Exhibit 10.1

 

Execution Copy

 

ASSET PURCHASE AGREEMENT

 

between

 

The Interstate Natural Gas Company, LLC
(“Seller”)

 

and

 

Nytis Exploration Company LLC
(“Buyer”)

 

DATED:  February 14, 2011

 

--------------------------------------------------------------------------------

 

 

 

Page

 

 

 

TABLE OF CONTENTS

 

 

 

 

ARTICLE 1 TRANSFER OF PURCHASED ASSETS AND RELATED MATTERS

1

1.1

Purchased Assets

1

1.2

Excluded Assets

4

1.3

Passage of Title and Risk of Loss

5

1.4

Occupancy of the Mims Branch Office

5

1.5

Hi Hat Capacity Right of First Refusal

5

 

 

 

ARTICLE 2 ASSUMPTION OF CERTAIN LIABILITIES

5

2.1

Assumed Obligations

5

2.2

Excluded Obligations

5

2.3

Ownership Rights and Obligations

6

 

 

 

ARTICLE 3 PURCHASE PRICE

7

3.1

Purchase Price

7

3.2

Escrow

7

3.3

Deposit

7

3.4

Adjustment to Purchase Price

7

3.5

Calculation of Estimated Adjusted Purchase Price; Payment at Closing

10

3.6

Allocation of Purchase Price

10

 

 

 

ARTICLE 4 CLOSING

10

4.1

Closing Date

10

4.2

Simultaneous Actions

10

4.3

Deliveries by Seller

11

4.4

Deliveries by Buyer

13

 

 

 

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF INGC

14

5.1

Organizational Matters

14

5.2

Authority

14

5.3

Noncontravention

15

5.4

Absence of Changes

16

5.5

Title to Assets.

16

5.6

Real Property - Owned

17

5.7

Real Property - Leased

17

5.8

Personal Property - Owned

17

5.9

Personal Property - Leased

17

5.10

Agreements

18

5.11

Brokers

18

5.12

Litigation

18

5.13

Licenses, Permits, Etc.

18

5.14

Encumbrances

18

 

i

--------------------------------------------------------------------------------

 

5.15

Compliance with Law

19

5.16

AFE’s

19

5.17

Taxes

19

5.18

Gas Imbalances, Prepayments, Hedges

20

5.19

Well Status

20

5.20

Equipment

20

5.21

Preference Rights

20

5.22

Rentals/Royalties

20

5.23

Bankruptcy

21

5.24

Environmental

21

5.25

Not a Utility

21

5.26

Partnership Matters

21

 

 

 

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER

22

6.1

Organization Standing and Power

23

6.2

Authority

23

6.3

No Conflict or Violation

23

6.4

Consents

23

6.5

Actions

23

6.6

Brokers

24

 

 

 

ARTICLE 7 ACCESS, DUE DILIGENCE AND ENVIRONMENTAL MATTERS

24

7.1

General Access and Special Indemnity

24

7.2

Confidential Information

24

7.3

Environmental Review

25

7.4

Environmental Defects

25

 

 

 

ARTICLE 8 TITLE MATTERS

27

8.1

Buyer’s Title Review

27

8.2

Determination of Title Defects

29

8.3

Preference Rights and Transfer Requirements

30

 

 

 

ARTICLE 9 DEFERRED CLAIM AND DISPUTES

31

9.1

Deferred Claims and Disputes

31

 

 

 

ARTICLE 10 COVENANTS OF SELLER

31

10.1

Conduct of Business Until Closing Date

31

10.2

Advice of Changes

32

10.3

Conduct

32

10.4

Further Assurances

32

10.5

Employee Matters

32

 

 

 

ARTICLE 11 COVENANTS OF BUYER

34

11.1

Confidentiality; Return of Documents

34

11.2

Access to Records

34

 

ii

--------------------------------------------------------------------------------

 

ARTICLE 12 CONDITIONS TO OBLIGATIONS OF BUYER

35

12.1

Authorization

35

12.2

Accuracy of Representations and Warranties

35

12.3

Performance of Agreements

35

12.4

No Action or Legislation

35

12.5

Releases

35

 

 

 

ARTICLE 13 CONDITIONS TO OBLIGATIONS OF SELLER

35

13.1

Authorization

35

13.2

Accuracy of Representations and Warranties

35

13.3

Performance of Agreements

36

13.4

No Action or Legislation

36

 

 

 

ARTICLE 14 ADDITIONAL CLOSING CONDITIONS

36

14.1

Regulatory Approvals

36

14.2

Suspense Proceeds

36

14.3

Partnership Funds

36

 

 

 

ARTICLE 15 POST CLOSING MATTERS

36

15.1

Records

36

15.2

Final Settlement Statement

37

15.3

Remittance of Proceeds by Seller and Buyer

37

15.4

Taxes

37

15.5

Further Assurances

37

 

 

 

ARTICLE 16 TERMINATION

37

16.1

Termination

37

 

 

 

ARTICLE 17 SURVIVAL AND INDEMNIFICATION

39

17.1

Survival

39

17.2

Indemnification by Seller

39

17.3

Indemnification by Buyer

40

17.4

Notification

40

17.5

Recoveries

41

17.6

Characterization

41

17.7

Buyer’s Due Diligence

41

 

 

 

ARTICLE 18 MISCELLANEOUS

41

18.1

Interpretation

41

18.2

Expenses

41

18.3

Arbitration

42

18.4

Binding Effect

43

18.5

Severability

43

18.6

Non-Reliance

43

18.7

Entire Agreement; Amendments

43

18.8

Headings

43

18.9

Notices

43

 

iii

--------------------------------------------------------------------------------

 

18.10

Legal Counsel

45

18.11

Publicity

45

18.12

Counterparts

45

18.13

Governing Law

45

18.14

Remedies and Waivers

45

18.15

Defined Terms

46

18.16

Non-Reliance

46

18.17

Time of the Essence

46

18.18

Damages

46

 

iv

--------------------------------------------------------------------------------

 

DEFINITIONS

 

 

Section

“Acquired Assets”

1.1

“Arbitrator”

3.3

“Assumed Obligations”

2.1

“Balance Sheet”

5.4

“Balance Sheet Date”

5.5

“Business”

 

“Buyer”

Introduction

“Closing”

4.1

“Closing Date”

4.1

“Consolidated”

Introduction

“Encumbrances”

5.6(a)

“Excluded Assets”

1.2

“Excluded Obligations”

2.2

“Financial Statements”

5.4

“Hazardous Substance”

5.13(d)

“Indemnified Party”

12.3

“Indemnifying Party”

12.3

“Intellectual Property”

1.1(h)

“Kanney”

Introduction

“Leasehold Interests

1.1(a)

“MGP Partnerships”

1.1(b)

“Returns”

5.15(a)

“Rohrer”

Introduction

“Seller”

Introduction

“Special Survival Date”

12.1

“Survival Date”

12.1

“Taxes”

5.15

 

v

--------------------------------------------------------------------------------

 

INDEX TO EXHIBITS

 

Section and Exhibit

 

Description

1.5

 

Hi Hat Capacity Right of First Refusal

3.1

 

Seller’ Wiring Instructions

3.2

 

Escrow Agreement

4.3(a)

 

Seller Closing Certificate

4.3(b)

 

Bill of Sale and General Instrument of Assignment

4.3(e)

 

Opinion of Seller’s Counsel

4.3(h)

 

Easements

4.4(a)

 

Buyer Closing Certificate

4.4(c)

 

Opinion of Buyer’s Counsel

4.4(d)

 

Services Agreement

4.4(e)

 

Transportation, Compression and Marketing Agreement

 

INDEX TO SCHEDULES

 

Section and Schedule

 

Description

1.1(a)

 

Leasehold Interests

1.1(b) Part 1

 

Wells

1.1(b) Part 2

 

Equipment

1.1(c)

 

MGP Partnerships

1.1(d)

 

Passive Partnerships

1.1(e)

 

Farmout Agreements

1.1(f)

 

Assumed Contracts

1.1(g)

 

Pipeline Segment

1.1 (i)

 

Alerion Assets

1.1(j)

 

Physical Assets

1.1(k)

 

Easements

1.1(l)

 

Deeds

3.6

 

Allocated Values

5.3(b)(iv)

 

Defaults Consequent to Transaction

 

vi

--------------------------------------------------------------------------------

 

5.3(c)

 

Consents of Public Body or Authority

5.4

 

Absence of Changes

5.5(a)

 

INGC Permitted Encumbrances

5.5(b)

 

Consents/Waivers of Third Parties

5.5(c)

 

Related Party Permitted Encumbrances

5.6

 

Real Property — Owned

5.7

 

Real Property — Leased

5.8

 

Personal Property - Owned

5.9

 

Personal Property - Leased

5.10

 

Agreements

5.12

 

Litigation

5.14

 

Liens Under Protest

5.16

 

AFE’s

5.17

 

Taxes

5.18

 

Gas Imbalances, Prepayments, Hedges

5.19

 

Well Status — P&A Obligations

5.21

 

Preference Rights

5.22(a)

 

INGC Suspense Proceeds

5.22(b)

 

Related Party Suspense Proceeds

5.24

 

Environmental Matters

5.26(f)

 

Partnership Distributions

8.1(c)(i)

 

Example - Calculation of Title Defect Amount

 

vii

--------------------------------------------------------------------------------

 

This ASSET PURCHASE AGREEMENT (the “Agreement”) is entered into this 14th day of
February 2011 by and among The Interstate Natural Gas Company, LLC, a limited
liability company organized pursuant to the laws of the Commonwealth of Kentucky
(“INGC”), and Nytis Exploration Company LLC, a limited liability company
organized pursuant to the laws of the State of Delaware (“Buyer”).  INGC has
been designated by certain parties listed in Appendix A (“Related Parties”) to
act as their agent with authority to enter into this Agreement on their behalf
and to sell and convey their interests in the assets to be sold under the terms
of this Agreement to Buyer and to collect all proceeds to be received in
connection with same.  INGC and the Related Parties are referred to in this
Agreement collectively as “Seller.”

 

Terms defined in the preamble and in the body of this Agreement shall have the
meanings set forth therein.  Additional terms used in the body of this Agreement
shall have the meanings set forth in Appendix B attached hereto and made a part
hereof by this reference.  Each such definition is equally applicable both to
the singular and the plural forms of the term so defined.  Whenever the words
“include”, “includes” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation”.

 

W I T N E S S E T H:

 

WHEREAS, Seller has directly and through various other business organizations
been involved in the exploration, drilling, gathering and sale of oil, natural
gas and other Hydrocarbons (the “Business”); and

 

WHEREAS, Buyer desires to purchase from Seller certain of the assets utilized in
the Business, which assets Seller has agreed to sell and convey to Buyer; and

 

WHEREAS, Buyer and Seller have agreed to the terms of the purchase and sale of
the assets by the parties; and

 

WHEREAS, the parties desire to set forth their agreement in an integrated
written instrument;

 

NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements set forth below, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

ARTICLE 1
TRANSFER OF PURCHASED ASSETS AND RELATED MATTERS

 

1.1          Purchased Assets.  On the terms and subject to the conditions of
this Agreement, at the Closing (as defined in Article 4 hereof), Seller shall
transfer, convey and assign to Buyer, and Buyer shall purchase and acquire from
Seller, those assets, properties and rights of Seller, relating to, or used in
the Business, real, personal and mixed, tangible and intangible, as the same
shall exist immediately prior to the Closing (except for the Excluded Assets
identified in Section 1.2 hereof), which are listed below:

 

1

--------------------------------------------------------------------------------

 

(a)           the leases and leasehold interests of Seller listed on Schedule
1.1(a) (the “Leasehold Interests”), together with all rights, benefits, and
powers conferred upon the holder of such Leasehold Interests, all rights,
options, titles, and interests of Seller, including, if any, rights of Seller to
obtain or otherwise earn an interest in said Leasehold Interests or the lands
covered thereby (the “Lands”), and, if any, all surface fee and leasehold
interests, operating rights, reversionary rights, and other interests relating
to oil, gas or other Hydrocarbons attributable or allocable to such Leasehold
Interests and Lands;

 

(b)           the interests of Seller in the wells and wellbores located on the
Lands covered under the Leasehold Interests and described on Schedule
1.1(b) Part 1 (the “Wells”), together with corresponding interests in and to
personal property, equipment, fixtures and improvements located in or on, or
incident or attributable to, the Wells, or used or obtained in connection with
the production, treatment, sale or disposal of Hydrocarbons or water produced
therefrom, including the compressors, scrubbers, pump jacks, tanks, meters and
satellite meters which are listed on Schedule 1.1(b) Part 2  (collectively, the
“Equipment”);

 

(c)           the partnership interests of Seller in the various general
partnerships listed on Schedule 1.1(c) for which INGC serves as the Managing
General Partner and for which, upon Closing, Buyer will become a substitute
partner and the Managing General Partner (the “MGP Partnership Interests”);

 

(d)           the interests of Seller in the various general partnerships listed
on Schedule 1.1(d) for which INGC is not the Managing General Partner and for
which, upon Closing, Buyer will become a substitute partner but not the Managing
General Partner (the “Passive Partnership Interests”);

 

(e)           the various farmout and similar agreements of Seller listed on
Schedule 1.1(e) (the “Farmout Agreements”);

 

(f)            Seller’s Big Sandy transportation contract for 2,300 DTH/day,
Seller’s eServices contracts and the other contracts and agreements listed on
Schedule 1.1(f) (the “Assumed Contracts”);

 

(g)           the Lawrence County pipeline from the Cook/Bussey lease to the
Paul Preece lease as listed on Schedule 1.1(g) (the “Pipeline Segment”);

 

(h)           all other contracts and agreements of Seller relating directly
(but not to the extent related to Excluded Assets) to the Leasehold Interests
and the Wells (“Contract Rights”), including without limitation, any unit
agreements, pooling agreements, area of mutual interest agreements, farm-outs
and farm-ins, saltwater disposal agreements, water injections agreements, line
well injection agreements, road use agreements, drilling contracts, operating
agreements, well service contracts, production sales contracts, gas balancing
agreements, storage or warehouse agreements, service contracts, construction
agreements, and division and transfer orders, except for and excluding contracts
and

 

2

--------------------------------------------------------------------------------

 

agreements to the extent such contracts and agreements are Excluded Assets under
Section 1.2;

 

(i)            the Alerion Assets of Seller as listed on Schedule 1.1(i) (the
“Alerion Assets”), including the general partnership interest of INGC (the
“Alerion Partnership Interest”) in the Interstate Alerion JV 1 partnership under
the August 11, 2006 General Partnership Agreement listed on said Schedule
1.1(i) as to which partnership Buyer will become a substitute partner and
Operator, as defined in said General Partnership Agreement;

 

(j)            the personal property, vehicles and equipment of Seller listed on
Schedule 1.1(j) (the “Physical Assets”);

 

(k)           all easements, rights-of-way and other real property interests of
Seller directly relating to or used in connection with the ownership and
operation of the Acquired Assets or the exploration for and production of
Hydrocarbons therefrom, including without limitation the easements,
rights-of-way and other real property interests of Seller listed on Schedule
1.1(k) (collectively the “Easements”); provided that, for simplicity and
efficiency purposes, the Parties agree that pipeline or road rights-of-way
included in leases or other real property interests transferred herein, need not
be separately listed on Schedule 1.1(k);

 

(l)            the real property interests of Seller listed on Schedule
1.1(l) (the “Deeds”); and

 

(m)          All the issued and outstanding shares (the “Brushy Gap Shares”) of
Brushy Gap Coal and Gas, Inc., a Kentucky corporation (“Brushy Gap”), provided
that Buyer may, at its election, acquire the assets of Brushy Gap (the “Brushy
Gap Assets”) instead of the Brushy Gap Shares.  Buyer shall notify INGC of its
election to acquire the Brushy Gap Shares or the Brushy Gas Assets within thirty
(30) days of execution of this Agreement by all parties.  If Buyer elects to
acquire the Brushy Gap Assets, such acquisition shall be in accordance with the
terms, covenants and conditions of this Agreement.  If Buyer elects to acquire
the Brushy Gap Shares, such acquisition shall be in accordance with the terms,
covenants and conditions of this Agreement supplemented by an amendment to this
Agreement containing such additional representations, warranties and covenants
regarding Brushy Gap and the Brushy Gap Shares as are standard in the transfer
of all the shares of a corporation free and clear of liens, claims and
encumbrances and all of whose assets are comprised of assets otherwise included
in the assets listed in clauses (a) through (l) of this Section 1.1 whereupon
this Agreement and the Exhibits and Schedules hereto shall be deemed to have
been modified so as not to include the Brushy Gap Assets.  The parties
acknowledge that Brushy Gap has interests in three wells that are not being
acquired by Buyer under this Agreement.  Those wells are:  EPC C Compton 3, EPC
C Compton 4, and EPC C Compton 5.  Should Buyer elect to acquire the shares of
Brushy Gap, the parties will enter into a side agreement pursuant to which the
three identified wells will remain the property of the current owners of Brushy
Gap.  The parties further acknowledge that the Brushy Gap Shares are owned by
the members of INGC and not by INGC.  By executing this Agreement on behalf of
INGC, such members acknowledge and agree that they will be bound by this
Section 1.1(m) and the other provisions of this Agreement regarding Brushy Gap,
the Brushy Gap Assets and the Brushy Gap Shares.

 

3

--------------------------------------------------------------------------------

 

The Leasehold Interests, the Wells, the Equipment, the MGP Partnership
Interests, the Passive Partnership Interests, the Farmout Agreements, the
Assumed Contracts, the Pipeline Segment, the Contract Rights, the Alerion
Assets, the Physical Assets, the Easements and the Deeds collectively being the
“Acquired Assets.”

 

1.2          Excluded Assets.  Anything contained in Section 1.1 hereof to the
contrary notwithstanding, there are expressly excluded from the Acquired Assets:

 

(a)           the Adjusted Purchase Price delivered by Buyer to Seller pursuant
to this Agreement;

 

(b)           all cash and cash equivalents of Seller on hand and in banks,
certificates of deposit, commercial paper and similar securities other than
(i) Suspense Proceeds transferred to Buyer at Closing as provided in Sections
4.3(k) and (ii) Partnership Funds as provided in Section 4.3(l);

 

(c)           all releases provided to or in favor of Seller, provided that
Seller agrees that Buyer shall be entitled to the benefits of any such releases
to the extent that they relate to the Acquired Assets or operations conducted
thereon prior to the Closing;

 

(d)           all limited liability company interests in INGC, any equity or
ownership interest in any Related Party, or in Crossrock, Inc.;

 

(e)           INGC’s firm pipeline capacity contract for 1,984 DTH/day at Hi
Hat; INGC’s firm pipeline capacity contract for 150 DTH/day at Kermit Inez;
INGC’s transportation contracts on Kentucky-West Virginia Gas Co., Jefferson
Gas, Chesapeake, and TCO for natural gas production from wells retained by INGC
or any Related Party; and INGC’s sales contract with Mountaintop Baking at
Kimper, none of which is essential for Buyer’s ownership or operation of the
Acquired Assets following Closing or for the normal delivery of Hydrocarbons
produced from the Acquired Assets consistent with Seller’s current (within the
last twelve months) practice;

 

(f)            leasehold interests and other mineral interests owned by INGC or
any Related Party and not included on Schedules 1.1(a) or Schedule
1.1(b) Part 1;

 

(g)           Seller’s interest in processing contracts with Markwest Processing
to process natural gas but only to the extent such contracts are used by INGC or
any Related Party, or by their respective successors or assigns, to process
Hydrocarbons, other than Hydrocarbons produced from the Acquired Assets;

 

(h)           real estate and all improvements thereon, none of which is
essential for Buyer’s ownership and operation of the Acquired Assets following
Closing, which excluded real estate and improvements include (i) those located
at 347 Thompson Road and Mims Branch Road in Pikeville, Kentucky, and (ii) real
estate parcels known as Sulpher Springs, Quail Valley Lot, Coldwater, Stone
Coal, and Harmon’s Branch, provided that such excluded real estate and
improvements do not include (A) the Easements, (B) the right to use and/or lease
the Mims Branch Office as provided in Section 1.4 below, and (C) the Deeds ;

 

4

--------------------------------------------------------------------------------

 

(i)            that certain Joint Venture Omnibus Agreement dated August 11,
2006 by and between Hartz Trading, Inc., a New Jersey corporation (“Hartz”) and
INGC, as amended (the “Hartz Agreement”); and

 

(j)            any other asset of Seller not identified as Acquired Assets, and
any asset owned by Jerome A. Kanney or Dennis L. Rohrer.

 

For convenience of reference, the assets, properties and rights which are not to
be transferred, conveyed and assigned to Buyer hereunder are herein collectively
called the “Excluded Assets.”

 

1.3          Passage of Title and Risk of Loss.  Legal and equitable title with
respect to the Acquired Assets will not pass to Buyer until such Assets are
transferred at the Closing.  Except as otherwise provided in this Agreement,
Seller (or as applicable INGC or Related Party) shall assume all risk of loss
with respect to the Acquired Assets prior to the Effective Date and Buyer shall
assume all risk of loss from and after the Effective Date.

 

1.4          Occupancy of the Mims Branch Office.  From the Closing Date, Buyer
may occupy the Mims Branch office (owned by Seller) at no rental cost to Buyer
for a period not to exceed 180 days.  During the 180-day period, the Buyer and
the Seller may negotiate the terms of a long-term lease of the property,
provided that there shall be no obligation on the part of either party to
negotiate or enter into any such long-term lease.  During the initial 180-day
period, Buyer will, by occupying the Mims Branch office, be responsible for any
costs for operating the Mims Branch office including, but not limited to,
utilities for heat, light, power, telecommunications, water, and garbage and
waste pick-up for such premises during the period of occupancy.

 

1.5          Hi Hat Capacity Right of First Refusal.  At the Closing, Seller and
Buyer will enter into a right of first refusal agreement in the form set forth
as Exhibit 1.5 hereto for the Hi Hat capacity.

 

ARTICLE 2

ASSUMPTION OF CERTAIN LIABILITIES

 

2.1          Assumed Obligations.  At the Closing, Buyer will assume all
liabilities and obligations of Seller existing under the Assumed Contracts
identified on Schedule 1.1(f).

 

2.2          Excluded Obligations(a)     .  Any other provision of this
Agreement to the contrary notwithstanding, Buyer will not assume any liability
or obligation of Seller not included in the Assumed Contracts, including, but
not limited to, the following:

 

(a)           any liabilities and obligations of Seller arising or occurring
prior to the Effective Date for Federal, state, territorial, local and foreign
taxes (including, without limitation, franchise, income, personal, real
property, sales, use, unemployment, gross receipts, excise, payroll, withholding
or other taxes);

 

(b)           any claims, demands, liabilities or obligations of any nature
whatsoever which arose or were incurred at or before the Effective Date, or
which are based on events occurring or conditions existing at or before the
Effective Date, or which are based on

 

5

--------------------------------------------------------------------------------

 

services performed by Seller at or before the Effective Date, or which relate to
goods or products of Seller shipped or delivered at or before the Effective Date
or goods or products of Seller in transit prior to or at the Effective Date and
delivered after the Effective Date, (i) notwithstanding that the claim, demand,
liability or obligation arises or becomes manifest after the Effective Date and
(ii) regardless of whether or not set forth or otherwise disclosed on any
Schedule attached hereto (whether or not required to be so set forth or
disclosed);

 

(c)           any actions, suits, claims, investigations or legal,
administrative or arbitration proceedings pending or threatened against Seller
or the Business, including without limitation litigation matters described in
Schedule 5.12(a) and Schedule 5.12(b) except as otherwise stated in such
Schedule;

 

(d)           any liabilities and obligations of Seller for amounts owed to any
member of Seller or any person affiliated therewith in such person’s capacity as
a member of Seller;

 

(e)           any liabilities and obligations of Seller relating to Seller’s
employees, agents and contractors, including liabilities and obligations arising
in connection with the termination of any such employee, agent or contractor’s
employment or services, accrued holiday, and vacation and severance pay;

 

(f)            any liabilities or obligations for payments due or required to be
made under any pension, retirement, savings or other compensation plan
maintained by Seller or any Affiliate of Seller;

 

(g)           any liabilities and obligations of Seller under this Agreement or
with respect to or arising out of the transactions contemplated hereby;

 

(h)           any liabilities and obligations relating to the Excluded Assets;
and

 

(i)            any other liabilities and obligations of Seller not being
specifically assumed by Buyer pursuant to Section 2.1 above.

 

For convenience of reference, the liabilities and obligations of Seller not
being assumed by Buyer as aforesaid are collectively called the “Excluded
Obligations.”

 

2.3          Ownership Rights and Obligations.  Subject to the provisions of
this Agreement, should Closing of the transactions contemplated hereby occur,
(a) Seller shall be entitled to all of the rights of ownership (including the
right to all production, proceeds of production, partnership distributions and
other proceeds) and shall be subject to the duties and obligations of such
ownership, attributable to the Acquired Assets for the period of time prior to
the Effective Date as “Excluded Obligations”, and (b) Buyer shall be entitled to
all of the rights of ownership (including the right to all production, proceeds
of production, partnership distributions and other proceeds) and shall be
subject to the duties and obligation of such ownership, attributable to the
Acquired Assets for the period of time from and after the Effective Date as
“Assumed Obligations.”  All expenses and costs including, without limitation,
all ad valorem, property, production, severance, and similar taxes and
assessments based upon or measured by the ownership of the Acquired Assets, the
production of Hydrocarbons, or the

 

6

--------------------------------------------------------------------------------

 

receipt of proceeds therefrom, shall be: (i) paid by or allocated to Seller if
incurred or accruing with respect to operations conducted prior to the Effective
Date; or (ii) paid by or allocated to Buyer if incurred or accruing with respect
to operations conducted after the Effective Date.  All receipts and receivables
(billed or accrued) for Hydrocarbons produced and sold or delivered prior to the
Effective Date will be and remain the property of Seller.  All receipts and
receivables (billed or accrued) for Hydrocarbons produced and sold or delivered
from an Acquired Asset on and after the Effective Date will be and remain the
property of Buyer.

 

ARTICLE 3

PURCHASE PRICE

 

3.1          Purchase Price. The total purchase price for the sale and
conveyance to Buyer of the Acquired Assets is TWENTY-NINE MILLION, SIX HUNDRED
THOUSAND and No/100 US Dollars (US $29,600,000.00) (the “Purchase Price”),
subject to adjustment in accordance with the terms of this Agreement.  At
Closing, Buyer shall pay Seller an amount (the “Closing Payment”) equal to the
Adjusted Purchase Price, as defined in Section 3.4.  The Closing Payment shall
be made in immediately available funds and by wire transfer to the account or
accounts specified in Seller’s wiring instructions set forth on Exhibit 3.1.

 

3.2          Escrow.  Upon execution of this Agreement, Buyer and Seller will
enter into an Escrow Agreement (the “Escrow Agreement”) substantially in the
form of Exhibit 3.2.  At the Closing, Buyer will cause a portion of the Deposit
equal to TWO HUNDRED THOUSAND and No/100 US Dollars (US $200,000.00) (the
“Escrow Amount”) to remain on deposit with the escrow agent in accordance with
the terms of the Escrow Agreement and Article 17 of this Agreement.  Except to
the extent that the Escrow Amount has been depleted by indemnity claims under
Article 17, the Escrow Amount (less an amount sufficient to cover any pending
indemnity claims that may exist on the Closing Date) will be released to Seller
on the first anniversary of the Closing Date (or the first business day
thereafter), in accordance with Seller’s wiring instructions as set forth on
Exhibit 3.1.

 

3.3          Deposit.  Upon execution of this Agreement by all parties, Buyer
shall deposit with escrow agent under the Escrow Agreement an earnest money
deposit equal to FOUR HUNDRED FIFTY THOUSAND and No/100 US Dollars (US
$450,000.00) to be held as a deposit (the “Deposit”) in an interest bearing
account under the terms of the Escrow Agreement, pending Closing.  At Closing,
the Deposit (plus any interest accrued thereon) shall be a credit against the
Purchase Price and paid to Seller, less the Escrow Amount as provided in
Section 3.2.  If this Agreement is terminated without a Closing, the provisions
of Article 16 hereof shall govern the Deposit.

 

3.4          Adjustment to Purchase Price.  At Closing, the Purchase Price shall
be adjusted as follows and the resulting amount shall be referred to herein as
the “Adjusted Purchase Price”:

 

(a)         The Purchase Price shall be adjusted upward and without duplication
by each of the following:

 

(i)            The amount of all actual operating or capital expenditures or
prepaid expenses attributable to the Acquired Assets (including if paid by
Seller at

 

7

--------------------------------------------------------------------------------

 

Closing) paid by or on behalf of Seller in connection with the Acquired Assets
and which are attributable to the period of time after the Effective Date.  Such
prepaid expenses shall include royalties, rentals and other charges; ad valorem,
property, excise and any other taxes based upon or measured by the ownership of
the Acquired Assets or the receipt of proceeds therefrom (and Buyer acknowledges
that it shall pay all such taxes attributable to time periods on or after the
Effective Date, even if such tax bills are issued in the name of Seller); and
expenses payable to a third person under applicable joint operating agreements,
including overhead charges and royalty disbursement fees payable to operator, or
similar payments to third party operators, or, in the absence of any joint
operating agreement, those items customarily billed under such an agreement.  To
compensate Seller for all indirect expenses, including salaries, benefits,
office rent and other general and administrative costs, borne by it in the
operation of the Acquired Assets during the period between the Effective Date
and the Closing Date, the Purchase Price adjustment under this
Section 3.4(a)(i) shall include a fixed overhead fee of Twenty-Five Thousand US
Dollars (US $25,000) per month for each month between the Effective Date and the
Closing Date, prorated for any partial month.

 

(ii)           An amount equal to receipts, if any, received by Buyer that
Seller is entitled to with respect to Hydrocarbons produced and sold or
delivered prior to the Effective Date, as contemplated in Section 2.3 of this
Agreement.

 

(iii)          Expenditures incurred by Seller in the ordinary course of
business and in accordance with Section 10.1 not described above that are
directly associated or connected with owning, developing, operating or
maintaining the Acquired Assets for all periods on and after the Effective Date.

 

(iv)          Any other amounts agreed upon by Seller and Buyer.

 

All liabilities and related obligations with respect to each item that results
in an upward adjustment in the Purchase Price under this Section 3.4(a) shall be
deemed to be “Excluded Obligations” and retained by Seller.

 

(b)           The Purchase Price shall be adjusted downward and without
duplication by each of the following:

 

(i)            Environmental Defects pursuant to Article 7, if any.

 

(ii)           Title Defects pursuant to Article 8, if any.

 

(iii)          An amount equal to receipts, if any, received by Seller that
Buyer is entitled to with respect to Hydrocarbons produced and sold or delivered
on and after the Effective Date, as contemplated in Section 2.3 of this
Agreement.

 

(iv)          An amount equal to all expenditures, liabilities and costs
relating to the Acquired Assets that are assessed for or attributable to the
period of time prior to

 

8

--------------------------------------------------------------------------------

 

the Effective Date and (A) that are unpaid as of the Closing Date and (B) as to
which the payment obligation is assumed by Buyer at Closing.

 

(v)           An amount equal to all unpaid ad valorem, property, production,
severance and similar taxes and assessments (but not including income taxes)
based upon or measured by the ownership of the Acquired Assets, the production
of Hydrocarbons, or the receipt of proceeds therefrom, which taxes or assessment
become due and payable or accrue (but have not yet become due and payable) with
respect to the Acquired Assets prior to the Effective Date, which amount shall,
where possible, be computed based upon the tax rate and values applicable to the
tax period in question; otherwise, the amount of the adjustment under this
paragraph shall be computed based upon such taxes assessed against the
applicable portion of the Acquired Assets for the immediately preceding tax
period just ended.

 

(vi)          The amount of the Deposit plus interest accrued thereon less the
Escrow Amount, which shall remain on deposit with the escrow agent under the
terms of the Escrow Agreement.

 

(vii)         The amount of any proceeds of production attributable to the
Acquired Assets which Seller is holding in suspense as of the Closing Date,
including Suspense Proceeds shown on Schedule 5.22, but only to the extent that
Seller has not transferred such amounts to Buyer in accordance with
Section 4.3(k), below.  Notwithstanding the above, Buyer and Seller may agree on
a case-by-case basis for Seller to retain certain Suspense Proceeds and likewise
to retain all liability associated therewith.  To the extent Suspense Proceeds
are not so transferred to Buyer, Seller (as applicable INGC or the Related
Parties) shall remain responsible for such Suspense Proceeds as Excluded
Obligations and shall indemnify and hold Buyer harmless from all Losses in
connection therewith without regard to the limitations set forth in Article 17
or elsewhere in this Agreement.  To the extent Suspense Proceeds are so
transferred by Seller to Buyer, Buyer shall assume responsibility for the
Suspense Proceeds so transferred as an Assumed Obligation and shall indemnify
and hold Seller (as applicable INGC or the Related Parties) harmless from all
Losses in connection therewith without regard to the limitations set forth in
Article 17 or elsewhere in this Agreement.

 

(viii)        The Partnership Funds but only to the extent that Seller has not
transferred such Funds to Buyer in accordance with Section 4.3(l), below.

 

(ix)           An amount equal to any distributions made to INGC with respect to
the MGP Partnership Interests, the Passive Partnership Interests and the Alerion
Assets attributable to production or sales that occur on and after the Effective
Date.

 

(x)            Any other amounts agreed upon by Seller and Buyer.

 

9

--------------------------------------------------------------------------------

 

All liabilities and related obligations with respect to each item that results
in a downward adjustment in the Purchase Price under this Section 3.4(b) shall
be deemed to be “Assumed Obligations” of Buyer.

 

(c)           If Buyer and Seller determine that imbalances exist relative to
Hydrocarbons produced from the Acquired Assets prior to the Effective Date under
any operating agreement, partnership agreement, joint venture agreement, gas
balancing and storage agreement, gas processing or dehydration agreement or
similar agreement, the Purchase Price shall be adjusted upward or downward,
depending upon whether there is a net over-production or net under-production
attributable to such production, based on a value to be determined by Buyer and
Seller prior to the Closing Date.

 

3.5          Calculation of Estimated Adjusted Purchase Price; Payment at
Closing.  Seller shall prepare and deliver to Buyer, at least five (5) Business
Days prior to the Closing Date, Seller’s estimate of the Adjusted Purchase
Price, together with a statement setting forth Seller’s estimate of the amount
of each adjustment to the Purchase Price to be made pursuant to Section 3.4. 
The Parties shall negotiate in good faith and attempt to agree on such estimated
adjustments prior to Closing.  In the event any estimated adjustment amounts are
not agreed upon prior to Closing, the estimate of the Adjusted Purchase Price
for purposes of Closing shall be calculated based on Seller’s and Buyer’s agreed
upon estimated adjustments and Seller’s good faith estimation of any disputed or
undetermined amounts and shall be set forth in a statement to be signed by the
Parties at Closing (the “Closing Statement”).

 

3.6          Allocation of Purchase Price.  The Purchase Price has been
allocated among the Acquired Assets in accordance with the respective values set
forth on Schedule 3.6, attached hereto (the “Allocated Values”).  If any
adjustment is made to the Purchase Price pursuant to Article 7 or Article 8, a
corresponding adjustment shall be made to the Allocated Value of the affected
Acquired Assets.

 

ARTICLE 4
CLOSING

 

4.1          Closing Date.  The closing for the consummation of the transactions
contemplated by this Agreement (the “Closing”) will take place at the offices of
Stoll Keenon Ogden PLLC, Lexington, Kentucky, on the first Business Day that
occurs after expiration of the 60-day period commencing on the date this
Agreement is executed by all parties, or on such other date and at such other
time or place as Buyer and Seller may mutually agree to in writing.  The date on
which the Closing actually occurs is called the “Closing Date”.  Irrespective of
the Closing Date, it is agreed that the effective date of this Agreement and the
obligations undertaken hereunder, shall be 12:01 a.m. January 1, 2011 (the
“Effective Date”).

 

4.2          Simultaneous Actions.  All actions to be taken and all documents to
be executed and delivered by the parties at the Closing will be deemed to have
been taken and executed simultaneously and no actions will be deemed taken nor
any documents executed or delivered until all have been taken, executed and
delivered.

 

10

--------------------------------------------------------------------------------

 

4.3          Deliveries by Seller.  On or before the Closing Date, Seller will
deliver to Buyer the following:

 

(a)           Closing Certificate.  An accurate certificate of Seller, dated the
Closing Date and in the form of Exhibit 4.3(a), certifying that:

 

(i)            the representations and warranties of Seller contained in this
Agreement are true and accurate on and as of the Closing Date with the same
force and effect as if made on the Closing Date;

 

(ii)           Seller has performed and complied with all covenants, obligations
and agreements to be performed or complied with by it on or before the Closing
Date pursuant to this Agreement;

 

(iii)          Seller is not a foreign person within the scope of Treas. Reg.
1.1445-2(b); and

 

(iv)          Seller is not named on the Specially Designated Nationals List
maintained by the Office of Foreign Asset Control of the Department of the
Treasury.

 

(b)           Instruments of Transfer.  A duly executed bill of sale and general
instrument of assignment substantially in the form of Exhibit 4.3(b) attached
hereto and incorporated herein by reference, and such other duly executed
general warranty deeds, endorsements, assignments and instruments of transfer,
conveyance and assignment in form and substance reasonably satisfactory to
Buyer, as are necessary or desirable to effect the transfers, conveyances and
assignments to Buyer of the Acquired Assets referred to in Article 1 hereof.

 

(c)           Good Standing Certificates.  Certificates dated within five
(5) Business Days of the Closing Date (i) from the Secretary of State of the
Commonwealth of Kentucky to the effect that INGC is duly organized and validly
existing under the laws of the Commonwealth of Kentucky and from the Secretary
of State of the State of West Virginia to the effect that INGC is qualified as a
foreign limited liability company to transact business in West Virginia, and
(ii) similar certificates, if applicable, for each Related Party (other than a
natural person) that is an entity with respect to its due organization, valid
existence and good standing.  If Buyer elects to acquire the Brushy Gap Shares
under Section 1.1(m) of this Agreement, certificates provided for under this
Section 4.3(c) shall also be delivered to Buyer with regard to Brushy Gap.

 

(d)           Releases.  Releases of all encumbrances on the Acquired Assets
(other than Permitted Encumbrances as defined in Appendix B), including releases
or re-conveyances, as applicable, of (i) the INGC Permitted Encumbrances,
(ii) the Related Party Permitted Encumbrances, (iii) each mortgage and UCC-1
Financing Statement of record, and (iv) each deed of trust with respect to each
interest in real or personal property that is subject to liens, claims or
encumbrances.

 

(e)           Opinion of Counsel.  An opinion of counsel for Seller in the form
of Exhibit 4.3(e), dated as of the Closing Date.

 

11

--------------------------------------------------------------------------------

 

(f)            Consents.  Duly executed consents, authorizations, orders or
approvals of any third party which are required for the consummation by Seller
of the transactions contemplated by this Agreement, each of which shall be in
full force and effect on the Closing Date, including without limitation,
(i) powers of attorney or other written evidence of INGC’s authority to execute,
deliver and perform this Agreement and the other documents to be delivered by
Seller at Closing, in recordable form and reasonably satisfactory to Buyer,
(ii) written consents of the other partners in each of the partnerships listed
on Schedule 1.1 (c) to the extent necessary for Buyer to succeed to the MGP
Partnership Interest in each such partnership as a full substitute partner,
(iii) written consents of the other partners in each of the partnerships listed
on Schedule 1.1 (d) to the extent necessary for Buyer to succeed to the Passive
Partnership Interest in each such partnership as a full substitute partner and
as the Managing General Partner, (iii) written consents of the other partners to
the partnership that is the subject of the Alerion Partnership Interest and
under related agreements comprising the Alerion Assets to the extent necessary
for Buyer to succeed to the Alerion Partnership Interest as a full substitute
partner and as the Operator and successor in interest to INGC’s interest in the
Alerion Assets, which consents shall confirm INGC’s representations, warranties
and covenants with respect to the Hartz Agreement under Section 5.26(h) of this
Agreement.

 

(g)           Kentucky and West Virginia Permit and Transfer Forms and Tariffs. 
Approval documents executed by the parties with respect to all applicable
regulatory agencies including, but not limited to, the Kentucky Division of Oil
and Gas, the Kentucky Division of Water, the Kentucky Public Service Commission,
the West Virginia Office of Oil and Gas, the West Virginia Department of
Environmental Protection, and the West Virginia Public Service Commission,
transferring all operating responsibility attendant to the ownership and
operation of the Acquired Assets from Seller to Buyer as of the Effective Date. 
Such approval documents include, but are not limited to, Kentucky and West
Virginia transfer forms for well transfer, plugging bonds or other surety, flow
lines, gathering lines, and pipeline permits, tank battery permits or
registrations, and retail sale tariffs.

 

(h)           Easements.  Duly executed easements in substantially the form of
Exhibit 4.3(h) attached hereto and incorporated herein by reference.

 

(i)            Transfer Orders.  Transfer orders or letters in lieu thereof,
directing the operator and/or the purchaser of production to make payment of
proceeds attributable to production from the Acquired Assets to Buyer after the
Effective Date in a form reasonably acceptable to Buyer.

 

(j)            Change of Operator.  Change of operator forms, including
applicable state forms with regard to the transfer of the Wells and/or the
Leasehold Interests and/or operatorship thereof, for the Acquired Assets.

 

(k)           Suspense Proceeds.  The Suspense Proceeds except to the extent
that Buyer has received a Purchase Price Adjustment therefor as contemplated in
Section 14.2, and except to the extent that Buyer and Seller have agreed for
Seller to retain and be responsible for certain Suspense Proceeds.

 

12

--------------------------------------------------------------------------------

 

(l)            Partnership Funds.  The Partnership Funds except to the extent
that Buyer has received a Purchase Price Adjustment therefor as contemplated in
Section 14.3.

 

(m)          Escrow Agreement.  The Escrow Agreement with confirmation from the
escrow agent that the Escrow Amount remains in escrow as provided in
Section 3.2.

 

(n)           Closing Statement.  The Closing Statement.

 

(o)           Brushy Gap.  If Buyer elects to purchase the Brushy Gap Shares in
lieu of the Brushy Gap Assets, certificates representing the Brushy Gap Shares
together with stock powers, duly executed by each of the members of INGC, as the
owners of all of the Brushy Gap Shares transferring such Shares to Buyer, with
side agreement addressing the retention of Brushy Gap’s owners of the three
wells identified in Section 1.1(m).

 

(p)           Transportation, Compression and Marketing Agreement.  A
Transportation, Compression and Marketing Agreement between Buyer and INGC and
the Related Parties (including their respective successors or assigns)
substantially in the form of Exhibit 4.4(e) attached hereto and incorporated by
reference.

 

4.4          Deliveries by Buyer.  On or before the Closing Date, Buyer will
have delivered to Seller the following:

 

(a)           Closing Certificate.  An accurate certificate of Buyer, dated the
Closing Date and in the form of Exhibit 4.4(a), certifying that:

 

(i)            the representations and warranties of Buyer contained in this
Agreement are true and accurate on and as of the Closing Date with the same
force and effect as if made on the Closing Date;

 

(ii)           Buyer has performed and complied with all covenants, obligations
and agreements to be performed or complied with by it on or before the Closing
Date pursuant to this Agreement;

 

(iii)          Buyer is not a foreign person within the scope of Treas. Reg.
1.1445-2(b); and

 

(iv)          Buyer is not named on the Specially Designated Nationals List
maintained by the Office of Foreign Assets Control of the Department of the
Treasury.

 

(b)           Payment.  The Closing Payment in the manner set forth in
Section 3.1.

 

(c)           Opinion of Counsel.  An opinion of counsel for Buyer in the form
of Exhibit 4.4(c), dated as of the Closing Date.

 

(d)           Services Agreement.  A services agreement in the form of
Exhibit 4.4(d) between Buyer and Jerome A. Kanney, CPA, PSC for transitional and
other services to be provided as and to the extent requested by Buyer and agreed
to by Jerome A. Kanney, CPA, PSC.

 

13

--------------------------------------------------------------------------------

 

(e)           Transportation, Compression and Marketing Agreement.  A
Transportation, Compression and Marketing Agreement between Buyer and INGC and
the Related Parties (including their respective successors or assigns)
substantially in the form of Exhibit 4.4(e) attached hereto and incorporated by
reference.

 

(f)            Kentucky and West Virginia Permit and Transfer Forms and Tariffs.
Approval documents executed by the parties with respect to all applicable
regulatory agencies including, but not limited to, the Kentucky Division of Oil
and Gas, the Kentucky Division of Water, the Kentucky Public Service Commission,
the West Virginia Office of Oil and Gas, the West Virginia Department of
Environmental Protection, and the West Virginia Public Service Commission,
transferring all operating responsibility attendant to the ownership and
operation of the Acquired Assets from Seller to Buyer as of the Effective Date. 
Such approval documents include, but are not limited to, Kentucky and West
Virginia transfer forms for well transfer, plugging bonds or other surety, flow
lines, gathering lines, and pipeline permits, tank battery permits or
registrations, and retail sale tariffs.

 

(g)           Good Standing Certificates.  Certificates dated within five
(5) Business Days of the Closing Date from the Secretary of State of Delaware,
Kentucky and West Virginia to the effect that the Buyer is duly organized and
validly existing under the laws of the jurisdiction where it is organized, and
that Buyer is duly qualified to do business as a foreign company and in good
standing under the laws of Kentucky and West Virginia.

 

(h)           Escrow Agreement.  The Escrow Agreement.

 

(i)            Closing Statement.  The Closing Statement.

 

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF INGC

 

INGC represents and warrants to and covenants and agrees with Buyer as follows:

 

5.1          Organizational Matters.  INGC is a limited liability company duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky and has all requisite power and authority to own, lease
and operate its properties and to carry on its business with respect to the
Acquired Assets as now being conducted. Each Related Party (other than a natural
person) that is an entity has been duly organized, and is validly existing and
in good standing under the laws of state of its organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.

 

5.2          Authority.

 

(a)           INGC has all requisite power, authority and capacity to:  own,
lease and operate its properties; carry on its business as now being conducted
with respect to the Acquired Assets; enter into this Agreement; perform its
obligations hereunder; and consummate the transactions contemplated hereby.

 

14

--------------------------------------------------------------------------------

 

(b)           The execution, delivery and performance of this Agreement by INGC,
and the consummation of the transactions contemplated hereby, have been duly and
validly authorized by all necessary action on the part of INGC and its
constituents.

 

(c)           This Agreement has been duly and validly executed by Seller and by
the Related Parties and is a valid and binding obligation of Seller and the
Related Parties, enforceable in accordance with its terms.

 

(d)           INGC has been duly authorized by each Related Party to execute,
deliver and perform its obligations under this Agreement, and to convey and
transfer to Buyer those Acquired Assets that are titled in the name of each such
Related Party.

 

5.3          Noncontravention.

 

(a)           INGC has the power, authority and capacity to enter into and
consummate the sale and other transactions contemplated by this Agreement both
on its own behalf and on behalf of each of the Related Parties.  This Agreement
has been duly and validly executed and delivered by INGC and is a valid and
binding obligation of INGC, enforceable in accordance with its terms.

 

(b)           Neither the execution, delivery and performance of this Agreement
by INGC, nor the consummation by INGC of the transactions contemplated hereby,
nor compliance by INGC with any of the provisions hereof, will:

 

(i)            conflict with or result in a breach of any provision of the
Articles of Organization or operating agreement of INGC or the governing
documents of any Related Party;

 

(ii)           conflict with or result in a breach of any provision of any of
the partnership agreements or other documents governing the partnerships that
are the subject of the MGP Partnership Interests or the Passive Partnership
Interests;

 

(iii)          conflict with or result in a breach of any provision of the Hartz
Agreement or of any partnership, operating or other agreement entered into
pursuant to or in connection with the Hartz Agreement;

 

(iv)          except as set forth in Schedule 5.3(b)(iv), cause a default (or
give rise to any right of termination, cancellation, or acceleration) under any
of the terms, conditions or provisions of any note, bond, lease, mortgage,
indenture, license, warranty or other instrument or agreement relating to the
Acquired Assets, including the partnership agreements or other documents
governing the partnerships that are the subject of the MGP Partnership
Interests, the Passive Partnership Interests or the Alerion Assets; or

 

(v)           violate any law, statute, rule or regulation or order, writ,
judgment, injunction or decree applicable to (A) INGC, (B) any of the Acquired
Assets, or (C) to INGC’s Knowledge, any of the Related Parties.

 

15

--------------------------------------------------------------------------------

 

(c)           Except for the notices referred to in Schedule 5.3(c) hereof, no
consent or approval by, or any notification of or filing with, any public body
or authority is required in connection with the execution, delivery or
performance by Seller of this Agreement or the consummation by Seller of the
transactions contemplated hereby.

 

5.4          Absence of Changes.  Since the execution of this Agreement, except
as set forth on Schedule 5.4 attached hereto, there has not been:

 

(a)           any material adverse change in the condition of an Acquired Asset;

 

(b)           any material damage, destruction or loss (whether or not covered
by insurance) adversely affecting any of the Acquired Assets;

 

(c)           any amendment or termination of any Assumed Obligation;

 

(d)           any license, sale, transfer, pledge, mortgage or other disposition
of any Acquired Asset except sales of oil, natural gas and other Hydrocarbons in
the ordinary course of business and consistent with the past practices of
Seller;

 

(e)           any cancellation of any debts or claims or any amendment,
termination or waiver of any rights of Seller relating to the Acquired Assets or
an Assumed Obligation; or

 

(f)            any decrease in the level of maintenance of tangible Acquired
Assets from that level generally in effect prior to execution of this Agreement.

 

5.5          Title to Assets.

 

(a)           INGC has good and marketable title to all of the Acquired Assets
(save and except those that are owned by the Related Parties), free and clear of
all mortgages, liens, pledges, charges, security interests, rights of way,
options, rights of first refusal, conditions, restrictions or encumbrances of
any kind or character, whether or not relating to the extension of credit or the
borrowing of money (collectively, “Encumbrances”) except for the Encumbrances
set forth on Schedule 5.5(a) (the “INGC Permitted Encumbrances”) and liens for
taxes and governmental charges not yet due and payable.

 

(b)           INGC has complete and unrestricted power and the unqualified right
to sell, convey, assign, transfer and deliver the Acquired Assets to Buyer (save
and except those that are owned by the Related Parties and subject to obtaining
any consents or waivers of third parties disclosed on Schedule 5.5(b) and
Schedule 5.21, and Transfer Requirements required to be obtained in connection
with such sale, conveyance, assignment, transfer and delivery of the Acquired
Assets or any part thereof).  The instruments of transfer, conveyance and
assignment executed and delivered by INGC to Buyer at the Closing will be valid
and binding obligations of Seller, enforceable in accordance with their
respective terms, sufficient for purposes of recordation and filing where
permitted by law, sufficient to transfer, convey and assign to Buyer all of
Seller’s interest in and to the Acquired Assets, the foregoing to constitute
good and marketable title thereto, free and clear of all Encumbrances.

 

16

--------------------------------------------------------------------------------

 

(c)           To INGC’s Knowledge, each Related Party has good and marketable
title to each Acquired Asset owned by such Related Party, free and clear of
Encumbrances except for the Encumbrances set forth in Schedule 5.5(c) (the
“Related Party Permitted Encumbrances”) and liens for taxes and governmental
charges not yet due and payable.

 

(d)           INGC has (or at Closing will have) complete and unrestricted power
and the unqualified right to sell, convey, assign, transfer and deliver the
Acquired Assets that are owned by the Related Parties to Buyer (subject to
obtaining any consents or waivers of third parties disclosed on Schedule
5.5(b) and Schedule 5.21, and Transfer Requirements required to be obtained in
connection with such sale, conveyance, assignment, transfer and delivery of the
Acquired Assets or any part thereof).

 

5.6          Real Property - Owned.  Schedule 5.6 attached hereto contains a
list and brief description of all real property which is included in the
Acquired Assets, including a brief description of each such parcel, the record
title holder thereof, the location thereof, the material improvements thereon
and all Permitted Encumbrances thereon.  Statements as to acreage are
commercially reasonable estimates as maintained and utilized by Seller but are
not of themselves warranted.

 

5.7          Real Property - Leased.  Schedule 5.7 attached hereto contains a
list and brief description (including with respect to each Leasehold Interest
and each Well (i) as to any Preference Rights and Transfer Requirements
applicable thereto and (ii) as to whether the lessee has or has not agreed to
subordinate the leasehold estate to any liens encumbering the property and
(iii) as to the terms of all real estate leases included in the Acquired
Assets.  True, complete and correct copies (or, in the case of oral leases,
descriptions) of each lease have been furnished to Buyer.  Each such lease is in
full force and effect and constitutes a legal, valid and binding obligation of
the respective parties thereto.  All rents and additional amounts due to date on
each such lease have been paid.  In each case, the lessee is in peaceable
possession under such lease, has a valid leasehold interest therein and is not
in default thereunder and no waiver, indulgence or postponement of the lessee’s
obligations thereunder has been granted by the lessor, nor does there exist any
event, condition or occurrence which, with the giving of notice or the lapse of
time, or both, would constitute such a default under any such lease.  Seller has
not violated any of the terms or conditions under any such lease in any respect
which violation would give rise to the right of the other party thereto to
terminate such lease or sue for damages thereunder.  Statements as to acreage
are commercially reasonable estimates as maintained and utilized by Seller but
are not of themselves warranted.

 

5.8          Personal Property - Owned.  Schedule 5.8 attached hereto contains a
summary and brief description of all tangible personal properties and assets
included in the Acquired Assets.

 

5.9          Personal Property - Leased.  Schedule 5.9 attached hereto contains
a list of all leases or other material agreements under which Seller is lessee
of or holds or operates any items of machinery, equipment, motor vehicles,
office furniture, computer software, fixtures or other tangible personal
property owned by any third party which are included in the Acquired Assets. 
True, complete and correct copies (or, in the case of oral leases or agreements,
descriptions) of such leases and agreements have been furnished to Buyer. 
Seller (as applicable INGC or Related

 

17

--------------------------------------------------------------------------------

 

Party) is the owner and holder of all of the leasehold estates purported to be
granted by such leases or agreements and all other leases or agreements under
which it is lessee of or holds or operates any such items owned by a third
party.  Each of such leases and agreements is in full force and effect and
constitutes a legal, valid and binding obligation of the respective parties
thereto.  There is not under any of such leases any existing default or event,
condition or occurrence which, with the giving of notice or lapse of time, or
both, would constitute a default thereunder.

 

5.10        Agreements.  Schedule 5.10 attached hereto sets forth a true,
complete and correct list and brief description (including a statement as to
whether there is any requirement of consent of any party other than Seller to
assignment) of all written or oral contracts, agreements and other instruments
included in the Acquired Assets.  Each such agreement, lease, contract,
commitment, instrument and obligation is in full force and effect and
constitutes a legal, valid and binding obligation of Seller (as applicable INGC
or Related Party) and is enforceable in accordance with its terms.  Seller (as
applicable INGC or Related Party) has performed all the obligations required to
be performed by it to date and is not in default or alleged to be in default in
any respect under any such agreement, lease, contract, commitment, instrument or
obligation.  Seller has furnished to Buyer complete and correct copies of all
documents set forth on said Schedule 5.10.

 

5.11        Brokers.  Neither Seller, nor any of its members, managers,
officers, constituents or employees, has employed any broker or finder other
than Albrecht and Associates, in connection with the transactions contemplated
by this Agreement.  Seller shall indemnify, defend and hold Buyer harmless from
any and all claims or losses relating to brokerage fees, commissions or finder’s
fees owed or claimed to be owed to any broker or finder engaged or claimed to be
engaged by Seller.

 

5.12        Litigation.  As of the date of this Agreement, INGC is involved in
the litigation described on Schedule 5.12(a).  As of the date of the Agreement,
Related Parties are involved in the litigation in which a claim has been
asserted with respect to an Acquired Asset described on Schedule 5.12(b). 
Except as set forth in Schedule 5.12(a) and Schedule 5.12(b), none of the
litigation so scheduled relates to the Acquired Assets or affects the ownership
or operation thereof and Seller (as applicable INGC or Related Party) shall
retain all liability and responsibility for such litigation after Closing and
shall indemnify and hold Buyer harmless from all Losses in connection therewith
without regard to the limitations set forth in Article 17 or elsewhere in this
Agreement.

 

5.13        Licenses, Permits, Etc.  Seller possesses such valid franchises,
certificates of convenience and necessity, operating rights, rights of way,
licenses, permits, consents, authorizations, exemptions and orders of
Governmental Authorities, as are necessary to operate the Acquired Assets in the
manner currently operated by Seller except for such of the foregoing as to which
the failure to possess will not have a material adverse effect on the Acquired
Assets and the ownership or operation thereof, or on Seller’s ability to
consummate and perform the transactions contemplated by this Agreement

 

5.14        Encumbrances.  Seller has neither caused nor allowed (and the
execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, will

 

18

--------------------------------------------------------------------------------

 

not cause) any mortgage, lien or other encumbrance to be placed upon or against
the Acquired Assets that will not be released at or prior to Closing, other than
(i) liens for taxes and assessments which are not yet delinquent, or, if
delinquent, are being protested in good faith and are set forth on Schedule
5.14, (ii) rights under operating agreements or similar contracts to assert
liens against the Acquired Assets (but not including rights which have actually
been asserted), and (iii) Permitted Encumbrances as defined in Appendix B.

 

5.15        Compliance with Law.

 

(a)           INGC is in material compliance with all Laws and other
requirements of Governmental Authorities applicable to the Acquired Assets and
the operation thereof, and, to the Knowledge of INGC, there are no material
violations of any such Laws or requirements applicable to any portion of the
Acquired Assets that is operated by a third party.

 

(b)          To INGC’s Knowledge, each Related Party, as to each Acquired Asset
owned by a Related Party, is in material compliance with all Laws and other
requirements of Governmental authorities applicable to the Acquired Assets and
the ownership and operation thereof.

 

5.16        AFE’s.  Schedule 5.16 sets forth the authorizations for expenditures
(“AFE’s”) that are currently outstanding and that (i) provide for the drilling
of wells or other development operations in order to earn or to continue to hold
all or any portion of the Acquired Assets, or (ii) obligate Seller to make
payments of any amounts in connection with the drilling of wells or other
capital expenditures affecting the Acquired Assets.  Schedule 5.16 also sets
forth all drilling commitments and deadlines (other than routine or recurring
payment or maintenance deadlines) relating to the Acquired Assets that exist
currently or as of the date of the Closing.

 

5.17       Taxes.  Except as shown on Schedule 5.17, (i) all excise, occupation,
franchise, severance, production, sales, use and other taxes, duties or charges
levied, assessed or imposed upon or against the Acquired Assets by any
Governmental Authority which are currently due and payable have been duly paid
or adequately provided for or are being timely and properly contested, and all
currently due excise, franchise and other tax reports or other reports required
by law or regulation with respect thereto have been duly filed and are complete
and accurate in all material respects or extensions have been duly obtained, and
(ii) all such taxes, including sales and use taxes, were timely and properly
paid with respect to the acquisition of each item of personal property located
in Kentucky included in the Equipment and the Physical Assets or such
acquisition was exempt from the imposition of sales and use tax (in which case,
Schedule 5.17 identifies the items of personal property that were so exempt, it
being understood that Seller has represented to Buyer that such exemption
exempts the purchase and sale of the personal property so identified from the
imposition of sales tax in connection with the transactions provided for under
this Agreement provided Buyer continues to use said personal property for the
same purposes for which it was originally acquired by Seller and in the same
location as provided in Section 10.6(c) of this Agreement).  Buyer acknowledges
that it shall be responsible for and pay all such taxes with respect to time
periods on and after the Effective Date, even if the tax notice is issued in the
name of Seller, and Seller acknowledges that it shall be responsible for and pay

 

19

--------------------------------------------------------------------------------

 

all such taxes with respect to time periods prior to the Effective Date, even if
the tax notice is issued in the name of Buyer.

 

5.18        Gas Imbalances, Prepayments, Hedges.  Except as shown on Schedule
5.18, (i) there are no material imbalances affecting the Acquired Assets that
would require Buyer to deliver any Hydrocarbons after the Effective Date without
receiving full payment therefor, (ii) Seller has not received any prepayments or
other payments that would require Buyer to deliver any Hydrocarbons after the
Effective Date without receiving full payment therefor, and (iii) Seller has not
entered into any hedging arrangements that affect the sale or marketing of
Hydrocarbons produced from the Acquired Assets after the Effective Date.

 

5.19        Well Status.  Except as set forth in Schedule 5.19, as of the date
of this Agreement and with respect to the Acquired Assets, notwithstanding
obligations to ultimately plug Wells, Seller is not currently obligated by law
or contract to plug and abandon any of the Wells at this time.

 

5.20        Equipment.  The Equipment and Physical Assets included in the
Acquired Assets are sold “AS IS, WHERE IS” without warranty of any kind other
than clear title free and clear of Encumbrances.

 

5.21        Preference Rights.  Except as shown on Schedule 5.5(b) and Schedule
5.21, there are no Preference Rights or Transfer Requirements required to be
obtained or complied with prior to the Closing.  Schedule 5.5.(b) and Schedule
5.21 include detailed information regarding (i) the Preference Rights and
Transfer Requirements included in such Schedules and (ii) each party whose
interest is subject to such Preference Rights or Transfer Requirements.

 

5.22        Rentals/Royalties.

 

(a)           Except for suspense proceeds shown on Schedule 5.22(a) that are
being held in suspense by INGC (“INGC Suspense Proceeds”), all rentals,
royalties, shut-in royalties and other similar payments due and payable with
respect to the Acquired Assets (other than those owned by a Related Party) and
production therefrom have been timely paid.  Schedule 5.22(a) includes detailed
information regarding the INGC Suspense Proceeds and each party whose interest
is in suspense and the amount of Suspense Proceeds attributable to the interest
of each such party.

 

(b)          To INGC’s Knowledge, except for Suspense Proceeds shown on Schedule
5.22(b) that are being held in suspense by a Related Party (“Related Party
Suspense Proceeds”), all rentals, royalties, shut-in royalties and other similar
payments due and payable with respect to Acquired Assets owned by a Related
Party and production therefrom have been timely paid.  Schedule 5.22(b) includes
detailed information regarding the Suspense Payments of Related Parties and the
amount of the Related Party Suspense Payments attributable to the interests of
each Related Party.  The INGC Suspense Proceeds and the Related Party Suspense
Proceeds are collectively referred to herein as the “Suspense Proceeds.”  The
parties acknowledge that Seller and Buyer may agree on a case-by-case basis for

 

20

--------------------------------------------------------------------------------

 

Seller to retain certain Suspense Proceeds including all liability associated
therewith.

 

5.23                    Bankruptcy.  There are no bankruptcy or reorganization
proceedings pending against, or, to the Knowledge of Seller, threatened against
Seller.

 

5.24                    Environmental.  Except as set forth on Schedule 5.24
(i) Seller has no Knowledge of any Environmental Condition with respect to the
Acquired Assets, (ii) no Environmental Claims have been made by any Person with
respect to the Acquired Assets, and (iii) Seller has not received notice of the
alleged existence of any such Environmental Condition or Environmental Claim
from any Governmental Authority.  Except as set forth on Schedule 5.24, Seller
has no environmental audits, assessments, or reports materially bearing on
environmental, health or safety liabilities, in each case relating to the
Acquired Assets or the Business, in its possession or under its reasonable
control.

 

5.25                    Not a Utility.  Seller is not a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” of a “holding company,” in each case
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.  The Acquired Assets are not currently regulated by any federal or
state utility commission except with respect to the filing of tariffs for “farm
tap” sales, the transportation of natural gas as a shipper over third-party
owned, federally regulated pipelines, and by other Governmental Authorities with
respect to matters of safety, health, environmental regulation and taxation.

 

5.26                    Partnership Matters.  With respect to the MGP
Partnership Interests, the Passive Partnership Interests, the Alerion Assets and
the partnerships that comprise the MGP Partnership Interests, the Passive
Partnership Interests and the Alerion Partnership Interest:

 

(a)                                  INGC is the record and beneficial owner of
the MGP Partnership Interests, the Passive Partnership Interests, and the
Alerion Assets free and clear of all Encumbrances other than Permitted
Encumbrances as defined in Appendix B.

 

(b)                                 Upon Closing, Buyer will obtain good and
valid title to the MGP Partnership Interests, the Passive Partnership Interests
and the Alerion Assets, free and clear of all Encumbrances other than Permitted
Encumbrances as defined in Appendix B.

 

(c)                                  With respect to the partnerships that are
the subject of the MGP Partnership Interests and the Alerion Partnership
Interest, INGC has filed or caused to be filed all reports, statements, returns
and similar filings, including, without limitation, K-1’s, as required under the
Code and applicable state and federal tax laws for all tax years through 2009,
and shall cooperate with Buyer to assure the timely filing of all such reports,
statements, returns and similar filings for 2010 as provided in Section 10.6 of
this Agreement.

 

(d)                                 The Records to be delivered to Buyer at
Closing will contain (i) complete and accurate copies of and information with
respect to all federal and state tax returns and filings (but not including tax
returns and filings of INGC and Related Parties)

 

21

--------------------------------------------------------------------------------

 

for the partnerships and partnership interests conveyed herein that are the
subject of the MGP Partnership Interests, the Passive Partnership Interests and
the Alerion Assets, and (ii) the books and records being made available to Buyer
under Section 7.1 of this Agreement with regard to such partnerships and
partnership interests.

 

(e)                                  INGC has paid (or with respect to 2010,
shall pay) all of its state, federal and local income taxes for 2010 with
respect to the MGP Partnership Interests, the Passive Partnership Interests and
the Alerion Assets, and INGC and the Related Parties, as applicable, shall be
responsible for any and all such taxes due with respect to the MGP Partnership
Interests, the Passive Partnership Interests and the Alerion Assets for all time
periods before the Effective Date.

 

(f)                                    Schedule 5.26(f) sets forth the amount of
all partnership distributions that have been declared and are payable on or
after the Effective Date with regard to the partnerships that are the subject of
the MGP Partnership Interests, the Passive Partnership Interests and the Alerion
Assets.

 

(g)                                 No default exists under the partnership
agreements or other governing documents that pertain to the partnerships that
are the subject of the MGP Partnership Interests, the Passive Partnership
Interests and the Alerion Assets, nor to the best of INGC’s Knowledge, do facts
exist that would support a claim that any such default exists.

 

(h)                                 Buyer is not acquiring and shall not be
subject to that certain Joint Venture Omnibus Agreement dated August 11, 2006 by
and between Hartz Trading, Inc. and INGC as amended (the “Hartz Agreement”).  In
particular, Buyer shall not be subject to area of mutual interest or other
provisions of the Hartz Agreement (including Section 6.1 thereof), including any
partnership agreement established pursuant to the Hartz Agreement or the
operating agreements provided for therein, whereby any asset or property of
Buyer now owned or acquired in the future by Buyer, Buyer’s Affiliates or their
respective successors, assigns, heirs, or personal representatives (including
the Acquired Assets) would be subject to any rights of any party to the Hartz
Agreement or their respective successors, assigns, heirs or personal
representatives, it being agreed that if the Hartz Agreement or any other
agreement provides for such rights, it shall be a condition to Buyer’s
obligation to close this Agreement that such agreement be amended so as to
terminate such rights.  Notwithstanding the above, Buyer is acquiring the
Alerion Partnership Interest described in Section 1.1(i) of this Agreement, and
succeeding INGC as Operator under the partnership agreement that governs the
Alerion Partnership Interest and the related operating agreement..

 

ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents and warrants to and covenants and agrees with Seller as
follows:

 

22

--------------------------------------------------------------------------------

 

6.1                               Organization Standing and Power.  Buyer is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby.

 

6.2                               Authority.  The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action on the part of Buyer and its constituents.  This Agreement has been duly
and validly executed and delivered by Buyer and is a valid and binding
obligation of Buyer, enforceable in accordance with its terms.  Neither the
execution, delivery and performance of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by Buyer with any of the
provisions hereof will:

 

(i)                                     conflict with or result in a breach of
any provision of its Articles of Organization or operating agreements;

 

(ii)                                  cause a default (or give rise to any right
of termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any agreement, instrument or obligation to which Buyer is a
party, or by which any of its properties or assets may be bound; or

 

(iii)                               violate any statute, rule or regulation or
judgment, order, writ, injunction or decree of any court, administrative agency
or governmental body, in each case applicable to Buyer or any of its properties
or assets.  No filing with, and no permit, authorization, consent or approval
of, any public body or authority is necessary for the consummation by Buyer of
the transactions contemplated by this Agreement.

 

6.3                           No Conflict or Violation.  Neither the execution
and delivery of this Agreement nor the consummation of the transactions and
performance of the terms and conditions contemplated hereby by Buyer will
(i) conflict with or result in a violation or breach of any provision of the
articles of organization, operating agreement or other similar governing
documents of Buyer or of any agreement, indenture or other instrument under
which Buyer is bound, or (ii) violate or conflict with any Law applicable to
Buyer.

 

6.4                           Consents.  No consent, approval, authorization or
permit of, or filing with or notification to, any person is required for or in
connection with the execution and delivery of this Agreement by Buyer or for or
in connection with the consummation of the transactions and performance of the
terms and conditions contemplated hereby by Buyer, except as set forth in
Schedule 5.5(b) and Schedule 5.21 and except for such consents, approvals,
authorizations, permits, filings and notifications the failure of which to
obtain or make will not have a material adverse effect on the ability of Buyer
to perform its obligations under, and consummate the transactions contemplated
by, this Agreement.

 

6.5                           Actions.  No action, suit or proceeding is pending
or, to the Knowledge of Buyer, threatened against Buyer, which would be likely
to have a material adverse effect on the ability of Buyer to consummate and
perform the transactions contemplated by this Agreement.

 

23

--------------------------------------------------------------------------------

 

6.6                           Brokers.  Neither Buyer nor any of its officers,
directors, members, managers, constituents or employees has employed any broker
or finder in connection with the transactions contemplated by this Agreement. 
Buyer shall indemnify, defend and hold Seller harmless from any and all claims
or losses relating to brokerage fees, commissions or finder’s fees owed or
claimed to be owed to any broker or finder engaged or claimed to be engaged by
Buyer.

 

ARTICLE 7
ACCESS, DUE DILIGENCE AND ENVIRONMENTAL MATTERS

 

7.1                           General Access and Special Indemnity.  Upon
execution of this Agreement and through and until the Closing Date, Seller shall
permit Buyer and its representatives (a) to have access to and inspect the
Acquired Assets, subject to any required consent of third Persons, and (b) to
have access at reasonable times in Seller’s offices and, in a manner so as not
to interfere unduly with the business operations of Seller, to Seller’s Records
insofar as the Seller may do so without (i) violating legal constraints or any
legal obligation, or (ii) waiving any attorney/client work product or like
privilege.  Notwithstanding the foregoing, it is understood and agreed that the
Records to be made available to Buyer under this Section 7.1 shall include all
of Seller’s books and records related to the ownership and operation of the
Acquired Assets, including without limitation lease and mineral ownership
documents, general ledgers, monthly production purchase receipts, monthly lease
operating expense statements, oil and gas production records, tax payment
records, partnership agreements, joint venture agreements and joint operating
agreements.  Buyer agrees to indemnify and hold Seller harmless from and against
any and all claims arising in connection with Buyer’s inspecting and observing
the Acquired Assets and Records, including (y) claims for personal injuries to
or death of employees of the Buyer, its contractors, agents, consultants and
representatives, and damage to the property of Buyer or others acting on behalf
of Buyer; and (z) claims for personal injuries to or death of employees of
Seller or third parties, and damage to the property of the Seller or third
parties, and in each case without regard to the legal basis or nature of such
claims.  Without limiting the foregoing, on the date hereof, Seller shall
provide reasonable access to Buyer upon its request, to all of the agreements,
Leases, contracts, permits, Lease operating statements, environmental audits,
assessments, and reports and other documents referenced in this Agreement or
identified on the Exhibits and Schedules to this Agreement.

 

7.2                           Confidential Information.  Buyer agrees to
maintain all information made available to it pursuant to this Agreement as
confidential and to cause its officers, employees, representatives, consultants
and advisors to maintain all information made available to them pursuant to this
Agreement as confidential if this Agreement terminates, except as and to the
extent required by law and except for any information which Buyer can
demonstrate (i) is generally available to or known by the public other than as a
result of improper disclosure by Buyer, (ii) is obtained by Buyer from a source
other than Seller, which source was not bound by a duty of confidentiality to
Seller or another party with respect to such information or (iii) was already
known to Buyer prior to its disclosure by Seller.  Notwithstanding anything to
the contrary, any information pertaining to or relating to the “tax treatment”
or “tax structure” (in each case, within the meaning of Treasury Regulation Sec.
1.6011-4) arising from or in respect of this Agreement and any related
transactions contemplated pursuant thereto, shall not be subject to the
confidentiality obligation imposed hereunder.

 

24

--------------------------------------------------------------------------------

 

7.3                               Environmental Review.

 

(a)                                  Environmental Access.  Until five (5) days
prior to Closing (the “Environmental Examination Period”), and subject to the
restrictions contained in this Agreement and any required consent or waiver of
any third person, Seller shall permit (i) Buyer and its representatives and
consultants to have reasonable access at reasonable times in Seller’s offices,
and in a manner so as not to interfere unduly with the business operations of
Seller, to Seller’s environmental files and records relating to the Acquired
Assets insofar as Seller may do so without waiving any attorney/client, work
product or like privilege, and (ii) Buyer and its representatives and
consultants to have reasonable access to the Acquired Assets for the purpose of
allowing Buyer and such representatives or consultants to inspect and/or audit
the Acquired Assets for any Environmental Defects (collectively, “Buyer’s
Environmental Review”), all at Buyer’s sole risk, cost and expense.

 

(b)                                 Buyer’s Responsibility for Review.  In
connection with Buyer’s Environmental Review, Buyer agrees that Buyer and its
representatives or consultants shall comply in all material respects with all
laws and shall exercise due care with respect to the Acquired Assets and their
condition, taking into consideration the characteristics of any wastes or
substances found thereon, and in light of all relevant facts and circumstances. 
Promptly after completing Buyer’s Environmental Review, Buyer, at its sole cost
and expense, shall restore the Acquired Assets to substantially the same
condition the Acquired Assets were in at the time of Buyer’s entry thereon, in
accordance with good engineering practice, if changed in any material respect
due to Buyer’s Environmental Review.

 

7.4                               Environmental Defects.

 

(a)                                  Buyer’s Assertion of Environmental
Defects.  On or prior to the expiration of the Environmental Examination Period,
Buyer shall notify Seller in writing of any matters which, in Buyer’s reasonable
opinion, constitute Environmental Defects; provided, however, Buyer shall not
assert an Environmental Defect unless (i) the Remediation Amount with respect
thereto exceeds $5,000, or (ii) the aggregate Remediation Amount of all alleged
Environmental Defects (other than any such Environmental Defects excluded by
reason of the $1,000 threshold in the definition thereof in Appendix B but
including all such Environmental Defects alleged under clause (i) of this
Section 7.4(a)), exceeds $100,000.  To the extent that alleged Environmental
Defects do not exceed both of the foregoing thresholds, such alleged
Environmental Defects will be deemed waived.  Buyer’s written notice shall
include: (i) a specific description of each Asset (or portion thereof) that is
affected by the alleged Environmental Defect, (ii) a description of the alleged
Environmental Defect, and (iii) a calculation of the Remediation Amount that
Buyer asserts is attributable to such Environmental Defect.  For all purposes of
this Agreement, Buyer shall be deemed to have waived any Environmental Defect
that Buyer fails to assert as an Environmental Defect by notice given to Seller
on or before the expiration of the Environmental Examination Period, all of
which shall be considered “Permitted Encumbrances” hereunder.

 

25

--------------------------------------------------------------------------------

 

(b)                                 Seller’s Rights and Elections.  If Buyer
timely notifies Seller in writing of any Environmental Defect under
Section 7.4(a), Seller shall have the right to dispute the existence of such
Environmental Defect and/or the alleged Remediation Amount asserted with respect
thereto in accordance with the provisions of Section 9.1 of this Agreement.  In
addition, Seller, at its option, may elect, at or prior to the Closing, one of
the following options with respect to the Asset or portion thereof (the
“Environmental Defect Property”):

 

(i)                                     leave such Environmental Defect Property
in the Acquired Assets and assume responsibility for the Remediation of such
Environmental Defect; or

 

(ii)                                  withdraw such Environmental Defect
Property from this Agreement, delete it from the Acquired Assets, and retain and
not sell the Environmental Defect Property; provided, that if Seller wishes to
make this election, Buyer may override such election and keep such Environmental
Defect Property in the Acquired Assets.

 

If Seller elects the option set forth in clause (i) above, Seller shall
implement such Remediation in a manner that complies in all material respects
with the requirements of Environmental Laws and the provisions of any applicable
Lease, and Seller shall have access to the Environmental Defect Property after
the Closing Date to implement and complete such Remediation in accordance with
this Section 7.4(b).  In conducting such Remediation, Seller shall not
unreasonably interfere with Buyer’s operations at the Environmental Defect
Property and shall indemnify Buyer from and against any personal injury,
property damage, or other Losses arising in connection with such Remediation. 
If the Remediation is subject to a mandatory report to a Governmental Authority,
Seller will be deemed to have adequately completed the Remediation required
hereunder upon receipt of a “no further action” or similar letter from a
Governmental Authority.  If, after Seller uses reasonable efforts to obtain such
a letter, no applicable regulatory program to obtain such a letter is available,
or if the Remediation is not subject to a mandatory report to a Governmental
Authority, Seller shall obtain a certificate from a licensed professional
engineer selected by Seller and reasonably acceptable to Buyer that states that
the Remediation attains compliance with Environmental Laws in all material
respects, including all action levels or cleanup standards promulgated
thereunder.  The foregoing notwithstanding, Seller may elect to obtain a
certificate from such a licensed professional engineer with respect to the
completion of Remediation of any Environmental Condition except an Environmental
Condition as to which Seller has Knowledge that a Governmental Authority has
asserted the existence of such Environmental Condition.  Unless and until such
Remediation is so completed in accordance with this Section 7.4(b), Seller shall
remain responsible for such Environmental Defect and the Remediation thereof as
“Excluded Obligations.”

 

(c)                                  Reduction Amount.  If Seller elects to
withdraw an Environmental Defect Property as set forth in Section 7.4(b)(ii),
then as Buyer’s sole and exclusive remedy with respect to such Environmental
Defects, Buyer shall be entitled to reduce the Purchase Price by the Allocated
Value of the affected Environmental Defect Property; provided, that if Buyer
overrides Seller’s election to withdraw an Environmental Defect Property

 

26

--------------------------------------------------------------------------------

 

under said Section 7.4(b)(ii), then the Purchase Price shall not be reduced by
the Allocated Value of the affected Environmental Defect Property, by the
Remediation Amount asserted with respect to such Environmental Defect Property,
or otherwise and Seller shall have no obligation to implement any Remediation in
connection with such Environmental Defect Property or to indemnify Buyer with
respect thereto.

 

ARTICLE 8
TITLE MATTERS

 

8.1                               Buyer’s Title Review.

 

(a)                                  Buyer’s Assertion of Title Defects.  Until
five (5) days prior to the Closing Date (the “Title Examination Period”), Buyer
shall have the right to furnish Seller written notice meeting the requirements
of this Section 8.1(a) (the “Title Defects Notice”) setting forth any matters
which, in Buyer’s reasonable opinion, constitute Title Defects (defined in
Section 8.2, below) and which Buyer asserts as a Title Defect with respect to
any Acquired Assets pursuant to this Article 8; provided however Buyer shall not
assert a Title Defect unless (i) the Title Defect Amount with respect thereto
exceeds $5,000, or (ii) the aggregate Title Defect Amount of all alleged Title
Defects (other than any such Title Defects excluded by reason of the $1,000
threshold under Section 8.1(c)(vi) below but including all such Title Defects
alleged under clause (i) of this Section 8.1(a)), exceeds $100,000.  To the
extent that alleged Title Defects do not exceed both of the foregoing
thresholds, such alleged Title Defects will be deemed waived.  For all purposes
of this Agreement, Buyer shall be deemed to have waived any Title Defect, which
Buyer fails to assert as a Title Defect, by a Title Defect Notice given to
Seller on or before the expiration of the Title Examination Period, all of which
shall be considered “Permitted Encumbrances” hereunder.  Buyer’s Title Defect
Notice of a Title Defect shall include (i) a brief description of the matter
constituting the asserted Title Defect, (ii) the claimed Title Defect Amount
attributable thereto, and (iii) reference to supporting documents reasonably
necessary for Seller to evaluate the asserted Title Defect but only to the
extent such documents are available.

 

(b)                                 Seller’s Rights and Opportunity to Cure.  If
Buyer timely gives Seller a Title Defects Notice, Seller shall have the right to
dispute the existence of such Title Defect and/or the alleged Title Defect
Amount asserted with respect thereto in accordance with the provisions of
Section 9.1 of this Agreement.  In addition, the following terms and conditions
shall apply with respect to any Title Defect asserted by Buyer in a timely Title
Defect Notice:

 

(i)                                     Seller shall have until the Closing
Date, at its cost and expense, if it so elects but without obligation, to cure
all or a portion of such asserted Title Defects.  Any asserted Title Defects
that are waived by Buyer within such time shall be deemed “Permitted
Encumbrances” hereunder.  Subject to Section 8.1(b)(ii) and Seller’s right to
dispute the existence of a Title Defect and/or the Title Defect Amount asserted
with respect thereto under Section 9.1, if Seller within such time fails to cure
any Title Defect of which Buyer has given timely written notice as required
above, and Buyer has not and does not waive same on

 

27

--------------------------------------------------------------------------------

 

or before the Closing Date, each Asset affected by such uncured and unwaived
Title Defect shall be a “Title Defect Property.”

 

(ii)                                  If Buyer furnishes to Seller a timely
Title Defect Notice(s) of one or more Title Defects and the same are not waived
or cured as provided in Section 8.1(b)(i), as applicable, Seller may elect to
close the transactions contemplated hereby and retain the right to cure any such
Title Defects after Closing.  In such event, but subject to Seller’s right to
dispute the existence of a Title Defect and/or the Title Defect Amount asserted
with respect thereto under Section 9.1, the Purchase Price shall be subject to
reduction pursuant to Section 8.1(c), taking into account all Title Defect
Amounts attributable to the Title Defect Properties affected by the Title
Defects which Seller elects to cure after Closing.  Seller shall have ninety
(90) calendar days after the Closing Date in which to attempt to cure any such
Title Defect. If Seller so cures any such Title Defect within such ninety (90)
day period, then Buyer shall promptly pay Seller the Title Defect Amount with
respect to the Title Defect so cured, but not exceeding the aggregate amount of
the reductions in the Purchase Price that Buyer received as a result of any
Title Defects.  Buyer may dispute whether any such Title Defect has been so
cured by giving Seller prompt written notice thereof and in that event the
matter shall be resolved in accordance with the provisions of Section 9.1 of
this Agreement.

 

(c)                                  Buyer’s Title Adjustments.  Buyer shall be
entitled to reduce the Purchase Price by the aggregate amount of the Title
Defect Amounts.  “Title Defect Amount” shall mean, with respect to a Title
Defect Property, the amount by which the value of such Title Defect Property is
impaired as a result of the existence of one or more uncured and unwaived Title
Defects, which amount shall be determined as follows and subject to the
following conditions:

 

(i)                                     If the Title Defect results from Seller
having a lesser Net Revenue Interest, or a greater Working Interest in such
Title Defect Property than the Net Revenue Interest or the Working Interest
specified therefor in Schedule 1.1(a) or in Schedule 1.1(b), the Title Defect
Amount shall be equal to the difference between the Allocated Value and the
product obtained by multiplying the Allocated Value for such Title Defect
Property by a fraction, the numerator of which is the PW12 value calculated
using the Aries file provided to Nytis (“Aries”) at the lesser Net Revenue
Interest or greater Working Interest, as applicable, and the denominator of
which is the PW12 value calculated by using Aries at the Net Revenue Interest
and Working Interest specified for such Title Defect Property in Schedule
1.1(a) and in Schedule 1.1(b).  Attached hereto as Schedule 8.1(c)(i) is an
example of a calculation of how the Title Defect Amount is determined based on a
Well that has either a Net Revenue Interest that is less than or a Working
Interest that is greater than that specified for such Well in Schedule 1.1(b).

 

(ii)                                  If the Title Defect results from the
existence of a lien, the Title Defect Amount shall be an amount sufficient to
discharge such lien.

 

28

--------------------------------------------------------------------------------

 

(iii)                               If the Title Defect results from any matter
not described in paragraphs (i) or (ii) above, the Title Defect Amount shall be
an amount equal to the difference between the value of the Title Defect Property
affected by such Title Defect with such Title Defect and the value of such Title
Defect Property without such Title Defect; provided, that if such Title Defect
is reasonably susceptible of being cured, the Title Defect Amount shall be the
reasonable cost and expense of curing such Title Defect, if less.

 

(iv)                              The Title Defect Amount attributable to a
Title Defect Property shall not exceed the Allocated Value for such Title Defect
Property.

 

(v)                                 No Title Defect Amount shall be allowed on
account of and to the extent that an increase in Seller’s Working Interest in a
Well has the effect of proportionately increasing Seller’s Net Revenue Interest
in such Well.

 

(vi)                              Notwithstanding the foregoing, if the Title
Defect Amount determined pursuant to this Section 8.1 with respect to a Title
Defect Property is less than $1,000, then the Title Defect Amount with respect
to such Title Defect Property shall be deemed to be zero (0).

 

8.2                               Determination of Title Defects.  An Asset
shall not be deemed to have a “Title Defect” if the following statements are
true in all material respects with respect to such Asset as of the Closing Date:

 

(a)                                  Seller has Defensible Title thereto.

 

(b)                                all rentals, Pugh clause payments, shut-in
gas payments and other similar payments (including royalties, overriding
royalties and other similar payments on production required to be paid under the
terms of any Lease, farmout agreement or other contract or agreement where the
failure to make a payment in accordance with such terms could (i) prevent Seller
from receiving the proceeds of production attributable to Seller’s interest
therein, or (ii) result in cancellation of Seller’s interest therein) due with
respect to such Asset have been properly and timely paid.

 

(c)                                 Seller is not in default under the material
terms of any lease, farmout agreement or other contract or agreement with
respect to such Asset that could (i) prevent Seller from receiving the proceeds
of production attributable to Seller’s interest therein, or (ii) result in
cancellation of Seller’s interest therein.

 

(d)                                defects based solely on: (i) lack of
information in Seller’s files; (ii) references to a document(s) if such
document(s) is not in Seller’s files; or (iii) Tax assessments, Tax payments or
similar records that are available to Buyer in the records of a Governmental
Authority;

 

(e)                                 defects in the chain of title such as minor
name discrepancies, or the mere failure to recite marital status in a document,
unless Buyer provides evidence that such failure or omission results in another
party’s superior claim of title to the relevant Asset or portion thereof;

 

29

--------------------------------------------------------------------------------

 

(f)                                   defects that have been cured by applicable
Laws of limitation or prescription and not subject to any dispute or claim to
the contrary; and.

 

(g)                                   defects disclosed in writing to Buyer by
Seller and accepted by Buyer in writing prior to the execution of this
Agreement.

 

The foregoing notwithstanding, any failure to provide consents and otherwise
satisfy Preference Rights and Transfer Requirements shall constitute a Title
Defect with respect to the Acquired Assets affected, including interests in
properties that are indirectly owned through the partnerships that comprise the
MGP Partnership Interests, the Passive Partnership Interests and the Alerion
Assets.

 

8.3                           Preference Rights and Transfer Requirements. 
Buyer shall notify Seller if it discovers that any Acquired Assets are subject
to Preference Rights or Transfer Requirements (other than those set forth on
Schedule 5.5(b) or Schedule 5.21).  Seller shall make a good-faith effort to
obtain waivers of all Preference Rights and Transfer Requirements as to which
Buyer has so notified Seller together with those set forth on Schedule
5.5(b) and Schedule 5.21 or required to be furnished under Section 4.3(f).  If a
Preference Right is timely exercised prior to Closing, the Purchase Price shall
be adjusted downward in an amount equal to the Allocated Value for the Asset
with respect to which the Preference Right has been exercised and such Asset
shall be deleted from this Agreement.  As to any Asset with respect to which a
Transfer Requirement has not been obtained prior to Closing, Buyer may waive
such Transfer Requirement and accept an assignment covering such Asset without
an adjustment in the Purchase Price.  If Buyer does not waive the Transfer
Requirement, then an adjustment shall be made to the Purchase Price based upon
the Allocated Value of the Asset so affected and, if the Transfer Requirement is
obtained after Closing, then Buyer shall pay Seller such Allocated Value and
receive an assignment of such Asset from Seller pursuant to this Agreement.  If
a Preference Right burdening an Asset has not been exercised or waived prior to
Closing, an adjustment shall be made to the Purchase Price based upon the
Allocated Value of the Asset so affected and, if the Preference Right is waived
by the holder thereof after Closing, then Buyer shall pay Seller such Allocated
Value and receive an assignment of such Asset from Seller pursuant to this
Agreement.  If the Preference Right is exercised after Closing, Seller shall be
entitled to all proceeds paid for such interest by the third party exercising
such Preference Right, and Seller shall be responsible for conveying title to
the Asset affected by said Preference Right to the party exercising the same. 
For the avoidance of doubt, all Acquired Assets (and all obligations and
liabilities in connection therewith) which are retained by Seller pursuant to
this Section 8.3 shall be Excluded Obligations for all purposes under this
Agreement, provided that if Seller subsequently assigns any such Asset to Buyer
pursuant to the terms of this Section 8.3, such Asset (and all obligations and
liabilities in connection therewith) shall thereupon no longer be Excluded
Obligations but shall be Assumed Obligations of Buyer.

 

30

--------------------------------------------------------------------------------

 

ARTICLE 9

DEFERRED CLAIM AND DISPUTES

 

9.1                               Deferred Claims and Disputes.  Seller shall
notify Buyer of any Title Defects or Environmental Defects that it disputes no
later than two (2) days before Closing.  Otherwise, Seller shall be deemed to
have accepted such Defects, whereupon they shall be deemed “Permitted
Encumbrances” as provided in Article 7 or 8 of this Agreement.  In the event
that Buyer and Seller have not agreed upon (i) the existence of one or more
Title Defects or one or more adjustments, credits or offsets claimed by Buyer or
Seller pursuant to and in accordance with the requirements of Article 8, or
(ii) the existence of one or more Environmental Defects, any Remediation,
Remediation Amount or plan therefor, under Article 7, then unless such dispute
or claim (a “Disputed Defect”) is waived in writing by Buyer, such Disputed
Defects shall be settled pursuant to this Article 9, and shall not prevent or
delay Closing.  The amount attributable to any Disputed Defects (including the
Remediation Amounts and Title Defect Amounts) shall be a reduction in the
Purchase Price due at Closing.  Buyer shall place such amount in an escrow
account under the terms of the Escrow Agreement pending resolution of the
dispute as provided for herein.  If the parties are unable to resolve the
dispute by informal discussions within 30 days of Closing, then the dispute
resolution procedure set forth in Section 18.3 shall apply.

 

ARTICLE 10
COVENANTS OF SELLER

 

Seller hereby covenants and agrees with Buyer as follows:

 

10.1                        Conduct of Business Until Closing Date.  Except as
permitted or required hereby or as Buyer may otherwise consent in writing,
between the date hereof and the Closing Date:

 

(a)                                  Seller will:

 

(i)                                     operate the Acquired Assets only in the
usual, regular and ordinary manner as such business was conducted before the
execution of this Agreement;

 

(ii)                                  maintain all Acquired Assets, whether
owned or leased, in substantially the same condition as they now are, except for
(A) damage due to unavoidable casualty; (B) reasonable wear and tear which do
not materially adversely affect its operations; and (C) on-going production of
natural gas from the Leasehold Interests and the Wells;

 

(iii)                               as to any Acquired Asset materially damaged
before the Closing Date by casualty not covered by insurance, at Buyer’s option
and, at Seller’s sole cost and expense, either (A) restore it to its condition
before such damage; (B) replace it with another item of similar quality and
condition; or (C) reduce the Purchase Price by the amount of such loss.  Should
Buyer elect option (C), Seller shall, at its option, be entitled to elect to
remove the damaged Acquired Asset from the sale and reduce the Purchase Price by
the Allocated Value of the damaged Acquired Asset;

 

31

--------------------------------------------------------------------------------

 

(iv)                              comply in all material respects with all Laws
that apply to the Acquired Assets and the operation thereof;

 

(b)                                 Seller will not, other than in the ordinary
course of business:

 

(i)                                     convey, transfer, sell, lease or
otherwise dispose of any material Acquired Asset; or

 

(ii)                                  change, amend or terminate any Assumed
Obligation; and

 

(c)                                  Seller will not:

 

(i)                                     without prior disclosure to Buyer and
Buyer’s written consent encumber, mortgage, or voluntarily subject to lien any
of the Acquired Assets; or

 

(ii)                                  breach or violate or cause any of the
representations and warranties contained in Article 5 of this Agreement to be
breached or violated.

 

10.2                        Advice of Changes.  Between the date hereof and the
Closing Date, Seller will advise Buyer promptly in writing of any material fact
of which Seller becomes aware, which, if known at the date hereof, would have
been required to be set forth or disclosed in or pursuant to this Agreement.

 

10.3                        Conduct.  Except as permitted or required hereby or
as Buyer may otherwise consent in writing, Seller will not enter into any
transaction, take any action or fail to take any action, which would result in
any of the representations and warranties of Seller contained in this Agreement
or in any Schedule or Exhibit hereto not being true and correct at and as of the
time immediately after such transaction has been entered into or such event has
occurred and on the Closing Date.

 

10.4                        Further Assurances.  Seller will at any time and
from time to time after the Closing, upon the reasonable request of Buyer, do,
execute, acknowledge and deliver, and cause to be done, executed, acknowledged
or delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney or assurances as may be required for the transferring,
assigning, conveying, granting, assuring and confirming to Buyer, or for aiding
and assisting in the collection of or reducing to possession by Buyer, of the
Acquired Assets, or to vest in Buyer good, valid and marketable title to the
Acquired Assets and otherwise to consummate the transactions contemplated by
this Agreement.

 

10.5                        Employee Matters.  Prior to the Closing Date, Buyer
may request INGC to sever its employment relationship with any employee who is
designated by Buyer in accordance with this Section 10.5.  No later than five
(5) Business Days prior to Closing, Buyer shall provide Seller with a written
notice of which employees of Seller it wishes to hire following the Closing. 
Upon receipt of such notice and in any event prior to Closing, Seller will
consider Buyer’s request in good faith, giving consideration to the needs of
Buyer following Closing to receive the benefits of the transactions hereunder,
the remaining needs of INGC, and the wishes of the employee.  Seller shall be
responsible for any and all severance, termination benefits and other
liabilities associated with the termination of employment of its employees, it
being understood

 

32

--------------------------------------------------------------------------------

 

and agreed that Buyer shall only be responsible for those employees that it in
fact hires after the Closing and then only as of the date such employees are
hired by Buyer and in accordance with the terms of employment agreed to by Buyer
and such employees.

 

10.6                        Tax Records and Tax Matters.

 

(a)                                  At Buyer’s election, Seller shall retain
records pertaining to Tax matters for periods prior to the Effective Date,
provided that Seller shall provide Buyer complete access to such Tax matters
records, including Tax returns with respect to the MGP Partnerships, the Passive
Partnerships, and the Alerion Assets for the seven (7) years preceding the
Effective Date and all back-up relating thereto and from which such Tax returns
were prepared.  Seller shall be responsible for and shall indemnify and hold
Buyer harmless from and against any and all Losses arising out of or in
connection with all Tax matters for all periods prior to the Effective Date
without regard to the limits provided in Article 17 or elsewhere in this
Agreement.

 

(b)                                 The parties shall cooperate to assure the
timely preparation and filing of partnership tax returns for 2010 with respect
to the partnerships that are the subject of the MGP Partnership Interests and
the Alerion Partnership Interest, including the preparation and furnishing of
K-1’s to each of the partners in such partnerships, provided however, (i) Buyer
shall not be obligated to incur any costs or liability in connection therewith
(other than costs which the partners of such partnerships, including as
applicable INGC and the Related Parties, are required to bear and which Buyer,
as successor to INGC, is entitled to collect and has collected or been
reimbursed for), (ii) INGC shall be responsible for the initial preparation of
such partnership tax returns and K-1’s for 2010 and shall be reimbursed by Buyer
for the costs thereof in an amount consistent with past practice but only to the
extent that such charges are charged through to and collected from the partners
in such partnerships (including as applicable INGC and the Related Parties) by
Buyer, as successor in interest to INGC with respect to such partnership
interests, and (iii) Seller (as applicable INGC or the Related Parties) shall
indemnify and hold Buyer harmless from all Losses in connection with all Tax
returns and Tax matters relating to such 2010 tax returns without regard to the
limitations set forth in Article 17 or elsewhere in this Agreement, provided
that Buyer shall indemnify Seller (as applicable INGC or the Related Parties) to
the extent that any decision made or action taken by Buyer with respect to such
tax returns causes Seller (as applicable INGC or the Related Parties) to incur
Losses.

 

(c)                                  As a condition to Seller’s representation
and warranty in Section 5.17(ii) of this Agreement, Buyer agrees that it will
continue to use the personal property identified on Schedule 5.17 as exempt from
sales tax at the time it was acquired by Seller for the same purpose such
personal property was originally acquired by Seller and in the same location.

 

33

--------------------------------------------------------------------------------

 

10.7                        Assistance.  Each of Buyer and Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax returns and any audit, litigation or other
proceeding with respect to Taxes.  Except as otherwise provided in this
Agreement, the party requesting assistance under this Section 10.7 shall
reimburse the other party for reasonable expenses incurred in providing such
assistance.  In addition, each of Buyer and Seller shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with
Buyer’s preparation of audited financial statements relating to the Acquired
Assets, including completion of the audited financial statements that Buyer will
commence during the due diligence period under Section 7.1 of this Agreement and
continuing after the Closing until such audit has been completed or expiration
of the 90-day period following Closing, whichever occurs first.  In connection
with Buyer completing such audited financial statements, Seller shall, on a
timely basis, provide Buyer and its representatives access to its books and
records, including work papers, and shall make its personnel and representatives
who are familiar with such books and records available to Buyer and its
representatives.  In connection with Buyer’s completion of the referenced
audited financial statements after the Closing, to the extent Buyer’s requests
include use of personnel from Jerome A. Kanney, CPA, PSC, Buyer shall pay the
rate per hour for such services as set forth in the Services Agreement, plus
reimbursement for reasonable expenses.  In connection with Buyer’s preparation
of audited financial statements relating to the Acquired Assets prior to
Closing, including access to Seller’s books and records and personnel (including
access to personnel from Jerome A. Kanney, CPA, PSC), the parties acknowledge
and agree that no additional charges will be made it being understood that any
such charges are covered by the $25,000 per month fee under Section 3.4(a)(i) of
this Agreement.

 

ARTICLE 11
COVENANTS OF BUYER

 

Buyer hereby covenants and agrees with Seller as follows:

 

11.1                        Confidentiality; Return of Documents.  Unless and
until the transactions contemplated by this Agreement are consummated, Buyer
will keep in confidence all proprietary and financial information of Seller
including information concerning its customers, suppliers, business and
know-how, and will not, except to the extent required by law or to the extent
any such information is otherwise publicly available or received from a third
party not affiliated with Seller, without the prior written consent of Seller,
reveal any such financial or proprietary information to any third party other
than affiliates or representatives of Buyer and potential lenders and other
providers of funds each of whom shall agree to be bound by the same restrictions
with respect to confidentiality imposed on Buyer hereunder.  If the transactions
contemplated by this Agreement are not consummated, Buyer will return to Seller,
at Seller’s request, all documents supplied to Buyer by Seller pursuant to the
provisions of this Agreement.

 

11.2                        Access to Records.  Following the Closing, Buyer
will upon request provide Seller, its accountants and attorneys reasonable
access at times to be designated by Buyer during normal working hours, to the
Records which are to be transferred to Buyer pursuant to this Agreement.

 

34

--------------------------------------------------------------------------------

 

ARTICLE 12
CONDITIONS TO OBLIGATIONS OF BUYER

 

The obligations of Buyer under this Agreement are subject to the satisfaction,
on or before the Closing Date, of the following conditions, any of which may be
waived by Buyer:

 

12.1                        Authorization.  All action necessary to authorize
the execution, delivery and performance of this Agreement by Seller, and the
consummation of the transactions contemplated hereby will have been duly and
validly taken by Seller, and Seller will have full power and right to sell the
Acquired Assets as contemplated hereby.

 

12.2                        Accuracy of Representations and Warranties.  The
representations and warranties of Seller contained in this Agreement and in any
schedule or exhibit hereto shall be true and accurate on and as of the Closing
Date, with the same force and effect as if made on the Closing Date, except as
affected by transactions contemplated or permitted hereby.

 

12.3                        Performance of Agreements.  Seller shall have
performed and complied with all covenants, obligations and agreements to be
performed or complied with by it on or before the Closing Date pursuant to this
Agreement or any schedule or exhibit hereto, including, but not limited to, each
of Seller’s obligations under Section 4.3.

 

12.4                        No Action or Legislation.  No Federal, state,
territorial, local or foreign statute, rule or regulation shall have been
enacted which prohibits, restricts, delays or materially adversely affects the
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of such transactions.  No temporary restraining
order or injunction shall be in effect restraining the consummation of the
transactions contemplated hereby.

 

12.5                        Releases.  Buyer shall have been provided with
copies of releases in form reasonably satisfactory to Buyer, of the INGC
Permitted Encumbrances, the Related Party Permitted Encumbrances, and any and
all mortgages, security interests, indebtedness, monetary liens and other
Encumbrances or burdens (other than Permitted Encumbrances) affecting the
Acquired Assets.

 

ARTICLE 13
CONDITIONS TO OBLIGATIONS OF SELLER

 

The obligations of Seller under this Agreement are subject to the satisfaction,
on or before the Closing Date, of the following conditions, any of which may be
waived by Seller.

 

13.1                        Authorization.  All action necessary to authorize
the execution, delivery and performance of this Agreement by Buyer and the
consummation of the transactions contemplated hereby will have been duly and
validly taken by Buyer.

 

13.2                        Accuracy of Representations and Warranties.  The
representations and warranties of Buyer contained in this Agreement or in any
schedule or exhibit hereto shall be true and accurate on and as of the Closing
Date, with the same force and effect as if made on the Closing Date, except as
affected by transactions contemplated or permitted hereby.

 

35

--------------------------------------------------------------------------------

 

13.3                        Performance of Agreements.  Buyer shall have
performed and complied with all covenants, obligations and agreements to be
performed or complied with by it on or before the Closing Date pursuant to this
Agreement or any schedule or exhibit hereto, including, but not limited to, each
of Buyer’s obligations under Section 4.4.

 

13.4                        No Action or Legislation.  No Federal, state,
territorial, local or foreign statute, rule or regulation shall have been
enacted which prohibits, restricts, delays or materially adversely affects the
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of such transactions.  No temporary restraining
order or injunction shall be in effect restraining the consummation of the
transactions contemplated hereby.

 

ARTICLE 14
ADDITIONAL CLOSING CONDITIONS

 

14.1                        Regulatory Approvals.  As a further condition to the
obligations of both Seller and Buyer to proceed with the Closing contemplated
hereby, all governmental permits and other regulatory approvals that are
required by Law to be obtained prior to Closing with respect to the purchase and
sale of the Acquired Assets shall have been obtained prior to Closing, including
the filing of any notifications and reports that may be required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.  Buyer and
Seller shall use commercially reasonable efforts to obtain all such governmental
permits and other regulatory approvals, and Buyer and Seller agree to cooperate
in the preparation and filing of the required applications and notices with the
appropriate Governmental Authorities.

 

14.2                        Suspense Proceeds.  Seller shall transfer to Buyer
the aggregate amount of any proceeds of production attributable to the Acquired
Assets, which Seller is holding in suspense as of the Closing Date, including
amounts shown on Schedule 5.22.  Buyer shall be responsible for the proper
distribution of the suspended amounts so transferred as an Assumed Obligation,
and Buyer agrees to indemnify, defend and hold Seller harmless from and against
all any and all Losses arising in connection with the suspended amounts so
transferred.

 

14.3                        Partnership Funds.  Seller shall transfer to Buyer
the amount of any partnership funds that it holds or otherwise controls as the
Managing General Partner of the general partnerships listed on Schedule
1.1(c) and on Schedule 1.1(i) of this Agreement.

 

ARTICLE 15
POST CLOSING MATTERS

 

15.1                        Records.  Within seven (7) Business Days after
Closing, Seller shall deliver the Records to Buyer provided that Buyer, at its
election may choose to have Seller retain Records with regard to Tax matters as
contemplated in Section 10.6 of this Agreement.  Seller shall be entitled to
keep a copy of any such Records for its files.  Buyer agrees to maintain the
Records until the seventh (7th) anniversary of the Closing Date (or for such
longer period of time as Seller shall advise Buyer is necessary in order to have
the Records available with respect to open years for tax audit purposes), or, if
any of the Records pertain to any claim or dispute pending on the seventh (7th)
anniversary of the Closing Date, Buyer shall maintain any of the Records

 

36

--------------------------------------------------------------------------------

 

designated by Seller until such claim or dispute is finally resolved and the
time for all appeals has been exhausted.  Buyer shall have no continuing
obligation under this Section 15.1 to the extent that the Records pertain to
Acquired Assets that it sells or otherwise disposes of, provided that the
transferee assumes Buyer’s obligation so to maintain such Records in connection
with such disposition and to permit Seller access thereto.

 

15.2                        Final Settlement Statement.  As soon as practicable
after the Closing, but in no event later than ninety (90) days after Closing,
Seller shall prepare and deliver to Buyer, in accordance with this Agreement and
generally accepted accounting principles, a statement (the “Final Settlement
Statement”) setting forth each adjustment to the Closing Statement, finally
determined as of Closing, and showing the calculation of such adjustments. 
Within thirty (30) days after receipt of the Final Settlement Statement, Buyer
shall deliver to Seller a written report containing any changes that Buyer
proposes be made in good faith to resolve any questions with respect to the
amounts due pursuant to such Final Settlement Statement.  If the Parties fail to
resolve any differences in the Final Settlement Statement and Buyer’s report of
proposed changes within ninety (90) days after the later of Buyer’s receipt of
the Final Settlement Statement or Seller’s receipt of Buyer’s written report in
response thereto, the matters in dispute shall be submitted to the dispute
resolution procedures set forth in Section 18.3.

 

15.3                        Remittance of Proceeds by Seller and Buyer.  If,
following Closing, Seller receives proceeds attributable to production from the
Acquired Assets after the Effective Date, it shall immediately remit such
proceeds to Buyer, together with a copy of the purchaser detail.  Likewise, if,
following Closing, Buyer receives proceeds attributable to production from the
Acquired Assets before the Effective Date, it shall immediately remit such
proceeds to Seller, together with a copy of the purchaser detail.

 

15.4                        Taxes.  Seller and Buyer shall cooperate in the
preparation of Internal Revenue Service Form 8594, including all required
amendments thereto, in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder, to report the allocation of the Purchase
Price among the Parties.

 

15.5                        Further Assurances.  Seller and Buyer agree that,
from time to time after the Closing Date, they will execute and deliver such
further instruments, and take or cause to take, such other action as may be
necessary to carry out the purposes and intents of this Agreement.

 

ARTICLE 16
TERMINATION

 

16.1                        Termination.  This Agreement may be terminated at
any time prior to the Closing:

 

(a)                                  by Seller or Buyer at any time after
April 30, 2011, other than due to the failure of the party seeking to terminate
this Agreement to comply fully with its obligations under this Agreement,
including such other party’s obligation to close in accordance with this
Agreement;

 

37

--------------------------------------------------------------------------------

 

(b)                                 by either Seller or Buyer if the total
Purchase Price Adjustments required to be made at Closing under Articles 3, 7,
and 8 exceed Three Million US dollars (US $3,000,000).

 

(c)                                  by Buyer if there has been a violation or
breach by Seller of any material agreement, representation or warranty of Seller
contained in this Agreement (including Seller’s obligation to close in
accordance with the terms of this Agreement) and such violation or breach has
not been waived by Buyer, or, with respect to a violation or breach of an
agreement, cured by the deadline provided in Section 16.1(a) above (or by its
nature cannot be cured);

 

(d)                                 by Seller, if there has been a violation or
breach by Buyer of any material agreement, representation or warranty of Buyer
contained in this Agreement (including Buyer’s obligation to close in accordance
with the terms of this Agreement) and such violation or breach has not been
waived by Seller or, with respect to a violation or breach of an agreement,
cured by the deadline provided in Section 16.1(a) above (or by its nature cannot
be cured).

 

In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby pursuant to this Section 16.1, written notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto; provided, however, that following
such termination the parties shall continue to be bound by the confidentiality
obligations set forth in this Agreement and Buyer shall promptly return to
Seller all documents which Buyer received from Seller for purposes of evaluating
the transaction.

 

In the event of termination of this Agreement under Section 16.1 (b) or (c) or
by Buyer pursuant to Section 16.1(a) following Seller’s failure to close in
accordance with the terms of this Agreement, the Deposit shall be refunded to
Buyer.  In the event of termination under Section 16.1(d) or by Seller pursuant
to Section 16.1(a) following Buyer’s failure to close in accordance with the
terms of this Agreement, the Deposit shall be paid to Seller as liquidated
damages as Seller’s sole and exclusive remedy, all other remedies being
expressly waived by Seller, the parties having agreed that (y) actual damages in
such circumstances would be difficult to ascertain and not reasonably subject to
determination, and (z) the amount of liquidated damages agreed upon by the
parties is (A) both reasonable and not disproportionate to the damages that
would actually be sustained and (B) not in the nature of a penalty.  In the
event of termination by Buyer under Section 16.1(c) or by Buyer pursuant to
Section 16.1(a) following Seller’s failure to close in accordance with the terms
of this Agreement, Buyer may either (i) enforce its equitable remedies for such
breach or failure, including specific performance of this Agreement, or
(ii) bring legal action to recover damages (subject to the limitations in
Section 18.18), provided that any such damages shall be limited to the sum of
$3,000,000 unless Seller’s failure to close is attributable to Seller
negotiating with or closing a sale of all or part of the Acquired Assets to a
third party not affiliated with Buyer in which case there shall be no limit on
such damages except as provided in Section 18.18.  The foregoing remedies shall
be Buyer’s sole and exclusive remedies for such termination, all other remedies
being expressly waived by Buyer.

 

38

--------------------------------------------------------------------------------

 

ARTICLE 17
SURVIVAL AND INDEMNIFICATION

 

17.1                        Survival.  All representations, warranties and
covenants contained herein shall survive the Closing for the period that ends on
the first anniversary of the Closing Date, at which time such representations,
warranties and covenants shall expire except that (i) Seller’s representations,
warranties and covenants in Section 2.3, Section 3.4(b)(vii), Section 5.11,
Section 5.12, Section 5.17, Section 5.26, Section 10.4, Section 10.6,
Section 10.7, Article 15 and Section 18.2 of this Agreement shall survive
indefinitely, and (ii) Buyer’s representations, warranties and covenants in
Section 2.3, Section 3.4(b)(vii), Section 6.6, Section 10.4, Section 10.6,
Section 10.7, Section 11.2, Article 15 and Section 18.2 of this Agreement shall
survive indefinitely.  The date on which the parties’ respective
representations, warranties and covenants expire under this Section 17.1 is
referred to herein as the “Survival Date.”

 

17.2                        Indemnification by Seller.  Upon Closing, Seller
shall defend, indemnify and hold harmless Buyer, its Affiliates and their
respective members, directors, officers, employees, agents and other
representatives from and against the following:

 

(a)                                  All Losses arising from the breach by
Seller of any representation or warranty set forth in this Agreement that
survives Closing;

 

(b)                                 All Losses arising from the breach by Seller
of any covenant set forth in this Agreement that survives Closing;

 

(c)                                  All Losses arising from or in connection
with the Excluded Obligations.

 

Notwithstanding the above, the following limitations shall apply to Seller’s
indemnification obligations:

 

(i)                                     Seller shall not be obligated to
indemnify Buyer for any Loss under clause (a) and clause (b) of this
Section 17.2 unless Buyer has delivered a written notice of such Loss prior to
expiration of the Survival Date.  Any such Loss for which Seller does not
receive written notice prior to expiration of such survival period shall be
deemed to be an Assumed Liability.

 

(ii)                                  The amount of Losses required to be paid
by Seller to indemnify Buyer pursuant to this Agreement shall be reduced to the
extent of any amounts actually received by Buyer pursuant to the terms of
insurance policies (if any) covering such claim.

 

(iii)                               Seller’s indemnification obligations shall
not cover any Loss relating to or arising in connection with Environmental
Defects or Title Defects for which Buyer received a Purchase Price Adjustment or
other resolution under Article 7 or Article 8, or a Purchase Price Adjustment
under Article 3; and

 

(iv)                              In no event will Seller’s aggregate liability
under Section 17.2(a) exceed Ten Million Dollars ($10,000,000) except as
otherwise specifically provided in this Agreement.

 

39

--------------------------------------------------------------------------------

 

17.3                        Indemnification by Buyer.  Upon Closing, Buyer shall
defend, indemnify, and hold harmless Seller, its Affiliates and their respective
members, managers, directors, officers, employees, agents and other
representatives from and against the following:

 

(a)                                  All Losses arising from the breach by Buyer
of any representation or warranty set forth in this Agreement that survives
Closing;

 

(b)                                 All Losses arising from the breach by Buyer
of any covenant set forth in this Agreement;

 

(c)                                  All Losses arising from the ownership and
operation of the Acquired Assets after the Effective Date but excluding the
Excluded Obligations; and

 

(d)                                 All Losses arising from the Assumed
Liabilities.

 

Notwithstanding the above, the following limitations shall apply to Buyer’s
indemnification obligations:

 

(i)                                     Buyer shall not be obligated to
indemnify Seller for any Loss under clause (a) and clause (b) of this
Section 17.3 unless Seller has delivered a written notice of such Loss prior to
expiration of the Survival Date.  Any such Loss for which Buyer does not receive
written notice prior to expiration of such survival period shall be deemed to be
an Excluded Obligation.

 

(ii)                                  The amount of Losses required to be paid
by Buyer to indemnify Seller pursuant to this Agreement shall be reduced to the
extent of any amounts actually received by Seller pursuant to the terms of
insurance policies (if any) covering such claim.

 

(iii)                               In no event will Buyer’s aggregate liability
under Section 17.3(a) exceed Ten Million Dollars ($10,000,000); provided that
such limitation shall not apply to Buyer’s liabilities attributable to Buyer’s
ownership and operation of the Acquired Assets following Closing.

 

17.4                        Notification.  As soon as reasonably practical after
obtaining knowledge thereof, an indemnified party shall notify the indemnifying
party of any claim or demand which the indemnified party has determined has
given or could give rise to a claim for indemnification under this Article 17. 
Such notice shall specify the agreement, representation or warranty with respect
to which the claim is made, the facts giving rise to the claim and the alleged
basis for the claim, and the amount (to the extent then determinable) of
liability for which indemnity is asserted.  In the event any action, suit or
proceeding is brought with respect to which a party may be liable under this
Article 17, the defense of the action, suit or proceeding (including all
settlement negotiations, trial, appeal, or other proceeding) shall be at the
discretion of and conducted by the indemnifying party.  If an indemnified party
shall settle any such action, suit or proceeding without the written consent of
the indemnifying party (which consent shall not be unreasonably withheld,
conditioned or delayed), the right of the indemnified party to make any claim
against the indemnifying party on account of such settlement shall be deemed
conclusively denied. An indemnified party shall have the right to be represented
by its own counsel at its own expense in any such action, suit or proceedings,
and if an indemnified party is named as the

 

40

--------------------------------------------------------------------------------

 

defendant in any action, suit or proceedings, it shall be entitled to have its
own counsel and defend such action, suit or proceeding with respect to itself at
its own expense.  Subject to the foregoing provisions of this Article 17,
neither Party shall, without the other Party’s written consent, settle,
compromise, confess judgment or permit judgment by default in any action, suit
or proceeding if such action would create or attach any liability or obligation
to the other Party.  The Parties agree to make available to each other, and to
their respective counsel and accountants, all information and documents
reasonably available to them which relate to any action, suit or proceeding, and
the Parties agree to render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and adequate defense of any
such action, suit or proceeding.

 

17.5                        Recoveries.  In the event an Indemnified Party
receives payment (including, without limitation, proceeds of insurance and
payments on accounts receivable) with respect to a matter for which it has been
indemnified by the Indemnifying Party, the Indemnified Party will promptly pay
the amount of such payment up to the indemnification received, to the
Indemnifying Party.

 

17.6                        Characterization.  Any amounts paid by an
Indemnifying Party to an Indemnified Party pursuant to this Article 12 shall be
treated for all tax purposes as adjustments to the Purchase Price.

 

17.7                        Buyer’s Due Diligence.  Buyer’s right to
indemnification, reimbursement, or other remedy based on representations,
warranties, covenants, given by or obligations undertaken shall be limited by
any investigation conducted with respect to, or any knowledge acquired (or
reasonably capable of having been acquired) about, the accuracy or inaccuracy
of, or compliance with, any such representation, warranty, covenant, or
obligation.

 

ARTICLE 18
MISCELLANEOUS

 

18.1                        Interpretation.  The parties agree that this
Agreement is the product of negotiation, and expressly waive the rule of
interpretation of a writing against the drafter.  Any reference to a particular
gender shall be deemed to include all other genders unless the context otherwise
requires.  The headings of Articles and Sections in this Agreement are provided
for convenience only and will not effect in construction or interpretation.  All
references to “Articles,” “Sections” and “Parts” refer to the corresponding
Articles and Sections of this Agreement, all references to Schedules and
Exhibits refer to the corresponding Schedules and Exhibits to this Agreement.

 

18.2                        Expenses.  Seller will bear all fees, costs and
expenses incurred by Seller (as applicable, INGC or the Related Parties) in
connection with, relating to or arising out of the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, legal and accounting fees
and expenses.  Buyer will bear all fees, costs and expenses incurred by Buyer in
connection with, relating to or arising out of the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, legal and accounting fees
and expenses.  Buyer shall be responsible for (i) all transfer, stamp,
documentary

 

41

--------------------------------------------------------------------------------

 

and similar taxes imposed on the parties hereto with respect to the purchase and
sale of the Acquired Assets contemplated pursuant to this Agreement, including
transfer taxes imposed by Governmental Authorities on the transfer of the Wells
and the transfer of title to motor vehicles listed in Schedule 1.1(j); (ii) all
recording, filing or registration fees for any assignment or conveyance
delivered to Buyer under or pursuant to this Agreement.  Buyer shall be
responsible for sales tax, if any, resulting from the purchase and sale of the
Acquired Assets pursuant to this Agreement except that Seller (as applicable
INGC and the Related Parties) shall be responsible for any Kentucky sales taxes
imposed with respect to the purchase and sale of items of personal property
identified in Schedule 5.17 as being exempt from the imposition of sales and use
tax at the time such personal property was originally acquired, it being
understood that such exemption is the basis for an exemption for Kentucky sales
tax on the sale of such personal property to Buyer under this Agreement, and it
being further understood that Buyer has agreed with Seller that Buyer will
continue to use said personal property for the same purpose for which it was
originally acquired by Seller and in the same location; (iii) Buyer shall be
responsible for and pay all such taxes with respect to the purchase and sale of
personal property included in the Acquired Assets and located in West Virginia
for time periods including the Effective Date and thereafter, even if the tax
notice is issued in the name of Seller, unless such tax is imposed due to Seller
(as applicable INGC or Related Parties) having engaged in more than four
(4) “isolated transactions” as contemplated in W. Va. Code §11-15-9(a) and the
applicable rules and regulations adopted pursuant thereto; and (iv) Seller (as
applicable INGC or Related Parties) shall be responsible for and pay all such
taxes with respect to the purchase and sale of personal property included in the
Acquired Assets and located in West Virginia for time periods prior to the
Effective Date, even if the tax notice is issued in the name of Buyer unless
such taxes are imposed due to Buyer having engaged in more than (four( 4) such
isolated transactions.  Buyer and Seller shall join in a sales tax return, if
any, required to be filed.  Seller shall file any required sales tax return. 
All other costs and expenses incurred by each Party hereto in connection with
all things required to be done by it hereunder, including attorneys’ fees,
accountant fees and the expense of environmental and title examination, shall be
borne by the Party incurring same.

 

18.3                        Arbitration.  Any dispute or question arising as to
the interpretation of any clause of, or the rights and liabilities of the
parties under, in any manner relating to, this Agreement, if not resolved by
negotiation, shall be referred to binding arbitration before a single arbitrator
in Lexington, Kentucky, under the rules and procedures of the American
Arbitration Association relating to the selection of arbitrators for the
determination of issues.  This agreement to arbitrate is supported by adequate
consideration, receipt of which is acknowledged.  The decision of the arbitrator
will be binding, final and conclusive on the parties, and judgment on the
arbitrator’s decision may be entered in any court having jurisdiction thereof. 
This agreement to arbitrate is binding upon the respective successors, heirs,
legal representatives, assigns and transferees of the parties.  The arbitrator
may, sua sponte or upon the written request of a party, issue written directions
as to the scope and timetable for discovery.  In the event that the arbitrator
should determine that the matter(s) in dispute may be resolved by a review of a
written record, and that a hearing is not necessary, each party waives the right
to a hearing.  The arbitrator shall be charged to render a written opinion
reciting the facts as determined and the applicable law as applied.  Except as
provided in Section 18.18, the arbitrator may award injunctive and other
equitable relief, as well as an award of monetary damages.  No claim of fraud,
duress or other basis for revocation of contract made with respect to this
Agreement shall limit or preclude the

 

42

--------------------------------------------------------------------------------

 

enforcement of this agreement to arbitrate except as such fraud, duress or other
basis for revocation shall arise with particularity to this agreement to
arbitrate, and each party conclusively agrees that this provision shall be
interpreted in a manner consistent with the separability doctrine of Prima Paint
Corp. v. Flood and Conklin Mfg. Co., 388 U.S. 395 (1967).

 

18.4                        Binding Effect.  This Agreement shall become binding
and effective when executed by Buyer and by Seller.  This Agreement shall not be
assignable by either Buyer or Seller without the prior written consent of the
other, which consent shall not unreasonably be withheld, provided that without
relieving Buyer of any of its obligations under this Agreement, Buyer may assign
this Agreement to a credit-worthy Affiliate of Buyer and may collaterally assign
its rights hereunder to any financial institution providing financing in
connection with transactions contemplated hereby; provided further that INGC and
any Related Party may assign their rights hereunder to any members or owners
thereof who assume and agree to be bound by the terms of this Agreement in
writing.  Subject to the foregoing, this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the respective successors, heirs,
legal representatives and permitted assigns of the parties hereto.  This
Agreement constitutes an agreement among the parties hereto and none of the
agreements, covenants, representations or warranties contained herein shall be
for the benefit of any third party not a party to this Agreement except such
rights as shall inure to a successor or permitted assignee pursuant to this
Section 18.4.

 

18.5                        Severability.  The various provisions of this
Agreement as well as the related agreements of the parties are inter-related,
and all contribute to and form part of the complete agreement of the parties. 
In the event that any provision of this Agreement (or of a related agreement)
should be determined to be invalid or unenforceable, the balance of the
provisions shall be interpreted and applied so as to give maximum legal effect
to the agreement of the parties as originally contemplated.

 

18.6                        Non-Reliance.  The making, execution, and delivery
of this Agreement by the parties hereto have not been induced by any
representations, warranties, statements, or agreements other than those
expressed in this Agreement.

 

18.7                        Entire Agreement; Amendments.  This Agreement
(including the Schedules and Exhibits attached hereto) contains the entire
understanding of the parties with respect to its subject matter.  This Agreement
supersedes all prior agreements and understandings between the parties with
respect to the subject matter hereof except for the confidentiality agreement
between INGC and Buyer dated October 8, 2010.

 

18.8                        Headings.  The article and section headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

 

18.9                        Notices.  All notices, claims, certificates,
requests, demands and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, if mailed (by registered or
certified mail, return receipt requested and postage prepaid), if sent by
reputable overnight courier service for next Business Day delivery, as follows:

 

43

--------------------------------------------------------------------------------

 

To Buyer:

 

 

Nytis Exploration Company LLC

2501 Broadway

Catlettsburg, KY 41129

Attention: Mark Pierce

Telephone: (606) 739-8864

Facsimile: (606) 739-9158

Mobile: (606) 922-3918

E-mail: mpierce@NytisKy.com

 

 

 

 

 

with a copy (which shall not of itself constitute notice) to:

Nytis Exploration (USA) Inc.

1700 Broadway, Suite 2020

Denver, CO 80290

Attention: Patrick R. McDonald

Telephone: (720) 407-7032

Facsimile: (720) 407-7031

E-mail: pmcdonald@nytis.com

 

and (which shall not of itself constitute notice) to:

Welborn Sullivan Meck & Tooley, P.C.

821 17th Street, Suite 500

Denver, CO 80202

Attention: John F. Meck

Telephone: (303) 830-2500

Facsimile: (303) 832-2366

E-Mail: jmeck@wsmtlaw.com

 

 

 

To Seller:

 

 

to Jerome A. Kanney:

 

Jerome A. Kanney

347 Thompson Road

P. O. Box 3385

Pikeville, Kentucky  41502-3385

 

with a copy (which shall not of itself constitute notice) to

 

C. Kent Hatfield, Esq.

Stoll Keenon Ogden PLLC

2000 PNC Plaza

500 West Jefferson Street

Louisville, Kentucky 40202

 

 

 

and to Dennis L. Rohrer:

 

Dennis L. Rohrer

347 Thompson Road

P. O. Box 3385

Pikeville, Kentucky  41502-3385

 

with a copy (which shall not of itself constitute notice) to:

 

David Stratton, Esq.

Stratton, Hogg and Maddox, P.S.C.

P.O. Box 1530

130 Chestnut Drive

Pikeville, Kentucky 41502

 

or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith.  Any such
communication shall be effective on the date of receipt (or, if received on a
non-Business Day, on the first Business Day after the date of receipt).

 

44

--------------------------------------------------------------------------------

 

18.10                 Legal Counsel

 

(a)                                  Seller acknowledges that Buyer has in
connection with this Agreement and the transactions contemplated thereby been
represented by the firm of Welborn Sullivan Meck & Tooley, P.C.  Seller has not
relied upon Welborn Sullivan Meck & Tooley, P.C. to represent their individual
or joint interests in connection with this Agreement and the transactions
contemplated thereby.

 

(b)                                  Buyer acknowledges that Seller was in
connection with this Agreement and the transactions contemplated thereby
represented by Stoll Keenon Ogden PLLC.  Buyer has not relied upon Stoll Keenon
Ogden PLLC to represent its interests in connection with this Agreement and the
transactions contemplated thereby.

 

18.11                 Publicity.  The parties agree that, except as otherwise
required by law, the issuance of any reports, statements or releases pertaining
to this Agreement or the transactions contemplated hereby is subject to mutual
consent.  The foregoing notwithstanding, the parties agree that such consent
shall not be required for a party to comply with applicable laws, including
federal and state securities laws in connection with any offer or sale of
securities by a party or by any Affiliate of a party; provided further that such
consent shall not be required with respect to the parties’ professional
advisors, the parties’ banking or financial institutions, or partners (or their
professional advisors) in the MGP Partnerships, the Passive Partnerships, and
the Alerion Assets.

 

18.12                 Counterparts.  This Agreement may be signed by each party
upon a separate copy or separate signature page, and any combination of separate
copies signed by all parties or including signature pages so signed will
constitute a single counterpart of this Agreement.  This Agreement may be signed
in any number of counterparts, each of which will be deemed to be an original,
but all of which together will constitute one and the same agreement.  It will
not be necessary, in proving this Agreement in any proceeding, to produce or
account for more than one counterpart of this Agreement.  This Agreement will
become effective when one or more counterparts have been signed by each party,
and delivered to the other party.  Any party may deliver an executed copy of
this Agreement (and an executed copy of any documents contemplated by this
Agreement) by facsimile transmission to the other party, and such delivery will
have the same force and effect as any other delivery of a manually signed copy
of this Agreement (or such other document).

 

18.13                 Governing Law.  In view of the locations of the parties’
principal offices and taking into account where the obligations to be performed
under this Agreement will be performed, the terms of this Agreement will be
construed and governed according to the internal laws of the Commonwealth of
Kentucky without regard to conflicts of laws principles.

 

18.14                 Remedies and Waivers.  All rights and remedies available
at law, in equity or under the terms of this Agreement or any other agreement or
instrument executed in connection herewith shall be cumulative, and no waiver
thereof shall be (a) implied from the prior acts or omissions, or based solely
upon the oral representations, of a party hereto; or (b) effective or binding
unless, and then only to the extent that, such waiver is set forth in this
Agreement, or a

 

45

--------------------------------------------------------------------------------

 

party hereto signs an express written waiver of rights or remedies and causes
such written waiver to be delivered to the party for whose benefit it was made.

 

18.15                 Defined Terms.  Throughout this Agreement various terms
have been defined by being enclosed in quotation marks, usually in parentheses,
and used with their initial letters capitalized.  Unless the context otherwise
requires, such defined terms shall have their designated meaning whenever used
in this Agreement or any attached Schedules.  Unless an express reference is
made to a different document, all references to a Section or Article shall be
understood to refer to the indicated Section or Article of this Agreement, and
all references to a Schedule or Exhibit shall be understood to refer to the
indicated Schedule or Exhibit attached to this Agreement.

 

18.16                 Non-Reliance.  The making, execution, and delivery of this
Agreement by the parties hereto have not been induced by any representations,
warranties, statements, or agreements other than those expressed in this
Agreement

 

18.17                 Time of the Essence.  Time is of the essence in this
Agreement.  If the date specified in this Agreement for giving any notice or
taking any action is not a Business Day (or if the period during which any
notice is required to be given or any action taken expires on a day which is not
a Business Day), then the date for giving such notice or taking such action (and
the expiration date of such period) shall be the next day which is a Business
Day.

 

18.18                 Damages.  NOTWITHSTANDING ANYTHING CONTAINED TO THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, SELLER AND BUYER AGREE THAT
THE RECOVERY OF ANY DAMAGES SUFFERED OR INCURRED AS A RESULT OF ANY BREACH BY
ANY PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS UNDER THIS
AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED OR INCURRED (AND SHALL
NOT INCLUDE ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES
EXCEPT TO THE EXTENT SUCH DAMAGES ARE INCLUDED IN AN AWARD AGAINST OR PAID BY
THE INDEMNIFIED PARTY SEEKING INDEMNITY HEREUNDER TO ANY THIRD PARTY) AS A
RESULT OF THE BREACH BY THE BREACHING PARTY OF ITS REPRESENTATIONS, WARRANTIES
OR OBLIGATIONS HEREUNDER AND IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE TO
THE NON-BREACHING PARTY FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR
PUNITIVE DAMAGES (INCLUDING, WITHOUT LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST
PROFITS OR OPPORTUNITIES OR LOST OR DELAYED PRODUCTION) SUFFERED OR INCURRED BY
THE NON-BREACHING PARTY AS A RESULT OF THE BREACH BY THE BREACHING PARTY OF ANY
OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER.

 

[Signatures appear on next page]

 

46

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on the date first above written.

 

 

The Interstate Natural Gas Company, LLC

 

(“Seller”)

 

 

 

 

 

By:

/s/ Dennis L. Rohrer

 

 

Dennis L. Rohrer, Member

 

 

 

 

By:

/s/ Jerome A. Kanney

 

 

Jerome A. Kanney, Member

 

 

 

 

 

Nytis Exploration Company, LLC

 

(“Buyer”)

 

 

 

By:

Nytis Exploration (USA) Inc.

 

 

 

 

 

 

 

By:

/s/ Patrick R. McDonald

 

 

Patrick R. McDonald, President

 

47

--------------------------------------------------------------------------------

 

Appendix A

Related Parties of INGC

 

Attached to and made a part of that certain Asset Purchase Agreement dated
February 14, 2011 by and between The Interstate Natural Gas Company LLC as
Seller and Nytis Exploration Company as Buyer

 

Brent Rohrer

Michael Rohrer

Monique Kolb

Eureka Gas Company, Inc.

Empire Drilling Company, Inc.

Diamond Gas, Inc.

Gibraltar Gas, Inc.

Brushy Gap Coal & Gas, Inc. (1)

 

--------------------------------------------------------------------------------

(1)  Brushy Gap Coal & Gas, Inc. will be deemed to be deleted from this Appendix
A if Nytis exercises its option to acquire all of the issued and outstanding
stock thereof

 

--------------------------------------------------------------------------------

 

APPENDIX B

TO

ASSET PURCHASE AGREEMENT

 

DEFINITIONS

 

Additional Terms not defined in the Agreement:

 

“Affiliate” shall mean, as to the party specified, any entity controlling,
controlled by or under common control with such specified party.  Control,
controlling or controlled as used herein means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of another, whether through the ownership of voting securities, by
contract or otherwise.

 

“Business Day” shall mean any day other than (a) Saturday or Sunday, and (b) any
other day on which national banks are permitted or required to be closed.

 

“Coalbed Methane” means coalbed methane gas, coalbed gas, methane gas, gob gas,
occluded natural gas in any formation, or other naturally occurring gases
generated from or located in any coal seam or coal mine void, and all other
Hydrocarbons originating or produced therefrom.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Defensible Title” shall mean, respectively as to each of the Mineral Interests
comprising the Acquired Assets identified in Schedule 1.1(a) and Schedule
1.1(b) such title held by Seller that (i) entitles Seller to receive not less
than the applicable Net Revenue Interest specified for such Mineral Interest in
said Schedules; (ii) obligates Seller to bear the costs and expenses
attributable to the maintenance, development, and operation of such Mineral
Interest in an amount not greater than the applicable Working Interest or
Working Interests specified for such Asset in said Schedules; (iii) except for
Permitted Encumbrances, is free and clear of all liens and encumbrances; (iv) is
free from reasonable doubt to the end that a prudent purchaser engaged in the
business of the ownership, development and operation of oil and gas properties
with knowledge of all of the facts and their legal bearing would be willing to
accept and pay full value for the same; and (v) does not delay, restrict or
otherwise impede the ability of Seller to utilize the properties as currently
intended.

 

“Environmental Claim” shall mean any action or written notice threatening same
by any third party alleging potential liability of Seller arising out of or
resulting from any actual or alleged violation of, or liability under, or any
remedial obligation under, any Environmental Law as a result of an Environmental
Condition with respect to the Acquired Assets or an Offsite Environmental
Matter.

 

“Environmental Condition” shall mean an existing condition or circumstance with
respect to the air, soil, subsurface, surface waters, groundwaters, and/or
sediments that causes (i) an Asset not to be in compliance with any
Environmental Law, including any permits issued thereunder, in any material
respect, (ii) an Asset to be required to be remediated (or other corrective
action taken with respect to such Asset) to attain compliance with any
Environmental Law, or (iii) an Asset to have contamination or concentrations of
Hazardous Materials that exceed regulatory limits or cleanup standards and that
is not authorized by permit or law resulting from any release of Hazardous
Materials on the Acquired Assets or the migration or transportation from other
lands of Hazardous Materials to any Acquired Assets.

 

“Environmental Defect” shall mean an Environmental Condition with respect to the
Acquired Assets, provided that if, after taking into account any Remediation
performed by or on behalf of Seller, the

 

--------------------------------------------------------------------------------

 

reasonably anticipated Remediation Amount with respect to such Environmental
Condition does not exceed$1,000, such Environmental Condition shall not
constitute an Environmental Defect.

 

“Environmental Laws” shall mean all Laws relating to (a) pollution, including
the control of any potential pollutant, or protection of the environment,
including the air, water, land, wetlands, natural resources, wildlife and
endangered species, (b) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation, and (c) human health and safety
and worker health and safety, including exposure to hazardous, toxic,
radioactive or other substances alleged to be harmful.  “Environmental Laws”
shall include, but are not limited to, the Clean Air Act, the Clean Water Act,
the Resource Conservation Recovery Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, the Safe Drinking Water
Act, and CERCLA and shall also include all state, local and municipal Laws
dealing with the subject matter of the above listed Federal statutes or
promulgated by any governmental or quasigovernmental agency thereunder in order
to carry out the purposes of any Federal, state, local or municipal Law.  The
above reference to Laws relating to natural resources is not intended to include
non-environmental Laws relating to the exploration, development, production,
proration, allocation, pooling, unitization or correlative rights relating to
oil, gas and other Hydrocarbons.

 

“Environmental Liabilities” shall mean any and all costs (including costs of
Remediation), damages, settlements, expenses, penalties, fines, taxes,
prejudgment and post-judgment interest, court costs and attorneys’ fees incurred
or imposed (i) pursuant to any order, notice of responsibility, directive
(including requirements embodied in Environmental Laws), injunction, judgment or
similar act (including settlements) by any Governmental Authority to the extent
arising out of or under Environmental Laws or (ii) pursuant to any claim or
cause of action by a Governmental Authority or third party for personal injury,
property damage, damage to natural resources, remediation or response costs to
the extent arising out of or attributable to any violation of, or any remedial
obligation under, any Environmental Law.

 

“Escrow Agent” shall mean Community Trust Bank, Inc., a Kentucky banking
corporation.

 

“Governmental Authority” shall mean (i) the United States of America, (ii) any
state, county, municipality or other governmental subdivision within the United
States of America, and (iii) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America or of any state, county, municipality or other governmental
subdivision within the United States of America.

 

“Hazardous Materials” shall mean any explosives, radioactive materials, asbestos
material, urea formaldehyde, hydrocarbon contaminants, underground tanks,
pollutants, contaminants, hazardous, corrosive or toxic substances, special
waste or waste of any kind, including compounds known as chlorobiophenyls and
any waste, material or substance the storage, manufacture, disposal, treatment,
generation, use, transport, mediation or release into the environment of which
is prohibited, controlled, regulated or licensed under Environmental Laws or
that may otherwise serve as the basis for liability under Environmental Laws,
including, but not limited to, (i) all “hazardous substances” as that term is
defined in Section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and (ii) petroleum and petroleum
products.

 

“Hydrocarbons” means crude oil, natural gas, casinghead gas, Coalbed Methane,
condensate, helium, sulphur, SO2, CO2, natural gas liquids, and other gaseous
and liquid substances or any combination thereof, but does not include coal or
any other hard minerals.

 

2

--------------------------------------------------------------------------------

 

“Knowledge” shall mean the actual knowledge of a party’s officers, members,
managers and owners.

 

“Law” or “Laws” shall mean any applicable statute, law (including common law),
ordinance, regulation, rule, ruling, order, writ, injunction, decree or other
official act of or by any Governmental Authority.

 

“Loss” or “Losses shall mean all claims, demands, damages, liabilities,
judgments, losses and reasonable costs, expenses and attorneys’ fees.

 

“Mineral Interests” shall mean the rights, estates, titles and interests of
Seller in and to the Leasehold Interests, Deeds, Wells and Wellbores.

 

“Net Revenue Interest” shall mean an interest (expressed as a percentage or
decimal fraction) in and to all Hydrocarbons produced and saved from or
attributable to an Acquired Asset.

 

“Permitted Encumbrances” shall mean any of the following matters:

 

(a)         all agreements, instruments, documents, liens, encumbrances, and
other matters which are described in any Schedule or Exhibit to the Agreement,
to the extent that (i) the net cumulative effect of such matter does not operate
to reduce the Net Revenue Interest in the affected Asset to less than the Net
Revenue Interest specified in Schedules 1.1(a) and 1.1(b) and such encumbrances
are released at or prior to Closing;

 

(b)         Preference Rights, Transfer Requirements and other required third
party consents to assignment and similar agreements with respect to which
(i) written waivers or consents are obtained from the appropriate parties, or
(ii), after written notice has been given to the third party or parties holding
said Right, the appropriate time period for asserting any such Right has expired
without an exercise of the Right;

 

(c)         any liens for taxes not yet due and payable or, if delinquent, that
are being contested in good faith in the ordinary course of business pursuant to
legally permissible means, with adequate reserves and which are described on
Schedule 5.17;

 

(d)         all rights to consent by, required notices to, filings with, or
other actions by Governmental Authorities in connection with the sale or
conveyance of oil and gas leases or interests therein if they are routinely
obtained subsequent to the sale or conveyance; and

 

(e)         any easements, rights-of-way, servitudes, permits, licenses, surface
leases and other rights with respect to surface operations to the extent such
matters do not interfere in any material respect with Seller’s operation of the
portion of the Acquired Assets burdened thereby;

 

“Person” means an individual, a corporation, a partnership, an association, a
trust or any other entity or organization, including a Government Authority.

 

“Preference Right” shall mean any right or agreement that enables any third
party to purchase or acquire any Acquired Asset or any interest therein or
portion thereof as a result of or in connection with the sale, assignment,
encumbrance or other transfer of any Acquired Asset or any interest therein or
portion thereof.

 

“Records” shall mean all books, records, contracts, agreements and files related
to the Acquired Assets, including the logs and seismic information related to
the Wells.

 

3

--------------------------------------------------------------------------------

 

“Remediation” shall mean, with respect to an Environmental Condition, the
implementation and completion of any actions to correct or remove such
Environmental Condition.

 

“Remediation Amount” shall mean, with respect to an Environmental Condition, the
cost of the most cost effective Remediation of such Environmental Condition,
which is reasonable under the circumstances.

 

“Transfer Requirement” shall mean any consent, approval, authorization or permit
of, or filing with or notification to, any third party which is required to be
obtained, made or complied with for or in connection with any sale, assignment,
transfer or encumbrance of any Acquired Asset or any interest therein in
connection with the sale of the Acquired Assets to Buyer as contemplated by the
Agreement, including the consents required to be obtained under
Section 4.3(f) of the Agreement.

 

“Well” or “Wellbore” means each oil and gas well, wellbore, well completion,
multiple well completion and other subdivision of property located on the Leases
and Lands, including the wells and wellbores set forth on Schedule 1.1(b) to the
Agreement.

 

“Working Interest” shall mean the percentage of costs and expenses attributable
to the maintenance, development and operation of an Acquired Asset.

 

4

--------------------------------------------------------------------------------