CORNING NATURAL GAS CORP (Form: 10-Q, Received: 08/12/2009 15:36:11)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-00643

CORNING NATURAL GAS CORPORATION

(Exact name of Registrant as specified in its charter)

New York	16-0397420
(State of incorporation)	(I.R.S. Employer Identification No.)

330 West William Street, Corning, New York 14830

(Address of principal executive offices) (Zip Code)

(607) 936-3755

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer", "non-accelerated filer" and "smaller reporting company" in rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-accelerated Filer [ ] Smaller Reporting Company [X]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of Shares outstanding of the issuer's common stock as of the latest practicable date.

Common Stock, $5.00 par value	1,010,356
Class	Shares outstanding as of August 12, 2009

As used in this Form 10-Q, the terms "Company," "Corning," "Registrant," "we," "us," and "our" mean Corning Natural Gas Corporation and its subsidiary, taken as a whole, unless the context indicates otherwise. Except as otherwise stated, the information contained in this Form 10-Q is as of June 30, 2009.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

Notes to Consolidated Financial Statements

Note A - Basis of Presentation

The information furnished herewith reflects all adjustments, which are in the opinion of management necessary to a fair statement of the results for the period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading.

The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. These unaudited interim consolidated financial statements have not been audited by a firm of certified public accountants.

It is the Company's policy to reclassify amounts in the prior year financial statements to conform to the current year presentation.

Subsequent events were evaluated through August 12, 2009, the date these financial statements were issued.

Note B - New Accounting Standards

In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141(R), "Business Combinations." SFAS 141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended September 30, 2010. The Company is currently evaluating the impact of SFAS 141(R) on its consolidated financial statements but does not expect it to have a material effect.

In December 2007, FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51." SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. As such, the Company is required to adopt these provisions at the beginning of the fiscal year ended September 30, 2010. The Company is currently evaluating the impact of SFAS 160 on its consolidated financial statements but does not expect it to have a material effect.

In March 2008, FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133." SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early application encouraged. The Company is required to adopt these provisions at the beginning of the fiscal year ended September 30, 2010. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements but does not expect it to have a material effect.

In May 2008, FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. SFAS 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company is currently evaluating the impact of SFAS 162 on its consolidated financial statements but does not expect it to have a material effect.

In May 2008, FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60" ("SFAS 163"). SFAS 163 interprets Statement 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that Statement. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. The Company is required to adopt these provisions at the beginning of the fiscal year ended September 30, 2010. The Company is currently evaluating the impact of SFAS 163 on its consolidated financial statements but does not expect it to have a material effect.

In May 2009, FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"). SFAS 165 establishes principles and requirements for subsequent events. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The Company is required to adopt this standard in the current period. Adoption of SFAS 165 did not have a significant effect on the Company's consolidated financial statements.

In June 2009, FASB issued SFAS No. 166 "Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140" ("SFAS 166"). SFAS 166 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. SFAS 166 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company is required to adopt this standard in October 2010. The Company is evaluating the impact the adoption of SFAS 166 will have on its consolidated financial statements.

In June 2009, FASB issued SFAS No. 167 "Amendments to FASB Interpretation No. 46(R)" ("SFAS 167"). SFAS 167 improves financial reporting by enterprises involved with variable interest entities and to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities", as a result of the elimination of the qualifying special-purpose entity concept in SFAS 166 and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise's involvement in a variable interest entity. SFAS 167 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The Company is required to adopt this standard in October 2010. The Company is evaluating the impact the adoption of SFAS 167 will have on its consolidated financial statements.

In June 2009, FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles." SFAS 168 replaces SFAS 162 and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company is currently evaluating the impact of SFAS 168 on its consolidated financial statements but does not expect it to have a material effect.

Note C - Statement of Other Comprehensive Income (Loss)

Note D - Pension and Other Post-retirement Benefit Plans

Components of Net Periodic Benefit Cost:

Contributions

The Company expects to contribute $502,252 to its Pension Plan and $84,334 to its other Post Retirement Benefit Plan in fiscal year 2009. A total of $170,413 has been paid to the Pension Plan for the first nine months of this fiscal year.

Note E - Rate Case

On March 27, 2009, Corning Natural Gas Corporation, the Staff of the New York Department of Public Service, the Village of Bath Electric, Gas and Water Systems and multiple interveners (representing large industrial customers in the Company's service area) entered into and filed with the New York Public Service Commission ("NYPSC") a settlement agreement (the "Joint Proposal") in the Company's current gas rate case, Case 08-G-1137. The Joint Proposal, if adopted by the Commission, would, starting in September 2009, raise delivery base rates by $972,794. The Joint Proposal includes the establishment of a Merchant Function Charge ("MFC") for the commodity-related costs of natural gas service. The MFC surcharge is separate from the delivery base rate increase and would collect $523,538. The Joint Proposal also establishes a process to adjust rates in September 2010 for new capital expenditures and property taxes, as well as establishing a "revenue decoupling mechanism," intended to encourage conservation, and a sharing formula for "producer revenues," the revenues derived from service provided to natural gas producers in the Corning area. The Joint Proposal also continues certain infrastructure and safety mandates. On July 16, 2009 the NYPSC approved the Joint Proposal as submitted by the parties. However, the NYPSC added a provision that would establish an earnings sharing mechanism ("ESM") for Corning. The ESM provides for sharing of revenues between customers and Corning if the Company's average earned return on equity for rate years one and two exceeds an earnings sharing threshold of 11.85 percent. The customers would receive 50 percent of earnings exceeding 11.85 percent, 75 percent of earnings exceeding 14.1 percent, and 90 percent of earnings exceeding 16.1 percent. In order to give the Company an opportunity to be heard on the ESM proposal, the Commission issued a show cause order as to why the NYPSC should not adopt an ESM. The Company will have an opportunity to comment on the ESM proposal. The Company has filed comments opposing the ESM proposal. The NYPSC will consider the Company's comments and determine if the ESM proposal should be implemented or modified at its August 2009 session.

Note F - Financing Activities

On May 7, 2008, we entered into a credit agreement with M&T Bank to provide for a $6.0 million note for the purpose of retiring a $3.1 million first mortgage and an unsecured senior note in the amount of $1.5 million. The remaining proceeds were used to fund construction projects related to furnishing natural gas within the Company's service area. This note was converted to a long term loan on October 16, 2008, with an interest rate of 5.96%. In October 2008, we obtained $1.0 million of financing in a form of Demand Note from M&T Bank to help with the cost of our new construction. Interest on this loan is payable on the monthly basis at the rate equal to 1% above the prime rate. The initial interest rate on this loan was 5.5% and was 4.25% at the end of June of 2009.

Note G - Director Compensation

On April 1, 2008, the board of directors agreed to increase the compensation for all board members from 50 shares of our restricted common stock for each quarter of service as a director to 150 shares of our restricted common stock for each quarter of service as a director. The shares awarded will become unrestricted upon a director leaving the board. Directors who also serve as officers of Corning are not compensated for their service as directors. In the first quarter of fiscal 2009, directors were issued compensatory shares for service from January 2007 through March 2008. Directors were issued compensatory shares for service from April 2008 to March 2009 on April 1, 2009. Information regarding shares of restricted stock awarded to directors in fiscal 2009 is summarized below.

We also recognized in March 2009, 100 shares valued at $15.35 a share, that were paid to Robert J. Pollock for two consecutive quarters for service to the Board of Directors, January 2007 through May 2007.

Note H - Fair Value Measurements

The Company has determined the fair value of certain assets through application of SFAS No. 157, " Fair Value Measurements."

Fair value of assets and liabilities measured on a recurring basis at June 30, 2009 and 2008 are as follows:

Gains and losses included in earning for the periods reported in investment income as follows:

Financial assets and liabilities valued using level 1 inputs are based on unadjusted quoted market prices within active market.

Note I - Stock Options

On November 5, 2007, the Board of Directors granted stock options to the Company President and Chief Executive Officer totaling 75,000 shares. 25,000 of the stock options were vested immediately and 25,000 additional options vest on each of the 1 ^st and 2 ^nd anniversary of the grant date. The Company is recognizing $29,157 quarterly, a total of $116,628 expense for the fiscal year 2009, using the Black-Scholes option pricing model for the 25,000 shares that vested on November 5, 2008.

Note J - Rights Offering

During the third quarter of 2007 we conducted a rights offering. The rights offering provided holders of our common stock with the right to purchase, at the price of $16.00, one "investment unit" for each share of common stock held. Each investment unit consists of one share of common stock and one four-year warrant to purchase .7 shares of our common stock at a price of $19.00. The rights offering resulted in warrants being issued for 211,842 shares. On July 1, 2009, we amended the warrant agreement to reduce the exercise price of the warrants to $15.00 a share from July 6, 2009 to August 5, 2009. After August 5, 2009, the exercise price returned to $19.00 a share. Corning's board of directors elected to reduce the exercise price in order to increase the likelihood that the warrants would be exercised in the near term. During the month in which the exercise price was reduced, warrants to purchase 185,756 shares were exercised, comprising 87.7% of the outstanding warrants. We received $2,786,340 in connection with the warrant exercises. This capital will be used to support our business plan.

On August 3, 2009, Richard M. Osborne, a significant shareholder of Corning and the former chairman of our board of directors, brought an action against Corning and Registrar and Transfer Company, the transfer agent for our warrants, in the United States District Court for the Western District of New York, Rochester Division, seeking to enjoin the closing of the warrant exercises. In his complaint Mr. Osborne claims that Corning's board did not have the authority to amend the warrant agreement to reduce the exercise price. On August 4, 2009, Judge Michael A. Telesca heard oral arguments of the parties and denied Mr. Osborne's request for a temporary restraining order. Although the case is still pending, we believe Mr. Osborne's claims are without merit and intend to vigorously defend the suit.

Note K - 311 Filing

On July 27, 2009, the Company filed a Notice of Rate Election and a Statement of Operating Conditions Docket No. PR09-30-000 for NGPA section 311 firm transportation service pursuant to sections 284.123(b)(ii) and 284.123(e) of the Federal Energy Regulatory Commission's regulations. This filing will allow Corning to transport excess local production volumes into the interstate transmission system.

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our primary business is natural gas distribution. We serve approximately 14,500 customers through 400 miles of pipeline in the Corning and Hammondsport, New York areas. Residential growth in our service territory is dependent on overall economic activity. Corning Inc., the largest employer in our service area, announced this year a reduction in work force locally. In aggregate the Company has not seen any meaningful change in billing to large customers to date. The Company's major growth opportunities exist in extending our mains to areas not currently served by natural gas, as well as connecting to local gas production. During fiscal 2009, the Company completed construction on its 1.8 mile long 10" steel distribution pipeline in the Town of Caton to interconnect with Marcellus Shale gas production located in Pennsylvania. This pipeline has been operational since late January. We also completed construction on a 1.2 mile long 6" HDPE distribution pipe to feed a commercial asphalt plant in the Town of Bath and began supplying gas to the plant for the 2009 construction season in May 2009.

We are also in the process of making capital investments to improve our infrastructure including upgrading our distribution system through replacement of distribution mains and customer service lines. The Company has designated seven miles of bare steel pipe and 400 bare steel services for replacement during calendar year 2009 in addition to replacing and/or upgrading portions of two major supply pipelines. Additionally the Company will continue toward its goal to end the calendar year with 10 or less repairable leaks remaining on our books.

Our key performance indicators are net income, stockholders' equity and the safety of our system. For the three months ended June 30, 2009 net income was comparable to the same period in 2008 because lower revenues were offset by lower overall expenses. Higher earnings for the nine month period in 2009 were primarily the result of a decrease in interest expense offset partly by a loss in investment income. As a regulated utility company, stockholders' equity is an important performance indicator. The New York Public Service Commission ("NYPSC") allows us to earn a just and reasonable return on stockholders' equity. Stockholders' equity is therefore a precursor of future earnings potential. For the 2009 fiscal year to date, stockholders' equity increased from $9.96a share to $10.79 a share. We currently plan to continue our focus on building stockholders' equity. Safety and efficiency indicators include leak repair, main and service replacements and customer service metrics. With regards to the safety indicators that are tracked in 2009 the Company continued its effort to improve the gas system. For the third fiscal quarter of 2009 we repaired 16 leaks, replaced 170 bare steel services and replaced 15,460 feet of bare steel main.

Revenue and Margin

Utility operating revenue decreased $2,250,147 in the three months ended June 30, 2009 compared to the same period last year and $735,751 in the nine months ended June 30, 2009 compared to the prior year, due to lower gas costs. The most significant change in gas costs has occurred in the last three months. The average price of commodity gas has averaged $5.63 a mcf for the third quarter this year compared to an average of $11.68 for the same period last year.

Margin percentage increased 23.19% for the three months ended June 30, 2009 compared to the same period last year primarily because of lower gas costs, a favorable GAC adjustment and local production revenues. Our margin percentage increased 2.22% for the nine months ended June 30, 2009 compared to the nine months ended June 30, 2008 mainly due to lower gas costs and local production revenues.

Operating Expenses

Gas supply is our largest expense. We entered into a gas management agreement with Atmos Energy Marketing, LLC starting July 1, 2008 that continues until March 31, 2010. Purchased gas expense decreased $2,118,713 to $1,221,310 in the three months ended June 30, 2009 compared to $3,340,023 in the same period last year due primarily to lower gas cost and favorable GAC adjustments for the period. This is also the main reason for the decrease of $922,323 in purchase gas expense for the first nine months of fiscal 2009 compared to the first nine months of fiscal 2008. Other operating and maintenance expense increased in the third quarter of fiscal 2009 to $1,576,220 compared to $1,457,602 in the same quarter of 2008 due primarily to expense recognized this quarter for stock options and directors' fees. These are the main reasons for the increase of $272,459 for operating and maintenance expense for fiscal 2009 to date compared to 2008. Depreciation expense increased to $198,097 in this quarter of 2009 from $170,308 in 2008 and $575,621 this year to date from $519,170 in 2008 due to increased investment in plant property and equipment. Interest expense decreased from $556,357 to $206,960 for the quarter and from $1,408,694 to $661,922 for the first nine months primarily due to refinancing activities and lower interest rates on variable rate debt.

Net Income

Net income decreased to $25,503 for the three months ended June 30, 2009 compared to $26,937 for the same period last year because lower revenues were partially offset by lower total expenses including a change from income tax expense of $58,858 in 2008 to a benefit of $182,718 in 2009. Earnings increased $83,279 for the nine months ended June 30, 2009 over the nine months ended June 30, 2008. The increase is primarily attributable to a decrease in interest expense of $746,772, offset in part by a loss of $161,919 for the nine months ended June 30, 2009 on realized gains (losses) plus interest and dividend income earned on investments compared to a gain of $376,091 for the comparable period last year.

Liquidity and Capital Resources

Internally generated cash from operating activities consists of net income, adjusted for non-cash expenses and changes in operating assets and liabilities. Non-cash items include depreciation and amortization; gain on sale of securities and deferred income taxes. Over or under recovered gas costs significantly impact cash flow. In addition, there are significant year-to-year changes in regulatory assets that impact cash flow.

Capital expenditures are the principal use of internally generated cash flow. Capital expenditures have historically exceeded $1.0 million annually and have increased significantly due to an infrastructure investment mandate in our December 2007 rate order. In the first nine months of fiscal year 2009 alone we have invested $3.1 million to improve our infrastructure, including upgrading our distribution system through replacing mains and customer service lines as well as two major expansion projects.

Cash flows from financing activities consist of repayment of long-term debt and borrowings and repayments under our lines-of-credit. For our consolidated operations, we have an $8 million line of credit with an interest rate of the greater of 4.0% or 2.25 basis points above LIBOR . The amount outstanding under this line on June 30, 2009 was $4.7 million. Collateral assignments have been executed which assign to the lender various rights in the investment trust account. In addition, our lender has a purchase money interest in and to all natural gas purchases by us utilizing funds advanced by the bank under the line-of-credit agreement and all proceeds of sale thereof and accounts receivable pertaining to such sale. We rely heavily on our credit lines to finance gas purchases that we place in storage.

We have $10.1 million in long term debt outstanding. We repaid $472,052 in the first nine months of 2009 consistent with the requirements of our debt instruments and refinancing activities. On May 7, 2008, we entered into a credit agreement with M&T Bank to provide for a $6.0 million note for the purpose of retiring a $3.1 million first mortgage and an unsecured senior note in the amount of $1.5 million. The remaining proceeds were used to fund construction projects related to furnishing natural gas within the Company's service area. This note was converted to a long term loan on October 16, 2008, with an interest rate of 5.96%. Great West Life & Annuity Insurance Company, the holder of the Company's $4.7 million 7.9% Senior Notes dated as of September 1, 1997, believes that the refinancing with M&T Bank may breach the negative covenants contained in the 1997 note agreement. As a result, Great West claims that the note holders are entitled to share in the security interest the Company has granted to M&T Bank. Great West is currently in discussion with the Company to resolve this matter. However we cannot guarantee that Great West will not call a default under our senior notes, which would significantly impair our financial position.

During this quarter we are mainly injecting gas into storage and by June 30, 2009, had a balance of $1,183,038 worth of gas in storage. We anticipate that we will have sufficient gas to supply our customers for the current winter season.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

Contractual Obligations

In September 2008, we refinanced a line of credit and a term loan with banks in order to increase our credit limit and decrease interest expense. The limit on the line of credit was increased from $7.0 million to $8.0 million. The line of credit was renewed on June 5, 2009 at the rate of the greater of 4.0% or 30 days LIBOR plus 2.25%. The interest rate on this loan will be adjusted monthly and was 4.0% at June 30, 2009. We believe we are in compliance with the financial covenants in these debt instruments as of June 30, 2009.

In October 2008, we obtained $1.0 million of financing in a form of demand note from M&T Bank to help with the cost of our new construction. Interest on this loan is payable on the monthly basis at the rate equal to 1% above the prime rate. The initial interest rate on this loan was 5.5% and was 4.25% as of March 31, 2009.

Regulatory Matters

Energy Efficiency

On June 23, 2008, the NYPSC issued an order in Case 07-M-0548 Proceeding on Motion of the Commission Regarding an Energy Efficiency Portfolio Standard ("EEPS"). In that order, as amended on July 3, 2008, the NYPSC determined that a Gas System Benefits Charge ("GSBC") should be established for New York gas utilities that have 14,000 customers or more. As such, Corning was required to establish a GSBC effective October 1, 2008 and collect from its customers $148,647 annually until December 31, 2011. One quarter of the annual amount was collected from October to December of 2008 and we began collecting the full amount in January 2009. These funds will be used for NYPSC approved energy efficiency initiatives in the Corning franchise area. The funds collected will be disbursed and reconciled to energy efficiency expenditures annually. Any over or under collection will be included in the GSBC rate determination for the following year. The additional revenues collected through the GSBC will not impact income from operations. The Company's plan was approved in Case 08-G-1010 dated April 7, 2009 and was implemented on July 1, 2009.

Deferred Interest Petition

On August 22, 2008, in Case 06-G-0064 the NYPSC denied our request filed on January 12, 2007 for deferral of interest cost in excess of the amount allowed in rates for the fiscal year ended September 30, 2006. The deferral request was $573,183. The Company on September 14, 2008 petitioned for re-hearing of the Commission decision in Case 06-G-0064 on the grounds that the Commission erred in its conclusion the interest expense was neither incremental nor extraordinary and therefore did not qualify for deferral and recovery under current Commission guidelines. Action by the Commission on the Company's re-hearing request is still pending and is unknown at this time.

New Franchise

The Virgil Town Board granted the Company a franchise to provide natural gas service to the Town of Virgil, New York on March 12, 2009. The Town of Virgil is the home of a ski resort/recreation complex. The Company has a contract to provide gas transportation to the complex. The Company filed Case 09-G-0252, a petition seeking approval of the Virgil franchise, with the NYPSC on March 20, 2009. The Virgil franchise petition was approved by the Commission on June 19, 2009 with certain conditions that were unacceptable to the Company. The Company on July 3, 2009 petitioned for re-hearing on the Commission decision. The Commission reissued its Virgil Order with certain modifications that were acceptable to the Company on July 21, 2009. Construction started the first week of August on this project.

Dividends

On March 13, 2009, the NYPSC in Case 07-G-0772 lifted the prohibition on the payment of dividends on the Company's common stock. The Company declared a quarterly dividend of $0.12 per share, and paid the second quarter dividend on July 15, 2009, to shareholders of record as of June 30, 2009.

Temporary State Energy and Utility Service Conservation Assessment

Effective July 1, 2009, the rates and charges under Service Classifications SC1, SC2, SC5, SC6, SC7 and SC14 and contract customers will be increased by a surcharge to recover the Temporary State Energy And Utility Service Conservation Assessment imposed pursuant to Chapter 59 of the Laws of 2009, Public Service Law Section 18-a(6). The surcharge will be determined according to Commission "Order Implementing State Assessment" issued June 19, 2009 in Case 09-M-0311. The surcharge will be set forth on the company's State Assessment Surcharge Statement. This assessment will be in effect from April 1, 2009 to March 31, 2014 and collected funds will be remitted directly to the New York State's General Fund. The first year assessment of $1.1 million (April 1, 2009 to March 31, 2010) will be due and payable on September 15, 2009. Thereafter payments will be made on a semi-annual basis in March and September for subsequent tax years. To ameliorate the impact of the first year payment on the Company's cash flow, the Company filed on June 30, 2009, on an emergency basis, a petition with the Commission to recover the assessment associated with all customers other than residential customers over a nine month period instead of a twelve month period. The Company in its petition proposed to collect the assessment on residential customers over the months of July and August via a fixed customer charge. The Commission in Case 09-G-0546 issued on July 24, 2009, granted the Company's petition in part. The Commission approved recovery of the assessment over the nine month period proposed by the Company. However, it denied the Company's request to collect the residential assessment over the months of July and August. Instead, it required the Company to collect the residential amount over the nine month period similar to all other customer classes on a per MCF basis. The Commission assessment, including any carrying costs (finance charges), is fully recoverable from customers and will have no impact the Company's earnings.

Critical Accounting Policies

Our significant accounting policies are described in the notes to the Consolidated Financial Statements in the Company's Form 10-K for the year ended September 30, 2008, filed on December 19, 2008. It is increasingly important to understand that the application of generally accepted accounting principles involve certain assumptions, judgments and estimates that affect reported amounts of assets, liabilities, revenues and expenses. Thus, the application of these principles can result in varying results from company to company. The most significant principles that impact us are discussed below.

Accounting for Utility Revenue and Cost of Gas Recognition

We record revenues from residential and commercial customers based on meters read on a cycle basis throughout each month, while certain large industrial and utility customers' meters are read at the end of each month. We do not accrue revenue for gas delivered but not yet billed. We do not currently anticipate adopting unbilled revenue recognition and we do not believe it would have a material impact on our financial results. Our tariffs contain mechanisms that provide for the recovery of the cost of gas applicable to firm customers, which includes estimates. Under these mechanisms, we periodically adjust our rates to reflect increases and decreases in the cost of gas. Annually, we reconcile the difference between the total gas costs collected from customers and the cost of gas. We defer any excess or deficiency and subsequently either recover it from, or refund it to, customers over the following twelve-month period. To the extent estimates are inaccurate; a regulatory asset on the balance sheet is increased or decreased.

Accounting for Regulated Operations - Regulatory Assets and Liabilities

All of our business is subject to regulation. Our regulated utility records the results of its regulated activities in accordance with SFAS No.71, "Accounting for the Effects of Certain Types of Regulation," which results in differences in the application of generally accepted accounting principles between regulated and non-regulated businesses. SFAS No. 71 requires the recording of regulatory assets and liabilities for certain transactions that would have been treated as revenue and expense in non-regulated businesses. In certain circumstances, SFAS No. 71 allows entities whose rates are determined by third-party regulators to defer costs as "regulatory" assets in the balance sheet to the extent that the entity expects to recover these costs in future rates. Management believes that currently available facts support the continued application of SFAS No. 71 and that all regulatory assets and liabilities are recoverable or refundable through the regulatory environment.

Pension and Post-Retirement Benefits

The amounts reported in our financial statements related to pension and other post-retirement benefits are determined on an actuarial basis, therefore certain assumptions are required to calculate those amounts. These assumptions include the discount rate, the expected return on plan assets, the rate of compensation increase and, for other post-retirement benefits, the expected annual rate of increase in per capita cost of covered medical and prescription benefits. Changes in actuarial assumptions and actuarial experience could have a material impact on the amount of pension and post-retirement benefit costs and funding requirements. However, we expect to recover our entire net periodic pension and other post-retirement benefit costs attributed to employees in our utility segment in accordance with the applicable NYPSC authorization. For financial reporting purposes, the difference between the amounts of such costs as determined under applicable accounting principles is recorded as either a regulatory asset or liability.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements which, to the extent they are not recitations of historical facts, constitute "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995 (Reform Act). In this respect, the words "estimate", "project", "anticipate", "expect", "intend", "believe" and similar expressions are intended to identify forward-looking statements. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward looking statements, these statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the expected results. Accordingly, actual results may differ materially from those expressed in any forward looking statements. Factors that could cause results to differ materially from our management's expectations include, but are not limited to, those listed under Item 1A - "Risk Factors" of our Form 10-K, in addition to:

*	the effect of any interruption in our supply of natural gas or a substantial increase in the price of natural gas,
*	our ability to successfully negotiate new supply agreements for natural gas as they expire, on terms favorable to us, or at all,
*	the effect on our operations of weather conditions and conservation efforts by our customers,
*	the effect on our operations of any action by the New York Public Service Commission,
*	the effect on our operations of unexpected changes in any other applicable legal or regulatory requirements,
*	our ability to obtain additional equity or debt financing,
*	our ability to retain the services of our senior executives and other key employees, and
*	our vulnerability to adverse general economic and industry conditions and competition.

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events.

Item 4T - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 2009, the Company's management, with the participation of the Company's chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based upon the Company's evaluation, the Company's chief executive officer and chief financial officer each concluded that the Company's disclosure controls and procedures are effective as of June 30, 2009.

This Quarterly Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Quarterly Report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company's management, including our chief executive officer and chief financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings .

We did not become a party to or settle any legal proceedings in the quarter ended June 30, 2009. However, please see "Note J - Rights Offering" for information regarding a suit brought against the Company after the end of the quarter.

Item 1A. Risk Factors.

Please refer to the Company's Form 10-K for the year ended September 30, 2008 for disclosure relating to certain risk factors applicable to the Company. We cannot guarantee that Great West will not call a default under our senior notes, which would significantly impair our financial position. Great West is currently in discussion with the Company to resolve this matter.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

None

Item 6. Exhibits.

10.1* First Amendment to Employment Agreement between Michael I. German and the Company dated December 31, 2008
10.2* Amended and Restated 2007 Stock Plan
31.1* Certification of the Chief Executive Officer and President pursuant to 17 CFR Section 240.13a-14
31.2* Certification of the Chief Financial Officer and Treasurer pursuant to 17 CFR Section 240.13a-14
32.1* Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

____________

* Filed or furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CORNING NATURAL GAS CORPORATION

Date: August 12, 2009 ________________________________________

By Michael I. German, Chief Executive Officer and President

(Principal Executive Officer)

Date: August 12, 2009 ________________________________________

By Firouzeh Sarhangi, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

Exhibit 10.1

FIRST AMENDMENT

TO EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made and entered into as of this 31st day of December 2008, by and between MICHAEL GERMAN (the "Executive") and CORNING NATURAL GAS CORPORATION, a New York corporation, having its principal place of business in Corning, New York (the "Company").

RECITALS:

The Company and the Executive are parties to an Employment Agreement dated as of November 30, 2006 (the "Original Agreement").

In order to ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended, and the U.S. Department of Treasury regulations and other interpretive guidance issued thereunder, the Company and the Executive desire to amend the Original Agreement as set forth in this Amendment (the Original Agreement as amended by this Amendment, the "Amended Agreement").

ACCORDINGLY, in consideration of the promises hereinafter set forth in this Amendment, the parties agree as follows:

Changes to Section 2 of the Original Agreement . The Company and the Executive hereby agree that Section 2 of the Original Agreement is hereby amended as follows:

Section 2.1 is deleted in its entirety from the Original Agreement and is replaced in its entirety in the Amended Agreement by the following:

2.1 Salary . As basic compensation for the services to be rendered by the Executive to the Company during the Employment Period, the Company shall pay the Executive during the Employment Period a salary in the amount of One Hundred Fifty Thousand Dollars ($150,000.00) annually, payable in twenty-six (26) equal biweekly installments (the "Base Salary"), less such deductions and amounts to be withheld as may be required by applicable law and regulations. To ensure compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and the U.S. Department of Treasury regulations and other interpretive guidance issued thereunder, each as in effect from time to time (collectively, "Section 409A"), no payment under this Section 2.1 shall be made on a date later than the later of the fifteenth day of the third month following the end of the Executive's or the Company's first taxable year in which the amount was earned and accrued.

(b) The following is added in its entirety as the last sentence of Section 2.2 of the Amended Agreement:

To ensure compliance with Section 409A, no bonus payment under this Section 2.2 shall be made on a date later than the later of the fifteenth day of the third month following the end of the Executive's or the Company's first taxable year in which the amount was earned and accrued.

The first sentence of Section 2.4 of the Original Agreement is deleted in its entirety and is replaced in its entirety in the Amended Agreement by the following:

The Executive shall be entitled to participate in or receive compensation and/or benefits, as applicable, under all employee benefit plans, and all employee benefit arrangements (the "Welfare Benefits") and vacation policies made available by Company now or during the Employment Period to its executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements; provided, however, that there shall be no duplication of the compensation and benefits created by this Agreement.

The following is added in its entirety as the last sentence of Section 2.5 of the Amended Agreement:

To ensure compliance with Section 409A, reimbursed expenses for any calendar year payable under this Section 2.5 shall be paid no later than March 15 of the calendar year following the calendar year in which those expenses were incurred by the Executive.

Changes to Section 3 of the Original Agreement . The Company and the Executive hereby agree that Section 3 of the Original Agreement is hereby amended as follows:

The second sentence of Section 3.2 of the Original Agreement is deleted in its entirety and replaced in its entirety in the Amended Agreement by the following:

During the first 120 days of any such disability, Company shall pay to Executive his Base Salary, and Welfare Benefits until Executive's employment is terminated; provided, however, Executive's salary payments shall be reduced by the sum of the amounts, if any, payable to Executive under any disability benefit plans of the Company or under the Social Security disability insurance program.

The first sentence of Section 3.4 of the Original Agreement is redesignated as Section 3.4(a) of the Amended Agreement.

The second sentence of Section 3.4 of the Original Agreement is deleted in its entirety from the Amended Agreement and replaced in its entirety with the following new Section 3.4(b) of the Amended Agreement:

In the event that Executive elects to terminate this Agreement by resignation in accordance with this provision, Company may elect notwithstanding the effective date of such termination contained in Executive's resignation notice to make Executive's resignation effective on such earlier date, if any, as Company determines in its sole discretion, provided that notwithstanding such election and determination by Company, Company shall be obligated to pay Executive's Base Salary and Welfare Benefits due hereunder through a date not earlier than ninety (90) days after the date of Executive's resignation notice.

Changes to Section 8 of the Original Agreement . The Company and the Executive hereby agree that Section 8 of the Original Agreement is hereby amended as follows:

Section 8.4 of the Original Agreement is deleted in its entirety and is replaced in its entirety in the Amended Agreement by the following.

8.4 Termination Pursuant to Section 3.4(a) Hereof . In the event of the termination of this Agreement, pursuant to the provisions of Section 3.4(a) hereof, Executive's entitlement to all compensation and benefits hereunder (including any right to participate in any bonus per Section 2.2) shall cease and terminate as of the effective date of the termination of Executive's employment.

Section 8.5 of the Original Agreement is deleted in its entirety and is replaced in its entirety in the Amended Agreement by the following.

8.5 Termination Pursuant to Section 3.5 Hereof . In the event of the termination of this Agreement pursuant to the provisions of Section 3.5 hereof, Executive's entitlement to all compensation and benefits (including any right to participate in any bonus per Section 2.2) hereunder shall terminate as of the effective date of such termination, provided, however, that Executive shall further received a severance package equal to one (1) times Executive's then current annual Base Salary (the "Severance Salary").

Section 8.6 of the Original Agreement is deleted in its entirety and is replaced in its entirety in the Amended Agreement by the following.

8.6 Termination After a Change in Control . In the event of the involuntary termination of Executive's employment by Company or its successor in anticipation of, in connection with, or within one (1) year after the Change in Control, unless such termination is pursuant to the provisions of Section 3.1, 3.2, 3.3, or 3.4 hereof, then Executive shall be entitled to receive from Company all compensation and benefits (including any right to participate in any bonus per Section 2.2) through the effective date of such termination, plus a severance package equal to three (3) times Executive's then current annual Base Salary (the "Change in Control Salary").

Section 8.7 of the Original Agreement is deleted in its entirety and is replaced in its entirety in the Amended Agreement by the following.

8.7 Termination of Employment Without Cause . Subject to Section 8.6, in the event of the termination of employment by the Company without cause, Executive shall be entitled to receive all compensation and benefits (including any right to participate in any bonus per Section 2.2) through the effective date of such termination, plus the Severance Salary.

Addition of New Section 12.8 to the Amended Agreement . The Company and the Executive hereby agree that the following is added in its entirety as Section 12.8 of the Amended Agreement:

12.8 Section 409A .

To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A.

To ensure compliance with Section 409A, the Company shall pay:

all Base Salary payable (A) under Section 3.2 in accordance with the Company's payroll procedures set forth in Section 2.1 above as in effect on the Effective Date beginning with the first pay period (determined in accordance with the Company's payroll procedures set forth in Section 2.1 above) following the commencement of the Executive's physical or mental disability, and (B) under Section 3.4(b) in accordance with the Company's payroll procedures set forth in Section 2.1 above as in effect on the Effective Date beginning with the first pay period (determined in accordance with the Company's payroll procedures set forth in Section 2.1 above) following the Executive's termination as determined by the Company;

any bonus payment payable under Section 8.1, 8.3, 8.4, 8.5, 8.6 or 8.7, if any, in accordance with the Company's procedures set forth in Section 2.2;

any Severance Salary payable under Section 8.5 or 8.7 in a lump sum payment on a date that is no later than the later of the fifteenth day of the third month following the end of the Executive's or the Company's first taxable year after the termination, of (A) this Agreement in accordance with Section 3.5 or (B) the Executives employment under this Section 8.7, respectively;

any Change in Control Salary payable under Section 8.6 in a lump sum payment on a date that is no later than the later of the fifteenth day of the third month following the end of the Executive's or the Company's first taxable year after the termination of this Agreement in accordance with Section 7.1. and

to the extent that any continued payments or reimbursements of Welfare Benefits under Section 3.2 or 3.4(b) are deemed to constitute taxable compensation to the Executive, any such payment due to the Executive shall be paid to the Executive on or before the last day of the Executive's taxable year following the taxable year in which the related expense was incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and the Executive's right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.

If the Executive is a "specified employee" (within the meaning of Treasury Regulation Section 1.409A-1(i)), as determined by the Company in accordance with Section 409A, as of the date of the Executive's separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), to the extent that any payments or benefits under this Agreement are subject to Section 409A and the delayed payment or distribution of all or any portion of such amounts to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion deferred under this Section 12(c) shall be paid or distributed (without interest) to the Executive in a lump sum on the earlier of (i) the date that is six (6) months following termination of the Executive's employment, (ii) a date that is no later than thirty (30) days after the date of the Executive's death or (iii) the earliest date as is permitted under Section 409A. For purposes of clarity, the six (6) month delay shall not apply in the case of severance pay contemplated by Treasury Regulation Section 1.409A-1(b)(9)(iii) to the extent of the limits set forth therein. Any remaining payments due under this Agreement shall be paid as otherwise provided herein.

For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the Executive's right to receive the installment payments described in Sections 3.2 and 3.4(b) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment.

(e) To the maximum extent permitted by applicable law, the amounts payable to the Executive under this Agreement shall be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9) (with respect to separation pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (with respect to short-term deferrals).

(f) As provided in Internal Revenue Notice 2007-86, notwithstanding any other provision of this Agreement, with respect to an election or amendment to change a time and form of payment under this Agreement that is subject to Section 409A made on or after January 1, 2008 and on or before December 31, 2008, the election or amendment may apply only to amounts that would not otherwise be payable in 2008 and may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008.

Full Force and Effect . Except to the extent specifically modified in this Amendment, each and every provision of the Original Agreement remains in full force and effect.

Miscellaneous . This Amendment shall be governed by and construed in accordance with the substantive laws of the State of New York. The parties intend to and do hereby confer jurisdiction upon the courts of any jurisdiction within the State of New York to determine any dispute arising out of or related to this Amendment, including the enforcement and the breach hereof. This Amendment may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. In the event of any conflict between the original terms of the Original Agreement and this Amendment, the terms of this Amendment shall prevail.

IN WITNESS WHEREOF, the parties personally or by their duly authorized officers have executed this Amendment as of the date first above written.

EXECUTIVE

/s/ Michael German

MICHAEL GERMAN

CORNING NATURAL GAS CORPORATION

By: / s/ Stanley G. Sleve

Its: VP Administration and Corporate Secretary

Exhibit 10.2

Amended and Restated

Corning Natural Gas Corporation

2007 Stock Plan

Section 1 General Purpose of the Plan; Definitions.

Purpose of the Plan . The name of the plan is the Corning Natural Gas Corporation 2007 Stock Plan (the "Plan"). The purpose of the Plan is to encourage and enable the officers, employees and Directors of Corning Natural Gas Corporation (the "Company") and its Affiliates upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company's welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company.

Definitions. The following terms shall be defined as set forth below:

"409A Award" means an Award that provides for a deferral of compensation from the date of grant, as determined under Section 409A.

"409A Change in Control" means the date on which any one of the following occurs: (A) any one person, or more than one person acting as a group (as determined under Section 409A), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company; (B) a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of that appointment or election; (C) any one person, or more than one person acting as a group (as determined under Section 409A), acquires ownership of stock of the Company that, together with stock held by that person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; or (iv) any one person, or more than one person acting as a group (as determined under Section 409A), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that person or persons) assets from the Company that have a total gross fair market value equal to more than 40% of the total gross fair market value of all of the assets of the Company before such acquisition or acquisitions. For this purpose, "gross fair market value" means the value of the assets of the Company, or the value of the assets being disposed of, without regard to any liabilities associated with those assets.

"Act" means the Securities Exchange Act of 1934, as amended.

"Affiliate" means any entity other than the Company and its Subsidiaries that is designated by the Board or the Committee as a participating employer under the Plan, provided that the Company directly or indirectly owns at least 20% of the combined voting

power of all classes of stock of such entity or at least 20% of the ownership interests in such entity.

"Award" or "Awards," except where referring to a particular category of grant under the Plan, shall include, but not be limited to, Incentive Options, Non-Qualified Options, Restricted Stock Awards, Performance Stock Awards, Stock Appreciation Rights, and Dividend Equivalents.

"Award Agreement" shall mean any written agreement, contract, or other instrument or document evidencing any Award granted by the Committee hereunder and signed by both the Company and the Award recipient.

"Board" means the Board of Directors of the Company.

"Cause" means, and shall be limited to, a vote of the Board to the effect that the participant should be dismissed as a result of (A) any material breach by the participant of any agreement to which the participant and the Company or an Affiliate are parties, (B) any act (other than retirement, death or disability) or omission to act by the participant, including without limitation, the commission of any crime, which may have a material and adverse effect on the business of the Company or any Affiliate or on the participant's ability to perform services for the Company or any Affiliate, or (C) any material misconduct or neglect of duties by the participant in connection with the business or affairs of the Company or any Affiliate.

"Change of Control" is defined in Section 14.

"Code" means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

"Committee" means any Committee of the Board referred to in Section 2.

"Disability" means a disability determination in which a Participant meets one of the following conditions:

(A) The Participant is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment that can be expected to last for a continuous period of not less than 12 months.

(B) The Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.

"Director" means a member of the Board.

"Dividend Equivalent" means a right, granted under Section 9 hereof, to receive cash, Shares, or other property equal in value to dividends paid with respect to a specified number of Shares or the excess of dividends paid over a specified rate of return. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award, and may be paid currently or on a deferred basis.

"Effective Date" means the date on which the Plan has both been adopted by the Board and approved by the Shareholders as set forth in Section 16.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the related rules, regulations and interpretations.

"Fair Market Value" means, as of a given date, the value of a Share determined as follows (in order of applicability): (A) if on the Grant Date or other determination date the Share is listed on an established national or regional stock exchange, is admitted to quotation on The NASDAQ Stock Market, Inc. or is publicly traded on an established securities market, the Fair Market Value of a Share shall be the closing price of the Share on that exchange or in that market (if there is more than one such exchange or market the Committee shall determine the appropriate exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on that trading day) or, (B) if no sale of Shares is reported for that trading day, on the next preceding day on which any sale has been reported. If the Share is not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of the Share as determined by the determined by such methods or procedures as shall be established from time to time by the Committee in good faith in a manner consistent with Section 409A. .

"Grant Date" shall mean, as determined by the Committee, the latest to occur of: (A) the date as of which the Committee approves an Award, (B) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 4 of this Plan, or (C) any other date as may be specified by the Committee. The Grant Date for a substituted Award is the Grant Date of the original Award.

"Incentive Option" means any Option designated and qualified as an "incentive stock option" as defined in Section 422 of the Code.

"Non-Employee Director" means a member of the Board who: (i) is not currently an officer of the Company or any Affiliate; and (ii) does not receive compensation for services rendered to the Company or any Affiliate in any capacity other than as a Director.

"Non-Qualified Option" means any Option that is not an Incentive Option.

"Option" or "Stock Option" means any option to purchase Shares granted pursuant to Section 5.

"Parent" means a "parent corporation" as defined in Section 424(e) of the Code.

"Performance Stock Award" means Awards granted pursuant to Section 7.

"Restricted Stock Award" means Awards granted pursuant to Section 6.

"Section 409A" shall mean Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, each as in effect from time to time.

"Separation from Service" means a termination of services provided by a participant to the Company, whether voluntarily or involuntarily, as determined by the Committee in accordance with Treas. Reg. Section 1.409A-1(h).

"Share" means a share of common stock, $0.10 par value, of the Company, subject to adjustment pursuant to Section 3.

"Shareholder" means the holder of a Share.

"Specified Employee" means any participant who is determined to be a "key employee" (as defined under Code Section 416(i) without regard to paragraph (5) thereof) for the applicable period, as determined by the Company under Section 409A and in accordance with Treas. Reg. Section 1.409A-1(i).

"Subsidiary" means a "subsidiary corporation" as defined in Section 424(f) of the Code.

Section 409A . This Plan and any Awards granted hereunder are intended to comply with or be exempt from the requirements of Section 409A, and shall be interpreted and administered in a manner consistent with those intentions.

Section 2 Administration of Plan; Committee Authority to Select Participants and Determine Awards.

(a) Committee . The Plan shall be administered by a committee of not less than two Non-Employee Directors, as appointed by the Board from time to time, or, in the absence of such a committee, the entire Board (the "Committee").

(b) Powers of Committee . The Committee shall have the power and authority, subject to and within the limitations of the express provisions of the Plan, to grant Awards consistent with the terms of the Plan, including the power and authority:

(i) to select the officers, employees and Directors of the Company and Affiliates to whom Awards may from time to time be granted;

(ii) to determine the time or times of grant, and the extent, if any, of Incentive Options, Non-Qualified Options, Restricted Shares, Performance Stock Awards and Dividend Equivalents, or any combination of the foregoing, granted to any officer, employee or Director;

(iii) to determine the number of Shares to be covered by any Award granted to an officer, employee or Director;

(iv) to determine and modify the terms and conditions, including restrictions, not inconsistent with the terms of the Plan and the Code, of any Award granted to an officer, employee or Director, which terms and conditions may differ among individual Awards and participants, and to approve the form of written instruments evidencing the Awards;

(v) to accelerate the exercisability or vesting of all or any portion of any Award granted to a participant, subject to and in accordance with the requirements of Section 409A;

(vi) subject to the provisions of Section 5(b) and the Code, to extend the period in which Options granted may be exercised;

(vii) to determine whether, to what extent and under what circumstances Shares and other amounts payable with respect to an Award granted to a participant shall be deferred either automatically or at the election of the participant and whether and to what extent the Company shall pay or credit amounts equal to interest (at rates determined by the Committee) or dividends or deemed dividends on such deferrals; and

(viii) to adopt, alter and repeal such rules, guidelines and practices in accordance with and subject to the requirements of Section 409A for the administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments) granted to a participant; and to decide all disputes arising in connection with and make all determinations it deems advisable for the administration of the Plan.

All decisions, interpretations and constructions made by the Committee in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons, including the Company and Plan participants.

Award Agreements . Any Award granted by the Committee under the Plan shall be evidenced by a written agreement, contract, or other instrument or document in such form as the Committee may from time to time approve and signed by both the Company and the Award recipient.

Section 3 Shares Issuable under the Plan; Mergers; Substitution.

(a) Shares Issuable . Subject to the provisions of Sections 3(b) and (c), the maximum number of Shares reserved and available for issuance under the Plan shall be 100,000. For purposes of this limitation, the Shares underlying any Awards which are forfeited, canceled, reacquired by the Company, satisfied without the issuance of Shares or otherwise terminated (other than by exercise) shall be added back to the Shares available for issuance under the Plan so long as the participants to whom such Awards had been previously granted receive no benefits of ownership of the underlying Shares to which the Award related. Shares issued under the Plan may be authorized but unissued Shares or Shares reacquired by the Company.

(b) Share Dividends, Mergers, etc . In the event of any recapitalization, reclassification, split-up or consolidation of Shares, separation (including a spin-off), dividend on Shares payable in Shares, or other similar change in capitalization of the Company or a merger or consolidation of the Company or sale by the Company of all or a portion of its assets or other similar event, the Committee shall make such appropriate adjustments in the exercise prices of Awards, including Awards then outstanding, in the number and kind of securities, cash or other property which may be issued pursuant to Awards under the Plan, including Awards then outstanding, and in the number of Shares with respect to which Awards may be granted (in the aggregate and to individual participants) as the Committee deems equitable with a view toward maintaining the proportionate interest of the participant and preserving the value of the Awards. Notwithstanding the foregoing, no adjustment shall be made under this Section 3(b) which will result in an Award becoming subject to the terms and conditions of Section 409A, unless agreed upon by the Committee and the participant.

(c) Evergreen Share Reserve Increase . Notwithstanding Section 3(a), and subject to the provisions of Section 3(b), on the day of each annual meeting of the Shareholders of the Company, for a period of nine (9) years, commencing with the annual meeting of Shareholders in 2008, the aggregate number of Shares available for issuance under the Plan shall automatically be increased to the number of Shares equal to 15% of the Shares outstanding, if greater than the number of Shares then available for issuance under the Plan.

(d) Substitute Awards . The Committee may grant Awards under the Plan in substitution for Share and Share-based awards held by employees of another corporation who concurrently become employees of the Company or an Affiliate as the result of a merger or consolidation of the employing corporation with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or shares of the employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.

Section 4 Eligibility.

Participants in the Plan will be Directors and such full or part-time officers and other employees of the Company and its Affiliates who are responsible for or contribute to the management, growth or profitability of the Company and its Affiliates and who are selected from time to time by the Committee, in its sole discretion.

Section 5 Options.

Grant of Options. Any Option granted under the Plan shall be in such form as the Committee may from time to time approve. Options granted under the Plan may be either Incentive Options or Non-Qualified Options. To the extent that any option does not qualify as an Incentive Option, it shall constitute a Non-Qualified Option. No officer, employee or Director shall be granted together Incentive Options and Non-Qualified Options under the Plan if the right to exercise one type of option is dependent upon or affects the right to exercise the other ("Tandem Incentive/Non-Qualified Options"). No Incentive Option may be granted under the Plan after the tenth (10th) anniversary of the Effective Date. The Committee in its discretion may grant Options to officers, employees or Directors of the Company or any Affiliate; provided, however, that Incentive Options may only be granted to employees of the Company, as that relationship is defined in Treasury Regulation 31.3401(c)-1. Options granted to officers, employees or Directors pursuant to this Section 5 shall be subject to the terms and conditions set forth in this Section 5 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

(b) Exercise Price . The per share exercise price of an Option granted pursuant to this Section 5 shall be determined by the Committee at the time of grant. In no event shall the per share exercise price of an Option be less than 100% of Fair Market Value on the date of grant. If an employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of shares of the Company or any Subsidiary or Parent and an Incentive Option is granted to such employee, the option price shall be not less than 110% of Fair Market Value on the grant date.

(c) Option Term . The term of each Option shall be fixed by the Committee, but no Incentive Option shall be exercisable more than ten (10) years after the date the option is granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of shares of the Company or any Subsidiary or Parent and an Incentive Option is granted to such employee, the term of such option shall be no more than five (5) years from the date of grant.

(d) Exercisability; Rights of a Shareholder . Options shall become exercisable at such time or times, whether or not in installments, and shall be subject to such terms and conditions as shall be determined by the Committee at or after the grant date. The Committee may at any time accelerate the exercisability of all or any portion of any Option; provided, however, that any such acceleration of the exercisability of all or any portion of an Option is subject to the limitations of Section 409A. If any Option is exercisable only in installments, the Committee may waive, in whole or in part, such installment exercise provisions, at any time at or after grant, based on those factors as the Committee shall determine in its sole discretion; provided, however, that any such waiver of installment exercise provisions of the Option is subject to the limitations of Section 409A and, unless otherwise determined by the Committee, any waiver of installment exercise provisions under this Section 5(d) shall comply with Section 409A. An optionee shall have the rights of a Shareholder only as to Shares acquired upon the exercise of an Option and not as to unexercised Options.

Section 409A . Notwithstanding the foregoing, to ensure compliance with Section 409A each of the following shall apply to the exercise of any Option:

No amendment or modification shall be made to the Plan or any Award which will result in an Award becoming subject to the terms and conditions of Section 409A or otherwise constitute an impermissible acceleration, unless agreed upon by the Committee and the participant.

Any acceleration of the exercisability or vesting of all or any portion of any Award is subject to the limitations of Section 409A and, unless otherwise determined by the Committee, any acceleration of the exercisability or vesting of all or any portion of any Award shall comply with Section 409A.

With respect to extensions that were not included in the original terms of the Option but were provided by the Committee after the date of grant, if at the time of any such extension, the exercise price per Share of the Option is less than the Fair Market Value of a Share, the extension shall, unless otherwise determined by the Committee, be limited to the earlier of (a) the maximum term of the Option as set by its original terms or (b) ten (10) years from the Grant Date. Unless otherwise determined by the Committee and agreed upon by the Committee and the participant, any extension of the period in which any Option granted may be exercised shall comply with Section 409A to the extent applicable.

No Share or other amount payable with respect to an Option Award granted to a participant shall be deferred if such deferral constitutes a "deferral of compensation" within the meaning of Section 409A or otherwise causes the Share or other amount payable with respect to an Award to be subject to the requirements of Section 409A.

Method of Exercise . Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of Shares to be purchased. Payment of the purchase price may be made by one or more of the following methods:

(i) In cash, by certified or bank check or other instrument acceptable to the Committee;

(ii) In the form of Shares that are not then subject to restrictions under any Company plan, if permitted by the Committee in its discretion. Such surrendered Shares shall be valued at Fair Market Value on the exercise date; or

(iii) By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. Payment instruments will be received subject to collection. Notwithstanding the foregoing, no payment of the purchase price under this Section 5(f) shall be made if such form of payment constitutes a deferral of compensation within the meaning of Section 409A or otherwise causes the Option to be subject to the requirements of Section 409A. The delivery of certificates representing Shares to be purchased pursuant to the exercise of the Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Option) by the Company of the full purchase price for such Shares and the fulfillment of any other requirements contained in the Option or applicable provisions of laws.

(g) Non-transferability of Options . No Option shall be transferable by the optionee other than by will or by the laws of descent and distribution.

(h) Termination by Death . If any optionee's service with the Company and its Affiliates terminates by reason of death, the Option may thereafter be exercised, to the extent exercisable at the date of death, by the legal representative or legatee of the optionee, for a period of six (6) months (or such longer period as the Committee shall specify at any time) from the date of death, or until the expiration of the stated term of the Option, if earlier.

(i) Termination by Reason of Disability .

(i) Any Option held by an optionee whose service with the Company and its Affiliates has terminated by reason of Disability may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of twelve (12) months (or such longer period as the Committee shall specify at any time) from the date of such termination of service, or until the expiration of the stated term of the Option, if earlier.

(ii) The Committee shall have sole authority and discretion to determine whether a participant's service has been terminated by reason of Disability.

(iii) Except as otherwise provided by the Committee at the time of grant or otherwise, the death of an optionee during a period provided in this Section 5(i) for the exercise of a Non-Qualified Option, shall extend such period for six (6) months from the date of death, subject to termination on the expiration of the stated term of the Option, if earlier.

(j) Termination for Cause . If any optionee's service with the Company and its Affiliates has been terminated for Cause, any Option held by such optionee shall immediately terminate and be of no further force and effect; provided, however, that the Committee may, in its sole discretion, provide that such Option can be exercised for a period of up to thirty (30) days from the date of termination of service or until the expiration of the stated term of the Option, if earlier.

(k) Other Termination . Unless otherwise determined by the Committee, if an optionee's service with the Company and its Affiliates terminates for any reason other than death, Disability, or for Cause, any Option held by such optionee may thereafter be exercised, to the extent it was exercisable on the date of termination of service, for three (3) months (or such longer period as the Committee shall specify at any time) from the date of termination of service or until the expiration of the stated term of the Option, if earlier.

(l) Annual Limit on Incentive Options . To the extent required for "incentive stock option" treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Share with respect to which Incentive Options granted under this Plan and any other plan of the Company or its Subsidiaries become exercisable for the first time by an optionee during any calendar year shall not exceed one hundred thousand dollars ($100,000).

(m) Form of Settlement . Shares issued upon exercise of an Option shall be free of all restrictions under the Plan, except as otherwise provided in this Plan.

Section 6 Restricted Stock Awards.

(a) Nature of Restricted Stock Award . The Committee may grant Restricted Stock Awards to officers, employees and Directors of the Company or any Affiliate. A Restricted Stock Award is an Award entitling the recipient to acquire, at no cost or for a purchase price determined by the Committee, Shares subject to such restrictions and conditions as the Committee may determine at the time of grant in accordance with Code Section 83 ("Restricted Share"). Conditions may be based on continuing service and/or achievement of pre-established performance goals and objectives. In addition, a Restricted Stock Award may be granted to an officer, employee or Director by the Committee in lieu of any compensation due to such officer, employee or Director.

(b) Acceptance of Award . A participant who is granted a Restricted Stock Award shall have no rights with respect to such Award unless the participant shall have accepted the Award within sixty (60) days (or such shorter date as the Committee may specify) following the award date by making payment to the Company, if required, by certified or bank check or other instrument or form of payment acceptable to the Committee in an amount equal to the specified purchase price, if any, of the Shares covered by the Award and by executing and delivering to the Company a written instrument that sets forth the terms and conditions of the Restricted Stock Award in such form as the Committee shall determine.

(c) Rights as a Shareholder . Upon complying with Section 6(b) above, a participant shall have all the rights of a Shareholder with respect to the Restricted Share including voting and dividend rights, subject to transferability restrictions and Company repurchase or forfeiture rights described in this Section 6 and subject to such other conditions contained in the written instrument evidencing the Restricted Stock Award. Unless the Committee shall otherwise determine, certificates evidencing Restricted Shares shall remain in the possession of the Company until such shares are vested as provided in Section 6(e) below.

(d) Restrictions . Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein.

(e) Vesting of Restricted Shares . The Committee at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company's right of repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the Shares on which all restrictions have lapsed shall no longer be Restricted Shares and shall be deemed "vested."

(f) Waiver, Deferral and Reinvestment of Dividends . The written instrument evidencing the Restricted Stock Award may require or permit the immediate payment, waiver, deferral or investment of dividends paid on the Restricted Shares.

Section 7 Performance Stock Awards.

(a) Nature of Performance Shares . A Performance Stock Award is an award entitling the recipient to acquire Shares upon the attainment of specified performance goals. The Committee may make Performance Stock Awards independent of or in connection with the granting of any other Award under the Plan. Performance Stock Awards may be granted under the Plan to officers, employees and Directors of the Company or any Affiliate, including those who qualify for awards under other performance plans of the Company. The Committee in its sole discretion shall determine whether and to whom Performance Stock Awards shall be made, the performance goals applicable under each such Award, the periods during which performance is to be measured, and all other limitations and conditions applicable to the Performance Stock Award; provided, however, that the Committee may rely on the performance goals and other standards applicable to other performance based plans of the Company in setting the standards for Performance Stock Awards under the Plan.

(b) Restrictions on Transfer . Performance Stock Awards and all rights with respect to such Awards may not be sold, assigned, transferred, pledged or otherwise encumbered.

(c) Rights as a Shareholder . A participant receiving a Performance Stock Award shall have the rights of a Shareholder only as to Shares actually received by the participant under the Plan and not with respect to shares subject to the Award but not actually received by the participant. A participant shall be entitled to receive a share certificate evidencing the acquisition of Shares under a Performance Stock Award only upon satisfaction of all conditions specified in the written instrument evidencing the Performance Stock Award (or in a performance plan adopted by the Committee).

(d) Termination . Except as may otherwise be provided by the Committee at any time prior to termination of service, a participant's rights in all Performance Stock Awards shall automatically terminate upon the participant's termination of service with the Company and its Affiliates for any reason (including, without limitation, death, Disability and for Cause).

(e) Acceleration, Waiver, Etc . At any time prior to the participant's termination of service with the Company and its Affiliates, the Committee may in its sole discretion accelerate, subject to and in accordance with the requirements of Section 409A, waive or, subject to Section 12, amend any or all of the goals, restrictions or conditions imposed under any Performance Stock Award; provided, however, that in no event shall any provision of the Plan be construed as granting to the Committee any discretion to increase the amount of compensation payable under any Performance Stock Award to the extent such an increase would cause the amounts payable pursuant to the Performance Stock Award to be nondeductible in whole or in part pursuant to Section 162(m) of the Code and the regulations thereunder, and the Committee shall have no such discretion notwithstanding any provision of the Plan to the contrary. The Committee shall have the power to impose such other restrictions on Awards subject to this Section 8 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements of Section 409A.

Section 8 Stock Appreciation Rights.

(a) Nature of Stock Appreciation Rights . A Stock Appreciation Right ("SAR") is a right entitling the participant to receive cash or Shares having a fair market value equal to the appreciation in the Fair Market Value of a stated number of Shares from the date of grant, or in the case of rights granted in tandem with or by reference to an Option granted prior to the grant of such rights, from the date of grant of the related Option to the date of exercise. SARs may be granted to officers, employees or Directors of the Company or any Affiliate. No SAR granted in connection with all or any part of an Option shall be exercisable for less than the Fair Market Value of the underlying Shares as of the date of the original grant of the Option unless that SAR or Option is a 409A Award, as provided for in the applicable Award Agreement.

(b) Terms of Awards . No employee may be granted together an Incentive Option and a SAR if the right to exercise the Incentive Option or the SAR is dependent upon or affects the right to exercise the other instrument ("Tandem Incentive Option/SAR"). Notwithstanding this general prohibition, an employee may be granted a Tandem Incentive Option/SAR if the SAR meets all of the following requirements:

(i) the SAR expires no later than the expiration of the underlying Incentive Option;

(ii) the SAR has a value of no more than 100% of the bargain purchase element of the underlying Incentive Option;

(iii) the SAR is transferable only when the underlying Incentive Option is transferable and subject to the same conditions;

(iv) the SAR may only be exercised when the underlying Incentive Option may be exercised; and

(v) the SAR may only be exercised when the market price of the stock exceeds the exercise price of the Incentive Option.

In the event of an independent Award, or the award of a SAR in tandem with a Non-Qualified Option, the SAR shall be subject to the terms and conditions determined by the Committee.

(c) Restrictions on Transfer . SARs shall not be transferred, assigned or encumbered, except that SARs may be exercised by the executor, administrator or personal representative of the deceased participant within six (6) months of the death of the participant (or such longer period as the Committee shall specify at any time) and transferred pursuant to a certified domestic relations order.

(d) Payment Upon Exercise . Upon exercise of an SAR, the participant shall be paid the excess of the then Fair Market Value of the number of shares to which the SAR relates over the Fair Market Value of such number of shares at the date of grant of the SAR, or of the related Option, as the case may be. Such excess shall be paid in cash or in Shares having a Fair Market Value equal to such excess or in such combination thereof as the Committee shall determine.

Section 9 Dividend Equivalents.

The Committee is authorized to grant Dividend Equivalents to the officers, employees and Directors of the Company or any Affiliate. The Committee may provide, at the date of grant or thereafter, that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, or other investment vehicles as the Committee may specify, provided that Dividend Equivalents (other than freestanding Dividend Equivalents) shall be subject to all conditions and restrictions of the underlying Awards to which they relate.

Section 10 Tax Withholding.

(a) Payment by Participant . Each participant shall, no later than the date as of which the value of an Award or of any Share or other amounts received thereunder first becomes includible in the gross income of the participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld with respect to such income. The Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the participant.

(b) Payment in Shares . A participant may elect to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from Shares to be issued pursuant to any Award a number of Shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due, or (ii) transferring to the Company Shares owned by the participant with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due. With respect to any participant who is subject to Section 16 of the Act, the following additional restrictions shall apply:

(i) the election to satisfy tax withholding obligations relating to an Award in the manner permitted by this Section 10(b) and the actual tax withholding shall be made during the period beginning on the third (3rd) business day following the date of release of quarterly or annual summary statements of revenues and earnings of the Company and ending on the twelfth (12th) business day following such date. Alternatively, such election may be made at least six (6) months prior to the date as of which the receipt of such an Award first becomes a taxable event for Federal income tax purposes;

(ii) such election shall be irrevocable;

(iii) such election shall be subject to the consent or disapproval of the Committee; and

(iv) the Share(s) withheld to satisfy tax withholding, if granted at the discretion of the Committee, must pertain to an Award which has been held by the participant for at least six (6) months from the date of grant of the Award.

Section 11 Transfer, Leave of Absence, Etc.

For purposes of the Plan, the following events shall not be deemed a termination of service:

(a) a transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; and

(b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee's right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing.

Section 12 Amendments and Termination.

The Board may at any time amend or discontinue the Plan and the Committee may at any time amend or cancel any outstanding Award (or provide substitute Awards at the same or reduced exercise or purchase price or with no exercise or purchase price, but such price, if any, must satisfy the requirements which would apply to the substitute or amended Award if it were then initially granted under this Plan) for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder's consent.

Section 13 Status of Plan.

With respect to the portion of any Award which has not been exercised and any payments in cash, Shares or other consideration not received by a participant, a participant shall have no rights greater than those of a general unsecured creditor of the Company unless the Committee shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the Company's obligations to deliver Shares or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the provision of the foregoing sentence.

Section 14 Change of Control Provisions.

Upon the occurrence of a Change of Control as defined in this Section 14 or a 409A Change in Control, the following provisions of this Section 14 shall apply:

(a) Each Stock Option shall automatically become fully exercisable unless the Committee shall otherwise expressly provide at the time of grant.

(b) Restrictions and conditions on Awards of Restricted Shares, Performance Shares and Dividend Equivalents shall automatically be deemed waived, and the recipients of such Awards shall become entitled to receipt of the maximum amount of Shares subject to such Awards unless the Committee shall otherwise expressly provide at the time of grant; provided, however, that if an Award of Performance Shares or Dividend Equivalents constitutes a 409A Award, then the provisions of this Section 14(b) shall only apply upon the occurrence of a 409A Change in Control and the provisions of this Section 14(b) shall not apply upon the occurrence of a Change in Control.

(c) Unless otherwise expressly provided at the time of grant, participants who hold Options shall have the right, in lieu of exercising the Option, to elect to surrender all or part of such Option to the Company and to receive cash in an amount equal to the excess of (i) the higher of (x) the Fair Market Value of a Share on the date such right is exercised and (y) the highest price paid for Shares or, in the case of securities convertible into Shares or carrying a right to acquire Shares, the highest effective price (based on the prices paid for such securities) at which such securities are convertible into Shares or at which Shares may be acquired, by any person or group whose acquisition of voting securities has resulted in a Change of Control of the Company over (ii) the exercise price per share under the Option, multiplied by the number of Shares with respect to which such right is exercised.

(d) "Change of Control" shall mean the occurrence of any one of the following events:

(i) any "person," as such term is used in Sections 13(d) and 14(d) of the Act (other than the Company, any of its Subsidiaries, any Director, fiduciary or other person or entity holding securities under any employee benefit plan of the Company or any of its Subsidiaries or the Richard M. Osborne Trust), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 40% or more of either (A) the combined voting power of the Company's then outstanding securities having the right to vote in an election of the Company's Board of Directors ("Voting Securities") or (B) the then outstanding shares of common stock of the Company (in either such case other than as a result of acquisition of securities directly from the Company);

(ii) persons who, as of the Effective Date, constitute the Company's Board of Directors (the "Incumbent Directors") cease for any reason, including without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority of the Board, provided that any person becoming a director of the Company subsequent to the Effective Date whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors shall, for purposes of this Plan, be considered an Incumbent Director; or

(iii) the Shareholders of the Company shall approve (A) any consolidation or merger of the Company or any Subsidiary where the Shareholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate 50% or more of the voting shares of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company or (C) any plan or proposal for the liquidation or dissolution of the Company;

Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Common Shares or other Voting Securities outstanding, increases (x) the proportionate number of shares of Common Shares beneficially owned by any person to 40% or more of the shares of Common Shares then outstanding or (y) the proportionate voting power represented by the Voting Securities beneficially owned by any person to 40% or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if any person referred to in clause (x) or (y) of this sentence shall thereafter become the beneficial owner of any additional shares of Common Shares or other Voting Securities (other than pursuant to a share split, share dividend, or similar transaction), then a "Change of Control" shall be deemed to have occurred for purposes of the foregoing clause (i).

Section 15 General Provisions.

(a) No Distribution; Compliance with Legal Requirements . The Committee may require each person acquiring Shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof. No Shares shall be issued pursuant to an Award until all applicable securities laws and other legal and stock exchange requirements have been satisfied. The Committee may require the placing of such stop-orders and restrictive legends on certificates for Shares and Awards as it deems appropriate.

(b) Delivery of Share Certificates . Delivery of Share certificates to participants under this Plan shall be deemed effected for all purposes when the Company or a Share transfer agent of the Company shall have delivered such certificates in the United States mail, addressed to the participant, at the participant's last known address on file with the Company.

(c) Other Compensation Arrangements; No Employment Rights . Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company, or any Subsidiary or Affiliate.

Section 16 Effective Date of Plan.

The Plan shall become effective upon (i) its adoption by the Board, or any committee appointed by the Board with the authority to adopt the Plan on its behalf, and (ii) the approval of the Plan by the Shareholders. With respect to the granting of Incentive Options, no Options granted under the Plan shall be considered to be Incentive Options unless the Plan is approved by the Shareholders within 12 months before or after its adoption by the Board.

Section 17 Governing Law.

This plan shall be governed by New York Law except to the extent such law is preempted by Federal law.

Section 18 Time and Form of Payment of Awards; Deferrals.

Limitations on Awards to Ensure Compliance with Section 409A .

(i) 409A Awards and Deferrals . To the extent applicable, this Plan shall be interpreted in accordance with Section 409A. Other provisions of this Plan notwithstanding, the terms of any 409A Award, including any authority of the Company or the Committee and rights of the participant with respect to the 409A Award, shall be limited to those terms permitted under Section 409A. Each of the following provisions will apply to 409A Awards:

(A) If a participant is permitted to elect to defer an Award or any payment under an Award, that election shall be permitted only at time in compliance with Section 409A and as provided under Section 18(b) below.

(B) The Company shall have no authority to accelerate or delay distributions relating to 409A Awards in excess of the authority permitted under Section 409A.

(C) Any distribution of a 409A Award triggered by a participant's termination of employment shall be made only at the time that the participant has a Separation from Service (or at such earlier time preceding a termination of employment that there occurs another event triggering a distribution under the Plan or the applicable Award Agreement in compliance with Section 409A).

(D) Any distribution to a Specified Employee after Separation from Service shall occur at or before the expiration of the six-month period following that Specified Employee's Separation from Service in accordance with Section 18(e) below.

(E) In the case of any distribution of a 409A Award, the time and form of payment for that distribution will be specified in the Award Agreement; provided that, if the time and form of payment for that distribution is not otherwise specified in the Plan or an Award Agreement or other governing document, the distribution shall be made in one lump sum amount not later than the later of the fifteenth day of the third month following the end of the participant's or the Company's first taxable year at which the settlement of the Award is specified to occur, any applicable restriction lapses, or there is no longer a substantial risk of forfeiture applicable to those amounts.

(ii) Distribution upon Vesting . Except as otherwise provided in Section 18(b) below or an Award Agreement, in the case of any Award other than Options granted on or after December 31, 2008 providing for a distribution upon the lapse of a substantial risk of forfeiture, the time and form of payment for that distribution will be specified in the Award Agreement; provided that, if the timing and form of payment of that distribution is not otherwise specified in the Plan or an Award Agreement or other governing document, the distribution shall be made in one lump sum amount on March 15 of the calendar year following the calendar year in which the payment is no longer subject to a substantial risk of forfeiture within the meaning of Section 409A. Notwithstanding the foregoing, payment may be made at a later date for administrative reasons to the extent permitted by Section 409A. No participant is permitted, directly or indirectly, to designate the calendar year of payment. Delivery of Shares upon exercise by participants of Options will be made in accordance with Section 5.

(iii) Scope and Application of this Provision . For purposes of the Plan, references to a term or event (including any authority or right of the Company, the Committee, or a participant) being "permitted" under Section 409A means that the term or event will not cause the participant to be deemed to be in constructive receipt of compensation relating to the 409A Award prior to the distribution of cash, Shares, or other property or to be liable for payment of interest or a tax penalty under Section 409A.

(iv) Interpretation . If and to the extent that any provision of an Award is required or intended to comply with Section 409A, that provision shall be administered and interpreted in a manner consistent with the requirements of Section 409A. If and solely to the extent that any such provision of any Award as currently written would conflict with or result in adverse consequences to a participant under Section 409A, the Committee shall have the authority, without the consent of the participant, to administer that provision and to amend the Award with respect to that provision to the extent the Committee deems necessary for the purposes of avoiding any portion of the Shares or amounts to be delivered to the participant being subject to additional income or other taxes under Section 409A.

(b) Deferral . With the approval of the Committee, payment in respect of Awards other than Options may be deferred and paid either in the form of installments or as a lump-sum payment. The Committee may permit selected participants to elect to defer payments of some or all types of such Awards payable by the Corporation in accordance with the provisions of this Section 18(b) and those other procedures as may be established by the Committee. The Committee may also specify in an Award Agreement or the terms of the Award that payment in respect of an Award will be deferred. Any deferred payment under an Award, whether elected by the participant or specified by the Award Agreement or by the terms of the Award, may be forfeited if and to the extent that Award Agreement or the terms of the Award so provide. Any such deferral of payment will be made in accordance with each of the following:

(i) Initial Deferral Elections by Participants . Except as otherwise provided in this Section 18(b), the participant must make a written, irrevocable election as to the deferral of payment in respect of an Award and the time and form of that payment on or before the deadline established by the Committee, which shall be no later than:

(A) December 31 ^st of the calendar year preceding the calendar year during which the participant will commence performing the services giving rise to the Award subject to the deferral election; or

(B) for the first year in which the participant becomes eligible to participate in the Plan, 30 days after the date the participant first becomes eligible to participate in the Plan, provided that such an election will only be effective with respect to the portion of the Award related to services performed after the election.

(ii) Initial Participant Deferral Elections for Performance-Based Compensation . In the event that the Committee determines that a deferral election may be made with respect to an Award that is Performance-Based Compensation (as defined below), an eligible participant may make a written, irrevocable election as to deferral of payment in respect of the Award and the time and form of that payment on or before the deadline established by the Committee, which deadline shall not be later than six months before the end of the performance period.

For purposes of this Section 18(b)(ii), the term "Performance-Based Compensation" means an Award, the amount of which, or the entitlement to which, is contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least 12 consecutive months, as determined by the Committee in accordance with Treas. Reg. Section 1.409-1(e). Performance criteria are considered preestablished if established in writing by not later than 90 days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established.

For a participant to be eligible to make a deferral election in accordance with this Section 18(b)(ii), the participant must have performed services continuously from the later of (A) the beginning of the performance period for the Performance-Based Compensation or (B) the date upon which the performance criteria for the Performance-Based Compensation are established, through the date on which the participant makes the deferral election. In addition, in no event may a deferral election under this Section 18(b)(ii) be made after the Performance-Based Compensation has become readily ascertainable within the meaning of Treas. Reg. Section 1.409A-2(a)(8).

(iii) Initial Participant Deferral Elections for Fiscal Year Compensation . In the event that the Committee determines that a deferral election may be made with respect to an Award that is Fiscal Year Compensation (as defined below), the participant may make a written, irrevocable election as to the deferral of payment in respect of the Award and the time and form of that payment on or before the deadline established by the Committee, which deadline shall not be later than the close of the Company's fiscal year immediately preceding the first fiscal year in which any services are performed for which the Award is payable. For purposes of this Section 18(b)(iii), the term "Fiscal Year Compensation" means an Award relating to a period of service coextensive with one or more consecutive fiscal years of the Company, of which no amount is paid or payable during the fiscal year(s) constituting the period of service.

(iv) Initial Participant Deferral Elections for Short-Term Deferrals . If a participant has a legally binding right to an Award under the Plan or a payment under an Award in a subsequent calendar year that, absent a deferral election, would be treated as a short-term deferral within the meaning of Treas. Reg. Section 1.409A-1(b)(4) and the Committee determines that a deferral election may be made with respect to payment under the Award, the participant may make a written, irrevocable election to defer that payment in accordance with the requirements of Section 18(b)(vii) below, applied as if the payment were a deferral of compensation and the scheduled payment date for the payment were the date that the substantial risk of forfeiture lapses. The Committee may provide in the deferral election that the deferred payment will be payable upon a 409A Change in Control without regard to the five-year additional deferral requirement in Section 18(b)(vii) below.

(v) Initial Participant Deferral Elections for Compensation Subject to a Substantial Risk of Forfeiture . If a participant has a legally binding right to an Award under the Plan or payment in respect of an Award in a subsequent year and the payment of or under the Award is subject to a substantial risk of forfeiture condition requiring the participant's continued services for a period of at least 12 months from the date the participant obtains the legally binding right, the Committee may permit the participant to make a written, irrevocable election to defer that payment no later than the 30 ^th day after the participant obtains the legally binding right to the payment, provided that the election is made at least 12 months in advance of the earliest date at which the forfeiture condition could lapse, as determined in accordance with Treas. Reg. Section 1.409A-2(a)(5). For purposes of this Section 18(b)(v), a condition will not be treated as failing to require the participant to continue to provide services for a period of at least 12 months from the date the participant obtains the legally binding right merely because the condition immediately lapses upon Disability or death of the participant or upon a 409A Change in Control. However, if the participant's Disability, death, or 409A Change in Control event occurs before the end of that 12-month period, a deferral election under this Section 18(b)(v) will be effective only if it would be permissible under another subparagraph of this Section 18(b).

(vi) Deferrals by Committee . If an Award is made that provides for the deferral of compensation for services performed during a participant's taxable year and the participant is not given an opportunity to elect the time and form of payment of that Award, the Committee must designate the time and form of payment no later than the time the participant first has a legally binding right to the Award or, if later, the time the participant would be required under this Section 18(b)(vi) to make such an election if the participant were provided such an election.

(vii) Subsequent Deferral Elections . Notwithstanding the foregoing provisions of this Section 18(b), with the approval of the Committee, a participant may elect to further delay payment in respect of an Award or change the form of payment if each of the following conditions is met:

(A) The election will not take effect until at least 12 months after the date on which the election is made.

(B) For any payment not made on account of death or Disability, the payment is deferred for a period of not less than five years from the date the payment would otherwise have been paid and not later than the expiration date of the Award.

(C) Any election related to a payment to be made at a specified time or under a fixed schedule must be made not less than 12 months before the date the payment is scheduled to be paid.

(viii) Acceleration of Payments . Notwithstanding any other provision of this Plan, an Award Agreement or a deferral election to the contrary, the Committee in its discretion, may accelerate payment in respect of an Award in accordance with the provisions of Treas. Reg. Section 1.409A-2(b)(7), provided that the Committee treats all payments to similarly situated participants on a reasonably consistent basis.

(ix) Delay of Payments . Notwithstanding any other provision of this Plan, an Award Agreement or a deferral election to the contrary, payment under an Award may be delayed by the Committee under the circumstances described in Treas. Reg. Section 1.409A-2(b)(7), provided that the Committee treats all payments to similarly situated participants on a reasonably consistent basis.

(c) Permissible Payment Events/Times. The Committee may specify any one or more of the following as an event upon or a time at which payment of the vested portion of an Award may be under a deferral election under Section 18(b) above: (i) Separation from Service; (ii) Disability; (iii) death; (iv) a specified date or under a fixed schedule; or (v) a 409A Change in Control. The Committee may provide for payment upon the earliest or latest of more than one such event or time.

(d) Time of Payment. The payment date with respect to payment of an Award that is deferred under Section 18(b) above shall be the permissible payment event or time under Section 18(c) above designated by the participant or the Committee, as applicable, in accordance with Section 18(b). Payment in respect of an Award shall be made within 60 days following the payment date; provided, however, that payment may be made at a later date for administrative reasons to the extent permitted by Section 409A; provided, further, that the participant shall not be permitted, directly or indirectly, to designate the calendar year of the payment.

(e) Specified Employees . Notwithstanding any provision of this Plan or any Award Agreement to the contrary, if any payment under a participant's Award provides for a deferral of compensation under Section 409A and the participant is a Specified Employee, as determined by the Company in accordance with Section 409A, as of the date of that participant's Separation from Service, to the extent that the payments or benefits under this Plan or any Award Agreement are subject to Section 409A and the delayed payment or distribution of all or any portion of those amounts to which the participant is entitled under this Plan or an Award Agreement, exclusive of any amount that is permitted to be distributed under U.S. Treasury Regulation Section 1.409A-1(b)(9)(iii) (regarding the two-times, two year exception), is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion deferred under this Section 18(e) shall be paid or distributed (without interest) to the participant in a lump sum on the earlier of (i) the date that is six (6) months following termination of the participant's Separation from Service, (ii) a date that is no later than thirty (30) days after the date of the participant's death, or (iii) the earliest date as is permitted under Section 409A. For purposes of clarity, the six (6) month delay shall not apply in the case of severance pay contemplated by U.S. Treasury Regulation Section 1.409A-1(b)(9)(iii) to the extent of the limits set forth therein. Any remaining payments due under this Plan or an Award Agreement shall be paid as otherwise provided in this Plan or the Award Agreement.

(f) Installment Payments . For purposes of Section 409A (including, without limitation, for purposes of U.S. Treasury Regulation Section 1.409A-2(b)(2)(iii)), a participant's right under an Award Agreement to receive installment payments shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment.

(g) 2008 Elections or Amendments. As provided in Internal Revenue Notice 2007-86, notwithstanding any other provision of this Plan, with respect to an election or amendment to change a time and form of payment under this Agreement that is subject to Section 409A made on or after January 1, 2008 and on or before December 31, 2008, the election or amendment may apply only to amounts that would not otherwise be payable in 2008 and may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008.

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO

17 CFR SECTION 240.13a-14(a)

I, Michael I. German, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Corning Natural Gas Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 12, 2009

/s/ Michael I. German

Michael I. German, Chief Executive Officer and President

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO

17 CFR SECTION 240.13a-14(a)

I, Firouzeh Sarhangi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Corning Natural Gas Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 12, 2009

/s/ Firouzeh Sarhangi

Firouzeh Sarhangi, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report of Corning Natural Gas Corporation (the "Company") on Form 10-Q for the period ending June 30, 2009 (the "Report") with the Securities and Exchange Commission, I, Michael I. German, Chief Executive Officer and President of the Company and I, Firouzeh Sarhangi, Chief Financial Officer and Treasurer of the Company, certify pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Company for such period.

Dated: August 12, 2009

/s/ MICHAEL I. GERMAN

Michael I. German, Chief Executive Officer and President

(Principal Executive Officer)

/s/ FIROUZEH SARHANGI

Firouzeh Sarhangi, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)