RGC RESOURCES INC
EXHIBIT 10.2 TO FORM 8-K
<DOCUMENT>
<TYPE>EX-10
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<FILENAME>frm8k1205ex9-2.txt
<DESCRIPTION>EXHIBIT 10.2 TO FORM 8-K
<TEXT>
                                                                  Exhibit 10.2

                                 LOAN AGREEMENT


Wachovia Bank, National Association
201 S. Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")

Roanoke Gas Company
519 Kimball Avenue
P.O. Box 13007
Roanoke, Virginia 24016
(Individually and collectively "Borrower")

This Loan Agreement ("Agreement") is entered into November 28, 2005, by and
between Bank and Borrower.

This Agreement applies to the loan or loans (individually and collectively, the
"Loan") evidenced by one or more promissory notes of even date herewith or other
notes subject hereto, as modified from time to time (whether one or more, the
"Note") and all Loan Documents. The terms "Loan Documents" and "Obligations," as
used in this Agreement, are defined in the Note.

Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:

REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct and
complete in all materal respects. Any such information relating to Borrower's
financial condition will accurately reflect Borrower's financial condition as of
the date(s) thereof, (including all contingent liabilities of every type), and
Borrower further represents that its financial condition has not changed
materially or adversely since the date(s) of such documents. Authorization;
Non-Contravention. The execution, delivery and performance by Borrower and any
guarantor, as applicable, of this Agreement and other Loan Documents to which it
is a party are within its power, have been duly authorized as may be required
and, if necessary, by making appropriate filings with any governmental agency or
unit and are the legal, binding, valid and enforceable obligations of Borrower
and any guarantors; and do not (i) contravene, or constitute (with or without
the giving of notice or lapse of time or both) a violation of any provision of
applicable law, a violation of the organizational documents of Borrower or any
guarantor, or a default under any agreement, judgment, injunction, order, decree
or other instrument binding upon or affecting Borrower or any guarantor, (ii)
result in the creation or imposition of any lien (other than the lien(s) created
by the Loan Documents) on any of Borrower's or any guarantor's assets, or (iii)
give cause for the acceleration of any obligations of Borrower or any guarantor
to any other creditor. Asset Ownership. Borrower has good and marketable title
to all of the properties and assets reflected on the balance sheets and
financial statements supplied Bank by Borrower, and all such properties and
assets are free and clear of mortgages, security deeds, pledges, liens, charges,
and all other encumbrances, except as otherwise disclosed to Bank by Borrower in
writing and approved by Bank ("Permitted Liens"). To Borrower's knowledge, no
default has occurred under any Permitted Liens and no claims or interests
adverse to Borrower's present rights in its properties and assets have arisen.
Discharge of Liens and Taxes. Borrower has duly filed, paid and/or discharged
all taxes or other claims that may become a lien on any of its property or
assets, except to the extent that such items are being appropriately contested
in good faith and an adequate reserve for the payment thereof is being
maintained. Sufficiency of Capital. Borrower is not, and after consummation of
this Agreement and after giving effect to all indebtedness incurred and liens
created by Borrower in connection with the Note and any other Loan Documents,
will not be, insolvent within the meaning of 11 U.S.C. Section 101, as in effect
from time to time. Compliance with Laws. Borrower and any subsidiary and
affiliate of Borrower and


<PAGE>



any guarantor are in compliance in all material respects with all federal, state
and local laws, rules and regulations applicable to its properties, operations,
business, and finances, including, without limitation, any federal or state laws
relating to liquor (including 18 U.S.C. Section 3617, et seq.) or narcotics
(including 21 U.S.C. Section 801, et seq.) and/or any commercial crimes; all
applicable federal, state and local laws and regulations intended to protect the
environment; and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if applicable. None of Borrower, or any subsidiary or affiliate of
Borrower or any guarantor is a Sanctioned Person or has any of its assets in a
Sanctioned Country or does business in or with, or derives any of its operating
income from investments in or transactions with, Sanctioned Persons or
Sanctioned Countries in violation of economic sanctions administered by OFAC.
The proceeds from the Loan will not be used to fund any operations in, finance
any investments or activities in, or make any payments to, a Sanctioned Person
or a Sanctioned Country. "OFAC" means the U.S. Department of the Treasury's
Office of Foreign Assets Control. "Sanctioned Country" means a country subject
to a sanctions program identified on the list maintained by OFAC and available
at http://www.treas.gov/offices/enforcement/ofac/sanctions/, or as otherwise
published from time to time. "Sanctioned Person" means (i) a person named on the
list of Specially Designated Nationals or Blocked Persons maintained by OFAC
available at http://www.treas.gov/offices/enforcement/ofac/sdn/, or as otherwise
published from time to time, or (ii) (A) an agency of the government of a
Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or
(C) a person resident in a Sanctioned Country to the extent subject to a
sanctions program administered by OFAC. Organization and Authority. Each
corporation, partnership or limited liability company Borrower and/or guarantor,
as applicable, is duly created, validly existing and in good standing under the
laws of the state of its organization, and has all powers, governmental
licenses, authorizations, consents and approvals required to operate its
business as now conducted. Each corporation, partnership or limited liability
company Borrower and/or guarantor, as applicable, is duly qualified, licensed
and in good standing in each jurisdiction where qualification or licensing is
required by the nature of its business or the character and location of its
property, business or customers, and in which the failure to so qualify or be
licensed, as the case may be, in the aggregate, could have a material adverse
effect on the business, financial position, results of operations, properties or
prospects of Borrower or any such guarantor. No Litigation. To the best of
Borrower's knowledge, there are no threatened suits, claims or demands against
Borrower or any guarantor where the claim or controversy amount is in excess of
$500,000.00 that have not been disclosed to Bank by Borrower in writing, and
approved by Bank. Indemnity. Borrower will indemnify Bank and its affiliates
from and against any losses, liabilities, claims, damages, penalties or fines
imposed upon, asserted or assessed against or incurred by Bank arising out of
the inaccuracy or breach of any of the representations contained in this
Agreement or any other Loan Documents.

AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and until final
payment in full of the Obligations, unless Bank shall otherwise consent in
writing, Borrower will: Access to Books and Records. Allow Bank, or its agents,
during normal business hours, access to the books, records and such other
documents of Borrower as Bank shall reasonably require, and allow Bank, at
Borrower's expense, to inspect, audit and examine the same and to make extracts
therefrom and to make copies thereof. Business Continuity. Conduct its business
in substantially the same manner and locations as such business is now and has
previously been conducted. Compliance with Other Agreements. Comply with all
terms and conditions contained in this Agreement, and any other Loan Documents,
and swap agreements, if applicable, as defined in the 11 U.S.C. Section 101, as
in effect from time to time. Estoppel Certificate. Furnish, within 15 days after
request by Bank, a written statement duly acknowledged of the amount due under
the Loan and whether offsets or defenses exist against the Obligations.
Insurance. Maintain adequate insurance coverage with respect to its properties
and business against loss or damage of the kinds and in the amounts customarily
insured against by companies of established reputation engaged in the same or
similar businesses including, without limitation, commercial general liability
insurance, workers compensation insurance, and business interruption insurance;
all acquired in such amounts and from such companies as Bank may reasonably
require. Maintain Properties. Maintain, preserve and keep its property in good
repair, working order and condition, making all replacements, additions and
improvements thereto necessary for the proper conduct of its business, unless
prohibited by the Loan Documents. Non-Default Certificate From Borrower. Deliver
to Bank, with the Financial Statements required below, a certificate signed by


<PAGE>



Borrower, in the form attached hereto as Exhibit A, if Borrower is an
individual, or by a principal financial officer of Borrower warranting that no
"Default" as specified in the Loan Documents nor any event which, upon the
giving of notice or lapse of time or both, would constitute such a Default, has
occurred and demonstrating Borrower's compliance with the financial covenants
contained herein. Notice of Default and Other Notices. (a) Notice of Default.
Furnish to Bank immediately upon becoming aware of the existence of any
condition or event which constitutes a Default (as defined in the Loan
Documents) or any event which, upon the giving of notice or lapse of time or
both, may become a Default, written notice specifying the nature and period of
existence thereof and the action which Borrower is taking or proposes to take
with respect thereto. (b) Other Notices. Promptly notify Bank in writing of (i)
any material adverse change in its financial condition or its business; (ii) any
default under any material agreement, contract or other instrument to which it
is a party or by which any of its properties are bound, or any acceleration of
the maturity of any indebtedness owing by Borrower; (iii) any material adverse
claim against or affecting Borrower or any part of its properties; (iv) the
commencement of, and any material determination in, any litigation with any
third party or any proceeding before any governmental agency or unit affecting
Borrower; and (v) at least 30 days prior thereto, any change in Borrower's name
or address as shown above, and/or any change in Borrower's structure. Other
Financial Information. Deliver promptly such other information regarding the
operation, business affairs, and financial condition of Borrower which Bank may
reasonably request. Payment of Debts. Pay and discharge when due, and before
subject to penalty or further charge, and otherwise satisfy before maturity or
delinquency, all obligations, debts, taxes, and liabilities of whatever nature
or amount, except those which Borrower in good faith disputes. Reports and
Proxies. Deliver to Bank, promptly, a copy of all financial statements, reports,
notices, and proxy statements, sent by Borrower to stockholders, and all regular
or periodic reports required to be filed by Borrower with any governmental
agency or authority.

NEGATIVE COVENANTS. Borrower agrees that from the date hereof and until final
payment in full of the Obligations, unless Bank shall otherwise consent in
writing, Borrower will not: Encumbrances. Create, assume, or permit to exist any
mortgage, security deed, deed of trust, pledge, lien, charge or other
encumbrance on any of its assets, whether now owned or hereafter acquired, other
than: (i) security interests required by the Loan Documents; (ii) liens for
taxes contested in good faith; or (iii) Permitted Liens. Default on Other
Contracts or Obligations. Default on any material contract with or obligation
when due to a third party or default in the performance of any obligation to a
third party incurred for money borrowed in an amount in excess of $250,000.00.
Government Intervention. Permit the assertion or making of any seizure, vesting
or intervention by or under authority of any governmental entity, as a result of
which the management of Borrower or any guarantor is displaced of its authority
in the conduct of its respective business or such business is curtailed or
materially impaired. Judgment Entered. Permit the entry of any monetary judgment
or the assessment against, the filing of any tax lien against, or the issuance
of any writ of garnishment or attachment against any property of or debts due
Borrower in an amount in excess of $500,000.00 which is not discharged or
execution is not stayed within 30 days of entry. Retire or Repurchase Capital
Stock. Retire or otherwise acquire any of its capital stock.

PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 30 days
after the end of each fiscal quarter, unaudited management-prepared quarterly
financial statements including, without limitation, a balance sheet, profit and
loss statement and statement of cash flows, with supporting schedules; all in
reasonable detail and prepared in conformity with generally accepted accounting
principles, applied on a basis consistent with that of the preceding year. Such
statements shall be certified as to their correctness by a principal financial
officer of Borrower and in each case, if audited statements are required,
subject to audit and year-end adjustments.

FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date
hereof until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing, using the financial information for Borrower, its
subsidiaries, affiliates and its holding or parent company, as applicable:
Retained Earnings. Borrower shall, at all times maintain Retained Earnings of
not less than $9,000,000.00. Retained Earnings shall be defined according to
generally accepted accounting principles. EBIT to Interest Ratio. Borrower
shall, at all times, maintain an EBIT to Interest Ratio of not


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less than 1.50 to 1.00. This covenant shall be calculated quarterly, on a
rolling four quarters basis. "EBIT to Interest Ratio" shall mean the sum of
earnings before interest and taxes divided by interest expense. Long Term Debt
to Long Term Capitalization Ratio. Borrower shall maintain a ratio of Long Term
Debt to Long Term Capitalization of not more than .65 to 1.00 measured at each
fiscal year end. "Long Term Debt to Long Term Capitalization" shall mean Long
Term Funded Debt divided by the sum of Long Term Funded Debt and Effective Net
Worth. "Long Term Funded Debt" shall mean, as applied to any person or entity,
the sum of all indebtedness for borrowed money, including, without limitation,
capital lease obligations, subordinated debt (including debt subordinated to the
Bank), and unreimbursed drawings under letters of credit, or any other monetary
obligation evidenced by a note, bond, debenture or other agreement of that
person or entity with a maturity greater than one year. "Effective Net Worth"
shall mean total assets minus Total Liabilities. "Total Liabilities" shall mean
all liabilities of Borrower excluding debt fully subordinated to Bank on terms
and conditions acceptable to Bank, and including capitalized leases and all
reserves for deferred taxes and other deferred sums appearing on the liabilities
side of a balance sheet, in accordance with generally accepted account
principles applied on a consistent basis.

CONDITIONS PRECEDENT.  The obligations of Bank to make the loan and any advances
pursuant to this  Agreement are subject to the following  conditions  precedent:
Additional Documents. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request.

IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.


                               Roanoke Gas Company



                               By: s/John B. Williamson, III (SEAL)
                                     John B. Williamson, III, Chairman/CEO


                               By: s/Howard T. Lyon (SEAL)
                                     Howard T. Lyon, Controller/Treasurer




                                Wachovia Bank, National Association



                                By: s/Laruie Hart (SEAL)
                                      Laruie Hart, Vice President



<PAGE>



                                    EXHIBIT A

                             NON-DEFAULT CERTIFICATE


In accordance with the terms of the Loan Documents dated November 25, 2005 by
and between Wachovia Bank, National Association and Roanoke Gas Company
("Borrower"), I hereby certify that:


1.       I am a principal financial officer of Borrower;

2.       The enclosed financial statements are prepared in accordance with
         generally accepted accounting principles;

3.       No Default (as defined in the Loan Documents) or any event which, upon
         the giving of notice or lapse of time or both, would constitute such a
         Default, has occurred.

4.       Borrower is in compliance with the Financial Covenant(s) set forth in
         the Loan Documents, as demonstrated by the calculations contained in
         the Covenant Compliance Certificate attached hereto as Schedule 1.


s/John B. Williamson, III
-------------------------------
Name: John B. Williamson, III
Title: Chairman/CEO


<PAGE>


                                   SCHEDULE 1

                         COVENANT COMPLIANCE CERTIFICATE

Borrower Name: Roanoke Gas Company

For the fiscal ________________________ ended ____________________

ALL CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN
IN THE LOAN DOCUMENTS.

                 CALCULATIONS FOR ROLLING FOUR QUARTERS COVENANT
               COMPLIANCE FOR THE QUARTER ENDED__________________

INSTRUCTIONS: THIS IS A ROLLING FOUR-QUARTER CALCULATION. THE COLUMN LABELED
Q1 SHOULD CONTAIN INFORMATION FOR THE MOST RECENTLY ENDED QUARTER (I.E.,
MATCHES THE DATE ABOVE). Q2 SHOULD CONTAIN INFORMATION FOR THE IMMEDIATELY
PRECEDING QUARTER-END, AND SO ON FOR Q3 AND Q4.
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<S>     <C>    <C>    <C>    <C>    <C>    <C>

MOST RECENT QUARTER                         PRECEDING THREE QUARTERS

COVENANT:                  Q1               Q2                Q3                Q4               TOTAL
--------

                                              EBIT to Interest Ratio

(a) net income             _____            _____             _____             _____            _____

(b) interest               _____            _____             _____             _____            _____

(c) taxes                  _____            _____             _____             _____            _____

</TABLE>

The sum of the  Totals  of (a) plus (b) plus  (c)  divided  by the  Total of (b)
equals an EBIT to Interest  Ratio of _____.  Required EBIT to Interest  Ratio is
not less than ____ to 1.00.

Compliance? ___Yes ___No


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