Document:

Unassociated Document

    
      Exhibit
10.2

      

      

      SECURITY
AGREEMENT

      

      

      THIS SECURITY AGREEMENT (this
“Agreement”) is dated as of February 11, 2009, and is entered into by and
between ThermoEnergy Corporation, a Delaware corporation having its principal
place of business in Little Rock, Arkansas (“Thermo”) and Thermo’s subsidiary
CASTion Corporation, a Massachusetts corporation having its principal place of
business in Worcester, Massachusetts (“CASTion” and, together with Thermo,
“Debtor”), and The Quercus Trust (“Secured Party”).  Capitalized terms
not otherwise defined herein are used as defined in the New York Uniform
Commercial Code on the date of this Agreement.

      

      WHEREAS, the Debtor is borrowing Two
Hundred Fifty Thousand Dollars ($250,000.00) from Secured Party pursuant to that
certain Promissory Note of even date herewith in favor of Secured Party (the
“Note”);

      

      WHEREAS, it is a condition precedent to
Secured Party’s making any payments to Debtor under the Note that the Debtor
execute and deliver to the Secured Party a security agreement in substantially
the form hereof; and

      

      WHEREAS, the Debtor wishes to grant a
security interest in favor of the Secured Party as herein provided.

      

      NOW, THEREFORE, in consideration of the
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

      

      SECTION 1.  Grant of
Security.  As consideration for Secured Party’s loan to Debtor
pursuant to the Note, Debtor hereby grants to Secured Party a security interest
in all intellectual property rights of Debtor, including without limitation all
rights under and pursuant to that certain License Agreement between Debtor and
Alexander G. Fassbender dated October 1, 2003, as amended by that certain letter
agreement between Debtor and Alexander G. Fassbender dated December 17, 2007
(the “Fassbender License”) and any and all proceeds from the transfer,
assignment or other permitted disposition thereof (the
“Collateral”).  Notwithstanding the foregoing, the Collateral shall
not include any and all rights related to the patents and licenses described on
Exhibit A hereto and related intellectual property used in connection therewith,
including, without limitation, the intellectual property rights used in or
relating to the Debtor’s “TEPS” business (collectively, the “Excluded
Assets”),.

      

      SECTION 2.  Security for
Obligations.  This Agreement secures and the Collateral is
collateral security for the prompt payment or performance in full (including,
without limitation, amounts that would become due but for the filing of a
petition in bankruptcy), of all amounts when due under the Note, as well as
Debtor’s performance and observance of all covenants contained herein and in the
Note and the Fassbender License (the “Obligations”).

       

      
 

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      SECTION 3.  Further
Assurances.  Debtor hereby authorizes Secured Party to execute
any and all financing statements necessary to carry out this
Agreement.  Debtor further agrees that from time to time, at the
expense of Debtor, Debtor will promptly execute and deliver all further
instruments and documents, and take all further action that Secured Party may
reasonably request, in order to perfect, protect and maintain or establish the
priority of any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Collateral.

      

      SECTION
4.  Representations, Warranties
and Covenants. Debtor represents, warrants and covenants as
follows:

       

      (a)           Thermo
is and will continue to be a corporation existing and in good standing under the
laws of the State of Delaware.

       

      (b)           CASTion
is and will continue to be a corporation existing and in good standing under the
laws of the Commonwealth of Massachusetts.

       

      (c)           Debtor
is duly empowered and authorized to enter into, and grant security interests in,
its property, and perform its obligations under this Agreement and all other
instruments and transactions contemplated hereby or relating
hereto.  The execution, delivery and performance by Debtor of this
Agreement and all other instruments and contemplated transactions do not and
will not violate any law or any provision of nor be grounds for acceleration
under any agreement, indenture, note or instrument which is binding upon Debtor,
including without limitation, Debtor’s Certificate of Incorporation, Articles of
Organization, By-Laws or any other loan or security agreements.

       

      (d)           Assuming
the due filing of financing statements in proper form with the proper public
officials, the security interest granted to Secured Party pursuant to this
Agreement is a valid, perfected first-priority security interest in the that
portion of the Collateral in which a security interest may be perfected under
the Uniform Commercial Code.

       

      (e)           Debtor
shall not hereafter transfer, assign or otherwise dispose of the Collateral
without Secured Party’s prior written consent.  Debtor shall not
create, permit or suffer to exist, and shall take such other action as is
necessary to remove, any claim to or interest in the Collateral, and the
security interest granted hereby, and shall defend the right, title and interest
of Secured Party in and to the Collateral against all claims and demands of all
persons and entities at any time claiming the same or any interest
therein.

       

      (f)           Subject
to any limitation stated therein or in connection therewith, all information
furnished by Debtor concerning the Collateral or otherwise in connection with
the Obligations, is or shall be at the time the same is furnished, accurate,
correct and complete in all material respects.

       

      (g)           All
representations, warranties and covenants of Debtor contained in this Agreement
and any other agreement with Secured Party shall be true and correct at the time
of the effective date of each such agreement and shall be deemed continuing and
shall remain true, correct and in full force and effect until payment and
satisfaction in full of all of the Obligations.

       

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (g)           Debtor
shall not pledge, encumber, hypothecate, or grant a security interest in the
Excluded Assets to any person or entity unless it first makes arrangements
reasonably acceptable to Secured Party to pledge to Secured Party the proceeds
of such transfer as additional Collateral hereunder.

       

      (h)           The
Company’s rights in the Collateral are sufficient to conduct the business of the
Company (excluding the TEPS business) as currently conducted and proposed to be
conducted.

       

      SECTION
5.  Secured
Party’s Appointment as Attorney-in-Fact.  Debtor hereby
irrevocably constitutes and appoints, from and after the occurrence of a default
by Debtor in its obligations under this Agreement, Secured Party and any officer
or agent thereof, with full power of substitution, as Debtor’s true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in Secured Party’s own name, from
time to time in Secured Party’s discretion, for the purpose of carrying out the
terms of this agreement, to take any and all appropriate action and to execute
any and all documents and instruments that may be necessary or desirable to
accomplish the purposes of this agreement and, without limiting the generality
of the foregoing, hereby grants to Secured Party the power and right, on behalf
of Debtor, without notice to or assent by Debtor to execute, file and record all
such financing statements, certificates of title and other certificates of
registration and operation and similar documents and instruments as Secured
Party may deem necessary or desirable to protect, perfect and validate Secured
Party’s security interest.

       

      Debtor
hereby ratifies all that such attorneys shall lawfully do or cause to be done by
virtue hereof.  This power of attorney is a power coupled with an
interest and shall be irrevocable.

       

      The
powers conferred upon Secured Party hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon Secured Party to
exercise any such powers.  The Secured Party shall be accountable only
for amounts that Secured Party actually receives as a result of the exercise of
such powers and neither the Secured Party nor any of its partners, officers,
directors, employees or agents shall be responsible to Debtor for any act or
failure to act, except for Secured Party’s own gross negligence or willful
misconduct.

       

      SECTION 6.  
Remedies.  If a default by Debtor in its Obligations under
Section 2 of this Agreement shall have occurred and is continuing, Secured Party
shall have all of the rights and remedies which secured parties may have under
the New York Uniform Commercial Code or other applicable law or at equity, and
may do, at its option, one or more of the following, with or without further
notice to Debtor:

      

      (a)           Accelerate
and declare all or any part of the Obligations to be immediately due, payable
and performable;

      

      (b)           Appropriate,
set off and apply to any or all of the Obligations, any or all Collateral in
such manner as Secured Party may determine; and/or

      

      (c)           Foreclose
the security interest created under this Agreement or under any other agreement
relating to the Collateral by any available procedure and with or without
judicial process.

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
 

      SECTION  7.  Termination of Security
Interest.  Secured Party’s security interest in the Collateral
shall be extinguished when (a) Debtor completes performance of all Obligations
to Secured Party, and (b) Secured Party has no commitment to Debtor (whether
under the Note or otherwise) that would give rise to an
Obligation.  By way of clarification, Secured Party acknowledges that
the Obligations of Debtor under the Fassbender License shall not be deemed to be
“Obligations” for purposes of this Agreement from and after the date on which
(i) the Note shall have been paid in full, (ii) any other payment Obligations of
Debtor under the Note or this Agreement have been satisfied in full and (iii)
Secured Party no longer has any commitment to Debtor that would give rise to an
Obligation, and at such time Secured Party’s security interest in the Collateral
shall be extinguished notwithstanding the existence of continuing Obligations of
Debtor under the Fassbender License.

      

      SECTION  8.  Governing
Law.  This Agreement and the rights of the parties shall be
construed and enforced in accordance with the laws of the State of New York
applicable to agreements executed and to be performed wholly within such state
and without regard to principles of conflicts of law.  Each party
irrevocably (a) consents to the jurisdiction of the federal and state courts
situated in New York, New York in any action that may be brought for the
enforcement of this Note, and (b) submits to and accepts, with respect to its
properties and assets, generally and unconditionally, the in personam
jurisdiction of the aforesaid courts, waiving any defense that such court is not
a convenient forum; provided,
however, that if the federal and state courts situated in New York, New
York refuse to accept jurisdiction in any action brought for the enforcement of
this Note, each party irrevocably (a) consents to the jurisdiction of the
federal and state courts situated in Wilmington, Delaware in any such action,
and (b) submits to and accepts, with respect to its properties and assets,
generally and unconditionally, the in personam jurisdiction of the aforesaid
courts, waiving any defense that such court is not a convenient
forum.  In any such litigation to the extent permitted by applicable
law, each party waives personal service of any summons, complaint or other
process, and agrees that the service thereof may be made either (i) in the
manner for giving of notices provided in this Note (other than by telecopier) or
(ii) in any other manner permitted by law..

      

      SECTION  9.  Severability.  In
case any provision in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation and in any other jurisdiction, shall not in any way be affected or
impaired thereby.

      

      SECTION  10.                                  General.  Secured
Party shall not be deemed to have waived any of its respective rights hereunder
or under any other agreement, instrument or paper signed by Debtor unless such
waiver be in writing and signed by Secured Party.  No delay or
omission on the part of Secured Party in exercising any right shall operate as a
waiver of such right or any other right.  All of Secured Party’s
rights and remedies, whether evidenced hereby or by any other agreement,
instrument or paper, shall be cumulative and may be exercised singularly or
concurrently.  The provisions hereof shall, as the case may require,
bind or inure to the benefit of, the respective heirs, successors, legal
representatives and assigns of Debtor and Secured Party.

       

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      SECTION 11.  Amendments.  This
Agreement may be amended or modified only by a written instrument executed by
each party hereto.

      

      SECTION 12.  Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and together shall constitute one and the same
instrument.

      

      

      IN WITNESS WHEREOF, Debtor and Secured
Party have caused this Agreement to be duly executed as of the date first above
written.

      

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	 
      	
                                    “DEBTOR”

                                  
	 
      	 
      	 
      
	 
      	
                                    ThermoEnergy
      Corporation,

                                  
	 
      	
                                    a
      Delaware corporation

                                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                                    By:

                                  	
                                      /s/  Andrew T.
      Melton

                                  
	 
      	 
      	
                                           Andrew
      T. Melton

                                  
	 
      	 
      	
                                           Executive
      Vice President and CFO

                                  
	 
      	 
      	 
      
	 
      	
                                    CASTion
      Corporation,

                                  
	 
      	
                                    a
      Massachusetts corporation

                                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                                    By:

                                  	
                                      /s/  Andrew T.
      Melton

                                  
	 
      	 
      	
                                           Andrew
      T. Melton

                                  
	 
      	 
      	
                                           Executive
      Vice President and CFO

                                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                                    “SECURED
      PARTY”

                                  
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	  /s/  David
    Gelbaum
	 
      	David
      Gelbaum,
	 
      	Trustee
      of The Quercus
Trust

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Exhibit
A

      

      Excluded
Assets

      

      

      1.  License
Agreement between Debtor and Battelle Memorial Institute dated December 30,
1997, as amended

      

      2.  License
of US Patent No. 6,196,000 “Power System with Enhanced Thermodynamic Efficiency
and Pollution Control”  (Filed: January 14, 2000; Issued: March 6,
2001; Expiration Date: January 14, 2020)

      

      3.  License
of US Patent No. 6,918,253 “Power System with Enhanced Thermodynamic Efficiency
and Pollution Control”  (Filed: July 22, 2002; Issued: July 19, 2005;
Expiration Date: July 22, 2022)

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
 

      Agreement, Acknowledgment
and Consent

      

      For good and valuable consideration,
the receipt and sufficiency of which is acknowledged, Alexander G. Fassbender
(“Fassbender”), as licensor under the Fassbender Licensor, hereby agrees as
follows:

      

      1.           Fassbender
is not aware of any existing breach under the Fassbender License.

      

      2.           Fassbender
hereby consents to (a) the execution of the Security Agreement by Debtor, and
(b) the enforcement by Secured Party of any and all rights under the Security
Agreement, including without limitation the foreclosure on, acquisition of, and
full exercise of Debtor’s rights under the Fassbender License.

      

      3.           Fassbender
agrees that if Secured Party shall succeed to Debtor’s interest in the
Fassbender License, Fassbender shall provide Secured Party without additional
consideration all rights and information derivative of the rights under the
Fassbender License that would be reasonably useful by Secured Party in
exercising its rights under the Security Agreement and the Fassbender License,
to the extent Fassbender has established any interest in such
rights.

      

      4.           If
Secured Party shall succeed to Debtor’s interest in the Fassbender License, then
during the period of Secured Party’s ownership of such interest, Fassbender
shall continue to be bound by all the terms, covenants, and conditions of the
Fassbender License; provided, however, that notwithstanding any provisions in
the Fassbender License to the contrary, Secured Party shall not be liable for
any act, omission or other failure of Debtor arising under the Fassbender
License, and shall not be subject to any offsets or defenses that Fassbender may
have against Debtor arising under the Fassbender License.

      

      IN WITNESS WHEREOF, the undersigned has
duly executed this Agreement, Acknowledgment and Consent as of February 11,
2009.

      

      

      
        
          	 
      	 
      	
                  __________________________________

                
	 
      	 
      	
                  Alexander
      G. FassbenderExhibit
10.1

    

    
      
        
          
            
              
                
                  
                    
                      	
                              COMMERCIAL
      LINE OF CREDIT

                            	
                              Community
      Bank N.A.

                            
	
                              AGREEMENT
      AND NOTE

                            	
                              331
      West Pulteney Street

                            
	 
      	
                              Corning,
      New York 14830

                            
	 
      	
                              (607)
      937-5471

                            

                    

                  

                

              

            

          

        

      

    

     

     

    
      
        
          
            
              
                
                  
                    
                      	
                              LOAN
      NUMBER

                            	
                              AGREEMENT
      DATE

                            	
                              LOAN
      TERM

                            	
                              LINE
      OF CREDIT LIMIT

                            
	
                              C-08-10-062327

                            	
                              December
      10, 2008

                            	
                              On
      Demand

                            	
                              $8,000,000.00

                            
	
                              LOAN
      PURPOSE: Working
Capital

                            

                    

                  

                

              

            

          

        

      

    

     

     

    BORROWER
INFORMATION

     

    Corning
Natural Gas Corporation

    330
William Street, P. 0. 58

    Coming,
NY 14830-0058

     

    
      
        
 

    

    LINE OF CREDIT AGREEMENT AND
NOTE. This Commercial Line of Credit Agreement and Note will be referred
to in this document as the "Agreement."

     

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

     

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

     

    PROMISE TO PAY. For value
received, receipt of which is hereby acknowledged, the Borrower promises to pay,
on demand by Lender, the principal amount of Eight Million and 00/100 Dollars
($8,000,000.00) or such lesser amount as shall have been advanced by Lender,
from time to time, to or on behalf of Borrower under this Agreement, and all
interest and any other charges, including service charges, to the order of
Lender at its office at the address noted above or at such other place as Lender
may designate in writing.  The Borrower will make all payments in
lawful money of the United States of America.

     

    PAYMENT SCHEDULE. This
Agreement will be paid according to the following required payment schedule:
Beginning on January 1, 2009, monthly payments of accrued and unpaid interest.
All payments received by the Lender from the Borrower for application to the
Line of Credit may be applied to the Borrower’s obligations under the Line of
Credit in such order as determined by the Lender.

     

    INTEREST RATE AND SCHEDULED PAYMENT
CHANGES. The initial variable interest rate on this Agreement will be
3.261% per annum.  This interest rate may change on January 1, 2009,
and on the same day of each month thereafter.  Each date on which the
interest rate may change is called the "Change Date."  Beginning with
the first Change Date, Lender will calculate the new interest rate based on One
Month Libor Rate in effect on the Change Date (the "Index") plus 1.350
percentage points (the "Margin").  If the Index is not available at
that time, Lender will choose a new Index which is based on comparable
information.  The Index is used solely to establish a base from which
the actual rate of interest payable under this Agreement will be calculated, and
is not a reference to any actual rate of interest charged by any lender to any
particular borrower.

     

    
      
         

      

      
        Page 1 of
5

        
          

        

      

      
         

      

    

     

    Nothing
contained herein shall be construed as to require the Borrower to pay interest
at a greater rate than the maximum allowed by law.  If, however, from
any circumstances, Borrower pays interest at a greater rate than the maximum
allowed by law, the obligation to be fulfilled will be reduced to an amount
computed at the highest rate of interest permissible under applicable law and
if, for any reason whatsoever, Lender ever receives interest in an amount which
would be deemed unlawful under applicable law, such interest shall be
automatically applied to amounts owed, in Lender's sole discretion, or as
otherwise allowed by applicable law.  An increase in the interest
rates will result in a higher payment amount.  Interest on this
Agreement is calculated on a 365/360 day basis.  The unpaid balance of
this loan shall, after an Event of Default exists under this Agreement or any
other agreement related to the loan, be subject to a Default Rate of interest
equal to 2.000 percentage points over the applicable variable interest rate in
effect from time to time, calculated as described above in the section "Interest
Rate."

     

    LATE PAYMENT CHARGE. If any
required payment is more than 10 days late, then at Lender's option, Lender will
assess a late payment charge of $25.00 or 5% of the amount past due, whichever
is greater.

     

    LINE OF CREDIT
TERMS.  This Agreement is discretionary.  The
Borrower acknowledges and agrees that although the Borrower may from time to
time request an advance under this Agreement up to a maximum amount equal to the
Line of Credit Limit, the Lender in no way is obligated to make such advance and
all advances will be made by Lender in its sole and absolute discretion and
subject to the terms and conditions of this Agreement.

    

    Advances.

    

    
      	
               
      

            	
              ·

            	
              Advances
      under this Agreement may be requested orally or in writing by the Borrower
      or by an authorized person.

            

    

    
      	
               
      

            	
              ·

            	
              The
      total of all advances requested and unpaid principal cannot exceed Eight
      Million and 00/100 Dollars
($8,000,000.00).

            

    

    
      	
               
      

            	
              ·

            	
              All
      advances made will be charged to a loan account in Borrowers name on
      Lender's books, and the Lender shall debit such account the amount of each
      advance made to, and credit to such account the amount of each repayment
      made by Borrower. Lender shall provide to Borrower periodic statements of
      Borrower's loan account, which shall be deemed to be correct, accepted by,
      and binding upon Borrower unless Lender receives a written statement of
      exception from Borrower within 10 days after such statement is
      furnished.

            

    

     

    
      
         

      

      
        Page 2 of
5

        
          

        

      

      
         

      

    

     

    Suspension and
Termination.  Advances under this Agreement will be available
until the earlier to occur of (a) demand by the Lender; (b) the Line of Credit
is cancelled by Borrower; or (c) the occurrence of an Event of
Default.

     

    Loan Type
Conversion.  Provided no default or event of default shall have
occurred, the Borrower may, at its option, apply for conversion of this
Agreement into a Term loan 30 days prior to the Maturity Date. However, the
Lender shall have no obligation to approve the Borrower's
application.

     

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

    

    
      	
              
              

            	
              ·

            	
              Security
      Agreement - all business assets dated August 4,
  2005.

            

    

    
      	
              
              

            	
              ·

            	
              Security
      Agreement - assignment of trust fund dated November 28,
    2005.

            

    

    

    RIGHT OF SET-OFF. To the
extent permitted by law, Borrower agrees that Lender has the right to set-off
any amount due and payable under this Agreement, whether matured or unmatured,
against any amount owing by Lender to Borrower including any or all of
Borrower's accounts with Lender. This shall include all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future. Such
right of set-off may be exercised by Lender against Borrower or against any
assignee for the benefit of creditors, receiver, or execution, judgment or
attachment creditor of Borrower, or against anyone else claiming through or
against Borrower of such assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact that such
right of set-off has not been exercised by Lender prior to the making, filing or
issuance or service upon Lender of, or of notice of, assignment for the benefit
of creditors, appointment or application for the appointment of a receiver, or issuance
of execution, subpoena or order or warrant.

     

    PAYABLE ON
DEMAND.  This is a demand note.  Payment is due upon
Lender's demand.

     

    DEFAULT. Upon the occurrence
of any one of the following events (each, an "Event of Default" or "default" or
"event of default"), Lender's obligations, if any, to make any advances will, at
Lender's option, immediately terminate and Lender, at its option, may declare
all indebtedness of Borrower to Lender under this Agreement to be immediately
due and payable without further notice of any kind notwithstanding anything to
the contrary in this Agreement or any other agreement: (a) Borrower's failure to
make any payment on time or in the amount due; (b) any default by Borrower under
the terms of this Agreement or any other agreement, security agreement executed
in connection with this Agreement (individually, a "Loan Document" and
collectively, the "Loan Documents"); (c) any default by Borrower under the terms
of any other loan agreement, security agreement, mortgage or other document in
favor of Lender;
(d) the death, dissolution, or termination of existence of Borrower or any
guarantor; (e) Borrower is not paying Borrower’s debts as such debts become
due; (f) the
commencement of any proceeding under bankruptcy or insolvency laws by or against
Borrower or any guarantor or the appointment of a receiver; (g) any default
under the terms of any other indebtedness of Borrower to any other creditor; (h)
any writ of attachment, garnishment, execution, tax lien or similar instrument
is issued against any collateral securing the loan, if any, or any of Borrower's
property or any judgment is entered against Borrower or any guarantor; (i) any
part of Borrower's business is sold to or merged with any other business,
individual, or entity; (j) any representation or warranty made by Borrower to
Lender in any of the Loan Documents or any financial statement delivered to
Lender proves to have been false in any maternal respect as of the time when
made or given; (k) if any guarantor, or any other party to any agreement or
instrument with or in favor of Lender entered into or delivered in connection
with the Loan terminates, attempts to terminate or defaults under any such
agreement or instrument; (l) Lender has deemed itself insecure or there has been
a material adverse change of condition of the financial prospects of Borrower or
any collateral securing the obligations owing to Lender by Borrower Upon the
occurrence of an event of default, Lender may pursue any remedy available under
any Related Document, at law or in equity.

     

    
      
         

      

      
        Page 3 of
5

        
          

        

      

      
         

      

    

     

    RELATED
DOCUMENTS.  If this Agreement is secured by a security
agreement, mortgage, deed of trust, trust deed, security deed or loan agreement
of even or previous date, it is subject to all the terms thereof.

     

    GENERAL WAIVERS.  To
the extent permitted by law, the Borrower severally waives any required notice
of presentment, demand, acceleration, intent to accelerate, protest and any
other notice and defense due to extensions of time or other indulgence by Lender
or to any substitution or release of collateral. No failure or delay on the part
of Lender, and no course of dealing between Borrower and Lender, shall operate
as a waiver of such power or right, nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right.

     

    JOINT AND SEVERAL
LIABILITY.  If permitted by law, each Borrower executing this
Agreement is jointly and
severally bound.

     

    SEVERABILITY.  If a
court of competent jurisdiction determines any term or provision of this
Agreement is invalid or prohibited by applicable law, that term or provision
will be ineffective to the extent required. Any term or provision that has been
determined to be invalid or prohibited will be severed from the rest of this
Agreement without invalidating the remainder of either the affected provision or
this Agreement.

     

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

     

    ASSIGNABILITY.  Lender
may assign, pledge or otherwise transfer this Agreement or any of its rights and
powers under this Agreement without notice, with all or any of the obligations
owing to Lender by Borrower, and in such event the assignee shall have the same
rights as if originally named herein in place of Lender. Borrower may not assign
this Agreement or any benefit accruing to it hereunder without the express
written consent of the Lender.

     

    ORAL AGREEMENTS
DISCLAIMER.  This Agreement represents the final agreement
between the parties and may not be contradicted by evidence of prior contemporaneous or
subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.

     

    
      
         

      

      
        Page 4 of
5

        
          

        

      

      
         

      

    

     

    GOVERNING LAW.  This
Agreement is governed by the laws of the state of New York except to the extent
that federal law controls.

     

    HEADING AND
GENDER.  The headings preceding text in this Agreement are for
general convenience in identifying subject matter, but have no limiting impact
on the text which follows any particular heading. All words used in this
Agreement shall be construed to be of such gender or number as the circumstances
require.

     

    ATTORNEYS' FEES AND OTHER
COSTS.  If legal proceedings are instituted to enforce the
terms of this Agreement, Borrower agrees to pay alt costs of the Lender in
connection therewith, including reasonable attorneys' fees, to the extent
permitted by law.

     

    ADDITIONAL
PROVISIONS.  The Commitment Letter from Lender to Borrower
dated September 12, 2008, and its terms and conditions, together with the Line
of Credit Agreement dated December 10, 2008, are incorporated by reference and
made a part hereof with the same force and effect as if it were set forth
herein. In the event that any of the provisions contained in the Commitment
Letter or the Line of Credit Agreement conflict in whole or in part with the
provisions contained in this Commercial Line of Credit Agreement and Note, the
provisions contained in the Commitment Letter and Line of Credit Agreement shall
control.

     

    WAIVER OF JURY
TRIAL.  All
parties to this Agreement hereby knowingly and voluntarily waive, to the fullest
extent permitted by law, any right to trial by jury of any dispute, whether in
contract, tort, or otherwise, arising out of, in connection with, related to, or
incidental to the relationship established between them in this Agreement or any
other instrument, document or agreement executed or delivered in connection with
this Agreement or the related
transactions.

     

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

    

    Corning
Natural Gas Corporation

     

    
      
        
          
            
              	
                      /s/ Firouzeh Sarhangi

                    	 
      	
                      1/21/09

                    	 
      
	
                      By:
      Firouzeh Sarhangi

                    	 
      	
                       Date

                    	 
      
	
                      Its:
      Chief Financial Officer

                    	 
      	 
      	 
      

            

          

        

      
 

    
      
         

      

      
        Page 5 of
5

        
          

        

      

      
         

      

    

     

    
      	
              

               

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

            	 
      

    

     

    September
12, 2008

    

    Michael
German, President

    Corning
Natural Gas Corp.

    330 West
William Street

    Corning,
NY   14830

    

    Dear Mr.
German:

    

    I am
pleased to inform you that Community Bank, N.A. has approved the renewal and an
increase in the Line of Credit up to $8,000,000.  This approval is
subject to the following terms and conditions:

    

    
      	
              BORROWER:

            	
              Corning
      Natural Gas Corp.

            

    

    

    AMOUNT OF
LOAN:

    

    Under the
Line of Credit, the Borrower may borrow from time to time up to an aggregate
maximum amount of $8,000,000.

    

    
      	
              USE OF
      PROCEEDS:

            	
              Proceeds
      will be used to finance working capital
needs.

            

    

    

    INTEREST
RATE:

    

    Interest
will be charged on the outstanding principal balance at 30 day Libor Rate plus
1.35%, as published in the Wall Street Journal, with changes to occur
automatically with changes in the 30 day Libor Rate.

    

    PAYMENTS:

    

    Payments
of all interest accrued on the outstanding principal balance hereunder shall be
due on the first day of every month.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    ADVANCES:

    

    Advances
in excess of $4,000,000.00 will be limited to an amount equal to 100% of the
outstanding inventory.  This will be monitored at month-end only via
monthly inventory reports showing the volume, cost and market value of gas in
storage.

    

    EXPIRATION:

    

    This Line
of Credit will expire February 28, 2009, unless extended in writing by the
Bank.  All advances under the Line shall remain repayable upon
demand.

    

    LATE
CHARGE:

    

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

    

    COLLATERAL:

    

    The Line
of Credit shall be secured by:

    

    
      	
              1)

            	
              Assignment
      of trust fund.

            

    

    
      	
              2)

            	
              Accounts
      receivable, inventory and equipment.  It is understood that M
      & T Bank has a prior lien on the
equipment.

            

    

    

    LOAN
DOCUMENTS:

    

    Borrower
agrees to execute a revised Line of Credit Agreement.  This Line of
Credit Agreement will include but not be limited to the following
covenants:

    

    
      	
              1)

            	
              Borrower
      is to maintain a leverage ratio of less then 4 to 1.  This
      requirement will be measured annually based on the audited financial
      statements starting with the fiscal year ending
  9/30/08.

            

    

    

    
      	
              2)

            	
              Borrower
      is prohibited from paying cash dividends or stock buy-backs until its
      actual regulated capital structure supports an equity ratio of 70%
      debt/30% equity.

            

    

    

    
      	
              3)

            	
              Borrower
      is to maintain a net worth of at least $8,000,000.  This
      requirement will be measured annually based on the audited financial
      statements starting with the fiscal year ending
  9/30/08.

            

    

    

    STATEMENTS:

    

    Borrower
agrees to furnish, within 90 days after the end of your fiscal year, an audited
financial statement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Borrower
shall also furnish to us your unaudited financial statements not more than
thirty (30) days after the close of each quarter.

    

    Borrower
shall furnish to us natural gas inventory volumes, cost and market value on a
monthly basis when this line of credit is over $4,000,000 at month
end.

    

    WARRANTY:

    

    Borrower
warrants that all matters, documents and instruments furnished to the Bank and
upon which this commitment is based, including without limitation, financial
statements are complete and that there has been no material omission
therefrom.

    

    FURTHER
ASSURANCES:

    

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

    

    SURVIVAL:

    

    The terms
and conditions of this letter shall survive the closing of the Line of
Credit.

    

    ADVERSE
CHANGES:

    

    This
commitment is contingent upon there being no materially detrimental or adverse
change in the financial condition of the Borrower prior to closing of the Line
of Credit.

    

    ASSIGNABILITY/ACCEPTANCE:

    

    This
commitment is not assignable and will expire in the event it is not accepted and
returned to Community Bank, N. A. on or before September 30, 2008.

    

    Thank you
for giving us the opportunity to make this commitment available to
you.

    

    Sincerely,

    

    COMMUNITY
BANK, N.A.

    

    /s/
Thomas F. Beers

    Thomas F.
Beers

    Vice
President

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ACCEPTANCE AND
CONFIRMATION

    

    

    We hereby
accept and confirm the conditions of this commitment dated September 12,
2008.

    

    

    CORNING NATURAL GAS
CORP.

     

     

    
      
        	By:	
                /s/ Michael German

              	 	9/12/08
	 	Michael German,
      President      	 	Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}]]