Case CSS Doc 1070 Filed 02/01/17 Page 1 of 9 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

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1 Case CSS Doc 1070 Filed 02/01/17 Page 1 of 9 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re : Chapter 11 : PARAGON OFFSHORE PLC, et al., : Case No (CSS) : : Jointly Administered Debtors. 1 : : Hearing Date: 2/21/2017 at 10:00 a.m. (ET) : Obj. Deadline: 2/14/2017 at 4:00 p.m. (ET) x DEBTORS MOTION TO APPROVE STIPULATION BETWEEN THE DEBTORS AND LIBERTY MUTUAL INSURANCE COMPANY Paragon Offshore plc and its affiliated debtors in the above-captioned chapter 11 cases, as debtors and debtors in possession (collectively, the Debtors ), respectfully represent as follows in support of this motion (this Motion ): Jurisdiction 1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. 157 and 1334, and the Amended Standing Order of Reference from the United States District Court for the District of Delaware dated February 29, This is a core proceeding pursuant to 28 U.S.C. 157(b) and, pursuant to Rule (f) of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules ), the Debtors consent to the entry of a final order by the Court in connection with this 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Paragon Offshore plc (6017); Paragon Offshore Finance Company (6632); Paragon International Finance Company (8126); Paragon Offshore Holdings US Inc. (1960); Paragon Offshore Drilling LLC (4541); Paragon FDR Holdings Ltd. (4731); Paragon Duchess Ltd.; Paragon Offshore (Luxembourg) S.à r.l. (5897); PGN Offshore Drilling (Malaysia) Sdn. Bhd. (9238); Paragon Offshore (Labuan) Pte. Ltd. (3505); Paragon Holding SCS 2 Ltd. (4108); Paragon Asset Company Ltd. (2832); Paragon Holding SCS 1 Ltd. (4004); Paragon Offshore Leasing (Luxembourg) S.à r.l. (5936); Paragon Drilling Services 7 LLC (7882); Paragon Offshore Leasing (Switzerland) GmbH (0669); Paragon Offshore do Brasil Ltda.; Paragon Asset (ME) Ltd. (8362); Paragon Asset (UK) Ltd.; Paragon Offshore International Ltd. (6103); Paragon Offshore (North Sea) Ltd.; Paragon (Middle East) Limited (0667); Paragon Holding NCS 2 S.à r.l. (5447); Paragon Leonard Jones LLC (8826); Paragon Offshore (Nederland) B.V.; and Paragon Offshore Contracting GmbH (2832). The Debtors mailing address is 3151 Briarpark Drive, Suite 700, Houston, Texas RLF V.1

2 Case CSS Doc 1070 Filed 02/01/17 Page 2 of 9 Motion to the extent that it is later determined that the Court, absent consent of the parties, cannot enter final orders or judgments consistent with Article III of the United States Constitution. Venue is proper before this Court pursuant to 28 U.S.C and Background A. General Background 2. On February 14, 2016 (the Petition Date ), each of the Debtors commenced with this Court a voluntary case under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ). The Debtors chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ). The Debtors continue to operate their business and manage their property as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee of creditors has been appointed in these chapter 11 cases. 3. Additional information regarding the circumstances leading to the commencement of these chapter 11 cases and information regarding the Debtors business and capital structure is set forth in the Declaration of Ari Lefkovits in Support of the Debtors Chapter 11 Petitions and Related Requests for Relief (Docket No. 17) and the Declaration of James A. Mesterharm in Support of the Debtors Chapter 11 Petitions and Related Requests for Relief (Docket No. 18). RLF v.1 2

3 Case CSS Doc 1070 Filed 02/01/17 Page 3 of 9 B. The Debtors Relationship with Liberty 4. The Debtors and Liberty Mutual Fire Insurance Company ( Liberty, and together with the Debtors, the Parties ) are parties to certain insurance policies and related agreements (collectively, the Policies ) that set forth the calculation and payment of premiums, administrative expenses, deductible reimbursement and other obligations Prior to the Petition Date, the Debtors initially paid an estimated premium for the Policies and then continued to make additional periodic payments to Liberty based on actual losses and expenses, subject to contractual limitations, under the Policies (collectively the Obligations ). The Debtors also provided Liberty with security to back Obligations to Liberty, which security as of the Petition Date included a letter of credit issued by HSBC Bank ( HSBC ) with a balance of approximately $600,000 (as amended from time to time, the LC ). 6. Since the Petition Date, the Parties have exchanged information and held discussions regarding the LC proceeds and the extent and sufficiency of the security for the Obligations. Based on these discussions, the Parties engaged in arm s length negotiations and entered into a Stipulation Between Debtors and Liberty Mutual Insurance Company (the Stipulation ), which, subject to Court approval, will result in the payment of 50% of the LC proceeds (the LC Proceeds ) to the Debtors on the terms set forth therein. Relief Requested 7. Pursuant to sections 105(a) and 363 of the Bankruptcy Code and Bankruptcy Rule 9019, the Debtors respectfully request entry of an order, substantially in the form attached hereto as Exhibit A, approving the Stipulation in the form attached as Exhibit 1 to the proposed order. 2 The Debtors ability to continue the insurance programs covered by the Polices was approved pursuant to the Court s final order approving the Debtors first-day insurance motion (Docket No. 141). RLF v.1 3

4 Case CSS Doc 1070 Filed 02/01/17 Page 4 of 9 8. The essential terms of the Parties agreement under the Stipulation is as follows: 3 A. Within ten (10) days following the Court s entry of a final order approving the Stipulation, Liberty shall pay the Debtors the sum of $300,000 (the Funds ) from the LC Proceeds. B. Upon transfer of the Funds by Liberty to the Debtors, the Debtors shall not object to Liberty having all right, title and interest in the remaining LC Proceeds and to utilize the LC Proceeds in accordance with the Policies. C. Upon receipt of the Funds, the Debtors and their estates agree to release Liberty from any and all claims or causes of action arising from or related to the LC and the Funds. D. Upon receipt of the Funds, Liberty agrees to release the Debtors from any and all claims or causes of action arising from or related to the LC and the Funds. E. With the exception of the limited releases regarding the LC, the Parties expressly reserve all of their respective rights and claims under or in connection with the Policies. Basis For Relief Requested 9. Bankruptcy Rule 9019(a) provides, in relevant part, that [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. Fed. R. Bankr. P. 9019(a). Compromises and settlements are a normal part of the process of reorganization. Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968) (quoting Case v. L.A. Lumber Prods. Co., 308 U.S. 106, 130 (1939)). The compromise or settlement of time-consuming and burdensome litigation, especially in the bankruptcy context, is encouraged and generally favored in bankruptcy. In re World 3 Reference is made to the Stipulation for a complete description of its terms. To the extent any summaries and/or descriptions of the terms of the Stipulation contained in the Motion differ in any way from those contained in the Stipulation, the Stipulation shall govern. All capitalized terms that are used but not defined herein shall have the meanings ascribed to such terms in the Stipulation. RLF v.1 4

5 Case CSS Doc 1070 Filed 02/01/17 Page 5 of 9 Health Alternatives, Inc., 344 B.R. 291, 296 (Bankr. D. Del. 2006); see also In re Penn Cent. Transp. Co., 596 F.2d 1102 (3d Cir. 1979). 10. [T]he decision whether to approve a compromise under Bankruptcy Rule 9019 is committed to the sound discretion of the Court, which must determine if the compromise is fair, reasonable, and in the interest of the estate. In re Louise s, Inc., 211 B.R. 798, 801 (D. Del. 1997). Courts should not, however, substitute their judgment for that of the debtor, but instead canvas the issues to see whether the compromise falls below the lowest point in the range of reasonableness. See In re Neshaminy Office Bldg. Assocs., 62 B.R. 798, 803 (E.D. Pa. 1986); In re W.T. Grant and Co., 699 F.2d 599, 608 (2d Cir. 1983); see also In re World Health, 344 B.R. at 296 ( The court does not have to be convinced that the settlement is the best possible compromise. Rather, the court must conclude that the settlement is within the reasonable range of litigation possibilities. ) (internal citations and quotations omitted). 11. The Third Circuit Court of Appeals has enumerated four factors that should be considered in determining whether a compromise should be approved. The four enumerated factors are: (1) the probability of success in litigation; (2) the likely difficulties in collection; (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (4) the paramount interest of the creditors. Meyers v. Martin (In re Martin), 91 F.3d 389, 393 (3d Cir. 1996); accord Will v. Nw. Univ. (In re Nutraquest, Inc.), 434 F.3d 639, 644 (3d Cir. 2006) (finding that the Martin factors are useful when analyzing a settlement of a claim against the debtor as well as a claim belonging to the debtor); see also TMT Trailer Ferry, Inc., 390 U.S. 414, 424 (1968); In re Marvel Entm t Group, Inc., 222 B.R. 243 (D. Del. 1998) (proposed settlement held in best interest of the estate); In re Mavrode, 205 B.R. 716, 721 (Bankr. D.N.J. 1997). The test boils down to whether the terms of the proposed compromise fall within a reasonable range of litigation possibilities. In re Penn RLF v.1 5

6 Case CSS Doc 1070 Filed 02/01/17 Page 6 of 9 Cent., 596 F.2d at 1114 (citations omitted); see also In re Pa. Truck Lines, Inc., 150 B.R. 595, 598 (E.D. Pa. 1992) (same). 12. The compromise embodied in the Parties agreement and Stipulation is fair and equitable. The Parties are resolving disputes between the Debtors and Liberty related to the LC in a manner that will lead to the release of significant funds to the Debtors and their estates. Their agreement is a result of arm s length negotiations. In fact, the Debtors have been engaged in negotiations with Liberty related to these issues for several months. Accordingly, the Debtors believe that their agreement and Stipulation is in the best interest of the Debtors and their estates. Further, the Parties agreement and Stipulation represents a simpler and more efficient solution than likely could be obtained through further litigation regarding the LC. Pursuant to the Stipulation, 50% of the Funds in the LC are returned to the Debtors without the need for further costly litigation or the uncertainty attendant to litigation. 13. Accordingly, the Parties agreement and Stipulation (i) are fair and equitable; (ii) represent a compromise between the Debtors and Liberty that is reasonable; and (iii) obviate the expense, delay, inconvenience and uncertainty that would attend any further litigation between the Parties. Therefore, the Stipulation satisfies Bankruptcy Rule 9019 and should be approved by the Court. 14. To the extent that section 363 of the Bankruptcy Code is implicated in connection with the Parties agreement and Stipulation, the Debtors seek authority thereunder to execute and perform their obligations under the Stipulation. The Debtors submit that the terms of the Stipulation have a sound business purpose and represent the exercise of their sound business judgment. Accordingly, any actions required to effectuate the terms of the Stipulation should be authorized and approved pursuant to Section 363(b). See In re Lionel Corp., 722 F. 2d 1063, 1071 (2d Cir. 1983) ( The rule we adopt requires that a judge determining a RLF v.1 6

7 Case CSS Doc 1070 Filed 02/01/17 Page 7 of 9 363(b) application expressly find from the evidence presented before him a good business reason to grant the application. ); In re Del. Hudson Ry. Co., 124 B.R. 169, 179 (Bankr. D. Del. 1991) Finally, authorizing the Debtors to enter into and effectuate the terms of the Parties agreement and Stipulation is well within the equitable powers of this Court. See 11 U.S.C. 105(1) ( The court may issue any order, process, or judgment that is necessary to carry out the provisions of [the Bankruptcy Code]. ); see also Chinichian v. Campolongo (In re Chinichian), 784 F.2d 1440, 1443 (9th Cir. 1986) ( Section 105 sets out the power of the bankruptcy court to fashion orders as necessary pursuant to the purposes of the Bankruptcy Code. ); In re Cooper Props. Liquidating Trust, Inc., 61 B.R. 531, 537 (Bankr. W.D. Tenn. 1986) (noting that bankruptcy court is one of equity and as such it has a duty to protect whatever equities a debtor may have in property for the benefit of its creditors as long as that protection is implemented in a manner consistent with the bankruptcy laws. ). 16. The Stipulation is in the best interests of the Debtors and their estates. Accordingly, it should be approved under Bankruptcy Rule 9019 and sections 105 and 363 of the Bankruptcy Code. Notice 17. No trustee, examiner, or statutory committee of creditors has been appointed in these chapter 11 cases. Notice of this Motion has been provided to (i) the Office of the United States Trustee for the District of Delaware; (ii) the Debtors thirty (30) largest unsecured creditors on a consolidated basis; (iii) Simpson Thacher & Bartlett LLP, To the extent that the provisions of the automatic stay are implicated by the Parties settlement, or the requirement thereunder for Liberty to deliver the Funds as provided under the Stipulation, the Debtors respectfully move the Court to confirm through any order approving the Stipulation that the automatic stay is lifted for the purposes of the Stipulation and the actions required by the Parties thereunder, as well as for Liberty to deliver the Funds as required under the Stipulation. RLF v.1 7

8 Case CSS Doc 1070 Filed 02/01/17 Page 8 of 9 Lexington Avenue, New York, NY (Attn: Sandeep Qusba, Esq., Kathrine A. McLendon, Esq., and Morris J. Massel, Esq.), counsel to JPMorgan Chase Bank, N.A. (a) as administrative agent under the Senior Secured Revolving Credit Agreement, dated as of June 17, 2014, and (b) as collateral agent under the Guaranty and Collateral Agreement, dated as of July 18, 2014; (iv) Kaye Scholer LLP, 250 West 55th Street, New York, NY (Attn: Scott D. Talmadge, Esq. and Mark F. Liscio, Esq.), counsel to Cortland Capital Market Services LLC as administrative agent under the Senior Secured Term Loan Agreement, dated as of July 18, 2014; (v) Morgan, Lewis, & Bockius LLP, 101 Park Avenue, New York, NY (Attn: James O. Moore, Esq., Glenn E. Siegel, Esq., and Joshua Dorchak, Esq.), counsel to Deutsche Bank Trust Company Americas as trustee under the Senior Notes Indenture, dated as of July 18, 2014, for the 6.75% Senior Notes due 2022 and the 7.25% Senior Notes due 2024; (vi) Paul, Weiss, Rifkind, Wharton, & Garrison LLP, 1285 Avenue of the Americas, New York, NY (Attn: Andrew N. Rosenberg, Esq. and Elizabeth R. McColm, Esq.), counsel to certain holders of the 6.75% Senior Notes due 2022 and the 7.25% Senior Notes due 2024; (vii) the Securities and Exchange Commission; (viii) the Internal Revenue Service; (ix) the United States Attorney s Office for the District of Delaware; (x) Choate Hall & Stewart LLP, Two International Place, Boston, MA (Attn: Douglas R. Gooding), counsel for Liberty; and (xi) all parties who filed a request for service of notices under Bankruptcy Rule No Prior Motion 18. The Debtors have not made any prior motion for the relief sought in this Motion to this Court or any other. RLF v.1 8

9 Case CSS Doc 1070 Filed 02/01/17 Page 9 of 9 WHEREFORE the Debtors respectfully request that this Court enter the Order, substantially in the form attached hereto as Exhibit A, (a) approving the Stipulation, (b) authorizing the Debtors to effectuate the compromise embodied therein, and (c) granting such other and further relief as the Court deems appropriate. Dated: February 1, 2017 Wilmington, Delaware /s/ Amanda R. Steele RICHARDS, LAYTON & FINGER, P.A. Mark D. Collins (No. 2981) Amanda R. Steele (No. 5530) Joseph C. Barsalona II (No. 6102) One Rodney Square 920 North King Street Wilmington, Delaware Telephone: (302) Facsimile: (302) and- WEIL, GOTSHAL & MANGES LLP Gary T. Holtzer (admitted pro hac vice) Stephen A. Youngman (admitted pro hac vice) Alfredo R. Pérez (admitted pro hac vice) 767 Fifth Avenue New York, New York Telephone: (212) Facsimile: (212) Attorneys for Debtors and Debtors in Possession RLF v.1 9

10 Case CSS Doc Filed 02/01/17 Page 1 of 3 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE x In re : Chapter 11 : PARAGON OFFSHORE PLC, et al., : Case No (CSS) : : Jointly Administered Debtors. 1 : : Hearing Date: Feb. 21, 2017 at 10:00 a.m. (ET) : Obj. Deadline: Feb. 14, 2017 at 4:00 p.m. (ET) x NOTICE OF MOTION AND HEARING PLEASE TAKE NOTICE that, on February 1, 2017, Paragon Offshore plc and its affiliated debtors in the above-captioned chapter 11 cases, as debtors and debtors in possession (collectively, the Debtors ) filed the Debtors Motion to Approve Stipulation Between the Debtors and Liberty Mutual Insurance Company (the Motion ) with the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court ). PLEASE TAKE FURTHER NOTICE that any responses or objections to the Motion must be in writing, filed with the Clerk of the Bankruptcy Court, 824 North Market Street, 3rd Floor, Wilmington, Delaware 19801, and served upon and received by the undersigned counsel for the Debtors on or before February 14, 2017 at 4:00 p.m. (ET). 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Paragon Offshore plc (6017); Paragon Offshore Finance Company (6632); Paragon International Finance Company (8126); Paragon Offshore Holdings US Inc. (1960); Paragon Offshore Drilling LLC (4541); Paragon FDR Holdings Ltd. (4731); Paragon Duchess Ltd.; Paragon Offshore (Luxembourg) S.à r.l. (5897); PGN Offshore Drilling (Malaysia) Sdn. Bhd. (9238); Paragon Offshore (Labuan) Pte. Ltd. (3505); Paragon Holding SCS 2 Ltd. (4108); Paragon Asset Company Ltd. (2832); Paragon Holding SCS 1 Ltd. (4004); Paragon Offshore Leasing (Luxembourg) S.à r.l. (5936); Paragon Drilling Services 7 LLC (7882); Paragon Offshore Leasing (Switzerland) GmbH (0669); Paragon Offshore do Brasil Ltda.; Paragon Asset (ME) Ltd. (8362); Paragon Asset (UK) Ltd.; Paragon Offshore International Ltd. (6103); Paragon Offshore (North Sea) Ltd.; Paragon (Middle East) Limited (0667); Paragon Holding NCS 2 S.à r.l. (5447); Paragon Leonard Jones LLC (8826); Paragon Offshore (Nederland) B.V.; and Paragon Offshore Contracting GmbH (2832). The Debtors mailing address is 3151 Briarpark Drive, Suite 700, Houston, Texas RLF v.1

11 Case CSS Doc Filed 02/01/17 Page 2 of 3 PLEASE TAKE FURTHER NOTICE that if any objections to the Motion are received, the Motion and such objections shall be considered at a hearing before The Honorable Christopher S. Sontchi, United States Bankruptcy Judge for the District of Delaware, at the Bankruptcy Court, 824 North Market Street, 5th Floor, Courtroom 6, Wilmington, Delaware on February 21, 2017 at 10:00 a.m. (ET). PLEASE TAKE FURTHER NOTICE THAT IF NO OBJECTIONS TO THE MOTION ARE TIMELY FILED, SERVED AND RECEIVED IN ACCORDANCE WITH THIS NOTICE, THE BANKRUPTCY COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION WITHOUT FURTHER NOTICE OR HEARING. RLF v.1 2

12 Case CSS Doc Filed 02/01/17 Page 3 of 3 Dated: February 1, 2017 Wilmington, Delaware /s/ Amanda R. Steele RICHARDS, LAYTON & FINGER, P.A. Mark D. Collins (No. 2981) Paul N. Heath (No. 3704) Amanda R. Steele (No. 5530) Joseph C. Barsalona II (No. 6102) One Rodney Square 920 North King Street Wilmington, Delaware Telephone: (302) Facsimile: (302) and- WEIL, GOTSHAL & MANGES LLP Gary T. Holtzer (admitted pro hac vice) Stephen A. Youngman (admitted pro hac vice) Alfredo R. Pérez (admitted pro hac vice) 767 Fifth Avenue New York, New York Telephone: (212) Facsimile: (212) Attorneys for the Debtors and Debtors in Possession RLF v.1 3

13 Case CSS Doc Filed 02/01/17 Page 1 of 8 EXHIBIT A Proposed Order RLF V.1

14 Case CSS Doc Filed 02/01/17 Page 2 of 8 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re : Chapter 11 : PARAGON OFFSHORE PLC, et al., : Case No (CSS) : : Jointly Administered Debtors. 1 : : Re: Docket No. : x ORDER APPROVING STIPULATION BETWEEN THE DEBTORS AND LIBERTY MUTUAL INSURANCE COMPANY Upon the motion (the Motion ) 2 of the Debtors for entry of an order (this Order ): approving the Stipulation Between Debtors and Liberty Mutual Insurance Company, all as more fully set forth in the Motion; and due and sufficient notice of the Motion having been provided under the particular circumstances, and it appearing that no other or further notice need be provided; and the Court having jurisdiction to consider the Motion and the relief requested therein in accordance with 28 U.S.C. 157 and 1334; and consideration of the Motion and the relief requested therein being a core proceeding under 28 U.S.C. 157(b); and that this Court may enter a final order consistent with Article III of the United States Constitution; and venue being proper before this Court under 28 U.S.C and 1409; and the Court having found 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Paragon Offshore plc (6017); Paragon Offshore Finance Company (6632); Paragon International Finance Company (8126); Paragon Offshore Holdings US Inc. (1960); Paragon Offshore Drilling LLC (4541); Paragon FDR Holdings Ltd. (4731); Paragon Duchess Ltd.; Paragon Offshore (Luxembourg) S.à r.l. (5897); PGN Offshore Drilling (Malaysia) Sdn. Bhd. (9238); Paragon Offshore (Labuan) Pte. Ltd. (3505); Paragon Holding SCS 2 Ltd. (4108); Paragon Asset Company Ltd. (2832); Paragon Holding SCS 1 Ltd. (4004); Paragon Offshore Leasing (Luxembourg) S.à r.l. (5936); Paragon Drilling Services 7 LLC (7882); Paragon Offshore Leasing (Switzerland) GmbH (0669); Paragon Offshore do Brasil Ltda.; Paragon Asset (ME) Ltd. (8362); Paragon Asset (UK) Ltd.; Paragon Offshore International Ltd. (6103); Paragon Offshore (North Sea) Ltd.; Paragon (Middle East) Limited (0667); Paragon Holding NCS 2 S.à r.l. (5447); Paragon Leonard Jones LLC (8826); Paragon Offshore (Nederland) B.V.; and Paragon Offshore Contracting GmbH (2832). The Debtors mailing address is 3151 Briarpark Drive, Suite 700, Houston, Texas Capitalized terms used but not defined in this Order have the meanings used in the Motion. RLF V.1

15 Case CSS Doc Filed 02/01/17 Page 3 of 8 and determined that the relief requested in the Motion is in the best interests of the Debtors, their estates and creditors, and any parties in interest; and that the legal and factual bases set forth in the Motion establish just cause for the relief granted herein; and after due deliberation thereon and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is GRANTED to the extent set forth herein. 2. The Stipulation, attached hereto as Exhibit 1, is approved. 3. As set forth in the Stipulation, Liberty is directed within ten (10) days after the date of entry of this Order to pay the Debtors from the LC Proceeds the sum of $300,000 (the Funds ) 4. The Parties and their officers and agents are authorized and directed to execute, deliver, implement and fully perform any and all obligations, instruments, documents and papers and to take any and all actions reasonably necessary or appropriate to consummate and fully execute the Stipulation and effectuate its terms. 5. To the extent applicable, the automatic stay in effect in the Debtors cases is lifted for the purposes of the Stipulation, the Parties compliance with the terms thereof, and Liberty s delivery of the Funds as required under the terms of the Stipulation and this Order. 6. This Court shall retain jurisdiction over any and all issues arising from or related to the implementation and interpretation of this Order. Dated:, 2017 Wilmington, Delaware THE HONORABLE CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY JUDGE RLF V.1 2

16 Case CSS Doc Filed 02/01/17 Page 4 of 8 EXHIBIT 1 Stipulation RLF V.1

17 Case CSS Doc Filed 02/01/17 Page 5 of 8 UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ) In re ) Chapter 11 ) PARAGON OFFSHORE PLC, et al., 1 ) Case No (CSS) ) Debtors. ) Jointly Administered ) STIPULATION BETWEEN DEBTORS AND LIBERTY MUTUAL INSURANCE COMPANY REGARDING PAYMENT OF SECURITY This Stipulation (the Stipulation ) dated as of January 31, 2017, is entered by and between Paragon Offshore plc and each of its affiliated debtors in the above-captioned chapter 11 cases (collectively, the Debtors ) and Liberty Mutual Insurance Company, on behalf of itself and its affiliates (collectively, Liberty ) (collectively, the Debtors and Liberty, the Parties ). WHEREAS, Liberty and the Debtors are parties to certain insurance policies and related agreements, (collectively, the Policies ), which set forth the calculation and payment of premiums, administrative expenses, deductible reimbursement and other obligations. For certain of the Policies, payment obligations are based on the actual loss experience of the Debtors. Under certain of the Policies, the Debtors initially paid an estimated premium and then continued to make additional periodic payments to Liberty based on actual losses and expenses, subject to contractual limitations, under the Policies (collectively the Obligations ); 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, as applicable, are: Paragon Offshore plc (6017); Paragon Offshore Finance Company (6632); Paragon International Finance Company (8126); Paragon Offshore Holdings US Inc. (1960); Paragon Offshore Drilling LLC (4541); Paragon FDR Holdings Ltd. (4731); Paragon Duchess Ltd.; Paragon Offshore (Luxembourg) S.à r.l. (5897); PGN Offshore Drilling (Malaysia) Sdn. Bhd. (9238); Paragon Offshore (Labuan) Pte. Ltd. (3505); Paragon Holding SCS 2 Ltd. (4108); Paragon Asset Company Ltd. (2832); Paragon Holding SCS 1 Ltd. (4004); Paragon Offshore Leasing (Luxembourg) S.à r.l. (5936); Paragon Drilling Services 7 LLC (7882); Paragon Offshore Leasing (Switzerland) GmbH (0669); Paragon Offshore do Brasil Ltda.; Paragon Asset (ME) Ltd. (8362); Paragon Asset (UK) Ltd.; Paragon Offshore International Ltd. (6103); Paragon Offshore (North Sea) Ltd.; Paragon (Middle East) Limited (0667); Paragon Holding NCS 2 S.à r.l. (5447); Paragon Leonard Jones LLC (8826); Paragon Offshore (Nederland) B.V.; and Paragon Offshore Contracting GmbH (2832). The Debtors mailing address is 3151 Briarpark Drive, Suite 700, Houston, Texas

18 Case CSS Doc Filed 02/01/17 Page 6 of 8 WHEREAS, the Debtors provided Liberty with security to back the various financial Obligations to Liberty, which security as of the Petition Date (as defined below) included a letter of credit issued by HSBC Bank ( HSBC ) with a balance of approximately $600,000 (as amended from time to time, the LC ); WHEREAS, on February 14, 2016 (the Petition Date ), each of the Debtors filed a voluntary petition for relief pursuant to Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court ), jointly administered as Case No (CSS); WHEREAS, pursuant to the terms of the Policies, Liberty drew down full sum of the LC in the amount of $600,000 (the LC Proceeds ); WHEREAS, the Parties have exchanged information and held discussions regarding the LC Proceeds and the extent and sufficiency of the security; and WHEREAS, the Parties have engaged in arm s length negotiations and now seek to enter into a settlement that will result in the payment of fifty (50) percent of the LC Proceeds to the Debtors on the terms set forth herein. NOW, THEREFORE, the Parties hereto agree to be mutually bound and in consideration of their mutual obligations as set forth herein agree as follows: 1. The recitals set forth above are hereby incorporated herein and made a part of this Stipulation. 2. Within ten (10) days following the Bankruptcy Court s entry of a final order approving the Stipulation, Liberty shall pay the Debtors from the LC Proceeds the sum of $300,000 (the Funds ). Payment of the Funds shall be made payable to the Debtors via wire transfer using the wiring instructions to be provided by the Debtors. The Debtors represent to Liberty that the Funds are properly payable to the Debtors. -2-

19 Case CSS Doc Filed 02/01/17 Page 7 of 8 3. Upon transfer in good funds by Liberty of the Funds to the Debtors, the Debtors shall not object to Liberty having all right, title and interest in the remaining LC Proceeds and shall utilize the LC Proceeds in accordance with the Policies. Liberty is under no obligation to file a proof of claim in connection with the Debtors bankruptcy cases. 4. Upon receipt of the Funds, the Debtors and their estates, hereby release Liberty from any and all, claims (as defined in section 101(5) of the Bankruptcy Code), causes of action, counterclaims, demands, and liabilities of any nature or type, whether legal, equitable, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed or undisputed, arising from or related to the LC and the LC Proceeds. The release provided herein shall not become effective until the Funds are received by the Debtors. 5. Upon receipt of the Funds, Liberty hereby releases the Debtors from any and all, claims (as defined in section 101(5) of the Bankruptcy Code), causes of action, counterclaims, demands, and liabilities of any nature or type, whether legal, equitable, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed or undisputed, arising from or related to the LC and the LC Proceeds. The release provided herein shall not become effective until the Funds are received by the Debtors. 6. Except for the limited release contained in paragraphs 4 and 5 above, the Parties expressly reserve all of their respective rights and claims under or in connection with the Policies. 7. The Parties to this Stipulation acknowledge that they have read all of the terms of this Agreement and/or have consulted with the counsel of their choice, if any, regarding the terms of this Stipulation and enter into this Stipulation voluntarily and without duress. 8. This Stipulation contains the entire agreement between the Parties regarding the provisions set forth above and may only be modified in a writing signed by the Parties. -3-

20 Case CSS Doc Filed 02/01/17 Page 8 of 8 9. Each person signing this Stipulation hereby covenants and warrants that (i) he or she is fully authorized to sign the Stipulation on behalf of the party he or she represents; (ii) is fully authorized to bind the party to all of the terms of this Stipulation; and (iii) it has not sold pledged or otherwise assigned or transferred in whole or in part, its interest in any of the claims implicated or addressed by this Stipulation. 10. This Stipulation shall be binding upon, and inure to the benefit of, the successors, representatives, assigns and heirs of the Parties hereto. 11. This Stipulation may be executed in one or more counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one agreement binding upon the Parties. Executed facsimile and/or.pdf copies shall be deemed and considered originals. PARAGON OFFSHORE PLC on behalf of itself and the Debtors LIBERTY MUTUAL INSURANCE COMPANY on behalf of itself and its property casualty affiliates identified on the first page of this Stipulation By: /s/ Todd D. Strickler By: /s/ Jeff Kister Name: Todd D. Strickler Title: SVP, General Counsel and Corporate Secretary Name: Jeff Kister Title: VP, Division Underwriting Manager -4-