Exhibit 10.3

SUBORDINATION AGREEMENT

THIS SUBORDINATION AGREEMENT (“Agreement”) is made as of this 31st day of
October, 2007, by and among ANGD, LLC, a Virginia limited liability company
(“ANGD”), APPALACHIAN NATURAL GAS DISTRIBUTION COMPANY, a Virginia corporation
(“Appalachian Gas”), and BLUEFIELD GAS COMPANY, a West Virginia corporation
(BGC, together with ANGD and Appalachian Gas, the “Borrowers”), ROANOKE GAS
COMPANY, a Virginia corporation (“Roanoke Gas Company”), and BRANCH BANKING AND
TRUST COMPANY, a North Carolina banking corporation (the “Bank”).

Recitals:

A. Roanoke Gas Company and Appalachian Gas entered into an Asset Purchase and
Sale Agreement dated as of February 16, 2007 (the “Asset Purchase Agreement”),
under which, among other things, Roanoke Gas Company sold to Appalachian Gas,
and Appalachian Gas purchased from Roanoke Gas Company the assets from the
Bluefield Division of Roanoke Gas Company, on the terms and subject to the
conditions set forth therein (the “Acquisition”).

B. In connection with the Acquisition, Appalachian Gas executed in favor of
Roanoke Gas Company a Promissory Note in the aggregate amount of One Million
Three Hundred Thousand Dollars ($1,300,000) (the “ANGD Note”). All obligations
of ANGD to Roanoke Gas Company under the ANGD Note including the obligation to
pay principal, interest, fees, premiums and expenses of collection, and
including any obligations on account of any extension, renewal or restructuring
of the debt due and owing to Roanoke Gas Company by such Borrower under the
Subordinated Note, are hereafter referred to as the “Subordinated Debt”. The
Subordinated Debt will be secured by all assets of the Borrowers pursuant to the
terms of the Asset Purchase Agreement, ANGD Note and all documents related
thereto (the “Subordinated Documents”).

C. The Bank and Borrowers are parties to a Loan Agreement dated as of the date
hereof, as it may be amended, modified or supplemented from time to time (the
“Loan Agreement”), under the terms of which a term loan in the original
principal amount of $6,800,000.00 (the “Term Loan”) and a line of credit in the
maximum principal amount of $4,400,000.00 (the “Line of Credit”) have been
extended by Bank to Borrowers (collectively, the “Bank Loans”). All obligations
of Borrowers to the Bank under the Loan Agreement, the other Loan Documents (as
defined below) and the Bank Loans, whether such obligations now exist or arise
hereafter, including principal, interest, fees, premiums and expenses of
collection, and including any obligations on account of any extension, renewal
or restructuring of the Bank Loans, is hereafter referred to as the “Senior
Debt”. As used herein, the term “Loan Documents” means the documents described
in the Loan Agreement as “Loan Documents”, as well as any other agreement,
instrument or document executed by any Borrower to evidence any Bank Loan. The
Bank Loans will be secured by all assets of Borrowers pursuant to the terms of
the Loan Documents.

D. Having determined that the Senior Debt will be of substantial benefit to
Borrowers and Roanoke Gas Company, and as required by the Loan Agreement,
Roanoke Gas

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Company has agreed to the subordination of the Subordinated Debt to the Senior
Debt and the lien subordination on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, and
intending to be legally bound, the parties agree as follows:

1. All indebtedness, obligations and liabilities of Borrowers under, arising out
of, or in any way connected with the Subordinated Debt, or any instruments,
agreements or documents relating to the Subordinated Debt, shall be junior in
right of payment and collection to the prior payment and collection in full of
all Senior Debt. However, Roanoke Gas Company shall not receive scheduled
payments on the Subordinated Debt payable to Roanoke Gas Company in the event
that an Event of Default has occurred and is continuing under the Loan
Documents.

2. Roanoke Gas Company shall not ask, demand or sue for, take or receive, or
accelerate or exercise any other remedy or enforcement right (including
initiating any suit or proceeding) with respect to, any payment or distribution
on account of or for application against any Subordinated Debt from any source,
whether as a result of setoff, voluntary payment or otherwise, and Borrowers
shall not offer, give or make any payment or distribution on account of or for
application to any Subordinated Debt obligations of Borrowers to Roanoke Gas
Company, if at the time of such payment or at the time Roanoke Gas Company
proposes to take any action described above if any Borrower is in violation of
the terms of the Loan Agreement or the other Loan Documents, or if such payment
or the taking of such action by Roanoke Gas Company would cause any Borrower to
be in violation of the Loan Agreement or the other Loan Documents.

3. In the event of any insolvency, bankruptcy, liquidation or assignment for the
benefit of creditors of any Borrower, or in the event of any acceleration of the
Subordinated Debt, the Senior Debt shall be accelerated as provided in the Loan
Documents and all of the Senior Debt shall be paid in full before any payment or
distribution shall be made on account of or for application against any
Subordinated Debt.

4. Subject to the terms and conditions of this Agreement, Roanoke Gas Company
hereby agrees that all security interests and liens of Roanoke Gas Company
securing the Subordinated Debt, whether now existing or hereafter created or
acquired, in assets of any Borrower that constitute collateral securing the Bank
Debt (the “Collateral”) shall be subordinate and junior in lien, right, priority
and dignity to any lien or security interest of Bank in the Collateral securing
the Senior Debt, regardless of (i) the date, manner, order or method of
attachment or perfection of any such security interests or liens, (ii) the time
or order of filing or recording of financing statements or other agreements,
documents or instruments filed or recorded to perfect security interests or
liens in any Collateral or any failure of Bank to file or record any financing
statement or any continuations thereof under the Uniform Commercial Code or
other law in any other applicable jurisdiction to perfect security interests or
liens in any Collateral, (iii) anything contained in any filing or agreement to
which Bank or Roanoke Gas

 

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Company now or hereafter may be a party, or (iv) the rules for determining
priority under the Uniform Commercial Code or any other law governing the
relative priorities of secured creditors.

5.(a) So long as the Senior Debt is outstanding, (i) Roanoke Gas Company shall
not exercise or seek to exercise any rights or exercise any remedies with
respect to any Collateral or as a secured creditor under Article 9 of any
applicable Uniform Commercial Code or other applicable state law with respect to
any Collateral, except to the extent Roanoke Gas Company reasonably deems
necessary to perfect or continue to perfect or preserve its security interest
and liens created under the Subordinated Documents.

(b) In exercising rights and remedies with respect to the Collateral, Bank may
enforce the terms and provisions of the Loan Documents and exercise rights and
remedies thereunder and under any applicable law or otherwise, all in such order
and in such manner as Bank may determine in the exercise of its sole business
judgment. Such exercise and enforcement shall include, without limitation, the
rights to sell or otherwise dispose of Collateral, to incur costs and expenses
in connection with such sale or disposition and to exercise all rights and
remedies of a secured lender under the Uniform Commercial Code of any applicable
jurisdiction or other applicable state law.

(c) When the Senior Debt has been paid in full, Roanoke Gas Company shall have
the right to enforce the provisions of the Subordinated Documents with respect
to the Collateral and exercise of remedies thereunder.

6. Notwithstanding the foregoing, if Roanoke Gas Company or any person on behalf
of Roanoke Gas Company shall receive any payment or distribution of all or any
part of the Collateral for payment in satisfaction of the Subordinated Debt, in
whole or in part, whether in cash, property or securities, which, under the
provisions of this Agreement should not have been made, such payment or
distribution shall be held in trust for the benefit of and shall immediately be
paid to Bank and applied to the Senior Debt, delivered to Bank together with any
necessary endorsement.

7. Roanoke Gas Company hereby consents to the execution and recording of the
Loan Documents, the indebtedness incurred thereby and the liens created
thereunder. Bank hereby consents to the execution of the Subordinated Documents,
the indebtedness incurred thereby and the liens created thereunder.

8. The terms of this Agreement shall survive any assignment or transfer of any
of Roanoke Gas Company’s interest in the Subordinated Debt.

9. This is a continuing agreement of subordination and Bank may continue,
without notice to or consent of Roanoke Gas Company, to loan money and extend
credit to Borrowers, to amend, renew, extend and rearrange indebtedness,
obligations, and liabilities of Borrowers, and otherwise to rely hereon in any
future dealings with Borrowers; provided,

 

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however, that any such amendment, renewal, extension or rearrangement does not
increase the original principal amount of the Senior Debt.

10. Bank may, at any time, and from time to time, without the consent of or
notice to Roanoke Gas Company, without incurring responsibility to any person,
and without impairing or releasing the obligations of Borrowers or Roanoke Gas
Company hereunder (i) change the manner, place or terms of payment of, change or
extend the time of payment of, change the interest rates applicable to and/or
otherwise renew or alter any of the Senior Debt, (ii) extend, modify or amend
the Loan Agreement, the Loan Documents or any other agreement or document with
Borrowers, (iii) release anyone liable in any manner for the payment or
collection of the Senior Debt, (iv) exercise or refrain from exercising any
rights against any Borrower or any other person, and (v) take or refrain from
taking any other action whatsoever; provided, however, that any such action does
not increase the original principal amount of the Senior Debt.

11. All indebtedness, obligations and liabilities of Borrowers to Bank shall be
deemed to have been made or incurred in reliance by Bank upon this Agreement,
and Roanoke Gas Company expressly waives all notice of acceptance by Bank of
this Agreement and all other notices whatsoever and expressly acknowledges such
reliance by Bank upon this Agreement. This Agreement shall not be amended,
waived, terminated or otherwise modified except in writing executed by Bank and
Roanoke Gas Company. Any delay in the exercise of, or any failure to exercise,
any right or remedy of Bank shall not be deemed a waiver of any such right or
remedy. This Agreement and all documents and instruments executed in connection
herewith shall be binding on each Borrower, Roanoke Gas Company, and their
respective legal representatives, successors, assigns and heirs, and this
Agreement and all documents and instruments executed in connection herewith
shall be binding on and inure to the benefit of Bank and their respective
successors and assigns. Each reference in this Agreement to Roanoke Gas Company
shall include any subsequent assignee or other transferee of any Subordinated
Debt.

12. ANGD and Roanoke Gas Company represent and warrant to Bank that (i) the
Subordinated Debt has not been, and will not be altered or amended, (ii) no
prepayment of principal or interest on the Subordinated Debt has been, or will
be (without the prior written consent of Bank) made, and (iii) as of the date
hereof, Roanoke Gas Company have not assigned or transferred any of the
Subordinated Debt or any interest therein to any other person or entity. Roanoke
Gas Company and ANGD shall not alter or amend the ANGD Note or the related loan
documentation in any manner that would increase the original principal amount or
accelerate the payment of the ANGD Note.

13. Any agreement, instrument or other document given by Borrowers to evidence a
Subordinated Debt shall be clearly marked in its heading with a legend
indicating that such Subordinated Debt is subordinated to the Senior Debt
pursuant to the terms of this Agreement.

 

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14. All notices and other communications under this Agreement shall be
sufficient if given in writing and if delivered personally, with a receipt
thereof obtained, or mailed, certified or registered mail, return receipt
requested, postage prepaid, or by a recognized overnight delivery service, to
the parties at their respective addresses set forth below, or to such other
address of which either party shall give the other notice. Notices shall be
deemed given upon receipt or refusal of delivery if hand delivered, one
(1) business day after deposit for delivery with an overnight delivery service,
or three (3) business days after deposit for delivery by certified or registered
mail. The notice addresses for the parties are as follows:

 

  (a) If to Bank:

 

       Branch Banking and Trust Company

       233 Wyndale Road/P.O. Box 1209

       Abingdon, Virginia 24212

       Attn: Commercial Loan Department

 

  (b) If to Borrowers:

 

       ANGD, LLC

       271 West Main Street, Suite 200

       Abingdon, Virginia 24212

       Attn: Manager

 

  (c) If to Roanoke Gas Company:

 

       Roanoke Gas Company

       519 Kimball Avenue

       Roanoke, Virginia 24016

15. The invalidity or unenforceability of any portion of this Agreement shall
not affect the validity or enforceability of the remainder. This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original and together which shall constitute a single agreement. This Agreement
shall be deemed to be a contract made under, and shall be construed in
accordance with, the laws of the State of Virginia applicable to contracts made
and to be performed entirely within such State, without giving effect to its
conflicts of laws principles or rules.

[Separate Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties or their authorized representative have executed
and delivered this Agreement with effect as of the day and year first above
written.

 

ROANOKE GAS COMPANY:    

ROANOKE GAS COMPANY,

a Virginia corporation

    By:   /s/ John B. Williamson, III     Name:   John B. Williamson, III    
Title:   President & CEO

 

BORROWERS:    

ANGD, LLC,

a Virginia limited liability company

    By:   /s/ John W. Ebert     Name:   John W. Ebert     Title:   Manager

 

   

APPALACHIAN NATURAL GAS

DISTRIBUTION COMPANY,

a Virginia corporation

    By:   /s/ John W. Ebert     Name:   John W. Ebert     Title:   President

 

   

BLUEFIELD GAS COMPANY,

a West Virginia corporation

    By:   /s/ John W. Ebert     Name:   John W. Ebert     Title:   President

 

BANK:    

BRANCH BANKING AND TRUST COMPANY,

a North Carolina banking corporation

    By:   /s/ Hugh Ferguson     Name:   Hugh Ferguson     Title:   Senior Vice
President