UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF TENNESSEE MOTION OF TITAN GLOBAL HOLDINGS, INC. TO APPOINT A CHAPTER 11 TRUSTEE

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1 UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF TENNESSEE In re: APPALACHIAN OIL COMPANY, INC., Debtor. Case No. 2:09-bk (Chapter 11) MOTION OF TITAN GLOBAL HOLDINGS, INC. TO APPOINT A CHAPTER 11 TRUSTEE Titan Global Holdings, Inc. ( Titan ), by its undersigned attorneys, hereby moves, for cause, pursuant to Bankruptcy Code 1104(a)(1), for the appointment of a Chapter 11 trustee. In support of this motion, Titan states as follows: 1. As set forth more fully in the Objection of Titan Global Holdings, Inc. to Approval of Compromise and Settlement By and Between Debtor, Official Committee of Unsecured Creditors, and Greystone Business Credit II, L.L.C. (the Titan Objection ) (Docket No. 451), the Debtor s principal secured creditor, Greystone Business Credit II, L.L.C. ( Greystone ), insisted on the installation of Andrew Weber as Chief Restructuring Officer of the Debtor. By this Court s order of April 14, 2009, Weber was installed as CRO of the Debtor, with the authority and the duty to investigate and prosecute potential claims of the estate. On May 4, 2009, Mr. Weber terminated the Debtor s employment of Bryan Chance, a Titan employee who had previously served as Chief Executive Officer of the Debtor. 2. Four days later, on May 8, 2009, the Debtor, under Mr. Weber s management, filed a motion to compromise (the Compromise Motion ) claims of the Debtor against certain escrowed funds and against various of the Debtor s landlords. Although Titan was a party to the escrow agreement, the Debtor, under Mr. Weber s management, did not give

2 notice of the Compromise Motion to Titan. The Compromise Motion made no reference to any settlement of claims of the Debtor against Greystone. 3. Titan only learned, by happenstance, and shortly prior, of the hearing ultimately conducted on June 1, 2009, on the Compromise Motion. 4. At the June 1 hearing on the Compromise Motion, the Debtor and the Official Unsecured Creditors Committee sought to include, as part of the settlement being approved, but without any notice to creditors whatsoever, a release of Greystone in exchange for $250,000 of sale proceeds in excess of $4 million and 5% of sale proceeds in excess of $4,250,000, up to $10 million. At this Court s direction, the Debtor has now given expedited notice of that proposed deal, but without any explanation of the nature of the claims the Debtor has against Greystone, or why settling them on the terms proposed amounts to a good deal for the estate. 5. As set forth in the Titan Objection, the Debtor possesses claims to avoid as preferences leasehold mortgages Greystone recorded on approximately $7.5 million in aggregate value of leaseholds seven weeks before the petition date. (Other leasehold mortgages were either recorded later or never recorded.) In addition, the $4,597,251 the Debtor paid Greystone in the 90 days before the petition date is potentially subject to recovery as a preference. 6. Titan has no information, at this juncture, that Mr. Weber knew of the preferentially recorded Greystone leasehold mortgages, but nonetheless intentionally acted to compromise claims against his sponsor Greystone without notice to creditors. But that leaves open the remaining possibility: without having conducted a full review of potential avoidance claims against his sponsor Greystone, Mr. Weber endorsed a settlement of those claims without notice to creditors. In either event, cause exists, pursuant to Bankruptcy Code 1104(a)(1), for 2

3 the appointment of a disinterested Chapter 11 trustee -- someone who is not beholden to Greystone for his job, and who can perform an independent evaluation of the estate s claims against it. Those claims are almost certainly the majority of the assets potentially available to unsecured creditors in this case. Dated this 9 th day of June, BASS, BERRY & SIMS PLC Of counsel: /s/ Paul G. Jennings Attorneys for Titan Global Holdings, Inc. 315 Deaderick Street, Suite 2700 Nashville, TN (615) (615) (fax) ghumphreys@bassberry.com Leonard G. Leverson Leverson & Metz S.C. 225 East Mason Street Suite 100 Milwaukee, WI (414) (414) (fax) CERTIFICATE OF SERVICE I hereby certify that on June 9 th, 2009 I electronically filed the foregoing Motion of Titan Global Holdings, Inc. to Appoint a Chapter 11 Trustee by using the CM/ECF system, which will send notice of electronic filing to the parties consenting to electronic service. /s/

4 IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF TENNESSEE AT GREENEVILLE IN RE: ) ) Case No. 2:09-bk Appalachian Oil Company, Inc. ) ) Chapter 11 Debtor. ) ORDER GRANTING MOTION OF TITAN GLOBAL HOLDINGS, INC. TO APPOINT A CHAPTER 11 TRUSTEE Upon consideration of the Motion filed by Titan Global Holdings, Inc. to Appoint a Chapter 11 Trustee (the Motion ), and the Court having determined that the relief sought in the Motion is appropriate; and upon the Motion and all of the proceedings had before the Court; and after due deliberation and sufficient cause appearing therefore, it is ORDERED that the Motion is granted; it is FURTHER ORDERED that the U.S. Trustee shall appoint a Chapter 11 Trustee within five (5) days after entry of this order. # # #

5 Prepared By: /s/ Paul G. Jennings Bass, Berry & Sims, PLC 315 Deaderick Street, Suite 2700 Nashville, TN Telephone: (615) Facsimile: (615) Attorney for Titan Global Holdings, Inc