person (all and each of which demands, presentments, protests, advertisements
      and notices are hereby waived), may exercise all rights and remedies of a
      secured party under the UCC, under other applicable law, in equity or otherwise
      or available under in this Agreement including:

    


    7.2.1 Obligations
      Immediately Due; Termination of Lending.
      Secured
      Party may declare all or any part of any Obligations not payable on demand
      to be
      immediately due and payable without demand or notice of any kind. All or any
      part of any Obligations whether or not payable on demand, shall be immediately
      due and payable automatically upon the occurrence of an Event of Default in
      Section 7.1 (vi) above. The provisions hereof are not intended in any way to
      affect any rights of Secured Party with respect to any Obligations which may
      now
      or hereafter be payable on demand. Secured Party may terminate any obligation
      it
      may have to grant any additional loan, credit or other financial accommodation
      to Debtor.

    


    7.2.2 Access
      to Collateral.
      Secured
      Party, or its agents, may peaceably retake possession of the Collateral with
      or
      without notice or process of law, and for that purpose may enter upon any
      premises where the Collateral is located and remove the same. At Secured Party’s
      request, Debtor shall assemble the Collateral and deliver it to Secured Party
      or
      any place designated by Secured Party, at Debtor’s expense.

     

    
      
        ©Manufacturers
          and Traders Trust Company, 2008

        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    7.2.3 Sell
      Collateral.
      Secured
      Party shall have the right to sell, lease or otherwise dispose of the Collateral
      in one or more parcels at public or private sale or sales upon such terms and
      conditions as it may deem advisable and at such prices as it may deem best,
      for
      cash or on credit or for future delivery without assumption of any credit risk.
      Each purchaser at any such sale shall hold the property sold absolutely, free
      from any claim or right on the part of Debtor. Debtor hereby waives (to the
      extent permitted by law) all rights of redemption, stay and appraisal which
      Debtor now has or may at any time in the future have under any applicable law
      now existing or hereafter enacted. Secured Party shall have the right to use
      Debtor’s premises and any materials or rights of Debtor (including any
      intellectual property rights) without charge for such sales or disposition
      of
      the Collateral or the completion of any work in progress for such times as
      Secured Party may see fit. Without in any way requiring notice to be given
      in
      the following time and manner, Debtor agrees that with respect to any notice
      by
      Secured Party of any sale, lease or other disposition or realization or other
      intended action hereunder or in connection herewith, whether required by the
      UCC
      or otherwise, such notice shall be deemed reasonable and proper if given at
      least five (5) days before such action in the manner described below in the
      Section entitled “Notices”.

    


    7.2.4 Collect
      Revenues.
      Secured
      Party may either directly or through a receiver (i) demand, collect and sue
      on
      any Collateral consisting of accounts or any other Collateral including
      notifying account debtors or any other persons obligated on the Collateral
      to
      make payment on the Collateral directly to Secured Party; (ii) file any claim
      or
      to take any other action or proceeding in any court of law or equity or
      otherwise deemed appropriate by Secured Party with respect to the Collateral
      or
      to enforce any other right in respect of the Collateral; (iii) take control,
      in
      any manner, of any payment or proceeds from the Collateral; (iv) prosecute
      or
      defend any suit, action or proceeding brought against Debtor with respect to
      the
      Collateral; (v) settle, compromise or adjust any and all claims arising under
      the Collateral or, to give such discharges or releases as Secured Party may
      deem
      appropriate; (vi) receive and collect all mail addressed to Debtor, direct
      the
      place of delivery thereof to any location designated by Secured Party; to open
      such mail; to remove all contents therefrom; to retain all contents thereof
      constituting or relating to the Collateral; (vii) execute, sign or endorse
      any
      and all claims, endorsements, assignments, checks or other instruments with
      respect to the Collateral; or (viii) generally, use, sell, transfer, pledge
      and
      make any agreement with respect to or otherwise deal with any of the Collateral;
      and Debtor hereby irrevocably appoints Secured Party, its officers, employees
      and agents, or any of them, as attorneys-in-fact for Debtor with full power
      and
      authority in the place and stead of Debtor and in the name of Debtor or in
      its
      own name from time to time in Secured Party’s discretion, to take any and all
      appropriate action Secured Party deems necessary or desirable to accomplish
      any
      of the foregoing or otherwise to protect, preserve, collect or realize upon
      the
      Collateral or to accomplish the purposes of this Agreement. Debtor revokes
      each
      power of attorney (including any proxy) heretofore granted by Debtor with regard
      to the Collateral. This power of attorney, being coupled with an interest,
      is
      irrevocable and shall not be affected by the subsequent disability or
      incompetence of Debtor.

    


    7.2.5 Setoff.
      Secured
      Party may place an administrative hold on and set off against the Obligations
      any property held in a deposit or other account with Secured Party or any of
      its
      Affiliates or otherwise owing by Secured Party or any of its Affiliates in
      any
      capacity to Debtor. Such set-off shall be deemed to have been exercised
      immediately at the time Secured Party or such Affiliate elects to do
      so.

    


    8. Expenses.
      Debtor
      shall pay to Secured Party on demand all costs and expenses (including all
      reasonable fees and disbursements of all counsel retained for advice, suit,
      appeal or other proceedings or purpose and of any experts or agents it may
      retain), which Secured Party may incur in connection with (i) the administration
      of this Agreement, including any administrative fees Secured Party may impose
      for the preparation of discharges, releases or assignments to third-parties;
      (ii) the custody or preservation of, or the sale, lease or other disposition
      or
      realization on the Collateral; (iii) the enforcement and collection of any
      Obligations or any guaranty thereof; (iv) the exercise, performance ,enforcement
      or protection of any of the rights of Secured Party hereunder; or (v) the
      failure of Debtor to perform or observe any provisions hereof. After such demand
      for payment of any cost, expense or fee under this Section or elsewhere under
      this Agreement, Debtor shall pay interest at the highest default rate specified
      in any instrument evidencing any of the Obligations from the date payment is
      demanded by Secured Party to the date reimbursed by Debtor. All such costs,
      expenses or fees under this Agreement shall be added to the
      Obligations.

    


    9. Indemnification.
      Debtor
      shall indemnify Secured Party and its Affiliates and each officer, employee,
      accountant, attorney and other agent thereof (each such person being an
“Indemnified Party”) on demand, without any limitation as to amount, against
      each liability, cost and expense (including all reasonable fees and
      disbursements of all counsel retained for advice, suit, appeal or other
      proceedings or purpose, and of any expert or agents an Indemnified Party may
      retain) heretofore or hereafter imposed on, incurred by or asserted against
      any
      Indemnified Party (including any claim involving any allegation of any violation
      of applicable law of any governmental authority (including any environmental
      law
      or criminal law)), however asserted and whether now existing or hereafter
      arising, arising out of any ownership, disposition or use of any of the
      Collateral; provided, however, the foregoing indemnity shall not apply to
      liability, cost or expense solely attributable to an Indemnified Party’s gross
      negligence or willful misconduct. This indemnity agreement shall survive the
      termination of this Agreement. Any amounts payable under this or any other
      section of this Agreement shall be additional Obligations secured
      hereby.

    


    10. Miscellaneous.

    


    10.1 Notices.
      Any
      demand or notice hereunder or under any applicable law pertaining hereto shall
      be in writing and duly given if delivered to Debtor (at its address on Secured
      Party’s records) or to Secured Party (at the address on page one and separately
      to Secured Party’s officer responsible for Debtor’s relationship with Secured
      Party). Such notice or demand shall be deemed sufficiently given for all
      purposes when delivered (i) by personal delivery and shall be deemed effective
      when delivered, or (ii) by mail or courier and shall be deemed effective three
      (3) business days after deposit in an official depository maintained by the
      United States Post Office for the collection of mail or one (1) business day
      after delivery to a nationally recognized overnight courier service (e.g.,
      Federal Express). Notice by e-mail is not valid notice under this or any other
      agreement between Debtor and Secured Party. 

    


    10.2 Governing
      Law; Jurisdiction.
      This
      Agreement has been delivered to and accepted by Secured Party and will be deemed
      to be made in the State of New York. Except as otherwise provided under federal
      law, this Agreement will be interpreted in accordance with the laws of the
      State
      of New York excluding its conflict of laws rules. DEBTOR
      HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
      FEDERAL COURT IN THE STATE OF NEW YORK IN A COUNTY OR JUDICIAL DISTRICT WHERE
      SECURED PARTY MAINTAINS A BRANCH AND CONSENTS THAT SECURED PARTY MAY EFFECT
      ANY
      SERVICE OF PROCESS IN THE MANNER AND AT DEBTOR’S ADDRESS SET FORTH ABOVE FOR
      PROVIDING NOTICE OR DEMAND; PROVIDED THAT NOTHING CONTAINED IN THIS AGREEMENT
      WILL PREVENT SECURED PARTY FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR
      JUDGMENT OR EXERCISING ANY RIGHTS AGAINST DEBTOR INDIVIDUALLY, AGAINST ANY
      SECURITY OR AGAINST ANY PROPERTY OF DEBTOR WITHIN ANY OTHER COUNTY, STATE OR
      OTHER FOREIGN OR DOMESTIC JURISDICTION.
      Debtor
      acknowledges and agrees that the venue provided above is the most convenient
      forum for both Secured Party and Debtor. Debtor waives any objection to venue
      and any objection based on a more convenient forum in any action instituted
      under this Agreement.

     

    
      
        ©Manufacturers
          and Traders Trust Company, 2008

        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    10.3 Security
      Interest Absolute.
      All
      rights of Secured Party hereunder, the Security Interest and all obligations
      of
      Debtor hereunder shall be absolute and unconditional irrespective of (i) any
      filing by or against Debtor of any petition in bankruptcy or any action under
      federal or state law for the relief of debtors or the seeking or consenting
      to
      of the appointment of an administrator, receiver, custodian or similar officer
      for the wind up of its business; (ii) any lack of validity or enforceability
      of
      any agreement with respect to any of the Obligations, (iii) any change in the
      time, manner or place of payment of, or in any other term of, all or any of
      the
      Obligations, or any other amendment or waiver of or any consent to any departure
      from any agreement or instrument with respect to the Obligations, (iv) any
      exchange, release or non-perfection of any lien or any release or amendment
      or
      waiver of or consent under or departure from any guarantee, securing or
      guaranteeing all or any of the Obligations, or (v) any other circumstance that
      might otherwise constitute a defense available to, or a discharge of, Debtor
      in
      respect of the Obligations or this Agreement. If, after receipt of any payment
      of all or any part of the Obligations, Secured Party is for any reason compelled
      to surrender such payment to any person or entity, because such payment is
      determined to be void or voidable as a preference, impermissible setoff, or
      a
      diversion of trust funds, or for any other reason, such payment shall be
      reinstated as part of the Obligations and this Agreement shall continue in
      full
      force notwithstanding any contrary action which may have been taken by Secured
      Party in reliance upon such payment, and any such contrary action so taken
      shall
      be without prejudice to Secured Party’s rights under this Agreement and shall be
      deemed to have been conditioned upon such payment having become final and
      irrevocable.

    


    10.4 Remedies
      Cumulative; Preservation of Rights.
      The
      rights and remedies herein are cumulative, may be exercised singly or
      concurrently and are not exclusive of any other rights or remedies which Secured
      Party may have under other agreements now or hereafter in effect between Debtor
      and Secured Party, at law (including under the UCC) or in equity. No failure
      or
      delay of Secured Party in exercising any power or right hereunder shall operate
      as a waiver thereof, nor shall any single or partial exercise of any such right
      or power, or any abandonment or discontinuance of steps to enforce such a right
      or power, preclude any other or further exercise thereof or the exercise of
      any
      other right or power. Debtor expressly disclaims any reliance on any course
      of
      dealing or usage of trade or oral representation of Secured Party including
      representations to make loans to Debtor. No notice to or demand on Debtor in
      any
      case shall entitle Debtor to any other or further notice or demand in similar
      or
      other circumstances.

    


    10.5 Joint
      and Several; Successors and Assigns.
      If
      there is more than one Debtor, each of them shall be jointly and severally
      liable for all amounts, which become due, and the performance of all obligations
      under this Agreement and the term “Debtor” shall include each as well as all of
      them. This Agreement shall be binding upon Debtor and upon its heirs and legal
      representatives, its successors and assignees, and shall inure to the benefit
      of, and be enforceable by, Secured Party, its successors and assignees and
      each
      direct or indirect assignee or other transferee of any of the Obligations;
      provided, however, that this Agreement may not be assigned by Debtor without
      the
      prior written consent of Secured Party.

    


    10.6 Waivers;
      Changes in Writing.
      No
      course of dealing or other conduct, no oral agreement or representation made
      by
      Secured Party or usage of trade shall operate as a waiver of any right or remedy
      of Secured Party. No waiver of any provision of this Agreement or consent to
      any
      departure by Debtor therefrom shall in any event be effective unless made
      specifically in writing by Secured Party and then such waiver or consent shall
      be effective only in the specific instance and for the purpose for which given.
      No modification to any provision of this Agreement shall be effective unless
      made in writing in an agreement signed by Debtor and Secured Party.

    


    10.7 Interpretation.
      Unless
      the context otherwise clearly requires, references to plural includes the
      singular and references to the singular include the plural; the word “or” has
      the inclusive meaning represented by the phrase “and/or”; the word “including”,
“includes” and “include” shall be deemed to be followed by the words “without
      limitation”; and captions or section headings are solely for convenience and not
      part of the substance of this Agreement. Any representation, warranty, covenant
      or agreement herein shall survive execution and delivery of this Agreement
      and
      shall be deemed continuous. Each provision of this Agreement shall be
      interpreted as consistent with existing law and shall be deemed amended to
      the
      extent necessary to comply with any conflicting law. If any provision
      nevertheless is held invalid, the other provisions shall remain in effect.
      Debtor agrees that in any legal proceeding, a photocopy of this Agreement kept
      in Secured Party’s course of business may be admitted into evidence as an
      original. Terms not otherwise defined in this Agreement shall have the meanings
      attributed to such terms in the UCC. 

    


    10.8 Waiver
      of Jury Trial.
      DEBTOR
      AND SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY
      RIGHT TO TRIAL BY JURY DEBTOR AND SECURED PARTY MAY HAVE IN ANY ACTION OR
      PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS AGREEMENT OR ANY
      TRANSACTIONS RELATED HERETO. DEBTOR REPRESENTS AND WARRANTS THAT NO
      REPRESENTATIVE OR AGENT OF SECURED PARTY HAS REPRESENTED, EXPRESSLY OR
      OTHERWISE, THAT SECURED PARTY WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO
      ENFORCE THIS JURY TRIAL WAIVER. DEBTOR ACKNOWLEDGES THAT SECURED PARTY HAS
      BEEN
      INDUCED TO
      ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE PROVISIONS OF THIS
      SECTION.

    


    
      	
              Dated:
                May 7, 2008

            	
              CORNING
                NATURAL GAS CORPORATION

            
	 	 
	 	
              By:  

            	/s/
              Michael I. German
	 	
              Name:

            	
              Michael
                I German

            
	 	
              Title:

            	
              President

            


    

    


    ACKNOWLEDGMENT

    


    
      	
              STATE
                OF NEW YORK

            	
              )

            
	 	
              :
                SS.

            
	
              COUNTY
                OF BROOME

            	
              )

            


    

    


    On
      the
      ______ day of May, in the year 2008, before me, the undersigned, a Notary Public
      in and for said State, personally appeared MICHAEL
      I. GERMAN,
      personally known to me or proved to me on the basis of satisfactory evidence
      to
      be the individual(s) whose name(s) is (are) subscribed to the within instrument
      and acknowledged to me that he/she/they executed the same in his/her/their
      capacity(ies), and that by his/her/their signature(s) on the instrument, the
      individual(s), or the person upon behalf of which the individual(s) acted,
      executed the instrument.

     

    
      
        
Notary
        Public                                             

    

     

    
      
        
FOR
        SECURED PARTY USE ONLY:

    

    Authorization
      Confirmed:
      _______________________________________________________________________________

    If
      Debtor’s Obligations arise under a guaranty in favor of Secured Party, list the
      name of each party whose indebtedness is being guaranteed under such guaranty:
      __________________

     

    
      
        ©Manufacturers
          and Traders Trust Company, 2008

        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A

    


    
      	1.	
              Grant
                (§1.1): Debtor grants the Security Interest in its property described
                below (mark applicable box): 

            


    

    


    
      	o	
              All
                Equipment.
                If
                marked here, all equipment, including equipment which is or becomes
                fixtures, and any general intangibles associated with such equipment
                and
                fixtures.

            


    

    


    
      
        
          	x	
                  Specific
                    Equipment.
                    If marked here, in the following described equipment, including
                    equipment
                    which is or becomes fixtures, and any general intangibles associated
                    with
                    such equipment: 

                


        

      

    

    


    All
      Fixtures and Equipment now owned or hereafter affixed to, or used in connection
      with, the premises described on attached Schedule A and any and all replacements
      thereof and additions thereto and in the proceeds, rents, issues, profits and
      all now in existence or hereafter arising, Accounts and General Intangibles
      arising from such premises. All present and future debts between the parties
      are
      hereby secured.

    


    
      	o	
              All
                Inventory.
                If
                marked here, in all inventory. 

            


    

    


    
      	o	
              Specific
                Inventory.
                If
                marked here, in the following described inventory and in all inventory
                of
                the same class:

            


    

     

      
        

      

       

    

    
      

    

     

    
      	o	
              All
                Accounts, General Intangibles and Chattel Paper. If
                marked here, in all accounts, general intangibles or chattel
                paper.

            


    

     

    
      
        
          	o	
                  Specific
                    Accounts, General Intangibles or Chattel Paper. If
                    marked here, in the following described accounts, general intangibles
                    or
                    chattel paper:
                    __________________________________________________________________________

                


        

      

    

     

    
      

    

     

    
      

    

     

    
      
        
          	o	
                  Other
                    Types of Property. If
                    marked here, in the following described property:
                    _________________________________

                


        
 

    

    
      

    

     

    
      

    

     

    
      	2.	
              Permitted
                Liens (§3.1)

            


    

    


    
      	3.	
              Residence,
                principal place of business or chief executive office
                (§3.5(i))

            


    

    


    
      	4.	
              Location
                of Books and Records (§3.5(ii))

            


    

    


    
      	5.	
              Location
                of Inventory, Equipment, Fixtures, Crops or Timber (§3.5(iii) and
                §3.5(iv))

            


    

    


    
      	6.	
              Locations
                Not Owned by Debtor and Name of Record Owner
                (§3.5)

            


    

    


    
      	7.	
              Trade
                Name, “Doing Business As” Name or Assumed Name
                (§3.6)