RGC RESOURCES INC
MODIFICATION NUMBER TWO TO PROMISSORY NOTE
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<DESCRIPTION>MODIFICATION NUMBER TWO TO PROMISSORY NOTE
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT 10.1 </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>MODIFICATION NUMBER TWO </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>TO PROMISSORY NOTE </B></FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">RGC Resources, Inc. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">519 Kimball Avenue N.E. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Roanoke, Virginia 24030 </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(Hereinafter referred to as &#147;Borrower&#148;)
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Wachovia Bank, National Association </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Roanoke, Virginia 24011
</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">(Hereinafter referred to as &#147;Bank&#148;) </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman"
SIZE="2"><B>IMPORTANT NOTICE </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>THIS AGREEMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE
AS A BORROWER AND ALLOWS BANK TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT FURTHER NOTICE. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">THIS AGREEMENT is entered into as of March&nbsp;28, 2008 by and
between Bank and Borrower. </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>RECITALS </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2">Bank is the holder of a Promissory Note, as modified from time to time, executed and delivered by Borrower, dated March&nbsp;24, 2006, in the original principal amount of $1,000,000.00 (the &#147;Note&#148;); </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Borrower and Bank have agreed to modify the terms of the Note. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">In
consideration of Bank&#146;s continued extension of credit and the agreements contained herein, the parties agree as follows: </FONT></P> <P STYLE="margin-top:24px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>AGREEMENT
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>ACKNOWLEDGMENT OF BALANCE.</B> Borrower acknowledges that the most recent Commercial Loan Invoice sent to Borrower with respect to the Obligations
under the Note is correct. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>MODIFICATIONS. </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">The Note is
hereby modified by deleting the provisions in the Note establishing the repayment terms and substituting the following in their place and stead: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman"
SIZE="2"><B>REPAYMENT TERMS.</B> The Note shall be due and payable in consecutive monthly payments of accrued interest only, commencing on April&nbsp;1, 2008, and continuing on the same day of each month thereafter until fully paid. In any event,
all principal and accrued interest shall be due and payable on March&nbsp;31, 2009. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>ACKNOWLEDGMENTS AND REPRESENTATIONS.</B> Borrower acknowledges and
represents that the Note and other Loan Documents, as amended hereby, are in full force and effect without any defense, counterclaim, right or claim of set-off; that, after giving effect to this Agreement, no default or event that with the passage
of time or giving of notice would constitute a default under the Loan Documents has occurred, all representations and warranties contained in the Loan Documents are true and correct as of this date, all necessary action to authorize the execution
and delivery of this Agreement has been taken; and this Agreement is a modification of an existing obligation and is not a novation. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>MISCELLANEOUS.</B> This Agreement shall be construed in accordance with and governed by the laws of the applicable
state as originally provided in the Loan Documents, without reference to that state&#146;s conflicts of law principles. This Agreement and the other Loan Documents constitute the sole agreement of the parties with respect to the subject matter
thereof and supersede all oral negotiations and prior writings with respect to the subject matter thereof. No amendment of this Agreement, and no waiver of any one or more of the provisions hereof shall be effective unless set forth in writing and
signed by the parties hereto. The illegality, unenforceability or inconsistency of any provision of this Agreement shall not in any way affect or impair the legality, enforceability or consistency of the remaining provisions of this Agreement or the
other Loan Documents. This Agreement and the other Loan Documents are intended to be consistent. However, in the event of any inconsistencies among this Agreement and any of the Loan Documents, the terms of this Agreement, and then the Note, shall
control. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts. Each such counterpart shall be deemed an original, but all such counterparts shall together constitute one and the same
agreement. Terms used in this Agreement which are capitalized and not otherwise defined herein shall have the meanings ascribed to such terms in the Note. <B>LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. </B>EACH OF THE PARTIES HERETO,
INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
OTHER AGREEMENT OR DOCUMENT BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1)&nbsp;INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR
(2)&nbsp;PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY SUCH PROCEEDING, CLAIM OR CONTROVERSY,
WHETHER THE SAME IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE. <B>Final Agreement. </B>This Agreement and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent agreements of the parties. There are no unwritten agreements between the parties. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">Borrower reaffirms and restates the
following with respect to the Note as modified herein: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>CONFESSION OF JUDGMENT.</B> Each Borrower hereby constitutes and appoints John G. Fox, Thomas G.
Cooper, Sr. (each of whom is an officer of Bank), and Bank through an officer duly authorized by Bank (any of the foregoing may act), as the true and lawful attorneys-in-fact for them, in any or all of their names, place and stead, and upon the
occurrence of a Default in the payment of the Obligations due under this Agreement, at maturity, or upon acceleration, to confess judgment against them or any of them, in favor of Bank, before the Clerk of the Circuit Court for City of Richmond,
Virginia, in accordance with 1950 Code of Virginia, Section&nbsp;8.01-431 <U>et seq.</U>, and any successor statute, for all amounts owed with respect to the Obligations under and pursuant to this Agreement including, without limitation, all costs
of collection and attorneys&#146; fees in an amount equal to 15% of the Obligations then outstanding (which shall be deemed reasonable attorneys&#146; fees for the purposes of this paragraph), and court costs, hereby ratifying and confirming the
acts of said attorney-in-fact as if done by themselves. Upon request of Bank, each Borrower will execute an amendment or other agreement substituting attorneys-in-fact appointed to act for each Borrower hereunder. </FONT></P> <P
STYLE="margin-top:12px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>WAIVER OF JURY TRIAL.</B> TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF BORROWER BY EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH
THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS AGREEMENT<I>.</I> EACH OF THE PARTIES
AGREES THAT THE TERMS HEREOF SHALL SUPERSEDE AND REPLACE ANY PRIOR AGREEMENT RELATED TO ARBITRATION OF DISPUTES BETWEEN THE PARTIES CONTAINED IN ANY LOAN DOCUMENT OR ANY OTHER DOCUMENT OR AGREEMENT HERETOFORE EXECUTED IN CONNECTION WITH, RELATED TO
OR BEING REPLACED, SUPPLEMENTED, EXTENDED OR MODIFIED BY, THIS AGREEMENT. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2"><B>IN WITNESS WHEREOF,</B> the undersigned have duly signed and sealed this Agreement the day and year first above
written. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">RGC Resources, Inc.</FONT></TD>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ John B. Williamson, III</FONT></P></TD>
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<TD VALIGN="bottom" NOWRAP><FONT FACE="Times New Roman" SIZE="2">John B. Williamson, III, CEO/President</FONT></TD>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Howard T. Lyon</FONT></P></TD>
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<TD VALIGN="bottom"><FONT FACE="Times New Roman" SIZE="2">(SEAL)</FONT></TD></TR>
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<TD VALIGN="bottom" NOWRAP><FONT FACE="Times New Roman" SIZE="2">Howard T. Lyon, Controller/Treasurer</FONT></TD>
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<TD VALIGN="top" COLSPAN="3"><FONT FACE="Times New Roman" SIZE="2">Wachovia Bank, National Association</FONT></TD>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:1px;border-bottom:1px solid #000000"><FONT FACE="Times New Roman" SIZE="2">/s/ Arnold W. Adkins, Jr.</FONT></P></TD>
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<TD VALIGN="bottom" NOWRAP><FONT FACE="Times New Roman" SIZE="2">Arnold W. Adkins, Jr., Vice President</FONT></TD>
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