instruction:
In this task, you're given a passage that represents a legal contract or clause between multiple parties. Your job is to write questions that ask the basic details corresponding to the legal contracts or clauses. Avoid questions that can be answered correctly without actually understanding the paragraph, and which might have multiple answers. The answer to each question should be unambiguous.
question:
EXHIBIT 10.1

DEVELOPMENT AGREEMENT

THIS DEVELOPMENT AGREEMENT (Agreement), made and entered into effective as of January 1, 2007 (the Effective Date), by and between BP AMERICA PRODUCTION COMPANY (BP), a Delaware corporation, with an office at 501 Westlake Park Boulevard, Houston, Texas 77079, and TRUE NORTH ENERGY CORP. (Company), a Nevada corporation, with an office at 1200 Smith Street, 16th Floor, Houston, Texas 77002 (individually, a Party and collectively, the Parties).

WITNESSETH:

WHEREAS, BP owns those certain oil, gas and mineral leases set forth in Exhibit A (the Leases) covering the Contract Area; and

WHEREAS, subject to the terms, provisions and conditions set forth below, Company will pay a disproportionate 11.67% of the Drilling Costs for the BP America Production Company - A. Major Heirs No. 1 well (the Initial Well) to be drilled at the location shown on the plat attached as Exhibit C, and in return BP will assign to Company an 8.75% interest in the Initial Well and the BP Interests, all as further provided in this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, to be kept and performed by the Parties, it is hereby agreed by and between the Parties as follows:

ARTICLE I DEFINITIONS

Each capitalized term in this Agreement has the meaning given to it in this Article. All defined terms include the singular and the plural. All references to: Articles and Sections refer to Articles and Sections in this Agreement, and Exhibits refer to Exhibits attached to this Agreement.

1.1  Additional Well means a well, other than the Initial Well or a Substitute Well, drilled on the Contract Area after Company earns its proportionate share of the BP Interests in accordance with Section 4.1.

1.2  Affiliate of a Party means (i) the parent company thereof or (ii) any Person directly or indirectly controlled by, controlling, or under common control with that party (for the purposes of this definition, ownership of fifty percent (50%) or more of the stock, equity or property of such Person, or having the right to appoint fifty percent (50%) or more of the members or owner representatives of such Person are examples of forms of control).

1.3  AFE means an Authority for Expenditure prepared by a Party for the purpose of estimating the costs to be incurred in conducting an operation on a well subject to this Agreement and for providing such other information as may be specifically set forth elsewhere in this Agreement.

1.4  Agreement has the meaning given to it in the preamble.

1.5  BP has the meaning given to it in the preamble.

1.6  BP Interests means the Leases to the extent they are contained within the Contract Area.

1.7  BP GROUP means the following Persons, individually and collectively: BP and its Affiliates and the officers, directors, employees, agents, and representatives of all of those Persons.

1.8  Carried Interests has the meaning given to it in Section 5.7.







1.9  Casing Point means the time when (a) a well has been drilled to the Objective Zone, (b) all logs, tests, and evaluations have been completed and the results thereof have been furnished to the Parties, and (c) a recommendation has been made whether to run and set production casing and attempt to Complete the well as a producer or to abandon the well as a dry hole.

1.10  Company has the meaning given to it in the preamble.

1.11  Complete or Completion or Completing means a single operation intended to complete a well as a producer of oil and/or gas in one or more Zone(s), including, but not limited to, the setting of pipe/production lining and casing tie-back, installing tubing, wellhead and tree, perforating, plugging back, well stimulation, and testing.

1.12  Completion Costs means the actual costs and expenses incurred in Completing a well subject to this Agreement.

1.13  Contract Area means the geographic area (covering all depths) defined by the following Units, as they may be amended from time to time: (a) the 640-acre Moore Sams Field 18,100' TUSC RA SUW, created by the State of Louisiana Office of Conservation Order No. 1063-A- 1, effective November 29, 1979; (b) the 640-acre Moore Sams Field 18,100' TUSC RA SUCC, created by the State of Louisiana Office of Conservation Order No. 1063-A-2, effective February 20, 1980; and (c) the 640-acre Moore Sams Field 18,100' TUSC RA SUDD, created by the State of Louisiana Office of Conservation Order No. 1063-A-2, effective February 20, 1980. The Contract Area, as it exists now, is outlined in red on the plat attached as Exhibit B, but in the event of any conflict between the definition set forth in the preceding sentence and Exhibit B, the definition set forth in the preceding sentence shall govern and control.

1.14  Data means 3D seismic data, in whatever form (reels, paper, film, tape, magnetic or electronic, covering the Contract Area.

1.15  Data Owner means a Third Party who owns the Data.

1.16  Drilling Costs means the actual costs and expenses incurred in drilling a well subject to this Agreement beginning with the initiation of preliminary site preparation activities through and including logging, testing and evaluating the well prior to recommending whether to attempt a Completion. Drilling Costs shall include, but shall not be limited to, the costs and expenses associated with permitting, preparing the site, drilling to the Objective Zone, and evaluating any Zone(s) in such well to which a Completion may be attempted, as well as any unplanned or unforeseen events such as fire, explosion, or loss of well control. Drilling Costs shall also include brokerage, abstracting, and reasonable attorney fees related to the preparation of drilling title opinions for such well. Drilling Costs shall not include the cost to plug and abandon any well, including a dry hole, and shall not include any Completion Costs.   1.17  Estimated Drilling Costs has the meaning given to it in Section 2.1.

1.18  Effective Date has the meaning given to it in the preamble.

1.19  Exhibits has the meaning given to it in Section 16.6.

1.20  Force Majeure has the meaning given to it in Section 9.1.

1.21  Initial Well has the meaning given to it in the recitals.

1.22  Insurance Requirements has the meaning given to it in Exhibit G.

1.23  Leases has the meaning given to it in the recitals.







1.24  Objective Zone, with respect to the Initial Well, means the base of the Tuscaloosa C-1 sand, being the stratigraphic equivalent of the base of the Tuscaloosa C-1 sand as seen at 18,484 feet (electrical log measurement) for the Amarex - Major Heirs No. 1 well, located in Section 47, Township 4 South, Range 10 East, Pointe Coupee Parish, Louisiana, or eighteen thousand, five hundred feet measured depth (18,500' MD), whichever occurs first in the Initial Well. The term Objective Zone, with respect to any Substitute Well or Additional Well, means the deepest Zone to which the Substitute Well or Additional Well is proposed to be drilled as provided in the relevant AFE for such well.

1.25  Operating Agreement has the meaning given to it in Section 5.5.

1.26  Partial Assignment has the meaning given to it in Section 4.1.

1.27  Partial Interest has the meaning given to it in Section 4.2.

1.28  Party and Parties have the meaning given to them in the preamble.

1.29  Person means any individual or entity, in the broadest sense possible, including but not limited to a corporation, partnership, limited partnership, limited liability company, trust, trustee, association or unincorporated organization.

1.30  Plants has the meaning given to it in Section 5.6.

1.31  Properties mean all of BP's right, title and interest (real or immovable, personal or movable, mixed, contractual or otherwise), as of the Effective Date, in, to and under or derived from the following:     (a) the Leases, as well as the production of oil, gas or other hydrocarbon substances attributable thereto;

  (b) all unitization, communitization and pooling declarations, orders and agreements (including all units formed by voluntary agreement and those formed under the rules, regulations, orders or other official acts of any governmental entity or tribal authority having jurisdiction) to the extent they relate to the Initial Well and any Additional Well, or the production of oil, gas or other hydrocarbon substances attributable thereto;

  (c) all product sales contracts, processing contracts, gathering contracts, transportation contracts, easements, rights-of- way, servitudes, surface leases, subsurface leases, farm-in and farm-out contracts, areas of mutual interest, operating agreements, balancing contracts and other contracts, agreements and instruments to the extent they relate to the Initial Well and any Additional Well, or the production of oil, gas or other hydrocarbon and non-hydrocarbon substances attributable thereto;

  (d) all personal or movable property, improvements, fixtures and other appurtenances, to the extent situated upon and exclusively used, or situated upon and held exclusively for use in connection with ownership, operation, maintenance or repair of the interests described in the Leases, or production of oil, gas or other hydrocarbon and non-hydrocarbon substances attributable thereto, including all wells (whether producing, shut-in, injection, disposal, water supply or plugged and abandoned), gathering and processing systems, platforms, buildings, pipelines, compressors, meters, tanks, equipment, machinery, tools, utility lines, permits, licenses, imbalances and suspense funds; and     (e) all partnerships (tax, state law or otherwise) affecting any of the items enumerated above.







1.32  Rig Release Date has the meaning given to it in Section 3.2.

1.33  Seismic Use Agreements means those agreements between BP and the Data Owner governing BP's rights and obligations concerning the Data.

1.34  Substitute Well means a well proposed within one (1) year of the Rig Release Date and drilled by BP within the Contract Area, all in accordance with Section 3.2.

1.35  Third Party means a Person other than a Party or an Affiliate of a Party.

1.36  Unit means a compulsory unit established by the Commissioner of the Office of Conservation within the State of Louisiana Department of Natural Resources pursuant to Chapter 39 of Part XIX of Title 43 of the Louisiana Administrative Code, as same may be amended from time to time.

1.37  Well Information has the meaning give to it in Section 2.2

1.38  Zone or Zone(s) means a stratum of earth containing or thought to contain a common accumulation of oil and/or gas separately producible from any other common accumulation of oil and/or gas.   ARTICLE II DRILLING AND COMPLETING THE INITIAL WELL

2.1   BP has commenced drilling operations for the Initial Well, and, except as provided elsewhere in this Agreement, BP shall continue drilling the Initial Well with due diligence to the Objective Zone and perform all logging and testing operations to which the Parties agree. Company shall pay 11.67% of the Drilling Costs of the Initial Well, regardless of whether the Initial Well is successfully drilled to the Objective Zone. BP has estimated that Drilling Costs will be approximately FOURTEEN MILLION, EIGHT HUNDRED SIXTY TWO THOUSAND DOLLARS ($14,862,000) (the Estimated Drilling Costs) for the Initial Well. Company shall pay its share of Estimated Drilling Costs, being ONE MILLION, SEVEN HUNDRED THIRTY FOUR THOUSAND, THREE HUNDRED NINETY FIVE DOLLARS ($1,734,395), at execution of this Agreement via wire transfer according to the wiring instructions set forth in Exhibit I, but Company will pay its share of actual Drilling Costs in accordance with this Article II and Section 5.4.

2.2  When and if Casing Point is reached in the Initial Well, BP shall give written notice to Company of such occurrence, and such notice shall state whether BP proposes to attempt to Complete the Initial Well as a producer, whether in the Objective Zone or in a shallower Zone, or to abandon the Initial Well as a dry hole. The notice shall be accompanied by all well information and data set forth in Exhibit D (the Well Information), unless such information has been previously furnished to Company.

  (A) If BP reaches Casing Point and proposes to Complete the Initial Well as a producer, whether in the Objective Zone or in a shallower Zone, such notice shall also include a completion AFE. The completion AFE shall include, at a minimum, an estimate of Completion Costs for the Initial Well. Company shall have forty-eight (48) hours (exclusive of Saturday, Sunday and holidays) from receipt of the notice to elect, by written notice, whether it will participate in accordance with Section 2.3. BP shall not Complete the Initial Well until Company has notified BP in writing whether or not it will participate or until forty-eight (48) hours (exclusive of Saturday, Sunday and holidays) have elapsed since Company's receipt of BP's notice. Failure to respond within the time period allowed shall be deemed to be an election not to participate in the Completion of the Initial Well.

  (B) If BP reaches Casing Point and proposes to abandon the Initial Well as a dry hole, (i) BP shall plug and abandon the Initial Well in accordance with Section 2.6, and (ii) Company shall have no right or option to takeover the Initial Well.







2.3  If BP proposes to Complete the Initial Well and Company timely elects to participate in such Completion attempt in accordance with Section 2.2(A), Company shall pay 8.75% of the Completion Costs associated with the Initial Well and 8.75% of the cost of any newly acquired surface equipment associated with the Initial Well beyond the wellhead connections (including but not limited to stock tanks, separators, treaters, pumping equipment, piping, and metering devices).   2.4  If BP proposes to Complete the Initial Well and Company elects not to participate in such Completion attempt, or is deemed not to participate, BP may nonetheless continue with such operation and carry Company's proportionate part of Completion Costs. If the Completion attempt is ultimately not successful, BP shall abandon the Initial Well in accordance with Section 2.6 or propose to Complete the Initial Well in another Zone under the provisions of Section 2.2 (and Company shall be given another election to participate in such newly proposed Completion). If the Completion attempt results in the production of oil and/or gas in paying quantities, the Initial Well shall be operated by BP at the expense and for the account of BP and other parties who agreed to participate in the Completion attempt. By electing not to participate in any Completion attempt, or being deemed not to participate in any Completion attempt, Company shall be deemed to have relinquished to BP, and BP shall own and be entitled to receive, all of Company's interest in the Initial Well and share of production therefrom until the proceeds of the sale of such share, calculated at the well, or market value thereof if such share is not sold (after deducting applicable ad valorem, production, severance, windfall profits, and excise taxes, royalty, overriding royalty and other interests payable out of or measured by the production from the Initial Well accruing with respect to such interest until it reverts), shall equal the total of the following:

  (A) twenty six and one-quarter percent (26.25%) of the Completion Costs associated with the Initial Well and twenty six and one-quarter percent (26.25%) of the cost of any newly acquired surface equipment beyond the wellhead connections (including but not limited to stock tanks, separators, treaters, pumping equipment, piping and metering devices) (i.e., 300% non-consent penalty on a non-promoted basis); and

  (B) eight and three quarters percent (8.75%) of the cost of operation of the Initial Well commencing with first production and continuing until Company's interest shall revert to it in accordance with this Section 2.4 (i.e., 100% non-consent penalty on a non-promoted basis).

2.5  Company shall bear its proportionate part, being eight and three quarters percent (8.75%), of any severance, production and gathering taxes and any other taxes imposed or measured by the volume or value of production from the Initial Well, including, but only by way of illustration, excise taxes and windfall profit taxes, whether enacted by federal, state or local authority.

2.6  The Initial Well shall be plugged and abandoned in accordance with applicable regulations and at the cost, risk and expense of the parties who participated in the cost of drilling the Initial Well. Company's proportionate share of the cost, risk and expense to plug and abandon the Initial Well shall be eight and three quarters percent (8.75%).   ARTICLE III SUBSTITUTE WELLS

3.1   If, prior to reaching Casing Point in the Initial Well, BP should encounter geological or mechanical conditions which render further operations impracticable or economically infeasible, in the sole reasonable opinion of BP, BP shall (i) give written notice of such occurrence to Company, and (ii) such notice shall state whether BP proposes to attempt to Complete the Initial Well in a shallower Zone or to abandon the Initial Well as a dry hole.







  (A) If BP proposes to Complete the Initial Well without reaching the Objective Zone, such notice shall also include a completion AFE. The completion AFE shall include, at a minimum, an estimate of Completion Costs for the Initial Well. Company shall have forty-eight (48) hours (exclusive of Saturday, Sunday and holidays) from receipt of the notice to elect, by written notice, whether it will participate in accordance with Section 2.3. BP shall not Complete the Initial Well until Company has notified BP in writing whether or not it will participate or until forty-eight (48) hours (exclusive of Saturday, Sunday and holidays) have elapsed since Company's receipt of BP's notice. Failure to respond within the time period allowed shall be deemed to be an election not to participate in the Completion of the Initial Well. If BP proposes to Complete the Initial Well and Company elects not to participate in such Completion attempt, or is deemed not to participate, BP may nonetheless continue with such operation and carry Company's proportionate part of Completion Costs in accordance with Section 2.4.

  (B) If BP proposes to abandon the Initial Well as a dry hole, (i) BP shall plug and abandon the Initial Well in accordance with Section 2.6, and (ii) Company shall have no right or option to takeover the Initial Well.

3.2  If BP does not drill the Initial Well to the Objective Zone, Company shall have the right, but not the obligation, for a period of one (1) year from the date the drilling rig used to drill the Initial Well is removed from the well site location for the Initial Well (the Rig Release Date), to participate in the drilling of a Substitute Well. BP shall have no obligation to drill a Substitute Well, and Company shall have no right to propose a Substitute Well. If and when BP elects to drill a Substitute Well, BP shall provide Company with an AFE for the Substitute Well. The AFE for the Substitute Well shall include, at a minimum, the surface and bottomhole location of the Substitute Well, the Objective Zone, and the estimated costs for the Substitute Well as a dry hole and as a producer. Company shall have thirty (30) days from receipt of such written notice to elect whether it shall participate in such Substitute Well. Failure to respond within the time period allowed shall be deemed to be an election not to participate in the Substitute Well.

3.3  If BP proposes to drill a Substitute Well and Company timely elects to participate in such Substitute Well in accordance with Section 3.2, such Substitute Well shall be treated for all purposes herein as the Initial Well (including, but not limited to, Company's obligation to pay 11.67% of the Drilling Costs for such Substitute Well), except that the Objective Zone for such Substitute Well shall be governed by the AFE for such Substitute Well.

3.4  If Company elects not to participate in a Substitute Well, or is deemed not to participate in a Substitute Well, this Agreement shall terminate except as provided in Sections 6.2, 6.3, 6.4, and 6.5.

ARTICLE IV EARNING RIGHTS

4.1  When and if the Initial Well is drilled to the Objective Zone and successfully Completed as a well capable of producing oil and/or gas in paying quantities, BP shall assign to Company, by partial assignment in the form attached hereto as Exhibit E(the Partial Assignment), an eight and three quarters percent (8.75%) working interest in the Initial Well and an eight and three quarters percent (8.75%) interest in the BP Interests.   4.2  If the Initial Well is not drilled to the Objective Zone, for any reason, but the Initial Well is successfully Completed as a well capable of producing oil and/or gas in paying quantities, BP shall assign to Company, by partial assignment in the form of the Partial Assignment, an eight and three quarters percent (8.75%) working interest in the Initial Well and an undivided eight and three quarters percent (8.75%) interest in the BP Interests, but limited as to the geographic boundaries of the Unit in which the Initial Well is located and further limited as to those depths between the surface and the stratigraphic equivalent of the deepest Zone penetrated in the Initial Well (the Partial Interest). BP and Company shall conduct operations with respect to such Initial Well as if they have entered into the Operating Agreement until such well or a Substitute Well is drilled to and successfully Completed in the Objective Zone or until this Agreement is terminated; provided, however, if this Agreement is to be terminated without Company earning its proportionate share of the BP Interests in accordance with Section 4.1, then the Parties shall enter into an operating agreement in the form of the Operating Agreement except that the contract area of such operating agreement shall be limited to the Partial Interest.







ARTICLE V JOINT OPERATIONS

5.1   BP does not own but has a limited non-exclusive right to use the Data in accordance with the Seismic Use Agreements. Under the Seismic Use Agreements, BP may not sell, assign, copy, transfer, display, exhibit or in any way reveal the Data, except as authorized by and in compliance with the provisions of the Seismic Use Agreements. Therefore, Company's access to the Data shall be limited, and may be prohibited all together upon execution of this Agreement, unless Company obtains the consent or otherwise enters into a seismic license or seismic use agreement with the Data Owner. BP does not represent or warrant in any way, and expressly disclaims any representations or warranties, of any kind, express, implied or otherwise, that it owns the Data or otherwise has the right to provide all or any portion of the Data to Company.

5.2  BP shall deliver to Company the Well Information derived from or attributable to the Initial Well and any Substitute Well and Additional Well, if such Well Information is acquired, obtained, or performed by BP.

5.3   The Initial Well and each Substitute Well and Additional Well shall be under the exclusive control of BP and the operation thereof shall be conducted in a prudent and workmanlike manner. BP shall conduct all its activities under this Agreement as a reasonable prudent operator, in a good and workmanlike manner, with due diligence and dispatch, in accordance with good oilfield practice, and in compliance with applicable law and regulation, but in no event shall BP have any liability to Company for losses sustained or liabilities or obligations incurred except such as may result from BP's gross negligence or willful misconduct.

5.4  Except as otherwise specifically provided in this Agreement, BP shall promptly pay and discharge expenses incurred in drilling the Initial Well and each Substitute Well and Additional Well pursuant to this Agreement and shall charge Company with its proportionate shares upon the expense basis provided in Exhibit C to the Operating Agreement, whether or not such Operating Agreement has been executed by the Parties. BP shall keep an accurate record, in accordance with generally accepted accounting principles, showing expenses incurred and charges and credits made and received.

5.5  When and if the Initial Well is drilled to the Objective Zone and successfully Completed as a well capable of producing oil and/or gas in paying quantities, BP and Company shall enter into an operating agreement attached hereto as Exhibit F (the Operating Agreement) covering the Contract Area. The Operating Agreement shall be executed contemporaneously with the Partial Assignment but shall be effective on October 1, 2006. The Operating Agreement shall apply to all Additional Wells. In the event of any conflict between the Operating Agreement and this Agreement, this Agreement shall govern.

5.6  Unless Company elects by thirty (30) days' prior written notice to BP either to take in kind or to separately dispose of its share of oil, gas and other hydrocarbons, BP shall in good faith, to the extent it can do so, cause Company's share of production from the Initial Well and each Substitute Well and Additional Wells to be marketed and sold to either a Third Party or to an Affiliate of BP in a commercially reasonable manner, which terms shall not be less than on the same terms and conditions as BP's share of production from such wells are sold. It is recognized by the Parties that BP, or its predecessor, has provided at its cost or made arrangements with Third Parties to provide certain facilities beyond the wellhead (the Plants) needed for producing, storing, separating, gathering, treating, processing and delivering production from the Initial Well and each Substitute Well and Additional Well. It is agreed that BP will continue to make the Plants (as they or any contractual arrangements related thereto may be modified, changed or upgraded) proportionately available to handle BP, Company and Third Party production from the Contract Area. It is understood that a proportionate share of the cost of maintaining and operating the Plants, including depreciation or rental in lieu of depreciation and actual Third Party costs, whether on a cash fee basis or on a retained volume basis, will be allocated to the Parties on a throughput basis (being that portion of such costs relating to the production volumes from the Initial Well or, if drilled, any Substitute Well or Additional Well, as each may bear to the total production volumes handled by the Plants, including any Third Party or BP volumes not produced from the Initial Well or, if drilled, any Substitute Well or Additional Well). Nothing herein shall be construed to impart, transfer or convey any ownership interest in the Plants to Company.







5.7  If any lands within the Contract Area (other than those lands covered by the Leases) contain an interest which is unleased or leased to a Third Party and such interest must be carried in order to conduct operations consistent with this Agreement (such Third Party interest being a Carried Interest), Company shall bear eight and three quarters percent (8.75%) of the Carried Interests in order to conduct such operations.

5.8  At all times while this Agreement is in effect, Company shall carry insurance of the types and in the minimum amounts set forth in Exhibit G. All such insurance set forth in Exhibit G shall specifically name BP as an additional insured or provide that the insurer shall waive all rights of subrogation against BP.

ARTICLE VI TERM AND TERMINATION

6.1  Except as provided in Sections 6.2, 6.3, 6.4, and 6.5, this Agreement shall terminate one (1) year from the Rig Release Date, if such has not been terminated sooner pursuant to the provisions hereof.

6.2  Notwithstanding Section 6.1, if the Initial Well is drilled to the Objective Zone and successfully Completed as a well capable of producing oil and/or gas in paying quantities, this Agreement shall continue for so long as the Operating Agreement remains in full force and effect.

6.3   Notwithstanding Section 6.1, this Agreement shall remain in full force and effect for so long as Company participates in the drilling of a Substitute Well in accordance with Section 3.2.

6.4  Notwithstanding anything in this Agreement to the contrary, if Company earns a Partial Interest in the Initial Well and the BP Interests pursuant to Section 4.2, the Parties shall first enter into an operating agreement in the form of the Operating Agreement, except that the contract area of such operating agreement shall be limited to the Partial Interest, prior to termination of this Agreement.

6.5  Notwithstanding anything in this Agreement to the contrary, the expiration or termination of this Agreement shall not release any of the Parties from any obligation or liability which accrued prior to such expiration or termination (including the costs to plug and abandon the Initial Well and any Substitute Wells and Additional Wells) or which, by the terms hereof, is intended to survive such expiration or termination, including but not limited to Articles I, X, XI, XII, XIII, XIV, XV, and XVI and Sections 5.1 and 5.6, which terms shall survive indefinitely.







ARTICLE VII ASSIGNMENT; PREFERENTIAL RIGHTS

7.1   The rights and obligations created by this Agreement may not be assigned by Company, in whole or in part, without first obtaining BP's written consent under this Agreement, such consent not to be unreasonably withheld. If BP consents to an assignment by Company of all or part of its rights and obligations under this Agreement, it is nevertheless understood and agreed that any such consent shall not relieve Company of its primary liability for the performance of and compliance with the terms and provisions hereof, and shall not have the effect nor be construed to have the effect of waiving this limitation as to future, further, or additional assignments. Any assignment of the rights and obligations under this Agreement by Company without the consent of BP shall be voidable by BP.

7.2  Notwithstanding anything to the contrary in any other agreement, including the Operating Agreement, should Company desire to sell all or any part of its interest in the Initial Well, the BP Interests, or any Substitute Well or Additional Well, Company shall promptly give written notice to BP, with full information concerning its proposed disposition, which shall include the name and address of the prospective transferee (who must be ready, willing and able to purchase), the purchase price, a legal description sufficient to identify the property, and all other terms of the offer. BP shall then have an optional prior right, for a period of fifteen (15) days after receipt of such written notice, to purchase for the stated consideration on the same terms and conditions the interest which Company proposes to sell.







ARTICLE VIII NOTICE

8.1  All notices and other communications required or desired to be given hereunder must be in writing and sent (properly addressed as set forth below) by (a) certified or registered U.S. mail, return receipt requested, with all postage and other charges fully prepaid, (b) hand or courier delivery, or (c) facsimile transmission. Date of service by mail and delivery is the date on which such notice is received by the addressee and by facsimile is the date sent (as evidenced by fax machine generated confirmation of transmission); provided, however, if such date received is a Saturday, Sunday or legal holiday, then date of receipt will be on the next date that is not a Saturday, Sunday or legal holiday, and if a facsimile is received after 5:00 pm local time, then date of receipt will be the next date that is not a Saturday, Sunday or legal holiday. Each Party may change its address by notifying the other Party in writing of such address change, and the change will be effective thirty (30) days after such notification is received by the other Party.

FOR COMPANY:   True North Energy Corp. 1200 Smith Street, 16th Floor Houston, Texas 77002 Fax No.: (832) 553-7244

FOR BP:       BP America Production Company 501 Westlake Park Boulevard Houston, Texas 77079 Attention: Tuscaloosa Area Land Negotiator Fax No.: (281) 366-4519

ARTICLE IX FORCE MAJEURE

9.1  If either Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, upon such Party giving notice and reasonably full particulars of such Force Majeure in writing to the other Party within a reasonable time after the occurrence of the cause relied upon, the obligations of such Party, upon giving said notice, so far as such Party's ability to perform such obligations are materially affected by such Force Majeure, shall be suspended during the continuance of any inability so caused, and the cause of the Force Majeure as far as possible shall be remedied with all reasonable dispatch. The term Force Majeure means one or a set of circumstances such as an act of God, strike, lockout or other industrial disturbances, act of the public enemy, war, terrorism, blockade, riot, lightning, fire, storm, freezing, flood, explosion, governmental action, delay, restraint or inaction (whether said government's jurisdiction or authority be actual or assumed), including without limitation, governmental action or inaction relating to the permitting of wells, and any other cause, circumstance or condition (except financial) whether of the kind herein enumerated or otherwise, not reasonably within the control of the Party claiming Force Majeure. The above requirement that any Force Majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes, lockouts or other labor difficulty by acceding to the demands of opponents therein when such course is inadvisable in the discretion of the Party claiming Force Majeure.







ARTICLE X RELATIONSHIP OF THE PARTIES; TAX PARTNERSHIP

10.1  This Agreement does not create, and shall not be construed to create, a partnership, association, joint venture or fiduciary relationship of any kind or character between the Parties, and shall not be construed to impose any duty, obligation, or liability arising from such a relationship by or with respect to any Party.

10.2  For federal and state income tax purposes only, the Parties shall be governed by the terms and provisions of the Badger Prospect Tax Partnership provisions attached as Exhibit H.

ARTICLE XI ENTIRE AGREEMENT AND CORPORATE AUTHORITY

11.1  When executed by the duly authorized representatives of Company and BP, this Agreement shall constitute the entire agreement between the Parties regarding the subject matter herein and shall supersede and replace any and all other writings, understandings, letters of intent or memorandums of understanding entered into or discussed prior to the execution date hereof.

11.2  The Parties hereto represent that, as of the date of the execution hereof, they are corporations duly authorized, validly existing and in good standing under the laws of the state of their incorporation and are qualified and authorized to do business in the State of Louisiana and that all requisite corporate power and authority to duly execute, deliver and effectuate this Agreement have been duly obtained.

ARTICLE XII LAWS AND REGULATIONS; GOVERNING LAW

12.1  Each Party shall comply with and conduct its operations hereunder in accordance with the Leases, and if applicable, assignment(s) and other agreements relating to the Properties, and all applicable laws, ordinances, rules, regulations, and orders of all federal, state and local governmental authorities having jurisdiction over the operations.

12.2  This Agreement and all matters pertaining hereto shall be governed by and construed under the laws of the State of Louisiana, except to the extent that the conflict of law rules of said state would require that the laws of another state would govern its validity, construction, or interpretation.

ARTICLE XIII DISCLAIMERS AND LIMITATION OF LIABILITY

13.1  BP hereby expressly disclaims any and all representations and warranties associated with the Properties, express, statutory, implied or otherwise, including without limitation: (a) warranty of title, except as expressly provided in the Partial Assignment, (b) existence of any and all prospects, (c) geographic, geologic or geophysical characteristics associated with any and all prospects, (d) existence, quality, quantity or recoverability of hydrocarbon and non-hydrocarbon substances associated with the Properties, (e) costs, expenses, revenues, receipts, accounts receivable, accounts payable, suspense fund or gas imbalances associated with the Properties, (f) contractual, economic or financial information and data associated with the Properties, (g) continued financial viability or productivity of the Properties, (h) environmental or physical condition of the Properties, (i) federal or state income or other tax consequences associated with the Properties, (j) absence of patent or latent defects, (k) safety, (l) state of repair, (m) merchantability, and (n) fitness for a particular purpose; and Company (on behalf of itself and its Affiliates and each of their officers, directors, agents, employees, successors and assigns) irrevocably waives any and all claims it may have against BP GROUP with respect to the matters set forth in this Section 13.1.







13.2  Each of the Parties expressly waives and agrees not to seek indirect, consequential, punitive or exemplary damages of any kind with respect to any dispute arising out of or relating to this Agreement or breach hereof.

13.3  Company: (a) waives all rights in redhibition pursuant to Louisiana Civil Code Articles 2520, et seq.; (b) acknowledges that this express waiver shall be considered a material and integral part of this Agreement and the consideration thereof; and (c) acknowledges that this waiver has been brought to the attention of Company, has been explained in detail and that Company has voluntarily and knowingly consented to this waiver of warranty of fitness and warranty against redhibitory vices and defects for the Properties.

13.4  To the extent applicable to the Properties, Company hereby waives the provisions of the Louisiana Unfair Trade Practices and Consumer Protection Law (La. R.S. 51:1402, et seq.). Company warrants and represents that it: (a) is experienced and knowledgeable with respect to the oil and gas industry generally and with transactions of this type specifically; (b) posses ample knowledge, experience and expertise to evaluate independently the merits and risks of the transactions herein contemplated; and (c) is not in a significantly disparate bargaining position.

ARTICLE XIV NOT CONSTRUED AGAINST DRAFTER

14.1  The Parties acknowledge that they have had an adequate opportunity to review each and every provision contained in this Agreement, including the opportunity to submit the same to legal counsel for review and comment. Based on said review and consultation, the Parties agree with each and every term contained in this Agreement. Based on the foregoing, the Parties agree that the rule of construction that a contract be construed against the drafter, if any, shall not be applied in the interpretation and construction of this Agreement.

ARTICLE XV CONSPICUOUSNESS OF PROVISIONS

15.1  The Parties acknowledge that the provisions contained in this Agreement that are set out in bold satisfy any requirement at law or in equity that provisions contained in a contract be conspicuously marked or highlighted.

ARTICLE XVI MISCELLANEOUS PROVISIONS

16.1  The terms and conditions of this Agreement (including the Exhibits) shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns, and the terms, covenants and conditions shall be covenants running with the Properties and with each transfer or assignment of the Properties, or portion thereof.

16.2  If any provision of this Agreement is declared invalid or unenforceable, such declaration shall not affect the validity of the other provisions of this Agreement, which other provisions shall continue and remain in full force and effect.

16.3  This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes.







16.4  The article headings in this Agreement are inserted for convenience and identification only, and are in no way intended to describe, interpret, define, extend or limit the scope or intent of this Agreement or any provisions hereof.

16.5  This Agreement may be amended, modified, changed, altered or supplemented only by written instrument (not electronic) duly executed by the parties hereto which specifically refers to this Agreement.

16.6  The following constitute all of the exhibits to this Agreement (the Exhibits) and are attached hereto and incorporated by reference herein:

Exhibit A  Lease Schedule Exhibit B  Map of the Contract Area Exhibit C  Plat of the Initial Well Exhibit D  Well Information Requirements Exhibit E  Form of Partial Assignment Exhibit F  Form of Operating Agreement Exhibit G  Insurance Requirements Exhibit H  Badger Prospect Tax Partnership Provisions Exhibit I  Wiring Instructions   EXECUTED by the Parties on the date(s) indicated in the acknowledgments below, but effective as of the Effective Date.          BP AMERICA PRODUCTION COMPANY /s/ Peter Wroe Foster

Witness

        Peter Wroe Foster

Full Name (Typed or Printed)

      By:  /s/ Stacey J. Garvin

/s/ Craig Alan Carley

    Stacey J. Garvin Attorney-in-Fact

Witness

        Craig Alan Carley

Full Name (Typed or Printed)

      TRUE NORTH ENERGY CORP. /s/ Peter Wroe Foster

Witness

        Peter Wroe Foster

Full Name (Typed or Printed)

      By:  /s/ John I. Folnovic

/s/ Craig Alan Carley

    Name: John I. Folnovic Title: President and Chief Executive Officer

Witness

        Craig Alan Carley

Full Name (Typed or Printed)









ACKNOWLEDGMENTS   STATE OF TEXAS §   § COUNTY OF HARRIS §   On this 7t h day of February, 2007, before me appeared STACEY J. GARVIN, to me personally known, who, being by me duly sworn, did say that he is Attorney-in-Fact for BP AMERICA PRODUCTION COMPANY, and that said instrument was signed on behalf of said corporation.   Given under my hand and seal this 7t h day of February, 2007       My Commission Expires: /s/ Teresa L. Bowerman

Notary Public, State of Texas

      Teresa L. Bowerman

(NOTARY SEAL OF TERESA L. BOWERMAN) Name (Typed or Printed)             131239-6

Notary's Identification Number   STATE OF TEXAS §   § COUNTY/PARISH OF HARRIS §

On this 7t h day of February, 2007, before me appeared John I. Folnovic, to me personally known, who, being by me duly sworn, did say that he or she is President and Chief Executive Officer of or for TRUE NORTH ENERGY CORP., and that said instrument was signed on behalf of said corporation.   Given under my hand and seal this 7t h day of February, 2007       My Commission Expires: /s/ Teresa L. Bowerman

Notary Public, State of Texas             Teresa L. Bowerman

(NOTARY SEAL OF TERESA L. BOWERMAN) Name (Typed or Printed)             131239-6

Notary's Identification Number
answer:
Highlight the parts (if any) of this contract related to Insurance that should be reviewed by a lawyer. Details: Is there a requirement for insurance that must be maintained by one party for the benefit of the counterparty?


question:
Exhibit 10.1

Confidential treatment has been requested for portions of this Exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are marked by brackets with asterisks, such as [***]. A complete version of this Exhibit has been filed separately with the Securities and Exchange Commission.

STRATEGIC ALLIANCE AGREEMENT   THIS STRATEGIC ALLIANCE AGREEMENT  (Agreement), entered into as of October 22, 2010 (the Effective Date) by and between PPD Development, LP, a Texas limited partnership, with its principal executive offices located at 929 North Front Street, Wilmington, North Carolina 28401 (PPD) and VirtualScopics, Inc., with an address of 500 Linden Oaks, Second Floor, Rochester, New York 14625 (VS).   WHEREAS, PPD is a clinical research organization engaged in the business of managing clinical research programs and providing services regarding the development of pharmaceuticals, chemicals, biotechnology and other products through clinical testing;   WHEREAS, VS is in the business of providing imaging services to the medical, pharmaceutical and related industries;   WHEREAS, PPD and VS desire to enter into a mutually beneficial relationship with a mission to deliver a comprehensive set of clinical and medical imaging services that will enable biopharmaceutical companies to make faster, more confident decisions on the development of their compounds, creating time and cost efficiencies; and   WHEREAS, the parties desire to develop, market, sell, and deliver those joint service offerings pursuant to the terms and conditions set forth herein.   NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:   1. Term. The term of this Agreement shall begin on the Effective Date and shall continue for a period of two (2) years (Initial Term) unless terminated earlier in accordance with Section 11 of this Agreement. Upon expiration of the Initial Term, unless written notice to the contrary is provided by one party to the other party at least 30 days prior to the expiration of the then-current term, this Agreement shall be renewed for additional, successive periods of one (1) year each (each a Renewal and together with the Initial Term, collectively, the Term).  In connection with any Renewal, the parties shall mutually agree upon and set forth in a written amendment signed by the parties (i) any changes to the Services constituting Preferred Services and (ii) any changes to the [***], VS Preferred Pricing, percentage Discount (defined in Section 4 below) or Bookings thresholds for all such Preferred Services. Upon any expiration or termination of this Agreement, all active Work Orders issued prior to such expiration or termination shall remain subject to the terms and conditions contained herein so long as such Work Order remains active.   2. Services. PPD or any of its subsidiaries or affiliates may engage VS to perform imaging services (the Services) for a specific sponsor's clinical research study (Sponsor) or for a particular project. The Services may be amended, supplemented, or replaced from time to time upon mutual agreement of VS and PPD.

[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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3. Services Commitment. Preferred Services shall be defined as those imaging services included within the service offerings of VS at the time of final execution of this Agreement which are specifically provided by VS in the therapeutic areas of hematology and oncology (Designated Therapeutic Areas) to the extent such imaging services are subject to the commitments of VS set forth in this Section 3 (the Commitments). PPD Services shall be defined as clinical research organization services regarding the management of clinical trials for the development of pharmaceuticals, chemicals, biotechnology and other products through clinical testing. Preferred Services and PPD Services shall be subject to all of the rights and obligations otherwise set forth in this Agreement. Nothing contained herein shall be construed to limit the provision of non-Preferred Services hereunder, however, such non-Preferred Services shall not be subject to the Commitments set forth in this Section 3.   a. Joint Commitments   (i) The parties acknowledge and agree that it is their intent and commitment to expand the Joint Solution (as defined below) to therapeutic areas beyond the Designated Therapeutic Areas. Upon mutual agreement regarding such expansion, it is the parties' further intent to make such additional Joint Solution services subject to substantially the same commitments as those set forth herein.   (ii) The parties acknowledge and agree that each party has in place, or will develop, processes and procedures applicable to their performance hereunder as specified on Exhibit A (Integration  Services). The Integration Services shall be reviewed and assessed by the parties from time to time and may be amended or updated from time to time. Exhibit A shall be used as a guide for developing integrated service offerings to meet the needs of each party's clients, as applicable (in each instance, a Joint Solution or collectively, the Joint Solution).   (iii) Where either party determines that an opportunity exists and is appropriate for the offering of the Joint Solution to that party's customer or client, it is the parties' mutual intent and commitment to collaborate, as needed, to propose the Joint Solution to that customer or client. Each party agrees to make a good faith effort to promote a Joint Solution for a Sponsor seeking services that could reasonably be addressed by the Joint Solution. In connection with PPD's response to a request for proposal (an RFP) in which a Joint Solution is proposed, PPD shall be responsible for the preparation and submission of such RFP response; provided, however, that PPD shall provide VS an opportunity to review and provide approval on the Joint Solution framework, including, the scope of the Preferred Services and the pricing thereof. VS shall provide such review within two (2) business days following receipt by VS of such RFP response from PPD. Where reasonably appropriate for the proper defense of an RFP, PPD will use its reasonable efforts to provide VS an opportunity to participate in a call or bid defense meeting to the extent related to the Joint Solution. In the event PPD is awarded a clinical research study and such award includes selection by Sponsor of the Joint Solution, the parties shall mutually agree upon an applicable Work Order in accordance with Section 4 below.

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A. However, nothing contained herein shall be construed to impose upon PPD an obligation to offer the Joint Solution or to use VS for Preferred Services where: (1) Sponsor is not in agreement, (2) VS's pricing is not competitive, or (3) there have been advances in technology not offered by VS.   B. Further, nothing contained herein shall enable either party to utilize the Joint Solution where the client has rejected the involvement of either party. For the avoidance of doubt, the Joint Solution shall only be utilized where both parties' services in furtherance of the Joint Solution have been retained by the client. Nonetheless, a client's selection or rejection of either party for services outside the Joint Solution shall in no way impact or impede a party from performing such services, regardless of the other party's selection or rejection by the client.   C. In the event either party discovers, directly or indirectly, technology not currently in use by the other party but which could improve the Preferred Services, PPD Services or the Joint Solution, the discovering party may elect to share such technology with the other party with the intent of integration by the other party. However, to the extent such other party elects not to integrate or otherwise use such technology, the discovering party shall not be prohibited from using that technology without the other party's involvement.   (iv) During the Term, VS acknowledges and agrees that, to the extent it is aware of an opportunity for clinical research services, it will refer such opportunity to PPD as soon as possible. VS shall not refer that opportunity to any other third party provider unless PPD declines to bid on such opportunity or does not offer the service in question. During the Term, PPD acknowledges and agrees that, to the extent it is aware of an opportunity for imaging services outside of the Joint Solution, it will refer such opportunity to VS as soon as possible. Unless otherwise required by a particular Sponsor, PPD shall not refer that opportunity to any other third party provider unless VS declines to bid on such opportunity or does not offer the service in question.

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(v) During the Term of this Agreement, except as otherwise permitted by this Section 3(a)(v), VS agrees that it shall not enter into the same or substantially similar Commitments with any other company or entity which performs clinical research services the same or similar to those provided by PPD or any PPD affiliate (collectively, PPD Competitor), nor shall VS provide preferred pricing to a PPD Competitor which is better than that provided by VS hereunder to PPD. Further, during the Term of this Agreement, PPD agrees that it shall not enter into commitments which are the same or substantially similar to the PPD commitments set forth in Section 3 with any other imaging vendor for the performance of Preferred Services. In the event that, during the Term of this Agreement, VS desires to enter into the same or substantially similar Commitments with a PPD Competitor for imaging services outside of the Designated Therapeutic Areas (defined herein or in any amendment hereto), VS shall first notify PPD regarding the same and PPD shall have a right, for a period of 45 days following receipt of such notice (the Election Period), to elect to include such imaging services as Preferred Services hereunder (the Right of First Refusal). In the event PPD either (i) fails to respond within the Election Period or (ii) declines to include such imaging services as Preferred Services prior to termination of the Election Period, then in either such event, VS shall be permitted to pursue such relationship without being considered in violation of the Commitments or this Agreement. Additionally, in the event that PPD enters into a relationship with a VS competitor which provides for commitments which are the same or substantially similar to the Commitments in a therapeutic area outside the Designated Therapeutic Areas (defined herein or in any amendment hereto), VS shall have the right, without violating the Commitments or this Agreement (including the Right of First Refusal), to enter into a relationship with a PPD Competitor which provides for commitments which are the same or substantially similar to the Commitments outside the Designated Therapeutic Areas (defined herein or in any amendment hereto).   (vi) The parties shall form a Steering Committee comprised of high level personnel from each party which shall meet quarterly during the Term of this Agreement to oversee the implementation of this preferred relationship and the obligations set forth herein.   The Steering Committee shall be comprised of an equal number of representatives from each party. PPD's Steering Committee representatives shall be comprised of: Director, Finance; Therapeutic Head; Relationship Manager; Executive Director, Business Development; Executive Director, Information Technology; Medical Director, Global Drug Development. VS's Steering Committee representatives shall be comprised of: Chief Financial Officer; Chief Executive Officer/President; Director of Operations and Director of Project Management. Each party shall provide prior written notice to the other party of any desired change in Steering Committee representatives. Each party's Steering Committee representatives shall hold a position of sufficient level within its respective company to be able to obtain timely resolution of disputes submitted to the Steering Committee.

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In the event a Sponsor shall raise concerns or issues with respect to any Preferred Services performed by VS in conjunction with   Sponsor's selection of the Joint Solution, which Preferred Services are agreed upon by the parties in an executed Work Order, VS and PPD shall mutually evaluate such concerns or issues prior to any communication with Sponsor and shall mutually agree upon an appropriate response to Sponsor related to such concerns or issues. The resolution of any such matters shall be submitted first to the parties' respective Project Manager for the study, and in the event such persons are unable to agree upon resolution, then to each parties' Relationship Manager/Senior Director and finally to the Therapeutic Head or equivalent position. The foregoing paragraph shall not be deemed to restrict a PPD project manager from ordinary course discussions with a Sponsor in order to collect information related to the nature of any such concerns or issues raised by Sponsor.   b. VS Commitment. VS agrees to continue to make investments in and improvements to those processes, technologies, techniques, software, hardware and methods which are integral or beneficial to the Services provided by VS, specifically but without limitation, to the Preferred Services.   c. PPD Commitment. Where PPD is in a position to make a recommendation to Sponsor with regard to imaging services, and VS is able to provide such imaging services in accordance with Sponsor's specifications, PPD agrees to recommend VS to Sponsor. PPD also agrees to maintain, when present, VS's name and logo on all VS generated deliverables to the Sponsor.   4. Compensation.   a. Each time VS is requested to perform Services, PPD shall provide VS with a work order or other similar written document mutually agreed upon by VS and PPD which shall set forth the specific services being requested, the compensation therefore and such other terms, conditions and specifications as VS and PPD may mutually agree (referred to herein as a Work Order). The parties acknowledge that no services shall be conducted by VS and no compensation shall be due and payable to VS without a Work Order.  In the event PPD receives a change order from a Sponsor which includes changes to VS's Services as set forth in an executed Work Order or may otherwise impact the provision by VS of Services to PPD hereunder, PPD shall promptly notify VS. Thereafter, the parties shall negotiate, in good faith, for an amendment to the applicable Work Order, as appropriate, as a result of such Sponsor change order.   b. VS shall be compensated for the Services in accordance with the Work Order. All pricing and rates used to establish the budget for Services set forth in each Work Order shall be in accordance with the pricing structures agreed upon by the parties herein and set forth in Exhibit B attached hereto and incorporated herein by reference. PPD acknowledges that VS customarily receives an advance payment in connection with the provision of imaging services to its clients. PPD agrees that, where appropriate and permitted by the Sponsor, PPD will provide for an advance payment mutually determined by PPD and VS (and acceptable to Sponsor) in connection with the provision of Preferred Services to such Sponsor.     5





    c. Exhibit B sets forth the pricing and rates for Preferred Services [***]. The prices and rates set forth in Exhibit B and the Discount and Booking thresholds set forth in Exhibit C shall remain in effect, without adjustment, during the Initial Term of this Agreement and may thereafter be updated to reflect changes in connection with any Renewal of this Agreement, as specified in Section 1 herein.   [*** 2.5 paragraphs omitted]   Upon the termination of this Agreement for any reason, VS shall no longer have any obligation to provide PPD with any Discount with respect to Preferred Services nor shall VS be required to offer VS Preferred Pricing [***]. The parties acknowledge and agree that the VS Preferred Pricing [***] shall apply to, and remain in effect for, all active Work Orders issued hereunder, regardless of the expiration or termination of this Agreement, as well as for any timeline extensions to an active Work Order, provided that in the case of a timeline extension, the parties may mutually agree to apply an inflation rate for the extension period. In the event a Work Order shall be amended in any respect (including with respect to the scope of the Preferred Services, the timing for the delivery thereof, or otherwise), the VS Preferred Pricing [***] applicable to any Preferred Services included in such amendment and the Discount shall be the VS Preferred Pricing [***] and the Discount in effect on the date of the original Work Order. The parties further acknowledge and agree that VS Preferred Pricing [***] shall be applicable to any agreed upon expansion of the Preferred Services. With respect to any Services provided to PPD hereunder, PPD shall charge each Sponsor the actual invoiced amounts charged by VS to PPD for such Services without any mark-up or administrative or other fee, unless VS has agreed otherwise in writing in the applicable Work Order.   d. Additionally, PPD shall reimburse VS for all reasonable expenses incurred in the course of performing the Services which are set forth in the Work Order. VS shall maintain a complete accounting of all expenses incurred and shall include such accounting with VS's invoice submitted to PPD. Expenses incurred must be invoiced separately and must include an expense report along with original receipts for such expenses.   e. VS shall submit monthly invoices to PPD detailing its activities and fees in accordance with Section 5 of this Agreement. Notwithstanding the foregoing, invoices must be submitted to PPD within thirty (30) days of performing the Service or incurring the expense. PPD shall have no obligation to issue payment to VS for Services performed or expenses incurred which were not invoiced to PPD in accordance with this Agreement.   f. VS acknowledges and agrees that where VS's Services relate to a specific Sponsor's clinical research study, all payments under a Work Order are pass through payments from Sponsor and PPD shall not have any payment obligations until such payments are received from Sponsor. PPD shall use all reasonable diligence to obtain timely payment from Sponsor in order to make payment to VS within 45 days following the date of invoice receipt. In furtherance thereof, PPD shall ensure that Sponsor is invoiced no later than ten (10) days following PPD's receipt of VS's invoice, assuming such invoice was provided to PPD by VS in accordance herewith and provided that Sponsor's invoice requirements do not preclude the same. PPD shall ensure that VS is aware of any such Sponsor restrictions as soon as possible. Further, PPD shall ensure that payment is made to VS either by wire transfer or PPD check in accordance with PPD's applicable payment processes no later than ten (10) days following PPD's receipt of applicable funds from Sponsor; provided, however, that in the event such payment occurs more than 45 days following the date of PPD's receipt of VS' invoice, such payment shall be made by wire transfer. Notwithstanding the foregoing, where a Sponsor fails to issue payment to PPD, affecting PPD's ability to pay VS, the parties shall communicate with the other to jointly pursue communication with the Sponsor to address the non­payment.

[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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g. Where PPD and Sponsor have agreed upon and captured in a fully executed contract any bonus/penalty or other similar, milestone based incentive provisions, and PPD's ability to meet the terms of such provisions will be impacted by VS's Services, PPD and VS may mutually agree, case by case, to flow through to the applicable Work Order all or agreed upon portions of such bonuses, penalties or incentives.   5. Invoices and Billing Account Number. PPD shall assign a billing account number (Purchase Order Number) to VS for the Services in each Work Order. All VS invoices must reference the Purchase Order Number, Service fees, any PPD pre-approved expenses incurred by VS, the remittance address, and the total amount of compensation owed to VS. These invoices must be sent to the following address: PPD, 929 North Front Street, Wilmington, NC 28401, Attention: Accounts Payable.   6. Independent Contractor. VS shall perform all Services under this Agreement as an independent contractor and not as an employee, partner or agent of PPD. As such, VS shall be solely responsible for the payment of all taxes, payroll deductions and similar items associated with compensation for its services under this Agreement as may be required by applicable law. VS acknowledges that as an independent contractor it will not be entitled to insurance or other benefits made available to employees of PPD.   7. Additional Personnel. VS shall have the authority to utilize a third party vendor as may be required to perform the Services (Subcontractors); provided, however, that:   a. Subcontractors must be approved in advance by PPD, such approval not to be unreasonably withheld, conditioned or delayed.   b .  VS shall be responsible for all taxes, payroll deductions and similar items which may result from the retention of such Subcontractors to assist in the performance of VS's obligations under this Agreement.   c. Compensation for the services of said Subcontractor shall be paid to VS by PPD on a pass-through basis and at no profit to VS.   d. Any such Subcontractor and its employees or other personnel shall be bound by the terms and conditions of this Agreement with respect to representations and warranties, privacy, confidential information, intellectual property, indemnification, debarment, record keeping and audit (see Sections 8, 9, 10, 12, 14 and 15), which provisions shall be incorporated into a written agreement between VS and such Subcontractor.   e. Notwithstanding the foregoing, VS shall remain responsible for the actions of all of the Subcontractors retained by VS.

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8. Representation and Warranties. VS represents and warrants that it shall utilize independent discretion and judgment in discharging its responsibilities in a timely, professional and workmanlike manner in accordance with internationally accepted standards, and shall, at all times: (i) use individuals of suitable training and skill to perform its duties and responsibilities under this Agreement, if applicable; (ii) be in possession of all the necessary facilities, resources and personnel required to perform its duties and responsibilities under this Agreement; and (iii) comply with all applicable laws, rules, regulations and guidelines.   Further, VS represents and warrants that it has all of the necessary licenses, permits and/or registrations to perform the Services in accordance with the terms and conditions of this Agreement and that during the Term of this Agreement, all such licenses, permits and/or registrations are and shall remain current and in good standing.   [*** 1 paragraph omitted]   9. Confidential Information. It is understood and agreed that any and all information which may be made available to, learned by or generated by either party during the Term of this Agreement, including without limitation, information relating to the other party's businesses, its affiliates or the Sponsor, Sponsor's protocol, and this Agreement (collectively, Confidential Information), is to be treated as strictly confidential (the party disclosing such Confidential Information, the Disclosing Party and the party receiving such Confidential Information, the Receiving Party, with the understanding that either term may include, as applicable, an affiliate of either party). Confidential Information shall be used solely in connection with performance hereunder or as otherwise may be necessary for a party to fulfill its obligations to a customer or client and shall not to be published or disclosed to any third parties other than the Receiving Party's employees on a strict need­to­know basis and provided that such employee is under a similar written and enforceable obligation to keep such information strictly confidential. Further, nothing contained herein shall prevent PPD from disclosing VS Confidential Information to PPD's customers and clients solely to the extent directly related to the provision of Services to such customer or client. The nondisclosure obligations set forth in this Section 9 shall not apply to any portion of Confidential Information (i) which is, or subsequently may, become within the knowledge of the general public other than as a result of a breach of this Agreement by the Receiving Party; (ii) which is known to the Receiving Party on a non-confidential basis at the time of receipt thereof from the Disclosing Party; (iii) which may subsequently be rightfully obtained from a third party not bound by an obligation of confidentiality to the Disclosing Party, or (iv) which is required by any law, rule, regulation, order, decision, decree, subpoena or other judicial, administrative or legal process to be disclosed, provided that the Disclosing Party receives prior written notice of such disclosure and that the Receiving Party takes all reasonable and lawful actions to obtain confidential treatment for such disclosure and, if possible, to minimize the extent of such disclosure.   Receiving Party shall take reasonable care of all Confidential Information entrusted to it by or on behalf of the Disclosing Party or Sponsor, and shall return such materials to the Disclosing Party or Sponsor (as the case may be) immediately upon expiration or termination of this Agreement.   Both parties agree to handle all information containing personal data in accordance with all applicable privacy laws, rules, and regulations.

[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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10. Intellectual Property. Nothing contained herein, nor the delivery of any information to either party hereunder, shall be deemed to grant the other party a right or license under any patent or patent application or to any know-how, technology, invention or other intellectual property of the other party or of the Sponsor.   All inventions, patents, know-how, trademarks, copyrights, information, data, software, methodologies, writings and other property in any form whatsoever, which are provided to either party and which were owned or controlled by the providing party (Originator) shall remain the sole property of the Originator.   The parties' ownership rights in any inventions, patents, trademarks, copyrights, software, methodologies, writings and other property in any form whatsoever that results out of the development of a Joint Solution shall be addressed by the parties by separate written agreement which may include, an applicable Work Order and/or an amendment to this Agreement (Intellectual Property Amendment) .   Unless otherwise addressed in an Intellectual Property Amendment, VS hereby assigns to PPD (or Sponsor as the case may be) all rights that VS may have in any invention, technology, know-how or other intellectual property which is developed with use of Confidential Information provided to VS by PPD. Additionally, VS shall assist PPD (or Sponsor), at PPD's (or Sponsor's) sole cost and expense, in obtaining or extending protection therefor.   Unless otherwise addressed in an Intellectual Property Amendment, PPD hereby assigns to VS all rights that PPD may have in any invention, technology, know-how or other intellectual property which is developed with use of Confidential Information provided to PPD by VS. Additionally, PPD shall assist VS, at the sole cost and expense of VS, in obtaining or extending protection therefor.   11. Termination. Either party may terminate this Agreement, without cause, upon ninety (90) days prior written notice to the other party, provided, however, that all outstanding Work Orders shall continue to be governed by the terms and conditions hereof. Either party may terminate this Agreement, or a relevant Work Order, immediately, upon the occurrence of any of the following for cause events: (a) either party's material breach of the commitments set forth in Section 3; (b) either party commences a voluntary proceeding under any bankruptcy, insolvency or other similar law or an involuntary case or proceeding is commenced against a party under any bankruptcy, insolvency or other similar law; (c) significant audit findings are identified by the other party, a Sponsor, or an applicable regulatory authority; or (d) significant operational deficiencies that are not resolved in accordance with the Steering Committee determinations following escalation. PPD shall further be permitted to terminate this Agreement or a relevant Work Order, immediately, for cause, upon the occurrence of any of the following: (a) VS's failure to meet the agreed upon timelines, provided that such failure is due to circumstances within VS's reasonable control; (b) VS's failure to provide pricing which is reasonably competitive; (c) a change of ownership equal to fifty percent (50%) or more in the outstanding voting securities of VS; (d) the acquisition of a number of VS's outstanding voting securities by a PPD Competitor that would require disclosure by such PPD Competitor pursuant to Rule 13d-1 of the Securities Exchange Act of 1934 (a Significant Ownership Position); (e) a change in any VS Key Leadership Position.   In the event Sponsor, with or without cause, terminates, or requests that PPD terminate, VS's involvement in a project, PPD shall have the right to immediately terminate the Work Order to which such project relates. Additionally, in the event the services requested of PPD by Sponsor are cancelled or put on hold or the services agreement between PPD and Sponsor is terminated, PPD may terminate any relevant Work Order immediately upon notice to VS. In the event any Work Order is terminated, PPD shall pay VS for all Services performed in accordance with the Work Order through the date of termination plus any agreed upon costs necessary to close-out the Work Order (which costs shall be documented in a Work Order amendment if not included in the Work Order) and any non-cancelable expenses incurred prior to the termination of such Work Order, provided VS makes all reasonable attempts to mitigate such non-cancelable expenses.

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12. Indemnification. VS shall indemnify, defend and hold harmless PPD, its affiliates, directors, officers and employees thereof for any and all damages, costs, expenses and other liabilities, including reasonable attorney's fees and court costs, incurred by any such party as a result of any claim, action or proceeding by a third party (a Third Party Claim) arising from VS's negligence, intentional misconduct, or breach of this Agreement.   PPD shall indemnify, defend and hold harmless VS, its directors, officers and employees thereof for any and all damages, costs, expenses and other liabilities, including reasonable attorney's fees and court costs, incurred by any such party as a result of any Third Party Claim arising from PPD's negligence, intentional misconduct, or breach of this Agreement.   Either indemnified party shall give the indemnifying party prompt notice of any Third Party Claim for which indemnification is sought hereunder. The indemnifying party shall have the right to control the defense and settlement of such Third Party Claim, provided the indemnifying party shall act reasonably and in good faith with respect to all matters relating to the settlement or disposition of the claim, and the indemnified party shall reasonably cooperate in the investigation, defense and settlement of such claim. The indemnified party shall have the right to participate in, but not control, the defense and settlement of a claim and to employ separate legal counsel of its own choice; provided, however, that such employment shall be at the indemnified party's own expense, unless (i) the employment thereof has been specifically authorized by the indemnifying party, or (ii) the indemnifying party has failed to assume the defense and employ counsel (in which case the indemnified party shall control the defense and settlement of such claim).   13. Limitation of Liability. EXCEPT WITH REGARD TO A PARTY'S BREACH OF SECTION 9, GROSS NEGLIGENCE, WILLFUL MISCONDUCT AND INDEMNIFICATION OBLIGATIONS RELATED TO THIRD PARTY CLAIMS PURSUANT TO SECTION 12, EACH PARTY'S ENTIRE LIABILITY UNDER THIS AGREEMENT WILL IN NO EVENT EXCEED THREE TIMES (3X) THE TOTAL VALUE OF THE WORK ORDER UNDER WHICH THE CLAIM AROSE. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL DAMAGES OR FOR ANY DAMAGES ARISING OUT OF OR IN CONNECTION WITH ANY LOSS OF PROFIT, INTERRUPTION OF SERVICE OR LOSS OF BUSINESS OR ANTICIPATORY PROFITS, EVEN IF A PARTY OR ITS AFFILIATES HAVE BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING, IN EACH CASE ARISING IN CONNECTION WITH ANY DEFAULT OR BREACH OF OBLIGATIONS UNDER THIS AGREEMENT OR ANY ATTACHMENTS HERETO.   IN THE EVENT OF A BREACH OR DEFAULT BY VS UNDER THIS AGREEMENT OR ANY WORK ORDER, VS AGREES, AT PPD'S OPTION, TO EITHER REPEAT THE SERVICES AT ISSUE OR REFUND THE PORTION OF THE CONSIDERATION ATTRIBUTABLE THERETO.

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THE WARRANTIES PROVIDED IN SECTION 8 AND ANY WORK ORDER ARE IN LIEU OF ALL OTHER CONDITIONS OR WARRANTIES, EXPRESS OR IMPLIED, WHETHER ARISING BY STATUTE, COURSE OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR PROFESSION OR OTHERWISE, INCLUDING BUT NOT LIMITED TO, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE, AND ARE IN LIEU OF ALL OTHER OBLIGATIONS RELATING TO THE QUALITY OR ADEQUACY OF THE SERVICES IMPOSED BY LAW, ALL OF WHICH ARE EXPRESSLY DISCLAIMED TO THE EXTENT PERMITTED BY APPLICABLE LAW.

14. Debarment. VS hereby certifies that it has not been debarred, and has not been convicted of a crime which could lead to debarment, under the Generic Drug Enforcement Act of 1992. If VS or any of its employees or agents who perform Services hereunder is debarred or receives notice of an action or threat of action of debarment, VS shall immediately notify PPD.   15. Record Keeping and Audit. During the Term of this Agreement, VS shall maintain all materials and all other data obtained or generated by VS in the course of providing the Services hereunder, including all computerized records and files. VS shall cooperate with any internal reviews or audits by PPD or Sponsor (or its and their representatives) and shall make available for examination and duplication, during normal business hours and at mutually agreeable times, all documentation, data and information relating to this Agreement or any Work Order.   Further, VS shall inform PPD within one (1) business day of being notified of an audit by any regulatory authority or by any Sponsor to the extent such audit relates to the Preferred Services, the Joint Solution or a Work Order hereunder. PPD or its representatives shall be permitted to be present at and directly communicate with such regulatory authority or Sponsor representatives (as the case may be) concerning any matters related to the Preferred Services, the Joint Solution or a Work Order hereunder arising in connection with such audit. To the extent permitted by the auditing entity, VS shall ensure that PPD is provided with copies of any written communications, reports and findings resulting from any inspection of VS by that regulatory authority or Sponsor to the extent related to the Preferred Services, the Joint Solution or a Work Order. To the extent any such communications, reports or findings require action by VS, VS shall include with such copies its remedial plan of action, including timelines for completion of the same. To the extent such remedial plan of action impacts the Preferred Services or Joint Solution, and, where applicable, to the extent permitted by the relevant regulatory authority, VS shall collaborate with PPD prior to developing or implementing any changes to the Preferred Services or Joint Solution as a result of the audit findings.   16. Insurance. VS represents and warrants that it has and will maintain during the Term of this Agreement and, additionally, where applicable, during the term of any active Work Order, and for a period of two (2) years following expiration or termination of either, insurance in the types and limits generally accepted in the industry. Upon request, VS shall provide PPD with a copy of its certificate of insurance.   17. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Delaware without regard to its conflict of laws provisions.   18. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns. Neither party shall have the right to assign this Agreement or any Work Order or to assign any rights thereunder without the prior written consent of the other party. Notwithstanding the foregoing, PPD may assign a Work Order to an affiliate or to Sponsor upon written notice to VS. In the event PPD assigns a Work Order to a Sponsor, VS agrees to release and forever discharge PPD from any and all claims that may arise out of the relevant Work Order after the effective date of such assignment. Unless otherwise agreed in writing by VS, PPD shall not be released from any liability or obligation under this Agreement upon assignment of any Work Order to an affiliate of PPD. VS may subcontract all or a portion of the Services to be provided hereunder in accordance with Section 7 above. Any unauthorized attempt to assign or delegate any portion of this Agreement or any Work Order shall be void.

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19. Publicity. Except as otherwise specifically set forth herein, neither party shall use the name, insignia, symbol, trademark, trade name, logo, logotype, or any abbreviation or adaptation thereof, of the other party or any affiliate of the other party, in any publication, press release, promotional material or other form of publicity, nor will either party use the same as verbal endorsement of its services, without the prior written approval of the other party in each instance. Further, VS shall be similarly restricted as it pertains to Sponsor and any Sponsor affiliate. The restrictions imposed by this Section shall not prohibit the parties from making any disclosure identifying the other party that is required by any applicable law, rule or regulation. Additionally, following final execution of this Agreement, the parties acknowledge and agree that a joint press release statement regarding the parties' preferred relationship and its impact on the parties' ability to provide Services hereunder shall be prepared and mutually agreed upon prior to its release or use by either party.   20. Force Majeure. The parties shall be excused from performing their obligations under this Agreement if its performance is delayed or prevented by any event beyond such party's reasonable control, including, but not limited to, acts of God, fire, explosion, weather, disease, war, insurrection, civil strife, riots, government action, or power failure, provided that such performance shall be excused only to the extent of and during such disability.   21. Covenant Not to Interfere. Neither party will solicit for employment any employee of the other party during the active term of this Agreement and further, where applicable, the term of any active Work Order. As used in this section solicit means the initiation by a party or its agent or representative of a contact with any of the other party's then current employees who are performing services under this Agreement for the purpose of offering employment to such employees, but shall not include the circumstance where any such employee initiates a contact with the other party for the purpose of obtaining employment whether in response to a general advertisement of employment or where such contact is initiated by a third party who was not instructed to contact such employee by the hiring party.   22. Miscellaneous.   a. By agreeing to the terms and conditions of this Agreement and performing the Services for PPD, VS is representing that it is not in violation of any terms and conditions of any agreement with any other individual or entity.   b. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements, whether written or oral. This Agreement shall be construed according to its fair meaning and not strictly for or against any party.   c. This Agreement may be modified only by a writing signed by the parties hereto.   d. If any provision of this Agreement conflicts with the law under which this Agreement is to be construed or if any such provision is held invalid by a court, such provision shall be deemed to be restated to reflect as nearly as possible the original intentions of the parties in accordance with applicable law and the remainder of this Agreement shall remain in full force and effect.

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e. Waiver or forbearance by either party with respect to a breach of any provision of this Agreement or any applicable law shall not be deemed to constitute a waiver with respect to any subsequent breach of any provision hereof.   f. Any notice required or permitted to be given hereunder by either party hereto shall be in writing and shall be deemed given on the date received if delivered personally, by recognized overnight courier, by facsimile or by electronic delivery, or five (5) days after the date postmarked if sent by registered or certified U.S. mail, return receipt requested postage prepaid, to the following address:   If to PPD: PPD Development, LP 929 North Front Street Wilmington, NC 28401 Telephone: (910) 251-0081 Facsimile: (910) 343-5920 Attn.: Chief Executive Officer With a Copy to: General Counsel

If to VS: VirtualScopics, Inc. 500 Linden Oaks, Second Floor Rochester, New York 14625 Telephone: (585) 249-6231 Facsimile: (585) 218-7350 Attn: Molly Henderson

Either party may change its notice address and contact person by giving notice of same in the manner herein provided.   g. This Agreement may be executed in one or more counterparts, each of which for all purposes shall be deemed to be an original, and all of which when taken together shall constitute but one and the same instrument. This Agreement and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or by electronic mail, shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.   23. Survival. The obligations of the parties contained in Sections 4 (provided that any payments due upon termination shall be governed in accordance with Section 11), 5, 9, 10, 12, 13, 15, 19 and 23 hereof and herein shall survive termination of this Agreement or any Work Order.   24. Conflict. Any and all Services provided during the Term of this Agreement, including all Services provided pursuant to a Work Order, shall be subject to the terms and conditions contained herein. To the extent any terms contained in this Agreement conflict with a Work Order, the terms of this Agreement shall govern and control unless the Work Order specifically states otherwise. To the extent any terms contained in this Agreement or a Work Order conflict with a Purchase Order, the terms of this Agreement shall govern and control first, followed by the terms of the applicable Work Order.

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[signatures appear on following page]

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IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement as of the Effective Date.

VirtualScopics, Inc. By: Name: Molly J. Henderson Title: Chief Business and Financial Officer, Sr. Vice President PPD Development, LP By: PPD GP, LLC Its General Partner By: Name: Title:

[Signature Page to Strategic Alliance Agreement]





Exhibit A

Integration Services

[*** 2 pages omitted]

[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.





Exhibit B

[***] Pricing

[*** 3 pages omitted]

[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.





Exhibit C

Discounts and Bookings Thresholds

The percentage Discount applicable to Bookings in any given Measurement Period shall be determined in accordance with the discount structure set forth in the table below:

[*** .5 pages omitted]

[***] Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
answer:
Highlight the parts (if any) of this contract related to Insurance that should be reviewed by a lawyer. Details: Is there a requirement for insurance that must be maintained by one party for the benefit of the counterparty?


question:
Exhibit 10.24

______________________________________________________________________________

______________________________________________________________________________

OPERATION AND MAINTENANCE AGREEMENT

Dated as of November 3, 2010

______________________________________________________________________________

______________________________________________________________________________

10.23





TABLE OF CONTENTS Page

ARTICLE I : DEFINITIONS1

ARTICLE II : ENGAGEMENT OF OPERATOR5 2.1 Engagement..    5 2.2 Independent Contractor.    5 2.3 Owner Cooperation    5

ARTICLE III : TERM, RESIGNATION OR REMOVAL OF OPERATOR5 3.1 Term.    5 3.2 Owner Default.    5 3.3 Operator Default    6 3.4 Cooperation with Owner or Successor Operator    7 3.5 Effect of Termination    7

ARTICLE IV : DUTIES AS OPERATOR7 4.1 Duties as Operator.    7 4.2 Standard of Care..    11 4.4 Limitation of Authority    12

ARTICLE V : ACCOUNTING, REPORTS, RECORDS12 5.1 Accounting Methods.    12 5.2 Independent Audit.    12

ARTICLE VI : FORCE MAJEURE12 6.1 Procedure..    12





6.2 Strikes.    13

ARTICLE VII : INSURANCE AND INDEMNIFICATION13 7.1 Operator Insurance.    13 7.2 Contractors    14 7.3 Notice of Claims..    14 7.4 Mutual Release and Indemnification.    14

ARTICLE VIII : GENERAL PROVISIONS15 8.2 Notices    15 8.3 Rights    16 8.4 Applicable Laws    16 8.5 Rules of Construction.    16 8.6 Governing Law..    17 8.7 Dispute Resolution.    17 8.8 Limitation of Liability..    17 8.9 Entirety of Agreement, Amendments    17 8.10 Waivers.    18 8.11 Headings.    18 8.12 Rights and Remedies.    18 8.13 Assignment    18 8.14 Counterparts    18 8.15 No Third Party Beneficiary    18 8.16 Further Assurances.    28

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OPERATION AND MAINTENANCE AGREEMENT      This OPERATIONS AND MAINTENANCE AGREEMENT dated this  3rd day of November, 2010 (the Effective Date), is made and entered into by and between MAGELLAN TERMINALS HOLDINGS, L.P. (f/k/a Marrero Terminal, LLC), a Delaware limited partnership (Owner), and OMEGA REFINING, LLC, a Delaware limited liability company (Omega or Operator). Owner and Operator are referred to individually herein as a Party and collectively herein as the Parties.

WITNESSETH:

WHEREAS, Owner currently operates that certain six spot rail car loading/offloading area located at 5000 River Road, Marrero, Louisiana, including associated piping, hoses, and pumps as more particularly described on Exhibit A attached hereto and incorporated by reference herein (the Rail Facility); and

WHEREAS, Owner wishes to retain Operator to maintain and operate the Rail Facility as well as administering the business and regulatory affairs of Owner relating to the Rail Facility, all in accordance with the terms and conditions set forth below.

  NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I : DEFINITIONS

Capitalized terms used in this Agreement but not otherwise defined herein shall have the following meanings:

Affiliate means, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person through one or more intermediaries or otherwise. For the purposes of this definition, control means, where used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Securities or interests, by contract or otherwise, and the terms controlling and controlled have correlative meanings.

Agreement means this Amended and Restated Operations and Maintenance Agreement (including all exhibits), as amended from time to time in accordance with the terms hereof.

Business Day means any calendar day, other than a Saturday or Sunday, on which commercial banks in New Orleans, Louisiana are open for business.

Calendar Year means the time period from January 1 through December 31 of the same calendar year.

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Capital Project means any capital expenditure to repair, maintain, construct, expand, or modify the Rail Facility.

Capital Project Proposal shall have the meaning set forth in Section 4.1.11.

Claim means any lawsuit, claim, proceeding, investigation, review, audit or other cause of action of any kind.

Constituent of Concern means any substance defined as a hazardous substance, hazardous waste, hazardous material, toxic substance, solid waste, pollutant or contaminant by an Environmental Law.

Effective Date shall have the meaning set forth in the preamble to this Agreement.

Emergency means a sudden or unexpected event that causes, or risks causing, imminent material damage to the Rail Facility, death or injury to any Person, or material damage to property or the environment.

Emergency Work shall have the meaning set forth in Section 4.1.12.

Environmental Law means all applicable Laws and Environmental Permits of any Governmental Authority relating to the environment, natural resources, or the protection thereof, including, without limitation: (a) all requirements pertaining to liability for reporting, management, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of a Constituent of Concern; and (b) CERCLA, the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq. the Federal Clean Water Act, the Federal Clean Air Act, the Federal Solid Waste Disposal Act (which includes the Resource Conservation and Recovery Act), the Federal Toxic Substances Control Act, and the Federal Insecticide, Fungicide and Rodenticide Act, the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq., and the Safe Drinking Water Act, 42 U.S.C. § 300f et seq. and any applicable Law relating to health, safety, the environment, natural resources or the protection thereof, each as amended from time to time, including any regulations promulgated pursuant thereto, and any state or local counterparts.   Environmental Permits all permits, licenses, registrations, authorizations, certificates and approvals, and any other similar items, of Governmental Authorities required by Environmental Laws and necessary for or held in connection with the ownership and/or operation of the Rail Facility or any of the transactions contemplated hereby.

Force Majeure means any cause or causes not reasonably within the control of the Party claiming suspension and which, by the exercise of reasonable diligence, such Party is unable to prevent or overcome, including, without limitation, acts of God, acts, omissions to act, and/or delays in action of federal, state, or local government or any agency thereof, strikes, lockouts, work stoppages, or other industrial disturbances, acts of a public enemy, sabotage, wars, blockades, insurrections, riots, acts of terror, epidemics, landslides, lightning, earthquakes, fires, storms, storm warnings, floods, washouts, extreme cold or freezing weather, arrests and restraints of governments

2 10.23





and people, civil or criminal disturbances, interruptions by governmental or court orders, present and future valid orders of any regulatory body having jurisdiction, explosions, mechanical failures, breakage, or accident to equipment installations, machinery, compressors, or lines of pipe, and associated repairs, freezing of wells or lines of pipe, partial or entire failure of wells, pipes, facilities, or equipment, electric power unavailability or shortages, failure of pipelines or carriers to transport, partial or entire failure or refusal of operators of upstream or downstream pipelines or facilities to receive used motor oil, governmental regulations, and inability to obtain or timely obtain, or obtain at a reasonable cost, after exercise of reasonable diligence, pipe, materials, equipment, rights-of-way, servitudes, governmental approvals, or labor, including those necessary for the facilities provided for in this Agreement.

GAAP means generally accepted accounting principles, consistently applied.

Governmental Authority means any federal, state, municipal, local or similar governmental authority, regulatory or administrative agency, court or arbitral body with jurisdiction over the Parties, this Agreement, any of the transactions contemplated hereby or the Rail Facility.

Hazardous Materials means any materials, including without limitation chemicals and wastes that are regulated under Environmental Law.   Law means any statute, writ, law, common law, rule, regulation, ordinance, order, judgment, injunction, award, determination or decree of a Governmental Authority, or any requirement under the common law.

Lease shall mean that certain Land Lease dated as of April 30, 2008, pursuant to which Operator leased certain property from Owner's predecessor in interest, as described therein, as amended by that certain First Amendment to Land Lease dated as of October 29, 2009.

Liability Claim means a Claim arising out of the administration, operation, or maintenance of the Rail Facility, or arising out of or incidental to the activities carried on or work performed or required by this Agreement.

Loss means any loss, cost, expense, liability, damage, sanction, judgment, lien, fine, or penalty, including reasonable attorney's and consultant's fees and expenses, incurred, suffered or paid by, or resulting to, the applicable indemnified Persons on account of (i) injuries (including death) to any Person or damage to or destruction of any property, sustained or alleged to have been sustained in connection with or arising out of the matters for which the indemnifying Party has indemnified the applicable indemnified Persons, (ii) any failure of any representation or warranty made by Operator in this Agreement to be true and correct when made, or (iii) the breach of any covenant or agreement made or to be performed by the indemnifying Party pursuant to this Agreement.

Operating and Capital Expenditure Budget means, with respect to each period, the Operating and Capital Expenditure Budget for such period approved by Owner.

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Operator shall have the meaning set forth in the preamble to this Agreement.

Operator Indemnified Parties means, collectively, Operator, its successors and permitted assigns, and their respective Affiliates, shareholders, members, partners, officers, directors, employees, and agents.

Operator Parties means, collectively, Operator, Operator's Affiliates, and their respective successors and assigns; Operator Party means any such Person individually.

Owner shall have the meaning set forth in the preamble to this Agreement.

Owner Indemnified Parties means, collectively, Owner, its successors and permitted assigns, and their respective Affiliates, shareholders, members, partners, officers, directors, employees, and agents.

Party means either Owner or Operator, as applicable, and Parties means both Owner and Operator.

Person means an individual, a corporation, a partnership, a limited partnership, a limited liability company, an association, a joint venture, a trust, an unincorporated organization, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

Rail Facility shall have the meaning ascribed to such term m the recital of this Agreement.

Tax or Taxes means any (i) federal, state, provincial, county, local or foreign taxes, charges, fees, levies or other assessments, including all sales and use, goods and services, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, value added, capital stock, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance, unemployment, social security, Medicare, alternative minimum or withholding taxes or charges imposed by any Governmental Authority, and including any interest and penalties (civil or criminal) on or additions to any such taxes, but expressly excluding any income tax or tax based on income, such as, without limitation, the franchise tax set forth in Delaware Tax Code: 8 Del. Laws, c. 5 §501 et. seq., as the same may be amended or recodified from time to time, and (ii) liability for items in (i) of any other Person by contract, operation of Law (including Treasury Regulation 1.1502-6) or otherwise.

Tax Returns means any return, report, election, declaration, statement, notice, information return, schedule, or other document (including any related or supporting information) filed or required to be filed with any Governmental Authority in connection with the determination, assessment, collection or administration of any Taxes or any income tax or tax based on income, such as, without limitation, the franchise tax set forth in Delaware Tax Code 8 Del. Laws, c. 5 §501

4 10.23





et. seq., as the same may be amended or recodified from time to time, or the administration of any laws, regulations or administrative requirements relating to any Taxes or any amendment thereof.

Voting Securities means, as it relates to a Person, securities of any class of such Person entitling the holders thereof to vote in the election of, or to appoint, members of the board of directors or other similar governing body of the Person; provided that if such Person is a limited partnership, Voting Securities of such Person shall be the general partner interest in such Person.

ARTICLE II    : ENGAGEMENT OF OPERATOR

2.1    Engagement. Owner hereby appoints and retains Operator to manage, operate, and maintain the Rail Facility and to administer the business and regulatory affairs of Owner relating to the Rail Facility in accordance with the terms and conditions set forth herein, and Operator hereby accepts such appointment.

2.2    Independent Contractor. The Parties expressly understand and agree that Operator is acting and shall perform and execute the provisions of this Agreement as an independent contractor unrelated to Owner or any Owner Affiliate, and the work performed by Operator hereunder shall be subject to Owner's general right of inspection and approval. Nothing in this Agreement is intended to create a relationship, expressed or implied, of employer-employee or principal-agent between Owner and Operator or between Owner and any individual employed or provided to work hereunder by Operator.

2.3     Owner Cooperation. Owner shall cooperate with Operator and provide Operator with such information as Operator may reasonably request from time to time in connection with the performance of Operator's duties hereunder.

ARTICLE III    : TERM, RESIGNATION OR REMOVAL OF OPERATOR

3.1    Term. This Agreement shall commence on the Effective Date and, shall continue for the duration of the Lease, unless terminated earlier pursuant to Section 3.2 or 3.3.

3.2    Owner Default. Operator may terminate this Agreement at any time upon the occurrence of any of the following:

(a)    the dissolution or bankruptcy of Owner;

(b)     Owner fails to pay when due any amount due and payable hereunder, including, without limitation, any interest, fees, reimbursements or indemnifications, and such failure shall continue for a period of 15 days after the due date thereof; or

(c)     other than as set forth in clause (b) above, Owner breaches or fails to observe or perform any material term, condition, or obligation contained in this Agreement and fails to correct, or fails to diligently pursue correction of, such breach within 60 days after receipt of written notice from Operator of any such breach.

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If any of the above occurs and Operator elects to terminate this Agreement, then Operator may give a written notice of termination to Owner, which termination shall be effective on the date specified by Operator in such notice, provided that such termination date shall be within 60 days of the date such notice is delivered to Owner. Operator's notice of breach to Owner under Section 3.2(b) or (c) shall state with particularity the breach alleged by Operator. To the extent Owner disputes the basis for Operator's notice of breach, the matter shall be addressed under Section 8.6. Nothing in this Section 3.2 shall be construed to limit or preclude any remedy Operator may have at law or in equity with respect to any material breach by Owner.

3.3     Operator Default. Owner may terminate this Agreement at any time upon the occurrence of any of the following:

(a) the dissolution or bankruptcy of Operator;

(b) Operator fails to pay when due any amount due and payable hereunder, including, without limitation, any interest, fees, reimbursements or indemnifications, and such failure shall continue for a period of 15 days after the due date thereof;

(c) other than as set forth in clause (b) above, Operator breaches or fails to observe or perform any material term, condition, or obligation contained in this Agreement and fails to correct, or fails to diligently pursue correction of, such breach within 60 days after receipt of written notice from Owner of any such breach;

(d) Termination by Owner pursuant to Section 4.1.1; or

(e) Without cause on no less than seven (7) days prior written notice.

In the event Owner terminates this Agreement pursuant to subparagraph (e) above, Owner may reimburse Operator for any unamortized capital expenditure (determined in accordance with GAAP) to the extent such capital expenditure was included in the Operating and Capital Expenditure Budget. If any of the above occurs, other than an event described in subparagraph (d), and Owner elects to terminate this Agreement (a termination for cause), then Owner may give a written notice of termination to Operator, which termination shall be effective on the date specified by Owner in the notice, provided that such termination date shall be within 60 days of the date the notice is delivered to Operator. Owner's notice of breach to Operator under Section 3.3(b) or (c) shall state with particularity the breach alleged by Owner. To the extent Operator disputes the basis for Owner's notice of breach, the matter shall be addressed under Section 8.6. Nothing in this Section 3.3 shall be construed to limit or preclude any remedy Owner may have at law or in equity with respect to any material breach by Operator.

3.4     Cooperation with Owner or Successor Operator. Upon the termination of this Agreement, Operator shall cooperate in the transition of operations to Owner or a successor operator

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and upon Owner's request, will promptly deliver all books and records and other property (including, without limitation, intellectual property) of Owner to Owner or the successor operator, as applicable.

3.5     Effect of Termination. Any termination of this Agreement pursuant to this Article III will release Operator from, and Owner agrees to indemnify Operator against, any liability accruing or accrued hereunder after the effective date of termination, except with respect to the obligations and liabilities of Operator that survive termination including any and all liabilities arising out of or resulting from Operator's operation and maintenance of the Rail Facility. Termination of this Agreement shall not relieve the Parties from any liability or obligation accruing or accrued prior to the date of such termination or deprive a Party not in breach (other than a breach which occurs because such Party is rightfully withholding performance in response to a breach by the other Party) of its right to any remedy otherwise available to such Party.

ARTICLE IV    : DUTIES AS OPERATOR

4.1    Duties as Operator. Operator shall be responsible for (1) construction of the improvements to the Rail Facility in accordance with those plans and specifications approved by Owner in writing, (2) administering the regulatory, business, and financial affairs of the Rail Facility; (3) maintaining the financial and product accounting records of the Rail Facility; 4) preparing and distributing financial statements; (5) complying with any and all instructions it receives from Owner with respect to the operation and maintenance of the Rail Facility, provided that such instructions are consistent with applicable Laws and (6) complying with any and all Law and Environmental Law including any other permits or licenses.

4.1.2     Improvements/Alterations to the Rail Facility. Operator shall evaluate and modify, at its sole cost and expense, the rail car containment pan system (the Containment Pan System) so that such system is in compliance with the Spill Prevention, Control, and Countermeasure Regulations promulgated by the Environmental Protection Agency (the SPCC Regulations) and any other applicable regulations, rules or similar administrative publications promulgated by any other federal, state, or local regulatory agency. Such evaluation and modification, if necessary, of the Containment Pan System shall occur within ninety (90) days of the Effective Date. Owner specifically reserves the right to review, evaluate and approve the plans and specifications developed by Operator for any modifications to be made to the Containment Pan System for such compliance. Owner will provide written notice to Operator, within fifteen (15) days of Operator's submission of the plans and specifications for the Containment Pan System, confirming or denying its approval of Operator's plans and specifications for modification to the Containment Pan System, and in the event Owner does not approve such plans and specifications, Owner will provide Operator with written detail describing why such approval was withheld. Operator will have ten (10) days from the date it receives such written notice from Owner denying approval of its Containment Pan System plans and specifications to remediate such plans and specifications so that the modifications will comply with the SPCC Regulations. If Operator fails to remediate the Containment Pan System plans and specifications in a manner that will result in the modifications to the Containment Pan System complying with the SPCC Regulations within such ten (10) day period in a manner satisfactory to Owner, Owner, in its sole discretion, may unilaterally terminate this Agreement. Additionally, Owner reserves the right to inspect the

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Containment Pan System after Operator has modified such equipment, and if such modifications made by Operator to the Containment Pay System do not comply with SPCC Regulations, then Owner, in its sole discretion, may unilaterally terminate this Agreement. Any other alterations or improvements to the Rail Facility may not be made by Operator without the written consent of Owner.

4.1.3     Operation of the Rail Facility. Operator shall manage and operate the Rail Facility, the construction and future modifications to the Rail Facility, and negotiate agreements in Owner's name with third parties related to the operation of the Rail Facility (provided that (i) Owner shall have the right to approve or disapprove any such agreements, and (ii) if approved, except as provided in Section 4.1.1, Owner, and not Operator, shall execute all such agreements), comply with any instructions it receives from Owner with respect to the operation and maintenance of the Rail Facility, provided that such instructions are consistent with applicable Laws, and perform all other services and functions related thereto subject to the limits, requirements, and restrictions otherwise set forth in this Agreement.

4.1.4    Maintenance of the Rail Facility. Subject to the terms, conditions and limitations set forth in this Agreement, Owner hereby authorizes and empowers Operator, and Operator agrees, in the name of and on behalf of Owner, to, at its sole cost and expense, keep and maintain the Rail Facility in a condition and repair similar to, but not less than, its condition and repair on the Effective Date hereof.

4.1.5     Operator Recommendations. In the event that Operator makes a good-faith recommendation in writing regarding an operational issue to Owner, and Owner does not, for any reason whatsoever, approve such recommendation, then Operator shall not be liable and Owner hereby releases and shall indemnify, defend and hold Operator harmless from and against any Claim or Loss that arises from, or is attributable to, the failure to implement such recommendation.

4.1.6     Compliance with Owner Instructions. Notwithstanding anything to the contrary in this Agreement, in the event that Owner instructs Operator to take any action or refrain from taking any action in connection with the operation or maintenance of the Rail Facility and Operator in good faith disagrees with Owner because, among other reasons, it is not consistent with prudent operating standards, then Operator shall notify Owner of such disagreement in writing, and Owner hereby releases and shall indemnify, defend and hold Operator harmless from and against any Claim or Loss that arises from, or is attributable to, Operator's compliance with Owner's instructions.

4.1.7    Environmental Laws. Operator shall comply, in the performance of its duties and responsibilities hereunder, in all respects with all Environmental Laws and all Environmental Permits.

4.1.8     Purchase of Services, Materials and Supplies. Except as otherwise provided below and subject to the limitations herein, Operator shall, on Owner's behalf and as its agent, purchase or cause to be purchased necessary services, materials and supplies and incur such expenses and enter into such commitments as may be necessary to operate and maintain the Rail Facility, including, but not limited to, (i) contracts for the maintenance, repair and replacement of the Rail

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Facility and, if requested by Owner, construction of additions to the Rail Facility; and (ii) contracts for power, fuel, other utilities, and communication facilities as may be necessary in connection with proper operation and maintenance of the Rail Facility and for providing adjustments and replacements thereto.

4.1.9     Personnel. Except as otherwise provided below and subject to the limitations herein, Operator, in its reasonable judgment, shall employ such personnel, with Operator or an Affiliate as their employer, as it may deem necessary to operate and maintain the Rail Facility and to provide adjustments and replacements thereto and to perform its other obligations hereunder. In addition to Operator's or Operator's Affiliates' employees who are either full-time or part-time dedicated to operating and maintaining the Rail Facility, Operator may: (i) utilize from time to time its other employees or the employees of Operator's Affiliates in services in connection therewith at a usual and customary rate of compensation; and/or (ii) engage the services of third-party contractors in the performance of such functions. Notwithstanding the foregoing, all personnel provided by Operator to operate and maintain the Rail Facility shall have the requisite background, training and skill necessary to operate such a facility in accordance with all current industry standards and any and all applicable state and federal Laws, Environmental Laws, and Environmental Permits.

4.1.10     Payment of Operating Expenses. Operator shall promptly pay all direct costs and expenses incurred in operating and maintaining the Rail Facility as they become due, without reimbursement by Owner save and except to the extent specifically provided otherwise herein.

4.1.11    Operating Expense Budget. Operator shall (i) administer and otherwise comply with the budget proposed by Operator and approved by Owner (ii) operate and maintain the Rail Facility in compliance with the Operating and Capital Expenditure Budget established for the Rail Facility; provided, however, if Owner instructs Operator to perform any services outside of the scope of the services contemplated in the Operating and Capital Expenditure Budget (exclusive of those services to be performed by Operator in connection with any necessary alterations or modifications to the Containment Pan System pursuant to Section 4.1.1), then Owner shall reimburse Operator for the costs and expenses associated therewith.

4.1.12     Capital Projects. Operator may propose an unbudgeted Capital Project at any time by giving written notice of such to Owner. The notice (the Capital Project Proposal) must specifically describe the proposed Capital Project and shall include the following:

(i)a good-faith estimate of the costs associated with the operation and maintenance of the proposed Capital Project;

(ii)preliminary engineering designs and plans; and

(iii)general requirements or provisions for the Capital Project, including construction of the Capital Project and insurance coverage.

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Owner shall approve or reject the proposed Capital Project set forth in the applicable Capital Project Proposal within fifteen (15) days from the date of receipt of the same, such approval not to be unreasonably withheld, conditioned or delayed. If Owner approves the applicable Capital Project, then Operator shall have the right and authority with respect to the approved Capital Project to make expenditures, or enter into contracts to incur expenditures, without further authorization by Owner; provided, however, Owner will not be responsible for reimbursing Operator for any expenditures incurred by Operator related to the construction, operation, and maintenance of the Capital Project.

4.1.13     Emergencies. Notwithstanding any provision of this Agreement, in the event of an Emergency, Operator shall proceed with maintenance or repair work or with any other action when necessary to minimize damage and to end the Emergency (Emergency Work), without regard to the limits set forth in this Article IV. Operator shall, as soon as reasonably practicable, notify Owner of the existence or occurrence of the Emergency, setting forth the nature of the emergency, the corrective action taken or proposed to be taken, and the actual or estimated cost of such corrective action. Emergency Work shall include only such work as is necessary to immediately address the Emergency and does not include any work necessary to restore the Rail Facility or improve the Rail Facility in order to permit continued operations.

4.1.14    Reporting By Operator. Operator shall (by either (i) submitting written reports or records or (ii) providing Owner with access to Operator's internet website containing the relevant information, at Operator's discretion) provide to Owner the following reports or records, based on the best data available at the time of preparation and subject to revision based on acquisition of more accurate data:

(i) as soon as available, and in any event within 30 days after the end of each calendar month, an operational report on major repairs and other operational details materially affecting the operations of the Rail Facility during such month;

(ii) as soon as available, and in any event within 30 days after the end of each Calendar Year, a certificate from the president or chief executive officer of Operator stating that no event or condition exists or has occurred that violates, results in a breach of, or constitutes a default on the part of any Operator Party under, any of the terms, conditions or provisions of this Agreement;

(iii) within 5 days of Owner's request, environmental information or records pertaining to the Rail Facility (as specified by Owner) necessary for Owner to comply with any reporting obligations of Owner related to all applicable Environmental Law and Environmental Permits; and

(iv) such other information regarding the Rail Facility or the operation and maintenance of the Rail Facility as Owner may from time to time reasonably request.

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4.1.15    Notices to Owner. Operator shall immediately notify Owner in writing of (i) any enforcement, clean-up, removal or other governmental or regulatory action instituted, completed or threatened against Operator Parties or Owner pursuant to any Law or Environmental Law as a result of the operation of the Rail Facility; (ii) any claim made or threatened by any person arising out of or in connection with the operation of the Rail Facility against Operator Parties or Owner relating to damage, contribution, cost recovery, compensation loss or injury resulting from or claimed to result from any Hazardous Materials; (iii) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials removed from the Rail Facility or the property on which the Rail Facility is situated including any complaints, notices, warnings, reports or asserted violations in connection therewith; and (d) the discovery of any Hazardous Materials at the Rail Facility or the property on which the Rail Facility is situated that are or may be in violation of Environmental Law. Operator shall also provide to Owner, as promptly as possible, and in any event within five (5) business days after the Operator Parties first received or sent the same, copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Rail Facility or the Operator Parties' operation thereof. Upon written request of Owner (to enable Owner to defend itself from any claim or charge related to any Law or Environmental Law), Operator shall promptly deliver to Owner notices of hazardous waste manifests reflecting the legal and proper disposal of all such Hazardous Materials removed from the Rail Facility or the property on which the Rail Facility is situated.

4.1.16     Chevron Terminaling Agreement. Each of the parties hereto acknowledges that rail car utilization is a service to which Chevron Marine Products LLC (Chevron) is entitled under that certain Terminaling Agreement between Chevron and Owner, dated as of May 1, 2008 (the Chevron Terminaling Agreement).  As such, Operator agrees to provide such service to Chevron in the event such service is warranted until the earlier to occur of (i) the termination of the provisions of this Agreement, or (ii) the termination of the Chevron Terminaling Agreement.

4.1.17     Regulatory Affairs. Operator shall be responsible for preparing and submitting all regulatory filings pertaining to the Rail Facility required by any Governmental Authority.

4.1.18     Devotion of Time. The employees of Operator, or the Operator Parties, as applicable, designated to perform the functions under this Agreement shall devote such time to the operation and maintenance of the Rail Facility as necessary to accomplish the responsibilities of Operator as set forth in this Article IV. Owner recognizes that the employees of Operator, or the Operator Parties, as applicable, shall not be obligated to devote full time to the operation and maintenance of the Rail Facility and that such employees of Operator may act on behalf of Operator or the Operator Parties, as applicable, in activities not associated with this Agreement.

4.2    Standard of Care. Operator shall perform its duties and obligations hereunder and its responsibilities as Operator of the Rail Facility, (i) in a good and workmanlike manner, (ii) in conformity with the good practices in the rail car loading and unloading industry, (iii) in accordance with all valid and applicable Laws, including, without limitation, all Environmental Laws and Environmental Permits, and (iv) in accordance with the Operating and Capital Expenditure Budget.

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4.3    Limitation of Authority. Notwithstanding anything in this Agreement, Operator shall seek prior approval of Owner prior to taking the following actions:

4.3.1     Binding Owner. Endorsing the name of Owner on any contract, commercial paper, or instruments of any nature or otherwise creating any obligation binding upon Owner except as expressly permitted under this Agreement.

4.3.2    Asset Sales. Acquiring or disposing of any assets of Owner in a single transaction or in a series of related transactions, with a fair market value exceeding $10,000 in the aggregate, provided, however that Operator is expressly permitted to terminate leases or other contracts in respect of rental equipment regardless of value.

4.3.3     Incurring any indebtedness on behalf of Owner, except for trade credit incurred by Operator in the ordinary course of business or within its expenditure authority set forth in this Agreement.

ARTICLE V    : ACCOUNTING, REPORTS, RECORDS

5.1     Accounting Methods. Operator shall keep proper and complete records and books of account, which shall fully and accurately reflect all transactions and other matters relative to its operation and maintenance of the Rail Facility as are entered into records and books of account in accordance with generally accepted industry practices, and the same shall be supported by purchase orders, invoices, payrolls or other customary or necessary records pertaining thereto. Operator's financial books and records shall be kept in accordance with GAAP and shall be maintained on an accrual basis. The costs of any audit of Operator's books or records shall be borne by Owner absent manifest error.

5.2     Independent Audits. Upon reasonable prior written notice to Operator, Owner shall have the right during normal business hours to audit or examine all books and records of Operator to the extent they relate to Operator's performance hereunder as well as the relevant books of account of Operator's contractors, relating to the performance of Operator's obligations under this Agreement. Operator shall cooperate with Owner's auditors by (i) making the applicable books and records available for inspection by Owner's auditors, and (ii) making such copies of books and records as may be reasonably requested by such auditors. In no event shall Owner's audits unreasonably interfere with Operator's operations.

ARTICLE VI    : FORCE MAJEURE

6.1    Procedure. If either Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations under this Agreement, other than the obligation to indemnify and to make payments then or thereafter due hereunder, upon such Party giving notice and full particulars of such Force Majeure in writing to the other Party as soon as reasonably possible after the occurrence of the cause relied on, then the obligations of the Party giving such notice, so far as they are affected by such Force Majeure, will be suspended during the continuance of any inability so caused but for no longer period, and such cause must as far as possible be remedied with all reasonable and diligent dispatch by the Party claiming such in order to put itself in a position to carry out its obligations

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under this Agreement. Such notifying Party must also provide notice of the date of termination of such Force Majeure event. A Force Majeure event affecting the performance by either Party shall not relieve it of liability in the event of its negligence, where such negligence was a cause of the Force Majeure event, or in the event of its failure to use commercially reasonable efforts to remedy the situation and remove the cause with all reasonable dispatch.

6.2     Strikes. It is understood and agreed that the settlement of strikes or lockouts is entirely within the discretion of the Party directly involved in the strike or lockout, and that the above requirement that any Force Majeure must be remedied with all reasonable dispatch will not require the settlement of strikes or lockouts by acceding to the demands of the opposing party when such course is inadvisable in the discretion of the Party having the difficulty.

ARTICLE VII    : INSURANCE AND INDEMNIFICATION

7.1    Operator Insurance.

7.1.1     Operator, with respect to Operator's activities provided for under this Agreement, shall maintain the following insurance coverage with responsible insurance carriers:

(a)    Workers' Compensation. Operator shall maintain statutory worker's  compensation insurance, covering all of its and its Affiliates' employees and statutory employees, in accordance with the benefits afforded by the statutory Worker's Compensation Acts applicable to the state, territory, or district of hire, supervision, or place of accident. In addition, Operator shall maintain employer's liability insurance with a limit of not less than one million dollars ($1,000,000) each accident, one million dollars ($1,000,000) disease each employee, and one million dollars ($1,000,000) disease policy limit. Where not prohibited by law, Operator shall waive its right of subrogation against Owner.

(b)     Commercial General Liability Insurance. Operator shall maintain Commercial General Liability Insurance covering its operations under this Agreement including, without limitation, bodily injury, death, property damage, premises/operations, sudden and accidental pollution, independent contractors, products/completed operations, contractual, and personal injury liability, with a limit of not less than one million dollars ($1,000,000) per occurrence and two million dollars ($2,000,000) in the annual aggregate.

(c)     Commercial Automobile Insurance. Operator shall maintain Commercial Automobile Insurance coverage, including, without limitation, bodily injury and property damage for owned, hired, rented, and non-owned automotive equipment with a limit of not less than one million dollars ($1,000,000) per accident.

(d)     Umbrella Liability Insurance. Operator shall maintain Umbrella Liability Insurance coverage covering in excess of (a), (b), and (c) above, excluding Worker's Compensation, in the amount of ten million dollars ($10,000,000).

7.1.2     To the extent of the liabilities assumed by Operator in this Agreement, Operator shall name Owner Indemnified Parties as additional insured on all insurance policies,

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except Workers' Compensation. The Owner Indemnified Parties' additional insured status will not limit the application of insurance protection as required by this Agreement which arises out of the Operator's indemnity obligations. These policies shall provide primary coverage for claims in which Operator has agreed to hold harmless and/or to indemnify the Owner Indemnified Parties. No other insurance clause may be invoked by any insurer. This coverage shall apply whether or not the indemnification is valid. Operator shall have its insurer(s) waive its right of subrogation against Owner Indemnified Parties on all insurance carried. Unless expressly stated to the contrary elsewhere in this Agreement or prohibited by applicable law or legal statute, Operator's indemnification obligations under this Agreement shall not be limited by amount or in scope to coverage provided by insurance which is required under this Agreement.

7.1.3    Upon request, Operator agrees to furnish to Owner certificates of insurance or other evidence satisfactory to Owner to demonstrate that the required insurance has been procured and is in force. The certificate shall accurately reflect the required insurance coverages and shall provide that in the event of modification, expiration, cancellation or material change in a policy affecting the certificate holder, thirty days prior written notice shall be given to the certificate holder. Operator waives all rights against Owner for recovery of damages to the extent such damages are covered by the insurance maintained in accordance with this Section 7.1.

7.2    Contractors. Operator acknowledges and agrees that any contractor engaged by Operator to perform services at the Rail Facility will be required to execute an access agreement, in a  form acceptable to Owner, prior to such contractor accessing the Rail Facility and performing any services. Further, Operator shall attempt to obtain reasonable indemnification and insurance protection from contractors performing services for Owner to protect Owner and Operator. Operator shall require each of its contractors to carry insurance coverage substantially equivalent to the insurance required of Operator above, and to include provisions for its contractors to name Owner and Operator as additional insureds, with the exception of Workers' Compensation Insurance, and state that such policies will be primary to and non-contributory with any other insurance maintained by Operator and Owner. With respect to Workers' Compensation Insurance, the applicable contractor shall be required to cause its insurers to wave all rights of recovery or subrogation against Owner and Operator, where not prohibited by law.

7.3    Notice of Claims. In the event that Operator receives notice, either in writing or orally, of an asserted or threatened Liability Claim against Operator or Owner, Operator shall provide Owner within 10 days of receipt of such Liability Claim a copy of any demand letter, petition, or similar documentation of the Liability Claim.

7.4    Mutual Release and Indemnification.

7.4.1    Owner's Indemnification. Subject to the terms of this Agreement, including, without limitation, Section 8.8 of this Agreement, Owner shall indemnify, defend, and hold harmless the Operator Indemnified Parties from and against all Claims and Losses arising out of or relating to (i) allegations of death or bodily injury or damage to property, to the extent arising out of or resulting from the negligence, gross negligence or willful misconduct of Owner, its Affiliates or its or their respective officers, directors, employees, or contractors in connection with this Agreement or the performance hereof; provided that Owner shall not be required to indemnify the Operator

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Indemnified Parties against such Claims and Losses to the extent such Claims and Losses are attributable to the acts or omissions of any Operator Indemnified Parties, (ii) any breach of this Agreement by Owner, and (iii) any agreements relating to the Rail Facility between Owner and third parties not affiliated with the Operator Parties (except to the extent expressly assumed by Operator hereunder). The duty to indemnify, defend and hold harmless under this Section 7.4.1 shall continue in full force and effect, notwithstanding the expiration or early termination of this Agreement, with respect to any Claims or Losses based on facts or conditions that occurred prior to such expiration or termination.

7.4.2     Operator's Indemnification. Subject to the terms of this Agreement, including, without limitation, Section 8.8 of this Agreement, Operator shall indemnify, defend, and hold harmless the Owner Indemnified Parties from and against all Claims and Losses arising out of or relating to (i) allegations of death or bodily injury or damage to property, to the extent arising out of or resulting from the negligence, gross negligence or willful misconduct of Operator, its Affiliates or its or their respective officers, directors, employees, or contractors in connection with this Agreement or the performance hereof; provided that Operator shall not be required to indemnify the Owner Indemnified Parties against such Claims or Losses to the extent such Claims or Losses are attributable to the acts or omissions of any Owner Indemnified Party, (ii) any breach of this Agreement by Operator, and (iii) any agreements relating to the Rail Facility between Operator and third parties not affiliated with Owner (except to the extent expressly assumed by Owner hereunder). The duty to indemnify, defend and hold harmless under this Section 7.4.2 shall continue in full force and effect, notwithstanding the expiration or early termination of this Agreement, with respect to any Claims or Losses based on facts or conditions that occurred prior to such expiration or termination.

ARTICLE VIII    : GENERAL PROVISIONS

8.1    Additional Rail Facilities. Nothing in this Agreement shall limit Owner's right to construct, expand or modify, and operate other rail car loading/off loading facilities (i) at Owner's terminal and storage facility located on the property on which the Rail Facility is located, or (ii) at any other location in Owner deems necessary and beneficial.

8.2    Notices. Except as specifically provided otherwise herein, any notice, claim, or other communication provided for in this Agreement or any notice that either Party may desire to give to the other shall be in writing and shall be: (i) sent by facsimile transmission; (ii) delivered by hand; (iii) sent by United States mail with all postage fully prepaid; or (iv) delivered by courier with charges paid in accordance with the customary arrangements established by such courier, in each of the foregoing cases addressed to the Party at the following addresses:

To Owner:

Magellan Terminals Holdings, L.P. Attn: Mark Roles Manager, Commercial Development P.O. Box 22186 MD 31st Floor

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Tulsa, Oklahoma 74121-2186                                                                               To Operator:

Omega Refining, LLC Attn: Robert Winland 5000 River Road Marrero, Louisiana 70072

with a copy to:

Gregory & Plotkin, LLC Attn: James P. Gregory, Esq. 1331 17t h Street, Suite 1060 Denver, Colorado 80202

or at such other address as either Party may at any time designate by giving written notice to the other Party. Such notices, claims, or other communications shall be deemed received as follows:

(i) if delivered personally, upon delivery;

(ii) if sent by United States mail, whether by express mail, registered mail, certified mail or regular mail, the notice shall be deemed to have been received on the day receipt is refused or is confirmed orally or in writing by the receiving Party;

(iii)if sent by a courier service, upon delivery; or

(iv)if sent by facsimile, the Business Day following the day on which it was transmitted and confirmed by transmission report or such earlier time as confirmed orally or in writing by the receiving Party.

8.3    Rights. The failure of either Party to exercise any right granted hereunder shall not impair nor be deemed a waiver of that Party's privilege of exercising that right at any subsequent time or times.

8.4     Applicable Laws. This Agreement is subject to all valid present and future laws, regulations, rules, and orders of governmental authorities now or hereafter having jurisdiction over the Parties, this Agreement, any of the transactions contemplated hereby or the Rail Facility.

8.5    Rules of Construction. In construing this Agreement, the following principles shall be followed:

8.5.1     no consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Agreement;

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8.5.2    examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

8.5.3     the word includes and its syntactical variants mean includes, but is not limited to and corresponding syntactical variant expressions; and

8.5.4     the plural shall be deemed to include the singular and vice versa, as applicable.

8.6    Governing Law. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware, without regard to choice of law principles that would require the application of the laws of any other jurisdiction.

8.7    Dispute Resolution.

8.7.1    Negotiation. Prior to submitting any dispute for resolution by a court, a Party shall provide written notice to the other of the occurrence of such dispute. If the Parties have failed to resolve the dispute within 15 Business Days after such notice was given, the Parties shall seek to resolve the dispute by negotiation between senior management personnel of each Party. Such personnel shall endeavor to meet and attempt to amicably resolve the dispute. If the Parties are unable to resolve the dispute for any reason within 30 Business Days after the original notice of dispute was given, then either Party shall be entitled to pursue any remedies available at law or in equity; provided, however, this Section 8.6.1 shall not limit a Party's right to initiate litigation prior to the expiration of the time periods set forth herein of such limitations would prevent a Party from filing a lawsuit or claim within the applicable period for filing lawsuits (e.g. statutes of limitation, prescription, etc.).

8.7.2     Costs and Expenses. The prevailing Party in any litigation pertaining to any dispute hereunder shall be entitled to recover its reasonable costs, expenses, and attorney's fees in connection with such litigation.

8.8     Limitation of Liability. Notwithstanding anything in this agreement to the contrary, neither Party shall be liable to the other Party for special, indirect, consequential, punitive, or exemplary damages suffered by such Party resulting from or arising out of this Agreement or the breach thereof or under any other theory of liability, whether tort, negligence, strict liability, breach of contract, warranty, indemnity, or otherwise, including, without limitation, loss of use, increased cost of operations, loss of profit or revenue, or business interruptions. In furtherance of the foregoing, each Party releases the other Party and waives any right of recovery for special, indirect, consequential, punitive, or exemplary damages suffered by such Party regardless of whether any such damages are caused by the other Party's negligence (and regardless of whether such negligence is sole, joint, concurrent, active, passive, or gross negligence), fault, or liability without fault.

8.9     Entirety of Agreement, Amendments. This Agreement, including, without limitation, all exhibits hereto, integrate the entire understanding between the Parties with respect to the operation and maintenance by Operator of Owner's Rail Facility and supersede all prior understandings, drafts, discussions, or statements, whether oral or in writing, expressed or implied,

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dealing with the same subject matter. This Agreement may not be amended or modified in any manner except by a written document signed by the Parties that expressly amends this Agreement.

8.10    Waivers. No waiver by either Party of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless expressly provided. No waiver shall be effective unless made in writing and signed by the Party to be charged with such waiver.

8.11    Headings. The headings and captions in this Agreement have been inserted for convenience of reference only and shall not define or limit any of the terms and provisions hereof.

8.12     Rights and Remedies. Except as otherwise provided in this Agreement, each Party reserves to itself all rights, counterclaims, other remedies, and defenses to which such Party is or may be entitled arising from or out of this Agreement or as otherwise provided by law.

8.13     Assignment. Operator shall not make any assignment of all or any part of this Agreement or any of the rights or obligations hereunder unless there first shall have been obtained the written consent thereto of Owner, which consent shall not be unreasonably withheld, conditioned, or delayed. Owner shall not make any assignment of all or any part of this Agreement or any of the rights or obligations hereunder except in connection with the sale, financing or conveyance of all or any part of the Rail Facility. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Parties. Any attempted assignment of this Agreement in violation of this Section 8.12 shall be null and void.

8.14     Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile), each of which shall be deemed an original, and all of which shall be deemed one and the same Agreement.

8.15    No Third Party Beneficiary. Except for parties indemnified hereunder, this Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns, and shall not inure to the benefit of any other Person whomsoever or whatsoever, it being the intention of the Parties that no third Person shall be deemed a third-party beneficiary of this Agreement.

8.16     Further Assurances. Each Party shall take such acts and execute and deliver such documents as may be reasonably required to effectuate the purposes of this Agreement.

* * * * *

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IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Agreement to be effective on the Effective Date.





Operation & Maintenance Agreement Signature Page   K&E 10351208.3





EXHIBIT A

  Exhibit A   K&E 10351208.3





EXHIBIT C Owner's Facility Security Plan

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answer:

Highlight the parts (if any) of this contract related to Insurance that should be reviewed by a lawyer. Details: Is there a requirement for insurance that must be maintained by one party for the benefit of the counterparty?