U.S. TelePacific Corp. - Chapter 11 Plan Terms

Plan / RSA Terms

Overview

• U.S. TelePacific Corp. and the above-captioned debtors and debtors in possession (collectively, the “Debtors”) propose a joint chapter 11 plan (the “Plan”) for the resolution of the outstanding claims against, and equity interests in, the Debtors.
  • Although proposed jointly for administrative purposes, the Plan constitutes a separate Plan for each Debtor, and the Debtors are the proponents of the Plan within the meaning of section 1129 of the Bankruptcy Code.
  • The “Debtors” are, collectively: U.S. TelePacific Holdings Corp., Mpower Holding Corporation, Mpower Communications Corp., TPx International Holdings Corp., U.S. TelePacific Corp., NextWeb, Inc., DSCI, LLC, OCiX, Inc., Arrival Communications, Inc., TPx Communications Co., Big City Networks, Inc., and ICG ChoiceCom L.P.
    • “Parent” means U.S. TelePacific Holdings Corp., and the “Company Parties” means the Parent and each of its direct and indirect subsidiaries.
• The “Restructuring” refers to the financial and operational restructuring of the Debtors, the principal terms of which are set forth in the Plan (including the Plan Supplement).
  • The Plan contemplates two alternative paths: a Sale Transaction or, if the Debtors (with the consent of the Ad Hoc Group) elect not to pursue any Sale Transaction, a Reorganization Transaction.

Restructuring Support Agreement

• The Plan is supported by a Restructuring Support Agreement dated as of January 6, 2026, and amended and restated on March 18, 2026 and June 28, 2026.
  • The “Consenting Lenders” are, collectively, Holders of First Lien Term Loan Claims and/or Third Lien Term Loan Claims that are party to the Restructuring Support Agreement.
• The “Ad Hoc Group” is an ad hoc group of holders of, or investment advisors, sub-advisors, or managers of discretionary accounts of funds that hold, DIP Claims, Superpriority Term Loan Claims, First Lien Term Loan Claims, and/or Third Lien Term Loan Claims.
  • The Ad Hoc Group is represented by the Ad Hoc Group Advisors, which comprise Davis Polk & Wardwell LLP, Guggenheim Securities, LLC, and any special or local counsel and other advisors retained by the Ad Hoc Group.
  • Each Definitive Document shall be acceptable in form and substance to the Ad Hoc Group and otherwise comply with the consent rights set forth in the Restructuring Support Agreement. All consultation, information, notice, and consent rights set forth in the Restructuring Support Agreement are incorporated into, and fully enforceable as if stated in full in, the Plan.

DIP Financing

• The “DIP Facility” is a senior-secured superpriority debtor-in-possession delayed draw term loan facility for the DIP Loans, governed by the DIP Credit Agreement among U.S. TelePacific Corp., as borrower, U.S. TelePacific Holdings Corp., as parent, the DIP Guarantors, the DIP Lenders, and the DIP Agent.
  • DIP Claims include all amounts outstanding under the DIP Loan Documents, including any roll-up, refinancing, repayment, or reinstatement of the Superpriority Term Loan Claims, PIK Bridge Claims, or First Lien Term Loan Claims, and any multiple on invested capital, make-whole, or other premium.
• On the Effective Date, in full and final satisfaction of all Allowed DIP Claims, the DIP Obligations shall be treated as follows:
  • In the event of a Sale Transaction, paid in full in Cash; or
  • In the event of a Reorganization Transaction:
    • Holders of Allowed DIP Claims on account of DIP New Money Term Loan Advances and DIP Rolled-Up First Lien Principal Term Loan Advances shall receive 1L Exit Term Loans;
    • Holders of Allowed DIP Claims on account of DIP Rolled-Up Bridge Term Loan Advances shall be paid in full in Cash or, if such holders are Funding Consenting Lenders, receive 1L Exit Term Loans; and
    • Holders of Allowed DIP Claims on account of DIP Rolled-Up First Lien Interest Term Loan Advances shall be paid in full in Cash or, if such holders are Funding Consenting Lenders, receive Preferred Equity Tranche A Interests (including in respect of the Preferred Equity Exchange Premium).

Sale Transaction

• The Debtors shall engage in a process for the sale of some or all of their assets, which sales may be subject to regulatory approvals prior to consummation.
  • In the event the Debtors, with the consent of the Ad Hoc Group, elect to consummate the Sale Transaction, the Debtors shall seek approval of the Sale Orders, which shall approve, pursuant to section 363 of the Bankruptcy Code, one or more sales of all or substantially all of the Debtors’ assets to one or more purchasers who tender the highest or best bid.
  • “Turnover Proceeds” means 10% of any Net Sale Proceeds (including non-Cash Net Sale Proceeds, which shall be paid in kind) that exceed $200,000,000.

Reorganization Transaction

• In the event the Debtors, with the consent of the Ad Hoc Group, elect not to pursue any Sale Transaction, the Reorganization Transaction shall be consummated on the Effective Date or as soon as reasonably practicable thereafter, and may be subject to regulatory approvals.
  • The “Reorganization Consideration” means 100% of the Common Equity Interests, subject to dilution by the issuance, conversion, and/or exercise of the New Equity Interests and the Warrants, including conversion of the Preferred Equity Interests.
  • The Reorganized Debtors shall issue all securities, notes, instruments, certificates, and other documents required to be issued pursuant to the Restructuring Transactions.
  • On the Effective Date, the New Board shall be established and the Reorganized Debtors shall adopt their New Organizational Documents.

1L Exit Facility

• In the event of a Reorganization Transaction, the “1L Exit Facility” is a senior secured first lien term loan facility to be entered into by the Reorganized Debtors on the Effective Date, with an aggregate principal amount estimated to be approximately $54,100,000 as of the Petition Date.
  • The 1L Exit Term Loans are comprised of loans converted, on the Effective Date, from (i) DIP New Money Term Loan Advances, (ii) DIP Rolled-Up Bridge Term Loan Advances, and (iii) DIP Rolled-Up Prepetition Term Loan Advances.
  • The 1L Exit Facility shall constitute a legal, valid, binding, and authorized obligation of the applicable Reorganized Debtors enforceable in accordance with its terms.

Preferred Equity Interests

• In the event of a Reorganization Transaction, the Reorganized Debtors shall issue Preferred Equity Tranche A Interests and Preferred Equity Tranche B Interests, with an aggregate principal amount estimated to be approximately $74,500,000 as of the Petition Date.
  • As of the Petition Date, the aggregate principal amount of the Preferred Equity Tranche A Interests is estimated to be approximately $64,600,000, and the Preferred Equity Tranche B Interests approximately $9,800,000.
• The Preferred Equity Tranche A Interests shall:
  • Accrue at an annual rate of 14.0%, payable in kind;
  • Be junior to the 1L Exit Facility and senior to all other equity of the Reorganized Debtors;
  • Be mandatorily convertible into New Equity Interests upon a sale or similar transaction, at a conversion ratio set at emergence representing the pro forma ownership on an as-converted basis as if the Preferred Equity Tranche A Commitment Amount were invested at a 25% discount to the equity value implied by a $175 million total enterprise value; and
  • Vote on governance matters on an as-converted basis.
  • As of the Petition Date, the Debtors estimate the aggregate Preferred Equity Tranche A Interests represent 75.10% of the Common Equity Interests on an as-converted basis at emergence.
• The Preferred Equity Tranche B Interests shall:
  • Accrue at an annual rate of 14.0%, payable in kind;
  • Be junior to the 1L Exit Facility and senior to all other equity of the Reorganized Debtors;
  • Be mandatorily convertible into Common Equity Interests upon a sale or similar transaction, at a conversion ratio set at emergence representing the pro forma ownership on an as-converted basis as if the Preferred Equity Tranche B Commitment Amount were invested at the equity value implied by a $250 million total enterprise value; and
  • Vote on governance matters on an as-converted basis.
  • As of the Petition Date, the Debtors estimate the aggregate Preferred Equity Tranche B Interests represent 5.16% of the Common Equity Interests on an as-converted basis at emergence.
• Commitment amounts and premiums:
  • The Preferred Equity Tranche A Commitment Amount, comprising the Initial Pro Rata Share Tranche A Preferred Equity New Money Commitments and the Oversubscribed Tranche A Preferred Equity New Money Commitments, is approximately $51,650,000 as of the Petition Date.
  • The Preferred Equity Tranche B Commitment Amount is approximately $9,800,000 as of the Petition Date.
  • The “Preferred Equity Exchange Premium” equals 22.5% of the amount of DIP Claims in respect of the principal amount of DIP Rolled-Up First Lien Interest Term Loan Advances held by the applicable Funding Consenting Lender, payable in Preferred Equity Tranche A Interests on the Effective Date.
  • The Preferred Equity Tranche A Commitment Premium, payable in Preferred Equity Tranche A Interests to each Preferred Equity Tranche A Commitment Party, equals 5.00% of their respective Initial Pro Rata Share Tranche A Preferred Equity New Money Commitments and 10.00% of their respective Oversubscribed Tranche A Preferred Equity New Money Commitments.

Warrants

• In the event of a Reorganization Transaction, the Reorganized Debtors shall issue Warrants to the Holders of Allowed Second Lien Secured Claims to purchase New Equity Interests representing, in the aggregate, up to 5.94% of the Common Equity Interests upon exercise.
  • The Warrants are exercisable on a cashless basis at any time prior to the date that is four years from the Effective Date, with an exercise price per underlying share calculated using a total equity value of approximately $326,000,000 as of the Effective Date (equal to the product of four and the sum of the DIP New Money Term Loan Advances and the Preferred Equity New Money Commitment Amount).
• The Warrants Term Sheet and Warrants Agreements shall provide that the Warrants:
  • Do not have Black-Scholes protections;
  • Receive value only to the extent of any appreciation above the exercise price, without any catch-up provision;
  • Are transferable only to Affiliates of the Consenting Investor; and
  • Upon a change of control of the Reorganized Debtors, shall, if out of the money, be canceled for no consideration, or, if in the money, be cashed out or automatically net exercised in connection with such change of control.

Cash-Out Option

• In the event of a Reorganization Transaction, in lieu of receiving New Equity Interests, each holder of an Allowed Pari Funded Debt Secured Claim shall be entitled to irrevocably elect to receive all or a portion of its distribution of New Equity Interests in Cash, consistent with the Cash-Out Option, the Plan, and the Election Procedures.
  • The “Cash-Out Amount” is Cash per Cashed-Out Interest, in an amount to be disclosed in the Plan Supplement, paid in exchange for the New Equity Interests a Prepetition Secured Party elects to exchange for Cash (the “Cashed-Out Interests”).
  • The aggregate Cash-Out Amount shall be funded by the proceeds of the 1L Exit Facility and the Preferred Equity New Money Commitments.

Transaction Expenses

• “Transaction Expenses” include:
  • All documented fees, costs, and out-of-pocket expenses of the Ad Hoc Group Advisors and the Agent Advisor related to or incurred in connection with the Restructuring Transactions and the Chapter 11 Cases, whether arising before or after the Petition Date; and
  • Subject to a $50,000 cap, all documented fees, costs, and out-of-pocket expenses of legal counsel to the Consenting Investor related to or incurred in connection with the Restructuring Transactions and the Chapter 11 Cases.
• The Transaction Expenses incurred, or estimated to be incurred, up to and including the Effective Date (or, with respect to necessary post-Effective Date activities, thereafter) shall be paid in full in Cash on the Effective Date, to the extent not previously paid, without any requirement to file a fee application, without the need for itemized time detail, and without any requirement for Bankruptcy Court review or approval.

Conditions Precedent to the Effective Date

• It shall be a condition to the Effective Date that, among other things:
  • The final version of each of the Plan, the Definitive Documents, and all documents contained in any supplement to the Plan shall have been executed or Filed, in form and substance consistent in all respects with the Plan and the Restructuring Support Agreement, and shall comply with the applicable consent rights, absent the Ad Hoc Group’s (and, to the extent required, the Consenting Investor’s, and, with respect to any modification to the treatment of the RPA Obligations, TSHL’s) prior written consent;
  • Each of the Definitive Documents shall have been executed by the applicable parties (or Filed), consistent with the Plan and the consent rights set forth in the Restructuring Support Agreement, and the conditions to effectiveness shall have been satisfied or waived; and
  • The Restructuring Support Agreement shall be in full force and effect, with no termination event (or event that would give rise to one upon expiration of the applicable grace period) having occurred, and shall not have been validly terminated prior to the Effective Date.
• Any one or more of the conditions to Consummation may be waived by the Debtors solely with the prior written consent of the Required Consenting Ad Hoc Group Lenders and the Required Funding Consenting Lenders (and, solely if required by the consent rights in the Restructuring Support Agreement, the Consenting Investor and/or TSHL), without notice, leave, or order of the Bankruptcy Court.

Releases

• The “Released Parties” include, in each case in its capacity as such: each Debtor; the Plan Administrator or the Reorganized Debtors, as applicable; the Consenting Investor; TSHL; the DIP Lenders and the DIP Agent; the Agents; each Releasing Party; each Consenting Lender; and each current and former Affiliate and Related Party of the foregoing.
• The “Releasing Parties” include each Debtor; the Plan Administrator or the Reorganized Debtors, as applicable; the Consenting Investor; TSHL; the DIP Lenders and the DIP Agent; the Agents; and all Holders of Claims or Interests that vote to accept, are deemed to accept, vote to reject, are deemed to reject, or abstain from voting on the Plan and who do not affirmatively opt out of (or opt in to, as applicable) the releases, together with the current and former Affiliates and Related Parties of the foregoing.
  • An Entity shall not be a Releasing Party if it elects to opt out of, or not opt in to, as applicable, the Third-Party Release, or timely objects to the Third-Party Release through a formal objection Filed on the docket that is not resolved before Confirmation.
  • Holders of General Unsecured Claims shall only be Releasing Parties to the extent such Holders receive or retain any distribution, property, or other value on account of their General Unsecured Claims under the Plan.
  • “TSHL” means Tango Stockholder Holdings, LLC, a Delaware limited liability company.