Case Doc Filed 05/16/14 Entered 05/16/14 11:44:52 Clean Version of Plan with Exhibits Page 1 of 95

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1 Clean Version of Plan with Exhibits Page 1 of 95 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF LOUISIANA IN RE: VIRGIN OFFSHORE USA, INC., DEBTOR CASE NO CHAPTER 11 CHIEF JUDGE ELIZABETH W. MAGNER SECOND AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED JULY 15, 2013 OF VIRGIN OFFSHORE U.S.A., INC. WITH IMMATERIAL MODIFICATIONS SUBMITTED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE U.S.A., INC. GORDON, ARATA, MCCOLLAM, DUPLANTIS & EAGAN, LLC By: /s/ Louis M. Phillips Louis M. Phillips (La. Bar No ) GORDON, ARATA, MCCOLLAM, DUPLANTIS, & EAGAN, LLC One American Place 301 Main Street, Suite 1600 Baton Rouge, LA Phone: (225) lphillips@gordonarata.com - AND - Patrick Rick M. Shelby (La. Bar No ) James D. Rhorer (La. Bar No ) 201 St. Charles Avenue, 40 th Floor New Orleans, LA Telephone: (504) pshelby@gordonarata.com - AND - Armistead M. Long (La. Bar No ) GORDON, ARATA, MCCOLLAM, DUPLANTIS, & EAGAN, LLC 400 East Kaliste Saloom Road, Suite 4200 Lafayette, LA Phone: (337) Facsimile: (337) along@gordonarata.com Attorneys for Gerald H. Schiff, Chapter 11 Trustee Dated: May 16, 2014

2 Clean Version of Plan with Exhibits Page 2 of 95 TABLE OF CONTENTS I. DEFINITIONS, RULES OF INTERPRETATION, COMPUTATION OF TIME, AND GOVERNING LAW... 1 A. Rules of Interpretation, Computation of Time, and Governing Law... 1 B. Defined Terms... 2 II. UNCLASSIFIED CLAIMS A. Unclassified Claims B. Time for Filing Administrative Claims and Professional Compensation Claims C. Allowance of Administrative Claims D. Allowed Priority Tax Claims E. United States Trustee Fees III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS A. SUMMARY B. CLASSIFIED CLAIMS AND TREATMENT CLASS 1 EMPIRE SECURED CLAIMS (1) Claim (2) Treatment (3) Voting CLASS 2 RLI INSURANCE CLAIM (1) Claim (2) Treatment (3) Voting CLASS 3 UNSECURED CLAIMS (1) Claim i

3 Clean Version of Plan with Exhibits Page 3 of 95 (2) Treatment (3) Voting CLASS 4 EQUITY INTERESTS (1) Classification (2) Treatment (3) Voting IV. ACCEPTANCE OR REJECTION OF THE PLAN A. Voting Classes B. Voting Rights as to Confirmation of the Plan; Necessity of Allowance of Claims C. Acceptance by Impaired Classes D. Non-Consensual Confirmation V. PROCEDURES FOR RESOLUTION OF DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS OR EQUITY INTERESTS A. Prosecution of Objections to Claims i. Establishment of the Offshore Equity Trust B. Allowance of Claims C. Controversy Concerning Impairment D. Payments and Distributions on Disputed Claims and Class 3 Claims VI. MEANS OF IMPLEMENTATION OF THE PLAN A. Operation of Reorganized Offshore Post-Effective Date B. Disposition of Reorganized Offshore s Existing Oil and Gas Assets C. The Offshore Equity Trust and Appointment, Powers and Removal of the Offshore Equity Trustee i. Establishment of the Offshore Equity Trust ii

4 Clean Version of Plan with Exhibits Page 4 of 95 ii. Purpose of the Offshore Equity Trust iii. Issuance of Equity by the Debtor to the Offshore Equity Trust iv. Appointment of and Compensation for the Offshore Equity Trustee v. Powers and Duties of the Offshore Equity Trustee vi. Indemnification of the Offshore Equity Trustee vii. Tax Treatment of the Offshore Equity Trust D. Offshore Equity Trust Distributions E. Term and Termination of the Offshore Equity Trust and Offshore Equity Trustee F. Causes of Action and Avoidance Actions VII. EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. General Comment B. DELETED C. Investors Contracts in Producing Wells D. Rejection Claims VIII. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN A. The Effective Date B. Conditions Precedent to Effective Date Confirmation Order Documents Authorizations C. Waiver of Conditions D. Effects of Confirmation Assets of the Debtor iii

5 Clean Version of Plan with Exhibits Page 5 of Cancellation of Class 4 Equity Interests Issuance of New Equity Conversion of Allowed Class 3 General Unsecured Claims into Beneficial Interests in the Offshore Equity Trust Findings by the Bankruptcy Court X. MODIFICATIONS AND AMENDMENTS XI. RETENTION OF JURISDICTION XII. MISCELLANEOUS PROVISIONS A. Severability of Plan Provisions B. Successors and Assigns C. Notices D. Compromise and Settlement E. Section 1146 Exemption F. Post-Confirmation Reporting Requirements G. Modification of the Plan H. Reservation of Rights I. Governing Law J. No Admission or Waivers K. Continuing Viability of Other Orders/Agreements L. Limitations on Liability XIII. DISCHARGE OF OFFSHORE, INJUNCTION AND RELATED PROVISIONS A. Discharge of Debtor B. Injunction C. Exculpations D. Indemnification Obligations iv

6 Clean Version of Plan with Exhibits Page 6 of 95 E. Limited Release F. Releases by Consenting Parties G. Subordination H. Binding Effect I. Revocation, Withdrawal, or Non-Consummation J. Section 1129(b) K. Section 1125(e) v

7 Clean Version of Plan with Exhibits Page 7 of 95 INTRODUCTION AND OVERVIEW Gerald H. Schiff, Chapter 11 Trustee for the Bankruptcy Estate of Virgin Offshore U.S.A., Inc., proposes this Second Amended Plan of Reorganization dated July 15, 2013 pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code for the resolution of outstanding Claims against and interest in the Debtor, Virgin Offshore U.S.A., Inc. Reference is made to the Second Amended Disclosure Statement for this Second Amended Plan for a discussion of the Debtor s history, businesses, assets, results of operations, projections for future operations, risk factors, and a summary and analysis of this Second Amended Plan and certain related matters, including procedures for voting on this Second Amended Plan and Distributions to be made under this Second Amended Plan. The Trustee is the proponent of this Second Amended Plan within the meaning of section 1129 of the Bankruptcy Code. As more particularly described in the Second Amended Disclosure Statement, the primary purpose of this Second Amended Plan is to provide for the disallowance and/or modification of certain Secured and Unsecured Claims, pay the Allowed Claims of the Creditors of the Debtor, provide for the settlement and compromise of Claims and Causes of Action against the Debtor, and provide for a liquidation of the Debtor s Assets. ALL CREDITORS AND PARTIES IN INTEREST ARE ENCOURAGED TO CONSULT THE SECOND AMENDED DISCLOSURE STATEMENT BEFORE VOTING TO ACCEPT OR REJECT THIS SECOND AMENDED PLAN. Subject to certain restrictions and requirements set forth in section 1127 of the Bankruptcy Code, Rule 3019 of the Bankruptcy Rules and Article XII of this Second Amended Plan, the Trustee reserves the right to alter, amend, modify, revoke or withdraw this Second Amended Plan prior to its substantial consummation. I. DEFINITIONS, RULES OF INTERPRETATION, COMPUTATION OF TIME, AND GOVERNING LAW A. Rules of Interpretation, Computation of Time, and Governing Law For purposes herein: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, shall include both the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and the neuter gender; (b) any reference herein to a contract, instrument, release, indenture or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (c) any reference herein to an existing document or exhibit Filed, or to be Filed, shall mean such document or exhibit, as it may have been or may be amended, modified or supplemented; (d) unless otherwise specified, all references herein to Sections, Articles and Exhibits are references to Sections, Articles and Exhibits hereof or hereto; (e) the words herein, hereof and hereto refer to the Second Amended Plan in its entirety rather than to a particular portion of this Second Amended Plan; (f) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation hereof; (g) the rules of construction set forth in section 102 of the Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 1 of 47

8 Clean Version of Plan with Exhibits Page 8 of 95 Bankruptcy Code shall apply; and (h) any term used in capitalized form herein that is not otherwise defined but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as the case may be. In computing any period of time prescribed or allowed hereby, the provisions of Bankruptcy Rule 9006(a) shall apply as though the Second Amended Plan is an order of the Bankruptcy Court. Except to the extent that the Bankruptcy Code or Bankruptcy Rules are applicable, and subject to the provisions of any contract, instrument, release, indenture or other agreement or document entered into in connection herewith, the rights and obligations arising hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of Louisiana, without giving effect to the principles of conflict of laws thereof. All references in the Second Amended Plan to monetary figures shall refer to United States of America currency, unless otherwise expressly provided. B. Defined Terms Unless the context otherwise requires, the following terms shall have the following meanings when used in capitalized form herein: Administrative Claim means (a) any Professional Compensation Claim, (b) any Claim constituting a cost or expense of administration of the Bankruptcy Case asserted or authorized to be asserted in accordance with sections 503(b) and 507(a)(2) of the Bankruptcy Code during the period up to and including the Effective Date, and (c) any fees or charges assessed against the Estate pursuant to section 1930 of chapter 123 of title 28 of the United States Code. Administrative Claim Bar Date means (a) the 60th day after the Effective Date or (b) such other date established by Final Order of the Bankruptcy Court. Administrative Claim Objection Deadline means (a) the earlier of the 28th day after the filing of an Administrative Claim or the 28th day after the Administrative Claim Bar Date or (b) such other date established by Final Order of the Bankruptcy Court. Code. Affiliate means any Person or Entity described under section 101(2) of the Bankruptcy Allowed means that, with respect to a Claim, (i) such Claim has been listed by Offshore in the Schedules, as such Schedules may be amended by Offshore from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and no contrary Proof of Claim has been filed, (ii) a Proof of Claim with respect to such Claim has been timely filed and no objection thereto has been interposed within the time period set forth in this Second Amended Plan or such other applicable period of limitation fixed by the Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or an objection thereto has been interposed and such Claim has been allowed in whole or in part by a Final Order, (iii) such Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 2 of 47

9 Clean Version of Plan with Exhibits Page 9 of 95 Claim has been expressly allowed by a Final Order or under this Second Amended Plan, or (iv) such Claim has been compromised, settled, or otherwise resolved pursuant to the authority granted to the Trustee or Debtor pursuant to a Final Order of the Bankruptcy Court or under this Second Amended Plan; provided, however, that Claims allowed solely for the purpose of voting to accept or reject this Second Amended Plan pursuant to an order of the Bankruptcy Court shall not be considered Allowed Claims under this Second Amended Plan. Allowed Claim means an Allowed Claim in the particular Class described. Amendment means the First Amendment to Decommissioning Term Sheet by and between Whistler, the Virgin Plan Trust, the Bureau of Ocean Energy Management ( BOEM ), the Bureau of Safety and Environmental Enforcement ( BSEE ), RLI, and Offshore, amending and restating the Decommissioning Term Sheet, and addressing the P&A Work to be completed in accordance with the terms contained therein. A copy of the Amendment is attached as Exhibit G, the terms and conditions of which are incorporated herein by reference. Asset means any property of the Debtor and the Estate as defined in section 541(a) of the Bankruptcy Code. Assumed Executory Contracts and Unexpired Leases means any Executory Contracts and Unexpired Leases assumed by the Debtor or by the Trustee on behalf of the Debtor. Avoidance Claims means any and all Causes of Action which a trustee, debtor-inpossession, an estate, or other legal representative or appropriate party-in-interest may assert, including Causes of Action under sections 502, 510, 541, 542, 543, 544, 545, 547, 548 through 551, and 553 of the Bankruptcy Code, or under similar or related state or federal statutes, civil law, and common law, including fraudulent transfer laws, and also including Offshore s rights of setoff, recoupment, contribution, or indemnity in connection with the foregoing (as those terms are defined by the non-bankruptcy law of any relevant jurisdiction) whether or not litigation has been commenced as of the Confirmation Date to prosecute such Avoidance Claims. Ballot means the ballot form upon which Holders of Impaired Claims and Equity Interests who are entitled to vote under this Second Amended Plan shall indicate acceptance or rejection of the Second Amended Plan in accordance with the Voting Instructions. Bankruptcy Case means the involuntary bankruptcy case filed against Offshore by Precision Drilling Company, LP, Dynamic Energy Services, LLC and Tanner Services, LLC, and styled and numbered as follows: In re Virgin Offshore, USA, Inc., Case No (Bankr. E.D. La). Bankruptcy Code means Title 11 of the United States Code, 11 U.S.C. 101 et seq., as now in effect or hereafter amended. Bankruptcy Court means the United States Bankruptcy Court for the Eastern District of Louisiana. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 3 of 47

10 Clean Version of Plan with Exhibits Page 10 of 95 Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure, FED. R. BANKR. P et seq., as promulgated under 28 U.S.C. 2075, and the Federal Rules of Civil Procedure, FED. R. CIV. P. 1 et seq., and the Local Rules of the Bankruptcy Court, as applicable to the Bankruptcy Cases, and as now in effect or hereafter amended. BP Claim means that certain claim for economic loss filed by Offshore pursuant to the Deepwater Horizon Economic and Property Damages Settlement Agreement. Business Day means any day other than a Saturday, a Sunday, legal holidays (as defined under Bankruptcy Rule 9006(a)), or any other day on which banking institutions in Baton Rouge, LA are required or authorized to close by law or executive order. Cash means legal tender of the United States of America, cash equivalents, and readily marketable securities or instruments, including, but not limited to, bank deposits, accounts, certified or cashier s checks, timed certificates of deposit issued by any bank, commercial paper, and readily marketable direct obligations of the United States of America or agencies or instrumentalities thereof. CIT means CIT Capital USA, Inc. Causes of Action means any and all actions, proceedings, causes of action, suits, accounts, controversies, agreements, promises, rights to legal remedies, rights to equitable remedies, rights to payment and claims, whether known, unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured and whether asserted or assertable directly or derivatively, in law, equity, or otherwise including, but not limited to, (i) Avoidance Claims unless otherwise waived or released by Offshore or Reorganized Offshore, (ii) any and all rights under applicable state and/or non-bankruptcy law to assert, pursue, prosecute, and/or commence actions to enforce and/or collect the BP Claim, (iii) the D&O Litigation and Paxton Intervention, and (iv) all rights to assert, pursue, prosecute and/or commence action, to enforce the rights of Offshore in any way related to the P&A Work and related liabilities. Century means Century Exploration New Orleans, Inc. Century Cure means the pre-petition debt owed by the Debtor to Century Exploration New Orleans, Inc. under the Ship Shoal JOA. Century PSA means the purchase and sale agreement executed by the Trustee and Century in accordance with the Century Settlement. Century Settlement means the May 13, 2014 Order of the Bankruptcy Court approving the Amended Motion Pursuant to Bankruptcy Rule 9019 for Approval of Settlement and Compromise with Century Exploration New Orleans, LLC filed by the Trustee and the settlement and transfer of the Debtor s interest in Ship Shoal to Century as described in the Order and Century PSA. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 4 of 47

11 Clean Version of Plan with Exhibits Page 11 of 95 Claim means a claim, as defined in section 101(5) of the Bankruptcy Code, against Offshore, including, but not limited to: (a) any right to payment from Offshore whether in rem or in personam or whether or not such right is reduced to judgment, liquidated, unliquidated, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (b) any right to an equitable remedy for breach of performance if such performance gives rises to a right of payment from Offshore, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. Claim Holder or Claimant means a holder of a Claim. Claims Objection Bar Date means, for all Claims, the latest of (a) 180 days after the Effective Date, or (b) such other period of limitation as may be specifically fixed by a Final Order of the Bankruptcy Court for objecting to such Claim. Class means a category of Holders of Claims or Equity Interests. Clerk means the clerk of the Bankruptcy Court. Collateral means any property or interest in property of the Estate subject to a Lien, charge, or other encumbrance to secure the payment or performance of a Claim, which Lien, charge, or other encumbrance is not subject to avoidance under the Bankruptcy Code. Confirmation means the Entry of the Confirmation Order, subject to all conditions specified in Article VIII hereof having be (i) satisfied or (ii) waived pursuant to Article VIII. Confirmation Date means the date of Entry by the Clerk of the Confirmation Order. Confirmation Hearing means the hearing to consider Confirmation of the Second Amended Plan. Confirmation Order means the order Entered by the Bankruptcy Court confirming the Second Amended Plan pursuant to section 1129 of the Bankruptcy Code. Consenting Parties means, collectively, each Holder of a Claim or Equity Interest who has affirmatively voted to accept the Second Amended Plan and is a Holder in a Class that has, as a Class, voted to accept the Second Amended Plan. Creditor means any Person who holds a Claim against Offshore. Cure means the distribution by the Trustee on behalf of the Debtor, on or within a reasonable period of time following the Effective Date, of Cash, or such other property as may be agreed upon by the parties or ordered by the Bankruptcy Court, with respect to the assumption of an Executory Contract or Unexpired Lease, pursuant to Section 365(b) of the Bankruptcy Code, in an amount equal to all unpaid monetary obligations, without interest, or such other amount as may be agreed upon by the parties, under such Executory Contract or Unexpired Lease, to the extent such obligations are enforceable under the Bankruptcy Code and applicable non-bankruptcy law. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 5 of 47

12 Clean Version of Plan with Exhibits Page 12 of 95 Cure Claim means the Claim of any party for monetary damages arising out of the assumption of an Executory Contract by the Debtor pursuant to Section 365 of the Bankruptcy Code. Current Operating Partners means the Virgin Oil Plan Trust, Breton Energy, L.L.C., BREPS Petroleum, LLC, Montecito Offshore, L.L.C., Harvest Operating, LLC and Century Exploration New Orleans, Inc. Debtor means Virgin Offshore, USA, Inc. Decommissioning Term Sheet means the agreement by and between Whistler, the Virgin Plan Trust, the Bureau of Ocean Energy Management ( BOEM ), the Bureau of Safety and Environmental Enforcement ( BSEE ), RLI, and Offshore, addressing the P&A Work to be completed in accordance with the terms contained therein. D&O Litigation means those certain proceedings commenced on August 19, 2011 styled The Official Committee of Unsecured Creditors of Virgin Oil Company, Inc., et al v. Robert Fulton Smith, Jr., et al, Civil Action No pending before the Civil District Court for the Parish of Orleans, State of Louisiana. Disallowed Claims means a Claim or any portion thereof (a) that has been disallowed by Final Order, (b) to which a party in interest has filed an objection and no Final Order of allowance has been entered, (c) proof of which was untimely filed, or (d) listed as disputed, contingent, or unliquidated on the Bankruptcy Schedules. Disputed Claims means all Claims: (a) which are listed in the Schedules as disputed, contingent, or unliquidated, or (b) as to which (i) a Proof of Claim has been filed, (ii) an objection, or request for estimation, has been timely filed (and not withdrawn) by any party in interest, and (iii) no Final Order has been entered thereon. In the event that any part of a Claim is disputed, such Claim in its entirety shall be deemed to constitute a Disputed Claim for purposes of Distribution under this Plan unless a Final Order has been Entered allowing such Claim or portion thereof. Without limiting the above, a Claim that is the subject of a pending objection, or any other proceeding seeking to disallow, subordinate, or estimate such Claim, shall be deemed to constitute a Disputed Claim. Distribution means any transfer, payment under or in accordance with the Second Amended Plan, the corporate documents of Reorganized Offshore, or the Offshore Equity Trust Agreement of Cash or other property. Effective Date means the first Business Day that is at least one (1) full Business Day after the Confirmation Order becomes a Final Order and all conditions precedent to the Effective Date have been consummated or waived pursuant to Article VIII, hereof. Empire Lease means the Louisiana State Oil and Gas Lease referred to as SL 18165, Empire Field, Plaquemines Parish Louisiana. Empire Lien Compromise means the December 3, 2012 Order of the Bankruptcy Court approving the Joint Motion to Approve Settlement and Compromise filed by the Trustee and lien Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 6 of 47

13 Clean Version of Plan with Exhibits Page 13 of 95 claimant Dynamic Energy Services, LLC and the settlement related thereto between the Lien Adversary parties. Empire Secured Claims means the Lien Claimants set forth in the Empire Lien Compromise with Allowed Claims secured by Liens filed against the Empire Lease and payable pursuant to the terms of the Empire Lien Compromise and this Second Amended Plan in the total amount of $3,983, The Empire Secured Claims consists of three tiers with each tier only receiving payment upon satisfaction of all Claims within the preceding tier. A schedule of the Empire Lien Claimants and the amount of each Empire Secured Lien Claim is attached as Exhibit A. For avoidance of any doubt, Holders of Empire Secured Claims in each tier are as follows: Tier 1 - Dynamic Energy Services, LLC, Industrial & Oilfield Services, Inc., Tanner Services, LLC, Global Vessel & Tank, LLC, Ranger Specialty Supply & Control Systems, LLC, Newpark Mats & Integrated Services, LLC, Newpark Environmental Services, LLC, Weatherford International, Inc., GE Oil & Gas Pressure Control, LP as successor in interest to Wood Group Pressure Control, LP, Quality Energy Services, Inc., and Stokes & Spiehler Offshore, Inc. Tier 2 - Workover Specialties, LLC Tier 3 - Precision Drilling Company, LP Entity means an entity defined in section 101(15) of the Bankruptcy Code. Entry or Entered means entry or entered by the Clerk into the records and dockets of the Bankruptcy Case within the meaning of Bankruptcy Rules 5003 and Equity Interest or Interest means any equity security as defined under section 101(16) of the Bankruptcy Code. Estate means the bankruptcy estate created upon the commencement of the Bankruptcy Case pursuant to section 541 of the Bankruptcy Code, or thereafter acquired as provided in section 541 or any other applicable section of the Bankruptcy Code. Excess Cash means, in the sole discretion of the Offshore Equity Trustee, available excess Cash in an amount sufficient to render feasible a Distribution of Cash to the Offshore Equity Trust Beneficiaries. Executory Contracts and Unexpired Leases means executory contracts and unexpired leases as such terms are used in section 365 of the Bankruptcy Code. Existing Oil and Gas Assets means and includes the Empire Lease, Ship Shoal, the Federal Oil and Gas Lease referred to as East Cameron Area, Block 219 bearing serial number OCS-G 33580, and the Federal Oil and Gas Lease referred to as West Cameron Area, Block 78 bearing serial number OCS-G Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 7 of 47

14 Clean Version of Plan with Exhibits Page 14 of 95 Expired Leases means Federal Oil and Gas Leases operated by the Debtor pre-petition which have expired and require abandonment. Attached as Exhibit D is a schedule of Expired Leases and Existing Oil and Gas Assets. Fees means any reasonable and necessary fees, charges, or expenses, including Professional Compensation Claims and Claims arising under any contract, Executory Contract, or any other form of agreement. File, Filing, or Filed means file, filing or filed with the Clerk into the record of the Bankruptcy Case in accordance with the applicable Bankruptcy Rules. Final Decree means the decree contemplated under Bankruptcy Rule Final Order means an order of the Bankruptcy Court or court of competent jurisdiction which, not having been stayed by order of a court of competent jurisdiction, has become conclusive of all matters adjudicated thereby and is in full force and effect. First Amended Disclosure Statement means the FIRST AMENDED DISCLOSURE STATEMENT IN SUPPORT OF CHAPTER 11 PLAN OF REORGANIZATION DATED MARCH 28, 2013 SUBMITTED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE, USA, INC. First Amended Plan means the FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED MARCH 28, 2013 SUBMITTED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE, USA, INC. General Unsecured Claim means any Claim that is not an Administrative Claim, Priority Tax Claim, Secured Claim, or Priority Non-Tax Claim. Gordon Arata means the law firm of Gordon, Arata, McCollam, Duplantis & Eagan, LLC, attorneys for the Trustee. Governmental Unit means United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government. Gros Firm means Patrick Gros, APAC, accountant for the Estate. Holder means a Person or Entity holding an Equity Interest or Claim. Impaired means a Claim or Equity Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code and applicable case law. Code. Insider means any Person or Entity described under section 101(31) of the Bankruptcy Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 8 of 47

15 Clean Version of Plan with Exhibits Page 15 of 95 Interest Holder means Holder of an Equity Interest. The Interior means the United States Department of the Interior. Internal Revenue Code means title 26 of the United States Code, 26 U.S.C. 1 et seq., as now in effect or hereafter amended. Investors means third party investors granted certain unrecorded contractual working interests in the Virgin Oil and Offshore properties. Investor Claims means any Claim evidenced by a Proof of Claim filed by any Person or Entity in the Bankruptcy Case that assert an ownership, economic or revenue interest and/or claim for damages for loss thereof based upon certain contractual investment agreements with the Debtor. The Investor Claims are Disputed by the Debtor and shall be addressed pursuant to the Claims Objection Process described in Article V of this Second Amended Plan. A schedule of the Investor Claims and Claimants is attached as Exhibit B. Lien or Liens means mortgages, security interests, privileges, conditional sale or other title retention agreements, pledges, liens, judgments, demands, encumbrances, taxes, including without limitation, property taxes, sales, use and ad valorem taxes, easements, restrictions or charges of any kind or nature, if any, including, but not limited to, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership, debts arising in any way in connection with any acts of Offshore, Claims, obligations, demands, guaranties, options, rights, contractual commitments, executory contracts, unexpired leases, employment agreements, restrictions, rights of lesion beyond moiety, tort claims, product liability claims, interests and matters of any kind and nature, whether arising prior to or subsequent to the commencement of the Bankruptcy Cases, and whether imposed by agreement, understanding, law, equity or otherwise. Lien Adversary means the Adversary Proceeding No filed in the U.S. Bankruptcy Court for the Eastern District of Louisiana by Dynamic Energy Services, LLC, Precision Drilling Company, LP, Tanner Services, LLC and Industrial & Oilfield Services, Inc. against Offshore and assorted parties claiming liens against the Empire Lease. Lien Compromise means the compromise between the Trustee, the Debtor and various lien claimants involved in the Lien Adversary, which was approved by order entered by the Bankruptcy Court in the Bankruptcy Case on December 3, The Lien Compromise includes all agreements executed pursuant to the agreement of the parties including the settlement agreement and mutual release. The terms and conditions of the Lien Compromise are incorporated into this Plan as if fully set forth herein. Offshore means the Debtor, Virgin Offshore, USA, Inc. Offshore Claims Bar Date means the last date for filing Claims against Offshore, which was December 7, Offshore Governmental Claims Bar Date means the last date for filing Governmental Unit Claims, which was January 7, Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 9 of 47

16 Clean Version of Plan with Exhibits Page 16 of 95 Offshore Equity Trust means the trust to be established as of the Effective Date pursuant to the terms of the Offshore Equity Trust Agreement which shall be the owner of the new Equity Interests in Reorganized Offshore which shall be held for the benefit of Holders of Allowed Unsecured Class 3 Claims. Offshore Equity Trust Agreement means that certain agreement to be approved in connection with the Confirmation Order, which contains provisions customary to trust agreements utilized in comparable circumstances, including but not limited to, any and all provisions necessary to govern the rights, powers, obligations and appointment and removal of the Offshore Equity Trustee or any successor Offshore Equity Trustee. A form copy of the proposed Offshore Equity Trust Agreement is attached as Exhibit I. Offshore Equity Trust Assets means all Equity Interests in the Reorganized Debtor which shall be issued upon the Effective Date to the Offshore Equity Trustee for the benefit of the Holders of Allowed Unsecured Claims who shall be become Offshore Equity Trust Beneficiaries. Offshore Equity Trust Beneficiaries means the Holders of Allowed Unsecured Claims that shall receive a beneficial interest in the Offshore Plan Trust created pursuant to this Second Amended Plan. Offshore Equity Trustee means Gerald H. Schiff, or his successor as provided in the Offshore Equity Trust Agreement. Oil/Offshore Settlement means the compromise between the Virgin Oil bankruptcy estate and Offshore Estate approved by order entered by the Bankruptcy Court in the Bankruptcy Case on January 5, 2012 and the terms and conditions thereof that are incorporated into this Second Amended Plan by reference to the agreement. The Oil/Offshore Settlement includes all agreements executed pursuant to the agreement of the parties including the joint operating agreements, contract operator agreement, and decommissioning term sheet. Furthermore, the releases and obligations set forth in the Oil/Offshore Settlement are incorporated into this Second Amended Plan as if fully set forth herein. Order for Relief means the order for relief entered by the Bankruptcy Court in the Bankruptcy Case. P&A Work means the requisite plug and abandonment work relating to Offshore s expired oil and gas leases. A schedule of the P&A Work is attached hereto as Exhibit B. P&A Properties means, collectively, the following expired leases, rights of use and pipeline rights of way subject to abandonment as part of the P&A Work: Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 10 of 47

17 Clean Version of Plan with Exhibits Page 17 of 95 Leases: OCS-G 23822; VM 179 OCS-G 25980; VM 179 OCS-G 27042; EC 122 OCS-G 25949; EC 134 OCS-G 25948; EC 133 OCS-G 19750; EC 219 OCS-G 10605; EC 2 OCS-G 17753; WC 41 OCS-G 17151; HI 198 OCS-G 19702; WC 78 OCS-G 15097; WC 494 RUE: OCS-G 23680; EC 104 Rights of Way: ROW No. G16076 ROW No. G23435 ROW No. G25317 ROW No. G26943 ROW No. G Paxton Intervention means those certain proceedings commenced on December 5, 2011 (Trustee s intervention filed on May 17, 2011 and Granted on May 21, 2011) styled Montecito Offshore LLC v. Paxton Energy Inc. and PaxAcq, Inc., Civil Action No pending before the Civil District Court for the Parish of Orleans, State of Louisiana. Per Annum means for a calendar year of 365 or 366 days, as the case may be. Person means any natural person or juridical entity to the broadest extent the term person is defined under the laws of the State of Louisiana. Person also includes any Governmental Unit. Petition Date means September 16, Phelps Dunbar means the law firm of Phelps Dunbar, LLP, special litigation counsel for the Estate and Reorganized Debtor in the D&O Litigation and Paxton Intervention. Plan Proponent means the Trustee. Plan Supplement means the compilation of documents and form of documents, schedules and exhibits to be filed prior to the Voting Deadline, as modified or supplemented prior to the Confirmation Hearing. Post-Petition means any date on or after the Petition Date. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 11 of 47

18 Clean Version of Plan with Exhibits Page 18 of 95 Pre-Petition means any date before the Petition Date. Priority Non-Tax Claim means any Claim given priority in payment pursuant to section 507 of the Bankruptcy Code, but not including Priority Tax Claim and Administrative Claims. Priority Tax Claim means any Claim (or portion of a Claim) of a Governmental Unit entitled to priority under section 507(a)(8) of the Bankruptcy Code. Pro Rata Share means, at any time, the proportion that the amount of a Claim in a particular Class or Classes (or portions thereof, as applicable) bears to the aggregate amount of all Claims (including Disputed Claims) in such Class or Classes, unless the Second Amended Plan provides otherwise. Producing Wells means and includes wells producing on the Ship Shoal and the Empire Leases, and shall also include any wells in which Offshore holds an interest that begin producing after the Confirmation Date. Professional Compensation Claim means a Claim for compensation or reimbursement of expenses of a Professional retained in the Bankruptcy Cases, and requested in accordance with sections 326, 327, 328, 330, 331, 503(b), and Professional means a professional person, as that term in used in section 327 and 1103 of the Bankruptcy Code. Proof of Claim means a Claimant s written statement that is filed with the Clerk in accordance with applicable provisions of the Bankruptcy Code and Bankruptcy Rules in the record of the Bankruptcy Case to show the basis and amount of such Claimant s Claim. Property of the Estate means all property or interests in property of Offshore and the Estate of every type and nature pursuant to section 541 of the Bankruptcy Code and applicable case law. RLI means RLI Insurance Company. RLI Insurance Claim means the Class 2 Claim of RLI Insurance Company. Recovery Allocation Agreement means the compromise between Virgin Oil Co., Inc. Plan Trust and collectively, Cahaba Partnership, Ltd., Lagniappe Productions of Louisiana, LLC, Ann Broome Priske, Horizon Energy, LLC, B.A. Adams Oil and Gas Investments, LLC, Kathy Roberts, The Carlton Capital Group LLC, ADM Properties, Inc., W.D. Mounger, Delta Royalty Company, Inc., Silver Sands Offshore, LLC, Silver Sands High Island 198, LLC, Silver Sands Ship Shoal, LLC, Paul McMullan, Jr., in his capacity as Executor for the Estate of Dr. Paul McMullan and Mrs. Georgie McMullan and Offshore approved by order entered by the Bankruptcy Court in the Bankruptcy Case on May 3, 2012 and the terms and conditions thereof that are incorporated into this Second Amended Plan by reference to the agreement. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 12 of 47

19 Clean Version of Plan with Exhibits Page 19 of 95 Rejection Claim means any Claim arising out of the rejection of an Unexpired Lease or Executory Contract pursuant to Section 365 of the Bankruptcy Code. Allowed Rejection Claims are classified as General Unsecured Claims and treated in Class 3. Reorganized Debtor means Offshore as of and after the Effective Date. Reorganized Offshore means Offshore as of and after the Effective Date. Schedules mean the schedules of assets and liabilities, schedules of executory contracts, and the statement of financial affairs as the Bankruptcy Court requires a debtor to file pursuant to section 521 of the Bankruptcy Code, the Official Bankruptcy Forms and the Bankruptcy Rules, which have been filed by Offshore, as they may be amended and supplemented from time to time. Second Amended Disclosure Statement means the SECOND AMENDED DISCLOSURE STATEMENT IN SUPPORT OF CHAPTER 11 PLAN OF REORGANIZATION DATED JULY 15, 2013 SUBMITTED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE, USA, INC., as amended, supplemented, or modified from time to time, describing this Second Amended Plan, that is prepared and distributed in accordance with sections 1125, 1126(b) and/or 1145 of the Bankruptcy Code and Bankruptcy Rule 3018 and/or other applicable law. Second Amended Plan means this SECOND AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED JULY 15, 2013 SUBMITTED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEE FOR THE ESTATE OF VIRGIN OFFSHORE, USA, INC., either in its present form or as it may be altered, amended, modified or supplemented from time to time in accordance with the Second Amended Plan, the Bankruptcy Code and the Bankruptcy Rules. Secondary Offshore Equity Trust Beneficiaries means the Class 4 Equity Interest Holder(s) that shall receive a subordinated beneficial interest in the Offshore Equity Trust created pursuant to this Second Amended Plan. Secured Claim means a Claim against Offshore (a) secured by a valid, perfected, and unavoidable Lien on Collateral or (b) subject to setoff under sections 553, 555, 556, 559, 560, and 561 of the Bankruptcy Code, in each case to the extent of the value of the Collateral or to the extent of the amount subject to setoff, as applicable, as determined in accordance with section 506(a) of the Bankruptcy Code or as otherwise agreed to, in writing, by the Trustee, Offshore or Reorganized Offshore, as the case may be, and the holder of such Claim; provided, however, that, to the extent that the value of such interest is less than the amount of the Claim which has the benefit of such security, the unsecured portion of such Claim shall be treated as an Unsecured Claim unless, in any such case, the Class of which such Claim is a part makes a valid and timely election in accordance with section 1111(b) of the Bankruptcy Code to have such Claim treated as a Secured Claim to the extent Allowed. Securities Act means the Securities Act of 1933, 15 U.S.C. 77a et seq., as now in effect or hereafter amended. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 13 of 47

20 Clean Version of Plan with Exhibits Page 20 of 95 Code. Security shall have the meaning ascribed to it in section 101(49) of the Bankruptcy Security Interest means a Lien created by agreement. Seismic Material means certain geophysical and geological data covered by the TGSN License resulting from seismic surveys performed by or on behalf of TGSN, together with the results of all processing, reprocessing, and re-display thereof. Ship Shoal means the Federal Oil and Gas Leases referred to as (i) Block 153, Ship Shoal, bearing Serial Number OCS-G18011; Block 150, Ship Shoal, bearing Serial Number OCS-419; and Block 154, Ship Shoal, bearing Serial Number OCS-420. Ship Shoal JOA means the Joint Development Agreement dated effective December 31, 2003, as amended by the First Amendment To Joint Development Agreement dated effective May 1, 2005; an Offshore Operating Agreement between Offshore, Century and Virgin Oil dated effective December 1, 2003; and a Production Handling Agreement dated effective December 1, 2003 between Offshore and Century. Term Sheet Stipulation means the stipulation between RLI, Whistler, the Plan Trust and Offshore to clarify and reduce to terms the intended meaning and application of (1) Section 4.4(A)(ii) of the Second Amended Chapter 11 Plan of Reorganization Filed by the Official Committee of Unsecured Creditors and CIT Capital USA, Inc. as of August 26, 2011, (2) paragraph 8 of the Decommissioning Term Sheet, and (3) the bonding obligation in connection with Offshore s supplemental bonds and the terms and conditions thereof that are incorporated into this Second Amended Plan by reference to the stipulation. Treasury Regulations means title 26 of the Code of Federal Regulations, 26 C.F.R et seq., as now in effect or hereafter amended. Trustee means Gerald H. Schiff, Chapter 11 Trustee for the Estate of Virgin Offshore, USA, Inc. Trustee Discharge Date means the date of Entry of the Final Decree. Unimpaired means a Claim or Interest that is not Impaired within the meaning of section 1124 of the Bankruptcy Code and applicable case law. United States Trustee means the United States trustee appointed under section 581(a)(3) of title 28 of the United States Code, as now in effect or hereafter amended, to serve in the Eastern District of Louisiana. Unsecured Creditor means the Holder of a General Unsecured Claim. Virgin Oil means Virgin Oil Company, Inc., a corporation incorporated under the laws of the State of Louisiana and formerly the sole shareholder of Offshore. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 14 of 47

21 Clean Version of Plan with Exhibits Page 21 of 95 Virgin Oil Bankruptcy Case means the Chapter 11 case of Virgin Oil styled and numbered as follows: In re Virgin Company, Inc., Case No (Bankr. E.D. La). Virgin Oil Committee means the Official Committee of Unsecured Creditors of the Virgin Oil bankruptcy estate. Virgin Oil Plan Trust means the trust formed pursuant to the Virgin Oil Chapter 11 Plan of Reorganization, as modified and amended. Voting Classes shall mean those Classes of Claims or Equity Interests entitled to vote to accept or reject the Plan. Voting Deadline means the date stated in the Voting Instructions by which all Ballots must be received by the Trustee. Voting Instructions mean the instructions for voting on the Second Amended Plan contained in the section of the Second Amended Disclosure Statement entitled VOTING PROCEDURES AND REQUIREMENTS and in the Ballots. Whistler means Whistler Energy, LLC, trustee for the Virgin Oil Plan Trust. THIS SPACE INTENTIONALLY LEFT BLANK Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 15 of 47

22 Clean Version of Plan with Exhibits Page 22 of 95 II. UNCLASSIFIED CLAIMS A. Unclassified Claims As provided in section 1123(a) of the Bankruptcy Code, Administrative Claims, Priority Tax Claims, and Professional Compensation Claims are not classified for purposes of voting on, or receiving distributions under this Plan. Holders of Administrative Claims, Priority Tax Claims, and Professional Compensation Claims are not entitled to vote on the Plan but, rather, are treated separately in accordance with Article II of this Second Amended Plan and under section 1129(a)(9)(A) of the Bankruptcy Code. B. Time for Filing Administrative Claims and Professional Compensation Claims On or as soon as practicable after the later of (i) the Effective Date or (ii) the date that an Administrative Claim, becomes an Allowed Administrative Claim, each Administrative Claim that is an Allowed Claim shall be paid in full, in Cash; provided, however, that Administrative Claims, the payment of which are not expressly provided for elsewhere in this Second Amended Plan and that represent indebtedness incurred in the ordinary course of business by the Debtor, shall be paid by the Trustee either (i) in the ordinary course of business in accordance with the terms and conditions of any agreements related thereto or (ii) as otherwise agreed among the Trustee and the Holder of such Administrative Claim. Additionally, any fees due to the U.S. Trustee s Office pursuant to 28 U.S.C will be paid as they become due by the Debtor or the Trustee. All Professionals seeking payment of an Administrative Claim pursuant to an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under Sections 503(b)(2), 503(b)(3) or 503(b)(4) of the Bankruptcy Code shall file their respective final applications for allowances of compensation for services rendered and reimbursement of expenses incurred through the Effective Date within thirty (30) days of the occurrence of the Effective Date. If granted, such Professional Compensation Claim shall be paid by Reorganized Offshore in full in such amounts as are Allowed by the Bankruptcy Court (i) on the date such Administrative Claim becomes an Allowed Administrative Claim, or as soon thereafter as is practicable or (ii) upon such other terms as may be mutually agreed upon between the Holder of an Administrative Claim and the Trustee or, on and after the Effective Date. C. Allowance of Administrative Claims An Administrative Claim with respect to which notice has been properly filed and served shall become an Allowed Administrative Claim if no objection is filed on or prior to the Administrative Claim Objection Deadline. If an objection is timely filed, the Administrative Claim shall become an Allowed Administrative Claim only to the extent Allowed by Final Order or as such Claim is settled, compromised, or otherwise resolved by the Trustee. Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 16 of 47

23 Clean Version of Plan with Exhibits Page 23 of 95 D. Allowed Priority Tax Claims Each Holder of an Allowed Priority Tax Claim shall receive Cash in an amount equal to the amount of such Allowed Priority Tax Claim on the latest of (a) the Effective Date or (b) the 30th day after such Priority Tax Claim is Allowed pursuant to (i) any agreement between the Trustee and the Holder of such Priority Tax Claim or (ii) a Final Order. The Trustee retains the right to prepay any Allowed Priority Tax Claim, or any remaining balance of such a Claim, in full or in part, at any time on or after the Effective Date without premium or penalty. E. United States Trustee Fees All fees payable under 28 U.S.C shall be paid in Cash in full as they become due by the Debtor and/or Reorganized Offshore, as applicable, up until issuance of the Final Decree. III. CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS A. SUMMARY The categories of Claims and Equity Interests listed below classify Claims and Equity Interests for all purposes, including voting, confirmation, and distribution pursuant hereto and pursuant to sections 1122 and 1123(a)(1) of the Bankruptcy Code. A Claim or Equity Interest shall be deemed classified in a particular Class only to the extent that the Claim or Equity Interest qualifies within the description of that Class and shall be deemed classified in a different Class to the extent that any remainder of such Claim or Equity Interest qualifies within the description of such different Class. A Claim or Equity Interest is in a particular Class only to the extent that such Claim or Equity Interest is Allowed in that Class and has not been paid or otherwise settled prior to the Effective Date. Class Number Claim Status Voting Rights Class 1 Empire Secured Claims Impaired Entitled to Vote Class 2 RLI Insurance Claim Impaired Entitled to Vote Class 3 General Unsecured Claims Impaired Entitled to Vote Class 4 Debtor Equity Interests Impaired Entitled to Vote Second Amended Plan of Reorganization Dated July 15, 2013 with Immaterial Modifications Page 17 of 47