INTERCREDITOR
AGREEMENT
THIS INTERCREDITOR AGREEMENT is made as of this 6th day of
December, 2005 by and among KEYSPAN ENERGY ("KeySpan")
having principal offices located at One Metro Tech Center,
Brooklyn, New York 11201, COMMUNITY BANK, N.A. , having
offices located at 240 South Hamilton Street, Painted Post, New
York 14870 ("Community Bank"), CORNING NATURAL GAS
CORPORATION , a New York business corporation having principal
offices located at 330 West William Street, Corning, New York 14830
("Corning"), and CONOCOPHILLIPS COMPANY , a
Delaware corporation having principal offices located at 600 North
Dairy Ashford, Houston, Texas, 77079 ("Conoco").
WHEREAS, Community Bank has, pursuant to a Promissory Note, Term
Loan Agreement, Line of Credit Agreement, and various related
instruments (as amended and in effect from time to time, including
any replacement agreement therefor, and all other documents made or
to be made and delivered by Corning to Community Bank pursuant to
said Term Loan Agreement and Line of Credit Agreement, together
referred to herein and therein as the "Loan Documents"), upon the
terms and subject to the conditions contained therein, previously
made and/or may from time to time hereafter agree to make loans to
Corning, or fund Corning&s purchase of natural gas supplies, in
any amount or amounts (the "Loans") which Loans are partially
secured by accounts receivable of Corning; and
WHEREAS, each of Conoco and KeySpan wish to sell natural gas
supplies to Corning for the period December 1, 2005 through March
31, 2006, but require Corning to provide security for Corning&s
payment for such gas supplies in the form of a security interest in
such supplies provided respectively by Conoco and KeySpan and in
the proceeds of such supplies, which proceeds would include, but
are not limited to, the accounts receivable and cash arising out of
the sale of such gas by Corning (the "Purchase Money Security
Interest"); and
WHEREAS, it is a condition precedent to the willingness of each of
Conoco and KeySpan to sell or continue to sell natural gas supplies
to Corning and of Community Bank to continue the Loans to Corning
that Corning, Conoco, KeySpan and Community Bank (together referred
to as the "Parties," such Parties other than Corning referred to
together as the "Secured Parties") enter into this Agreement;
and
WHEREAS, on the terms set forth in this Agreement, Community Bank
has agreed to consent to Corning&s grant of the Purchase Money
Security Interests and the Secured Parties have agreed to certain
other rights, priorities and interests among themselves, including
but not limited to their respective rights in Corning&s natural
gas delivered after November 28, 2005 and the proceeds thereof,
including accounts receivable and Proceeds and the mechanism for
each of the Secured Parties to realize such security if
necessary.
NOW, THEREFORE, in consideration of the foregoing, the mutual
agreements herein contained and other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the Parties hereto, intending to be legally bound,
hereby agree as follows:
1.
Definitions . The following terms shall have the
meanings indicated below:
" Commodity Related ARs and Payments " means that portion of
Corning&s total accounts receivable and payments thereon
(expressed in dollars) as is calculated by Corning each month
during the effectiveness of this Agreement which is the
mathematical product of (a) the ratios of commodity charges to
Corning&s total charges to customers and (b) Corning&s
total accounts receivable and payments thereon for such month.
" Distribution Related ARs and Payments " means that portion
of Corning&s total accounts receivable and payments thereon
(expressed in dollars) as is calculated by Corning each month
during the effectiveness of this Agreement which is the
mathematical product of (a) the ratios of distribution charges to
Corning&s total charges to customers and (b) Corning&s
total accounts receivable and payments thereon for such month.
" Proceeds " means Corning&s accounts receivable
allocated to a particular supply of gas and cash collected on such
accounts receivable.
" Purchase Money Security Interest " means the security
interest granted by Corning to each of the respective Secured
Parties in the natural gas made available by such Secured Party as
described in this Agreement and the Proceeds of such natural gas
supplies.
" Secured Parties " means Community Bank, Conoco and
KeySpan.
All other defined terms shall have the meaning set forth in the
provisions hereof, or in a specifically referenced document.
2.
Gas Supplies-Purchase Money Security Interests .
(a)
Conoco Gas Supplies . With respect to supplies of
natural gas that are obtained from Conoco, Corning shall provide to
Conoco a Purchase Money Security Interest in such gas and the
Proceeds thereof, including Corning&s accounts receivable
arising from the sale by Corning of such gas. Such security
interest shall have priority to claims of the other Secured
Creditors as discussed in Section 2.d. hereof.
(b)
KeySpan Gas Supplies . With respect to supplies of
natural gas that are obtained from or financed by KeySpan, Corning
shall provide to KeySpan a Purchase Money Security Interest in such
gas and the Proceeds thereof, including Corning&s accounts
receivable arising from the sale by Corning of such gas. Such
security interest shall have priority to claims of the other
Secured Creditors as further discussed in Section 2.d. hereof.
(c)
Storage Gas Supplies . The payment and security
arrangements with respect to supplies of natural gas that are
obtained from Sprague Energy ("Storage Gas") are as follows:
Payments for such supplies are funded by Community Bank without
recourse to KeySpan; title for the supplies shall transfer from
Sprague Energy to KeySpan. Corning shall provide to KeySpan a
purchase money security interest in such gas (the "Storage Gas
Purchase Money Security Interest") and the proceeds thereof,
including Corning&s accounts receivable arising from the sale
by Corning of such gas, as further described in Section 2.d.
hereof. Upon Community Bank&s payment of the purchase price to
Sprague Energy, KeySpan shall immediately transfer title to such
storage gas to Corning and KeySpan shall transfer the Storage Gas
Purchase Money Security Interest to Community Bank. Corning shall
repay the purchase price for such supplies to Community Bank.
KeySpan shall have no obligation to Community Bank as a result of
this agreement under any theory of law or equity. Keyspan makes no
representation or warranty regarding the validity, priority or
enforceability of the Storage Gas Purchase Money Security Interest
being transferred to Community Bank. Transfer of title to Storage
Gas from Sprague ultimately to Corning and transfer of security
interests from Corning ultimately to Community Bank shall be deemed
to occur by operation of this Agreement and related assignments of
such rights and interests are hereby implemented. Actual physical
possession of the storage gas and related security interests by
KeySpan, as well as any attendant liabilities, is not
contemplated.
(d)
Allocation of Priority Interests . To the extent it
may be necessary, each of the Secured Parties subordinates its
rights in Corning&s natural gas and Proceeds, including
accounts receivable, to allow the other two Secured Parties a first
security interest in that portion of Corning&s natural gas and
Proceeds, including accounts receivable, as is warranted by the
respective Secured Parties& extension of credit on or after
November 28, 2005 by means of loan or forbearance from requiring
pre-payment for natural gas supplies. On a monthly basis, Corning
will estimate the portions of its total charges for that month that
are, respectively, distribution and commodity-related. Corning
shall provide the Secured Parties with the estimate and the
documentation upon which it was based no later than the third day
of the following month. Based on such allocation, Community Bank
will hav
