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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

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In re ELECTROGLAS, INC., et al.,


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Chapter 11 Case No. 09-

L_)

(Joint Administration Pending)


Hearing Date: Objection Deadline:

Debtors.

MOTION OF THE DEBTORS AND DEBTORS-IN-POSSESSION FOR ENTRY OF AN ORDER ESTABLISHING PROCEDURES FOR THE REJECTION OF UNEXPIRED LEASES OF NONRESIDENTIAL REAL PROPERTY AND EXECUTORY CONTRACTS

The above captioned debtors and debtors-in-possession (the "Debtors") hereby respectfully move the Bankruptcy Court (the "Motion") for entry of an order (the "Order"), the proposed form of which is attached to this Motion as Exhibit A, pursuant to sections 365 and 554 of Title 11 of the United States Code (as amended, the ''Bankruptcy Code"), authorizing and approving procedures for the rejection of unexpired property leases and executory contracts, and in support of this 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.

157 and 1334(b). Venue is proper pursuant to 28 U.S.C. 1408 and 1409. This matter is a

core proceeding pursuant to 28 U.S.C. 157(b)(2). 2. The statutory predicates for the relief requested in this Motion are Bankruptcy

Code sections 105(a) and 331, Bankruptcy Rule 2016(a) and Local Rule 2016-2.

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

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Background

3.

On the date hereof (the "Petition Date"), the Debtors each filed a voluntary

petition 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 yet 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 herewith and which is respectfully incorporated into this Motion by reference. Additional facts in support of the specific relief sought in this Motion are set forth below.
Relief Requested and Authority for Requested Relief

7.

The Debtors are presently contemplating a sale of substantially all assets pursuant

to a "stalking horse" auction process, which will involve the assumption and assignment of certain executory contracts and unexpired leases that the ultimate purchaser of the Debtors'

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assets finds desirable. With respect to those leases and contracts that: (i) are not sought by the purchaser in the sale; and (ii) would not represent, going forward, a provident business decision by Debtors to continue performing in accordance with their respective terms, the Debtors seek to position themselves to move quickly to reject such leases and contracts, so as to minimize the administrative burdens of their estates attendant to obligations under sections 365(d)(3) and 503 of the Bankruptcy Code. 2 Accordingly, by this Motion, Debtors seek an Order authorizing and approving procedures for the rejection of unexpired leases and executory contracts. The Debtors request that the procedures enumerated below (the "Rejection Procedures") be approved in connection with the rejection of any executory contract, lease, sublease, or interest in such lease or sublease during the course of these chapter 11 cases: (a) The Debtors will file a notice to reject any such executory contract, lease,

sublease, or interest in such lease or sublease, pursuant to section 365 of the Bankruptcy Code (the "Notice") and will serve the Notice via overnight delivery service upon (i) the Office of the U.S. Trustee; (ii) counsel to the Official Committee of Unsecured Creditors (the "Creditors Committee") (if any); (iii) the contract counter-party or landlord(s) affected by the Notice; and (iv) any other party in interest to the executory contract or lease, including subtenants, if any, sought to be rejected by the Debtors (collectively, the "Service Parties"), advising such parties of the Debtors' intent to reject the specified executory contract, lease, sublease or interest, as well as deadlines and procedures for filing objections to the Notice (as set forth below). If the Notice is issued by the Debtors prior to the effective date of any plan, the affected executory contract,

Nothing herein should be interpreted as an admission or concession by Debtors that any administrative obligations are owed to contract counter-parties under Bankruptcy Code sections 365, 503 or otherwise, all of Debtors' rights, arguments and defenses with respect to claims based on such alleged obligations being expressly preserved.

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lease, sublease or interest in such lease or sublease shall be deemed to be subject to a motion to reject for all purposes. (b) The Notice shall set forth the following information, to the best of the

Debtors' knowledge, as applicable: (i) the street address of the real property underlying the lease and/or sublease, the interest in such personal property lease or sublease or the type of executory contract which the Debtors seek to reject; (ii) the name and address of the counter-party to the contract, landlord(s) and/or subtenant(s); (iii) a general description of the terms of the executory contract or lease; and (iv) a disclosure describing the procedures for filing objections, if any. (c) Should a party in interest object to the proposed rejection of an executory

contract, lease, sublease, or interest in such lease or sublease, such party must file and serve a written objection so that such objection is filed with the Court and is actually received by the following parties (collectively, the "Notice Parties") no later than ten (10) days after the date the Debtors serve the Notice: (i) counsel to the Debtors: Pepper Hamilton LLP, Hercules Plaza, Suite 5100, 1313 Market Street, P.O. Box 1709, Wilmington, DE 19899-1709, Attn: David B. Stratton, Esq. and James C. Carignan, Esq.; (ii) special counsel to the Debtors: Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104, Attn: James D. DeCristofaro, Esq.; (ii) counsel to the Creditors Committee, if any; and (iii) the Office of the U.S. Trustee. (d) Absent an objection being filed in compliance with subparagraph (c) of

this paragraph, the rejection of such executory contract, lease or sublease, or interest in such lease or sublease, shall become effective ten (1 0) days from the date the Notice was served on the Service Parties (the "Rejection Date") without further notice, hearing or order of this Court; provided, however, that with respect to leases or subleases for nonresidential real property, such

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rejection shall become effective on the later of (i) the Rejection Date or (ii) the date the Debtors unequivocally relinquish control of the premises to the affected landlord(s) by turning over the keys or "key codes" to the affected landlord(s) (the "NRP Lease Rejection Date"). (e) If a timely rejection is filed that cannot be resolved, the Court will

schedule a hearing to consider the objection only with respect to the rejection of any executory contract, lease, sublease or interest in such lease or sublease, as to which an objection is properly filed and served. If this Court upholds the objection vis-a-vis the effective date of rejection and determines the effective date of rejection of such executory contract, lease or sublease, or interest in such lease or sublease, the date shall be the rejection date. If the objection filed is overruled by the Court or withdrawn or the Court does not determine the date of rejection, the rejection date of such lease, sublease, or interest shall be deemed to have occurred on the Rejection Date or NRP Lease Rejection Date, as applicable.
(f)

If the Debtors have deposited monies with a lessor or contract counter

party as a security deposit or other arrangement, such lessor or contract counter party shall not be entitled to setoff or otherwise use such deposit without the consent of this Court. (g) With respect to any personal property of the Debtors located at any of the

premises subject to the Notice, the Debtors shall remove such property prior to the expiration of the period within which a party must file and serve a written objection pursuant to section (c) above. If the Debtors determine that the value of the property at a particular location has a de
minimis value or the cost of removing the property exceeds the value of such property, the

Debtors shall generally describe the property and their intention to abandon such property in the Notice and, absent a timely objection, the property will be deemed abandoned pursuant to section

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554 of the Bankruptcy Code, as is, where is, effective as of the date of the rejection of the underlying expired lease. 8. The Debtors further request that counter parties to executory contracts, leases,

subleases or interests in such leases or subleases, that are rejected according to the Rejection Procedures, be required to file a proof of claim relating to the rejection of such executory contract, lease, sublease or interest in such lease or sublease, if any, by the later of (i) the claims bar date, if any and (ii) thirty (30) days after the Rejection Date. 9. The Debtors submit that the Rejection Procedures are fair and reasonable and are

an efficient means for rejecting contracts, leases, subleases, and interests in leases and subleases. The Rejection Procedures will assist the Debtors in eliminating unnecessary post petition obligations while at the same time giving parties in interest adequate notice of lease and contract rejections and affording them an opportunity to object to such relief within a certain time period. 10. Adoption of the Rejection Procedures represents sound business judgment by the

Debtors and gives fair balance to the need of a lessor or contract counter party for certainty with the Debtors' need to move quickly and cut off the needless accrual of administrative rent and other post petition charges. 11. The Debtors are parties to a substantial number of leases and executory contracts.

The Debtors will continue to review such agreements and it is likely they will identify a number of agreements that will need to be rejected. Establishing the Rejection Procedures will minimize the Debtors' postpetition obligations and maximize the value of the Debtors' estates for the benefit of their creditors. The Rejection Procedures also give parties in interest the opportunity to appear and be heard with respect to the rejection of the leases and contracts. In addition, the Rejection Procedures will save the Debtors' estate substantial legal expense and Court time that

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would otherwise be incurred if hearings were held on separate motions with respect to every lease or contact the Debtors sought to reject. Similar rejection procedures have been approved by other courts. See e.g., In reNew Century TRS Holdings, Inc., Case No. 07-10416 (Bankr. D. Del. Apr. 24, 2007); In re Dura Automotive Sys., Inc., Case. No. 06-11202 (Bankr. D. Del. Dec. 22, 2002); In re Tower Automotive, Inc., Case No. 05-10578 (Bankr. S.D.N.Y. Mar. 14, 2005). 12. Accordingly, the Debtors believe the Court should approve the Rejection

Procedures as being in the best interests of the Debtors' estates and their creditors.
Notice

13.

Notice ofthis Motion has been provided to: (a) the Office ofthe 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; and (d) the Internal Revenue Service. As this Motion is seeking first day relief, notice of this Motion and any related order will be served as required by Local Rule 9013-l(m). In light of the relief requested in this Motion, no other or further notice is necessary or required. 14. The Debtors submit that 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.

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No Prior Request

15.

No prior motion for the relief requested in this Motion has been made to this or

any other court. WHEREFORE, the Debtors respectfully request that the Bankruptcy Court: (a) enter an order substantially in the form annexed hereto as Exhibit A, granting the relief requested in this Motion; and (b) grant such other and further relief as the Bankruptcy Court may deem just and proper. Dated: July 9, 2009 Wilmington, Delaware Respectfully submitted,

Proposed counsel to 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 GRANTING MOTION OF THE DEBTORS AND DEBTORS-IN-POSSESSION FOR ENTRY OF AN ORDER ESTABLISHING PROCEDURES FOR THE REJECTION OF UNEXPIRED LEASES OF NONRESIDENTIAL REAL PROPERTY AND EXECUTORY CONTRACTS UPON THE MOTION of the Debtors and Debtors-In-Possession (the "Debtors") for Entry of an Order Establishing Procedures for the Rejection of Unexpired Leases of Nonresidential Real Property and Executory Contracts (the "Motion"), and this Court possessing jurisdiction to consider the Motion, and venue being proper, and notice of the Motion having been adequate, and having considered the Motion and all papers related thereto heretofore filed, and the relief requested in the Motion being warranted; it is hereby ORDERED, that the Motion is granted in its entirety; and it is further ORDERED, that the following procedures shall govern the rejection of unexpired leases of property and executory contracts, which procedures are approved in all respects: (a) The Debtors will file a notice to reject any such executory contract, lease,

sublease, or interest in such lease or sublease, pursuant to section 365 of the Bankruptcy Code (the "Notice") and will serve the Notice via overnight delivery service upon (i) the Office of the U.S. Trustee; (ii) counsel to the Official Committee of Unsecured Creditors (the "Creditors

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

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Committee") (if any); (iii) the contract counter-party or landlord(s) affected by the Notice; and (iv) any other party in interest to the executory contract or lease, including subtenants, if any, sought to be rejected by the Debtors (collectively, the "Service Parties"), advising such parties of the Debtors' intent to reject the specified executory contract, lease, sublease or interest, as well as deadlines and procedures for filing objections to the Notice (as set forth below). If the Notice is issued by the Debtors prior to the effective date of any plan, the affected executory contract, lease, sublease or interest in such lease or sublease shall be deemed to be subject to a motion to reject for all purposes. (b) The Notice shall set forth the following information, to the best of the Debtors'

knowledge, as applicable: (i) the street address of the real property underlying the lease and/or sublease, the interest in such personal property lease or sublease or the type of executory contract which the Debtors seek to reject; (ii) the name and address of the counter-party to the contract, landlord(s) and/or subtenant(s); (iii) a general description of the terms of the executory contract or lease; and (iv) a disclosure describing the procedures for filing objections, if any. (c) Should a party in interest object to the proposed rejection of an executory

contract, lease, sublease, or interest in such lease or sublease, such party must file and serve a written objection so that such objection is filed with the Court and is actually received by the following parties (collectively, the "Notice Parties") no later than ten (10) days after the date the Debtors serve the Notice: (i) counsel to the Debtors: Pepper Hamilton LLP, Hercules Plaza, Suite 5100, 1313 Market Street, P.O. Box 1709, Wilmington, DE 19899-1709, Attn: David B. Stratton, Esq. and James C. Carignan, Esq.; (ii) special counsel to the Debtors: Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104, Attn: James D.

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DeCristofaro, Esq.; (ii) counsel to the Creditors Committee, if any; and (iii) the Office of the U.S. Trustee. (d) Absent an objection being filed in compliance with subparagraph (c) of

this paragraph, the rejection of such executory contract, lease or sublease, or interest in such lease or sublease, shall become effective ten (1 0) days from the date the Notice was served on the Service Parties (the "Rejection Date") without further notice, hearing or order of this Court; provided, however, that with respect to leases or subleases for nonresidential real property, such rejection shall become effective on the later of (i) the Rejection Date or (ii) the date the Debtors unequivocally relinquish control of the premises to the affected Jandlord(s) by turning over the keys or "key codes" to the affected landlord(s) (the "NRP Lease Rejection Date"). (e) If a timely rejection is filed that cannot be resolved, the Court will

schedule a hearing to consider the objection only with respect to the rejection of any executory contract, lease, sublease or interest in such lea$e or sublease, as to which an objection is properly filed and served. If this Court upholds the objection vis-a-vis the effective date of rejection and determines the effective date of rejection of such executory contract, lease or sublease, or interest in such lease or sublease, the date shall be the rejection date. If the objection filed is overruled by the Court or withdrawn or the Court does not determine the date of rejection, the rejection date of such lease, sublease, or interest shall be deemed to have occurred on the Rejection Date or NRP Lease Rejection Date, as applicable. (f) If the Debtors have deposited monies with a lessor or contract counter

party as a security deposit or other arrangement, such lessor or contract counter party shall not be entitled to setoff or otherwise use such deposit without the consent of this Court.

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(g)

With respect to any personal property of the Debtors located at any of the

premises subject to the Notice, the Debtors shall remove such property prior to the expiration of the period within which a party must file and serve a written objection pursuant to section (c) above. If the Debtors determine that the value of the property at a particular location has a de
minimis value or the cost of removing the property exceeds the value of such property, the

Debtors shall generally describe the property and their intention to abandon such property in the Notice and, absent a timely objection, the property will be deemed abandoned pursuant to section 554 of the Bankruptcy Code, as is, where is, effective as of the date of the rejection of the underlying expired lease. (h) Counter parties to executory contracts, leases, subleases or interests in

such leases or subleases, that are rejected according to the Rejection Procedures shall file a proof of claim relating to the rejection of such executory contract, lease, sublease or interest in such lease or sublease, if any, by the later of (i) the claims bar date, if any and (ii) thirty (30) days after the Rejection Date; and it is further ORDERED, that the Bankruptcy Court shall retain exclusive jurisdiction to enforce the terms ofthis Order. Dated: _ _ _ _ _ _, 2009

UNITED STATES BANKRUPTCY JUDGE

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