UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

) ) ) ) ) )

In re ELECTROGLAS, INC., et al., 1 Debtors.

Chapter 11 Case No. 09-

(_)

(Joint Administration Pending)

MOTION OF THE DEBTORS FOR AN ORDER AUTHORIZING (I) CONTINUED MAINTENANCE OF EXISTING BANK ACCOUNTS; (II) CONTINUED USE OF EXISTING CASH MANAGEMENT SYSTEM; (III) CONTINUED USE OF EXISTING CHECKS AND BUSINESS FORMS; AND (IV) WAIVER OF INVESTMENT AND DEPOSIT REQUIREMENTS

The Debtors hereby move the Bankruptcy Court (the "Motion") for entry of an order, the proposed form of which is attached to this Motion as Exhibit A (the "Order"), pursuant to sections 105(a), 345(b) and 363(c) ofthe Bankruptcy Code, that authorizes: (a) the continued maintenance of existing bank accounts; (b) the continued use of the Debtors' existing cash management system; (c) the continued use of the Debtors' existing business forms; and (d) the waiver of investment and deposit requirements. In support of the Motion, the Debtors respectfully represent as follows:
Jurisdiction, Venue & Statutory Predicate

1.

The Bankruptcy Court has jurisdiction over this matter pursuant to 28 U.S.C.

1334(b). Venue is proper pursuant to 28 U.S.C. 1408 and 1409. This matter is a core proceeding within the meaning of28 U.S.C. 157(b)(2). 2. The statutory predicates for the relief requested in this Motion are sections 105(a),

345(b) and 363(c) ofthe Bankruptcy Code.

The Debtors are Electroglas, Inc. (EIN 77-0336101) and Electroglas International, Inc. (EIN 77-0345011).

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Background
A.

Commencement of Cases 3. On the date hereof (the "Petition Date"), the Debtors filed their respective

voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 ofthe Bankruptcy Code. 4. No creditors' committee has been appointed in these cases. No trustee or

examiner has been appointed. 5. The Debtors supply semiconductor manufacturing test equipment and software to

the global semiconductor industry, and have been in the semiconductor equipment business for more than 40 years. The Debtors' installed customer base is one of the largest in the industry, as the Debtors have sold to date more than 16,500 units of one of their core products, the "wafer prober" (and its related operating system). The Debtors' other major source of revenue comes from their business of designing, manufacturing, selling and supporting motion control systems for advanced technologies. 6. A full description of the Debtors' business operations, corporate structures, capital

structures, and reasons for commencing these cases is set forth in full detail in the Affidavit of Thomas Brunton in Support of Chapter 11 Petitions and First Day Relief, which was filed contemporaneously with this Motion and which is incorporated in this Motion by reference. Additional facts in support of the specific relief sought in this Motion are set forth below.

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B.

The Debtors' Bank Accounts and Cash Management System 7. The Debtors maintain a system of checking, money market, concentration and

disbursement accounts (attached to this Motion as Exhibit B, the "Accounts") and have established local banking relationships in each country where they conduct business. 8. Electroglas maintains several money market accounts at Comerica Bank

("Comerica") and one at Provident Bank ("Provident"). Electroglas uses the Comerica Accounts as its primary accounts (subject to any applicable restrictions) and uses the Provident Account in order to obtain a better interest rate on funds in excess of its immediate liquidity requirements. Funds are typically moved between the Provident Account and the Comerica Accounts as business needs dictate. 9. The Debtors' cash management system has been designed to: (a) provide an

efficient method of collecting, transferring and disbursing funds; (b) establish procedures and controls to account for funds in an accurate manner; and (c) enable the Debtors to meet their financial obligations. The Debtors maintain up-to-date and accurate accounting records of daily cash transactions, and the preservation of their cash management system will prevent undue disruption to the Debtors' business operations, while protecting the Debtors' cash for the benefit of the estates. All funds received or disbursed are properly reflected on the Debtors' books and records. 10. The Debtors' cash activities are tracked and managed through the Debtors' online

banking systems. These systems enable real-time account inquiry and money transfer activity. The Debtors' accounting department is primarily responsible for the Debtors' cash account activity. The accounting department is also responsible for identifying the Debtors' daily liquidity requirements and for projecting future liquidity requirements by utilizing cash flow

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projection analysis to track the Debtors' immediate and projected cash position. This analysis is used by the Debtors' executive management as a monitoring tool to track and account for expense ("Outflow") and income ("Inflow") transactions. While the Debtors' cash management system is complex, it can generally be described by organizing the main cash flow into the following categories. a.

Outflow Transactions Wire Transfer: All outgoing wire transfers are generally routed through the bank supporting the activities and must be approved by an authorized signer. Checks: All checks are prepared by Debtors' accounting staff using processes that ensure that appropriate controls are used.

b.

Inflow Transactions
Inflows or incoming wire transfers are generally routed through Electroglas' Comerica operations account or Electroglas International's CIC Lyonnaise account. The Accounting Group monitors the incoming wire amounts on a daily basis and credits the appropriate account upon receipt.

11.

In May 2009, the Debtors began the process of closing their non-U.S. operations.

Before the Petition Date, some cash flowed to the Debtors from their non-U.S. operations (e.g., in respect of accounts receivable collected by the foreign offices and then remitted to the Debtors), but the majority of the cash flow was in the other direction: cash primarily flowed from the U.S. offices to the non-U.S. offices to fund the foreign operations. 12. However, as of the Petition Date, the Debtors stopped all transfers to their non-

U.S. operations to preserve their limited cash resources for the benefit of all creditors. Currently, cash continues to flow from the non-U.S. offices to the U.S. offices as the foreign offices collect

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accounts receivable; however, once those foreign offices close, the accounts receivable will be sent directly to the Debtors. 13. The Debtors expect to receive additional cash into the estates to the extent that

there are funds remaining in foreign accounts after the non-U.S. operations close and wind up. However, where the closure of non-U.S. operations has left a deficit or a zero balance, the Debtors do not expect to fund those operations postpetition without advance approval from the Bankruptcy Court or to otherwise receive additional funds into the estates. Relief Requested 14. The Debtors request that the Bankruptcy Court enter an order authorizing: (a) the

continued maintenance of existing bank accounts; (b) the continued use of their existing cash management system; (c) the continued use of their existing checks and business forms; and (d) waiver of the investment and deposit requirements of section 345(b) of the Bankruptcy Code for cause. Basis for Relief 15. The Office of the United States Trustee for the District of Delaware has

established operating guidelines (the "Operating Guidelines") for debtors in possession. The Operating Guidelines provide that chapter 11 debtors must: (a) close all existing bank accounts and open new debtor in possession bank accounts; (b) establish a single debtor in possession account for all estate monies required for the payment of taxes, including payroll taxes; (c) maintain a separate debtor in possession account for cash collateral; and (d) acquire new checks for all debtor in possession accounts which bear the designation "Debtor In Possession," the bankruptcy case number, and the type of account. However, the Debtors respectfully request that they be granted authority to: (a) maintain their existing Accounts to ensure the uninterrupted

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conduct of the Debtors' businesses; (b) continue using their existing cash management system to preserve costs to the Debtors' estates and ensure efficient operation of the Debtors' businesses; (c) maintain use of their existing business forms in the ordinary course of business to minimize disruption to the Debtors' businesses and cost to the Debtors' estates; and (d) continue operating under their current deposit system and investment guidelines to further the Debtors' goal of maximizing value of the estates. 16. The reliefrequested in this Motion is authorized by Rule 2015-2 ofthe Local

Rules of Practice and Procedure for the United States Bankruptcy Court for the District of Delaware (the "Local Rules"). Furthermore, in other chapter 11 cases, courts have routinely authorized relief similar to that requested in this Motion. See, e.g., In re Badanco Acquisition
LLC, Case No. 09-11638 (CSS) (Bankr. D. Del. May 13, 2009); In re White Energy, Inc., Case

No. 09-11601 (CSS) (Bankr. D. Del. May 12, 2009); In re Broadstripe, LLC, Case No. 09-10006 (CSS) (Bankr. D. Del. Jan. 6, 2009). It is therefore appropriate for the Bankruptcy Court to grant the relief requested by this Motion.
A.

The Debtors Should Be Granted Authority to Maintain Their Existing Bank Accounts 17. The Debtors ask that the Bankruptcy Court waive the requirements of the

Operating Guidelines to the extent those guidelines require the Debtors to open new bank accounts and close their existing accounts. The Operating Guidelines would likely cause substantial disruption to the Debtors' businesses. The Debtors' Accounts are crucial elements of an established cash management system that the Debtors must maintain to ensure the uninterrupted conduct of their businesses. Thus, to ensure the Debtors' continued operations during the pendency of a sale or a potential reorganization, it is in the best interest of the estates and the creditors that the Debtors be allowed to continue to maintain their existing Accounts.

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18.

Accordingly, the Debtors request that their existing Accounts be deemed debtor in

possession accounts and that the maintenance and continued use of the Accounts, in the same manner and with the same account numbers, styles, and document forms as those employed during the prepetition period, be authorized, subject to a prohibition against honoring prepetition payments without specific authorization from the Bankruptcy Court. 19. If the relief requested in this Motion is granted, the Debtors will not pay, and will

instruct each of the banks at which the Accounts are maintained not to pay, any debts incurred before the Petition Date except as otherwise authorized by the Bankruptcy Court. B. The Debtors Should Be Authorized to Continue Using Their Existing Cash Management System 20. The cash management procedures employed by the Debtors constitute customary

and essential business practices. The cash management system provides significant benefits to the Debtors, including the ability to: (a) control corporate funds centrally; (b) ensure availability of funds when necessary; and (c) reduce administrative expenses by enabling the movement of funds among relevant entities. 21. The smooth operation of the Debtors' businesses requires that the cash

management system continue during the pendency of these chapter 11 cases. Any new, segmented cash management systems would be costly, would likely create unnecessary administrative and other problems, and would be more disruptive than productive. That type of disruption could adversely affect the Debtors' ability to operate. Therefore, maintenance of the existing cash management system is both essential and in the best interests of all creditors and other parties in interest. 22. The Debtors' cash management system includes the necessary accounting

controls to enable the Debtors, and other interested parties in these cases, to trace funds through

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the system and ensure that all transactions are adequately documented and readily ascertainable. The Debtors will continue to maintain detailed records reflecting all transfers of funds. 23. The Debtors request that all banks at which their existing Accounts are

maintained be authorized and directed to continue to administer those Accounts in the same manner as they were maintained prepetition, without interruption and in the usual and ordinary course, and to pay any and all checks, drafts, wires and Automated Clearing House transfers issued on those Accounts with respect to any claims arising on or after the Petition Date so long as sufficient funds are in the Debtors' Accounts. 24. The Debtors request that: (a) the banks be authorized and directed to honor all

representations from the Debtors concerning which checks should be honored or dishonored; and (b) any final payment made by a bank at which the Debtors' maintained an account before the Petition Date (including any Automated Clearing House transfer the banks are or become obligated to settle) against any of the Debtors' Accounts shall be deemed to be paid prepetition, whether or not actually debited from the Debtors' Accounts prepetition. To the extent that the Debtors have directed that any prepetition checks be dishonored, they reserve the right to issue replacement checks to pay the amounts related to those dishonored checks, consistent with the orders of the Bankruptcy Court. 25. The relief requested in this Motion is fully appropriate and supported by ample

authority in this and other courts. Indeed, a debtor's continued use of a centralized cash management system has been recognized as fully consistent with section 363(c)(l) ofthe Bankruptcy Code, which allows a debtor in possession to use property of the estate in the ordinary course ofbusiness. See Charter Co. v. Prudential Ins. Co. of Am. (In reCharter Co.), 778 F.2d 617, 620 (11th Cir. 1985) (debtors authorized to "continue to consolidate the

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management of their cash as has been usual and customary in the past, and to transfer monies from affiliated entity to entity, including operating entities that are not debtors herein" (citation omitted)). C. The Debtors Should Be Authorized to Continue Using Their Existing Business Forms 26. The Debtors use a variety of checks and other pre-printed business forms

(collectively, the "Business Forms") in the ordinary course oftheir businesses. Because ofthe nature and scope of the Debtors' business operations it is important that the Debtors be permitted to continue to use their Business Forms without alteration or change. To avoid disruption of the cash management system and unnecessary expense, the Debtors request that they be allowed to continue to use their Business Forms substantially in the forms existing immediately before the Petition Date, without reference to their status as debtors in possession; provided, however, that (a) once the Debtors' existing check stock has been used, any future checks ordered by the Debtors will include the legend "Debtor in Possession" and (b) as soon as reasonably practicable, the Debtors will cause the phrase "Debtor in Possession" to be included on their blank check stock. In the absence of such relief, the estates will be required to bear a potentially significant administrative burden and expense, which is unwarranted and likely will have little or no attendant benefit to their estates or creditors under the facts of these cases. D. The Debtors Should Be Granted Authority to Continue Operating Under their Current Deposit System and Investment Guidelines 27. Section 345(a) of the Bankruptcy Code permits debtors to deposit or invest the

money of a bankruptcy estate in a manner that will "yield the maximum reasonable net return on such money, taking into account the safety of such deposit or investment." 11 U.S.C. 345(a). To the extent deposits or investments are not "insured or guaranteed by the United States or by a department, agent or instrumentality of the United States or backed by the full faith and credit of

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the United States," section 345(b) of the Bankruptcy Code requires that a debtor obtain from the entity with which the money is deposited: (a) a bond in favor of the United States secured by the undertaking of an adequate corporate surety; or (b) a deposit of certain governmental securities. 11 U.S.C. 345(b). 28. However, a court is authorized to relieve a debtors in possession of the deposit

and investment restrictions "for cause." 11 U.S.C. 345(b)(2). Here, the Debtors are sophisticated companies with a complex cash management system. Moreover, the benefits to the Debtors of waiving the section 345(b) requirements outweigh any potential harm to their estates, and the failure to waive the requirements may needlessly impair the Debtors' goal of maximizing the value of the estates. 29. The financial institutions at which the Debtors maintain their Accounts are FDIC

insured (up to an applicable unit per account). Upon information and belief, Comerica Bank has already agreed with the Office of the United States Trustee to collateralize all debtor in possession accounts with government securities, but Provident Bank has not entered into any similar agreement. Pursuant to this Motion, Debtors are seeking an interim 60 day limited waiver of the section 345 requirements as it applies to the Accounts, to provide Debtors an opportunity to present a form of collateralization agreement to Provident that is acceptable to the UST's Office. In addition, Provident is a federally insured institution. 30. All deposits in Debtors' Accounts are prudent and designed to yield the maximum

reasonable net return on the funds invested. Thus, good cause exists to waive the investment and deposit restrictions under section 345(b) of the Bankruptcy Code on an interim basis to the extent that the Debtors' cash management and other Accounts do not comply. See In re Serv. Merch.

Co., 240 B.R. 894, 896-97 (Bankr. M.D. Tenn. 1999).

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Notice
31. Notice of this Motion has been provided to: (a) the Office of the United States

Trustee for the District of Delaware; (b) the creditors holding the 20 largest unsecured claims against the Debtors, as identified in the Debtors' respective chapter 11 petitions; (c) Lovells, 590 Madison Avenue, New York, NY 10022 (Attn: Christopher R. Donoho III, Esq.), counsel to bondholder group for the 6.25% Convertible Senior Subordinated Secured Notes due 2027; (d) the Internal Revenue Service; and (e) the banks holding the Debtors' Accounts. As this Motion is seeking first day relief, notice of this Motion and any order entered hereon will be served as required by Local Rule 9013-1 (m). In light of the relief requested in this Motion, the Debtors submit that no other or further notice need be provided. 32. This Motion does not contain any novel issues of law requiring briefing.

Therefore, pursuant to Rule 7 .1.2 of the Local Rules of Civil Practice of the United States District Court for the District of Delaware, as amended from time to time (the "Local District Court Rules"), as incorporated by reference into Local Rule 1001-1 (b), the Debtors respectfully request that the Bankruptcy Court set aside the briefing schedule set forth in Rule 7.1.2(a) ofthe Local District Court Rules.

No Prior Reguest
33. No prior motion for the relief requested in this Motion has been made to this or

any other court.

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WHEREFORE, the Debtors respectfully request that the Bankruptcy Court enter an order (a) authorizing the continued maintenance of existing bank accounts, (b) authorizing the continued use of their existing cash management system, (c) authorizing the continued use of their existing Business Fonns; (d) waiving the investment and deposit guidelines of section 345(b) ofthe Bankruptcy Code, and (e) granting such other and further relief in favor ofthe Debtors as the Bankruptcy Court deems just and proper. 2009 Dated: July Wilmington, Delaware Respectfully submitted,

Proposed Attorneys for the Debtors

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EXHIBIT A

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re ELECTROGLAS, INC., et al.,

1

Debtors.

) ) ) ) )

Chapter 11 Case No. 09-

(_)

(Joint Administration Pending)

ORDER AUTHORIZING (I) CONTINUED MAINTENANCE OF EXISTING BANK ACCOUNTS; (II) CONTINUED USE OF EXISTING CASH MANAGEMENT SYSTEM; (III) CONTINUED USE OF EXISTING CHECKS AND BUSINESS FORMS; AND (IV) WAIVER OF INVESTMENT AND DEPOSIT REQUIREMENTS
THIS MATTER having come before the Bankruptcy Court upon the motion (the "Motion")2 of the Debtors for entry of an order authorizing: (a) the continued maintenance of the Debtors' existing bank accounts; (b) the continued use of the Debtors' existing cash management system; (c) the continued use of the Debtors' existing checks and business forms; and (d) the waiver of certain investment and deposit requirements; and the Bankruptcy Court having found that: (a) it has jurisdiction over the matters raised in the Motion pursuant to 28 U.S.C. 157 and 1334(b); (b) this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); (c) venue is lying properly with the Bankruptcy Court; (d) the relief requested in the Motion is in the best interests of the Debtors, their estates and their creditors; (e) proper and adequate notice of the Motion and the hearing on the Motion has been given and that no other or further notice is necessary or required; and (f) upon the record and after due deliberation, good and sufficient cause exists for the granting of the relief as set forth in this Order; it is hereby

The Debtors are Electroglas, Inc. (EIN 77-0336101) and Electroglas International, Inc. (EIN 77-0345011).

Capitalized terms used but not otherwise defined in this Order shall have the meanings ascribed to them in the Motion.

ORDERED, that the Motion is granted in its entirety; and it is further ORDERED, that the Debtors are authorized to continue to use their existing cash management system, including without limitation the continued use of their existing Accounts with the same names and account numbers as existed immediately before the Petition Date; and it is further ORDERED, that the Debtors are authorized to deposit funds in and withdraw funds from the Accounts by all usual means, including, but not limited to, checks, wire transfers, electronic funds transfers and other debits, and to otherwise treat the prepetition Accounts for all purposes as debtor in possession accounts; and it is further ORDERED, that all banks where the Debtors maintain the Accounts are authorized and directed to continue to maintain, service and administer the Accounts, except that those banks shall not be authorized to honor any check issued or dated before the Petition Date absent an order of the Bankruptcy Court and direction from the Debtors to honor such checks. Those banks shall have no liability to any party for relying on the directions of the Debtors as provided in this Order, so long as such reliance was in good faith; and it is further ORDERED, that the Debtors are authorized to continue using their existing Business Forms, which forms shall not be required to include the legend "Debtor in Possession" or other similar legend; and it is further ORDERED, that the Debtors are authorized to continue using their existing check stock; provided, however, that upon depletion of the Debtors' check stock or business form stock, the Debtors are directed to obtain new check stock or business form stock (as the case may be) reflecting their status as debtors in possession; and it is further ORDERED, that the Debtors are authorized, for a period of 60 days from the Petition

Date, to invest and deposit funds in accordance with their prepetition investment practices, notwithstanding that certain of such practices may not strictly comply in all respects with the investment guidelines expressly set forth in section 345 ofthe Bankruptcy Code. If the Debtors determine that some accounts or deposits will not comply with the requirements of section 345 within the stated 60 day period, the Debtors may request further consideration of the relief requested in this Motion pertaining to modification of the section 345 requirements; and it is further ORDERED, that for banks at which the Debtors hold accounts that are party to a Uniform Depository agreement with the Office of the United States Trustee for the District of Delaware, within fifteen (15) days from the date of entry of this Order the Debtors shall (a) contact each bank, (b) provide the bank with each of the Debtors' employer identification numbers, and (c) identify each of their accounts held at such banks as being held by a debtor in possession; and it is further ORDERED, for banks that are not party to a Uniform Depository Agreement with the Office of the United States Trustee for the District of Delaware, the Debtors shall use their goodfaith efforts to cause the bank to execute a Uniform Depository agreement in a form prescribed by the Office of the United States Trustee within sixty (60) days of the date of entry of this Order; and it is further ORDERED, that all applicable banks and other financial institutions are authorized to accept and hold or invest funds, at the Debtors' direction, in accordance with the Debtors' prepetition investment practices; and it is further ORDERED, that the Debtors, their officers, employees and agents are authorized to take or refrain from taking such acts as are necessary and appropriate to implement and effectuate the

relief granted in this Order without further order of the Bankruptcy Court; and it is further ORDERED, that the Bankruptcy Court shall retain exclusive jurisdiction to enforce the terms of this Order. Dated: July_, 2009

UNITED STATES BANKRUPTCY JUDGE

EXHIBIT B

Electroglas, Inc. et. al.

Electroglas Entity 1 Bank
Bank of America**

Type of Account2
Concentration Account (no longer used) Money Market Account Comerica Operating Account Restricted Money Market Account
AlP Checking Account

Account Numbers

1 2 3 4 5 6 7 8 9 10

EGI EGI EGI EGI EGI EGI Ell (France) Ell (France) GmbH GmbH

1486000751 1893953107 1892628643 1892628650 1893953198 1893953180 18540 000140097 01 18541 000140097 02 36442921 848729400 848709832 23642 052-01-070195300

Comerica Comerica Comerica

Comerica Comerica CIC Lyonnaise** CIC Lyonnaise** Hypo V ereinsbank * * HypoVereinsbank** Hypo Vereinsbank* * Provident (Black Rock) Taishin International Bank, Hsinchu Science Park Branch** Taishin International Bank, Hsinchu Science Park Branch**

Payroll Checking Account USD USD Euro USD Capital Euro Money Market Account TWD Savings Account

11 GmbH 12 13
EGI Ell (Taiwan)

14

Ell (Taiwan)

TWO Current Account

052-20-070195000

The following abbreviations are used in this column: Electroglas, Inc. ("EGI"), Electroglas International, Inc. ("Eli"), Electroglas GmbH ("GmbH"), Electroglas Private Limited (Singapore PTE Ltd) ("EPL"), Electroglas Far East Holding Co. ("EFEHC") To the extent the funds held by the Debtors are maintained in an escrow or custodial account, those funds will continue to be treated as escrow or custodial monies.
2

** The Debtors expect to close these bank accounts as soon as reasonably practicable after the corresponding foreign office shuts down and the related operations are fully wound up.

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Ell (Taiwan) EPL EPL EFEHC EFEHC

Taishin International Bank, Hsinchu Science Park Branch** Standard Chartered** Standard Chartered** ShanghaiPudong Development Bank** ShanghaiPudong Development Bank**

USD Savings Account

052-75-000217300

16 17 18 19

Singapore currency for local disbursements USD for funding Singapore operations Chinese currency for local disbursements USD for funding Chinese operations

03-0-170307-8 03-7-900055-5 07636397080155300002945 07637698860155300001128