In re:

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE
)
) Chapter II
)
Electroglas, Inc., et al., ) Case No. 09-12416 (PJW)
)
Debtors. ) (Jointly Administered)
) Re: D.I.19
ORDER (I) APPROVING BIDDING PROCEDURES IN
CONNECTION WITH ANTICIPATED SALE OF SUBSTANTIALLY ALL
OF THE DEBTORS' ASSETS; (II) SCHEDULING HEARING TO
CONSIDER SALE OF ASSETS; (Ill) APPROVING FORM AND
MANNER OF NOTICE; (IV) APPROVING MAXIMUM
BREAK-UP FEE; AND M GRANTING RELATED RELIEF
Upon consideration of the motion (the "Motion")
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of Electroglas, Inc. and
Electroglas International, Inc., the debtors and debtors in possession in the above-captioned
Chapter II Cases (together, the "Debtors"), seeking entry of an order (the "Bidding Procedures
Order") pursuant to Bankruptcy Code sections 105(a), 363, 365 and 503, Bankruptcy Rules
2002, 6004, 6006, 9007, and 9014(a), and Local Bankruptcy Rules 2002-1, 6004-1 and 9006-1
approving: (a) the Bidding Procedures and the proposed maximum Break-up Fee, and (b) the
form and manner of related notices; and the Bankruptcy Court having determined that the relief
provided herein is in the best interest of the Debtors, their estates, their creditors and other parties
in interest; and due and adequate notice of the Motion having been given under the
circumstances; and upon the record of the hearing on the Motion, and the full record of this case;
and after due deliberation thereon; and good and sufficient cause appearing therefor, it is hereby:
Capitalized tenus used but not otherwise defined in this Bidding Procedures Order and its attached exhibits
shall have the meanings ascribed to them in the Motion.
Docket No. 86
July 30, 2009
FOUND AND DETERMINED THAT:
A. The Bankruptcy Court has jurisdiction over the Motion pursuant to 28
U.S.C. 157 and 1334, and this matter is a core proceeding pursuant to 28 U.S.C. 157(b).
Venue in this district is proper under 28 U.S.C. 1408 and 1409.
B. Good and sufficient notice of the Motion and the relief sought therein has
been given under the circumstances, and no other or further notice is required except as set forth
in this Bidding Procedures Order with respect to the Auction and Sale Hearing. A reasonable
opportunity to object or be heard regarding the relief provided in this Bidding Procedures Order
has been afforded to parties in interest.
C. The Debtors' proposed notice of the Bidding Procedures is appropriate
and reasonably calculated to provide all interested parties with timely and proper notice of the
Auction, the sale of the Purchased Assets, and the Bidding Procedures to be employed in
connection therewith.
D. The Debtors have articulated good and sufficient business reasons for the
Bankruptcy Court to approve the Bidding Procedures, including: (i) the scheduling of a bid
deadline, Auction and Sale Hearing for the sale of the Purchased Assets; and (ii) the
establishment of procedures to fix the Cure Amounts to be paid under section 365 of the
Bankruptcy Code in connection with the assumption and assignment of the Executory Contracts
and Unexpired Leases.
E. The Bidding Procedures are reasonably designed to maximize the value to
be achieved for the Purchased Assets.
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F. The Debtors have demonstrated that the proposed maximum Break-up Fee
would provide a benefit to the Debtors' estates, within the meaning of section 503(b) of the
Bankruptcy Code, if used to induce a potential Stalking Horse Bidder's bid.
G. The entry of this Bidding Procedures Order is in the best interests of the
Debtors, their estates, their creditors, and other parties in interest.
NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED
THAT:
1. The Motion as it relates to the Bidding Procedures is GRANTED as set
forth herein. This Bidding Procedures Order shall constitute findings of fact and conclusions of
law and shall become effective immediately upon its entry by the Bankruptcy Court.
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2. The Bidding Procedures, in substantially the form attached to this Bidding
Procedures Order as Exhibit A, are hereby incorporated herein and approved, and shall apply
with respect to the sale of the Purchased Assets. The Debtors are authorized to take all actions
necessary or appropriate to implement the Bidding Procedures.
3. This Bidding Procedures Order overrules all objections to the relief
requested in the Motion (only as those objections relate to the Bidding Procedures and not the
Sale) that have not been withdrawn, waived, or settled as announced to the Bankruptcy Court at
the hearing on the Bidding Procedures or by stipulation filed with the Bankruptcy Court.
4. As further described in the Bidding Procedures, the deadline for
submitting bids (other than a Credit Bid) for the Purchased Assets (the "Third Party Bid
Deadline") is August 19, 2009 at 12:00 noon (prevailing Eastern time) and the deadline for
2
The findings and conclusions set forth in this Bidding Procedures Order constitute the Bankruptcy Court's findings
of fact and conclusions of law pursuant to Bankruptcy Rule 7052, made applicable to this proceeding pursuant to
Bankruptcy Rule 9014. To the extent that any of the findings of fact set forth in this Bidding Procedures Order
constitute conclusions of law, they are adopted as such. To the extent any of the conclusions of law set forth in
this Bidding Procedures Order constitute fmdings of fact, they are adopted as such.
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submitting a Credit Bid (the "Credit Bid Deadline") is August 24, 2009 at 7:00 p.m. (prevailing
Eastern time). No bid shall be deemed to be a Qualified Bid (as defined in the Bidding
Procedures) or otherwise considered for any purposes unless such bid meets the requirements set
forth in the Bidding Procedures.
5. The Debtors may seek the highest or otherwise best offer for the
Purchased Assets by conducting an Auction in accordance with the Bidding Procedures. If
Qualified Bids are timely received by the Debtors in accordance with the Bidding Procedures,
the Auction shall take place on August 21, 2009 at 12:00 noon (prevailing Eastern Time) at
the offices of the Debtors' special counsel, Morrison & Foerster LLP, at 1290 Avenue of the
Americas, New York, New York 10104 or such later time on such day or other place as the
Debtors shall notify all Qualified Bidders, the Creditors' Committee, and other invitees.
6. Each Qualified Bidder participating at the Auction will be required to
confirm that it has not engaged in any collusion with respect to the bidding or the Sale.
Consistent with Del. Bank. LR 6004-l(b)(iv), to the extent that a Qualified Bid or any agreement
proposed in connection with a Qualified Bid or any agreement proposed in connection with a
Qualified Bid (a) proposes a sale to an insider, (b) involves any agreement with any member of
management, or (c) involves a proposed release of any entity from any claims, (d) any interim
management arrangement, or (e) involves any proposed transfer of any avoidance actions, such
provisions must be promptly disclosed in a supplemental filing which provides the information
required by Ru1e 6004-l(b)(iv).
7. The Auction will be conducted openly.
8. Bidding at the Auction will be transcribed or videotaped.
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~ , o-o ~ . f'-1.
9. The S e Hearing shall be held before the Bankruptcy Court on
parties in interest may be heard.
10. On or before three (3) business days after entry of this Bidding Procedures
Order, the Debtors will cause: (A) the notice, substantially in the form attached to the Motion as
Exhibit C (the "Notice of Auction and Sale Hearing") and the Bidding Procedures Order to be
filed and sent by first-class mail postage prepaid, to the following:
(i) the Office of the United States Trustee;
(ii) counsel for the Creditors' Committee (if any);
(iii) counsel to Comerica Bank;
(iv) all entities known to have expressed a bonafide interest in acquiring all or
substantially all of the Purchased Assets;
(v) all entities (or counsel therefor) known to have asserted any lien, claim,
encumbrance, right of refusal, or other interest in or upon any portion of
the Purchased Assets;
(vi) federal, state, and local regulatory or taxing authorities or recording offices
or any other governmental authorities that, as a result of the sale of the
Purchased Assets, may have claims, contingent or otherwise, in connection
with the Debtors' ownership of the Purchased Assets or have any
reasonably known interest in the relief requested by the Motion, including
the Delaware Secretary of State;
(vii) all parties, if any, who are known to claim interests in, and the non-Debtor
counterparty to, any Executory Contracts or Unexpired Leases;
(viii) the United States Attorney's office;
(ix) the Internal Revenue Service; and
(x) all parties who have requested or are required to receive notice pursuant to
Bankruptcy Rule 2002 as of the date of the entry of the Bidding
Procedures Order;
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(B) the Notice of Auction and Sale Hearing to be served on all known creditors of the Debtors;
and (C) the Debtors shall publish notice of the Sale, the time and place of the proposed Auction,
the time and place of the Sale Hearing and the time for filing an objection to the Motion in the
local edition of the San Jose Mercury News during the week of August 3, 2009.
11. On or before twenty three (23) days prior to the Sale Hearing, the Debtors
shall file and serve by first class mail or hand delivery, a notice of potential assumption and
assignment of the Executory Contracts and Unexpired Leases (substantially in the form annexed
to the Motion as Exhibit C, the "Notice of Assumption and Assignment") on all non-Debtor
parties to the Executory Contracts and Unexpired Leases. The Notice of Assumption and
Assignment shall identify whether each Executory Contract or Unexpired Lease is a Purchased
Asset and the calculation of the cure amounts that the Debtors believe must be paid to cure all
defaults under the Executory Contracts or Unexpired Leases (the "Cure Amounts"). In addition,
if after the Auction, the Successful Bidder identifies additional Executory Contracts or
Unexpired Leases to be assumed and assigned that are not set forth in the original Notice of
Assumption and Assignment, or chooses to remove any of the previously identified Executory
Contracts and Unexpired Leases from the list of Assumed Contracts, the Debtors will promptly
file and send a supplemental notice (a "Supplemental Notice of Assumption and Assignment") to
the applicable counterparties regarding these executory contracts and unexpired leases prior to
the Sale Hearing.
12. Unless the non-Debtor party to an Executory Contract or Unexpired Lease
files an objection (the "Cure Amount/Assignment Objection") to (a) its scheduled Cure Amount
or (b) the proposed assumption or assignment of such Executory Contract or Unexpired Lease by
the later of (i) 4:00 p.m. (prevailing Eastern time) on the date that is five ( 5) business days prior
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to the Sale Hearing or (ii) ten (10) days after service of the Supplemental Notice of Assumption
and Assignment (such later date, the "Cure Amount/Assignment Objection Deadline") and
serves a copy of the Cure Amount/Assignment Objection so as to be received no later than the
Cure Amount/ Assignment Objection Deadline on the same day by: (a) Electroglas, Inc., 5729
Fontanoso Way, San Jose, CA 95138-1015 (Attn: Company Officer); (b) counsel to the Debtors,
Pepper Hamilton LLP, Hercules Plaza, Suite 5100, 1313 N. Market Street, P.O. Box 1709,
Wilmington, Delaware 19899-1709(Attn: David B. Stratton, Esq. and James C. Carignan, Esq.);
(c) special counsel to the Debtors, Morrison & Foerster LLP, 425 Market Street, San Francisco,
California 94105 (Attn: G. Larry Engel, Esq.), and Morrison & Forester LLP, 1290 Avenue of
the Americas, New York, New York 10019 (Attn.: James J. DeCristofaro, Esq.); (d) co-counsel
to the DIP Lenders, Cozen O'Connor, Chase Manhattan Centre, 1201 North Market Street, Suite
1400, Wilmington, DE 19801 (Attn: Mark E. Felger, Esq.); and (e) co-counsel to the DIP
Lenders, Lovells LLP, 590 Madison Avenue, New York, New York 10022 (Attn.: Christopher
R. Donoho III, Esq.); (f) counsel to the Creditors' Committee, Womble Carlyle Sandridge &
Rice, PLLC, 222 Delaware Avenue, Suite !50 I, Wilmington, Delaware 1980 I (Attn: Steven K.
Kortanek, Esq. and Matthew P. Ward, Esq.); and (g) the Office of the United States Trustee, 844
King Street, Room 2313, Wilmington, Delaware 19801 (Attn: Jane Leamy, Esq.), (collectively,
the "Notice Parties"), such non-Debtor party (i) will be forever barred from objecting to the Cure
Amount and from asserting any additional cure or other amounts with respect to such Executory
Contract or Unexpired Lease, and the Debtors shall be entitled to rely solely upon the Cure
Amount, and (ii) be deemed to have consented to the assumption and assignment of such
Executory Contract or Unexpired Lease and will be forever barred and estopped from asserting
or claiming against the Debtors or the Successful Bidder or any other assignee of the relevant
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Executory Contract or Unexpired Lease that any additional amounts are due or defaults exist, or
that any non-monetary conditions to assumption or assignment must be satisfied, under such
Executory Contract or Unexpired Lease, provided, however, that any counterparty may raise at
the Sale Hearing an objection to the assumption and assignment of the Executory Contract or
Unexpired Lease solely with respect to the Successful Bidder's ability to provide adequate
assurance of future performance.
13. If an objection challenges a Cure Amount, the objection must set forth the
prepetition cure amount being claimed by the objecting party (the "Claimed Cure Amount") with
appropriate documentation in support thereof. Upon receipt of an objection to a Cure Amount,
the Debtors may, in their sole discretion, hold an amount equal to the Claimed Cure Amount in
reserve pending further order ofthe Bankruptcy Court or agreement between the Debtors and the
objecting party. Ifthe Debtors hold the Claimed Cure Amount in reserve, the Debtors may
assume and assign the Assumed Contract that is the subject of an objection relating to that
Assumed Contract's Cure Amount without further delay.
14. The Debtors or the Successful Bidder, as the case may be, may determine
to exclude any Executory Contract or Unexpired Lease from the list of Purchased Assets at any
time prior to the conclusion of the Sale Hearing. The non-Debtor party or parties to any such
excluded contract or lease will be notified of such exclusion by the fastest means feasible and
reasonable under the circumstances, and by written notice.
15. The Notice of Auction and Sale Hearing and the Notice of Assumption
and Assignment to be issued in connection with the proposed sale of the Purchased Assets,
substantially in the form annexed the Motion as Exhibit B and Exhibit C, respectively, are
approved.
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16. The Sale Hearing may be adjourned, from time to time, without further
notice to creditors or other parties in interest other than by announcement of the adjournment
before the Bankruptcy Court or on the Bankruptcy Court's calendar on the date scheduled for the
Sale Hearing.
17. Nothing herein shall prejudice or otherwise affect the right of the Debtors
or any of them to select a "stalking horse" bidder and to return to the Court to seek approval of
appropriate buyer protections or modifications to this Order or the Bidding Procedures approved
hereby.
18. Except as otherwise provided in this Bidding Procedures Order and in the
Bidding Procedures, Local Bankruptcy Rule 6004-1 ( c )(ii) is waived.
19. Except as otherwise provided in this Bidding Procedures Order, the
Debtors shall have the right as they may reasonably determine (after consultation with the DIP
Lenders and the Creditors' Committee) to be in the best interests of their estates, to: (i) determine
which bidders are Qualified Bidders; (ii) determine which bids are Qualified Bids; (iii) determine
which Qualified Bid is the highest or otherwise best proposal and which is the next highest or
otherwise best proposal; (iv) reject any bid that is (a) inadequate or insufficient, (b) not in
conformity with the requirements of the Bidding Procedures or the requirements of the
Bankruptcy Code, or (c) contrary to the best interests of the Debtors and their estates; (v) remove
some of the Purchased Assets from the Auction; (vi) waive terms and conditions set forth herein
with respect to all potential bidders; (vii) impose additional terms and conditions with respect to
all potential bidders; (viii) extend the deadlines set forth herein; (ix) adjourn or cancel the
Auction or Sale Hearing in open court without further notice; and (x) modifY the Bidding
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Procedures as the Debtors may determine to be in the best interest of their estates or to withdraw
the Motion at any time with or without prejudice.
20. The stays provided for in Bankruptcy Rules 6004(h) and 6006(d) are
waived and Bidding Procedures Order shall be effective immediately upon its entry.
21. The Bankruptcy Court shall retain jurisdiction over any matters related to
or arising from the implementation ofthis Bidding Procedures Order.
Dated:
Wilmington, Delaware
P:ft? p vAl\ --
UNITED STATES BA KRUPTCY JUDGE
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EXIDBITA
Bidding Procedures
BIDDING PROCEDURES
By motion dated July 10, 2009 (the "Motion"), Electroglas, Inc. and Electroglas
International, Inc. (together, the "Debtors") sought approval of, among other things, the
procedures through which they will determine the highest or otherwise best price for the sale
(collectively, the "Sale") of substantially all of their assets (the "Purchased Assets").
On [], 2009, the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court'') entered an order (the "Bidding Procedures Order"), which, among
other things, authorized the Debtors to determine the highest or otherwise best bid for the
Purchased Assets through the process and procedures set forth below (the "Bidding
Procedures"). The Debtors reserve the right to waive the Bidding Procedures, to the extent set
forth in the Bidding Procedures Order.
The sale will be subject to competitive bidding as set forth herein and approval of
the Bankruptcy Court pursuant to sections 1 OS, 363 and 365 of chapter 11 oftitle 11 of the
United States Code (the "Bankruptcy Code").
These are the Bidding Procedures for the sale of the Purchased Assets.
Important Dates
July 31, 2009: Debtors to send Bidding Procedures Order and Bidding Procedures to all
Notice Parties
August 3, 2009: Debtors to send Original Notice of Assumption and Assignments to all
counterparties to Assumed Contracts
August 19, 2009: Deadline to submit Bid to be considered for the Auction
August 21, 2009: Date of Auction
August 21, 2009: Objection Deadline for Original Notice of Assumption and Assignments
August 24, 2009: Deadline to file and serve objections to relief requested at Sale Hearing
August 24, 2009: Deadline to submit Credit Bid
August 26, 2009: Date of Sale Hearing
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Assets to Be Sold
The Debtors are offering to sell substantially all of their assets (the "Purchased
Assets").
Marketing Process
Contact Parties
The Debtors have developed a list of parties the Debtors believe may be interested
in a transaction with the Debtors. This list includes both potential strategic investors and
financial investors and may include additional parties to the extent the Debtors generate more
interest in the Purchased Assets as they continue the marketing process in chapter II (each, a
"Contact Party"). Within three (3) business days after the entry of the Bidding Procedures
Order, the Debtors will notify the Contact Parties to explore interest in any transactions. Contact
Parties may include parties whom the Debtors or their advisors previously contacted regarding a
transaction, regardless of whether such parties expressed any interest, at that time, in pursuing a
transaction.
The Debtors may distribute to each Contact Party an "Information Package,"
comprising:
I. A cover letter;
2. A copy of these Bidding Procedures; and
3. A copy of a confidentiality agreement in form and substance acceptable to
the Debtors (the "Confidentiality Agreement").
Access to Diligence Materials
I. To participate in the bidding process and receive access to diligence
materials in a data room (the "Diligence Materials"), a party must submit an executed
Confidentiality Agreement to the Debtors. A party who qualifies for access to Diligence
Materials shall be a "Preliminarily Interested Party".
2. All due diligence requests must be directed to Morrison & Foerster LLP,
755 Page Mill Road, Palo Alto, California 94304-1018 (Attn: Justin L. Bastian, Esq.).
3. For Preliminarily Interested Parties who are competitors of the Debtors or
are affiliated with competitors of the Debtors, the Debtors reserve the right to withhold any
Diligence Materials that the Debtors determine, in their reasonable discretion, are business-
sensitive or otherwise not appropriate for disclosure to such Preliminarily Interested Party,
because such disclosure poses a material and adverse risk to the competitive position of the
Debtors' businesses. In the event that any such information is withheld, it shall be made
available to such Preliminarily Interested Party's outside professionals and employees who are
not involved in any aspect of the Preliminarily Interested Party's business which competes with
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the business of the Debtors on a customary "clean-room" (electronic or otherwise) basis (with
the appropriate restrictions to be determined by the Debtors in their reasonable discretion).
Updates to DIP Lenders and Creditors' CommiUee Regarding Marketing Process
The Debtors shall provide counsel to Peninsula Master Fund Ltd., Peninsula
Technology Fund LP, QVT Fund LP, and Quintessence Fund L.P. (the "DIP Lenders") and the
Bank of New York Mellon Trust Company, N.A., as Trustee (the "Indenture Trustee") of the
6.25% Convertible Senior Subordinated Secured Notes due 2027 and counsel to the Official
Committee of Unsecured Creditors (the "Creditors' Committee"), daily telephonic reports of all
sale efforts, expressions of interest, and offers received, and shall provide such counsel with
copies of all such offers.
Auction Qualification Process
Each offer, solicitation, or proposal (each, a "Bid") and each party submitting
such a Bid (each, a "Bidder") must satisfy the conditions listed below to be eligible to participate
in the Auction. The Debtors, in their sole discretion, shall determine compliance with each
condition.
Conditions:
1. Confidentiality Agreement: A Bidder must deliver to the Debtors an
executed confidentiality agreement(s) in form and substance acceptable to the Debtors.
2. Form of Consideration. A Bid must be either cash, the assumption of
debt, marketable securities that will be freely transferable no later than six months following the
date of the closing the Sale, or a credit bid under section 363(k) of the Bankruptcy Code
("Qualified Consideration").
3. Good Faith Deposit: A Bid (other than a Credit Bid (as defined below))
must be accompanied by a deposit to an interest bearing escrow account to be identified and
established by the Debtors in the amount of 10% of the proposed purchase price (the "Good
Faith Deposit"). Notwithstanding the foregoing, the Debtors may elect to accept a Good Faith
Deposit in the form of securities of a type acceptable to the Debtors in their discretion in
consultation with the DIP Lenders.
4. Documentation: A Bid must include executed transaction documents (the
"Transaction Documents") to effect the proposed sale transaction (the "Transaction"). A copy of
the foregoing documents (including the matters contemplated by clause "(5)" below) shall be
forwarded by the Debtors to the DIP Lenders and the Creditors' Committee, promptly (and in
any event within 24 hours) after they are provided to the Debtors.
5. Fees and Expense Reimbursements: No Bidder shall be entitled to any
expense reimbursement, breakup fee, termination fee, or similar fee or payment; provided,
however, that pursuant to the Bidding Procedures Order, Debtors may seek one or more of such
bidder protections by request made to the Bankruptcy Court.
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6. Executory Contracts and Leases: Transaction Documents shall identifY all
of the Debtors' executory contracts and unexpired leases that the Bidder wishes to have assumed
and assigned to it pursuant to the Transaction.
7. Comorate Authority: A Bid must include written evidence that
demonstrates appropriate corporate authorization for the Bidder to consummate the proposed
Transaction; provided, that if the Bidder is an entity specially formed for the purpose of effecting
the Transaction, then the Bidder must furnish written evidence of the approval of the Transaction
by the equity holder(s) of such Bidder.
8. No Collusion: A Bidder must confirm that it has not engaged in any
collusion with respect to the bidding or the sale.
9. Disclosure: A Bid must fully disclose the identity of each entity that will
be bidding for the assets or otherwise participating in connection with such bid, and the complete
terms of any such participation.
I 0. Proof of Financial Ability to Perform: A Bid must include written
evidence that the Bidder has the necessary financial ability to close the Transaction and provide
adequate assurance of future performance under all executory contracts and leases to be assumed
and assigned in such Transaction. Such information should include, among other things, the
following:
(i) contact names and numbers for verification of financing sources;
(ii) evidence of the Bidder's internal resources and proof of any debt or equity
funding commitments that are needed to close the Transaction;
(iii) the Bidder's most current audited and latest unaudited financial
statements; and
(iv) any such other form of financial disclosure or credit-quality support
information or enhancement, acceptable to the Debtors in their sole
discretion, that demonstrates such Bidder is able to close the Transaction.
11. Contingencies: A Bid may not be conditioned on obtaining financing or
any internal approval, or on the outcome or review of due diligence, but may be subject to the
accuracy in all material respects at the closing of specified representations and warranties.
12. Irrevocable: A Bid must be irrevocable through the Auction and, if such
Bid is accepted as the Successful Bid or the Backup Bid (as defined below), must continue to
remain irrevocable, subject to the terms and conditions of these Bidding Procedures.
13. Third Partv Bid Deadline: Regardless of when a party qualifies as a
Preliminarily Interested Party, all Bids (other than a Credit Bid) must be in writing and received
by the Debtors on or before 12:00 noon (prevailing Eastern time) on August 19,2009 (the "Third
Partv Bid Deadline").
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Bids received from Bidders before the Third Party Bid Deadline that are
determined by the Debtors to meet the above requirements and any Credit Bid received before
the Credit Bid Deadline (as defined below) shall constitute "Qualified Bids," and such Bidders
shall constitute "Qualified Bidders." The Debtors will promptly advise the potential bidder in
writing of the Debtors' determination whether or not the Bidder is a Qualified Bidder; provided
however, that a Bidder who submits a Credit Bid by the Credit Bid Deadline is deemed a
Qualified Bidder and shall receive no such written determination. Only Qualified Bidders may
participate at the Auction.
Auction
If more than one Qualified Bid is received by the Third Party Bid Deadline, the
Debtors will conduct an auction (the "Auction") to determine the highest or otherwise best
Qualified Bid. The Debtors, after consulting with the DIP Lenders and the Creditors'
Committee, will determine the highest or otherwise best Qualified Bid in their business
judgment, after taking into account any factors the Debtors, after consulting with the DIP
Lenders and the Creditors' Committee, deem relevant, including, without limitation, the
following criteria (the "Bid Assessment Criteria"):
(v) the amount and nature of the consideration;
(vi) the proposed assumption of any liabilities, if any;
(vii) the ability of the Qualified Bidder to close the proposed Transaction;
(viii) the proposed closing date and the likelihood, extent, and impact of any
potential delays in closing;
(ix) any purchase price (or similar) adjustments;
(x) the impact of the Transaction on any actual or potential litigation; and
(xi) the net after-tax consideration to be received by the Debtors' estates.
If no Qualified Bid is received by the Third Party Bid Deadline, the Debtors may
determine not to conduct the Auction.
The Auction shall take place at 12:00 noon (prevailing Eastern time) on
August 21,2009, at the offices of the Debtors' special counsel, Morrison & Foerster LLP, at
1290 Avenue of the Americas, New York, New York 10104 or such later time on such day or
other place as the Debtors shall notify all Bidders who have submitted Qualified Bids. The
Auction shall be conducted according to the following procedures:
1. The Debtors Shall Conduct the Auction.
The Debtors and their professionals shall direct and preside over the Auction.
Qualified Bidders shall appear in person at the Auction, or through a duly authorized
representative.
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At the start of the Auction, the Debtors shall describe the terms of the Qualified
Bid serving as the baseline bid (the "Auction Baseline Bid").
All Bids made thereafter shall be Overbids (as defmed below), shall be made and
received on an open basis, and all material terms of each Overbid shall be fully disclosed to all
Bidders who have submitted Qualified Bids. The Debtors shall maintain a transcript or video
record of all bids made and announced at the Auction, including the Auction Baseline Bid and all
Overbids.
2. Terms of Overbids.
An "Overbid" is any bid made at the Auction subsequent to the Debtors'
announcement of the Auction Baseline Bid. To submit an Overbid for purposes of the Auction, a
Bidder must comply with the following conditions:
(i) Minimum Overbid Increment.
Any Overbid after the Auction Baseline Bid shall be made in $1 00,000
increments. Additional consideration over the amount set forth in the Auction Baseline Bid may
include only Qualified Consideration.
(ii) Remaining Terms are the Same as tor Qualified Bids.
An Overbid must comply with the conditions for a Qualified Bid set forth above
and shall constitute a Qualified Bid; provided, that the Third Party Bid Deadline shall not apply.
Any Overbid must remain open and binding on the Bidder until and unless the Debtors accept a
higher or otherwise better Overbid and subject to the procedures with respect to Backup Bids (as
described below).
To the extent not previously provided (which shall be determined by the Debtors),
a Bidder submitting an Overbid (other than any Bidder making a Credit Bid) must submit, as part
of its Overbid, written evidence (in the form of financial disclosure or credit-quality support
information or enhancement acceptable to the Debtors) demonstrating such Bidder's ability to
close the Transaction proposed by such Overbid.
(iii) Announcing Overbids.
The Debtors shall announce to each Qualified Bidder at the Auction the material
terms of each Overbid, and the current highest or otherwise best bid.
(iv) Consideration of Overbids.
The Debtors shall have the right to declare one or more adjournments in the
Auction. The Debtors may declare adjournments to, among other things: (1) facilitate
discussions between the Debtors and individual Bidders; (2) allow individual Bidders to consider
how they wish to proceed; and (3) give Bidders the opportunity to provide the Debtors with such
additional evidence as the Debtors may require that the Bidder has sufficient internal resources,
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#11310407 v3
or has received sufficient non-contingent debt or equity funding commitments, to consummate
the proposed Transaction at the prevailing Overbid amount.
3. Backup Bidder.
Notwithstanding anything in the Bidding Procedures to the contrary, if an Auction
is conducted, the party the Debtors determine to have the second highest or otherwise best
Qualified Bid at the Auction shall be required to serve as a backup bidder (the "Backup Bidder").
The Backup Bidder shall be required to keep its initial Qualified Bid (or if the Backup Bidder
submitted one or more Overbids at the Auction, its final Overbid) (the "Backup Bid") open and
irrevocable until the earlier of 5:00p.m. (prevailing Eastern time) on the date that is forty-five
( 45) days after the date of the Auction (the "Outside Backup Date") or the closing of the
transaction with the Successful Bidder.
If following the Sale Hearing the Successful Bidder fails to consummate an
approved transaction because of a breach or failure to perform on the part of such Successful
Bidder, the Debtors may designate the Backup Bidder to be the new Successful Bidder, and the
Debtors will be authorized (but not required) to consummate the transaction proposed in such
Backup Bid without further order of the Bankruptcy Court. In such case, the defaulting
Successful Bidder's Good Faith Deposit, if any, shall be forfeited to the Debtors, and the Debtors
specifically reserve the right to seek all available damages from the defaulting Successful Bidder.
The Good Faith Deposit of the Backup Bidder shall be held by the Debtors until the earlier of24
hours after (i) the closing of the transaction with the Successful Bidder and (ii) the Outside
Backup Date.
4. Additional Procedures.
The Debtors may armounce at the Auction additional procedural rules ~ . the
amount oftime to make subsequent Overbids) for conducting the Auction so long as the rules are
not inconsistent with these Bidding Procedures.
5. Consent to Jurisdiction as Condition to Bidding.
All Bidders at the Auction shall be deemed to have consented to the core
jurisdiction of the Bankruptcy Court and waived any right to a jury trial in connection with any
disputes relating to the Auction or the construction and enforcement of any Transaction
Documents.
6. Closing the Auction.
The Debtors shall continue the Auction until there is only one Third Party Bid that
is a Qualified Bid the Debtors determine in their sole discretion (after consultation with the DIP
Lenders and the Creditors' Committee) is the highest or otherwise best Qualified Bid at the
Auction (the "Winning Bid," and the Bidder submitting such Winning Bid, the "Winning
Bidder"). In making this decision, the Debtors shall consider, among other things, the Bid
Assessment Criteria. The Auction shall not close unless and until: (a) all Bidders who have
submitted Qualified Bids have been given a reasonable opportunity as determined by the Debtors
in their sole discretion, after consultation with the DIP Lenders and the Creditors' Committee, if
-6-
#11310407 v3
any, to submit an Overbid at the Auction to the then-existing Overbid; and (b) the Winning
Bidder has submitted fully executed transaction documents memorializing the terms of the
Winning Bid.
7.
Notwithstanding anything e Bidding Procedures to the contrary, in the vent
CreditBid ~
that secured creditors (any special entity that is an affiliate of existing secured creditors
specially formed for the purpose of effecting a Credit Bid, if any, the "Credit Bidder") opt to
submit a credit bid under Section 363(k) of the Bankruptcy Code for the Purchased Assets (a
"Credit Bid"), such Credit Bid must be (i) higher than the Winning Bid, (ii) duly authorized, (iii)
in writing and (iv) received by the Debtors on or before 7:00p.m. (prevailing Eastern time) on
August 24, 2009 (the "Credit Bid Deadline"). Notwithstanding this deadline, the Debtors'
secured creditors are not waiving their rights to credit bid pursuant to Section 363(k) at a later
time should this process fail.
At the Sale Hearing, the Debtors shall present either the Winning Bid or a Credit
Bid (the "Successful Bid" and the Bidder submitting the Successful Bid, the "Successful
Bidder") to the Bankruptcy Court for approval. The Debtors' presentation of the Successful Bid
to the Bankruptcy Court for approval does not constitute the Debtors' acceptance of the
Successful Bid. The Debtors shall have accepted a Successful Bid only when the Bankruptcy
Court has approved such Bid.
Procedures for Determining Cure Amounts and
Adeguate Assurance for Counterparties to Assumed Contracts
On or before twenty three (23) days before the Sale Hearing, the Debtors shall file
and serve by first class mail or hand delivery, a notice of potential assumption or assignment of
the Executory Contracts and Unexpired Leases (substantially in the form annexed to the Motion
as Exhibit C, the "Notice of Assumption and Assignment") on all non-Debtor parties to the
Executory Contracts and Unexpired Leases. The Notice of Assumption and Assignment shall
identify whether each Executory Contract or Unexpired Lease is a Purchased Asset and the
calculation of the cure amounts that the Debtors believe must be paid to cure all prepetition
defaults under the Executory Contracts and Unexpired Leases (the "Cure Amounts"). In
addition, if the Debtors identify additional executory contracts or unexpired leases that might be
assumed by the Debtors and assigned to the Successful Bidder not set forth in the original Notice
of Assumption and Assignment, the Debtors shall promptly file and send a supplemental notice
(a "Supplemental Notice of Assumption and Assignment") to the applicable counterparties to
such additional executory contracts and unexpired leases prior to the Sale Hearing.
Unless the non-Debtor party to an Executory Contract or Unexpired Lease files an
objection (the "Cure Amount/Assignment Objection") to (a) its scheduled Cure Amount or
(b) the proposed assumption or assignment of such Executory Contract or Unexpired Lease by
the later of (i) 4:00p.m. (prevailing Eastern time) on the date that is five (5) days before the Sale
Hearing or (ii) ten (1 0) days after service of the Supplemental Notice of Assumption and
Assignment (such later date, the "Cure Amount/Assignment Objection Deadline") and serves a
copy of the Cure Amount/Assignment Objection so as to be received no later than the Cure
-7-
#11310407 yJ
Amount/ Assignment Objection Deadline on the same day to: (a) Electroglas, Inc., 5729
Fontanoso Way, San Jose, CA 95138-1015 (Attn: Company Officer); (b) counsel to the Debtors,
Pepper Hamilton LLP, Hercules Plaza, Suite 5100, 1313 N. Market Street, P.O. Box 1709,
Wilmington, Delaware 19899-1709(Attn: David B. Stratton, Esq. and James C. Carignan, Esq.) ;
(c) special counsel to the Debtors, Morrison & Foerster LLP, 425 Market Street, San Francisco,
California 94105 (Attn: G. Larry Engel, Esq.), and Morrison & Forester LLP, 1290 Avenue of
the Americas, New York, New York 10019 (Attn: James J. DeCristofaro, Esq.); (d) co-counsel
to the DIP Lenders, Cozen O'Connor, Chase Manhattan Centre, 1201 North Market Street, Suite
1400, Wilmington, DE 19801 (Attn: Mark E. Felger, Esq.); and (e) co-counsel to the DIP
Lenders, Lovells LLP, 590 Madison Avenue, New York, New York 10022 (Attn: Christopher R.
Donoho III, Esq.); (f) counsel to the Creditors' Committee, Womble Carlyle Sandridge & Rice,
PLLC, 222 Delaware Avenue, Suite 1501, Wilmington, Delaware 19801 (Attn: Steven K.
Kortanek, Esq. and Matthew P. Ward, Esq.); and (g) the Office of the United States Trustee, 844
King Street, Room 2313, Wilmington, Delaware 19801 (Attn: Jane Leamy, Esq.), (collectively,
the "Notice Parties"), such non-Debtor party (i) will be forever barred from objecting to the Cure
Amount and from asserting any additional cure or other amounts with respect to such Executory
Contract or Unexpired Lease, and the Debtors shall be entitled to rely solely upon the Cure
Amount with respect to the pre-assumption period, and (ii) be deemed to have consented to the
assumption and assignment of such Executory Contract or Unexpired Lease, as the case may be,
and will be forever barred and estopped from asserting or claiming against the Debtor or the
Successful Bidder or any other assignee of the relevant Executory Contract or Unexpired Lease
that any additional amounts are due or monetary defaults exist, or conditions to assumption or
assignment must be satisfied, under such Executory Contract or Unexpired Lease, provided,
however, that any counterparty may raise at the Sale Hearing an objection to the assumption and
assignment of the Executory Contract or Unexpired Lease solely with respect to the Successful
Bidder's ability to provide adequate assurance of future performance.
Counterparties to Executory Contracts and Unexpired Leases shall have the
opportunity to object to the proposed assumption and assignment or Cure Amount proposed in a
Supplemental Notice of Assumption and Assignment within ten (1 0) days after receiving a
Supplemental Notice of assumption and assignment, and shall be heard at a hearing before the
Bankruptcy Court should the parties be unable to resolve the objection consensually.
If an objection challenges a Cure Amount, the objection must set forth the
prepetition cure amount being claimed by the objecting party (the "Claimed Cure Amount") with
appropriate documentation in support thereof. Upon receipt of an objection to a Cure Amount,
the Debtors may, in their sole discretion, hold an amount equal to the Claimed Cure Amount in
reserve pending further order of the Bankruptcy Court or agreement between the Debtors and the
objecting party. If the Debtors hold the Claimed Cure Amount in reserve, the Debtors may
assume and assign the contract that is the subject of an objection relating to its Cure Amount
without further delay.
The Debtors or the Successful Bidder, as the case may be, may determine to
exclude any Executory Contract or Unexpired Lease from the Jist of Purchased Assets at any
time before the conclusion of the Sale Hearing. The non-Debtor party or parties to any such
excluded contract or lease will be notified of such exclusion by the fastest means feasible and
reasonable under the circumstances, and by written notice.
-8-
#ll310407v3
av+- ?v. rJO P M C S 1
Sale Hearing
Th ptcy Court has scheduled a hearing (the "Sale Hearing") o n ~
August 26, 2009 tion with the approval of the transaction. Any objections to the sale of
the Purchased Assets to the Successful Bidder or Backup Bidder must be filed with the
Bankruptcy Court and served on the Service Parties so that they are actually received by no later
than 4:00p.m. (prevailing Eastern Time) on August 24,2009.
Return of Good Faith Deposit
The Good Faith Deposits of all Qualified Bidders required to submit a Good Faith
Deposit shall be held in one or more interest-bearing escrow accounts by the Debtors, but shall
not become property of the Debtors' estates unless forfeited according to these Bidding
Procedures or otherwise pursuant to further order of the Bankruptcy Court. The Good Faith
Deposits of any Qualified Bidder that is neither the Successful Bidder nor the Backup Bidder
shall be returned to such Qualified Bidder not later than 3 business days after the Sale Hearing.
The Good Faith Deposit of the Backup Bidder shall be returned to the Backup Bidder on the date
that is the earlier of [ ] hours after (i) the closing of the transaction with the Successful Bidder
and (ii) the Outside Backup Date. Upon the return of the Good Faith Deposits, their respective
owners shall receive any and all interest that will have accrued thereon. If the Successful Bidder
timely closes the winning transaction, its Good Faith Deposit may be credited towards its
purchase price.
Reservation of Rights
The Debtors reserve all rights to terminate the bidding process at any time if the
Debtors determine, in their business judgment, that the bidding process will not maximize the
value of the Debtors' bankruptcy estates. In addition, the Debtors reserve all rights not to submit
any bid that is not acceptable to the Debtors for approval to the Bankruptcy Court. The Debtors
shall further have the right to amend these bidding rules or impose such other terms and
conditions for the bidding process that the Debtors determine, in their sole business judgment,
are necessary to fulfill their fiduciary duties, provided that such modifications are not
inconsistent with any Bankruptcy Court order. Without limiting the generality of the foregoing,
the Debtors may reject at any time before entry of an order of the Bankruptcy Court approving a
Qualified Bid, any bid that, in the Debtors' sole discretion, is (i) inadequate or insufficient,
(ii) not in conformity with the requirements of the Bankruptcy Code or the Bidding Procedures,
or (iii) contrary to the best interests of the Debtors, their estates and their creditors.
-9-
#11310407 v3
EXHIBITC
Proposed Form of Asset Purchase Agreement
EXHIBITC
Notice of Auction and Sale Hearing
In re
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
Chapter 11
Case No. 09- 12416 (PJW)
ELECTROGLAS, lNC., et al.,
1
)
)
)
)
)
)
(Jointly Administered)
Debtors.
NOTICE OF AUCTION AND SALE HEARING
PLEASE TAKE NOTICE OF THE FOLLOWING:
1. On July 10, 2009, the Debtors filed a motion (the "Motion") for entry of an order,
among other things: (i) approving bidding procedures (the "Bidding Procedures") in connection
with the sale (the "Sale") of substantially all of the Debtors' assets (the "Purchased Assets") to
the bidder with the highest or otherwise best offer (the "Successful Bidder"); (ii) scheduling a
hearing (the "Sale Hearing") to consider the sale of the Purchased Assets and setting objection
and bidding deadlines with respect to the sale; (iii) approving the form and manner of notice of
the Auction on the Purchased Assets and the Sale Hearing; (iv) establishing deadlines by which
parties may object to the proposed assumption and assignment of executory contracts and
unexpired leases and assert claims for any cure amount; and (v) granting related relief.
2. The Debtors are seeking to sell the Purchased Assets to the Successful Bidder.
Approval of the sale of assets to the Successful Bidder may result in, among other things, the
assumption and assignment by the Debtors of certain executory contracts and leases. If you are a
party to an executory contract or lease with the Debtors, you will receive a separate notice that
contains relevant dates and other information that may impact you as a party to an executory
contract or lease.
3. On July 30,2009, the United States Bankruptcy Court for the District of Delaware
entered the Bidding Procedures Order. Pursuant to the Bidding Procedures Order, if the Debtors
receive any Qualified Bids (as defined in the Bidding Procedures), the Auction for the Purchased
Assets shall take place on August 21, 2009 at 12:00 noon (prevailing Eastern Time) at the
offices of Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York
10104. Only parties that have submitted a Qualified Bid in accordance with the Bidding
Procedures, attached to the Bidding Procedures Order as Exhibit A, by no later than August 19,
2009 at 12:00 noon (prevailing Eastern time) (the "Third Partv Bid Deadline"), may participate
at the Auction. Any party that wishes to take part in this process and submit a bid for the
Purchased Assets must submit their competing bid before the Third Party Bid Deadline and in
accordance with the Bidding Procedures.
The Debtors are Electroglas, Inc. ("Electroglas") and Electroglas International, Inc. ("Electroglas
International").
2
4. The Sale Hearing to consider approval of the Sale of the Purchased Assets to the
Successful Bidder free and clear of all liens, claims, and encumbrances will be held before the
Honorable Peter J. Walsh, United States Bankruptcy Judge, 824 North Market Street,
Wilmington, Delaware 19801 on August 26,2009 at 10:00 a.m. (prevailing Eastern time), or
at such other time as scheduled by the Bankruptcy Court. The Sale Hearing may be adjourned
from time to time without further notice to creditors or parties in interest other than by
announcement of the adjournment in open court on the date scheduled for the Sale Hearing.
5. Objections, if any, to the Sale, or to the relief requested in the Motion (other than
with respect to cure amounts and adequate assurance, which are subject to a separate notice, and
other than with respect to the Bidding Procedures, which have already been approved by the
Bankruptcy Court) must: (a) be in writing; (b) comply with the Bankruptcy Rules and the Local
Bankruptcy Rules; (c) be filed with the clerk of the Bankruptcy Court for the District of
Delaware, Third Floor, 824 Market Street, Wilmington, Delaware 19801, on or before 4:00 p.m.
(prevailing Eastern Time) on August 24, 2009, or such later date and time as the Debtors may
agree; and (d) be served so as to be received no later than 4:00p.m. (prevailing Eastern Time)
on the same day, upon (a) Electroglas, Inc., 5729 Fontanoso Way, San Jose, CA 95138-1015
(Attn: Company Officer); (b) counsel to the Debtors, Pepper Hamilton LLP, Hercules Plaza,
Suite 5100, 1313 N. Market Street, P.O. Box 1709, Wilmington, Delaware 19899-1709(Attn:
David B. Stratton, Esq. and James C. Carignan, Esq.); (c) special counsel to the Debtors,
Morrison & Foerster LLP, 425 Market Street, San Francisco, California 94105 (Attn: G. Larry
Engel, Esq.), and Morrison & Forester LLP, 1290 Avenue of the Americas, New York, New
York 10019 (Attn: James J. DeCristofaro, Esq.); (d) co-counsel to the DIP Lenders, Cozen
O'Connor, Chase Manhattan Centre, 1201 North Market Street, Suite 1400, Wilmington, DE
I 9801 (Attn: Mark E. Felger, Esq.); (e) co-counsel to the DIP Lenders, Lovells LLP, 590
Madison Avenue, New York, New York 10022 (Attn: Christopher R. Donoho III, Esq.);
(f) counsel to the Creditors' Committee, Womble Carlyle Sandridge & Rice, PLLC, 222
Delaware Avenue, Suite 1501, Wilmington, Delaware 19801 (Attn: Steven K. Kortanek, Esq.
and Matthew P. Ward, Esq.); and (g) the Office of the United States Trustee, 844 King Street,
Room 2313, Wilmington, Delaware 19801 (Attn: Jane Leamy, Esq.). UNLESS AN
OBJECTION IS TIMELY SERVED AND FILED IN ACCORDANCE WITH THIS NOTICE,
IT MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT AND THE
BANKRUPTCY COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION
WITHOUT FURTHER HEARING AND NOTICE.
6. This Notice and the Sale Hearing is subject to the terms and conditions of the
Motion, the Bidding Procedures Order, and the Bidding Procedures, which shall control in the
event of any conflict and the Debtors encourage parties in interest to review those documents in
their entirety. The Bidding Procedures do not impair the rights of secured creditors to credit bid.
Parties interested in receiving more information regarding the sale of the Purchased Assets or to
obtain a copy of any related document, subject to any necessary confidentiality agreement, may
make a written request to Morrison & Foerster LLP, 755 Page Mill Road, Palo Alto, California
94304-1018 (Attn: Justin Bastian), special counsel to the Debtors. In addition, copies ofthe
Motion, the Bidding Procedures Order and this Notice can be found on (a) the Bankruptcy
Court's website, www.deb.uscourts.gov; and (b) www.omnimgt.com/sblite/electroglas, and are
on file with the Clerk of the Bankruptcy Court, Third Floor, 824 Market Street, Wilmington,
Delaware 19801.
3
Dated: Wilmington, Delaware
July 30, 2009
David B. Stratton (DE No. 960)
James C. Carignan (DE No. 4230)
PEPPER HAMILTON LLP
Hercules Plaza, Suite 5100
1313 N. Market Street, P.O. Box 1709
Wilmington, Delaware 19899-1709
Tel.: (302) 777-6500
Fax: (302) 421-8390
Section 327(a) Counsel to the Debtors
-and-
MORRISON & FOERSTER LLP
G. Larry Engel
Vincent J. Novak
425 Market Street
San Francisco, California 94105
Telephone: ( 415) 268-7000
Facsimile: (415) 268-7522
MORRISON & FOERSTER LLP
James J. DeCristofaro
Samantha Martin
1290 Avenue of the Americas
New York, NY 10104
Telephone: (212) 468-8000
Facsimile: (212) 468-7900
Section 327(e) Counsel to the Debtors
4
EXHIBITD
Notice of Assumption and Assignment
In re
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
Chapter 11
Case No. 09- 12416 (PJW)
ELECTROGLAS, INC., et ill,
1
)
)
)
)
)
)
(Jointly Administered)
Debtors.
FIRST OMNIBUS NOTICE OF ASSUMPTION AND ASSIGNMENT
OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
TO: Parties listed on Exhibit A to this notice. If you received this notice. you should locate
your name and contract or lease listed on Exhibit A to this notice.
RE: Executory contracts and unexpired leases listed on Exhibit A.
1. On July 30, 2009, the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court") entered an order (the "Bidding Procedures Order") in the chapter 11
cases of the above-captioned debtors and debtors in possession (the "Debtors") approving,
among other things, the fixing of cure amounts (the "Cure Amounts") related to the Debtors'
assumption and assignment of certain executory contracts, unexpired leases, and other
agreements (the "Assumed Contracts") listed on Exhibit A annexed to this Notice in connection
with the sale of substantially all of the Debtors' assets (the "Purchased Assets"). The Debtors
will assume and assign the Assumed Contracts to the successful bidder for the Purchased Assets
(the "Successful Bidder") under the bidding procedures approved by the Bankruptcy Court and
attached to the Bidding Procedures Order as Exhibit A (the "Bidding Procedures"). IF YOU
RECEIVED THIS NOTICE, YOU SHOULD LOCATE YOUR NAME AND CONTRACT
OR LEASE LISTED ON EXHIBIT A TO THIS NOTICE.
2. The Debtors believe that any and all monetary defaults (other than the filing of
these chapter 11 cases) existing as of the date of assumption and assignment under the Assumed
Contracts can be cured by the payment of the Cure Amounts listed on Exhibit A annexed to this
Notice.
3. Any objections to (i) the assumption or assignment of an Assumed Contract, or
(ii) the amount asserted as the Cure Amount (each, a "Cure Amount/Assignment Objection"),
must be in writing and set forth with specificity the nature of the objection and the cure amount
that the objecting party believes should be paid in connection with the assumption of the Assumed
Contract (the "Claimed Cure Amount"). In addition, if the Debtors identify additional executory
The Debtors are Electroglas, Inc. ("Eiectroglas") and Electroglas International, Inc. ("Electroglas
International").
2
#11310407 v3
contracts or unexpired leases that might be assumed by the Debtors and assigned to the Successful
Bidder not set forth in the original Notice of Assumption and Assignment, the Debtors shall
promptly send a supplemental notice (a "Supplemental Notice of Assumption and Assignment")
to the applicable counterparties to the additional executory contracts and unexpired leases.
4. To be considered a timely Cure Amount/Assignment Objection, the Cure
Amount/Assignment Objection must be filed with the Bankruptcy Court and served upon
(a) Electroglas, Inc., 5729 Fontanoso Way, San Jose, CA 95138-1015 (Attn: Company Officer);
(b) counsel to the Debtors, Pepper Hamilton LLP, Hercules Plaza, Suite 5100, 1313 N. Market
Street, P.O. Box 1709, Wilmington, Delaware 19899-1709(Attn: David B. Stratton, Esq. and
James C. Carignan, Esq.); (c) special counsel to the Debtors, Morrison & Foerster LLP, 425
Market Street, San Francisco, California 94105 (Attn: G. Larry Engel, Esq.), and Morrison &
Forester LLP, 1290 Avenue of the Americas, New York, New York 10019 (Attn: James J.
DeCristofaro, Esq.); (d) co-counsel to the DIP Lenders, Cozen O'Connor, Chase Manhattan
Centre, 1201 North Market Street, Suite 1400, Wilmington, DE 19801 (Attn: Mark E. Felger,
Esq.); and (e) co-counsel to the DIP Lenders, Lovells LLP, 590 Madison Avenue, New York,
New York I 0022 (Attn: Christopher R. Donoho III, Esq.); (f) counsel to the Creditors'
Committee Womble Carlyle Sandridge & Rice, PLLC, 222 Delaware Avenue, Suite 1501,
Wilmington, Delaware 19801 (Attn: Steven K. Kortanek, Esq. and Matthew P. Ward, Esq.); and
(g) the Office of the United States Trustee, 844 King Street, Room 2313, Wilmington, Delaware
19801 (Attn: Jane Leamy, Esq.) (the "Objection Notice Parties"), by the later of (i) 4:00p.m.
(prevailing Eastern time) on August 19, 2009; or (ii) ten (10) days after service of the
Supplemental Notice of Assumption and Assignment.
5. If a Cure Amount/Assignment Objection is timely filed, a hearing with respect to
that objection shall be held before the Honorable Peter J. Walsh, United States Bankruptcy
Judge, United States Bankruptcy Court for the District of Delaware, 824 North Market Street,
Wilmington, DE 19801 at such date and time as the Debtors may schedule with the Bankruptcy
Court. A hearing regarding the Cure Amounts or disputed Claimed Cure Amounts, if any, for
any Assumed Contracts may be continued at the Debtors' sole discretion until after the Sale
closing.
6. Unless the Cure Amount/Assignment Objection is timely filed and served, the
assumption and assignment of the applicable Assumed Contract will proceed without further
notice at the hearing to approve the sale ofthe Purchased Assets.
7. Parties that fail to file and serve timely Cure Amount/Assignment Objections
shall be deemed to have waived and released any and all rights to assert against the Debtors or
the Successful Bidder cure amounts different from the Cure Amounts listed on Exhibit A annexed
to this Notice and shall be forever barred and estopped from asserting or claiming against the
Debtors or the Successful Bidder, or any assignee of any Assumed Contract that any additional
amounts are due or defaults exist, or prohibitions or conditions to assignment exist or must be
satisfied, under the Assumed Contract.
8. The Debtors or the Successful Bidder, as the case may be, may determine to
exclude any Executory Contract or Unexpired Lease from the list of Purchased Assets at any
time before the Sale Hearing. The non-debtor party or parties to any excluded contract or lease
3
#11310407 vJ
will be notified of the exclusion by written notice mailed within two (2) business days of the
determination.
9. If no Cure Amounts are due under an Assumed Contract, and the non-debtor party
to the Assumed Contract does not otherwise object to the Debtors' assumption and assignment of
the Assumed Contract, no further action need to be taken on the part of that non-debtor party.
10. Cure Amount/Assignment Objections that object solely to the Cure Amount may
not prevent or delay the Debtors' assumption and assignment of any Assumed Contract If a
party objects solely to a Cure Amount, the Debtors may, in their sole discretion, hold the
Claimed Cure Amount in reserve pending further order of the Bankruptcy Court or mutual
agreement of the parties. So long as the Debtors hold the Claimed Cure Amount in reserve, the
Debtors can, without further delay, assume and assign the Assumed Contract that is the subject
of the objection. At that point, the objecting party's recourse is limited to the funds held in
reserve.
II. Copies of the Bidding Procedures Order and other relevant documents are posted
on the Bankruptcy Court's website, www.deb.uscourts.gov, and the website of the Debtors'
claims and noticing agent, www.omnimgt.com/sblite/electroglas.
12. The Debtors' decision to assume and assign to the Successful Bidder the Assumed
Contracts is subject to Bankruptcy Court approval and the Sale closing. Accordingly, absent
such approval and closing, any of the Assumed Contracts shall not be deemed to be assumed and
assigned, and shall in all respects be subject to further administration under the Bankruptcy Code.
The inclusion of any document on the list of Assumed Contracts shall not constitute or be deemed
a determination or admission by the Debtors or the Successful Bidder that the document is, in
fact, an executory contract or unexpired lease within the meaning of the Bankruptcy Code (all
rights with respect thereto being expressly reserved).
4
#11310407 v3
Dated: Wilmington, Delaware
August 3, 2009
#11310407v3
5
David B. Stratton (DE No. 960)
James C. Carignan (DE No. 4230)
PEPPER HAMILTON LLP
Hercules Plaza, Suite 51 00
1313 N. Market Street, P.O. Box 1709
Wilmington, Delaware 19899-1709
Tel.: (302) 777-6500
Fax: (302) 421-8390
Section 327(a) Counsel to the Debtors
-and-
MORRISON & FOERSTER LLP
G. Larry Engel
Vincent J. Novak
425 Market Street
San Francisco, California 941 05
Telephone: ( 415) 268-7000
Facsimile: ( 415) 268-7522
MORRISON & FOERSTER LLP
James J. DeCristofaro
Samantha Martin
1290 Avenue of the Americas
New York, NY 10104
Telephone: (212) 468-8000
Facsimile: (212) 468-7900
Section 327(e) Counsel to the Debtors