Case 11-13028

Claim 25-1 Part 3

Filed 05/11/12 Page 1 of 5

Exhibit Exhibit A to Supplement

Ifl

OFFSHORE U.S.A

INC

July

10

2008

Montecito

Offshore

LLC
Suite 2200

do

Fulton Smith
Str..et

909 Poydras

New

Orleans

LA

70112

Re

Empire

State Lease

18165

Well

Plaquemines

Parish Louisiana

Dear

Sir

Virgin

Offshore U.S.A
leasehold covers

Inc

hereinafter

referred

to

as

Virgin
in

has

acquired

one hundred percent Parish Louisiana

interest shall

10001o

working

interest

in Louisiana State Lease

18165

Plaquemines

The ieae
subject
to

approximately 660 acres of

Your

participation

Virgics

leasehold

be

the terms and conditions for expenditure

an authorization and made abandonment

are adequate lease

AFE
This
is

Joint Operating together

Agreement
cash
that

and ancillary exhibits

all

including hereto

with

call

of which

is

attached

part hereof as Exhibit

totals

You
not

will note turnkey

the drilling

AFE
it

through
for at

plugging

and
feel

$2400000
contingencies

price however
potential

provides

what

we

up-front

for weather cost

and other

ic1ogical
the cash
to

and

geophysical
for

.ccorrfJ
hereby

cl
to

G3
Virgilk

cost

overruns

15%

The base

for

rospert
cost totals

t.tals

$1000000
Virgin royalty

attached

the

drilling Jeses

4nd
in

34bOOOO
burdened

deliver

mi ov

ig
arr

you

proportionate

working

interest

the prospect

by

roialty toa1ing

25%

of 8/8ths

Yc
by ayiri

.-

te

be

drilling

patcipant of the

with

Ai
the in

.O% 5.0%
and

of

8/8ths

GG and

..

WEL
iogs

on the Lease
the attached

drii c.s
in

through

based

3.75%
drilling

of 8/Sths
cost totals

working

interest

tw

ieae

Yur
h.reipfter

parlicipation in referred to
as

an estimated

amouci

nt
exc
of
test

Axanc You will FE amounts and

/8ths
of
all

be responsible
the event

fe paiicompletion

ir

pro et
id

share of any costs

in

of

at.eirit

the test well flcwline

you will pay

costs of the

further well

completion

urfe

.aci

wt
to

Subject

the

terms and conditions

leasehold

of

this

agreement
out

paymem

or Participants
title

Advance

entitles

you

to

3.75%
hereinafter

ownership

interest

of Virgins rights

and

interest

in-and-to

the

Lease

referred to

as Participants Interest

909

Povdras

Street

Suite

2200

New

Orleans Louisiana

70112

504-525-6909

504-529-2362

Fax

Case 11-13028

Claim 25-1 Part 3

Filed 05/11/12 Page 2 of 5

Exhibit Exhibit A to Supplement

July

10

2008

Page

Participants incurred

Advance
drilling

shall

be applied

solely for the purpose of paying

Participants costs
set

share of costs

in the

of the Test Well and the geologic

to

and geophysical
share

out hereinabove

Participant the

shall

be

entitled

receive
to

its

proportionate Test

of

all to

production
its

and proceeds
share

from of
all

sale of production

attributable

the

Well

subject

only

proportionate share

royalties

and other burdens described expenses

Participant

hereinabove
agrees to bear

and
its

its

proportionate

of taxes operating
accounting
in

and marketing
fees incurred

proportionate

share of any direct

to participate

on behalf of the joint participant

share

account
out

Further you agree

funding

your proportionate proceeds

well
to

of an escrow

account

of three percent

3%
shall

of the

net

production for the

first

cover your proportionate

facility until

share of the estimated three percent

is fully

plugging and abandonment

costs

and

production

The

3% payments
funded escrow

commence

upon

production and continue

well
shall

such escrow

All working

interestownership

in the

be participants

in this plug and abandonment

program

Assignment

of

Interests

For and
herein

in

consideration

of Participants
its

agreement

to

participate

in the drilling the receipt

of the Test Well as and sufficiency and and

that

provided
are

and

tender

to

Virgin Virgin

of Participants hereby
assigns

advance conveys

of

which

hereby
subject
is

acknowledged
to

sets

over
in

delivers
to

unto

Participant This

the

terms and conditions warranty of

herein
title

hereof Participants
either

Interest

the

Lease
shall

assignment
title

without
interests

express

or liens
to

implied except
claims

Virgin

defend

to

the

conveyed

as against
is

any

or encumbrances

created

by

through

or
set

under

Virgin

This

assignment
attached

subject

all

of the

tenns

conditions

and of

restrictions

forth in the

Agreements
to

hereto

as Exhibit

and Virgins acquisition

same

and you hereby agree

assume your proportionate

part of the aforesaid obligations

General Rights

and Obligations

During

the

drilling

teting

completing
in which or

equipping Participant the Operating

and operating

of the Test
participate Participant

Well

as well
to

any terms

Substitute

Well

or

othr
this shall

wells

may

elect

to

pursuant
shall

the

and provisions
receive operating

of

Agreement
furnish

Agreement

be

eto.d
and

and Virgin

to Participant

the daily drilling testing

completing

equipping

reports applicable

thereto

Participant
that
it

hereby acknowledges an independent

Participant matters
interest

that

it

has

examined

all

well

and leasehold

data

on the Let of
its

an
pation in

has made
Test

evaluation

of the potential
that
it it

for success

or failure

pani

in the

Well

represents
that

has

net

worth

and knowledge and

risks

and
this

eperkie
agreerneit

financial and business participate as

enable

to
it

evaluate
is

the merits

of

and only

working

owner

that

acquiring

the subject
that

interest

for investment

and not
interest

for public has

distribution or resale registered

Participant

understands

the purchase
that

and 6aIe of such no

interest

not been

under Federal
the interest or
is

and State Securities

is

Laws and

should

be transferred

subsequently

unless
exists

registered under applicable

laws

or an exemption

from such law or regulations

available

Case 11-13028

Claim 25-1 Part 3

Filed 05/11/12 Page 3 of 5

Exhibit Exhibit A to Supplement

July

10 2008

Page3
the

Subject

to

terms and conditions

attributable to
its

of

this

Agreement
interest

Participant in the
its

hereby and

assumes does

and agrees
agree

to

bear

all

liabilities

working

Lease
officers losses

further

to

indemnify agents
actions

protect

defend
against

save

and keep
all

harmless

Virgin

directors

employees

and

from
suits

and

any

and

liabilities

obligations including

damages

penalties

claims

costs expenses

and dispersements

without limitation reasonable Liabilities of the

Test
in

legal fees relating to

to this

and related expenses

or arising out

of whatever kind and nature

participation
in

collectively the
drilling shall willful

any way

of Participants
foregoing

Well
extend

pursuant
to

Agreement
arising out

The

indenmification

obligation or

not however misconduct

any

Liabilities

of or resulting from the gross negligence

of Virgin

Insurance

Virgin

shall Ott

on behalf of the
the Lease carry

Parties or cause

to
to

this

Agreement

at

all

times

while operations
its

are being

conducted
share

be carried

pay for and charge each party

proportionate

of the premiums

for the insurance

required under the Joint Operating

Agreement

Notice

to

the Parties

All notices

required

under the terms of

this

agreement

until

contrary

notice

shall

have been received

by

the other party class United

shall

be given in person or by telephone mail or telegram as follows

confirmed

in writing

by

facsimile

or

by

first

States

TO VIRGIN

Virgin

Offshore

U.S.A

Inc

909 Poydras Street Suite 2200

New

Orleans

Louisiana

70112

Telephone

504
Offshore

525-6909

TO PARTICIPANT

Montecito

LLC
Suite 2200

do

Fulton

Smith

909 Poydras Street

New

Orleans

LA

70112

Misc
The
any
rights interests duties and obligations

aneous

of

Virn

aid Paiticipant
acquired

as set covering

out herein the

is

shall

apply

to

extensions
to

or renewals of the Lease any new

Lease

same

block

as the

Lease and
during

any blocks

or leases unitized

with

the Lease year

provided
after

that same

acquired

or occurs

the primary term of the Lease or within

one

the termination

thereof

This agreement venture

is

not intended

to

create

nor

shall

it

be construed
giving

so as to
rise to

create

partnership obligations

joint or

mining partnership

agency

or other relationship

partnership

Case 11-13028

Claim 25-1 Part 3

Filed 05/11/12 Page 4 of 5

Exhibit Exhibit A to Supplement

July

10 2008

Page

liabilities

Each

party

shall

be severally of the
as
set

but

not

jointly

or
to

collectively

responsible

only

for

its

respective exploration

proportionate
efforts

share

costs

and

expenses

be incurred

in connection

with

the

on

the

Lease

out herein

For federal income

tax purposes

however

Virgin

and Participant
Subtitle Section directed

elect

to

be excluded from the application Revenue

the

of the provisions

of Subchapter

Chapter

of the Internal of the

Code of 1986

as

amended

as permitted Virgin

and authorized
is

by
and

761

Code and

regulations

promulgated

thereunder

authorized

to execute on behalf of itself and Participant

evidence

of these and such other elections as

States or the Internal

may

be required
including

by

the

Secretary but

of the Treasury
not limited

of the

United

Revenue

Service Treasury

specifically

to

all

of the returns
to

statements

and data required by of and

to

Regulation

Sec 1.761
as

Each

party
to

agrees

provide

further evidence

execute
shall

such further documents

give

may

be required

evidence the elections made hereby with the elections hereby

future

No
If

party

any notice

or take

any

action

inconsistent

made

any present

or

future income contain

tax laws of the State of Louisiana or nay similar to agrees those

to

income

tax laws of the United

States or

provisions

referenced

above

under which
as

similar elections permitted or

are permitted required

required

each

party

make

such

elections

may

be

by law

consistent with the terms

hereof

This Agreement Louisiana

ordinances agree to

shall

be governed Agreement
state

by and
shall

construed

in accordance
to all

with the
rules

laws

of the

State

of

Further of any

this

be subject

applicable

regulations

laws and
parties

federal the

or local

bodies out
all

having jurisdiction
activities

over

the Lease or

and the

abide

by

same
of

in carrying
this to

conducted

hereunder

in connection
shall

herewith

If any provision

Agreement

or the application the remainder

thereof in any circumstance

be and
the

held invalid or unenforceable

shall

any extent
extent

of

this

Agreement
event

shall

be unaffected between
that

be enfcrced

to

the

fullest

permitted

by law

In the

of any dispute

parties hereto they are

arising out of or resulting from this to resolve

Agreement Virgin and Participant

good
faith

agree

if

unable

such
shall

dispute

through
to

negotiation
to either

with
party

one

another any

then other

resolution action

oi

the

disput

be submitted

mediation prior

taking

The

foregoing
this

sets

forth

the

entire

Agreement
all

between

Virgin

and Participant

as the

subject

matter

hereof and
to

Agreement hereof

supersedes This

prior negotiations

discussions

and understanding
or modified only
in

the

subject

matter

Agreement
This
their

may

be revised
shall

amended
be binding

writing ihe

executed by both Virgin and Participant

benefit receipt

Agreement
respective

upon and inure

assigns

te

of Virgin of
request

and

Participant

and

successors
shall

and

Promptly upon
tc

from

th

other party each party hereto

execute as

and return

the requesting requested for

party such MemorandumofAgreement the purposes of filing the respective

or other documentation records

may

be reasonably
all

same

in the public

and otherwise

placing

third

parties

on

notice

of

rights and

interests

of the parties

Case 11-13028

Claim 25-1 Part 3

Filed 05/11/12 Page 5 of 5

Exhibit Exhibit A to Supplement

July

10 2008

Page

Please

signify

you

acceptance returning
it

and

agreement by signing

and dating

this

agreement in the

space

provided

below and

to us with your payment

of the amount
this

specified hereinabove

Due

to the timing of the lease expiration

and

drilling

rig

under contract
is

agreement

shall

be null and August

void

if

the

payment of your participants

advance

not received

by

Virgin

on or before

2005

Very truly yours

VIRGiN

U.S.A INC

President

Agreed

to and accepted

this

day of July 2008

Montecito

LLC