Montecito Exhibit a to Supplement
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Transcript of Montecito Exhibit a to Supplement
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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
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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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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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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
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