**EXHIBIT 10.3**

 

**PURCHASEAND SALE AGREEMENT**

 

BY AND BETWEEN

 

 

NATHANIEL ENERGY CORPORATION

 

NATHANIEL ENERGY OKLAHOMAHOLDINGS CORPORATION

 

AND

 

MCNIC RODEO GATHERING, INC.

SELLER

 

AND

 

MIDSTREAM ENERGY SERVICES, LLC

BUYER

 

ENTERED INTO SEPTEMBER 30,2005

 

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**TABLE OFCONTENTS**

 
| 1.     |   | PURCHASE AND SALE                            |                                                      |
|--------|--------|----------------------------------------------|-----------------------------------------------------------|
|   | 1.1.   |                                         | Purchase And Sale                                         |   |
|   |   |                                         |                                                      |   |
| 2.     |   | PURCHASE PRICE                               |                                                      |
|   | 2.1    |                                         | Purchase Price                                            |   |
|   | 2.2.   |                                         | Adjustments To Purchase Price                             |   |
|   | 2.3.   |                                         | Closing Statement                                         |   |
|   | 2.4.   |                                         | Final Settlement                                          |   |
|   | 2.5.   |                                         | Allocated Values                                          |   |
|   |   |                                         |                                                      |   |
| 3.     |   | CLOSING                                      |                                                      |
|   | 3.1.   |                                         | Time And Place Of Closing                                 |   |
|   | 3.2.   |                                         | Assumed Liabilities                                       |   |
|   | 3.3.   |                                         | Closing Obligations                                       |   |
|   |   |                                         |                                                      |   |
| 4.     |   | SELLER’S REPRESENTATIONS AND WARRANTIES |                                                      |
|   | 4.1.   |                                         | Organization And Good Standing                            |   |
|   | 4.2.   |                                         | Binding Agreement, Authority, And No  Affiliate Ownership |   |
|   | 4.3.   |                                         | No Breach And Compliance                                  |   |
|   | 4.4.   |                                         | Governmental Consents And Approvals                       |   |
|   | 4.5.   |                                         | Title                                                     |   |
|   | 4.6.   |                                         | Condition Of Assets And Disclosure Of  Information        |   |
|   | 4.7.   |                                         | Keyes Helium Company, LLC                                 |   |
|   | 4.8.   |                                         | Contracts                                                 |   |
|   | 4.9.   |                                         | Properties                                                |   |
|   | 4.10.  | Environmental Matters And Permits            |                                                      |
|   | 4.11.  | Financial Statements And Prepayments         |                                                      |
|   | 4.12.  | Gas Imbalances                               |                                                      |
|   | 4.13.  | Suspense Funds                               |                                                      |
|   | 4.14.  | Employees                                    |                                                      |
|   | 4.15.  | Litigation                                   |                                                      |
|   | 4.16.  | Taxes                                        |                                                      |
|   | 4.17.  | Brokers’ Fees                           |                                                      |
|   | 4.18.  | Preferential Rights                          |                                                      |
|   | 4.19.  | Operation of Assets Since Effective Time     |                                                      |
|   |   |                                         |                                                      |   |
| 5.     |   | BUYER’S REPRESENTATIONS AND WARRANTIES  |                                                      |
|   | 5.1.   |                                         | Organization And Good Standing                            |   |
|   | 5.2.   |                                         | Binding Agreement And Authority                           |   |
|   | 5.3.   |                                         | No Breach And Compliance                                  |   |
|   | 5.4.   |                                         | Governmental Consents And Approvals                       |   |
|   | 5.5.   |                                         | Litigation                                                |   |
|   | 5.6.   |                                         | Buyer’s Commitment Not Subject To Financing          |   |

 

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|   | 5.7.   |                                                 | Brokers’ Fees                                   |   |
|--------|--------|------------------------------------------------------|------------------------------------------------------|--------|
|   |   |                                                 |                                                 |   |
| 6.     |   | COVENANTS                                            |                                                 |
|   | 6.1.   |                                                 | Operation Of The Assets Prior To The  Closing Date   |   |
|   | 6.2.   |                                                 | Permits                                              |   |
|   | 6.3.   |                                                 | Access                                               |   |
|   | 6.4.   |                                                 | Risk Of Loss; Casualty Loss                          |   |
|   | 6.5.   |                                                 | Income And Expense From Assets And Receipt  Of Funds |   |
|   | 6.6.   |                                                 | Allocation of Taxes                                  |   |
|   | 6.7.   |                                                 | Supplements To Schedules                             |   |
|   | 6.8.   |                                                 | Other Negotiations                                   |   |
|   | 6.9.   |                                                 | Records                                              |   |
|   | 6.10.  | Names                                                |                                                 |
|   | 6.11.  | Consents And Contract Matters                        |                                                 |
|   | 6.12.  | Shareholders’ Meeting/Vote                      |                                                 |
|   | 6.13.  | Further Assurances                                   |                                                 |
|   | 6.14.  | Post-Closing Adjustment For Defects                  |                                                 |
|   |   |                                                 |                                                 |   |
| 7.     |   | TRANSITION AND EMPLOYEE MATTERS                      |                                                 |
|   | 7.1.   |                                                 | Transition                                           |   |
|   | 7.2.   |                                                 | Offers Of Employment                                 |   |
|   | 7.3.   |                                                 | Benefits                                             |   |
|   | 7.4.   |                                                 | Retained Employee Liabilities                        |   |
|   |   |                                                 |                                                 |   |
| 8.     |   | CONDITIONS TO CLOSING                                |                                                 |
|   | 8.1.   |                                                 | Seller’s Conditions                             |   |
|   | 8.2.   |                                                 | Buyer’s Conditions                              |   |
|   |   |                                                 |                                                 |   |
| 9.     |   | TERMINATION                                          |                                                 |
|   | 9.1.   |                                                 | Termination Rights                                   |   |
|   | 9.2.   |                                                 | Effect Of Termination                                |   |
|   |   |                                                 |                                                 |   |
| 10.    |   | INDEMNIFICATION                                      |                                                 |
|   | 10.1.  | Indemnification By Buyer                             |                                                 |
|   | 10.2.  | Indemnification By Seller                            |                                                 |
|   | 10.3.  | Limitations On Indemnification                       |                                                 |
|   | 10.4.  | Collateral Sources                                   |                                                 |
|   | 10.5.  | Limitations On Damages; Survival Of  Representations |                                                 |
|   | 10.6.  | Notice Of Asserted Liability; Opportunity  To Defend |                                                 |
|   | 10.7.  | Exclusive Remedy                                     |                                                 |
|   | 10.8.  | Negligence And Strict Liability Waiver               |                                                 |
|   |   |                                                 |                                                 |   |
| 11.    |   | MISCELLANEOUS                                        |                                                 |
|   | 11.1.  | Applicable Law                                       |                                                 |
|   | 11.2.  | Expenses                                             |                                                 |
|   | 11.3.  | Independent Investigation                            |                                                 |
|   | 11.4.  | Disclaimer Regarding Assets                          |                                                 |

 

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|   | 11.5.  | No Third-Party Beneficiaries |   |
|--------|--------|------------------------------|--------|
|   | 11.6.  | Waiver                       |   |
|   | 11.7.  | Entire Agreement, Amendment  |   |
|   | 11.8.  | Notices                      |   |
|   | 11.9.  | No Assignment                |   |
|   | 11.10. | Severability                 |   |
|   | 11.11. | Press Release; Publicity     |   |
|   | 11.12. | Construction                 |   |
|   | 11.13. | Counterparts                 |   |
|   | 11.14. | Time Is Of The Essence       |   |
|   | 11.15. | Confidentiality              |   |

 

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| **EXHIBITS**         |                              |
|----------------------|-----------------------------------|
| Exhibit A       | Defined Terms                     |
| Exhibit B       | Assignment And Bill Of Sale       |
| Exhibit C       | Transition Services Agreement     |
| Exhibit D       | CIG Proposal                      |
|                 |                              |
| **SCHEDULES**        |                              |
| Schedule 1.1    | Assets                            |
| Schedule 2.5    | Allocated Values                  |
| Schedule 4.7    | Liens                             |
| Schedule 4.8    | Contracts And Consents            |
| Schedule 4.9(A) | Real Property                     |
| Schedule 4.9(B) | Facilities                        |
| Schedule 4.9(C) | Surface Rights                    |
| Schedule 4.10   | Environmental Matters And Permits |
| Schedule 4.12   | Gas Imbalances                    |
| Schedule 4.13   | Suspense Funds                    |
| Schedule 4.14   | Employees                         |
| Schedule 4.15   | Litigation                        |
| Schedule 4.16   | Taxes                             |

 

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**PURCHASE AND SALE AGREEMENT**

 

NathanielEnergy Corporation, a Delaware corporation (**“NEC”**),Nathaniel Energy Oklahoma Holdings Corporation, an Oklahoma corporation (**“NEOHC”**) and MCNIC Rodeo Gathering, Inc., a Michigancorporation (“MCNIC”) (NEC, NEOHC, and MCNIC collectively, **“Seller”**)and Midstream Energy Services, LLC, an Oklahoma limited liability company (**“Midstream”** or **“Buyer”**) enterinto this Purchase And Sale Agreement (**“PSA”**) as of September 30,2005.  Buyer and Seller may be referredto in this PSA individually as a **“Party”** orcollectively as the **“Parties”**.  Unless otherwise defined in the body of thisPSA, all capitalized will have the meaning given to them in **Exhibit A**.  All Exhibits and Schedules referenced andattached to this PSA are incorporated herein by reference and are made a partof this PSA.

 

Forand in consideration of the premises and the mutual covenants and agreementsset forth in this PSA, the Parties agree as follows:

 

**1.****              PURCHASE AND SALE****.**

 

**1.1.****                 ****Purchase And Sale****.** Subject to the terms and conditions of this PSA, at the Closing, Sellerwill sell, assign, transfer, convey, and deliver to Buyer, and Buyer willpurchase and acquire from Seller, the assets described on **Schedule 1.1**(**“Assets”**).  Any assets which are not described on **Schedule 1.1** will be excludedfrom the sale described in this PSA.

 

**2.****             ****PURCHASE PRICE****.**

 

**2.1.****                  Purchase Price****.**  Infull consideration for the purchase of the Assets, Buyer agrees to pay anaggregate purchase price to Seller of Sixteen Million Two Hundred ThousandDollars and no/100 ($16,200,000) (**“Purchase Price”**),as adjusted at Closing pursuant to ***Section 2.2***(**“Adjusted Purchase Price”**), by means ofa completed Federal Funds wire transfer of immediately available funds to anaccount designated by Seller.

 

**2.2.****                  Adjustments To PurchasePrice****.**  ThePurchase Price will be adjusted as follows:

 

**(A)****      **Increased by

 

**(1)****        **all capital expenditures reasonably paid orincurred by Seller and approved by Buyer that are attributable to the Assetsand attributable to the period of time from August 1, 2005 (**“Effective Time”**) to the Closing Date; and

 

**(2)****        **an amount equal to the costs, expenses, andother expenditures (but only to the extent expensed and not capitalized inaccordance with GAAP) reasonably and in the ordinary course of business paid bySeller in accordance with this PSA that are directly related to the Assets fromthe Effective Time until the Closing Date; and

 

**(3)****        **all amounts owed to Seller by third partiesas of the Closing Date under the Contracts, including Gas Imbalances (asdefined in this ***Section 2.2(A)(3)***)existing at the Closing Date, and for the amounts that Seller receives anincrease to the Purchase Price, the receivables and other rights attributableto such amounts will be deemed transferred to Buyer at Closing. “Gas Imbalances”will be the actual financial value of any gas imbalances incurred; and

 

**(4)****        **one million eight hundred thousand dollarsand no/100 ($1,800,000) if a binding contract is entered into between CIG andBuyer for nitrogen and/or air services beginning on or near January 1,2007, with commercial terms that are substantially similar to the proposal sentto CIG set forth in **Exhibit D**;provided, that, if a binding contract is entered into between CIG and Buyer fornitrogen and/or air services beginning on or near January 1, 2007, and thecommercial terms of such agreement differ from those set forth in **Exhibit D** such that there is anegative impact to Buyer, then the Parties will negotiate in good faith toproportionally reduce this one million eight hundred thousand dollar ($1,800,000)adjustment to reasonably reflect such negative impact.

 

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**(B)****      **Decreased by

 

**(1)****        **an amount equal to the costs, expenses, andother expenditures (whether capitalized or expensed) relating to the Assetsthat are unpaid as of the Closing Date and assessed for or attributable toperiods of time prior to the Closing Date regardless of how such costs,expenses, and other expenditures are calculated, provided that, to the extentthe actual amounts cannot be determined prior to the Closing, a reasonableestimate of such costs, expenses, and other expenditures will be used (and forany such costs, expenses, or other expenditures that Buyer receives a decreaseto the Purchase Price, Buyer will assume the liability and responsibility forpayment thereof at Closing to the extent of such downward adjustment);

 

**(2)****        **all amounts owed by Seller to third partiesas of the Closing Date under the Contracts, including Gas Imbalances existingat the Closing Date, and for the amounts that Buyer receives a downwardadjustment to the Purchase Price, Buyer will assume the liability andresponsibility for payment of such amounts at Closing; and

 

**(3)****        **to the extent retained by Seller (if any),all monies, proceeds, receipts, credits and income attributable to thePurchased Assets for all periods of time from and after, or attributable to theperiods of time from and after, the Effective Time.

 

**(C)****      **The Purchase Price will be increased or decreased by any other amountas provided for in this PSA or agreed upon in writing by Buyer and Seller.

 

**(D)****      **Notwithstanding any other provision of this Agreement, (i) in noevent will there be a duplication of adjustments to the Purchase Price whichwould result in a specific amount being double counted; (ii) the PurchasePrice will not be increased pursuant to ***Section 2.2(A) (1),(2) ***or ***(3) ***byany amount which is paid by Buyer; and (iii) the Purchase Price will notbe decreased pursuant to ***Section 2.2(B) (1) ***or***(2) ***by any amount paid bySeller.

 

**(E)****        **The adjustments described above are referredto as **“Purchase Price Adjustments”**.  Except as specifically set forth above inthis ***Section 2.2***, the Purchase PriceAdjustments will not modify any of Buyer’s or Seller’s representations,warranties, or covenants specified elsewhere in this PSA.

 

**2.3.****                  Closing Statement****.**  Nolater than five (5) business days before the Closing Date Seller willprepare and deliver to Buyer in writing its proposed Purchase PriceAdjustments. Then, no later than three (3) business days before theClosing Date, Buyer will prepare and deliver to Seller a statement (**“Closing Statement”**) of all Purchase Price Adjustments and theAdjusted Purchase Price to be used for Closing (**“ClosingAmount”**), which will be subject to final settlement as set forth in ***Section 2.4***.

 

**2.4.****                  FinalSettlement****.**

 

**(A)****      **As soon as practicable after the Closing, but on or before fifteen (15)days after Closing, Seller will prepare and deliver to Buyer a final settlementstatement (“**Final Settlement Statement”**)setting forth each Purchase Price Adjustment that was not finally determined asof the Closing and showing the calculation of such adjustment and the resultingfinal purchase price (**“Final Purchase Price”**).  As soon as practicable after receipt ofSeller’s proposed Final Settlement Statement, but on or before fifteen (15)days after receipt of Seller’s proposed Final Settlement Statement, Buyer willdeliver to Seller a written report, containing any changes that Buyer proposesto make to the Final Settlement Statement. The Parties will endeavor to agree with respect to the changes proposedby Buyer, if any, no later than ten (10) days after receipt by Seller ofBuyer’s comments to the proposed Final Settlement Statement.  The date upon which such agreement is reachedor upon which the Final Purchase Price is established will be called the **“Final Settlement Date”**.

 

**(B)****      **If the Final Purchase Price is more than the Closing Amount, Buyer willpay Seller the amount of such difference. If the Final Purchase Price is less than the Closing Amount, Seller willpay to Buyer the amount of such difference. Any payment(s) by Buyer or Seller will be by wire transfer inimmediately available funds.  Any suchpayment(s) will be made within five (5) days of the Final Settlement Date.

 

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**(C)****      **If the Parties are unable to resolve disputes concerning the FinalSettlement Statement or Final Purchase Price on or before thirty (30) daysafter the Final Settlement Statement is received by Buyer, such disputes willbe resolved by a mutually agreeable nationally recognized certified publicaccounting firm (**“Reviewing Accountant”**).  If the Parties are unable to agree on thedesignation of a Reviewing Accountant within forty five (45) days after theFinal Settlement Statement is received by the Buyer, the Buyer and Seller willeach designate a nationally recognized certified public accounting firm (each a“Designating Accountant”) within such forty five (45) day period, and suchDesignating Accountants will designate the Reviewing Accountant within fifteen(15) days after the date on which the last Designating Accountant isappointed.  The Parties will makeavailable to the Reviewing Accountant all work papers and all other informationand material in their possession relating to the matters in dispute regardingthe Final Settlement Statement and the Final Purchase Price.  The Reviewing Accountant will be instructedby the Parties to use its best efforts to deliver its determination to theParties as promptly as practicable after submission of the dispute to theReviewing Accountant.  The determinationof the Reviewing Accountant will be final and binding on the Parties; and theFinal Settlement Statement and the Final Purchase Price as modified (if at all)by agreement of the Parties or by the Reviewing Accounting in accordance withthis ***Section 2.4*** will be the FinalSettlement Statement and the Final Purchase Price.

 

**(D)****      **Each Party will bear its own expenses and the fees and expenses of itsown representatives and experts, including without limitation, the DesignatingAccountant chosen by such party, in connection with the preparation, review,dispute (if any) and final determination of the Final Settlement Statement andthe Final Purchase Price.  In the eventthe Reviewing Accountant agrees in all material respects with the computationpresented by either Seller or Buyer, the fees charged by the ReviewingAccounting will be paid by the other.  Inthe event the Reviewing Accountant does not agree in all material respects withthe computations presented by the Seller or Buyer, the fees of the ReviewingAccountant will be paid equally by Seller and Buyer.

 

**2.5.****                  Allocated Values****.**  TheParties agree to allocate the Adjusted Purchase Price among the Assets for allpurposes (including financial accounting and tax purposes) in the manner setforth on **Schedule 2.5** (“**Allocated Values**”). Seller and Buyer each agree that they will not take any positioninconsistent with such allocation in preparing all tax returns and tax reportsto governmental authorities or otherwise. The Parties will timely furnish each other their tax identificationnumbers, non-foreign affidavits and other reasonably requested tax complianceinformation.  

 

**3.****              CLOSING****.**

 

**3.1.****                  Time And Place Of Closing****.** Subject to satisfaction of all of the Conditions To Closing contained in***Section 3.3***, the consummationof the transactions contemplated by this PSA (**“Closing”**)will take place at 10:00 a.m. in the offices of Seller at 8801 SouthInterPort Boulevard, Suite 260, Englewood, Colorado on December 31,2005, or such earlier date that Seller has completed the matters set forth in ***Section 6.12*** or on another datethat the Parties agree to in writing (**“Closing Date”**).  

 

**3.2.****                  Assumed Liabilities****.**  Buyerwill assume the liabilities of Seller under the express terms of the Contractsafter the Closing Date and Buyer will assume liabilities related to the Assetsthat occur and accrue as the result of Buyer’s action or omission after theClosing Date (**“Assumed Liabilities”**).  However, Buyer does not assume any obligationor liability relating to or arising out of the performance or non-performanceby Seller (or its predecessors) under the Contracts that occurred or accrued onor before the Closing Date nor does Buyer assume any liabilities related to theAssets that occurred or accrued on or after the Closing Date as the result ofSeller’s (or its predecessors’) action or omission which are expressly retainedby Seller,  nor any other liabilities andobligations relating to the Assets not included in the Assumed Liabilitiesand/or not otherwise specifically assumed by Buyer under this PSA (**“Retained Liabilities”**). 

 

**3.3.****                  Closing Obligations****.**  At Closing:

 

**(A)****      **Seller will deliver to Buyer:  

 

**(1)****        **an Assignment And Bill Of Sale insubstantially similar form as **Exhibit B**duly executed by Seller by which the Assets are assigned to Buyer free andclear of all Liens, except Permitted Liens;

 

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**(2)****        **a TransitionServices Agreement (**“Transition ServicesAgreement”**) in substantially similar form as **Exhibit C**duly executed by Seller;

 

**(3)****        **the Consents,in a form reasonably acceptable to Buyer, as set forth in **Schedule 4.8**,subject to ***Section 6.11 (******Consents And Contract Matters)***;

 

**(4)****        **a Waiver of Right of First Refusal ofColorado Interstate Gas Company’s right of first refusal pursuant to Section 10of the Operational Agreement by and between Colorado Interstate Gas Company andNEOC;

 

**(5)****        **the Resignationof the manager and all officers of Keyes Helium Company, LLC;

 

**(6)****        **an Officer’s Certificate dated theClosing Date and executed on behalf of Seller by a Responsible Officer ofSeller to the effect that each of the representations of Seller contained inthis PSA are true and correct as of the Closing Date as if made on and as ofthe Closing Date;

 

**(7)****        **a Certificate of the Secretary of Sellercertifying to the truth, correctness, and completeness of copies of resolutionsduly adopted by Seller’s Board of Directors and shareholders respectively,approving the transactions contemplated by this PSA and any other agreementsrelated hereto; and

 

**(8)****        **such other certificates and documents as maybe called for under this PSA or as Buyer reasonably requests.

 

**(B)****      **Buyer will deliver to Seller:

 

**(1)****        **the Closing Amount in immediatelyavailable funds, by wire transfer to the accounts designated by Seller;

 

**(2)****        **a TransitionServices Agreement in substantially similar form as **Exhibit C**duly executed by Buyer;

 

**(3)****        **an Officer’s Certificate dated theClosing Date and executed on behalf of Buyer by a Responsible Officer of Buyerto the effect that each of the representations of Buyer contained in this PSAare true and correct as of the Closing Date as if made on and as of the ClosingDate;

 

**(4)****        **a Certificate of the Secretary of Buyercertifying to the truth, correctness, and completeness of copies of resolutionsduly adopted by Buyer’s Executive Committee approving the transactionscontemplated by this PSA and any other agreements related hereto; and

 

**(5)****        **such other certificates and documents as maybe called for under this PSA or as Seller reasonably requests.

 

**4.****              SELLER’S REPRESENTATIONSAND WARRANTIES****.**** **NEC, NEOHC, and MCNICeach represent and warrant to Buyer as of the date of this PSA and as of theClosing Date that:

 

**4.1.****                  Organization And GoodStanding****.** NEC, NEOHC, and MCNIC are each corporationsduly organized, validly existing, and in good standing under the laws of thejurisdictions of their respective incorporations with full power and authorityto own, lease, and operate their respective assets and to carry on theirrespective businesses as now conducted.

 

**4.2.****                  Binding Agreement,Authority, And No Affiliate Ownership****.**  This PSA has been duly authorized, executed,and delivered by Seller and constitutes the legal, valid, and bindingobligation of Seller enforceable in accordance with its terms.  The performance by Seller of this PSA and thetransactions contemplated herein will be at the time required to be performed,duly and validly authorized by all requisite corporate action on the part ofSeller.   No Affiliate of Seller owns anyinterest in any of the Assets.

 

**4.3.****                  No Breach And Compliance****.** Neither the execution and delivery of this PSA, nor the consummation ofthe transactions contemplated hereby, will (A) violate any Law or otherrestriction of any Governmental Authority to which such Seller is subject; or (B) conflictwith, result in a breach of, constitute a default under, result in theacceleration of, create in any party the right to accelerate, terminate,modify, or

 

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cancel, or require any notice or consent (except asset forth on **Schedule 4.8**) under anyagreement, contract, lease, license, instrument, or other arrangement to whichSeller is a party, or to which the Assets are subject, or by which Seller isbound or to which any of such Seller’s assets are subject.  The Assets, and Seller’s ownership, use, andoperation of the Assets, are in compliance in all material respects, with allapplicable Laws.

 

**4.4.****                  Governmental Consents AndApprovals****.**  No consent, approval, order, or authorizationof, registration, declaration or filing with, or permit from, any GovernmentalAuthority is required by or with respect to Seller in connection with theexecution and delivery of this PSA or the consummation of the transactionscontemplated hereby.

 

**4.5.****                  Title****.**  TheAssets are owned by Seller, and will be conveyed to Buyer, free and clear ofany Lien other than Permitted Liens.

 

**4.6.****                  Condition Of Assets AndDisclosure Of Information****.**  TheAssets are in good operating condition and repair, subject to normal wear andtear, are usable in the regular and ordinary course of business, and have beenmaintained in accordance with normal industry practice.   Seller has disclosed or made available toBuyer all of the information in Seller’s possession, custody, or controlpertaining to the Assets.

 

**4.7.****                  Keyes Helium Company, LLC****.**

 

**(A)****      **Seller owns 100% of the ownership interest in the Keyes Helium Company,LLC, a Colorado limited liability company (**“Keyes Helium Company”**)free and clear of all Liens (**“Keyes Interests”**)except as set forth in **Schedule 4.7**which will be paid in full and released at Closing so that the Keyes Interestsare transferred at Closing free and clear of all Liens, and Keyes Helium isduly organized, validly existing, and in good standing under the laws of thejurisdiction of its formation with full power and authority to own, lease, andoperate its assets and to carry on its business as now conducted.  Those assets as listed in **Schedule 1.1** (designated asthe Keyes Helium Company Assets) are the only assets owned by Keyes HeliumCompany and the contracts listed on **Schedule 4.8**(designated as the Keyes Helium Company Contracts) are the only contracts towhich Keyes Helium Company is a party or is obligated.   All obligations, liabilities, andcontingencies of Keyes Helium Company are reflected and reserved against in theFinancial Statements.  Seller hasdelivered to Buyer true and correct copies of the organizational documents ofKeyes Helium Company (including its certificate of formation and its limitedliability company operating agreement) as currently in effect.  No changes will be made to suchorganizational documents prior to Closing.

 

**(B)****      **The Keyes Interests constitute all of the outstanding ownershipinterests in Keyes Helium Company and are duly authorized, validly issued,fully paid and non-assessable, and were not issued in violation of anypre-emptive rights.

 

**(C)****      **There are no existing rights, agreements, or commitments of anycharacter obligating Keyes Helium Company to issue, transfer or sell anyadditional ownership rights or interests in Keyes Helium Company or any othersecurities (debt, equity, or otherwise) convertible into or exchangeable forsuch ownership rights or interests. Keyes Helium Company does not have any subsidiaries or own any equityinterest in any other Person.

 

**(D)****      **Keyes Helium Company has no accounts or safe-deposit boxes with banks,trust companies, savings, and loan associations, or other financialinstitutions.

 

**4.8.****                  Contracts****.**  **Schedule 4.8** is a true, correct, and complete list of all of thecontracts and agreements relating to the Assets and all such contracts andagreements are included in the definition of “Assets” (**“Contracts”**) and **Schedule 4.8**identifies all the consents required in order to assign, transfer, or conveythe Assets to Buyer (**“Consents”**). Each of the Contracts is in full force andeffect, and there is no breach, or claimed breach, of any of the Contracts.

 

**4.9.****                  Properties****.**

 

**(A)****      **The Real Property listed in **Schedule 4.9(A) **includes all thereal property related to the Assets. Seller owns the Real Property in fee simple, and, upon the consummationof the transactions contemplated by

 

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this PSA, Buyer will acquire title to the RealProperty held in fee simple, free and clear of all Liens, other than PermittedLiens.

 

**(B)****      **The Facilities listed in **Schedule 4.9(B) **includes all thepersonal property related to the Assets. Seller owns the Facilities, and, upon the consummation of thetransactions contemplated by this PSA, Buyer will acquire title to theFacilities, free and clear of all Liens, other than Permitted Liens.  Seller holds all patents, trademarks,licenses, copyrights and other intangible rights necessary for the ownershipand operation of the Assets, all of which are included in the Assets.

 

**(C)****      **The Surface Rights listed on **Schedule 4.9(C) **includeall of the rights of way, easements, surface use agreements, and surface leasesrelated to the Assets.  Upon the consummationof the transactions contemplated hereby, Buyer will acquire all Surface Rightsso identified in **Schedule 4.9(C) **freeand clear of all Liens, other than Permitted Liens.  All Surface Rights have been acquired in theordinary course of business and are valid, binding, and enforceable inaccordance with their respective terms and there exists no default thereunder.

 

**(D)****      **The Real Property and the Surface Rights constitute all of the feeproperty, rights of way, easements, surface use agreements, and surface leaseagreements as of the Effective Time and as of the Closing necessary in theownership and operation of the Assets.

 

**4.10.****           EnvironmentalMatters And Permits****.** Except as set forth in **Schedule 4.10** (which are Retained Liabilities):

 

**(A)****      **To Seller’s knowledge, the Assets are currently operating in allmaterial respects in compliance with all Environmental Laws and Permits;

 

**(B)****      **Seller has not been notified by any Governmental Authority or otherthird party that any of the operations of the Assets are the subject of anyinvestigation or inquiry by any Governmental Authority or other third partyevaluating whether any remedial action is needed to respond to a release orthreatened release of any Hazardous Substance in violation of any EnvironmentalLaw or to the improper storage or disposal (including storage or disposal atoffsite locations) of any Hazardous Substance in violation of any EnvironmentalLaw; and

 

**(C)****      **Seller has not filed any written notice under any Environmental Lawindicating that (i) it is responsible for the improper release into theenvironment, or the improper storage or disposal, of any Hazardous Substance,or (ii) any Hazardous Substance is improperly stored or disposed of uponor from the Assets.

 

**4.11.****           FinancialStatements And Prepayments****.**  Seller has delivered to Buyer (A) NEOHCbalance sheets, statement of operations and cash flows for the nine-monthperiod ended December 31, 2003, the twelve-month period ended December 31,2004, and seven-month period ended August 31, 2005; (B) monthlyoperating income, cost of sales, and operating expenses for the Assets for theperiod April 1, 2003, through August 31, 2005; and (C) detailsupport for all revenue, cost of sales, and significant operating expenses forthe seven-month period ended August 31, 2005 (**“FinancialStatements”**).  The FinancialStatements were prepared in accordance with GAAP applied on a consistent basisduring the periods involved (except for the absence of footnotes and subject tonormal, recurring adjustments) and fairly present in all material respects theresults of operations of NEOHC and the Assets and the cash flows related toNEOHC and the Assets as of their respective dates and for the period presentedtherein.  There have been no MaterialAdverse Effects with respect to the Assets or NEOHC since the date of theFinancial Statements.  All of the assetsreflected or otherwise included in the Financial Statements are included in theAssets.  Seller has not received anyprepayment, advance payment, deposit, or similar payment relating to the Assetswhich would require Buyer to deliver gas, liquids, helium (crude or liquid), orother products, or to provide services, after the Closing Date withoutreceiving full payment for same, or which would be subject to refund or createany repayment obligation.

 

**4.12.****           GasImbalances****.** Except as set forth in **Schedule 4.12**,the Assets are not subject to any gas imbalances as of August 1, 2005.

 

**4.13.****           SuspenseFunds****.** Except as set forth on **Schedule 4.13** (which are Retained Liabilities),there are no funds held in relation to the Assets, in suspense, which representfunds due to third parties in connection with the ownership or operation of theAssets.

 

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**4.14.****           Employees****.**  **Schedule 4.14** sets forth a trueand complete list of the names, titles, hire date, pay scale, and annualsalaries and other compensation of all employees of Seller or its Affiliateswho render services primarily in connection with the Assets (**“Employees”**).  ToSeller’s knowledge, all Employees are available for hire by Buyer.  None of the Employees has indicated to Selleror its Affiliates an intention to resign or retire as a result of thetransactions contemplated by this PSA or otherwise within one (1) yearafter the Closing Date.  No Employee iscovered by any collective bargaining agreement or any other arrangement withany labor union with respect to his or her services in connection with theAssets.

 

**4.15.****           Litigation****.** Except as set forth in **Schedule 4.15**(those matters that are Retained Liabilities are noted as such on the Schedule),there is no claim, litigation, arbitration, investigation, or other proceedingof any Governmental Authority or other third party pending or, to Seller’sknowledge, threatened against or related to the Assets.  The Assets are not subject to any outstandinginjunction, judgment, order, decree, or ruling. There is no litigation, proceeding, or investigation pending or, toSeller’s knowledge, threatened that questions the validity or enforceability ofthis PSA or any other document, instrument, or agreement to be executed anddelivered by Seller in connection with the transactions contemplated hereby.

 

**4.16.****           Taxes****.** Except as set forth in **Schedule 4.16**(which are Retained Liabilities), there are no applicable Taxes, including advalorem taxes relating to the Assets that are delinquent.  Seller has properly completed and filed orcaused to be filed in a timely manner all material reports or returns requiredto be filed with respect to such Taxes relating to the Assets with anyapplicable taxing authority.

 

**4.17.****           Brokers’Fees****.**  Buyerwill have no liability to pay any compensation to any broker, finder, orinvestment banker used by Seller or its Affiliates in connection with thetransactions contemplated by this PSA for which Seller or any of its Affiliatescould become directly or indirectly liable. 

 

**4.18.****           PreferentialRights****.**  Except for Colorado Interstate Gas Company’sright of first refusal pursuant to Section 10 of the Operational Agreementby and between Colorado Interstate Gas Company and NEOHC dated April 3,2003, which has been waived by Colorado Interstate Gas Company pursuant to an August 4,2005, letter to NEOHC, as extended by a September 30, 2005, letter toNEOHC, there are no preferential or similar rights to purchase any portion ofthe Assets.

 

**4.19.****          ****Operation of Assets SinceEffective Time.**  During the period from the Effective Timeuntil the date of this PSA, Seller has maintained, operated and administeredthe Assets, in a good and workmanlike manner, consistent with industrystandards and the historical routine operation of the Assets and in compliancewith all applicable Laws.  From theEffective Time until the date of this PSA, there has not been any:

 

**(A)****      **damage, destruction or loss to any of the Assets, whether or not coveredby insurance;

**(B)****      **business interruption in the use or operation of any of the Assets;

**(C)****      **disposition of any of the Assets, other than sales of inventory in theordinary course of business;

**(D)****      **waiver or release of any rights of Seller or any of its predecessorsunder any Contracts which would affect the rights of Buyer thereunder after theClosing;

**(E)****        **capital expenditure or commitment foradditions to property, plant, or equipment to the Assets in excess of (i) $10,000individually, or (ii) with respect to all individual capital expendituresor commitments in excess of such threshold, $50,000 in the aggregate;

**(F)****        **adverse change in maintenance practices withrespect to any of the Assets;

**(G)****      **amendment of any of the Contracts or contracts entered into related tothe Assets, unless expressly approved in writing by Buyer; or

**(H)****      **agreement or commitment of Seller to do any of the foregoing.

 

**5.****              BUYER’S REPRESENTATIONSAND WARRANTIES****.**  Buyerrepresents and warrants to Seller as of the date of this PSA and as of theClosing Date that:

 

**5.1.****                 ****Organization And Good Standing.** Buyer is a limited liability company duly organized, validly existing,and in good standing under the laws of the jurisdictions of its respectiveformation with full power and authority to own, lease, and operate its assetsand to carry on its respective business as now conducted.

 

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**5.2.****                 ****Binding Agreement And Authority.**This PSA has been duly authorized, executed, and delivered by Buyer andconstitutes the legal, valid, and binding obligation of Buyer enforceable inaccordance with its terms.  Theperformance by Buyer of this PSA and the transactions contemplated herein willbe at the time required to be performed, duly, and validly authorized by allrequisite limited liability company action on the part of Buyer.

 

**5.3.****                 ****No Breach And Compliance.**  Neither the execution anddelivery of this PSA, nor the consummation of the transactions contemplatedhereby, will (A) violate any Law or other restriction of any GovernmentalAuthority to which such Buyer is subject; or (B) conflict with, result ina breach of, constitute a default under, result in the acceleration of, createin any party the right to accelerate, terminate, modify, or cancel, or requireany notice or consent under any agreement, contract, lease, license,instrument, or other arrangement to which Buyer is a party or by which Buyer isbound.

 

**5.4.****                 ****Governmental Consents And Approvals.**  Noconsent, approval, order, or authorization of, registration, declaration orfiling with, or permit from, any Governmental Authority is required by or withrespect to Buyer in connection with the execution and delivery of this PSA orthe consummation of the transactions contemplated hereby.

 

**5.5.****                 ****Litigation****.**  There is no litigation, proceeding or investigationpending or, to the knowledge of Buyer, threatened against or affecting Buyerthat questions the validity or enforceability of this PSA or any otherdocument, instrument, or agreement to be executed and delivered by Buyer inconnection with the transactions contemplated hereby.

 

**5.6.****                  Buyer’s Commitment NotSubject To Financing.**  Buyer has, and will have on the Closing Date,sufficient cash to enable it to make payment in immediately available funds ofthe Adjusted Purchase Price.

 

**5.7.****                  Brokers’ Fees****.** Seller will have no liability to pay any compensation to any broker,finder, or investment banker used by Buyer or its Affiliates in connection withthe transactions contemplated by this PSA for which Buyer or any of itsAffiliates could become directly or indirectly liable.  

 

**6.****              COVENANTS****.**

 

**6.1.****                  Operation Of The AssetsPrior To The Closing Date****.**

 

**(A)****      **Between the date of this PSA and the Closing Date, Seller will continueto maintain, operate, and administer the Assets, in a good and workmanlikemanner, consistent with industry standards and the historical routine operationof the Assets and in compliance with all applicable Laws.  Seller will diligently continue to work onand will timely complete before Closing (1) any existing open or pendingauthority for expenditures; (2) that certain Sturgis Compressor Stationengine overhaul being performed by Endyne; and (3) the moving to the KeyesHelium Plant site all inventory or spare parts that are related to theFacilities and that are stored offsite of the Keyes Helium Plant site.  Notwithstanding any other provision of thisPSA, Seller will bear all costs of the matters which are the subject of thepreceding sentence without any upward Purchase Price Adjustments orreimbursement by Buyer, except for any capital expenditures paid by Sellerwhich are the subject of item (1) of the preceding sentence and approvedby Buyer in writing for which Seller will receive an upward adjustment to thePurchase Price.

 

**(B)****      **Between the date of this PSA and the Closing Date, Seller will take thenecessary actions if, and only if requested by Buyer, and in such event asinstructed and directed by Buyer to:

 

**(1)****                    **Initiate the detailed design, procurement,and installation of the necessary land and equipment to provide for the deliveryof air and/or nitrogen to CIG pursuant to the requirements of any agreementexecuted for such service (**“AIR Project”**);

 

**(2)****                    **Initiate the detailed design, procurement,and installation of the necessary equipment to provide for the removal ofnitrogen from the inlet natural gas stream, including optimizing the recoveryof natural gas liquids and helium from the inlet natural gas stream, theremoval of inlet contaminants in the gas stream, and the upgrade of capacity ofthe inlet and process facility to handle increased volumes of field gatherednatural gas (**“NRU Projects”**);

 

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**(3)****                    **Enter into the necessary contracts asdirected and approved by Buyer for such AIR Project and NRU Projects(collectively **“Projects”**).  Seller will receive a Purchase Price Adjustmentupward for the capital expenditures paid by Seller associated with the aboveProjects which are directed and approved by Buyer in writing.

 

**(4)****                  **If Seller does not have the funds availablefor such Projects, then Buyer will directly pay third parties as necessary forservices and/or equipment incurred by Seller because of such Projects.  As a condition to such payment, Seller will (i) executesuch documents as reasonably requested by Buyer to facilitate such payment,including without limitation, promissory notes (with recourse only to theassets and real property relating to any Projects described in subparagraphs (a) and(b) below of this ***Section 6.1(B)(4)(i)***)and documents to (a) secure a first priority security interest in thecontracts, resulting hard assets, and equipment for which Buyer pays any thirdparty and (b) secure a first and prior mortgage in any real propertyinterests relating to any Projects for which Buyer so pays any third party and (ii) causeto be released any security interests or mortgages which may attach orotherwise apply to any of the assets for which Buyer is to receive a firstpriority security interest or a first mortgage under (i) (a) or (b) above.  In the event that Closing does not occur thenSeller agrees (x)  that Buyer will have acontinuing first priority security interest in the contracts, resulting hardassets, and equipment for which Buyer pays any third party as set forth in thisparagraph and a continuing first mortgage in any real property interests in theProjects for which Buyer pays any third party as set forth in this paragraphand (y) upon Buyer’s written request, to assign all of Seller’s interests(contractual or otherwise) in the Projects for which Buyer has paid any third partyas set forth above in this paragraph. If the Closing occurs, there will not bea Purchase Price Adjustment upward for those amounts that Buyer pays any thirdparty as set forth in this paragraph, and all promissory notes or otherevidences of indebtedness by Seller by Buyer relating to such amounts paid byBuyer will be deemed satisfied and cancelled in all respects.  If the Closing does not occur and Buyer hasfailed to directly pay any third parties for services and/or equipment requiredto be paid under the first sentence of this ***Section 6.1(B)(4)***,Buyer will reimburse Seller for and indemnify Seller from and against any andall claims, liabilities, losses, causes of actions, costs, and expenses(including, reasonable costs of defense and investigations, settlements, andreasonable attorneys’ fees and court costs) asserted against, resulting from,imposed upon, or incurred by Seller as a result of Buyer’s failure to make suchpayments.  Provided, that, the precedingsentence is not applicable if the Seller terminates such that the last sentenceof ***Section 9.2*** of this PSA isapplicable.

 

**(C)****      **Between the date of this PSA and the Closing Date, Seller will, exceptfor emergency action taken in the face of risk to life, property, or theenvironment (such determination to be made in Seller’s reasonable discretion)and matters set forth in ***Section 6.1(A)(2)***,submit to Buyer for prior written approval all requests for capitalexpenditures relating to the Assets that involve individual commitment of morethan $10,000 or individual commitments that aggregate to more than $50,000,prior to committing to or making such capital expenditures.  Buyer will respond to Seller in writingwithin ten (10) days of receiving from Seller a request for approval of acapital expenditure.  If Buyer fails todeliver a written response to Seller within such ten (10) days, Buyer willbe deemed to have approved such expenditure.

 

**(D)****      **Without the prior written approval of Buyer, Seller will not enter intoany contract related to the Assets or, amend, or terminate or allow toterminate by inaction any of the Contracts, except for termination due to theexpiration of the term thereof.  Sellerwill take all commercially reasonable steps to keep in force and perform theContracts according to their terms.  Anycontract entered into by Seller with Buyer’s written approval pursuant to thefirst sentence of this ***Section 6.1(C) ***willbe included in the Contracts.

 

**6.2.****                  Permits****. **Seller agrees to keepin full force and effect and to cooperate with Buyer to (A) makeapplication for assignment of any Permits to be effective with the conveyanceof the Assets to Buyer or (B) have issued new Permits relating to theAssets subsequent to the conveyance of the Assets to Buyer.  Seller has pending at the Oklahoma Departmentof Environmental Quality (**“ODEQ”**) anapplication for Permit under Title V of the Clean Air Act for the Keyes HeliumPlant which includes that certain compressor (CG-8) (a compressor that wasrelocated by CIG to the Keyes Helium Plant). Seller will endeavor in good faith to obtain such Title V Permit (whichincludes the relocated compressor CG-8) prior to Closing.

 

**6.3.****                  Access****.** Seller will permit Buyer’s officers, employees, agents, representatives,and advisors to have reasonable access to the Assets and the Employees (so longas such access occurs during normal

 

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business hours and does not unreasonably interferewith the operation of the Assets), in the presence of a representative ofSeller (unless otherwise specifically authorized by Seller) for the following:

 

**(A)****      **To review and inspect the Assets (including any environmentalinspections and interviews);

**(B)****        **To observe the operation of the Assets andthe performance of duties by the Employees; and

**(C)****        **Related purposes consistent with this PSA.

 

In connection with Buyer’s rights to reasonableaccess to the Assets BUYER HEREBY AGREES TO DEFEND, INDEMNIFY, RELEASE,PROTECT, SAVE, AND HOLD HARMLESS THE SELLER AND ANY OF SELLER’S EMPLOYEES,AGENTS AND/OR REPRESENTATIVES (EACH A **“SELLER INDEMNITEE”**AS USED IN THIS SECTION) FROM AND AGAINST ANY AND ALL LOSSES ARISING OUT OF ORRELATING TO ANY PLANT OR FIELD VISIT CONDUCTED BY ANY EMPLOYEE, AGENT AND/ORREPRESENTATIVE OF BUYER (EACH A **“BUYER PARTY”**).  NOTWITHSTANDING THE FOREGOING, BUYER WILL NOTBE OBLIGATED TO INDEMNIFY ANY SELLER INDEMNITEE FOR LOSSES THAT ARE THE RESULTOF ANY SELLER INDEMNITEE’S STRICT LIABILITY OR THE NEGLIGENCE OF ONE OR MORESELLER INDEMNITEES.  THE PARTIES AGREETHAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.

 

**6.4.****                  RISK OF LOSS; CASUALTYLOSS****.**  Therisk of loss to the Assets will remain with Seller until the Closing Date, andBuyer will receive the Assets, taken as a whole, in good operating conditionand repair, ordinary wear and tear excepted. In the event any of the Assets are damaged or destroyed by fire or othercasualty prior to the Closing Date, the Parties will negotiate in good faithreasonable compensation reflecting the reasonable costs of repair, replacement,or reconstruction to the extent such repair, replacement, or reconstruction hasnot occurred at or prior to the Closing and at Seller’s expense (without anyreimbursement obligation by Buyer).

 

**6.5.****                 ****Income And Expense From Assets And Receipt Of Funds.**

 

**(A)****      **Income.  All proceeds, receipts,credits, and income attributable to the Assets for all periods of time prior tothe Closing Date will belong to Seller. All proceeds, receipts, credits, andincome attributable to the Assets for the periods of time from and after theClosing Date will belong to Buyer.  Allinsurance recoveries relating to losses occurring before the Closing Date willbelong to Seller; provided Seller has cured, or otherwise remedied, at its solecost and expense (and without an increase in the Purchase Price orreimbursement by Buyer), the matters which are the subject of such losses suchthat Buyer is placed in the same position as if such losses had not occurred.

 

**(B)****      **Expenses.  Seller will be responsible forrentals, ad valorem, property, and similar taxes, and operating costsattributable to the Assets and to the period prior to the Closing Date.  Buyer will be responsible for rentals, advalorem, property, and similar taxes, and operating costs attributable to theAssets and to the period after the Closing Date.

 

**(C)****      **Receipt Of Funds.  If atany time subsequent to the Closing, Buyer comes into possession of money orproperty belonging to Seller that was not previously accounted for by credit oradjustment according to this PSA, such money or other property will be promptlydelivered to Seller. If at any time subsequent to the Closing, Seller comesinto possession of money or property belonging to Buyer that was not previouslyaccounted for by credit or adjustment according to this PSA such money or otherproperty will be promptly delivered to Buyer.

 

**6.6.****                 ****Allocation Of Taxes.**

 

**(A)****      **Property And Proratable Taxes.  Allreal estate taxes and assessments, property, and ad valorem taxes, leaseholdrentals and other customarily proratable items relating to the Assets andrelating to a period of time that begins before and ends after the Closing Datewill be prorated as of the close of business on the day before the Closing Datebetween Buyer and Seller.  If the actualamount of any such item is not known as of the Closing, the proration will bebased on the previous year’s (or prior period’s) payment or assessment withrespect to such item, and the Parties agree to adjust the proration and pay anyunderpayment or reimburse for any overpayment within thirty (30) days after theactual amount becomes known.

 

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**(B)****      **Transfer Taxes.   Buyer and Seller agree to take all reasonable action to support the saleof Assets, as contemplated by this PSA, as a “casual sale” and/or “manufacturingcosts” so that, to the extent permitted by applicable Law, no sales tax will beowed on this transaction. ** **To the extent any such sales tax isowed on this transaction Seller and Buyer will each bear fifty percent (50%) ofthe cost of such sales taxes.  Any suchtaxes will be based upon the valuation of the applicable Asset as provided in ***Section 2.5 (Allocated Values)***.  Any documentary stamp tax which may be duewill be paid by Buyer.

 

**6.7.****                 ****Supplements To Schedules.**  From time to time, but notafter five (5) business days prior to Closing, Seller and Buyer willpromptly supplement or amend the Schedules with respect to any matter arisingafter the date of this PSA which, if existing or occurring at the date of thisPSA, would have been required to be set forth or described in suchSchedule.  However, in the event there isa Material Adverse Effect caused by any such supplement or amendment, thenSeller and Buyer will enter into good faith negotiations to resolve suchMaterial Adverse Effect.  In the eventthe Parties cannot reach a mutually agreeable resolution, then Buyer mayterminate this PSA.

 

**6.8.****                 ****Other Negotiations. **Seller agrees that unless and until this PSAis terminated in accordance with ***Section 9(Termination)*** or as otherwise provided in this PSA, Seller willnot, and will ensure that no other person acting on its behalf, enters into orcontinues negotiations with any person other than Buyer with respect to anytransaction involving the acquisition by any person other than Buyer of anyinterest, direct or indirect, in the Assets.

 

**6.9.****                 ****Records. **Within 15 days following the Closing, Sellerwill deliver to Buyer the Records. During normal business hours Buyer will provide Seller access to theRecords, and will afford to Seller the right (at Seller’s expense) to takeextracts therefrom and to make copies thereof to the extent reasonably necessaryto permit Seller to fulfill its obligations to Governmental Authorities, whichobligations are imposed by applicable Law.

 

**6.10.****          ****Names.** Within ninety (90) days after Closing, Buyer will remove the name ofSeller, and all variations thereof, from all of the Assets.

 

**6.11.****          ****Consents And Contract Matters.** Seller will use its reasonable good faith efforts to obtain all requiredConsents to consummate the transactions contemplated in this PSA prior to theClosing Date, including making all necessary filings, notifications, andregistrations with all third parties, including Governmental Authoritiesnecessary for the transfer of the Assets, except for Consents from GovernmentalAuthorities customarily obtained after Closing. If Seller is unable to obtain any Consent with respect to any Asset (a **“Non-Assigned Asset”**), such Non-Assigned Asset will be heldby Seller for the benefit of Buyer after the Closing for its term such that (A) Sellerwill provide Buyer with the economic benefits of such Contract and Buyer willbear the economic burdens of such Contract until or unless such Consent isreceived and (B) Buyer will be entitled to enforce at its sole cost andexpense, any and all rights of Seller against a third party with respect tosuch Non-Assigned Asset; *provided that*,Seller hereby constitutes and appoints, effective as of the Closing Date, Buyerand its successors and assigns as the true and lawful attorney of Seller withfull power of substitution in the name of Buyer, or in the name of Seller butfor the benefit of Buyer, to institute and prosecute all proceedings whichBuyer may in its sole discretion deem proper in order to assert or enforce anyright, title, or interest in, to, or under the Non-Assigned Assets or takeother actions reasonably necessary to obtain the benefits of such Non-AssignedAssets.  Buyer will be entitled to retainfor Buyer’s own account any amounts collected pursuant to the foregoingpowers.  Seller will promptly pay toBuyer when received all monies received by Seller under any Non-Assigned Assetor any claim or right or any benefit arising thereunder.

 

**6.12.****          ****Shareholders’ Meeting/Vote.**

 

**(A)****      **Seller will, in accordance with applicable law, as soon as practicablefollowing the execution and delivery of the PSA by the Parties:

 

**(1)****        **duly call, give notice of, convene and holdan annual or special meeting of its shareholders (the “Shareholders’ Meeting”)for the purpose of considering and taking action upon the PSA, which meetingwill take place no later than twenty (20) days after the mailing of a proxystatement (the **“Proxy Statement”**) which will beprepared in accordance with rules of the Securities and ExchangeCommission (the **“SEC”**) set forth in Regulation 14Apromulgated under the Securities Exchange Act of 1934, as amended (the **“Exchange Act”**);

 

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**(2)****        **include in the Proxy Statement, therecommendation of its Board of Directors that shareholders of Seller vote infavor of the approval and adoption of this PSA and the transactionscontemplated hereby; and

 

**(3)****        **(a) obtain and furnish the informationrequired to be included by it in the Proxy Statement, file a preliminary ProxyStatement with the SEC and pay any required fees, and, after consultation withBuyer, respond promptly to any comments made by the SEC with respect to theProxy Statement and any preliminary version thereof, file a definitive ProxyStatement with the SEC as soon as possible following notification by the SEC toSeller that the SEC has no comments or no further comments on the ProxyStatement, and cause the Proxy Statement to be mailed to its shareholderswithin five (5) business days following the filing of a definitive ProxyStatement with the SEC and (b) obtain the necessary approvals by itsshareholders of this PSA and the transactions contemplated hereby.

 

**(B)****      **The provisions of ***Section 6.12(A) ***notwithstanding,Seller may, alternatively to convening a Shareholders’ Meeting, use its bestefforts to seek to obtain shareholders’ approval of the PSA and the transactioncontemplated hereby, by written action of the holders of a majority of thevoting stock of Seller in accordance with the Delaware General CorporationLaw.  In that regard:

 

**(1)****        **Instead of preparing and filing a ProxyStatement, Seller will prepare an information statement (**“InformationStatement”**) in accordance with the rules of the SEC set forthin Regulation 14C promulgated under the Exchange Act.

 

**(2)****        **Seller will (a) obtain and furnish theinformation required to be included in the Information Statement, file apreliminary Information Statement with the SEC and pay any required fees, andafter consultation with Buyer, respond promptly to any comments made by the SECwith respect to the Information Statement and preliminary version thereof, filea definitive Information Statement with the SEC as soon as possible followingnotification by the SEC to Seller that the SEC has no comments or no furthercomments on the Information Statement, and cause the Information Statement tobe mailed to its shareholders within five (5) business days following thefiling of a definitive Information Statement with the SEC, and (b) obtainthe necessary written consent of its shareholders holding a majority of itsvoting stock of this PSA and the transactions contemplated hereby.

 

**6.13.****           FurtherAssurances.**  Each Party will use its reasonable efforts totake all actions and do all things necessary, proper, or advisable to effectthe transactions contemplated by this PSA, whether before or after Closing.

 

**6.14.****          ****Post-Closing Adjustment ForDefects.**  For a period of six (6) months afterClosing, Buyer will continue to ascertain the status of any Defects.  If Buyer finds Defects (individually or inthe aggregate) exceeding $22,400, on or before the end of six (6) monthsafter Closing, Buyer will submit to Seller a report detailing all such Defectsin excess of such aggregate $22,400 amount. For purposes of the foregoing, the value of all Title Defects (and notjust the value of all Title Defects exceeding $10,000), will be used in determiningwhether or not the $22,400 threshold has been exceeded.  Seller will have six (6) months from thedate that such report is submitted to it to attempt to cure such Defects at itssole cost and expense.  In the eventSeller fails to cure the Defects within such six (6) month period, thenSeller agrees at the end of such six (6) month period to pay Buyer forsuch Title Defects at the agreed rate of $60.00 per rod and for Defects otherthan Title Defects, Seller will pay Buyer the value associated with thenegative financial impact of such Defects to the Assets as determined by Buyerin its reasonable good faith judgment.   Ifthe Parties are unable to agree upon the value or existence of Defects(individually or in the aggregate) within fifteen (15) days after Buyernotifies Seller of the value of such Defects then such dispute(s) will beresolved by a mutually agreeable nationally recognized certified publicaccounting firm, engineering or environmental firm **(“ReviewingFirm”)**as applicable depending upon the nature of the Defect.  If the Parties are unable to agree on thedesignation of a Reviewing Firm within twenty (20) days after Buyer notifiesSeller of the value of the Defects, then Buyer and Seller will each designate anationally recognized certified public accounting firm, engineering, orenvironmental firm (each a **“Designating Firm”**)as applicable depending upon the nature of the Defect within the next five (5) dayperiod, and such Designating Firms will designate the Reviewing Firm within ten(10) days after the date on which the last Designating Firm isappointed.  The Parties will makeavailable to the Reviewing Firm all work papers and all other information andmaterial in their possession relating to the matters in dispute regarding the Defects.  The Reviewing Firm will be instructed by theParties to use its best efforts

 

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to deliver its determination to the Parties withinten (10) days and as promptly as practicable after submission of thedispute to the Reviewing Firm.  Thedetermination of the Reviewing Firm will be final and binding on the Parties.  Each Party will bear its own expenses and thefees and expenses of its own representatives and experts, including withoutlimitation, the Designating Firms chosen by such Party, in connection with thepreparation, review, dispute (if any), and final determination.  In the event the Reviewing Firm agrees in allmaterial respects with the computation presented by either Seller or Buyer, thefees charged by the Reviewing Firm will be paid by the other.  In the event the Reviewing Firm does notagree in all material respects with the computations presented by the Seller orBuyer, the fees of the Reviewing Firm will be paid equally by Seller and Buyer.

 

**7.****             ****TRANSITION AND EMPLOYEE MATTERS**.

 

**7.1.****                 ****Transition****.**  Seller agrees to cooperate with Buyer so asto insure a smooth transition of the transfer of the Assets to Buyer.  At Buyer’s request, Seller will (A) contactSeller’s suppliers and/or customers to inform them of the sale of the Assetsand to reasonably encourage them to continue to transact business with Buyerwhich will include Seller informing Buyer in detail of the status of Seller’srelationships and transactions with and Seller introducing Buyer to itscontacts at:   Air and Chemical Products,Inc;  Regency Gas Services; Colorado InterstateGas Company (and/or its relevant its affiliates); El Paso Corporation; NexusEnergy Company; Linde Gas, LLC; Tenaska Marketing Ventures; the Bureau of LandManagement, and any area producers with which Seller has a relationship and (B) reasonablyencourage Employees to continue working for Buyer as their new employer.

 

**7.2.****                  Offers Of Employment****.**  Uponexecution of this PSA, Buyer may convey offers of employment to the Employeeswhom Buyer desires to employ.  Buyeranticipates that it will make offers to all Employees (if they comply withBuyer’s policies and procedures as outlined in Buyer’s Employee Handbook).  Buyer may offer employment to each Employeeon terms substantially similar terms as such Employee now receives fromSeller.  Seller will not make anycompeting offer of continued employment to any Employee and will not otherwiseinterfere with Buyer’s efforts to employ any Employee or discourage anyEmployee from accepting Buyer’s offer of employment.  Each Employee who accepts Buyer’s offer ofemployment and commences and/or maintains employment with Buyer is referred toas a **“Transferred Employee”**, and the date onwhich each such Transferred Employee commences employment with Buyer isreferred to as the **“Transfer Date”**,which Transfer Date will not be before the Closing Date.  For a period of two (2) years from theClosing Date, neither Seller nor any of its Affiliates will solicit employmentof any Transferred Employee. Notwithstanding anything to the contrary contained herein, each TransferredEmployee will be employed by Buyer on an at-will basis and nothing willprohibit Buyer from terminating such employment at any time.

 

**7.3.****                  Benefits****.**  Buyerwill permit each Transferred Employee to participate, on the same basis thatsimilarly situated employees of Buyer participate, in the employee benefit andcompensation plans, policies, practices, arrangements, and programs regularlymade available to the employees of Buyer which Buyer currently anticipates willbe on substantially similar or better terms as the Employees now receive fromSeller.  Buyer will credit the years ofservice with Seller prior to the Closing by any Transferred Employee as servicewith Buyer for purposes of vesting and participating in such plans, policies,practices, arrangements, and programs.

 

**7.4.****                  Retained EmployeeLiabilities****.** Seller will be responsible for all liabilities for its employees oragents, including compensation and benefits accrued or otherwise arising out ofservices rendered prior to Closing or arising by reason of actual,constructive, or deemed termination at Closing. On the Closing Date, Seller will pay all of its respective employeesperforming services in relation to the Assets compensation or accrued benefits,including but not limited to vacation, without any increase in the PurchasePrice or reimbursement by Buyer.  Buyeris assuming no obligation or liabilities of Seller under any employee benefitplan or any oral or written contract of employment.

 

**8.****              CONDITIONS TO CLOSING****.**

 

**8.1.****                  Seller’s Conditions****.**  Theobligations of Seller at Closing are subject to the satisfaction at or prior toClosing of the following conditions, which may be waived, in whole or in part,in writing by Seller:

 

**(A)****      **All representations and warranties of Buyer contained in this PSA willbe made again at Closing and will be true and correct in all material respectsas of the Closing Date; and

 

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**(B)****      **Buyer has performed and satisfied in all material respects allcovenants and other obligations required by this PSA to be performed andsatisfied by Buyer prior to Closing; and

 

**(C)****      **Seller has received the Closing Amount in immediately available funds.

 

**8.2.****                  Buyer’s Conditions****. **The obligations ofBuyer at Closing are subject to the satisfaction prior to the Closing of thefollowing conditions, which may be waived, in whole or in part, in writing byBuyer:

 

**(A)****      **All representations and warranties of Seller contained in this PSA willbe made again at Closing and will be true and correct in all material respectsas of the Closing Date; and

 

**(B)****      **Seller has performed and satisfied in all material respects allcovenants and other obligations required by this PSA to be performed andsatisfied by Seller prior to Closing; and

 

**(C)****      **The Seller has received all Consents, except for Consents to assign anyof the Contracts, if Seller has complied with its covenants set forth in ***Section 6.11******(Consents And Contract Matters)***withrespect to such Consents to assign any of the Contracts that have not beenobtained at the Closing; and

 

**(D)****      **The Assets will not have been materially damaged, lost, or destroyedwhere the cost to repair or replace such Assets to the condition prior to suchdamage, loss, or destruction exceeds an amount equal to five percent (5%) ofthe Purchase Price (**“Catastrophic Occurrence”**).

 

**(E)****        **The preferential rights set forth in ***Section 4.18 (Preferential Rights)***willnot have been exercised.

 

**9.****              TERMINATION****.**

 

**9.1.****                  Termination Rights**.  ThisPSA may be terminated at any time prior to the Closing Date:

 

**(A)****      **By mutual written consent of Buyer and Seller;

 

**(B)****      **By either Seller or Buyer if:

 

**(1)****        **the Closing has not occurred by March 31,2006 (provided, however, that the right to terminate this PSA pursuant to thisclause will not be available to any Party whose breach of anyrepresentation or warranty or failure to perform any covenant or agreementunder this PSA has been the cause of or resulted in the failure of the Closingto occur on or before such date); or

 

**(2)****        **any Governmental Authority has issued anorder, decree or ruling or taken any other action permanently restraining,enjoining, or otherwise prohibiting the Closing and such order, decree, rulingor other action has become final and non-appealable (provided, however, thatthe right to terminate this PSA pursuant to this clause will not beavailable to any Party until such Party has used all reasonable efforts toremove such injunction, order, or decrees).

 

**(C)****      **By Buyer if there is a Catastrophic Occurrence.

 

**(D)****      **By Buyer or Seller, as applicable, as specifically permitted underother provisions of this PSA.

 

**9.2.****                  Effect Of Termination**.  Ifthis PSA is terminated by either Seller or Buyer pursuant to the provisions of ***Section 9.1***, then this PSA willbecome void, and there will be no further obligation on the part of any Party;provided, however, that a termination of this PSA will not relieve any Partyhereto from any liability for damages incurred as a result of a breach by suchParty of its representations, warranties, covenants, agreements, or otherobligations hereunder occurring prior to such termination.  If either Party terminates this PSA otherthan pursuant to the terms of ***Section 9.1***of this PSA or Seller terminates for any reason prior to March 31, 2006, topursue any type of transaction involving the acquisition by any person otherthan Buyer of any interest, direct or indirect, in the Assets, then theterminating Party will promptly pay the non-terminating Party (A) $2,000,000as liquidated damages plus (B) if terminating Party is Seller, then Sellerwill reimburse Buyer for those amounts that Buyer has directly paid to anythird parties for services and/or equipment required to be paid under the firstsentence of ***Section 6.1(B)(4)***;provided, that, in reference to Seller as terminating Party, (A) and (B) willnot exceed $5,000,000 in the aggregate.

 

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**10.****       INDEMNIFICATION****.**

 

**10.1.****         Indemnification By Buyer****.**  Buyerwill indemnify, defend, and hold harmless Seller, its Affiliates and theirrespective officers, directors, employees, agents, representatives, successors,and permitted assigns (collectively, **“Seller Indemnitees”**)from and against any and all claims, liabilities, losses, causes of actions,costs, and expenses (including, reasonable costs of defense and investigations,settlements, and reasonable attorneys’ fees, court costs, environmentalengineering fees, and also including any losses attributable to personal injuryor death or property damage) (**“Losses”**)asserted against, resulting from, imposed upon, or incurred by any of theSeller Indemnitees as a result of, or arising out of: (A) the AssumedLiabilities; (B) the breach of any of the representations, warranties,covenants, or agreements of Buyer contained in this PSA; (C) theownership, operation, maintenance, occupancy, use, or condition of the Assetson and after the Closing Date; or (D) any matters relating to the breachof Environmental Laws or the release of materials into the environment orprotection of the environment that occurs after the Closing Date; or (E) anyliability for Taxes (including interest, penalties, or fines related thereto)the responsibility for payment of which was assumed by Buyer pursuant to thisPSA (in each case, except for matters resulting from or arising out of a breachof Seller’s representations, warranties, covenants, or agreements contained inthis PSA).

 

**10.2.****         Indemnification****By****Seller****.** Seller will indemnify, defend, and hold harmless Buyer, its Affiliatesand their respective officers, directors, employees, agents, representatives,successors, and permitted assigns (collectively, **“BuyerIndemnitees”**) from and against all Losses asserted against,resulting from, imposed upon, or incurred by any of the Buyer Indemnitees as aresult of, or arising out of, (A) the Retained Liabilities; (B) thebreach of any of the representations, warranties, covenants, or agreements ofSeller contained in this PSA; (C) the ownership, operation, maintenance,occupancy, use, or condition of the Assets prior to the Closing Date; (D) anymatters relating to the breach of Environmental Laws or the release ofmaterials into the environment or protection of the environment prior to theClosing Date; or (E) any liability for Taxes (including interest,penalties, or fines related thereto) related to the Assets for the period priorto the Closing Date (in each case, except for matters resulting from or arisingout of a breach of Buyer’s representations, warranties, covenants, oragreements contained in this PSA).

 

**10.3.****          ****Limitations OnIndemnification. **Notwithstanding the foregoing, Seller willnot be obligated to provide any such indemnification for Losses pursuant toclaims under ***Section 10.2*** unless theaggregate amount that Buyer is entitled to recover in respect of all suchclaims exceeds $100,000 (**“Deductible”**),in which case Seller will be only be liable to the extent such amount exceedsthe Deductible.  The maximum aggregateobligation of Seller for Losses pursuant to claims under ***Section 10.2***will not exceed $8,100,000 (**“Maximum”**).

 

**10.4.****          ****Collateral Sources.**** **The amount of anyLosses for which indemnification is provided under ***Section 10.1***or ***10.2*** will be net of (A) anyamounts recovered (net of any applicable tax liability on such amounts) bySeller Indemnities or Buyer Indemnities pursuant to any indemnification by orindemnification agreement with any third party, if any;  (B) any insurance proceeds (net of anyincreased insurance premiums that are the result of the applicable claims)available as an offset against such Losses (and no right of subrogation willaccrue to any insurer or third party indemnitor under this PSA) (each person inclauses (A) and (B) is referred to as, a **“CollateralSource”**) and (C) an amount equal to the present value of thefederal, state, local and/or foreign tax benefit, if any, attributable to suchLosses.  If the amount to be netted underthis ***Section 10.4*** from any paymentrequired under ***Sections 10.1*** or ***10.2*** is determined after payment bythe Buyer or Seller indemnitor of any amount otherwise required to be paid to aBuyer Indemnitee or Seller Indemnitee pursuant to this ***Section 10***,then the Buyer Indemnitee, or Seller Indemnitee, as applicable, will repay toBuyer or Seller indemnitor, as applicable, promptly after such determination,any amount that Buyer or Seller indemnitor would not have had to pay pursuantto this ***Section 10*** had suchdetermination been made at the time of such payment.

 

**10.5.****           LimitationsOn Damages; Survival Of Representations****.**

 

**(A)****      **Survival Of Representations, Warranties,Covenants And Indemnities**.** The representations and warranties madepursuant to this PSA or any certificate or other document delivered by Sellerat Closing will survive Closing for a period of three (3) years followingthe Closing Date; *provided that* the representationsand warranties in ***Section 4.8******(Contracts)***, ***Section 4.9******(Properties)***, ***Section 4.10******(Environmental Matters And Permits)***,***Section 4.16******(Taxes)***, will survive for the termof the statute of

 

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limitations applicable to that subject matter andnot the applicable statute of limitations for the breach of this PSA.  The covenants and agreements of the Partieshereto will survive in accordance with their terms or, if no term is specified,indefinitely.  Representations,warranties, covenants, and agreements under this PSA will be of no further forceor effect after the expiration date specified above; except that there will beno such termination of any representation, warranty, covenant, or agreementregarding a bona fide claim asserted with respect to such representation,warranty, covenant, or agreement by either Seller or Buyer before such datepursuant to ***Section 10***.

 

**(B)****      **Liability Limitations**. **NOTWITHSTANDINGANYTHING TO THE CONTRARY STATED HEREIN, NEITHER BUYER NOR SELLER WILL BE LIABLEFOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OF THE SELLERINDEMNITEES OR THE BUYER INDEMNITEES, RESPECTIVELY ARISING OUT OF THIS PSAUNLESS SUCH DAMAGES ARE INCURRED BECAUSE OF A THIRD PARTY CLAIM WHICH RESULTSIN INDEMNIFICATION UNDER THIS PSA.

 

**10.6.****         Notice Of AssertedLiability; Opportunity To Defend****.**  All claims for indemnification under ***Section 10*** will be asserted andresolved pursuant to this ***Section 10.6***.Any Person claiming indemnification under this PSA is referred to as the **“Indemnified Party”** and any Person against whom such claimsare asserted is referred to as the **“Indemnifying Party”**.In the event any Losses are asserted against or sought to be collected from anIndemnified Party by a third party, said Indemnified Party will with reasonablepromptness provide to the Indemnifying Party a written notice of such claim specifyingin reasonable detail the basis for which indemnification is sought under thisPSA (**“Claim Notice”**). The Indemnifying Partywill have fifteen (15) days from the personal delivery or receipt of the ClaimNotice (**“Notice Period”**) to notify the IndemnifiedParty (A) whether or not it disputes the liability of the IndemnifyingParty to the Indemnified Party with respect to such Losses and (B) whetheror not it will, at the sole cost and expense of the Indemnifying Party,indemnify and defend the Indemnified Party against such Losses.  Any Indemnified Party is authorized prior toand during the Notice Period to file any motion, answer, or other pleading thatit deems necessary or appropriate to protect its interests or those of theIndemnifying Party (of which it will have given notice and opportunity tocomment to the Indemnifying Party) and not prejudicial to the IndemnifyingParty. If the Indemnifying Party notifies the Indemnified Party within theNotice Period that it will indemnify and defend the Indemnified Party againstsuch Losses, then the Indemnifying Party will defend all claims and proceedingswith respect to such Losses, and with counsel of its own choosing.  The Indemnifying Party will promptly settleor prosecute such claims and proceedings to a final conclusion. If theIndemnified Party desires to participate in, but not control, any such defenseor settlement, then it may do so at its sole cost and expense.  If requested by the Indemnifying Party, the IndemnifiedParty agrees to cooperate with the Indemnifying Party and its counsel incontesting any such Losses. If the Indemnifying Party does not notify theIndemnified Party within fifteen (15) days of receipt of the Claim Notice thatit will, at its sole cost and expense, indemnify and defend the IndemnifiedParty against such Losses, then the Indemnified Party will have the right, atthe Indemnifying Party’s sole cost and expense, to contest, defend, compromise,or settle such Losses, but will not thereby waive any right to indemnity underthis PSA.  The Indemnifying Party willnot, except with the written consent of the Indemnified Party (1) enterinto any settlement or compromise that does not include as an unconditionalterm of such settlement or compromise the giving by the Person asserting theLosses of an unconditional release to all Indemnified Parties from allliability with respect to such Losses or (2) consent to entry of judgmentwith respect to such Losses.  If the claimfor indemnification under ***Section 10***does not involve a third party claim, then the Indemnified Party will assertsuch claim in writing to the Indemnifying Party, specifying in reasonabledetail, the basis for such claim and Indemnifying Party will promptly indemnifythe Indemnified Party for such Losses.

 

**10.7.****           ExclusiveRemedy****.**  Asbetween the Buyer Indemnitees and the Seller Indemnitees the rights andobligations set forth in this ***Section 10***willbe the exclusive rights and obligations with respect to this PSA, the eventsgiving rise to this PSA, and the transactions provided for herein orcontemplated hereby or thereby, except in the event of fraud.

 

**10.8.****         NEGLIGENCE AND STRICTLIABILITY WAIVER****.** WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE INDEMNIFICATIONOBLIGATIONS SET FORTH IN THIS PSA, AN INDEMNIFIED PARTY WILL BE ENTITLED TOINDEMNIFICATION IN ACCORDANCE WITH THE TERMS OF THIS PSA, REGARDLESS OF WHETHERTHE LOSS OR CLAIM GIVING RISE TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULTOF THE SOLE, CONCURRENT, OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, OR VIOLATIONOF ANY LAW OF OR BY SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.

 

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**11.****       MISCELLANEOUS****. **

 

**11.1.****                     ApplicableLaw****.**  ThisPSA will be governed by and construed in accordance with the domestic laws of theState of Oklahoma without giving effect to any choice or conflict of lawprovision or rule (whether of the State of Oklahoma or any otherjurisdiction) that would cause the application of the laws of any jurisdictionother than the State of Oklahoma.

 

**11.2.****                     Expenses****.**  EachParty will be solely responsible for all expenses, including due diligenceexpenses, incurred by it in connection with the negotiation and execution ofthis PSA and the consummation of the transaction contemplated hereunder, andneither Party will be entitled to any reimbursement for such expenses from theother Party hereto. Without limiting the generality of the foregoing, Buyerwill be solely responsible for all recording fees relating to the conveyancesto be delivered pursuant hereto.

 

**11.3.****                     IndependentInvestigation****.**  Buyerrepresents and acknowledges that it is knowledgeable of the business ofoperating pipelines and that it has had access to the Assets, the officers andemployees of Seller, and the Records of Seller relating to the Assets and inmaking the decision to enter into this PSA and consummate the transactionscontemplated hereby, Buyer has relied on the basis of its own independent duediligence investigation of the Assets and upon the representations, warranties,and covenants of Seller in this PSA.

 

**11.4.****                     DisclaimerRegarding Assets****.** Except as otherwise provided in this PSA, BUYER ACKNOWLEDGES THAT SELLERHAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANYREPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE PHYSICALCONDITION OF ANY PART OF THE ASSETS (INCLUDING, WITHOUT LIMITATION, (A) ANYIMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY; (B) ANY IMPLIED OR EXPRESSWARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (C) ANY IMPLIED OR EXPRESSWARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS; AND (D) ANYIMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT)IT BEING THE EXPRESS INTENTION OF BUYER AND SELLER THAT (EXCEPT TO THE EXTENTEXPRESSLY PROVIDED IN THIS PSA) THE ASSETS WILL BE ACCEPTED BY BUYER AS IS ANDIN THEIR PRESENT CONDITION AND STATE OF REPAIR; AND BUYER REPRESENTS TO SELLERTHAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO THEASSETS AS BUYER DEEMS APPROPRIATE AND, SUBJECT TO THE TERMS OF THIS PSA, BUYERWILL ACCEPT THE ASSETS AS IS, IN THEIR PRESENT CONDITION AND STATE OF REPAIR.THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.

 

**11.5.****                     NoThird-Party Beneficiaries****.** Nothing in this PSA will provide any benefit to any third party orentitle any third party to any claim, cause of action, remedy, or right of anykind, it being the intent of the Parties that this PSA will not be construed asa third-party beneficiary contract; provided, however, that the indemnificationprovisions in ***Section 10*** will inure tothe benefit of the Buyer Indemnitees and the Seller Indemnitees as providedtherein.

 

**11.6.****           Waiver****.** Except as expressly provided in this PSA, neither the failure nor anydelay on the part of any Party hereto in exercising any right, power, or remedyhereunder will operate as a waiver thereof, of any other right, power, orremedy; nor will any single or partial exercise of any right, power or remedypreclude any further or other exercise thereof, or the exercise of any otherright, power, or remedy. Except as expressly provided in this PSA, no waiver ofany of the provisions of this PSA will be valid unless it is in writing andsigned by the Party against whom it is sought to be enforced.

 

**11.7.****                     EntireAgreement, Amendment****.**  ThisPSA, the Schedules and Exhibits attached to this PSA, each of which is deemedto be a part of this PSA, and any agreements, instruments, or documentsexecuted and delivered by the Parties pursuant to this PSA, constitute theentire agreement and understanding between the Parties, and all previousundertakings, negotiations, and agreements between the Parties regarding thesubject matter hereof are merged into this PSA. This PSA may not be modifiedorally, but only by an agreement in writing signed by Buyer and Seller.

 

**11.8.****                     Notices****.**  Anyand all notices or other communications required or permitted under this PSAwill be given in writing and delivered in person or sent by United Statescertified or registered mail, postage prepaid,

 

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return receipt requested, or by overnight expressmail, or by telex, facsimile or telecopy to the address of such Party set forthbelow. Any such notice will be effective upon receipt or three (3) daysafter placed in the mail, whichever is earlier.

 

 
| If to Buyer:  |   |                                                                                                                      |
|---------------|--------|---------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                      |
| By Mail:      |   | Midstream Energy Services, LLC                                                                                            |
|          |   | 8801 South Yale Avenue, Suite 350                                                                                    |
| Attention:    |   | Tulsa, Oklahoma 74137                                                                                                     |
|          |   | Jim Lind                                                                                                                  |
|          |   |                                                                                                                      |
| Phone:        |   | 918.388.6900                                                                                                              |
| Fax:          |   | 918.388.6950                                                                                                              |
|          |   |                                                                                                                      |
| If to Seller: |   |                                                                                                                      |
|          |   |                                                                                                                      |
| By Mail:      |   | Nathaniel Energy Corporation, Nathaniel Energy Oklahoma Holdings  Corporation  and MCNIC  Rodeo Gathering, Inc. |
|          |   | 8001 South InterPort Blvd., Suite 260                                                                                |
|          |   | Englewood, Colorado 80112                                                                                                 |
| Attention:    |   | George Cretecos                                                                                                           |
| Phone:        |   | 303.690.8300                                                                                                              |
| Fax:          |   | 303.539.0741                                                                                                              |

 

Any Party may, by notice so delivered, change itsaddress for notice purposes hereunder.

 

**11.9.****           NoAssignment****.**  ThisPSA may not be assigned or transferred by Seller in anyway whatsoever exceptwith prior written consent of Buyer, which consent will not be unreasonablywithheld.  Subject to the precedingsentence, this PSA will be binding on and inure to the benefit of the Partieshereto and their successors and assigns.

 

**11.10.****              Severability****.**  Ifany provision of this PSA is invalid, illegal, or unenforceable, the balance ofthis PSA will remain in full force and effect.

 

**11.11.****              PressRelease; Publicity****.** Seller and Buyer will consult with each other with regard to allpublicity and other releases concerning this PSA and the transactionscontemplated hereby and, except as required by applicable law or the applicablerules or regulations of any Governmental Authority or stock exchange, noParty will issue any press release or other publicity without the prior writtenconsent of the other Party, which will not be unreasonably withheld.

 

**11.12.****              Construction****.**  Any section headingsin this PSA are for convenience of reference only, and will be given no effectin the construction or interpretation of this PSA or any provisions thereof. Noprovision of this PSA will be interpreted in favor of, or against, any Party byreason of the extent to which any such Party or its counsel participated in thedrafting thereof.

 

**11.13.****              Counterparts****.** This PSA may be executed in two (2) ormore counterparts, each of which will be deemed an original, and which togetherwill constitute but one and the same instrument.

 

**11.14.****              TimeIs Of The Essence****.** It is understood and agreed that time is ofthe essence in this PSA.

 

**11.15.****              Confidentiality****.**  Fromthe date of the Agreement to the Closing, the Parties acknowledge and agreethat the Confidentiality Agreement dated June 7, 2005, between Seller andBuyer will remain in full force and effect according to the terms thereof andafter the Closing, such Confidentiality Agreement will be null and void and ofno further force and effect. Furthermore, after Closing, Seller will not, andwill not permit any of its Affiliates to, disclose or provide to any otherPerson any non-public or confidential information concerning the Assets, exceptas required to be disclosed to comply with any applicable Law.

 

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**SIGNATURE PAGE**

TO PURCHASE AND SALE AGREEMENT

BETWEEN NATHANIEL ENERGY CORPORATION,

NATHANIEL ENERGY OKLAHOMA HOLDINGSCORPORATION,

MCNIC RODEO GATHERING, INC.,

AND MIDSTREAM ENERGY SERVICES, LLC

 

INWITNESS WHEREOF, the Parties have duly executed and delivered this PSA as ofthe date first written above.

 

 
| **NATHANIEL ENERGY CORPORATION**                   |
|----------------------------------------------------|
| ** **                                         |
| By:                                                | /s/ George A. Cretecos |   |
| Name:                                              | George A. Cretecos |
| Title:                                             | Chief Executive Officer |
|                                               |   |
|                                               |   |
| **NATHANIEL ENERGY OKLAHOMA HOLDINGS CORPORATION** |
|                                               |   |
|                                               |   |
| By:                                                | /s/ George A. Cretecos |   |
| Name:                                              | George A. Cretecos |
| Title:                                             | Chief Executive Officer |
|                                               |   |
|                                               |   |
| **MCNIC RODEO GATHERING, INC.**                    |
|                                               |   |
|                                               |   |
| By:                                                | /s/ George A. Cretecos |   |
| Name:                                              | George A. Cretecos |
| Title:                                             | Chief Executive Officer |
|                                               |   |
|                                               |   |
| **MIDSTREAM ENERGY SERVICES, LLC**                 |
| ** **                                         |
|                                               |   |
| By:                                                | /s/ James E. Lind |   |
| Name:                                              | James E. Lind |
| Title:                                             | President |
|                                                    |  |  |  |  |

 

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**EXHIBIT A**

**To Purchase And Sale Agreement**

**Between Nathaniel EnergyCorporation, Nathaniel Energy Oklahoma Holdings Corporation,**

**And Midstream Energy Services,LLC**

 

**DEFINITIONS**

 

Thefollowing terms wherever used in this PSA will have the following meanings:

 

1.               **“Affiliate”** means, with respect to any person, anyperson which, directly or indirectly controls, is controlled by or is undercommon control with such person.  Theterm “control” (including the terms “controlled by” and “under common controlwith”) as used in the preceding sentence means the possession, directly orindirectly, of the power to direct or cause the direction of management andpolicies of a person, whether through the ownership of voting securities, bycontract, or otherwise.

 

2.               **“Code”** means the Internal Revenue Code of 1986, asamended.

 

3.               **“Defects”** means (a) a missing Surface Right or aLien (except for a Permitted Lien) upon any Surface Right (collectively, **“Title Defects”**) only if the value of such Title Defectsexceeds $10,000 in the aggregate which Seller will cure on or before Closingand if Seller fails to cure for which Seller will pay to Buyer $60.00 per rodfor each affected Surface Right or missing Surface Right at Closing and (b) thenegative financial impact as determined by Buyer in reasonable good faithresulting from the actual operations of the Assets not being in conformancewith either the information reflected in the Financial Statements or any of theCritical Assumptions (D, E, F, G, or H) in Section 6 of that certain OfferLetter from Midstream to NEOHC dated July 7, 2005.

 

4.               **“EnvironmentalLaws”** as used herein meansall federal, state and local laws (including common law), statutes, ordinances,permits, orders, judgments, rules, regulations, decrees, injunctions, permitsor governmental restrictions or requirements relating to (a) the controlof any pollutant,  potential pollutant,or Hazardous Substance, the protection of the air, water, land or the environment,or the prevention of environmental damage, (b) solid, gaseous or liquidwaste generation, handling, treatment, storage, disposal or transportation orany toxic, radioactive, ignitable, corrosive, reactive or otherwise HazardousSubstance, waste or chemical, or (c) exposure to hazardous, toxic,explosive, corrosive or other substances alleged to be harmful or otherwiserelating to the effect of the environment on human health and safety.

 

5.               **“****GAAP****”** means generally accepted accountingprinciples, as recognized by the U.S. Financial Accounting Standards Board (orany generally recognized successor).

 

6.               **“Governmental Authority****”** means anynational, state, county or municipal government, domestic or foreign, anyagency, board, bureau, commission, court, department, or other instrumentalityof any such government, or any arbitrator in any case that has jurisdictionover the Assets or the Parties.

 

7.               **“HazardousSubstance”** means anypollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable,corrosive, reactive or otherwise hazardous substance, waste or material, or anysubstance, waste or material having any constituent elements displaying any ofthe foregoing characteristics, including petroleum, its derivatives,by-products and other hydrocarbons, and any substance, waste or materialregulated under any Environmental Law.

 

8.               **“Including”** whether capitalized or not, means including,without limitation.

 

9.               **“Law”****meansany and all applicable common law and any statute, ordinance, code, law, rule,regulation, order, judgment, enacted, adopted, or promulgated by anyGovernmental Authority, or any agreement entered into between Seller and anyGovernmental Authority in force and effect on the execution hereof or on theClosing Date (including any such requirement regarding building, zoning,subdivision, land use or other similar legal requirements).

 

10.         **“Lien”** means, with respect to any Asset, anymortgage, lien, pledge, charge, security interest, encumbrance, rights of avendor under any title retention or conditional sale agreement, or lease orother similar arrangement in respect of the Assets

 

11.         **“MaterialAdverse Effect”** means anyadverse change or condition with respect to the use, ownership, operation,property, or liabilities (financial or otherwise) of the Assets; *provided, however*, that any change or changes in or causedby the following will not be deemed to constitute a Material Adverse Effect: (A) thedepletion of reserves in the ordinary course of business; or (B) generaleconomic conditions.

 

12.         **“Permits”** mean the permits, licenses, variances,exemptions, orders, franchises, approvals, and authorizations of allGovernmental Authorities necessary for the lawful ownership and/or operation ofthe Assets.

 

13.         **“PermittedLiens”** means any of thefollowing: (a) any liens for Taxes not yet due and payable and for whichSeller is responsible; (b) any obligations or duties reserved to or vestedin any Governmental Authority to regulate any Asset under all applicable Laws; (c) allrights to consent by, required notices to, filings with or other actions byGovernmental Authorities in connection with the sale or conveyance of anyAssets to the extent such consents are customarily obtained after the Closing; (d) anyrequired Consents to

 

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assignment and similar agreements and obligations with respect towhich, prior to the Closing: (i) waivers or consents have been obtainedfrom the appropriate party, (ii) the applicable period of time forasserting such rights has expired without any exercise of such rights, or (iii) arrangementsreasonably satisfactory to Buyer have been made by the parties to allow Buyerto receive substantially the same economic benefits as if all such waivers andconsents had been obtained; (e) easements, rights of way, servitudes,permits, surface leases and other similar rights with respect to surfaceoperations, pipelines, grazing, canals, ditches, reservoirs, or the like, andthe conditions, covenants or other restrictions found therein and easements forstreets, alleys, highways, pipelines, telephone lines, power lines, railwaysand other easements and rights of way on, over or in respect of any of theAssets, so long as individually or in the aggregate they are not such as tomaterially interfere with the ownership or operation of any of the Assets; (f) materialmen’s,mechanics’, repairmen’s, employees’, contractors’, operators’, and othersimilar liens or charges arising in the ordinary course of business incidentalto construction, maintenance or operation of any of the Assets which have notyet become due and payable.

 

14.         **“Person”** whether capitalized or not, means anynatural person, corporation, limited liability company, partnership, trust,estate, association or other entity or organization.

 

15.         “**Responsible Officer**” means, with respect toany entity, the Chief Executive Officer, the Chief Operating Officer, thePresident, any Director, or the Executive Vice President of such entity.

 

16.         **“Tax”** means (a) any tax, governmental fee orother like assessment or charge of any kind whatsoever (including, but notlimited to, withholding on amounts paid to or by any Person), together with anyinterest, penalty, addition to tax or additional amount imposed by anyGovernmental Authority (a “**Taxing Authority**”)responsible for the imposition of any such tax (domestic or foreign), or (b) liabilityfor the payment of any amounts of the type described above in (a) byeither Law or as a result of being party to any agreement or any express orimplied obligation to indemnify any other Person.

 

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| **Term**                              | ** ** | **Section**       | ** ** | **Page**          |
|---------------------------------------|------------|-------------------|------------|-------------------|
|                                  |       |              |       |              |
| Adjusted Purchase Price               |       | 2.1               |       | Page 2       |
| Allocated Values                      |       | 2.5               |       | Page 3       |
| AIR Project                           |       | 6.1               |       | Page 8       |
| Assets                                |       | 1.1               |       | Page 1       |
| Assumed Liabilities                   |       | 3.2               |       | Page 3       |
| Buyer                                 |       | Preamble          |       | Page 1       |
| Buyer Indemnitees                     |       | 10.2              |       | Page 14      |
| Buyer Party                           |       | 6.3               |       | Page 9       |
| Catastrophic Occurrence               |       | 8.2               |       | Page 13      |
| Claim Notice                          |       | 10.4              |       | Page 15      |
| Closing                               |       | 3.1               |       | Page 3       |
| Closing Amount                        |       | 2.3               |       | Page 2       |
| Closing Date                          |       | 3.1               |       | Page 3       |
| Closing Statements                    |       | 2.3               |       | Page 2       |
| Collateral Source                     |       | 10.4              |       | Page 14      |
| Consents                              |       | 4.8               |       | Page 5       |
| Contracts                             |       | 4.8               |       | Page 5       |
| Deductible                            |       | 10.3              |       | Page 14      |
| Designating Accountant                |       | 2.4               |       | Page 3       |
| Designating Firm                      |       | 6.14              |       | Page 12      |
| Effective Time                        |       | 1.1               |       | Page 1       |
| Employees                             |       | 4.14              |       | Page 7       |
| Exchange Act                          |       | 6.12              |       | Page 11      |
| Final Purchase Price                  |       | 2.4               |       | Page 3       |
| Facilities                            |       | Schedule 1.1 |       | Schedule 1.1 |
| Final Settlement Date                 |       | 2.4               |       | Page 2       |
| Final Settlement Statement            |       | 2.4               |       | Page 2       |
| Financial Statements                  |       | 4.11              |       | Page 6       |
| Gas Imbalances                        |       | 2.2               |       | Page 1       |
| Indemnified Party                     |       | 10.4              |       | Page 15      |
| Indemnifying Party                    |       | 10.4              |       | Page 15      |
| Information Statement                 |       | 6.12              |       | Page 11      |
| Keyes Gathering System and Gas Plants |       | Schedule 1.1 |       | Schedule 1.1 |
| Keyes Helium Company                  |       | 4.7               |       | Page 5       |
| Keyes Helium Company Contracts        |       | Schedule 1.1 |       | Schedule 1.1 |
| Keyes Helium Plant                    |       | Schedule 1.1 |       | Schedule 1.1 |
| Keyes Interests                       |       | 4.7               |       | Page 5       |
| Lakin Pipeline                        |       | Schedule 1.1 |       | Schedule 1.1 |
| Losses                                |       | 10.1              |       | Page 14      |
| Maximum                               |       | 10.3              |       | Page 14      |
| MCNIC                                 |       | Preamble          |       | Page 1       |
| Midstream                             |       | Preamble          |       | Page 1       |
| NEC                                   |       | Preamble          |       | Page 1       |
| NEOHC                                 |       | Preamble          |       | Page 1       |
| Non-Assigned Asset                    |       | 6.11              |       | Page 10      |
| Notice Period                         |       | 10.4              |       | Page 15      |
| NRU Projects                          |       | 6.1               |       | Page 8       |

 

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| ODEQ                           |   | 6.2               |   | Page 9       |
|--------------------------------|--------|-------------------|--------|-------------------|
| Parties                        |   | Preamble          |   | Page 1       |
| Party                          |   | Preamble          |   | Page 1       |
| Proxy Statement                |   | 6.12              |   | Page 11      |
| PSA                            |   | Preamble          |   | Page 1       |
| Purchase Price                 |   | 2.1               |   | Page 1       |
| Purchase Price Adjustments     |   | 2.2               |   | Page 2       |
| Real Property                  |   | Schedule 1.1 |   | Schedule 1.1 |
| Records                        |   | Schedule 1.1 |   | Schedule 1.1 |
| Retained Liabilities           |   | 3.2               |   | Page 3       |
| Reviewing Accountant           |   | 2.4               |   | Page 3       |
| Reviewing Firm                 |   | 6.14              |   | Page 12      |
| SEC                            |   | 6.12              |   | Page 11      |
| Seller                         |   | Preamble          |   | Page 1       |
| Seller Indemnitee              |   | 6.3               |   | Page 9       |
| Seller Indemnitees             |   | 10.1              |   | Page 14      |
| Shareholders’ Meeting     |   | 6.12              |   | Page 11      |
| Spelunker Gathering System     |   | Schedule 1.1 |   | Schedule 1.1 |
| Sturgis Compression Facilities |   | Schedule 1.1 |   | Schedule 1.1 |
| Surface Rights                 |   | Schedule 1.1 |   | Schedule 1.1 |
| Transfer Date                  |   | 7.2               |   | Page 12      |
| Transferred Employee           |   | 7.2               |   | Page 12      |
| Transition Services Agreement  |   | 3.3               |   | Page 4       |

 

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