Case 11-13028

Claim 19-1 Part 2

Filed 03/09/12 of 2

Supplement Attachment A

Page 1

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF LOUISIANA In re: VIRGIN OFFSHORE USA, INC. Debtor CHAPTER 11 CASE NO. 11-13028 JUDGE MAGNER

ATTACHMENT A--MEMORANDUM IN SUPPORT OF PROOF OF CLAIM Robert Fulton Smith, Jr. has incurred substantial expenses, including attorneys fees, in the defense of the lawsuit styled The Official Committee of Unsecured Creditors of Virgin Oil Company, Inc., et al. v. Robert Fulton Smith, Jr., et al., No. 11-08906, currently pending in the Civil District Court for the Parish of Orleans (the CDC Case).1 To date, these expenses total $45,054, and Mr. Smiths expenses will continue to grow as the case against him proceeds.2 The by-laws of Virgin Offshore USA, Inc. (Virgin Offshore) entitle Mr. Smith to indemnity for these expenses. Section 7.1 of Virgin Offshores by-laws provides as follows: The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative, including any action by or in the right of the Corporation, by reason of the fact that he or she is or was a director, officer, employee, or agent of the Corporation . . . against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation.3 As the CDC Case brings allegations against Mr. Smith in his capacity as an officer and director

The plaintiffs Second Supplemental, Superseding, and Amending Petition in the CDC Case is attached as Ex. A. Mr. Smith reserves the right to amend and supplement this proof of claim as the CDC Case continues. Mr. Smith also expressly reserves the right of setoff.
3 2

Virgin Oils by-laws are attached as Ex. B.

Case 11-13028

Claim 19-1 Part 2

Filed 03/09/12 of 2

Supplement Attachment A

Page 2

of Virgin Offshore, Section 7.1 of Virgin Oils by-laws applies to the CDC case.4 Virgin Offshore will be required to indemnify Mr. Smith for his expenses in defending against many of the allegations in the CDC case. Although some of the allegations in the CDC case involve willful or intentional misconduct for which Virgin Offshore may not be required to indemnify Mr. Smith, other allegations involve only negligence of varying degrees. For example, Count X alleges negligent misrepresentation on the part of Mr. Smith; Count IX alleges negligent misappropriation of assets; Count VIII alleges gross mismanagement of wells and reserves; Count VII alleges gross negligence in the loss of various leases; and Count VI alleges gross negligence associated with a supposed failure to develop the High Island 199 Lease. For at least each of these counts, Virgin Offshores by-laws require it to indemnify Mr. Smith for his expenses in defending the CDC case. As a result of Virgin Offshores obligation to indemnify him, Mr. Smith is a creditor of Virgin Offshore.

Respectfully submitted, /s/ Paul E. Bullington________ Guy E. Wall (#7718) Paul E. Bullington, T.A. (#14109) Jonathan R. Cook (#25629) Wall, Bullington & Cook, LLC 540 Elmwood Park Blvd. New Orleans, LA 70123 (504) 736-0347 (Phone) (504) 734-8574 (Fax) Attorneys for Robert Fulton Smith, Jr.

Ex. A, Introduction.