equity trust agreement and declaration of trust 6-12-13.pdf

7/28/2019 equity trust agreement and declaration of trust 6-12-13.pdf

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EQUITY TRUST AGREEMENT AND DECLARATION OF TRUST

This Equity Trust Agreement (the Equity Trust Agreement), dated as of _______ __,2013 (the Effective Date), is entered into by and among Virgin Offshore U.S.A., Inc. (theDebtor), and Gerald H. Schiff, in his capacity as trustee under this Equity Trust Agreement

(the Equity Trustee).

RECITALS

A. On September 16, 2011, an involuntary petition under chapter 11 of the United StatesCode, 11 U.S.C. 101, et seq. (the Bankruptcy Code) was filed in the United StatesBankruptcy Court for the Eastern District of Louisiana (the Bankruptcy Court) byPrecision Drilling Company, LP, Dynamic Energy Services, LLC and Tanner Services,LLC and subsequently consented to by the Debtor on October 6, 2011.

B. On October 14, 2011, the Bankruptcy Court entered an Order approving the appointmentof Gerald H. Schiff as chapter 11 trustee of the Debtors estate. The Debtors case isbeing administered under Case No. 11-13028.

C. The FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATEDMARCH 28, 2013 SUBMITTED BY GERALD H. SCHIFF, CHAPTER 11 TRUSTEEFOR THE ESTATE OF VIRGIN OFFSHORE, USA, INC. (the Plan) was confirmedby Order of the Bankruptcy Court, entered on ______ __, 2013 (the ConfirmationOrder).

D. Pursuant to the Plan and this Equity Trust Agreement, Gerald H. Schiff has beenappointed as the Equity Trustee.

E. The Plan has become effective as of the Effective Date set forth above.F. The terms and conditions of the Plan are hereby incorporated by reference. A copy of the

Plan is attached hereto as Exhibit A.

G. Capitalized terms not otherwise defined herein shall have the meanings set forth in thePlan.

NOW, THEREFORE, in consideration of the mutual covenants and agreements of theparties contained herein, the parties hereby agree as follows:

1. DECLARATION OF TRUST(a) Name and Address of Equity Trust. The Equity Trust established hereby

shall be named the Offshore Equity Trust. In connection with the exercise of its powers, theEquity Trustee may use such name and may transact the business and affairs of the Equity Trustin such name.

Case 11-13028 Doc 430-1 Filed 06/12/13 Entered 06/12/13 16:40:20 Exhibit A -Form Equity Trust Agreement Page 1 of 14

Exhibit A


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(b) Declaration and Establishment of Equity Trust. For good and valuableconsideration, the receipt of which is hereby acknowledged by the undersigned, the Debtor,pursuant to the Plan and the Confirmation Order and in accordance with the Bankruptcy Code,applicable tax statutes, rules and regulations, hereby executes this Equity Trust Agreement,creates and establishes the Equity Trust and irrevocably issues, transfers, grants, assigns, conveys

and delivers to the Equity Trustee, pursuant to the Plan, all of the rights, title and interest of theDebtor in and to the Debtors Common Stock to be held in trust to and for the benefit of the ofthe Offshore Equity Trust Beneficiaries and Secondary Offshore Equity Trust Beneficiary for theuses and purposes stated herein and in the Plan.

(c) Purpose of Equity Trust. The Equity Trust is organized and establishedfor the sole purpose of holding the Equity Interest of Reorganized Offshore and distributing theDistributions made by Reorganized Offshore to the Offshore Equity Trust, which shall hold suchDistributions as necessary to pay expenses of the Trust and thereafter for the benefit of OffshoreEquity Trust Beneficiaries in accordance with Treasury Regulation section 301.7701-4(d). TheOffshore Equity Trust shall not have as its objective the conduct of a trade or business for profit

but shall own the new Equity Interests in the reorganized Debtor for the purpose of directing theliquidation of the Debtors assets. Interests in the Offshore Equity Trust shall not be certificatedor transferable, except with respect to a transfer by will or under the laws of descent anddistribution, as set forth in the Offshore Equity Trust Agreement.

(d) Appointment of Equity Trustee. Gerald H. Schiff is hereby appointed asthe Equity Trustee as of the Effective Date. Beginning as of the Effective Date, and unless anduntil a removal or resignation of the Equity Trustee occurs pursuant to the terms of this EquityTrust Agreement, the Equity Trustee shall serve as the representative of the Equity Trust forpurposes of administering the Equity Trust.

(e) Acceptance by Equity Trustee. The Equity Trustee has accepted (i) hisappointment to serve as Equity Trustee; (ii) the transfer of the Debtors Common Stock on behalfof the Equity Trust and (iii) the trust imposed by this Equity Trust Agreement. The EquityTrustee agrees to accomplish all activities necessary to ensure the transfer of the DebtorsCommon Stock to the Equity Trust. The Equity Trustee further agrees to make distributions fromthe Equity Trust to Holders of Equity Trust Interests pursuant to the terms of the Plan, theConfirmation Order and this Equity Trust Agreement.

(f) Equity Trust Expense Reserve. On the Effective Date, a reserve of$10,000 shall be established (and replenished as necessary) to fund all operating andadministrative costs and expenses and other costs and expenses necessary to conduct allactivities in connection with the Equity Trust (the Equity Trust Expense Reserve), as set forthin the Plan and this Equity Trust Agreement. The Equity Trustee shall be entitled to seekreimbursement for reasonable expenses from the Reorganized Debtor in an amount not to exceedthe Equity Trust Expense Reserve; provided, however, that the Reorganized Debtor shall have noliability or obligation to provide reimbursement in an amount greater than the Equity TrustExpense Reserve.

2. EQUITY TRUST INTERESTS



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(a) Issuance and Allocation of Equity Trust Interests. In accordance withthe Plan, each Beneficiary shall receive an uncertificated and nontransferable Equity TrustInterest in the Equity Trust which shall entitle the Holder of such Equity Trust Interest todistributions from the Equity Trust as provided in the Plan and this Equity Trust Agreement.

Subject to and in accordance with the terms of the Plan, the beneficial interests in the EquityTrust shall be divided into Series A Equity Trust Interests and Series B Equity Trust Interests.Subject to and in accordance with the terms of the Plan, including without limitation theallocation formulas set forth in the Plan (and defined below), (i) each Holder of an AllowedClass 3 General Unsecured Claim shall be deemed to receive Series A Equity Trust Interests inan amount equal to the Allowed Amount of such Claim (the Offshore Equity TrustBeneficiaries) and (ii) the Equity Interest Holder (the Virgin Oil Plan Trust) shall be deemed toreceive Series B Equity Trust Interests in an amount equal to the number of shares of theDebtors common stock owned by such Holder (the Secondary Offshore Equity TrustBeneficiary). The rights of the Secondary Offshore Equity Trust Beneficiary to receiveDistributions shall be subordinate to the rights of the Offshore Equity Trust Beneficiaries and the

Secondary Offshore Equity Trust Beneficiary shall only receive Distributions from the OffshoreEquity Trust in the event that and after all expenses of the Offshore Equity Trust are paid in full,all Allowed Claims in Classes 1 and 2 are paid in full, and Distributions in the aggregate amountof the Allowed Class 3 Claims have been made to the Offshore Equity Trust Beneficiaries,including Distributions to the Holder of the Class 2 Claim (RLI Insurance Company) on accountand in the amount of any such Holders Class 3 Claim.

(b) Equity Trust Interests Beneficial Only. The ownership of an EquityTrust Interest shall not entitle any Beneficiary to any title in the Equity Trust or to any right tocall for partition or division of any assets of the Equity Trust or otherwise make any investmentdecision with respect to or in respect of the assets of the Equity Trust.

(c) Register of Holders of Equity Trust Interests. The Equity Trustee shallmaintain at all times a register of the names and addresses of the Holders of Equity TrustInterests and the amount of their respective Equity Trust Interests (the Register). The EquityTrustee shall update the Register as appropriate to reflect any changes of ownership of EquityTrust Interests. The Equity Trustee may deem the Beneficiary of record in the Register as theabsolute owner of such Equity Trust Interests for the purpose of making distributions on accountof such Equity Trust Interests and for all other purposes. The Equity Trustee shall not be liablefor relying on the accuracy of the Register, provided that he has maintained the Register inaccordance with this Equity Trust Agreement, including making all changes based upon propernotification under this Equity Trust Agreement. Beneficiaries and their duly authorizedrepresentatives shall have the right, upon reasonable prior written notice to the Equity Trustee,and in accordance with any reasonable requirements imposed by the Equity Trustee, to inspectand make copies of the Register, in each case for a purpose reasonably related to the Equity TrustInterests of such Beneficiaries. For the avoidance of doubt, the Register shall initially bedetermined by the Reorganized Debtor submitting a final schedule of the Holder of AllowedClass 3 General Unsecured Claims that are entitled to a beneficial interest in the Offshore EquityTrust in accordance with Article III of the Plan.



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3. EQUITY TRUSTEE(a) General. The Equity Trustee shall have all duties specified in the Plan,

the Confirmation Order and this Equity Trust Agreement. The Equity Trustees powers areexercisable solely in a fiduciary capacity consistent with, and in furtherance of, the purposes of

the Equity Trust. The Equity Trustee, and any successor Equity Trustee, shall receive, withoutBankruptcy Court approval, reasonable compensation for services rendered equivalent to three(3%) percent of (1) all Distributions made by the Equity Trustee, including but not limited to allpayments made by the Equity Trust in the ordinary course, all Distributions, if any, made toOffshore Equity Trust Beneficiaries and the Secondary Offshore Equity Trust Beneficiaryaccording to the terms of the Plan and this Equity Trust Agreement, and (2) reimbursement ofout-of-pocket expenses of the Offshore Equity Trustee in handling his duties as Trustee of theTrust. Further, the Offshore Equity Trustee shall be entitled to retain counsel of his choosing,including counsel for the Trustee and Reorganized Offshore (i.e. Gordon Arata) and suchentitlement shall be recognized by the Offshore Equity Trust Agreement, Reorganized OffshoreBy-Laws and Confirmation Order. No Equity Trustee shall be required to give any bond or

surety or other security for the performance of its duties.

(b) Tenure, Removal and Replacement of Equity Trustee. The EquityTrust shall be created, effective as of the Effective Date. Thereupon, the Equity Trustee willserve until resignation or removal as provided below:

(i) Prior to the final submission of the Register, the Equity Trusteemay resign upon not less than sixty (60) days prior written notice to the Beneficiaries; provided,however, that no such resignation will be effective until a successor Equity Trustee has beenappointed and approved in accordance with this Equity Trust Agreement and such successorEquity Trustee has accepted such appointment in accordance hereof. If a successor EquityTrustee is not appointed or does not accept the appointment within ninety (90) days followingdelivery of a written notice of resignation, the resigning Equity Trustee may file a motion withthe Bankruptcy Court (on notice to the Beneficiaries) for the appointment of a successor EquityTrustee. Upon the resignation of the Equity Trustee and the appointment and acceptance of asuccessor, the resigning Equity Trustee, if applicable, will convey, transfer, and set over to thesuccessor Equity Trustee by appropriate instrument or instruments all of the funds, if any, thenunconveyed or otherwise undisposed of and all other assets then in the resigning EquityTrustees possession and held under this Equity Trust Agreement, including without limitationthe Exchanged Common Stock.

(ii) Following the final submission of the Register, the Equity Trusteemay be removed by the filing of a motion with the Bankruptcy Court, on notice to theBeneficiaries, that is supported by a simple majority of the Holders of Equity Trust Interests (interms of the number of interests held), which removal shall become effective upon the entry ofan order of the Bankruptcy Court granting such motion and directing such removal; provided,however, that prior to the removal of the Equity Trustee, a successor to the Equity Trustee shallbe appointed.



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(iii) In the event of a vacancy in the position of the Equity Trustee, asuccessor Equity Trustee shall be appointed upon (a)(1) the written consent of a simple majorityof the Holders of Equity Trust Interests (in terms of the number of interests held), or (2) by theBankruptcy Court upon the filing of a motion supported by a simple majority of the Holders ofEquity Trust Interests (in terms of the number of interests held), with notice to the Beneficiaries

and (b) the confirmation of such appointment by the Bankruptcy Court and the acceptance ofsuch appointment by the successor Equity Trustee. Upon the appointment of, and acceptance by,a successor Equity Trustee, such successor Equity Trustee shall file a notice of such appointmentand acceptance with the Bankruptcy Court, which notice shall be served upon the Beneficiariesand shall include the name, address, and telephone number of the successor Equity Trustee;provided, however that the filing of such notice shall not be a condition precedent to the vestingin the successor Equity Trustee of all rights, powers, duties, authority, and privileges of thepredecessor Equity Trustee.

(iv) Immediately upon appointment of any successor Equity Trusteeand acceptance of such appointment by such successor Equity Trustee, all rights, powers, duties,

authority, and privileges of the predecessor Equity Trustee hereunder will be vested in andundertaken by the successor Equity Trustee without any further act.

(c) Equity Trust Continuance. The resignation, removal or death of theEquity Trustee shall not terminate this Equity Trust Agreement or the Equity Trust nor revokeany existing agency (other than any agency of such Equity Trustee) created pursuant to thisEquity Trust Agreement or invalidate any action theretofore taken by such Equity Trustee. Upontermination of its employment, the Equity Trustee shall (i) promptly execute and deliver suchdocuments, instruments or other writings as may be necessary to effect the termination of theEquity Trustees employment under this Equity Trust Agreement; (ii) deliver to any temporaryor successor Equity Trustee all documents, instruments, records and other writings related to theEquity Trust as may be in possession of the Equity Trustee and (iii) otherwise assist andcooperate in effecting the assumption of its obligations and functions by the temporary orsuccessor Equity Trustee. Any successor Equity Trustee shall be deemed to agree that theprovisions of this Equity Trust Agreement are binding upon and inure to the benefit of suchsuccessor Equity Trustee, as well as its respective heirs and legal and personal representatives,successors or assigns.

(d) Powers of Equity Trustee. In connection with the administration of theEquity Trust, the Equity Trustee shall perform only those acts necessary and desirable toaccomplish the purposes of the Equity Trust to the extent authorized hereunder and under thePlan. Subject to the limitations and fiduciary duties set forth in this Equity Trust Agreement, thePlan and the Confirmation Order, and in addition to any powers and authority conferred by lawor by this Equity Trust Agreement or the Plan, the Equity Trustee may exercise all powersgranted to it hereunder or under the Plan, including, without limitation, all actions related to, orin connection with, administration of the Equity Trust and making distributions to holders ofEquity Trust Interests in accordance with the Plan and this Equity Trust Agreement. Subject tothe foregoing, the duties and powers of the Equity Trust shall include, without limitation, thefollowing:



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(i) To accept, preserve, receive, collect, manage, invest, supervise andprotect the Distributions from Reorganized Offshore, as provided in the Plan;

(ii) To open and maintain bank accounts on behalf of the Equity Trust,deposit funds therein, and draw checks thereon, as appropriate under the Plan, the Confirmation

Order and this Equity Trust Agreement;

(iii) To seek reimbursement for reasonable expenses of the EquityTrust from the Reorganized Debtor;

(iv) To make distributions from the Equity Trust to Holders of EquityTrust Interests in accordance with the terms of the Plan, the Confirmation Order and this EquityTrust Agreement;

(v) To prepare and file any statements, returns or disclosures relatingto the Equity Trust that are required by any governmental unit or the Bankruptcy Court;

(vi) To prepare and file tax and other informational returns for theEquity Trust;

(vii) To prepare and provide annual unaudited reports and otherinformation to the Beneficiaries; and

(viii) To take all other actions not inconsistent with the provisions of thisEquity Trust Agreement and the Plan which the Equity Trustee deems reasonably necessary ordesirable in connection with the administration of the Equity Trust.

(e) Limitations on Powers of Equity Trustee.Notwithstanding anything inthis Equity Trust Agreement to the contrary, the Equity Trustee shall not do or undertake any ofthe following:

(i) Make any distributions from the Equity Trust to Holders of EquityTrust Interests other than as authorized under the Plan, the Confirmation Order and this EquityTrust Agreement;

(ii) Use any portion of the assets of the Equity Trust in the conduct ofa trade or business;

(iii) Take any action in contravention of the Plan, the ConfirmationOrder or this Equity Trust Agreement;

(iv) Take any action or fail to take any action that would jeopardizetreatment of the Equity Trust as a liquidating trust or a grantor trust for federal income taxpurposes;



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(v) Grant any liens, charges, pledges or encumbrances on any of theassets of the Equity Trust;

(vi) Issue any securities or other evidences of beneficial ownership of,or beneficial interest in, the Equity Trust or the assets of the Equity Trust other than maintaining

the Register;

(vii) Guaranty any debt;(viii) Loan or transfer any assets to the Equity Trustee in its individual

capacity;

(ix) Purchase any assets from the Equity Trust;(x) Transfer any assets of the Equity Trust to another trust with respect

to which any Equity Trustee serves as trustee; or

(xi) Possess the assets of the Equity Trust for purposes other than thepurposes of the Equity Trust as expressly provided in the Plan and this Equity Trust Agreement.

(f) Limitations on Investments by Equity Trustee. The right and power ofthe Equity Trustee to invest any assets transferred to the Equity Trust, the proceeds thereof, orany income earned by the Equity Trust, shall be limited to the right and power to invest suchassets in deposits in banks or savings institutions and temporary, liquid investments such asshort-term certificates of deposit or Treasury bills. The scope of any such permissibleinvestments will be limited to include only those investments, or will be expanded to include anyadditional investments, as the case may be, that a liquidating trust, within the meaning ofTreasury Regulation Section 301.7701-4(d) may be permitted to hold, pursuant to the TreasuryRegulations, or any modification in the IRS guidelines, whether set forth in IRS rulings, otherIRS pronouncements or otherwise.

(g) Books and Records. The Equity Trustee shall maintain in respect of theEquity Trust books and records relating to the assets of the Equity Trust and income realizedtherefrom and the payment of expenses of and claims against or assumed by the Equity Trust insuch detail and for such period of time as may be reasonably necessary to enable the EquityTrust to make full and proper reports in respect thereof. Except as expressly provided in thisEquity Trust Agreement, the Plan or the Confirmation Order, nothing in this Equity TrustAgreement is intended to require the Equity Trustee to file any accounting or seek approval ofany court with respect to the administration of the Equity Trust, or as a condition for making anypayment or distribution from or on account of the assets of the Equity Trust.

4. LIABILITY OF EQUITY TRUSTEE(a) Standard of Care; Exculpation. The Equity Trustee shall not be liable

for any action it takes or omits to take that it believes in good faith to be authorized or within itsrights or powers unless it is ultimately and finally determined by a court of competent



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jurisdiction that such action or inaction was the result of gross negligence or willful misconduct.Persons dealing with the Equity Trustee, or seeking to assert claims against the Equity Trust orthe Equity Trustee, shall have recourse only to the assets of the Equity Trust to satisfy anyliability incurred by the Equity Trustee to such persons in carrying out the terms of this EquityTrust Agreement.

(b) No Liability for Acts of Predecessor Equity Trustee. No successorEquity Trustee shall be in any way liable for the acts or omissions of any predecessor EquityTrustee unless such successor Equity Trustee expressly assumes such responsibility.

(c) Reliance by Equity Trustee on Documents, Mistake of Fact or Adviceof Counsel. Except as otherwise provided in this Equity Trust Agreement, the Equity Trusteemay rely, and shall be protected from liability for acting, upon any resolution, certificate,statement, instrument, opinion, report, notice, request, consent, order or other paper or documentreasonably believed by the Equity Trustee to be genuine and to have been presented by anauthorized party. The Equity Trustee shall not be liable if it acts or fails to act based on a mistake

of fact before having actual knowledge of an event, except with respect to any act or omissionthat constitutes intentional fraud, willful misconduct, gross negligence or willful disregard of itsduties hereunder. The Equity Trustee shall not be liable for any action or omission taken orsuffered by the Equity Trustee in relying upon the advice of counsel or other professionalsengaged by the Equity Trustee in accordance with this Equity Trust Agreement, except withrespect to any act or omission that constitutes intentional fraud, willful misconduct, grossnegligence or willful disregard of its duties hereunder.

5. TAXES(a) Income Tax Status. The Equity Trust created by this Equity Trust

Agreement is intended (i) to be a liquidating trust within the meaning of Section 301.7701-4(d)of the United States Treasury Regulations and a grantor trust pursuant to Sections 671 and 677 ofthe Internal Revenue Code and (ii) to comply with the requirements of Revenue Procedure 94-45, 1994-2 C.B. 684. The Beneficiaries of the Equity Trust shall be treated as its grantors anddeemed owners. All earnings of the Equity Trust, including earnings or income retained inreserve accounts or as reserves, will be allocated to the Beneficiaries on an annual basis in amanner consistent with the distributions to each such Beneficiary pursuant to this Equity TrustAgreement, and each Beneficiary shall be responsible to report and pay the taxes due on itsproportionate share of the Equity Trust income whether or not amounts are actually distributedby the Equity Trustee to the Beneficiaries. The value of the assets transferred into the EquityTrust shall be the fair market value of such assets at the time of such transfer. The assetstransferred to the Equity Trust shall be valued consistently by all parties including, but notlimited to, the Beneficiaries, and these valuations will be used for federal income tax purposes.

(b) Tax Returns. Subject to definitive guidance from the IRS or a court ofcompetent jurisdiction to the contrary (including, without limitation, the receipt by the EquityTrustee of a private letter ruling if the Equity Trustee so requests one, or the receipt of an adversedetermination by the IRS upon audit if not contested by the Equity Trustee), the Equity Trusteeshall file with the IRS annual tax returns attached to Form 1041 as a grantor trust pursuant to



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Treasury Regulation Section 1.671-4(a), and shall file in a timely manner such other tax returnsas are required by applicable law and pay any taxes shown as due thereon. As soon as practicableafter the close of each calendar year, the Equity Trustee will mail to each Holder of a EquityTrust Interest of record during such year a statement showing information sufficient for suchHolders to determine its share of income, gain, loss, deduction or credit and credits for federal

income tax purposes in accordance with United States Treasury Regulation Section 1.671-4(a)and Form 1041, which the Equity Trustee will instruct all such Holders to report such items ontheir federal income tax returns.

6. DISTRIBUTIONS TO BENEFICIARIES(a) General. The Equity Trustee shall be responsible for making distributions

to Beneficiaries from the Equity Trust as required by and set forth in the Plan, the ConfirmationOrder and this Equity Trust Agreement. All distributions made by the Equity Trustee to theBeneficiaries shall be payable to the Beneficiaries of record, as set forth in the Register. If thedistribution shall be in Cash, the Equity Trustee shall distribute such Cash by wire from a

domestic bank, by check drawn on an Equity Trust bank account, or by such other method as theEquity Trustee deems appropriate under the circumstances. The Equity Trustee may withholdfrom amounts distributable to any Beneficiary any and all amounts, determined in the EquityTrustees reasonable sole discretion, to be required by any law, regulation, rule, ruling, directiveor other governmental requirement.

(b) Source and Manner of Distributions. All distributions made to theBeneficiaries under the Plan and this Equity Trust Agreement shall be made only from theEquity Trust, and only to the extent that the Equity Trustee shall have sufficient assets to makesuch distributions in accordance with the terms of the Plan and this Equity Trust Agreement.Each Beneficiary shall look solely to the Equity Trust and not to the Equity Trustee in itspersonal, individual or corporate capacity for distribution to such Beneficiary as herein provided.When, in the discretion of the Equity Trustee, the Equity Trust has Cash in an amount sufficientto render feasible a distribution to the Beneficiaries, the Equity Trustee shall transfer and pay, orcause to be transferred and be paid, to the Beneficiaries such aggregate amount of Cash as shallthen be held in the Equity Trust in accordance with the Plan and this Equity Trust Agreement;provided, however, that the aggregate amount of Cash shall exclude any Cash needed to pay theexpenses, debts, charges, liabilities and obligations of the Equity Trust. The amount of any suchdistribution shall be determined by the Equity Trustee in its reasonable discretion and inaccordance with the Plan and this Equity Trust Agreement.

(c) Distributions and Withholdings. No distributions shall be made untilcompletion of the P&A Work and final determination of all Allowed Claims in accordance withthe Plan. Upon submittal of the Register by the Equity Trustee, pro rata Distributions to theOffshore Equity Trust Beneficiaries of the Distributions shall be made by the Equity Trust assoon as practicable, but in no case later than ninety (90) days after receipt of distributions fromthe Reorganized Debtor. For the avoidance of doubt, the pro rata Distributions by the EquityTrust to the Holders of Class 3 Claims shall be from the following types of proceeds distributedby Reorganized Debtor to the Equity Trust, in accordance with the objectives of the Equity Trustas owner of Reorganized Debtor to oversee the liquidation of Assets of Reorganized Offshore:



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(i) The net proceeds received from currently Producing Wells, less expensesinvolved in administering the Equity Trust.

(ii) The net proceeds, if any, received from the sale and/or transfer byReorganized Debtor of Existing Oil and Gas Assets (as defined in the Plan).

(iii) The net proceeds received pursuant to the Recovery AllocationAgreement, if any, for the prosecution and/or settlement of the D&O Litigation.

(iv) The net proceeds, if any, derived from any and all other causes of actionretained by the Debtor.

The rights of the Secondary Offshore Equity Trust Beneficiary to receive Distributionsshall be subordinate to the rights of the Offshore Equity Trust Beneficiaries and the SecondaryOffshore Equity Trust Beneficiary shall only receive Distributions from the Equity Trust in the

event that funds are available for Distribution after all expenses of the Equity Trust are paid infull, all Allowed Claims in Classes 1 and 2 are paid in full, and Distributions in the aggregateamount of the Allowed Class 3 Claims have been made to the Offshore Equity TrustBeneficiaries, including Distributions to the Holders of Class 2 Claims on account and in theamount of any such Holders Class 3 Claim.

Except as otherwise provided in the Plan or this Equity Trust Agreement, in the event thatthe Equity Trustee were to fail to make any payment or perform any obligation when due underthe Plan or under any instrument issued under the Plan, the affected Claimant/Beneficiary shallgive thirty-five (35) days written notice to the Equity Trustee with opportunity to cure any suchfailure; if cure is not timely effected, then and only then may such Claimant proceed to enforce

its rights and remedies pursuant to applicable law.

7. DURATION OF EQUITY TRUST(a) Duration and Termination of Equity Trust. The Equity Trust will

terminate and cease to exist on the date that is the later of liquidation of all Assets of theReorganized Debtor and three (3) years from the Effective Date; provided, however, that uponcomplete liquidation of the Reorganized Debtors assets and satisfaction as far as possible of allremaining obligations, liabilities and expenses of the Reorganized Debtor and the Equity Trustprior to such date, and upon conclusion of the prosecution of all Causes of Action and all ClaimObjections litigated by the Reorganized Debtor for purposes of establishing Holders of Allowed

Class 3 Claims pro rata share of the beneficial interest in the Equity Trust, the Equity Trusteemay, with approval of the Bankruptcy Court, sooner terminate the Equity Trust; and providedfurther, that prior to the end of three (3) years from the Effective Date, the Equity Trustee maymove the Bankruptcy Court to extend the termination date of the Equity Trust after notice tointerested parties and an opportunity for hearing.

(b) Winding Up and Discharge of the Equity Trustee. For the purpose ofwinding up the affairs of the Equity Trust at its termination, the Equity Trustee shall continue to



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act as Equity Trustee until its duties have been fully discharged. After doing so, the EquityTrustee, its agents and employees shall have no further duties or obligations hereunder, except asrequired by this Equity Trust Agreement, the Plan, the Confirmation Order or applicable lawconcerning the termination of a trust.

8.

GENERAL PROVISIONS

(a) Amendments. On notice to the Beneficiaries, the Equity Trustee maypropose to the Bankruptcy Court the modification, supplementation or amendment of this EquityTrust Agreement or, alternatively, effect such modification, supplementation or amendment uponthe written consent of a simple majority of the Holders of Equity Trust Interests (in terms of thenumber of interests held); provided, however, that no modification, supplementation oramendment of this Equity Trust Agreement that materially alters or modifies the rights of anyHolder of an Equity Trust Interest shall be effective except upon a final order of the BankruptcyCourt.

(b)

Waiver. No failure by the Equity Trustee to exercise or delay inexercising any right, power or privilege hereunder shall operate as a waiver, nor shall any singleor partial exercise of any right, power or privilege hereunder preclude any further exercisethereof, or of any other right, power or privilege.

(c) Cumulative Rights and Remedies. The rights and remedies provided inthis Equity Trust Agreement are cumulative and are not exclusive of any rights under law or inequity.

(d) No Bond Required. Notwithstanding any state law to the contrary, theEquity Trustee (including any successor Equity Trustee) shall be exempt from giving any bondor other security in any jurisdiction, unless otherwise ordered by the Bankruptcy Court; if sootherwise ordered, all costs and expenses of procuring any such bond shall be paid from theEquity Trust Expense Fund.

(e) Irrevocability. The Equity Trust is irrevocable.(f) Tax Identification Numbers. The Equity Trustee may require any

Beneficiary to furnish to the Equity Trustee its social security number or taxpayer identificationnumber as assigned by the IRS, and the Equity Trustee may condition any distribution to anyBeneficiary upon the receipt of such identification number.

(g) Relationship to the Plan and the Confirmation Order. The principalpurpose of this Equity Trust Agreement is to aid in the implementation of the Plan and theConfirmation Order. Notwithstanding the foregoing, in the event that any provision of thisEquity Trust Agreement is found to be inconsistent with a provision of the Plan or theConfirmation Order, the provisions of the Plan and Confirmation Order shall control.

(h) Division of Trust. Under no circumstances shall the Equity Trustee havethe right or power to divide the Equity Trust unless authorized to do so by the Bankruptcy Court.



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(i) Governing Law. This Equity Trust Agreement shall be governed andconstrued in accordance with the laws of the State of Louisiana, without giving effect to rulesgoverning the conflict of laws.

(j)

Jurisdiction. The Bankruptcy Court shall have continuing and exclusivejurisdiction to hear and determine all disputes arising out of the administration and operation ofthe Equity Trust and distributions therefrom and the interpretation of this Equity TrustAgreement.

(k) Severability. In the event that any provision of this Equity TrustAgreement or the application thereof to any person or circumstance shall be determined by theBankruptcy Court or another count of competent jurisdiction to be invalid or unenforceable toany extent, the remainder of this Equity Trust Agreement, or the application of such provision topersons or circumstance, other than those as to which it is held invalid or unenforceable, shall notbe affected thereby, and such provision of this Equity Trust Agreement shall be valid and

enforced to the fullest extent permitted by law.

(l) Notices. All notices, requests, demands, consents and othercommunications hereunder shall be in writing and shall be deemed to have been duly given, ifdelivered in person or by facsimile with an electromechanical report of delivery or if sent byovernight mail or by registered or certified mail with postage prepaid, return receipt requested, orby email (to an address provided by the noticee and which, after transmission, is not rejected byrecipients email server), to the following addresses:

To the Reorganized Debtor:

To the Equity Trust:

The parties may designate in writing from time to time other and additional places to whichnotices may be sent. All demands, requests, consents, notices and communications shall bedeemed to have been given (i) at the time of actual delivery thereof, (ii) if given by certified orregistered mail, five (5) business days after being deposited in the United States mail, postageprepaid and properly addressed, (iii) if given by overnight courier, the next business day afterbeing sent, charges prepaid and properly addressed or (iv) if given via email, 24 hours aftertransmission, so long as the email transmitted has not been rejected by the recipients emailserver or otherwise.

(m) Further Assurances. From and after the Effective Date, the parties heretocovenant and agree to execute and deliver all such documents and notices and to take all suchfurther actions as may reasonably be required from time to time, to carry out the intent andpurposes of this Equity Trust Agreement, and to consummate the transactions contemplatedhereby.

(n) Integration. This Equity Trust Agreement, the Plan and the ConfirmationOrder constitute the entire agreement with by and among the parties, and there are norepresentations, warranties, covenants or obligations except as set forth herein, in the Plan and in



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the Confirmation Order. This Equity Trust Agreement, together with the Plan and theConfirmation Order, supersede all prior and contemporaneous agreements, understandings,negotiations and discussions, written or oral, of, the parties hereto, relating to any transactioncontemplated hereunder. Except as otherwise provided herein or in the Plan or ConfirmationOrder, nothing herein is intended or shall be construed to confer upon or give any person other

than the parties hereto any rights or remedies under or by reason of this Equity Trust Agreement.

(o) Binding Effect; Third Party Beneficiaries. This Equity Trust Agreementshall be binding upon, and inure to the benefit of, the parties and their respective beneficiaries,heirs, representatives, successors and permitted assigns. This Equity Trust Agreement shall notconfer any rights or remedies upon any person other than the parties hereto.

(p) Successors or Assigns. The terms of this Equity Trust Agreement shall bebinding upon, and shall inure to the benefit of the parties hereto and its successors and assigns, ifany.

(q)

Interpretation. The enumeration and section headings contained in thisEquity Trust Agreement are solely for convenience of reference and shall not affect the meaningor interpretation of this Equity Trust Agreement or of any term or provision hereof. Unlesscontext otherwise requires, whenever used in this Equity Trust Agreement the singular shallinclude the plural and the plural shall include the singular, and words importing the masculinegender shall include the feminine and the neuter, if appropriate, and vice versa and wordsimporting persons shall include partnerships, associations and corporations. The words herein,hereby, and hereunder and words with similar import, refer to this Equity Trust Agreement as awhole and not to any particular section or subsection hereof unless the context requiresotherwise.

(r) Counterparts. This Equity Trust Agreement may be signed by the partieshereto in counterparts, which, when taken together, shall constitute one and the same document.

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IN WITNESS WHEREOF, the parties hereto have either executed and acknowledgedthis Equity Trust Agreement, or caused it to be executed and acknowledged on their behalf bytheir duly authorized officers all as of-the date first above written.

By:Name:

Title:

By:

Name: Gerald H. Schiff

Title: Equity Trustee
