AOne Bankruptcy Auction

7/30/2019 AOne Bankruptcy Auction

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In re: A123 Systems Inc. et al.December 6, 2012 to December 9, 2012

(312) 386-2000 www.merrillcorp.com/lawMerrill Corporation - Chicago

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1 determine the assumption of a rejection of contracts

2 and will fund the cost of administering the contracts

3 during that period. The time that we are going to

4 shorten it to is to be determined, we haven't yet

5 determined that, and we will clarify that at a later

6 date.

7 We removed the ability to reject contracts

8 post closing. We retain the ability to determine the

9 assumption or rejection of four specific contracts

10 that the debtors have proposed to be rejected, and

11 those contracts are the equipment purchase agreement

12 dated September 30, 2010 between A123 and AES ES

13 Westover, LLC, the equipment purchase agreement dated

14 January 18, 2011 between A123 and AES Gener, SA, the

15 equipment purchase agreement dated September 28, 2011

16 by and between A123 and AES Energy Storage, LLC, and

17 the professional services agreement dated July 16,

18 2012 between A123 and AES ES Westover, LLC.

19 Our last point is we will remove the

20 assumption of the separate ConEd contract that we had

21 proposed to assume in our APA and was on our list22 because the debtors have already rejected that

23 contract. Those are our clarifications.

24 MR. POHL: Thank you.


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1 MR. FELTMAN: Thanks, Tim. Quickly, a couple of

2 clarifications on our side. One, a misunderstanding

3 by us and frankly, I'll take the blame. It's Josh

4 Feltman. Regarding the DOE language from last night

5 that was circulated, upon review of further language

6 this morning we came to understand it differently

7 than we had understood it last night. So the

8 language that would require Johnson Controls in the

9 event of a failure of novation to pay incrementally

10 for the equipment would not be acceptable.

11 So we're not going to -- it would have to be

12 otherwise worked out. Whether the fault of the DOE

13 or the debtor is of no consequence to us. That being

14 said, we have a great deal of confidence that it's

15 not going to be an issue as a practical matter as we

16 expect novation. We have, for the record, applied

17 pursuant to the requested process.

18 I would also say that we will give a formal

19 covenant in the APA to use commercially reasonable

20 best efforts to do everything and anything necessary

21 to get that novation, responding to document requests22 and so forth. But we anticipate it won't be

23 difficult.

24 Further clarification, and this is not really


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1 an error, but just to be clear on the IP contract, no

2 conditionality around the IP license. I do want to

3 be clear that because of the dual bid nature, NEC and

4 Johnson Controls, with a separate in time closing

5 likely, although it would be great if we could all

6 close early and at the same time, we will need the

7 debtor to actually execute an IP license agreement

8 for a period. That license agreement, the terms of

9 that agreement are fully worked out between NEC and

10 JCI, so we don't view it as any type of real

11 condition. We just want to be clear that it is

12 necessary as just a mechanical step pending the

13 second closing in the transaction.

14 And the third thing is we've agreed and

15 accepted the HQ, Hydro-Quebec language. To the

16 extent that MIT or others somehow fail to consent to

17 the assignment of the license, that would remain a

18 condition now and that would remain conditions, I

19 think that's probably true of all the bids on the

20 table right now. And again, we don't expect any

21 problem there. But as concerns the specific22 objection of the Hydro-Quebec consortium, the

23 language proposed by that consortium is acceptable

24 and therefore, that we view as no issue. So I just


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1 wanted to clear that up. Thank you.

2 MR. POHL: Thank you. Okay, I think at this time

3 I'll ask W for a clarification which I think is

4 agreed upon which is that you will incorporate the

5 same covenant to use your good faith commercial

6 efforts to seek resolution.

7 MR. GUZINA: That is correct. And also -- Bojan

8 Guzina on behalf of Wanxiang. We'll incorporate that

9 type of a covenant and counsel confirmed that we also

10 don't have an agreement on the DOE language based on

11 the latest round of revisions but that we are

12 continuing to work with the Department of Energy

13 towards a resolution.

14 MR. FELTMAN: Let me be clear. We recited last

15 night in connection with our bid that the assets will

16 include certain assets located in Korea. I think, if

17 I won't butcher this, I understand that there's a

18 lease expiring and that we have agreed that we will

19 pay for the removal of the asset and transfer and pay

20 for the value of the asset ahead of the expirate of

21 that lease which might be otherwise prior to closing.22 Did that help?

23 MR. POHL: I believe that value is --

24 MR. FELTMAN: I believe $200,000 --


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1 MR. MILLER: Yes.

2 MR. FELTMAN: -- has been, just to be clear what

3 we pay for it.

4 MR. OKLOBDZIJA: We'll pay the cost. And if it's

5 50 grand, 50K, it's 50K and not 200K.

6 MR. MILLER: Correct.

7 MR. FELTMAN: Estimated at 200,000.

8 MR. POHL: Okay, here's where the estate is,

9 three things. Number one, the bid that is now on the

10 table from JCI and NEC is deemed to be a higher and

11 better bid than the prior bid from Wanxiang by the

12 amount of a bid increment of $500,000.

13 Number two, in response to the dialogue on

14 the record with respect to the DOE and the estate, I

15 just want to make this clear on the record, there is

16 no differential value being ascribed by the estate at

17 this time to the two parties' position with respect

18 to the DOE.

19 Number three, from this point forward until

20 further notice on the record, with the advice and

21 consent of the creditors committee, we are increasing22 the go forward bid increments from $500,000 to

23 $5 million. Does anybody wish to be heard?

24 MR. GUZINA: For the record, Bojan Guzina on


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1 behalf of Wanxiang. We reserve all rights for the

2 record with respect to the modifications to the bid

3 increments after the announcement of a higher amount

4 of bid.

5 MR. POHL: That's fine. Does anybody wish to

6 make a bid or request a recess to consider whether or

7 not they are going to make a bid?

8 MR. GUZINA: We request a recess.

9 MR. POHL: We are in recess.

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1 STATE OF ILLINOIS )) ss:

2 COUNTY OF C O O K )

3 IN THE UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF ILLINOIS

4 BANKRUPTCY DIVISION

5 IN RE: A123 SYSTEMS, INC. ))

6 ))

7 ) No. 12-12859)

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)9 )

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11 Report of proceedings in the

12 auction of the above-entitled cause, at 233 S.

13 Wacker Drive, Third Floor, in the City of Chicago,

14 County of Cook, State of Illinois, before Victoria

15 D. Rocks, CSR, Notary Public, commencing at 4:08

16 p.m. o'clock, on the 7th day of December, 2012 A.D.

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1 APPEARANCES:

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LATHAM & WATKINS3 MR. PAUL VAGLICAMS. ALICIA DAVIS

4 MS. CAROLINE RECKLER233 S. Wacker Drive

5 Suite 5800Chicago, Illinois 60606

6 (312) [email protected]

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1 I-N-D-E-X

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1 MR. POHL: I think that we're ready to start.

2 Tim Pohl, for the debtor. We're back on the record.

3 A couple of process announcements before we

4 get started. First, something that was implicit,

5 which I should make explicit from the last time we

6 were on the record. When we increased the bid

7 increment going forward to five million dollars, we

8 will, of course, maintain whatever the then current

9 bid increments are for an equal number of bids by

10 both parties. If that wasn't clear, it should be

11 clear now.

12 Second, we are going to begin after the next

13 bid with some time limits, which we're going to set

14 at 45 minutes. So from the time that a bid is made

15 that is announced by the debtors to be accepted as a

16 higher end, better bid, from that announcement

17 forward there will be a 45 minute clock on the next

18 bid and so on and so forth.

19 Debtors, of course, reserve the right to

20 take as long a recess as we need to evalulate the

21 value of a bid, although we promise you it won't22 take us very long to evaluate the value of cash.

23 And so with that, we also want to indicate

24 that we are not going to increase the bid increments


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1 above five million dollars, although we will reserve

2 the right to lower them.

3 MR. GUZINA: For the record, Bojan Guzina, on

4 behalf of Wanxiang. With those clarifications, we

5 are prepared to make a new bid.

6 Most importantly, the dollar amount of our

7 bid will be increased by 5.5 million dollars. So

8 the new amount is one hundred thirty six million

9 five hundred thousand dollars. The only other

10 clarification we will make into the record is that

11 the two security deposits under our agreements, one

12 in the amount of $25 million, the other in the

13 amount of 13 and a half million dollars are not

14 additive.

15 There's no real circumstance in which both

16 could be triggered. That is an understanding that

17 we have reached with the debtor. We just wanted to

18 read that into the record.

19 MR. POHL: It is now on my watch. That bid is

20 a higher and better bid than the last bid by JC,

21 Inc. Does anybody else wish to make a bid?22 MR. FELTMAN: Joshua Feltman from Wachtell

23 Lipton for JC, Inc. We will change our bid to say

24 that JC will pick up the first 10 million dollars of


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1 cure costs.

2 So the current cure costs were estimated of

3 the debtor at 17 million. I don't think there's any

4 question, unfortunately, that they would -- even in

5 a conservative scenario could add up to an excess of

6 10 million. We'll pick up the first 10 million and

7 that is the change of the bid.

8 MR. POHL: The debtors will take between a two

9 and a three minute recess. I suggest that everybody

10 just hang out.

11 (Recess.)

12 MR. POHL: We're back on the record. First, to

13 repeat something that I think we said yesterday

14 whenever we actually started this auction so that

15 there's no misunderstanding.

16 Whenever this auction ends, whatever the then

17 highest bid is, that bid is not officially deemed

18 the highest bidder accepted until we stay and

19 finalize the documentation, just to be clear.

20 Having said that, with respect to the bid that was

21 just made, we value that on the current schedule of22 assumed contracts at ten million dollars. And so I

23 think the bid is ten million dollars W at the

24 current bid.


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1 MR. GUZINA: Bojan Guzina, on behalf of

2 Wanxiang America Corporation. We will do the same

3 with respect to the cure cost increment. Wanxiang

4 will pay the first 10 million.

5 MR. POHL: Again, on the current schedule of

6 contracts that we have from W, we value that at

7 10 million.

8 MR. FELTMAN: Joshua Feltman, on behalf of JCI,

9 I request a hopefully quick adjournment.

10 MR. GUZINA: Forty-five minutes?

11 MR. POHL: That's fine.

12 (Recess.)

13 MR. POHL: Back on the record. I believe that

14 someone wants to speak.

15 MS. BRIGHTON: Jo Ann Brighton, K & L Gates, on

16 behalf of NEC Corporation. We would like to amend

17 our asset purchase agreement to reflect a change in

18 purchase price of an increase of 10 million dollars.

19 We would also like to change the indemnity

20 cap provision, which currently provides for

21 5 percent of the purchase price and cap out the22 indemnity at 2 million dollars. By way of cleaning

23 up some contractual terms, earlier in the record we

24 indicated four AES contracts that we would like to


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1 have the option to assume or reject. We would like

2 to modify that, and we would like to have the option

3 to assume or reject all of the AES contracts and

4 will be responsible for any obligations associated

5 with those contracts, ongoing warranty obligations

6 if we assume those contracts, but to be clear, not

7 for the payment of a fixed liquidated sum.

8 MR. MILLER: Joe Miller, one question.

9 MS. BRIGHTON: Sure.

10 MR. MILLER: Was there any change to the

11 indemnity or it's the same?

12 MS. BRIGHTON: Currently, it provides that we

13 would like an indemnity of 5 percent of the purchase

14 price. If you raise the purchase price, we cap the

15 indemnity at 2 million dollars.

16 MR. MILLER: Okay. Thank you.

17 MR. POHL: Can you clarify what you mean by

18 what you just said with respect to the AES

19 contracts?

20 MS. BRIGHTON: The AES contracts are service

21 contracts, and there's an estimated amount of about22 $901,000 associated with the obligation under those

23 contracts.

24 It is not the payment of a fixed liquidated


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1 sum of money at $1,000 that we would be obligated to

2 pay, but rather the service warranty obligation

3 under those contracts.

4 MR. GUZINA: There's no monetary default on

5 those contracts that the debtors would have to cure

6 upon assignment?

7 MS. BRIGHTON: That's correct.

8 MR. GUZINA: It's simply the assumption of

9 liability. So the benefit to the estate would be

10 just the awardance of ejection damages. There's no

11 dollar for dollar benefit to the estate.

12 MS. BRIGHTON: Are there ejection damages?

13 MS. RECKLER: This is Caroline Reckler, for the

14 record. There could be. We're talking about the

15 ongoing warranty obligations that you can choose to

16 assume those contracts, NEC would be responsible,

17 not the debtor's estate.

18 And if there is any cure amount which we

19 have estimated at zero, NEC would be responsible for

20 those cure amounts.

21 MS. BRIGHTON: That's correct.22 MR. POHL: Anybody else?

23 MS. RECKLER: I think there's one more

24 clarifification.


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1 MR. MILLER: Did you want to clarify the cure

2 amount?

3 MR. FELTMAN: Sure. Under our contract, we

4 noted earlier that we take the first 10 million of

5 cure costs.

6 We also, the way the contract works, we're

7 going to have anything above 17,5.

8 MR. POHL: Okay. I think that we agree that is

9 10 million dollars.

10 MR. GUZINA: Is it ten flat?

11 MR. POHL: Ten flat, yes. And the clock starts

12 now.

13 MR. GUZINA: We'll take a recess.

14 MR. POHL: Okay. Off the record.

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1 STATE OF ILLINOIS )

2 ) ss:


4

5 VICTORIA D. ROCKS, C.S.R., Notary

6 Public, being first duly sworn, deposes and says

7 that she is a Certified Shorthand Reporter, doing

8 business in the City of Chicago, County of Cook,

9 State of Illinois, and reported proceedings in the

10 Courts in said County;

11 That she reported in shorthand and

12 thereafter transcribed the foregoing proceedings;

13 That the within and foregoing

14 transcript is a true, accurate, and complete record

15 of the proceedings had upon the auction in the

16 County of Cook, State of Illinois, on this 7th day

17 of December, 2012.

18

19

20 ____________________________________________ VICTORIA D. ROCKS, C.S.R.

21 License No. 084-00269222

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1 IN THE UNITED STATES BANKRUPTCY COURT

2 FOR THE DISTRICT OF DELAWARE

3

4 -------------------------------))

5 In re: ) Chapter 11)

6 A123 SYSTEMS, INC., et al., ) Case No. 12-12859 (KJC))

7 Debtors. ) Jointly Administered)

8 -------------------------------)

9

10

11 Record of proceedings of Bid Auction taken

12 pursuant to the Federal Rules of Bankruptcy Procedure

13 held at Latham & Watkins, 233 South Wacker Drive, 34th

14 Floor, Chicago, Illinois, on the 7th day of December,

15 2012 upon the hearing of the above-entitled case.

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1 MR. POHL: Okay. I think everyone is most likely

2 here. We're back on the record. And I believe that the

3 bid is to W.

4 MR. GUZINA: Bojan Guzina from Sidley Austin on

5 behalf of Wanxiang America. We will increase our

6 purchase price to 146,500,000, all other terms remain

7 unchanged. But we do not agree to be the back-up

8 bidder.

9 MR. POHL: That bid is a higher and better bid.

10 MR. FELTMAN: Does that not violate the bid

11 procedures?

12 MR. POHL: In what way?

13 MR. FELTMAN: That every bidder is required to be a

14 back-up bidder except us I think. And there's a court

15 order to that effect. Maybe you guys should think about

16 that.

17 MR. POHL: Okay. We have the discretion to modify

18 the procedures.

19 MR. FELTMAN: To what's the deduct for that?

20 MR. POHL: The bid procedures require that a back-up

21 bidder must modify by the Debtors -- that the back-up22 bidder's bid remain open for 20 days from the sale

23 order. Because that period is inside of the CFIUS

24 period, there is no possibility in the Debtors' view


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1 that we could effectuate the closing of a back-up bid by

2 Wanxiang. And, therefore, we have never placed any

3 value in their favor on their prior position,

4 differential for being a back-up bidder, compared to

5 JCI. And, therefore, we're not placing any degradation

6 on the value of their bid from removing that position.

7 So Debtors, in consultation with the Committee,

8 believe that bid satisfies the bid procedures and

9 is -- $10 million is $10 million. So the bid is to JCI

10 and NEC.

11 MS. BRIGHTON: We would like to request a recess.

12 MR. POHL: NEC requested a recess. That's fine.

13 We're in recess. We'll start the clock.

14 (recess taken.)

15 MR. POHL: Okay. We're back on the record. And I

16 believe the bid is to --

17 MR. FELTMAN: Josh.

18 For the record, Josh at Wachtell. We're going

19 to raise our bid as follows:

20 Two-and-a-half million in cash, and we're going

21 to take the seven-and-a-half million of cure and wipe it22 out. The result of that would be that our contract will

23 be that any contract -- our contract will say that any

24 contract that we wish to assume/assign, effectively, we


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1 have to pay all the cure costs.

2 And -- Well, I won't even defer to Jo Ann. On

3 behalf of our good friends at NEC, they're no longer

4 going to be a back-up bidder either. I think they

5 suffer from the same CFIUS pathology, if you will, and

6 it shouldn't be an issue.

7 MS. BRIGHTON: I didn't get a chance to speak.

8 MR. POHL: Would you like to speak?

9 MS. BRIGHTON: No.

10 MR. POHL: We have no objection for valuation

11 application to the back-up bidder --

12 MR. FELTMAN: Thank you.

13 MR. POHL: -- for the same reason.

14 And I believe, in consultation with the

15 Committee, that that bid satisfies the requirement of

16 being $10 million higher.

17 The bid is now to W.

18 MR. GUZINA: We will take a recess.

19 MR. POHL: You may have one.

20 We're in recess.

21 (recess taken.)22 MR. POHL: Okay, everybody. I don't have a

23 microphone up here. I think we're ready to start.

24 Okay. We're back on the record.


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1 I believe that, just to recap -- no, not from

2 the beginning -- the headline numbers that we left off

3 with, the top line numbers, to make sure that we're

4 clear, on the JCI/NEC bid it is 149.2 million, and on

5 the W bid it was 146.5.

6 And with all of the adjustments, there's a 10

7 million -- a $5 million differential.

8 And the bid is to W.

9 MR. GUZINA: Bojan Guzina on behalf of Wanxiang

10 America.

11 We will increase our headline number to 150

12 million. So that's an increase of 3.5 million. And we

13 will take down our cure cost reimbursement to zero. So

14 it's a total adjustment of 11 million. And we do not

15 agree to be a back-up bidder, still.

16 MR. POHL: Twice. And we will give you double the

17 credit.

18 That is -- I'm looking for my Committee

19 consent. Yes, that's valued at $11 million.

20 Before I move on, we are going to alter the

21 time clock increments from 45 minutes to 30 minutes,22 starting now.

23 MS. BRIGHTON: Josh is going to let me speak first,

24 if you can believe that.


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1 Jo Ann Brighton, K&L Gates, on behalf of NEC.

2 NEC would like to increase the purchase price

3 under the APA to $4.2 million cash.

4 And just as a few clean-up items on the APA, as

5 we did with the indemnity last night, we'd like to

6 freeze the deductible, which was formerly 1 percent of

7 the purchase price. As we increase the purchase price,

8 we'd like to freeze that indemnity at $400,000. It's

9 not really an economically impactful change.

10 And then the second is, we'd like to change the

11 deposit to be delivered seven business days to the

12 Debtor.

13 MR. BALDIGA: I'm sorry. Can you repeat the last

14 part?

15 MS. BRIGHTON: The deposit to be delivered in seven

16 business days. Right now it's three. And given the

17 wiring and the Tokyo time, we'd like to just change it

18 to seven.

19 MR. POHL: And the indemnity again?

20 I got it. Never mind.

21 MS. BRIGHTON: Okay. And now I'll hand the floor to22 Josh.

23 MR. FELTMAN: Yeah, very simple. You heard NEC cash

24 portion was up 4.2. We're taking the JCI cash up 8.4.


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1 So that's a total of 12.6, if I'm doing my math

2 right.

3 MR. POHL: Okay. That for sure meets the bid

4 increment. I just need a second to remind myself again.

5 So, just to be clear, so I'll do the headline

6 numbers first, and then where the delta is.

7 The headline number for JCI and NEC combined is

8 161.8, and for W it is 150. And the amount by which JCI

9 and NEC are ahead is $6.6 million.

10 MR. GUZINA: We're going to break.

11 MR. POHL: We are in recess.

12 (recess taken.)

13 MR. POHL: Okay. I think everybody is here again.

14 We are back on the record. And the bid is to

15 W.

16 MR. GUZINA: Bojan Guzina on behalf of Wanxiang.

17 I believe the increment is 6.6 plus the 5

18 million overbid, correct?

19 MR. POHL: That's right.

20 MR. GUZINA: Okay. We will increase our headline

21 number by 11.6 million. That takes us to 161.6. And we22 do not agree to be a back-up bidder.

23 MR. POHL: Quadruple the credit.

24 Okay. We think that works.


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1 MR. FELTMAN: I think we need a recess.

2 MR. POHL: Recess granted.

3 MR. FELTMAN: Thank you.

4 (recess taken.)

5 MR. POHL: We are back on the record. And the bid

6 is to JCI/NEC.

7 MS. BRIGHTON: Josh is going to let me speak again

8 first.

9 Jo Ann Brighton, K&L Gates, for NEC. We are

10 increasing our purchase price under our APA $5 million.

11 MR. FELTMAN: And on the JCI side, we're going to

12 drop the condition related to the approvals in the State

13 of Michigan of economic development authorities and so

14 forth.

15 MR. POHL: Okay. Based on previous discussions we

16 have had with both bidders, the value of the dropping of

17 that condition is $10 million. And so that's a $15

18 million bid.

19 MR. GUZINA: How do you come up with $10 million?

20 MR. POHL: The same way we came up with it when we

21 offered it to you yesterday, which is that we consulted22 with the Committee, and we ascribed that value to the

23 elimination of that closing condition.

24 And so that means, to sum up, the headline


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1 number is 166.8, and the delta is $10 million to deposit

2 for JCI/NEC.

3 So the next bid would need to be $15 million of

4 value.

5 MR. GUZINA: Let's take a break.

6 MR. POHL: Break granted.

7 (recess taken.)

8 MR. POHL: Okay. I think we're back on the record.

9 For the record, just to stay current, the

10 headline numbers, as I indicated before, for JCI/NEC are

11 166.8, as compared to for W are 161.6. And after all of

12 the adjustments, there is a current delta of $10

13 million, which means the bid is $15 million to W.

14 MR. GUZINA: Okay. Bojan Guzina on behalf of

15 Wanxiang, not a back-up bidder.

16 We will increase the headline number by 5

17 million. So it would be 166.6. And we will drop the

18 Michigan grant condition.

19 MR. POHL: Okay. That's accepted as $15 million.

20 MR. FELTMAN: I think we're going to need a few,

21 Tim.22 MR. POHL: Granted.

23 (recess taken.)

24 MR. POHL: Okay. We're back on the record. And the


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1 bid is to JCI/NEC.

2 MR. FELTMAN: Josh Feltman, for the record.

3 Let me just start with an element of this which

4 is not highly relevant to the acumen of this auction.

5 We want to add to the bid, in terms of the

6 assets we're purchasing, the remainder of the assets in

7 Korea. Namely, the NPD line, including the coder.

8 Now, we understand that the company values that

9 at $400,000 on an independent basis. And I think for

10 all intents and purposes, separate from everything else,

11 we will pay 400,000 for that. I don't think that's

12 helpful in analyzing the bids, and I don't want to

13 editorialize too much, but we want those assets.

14 MR. POHL: Just as a clarification, you want them

15 in, and you're increasing by 400, and that's value

16 neutral?

17 MR. FELTMAN: That's value neutral.

18 MR. POHL: Got it.

19 MR. FELTMAN: So then of import, or more import, JCI

20 will increase the cash portion of our bid, on top of the

21 400 separate, by $5 million.22 MS. BRIGHTON: Jo Ann Brighton, K&L Gates, on behalf

23 of NEC.

24 NEC would like to amend their asset purchase


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1 agreement and increase their bid by $10 million.

2 MR. POHL: Okay. I think with that, the Debtors

3 would like to take a recess.

4 (recess taken.)

5 MR. POHL: We're on the record.

6 MR. GUZINA: Can you just restate, for the record,

7 where we are?

8 MR. POHL: Yeah.

9 All right. We're on the record. Just to

10 refresh where we last left off, W's gross number is

11 166.6, JCI/NEC's gross number is 181.8, which does not

12 include the $400,000 Korea issue, which is separate,

13 there's no impact, and down 10.

14 MR. GUZINA: We're going to increase the gross

15 number to 180 million, and we're going to decrease the

16 indemnity holdback by 10 million from 18.75 down to

17 8.75. And we're not the back-up bidder.

18 MR. FELTMAN: Sorry, the amount on the indemnity

19 holdback again?

20 MR. GUZINA: Goes down by 10 million.

21 MR. BALDIGA: How much was the increase in the gross22 on the cash portion?

23 MR. GUZINA: It goes from 166.6 to 185. 13.4

24 million.


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1 MR. POHL: Okay. We need to take a recess. Thank

2 you.

3 (recess taken.)

4 MR. POHL: Okay. We're back on the record.

5 So where we left off was, W had made a bid

6 increasing their cash from 166.6 to 180, and reducing

7 their indemnity by 10, which we value at 50 cents on the

8 dollar for 5. Cash is cash. The net effect of that,

9 inclusive of a few more things I'm going to put on the

10 record, but in dollars that would be 8.4 million ahead

11 of the prior bid by JCI and NEC.

12 In addition to that, and someone will correct

13 me if I garble this, two things.

14 Number one, again, all subject to agreement on

15 language, like everybody's documentation all through

16 this auction, the regulatory approval conditions will be

17 limited to U.S. regulatory approvals only, as conditions

18 to closing. Point one.

19 Point two, the language in the -- the

20 provisions in the Wanxiang agreement that eliminate

21 their obligation to fund into the trust by January 15th22 will be modified such that there will need to have been

23 a so-called CFIUS order in order for them to not be

24 obligated to fund, subject to agreement on the language


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Page 54

1 of exactly how that's described.

2 MR. BOX: I think the right way to describe it is

3 that our CFIUS lawyers need to come to agreement on what

4 that wording is.

5 MR. POHL: Okay. That's fine.

6 MR. BOX: But we haven't agreed that CFIUS order is

7 the right standard.

8 What I told the folks in the other room was

9 that we've got some language that we think should get

10 you there. And David has just sent it over.

11 MR. POHL: Without putting a label on what we'll

12 call that language. That was my label.

13 MR. FELTMAN: Can I ask, just directionally, is that

14 latter point a narrowing of the circumstances under

15 which Wanxiang would be excused --

16 MR. POHL: Correct.

17 MR. FELTMAN: -- from funding into trust?

18 MR. POHL: That's correct. It would be a

19 significant narrowing of the standards that would excuse

20 them from funding into the trust, that's correct.

21 Subject to agreement on that language, and22 rather than wait all night -- wait longer to do that,

23 we're going to keep going, just like we've been doing

24 with all the documentation language.


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1 We would value -- The state of play is plus 8.4

2 to W.

3 MR. SHEMANSKI: Josh, you looking for me?

4 MR. FELTMAN: I am.

5 And we would request a recess.

6 MR. POHL: No problem.

7 (recess taken.)

8 MR. POHL: Okay. Back on the record.

9 Just to recap, briefly, where we are. Headline

10 number W, 180. Headline number JCI/NEC, 181.8. For a

11 current delta, with all of the adjustments, of 13.4.

12 I'm sorry, 8.4.

13 MS. BRIGHTON: Jo Ann Brighton, K&L Gates, on behalf

14 of NEC Corp. They would like to increase their purchase

15 price to $20 million.

16 MR. FELTMAN: And Josh Feltman on behalf of JCI.

17 Likewise, increase to the JCI bid of $20 million.

18 MR. POHL: I don't need a recess.

19 Do you need a recess?

20 MR. GUZINA: Yes.

21 I assume you're going to accept this?22 MR. POHL: Yes, that's accepted.

23 Okay. We're recessed.

24 (recess taken.)


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2 Again, to recap, it seems to be increasingly

3 necessary, the last W headline number was 180; the

4 current headline JCI/NEC number is 221.8, after all the

5 adjustments. The delta is 31.6 million. The bid is

6 36.6 million to W.

7 MR. GUZINA: Bojan Guzina on behalf of Wanxiang

8 America.

9 We will increase our headline bid by 36.6

10 million. And we will not be the back-up bidder.

11 MR. FELTMAN: I would like to point out that at this

12 moment I believe Siemens is the back-up bidder.

13 MR. POHL: I said earlier, they're the smartest

14 people here.

15 MR. FELTMAN: I think Jo Ann and I would --

16 MS. BRIGHTON: We would request a recess.

17 MR. POHL: Granted.

18 (recess taken.)


20 To recap where we left off last, W's headline

21 number was 216.6; JCI and NEC's headline number was22 221.8, which was, with all the deductions and additions

23 and adjustments, a positive 5 for W, which means the bid

24 is 10 to JCI/NEC.


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1 MS. BRIGHTON: Jo Ann Brighton, K&L Gates, on behalf

2 of NEC Corp.

3 First of all, NEC and JCI want to thank

4 everybody for their patience. We've been working on

5 reworking our internal deal. And that's resulted in NEC

6 making a bid of $40 million in addition to what's on the

7 table.

8 MR. POHL: Do you have anything to add?

9 MS. BRIGHTON: You want more?

10 MR. POHL: No. That wasn't my question. He was

11 looking at me, so I just -- I was being polite.

12 MR. FELTMAN: No, that's it.

13 MR. POHL: We count that as $40 million.

14 MR. GUZINA: We request a recess.

15 MR. POHL: Granted.

16 (recess taken.)

17 MR. POHL: Okay. I think we're ready to go back on

18 the record.

19 To recap, the last bid from W, headline number

20 216.6, after the JCI/NEC bid was 261.8, for a negative

21 delta for W of 35. Meaning a bid of 40 to W.22 MR. GUZINA: Bojan Guzina on behalf of Wanxiang

23 America.

24 We will increase our headline bid by 40 million


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Page 58

1 to 256.6. And we're not the back-up bidder.

2 MR. POHL: Okay. I think we'd like -- I think we'll

3 take a brief recess.

4 (recess taken.)


6 The prior bid by W was a headline number of

7 256.6. We have been informed by JCI and NEC, as

8 everybody can see, that they have declined to bid

9 further.

10 With respect to the W bid, as we've talked

11 about with counsel, and as I indicated, that is the

12 highest bid as we stand right now. And NEC and JCI have

13 declined to bid further.

14 We're going to adjourn the auction until noon

15 tomorrow. The intention of that is to use the time, not

16 all of the time, I hope, between now and then to

17 complete the documentation, with the expectation that

18 upon satisfactory documentation and after the Debtor

19 consults with the Committee and consults with its Board,

20 that we'll be at that time prepared to come back on the

21 record. So that's that.22 It's also my understanding that Navitas would

23 like to make a bid for the government business, which

24 has not so far been purchased.


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Page 59

1 MR. McGUIRE: Yes. This is Dan McGuire from

2 Navitas.

3 Our bid is for the same government assets as in

4 our previous APA. However, we'll modify the APA to

5 exclude any assets that are in the last W bid that was

6 made on the record.

7 In addition, we'll be adding all the equipment

8 in Korea to be removed by Navitas at our expense.

9 The Debtor will have the condition that if

10 we're not able to reach agreements with W with respect

11 to transition services and IP license, et cetera, it

12 will obviously have no obligation to close. So that our

13 deal cannot impede the W transaction. Likewise, we will

14 have an out if they're unable to reach terms on those

15 documents.

16 And our purchase price on those assets will be

17 2.25 million.

18 MR. POHL: Okay. Does anybody else wish to bid on

19 the government business?

20 Okay. So, similarly, that is the highest,

21 best, and only bid for the government business.22 We will adjourn the auction to complete the

23 documentation. And we'll see where we are tomorrow.

24


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Page 60

1 With that, I think we're done for tonight. And

2 on behalf of the Debtor, we thank everybody.

3

4 (Whereupon, proceedings in the

5 above-entitled cause were continued until

6 12:00 o'clock p.m. on Saturday, December

7 8th, 2012.)

8

9 * * o O o * *

10

11

12

13

14

15

16

17

18

19

20

2122

23

24


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Page 61

1 STATE OF ILLINOIS )) ss:


3

4 MARINA MOGILEVSKY, being first duly

5 sworn, deposes and says that she is a Certified

6 Shorthand Reporter in Cook County, Illinois, and

7 reporting proceedings in the Courts in said County;

8 That she reported in shorthand and

9 thereafter transcribed the foregoing proceedings;

10 That the within and foregoing transcript

11 is true, accurate and complete and contains all

12 proceedings had upon the within cause.

13

14 _________________________ MARINA MOGILEVSKY, C.S.R.

15 CSR No. 084-004103311 South Wacker Drive

16 Suite 300Chicago, Illinois 60606

17 Phone: (312) 386-2000

18

19

20 SUBSCRIBED AND SWORN tobefore me this _____ day

21 of ________________, A.D., _______.

22

23 _________________________________

24 Notary Public


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Page 62

1 IN THE UNITED STATES BANKRUPTCY COURTFOR THE DISTRICT OF DELAWARE

2

3 In Re: ))

4 A123 SYSTEMS, INC., et al., ) Chapter 11) No. 12-12859

5 Debtors. )

6

7

8 REPORT OF PROCEEDINGS at the bankruptcy

9 auction of the above entitled case held on the 9th

10 day of December, 2012, at 12:45 p.m.

11

12

13

14

15

16

17

18

19

20

2122

23

24


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1 MR. MILLER: Good afternoon. Joe Miller from

2 Lazard on behalf of A123 Systems, Inc. We're back on

3 the record on Sunday, December 9th to close the

4 auction of the assets and equity interests of the

5 debtors and their non-debtor affiliates.

6 Very early Saturday morning, we adjourned

7 the auction with a successful bid from Wanxiang

8 America Corp. with a purchase price of

9 $256.6 million. In order to enable the debtors, in

10 consultation with the UCC and DOE, to finalize all

11 documentation related to the successful bid, it's my

12 pleasure to announce that the debtors and Wanxiang

13 have agreed on documentation to the successful

14 Wanxiang bid.

15 The debtors also have determined that

16 Navitas has submitted a successful bid for the

17 remaining assets related to the government business

18 in the amount of $2.25 million. Definitive

19 documentation relating to their bid will be finalized

20 between now and the sale hearing.

21 The debtors would like to thank all the22 bidders for their interest, participation, patience

23 and conduct. With that, we're now closing the

24 auction of A123 Systems, Inc. and will see everyone


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Page 64

1 at the sale hearing on Tuesday, December 11th at

2 2:00 Eastern time in Wilmington, Delaware. Thank you

3 and have a good afternoon.

4 (Which were all the proceedings had or

5 offered at hearing of said cause.)

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

2122

23

24


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Page 65

1 STATE OF ILLINOIS )) ss.


3

4 LYDIA B. PINKAWA, CSR, does hereby certify

5 that she is a Certified Shorthand Reporter in the

6 firm of Merrill Legal Solutions, doing business in

7 the City of Chicago at 311 South Wacker Drive,

8 Chicago, Illinois, that said firm reported in

9 shorthand the proceedings had at the hearing

10 aforesaid, and that the foregoing is a full, true and

11 correct transcript of said shorthand notes so taken

12 as aforesaid, and contains all the proceedings given

13 at said hearing.

14

15

16 ____________________________

17 Certified Shorthand Reporter

18

19 CSR No. 84-002342

20

2122

23

24


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back-up 5:19,24 7:1343:7,14,20,21 44:1,445:4,11 46:15 48:2250:15 52:17 56:10,1258:1

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37:15,15 38:9,12,2039:7,12,21 44:1145:7,9 46:23 47:1,1547:21 49:7,9 51:2251:22 55:13,13 56:1657:1,1,9

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