Montecito Exhibit a to Supplement

7/28/2019 Montecito Exhibit a to Supplement

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Ifl OFFSHORE U.S.A INC

July 10 2008

Montecito Offshore LLC

do Fulton Smith

909 Poydras Str..et Suite 2200

New Orleans LA 70112

Re Empire State Lease 18165 Well

Plaquemines Parish Louisiana

Dear Sir

Virgin Offshore U.S.A Inc hereinafter referred to as Virgin has acquired one hundred percent

10001o leasehold working interest in Louisiana State Lease 18165 Plaquemines Parish Louisiana

The ieae covers approximately 660 acres Your participation in Virgics leasehold interest shall be

subject to the terms and conditions of Joint Operating Agreement and ancillary exhibits including

an authorization for expenditure AFE together with cash call all of which is attached heretoand made part hereof as Exhibit You will note that the drilling AFE through plugging and

abandonment totals $2400000 This is not turnkey price however it provides for what we feel

are adequate up-front contingencies for weather and other potential cost overruns at 15% The base

lease ic1ogical and geophysical cost G3 forrospert

t.tals $1000000

.ccorrfJ the cash cl attached for the drilling Jeses 4nd cost totals 34bOOOO Virgin

hereby to deliver to you proportionate working interest in the prospect burdened by royalty

mi ov ig roialty toa1ing 25% of 8/8ths

Yc .- te be drilling patcipant with Virgilk .. WEL on the Lease

by ayiri .O% 5.0% of 8/8ths of the GG and drii c.s through iogs based the attachedAi arr 3.75% of 8/Sths working interest in tw ieae Yur parlicipation inthe and drilling cost totals an estimated amouci h.reipfter referred to as

nt Axanc You will be responsible fe paii- irpro et share of any costsin exc of FE amounts and in the event of completion at.eirit the test well you will pay

/8ths of all further well completion urfe .aci id flcwline costs of the

test wt

Subject to the terms and conditions of this agreement paymem or Participants Advance entitles

you to 3.75% leasehold ownership interest out of Virgins rights title and interest in-and-to the

Lease hereinafter referred to as Participants Interest

909 Povdras Street Suite 2200 New Orleans Louisiana 70112 504-525-6909 5 04 -5 29 -2 36 2 F ax

Case 11-13028 Claim 25-1 Part 3 Filed 05/11/12 Exhibit Exhibit A to SupplementPage 1 of 5


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July 10 2008

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Participants Advance shall be applied solely for the purpose of paying Participants share of costs

incurred in the drilling of the Test Well and the geologic and geophysical costs set out hereinabove

Participant shall be entitled to receive its proportionate share of all production and proceeds from

the sale of production attributable to the Test Well subject only to its proportionate share of all

royalties and other burdens described hereinabove and its proportionate share of taxes operating

and marketing expenses Participant agrees to bear its proportionate share of any direct accounting

fees incurred on behalf of the joint participant account Further you agree to participate in funding

your proportionate share of an escrow account out of three percent 3% of the net productionproceeds to cover your proportionate share of the estimated plugging and abandonment costs for the

well and production facility The three percent 3% payments shall commence upon firstproduction and continue until such escrow is fully funded All working interestownership in the

well shall be participants in this plug and abandonment escrow program

Assignment of Interests

For and in consideration ofParticipants agreement to participate in the drilling of the Test Well as

herein provided and its tender to Virgin of Participants advance the receipt and sufficiency of

which are hereby acknowledged Virgin hereby assigns conveys sets over and delivers unto

Participant subject to the terms and conditions hereof Participants Interest in and to the Lease

This assignment is without warranty of title either express or implied except that Virgin shall

defend title to the interests herein conveyed as against any liens claims or encumbrances created

by through or under Virgin This assignment is subject to all of the tenns conditions and

restrictions set forth in the Agreements attached hereto as Exhibit and Virgins acquisition of

same and you hereby agree to assume your proportionate part of the aforesaid obligations

General Rights and Obligations

During the drilling teting completing equipping and operating of the Test Well as well any

Substitute Well or othr wells in which Participant may elect to participate pursuant to the terms

and provisions of this Agreement or the Operating Agreement Participant shall be eto.d

receive and Virgin shall furnish to Participant the daily drilling testing completing equipping and

operating reports applicable thereto

Participant hereby acknowledges that it has examined all well and leasehold data on t he Let anthat it has made an independent evaluation of the potential for success or failure of its pani pation

in t he Tes t Well Participant represents that it has net worth and knowledge and eperkie in

financial and business matters that enable it to evaluate the merits and risks of this agreerneit and

participate as working interest owner that it is acquiring the subject interest for investment only

and not for public distribution or resale Participant understands that the purchase and 6aIe of such

interest has not been registered under Federal and State Securities Laws and that no interest should

be transferred subsequently unless the interest is registered under applicable laws or an exemption

from such law or regulations exists or is available



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July 10 2008

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Subject to the terms and conditions of this Agreement Participant hereby assumes and agrees to

bear all liabilities attributable to its working interest in the Lease and does further agree to

indemnify protectdefend save and keep harmless Virgin its officers directors employees and

agents from and against any and all liabilities obligations losses damages penalties claims

actions suits costs expenses and dispersements includingwithout limitation reasonable legal fees

and related expenses of whatever kind and nature collectively Liabilitiesin any way relating to

or arising out of Participants participation in the drilling of th e Te st Well pursuant tothis

Agreement The foregoing indenmification obligation shall not howeverextend to any Liabilities

arising out of or resulting from the gross negligence orwillful misconduct of Virgin

Insurance

Virgin shall on behalf of the Parties to this Agreement at alltimes while operations are being

conducted Ott the Lease carry or cause to be carried pay forand charge each party its proportionate

share of the premiums for the insurance required under the Joint Operating Agreement

Notice to the Parties

All notices required under the terms of this agreementuntil contrary notice shall have been received

by the other party shall be given in person or by telephoneconfirmed in writing by facsimile or by

first class United States mail or telegram as follows

TO VIRGIN Virgin Offshore U.S.A Inc

909 Poydras Street Suite 2200

New Orleans Louisiana 70112

Telephone 504 525-6909

TO PARTICIPANT Montecito Offshore LLC

do Fulton Smith

909 Poydras Street Suite 2200

New Orleans LA 70112

Misc aneous

The rights interests duties and obligations ofVirn aid Paiticipant as set out herein shall apply to

any extensions or renewals of the Lease any newLease acquired covering the same block as the

Lease and to any blocks or leasesunitized with the Lease provided that same is acquired or occurs

during the primary term of the Lease or within one year after the termination thereof

This agreement is not intended to create nor shall it be construed s o a s to create partnership joint

venture mining partnership agency or other relationship givingrise to partnership obligations or



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July 10 2008

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liabilities Each party shall be severally bu t n ot jointly or collectively responsible onlyfor its

respectiveproportionate share of the costs and expenses to be incurred in connection with the

exploration efforts on the Lease as set out herein Forfederal income tax purposes however Virgin

and Participant e le ct t o be excluded from the application of the provisions of S ubcha pter C ha pter

Subtitle of the Internal Revenue Code of 1986 as amended as permitted and authorized by

Section 761 of the Code and the regulations promulgated thereunder Virgin is authorized and

directed to execute on behalf of itself and Participant evidence of these and such other elections as

may be required by the Secretary of the Treasury of the United States or the Internal Revenue

Service including specifically but not limited to all of the returns statements and data required by

Treasury Regulation Sec 1.761 Each party agrees to provide further evidence of and to execute

such further documents as may be required to evidence the elections made hereby No party shall

give any notice or take any action inconsistent with the elections hereby made If any present or

future income tax laws of the State of Louisiana or nay future income tax laws of the United States

contain provisions similar to those referenced above under which similar elections are permitted or

required each party agrees to make such elections as may be permitted or required by law

consistent with the terms hereof

This Agreement shall be governed by and construed in accordance with t he law s of the State of

Louisiana Further this Agreement shall be subject to all applicable rules regulations laws and

ordinances of any federal state or local bodies having jurisdiction over the Lease and the parties

agreeto abide by the same in carrying out all activities conducted hereunder or in connection

herewith If any provision of this Agreement or the application thereof in any circumstance shall be

held invalid or unenforceable to any extent the remainder of this Agreement shall be unaffected and

shall be enfcrced to the fullest extent permitted by law In the event of any dispute between the

parties hereto arising out of or resulting from this Agreement Virgin and Participant agree that if

they are unable to resolve such dispute through good faith negotiation with one another then

resolution oi the disput shall be submitted to mediation prior to either party taking any other

action

The foregoing sets forth the entire Agreement between Virgin and Participant as the subject matter

hereof and this Agreement supersedes all prior negotiations discussions and understanding

to the subject matter hereof This Agreement may be revised amended or modified only in writing

executed by both Virgin and Participant This Agreement shall be binding upon and inure te ihe

benefit of Virgin and Participant and their respective successors and assigns Promptly upon

receipt of request from th other party each party hereto shall execute and return tc the requesting

partysuch MemorandumofAgreement or other documentation as may be reasonably requested for

the purposes of filing same in the publicrecords and otherwise placing all third parties on notice of

the respective rights and interests of the parties



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Please signify you acceptance and agreement by signingand dating this agreement in the space

providedbelow and returning it to us with

yourpayment of the amount specified hereinabove Due

to the timing of the lease expiration and drilling rig under contract this agreement shall be null and

void if the payment of your participants advance is not received by Virgin on or before August

2005

Agreed to and accepted this

day of July 2008

Very truly yours

July 10 2008

Page

VIRGiN U.S.A INC

President

Montecito LLC


Documents

Montecito Exhibit a to Supplement