NATIONAL ARSENIC SALES AGREEEMENT

Exhibit 10.16

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

National Arsenic Sales Agreement

December 9, 2005

This National Arsenic Sales Agreement (the Agreement) is entered into by and between Shaw Environmental, Inc., a Louisiana corporation with an office at 3347 Michelson Drive, Suite 200, Irvine, CA 92612 (“Shaw”) and Basin Water Inc., a California corporation with an office at 8731 Prestige Court, Rancho Cucamonga, CA 91730 (“Basin”). Each of Shaw and Basin may be individually referred to as a “Party” and collectively referred to as the “Parties” in this Agreement.

WHEREAS, Basin designs, manufactures, sells and services a packaged ion exchange system and provides an analysis routine for turnkey, full life cycle water treatment systems for the removal of arsenic from drinking water as described in Exhibit I (hereinafter referred to as the “Product” or “Products”) in the United States of America. Basin also designs, manufactures, sells and services packaged ion exchange systems and provides an analysis routine for turnkey, full life cycle water treatment systems for the removal of other chemical components from drinking water; and

WHEREAS , Shaw possesses environmental expertise and desires to expand the type of environmental services it provides to commercial and other clients, and wishes to buy and resell the Product as a Sales Representative, with the exclusive right to sell the Product to Clients located in the Territory defined below, except as provided in 1.2.1 hereof; and

WHEREAS , each of the Parties hereto having carefully assessed the capabilities and interests of each other, have concluded that they should establish an arrangement to propose and then perform projects using the Product, and in which the likelihood of awards to Shaw for such projects would be increased; and

WHEREAS , Basin represents that it has not appointed a Sales Representative specific to the market for arsenic treatment of drinking water, with primary responsibility for the Territory defined below.

NOW, THEREFORE , in consideration of the mutual covenants and conditions contained herein, the Parties agree as follows:

ARTICLE I – APPOINTMENT

1.1 Basin hereby appoints Shaw as a Sales Representative for the Product, subject to the terms of this Agreement.

1.2 Basin hereby grants to Shaw the exclusive right to sell the Product to Clients as defined herein with projects located in the states of Idaho, Oregon, Washington, Alaska, Texas, Arkansas, Wisconsin, Minnesota, Michigan, Illinois, Pennsylvania, New Jersey, New York, Massachusetts, Maine, Vermont New Hampshire, and Connecticut (the “Territory”) to customers or potential customers for the Product (“Client” or “Clients”) during the Term (defined below) subject to the terms of this Agreement (including without limitation Section

1.2.1 below), and a nonexclusive right to sell the Product throughout the balance of the United States including but not limited to California, Nevada and Arizona. Nothing herein shall be construed as restricting Basin’s freedom to sell Product outside of the Territory. Shaw also is granted the right to sell other Basin treatment technologies on a nonexclusive basis throughout the United States.

1.2.1 Notwithstanding the foregoing exclusive right, Basin retains the right to sell to [***]and each of their subsidiaries or affiliates (“affiliates are defined as entities under common ownership) or any of their respective successors, regardless of whether these named companies have projects located in the Territory.

1.2.2 If Shaw elects not to bid on any project in the Territory for which Shaw has knowledge that the Product has been specified, Shaw shall notify Basin at least 14 days prior to the due date for such bid (or immediately if Shaw learns of such Project less than 14 days’ prior to the due date for such bid), and Basin may elect to bid on the project itself or to provide its Product to another company for purposes of bidding for that Project within the exclusive Territory. If Basin is the successful bidder, then Basin would pay Shaw a referral fee of [***] of the cash received for the sale of the Product. It is Basin’s intent that where possible, Shaw would be utilized to support the Product under any associated service contract, whether outright or as a subcontractor to Basin. In the event that this arrangement is not practical, then Basin would pay Shaw a referral fee of [***] of the cash received for (the associated service contract, if any, to support such Product.

1.2.3 If Shaw is not accepted by any Client as a bidder or a Client refuses to purchase from Shaw within the Territory and not as a result of Shaw’s failure to be qualified for such bid, Basin may elect to provide its Product for that Project provided that Basin shall pay a referral fee to Shaw for such sales within the Territory of [***] of the cash received for the sale of the Product. In this case, Basin agrees that the pricing of such Product shall be no less than [***] of the Basin list price (as indicated in Section 4.1.1). It is Basin’s intent that where possible, Shaw would be utilized to support the Product under any associated service contract, whether outright or as a subcontractor to Basin. In the event that this arrangement is not practical, then Basin would pay to Shaw a referral fee of [***] on a regenerable Product, or [***] on a non-regenerable Product of the cash received for the associated service contract, if any, to support such Product or Products.

1.3 Each of the Parties hereto is an independent contractor and engages in the Operation of its respective business, and neither Party hereto is or shall be considered to be the agent of the other Party for any purpose whatsoever Neither Party has any authorization to enter any contracts or assume any obligations for the other Party, or to make any warranties or representations on behalf of the other Party, other than as authorized herein or in any written contract between the Parties for a specific project, and nothing in this Agreement shall be

construed as establishing a relationship of co-partner or joint venturer with the other Party This Agreement shall not be construed or argued to create any third party beneficiary rights in any third party.

ARTICLE 2 - TERM AND TERMINATION

2.1 This Agreement shall be effective as of December 9, 2005 (the “Effective Date”), and shall be valid for two (2) years from the Effective Date (the “Initial Term”)- The Initial Term and any additional tern’s as extended in Section 2.1 shall be known as the “Term”.

2.1.1 The Parties hope to achieve sales of $2M per state per year. Maintenance of exclusivity for all the states in the Territory is contingent on achieving a sales goal of $2 million in EACH state by the end of the first year of the Initial Term. Any states in which this goal is not met become non- exclusive at the end of this period. The preferential pricing and right to provide service for units sold will continue throughout the Term of the agreement regardless of the loss of exclusivity in any state or states.

Provided that Shaw’s total sales of Product exceeds $19M in the year preceding expiration of this Agreement, Shaw shall have an Option to extend the Initial Term of this Agreement for another two-year (2) period by giving written notice to Basin at least 30 days prior to the end of the Initial Term. Sales credit shall apply to the total value of binding purchase orders by Shaw and its affiliates from Basin, including but not limited to system components and Product provided by Basin, whether or not such purchase has been commenced or completed or is in progress. For purchase orders submitted by Shaw, Basin shall not unreasonably withhold their approval of such purchase order in order to create the binding purchase order, within the parameters of this Agreement. Such purchase orders to be defined as a “Binding Purchase Order”.

2.2 This Agreement may be terminated for cause by either Party (i) if the other Party breaches any material obligation under this Agreement and such breach is not excused by the nonbreaching Party or remains uncured by the breaching Party ten (10) business days after written notice thereof; (ii) upon the occurrence of any of the following events with respect to the other Party (a) insolvency; (b) filing of a bankruptcy petition by or against a Party; or (c) the making of a general assignment for the benefit of creditors; or (d) an attempted assignment of this agreement without the other Party’s consent; (e) discontinuance of marketing efforts for the Product within the Territory; (f) the inability or unwillingness to perform, after having been asked for reasonable assurances of performance; (f) the inability of a Party to obtain any necessary permits, approvals or licenses for the Product; (g) any Party being charged with criminal wrongdoing which may impair the reputation of the other Party, or the adoption of any law or regulation that adversely affects Shaw’s ability to sell Product; or (h) the appointment of a receiver with respect to a Party or any substantial portion of its property or assets. It is agreed that each Party will immediately advise the other Party in writing of the occurrence of any event specified in this paragraph.

2.3 This Agreement may be terminated by mutual written consent of the Parties, or by either party without cause upon identification of technical difficulties or limitations of the Product that are not in compliance with the Basin supplied specifications for the Product that impair the Product’s marketability and which can not be remedied within a reasonable time or; by Basin at any time after the first year of this Agreement if Shaw has failed to enter into Binding Purchase Orders with Basin valued in excess of $1M during that year. In the event Basin elects to terminate this Agreement without cause, ii shall provide no less than ninety (90) days’ written notice to Shaw of its election to terminate, during which period Shaw may continue to market and submit proposals for the Product subject to the terms of this Agreement. The terms and conditions of this Agreement, including hut not limited to pricing and cooperation, shall remain in effect for proposals that are submitted within this 90-day period.

2.3.1 If Shaw is the Party requesting the termination and if such request is not due to technical difficulties or limitations of the Product that are not in compliance with the Basin supplied specifications for the Product that impair its marketability and that can not be remedied within a reasonable time, the minimum commitment of $1 million of equipment purchases by Shaw or its affiliates will be honored by Shaw within six months of such termination date if such purchases have not already occurred. If Basin requests the termination, no thither commitment in addition to what has already been contracted for will be required.

2.4 Upon termination of this Agreement, Shaw and Basin agree to cooperate in good faith so that Shaw may honor commitments to Clients for the remainder of the term of such agreements, including but not limited to warranty, operation and maintenance work relating to Product. Notwithstanding any termination of this Agreement, Basin and Shaw shall perform any subcontracts entered into between the Parties in accordance with the terms of those agreements.

ARTICLE Ill - MUTUAL SERVICES AND OBLIGATIONS

3.1 Shaw agrees to accept the appointment as Sales Representative for the Territory, and that it will at all times use commercially reasonable efforts to obtain sales of the Product in the Territory under the terms of this Agreement. These efforts will include (a) the services of a National Sales / Technical support team currently consisting of R. Schowengerdt, L. Joffe, and W. Guarini (or other mutually acceptable key personnel in the event any of these individuals are no longer associated with Shaw) plus business development personnel will be assigned for the purpose of identifying Product opportunities; (b) a business development staff member within each region will be assigned to develop leads, coordinate efforts within a region, develop proposals and interact with state and local regulators to support the development of leads; (c) Shaw will provide Basin access to Shaw’s sales representatives which currently encompass thirteen companies, and will coordinate training for these representatives in Basin’s Product for purposes of promoting sales; (d) Shaw will provide Basin access to Shaw’s engineering staff, including nationally-recognized biotechnology experts in the Lawrenceville Labs, for the support

of joint projects including BION projects; (e) Shaw will assist with joint marketing of the Product, including attendance at trade shows and national and regional conferences and the coordination of presentations.

3.2 Shaw agrees to consider Basin’s potential to perform portions of scope for non- arsenic treatment systems which may be sold by Shaw in the Territory, on terms and pricing to be mutually agreed by the Parties upon Shaw’s identification of potential teaming opportunities for the Parties.

3.3 Shaw agrees to evaluate the possibility of committing portions of Shaw’s fabrication shop resources in the Eastern United States to the manufacture and assembly of Basin systems, evaluating the economies of existing resources and evaluating the establishment of rates and other terms that would permit both Parties to achieve benefits from further synergies.

3.4 Basin agrees to consider Shaw’s experience with biological treatments and its potential to perform or partner with Basin for projects utilizing Basin’s BION process, on terms and pricing to be mutually agreed by the Parties, upon Basin’s identification of potential teaming opportunities for the Parties.

3.5 For Product projects performed by Basin, whether in or outside of the Territory, Basin agrees to use commercially reasonable efforts to give Shaw a right of first refusal to match pricing from other contractors. If Shaw is willing to match pricing and to accept terms and conditions which shall be no less favorable in the aggregate to Basin than the terms under which another contractor would accept the work, Basin will award such work and issue a contract to Shaw.

3.6 Basin understands that Shaw’s Clients may wish to use alternative technologies or engineering methods, or that alternative technologies or methods may be recommended by Shaw in the exercise of its professional or commercial judgment, depending on requirements and cost. Nothing herein shall therefore be construed as requiring Shaw to propose or use the Product for any particular Client or project and Shaw expressly reserves, to its sole and absolute discretion, the tight at any time during the term of this Agreement to accept or reject any contract or decli