U.S. TelePacific Corp. - Chapter 11 Bidding Procedures Summary

Bidding Procedures / Asset Purchase Agreement Summary

Overview

• On June 28, 2026, U.S. TelePacific Corp. and its debtor affiliates (collectively, the Debtors) filed voluntary chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of Texas.
• The Debtors filed these cases pursuant to a Restructuring Support Agreement (RSA) with certain key stakeholders (the Consenting Stakeholders), including:
  • Holders of 100% of the outstanding obligations under the Superpriority Term Loan Facility;
  • Holders of approximately 98% of the outstanding obligations under the First Lien Term Loan Facility;
  • Holders of 100% of the outstanding obligations under the Second Lien Term Loan Facility;
  • Holders of approximately 88% of the outstanding obligations under the Third Lien Term Loan Facility;
  • The Debtors' sole equity holder; and
  • 100% of the Debtors' accounts receivable purchasers.
• Pursuant to the RSA, the Consenting Stakeholders agreed to support the Joint Chapter 11 Plan, which contemplates two paths to a value-maximizing transaction: (a) a standalone restructuring of the Debtors' balance sheet (the Reorganization Transaction) or (b) the Sale Transaction.
• The Plan contemplates that the Debtors will continue their M&A Process and, if such process does not maximize value for stakeholders, pursue the Reorganization Transaction. The Reorganization Transaction serves as an alternative restructuring proposal, pursuant to which the Debtors will equitize the Pari Funded Debt Claims.

Parties Involved

• Debtors / Sellers: U.S. TelePacific Corp. and its debtor affiliates, including U.S. TelePacific Holdings Corp., Mpower Holding Corporation, Mpower Communications Corp., TPx International Holdings Corp., NextWeb, Inc., DSCI, L.L.C., OCIX, Inc., Arrival Communications, Inc., TPx Communications Co., Big City Networks, Inc., and ICG ChoiceCom L.P.
• Debtors' Counsel: Sidley Austin LLP
• Debtors' Investment Banker: PJT Partners, LP (designated to coordinate all due diligence requests and serve as the lead point of contact for potential bidders)
• Debtors' Financial Advisor: Triple P TRS, LLC

Assets Being Sold

• The Debtors seek the highest or otherwise best offer(s) for the sale of all or substantially all of their assets, under section 363 of the Bankruptcy Code, including, without limitation:
  • Assets related to the Debtors' managed IT services for networking, security, and UCaaS, including SD-WAN/SASE, firewalls, and endpoint protection (the Managed IT Service Assets);
  • Assets related to the Debtors' advisory and professional implementation services (the Advisory Services Assets);
  • Assets related to the Debtors' voice and internet access services (the Voice & Internet Services Assets); and
  • Certain remaining property owned by the Debtors (the Other Assets).
• The Debtors may determine, in consultation with the Consultation Parties, whether to proceed with any Sale Transaction pursuant to the Bid Procedures.

Stalking Horse Bid

• The Debtors are authorized, in the exercise of their reasonable business judgment and after consultation with the Consultation Parties, but are not obligated to, designate a Stalking Horse Bidder for one or more of the Assets and enter into a Stalking Horse Agreement.
• Any Stalking Horse Bidder is deemed a Qualified Bidder, and any Stalking Horse Bid is deemed a Qualified Bid, for all purposes under the Bid Procedures, and the Stalking Horse Bidder may participate in the Auction.
• In the event that no other Qualified Bids are submitted, the Debtors shall deem any Stalking Horse Bidder to be the Successful Bidder.
• Upon execution of a Stalking Horse Agreement, the Debtors shall file with the Court, serve on the Notice Parties, and publish on the Case Website maintained by Kroll Restructuring Administration LLC a Notice of Stalking Horse Bidder containing information about the Stalking Horse Bidder, the Stalking Horse Bid, and the proposed Stalking Horse Bid Protections, attaching the proposed Stalking Horse Agreement.
• Objections to the provision of Stalking Horse Bid Protections (a Stalking Horse Objection) must be in writing, comply with the applicable rules, state with specificity the legal and factual bases, and be filed and served on the Objection Notice Parties within three business days after service of the Sale Notice or the applicable Notice of Stalking Horse Bidder.
  • If a timely Stalking Horse Objection is filed, the proposed designation and Bid Protections will not be approved until the objection is resolved by agreement or by order of the Court following an expedited hearing.
  • If no timely Stalking Horse Objection is filed, the Debtors shall file a Certificate of No Objection and submit a proposed order approving the Stalking Horse Bid Protections.

Bid Protections

• The Debtors, after consultation with the Consultation Parties, are authorized, but not obligated, to offer Stalking Horse Bid Protections, which may consist of (a) reimbursement of reasonable and documented out-of-pocket costs and expenses up to a specified amount (the Purchaser Expense Reimbursement) and/or (b) a breakup fee (the Breakup Fee).
• Without further order of the Court, no break-up fee shall exceed three percent (3%) of the purchase price (including the value of assumed liabilities) in the Stalking Horse Bid, and the total expense reimbursements shall be subject to a reasonable cap to be agreed upon by the Debtors and any Stalking Horse Bidder.
• The Stalking Horse Bid Protections, to the extent earned and payable, shall constitute an allowed administrative expense claim pursuant to sections 105(a), 364, 503, and 507 of the Bankruptcy Code.
• Absent further order of the Court, no person or entity other than a Stalking Horse Bidder shall be entitled to any expense reimbursement or break-up, topping, termination, or other similar fee for submitting a bid or participating in the sale process. All other Potential and Qualified Bidders (other than the Stalking Horse Bidder and members of the Ad Hoc Group) will bear their own costs and expenses and, by submitting a bid, waive any assertion or request for reimbursement, including under section 503(b) of the Bankruptcy Code.

Credit Bid

• Any creditor holding a valid and perfected lien on any Assets (a Secured Party) shall be entitled to credit bid all or a portion of the face value of its claims toward the Purchase Price specified in its Bid, including, in the event of an Auction, as part of an Overbid.
  • A Secured Party may credit bid only with respect to Assets subject to its valid and perfected lien and only to the extent permitted under any relevant agreements (including the DIP Orders) and the Bankruptcy Code.
  • A Secured Party (other than the DIP Lenders and Prepetition First Lien Lenders) may credit bid only to the extent that all claims senior to its liens on the applicable Assets will be paid in full in cash at closing.
• Each Secured Party may, subject to section 363(k) of the Bankruptcy Code and the Complex Case Procedures, submit a Credit Bid of all or any portion of its secured claims, including any postpetition financing claims, and shall have the absolute right to assign, transfer, sell, or otherwise dispose of its Credit Bid rights to any entity formed in connection with such bid or other designee.
• A Credit Bid shall be deemed a cash Bid and shall not be considered inferior to, or a detrimental factor relative to, a comparable cash or other non-cash bid.
• Any Secured Party submitting a Credit Bid (or any entity formed for that purpose), whether acting as a Stalking Horse Bidder or otherwise, shall be deemed a Potential Bidder and Qualified Bidder (provided that no Stalking Horse Bidder shall be a Potential Bidder), shall be deemed to have submitted a Qualified Bid, and may participate in any Auction with respect to its collateral without the requirement to submit a Good Faith Deposit, additional diligence information, or any Bid Documents.

Due Diligence

• To participate in the bid process, an interested party must deliver Preliminary Bid Documents, including an executed confidentiality agreement and sufficient information demonstrating financial capacity and authorization to close a Sale Transaction.
• Only parties submitting acceptable Preliminary Bid Documents (each, a Potential Bidder), to the reasonable satisfaction of the Debtors and their advisors and in consultation with the Consultation Parties, may submit bids and receive access to the Debtors' electronic Data Room and additional non-public information.
• The Debtors reserve the right to require Potential Bidders to submit written indications of interest prior to the Bid Deadline (specifying, among other things, the Assets to be acquired, the amount and type of consideration, and other material terms). Failure to comply may result in denial of further diligence access or participation, and the Debtors may exclude any Potential Bidder whose proposed consideration they determine is insufficient.
• The Debtors will post substantially all written due diligence provided to any Potential Bidder to the Data Room. The due diligence period will end on the Bid Deadline, after which the Debtors have no obligation to furnish further due diligence information.
• For any bidder that is a competitor or customer of the Debtors, or affiliated with any competitor or customer, the Debtors reserve the right to withhold or modify any diligence materials they determine are business sensitive or otherwise inappropriate for disclosure.
• The Debtors have designated PJT to coordinate responses to all reasonable information and due diligence requests; any bidder must contact PJT to ensure participation in the marketing and sale process.

Bid Requirements

• To participate in the Auction, a Potential Bidder (other than the Stalking Horse Bidder) must deliver an irrevocable offer for the purchase of the Assets that, among other requirements:
  • Clearly proposes a Sale Transaction, specifies the disposition of liabilities or obligations, and identifies which Assets are included or excluded;
  • Clearly specifies a Purchase Price of no less than $175,000,000, separately identifying any cash and non-cash components, with allocation among multiple facilities or Assets and the key assumptions, valuation metrics, and methodologies underlying the Purchase Price;
  • Is accompanied by an executed asset purchase agreement (APA), including exhibits, schedules, and ancillary agreements, together with a redline against the Debtors' form purchase agreement;
  • Includes written evidence demonstrating the Potential Bidder's financial ability to close;
  • Is not conditioned on financing, internal approval, or the outcome or review of due diligence, with any financing commitments in effect as of submission and not subject to financing contingencies;
  • Fully discloses the identity of each entity bidding or participating, including each equity holder or financial backer of any bidder formed for the purpose of the transaction;
  • Addresses regulatory and third-party approvals, including required Hart-Scott-Rodino and other antitrust filings and a timeline and plan to obtain requisite approvals;
  • Contains evidence of board or comparable governing-body authorization;
  • Identifies each executory contract and unexpired lease to be assumed and assigned (the 365 Contracts) and includes an Adequate Assurance Package, submitted as its own compiled PDF;
  • Indicates whether the bidder intends to hire all or some of the employees primarily employed in connection with the Assets and, if so, which employees;
  • Includes a written acknowledgement that the bid is made on an independent-review, as-is, where-is basis without reliance on any representations and without collusive conduct;
  • Provides a commitment to close as soon as practicable following Court approval and that the offer remains open and irrevocable through the conclusion of the Auction (and, if chosen as the Back-Up Bid, until consummation of the Sale Transaction);
  • Includes a written commitment to serve as a Back-Up Bidder if its Bid is the next highest or otherwise best bid;
  • States the expected closing date and whether the Potential Bidder would like its Bid considered as a Stalking Horse Bid; and
  • Contains a covenant to comply with the Bid Procedures and the Bid Procedures Order.
• Only Bids fulfilling all of the foregoing requirements (or as otherwise determined in the Debtors' reasonable discretion and in consultation with the Consultation Parties) shall be deemed Qualified Bids, and only those parties submitting Qualified Bids may be deemed Qualified Bidders.
• Within one business day after the Bid Deadline, or as soon thereafter as reasonably practicable, the Debtors shall, in consultation with the Consultation Parties, determine which Potential Bidders are Qualified Bidders and notify them accordingly. Any Bid not deemed a Qualified Bid will not be considered, though the Debtors may provide a Potential Bidder the opportunity to remedy deficiencies prior to the Auction.
• Without the Debtors' written consent (in consultation with the Consultation Parties), a Qualified Bidder may not modify, amend, or withdraw its Qualified Bid, except to increase the Purchase Price or otherwise improve its terms.
• Bids must be transmitted via email (in PDF or similar format) to the Debtors and their advisors so as to be actually received no later than 4:00 p.m. (prevailing Central Time) on August 7, 2026 (the Bid Deadline). The Debtors, in consultation with the Consultation Parties, may extend the Bid Deadline if doing so would further the goal of attaining the highest or otherwise best offer.

Good Faith Deposit

• Each Bid, other than a Credit Bid, must be accompanied by a cash deposit equal to 10% of the aggregate Purchase Price, submitted by wire transfer to one or more escrow accounts designated by the Debtors (the Good Faith Deposit); the Debtors may elect to waive or modify this requirement on a case-by-case basis.
• If a Qualified Bid is modified to increase the Purchase Price, the Debtors reserve the right to require the Qualified Bidder to increase its Good Faith Deposit.
• Good Faith Deposits shall be held in escrow and shall not become property of the Debtors' estates. Deposits of bidders that are not the Successful Bidder (or Back-Up Bidder) will be returned no later than five business days after the Auction.
• The Good Faith Deposit of a Successful Bidder shall be applied to the Purchase Price at closing. The Back-Up Bidder's deposit shall be returned no later than the earlier of five business days after closing with the Successful Bidder and the Back-Up Termination Date.
• If a Successful Bidder (or Back-Up Bidder) fails to consummate the Sale Transaction because of its breach, the Debtors will not be obligated to return the Good Faith Deposit, which may be retained in addition to any other rights, remedies, or causes of action available to the Debtors and their estates.

Overbid

• Only incremental Bids complying with the terms of the Bid Procedures shall be considered Overbids. Overbids shall be made and received on an open basis, with all material terms fully disclosed to all other Qualified Bidders in attendance.
• At the commencement of the initial solicitation of Overbids, the Debtors shall announce the minimum increment by which any Overbid must exceed the Starting Bid; at each subsequent round, the Debtors shall announce the minimum increment by which any Overbid must exceed the then-Prevailing Highest Bid.
• The Debtors may announce an Overbid Round Deadline for each round and may extend such deadline. An Overbid may contain alterations no less favorable in the aggregate to the Debtors' estates than any prior Qualified Bid or Overbid.
• No Round-Skipping: to remain eligible, each Qualified Bidder must submit an Overbid in each round of bidding, failing which it shall be disqualified, unless the Debtors waive the requirement.

Auction Details

• If the Debtors receive two or more Qualified Bids (including the Stalking Horse Bid, if any) by the Bid Deadline, the Debtors may conduct an Auction, to be held in person or via remote video connection on August 12, 2026, to determine the Successful Bidder or Back-Up Bidder.
• The Debtors will identify the highest or otherwise best Qualified Bid (or combination of Qualified Bids) as the Starting Bid, considering factors including the amount and nature of total consideration; the likelihood and timing of closing (including regulatory approvals); the net economic effect on the estates; tax consequences; treatment of executory contracts and unexpired leases; the number and nature of changes to the APA; closing contingencies or conditions; the proposed treatment of the Debtors' employees; and any other relevant qualitative or quantitative factors.
• The Debtors, with the assistance of their advisors, shall direct and preside over the Auction and maintain a written transcript of all Bids, including the Starting Bid, all Overbids, and the Successful Bid and Back-Up Bid.
• Only Qualified Bidders, the Debtors, the Consultation Parties, their respective legal and financial advisors, and any other parties specifically invited by the Debtors may attend. Qualified Bidders shall appear in person, with a principal having decision-making authority present.
• Each participating Qualified Bidder must confirm on the record that it has not engaged in collusion and that its Qualified Bid is a good-faith offer.
• The Auction shall continue until the Debtors determine the highest or otherwise best Qualified Bid (the Successful Bid, submitted by the Successful Bidder), at which point the Debtors will close the Auction and designate the next-highest or second-best Bid as the Back-Up Bid.
• The Debtors may reject, at any time before entry of an order approving a Successful Bid (or Back-Up Bid), any Bid that is inadequate or insufficient, not in conformity with the Bankruptcy Code and/or Bid Procedures, or contrary to the best interests of the Debtors, their estates, their creditors, and other stakeholders.
• Following the Auction, the Debtors shall file the Post-Auction Notice within one business day, or as soon thereafter as reasonably practicable.
• If no Qualified Bids are received by the Bid Deadline, the Debtors shall cancel the Auction and, in lieu of proceeding with the Sale Transaction, pursue the Reorganization Transaction, filing a notice with the Court within one business day of such designation.

Back-Up Bidder

• Each Bid must include a written commitment by the Potential Bidder to serve as a Back-Up Bidder in the event its Bid is not selected as the Successful Bid and is the next highest or otherwise best bid.
• Unless otherwise agreed by the Debtors, the Back-Up Bid shall remain open and irrevocable until the earliest of (i) the consummation of the transaction with the Successful Bidder and (ii) the release of such bid by the Debtors (the Back-Up Termination Date), notwithstanding any contrary termination date in the applicable APA.
• If the Sale Transaction with the Successful Bidder is terminated prior to the Back-Up Termination Date, the Back-Up Bidder shall be deemed the Successful Bidder and obligated to consummate the Back-Up Bid as if it were the Successful Bid.

Assumption and Assignment of 365 Contracts

• The Debtors shall file, post on the Case Website, and serve on each Counterparty the Cure Notice on or prior to July 7, 2026. The Cure Notice will contain the list of 365 Contracts, notice of the proposed assumption and assignment, the Cure Amount (if any), and the procedures for objecting. If no Cure Amount is listed for a particular 365 Contract, the asserted Cure Amount shall be deemed to be $0.00.
• Cure Objections (to proposed Cure Amounts or any other matter pertaining to assumption or payment of Cure Amounts under section 365(b)(1)) must be filed with the Court and served on the Objection Notice Parties no later than July 21, 2026, at 4:00 p.m. (Central Time) (the Cure Objection Deadline). Any Cure Objection to a Supplemental Cure Notice must be filed within seven days after its service.
• If a Contract Objection (including any Cure Dispute over the Cure Amount required under section 365(b)(1)) cannot be consensually resolved before the Sale Hearing, the Debtors may (a) assume the 365 Contract before the dispute is resolved - paying the undisputed portion of the Cure Amount within five business days after closing and reserving cash sufficient to cover the disputed portion - or (b) adjourn the assumption request pending resolution (an Adjourned Cure Dispute), and may withdraw the proposed assumption if the dispute is resolved unfavorably (for a lease, prior to the section 365(d)(4) deadline to assume or reject).
• Following the Auction, the Successful Bidder shall provide adequate assurance information to the Debtors, who will provide it to requesting Counterparties on a strictly confidential basis. Adequate Assurance Objections (to the Successful Bidder's ability to provide, or the proposed form of, adequate assurance of future performance) must be filed by no later than August 26, 2026, at 4:00 p.m. (Central Time) (the Adequate Assurance Objection Deadline) and served on the Objection Notice Parties.
• If the Debtors or the Successful Bidder identify additional 365 Contracts or modifications to proposed Cure Amounts, the Debtors shall file and serve a Supplemental Cure Notice substantially similar to the Cure Notice.
• If no timely Cure Objection is filed, the Cure Amount identified will be the only amount necessary under section 365(b) to cure all defaults. If no timely Adequate Assurance Objection is filed, the Debtors will be deemed to have provided adequate assurance of future performance, and the Counterparty will be forever barred from asserting any additional adequate-assurance obligation.
• The inclusion of any contract on a Cure Notice does not obligate the Debtors to assume, or the Successful Bidder to take assignment of, such contract, nor does it constitute an admission that the contract is an executory contract or unexpired lease. At the Sale Hearing, the Debtors will seek approval of the assumption and assignment of those 365 Contracts selected by the Successful Bidder; absent an order approving the Sale Transaction, the 365 Contracts shall not be deemed assumed or assigned.
• Any counterparty that fails to object timely to the proposed assumption or Cure Amount will be deemed to have assented to such assumption and Cure Amount.

Sale Free and Clear & "As Is, Where Is"

• Consummation of the Sale Transaction will be on an "as is, where is" basis, without representations or warranties of any kind by the Debtors, their estates, or their representatives or advisors, except as specifically agreed to by the Debtors in the executed Definitive Documents.
• Unless otherwise specifically agreed to in the Definitive Documents, all of the Debtors' right, title, and interest in the Assets will be transferred to the Successful Bidder (or Back-Up Bidder) free and clear of all pledges, liens, security interests, encumbrances, claims, charges, options, and interests in accordance with sections 363(f) or 1123 of the Bankruptcy Code.
• By submitting a Bid, each bidder is deemed to acknowledge that it conducted adequate due diligence, relied solely on its own independent review, and did not rely on any representations or warranties whatsoever regarding the Sale Transaction.

Fiduciary Out

• Nothing in the Bid Procedures or the Bid Procedures Order shall require a Debtor or its governing body (including the Transaction Committee) to take or refrain from taking any action that it determines in good faith, in consultation with counsel, would be inconsistent with applicable law or its fiduciary obligations.
• Until the closing of the Auction, the Debtors and their advisors retain the right to consider and respond to unsolicited Alternate Proposals, provide access to non-public information under confidentiality agreements, and maintain or continue discussions and negotiations regarding Alternate Proposals.
• Nothing in this provision shall override or modify the Restructuring Support Agreement or prevent the Debtors or their affiliates from performing under it and continuing the marketing process in accordance therewith.

Consultation Parties

• The Consultation Parties are: (a) the ad hoc group of Consenting Superpriority Lenders, Consenting First Lien Lenders, and Consenting Third Lien Lenders (the Ad Hoc Group) and (b) any statutory committee appointed in these cases, together with their respective counsel or financial advisors.
  • To the extent any such party (or, with respect to the Ad Hoc Group, any member thereof) is a bidder, it shall not be a Consultation Party to the extent that doing so would violate the Procedures for Complex Cases in the Southern District of Texas.
  • The Prepetition Second Lien Lenders, in any capacity, shall not be a Consultation Party.

Reservation of Rights

• The Debtors are entitled to modify the Bid Procedures in their business judgment to best promote the goals of the Bid Procedures, including by extending deadlines, adjourning or canceling the Auction, adding procedural rules, rejecting any or all Bids or Qualified Bids, and adjusting the applicable bid increment, provided that they may not modify their obligations to consult with any Consultation Party without its consent and may not modify the credit-bid provisions or otherwise alter or limit the rights of, or impose additional burdens on, the Ad Hoc Group.
• The Debtors reserve the right to terminate the sale process at any point prior to selection of a Successful Bidder, without prejudice to the rights of the DIP Lenders under the DIP Orders.
• The rights of the DIP Secured Parties and the Ad Hoc Group under the Restructuring Support Agreement, DIP Orders, and DIP Documents—including consent rights over the sale of their collateral and the application of cash proceeds—are expressly reserved and not modified by the Bid Procedures.
• The Debtors shall be under no obligation to pay any commissions, fees, or expenses to any bidder's agent, advisor, or broker.
• The key dates and deadlines may be extended or modified only with the prior written consent (email being sufficient) of the Ad Hoc Group, with any extension or modification effected by the Debtors filing a notice on the Court's docket or by order of the Court. (The Bid Deadline provision separately frames extension as being made by the Debtors in consultation with the Consultation Parties - an apparent inconsistency within the source.)

Sale Hearing

• A Sale Hearing to (a) approve the sale of the Assets to the Successful Bidder, (b) approve designation of the Back-Up Bid and Back-Up Bidder, if applicable, and (c) authorize the assumption and assignment of certain executory contracts and unexpired leases shall be held before the Honorable Judge Pérez on September 2, 2026, at 11:00 a.m. (prevailing Central Time), and may be adjourned or rescheduled upon notice by the Debtors.
• Unless the Court orders otherwise, the Sale Hearing shall be an evidentiary hearing and may be the same hearing at which the Debtors' chapter 11 plan is approved.
• Sale Objections (including any objection to the sale free and clear under section 363(f) and entry of a Sale Order) must be in writing, comply with the applicable rules, state with specificity the legal and factual bases, and be filed and served on the Objection Notice Parties no later than August 26, 2026, at 4:00 p.m. (prevailing Central Time) (the Sale Objection Deadline). Any party failing to timely file a Sale Objection will be forever barred from asserting such objection.
• If the Successful Bidder cannot or refuses to consummate the Sale Transaction because of its breach or failure, the Debtors may designate the Back-Up Bid as the new Successful Bid and the Back-Up Bidder as the new Successful Bidder, and shall be authorized, but not required, to consummate the Sale Transaction with the Back-Up Bidder without further order of the Court.
• The Debtors' presentation of a Successful Bid to the Court does not constitute acceptance; the Debtors shall be deemed to have accepted the Successful Bid only when it has been approved by order of the Court.

Key Dates

• Hearing to Approve Bid Procedures: June 29, 2026
• Deadline to File Cure Notice: July 7, 2026
• Cure Objection Deadline: July 21, 2026, at 4:00 p.m. CT
• Bid Deadline: August 7, 2026, at 4:00 p.m. CT
• Determination of Qualified Bids: August 10, 2026
• Auction (if applicable): August 12, 2026
• Deadline to Serve Post-Auction Notice: One business day following the close of the Auction, or as soon thereafter as is reasonably practicable
• Sale Objection Deadline: August 26, 2026, at 4:00 p.m. CT
• Adequate Assurance Objection Deadline: August 26, 2026, at 4:00 p.m. CT
• Sale Hearing: September 2, 2026, at 11:00 a.m. CT