scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 1 of 15

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1 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 1 of 15 TOGUT, SEGAL & SEGAL LLP One Penn Plaza Suite 3335 New York, New York (212) Albert Togut Frank A. Oswald Kyle J. Ortiz Brian F. Moore Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x : In re: : : TOISA LIMITED, et al., : : Debtors. : 1 : x Chapter 11 Case No (SCC) (Jointly Administered) DEBTORS APPLICATION FOR ORDER APPROVING TERM SHEET UNDER BANKRUPTCY CODE SECTIONS 105(a), 362 AND FED. R. BANKR. P TO THE HONORABLE SHELLEY C. CHAPMAN, UNITED STATES BANKRUPTCY JUDGE: Toisa Limited and certain of its affiliates, as debtors and debtors in possession in the above-captioned cases (collectively, the Debtors ), hereby submit this application (the Motion ) for entry of an order, substantially in the form attached hereto as Exhibit A (the 9019 Order ), pursuant to sections 105(a) and 362 of title 11 of the United States Code (the Bankruptcy Code ) and Rule 9019 of the Federal Rules of Bankruptcy Procedure (as amended, the Bankruptcy Rules ) approving the Term Sheet by and 1 The Debtors in these chapter 11 cases are as follows: Trade Prosperity, Inc.; Toisa Limited; United Courage, Inc.; Trade Vision, Inc.; United Journey, Inc.; United Kalavryta, Inc.; Trade Sky, Inc.; Trade Industrial Development Corporation; United Honor, Inc.; Trade Will, Inc.; United Leadership Inc.; United Seas, Inc.; United Dynamic, Inc.; United Emblem, Inc.; United Ideal Inc.; Trade Unity, Inc.; Trade Quest, Inc.; Trade Spirit, Inc.; Trade Resource, Inc.; United Ambassador, Inc.; Edgewater Offshore Shipping, Ltd.; United Banner, Inc.; Toisa Horizon, Inc.; and Trade and Transport Inc.

2 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 2 of 15 among Gregory Callimanopulos ( the Shareholder ), the Debtors, the members of the Informal Committee of Secured Lenders (the Informal Committee ), and the Official 2 Committee of Unsecured Creditors and its individual members (the Creditors Committee ) (collectively, the Parties ), which is attached to the 9019 Order as Exhibit 1 (the Term Sheet ). In support of this Motion, the Debtors rely upon and incorporate 3 by reference the Declaration of Richard Baldwin (the Declaration ), attached hereto as Exhibit B, and respectfully state: PRELIMINARY STATEMENT The Parties have negotiated the terms of the Term Sheet, which includes a Form of Shareholder Release that will not become effective until the Plan Effective Date subject to the terms and conditions in the Term Sheet, to implement the agreements reached at a successful Mediation in London in early November The terms memorializing the agreements reached among the Parties are the culmination of extensive dialogue and negotiations among them, facilitated by the Honorable James M. Peck, (ret.), as the Court-appointed Mediator. The Debtors seek this Court s approval of, and authorization to enter into, the Term Sheet including its Form of Shareholder Release, which will be contained in a forthcoming chapter 11 plan, subject to the terms and conditions in the Term Sheet. The Debtors believe that entry into the Term Sheet is in the best interest of their estates 2 An Informal Committee has been formed consisting of the following lenders: BNP Paribas S.A., Citibank Europe, plc UK Branch, Citibank N.A. London Branch, Commerzbank AG, Commonwealth Bank of Australia, Credit Agricole Corporate and Investment Bank, Danish Ship Finance A/S, DNB (UK) Limited, DVB Bank America N.V., Export-Import Bank of China, HSH Nordbank AG, ING Bank N.V., London Branch, National Bank of Greece S.A., Royal Bank of Scotland plc, and Unicredit Bank AG. 3 Additional factual background information regarding the Debtors, including their business operations, their corporate and capital structure, and the events leading to these Chapter 11 Cases, is set forth in detail in the Proposed Disclosure Statement. 2

3 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 3 of 15 because it is an important step required before the Debtors can negotiate an exit from Chapter 11. Once the Term Sheet is approved, the Debtors will formulate, in good faith and subject to Bankruptcy Court approval, a chapter 11 plan on terms supported by its key creditors. JURISDICTION AND VENUE 1. This Court has jurisdiction to consider this Motion under 28 U.S.C. 157 and 1334 and the Amended Standing Order of Reference for the Southern District of New York, dated January 31, This is a core proceeding under 28 U.S.C. 157(b). Venue is proper in this district under 28 U.S.C and The statutory predicate for the relief requested herein is Bankruptcy Code sections 105(a). Such relief is also warranted pursuant to Bankruptcy Rule BACKGROUND 3. On January 29, 2017 (the Petition Date ), the Debtors each commenced a case by filing a petition for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. The Debtors chapter 11 cases (the Chapter 11 Cases ) have been consolidated for procedural purposes only and are being jointly administered. 4. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to Bankruptcy Code sections 1107 and On May 18, 2017, the United States Trustee for the Southern District of New York appointed the Creditors Committee. No trustee or examiner has been appointed in the Debtors Chapter 11 Cases. 6. On August 15, 2017, the Debtors filed the Joint Plan of Reorganization for Toisa Limited and Certain of Its Affiliates Pursuant to Chapter 11 of the Bankruptcy Code 3

4 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 4 of 15 [Docket No. 281] (the Proposed Plan ) and the accompanying Disclosure Statement for the Joint Plan of Reorganization for Toisa Limited and Certain of Its Affiliates Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 282]. At the time of the filing of the Proposed Plan, it was expected that the Proposed Plan would be modified and further refined. 7. On September 19, 2017, the Informal Committee provided the Debtors with a formal response to the Proposed Plan by a term sheet that provided for, among other things, the right of each secured vessel lender to credit bid for the vessel that secures such lender s vessel facility (the Lender Response ). 8. Notwithstanding the differences in the Proposed Plan and the Lender Response, the Parties agreed to continue to work toward a consensual plan of reorganization, and, therefore, determined that it was in their collective best interest to seek mediation. 9. On September 29, 2017, the Court entered its Mediation Order [Document No. 318] scheduling mediation (the Mediation ) to take place in London, England on November 2 and 3, 2017 [Docket No. 318]. In connection therewith, the hearing to consider approval of the Proposed Disclosure Statement was cancelled (See Notice of Cancellation, Docket No. 325). 10. Pursuant to the Mediation Order, the Honorable James Peck (ret.) was appointed as the Mediator. 11. At the formal Mediation sessions in London, a verbal agreement was reached that there would not be a Shareholder-sponsored plan, and the parties committed to working together toward a consensual plan. As reported to the Court at an omnibus hearing on November 8, 2017, the parties agreed to, among other things: 4

5 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 5 of 15 extend the Debtors exclusive period to solicit acceptances through November 30, 2017 (subsequently further extended through January 8, 2018); extend the Debtors consensual use of cash collateral under each of the three final cash collateral orders entered in the Chapter 11 Cases through November 30, 2017 (subsequently further extended through January 8, 2018); and the Debtors also agreed to make certain governance changes, including appointing three new independent directors to replace the current board of directors of Toisa Limited, and appointing Jonathan Joff Mitchell as Chief Restructuring Officer ( CRO ). 12. Additionally, it was agreed that the Shareholder would be granted a release in exchange and consideration for the Shareholder s agreement to (i) facilitate the governance changes, (ii) facilitate the settlement, collection or recovery of any refunds on account of vessel construction contracts or account receivables, (iii) reasonably cooperate with the Toisa CRO to assist through the Plan Effective Date, available to, (iv) facilitate the proposed plan, and (v) other non-monetary contributions, cooperation and support to be provided by the Shareholder. 13. From the November 8, 2017 hearing through the filing of this Motion, the Parties have continued to negotiate the terms of the Term Sheet and Form of Shareholder Release to implement the agreement reached at the Mediation sessions in London. The Debtors thus seek this Court s approval of, and authorization to enter into, the Term Sheet, which includes the Form of Shareholder Release. The Debtors believe that entry into the Term Sheet is in the best interest of their estates. 5

6 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 6 of 15 RELIEF REQUESTED 14. The Debtors request entry of the 9019 Order substantially in the form attached hereto as Exhibit A, (a) finding that the Term Sheet and Form of Shareholder Releases embodied in the Term Sheet have been entered into; (b) approving the Term Sheet and the Form of Shareholder Release therein to be implemented in, and effective upon the Plan Effective Date of, a Chapter 11 plan; and (c) granting such other relief as this Court deems just and proper. BASIS OF RELIEF REQUESTED 15. The Debtors entry into, and approval of, the Term Sheet, including the Form of Shareholder Release, is appropriate under Bankruptcy Rule Courts in this District have authorized debtors to enter into settlement agreements with reference to the settlement standards of Bankruptcy Rule 9019 where a critical component of the settlement, as here, requires the approval of the forms of releases that are to be implemented under a plan. See See In re Dewey & LeBoeuf LLP, 478 B.R. 627, 64 (Bankr. S.D.N.Y 2012) (approving releases under Bankruptcy Rule 9019 that were to be implemented under subsequent Chapter 11 plan). I. THE TERM SHEET SHOULD BE APPROVED UNDER BANKRUPTCY RULE Bankruptcy Rule 9019(a) authorizes a court, after notice and a hearing, to approve a compromise or settlement of a controversy, providing, in relevant part, that [o]n motion by the [debtor in possession] and after notice and a hearing, the court may approve a compromise or settlement. Fed. R. Bankr. P. 9019(a). Bankruptcy courts will generally approve a settlement pursuant to Rule 9019 if the settlement is in the best interest of the debtor s estate. See Vaughn v. Drexel Burnham Lambert Grp., Inc. (In re Drexel Burnham Lambert Grp., Inc.), 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991). And 6

7 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 7 of 15 settlements and compromises are a normal part of the process of reorganization. Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson ( TMT Trailer ), 390 U.S. 414, 424 (1968) (quoting Case v. L.A. Lumber Prods. Co., 308 U.S. 106,130 (1939)); see also In re Adelphia Commc ns Corp., 327 B.R. 143, 159 (Bankr. S.D.N.Y. 2005) (decision to accept or reject settlement lies within sound discretion of bankruptcy court). 17. A court must determine that a settlement under Bankruptcy Rule 9019 is fair, equitable, and in the best interests of the estate before it may approve it. TMT Trailer, 390 U.S. 414, (1968); In re Ionosphere Clubs, Inc., 156 B.R. 414, 426 (S.D.N.Y. 1993), aff d, 17 F.3d 600 (2d Cir. 1994); In re Mrs. Weinberg s Kosher Foods, Inc., 278 B.R. 358, 365 (Bankr. S.D.N.Y. 2002); In re MF Global Inc., Case No WL at *5 (Bankr. S.D.N.Y. Aug 10, 2012). 18. In doing so, the Court need not decide the numerous issues of law and fact raised by a compromise or settlement but must only canvass the issues and see whether the settlement falls below the lowest point in the range of reasonableness. In re Adelphia Commc n. Corp., 327 B.R. 143, 159 (Bankr. S.D.N.Y. 2005) (quoting In re W.T. Grant Co., 699 F.2d 599, 608 (2d Cir. 1983)). The Court need not conduct a mini-trial but rather only need be apprised of those facts that are necessary to enable it to evaluate the settlement and make a considered and independent judgment. In re Adelphia, 327 B.R. at The decision to approve or deny a particular settlement involving a bankruptcy estate lies within the discretion of the bankruptcy court. See In re Drexel Burnham Lambert Group, Inc., 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991); see also Nellis v. Shugrue, 165 B.R. 115, (S.D.N.Y. 1994). A court may exercise its discretion in light of the general public policy favoring settlements. In re Hibbard Brown & Co., Inc., 217 B.R. 41, 46 (Bankr. S.D.N.Y. 1998) (citing cases). And, in order to evaluate the 7

8 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 8 of 15 necessary facts, a court may rely on the opinion of the debtor, settlement parties and professionals. See In re Purofied Down Prods. Corp., 150 B.R. 519, 522 (S.D.N.Y. 1993); In re Chemtura Corp., 439 B.R. 561, 594 (Bankr. S.D.N.Y. 2010); See also In re MF Global Inc., Case No , 2012 WL at *5 (Bankr. S.D.N.Y. Aug 10, 2012) (recognizing the business judgment of the debtor in recommending a settlement should be considered). 20. Courts evaluate the following factors when considering whether to approve a settlement: (a) (b) (c) (d) (e) (f) (g) the balance between the litigation s possibility of success and the settlement s future benefits; the likelihood of complex and protracted litigation, with its attendant expense, inconvenience, and delay, including the difficulty in collecting on the judgment; the paramount interests of the creditors, including each affected class relative benefits and the degree to which creditors either do not object to or affirmatively support the proposed settlement ; whether other parties in interest support the settlement; the competency and experience of counsel supporting the settlement; the nature and breadth of releases to be obtained by officers and directors ; and the extent to which the settlement is the product of arm s length bargaining. See Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d 452, 462 (2d Cir. 2007). 21. The Term Sheet meets each of the so-called Iridium factors and amply satisfy the TMT Trailer standards for approval of a settlement. The Term Sheet is fair and equitable and in the best interests of the estate because, together, it resolves on a consensual basis potential claims and causes of action assertable against Shareholder on terms well above the lowest point in the range of reasonableness, since the agreement 8

9 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 9 of 15 will implement corporate governance changes and result in the installation of a CRO that will be a key step to formulating a feasible, consensual chapter 11 plan pursuant to which the Form of Shareholder Release will be implemented, subject to the terms and conditions of the Term Sheet. i. The Outcome of Litigation Is Uncertain While Settlement Benefits Are Substantial 22. The first Iridium factor reflects the Supreme Court s view that a court should form an intelligent and objective opinion of the probability of success in the underlying litigation and inherent costs of such litigation. TMT Trailer, 390 U.S. at There was a concern by some creditors that there may have been funds improperly transferred by the Shareholder through the Debtors and the non-debtor affiliates. At the urging of the Informal Committee and the Creditors Committee, Zolfo Cooper was retained, in part, as the Debtors Bankruptcy Consultants and Special Financial Advisors to review the transactions with non-debtor affiliates, and to provide a full and complete accounting and reconciliation of all cash receipts, disbursements, and transfers of the Debtors cash with respect to the Debtors and their non-debtor management companies from August 31, 2016 through June 30, During the process of preparing this report, Zolfo Cooper did not find evidence of misappropriation of cash by the Shareholder or the Debtors. The Debtors agree with the Zolfo Cooper findings and are not aware of any colorable claims that could be successfully asserted against the Shareholder on such grounds. See Declaration, Annually, the Debtors would typically declare a dividend to be paid to the Shareholder based on the company s financial performance. The Debtors evaluated the annual dividend paid (either directly or indirectly) to the Shareholder by Toisa Limited on or about May 31, 2016, in an amount totaling $20 million (the Dividend ). The 9

10 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 10 of 15 Debtors have assessed and evaluated the Dividend, as well as the significant defenses and counterclaims that would likely preclude a meaningful recovery, if any, on account of the otherwise duly-declared Dividend, based upon potential claims or causes of action for actual or constructive fraudulent transfers or conveyances under Sections 544 and 548 of the Bankruptcy Code or other applicable law. 25. Accordingly, the Debtors have concluded that they will not pursue any such claims for the Dividend, or any other claims set forth in the term sheet (subject to the usual exceptions for causes of action arising out of or related to any act or omissions that constitute gross negligence, fraud, willful misconduct or criminal conduct), in light of the Shareholder s agreement to facilitate the reorganization or liquidation of the Debtors in the Chapter 11 Cases and provide other non-monetary contributions, cooperation and support, including the terms of the Term Sheet which, inter alia, will allow for the Debtors to reconstitute the Toisa Limited Board, and, in turn, allow for the appointment of Joff Mitchell as CRO with the support of the members of the Informal Committee. See Declaration, Additionally, in exchange for the duly-negotiated release of claims set forth in the Form of Shareholder Release, the Shareholder has and will continue to facilitate the settlement, collection and recovery of any refunds on account of vessel construction contracts or account receivables and otherwise cooperate as required by the terms of the Term Sheet. Most notably, the Debtors believe Shareholder has made a very considerable contribution for the benefit of the Debtors estate in obtaining the valuable settlement (the HHI Settlement ) with Hyundai Heavy Industries Co., Ltd ( HHI ), which is currently pending before the Court for approval. See Debtors Application For Entry Of An Order Approving Settlement Agreement With Hyundai Heavy Industries Co., Ltd. [Docket No. 403]. Pursuant to the HHI Settlement, the Debtors have 10

11 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 11 of 15 resolved an alleged multi-million dollar claim against the estate on account of a vessel construction contract with HHI, and recovered $42.5 million on the counterclaim, without the need for additional arbitration proceedings or litigation. The Shareholder has also facilitated a structured settlement between the Debtors and Constructora Subacuática Diavaz, S.A. de C.V. ( Diavaz ), a former charter counterparty of the Debtors, which, if approved by the Court, will result in the Debtors recovery of an approximate $20.4 million receivable over a term of years. See Declaration, For these reasons, pursuing claims against the Shareholder would involve significant and complex issues of fact and law, all of which carry significant litigation risk (to all parties). 28. Accordingly, the Debtors have, in consultation with their counsel and financial advisors, made a well-considered business judgment to release certain claims, if any, against the Shareholder. With new and independent corporate governance and a CRO in place, the Debtors have determined the Term Sheet, including the Form of Shareholder Release, to be in the best interests of their estates and will provide a path forward to efficiently conclude the Debtors Chapter 11 Cases, without the considerable cost, delay and uncertainty if the Shareholder claims were fully investigated and litigated. See Declaration, 8. ii. The Alternative Is Years of Complex, Costly Litigation 29. In evaluating the reasonableness of a settlement, a court should form an educated estimate of the complexity, expense, and likely duration of such litigation, the possible difficulties of collecting on any judgment which might be obtained, and all other factors relevant to a full and fair assessment of the wisdom of the proposed compromise. TMT Trailer, 390 U.S. at

12 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 12 of Clearly, any litigation over the potential claims against the Shareholder would be highly contentious, drawn-out and costly, especially with the involvement of highly sophisticated and able counsel and advisors. Thus, the alternative would be years of expensive and protracted litigation. Insolvency would be a threshold issue for certain fraudulent conveyance claims. Proving insolvency would be expensive and vigorously contested. Indeed, at the time of the annual distribution, the Debtors believed that they were solvent. iii. The Term Sheet Has Widespread Support 31. It appears that virtually every constituency in the Debtors Chapter 11 Cases supports the Term Sheet. Significantly, the members of the Informal Committee and the Creditors Committee, which is a fiduciary body charged with representing the interests of all of the Debtors unsecured creditors, are supportive of the Term Sheet. The Term Sheet was developed over many weeks of intense negotiations among the Parties with the assistance of the Mediator. The result of these negotiations, with the assistance of the Mediator, is a comprehensive settlement that is fair, equitable, and in the best interests of the estate. See Declaration, The Informal Committee and its counsel have agreed to obtain confirming s from each of the lenders represented by the Informal Committee, who are creditors of the Debtors, prior to any hearing in this application. Until all such lenders provide such confirmations, the Debtors will not prosecute this Motion and will adjourn it, pending receipt of such confirmations. iv. The Term Sheet Is Supported By Highly Skilled Counsel and Advisors 33. The Parties have been represented by skilled and experienced bankruptcy practitioners during the negotiations to get to the Term Sheet, which further supports approval of the settlement. Courts have given this factor considerable weight. See In re 12

13 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 13 of 15 Adelphia, 327 B.R. at 164; see also In re Chemtura Corp., 439 B.R. at 608 ( No argument has been made, nor could any argument be made that counsel who put the Settlement together were anything less than highly skilled in their craft.... ). If the Term Sheet is not approved, these same skilled attorneys will zealously represent their clients to pursue any and all claims and causes of action against the Shareholder and the Debtors. v. Nature and Breadth of Releases Are Proper 34. The Form of Shareholder Release embodied in the Term Sheet is appropriate and an integral part of the comprehensive resolution of the claims and corporate governance resolution achieved by the Term Sheet. 35. The Form of Shareholder Release is an integral part of the Term Sheet. Without the release, the Shareholder would not have entered into the Term Sheet. See Declaration, With respect to the release being given by the Debtors to the Shareholder, all Debtor claims, including derivative claims, accrue to the debtor in possession upon the filing of bankruptcy, and the debtor in possession is vested with the power to settle the estate s claims. Police & Fire Retirement System v. Ambac Fin. Group (In re Ambac Fin. Group, Inc.), 2011 WL at *2 (S.D.N.Y. Dec. 29, 2011) (quoting Smart World Techs., LLC v. Juno Online Servs., Inc., 423 F.3d 166, 175 (2d Cir. 2005)). Therefore, the Debtors release will only reach claims or causes of action that are either: (i) property of the Debtors estates, or (ii) derivative of a right asssertable by, or belonging to, the Debtors. State law determines which claims belong to the estate, and hence, can be asserted by the trustee. Goldin v. Primavera Familienstiftugn, et al. (In re Granite Partners, L.P.), 194 B.R. 318, 324 (Bankr. S.D.N.Y. 1996) (citing cases); see also St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688, 700 (2d Cir. 1989). If, under state law, a cause of action belongs to the estate, the trustee has the exclusive standing to assert it. See Granite 13

14 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 14 of 15 Partners, 194 B.R. at (enjoining an action to prosecute waste, mismanagement and breach of fiduciary duty); see also ixl Enters. v. GE Capital Corp., 167 Fed. Appx. 824, 826 (2d Cir. 2006) (allowing a debtor to be substituted as plaintiff of an existing pre-petition derivative action because such a claim was property of the debtor s estate). 37. Thus, the scope of the release is proper here because it could only apply to claims that belong to the bankruptcy estate, or are derivative of claims belonging to the estate -- all claims that the Debtors have the exclusive standing to assert. See, e.g., Fox v. Picard (In re Madoff ), 848 F.Supp.2d 469, 481 (S.D.N.Y. 2012) ( [A] bankruptcy court may enjoin actions that are derivative or duplicative of claims brought by the trustee, or that could have been brought by the trustee in the first instance. ); In re The 1031 Tax Group, LLC, 397 B.R. 670, (Bankr. S.D.N.Y. 2008) (holding that derivative claims are property of the estate); In re Mrs. Weinberg s Kosher Foods, Inc., 278 B.R. 358, 365 (Bankr. S.D.N.Y. 2002) (holding that, in approving a settlement, a bankruptcy court may enjoin creditors from prosecuting the settled claims derivatively in another court ). With respect to the release being given by members of the Informal Committee and the Creditors Committee to the Shareholder, that release is consensual and will not take effect until the Plan Effective Date, subject to the terms and conditions in the Term Sheet. Therefore, that release should be approved. vi. The Term Sheet Is the Product of Arm s Length Bargaining 38. The Term Sheet is indisputably the product of good-faith, arm s length negotiations that took place over the last nine weeks since the London Mediation involving various representatives of, and advisors to, the Parties. See Declaration, 11. Ultimately, the Term Sheet represents concessions by all of the Parties, is the result of extensive negotiations by parties with competing economic interests, and was not the result of fraud or collusion. See In re Chemtura Corp., 439 B.R. at 608 ( Finally, I find that 14

15 scc Doc 416 Filed 12/31/17 Entered 12/31/17 16:58:01 Main Document Pg 15 of 15 the Settlement was truly the product of arms-length bargaining, and not fraud or collusion. ). NOTICE 39. Notice of this Motion and has been given to (a) the United States Trustee; (b) counsel for the Informal Committee; (c) the Debtors prepetition lenders; (d) counsel for the Creditors Committee; (e) all parties in interest under Bankruptcy Rule 2002; and (f) any other party entitled to notice pursuant to Local Bankruptcy Rule (b) and which has filed a notice of appearance in these Chapter 11 Cases (collectively, the Notice Parties ). The Debtors submit that no other or further notice need be provided. CONCLUSION WHEREFORE, the Debtors respectfully request that the Court enter the 9019 Order substantially in the form attached hereto as Exhibit A granting the relief requested herein, and such other and further relief as may be just and proper. Dated: New York, New York December 31, 2017 TOISA LIMITED, et al., Debtors and Debtors in Possession By Their Counsel TOGUT, SEGAL & SEGAL LLP, By: /s/ Albert Togut ALBERT TOGUT FRANK A. OSWALD KYLE J. ORTIZ BRIAN F. MOORE One Penn Plaza, Suite 3335 New York, New York (212)

16 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit A: Proposed Order Pg 1 of 4 Exhibit A 9019 Order

17 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit A: Proposed Order Pg 2 of 4 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x : In re: : Chapter 11 : TOISA LIMITED, et al., : Case No (SCC) : Debtors. 1 : (Jointly Administered) : x ORDER APPROVING TERM SHEET UNDER BANKRUPTCY CODE SECTIONS 105(a), 362 AND FED. R. BANKR. P Upon the application (the Motion ) 2 of Toisa Limited ( Toisa ) and certain of its affiliates, as debtors and debtors in possession in the above-captioned cases (collectively, the Debtors ), by their attorneys, Togut, Segal & Segal LLP, for entry of an order pursuant to Rule 9019(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) approving the Term Sheet; and it appearing that this Court has jurisdiction to consider the Motion and relief requested therein pursuant to 28 U.S.C. 157 and 1334 and the Amended Standing Order of Reference M-431, dated January 31, 2012 (Preska, C.J.); and it appearing that this matter is a core proceeding pursuant to 28 U.S.C. 157(b); and it appearing that venue being proper in this Court pursuant to 28 U.S.C and 1409; and it appearing that the relief requested in the Motion is in the best interests of the Debtors estates; and it appearing that due and appropriate notice of the Motion has been given under the circumstances of these Chapter 11 cases; 1 The Debtors in these chapter 11 cases are as follows: Trade Prosperity, Inc.; Toisa Limited; United Courage, Inc.; Trade Vision, Inc.; United Journey, Inc.; United Kalavryta, Inc.; Trade Sky, Inc.; Trade Industrial Development Corporation; United Honor, Inc.; Trade Will, Inc.; United Leadership Inc.; United Seas, Inc.; United Dynamic, Inc.; United Emblem, Inc.; United Ideal Inc.; Trade Unity, Inc.; Trade Quest, Inc.; Trade Spirit, Inc.; Trade Resource, Inc.; United Ambassador, Inc.; Edgewater Offshore Shipping, Ltd.; United Banner, Inc.; Toisa Horizon, Inc.; and Trade and Transport Inc. 2 Capitalized terms not defined herein shall have the meanings ascribed to them in the Motion.

18 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit A: Proposed Order Pg 3 of 4 and it appearing that no other or further notice need be provided; and upon the record in these Chapter 11 cases; and after due deliberation thereon; and good and sufficient cause appearing therefore; it is hereby: ORDERED, that the Motion is granted, and subject to the terms of the Term Sheet, the Term Sheet, including the Form of Shareholder Release and releases provided by the Shareholder, are approved and will be implemented under any Chapter 11 plan subject to the terms of the Term Sheet; and it is further; ORDERED, that due and sufficient notice of the Hearing and the Motion was provided pursuant to Bankruptcy Rule 9019 and the order shortening notice for same; and it is further ORDERED, that the stay provisions of 11 U.S.C. 362 apply to all claims of the Debtors and the Debtors Chapter 11 estate that are the subject of the Shareholder Release (as set forth in the Form of Shareholder Release) or the Lender Release (as set forth in the Term Sheet) and the Court expressly reserves jurisdiction, including its exclusive jurisdiction pursuant to 28 U.S.C. 1334(e), to enforce the stay provisions of 11 U.S.C. 362 and over any and all disputes, actions, contested matters, or other proceedings brought with respect to the Settlement, this Order, or and any and all claims of the Debtors and the Debtor s Chapter 11 estate that are the subject of the claims released pursuant to the Shareholder Release or the Lender Release; and it is further; ORDERED, that the Informal Committee and its members and the Creditors Committee and its members may not bring any claims of the Debtors and the Debtors Chapter 11 estates that are the subject of the Shareholder Release (as set forth in the Form of Shareholder Release), and the Shareholder may not bring any claims of

19 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit A: Proposed Order Pg 4 of 4 the Debtors and the Debtors Chapter 11 estates that are the subject of the Lender Release (as set forth in the Term Sheet), without prior Court approval; and it is further; ORDERED, that the Debtors are authorized to take all necessary actions to carry out this Order; and it is further; ORDERED, that notwithstanding any provision in the Bankruptcy Code or the Bankruptcy Rules to the contrary, including, but not limited to Bankruptcy Rules 1018, 3020(e), 6004(h), 7062 and 9014, (a) this Order shall be effective immediately and enforceable upon its entry; and it is further ORDERED, that the Court shall retain exclusive jurisdiction to hear and determine any and all matters arising from the interpretation or implementation of this Order. Date: New York, New York January, 2018 HONORABLE SHELLEY C. CHAPMAN UNITED STATES BANKRUPTCY JUDGE

20 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 1 of 12 Exhibit 1 Term Sheet

21 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 2 of 12 Toisa Limited, et al. Case No (SCC) Shareholder Term Sheet On September 29, 2017, the Court entered its Mediation Order 1 scheduling a mediation that commenced in London, England on November 2 and 3, 2017 to facilitate discussions regarding the structure and material content of a Chapter 11 plan that comports with the requirements of the Bankruptcy Code [Dkt. No. 318]. This mediation term sheet (the Term Sheet ) memorializes the agreement reached between Mr. Gregory Callimanopulos (the Shareholder ), the Debtors, 2 the members of the Informal Committee of Secured Lenders (the Informal Committee ), 3 and the Official Committee of Unsecured Creditors and its individual members (the Creditors Committee ) (collectively, the Parties ). Term Sheet Toisa Limited Board Composition The existing seven-member board of directors of Toisa Limited will be re-constituted to a three-member board (the Toisa Board ) comprised of the following three (3) independent directors: Len Hoskinson, Scott Vogel and Alan Jacobs; 4 The Shareholder shall cause all seven directors to resign from the existing Toisa board, including the Shareholder and Joseph Bondi; and One of the independent directors shall be appointed chairman of the Toisa Board. To the extent necessary, the existing by-laws or equivalent governing documents of Toisa Limited shall be amended and modified to provide for the three Unless otherwise defined, capitalized terms shall have the meaning ascribed in the Mediation Order. Trade Prosperity, Inc.; Toisa Limited; United Courage, Inc.; Trade Vision, Inc.; United Journey, Inc.; United Kalavryta, Inc.; Trade Sky, Inc.; Trade Industrial Development Corporation; United Honor, Inc.; Trade Will, Inc.; United Leadership Inc.; United Seas, Inc.; United Dynamic, Inc.; United Emblem, Inc.; United Ideal Inc.; Trade Unity, Inc.; Trade Quest, Inc.; Trade Spirit, Inc.; Trade Resource, Inc.; United Ambassador, Inc.; Edgewater Offshore Shipping, Ltd.; United Banner, Inc.; Toisa Horizon, Inc.; and Trade and Transport Inc. An Informal Committee has been formed consisting of the following lenders: BNP Paribas S.A., Citibank Europe, plc UK Branch, Citibank N.A. London Branch, Commerzbank AG, Commonwealth Bank of Australia, Credit Agricole Corporate and Investment Bank, Danish Ship Finance A/S, DNB (UK) Limited, DVB Bank America N.V., Export-Import Bank of China, HSH Nordbank AG, ING Bank N.V., London Branch, National Bank of Greece S.A., Royal Bank of Scotland plc, and Unicredit Bank AG. The independent directors shall be independent from, and not under the control of, any Lender. -1-

22 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 3 of 12 Term Sheet member Toisa Board and any other necessary changes and shall be in form and substance acceptable to the Informal Committee. Voting Rights: Each Director shall have one vote. Shareholder Equity D&O Insurance Chief Restructuring Officer Disposition of the Shareholder s equity interests in the Debtors will be dealt with under a chapter 11 plan in accordance with the priorities and applicable confirmation standards under the Bankruptcy Code and applicable laws. The Debtors will procure and maintain usual and customary D&O Insurance for the directors and officers of Toisa Limited. The Toisa Board will appoint Joff Mitchell as the Chief Restructuring Officer of Toisa Limited ( Toisa CRO ). The Toisa CRO will report to the Toisa Board or any committee that may be delegated authority by the Toisa Board. The Toisa CRO will be empowered to make dayto-day, ordinary course management decisions on behalf of the Debtors. The scope of the Toisa CRO s management authority shall be set forth in the Toisa CRO s retention application, which shall be in form and substance acceptable to the Informal Committee. Director and Officer Indemnification The documents describing corporate governance shall provide for the indemnification of the directors and officers of Toisa Limited to the fullest extent permitted by law. Any obligations of the Debtors pursuant to their organizational documents to indemnify officers, directors, employees, and agents, serving in such capacities on and after the petition date (including the independent directors) (i) shall not be discharged or impaired by confirmation of the proposed plan and (ii) shall be deemed and treated as executory contracts to be assumed by the Debtors under the proposed plan; provided, -2-

23 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 4 of 12 Term Sheet however, that the Debtors shall not indemnify officers, directors, agents, or employees of the Debtors for any claims or causes of action arising out of or relating to any act or omission that is a criminal act or constitutes fraud, willful misconduct or gross negligence or for any other acts or omissions that are excluded under the terms of the organizational documents. After the effective date of any plan (the Plan Effective Date ), the Reorganized Debtors shall not terminate or otherwise reduce the coverage under any D&O insurance policies (including any tail policy ) then in effect. Marine Management Bulk Services, Inc. ( MMBS ); Sealion Do Brasil Navegação Ltda ( SBN ); and Sealion Shipping, Ltd. ( Sealion ); (collectively the Affiliate Companies ) The management of the Affiliate Companies will report to the Toisa CRO, and will cooperate with the Toisa CRO with respect to the operation and management of the Affiliate Companies. The Affiliate Companies will continue to provide services to the Debtors pursuant to the terms of the existing management agreements. The existing agreements between the Debtors and the Affiliate Companies shall not be amended or modified prior to the Plan Effective Date without the consent of the Toisa CRO. Nothing herein shall limit the Debtors ability to replace the Affiliate Companies or modify, reject or terminate the existing management agreements in connection with any plan or as otherwise allowed under the Bankruptcy Code. Brokerage and Management Corporation ( B&M ); Marine Management Services M.C. ( MMS ); and Trade and Transport (UK) Ltd. ( TATUK ) (collectively the Non-Affiliate Companies ) The Shareholder and the management of the Non-Affiliate Companies will reasonably cooperate with Toisa Limited and with the Toisa CRO with respect to the operation and management of the Non-Affiliate Companies through the Plan Effective Date. The Non-Affiliate Companies will continue to provide agency services to the Debtors pursuant to the existing agency agreements. -3-

24 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 5 of 12 Term Sheet The existing agreements between the Debtors and the Non-Affiliate Companies shall not be amended or modified prior to the Plan Effective Date without the consent of the Toisa CRO. The Non-Affiliate Companies shall be responsible for the payment of any severance and redundancies, and any and all obligations, including any wind down costs, if and when it takes place payable by or incurred by the Non- Affiliate Companies. Notwithstanding the existence of any agreements or documents that may provide otherwise (including any management or agency agreements), neither the Debtors, the Informal Committee, the Affiliate Companies, nor the members of the Informal Committee shall have any liability for the foregoing obligations or be responsible for the payment of any severance or redundancies, or any other obligations, including any wind down costs payable by or incurred by the Non-Affiliate Companies, and the Non-Affiliate Companies shall not seek compensation from any Debtor, the Informal Committee, any Affiliate Company or any member of the Informal Committee in respect of any costs, expenses, losses, liabilities, or other matters which are not incurred directly in the course of such Non-Affiliate Companies performance of services required to be performed under the applicable management or agency agreement. Nothing herein shall limit the Debtors ability to replace the Non-Affiliate Companies or modify, reject or terminate the existing management and/or agency agreements in connection with any plan or as otherwise allowed under the Bankruptcy Code. Releases As of the Plan Effective Date, and pursuant to and as shall be reflected in any reorganization or liquidating plan in these cases, the Shareholder shall release the Debtors, the Informal Committee and the individual -4-

25 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 6 of 12 Term Sheet members thereon, and the Creditors Committee, and each of their respective current and former officers and directors, professionals, advisors, accountants, attorneys, investment bankers, consultants, employees, and other representatives (each solely in its capacity as such), from liability to the maximum extent permitted under applicable law for all claims and causes of action, arising directly or derivatively, known or unknown, based on, relating to or arising out of the Debtors and their estates, the chapter 11 cases, any prepetition credit facilities and loan documents, the Debtors restructuring efforts, this Term Sheet, and the Plan, in each case other than claims and causes of action arising out of or related to any act or omission that is a criminal act or constitutes fraud, willful misconduct or gross negligence. Any releases of the Shareholder to be provided by third parties (other than Parties to this Term Sheet) shall not be inconsistent with the Shareholder Release. Shareholder Release As of the Plan Effective Date, in exchange and consideration for the Shareholder s agreement to (i) facilitate a proposed plan, (ii) facilitate the settlement, collection or recovery of any refunds on account of vessel construction contracts or account receivables, (iii) facilitate a change in governance of the Debtors, (iv) reasonably cooperate with the Toisa CRO to assist through the Plan Effective Date, and (v) other nonmonetary contributions, cooperation and support to be provided by the Shareholder, the Shareholder shall be granted a release in the form of Exhibit A (the Shareholder Release ) attached hereto. For purposes of the Shareholder Release, the term Shareholder shall have the meaning in Exhibit A. Exculpation and Injunction Protections As of the Plan Effective Date, the Debtors, the Shareholder, the Informal Committee and the individual members thereon, and the Creditors Committee, and each of their respective current and former officers and directors, professionals, advisors, accountants, attorneys, investment bankers, consultants, employees, and other -5-

26 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 7 of 12 Term Sheet representatives (each solely it its capacity as such), shall be granted standard exculpation and injunction protections under any plan, governing any liability to the maximum extent permitted under applicable law for their actions in connection with and during the chapter 11 cases, the Debtors restructuring efforts, this Term Sheet, any plan, and any exit credit facilities and loan documents, except to the extent arising out of or related to any act or omission that is a criminal act or constitutes fraud, willful misconduct or gross negligence Motion The Debtors agree to seek Bankruptcy Court approval of this Term Sheet by filing a motion for approval of this Term Sheet pursuant to Federal Rule of Bankruptcy Procedure 9019 (the 9019 Motion ). The Shareholder agrees to cause the governance changes described in this Term Sheet to occur upon entry of an order by the Bankruptcy Court approving the 9019 Motion, which order shall not have been stayed. Fees and Expenses The Debtors shall pay Bracewell LLP, counsel to the Shareholder, for reasonable and documented fees and expenses incurred in connection with the mediation, the negotiation and execution of the Term Sheet, the negotiation and execution of the Plan and related documents; and matters relating to the transition and other transactions contemplated in the Term Sheet, Plan and related documents. Aircraft Purchase Creditors Committee Reservation of Rights The Parties will not oppose the entry of the proposed order submitted to the Bankruptcy Court on December 14, 2017 seeking approval of the Shareholder s purchase of the G550 aircraft. In exchange for the Creditors Committee s support of this Term Sheet, the Creditors Committee expressly reserves the right to raise the following issue for negotiations in connection with the Chapter 11 plan process: Whether or not and to what extent, if at all, the -6-

27 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 8 of 12 Term Sheet Shareholder Release (including for avoidance and recovery of the Dividend (as defined in the Shareholder Release provision)) set forth in this Term Sheet for inclusion in any Chapter 11 plan should affect the allowance of the Lenders or any other Parties claims in these cases. For the avoidance of doubt, the Lenders dispute that the agreement to support the Shareholder Release should affect in anyway whatsoever their claims (including but not limited to adequate protection or diminution claims. For the avoidance of doubt nothing in the Creditors Committee Reservation of Rights shall in any way prejudice the agreements reached under the Term Sheet and the release therein in favor of the Shareholder. -7-

28 scc Doc Filed 12/31/17 Entered 12/31/17 16:58:01 Exhibit 1 to Ex A: Term Sheet Pg 9 of 12 Definitions FORM OF SHAREHOLDER RELEASE Affiliate Companies means collectively Marine Management Bulk Services, Inc., Sealion Do Brasil Navegação Ltda and Sealion Shipping, Ltd. Avoidance Action means any claim or Cause of Action of an Estate arising out of or maintainable pursuant to sections 510, 541, 542, 543, 544, 545, 547, 548, 549, 550, 551, or 553 of the Bankruptcy Code or under any other similar applicable nonbankruptcy law. Bankruptcy Code means Title 11 of the United States Code, as now in effect or hereafter amended, to the extent such amendments apply to the Chapter 11 Cases. Bankruptcy Court means the United States Bankruptcy Court for the Southern District of New York, or any other court with jurisdiction over the Chapter 11 Cases. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure and the local rules of the Bankruptcy Court, as now in effect or hereafter amended, to the extent such amendments apply to the Chapter 11 Cases. Cause of Action means any action, proceeding, agreement, Claim, Interest, cause of action, controversy, demand, debt, right, action, Avoidance Action, Lien, indemnity, guaranty, suit, obligation, liability, remedy, damage, judgment, account, defense, offset, power, privilege, recoupment, crossclaim, counterclaim, third-party claim, indemnity claim, contribution claim or any other claim, whether known or unknown, contingent or non-contingent, foreseen or unforeseen, matured or unmatured, existing or hereafter arising on or before the Plan Effective Date, suspected or unsuspected, liquidated or unliquidated, disputed or undisputed, secured or unsecured, asserted or capable of assertion, directly or derivatively, whether pending in litigation or otherwise, in contract or in tort, by statute, in law or in equity or pursuant to any other theory of law. Without limiting the generality and scope of the foregoing, this provision shall (1) include any potential claims relating to (a) the Shareholder s exercise of his fiduciary duties with regard to the HHI contract and settlement, the Diavaz contract and settlement, the Pelagidis litigation, any other claims arising out of any newbuild contract or dispute, or the defense of the IRS claims; (b) the recoupment of costs relating to personal use of corporate aircraft or other corporate property; (c) the recoupment of the payment of any personal expenses by any Debtor, directly or indirectly, to or for the benefit of the Shareholder; (d) any and all dividends made by any Debtor, directly or indirectly, to the Shareholder; and (e) any transfer or reallocation of value made by any Debtor, directly or indirectly, to or for the benefit of the Shareholder; and (2) exclude any potential claims arising out of or related to any act or omissions that constitutes gross negligence, fraud, willful misconduct or criminal conduct. Chapter 11 Case(s) means the cases under chapter 11 of the Bankruptcy Code commenced by the Debtors in the Bankruptcy Court. Claim means a claim as defined in section 101(5) of the Bankruptcy Code. -8-