EXHIBIT 10.3


 


PURCHASE
AND SALE AGREEMENT


 


BY AND BETWEEN


 


 


NATHANIEL ENERGY CORPORATION


 


NATHANIEL ENERGY OKLAHOMA
HOLDINGS CORPORATION


 


AND


 


MCNIC RODEO GATHERING, INC.


SELLER


 


AND


 


MIDSTREAM ENERGY SERVICES, LLC


BUYER


 


ENTERED INTO SEPTEMBER 30,
2005


 





















 


TABLE OF
CONTENTS


 


	
  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

  	
   

  



 





















 


	
   

  	
  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

  	
   

  



 





















 


	
   

  	
  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

  	
   

  



 





















 


	
  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

  



 





















 


PURCHASE AND SALE AGREEMENT


 


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


 


For
and in consideration of the premises and the mutual covenants and agreements
set 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, Seller
will sell, assign, transfer, convey, and deliver to Buyer, and Buyer will
purchase and acquire from Seller, the assets described on Schedule 1.1
(“Assets”).  Any assets which are not described on Schedule 1.1 will be excluded
from the sale described in this PSA.


 


2.              PURCHASE PRICE.


 


2.1.                  Purchase Price.  In
full consideration for the purchase of the Assets, Buyer agrees to pay an
aggregate purchase price to Seller of Sixteen Million Two Hundred Thousand
Dollars and no/100 ($16,200,000) (“Purchase Price”),
as adjusted at Closing pursuant to Section 2.2
(“Adjusted Purchase Price”), by means of
a completed Federal Funds wire transfer of immediately available funds to an
account designated by Seller.


 


2.2.                  Adjustments To Purchase
Price.  The
Purchase Price will be adjusted as follows:


 


(A)       Increased by


 


(1)         all capital expenditures reasonably paid or
incurred by Seller and approved by Buyer that are attributable to the Assets
and 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, and
other expenditures (but only to the extent expensed and not capitalized in
accordance with GAAP) reasonably and in the ordinary course of business paid by
Seller in accordance with this PSA that are directly related to the Assets from
the Effective Time until the Closing Date; and


 


(3)         all amounts owed to Seller by third parties
as of the Closing Date under the Contracts, including Gas Imbalances (as
defined in this Section 2.2(A)(3))
existing at the Closing Date, and for the amounts that Seller receives an
increase to the Purchase Price, the receivables and other rights attributable
to 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 dollars
and no/100 ($1,800,000) if a binding contract is entered into between CIG and
Buyer for nitrogen and/or air services beginning on or near January 1,
2007, with commercial terms that are substantially similar to the proposal sent
to CIG set forth in Exhibit D;
provided, that, if a binding contract is entered into between CIG and Buyer for
nitrogen and/or air services beginning on or near January 1, 2007, and the
commercial terms of such agreement differ from those set forth in Exhibit D such that there is a
negative impact to Buyer, then the Parties will negotiate in good faith to
proportionally reduce this one million eight hundred thousand dollar ($1,800,000)
adjustment to reasonably reflect such negative impact.


 





















 


(B)       Decreased by


 


(1)         an amount equal to the costs, expenses, and
other expenditures (whether capitalized or expensed) relating to the Assets
that are unpaid as of the Closing Date and assessed for or attributable to
periods of time prior to the Closing Date regardless of how such costs,
expenses, and other expenditures are calculated, provided that, to the extent
the actual amounts cannot be determined prior to the Closing, a reasonable
estimate of such costs, expenses, and other expenditures will be used (and for
any such costs, expenses, or other expenditures that Buyer receives a decrease
to the Purchase Price, Buyer will assume the liability and responsibility for
payment thereof at Closing to the extent of such downward adjustment);


 


(2)         all amounts owed by Seller to third parties
as of the Closing Date under the Contracts, including Gas Imbalances existing
at the Closing Date, and for the amounts that Buyer receives a downward
adjustment to the Purchase Price, Buyer will assume the liability and
responsibility 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 the
Purchased Assets for all periods of time from and after, or attributable to the
periods of time from and after, the Effective Time.


 


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


 


(D)       Notwithstanding any other provision of this Agreement, (i) in no
event will there be a duplication of adjustments to the Purchase Price which
would result in a specific amount being double counted; (ii) the Purchase
Price will not be increased pursuant to Section 2.2(A) (1),
(2) or (3) by
any amount which is paid by Buyer; and (iii) the Purchase Price will not
be decreased pursuant to Section 2.2(B) (1) or
(2) by any amount paid by
Seller.


 


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


 


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


 


2.4.                  Final
Settlement.


 


(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 settlement
statement (“Final Settlement Statement”)
setting forth each Purchase Price Adjustment that was not finally determined as
of the Closing and showing the calculation of such adjustment and the resulting
final purchase price (“Final Purchase Price”).  As soon as practicable after receipt of
Seller’s proposed Final Settlement Statement, but on or before fifteen (15)
days after receipt of Seller’s proposed Final Settlement Statement, Buyer will
deliver to Seller a written report, containing any changes that Buyer proposes
to make to the Final Settlement Statement. 
The Parties will endeavor to agree with respect to the changes proposed
by Buyer, if any, no later than ten (10) days after receipt by Seller of
Buyer’s comments to the proposed Final Settlement Statement.  The date upon which such agreement is reached
or 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 will
pay Seller the amount of such difference. 
If the Final Purchase Price is less than the Closing Amount, Seller will
pay to Buyer the amount of such difference. 
Any payment(s) by Buyer or Seller will be by wire transfer in
immediately available funds.  Any such
payment(s) will be made within five (5) days of the Final Settlement Date.


 





















 


(C)       If the Parties are unable to resolve disputes concerning the Final
Settlement Statement or Final Purchase Price on or before thirty (30) days
after the Final Settlement Statement is received by Buyer, such disputes will
be resolved by a mutually agreeable nationally recognized certified public
accounting firm (“Reviewing Accountant”).  If the Parties are unable to agree on the
designation of a Reviewing Accountant within forty five (45) days after the
Final Settlement Statement is received by the Buyer, the Buyer and Seller will
each designate a nationally recognized certified public accounting firm (each a
“Designating Accountant”) within such forty five (45) day period, and such
Designating Accountants will designate the Reviewing Accountant within fifteen
(15) days after the date on which the last Designating Accountant is
appointed.  The Parties will make
available to the Reviewing Accountant all work papers and all other information
and material in their possession relating to the matters in dispute regarding
the Final Settlement Statement and the Final Purchase Price.  The Reviewing Accountant will be instructed
by the Parties to use its best efforts to deliver its determination to the
Parties as promptly as practicable after submission of the dispute to the
Reviewing Accountant.  The determination
of the Reviewing Accountant will be final and binding on the Parties; and the
Final Settlement Statement and the Final Purchase Price as modified (if at all)
by agreement of the Parties or by the Reviewing Accounting in accordance with
this Section 2.4 will be the Final
Settlement Statement and the Final Purchase Price.


 


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


 


2.5.                  Allocated Values.  The
Parties agree to allocate the Adjusted Purchase Price among the Assets for all
purposes (including financial accounting and tax purposes) in the manner set
forth on Schedule 2.5 (“Allocated Values”). 
Seller and Buyer each agree that they will not take any position
inconsistent with such allocation in preparing all tax returns and tax reports
to governmental authorities or otherwise. 
The Parties will timely furnish each other their tax identification
numbers, non-foreign affidavits and other reasonably requested tax compliance
information.  


 


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 consummation
of the transactions contemplated by this PSA (“Closing”)
will take place at 10:00 a.m. in the offices of Seller at 8801 South
InterPort 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 date
that the Parties agree to in writing (“Closing Date”).  


 


3.2.                  Assumed Liabilities.  Buyer
will assume the liabilities of Seller under the express terms of the Contracts
after the Closing Date and Buyer will assume liabilities related to the Assets
that occur and accrue as the result of Buyer’s action or omission after the
Closing Date (“Assumed Liabilities”).  However, Buyer does not assume any obligation
or liability relating to or arising out of the performance or non-performance
by Seller (or its predecessors) under the Contracts that occurred or accrued on
or before the Closing Date nor does Buyer assume any liabilities related to the
Assets that occurred or accrued on or after the Closing Date as the result of
Seller’s (or its predecessors’) action or omission which are expressly retained
by Seller,  nor any other liabilities and
obligations relating to the Assets not included in the Assumed Liabilities
and/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 in
substantially similar form as Exhibit B
duly executed by Seller by which the Assets are assigned to Buyer free and
clear of all Liens, except Permitted Liens;


 





















 


(2)         a Transition
Services Agreement (“Transition Services
Agreement”) 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 of
Colorado Interstate Gas Company’s right of first refusal pursuant to Section 10
of the Operational Agreement by and between Colorado Interstate Gas Company and
NEOC;


 


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


 


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


 


(7)         a Certificate of the Secretary of Seller
certifying to the truth, correctness, and completeness of copies of resolutions
duly adopted by Seller’s Board of Directors and shareholders respectively,
approving the transactions contemplated by this PSA and any other agreements
related hereto; and


 


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


 


(B)       Buyer will deliver to Seller:


 


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


 


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


 


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


 


(4)         a Certificate of the Secretary of Buyer
certifying to the truth, correctness, and completeness of copies of resolutions
duly adopted by Buyer’s Executive Committee approving the transactions
contemplated by this PSA and any other agreements related hereto; and


 


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


 


4.              SELLER’S REPRESENTATIONS
AND WARRANTIES. 
NEC, NEOHC, and MCNIC
each represent and warrant to Buyer as of the date of this PSA and as of the
Closing Date that:


 


4.1.                  Organization And Good
Standing. NEC, NEOHC, and MCNIC are each corporations
duly organized, validly existing, and in good standing under the laws of the
jurisdictions of their respective incorporations with full power and authority
to own, lease, and operate their respective assets and to carry on their
respective 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 binding
obligation of Seller enforceable in accordance with its terms.  The performance by Seller of this PSA and the
transactions contemplated herein will be at the time required to be performed,
duly and validly authorized by all requisite corporate action on the part of
Seller.   No Affiliate of Seller owns any
interest in any of the Assets.


 


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


 





















 


cancel, or require any notice or consent (except as
set forth on Schedule 4.8) under any
agreement, contract, lease, license, instrument, or other arrangement to which
Seller is a party, or to which the Assets are subject, or by which Seller is
bound or to which any of such Seller’s assets are subject.  The Assets, and Seller’s ownership, use, and
operation of the Assets, are in compliance in all material respects, with all
applicable Laws.


 


4.4.                  Governmental Consents And
Approvals.  No consent, approval, order, or authorization
of, registration, declaration or filing with, or permit from, any Governmental
Authority is required by or with respect to Seller in connection with the
execution and delivery of this PSA or the consummation of the transactions
contemplated hereby.


 


4.5.                  Title.  The
Assets are owned by Seller, and will be conveyed to Buyer, free and clear of
any Lien other than Permitted Liens.


 


4.6.                  Condition Of Assets And
Disclosure Of Information.  The
Assets are in good operating condition and repair, subject to normal wear and
tear, are usable in the regular and ordinary course of business, and have been
maintained in accordance with normal industry practice.   Seller has disclosed or made available to
Buyer all of the information in Seller’s possession, custody, or control
pertaining 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 Interests
are transferred at Closing free and clear of all Liens, and Keyes Helium is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its formation with full power and authority to own, lease, and
operate its assets and to carry on its business as now conducted.  Those assets as listed in Schedule 1.1 (designated as
the Keyes Helium Company Assets) are the only assets owned by Keyes Helium
Company and the contracts listed on Schedule 4.8
(designated as the Keyes Helium Company Contracts) are the only contracts to
which Keyes Helium Company is a party or is obligated.   All obligations, liabilities, and
contingencies of Keyes Helium Company are reflected and reserved against in the
Financial Statements.  Seller has
delivered to Buyer true and correct copies of the organizational documents of
Keyes Helium Company (including its certificate of formation and its limited
liability company operating agreement) as currently in effect.  No changes will be made to such
organizational documents prior to Closing.


 


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


 


(C)       There are no existing rights, agreements, or commitments of any
character obligating Keyes Helium Company to issue, transfer or sell any
additional ownership rights or interests in Keyes Helium Company or any other
securities (debt, equity, or otherwise) convertible into or exchangeable for
such ownership rights or interests. 
Keyes Helium Company does not have any subsidiaries or own any equity
interest 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 financial
institutions.


 


4.8.                  Contracts.  Schedule 4.8 is a true, correct, and complete list of all of the
contracts and agreements relating to the Assets and all such contracts and
agreements are included in the definition of “Assets” (“Contracts”) and Schedule 4.8
identifies all the consents required in order to assign, transfer, or convey
the Assets to Buyer (“Consents”). Each of the Contracts is in full force and
effect, 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 the
real property related to the Assets. 
Seller owns the Real Property in fee simple, and, upon the consummation
of the transactions contemplated by


 





















 


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


 


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


 


(C)       The Surface Rights listed on Schedule 4.9(C) include
all of the rights of way, easements, surface use agreements, and surface leases
related to the Assets.  Upon the consummation
of the transactions contemplated hereby, Buyer will acquire all Surface Rights
so identified in Schedule 4.9(C) free
and clear of all Liens, other than Permitted Liens.  All Surface Rights have been acquired in the
ordinary course of business and are valid, binding, and enforceable in
accordance with their respective terms and there exists no default thereunder.


 


(D)       The Real Property and the Surface Rights constitute all of the fee
property, rights of way, easements, surface use agreements, and surface lease
agreements as of the Effective Time and as of the Closing necessary in the
ownership and operation of the Assets.


 


4.10.           Environmental
Matters 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 all
material respects in compliance with all Environmental Laws and Permits;


 


(B)       Seller has not been notified by any Governmental Authority or other
third party that any of the operations of the Assets are the subject of any
investigation or inquiry by any Governmental Authority or other third party
evaluating whether any remedial action is needed to respond to a release or
threatened release of any Hazardous Substance in violation of any Environmental
Law or to the improper storage or disposal (including storage or disposal at
offsite locations) of any Hazardous Substance in violation of any Environmental
Law; and


 


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


 


4.11.           Financial
Statements And Prepayments.  Seller has delivered to Buyer (A) NEOHC
balance sheets, statement of operations and cash flows for the nine-month
period ended December 31, 2003, the twelve-month period ended December 31,
2004, and seven-month period ended August 31, 2005; (B) monthly
operating income, cost of sales, and operating expenses for the Assets for the
period April 1, 2003, through August 31, 2005; and (C) detail
support for all revenue, cost of sales, and significant operating expenses for
the seven-month period ended August 31, 2005 (“Financial
Statements”).  The Financial
Statements were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except for the absence of footnotes and subject to
normal, recurring adjustments) and fairly present in all material respects the
results of operations of NEOHC and the Assets and the cash flows related to
NEOHC and the Assets as of their respective dates and for the period presented
therein.  There have been no Material
Adverse Effects with respect to the Assets or NEOHC since the date of the
Financial Statements.  All of the assets
reflected or otherwise included in the Financial Statements are included in the
Assets.  Seller has not received any
prepayment, advance payment, deposit, or similar payment relating to the Assets
which would require Buyer to deliver gas, liquids, helium (crude or liquid), or
other products, or to provide services, after the Closing Date without
receiving full payment for same, or which would be subject to refund or create
any repayment obligation.


 


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


 


4.13.           Suspense
Funds. 
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 represent
funds due to third parties in connection with the ownership or operation of the
Assets.


 





















 


4.14.           Employees.  Schedule 4.14 sets forth a true
and complete list of the names, titles, hire date, pay scale, and annual
salaries and other compensation of all employees of Seller or its Affiliates
who render services primarily in connection with the Assets (“Employees”).  To
Seller’s knowledge, all Employees are available for hire by Buyer.  None of the Employees has indicated to Seller
or its Affiliates an intention to resign or retire as a result of the
transactions contemplated by this PSA or otherwise within one (1) year
after the Closing Date.  No Employee is
covered by any collective bargaining agreement or any other arrangement with
any labor union with respect to his or her services in connection with the
Assets.


 


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 proceeding
of any Governmental Authority or other third party pending or, to Seller’s
knowledge, threatened against or related to the Assets.  The Assets are not subject to any outstanding
injunction, judgment, order, decree, or ruling. 
There is no litigation, proceeding, or investigation pending or, to
Seller’s knowledge, threatened that questions the validity or enforceability of
this PSA or any other document, instrument, or agreement to be executed and
delivered 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 ad
valorem taxes relating to the Assets that are delinquent.  Seller has properly completed and filed or
caused to be filed in a timely manner all material reports or returns required
to be filed with respect to such Taxes relating to the Assets with any
applicable taxing authority.


 


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



 


4.18.           Preferential
Rights.  Except for Colorado Interstate Gas Company’s
right of first refusal pursuant to Section 10 of the Operational Agreement
by 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 to
NEOHC, there are no preferential or similar rights to purchase any portion of
the Assets.


 


4.19.           Operation of Assets Since
Effective Time.  During the period from the Effective Time
until the date of this PSA, Seller has maintained, operated and administered
the Assets, in a good and workmanlike manner, consistent with industry
standards and the historical routine operation of the Assets and in compliance
with all applicable Laws.  From the
Effective 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 covered
by 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 the
ordinary course of business;


(D)       waiver or release of any rights of Seller or any of its predecessors
under any Contracts which would affect the rights of Buyer thereunder after the
Closing;


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


(F)         adverse change in maintenance practices with
respect to any of the Assets;


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


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


 


5.              BUYER’S REPRESENTATIONS
AND WARRANTIES.  Buyer
represents and warrants to Seller as of the date of this PSA and as of the
Closing 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 respective
formation with full power and authority to own, lease, and operate its assets
and to carry on its respective business as now conducted.


 





















 


5.2.                  Binding Agreement And Authority. This PSA has been duly authorized, executed, and delivered by Buyer and
constitutes the legal, valid, and binding obligation of Buyer enforceable in
accordance with its terms.  The
performance by Buyer of this PSA and the transactions contemplated herein will
be at the time required to be performed, duly, and validly authorized by all
requisite limited liability company action on the part of Buyer.


 


5.3.                  No Breach And Compliance.  Neither the execution and
delivery of this PSA, nor the consummation of the transactions contemplated
hereby, will (A) violate any Law or other restriction of any Governmental
Authority to which such Buyer is subject; or (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice or consent under any agreement, contract, lease, license,
instrument, or other arrangement to which Buyer is a party or by which Buyer is
bound.


 


5.4.                  Governmental Consents And Approvals.  No
consent, approval, order, or authorization of, registration, declaration or
filing with, or permit from, any Governmental Authority is required by or with
respect to Buyer in connection with the execution and delivery of this PSA or
the consummation of the transactions contemplated hereby.


 


5.5.                  Litigation.  There is no litigation, proceeding or investigation
pending or, to the knowledge of Buyer, threatened against or affecting Buyer
that questions the validity or enforceability of this PSA or any other
document, instrument, or agreement to be executed and delivered by Buyer in
connection with the transactions contemplated hereby.


 


5.6.                  Buyer’s Commitment Not
Subject To Financing.  Buyer has, and will have on the Closing Date,
sufficient cash to enable it to make payment in immediately available funds of
the 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 with
the transactions contemplated by this PSA for which Buyer or any of its
Affiliates could become directly or indirectly liable.  


 


6.              COVENANTS.


 


6.1.                  Operation Of The Assets
Prior To The Closing Date.


 


(A)       Between the date of this PSA and the Closing Date, Seller will continue
to maintain, operate, and administer the Assets, in a good and workmanlike
manner, consistent with industry standards and the historical routine operation
of the Assets and in compliance with all applicable Laws.  Seller will diligently continue to work on
and will timely complete before Closing (1) any existing open or pending
authority for expenditures; (2) that certain Sturgis Compressor Station
engine overhaul being performed by Endyne; and (3) the moving to the Keyes
Helium Plant site all inventory or spare parts that are related to the
Facilities and that are stored offsite of the Keyes Helium Plant site.  Notwithstanding any other provision of this
PSA, Seller will bear all costs of the matters which are the subject of the
preceding sentence without any upward Purchase Price Adjustments or
reimbursement by Buyer, except for any capital expenditures paid by Seller
which are the subject of item (1) of the preceding sentence and approved
by Buyer in writing for which Seller will receive an upward adjustment to the
Purchase Price.


 


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


 


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


 


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


 





















 


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


 


(4)                   If Seller does not have the funds available
for such Projects, then Buyer will directly pay third parties as necessary for
services and/or equipment incurred by Seller because of such Projects.  As a condition to such payment, Seller will (i) execute
such documents as reasonably requested by Buyer to facilitate such payment,
including without limitation, promissory notes (with recourse only to the
assets 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 the
contracts, resulting hard assets, and equipment for which Buyer pays any third
party and (b) secure a first and prior mortgage in any real property
interests relating to any Projects for which Buyer so pays any third party and (ii) cause
to be released any security interests or mortgages which may attach or
otherwise apply to any of the assets for which Buyer is to receive a first
priority security interest or a first mortgage under (i) (a) or (b) above.  In the event that Closing does not occur then
Seller agrees (x)  that Buyer will have a
continuing first priority security interest in the contracts, resulting hard
assets, and equipment for which Buyer pays any third party as set forth in this
paragraph and a continuing first mortgage in any real property interests in the
Projects for which Buyer pays any third party as set forth in this paragraph
and (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 party
as set forth above in this paragraph. If the Closing occurs, there will not be
a Purchase Price Adjustment upward for those amounts that Buyer pays any third
party as set forth in this paragraph, and all promissory notes or other
evidences of indebtedness by Seller by Buyer relating to such amounts paid by
Buyer will be deemed satisfied and cancelled in all respects.  If the Closing does not occur and Buyer has
failed to directly pay any third parties for services and/or equipment required
to 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 and
all claims, liabilities, losses, causes of actions, costs, and expenses
(including, reasonable costs of defense and investigations, settlements, and
reasonable attorneys’ fees and court costs) asserted against, resulting from,
imposed upon, or incurred by Seller as a result of Buyer’s failure to make such
payments.  Provided, that, the preceding
sentence is not applicable if the Seller terminates such that the last sentence
of Section 9.2 of this PSA is
applicable.


 


(C)       Between the date of this PSA and the Closing Date, Seller will, except
for emergency action taken in the face of risk to life, property, or the
environment (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 capital
expenditures relating to the Assets that involve individual commitment of more
than $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 writing
within ten (10) days of receiving from Seller a request for approval of a
capital expenditure.  If Buyer fails to
deliver a written response to Seller within such ten (10) days, Buyer will
be deemed to have approved such expenditure.


 


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


 


6.2.                  Permits. 
Seller agrees to keep
in full force and effect and to cooperate with Buyer to (A) make
application for assignment of any Permits to be effective with the conveyance
of the Assets to Buyer or (B) have issued new Permits relating to the
Assets subsequent to the conveyance of the Assets to Buyer.  Seller has pending at the Oklahoma Department
of Environmental Quality (“ODEQ”) an
application for Permit under Title V of the Clean Air Act for the Keyes Helium
Plant which includes that certain compressor (CG-8) (a compressor that was
relocated by CIG to the Keyes Helium Plant). 
Seller will endeavor in good faith to obtain such Title V Permit (which
includes 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 long
as such access occurs during normal


 





















 


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


 


(A)       To review and inspect the Assets (including any environmental
inspections and interviews);


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


(C)         Related purposes consistent with this PSA.


 


In connection with Buyer’s rights to reasonable
access 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 OR
RELATING TO ANY PLANT OR FIELD VISIT CONDUCTED BY ANY EMPLOYEE, AGENT AND/OR
REPRESENTATIVE OF BUYER (EACH A “BUYER PARTY”).  NOTWITHSTANDING THE FOREGOING, BUYER WILL NOT
BE OBLIGATED TO INDEMNIFY ANY SELLER INDEMNITEE FOR LOSSES THAT ARE THE RESULT
OF ANY SELLER INDEMNITEE’S STRICT LIABILITY OR THE NEGLIGENCE OF ONE OR MORE
SELLER INDEMNITEES.  THE PARTIES AGREE
THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.


 


6.4.                  RISK OF LOSS; CASUALTY
LOSS.  The
risk of loss to the Assets will remain with Seller until the Closing Date, and
Buyer will receive the Assets, taken as a whole, in good operating condition
and repair, ordinary wear and tear excepted. 
In the event any of the Assets are damaged or destroyed by fire or other
casualty prior to the Closing Date, the Parties will negotiate in good faith
reasonable compensation reflecting the reasonable costs of repair, replacement,
or reconstruction to the extent such repair, replacement, or reconstruction has
not occurred at or prior to the Closing and at Seller’s expense (without any
reimbursement 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 to
the Closing Date will belong to Seller. All proceeds, receipts, credits, and
income attributable to the Assets for the periods of time from and after the
Closing Date will belong to Buyer.  All
insurance recoveries relating to losses occurring before the Closing Date will
belong to Seller; provided Seller has cured, or otherwise remedied, at its sole
cost and expense (and without an increase in the Purchase Price or
reimbursement by Buyer), the matters which are the subject of such losses such
that Buyer is placed in the same position as if such losses had not occurred.


 


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


 


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


 


6.6.                  Allocation Of Taxes.


 


(A)       Property And Proratable Taxes.  All
real estate taxes and assessments, property, and ad valorem taxes, leasehold
rentals and other customarily proratable items relating to the Assets and
relating to a period of time that begins before and ends after the Closing Date
will be prorated as of the close of business on the day before the Closing Date
between Buyer and Seller.  If the actual
amount of any such item is not known as of the Closing, the proration will be
based on the previous year’s (or prior period’s) payment or assessment with
respect to such item, and the Parties agree to adjust the proration and pay any
underpayment or reimburse for any overpayment within thirty (30) days after the
actual amount becomes known.


 





















 


(B)       Transfer Taxes.   
Buyer and Seller agree to take all reasonable action to support the sale
of Assets, as contemplated by this PSA, as a “casual sale” and/or “manufacturing
costs” so that, to the extent permitted by applicable Law, no sales tax will be
owed on this transaction.  To the extent any such sales tax is
owed on this transaction Seller and Buyer will each bear fifty percent (50%) of
the cost of such sales taxes.  Any such
taxes 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 due
will be paid by Buyer.


 


6.7.                  Supplements To Schedules.  From time to time, but not
after five (5) business days prior to Closing, Seller and Buyer will
promptly supplement or amend the Schedules with respect to any matter arising
after the date of this PSA which, if existing or occurring at the date of this
PSA, would have been required to be set forth or described in such
Schedule.  However, in the event there is
a Material Adverse Effect caused by any such supplement or amendment, then
Seller and Buyer will enter into good faith negotiations to resolve such
Material Adverse Effect.  In the event
the Parties cannot reach a mutually agreeable resolution, then Buyer may
terminate this PSA.


 


6.8.                  Other Negotiations.  Seller agrees that unless and until this PSA
is terminated in accordance with Section 9
(Termination) or as otherwise provided in this PSA, Seller will
not, and will ensure that no other person acting on its behalf, enters into or
continues negotiations with any person other than Buyer with respect to any
transaction involving the acquisition by any person other than Buyer of any
interest, direct or indirect, in the Assets.


 


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


 


6.10.           Names. 
Within ninety (90) days after Closing, Buyer will remove the name of
Seller, 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 required
Consents to consummate the transactions contemplated in this PSA prior to the
Closing Date, including making all necessary filings, notifications, and
registrations with all third parties, including Governmental Authorities
necessary for the transfer of the Assets, except for Consents from Governmental
Authorities 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 held
by Seller for the benefit of Buyer after the Closing for its term such that (A) Seller
will provide Buyer with the economic benefits of such Contract and Buyer will
bear the economic burdens of such Contract until or unless such Consent is
received and (B) Buyer will be entitled to enforce at its sole cost and
expense, any and all rights of Seller against a third party with respect to
such Non-Assigned Asset; provided that,
Seller hereby constitutes and appoints, effective as of the Closing Date, Buyer
and its successors and assigns as the true and lawful attorney of Seller with
full power of substitution in the name of Buyer, or in the name of Seller but
for the benefit of Buyer, to institute and prosecute all proceedings which
Buyer may in its sole discretion deem proper in order to assert or enforce any
right, title, or interest in, to, or under the Non-Assigned Assets or take
other actions reasonably necessary to obtain the benefits of such Non-Assigned
Assets.  Buyer will be entitled to retain
for Buyer’s own account any amounts collected pursuant to the foregoing
powers.  Seller will promptly pay to
Buyer when received all monies received by Seller under any Non-Assigned Asset
or 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 practicable
following the execution and delivery of the PSA by the Parties:


 


(1)         duly call, give notice of, convene and hold
an annual or special meeting of its shareholders (the “Shareholders’ Meeting”)
for the purpose of considering and taking action upon the PSA, which meeting
will take place no later than twenty (20) days after the mailing of a proxy
statement (the “Proxy Statement”) which will be
prepared in accordance with rules of the Securities and Exchange
Commission (the “SEC”) set forth in Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”);


 





















 


(2)         include in the Proxy Statement, the
recommendation of its Board of Directors that shareholders of Seller vote in
favor of the approval and adoption of this PSA and the transactions
contemplated hereby; and


 


(3)         (a) obtain and furnish the information
required to be included by it in the Proxy Statement, file a preliminary Proxy
Statement with the SEC and pay any required fees, and, after consultation with
Buyer, respond promptly to any comments made by the SEC with respect to the
Proxy Statement and any preliminary version thereof, file a definitive Proxy
Statement with the SEC as soon as possible following notification by the SEC to
Seller that the SEC has no comments or no further comments on the Proxy
Statement, and cause the Proxy Statement to be mailed to its shareholders
within five (5) business days following the filing of a definitive Proxy
Statement with the SEC and (b) obtain the necessary approvals by its
shareholders 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 best
efforts to seek to obtain shareholders’ approval of the PSA and the transaction
contemplated hereby, by written action of the holders of a majority of the
voting stock of Seller in accordance with the Delaware General Corporation
Law.  In that regard:


 


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


 


(2)         Seller will (a) obtain and furnish the
information required to be included in the Information Statement, file a
preliminary Information Statement with the SEC and pay any required fees, and
after consultation with Buyer, respond promptly to any comments made by the SEC
with respect to the Information Statement and preliminary version thereof, file
a definitive Information Statement with the SEC as soon as possible following
notification by the SEC to Seller that the SEC has no comments or no further
comments on the Information Statement, and cause the Information Statement to
be mailed to its shareholders within five (5) business days following the
filing of a definitive Information Statement with the SEC, and (b) obtain
the necessary written consent of its shareholders holding a majority of its
voting stock of this PSA and the transactions contemplated hereby.


 


6.13.           Further
Assurances.  Each Party will use its reasonable efforts to
take all actions and do all things necessary, proper, or advisable to effect
the transactions contemplated by this PSA, whether before or after Closing.


 


6.14.           Post-Closing Adjustment For
Defects.  For a period of six (6) months after
Closing, Buyer will continue to ascertain the status of any Defects.  If Buyer finds Defects (individually or in
the aggregate) exceeding $22,400, on or before the end of six (6) months
after Closing, Buyer will submit to Seller a report detailing all such Defects
in excess of such aggregate $22,400 amount. 
For purposes of the foregoing, the value of all Title Defects (and not
just the value of all Title Defects exceeding $10,000), will be used in determining
whether or not the $22,400 threshold has been exceeded.  Seller will have six (6) months from the
date that such report is submitted to it to attempt to cure such Defects at its
sole cost and expense.  In the event
Seller fails to cure the Defects within such six (6) month period, then
Seller agrees at the end of such six (6) month period to pay Buyer for
such Title Defects at the agreed rate of $60.00 per rod and for Defects other
than Title Defects, Seller will pay Buyer the value associated with the
negative financial impact of such Defects to the Assets as determined by Buyer
in its reasonable good faith judgment.   If
the Parties are unable to agree upon the value or existence of Defects
(individually or in the aggregate) within fifteen (15) days after Buyer
notifies Seller of the value of such Defects then such dispute(s) will be
resolved by a mutually agreeable nationally recognized certified public
accounting firm, engineering or environmental firm (“Reviewing
Firm”) as applicable depending upon the nature of the Defect.  If the Parties are unable to agree on the
designation of a Reviewing Firm within twenty (20) days after Buyer notifies
Seller of the value of the Defects, then Buyer and Seller will each designate a
nationally recognized certified public accounting firm, engineering, or
environmental firm (each a “Designating Firm”)
as applicable depending upon the nature of the Defect within the next five (5) day
period, and such Designating Firms will designate the Reviewing Firm within ten
(10) days after the date on which the last Designating Firm is
appointed.  The Parties will make
available to the Reviewing Firm all work papers and all other information and
material in their possession relating to the matters in dispute regarding the Defects.  The Reviewing Firm will be instructed by the
Parties to use its best efforts


 





















 


to deliver its determination to the Parties within
ten (10) days and as promptly as practicable after submission of the
dispute to the Reviewing Firm.  The
determination of the Reviewing Firm will be final and binding on the Parties.  Each Party will bear its own expenses and the
fees and expenses of its own representatives and experts, including without
limitation, the Designating Firms chosen by such Party, in connection with the
preparation, review, dispute (if any), and final determination.  In the event the Reviewing Firm agrees in all
material respects with the computation presented by either Seller or Buyer, the
fees charged by the Reviewing Firm will be paid by the other.  In the event the Reviewing Firm does not
agree in all material respects with the computations presented by the Seller or
Buyer, 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 as
to insure a smooth transition of the transfer of the Assets to Buyer.  At Buyer’s request, Seller will (A) contact
Seller’s suppliers and/or customers to inform them of the sale of the Assets
and to reasonably encourage them to continue to transact business with Buyer
which will include Seller informing Buyer in detail of the status of Seller’s
relationships and transactions with and Seller introducing Buyer to its
contacts at:   Air and Chemical Products,
Inc;  Regency Gas Services; Colorado Interstate
Gas Company (and/or its relevant its affiliates); El Paso Corporation; Nexus
Energy Company; Linde Gas, LLC; Tenaska Marketing Ventures; the Bureau of Land
Management, and any area producers with which Seller has a relationship and (B) reasonably
encourage Employees to continue working for Buyer as their new employer.


 


7.2.                  Offers Of Employment.  Upon
execution of this PSA, Buyer may convey offers of employment to the Employees
whom Buyer desires to employ.  Buyer
anticipates that it will make offers to all Employees (if they comply with
Buyer’s policies and procedures as outlined in Buyer’s Employee Handbook).  Buyer may offer employment to each Employee
on terms substantially similar terms as such Employee now receives from
Seller.  Seller will not make any
competing offer of continued employment to any Employee and will not otherwise
interfere with Buyer’s efforts to employ any Employee or discourage any
Employee from accepting Buyer’s offer of employment.  Each Employee who accepts Buyer’s offer of
employment and commences and/or maintains employment with Buyer is referred to
as a “Transferred Employee”, and the date on
which each such Transferred Employee commences employment with Buyer is
referred to as the “Transfer Date”,
which Transfer Date will not be before the Closing Date.  For a period of two (2) years from the
Closing Date, neither Seller nor any of its Affiliates will solicit employment
of any Transferred Employee. 
Notwithstanding anything to the contrary contained herein, each Transferred
Employee will be employed by Buyer on an at-will basis and nothing will
prohibit Buyer from terminating such employment at any time.


 


7.3.                  Benefits.  Buyer
will permit each Transferred Employee to participate, on the same basis that
similarly situated employees of Buyer participate, in the employee benefit and
compensation plans, policies, practices, arrangements, and programs regularly
made available to the employees of Buyer which Buyer currently anticipates will
be on substantially similar or better terms as the Employees now receive from
Seller.  Buyer will credit the years of
service with Seller prior to the Closing by any Transferred Employee as service
with Buyer for purposes of vesting and participating in such plans, policies,
practices, arrangements, and programs.


 


7.4.                  Retained Employee
Liabilities. 
Seller will be responsible for all liabilities for its employees or
agents, including compensation and benefits accrued or otherwise arising out of
services 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 employees
performing services in relation to the Assets compensation or accrued benefits,
including but not limited to vacation, without any increase in the Purchase
Price or reimbursement by Buyer.  Buyer
is assuming no obligation or liabilities of Seller under any employee benefit
plan or any oral or written contract of employment.


 


8.              CONDITIONS TO CLOSING.


 


8.1.                  Seller’s Conditions.  The
obligations of Seller at Closing are subject to the satisfaction at or prior to
Closing 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 will
be made again at Closing and will be true and correct in all material respects
as of the Closing Date; and


 





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(E)         The preferential rights set forth in Section 4.18 (Preferential Rights) will
not have been exercised.


 


9.              TERMINATION.



 


9.1.                  Termination Rights.  This
PSA 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 this
clause will not be available to any Party whose breach of any
representation or warranty or failure to perform any covenant or agreement
under this PSA has been the cause of or resulted in the failure of the Closing
to occur on or before such date); or


 


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


 


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


 


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


 


9.2.                  Effect Of Termination.  If
this PSA is terminated by either Seller or Buyer pursuant to the provisions of Section 9.1, then this PSA will
become 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 Party
hereto from any liability for damages incurred as a result of a breach by such
Party of its representations, warranties, covenants, agreements, or other
obligations hereunder occurring prior to such termination.  If either Party terminates this PSA other
than pursuant to the terms of Section 9.1
of this PSA or Seller terminates for any reason prior to March 31, 2006, to
pursue any type of transaction involving the acquisition by any person other
than Buyer of any interest, direct or indirect, in the Assets, then the
terminating Party will promptly pay the non-terminating Party (A) $2,000,000
as liquidated damages plus (B) if terminating Party is Seller, then Seller
will reimburse Buyer for those amounts that Buyer has directly paid to any
third parties for services and/or equipment required to be paid under the first
sentence of Section 6.1(B)(4);
provided, that, in reference to Seller as terminating Party, (A) and (B) will
not exceed $5,000,000 in the aggregate.


 





















 


10.       INDEMNIFICATION.


 


10.1.         Indemnification By Buyer.  Buyer
will indemnify, defend, and hold harmless Seller, its Affiliates and their
respective 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, environmental
engineering fees, and also including any losses attributable to personal injury
or death or property damage) (“Losses”)
asserted against, resulting from, imposed upon, or incurred by any of the
Seller Indemnitees as a result of, or arising out of: (A) the Assumed
Liabilities; (B) the breach of any of the representations, warranties,
covenants, or agreements of Buyer contained in this PSA; (C) the
ownership, operation, maintenance, occupancy, use, or condition of the Assets
on and after the Closing Date; or (D) any matters relating to the breach
of Environmental Laws or the release of materials into the environment or
protection of the environment that occurs after the Closing Date; or (E) any
liability for Taxes (including interest, penalties, or fines related thereto)
the responsibility for payment of which was assumed by Buyer pursuant to this
PSA (in each case, except for matters resulting from or arising out of a breach
of Seller’s representations, warranties, covenants, or agreements contained in
this PSA).


 


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


 


10.3.           Limitations On
Indemnification.  Notwithstanding the foregoing, Seller will
not be obligated to provide any such indemnification for Losses pursuant to
claims under Section 10.2 unless the
aggregate amount that Buyer is entitled to recover in respect of all such
claims exceeds $100,000 (“Deductible”),
in which case Seller will be only be liable to the extent such amount exceeds
the Deductible.  The maximum aggregate
obligation 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 any
Losses for which indemnification is provided under Section 10.1
or 10.2 will be net of (A) any
amounts recovered (net of any applicable tax liability on such amounts) by
Seller Indemnities or Buyer Indemnities pursuant to any indemnification by or
indemnification agreement with any third party, if any;  (B) any insurance proceeds (net of any
increased insurance premiums that are the result of the applicable claims)
available as an offset against such Losses (and no right of subrogation will
accrue to any insurer or third party indemnitor under this PSA) (each person in
clauses (A) and (B) is referred to as, a “Collateral
Source”) and (C) an amount equal to the present value of the
federal, state, local and/or foreign tax benefit, if any, attributable to such
Losses.  If the amount to be netted under
this Section 10.4 from any payment
required under Sections 10.1 or 10.2 is determined after payment by
the Buyer or Seller indemnitor of any amount otherwise required to be paid to a
Buyer Indemnitee or Seller Indemnitee pursuant to this Section 10,
then the Buyer Indemnitee, or Seller Indemnitee, as applicable, will repay to
Buyer or Seller indemnitor, as applicable, promptly after such determination,
any amount that Buyer or Seller indemnitor would not have had to pay pursuant
to this Section 10 had such
determination been made at the time of such payment.


 


10.5.           Limitations
On Damages; Survival Of Representations.


 


(A)       Survival Of Representations, Warranties,
Covenants And Indemnities. The representations and warranties made
pursuant to this PSA or any certificate or other document delivered by Seller
at Closing will survive Closing for a period of three (3) years following
the Closing Date; provided that the representations
and 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 term
of the statute of


 





















 


limitations applicable to that subject matter and
not the applicable statute of limitations for the breach of this PSA.  The covenants and agreements of the Parties
hereto 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 force
or effect after the expiration date specified above; except that there will be
no such termination of any representation, warranty, covenant, or agreement
regarding a bona fide claim asserted with respect to such representation,
warranty, covenant, or agreement by either Seller or Buyer before such date
pursuant to Section 10.


 


(B)       Liability Limitations. 
NOTWITHSTANDING
ANYTHING TO THE CONTRARY STATED HEREIN, NEITHER BUYER NOR SELLER WILL BE LIABLE
FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OF THE SELLER
INDEMNITEES OR THE BUYER INDEMNITEES, RESPECTIVELY ARISING OUT OF THIS PSA
UNLESS SUCH DAMAGES ARE INCURRED BECAUSE OF A THIRD PARTY CLAIM WHICH RESULTS
IN INDEMNIFICATION UNDER THIS PSA.


 


10.6.         Notice Of Asserted
Liability; Opportunity To Defend.  All claims for indemnification under Section 10 will be asserted and
resolved 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 claims
are asserted is referred to as the “Indemnifying Party”.
In the event any Losses are asserted against or sought to be collected from an
Indemnified Party by a third party, said Indemnified Party will with reasonable
promptness provide to the Indemnifying Party a written notice of such claim specifying
in reasonable detail the basis for which indemnification is sought under this
PSA (“Claim Notice”). The Indemnifying Party
will have fifteen (15) days from the personal delivery or receipt of the Claim
Notice (“Notice Period”) to notify the Indemnified
Party (A) whether or not it disputes the liability of the Indemnifying
Party to the Indemnified Party with respect to such Losses and (B) whether
or 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 to
and during the Notice Period to file any motion, answer, or other pleading that
it deems necessary or appropriate to protect its interests or those of the
Indemnifying Party (of which it will have given notice and opportunity to
comment to the Indemnifying Party) and not prejudicial to the Indemnifying
Party. If the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it will indemnify and defend the Indemnified Party against
such Losses, then the Indemnifying Party will defend all claims and proceedings
with respect to such Losses, and with counsel of its own choosing.  The Indemnifying Party will promptly settle
or prosecute such claims and proceedings to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement, then it may do so at its sole cost and expense.  If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel in
contesting any such Losses. If the Indemnifying Party does not notify the
Indemnified Party within fifteen (15) days of receipt of the Claim Notice that
it will, at its sole cost and expense, indemnify and defend the Indemnified
Party against such Losses, then the Indemnified Party will have the right, at
the Indemnifying Party’s sole cost and expense, to contest, defend, compromise,
or settle such Losses, but will not thereby waive any right to indemnity under
this PSA.  The Indemnifying Party will
not, except with the written consent of the Indemnified Party (1) enter
into any settlement or compromise that does not include as an unconditional
term of such settlement or compromise the giving by the Person asserting the
Losses of an unconditional release to all Indemnified Parties from all
liability with respect to such Losses or (2) consent to entry of judgment
with respect to such Losses.  If the claim
for indemnification under Section 10
does not involve a third party claim, then the Indemnified Party will assert
such claim in writing to the Indemnifying Party, specifying in reasonable
detail, the basis for such claim and Indemnifying Party will promptly indemnify
the Indemnified Party for such Losses.


 


10.7.           Exclusive
Remedy.  As
between the Buyer Indemnitees and the Seller Indemnitees the rights and
obligations set forth in this Section 10 will
be the exclusive rights and obligations with respect to this PSA, the events
giving rise to this PSA, and the transactions provided for herein or
contemplated hereby or thereby, except in the event of fraud.


 


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


 





















 


11.       MISCELLANEOUS. 



 


11.1.                     Applicable
Law.  This
PSA will be governed by and construed in accordance with the domestic laws of the
State of Oklahoma without giving effect to any choice or conflict of law
provision or rule (whether of the State of Oklahoma or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Oklahoma.


 


11.2.                     Expenses.  Each
Party will be solely responsible for all expenses, including due diligence
expenses, incurred by it in connection with the negotiation and execution of
this PSA and the consummation of the transaction contemplated hereunder, and
neither Party will be entitled to any reimbursement for such expenses from the
other Party hereto. Without limiting the generality of the foregoing, Buyer
will be solely responsible for all recording fees relating to the conveyances
to be delivered pursuant hereto.


 


11.3.                     Independent
Investigation.  Buyer
represents and acknowledges that it is knowledgeable of the business of
operating pipelines and that it has had access to the Assets, the officers and
employees of Seller, and the Records of Seller relating to the Assets and in
making the decision to enter into this PSA and consummate the transactions
contemplated hereby, Buyer has relied on the basis of its own independent due
diligence investigation of the Assets and upon the representations, warranties,
and covenants of Seller in this PSA.


 


11.4.                     Disclaimer
Regarding Assets. 
Except as otherwise provided in this PSA, BUYER ACKNOWLEDGES THAT SELLER
HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE PHYSICAL
CONDITION OF ANY PART OF THE ASSETS (INCLUDING, WITHOUT LIMITATION, (A) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY; (B) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (C) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS; AND (D) ANY
IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT)
IT BEING THE EXPRESS INTENTION OF BUYER AND SELLER THAT (EXCEPT TO THE EXTENT
EXPRESSLY PROVIDED IN THIS PSA) THE ASSETS WILL BE ACCEPTED BY BUYER AS IS AND
IN THEIR PRESENT CONDITION AND STATE OF REPAIR; AND BUYER REPRESENTS TO SELLER
THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO THE
ASSETS AS BUYER DEEMS APPROPRIATE AND, SUBJECT TO THE TERMS OF THIS PSA, BUYER
WILL 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.                     No
Third-Party Beneficiaries. 
Nothing in this PSA will provide any benefit to any third party or
entitle any third party to any claim, cause of action, remedy, or right of any
kind, it being the intent of the Parties that this PSA will not be construed as
a third-party beneficiary contract; provided, however, that the indemnification
provisions in Section 10 will inure to
the benefit of the Buyer Indemnitees and the Seller Indemnitees as provided
therein.


 


11.6.           Waiver. 
Except as expressly provided in this PSA, neither the failure nor any
delay on the part of any Party hereto in exercising any right, power, or remedy
hereunder will operate as a waiver thereof, of any other right, power, or
remedy; nor will any single or partial exercise of any right, power or remedy
preclude any further or other exercise thereof, or the exercise of any other
right, power, or remedy. Except as expressly provided in this PSA, no waiver of
any of the provisions of this PSA will be valid unless it is in writing and
signed by the Party against whom it is sought to be enforced.


 


11.7.                     Entire
Agreement, Amendment.  This
PSA, the Schedules and Exhibits attached to this PSA, each of which is deemed
to be a part of this PSA, and any agreements, instruments, or documents
executed and delivered by the Parties pursuant to this PSA, constitute the
entire agreement and understanding between the Parties, and all previous
undertakings, negotiations, and agreements between the Parties regarding the
subject matter hereof are merged into this PSA. This PSA may not be modified
orally, but only by an agreement in writing signed by Buyer and Seller.


 


11.8.                     Notices.  Any
and all notices or other communications required or permitted under this PSA
will be given in writing and delivered in person or sent by United States
certified or registered mail, postage prepaid,


 





















 


return receipt requested, or by overnight express
mail, or by telex, facsimile or telecopy to the address of such Party set forth
below. Any such notice will be effective upon receipt or three (3) days
after 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 its
address for notice purposes hereunder.


 


11.9.           No
Assignment.  This
PSA may not be assigned or transferred by Seller in anyway whatsoever except
with prior written consent of Buyer, which consent will not be unreasonably
withheld.  Subject to the preceding
sentence, this PSA will be binding on and inure to the benefit of the Parties
hereto and their successors and assigns.


 


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


 


11.11.              Press
Release; Publicity. 
Seller and Buyer will consult with each other with regard to all
publicity and other releases concerning this PSA and the transactions
contemplated hereby and, except as required by applicable law or the applicable
rules or regulations of any Governmental Authority or stock exchange, no
Party will issue any press release or other publicity without the prior written
consent of the other Party, which will not be unreasonably withheld.


 


11.12.              Construction.  Any section headings
in this PSA are for convenience of reference only, and will be given no effect
in the construction or interpretation of this PSA or any provisions thereof. No
provision of this PSA will be interpreted in favor of, or against, any Party by
reason of the extent to which any such Party or its counsel participated in the
drafting thereof.


 


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


 


11.14.              Time
Is Of The Essence. It is understood and agreed that time is of
the essence in this PSA.


 


11.15.              Confidentiality.  From
the date of the Agreement to the Closing, the Parties acknowledge and agree
that the Confidentiality Agreement dated June 7, 2005, between Seller and
Buyer will remain in full force and effect according to the terms thereof and
after the Closing, such Confidentiality Agreement will be null and void and of
no further force and effect. Furthermore, after Closing, Seller will not, and
will not permit any of its Affiliates to, disclose or provide to any other
Person any non-public or confidential information concerning the Assets, except
as required to be disclosed to comply with any applicable Law.


 





















 


SIGNATURE PAGE 


TO PURCHASE AND SALE AGREEMENT


BETWEEN NATHANIEL ENERGY CORPORATION,


NATHANIEL ENERGY OKLAHOMA HOLDINGS
CORPORATION,


MCNIC RODEO GATHERING, INC.,


AND MIDSTREAM ENERGY SERVICES, LLC


 


IN
WITNESS WHEREOF, the Parties have duly executed and delivered this PSA as of
the 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

  
					



 





















 


EXHIBIT A


To Purchase And Sale Agreement


Between Nathaniel Energy
Corporation, Nathaniel Energy Oklahoma Holdings Corporation,


And Midstream Energy Services,
LLC


 


DEFINITIONS


 


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


 


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


 


2.               “Code” means the Internal Revenue Code of 1986, as
amended.


 


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


 


4.               “Environmental
Laws” as used herein means
all federal, state and local laws (including common law), statutes, ordinances,
permits, orders, judgments, rules, regulations, decrees, injunctions, permits
or governmental restrictions or requirements relating to (a) the control
of 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 liquid
waste generation, handling, treatment, storage, disposal or transportation or
any toxic, radioactive, ignitable, corrosive, reactive or otherwise Hazardous
Substance, waste or chemical, or (c) exposure to hazardous, toxic,
explosive, corrosive or other substances alleged to be harmful or otherwise
relating to the effect of the environment on human health and safety.


 


5.               “GAAP” means generally accepted accounting
principles, as recognized by the U.S. Financial Accounting Standards Board (or
any generally recognized successor).


 


6.               “Governmental Authority” means any
national, state, county or municipal government, domestic or foreign, any
agency, board, bureau, commission, court, department, or other instrumentality
of any such government, or any arbitrator in any case that has jurisdiction
over the Assets or the Parties.


 


7.               “Hazardous
Substance” means any
pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substance, waste or material, or any
substance, waste or material having any constituent elements displaying any of
the foregoing characteristics, including petroleum, its derivatives,
by-products and other hydrocarbons, and any substance, waste or material
regulated under any Environmental Law.


 


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


 


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


 


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


 


11.         “Material
Adverse Effect” means any
adverse 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 caused
by the following will not be deemed to constitute a Material Adverse Effect: (A) the
depletion of reserves in the ordinary course of business; or (B) general
economic conditions.


 


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


 


13.         “Permitted
Liens” means any of the
following: (a) any liens for Taxes not yet due and payable and for which
Seller is responsible; (b) any obligations or duties reserved to or vested
in any Governmental Authority to regulate any Asset under all applicable Laws; (c) all
rights to consent by, required notices to, filings with or other actions by
Governmental Authorities in connection with the sale or conveyance of any
Assets to the extent such consents are customarily obtained after the Closing; (d) any
required Consents to


 





















 


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


 


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


 


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


 


16.         “Tax” means (a) any tax, governmental fee or
other like assessment or charge of any kind whatsoever (including, but not
limited to, withholding on amounts paid to or by any Person), together with any
interest, penalty, addition to tax or additional amount imposed by any
Governmental Authority (a “Taxing Authority”)
responsible for the imposition of any such tax (domestic or foreign), or (b) liability
for the payment of any amounts of the type described above in (a) by
either Law or as a result of being party to any agreement or any express or
implied obligation to indemnify any other Person.


 





















 


	
  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

  



 





















 


	
  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