Document:

Exhibit 10.1

August 21, 2007

 

 

 

Mr. Barclay Corbus

230 Santa Paula Avenue

San Francisco, CA 94127

 

Dear Clay:

 

I am pleased to extend to
you this written offer of employment for the position of Senior Vice President,
Strategic Development.

 

Title and Duties

 

We will employ you for a two
year period, beginning September 10, 2007 through September 10, 2009, to
perform services for Clean Energy as Senior Vice President, Strategic
Development, to develop strategic growth opportunities, acquisitions,
financings and other activities as described below.

 

You agree to devote all of
your business time, attention and energy to the performance of your duties as
Senior Vice President, subject to the direction and control of the Board of
Directors and policies of Clean Energy. 
This position reports to the President and CEO.  It is understood that you will reside in
Northern California, but travel to the Corporate Office as needed.

 

Primary responsibility is to
develop strategic opportunities for the Company utilizing your investment
banking experience.  This activity may
include, but not be limited to, strategic growth initiatives, acquisitions,
development of various financial structures that may enhance the growth of the
Company and/or add to the value of the Company.  You will be a member of the Senior Executive
Management Team and will work closely with the Board of Directors, CEO, CFO,
Senior VP Sales & Marketing, Senior VP Operations, and the Vice Presidents
of Finance and Leasing, and Development.

 

Compensation

 

Salary and Performance Bonus

 

As compensation for your
services, you will be paid an annual salary of $260,000 in equal installments
on the 15th and the last day of the month.  In addition, you will be

 

 

 

eligible for a performance
bonus at the rate of 50/70/100% based on criteria set by the Compensation
Committee of the Board.

 

 

Signing Bonus

 

You will receive a signing
bonus of $100,000 payable on September 10, 2007.

 

 

Stock Options

 

As part of Clean Energy’s
2007 employee incentive program, you will be entitled to receive Company stock
options in total of 350,000 options at market price.

 

 

Benefits

 

You will be eligible for benefits as an employee of Clean
Energy on the first day of the month following your date of hire.  Clean Energy’s benefits program currently
provides that Clean Energy will pay 80% of the health insurance premiums for
you and your dependent(s) if you elect coverage with the Company.  Your benefits will also include four weeks of
paid vacation (20 business days).  Clean
Energy reserves the right to change any of its benefit programs in its sole and
absolute discretion.

 

 

Reimbursement for Necessary
Business Expenses

 

Clean Energy will reimburse you for
reasonable and necessary business and travel expenses incurred in the
performance of your duties, provided that for each business and travel expense,
it is a proper deduction on the federal and state income tax return for the
Company and you present Clean Energy with adequate documentation (e.g. detailed
receipt or paid bill) which sets forth the date, place and amount of the
expenditure, an explanation of the business purpose for the expenditure, and
the names, occupations, addresses and other information sufficient to establish
a business relationship to Clean Energy concerning each person who was
entertained and any other documentation required in the future by the Internal
Revenue Service.

 

 

 

Company Vehicle

 

The Company will provide you with a natural
gas vehicle and a home refueling appliance. 
You agree to maintain a valid U.S. Driver’s License and to operate any
vehicle driven on company business in a safe and prudent manner and in
accordance with applicable laws.

 

 

Duty Not to Compete

 

While you are employed by Clean Energy, you
shall not directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director, or in any
other representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of Clean Energy, its
parent, subsidiary or affiliated companies.

 

 

Adherence to Company
Policies

 

You agree to abide by all company policies that are issued by the
company during your employment, including the following policies, which are
attached and incorporated hereby reference: confidentiality policy relating to
company information, and arbitration agreement.

 

 

Termination of Agreement

 

You and Clean Energy agree that either you or
Clean Energy may terminate the employment relationship, at will, at any time,
with or without cause.  The offer of
employment is contingent upon acceptable results of a pre-employment drug
screen test, a thorough background check, and an insurable motor vehicle record
(MVR), all conducted by Clean Energy’s third party contractor(s).

 

 

 

If this offer is acceptable to you, please
sign the included copy of this letter in the space below for your signature and
Attachments 1 and 2 and return them in the enclosed self-addressed
envelope.  This offer will remain in
effect through September 1, 2007 and will be officially withdrawn at close of
business on that day.

 

Very truly yours,

 

 

 

 

	
  /s/ Andrew J. Littlefair

  	
   

  
	
  Andrew J. Littlefair

  
	
  President and CEO

  

 

 

 

                I
have read this letter and accept the offer of employment on the terms and
conditions set forth herein.

 

 

 

	
  Date:

  	
    August 21, 2007

  	
  By:

  	
  /s/ Barclay
  Corbus

  
	
   

  	
   

  	
   

  	
  Barclay
  Corbus

  

 

 

 

ATTACHMENT 1

 

I will not use or disclose during or after my
employment, except as authorized by Clean Energy (“Company”) in the performance
of my duties, Company Information that I have or will acquire (whether or not
developed by me) during my employment by Company, its predecessor companies,
and their subsidiaries or any companies, joint ventures or other operations in
which Company has any interest.

 

The term “Company Information” as used in
this Agreement means (a) information or any item of knowledge owned, acquired,
or developed by Company not generally known in the relevant trade or industry,
the use of which confers a competitive advantage over those that do not use or
possess it including without limitation confidential information or knowledge
about Company’s products, processes, services, research, exploration, reserves,
engineering, manufacturing operations, computer programs, marketing, business
plans, and methods of doing business; (b) other information or knowledge in
Company’s possession, whether technical, business, or financial, the use or
disclosure of which might reasonably be construed to be contrary to the
interest of Company; and (c) information received from third parties under
confidential conditions or with a restriction on use or disclosure.

 

I agree that upon termination of my
employment for any reason I will turn over to Company all tangible embodiments
of Company Information that I have in my possession and my obligations not to
use or disclose Company Information will continue except that when Company
Information becomes generally available to the public other than by my acts or
omissions, it is no longer subject to the restrictions provision.

 

 

 

	
  Date:

  	
    August 21, 2007

  	
  By:

  	
  /s/ Barclay
  Corbus

  
	
   

  	
   

  	
   

  	
  Barclay Corbus

  

 

 

 

ATTACHMENT 2

 

Any controversy, dispute or claim between any
employee and the Company, or its officers, agents or other employees, shall be
settled by binding arbitration, at the request of either party.  The arbitrability of any controversy, dispute
or claim under this policy shall be determined by application of the
substantive provisions of the Federal Arbitration Act (9 U.S.C. sections 1 and
2) and by application of the procedural provisions of the California
Arbitration Act.  Arbitration shall be
the exclusive method for resolving any dispute; provided, however, that either
party may request provisional relief from a court of competent jurisdiction, as
provided in California Code of Civil Procedure Section 1281.8.

 

The claims which are to be arbitrated under
this policy include, but are not limited to claims for wages and other
compensation, claims for breach of contract (express or implied), claims for
violation of public policy, wrongful termination, tort claims, claims for
unlawful discrimination and/or harassment (including, but not limited to, race,
religious creed, color, national origin, ancestry, physical disability, mental
disability, gender identity or expression, medical condition, marital status,
age, pregnancy, sex or sexual orientation ) to the extent allowed by law, and
claims for violation of any federal, state, or other government law, statute,
regulation, or ordinance, except for claims for workers’ compensation and unemployment
insurance benefits.

 

The employee and the Company will select an
arbitrator by mutual agreement.  If the
employee and the Company are unable to agree on a neutral arbitrator, either
party may elect to obtain a list of arbitrators from the Judicial Arbitration
and Mediation Service, the American Arbitration Association, or any other
reputable dispute resolution organization.

 

The demand for arbitration must be in writing
and must be made by the aggrieved party within the statute of limitations period
provided under applicable California and/or federal law for the particular
claim.  Failure to make a written demand
within the applicable statutory period constitutes a waiver to raise that claim
in any forum.  Arbitration proceedings
will be held in Los Angeles County, California.

 

The arbitrator shall apply applicable
California and/or federal substantive law to determine issues of liability and
damages regarding all claims to be arbitrated, and shall apply the California
Evidence Code to the proceeding.  The
parties shall be entitled to conduct reasonable discovery and the arbitrator
shall have the authority to determine what constitutes reasonable
discovery.  The arbitrator shall hear
motions for summary disposition as provided in the California Code of Civil
Procedure.

 

 

 

Within thirty days following the hearing and
the submission of the matter to the arbitrator, the arbitrator shall issue a
written opinion and award which shall be signed and dated.  The arbitrator’s award shall decide all
issues submitted by the parties, and the arbitrator may not decide any issue
not submitted.  The arbitrator shall
prepare in writing and provide to the parties a decision and award which
includes factual findings and the reasons upon which the decision is
based.  The arbitrator shall be permitted
to award only those remedies in law or equity which are requested by the
parties and allowed by law.

 

The decision of the arbitrator shall be
binding and conclusive on the parties and cannot be reviewed for error of law
or legal reasoning of any kind.  Judgment
upon the award rendered by the arbitrator may be entered in any court having
proper jurisdiction.

 

The cost of the arbitrator and other
incidental costs of arbitration that would not be incurred in a court
proceeding shall be borne by the Company. 
The parties shall each bear their own costs and attorneys’ fees in any
arbitration proceeding, provided however, that the arbitrator shall have the
authority to require either party to pay the costs and attorneys’ fees of the
other party, as is permitted under federal or state law, as a part of any
remedy that may be ordered.

 

Both the Company and employees understand
that by using arbitration to resolve disputes they are giving up any right that
they may have to a judge or jury trial with regard to all issues concerning
employment.

 

No employee or other Company representative
can modify this policy in any manner nor enter into any agreement that is
contrary to this policy unless it is in writing and signed by the Chief Executive
Officer.  If any term, provision,
covenant or condition of this policy is held by a court of competent
jurisdiction or an arbitrator to be invalid, void, or unenforceable, the
remaining terms and provisions of this Policy will remain in full force and
effect and shall in no way be affected, impaired, or invalidated.

 

 

 

	
  Date:

  	
    August 21, 2007

  	
  By:

  	
  /s/ Barclay
  Corbus

  
	
   

  	
   

  	
   

  	
  Barclay
  CorbusExhibit 10.2

LNG SALES AGREEMENT

 

Between

SPECTRUM
ENERGY SERVICES, LLC

An Alaska Limited
Liability Company with offices at

8505 South Elwood Avenue, Building #123

Tulsa, OK 74132

Telephone: 918-298-6660

Fax: 918-298-6662

SELLER

 

and

 

CLEAN
ENERGY

A California
Corporation, with offices at

3020 Old Ranch Parkway, Suite 200

Seal Beach, CA 90740

Telephone: 562-493-2804

Fax: 562-546-0097

BUYER

 

 

Dated
as of October 17th, 2007

Sales Agreement No: 100-07

 

 

 

TABLE OF CONTENTS

	
  PREAMBLE

  	
  2

  
	
   

  	
   

  
	
  ARTICLE 1 DEFINITIONS

  	
  2

  
	
   

  	
   

  
	
  ARTICLE 2 TERM OF SALES AGREEMENT

  	
  3

  
	
   

  	
   

  
	
  ARTICLE 3 REPRESENTATIONS AND COVENANTS REGARDING
  LNG FACILITIES

  	
  3

  
	
   

  	
   

  
	
  ARTICLE 4 CONSTRUCTION OF FACILITIES

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 5 LNG PLANT CAPACITY AND HOURS OF OPERATION

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 6 QUALITY OF LNG

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 7 DELIVERY POINT

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 8 MEASUREMENT

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 9 SELLER’S SHUT DOWN

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 10 BUYER’S SHUT DOWN

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 11 PRICE

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 12 MONTHLY LIQUEFACTION CHARGE

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 13 GAS COST

  	
  7

  
	
   

  	
   

  
	
  ARTICLE 14 ENERGY CHARGE

  	
  8

  
	
   

  	
   

  
	
  ARTICLE 15 BILLING AND PAYMENT

  	
  8

  
	
   

  	
   

  
	
  ARTICLE 16 TAKE OR PAY

  	
  9

  
	
   

  	
   

  
	
  ARTICLE 17 EXCLUSIVITY

  	
  10

  
	
   

  	
   

  
	
  ARTICLE 18 DEFAULT

  	
  10

  
	
   

  	
   

  
	
  ARTICLE 19 LAWS

  	
  11

  
	
   

  	
   

  
	
  ARTICLE 20 LIABILITY AND WARRANTIES

  	
  11

  
	
   

  	
   

  
	
  ARTICLE 21 TAXES

  	
  12

  
	
   

  	
   

  
	
  ARTICLE 22 FORCE MAJEURE

  	
  13

  
	
   

  	
   

  
	
  ARTICLE 23 ASSIGNMENT

  	
  13

  
	
   

  	
   

  
	
  ARTICLE 24 SEVERABILITY

  	
  14

  
	
   

  	
   

  
	
  ARTICLE 25 NOTICES

  	
  14

  
	
   

  	
   

  
	
  ARTICLE 26 MODIFICATIONS AND AMENDMENTS

  	
  15

  
	
   

  	
   

  
	
  ARTICLE 27 CONFIDENTIALITY

  	
  15

  
	
   

  	
   

  
	
  ARTICLE 28 WAIVER

  	
  15

  
	
   

  	
   

  
	
  ARTICLE 29 MISCELLANEOUS

  	
  16

  
	
   

  	
   

  
	
  ARTICLE 30 INTERPRETATION

  	
  19

  
	
   

  	
   

  
	
  ARTICLE 31 PRIOR AGREEMENTS

  	
  19

  
	
   

  	
   

  
	
  ARTICLE 32 TERMINATION

  	
  19

  
	
   

  	
   

  
	
  ARTICLE 33 DAMAGES, FEES AND COSTS

  	
  20

  
	
   

  	
   

  
	
  ARTICLE 34 MUTUAL WAIVER OF CERTAIN REMEDIES

  	
  20

  
	
   

  	
   

  
	
  ARTICLE 35 RELATIONSHIP OF THE PARTIES

  	
  21

  
	
   

  	
   

  
	
  ARTICLE 36 EXECUTION REQUIRED

  	
  21

  
	
   

  	
   

  
	
  ARTICLE 37 WAIVER OF RIGHT TO TRIAL BY JURY

  	
  21

  
	
   

  	
   

  
	
  SIGNATURE PAGE

  	
  22

  
	
   

  	
   

  
	
  EXHIBIT A WAIVER OF SOVEREIGN IMMUNITY DEFENSE;
  CONSENT TO JURISDICTION

  	
  23

  

 

1

 

LNG SALES AGREEMENT

(Sales Agreement No. 100-07)

 

THIS
LNG SALES AGREEMENT (this “Sales Agreement”) is entered into as of the 17th day
of October 2007 (the “Effective Date”) by and between CLEAN ENERGY,  a California corporation,  hereinafter
referred to as “Buyer,” and SPECTRUM ENERGY
SERVICES, LLC, an Alaska limited liability company, hereafter
referred to as “Seller.” Buyer and Seller are sometimes hereinafter referred
to, individually, as “Party” and collectively, as “Parties.”

W
I T N E S S E T H:

WHEREAS,
Buyer is in the business of marketing liquefied natural gas and needs
additional liquefied natural gas supplies in Arizona and California in order to
meet customer demand;

WHEREAS,
Seller is in the business of processing natural gas and developing plants and
projects that produce liquefied natural gas;

WHEREAS,
Seller is the owner of certain liquefied natural gas production facilities,
which when installed at or near Ehrenberg, Arizona as provided below, will have
the capacity to produce a certain amount of liquefied natural gas for sale to
Buyer on the terms and conditions set forth in this Sales Agreement; and

WHEREAS,
Buyer desires to purchase liquefied natural gas from Seller on the terms and
conditions set forth in this Sales Agreement,

NOW
THEREFORE, in consideration of the covenants and provisions herein contained,
Buyer and Seller do mutually agree as follows:

ARTICLE 1 DEFINITIONS

1.1                                 “Adjustment
Date” shall be as defined in Article 12.2

1.2                                 “Allowed
Power” shall be as defined in Article 14.

1.3                                 “BTU” shall
mean British Thermal Unit and shall have the meaning as defined in the American
Gas Association Report No. 3 as revised from time to time.

1.4                                 “Business
Day” shall mean a day other than Saturday, Sunday or any other day when
commercial banks in New York, New York are authorized or required to close.

1.5                                 “Buyer’s
Shut Down” shall mean any period during which the LNG Plant is able to produce
LNG, but Buyer is unable or elects not to purchase and receive LNG from the LNG
Plant.

1.6                                 “Capacity,”
or “Plant Capacity,” or “LNG Plant Capacity” shall mean the GPD that the LNG
Plant can produce in a Day as described in Article 5.4.

1.7                                 “Day” means
a period of time from 12:01 a.m. to Midnight.

1.8                                 “Delivery”
or “Delivered” shall mean the transfer of LNG from the LNG Plant into Buyer’s
LNG trailers at the Delivery Point.

1.9                                 “Delivery
Point” shall mean the connection located on the discharge side of the loading
hose at the truck loading facility at the LNG Plant.

1.10                           “Energy
Charge” shall be as defined in Article 14.3.

1.11                           “Feedstock
Gas” shall mean the Natural Gas delivered to the LNG Plant less any gas
returned to the gas supplier.

 

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

2

 

1.12                           “Gallon” or “US
Gallon” shall be a measure of LNG that weighs 3.55 pounds until as determined
in Article 8.1.

1.13                           “Gas” or “Natural
Gas” shall mean natural gas delivered by or for Seller to the LNG Plant.

1.14                           “GPD” means
Gallons per Day.

1.15                           “Liquefaction
Fee” shall have the definition set forth in Article 12.1.

1.16                           “LNG” shall
mean liquefied natural gas, largely made up of methane in a cryogenic liquid
state.

1.17                           “LNG Plant”
or “Plant” shall mean the components required to produce LNG at the Plant
Capacity required pursuant to this Sales Agreement at the LNG Plant Site.

1.18                           “LNG Plant
Site” shall mean the location of the LNG Plant as defined in Article 4.1.

1.19                           “Market Risk”
shall mean Buyer’s risk of not being able to successfully sell LNG to end users
or others at all or at a particular price.

1.20                           “MCF” shall
mean one thousand (1,000) cubic feet.

1.21                           “MMBTU”
shall mean one million (1,000,000) British Thermal Units.

1.22                           “MMCF” shall
mean one million (1,000,000) cubic feet.

1.23                           “Month”
shall mean a calendar month.

1.24                           “Monthly
Liquefaction Charge” shall have the definition set forth in Article 12.1 below.

1.25                           “Natural Gas
Provider” shall mean the vendor of Natural Gas which supplies the Feedstock
Gas.

1.26                           “Sales
Agreement Year” shall mean a period of twelve (12) consecutive Months
commencing on the first day of the first Month following the initial delivery
of LNG from Seller to Buyer, except that the period from the initial delivery
of LNG to the first day of the following Month shall be included in the first
Sales Agreement Year.

1.27                           “Seller’s
Shut Down” shall mean any period in excess of four (4) hours in duration during
which Seller is unable to produce LNG at the LNG Plant.

1.28                           “Take or Pay”
shall have the definition set forth in Article 16.1 below.

ARTICLE 2 TERM OF
SALES AGREEMENT

2.1                                 This Sales
Agreement shall be deemed operative and in full force and effect from and after
the Effective Date and shall remain operative and in full force and effect for
a primary term of ten (10) Sales Agreement Years, unless earlier terminated
pursuant to the terms of this Sales Agreement (the “Primary Term”).  Upon expiration of the Primary Term, this
Sales Agreement shall automatically renew on a year-to-year basis
(each year, a “Renewal Term”) until terminated by either Party at the end of
the Primary Term or any subsequent Renewal Term upon at least one hundred and
eighty (180) days prior written notice to the other Party.  The Primary Term and all Renewal Terms are
collectively referred to herein as the “Term.”

ARTICLE 3
REPRESENTATIONS AND COVENANTS REGARDING LNG FACILITIES

3.1                                 Seller
represents and warrants that it is the owner of certain LNG Plant equipment.
Seller agrees to install, maintain, and operate the LNG Plant in good safe
operating condition, in accordance with generally accepted industry practices
and the terms of Article 4 below.

 

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

3

 

3.2                                 Buyer
represents that it currently has LNG trailers, LNG storage facilities and
marketing and distribution systems in place and available for the receipt,
collection, distribution and marketing of LNG at and from the Delivery Point at
Seller’s LNG Plant to Buyer’s customers or marketing distribution points (the “Buyer
System”).

3.3                                 Other
representations or warranties are set forth elsewhere in this Sales Agreement.

ARTICLE 4 CONSTRUCTION OF FACILITIES

4.1                                 Upon
execution of this Sales Agreement, Seller shall commence and complete with due
diligence the construction and installation of the LNG Plant at or within
fifteen miles of Ehrenberg, Arizona  (the
“LNG Plant Site”).

4.2                                 Within 30
days following execution of this Sales Agreement, Seller shall deliver to Buyer
a construction schedule with a start-up date for the LNG Plant of July 1,
2008 (the “Start-up Date”).

4.3                                 Seller will
promptly notify Buyer upon reaching certain milestones to be set forth in the
construction schedule.  These milestones
shall include the following:  1)
Execution of a ground lease between Seller and the land owner; 2) Application
for construction permits and other authorizations from governmental authorities
required for construction and operation of the LNG Plant (collectively, “Permits”);
3) Receipt of construction Permits from governmental authorities for the LNG
Plant; 4) Installation of LNG Plant foundations; 5) Installation of electrical
power to the LNG Plant; 6) Setting of key LNG Plant components; 7) Installation
of LNG storage tanks; 8) Completion of interconnecting piping; 9) Completion of
electrical and instrumentation systems; 10) Completion of integrity testing;
11) Completion of Gas supply interconnecting piping with the Gas Supplier; 12)
Functional check out of LNG Plant operation; and 13) Issuance of Certificate of
Occupancy or the equivalent thereof authorizing commencement of operation of
the LNG Plant.

ARTICLE 5 LNG PLANT CAPACITY AND HOURS OF
OPERATION

5.1                                 The LNG
Plant will be designed to have and will have the Capacity to produce a minimum
of 50,000 GPD. However, initially, the LNG Plant may produce fewer than 50,000
GPD due to insufficient electrical power being available from Arizona Public
Service Co. (“APS”), the electricity provider to the LNG Plant.  Seller will make commercially reasonable
efforts to cause the LNG Plant to produce 50,000 GPD beginning on July 1, 2008,
although it shall not be in default of this Sales Agreement if its failure or
inability to do so is due to a lack of electrical power from APS.  In no event, however, shall the LNG Plant
produce fewer than 20,000 GPD during the period from July 1, 2008 to June 30,
2009.

5.2                                 On and after
July 1, 2009, regardless of available electric power supplied by APS, the LNG
Plant will produce a minimum of 50,000 GPD.

5.3                                 Prior to the
Start-Up Date, Seller will provide prompt written notice to Buyer of
anticipated changes in Plant Capacity and keep Buyer promptly apprised of
issues it is dealing with regarding Plant Capacity and power availability.
After the Start Up Date of the LNG Plant, Plant Capacity will be determined by
demonstration over a 24-hour period pursuant to the procedure described
in Article 5.4 below. Prior to Start Up Date, Plant Capacity will be determined
by thermodynamic modeling.

5.4                                 Seller will
arrange for a Plant Capacity test and provide Buyer five (5) Business Days
prior written notice of the test to enable Buyer to be present, the first of
which shall occur within three (3) months after Plant startup.  Subsequent tests can be requested by Buyer and
will be performed within 10 days of the request.  To administer the test, Seller will operate
the Plant in a normal mode over a seventy-two (72) hour period during which
Plant production will be recorded every twelve (12) hours. The Plant Capacity
will be determined by taking the average hourly production over the 72-hour
period and multiplying the hourly average by 24.

 

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

4

 

                                                Subsequent
changes in Plant Capacity will be calculated the same way as the initial Plant
Capacity test.

5.5                                 Buyer and
Seller shall use commercially reasonable efforts to regulate the Delivery in
quantities, at times and in a manner that prevents LNG stored at the LNG Plant
from exceeding 100,000 Gallons at any time.

5.6                                 Seller will
use commercially reasonable efforts to regulate its production schedule so that
LNG produced by the LNG Plant will be available for Delivery at as much of a
uniform rate of flow as is practicable.

5.7                                 Subject to
Seller Shut Downs, the LNG Plant shall be operational 24 hours per Day and
Buyer may take Delivery at any time during the time the LNG Plant is operating.

ARTICLE 6 QUALITY OF LNG

6.1                                 The LNG
Delivered at the Delivery Point hereunder, shall:

(a)                                  be free of
solids, sand, salt, dust, gums, crude oil, and other objectionable substances
which may be injurious to facilities and systems designed for LNG use;

(b)                                 contain not
more than one mole percent (1%) of ethane;

(c)                                  contain at
least ninety-seven mole percent (97%) of methane;

(d)                                 contain not
more than three mole percent (3%) of nitrogen;

(e)                                  when
delivered to the loading pumps, the LNG will have a saturation pressure not to
exceed 15 PSIG; and

(f)                                    be free of
odor.

ARTICLE 7 DELIVERY POINT

7.1                                 Delivery of
LNG purchased by Buyer hereunder from Seller shall be made at the Delivery
Point.  As part of Seller’s obligation to
construct the LNG Plant, Seller, at its cost, will install facilities
sufficient to enable Buyer’s personnel to operate and pump LNG into Buyer’s LNG
trailers.

ARTICLE 8 MEASUREMENT

8.1                                 The unit of
measurement for LNG delivered under this Sales Agreement shall be one Gallon of
LNG. Unless otherwise stated, all quantities given herein are in terms of such
unit. For the purposes of this Sales Agreement, each such Gallon shall weigh
3.55 Pounds until actual LNG produced from the Plant is analyzed to determine
the composition and the weight of one US Gallon. The computations used to
determine the actual weight in Pounds per Gallon and Gallons per MMBTU will be
performed by CHI Engineering Co. or another third party engineering firm
mutually agreed upon using Gas Processors and Suppliers Association (GPSA)
standards.

8.2                                 Seller shall
calibrate its truck scale on an annual basis. If either Party, at any time,
desires a special test of the scale, it will promptly notify the other Party,
and the Parties will then cooperate to secure a calibration test and a joint
observation of any adjustments, if such adjustments are necessary. If the scale
is accurate upon calibration to within 2%, the Party who requested the test
will pay for the calibration test. If, upon calibration, the scale equipment is
found to be inaccurate by two percent (2%) or more, Seller shall pay the cost
of the test and registrations thereof shall be corrected at the rate of such
inaccuracy for any period which is definitely known and agreed upon, but in the
case the period is not definitely known and agreed upon, then for a period
extending back one half (1/2) of the time elapsed since the last date of

 

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                                                calibration
or 3 months whichever is shorter. The amount of inaccuracy, if over 2%, will be
invoiced or credited to the appropriate Party within 10 days. Following any
test, scale equipment found inaccurate shall immediately be restored as closely
as possible to a condition of accuracy. If, for any reason, the scale is out of
service or out of repair so that the amount of LNG delivered cannot be
ascertained or computed from the reading thereof, the LNG delivered during the
period such scales are out of service, or out of repair, shall be transported
to an agreed upon alternative truck scale.

8.3                                 Seller’s
scale shall be of sufficient quality to be approved and certified by the local
governmental agency having jurisdiction over weights and measures.  Seller will provide detailed information to
Buyer about the scale prior to acquiring the scale for installation into the
LNG Plant and provide Buyer with the option of paying Seller to upgrade the
scale to a model preferred by Buyer that can weigh individual truck axle
groupings as well as total truck weights. 
Seller will provide Buyer seven (7) days to determine if it wishes to
pay for such an upgrade.  In the event
Buyer elects to pay for said upgrade, it will become the property of Seller.

8.4                                 Buyer
anticipates that it will be able to recover LNG vapors from its LNG trailers upon
their arrival at the LNG Plant for delivery. 
Buyer and Seller will cooperate in developing a method of transferring
such vapor to the LNG Plant and measuring the volume of LNG derived from such
vapor recovery, for which volume Buyer shall receive a credit against Buyer’s
payments to Seller under Article 15.1.

ARTICLE 9 SELLER’S SHUT DOWN

9.1                                 The LNG
Plant is engineered to operate 345 Days per year. Seller will provide Buyer
with at least one Month advance notice in writing of any planned Seller’s Shut
Down in any Month.  Buyer will provide
Seller with its preferred schedule for Delivery at the Delivery Point.  Buyer acknowledges that there will only be
one (1) loading rack and scale at the LNG Plant and that it will thus not be
possible to load multiple trucks simultaneously and agrees to take such fact
into account in developing its LNG Delivery schedules. The Parties will
cooperate to make the scheduled Seller’s Shut Downs coincide with times that
are as convenient as practicable for Buyer.

9.2                                 In the event
of an unscheduled Seller’s Shut Down due to mechanical problems, interruption
in electricity supply or Natural Gas supply or any Force Majeure condition,
Seller will immediately notify Buyer of the circumstances, and provide
sufficient details to Buyer. Seller will keep Buyer promptly apprised of any
change in status of Seller’s Shut Down.

9.3                                 In the event
that for any reason, other than a Default by Buyer or Seller’s Shut Down not
exceeding ten (10) Days, Seller is unable or unwilling to operate the LNG
Plant, Buyer shall have the right, but not the obligation, to operate the LNG
Plant as an independent contractor, until such time as Seller is able or
willing, as the case may be, to operate the LNG Plant.  In such event, Buyer shall be entitled to
reimbursement of its reasonable costs of operating the LNG Plant, which
reimbursement shall be by way of offset against Buyer’s payments to Seller
under Article 15.

ARTICLE 10 BUYER’S SHUT DOWN

10.1                           In the event
that Buyer, for whatever reason(s), other than Force Majeure, elects not to
take LNG from the Plant or to take less than Plant Capacity for a prolonged
period, Buyer will give as much advance written notice to Seller as reasonably
possible under the circumstances of its intention to discontinue taking LNG
from the Plant or to take less than Plant Capacity, and the anticipated
duration of discontinuance or reduction. 
Buyer will be responsible for taking away any remaining LNG product
stored at the Plant.  Under these
circumstances Buyer shall be subject to its Take or Pay Monthly Quantity
pursuant to Article 16 below.

 

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ARTICLE 11 PRICE

11.1                           Subject to
all of the terms and conditions of this Sales Agreement, Buyer shall pay Seller
the sum of (1) the Monthly Liquefaction Charge, (2) the Gas Cost of the natural
gas purchased in accordance with Article 13, and (3) the Energy Charge to
produce the LNG, as defined in Article 14.

ARTICLE 12 MONTHLY LIQUEFACTION CHARGE

12.1                           The initial
liquefaction fee is [***] per Gallon of LNG Delivered to Buyer (the “Liquefaction
Fee”).  The “Monthly Liquefaction Charge”
shall mean the Liquefaction Fee times the number of Gallons delivered to Buyer
during a Month.

12.2                           On January
1, 2009 and on January 1st of each subsequent year during the Term of this
Sales Agreement (each, an “Adjustment Date”), the Liquefaction Fee shall be
subject to an annual adjustment. The annual adjustment shall be equal to the
percentage change, upward or downward, in [***] (the “Index”), during the one-year
period ending on the applicable Adjustment Date; provided, however, in no event
shall any such annual adjustment exceed [***] and in no event shall the
Liquefaction Fee be less than the amount specified in Article 12.1. For
example, the first such adjustment shall be effective as of January 1, 2009
based on the change in the Index from January 1, 2008 through January 1, 2009
as described above and subject to the foregoing limitations.

ARTICLE 13 GAS COST

13.1                           Seller shall
make arrangements for the purchase of Feedstock Gas for the Plant. Seller will
propose its preferred method of purchasing the Feedstock Gas to Buyer
including, without limitation, how it will be priced and any other terms
associated with acquiring the Feedstock Gas. 
Buyer will be provided with a thirty (30) day period within which to
object to the purchase method and propose an alternative.  In such event, the Parties shall negotiate in
good faith to agree upon the Feedstock Gas purchase method to be implemented
and used by Buyer that will provide the quantities of Feedstock Gas needed by
Seller to satisfy its obligations under this Sales Agreement at the lowest
total cost practicable.  In the absence
of any objection and proposed alternative by Buyer within such 30-day period,
Seller will execute the purchase arrangements proposed as Seller’s preferred
method and Buyer will reimburse Seller for the cost of purchased Feedstock Gas.  In the event the parties cannot agree upon
the purchase method, Buyer shall be responsible for obtaining at its sole cost
and expense Feedstock Gas for the LNG Plant and for delivering the same thereto
in sufficient quantities to allow Seller to satisfy its obligations under this
Sales Agreement in accordance with and subject to Article 13.2 below.  Unless Buyer pays the supplier of the
Feedstock Gas, the quantity of purchased Feedstock Gas for which Seller will be
reimbursed will be determined by the weights from the scale readings used to
calculate the LNG sales volume and shall exclude any Feedstock Gas that is lost
or combusted in the LNG production process. The costs to be reimbursed shall
include not only the cost for the volume of Feedstock Gas converted to LNG as
described above, but also the transportation costs, metering and blending
charges and all other costs associated with purchasing the Feedstock Gas and
having it delivered to the LNG Plant (said cost of Feedstock Gas and such other
costs collectively, the “Gas Cost”).  In
the event of a Take or Pay situation based on a Buyer’s Shut Down, the Gas Cost
will also include any penalty, take or pay charges, transportation charges
and/or other fees or charges Seller has to pay for not taking the Feedstock
Gas.

13.2                           In the event
Buyer wishes to make its own arrangements for Natural Gas deliveries to the LNG
Plant and pay directly for this Natural Gas supply, it shall provide Seller
with no less than sixty (60) days prior written notice of its intent to do
so.  As part of such notice, Buyer will
propose to Seller its preferred method of purchasing the Gas, how it will be
priced and delivered to the Plant, and any other terms associated with
acquiring the Gas.  Seller will have a
thirty (30) day period to object to the purchase method if it believes that the
proposed arrangement will adversely affect its ability to perform its
obligations under this Sales Agreement. 
In such event,

 

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                                                the Parties
shall negotiate in good faith to agree upon the Natural Gas purchase
arrangement to be entered into by Buyer that will provide the quantities of
Natural Gas needed by Seller to satisfy its obligations under this Sales
Agreement.  In the absence of any
objection by Seller within such 30-day period, Buyer shall execute the purchase
arrangements proposed and give written notice to Seller of the date on which
the new arrangement will be implemented so that Seller may cancel Seller’s
existing purchase agreements.  Seller
shall reimburse Buyer for any gas consumed in the LNG production process at a
price not to exceed Buyer’s supply Gas Cost. 
Any early termination penalties or other costs that Seller may incur due
to its cancellation of gas purchase agreements or other arrangements and
substitution of Buyer’s new arrangement will be reimbursed by Buyer within
thirty (30) calendar days after Seller’s invoice(s) therefore. If Buyer elects
to supply Natural Gas pursuant to this Article, Buyer will arrange for and pay
directly for all transportation, metering and blending charges and other gas
acquisition costs associated with said volume of Natural Gas, and Buyer will indemnify
and hold Seller harmless from any and all claims, losses, liability, costs or
expenses associated with the supply of Gas to the Plant unless attributed to
the Seller or to a Force Majeure.  In the
event of a Seller’s Shut Down, Seller will indemnify and hold Buyer harmless
from any and all claims, losses, liability, costs or expenses associated with
the supply of Gas to the Plant including any penalty, take or pay charges,
transportation charges and/or other fees or charges Buyer has to pay for not taking
the Natural Gas unless due to a Force Majeure event.

ARTICLE 14 ENERGY CHARGE

14.1                           In addition
to the other charges payable by Buyer to Seller under this Sales Agreement,
Buyer shall pay to Seller an Energy Charge on a monthly basis.  The method used to calculate the amount of
the Energy Charge will be identical to the method used by Arizona Public
Service Company (APS) as if APS had delivered the “Allowed Power” during the
subject month.

14.2                           The Allowed
Power has two components: (1) the quantity of power delivered measured in
kilowatt hours (kwh), which will be calculated by multiplying the Gallons
delivered in the subject month by [***] and (2) the monthly power demand as
measured in kilowatts (kw), which shall be determined by multiplying [***] for
the subject month by [***].  For the
purposes of calculating the monthly power demand, Plant Capacity will not
exceed 50,000 Gallons per day without Buyers prior written approval.

14.3                           The Energy
Charge will be calculated by multiplying each of the respective Allowed Power
components, as calculated in accordance with Article 14.2, by the applicable
rates for Transmission Service contained in Arizona Public Service Company’s
(APS) Rate Schedule [***], or as amended from time to time and approved by the
Arizona Corporation Commission or its successor, and the Energy Charge will
also include all other adjustments, assessments, charges and taxes that APS is
required to charge its customers under the Transmission Service contained in
its Rate Schedule [***] or, as amended from time to time and approved by the
Arizona Corporation Commission or its successor..

14.4                           If APS
changes its demand charge structures, then both Parties will negotiate a new
Energy Charge in a manner that is consistent with Article 14.1.

ARTICLE 15 BILLING AND PAYMENT

15.1                           On or before
the 15th day of each Month, Seller shall render to Buyer an invoice showing the
number of Gallons of LNG delivered to Buyer at the Delivery Point during the
preceding calendar Month and the amount due to Seller according to the
measurement, terms, conditions and price herein provided. The invoice will
separately identify and include the number of delivered Gallons, Take or Pay
Gallons, if any, Monthly Liquefaction Charge, Gas Cost, Energy Charge for the
previous Month, and Conditioning Fees, if any. In the case of the Energy
Charge, information in the invoice will include the current published APS rates
applicable to the respective month. 
Buyer will provide Seller with the form Buyer desires Seller to use in
generating the invoice prior to the start up of the LNG Plant.

 

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15.2                           In the event
Buyer supplies the Natural Gas to the Plant in accordance with Article 13.2,
Buyer  shall invoice Seller for the
difference between what Buyer was charged for the Natural Gas and the quantity
of Natural Gas condensed into LNG and Delivered for the subject month.  Seller shall pay the invoice in accordance
with Article 15.4.

15.3                           Seller will
install an enclosed, air conditioned room that will be close to the truck
loading facility so that Buyer can install point of sale systems that will
produce a bill of lading for each load of LNG Delivered.  Seller will provide scale weight indicators
and data so Buyer may interface it with Buyer’s systems.  Seller will provide composition of the LNG to
be loaded so Buyer’s system can also utilize this data.  Seller shall provide Buyer with loading
controls such that Buyer’s system will have to authorize any and all
Deliveries.  Buyer’s system will produce
a duplicate bill of lading for each Delivery that will be kept by Seller at the
LNG Plant for a period of 24 months.

15.4                           All invoices
will be paid within thirty (30) calendar days of the invoice date by electronic
funds transfer to invoicing Party’s bank account the amount as shown on the
above mentioned invoice. In the event either Party disputes any portion of the
amount on the invoice, said Party shall pay those amounts not in dispute and
notify the other Party in writing of the details associated with the disputed
amount no later than fifteen (15) days after the invoice date.

15.5                           In the event
an error is discovered in the amount shown to be due in any invoice such error
shall be adjusted without interest or penalty as soon as reasonably possible;
provided, however, any invoice shall be final as to both Parties unless written
notice of an error in such invoice is given by a Party to the other Party
within one (1) year after payment therefore has been made. Such notice shall be
effective when received by the Party to which such notice is sent.

15.6                           In the event
a Party fails to pay all of the amount of any invoice, as set forth in Articles
15.1, 15.2, and 15.4 above, upon written notice from the invoicing Party to the
other Party, the other Party shall have ten (10) days to cure the Default
condition.  Upon the other Party’s
failure to cure the Default condition, the invoicing Party shall have the right
to (a) require payment in advance of each Delivery, or (b) withhold and set off
payment of any amounts of monies due or owing by Seller to Buyer, whether in
conjunction with this Sales Agreement or otherwise, against any and all amounts
due or owing by Buyer to Seller under this Sales Agreement, or (c) suspend or
discontinue services until such amount is paid, or (d) terminate this Sales
Agreement. In addition, in the event an invoice is not paid within the time set
forth in Article 15.4, the undisputed invoice balance will accrue a late fee of
one percent (1%) of the undisputed balance for each month payment is late. The
exercise by the invoicing Party of any of these options shall not preclude the
invoicing Party from pursuing any other available remedy in equity or at law.
The prevailing Party shall be entitled to claim recovery pursuant to Article
33.2.

15.7                           Seller and
Buyer shall each preserve all records pertaining to this Sales Agreement,
including all test and measurement data and charts, and all test equipment
calibration records for a period of at least two (2) years, or longer as shall
be required under law or regulation. 
Each Party, or its designated representative shall have access to the
books and records of the other Party upon reasonable notice during regular
business hours to the extent such records are applicable to the quality,
measurement, billing, pricing and quantities of LNG delivered hereunder.

ARTICLE 16 TAKE OR PAY

16.1                           It is
recognized that (a) Seller is making a considerable financial investment in the
capital cost of the LNG Plant and a financial return is required and Seller is
relying solely on Buyer’s commitments and obligations under this Sales
Agreement for such return and that Seller is granting an exclusive marketing
arrangement to Buyer pursuant to this Sales Agreement; (b)

 

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                                                Seller would
not undertake the cost of building the LNG Plant were it not for Buyer’s
agreement as set forth herein to agree to purchase the entire Plant
Capacity.  Therefore, Buyer agrees to pay
Seller for the Take or Pay Monthly Quantity regardless of Buyer’s ability to
take Delivery of the Take or Pay Monthly Quantity of LNG and thus, the Market
Risk is fully assumed by Buyer by its execution of this Sales Agreement.  In the event Buyer for any reason, other than
Force Majeure, fails to take delivery of the Take or Pay Monthly Quantity of
LNG from Seller, where the Plant Capacity was available to be taken, Buyer will
pay Seller an amount equal to (1) the  Liquefaction Fee multiplied by the
Take or Pay Monthly Quantity, (2) the actual demand charge and other fixed,
monthly charges from APS, and (3) any unavoidable Gas Costs related to the
shortfall of LNG gallons taken below the Take or Pay Monthly Quantity.  Buyer agrees that the Take or Pay Monthly
Quantity for each Month shall be equal to the number of days in such Month
multiplied by 45,000 GPD (the “Take or Pay Monthly Quantity”).  By way of example, if a particular Month
contains thirty (30) days, the Take or Pay Monthly Quantity for such Month
would be (30 days X 45,000 GPD) or 1,350,000 Gallons.  Take or Pay shall apply when the LNG Plant is
not experiencing a Seller’s Shut Down, and the Plant Capacity is available to
produce LNG and Buyer does not take Delivery of its Take or Pay Monthly
Quantity for reasons other than a Force Majeure, Buyer must pay Seller as if
Buyer had taken Delivery of the Take or Pay Monthly Quantity of LNG, subject to
the provisions of this Article 16.

16.2                           Notwithstanding
Article 16.1 above, at times when the quality of LNG delivered by Seller does
not meet the specifications set forth in Article 6, Buyer shall only be
required to purchase and take delivery of fifty percent (50%) of the Take or
Pay Monthly Quantity during such period, but in no case shall Buyer be required
to take Delivery of LNG that is less than 92 mole percent methane and not more
than 4 mole percent ethane but otherwise meets the specifications listed in
Article 6.  In such event, Seller shall
have the right to sell the quantities of the off specification LNG not purchased
by Buyer to others. Buyer agrees to use its commercially reasonable efforts to
market all of the Plant Capacity during such upset periods and Seller agrees to
use  commercially reasonable efforts to
resolve the composition issue and deliver LNG meeting the specifications set
forth in Article 6.1 as soon as practicable. 
Both Parties recognize that the composition of the Feedstock Gas might
vary from time to time and there is a remote chance that the Feedstock Gas may
be too ethane rich for the Plant to remove it to less than the one mole percent
(1%) level.

16.3                           Notwithstanding
Article 16.1 above, in the event of a Seller’s Shut Down, Buyer is relieved
from any Take or Pay liability during the actual period of the Seller’s Shut
Down or a Force Majeure event and during the first twenty-four (24) hours after
the LNG Plant is restarted.

16.4                           In the event
that the Plant Capacity is less than 50,000 GPD as determined in accordance
with Article 5.4 or as agreed to by the Parties, the Take or Pay Quantity of
45,000 GPD in Article 16.1 will be reduced on a pro rata basis.

ARTICLE 17 EXCLUSIVITY

17.1                           Seller is
constructing the LNG Plant for the purpose of dedicating to Buyer all of the
Plant’s Capacity for the term of the Sales Agreement and, subject to exceptions
set forth in this Sales Agreement, that it will sell all LNG produced at the
Plant to Buyer pursuant and subject to the terms and conditions of this Sales
Agreement. Buyer agrees to purchase all of the Plant’s LNG production, not to
exceed 45,000 GPD. As such, it is agreed that no LNG will be marketed from this
Plant to other parties without the express written permission of Buyer, except
as otherwise provided in this Sales Agreement and unless Buyer is in Default.
In the event of a Default, as defined in Article 18, by Buyer, Seller shall use
commercially reasonable efforts to sell LNG to others.

17.2                           Upon
execution of this Sales Agreement, Seller will advise other entities with which
it has communicated within the ninety (90) days preceding the Effective Date
regarding the sale of LNG by the LNG Plant, that Seller has entered into an
exclusive arrangement for the sale of

 

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                                                LNG to Buyer
and at Buyer’s option, will advise those entities of Buyer’s identity so they
may contact Buyer if interested in purchasing LNG. Except as otherwise
permitted pursuant to the terms of this Sales Agreement, Seller will make no
further marketing efforts other than during the 180 day period prior to the
expiration of this Sales Agreement, in the event notice is given by either
Party not to extend the term of this Sales Agreement as provided in Article 2.1
above.

ARTICLE 18 DEFAULT

18.1                           Seller’s
rights upon a payment default by Buyer are set forth in Article 15 above.  Subject to Article 15 and notwithstanding any
other provision herein, a Party to this Sales Agreement (the “Defaulting Party”)
shall be in default of this Sales Agreement if the Defaulting Party shall (a)
default in the payment or performance of any material obligation to the Party
not in default (the “Non-defaulting Party”) under this Sales Agreement, and
such default shall continue for thirty (30) days after notice of such default
from the Non-defaulting Party to the Defaulting Party (or such longer period if
such default cannot be cured within such 30-day period provided that the
Defaulting Party promptly commences curing within such 30-day period and
thereafter pursues the same with due diligence until completion); (b) file a
petition or otherwise commence or authorize the commencement of a proceeding or
case under any bankruptcy, reorganization, or similar law for the protection of
creditors or have any such petition filed or proceeding commenced against it;
(c) otherwise become bankrupt or insolvent (however evidenced); (d) be unable
to pay its debts as they fall due by acceleration or otherwise; or (e) fails to
give adequate security for, or assurance of, its ability to perform its obligations
hereunder within ten (10) days of a reasonable request therefore from the
Non-defaulting Party (each a “Default”).

18.2                           Upon the
occurrence of a Default described above, and for so long as such Default is
continuing, the Non-defaulting Party shall, in addition to all other rights and
remedies available to the Non-defaulting Party set forth elsewhere in this
Sales Agreement, shall have the right to exercise any and all rights and
remedies available under applicable law.

18.3                           This Article
18 shall be without prejudice and in addition to any right of termination,
setoff, combination of accounts, lien, or other right to which  the Non-defaulting Party is at any time
otherwise entitled (whether by operation of law, contract, or otherwise).

ARTICLE 19 LAWS

19.1                           This Sales
Agreement shall be subject to, and each Party shall perform its obligations
hereunder in compliance with, all valid and applicable laws, orders, rules and
regulations made by duly constituted governmental authorities. The
interpretation and performance of this Sales Agreement shall be governed and
construed in accordance with the laws of the State of Texas, excluding any
conflict of law principles which may apply to the laws of another jurisdiction.

ARTICLE 20 LIABILITY AND WARRANTIES

20.1                           Buyer’s
Liability for Possession and Control of LNG. As between
Buyer and Seller hereto, Buyer shall be deemed to have title to and be in
control and possession of all LNG delivered by Seller under this Sales
Agreement upon Delivery thereof by Seller to Buyer at the Delivery Point.  From and after such delivery at the Delivery
Point, Buyer will be fully responsible and liable for any and all LNG loss,
damages, injuries, claims, actions, expenses and liabilities, including reasonable
attorney’s fees caused or resulting from Buyer’s handling, transportation and
sale of LNG following Delivery and Buyer shall release, indemnify, defend and
hold Seller harmless from and against any and all claims, suits, judgments,
damages, losses, liability and expenses on account of the foregoing matters for
which Buyer is responsible.

20.2                           Seller’s
Liability for possession and Control of Natural Gas and/or LNG. As between
Seller and Buyer hereto, Seller shall have title and/or custody to and be in
control and possession of any Natural Gas and/or LNG from and after the time
such Natural Gas is received at the Plant and until the LNG is Delivered to
Buyer at the Delivery Point.  Until
Delivery at the Delivery Point, Seller will be fully responsible and liable for
any and all Natural Gas and/or LNG loss, damages,

 

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                                                injuries,
claims, actions, expenses and liabilities, including reasonable attorney’s fees
caused by or resulting from the Natural Gas or LNG and Seller shall release,
indemnify, defend and hold Buyer harmless from and against any and all claims,
suits, judgments, damages, losses, liability and expenses on account of the foregoing
matters for which Seller is responsible.

20.3                           Notwithstanding
the foregoing provisions of this Article 20, neither Party shall be required to
indemnify the other Party for the other Party’s own negligence.

20.4                           Limitation
of Liability. Except when necessary to provide
indemnity against a third party claim pursuant to an indemnification obligation
of a Party under this Sales Agreement and subject to the Take or Pay
obligations set forth in Article 16, neither Party shall be liable to the other
for incidental consequential, special, direct, punitive, or exemplary damages.

20.5                           Warranty of
Title. Seller warrants that it will, at the time of Delivery of
LNG hereunder, deliver said LNG free and clear of all liens, encumbrances, and
claims whatsoever, except for Seller’s rights to receive payment therefore
pursuant to this Sales Agreement and except to the extent caused by Buyer’s
purchases of Natural Gas for the Plant pursuant to the terms of this Sales
Agreement. Except as set forth in this Article, Seller shall indemnify, save,
and hold Buyer, its subsidiaries and/or affiliates, and their directors,
officers, employees, and agents, free and harmless from all suits, actions,
debts, accounts, damages, costs, losses, and expenses, including reasonable attorney’s
fees, arising from or out of a breach of the warranty contained in this Article
20.5.

20.6                           Disclaimer
of Warranties. EXCEPT AS SPECIFICALLY SET FORTH IN
THIS SALES AGREEMENT, SELLER MAKES ABSOLUTELY NO OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THOSE OF MERCHANTABILITY AND OF FITNESS
FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE LNG PLANT OR LNG PRODUCED AND
SOLD PURSUANT TO THIS SALES AGREEMENT OR AS TO ANY OTHER MATTER, ALL OF WHICH
ARE HEREBY DISCLAIMED.  UNDER NO CIRCUMSTANCES
SHALL SELLER, ITS OFFICERS, AGENTS, EMPLOYEES, PRINCIPALS, PARENT OR AFFILIATE
BE LIABLE FOR ANY DAMAGE TO ANY EQUIPMENT WHICH SHALL BE OPERATED USING THE LNG
PROVIDED HEREUNDER. THE LIABILITY OF SELLER FOR ANY BREACH OF THIS ARTICLE 20.6
SHALL BE LIMITED TO THE REPLACEMENT VALUE OF ANY LNG AND SUCH REASONABLE AND
CUSTOMARY TRUCK TRANSPORT COSTS, AS MAY BE INVOLVED IN A DISPUTE.  IN NO INSTANCE SHALL SELLERS UNINSURED
LIABILITY FOR THE TOTAL OF ALL SUCH AMOUNTS EXCEED $25,000.00 PER DELIVERY. THE
PARTIES SHALL ENDEAVOR TO MITIGATE DAMAGES HEREUNDER.

20.7                           Buyer’s
Knowledge of Product, Odorization, and Indemnity. BUYER
HEREBY EXPRESSLY REPRESENTS THAT BUYER IS FAMILIAR WITH THE PROPERTIES OF LNG
AND NATURAL GAS, AND BUYER AGREES TO INFORM BUYER’S CUSTOMERS, AGENTS,
EMPLOYEES, AND/OR PURCHASER(S) OF THE SAME. THE LNG PROVIDED HEREUNDER WILL NOT
BE STENCHED AND/OR ODORIZED BY SELLER AND BUYER CERTIFIES, REPRESENTS AND
WARRANTS THAT ODORIZATION IS NOT REQUIRED FOR DELIVERY OF LNG TO BUYER UNDER
THIS SALES AGREEMENT. BUYER SHALL BE RESPONSIBLE FOR ODORlZlNG THE LNG AFTER
DELIVERY IN ORDER TO COMPLY WITH ANY ODOR STANDARDS CONTAINED IN APPLICABLE
REGULATIONS, RULES OR LAW . AS SET FORTH ABOVE, BUYER SHALL BE DEEMED TO BE IN
EXCLUSIVE POSSESSION AND CONTROL OF THE LNG ONCE BUYER HAS TAKEN DELIVERY AND
BUYER ASSUMES ALL RESPONSIBILITY FOR SAFE HANDLING OF THE LNG PROVIDED
HEREUNDER FROM THE TIME OF SAID DELIVERY. BUYER SHALL FULLY PROTECT, INDEMNIFY,
AND DEFEND SELLER, AND ITS OFFICERS, AGENTS, EMPLOYEES, PRINCIPALS, INSURERS
AND PARENT, AND HOLD IT HARMLESS FROM ANY AND ALL CLAIMS, LOSSES, DAMAGES,
DEMANDS, SUITS, CAUSES OF ACTION AND LIABILITIES

 

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                                                (INCLUDING
ALL REASONABLE ATTORNEY FEES AND EXPENSES) INCURRED BY OR IMPOSED UPON ARISING,
DIRECTLY OR INDIRECTLY, FROM BUYER’S FAILURE TO PROPERLY ODORIZE AND/OR TO
EITHER MONITOR OR MAINTAIN ODORIZATION AT OR ABOVE APPLICABLE ODOR STANDARDS OR
SO NOTIFY BUYER’S CUSTOMERS, AGENTS, AND/OR EMPLOYEES.

20.8                           Mutual
Indemnity for Negligence or Willful Misconduct.  Each Party (the “Indemnifying Party”) shall
release, indemnify, defend and hold the other Party and such other Party’s
affiliates, parents and subsidiaries and their respective shareholders or other
equity owners, directors, managers, officers, employees and agents harmless
from and against any and all claims, suits, judgments, damages, losses,
liability and expenses arising out of or resulting from the negligence or
willful misconduct of the Indemnifying Party or the Indemnifying Parties
employees, contractors, agents or invitees.

ARTICLE 21 TAXES

21.1                           None of the
fees or charges set forth and described in this Sales Agreement shall be deemed
to include any tax. Buyer shall bear sole responsibility and liability for
payment of any taxes associated with the purchase, transportation, use, sale or
resale of LNG. If Seller is required to pay any tax (other than income tax,
property tax, or normal enterprise taxes), Buyer shall promptly reimburse
Seller for same upon Seller’s demand, in addition to the other fees and charges
provided for in this Sales Agreement. Where applicable, Seller agrees to take
receipt of such tax and process same with the appropriate tax authority. Buyer
shall be required to provide Seller with proof, satisfactory to the appropriate
tax authority, of any and all tax exemptions Buyer may claim, Buyer shall
provide Seller with all records and information, satisfactory to the
appropriate tax authority, regarding Buyer’s disposition of all LNG delivered
hereunder. [***].

ARTICLE 22 FORCE MAJEURE

22.1                           Neither
Seller nor Buyer shall be liable to the other for failure, whether in whole or
in part to perform or comply with any obligation or condition of this Sales
Agreement caused by an event of force majeure which, for purposes of this Sales
Agreement shall include, without limitation blockades; embargoes;
insurrections; riots; epidemics; flood; washouts; landslides; mudslides;
earthquakes; extreme cold or freezing weather; lightning, civil disturbances;
failure to prevent or settle any strike; fire; explosions; breakdown or failure
or accident to machinery, method of transport or line of pipe, or the order of
any court or governmental authority having jurisdiction, war; acts of the
public enemy; terrorism; espionage; nuclear disaster; act of God; fire; severe
weather; earthquakes; floods; material shortage or unavailability at reasonable
cost not resulting from the failing Party’s failure to timely place orders or
take other necessary actions therefore; inability or delay in obtaining
governmental permits; government codes, ordinances, laws, rules, regulations,
or restrictions; or any other cause, whether similar or dissimilar to those
above mentioned (excluding, however, any obligation to make payments of monies
due hereunder), which is beyond the reasonable control of the Party claiming
relief under this provision and which by the exercise of due diligence such
Party is unable to prevent or overcome (each, a “Force Majeure Event”). The
settlement of strikes and lockouts shall be entirely within the discretion of
the Party experiencing the same.

22.2                           Force
Majeure Events shall not relieve a party of liability to the extent such causes
are the result of the negligence of such Party or in the event of its failure
to use all commercially reasonable efforts to remedy the situation, nor shall
such causes or contingencies affecting such performance relieve either Party
from its obligations to make payments of amounts then due in respect of
Feedstock Gas and/or LNG already delivered. For the avoidance of doubt, should
Seller’s provision of services or supply of LNG depend in whole or in part upon
production from a Plant which is damaged or destroyed, Seller shall not be
obliged to repair or rebuild such Plant in order to fulfill the terms of this
Sales Agreement.

 

[***]      Confidential portions of this document
have been redacted and filed separately with the Commission.

 

13

 

22.3                           A Party
claiming relief under this Article 22 shall promptly notify the other Party in
writing of the event preventing its performance stating facts supporting such
claim of inability to perform. 
Thereupon, the obligation to deliver or receive the quantities so
affected shall be suspended during the continuation of an inability so caused,
but for no longer period, this Sales Agreement shall otherwise remain
unaffected.

ARTICLE 23 ASSIGNMENT

23.1                           Either Party
may assign or otherwise convey any of its rights, titles, or interests under
this Sales Agreement to an affiliate of such party or joint venture in which
the assigning Party owns a 100% equity interest, without prior approval, but
with notice to the other Party; provided that no such assignment shall relieve
the assigning Party of its obligations under this Sales Agreement. Either Party
may assign or otherwise convey any of its rights, titles or interests to any
third party provided it has obtained the prior written consent of the other
Party hereto, which consent shall not be unreasonably withheld, conditioned or
delayed, however, Buyer may unreasonably withhold approval of any sale or
transfer to any person or business previously or currently in the natural gas
vehicle industry.  No assignment of this
Sales Agreement by Buyer shall release Buyer or any guarantor from liability
under this Sales Agreement unless the assignee’s and any replacement guarantor
possess creditworthiness acceptable to Seller, as determined in Seller’s sole
and absolute discretion.  Notwithstanding
the foregoing, the obligations set forth in Article 29 shall run with the LNG
Plant and the land upon which it is situated and be the obligation of the party
owning the LNG Plant.

23.2                           Notwithstanding
the provisions of Article 23.1, any assignment to a tribe of American indians
or any affiliate thereof, shall be subject to and conditioned upon the receipt
by Buyer of a waiver of sovereign immunity substantially in the form attached
hereto as Exhibit A.

ARTICLE 24 SEVERABILITY

24.1                           Should any
section, paragraph, subparagraph, or other portion of this Sales Agreement be
found invalid or be required to be modified by a court or government agency
having jurisdiction, then only that portion of this Sales Agreement shall be
invalid or modified.

                                                The
remainder of this Sales Agreement which is still valid and unaffected shall
remain in force. If the absence of the part that is held to be invalid,
illegal, or unenforceable, or modification of the part to be modified,
substantially deprives a Party of the economic benefit of this Sales Agreement,
the Parties shall negotiate reasonable and valid provisions to restore the
economic benefit to the Party deprived or to balance the Parties’ obligations
consistent with the intent reflected in this Sales Agreement. If the Parties
are unable to do so, either Party may terminate this Sales Agreement by giving
the other Party notice of termination not later than sixty (60) days after the
effective date of the order, rule, or regulation so affecting this Sales
Agreement. Seller shall also have the right to terminate this Sales Agreement
as provided above in the event either the services performed by Seller, or
facilities utilized by Seller become subject to regulation which substantially
deprives Seller of the economic benefit of this Sales Agreement.

ARTICLE 25 NOTICES

25.1                           Any notice,
request, demand, statement, invoice or payment provided for in this Sales
Agreement or any notice which a Party may desire to give to the other shall be
in writing and shall be, except as otherwise specifically set forth herein,
considered as duly delivered (i) as of the date of transmittal if sent by email
to the other Party’s email address as set forth below and mailed by
certified mail return receipt required (postage prepaid) to the other Party’s
address as set forth below, (ii) telecopied (with answer-back confirmation of
receipt to the other Party’s fax address as set forth below), or (iii) courier
expressed to the other Party at the address set forth below:

 

[***]      Confidential portions of this document
have been redacted and filed separately with the Commission.

 

14

 

NOTICES TO BUYER:

CLEAN
ENERGY

3020 Old Ranch Parkway, Suite  200

Seal Beach, CA 90740

Attention:   Chief Operating Officer and
                      Chief Financial
Officer

Telephone: 562-493-2804

Fax: 562-546-0097

Email: mpratt@cleanenergyfuels.com and rwheeler@cleanenergyfuels.com

NOTICES TO SELLER:

SPECTRUM ENERGY SERVICES, LLC 

8505 South Elwood Avenue, Building #123

Tulsa, OK 74132

Attention:   President-Managing Member

Telephone: 918-298-6660

Fax: 918-298-6662

Email: ray@latchem.com

PAYMENTS AND STATEMENTS
TO SELLER:

SPECTRUM ENERGY SERVICES, LLC  

8505 South Elwood Avenue, Building #123

Tulsa, OK 74132

Attention:   President-Managing Member

Telephone: 918-298-6660

Fax: 918-298-6662

Email: ray@latchem.com

25.2                           Either Party
may change any of its addresses shown above by notifying the other Party, in
accordance with the notice provisions above, of such change.

ARTICLE 26 MODIFICATIONS AND AMENDMENTS

26.1                           Any change,
modification, amendment or alteration of this Sales Agreement shall be in
writing, signed by the Parties hereto, and no course of dealing between the
Parties shall be construed to alter the terms hereof, except as expressly
stated herein.

ARTICLE 27 CONFIDENTIALITY

27.1                           The Parties
understand and agree that the terms and conditions of this Sales Agreement, all
documents referenced herein or exchanged between the Parties and all
communications between the Parties regarding this Sales Agreement are
considered as being confidential or proprietary (collectively, “Confidential
Information”) as between the Parties, and shall not, without the other Party’s
prior written consent, be disclosed to any third party, corporation or entity,
except  (i) to Affiliates, legal,
accounting and other professional advisors, provided that such Party shall be
liable under this Article for any such Affiliate’s or any such legal,
accounting or other professional advisor’s failure to comply with the terms
hereof; (ii) as may be required by governmental authority or court; (iii) as
may be necessary to enforce the terms of this Sales Agreement, as provided
below.  As a condition of its consent to
disclosure of Confidential Information by the other Party as required above, a
Party may require redaction of portions of this Sales Agreement or other
document containing Confidential Information. 
Notwithstanding the foregoing, nothing herein contained shall prevent a
Party or its parent or other Affiliate from complying with state and federal
securities laws, including without limitation, the filing of this

 

[***]      Confidential portions of this document
have been redacted and filed separately with the Commission.

 

 

 

15

 

                                                Sales
Agreement as an exhibit to a filing by the parent of Buyer with the Securities
and Exchange Commission under the Securities Exchange Act of 1934.

27.2                           Information
will not be deemed Confidential Information if it (i) is or becomes publicly
available other than through the actions of the receiving Party; (ii) was
previously known to or is independently developed by the receiving Party free
of any obligation to keep it confidential; or (iii) was previously disclosed or
becomes available to the receiving Party without restriction from a third party
whose disclosure did not or does not violate any confidentiality
obligation.  Seller acknowledges that
Buyer owns and operates a plant that produces liquefied natural gas and is
familiar with all aspects of the production of LNG.  A Party shall be excused from these
nondisclosure provisions if the disclosure is required by law, rule,
regulations or governmental authority or to the extent required for a Party to
undertake or defend an action brought by one Party in court to enforce the
terms of this Sales Agreement against the other Party.  In the event that a Party is requested or
required by law, rule, regulation or governmental authority or court to disclose
any Confidential Information of the other Party, it is agreed that it shall
provide the other Party prompt notice of such request so that an appropriate
protective order may be sought by the affected Party. It is understood that the
Party requesting a protective order shall bear all costs related thereto.

27.3                           Each Party
shall have the right to review and approve any publicity material, press
releases or other public statements by the other that refer to such Party or
that describe any aspect of this Sales Agreement.  Each Party agrees not to issue any such
publicity materials, press releases, or public statements without the prior
written approval of the other party, unless the information has already been
made public by the other party, except as is required by the Party or its
parent or other Affiliate to comply with federal or state securities laws.  Neither Party shall publish or use any
advertising, sales promotions or other publicity materials that use the other
Party’s logo, trademarks or service marks without the prior written approval of
the other Party, which may be withheld in a Party’s sole discretion.

ARTICLE 28 WAIVER

28.1                           The failure
of Seller or Buyer at any time to require performance by the other Party of any
provision hereof shall in no way affect the right of either Party to require
any performance which may be due thereafter pursuant to such provision, nor
shall the waiver by Buyer or Seller of any breach of any provision hereof be
taken or held to be a waiver of any subsequent breach of such provision.

ARTICLE 29 MISCELLANEOUS

29.1                           Conditioning
Fee. Buyer shall pay Seller a conditioning fee to take Delivery
with a Warm Trailer. Such fee shall be equal to [***] per Delivery into a Warm
Trailer (the “Conditioning Fee”).  As
used herein, “Warm Trailer” means an LNG trailer that is warmer than minus 230
degrees Fahrenheit (-230°F).

29.2                           Delivery
into a Warm Trailer. Buyer shall use its commercially
reasonable efforts to bring each LNG trailer to the Delivery Point with the
temperature inside its LNG storage tank(s) not greater than -230 degrees
F.  When Buyer desires to take Delivery
of LNG with a Warm Trailer, Buyer shall contact Seller to agree on a date and
time when Buyer shall take such Delivery. In the event that Buyer arrives at
the Delivery Point to take Delivery of LNG with a Warm Trailer without Seller
having agreed on a date and time for such Delivery, Seller will arrange
Delivery as soon as Seller determines that it can accommodate such Delivery.
Seller shall require Buyer to pay Seller the Conditioning Fee set forth in this
Sales Agreement to take Delivery with a Warm Trailer. Seller shall not be
liable for any damage that may occur as a result of the Delivery of LNG into a
Warm Trailer.

29.3                           Personal
Protective Equipment. Buyer shall ensure that, prior to
taking Delivery, all truck operator(s) shall have been provided appropriate
personal protective equipment, including, but

 

[***]      Confidential portions of this document
have been redacted and filed separately with the Commission.

 

16

 

                                                not limited
to, flame retardant clothing fully covering the arms, legs and torso, sturdy
leather work shoes (not athletic type), apron, hard hat, gloves, splash-proof
safety goggles, and facial shield. Buyer shall ensure that, while inside the
Plant, including the Delivery point area, the truck operator(s) shall at all
times, wear such personal protective equipment and comply with Seller’s Plant
safety requirements. While Seller reserves the right to deny Delivery to any
person observed not using all appropriate personal protective equipment, Seller
has no obligation to observe or ensure that all appropriate personal protective
equipment is used.

29.4                           Training. Buyer
shall ensure that all truck operator(s) have received instruction in Seller’s
truck loading procedures prior to taking Delivery of LNG at Plant. Buyer shall
provide no less than one (1) Business Day notice of the arrival of any truck
operator(s) that shall require such instruction. Plant personnel shall endeavor
to provide instruction in a timely manner upon arrival of the truck. Buyer will
cause training to be provided to the truck operator(s) regarding the hazards of
handling LNG and the precautions to take to safely load LNG. Buyer shall ensure
that while inside the Plant, including the LNG Delivery Point area, the truck
operator(s) shall at all times act in compliance with such training and
precautions. While Seller reserves the right to deny Delivery to any person not
using the truck loading facilities in the proper manner, Seller has no
obligation to observe that the truck loading facilities are being used in the
proper manner.  Seller acknowledges that
Buyer may engage an independent truck operator to haul Buyer’s LNG
trailers.  Seller shall provide training
to its employees and independent contractors in the proper operation and
maintenance of an LNG plant.

29.5                           Insurance. Buyer and
Seller shall maintain in force and effect throughout the term of this Sales
Agreement, insurance coverage of the types and in the amounts set forth below,
which may be under blanket policies, with insurance companies reasonably
acceptable to either Party whose acceptance shall not be unreasonably withheld.
If either Party violates this provision, the other Party may, at its option and
without prejudice to its other legal rights, terminate this Sales Agreement
upon reasonable notice.  The limits set
forth below are minimum limits and shall not be construed to limit either Party’s
liability. All costs and deductible amounts will be for the sole account of
each Party for maintaining its own coverage.

Worker’s
Compensation Insurance, complying with the laws of any state having
jurisdiction over each employee, and employer’s liability insurance with limits
of $1,000,000 for each accident, $1,000,000 for each disease for each employee,
and a $1,000,000 disease policy limit.

Commercial
or comprehensive general liability insurance on an occurrence form with a
combined single limit of $1,000,000 for each occurrence, and annual aggregates
of $1,000,000 for bodily injury and property damage, including coverage for
blanket contractual liability, broad form property damage, personal injury
liability, independent contractors, products/completed operations, and the
explosion exclusion shall be deleted.

Automobile
liability insurance with a combined single limit of $1,000,000 for each
accident for bodily injury and property damage, to include coverage for all
owned, non-owned, and hired vehicles.

Excess
or umbrella liability insurance with a combined single limit of $1,000,000 for
each occurrence, and annual aggregates of $1,000,000 for bodily injury and
property damage covering the excess of employer’s liability insurance and the
insurance set forth above.

29.5.1                  In each of
the policies described above, each Party agrees to waive, and will require each
of its insurers to waive, any rights of subrogation or recovery it may have
against the other Party, their parents, subsidiaries, or affiliated companies
to the extent of the indemnity obligations. Each Party shall name the other
Party as an additional insured under the policies described above to the extent
of the indemnity obligations.

[***]      Confidential portions of this document
have been redacted and filed separately with the Commission.

 

17

 

29.5.2                  The policies
described above will include the following amendment. “This insurance is
primary insurance with respect to Seller, its parents, subsidiaries and
affiliated companies, and any other insurance maintained by Seller, its
parents, subsidiaries, or affiliated companies is excess and not contributory
with this insurance,” but only to the extent of liabilities of Buyer not
otherwise indemnified under this Sales Agreement and for any indemnities
assumed by Buyer under this Sales Agreement.

29.5.3                  Non-renewal
or cancellation of policies described above shall be effective only after the
other Party shall have received thirty (30) days prior written notice of such
non-renewal or cancellation. Prior to the creation of any obligation on the
part of Seller to Deliver any LNG hereunder, Buyer shall provide Seller, and
Seller shall provide Buyer, with certificates of insurance on an Accord 25 or
25S form evidencing the existence of the insurance coverage required.

29.5.4                  Buyer may
self-insure for any of the coverage requested herein provided Buyer has an
investment grade credit rating. In the event of self-insurance, the following
conditions shall apply: (1) Such self-insurance program shall provide levels of
coverage that are equivalent to or greater than the amounts required by this
Article either by itself or in combination with any insurance policies that
might be purchased; (2) Coverage provided by such self-insurance shall be as
broad as the most current ISO forms(s) issued for like or same coverage; (3)
Buyer can provide reasonable proof that it has made adequate financial
arrangements to fund such self-insurance program; (4) Such self-insurance is
permitted by any applicable law; and (5) Such self-insurance shall comply with
all the “additional insured” and “waiver of subrogation or recovery” terms and
conditions in this Article as if insurance policies had been issued.

29.6                           Right of
First Refusal. 
Before the Start-up Date, Seller may assign all rights and obligations
of this Sales Agreement to a newly created company (“NEWCO”) which will be
created to own and manage the LNG Plant and Seller shall own 100% of
NEWCO.  This assignment will be permitted
and is not subject to a Right of First Refusal (“ROFR”) described in this
Article 29.6, provided that in such event, NEWCO shall be subject to the ROFR
described in this Article 29.6, and all other obligations of Seller under this
Sales Agreement.  In the event Seller or
NEWCO wishes to transfer ownership or partial ownership in the Plant or an
equity interest in NEWCO or Seller, or the ultimate parent of Seller, if any,
such transaction will be subject to the ROFR. 
A sale by one partner of Seller or NEWCO of part or all of its ownership
interest in Seller or NEWCO to another partner(s) of Seller or NEWCO shall not
be subject to the ROFR described below.

29.6.1                  Subject to
the immediately preceding paragraph, in the event that Seller seeks to transfer
all or part of its interest in the LNG Plant, whether such transfer is
structured as an asset sale or a sale of a controlling equity interest in
Seller (whether such sale is a single sale or a series of transfers), Seller
shall include with the transfer notice delivered in accordance with Article 25
a written right of first refusal notice (a “ROFR Notice”).  Each ROFR Notice shall set forth the proposed
transferee’s name and shall include a summary of the terms of the proposed
transfer, including without limitation, the purchase price and method of
payment, and shall have attached to it a copy of any offer or counteroffer
executed or to be executed by Seller and the transferee.  Seller represents and warrants that the
purchase price, terms and conditions referred to in the ROFR Notice shall have
been arrived at through arm’s length negotiations.  Buyer agrees that any ROFR Notice and the
terms therein or attached thereto shall be considered Confidential Information
of Seller and shall be subject to Article 26 above.

29.6.2                  If Buyer,
within thirty (30) days after receipt of a ROFR Notice, indicates in writing to
Seller its agreement to purchase the LNG Plant to be transferred on the terms
stated in such ROFR Notice, Seller shall sell and convey such property to Buyer
on the same terms and conditions as set forth in such ROFR Notice,.  If Buyer does not notify Seller of its intent
to exercise its right of first refusal within such thirty (30) day period, or
if Buyer gives Seller written notification that it does not elect to exercise
such right of first refusal, then Seller may transfer the LNG Plant free of

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

18

 

                                                this right
of first refusal on the same terms and conditions offered to Buyer as set forth
in the ROFR Notice.

29.6.3                  If Seller
does not complete the transfer of the LNG Plant described within the ROFR
Notice within sixty (60) days of (i) the expiration of the aforementioned
thirty (30) day period or (ii) such earlier date on which Buyer notifies Seller
that it does not wish to exercise its right of first refusal, or if Seller
intends to transfer the LNG Plant on terms and conditions which are changed or
modified from those stated in the ROFR Notice, then the transaction or any
further transaction shall be deemed a new determination by Seller to transfer
the LNG Plant and the provisions of this Article 29.6 shall again be applicable
to any proposed transfer.

29.6.4                  Buyer’s
right of first refusal as provided herein shall be extinguished if and only if
Buyer fails to exercise its right to purchase the LNG Plant within the thirty
(30) day period provided above and Seller thereafter transfers the LNG Plant to
the transferee and on the terms set forth in the ROFR Notice within the sixty
(60) day period provided above, and provided the offer from the transferee
presented to Buyer in the ROFR Notice was a valid, bona fide and binding third
party offer.  Failure by Buyer to respond
to any other offer shall in no way extinguish the right granted to Buyer
hereunder which shall in such case continue to burden the LNG Plant.

29.6.5                  As used in
this Article 29.6, the term “transfer” shall be defined to mean any transfer,
sale, lease, or other conveyance, whether by agreement for sale or in any other
manner except as otherwise provided in the first paragraph of this Article
29.6.  A sale of a parent company that
holds an interest in NEWCO is not deemed to be a “transfer” provided that the
value of the parent company’s interest in NEWCO is less than 25 per cent of the
value of the parent company.

29.6.6                  Buyer shall
have the right to record a memorandum of its right of First Refusal in the
records of the county where the LNG Plant is located.

29.7                           Dispute
Resolution Procedures. 
In the event a dispute arises between the Parties related to this Sales
Agreement, the following process shall be followed:

(a)                  Each Party
will designate a senior executive (“Designated Representative”) to represent it
in connection with any dispute that may arise between the Parties (a “Party
Dispute”).  The Designated Representative
shall initially be the persons identified in Article 25.1.  Subsequent changes in a Party’s Designated
Representative shall be communicated according to Article 25.

(b)                 In the event
that a Party Dispute should arise, the Designated Representatives will meet,
with their attorneys, if they so agree, within five (5) Business Days after
written request by any Party to any other Party (the “Dispute Notice”) in an
effort to resolve the Party Dispute.

(c)                  If the
Designated Representatives are unable to resolve the Party Dispute within
twenty (20) Business Days following their first meeting, the Party Dispute will
be submitted to non-binding mediation in Dallas, Texas before a mediator made
available to the Parties through JAMS.

(d)                 In the event
that the mediation process fails to result in a resolution of the Party Dispute
within sixty (60) days following receipt of the Dispute Notice, the Parties may
take any action they may deem necessary to protect their interests.

(e)                  The
foregoing provisions of this Article 29.7 shall not be construed to prohibit
any Party from commencing, at any time prior to the completion of the process
described above,

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

19

 

                                                any action
or proceeding which such Party determines is necessary to protect or preserve
any rights or remedies it may have in law or in equity.

ARTICLE 30
INTERPRETATION

30.1                           The captions
in this Sales Agreement are for convenience of the Parties in identification of
the provisions hereof and shall not constitute a part of the agreement nor be
considered interpretive thereof. In the consideration and interpretation of
this Sales Agreement, the following shall apply:

(a)                                  This Sales
Agreement was prepared jointly by the Parties hereto and not by either Party to
the exclusion of the other.

(b)                                 Failure to
exercise any right or rights hereunder shall not be considered a waiver of such
right or rights in the future.

ARTICLE 31 PRIOR
AGREEMENTS

31.1                           This Sales Agreement
contains the entire agreement of Buyer and Seller and supersedes all prior
understandings or agreements whether oral or written between the Parties, with
respect to the matters addressed herein. 
This Sales Agreement shall be amended only by an instrument in writing
signed by both parties hereto.

ARTICLE 32
TERMINATION

32.1                           In the event
that Seller has not produced and delivered to Buyer 45,000 Gallons per day for
a minimum of 25 consecutive days from the LNG Plant by December 1, 2009, Buyer
may terminate this Sales Agreement upon 60 days written notice to Seller.

32.2                           In the event
Seller is unable to complete and start up operations of the LNG Plant by
December 1, 2009 due to unforeseen circumstances including but not limited to
any legal actions, injunctions, or any governmental authorities, Seller may
terminate this Sales Agreement upon 60 days written notice to Buyer.

32.3                           If either
Party elects to terminate this Sale Agreement under Article 32.1 or 32.2,
neither Party shall be liable to the other Party for any further obligations
under this Sales Agreement.

32.4                           In the event
Buyer wishes to terminate this Sales Agreement any time during the Term of this
Sales Agreement and make a one time payment to Seller in lieu of continuing
Take or Pay payments, Buyer may do so according to the following payment
schedule. The one time payment will equal the applicable termination fee set
forth below at the time of Seller’s receipt of Buyer’s written notice of its
exercise of its termination right pursuant to this Article 32.4 in accordance
with the table below.  Buyer will include
specific details regarding the rational for Buyer’s decision to exercise this
determination option.

	
  

  Sales Agreement Year

  	
  

  Termination Fee

  
	
   

  	
   

  
	
  Effective
  Date through end of Year 1

  	
  [***]

  
	
  Any
  time during year 2

  	
  [***]

  
	
  Any
  time during year 3

  	
  [***]

  
	
  Any
  time during year 4

  	
  [***]

  
	
  Any
  time during year 5

  	
  [***]

  
	
  Any
  time during year 6

  	
  [***]

  
	
  Any
  time during year 7

  	
  [***]

  
	
  Any
  time during year 8

  	
  [***]

  
	
  Any
  time during year 9

  	
  [***]

  
	
  Any
  time during year 10

  	
  [***]

  

 

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

20

 

32.5                           In
consideration of a payment made in accordance with the foregoing schedule,
Seller agrees that without the prior written consent of Buyer, which consent
may be withheld in the sole discretion of Buyer, Seller will not, prior to the
tenth anniversary of the Effective Date (a) operate, or cause to be operated,
the LNG Plant or sell, or cause to be sold, LNG produced by the LNG Plant or
(b) sell or lease the LNG Plant to a third party, it being understood and
agreed that by virtue of such payment Buyer has in effect paid for the shutdown
of the LNG Plant for the remaining term of this Sales Agreement.  Seller may dismantle the LNG Plant and
dispose of the components.  Until such
time as the Plant may be dismantled and disposed of, Seller agrees to mothball
the Plant until the tenth anniversary of the Effective Date of this Agreement,
in a manner that it could be restarted to produce LNG in the event Buyer elects
at a future date to purchase LNG from the Plant.  In the event Seller wishes to resume LNG
production at the Ehrenberg location, Seller shall refund a portion of the Termination
Fee which shall be calculated by multiplying the number of years remaining
(including the year in which Seller resumes LNG production at the Ehrenberg
location) before the tenth anniversary of the Effective Date by [***].  Seller shall have the right to move the Plant
to a new location and resume LNG production. 
If the LNG produced at the new location competes with Buyer’s
operations, Seller shall refund a portion of the Termination Fee which shall be
calculated by multiplying the number of years remaining (including the year in
which Seller resumes LNG production at the new location) before the tenth
anniversary of the Effective Date by [***].

ARTICLE 33 DAMAGES,
FEES AND COSTS

33.1                           Except as
otherwise expressly provided in this Sales Agreement, the Parties are entitled
to recover as their sole and exclusive damages for breach of the price and
quantity obligations under this Sales Agreement their actual damages resulting
from such breach.

33.2                           In the event
litigation is necessary to resolve a dispute, the prevailing Party shall be
entitled to receive reimbursement by the other Party of its attorneys’ fees and
costs of investigation and defense, and shall have the right to recover those
fees and costs from the other Party.

ARTICLE 34 MUTUAL
WAIVER OF CERTAIN REMEDIES

34.1                           EXCEPT AS TO
THE PARTIES’ INDEMNIFICATION OBLIGATIONS WITH RESPECT TO THIRD PARTY CLAIMS
SUBJECT TO SUCH OBLIGATIONS AND SUBJECT TO THE TAKE OR PAY OBLIGATIONS OF BUYER
SET FORTH IN THIS SALES AGREEMENT, NEITHER PARTY SHALL BE LIABLE OR OTHERWISE
RESPONSIBLE TO THE OTHER FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, FOR LOST
PRODUCTION, OR FOR PUNITIVE DAMAGES AS TO ANY ACTION OR OMISSION, WHETHER
CHARACTERIZED AS A SALES AGREEMENT BREACH OR TORT OR OTHERWISE, THAT ARISES OUT
OF OR RELATES TO THIS SALES AGREEMENT OR ITS PERFORMANCE OR NONPERFORMANCE
HEREUNDER.

ARTICLE 35
RELATIONSHIP OF THE PARTIES

35.1                           Seller is
selling LNG to Buyer. By entering into this Sales Agreement, the Parties do not
intend to create an agency, partnership, joint venture, or distributorship
relationship.

ARTICLE 36 EXECUTION
REQUIRED

36.1                           This Sales
Agreement shall become effective only upon execution by both Parties hereto.

 

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

21

 

ARTICLE 37 WAIVER OF
RIGHT TO TRIAL BY JURY

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
SALES AGREEMENT OR ANY OTHER DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SALES
AGREEMENT AND THE OTHER DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS ARTICLE.

 

 

[Signature
page follows.]

 

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

22

 

IN
WITNESS WHEREOF, the Parties hereto have executed this LNG Sales Agreement as
of the day and year first above written.

	
  BUYER:

  	
  CLEAN
  ENERGY

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Mitchell W. Pratt

  
	
  Name:

  	
   

  	
  Mitchell W.
  Pratt

  
	
  Title:

  	
   

  	
  Senior Vice
  President

  
	
  Date:

  	
   

  	
  October 17, 2007

  
	
   

  	
   

  
	
   

  	
   

  
	
  SELLER:

  	
  SPECTRUM
  ENERGY SERVICES, LLC

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Raymond R.
  Latchem

  
	
  Name:

  	
   

  	
  Raymond R.
  Latchem

  
	
  Title:

  	
   

  	
  President -
  Managing Member

  
	
  Date:

  	
   

  	
  October 17, 2007

  
	
   

  	
   

  
	
  Federal I.D. #:
  92-0171071

  

 

[***]                   Confidential
portions of this document have been redacted and filed separately with the
Commission.

 

23

 

EXHIBIT A

 

WAIVER OF SOVEREIGN IMMUNITY
DEFENSE; CONSENT TO JURISDICTION

 

 

To be completed later with the approval of Buyer.

 

[***]      Confidential portions of this document
have been redacted and filed separately with the Commission.

 

24

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