IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: FASTSHIP, INC., et al., Debtors.

) ) ) ) ) ) )

Chapter 11 Case No. 12-10968 (BLS) (Jointly Administered)

Hearing Date: April 25, 2012 at 9:30 a.m. (ET) Objection Deadline: April 18, 2012 at 4:00 p.m. (ET)

MOTION OF FASTSHIP INC. FOR AUTHORIZATION TO ASSUME CERTAIN EXECUTORY CONTRACTS UNDER 11 U.S.C. 365 FastShip, Inc. (FSI), debtor and debtor in possession in the above-captioned chapter 11 case (the Debtor), hereby moves (the Motion) the Court, pursuant to sections 105(a) and 365(a) of Title 11 of the United States Code 101, et seq. (the Bankruptcy Code) and Rule 6006 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules), for authorization to assume the contracts identified on Exhibit A (as described below, each an Executory Contract and, collectively, the Executory Contracts). In support of this Motion, the Debtor respectfully represents as follows: BACKGROUND A. Overview of the Debtors Business and Need for Protection Under Chapter 11 of the Bankruptcy Code. 1. The Debtor (FSI along with its affiliated chapter 11 debtors FastShip Atlantic,

Inc. (FSA) and Thornycroft, Giles & Co., Inc. (TGC) are three interrelated entities, each of which is a Delaware corporation. FSI was formed in 1997. Shortly thereafter FSA and TGC were merged into, and then became, wholly-owned subsidiaries of FSI.

The Debtors, along with the last four digits of each Debtors tax identification number, are as follows: FastShip, Inc. (8309) (Case No. 12-10968 (BLS)), FastShip Atlantic, Inc. (0980) (Case No. 12-10970 (BLS)) and Thornycroft, Giles & Co., Inc. (1142) (Case No. 12-10971 (BLS)). The mailing address for the Debtors is 1608 Walnut Street, Suite 501, Philadelphia, PA 19103.

2.

The Debtors are privately held companies that have sought to raise seed capital to

implement a business plan using patented ship technology to revolutionize international freight transportation. The new ships would provide service speeds three times faster than traditional sea freight with previously unheard-of reliability. On a door-to-door basis, the resulting service would be comparable to airfreight at half the cost. 3. TGC holds U.S. and international patents for its unique design (the Design) for

a ship that operates at high speeds carrying heavy loads of freight in open-ocean conditions in virtually any weather. The Debtors believe the Design will be of significant commercial and military value, particularly in a world of expanding trade, global manufacturing, and just-in-time supply-chain methods. 4. For many years, the Debtors focused their efforts on creating the first commercial

service using the Design to demonstrate the value of the new technology in commercial use. To this end, the Debtors developed a business plan for a freight service on the North Atlantic trade route, which business plan required the Debtors to build four ships using the Design with specialized cargo-handling systems calling on dedicated terminals in Philadelphia, Pennsylvania and Cherbourg, France. 5. In order to construct the ships and fully fund the business plan, the Debtors sought

to raise $2 billion in financing. During the period from 1998 to 2008, the Debtors were close to raising the necessary capital to launch the business plan on three occasions, but were unable to close on the required financing because of political and market setbacks. 6. The combination of deal fatigue and the collapse of the global economy in 2008-

2009 forced the Debtors to abandon their original commercial business plan.

7.

At the same time that hope for the commercial business plan faded, the U.S. Navy

took delivery of a new class of high speed combat vessels, the first of which was built and delivered at a cost of $650 million. The Debtors believe that the design of this vessel infringes on TGCs patents. As a result, the Debtors believe a strong claim exists against the U.S. government for patent infringement. The Debtors attempted to reach a negotiated settlement with the U.S. government by filing an administrative claim in April 2008. Fully two years later, the U.S. government summarily denied the Debtors claim on what the Debtors, and their technical advisors, believe to be meritless grounds. 8. Through the bankruptcy process, the Debtors will create a liquidating trust to

pursue and monetize the patent infringement litigation (the IP Litigation) against the U.S. government and distribute the proceeds of such action to their creditors in an orderly fashion. 9. Accordingly, on March 20, 2012 (the Petition Date) the Debtors filed voluntary

petitions for relief under Chapter 11 of the Bankruptcy Code. 10. The Debtors continue to operate their business and manage their assets as debtors-

in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. 11. To date, no trustee or official committee of unsecured creditors has been

appointed or designated by the Office of the United States Trustee. B. The Debtors Employment Contracts. 12. Prior to the Petition Date, FSI entered into the Executory Contracts, which are

employment contracts with (i) Roland K. Bullard, FSIs President and Chief Executive Officer, and (ii) Kathryn R. Chambers, FSIs Executive Vice President, Secretary and Treasurer (each an Executive and together the Executives). The Executory Contracts are identified in more detail on Exhibit A, which specifies each Executory Contract by name, date and counterparty.

13.

Under the Executory Contracts, the Debtor is required to pay Mr. Bullard a

monthly salary of $20,833 ($9,375 in cash and $11,458 in equity) and is required to pay Ms. Chambers a monthly salary of $17,500 ($7,500 in cash and $10,000 in equity). FSI has not paid the Executives salaries since August 2009. In addition, since August 2009, the Executives have incurred unreimbursed out-of-pocket expenses which, pursuant to the Executory Contracts, FSI is required to reimburse them. Accordingly, FSI owes pre-petition monetary arrearages under the Executory Contracts in the amounts set forth in Exhibit A (collectively, the Cure Amounts). 14. Pursuant to this Motion, the Executory Contracts will be assumed with the

following modifications, as agreed to by each Executive: (i) Mr. Bullards compensation shall be reduced to $16,400 per month2 during the first two months following the Petition Date and shall be further reduced to $8,200 per month during the third through fifth months following the Petition Date; (ii) Ms. Chambers compensation shall be reduced to $8,750 per month during the first two months following the Petition Date and shall be further reduced to $4,375 per month during the third through fifth months following the Petition Date.3 The Executory Contracts shall terminate with no concomitant administrative claim (other than the Cure Amounts and any unpaid compensation up to the date of such termination, as modified herein) upon the occurrence of any of the following: the date on which a plan is confirmed and becomes effective in these cases; conversion of these cases to cases under Chapter 7; or dismissal of these cases. Ms. Chambers and Mr. Bullard acknowledge and agree that they are entitled to no compensation for

For purposes of this Motion and the obligations owed to Ms. Chambers and Mr. Bullard during these chapter 11 proceedings, a month shall be a thirty-day period with the first month following the Petition Date to be that period from March 20, 2012 through April 18, 2012. The second month shall be the next succeeding thirty day period and so on. To the extent that FSI does not have sufficient funds to pay employer payroll taxes, these amounts will be further reduced to cover employer payroll taxes.

services rendered in these bankruptcy proceedings after the expiration of the fifth month following the Petition Date. 15. FSI has determined, in its sound business judgment, that it would be in the best

interests of its bankruptcy estate as well as the estates of FSA and TGC to assume the Executory Contracts and cure the arrearages due thereunder, as follows: the Cure Amounts shall be allowed chapter 11 administrative claims payable only from the proceeds of the IP Litigation (by way of judgment or settlement) after the payment of all allowed claims properly perfected in the IP Litigation, or as otherwise set forth in any confirmed Plan of Reorganization in these proceedings. RELIEF REQUESTED 16. By this Motion, FSI seeks authority under sections 105(a) and 365(a) of the

Bankruptcy Code to assume the Executory Contracts listed on Exhibit A. JURISDICTION AND VENUE 17. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. 1334. This is

a core proceeding pursuant to 28 U.S.C. 157(b)(2). Venue is proper in this district pursuant to 28 U.S.C. 1408 and 1409. The statutory predicates for the relief sought herein are sections 105(a), and 365(a) of the Bankruptcy Code and Rule 6006 of the Bankruptcy Rules. BASIS FOR RELIEF A. Assumption of the Executory Contracts is in the Debtors best interests 18. Section 365(a) of the Bankruptcy Code provides that a debtor-in-possession

subject to the courts approval, may assume . . . any executory contract or unexpired lease of the debtor. 11 U.S.C. 365(a).

19.

The standard applied to determine whether assumption of an executory contract or

unexpired lease should be authorized is the business judgment standard. See Orion Pictures Corp. v. Showtime Networks Inc. (In re Orion Pictures Corp.), 4 F.3d 1095, 1098-99 (2d Cir. 1993); see also In re Crystalin, L.L.C., 293 RR. 455, 463 (B.A.P. 8th Cir. 2003) (citing In re Food Barn Stores, Inc., 107 F.3d 558, 566 (B.A.P. 8th Cir. 1997) (assumption of prepetition agreement approved under the business judgment standard)). This standard is satisfied when a debtor determines that assumption will benefit the estate. ld.; see also In re Farmland Indus., Inc., 294 B.R. 903, 913 (W.D. Mo. 2003) (finding that the debtor must show merely that the action to be taken will benefit the estate). 20. If a debtors business judgment has been exercised reasonably, a court should

approve the assumption of an executory contract or unexpired lease. See, e.g., NLRB v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984); Group of Instl Investors v. Chicago, Milwaukee, St. Paul & Pacific R.R. Co., 318 U.S. 523 (1943); Cleveland Hotel Protective Comm. v. Natl City Bank of Cleveland (In re Van Sweringen Corp.), 155 F.2d 1009, 1013 (6th Cir.), cert. denied, 329 U.S. 766 (1946); In re Child World, Inc., 142 B.R 87, 89 (Bankr. S.D.N.Y. 1992); In re Ionosphere Clubs, Inc., 100 B.R. 670, 673 (Bankr. S.D.N.Y. 1989). Once a debtor has satisfied the business judgment standard by showing that assumption will benefit the estate, the court should not interfere except upon a finding of bad faith or gross abuse of [the debtors] business discretion. Lubrizol Enters., Inc. v. Richmond Metal Finishers Inc., 756 F.2d 1043, 1047 (4th Cir. 1985). 21. The business judgment rule shields a debtors management from judicial second

guessing. In re Farmland Indus., Inc., 294 B.R. at 913 (quoting In re Johns-Manville Corp., 60 B.R. 612, 615-16 (Bankr. S.D.N.Y. 1986)) ([T]he Code favors the continued operation of business by a debtor and a presumption of reasonableness attaches to a debtors management

decisions.). Once the Debtor articulates a valid business justification, [t]he business judgment rule is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action was in the best interests of the company. In re Integrated Res., Inc., 147 B.R. 650, 656 (S.D.N.Y. 1992) (quoting Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985)). 22. Indeed, when applying the business judgment rule, courts show great deference to

the debtors decision making. See In re Crystalin, L.L.C., 293 B.R. at 464 (finding that the court need not place itself in the position of the trustee or debtor in possession) (omitting citations); see also Summit Land Co. v. Allen (In re Summit Land Co.), 13 B.R. 310, 315 (Bankr. D. Utah 1981) (holding that, absent extraordinary circumstances, court approval of a debtors decision to assume an executory contract should be granted as a matter of course). 23. FSI has evaluated each of the Executory Contracts and, in the exercise of its

business judgment, has determined that assumption of the Executory Contracts will benefit the all of the Debtors estates. 24. The Executives possess critical institutional knowledge, gained over the course of

more than a decade-long employment with and commitment to the Debtors. The Executives have been instrumental in coordinating the Debtors various constituents and stakeholders in order to make these Chapter 11 proceedings a reality. Without the Executives continued involvement with and participation in these Chapter 11 proceedings, the Debtors ability to reach confirmation would be jeopardized. The unique institutional knowledge and skill set possessed by each Executive is irreplaceable and critical to the reorganization process. 25. Accordingly, the assumption of the Executory Contracts is in the best interests of

the Debtors and their bankruptcy estates.

26.

In connection with the assumption, FSI intends to cure past due amounts to bring

the Executory Contracts current at the time a judgment is awarded or a settlement reached in connection with the IP Litigation, after secured claims are paid in full. As indicated on Exhibit A, the Cure Amounts total $556,061.35 in the aggregate. B. Adequate Assurance of Future Performance 27. In order to assume an executory contract or unexpired lease under the Bankruptcy

Code, a debtor, under certain circumstances, must provide adequate assurance of future performance under the executory contract. 11 U.S.C. 365(b)(1)(C). Adequate assurance of future performance is dependent on the specific facts and circumstances of the case and ultimately must be viewed in a practical light. See Carlisle Homes, Inc. v. Arrari (In re Carlisle Homes, Inc.), 103 B.R. 524, 538 (Bankr. D. N.J. 1989). Adequate assurance of future performance can be established by demonstrating the financial resources to perform and an expression of willingness to do so. See In re Bygaph, Inc., 56 B.R. 596, 605-06 (Bankr. S.D.N.Y. 1986) (considering adequate assurance of future performance in the context of a lease assignment). 28. In the present case, the Executives have agreed to the assumption of the

Executory Contracts and that the Cure Amounts will not be paid until such time as a judgment is awarded or a settlement reached in connection with the IP Litigation and only after creditors with senior claims are paid in full. The Cure Amounts shall be paid as an administrative expense of the estate, after secured claims have been paid in full. 29. In the event that the Executory Contracts are not assumed, and the Executives, as

a result, refuse to continue working for the Debtors, the Debtors estates will all suffer as they will have no ability to complete plans and disclosure statements, to have plans confirmed or to

emerge from their bankruptcy proceedings. In that circumstance, the IP Litigation will not be pursued to the detriment of all creditors. 30. For the foregoing reasons, FSI, in the exercise of its business judgment, has

determined that it is in the best interests of its estate, as well as the estates of FSA and TGC, to assume the Executory Contracts effective as of the date of the Order approving their assumption. 31. FSI has caused a copy of this Motion to be served upon: (a) the Office of the

United States Trustee; (b) each of the Debtors top twenty (20) unsecured creditors; (c) all parties requesting notices in these bankruptcy cases; (d) the Debtors DIP Lender; and (e) the counterparties to the Executory Contracts listed on Exhibit A. FSI submits that good and sufficient notice of this Motion has been provided and no other or further notice need be provided. WHEREFORE, FSI respectfully requests that this Court enter an order substantially in the form of the proposed order submitted herewith: (a) authorizing FSI to assume the Executory Contracts and pay such amounts as and when set forth in the Motion, as are necessary to cure any arrearages thereunder; and (b) granting such other and further relief as the Court deems necessary and proper under the circumstances. Dated: April 5, 2012 BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP By: /s/ Raymond H. Lemisch Raymond H. Lemisch, Esquire (No. 4204) Jennifer E. Smith, Esquire (No. 5278) 222 Delaware Avenue, Suite 801 Wilmington, DE 19801 (302) 442-7010 (Telephone) (302) 442-7012 (Facsimile) rlemisch@beneschlaw.com jsmith@beneschlaw.com -and-

Kari Coniglio, Esquire (OH 0081463) 200 Public Square Suite 2300 Cleveland, OH 44114 (216) 363-4500 (Telephone) (216) 363-4588 (Facsimile) kconiglio@beneschlaw.com Proposed Counsel for FastShip, Inc., FastShip Atlantic, Inc. and Thornycroft, Giles & Co., Inc., Debtors and Debtors in Possession

10

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: FASTSHIP, INC., et al., Debtors.1 ) ) ) ) ) ) ) Chapter 11 Case No. 12-10968 (BLS) Jointly Administered
Hearing Date: April 25, 2012 at 9:30 a.m. (ET) Objection Deadline: April 18, 2012 at 4:00 p.m. (ET)

NOTICE OF MOTION TO: (1) the Office of the United States Trustee; (2) the Debtors twenty largest unsecured creditors; (3) the DIP Lender; (4) the counterparties to the Executory Contracts listed on Exhibit A to the Motion; and (5) all parties requesting notice pursuant to Bankruptcy Rule 2002 PLEASE TAKE NOTICE that FastShip, Inc., et al., (the Debtors), by and through their undersigned counsel, have filed the Motion of FastShip, Inc. for Authorization to Assume Certain Executory Contracts Under 11 U.S.C. 365 (the Motion). You are required to file a response, if any, to the Motion, on or before April 18, 2012 at 4:00 pm. (ET). At the same time, you must serve a copy of the response upon the Debtors attorneys: Raymond H. Lemisch, Esquire Jennifer E. Smith, Esquire BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP 222 Delaware Avenue, Suite 801 Wilmington, DE 19801

A HEARING ON THIS MATTER WILL BE HELD ON APRIL 25, 2012 AT 9:30 A.M. (ET) BEFORE THE HONORABLE BRENDAN L. SHANNON AT THE UNITED STATES
1

The Debtors, along with the last four digits of each Debtors tax identification number, are as follows: FastShip, Inc. (8309) (Case No. 12-10968-BLS), FastShip Atlantic, Inc. (0980) (Case No. 12-10970-BLS) and Thornycroft, Giles & Co., Inc. (1142) (Case No. 12-10971. The mailing address for the Debtors is 1608 Walnut Street, Suite 501, Philadelphia, PA 19103.

BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE, 824 MARKET STREET, 6TH FLOOR, COURTROOM NO. 1, WILMINGTON, DELAWARE 19801. IF YOU FAIL TO RESPOND IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED WITHOUT FURTHER NOTICE OR HEARING. Dated: April 5, 2012 BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP By: /s/ Raymond H. Lemisch Raymond H. Lemisch, Esquire (No. 4204) Jennifer E. Smith, Esquire (No. 5278) 222 Delaware Avenue, Suite 801 Wilmington, DE 19801 (302) 442-7010 (Telephone) (302) 442-7012 (Facsimile) rlemisch@beneschlaw.com jsmith@beneschlaw.com - and Kari Coniglio, Esquire (OH 0081463) 200 Public Square 2300 BP Tower Cleveland, OH 44114 (216) 363-4500 (216) 363-4588 kconiglio@beneschlaw.com Proposed Counsel for FastShip, Inc., FastShip Atlantic, Inc. and Thornycroft, Giles & Co., Inc., Debtors and Debtors in Possession

7112222_1.DOC

EXHIBIT A

Contract Employment Agreement

Counterparty Roland K. Bullard II 1822 Pine Street Philadelphia, PA 19103

Effective 10/16/03

Type of Expense Unpaid cash compensation; Unreimbursed, noncontingent out-ofpocket expenses Unpaid cash compensation; Unreimbursed, noncontingent out-ofpocket expenses TOTAL:

Proposed Cure Amount1 $291,683.00 $25,330.91

Employment Agreement

Kathryn Riepe Chambers 12 Betty Bush Lane Baltimore, MD 21212

10/16/03

$233,347.00 $5,700.44 $556,061.35

The Debtor reserves the right to amend the cure amounts listed herein at any time.

Doc 7092567 Ver 1

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: FASTSHIP, INC., et al., Debtors.
1

) ) ) ) ) ) )

Chapter 11 Case No. 12-10968 (BLS) (Jointly Administered) Re: Docket No. ______

ORDER GRANTING MOTION OF FASTSHIP INC. FOR AUTHORIZATION TO ASSUME CERTAIN EXECUTORY CONTRACTS UNDER 11 U.S.C. 365

AND NOW, this _____ day of ____________________, 2012, upon consideration of the Motion of FastShip Inc. for Authorization to Assume Certain Executory Contracts Under 11 U.S.C. 365 (the Motion), and upon further consideration of any opposition thereto, and the Court finding that: (a) it has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; (b) this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); (c) venue of this proceeding and this Motion in this District is proper pursuant to 28 U.S.C. 1408 and 1409; (d) due and proper notice of and an opportunity to be heard with respect to the Motion having been provided and that no other or further notice need be provided; (e) assumption of the Executory Contracts2 identified on Exhibit A to the Motion is beneficial to the bankruptcy estates; and (f) FSI has demonstrated, if and to the extent required, adequate assurance of future performance under the Executory Contracts; and after due deliberation and good cause appearing therefor, both on the record and as otherwise shown, it is hereby: ORDERED, that the Motion is GRANTED; and it is further
1

The Debtors, along with the last four digits of each Debtors tax identification number, are as follows: FastShip, Inc. (8309) (Case No. 12-10968 (BLS)), FastShip Atlantic, Inc. (0980) (Case No. 12-10970 (BLS)) and Thornycroft, Giles & Co., Inc. (1142) (Case No. 12-10971 (BLS)). The mailing address for the Debtors is 1608 Walnut Street, Suite 501, Philadelphia, PA 19103. Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Motion.

ORDERED, that FSI is AUTHORIZED to assume each of the Executory Contracts, as modified, listed on Exhibit A to the Motion, which Executory Contracts shall be deemed assumed as of the date of this Order; and it is further ORDERED, that FSI is AUTHORIZED to pay: (i) Mr. Bullards reduced compensation in the amount of $16,400 per month3 during the first two months following the Petition Date and $8,200 per month during the third through fifth months following the Petition Date; and (ii) Ms. Chambers reduced compensation of $8,750 per month during the first two months following the Petition Date and $4,375 per month during the third through fifth months following the Petition Date;4 and it is further ORDERED, that FSI is AUTHORIZED to pay the Cure Amounts in Exhibit A to the Motion as administrative claims, payable only from the proceeds of the IP Litigation (by way of judgment or settlement) after the payment of any allowed claims properly perfected in the IP Litigation, or as set forth in any confirmed Plan of Reorganization in these proceedings; and it is further ORDERED, that the Executory Contracts shall terminate (without any concomitant administrative claim allowed against the Debtors estates, except for the Cure Amounts as set forth on Exhibit A to the Motion and any unpaid compensation up to the date of termination, as modified in this Order) upon the occurrence of any of the following: the date on which a plan is confirmed and becomes effective in these cases; conversion of these cases to cases under Chapter 7; or dismissal of these cases; and it is further

For purposes of this Order and the obligations owed to Ms. Chambers and Mr. Bullard during these chapter 11 proceedings, a month shall be a thirty-day period with the first month following the Petition Date to be that period from March 20, 2012 through April 18, 2012. The second month shall be the next succeeding thirty day period and so on. To the extent that FSI does not have sufficient funds to pay employer payroll taxes, these amounts will be further reduced to cover employer payroll taxes.

ORDERED, that the Debtors are AUTHORIZED to take all other and further actions as it deems necessary and appropriate to effectuate the relief granted pursuant to this Order in accordance with the Motion; and it is further ORDERED, that the Court shall retain jurisdiction with respect to this Order and any of the issues raised in the Motion.

______________________________________ HONORABLE BRENDAN L. SHANNON United States Bankruptcy Judge