Case Document 64 Filed in TXSB on 07/14/11 Page 1 of 7

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1 Case Document 64 Filed in TXSB on 07/14/11 Page 1 of 7 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION IN RE: BAYTOWN NAVIGATION INC., et al. Debtors. * * * * * * CASE NO (KKB) Chapter 11 Joint Administration Requested CAPE TANKERS INC. S COMBINED MOTION TO COMPEL ASSUMPTION OR REJECTION OF EXECUTORY CONTRACT AND FOR CONSIDERATION ON AN EMERGENCY BASIS NOTICE: THIS MOTION SEEKS AN ORDER THAT MAY ADVERSELY AFFECT YOU. IF YOU OPPOSE THE MOTION, YOU SHOULD IMMEDIATELY CONTACT THE MOVING PARTY TO RESOLVE THE DISPUTE. IF YOU AND THE MOVING PARTY CANNOT AGREE, YOU MUST FILE A RESPONSE AND SEND A COPY TO THE MOVING PARTY. YOU MUST FILE AND SERVE YOUR RESPONSE WITHIN 21 DAYS OF THE DATE THIS WAS SERVED ON YOU. YOUR RESPONSE MUST STATE WHY THE MOTION SHOULD NOT BE GRANTED. IF YOU DO NOT FILE A TIMELY RESPONSE, THE RELIEF MAY BE GRANTED WITHOUT FURTHER NOTICE TO YOU. IF YOU OPPOSE THE MOTION AND HAVE NOT REACHED AN AGREEMENT, YOU MUST ATTEND THE HEARING. UNLESS THE PARTIES AGREE OTHERWISE, THE COURT MAY CONSIDER EVIDENCE AT THE HEARING AND MAY DECIDE THE MOTION AT THE HEARING. REPRESENTED PARTIES SHOULD ACT THROUGH THEIR ATTORNEY. EMERGENCY RELIEF HAS BEEN REQUESTED. IF THE COURT CONSIDERS THE MOTION ON AN EMERGENCY BASIS, THEN YOU WILL HAVE LESS THAN 21 DAYS TO ANSWER. IF YOU OBJECT TO THE REQUESTED RELIEF OR IF YOU BELIEVE THAT THE EMERGENCY CONSIDERATION IS NOT WARRANTED, YOU SHOULD FILE AN IMMEDIATE RESPONSE. THERE WILL BE A HEARING ON THIS MOTION ON AN EMERGENCY BASIS ON JULY 18, 2011, AT 2:30 P.M. IN THE COURTROOM OF THE UNITED STATES BANKRUPTCY COURT, 515 RUSK AVENUE, COURT 403, 4TH FLOOR, HOUSTON, TEXAS

2 Case Document 64 Filed in TXSB on 07/14/11 Page 2 of 7 TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW Cape Tankers Inc. ( Creditor or Cape ), a creditor in one of these Chapter 11 cases, 1 and files this its Combined Motion to Compel Assumption or Rejection of Executory Contract and for Consideration on an Emergency Basis, stating to the Court as grounds therefor the following: 1. On July 8, 2011, Fulton Navigation Inc. ( Debtor ) filed for relief under Chapter 11 of the Bankruptcy Code and has allegedly continued to operate its business as a debtor in possession. See In re Fulton Navigation Inc., Case No At the time of the bankruptcy filing, Debtor was the owner of the vessel Omega King. The Omega King was under time charter to Cape pursuant to a charter party by and between Fulton Navigation Inc. and Cape Tankers, Inc., dated May 6, 2011 ( Charter ), a copy of which is attached in globo hereto and marked for identification as Exhibit #1. The initial charter term was extended on April 27, 2011, for an additional 120 to 150 days, charterer s option. (Extension Recap, a copy of which is attached hereto and marked for identification as Exhibit #2). 3. On or about July 7, 2011, Cape paid hire for the 31-day period July 1, 2011 through August 1, 2011, at a rate of approximately $14,000 (USD) per day for a total payment of $434,000 (USD), less commission. Creditor also paid $118, (USD) to third parties in port charges for port costs, agency fees, booming, and bunker barge costs. The next day, after receiving these payments, Debtor filed for relief. 1 See In re Fulton Navigation Inc., Case No The Debtors in these chapter 11 cases are Omega Navigation Enterprises, Inc.; Galveston Navigation Inc.; Beaumont Navigation Inc.; Carrolton Navigation Inc.; Decatur Navigation Inc.; Elgin Navigation Inc.; Fulton Navigation Inc.; Orange Navigation Inc.; Baytown Navigation Inc.; and Omega Navigation (USA) LLC. Omega - Combined Motion to Accept or Reject and for Emergency Consideration (2).DOC 2

3 Case Document 64 Filed in TXSB on 07/14/11 Page 3 of 7 4. The Omega King is currently at anchor in Long Beach, California and is not performing under the charter agreement. 5. With regard to the underlying Motion to Compel Assumption or Rejection of Executory Contract, Section 365(d)(2) provides: In a case under Chapter 9, 11, 12 or 13 of this Title, the Trustee may assume or reject an executory contract or unexpired lease of residential or personal property of the Debtor at any time before the confirmation of a Plan but the Court, on the request of any party to such contract or lease, may order the Trustee to determine within a specified period of time whether to assume or reject such contract or lease. Creditor Cape Tankers requests that the Court compel the Debtor to assume or reject by written notice the charter agreement not later than the hearing date of this Motion. 6. By filing the bankruptcy proceeding, Debtor has created uncertainty by obtaining an option to perform or reject its obligations under the charter agreement. 7. The charter party requires Debtor to provide and pay for all provisions, wages, and shipping and discharging fees, and all other crew expenses. (Exhibit 1, pro forma Shelltime4, Clause 6). Debtor is also required to enter and maintain the vessel in a protection and indemnity insurance association and provide certain types of insurance, including Hull and machinery and USD 1.0 Billion P&I cover. (Exhibit 1, pro forma Shelltime4 Additional Terms, Clauses 44, 47). 8. The bankruptcy filing also highlights the uncertainty due to risk of arrest of the vessel in a foreign port by other unpaid creditors who are either outside of the jurisdiction of this Court and/or are creditors for debts incurred post-filing, placing at risk Creditor s ability to perform its obligations and deliver cargo under other time sensitive agreements. 9. In this regard Debtor s Chapter 11 filing has impaired and impacted its ability, as well as hindered and impaired Creditor s ability, to perform under the charter, irrespective of Omega - Combined Motion to Accept or Reject and for Emergency Consideration (2).DOC 3

4 Case Document 64 Filed in TXSB on 07/14/11 Page 4 of 7 or in spite of the financial assurances Debtor represents to have in place. Debtor is also in possession of approximately $276, USD in unearned hire and Creditor has paid approximately $118, (USD) to third parties in port charges for which it seeks indemnity from Debtor. 10. Section 365(b)(1) provides that, if there has been a default in an executory contract or unexpired lease, said contract or lease may not be assumed unless the Trustee at the time of the assumption cures or provides adequate assurance that the Trustee will promptly cure such default and provides adequate assurance of future performance under such contract or lease. 11. In the event the Debtor elects to accept the charter, then Cape requests that the Court Order the Debtor to provide immediately, within twenty-four hours of entry of the Order, the following evidence as assurance of ability to perform under the charter: (1) insurance certificates or other evidence of P&I and Hull & Machinery insurance coverage; (2) stipulation filed into the record of this proceeding as written confirmation that no debts exist which would subject the vessel to arrest outside of United States jurisdiction; (3) evidence of ability to pay, or setting aside of funds to pay, or of security arrangements to secure, any such debts should they exist and/or as they arise; (4) agreement to amend the charter to make future hire payments in arrears and not in advance; and (5) agreement permitting Cape and/or the court to allocate hire payments made by Cape toward vessel running and operating costs and/or to meet any obligations which may restrict the vessel s trading ability. 12. With regard to the request for Emergency Consideration of the Motion to Compel Assumption or Rejection of Executory Contract, Cape would note the following: It is Omega - Combined Motion to Accept or Reject and for Emergency Consideration (2).DOC 4

5 Case Document 64 Filed in TXSB on 07/14/11 Page 5 of 7 in the parties mutual interest to resolve this issue as promptly as possible so that the ship can be given instructions to sail and continue operations and/or for proper and adequate assurances to be provided by Debtor. Each day allows mounting expenses for port and other related charges as well as hire and operating costs and therefore there is great urgency in obtaining a hearing and a decision from this Honorable Court. Therefore, Creditor Cape Tankers requests that the Court grant its request to have the underlying Motion to Compel Assumption or Rejection of the Executory Contract (along with the requested adequate assurances) on an Emergency Basis, setting the hearing for next Monday, July 18, 2011 at 2:30 p.m. WHEREFORE, PREMISES CONSIDERED, Cape Tankers Inc. hereby respectfully requests that this Court enter an Order: (1) granting its request for emergency hearing on its Motion to Compel Assumption or Rejection of Executory Contract, setting said hearing on an emergency basis on Monday July 18, 2011 at 2:30 p.m.; (2) compelling the Debtor, Fulton Navigation Inc., to assume or reject (in writing) by the date of the hearing on this motion, the charter party between Fulton Navigation Inc. and Cape Tankers Inc., dated May 6, 2010, as amended; (3) Creditor also requests that such Order require Debtor, if it assumes the charter agreement, to provide all assurances outlined above, immediately, within twenty-four hours of entry of this Court s Order; and (4) for such other relief, whether at law or in equity, to which Movant may be justly entitled. Omega - Combined Motion to Accept or Reject and for Emergency Consideration (2).DOC 5

6 Case Document 64 Filed in TXSB on 07/14/11 Page 6 of 7 Respectfully submitted this 14 th day of July, Chaffe McCall, L.L.P. By: /s/ Clinton F. Brown Kevin P. Walters Texas State Bar No S.D. Tx. Bar No Clinton F. Brown State Bar No S.D. Tx. Bar No Mellie Esperson Building 815 Walker Street, Suite 953 Houston, Texas Telephone: (713) Fax: (713) walters@chaffe.com brown@chaffe.com - And - Derek A. Walker Texas State Bar No S.D. Tx. Bar No Poydras Street 2300 Energy Centre New Orleans, LA Telephone: (504) Facsimile: (504) walker@chaffe.com COUNSEL FOR CAPE TANKERS INC. Omega - Combined Motion to Accept or Reject and for Emergency Consideration (2).DOC 6

7 Case Document 64 Filed in TXSB on 07/14/11 Page 7 of 7 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the above and foregoing Motion to Accept or Reject filed by Cape Tankers Inc., was served by ECF on those parties registered for ECF notification on this 14th day of July, 2011, including: Jason G. Cohen William A. Wood, III Bracewell & Giuliani LLP 711 Louisiana Street, Suite 2300 Energy Centre Houston, Texas Jason.cohen@bgllp.com Trey.wood@bgllp.com Counsel for Fulton Navigation Inc. United States Trustee Office of the US Trustee 515 Rusk Avenue, Suite3516 Houston, TX /s/ Clinton F. Brown Clinton F. Brown Omega - Combined Motion to Accept or Reject and for Emergency Consideration (2).DOC 7

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9 Case Document 64-2 Filed in TXSB on 07/14/11 Page 1 of 2 IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION IN RE: BAYTOWN NAVIGATION INC., et al. Debtors. * * * * * * CASE NO (KKB) Chapter 11 Joint Administration Requested ORDER Upon consideration of the Motion to Compel Assumption or Rejection of Executory Contract filed by Cape Tankers Inc., the Court finds that good and adequate grounds exist for the relief requested and that the request for consideration on an emergency basis complies with LBR (i) and Uniform Texas Complex Rules for Chapter 11 Rule 4 and demonstrates that sufficient cause exists for shortening the normal response time and scheduling an emergency hearing on the Motion to Compel Assumption or Rejection of Executory Contract. Accordingly, IT IS ORDERED Debtor, Fulton Navigation Inc., assume or reject by written notice the charter agreement between Fulton Navigation Inc. and Cape Tankers Inc., dated May 6, 2010, as amended, not later than the hearing date of this Motion; IT IS FURTHER ORDERED that the Debtor, Fulton Navigation, provide immediately, within twenty-four hours of entry of this Order, the following evidence to Cape Tankers as assurance of ability to perform under the charter: (1) insurance certificates or other evidence of P&I and Hull & Machinery insurance coverage; (2) stipulation filed into the record of this proceeding as written confirmation that no debts exist which would subject the vessel to arrest outside of United States jurisdiction; (3) evidence

10 Case Document 64-2 Filed in TXSB on 07/14/11 Page 2 of 2 of ability to pay, or setting aside of funds to pay, or of security arrangements to secure, any such debts should they exist and/or as they arise; (4) agreement to amend the charter to make future hire payments in arrears and not in advance; and (5) agreement permitting Cape and/or the court to allocate hire payments made by Cape toward vessel running and operating costs and/or to meet any obligations which may restrict the vessel s trading ability. IT IS FURTHER ORDERED that the request for emergency hearing is GRANTED and that a hearing on Cape s Motion to Compel Assumption or Rejection of Executory Contract, shall be held on Monday, July 18, 2011 at 2:30 p.m. in the Courtroom of the United States Bankruptcy Court, 515 Rusk Ave., Court 403, 4th Floor, Houston, Texas IT IS FURTHER ORDERED that the Movant or its counsel shall give notice of this emergency hearing by forwarding a copy of this Order by the most expedient means available, including electronic or telephonic transmission, or otherwise by First Class United States Mail, to all parties listed in the certificate of service contained in the Motion and shall evidence such service by the filing of a Certificate of Service with the Court prior to the scheduled hearing. DATED: UNITED STATES BANKRUPTCY JUDGE Omega - Proposed Order Combined Motion - Final (2).DOC2

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