Unassociated Document


    MODIFICATION
      AND SETTLEMENT AGREEMENT

    


     

    This
      Modification and Settlement Agreement (the "Agreement")
      is made
      and entered
      into as of this 11th day of November 2007 by and among Indigo-Energy, Inc.,
      a
      Nevada corporation (the "Company"),
      HUB
      Energy, LLC, Mid-East Oil Company and Mark Thompson, an individual residing
      at
      255 Airport Road, Indiana, PA 15701 (HUB, Mid-East and Thompson are collectively
      referred to as the “Advisors”
      and
      together with the Company, the “Parties”.)

    


    WHEREAS,
      the
      Company previously entered into various agreements with the Advisors, including
      but not limited to Drilling and Operating Agreement dated July 24, 2006 (the
      “Original Agreements”) pursuant
      to which the Company engaged the Advisors to perform certain services on the
      Company’s behalf with respect to the development of certain oil and gas
      interests;.

    


    WHEREAS,
      the
      Parties have agreed that it is in all of their interests to modify the terms
      provided under
      the
      Original Agreements, including those terms relating to the payment of certain
      obligations of the Company owed to the Advisors; and

    


    WHEREAS,
      the
      Company has offered and the Advisors have agreed to accept modifications
      to the terms and condition provided in the Original Agreements, subject to
      the
      provisions set forth herein.

    


    NOW
      THERFORE,
      the
      Parties hereto agree as follows:

    


    Section
      1. Release.
      Effective upon the execution of this Agreement set forth herein (the “Contract
      Obligations”), the Advisors hereby release the Company from any liability,
      except the obligation to make payments as set forth below. It is agreed that
      upon execution of this Agreement, the Advisors will have no right to any
      overriding royalty on any new wells subject to §2(c ). Further, the Company, for
      itself and for its officers, directors, employees, agents and consultants,
      hereby agrees to release the Advisors, their employees, agents, attorneys,
      consultants and affiliates, from any liability to the Company or any of its
      affiliates. 

     

    Section
      2.  Consideration.
      As
      consideration for this release and settlement by the Parties the Parties agrees
      as follows:

    


    a. Amounts
      Owed - The Company acknowledges that they are indebted to the Advisors in the
      amount of $65,000 to Hub Energy, Inc. and $1,037,644.74 to Mid East Oil for
      Drilling Obligations and $33,039 to Mid-East Oil in Expense Reimbursements
      (cumulatively the “Old Obligations”); but have the right to certain write-offs
      with respect to the Old Obligations for work not completed or not satisfactorily
      performed. The Parties agree that all of the Old Obligations will be satisfied
      by paying $250,000 to Mid-East plus an additional $33,039 for expenses and
      $65,000 to HUB (the “Negotiated Payments”). These payments shall be made on the
      following terms:


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    All
      due
      and payable upon the first occurrence of funds received from the Company by
      either a Yorkville Advisors SEPA in the amount of two million dollars
      ($2,000,000) or greater, or general disbursement funds made available from
      any
      source in the amount of two million dollars ($2,000,000) or greater but in
      no
      case less than ten percent (10%) of the total general disbursement funding
      received from the Company. Notwithstanding the above, the Negotiated Payments
      must be made no later than January 5, 2008. In the event that Advisors have
      not
      obtained a full settlement with LK Drilling (as set forth in section 2(e) below)
      and the current litigation has not been withdrawn, the Company shall have the
      right to make payment directly to LK Drilling in order to procure the release
      of
      any liens then outstanding which payment amounts will be deducted from the
      Negotiated Payments.

    


    b. Additional
      Payments -
      The
      Company acknowledges that it will be obligated to pay the Advisors an additional
      $18,000 toward the costs of the pipeline and related completion of the Serian
      SMMP well.

    


    c.
       Wells
      Covered
      -

    


    1.
      The
      Company agrees that upon execution of this Agreement, all of the Company’s
      right, title and interest in the wells identified on Schedule A hereto will
      be
      transferred to the Advisors so that the Company will have no right to any
      portion of the production related to such wells. 

    


    2.
      The
      Advisors will give up all right, title and interest, excluding the right to
      the
      overriding royalty, on the wells identified on Schedule B. The Advisors will
      provide positive affirmation that the Company has all right and title to the
      wells identified on Schedule B as Mid East Oil Wells and will indemnify the
      Company for any claims of any third party challenging the Company’s title to
      such wells.

    


    d. Future
      Obligations - The Advisors hereby waive any right to continue to receive the
      monthly Operating Fee for the wells identified on Schedule A . With respect
      to
      the wells identified on Schedule B which are tended by the Advisors, the
      Advisors shall be entitled to a tending fee equal to the lesser of $300 or
      the
      Company’s monthly net revenue interest in such wells. Any costs other than the
      tending fee must be pre-approved in writing by Indigo. The Parties further
      agree
      that the Advisors shall have no right to any future overriding royalty on any
      wells owned by the Company, except that in the event that the Company enters
      into an agreement to develop wells in Pennsylvania, Kentucky or West Virginia
      and to utilize TAPO Energy, LLC, Dannic Energy Corp, P&J Resources Inc. or
      Mid-East Oil Company as drillers (“Protected Wells”) the Advisors shall be
      entitled to a continuing overriding royalty equal to one-sixteenth (1/16) of
      all
      gross revenues from all gas produced, saved and marketed from any Protected
      Wells for the life of such wells. The Advisors acknowledge that they shall
      have
      no right to any additional equity securities of the Company. For clarification
      purposes, the Advisors shall be entitled to retain the ten million shares of
      common stock previously issued which but shall have no right to any additional
      shares of common stock, preferred stock or options to purchase common
      stock.

    


    e. Satisfaction
      of Drilling Obligations and Clear Title and Interst.
      - The
      Advisors agree to make any payments necessary to obtain a full settlement from
      LK Drilling by January 12, 2008. The Advisors hereby agree to indemnify the
      Company from any liability arising from any failure to satisfy the obligations
      to LK or any of the drillers or subcontractors that Advisors contracted with
      during the term of the Original Agreement and recognize that such failure could
      result in significant economic damage to the Company. 


    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    


    Section
      3. Successors. This
      Agreement shall be binding upon and inure to the benefit
      of the Parties and their respective administrators, representatives, executors,
      successors and assigns, either by reason of death, incapacity, merger,
      consolidation, and/or purchase or acquisition of substantially all of the
Company's
      assets or otherwise.

    


    Section
      4. Governing
      Law, Each
      Party acknowledges that it has been represented by
      counsel in connection with this Agreement, and has executed the same with
      knowledge of its consequences.
      This Agreement is made and entered into under Pennsylvania law and shall be
      interpreted, enforced
      and governed under the laws of the laws of the Commonwealth of Pennsylvania
      without regard to its conflicts of laws principles.
      

    


    Section
      5. Paragraph
      Headings. The
      paragraph headings used in this Agreement are intended
      solely for convenience of reference and shall not in any manner amplify, limit,
      modify or otherwise
      be used in the interpretation of any of the provisions hereof.

     

    Section
      6. Severability. Should
      any of the provisions of this Agreement be declared or
      be
      determined to be illegal or invalid, the validity of the remaining parts, terms
      or provisions shall not be
      affected thereby and said illegal or invalid part, term or provision shall
      be
      deemed not to be a part of this Agreement.

     

    Section
      7. Entire
      Agreement.
      Except
      as provided in the next sentence, this
      Agreement sets forth the entire agreement between
      the Parties, and fully supersedes any and all prior agreements or understandings
      between the Parties
      pertaining to the subject matter hereof including but not limited to the
      Original Agreements. Nothwithstanding the foregoing, if the Company defaults
      in
      any payments due under this Agreement, or defaults in any other term or
      provision of this Agreement, the Advisors will be entitled to enforce this
      Agreement and the Original Agreements, at the sole option of the
      Advisors. 

    


    Section
      8. Counterparts. This
      Agreement may be executed in counterparts. Each counterpart
      shall be deemed an original, and when taken together with the other signed
      counterpart, shall constitute one fully executed Agreement.

     

    Section
      9. Further
      Assurances. From
      and
      after the date hereof, the parties hereto shall take all actions, including
      the
      execution and delivery of all documents, necessary to effectuate the
terms
      hereof.

     

    Section
      10, Survival. All
      obligations of the Parties as set forth herein shall survive the execution
      and
      delivery hereof.



    
      
         

      

      
        3

        
          

        

      

      
         

      

    


    IN
      WITNESS WHEREOF, the Parties have caused this Agreement to be entered into
      as
of
      the
      date first written above.

    


    


    
      	 	
              THE
                COMPANY:

            
	 	 
	 	
              INDIGO-ENERGY,
                INC.

               

              ___________________

              By:

              Title:

              Date:

               

              HUB-ENERGY,
                LLC

               

              _____________________

              By:

              Title:

              Date:

               

              MID-EAST
                OIL COMPANY

               

              _______________________

              By:

              Title:

              Date:

               

              ________________________

              Mark
                Thompson, Individually

            


    


    
      
         

      

      
        4

        
          

        

      

      
         

      

    


    Schedule
      A

    


    To

    Modification
      and Settlement Agreement

    Mid
      East

    


    


    Mid
      East
      Oil Wells:

    


    1.
      Scot
      #2

    2.
      Coastal Timberlands #1

    3.
      Conrad
      #3

    4.
      Crown
      Crest #1


    
      
         

      

      
        5

        
          

        

      

      
         

      

    


    Schedule
      B

    


    To

    Modification
      and Settlement Agreement

    Mid
      East

    


    


    Tapo
      Energy Company Wells:

    


    1.
      Suan
      #1

    2.
      Suan
      #2

    3.
      Suan
      #3

    4.
      Hudkins #2

    5.
      Hudkins #3

    


    Dannic
      Energy Wells:

    


    1.
      Grape
      #1

    2.
      Grape
      #3

    3.
      Grape
      #4

    4.
      Magagnotti #1

    5.
      Magagnotti #2

    


    P&J
      Resources Wells

    


    1.
      Darrell Keith #1

    2.
      Thomas
      Keith #1

    3.
      Don
      Cecil #1

    4.
      John
      Montgomery #1

    5.
      John
      Montgomery #2

    


    Mid
      East
      Oil Wells:

    


    1.
      RD
      Caddick #3

    2.
      DL
      Dominic #4

    3.
      Serian
      SMMB #1

    4.
      McCune
      #2 

    5.
      Harris
      #2

     

    
      
         

      

      
        6