Document:

Exhibit 10.2

 

STOCK PURCHASE
AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (the “Agreement”)
is entered into on December 7, 2005, but effective as of November 30,
2005 (the “Effective Date”), by and among the parties listed below:

 

	
  SELLING

  	
   

  	
  OLIVER KENDALL KELLEY

  
	
  STOCKHOLDER:

  	
   

  	
  Address: 8101 West 34th Avenue

  
	
   

  	
   

  	
  Amarillo, Texas
  79159-1166

  
	
   

  	
   

  	
  Telephone No.: (806)
  355-5679

  
	
   

  	
   

  	
  Facsimile No.: (806)
  353-9611

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Jeff Shrader

  
	
   

  	
   

  	
  Joel Howard

  
	
   

  	
   

  	
  Sprouse Shrader Smith,
  P.C.

  
	
   

  	
   

  	
  701 South Taylor, Suite 500

  
	
   

  	
   

  	
  P.O. Box 15008

  
	
   

  	
   

  	
  Amarillo, Texas
  79105-5008

  
	
   

  	
   

  	
  Telephone No.: (806)
  468-3300

  
	
   

  	
   

  	
  Facsimile No.: (806)
  373-3454

  
	
   

  	
   

  	
   

  
	
  BUYER:

  	
   

  	
  APOLLO LNG, INC.,

  
	
   

  	
   

  	
  a Texas corporation

  
	
   

  	
   

  	
  Address: Mr. Dennis
  McLaughlin

  
	
   

  	
   

  	
  3001 Knox, Suite 407

  
	
   

  	
   

  	
  Dallas, Texas 75205

  
	
   

  	
   

  	
  Telephone: (214)
  389-9800

  
	
   

  	
   

  	
  Facsimile No.: (214)
  389-9806

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  	
   

  	
  a Utah corporation

  
	
   

  	
   

  	
  Mr. Dennis
  McLaughlin

  
	
   

  	
   

  	
  3001 Knox, Suite 407

  
	
   

  	
   

  	
  Dallas, Texas 75205

  
	
   

  	
   

  	
  Telephone:  (214) 389-9800

  
	
   

  	
   

  	
  Facsimile No.: (214)
  389-9806

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  George Lowrance

  
	
   

  	
   

  	
  Chappell, Hill &
  Lowrance, L.L.P.

  
	
   

  	
   

  	
  2501 Parkview, Suite 220

  
	
   

  	
   

  	
  Fort Worth, Texas 76102

  
	
   

  	
   

  	
  Telephone No.: (817)
  332-1800

  
	
   

  	
   

  	
  Facsimile No.: (817)
  332-1956

  

 

1

 

	
  With a copy to:

  	
   

  	
  Roger Crabb

  
	
   

  	
   

  	
  Scheef &
  Stone, LLP

  
	
   

  	
   

  	
  5956 Sherry Lane, Suite 1400

  
	
   

  	
   

  	
  Dallas, Texas 75225

  
	
   

  	
   

  	
  Telephone No.: (214)
  706-4224

  
	
   

  	
   

  	
  Facsimile No.: (214)
  706-4242

  

 

RECITALS

 

WHEREAS, TxHLDM, Inc. (“HLDM”) is
a corporation organized under the laws of the State of Texas; and

 

WHEREAS, All of the issued and outstanding
stock (the “Stock”) of HLDM is owned by Oliver Kendall Kelley (“Kelley”
or “Selling Stockholder”); and

 

WHEREAS, HLDM owns all of the Member Units
(the “Member Units”) of Arizona LNG, L.L.C. (“Arizona LNG” and,
along with HLDM, the “Companies,” and each, a “Company”), a
limited liability company organized under the laws of the State of Nevada; and

 

WHEREAS, Apollo Resources International, Inc.
(“Apollo”) is a corporation organized under the laws of the State of
Utah; and

 

WHEREAS, Apollo LNG, Inc. is a
corporation organized pursuant to the laws of the State of Texas (“Apollo
LNG”), and is a subsidiary of Apollo; and

 

WHEREAS, Apollo LNG is a newly organized and
capitalized business, Apollo will gain substantial benefit under this
Agreement, and Selling Stockholder has entered into this Agreement
substantially in reliance upon the representations, warranties, covenants and
agreements of Apollo hereunder (hereinafter, Apollo, Apollo LNG, and Selling
Stockholder may be referred to collectively, as the “Parties,” and each
a “Party”); and

 

WHEREAS, Apollo LNG wishes to acquire the
Stock and Kelley wishes to sell the Stock; and

 

NOW, THEREFORE, subject to the terms and
conditions herein expressed, the Parties agree as follows:

 

AGREEMENT

 

1.                                      DEFINITIONS.

 

1.1.                              Except
as otherwise provided or unless the context otherwise requires, and in addition
to terms defined in other provisions of this Agreement, the following terms
shall have the meanings specified in this Section 1.1 when
capitalized and used in this Agreement.

 

(a)                                  “Affiliate”
of a specified Person shall mean a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by or is under common
control with, the Person specified, and in the case of a specified Person who
is a natural person,

 

2

 

his/her
spouse, his/her issue, his/her parents, his/her estate and any trust entirely
for the benefit of his/her spouse and/or issue.

 

(b)                                 “Agreement”
shall mean this Stock Purchase Agreement, including the Disclosure Schedules
attached hereto.

 

(c)                                  “ALT”
shall mean Applied LNG Technologies USA, L.L.C.

 

(d)                                 “ALT
Member Units” shall mean all of the issued and outstanding limited liability
company membership interests in ALT.

 

(e)                                  “Business
Day” shall mean any day during which the Citibank, NA office at 53rd
and Park Avenue, New York, New York is open for business.

 

(f)                                    “Cash”
shall mean immediately available funds, in US Dollars.

 

(g)                                 “Collateral
Agreements” shall mean the Purchase Note, the Security Documents, the
Intercreditor Agreement, the Gas Supply MOU, and the Transition Services
Agreement.

 

(h)                                 “Commercially
Reasonable Efforts” shall mean those efforts which a prudent business person
would exert using sound business judgment in like circumstances.

 

(i)                                     “Confidentiality
Agreement” shall mean the Confidentiality Agreement dated September 26,
2005, between ALT and Apollo.

 

(j)                                     “Disclosure
Schedule” shall mean the schedules attached to this Agreement.

 

(k)                                  “Effective
Closing Date” shall mean November 30, 2005.

 

(l)                                     “Effective
Date” has the meaning given to it in the introductory paragraph of this
Agreement.

 

(m)                               “Gas
Supply MOU” shall mean the Memorandum of Understanding of even date herewith
between Apollo, Apollo Production, and Arizona LNG, L.L.C.

 

(n)                                 “Governmental
Approvals” shall mean any authorization, approval, consent, license,
registration, lease, ruling, permit, tariff, certification, exemption, filing
or registration by or with any Governmental Authority.

 

(o)                                 “Governmental
Authority” shall mean the United States, any state, county, or city, any
political subdivision, agency, court or instrumentality of any of the
foregoing, and any governmental or quasi-Governmental Authority, agency or body
having jurisdiction over the respective assets or the Person in question.

 

(p)                                 “Intercreditor
Agreement” shall mean the Intercreditor Agreement of even date herewith between
Ken Kelley, Arizona LNG, and Jack B. Kelley, Inc.

 

3

 

(q)                                 “JBK
Liens” shall mean the Liens of Jack B. Kelley, Inc., on certain assets of
ALT as more particularly described in that certain Security Agreement, dated as
of November 1, 2005, executed by ALT, in favor of Jack B. Kelley, Inc.,
securing payment of that certain Promissory Note dated November 1, 2005, in
the original principal sum of $8,000,000, executed by ALT, and payable to the
order of Jack B. Kelley, Inc.

 

(r)                                    “Knowledge,”
“known” and “knows,” shall mean the knowledge, either actual or constructive
(based upon what a reasonable person in the applicable position with a Party
should know), of (i) a Responsible Officer of that Party and (ii) in
the case of the knowledge of Selling Stockholder, and without limiting
clause (i) above, the Responsible Officers of HLDM, Arizona LNG, and
each of Ken Kelley, Eric Alexander and Steve Bartlett and (iii) in the
case of the knowledge of Apollo LNG and of Apollo, and without limiting clause (i) above,
the Responsible Officers of Apollo, Apollo LNG and each of Dennis McLaughlin,
Mark Ariail, Lyle Justus, Wayne McPherson, and Christopher Chambers.

 

(s)                                  “Law”
or “Laws” shall mean any constitution, statute, code, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
(including applicable permits and Governmental Approvals) of any applicable
Governmental Authority.

 

(t)                                    “Liens”
shall mean any lien, charge, hypothecation, pledge, mortgage, title retention
agreement, security interest, adverse claim, option, or pledge of any nature,
kind or description whatsoever and any agreement to create any of the
foregoing.

 

(u)                                 “Losses”
shall mean any and all liabilities, payments, losses, suits, claims, costs, or
expenses (including attorneys fees and costs of investigation incurred in
defending against such liabilities, payments, losses, suits, claims, costs or
expenses).

 

(v)                                 “Material
Adverse Effect” or “Material Adverse Change” shall mean any change in or effect
on, HLDM, Arizona LNG, Apollo LNG or Apollo, as the case may be (including the
businesses thereof) which is, or reasonably could be expected to be, materially
adverse to the business, operations, assets, condition (financial or otherwise)
or prospects of any such entity.

 

(w)                               “Mountain
States Stock Purchase Agreement” shall mean the Stock Purchase Agreement of
even date herewith between Neptune Leasing, Inc., Golden Spread Energy, Inc.,
Apollo, and Apollo Production & Operating, Inc.

 

(x)                                   “Neutral
Accountant” shall mean KPMG LLP, U.S., or a similar nationally recognized firm
agreed upon by the Parties.

 

(y)                                 “Ordinary
Course of Business” shall mean the ordinary course of business consistent with
past custom and practice (including with respect to quantity, quality and
frequency).

 

(z)                                   “Permitted
Liens” shall mean any of the following:  (i) Liens
for current taxes,  assessments or
government charges not yet due and payable and clearly reflected on the
appropriate company balance sheet and adequately reserved for, (ii) Liens
that, when taken together, would not materially detract from the market value
or materially interfere with the

 

4

 

present
businesses of HLDM, Arizona LNG, Apollo LNG or of Apollo, as applicable, or
otherwise have a Material Adverse Effect, (iii) and Liens set forth on Schedule 1.1(z).

 

(aa)                            “Person”
shall mean and include an individual, 
partnership,  limited
partnership,  limited liability
company,  corporation,  association, 
joint stock company,  trust,  joint venture, unincorporated organization,
or a Governmental Authority.

 

(bb)                          “Responsible
Officer” shall mean, with respect to any Person, the chief executive officer,
the president, the respective vice presidents in charge of operations, legal,
finance, and accounting of such Person and, in each case, any Person fulfilling
substantially the same role for such Person, however designated.

 

(cc)                            “Transfer
and Exchange Agreement” shall mean the Transfer and Exchange Agreement by and
between Neptune Leasing, Inc., Golden Spread Energy, Inc., Apollo
Resources International, Inc., and Apollo LNG, Inc., of even date
herewith.

 

(dd)                          “Transition
Services Agreement” shall mean the Transition Services Agreement of even date
herewith between Golden Spread Energy, Inc. and Apollo.

 

1.2.                              Rules of Interpretation.

 

(a)                                  The
singular includes the plural, and the plural includes the singular.

 

(b)                                 A
reference to any Law includes any amendment or modification thereto, all rules and
regulations promulgated under such Law and all administrative and judicial
authority exercisable thereunder.

 

(c)                                  A
reference to any contract, agreement or instrument includes any amendment or
modification thereto including by waiver or consent.

 

(d)                                 A
reference to Person includes its permitted successors and assigns.

 

(e)                                  Any
date specified for any action that is not a Business Day shall be deemed to
mean the first Business Day after such date.

 

(f)                                    This
Agreement shall be deemed to have been drafted by each Party hereto and this
Agreement shall not be construed against any Party as a principal drafts
Person.

 

2.                                      AGREEMENT FOR PURCHASE AND SALE OF STOCK.

 

2.1.                              Purchase and Sale of Stock.  Upon the terms and subject to the conditions
set forth in this Agreement, the Selling Stockholder shall sell to Apollo LNG,
and Apollo LNG, shall purchase from the Selling Shareholder the Stock for an
aggregate purchase price (the “Purchase Price”) equal to (i) a promissory
note (the “Purchase Note”) in the original principal amount of Six
Million Dollars and more particularly described in Section 2.2(a) below;
and (ii) Cash in the amount of Four Million Five Hundred Thousand Dollars
($4,500,000.00) (the “Cash Payment” and, along with the Purchase Note, is
referred to herein as the “Purchase Price”). The

 

5

 

Cash Payment is subject to adjustment subsequent to Closing as provided
in Section 2.3 hereof.  At
the Closing referred to in Section 3.1:

 

(a)                                  The
Selling Stockholder shall sell, assign, transfer, and deliver to Apollo LNG the
shares representing 100% of the Stock, together with appropriate documentation of
the ownership by HLDM of all of the Member Units and shall represent to Apollo
LNG that there are no additional shares of stock in HLDM or membership interests
in Arizona LNG of any nature or of any category and shall deliver the
certificates representing the Stock accompanied by stock powers duly executed
in blank; and

 

(b)                                 Apollo
LNG shall accept and purchase the Stock from the Selling Stockholder and in
payment thereof shall deliver to the Selling Stockholder the Purchase Note and
the Cash.

 

2.2.                              The Purchase Note and The Cash.

 

(a)                                  The
Purchase Note shall be a negotiable promissory note, executed and delivered by
Apollo and Apollo LNG, jointly and severally, the terms of which shall, among
others, contain the following: (i) the term of the Purchase Note shall be
for six (6) years after the Closing, as that term is defined herein below;
(ii) commencing on December 1, 2006, the Purchase Note shall bear
interest at the rate of eight and one-half percent (8-1/2%) per annum, payable
semi-annually beginning June 1, 2007, at which time the Purchase Note
shall have accrued interest for a period of six (6) months after the
Closing and payable semi-annually thereafter until the Purchase Note shall be
fully re-paid; (iii) the principal of the Purchase Note shall be repaid in
six annual installments of One Million Dollars ($1,000,000.00), each,
commencing on December 1, 2006, with the final payment due and payable on December 1,
2011; (iv) the Purchase Note shall be secured by a Lien (the “Purchase
Lien”) on the stock and assets of Apollo LNG, the Stock and assets of HLDM,
the assets and Member Units of Arizona LNG, and the assets of ALT and the ALT Member
Units (the “Purchase Lien Collateral”), and (v) the Purchase Note
shall be substantially in the form of Schedule 2.2(a)-1.  The Purchase Lien shall be senior and
superior to any other debts, encumbrances, security interests, Liens or
hypothecations of the Purchase Lien Collateral; provided, however, that the JBK
Lien shall be superior to the Purchase Lien. 
Apollo and Apollo LNG shall at the Closing, and from time to time
thereafter, deliver, and shall cause ALT, HLDM and Arizona LNG to deliver, such
security agreements, deeds of trust, mortgages, Uniform Commercial Code
financing statements, and other instruments and documents, in form and
substance reasonably satisfactory to Selling Stockholder, as are necessary and
appropriate to create and perfect the Liens contemplated under this Section,
(collectively, the “Security Documents”), including a Security Agreement
substantially in the form of Schedule 2.2(a)-2, and at the Closing,
the delivery of the Stock of HLDM and of Apollo LNG, with stock powers endorsed
in blank.

 

(b)                                 The
Cash shall be payable to the Selling Stockholder at the Closing.

 

(c)                                  The
payment and performance of the Purchase Note and the payment and performance of
all obligations, liabilities, covenants and agreements of Apollo LNG under this
Agreement, shall be the joint and several obligations of Apollo and Apollo LNG.

 

6

 

2.3.                              The Cash Adjustment.

 

(a)                                  If
the combined cash and working capital of Arizona
LNG and ALT, as of the Effective Closing Date (“Combined Cash and Working
Capital”) is less than $13,550,000.00 (the “Target Amount”), the
Cash Payment shall be reduced by an amount equal to the amount by which such
Combined Cash and Working Capital is less than the Target Amount.  If the Combined Cash and Working Capital
exceeds the Target Amount, the Cash Payment shall be increased by an amount
equal to the amount by which the Combined Cash and Working Capital exceeds the
Target Amount.

 

(b)                                 Within
30 days after the Closing Date, Selling Stockholder shall prepare and deliver
to Apollo LNG Selling Stockholder’s determination of the Combined Cash and
Working Capital as of the Effective Closing Date (the “Working Capital
Calculation”).  The Working Capital
Calculation shall take into account only the specific categories set forth on Schedule 2.3(b),
as reflected on the unaudited balance sheets of Arizona LNG and ALT, as of the
Effective Closing Date, and which shall be delivered to Apollo LNG
contemporaneously with the delivery of the Working Capital Calculation.

 

(c)                                  The
Working Capital Calculation shall be final and binding on each of the Parties
hereto and their respective Affiliates unless Apollo LNG objects, by giving
written notice within five (5) Business Days after Apollo LNG’s receipt of
the Working Capital Calculation, to the Working Capital Calculation.  Such notice shall state in reasonable detail
the item or items in dispute, and shall state the amount of any adjustment that
Apollo LNG believes should be made to the Working Capital Calculation.

 

(d)                                 In
the event of a dispute, Apollo LNG and Selling Stockholder will use their
reasonable efforts to resolve any such objections, and any resolution by them
shall be final and binding on them.  If
Apollo LNG and Selling Stockholder do not resolve any such dispute within ten
Business Days after receipt of Apollo LNG’s written notice of dispute, then Apollo
LNG and Selling Stockholder shall, within five Business Days, submit any such
unresolved dispute to the Dallas, Texas office of the Neutral Accountant, which
firm shall, within 30 days of such submission, resolve such remaining dispute
and such resolution shall be binding and conclusive on the Parties. The fees
and expenses of the Neutral Accountant shall be shared equally by Apollo LNG
and Selling Stockholder. If issues in dispute are submitted to the Neutral
Accountant for resolution, each Party will furnish to the Neutral Accountant
such work papers and other documents and information relating to the disputed
issues as the Neutral Accountant may request and are available to that Party,
and each Party will be afforded the opportunity to present to the Neutral
Accountant any material relating to the determination and to discuss the
determination with the Neutral Accountant. 
The determination by the Neutral Accountant of the Working Capital Calculation
as set forth in a notice delivered by the Neutral Accountant to both Parties
will be final and binding on the Parties hereto.

 

(e)                                  Any
Cash Payment adjustment shall be paid by Apollo LNG, on the one hand, or by
Selling Stockholder on the other hand, as applicable (taking into account any
payments made pursuant to Section 2.2(c), on the fifth Business Day
following final determination of the Working Capital Calculation, by wire
transfer of immediately available funds.

 

7

 

3.                                      CLOSING

 

3.1.                              Closing and Preparation Therefor.  The closing of the transactions contemplated
by this Agreement (“Closing”) shall be transacted on the date five (5) days
after all conditions set forth in Sections 5.1 and 5.2 have been
satisfied or waived, or such other date as may be mutually agreed to by Selling
Stockholder and Apollo LNG, but in no event after December 7, 2005 (the “Closing
Date”) and shall occur at the offices of Sprouse Shrader Smith, P.C.,
Amarillo, Texas or such other location as the Parties may agree.  The Parties understand and agree, however,
that the date of Closing shall be deemed to be the Effective Closing Date.

 

3.2.                              Closing Obligations of Apollo and Apollo LNG.  At or before the Closing, Apollo and Apollo
LNG shall deliver to Selling Stockholder the following:

 

(a)                                  the
Purchase Note, executed by Apollo and Apollo LNG;

 

(b)                                 the
Cash Payment;

 

(c)                                  the
Security Documents and other Collateral Agreements, and delivery of the Apollo
LNG Stock and HLDM Stock, with appropriate stock powers, as security for the payment
of the Purchase Note, and any other Security Documents contemplated pursuant to
Section 2.2;

 

(d)                                 certified
resolution of the boards of directors of Apollo and Apollo LNG authorizing or
ratifying the execution, delivery and performance of this Agreement and all
related documents, and instruments;

 

(e)                                  the
certificates, instruments, and other documents provided for in Section 5.2
hereof;

 

(f)                                    such
other documents as Selling Stockholder’s counsel may reasonably request to consummate
the transactions contemplated herein.

 

3.3.                              Closing Obligations of Selling Stockholder.  At or before the Closing, Selling Stockholder
shall deliver to Apollo LNG the following:

 

(a)                                  Certificates
representing the Stock bearing the restrictive legend customarily placed on
securities that have not been registered under applicable federal and state
securities laws (and approved by counsel for the Selling Stockholder and Apollo
LNG) and accompanied by stock powers duly executed in blank, free and clear of
all Liens.

 

(b)                                 Certified
resolutions of the boards of directors of the Companies authorizing or
ratifying the execution, delivery and performance of this Agreement and all
related documents and instruments.

 

(c)                                  A
Certificate from the Texas Secretary of State with respect to HLDM and from the
Secretary of State of Nevada, with respect to Arizona LNG, confirming that each
of the Companies is a corporation or limited liability company in good standing
in such states.

 

8

 

(d)                                 Releases
of any Liens against any of the Stock, the Member Units or the assets of any of
the Companies, other than Permitted Liens or other Liens expressly permitted by
this Agreement.

 

(e)                                  Copies
of letters from Arizona LNG to all material vendors and suppliers advising them
of the sale, which letters will be mailed following the Closing.

 

(f)                                    The
certificates, instruments, and other documents provided for in Section 5.1
hereof.

 

(g)                                 The
Collateral Agreements.

 

(h)                                 Such
other documents as Apollo LNG’s counsel may reasonably request to evidence compliance
with the terms hereof.

 

3.4.                              Risk of Loss.  Pending the Closing, HLDM and Arizona LNG
shall bear all risk of loss, damage, or destruction suffered by them.  In the event of any material loss, damage or
destruction of the assets of HLDM or Arizona LNG prior to the Closing, which
cannot be repaired prior to the Closing, Apollo may, in the exercise of its
sole judgment (a) declare this Agreement to be null and void, or (b) waive
the loss, damage or destruction, and accept the assets of HLDM and Arizona LNG
in an “as is, how is, where is” condition. In such event any insurance proceeds
received by HLDM or Arizona LNG from such loss, damage or destruction shall be
retained in HLDM or Arizona LNG.  Pending
the Closing, Apollo LNG and Apollo shall bear all risk of loss, damage, or
destruction suffered by Apollo LNG or by Apollo, respectively.  In the event of any material loss, damage or
destruction to the assets of Apollo LNG or of Apollo prior to the Closing,
which cannot be repaired prior to the Closing, Selling Stockholder may, in the
exercise of his sole judgment (a) declare the Agreement to be null and
void, or (b) waive the loss, damage or destruction, and close the transactions
contemplated hereby.  Each Party shall
immediately notify the other Party of any loss, damage or destruction, as
contemplated pursuant to this Section 3.4.

 

4.                                      COVENANTS AND AGREEMENTS OF SELLING STOCKHOLDER

 

4.1.                              Environmental.  It is specifically understood and agreed by
the Parties that, as described in Schedule 4.1 and made a part
hereof by this reference, Selling Stockholder has provided a true and complete
copy of a Phase I environmental survey (the “Environmental Survey”) of
all of the real property owned by Arizona LNG. The Parties agree that, as of
the date of the Closing, the Environmental Survey shall be conclusively
presumed to be an accurate reflection of the environmental conditions of all of
the real property addressed by the Environmental Survey.

 

4.2.                              Apollo’s Access to Records.  Upon the mutual execution of this Agreement,
Selling Stockholder shall give Apollo and Apollo LNG, their counsel,
accountants, lenders, and other designated agents full access, at reasonable
times and on reasonable notice but without any unreasonable disruption to
Selling Stockholder’s, HLDM’s, or Arizona LNG’s businesses, to all records,
assets, properties and operations pertaining to HLDM and Arizona LNG.

 

9

 

The activities described in Section 4.1 and Section 4.2  shall be referred to in this Agreement as “Apollo’s
Due Diligence Review.”

 

4.3.                              Apollo’s Due Diligence Review.  Apollo’s Due Diligence Review shall also be
subject to the following terms and conditions:

 

(a)                                  Apollo’s
Due Diligence Review shall be scheduled through designated representative(s) of
Selling Stockholder and Selling Stockholder shall have the right to accompany Apollo’s
and Apollo LNG’s employees, representatives and agents as they perform Apollo’s
Due Diligence Review;

 

(b)                                 Apollo
LNG and Apollo shall not disclose or allow their employees, representatives or
agents to disclose the purposes for Apollo’s Due Diligence Review, without the
consent of Selling Stockholder, which consent shall not be unreasonably
withheld or delayed;

 

(c)                                  Apollo
and Apollo LNG shall obtain the prior approval of Selling Stockholder before
conducting any discussions with Selling Stockholder’s employees, vendors,
customers or service providers, which approval shall not be unreasonably
withheld or delayed;

 

(d)                                 Apollo
and Apollo LNG shall indemnify Selling Stockholder, HLDM, and Arizona LNG against
any physical damage or injury to property or persons or for any loss or damage
proximately arising from Apollo’s Due Diligence Review;

 

(e)                                  Except
as otherwise required by Law, any information concerning HLDM’s or Arizona LNG’s
properties gathered by Apollo or Apollo LNG as the result of, or in connection
with, Apollo’s Due Diligence Review shall be kept confidential and shall not be
revealed to, or discussed with, anyone other than representatives of Apollo LNG
or of Apollo or representatives of Selling Stockholder;

 

(f)                                    Apollo
and Apollo LNG shall bear all costs and expenses of Apollo’s Due Diligence
Review.

 

(g)                                 From
the Effective Date through the Closing Date, Selling Stockholder shall notify
Apollo promptly of (i) any actions or proceedings threatened or commenced
against Selling Stockholder, HLDM, or Arizona LNG or against any officer,
director, Affiliate, employee, properties or assets of Selling Stockholder,
HLDM, or Arizona LNG which could impair Selling Stockholder’s, HLDM’s, or
Arizona LNG’s ability to perform their obligations under this Agreement, and (ii) any
request for additional information or documentary materials by any Governmental
Authority in connection with the transactions contemplated hereby.

 

(h)                                 Promptly
upon request, Selling Stockholder shall deliver to Apollo LNG copies or
originals of minute books, property files, accounting and tax records, and
other material records in whatever form or medium that relate to the business
or assets of HLDM or Arizona LNG, and that are in the possession or control of Selling
Stockholder, HLDM, or Arizona LNG, and Apollo LNG shall receive possession of
all original records, to the extent they are in the possession of Selling
Stockholder, HLDM or Arizona LNG and, in the event such originals are not so
possessed, then true, complete and accurate copies thereof.

 

10

 

4.4.                              Selling Stockholder’s Conduct of Business.   Without in any way limiting any other
obligation of Selling Stockholder pursuant to this Agreement, from the
Effective Date until the Closing, Selling Stockholder shall cause HLDM and
Arizona LNG to: (a) maintain their books and records in accordance with
past practices; (b) comply in all material respects with all applicable
Laws; (c) conduct their businesses in the Ordinary Course of Business; (d) maintain
insurance on the assets and operations of their businesses in amounts and with
coverage at least as great as the amounts and coverage presently maintained by them;
(e) not do any act or omit to do any act, or permit any act or omission to
act, which would cause a breach of any contract, commitment or obligation for
which Apollo LNG or Apollo would be liable or which would have a Material
Adverse Effect.  Selling Stockholder will
not take or permit any action to be taken which would result in any
representation or warranty of Selling Stockholder herein becoming untrue or
incorrect in any material respect.

 

4.5.                              Employees. 
As of the Effective Date, the Companies do not have any employees.  Selling Stockholder shall indemnify, defend,
and hold harmless Apollo LNG from any and all obligations, claims, losses, or
expenses associated in any manner with each Company’s former employees and
COBRA participants’ rights to group health coverage benefits after their
employment termination.

 

4.6.                              Selling Stockholder’s Access to Records.  Upon the mutual execution of this Agreement,
Apollo and Apollo LNG shall give Selling Stockholder, its counsel, accountants,
lenders, and other designated agents full access, at reasonable times and on
reasonable notice but without any unreasonable disruption to Apollo’s business,
to all records, assets, properties and operations pertaining to Apollo or to
Apollo LNG. The activities described in this Section shall be referred to
as the “Selling Stockholder’s Due Diligence Review”.

 

4.7.                              Selling Stockholder’s Due Diligence Review.  Selling Stockholder’s Due Diligence Review
shall also be subject to the following terms and conditions:

 

(a)                                  Selling
Stockholder’s Due Diligence Review shall be scheduled through designated
representative(s) of Apollo, and which shall have the right to accompany
Selling Stockholder’s employees, representatives and agents as they perform Selling
Stockholder’s Due Diligence Review;

 

(b)                                 Selling
Stockholder shall not disclose or allow its employees, representatives or
consultants to disclose the purposes for Selling Stockholder’s Due Diligence
Review, without the consent of Apollo, which consent shall not be unreasonably
withheld or delayed;

 

(c)                                  Selling
Stockholder shall obtain the prior approval of Apollo before conducting any
discussions with Apollo’s employees, vendors, customers or service providers,
which approval shall not be unreasonably withheld or delayed;

 

(d)                                 Selling
Stockholder shall indemnify Apollo against any physical damage or injury to
property or persons or for any loss or damage proximately arising from Selling
Stockholders’ Due Diligence Review;

 

11

 

(e)                                  Except
as otherwise required by Law, any information concerning Apollo’s properties
gathered by Selling Stockholder as the result of, or in connection with, Selling
Stockholder’s Due Diligence Review shall be kept confidential and shall not be
revealed to, or discussed with, anyone other than representatives of Selling
Stockholder;

 

(f)                                    From
the Effective Date through the Closing Date, Apollo LNG and Apollo shall notify
Selling Stockholder promptly of (i) any actions or proceedings threatened
or commenced against Apollo LNG or Apollo or against any officer, director,
affiliate, employee, properties or assets of Apollo or Apollo LNG which could
impair Apollo’s or Apollo LNG’s ability to perform their obligations under this
Agreement, and (ii) any request for additional information or documentary
materials by any Governmental Authority in connection with the transactions
contemplated hereby.

 

4.8.                              Apollo LNG’s and Apollo’s Conduct of Business.  Without in any way limiting any other
obligation of the Selling Stockholder pursuant to this Agreement, from the
Effective Date until the Closing, Apollo LNG and Apollo shall (a) maintain
their books and records in accordance with past practices; (b) comply in
all material respects with all applicable Laws; (c) conduct their businesses
in the Ordinary Course of Business; (d) maintain insurance on the assets
and operations of their business in amounts and with coverage at least as great
as the amounts and coverage presently maintained by them; (e) not do any
act or omit to do any act, or permit any act or omission to act, which would
cause a breach of any contract, commitment or obligation for which Selling
Stockholder would be liable or which would have a Material Adverse Effect.  Apollo LNG and Apollo will not take or permit
any action to be taken which would result in any representation or warranty of
either or Apollo LNG or Apollo herein becoming untrue or incorrect in any material
respect.

 

4.9.                              Records. 
After the Closing, Apollo LNG shall maintain the books and records
relating to ALT in an orderly and businesslike fashion and shall permit Selling
Stockholder to have reasonable access at Selling Stockholder’s expense to such
books and records in connection with the preparation of Selling Stockholder’s
financial reports, Tax returns, Tax audits, the defense or prosecution of
litigation (including arbitration), or any other reasonable need of Selling
Stockholder to consult such books and records.

 

4.10.                        Certificates of Clearance.  The Selling Stockholder shall exercise
Commercially Reasonable Efforts to deliver to Apollo LNG, as soon as
practicable following Closing, certificates of clearance from the Arizona
Department of Revenue, Mojave County, dated within a reasonable period
subsequent to the Closing Date, addressed to Arizona LNG, verifying the timely
filing of and required transaction privilege, sales, and/or use tax, income tax
and unemployment and withholding Tax returns by Arizona LNG, and payment by
Arizona LNG of all amounts due.

 

5.                                      CONDITIONS PRECEDENT TO THE PARTIES’ OBLIGATIONS TO CLOSE

 

5.1.                              Contingencies of Apollo LNG.  Apollo LNG’s obligation to purchase the Stock
and the obligations of Apollo and Apollo LNG to take the other actions required
to be taken by Apollo and Apollo LNG at the Closing is subject to the
satisfaction, at or prior to the Closing, of

 

12

 

each of the
following conditions (any of which may be waived by Apollo and Apollo LNG, in
whole or in part, in writing).

 

(a)                                  Representations and Warranties; Agreements; Covenants.  Each of the representations and warranties of
Selling Stockholder shall be true and correct in all material respects on the
date made and shall be true and correct in all material respects as of the
Closing. Each of the obligations of Selling Stockholder required by this
Agreement to be performed by him at or prior to the Closing shall have been
duly performed and complied with in all material respects as of the Closing.

 

(b)                                 Authorizations; Consents.  All personal, corporate and limited liability
company action necessary to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
shall have been duly and validly taken by Selling Stockholder and the Companies,
and all notices to, and declarations, filings and registrations with, and
consents, authorizations, approvals and waivers from, Governmental Authorities
and third persons required to consummate the transactions contemplated hereby
shall have been made or obtained.

 

(c)                                  Absence of Litigation. 
No order, stay, injunction or decree of any Governmental Authority shall
be in effect (i) that prevents or delays the consummation of any of the
transactions contemplated hereby; or (ii) would impose any limitation on
the ability of Apollo LNG effectively to exercise full rights of ownership of
the Stock and of the Member Units. No action, suit or proceeding before any
Governmental Authority shall be pending or threatened, and no investigation by
any Governmental Authority shall have been commenced (and be pending), seeking
to restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which Apollo or Apollo LNG, in good faith and
with the advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.

 

(d)                                 No Material Adverse Change.  During the period from September 30,
2005, to the Closing, there shall not have been any Material Adverse Change
with respect to HLDM or Arizona LNG.

 

(e)                                  Organizational Documents.  Selling
Stockholder shall have delivered to Apollo and Apollo LNG each of the following
documents:

 

(i)                                     certified
copies of the Articles of Incorporation and Bylaws of HLDM and a certified copy
of the certificate of formation and limited liability company agreement of Arizona
LNG;

 

(ii)                                  appropriate
board, shareholder, manager, and member resolutions, and other similar
documents in order to ratify, approve and implement further the transactions
contemplated hereunder in form reasonably satisfactory to counsel for Apollo
and Apollo LNG.

 

13

 

(f)                                    Stock Transfer Documents. 
Selling Stockholder shall have delivered to Apollo LNG such stock
transfer documents and other documents and instruments as shall be reasonably
necessary to transfer to Apollo LNG the Stock.

 

(g)                                 Completion of Due Diligence.  Apollo and Apollo LNG shall have completed
the Apollo Due Diligence Review and the results of the Apollo Due Diligence
Review, shall be satisfactory to Apollo and Apollo LNG.

 

(h)                                 Board Approval.  The Board of Directors of Apollo and Apollo
LNG shall have approved the consummation of all of the transactions
contemplated by this Agreement.

 

(i)                                     Certificates.  Selling Stockholder shall have furnished Apollo
LNG with such certificates of the officers of HLDM and Arizona LNG and others
as Apollo or Apollo LNG may reasonably request to evidence compliance with all
of the conditions set forth in this Section 5.1.

 

(j)                                     Legal Matters.  All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of Selling
Stockholder, HLDM or Arizona LNG under the provisions of this Agreement, and
all other actions and proceedings required to be taken by or on behalf of
Selling Stockholder, HLDM or Arizona LNG in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for Apollo and Apollo LNG.

 

(k)                                  Schedules. 
Selling Stockholder shall have delivered to Apollo and Apollo LNG all
schedules referred to in this Agreement and required to be delivered by Selling
Stockholder and such schedules shall be acceptable in form and substance to Apollo
and Apollo LNG.

 

(l)                                     Collateral Agreements.  The Collateral Agreements shall have been
executed and delivered by the respective parties to such agreements.

 

(m)                               Related Transactions.  The transactions contemplated by the Transfer
and Exchange Agreement shall have previously closed and the transactions
contemplated by the Mountain States Stock Purchase Agreement shall have previously
closed or shall close substantially simultaneously with the Closing under this
Agreement.

 

5.2.                              Contingencies of Selling Stockholder.  Selling Stockholder’s obligations to sell the
Stock and to take the other actions required to be taken by Selling Stockholder
at the Closing are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Selling
Stockholder, in whole or in part, in writing).

 

(a)                                  Representations and Warranties; Agreements; Covenants.  Each of the representations and warranties of
Apollo and Apollo LNG shall be true and correct in all material respects on the
date made and shall be true and correct in all material respects as of the
Closing. Each of the obligations of Apollo LNG and Apollo required by this
Agreement to be performed by them at or prior to the Closing shall have been
duly performed and complied with in all

 

14

 

material
respects as of the Closing, including but not limited to the actions required
pursuant to Sections 2.1, 2.2, and 3.2.

 

(b)                                 Authorizations; Consents.  All corporate action necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby shall have been duly and validly taken by
Apollo LNG and by Apollo, and all notices to, and declarations, filings and
registrations with, and consents, authorizations, approvals and waivers from,
Governmental Authorities and third Persons required to consummate the
transactions contemplated hereby shall have been made or obtained.

 

(c)                                  Organizational Documents.  Apollo LNG and Apollo shall have delivered to
Selling Stockholder each of the following documents:

 

(i)                                     certified
copies of the articles of incorporation and bylaws of Apollo LNG and Apollo;
and

 

(ii)                                  appropriate
board and shareholder resolutions, and other similar documents in order to
approve and implement further the transactions contemplated hereunder in form
reasonably satisfactory to counsel for Selling Stockholder.

 

(d)                                 Absence of Litigation. 
No order, stay, injunction or decree of any Governmental Authority shall
be in effect that prevents or delays the consummation of any of the
transactions contemplated hereby. No action, suit or proceeding before any
Governmental Authority shall be pending (or threatened by any Governmental
Authority), and no investigation by any Governmental Authority shall have been
commenced (and be pending), seeking to restrain or prohibit (or questioning the
validity or legality of) the consummation of the transactions contemplated by
this Agreement or seeking damages in connection therewith which Selling
Stockholder, in good faith and with the advice of counsel, believes makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.

 

(e)                                  No Material Adverse Change.  During the period from September 30,
2005 to the Closing, there shall not have been any Material Adverse Change with
respect to Apollo LNG or Apollo.

 

(f)                                    Completion of Due Diligence.  Selling Stockholder shall have completed the
Selling Stockholder’s Due Diligence Review and the result of the Selling
Stockholder’s Due Diligence Review, including any environmental audits of the
properties of Apollo, shall be satisfactory to Selling Stockholder.

 

(g)                                 Certificates.  Apollo LNG and Apollo shall have furnished
the Selling Stockholder with such certificates of their officers and others as
the Selling Stockholder may reasonably request to evidence compliance with all
of the conditions set forth in this Section 5.2.

 

(h)                                 Legal Matters.  All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of Apollo
LNG or Apollo under the provisions of this Agreement, and all other actions and
proceedings required to be taken by

 

15

 

or on behalf
of Apollo LNG or Apollo in furtherance of the transactions contemplated hereby,
shall be reasonably satisfactory in form and substance to counsel for the
Selling Stockholder.

 

(i)                                     Selling Stockholder’s Approval.  Selling Stockholder shall have approved the
consummation of all of the transactions contemplated by this Agreement.

 

(j)                                     Schedules. 
Apollo and Apollo LNG shall have delivered to Selling Stockholder all schedules
referred to in this Agreement and required to be delivered by Apollo and Apollo
LNG and such schedules shall be acceptable in form and substance to the Selling
Stockholder.

 

(k)                                  Collateral Agreements.  The Collateral Agreements shall have been executed
and delivered by the respective parties to such agreements.

 

(l)                                     Related Transactions.  The transactions contemplated by the Transfer
and Exchange Agreement shall have previously closed, and the transactions
contemplated by the Mountain States Stock Purchase Agreement shall have
previously closed or shall close substantially simultaneously with the Closing
under this Agreement.

 

6.                                      REPRESENTATIONS AND WARRANTIES

 

6.1.                              Warranties and Representations of Selling Stockholder.  In order to induce Apollo and Apollo LNG to
enter into this Agreement, Selling Stockholder covenants, warrants and
represents to Apollo and Apollo LNG that each of the following representations
and warranties are materially true and correct as of the date of this Agreement
and will be materially true and correct on and as of the Closing Date:

 

(a)                                  Organization and Licensing.  Arizona LNG is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of Nevada, and HLDM is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Texas, and each such
Company has the power to own, lease and use the properties used in its business
and to carry on its business as now being conducted. Each Company is duly
qualified to do business and is in good standing as a foreign corporation in
each state and jurisdiction where qualification as a foreign corporation is
required, except to the extent that any variation or failure thereof does not
have a Material Adverse Effect .  Schedule 6.1(a) lists
(i) the states and other jurisdictions where each Company is so qualified;
and (ii) the assumed names under which each Company conducts business or
has conducted business during the past five (5) years. The Governmental Approvals
of each Company are now and will be current and valid as of the Closing Date. Arizona
LNG has previously delivered or made available to Apollo complete and correct
copies of its certificate of formation, limited liability company agreement, and
other organizational documents as amended and presently in effect, and HLDM has
previously delivered or made available to Apollo complete and correct copies of
its articles of incorporation, bylaws, and other organizational documents as
amended and presently in effect.

 

Selling Stockholder has full power and authority to enter into this
Agreement, to consummate the transactions contemplated hereby and to perform,
or to cause HLDM and Arizona LNG to perform, their or its obligations
hereunder.  The execution, delivery

 

16

 

and performance of this Agreement and the
Collateral Agreements to which they are a party, and the consummation of the
transactions contemplated herein have been duly authorized by all requisite
corporate and limited liability company action on the part of HLDM and Arizona
LNG, respectively.  This Agreement has
been duly executed and delivered by Selling Stockholder and is a valid and
binding obligation of Selling Stockholder, enforceable against him in
accordance with its terms, and the Collateral Agreements when executed and
delivered by the Selling Stockholder, HLDM, or Arizona LNG, as applicable,
shall be the valid and binding obligations of such Parties, enforceable against
them in accordance with their terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to creditors’ rights
generally, and (ii) is subject to general principles of equity.

 

(b)                                 Subsidiaries.  HLDM’s only subsidiary is Arizona LNG and
Arizona LNG has no subsidiaries.

 

(c)                                  Capitalization.  The authorized stock of HLDM and the number
of shares of capital Stock that are issued and outstanding and the Member Units
of Arizona LNG are set forth in Schedule 6.1(c) hereto. The Stock
and Member Units listed on Schedule 6.1(c) hereto constitute
all the issued and outstanding shares of capital Stock of HLDM and Member Units
of Arizona LNG and have been validly authorized and issued, are fully paid and
nonassessable, have not been issued in violation of any preemptive rights or of
any federal or state securities Law and no personal liability is attached to
the ownership thereof. There is no security, option, warrant, right, call,
subscription, agreement, commitment or understanding of any nature whatsoever,
fixed or contingent, that directly or indirectly (i) calls for the
issuance, sale, pledge or other disposition of any shares of capital Stock of
HLDM or Member Units of Arizona LNG, or any securities convertible into, or
other rights to acquire, any shares of capital Stock of HLDM or Member Units of
Arizona LNG; or (ii) obligates either of the Companies to grant, offer or
enter into any of the foregoing; or (iii) relates to the voting or control
of such capital Stock or Member Units, securities or rights, except as provided
in this Agreement, or in the articles of incorporation or bylaws of HLDM, or in
the limited liability company agreement of Arizona LNG. The Companies have not
agreed to register any securities under the Securities Act.

 

(d)                                 Governmental Approvals. 
Schedule 6.1(d) sets forth all Governmental Approvals
held by HLDM and Arizona LNG.  To Selling
Stockholder’s Knowledge, no Governmental Approvals other than those listed on Schedule 6.1(d) are
necessary for the transaction of HLDM’s or Arizona LNG’s business as currently
conducted.  All such Governmental
Approvals are currently in force.  No
notice of any violation has been received in respect of any such Governmental
Approvals and Selling Stockholder has no Knowledge of any proceeding which is
pending or threatened that would suspend or revoke or limit any such
Governmental Approvals.

 

(e)                                  Financial Reports.  Attached as Schedule 6.1(e) are
true and complete copies of (i) a preliminary October 2005 trial
balance for HLDM derived from HLDM’s accounting records (the “HLDM Trial
Balance”), and (ii) the preliminary unaudited balance sheet and
related statements of income and cash flow of Arizona LNG (the “Arizona LNG Financial
Statements”) as of September 30, 2005 (the “Balance Sheet Date”).  (The HLDM Trial

 

17

 

Balance and
the Arizona LNG Financial Statements are collectively referred to herein as the
“Financial Reports”).

 

The Arizona LNG Financial Statements have been prepared in material accordance
with and are consistent with the books and records of Arizona LNG, fairly
present the financial positions and results of operations of Arizona LNG as of
the dates and for the periods indicated, are stated in material conformity with
GAAP, consistently applied, except as otherwise clearly and conspicuously
stated, and except that they do not contain a full set of footnotes, and can be
legitimately reconciled with the financial statements and with the financial
records maintained and the accounting methods applied by Arizona LNG for
federal income tax purposes.

 

Except as set forth on Schedule 6.1(e), the statements of
income included in the Arizona LNG Financial Statements do not contain any material
items of special or non-recurring income except as expressly specified therein,
and the balance sheet included in the Arizona LNG Financial Statements does not
reflect any write-up or revaluation increasing the book value of any assets
except as otherwise clearly and conspicuously stated therein.

 

The HLDM Trial Balance is a materially accurate reflection of the
assets, liabilities, and equity accounts of HLDM as of the Balance Sheet Date.

 

(f)                                    Absence of Undisclosed Tax Liabilities.  To the Selling Stockholder’s Knowledge, neither
of the Companies has any liability for Taxes (as defined in Section 6.1(i))
(whether due or to become due, accrued, absolute, or contingent), except for (i) liabilities
reflected or reserved against in the most recent financial statements provided
to Apollo by Selling Stockholder; (ii) Tax liabilities which, individually
and in the aggregate, do not have and cannot reasonably be expected to have a
Material Adverse Effect; or (iii) Tax liabilities disclosed in Schedule 6.1(f) or
Schedule 6.1(i) hereto.

 

(g)                                 Projections.  The Companies have previously supplied to Apollo
in conjunction with Apollo’s investigation of the Companies certain
forward-looking financial estimates with respect to Arizona LNG (the “Projections”),
a description of which is attached here as Schedule 6.1(g).  The Projections (and accompanying supporting
information), were predicated upon assumptions and subjective judgments
(including those provided with the Projections) believed by Selling Stockholder
to be reasonable at the time the Projections were prepared, but which may or
may not, in fact, prove to be correct. 
No representations or warranties are made as to the accuracy of such
Projections.  The Projections and
supporting data did not, to Selling Stockholder’s Knowledge, contain any
material computational errors.  The
Projections may in certain instances also contain information regarding the
projected potential financial performance of assets and business activities in addition
to those of Arizona LNG.  The Projections
are subject to various risks, uncertainties, and other variable and
unpredictable factors and accordingly, they are not intended to be construed as
an assurance or guarantee that actual financial performance will, in any
respect, be as indicated therein.

 

18

 

(h)                                 Absence of Material Adverse Effect; Conduct of
Business.

 

(i)                                     Since
the Balance Sheet Date, except as set forth on Schedule 6.1(h)(i) hereto,
the Companies have operated in the Ordinary Course of Business and there has
not been:

 

(1)                                  any
material adverse change in the assets, properties, business, operations,
prospects, net income or financial condition of either of the Companies and, to
the Knowledge of Selling Stockholder, no factor, event, condition, circumstance
or prospective development exists which could reasonably be expected to have a
Material Adverse Effect;

 

(2)                                  any
material loss, damage, destruction or other casualty to the property or other
assets of either of the Companies, whether or not covered by insurance; or

 

(3)                                  any
change in any method of accounting or accounting practice.

 

(ii)                                  Since
the Balance Sheet Date , except as set forth in Schedule 6.1(h)(ii) hereto,
neither of the Companies has:

 

(1)                                  incurred
any material obligation or liability (whether absolute, accrued, contingent or
otherwise), except in the Ordinary Course of Business;

 

(2)                                  mortgaged,
pledged or subjected to any Lien any of its property or other assets except in
the Ordinary Course of Business, and except for mechanics and materialmen’s Liens
and Liens for Taxes not yet due and payable;

 

(3)                                  sold
or transferred any material assets or cancelled any debts or claims or waived
any rights of material value, except in the Ordinary Course of Business ;

 

(4)                                  defaulted
on any material obligation;

 

(5)                                  entered
into any material transaction, except in the Ordinary Course of Business ;

 

(6)                                  written
down the value of any inventory or written off as uncollectible any accounts
receivable or any portion thereof not reflected in the Companies’ Financial
Statements except in the Ordinary Course of Business; or

 

(7)                                  entered
into any agreement or made any commitment to do any of the foregoing.

 

19

 

(i)                                     Taxes.  Except as set
forth on Schedule 6.1(f) or Schedule 6.1(i), the
Companies and, for any period during all, or part of which, the Tax liability
of any other corporation or entity was determined on a combined or consolidated
basis with either of the Companies any such other corporation or entity, have
filed timely all federal, state, local and foreign Tax returns, reports and
declarations required to be filed (or have obtained or timely applied for an
extension with respect to such filing) currently reflecting the Taxes (as
defined below) and all other information required to be reported thereon, and
have paid, or made adequate provision for the payment of, all material Taxes
which are due pursuant to such returns or pursuant to any assessments received
by either of the Companies or any such other corporation or entity. As used
herein, “Tax” or “Taxes” shall mean all taxes, fees, levies or other
assessments, including but not limited to income, excise, property (including
property taxes paid by either of the Companies pursuant to any lease), sales,
franchise, withholding, social security and unemployment taxes imposed by the
United States, or any state, county, local or foreign government, or any
subdivision or agency thereof, or taxing authority therein, and any interest, penalties
or additions to tax relating to such taxes, charges, fees, levies or other
assessments. Copies of all Tax returns for each fiscal year since the formation
of each of the Companies have been furnished or made available to Apollo or to
its representatives and such copies are accurate and complete as of the date
thereof. The Companies have also furnished or made available to Apollo or its
representatives correct and complete copies of all notices and correspondence
sent or received since the formation of either of the Companies to or from any
federal, state or local Tax authorities. The Companies have adequately reserved
for the payment of all material Taxes with respect to periods ended on, prior
to or through the date of Closing for which Tax returns have not yet been
filed. In the ordinary course, the Companies make adequate provision on their books
for the payment of all Taxes (including for the current fiscal period) owed by each
of the Companies. Except as disclosed on Schedule 6.1(i), neither
of the Companies have been subject to a federal or state Tax audit of any kind
and no adjustment has been proposed by the Internal Revenue Service (“IRS”)
with respect to any Tax return for any subsequent year. With respect to the Tax
audits referred to on Schedule 6.1(i) hereto, no such audit
has resulted in an adjustment in excess of $25,000.

 

(j)                                     Legal Matters.  Neither of the Companies is subject to any
judgment, decree, writ, injunction ruling or order (collectively, “Judgments”)
of any Governmental Authority.

 

(i)                                     To
the Knowledge of Selling Stockholder, the businesses of the Companies are being
conducted in compliance with all Laws applicable to either of the Companies or
any of their respective business or properties, except for where the failure to
be in such compliance could not reasonably be expected to have a Material
Adverse Effect.

 

(ii)                                  Each
Company owns or holds all Governmental Approvals material to the conduct of its
business. To Selling Stockholder’s Knowledge, no event has occurred and is continuing
which permits, or after notice or the lapse of time, or both, would permit, any
modification or termination of any such Governmental Approval.

 

20

 

(k)                                  Property.

 

(i)                                     Schedule 6.1(k)
hereto is a list of all real property owned by or leased to either of the
Companies (including all real property owned by or leased to the Selling
Stockholder and used in the business of the Companies) and of all options or
other contracts to acquire any such real property (collectively, the “Real
Property”). To Selling Stockholder’s Knowledge, except as set forth on Schedule 6.1(k)
and in the Environmental Reports, all improvements to the Real Property (“Improvements”)
conform in all material respects with all applicable Laws and such Improvements
do not encroach in any material respect on the property of others. All
Improvements are supplied with utilities (including, without limitation, water,
sewage disposal, electricity, gas, and telephone) necessary for the operation of
such Improvements as currently operated. 
Neither the whole nor any portion of the Improvements have been
condemned, requisitioned or otherwise taken by any Governmental Authority, and
Selling Stockholder has not received any notice that any such condemnation,
requisition, or taking is threatened, which condemnation, requisition, or
taking would preclude or materially impair the current use thereof.

 

(ii)                                  The
Real Property is zoned to permit the conduct of the businesses of the Companies
as presently conducted and a Certificate of Occupancy or other similar
Governmental Approval for each of the Companies to conduct its business has
been issued and is in good standing, and each Company is authorized to conduct
its business on all or any part of its Real Property.

 

(iii)                               Except
as set forth in Schedule 6.1(k), Selling Stockholder has not received
any written notice that either of the Companies is in violation of, and Selling
Stockholder has no Knowledge that either Company is in material violation of,
any zoning, use, occupancy, building, wetlands, ordinance, or other Law
relating to the Improvements, including without limitation, any Environmental
Law.

 

(l)                                     Inventories.  The
values at which inventories are carried on the Companies’ Financial Statements reflect
the normal inventory valuation policies of the Companies.

 

(m)                               Contracts, Etc.  As
used in this Agreement, the term “Company Agreements” shall mean all mortgages,
indentures, notes, agreements, contracts, leases, licenses, franchises,
obligations, instruments or other commitments, arrangements or understandings
of any kind, whether written or oral, binding or non-binding to which either of
the Companies is a party or by which either of the Companies or any of their properties
may be bound or affected, including all amendments, modifications, extensions
or renewals of any of the foregoing. Set forth on Schedule 6.1(m)
is a complete and accurate list of each Company Agreement which is material to
the business, operations, assets, condition (financial or otherwise) or
prospects of either of the Companies and involves the payment or receipt of
consideration in excess of $25,000 over the term of such Company Agreement (the
“Material Company Agreements”). True and correct copies of all written
Material Company Agreements and an accurate, complete

 

21

 

and written
description of all verbal Material Company Agreements have been provided or
made available to Apollo. Except as disclosed in Schedule 6.1(m),
neither the Companies nor, to the Knowledge of the Selling Stockholder, any
other party to any Material Company Agreement, is in default thereunder, and no
event has occurred which, with the passage of time or the giving of notice, or
both, would constitute a default by the Companies thereunder, or to Selling
Stockholder’s Knowledge, by any other party to any such contract or agreement.

 

(n)                                 Transactions with Affiliates.  Schedule 6.1(n) is a true,
correct, and complete list of all existing business relationships between the
Companies and any of the Affiliates of the Companies that relate in any
material way to the conduct of the Companies’ respective businesses and that
are expected to continue after the Closing.

 

(o)                                 Environmental.  True, complete and correct copies of the
written reports of all environmental audits or assessments which have been
conducted with respect to any real property owned or leased by either of the
Companies and which have been commissioned and received by Selling Stockholder
or the Companies, including the Environmental Surveys, have been delivered or
made available to Apollo (the “Environmental Reports”), and a list of
all such Environmental Reports is included in Schedule 6.1(o).  To Selling Stockholder’s Knowledge, except as
disclosed in the Environmental Reports, the Real Property contains no Hazardous
Substances and is not in violation of any Environmental Laws.  To Selling Stockholder’s Knowledge, except as
disclosed in the Environmental Reports, neither Selling Stockholder nor either
of the Companies has caused or allowed the illegal or unauthorized use,
generation, manufacture, production, treatment, storage, release, discharge, or
disposal of any Hazardous Substances on, under, or about the Real Property, nor
has caused or allowed the illegal or unauthorized transportation to or from the
Real Property of any Hazardous Substance. 
Except as set forth on Schedule 6.1(o), or in the
Environmental Reports, neither Selling Stockholder nor either of the Companies has
received any warning, notice of violation, administrative complaint, judicial
complaint, or other formal notice alleging that either Company or the Real
Property is in violation of any Environmental Laws, or informing Selling
Stockholder or either Company that either Company or the Real Property is
subject to investigation, inquiry, or threatened litigation regarding the
presence of Hazardous Substances on, under or about the Real Property or the
potential violation of any Environmental Laws. 
There are no environmental Liens or “superfund liens” attached to the
Real Property pursuant to any Environmental Laws.  The term “Environmental Laws” shall mean any
federal, state or local law, whether by common law, statute, ordinance, or
regulation, pertaining to health, industrial hygiene, or environmental
conditions on, under, or about the Real Property, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. 9601, et seq.; the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. §§ 6901, et seq.; the Toxic
Substances Control Act of 1976, 15 U.S.C. §§ 2604, et seq.;
the Superfund Amendments and Reauthorization Act of 1986, Title III,
42 U.S.C. §§ 11001, et seq.; the Clean Air Act, 42 U.S.C.
§§ 7401 et seq.; the Federal Water Pollution Control Act,
33 U.S.C. §§ 1251, et seq.; the Safe Drinking Water Act,
42 U.S.C. §§ 300f, et seq.; the Solid Waste Disposal Act,
42 U.S.C. §§ 3251, et seq.; and the storage tank requirements
in 40 C.F.R. Part 280.  The term “Hazardous
Substances” shall mean those substances included within the definitions of “hazardous
substance,” “hazardous waste,” “hazardous material,” “toxic substance,” “solid
waste,” or “pollutant or contaminant” in, or otherwise regulated by, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980;
the Resource Conservation

 

22

 

and Recovery
Act of 1976; the Toxic Substances Control Act of 1976; the Hazardous Materials
Transportation Act, 49 U.S.C. §§ 1801, et seq.; and in the
regulations promulgated pursuant to said Laws.

 

(p)                                 Effect of Agreement.  The execution, delivery and performance by
Selling Stockholder of this Agreement, and the consummation by Selling
Stockholder of the transactions contemplated hereby will not, with or without
the giving of notice or the lapse of time, or both, (i) result in a
default, right to accelerate or loss of material rights under, or result in,
cause or create any material liability, charge or Lien pursuant to, any franchise,
mortgage, deed of trust, lease, license, agreement, or other contractual
relationship to which Selling Stockholder, HLDM or Arizona LNG is a party or by
which any of them or their assets may be bound or affected; (ii) violate
any Judgment applicable to Selling Stockholder, HLDM or Arizona LNG; or (iii) violate
any provision of the organizational documents of HLDM or Arizona LNG.

 

(q)                                 Litigation.  Except as
set forth on Schedule 6.1(q), there is no legal action, suit,
proceeding, grievance, arbitration, investigation, audit or claim by, of or
before any court, arbitration panel, Governmental Authority, or other body
acting in an adjudicative capacity pending or, to the Selling Stockholder’s Knowledge,
threatened against any of the Selling Stockholder, HLDM, or Arizona LNG, (i) that
involves or could reasonably be expected to involve HLDM, Arizona LNG, or any
of their respective assets, properties, operations or business or (ii) that
seeks to enjoin or obtain material damages in respect of the consummation of
the transactions contemplated hereby.

 

6.2.                              Warranties and Representations of Apollo and Apollo
LNG.  In order to induce
Selling Stockholder to enter into this Agreement, Apollo and Apollo LNG,
jointly and severally, covenant, warrant and represent to Selling Stockholder
that each of the following representations and warranties is true as of the
date of this Agreement and will be true on and as of the Closing Date.

 

(a)                                  Organization and Licensing.  Apollo LNG and Apollo are corporations duly
organized, validly existing, and in good standing under the Laws of the States
of Utah and Texas, respectively,  and
have the power to own, lease and use the properties used in their businesses
and to carry on their businesses as now being conducted. They are each duly
qualified to do business and each is in good standing as a foreign corporation
in each state and jurisdiction where qualification as a foreign corporation is
required, except to the extent that any variation or failure thereof shall not
be material in its effect.  Schedule 6.2(a) lists
(a) the states and other jurisdictions where either Apollo LNG or Apollo is
so qualified; and (ii) the assumed names under which either conducts
business or has conducted business during the past five (5) years. Apollo
LNG and Apollo each have full power and authority to enter into this Agreement,
to consummate the transactions contemplated hereby and to perform their
respective obligations hereunder.  The
execution, delivery and performance of this Agreement, and the Collateral Agreements
to be executed and delivered by Apollo and Apollo LNG, and the consummation of
the transactions contemplated herein by Apollo and Apollo LNG have been duly
authorized by all requisite corporate action on the part of Apollo and Apollo
LNG.  This Agreement has been duly
executed and delivered by Apollo and Apollo LNG and is a valid and binding
obligation of Apollo and Apollo LNG enforceable against them in accordance with
its terms, and the

 

23

 

Collateral Agreements
to which Apollo and Apollo LNG are parties, shall be, when executed and
delivered by Apollo and Apollo LNG, the valid and binding obligations of Apollo
and Apollo LNG, enforceable against them in accordance with its terms, except
to the extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws relating to
creditors’ rights generally, and (ii) is subject to general principles of
equity.  All permits, licenses and certificates
required by any Governmental Authority having jurisdiction over Apollo LNG and Apollo
and their respective operations, are now and will be current and valid as of
the date of Closing. Apollo LNG and Apollo have previously delivered or made
available to Selling Stockholder complete and correct copies of their articles
of incorporation, bylaws and other corporate documents as amended and presently
in effect.

 

(b)                                 Approvals; Consents.  Except as set forth on Schedule 6.2(b) hereto,
no Governmental Approval is necessary to be obtained or made by Apollo LNG or
by Apollo to enable them to continue to continue to conduct their businesses
and operations and use their properties after the Closing in a manner which is
in all material respects consistent with that in which they are currently
conducted except for the renewal of any permits in the Ordinary Course of
Business (the renewal of which is purely administrative in nature and does not
call for a discretionary review by any granting authority) and for which Apollo
LNG and Apollo have no reason to believe will not be routinely renewed.

 

(c)                                  Financial Statements.  Attached as Schedule 6.2(c) are
true and complete copies of:

 

(i)                                     the
audited balance sheet of Apollo as of December 31, 2004 and the related
statements of income, stockholders’ equity and cash flow for the fiscal year
ended December 31, 2004, together with the notes thereto, in each case
examined by and accompanied by the report of independent certified public
accountants, and the unaudited balance sheet of Apollo as of September 30,
2005, and the related statements of income, stockholders’ equity and cash flow
for the nine months ended September 30, 2005, together with the notes
thereto (the “Apollo Financial Statements”).

 

(ii)                                  The
Apollo Financial Statements have been prepared in accordance with and are
consistent with the books and records of Apollo, fairly present the
consolidated financial positions and results of operations of Apollo as of the
dates and for the periods indicated, are stated in material conformity with
GAAP, consistently applied, except as otherwise clearly and conspicuously
stated, and except that the unaudited financial statements of Apollo do not
contain a full set of footnotes, and can be legitimately reconciled with the financial
statements and with the financial records maintained and the accounting methods
applied by Apollo [for federal income tax purposes]. The statements of income
included in the Apollo Financial Statements do not contain any material items
of special or non-recurring income except as expressly specified therein, and
the balance sheets included in the Apollo Financial Statements do not reflect
any write-up or revaluation increasing the book value of any assets except as
otherwise clearly and conspicuously stated therein. The books and accounts of Apollo
are complete and correct in all material respects and fairly reflect, to the
extent required or

 

24

 

permitted by GAAP, all of the
transactions, items of income and expense and all assets and liabilities of the
businesses of Apollo consistent with prior practices of Apollo, including past
accounting treatments utilized by Apollo.

 

(d)                                 Absence of Undisclosed Tax Liabilities.  To the Knowledge of Apollo and Apollo LNG,
neither Apollo nor Apollo LNG have any liability or obligation (whether
accrued, absolute, contingent or otherwise) for Taxes (as defined in Section 6.2(g),
except for (i) Tax liabilities reflected or reserved against in the most
recent financial statements provided to Selling Stockholder by Apollo; (ii) Tax
liabilities incurred in the Ordinary Course of Business after the date of the
last Apollo Balance Sheets as supplied to Selling Stockholder or which,
individually and in the aggregate, do not have and cannot reasonably be
expected to have a Material Adverse Effect; and (iii) Tax liabilities
disclosed in Schedule 6.2(d) or Schedule 6.2(g).

 

(e)                                  Absence of Material Adverse Effect; Conduct of Business.

 

(i)                                     Since
September 30, 2005, except as set forth on Schedule 6.2(e) hereto,
Apollo has operated in the Ordinary Course of Business and there has not been:

 

(1)                                  any
material adverse change in the assets, properties, business, operations,
prospects, net income or financial condition of Apollo and no factor, event,
condition, circumstance or prospective development exists which could
reasonably be expected to have a Material Adverse Effect;

 

(2)                                  any
material loss, damage, destruction or other casualty to the property or other
assets of Apollo, whether or not covered by insurance;

 

(3)                                  any
change in any method of accounting or accounting practice of Apollo; or

 

(4)                                  any
loss of the employment, services or benefits of any key employee of Apollo.

 

(ii)                                  Since
September 30, 2005, except as set forth in Schedule 6.2(e)(ii) hereto,
Apollo has not:

 

(1)                                  incurred
any material obligation or liability (whether absolute, accrued, contingent or
otherwise), except in the Ordinary Course of Business ;

 

(2)                                  mortgaged,
pledged or subjected to any Lien any of its property or other assets except in
the Ordinary Course of Business, and except for mechanics and materialmen’s
Liens and Liens for Taxes not yet due and payable;

 

25

 

(3)                                  sold
or transferred any assets or cancelled any debts or claims or waived any
rights, except in the Ordinary Course of Business ;

 

(4)                                  defaulted
on any material obligation;

 

(5)                                  entered
into any material transaction, except in the Ordinary Course of Business ;

 

(6)                                  written
down the value of any inventory or written off as uncollectible any accounts
receivable or any portion thereof not reflected in Apollo’s Financial
Statements except in the Ordinary Course of Business;

 

(7)                                  incurred
any obligation or liability to any employee for the payment of severance
benefits of more than $1,000; or

 

(8)                                  entered
into any agreement or made any commitment to do any of the foregoing.

 

(f)                                    Judgments. 
Except as set forth on Schedule 6.2(f) hereto, neither
Apollo nor Apollo LNG is subject to any judgment, decree, writ, injunction
ruling or order (collectively, “Apollo Judgments”) of any Governmental
Authority. Schedule 6.2(f) identifies each Apollo Judgment,
each of which is fully covered by an insurance policy and Apollo and Apollo LNG
hereby represent and warrant to Selling Stockholder that they shall be
financially responsible for the full satisfaction of any such Apollo Judgment,
including costs of defense and costs of court and attorney fees, to the extent that
(i) any such Apollo Judgment, including costs of defense and costs of
court including attorney fees, is not covered by insurance; and (ii) to
the extent that any such Apollo Judgment, including costs of defense and costs
of court and attorney fees, is not fully satisfied by insurance proceeds.

 

(i)                                     The
businesses of Apollo and Apollo LNG are being conducted in compliance with all
Laws applicable to either Apollo or Apollo LNG or any of their businesses or
properties, except for where the failure to be in such compliance could not
reasonably be expected to have a Material Adverse Effect.

 

(ii)                                  Apollo
and Apollo LNG own or hold all Governmental Approvals material to the conduct
of their business. To Apollo’s and Apollo LNG’s Knowledge, no event has
occurred and is continuing which permits, or after notice or the lapse of time,
or both, would permit, any modification or termination of any Governmental
Approval.

 

(g)                                 Inventories.  The
values at which inventories are carried by Apollo on its balance sheets reflect
the normal inventory valuation policies of Apollo.

 

(h)                                 Taxes.  Apollo and,
for any period during all or part of which, the tax liability of any other
corporation or entity was determined on a combined or consolidated basis with
Apollo any such other corporation or entity, have filed timely all federal,
state, local and foreign Tax returns, reports and declarations required to be
filed (or have obtained or timely

 

26

 

applied for an
extension with respect to such filing) currently reflecting the Apollo Taxes
(as defined below) and all other information required to be reported thereon,
and have paid, or made adequate provision for the payment of, all Apollo Taxes
which are due pursuant to such returns or are pursuant to any assessments
received by Apollo or any such other corporation or entity. As used herein, “Apollo
Taxes” shall mean all taxes, fees levies or other assessments, including but
not limited to income, excise, property (including property taxes paid by
Apollo pursuant to any lease), sales, franchise, withholding, social security
and unemployment taxes imposed by the United States, or any state, county,
local or foreign government, or any subdivision or agency thereof, or taxing
authority therein, and any interest, penalties or additions to tax relating to
such taxes, charges, fees, levies or other assessments. Copies of all tax
returns for each fiscal year since the formation of Apollo have been furnished
or made available to the Selling Stockholder or to its representatives and such
copies are accurate and complete as of the date thereof.  Apollo has also furnished or made available
to the Selling Stockholder or its representatives correct and complete copies
of all notices and correspondence sent or received since the formation of
Apollo by Apollo to or from any federal, state, or local Tax authorities.  Apollo has adequately reserved for the
payment of all material Apollo Taxes with respect to periods ended on, prior to
or through the date of Apollo’s balance sheets for which tax returns have not
yet been filed. In the ordinary course, Apollo makes adequate provision on its
books for the payment of all Apollo Taxes (including for the current fiscal
period) owed by Apollo. Except to the extent reserves therefore are reflected
on its balance sheet, Apollo is not liable or will not become liable, for any
Apollo Taxes for any period ending on, prior to or through the dates of those
balance sheets. Except as disclosed on Schedule 6.2(h), Apollo has
not been subject to a federal or state tax audit of any kind and no adjustment
has been proposed by the IRS with respect to any return for any subsequent
year. With respect to the audits referred to on Schedule 6.2(h) hereto,
no such audit has resulted in an adjustment in excess of $25,000.

 

(i)                                     Subsidiaries.  Except
as reflected on Schedule 6.2(i), neither Apollo LNG nor Apollo has
any subsidiaries.

 

(j)                                     Apollo LNG Business Activities. Apollo LNG was capitalized
in a transaction pursuant to the Transfer and Exchange Agreement, immediately
prior to the execution and delivery by Apollo LNG of this Agreement, and prior
to such capitalization had no shareholders or employees, had conducted no
business activities, and had no assets, properties or liabilities of any nature
whatsoever (whether due or to become due, accrued, contingent or otherwise).

 

(k)                                  Capitalization of Apollo LNG.  The authorized stock of Apollo and Apollo LNG
and the number of shares of capital stock that are issued and outstanding of
Apollo and Apollo LNG are set forth in Schedule 6.2(k) hereto. The
shares listed on Schedule 6.2(k) hereto constitute all the issued
and outstanding shares of capital stock of Apollo and Apollo LNG and have been
validly authorized and issued, are fully paid and nonassessable, have not been
issued in violation of any preemptive rights or of any federal or state
securities law and no personal liability is attached to the ownership thereof.
Except as set forth on Schedule 6.2(k), there is no security,
option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition
of any shares of capital stock of Apollo or Apollo LNG, or any securities
convertible into, or other rights to acquire, any shares of capital

 

27

 

stock of
Apollo or Apollo LNG; or (ii) obligates Apollo or Apollo LNG to grant,
offer or enter into any of the foregoing; or (iii) relates to the voting
or control of such capital stock, securities or rights, except as provided in
this Agreement, or in the articles of incorporation or bylaws of Apollo or
Apollo LNG. Apollo LNG has not agreed to register any securities under the
Securities Act.

 

(l)                                     Effect of Agreement.  The execution, delivery and performance by
Apollo and Apollo LNG of this Agreement, and the consummation by Apollo and
Apollo LNG of the transactions contemplated hereby will not, with or without
the giving of notice or the lapse of time, or both, (i) result in a
default, right to accelerate or loss of material rights under, or result in,
cause or create any material liability, Lien, or charge pursuant to, any
franchise, mortgage, deed of trust, lease, license, agreement, or other
contractual relationship to which Apollo or Apollo LNG is a party or by which
any of them or their assets may be bound or affected; (ii) violate any
Judgment applicable to Apollo or Apollo LNG; or (iii) violate any
provision of the organizational documents of Apollo or Apollo LNG.

 

(m)                               Litigation.  Except as
set forth on Schedule 6.2(m) there is no legal action, suit,
proceeding, grievance, arbitration, investigation, audit or claim by, of or
before any court, arbitration panel, Governmental Authority, or other body
acting in an adjudicative capacity pending or, to Apollo’s or Apollo LNG’s
Knowledge, threatened against Apollo or Apollo LNG, (i) that involves or
could reasonably be expected to involve Apollo or Apollo LNG or any of their
respective assets, properties, operations or business or (ii) that seeks
to enjoin or obtain material damages in respect of the consummation of the
transactions contemplated hereby.

 

(n)                                 Public Utility Holding Company Act and Investment Company Act.  Neither Apollo nor Apollo LNG, is a “holding
company” or a “public utility company” as such terms are defined in the Public
Utility Holding Company Act of 1933 as amended. 
Neither Apollo nor Apollo LNG is, as a result of and immediately upon
the Closing will not be an “investment company” or company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940 as amended.

 

(o)                                 ERISA.  No liability
to the Pension Benefit Guaranty Corporation has been incurred with respect to
any benefit plan of Apollo or Apollo LNG or any of their respective
subsidiaries which is or would be materially adverse to Apollo, Apollo LNG or
their Affiliates.  The execution and
delivery of this Agreement will not involve any transaction which is subject to
the prohibitions of Section 406 of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”) or in connection with which a Tax
could be imposed thereto.

 

7.                                      TERMINATION

 

7.1.                              Termination Events.  The transactions contemplated herein may be
terminated and/or abandoned prior to the Closing:

 

(a)                                  by
the mutual consent of Apollo, Apollo LNG, and Selling Stockholder;

 

28

 

(b)                                 by
Apollo and Apollo LNG, if any of the conditions provided in Section 5.1
of this Agreement shall not have been met or waived in writing by Apollo and
Apollo LNG by the Closing date; or

 

(c)                                  by
Selling Stockholder, if any of the conditions provided for in Section 5.2
of this Agreement shall not have been met or waived in writing by Selling
Stockholder by the Closing date.

 

7.2.                              Procedure Upon Termination.  In the event of termination and/or
abandonment by Apollo or Apollo LNG or by Selling Stockholder, or both,
pursuant to Section 7.1 hereof, written notice thereof shall be
given to the other Party, and the transactions contemplated by this Agreement
shall be terminated without further action by Apollo and Apollo LNG or by
Selling Stockholder.  If the transactions
contemplated by this Agreement are terminated as provided herein:

 

(a)                                  each
Party, upon request by another Party, shall redeliver all documents, work
papers and other material, including all copies thereof, provided by the other
Party, to the Party furnishing the same;

 

(b)                                 no
Party hereto shall have any liability or further obligation to any other Party
to this Agreement, with the exception of any provisions hereof which expressly
survive the termination of this Agreement; and

 

(c)                                  the
Parties expressly acknowledge and agree that if the Closing fails to timely occur
due to the wrongful action or failure to act of Seller, Apollo or Apollo LNG,
then the sole remedy of the non-defaulting or non-breaching Part(ies) shall be
to terminate this Agreement.

 

8.                                      INDEMNIFICATION

 

8.1.                              Survival of Representations and Warranties.  The representations and warranties made by
the Parties under Sections 6.1 and 6.2 hereunder shall survive Closing
hereunder for a period of one (1) year, with the exception of the
representations and warranties made by the Parties relative to matters of
Taxes, which representations and warranties shall survive the Closing hereunder
for a period of seven (7) years.

 

8.2.                              Indemnification by Selling Stockholder.  Selling Stockholder shall indemnify, defend
and hold Apollo and Apollo LNG and each of Apollo and Apollo LNG’s Affiliates,
officers, directors, and shareholders (the “Apollo Indemnitees”)
harmless, from and against, and shall reimburse Apollo and Apollo LNG (or, as
the case may be, each of the Apollo Indemnitees) on demand for any liabilities,
payments, losses, suits, claims, costs, or expenses (including attorney’s fees
and costs of investigation incurred in defending against such liabilities,
payments, losses, suits, claims, costs or expenses) made against or incurred by
or asserted against Apollo or Apollo LNG or the Apollo Indemnitees at any time
on or after the Closing in respect of (a) any material breach of any
representation, warranty, covenant or agreement made by Selling Stockholder in
this Agreement or any certificate or other instrument furnished pursuant to
this Agreement, or (b) the failure of Selling Stockholder to convey to
Apollo LNG good and marketable title to the Stock, free and clear of all Liens.

 

29

 

8.3.                              Indemnification by Apollo LNG and by Apollo.  Apollo LNG and Apollo, jointly and severally,
shall indemnify, defend and hold Selling Stockholder and each of Selling
Stockholders’ Affiliates (the “Selling Stockholder Indemnitees”)
harmless, from and against, and shall reimburse Selling Stockholder (or, as the
case may be, each of Selling Stockholders’ Indemnitees), on demand for any
liabilities, payments, losses, suits, claims, costs, or expenses (including
attorney’s fees and costs of investigation incurred in defending against such
liabilities, payments, losses, suits, claims, costs or expenses) made against
or incurred by or asserted against Selling Stockholder or Selling Stockholder’s
Indemnitees after the Closing in respect of any breach of any representation,
warranty, covenant or agreement made by Apollo LNG or by Apollo in this
Agreement or any certificate or other instrument furnished by either of them
pursuant to this Agreement, including but not limited to the failure to pay the
Purchase Note.

 

8.4.                              Claims Subject to Indemnification.  Each Party shall promptly notify the other of
any claim for which indemnification may be sought under this Agreement, and
shall give the indemnifying Party the opportunity to defend the claim with
counsel of its choice, subject to the approval of the Party against whom the
claim is being brought, which shall not be unreasonably withheld or delayed, at
its sole cost and expense.  The
indemnifying Party shall not settle or compromise such claim without the prior
written consent of the indemnified Party, which shall not be unreasonably
withheld or delayed.  Notwithstanding the
foregoing, in the event the subject matter underlying such claim is reasonably
determined by the indemnitee to be or reasonably anticipated to be materially
and adversely precedent setting to the indemnitee, or which may materially and
adversely affect the indemnitee’s future operations, the indemnitee may, in its
reasonable judgment, withhold its consent to indemnitor defending the claim
with its own counsel, or settling the claim, and upon written notice to
indemnitor, indemnitee shall proceed with its defense of the claim.  The indemnitor’s liability when indemnitee is
defending the claim shall not exceed that which indemnitor would have incurred
had indemnitor provided the claim defense.

 

8.5.                              Limitation on Selling Stockholder’s Representations
and Warranties. Independent
Analysis.  APOLLO AND APOLLO
LNG ACKNOWLEDGE THAT APOLLO AND APOLLO LNG, EITHER ALONE OR TOGETHER WITH ANY
INDIVIDUALS OR ENTITIES APOLLO AND APOLLO LNG HAVE RETAINED TO ADVISE THEM WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, HAVE KNOWLEDGE AND EXPERIENCE
IN TRANSACTIONS OF THE TYPE CONTEMPLATED PURSUANT TO THIS AGREEMENT AND IN THE
BUSINESSES OF HLDM AND ARIZONA LNG, AND ARE THEREFORE CAPABLE OF EVALUATING THE
RISKS AND MERITS OF ACQUIRING THE STOCK. 
APOLLO AND APOLLO LNG FURTHER ACKNOWLEDGE THAT NEITHER SELLING
STOCKHOLDER, HLDM, ARIZONA LNG, NOR ANY OF THEIR RESPECTIVE DIRECTORS,
EMPLOYEES, SHAREHOLDERS, PARTNERS, MEMBERS, MANAGERS, OR OWNERS, NOR ANY OF
THEIR RESPECTIVE AFFILIATES, REPRESENTATIVES, AGENTS OR CONSULTANTS HAVE MADE
ANY REPRESENTATION OR WARRANTY IN RESPECT OF THE INTERPRETATIONS OR ECONOMIC
EVALUATIONS RELATIVE TO EITHER COMPANY, INCLUDING WITH RESPECT TO THE FUTURE
OPERATION OF EITHER COMPANY OR ITS BUSINESS, OR AS TO THE PROSPECTS (FINANCIAL
OR OTHERWISE) OF EITHER COMPANY.  APOLLO
AND APOLLO LNG FURTHER ACKNOWLEDGE, AGREE AND RECOGNIZE THAT ANY COST
ESTIMATES, PROJECTIONS OR OTHER PREDICTIONS CONTAINED

 

30

 

OR REFERRED TO
IN ANY DOCUMENT PROVIDED TO APOLLO OR APOLLO LNG OR ANY OF THEIR AFFILIATES,
EMPLOYEES, AGENTS OR REPRESENTATIVES, ARE PREPARED FOR INTERNAL PLANNING
PURPOSES ONLY AND ARE NOT DEEMED TO BE REPRESENTATIONS AND WARRANTIES OF
SELLING STOCKHOLDER, HLDM, ARIZONA LNG, OR ANY OF THEIR RESPECTIVE DIRECTORS,
EMPLOYEES, SHAREHOLDERS, PARTNERS, MEMBERS OR OWNERS, OR ANY OF THEIR
RESPECTIVE AFFILIATES, AGENTS, REPRESENTATIVES, OR CONSULTANTS.

 

IT IS EXPRESSLY UNDERSTOOD AND AGREED BY THE
PARTIES HERETO THAT THE SELLING STOCKHOLDER MAKES NO WARRANTIES OF ANY KIND,
INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE ASSETS OR PROPERTIES OF EITHER COMPANY,
WHETHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE. UPON CLOSING, APOLLO AND
APOLLO LNG ACKNOWLEDGE THAT THEY HAVE HAD, OR WILL HAVE HAD, PRIOR TO CLOSING,
A REASONABLE OPPORTUNITY TO CONDUCT THEIR DUE DILIGENCE ACTIVITIES AND TO
INSPECT AND EXAMINE THE CONDITION OF EACH AND EVERY ASSET AND PROPERTY OF EACH
COMPANY, INCLUDING THE ENVIRONMENTAL CONDITIONS OF THE ASSETS AND PROPERTIES OF
EACH COMPANY, AND APOLLO AND APOLLO LNG ARE AWARE OF AND ACCEPT THE CONDITION
OF EACH AND EVERY ASSET AND PROPERTY OF EACH COMPANY, INCLUDING THE
ENVIRONMENTAL CONDITIONS OF SUCH ASSETS AND PROPERTIES.

 

8.6.                              Remedies: 
Limitations on Liability.

 

(a)                                  Notwithstanding
any other provision of this Agreement, the sole remedy of Apollo LNG or Apollo
under this Agreement for a breach by Selling Stockholder of any representation
or warranty set forth in Section 6.1 of this Agreement, shall be to
deduct from the final payment due to Selling Stockholder under the Purchase
Note, the amount to which Apollo LNG and Apollo are entitled to indemnification
pursuant to Section 8.2; it being expressly understood and agreed
that the Selling Stockholder shall have no obligation to satisfy any such
liability to Apollo LNG or Apollo in any manner (including the payment of
money), other than by such deduction from the payment under the Purchase Note.

 

(b)                                 IT
IS EXPRESSLY UNDERSTOOD AND AGREED THAT KEN KELLEY SHALL HAVE NO PERSONAL
LIABILITY WHATSOEVER FOR ANY BREACH OF ANY WARRANTY, REPRESENTATION, COVENANT
OR AGREEMENT, OR WITH RESPECT TO ANY AND ALL OTHER CLAIMS RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT, OR FOR ANY INDEMNIFICATION OBLIGATIONS UNDER
THIS AGREEMENT, AND THAT APOLLO AND APOLLO LNG SHALL HAVE NO RECOURSE AGAINST
THE ASSETS OR PROPERTIES OF KEN KELLEY, IT BEING EXPRESSLY UNDERSTOOD AND AGREED
THAT THE SOLE REMEDY OF APOLLO LNG OR APOLLO WITH RESPECT TO KEN KELLEY SHALL
BE TO MAKE A DEDUCTION FROM THE FINAL PAYMENT DUE UNDER THE PURCHASE NOTE, AS
PROVIDED FOR AND SUBJECT TO THE LIMITATIONS HEREIN.

 

31

 

(c)                                  The
sole remedy of Selling Stockholder under this Agreement for a breach by Apollo
and/or Apollo LNG of any representation or warranty set forth in Section 6.2
of this Agreement, shall be an increase in the final payment due to Selling
Stockholder under the Purchase Note in an amount equivalent to the amount to
which Selling Stockholder is entitled to indemnification pursuant to Section 8.3.

 

(d)                                 The
maximum aggregate liability of Selling Stockholder to Apollo and Apollo LNG,
collectively, for a breach by Selling Stockholder of a representation or
warranty under Section 6.1, shall not exceed $1,000,000; and the
maximum aggregate liability of Apollo and Apollo LNG for a breach by Apollo or
Apollo LNG of a representation or warranty under Section 6.2 of
this Agreement shall not exceed $1,000,000, which shall in each case be
satisfied by addition to or deduction from the final payment due under the
Purchase Note, as provided in Sections 8.6(a) and 8.6(c).

 

(e)                                  No
Party will be required to indemnify another Party unless the indemnified Party’s
claims with respect to a particular set of facts or circumstances exceed
$50,000, and unless (and only to the extent that) the aggregate amount of the
agreed to or adjudicated indemnification claims against such Party exceed
$50,000.

 

(f)                                    NO
PARTY SHALL BE LIABLE OR OTHERWISE RESPONSIBLE TO ANY OTHER PARTY FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING LOST PROFITS, OR LOSS
OF BUSINESS OPPORTUNITY OR FOR PUNITIVE DAMAGES, AS TO ANY ACT OR OMISSION
WHATSOEVER, AND CHARACTERIZED AS A CONTRACT BREACH, TORT, OR OTHERWISE, WHICH
ARISES OUT OF OR RELATES TO THIS AGREEMENT OR ITS PERFORMANCE OR
NON-PERFORMANCE; PROVIDED THAT THIS LIMITATION ON LIABILITY SHALL NOT APPLY TO
ANY CLAIMS WITH RESPECT TO WHICH A PARTY IS FOUND BY A COURT OF COMPETENT
JURISDICTION TO HAVE COMMITTED ACTUAL FRAUD.

 

(g)                                 Each
indemnified Party shall be obligated in connection with any claim for
indemnification to exercise all Commercially Reasonable Efforts to mitigate the
Losses associated with such claim upon and after becoming aware of any event
which could reasonably be expected to give rise to such Losses.

 

(h)                                 The
amount of any Loss suffered by a Party, including any Tax Losses, will be
reduced by the amount, if any, of the recovery or Tax benefit (net of
reasonable expenses incurred in connection in obtaining such recovery or
benefit) such Party or its Affiliates has received, in the future receives, or
may reasonably be expected to receive, or otherwise enjoys with respect thereto
from any other Person, including any Affiliate (including the present value of
any federal, state, or local income Tax benefit, any recovery under any
insurance policies, after the deduction of any deductible payments and costs of
recovery, and any offsetting deductions, credits, losses, including net
operating losses and similar items).  The
present value of any Tax benefit will be calculated utilizing the prevailing
interest rates established by the Internal Revenue Code.

 

(i)                                     The
obligations of the Parties for indemnification for breach of a representation
or warranty under Sections 6.1 or 6.2 shall terminate after the
expiration of the

 

32

 

periods
indicated in Section 8.1, except with respect to any Loss which has
been the subject of written notice to the Party against whom such claim of loss
is asserted prior to the expiration of such period, which notice shall preserve
such claim until it is liquidated or otherwise finally resolved.

 

9.                                      TAX MATTERS

 

9.1.                              Tax Returns.  Apollo
LNG shall prepare or cause to be prepared and file or cause to be filed all Tax
returns with respect to HLDM and Arizona LNG for all Tax periods beginning with
and subsequent to the 2006 taxable year. 
Selling Stockholder shall prepare or cause to be prepared and file or
cause to be filed Tax returns with respect to HLDM and Arizona LNG for all Tax
periods beginning prior to the 2006 Taxable year.

 

9.2.                              Cooperation on Tax Matters.

 

(a)                                  Apollo
and Apollo LNG and Selling Stockholder shall cooperate fully, as and to the
extent reasonably requested by the other Party, in connection with the filing
of Tax returns pursuant to this Section and any audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.  Apollo, Apollo LNG and
Selling Stockholder shall (i) retain all books and records in their
possession with respect to Tax matters pertinent to HLDM and Arizona LNG, and
their assets or businesses relating to any whole or partial taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Apollo LNG or the Selling
Stockholder, any extensions thereof) of the respective taxable periods, and
abide by all record retention agreements (if any) entered into with any taxing
authority, and (ii) give the other Party reasonable written notice prior
to transferring, destroying or discarding any such books and records and, if
the other Party so requests, Apollo LNG or Selling Stockholder, as the case may
be, shall allow the other Party to take possession of such books and records.

 

(b)                                 Apollo
LNG and the Selling Stockholder further agree, upon request, to use their
Commercially Reasonable Efforts to obtain any certificate or other document
from any Governmental Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).

 

9.3.                              Confidentiality.  Any information shared in connection with
Taxes shall be kept confidential, except as may otherwise be necessary in
connection with the filing of Tax returns or reports, refund claims, Tax
audits, Tax claims and Tax litigation, or as required by Law.

 

9.4.                              Audits. 
The Selling Stockholder, Apollo LNG and Apollo shall provide prompt
written notice to the other of any pending or written threat of a Tax audit,
assessment or proceeding that it receives related to HLDM and Arizona LNG and
their assets for whole or partial periods for which it is indemnified by the
other Party hereunder.  Such notice shall
contain factual information (to the extent known) describing the asserted Tax
liability in reasonable detail and shall be accompanied by copies of any notice
or other document received from or with any Tax authority in respect of any
such matters.

 

33

 

9.5.                              Control of Proceedings. The Party responsible
for preparing and filing the Tax return under this Agreement shall control
audits and disputes relating to such Taxes (including action taken to pay,
compromise or settle such Taxes). The Selling Stockholder shall control audits
and disputes relating to Tax periods beginning on or before the Closing Date
and ending thereafter.  Reasonable
out-of-pocket expenses with respect to such contest shall be borne by the
Selling Stockholder and Apollo LNG in proportion to their responsibility for
such Taxes as set forth in this Agreement. 
Except as otherwise provided by this Agreement, the non-controlling
Party shall be afforded a reasonable opportunity to participate in such
proceedings at its own expense.

 

9.6.                              Arizona LNG Transaction.  Apollo and Apollo LNG hereby agree to pay any
Taxes payable by either HLDM, Neptune Leasing, Inc., or Golden Spread
Energy, Inc., arising out of the transaction described in item 1 of Schedule 6.1(i);
it being expressly agreed, in this respect, that if it is determined that the
value of the settlement with El Paso Field Services, and/or the acquisition of
Arizona LNG, L.L.C. was or is, now or in the future, taxable to HLDM or to
Neptune Leasing, Inc. and Golden Spread Energy, Inc., then Apollo and
Apollo LNG shall be responsible for the payment of such Taxes.

 

If Apollo LNG and Apollo are required to pay
any such Tax, then, in such event Apollo LNG shall have the right to encumber
the assets of Arizona LNG and ALT (the “Tax Lien”) for the purpose of
borrowing the funds necessary to pay such Taxes.  The Tax Lien shall have priority over any
Liens created upon the assets of Arizona LNG or ALT securing the payment of the
Purchase Note, but shall be inferior to the JBK Liens.

 

10.                               GENERAL PROVISIONS

 

10.1.                        Further Assurances.  Each Party hereto shall execute and/or cause
to be delivered to each other Party hereto such instruments and other
documents, and shall take such other actions, as such other Party may
reasonably request (prior to, at or after the Closing) for the purpose of
carrying out or evidencing any of the transactions contemplated pursuant to
this Agreement.

 

10.2.                        Waiver. 
Any waiver of any term or condition of this Agreement shall not operate
as a waiver of any prior or subsequent breach of such term or condition other
than the breach specifically intended to be waived, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof.  Prior to this
Agreement being terminated as a result of the failure of a contingency or
condition to be met, the Party in whose favor such failed condition or
contingency exists shall have the sole and exclusive right, by written notice
to the other, to waive any such condition or contingency, and if waived, said
condition or contingency shall be deemed satisfied.

 

10.3.                        Notices. 
Any notices required or capable of being rendered under the provisions
of this Agreement shall be in writing and (a) hand delivered in person, (b) sent
by United States Postal Service certified mail, postage prepaid, (c) sent
by a recognized national overnight delivery service, or local same day delivery
or courier service, addressed as shown on pages 1 and 2 of this
Agreement, or (d) sent by facsimile machine.  Any notice sent by United States Postal Service
certified mail shall be deemed to be effective the earlier of the actual
delivery, if

 

34

 

hand delivered
in Person, or three (3) Business Days after deposit in a post office
operated by the United States Postal Service. 
Any notice sent by a recognized national overnight delivery service
shall be deemed effective one (1) business day after deposit with such
service.  Any notice personally delivered
or delivered through a same-day delivery/courier service shall be deemed
effective upon its receipt or refusal to accept receipt by the addressee.  Any notice sent by facsimile machine shall be
deemed effective one Business Day after confirmation of the successful transmission
by the sender’s facsimile machine. 
Notices shall be addressed to the Parties in accordance with the
information provided on pages 1 and 2 of this Agreement or to such
other addresses as may be designated in writing from time to time pursuant
hereto.

 

10.4.                        Time is of the Essence.  Time is of the essence with respect to all
matters in this Agreement.  Except as
expressly provided for in this Agreement, the time for performance of any
obligation or taking any action under this Agreement will be deemed to expire
at 12:00 o’clock midnight (central time) on the last day of the applicable time
period provided for in this Agreement.

 

10.5.                        Binding Effect.  This Agreement shall be binding upon and
shall inure to the benefit of the Parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.  No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties.

 

10.6.                        No Third Party Beneficiaries.  Nothing in this Agreement or the attachments
hereto, express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any Persons other than the Parties to it, nor
is anything in this Agreement intended to relieve or discharge the obligations
or liabilities of any third Person to any Party to this Agreement.

 

10.7.                        Texas Law and Jurisdiction.  This Agreement shall be construed pursuant to
the laws of the State of Texas.  The
Parties hereby consent to the exclusive personal jurisdiction of the courts in
and for the State of Texas in the event of litigation pertaining hereto, with
venue to lie in Dallas County.

 

10.8.                        Attorneys’ Fees.  If any action at Law or in equity is brought
to enforce or interpret the terms of this Agreement, the prevailing Party shall
be entitled to reasonable attorneys’ fees, costs and disbursements from the
non-prevailing Party, in addition to any other relief to which the prevailing
Party may be entitled pursuant to the court’s ruling.

 

10.9.                        Counterparts and Facsimile Execution.  This Agreement may be executed in any number
of counterparts, and by facsimile signature, each of which will be an original
but all of which will constitute one and the same instrument.

 

10.10.                  Severability.  If any provision or provisions of this
Agreement shall be held to be wholly or partially invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall in no way be affected or impaired thereby.

 

10.11.                  Headings. 
The headings of the several Sections of this Agreement are inserted
solely for convenience of reference and are not a part of and are not intended
to govern, limit or aid in the construction of any term or provision hereof.

 

35

 

10.12.                  Other Offers.  From and after the mutual execution of this
Agreement, and until its closure or termination as herein provided, Selling
Stockholder shall not entertain any offers from any third party with respect to
the sale (outside the Ordinary Course of Business) of the assets or the Stock
of HLDM or the assets or the Member Units of Arizona LNG.

 

10.13.                  No Brokers. 
Apollo and Apollo LNG represent and warrant that Apollo and Apollo LNG
have not dealt with any sales agents, finders, brokers or other consultants in
connection with the transaction contemplated hereunder, and has no financial
obligation to any such sales agents, finders, brokers or other consultants in
connection with this transaction. 
Selling Stockholder represent and warrant that no broker, finder,
investment banker, sales agent, or other consultants, or other Person is or
will be in connection with the transactions contemplated by this Agreement,
entitled to any brokerage, finder’s or other fee or compensation based on any
arrangement or agreement made by or on behalf of Selling Stockholder, for which
Apollo and Apollo LNG will have any obligation or liability.  Selling Stockholder has engaged the services
of an investment banker, and Selling Stockholder shall be responsible for the
payment of any fees due to such Person as a result of the transactions
contemplated hereunder.  If any Person
asserts a claim to a finder’s fee, brokerage commission or other compensation
on account of alleged employment as a finder or broker, or the performance of
services as a finder or broker in connection with the transactions contemplated
hereunder, the Party under whom the finder or broker is claiming will
indemnify, defend and hold the other Party and the other Party’s affiliates
harmless for, from, and against any claims related thereto.  This indemnity will survive the Closing or
the cancellation of this Agreement.

 

10.14.                  Publicity. 
All notices to third parties and other publicity concerning the
transactions contemplated by this Agreement, or any subsequent termination of
this Agreement, shall be jointly planned and coordinated by and between Selling
Stockholder, Apollo, and Apollo LNG.  No
Party shall act unilaterally in this regard without the prior written approval
of the others; provided, however, that such approval shall not be unreasonably
withheld.  It is understood that this
provision shall never prevent any Party from complying with any applicable
public disclosure requirements; provided, however, that neither Party may
disclose or make public the work product of any certified public accountants
providing services for another Party without providing such certified public
accountants with the opportunity to review, comment upon, and approve any such
disclosure or publication.

 

10.15.                  Expenses. 
Each Party to this Agreement shall pay all expenses incurred by it or on
its behalf in connection with the preparation, authorization, execution and
performance of this Agreement and the transactions contemplated hereunder,
including but not limited to, all fees and expenses of agents, representatives,
counsel, and accountants engaged by such Party.

 

10.16.                  Confidentiality Agreement.  The Parties agree that the Confidentiality
Agreement shall remain in full force and effect, and each Party agrees to
comply with its terms and conditions.

 

10.17.                  Disclosure Schedules; Interpretation.  Any matter set forth in a Disclosure Schedule shall
be deemed disclosure also for purposes of any other Sections or Disclosure
Schedules in this Agreement to which it may relate.  Failure to provide a cross reference to other
applicable Sections contained in the Agreement or Disclosure Schedules shall
not, however, be

 

36

 

deemed a
failure to disclose unless a reasonable person would be unable to determine
that the disclosure contained in such Section or Disclosure Schedule contains
enough information to qualify or otherwise apply to other representations,
Sections or Disclosure Schedules contained in this Agreement.

 

10.18.                  Confidential Information.  Prior to the Closing Date and thereafter if
the Closing fails to occur, Apollo and Apollo LNG and their representatives and
Selling Stockholder and his representatives will hold in strict confidence ,
all data and information obtained regarding the other, their assets, the
operations, and financial status obtained in connection with this transaction
and the terms of this Agreement.  Except
as may be required by Law or any Governmental Authority, or to obtain any
consents or approvals required by this Agreement, or to their respective
attorneys, accountants, lenders, insurers, utility providers and consultants,
Selling Stockholder, Apollo and Apollo LNG will not, without the prior written
consent of the other Part(ies), make any disclosure to third Persons or parties
of the terms of this Agreement or any other matter related to the transactions
contemplated by this Agreement.  Apollo
and Apollo LNG and Selling Stockholder will use their Commercially Reasonable
Efforts to avoid such publicity in any newspaper or magazine, or on any radio
or television station, or through any other medium of publication.

 

10.19.                  Entire Agreement.  This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter contained in
this Agreement.  All prior and
contemporaneous agreements, representations and understandings of the parties,
oral or written, are superseded by and merged in this Agreement.  No supplement, modification or amendment of
this Agreement will be binding unless in writing and executed by Apollo and
Apollo LNG and Selling Stockholder.

 

10.20.                  Joint and Several Liability. The liability
and obligations of Apollo and Apollo LNG under this Agreement shall be joint
and several.

 

WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.

 

 

	
   

  	
  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

37

 

	
   

  	
  APOLLO LNG, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

38

 

	
   

  	
   

  
	
   

  	
  Oliver Kendall Kelley

  

 

39

 

Schedule 2.2(b)

Cash
Payment Adjustment –

Combined
Cash and Working Capital Calculation

 

The calculation of Combined Cash and Working Capital for the purpose of
making adjustments to the Cash Payment pursuant to Section 2.3,
shall be based solely on the balance sheet accounts set forth below.

 

	
   

  	
   

  	
  Arizona LNG

  	
   

  	
  ALT

  	
   

  	
  Combined

  	
   

  
	
  Projected Working Capital at Closing:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  $

  	
  2,100,000

  	
   

  	
  $

  	
  3,900,000

  	
   

  	
  $

  	
  6,000,000

  	
   

  
	
  NR – Ken Kelley

  	
   

  	
  2,500,000

  	
   

  	
  —

  	
   

  	
  2,500,000

  	
   

  
	
  Account Receivable

  	
   

  	
  —

  	
   

  	
  3,100,000

  	
   

  	
  3,100,000

  	
   

  
	
  Account Receivable – ALT (wholesale LNG
  sales)

  	
   

  	
  700,000

  	
   

  	
  —

  	
   

  	
  700,000

  	
   

  
	
  LNG inventory

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  	
  50,000

  	
   

  
	
  Equipment inventory

  	
   

  	
  —

  	
   

  	
  450,000

  	
   

  	
  450,000

  	
   

  
	
  Prepaid expenses

  	
   

  	
  2,300,000

  	
   

  	
  —

  	
   

  	
  2,300,000

  	
   

  
	
  OBA deposit

  	
   

  	
  450,000

  	
   

  	
  —

  	
   

  	
  450,000

  	
   

  
	
  Gas imbalance receivable/payable

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  AP

  	
   

  	
  (100,000

  	
  )

  	
  (1,200,000

  	
  )

  	
  (1,300,000

  	
  )

  
	
  AP – AzLNG (wholesale LNG purch)

  	
   

  	
  —

  	
   

  	
  (700,000

  	
  )

  	
  (700,000

  	
  )

  
	
  Cash & working capital

  	
   

  	
  $

  	
  8,000,000

  	
   

  	
  $

  	
  5,550,000

  	
   

  	
  $

  	
  13,550,000

  	
   

  

 

40Exhibit 10.3

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT
BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAW REQUIREMENTS HAVE BEEN MET OR (II)
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF APPLICABLE
STATE SECURITIES LAWS ARE AVAILABLE.

 

	
  $6,000,000.00

  	
   

  	
  November 30, 2005

  

 

PROMISSORY
NOTE

 

APOLLO LNG, INC., a
Texas corporation, and Apollo Resources
International, Inc., a Utah corporation, (collectively hereinafter
called “Maker”), a Texas corporation, for value received, promises and
agrees to pay to the order of OLIVER KENDALL KELLEY (hereinafter
called “Payee”) in lawful money of the United States of America, the
principal sum of SIX MILLION DOLLARS ($6,000,000.00), together with interest
thereon (calculated on the basis of a 365 day year or a 366 day year in the
case of a leap year) from and after the date hereof until maturity at a rate
per annum equal to eight and one-half percent (8.50%) (the “Applicable Rate”)
but in no event in excess of the maximum rate of nonusurious interest allowed
from time to time by law (hereinafter called the “Highest Lawful Rate”).
 All past due amounts of principal of,
and to the extent permitted by applicable law, unpaid interest on, this Note from
time to time outstanding, and all amounts of unpaid principal of this Note during
any period in which an Event of Default (as hereinafter defined) exists or
would exist but for the giving of notice or the passage of time, or both, shall
bear interest at the rate equal to the Applicable Rate plus five percent
(5.00%), but in no event higher than the Highest Lawful Rate. All sums due
under this Note are payable to Payee at 8101 W. 34th Avenue, Amarillo, Texas
79121, or at such other address as may be designated from time to time in
writing by Payee to the Maker.

 

This Note is
secured by a Security Agreement of even date herewith from Maker, as debtor, to
Payee, as secured party, covering the personal property and other interests
more fully described therein.  This Note
and the Security Agreement may be referred to herein as the “Transaction Documents.”

 

The principal and interest under this Note shall be payable as follows:

 

1.               THE PRINCIPAL of
this Note shall be paid in six (6) annual installments of One Million Dollars
($1,000,000.00) each; the first such installment shall be due and payable on December 1,
2006 (the “First Anniversary”), and one such installment shall be due and
payable on December 1 of each successive year thereafter until and
including December 1, 2011, when the final payment of the then remaining
unpaid principal balance and accrued interest shall be due and payable.

 

1

 

2.               AN INTEREST HOLIDAY
shall be in effect for a period beginning on the Execution Date and expiring on
the First Anniversary, during which time this Note shall not bear nor accrue
any interest.

 

3.               INTEREST shall
begin to accrue as of the First Anniversary and shall be due and payable
thereafter semi-annually, on each December 1 and each June 1,
beginning June 1, 2007, until the entire principal has been paid to Payee;
provided however, that if the principal
of this Note is prepaid, in whole or in part, all accrued and unpaid interest
is due and payable on the date of such prepayment. If any amount owing under
this Note is due and payable on a day that is not a Business Day (which shall
be defined as a day on which the Citibank, NA office at 53rd and
Park Avenue, New York, New York is open for business) such payment shall be due
and payable on the next succeeding Business Day. Maker has the right to prepay
this Note, in whole or in part, at any time and from time to time without
premium or penalty upon not less than five (5) days’ notice to Payee.  Any and all prepayments shall be applied
first to accrued interest and then toward the reduction of principal.  All prepayments of principal shall be applied
in the inverse order of maturity.

 

FOR PURPOSES of this Note, an “Event
of Default” shall occur if (a) Maker fails to pay any installment
of principal (or any part thereof) when due; or (b) after three (3) days
written notice to Maker of such failure, Maker fails to pay any installment of
interest (or any part thereof) when due; or (c) after twenty (20) days
written notice to Maker of such failure, Maker fails to perform any other
obligation under this Note when due; or (d) any Event of Default (as
defined in any Transaction Document) occurs under any of the Transaction
Documents, and is not cured within twenty (20) days following written notice of
such Event of Default.  Upon the
occurrence of an Event of Default, then, Payee, at Payee’s election, and
without notice to any person liable hereunder, may declare the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest
and other sums and charges due under this Note or any Transaction Document, to
be immediately due and payable.  Failure
to exercise this option will not constitute a waiver of the right to exercise
it at any other time when an Event of Default will exist or continue.  Upon the occurrence of an Event of Default,
Payee will also have the unconditional right to exercise all remedies provided (1) hereunder,
(2) under any Transaction Document, and (3) at law or in equity.  No delay on the part of Payee in the exercise
of any power or right under this Note, or under any other instrument executed
in connection herewith, will operate as a waiver thereof, nor will a single or
partial exercise of any power or right preclude other or further exercise thereof
or exercise of any other power or right. 
Enforcement by Payee of any security for the payment hereof will not
constitute an election by Payee of remedies so as to preclude the exercise of
any other remedy available to Payee.

 

MAKER SHALL promptly notify Payee in writing of any Event of Default
under any of the Transaction Documents or any event that, with the giving of
notice or the passage of time, or both, would constitute an Event of Default
under the Transaction Documents.

 

2

 

IT IS the intention of Maker and Payee to perform strictly according to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including, without limitation, the laws
of the State of Texas and of the United States of America), then, in that
event, notwithstanding anything to the contrary herein or in any agreement
entered into in  connection with or as
security for this Note, it is agreed that the aggregate of all consideration
which constitutes interest under applicable law that is taken, reserved,
contracted for, charged or received under this Note or under any of the
aforesaid agreements or otherwise in connection with this Note shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be cancelled automatically and, of theretofore paid, shall
be applied to the reduction of the principal balance of this Note by the holder
hereof (or, to the extent this Note shall have been or would thereby be paid in
full, refunded to the Maker).

 

FROM AND after the
occurrence of any Event of Default under this Note or the Transaction
Documents, in the event Payee employs one or more attorneys and/or legal
assistants to enforce collection of this obligation, in whole or in part, or to
pursue its remedies under the Transaction Documents or otherwise available at
law or in equity, then Maker will pay a reasonable fee for all such attorneys’
and legal assistants’ services and costs, regardless of whether suit is
instituted and, if suit or other action or proceeding is instituted, to enforce
payment of all or any portion of this obligation, for all administrative,
trial, and appellate proceedings, if any. Maker also agrees to pay (i) all
other reasonable costs of collection incurred, and (ii) all reasonable
costs and reasonable attorneys’ and legal assistants’ fees and costs otherwise
incurred by Payee for all administrative, trial, bankruptcy, insolvency, and
appellate proceedings in connection with the enforcement or protection of this
obligation and in connection with the enforcement or collection of any
judgment.

 

MAKER AND each surety, guarantor, endorser and other party ever liable
for payment of any sums of money payable on this Note jointly and severally
waive notice, presentment, demand for payment, protest, all notices (including,
without limitation, notice of protest and non-payment or dishonor, notice of
acceleration, notice of intent to accelerate, and notice of intent to demand),
diligence in collecting, grace, and all other formalities of any kind, and
consent to all extensions without notice for any period or periods of time and
partial payments, before or after maturity, all without prejudice to the
holder.

 

MAKER AND each surety, guarantor, endorser and other party ever liable
for payment of any sums of money payable on this Note jointly and severally do
hereby, to the extent permitted by applicable law, further convey and assign to
the holder hereof and waive and renounce any and all exemption rights which
they may have under or by virtue of the Constitution or laws of the State of
Texas, or any other applicable state, or the United States of America, as may
be allowed, against this debt or any renewal thereof.

 

IF THIS Note is
signed by more than one party, then all obligations contained in this Note are
the joint and several obligations of each signer.

 

IN THE event that
any one or more of the provisions of this Note will for any reason be held to
be invalid, illegal, or unenforceable, in whole or in part, or in any respect,
or in the event that any one or more of the provisions of this Note will
operate, or would prospectively operate, to invalidate this

 

3

 

Note, then and in such event, such provision or provisions only will be
deemed to be null and void and of no force or effect and will not affect any
other provision of this Note, and the remaining provisions of this Note will
remain operative and in full force and effect and will in no way be affected,
prejudiced, or disturbed thereby.

 

MAKER HEREBY
ACKNOWLEDGES AND REPRESENTS THAT THIS NOTE IS GIVEN FOR A BUSINESS, COMMERCIAL,
INVESTMENT, AGRICULTURAL, OR OTHER SIMILAR PURPOSE AND IS NOT GIVEN FOR MAKER’S
PERSONAL, FAMILY OR HOUSEHOLD USE.  MAKER
FURTHER ACKNOWLEDGES AND REPRESENTS THAT THIS NOTE AND THE INDEBTEDNESS
EVIDENCED HEREBY ARE NOT SUBJECT TO THE PROVISIONS OF CHAPTER XV OF THE TEXAS
CONSUMER CREDIT CODE.  MAKER ACKNOWLEDGES
RECEIPT OF A COPY OF EACH OF THE TRANSACTION DOCUMENTS (WITH ALL APPLICABLE
BLANKS FILLED IN) AT THE TIME OF SIGNING.

 

THE TRANSACTION DOCUMENTS, TOGETHER WITH THAT
CERTAIN STOCK PURCHASE AGREEMENT BETWEEN MAKER AND PAYEE DATED EFFECTIVE NOVEMBER 30,
2005, CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PAYEE AND THE OTHER PARTIES
TO THE LOAN DOCUMENTS CONCERNING THE SUBJECT MATTER CONTAINED IN THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS AND SUPERSEDE AS OF THE DATE HEREOF ALL PRIOR
AGREEMENTS BETWEEN PAYEE AND THE OTHER PARTIES TO THE LOAN DOCUMENTS, AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

THIS NOTE has been executed and delivered in and shall be construed in
accordance with the laws of the State of Texas and of the United States of
America.

 

	
   

  	
  APOLLO LNG, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

4

 

	
   

  	
  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

5

 

	
   

  	
   

  
	
   

  	
  OLIVER KENDALL KELLEY

  	
   

  

 

6

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