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Archive for May 21st, 2014

 

Sale of ClearEdge Power, Inc.

Further to Gerbsman Partners emails of May, 14, 2014 and May 1, 2014, regarding the sale of Assets and Intellectual Property of ClearEdge Power, Inc. (“ClearEdge”), ClearEdge and two of its subsidiaries (collectively, “ClearEdge Power”) filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”) in the United States Bankruptcy Court for Northern District of California, San Jose Division (such cases are jointly administered under Case No. 14-51955)

Gerbsman Partners – http://gerbsmanpartners.com – has been retained by ClearEdge (http://www.clearedgepower.com) to solicit interest for the acquisition of all or substantially all of ClearEdge’s assets, including its Intellectual Property in whole or in part (collectively, the “ClearEdge Assets”) and equipment, inventory and work-in-progress located at ClearEdge Power’s various facilities. Attached is a sales memorandum, patent list, fixed asset list and inventory list.

Please be advised that the ClearEdge Assets are being offered for sale pursuant Section 363 of the United States Bankruptcy Code. It is anticipated that the Bankruptcy Court will approve certain sale procedures within the next 30 days and sale procedures will set forth when and how bids, will be submitted, deposit requirements and if the bids are subject to overbids. Final Sale Procedures are subject to Court approval, which the ClearEdge expects in early June.

Outlined below is a summarization of the basic provisions of the Bidding Process being reviewed by the Court and a ClearEdge Asset Purchase Agreement to be submitted by all interested and qualified parties.

Please call Stephen O’Neill, Esq. 408 843 2719 oneill.stephen@dorsey.com and/or John WalsheMurray, Esq. 408 843 2718 murray.john@dorsey.com regarding legal questions.

IMPORTANT LEGAL NOTICE:

The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to the ClearEdge Power Assets has been supplied by ClearEdge, by third parties and obtained from a variety of sources. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit, as the Fixed Asset, Inventory and Patent lists may not be accurate.

Gerbsman Partners, and their respective staff and agents, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of ClearEdge Power’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the ClearEdge Power Assets will be made pursuant to the Bankruptcy Code and will require approval of the United States Bankruptcy Court. All sales will be “as-is,” “where-is,” and on a “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Gerbsman Partners. Without limiting the generality of the foregoing, Gerbsman Partners and their respective staff and agents, hereby expressly disclaim any and all implied warranties concerning the condition of the ClearEdge Power’s Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

BID PROCEDURES

In the exercise of their good faith reasonable business judgment, ClearEdge Power, Inc., ClearEdge Power LLC and ClearEdge Power International Service LLC (collectively, the “Debtors”) have determined to solicit and complete a transaction (a “Transaction”) selling substantially all of the Debtors’ assets, in whole or in part (the “Purchased Assets”), subject to the approval of the United States Bankruptcy Court for the Northern District of California, San Jose Division, Courtroom 3070, 280 S. First Street, San Jose, CA 95113-3099 (the “Bankruptcy Court” or the ‘Court”) after an opportunity for Qualified Bidders (as defined below) to submit competing bids (“Competing Bid(s)” or ”Bid(s)”) at an auction (the “Auction”).

Subject to approval of the Bankruptcy Court, the procedures hereinafter set forth (the “Bid Procedures”) will govern the bidding and sale process. As provided below and in the Purchase Agreement (as defined below), the Bid Procedures will be incorporated into a binding order (the “Bid Procedures Order”) entered by the Bankruptcy Court.

Bidding Process

The Debtors will:

(a) Determine the steps to be completed, and the timing in respect of such steps, for the marketing and sale of the Purchased Assets[1];

(b) Determine whether any person is a Qualified Bidder (as defined below);

(c) Determine whether a Qualified Bidder has made a Qualified Bid (as defined below); and

(d) Negotiate any offer set forth in a Qualified Bid.

Participation Requirement

Unless otherwise ordered by the Bankruptcy Court, in order to participate in the bidding process, each person (a “Potential Bidder”) must first deliver to: TGI Financial, Inc. dba Gerbsman Partners (“Gerbsman” or “Gerbsman Partners”), Attn: Steven R. Gerbsman, email steve@gerbsmanpartners.com, tel.: 415 505-4991, an executed confidentiality agreement in form and substance reasonably acceptable to the Debtors.

Access To Due Diligence Materials

Upon a Potential Bidder’s satisfaction of the participation requirements described herein, such bidder will be deemed to be a “Qualified Bidder.” The Debtors shall afford each Qualified Bidder due diligence access to the Debtors’ assets and business, subject to competitive and other business concerns, which diligence may include access to the Debtors’ electronic data room, management presentations and site visits, and such other diligence as Potential Bidders may request and to which the Debtors, in their sole and absolute discretion, may agree; provided, however, that the Debtors shall have no obligation to provide due diligence access to any Qualified Bidder after the Bid Deadline (as defined below). The Debtors will coordinate efforts and provide all reasonable requests for additional information and due diligence access for Qualified Bidders. The Debtors will provide a form of proposed asset purchase agreement (a “Purchase Agreement”) to each Qualified Bidder.
The Debtors (and their respective staff, agents, attorneys or representatives) make no representation or warranty as to the information to be provided through the due diligence process or otherwise, except to the extent set forth in the Purchase Agreement with the Successful Bidder (as defined below). Each Qualified Bidder, as a consequence of the due diligence access granted to it, shall be deemed to acknowledge and represent (i) that it has had an opportunity to inspect and examine the Debtors’ assets and business and to review all pertinent documents and information with respect thereto; (ii) that it is not relying upon any written or oral statements, representations, or warranties of the Debtors or Gerbsman Partners, or their respective staff, agents, attorneys or representatives; and (iii) all such documents and reports have been provided solely for the convenience of the Qualified Bidder, and the Debtors and Gerbsman Partners (and their respective employees, agents, attorneys, representatives, consultants and financial advisors) do not make any representations as to the accuracy or completeness of the same.

Bid Deadline

The deadline for submitting bids by a Qualified Bidder is June 25, 2014, at 4:00 p.m. (Pacific Daylight Time) (the “Bid Deadline”). No later than the Bid Deadline, a Qualified Bidder that desires to make a bid to acquire the Purchased Assets (a “Bid”) shall deliver written copies of its Bid in both written and electronic format to: (1) counsel for the Debtors, Dorsey & Whitney LLP, 305 Lytton Avenue, Palo Alto, CA 94301, email: murray.john@dorsey.com (“Mr. Murray”); and (2) Gerbsman Partners, Attn: Steven R. Gerbsman, email steve@gerbsmanpartners.com.

Determination of Qualified Bid Status

In order to be eligible for consideration as a Qualified Bid (defined below), each Bid must satisfy each of the following conditions:

(a) Marked Purchase Agreement: A Bid must be accompanied by a black-lined version of the Purchase Agreement (including any schedules or disclosures that are a part thereof) showing the purchase price and any changes to the Purchase Agreement requested by the Bidder, including those related to the assumption and assignment of contracts and licenses, and other material terms such that the Debtors may determine how such Bid compares to the terms of the Purchase Agreement and Competing Bids.

(b) Assets: Bids may be submitted for all or part of the Purchased Assets. Bids must identify, with specificity, which Purchased Assets are included in such Bid.

(c) Combining Bids: The Debtors, in their sole and absolute discretion, may determine that the sum of bids for less than all of the Purchased Assets is collectively the best and highest bid for all of the Purchased Assets and, upon such determination, may combine such bids.

(d) Joint Bids: Prospective Qualified Bidders may submit a “joint competing bid” for the Purchased Assets; provided, however, that the identity of each bidder participating in such “joint bid” must be disclosed in the Bid, and such “joint bid” will be subject to section 363(n) of the Bankruptcy Code.

(e) Conditions/Contingencies: Except as provided in the Purchase Agreement, a Qualified Bid must not be subject to material conditions or contingencies to closing, including without limitation obtaining financing, internal approvals or further due diligence.

(f) Authorization: A Bid must include evidence of authorization and approval, subject to verification by the Debtors and Gerbsman, from such Qualified Bidder’s board of directors or governing body with respect to the submission, execution, delivery and closing.

(g) Good Faith Deposit: Each Qualified Bid shall be accompanied by a good faith cash deposit in the amount of $250,000 in the form of a wire transfer, certified check or other form acceptable to the Debtors in their sole and absolute discretion. Each good faith deposit will be deposited and held in the trust account of Dorsey & Whitney LLP, counsel to the Debtors (“Dorsey”). Requests for wire transfer instructions should be directed to Mr. Murray.

(h) Evidence Of Financial Ability To Perform: Each Bid must contain evidence satisfactory to the Debtors, in their sole and absolute discretion, that the bidder is reasonably likely (based upon financial wherewithal, availability of financing, experience and other considerations) to be able to timely consummate a Transaction if selected as the Successful Bidder, and must further provide adequate assurance of future performance of all contracts and leases to be assumed and assigned. Such evidence must include, without limitation, the Qualified Bidder’s most current audited and latest unaudited financial statements or, if the bidder is an entity formed for the purpose of making a bid, the current audited and latest unaudited financial statements of the equity holder(s) of the bidder or such other form of financial disclosure, and a guaranty from such equity holder(s).

(i) Bid Irrevocable/Back-up Bid: A Bid must provide that it is irrevocable until two (2) business days after the closing of the Sale. Each Qualified Bidder further agrees that its Bid, if not chosen as the Successful Bidder, shall serve, without modification, as a Back-up Bid (as defined below) or Alternate Back-up Bid (as defined below) as may be designated by the Debtors at the Sale Hearing, in the event the Successful Bidder fails to close as provided in the Purchase Agreement, as modified, if at all, and the Sale Order.

(j) A written statement agreeing to being contractually bound by all of the terms of these Bid Procedures.

After the Bid Deadline, the Debtors will immediately review all Bids and will notify any Qualified Bidder whose Bid does not meet the above requirements why such Bid is insufficient. All Bidders shall have until June 30, 2014 (the “Qualifying Bid Deadline”), to cure any deficiencies in their Bids in order to become Qualified Bids. A Bid received from a Qualified Bidder on or before the Qualifying Bid Deadline that meets the above requirements, in the Debtors’ sole and absolute judgment, will constitute a qualified bid (a “Qualified Bid”). No later than five (5) days before the Sale Hearingall Bidders shall be notified whether or not their Bids are Qualified Bids. In the event a Bid is determined not to be a Qualified Bid, such Bidder shall be refunded its good faith deposit within three (3) business days of that determination.

Selection of Stalking Horse Bid

At any time prior to the hearing before the Bankruptcy Court to conduct the Auction of the Purchased Assets (the “Sale Hearing”), the Debtors may, in their sole and absolute discretion, designate a Qualified Bid as the “Stalking Horse Bid” submitted by the “Stalking Horse Bidder” for the Purchased Assets who shall execute the Purchase Agreement, subject to any modifications as agreed upon by the Debtors (the “Stalking Horse Purchase Agreement”). Such designation may result in a modification of these Bid Procedures. Immediately upon any such designation, the Debtors shall provide notice to all Qualified Bidders of such designation and provide such bidders with the Stalking Horse Purchase Agreement and the revised Bid Procedures, if any.

In the event the Debtors do not designate a Stalking Horse Bidder, each Qualified Bid will be designated a Competing Bid (defined below). At the Auction, the Debtors will announce one or more Qualified Bids to be the highest and best bid (s) for the Purchased Assets, in whole or in part, and the Auction will be conducted in accordance with the procedures set forth below.

The Auction and Sale Hearing

The Debtors shall hold the Auction at the Sale Hearing at the Bankruptcy Court before the Honorable Charles Novack, United States Bankruptcy Judge, at which time the Debtors shall conduct the Auction for Qualified Bidders to submit Bids for the Purchased Assets (each, a “Competing Bid” submitted by a “Competing Bidder”).

The Debtors and their advisors will conduct the Auction. At the beginning of the Auction, the Debtors shall announce (a) the Stalking Horse Bid or, in the event that no Stalking Horse Bid has been designated, one or more of the Competing Bids as the highest and best Bid(s) for the Purchased Assets (the “Opening Bid(s)”), and (b) the manner in which the bidding will be conducted. Any disputes arising with respect to any aspect of the Auction will be resolved by the Debtors in their sole and absolute discretion.

All Qualified Bidders, including the Stalking Horse Bidder, if any, may submit further Competing Bids, along with a markup or a further markup of the Purchase Agreement. The Auction will be conducted in rounds. All bidders are required to bid in each round or they forfeit their right to participate in subsequent rounds. At any time, a bidder may request that the Debtors announce the then current highest and best bid. If requested, the Debtors shall use reasonable efforts to clarify any and all questions any Qualified Bidder may have regarding the Debtors’ announcement of the then current highest and best bid. Bidders will have no longer than ten minutes between bidding rounds. If a bidder is not present in time to submit a bid in the next round, that bidder forfeits its right to participate in subsequent rounds.

In the event that a Stalking Horse Bidder is designated, each Competing Bid made at the Auction for the Purchased Assets in a single Transaction following announcement of the Opening Bid or Bids must be, at a minimum, equal to the sum of (i) the Purchase Price (as defined in the Stalking Horse Purchase Agreement); (ii) $250,000 representing the Break-Up Fee (defined below); and (iii) $500,000.00.

Each Competing Bid thereafter must be in increments of no less than the greater of (a) 5% of the Purchase Price (or, in the instance no Stalking Horse Bid is designated, 5% of the Purchase Price of the best and highest bid(s) as determined and announced by the Debtors prior to the Auction, and (b) $250,000; provided, however, that the Debtors reserve the right, in their sole and absolute discretion, to modify the incremental bidding requirement at the Auction.
An overbid made by a Competing Bidder must remain open and binding on the Competing Bidder for (a) each round of bidding, and (b) for those Competing Bidders not selected as the Successful Bidder for purposes of serving as a Back-up Bid or Alternate Back-up Bid (as defined below).

All bids must be in cash.

The Debtors may, in their sole and absolute discretion, (a) determine which Qualified Bid, if any, is the highest and best bid for the Purchased Assets, and (b) reject at any time before the entry of the Sale Order any bid that is (i) inadequate or insufficient, (ii) not in conformity with the requirements of the Bankruptcy Code or the Bid Procedures, or (iii) contrary to the best interests of the Debtors, the bankruptcy estates, and creditors and interest holders thereof.

At the conclusion of the Auction, the Debtors shall announce the winner of the auction (the “Successful Bidder(s)”) and request that the Court enter the Sale Order reciting the same.
The Debtors may announce at any time prior to or during the Auction such modifications to the Bid Procedures that they, in their sole and absolute discretion, believe will better promote the goals of the auction process and are in the best interest of the bankruptcy estates.

The Debtors may, in their sole and absolute discretion, prior to or during the auction, postpone or terminate the auction and the sale process without selecting any Bid as the Successful Bid. Neither the Debtors, their bankruptcy estates, employees, agents, attorneys, representatives, consultants nor financial advisors shall have any liability to anyone if the Debtors postpone or terminate the auction and the sale process.

The Debtors may modify these Bid Procedures if they determine, in their sole and absolute discretion, such modifications to be in the best interest of the bankruptcy estates.

Bid Protections

In the event the Debtors designate a Stalking Horse Bidder and the Stalking Horse Bidder is not the Successful Bidder, the Debtors shall pay in consideration of its being the Stalking Horse Bidder and to reimburse it for its reasonable and necessary out of pocket expenses, including all professional fees, an amount up to $250,000 (the “Break-Up Fee”) in accordance with the terms and conditions set forth in the Purchase Agreement and as approved by the Bankruptcy Court. If the Stalking Horse Bidder submits an overbid it will not be entitled to the Break-Up Fee. No other bidder will be entitled to any expense reimbursement, break-up fee, termination or similar fee or payment. Such payments are conditioned on the close of a Transaction.

“As Is Where Is”

The sale of the Purchased Assets will all be on an “as is, where is” basis without representations or warranties of any kind or nature, except to the extent set forth in the purchase agreement(s) with the Successful Bidder(s). Except as may be set forth in such purchase agreement(s), the Purchased Assets are sold free and clear of any and all liens, claims, interests, encumbrances, restrictions, charges and encumbrances of any kind or nature to the fullest extent permissible under the Bankruptcy Code, with such liens, claims, interests, encumbrances, restrictions, charges, and encumbrances to attach to the net proceeds of sale in their order of priority.

Conclusion of the Auction, Determination of the Successful Bidder and Sale Hearing

At the conclusion of the bidding, the Debtors shall (1) determine the Successful Bidder(s) on the basis of, among other things: (a) the amount of the Qualified Bid(s), (b) the number, type and nature of any modifications to the Purchase Agreement, and the extent to which such modifications are likely to delay the closing of a sale of the Purchased Assets and the costs attendant thereto, (c) the likelihood of the bidder’s ability to close a Transaction and the timing thereof; and (d) the net value to the Debtors; and (2) submit the highest and best bid, determined in the Debtors’ sole and absolute discretion, (the “Successful Bid”) for approval by the Bankruptcy Court pursuant to Section 363 of the Bankruptcy Code. For avoidance of doubt, the Debtors, in their sole and absolute discretion, may select a combination of Qualified Bids for the Purchased Assets in multiple lots, in determining the Successful Bid(s).

Prior to the Debtors submitting a Successful Bid to the Bankruptcy Court for approval, such Successful Bidder shall present evidence to the Court establishing to the Court’s satisfaction such bidder’s provision of adequate assurance of future performance of executory contracts and unexpired leases to be assumed and assigned to such bidder.

Any Qualified Bidder that intends to request that the Bankruptcy Court make a finding under Bankruptcy Code Section 363(m) that such bidder’s purchase of the Purchased Assets or the assignment to it of an executory contract or unexpired lease is in good faith, shall, in advance of the Sale Hearing, file with the Court and serve on the Service Parties (as defined in Section 29-a of the Bid Procedures Motion), a written declaration of a competent witness demonstrating (a) the bidder’s good faith, and (b) the absence of fraud or collusion between the bidder and any other bidder, party or the Debtors or their representatives. The declaration must also disclose any facts material to the good faith determination, including:

(a) The bidder’s pre- and post-petition relationships with (i) any other bidder, (ii) the Debtors or the Debtors’ current or former officers, directors, agents or employees, and (iii) any of the Debtors’ major creditors or equity security holders;

(b) The bidder’s anticipated relationship after the sale with any of the Debtors’ current or former officers, directors, agents or employees;

(c) Whether any offers of employment or compensation have been or will be made to any of the Debtors’ current or former officers, directors, agents or employees; and

(d) Whether the bidder has paid or contemplates paying consideration in connection with the sale to any person other than the Debtors.

Prior to the conclusion of the Sale Hearing, the Debtors shall designate, in their sole and absolute discretion, the next highest and best bid to serve as the first back-up bid (the “Back-up Bid” of the “Back-up Bidder”), and one or more alternate back-up bids (each, an “Alternate Back-up Bid” of an “Alternate Back-up Bidder”), as applicable, for the Purchased Assets.

In the event the Successful Bid is approved, but not consummated by the closing date designated in the Stalking Horse Purchase Agreement (or such later date as the Debtors and the Successful Bidder shall mutually agree in writing), the Debtors will request that the next highest and best bid (i.e., the Back-up Bid), and the next highest and best bid to that bid (i.e., the first Alternate Back-up Bid), and so on, be approved without the necessity of further order of the Bankruptcy Court, and that such bidder be required to consummate the Transaction contemplated in its bid within seven (7) business days of being declared the Successful Bidder.

In the event a Successful Bid is not consummated, the Debtors shall notify each Back-Up Bidder and Alternate Back-up Bidder within one (1) day of such bidder’s designation as the new Successful Bidder, Back-up Bidder or next Alternate Back-up Bidder, as applicable.

The Debtors may, in their sole and absolute discretion, prior to or during the auction and sale process, postpone or terminate the auction and sale process without selecting any Bid as the Successful Bid. Neither the Debtors nor their bankruptcy estates, employees, agents, attorneys, representatives, consultants nor financial advisors shall have any liability to anyone if the Debtors postpone or terminate the auction and the sale process.

Treatment of Deposits

The good faith deposit of the Successful Bidder will be applied to the purchase price of such Transaction at the closing date of the Sale set forth in its Purchase Agreement.

The good faith deposit of each of the Back-up Bidders and Alternate Back-up Bidders will be held in held in Dorsey’s trust account until the earlier of five (5) business days after the close of the Transaction contemplated in the Successful Bid(s), and thereafter returned (with the interest earned thereon) to the Back-up Bidder and/or Alternate Back-up Bidder. The good faith deposits of any Bidder not selected as a Back-up Bidder or an Alternate Back-up Bidder will be held in Dorsey’s trust account until no later than two (2) business days after the Sale Hearing, and thereafter returned (with the interest earned thereon) to the respective bidders. If a Successful Bidder, Back-up Bidder, or Alternate Back-up Bidder, as applicable, fails to consummate an approved sale because of a breach or failure to perform on the part of such Bidder, the Debtors (a) shall retain the good faith deposit of such Bidder as liquidated damages resulting from the breach or failure to perform by such Bidder; and (b) be authorized, but not required, to consummate the Back-up Bid, or Alternate Back-up Bid, as applicable, without further notice or order of the Bankruptcy Court.

[1] Capitalized terms not otherwise defined herein will have the meanings ascribed to them in the Amended Motion for Order Approving Bid Procedures and Related Matters Re Sale of Certain Assets of Debtors (the “Bid Procedures Motion”)

For additional information, please see below and/or contact:

Steven R. Gerbsman
Gerbsman Partners
(415) 505-4991
steve@gerbsmanpartners.com

Kenneth Hardesty
Gerbsman Partners
(408) 591-7528
ken@gerbsmanpartners.com

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