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Item 1.01
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Entry into a Material Definitive Agreement.
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On August 31, 2020, Corning Natural Gas Corporation
(“Corning Gas”), a wholly-owned subsidiary of Corning Natural Gas Holding Corporation, obtained a loan (the “Loan”)
from M&T Bank, a New York banking corporation (“M&T”). Corning Gas will use the Loan for 2020 capital expenditures
and to pay down $250,000 of existing indebtedness with M&T. Corning Gas can borrow up to $3.718 million under the Loan through
October 31, 2020, when the outstanding balance will convert to a fixed ten-year term loan.
To evidence the Loan, Corning Gas issued a
multiple disbursement term note to M&T in the principal amount of $3.718 million (the “Note”). Before converting
to a term loan, the Note bears interest at a rate equal to 3% plus the greater of 0.5% or the one-month LIBOR rate. After October
31, 2020, the Note will bear interest at a fixed rate equal to the then reported rate applicable to ten-year U.S. Treasury obligations,
plus 2.9%. The Note will then be payable in 119 equal monthly installments with an additional final installment of unpaid principal
and interest due of November 30, 2030 (the “Maturity Date”). The Note may be prepaid upon payment of a prepayment premium.
In connection with the Loan, Corning Gas entered
into a fourth amended replacement and restated credit agreement with M&T (the “Credit Agreement”). The Credit Agreement
contains various affirmative and negative covenants of Corning Gas including, among others: (i) a “Total Funded Debt to Tangible
Net Worth” ratio of not greater than 1.40 to 1.0; and (ii) a “Total Funded Debt to EBITDA” ratio of not greater
than 3.75 to 1.0, and (iii) a minimum “Cash Flow Coverage” of not less than 1.10 to 1.0; in each case measured quarterly
based on Corning Gas’s trailing twelve month operating performance and fiscal quarterly financial statements; delivery of
compliance and financial statement requirements; and prohibitions on any sale of all or substantially all of its assets, acquisitions
of substantially all the asset of any other entity, doing business under any assumed name, material changes to its business, purposes,
structure or operations which could materially adversely affect Corning Gas, or any merger, consolidation or other similar transaction.
Events of default under the Credit Agreement
and Note which permit M&T to exercise its remedies, including immediate acceleration of the principal and interest on the Note,
include, among others: (i) default in the payment of principal or interest on the Note, (ii) default by Corning Gas on any other
obligation under the Credit Agreement and related documents, (iii) failure to pay when due in any other obligations of Corning
Gas which could result in the acceleration of that obligation, (iv) entry of any judgments or order of any court or governmental
entity against Corning Gas, (v) various bankruptcy and insolvency events, (vi) any adverse change in Corning Gas, its business,
assets, operations, affairs or condition which M&T determines will have a material adverse effect on Corning Gas, its business,
assets, operation or condition (financial or otherwise) or on its ability to repay its debts, and (vii) at any time M&T in
good faith considers itself insecure with respect to payment of Corning Gas’s obligations to it or other performance of such
obligations.
In connection with the Loan, Corning Gas entered
into general security agreement with M&T (the “Security Agreement”). The Security Agreement secures all obligations
of Corning Gas to M&T including, without limitation, principal and interest on the Note and any fees and charges. The security
interest granted under the Security Agreement covers all personal property of Corning Gas including, among other things, accounts,
deposit accounts, general intangibles, inventory, and all fixtures, including, among other things, pipelines, easements, rights
of way and compressors in Corning Gas’s gas distribution system. The Security Agreement contains various representations,
warranties, covenants and agreements customary in security agreements and various events of default substantially similar to those
in the Credit Agreement with remedies under the New York Uniform Commercial Code and the Security Agreement.
The Note, Credit Agreement and Security Agreement
are filed as exhibits to this Current Report on Form 8-K. The descriptions above are qualified in their entirety by reference to
the full text of these documents.