IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re Northstar Aerospace (USA) Inc., et al.,1 Debtors.

Hearing Date: June 27, 2012 at 4:00 p.m. Objection Deadline: June 26, 2012 at 4:00 p.m. Committee Objection Deadline: Before Hearing.

Chapter 11 Case No.: 12-11817 (MFW) (Jointly Administered)

DEBTORS MOTION FOR ORDERS (I)(A) AUTHORIZING AND APPROVING THE JOINT CROSS-BORDER BIDDING PROCEDURES, (B) AUTHORIZING AND APPROVING A BREAK UP FEE AND EXPENSE REIMBURSEMENT, (C) APPROVING THE NOTICE PROCEDURES, (D) APPROVING THE ASSIGNMENT PROCEDURES, AND (E) SETTING A DATE FOR THE SALE HEARING, AND (II) AUTHORIZING AND APPROVING (A) THE SALE OF CERTAIN ASSETS, (B) THE ASSUMPTION AND ASSIGNMENT OF CERTAIN CONTRACTS AND (C) THE ASSUMPTION AND SUBLEASE OF CERTAIN LEASES The above-captioned debtors and debtors-in-possession (each a Debtor and collectively, the Debtors), hereby move (the Motion) this court (the Court) for the entry of orders pursuant to sections 105, 363 and 365 of chapter 11 of title 11 of the United States Code (the US Bankruptcy Code), Rules 2002, 6004, 6006 and 9014 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules), and Rule 6004-1 of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the Local Rules) (i)(a) authorizing and approving the joint cross-border bidding procedures (as attached hereto as Exhibit E, the Bidding Procedures) for the sale of substantially all of the Debtors assets, as described more fully herein (collectively, the US Purchased Assets) and the assets of the Canadian Vendors (as that term is defined below, the
1

The Debtors and the last four digits of their respective tax identification numbers are: Northstar Aerospace (USA) Inc. (XX-XXX4389), Northstar Aerospace (Chicago) Inc. (XX-XXX1441), D-Velco Manufacturing of Arizona, Inc. (XX-XXX5660) and Derlan USA Inc. (XX-XXX6924). The address of Northstar Aerospace (USA) Inc. and Northstar Aerospace (Chicago) Inc. is 6006 West 73rd Street, Bedford Park, Illinois 60638. The address of D-Velco Manufacturing of Arizona, Inc. and Derlan USA Inc. is 401 South 36th Street, Phoenix, Arizona 85034.

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Canadian Purchased Assets), (b) authorizing and approving the terms and conditions of the proposed bid protections, the Break-Up Fee and Expense Reimbursement and (as that term is defined below), (c) approving the form and manner of sale notices (the Notice Procedures), (d) approving the procedures as set forth below for the assumption and assignment of certain contracts and leases and the assumption and sublease of certain leases (the Assignment Procedures), and (e) setting the time, date and place of a later hearing (the Sale Hearing) to consider the sale of substantially all of the Debtors assets and the assumption and assignment, or assumption and sublease, as the case may be, of certain pre-petition executory contracts and unexpired leases of the Debtors; (ii) authorizing and approving (a) the sale (the Sale) of the US Purchased Assets free and clear of all liens, Claims, Liability, Encumbrances and Interests (as those terms are defined in the Asset Purchase Agreement (defined below), collectively, the Encumbrances and Interests), (b) the assumption and assignment of certain contracts and leases pursuant to section 365 of the Bankruptcy Code, and the assumption of certain real estate leases pursuant to section 365 of the Bankruptcy Code (collectively, the US Assumed Contracts); and (iii) granting them such other relief as the Court deems just and proper. In support of the Motion, the Debtors rely on the declaration of Jon Nemo (the Nemo Declaration), Managing Director at Harris Williams & Co. (Harris Williams), the Debtors investment banking firm. The Nemo Declaration is attached hereto as Exhibit B. In further support of the Motion, the Debtors respectfully represent as follows: Jurisdiction, Venue and Predicates for Relief 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334(b) and

the Amended Standing Order of Reference from the United States District Court for the District of Delaware, dated February 29, 2012. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2).
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2.

The statutory bases for the relief requested herein are sections 105, 363 and 365

of the US Bankruptcy Code, Rules 2002, 6004, 6006 and 9014 of the Bankruptcy Rules, and Rule 6004-1 of the Local Rules. Background A. 3. Introduction On June 14, 2012 (the Petition Date), the Debtors filed voluntary petitions for

relief under chapter 11 of the Bankruptcy Code (the US Bankruptcy Cases). 4. The Debtors continue to operate their businesses and manage their properties as

debtors in possession pursuant to sections 1107(a) and 1108 of the US Bankruptcy Code. 5. Each of the Debtors is a direct or indirect subsidiary of Northstar Aerospace, Inc.

(Northstar), an Ontario corporation, which had been listed on the Toronto Stock Exchange. Also on the Petition Date, Northstar, Northstar Aerospace (Canada) Inc. (Northstar Canada), 2007775 Ontario, Inc. and 3024308 Nova Scotia Company (collectively, the Canadian Debtors), commenced a proceeding under Canadas Companies Creditors Arrangement Act (the CCAA) in the Ontario Superior Court of Justice (the Canadian Court, and together with this Court, the Courts, and each individually a Court), seeking relief from their creditors (collectively, the Canadian Proceedings, and together with the U.S. Bankruptcy Cases, the Insolvency Proceedings). The Canadian Debtors will continue to manage their properties and operate their businesses under the supervision of the Canadian Court. 6. B. 7. No official committee of unsecured creditors has yet been appointed in the cases. Debtors Corporate Structure and Business A description of the Debtors corporate structure and business and the events

leading to the chapter 11 cases is set forth in Declaration of Craig A. Yuen in support of chapter 11 Petitions and Related Motions (the Yuen Declaration).
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C. 8.

Marketing Effort As described more fully in the Nemo Declaration, the assets of the Debtors have

been marketed twice in the last twenty months. In late 2010 and 2011, there was a marketing effort focused on stock transactions for Northstar -- the publicly traded Canadian parent entity -as a whole, primarily with strategic buyers. This marketing effort was led by Harris Williams as investment banker. 9. The 2012 marketing process was broader than the prior marketing process. In

addition to contacting potential interested bidders from the first process, an additional group of financial and strategic buyers were contacted about a potential transaction and portion bids for specific facilities of Northstar (as opposed to Northstar as a whole) were specifically encouraged. 10. 39 potential buyers were contacted by Harris Williams during the 2012 marketing

effort. 35 potential buyers executed a Non-Disclosure Agreement (NDA) and received an updated confidential information memorandum. 18 of the potential buyers who signed NDAs were strategic buyers and 17 were financial buyers. 11. Harris Williams assisted the Company in providing an extensive virtual dataroom

to bidders who had signed the NDA, as well as arranging other opportunities for due diligence meetings and calls. 12. 17 indications of interest (IOIs) were received in February and March, 2012,

including 5 IOIs for individual facilities. 13. Further dialogue, due diligence and meetings with potential bidders occurred

thereafter. In late March, non binding letters of intent (LOIs) from potential bidders were received and evaluated. 6 of the LOIs were for substantially all of Northstars operating assets in both the US and Canada, 1 of the LOIs was for a possible recapitalization of Northstar and 2 of the LOIs were for the Chicago Facility only.
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14.

The letters of intent were evaluated by Northstar on a number of criteria,

including, without limitation, overall value of the proposed transaction (or combination of transactions in the case of portion LOIs) and likelihood of closing a transaction in a reasonable time frame, and the Debtors then proceeded to more intensive diligence and discussions with a subset of the parties who submitted LOIs. 15. There were some requests from the remaining potential buyers for an exclusive

negotiating and diligence period, to which Debtors did not agree. The leading interested buyers which remained generally continued their discussion and diligence irrespective of the lack of exclusivity. 16. In early May, 2012, the Debtors agreed in lieu of exclusivity to an expense

reimbursement letter for due diligence and related expenses up to $750,000 each with the then two remaining leading bidders because the two leading bidders indicated they were unwilling to incur further material out-of-pocket expenses for accounting, legal, environmental and other diligence costs without the benefit of the expense reimbursement letter. The expense

reimbursement letters are subject to certain terms and conditions as set forth therein. 17. Each of the two leading bidders indicated they completed their due diligence and

negotiated forms of definitive Asset Purchase Agreements and related documents and exhibits with Northstar. D. 18. The Stalking-Horse Bid The Debtors marketing process culminated on June 13, 2012, with Debtor

Northstar Aerospace USA Inc. (Northstar USA), Debtor Northstar Aerospace (Chicago) Inc. (Northstar Chicago) and Debtor D-Velco Manufacturing of Arizona, Inc. d/b/a Northstar Aerospace (Phoenix) (Northstar Phoenix; together with Northstar USA and Northstar Chicago, the US Vendors), Northstar and Northstar Canada (together with Northstar, the Canadian
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Vendors; together with the US Vendors, the Vendors) and Heligear Acquisition Co. or its designee (the US Purchaser) and Heligear Canada Acquisition Corporation or its designee (the Canadian Purchaser; together with the US Purchaser, the Purchaser) entering into that certain Agreement of Purchase and Sale for the sale of substantially all of the Debtors assets as a stalking-horse purchase agreement (as attached hereto as Exhibit A, the Asset Purchase Agreement).2 19. The Purchasers are affiliates of Wynnchurch Capital (Wynnchurch), a leading

Chicago based private equity investment firm focused on middle-market investments, with over $1.1 billion under management. Since 1999, Wynnchurch has made more than 30 investments in middle-market companies, including AxleTech International, Henniges Automotive, Inc. and SafeWorks, LLC. Wynnchurch and its principals have significant experience in the niche

manufacturing and business services industries. Additional information regarding Wynnchurch and its investment portfolio companies may be found at www.wynnchurch.com. Relief Requested 20. By this Motion, the Debtors seek orders: (i)(a) authorizing and approving the

Bidding Procedures, (b) authorizing and approving the terms and conditions of the Break-Up Fee and Expense Reimbursement (as that term is defined below), (c) approving the Notice Procedures, (d) approving the Assignment Procedures, and (e) setting the time, date, and place of the Sale Hearing (such order, substantially in the form attached hereto as Exhibit C, the US Bidding Procedures Order); and (ii) authorizing and approving (a) the Sale of the Debtors rights, title and interests in the US Purchased Assets free and clear of all Encumbrances and

Certain confidential and sensitive commercial business information and terms have been redacted from the Asset Purchase Agreement filed with this Motion at the request of the Purchaser. However, an unredacted version of the Asset Purchase Agreement will be provided to the Court, counsel to any Official Committee of Unsecured Creditors, the Office of the United States Trustee and the Canadian Monitor and upon request to the Debtors investment banker or counsel, Qualified Bidders who have signed a Non-Disclosure Agreement.
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Interests, (b) the assumption and assignment of the US Assumed Contracts (such order, substantially in the form attached hereto as Exhibit D, the Sale Order); and (iii) granting them such other relief as the Court deems just and proper. A. 21. Highlighted Terms Pursuant to Local Rule 6004-1(b)(iv) Pursuant to Local Rule 6004-1(b)(iv), the Asset Purchase Agreement and/or the

proposed Sale Order contain the following terms:3 Deadlines The Asset Purchase Agreement requires that the Closing must occur prior to August 31, 2012. (APA 7.1). The Purchaser has deposited into escrow 10% of the total cash purchase price of $70,000,000.00 as a good faith deposit for the purchase of the US Purchased Assets and the Canadian Purchased Assets. $4,550,000.00 of the good faith deposit is allocated to the US Vendors and $2,450,000.00 of the good faith deposit is allocated to the Canadian Vendors. (APA 3.5). Such good faith deposit will be forfeited by the Vendors in the event the Sale contemplated by the Asset Purchase Agreement does not close. However, the Vendors will not forfeit the good faith deposit if the Purchasers are the Successful Bid, the Transaction does not close by August 31, 2012, but the Vendors are in compliance with all terms and conditions of the Asset Purchase Agreement. (Id.)

Good Faith Deposit

The highlighted terms and summary of the Asset Purchase Agreement is provided for the benefit of the Court and other parties in interest. The Asset Purchase Agreement is incorporated herein by reference. To the extent of any conflict between this summary and the Asset Purchase Agreements, the term of the Asset Purchase Agreement shall govern. Capitalized terms used but not otherwise defined in this summary shall have the meanings set forth in the Asset Purchase Agreement. 7

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Use and Allocation of Proceeds

The Purchaser shall pay a total cash Purchase Price of $70,000,000.00, subject to an adjustment for changes in working capital between the date of the Asset Purchase Agreement and the Closing Date. $45,500,000.00 of the total purchase price is allocated to the US Purchased Assets and $24,500,000.00 of the total purchase price allocated to the Canadian Purchased Assets. (APA 3.1 and 3.2). In addition, the Sale Order requires that the US Purchaser pay to Fifth Third Bank as Agent all proceeds of the Sale (after deducting certain amounts) to be held or applied to the Aggregate Secured Liabilities (as defined in the DIP Financing Order). (Sale Order, O and 29). The Asset Purchase Agreement does not claim any specific exemption from Transfer Taxes. Rather, the Asset Purchase Agreement requires the Vendors to pay all such Transfer Taxes, except to the extent of any exemptions pursuant to section 1146 of the US Bankruptcy Code. The Purchaser and Vendors will cooperate to exempt the acquisition of the Purchased Assets from Transfer Taxes, when possible. (APA 3.7). The Debtors do not believe any Transfer Taxes are owed in the U.S. under applicable nonbankruptcy law. The Asset Purchase Agreement requires that the Purchaser provide the Debtors access to their books and records for at least seven (7) years after the Closing. (APA 9.1). Pursuant to paragraph T of the Sale Order, the Debtors are requesting a finding of fact that the US Purchaser is not a successor of the Debtors. In addition, the Sale Order requests a conclusion that the US Purchaser will have no successor liability for any claim as of the Closing Date. (Sale Order, 25 and 27). Pursuant to paragraph 32 of the Sale Order, the Debtors request that the Sale Order be effective and enforceable immediately upon entry, and that the stay under Bankruptcy Rule 6004(h) not apply.

Taxes

Record Retention

Successor Liability

Relief from Bankruptcy Rule 6004(h)

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Credit Bidding

Pursuant to Section 5 of the Bidding Procedures, the Secured Lenders consent to the Stalking Horse Agreement and the Secured Lenders will not submit a credit bid against the Stalking Horse Bidder. However, if the Stalking Horse Agreement or any higher and better Successful Bid or Back-Up Bid is not approved by the U.S. Court or the Canadian Court or does not close for any reason on or before the Termination Date, the Agent may submit a credit bid on behalf of the Secured Lenders if it so chooses without any prior submission of a Bid, qualification as a Bidder or further auction and, subject to approval by the U.S. Court and the Canadian Court, close its credit bid pursuant to appropriate documentation consistent with a credit bid.

B. 22.

The Asset Purchase Agreement After extensive arms-length, good faith negotiations among the Vendors and the

Purchaser and their respective advisors, the parties have agreed, among other things, to convey the US Purchased Assets and assign the US Assumed Contracts to the Purchaser in accordance with the terms and conditions of the Asset Purchase Agreement, subject to the approval of the transaction in the jurisdictions in which the Vendors are subject to creditor protection proceedings. A copy of the Asset Purchase Agreement is attached hereto as Exhibit A. The Debtors have determined that the Asset Purchase Agreement represents the best opportunity for the Debtors to maximize the value of their assets and to serve as a basis for conducting an auction to seek higher and/or better offers. The Asset Purchase Agreement contemplates the sale of the US Purchased Assets, subject to higher and/or better bids, on the following material terms:

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Purchase Price

The Purchaser shall pay a total cash purchase price of $70,000,000.00, subject to an adjustment for changes in working capital between the date of the Asset Purchase Agreement and the closing date, plus assumption of certain Liabilities (further described below). $45,500,000.00 of the total cash purchase price is allocated to the US Purchased Assets and $24,500,000.00 of the total cash purchase price allocated to the Canadian Purchased Assets. (APA 3.1, 3.2). In certain circumstances the Vendors may be required to pay to the Purchaser a break-up fee and expense reimbursement in the amount of 3.5% of the total purchase price of $70,000,000.00, payable from the closing of a higher and better bid. (APA 1.1, 8.3). At the closing, the Debtors will transfer, subject to certain exceptions, their rights, title and interests in the US Purchased Assets, free and clear of all Encumbrances and Interests. (APA 2.2) The Purchaser will offer all active US Unionized Employees terms and conditions of employment which will exclude the Vendors pension plan. Thereafter, and when legally appropriate, the US Purchaser will recognize and offer to negotiate with the US Unionized Employees lawful representatives concerning terms and conditions of employment. (APA 5.1). The liabilities to be assumed by the Purchaser include, among others, (i) Liabilities relating to the US Purchases Assets arising on or after the Closing Date; (ii) all Liabilities (other than Cure Costs) arising after the Closing Date under the US Assumed Contracts; and (iii) specifically identified employee Liabilities. (APA 2.7). The Purchaser is not assuming the defined benefit pension plan for the Northstar Chicago facility and has begun negotiations with the union about the terms of their post-closing relationship.

Break-Up Fee and Expense Reimbursement

Assets and Shares Transferred Free and Clear Employees

Assumed Liabilities

Closing Conditions The obligation of the Purchaser to close the Sale is subject to, among other things, the satisfaction of the following conditions:
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the accuracy of the Vendors representations and warranties in all material respects; Vendors payment of all Cure Costs (as defined below); and The Vendors have obtained DIP financing sufficient to continue operations, and such DIP financing has been approve by the respective Courts.

(APA 6.1). Termination Rights The Asset Purchase Agreement may be terminated at any time prior to the Closing Date if the Purchasers, through the Asset Purchase Agreement are not the winning bid at the Auction. (APA 7.8).

C. 23.

The Bidding Procedures In order to ensure that the Debtors receive the maximum value for the US

Purchased Assets, the Asset Purchase Agreement is subject to higher or better offers, and, as such, the Purchaser (the Stalking Horse Bidder) and Asset Purchase Agreement will serve as the stalking-horse bid for the US Purchased Assets (the Stalking Horse Agreement). The US Purchased Assets and Canadian Purchased Assets may be sold in a single sale to a single purchaser or in strategic business units to several purchasers. 24. While the Debtors believe that the terms of the Asset Purchase Agreement are fair

and reasonable and reflect the highest and best value for the US Purchased Assets, the Debtor nevertheless desire to allow for any parties that may have an interest in purchasing the Assets a further opportunity to make a bid for the US Purchased Assets. Accordingly, the Debtors developed Bidding Procedures consistent with the Debtors need to expedite the sale process but with the objective of promoting active bidding that will result in the highest and best offer the marketplace can sustain for the US Purchased Assets while affording appropriate protect for the Stalking Horse Bidder. Moreover, the Bidding Procedures reflect the Debtors objective of
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conducting the Auction in a controlled, but fair and open, fashion that promotes interest in the US Purchased Assets by financially capable, motivated bidders who are likely to close a transaction, while simultaneously discouraging non-serious offers and offers from persons the Debtors do not believe are sufficiently capable or likely to actually consummate a transaction. 25. Pursuant to Local Rule 6004-1(c)(i), the Bidding Procedures (attached hereto as

Exhibit E) and/or the US Bidding Procedures Order (attached hereto as Exhibit C) contain the following key proposed terms:4 a) Assets for Sale The Vendors are soliciting superior offers for all or a portion of the Stalking Horse Assets. Bids may also include assets of the Vendors which are not Stalking Horse Assets. b) Bidding Deadlines All Bids must be submitted in accordance with the terms of the Bidding Procedures so that they are actually received no later than 10:00 a.m. (Eastern time) on July 13, 2012 (the Bid Deadline). A Bid received after the Bid deadline shall not constitute a Qualified Bid. c) Requirements for Participation in Auction: Qualified Bidders. To participate in the Auction, a party submitting a Bid (a Bidder) must submit a Bid that is determined by the Vendors to satisfy each of the following conditions (a Qualified Bid): i. Written Submission of Modified APA and Commitment to Close. Bidders (other than the Stalking Horse Bidder) must submit a Bid by the Bid Deadline in the form of an executed mark-up of the Stalking Horse Agreement (each a Modified APA) reflecting such Qualified Bidders proposed changes to the Stalking Horse Agreement, and a written and binding commitment to close on the terms and conditions set forth therein. ii. Irrevocable. A Bid must be irrevocable until the sooner of (i) August 31, 2012, in the event that the Qualified Bid is determined to be the Successful Bid; and (ii) the earlier

The summary of the principal terms of the US Bidding Procedures Order is provided for the benefit of the Court and other parties in interest. The US Bidding Procedures Order is incorporated herein by reference. To the extent of any conflict between this summary and the US Bidding Procedures Order, the term of the US Bidding Procedures Order shall govern. Interested parties should review the US Bidding Procedures Order for a full recital of the relevant terms and conditions of the proposed Sale and Auction. Capitalized terms used but not otherwise defined in this summary shall have the meanings set forth in the US Bidding Procedures Order. 12

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of August 31, 2012, 2012, or when the Successful Bid closes, in the event that the Qualified Bid is determined to be the Back-up Bid (the Termination Date); iii. Contingencies. A Bid may not be conditional on obtaining financing or any internal approval or on the outcome or review of due diligence. Any other contingencies associated with a Bid may not, in aggregate, be materially more burdensome than those set forth in the Stalking Horse Agreement; iv. Financing Sources and Evidence of Financial Ability to Close. A Bid must identify the actual Bidder and owners and ultimate parent company of the Bidder and contain written evidence of a commitment for financing or other evidence of the ability to fund and consummate the sale satisfactory to the Vendors with appropriate contact information for such financing sources; v. No Fees Payable to Qualified Bidder. A Bid may not request or entitle the Qualified Bidder (other than the Stalking Horse Bidder) to any break-up fee, expense reimbursement, or similar type of payment; vi. Good-Faith Deposit. Each Bid must be accompanied by a cash deposit (the Good Faith Deposit) in an amount equal to: (i) ten (10) percent in cash of the cash and value of the non-cash purchase price allocated to the Canadian Assets under the Modified APA, which shall be paid to the Monitor to be held in trust, and (ii) ten (10) percent in cash of the cash and value of the non-cash purchase price allocated to the U.S. Assets under the Modified APA, which shall be paid to the Debtors to be held in a separate escrow account; vii. Minimum Overbid. The aggregate consideration in a Bid must have a cash purchase price for the Canadian Assets (the Canadian Cash Purchase Price) of at least the amount payable for the Canadian Assets under the Stalking Horse Agreement, being $24,500,000, and a cash purchase price for the U.S. Assets (the U.S. Cash Purchase Price) of at least the amount payable for the U.S. Assets under the Stalking Horse Agreement, being $45,500,000.00, plus the Break-Up Fee and Expense Reimbursement of $2,450,000.00, plus $300,000 for a total minimum consideration of $72,750,000.00 (the Minimum Overbid); provided that any Portion Bidder shall not be subject to the Minimum Overbid and shall instead be subject to such overbid amount as the Vendors may determine prior to commencement of the Auction; and viii. Non-cash Consideration. Bids may include non-cash consideration, such as promissory notes, earn-outs, publicly traded equities or other equity consideration. The Vendors, after consultation with the Agent will determine how to value such consideration in their reasonable business judgment. d) Secured Lenders may Credit Bid The Secured Lenders consent to the Stalking Horse Agreement and the Secured Lenders will not submit a credit bid against the Stalking Horse Bidder. However, if the Stalking Horse Agreement or any higher and better Successful Bid or Back-Up Bid is not approved by the U.S. Court or the Canadian Court or does not close for any reason on or before the Termination Date, the Agent may submit a credit bid on behalf of the Secured
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Lenders if it so chooses without any prior submission of a Bid, qualification as a Bidder or further auction and, subject to approval by the U.S. Court and the Canadian Court, close its credit bid pursuant to appropriate documentation consistent with a credit bid. e) Portion Bidders A party who does not wish to purchase all or substantially all of the Stalking Horse Assets (a Portion Bidder) may submit a Bid in respect of a subset of such assets (a Portion Bid) and shall constitute a Qualified Bidder if such Portion Bid satisfies the requirements to become a Qualified Bidder, other than the Minimum Overbid. f) Due Diligence From Bidders Each Qualified Bidder shall comply with all reasonable requests for additional information by the Vendors regarding such Bidder and its contemplated transaction. Failure by a Bidder to comply with requests for additional information will be a basis for the Vendors to determine that the Bidder is not a Qualified Bidder. The other leading bidder candidate had completed its due diligence and other possible remaining bidders have already conducted substantial diligence on the Debtors and their business. g) Auction i. Only if a Qualified Bid (other than the Stalking Horse Bid) is received by the Bid Deadline will the Vendors conduct an auction (the Auction) to determine the highest and/or best Bid with respect to the Stalking Horse Assets. The Auction shall commence on July 17, 2012, at 10:00 a.m. (Central Time) at the offices of SNR Denton LLP, 233 South Wacker Drive, Suite 7800, Chicago, Illinois 60606. ii. If no such Qualified Bid is received by the Bid Deadline, then the Auction will not take place, the Stalking Horse Bidder will be declared the Successful Bidder, the Vendors will seek approval of, and authority to consummate, the Stalking Horse Agreement and the transactions provided for therein at the Sale Hearings. iii. If a Qualified Bid is received in accordance with the Bidding Procedures, the Auction will be conducted according to the following procedures: (A) Participation At The Auction. Only a Qualified Bidder that has submitted a Qualified Bid is eligible to participate at the Auction; provided that the Northstar Debtors may allow any or all Portion Bidders that are Qualified Bidders to participate in the Auction. Only the authorized representatives (including counsel and other advisors) of each of the Qualified Bidders, the Vendors, the Secured Lenders, advisors to any Official Committee in the Chapter 11 Proceedings, and the Monitor and any other party or representative who the Vendors in their reasonable business judgment authorize to attend shall be permitted to attend at the Auction. During the Auction, the bidding will begin with the highest Qualified Bid (the Opening Bid) and each subsequent round of bidding shall continue in minimum increments of at least the Minimum Overbid Increment. A combination of Portion Bids (an Aggregated Bid) which, when totaled, exceed the Minimum Overbid may
14

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be determined to be the Opening Bid. At least one business day prior to the start of the Auction, the Vendors will provide the terms of the Opening Bid to all participating Qualified Bidders and a blackline of the Opening Bid to the Stalking Horse Agreement. The determination of which Qualified Bid constitutes the Opening Bid shall take into account any factors the Vendors reasonably deem relevant to the value of the Qualified Bid to the Vendors, including, among other things, the following: (i) the amount and nature of the consideration; (ii) the proposed assumption of any liabilities, if any; (iii) the ability of the Qualified Bidder to close the proposed transaction; (iv) the proposed closing date and the likelihood, extent and impact of any potential delays in closing; (v) any purchase-price adjustments; (vi) the impact of the contemplated transaction on any actual or potential litigation; (vii) the net economic effect of any changes from the Stalking Horse Agreement, if any, contemplated by the contemplated transaction documents (the Contemplated Transaction Documents), (viii) the net after-tax consideration to be received by the Vendors; and (ix) such other considerations as the Vendors deem relevant in their reasonable business judgment (collectively, the Bid Assessment Criteria); (B) Authority to Bid. All representatives of Qualified Bidders who submit any bids at the Auction must represent on the record that they have authority to bid and that the Bid they submit is binding on the Qualified Bidder. Conduct of the Auction. The Vendors and their advisors will direct and preside over the Auction. All Bids made after the Opening Bid must be Overbids, and will be made and received on an open basis, and all material terms of each Overbid may be fully disclosed to all other Qualified Bidders that are participating in the Auction. Terms of Overbids. An Overbid is any Bid made at the Auction subsequent to the Vendors announcement of (i) the Opening Bid, and (ii) the then highest and/or best Overbid at the beginning of each subsequent round of bidding (the Round Leading Bid). To submit an Overbid, in any round of the Auction, a Qualified Bidder must comply with the following conditions: (1) Minimum Overbid Increment. Any Overbid must be made in increments of at least $300,000 (the Minimum Overbid Increment). (2) Remaining terms are the same as for Qualified Bids. An Overbid must comply with the conditions for a Qualified Bid set forth above, provided, however, that the Bid Deadline shall not apply. Any Overbid made by a Qualified Bidder must remain open and binding on the Qualified Bidder until the Termination Date. The Vendors will credit the amount of the Break-Up Fee and Expense Reimbursement to each and every Overbid submitted by the Stalking Horse Bidder at the Auction, meaning that if the Stalking Horse Bidders subsequent Overbid is the Round Leading Bid, any subsequent Overbid must exceed the Stalking Horse Bidders Overbid by the amount of the
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(C)

(D)

15

Break-Up Fee and Expense Reimbursement and Minimum Overbid Increment. To the extent not previously provided, a Qualified Bidder submitting an Overbid must submit, as part of its Overbid, written evidence (in the form of financial disclosure or credit-quality support information or enhancement reasonably acceptable to the Vendors) demonstrating such Qualified Bidders ability to close the transaction proposed by such Overbid. (3) Announcing Overbids. At the start of each round of bidding, the Vendors will announce the material terms of the Round Leading Bid, the basis for calculating the total consideration offered in such Overbid, and the resulting benefit to the Vendors based on, among other things, the Bid Assessment Criteria. (4) Consideration of Overbids. The Vendors reserve the right, in their reasonable business judgment, to make one or more adjournments in the Auction to, among other things: (A) facilitate discussions between the Vendors and individual Qualified Bidders; (B) allow individual Qualified Bidders to consider how they wish to proceed; (C) consider and determine the current highest and/or best Overbid at any given time during the Auction; and (D) give Qualified Bidders the opportunity to provide the Vendors with such additional evidence as they may require, in their reasonable business judgment, that the Qualified Bidder has obtained all required internal corporate approvals, has sufficient internal resources, or has received sufficient non-contingent debt and/or equity funding commitments, to consummate the proposed transaction at the prevailing Overbid amount. (5) Portion Bids. Each Portion Bidder entitled to participate in the Auction will be entitled to submit an Overbid (in a minimum increment to be determined by the Vendors) with respect to any portion of the Assets without being required to submit an Overbid with respect to all the Stalking Horse Assets or all assets subject to the Round Leading Bid. (E) Closing the Auction. Upon conclusion of the bidding, the Auction will be closed, and the Vendors will (i) immediately review the final Overbid of each remaining Qualified Bidder on the Bid Assessment Criteria, and (ii) identify the highest and/or best Overbid or Opening Bid (the Successful Bid and the entity or entities submitting such Successful Bid, the Successful Bidder), and the next highest and/or best Overbid, Opening Bid, or Stalking Horse Agreement, after the Successful Bid (the Back-up Bid and the entity or entities submitting such Back-up Bid, the Back-up Bidder), and advise the remaining Qualified Bidders of such determination. One or more Portion Bid(s) can form part of a Successful Bid and Back-up Bid so long as such Portion Bid(s) do not overlap in respect of the Assets sought to be purchased.
16

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h) Investment Bid If a Qualified Bidder submits an investment bid involving a restructuring, recapitalization or other form of reorganization of the business and affairs of the Vendors as a going concern or a plan of compromise and arrangement or reorganization concerning the Vendors, which the Vendors consider would result in a greater value being received for the benefit of the Vendors creditors than the Qualified Bids, then the Vendors may consider such investment bid a Qualified Bid and allow such Qualified Bidder to participate in the Auction, notwithstanding that such investment bid does not otherwise comply with the terms the Bidding Procedures. In such case, the Northstar Debtors may adopt appropriate rules to facilitate such Qualified Bidders participation in the Auction. i) Sale Hearing i. A joint hearing to approve the sale of Assets to the Successful Bidder shall be conducted by the Canadian Court and the U.S. Court within 7 days of the conclusion of the Auction and by no later than July 24, 2012 at the time set by the Court (the Sale Hearing). The Vendors will be deemed to have accepted the Successful Bid only when the Successful Bid has been approved by the Canadian Court and the U.S. Court. ii. Following the approval of the sale to the Successful Bidder at the Sale Hearing, if such Successful Bidder fails to consummate the sale in accordance with the terms and conditions of the Contemplated Transaction Documents of the Successful Bidder, the Vendors will be authorized, but not required, to deem the Back-up Bid, as disclosed at the Sale Hearing, as the Successful Bid and the Vendors will be authorized, but not required, to consummate the sale with the Back-up Bidder, subject to approval of the Canadian Court and the U.S. Court, which approvals may be sought by the Vendors on a conditional basis at the Sale Hearing, at the Vendors discretion. j) Break-Up Fee and Expense Reimbursement In the event that the Stalking Horse Bidder is entitled to payment of the Break-Up Fee and Expense Reimbursement pursuant to Section 8.3 of the Asset Purchase Agreement, the combined break-up fee and expense reimbursement in the amount of three and onehalf percent (3.5%) of the base cash purchase price amount of the Stalking Horse Bid (the Break-Up Fee and Expense Reimbursement) will be paid to the Stalking Horse Bidder from the proceeds received upon closing of the Successful Bid or the Back-up Bid. No other expense reimbursement will be payable to the Stalking Horse Bidder. k) As Is, Where Is The sale of Assets will be on an as is, where is basis and without representations or warranties of any kind, nature, or description by the Vendors, their agents or estates except to the extent as expressly stated in the Stalking Horse Agreement or the Contemplated Transaction Documents of another Successful Bidder. The Stalking Horse Bidder and each Qualified Bidder will be deemed to acknowledge and represent that it has had an opportunity to conduct any and all due diligence regarding the Assets prior to making its offer, that it has relied solely on its own independent review, investigation,
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and/or inspection of any documents and/or the Assets in making its Bid, and that it did not rely on any written or oral statements, representations, promises, warranties, conditions or guaranties whatsoever, whether express, implied, by operation of law or otherwise, regarding the Assets, or the completeness of any information provided in connection therewith or the Auction, except as expressly stated in the Bidding Procedures or (a) in the case of the Stalking Horse Bidder, the Stalking Horse Agreement, as may be modified in any Overbid by the Stalking Horse Bidder or (b) in the case of any other Successful Bidder, the Contemplated Transaction Documents of such Qualified Bidder. l) Free of Any and All Encumbrances and Interests. Except as otherwise provided in the Successful Bidders Contemplated Transaction Documents, all of the Vendors right, title, and interest in and to the Assets subject thereto shall be sold free and clear of all Claims Liens, Encumbrances and Interests in accordance with the Stalking Horse Agreement, if applicable, and the vesting orders of the Canadian Court and the U.S. Court, with such Encumbrances and Interests to attach to the net proceeds of the sale of the Assets. The Canadian Purchase Price and the U.S. Purchase Price will be paid, held, and distributed in accordance with orders of the Canadian Court and the U.S. Court, respectively, approving the sale or sales. m) Return or Application of Good Faith Deposit Good Faith Deposits of all Qualified Bidders will be held in a separate non-interestbearing account or escrow. Good Faith Deposits of all Qualified Bidders, other than the Successful Bidder and the Back-up Bidder will be returned to such Qualified Bidders two (2) business days after the selection of the Successful Bidder and Back-up Bidder. Good Faith Deposits of the Successful Bidder will be applied to the purchase price of such transaction at closing. The Good Faith Deposit of the Back-up Bidder will be held in an interest-bearing account until two (2) business days after the closing of the transactions contemplated by the Successful Bid, and thereafter returned to the Back-up Bidder. If a Successful Bidder fails to consummate an approved sale because of a breach or failure to perform on the part of such Successful Bidder, the Vendors will be entitled to retain the Good Faith Deposit of the Successful Bidder as part of their damages resulting from the breach or failure to perform by the Successful Bidder. If the Successful Bidder fails to consummate an approved sale for any reason, and a transaction is completed with the Back-up Bidder, the Good Faith Deposit of the Back-up Bidder will be applied to the purchase price of the transactions contemplated by the purchase agreement of the Backup Bidder at closing. n) Modifications and Reservations i. Subject to the Canadian Bidding Procedures Order and the U.S. Bidding Procedures Order, the Vendors will have the right after consultation with the Agent to adopt such other rules (including rules that may depart the Bidding Procedures), that in their reasonable business judgment will better promote the goals of the Bidding Procedures including the extension of the Bid Deadline; provided that the adoption of any rule that materially deviates from the Bidding Procedures will require the prior consent of the Stalking Horse Bidder or orders of the Canadian Court and the U.S. Court. Qualified Bidders (other than the Stalking Horse Bidder) shall not be deemed third
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party beneficiaries of these Joint Bidding Procedures and shall not have standing to object to the Vendors administration thereof. ii. The Vendors in consultation with the Agent may prior to or during the Auction, adopt such additional rules for the Auction that will better promote the goals of the Auction and that are not inconsistent with the provisions of the Bidding Procedures, the Canadian Bidding Procedures Order and the U.S. Bidding Procedures Order; provided that the adoption of any rule for the Auction that materially deviates from the Auction procedures set forth in these Bidding Procedures will require the prior consent of the Stalking Horse Bidder or orders of the Canadian Court and the U.S. Court. iii. The Vendors may, after consultation with the Agent for the Secured Lenders and the Monitor reject at any time before entry of an order of the Canadian Court or the U.S. Court approving a Successful Bid, any Bid (except the Stalking Horse Agreement, other than in accordance with its terms) that is (a) inadequate or insufficient, (b) not in conformity with the requirements of the CCAA, the Code, the Bidding Procedures, or (c) contrary to the best interests of the Vendors, their estates and creditors thereof. 26. The Debtors submit that implementation of the Bidding Procedures will not chill

the bidding for the US Purchased Assets. Rather, approval of the Bidding Procedures is in the best interests of the Debtors, their estates, and their creditors in that it provides a structure and format for other potentially interested parties to formulate a bid for the Assets. Failure to approve the Bidding Procedures may jeopardize the Sale to the Purchaser to the detriment of the Debtors creditors, employees, customers and vendors. 27. As described above, under the Asset Purchase Agreement, the Debtors and the

Canadian Debtors have agreed to pay the Purchaser a combined Break-Up Fee and Expense Reimbursement in the amount of three and one-half percent (3.5%) of the purchase price of the Stalking Horse Bid. The Debtors are obligated to pay the Purchaser their pro rata share of the Break-Up Fee and Expense Reimbursement based on the total purchase price allocated to the US Purchased Assets in the Asset Purchase Agreement, subject to this Courts approval, which amount the Debtors consider to be fair and reasonable for the time, effort and expense of the Stalking Horse Bidder in conducting due diligence and negotiating the Asset Purchase Agreement. The Debtors have further agreed that their obligation to pay the Break-Up Fee and
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Expense Reimbursement will survive termination of the Asset Purchase Agreement, and that the portion of the Break-Up Fee and Expense Reimbursement to be paid by the Debtors will constitute an administrative expense of the Debtors under sections 503(b) or 507(b) of the US Bankruptcy Code. Absent such provision, the Purchaser was unwilling to act as a stalking horse and thereby establish a baseline by which the value of the US Purchased Assets would be measured. The Debtors believe that in this instance it is necessary and appropriate for the Debtors to make payment of the Break-Up Fee and Expense Reimbursement, subject to the terms of the Asset Purchase Agreement. The Break-Up Fee and Expense Reimbursement will be paid only if the Debtors fail to consummate the transaction proposed in the Asset Purchase Agreement, but only if such failure to consummate the transaction is because the Debtors accept a competing offer from a competing bidder and actually closes the sale and receives the purchase price from such competing bidder. D. 28. The Notice Procedures The Debtors propose to give notice (the Notice Procedures), immediately after

the entry of the US Bidding Procedures Order of the Bidding Procedures, the time and place of the Auction, the time and place of the Sale Hearing, and the objection deadline for the Sale Hearing by sending a notice (the Sale Notice), substantially in the form attached to this Motion as Exhibit F, to (i) the Office of the United States Trustee; (ii) counsel for the US Purchaser; (iii) counsel to the Agent for the Debtors pre-petition secured lenders and DIP financiers, (iv) counsel to Boeing Capital Loan Corporation. (v) counsel for any Creditors Committee; (vi) all entities known to have expressed an interest in a transaction with respect to the US Purchased Assets during the past four months; (vi) all creditors of the Debtors and entities known to have asserted any Encumbrances and Interests in or upon an of the US Purchased Assets; (vii) all federal, state, county and local and foreign regulatory or taxing authorities or recording offices
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which have a reasonably known interest in the relief requested by the Motion; (viii) all parties to US Assumed Contracts; (ix) the United States Attorneys office; (x) the Securities and Exchange Commission; (xi) the Internal Revenue Service; (xii) the Pension Benefit Guaranty Corporation; and (xiii) all entities filing notices of appearance or requests for notice under Bankruptcy Rule 2002 in these US Bankruptcy Cases. 29. In addition, as soon as practicable after entry of the US Bidding Procedures Order,

but in any event no more than three (3) business days after entry of such order, the Debtors shall publish notice of the Bidding Procedures, the time and place of the Auction, the time and place of the Sale Hearing, and the objection deadline for the Sale Hearing in the Chicago Tribune, Arizona Republic and the Wall Street Journal (National Edition), substantially in the form attached hereto as Exhibit G (the Publication Notice). E. 30. The Assignment Procedures The Debtors propose a set of procedures to facilitate the Sale which would

involve the assumption and assignment of the US Assumed Contracts (the Assignment Procedures). The Debtors propose to serve the Notice of Possible Assumption, Sale and Assignment of Certain Unexpired Leases and Executory Contracts and Sale Hearing (the Cure Notice), substantially in the form attached hereto at Exhibit H. The Debtors will serve the Cure Notices as soon as practicable after the entry of the US Bidding Procedures Order, but in any event, no later than ten (10) business days prior to the Sale Hearing. 31. The Debtors will attach to the Cure Notice their calculations of the undisputed

cure amounts that the Debtors believe must be paid to cure all prepetition defaults under all US Assumed Contracts (the Cure Costs). The Debtors request that unless the non-debtor party to a US Assumed Contract files and serves an objection (the Cure Cost Objection) to the Cure Costs on or before 4:00 p.m. (prevailing Eastern Time) on July 13, 2012 (the Cure Objection
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Deadline), such non-debtor party should (a) be forever barred from objecting to the Cure Cost and from asserting any additional cure or other amounts with respect to such US Assumed Contract, and the Debtors shall be entitled to rely solely upon the Cure Cost, and (b) be forever barred and estopped from asserting or claiming against the Debtors, the Successful Bidder or any other assignee of the US Assumed Contract that any additional amounts are due or defaults exist, or conditions to assumption and assignment must be satisfied with respect to such US Assumed Contract. 32. In the event that a Cure Cost Objection is timely filed, the Cure Cost objection

must set forth (i) the basis for the objection and (ii) the amount the party asserts as the Cure Cost. After receipt of the Cure Cost Objection, the Debtors will attempt to reconcile any differences in the Cure Cost believed by the non-debtor party to exist. In the event, however, the Debtors and the non-debtor party cannot consensually resolve the Cure Cost Objection and such dispute must be resolved, the Debtors will segregate any disputed portion of the Cure Costs pending the resolution of any such disputes by this Court or mutual agreement of the parties. 33. In the event that the Successful Bidder is not the Stalking Horse Bidder, within

two (2) business days after the conclusion of the Auction, the Debtors will serve notice identifying the Successful Bidder upon each counterparty to an executory contract or unexpired lease to be assumed and assigned to the Successful Bidder. Each counter-party shall have until July 22 or the date that is two (2) business days prior to the Sale Hearing (the Adequate Assurance Objection Deadline) to object to the assumption and assignment of such executory contract or unexpired lease solely on the issue of whether the Successful Bidder can provide adequate assurance of future performance as required by section 365 of the US Bankruptcy Code.

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F. 34.

Request to Set a Date for the Sale Hearing The Debtors intend to present the Successful Bid and the Back-up Bid, if any, for

approval by the Court pursuant to the provisions of sections 105, 363 and 365 of the Bankruptcy Code at the Sale Hearing to be scheduled by the Court and currently proposed as __:_____ a.m/p.m. on July 24, 2012. The Debtors shall be deemed to have accepted a bid only when the Court has approved the bid at the Sale Hearing. Upon the failure to consummate a sale of the US Purchased Assets after the Sale Hearing because of the occurrence of a breach or default under the terms of the Successful Bid, the next highest or otherwise best Back-up Bid, if any, as disclosed at the Sale Hearing, shall be deemed the Successful Bid without further order of the Court, and the parties shall be authorized to consummate the transaction contemplated by the Back-up Bid. 35. The Debtors further request, pursuant to Bankruptcy Rule 9014, that any

objection to the relief to be considered at the Sale Hearing must be filed on or before 4:00 p.m. (prevailing Eastern Time) on July 13, 2012 (the Objection Deadline). G. 36. Sale Free and Clear of Liens and Claims The Debtors have agreed that the conveyance of the Debtors interest in the US

Purchased Assets in accordance with the Asset Purchase Agreement will be a legal, valid, and effective transfer of such US Purchased Assets, and, to the fullest extent permitted by sections 105, 363(f) and 365 of the Bankruptcy Code, or other applicable law, vests or will vest the Purchaser with all right, title, and interest of the Debtors in and to the US Purchased Assets free and clear of Encumbrances and Interests (except the US Assumed Obligations and US Permitted Encumbrances, as those terms are defined in the Asset Purchase Agreement) of any kind or nature whatsoever including, but not limited to, Encumbrances and Interests in respect of the following: (1) any labor agreements; (2) all mortgages, deeds of trust and security interests;
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(3) any pension, welfare, compensation or other employee benefit plans, agreements, practices and programs, including, without limitation, any pension plan of any Debtor; (4) any other employee, workers compensation, occupational disease or unemployment or temporary disability related claim, including, without limitation, claims that might otherwise arise under or pursuant to (a) the Employee Retirement Income Security Act of 1974, as amended, (b) the Fair Labor Standards Act, (c) Title VII of the Civil Rights Act of 1964, (d) the Federal Rehabilitation Act of 1973, (e) the National Labor Relations Act, (f) the Worker Adjustment and Retraining Act of 1988, (g) the Age Discrimination and Employee Act of 1967 and Age Discrimination in Employment Act, as amended, (h) the Americans with Disabilities Act of 1990, (i) the Consolidated Omnibus Budget Reconciliation Act of 1985, (j) state discrimination laws, (k) state unemployment compensation laws or any other similar state laws, or (l) any other state or federal benefits or claims relating to any employment with any of the Debtors or any of their respective predecessors; (5) any bulk sales or similar law; (6) any tax statutes or ordinances, including, without limitation, the Internal Revenue Code of 1986, as amended; (7) any theories of successor or products liability; and (8) any Environmental Laws (as defined in the Asset Purchase Agreement). However, the Debtors do not seek, and nothing in Sale Order should be construed to: (1) release, nullify, or enjoin a governmental authority from enforcing any Environmental Laws under which a purchaser of property would otherwise be liable as a current owner or operator after the date of purchase, or (2) permit a governmental authority to obtain from the US Purchaser penalties arising under Environmental Laws prior to the Closing Date. Any employee medical claims which are incurred prior to the Closing (regardless of when such claims are presented for payment) will be claims against the bankruptcy estates of the Debtors, and not the US Purchaser, and the US Purchaser will be responsible only for such claims which are incurred after the Closing.
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37.

All Encumbrances and Interests of any kind or nature whatsoever (other than US

Permitted Encumbrances) will attach to the proceeds of the Sale (the Proceeds) with the same force, validity, priority and effect, if any, as the claims, liens, encumbrances, and interests formerly had against the US Purchased Assets, if any, subject to the Debtors ability to challenge the extent, validity, priority and effect of the Encumbrances and Interests unless foreclosed by the DIP Financing Order and subject to and as otherwise provided in any other order of this Court in these US Bankruptcy Cases. H. 38. Canadian Proceedings Contemporaneously herewith, the Canadian Debtors are seeking authorization

from the Canadian Court to enter into the Asset Purchase Agreement, and approval of the Bidding Procedures (the Canadian Bidding Procedures Order). The final sale and assignment of the Canadian Purchased Assets also will be submitted for approval by the Canadian Court. To facilitate this process, the Debtors have simultaneously moved this Court for an order approving a court-to-court cross-border protocol. A full description of the court-to-court cross-border protocol is set forth in that motion. Basis for Relief A. 39. Sale of the Assets Is a Product of the Debtors Reasonable Business Judgment Section 363(b)(1) of the Bankruptcy Code provides: [t]he Trustee, after notice

and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate. Section 105(a) of the Bankruptcy Code provides in relevant part: The Court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. 40. Virtually all courts have held that approval of a proposed sale of assets of a debtor

under section 363 of the Bankruptcy Code outside the ordinary course of business and prior to
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the confirmation of a plan of reorganization is appropriate if a court finds that the transaction represents a reasonable business judgment on the part of the trustee or debtor-in-possession. See In re Abbotts Dairies of Pa., 788 F.2d 143 (3d Cir. 1986); In re Delaware & Hudson Ry. Co., 124 B.R. 169, 176 (D. Del. 1991) (holding that the following non-exclusive list of factors may be considered by a court in determining whether there is a sound business purpose for an asset sale: the proportionate value of the asset to the estate as a whole; the amount of elapsed time since the filing; the effect of the proposed disposition of [sic] the future plan of reorganization; the amount of proceeds to be obtained from the sale versus appraised values of the property; and whether the asset is decreasing or increasing in value); In re Stroud Ford, Inc., 205 B.R. 722 (Bankr. M.D. Pa. 1996); Titusville Country Club v. Pennbank (In re Titusville Country Club), 128 B.R. 396, 399 (Bankr. W.D. Pa. 1991); In re Industrial Valley Refrigeration & Air Conditioning Supplies Inc., 77 B.R. 15, 21 (Bankr. E.D. Pa. 1987); In re Lionel Corp., 722 F.2d 1063 (2d Cir. 1983); Stephens Indus., Inc. v. McClung, 789 F.2d 386, 391 (6th Cir. 1986); In re Ionosphere Clubs, Inc., 100 B.R. 670, 675 (Bankr. S.D.N.Y. 1989); In re Phoenix Steel Corp., 82 B.R. 334, 335-36 (Bankr. D. Del. 1987) (stating that the elements necessary for approval of a section 363 sale in a chapter 11 case are that the proposed sale is fair and equitable, that there is a good business reason for completing the sale and the transaction is in good faith). 41. The sound business reason test requires a trustee or debtor-in-possession to

establish four elements: (1) that a sound business purpose justifies the sale of assets outside the ordinary course of business; (2) that accurate and reasonable notice has been provided to interested persons; (3) that the trustee or the debtor-in-possession has obtained a fair and reasonable price; and (4) good faith. In re Titusville Country Club, 128 B.R. at 399; In re Sovereign Estates, Ltd., 104 B.R. 702, 704 (Bankr. E.D. Pa. 1989); Phoenix Steel Corp., 82 B.R. at 335-36; see also Stephens Indus., 789 F.2d at 390; In re Lionel Corp., 722 F.2d at 1071.
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42.

Additionally, prior to and after enactment of the Bankruptcy Code, courts have

permitted a proposed sale of all or substantially all assets of a trustee outside the ordinary course. 43. The proposed procedures for, and the sale of the Debtors interests in the US

Purchased Assets meet the sound business reason test. First, sound business purposes justify the sale. The Debtors believe that a prompt sale of the US Purchased Assets conducted pursuant to the Bidding Procedures presents the best opportunity to realize the maximum value of the US Purchased Assets for distribution to the Debtors estates and their creditors. The Debtors further believe that the benefit to their creditors will be adversely affected absent an immediate sale. See In re Lionel Corp., 722 F.2d at 1071 (of factors for court to evaluate on motion under section 363(b), most important perhaps, [is] whether the asset is increasing or decreasing in value). 44. The proposed procedures for, and the sale of the US Purchased Assets also meet

the other factors of the sound business reason test. As part of this Motion, the Debtors have sought to establish procedures for notice to creditors and other prospective bidders. Under the circumstances of this case, the Debtors submit that the notice period proposed satisfies the requirements of the Bankruptcy Rules, see Bankruptcy Rule 2002, and provides sufficient time for parties-in-interest to submit objections to the proposed sale and for bidders to formulate and submit competing proposals. 45. Finally, the proposed procedures for the sale of the US Purchased Assets, which

require the Debtors to consult with the Committee, the Agent for the Secured Lenders and the Monitor throughout the process, satisfy the good faith requirement of Abbotts Dairies. The Debtors submit that the Stalking Horse Bid and the results of the Auction will be the product of good faith, arms length negotiations with respect to the price and other terms of the sale of the US Purchased Assets between the Vendors (including the Debtors) and Successful Bidder at the conclusion of the Auction.
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46.

As set forth above, the Debtors have demonstrated compelling and sound business

justifications for authorizing the sale of the US Purchased Assets and the payment of the BreakUp Fee and Expense Reimbursement under the circumstances, timing, and procedures set forth in the Asset Purchase Agreement. The sale of the US Purchased Assets pursuant to the Bidding Procedures will afford the Debtors estates an opportunity to maximize the recoveries to creditors. Accordingly, the Debtors request that the Court approve the proposed procedures for sale of the US Purchased Assets to the highest or otherwise best bidder at the Auction and approve the Sale presented to the Court at the Sale Hearing and authorize the Debtors to take such other steps as are necessary to consummate the Sale. B. 47. The Bidding Procedures Are Appropriate Under the Circumstances A debtor may sell, after notice and a hearing, its assets outside the ordinary course

of business. 11 U.S.C. 363. Generally, to obtain approval of a proposed sale of assets, a debtor must demonstrate that the proffered purchase price is the highest and best offer under the circumstances of the case. See, e.g., Four B. Corp. v. Food Barn Stores, Inc. (In re Food Barn Stores, Inc.), 107 F.3d 558, 564-65 (8th Cir. 1997) (holding that in bankruptcy sales, a primary objective of the Code [is] to enhance the value of the estate at hand); In re Integrated Res., 147 B.R. 650, 659 (S.D.N.Y. 1992) (It is a well-established principle of bankruptcy law that the . . . Debtors duty with respect to such sales is to obtain the highest price or greatest overall benefit possible for the estate.) (quoting Cello Bay Co. v. Champion Intl Corn. (In re Packaging Prods., Inc.), 99 B.R. 124, 131 (Bankr. N.D. Ga. 1988)). 48. The implementation of competitive bidding procedures to facilitate the sale of a Atlanta

debtors assets outside of the ordinary course of a debtors business is routinely approved by bankruptcy courts as a means of ensuring that such sale will generate the highest and best return for a debtors estate. The Debtors submit that the opportunity for competitive bidding embodied
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in the Bidding Procedures will generate the highest or otherwise best offer for the US Purchased Assets and therefore is designed to maximize the value of the US Purchased Assets. 49. The Debtors believe that a prompt sale process is the best way to maximize the

value of the Debtors assets for the benefit of their estates, creditors and other stakeholders. Accordingly, the Debtors have concluded that: (a) a prompt sale of the US Purchased Assets is the best way to maximize value for these estates, and (b) the proposed Bidding Procedures described herein are fair, reasonable, and appropriate and are designed to maximize recovery with respect to the sale of the US Purchased Assets. C. 50. Provision for Bid Protections in the Form of a Break-Up Fee Has Become a Recognized and Necessary Practice The Debtors have formulated a bidding process that the Debtors believe will

induce prospective competing bidders to expend the time, energy and resources necessary to submit a bid, and which the Debtors believe is fair and reasonable and provides a benefit to the Debtors estates and creditors. The Bidding Procedures and, in particular, the proposed BreakUp Fee and Expense Reimbursement are reasonable and supported by applicable case law. 51. The use of bid protections such as these has become an established practice in

chapter 11 asset sales involving the sale of significant assets because such bid protections enable a debtor to ensure a sale to a contractually committed bidder at a price the debtor believes is fair, while providing the debtor with the potential of obtaining an enhanced recovery through an auction process. Historically, bankruptcy courts have approved bidding incentives (including bid protections) solely by reference to the business judgment rule, which proscribes judicial second-guessing of the actions of a corporations board of directors taken in good faith and in the exercise of honest judgment. See, e.g., In re 995 Fifth Ave. Assocs., 96 B.R. 24, 28 (Bankr. S.D.N.Y. 1992) (holding that bidding incentives may be legitimately necessary to convince a `white knight to enter the bidding by providing some form of compensation for the risks it is
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undertaking) (citation omitted); In re Marrose Corp., 1992 WL 33848, at *5 (Bankr. S.D.N.Y. 1992) ([bidding incentives] are meant to compensate the potential acquirer who serves as a catalyst or stalking horse which attracts more favorable offers). See also In re Integrated Res., 147 B.R. 650, 657-58 (S.D.N.Y. 1992). 52. The Third Circuit has clarified the standard for determining the appropriateness of

bidding incentives in the bankruptcy context. In Calpine Corp. v. OBrien Envtl. Energy, Inc. (In re OBrien Envtl. Energy, Inc.), 181 F. 3d 527 (3d Cir. 1999), the Third Circuit held that even though bidding incentives are measured against a business judgment standard in non-bankruptcy transactions, the administrative expense provisions in section 503(b) of the Bankruptcy Code govern in the bankruptcy context. Accordingly, to be approved, bidding incentives such as the Break-Up Fee and Expense Reimbursement must provide benefit to a debtors estate. Id. at 533. 53. OBrien identified at least two instances in which bidding incentives may provide

benefit to the estate. First, benefit may be found if assurance of a Break-up Fee promoted more competitive bidding, such as by inducing a bid that otherwise would not have been made and without which bidding would have been limited. Id. at 537. Second, where the availability of bidding incentives induced a bidder to research the value of the debtor and submit a bid that serves as a minimum or floor bid on which other bidders can rely, the bidder may have provided a benefit to the estate by increasing the likelihood that the price at which the debtor is sold will reflect its true worth. Id. 54. The bid protections proposed by the Debtors are consistent with the business At the

judgment rule and satisfy the Third Circuits administrative expense standard.

inception of the Auction process, potential purchasers will be provided with the Asset Purchase Agreement and will be afforded an opportunity to submit their own adaptation of that agreement, marked to show changes necessary to consummate a sale which must be acceptable to the
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Debtors. Under the administrative expense standard enunciated in OBrien, as well as the sound business judgment standard followed in other jurisdictions, the bid protections proposed by the Debtors, including the Break-Up Fee and Expense Reimbursement should be approved as fair and reasonable. The proposed bid protections are reasonable and generally consistent with the range of bidding protections typically approved by bankruptcy courts in this district. See, e.g., In re Rouge Indus., Inc., Case No. 03-13272 (Bankr. D. Del. Dec. 3, 2003); In re Ameriserve Food Distrib., Inc., Case No. 00-00358 (Bankr. D. Del. Jan 31, 2000) (court approved break-up fee of 3.6% or $4 million in connection with a $110 million sale of assets); In re Fruit of the Loom, Inc., Case No. 99-04497 (Bankr. D. Del. Dec. 29, 1999) (court approved break-up fee of 3.0%, or $25 million in connection with a $835 million sale of business); In re Worldwide Direct., Inc., Case No. 99-108 (Bankr. D. Del. Feb. 26, 1999) (approving break-up fee of 3.1% of the proposed purchase price); In re Montgomery Ward Holding Corp., et al., Case No. 97-1409 (Bankr. D. Del. June 15, 1998) (court approved break-up fee of 2.7% or $3 million in connection with $100 million sale of real estate); In re Medlab, Inc., Case No. 97-1893 (Bankr. D. Del. Apr. 28, 1999) (court approved break-up fee of 3.12% or $250,000 in connection with $8 million sale transaction). 55. Accordingly, the Debtors payment of the pro rata portion of the Break-Up Fee

and Expense Reimbursement which may be paid by the Vendors in the event that a higher or better offer for the US Purchased Assets is received, and consummated (a) constitutes an actual and necessary cost of preserving the Debtors estates, within the meaning of section 503(b) of the Bankruptcy Code, (b) provides a substantial benefit to the Debtors estates and creditors and all parties-in-interest, (c) is reasonable and appropriate, and (d) is necessary to ensure that the Purchaser will continue to pursue the proposed Asset Purchase Agreement consummate the

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purchase of the US Purchased Assets, and therefore constitute administrative expenses with priority pursuant to Bankruptcy Code sections 503(b) or 507(b). D. The Purchaser Should be Granted the Protection of Bankruptcy Code Section 363(m)As will be set forth in further detail at the Sale Hearing, the

Debtors also maintain that the Purchaser will be entitled to the protections afforded by Bankruptcy Code section 363(m). 57. Specifically, Bankruptcy Code section 363(m) provides that: [t]he reversal or modification on appeal of an authorization under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of a sale or lease under such authorization to an entity that purchased or leased such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale or lease were stayed pending appeal. 11 U.S.C. 363(m). 58. While the Bankruptcy Code does not define good faith, the Third Circuit in

Abbotts Dairies held that: [t]he requirement that a purchaser act in good faith . . . speaks to the integrity of his conduct in the course of the sale proceedings. Typically, the misconduct that would destroy a purchasers good faith status at a judicial sale involves fraud, collusion between the purchaser and other bidders or the trustee, or an attempt to take grossly unfair advantage of other bidders. 788 F.2d at 147 (citations omitted); see generally Marin v. Coated Sales, Inc., (In re Coated Sales, Inc.), 1990 WL 212899 (S.D.N.Y. Dec. 13, 1990) (holding that party, to show lack of good faith, must demonstrate fraud, collusion, or an attempt to take grossly unfair advantage of other bidders); see also In re Sasson Jeans, Inc., 90 B.R. 608, 610 (S.D.N.Y. 1988) (quoting In re Bel Air Assocs., Ltd., 706 F.2d 301, 305 (10th Cir. 1983)); In re Pisces Leasing Corp., 66 B.R. 671, 673 (E.D.N.Y. 1986) (examining facts of each case, concentrating on integrity of [an actors]
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conduct during the sale proceedings (quoting In re Rock Indus. Mach. Corp., 572 F.2d 1195, 1198 (7th Cir. 1978)). 59. As the Debtors will demonstrate at the Sale Hearing, over the last few months, the

Debtors have spent a considerable amount of time and resources negotiating the Asset Purchase Agreement at arms length, with give and take on both sides. Under the circumstances, the Purchaser is entitled to all of the protections of Bankruptcy Code section 363(m). E. 60. Sale of the Debtors Assets Should Be Free and Clear of Liens and Claims Pursuant to, and to the fullest extent permitted by, section 363(f) of the

Bankruptcy Code, the Debtors seek authority to sell and transfer the Debtors right, interest and title in the US Purchased Assets to the Purchaser or Successful Bidder free and clear of all liens, claims, encumbrances and other interests, except as set forth in the Asset Purchase Agreement, with such liens, claims, encumbrances and other interests to attach to the Proceeds of the Sale, subject to any rights and defenses of the Debtors and other parties-in-interest with respect thereto. Section 363(f) of the Bankruptcy Code provides, in pertinent part: The trustee may sell property under subsection (b) or (c) of this section free and clear of any interest in such property of an entity other than the estate, only if (1) applicable nonbankruptcy law permits sale of such property free and clear of such interest; (2) such entity consents;

(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property; (4) such interest is in bona fide dispute; or

(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.

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11 U.S.C. 363(f). See also In re Elliot, 94 B.R. 343, 345 (E.D. Pa. 1988) (holding that section 363(f) is written in the disjunctive; court may approve sale free and clear provided at least one of the requirements is met). 61. With respect to each creditor asserting an Encumbrance and Interest, the Debtors

believe that one or more of the standards set forth in Bankruptcy Code 363(f)(1)-(5) has been satisfied. Those holders of Encumbrances and Interests who do not object or who withdraw their objections to the Sale or the Motion will be deemed to have consented to the Motion and Sale pursuant to Bankruptcy Code 363(f)(2). The Debtors believe that those holders of

Encumbrances and Interests who do object fall within one or more of the other subsections of Bankruptcy Code section 363(f). 62. A sale free and clear of Encumbrances and Interests is necessary to maximize the

value of the US Purchased Assets. The Purchaser would not have entered into the Asset Purchase Agreement and would not consummate the Sale absent the ability to purchase the US Purchased Assets free and clear of all Encumbrances and Interests. A sale of the US Purchased Assets other than one free and clear of all Encumbrances and Interests would yield substantially less value for the Debtors estates, with less certainty than transaction proposed by the Asset Purchase Agreement. Accordingly, the Sale contemplated by the Asset Purchase Agreement is in the best interests of the Debtors, their estates and creditors, and all other parties-in-interest. 63. A sale free and clear of Encumbrances and Interests is particularly appropriate

under the circumstances because any Encumbrance and Interest in, to or against the Debtors right, interest and title in the US Purchased Assets that exists immediately prior to the Closing will attach to the sale Proceeds allocated to the Debtors with the same validity, priority, force and effect as it had at such time, subject to the rights and defenses of the Debtors or any party-ininterest. The Debtors submit that holders of Encumbrances and Interests, if any, will be
34

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adequately protected by the availability of the Proceeds of the Sale to satisfy such Encumbrances and Interests. F. 64. Notice of the Proposed Sale is Reasonable Under the Circumstances The Debtors submit that the Sale Notice as set forth above, along with the

Publication Notice in the Chicago Tribune, Arizona Republic and the Wall Street Journal (National Edition), is reasonable and appropriate and will be adequate to ensure that all interested parties have the opportunity to bid for the US Purchased Assets, and/or to object to the proposed Sale. G. 65. The Assumption and Assignment of the US Assumed Contracts Should Be Authorized Under Bankruptcy Code section 365(a), a debtor, subject to the courts approval,

may assume or reject any executory contract or unexpired lease of the debtor. 11 U.S.C. 365(a). Bankruptcy Code section 365(b)(1), in turn, codifies the requirements for assuming an executory contract of a debtor. This subsection provides: (b)(1) If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of assumption of such contract or lease, the trustee -(A) cures, or provides adequate assurance that the trustee will promptly cure, such default. . .; (B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and (C) provides adequate assurance of future performance under such contract or lease. 11 U.S.C. 365(b)(1). Section 365(f)(2) of the Bankruptcy Code provides, in pertinent part, that: The trustee may assign an executory contract or unexpired lease of the debtor only if -{BAY:02057312v1}
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(A) the trustee assumes such contract or lease in accordance with the provisions of this section; and (B) adequate assurance of future performance by the assignee of such contract or lease is provided, whether or not there has been a default in such contract or lease. 11 U.S.C. 365(f)(2). 66. The meaning of adequate assurance of future performance depends on the facts

and circumstances of each case, but should be given practical, pragmatic construction. EBG Midtown S. Corp. v. McLaren/Hart Envtl. Engg Corp. (In re Sanshoe Worldwide Corp.), 139 B.R. 585, 593 (S.D.N.Y. 1992); see also In re Prime Motor Inns Inc., 166 B.R. 993, 997 (Bankr. S.D. Fla. 1994); Carlisle Homes, Inc. v. Azzari (In re Carlisle Homes, Inc.), 103 B.R. 524, 538 (Bankr. D.N.J. 1988). 67. Among other things, adequate assurance may be provided by demonstrating the

assignees financial health and experience in managing the type of enterprise or property assigned. See, e.g., In re Bygaph, Inc., 56 B.R. 596, 605-06 (Bankr. S.D.N.Y. 1986) (finding adequate assurance of future performance present when prospective assignee of lease from debtor has financial resources and has expressed willingness to devote sufficient funding to business in order to give it strong likelihood of succeeding). 68. To the extent any defaults exist under any US Assumed Contract, any such default

will be promptly cured or adequate assurance that such default will be cured will be provided prior to the assumption and assignment. If necessary, the Debtors will submit facts prior to or at the Sale Hearing to show the financial credibility of the Purchaser or Successful Bidder and willingness and ability to perform under the US Assumed Contracts. The Sale Hearing will therefore provide the Court and other interested parties the opportunity to evaluate and, if necessary, challenge the ability of the Purchaser or Successful Bidder to provide adequate

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assurance of future performance under the US Assumed Contracts, as required under section 365(b)(1)(C) of the Bankruptcy Code. 69. In addition, the Debtors submit that it is an exercise of their sound business

judgment to assume and assign, as the case may be, the US Assumed Contracts to the Purchaser or Successful Bidder in connection with the consummation of the Sale, and that the assumption and assignment of the US Assumed Contracts are in the best interests of the Debtors, their estates, their creditors, and all parties-in-interest. The US Assumed Contracts being assigned to the Purchaser (or Successful Bidder) are an integral part of the US Purchased Assets being acquired by the Purchaser (or Successful Bidder), and accordingly, such assumption, and assignment of the US Assumed Contracts are reasonable and enhance the value of the Debtors estates. The Court should therefore authorize the Debtors to assume and assign the US Assumed Contracts. H. 70. Waiver of Bankruptcy Rule 6006(f)(6) with Respect To The US Assumed Contracts Bankruptcy Rule 6006(f)(6) requires that an omnibus motion to reject, assume or

assign multiple executory contracts or unexpired leases be limited to no more than 100 executory contracts or unexpired leases. With regards to the US Assumed Contracts, the Debtors request that the Court waive the provision in Bankruptcy Rule 6006(f)(6) limiting the number of executory contracts and unexpired leases that may be incorporated into one omnibus motion. Rule 6006(f)(6) seeks to help the other parties to the contracts locate their information in the midst of the omnibus motion. 10 Collier on Bankruptcy 6006.05 (15th ed. 1999). Because the Debtors propose to send an individual notice to each counterparty to the US Assumed Contracts, the purpose of the rule will be satisfied without needlessly filing multiple motions with the Court.

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I. 71.

Waiver of Automatic Fourteen-Day Stay Under Bankruptcy Rules 6004(h) and 6006(d) Pursuant to Bankruptcy Rule 6004(h), unless the Court orders otherwise, all

orders authorizing the sale of property pursuant to section 363 of the Bankruptcy Code are automatically stayed for fourteen days after entry of the order. Similarly, under Bankruptcy Rule 6006(d), unless the Court orders otherwise, all orders authorizing the assignment of contracts or unexpired leases are automatically stayed for fourteen days after entry of the order. The purpose of Bankruptcy Rules 6004(h) and 6006(d) is to provide sufficient time for an objecting party to request a stay pending appeal before the order can be implemented. See Advisory Committee Notes to Fed. R. Bankr. P. 6004(h); Advisory Committee Notes to Fed. R. Bankr. P. 6006(d). 72. Although Bankruptcy Rules 6004(h) and 6006(d) and the Advisory Committee

Notes are silent as to when a court should order otherwise and eliminate or reduce the 14-day stay period, commentators agree that the 14-day stay period should be eliminated to allow a sale or other transaction to close immediately where there has been no objection to the procedure. See generally 10 Collier on Bankruptcy 6004.09 (15th ed. 1999). Furthermore, if an objection is filed and overruled, and the objecting party informs the court of its intent to appeal, the stay may be reduced to the amount of time necessary to file such appeal. Id. 73. Because of the potentially diminishing value of the US Purchased Assets, the

Debtors need the flexibility to close this sale promptly after all closing conditions have been met or waived. While the Purchaser likely will not be able to close within 14 days of entry of the Sale Order, it is quite possible that another bidder may condition its bid on the ability to close promptly. Thus, out of an abundance of caution, the Debtors submit that waiver of any

applicable stays is appropriate in this circumstance.

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Notice 74. Notice of this Motion shall be provided to: (a) the Office of the United States

Trustee for the District of Delaware; (b) the creditors listed on the consolidated list of creditors holding the 30 largest unsecured claims; (c) counsel to Agent for the Debtors secured bank group, (d) counsel to Boeing Capital Loan Corporation, the Debtors proposed junior DIP lender and (e) all parties that requested notice of pleadings pursuant to Bankruptcy Rule 2002. The Debtors respectfully submit that no other or further notice need be provided. No Prior Request 75. court. [remainder of page intentionally left blank] No prior request for the relief sought herein has been made to this or any other

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WHEREFORE, the Debtors respectfully request that this Court (i) grant this Motion and the relief requested herein; (ii) enter the proposed orders attached hereto; and (iii) grant such other relief as it deems just and proper. Dated: June 18, 2012 Wilmington, Delaware

BAYARD, P.A. /s/ Charlene D. Davis Charlene D. Davis (No. 2336) Justin R. Alberto (No. 5126) 222 Delaware Avenue, Suite 900 Wilmington, Delaware 19801 Phone: (302) 655-5000 Facsimile: (302) 658-6395 Email: cdavis@bayardlaw.com jalberto@bayardlaw.com -andRobert E. Richards SNR DENTON US LLP 233 South Wacker Drive, Suite 7800 Chicago, Illinois 60606 Telephone: (312) 876-8000 Facsimile: (312) 876-7934 Email: robert.richards@snrdenton.com Scott E. Koerner David Pisciotta SNR DENTON US LLP 1221 Avenue of the Americas, Suite 2500 New York, New York 10020 Telephone: (212) 768-6700 Facsimile: (212) 768-6800 Email: scott.koerner@snrdenton.com david.pisciotta@snrdenton.com Proposed Attorneys for Debtors and Debtors-in-Possession

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