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.
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Question: Exhibit 10.13   TRANSPORTATION AGREEMENT   BETWEEN   ENERGY XXI GULF COAST, INC.   AND   ENERGY XXI USA, INC.   DATED EFFECTIVE AS OF   March 11, 2015









  TRANSPORTATION AGREEMENT   TABLE OF CONTENTS   ARTICLE 1 DEFINITIONS AND INTERPRETATION 1     ARTICLE 2 NOMINATIONS AND TRANSPORTATION 3     ARTICLE 3 RATES AND CHARGES 4     ARTICLE 4 QUALITY AND PRESSURE SPECIFICATIONS 5     ARTICLE 5 OFFSHORE PLATFORM FACILITIES AND OPERATING PROCEDURES 6     ARTICLE 6 GRAVITY BANK 8     ARTICLE 7 MEASUREMENT AND TESTING 9     ARTICLE 8 TERM 11     ARTICLE 9 TITLE AND CUSTODY 11     ARTICLE 10 BILLING AND PAYMENT 11     ARTICLE 11 REMEDIES 12     ARTICLE 12 FORCE MAJEURE 13     ARTICLE 13 INDEMNIFICATION 14     ARTICLE 14 NOTICES 14     ARTICLE 15 ASSIGNMENT 15     ARTICLE 16 MISCELLANEOUS 15

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  TRANSPORTATION AGREEMENT   This Transportation Agreement (the Agreement), dated as of March 11, 2015 (the Effective Date), is by and between ENERGY XXI GULF COAST, INC., a Delaware corporation (Shipper), and  ENERGY XXI USA, INC., a Delaware corporation  (Transporter). Shipper and Transporter may be referred to herein individually as a Party or collectively as the Parties.   WITNESSETH:   WHEREAS, Shipper desires to contract with Transporter for transportation service on Transporter's Gathering System;   WHEREAS, Transporter is willing to transport Shipper's Crude Petroleum on the Gathering System for the compensation and subject to the terms and conditions set forth below;   NOW, THEREFORE, in consideration of the mutual agreements, covenants and conditions herein contained, Transporter and Shipper hereby agree as follows:   ARTICLE 1 DEFINITIONS AND INTERPRETATION   1.1 Definitions. In addition to terms defined elsewhere in this Agreement and in Annex I hereto, the following definitions shall apply hereunder:   Agreement shall have the definition set forth in the preamble of this Agreement.   A.P.I. shall mean the American Petroleum Institute.   Barrel or Bbl shall mean forty-two (42) United States gallons at a temperature of sixty degrees (60°) Fahrenheit.   BS&W shall mean the basic sediment, water or other impurities found in a stream of Crude Petroleum.   Claiming Party shall have the meaning set forth in the definition of Force Majeure below.   Crude Petroleum shall mean the direct liquid products of oil wells, indirect petroleum products resulting either from distillate recovery equipment in gas and distillate fields, or a mixture of the direct product and indirect petroleum products.   Delivery Point shall mean the point(s) of interconnection between the Gathering System and one or more oil pipelines downstream of the Gathering System where Transporter delivers Crude Petroleum to Shipper. The initial Delivery Point shall be located at Grand Isle.

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  Downstream Pipelines shall mean any pipeline or other receiving facility downstream of the Delivery Point.   Effective Date shall have the definition set forth in the preamble of this Agreement.   Force Majeure shall mean an event which is not within the reasonable control of the Party claiming suspension (the Claiming Party), and which by the exercise of due diligence the Claiming Party is unable to overcome in a commercially reasonable manner. Force Majeure includes, to the extent such event satisfies the requirements of the preceding sentence: acts of God; wars (declared or undeclared); insurrections; hostilities; strikes; lockouts; riots; floods; fires; storms; storm warnings; named or numbered tropical disturbances and evacuations associated with the threat of the same; industrial disturbances; acts of the public enemy; sabotage; blockades; epidemics; landslides; lightning; earthquakes; washouts; arrests and restraints of rulers and peoples; civil disturbances; explosions; breakage or accidents to machinery or lines of pipe; hydrate obstruction or blockages of any kind of lines of pipe; adverse operating conditions on Shipper's facilities, Transporter's facilities, or the facilities of Downstream Pipelines; repairs, improvements, replacements or alterations to plants, lines of pipe or related facilities; inability of either Party to obtain necessary machinery, drilling or workover rigs, materials, permits, easements or rights-of-way on reasonable terms; freezing of delivery facility; and other events beyond the reasonable control of Shipper that affect production levels; action or restraint by court order or public or governmental authority (so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the extent reasonable, such government action); provided, however, that none of the loss of Shipper's or its Affiliates' markets, Shipper's or its Affiliates' inability to obtain adequate capacity (other than for reasons of force majeure affecting a Downstream Pipeline), nor Shipper's or its Affiliates' inability economically to use or resell Crude Petroleum transported hereunder shall constitute an event of Force Majeure. A force majeure event that occurs respecting one or more Downstream Pipelines for which there are no reasonable alternatives for a Claiming Party to utilize in order to meet its duties and obligations under this Agreement, regardless of whether such Downstream Pipeline declared such force majeure event, shall constitute Force Majeure for purposes of this Agreement, subject to the requirement of the first sentence of this definition. The failure of a Claiming Party to settle or prevent a strike or other labor dispute with employees shall not be considered to be a matter within such Claiming Party's control.   Gathering System shall mean Transporter's Grand Isle Gathering System.   Month shall mean a period of time beginning at 7:00 a.m. Central Clock Time on the first day of a calendar month and ending at 7:00 a.m. Central Clock Time on the first day of the next succeeding calendar month.   Psig shall mean pounds per square inch gauge.   Receipt Point shall mean the point(s) of interconnection between the Gathering System and one or more oil pipelines or other interconnecting facilities located upstream of the Gathering System where Shipper delivers Crude Petroleum to Transporter. The initial Receipt Points are identified on Exhibit A.

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  Shipper shall have the definition set forth in the preamble of this Agreement.   Transporter shall have the definition set forth in the preamble of this Agreement.   1.2 Other Terms. Other capitalized terms used in this Agreement and not defined in Section 1.1 above shall have the meanings ascribed to them throughout this Agreement.   ARTICLE 2 NOMINATIONS, SCHEDULING AND TRANSPORTATION   2.1 Nomination.   (a)  Applications for the transportation of Crude Petroleum shall be submitted in writing on Transporter's prescribed nomination of shipment form.   (b) Shipper desiring to nominate Crude Petroleum for transportation shall make such nomination to Carrier in writing on or before the twenty-fifth day of the month preceding the month during which the transportation under the nomination is to begin; except that, if space is available for current movement, a Shipper may nominate Crude Petroleum for transportation after the twenty-fifth day of the month preceding the month during which the transportation under the nomination is to begin.   2.2 Capacity Allocation.   (a) When pursuant to nominations hereunder, there shall be offered to Transporter more Crude Petroleum than can be immediately gathered and/or transported, the gathering and/or transportation shall be apportioned among all Shippers by Transporter on a just and reasonable basis.   2.3 Transportation.   (a) Subject to the provisions of this Agreement and all applicable Laws, Transporter shall accept and transport Shipper's Crude Petroleum and redeliver the quantity of Crude Petroleum received by Transporter, less applicable Losses as set forth in Section 7.3, at the Delivery Point. Transporter shall be under no obligation to deliver the identical Crude Petroleum received, and reserves the right to make delivery out of its common stock.   2.4 Transporter's Right to Shutdown Operations.   (a) Transporter shall have absolute discretion and authority to partially or totally shutdown any and all operations and activities (and temporarily or permanently discontinue the services) contemplated hereunder at any time, if in Transporter's sole discretion, such shutdown is warranted to (i) ensure the safety of persons, property, or the environment; (ii) ensure the operational integrity of the Gathering System; or (iii) modify, inspect, maintain or repair the Gathering System. Transporter shall notify Shipper in writing in the event of any of the occurrences listed above. In such cases, Transporter shall not have any liability to Shipper for such shutdowns.

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  (b) In the event interruption of service is required, Transporter's dispatcher will advise Shipper of an interruption as soon as practicable.   (c)  Nothing contained herein shall preclude Transporter from taking reasonable action(s) necessary to adjust receipts or deliveries hereunder in order to maintain the operational integrity of the Gathering System.   2.5 Line Fill and Tank Bottom Inventory.   (a) Either prior to or after the acceptance of Crude Petroleum for transportation, Transporter will, upon reasonable notice, require Shipper to provide a pro rata part of the volume of Crude Petroleum necessary for pipeline fill, unavailable stocks below tank connections, and reasonable additional minimum quantities required for efficient operation or to safeguard Transporter's tankage during passage of a tropical storm or hurricane. Crude Petroleum provided by Shipper for this purpose may be withdrawn after reasonable written notice of Shipper's intention to discontinue shipment in the Gathering System. Transporter may require advance payment of final transportation charges and settlement of any unpaid accounts receivable before final delivery will be made.   (b) In the event Shipper's inventory balance drops below its pro rata part of the volume of Crude Petroleum necessary for pipeline fill, unavailable stocks below tank connections, and reasonable additional minimum quantities required for the efficient operation of the system, then Transporter will require Shipper to provide the necessary volume to meet its pro rata part of such volume of Crude Petroleum.   (c) In the event that Shipper maintains an inventory balance after Shipper ceases movements on the Gathering System or Shipper gives written notice of its intent to cease movements over the system and Shipper is unable to schedule appropriate shipments to clear the inactive inventory balance, Shipper will be required to settle the inactive inventory balance through Transporter. In the event no such Shipper notice is given, then Transporter may require either an adjustment in Shipper's inventory balance or settlement of Shipper's inventory balance at any time after Shipper has ceased making movements under this Agreement for a period of six months. Such settlement will be based upon the fair market value of the Crude Petroleum, as published by Platts, at the time Shipper provides written notice of termination of this Agreement or if no such written notice is given, then at such time as Transporter calls for the settlement of the Shipper's inventory balance.   ARTICLE 3 RATES AND CHARGES   3.1 Transportation Charges. Crude Petroleum accepted for transportation by Transporter shall be subject to the transportation rates set forth on Exhibit A plus any other applicable charges specified in this Article 3.

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  ARTICLE 4 QUALITY AND PRESSURE SPECIFICATIONS   4.1 Quality Specifications. Transporter reserves the right to reject any and all shipments of: (i) Crude Petroleum delivered by Shipper to Transporter whose gravity, viscosity, and/or other characteristics are such that it is not readily susceptible to transportation through the Transporter's existing facilities and it will damage the quality of other shipments or cause disadvantage to other shippers and/or the Transporter; (ii) Crude Petroleum containing water, sediment and other impurities totaling in excess of one per cent as determined by centrifugal test, or by such other tests as may be agreed upon by the Shipper and Transporter; or (iii) Crude Petroleum where Shipper has failed to comply with all applicable laws, rules, and regulations made by any governmental authorities regarding shipment of Crude Petroleum.   4.2 Contaminants. Transporter has the right, at its discretion, to reject crude oil containing contaminants. If Transporter determines that a Shipper has delivered to Transporter's facilities Crude Petroleum that has been contaminated by the existence of and or excess amounts of impure substances, including but not limited to chlorinated and/or oxygenated hydrocarbons, arsenic, lead and/or other metals which results in harm to other shippers, Downstream Pipelines, users of the contaminated Crude Petroleum or Transporter, such Shipper will be excluded from further entry into applicable segments of the pipeline system until such time as the quality of the Crude Petroleum is to the satisfaction of the Transporter. Transporter is not responsible for monitoring receipts or deliveries for contaminants. Further, Transporter reserves the right to dispose of any contaminated Crude Petroleum blocking its pipeline system. Disposal thereof may be made in any reasonable manner including but not limited to commercial sales, and any liability associated with the contamination or disposal of any Crude Petroleum shall be borne by the Shipper introducing the contaminated Crude Petroleum into Transporter's system. Shipper liability includes, but is not limited to, claims from other shippers, carriers, or users of the contaminated Crude Petroleum and the costs of any regulatory or judicial proceeding.   4.3  Periodic Samples. Transporter reserves the right to periodically sample and test the quality of the Crude Petroleum delivered by Shipper at any Receipt Point. Transporter shall be responsible for all costs attributable to such periodic sampling and testing. If at any time Shipper's Crude Petroleum triggers any of the rejection rights set forth in Section 4.1, Shipper shall pay for any tests performed thereafter to establish that such Crude Petroleum no longer triggers such provisions.   4.4 Pressure. The present maximum operating pressure at all reception points is 1440 psig. Shipper's injection pressure shall be maintained within this stated maximum limit and shall conform, as near as possible, to the hydraulic gradient. Transporter reserves the right to reduce the maximum operating pressure by written notice to Shipper. Shipper shall furnish, or cause the producer from which Crude Petroleum is purchased to furnish, install, calibrate, and maintain continuous pressure recording devices at or near injection points to monitor pipeline operating pressures. Copies of the recording charts taken from these recording devices shall be furnished to Transporter on a weekly basis by Shipper. Shipper shall also furnish Transporter copies of annual calibration certificates for recording devices. Transporter reserves the right to witness calibration of these devices, and Shipper shall notify Transporter at least 48 hours prior to the initiation of such calibration procedures. Circumstances may arise which in Transporter's judgment require the Gathering System, or any part thereof, be shut down. Following such shutdown periods, Shippers shall obtain authorization from Transporter prior to the resumption of injections.

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  4.5 Excess Water, Sediment and Other Impurities. If during any monthly accounting period, the weighted average of the BS&W on all meter tickets covering Crude Petroleum delivered to Transporter by Shipper reflects a water, sediment and other impurities content which exceeds 1%, Shipper shall pay to Transporter a handling charge as specified in the table in Exhibit A on such excess water, sediment, and other impurities to cover the treating, separation and other aspects of handling such excess water, sediment and other impurities delivered to Transporter. This explicitly excludes disposal. Transporter shall accept excess water for handling only when Shipper has made the necessary arrangements for disposal of such excess water. Shipper may dispose of its excess water by method acceptable to Transporter such as barging or trucking subject to a mutually agreed upon schedule for excess water removal by Shipper from Transporter's Grand Isle tankage. As an alternative, Shipper may request Transporter to dispose of Shipper's excess water by use of Transporter's onshore disposal wells. The fees for disposal are set forth in Exhibit A. In any event, Shipper must contact Transporter in advance at 713-351-3000 to schedule means by which BS&W will be disposed. Where no meter tickets are available or meter tickets are in Transporter's opinion unreliable, water, sediment and other impurities in the system in excess of that reported on acceptable meter tickets will be allocated in a fair and equitable manner by Transporter. Notwithstanding the fact that Transporter levies a handling charge covering excess water, sediment and other impurities content in a Crude Petroleum stream, Transporter reserves the right to reject any nomination of products other than Crude Petroleum which satisfies all quality standards, requirements and conditions set forth herein.   ARTICLE 5 OFFSHORE PLATFORM FACILITIES AND OPERATING PROCEDURES   5.1 Transporter or its authorized representative shall have access to the platform from which shipments are received for the purpose of examining and checking meters and other installations utilized in connection with the handling of Crude Petroleum injected into the pipeline.   5.2  Shipper, upon request by Transporter, shall install, maintain and operate, or make arrangements with platform owners to install, maintain, and operate equipment to inject corrosion inhibitors, biocides, scale inhibitors, paraffin chemicals, or other chemicals as specified by Transporter.   5.3 Shipper shall provide or arrange with platform operator to furnish, operate, and maintain such pumping equipment as is necessary to inject the Crude Petroleum nominated by Shipper for shipment or will cause same to be done. Pumping equipment shall be controlled and operated so that the hourly rate at which Crude Petroleum is injected during each month shall not exceed 120% of the average hourly volume nominated and accepted for shipment during the current calendar month. If piston pumps are used, surge absorbers shall be installed, upon reasonable request of Transporter, to minimize pulsation. Transporter reserves the right, upon written notification to all Shippers to further limit the variation of Shipper's injection rates, if in Transporter's judgment proration is imminent. Reasonable exceptions to variations of injection rates for Shippers with newly discovered, expended production, and unusual production difficulties will be allowed by Transporter.

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  5.4  Physical and legal transfer of custody of Crude Petroleum to Transporter shall be at points where producer's or other delivering parties' lines are connected to Transporter's existing facilities, however, measurement of quantities received for the account of Shipper at such points shall be determined by measurement facilities installed on the production platforms where the Crude Petroleum is produced or to which it is moved for delivery into Transporter's existing facility.   5.5 The Transporter shall have the right to require uniform measurement and sampling equipment/procedures at all installations so that custody transfer measurements are made on a uniform basis. Transporter reserves the right to require Shipper to install or cause platform owners to install in accordance with applicable API and ASTM (American Society for Testing Materials) standards metering and meter proving equipment capable of continuous custody measurement, and devices for continuous proportional to-flow sampling of the Crude Petroleum.   5.6 If Crude Petroleum to be delivered to Transporter is produced at some distance from the Transporter's facilities and Transporter does not elect to provide a connection directly to the production platform where it is produced, Shipper may furnish, or cause to be furnished, free of cost to Transporter, the connecting pipeline required to deliver such Shipper's Crude Petroleum to the location designated by Transporter. If such location is on another producer's platform, all arrangement for installing the connecting pipeline or other required equipment or facilities on such platform shall be the sole responsibility of the Shipper.   5.7 At Transporter's request, Shipper will allow, or cause the platform owner(s) to allow, Transporter to place, operate, repair and maintain riser piping, scraper traps, valves, surveillance equipment, and any other equipment deemed by Transporter to be needed for the safe and efficient operation of the Gathering System. In the event Transporter should decide to transmit meter readings or other data from the platform from which Shipper's Crude Petroleum is run, Shipper will allow, or cause the platform owner(s) to allow, reasonable access to and use of communication facilities which may be available at the platform.   5.8 Where meter readings are available Transporter will prepare, as near as practicable to 7:00 a.m. on the first day of each month, a monthly pipeline run ticket for Shipper showing opening and closing meter readings and water, sediment, other impurities percentage on the basis of which Crude Petroleum and water, sediment, and other impurities volumes will be determined. If for any reason Transporter's representative fails to reach any receipt point on the first day of the month, Shipper's own representative, with prior authorization from Transporter, will obtain and make a record for Transporter's representative of the closing meter reading and will withdraw the sample material from the sampling equipment. The sample material thus withdrawn will be sealed in a special container and retained by Shipper's representative for Transporter's representative who will, during his next trip to that receipt point, determine the water, sediment, and other impurities percentage of the sample material in the special container and prepare the monthly pipeline run ticket. Where no meter readings are available, Crude Petroleum including water, sediment and other impurities will be determined by Transporter from the best available data.

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  5.9 It is recognized that from time to time producers inject acid into well formations containing Crude Petroleum in an attempt to stimulate production and fluids subsequently produced from such wells may contain unspent acid which must be neutralized to a pH of 4.5 or greater before the fluids (with which acid is produced) are delivered to Transporter. If such total fluids (Crude Petroleum plus unspent acid) is not so neutralized, the Gathering System may have to be shut down which in turn will require all connected producers to shut in their wells. To assist Transporter to anticipate the need and to prepare for possible corrective actions which may be required to void or minimize operating difficulties caused by any unneutralized acid, Shippers shall furnish, or cause the producer from which Crude Petroleum is purchased to furnish to Transporter, the following information at least 24 hours in advance of start of production from any well which has been acidized: (i) estimated time of first production from acidized well; (ii) estimated time that first production from acidized well, which has been neutralized to a pH equal to or greater than 4.5, will be injected into the Gathering System; and (iii) estimated time that produced fluids from previously acidized wells, which has been neutralized to a pH equal to or greater than 4.5, will be free of neutralized acids. Shipper shall assume full responsibility for and reimburse Transporter for all extra costs and expenses incurred by Transporter as the result of any unspent and/or unneutralized acids being present in the Crude Petroleum delivered to Transporter by Shipper. Shipper will be billed for all such extra costs and expenses for shutting down, purging of such unspent acids, and subsequent resuming operation of the Transporter's Gathering System. Transporter shall not be liable to any Shipper for any damage sustained by Shipper(s) as the result of unspent and/or unneutralized acids being received from other Shipper(s).   5.10 In the event that Shipper does not operate the wells from which the Crude Petroleum nominated for shipment is produced or does not operate the treating, measurement, or pumping equipment through which such Crude Petroleum is handled prior to its delivery to Transporter, then Shipper shall designate the party or parties responsible for the operation of such facilities and shall authorize and direct such party or parties to (1) comply with all provisions of this Agreement related to their operations and (2) furnish to Transporter such reasonably requested operational, technical, administrative, and analytical data as Transporter deems necessary to account for volumes being delivered to Transporter and assure safe, lawful, and efficient operations.   ARTICLE 6 GRAVITY BANK   6.1 To assure that no shipper will be materially damaged or allowed to benefit by changes in gravity due to the intermixing of petroleum in the Gathering System, Shipper will be required, as a condition of tendering, to participate in a Gravity Bank. The table of gravity differential values per barrel as attached hereto as Exhibit B is incorporated herein and made a part of this Agreement.

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  6.2 Transporter shall administer the Gravity Bank providing adjustments for the value of crudes with different qualities in the manner specified below for both receipt and delivery volumes. Applicable barrels and gravities shall be the net barrels at 60 degrees Fahrenheit (with no deduction for Loss allowance) and the gravities recorded by the Operator at points where it customarily records gravities and quantities. The weighted average gravity differential value per barrel (for two or more gravities of petroleum), as hereinafter referred to, shall be obtained in the following manner: multiply the gravity differential values per barrel (from the attached table as same is from time to time revised) by the number of barrels to which such gravity differential values are applicable and then divide the total of the resultant gravity differential values in dollars and cents by the total of the applicable barrels.   6.3 Adjustments between shippers shall be computed as follows: (i) compute the weighted average gravity differential value per barrel of the barrels received from by each shipper and (ii) compute the weighted average gravity differential value per barrel of the composite common stream for receipts.   6.4 Calculation:   (a) If the weighted average gravity differential value per barrel of a shipper as so determined under Section 6.3(i) above shall be greater than the weighted average gravity differential value per barrel of the aforementioned common stream petroleum as determined under Section 6.3(ii), the difference in cents per barrel shall be calculated and shipper shall be credited (receives) an amount calculated by multiplying said difference in gravity differential value per barrel by the applicable barrels.   (b) If the weighted average gravity differential value per barrel of a shipper is less than the weighted average gravity differential value per barrel of the aforementioned common stream petroleum, the difference shall be calculated as above outlined and a shipper debited for such difference.   (c) A sample calculation is attached as Exhibit C.   6.5 These calculations shall be made for each calendar month and the algebraic sum of the adjustments for the system shall be zero +/- One Dollar. If a shipper shall have a net debit balance in combining the two adjustments made above, the balance shall be remitted to the clearinghouse within fifteen (15) days from receipt of statement of such debit. If Shipper shall have a credit, the clearinghouse shall remit the amount thereof after receipt by the clearinghouse of the sums from those shippers having debits as calculated above.   ARTICLE 7 MEASUREMENT AND TESTING   7.1 Crude Petroleum tendered to Transporter for transportation shall be measured and tested by a representative of Transporter prior to its receipt from Shipper. Shipper shall have the privilege of being present or represented at the measurement and testing. Quantities shall be measured by meters and calculated in accordance with applicable A.P.I. Manual of Petroleum Measurement Standards. All shipments of required specifications will be received and delivered as net standard volume, as the total volume excluding water, sediment and other impurities, corrected by the appropriate volume correction factor for the observed temperature and A.P.I. gravity, relative density, or density to a standard temperature of 60 degrees Fahrenheit and also corrected by the applicable pressure correction factor and meter factor. Where measurement and testing of shipments to determine water, sediment, and other impurities content is not performed, the Transporter shall determine the water, sediment, and other impurities content of shipments based on the best available data. Due to the complexity of the allocations of the non-metered receipt locations, any prior period volume adjustment of 500 barrels or less will be corrected by including the corrected prior Months' (positive or negative) volume in the current month allocation process. Any shipper request for volume or quality adjustments prior to the most previous twenty-four (24) Month time frame will not be considered.

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  7.2  Evidence of Receipts and Deliveries. Transporter shall account to Shipper for Crude Petroleum received and delivered. Crude Petroleum received from Shipper and Crude Petroleum delivered to Shipper shall, in each instance, be evidenced by tickets, showing opening and closing tank gauges or meter readings, as applicable, temperature, basic sediment and water, and any other data essential to the determination of quantity. Such tickets shall be jointly signed by representatives of Transporter and Shipper, and shall constitute full receipt for (a) the Crude Petroleum received and (b) the Crude Petroleum delivered. Where meter tickets are not available or in Transporter's opinion are unreliable, Transporter shall use the best available data to determine the quantity of Crude Petroleum received and delivered. For receipt locations where custody transfer measurement is by Lease Automatic Custody Transfer (LACT) unit or by allocation process, a deduction of twenty-five hundredths of one percent (0.25%) will be made to cover evaporation, interface losses and normal losses during transportation.   7.3 Losses.   (a) All shipments of Crude Petroleum of 50 degrees A.P.I. gravity or above shall be subject to a deduction to cover the shrinkage resulting from the mixture thereof, in the facilities of Transporter, with Crude Petroleum of A.P.I. gravity of 49.9 degrees or less according to the following table:   A.P.I. Gravity  (Degrees)    Deduction  50 through 59.9    1% 60 through 74.9    2% 75 through 84.9    3% 85 through 94.9    4% 95 through 104.9    5% 105 through 120.9    6%   (b) The quantity of Crude Petroleum deliverable shall be the net standard volume less shrinkage, evaporation, or any other losses in transit or due to leaks or pipeline breaks. All such shrinkage, evaporation, and gains or losses shall be assigned by Transporter to Shipper on a just and reasonable basis.

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  ARTICLE 8 TERM   8.1 Term. Subject to the other provisions of this Agreement, the term of this Agreement shall commence on the Effective Date and shall remain in effect until terminated by either Party upon thirty (30) days' prior written notice.   8.2 Remedies Cumulative. Each Party shall have any and all remedies available to it under this Agreement, at law, or in equity for any breach by the other Party of the other Party's obligations under this Agreement. All such remedies are cumulative, not exclusive, and such Party may exercise any or all of such remedies in addition to or as an alternative to termination of the Term. No election of remedies shall be required or implied as the result of a Party's decision to avail itself of a remedy hereunder.   ARTICLE 9 TITLE AND CUSTODY   9.1 Title. A nomination of Crude Petroleum shall be deemed a warranty of title to such Crude Petroleum by Shipper, or a warranty of the good right to deliver such Crude Petroleum for transportation hereunder. Transporter may, in the absence of adequate security, decline to receive any Crude Petroleum which is in litigation, or as to which a dispute over title may exist, or which is encumbered by any lien. By nominating Crude Petroleum, Shipper also agrees to be responsible for any and all losses resulting from disputes, encumbrances, or failure of title thereto. Neither acceptance for transportation, nor redelivery by Transporter at the Delivery Point shall be deemed a representation by Transporter as to title.   9.2  Custody. As among the Parties, Shipper shall be in custody, control and possession of the Crude Petroleum affected by this Agreement at all times prior to delivery to Transporter at the Receipt Point and after redelivery by Transporter at the Delivery Point and Transporter shall have custody and control of the Crude Petroleum affected by this Agreement at all times after delivery by Shipper at the Receipt Point and prior to redelivery by Transporter at the Delivery Point.   ARTICLE 10 BILLING AND PAYMENT   10.1 Payment. All payments are due within 10 days of receipt of the invoice by ACH or wire transfer, unless the Transporter determines in a manner not unreasonably discriminatory that the financial condition of Shipper or Shipper's guarantor (if any) is or has become impaired or unsatisfactory or Transporter determines in a manner not unreasonably discriminatory it necessary to do so, in which case the payment due date shall be that specified in a written notice to the Shipper. Notwithstanding the foregoing, Shipper may withhold payment of amounts it disputes in good faith, provided that if any such amount is later determined to have been due Transporter Section 10.2 below shall apply to such amount.

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  10.2 Past-Due Interest. If any charge remains unpaid after the due date specified in Transporter's invoice, then such amount due may bear interest from the day after the due date until paid, calculated at an annual rate equivalent to the lesser of (1) 125% of the prime rate of interest, as of the date of Transporter's invoice, charged by the Citibank N.A. of New York, New York, for ninety (90) day loans made to substantial and responsible commercial borrowers or (2) the maximum rate allowed by law. In addition Shipper shall pay all documented costs incurred by Transporter to collect any unpaid amounts.   10.3 Setoff. In the event Shipper fails to pay any such undisputed charges when due, Transporter shall have the right to setoff such amounts owed and future amounts owed against those amounts Transporter owes Shipper.   10.4 In the event Transporter determines in a manner not unreasonably discriminatory that the financial condition of Shipper or Shipper's guarantor (if any) is or has become impaired or unsatisfactory or Transporter determines in a manner not unreasonably discriminatory it is necessary to obtain security from Shipper, Transporter, upon notice to Shipper, may require any of the following prior to Transporter's delivery of Shipper's Crude Petroleum in Transporter's possession or prior to Transporter's acceptance of Shipper's Crude Petroleum: (1) prepayment of all charges, (2) a letter of credit at Shipper's expense in favor of Transporter in an amount sufficient to ensure payment of all such charges and, in a form, and from an institution acceptable to Transporter, or (3) a guaranty in an amount sufficient to ensure payment of all such charges and in a form and from a third party acceptable to Transporter. In the event, Shipper fails to comply with any such requirement on or before the date supplied in Transporter's notice to Shipper, Transporter shall not be obligated to provide Shipper access to Transporter's facilities or provide services pursuant to this Agreement until such requirement is fully met.   ARTICLE 11 REMEDIES   11.1 Lien/Auction.   (a) Transporter shall have a lien on all Crude Petroleum delivered to Transporter to secure the payment of any and all transportation, or any other charges that are owed Transporter. Such lien shall survive delivery of Crude Petroleum to Shipper. Such lien shall extend to all Crude Petroleum in Transporter's possession beginning with Shipper's first receipt of transportation or other services from Transporter. The lien provided herein shall be in addition to any lien or security interest provided by statute or applicable law. Transporter may withhold delivery to Shipper of any of Shipper's Crude Petroleum in its possession and exercise any other rights and remedies granted under this Agreement or existing under applicable law until all such charges have been paid as provided above.   (b) If Shipper fails to pay the undisputed portion of an invoice by the due date, in addition to any other remedies under this Agreement or under applicable law, Transporter shall have the right, either directly or through an agent, to sell at a private sale any and all Crude Petroleum of such Shipper in its custody at fair market value at the time of sale. The proceeds of any sale shall be applied to the following order: (i) to the reasonable expenses of holding, preparing for sale, selling, and to the extent allowed by law, reasonable attorney's fees and legal expenses incurred by Transporter; and (ii) to the satisfaction of the Shipper's indebtedness including interest herein provided from the date of payment is due. The balance of the proceeds of the sale remaining, if any, shall be paid to Shipper or, if there is a dispute or claim as to entitlement, held for whoever may be lawfully entitled thereto.

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  11.2 Suspension of Performance. In the event Shipper fails to pay charges when due, Transporter shall not be obligated to provide Shipper access to Transporter's facilities or provide services pursuant to this Agreement until such time as payment is received by Transporter.   11.3 Legality of Shipments. Transporter reserves the right to reject any and all Crude Petroleum nominated for shipment when Shipper fails or is unwilling or unable to comply with all applicable Laws, or fails to reasonably demonstrate to Transporter that the shipment would be in conformance with the provisions of this Agreement.   11.4 Claims. As a condition precedent to recovery for losses or delay to shipments, claims must be filed in writing with Transporter within one year and one day after delivery of the Crude Petroleum, or, in case of failure to make delivery, then within one year and one day after a reasonable time for delivery has elapsed; and suits arising out of such claims shall be instituted against the Transporter only within two years and one day from the date of delivery, or within two years and one day after a reasonable time for delivery has elapsed. Where claims are not filed or suits are not instituted thereon in accordance with the foregoing provisions, Transporter shall not be liable and such claims will not be paid.   ARTICLE 12 FORCE MAJEURE   12.1 Force Majeure. If either Transporter or Shipper is rendered unable by an event of Force Majeure to carry out, in whole or part, its obligations hereunder and such Party gives notice and full details of the event to the other Party as soon as practicable after the occurrence of the event, then, pending such Force Majeure, but only during that period, the obligations of the Party affected by the event (other than the obligation to make payments then due or becoming due with respect to performance prior to the event) shall be canceled or suspended, as applicable, to the extent required; provided, however, that notwithstanding anything in the foregoing to the contrary, Shipper's obligation to pay the transportation charge set forth in Section 3.1 shall not be reduced, suspended or otherwise excused in any manner as the result of Force Majeure, regardless of which Party is affected. The Party affected by the Force Majeure shall use commercially reasonable efforts to remedy the Force Majeure condition with all reasonable dispatch, shall give written notice to the other Party of the termination of the Force Majeure, and shall resume performance of any suspended obligation promptly after termination of such Force Majeure; provided, that notwithstanding anything in the foregoing to the contrary, a Party may elect, in its sole discretion, whether or not to repair or replace its facilities following catastrophic destruction of all or substantially all of such facilities.

13







  ARTICLE 13 INDEMNIFICATION   13.1  Shipper shall release, indemnify, defend, and hold harmless Transporter and its affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Shipper, (ii) any breach of this agreement by Shipper, except to the extent attributable to the negligence, willful misconduct or fault of Transporter, and (iii) operations or activities upstream or downstream of the Gathering System, except to the extent attributable to the negligence, willful misconduct or fault of Transporter.   13.2  Transporter shall release, indemnify, defend, and hold harmless Shipper and its Affiliates, directors, officers, employees, agents, consultants, representatives, and invitees from and against all claims and losses arising out of or relating to (i) the operations of Transporter and (ii) any breach of this agreement by Transporter, except to the extent attributable to the negligence, willful misconduct or fault of Shipper.   ARTICLE 14 NOTICES   14.1 Notices. Unless otherwise provided herein, any notice, request, invoice, statement, or demand which either Party desires to serve upon the other regarding this Agreement shall be made in writing and shall be considered as delivered (i) when hand delivered, (ii) when delivery is confirmed by pre-paid delivery service (such as FedEx, UPS, DHL or a similar delivery service), (iii) if mailed by United States certified mail, postage prepaid, three (3) Business Days after mailing, (iv) if sent by facsimile transmission, when receipt is confirmed by the equipment of the transmitting Party, or (v) when sent, if sent by Email. Any notice shall be given to the other Party at the following address, or to such other address as either Party shall designate by written notice to the other:   ENERGY XXI USA, INC.           Attn:       Phone:      Fax:       Email address:           ENERGY XXI GULF COAST, INC.           Attn:       Phone:      Fax:       Email address:

14







  ARTICLE 15 ASSIGNMENT   15.1 Assignment.   (a) Shipper shall have the right to assign, or transfer all, but not less than all, of its rights and obligations under this Agreement with the prior written consent of Transporter, which consent may be withheld in Transporter's sole discretion.   (b) No assignment or transfer of this Agreement shall be effective as to Transporter unless and until Transporter has been provided written notice thereof.   15.2 Encumbrance.   (a)  Shipper shall not pledge, encumber or grant any security interest with respect to any portion of its interests or rights under this Agreement.   (b)  Transporter shall have the right to pledge, encumber or otherwise grant security interests in its interests or rights under this Agreement.   15.3  Nothing herein shall prevent or prohibit Shipper, without consent of Transporter, from engaging and using contractors and subcontractors to perform services, for the benefit of Shipper, in connection with the performance by Shipper of its obligations under this Agreement.   ARTICLE 16 MISCELLANEOUS   16.1 Applicable Laws. This Agreement is subject to, and the Parties shall comply with, all valid present and future laws, regulations, rules and orders of Governmental Authorities now or hereafter having jurisdiction over the Parties, this Agreement, or the Services performed or the facilities utilized under this Agreement.   16.2 Authorizations. The Parties hereto represent that they have all requisite corporate and/or company authorizations necessary or proper to consummate this Agreement.   16.3 Entirety. This Agreement constitutes the entirety of the understanding between the Parties with respect to the subject matter dealt with herein, and replaces and supersedes all prior agreements, conditions, understandings, representations and warranties made between the Parties with respect to the subject matter hereof, whether written or oral. It is further agreed that no amendment, modification or change herein shall be enforceable, except as specifically provided for in this Agreement, unless reduced to writing and executed by both Parties.   16.4 Governing Law; Jurisdiction; Jury Waiver.   (a) The validity, construction and performance of this Agreement shall be governed by the laws of the State of Texas, not including any of its conflicts of law rules that would direct or refer to the laws of another jurisdiction. The Parties have allocated liability risk pursuant to this Agreement and therefore intend that no anti-indemnity law, rule or regulation apply hereto.

15







  (b)  The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions contemplated hereby shall be in any state or federal court in Harris County, Texas, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.   (c) EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY DISPUTE ARISING FROM OR UNDER THIS AGREEMENT.   16.5 Non-Waiver. No waiver by either Party hereto of any one or more defaults by the other in the performance of any of the provisions of this Agreement shall be construed as a waiver of any other default or defaults whether of a like kind or different nature. Any delay, less than any applicable statutory period of limitations, in asserting or enforcing any rights under this Agreement, shall not be deemed a waiver of such rights. Failure of either Party to enforce any provision of this Agreement or to require performance by the other Party of any of the provisions hereof shall not be construed to affect the validity of this Agreement or any part thereof, or the right of either Party thereafter to enforce each and every provision hereof.   16.6 Severability. If any term or other provision or portion of a provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms and conditions of this Agreement shall nevertheless remain in full force and effect.   16.7 Amendments. This Agreement shall not be altered or amended, except by an agreement in writing executed by all parties to this Agreement in accordance with the limited partnership agreement of Transporter.   16.8 Confidentiality.   (a) Confidentiality. Except as otherwise provided in this Section 16.8, each Party agrees that it shall maintain all terms and conditions of this Agreement, and all information disclosed to it by the other Party or obtained by it in the performance of this Agreement and relating to the other Party's business (including all data relating to the production of Shipper, including well data, production volumes, volumes gathered, transported, or compressed, and quality) (collectively, Confidential Information) as confidential, and that it shall not cause or permit disclosure of this Agreement or its existence or any provisions contained herein without the express written consent of the other Party.

16







  (b) Permitted Disclosures. Notwithstanding Section 16.8(a), disclosures of any Confidential Information may be made by either Party (i) to the extent necessary for such Party to enforce its rights hereunder against the other Party; (ii) to the extent to which a Party is required to disclose all or part of this Agreement by a statute or by the order or rule of a Governmental Authority exercising jurisdiction over the subject matter hereof, by order, by regulations, or by other compulsory process (including deposition, subpoena, interrogatory, or request for production of documents in any administrative, judicial, or legislative proceedings); (iii) to the extent required by the applicable regulations of a securities or commodities exchange; (iv) to a third person in connection with a proposed sale or other transfer of all or any portion of a Party's assets and properties related to the subject matter of this Agreement, provided that such third person agrees in writing to be bound by the terms of this Section 16.8; (v) to its own directors, officers, employees, agents and representatives; (vi) to an Affiliate; (vii) to financial advisors, attorneys, and banks, provided that such Persons are subject to a confidentiality undertaking consistent with this Section 16.8(b); or (ix) any information which, through no fault of a Party, becomes a part of the public domain.   (c) Notification. If either Party is or becomes aware of a fact, obligation, or circumstance that has resulted or may result in a disclosure of any of the terms and conditions of this Agreement authorized by Section 16.8(b)(ii) or (iii), it shall so notify in writing the other Party promptly and shall provide documentation or an explanation of such disclosure as soon as it is available.   (d) Party Responsibility. Each Party shall be deemed solely responsible and liable for the actions of its directors, officers, employees, agents, representatives and Affiliates for maintaining the confidentiality commitments of this Section 16.8   (e) The provisions of this Section 16.8 shall survive any termination of this Agreement for a period of one (1) year.

17







  16.9 Representations. Each Party declares, warrants, and represents on behalf of itself (i) that it has contributed to the drafting of this Agreement or has had it reviewed by legal counsel before executing it, (ii) that this Agreement has been purposefully drawn and correctly reflects such Party's understanding of the transaction that it contemplates as of the Effective Date hereof, (iii) that this Agreement has been validly executed and delivered; (iv) that this Agreement has been duly authorized by all action necessary for the authorization thereof, and (v) this Agreement constitutes a binding and enforceable obligation of the Party, enforceable in accordance with its terms.   16.10 Counterparts. This Agreement may be executed in any number of counterparts and if so signed in counterparts, all counterparts taken together shall have the same effect as if all parties had signed the same instrument.   16.11 No Partnership. This Agreement shall not constitute a partnership or joint venture between Transporter and Shipper. Transporter shall carry out its operations with respect to the Gathering System as an independent contractor and shall not (except as expressly set forth in this Agreement) be subject to the control of Shipper in doing so.   16.12 No Third Party Beneficiaries. This Agreement is for the sole and exclusive benefit of the Parties hereto. Except as expressly provided herein to the contrary, nothing herein is intended to benefit any other Person not a Party hereto, and no such Person shall have any legal or equitable right, remedy or claim under this Agreement.   16.13 Exhibits. All exhibits and the like contained in or attached to the Agreement are integrally related to this Agreement and are hereby made a part of the Agreement for all purposes. To the extent of any ambiguity, inconsistency or conflict between the body of this Agreement and any of the exhibits and the like attached to the Agreement, the terms of the body of the Agreement shall prevail.   16.14 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.   16.15 Limitation of Liability. EXCEPT WITH REGARD TO OBLIGATIONS TO INDEMNIFY A PARTY FOR CLAIMS MADE BY THIRD PARTIES, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY (OR ITS AFFILIATES) PURSUANT TO THIS AGREEMENT FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR SPECIAL DAMAGES OR LOSSES OR ANY PUNITIVE, EXEMPLARY, TREBLE, OR SIMILAR DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE OF, OR FAILURE TO PERFORM, ITS OBLIGATIONS HEREUNDER, EVEN IF SUCH DAMAGES OR LOSSES ARE CAUSED BY THE SOLE, JOINT, OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF THE PARTY WHOSE LIABILITY IS BEING WAIVED HEREBY.   [Next page is signature page]

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  IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate originals to be effective as of the Execution Date.   ENERGY XXI USA, INC.   ENERGY XXI GULF COAST, INC.           By: /S/ ANTONIO DE PINHO   By: /S/ RICK FOX           Name: ANTONIO DE PINHO   Name: RICK FOX           Title: PRESIDENT   Title: CFO

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  EXHIBIT A TABLE OF RATES   FROM ESTABLISHED RECEPTION POINTS TO GRAND ISLE (JEFFERSON PARISH), LOUISIANA

From   Rate in Cents Per Barrel of 42 United States Gallons

Reception Points Offshore Louisiana   Crude Petroleum Transportation

Excess Water, Sediment, and  Other Impurities Handling  Block 22, Grand Isle 16     38.58      29.76  Block 30, Grand Isle 33     57.91      29.76  Block 73, West Delta 73     122.78      29.76  Block 90, West Delta 90     122.78      29.76  Block 62, West Delta 62     152.28      60.88  Block 54, South Timbalier 54     166.65      60.88  Block 30, West Delta 30     172.71      60.88  Block 32, West Delta 30     172.71      60.88  Block 45, West Delta 45     172.68      60.88  Block 93, South Pass 89     177.11      60.88  Block 152, Mississippi Canyon 268     242.01  &bbsp;  60.88  Block 311, Mississippi Canyon 311     242.01      60.88  Block 397, Mississippi Canyon 397     282.87      60.88  Block 280, Mississippi Canyon 281     291.11      60.88    Disposal Fee: _______________________

A-1







  EXHIBIT B ADJUSTMENT AUTHORIZATION   TABLES OF DIFFERENTIALS FOR USE IN DETERMINING ADJUSTMENTS FOR DIFFERENCE IN GRAVITY OF CRUDE PETROLEUM   API GRAV  DIFF/BBL  API GRAV  DIFF/BBL  API GRAV  DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL 20   2.75   24.9   3.485   29.8   4.22   34.7   4.955   39.6   5.08   44.5   5.1 20.1   2.765   25   3.5   29.9   4.235   34.8   4.97   39.7   5.08   44.6   5.1 20.2   2.78   25.1   3.515   30   4.25   34.9   4.985   39.8   5.08   44.7   5.1 20.3   2.795   25.2   3.53   30.1   4.265   35   5   39.9   5.08   44.8   5.1 20.4   2.81   25.3   3.545   30.2   4.28   35.1   5   40   5.1   44.9   5.1 20.5   2.825   25.4   3.56   30.3   4.295   35.2   5   40.1   5.1   45   5.1 20.6   2.84   25.5   3.575   30.4   4.31   35.3   5   40.2   5.1   45.1   5.085 20.7   2.855   25.6   3.59   30.5   4.325   35.4   5   40.3   5.1   45.2   5.07 20.8   2.87   25.7   3.605   30.6   4.34   35.5   5   40.4   5.1   45.3   5.055 20.9   2.885   25.8   3.62   30.7   4.355   35.6   5   40.5   5.1   45.4   5.04 21   2.9   25.9   3.635   30.8   4.37   35.7   5   40.6   5.1   45.5   5.025 21.1   2.915   26   3.65   30.9   4.385   35.8   5   40.7   5.1   45.6   5.01 21.2   2.93   26.1   3.665   31   4.4   35.9   5   40.8   5.1   45.7   4.995 21.3   2.945   26.2   3.68   31.1   4.415   36   5.02   40.9   5.1   45.8   4.98 21.4   2.96   26.3   3.695   31.2   4.43   36.1   5.02   41   5.1   45.9   4.965 21.5   2.975   26.4   3.71   31.3   4.445   36.2   5.02   41.1   5.1   46   4.95 21.6   2.99   26.5   3.725   31.4   4.46   36.3   5.02   41.2   5.1   46.1   4.935 21.7   3.005   26.6   3.74   31.5   4.475   36.4   5.02   41.3   5.1   46.2   4.92 21.8   3.02   26.7   3.755   31.6   4.49   36.5   5.02   41.4   5.1   46.3   4.905 21.9   3.035   26.8   3.77   31.7   4.505   36.6   5.02   41.5   5.1   46.4   4.89 22   3.05   26.9   3.785   31.8   4.52   36.7   5.02   41.6   5.1   46.5   4.875 22.1   3.065   27   3.8   31.9   4.535   36.8   5.02   41.7   5.1   46.6   4.86 22.2   3.08   27.1   3.815   32   4.55   36.9   5.02   41.8   5.1   46.7   4.845 22.3   3.095   27.2   3.83   32.1   4.565   37   5.04   41.9   5.1   46.8   4.83 22.4   3.11   27.3   3.845   32.2   4.58   37.1   5.04   42   5.1   46.9   4.815 22.5   3.125   27.4   3.86   32.3   4.595   37.2   5.04   42.1   5.1   47   4.8 22.6   3.14   27.5   3.875   32.4   4.61   37.3   5.04   42.2   5.1   47.1   4.785 22.7   3.155   27.6   3.89   32.5   4.625   37.4   5.04   42.3   5.1   47.2   4.77 22.8   3.17   27.7   3.905   32.6   4.64   37.5   5.04   42.4   5.1   47.3   4.755 22.9   3.185   27.8   3.92   32.7   4.655   37.6   5.04   42.5   5.1   47.4   4.74 23   3.2   27.9   3.935   32.8   4.67   37.7   5.04   42.6   5.1   47.5   4.725 23.1   3.215   28   3.95   32.9   4.685   37.8   5.04   42.7   5.1   47.6   4.71 23.2   3.23   28.1   3.965   33   4.7   37.9   5.04   42.8   5.1   47.7   4.695 23.3   3.245   28.2   3.98   33.1   4.715   38   5.06   42.9   5.1   47.8   4.68 23.4   3.26   28.3   3.995   332   4.73   38.1   5.06   43   5.1   47.9   4.665 23.5   3.275   28.4   4.01   33.3   4.745   38.2   5.06   43.1   5.1   48   4.65 23.6   3.29   28.5   4.025   33.4   4.76   38.3   5.06   43.2   5.1   48.1   4.635 23.7   3.305   28.6   4.04   33.5   4.775   38.4   5.06   43.3   5.1   48.2   4.62 23.8   3.32   28.7   4.055   33.6   4.79   38.5   5.06   43.4   5.1   48.3   4.605 23.9   3.335   28.8   4.07   33.7   4.805   38.6   5.06   43.5   5.1   48.4   4.59 24   3.35   28.9   4.085   33.8   4.82   38.7   5.06   43.6   5.1   48.5   4.575

B-1







  API GRAV  DIFF/BBL   API GRAV  DIFF/BBL   API GRAV  DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL   API GRAV   DIFF/BBL

24.1   3.365   29   4.1   33.9   4.835   38.8   5.06   43.7   5.1   48.6   4.56 24.2   3.38   29.1   4.115   34   4.85   38.9   5.06   43.8   5.1   48.7   4.545 24.3   3.395   29.2   4.13   34.1   4.865   39   5.08   43.9   5.1   48.8   4.53 24.4   3.41   29.3   4.145   34.2   4.88   39.1   5.08   44   5.1   48.9   4.515 24.5   3.425   29.4   4.16   34.3   4.895   39.2   5.08   44.1   5.1   49   4.5 24.6   3.44   29.5   4.175   34.4   4.91   39.3   5.08   44.2   5.1   49.1   4.485 24.7   3.455   29.6   4.19   34.5   4.925   39.4   5.08   44.3   5.1   49.2   4.47 24.8   3.47   29.7   4.205   34.6   4.94   39.5   5.08   44.4   5.1   49.3   4.455

B-2







  EXHIBIT C SAMPLE QUALITY BANK CALCULATION   GRAND ISLE GATHERING SYSTEM COMMON STREAM HLS CRUDE   Receipt Bank

SHIPPER   BBLS REC'D   API GRAV   FROM EXH. A  GRAV DIFF   BBLS REC'D X  GRAV DIFF A   100.00   29.8   4.220   422.00 B   150.00   38.6   5.060   759.00 C   100.00   36.4   5.020   502.00 C   200.00   46.2   4.920   984.00 TOTAL   550.00        2667.00   Common stream weighted average GRAVITY value: 2667.00/550.0 = 4.84909091   Shipper A:               Weighted average GRAVITY value: 422.00/100 = 4.220              Calculation: (4.84909091 - 4.220) x 100 =   $ 62.909                         Total Shipper A pays the bank:          $ 62.91                  Shipper B:               Weighted average GRAVITY value: 759.00/150 = 5.060               Calculation: (4.84909091 - 5.060) x 150 =   ($ 31.636)                        Total Shipper B pays the bank:          ($ 31.64)                 Shipper C:              Weighted average GRAVITY value: 1486.00/300 = 4.953               Calculation: (4.84909091 - 4.953) x 300 =   ($ 31.273)                        Total Shipper B pays the bank:          $ (31.27)                 NET          $ 0.00

C-1

Answer: Highlight the parts (if any) of this contract related to Cap On Liability that should be reviewed by a lawyer. Details: Does the contract include a cap on liability upon the breach of a party’s obligation? This includes time limitation for the counterparty to bring claims or maximum amount for recovery.


Question: [LOGO]

                                    EXHIBIT C

                                    AIRSOPURE                                FRANCHISE AGREEMENT

THIS AGREEMENT is entered into on this ____ day of ___________, 2000, by and between Airsopure International Group, Inc., a Nevada corporation whose principal place of business is located at 15400 Knoll Trail, Suite 200, Dallas, Texas 75248 (hereinafter AIRSOPURE or by reference we, us, our), and You:                                    ,     ------------------------------------ whose address is:

- ----------------------------------------

- ---------------------------------------- (hereinafter You or by reference Franchisee, or Your). Either Party or both Parties respectively may be referred to as Party or Parties.

                                    RECITALS

A. AIRSOPURE and its affiliate design, manufacture and distribute indoor air cleaning systems under the name and mark AIRSOPURE (the Products).

B. AIRSOPURE has developed a system for the establishment, development and operation of sales centers (AIRSOPURE Center(s) or Center(s)) for the sale and servicing of AIRSOPURE's exclusive line of Products using the service mark AIRSOPURE and other trademarks, service marks (including but not limited to, The Essence of Clean Air), logos and identifying features designated from time to time by AIRSOPURE (the Licensed Marks) and using AIRSOPURE's distinctive methods for establishing and operating AIRSOPURE Centers.

C. You desire to establish an AIRSOPURE Center to be located in the following geographic area:

- ----------------------------------------

- ----------------------------------------

(the Exclusive Territory), and AIRSOPURE desires to grant You the right to operate an AIRSOPURE Center at such location under the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual rights, covenants and obligations set forth herein, the Parties agree as follows:

1.  GRANT OF FRANCHISE

1.01. AIRSOPURE grants to You, and You accept from AIRSOPURE, the right and license to operate an AIRSOPURE Center (or the Franchise) for the sale or lease of AIRSOPURE's exclusive line of Products or at a location in the Exclusive Territory to be approved in writing by AIRSOPURE and listed in attached Exhibit A (the Exclusive Territory and Center Location), to purchase Products from AIRSOPURE or its affiliates for resale at the Center to customers in the Exclusive Territory, and to use the Licensed Marks only in connection with the operation of the Franchise in accordance with the terms and conditions of this Agreement. AIRSOPURE grants the Franchise to You hereunder in reliance upon Your agreement to at all times operate and manage the Franchise faithfully, honestly and diligently in strict conformance with AIRSOPURE's operating procedures and specifications, as set forth herein and as otherwise from time to time communicated to You, using Your best efforts to promote and enhance the performance and operation of the Franchise.

1.02. AIRSOPURE hereby grants to You the exclusive right to solicit customers for the Products by direct mail advertising, or other approved means, but not including the World Wide Web (Internet) nor by printed catalogues, in

                                       1

the Exclusive Territory described above and in Exhibit A. Other AIRSOPURE franchisees will not be permitted to solicit customers for Products by advertising in Your Exclusive Territory. Likewise, You may not target or solicit customers for Products by advertising in other Franchisees respective Exclusive Territories. Exclusive Territories will not overlap into other Exclusive Territories. You shall not purposely solicit sales and service to customers located outside Your Exclusive Territory, provided such activity in not within an assigned Exclusive Territory. You have been granted an exclusive trade area by this Agreement.

2.  TERM AND RENEWAL

2.01. The term of this Agreement shall be for 10 years commencing on the date of execution of this Agreement by AIRSOPURE.

2.02. At the expiration of the term or any renewal term hereof, You may, at its option, renew the Franchise granted hereunder for 2 additional terms of 10 years each on the following terms and conditions:





A. You shall give AIRSOPURE notice in writing of Your election to renew this Agreement at least 3 months prior to the expiration of the then-current term.

B. You shall not be in default of any provision of this Agreement or amendment hereto, including without limitation all payment obligations to AIRSOPURE and its affiliates.

C. As a condition of renewal of the Franchise, You agree to execute AIRSOPURE's then-current form of franchise agreement and to comply fully with all terms and conditions thereof, and to pay AIRSOPURE the then-current renewal fee, which is presently $1,000.00. You understand that AIRSOPURE may revise its franchise agreement for any renewal term, at AIRSOPURE's sole discretion, including without limitation to increase the royalty fees or other fees payable by You or to require other obligations of franchisees.

D. You shall meet AIRSOPURE's then-current qualifications and training requirements.

E. You shall execute a general release in a form prescribed by AIRSOPURE releasing AIRSOPURE and its affiliates, directors, officers, employees and agents from all known and unknown claims and liabilities to the extent permitted by state and federal law.

F. You may be required, at AIRSOPURE's sole discretion, to upgrade or remodel Your AIRSOPURE Center to conform to AIRSOPURE's then-current specifications and standards as specified in AIRSOPURE's Operating Manual of otherwise in writing, provided such upgrade or remodel is reasonable in terms of cost and implementation schedule.

3.  FEES

3.01. In consideration of the Franchise rights and license granted herein, You agree to pay to AIRSOPURE the following fees:

A. You shall pay to AIRSOPURE an initial franchise fee of $25,000.00 upon execution of this Agreement. You agree that the initial franchise fee represents payment for the initial grant of the Franchise rights and license granted herein, shall be fully earned upon execution of this Agreement, and the said fee will not be refunded under any circumstances unless otherwise specifically set forth herein. You must find a suitable Center site within 90 days of signing the Franchise Agreement, unless we mutually agree otherwise. If we cannot agree on a Center location, within 4 months, we may a) extend your search time, b) exchange your territory, or c) terminate your Franchise and refund up to 70% of your Franchise Fee, at our sole discretion. There are no refunds under any other circumstances.

B. You shall pay to AIRSOPURE a continuing non-refundable royalty fee on a monthly basis of

                                       2

5% of Your total monthly gross sales, as defined below. This fee is due by the 7th of the month for the preceding month.

C. You shall account to AIRSOPURE for Your continuing non-refundable local advertising fee of 2% of Your total monthly gross sales, which You must spend on the promotion of Your Center. This accounting is due by the 7th of the month for the preceding month.

D. You shall pay to AIRSOPURE a continuing non-refundable Advertising Fund fee of 2% of Your total monthly gross sales, beginning January 1, 2001, or later at our sole option, as described in Section 10 hereof. This fee will be due by the 7th of the month for the preceding month.

E. Gross sales as used in this Section 3.01 shall mean the amount of gross revenues received by You from all sources, including without limitation sales of Products, services or other merchandise of every kind or nature from, at or in connection with the operation of the AIRSOPURE Center granted herein, excluding state, federal or local sales taxes collected from customers and paid to the appropriate taxing authority.

F. Fees payable under Paragraphs 3.01.B and 3.01.D above shall be due and payable monthly by the seventh day of each month, based on Your gross sales of the previous month. Delinquent fees shall bear interest at a rate of the lower of: (i) one and one-half percent (1.5%) per month, or (ii) the maximum rate permitted by applicable law.

4.  DUTIES OF AIRSOPURE

4.01. Prior to the opening of the Franchise, AIRSOPURE shall:

A. Following receipt in writing from You of a request for approval of at least 3 possible locations as the Authorized Location for the Franchise, AIRSOPURE will promptly evaluate such locations and notify You in writing of its approval or rejection of such location(s) within 7 working days.

B. Provide You with AIRSOPURE's specifications and requirements or other assistance deemed necessary by AIRSOPURE to assist You in opening the Center.

C. Provide an initial training program for 2 people to be designated by You as described in AIRSOPURE's Operations Manual.

D. Provide one copy, on loan to You, of AIRSOPURE's Operations Manual as described in Section 8 hereof for use solely in connection with operation of the





AIRSOPURE Center granted hereunder.

E. Sell to You an opening order of Products for resale or lease at the Franchise as described in Paragraph 6.01 below.

4.02. Following the opening of the Franchise, AIRSOPURE shall:

A. Provide daily consultation by telephone as reasonably requested by You during the first two weeks of operation of the AIRSOPURE Center Franchise.

B. Provide continuing general advisory assistance as deemed necessary by AIRSOPURE regarding the operation and advertising of the Franchise.

C. Provide updates, revisions and amendments to the AIRSOPURE Operating Manual and system as AIRSOPURE may from time to time deem necessary or desirable.

D. Fill Your orders for Products for resale at the Franchise in accordance with Section 6 below.

E. Provide training programs or seminars as AIRSOPURE may, from time to time in its sole discretion, deem appropriate. AIRSOPURE's training programs for franchisees is described in AIRSOPURE's Operations Manual, and is subject to change at any time in AIRSOPURE's sole

                                       3

discretion.

F. AIRSOPURE may, from time to time at its sole discretion, provide test customers or store visits by AIRSOPURE representatives to evaluate Your methods of operation and compliance with AIRSOPURE's standards and specifications.

5.  YOUR DUTIES

5.01.  You shall: A. You must find a suitable Center site within 90 days of signing the Franchise Agreement, unless we mutually agree otherwise, and attend (or if You are a corporation, Your majority shareholder will attend or Your Operating Principal or manager and one other employee) and successfully complete to AIRSOPURE's reasonable satisfaction AIRSOPURE's initial training program within 90 DAYS following execution of this Agreement.

B. Obtain all federal, state and local business licenses, permits, certifications and bonds required for lawful operation of the Franchise and certify in writing to AIRSOPURE prior to opening that all such requirements have been obtained.

C. Attend (with Your manager) and complete to AIRSOPURE's reasonable satisfaction such continuing training or educational programs as AIRSOPURE may from time to time require in writing. AIRSOPURE will not charge You for the training programs, but You shall be responsible for the costs of meals, lodging, travel and all other expenses incurred by You or Your employees in attending such programs.

D. Actively promote AIRSOPURE's Products and services and exert Your best efforts to fully develop and maximize the market for AIRSOPURE's Products and services in Your Exclusive Territory.

E. Devote Your full time (or if You are a corporation, designate a manager) to oversee the management and operation of the Center.

F. Purchase and maintain and adequate supply for use in connection with the operation of the Franchise Business various copyrighted materials and forms which are the proprietary property of AIRSOPURE and which are an integral part of AIRSOPURE's system franchised hereunder. Other supplies and equipment necessary for operation of the Center may be purchased from third Party suppliers who meet AIRSOPURE's standards and specifications and have been approved in writing by AIRSOPURE in accordance with the procedures set forth in AIRSOPURE's Operating Manual, which may be amended from time to time by AIRSOPURE at its sole discretion.

G. Purchase Products from AIRSOPURE for resale to customers in the Exclusive Territory in accordance with Section 6 below.

H. Comply with all federal, state and local health and safety laws, rules and standards applicable to operation of the Franchise. You will forward copies of all notices of non-compliance by the Franchise with any law, rule, regulation or ordinance to AIRSOPURE within three days from receipt thereof accompanied by a summary of action You will take to comply.

I. Maintain adequate working capital to operate the Franchise in accordance with the AIRSOPURE Operations Manual, as such may be amended by AIRSOPURE from time to time.

J. Operate the Franchise in strict conformance with AIRSOPURE's policies, procedures, standards and specifications as may be prescribed by AIRSOPURE from time to time in the Operations Manual or otherwise in writing, including without limitation all changes specified by AIRSOPURE to its system or Products. .

K. Display AIRSOPURE's Licensed Marks or logos on all marketing materials and at Your AIRSOPURE Center. AIRSOPURE reserves the

                                       4





right to alter or change its Licensed Marks, logos or trade dress at any time, and You agree to use such Licensed Marks, logos or trade dress as specified from time to time by AIRSOPURE promptly upon receipt of notice in writing from AIRSOPURE.

L. Maintain and supply to third Parties upon request information to be supplied by AIRSOPURE regarding the availability of franchises.

M. Provide AIRSOPURE and its representatives with unlimited access to FRANCHISEE'S offices or its AIRSOPURE Center (personal residence excluded), including Your books, computer system (for sales and products only, unless we are auditing You) and records of the Franchise, during normal business hours for purposes of conducting inspections to fully examine and evaluate Your methods of doing business, including interviews with Your employees and customers.

N. You acknowledge and agree that such inspections and evaluations are necessary for AIRSOPURE to insure the maintenance of its quality standards, and You agree to fully cooperate with any reasonable request by AIRSOPURE in connection with such inspections and evaluations.

O. Diligently and immediately take such steps as are deemed reasonably necessary by AIRSOPURE to correct any deficiencies detected by AIRSOPURE in Your adherence to AIRSOPURE's operating policies, procedures, standards and specifications.

P. In the event You are a corporation, comply with the following:

1. You will provide in Your Articles of Incorporation that Your sole corporate purpose is the operation of the Franchise.

2. Every certificate for shares of stock in the corporation will include the following legend printed thereon if sole purpose of the corporation is to own and operate franchised business:

THE TRANSFER, PLEDGE OR ASSIGNMENT OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND RESTRICTIONS CONTAINED IN A FRANCHISE AGREEMENT BETWEEN THE HOLDER OF THESE SHARES AND AIRSOPURE FRANCHISE GROUP, INC.

3. You agree to comply with the restrictions on transfer of ownership of the corporation set forth in Section 12.02 below.

4. You will provide AIRSOPURE, prior to the opening of the Franchise, with copies of Your Articles of Incorporation, Bylaws and other governing documents, including all amendments thereto, and a copy of the resolutions by Your Board of Directors authorizing execution of this Agreement, certified by the Secretary of the corporation.

5. You will provide AIRSOPURE with a current list of shareholders and will update such list from time to time as the list changes.

6. Each shareholder of the corporation (if sole corporate purpose is the franchise), will execute a personal guarantee of Your performance under this Agreement and all amounts owed by You to AIRSOPURE in the form of attached Exhibit B.

Q. The Parties recognize the importance of fully developing the market for Products in the Exclusive Territory, and a substantial part of the consideration for and inducement to AIRSOPURE to enter into this Agreement is Your agreement to devote Your best efforts to market, sell and support Products to customers located in Your Exclusive Territory. You agree to concentrate Your marketing efforts to customers located in Your Territory, and You agree not to advertise the Products using media or publications whose primary coverage area is outside Your Exclusive Territory.

                                       5

R. You may relocate Your Center at Your sole expense, within Your Exclusive Territory, provided You give us written notification at least 30 days prior to relocation stating the reasons for such a move.

6.  PURCHASE AND SALE OF PRODUCTS

6.01. You will purchase from AIRSOPURE and AIRSOPURE will sell to You for resale or lease at the Center to customers in the Exclusive Territory an opening order of Products having an aggregate cost to You of from $5,000.00 to $10,000.00, by mutual agreement, based on market conditions. Such purchase must be consummated in its entirety before You open Your Center, unless AIRSOPURE agrees in writing to extend such time period.

6.02. After the opening order contemplated by the preceding Paragraph, You will from time to time place orders for Products with AIRSOPURE on the following basis:

A. All orders for Products shall be accompanied by payment, unless at AIRSOPURE's sole discretion, other payment terms are permitted.

B. All orders will be shipped freight collect unless freight is paid in advance by You.

C. You will pay the prices then prevailing at the time AIRSOPURE receives each order. Such prices are subject to change at any time by AIRSOPURE.

D. All merchandise will be shipped to You at the Center for resale to customers





in the Exclusive Territory. You will sell Products only to end-user customers and not for resale. You will not sell or lease Products at any location other than within Your Exclusive Territory, engage in mail order sales of Products or supply Products to others for resale or lease at any other location.

E. All orders for Products are subject to availability. In the event any Product is in short supply, AIRSOPURE shall have the right to allocate such Product on an equitable basis.

F. You will not modify the Products, and You will not offer or carry any products or services other than AIRSOPURE's Products and services specified by AIRSOPURE without written approval from AIRSOPURE.

G. Notwithstanding nationally advertised prices by AIRSOPURE, You may resell Products purchased under this Agreement at prices set by You. However, AIRSOPURE retains the right, to the extent permitted by law, to refuse to fill Your orders for Products if You fail to honor AIRSOPURE's suggested prices for the same Products sold by other franchise owners in Your region.

7.  LICENSED MARKS

7.01. AIRSOPURE represents with respect to the Licensed Marks that:

A. AIRSOPURE is the owner of all right, title and interest in and to the Licensed Marks or has the right and license to use and grant a license to You to use the said Licensed Marks.

B. AIRSOPURE will take all steps reasonably necessary to preserve and protect the ownership and validity in and to the Licensed Marks.

7.02. With respect to Your licensed use of the Licensed Marks pursuant to this Agreement, You agree that:

A. You shall use only the Licensed Marks designated by AIRSOPURE and shall use them only in the manner authorized and permitted by AIRSOPURE.

B. You shall use the Licensed Marks only for the operation of the Franchise at the Authorized Location.

                                       6

C. During the term of this Agreement, You shall identify Yourself as the owner of the Franchise in conjunction with any use of the Licensed Marks, including, but not limited to, on invoices, order forms, receipts, business cards, contracts and at such conspicuous locations on the Center's premises or in the field as AIRSOPURE may specify. The identification shall be in a form which specifies Your name, followed by the term Independent Franchise Owner or such other identification as shall be approved by AIRSOPURE.

D. You shall not use the Licensed Marks to incur any obligation or indebtedness on behalf of AIRSOPURE, and You shall not represent that Your Center is owned, operated by or affiliated with AIRSOPURE other than as a franchisee.

E. You shall not use the Licensed Marks as part of Your corporate or other legal name, without the prior written consent of AIRSOPURE.

F. You shall file an assumed name registration, and shall execute any documents deemed necessary by AIRSOPURE to obtain protection for the Licensed Marks or to maintain their continued validity and enforceability.

7.03. You expressly understand and acknowledge that:

A. As between the Parties hereto, AIRSOPURE, by its trademark License Agreement with Airsopure, Inc. is the licensor of all right, title and interest in and to the Licensed Marks and the goodwill associated with and symbolized by them.

B. You shall not directly or indirectly contest the validity of the ownership of the Licensed Marks.

C. Your use of the Licensed Marks pursuant to this Agreement does not give You any ownership interest or other interest in or to the Licensed Marks.

D. Any and all goodwill arising from Your use of the Licensed Marks in the Franchise under AIRSOPURE's system shall inure solely and exclusively to the benefit of AIRSOPURE, and upon expiration or termination of this Agreement and the Franchise herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Your use of the Licensed Marks.

E. The right and license to use the Licensed Marks granted hereunder to You is nonexclusive, and AIRSOPURE may use and grant franchises to others to use the Licensed Marks in any manner except as expressly provided otherwise herein.

F. AIRSOPURE reserves the right to substitute different Licensed Marks for use in identifying the System and the businesses operating thereunder, and You agree to comply with AIRSOPURE's requirements relating thereto.

7.04. You shall promptly notify AIRSOPURE of any unauthorized use of the Licensed Marks or marks confusingly similar thereto, any challenge to the validity of the Licensed Marks, or any challenge to AIRSOPURE's ownership of, or Your right to use, the Licensed Marks. You acknowledge that AIRSOPURE has the sole right to direct and control any administrative proceeding or litigation involving the Licensed Marks, including any settlement thereof. AIRSOPURE has the right, but not the obligation, to take action against uses by others that may constitute infringement of the Licensed Marks.





7.05. Provided You have used the Licensed Marks in accordance with this Franchise Agreement and AIRSOPURE's Operations Manual, AIRSOPURE will defend You at AIRSOPURE's expense against any third Party claim, suit or demand involving the Licensed Marks and arising out of Your use thereof. In the event that You have not used the Licensed Marks in accordance with this Agreement, AIRSOPURE shall defend You, at Your expense, against such third Party claims, suits or demands.

                                       7

7.06. In the event of any litigation or administrative proceeding relating to the Licensed Marks, You shall execute any and all documents and do all acts as may, in the opinion of AIRSOPURE, be necessary to carry out such defense or prosecution, including, but not limited to, becoming a nominal Party to any legal action. Except to the extent that such litigation is the result of Your use of the Proprietary Marks in a manner inconsistent with the terms of this Agreement, AIRSOPURE agrees to reimburse You for its out-of-pocket costs in performing such acts, except that You shall bear the salary costs of its employees, and AIRSOPURE shall bear the cost of any judgment or settlement.

8.  OPERATIONS MANUAL

8.01. AIRSOPURE shall provide You with one copy of AIRSOPURE's Operations Manual covering the proper operating and marketing techniques and the standards and specifications for operation of the Franchise. You agree to fully comply with the Operations Manual in its entirety as an essential aspect of Your obligations under this Agreement. Failure to so comply shall be treated as a breach of this Agreement.

8.02. You shall at all times treat the Operations Manual, all supplements and revisions thereto, any other operations manual, brochure or memorandum created for or approved for use in the operation of the Franchise and the information contained therein as the confidential and proprietary information of AIRSOPURE, and shall use all reasonable efforts to maintain the confidentiality of such information. You shall not at any time, without AIRSOPURE's prior written consent, copy, duplicate, record, or otherwise reproduce the foregoing materials, in whole or in part, nor otherwise make the same available to any unauthorized person. You may disclose such information and materials only to such of Your employees or agents, or others who must have access to it in connection with their employment or the performance of this Agreement, in which event You shall obtain the agreement of such persons and entities to maintain the confidentiality thereof. The Operations Manual shall remain at all times the sole property of AIRSOPURE.

8.03. AIRSOPURE may from time to time revise the contents of the Operations Manual, and You expressly agree to comply with each new or changed standard, specification or procedure set forth therein. You shall at all times ensure that Your copy of the Operations Manual is kept current and up to date. In the event of any dispute as to the content of the Operations Manual, the terms of the master copy of the Operations Manual maintained by AIRSOPURE at AIRSOPURE's home office shall be controlling.

9.  ACCOUNTING AND RECORDS

9.01. During the term of this Agreement, You shall maintain and preserve, for at least five years from the date of their preparation, full, complete, and accurate, books, records and accounts in the form and manner prescribed by AIRSOPURE from time to time in the Operations Manual or otherwise in writing.

9.02. You shall, at Your expense, submit to AIRSOPURE, by the 7th day of each month, a monthly statement on forms prescribed by AIRSOPURE accurately reflecting gross sales of the Franchise for the preceding calendar month. Each statement shall accompany Your monthly royalty and advertising fund fee payments and shall be signed by You attesting that it is true and correct.

9.03. You shall, at Your expense, submit to AIRSOPURE an annual financial statement for the Franchise, which includes an income statement prepared in accordance with generally accepted accounting principals, within 90 days of the end of each fiscal year during the term hereof. Each statement shall be signed by You attesting that it is true and correct.

9.04. You shall submit to AIRSOPURE for review and auditing such other forms, reports,

                                       8

records, information and data, as AIRSOPURE may reasonably request in writing.

9.05. AIRSOPURE or its designated agents shall have the right at all reasonable times to examine and copy, at its expense, all books, records, receipts and tax returns of Yours related to the Franchise and, at its option, to have an independent audit made, and thereupon be allowed to search Your computer accounting files. If an inspection or audit should reveal that payments have been understated in any report to AIRSOPURE, then You shall immediately pay to AIRSOPURE the amount understated upon demand, in addition to interest from the date such amount was due until paid, at the prime rate being charged by Bank of America on the date the payment was due plus 2%, or the maximum rate permitted by law, whichever is less. If an inspection discloses an underpayment to AIRSOPURE of 2% or more of the total amount that should have been paid to AIRSOPURE, You shall, in addition to repayment of such understated amount with interest, reimburse AIRSOPURE for any and all costs and expenses incurred in connection with the inspection or audit (including, without limitation,





reasonable accounting and attorneys' fees). The foregoing remedies shall be in addition to any other remedies AIRSOPURE may have, including without limitation, the remedies for default.

10.  MARKETING AND ADVERTISING

10.01. You shall submit to AIRSOPURE for review prior to use samples of all advertising and promotional materials that have not been previously approved by AIRSOPURE. AIRSOPURE shall notify You of its approval or disapproval within 7 days or less from the date of receipt by AIRSOPURE of such materials. Failure by You to obtain the prior approval in writing of AIRSOPURE for all advertising and promotional materials shall be a violation of this Agreement.

10.02. AIRSOPURE has established an advertising fund (the Fund) to build recognition of the Products and the Licensed Marks and to promote AIRSOPURE's Products and the Franchise. You shall participate in the Fund, in addition to Your obligation to conduct local advertising of the Franchise, on the basis described in Paragraph 3.01.D above.

10.03. AIRSOPURE will administer the Fund as follows:

A. The Fund shall be maintained in a separate bank account. Upon request by You, AIRSOPURE will provide an annual accounting of amounts spent from the Fund, including a reasonable allocation to cover AIRSOPURE's overhead expenses for administration and management of the Fund.

B. AIRSOPURE may allocate amounts held in the Fund at its discretion as AIRSOPURE deems appropriate. You are not guaranteed that any particular amount or percentage of the Fund will be spent in Your local market.

C. AIRSOPURE shall have the right to terminate the Fund at any time. However, the Fund will not be terminated until all moneys in the Fund have been expended for the purposes stated in Paragraph 10.02 above.

D. AIRSOPURE may from time to time amend its policies or establish new policies and procedures for administration of the Fund.

10.04. In addition to its monthly contribution to the Fund, You shall spend an amount equal to at least 2% of Your total monthly gross sales (as defined in Paragraph 3.01.C above) on local advertising in Your Exclusive Territory. You shall submit to AIRSOPURE a monthly report to accompany Your advertising fund fee and royalty fee payments accounting for and evidencing Your local advertising expenditures. Your local advertising shall comply with the procedures specified in Paragraph 10.01 above.

                                       9

11.  INSURANCE

11.01. You shall procure and maintain in full force and effect during the term of this Agreement, at Your expense, insurance policies written by an insurance company satisfactory to AIRSOPURE in accordance with standards and specifications set forth in the Operations Manual or otherwise by AIRSOPURE in writing. Such policies shall name AIRSOPURE as an additional insured and shall include, at a minimum:

A. Comprehensive general liability insurance in the amount of $1,000,000.00.

B. Comprehensive automobile liability insurance, including collision, comprehensive, medical and liability to satisfy state law requirements.

C. Additional coverage's and higher policy limits may be required from time to time by AIRSOPURE.

11.02. At least 7 days prior to the opening of the Center and on each policy renewal date thereafter, You shall submit to AIRSOPURE copies of all policies and policy amendments. The evidence of insurance shall include a statement by the insurer that the policy or policies will not be canceled or materially altered without at least 30 days prior written notice to AIRSOPURE.

11.03. Your obligation to obtain and maintain the foregoing policy or policies in the amounts specified shall not be limited in any way by reason of any insurance which may be maintained by AIRSOPURE, nor shall Your performance of that obligation relieve You of liability under the indemnity provisions set forth in Section 17 of this Agreement.

11.04. Should You, for any reason, fail to procure or maintain the insurance required by this Agreement, AIRSOPURE shall have the right and authority (without, however, any obligation to do so) immediately to procure such insurance and to charge same to You, which charges, together with a reasonable fee for AIRSOPURE's expenses in so acting, shall be payable by You immediately upon notice. AIRSOPURE is not a licensed insurance agent or agency.

12.  TRANSFER OF INTEREST

12.01.   Transfer by AIRSOPURE

A. AIRSOPURE shall have the right to transfer or assign all or any part of its rights or obligations in this Agreement to any person or legal entity. AIRSOPURE may sell or assign any of its assets, including without limitation the Licensed Marks, the system or Products, to any person or legal entity without liability or obligation to You.

B. Nothing in this Agreement or otherwise shall obligate AIRSOPURE to remain in





the indoor air purification business in the event AIRSOPURE should exercise its right to assign this Agreement or its assets which are the subject of this Agreement to a third Party.

12.02.   Transfer by You A. You agree that the rights and duties set forth in this Agreement are personal to You, and that AIRSOPURE has entered into this Agreement and granted the Franchise rights and license hereunder in reliance on Your business skill, financial capacity, and character. Accordingly, You shall not sell, assign, transfer, convey, give away, mortgage or otherwise encumber any direct or indirect interest in the Franchise without the prior written consent of AIRSOPURE.

B. Any purported assignment or transfer, by operation of law or otherwise, not having the prior written consent of AIRSOPURE shall be null and void and shall constitute a material breach of this Agreement.

C. AIRSOPURE shall not unreasonably withhold its consent to a transfer of any interest in Your Franchise or in this Agreement if the following conditions have been met:

1. All of Your accrued monetary and other

                                       10

obligations to AIRSOPURE and its subsidiaries, affiliates and suppliers shall have been satisfied;

2. You shall not be in default of any provisions of this Agreement or any other agreement between You and AIRSOPURE or its affiliates or suppliers;

3. You shall have executed a general release, in a form satisfactory to AIRSOPURE, of any and all claims against AIRSOPURE and its officers, directors, shareholders and employees.

4. You shall remain liable for all obligations to AIRSOPURE in connection with the Franchise prior to the effective date of the transfer;

5. The transferee shall enter into a written assignment in a form satisfactory to AIRSOPURE assuming and agreeing to discharge all of Your obligations under this Agreement;

6. The transferee shall demonstrate to AIRSOPURE's satisfaction that the transferee meets AIRSOPURE's then existing requirements and qualifications for the granting of an AIRSOPURE Franchise;

7. The transferee shall execute for a term ending on the expiration date of this Agreement the standard form franchise agreement then being offered to new franchisees and such other ancillary agreements and documents as AIRSOPURE may then require for the Franchise, which may include changes in required fee payments or other terms;

8. The transferee shall agree to upgrade the Franchise to conform to the then current standards and specifications for AIRSOPURE franchises;

9. Transferee and its employees shall complete such training programs as AIRSOPURE may reasonably require, at the transferee's expense;

10. You shall pay AIRSOPURE a transfer fee of $1000.00 to cover AIRSOPURE's administrative expenses in connection with the transfer.

12.03.   Right of First Refusal

In the event You desire to sell the AIRSOPURE Center and Franchise rights and license granted herein, or any part of Your stock interest in a corporation that has been granted such rights, and receives a bona fide acceptable offer in writing, You agree to notify AIRSOPURE in writing of the terms and conditions of such offer. AIRSOPURE shall have the option, within 15 days after receipt of such written notice, to notify You that AIRSOPURE elects to purchase the rights and license granted herein or stock ownership on the same terms and conditions as the bona fide written offer. You agree to sell to AIRSOPURE on the same terms and conditions as the bona fide offer and to comply with all applicable laws relating to bulk transfers of assets. If AIRSOPURE fails to notify You of its election to exercise its right of first refusal granted herein within the thirty day period, then You may sell the franchise rights and license or the stock for the amount of the bona fide offer, subject to AIRSOPURE's rights under Section 12.02 above. Any material change in the terms or conditions of any offer prior to closing shall constitute a new offer subject to AIRSOPURE's right of first refusal described herein. If You fail to consummate the transaction within 30 days from the earlier of: (a) receipt of notice from AIRSOPURE that it elects not to exercise its right of first refusal, or (b) expiration of the 15 day period referred to herein, then You must resubmit the proposed transaction to AIRSOPURE, and AIRSOPURE shall have a new 15 day review period and right of first refusal.

12.04.   Transfer Upon Death or Mental Incapacity Upon Your death or mental incapacity, or a person owning all or controlling interest in Your Franchise, AIRSOPURE shall consent to the transfer of such interest to Your spouse or heirs provided, in AIRSOPURE's sole determination, such person(s) meet AIRSOPURE's then existing requirements and qualifications for the granting of an AIRSOPURE Franchise. If the said transfer

                                       11





shall not be approved by AIRSOPURE, Your executor, administrator or personal representative shall transfer Your interest to a third Party approved by AIRSOPURE within 6 months after Your death or the determination of Your mental incapacity. If Your interest is not disposed of within 6 months after such death or mental incapacity, AIRSOPURE may terminate this Agreement.

12.05.   Operation of Franchise by AIRSOPURE In order to prevent any interruption in the business that would cause harm to the Franchise or AIRSOPURE, You authorize AIRSOPURE, at its option but not its obligation, in the event that You are absent or incapacitated by reason of illness, death or otherwise and are not, in AIRSOPURE's sole judgment, able to operate the Franchise for any extended period of time, to operate and manage the Franchise for so long as AIRSOPURE deems necessary, without waiving any of AIRSOPURE's other rights and remedies under this Agreement. All monies from the operation of the Franchise during such period of operation by AIRSOPURE shall be kept in a separate account, and the expenses of AIRSOPURE during such period for operating the Franchise, including reasonable compensation of AIRSOPURE and its employees or representatives, shall be charged to such account. You agree to save harmless and fully indemnify AIRSOPURE and its employees and representatives for and against all claims, losses or actions in connection with the operation and management of the Franchise hereunder.

12.06.   Non-Waiver of Claims AIRSOPURE's consent to a transfer of any interest in the Franchise granted herein shall not constitute a waiver of any claims it may have against You, nor shall it be deemed a waiver of AIRSOPURE's right to demand exact compliance with any of the terms of this Agreement by the transferee.

13.  CONFIDENTIAL INFORMATION

13.01 You shall not, during the term of this Agreement or thereafter, communicate, divulge, or use for the benefit of any other person or entity any confidential information, knowledge, or know-how concerning AIRSOPURE's system, the Products or the operation of the Franchise, including without limitation the Operations Manual. You shall divulge such confidential information only to such of Your employees or agents as must have access to it in order to operate the Franchise. Any and all information, trade secrets, knowledge, know-how, or other data concerning AIRSOPURE's system, the Products or which AIRSOPURE designates as confidential shall be deemed confidential for purposes of this Agreement, except information which You can demonstrate came to Your attention prior to disclosure thereof by AIRSOPURE, or which, at or after the time of disclosure by AIRSOPURE to You, had become or later becomes a part of the public domain, through publication or communication by others. You agree to use such proprietary information of AIRSOPURE only for operation of the Franchise Business.

13.02. You acknowledge that the provisions of this Section 13 are and have been a primary inducement to AIRSOPURE to enter into this Agreement, and that any failure to comply with the requirements of Section 13.01 will cause AIRSOPURE irreparable injury without an adequate remedy at law; and You agree to pay all court costs and reasonable attorneys' fees incurred by AIRSOPURE in obtaining specific performance of, or an injunction against any violation of, the requirements of Section 13.01.

14.  DEFAULT AND TERMINATION

14.01. AIRSOPURE may, at its option, terminate this Agreement and all rights granted hereunder, without affording You any opportunity to cure the defaults, effective immediately upon receipt of notice by You, upon the occurrence of any of the following:

A. You become insolvent or makes a general assignment for the benefit of creditors; or if a

                                       12

petition in bankruptcy is filed by You or such a petition is filed against and consented to by You; or if You are adjudicated a bankrupt; or if You are unable to pay commercial debts as they become due.

B. You (or a principal shareholder if the Franchisee is a corporation) is convicted of a felony or any other crime or offense that is reasonably likely, in the sole opinion of AIRSOPURE, to adversely affect the goodwill or reputation of AIRSOPURE or the Licensed Marks.

C. A judgment or consent decree is entered against You (or a principal shareholder if the Franchisee is a corporation) in a case involving allegations of fraud, racketeering, unfair or deceptive trade practices or similar allegations which, in AIRSOPURE's judgment, are likely to adversely affect AIRSOPURE, its Products, the Licensed Marks or the goodwill associated therewith.

D. You or any partner or shareholder in You transfers any rights or obligations under this Agreement or any interest in You or in the Franchise to any third Party without AIRSOPURE's prior written consent.

E. You intentionally disclose the contents of the Operations Manual or&bbsp;other trade secrets or confidential information provided to You by AIRSOPURE to any unauthorized person or fails to exercise reasonable care to prevent such disclosure.

F. You maintain false books or records of the Franchise or knowingly make any material false statements or omission to AIRSOPURE in connection with Your





application for the franchise granted herein or in connection with any reports submitted to AIRSOPURE, including without limitation the understatement of gross sales by more than 2%.

G. You fail to commence business within 4 months following the execution of this Agreement.

H. You (and Your manager) fail to attend any scheduled training program which AIRSOPURE has indicated is mandatory.

I. You operate the Franchise in such a manner which causes a threat or danger to public health or safety.

J. You receive 3 or more notices of default of this Agreement from AIRSOPURE for violations under Section 14.02 hereof.

14.02. Except for violations of this Agreement listed in Section 13.01 above, or violations specifically provided for elsewhere in this Agreement, You shall have 30 days from receipt from AIRSOPURE of a written Notice of Termination (citing the reason(s) therefor) within which to remedy any default listed in this Section 13.02, or any other violation of this Agreement.

A. You fail to pay promptly any monies owing to AIRSOPURE or its subsidiaries or affiliates when due, or to submit the financial information or reports required by AIRSOPURE under this Agreement.

B. You fail to meet or comply with any standards, specifications or procedures prescribed by AIRSOPURE in this Agreement, the Operations Manual or otherwise specified in writing from time to time by AIRSOPURE.

C. You are convicted, plead guilty or enter into a consent agreement for violation of any federal, state or local law, ordinance, rule or regulation that is reasonably likely, in the sole opinion of AIRSOPURE, to materially and unfavorably affect the Franchise or AIRSOPURE, the Licensed Marks or the goodwill associated therewith.

D. You misuse or make any unauthorized use of the Proprietary Marks or otherwise impairs the

                                       13

goodwill associated therewith or AIRSOPURE's rights therein.

E. You abandon the Franchise or fail to operate the Center during normal business hours without the consent in writing of AIRSOPURE.

F. You fail to submit advertising or promotional materials to AIRSOPURE for approval in writing prior to use.

14.03. No right or remedy of AIRSOPURE conferred herein shall be exclusive of any other right or remedy provided herein, at law or in equity, unless specifically provided otherwise in this Agreement or any amendment hereto.

14.04. In the event this Agreement is terminated by AIRSOPURE for violation of this Agreement by You, AIRSOPURE shall have the right, at its option, to purchase Your interest in the tangible assets of the Franchise at their fair market value.

15. OBLIGATIONS UPON TERMINATION

15.01. Upon termination or expiration of this Agreement, this Agreement and all rights granted hereunder to You shall immediately terminate, and:

A. You shall immediately cease to operate the Franchise and shall not thereafter, directly or indirectly, represent to the public or hold itself out as a present or former franchisee of AIRSOPURE.

B. You shall immediately and permanently cease to use, by advertising or in any other manner whatsoever, the Licensed Marks of AIRSOPURE, any other identifying characteristics or trade dress of the system, and all confidential methods, procedures and techniques associated with the Franchise.

C. You shall take such action as may be necessary to cancel any assumed name or equivalent registrations or listings in telephone or other directories which contain the names or Licensed Marks of AIRSOPURE, and You shall furnish AIRSOPURE with evidence satisfactory to AIRSOPURE of compliance with this obligation within 30 days after termination or expiration of this Agreement.

D. You shall promptly pay all sums owing to AIRSOPURE and its subsidiaries and affiliates, including all damages, costs and expenses, including reasonable attorneys' fees, incurred by AIRSOPURE as a result of the default.

E. You shall pay to AIRSOPURE all damages, costs and expenses, including reasonable attorneys' fees, incurred by AIRSOPURE subsequent to the termination or expiration of the Franchise herein granted in obtaining injunctive or other relief for the enforcement of any provisions of this Agreement.

F. You shall immediately turn over to AIRSOPURE the Operations Manual, records, files, instructions, software, correspondence, and all other materials provided by AIRSOPURE related to the operation of the Franchise, and all copies thereof (all of which are acknowledged to be AIRSOPURE's property), and shall retain no copy or record of any of the foregoing, except only Your copy of this Agreement and any correspondence between the Parties, and any other documents which You reasonably need for compliance with any applicable provision of law.





G. AIRSOPURE shall have the right, but not the duty, to be exercised by notice of intent to do so within 30 days after termination or expiration, to purchase any or all signs, advertising materials, supplies and inventory and any other items bearing AIRSOPURE's Licensed Marks, at Your cost or at fair market value, whichever is less. If the Parties cannot agree on the fair market value of such items, the Parties will select and share the expense of an independent appraiser to determine fair market value. With respect to any purchase by AIRSOPURE as provided herein, AIRSOPURE shall have the right to set off against the purchase price all amounts due from

                                       14

You under this Agreement.

16. COVENANTS

16.01. You covenant and agree (or if Your Franchise is a corporation Your controlling shareholder agrees) to supervise and devote Your best efforts to manage and operate the Franchise.

16.02. You acknowledge that, pursuant to this Agreement, You will receive valuable specialized training and confidential and proprietary information of AIRSOPURE, including, without limitation, information regarding the operational, sales, promotional, and marketing methods and techniques of AIRSOPURE and its system. You covenant and agree that during the term of this Agreement, and subject to the post-termination provisions contained herein, You shall not, except as otherwise approved in writing by AIRSOPURE, either directly or indirectly:

A. Divert or attempt to divert any business or customer of the Franchise to any competitor, or competing business, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to AIRSOPURE or the goodwill associated with the Licensed Marks and Products.

B. Employ or seek to employ any person who is at that time employed by AIRSOPURE or by another AIRSOPURE franchisee or induce such person to leave his or her employment.

C. Own, maintain, engage in, be employed by, advise, consult, assist, invest in or have any interest whatsoever in any business or entity which competes with or offers products or services which are the same or similar to those of AIRSOPURE or the Franchise.

16.03. You covenant and agree that You (or any shareholder if Your Franchise is a corporation) shall not, for a period of two years following termination of this Agreement for any reason, either directly or indirectly own, maintain, engage in, be employed by, advise, consult, assist, invest in or have any interest whatsoever in any business or entity which competes with or offers products or services which are the same or similar to those of AIRSOPURE or the Franchise within a radius of 25 miles of Your Exclusive Territory. In the event a court of competent jurisdiction should hold this covenant to be unreasonable or overly broad, the Parties agree to reduce the scope of such covenant to the maximum restriction permitted by law, and You agree to be bound by such less restrictive terms of this covenant. If requested by AIRSOPURE, You agree to obtain and provide to AIRSOPURE executed covenants containing terms equivalent to those contained herein from any employee of Yours who has received training from AIRSOPURE, and, if Your Franchise is a corporation, from any director or shareholder of Your corporation.

16.04. AIRSOPURE covenants and agrees that the restrictions set forth above in Paragraphs 16.02.C and 16.03 shall not apply to ownership by You of less than a 5% beneficial interest in the outstanding equity securities of any publicly traded corporation, provided that You are not an employee, consultant or director of such corporation.

16.05. You covenant and agree that its violation of any covenant contained herein would result in serious, immediate and irreparable injury to AIRSOPURE for which no adequate remedy at law will be available, and You consent, in addition to other remedies which may be available to AIRSOPURE, to the entry without opposition of an injunction prohibiting any conduct by You in violation of any covenant set forth herein.

17. INDEMNIFICATION

17.01. You agree to defend, indemnify and hold AIRSOPURE and its affiliates, directors, officers, employees and agents harmless from all claims, losses, lawsuits and expenses arising from or relating to the Franchise and Your operation thereof, except for: (i) any claims of infringement

                                       15

from third Parties due to Your use of the Licensed Marks, provided that You have used the said Licensed Marks as authorized by AIRSOPURE; and (ii) claims alleging that Products sold or leased by You are defective.

17.02. AIRSOPURE agrees to defend, indemnify and hold You harmless from all claims, losses, lawsuits and expenses arising from or relating to: (i) any claims of infringement from third Parties due to Your use of the Licensed Marks, provided that You have used the Licensed Marks as authorized by AIRSOPURE; and (ii) claims alleging that Products sold or leased by You are defective.





18. GENERAL PROVISIONS

18.01. No failure of a Party to exercise any power reserved to it by this Agreement or to insist upon strict compliance by the other Party with any obligation or condition hereunder shall constitute a waiver of such Party's rights unless such waiver is in writing. Any waiver by either Party shall not constitute a waiver thereafter to demand exact compliance with any of the terms herein. Waiver by a Party of any particular default by the other Party shall not affect or impair such Party's rights with respect to any subsequent default of the same, similar or different nature; nor shall any delay, forbearance or omission of a Party to exercise any power or right arising out of any breach or default by the other Party of any of the terms, provisions, or covenants thereof, affect or impair such Party's right to exercise the same.

18.02. Unforeseen Events

Delays in the performance of any duties hereunder which are not the fault of and are beyond the ability of the Party to control, including without limitation fires, floods, natural disasters, acts of God, labor disputes, riots or other similar events, shall not constitute a default in the Party's performance of this Agreement, and the Parties agree to extend the time of performance for a reasonable period of time to allow for such delays.

18.03. The relationship between the Parties is that of independent contractors. No partnership, joint venture, employment or relationship of principal and agent is intended, and You may not commit or bind AIRSOPURE to any obligation whatsoever.

18.04. Any and all notices required or permitted under this Agreement shall be in writing and shall be delivered by any means which will provide evidence of the date received, to the respective Parties at the following addresses unless and until a different address has been designated by written notice to the other Party:

Notices to AIRSOPURE: Airsopure International Group, Inc. 15400 Knoll Trail, Suite 200 Dallas, Texas 75248 Attn: John Potter, President

Notices to You:

- --------------------------------

- --------------------------------

- --------------------------------

Any notice shall be deemed to have been given at the date and time it is received.

18.05. This Agreement and the documents referred to herein constitute the entire Agreement between AIRSOPURE and You concerning the subject matter hereof, and supersede all prior agreements, oral or written. No amendment, change or variance from this Agreement shall be binding on either Party unless executed by both Parties in writing.

18.06. Except as expressly provided to the contrary herein, each provision of this Agreement shall be considered severable; and if, for any reason, any provision herein is determined to be invalid under any law or by a court having valid jurisdiction, such shall not impair the operation of, or have any other effect upon, such other

                                       16

provisions of this Agreement, and the latter shall continue to be given full force and effect and bind the Parties hereto, and the invalid provision shall be deemed not to be a part of this Agreement.

18.07. This Agreement takes effect upon its acceptance and execution by AIRSOPURE in the State of Texas, and shall be interpreted and construed under the laws of the State of Texas.

18.08. The Parties agree that any action brought by either Party against the other in any court, whether federal or state, shall be brought within the State of Texas in the judicial district in which AIRSOPURE has its principal place of business and do hereby waive all questions of personal jurisdiction or venue for the purpose of carrying out this provision.

18.09. If either Party is required to resort to legal process to enforce any provision of this Agreement, the prevailing Party will recover all costs, including reasonable attorneys fees, incurred in such legal proceeding.

18.10. You represent to AIRSOPURE that You have conducted an independent investigation of the business franchised hereunder and recognizes that the business venture contemplated by this Agreement involves business risks, and that its success will be largely dependent upon Your ability as an independent business person. AIRSOPURE expressly disclaims the making of, and You acknowledge that You have not received, any representation or guarantee, express or implied, as to the potential volume, profits or success of the business venture contemplated by this Agreement.

18.11. You acknowledge that You received a completed copy of this Agreement, the attachments hereto, if any, and agreements relating thereto, if any, at least 5





business days prior to the date on which this Agreement was executed. You further acknowledge that You have received the Offering Circular, as required by the Federal Trade Commission, at least 10 business days prior to the date on which this Agreement was executed.

18.12. This Agreement contains various headings, but it is agreed that such headings are for convenience only and shall not affect the meaning of the provisions of this Agreement.

18.13. You acknowledge that You have read and understood this Agreement, the attachments hereto, if any, and agreements relating thereto, if any, and that AIRSOPURE has accorded You ample time and opportunity to consult with advisors of Your own choosing about the potential benefits and risks of entering into this Agreement.

19. APPLICABLE LAW AND MEDIATION

A. THE PARTIES AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT (AND ATTACHMENTS) OR THE RELATIONSHIP CREATED BY THIS AGREEMENT TO NON-BINDING MEDIATION PRIOR TO BRINGING SUCH CLAIM, CONTROVERSY OR DISPUTE IN A COURT. THE MEDIATION SHALL BE CONDUCTED THROUGH EITHER AN INDIVIDUAL MEDIATOR OR A MEDIATOR APPOINTED BY A MEDIATION SERVICES ORGANIZATION OR BODY, EXPERIENCED IN THE MEDIATION OF DISPUTES IN THE AIR PURIFICATION SERVICE BUSINESS, AGREED UPON BY THE PARTIES AND, FAILING SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME AFTER EACH PARTY HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK MEDIATION OF ANY CLAIM CONTROVERSY OR DISPUTE (NOT TO EXCEED 15 DAYS), THROUGH THE AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE THE RULES GOVERNING MEDIATION, AT AIRSOPURE CORPORATE HEADQUARTERS IN DALLAS, TEXAS. THE COSTS AND EXPENSES OF MEDIATION, INCLUDING COMPENSATION AND EXPENSES OF THE MEDIATOR, SHALL BE BORNE BY THE PARTIES EQUALLY. IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR DISPUTE 90 DAYS

                                       17

AFTER THE MEDIATOR HAS BEEN APPOINTED, THEN EITHER PARTY MAY SUBMIT SUCH CLAIM, CONTROVERSY OR DISPUTE TO A COURT IN ACCORDANCE WITH SECTION 19.B. BELOW NOTWITHSTANDING THE FOREGOING, EITHER PARTY MAY BRING AN ACTION (1) FOR MONEYS OWED, (2) FOR INJUNCTIVE RELIEF, OR (3) INVOLVING THE POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO, REAL PROPERTY IN A COURT HAVING JURISDICTION AND IN ACCORDANCE WITH SECTION 19.B. BELOW, WITHOUT SUBMITTING SUCH ACTION TO MEDIATION.

B. WITH RESPECT TO ANY CLAIMS, CONTROVERSIES OR DISPUTES WHICH ARE NOT FINALLY RESOLVED THROUGH MEDIATION, YOU HEREBY IRREVOCABLY SUBMIT YOURSELF TO THE NONEXCLUSIVE JURISDICTION OF THE STATE COURTS OF DALLAS COUNTY, TEXAS AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. YOU HEREBY IRREVOCABLY AGREE THAT SERVICE OF PROCESS MAY BE MADE UPON YOU IN ANY EACH PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP CREATED BY THIS AGREEMENT BY ANY MEANS ALLOWED BY TEXAS OR FEDERAL LAW. VENUE FOR ANY SUCH LEGAL PROCEEDING SHALL BE DALLAS COUNTY, TEXAS; PROVIDED, HOWEVER WITH RESPECT TO ANY ACTION (1) FOR MONEYS OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF OR (3) INVOLVING POSSESSION OR DISPOSITION OF; OR OFFER RELIEF RELATING TO, REAL PROPERTY, AIRSOPURE MAY BRING SUCH ACTION IN ANY STATE OR FEDERAL DISTRICT COURT WHICH HAS JURISDICTION. YOU HEREBY WAIVE ALL QUESTIONS OF PERSONAL JURISDICTION FOR TITLE PURPOSE OF CARRYING OUT THIS PROVISION. WITH RESPECT TO ALL CLAIMS, CONTROVERSIES, DISPUTES OR ACTIONS, THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED UNDER TEXAS LAW (EXCEPT FOR TEXAS CHOICE OF LAW RULES).

C. YOU AND AIRSOPURE ACKNOWLEDGE THAT THE PARTIES' AGREEMENT REGARDING APPLICABLE STATE LAW AND FORUM SET FORTH IN SECTION 19.B. ABOVE PROVIDE EACH OF THE PARTIES WITH THE MUTUAL BENEFIT OF UNIFORM INTERPRETATION OF THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR THE PARTIES' RELATIONSHIP CREATED BY THIS AGREEMENT, EACH OF YOU AND AIRSOPURE FURTHER ACKNOWLEDGE THE RECEIPT AND SUFFICIENCY OF MUTUAL CONSIDERATION FOR SUCH BENEFIT.

D. YOU AND AIRSOPURE ACKNOWLEDGE THAT THE EXECUTION OF THIS AGREEMENT OCCURRED IN DALLAS, TEXAS AND FURTHER ACKNOWLEDGE THAT THE PERFORMANCE OF CERTAIN OBLIGATIONS OF YOU ARISING UNDER THIS AGREEMENT SHALL OCCUR IN DALLAS, TEXAS.

IN WITNESS WHEREOF, the Parties hereto have duly executed, sealed, and delivered this Agreement on the day and year first above written.

AIRSOPURE:

By:    ---------------------------------

Title:       ------------------------------

YOU:

By:    ---------------------------------

Title:       ------------------------------

                                       18

                                    EXHIBIT F





                               PERSONAL GUARANTEE

For value received, and in consideration of the execution by Airsopure International Group, Inc. (Airsopure) of a Franchise Agreement with

- ---------------------------------------- (Franchisee), The undersigned

- ---------------------------------------- (Guarantor) hereby unconditionally guarantees to Airsopure all indebtedness, obligations and liabilities, direct or indirect, matured or immatured, primary or secondary, certain or contingent, of Franchisee to Airsopure, now or hereafter owing or incurred. This Guarantee is an absolute, unconditional, unlimited and continuing guarantee of the full and punctual payment by Franchisee of the foregoing indebtedness, obligations and liabilities and not of their collectibility only. Upon any default by Franchisee in such full and punctual payment, the liabilities and obligations of the Guarantor hereunder shall, at Airsopure's option, become forthwith due and payable without demand or notice of any nature, all of which are expressly waived by the Guarantor.

Airsopure may deal with Franchisee in such manner as Airsopure in its sole discretion deems fit, and Guarantor gives to Airsopure full authority, in its sole discretion, to do any or all of the following things: a) extend credit, make loans and afford other financial accommodations to Franchisee at such times, in such amounts and on such terms as Airsopure may approve; b) vary the terms and grant extensions or renewals of any present or future indebtedness of Franchisee to Airsopure; c) grant time, waivers and other indulgences in respect thereto; d) vary, exchange, release or discharge, wholly or partially, or delay in or abstain from perfecting and enforcing any security or guaranty or other means of obtaining payment; e) accept partial payments from Franchisee; f) release or discharge, wholly or partially, any endorser or guarantor; g) compromise or make any settlement or other arrangement with Franchisee.

Guarantor waives notice of acceptance hereof or of any action taken or omitted by Airsopure in reliance hereon and any requirement that Airsopure be diligent or prompt in making demands hereunder, giving notice of any default by Franchisee or asserting any other right hereunder.

No provision of this Guaranty can be changed, waived, discharged or terminated except by an instrument in writing signed by Airsopure and Guarantor, and no such waiver shall extend to, affect or impair any other right of Airsopure hereunder.

This Unlimited Guarantee shall inure to the benefit of Airsopure and its successors and assigns, and shall be binding on the Guarantor and the Guarantor's successors, heirs and assigns.

EXECUTED on this ____ day of ____________, 2000.

- ---------------------------------------- GUARANTOR

- ---------------------------------------- WITNESS

                                   EXHIBIT G

                            CONFIDENTIALITY AGREEMENT

This Confidentiality and Noncompetition Agreement (the Agreement) is made and entered into effective the _____day of ________________, 2000 by and between Airsopure International Group, Inc., a Nevada corporation, located at 15400 Knoll Trail, Suite 200, Dallas, Texas 75248 (the Company) and

- ----------------------------------------------- who resides at

- -----------------------------------------------

- -----------------------------------------------

- -----------------------------------------------

- ----------------------------------------------- (the Associate).

                                    RECITALS

A. Company sells franchises for the operation of air purification system business which operate under the name and service mark Airsopure (the Franchises);

B. Company has developed a business method for operating Franchises utilizing certain Information, plans, methods, data, processes, marketing systems, techniques, operating procedures, trademarks, designs, information and know how of Company (the Confidential Information), and such Confidential Information may be further developed from time to time by Company:

C. Company has established substantial goodwill and an excellent reputation with respect to the quality of services available, which goodwill and reputation have been and will continue to be of Major benefit to Company;





D. Associate is or will become involved with Company, or a franchise of Company, in the capacity of an officer, partner, director or as beneficial owner of an Airsopure Franchise or an employee of a Franchise, and will become privileged to certain Confidential Information; and

E. Associate and Company have reached an understanding with regard to nondisclosure by Associate of Confidential Information and Noncompetition by Associate with Company

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

1. CONFIDENTIAL INFORMATION. Associate and Company acknowledge that the business plan and methods used in connection with the operation of the Franchise which utilize Company's Confidential Information, are confidential, unique, constitute the exclusive property of Company and are trade secrets of Company. Associate acknowledges that any disclosure of the Confidential Information would be wrong and would cause irreparable injury and harm to Company. Associate further acknowledges that Company has expended a great amount of effort and money in obtaining and developing the Confidential Information, the Company has taken numerous precautions to guard the secrecy of the Confidential Information and that it would be very costly for competitors to acquire or duplicate the Confidential Information.

2. OPERATIONS MANUAL AS TRADE SECRET It is understood that Confidential Information, constituting trade secret, as used in this Agreement is deemed to include, without initiation, any and all information contained in the Franchise Operations Manual, which may be provided AS one or more separate manuals, or written instructional guides, as the same are changed or supplemented from time to time, and any information of whatever nature which gives to Company an opportunity to obtain an advantage over its competitors who do not have access to, know or use such lists, written materials or information.

3. CONFIDENTIAL INFORMATION. Associate shall not at any time, publish, disclose, divulge or in any manner communicate to any person, firm' corporation, association. partnership or any other entity whatsoever or use, directly or indirectly, for its own benefit or for the benefit of any Person, firm, corporation or other entity, other than the use of Company, any of the Confidential Information of Company or its Affiliates.

4. NO INTERFERENCE WITH BUSINESS. During the term of this Agreement, neither Associate nor any member of his or her immediate finally shall divert or attempt to divert: I) any business related to, or any customer or prospective customer of; the Franchise by direct inducement or otherwise, or 2) the employment of Company or another franchisee licensed by Company,

                                       1

to any Competitive Business by any direct inducement or otherwise.

5. REMEDIES. Associate hereby acknowledges and agrees that in the event of any violations of this Agreement, Company shall be authorized and entitled, without posting a bond to obtain from any court of competent jurisdiction, preliminary and permanent injunctive relief as well as an equitable accounting of all profits or benefits arising out of any such violation, which rights and remedies shall be cumulative and in addition to any rights or remedies to which Company may be entitled.

6. EFFECT OF WAVIER. The waiver by Associate or company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof

7. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of Associate and Company and their respective heirs, executors, representatives successors and assigns.

8. ENTIRE AGREEMENT. This instrument contains the entire agreement of Associate and Company relating to the matters set forth here It may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change modification, extension or discharge is sought.

9. GOVERNING LAW. This instrument shall be governed by and construed under the laws of the State of Texas.

10. JURISDICTION AND VENUE. In the event of a breach or threatened breach by Associate of this Agreement, Associate hereby irrevocably submits to the jurisdiction of the State District Court in Dallas County, Texas and the Federal District Court for the Northern District of Texas, and irrevocably agrees that venue for any action or proceeding shall be in Dallas County, Texas. Notwithstanding the foregoing, in the event that the laws of the state where, Associate resides require that the jurisdiction or venue be elsewhere, then such other states laws shall control. but only to the extent that such other state's laws so require.

11. SEVERABILITV. Should anyone or more of the provisions hereof be determined to be illegal or unenforceable, all other provisions hereof shall be given separately therefrom and shall not be affected thereby.

12. COST OF ENFORCEMENT. In any action at law or in equity to enforce any of the provisions or rights under this Agreement, the unsuccessful party in such





litigation as determined by the court in a final judgment or decree, shall pay the successful party or parties all costs, expenses and reasonable attorney's fees incurred therein by such arty or parties (including without Initiation such as costs, expenses and fees on any appeals), plus, if applicable, interest at the highest rate allowable by law, accruing from the date of the breach of this Agreement. If such successful party shall recover judgement in any such action or proceeding, such costs, expenses. attorney's fees and interest shall be included as part of such judgment.

IN WITNESS WHEREOF, the parties hereto have signed this Agreement on the date first above written.

FOR AIRSOPURE (COMPANY):

- --------------------------------------------

FOR FRANCHISEE OF AIRSOPURE:

- --------------------------------------------

ASSOCIATE OF FRANCHISEE:

- --------------------------------------------

ASSOCIATE'S WORK CAPACITY:

- --------------------------------------------

                                       2

Answer: Highlight the parts (if any) of this contract related to Covenant Not To Sue that should be reviewed by a lawyer. Details: Is a party restricted from contesting the validity of the counterparty’s ownership of intellectual property or otherwise bringing a claim against the counterparty for matters unrelated to the contract?


Question: AMENDMENT 1 TO DEVELOPMENT AGREEMENT

This is the First Amendment (First Amendment) to the Development Agreement (Development Agreement) entered into on April 15, 2010, by  and between Cargill, Incorporated through its Bio Technology Development Center, having its principal place of business at 15407 McGinty Road  West, Wayzata, Minnesota 55391 USA (Cargill) and BioAmber S.A.S., having a place of business at Route de Bazancourt, F-51110, Pomacle  France (BioAmber). This First Amendment will be effective as of July 5, 2011, upon the signature of both Cargill and BioAmber.

Cargill and Bioamber mutually agree as follows:



The Parties, through their authorized representatives, hereby agree to the terms and conditions of this First Amendment.

   Cargill Confidential   * Confidential treatment requested

1. Section 2.2 of the Development Agreement is hereby amended to allow Cargill at its sole discretion to apply [***] during the period of July 5,  2011, through September 30, 2011, to perform the Work Plan in addition to the [***] specified in the unamended Section 2.2. The terms for  compensation and expenses for these additional FTEs will be as provided for the original FTEs in Section 2.2.

2. Other than as expressly modified by this First Amendment, all terms and conditions of the Development Agreement continue without  modification.

CARGILL, INCORPORATED  Bio Technology Development Center     BIOAMBER S.A.S.

/s/ Jack Staboch       /s/ Jim Millis Signature     Signature VP BioTDC     CTO Title     Title 7/14/11     7/18/11





AMENDMENTS TO COMMERCIAL LICENSE AGREEMENT AND DEVELOPMENT   AGREEMENT

WHEREAS, Cargill, Incorporated (Cargill) and BioAmber S.A.S. (Bioamber) entered into a Development Agreement having an Effective  Date of April 15 , 2010, as amended on July 5 , 2011 (the Development Agreement);

WHEREAS, Cargill and Bioamber entered into a Commercial License Agreement having an Effective Date of April 15, 2010 (the Commercial  License);

WHEREAS, Bioamber now desires to amend the Development Agreement to allow Bioamber to fund a research project being conducted by  the Biotechnology Research Institute (BRI), which involves the molecular re-engineering of a Methylotroph owned by BRI and the development  of a lab scale fermentation design for using the re-engineered Methylotroph to make succinic acid or salts thereof from a methanol feedstock (the  BRI Project). The BRI Project will be co-funded by funds available from the Canadian National Research Council;

WHEREAS, Bioamber further desires to scale-up the production of succinic acid using a Corynebacteria biocatalyst (MCC-17) available from  Mitsubishi Chemical Corporation (MCC) and to possibly produce succinic acid or salts using MCC-17 as an alternative to the E. coli BioAmber  has licensed from the DOE at: (1) Bioamber's existing demonstration-scale succinic acid production facility located at Pomacle, France; and (2) a  succinic acid production facility located at Sarnia, Ontario Canada having a maximum production capacity of 35,000 metric tons of succinic acid per  year (the Sarnia Plant). Together these scale-up projects will be referred to as the Scale-up and Production Project;

WHEREAS, Cargill is willing to allow Bioamber to fund the BRI Project and to conduct the Scale-up and Production Project, subject to the  following terms and conditions. Now therefore the Parties agree:

Amendment To the Development Agreement

A. Section 13.9 of the Development Agreement is amended to add the following at the end of the Section:   Notwithstanding the above, Bioamber may fund the BRI Project up until the Methylotroph (or re-engineered Methylotroph) demonstrates  the ability to produce succinic acid (or salts thereof) from any feedstock at a concentration of [***] grams/liter succinic acid (or salts thereof).  Within thirty (30) days of the Methylotroph (or re-engineered Methylotroph) demonstrating such production levels of succinic acid, Bioamber will  cease any further funding and/or other support for the BRI Project. Further Bioamber will require that any unexpended funds received from  Bioamber be utilized for a project other than the BRI Project.   B. New Section 13.10 is added to the Development Agreement as set forth below:   13.10 Notwithstanding the provisions of section 13.9, Bioamber may conduct the Scale-up and Production Project, subject to Bioamber hereby  agreeing to convert the demonstration-scale Pomacle France succinic acid production facility and the Sarnia Plant to solely utilize CB1 as the  biocatalyst for the production of succinic acid (and/or salts thereof). This conversion will be carried out according to the provisions of Section 5.9  of the Commercial License, it being understood that all economic obligations of item (iv) above will be relative to the E. coli strain technology, not  the Mitsubishi strain technology. In order to enable such conversion, Bioamber will put in place agreements with the owners/operators of the  Sarnia Plant that will enable Bioamber to require such conversion of the Sarnia Plant to solely use CB1 for the manufacture of succinic acid as  described above.

Amendment To the Commercial License

A. Section 5.9 of the Commercial License is amended to add the following at the end of the Section:

Bioamber shall use best efforts to obtain regulatory approvals for the use of the CB1 Strain in all countries where Bioamber and/or a Bioamber  licensee are using any strain other than the CB1 strain for the production of succinic acid and/or salts thereof. Additionally, Bioamber shall use  best efforts to scale up the CB1 Strain and fermentation protocols utilizing the CB1 Strain.

Nothing in these amendments will reduce Bioamber's obligations to replace MCC-17 and Bioamber's current E. coli strain with CB1 in all the  existing and future succinic acid production facilities of Bioamber and Bioamber licensees, according to the provisions of Section 5.9 of the  Commercial License.      * Confidential treatment requested

th th





   * Confidential treatment requested

CARGILL, INCORPORATED

By:    /s/ Pirkko Suominen



Name: Pirkko Suominen Title: Director, Bio Technology Development  Center, Minneapolis Date:   10/19/2011

BIOAMBER, SAS

By:    /s/ Jean-François Huc



Name: Jean-François Huc Title: President Date:   October 15, 2011

Answer:
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