SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DECEMBER 30, 1999
_______________________________________
Date of Report (Date of earliest event reported)
USN COMMUNICATIONS, INC.
______________________________________________________
(Exact name of Registrant as specified in its charter)
DELAWARE 333-16265 36-3947804
______________ _____________________ __________________
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
10 SOUTH RIVERSIDE PLAZA, SUITE 1810, CHICAGO, ILLINOIS 60606
____________________________________________________________
(Address of principal executive offices, including zip code)
(312) 474-5766
____________________________________________________
(Registrant's telephone number, including area code)
N/A
_____________________________________________________________
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
On December 30, 1999, USN Communications, Inc. (the "Company"), filed
with the United States Bankruptcy Court for the District of Delaware (the
"Court"), a Disclosure Statement for Debtors' Joint Consolidated Plan of
Reorganization (the "Disclosure Statement") in connection with the
Company's ongoing bankruptcy proceedings pending in the Court, Case No. 99-
383(PJW). The Disclosure Statement describes the proposed plan of
reorganization for the reorganized Company and certain of its subsidiaries
(collectively, the "Debtors"), including proposed uses of any realized
proceeds from any proposed or completed asset sales. Those uses include
the payment of actual and necessary costs and expenses incurred after the
commencement of the Debtors' bankruptcy proceedings, the payment of
authorized fees and expenses incurred during the Debtors' bankruptcy
proceedings, and the pro rata distribution of the remaining proceeds in
satisfaction of the Debtors' outstanding debts incurred prior to the
commencement of the Debtors' bankruptcy proceedings. The Disclosure
Statement also describes, among other things, (1) the planned sale of the
Company's wireless subsidiaries to Alexandra Telephone Acquisition LLC and
(2) the completed sale of certain warrants to purchase common stock in
CoreComm Limited issued in connection with the previous sale of certain of
the Debtors' assets to CoreComm Limited.
The Disclosure Statement, a copy of which is filed herewith as an
exhibit, remains subject to approval by the Court. A hearing to determine
whether the Disclosure Statement contains "adequate information" as defined
under Section 1125(b) of the Bankruptcy Code for purposes of soliciting
votes to accept or reject the Plan is scheduled for 3:00 p.m., February 2,
2000. The Disclosure Statement and the proposed plan are subject to
substantial change prior to approval by the Court. The Disclosure
Statement contains only a summary of the proposed plan of reorganization,
which plan is also subject to Court approval at a subsequent hearing and
satisfaction of the requirements under Section 1129 of the Bankruptcy Code.
The Disclosure Statement, is not intended to replace careful and detailed
review and analysis of the proposed plan (a copy of which is attached to
the Disclosure Statement as exhibit A), publicly available pleadings in the
Company's bankruptcy cases, and other publicly available information
regarding the Company. The Disclosure Statement is qualified in its
entirety by reference to the more detailed provisions set forth in the
proposed plan. The statements contained in the Disclosure Statement are
made as of the date thereof, and the attachment of the Disclosure Statement
to this Report will not, under any circumstances, create any implication
that the information contained in the Disclosure Statement is correct at
any time subsequent to the date thereof.
This Report contains statements which constitute "forward-looking
statements" within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. "Forward-looking statements" in this Report
include the intent, belief or current expectations of the Company and
members of its management team with respect to the timing of, completion of
and scope of the Company's proposed plan of reorganization and the
Company's future liquidity, as well as the assumptions upon which such
statements are based. While the Company believes that its expectations are
based upon reasonable assumptions within the bounds of its knowledge of its
business and operations, investors are cautioned that any such forward-
looking statements are not guarantees of future performance, involve risks
and uncertainties, and that actual results may differ materially from those
contemplated by such forward-looking statements. Important facts currently
known to management that could cause actual results to differ materially
from those contemplated by the forward-looking statements in this Report
include, but are not limited to, further adverse developments with respect
to the Company's liquidity position or operations of the Company's wireless
business and adverse developments in the Company's efforts to complete the
transactions contemplated by the proposed plan of reorganization.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibits are included with this Report:
Exhibit 10.1 Disclosure Statement for Debtors' Joint
Consolidated Plan of Reorganization
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
USN COMMUNICATIONS, INC.
By: /s/ J. Thomas Elliott
___________________
J. Thomas Elliott
President and Chief Executive Officer
THIS DISCLOSURE STATEMENT AND ITS RELATED DOCUMENTS ARE THE
ONLY DOCUMENTS AUTHORIZED BY THE COURT TO BE USED IN CONNECTION WITH THE
SOLICITATION OF VOTES ACCEPTING THE DEBTORS' JOINT CONSOLIDATED PLAN OF
REORGANIZATION, DATED AS OF DECEMBER 30, 1999 (AS MAY BE AMENDED, MODIFIED
AND SUPPLEMENTED AND INCLUDING ALL EXHIBITS, SCHEDULES AND ANCILLARY
DOCUMENTS EXECUTED THEREWITH, THE "PLAN"). EXCEPT AS EXPLICITLY SET FORTH
IN THIS DISCLOSURE STATEMENT, NO REPRESENTATIONS HAVE BEEN AUTHORIZED BY
THE COURT CONCERNING THE DEBTORS, THEIR BUSINESS OPERATIONS OR THE VALUE OF
THEIR ASSETS.
THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE PLAN.
THIS DISCLOSURE STATEMENT IS NOT INTENDED TO REPLACE CAREFUL AND DETAILED
REVIEW AND ANALYSIS OF THE PLAN, THE DEBTORS' FILINGS WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION, AND PUBLICLY AVAILABLE PLEADINGS
IN THE DEBTORS' BANKRUPTCY CASES. THIS DISCLOSURE STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED PROVISIONS SET FORTH IN THE
PLAN (WHICH IS INCLUDED AS EXHIBIT "A" TO THIS DISCLOSURE STATEMENT). IN
THE EVENT OF A CONFLICT BETWEEN THE PLAN AND THE DISCLOSURE STATEMENT, THE
PROVISIONS OF THE PLAN WILL GOVERN. ALL HOLDERS OF CLAIMS ARE ENCOURAGED TO
REVIEW THE FULL TEXT OF THE PLAN AND TO READ CAREFULLY THIS ENTIRE
DISCLOSURE STATEMENT, INCLUDING ALL EXHIBITS ANNEXED HERETO, BEFORE
DECIDING WHETHER TO VOTE TO ACCEPT THE PLAN.
THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE
AS OF THE DATE HEREOF, AND THE DELIVERY OF THIS DISCLOSURE STATEMENT WILL
NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF.
HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD NOT CONSTRUE THE
CONTENTS OF THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS,
FINANCIAL OR TAX ADVICE. EACH SUCH HOLDER SHOULD, THEREFORE, CONSULT WITH
HIS, HER OR ITS OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS AS TO ANY
SUCH MATTERS CONCERNING THE SOLICITATION, THE PLAN AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND
OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE STATEMENT
SHALL NOT BE CONSTRUED AS AN ADMISSION OR STIPULATION, BUT RATHER
AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS.
- -----------------------------------------------------------------------------
CAPITALIZED TERMS USED AND NOT DEFINED HEREIN HAVE THE MEANING ASCRIBED TO
THEM IN THE PLAN UNLESS CONTEXT REQUIRES OTHERWISE
- -----------------------------------------------------------------------------
I. INTRODUCTION
A. GENERAL
On the February 18, 1999 (the "Petition Date"), USN
Communications, Inc. ("USN Communications"), US Network Corporation,
FoneNet/Ohio, Inc., USN Communications Long Distance, Inc., USN
Communications Virginia, Inc., USN Communications Maine, Inc., Quest
United, Inc., USN Communications Atlantic, Inc., USN Solutions, Inc., USN
Communications Southwest, Inc., USN Communications West, Inc., USN
Communications Midwest, Inc., and USN Communications Northeast, Inc.
(collectively, the "Debtors") filed separate voluntary petitions for relief
under chapter 11 of title 11 of the United States Code (the "Bankruptcy
Code") with the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court"). By Order of the Bankruptcy Court, these cases
have been procedurally consolidated and are being jointly administered. The
Debtors remain debtors-in-possession pursuant to Sections 1107 and 1108 of
the Bankruptcy Code. On March 9, 1999, the United States Trustee for the
District of Delaware (the "U.S. Trustee") appointed a statutory committee
of unsecured creditors (the "Creditors' Committee") in these cases.
This Disclosure Statement and the accompanying materials are
furnished by the Debtors pursuant to Section 1125 of the Bankruptcy Code in
connection with the solicitation of acceptances of the Debtors' proposed
plan of reorganization (the "Plan") described herein. A copy of the Plan is
annexed hereto as Exhibit "A". The Bankruptcy Court has approved this
Disclosure Statement as containing "adequate information" in accordance
with Section 1125(b) of the Bankruptcy Code to enable a hypothetical,
reasonable investor to make an informed judgment about the Plan.
B. VOTING
Any Creditor or Equity Interest holder whose legal, contractual
or equitable rights are altered, modified or changed by the proposed
treatment under the Plan or whose treatment under the Plan is not provided
for in Section 1124 of the Bankruptcy Code is considered Impaired. Holders
of Claims in Classes that are Impaired, but not deemed to have rejected the
Plan, will receive this Disclosure Statement, a Ballot for the acceptance
or rejection of the Plan and other related voting materials.
Under the Plan, holders of Allowed Claims in Class 3
(Convenience Claims), Class 4 (Unsecured Claims) and Class 5 (Securities
Litigation Claims) are Impaired and entitled to vote on the Plan. Holders
of Allowed Claims in Class 1 (Priority Claims) and Class 2 (Secured
Claims), as well as holders of Allowed Fee Claims, Allowed Priority Tax
Claims and Allowed Administrative Claims, are unimpaired under the Plan and
are therefore deemed to have accepted the Plan. Finally, all holders of
Claims in Class 6 (Subordinated Securities Claims) and all holders Claims
in Class 7 (Equity Interests) will receive no Distribution under the Plan
and are therefore deemed to have rejected the Plan. For a description of
the Classes and their treatment under the Plan, see Part IV, Section C.5
below.
THE BANKRUPTCY COURT HAS FIXED 5:00 P.M. (PREVAILING EASTERN
TIME) ON _________ __, 2000 AS THE "VOTING RECORD DATE." ONLY PERSONS WHO
HOLD IMPAIRED CLAIMS AND ARE ENTITLED TO VOTE ON THE VOTING RECORD DATE,
AND CERTAIN OTHER PARTIES SPECIFIED BY THE BANKRUPTCY COURT, ARE ENTITLED
TO RECEIVE A COPY OF THIS DISCLOSURE STATEMENT AND ALL OF THE RELATED
MATERIALS.
The Ballots have been specifically designed for the purpose of
soliciting votes on the Plan from each Class entitled to vote. Accordingly,
in voting on the Plan, please use only the Ballot sent to you with this
Disclosure Statement. Please complete and sign your Ballot and return it in
the enclosed pre-addressed envelope to the Debtors' Balloting Agent:
USN COMMUNICATIONS, INC.
C/O ROBERT L. BERGER & ASSOCIATES, INC.
BOX 685
16161 VENTURA BLVD.
ENCINO, CA 91436
ALL PROPERLY COMPLETED BALLOTS RECEIVED BY THE BALLOTING AGENT
PRIOR TO 5:00 P.M. (PREVAILING PACIFIC TIME) ON _____________ ____, 2000
(THE "BALLOT DEADLINE"), WILL BE COUNTED FOR PURPOSES OF DETERMINING
WHETHER EACH CLASS OF IMPAIRED CLAIMS ENTITLED TO VOTE ON THE PLAN HAS
ACCEPTED THE PLAN. ANY BALLOTS RECEIVED AFTER THE BALLOT DEADLINE WILL NOT
BE COUNTED, NOR WILL ANY BALLOTS RECEIVED BY FACSIMILE BE ACCEPTED. The
Balloting Agent will prepare and file with the Bankruptcy Court a
certification of the results of the balloting with respect to the Plan on a
Class-by-Class basis.
In accordance with Bankruptcy Rule 3017(d), the Debtors will
cause Ballots to be sent to the Indenture Trustees, transfer agents,
registrars, servicing agents, or other intermediaries holding Claims for or
acting on behalf of holders of Claims (collectively, the "Intermediaries").
Upon request made upon the Debtors by _______________ ___, 2000, each
Intermediary will receive reasonably sufficient copies of Ballots and other
voting materials to distribute to the beneficial owners of the Claims for
which it is an Intermediary, and the Debtors shall be responsible for and
pay each such Intermediary's reasonable costs and expenses associated with
the distribution of copies of Ballots and other applicable voting materials
to the beneficial owners of such Claims and tabulation of the Ballots.
Additionally, each Intermediary shall receive returned Ballots and shall
tabulate and return the results to the Balloting Agent in a summary Ballot
by the Ballot Deadline indicating the number and dollar amount of cast
Ballots in the group of claimants for which it is an Intermediary. The
Intermediaries must certify that each beneficial holder has not cast more
than one vote for any purpose, including numerosity and Claim amount.
IF YOUR VOTE IS BEING PROCESSED BY AN INTERMEDIARY, PLEASE
ALLOW TIME FOR TRANSMISSION OF YOUR BALLOT TO SUCH INTERMEDIARY AND FROM
THE INTERMEDIARY TO THE BALLOTING AGENT. IF YOU HAVE A QUESTION CONCERNING
THE VOTING PROCEDURE, CONTACT THE APPLICABLE INTERMEDIARY. DO NOT RETURN
YOUR SECURITIES WITH YOUR BALLOTS.
HOLDERS OF EQUITY INTERESTS WILL NOT RECEIVE ANY DISTRIBUTION
UNDER THE PLAN. ACCORDINGLY, SUCH HOLDERS ARE DEEMED TO REJECT THE PLAN AND
WILL NOT BE ENTITLED TO VOTE THEREON. ON THE EFFECTIVE DATE, ALL EXISTING
USN COMMUNICATIONS INTERESTS WILL BE CANCELLED AND DE-REGISTERED AND USN
COMMUNICATIONS WILL CEASE TO BE A REPORTING COMPANY UNDER THE SECURITIES
EXCHANGE ACT OF 1934.
C. CONFIRMATION HEARING
THE BANKRUPTCY COURT WILL HOLD THE CONFIRMATION HEARING
COMMENCING AT _______ _.M. (PREVAILING EASTERN TIME) ON _____________ ___,
2000, AT THE UNITED STATES BANKRUPTCY COURT, 824 MARKET STREET, WILMINGTON,
DELAWARE 19801, BEFORE THE HONORABLE PETER J. WALSH, CHIEF UNITED STATES
BANKRUPTCY JUDGE. The Confirmation Hearing may be adjourned from time to
time by the Bankruptcy Court without further notice except for an
announcement in the Bankruptcy Court on the scheduled date of such hearing.
At the Confirmation Hearing, the Bankruptcy Court, inter alia, will (i)
determine whether the requisite vote has been obtained for each of the
Voting Classes, (ii) hear and determine objections, if any, to the Plan and
to confirmation of the Plan that have not been previously disposed of,
(iii) determine whether the Plan satisfies the confirmation requirements of
the Bankruptcy Code, and (iv) determine whether to confirm the Plan.
Pursuant to the Bankruptcy Court's Order approving the
Disclosure Statement, a copy of which is enclosed with the Disclosure
Statement, any objection to the confirmation of the Plan must be in
writing, state with particularity the grounds for objection, include
proposed language for amending the Plan to resolve the objection, and be
filed with the Bankruptcy Court and served in a manner so as to be received
on or before ________________, ___ 2000, at __:__ _.m. (Prevailing Eastern
Time), by: (1) the Office of the United States Trustee for the District of
Delaware, 601 Walnut Street, Suite 950W, Philadelphia, Pennsylvania 19106,
Attn.: Maria D. Giannirakis, Esq.; (2) bankruptcy counsel to the Debtors,
Morris, Nichols, Arsht & Tunnell, 1201 N. Market Street, P.O. Box 1347,
Wilmington, Delaware 19899-1347, Attn.: Robert J. Dehney, Esq.; (3) special
counsel to the Debtors, Skadden, Arps, Slate, Meagher & Flom (Illinois) and
Associates, 333 West Wacker Drive, Suite 2100, Chicago, Illinois 60606,
Attn.: John Wm. Butler, Jr., Esq.; (4) co-counsel to the Creditors'
Committee, (a) Foley & Lardner, One IBM Plaza, Suite 3300, 330 N. Wabash
Ave., Chicago, Illinois 60611-3608, Attn.: Mark Prager, Esq., and (b) Saul,
Ewing, Remick & Saul LLP, 222 Delaware Ave., Suite 1200, P.O. Box 1266,
Wilmington, Delaware 19899, Attn.: Mark Minuti, Esq.; and (5) counsel to
ATA, Salomon Green & Ostrow, P.C., 919 Third Avenue, New York, NY 10022,
Attn: Alec P. Ostrow, Esq.
D. SUMMARY OF DISTRIBUTIONS UNDER THE PLAN
The following table sets forth a brief summary of the
classification and treatment of Claims under the Plan. The information set
forth in the table is for convenience of reference only. Each holder of a
Claim referenced on the table should refer to Articles IV through VI of the
Plan, Part IV, Section D (Treatment of Claims and Equity Interests) in this
Disclosure Statement, and the Summary Liquidation Analysis annexed as
Exhibit "B" hereto for a full understanding of the classification and
treatment of Claims under the Plan.
The data contained in this table represents the Debtors' best
estimates of the numbers and amounts of Claims and Equity Interests treated
under the Plan. THESE ESTIMATES ARE BASED ON AN INITIAL REVIEW OF THE
CLAIMS REGISTER AND THE DEBTORS' BOOKS AND RECORDS, WHICH REVIEW IS STILL
ONGOING. THE DEBTORS HAVE ELIMINATED SOME DUPLICATIVE CLAIMS, AND IN
INSTANCES WHERE A TIMELY FILED PROOF OF CLAIM IS LESS THAN THE SCHEDULED
AMOUNT, THE DEBTORS HAVE USED THE LOWER NUMBER. THE DEBTORS ANTICIPATE THAT
ADJUSTMENTS TO THE ESTIMATES SET FORTH BELOW MAY BE NECESSARY AFTER THE
CLAIMS ADMINISTRATION PROCESS IS COMPLETE.
TOTAL CLAIMS ASSERTED(1)
CLASS CLAIM TYPE AND PROJECTED RECOVERY STATUS
- ----- ---------- ------------------------ ------
N/A Administrative o $______________ o Unimpaired.
Claims
o 100% o Deemed to have
Accepted the Plan.
N/A Fee Claims o $______________ o Unimpaired.
($_____________ net
unpaid)
o 100% o Deemed to have
Accepted the Plan.
N/A Priority Tax o $_______________ o Unimpaired.
Claims
o 100% o Deemed to have
Accepted the Plan.
Class 1 Priority Claims o $________________ o Unimpaired.
o 100% o Deemed to have
Accepted the Plan.
Class 2 Secured Claims o $__________________ o Unimpaired.
o 100% o Deemed to have
Accepted the Plan.
Class 3 Convenience o $_________________(2) o Impaired.
Claims
o It is currently o Entitled to Vote.
impossible to calculate
the range of Distributions
to holders of Allowed
Convenience Claims;
provided, however, that
Distributions (as a
percentage of the Allowed
amount of the Claim) to
holders of Allowed
Convenience Claims under
this Plan will always
exceed Distributions to
holders of Allowed
Unsecured Claims as a
result of the funding of
Convenience Class Reserve
with $100,000 Cash.
Class 4 Unsecured o $______________________ o Impaired.
Claims
o [____ - _____%](3) o Entitled to Vote.
Class 5 Securities o $______________________ o Impaired.
Litigation
Claims o (a) If Class 5 votes to o Entitled to Vote.
accept the Plan, each
holder of an Allowed
Securities Litigation Claim
will receive its Ratable
Share of the Available D&O
Insurance Proceeds. (b) If
Class 5 votes to reject the
Plan, holders of Securities
Litigation Claims will
receive no Distribution on
account of such Claims.
Class 6 Subordinated o $_______________________ o Impaired.
Securities
Claims o 0% o Deemed to have
Rejected the Plan;
not entitled to
Vote.
Class 7 Equity o N/A o Impaired.
Interests
o 0% o Deemed to have
Rejected the Plan;
not entitled to
Vote.
E. RECOMMENDATION
THE DEBTORS RECOMMEND THAT ALL HOLDERS OF CLAIMS IN VOTING
CLASSES VOTE TO ACCEPT THE PLAN.
II. HISTORICAL INFORMATION
A. BACKGROUND
The Debtors consist of USN Communications and twelve (12) of
its subsidiaries which are either wholly-owned by USN Communications or by
one of USN Communications' wholly-owned subsidiaries. In addition, USN
Communications wholly-owns USN Wireless, Inc., which in turn wholly-owns
Connecticut Telephone & Communications System, Inc., Connecticut Mobilcom,
Inc., USN Wireless of Massachusetts, Inc., and USN Wireless of Rhode
Island, Inc. (collectively, the "Wireless Companies"). None of the Wireless
Companies filed for relief under chapter 11 of the Bankruptcy Code.
USN Communications is a publicly held company which, along with
its direct and indirect wholly-owned subsidiaries, offered value-based,
integrated and customized packages of telecommunications services on a
single bill. The Debtors offered bundled, one-stop shopping for local,
long-distance, voice mail, paging, teleconferencing, and other enhanced
services. The Debtors primarily focused their marketing efforts on small
and medium-sized businesses with telecommunications usage of less than
$5,000 per month located primarily in the Eastern and Midwestern parts of
the United States.
The Debtors initially entered the local telecommunications
market as a facilities-based carrier with network facilities in Ohio. As a
facilities-based carrier, the Debtors used their own facilities and
infrastructure to provide service, in contrast with resellers who purchase
the services of other carriers and then retail the services to customers.
Incident to this strategy, the Debtors experienced high costs associated
with the initial construction, installation and expansion of each local
network facility.
Congress's passage of the Telecommunications Act of 1996 (the
"Telecommunications Act") created the opportunity to pursue a
non-facilities based approach in the local telecommunications market. The
Telecommunications Act allows Competitive Local Exchange Carriers ("CLECs")
to operate both as a peer to and competitor of an Incumbent Local Exchange
Carrier ("ILEC") for a given geographic region. As part of the deregulation
of the telecommunications industry, the Telecommunications Act requires
ILECs, such as Bell Atlantic Corporation and Ameritech Services, Inc. to
offer and price network components and services individually so that CLECs
can access essential components of local networks.
The Debtors refocused their operations to capitalize on the
opportunity created by the Telecommunications Act. USN Communications sold
its existing facilities in Ohio and certain other assets in February 1996,
and transferred certain liabilities with respect to those facilities to
pursue a primarily non-facilities based approach to the local
telecommunications market.
In anticipation of the imminent passage of the
Telecommunications Act, in November, 1995, USN Communications executed a
local services resale agreement with Ameritech, the first such agreement
executed in the nation with a Regional Bell Operating Company. In 1996, USN
Communications executed numerous other agreements with carriers for the
resale of long distance and enhanced telecommunications services.
As a non-facilities based carrier, the Debtors attempted to
distinguish themselves by bundling an extensive package of communications
services with superior customer service. The Debtors' near term goal was to
grow rapidly to achieve the critical mass necessary to attain profitability
without saddling themselves with significant capital expenditures in
facilities and other infrastructure.
In February of 1998, USN Communications completed its
acquisition of Hatten Communications Holding Company, Inc., which was
subsequently renamed USN Wireless, Inc. USN Communications purchased the
stock of the Hatten Communications Holding Company, Inc. for the aggregate
amount of $68,100,000, less debt assumed by USN Communications, from Mark
Hatten, Triumph-Connecticut Limited Partnership, Solomon Schechter Day
School of Greater Hartford, Inc. and FSC Corp. This acquisition allowed USN
Communications to provide wireless telephone communications services to its
customers.
As of June 30, 1998, the Debtors had an installed base of more
than 276,000 local access lines. Additionally, the Debtors were providing
local telephone service in 14 states and long-distance and enhanced
services in more than 45 states.
B. DEBT STRUCTURE
1. PREPETITION CREDIT FACILITY.
USN Communications was party to a note purchase agreement dated
November 18, 1998 (as subsequently amended, supplemented, or otherwise
modified, the "Prepetition Note Purchase Agreement") among USN
Communications and Merrill Lynch Global Allocation Fund, Inc. ("MLGAF" or,
in such capacity, the "Prepetition Lender") as lender. The Prepetition Note
Purchase Agreement initially consisted of a $10 million, 17% per annum loan
due January 15, 1999, but was subsequently amended on several occasions to
include an additional $5 million in loans and an extension of the maturity
date to February 23, 1999.
USN Communications also executed a security agreement (the
"Prepetition Security Agreement"), dated November 18, 1998, to secure all
obligations (the "Prepetition Obligations") under the Prepetition Note
Purchase Agreement and all ancillary and collateral documents executed in
connection therewith, whereby USN Communications granted to the Prepetition
Lender a security interest in certain accounts receivable, general
intangibles, and other intangible personal property and the proceeds
thereof.
In connection with the execution of the Prepetition Note
Purchase Agreement, USN Communications, MLGAF and MCI WorldCom ("MCI"), the
Debtors' primary long distance carrier, also executed a letter agreement
(the "MCI Letter Agreement") dated November 17, 1998, evidencing MCI's
agreement not to terminate service on account of $1,569,720 of outstanding
usage charges incurred in the month of September, 1998.
The MCI Letter Agreement provided that MCI would extend the
termination date of its services if (i) the September usage charges were
brought current, and (ii) MCI were granted a security interest in USN
Communications' accounts receivable, customer base and the proceeds
thereof. MCI agreed to subordinate its security interest to that of the
Prepetition Lender up to the original amount of the Prepetition Note
Purchase Agreement, i.e. $10 million, and up to an additional $10 million
of future financing by the Prepetition Lenders to USN Communications. On or
about November 18, 1998, USN Communications paid MCI the outstanding
arrearages and granted MCI the requisite security interest pursuant to a
security agreement dated November 24, 1998.
2. ALLEGED INTEREST OF CORPORATE CONCEPTS, INC.
On November 13, 1998, Corporate Concepts, Inc. ("CCI") filed a
Verified Complaint against USN Communications in the Circuit Court for the
Eighteenth Judicial Circuit of DuPage County, Illinois (the "Illinois
Court") for breach of contract (the "CCI Complaint"). The CCI Complaint
alleged, among other things, that the Debtors failed to make timely
payments for certain goods that CCI sold to the Debtors.
On February 16, 1999, the Illinois Court entered judgment for
CCI on the CCI Complaint in the amount of $1,476,918.43 (the "CCI
Judgment"). Immediately thereafter, CCI attempted to enforce the CCI
Judgment. On February 16 or 17, 1999, CCI allegedly served a Garnishment
Summons (the "Garnishment Summons") on Harris Trust and Savings Bank
("Harris Bank") in an attempt to create a lien against the funds held in
the Debtors' accounts maintained at Harris Bank.
3. UNSECURED PUBLIC DEBT.
The Debtors have four issuances of unsecured public debt
outstanding aggregating approximately $210,521,256 outstanding on the
Petition Date: (a) Indenture, dated as of August 15, 1997, by and between
USN Communications and Harris Trust and Savings Bank, as Trustee, for USN
Communications' 14 5/8 % Senior Discount Notes due 2004 (the "14 5/8 %
Senior Note Indenture"), as amended by Supplemental Indenture No. 1, dated
March 5, 1998, to the 14 5/8 % Senior Note Indenture, outstanding on the
Petition Date in the approximate amount of $150,799,339; (b) Indenture,
dated as of September 30, 1996, by and between USN Communications and
Harris Trust and Savings Bank, as Trustee, for USN Communications' 9%
Convertible Subordinated Discount Notes due 2004 (the "Convertible Note
Indenture"), as amended by Supplemental Indenture No. 1, dated August 12,
1997, by and between USN Communications and Harris Trust and Savings Bank,
as Trustee, to the Convertible Note Indenture, as further amended by
Supplemental Indenture No. 2, dated March 5, 1998, by and between USN
Communications and Harris Trust and Savings Bank, as Trustee, to the
Convertible Note Indenture, outstanding on the Petition Date in the
approximate amount of $34,096,740; (c) Indenture dated as of September 30,
1996, by and between USN Communications and Harris Trust and Savings Bank,
as Trustee, for USN Communications' 14% Senior Discount Notes due 2003 (the
"14% Senior Note Indenture"), as amended by Supplemental Indenture No. 1,
dated as of March 17, 1997, by and between USN Communications and Harris
Trust and Savings Bank, as Trustee, to the 14% Senior Note Indenture, as
further amended by Supplemental Indenture No. 2, dated as of August 18,
1997, by and between USN Communications and Harris Trust and Savings Bank,
as Trustee, to the 14% Senior Note Indenture, as further amended by
Supplemental Indenture No. 3, dated as of March 5, 1998, by and between USN
Communications and Harris Trust and Savings Bank, as Trustee, to the 14%
Senior Note Indenture, outstanding on the Petition Date in the approximate
amount of $14,617,175; and (d) Indenture, dated as of January 13, 1998, by
and between USN Communications and Harris Trust and Savings Bank, as
Trustee, for USN Communications' 9% Consent Convertible Subordinated Notes
due 2006 (the "Consent Notes Indenture"), outstanding on the Petition Date
in the approximate amount of $11,008,002.
4. MISCELLANEOUS OTHER UNSECURED DEBT.
Other obligations of the Debtors include, without limitation,
trade payables, certain customer claims, and other unsecured current
liabilities.
C. EVENTS LEADING TO CHAPTER 11 FILINGS
Several factors precipitated the Debtors' filings of these
chapter 11 cases. First, the Debtors endured problems typical of companies
that have experienced significant growth within a short period of time. For
instance, the Debtors' aggressive growth required that they add over 250
employees in 1996 and over 600 employees in 1997. These and other
significant investments in operating, sales, marketing, management
information systems and general and administrative expenses were major
contributing factors to the Debtors' consistent losses and negative cash
flow since their inception. Furthermore, the Debtors' aggressive growth
strained internal and external operating and billing systems reducing the
margins attainable from the Debtors' operations.
The Debtors also were plagued by problems peculiar to their
position in the telecommunications industry. As a non-facilities based
carrier, the Debtors effectively were forced to compete as a reseller of
telecommunications services offered by the ILECs. Historically,
non-facilities based carriers have been able to earn only slim margins
under the terms of carrier contracts offered by ILECs and approved by state
and municipal regulatory bodies.
In combination with the foregoing problems, during 1998 the
Debtors encountered adverse capital market conditions that prevented them
from accessing sources of public equity and debt capital that had been
previously used to fund the Debtors' growth. In response, the Debtors took
actions to reduce costs, including closing numerous sales offices,
eliminating more than 900 employee positions (46% of the workforce),
discontinuing certain telemarketing efforts, and concentrating operations
in the facilities located in the cities serving the largest portions of the
Debtors' current customer base.
By the end of 1998, the Debtors determined that it would be
difficult to meet their continuing financial obligations. They therefore
began to explore various out-of-court and bankruptcy restructuring
alternatives as the means to effectuate a recapitalization that would
permit their continued existence.
The Debtors engaged Jay Alix & Associates to develop and assist
with the execution of a short-term financial plan, explore restructuring
alternatives, and otherwise protect and enhance the going concern value of
the Debtors for the benefit of stakeholders. In addition, USN
Communications retained the investment banking firm of BT Alex Brown
("BTAB") to conduct a sale process involving the Debtors and retained the
investment banking firm of Daniels & Associates ("Daniels") to conduct a
sales process involving the Wireless Companies.
Facing increased liquidity issues, the Debtors concluded that
the best way to maximize the value of their assets for their stakeholders
was to file for chapter 11 relief and pursue one or more sales of their
businesses as going concerns, structured to ensure an orderly and equitable
sale procedure and distribution of the proceeds.
III. THE REORGANIZATION CASES
A. FIRST DAY MOTIONS AND APPLICATIONS
Shortly after the Petition Date, the Debtors obtained numerous
"first day" orders to facilitate the Debtors' transition to, and operation
of their businesses in, these Reorganization Cases with a minimum of
disruption. The Bankruptcy Court entered orders granting the Debtors the
authority to, among other things: honor prepetition payroll obligations;
honor prepetition refunds or credits owed to existing customers; maintain
existing bank accounts, cash management systems and business forms; and
retain professionals (including counsel, financial advisors and investment
bankers) to represent the Debtors in connection with the sale process begun
prepetition, the procurement of debtor-in-possession financing and to
represent the Debtors generally in their Reorganization Cases.
B. THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
On March 9, 1999, the United States Trustee appointed the
Creditors' Committee. The Bankruptcy Court authorized the Creditors'
Committee to retain the law firms of Foley & Lardner and Saul, Ewing,
Remick & Saul LLP as co-counsel and Houlihan Lokey Howard & Zukin Capital,
Inc. as its financial advisors.
C. MARKETING AND SALE OF THE DEBTORS' ASSETS AND BUSINESSES
1. THE CORECOMM SALE AND RELATED TRANSACTIONS.
Following a thorough marketing program conducted with the
assistance of BTAB and the Debtors' other professionals and extensive
arms-length negotiations, the Debtors and CoreComm Limited ("CoreComm")
executed an Asset Purchase Agreement, dated as of February 19, 1999 (as
amended, the "CoreComm Agreement"). The CoreComm Agreement provided for the
sale (the "CoreComm Sale") to CoreComm of substantially all of the Debtors'
assets, other than the Wireless Companies, for consideration consisting of,
among other things, an initial cash purchase price of approximately
$26,000,000, warrants to purchase 250,000 shares of CoreComm common stock
at a price of $30.00 per share at any time prior to the third anniversary
after the closing date of the CoreComm Sale and 100,000 shares of CoreComm
common stock at a price of $50.00 per share at any time prior to the fifth
anniversary after the closing date of the CoreComm Sale (collectively, the
"CoreComm Warrants") and the contingent right to receive an additional
payment of up to approximately $60,000,000, depending on the revenues
realized from the business in the states the Debtors had operations, other
than in Ohio, during the six month period ending on March 31, 2000 (the
"Contingent Payment"). There can be no assurances, however, that any
portion of the Contingent Payment will be realized.
Additionally, pursuant to the CoreComm Agreement, CoreComm
identified certain executory contracts and unexpired leases that it wanted
assumed and assigned to it under Section 365 of the Bankruptcy Code.
Contracts assumed and assigned as part of the CoreComm Sale included, among
others, certain of the Debtors' nonresidential real property leases,
certain contracts with Ameritech Information Industry Services, Inc. and
its affiliates and the Debtors' agreement with MCI/Worldcom, Inc. for the
provision of long-distance telecommunications services. The CoreComm
Agreement further provided that, with respect to "cure" obligations arising
from the assumption and assignment of contracts and leases identified by
CoreComm, the Debtors would be not be required to cure any default or
breach or under, or satisfy any obligating arising from, any such contract
or lease unless and until the aggregate amount of all such "cure"
obligations exceeded $500,000.
In furtherance of the CoreComm Sale, on February 22, 1999, the
Bankruptcy Court approved the form and manner of notice in connection with
the CoreComm Sale, procedures for obtaining additional bids, and certain
bidding protections for CoreComm. In accordance with the Bankruptcy Court's
order, the Debtors provided notice of the proposed sale to, among others,
all known creditors and more than fifty potential purchasers who were known
to have expressed an interest in a merger or acquisition transaction
regarding the Debtors or their assets. Nine prospects contacted BTAB to
express interest. Six of the nine prospects executed confidentiality
agreements, furnished financial information that demonstrated their ability
to consummate a purchase, and were furnished additional information
prepared by BTAB. Ultimately, however, all of the prospects declined to
submit bids or failed contact BTAB or the Debtors regarding further due
diligence.
Following a hearing held on April 2, 1999, the Bankruptcy Court
entered an order, approving the CoreComm Agreement. The Debtors and
CoreComm consummated the CoreComm Sale on May 26, 1999.
On October 28, 1999, the Debtors received approval from the
Bankruptcy court to retain the investment banking firm of Lazard Freres &
Co., LLC ("Lazard") as the Debtors' agent in connection with the Debtors'
efforts to sell the CoreComm Warrants. The Debtors also received authority
to sell the CoreComm Warrants, subject to certain procedures, but without
further notice, hearing or order of the Bankruptcy Court. Lazard has been
successful in selling all of the CoreComm Warrants, generating
approximately $13,513,750 in gross proceeds and approximately $13,102,377
in net proceeds for the Estates after payment of placement fees to Lazard.
To date, the Debtors have realized significant value from
certain aged accounts receivable that were retained by the Estates under
the CoreComm Agreement. The Debtors' ongoing asset recovery efforts have
yielded gross proceeds of approximately $768,003 and net proceeds of
approximately $635,362, after payment of collection fees to Dun &
Bradstreet Corporation.
2. MARKETING AND SALE OF THE WIRELESS COMPANIES.
The Debtors have exhaustively marketed the Wireless Companies,
both in the months prior to the Petition Date and during these
Reorganization Cases. Following Daniels' engagement on October 6, 1998, the
Debtors made substantial non-public information available to Daniels and
allowed Daniels access to the Debtors' officers, directors, employees,
independent accountants and legal counsel. Daniels invested a considerable
amount of time and resources in familiarizing itself with the operations of
the Wireless Companies and preparing an information memorandum (the
"Wireless Memorandum") concerning such operations. Daniels contacted
approximately sixty (60) potential acquirors of the Wireless Companies,
twenty-seven (27) of whom elected to sign a confidentiality agreement and
receive the Wireless Memorandum. Daniels' efforts on the Debtors' behalf
generated nearly one dozen formal and informal expressions of interest in
the Wireless Companies.
Daniels identified a potential purchaser of the Wireless
Companies with whom the Debtors, with Daniels' assistance, engaged in
intensive negotiations in order to reach agreement on a transaction for the
sale of all of the common stock of USN Wireless, Inc. (the "Wireless
Stock"). As of the Petition Date, those negotiations had not led to a
definitive agreement for the sale of the Wireless Stock.
Since the Petition Date, Daniels has continued acting as the
Debtors' investment banker respecting a sale or transaction involving the
Wireless Companies. Daniels developed a revised and expanded master list of
approximately 125 prospects to whom the Debtors sent notices regarding the
proposed sale of the Wireless Companies, which included bidding procedures
approved by the Bankruptcy Court. Additionally, Daniels actively solicited
the twenty-five (25) most attractive potential acquirors for the Wireless
Companies. These efforts produced fifteen (15) parties who had taken the
steps necessary to become Qualified Bidders under bidding procedures
previously approved by the Bankruptcy Court.
Ultimately, four bidders participated at an auction held on
March 30, 1999 at the offices of Skadden, Arps, Slate, Meagher & Flom, LLP,
919 Third Avenue, New York New York, 10022. To minimize the possibility for
collusion among bidders, each bidder was required to submit its bid outside
the presence of the other bidders. After three rounds of bidding, Unified
Signal Corporation ("Unified Signal") emerged as the highest and best
bidder for the Wireless Stock.
By an Order dated April 2, 1999, the Bankruptcy Court approved
an agreement with Unified Signal for the sale of the Wireless Stock.
Unified Signal, however, thereafter failed to close that transaction with
the Debtors.
Following Unified Signal's failure to close, the Debtors and
the Creditors' Committee redoubled their efforts to sell the Wireless
Companies. The Debtors, with the further assistance of Daniels, renewed
contacts with the three other bidders who had participated at the auction
sale of the Wireless Companies and additional parties who had expressed
serious interest in acquiring the Wireless Companies. The Creditors'
Committee and its financial advisor Houlihan Lokey Howard & Zukin also
actively sought out potential acquirors for the Wireless Companies.
The Debtors, the Creditors' Committee, and their respective
professionals, met and negotiated with multiple parties who expressed
interest in a transaction involving the Wireless Companies or the Wireless
Companies and Reorganized USN Communications. After extensive negotiations,
USN Communications and Alexandra Telephone Acquisition, LLC ("ATA" or
"Buyer") executed a Stock Purchase Agreement, dated as of November 17, 1999
(the "Purchase Agreement").
Under the Purchase Agreement, upon confirmation of the Plan and
the occurrence of the Effective Date, ATA will acquire all of the
authorized but unissued shares of capital stock of Reorganized USN
Communications in consideration of (i) $14,000,000 in cash (the "Initial
Cash Payment") and (ii) a promissory note of ATA (the "ATA Note") for an
aggregate principal amount of $6,000,000 (such transaction, the "Sale
Transaction" or "ATA Sale"). The ATA Note is subject to ATA's right to
prepay the ATA Note for amounts less than $6,000,000. The Purchase
Agreement further requires $2,000,000 of the Initial Purchase Price to be
deposited in an escrow account by ATA upon execution of the Purchase
Agreement, to be released to the Debtors or the trust or other entity
designated in the Plan as the successor to the Debtors' Estates.
The Purchase Agreement expressly provides that the following
Assets are excluded from the ATA Sale: (i) any and all consideration the
Debtors received or may receive in connection with the transactions
contemplated by the CoreComm Agreement; (ii) any and all claims and causes
of action of the Debtors and each of their respective bankruptcy estates
and all of their respective successors that exist or may exist from the
beginning of time through the Effective Date of the Plan; (iii) any and all
rights of the Debtors to setoff, refunds, abatements and the like of
whatever kind or nature; and (iv) any and all Cash and accounts receivable
or other rights of payment of the Debtors (collectively, the "Excluded
Assets"). As more fully described herein and in the Plan, the Excluded
Assets will be transferred to the Liquidating Trust upon the Effective Date
of the Plan.
In negotiating the Purchase Agreement, the Debtors, in
consultation with the Creditors' Committee, negotiated the right to
entertain higher and/or better offers pursuant to bidding procedures
whereby qualified bidders were entitled to submit competing bids for an
alternative transaction, whether pursuant to a sale of the Wireless Stock,
a sale of the Reorganized Stock, a sale of USN Communications' remaining
assets, or some combination of the foregoing. Additionally, the Debtors
agreed to provide certain bidding protections to ATA (the "Bidding
Protections") if, under certain circumstances, the Debtors execute and
consummate an agreement or confirm a plan providing for an Alternative
Transaction (as defined in the Purchase Agreement). The Bidding Protections
include (i) the right to reimbursement of ATA's actual reasonable out of
pocket expenses, not to exceed $250,000.00, incurred in connection with the
Purchase Agreement (the "Expense Reimbursement") and (ii) a termination
payment in the amount of $800,000.00 (the "Termination Fee"). Pursuant to
the Purchase Agreement, the Debtors' obligation, if any, to pay the
Termination Fee and/or Expense Reimbursement will constitute administrative
expenses of the Debtors' Estates until paid.
On November 18, 1999, the Debtors filed a motion seeking the
entry of an order, among other things, establishing certain bidding
procedures, approving the form and manner of notice of the proposed sale,
setting a date for a subsequent hearing to consider further relief in
connection with the ATA Sale, and approving the Bidding Protections. By an
order dated December 2, 1999, the Bankruptcy Court authorized and approved
the relief requested.
In accordance with the notice procedures approved by the
Bankruptcy Court, the Debtors served notice of the motion and the hearings
on certain parties in interest, including all Persons known to the Debtors
to have expressed an interest in a merger or acquisition transaction
regarding the Debtors or their assets in the year prior to the hearing on
the ATA Sale. On December 15, 1999, the Debtors conducted an auction in
accordance with the approved bidding procedures but received no further
offers. At the subsequent hearing held on December 22, 1999, the Bankruptcy
Court approved the offer of ATA as the highest and best bid to date,
subject to the right of the Debtors or the Creditors' Committee, as may be
required or necessary to the best interests of the Estates and Creditors,
to seek leave from the Bankruptcy Court to accept a higher and/or better
offer should one emerge prior to the consummation of the ATA Sale.
As set forth more fully in the Purchase Agreement, ATA's
obligations to consummate the ATA Sale are conditioned on, among other
things, the following: (i) the truth and accuracy in material respects as
of the date of closing of USN Communications' representations and
warranties contained in the Purchase Agreement; (ii) USN Communications'
performance in all material respects of its obligations under the Purchase
Agreement; (ii) the receipt of all Required Consents (as defined in the
Purchase Agreement), except where the failure to obtain such Required
Consents will not have a Seller Material Adverse Effect (as defined in the
Purchase Agreement); (iv) ATA's receipt of USN Communications'
certification, to the best of its knowledge after due inquiry, that items
(i) and (ii) have been satisfied; (v) the timely entry of an order
confirming the Plan and authorizing and approving the ATA Sale (as modified
by agreement of the parties and confirmed on the record at the hearing on
December 22, 1999); and (vi) the satisfaction by USN Communications and the
Wireless Companies of certain performance thresholds. The Debtors'
obligation to consummate the ATA Sale similarly is subject to conditions
regarding the covenants, representations and warranties of ATA.
3. OTHER MISCELLANEOUS ASSET SALES.
During the Reorganization Cases, the Bankruptcy Court has
approved various small sales and transfers of miscellaneous personal
property, consisting primarily of furniture, furnishings and related items
not acquired by CoreComm in the CoreComm Sale. These various small sales
have not been to insiders, have been the result of good faith arms-length
negotiations and have yielded additional value for the benefit of the
Estates and creditors from Assets for which the Debtors otherwise would
have had little use.
D. DIP FINANCING
As of the Petition Date, the Debtors were experiencing a severe
liquidity crisis and had an urgent need for emergency interim financing to
allow them to preserve going concern value through the continued operation
of their businesses while they worked to achieve a prompt and orderly sale
of their assets and businesses. Following extensive arms-length
negotiations with MLGAF, CoreComm and various other financial institutions,
the Debtors, MLGAF and CoreComm (MLGAF and CoreComm, in their capacities as
postpetition lenders, the "Postpetition Lenders") agreed to the terms of a
secured debtor-in-possession financing facility (the "DIP Facility").
The DIP Facility was structured as a note purchase agreement
(the "Postpetition Note Purchase Agreement"), pursuant to which USN
Communications would issue and sell to the Postpetition Lenders certain
notes (the "Postpetition Notes") in the aggregate principal amount of
$22,820,000 and bearing interest at the rate of 14% per annum. The
Postpetition Note Purchase Agreement provided for three tranches of notes:
Class A Notes in the principal amount up to $16,320,000; Class B Notes in
the principal amount up to $6,000,000 in exchange for new cash of the
Debtors; and Delayed Closing Notes of up to $500,000, in exchange for new
cash to the Debtors.
On February 19, 1999, the Debtors filed a motion requesting,
inter alia, the entry of interim and final orders: (a) authorizing the
Debtors to enter into the Postpetition Note Purchase Agreement; and (b)
granting the Postpetition Lenders (i) a superpriority administrative claims
under Section 364(c)(1) of the Bankruptcy Code, (ii) a perfected first
priority senior security interest on all unencumbered property of the
Debtors and a perfected junior security interest on all such property that
was encumbered, and (iii) a perfected first priority priming lien on
substantially all of the collateral subject to the Prepetition Note
Purchase Agreement. After a contested hearing, by order dated February 22,
1999, the Bankruptcy Court approved, on an interim basis, the DIP Facility
and authorized the Debtors to borrow up to $18,320,000 under it,
approximately 16,320,000 of which was paid to MLGAF in full and complete
satisfaction of the Debtors' obligations under the Prepetition Credit
Facility.
After certain amendments were made to the DIP Facility as of
March 15, 1999, and again as of March 24, 1999, on April 2, 1999, the
Bankruptcy Court entered a Final Order (the "Final DIP Financing Order")
approving the DIP Facility and authorizing the Debtors to borrow up to
$20,000,000 under the DIP Facility. The Final DIP Financing Order, together
with Cash generated from the Debtors' ongoing operations, provided the
Debtors with sufficient liquidity to operate their businesses through the
consummation of the CoreComm Sale. Upon the closing of the CoreComm Sale,
the Debtors applied a portion of the Cash consideration received from
CoreComm to satisfy and extinguish the Debtors' obligations under the DIP
Facility to the DIP Lenders.
E. SIGNIFICANT LITIGATION EVENTS
1. LITIGATION RELATED TO THE CORECOMM SALE.
Spectrum Cure Claim. Prior to filing these cases, USN
Communications and Spectrum Telecorp, Inc. ("Spectrum") entered into a
agreement (the "Services Agreement") for the provision of certain billing
services. In connection with the CoreComm Sale, CoreComm identified the
Services Agreement as one of the contracts it wanted assumed and assigned
to it. While Spectrum did not object to the proposed assumption and
assignment, it did assert a $1,131,603.48 cure claim (the "Spectrum Cure
Claim") for a alleged breaches of the Services Agreement. The Debtors and
the Creditors' Committee vigorously disputed the validity and amount of the
Spectrum Cure Claim. The parties eventually resolved this matter pursuant
to a settlement agreement approved by the Bankruptcy Court by Order, dated
October 28, 1999, pursuant to which the Debtors and Spectrum granted each
other general releases and the Debtors agreed to pay Spectrum $287,500 in
full and final satisfaction of its cure claim.
Equitable Cure Claim. Also among the contracts CoreComm
identified to be assumed and assigned to it was the nonresidential real
property lease (the "Headquarters Lease"), dated as of October 1, 1997, as
amended, between USN Communications and The Equitable Life Assurance
Society of the United States ("Equitable"), for certain premises located at
10 South Riverside Plaza, Chicago, Illinois 60606, which served as the
Debtors' headquarters facility. After receiving notice of the CoreComm
Sale, Equitable objected to the assumption and assignment of the
Headquarters Lease, asserting, among other things, a purported "cure claim"
in the amount of $1,348,626.00 pursuant to Section 365 of the Bankruptcy
Code.
Equitable asserted its purported right to cure notwithstanding
that it had entered into and consummated a purchase and sale agreement with
TrizecHahn Office Holdings, Inc. ("TrizecHahn"), pursuant to which
Equitable conveyed to TrizecHahn its entire right, title, and interest in
the Headquarters Lease and certain other assets. Thus, as of the Petition
Date, TrizecHahn had succeeded to Equitable's rights with respect to the
Headquarters Lease. The Debtors disputed Equitable's right to a cure
payment, challenging among other things, Equitable's standing to claim a
right of "cure" under Section 365 of the Bankruptcy Code.
Following briefing, the Bankruptcy Court entered an Order
granting Equitable's claim for payment of cure in the amount of
$1,348,626.00. On August 6, 1999, the Debtors timely appealed the
Bankruptcy Court's Order to the United States District Court for the
District of Delaware. In connection with the appeal, the Debtors posted a
supersedeas bond in the amount of 110% of the judgment amount with the
Bankruptcy Court as security to stay execution of the judgment pending
resolution of the appeal.
2. THE CORPORATE CONCEPTS LITIGATION.
As described more fully in Part II, Section B.2, CCI obtained
the CCI Judgment in the amount of $1,476,918.43 on February 16, 1999, and
thereafter attempted service of the Garnishment Summons on Harris Bank. On
March 19, 1999, the Debtors filed an adversary complaint, Adv. Proc. No.
99-081, against CCI in the Bankruptcy Court seeking, inter alia, to avoid
the purported lien as a preferential transfer under the Bankruptcy Code. In
response, on March 24, 1999, CCI filed a motion with the Bankruptcy Court
seeking to transfer venue of these cases to Illinois. The Debtors and the
Creditors' Committee vigorously opposed the motion.
The parties subsequently came to a negotiated resolution of
this litigation which the Bankruptcy Court approved by an order, dated
April 2, 1999. Pursuant to the settlement, CCI's Judgment was reduced and
liquidated as an Allowed Unsecured Claim in the amount of $1,350,000 and
CCI and the Debtors dismissed all adversary and contested matters then
pending against each other and granted each other releases.
3. THE MLGAF/HARRIS SETTLEMENT.
On April 30, 1999, the Senior Notes Indenture Trustees, filed
an adversary complaint in the Bankruptcy Court, Adv. Proc. No. 99-124 (the
"Harris Complaint"), against MLGAF challenging, among other things, the
priority of the liens obtained pursuant to the Prepetition Note Purchase
Agreement and Prepetition Security Agreement relative to the rights of the
holders of the Senior Notes and seeking an order compelling MLGAF to
turnover $14,833,000 to the Senior Notes Indenture Trustees for
distribution to the holders of the Senior Notes. The Senior Notes Indenture
Trustees asserted that MLGAF was required to share equally and ratably the
amounts received in repayment of the $16,320,000 in loan proceeds borrowed
through the issuance and sale of the Class A Notes under the DIP Facility.
Based on the Harris Complaint, MLGAF asserted against the
Debtors an alleged contractual right of indemnification contained in the
Prepetition Credit Facility and the DIP Credit Facility, which MLGAF
maintained was itself a secured obligation. Additionally, when the Debtors'
disputed MLGAF's right to indemnification, MLGAF, by a motion dated June 3,
1999, sought to prohibit or condition the Debtors' right to use cash
collateral under the DIP Facility on the Debtors' satisfaction of, or
provision of adequate protection for, these purported indemnification
obligations (the "MLGAF Motion").
MLGAF, the Senior Notes Indenture Trustees, the Debtors and the
Creditors' Committee subsequently settled these matters pursuant to an
Order dated June 24, 1999 (the "Adversary Proceeding Settlement") granting
the joint motion of foregoing parties. A copy of the Adversary Proceeding
Settlement is annexed as Exhibit "C" hereto. The Adversary Proceeding
Settlement comprises, among others, the following salient terms: (i) the
dismissal with prejudice of the Harris Complaint and a release of MLGAF,
its current and former officers, members, agents, counsel and professional
and investment advisors in connection with the Prepetition Credit Facility;
(ii) the withdrawal with prejudice of the MLGAF Motion; (iii) the payment
by the Debtors of the reasonable attorneys' fees and expenses of MLGAF
incurred in connection with the Harris Complaint; (iv) the payment by the
Debtors of the reasonable attorneys' fees and expenses of the Senior Notes
Indenture Trustees incurred in relation to the Debtors' Reorganization
Cases, including, without limitation, in relation to the Harris Complaint;
and (v) the Senior Notes Indenture Trustees' right to receive for
distribution in accordance with the Senior Notes Indentures all of and up
to the first $5 million of any recovery against Hatten and its former
shareholders in connection with potential claims held by the Debtors
arising out of purchase of the stock of Hatten by USN Communications in
1998. In accordance with the Adversary Proceeding Settlement, the Plan
provides that Distributions, not to exceed $5,000,000, shall be made to the
Senior Notes Indenture Trustees for distribution to holders of Allowed
Senior Notes Claims in accordance with the Senior Notes Indentures solely
from the net proceeds of any recovery on, or settlement of, the Hatten
Transaction Claims before any proceeds realized from the Hatten Transaction
Claims may be distributed to holders of Allowed Unsecured Claims; provided,
however, that no Distribution from the Hatten Transaction Claims Recoveries
Reserve contemplated by the Adversary Proceeding Settlement is permitted
under the Plan unless and until all costs, fees and expenses relating to
the prosecution and/or compromise of the Hatten Transaction Claims shall
have been paid, including, without limitation, the reimbursement of any
amounts drawn from the Liquidating Trust Administrative Reserve or any
other reserve established pursuant to the Plan to pay fees and expenses
associated with the prosecution and/or compromise of the Hatten Transaction
Claims.
4. TRIZECHAHN LITIGATION.
As described in Part III, Section E.1 above, pursuant to the
transaction with Equitable, TrizecHahn succeeded to Equitable's entire
right, title and interest under the Headquarters Lease. Significantly, the
Headquarters Lease required USN Communications to cause "standby" letters
of credit to be issued in the landlord's favor (subject to periodic
reductions in the amounts of the letters of credit, corresponding directly
to the reduction over time of USN Communications' remaining rent
obligations under the Headquarters Lease). On February 26, 1999, TrizecHahn
made a demand to Harris Bank, the issuing bank in respect of the letters of
credit, to draw down on the letters of credit. In attempting to draw down
on the letters of credit, TrizecHahn relied on a provision of the
Headquarters Lease that purported to create a right, upon the tenant's
commencement of a bankruptcy or insolvency proceeding, in favor of the
landlord under the Headquarters Lease to draw down on the entire remaining
balances of the letters of credit. TrizecHahn proceeded to draw down on the
letters of credit, thereby obtaining $1,139,336.50 in proceeds. Following
TrizecHahn's draw down on the letters of credit Harris Bank reimbursed
itself for the full amount of the draws from certain of the Debtors'
certificates of deposit held by Harris Bank as security for the Debtors'
obligations under the letters of credit.
On June 25, 1999, the Debtors filed an adversary complaint with
the Bankruptcy Court, Adv. Proc. No. 99-198, for, among other things,
damages arising out of TrizecHahn's wrongful draw down on the letters of
credit and an order compelling TrizecHahn to turnover the proceeds thereof.
By motion, dated December 1, 1999, the Debtors moved for summary judgment
in this proceeding. This matter is still pending before the Bankruptcy
Court.
5. 498 SEVENTH LLC LITIGATION.
On March 26, 1998, USN Communications and 498 Seventh, LLC
("498 Seventh") entered into a nonresidential real property lease (the "498
Lease"), for certain premises located on portions of the 9th, 10th and 11th
floors of 498 Seventh Avenue, New York, New York. The 498 Lease required
USN Communications to post a "standby" letter of credit in favor of 498
Seventh $4,543,000 as security for USN Communications' performance of its
obligations under the 498 Lease.
On March 1, 1999, less than two weeks after the Petition Date,
498 Seventh drew down $4,476,322.15 (all but $66,677.85) on the letter of
credit. The Bankruptcy Court approved the Debtors' rejection of the 498
Lease by order dated June 15, 1999. On August 6, 1999, 498 Seventh filed a
proof of Claim in the amount of $4,490,517.01 and a request for payment of
Administrative Claim in the amount $257,203.49. The Debtors objected to 498
Seventh's proof of Claim and Administrative Claim for numerous reasons,
including the inadequacy of the documentation or other evidence supporting
the Claims and the absence of any contractual bases for the amounts
claimed. Additionally, on September 13, 1999, the Debtors filed an
adversary complaint in the Bankruptcy Court, Adv. Proc. No. 99-344, for,
among other things, damages arising out of 498 Seventh's wrongful draw down
on the letters of credit and an order compelling 498 Seventh to turnover
the proceeds thereof. This matter is still pending before the Bankruptcy
Court.
6. SECURITIES LITIGATION.
Beginning on November 12, 1998, a total of fourteen putative
class action securities law suits were filed against USN Communications,
certain of its officers and directors, and other parties in the United
States District Courts for the Southern District of New York and for the
Northern District of Illinois. These actions were consolidated in the
Northern District of Illinois on February 12, 1999, in the case captioned
Danis v. USN Communications, Inc., et al., Case No. 98 C 7482 (N.D. Ill.)
(collectively, the "Securities Suit").
On June 17, 1999, a Consolidated Class Action Complaint (the
"Consolidated Complaint") was filed which continued to name certain of USN
Communications' officers and directors as defendants (the "Individual
Defendants"), but did not name USN Communications as a defendant.
Nevertheless, a proof of Claim (the "Class Claim") was filed in the
Reorganization Case of USN Communications on behalf of the class of
plaintiffs alleged in the Consolidated Complaint, asserting liability in
excess $100,000,000 against USN Communications arising out of the
Securities Suit. On or about November 8, 1999, the Debtors objected to the
Class Claim on the bases, inter alia, that the Claims asserted were without
legal and factual merit and that the claims were subject to subordination
under Section 510(b) of the Bankruptcy Code.
As a result of the Individual Defendants' motion to dismiss,
one count of the Consolidated Complaint was dismissed as against the
Individual Defendants on September 27, 1999. Subsequently, the court
certified a plaintiffs' class consisting of all persons, other than the
defendants, their heirs, successors, and assigns and the member of the
individual defendants' immediate families, (i) who purchased the common
stock of USN Communications in the open market pursuant to USN
Communications' Registration Statement/Prospectus or (ii) who purchased the
common stock of USN Communications in the open market from February 4,
1998, through November 20, 1998, and who were damaged by the defendants'
violations of federal securities laws.
F. LEASE AND CONTRACT REJECTIONS
On the Petition Date, the Debtors were party to various
unexpired leases and executory contracts. Many of the Debtors' leases and
contracts were assumed and assigned to CoreComm in connection with the
CoreComm Sale. Following the consummation of the CoreComm Sale, through
which the Debtors sold substantially all of their assets other than the
Wireless Companies, the Debtors determined, with the assistance of their
financial advisors and in consultation with the Creditors' Committee, that
the remaining contracts and leases were of no value to the Debtors' Estates
or of insufficient value to warrant incurring the cost and expense
association with their assumption and assignment. Accordingly, pursuant to
Section 365 of the Bankruptcy Code, the Debtors rejected, by motion or
operation of law under the Bankruptcy Code, substantially all of their
remaining unexpired leases and executory contracts.
G. CASE ADMINISTRATION
1. SCHEDULES AND STATEMENTS.
On or about April 12, 1999, the Debtors filed their Schedules
of Assets and Liabilities and Financial Statements. The Debtors later
caused Schedule F of USN Communications to be amended on June 18, 1999, and
again on December 15, 1999 (as amended, the "Schedules"). Any Claim
respecting which, on or about December 15, 1999, the Debtors amended their
Schedules to add such Claim, designate such Claim as Disputed, contingent
or unliquidated or to change the amount, nature or classification of such
Claim, is referred to herein as an "Amended Schedule Claim".
2. BAR DATES.
The General Bar Date. By order dated July 2, 1999, the
Bankruptcy Court established August 9, 1999 (the "General Bar Date") as the
final date for filing prepetition proofs of Claim against the Debtors,
subject to certain exceptions. Pursuant to Bankruptcy Rule 3003(c)(2) and
the Order establishing the General Bar Date, any creditor whose Claim was
not scheduled by the Debtors or was scheduled as disputed, contingent,
undetermined, unknown, zero or unliquidated, and who failed to file a proof
of Claim on or before the General Bar Date, will not be treated as a
creditor with respect to such Claim for purposes of voting on the Plan or
receiving a Distribution under the Plan.
The Bar Date for Amended Schedule Claims. The Order
establishing the General Bar Date also provided a bar date for holders of
Amended Schedule Claims. In Order for the holder of an Amended Schedule
Claim to be eligible to receive a Distribution under the Plan, at a
minimum, a holder of such Claim must have filed a proof of Claim on account
of such Claim within thirty (30) days after service of notice thereof.
Thus, any Creditor that fails to file a proof of Claim or application for
payment of an Amended Schedule Claim on or before January 18, 2000 shall be
forever barred from asserting such Amended Schedule Claim against any of
the Debtors, the Liquidating Trust, the Liquidating Trustee, Reorganized
USN Communications or their property.
Administrative Claim Bar Date. By Order dated December 17,
1999, the Bankruptcy Court set a bar date for filing requests for payment
of Administrative Claims incurred on or before December 17, 1999. To be
eligible to receive Distributions under the Plan on account of an Allowed
Administrative Claim, a holder of an Administrative Claim, at a minimum,
must have Filed a request for payment of such Administrative Claim by the
applicable bar date of January 18, 2000, unless otherwise provided in the
Bankruptcy Court's Order, dated December 17, 1999, establishing a bar date
for Administrative Claims. Unless otherwise ordered by the Bankruptcy
Court, any Person that fails to File such a request for payment of such
Administrative Claim on or before such date shall be forever barred from
asserting such Administrative Claim against any of the Debtors, the
Liquidating Trust, the Liquidating Trustee, Reorganized USN Communications
or their property, and the holder thereof shall be enjoined from commencing
or continuing any action, employment of process or act to collect, offset
or recover such.
3. REPRESENTATION OF THE DEBTORS.
The Debtors retained and have been represented in the
Reorganization Cases by: (a) the law firm of Morris, Nichols, Arsht and
Tunnell, located at 1201 North Market Street, P.O. Box 1347, Wilmington,
Delaware 19899-1347, as bankruptcy counsel; (b) the law firm of Skadden,
Arps, Slate, Meagher & Flom (Illinois) and Affiliates, 333 West Wacker
Drive, Suite 2100, Chicago, Illinois 60606, as special counsel; (c) Jay
Alix & Associates, located at 575 Fifth Avenue, New York, New York 10017,
as bankruptcy consultant and financial advisor; (d) Daniels & Associates,
L.P., 3200 Cherry Creek South Drive, Suite 500, Denver, Colorado 80209, as
special purpose investment banker; (e) Friedman & Huey Associates L.L.P.,
located at 1313 West 175th Street, Homewood, Illinois 60430, as their
general accountants; (f) KPMG L.L.P., located at 303 East Wacker Drive,
Chicago, Illinois 60601-5212, as tax advisor and tax accountant; and (g)
Lazard Freres & Co., LLC, located at 30 Rockefeller Plaza, New York, New
York 10020, as the Debtors' agent in connection with the monetization of
the CoreComm Warrants.
IV. SUMMARY OF THE PLAN
THE FOLLOWING IS A SUMMARY OF CERTAIN MATTERS CONTEMPLATED TO
OCCUR EITHER PURSUANT TO OR IN CONNECTION WITH CONFIRMATION OF THE PLAN.
THIS SUMMARY HIGHLIGHTS THE SUBSTANTIVE PROVISIONS OF THE PLAN AND IS NOT,
NOR IS IT INTENDED TO BE, A COMPLETE DESCRIPTION OR A SUBSTITUTE FOR A FULL
AND COMPLETE READING OF THE PLAN. STATEMENTS REGARDING PROJECTED AMOUNTS OF
CLAIMS AND DISTRIBUTIONS ARE ESTIMATES BY THE DEBTORS BASED ON CURRENT
INFORMATION AND THE DEBTORS DO NOT WARRANT THE ACCURACY OF SUCH AMOUNTS.
A. OVERVIEW OF CHAPTER 11
Chapter 11 is the principal reorganization chapter of the
Bankruptcy Code. Pursuant to chapter 11, the debtor in possession attempts
to reorganize its business for the benefit of the debtor, its creditors,
its stockholders and other parties in interest.
The commencement of a chapter 11 case creates an estate
comprising all of the legal and equitable interests of the debtor in
property as of the date the petition is filed. Sections 1101, 1107 and 1108
of the Bankruptcy Code provide that a debtor may continue to operate its
business and remain in possession of its property as a "debtor in
possession" unless the bankruptcy court orders the appointment of a
trustee. In the present Reorganization Cases, the Debtors have remained in
possession of their property and have continued to operate their businesses
as debtors in possession.
The filing of a chapter 11 petition also triggers the automatic
stay provisions of the Bankruptcy Code. Section 362 of the Bankruptcy Code
provides, among other things, for an automatic stay of all attempts to
collect prepetition claims form the debtor or otherwise interfere with its
property or business. Except as otherwise ordered by the bankruptcy court,
the automatic stay remains in full force and effect until the effective
date of a confirmed plan of reorganization.
The formulation of a plan of reorganization is the principal
purpose of a chapter 11 case. The plan sets forth the means for satisfying
claims against and equity interests in the debtor. Unless a trustee is
appointed, only the debtor may file a plan during the first 120 days of a
chapter 11 case (the "Exclusive Period"). However, Section 1121(d) of the
Bankruptcy Code permits the bankruptcy court to extend or reduce the
Exclusive Period upon a showing of "cause." After the Exclusive Period has
expired, a creditor or any other party in interest may file a plan, unless
the debtor has filed a plan within the Exclusive Period, in which case, the
debtor is given sixty (60) additional days (the "Solicitation Period")
during which may solicit acceptances of its plan. The Solicitation Period
may also be extended or reduced by the bankruptcy court upon a showing of
"cause."
B. PLAN OF REORGANIZATION
Although referred to as a plan of reorganization, a plan may
provide anything from a complex restructuring of a debtor's business and
its related obligations to a simple liquidation of the debtor's assets. In
either event, upon confirmation of the plan, it becomes binding on the
debtor and all of its creditors and equity holders, and the obligations
owed by the debtor to such parties are compromised and exchanged for the
obligations or other treatment specified in the plan. In the present
Reorganization Cases, the Plan essentially contemplates the (a)
reorganization of USN Communications, with all of the Existing USN
Communications Interests being cancelled, (b) the issuance and transfer of
all of the equity of Reorganized USN Communications, excluding the Excluded
Assets, to ATA in consideration of ATA's payment of the Purchase
Consideration upon consummation of the ATA Agreement and (c) the creation
and administration of the Liquidating Trust as a successor entity to the
Debtors for the purposes of liquidating the Residual Assets of, and Claims
against, the Debtors and the Estates and effecting the Distribution scheme
described more fully herein and the Plan. Additionally, the Plan is
structured to implement alternate scenarios if the Purchase Agreement is
not consummated such as the sale of the Wireless Stock to an Alternative
Buyer. Under all circumstances the Plan provides for the creation and
administration of the Liquidating Trust.
After a plan of reorganization has been filed, the holders of
claims against and equity interests in a debtor are permitted to vote to
accept or reject the plan. Before soliciting acceptances of the proposed
plan, Section 1125 of the Bankruptcy Code requires the debtor to prepare a
disclosure statement containing adequate information of a kind, and in
sufficient detail, to enable a hypothetical reasonable investor to make an
informed judgment about the plan. THIS DISCLOSURE STATEMENT IS PRESENTED TO
HOLDERS OF CLAIMS AGAINST THE DEBTORS TO SATISFY THE REQUIREMENTS OF
SECTION 1125 OF THE BANKRUPTCY CODE IN CONNECTION WITH THE DEBTORS'
SOLICITATION OF VOTES ON THE PLAN.
If all classes of claims and equity interests accept a plan of
reorganization, the bankruptcy court may confirm the plan if the bankruptcy
court independently determines that the requirements of Section 1129 of the
Bankruptcy Code have been satisfied. Section 1129 sets forth the
requirements for confirmation of a plan and, among other things, requires
that a plan meet the "best interests" of creditors test and be "feasible."
The "best interests" test generally requires that the value of the
consideration to be distributed to the holders of claims or equity
interests under a plan may not be less than those parties would receive if
the debtor were liquidated pursuant to a hypothetical liquidation occurring
under chapter 7 of the Bankruptcy Code. Under the "feasibility"
requirement, the bankruptcy court generally must find that there is a
reasonable probability that the debtor will be able to meet its obligations
to creditors under its plan without the need for further financial
reorganization.
THE DEBTORS BELIEVE THAT THEIR PLAN SATISFIES ALL OF THE
APPLICABLE REQUIREMENTS OF SECTION 1129(A) OF THE BANKRUPTCY CODE,
INCLUDING, IN PARTICULAR, THE "BEST INTERESTS OF CREDITORS" TEST AND THE
"FEASIBILITY" REQUIREMENT. SIGNIFICANTLY, THE PURCHASE AGREEMENT CANNOT BE
CONSUMMATED ABSENT A CONFIRMED CHAPTER 11 PLAN OF REORGANIZATION, AND
THEREFORE THE ESTATES WOULD NOT RECEIVE THE PURCHASE CONSIDERATION. THE
DEBTORS SUPPORT CONFIRMATION OF THEIR PLAN AND URGE ALL HOLDERS OF IMPAIRED
CLAIMS ENTITLED TO VOTE TO ACCEPT THE PLAN.
Chapter 11 does not require that each holder of a claim or
equity interest in a particular class vote in favor of a plan of
reorganization in order for the bankruptcy court to determine that the
class has accepted the plan. Rather, a class of claims will be determined
to have accepted the plan if the bankruptcy court determines that the plan
has been accepted by a majority in number and two-thirds in amount of those
claims actually voting in such class. IN THE PRESENT REORGANIZATION CASES,
ONLY THE HOLDERS OF CLAIMS WHO ACTUALLY VOTE WILL BE COUNTED AS EITHER
ACCEPTING OR REJECTING THE PLAN.
Classes of claims or equity interests that are not "impaired"
under a plan of reorganization are conclusively presumed to have accepted
the plan and thus are not entitled to vote. Accordingly, acceptances of the
plan will generally be solicited only from those persons who hold claims or
equity interests in an impaired class. A class is "impaired" if the legal,
equitable or contractual rights attaching to the claims or equity interests
of that class are modified in any way under the plan. Modification for
purposes of determining impairment, however, does not include curing
defaults and reinstating maturity or payment in full in cash. In addition,
classes of claims or equity interests are deemed to reject a plan if such
plan provides that the claims or equity interests of such class to not
entitle the holders of such claims or equity interests to receive or retain
any property under the plan. EXCEPT FOR CLASS 1 (PRIORITY CLAIMS) AND CLASS
2 (SECURED CLAIMS), ALL CLASSES OF CLAIMS AND EQUITY INTERESTS ARE IMPAIRED
UNDER THE PLAN. CLAIMS IN CLASS 6 (SUBORDINATED SECURITIES CLAIMS) AND
EQUITY INTERESTS IN CLASS 7 (EQUITY INTERESTS) WILL RECEIVE NO DISTRIBUTION
UNDER THE PLAN AND THUS ARE DEEMED TO REJECT THE PLAN. CLAIMS IN CLASS 3
(CONVENIENCE CLAIMS), CLASS 4 (UNSECURED CLAIMS AND CLASS 5 (SECURITIES
LITIGATION CLAIMS), WHILE IMPAIRED, MAY RECEIVE DISTRIBUTIONS, AND THUS ARE
ENTITLED TO VOTE ON THE PLAN.
The bankruptcy court may also confirm a plan of reorganization
even though fewer than all of the classes of impaired claims and equity
interests accept it. For a plan of reorganization to be confirmed despite
its rejection by a class of impaired claims or equity interests, the
proponents of the plan must show, among other things, that the plan does
not "discriminate unfairly" and that the plan is "fair and equitable" with
respect to each impaired class of claims or equity interests that has not
accepted the plan.
Under Section 1129(b) of the Bankruptcy Code, a plan is "fair
and equitable" as to a class of rejecting claims if, among other things,
the plan provides: (a) with respect to secured claims, that each such
holder will receive or retain on account of its claim property that has a
value, as of the effective date of the plan, equal to the allowed amount of
such claim; and (b) with respect to unsecured claims and equity interests,
that the holder of any claim or equity interest that is junior to the
claims or equity interests of such class will not receive or retain on
account of such junior claim or equity interest any property at all unless
the senior class is paid in full.
A plan does not "discriminate unfairly" against a rejecting
class if (a) the relative value of the recover of such class under the plan
does not differ materially from that of any class (or classes) of similarly
situated claims, and (b) no senior class of claims is to receive more than
100% of the amount of such claims in such class.
The Debtors believe that the Plan has been structured so that
it will satisfy these requirements as to any rejecting Class of Claims, and
can therefore be confirmed notwithstanding the deemed rejection by Class 6
(Subordinated Securities Claims) and Class 7 (Equity Interests) and, if
necessary, may be confirmed over the objection of any Class of Claims. The
Debtors, however, reserve the right to request confirmation of the Plan
under the "cramdown" provisions of Section 1129 of the Bankruptcy Code.
C. SUBSTANTIVE CONSOLIDATION
The Plan contemplates the substantive consolidation of the
these bankruptcy cases into a single chapter 11 case solely for the
purposes of all actions associated with confirmation and consummation of
the Plan. On the Confirmation Date or such other date as may be set by a
Final Order of the Bankruptcy Court: (i) all Intercompany Claims by and
among the Debtors will be eliminated; (ii) all Assets of and Claims against
the Debtors will be merged or treated as though they were merged; (iii) all
prepetition cross-corporate guarantees of the Debtors will be eliminated;
(iv) all Claims based upon guarantees of collection, payment or performance
made by one or more Debtors as to the obligations of another Debtor or of
any other person will be discharged, released and of no further force and
effect; (v) any obligation of any Debtor and all guarantees thereof
executed by one or more of the Debtors, will be deemed to be one obligation
of the consolidated Debtors; (vi) any Claims filed or to be filed in
connection with any such obligation and such guarantees will be deemed one
claim against the consolidated Debtors; and (vii) each and every Claim
filed in the individual bankruptcy cases shall be deemed filed against the
consolidated Debtor and shall be deemed a single obligation of all of the
Debtors under the Plan on and after the confirmation date; provided,
however, that substantive consolidation will not affect the obligations of
each of the Debtors under the Plan.
Unless substantive consolidation has been approved by a prior
order of the Bankruptcy Court, the Plan will serve as a motion seeking
entry of an order substantively consolidating the Reorganization Cases.
UNLESS AN OBJECTION TO SUBSTANTIVE CONSOLIDATION IS MADE IN WRITING BY ANY
CREDITOR AFFECTED BY THE PLAN ON OR BEFORE FIVE (5) DAYS PRIOR TO THE DATE
THAT IS FIXED BY THE BANKRUPTCY COURT AS THE LAST DATE ON WHICH ACCEPTANCES
TO THE PLAN MAY BE RECEIVED, OR SUCH OTHER DATE AS MAY BE FIXED BY THE
BANKRUPTCY COURT, THE SUBSTANTIVE CONSOLIDATION ORDER (WHICH MAY BE THE
CONFIRMATION ORDER) MAY BE ENTERED BY THE COURT. If any such objections are
timely filed, a hearing with respect thereto shall be scheduled by the
Bankruptcy Court.
Substantive consolidation is an equitable remedy which a
bankruptcy court may be asked to apply in cases involving affiliated
debtors. As contrasted with procedural consolidation, substantive
consolidation may affect the substantive rights and obligations of
creditors and debtors. Substantive consolidation involves the pooling and
merging of the assets and liabilities of the affected debtors; all of the
debtors in the substantively consolidated group are treated as if they were
a single corporate/economic entity. The consolidated assets create a single
fund from which all claims against the consolidated debtors are to be
satisfied. Consequently, a creditor of one of the substantively
consolidated debtors is treated as a creditor of the substantively
consolidated group of debtors and issues of individual corporate ownership
of property and individual corporate liability on obligations are ignored.
However, substantive consolidation does not affect the debtors' separate
corporate existence or independent ownership of property for any purposes
other than for making distributions of property under a plan of
reorganization or otherwise as necessary to implement such plan.
As discussed above, substantive consolidation generally has the
effect of, among other things, eliminating (i) cross-corporate guaranties
by one debtor of the obligation of another debtor in the substantively
consolidated group, (ii) duplicative claims against more than one debtor in
the substantively consolidated group and (iii) intercompany claims between
the substantively consolidated debtors.
The power to substantively consolidate interrelated chapter 11
cases lies in a bankruptcy court's general equitable powers which are set
forth in Section 105 of the Bankruptcy Code. Within this framework, the
factors to which courts have looked to determine the appropriateness of
substantive consolidation include: (i) whether creditors dealt with the
debtor entities as a single economic unit and did not rely on their
separate identities in extending credit, and (ii) whether the affairs of
the debtors are so entangled that the consolidation will benefit all
creditors of the debtors' estates. Additional factors include: (i) the
presence or absence of consolidated financial statements; (ii) the
existence of inter-company guarantees or loans; (iii) the unity of interest
and ownership between the various corporate entities; (iv) the transfer of
assets without observance of corporate formalities; (v) the degree of
difficulty in segregating and ascertaining individual assets and
liabilities; (vi) the parent, its affiliates and subsidiaries having common
directors and/or officers; (vii) the parent or its affiliates financing one
another; and (viii) the commingling of assets and business functions.
The Debtors believe that substantive consolidation of the
Debtors' Estates will facilitate the implementation of the Plan and foster
similarity and fairness of treatment of Claimholders. The Debtors believe
that these factors have been satisfied sufficiently to warrant an order of
substantive consolidation in the Reorganization Cases.
D. TREATMENT OF CLAIMS AND EQUITY INTERESTS
1. UNCLASSIFIED CLAIMS.
(a) ADMINISTRATIVE CLAIMS
o Unimpaired
o Deemed to Accept
Administrative Claims are Claims, other than Fee Claims,
constituting costs and/or expenses of administration of the Debtors'
Reorganization Cases under Sections 503(b) or 507(a)(1) of the Bankruptcy
Code, including, without limitation: (a) the actual, necessary costs and
expenses incurred after the Petition Date of preserving the Estates and
operating the Debtors' businesses (such as wages, salaries, taxes or
commissions for services rendered); (b) all fees and charges assessed
against the Estates pursuant to Section 1930 of title 28 of the United
States Code; (c) the Debtors' obligations under the Adversary Proceeding
Settlement, including the portion of the Senior Notes Indenture Trustee
Expenses accorded administrative priority treatment under the Adversary
Proceeding Settlement.
Treatment. Subject to the terms of Section 12.8 of the Plan
and unless (a) otherwise provided in the Plan or (b) the holder of an
Allowed Administrative Claim agrees to receive other, less favorable
treatment, each holder of an Allowed Administrative Claims shall be paid
100% of the unpaid amount of such Allowed Claim in Cash on or as soon as
reasonably practicable after the later of (x) Initial Distribution Date and
(y) the first Periodic Distribution Date after the date such Administrative
Claim becomes an Allowed Administrative Claim. Under the Plan,
Administrative Claims of the United States Trustee for fees pursuant to 28
U.S.C. ss. 1930(a)(6) will be paid in accordance with the applicable
schedule for payment of such fees. Furthermore, in the event the Buyer
becomes entitled to the Termination Fee and/or Expense Reimbursement
pursuant to, and subject to, the Purchase Agreement, the Termination Fee
and Expense Reimbursement will be paid in full from the proceeds of the
Alternative Purchase Consideration prior to such funds being transferred to
the Liquidating Trust.
(b) FEE CLAIMS
o Unimpaired
o Deemed to Accept
Fee Claims are Claims for compensation or reimbursement of
expenses of professionals retained or to be compensated for services
rendered or costs incurred on or after the Petition Date through and
including the Effective Date pursuant to Section 327, 328, 330, 503(b) or
1103 of the Bankruptcy Code.
Treatment. Unless (a) otherwise provided for in the Plan or
(b) the holder of an Allowed Fee Claim agrees to receive other, less
favorable treatment, each holder of an Allowed Fee Claim will receive 100%
of the unpaid Allowed amount of such Claim in Cash on or as soon as
reasonably practicable after the later of (x) Effective Date and (y) the
first Periodic Distribution Date after the date such Fee Claim becomes an
Allowed Fee Claim.
(c) PRIORITY TAX CLAIMS
o Unimpaired
o Deemed to Accept
Priority Tax Claims are any Claims that, if Allowed, would
be entitled to priority pursuant to Section 507(a)(8) of the Bankruptcy
Code. Priority Tax Claims include Federal Priority Tax Claims, which are
Priority Tax Claims of the United States federal government.
Treatment. Unless (a) otherwise provided for in the Plan or
(b) the holder of an Allowed Priority Tax Claim agrees to receive other,
less favorable treatment, each holder of an Allowed Priority Tax Claim
shall receive the following treatment:
(i) Each holder of an Allowed Priority Tax Claim
(other than any such Claim that is an Allowed Federal Priority Tax Claim)
against any of the Debtors shall be paid 100% of the unpaid amount of such
Allowed Priority Tax Claim in Cash on or as soon as reasonably practicable
after the later of (x) the Initial Distribution Date and (y) the first
Periodic Distribution Date after the date such Priority Tax Claim becomes
an Allowed Priority Tax Claim.
(ii) Each holder of an Allowed Priority Tax Claim that
is a Federal Priority Tax Claim, at the option of the Liquidating Trustee,
either: (i) shall be paid 100% of the unpaid amount of such Allowed
Priority Tax Claim in Cash on or as soon as reasonably practicable after
the later of (x) the Initial Distribution Date and (y) the first Periodic
Distribution Date after the date such Priority Tax Claim becomes an Allowed
Priority Tax Claim; or (ii) shall be paid in equal semi-annual Cash
payments in arrears over a period not exceeding six (6) years from the date
of assessment of such Claim, with simple interest at the deficiency rate as
determined on the Effective Date under Section 6621(c) of the Internal
Revenue Code or such other rates as may be fixed by a Final Order of the
Bankruptcy Court, until such Claim is paid in full.
(ii) Any claim or demand for penalty relating to any
Priority Tax Claim (including without limitation any Federal Priority Tax
Claim) shall be disallowed, and the holder of an Allowed Priority Tax Claim
shall not assess or attempt to collect such penalty from the Debtors or the
Liquidating Trustee.
2. CLASSIFIED CLAIMS AND EQUITY INTERESTS.
(a) CLASS 1 (PRIORITY CLAIMS)
o Unimpaired
o Deemed to Accept
Class 1 consists of all Claims entitled to priority
pursuant to Section 507(a) of the Bankruptcy Code, other than
Administrative Claims, Priority Tax Claims, and Fee Claims.
Treatment. Unless (a) otherwise provided for in the Plan or
(b) the holder of an Allowed Priority Claim agrees to receive other, less
favorable treatment, each holder of an Allowed Priority Claim shall be paid
100% of the unpaid amount of such Allowed Priority Claim in Cash on or as
soon as reasonably practicable after the later of (x) the Initial
Distribution Date and (y) the first Periodic Distribution Date after the
date such Priority Claim becomes an Allowed Priority Claim.
(b) CLASS 2 (SECURED CLAIMS)
o Unimpaired
o Deemed to Accept
Class 2 consists of all Secured Claims, whether validly
perfected under applicable state law prior to the Petition Date or validly
perfected after the Petition Date in accordance with Section 546(b) of the
Bankruptcy Code. Each Allowed Secured Claim in Class 2 shall be considered
to be a separate subclass within Class 2, and each such subclass shall be
deemed to be a separate Class for purposes of the Plan. A Secured Claim is,
pursuant to Section 506 of the Bankruptcy Code, that portion of a Claim
that is secured by a valid, perfected and enforceable security interest,
lien, mortgage or other encumbrance, that is not subject to avoidance under
applicable bankruptcy or non-bankruptcy law, in or upon any right, title or
interest of any of the Debtors in and to property of the Estates, to the
extent of the value of the holder's interest in such property as of the
relevant determination date. The defined term Secured Claim includes any
Claim that is: (i) subject to an offset right under applicable law; and
(ii) a secured claim against any of the Debtors pursuant to Sections 506(a)
and 553 of the Bankruptcy Code. Such defined term shall not include for
voting or Distribution purposes any such Claim that has been or will be
paid in connection with the cure of defaults under an assumed executory
contract or unexpired lease under Section 365 of the Bankruptcy Code.
Treatment. Subject to the provisions of Sections 502(b)(3)
and 506(d) of the Bankruptcy Code, each holder of an Allowed Secured Claim
shall receive, at the Liquidating Trustee's option and to the extent such
Claim is secured by Collateral in the possession of the Liquidating
Trustee: (a) 100% of the Net Proceeds from the sale of the relevant
Collateral, up to the unpaid Allowed amount of such Claim (with such
payments to be made, if applicable, from accounts set up by the Debtors,
during their Reorganization Cases, in connection with the sale of such
Collateral), subject to applicable inter-creditor lien priorities; (b) the
return of the relevant Collateral; or (c) such other treatment as shall be
agreed to between the holder of such Claim and the Debtors or the
Liquidating Trustee. Such Distribution shall be made on or as soon as
reasonably practicable after the later of (x) the Initial Distribution Date
(subject, if applicable, to the Liquidating Trustee's receipt of the
proceeds of the sale of the relevant collateral) and (y) the first Periodic
Distribution Date after such Secured Claim becomes an Allowed Secured
Claim. Upon receipt by the relevant holder of such Distributions, such
holder's lien or other security interest in the relevant Collateral shall
be deemed released. To the extent a Claim is partially an Allowed Secured
Claim based on an offset right and partially an Allowed Claim of another
type, such Secured Claim shall be deemed to have been (i) setoff only to
the extent of the Allowed amount of the Allowed, liquidated, nondisputed,
noncontingent claim owing to the relevant Debtor or Debtors, and (ii) a
Claim classified in another relevant Class for any excess of such Claim
over the amount so set off. If a Claim is fully a Secured Claim based on an
offset right, the allowance of such Claim shall not affect any obligations
or liabilities due and payable (at such time) to the Debtors or the
Liquidating Trust that are in an amount in excess of the amount validly
offset and the payment, in full and in cash, of all amounts due and owing
as of the Effective Date to the Liquidating Trust and the turnover of any
property of the Debtors or the Liquidating Trust held by such claimant on
account of any unliquidated, Disputed or contingent right of setoff shall
be a precondition of the allowance of such Secured Claim.
(c) CLASS 3 (CONVENIENCE CLAIMS)
o Impaired
o Entitled to Vote
Class 3 Consists of all Convenience Claims. Convenience
Claims are Claims that otherwise would be an Unsecured Claim (but expressly
excluding Notes Claims) that each have a Face Value of (a) $2,000 or less
or (b) more than $2,000 if the holder has properly made the Convenience
Class Election on a Ballot properly cast by the Ballot Deadline.
The Convenience Class Election is the election available to
a holder of an Unsecured Claim (but excluding any Unsecured Claim that is a
Notes Claim) with a Face Value in excess of $2,000 to have such Claim
treated as a Convenience Claim provided the holder of such Unsecured Claim
has agreed to reduce such Claim for purposes of voting and Distributions
under the Plan to an amount equal to or less than $2,000. The Convenience
Class Election must be made at the time of balloting for voting to accept
or reject the Plan and clearly indicated on the holder's Ballot; provided,
however, that, if such Claim is a Disputed Claim at the time of balloting
the Convenience Class Election may be made in a Final Order Allowing such
Claim. Once a Convenience Class Election has been made with respect to an
Unsecured Claim, such election shall be irrevocable except with the written
consent of the Debtors' or the Liquidating Trustee. Whether a Claimholder
has properly made a Convenience Class Election shall have no effect on
whether such Convenience Claim is or may become a Disputed Claim or an
Allowed Claim.
Treatment. On or as soon as practicable after the Effective
Date, $100,000 of Cash shall be transferred into the Convenience Class
Reserve. On the Later of (x) the Initial Distribution Date and (y) the date
that a Convenience Claim becomes an Allowed Convenience Claim, each holder
of an Allowed Convenience Claim shall receive (a) its Ratable share of the
Cash in the Convenience Class Reserve and (b) its ratable share of Cash
from the Distribution Reserve with such ratable share being calculated as
the proportion that the Face Amount of such Convenience Claim (without
giving effect to any Distributions received by such Claimholder from the
convenience Class Reserve) bears to the aggregate Face Amount of all
Convenience Claims and Unsecured Claims (including Disputed Claims, but
excluding Disallowed Claims); provided, however, no holder of an Allowed
Convenience Claim shall receive, on account of such Convenience Claim, more
than the Allowed amount of such Convenience Claim.
(d) CLASS 4 (UNSECURED CLAIMS)
o Impaired
o Entitled to Vote
Class 4 consists of all Unsecured Claims. Unsecured Claims
are Claims that are not: (a) Administrative Claims; (b) Priority Claims;
(c) Priority Tax Claims; (d) Secured Claims; (e) Fee Claims; (f)
Convenience Claims; (g) Securities Litigation Claims; or (h) a Subordinated
Securities Claim.
Treatment. Subject to Section 6.2(b) of the Plan, each
holder of an Allowed Unsecured Claim shall receive its ratable share of the
Liquidating Trust Assets remaining after: (a) all Allowed Administrative
Claims, Allowed Priority Claims, Allowed Priority Tax Claims, Allowed Fee
Claims and Allowed Secured Claims have been satisfied in full (b) all
Disputed Administrative Claims, Disputed Priority Claims, Disputed Priority
Tax Claims, Disputed Fee Claims, Disputed Secured Claims, and Disputed
Unsecured Claims have been reserved for in accordance with the Plan; (c)
the Convenience Class Reserve has been funded; and (d) all Liquidating
Trust Administrative Expenses have either been (x) satisfied in full or (y)
reserved for in accordance with the Plan. Such ratable share shall be
calculated as the proportion that the Face Amount of such Unsecured Claim
bears to the aggregate Face Amount of all Unsecured Claims and Convenience
Claims (including Disputed Claims, but excluding Disallowed Claims).
The Plan does not impair Subordination rights arising out
of contractual subordination provisions between and among the Senior Notes
and the Senior Notes Indentures, on the one hand, and the Junior Notes and
the Junior Notes Indentures, on the other hand. Based on the enforcement by
the holders of Senior Notes Claims of the foregoing contractual
subordination rights and the Debtors' recognition of the continued vitality
of the foregoing subordination agreements under Section 510(a) of the
Bankruptcy Code, the Plan provides that holders of Allowed Junior Note
Claims are deemed, without further action by any Person, to have
transferred their entire right, title and interest, if any, as holders of
Unsecured Claims to receive Distributions under the Plan to the holders of
Allowed Senior Notes Claims and are not entitled to retain any
Distributions on account of such Allowed Junior Notes Claims. Subject to
the conditions stated in the Plan (including, without limitation, the
conditions stated in Section 8.3 of the Plan) and the Confirmation Order,
Distributions that, but for the existence and enforceability of the
foregoing subordination rights, would be made on account of Allowed Junior
Notes Claims shall be made, in accordance with Section 11.8 of the Plan to
the Senior Notes Indenture Trustees for distribution to the holders of
Allowed Senior Notes Claims.
(e) CLASS 5 (SECURITIES LITIGATION CLAIMS)
o Impaired
o Entitled to Vote
Class 5 consists of all Securities Litigation Claims. A
Securities Litigation Claim is any Claim, right or cause of action, whether
known or unknown, that was or could have been asserted (notwithstanding the
applicability of the automatic stay provisions of Section 362 of the
Bankruptcy Code) in the Securities Suit against any Person, whether or not
insured under the D&O Insurance, including, without limitation, any of the
Debtors and their current or former officers, directors, employees, agents,
representatives, counsel, advisors and other professionals.
Treatment (If Class 5 Votes to Accept the Plan). If Class 5
votes to accept the Plan, each holders of an Allowed Securities Litigation
Claim will receive its Ratable share of the Available D&O Insurance
Proceeds. The foregoing will not preclude, restrict or limit any Person who
is covered by such D&O Insurance and who is sued from defending against or
opposing any claim by any Person.
Treatment (If Class 5 Votes to Reject the Plan). If Class 5
votes to reject the Plan, holders of Securities Litigation Claims will
receive no Distributions on account of such Claims.
(f) CLASS 6 (SUBORDINATED SECURITIES CLAIMS)
o Impaired
o Deemed to Reject
Class 6 consists of all Subordinated Securities Claims. A
Subordinated Securities Claim is a Claim, other than a Securities
Litigation Claim, subject to subordination under Section 510(b) of the
Bankruptcy Code that arises from the rescission of, or for damages,
reimbursement or contribution with respect to, a purchase or sale of an
Equity Interest in the Debtors prior to the Petition Date.
Treatment. Holders of Subordinated Securities Claims will
receive no Distribution on account of such Claims.
(g) CLASS 7 (EQUITY INTERESTS)
o Impaired
o Deemed to Reject
Class 7 consists of all Equity Interests in the Debtors. An
Equity Interest is any ownership or equity interest in any of the Debtors,
including, without limitation, shares of Existing USN Communications
Interests or warrants, options or other rights to purchase any ownership or
equity interest in any of the Debtors, but expressly excluding the
Reorganized Stock.
Treatment. Holders of Equity Interest will receive no
Distribution on account of such Equity Interests. The Plan provides that
all Equity Interests shall be deemed cancelled as of the Effective Date of
the Plan.
3. BAR DATES.
(a) GENERAL BAR DATE. As more fully described in Part III,
Section G.2 hereof, by order dated July 2, 1999, the Bankruptcy Court
established August 9, 1999 as the General Bar Date.
(b) AMENDED SCHEDULE CLAIMS BAR DATE. As more fully
described in Part III, Section G.2 hereof, the final date, subject to
certain exceptions, for filing proofs of Claim against the Debtors on
account of any Amended Schedule Claim is January 18, 2000.
(c) ADMINISTRATIVE CLAIM BAR DATE. As more fully described
in Part III, Section G.2 hereof, by order dated December 17, 1999, the
Bankruptcy Court established January 18, 2000 as the Administrative Claim
Bar Date.
(d) FEE CLAIMS BAR DATE. Unless otherwise provided in the
Plan, the Confirmation Order or another order of the Bankruptcy Court, all
applications for payment of Fee Claims must be Filed with the Bankruptcy
Court by the date that is 45 days after the Effective Date (or, if such
date is not a Business Day, by the next Business Day thereafter).
V. MEANS OF IMPLEMENTATION
A. PLAN IMPLEMENTATION RELATED TO SALE TRANSACTION AND
ALTERNATIVE SALE TRANSACTION
1. PLAN IMPLEMENTATION RELATED TO SALE TRANSACTION.
The Bankruptcy Court has approved the Purchase Agreement as the
highest and best offer to date for the Purchased Business. The Plan
provides for the following to occur upon the closing of the Purchase
Agreement:
(a) ISSUANCE OF REORGANIZED STOCK. The Reorganized Stock,
which shall constitute all of the authorized but unissued common
stock of Reorganized USN Communications, shall be issued and
transferred to the Buyer.
(b) REVESTING OF CERTAIN ASSETS IN REORGANIZED USN
COMMUNICATIONS. The Assets of the Estate of USN Communications, other
than the Excluded Assets and the Purchase Consideration, shall revest
in Reorganized USN Communications. Thereafter, Reorganized USN
Communications may operate its business and may use, acquire, and
dispose of property free of any restrictions of the Bankruptcy Code,
the Bankruptcy Rules and the Bankruptcy Court. All property of
Reorganized USN Communications shall be free and clear of all Claims
and Equity Interests, except as specifically provided in the Plan,
the Purchase Agreement or the Confirmation Order and all such Claims
and Equity Interests shall be both discharged and released as to
Reorganized USN Communications.
(c) AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF
INCORPORATION OF USN COMMUNICATIONS. The certificate of incorporation
of USN Communications shall be amended and restated in substantially
the form of the USN Communications Amended and Restated Certificate
of Incorporation, inter alia, (a) to prohibit the issuance of
nonvoting equity securities as required by Section 1123(a)(6) of the
Bankruptcy Code, subject to further amendment of such USN
Communications Amended and Restated Certificate of Incorporation as
permitted by applicable law, (b) to authorize the cancellation of the
Existing USN Communications Interests and the issuance of the
Reorganized Stock, (c) to change the name of Reorganized USN
Communications to a name recommended by Buyer in accordance with the
Purchase Agreement and (d) to effectuate the provisions of the Plan.
(d) AMENDMENT AND RESTATEMENT OF BY-LAWS OF USN
COMMUNICATIONS. The by-laws of USN Communications shall be amended
and restated in substantially the form of the USN Communications
Amended and Restated By-Laws.
(e) CONSUMMATION OF SALE TRANSACTION. The Buyer shall
accept the Reorganized Stock, manage Reorganized USN Communications,
appoint officers, and otherwise conduct the business and affairs of
Reorganized USN Communications for all appropriate purposes under
applicable law.
(f) TRANSFER OF RESIDUAL ASSETS TO LIQUIDATING TRUST. The
Buyer shall transfer the Purchase Consideration to the Liquidating
Trust and the Debtors shall transfer all of the Debtors' right, title
and interest in the Residual Assets to the Liquidating Trust.
2. ALTERNATIVE PLAN IMPLEMENTATION RELATED TO ALTERNATIVE
SALE TRANSACTION.
The Plan also contemplates and provides for alternate means of
Plan implementation. In the event the Purchase Agreement has been
terminated and the Debtors have executed an Alternative Purchase Agreement,
implementation of the Plan may occur by one of the following means:
(a) SALE OF REORGANIZED STOCK. If the Alternative Purchase
Agreement Contemplates the issuance and sale to an Alternative Buyer of the
Reorganized Stock, the following shall occur upon the closing of such
Alternative Purchase Agreement:
(i) Issuance of Reorganized Stock. The Reorganized
Stock, which shall constitute all of the then authorized but unissued
common stock of Reorganized USN Communications, shall be issued and
transferred to the Alternative Buyer.
(ii) Revesting of Certain Assets in Reorganized USN
Communications. The Assets of the Estate of USN Communications, other than
the Alternative Excluded Assets and the Alternative Purchase Consideration,
shall revest in Reorganized USN Communications. Thereafter, Reorganized USN
Communications may operate its business and may use, acquire, and dispose
of property free of any restrictions of the Bankruptcy Code, the Bankruptcy
Rules and the Bankruptcy Court. All property of Reorganized USN
Communications shall be free and clear of all Claims and Equity Interests,
except as specifically provided in the Plan, the Alternative Purchase
Agreement or the Confirmation Order and all such Claims and Equity
Interests shall be both discharged and released as to Reorganized USN
Communications.
(iii) Amendment and Restatement of the Certificate of
Incorporation of USN Communications. The certificate of incorporation of
USN Communications shall be amended and restated in substantially the form
of the USN Communications Amended and Restated Certificate of
Incorporation, inter alia, (a) to prohibit the issuance of nonvoting equity
securities as required by Section 1123(a)(6) of the Bankruptcy Code,
subject to further amendment of such USN Communications Amended and
Restated Certificate of Incorporation as permitted by applicable law, (b)
to authorize the cancellation of the Existing USN Communications Interests
and the issuance of the Reorganized Stock and (c) to effectuate the
provisions of the Plan.
(iv) Amendment and Restatement of By-Laws of USN
Communications. The by-laws of USN Communications shall be amended and
restated as of the Effective Date in substantially the form of the USN
Communications Amended and Restated ByLaws.
(v) Consummation of Sale Transaction. The Alternative
Buyer shall accept the Reorganized Stock, manage Reorganized USN
Communications, appoint officers, and otherwise conduct the business and
affairs of Reorganized USN Communications for all appropriate purposes
under applicable law.
(vi) Transfer of Residual Assets to Liquidating Trust.
The Alternative Buyer shall transfer the Alternative Purchase Consideration
to the Liquidating Trust and the Debtors shall transfer all of the Debtors'
right, title and interest in the Residual Assets to the Liquidating Trust.
(b) SALE OF WIRELESS STOCK. If the Alternative Purchase
Agreement contemplates a sale of the Wireless Stock to an Alternative
Buyer, the following shall occur:
(i) Consummation of Alternative Sale Transaction. Upon
the closing of such Alternative Sale Agreement, pursuant to such
Alternative Purchase Agreement, the Plan, the Disclosure Statement and
Sections 105(a) and 363 of the Bankruptcy Code, except to the extent
provided in such Alternative Purchase Agreement, the Plan and the
Conformation Order, the Alternative Buyer shall acquire the Purchased
Business free and clear of all Claims and Encumbrances against the Wireless
Stock.
(ii) Transfer of Residual Assets to Liquidating Trust.
(A) If the closing of the Alternative Purchase Agreement occurs prior to
the Effective Date, upon the closing of Such Alternative Purchase
Agreement, the Alternative Buyer shall transfer the Alternative Purchase
Consideration to the Debtors, and, upon the occurrence of the Effective
Date, the Debtors shall transfer all of the Debtors' right, title and
interest in the Residual Assets (including, without limitation, the
Alternative Purchase Consideration) to the Liquidating Trust. (B) If the
closing of the Alternative Purchase Agreement occurs on or after the
Effective Date, the Alternative Buyer shall transfer the Alternative
Purchase Consideration to the Liquidating Trust and the Debtors shall
transfer all of the Debtors' right, title and interest in the Residual
Assets to the Liquidating Trust.
(c) SALE OF THE ASSETS OF THE WIRELESS COMPANIES. If the
Purchase Agreement contemplates a sale of the assets of the Wireless
Companies to the Buyer the following shall occur:
(i) Consummation of Alternative Sale Transaction. Upon
the closing of the Alternative Purchase Agreement, pursuant to such
Alternative Purchase Agreement, the Plan, the Confirmation Order and
Sections 105(a) and 363 of the Bankruptcy Code (to the extent applicable),
except to the extent provided in the Alternative Purchase Agreement, the
Plan and the Conformation Order, the Alternative Buyer shall acquire the
Purchased Business in accordance with such Alternative Purchase Agreement.
(ii) Transfer of Purchase Consideration to USN
Wireless, Inc. Upon the closing of such Alternative Purchase Agreement, the
Alternative Buyer shall transfer the Alternative Purchase Consideration to
USN Wireless, Inc., pursuant to the Purchase Agreement.
(iii) Transfer of Estates' Assets to Liquidating Trust.
Upon the occurrence of the Effective Date, all of the Estates' Assets,
including, without limitation, the Wireless Stock, shall be transferred to
the Liquidating Trust. The Liquidating Trustee shall be authorized,
empowered and directed to take all actions and execute all documents
necessary to cause USN Wireless, Inc. to legally dividend or otherwise
disburse the net proceeds of the Purchase Consideration to the Liquidating
Trust.
3. IMPLEMENTATION OF PLAN ABSENT CONSUMMATION OF SALE
TRANSACTION OR ALTERNATIVE SALE TRANSACTION.
If no Sale Transaction or Alternative Sale Transaction
described in Sections 9.1 or 9.2 of the Plan is consummated pursuant to the
Plan on or before the Effective Date, as of the Effective Date all of the
Debtors' right, title and interest in all Assets of the Estates shall be
transferred to the Liquidating Trust, subject to the rights, if any, of the
Buyer (or Alternative Buyer, as the case may be), if any, under the
Purchase Agreement (or Alternative Purchase Agreement, as the case may be)
as may then be in existence, not terminated and enforceable. The
Liquidating Trust shall succeed to all of the rights of the Debtors
respecting the Purchase Agreement (or Alternative Purchase Agreement, as
the case may be), including, without limitation, all legal and equitable
remedies of the Debtors arising out of or related to the Purchase Agreement
(or Alternative Purchase Agreement, as the case may be). Additionally, the
Liquidating Trustee shall be authorized to enter into any agreement or
execute any document required by or consistent with the Plan and the
Purchase Agreement (or Alternative Purchase Agreement, as the case may be)
and perform all obligations thereunder.
B. APPLICABILITY OF SECTIONS 1125 AND 1145 OF BANKRUPTCY CODE
The Plan provides that the protection afforded by Section
1125(e) of the Bankruptcy Code with regard to solicitation of acceptances
or rejections of the Plan and the offer, issuance, sale or purchase of the
Reorganized Shares, shall apply to the fullest extent provided by law, and
the entry of the Confirmation Order shall constitute the determination by
the Bankruptcy Court that the Debtors, Reorganized USN Communications, the
Buyer, the Creditors' Committee, the PEDC (if appointed), the Liquidating
Trust and the Liquidating Trustee and each of their respective officers,
directors, partners, employees, members, agents, attorneys, accountants or
other professionals, shall have acted in good faith and in compliance with
the applicable provisions of the Bankruptcy Code pursuant to Section
1125(e) of the Bankruptcy Code. The Plan further provides that the
exemption from the requirements of Section 5 of the Securities Act of 1933,
15 U.S.C. ss. 77e, and any state and local law requiring registration for
the offer or sale of a security provided for in Section 1145 of the
Bankruptcy Code shall apply to the Reorganized Stock.
C. DISSOLUTION OF CORPORATION ENTITIES
On the Effective Date, each of US Network Corporation,
FoneNet/Ohio, Inc., USN Communications Long Distance, Inc., USN
Communications Virginia, Inc., USN Communications Maine, Inc., Quest
United, Inc., USN Communications Atlantic, Inc., USN Solutions, Inc., USN
Communications Southwest, Inc., USN Communications West, Inc., USN
Communications Midwest, Inc., and USN Communications Northeast, Inc. shall
be dissolved without any further action by the stockholders or directors of
the Debtors; provided, however, that if the Sale Transaction is not
consummated, or an Alternative Sale Transaction which provides for an
Alternative Buyer to acquire the Reorganized Stock is not consummated, then
USN Communications, Inc. also shall be dissolved. The Liquidating Trustee
shall be the sole Person authorized and responsible to effect the
dissolutions provided for in Section 9.4 of the Plan.
D. OFFICERS AND DIRECTORS
On the Effective Date, the authority, power and incumbency of
the Persons then acting as directors and officers of the Debtors shall be
terminated and such directors and officers shall be deemed to have
resigned.
E. DISSOLUTION OF CREDITORS' COMMITTEE; POST-EFFECTIVE DATE
COMMITTEE
The Plan provides for the dissolution of the Creditors'
Committee as of the Effective Date. Under the Plan, the Creditors'
Committee has the power, prior to its dissolution, to authorize the
creation and appointment the Post-Effective Date Committee (the "PEDC"). If
constituted the PEDC shall have certain authority, rights, and duties in
relation to the Liquidating Trust, all as set forth more fully in Section
9.9 of the Plan.
F. DANIELS' TRANSACTION FEE
The Plan provides that upon the consummation of a Sale
Transaction (or Alternative Sale Transaction, as the case may be) the
Daniels Transaction Fee shall paid (without further notice, hearing or
application by Daniels) from the proceeds of the Purchase Consideration (or
Alternative Purchase Consideration, as the case may be) prior to such funds
being transferred to the Liquidating Trust. The Daniels Transaction Fee
consists of compensation and reimbursement of expenses to which Daniels may
be entitled under the Letter Agreement, dated as of October 6, 1998, as
amended, between USN Communications and Daniels and the "Order Granting
Debtors' Application to Employ and Retain Daniels & Associates, L.P. as
Debtors' Special Purpose Investment Banker and Representative," dated
February 22, 1999.
G. TERMINATION OF DIP FACILITY
Upon the Effective Date, the following shall occur in respect
of the DIP Facility and the DIP Order: (a) all DIP Claims and other
obligations, if any, of the Debtors under the DIP Facility and the DIP
Order shall be deemed satisfied in full and released; and (b) the DIP
Facility, if not previously terminated, shall be deemed terminated and all
Encumbrances, liens and security interests granted to secure any obligation
under the DIP Facility shall be deemed terminated and of no further force
and effect.
H. SURRENDER AND CANCELLATION OF SECURITIES
1. CANCELLATION AND SURRENDER OF SECURITIES GENERALLY.
(a) CANCELLATION OF EQUITY INTERESTS. All Equity Interests
shall be deemed cancelled on the Effective Date.
(b) CANCELLATION OF SECURITIES GENERALLY. On the Effective
Date, other than as expressly provided in Section 8.2 of the Plan and
except to the extent of the treatment provided for in the Plan for
Claimholders, (a) the existing securities and any other note, bond,
indenture, or other instrument or document evidencing or creating any
indebtedness or obligation of the Debtors, shall be cancelled, and (b) the
obligations of, and/or Claims against, the Debtors under, relating or
pertaining to any agreements, indentures or certificates of designations
governing the existing securities and any other note, bond, indenture or
other instrument or document evidencing or creating any indebtedness or
obligation of the Debtors, as the case may be, shall be released and
discharged.
(c) SURRENDER OF OUTSTANDING SECURITIES. Except as
expressly provided in Section 8.3 of the Plan, as a condition to the
receipt of any Distributions under the Plan by the holder of an Allowed
Claim, such Claimholder must surrender to the Debtors or the Liquidating
Trust, the certificates, notes, debentures or other evidence of
indebtedness evidencing such holder's Allowed Claim, if any so exist. Such
certificates, notes, debentures or other evidence of indebtedness
surrendered will be marked as "cancelled" or "paid," as appropriate. In the
event of any lost, stolen, mutilated or destroyed security, the holder of
such security must deliver to the Debtors or the Liquidating Trust, as
appropriate, (a) evidence satisfactory to the Liquidating Trustee of the
loss, theft, mutilation or destruction of such security and, including
without limitation and affidavit containing averments describing the
circumstances under which such security was lost, stolen, mutilated or
destroyed, and (b) such security or indemnity as may be required by the
Liquidating Trustee to hold the Liquidating Trustee harmless with respect
thereto. Any holder of a certificate, note, debenture or other evidence of
indebtedness that fails to surrender or be deemed to have surrendered such
certificate, note, debenture or other evidence of indebtedness within the
second anniversary after the Effective Date shall have its Claim for a
Distribution pursuant to the Plan on account of such certificate, note,
debenture or other evidence of indebtedness discharged and shall be forever
barred from asserting any such Claim against any of the Debtors, the
Liquidating Trust, Reorganized USN Communications or any of their property.
2. CANCELLATION OF NOTES INDENTURES.
To the extent that each of the Notes Indentures are not
executory contracts rejected pursuant to Section 14.1 of the Plan (which
rejection shall not give rise to rejection damages or additional Claims by
the holders of the notes issued under any of the foregoing indenture
trustees), the rights and obligations of the Debtors and the Liquidating
Trust, if any, under any indenture shall be deemed canceled pursuant to
Section 1123(a)(5)(F) of the Bankruptcy Code on the Effective Date, except
to the extent that any provisions of any of the Notes Indentures are
incorporated by reference into the Plan or are expressly deemed in the Plan
to survive defeasance or termination under the respective Notes Indentures.
Notwithstanding the rejection or cancellation of any of the Notes
Indentures, such rejection or cancellation shall not impair the rights of
the holders of Notes Claims arising under or evidenced by any of the
foregoing Notes Indentures to receive Distributions on account of such
Notes Claims under the Plan or the Liquidating Trust Agreement pursuant to
and in accordance with the terms of the particular Notes Indenture pursuant
to which the notes evidencing or giving rise to such Notes Claims were
issued. The Notes Indentures shall continue in effect to the extent
necessary to (a) allow the Senior Notes Indenture Trustees to make the
Distributions required to be made to the holders of Allowed Senior Notes
Claims under the Plan; (b) enforce the subordination rights arising out of
contractual subordination agreements between and among the Convertible
Notes, the Consent Convertible Notes, the 14% Senior Notes and the 14 5/8%
Senior Notes; and (c) permit the Senior Notes Indenture Trustees to
maintain any rights or liens they may have in Distributions received by
such Senior Notes Indenture Trustees for fees, costs, expenses and
indemnification under their respective Senior Notes Indentures and to be
paid or reimbursed from such Distributions for such prepetition and
postpetition fees, costs, expenses and indemnification (until payment in
full) that are governed by the Senior Notes Indentures in accordance with
the provisions set forth therein.
3. SURRENDER OF SENIOR NOTES; CONDITION TO RECEIPT BY
SENIOR NOTES INDENTURE TRUSTEES OF DISTRIBUTIONS MADE
ON ACCOUNT OF ALLOWED JUNIOR NOTES CLAIMS.
With respect to Senior Notes, on or as soon as reasonably
practicable after the Effective Date, instructions regarding the time and
manner in which Senior Notes are to be surrendered will be transmitted by
the relevant Senior Notes Indenture Trustee to the holders of the Senior
Notes. Any holder of a Senior Note that fails to surrender or be deemed to
have surrendered such Senior Note to the relevant Senior Note Indenture
Trustee within the second anniversary after the Effective Date shall have
its claim for a Distribution pursuant to the Plan on account of such Senior
Note discharged and shall be forever barred from asserting any such claim
against any of the Debtors, the Liquidating Trust, Reorganized USN
Communications or any of their property. Upon receipt of a surrendered
Senior Note the relevant Senior Note Indenture Trustee shall mark such
Senior Note as "cancelled" or "paid," as appropriate. As a condition to a
Senior Note Indenture Trustee's receipt of any Distribution for the benefit
of a holder of an Allowed Senior Notes Claim, on or before the second
anniversary after the Effective Date, such Senior Notes Indenture Trustee
must deliver to the Liquidating Trustee: (a) in respect of any Distribution
on account of an Allowed Senior Notes Claim, (i) evidence reasonably
satisfactory to the Liquidating Trustee that the Senior Note or Senior
Notes evidencing such Senior Note Claim have been surrendered to the
relevant Senior Notes Indenture Trustee or, in the case of the loss, theft,
mutilation or destruction of such Senior Note or Senior Notes, evidence
reasonably satisfactory to the Liquidating Trustee of the loss, theft,
mutilation or destruction, including, without limitation, an affidavit
containing averments describing the circumstances under which such Senior
Note was lost, stolen, mutilated or destroyed, and (ii) such security or
indemnity as may be required by the Liquidating Trustee to hold the
Liquidating Trustee harmless with respect thereto; and (b) in respect of
any Distribution on account of an Allowed Junior Notes Claim for which the
corresponding Junior Note or Junior Notes have not been surrendered to the
Liquidating Trustee, such security or indemnity as may be required by the
Liquidating Trustee to hold the Liquidating Trustee harmless with respect
thereto.
I. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
1. ASSUMPTION OR REJECTION OF EXECUTORY CONTRACTS AND
UNEXPIRED LEASES.
On the Effective Date, all executory contracts and unexpired
leases of the Estates shall be rejected by the Debtors pursuant to the
provisions of Sections 365 and 1123 of the Bankruptcy Code, except: (i) any
executory contract or unexpired lease that is the subject of a separate
motion to assume or assume and assign Filed pursuant to Section 365 of the
Bankruptcy Code by the Debtors before the entry of the Confirmation Order,
provided, however, that upon denial or withdrawal of any such motion, such
executory contract or unexpired lease shall automatically be rejected as if
rejected pursuant to the Plan as of the Effective Date; (ii) executory
contracts and unexpired leases listed in the Executory Contract Schedule to
be served and Filed by the Debtors at least 10 days before the Confirmation
Hearing which shall provide, as of the Effective Date, for the assumption,
or assumption and assignment, of such executory contracts or unexpired
leases; (iii) all executory contracts or unexpired leases assumed under the
Plan or by order of the Bankruptcy Court entered before the Confirmation
Date and not subsequently rejected pursuant to an order of the Bankruptcy
Court; (iv) any executory contract or unexpired lease set forth in the
Executory Contract Schedule that is or becomes the subject of a dispute
over the amount or manner of cure pursuant to Section 14.3 of the Plan, if
the Debtors or the Liquidating Trust, as the case may be, make or makes a
motion to reject such contract or lease based upon the existence of such
dispute at any time; and (v) any agreement, obligation, security interest,
transaction or similar undertaking that the Debtors believe is not an
executory contract or lease that is later determined by the Bankruptcy
Court to be an executory contract or unexpired lease that is subject to
assumption or rejection under Section 365 of the Bankruptcy Code, which
agreements shall be subject to assumption or rejection within 30 days of
any such determination. Any executory contract or unexpired lease assumed
by the Liquidating Trust pursuant to or in accordance with the provisions
of Section 14.1 of the Plan shall become property of the Liquidating Trust,
and be subject to assignment by the Liquidating Trustee in accordance with
Section 365 of the Bankruptcy Code within 180 days after the Effective
Date, irrespective of any limitation or prohibition contained in such
executory contract or unexpired lease. The Liquidating Trust shall have the
right to amend the Executory Contract Schedule within 60 days after the
Effective Date, and will provide notice of any amendments to the Executory
Contract Schedule to the parties to the executory contracts or unexpired
leases affected thereby. Any order entered after the Confirmation Date by
the Bankruptcy Court, after notice and hearing, authorizing the rejection
of an executory contract or unexpired lease shall cause such rejection to
be a prepetition breach under Sections 365(g) and 502(g) of the Bankruptcy
Code, as if such relief were granted and such order were entered prior to
the Confirmation Date.
Listing a contract or lease in the Executory Contract Schedule
shall not constitute an admission by the Debtors or the Liquidating Trust
that such contract or lease, including related agreements, is an executory
contract or unexpired lease or that the Debtors or the Liquidating Trust
have any liability thereunder.
Subject to Section 14.1(a) and Section 14.3 of the Plan, the
Confirmation Order shall constitute an order of the Bankruptcy Court
approving the rejection of executory contracts and unexpired leases the
rejection of which is provided for in Section 14.1(a) of the Plan pursuant
to Section 365 and 1123 of the Bankruptcy Code and such rejection shall be
deemed effective as of the Effective Date.
2. BAR DATE FOR REJECTION DAMAGES.
If the rejection of any executory contract or unexpired lease
under the Plan gives rise to a Claim by the non-Debtor party or parties to
such contract or lease, such Claim, to the extent that it is timely Filed
and is an Allowed Claim, shall be classified as a Class 4 Unsecured Claim;
provided, however, that the Unsecured Claim arising from such rejection
shall be forever barred and shall not be enforceable against the Debtors,
the Liquidating Trust, the Liquidating Trustee, their successors or
properties, unless a proof of such Claim is Filed and served on the
Liquidating Trust within forty-five (45) days after the date of notice of
the entry of the order of the Bankruptcy Court rejecting the executory
contract or unexpired lease which may include, if applicable, the
Confirmation Order.
3. CURE/OBJECTIONS TO ARTICLE XIV.
On the Effective Date, the leases and executory contracts
listed on the Executory Contract Schedule shall be deemed assumed pursuant
to Section 365 of the Bankruptcy Code subject to Section 14.1(a) of the
Plan. The Executory Contract Schedule shall list the unexpired leases and
executory contracts to be assumed, and the cure amounts necessary for such
assumption. If a party to an unexpired lease or executory contract
disagrees with (a) the cure amount stated or opposes the assumption of that
lease or contract on any ground, including the inability to provide
adequate assurance of future performance or (b) any term or provision of
Article XIV of the Plan, such party must File and serve an objection at
least seven (7) days prior to the Confirmation Date. All such objections
shall be determined at the Confirmation Hearing. THE FAILURE TIMELY TO FILE
AND SERVE SUCH AN OBJECTION SHALL CONSTITUTE A WAIVER OF ANY OBJECTION TO
SUCH ASSUMPTION OR THE CURE AMOUNT AND THE WAIVING PARTY, ITS SUCCESSORS
AND ASSIGNS SHALL BE FOREVER BARRED FROM CONTESTING ASSUMPTION OR ASSERTING
A CLAIM FOR ADDITIONAL AMOUNTS AGAINST THE DEBTORS OR THEIR ESTATES,
SUCCESSORS OR ASSIGNS.
At the election of the Liquidating Trust, any monetary defaults
under an unexpired lease or executory contract to be assumed under the Plan
shall be satisfied by the Liquidating Trust from the Liquidating Trust
Administrative Reserve pursuant to Section 365(b)(1) of the Bankruptcy Code
in one of the following ways: (a) by payment of the default amount in Cash
on or as soon as practicable after the later to occur of (i) thirty (30)
days after determination of the cure amount; (ii) the Effective Date or
such other period as may be ordered by the Bankruptcy Court; or (b) on such
other terms as may be agreed to by the parties to such unexpired leases or
executory contracts. If a dispute occurs regarding the cure amount, the
cure payments required by Section 365(b)(1) of the Bankruptcy Code shall be
made following the entry of a Final Order resolving the dispute and
approving assumption.
Any contract or lease assumed pursuant to the Plan may be
assigned by the Liquidating Trust within 180 days after the Effective Date,
upon notice to any third party to such contract or lease, in accordance
with Section 365 of the Bankruptcy Code.
J. CREATION, FUNDING AND ADMINISTRATION OF LIQUIDATING TRUST
THE LIQUIDATING TRUST SHALL BE GOVERNED BY THE PLAN,
CONFIRMATION ORDER AND THE TERMS OF THE LIQUIDATING TRUST AGREEMENT, TO BE
FILED WITH THE BANKRUPTCY COURT AND SERVED ON THE UNITED STATES TRUSTEE AND
COUNSEL FOR THE CREDITORS' COMMITTEE IN ADVANCE OF THE CONFIRMATION
HEARING. THE FOLLOWING IS A SUMMARY OF CERTAIN SALIENT FEATURES OF THE
LIQUIDATING TRUST AND IS NOT, NOR IS IT INTENDED TO BE, A COMPLETE
DESCRIPTION OR A SUBSTITUTE FOR A FULL AND COMPLETE READING OF THE PLAN.
PARTIES IN INTEREST ARE URGED TO REVIEW THE PLAN AND ALL EXHIBITS THERETO,
INCLUDING WITHOUT LIMITATION, THE LIQUIDATING TRUST AGREEMENT.
1. ESTABLISHMENT OF THE LIQUIDATING TRUST.
The Plan provides that on the Effective Date, the Liquidating
Trust shall be created and that the Debtors shall transfer, deliver and
assign to the Liquidating Trust on behalf of all creditors all of their
right, title and interest in, to, under and in connection with all Residual
Assets free and clear of any interest in such property of any other Person.
For federal income tax purposes, the beneficiaries of the Liquidating Trust
will be treated as the grantors of the Liquidating Trust and deemed to be
the owners of the Liquidating Trust Assets and the Debtors will treat the
transfer of the Liquidating Trust Assets to the Liquidating Trust as a
deemed transfer to such beneficiaries followed by a deemed transfer by such
beneficiaries to the Liquidating Trust.
2. PURPOSE OF THE LIQUIDATING TRUST.
The Liquidating Trust will be organized for the sole purpose of
liquidating the Liquidating Trust Assets with no objective or authority to
continue or engage in the conduct of a trade or business. In particular,
the Liquidating Trust, through the Liquidating Trustee, will (i) collect
and reduce the Liquidating Trust Assets to Cash, (ii) make distributions on
account of Allowed Claims Pursuant to the Plan and the Liquidating Trust,
(iii) take such steps as are reasonably necessary to accomplish such
purpose, all as more fully provided in, and subject to the terms and
provisions of, the Plan, the Confirmation Order and the Liquidating Trust
Agreement.
3. POWERS AND OBLIGATIONS OF THE LIQUIDATING TRUST.
From and after the Effective Date, the Liquidating Trust and
Liquidating Trustee will succeed to all of the rights of the Debtors
necessary to protect, conserve and liquidate all Liquidating Trust Assets
as quickly as reasonably practicable, including, without limitation, the
duties and powers of the Liquidating Trustee specified in Section 9.10(k)
of the Plan, the Confirmation Order and the Liquidating Trust Agreement. In
that capacity, the Liquidating Trust will have the exclusive power, on
behalf and in the name of the Debtors, to prosecute, defend, compromise,
settle and otherwise deal with all such Liquidating Trust Assets subject to
the restrictions of the Liquidating Trust Agreement, the Plan and the
Confirmation Order; provided, however, that the Liquidating Trustee will
have no right to use Liquidating Trust Assets to conduct any trade or
business.
K. CREATION, FUNDING AND MAINTENANCE OF PLAN RESERVES
1. ADMINISTRATIVE/PRIORITY CLAIMS RESERVE.
The Plan requires the Liquidating Trustee on the Effective Date
to deposit funds into the Administrative/Priority Claims Reserve in an
amount sufficient to pay all Administrative Claims, Priority Claims and
Priority Tax Claims. The initial amount funded to the
Administrative/Priority Claims Reserve shall be an amount to be determined
by the Debtors, in consultation with the Creditors' Committee, as necessary
to pay the amounts of (a) all timely filed Administrative Claims, Priority
Claims and Priority Tax Claims that are not Disputed Claims and (b) all
Disputed Claims in such Classes and categories that may become Allowed
Claims. Furthermore, to the extent the Liquidating Trustee determines that
the funding of the Administrative/Priority Claims Reserve is insufficient,
the net proceeds of the continuing liquidating of the Debtors' Assets
shall, to the extent necessary for such purposes, be allocated to the
Administrative/Priority Claims Reserve.
The Liquidating Trustee shall disburse funds from the
Administrative/Priority Claims Reserve to pay the Administrative Claims,
the Priority Claims, and the Priority Tax Claims. Once all Administrative
Claims, Priority Claims and Priority Tax Claims have been either paid in
full or Disallowed, any remaining funds shall be deposited in the
Disbursement Account.
2. FEE CLAIMS RESERVE.
On the Effective Date, the Liquidating Trustee shall establish
the Fee Claims Reserve for the payment of Fee Claims allowed by Final Order
of the Bankruptcy Court. The Fee Claims Reserve shall be established in an
amount to be determined by the Debtors, in consultation with the Creditors'
Committee, representing the aggregate of (i) accrued holdbacks relating to
Fee Claims approved by the Bankruptcy Court prior to the Confirmation Date
or accrued in accordance with the Fee Order, and (ii) the Debtors' estimate
of the reasonable Fee Claims accrued or likely to accrue through the
Effective Date but not yet approved or disapproved by the Bankruptcy Court
or paid pursuant to the Fee Order, less the amount of any retainers held
by, for or on behalf of such Professionals.
Any remaining unapplied retainers held by, for or on behalf of
such Professionals following payment in full of their Allowed Claims shall
be deposited in the Distribution Reserve.
After all Fee Claims have been Allowed or Disallowed pursuant
to Final Orders and after all Allowed Fee Claims have been paid, the
remaining or excess funds, as applicable, in the Fee Claims Reserve shall
be deposited in the Distribution Reserve.
3. LIQUIDATING TRUST ADMINISTRATIVE RESERVE.
On the Effective Date, the Liquidating Trustee shall establish
the Liquidating Trust Administrative Reserve and deposit funds into the
Liquidating Trust Administrative Reserve in an amount to be determined by
the Debtors, in consultation with the Creditors' Committee, as reasonably
sufficient to pay the Liquidating Trust Administrative Expenses.
Furthermore, to the extent the Liquidating Trustee determines that funding
of the Liquidating Trust Administrative Reserve is insufficient, the net
proceeds of the continuing liquidation of the Debtors' Assets shall, to the
extent necessary for such purposes, be allocated to the Liquidating Trust
Administrative Reserve. After all costs and expenses associated with the
Liquidating Trust have been paid, and/or upon the reasonable determination
of the Liquidating Trustee that the funds in the Liquidating Trust
Administrative Reserve exceed the amounts necessary to pay the expenses of
for which such fund is established, the remaining or excess funds, as
applicable, in the Liquidating Trust Administrative Reserve shall be
deposited in the Distribution Reserve.
4. THE HATTEN TRANSACTION CLAIMS RECOVERIES RESERVE.
The Hatten Transaction Claims Recoveries Reserve shall be
established on the Effective Date and all proceeds received by the
Liquidating Trust through the prosecution and/or compromise of the Hatten
Transaction Claims shall be deposited into the Hatten Transaction Claims
Recoveries Reserve. All fees and expenses associated with the prosecution
and/or compromise of the Hatten Transaction Claims shall be paid from the
Liquidating Trust Administrative Reserve. No Distribution from the Hatten
Transaction Claims Recoveries Reserve contemplated by the Adversary
Proceeding Settlement shall be made unless and until all fees and expenses
associated with the prosecution and/or compromise of the Hatten Transaction
Claims shall have been paid, including, without limitation, the
reimbursement of any amounts drawn from the Liquidating Trust
Administrative Reserve to pay fees and expenses associated with the
prosecution and/or compromise of the Hatten Transaction Claims. Any
proceeds remaining in the Hatten Transaction Claims Recoveries Reserve
after all Distributions contemplated by the Adversary Proceeding Settlement
have been made shall be transferred to the Distribution Reserve.
5. THE CONVENIENCE CLASS RESERVE.
On or as soon as reasonably practicable after the Effective
Date, the Liquidating Trust shall deposit $100,000 in Cash in the
Convenience Class Reserve for the purpose of making Distributions to the
holders of Allowed Convenience Claims. After all Distributions authorized
by the Plan shall have been made to holders of Allowed Convenience Claims,
any funds remaining in the Convenience Class Reserve shall be transferred
to the Distribution Reserve.
6. THE DISBURSEMENT RESERVE.
On or after the Effective Date, except as otherwise provided in
the Plan, all Liquidating Trust Assets remaining after the
Administrative/Priority Claims Reserve, the Fee Claims Reserve and the
Liquidating Trust Administrative Reserve have been funded shall be
deposited into a Distribution Reserve for the purpose of making
Distributions on account of Allowed Convenience Claims and Allowed
Unsecured Claims required under the Plan.
VI. DISTRIBUTIONS AND PROCEDURES FOR
RESOLVING DISPUTED CLAIMS
A. OBJECTION DEADLINE
As soon as practicable, but in no event later than one hundred
eighty (180) days after the Effective Date (subject to extension by the
Bankruptcy Court upon motion of the Liquidating Trustee without notice or
hearing), objections to Claims shall be filed with the Bankruptcy Court and
served upon holders of each of the Claims to which objections are made.
B. PROSECUTION OF CONTESTED CLAIMS
Upon the occurrence of the Effective Date, the Liquidating
Trustee will have the exclusive right to object to the allowance,
classification or amount of any Claim filed in any of the Reorganization
Cases. The Liquidating Trustee is authorized and empowered, but not
required, to resolve any disputes regarding the allowance, classification
or amount of any Claim. All objections that are filed and prosecuted as
provided in the Plan shall be litigated to Final Order or compromised and
settled in accordance with Section 10.4 of the Plan.
C. DISPUTED CLAIM RESERVE
In determining the amount of Distributions to be made under the
Plan to holders of Allowed Claims, the appropriate Distribution required by
the Plan shall be made according to estimates and subject to the provisions
of the Plan. The Disputed Claim Reserve shall be established for each
Disputed Claim. The Liquidating Trustee shall fund the Disputed Claim
Reserve from the Liquidating Trust Assets in an amount that reasonably
approximates the Ratable Distribution that would otherwise be made to such
Claim holder assuming such Claim were to be Allowed in the amount set forth
on the Claim holder's proof of Claim or as estimated pursuant to agreement
with the Claim holder or Order of the Bankruptcy Court.
D. CLAIMS SETTLEMENT GUIDELINES
Notwithstanding any requirement that may be imposed pursuant to
Bankruptcy Rule 9019, from and after the Effective Date all Claims and all
claims that any of the Debtors have asserted against other parties may be
compromised and settled according to the following procedures:
(a) No review or approval of the Bankruptcy Court or any
other party in interest is required respecting: (i) any settlement or
compromise of a Claim pursuant to which such Claim is Allowed in an amount
of $20,000 or less; (ii) the settlement or compromise of a Claim where the
difference between the amount of the Claim listed on the Schedules and the
amount of the Claim proposed to be Allowed under the settlement or
compromise is $20,000 or less.
(b) The following settlements or compromises shall be
submitted to the Bankruptcy Court for approval and, if the PEDC has been
appointed, notice such proposed settlement or compromise shall be served
upon counsel for the PEDC (or the members of the PEDC if the PEDC has not
retained counsel): (i) any settlement or compromise not described in
subsection (a) above (i.e. Section 10.4(a) of the Plan); and (ii) any
settlement or compromise of a Claim or a claim asserted by the Debtors or
the Liquidating Trust involving an "insider" as defined in Section 101(31)
of the Bankruptcy Code.
E. ESTIMATION OF CLAIMS
The Liquidating Trustee may, at any time, request that the
Bankruptcy Court estimate any Disputed Claim pursuant to Section 502(c) of
the Bankruptcy Code regardless of whether the Debtors, Creditors' Committee
or Liquidating Trustee has previously objected to such Claim or whether the
Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court
will retain jurisdiction to estimate any Claim at any time during
litigation concerning any objection to any Claim, including during the
pendency of any appeal relating to any such objection. If the Bankruptcy
Court estimates any Disputed Claim, that estimated amount will constitute
either the Allowed amount of such Claim or a maximum limitation on such
Claim, as determined by the Bankruptcy Court. If the estimated amount
constitutes a maximum limitation on such Claim, the Liquidating Trustee may
elect to pursue any supplemental proceedings to object to any ultimate
Distribution on such Claim. All of the objection, estimation, settlement
and resolution procedures set forth in the Plan are cumulative and not
necessarily exclusive of one another. Claims may be estimated and
subsequently compromised, settled, withdrawn or resolved by any mechanism
approved by the Bankruptcy Court.
F. NO DISTRIBUTION PENDING ALLOWANCE
Notwithstanding any other provision of the Plan, no payment or
Distribution shall be made with respect to any Claim to the extent it is
Disputed unless and until such Disputed
Claim becomes an Allowed Claim.
G. DISTRIBUTIONS AFTER ALLOWANCE
Distributions to each holder of a Disputed Claim, to the extent
that such Claim ultimately becomes Allowed, shall be made in accordance
with the provisions of the Plan governing the Class of Claims to which such
Claim holder belongs.
H. DISPUTED PAYMENT
If any dispute arises as to the identity of a holder of an
Allowed Claim who is to receive any Distribution, the Liquidating Trustee
may, in lieu of making such Distribution to such Person, make such
Distribution into an escrow account until the disposition thereof shall be
determined by Bankruptcy Court Order or by written agreement among the
interested parties to such dispute.
I. AMENDMENTS TO CLAIMS
A Claim may be amended prior to the Confirmation Date only as
agreed upon by the Debtors and the holder of such Claim, or as otherwise
permitted by the Bankruptcy Court, the Bankruptcy Rules or applicable law.
After the Confirmation Date, a Claim may not be filed or amended without
the authorization of the Bankruptcy Court and, even with such Bankruptcy
Court authorization, may be amended by the holder of such Claim solely to
decrease, but not to increase, the amount or priority. Unless otherwise
provided in the Plan, any new or amended Claim filed after the Confirmation
Date shall be deemed disallowed in full and expunged without any action by
the Debtors or the Liquidating Trustee, unless the Claim holder has
obtained prior Bankruptcy Court authorization for the filing.
J. THIRD PARTY AGREEMENTS; SUBORDINATION
The Plan provides that Distributions to the various classes of
Claims shall not affect the right of any Person to levy, garnish, attach,
or employ any other legal process with respect to such Distributions by
reason of any claimed subordination rights, or otherwise. All of such
rights and any agreements relating thereto, including, without express or
implied limitation, subordination rights arising out of contractual
subordination provisions between and among the Senior Notes and Senior
Notes Indentures, on the one hand, and the Junior Notes and the Junior
Notes Indentures, on the other hand, shall remain in full force and effect.
Distributions made by the Liquidating Trustee shall not be inconsistent
with such contractual subordination provisions and may be modified only by
a Final Order directing that Distributions be made other than as provided
in the Plan and Confirmation Order; provided, however, that neither the
Liquidating Trust nor the Liquidating Trustee (or any of its agents,
representatives, professionals or employees) shall be liable to any Person
on account of Distributions made in good faith which are ultimately
determined to be inconsistent with inter-creditor contractual subordination
agreements or rights.
K. NO RECOURSE TO LIQUIDATING TRUSTEE
Notwithstanding that the Allowed amount of any particular
Disputed Claim is reconsidered under the applicable provisions of the
Bankruptcy Code and Bankruptcy Rules or is allowed in an amount for which
there is insufficient Cash in the relevant account to provide a recovery
equal to that received by other holders of Allowed Claims in the relevant
Class, no Claim holder shall have recourse to the Debtors, the Liquidating
Trust, the Liquidating Trustee, Reorganized USN Communications or any of
their respective professionals, or their successors or assigns, or the
holder of any other Claim, or any of their respective property. However,
nothing in the Plan shall modify any right of a holder of a Claim under
Section 502(j) of the Bankruptcy Code. THUS, THE BANKRUPTCY COURT'S ENTRY
OF AN ESTIMATION ORDER MAY LIMIT THE DISTRIBUTION TO BE MADE ON INDIVIDUAL
DISPUTED CLAIMS, REGARDLESS OF THE AMOUNT FINALLY ALLOWED ON ACCOUNT OF
SUCH DISPUTED CLAIMS.
L. NON-CASH PROPERTY
Any non-Cash property of the Estates may be sold, transferred
or abandoned by the Liquidating Trust. Notice of such sale, transfer or
abandonment shall be provided to the holders, if any, of Secured Claims
holding liens on such assets. If, in the Liquidating Trustee's judgment,
such property cannot be sold in a commercially reasonable manner, the
Liquidating Trustee shall have the right to abandon or otherwise dispose of
such property, including by donation of such property to a charity
designated by the Liquidating Trustee. Except in the case of willful
misconduct, no party in interest shall have a cause of action against any
Debtor, any director, officer, employee, consultant or professional of any
Debtor, the Liquidating Trust, the Liquidating Trustee or any director,
officer, employee, consultant or professional of the Liquidating Trust or
Liquidating Trustee arising from or related to: (a) the disposition of
non-Cash property in accordance with the Plan; or (b) the investment of
amounts by the Liquidating Trustee in accordance with the Plan.
M. TRANSMITTAL OF DISTRIBUTIONS AND NOTICES
Any property or notice which a Person is or becomes entitled to
receive pursuant to the Plan may be delivered by regular mail, postage
prepaid, in an envelope addressed to that Person at the address indicated
on any notice of appearance Filed by that Person or his authorized agent
prior to the Effective Date. If no notice of appearance has been Filed,
notice shall be sent to the address indicated on a properly Filed proof of
Claim or, absent such a proof of Claim, the address set forth in the
relevant Schedule of Assets and Liabilities for that Person. Property
distributed in accordance with 11.7(a) of the Plan shall be deemed
delivered to such Person regardless of whether such property is actually
received by that Person.
A holder of a Claim or Equity Interest may designate a
different address for notices and Distributions by notifying the
Liquidating Trustee, or with respect to a holder of a Notes Claim, the
appropriate indenture trustee for the indenture under which such Note Claim
arose, of that address in writing. Any change of address of a party
entitled to receive Distributions under the Plan must be provided to the
Liquidating Trustee by registered mail in order to be effective. Such
notification shall be effective upon receipt.
N. DISTRIBUTIONS TO HOLDERS OF NOTES CLAIMS
1. INDENTURE TRUSTEES AS CLAIMHOLDERS.
The Plan provides that each of the Indenture Trustees shall be
deemed to be the sole holder of all Allowed Notes Claims arising under,
related to or evidenced by their respective notes indentures. With respect
to Distributions provided for in the Plan or the Liquidating Trust
Agreement on account of Allowed 14% Senior Notes Claims and Allowed 14 5/8%
Senior Notes Claims, the corresponding indenture trustees shall be the only
Persons entitled to receive such Distributions.
2. OBLIGATION OF INDENTURE TRUSTEES TO TRANSMIT
DISTRIBUTIONS RECEIVED.
Under the Plan, the 14% Senior Notes Indenture Trustee and the
14 5/8% Senior Notes Indenture Trustee are obligated to Distribute, in
accordance with their respective notes indentures, all Distributions, if
any, received to the record holders of the notes issued under their
respective indentures, without prejudice to the rights of each of the
Senior Notes Indenture Trustees' under their respective notes indentures to
reimbursement or payment of fees, expenses and other charges.
O. WITHHOLDING TAXES AND EXPENSES OF DISTRIBUTION
Any federal, state or local withholding taxes or other amounts
required to be withheld under applicable law shall be deducted from
Distributions under the Plan. All Persons holding Claims shall be required
to provide any information necessary to effect the withholding of such
taxes. In addition, all Distributions under the Plan shall be net of the
actual and reasonable costs of making such Distributions.
P. METHOD OF CASH DISTRIBUTIONS
Any Cash payment to be made by the Liquidating Trust pursuant
to the Plan will be in U.S. dollars and may be made, at the sole discretion
of the Liquidating Trust, by draft, check, wire transfer, or as otherwise
required or provided in any relevant agreement or applicable law.
VII. CONFIRMATION OF THE PLAN
A. INTRODUCTION
The Bankruptcy Code requires the bankruptcy court to determine
whether a plan of reorganization complies with the technical requirements
of chapter 11 of the Bankruptcy Code. It requires further that a debtor's
disclosures concerning such plan have been adequate and have included
information concerning all payments made or promised by the debtor in
connection with the plan.
To confirm the Plan, the Bankruptcy Court must find that all of
these and other requirements have been met. Thus, even if the requisite
vote is achieved for each Class of Impaired Claims, the Bankruptcy Court
must make independent findings respecting the Plan's conformity with the
requirements of the Bankruptcy Code before it may confirm the Plan. Some of
these statutory requirements are discussed below.
B. VOTING PROCEDURES AND STANDARDS
With respect to Claims in Classes that are Impaired under the
Plan (but not deemed to reject the Plan by virtue of receiving no
Distributions thereunder), holders of Claims in such Classes will receive
this Disclosure Statement and a Ballot for the acceptance or rejection of
the Plan. Any Claim or Equity Interest whose legal, contractual or
equitable rights are altered, modified or changed by the proposed treatment
under the Plan or whose treatment under the Plan is not provided for in
Section 1124 of the Bankruptcy Code is considered Impaired.
On ____________ ___, 2000, the Bankruptcy Court entered an
Order setting certain procedures in connection with voting on the Plan (the
"Voting Procedures Order"), a copy of which is enclosed with the Disclosure
Statement. The Voting Procedures Order sets forth the procedures to be
employed in tabulating acceptances and rejection of the Plan. Ballots,
which contain comprehensive voting instructions, have been included with
the copies of this Disclosure Statement sent to members of voting Classes.
IF A BALLOT IS DAMAGED OR LOST OR IF YOU HAVE ANY QUESTIONS
CONCERNING VOTING PROCEDURES, YOU MAY CONTACT THE DEBTORS' BALLOTING AGENT:
USN COMMUNICATIONS, INC.
C/O ROBERT L. BERGER & ASSOCIATES, INC.
BOX 685
16161 VENTURA BLVD.
ENCINO, CA 91436
A VOTE MAY BE DISREGARDED IF THE COURT DETERMINES, AFTER NOTICE
AND A HEARING, THAT SUCH ACCEPTANCE OR REJECTION WAS NOT MADE OR SOLICITED
OR PROCURED IN GOOD FAITH OR IN ACCORDANCE WITH THE PROVISIONS OF THE
BANKRUPTCY CODE.
PURSUANT TO THE BANKRUPTCY CODE, IN ORDER FOR THE PLAN TO BE
"ACCEPTED," THE REQUISITE VOTE IS REQUIRED FOR EACH CLASS OF IMPAIRED
CLAIMS. ANY IMPAIRED CLASS THAT FAILS TO ACHIEVE THE REQUISITE VOTE WILL BE
DEEMED TO HAVE REJECTED THE PLAN.
C. ACCEPTANCE
The Bankruptcy Code defines acceptance of a plan by an Impaired
class of claims as acceptance by holders of at least two-thirds in dollar
amount, and more than one-half in number, of claims of that class that
actually vote. Acceptance of the Plan need only be solicited from holders
of Claims whose Claims are Impaired and not deemed to have rejected the
Plan. Except in the context of a "cram down," as a condition to
confirmation of the Plan, the Bankruptcy Code requires that, with certain
exceptions, each Class of Impaired Claims accepts the Plan. The Debtors
intend to seek acceptances of the Plan from holders of Claims in the voting
Classes, but intend to "cram down" the Plan on holders of certain Impaired
Claims and Equity Interests who are deemed to reject the Plan by virtue of
receiving no Distribution thereunder.
In the event the requisite vote is not obtained, the Debtors
have the right, assuming that at least one Class of Impaired Claims has
accepted the Plan, to request confirmation of the Plan pursuant to Section
1129(b) of the Bankruptcy Code. Section 1129(b) permits confirmation of a
plan notwithstanding rejection by one or more classes of Impaired claims or
Impaired equity interests if the bankruptcy court finds that the plan does
not discriminate unfairly and is "fair and equitable" with respect to the
rejecting class or classes. This procedure is commonly referred to in
bankruptcy parlance as "cram down." The Plan is predicated on all voting
Classes voting to accept the Plan. However, if any voting Class or Classes
vote to reject the Plan, the Debtors will seek a cram down of such Classes
at the Confirmation Hearing. In any event, the Debtors will seek a cram
down of the Plan on Classes deemed to reject the Plan by virtue of
receiving no Distributions thereunder.
D. CONFIRMATION AND CONSUMMATION
At the Confirmation Hearing, the Bankruptcy Court will
determine whether the requirements of Section 1129(a) of the Bankruptcy
Code have been satisfied with respect to the Plan. Section 1129(a) of the
Bankruptcy Code requires that, among other things:
o The plan comply with the applicable provisions of the
Bankruptcy Code.
o The proponent of the plan has complied with the applicable
provisions of the Bankruptcy Code.
o The plan has been proposed in good faith and not by any means
forbidden by law.
o Any payment made or to be made by the proponent under the
plan for services or for costs and expenses in, or in connection
with, the chapter 11 case, or in connection with the plan and
incident to the case, has been approved by, or is subject to the
approval of, the court as reasonable.
o The proponent has disclosed the identity and affiliations of
any individual proposed to serve, after confirmation of the plan, as
a director, officer, or voting trustee of the debtor, an affiliate of
the debtor participating in the plan with the debtor, or a successor
to the debtor under the plan. The appointment to, or continuance in,
such office of such individual, must be consistent with the interests
of creditors and equity security holders and with public policy and
the proponent must have disclosed the identity of any insider that
the reorganized debtors will employ or retain, and the nature of any
compensation for such insider.
o With respect to each class of Impaired claims or equity
interests, either each holder of a claim or equity interest of such
class has accepted the plan, or will receive or retain under the plan
on account of such claim or equity interest, property of a value, as
of the effective date of the plan, that is not less than the amount
that such holder would receive or retain if the debtor were
liquidated on such date under chapter 7 of the Bankruptcy Code.
o Each class of claims or equity interests has either accepted
the plan or is not Impaired under the Plan.
o Except to the extent that the holder of a particular claim
has agreed to a different treatment of such claim, the plan provides
that allowed administrative expenses and priority claims (other than
tax claims) will be paid in full on the effective date (except that
if a class of priority claims has voted to accept the plan, holders
of such claims may receive deferred cash payments of a value, as of
the effective date of the plan, equal to the allowed amount of such
claims) and that priority tax claims will receive on account of such
claims deferred cash payments, over a period not exceeding six (6)
years after the date of assessment of such claim, of a value, as of
the effective date, equal to the allowed amount of such claim.
o If a class of claims is Impaired, at least one (1) Impaired
class of claims has accepted the plan, determined without including
any acceptance of the plan by any insider holding a claim in such
class.
o Confirmation of the plan is not likely to be followed by the
liquidation, or the need for further financial reorganization, of the
debtor or any successor to the debtor under the plan, unless, as
here, such liquidation or reorganization is proposed in the plan.
Subject to receiving the requisite votes in accordance with
Section 1129(a)(8) of the Bankruptcy Code and the "cram down" of Classes
not receiving any Distribution under the Plan, the Debtors believe that (i)
the Plan satisfies all of the statutory requirements of chapter 11 of the
Bankruptcy Code, (ii) the Debtors have complied or will have complied with
all of the requirements of chapter 11, and (iii) the Plan has been proposed
in good faith.
Set forth below is a more detailed summary of the relevant
statutory confirmation requirements.
1. BEST INTERESTS OF HOLDERS OF CLAIMS AND EQUITY INTERESTS.
The "best interests" test requires that the bankruptcy court
find either that (a) all members of each Impaired class have accepted the
plan or (b) each holder of an allowed claim or equity interest of each
Impaired class of claims or equity interests will receive or retain under
the plan on account of such claim or interest property of a value, as of
the effective date of the plan, that is not less than the amount that such
holder would so receive or retain if the debtor were liquidated under
chapter 7 of the Bankruptcy Code on such date. This requirement is referred
to as the "best interests test."
In a chapter 7 liquidation, unsecured creditors and equity
interest holders of a debtor are paid from available assets generally in
the following order, with no lower priority class receiving any
distributions until all amounts due to senior priority classes have been
paid fully or payment provided for: (a) secured creditors (to the extent of
the value of their collateral); (b) priority creditors; (c) unsecured
creditors; (d) debt expressly subordinated by its terms or by order of the
bankruptcy court; and (e) equity interests.
The Debtors believe that the value of any distributions in a
chapter 7 liquidation would be less than the value of Distributions under
the Plan. Significantly, the Sale Transaction through which anticipated
Distributions will, in part, be funded, can only be accomplished pursuant
to a chapter 11 plan of reorganization. While an Alternative Sale
Transaction could be accomplished outside of a chapter 11 plan of
reorganization, such as through the sale of the Wireless Stock, there may
be substantial risk associated with pursuing such transaction in lieu of
the Sale Transaction to be effected under the Plan. After extensive
marketing of the Wireless Companies by the Debtors, the Creditors'
Committee and their respective professionals, no party has come forward
with a higher or better offer for an Alternative Sale Transaction.
Accordingly, the Debtors believe that the best, and perhaps only, means of
maximizing value for Claimholders is to proceed with the ATA Sale and
consummate the Plan.
Additionally, a chapter 7 liquidation likely would result in
(a) increased costs and expenses of liquidation arising from fees payable
to trustees in bankruptcy and professional advisors to such trustees, (b)
the erosion in the value of assets in chapter 7 cases in the context of the
expeditious liquidation required under a chapter 7 case and the "forced
sale" atmosphere that would prevail, and (c) the delay of distributions for
a substantial period of time, thereby reducing the present value of such
distributions.
Thus, for all of the foregoing reasons, the Debtors believe
that the Plan satisfies the best interests of creditors test. See also the
Summary Liquidation Analysis annexed as Exhibit "B" hereto, which, in the
Debtors' opinion, demonstrates that the Plan satisfies the "best interests
test."
2. FINANCIAL FEASIBILITY.
Section 1129(a)(11) of the Bankruptcy Code requires that
confirmation should not be likely to be followed by the liquidation, or the
need for further financial reorganization, of the Debtors or any successor
to the Debtors unless such liquidation or reorganization is proposed in the
plan. Under the terms of the Plan, the Debtors will be fully liquidated and
certain Allowed Claims against them will be paid in Cash as described in
the Plan and herein. Accordingly, confirmation of the Plan is not likely to
be followed by the liquidation or further reorganization of the Debtors not
contemplated by the Plan.
3. CRAM DOWN.
The Bankruptcy Code contains provisions for confirmation of a
plan even if the plan is not accepted by all Impaired classes, as long as
at least one Impaired class of claims has accepted the Plan. The "cram
down" provisions of the Bankruptcy Code are set forth in Section 1129(b) of
the Bankruptcy Code. Under the "cram down" provisions, upon the request of
a plan proponent the Bankruptcy Court will confirm a plan despite the lack
of acceptance by an Impaired class or classes if the bankruptcy court finds
that (i) the plan does not discriminate unfairly with respect to each
non-accepting Impaired class, (ii) the plan is fair and equitable with
respect to each non-accepting Impaired class, and (iii) at least one
Impaired class has accepted the plan. These standards ensure that holders
of junior interests, such as common stockholders, cannot retain any
interest in the debtor under a plan of reorganization that has been
rejected by a senior class of Impaired claims or equity interests unless
such Impaired claims or interests are paid in full.
As used by the Bankruptcy Code, the phrases "discriminate
unfairly" and "fair and equitable" have narrow and specific meanings unique
to bankruptcy law. A plan does not discriminate unfairly if claims or
equity interests in different classes but with similar priorities and
characteristics receive or retain property of similar value under a plan.
By establishing separate Classes for the holders of each type of Claim and
by treating each holder of a Claim in each Class identically, the Plan has
been structured so as to meet the "unfair discrimination" test of Section
1129(b) of the Bankruptcy Code.
The Bankruptcy Code sets forth different standards for
establishing that a plan is "fair and equitable" with respect to a
dissenting class, depending on whether the class is comprised of secured or
unsecured claims or equity interests. In general, Section 1129(b) of the
Bankruptcy Code permits confirmation notwithstanding non-acceptance by an
Impaired class if that class and all junior classes are treated in
accordance with the "absolute priority" rule, which requires that the
dissenting class be paid in full before a junior class may receive anything
under the plan. The Debtors will seek to confirm the Plan regardless of
whether holders of Impaired Claims vote to accept the Plan and believe that
the Plan satisfies all requirements to effect such a "cram down."
With respect to a Class of unsecured Claims that does not
accept the Plan, the Debtors must demonstrate to the Bankruptcy Court that
either (i) each holder of an unsecured Claim in the dissenting Class
receives or retains under such Plan property of a value equal to the
allowed amount of its unsecured Claim, or (ii) the holders of Claims that
are junior to the Claims of the holders of such unsecured Claims will not
receive or retain any property under the Plan. Additionally, the Debtors
must demonstrate that the holders of Claims that are senior to the
Claims of the dissenting Class of unsecured Claims receive no more than
payment in full on their Claims under the Plan.
If all the applicable requirements for confirmation of the Plan
are met as set forth in Sections 1129(a)(1) through (13) of the Bankruptcy
Code, except that one or more of Classes of Impaired Claims have failed to
accept the Plan pursuant to Section 1129(a)(8) of the Bankruptcy Code, the
Debtors will request that the Bankruptcy Court confirm the Plan over the
objections of such Classes in accordance with Section 1129(b) of the
Bankruptcy Code. The Debtors believe that the Plan satisfies the "cram
down" requirements of the Bankruptcy Code. The Debtors may seek
confirmation of the Plan over the objection of dissenting Classes, as well
as over the objection of individual holders of Claims who are members of an
accepting Class. In addition, the Debtors intend to seek a "cram down" of
the Plan on Classes deemed to reject the Plan pursuant to Section 1126(g)
of the Bankruptcy Code by virtue of receiving no Distributions thereunder.
However, there can be no assurance that the Bankruptcy Court will determine
that the Plan meets the requirements of Section 1129(b) of the Bankruptcy
Code.
4. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.
The Debtors believe that the Plan meets the classification
requirements of the Bankruptcy Code which require that a plan of
reorganization place each claim or equity interest into a class with other
claims or equity interests which are "substantially similar."
VIII. MANAGEMENT OF REORGANIZED USN COMMUNICATIONS
On the Effective Date, the authority, power and incumbency of
the persons then acting as officers and directors of the Debtors shall be
terminated and such officers and directors shall be deemed to have
resigned. If the Purchase Agreement is consummated, a board of directors
may be appointed by the Buyer as owner of the Reorganized Stock in
accordance with the provisions of the USN Communications Amended and
Restated Certificate of Incorporation. If the Purchase Agreement is not
consummated, but an Alternative Sale Transaction is consummated pursuant to
an Alternative Purchase Agreement that contemplates the issuance and sale
of the Reorganized Stock, the Alternative Buyer under such Alternative
Purchase Agreement may appoint a board of directors. If no Purchase
Agreement or Alternative Purchase Agreement which contemplates the issuance
and sale of the Reorganized Stock is consummated, then USN Communications
shall be dissolved and no replacement board of directors shall be
appointed.
IX. CERTAIN EFFECTS OF CONFIRMATION
A. DISCHARGE
Pursuant to Sections 524 and 1141(d) of the Bankruptcy Code,
except as expressly provided in this Plan and the Confirmation Order, the
Distributions and other rights or treatment of Claims and Equity Interests
under the Plan will be in exchange for, and in complete satisfaction,
discharge and release of, all Claims and termination of all Equity
Interests of any nature whatsoever, including any interest accrued thereon
from and after the Petition Date, against the Debtors, or any of their
Estates, the Reorganized Debtor, Assets, properties or interests in
property, regardless of whether any property shall have been distributed or
retained pursuant to the Plan or on account of such Claim or Equity
Interest. Except as otherwise expressly provided in the Plan or the
Confirmation Order, entry of the Confirmation Order acts as a discharge
effective as of the Effective Date of any and all Claims against and Equity
Interests in Debtors or any of their assets that arose at any time prior to
the entry of the Confirmation Order. Reorganized USN Communications shall
not be responsible for any obligations of the Debtors except those
expressly assumed by Reorganized USN Communications. The discharge shall be
effective as to each Claim and Equity Interest except as otherwise
expressly provided in the Confirmation Order, regardless of whether:
(a) a proof of Claim based on such debt or liability is
Filed or deemed Filed under the Bankruptcy Code;
(b) a Claim based on such Claim, Equity Interest, debt
or liability is Allowed; or
(c) the holder of a Claim based on such Claim, Equity
Interest, debt or liability has accepted the Plan.
B. TERM OF BANKRUPTCY INJUNCTION OR STAYS
Except as expressly provided in the Plan or the Confirmation
Order, all injunctions or stays provided for in the Reorganization Cases
under Section 105 or 362 of the Bankruptcy Code, or otherwise, and is in
existence on the Confirmation Date, shall remain in full force and effect
until the Effective Date.
C. WAIVER OF CLAIMS
As of the Confirmation Date, but subject to the occurrence of
the Effective Date, and except as otherwise expressly provided in the Plan
or the Confirmation Order, all Persons who, directly or indirectly, have
held, hold or may hold Claims against or Equity Interests in the Debtors
shall be deemed, by virtue of their receipt of Distributions and/or other
treatment contemplated under the Plan, to have forever covenanted with the
Debtors, Reorganized USN Communications and with each of the Released
Parties to waive, release and not to (a) sue, or otherwise seek any
recovery from the Debtors, Reorganized USN Communications or any Released
Party, whether for tort, contract, violations of federal or state
securities laws, or otherwise, based upon any act or occurrence or failure
to act taken from the beginning of time through the Effective Date arising
out of the business or affairs of the Debtors, or (b) assert any Claim,
obligation, right, cause of action and liability which any such holder of a
Claim against or Equity Interest in any Debtor has or may assert, whether
known or unknown, foreseen or unforeseen, existing or hereafter arising,
based in whole or in part upon any act or omission, transactions or the
occurrence taking place from the beginning of time through the Effective
Date in any way relating to the Debtors, the Reorganization Cases, or the
Plan.
D. DEBTORS' RELEASES
Except as expressly provided in the Confirmation Order and the
Plan, each Debtor hereby waives, releases and discharges all Released
Parties from any claim (as such term "claim" is defined in Section 101(5)
of the Bankruptcy Code) arising from the beginning of time through the
Effective Date related to such Released Party's acts or omissions to act
(including, but not limited to, any claims arising out of any alleged
fiduciary or other duty) as an agent, advisor, accountant, investment
banker, consultant, attorney or other representative (including any current
or former director, officer, employee, member or professional) of any
Debtor or Affiliate thereof, in that capacity. Any such release shall
additionally act as an injunction against any Claimholder or holder of an
Equity Interest of any Debtor from commencing or continuing any action,
employment of process or act to collect, offset or recover any claim that
is so released.
E. INJUNCTION
The Confirmation Order shall provide, among other things, that
all Persons who have held, hold or may hold Claims against or Equity
Interests in any of the Debtors are, with respect to any such Claims or
Equity Interests, permanently enjoined from and after the Confirmation Date
from taking any of the following actions (other than actions to enforce any
rights or obligations under the Plan): (i) asserting, commencing,
conducting or continuing in any manner, directly or indirectly, any suit,
action or other proceeding of any kind (including, without limitation, any
proceeding in a judicial, arbitral, administrative or other forum) against
or affecting any of the Debtors, the Liquidating Trust, any of the Released
Parties, Reorganized USN Communications, the Buyer, the Wireless Companies
or any of their Affiliates or property; (ii) enforcing, levying, attaching
(including, without limitation, any pre-judgment attachment), collecting or
otherwise recovering by any manner or means, whether directly or
indirectly, any judgment, award, decree or order against any of the
Debtors, the Liquidating Trust, any of the Released Parties, Reorganized
USN Communications or any of their Affiliates or property; (iii) creating,
perfecting or otherwise enforcing in any manner, directly or indirectly,
any Claim or Encumbrance of any kind against any of the Debtors, the
Liquidating Trust, any of the Released Parties, Reorganized USN
Communications, the Buyer, the Wireless Companies or any of their
Affiliates or property; (iv) asserting any right of setoff, subrogation, or
recoupment of any kind, directly or indirectly, against any obligation due
any of the Debtors, the Liquidating Trust, any of the Released Parties,
Reorganized USN Communications, the Buyer, the Wireless Companies or any of
their affiliates or property; (v) acting or proceeding in any manner, in
any place whatsoever, that does not conform to or comply with the
provisions of the Plan; and (vi) prosecuting or otherwise asserting any
right, claim or cause of action released pursuant to the Plan. Any Person
injured by any willful violation of such injunction shall recover actual
damages, including costs and attorneys' fees, and, in appropriate
circumstances, may recover punitive damages, from the willful violator.
F. EXCULPATION
Except as otherwise expressly provided in the Plan or the
Confirmation Order, the Debtors, the Released Parties, the Creditors'
Committee and members thereof (solely with respect to each member of the
Creditors' Committee's conduct in furtherance of its, his or her duties as
a member of the Creditors' Committee, and not with respect to the actions
of such members as individual creditors), the PEDC (if appointed, and then
solely with respect to each member of the PEDC's conduct in furtherance of
its, his or her duties as a member of the PEDC, and not with respect to the
actions of such members as individual creditors), the Liquidating Trustee,
Reorganized USN Communications, the Buyer and any of such parties'
respective present or former members, officers, directors, employees,
advisors, attorneys, representatives, financial advisors, investment
bankers or agents and any of such parties' successors and assigns, shall
not have or incur, and are hereby released from, any claim, obligation,
cause of action or liability to one another or to any Claimholder or holder
of any Equity Interest, or any other party in interest, or any of their
respective agents, employees, representatives, financial advisors,
attorneys or affiliates, or any of their successors or assigns, for any act
or omission in connection with, relating to or arising out of the Debtors'
Reorganization Cases, the pursuit of confirmation of the Plan, the
consummation of the Plan, the administration of the Plan or the property to
be distributed under the Plan, except for their willful misconduct, and in
all respects shall be entitled to reasonably rely upon the advice of
counsel with respect to their duties and responsibilities under the Plan.
Notwithstanding any other provision of the Plan, no Claimholder
or holder of an Equity Interest, or other party in interest, none of the
their respective agents, employees, representatives, financial advisors,
attorneys or affiliates, and no successors or assigns of the foregoing
shall have any right of action against the Debtors, any of the Released
Parties, the Creditors' Committee and members thereof (solely with respect
to each member of the Creditors' Committee's conduct in furtherance of its,
his or her duties as a member of the Creditors' Committee, and not with
respect to the actions of such members as individual creditors), the PEDC
(if appointed, and then solely with respect to each member of the PEDC's
conduct in furtherance of its, his or her duties as a member of the PEDC,
and not with respect to the actions of such members as individual
creditors), the Liquidating Trustee, Reorganized USN Communications, the
Buyer and any of such parties' respective present or former members,
officers, directors, employees, advisors, attorneys, representatives,
financial advisors, investment bankers or agents and any of such parties'
successors and assigns, for any act or omission in connection with,
relating to or arising out of the Reorganization Cases, the pursuit of
confirmation of the Plan, the consummation of the Plan, the administration
of the Plan or the property to be distributed under the Plan, except for
their willful misconduct.
G. PRESERVATION OF CERTAIN CLAIMS
Section 12.7 of the Plan provides that nothing in Article 12 of
the Plan shall discharge, release, limit or impair the rights of the
Debtors or Liquidating Trust in respect of: (a) any Hatten Fiduciary Claim
against any current or former officer or director; provided, however, no
current or former officer or director shall have liability in excess of the
Available D&O Insurance Proceeds to any Person (including, without
limitation, the Debtors, the Estates and/or the Liquidating Trust) arising
out of or related to any Hatten Fiduciary Claim; and (b) any claim, cause
of action, right, title and interest of the Debtors or the Liquidating
Trust arising under or related to the Purchase Agreement (or an Alternative
Purchase Agreement, as the case may be), including, without limitation, the
right to receive the Purchase Consideration (or the Alternative Purchase
Consideration, as the case may be).
H. SETOFFS
In the event the Debtors or the Liquidating Trust have a claim
of any nature whatsoever against a Claimholder, the Debtors or the
Liquidating Trust may, but are not required to, set off against such Claim
(and any Distributions or other rights to receive property arising out of
such Claim under the Plan) the Debtors' or the Liquidating Trust's claim
against such Claimholder, unless any such claim is or will be released
under the Plan, subject to the provisions of Section 553 of the Bankruptcy
Code. Neither the failure to set off nor the allowance of any Claim under
the Plan shall constitute a waiver or release by the Debtors or the
Liquidating Trust of any claims that the Debtors or the Liquidating Trust
have against a Claimholder.
I. RETENTION AND ENFORCEMENT OF CLAIMS AND INTERESTS
Upon the occurrence of the Effective Date, pursuant to Section
1123(b)(3) of the Bankruptcy Code, except as otherwise provided in the
Plan, the Liquidating Trust will have the exclusive right to enforce any
and all causes of action against any Person and rights of the Debtors that
arose before or after the Petition Date, including but not limited to the
rights and powers of a trustee and debtor-in-possession, against any Person
whatsoever, including but not limited to all avoidance powers granted to
the Debtors under the Bankruptcy Code and all causes of action and remedies
granted pursuant to Sections 502, 510, 541, 544, 545, 547 through 551 and
553 of the Bankruptcy Code.
J. PRESERVATION OF INSURANCE
The provisions of the Plan shall not diminish or impair the
enforceability of any Insurance Policies, including, without limitation,
the D&O Insurance, that may cover Claims
against the Debtors or any other Person.
K. POST-CONFIRMATION JURISDICTION OF BANKRUPTCY COURT
Notwithstanding confirmation of the Plan or the occurrence of
the Effective Date, the Bankruptcy Court shall retain such jurisdiction as
is legally permissible, including, without limitation, for the following
purposes:
(a) To determine the allowability, classification, or
priority of Claims upon objection by the Debtors, the Liquidating Trust,
the PEDC or any other party in interest entitled to File an objection, and
the validity, extent, priority and nonavoidability of consensual and
nonconsensual liens and other encumbrances;
(b) To issue injunctions or take such other actions or
make such other orders as may be necessary or appropriate to restrain
interference with the Plan or its execution or implementation by any
Person, to construe and to take any other action to enforce and execute the
Plan, the Confirmation Order, or any other order of the Bankruptcy Court,
to issue such orders as may be necessary for the implementation, execution,
performance and consummation of the Plan and all matters referred to in the
Plan, and to determine all matters that may be pending before the
Bankruptcy Court in the Reorganization Cases on or before the Effective
Date with respect to any Person;
(c) To protect the property of the Estates, including,
without limitation, Litigation Claims (and further including, without
limitation all Avoidance Claims, Hatten Transaction Claims and Hatten
Fiduciary Claims), from claims against, or interference with, such
property, including actions to quiet or otherwise clear title to such
property or to resolve any dispute concerning liens, security interest or
encumbrances on any property of the Estates;
(d) To determine any and all applications for allowance
of Fee Claims;
(e) To determine any Priority Tax Claims, Priority
Claims, Administrative Claims or any other request for payment of claims or
expenses entitled to priority under Section 507(a) of the Bankruptcy Code;
(f) To resolve any dispute arising under or related to
the implementation, execution, consummation or interpretation of the Plan
and the making of Distributions under the Plan or under the Liquidating
Trust Agreement;
(g) To determine any and all motions related to the
rejection, assumption or assignment of executory contracts or unexpired
leases, or to determine any motion to reject an executory contract or
unexpired lease pursuant to Section 14.1 of the Plan;
(h) To determine all applications, motions, adversary
proceedings, contested matters, actions, and any other litigated matters
instituted in and prior to the closing of the Reorganization Cases,
including any remands;
(i) To enter a Final Order closing the Reorganization
Cases;
(j) To modify the Plan under Section 1127 of the
Bankruptcy Code, remedy any defect, cure any omission, or reconcile any
inconsistency in the Plan or the Confirmation Order so as to carry out its
intent and purposes;
(k) To issue such orders in aid of consummation of the
Plan and the Confirmation Order notwithstanding any otherwise applicable
non-bankruptcy law, with respect to any Person, to the full extent
authorized by the Bankruptcy Code;
(l) To enable the Liquidating Trust to prosecute any and
all proceedings to set aside liens or encumbrances and to recover any
transfers, Assets, properties or damages to which the Debtors may be
entitled under applicable provisions of the Bankruptcy Code or any other
federal, state or local laws except as may be waived pursuant to the Plan;
(m) To determine any tax liability pursuant to Section
505 of the Bankruptcy Code;
(n) To enter and implement such orders as may be
appropriate in the event the Confirmation Order is for any reason stayed,
revoked, modified or vacated;
(o) To resolve any disputes concerning whether a Person
had sufficient notice of the Reorganization Cases, the applicable Claims
bar date, the hearing to consider approval of the Disclosure Statement or
the Confirmation Hearing or for any other purpose;
(p) To resolve any dispute or matter arising under or in
connection with any order of the Bankruptcy Court entered in the
Reorganization Cases;
(q) To authorize sales of Assets as necessary or
desirable and resolve objections, if any, to such sales;
(r) To hear and resolve Litigation Claims, including,
without limitation, the Avoidance Claims, Hatten Transaction Claims and
Hatten Fiduciary Claims;
(s) To resolve any disputes concerning any release of a
nondebtor under the Plan or the injunction against acts, employment of
process or actions against such nondebtor arising under the Plan;
(t) To approve any Distributions, or objections thereto,
under the Plan;
(u) To approve any Claims settlement entered into or
offset exercised by the Liquidating Trust;
(v) To oversee any dispute concerning improper or
excessive draws under letters of credit issued for the account of the
Debtors; and
(w) To determine such other matters, and for such other
purposes, as may be provided in the Confirmation Order or the Liquidating
Trust Agreement, or as may be authorized under provisions of the Bankruptcy
Code.
X. CERTAIN RISK FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST THE DEBTORS SHOULD READ AND CONSIDER
CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET
FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS DELIVERED TOGETHER
HEREWITH AND/OR INCORPORATED HEREIN BY REFERENCE), PRIOR TO VOTING TO
ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER, BE
REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE
PLAN AND ITS IMPLEMENTATION.
A. DISTRIBUTION RISKS
The Plan contemplates the resolution of many Disputed Claims
and certain of the Disputed Administrative Claims after the Effective Date.
Some of the Disputed Claims and Disputed Administrative Claims are
substantial, and, if resolved unfavorably, could have a significant
negative impact on the recoveries of the holders of Allowed Unsecured
Claims. For instance, Ameritech has filed a proof of Claim against the
Estate of USN Communications in the amount of $306,146,239.45 and sought
allowance of an Administrative Claim in the amount of $1,050,921.21.
Similarly, Bell Atlantic and certain of its affiliates have filed proofs of
Claim against certain of the Debtors aggregating more than approximately
$174,000,000.00 and have filed a motion seeking an order allowing and
compelling payment of an alleged Administrative Claim in excess of
$4,000,000.00. While the Debtors believe they have defenses and may have
counterclaims respecting many of the Disputed Claims and Disputed
Administrative Claims, and consequently that such Disputed Claims and
Disputed Administrative Claims are without merit, adverse resolution of
these Claims will reduce the Distributions to holders of Allowed Unsecured
Claims.
Except to the extent that the Debtors' Assets have already been
reduced to Cash, the Debtors' ability to make the Distributions described
in the Plan also depends upon the liquidation of the Debtors' remaining
Assets, many of which consist of potential avoidance actions and other
claims against third-parties. Although the Debtors and the Liquidating
Trustee will endeavor to liquidate these and other Assets as expeditiously
as possible, and in such manner so as to maximize the Cash realized from
their disposition, the Debtors cannot warrant either the timing or the
amount of Distributions contemplated under the Plan because prosecuting the
Debtors' claims could take substantially more time than anticipated and/or
result in little or no recovery.
B. BANKRUPTCY RISKS
1. OBJECTION TO CLASSIFICATIONS.
Section 1122 of the Bankruptcy Code provides that a plan may
place a claim or an interest in a particular class only if such claim or
equity interest is substantially similar to the other claims or equity
interests of such class. The Debtors believe the classification of Claims
and Equity Interests under the Plan complies with the requirements set
forth in the Bankruptcy Code. However, there can be no assurance that the
Bankruptcy Court will reach the same conclusion.
2. RISK OF NONCONFIRMATION OF THE PLAN.
Even if all voting Classes accept the Plan, the Plan might not
be confirmed by the Bankruptcy Court. As discussed herein, Section 1129 of
the Bankruptcy Code sets forth the requirements for confirmation and
requires, among other things, that the confirmation of a plan of
reorganization is not likely to be followed by the liquidation or the need
for further financial reorganization unless, as here, such liquidation or
reorganization is proposed in the plan, and that the value of distributions
to dissenting creditors and equity security holders not be less than the
value of distributions such creditors and equity security holders would
receive if the Debtors were liquidated under chapter 7 of the Bankruptcy
Code. The Debtors believe that the Plan satisfies all the requirements for
confirmation of a plan of reorganization under the Bankruptcy Code. There
can be no assurance, however, that the Bankruptcy Court will also conclude
that the requirements for confirmation of the Plan have been satisfied.
3. RISK OF DELAYED CONFIRMATION AND/OR EFFECTIVE DATE OF
PLAN.
Any delay of either the Confirmation Date or the Effective Date
of the Plan could result in, among other things, (a) increased Fee Claims,
(b) a failure to consummate the Sale Transaction, and/or (c) other adverse
effects on the Debtors' ability to make Distributions to the holders of
Allowed Unsecured Claims.
C. RISKS RELATING TO SALE TRANSACTION
The Purchase Agreement contains a number of conditions to the
closing of the Sale Transaction and it is likely that any Alternative
Purchase Agreement the Debtors may execute in lieu of the Purchase
Agreement would contain similar conditions. Although the Debtors presently
believe they will be able to satisfy all conditions to closing of the Sale
Transaction, it is possible that some may not be satisfied, and that the
Buyer will refuse to waive any such conditions and consummate the Sale
Transaction. In addition, it is possible that the Buyer may be unable, or
may refuse, to consummate the Sale Transaction, even if USN Communications
has satisfied all conditions to the closing.
XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes some of the more
significant United States federal income tax consequences of the Plan to
certain holders of Claims. The analysis contained herein is based upon the
Internal Revenue Code of 1986, as amended (the "IRC"), the Treasury
Regulations promulgated and proposed thereunder (the "Regulations"),
judicial decisions and published administrative rulings and pronouncements
of the Internal Revenue Service (the "IRS") as in effect on the date
hereof. Legislative, judicial or administrative changes or interpretations
hereafter enacted or promulgated could alter or modify the analysis and
conclusions set forth below. Any such changes or interpretations may be
retroactive and could affect significantly the federal income tax
consequences discussed below. This summary does not address foreign, state
or local income tax, or any estate or gift tax consequences of the Plan,
nor does it purport to address the federal income tax consequences of the
Plan to special classes of taxpayers (such as foreign companies,
nonresident alien individuals, S corporations, banks, mutual funds,
insurance companies, financial institutions, small business investment
companies, regulated investment companies, broker-dealers and tax-exempt
organizations).
THE TAX CONSEQUENCES TO HOLDERS OF CLAIMS MAY VARY BASED UPON
THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER. MOREOVER, THE TAX CONSEQUENCES
OF CERTAIN ASPECTS OF THE PLAN ARE UNCERTAIN DUE TO THE LACK OF APPLICABLE
LEGAL PRECEDENT AND THE POSSIBILITY OF CHANGES IN THE LAW. NO RULING HAS
BEEN APPLIED FOR OR OBTAINED FROM THE INTERNAL REVENUE SERVICE OR WILL BE
SOUGHT WITH RESPECT TO ANY OF THE TAX ASPECTS OF THE PLAN AND NO OPINION OF
COUNSEL HAS BEEN REQUESTED, OBTAINED BY THE DEBTORS OR WILL BE SOUGHT WITH
RESPECT THERETO. THIS DISCUSSION DOES NOT CONSTITUTE TAX ADVICE OR A TAX
OPINION CONCERNING THE MATTERS DESCRIBED. THERE CAN BE NO ASSURANCE THAT
THE INTERNAL REVENUE SERVICE WILL NOT CHALLENGE ANY OR ALL OF THE TAX
CONSEQUENCES DESCRIBED HEREIN, OR THAT SUCH A CHALLENGE, IF ASSERTED, WOULD
NOT BE SUSTAINED. ACCORDINGLY, EACH HOLDER OF A CLAIM OR EQUITY INTEREST IS
STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING THE FEDERAL,
STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES OF THE PLAN.
A. FEDERAL INCOME TAX CONSEQUENCES TO THE DEBTORS
1. CANCELLATION OF DEBT.
Upon implementation of the Plan, the amount of the Debtors'
aggregate outstanding indebtedness will be substantially reduced. A portion
of the reduction will be treated as income from the discharge of
indebtedness (also known as "Cancellation of Debt" or "COD"), i.e., the
amount by which the debt discharged exceeds any consideration paid in
exchange therefor. In general, the IRC provides that a corporate or
individual debtor in a case under the Bankruptcy Code does not recognize
such income for federal tax purposes but rather such debtor must reduce its
tax attributes by any COD.
For this purpose a Debtor's tax attributes include: net
operating losses ("NOLs") for the taxable year of the discharge and NOL
carryovers to such taxable year, credits, capital loss carryovers, basis of
property and passive activity losses and credits. Because any attribute
reduction will be applied only after determination of the tax liability of
the Debtors for the taxable year of the Discharge, any reduction in tax
attributes will not affect the utilization of such attributes against any
income or gain recognized upon implementation of the Plan; however, NOL
carryovers and suspended passive losses that otherwise might be available
to the Debtors in subsequent taxable years may be substantially reduced, if
not eliminated.
In the event that the amount of COD attributable to a Debtor
exceeds all of that Debtor's tax attributes, no income will be realized by
such Debtor as long as such cancellation occurs in connection with the
Debtor's Reorganization Case.
2. LIMITATION ON NOL CARRYOVERS AND OTHER TAX ATTRIBUTES.
Under IRC Section 382, if a loss corporation undergoes an
ownership change, the amount of its pre-change losses that may be utilized
to offset future taxable income generally will be subject to an "annual
limitation." Such annual limitation also may apply to subsequently
recognized "built-in" losses, i.e., losses economically accrued but
unrecognized as of the date of the ownership change. In general, the annual
limitation would be equal to the product of (i) the value of the loss
corporation's outstanding stock immediately before the ownership change
(with certain adjustments) and (ii) the "long-term tax-exempt rate" in
effect for the month in which the ownership change occurs. Any unused
portion of the annual limitation would be available in subsequent years.
In general, an ownership change occurs if the percentage of the
value of the loss corporation's stock owned by one or more direct or
indirect five percent (5%) shareholders (as specially defined for purposes
of IRC Section 382) has increased by more than fifty (50) percentage points
over the lowest percentage of that value owned by such five percent (5%)
shareholders at any time during a three-year test period. Under the
Regulations, the IRS, in certain circumstances, may treat certain non-stock
interests in a corporation (including debt) as stock for IRC Section 382
purposes if such interests offer a potential significant participation in
the growth of the corporation.
3. ALTERNATIVE MINIMUM TAX.
In general, an alternative minimum tax ("AMT") is imposed to
the extent that twenty percent (20%) of a corporation's alternative minimum
taxable income exceeds the corporation's regular Federal income tax. For
purposes of computing taxable income for AMT purposes, certain tax
deductions and other beneficial allowances are modified or eliminated. In
particular, even though a corporation might otherwise be able to offset all
of its taxable income for regular income tax purposes by available NOL
carryovers, only ninety percent (90%) of the corporation's taxable income
for AMT purposes may be offset by available NOL carryovers (as recomputed
for AMT purposes). In addition, if a corporation undergoes an ownership
change within the meaning of IRC Section 382, and is in a net built-in loss
position on the change date (as determined for AMT purposes), the
corporation's aggregate tax basis in its assets would be reduced for
certain AMT purposes to the fair market value of such assets as of the
change date.
4. SALE OR TRANSFER OF ASSETS BY THE DEBTORS.
Pursuant to the Plan, it is possible that some or substantially
all of the Assets will be sold or otherwise transferred. If this happens,
such sales or transfers of the Assets may result in taxable gain or loss to
the Debtors. Nevertheless, due to available NOL carryforwards, and
additional NOLs and other losses expected to be incurred in connection with
such transfers, the Debtors do not anticipate that a significant federal
income tax liability, if any, will be incurred as a result of such
transfers.
B. FEDERAL INCOME TAX TREATMENT OF THE LIQUIDATION TRUST
Upon the confirmation of the Plan, the occurrence of the
Effective Date and the closing of the Sale Transaction, the Residual Assets
will be transferred to the Liquidation Trust. In consideration thereof, the
Liquidation Trust will assume the Debtors' obligations to make
Distributions in accordance with the Plan. The Debtors believe that the
Liquidation Trust would qualify as a liquidating trust, as defined in
Treasury Regulation Section 301.7701-4(d), and would therefore be taxed as
a grantor trust, of which the holders of Allowed Claims and Disputed Claims
would be treated as the grantors. Thus, no tax should be imposed on the
Liquidation Trust itself or on the income earned or gain recognized by the
Liquidation Trust. Instead, holders of Allowed Unsecured Claims would be
taxed on their allocable shares of such income and gain in each taxable
year, whether or not they received any distributions from the Liquidation
Trust in such taxable year. The Liquidation Trust would pay federal, state
and local tax on the taxable income and gain allocable to holders of
Disputed Claims on behalf of such holders and, when such Disputed Claims
were ultimately resolved, holders whose Disputed Claims were determined to
be Allowed Claims would receive distributions from the Liquidation Trust
net of taxes which the Liquidation Trust had previously paid on their
behalf.
It is possible, however, that the IRS could require a different
characterization of the Liquidation Trust, which could result in different
and possibly greater tax liability to the Liquidation Trust and/or the
holders of Allowed Claims. If the IRS determines that the powers granted to
the Liquidation Trustee or the activities of the Liquidating Trustee are
greater than those normally associated with carrying out the liquidation
and distribution of assets transferred to a liquidating trust, as described
in Treasury Regulation Section 301.7701-4(d), the IRS may attempt to
re-characterize the Liquidation Trust as a complex trust under IRC Section
641 or as a corporation. A complex trust generally is subject to tax on
income received, less deductions allowed for its expenses and for
distributions that it makes to creditor-beneficiaries up to the amount of
its distributable net income ("DNI"), as defined in IRC Section 643(a). The
Liquidation Trust would be taxed on any current DNI not distributed to the
holders of Allowed Unsecured Claims, and such holders would be taxed on
income currently distributed to them by the Liquidation Trust (up to the
amount of their proportionate share of the Liquidation Trust's DNI for that
year).
Alternatively, the IRS may attempt to characterize the
Liquidation Trust as a Qualified Settlement Fund ("QSF") pursuant to
Treasury Regulations under IRC Section 468B(g) (the "QSF Regulations"). The
QSF Regulations generally do not apply to trusts which are established to
satisfy claims of general trade creditors and debt holders in a bankruptcy
case. The QSF Regulations, however, do apply to a trust which is
established to satisfy claims asserting liability: (i) arising out of a
tort, breach of contract, or violation of law; or (ii) otherwise designated
by the IRS. Thus, if the IRS asserted that Allowed Claims arose from such
causes (e.g., the fraudulent sale of securities or other obligations), the
Liquidation Trust could be treated as a QSF. If the Liquidation Trust were
treated as a QSF, it would be treated as a separate taxable entity subject
to federal income tax at the maximum tax rate applicable to trusts. In
general, amounts transferred to the QSF to resolve or satisfy a liability
for which the QSF was established are not included in gross income of the
QSF. Pursuant to the foregoing, if the Liquidation Trust were treated as a
QSF, holders of Allowed Unsecured Claims could receive decreased
distributions.
If the Liquidation Trust were determined by the IRS to be
taxable not as a liquidating trust, the taxation of the Liquidation Trust
and the transfer of assets by the Debtors to the Liquidation Trust could be
materially different than is described herein and could have a material
adverse effect on the holders of Claims.
C. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF CLAIMS
The federal income tax consequences of the Plan to a holder of
a Claim will depend upon several factors, including but not limited to: (i)
whether the holder's Claim (or a portion thereof) constitutes a Claim for
principal or interest, (ii) the origin of the holder's Claim, (iii) the
type of considerations received by the holder in exchange for the Claim,
(iv) whether the holder is a resident of the United States for tax purposes
(or falls into any of the special classes of taxpayers excluded from this
discussion as noted above), (v) whether the holder reports income on the
accrual or cash basis method, (vi) whether the holder has taken a bad debt
deduction or worthless security deduction with respect to this Claim, and
(vii) whether the holder receives distributions under the Plan in more than
one taxable year. HOLDERS ARE STRONGLY ADVISED TO CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX TREATMENT UNDER THE PLAN OF THEIR
PARTICULAR CLAIMS.
Generally, a holder of a Claim will recognize gain or loss
equal to the difference between the "amount realized" by such holder and
such holder's adjusted tax basis in the Claim. The "amount realized" is
equal to the sum of the Cash and the fair market value of any other
consideration received under the Plan in respect of a holder's Claim,
including the fair market value of each such holder's proportionate share
of the assets transferred to the Liquidation Trust on the behalf of and for
the benefit of such holder (to the extent that such Cash or other property
is not allocable to any portion of the Claim representing accrued but
unpaid interest (see discussion below)).
The transfer of Cash and assets to the Liquidation Trust by the
Debtors should be treated for federal income tax purposes as a transfer of
such Cash and assets to the holders of Claims to the extent they are
creditor-beneficiaries, followed by a deemed transfer of such assets by
such beneficiaries to the Liquidation Trust. As a result of such treatment,
holders of Allowed Claims will have to take into account the fair market
value of their pro rata share, if any, of the Cash and assets transferred
on their behalf to the Liquidation Trust in determining the amount of gain
realized and required to be recognized upon consummation of the Plan on the
Effective Date. In addition, since a holder's share of the assets held in
the Liquidation Trust may change depending upon the resolution of Disputed
Claims, the holder may be prevented from recognizing any loss in connection
with consummation of the Plan until the time that all such Disputed Claims
have been resolved. The Liquidation Trustee will provide the holders of
Allowed Claims with valuations of the assets transferred to the Liquidation
Trust and such valuations should be used consistently by the Liquidation
Trust and such holders for all federal income tax purposes. Furthermore, a
tax credit may be available to holders whose Disputed Claims are determined
to be Allowed Claims to the extent that the Liquidation Trust has
previously paid taxes on their behalf.
The character of any recognized gain or loss (e.g., ordinary
income, or short-term or long-term capital gain or loss) will depend upon
the status of the holder, the nature of the Claim in its hands, the purpose
and circumstances of its acquisition, the holder's holding period of the
Claim, and the extent to which the holder previously claimed a deduction
for the worthlessness of all or a portion of the Claim. HOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE RECOGNITION OF GAIN OR LOSS,
FOR FEDERAL INCOME TAX PURPOSES, ON THE SATISFACTION OF THEIR CLAIMS.
D. ALLOCATION OF CONSIDERATION TO INTEREST
A portion of the consideration received by a holder in
satisfaction of an Allowed Claim pursuant to the Plan may be allocated to
the portion of such Allowed Claim (if any) that represents accrued but
unpaid interest. The Plan does not provide an allocation of the
consideration to be received by the holders of Allowed Claims. Accordingly,
the manner in which such allocation must be made for federal income tax
purposes is not clear. If any portion of the distribution were required to
be allocated to accrued interest, such portion would be taxable to the
holder as interest income, except to the extent the holder has previously
reported such interest as income.
In that event, only the balance of the distribution would be
considered received by the holder in respect of the principal amount of the
Allowed Claim. Such an allocation would reduce the amount of the gain, or
increase the amount of loss, realized by the holder with respect to the
Allowed Claim. If any such loss were a capital loss, it would not offset
any amount of the distribution that was treated as ordinary interest income
(except, in the case of individuals, to the limited extent that capital
losses may be deducted against ordinary income).
To the extent that any portion of the distribution is treated
as interest, holders may be required to provide certain tax information in
order to avoid the withholding of taxes. HOLDERS SHOULD CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX TREATMENT OF CONSIDERATION
RECEIVED IN SATISFACTION OF THEIR CLAIMS.
E. FEDERAL INCOME TAX TREATMENT OF HOLDERS OF EQUITY INTERESTS
In accordance with the Plan, holders of Equity Interests in the
Debtors shall receive no Distribution of any kind. Holders of an Equity
Interest in the Debtors generally will recognize loss in the amount of the
holder's adjusted tax basis. The character of any recognized loss will
depend upon several factors including, but not limited to, the status of
the holder, the nature of the interest in the holder's hands, the purpose
and circumstances of its acquisition, the holder's holding period, and the
extent to which the holder had previously claimed a deduction for the
worthlessness of all or a portion of such Equity Interest.
A loss generally is treated as sustained in the taxable year
for which there has been a closed and completed transaction, and no portion
of a loss with respect to which there is a reasonable prospect of
reimbursement may be deducted until it can be ascertained with reasonable
certainty whether or not such reimbursement will be recovered. HOLDERS OF
EQUITY INTERESTS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
RECOGNITION OF LOSS FOR FEDERAL INCOME TAX PURPOSES, ON THE CONSUMMATION OF
THE PLAN.
F. BACKUP WITHHOLDING AND INFORMATION REPORTING
Payors of interest, dividends, and certain other reportable
payments are generally required to withhold thirty-one percent (31%) of
such payments if the payee fails to furnish such payee's correct taxpayer
identification number (social security number or employee identification
number) to the payor. The Debtors and/or the Liquidating Trust may be
required to withhold a portion of any payments made to a holder of an
Allowed Claim who does not provide its taxpayer identification number.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF CERTAIN OF
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN, AND IS NOT A
SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A TAX PROFESSIONAL. THE FEDERAL,
STATE AND LOCAL INCOME AND OTHER TAX CONSEQUENCES OF THE PLAN ARE COMPLEX
AND, IN SOME CASES, UNCERTAIN. SUCH CONSEQUENCES MAY ALSO VARY BASED ON THE
INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR EQUITY INTEREST.
ACCORDINGLY, EACH HOLDER OF A CLAIM OR EQUITY INTEREST IS STRONGLY URGED TO
CONSULT WITH HIS, HER OR ITS OWN TAX ADVISOR REGARDING THE FEDERAL, STATE
AND LOCAL INCOME AND OTHER TAX CONSEQUENCES UNDER THE PLAN.
XII. ALTERNATIVES TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
If the Plan is not confirmed and consummated, the Debtors'
alternatives include (a) liquidation of the Debtors under chapter 7 of the
Bankruptcy Code and (b) the preparation and presentation of an alternative
plan of reorganization.
A. LIQUIDATION UNDER CHAPTER 7.
If no chapter 11 plan can be confirmed, the Reorganization
Cases may be converted to cases under chapter 7 of the Bankruptcy Code in
which a trustee would be elected or appointed to liquidate the Assets of
the Debtors. For the reasons set forth in Part VII, Section D.1 entitled
"Confirmation and Consummation - Best Interests of Holders of Claims and
Equity Interests," the Debtors believe that confirmation and consummation
of the Plan will provide Claimholders with a recovery that is not less (and
generally expected to be more) than such Claimholders would receive
pursuant to a liquidation of the Debtors under chapter 7 of the Bankruptcy
Code.
B. ALTERNATIVE PLAN.
If the Plan is not confirmed, the Debtors, or, upon the
expiration (unless extended) of the Debtors' exclusive period in which to
file a plan of reorganization, any other party in interest would be
entitled to file a different plan. Such a plan might involve either (a) a
reorganization to act as a holding company with respect to the Wireless
Companies or to effect a sale transaction involving the Wireless Companies
or (b) an orderly liquidation of the Debtors' Assets. The Debtors believe
that the Plan enables Claimholders to realize the most value under the
circumstances of these particular Reorganization Cases. The Plan is
premised on Distributions to creditors under the priorities established by
the Bankruptcy Code or as otherwise agreed or approved by the Bankruptcy
Court and is the result of extensive negotiations between the Debtors, the
Creditors' Committee and the Debtors' major creditor constituencies. An
alternative chapter 11 plan would likely involve further discussions and
reformulation increasing administrative expenses and thus reducing creditor
distributions and likely would delay, perhaps significantly, the timing of
distributions to creditors.
XIII. CONCLUSION
The Debtors urge holders of Claims in the voting Classes to
vote to accept the Plan and to evidence such acceptance by returning their
Ballots so they will be received not later than 4:00 p.m. (Eastern Standard
Time) on _______, 2000.
Dated: December ___, 1999
USN COMMUNICATIONS, INC.
By: /s/ J. Thomas Elliott
--------------------------------------
Name: J. Thomas Elliott
Title: Chairman & CEO
On behalf of itself and the following
Debtors:
US NETWORK CORPORATION
FONENET/OHIO, INC.
USN COMMUNICATIONS LONG DISTANCE, INC.
USN COMMUNICATIONS VIRGINIA, INC.
USN COMMUNICATIONS MAINE, INC.
QUEST UNITED, INC.
USN COMMUNICATIONS ATLANTIC, INC.
USN SOLUTIONS, INC.
USN COMMUNICATIONS SOUTHWEST, INC.
USN COMMUNICATIONS WEST, INC.
USN COMMUNICATIONS MIDWEST, INC.
USN COMMUNICATIONS NORTHEAST, INC.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
) Chapter 11 Cases
In re )
) Case No. 99-383 (PJW)
USN COMMUNICATIONS, INC., et al., )
)
Debtors. ) Jointly Administered
)
DISCLOSURE STATEMENT FOR
DEBTORS' JOINT CONSOLIDATED PLAN OF REORGANIZATION
December 30, 1999
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
Wilmington, Delaware 19801
(302) 658-9200
Bankruptcy Counsel to
USN Communications, Inc., et al.,
Debtors and Debtors in Possession
SPECIAL COUNSEL:
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM (ILLINOIS) AND AFFILIATES
333 West Wacker Drive, Suite 2100
Chicago, Illinois 60606
(312) 407 0700
- ----------------------------------------------------------------------------
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT FOR
CIRCULATION TO CREDITORS OR FOR USE IN THE SOLICITATION OF VOTES ON THE
PLAN OF REORGANIZATION PROPOSED BY USN COMMUNICATIONS, INC., ET AL.,
DEBTORS AND DEBTORS IN POSSESSION.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
Page
I. INTRODUCTION ..................................................... 1
A. General ...................................................... 1
B. Voting ....................................................... 1
C. Confirmation Hearing ......................................... 3
D. Summary of Distributions Under the Plan ...................... 4
E. Recommendation ............................................... 6
II. HISTORICAL INFORMATION ........................................... 6
A. Background ................................................... 6
B. Debt Structure ............................................... 7
1. Prepetition Credit Facility .............................. 7
2. Alleged Interest of Corporate Concepts, Inc. ............. 8
3. Unsecured Public Debt .................................... 9
4. Miscellaneous Other Unsecured Debt ....................... 9
C. Events Leading to Chapter 11 Filings ......................... 9
III. THE REORGANIZATION CASES ......................................... 10
A. First Day Motions and Applications ........................... 10
B. The Official Committee of Unsecured Creditors ................ 11
C. Marketing and Sale of the Debtors' Assets and Businesses ..... 11
1. The CoreComm Sale and Related Transactions ............... 11
2. Marketing and Sale of the Wireless Companies ............. 12
3. Other Miscellaneous Asset Sales .......................... 15
D. DIP Financing ................................................ 15
E. Significant Litigation Events ................................ 16
1. Litigation Related to the CoreComm Sale .................. 16
2. The Corporate Concepts Litigation ........................ 17
3. The MLGAF/Harris Settlement .............................. 17
4. TrizecHahn Litigation .................................... 18
5. 498 Seventh LLC Litigation ............................... 19
6. Securities Litigation .................................... 19
F. Lease and Contract Rejections ................................ 20
G. Case Administration .......................................... 20
1. Schedules and Statements ................................. 20
2. Bar Dates ................................................ 20
3. Representation of the Debtors ............................ 21
IV. SUMMARY OF THE PLAN .............................................. 22
A. Overview of Chapter 11 ....................................... 22
B. Plan of Reorganization ....................................... 22
C. Substantive Consolidation .................................... 25
D. Treatment of Claims and Equity Interests ..................... 26
1. Unclassified Claims ...................................... 26
2. Classified Claims and Equity Interests ................... 28
3. Bar Dates ................................................ 32
V. MEANS OF IMPLEMENTATION .......................................... 33
A. Plan Implementation Related to Sale Transaction and
Alternative Sale Transaction ................................. 33
1. Plan Implementation Related to Sale Transaction .......... 33
2. Alternative Plan Implementation Related to
Alternative Sale Transaction ........................... 34
3. Implementation of Plan Absent Consummation of Sale
Transaction or Alternative Sale Transaction ............ 36
B. Applicability of Sections 1125 and 1145 of Bankruptcy Code ... 36
C. Dissolution of Corporation Entities .......................... 37
D. Officers and Directors ....................................... 37
E. Dissolution of Creditors' Committee; Post-Effective Date
Committee .................................................... 37
F. Daniels' Transaction Fee ..................................... 37
G. Termination of DIP Facility .................................. 38
H. Surrender and Cancellation of Securities ..................... 38
1. Cancellation and Surrender of Securities Generally ....... 38
2. Cancellation of Notes Indentures ......................... 39
3. Surrender of Senior Notes; Condition to Receipt by
Senior Notes Indenture Trustees of Distributions
Made on Account of Allowed Junior Notes Claims ......... 39
I. Executory Contracts and Unexpired Leases ..................... 40
1. Assumption or Rejection of Executory Contracts and
Unexpired Leases ....................................... 40
2. Bar Date for Rejection Damages ........................... 41
3. Cure/Objections to Article XIV ........................... 41
J. Creation, Funding and Administration of Liquidating Trust .... 42
1. Establishment of the Liquidating Trust ................... 42
2. Purpose of the Liquidating Trust ......................... 42
3. Powers and Obligations of the Liquidating Trust .......... 43
K. Creation, Funding and Maintenance of Plan Reserves ........... 43
1. Administrative/Priority Claims Reserve ................... 43
2. Fee Claims Reserve ....................................... 43
3. Liquidating Trust Administrative Reserve ................. 44
4. The Hatten Transaction Claims Recoveries Reserve ......... 44
5. The Convenience Class Reserve ............................ 45
6. The Disbursement Reserve ................................. 45
VI. DISTRIBUTIONS AND PROCEDURES FOR RESOLVING DISPUTED CLAIMS ....... 45
A. Objection Deadline ........................................... 45
B. Prosecution of Contested Claims .............................. 45
C. Disputed Claim Reserve ....................................... 45
D. Claims Settlement Guidelines ................................. 46
E. Estimation of Claims ......................................... 46
F. No Distribution Pending Allowance ............................ 46
G. Distributions after Allowance ................................ 47
H. Disputed Payment ............................................. 47
I. Amendments to Claims ......................................... 47
J. Third Party Agreements; Subordination ........................ 47
K. No Recourse to Liquidating Trustee ........................... 48
L. Non-Cash Property ............................................ 48
M. Transmittal of Distributions and Notices ..................... 48
N. Distributions to Holders of Notes Claims ..................... 49
1. Indenture Trustees as Claimholders ....................... 49
2. Obligation of Indenture Trustees to Transmit
Distributions Received ................................. 49
O. Withholding Taxes and Expenses of Distribution ............... 49
P. Method of Cash Distributions ................................. 49
VII. CONFIRMATION OF THE PLAN ......................................... 50
A. Introduction ................................................. 50
B. Voting Procedures and Standards .............................. 50
C. Acceptance ................................................... 51
D. Confirmation and Consummation ................................ 51
1. Best Interests of Holders of Claims and Equity
Interests .............................................. 53
2. Financial Feasibility .................................... 53
3. Cram Down ................................................ 54
4. Classification of Claims and Interests ................... 55
VIII. MANAGEMENT OF REORGANIZED USN COMMUNICATIONS ..................... 55
IX. CERTAIN EFFECTS OF CONFIRMATION .................................. 55
A. Discharge .................................................... 55
B. Term of Bankruptcy Injunction or Stays ....................... 56
C. Waiver of Claims ............................................. 56
D. Debtors' Releases ............................................ 56
E. Injunction ................................................... 57
F. Exculpation .................................................. 57
G. Preservation of Certain Claims ............................... 58
H. Setoffs ...................................................... 59
I. Retention and Enforcement of Claims and Interests ............ 59
J. Preservation of Insurance .................................... 59
K. Post-Confirmation Jurisdiction of Bankruptcy Court ........... 59
X. CERTAIN RISK FACTORS TO BE CONSIDERED ............................ 61
A. Distribution Risks ........................................... 61
B. Bankruptcy Risks ............................................. 62
1. Objection to Classifications ............................. 62
2. Risk of Nonconfirmation of the Plan ...................... 62
3. Risk of Delayed Confirmation and/or Effective Date
of Plan ................................................ 63
C. Risks Relating to Sale Transaction ........................... 63
XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES .......................... 63
A. Federal Income Tax Consequences to the Debtors ............... 64
1. Cancellation of Debt ..................................... 64
2. Limitation on NOL Carryovers and Other Tax Attributes .... 64
3. Alternative Minimum Tax .................................. 65
4. Sale or Transfer of Assets by the Debtors ................ 65
B. Federal Income Tax Treatment of the Liquidation Trust ........ 65
C. Federal Income Tax Consequences to Holders of Claims ......... 67
D. Allocation of Consideration to Interest ...................... 68
E. Federal Income Tax Treatment of Holders of Equity
Interests .................................................. 68
F. Backup Withholding and Information Reporting ................. 68
XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN ........ 69
A. Liquidation Under Chapter 7 .................................. 69
B. Alternative Plan ............................................. 69
XIII. CONCLUSION ....................................................... 71
EXHIBITS TO DISCLOSURE STATEMENT
EXHIBIT "A" Debtors' Joint Consolidated Plan of Reorganization
EXHIBIT "B" Summary Liquidation Analysis
EXHIBIT "C" Order Granting Joint Motion for Entry of Order Authorizing
and Approving Compromise and Settlement of Adversary
Proceeding and Related Claims, dated June 24, 1999
EXHIBIT "A"
(TO DISCLOSURE STATEMENT)
EXHIBIT "B"
(TO DISCLOSURE STATEMENT)
EXHIBIT "C"
(TO DISCLOSURE STATEMENT)
o "Total Claims Asserted" reflects the maximum potential Claims of each
type (i.e. Administrative Claims, Unsecured Claims) based on the
Debtors' Schedules and proofs of Claim (or, in the case of
Administrative Claims and Fee Claims, request for payment) Filed in
the Debtors' Reorganization Cases. The Debtors believe the aggregate
amount of Claims Allowed may be considerably less than the maximum
potential amount; however, as of the date hereof, the Debtors have
insufficient information to represent or warrant what the Allowed
amount of Claims will be.
o This is the Debtors' best estimate of the aggregate amount of
Convenience Claims based on Claims Filed and Scheduled in amounts
equal to or less than $2,000. The actual aggregate amount of
Convenience Claims may be higher if holders of qualifying Unsecured
Claims with Face Values in excess of $2,000 properly make the
Convenience Class Election.
o This is the Debtors' best estimate of the range of recovery for
Unsecured Claims at this time. The low end of the range of recovery
assumes that all Unsecured Claims Filed against the Debtors will be
Allowed in an amount equal to the Face Value of proofs of Claims
filed. The high end of the range of recovery assumes that Claims will
be Allowed only in the amounts Scheduled or as previously Allowed
during the Debtors' Reorganization Cases.
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
) Chapter 11 Cases
In re )
) Case No. 99-383(PJW)
USN COMMUNICATIONS, INC., et al., )
)
Debtors. ) Jointly Administered
)
DEBTORS' JOINT CONSOLIDATED PLAN OF REORGANIZATION
December 30, 1999
MORRIS, NICHOLS, ARSHT & TUNNELL
1201 North Market Street
Wilmington, Delaware 19801
(302) 658-9200
Bankruptcy Counsel to
USN Communications, Inc., et al.,
Debtors and Debtors in Possession
SPECIAL COUNSEL:
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM (ILLINOIS) AND AFFILIATES
333 West Wacker Drive, Suite 2100
Chicago, Illinois 60606
(312) 407 0700
PURSUANT TO SECTION 1125 OF TITLE 11 OF THE UNITED STATES CODE,
NOTHING CONTAINED IN THIS PLAN SHOULD BE CONSTRUED AS CONSTITUTING A
SOLICITATION OF ACCEPTANCES OF THIS PLAN UNTIL SUCH TIME AS THE DEBTORS'
DISCLOSURE STATEMENT (AS DEFINED HEREIN) HAS BEEN APPROVED BY THE UNITED
STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE AND DISTRIBUTED, WITH
APPROPRIATE BALLOTS, TO ALL HOLDERS OF IMPAIRED CLAIMS AGAINST THE DEBTORS
ENTITLED TO VOTE ON THE PLAN. THE DISCLOSURE STATEMENT HAS NOT YET BEEN
APPROVED BY THE BANKRUPTCY COURT FOR USE IN SOLICITING ACCEPTANCES OF THIS
PLAN. THE DEBTORS RESERVE THE RIGHT TO FILE AMENDMENTS AND/OR MODIFICATIONS
TO THE PLAN AND DISCLOSURE STATEMENT FROM TIME TO TIME UNTIL A DISCLOSURE
STATEMENT AND PLAN PROPOSED BY THE DEBTORS IS APPROVED BY THE BANKRUPTCY
COURT. REFERENCE IS MADE TO SUCH DISCLOSURE STATEMENT FOR A DISCUSSION OF
VOTING INSTRUCTIONS, RECOVERY INFORMATION, CLASSIFICATION, THE DEBTORS'
HISTORY, BUSINESSES, PROPERTIES, RESULTS OF OPERATIONS AND A SUMMARY AND
ANALYSIS OF THIS PLAN. ALL CLAIMANTS AND EQUITY INTEREST HOLDERS ARE HEREBY
ADVISED AND ENCOURAGED TO READ THE DISCLOSURE STATEMENT AND THIS PLAN IN
THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THIS PLAN.
THIS PLAN AND THE DISCLOSURE STATEMENT HAVE NOT BEEN REQUIRED
TO BE PREPARED IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS OR OTHER
APPLICABLE NONBANKRUPTCY LAW. PERSONS OR ENTITIES TRADING IN OR OTHERWISE
PURCHASING, SELLING OR TRANSFERRING SECURITIES OF THE DEBTORS SHOULD
EVALUATE THIS PLAN IN LIGHT OF THE PURPOSES FOR WHICH IT WAS PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER
ACTUAL, THREATENED OR POTENTIAL ACTIONS, THIS PLAN AND THE DISCLOSURE
STATEMENT SHALL NOT BE DEEMED OR CONSTRUED AS AN ADMISSION, STIPULATION OR
WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS.
TABLE OF CONTENTS
Page
INTRODUCTION ...............................................................1
ARTICLE I. ................................................................1
DEFINITIONS 1
1.1 Administrative Claim............................................1
1.2 Administrative/Priority Claims Reserve..........................1
1.3 Adversary Proceeding Settlement.................................1
1.4 Affiliate.......................................................2
1.5 Allowed.........................................................2
1.6 Allowed Administrative Claim....................................2
1.7 Allowed Claim...................................................2
1.8 Allowed [Class Designation] Claim...............................2
1.9 Allowed Fee Claim...............................................2
1.10 Allowed Priority Tax Claim......................................2
1.11 Alternative Buyer...............................................2
1.12 Alternative Excluded Assets.....................................2
1.13 Alternative Purchase Agreement..................................3
1.14 Alternative Purchase Consideration..............................3
1.15 Alternative Sale Transaction....................................3
1.16 Amended Schedule Claim..........................................2
1.17 Assets..........................................................2
1.18 Available D&O Insurance Proceeds................................3
1.19 Avoidance Claims................................................3
1.20 Ballot..........................................................4
1.21 Ballot Deadline.................................................4
1.22 Balloting Agent.................................................4
1.23 Bankruptcy Code.................................................4
1.24 Bankruptcy Court................................................4
1.25 Bankruptcy Rules................................................4
1.26 Bar Date........................................................4
1.27 Business Day....................................................4
1.28 Buyer...........................................................4
1.29 Cash............................................................4
1.30 Cash Equivalents................................................4
1.31 Claim...........................................................4
1.32 Claimholder.....................................................5
1.33 Class...........................................................5
1.34 Class [______] Claim............................................5
1.35 Collateral......................................................5
1.36 Confirmation Date...............................................5
1.37 Confirmation Hearing............................................5
1.38 Confirmation Order..............................................5
1.39 Consent Convertible Notes.......................................5
1.40 Consent Convertible Notes Indenture.............................5
1.41 Consent Convertible Notes Indenture Trustee.....................5
1.42 Convenience Claim...............................................5
1.43 Convenience Class Election......................................5
1.44 Convenience Class Reserve.......................................6
1.45 Convertible Notes...............................................6
1.46 Convertible Notes Indenture.....................................6
1.47 Convertible Notes Indenture Trustee.............................6
1.48 CoreComm........................................................6
1.49 CoreComm Agreement..............................................6
1.50 CoreComm Sale...................................................6
1.51 Creditor........................................................6
1.52 Creditors' Committee............................................6
1.53 D&O Insurance...................................................6
1.54 Daniels.........................................................6
1.55 Daniels Transaction Fee.........................................7
1.56 Debtors.........................................................7
1.57 Deficiency Claim................................................7
1.58 DIP Claims......................................................7
1.59 DIP Facility....................................................7
1.60 DIP Order.......................................................7
1.61 Disclosure Statement............................................7
1.62 Disclosure Statement Order......................................7
1.63 Disputed Administrative Claims..................................7
1.64 Disputed Claim..................................................7
1.65 Disputed Claim Reserve..........................................8
1.66 Distribution....................................................8
1.67 Distribution Address............................................8
1.68 Distribution Reserve............................................8
1.69 Effective Date..................................................8
1.70 Encumbrance.....................................................8
1.71 Equity Interest.................................................8
1.72 Estate..........................................................8
1.73 Estimation Order................................................9
1.74 Excluded Assets.................................................9
1.75 Executory Contract Schedule.....................................9
1.76 Exhibit.........................................................9
1.77 Exhibit Filing Date.............................................9
1.78 Existing USN Communications Interests...........................9
1.79 Expense Reimbursement...........................................9
1.80 Face Amount.....................................................9
1.81 Federal Priority Tax Claim......................................9
1.82 Fee Claim.......................................................9
1.83 Fee Claims Reserve..............................................9
1.84 Fee Order.......................................................10
1.85 "File" or "Filed"...............................................10
1.86 "Final Order"...................................................10
1.87 14 5/8% Senior Notes............................................10
1.88 14 5/8% Senior Notes Indenture..................................10
1.89 14 5/8% Senior Notes Indenture Trustees.........................10
1.90 14% Senior Notes................................................10
1.91 14% Senior Notes Indenture......................................10
1.92 14% Senior Notes Indenture Trustee..............................10
1.93 Hatten Fiduciary Claims.........................................10
1.94 Hattent Transaction Claim.......................................11
1.95 Hatten Transaction Claims Recoveries Reserve....................11
1.96 Impaired........................................................11
1.97 Indenture Trustees..............................................11
1.98 Initial Distribution Date.......................................11
1.99 Insurance Policy................................................11
1.100 Intercompany Claim..............................................11
1.101 IRS.............................................................11
1.102 Junior Notes....................................................11
1.103 Junior Notes Claim..............................................11
1.104 Junior Notes Indenture Trustee..................................12
1.105 Junior Notes Indentures.........................................12
1.106 Liquidating Trust...............................................12
1.107 Liquidating Trust Administrative Reserve........................12
1.108 Liquidating Trust Administrative Expense........................12
1.109 Liquidating Trust Agreement.....................................12
1.110 Liquidating Trust Assets........................................12
1.111 Liquidating Trustee.............................................12
1.112 Litigation Claim................................................12
1.113 Net Proceeds....................................................12
1.114 Notes Claim.....................................................13
1.115 Notes Indenture.................................................13
1.116 PEDC............................................................13
1.117 Periodic Distribution Date......................................13
1.118 Person..........................................................13
1.119 Petition Date...................................................13
1.120 Plan............................................................13
1.121 Plan Solicitation Procedures Order..............................13
1.122 Priority Claim..................................................13
1.123 Priority Tax Claim..............................................14
1.124 Professionals...................................................14
1.125 Purchase Agreement..............................................14
1.126 Purchase Consideration..........................................14
1.127 Purchased Business..............................................14
1.128 Ratable, Ratably, Ratable Share or Pro Rata.....................14
1.129 Released Party..................................................14
1.130 Reorganization Case.............................................14
1.131 Reorganized Stock...............................................14
1.132 Reorganized USN Communications..................................15
1.133 Residual Assets.................................................15
1.134 Sale Transaction................................................15
1.135 Schedule of Assets and Liabilities..............................15
1.136 Secured Claim ..................................................15
1.137 Securities Suit.................................................15
1.138 Securities Litigation Claim.....................................15
1.139 Senior Notes....................................................15
1.140 Senior Notes Claim..............................................16
1.141 Senior Notes Indenture..........................................16
1.142 Senior Notes Indenture Trustee..................................16
1.143 Substantive Consolidation Order.................................16
1.144 Subordinated Securities Claim...................................16
1.145 Termination Fee.................................................16
1.146 Unclaimed Property..............................................16
1.147 United States Trustee...........................................16
1.148 Unsecured Claim.................................................16
1.149 U.S. Government Obligations.....................................16
1.150 USN Communications Amended and Restated Certificate of
Incorporation..................................................17
1.151 USN Communications Amended and Restated By-Laws.................17
1.152 Wireless Companies..............................................17
1.153 Wireless Stock..................................................17
ARTICLE II. ...............................................................17
RULES OF CONSTRUCTION.................................................17
2.1 Generally.......................................................17
2.2 Exhibits........................................................17
2.3 Time Periods....................................................17
2.4 Miscellaneous Rules.............................................17
ARTICLE III. ..............................................................18
METHOD OF CLASSIFICATION OF CLAIMS AND INTERESTS
AND GENERAL PROVISIONS................................................18
3.1 General Rules of Classification.................................18
3.2 Administrative Claims, Priority Tax Claims and Fee Claims.......18
3.3 Bar Date for Administrative Claims..............................18
3.4 Bar Date for Amended Schedule Claims............................18
3.5 Bar Date for Fee Claims.........................................19
ARTICLE IV. ...............................................................19
CLASSIFICATION OF CLAIMS AND INTERESTS................................19
4.1 Class 1 Claims (Priority Claims)................................19
4.2 Class 2 Claims (Secured Claims).................................19
4.3 Class 3 Claims (Convenience Claims).............................19
4.4 Class 4 Claims ((Unsecured Claims)..............................19
4.5 Class 5 Claims (Securities Litigation Claims)...................20
4.6 Class 6 Claims (Subordinated Securities Claims).................20
4.7 Class 7 Claims (Equity Interests)...............................20
ARTICLE V. ................................................................20
PROVISIONS FOR PAYMENT OF ADMINISTRATIVE CLAIMS
AND PRIORITY TAX CLAIMS...............................................20
5.1 Administrative Claims...........................................20
5.2 Fee Claims......................................................21
5.3 Priority Tax Claims.............................................21
ARTICLE VI. ...............................................................21
TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS...................21
6.1 Priority Claims.................................................21
6.2 Secured Claims..................................................22
6.3 Convenience Claims..............................................22
6.4 Unsecured Claims................................................22
6.5 Securities Litigation Claims....................................23
6.6 Subordinated Securities Claims..................................23
6.7 Equity Interests................................................23
ARTICLE VII. ..............................................................23
ACCEPTANCE OR REJECTION OF THIS PLAN OR CONSENT
TO DIFFERENT TREATMENT................................................24
7.1 Impairment of Classes of Claims and Equity Interests............24
7.2 Each Impaired Class of Claims Entitled to Vote Separately.......24
7.3 Persons Entitled to Vote........................................24
7.4 Presumed Acceptances by Unimpaired Classes......................24
7.5 Class Deemed to Reject the Plan.................................24
7.6 Acceptance by a Class of Claims.................................24
7.7 Acceptance by an Individual Claimholder.........................24
7.8 Cramdown........................................................25
7.9 Confirmability and Severability of Plan.........................25
ARTICLE VIII. .............................................................25
SURRENDER AND CANCELLATION OF SECURITIES..............................25
8.1 Cancellation and Surrender of Securities Generally..............25
8.2 Cancellation of Notes Indentures................................26
8.3 Surrender of Senior Notes; Condition to Receipt by Senior
Notes Indenture Trustees of Distributions Made on Account
of Allowed Junior Notes Claims................................26
ARTICLE IX. ...............................................................27
IMPLEMENTATION OF THE PLAN............................................27
9.1 Plan Implementation Related to Sale Transaction.................27
9.2 Alternative Plan Implementation Related to Alternative
Sale Transaction..............................................28
9.3 Implementation of Plan Absent Consummation of a Sale
Transaction or Alternative Sale Transaction...................30
9.4 Dissolution of Corporation Entities.............................30
9.5 Directors and Officers..........................................30
9.6 Daniels' Transaction Fee........................................30
9.7 Termination of DIP Facility.....................................30
9.8 Applicability of Sections 1125 and 1145 of the Bankruptcy
Code..........................................................31
9.9 Dissolution of the Creditors' Committee.........................31
9.10 The PEDC........................................................31
9.11 Establishment of the Liquidating Trust and Trustee..............32
9.12 The Administrative/Priority Claims Reserve......................38
9.13 Fee Claims Reserve..............................................39
9.14 Liquidating Trust Administrative Reserve........................39
9.15 The Hatten Transaction Claims Recoveries Reserve................39
9.16 The Convenience Class Reserve...................................40
9.17 The Distribution Reserve........................................40
ARTICLE X. ................................................................40
PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS.................40
10.1 Objection Deadline..............................................40
10.2 Prosecution of Disputed Claims..................................40
10.3 Disputed Claim Reserve..........................................40
10.4 Claims Settlement Guidelines....................................40
10.5 Estimation of Claims............................................41
ARTICLE XI. ...............................................................42
DISTRIBUTIONS.........................................................42
11.1 No Distribution Pending Allowance...............................42
11.2 Distributions After Allowance...................................42
11.3 Third Party Agreements; Subordination...........................42
11.4 Amendments to Claims............................................42
11.5 No Recourse to Liquidating Trust, Liquidating Trustee or
Reorganized USN Communications................................42
11.6 Non-Cash Property...............................................43
11.7 Transmittal of Distributions and Notices........................43
11.8 Distributions to Holders of Notes Claims........................43
11.9 Disputed Payment................................................44
11.10 Unclaimed Property..............................................44
11.11 Withholding Taxes and Expenses of Distribution..................44
11.12 Method of Cash Distributions....................................45
11.13 Fractional Cents................................................45
11.14 Distributions on Non-Business Days..............................45
11.15 No Distribution in Excess of Allowed Amount of Claim............45
11.16 De-Minimis Distributions........................................45
ARTICLE XII. ..............................................................45
EFFECTS OF CONFIRMATION...............................................45
12.1 Discharge.......................................................45
12.2 Term of Bankruptcy Injunction or Stays..........................46
12.3 Waiver of Claims................................................46
12.4 Debtors' Releases...............................................46
12.5 Injunctions.....................................................47
12.6 Exculpation.....................................................47
12.7 Preservation of Certain Claims..................................48
12.8 Setoffs.........................................................48
12.9 Retention and Enforcement of Claims and Equity Interests........48
12.10 Preservation of Insurance.......................................49
ARTICLE XIII. .............................................................50
SUBSTANTIVE CONSOLIDATION.............................................50
13.1 Substantive Consolidation.......................................50
13.2 Order Granting Substantive Consolidation........................50
ARTICLE XIV. ..............................................................51
EXECUTORY CONTRACTS AND UNEXPIRED LEASES..............................51
14.1 Assumption or Rejection of Executory Contracts and Unexpired
Leases........................................................51
14.2 Bar Date for Rejection Damages..................................51
14.3 Cure/Objections to Article XIV..................................51
ARTICLE XV. ...............................................................52
CONDITIONS PRECEDENT..................................................52
15.1 Conditions to Confirmation......................................52
15.2 Conditions to the Effective Date................................52
15.3 Waiver of Conditions to Confirmation or Consummation............52
ARTICLE XVI. ..............................................................53
ADMINISTRATIVE PROVISIONS.............................................53
16.1 Retention of Jurisdiction.......................................53
16.2 Amendments to Plan..............................................55
16.3 Successors and Assigns..........................................55
16.4 Governing Law...................................................55
16.5 Controversies Concerning Impairment.............................55
16.6 Exemption from Transfer Taxes...................................56
16.7 Corporate Action................................................56
16.8 Effectuating Documents and Further Transactions.................56
16.9 Confirmation Order and Plan Control.............................56
16.10 Notices.........................................................56
16.11 No Admissions...................................................57
EXHIBITS
EXHIBIT "A" Stock Purchase Agreement by and among USN Communications,
Inc., USN Wireless, Inc., the direct subsidiaries of USN
Wireless, Inc. and Alexandra Telephone Acquisition, LLC,
dated as of November 17, 1999
EXHIBIT "B" USN Communications Amended and Restated Certificate of
Incorporation
EXHIBIT "C" USN Communications Amended and Restated By-Laws
EXHIBIT "D" Liquidating Trust Agreement
EXHIBIT "E" Schedule of Assumed Executory Contracts and Unexpired Leases
INTRODUCTION
USN Communications, Inc. ("USN Communications"), US Network
Corporation, FoneNet/Ohio, Inc., USN Communications Long Distance, Inc.,
USN Communications Virginia, Inc., USN Communications Maine, Inc., Quest
United, Inc., USN Communications Atlantic, Inc., USN Solutions, Inc., USN
Communications Southwest, Inc., USN Communications West, Inc., USN
Communications Midwest, Inc., and USN Communications Northeast, Inc.,
debtors and debtors in possession under chapter 11 of the Bankruptcy Code
(each a "Debtor" and collectively, the "Debtors"), hereby collectively and
jointly propose the following joint consolidated plan of reorganization:
ARTICLE I.
DEFINITIONS
The capitalized terms set forth below shall have the following
meanings:
1.1 ADMINISTRATIVE CLAIM means a Claim, other than a Fee Claim,
for costs and/or expenses of administration allowed under Sections 503(b)
or 507(a)(1) of the Bankruptcy Code, including, without limitation: (a) the
actual, necessary costs and expenses incurred after the Petition Date of
preserving the Estates and operating the Debtors' businesses (such as
wages, salaries, taxes or commissions for services rendered); (b) all fees
and charges assessed against the Estates pursuant to Section 1930 of title
28 of the United States Code; (c) the Debtors' obligations under the
Adversary Proceeding Settlement, including the portion of the Senior Notes
Indenture Trustee Expenses accorded administrative priority treatment under
the Adversary Proceeding Settlement.
1.2 ADMINISTRATIVE/PRIORITY CLAIMS RESERVE means the reserve to
be established on the Effective Date by the Liquidating Trustee to hold
amounts deposited by the Debtors under this Plan to pay Administrative
Claims, Priority Claims, and Priority Tax Claims when such Claims are
payable or when Allowed by the Bankruptcy Court.
1.3 ADVERSARY PROCEEDING SETTLEMENT means the settlement
agreement by and among the Debtors, the 14 5/8% Senior Notes Indenture
Trustee, the 14% Senior Notes Indenture Trustee, Merrill Lynch Global
Allocation Fund, Inc. and the Creditors' Committee embodied in the
Bankruptcy Court's Order Granting Joint Motion for Entry of Order
Authorizing and Approving Compromise and Settlement of Adversary Proceeding
and Related Claims, dated June 24, 1999. Pursuant to the Adversary
Proceeding Settlement, Distributions, not to exceed $5,000,000, shall be
made from the Hatten Transaction Claims Recoveries Reserve to Senior Notes
Indenture Trustees for distribution to holders of Senior Notes Claims in
accordance with the 14 5/8% Senior Notes Indenture or the 14% Senior Notes
Indenture, as appropriate, before the funds in the Hatten Transaction
Claims Recoveries Reserve are distributed to holders of Allowed Unsecured
Claims; provided, however, no Distribution from the Hatten Transaction
Claims Recoveries Reserve contemplated by the Adversary Proceeding
Settlement shall be made unless and until all fees and expenses relating to
the prosecution and/or compromise of the Hatten Transaction Claims shall
have been paid, including, without limitation, the reimbursement of any
amounts drawn from the Liquidating Trust Administrative Reserve or any
other reserve established pursuant to this Plan to pay fees and expenses
associated with the prosecution and/or compromise of the Hatten Transaction
Claims.
1.4 AFFILIATE shall have the meaning ascribed to such term in
Section 101(2) of the Bankruptcy Code.
1.5 ALLOWED means, with respect to a Claim or Equity Interest
to the extent such Claim or Equity Interest is either: (a) scheduled by a
Debtor pursuant to the Bankruptcy Code and Bankruptcy Rules in a liquidated
amount and that is not listed as contingent, unliquidated or Disputed; (b)
proof of which has been timely Filed, or deemed timely Filed under
applicable law or order of the Court, with the Court pursuant to the
Bankruptcy Code, the Bankruptcy Rules and any applicable orders of the
court, or late Filed with leave of the Court after notice and a hearing; or
(c) with respect to an Administrative Claim, proof of which, or application
for which, has been timely Filed, or deemed timely Filed under applicable
law or order of the court, with the Court pursuant to the Bankruptcy Code,
the Bankruptcy Rules and any applicable orders of the Court, or late Filed
with leave of the Court after notice and a hearing, and which, with respect
to each of the foregoing clauses: (i) has not been objected to within the
period fixed by the Bankruptcy Code, the Bankruptcy Rules and applicable
orders of the Court; (ii) has otherwise been Allowed by a Final Order or as
set forth in this Plan. An Allowed Claim: (a) includes a Disputed Claim to
the extent such Disputed Claim becomes Allowed after the Effective Date,
when the context so requires, and (b) shall be net of any valid setoff
exercised with respect to such Claim pursuant to the provisions of the
Bankruptcy Code. Unless otherwise specified herein, in Section 506(b) of
the Bankruptcy Code or by order of the Bankruptcy Court, "Allowed Claim,"
shall not, for purposes of Distribution under the Plan, include for any
Claim (x) interest on any Claim accruing from or after the Petition Date,
(y) punitive or exemplary damages or (z) any fine, penalty or forfeiture.
1.6 ALLOWED ADMINISTRATIVE CLAIM means an Administrative Claim
to the extent it is Allowed.
1.7 ALLOWED CLAIM means a Claim to the extent it is Allowed.
1.8 ALLOWED [CLASS DESIGNATION] CLAIM means an Allowed Claim in
the specified Class. For example, an Allowed Unsecured Claim is an Allowed
Claim in the Unsecured Claims Class designated herein as Class 4.
1.9 ALLOWED FEE CLAIM means a Fee Claim to the extent it is
Allowed.
1.10 ALLOWED PRIORITY TAX CLAIM means a Priority Tax Claim to
the extent it is Allowed.
1.11 ALTERNATIVE BUYER means, in the event the Purchase
Agreement is terminated, a Person, other than the Buyer, approved by the
Bankruptcy Court as the Person making the highest and/or best offer for the
Purchased Business.
1.12 ALTERNATIVE EXCLUDED ASSETS means (a) any Assets in an
Alternative Purchase Agreement identified as Assets (i) that the
Alternative Buyer will not be acquiring, or (ii) if the Alternative
Purchase Agreement provides for the purchase of Reorganized Stock, those
Assets in which Reorganized USN Communications will have no interest from
and after the Effective Date.
1.13 ALTERNATIVE PURCHASE AGREEMENT means, in the event the
Purchase Agreement is terminated, such other agreement or agreements as the
Debtors or the Liquidating Trust may execute to effectuate an Alternative
Sale Transaction (as the same may be amended, substituted or modified and
inclusive of all ancillary documents executed in connection therewith,
exhibits and schedules annexed thereto or referred to therein).
1.14 ALTERNATIVE PURCHASE CONSIDERATION means the consideration
to be paid by an Alternative Buyer pursuant to an Alternative Purchase
Agreement.
1.15 ALTERNATIVE SALE TRANSACTION means the transaction or
transactions through with an Alternative Buyer will acquire the Purchased
Business, in the event the Sale Transaction is not consummated.
1.16 AMENDED SCHEDULE CLAIM means any Claim respecting which,
on or about December 15, 1999, the Debtors amended their Schedules of
Assets and Liabilities to add such claim to their schedules, designate such
Claim as Disputed, contingent or unliquidated or to change the amount,
nature or classification of such Claim.
1.17 ASSETS means all of the right, title and interest of the
Debtors in any and all assets and property, whether tangible, intangible,
real, or personal, that constitute property of the Estates within the
purview of Section 541 of the Bankruptcy Code, including, without
limitation, all Cash, Avoidance Claims, Hatten Transaction Claims, Hatten
Fiduciary Claims and other Litigation Claims, any and all other claims,
causes of action or rights of the Debtors under federal or state law,
letters of credit issued for or on the behalf of the Debtors and the
proceeds thereof, monies deposited to secure the performance of any
contract or lease by any Debtor or Affiliate and any and all consideration
the Debtors have received or are entitled to receive in connection with the
CoreComm Sale.
1.18 AVAILABLE D&O INSURANCE PROCEEDS means: (a) with respect
to the proceeds of the D&O Insurance distributable to the holders of
Allowed Securities Litigation Claims pursuant to this Plan (if Class 5
accepts the Plan), fifty percent (50%), as of the Effective Date, of the
proceeds of the D&O Insurance net of all amounts owed and/or already paid
to all Persons (other than the holders of Allowed Securities Litigation
Claims) entitled to assert claims under the D&O Insurance other than the
amounts owed the Liquidating Trust to satisfy any Hatten Fiduciary Claim;
and (b) with respect proceeds of the D&O Insurance available to the
Liquidating Trust to satisfy any Hatten Fiduciary Claim, such proceeds of
the D&O Insurance available as of the Effective Date, net of the proceeds
of the D&O Insurance distributable to the holders of Allowed Securities
Litigation Claims pursuant to the Plan (if Class 5 accepts the Plan) and
all amounts owed and/or paid to all Persons (other than the holders of
Allowed Securities Litigation Claims) entitled to assert claims under the
D&O Insurance.
1.19 AVOIDANCE CLAIMS means all claims, rights and causes of
action assertable by the Debtors or their successor(s), including, but not
limited to, an action brought under Sections 541, 542, 543, 544, 545, 547,
548, 549, 550 or 553 of the Bankruptcy Code.
1.20 BALLOT means the ballot distributed by the Balloting Agent
to each Claimholder that is entitled to vote on the Plan, on which ballot
such Claimholder may, inter alia, vote for or against the Plan.
1.21 BALLOT DEADLINE means the date and time set by the
Bankruptcy Court by which the Balloting Agent must receive all Ballots in
order for such Ballots
to be counted.
1.22 BALLOTING AGENT means the entity designated by the
Bankruptcy Court to distribute, collect and tally Ballots from claimants.
Initially, the Balloting Agent is Robert L. Berger & Associates, Inc.
1.23 BANKRUPTCY CODE means title 11 of the United States Code,
as now in effect or hereafter amended.
1.24 BANKRUPTCY COURT means the United States Bankruptcy Court
for the District of Delaware, or any other court exercising competent
jurisdiction over the Reorganization Cases or any proceeding therein.
1.25 BANKRUPTCY RULES means the Federal Rules of Bankruptcy
Procedure and the local rules of the Bankruptcy Court (including any
applicable local rules of the United States Bankruptcy Court for the
District of Delaware), as now in effect or hereafter amended to the extend
such amendments are applied retroactively to the Debtors' Reorganization
Cases.
1.26 BAR DATE means such date or dates set by the Bankruptcy
Court as the last date for filing proofs of Claim against the Debtors.
1.27 BUSINESS DAY means any day except a Saturday, Sunday, or
"legal holiday" as such term is defined in Bankruptcy Rule 9006(a).
1.28 BUYER means Alexandra Telephone Acquisition, LLC.
1.29 CASH means cash and Cash Equivalents, including, but not
limited to, bank deposits, checks, and other similar items.
1.30 CASH EQUIVALENTS means equivalents of cash in the form of
readily marketable securities or instruments issued by a person other than
the Debtors or Reorganized USN Communications, including, without
limitation, U.S. Government Obligations, commercial paper of domestic
corporations carrying a Moody's Rating of "A" or better, or equivalent
rating of any other nationally recognized rating service, or
interest-bearing certificates of deposit or similar obligations of domestic
banks or other financial institutions having a shareholders' equity or
equivalent of capital of not less than Two Hundred Million Dollars
($200,000,000), having maturities of not more than one (1) year, at the
then best generally available rates of interest for like amounts and like
periods.
1.31 CLAIM means (a) any right to payment from a Debtor,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, Disputed, undisputed, legal,
equitable, secured or unsecured; (b) any right to an equitable remedy for
breach of performance if such breach gives rise to a right of payment from
a Debtor, whether or not such right to an equitable remedy is reduced to a
judgment, fixed, contingent, matured, unmatured, Disputed, undisputed,
secured or unsecured, or (c) any right under Section 502(h) of the
Bankruptcy Code. As defined herein, Claim includes, without limitation, an
Administrative Claim against any of the Debtors.
1.32 CLAIMHOLDER means a holder of a Claim.
1.33 CLASS means a category of holders of Claims or Equity
Interests described in Article IV of the Plan.
1.34 CLASS [_____] CLAIM means a Claim in the particular Class
of Claims or Equity Interests identified and described in Article IV of the
Plan.
1.35 COLLATERAL means property of any of the Debtors that
secures a Claim, up to the amount of such Claim.
1.36 CONFIRMATION DATE means the date the Bankruptcy Court
enters the Confirmation Order on its docket.
1.37 CONFIRMATION HEARING means the hearing pursuant to which
the Bankruptcy Court enters the Confirmation Order.
1.38 CONFIRMATION ORDER means the order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.
1.39 CONSENT CONVERTIBLE NOTES means USN Communications' 9%
Consent Convertible Subordinated Notes due 2006 issued pursuant to the
Consent Convertible Notes Indenture.
1.40 CONSENT CONVERTIBLE NOTES INDENTURE means the Indenture,
dated as of January 13, 1998, by and between USN Communications and Harris
Trust and Savings Bank, as Trustee, for USN Communications 9% Consent
Convertible Subordinated Notes due 2006.
1.41 CONSENT CONVERTIBLE NOTES INDENTURE TRUSTEE means SunTrust
Bank, Central Florida, National Association, or any other successor
indenture trustee under the Consent Convertible Notes Indenture.
1.42 CONVENIENCE CLAIM means a Claim that otherwise would be an
Unsecured Claim (but expressly excluding Notes Claims) that has a Face
Value of (a) $2,000 or less or (b) more than $2,000 if the holder has
properly made the Convenience Class Election on a Ballot properly cast by
the Ballot Deadline.
1.43 CONVENIENCE CLASS ELECTION means the election available to
a holder of an Unsecured Claim with a Face Value in excess of $2,000 to
have such Claim treated as a Convenience Claim provided the holder of such
Unsecured Claim has agreed to reduce such Claim for purposes of voting and
Distributions under the Plan to an amount equal to or less than $2,000. The
Convenience Class Election must be made at the time of balloting for voting
to accept or reject the Plan and clearly indicated on the holder's Ballot;
provided, however, that, if such Claim is a Disputed Claim at the time of
balloting the Convenience Class Election may be made in a Final Order
Allowing such Claim. Once a Convenience Class Election has been made with
respect to an Unsecured Claim, such election shall be irrevocable except
with the written consent of the Debtors' or the Liquidating Trustee.
Whether a Claimholder has properly made a Convenience Class Election shall
have no effect on whether such Convenience Claim is or may become a
Disputed Claim or an Allowed Claim.
1.44 CONVENIENCE CLASS RESERVE means the reserve established by
the Liquidating Trustee on the Effective Date to hold the $100,000
deposited by the Debtors under this Plan to pay Allowed Convenience Claims.
1.45 CONVERTIBLE NOTES means USN Communications' 9% Convertible
Subordinated Notes due 2004 issued pursuant to the Convertible Note
Indenture.
1.46 CONVERTIBLE NOTES INDENTURE means the Indenture, dated as
of September 30, 1996, by and between USN Communications and Harris Trust
and Savings Bank, as Trustee, for USN Communications' 9% Convertible
Subordinated Discount Notes due 2004, as amended by Supplemental Indenture
No. 1, dated August 12, 1997, by and between USN Communications and Harris
Trust and Savings Bank, as Trustee, to the Convertible Note Indenture, as
further amended by Supplemental Indenture No. 2, dated March 5, 1998, by
and between USN Communications and Harris Trust and Savings Bank, as
Trustee, to the Convertible Note Indenture.
1.47 CONVERTIBLE NOTES INDENTURE TRUSTEE means SunTrust Bank,
Central Florida, National Association, or any other successor indenture
trustee under the Convertible Note Indenture.
1.48 CORECOMM means CoreComm Limited, a Bermuda Corporation.
1.49 CORECOMM AGREEMENT means Asset Purchase Agreement, dated
as of February 19, 1999, between USN Communications and CoreComm and all
ancillary documents executed in connection therewith, as the same have been
modified, supplemented or amended from time to time (and all exhibits and
schedules annexed thereto or referred to therein)
1.50 CORECOMM SALE means the transactions effectuated through
the CoreComm Agreement.
1.51 CREDITOR means any Person holding a Claim.
1.52 CREDITORS' COMMITTEE means the Official Committee of
Unsecured Creditors in the Reorganization Cases, as appointed by the United
States Trustee and reconstituted from time to time.
1.53 D&O INSURANCE means the officers and directors insurance
policies maintained by the Debtors applicable to claims against the
Debtors' officers and directors.
1.54 DANIELS means Daniels & Associates.
1.55 DANIELS TRANSACTION FEE means such compensation or
reimbursement of expenses to which Daniels may be entitled under the Letter
Agreement, dated as of October 6, 1998, as amended, between USN
Communications and Daniels and the "Order Granting Debtors' Application to
Employ and Retain Daniels & Associates, L.P. as Debtors' Special Purpose
Investment Banker and Representative," dated February 22, 1999.
1.56 DEBTORS has the meaning ascribed to such term in the
Introduction to this Plan.
1.57 DEFICIENCY CLAIM means a claim by a Creditor arising out
of the same transaction as a Secured Claim to the extent that the value, as
determined by the Bankruptcy Court pursuant to Section 506(a) of the
Bankruptcy Code, of such creditor's interest in property of the Debtors'
estates securing such claim is less than the amount of the claim which has
the benefit of such security as provided by Section 506(a) of the
Bankruptcy Code.
1.58 DIP CLAIMS means all Claims arising under the DIP
Facility.
1.59 DIP FACILITY means those certain Note Purchase Agreements,
dated as of February 23, 1999, and March 15, 1999, between USN
Communications, Merrill Lynch Global Allocation Fund, Inc. and CoreComm,
and all ancillary documents executed in connection therewith, as the same
have been modified, supplemented or amended from time to time (and all
exhibits and schedules annexed thereto or referred to therein).
1.60 DIP ORDER means, collectively, the Orders of the
Bankruptcy Court dated February 22, 1999, and April 2, 1999, authorizing
and approving the DIP Facility.
1.61 DISCLOSURE STATEMENT means the Disclosure Statement that
relates to this Plan and is approved by the Bankruptcy Court pursuant to
Section 1125 of the Bankruptcy Code, as such Disclosure Statement may be
amended, modified, or supplemented (and all exhibits and schedules annexed
thereto or referred to therein).
1.62 DISCLOSURE STATEMENT ORDER means the order of the
Bankruptcy Court approving the Disclosure Statement as containing adequate
information pursuant to Section 1125 of the Bankruptcy Code.
1.63 DISPUTED ADMINISTRATIVE CLAIMS means any Administrative
Claims as to which the Debtors, the Liquidating Trustee or any other party
in interest has interposed an objection in accordance with the Bankruptcy
Code and the Bankruptcy Rules, which objection has not been withdrawn or
determined by a Final Order.
1.64 DISPUTED CLAIM means (a) if no proof of Claim has been
timely Filed or deemed timely Filed under applicable law or order of the
Court, a Claim that has been listed on a Debtor's Schedules of Liabilities
as other than disputed, contingent or unliquidated, but as to which no
later than the Effective Date an objection has been Filed; or (b) if a
proof of Claim has been Filed or deemed timely Filed under applicable law
or order of the Bankruptcy Court, a proof of Claim as to which an objection
has been timely Filed and has not been (i) withdrawn, (ii) overruled or
denied by a Final Order or (iii) granted in whole by a Final Order. For the
purposes of the Plan, a Claim shall be considered a Disputed Claim in its
entirety before the time that an objection has been or may be Filed if: (a)
the amount or classification of the Claim specified in the relevant proof
of claim exceeds the amount or classification of any corresponding Claim
scheduled by the appropriate Debtor in its Schedules of Assets and
Liabilities; (b) any corresponding Claim scheduled by any of the Debtors
that has been scheduled as disputed, contingent or unliquidated; or (c) no
corresponding Claim has been scheduled by the appropriate Debtor in its
Schedules of Assets and Liabilities.
1.65 DISPUTED CLAIM RESERVE means the reserve established by
the Liquidating Trustee for each Disputed Claim to be established pursuant
to Section 11.3 of this Plan.
1.66 DISTRIBUTION means the distribution in accordance with
this Plan of Cash.
1.67 DISTRIBUTION ADDRESS means the address set forth in the
relevant proof of claim. If no proof of claim is Filed in respect to a
particular Claim, such defined term means the address set forth in the
Debtors' Schedules of Assets and Liabilities or register maintained for
registered securities.
1.68 DISTRIBUTION RESERVE means the reserve established by the
Liquidating Trust on the Effective Date to hold amounts deposited by the
Debtors or the Liquidating Trustee under this Plan to pay Allowed Unsecured
Claims.
1.69 EFFECTIVE DATE means: (a) if no stay of the Confirmation
Order is in effect, the first Business Day after the date each of the
conditions set forth in Sections 15.1 and 15.2 hereof has been satisfied or
waived as set forth in Section 15.3 hereof, or such later date as may
reasonably be fixed by the Debtors with the consent of the Creditors'
Committee (such consent not be unreasonably withheld); or (b) if a stay of
the Confirmation Order is in effect, on the first Business Day or such
later date as may be fixed by the Debtors with the consent of the
Creditors' Committee (such consent not be unreasonably withheld) without
leave or order of the Bankruptcy Court and without further action after the
later of: (i) the date such stay is vacated or any appeal, rehearing,
remand or petition for certiorari is resolved in a manner that does not
reverse or materially modify the Confirmation Order; and (ii) the date each
condition set forth in Sections 15.1 and 15.2 hereof has been satisfied or
waived as set forth in Section 15.3 hereof.
1.70 ENCUMBRANCE means, with respect to any Asset, any claim,
mortgage, lien, pledge, charge, security interest, assignment or
encumbrance of any kind or nature in respect of such Asset (including,
without express or implied limitation, any conditional sale or other title
retention agreement, any security agreement and the filing of, or agreement
to give, any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
1.71 EQUITY INTEREST means any ownership or equity interest in
any of the Debtors, including, without limitation, shares of Existing USN
Communications Interests or warrants, options or other rights to purchase
any ownership or equity interest in any of the Debtors, but expressly
excluding the Reorganized Stock.
1.72 ESTATE means the relevant estate created in each of the
Reorganization Cases pursuant to Section 541 of the Bankruptcy Code and
existing as of the Effective Date.
1.73 ESTIMATION ORDER means an order or orders of the
Bankruptcy Court (a) estimating for voting and/or distribution purposes
(under Section 502(c) of the Bankruptcy Code) the aggregate (and, if
applicable, individual) Face Amount of Disputed Claims in each relevant
Class or (b) in the case of an Administrative Claim estimating for
allowance and/or other proper purposes under the Bankruptcy Code the
aggregate (and, if applicable, individual) Face Amount of Disputed
Administrative Claims. The defined term Estimation Order includes the
Confirmation Order if the Confirmation Order grants the same relief that
would have been granted in a separate Estimation Order.
1.74 EXCLUDED ASSETS shall have the meaning ascribed to such
term in the Purchase Agreement.
1.75 EXECUTORY CONTRACT SCHEDULE means the schedule captioned
"Schedule of Assumed Executory Contracts and Unexpired Leases" annexed as
Exhibit "E" hereto
1.76 EXHIBIT means, as appropriate to the context, an exhibit
to either this Plan or the Disclosure Statement.
1.77 EXHIBIT FILING DATE means the last date by which forms of
the Exhibits to the Plan shall be Filed with the Bankruptcy Court, which
date shall be as specified in this Plan for each such Exhibit, but in any
event, or when no such date is specified, no later than thirty (30) days
after the Confirmation Date.
1.78 EXISTING USN COMMUNICATIONS INTERESTS means all Equity
Interests in USN Communications but specifically excluding any and all
authorized but unissued shares of capital stock of USN Communications.
1.79 EXPENSE REIMBURSEMENT shall have the meaning ascribed to
such term in the Purchase Agreement.
1.80 FACE AMOUNT means: (a) with respect to any Claim for which
a proof of claim is Filed, an amount equal to: (i) the liquidated amount,
if any, set forth therein; or (ii) any other amount set forth in an
Estimation Order; or (b) with respect to any Claim scheduled in the
Debtors' Schedules of Assets and Liabilities, but for which no proof of
claim is Filed, the amount of the Claim scheduled as undisputed,
noncontingent and liquidated.
1.81 FEDERAL PRIORITY TAX CLAIM means a Priority Tax Claim of
the United States federal government.
1.82 FEE CLAIM means a Claim for compensation or reimbursement
of expenses of a Professional pursuant to Section 327, 328, 330, 331 or
503(b) of the Bankruptcy Code in connection with the Reorganization Cases.
1.83 FEE CLAIMS RESERVE means an account to be established on
the Effective Date by the Liquidating Trustee to pay the Fee Claims Allowed
by Final Order of the Bankruptcy Court.
1.84 FEE ORDER means the Bankruptcy Court's "Administrative
Order Under 11 U.S.C. ss.ss. 105(a), 327, 330 and 331 Establishing
Procedures For Interim Compensation And Reimbursement Of Expenses Of
Professionals," dated as of February 22, 1999, in the Reorganization Cases
(D.I. 31).
1.85 FILE OR FILED means filed with the Bankruptcy Court in the
Reorganization Cases.
1.86 FINAL ORDER means an order or judgment of the Bankruptcy
Court, as entered on the docket of the Bankruptcy Court, that has not been
reversed, stayed, modified, or amended, and as to which: (a) the time to
appeal, seek review or rehearing or petition for certiorari has expired and
no timely filed appeal or petition for review, rehearing, remand or
certiorari is pending; or (b) any appeal taken or petition for certiorari
filed has been resolved by the highest court to which the order or judgment
was appealed or from which certiorari was sought, provided, however, that
the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules
of Civil Procedure, or any analogous rule under the Bankruptcy Rules or
other rules governing procedure in cases before the Bankruptcy Court, may
be Filed with respect to such order shall not cause such order not to be a
Final Order.
1.87 14 5/8% SENIOR NOTES means USN Communications' 14 5/8%
Senior Discount Notes due 2003 issued pursuant to the 14 5/8% Senior Note
Indenture.
1.88 14 5/8% SENIOR NOTES INDENTURE means the Indenture, dated
as of August 15, 1997, by and between USN Communications and Harris Trust
and Savings Bank, as Trustee, for USN Communications' 14 5/8 % Senior
Discount Notes due 2004, as amended by Supplemental Indenture No. 1, dated
March 5, 1998, to the 14 5/8 % Senior Note Indenture.
1.89 14 5/8% SENIOR NOTES INDENTURE TRUSTEE means Harris Trust
and Savings Bank or any other successor indenture trustee under the 14 5/8%
Senior Notes Indenture.
1.90 14% SENIOR NOTES means USN Communications' 14% Senior
Discount Notes due 2003 issued pursuant to the 14% Senior Note Indenture.
1.91 14% SENIOR NOTES INDENTURE means the Indenture dated as of
September 30, 1996, by and between USN Communications and Harris Trust and
Savings Bank, as Trustee, for USN Communications' 14% Senior Discount Notes
due 2003, as amended by Supplemental Indenture No. 1, dated as of March 17,
1997, by and between USN Communications and Harris Trust and Savings Bank,
as Trustee, to the 14% Senior Note Indenture, as further amended by
Supplemental Indenture No. 2, dated as of August 18, 1997, by and between
USN Communications and Harris Trust and Savings Bank, as Trustee, to the
14% Senior Note Indenture, as further amended by Supplemental Indenture No.
3, dated as of March 5, 1998, by and between USN Communications and Harris
Trust and Savings Bank, as Trustee, to the 14% Senior Note Indenture.
1.92 14% SENIOR NOTES INDENTURE TRUSTEE means Harris Trust and
Savings Bank or any other successor indenture trustee under the 14% Senior
Notes Indenture.
1.93 HATTEN FIDUCIARY CLAIMS means any claim, right or cause of
action against any officer or director of any Debtor arising out of or
relating to USN Communications' purchase of the stock of Hatten
Communications, Inc. in 1998, whether known or unknown, in law, equity or
otherwise, other than any claim, right or cause of action which has been
waived, released, discharged or otherwise limited pursuant to the Plan, the
Confirmation Order or another Bankruptcy Court order in the Reorganization
Cases entered prior to the Effective Date.
1.94 HATTEN TRANSACTION CLAIM means any claim, right or cause
of action against Hatten Communications, Inc. or its former shareholders
arising out of or related to USN Communications' purchase of the stock of
Hatten Communications, Inc. in 1998, whether known or unknown, in law,
equity or otherwise, other than any claim, right or cause of action which
has been waived, released, discharged or otherwise limited pursuant to the
Plan, the Confirmation Order or another Bankruptcy Court order in the
Reorganization Cases entered prior to the Effective Date.
1.95 HATTEN TRANSACTION CLAIMS RECOVERIES RESERVE means the
reserve established by the Liquidating Trust on the Effective Date to hold
proceeds received on account of any Hatten Transaction Claim.
1.96 IMPAIRED refers to any Claim or Equity Interest that is
impaired within the meaning of Section 1124 of the Bankruptcy Code.
1.97 INDENTURE TRUSTEES means, collectively, the Consent
Convertible Notes Indenture Trustee, the Convertible Notes Indenture
Trustee, the 14 5/8% Senior Notes Indenture Trustee and the 14% Notes
Indenture Trustee.
1.98 INITIAL DISTRIBUTION DATE means: (a) with respect to
Claims, other than Fee Claims, the date that is the later of (i) thirty
(30) days after the Effective Date (or as soon thereafter as reasonably
practicable), (ii) the date (or as soon thereafter as reasonably
practicable) such Claims become Allowed Claims or otherwise become payable
under the Plan, and (iii) such later date as the Liquidating Trustee shall
determine is appropriate; and (b) with respect to Fee Claims, the date (or
as soon thereafter as reasonably practicable) that such Claims are Allowed
by Final Order of the Bankruptcy Court. With respect to Secured Claims,
occurrence of the Initial Distribution Date shall be subject, if
applicable, to the sale of the relevant Collateral and the collection by
the Debtors or the Liquidating Trust, as appropriate, of the proceeds
thereof.
1.99 INSURANCE POLICY means any policy of insurance and any
agreements relating thereto that may be available to provide coverage for
Claims against USN Communications, including but not limited to statutorily
mandated workers' compensation programs in effect on the Petition Date
providing compensation, paid for by third parties, to employees of the
Debtors for job-related injuries or job-related illnesses.
1.100 INTERCOMPANY CLAIM means a Claim of any Debtor against
another Debtor or affiliate (as defined in Section 101 of the Bankruptcy
Code).
1.101 IRS means the United States Internal Revenue Service.
1.102 JUNIOR NOTES means, as is appropriate to the context, the
Convertible Notes and/or the Consent Convertible Notes.
1.103 JUNIOR NOTES CLAIM means any Claim arising under,
relating to or evidenced by any of the Junior Notes, but excluding any
Claim that is a Subordinated Securities Claim.
1.104 JUNIOR NOTES INDENTURE TRUSTEE means, as is appropriate
to the context, the Convertible Notes Indenture Trustee and/or the Consent
Convertible Notes Indenture Trustee.
1.105 JUNIOR NOTES INDENTURES means, as is appropriate to the
context, the Convertible Notes Indenture and/or the Consent Convertible
Notes Indenture.
1.106 LIQUIDATING TRUST means the trust established under this
Plan and the Liquidating Trust Agreement.
1.107 LIQUIDATING TRUST ADMINISTRATIVE RESERVE means the
reserve established by the Liquidating Trust on the Effective Date to fund
the Liquidating Trust Administrative Expenses.
1.108 LIQUIDATING TRUST ADMINISTRATIVE EXPENSE means all
reasonable costs, expenses and fees incurred in connection with maintaining
the Liquidating Trust and the Liquidating Trust Assets, including without
limitation (a) all reasonable costs, fees and expenses incurred by the
Liquidating Trustee in employing attorneys, accountants, experts, advisors,
consultants, investigators, appraisers, auctioneers or other professionals
to represent or assist the Liquidating Trustee in carrying out the
Liquidating Trustee's duties under the Liquidating Trust Agreement, (b) the
compensation paid to the Liquidating Trustee under the Liquidating Trust
Agreement, (c) all reasonable costs, fees and expenses incurred in
prosecuting and/or settling the Avoidance Claims, the Hatten Transaction
Claims, the Hatten Fiduciary Clams and all other Litigation Claims, (d) all
other reasonable costs incurred in liquidating the Liquidating Trust Assets
in accordance with the Liquidating Trust Agreement, and (e) the reasonable,
actual and necessary expenses of the PEDC.
1.109 LIQUIDATING TRUST AGREEMENT means that certain
Liquidating Trust Agreement which is to govern the Liquidating Trust,
substantially in the form attached as Exhibit "D" to this Plan, pursuant to
which, among other things, the Liquidating Trust Assets shall be liquidated
and distributed to holders of Allowed Claims in accordance with terms of
this Plan. The Liquidating Trust Agreement shall be filed with the
Bankruptcy Court and served upon the United States Trustee and counsel for
the Creditors' Committee in advance of the Confirmation Hearing.
1.110 LIQUIDATING TRUST ASSETS mean all Residual Assets once
transferred into the Liquidating Trust, and any and all proceeds thereof
and interest accruing with respect thereto.
1.111 LIQUIDATING TRUSTEE means the trustee of the Liquidating
Trust as contemplated by the Liquidating Trust Agreement.
1.112 LITIGATION CLAIM means any claim, right, cause of action,
counterclaim or set off right of the Debtors, the Estates or the
Liquidating Trust, including, without limitation, any Avoidance Claim,
Hatten Transaction Claim or Hatten Fiduciary Claim, other than any claim,
right, cause of action, counterclaim or set off right which has been
waived, released, discharged or otherwise limited pursuant to the Plan, the
Confirmation Order or another Bankruptcy Court order in the Reorganization
Cases.
1.113 NET PROCEEDS means the Cash consideration received from
the sale, transfer, or collection of property of the Estates or the
conversion of such property to Cash in some other manner as contemplated in
this Plan, whether occurring before or after the Effective Date, less the
reasonable, necessary and customary expenses attributable to such sale,
transfer, collection or conversion, including costs of curing defaults
under executory contracts that are assigned, paying personal property or
other taxes accruing in connection with such sale, transfer or conversion
or such property, brokerage fees and commissions, collection costs,
reasonable attorneys' fees and expenses and any applicable taxes or other
claims of any governmental authority in connection with such property and
any escrows or accounts established to hold funds for purchase price
adjustments, indemnification claims, or other purposes in connection with
such sale, transfer or collection; provided, however, that upon the release
to the Debtors or the Liquidating Trustee of funds from such escrows or
accounts, such funds shall become Net Proceeds of the relevant sale,
transfer or collection.
1.114 NOTES CLAIM means a Claim arising under, relating to or
evidenced by any of the Convertible Notes, the Consent Convertible Notes,
the 14% Senior Notes or the 14 5/8% Senior Notes, but excluding any such
Claim that is a Subordinated Securities Claim.
1.115 NOTES INDENTURE means, as appropriate to the context, the
Convertible Notes Indenture, the Consent Convertible Notes Indenture, the
14% Senior Notes Indenture and/or the 14 5/8% Senior Notes Indenture.
1.116 PEDC means the post-Effective Date committee of Unsecured
Creditors which may be appointed by the Creditors' Committee which shall
have those duties and responsibilities described in the Plan and the
Liquidating Trust Agreement.
1.117 PERIODIC DISTRIBUTION DATE means (a) initially, the first
Business Day occurring three (3) full months after the Initial Distribution
Date, and (b) subsequently, the first Business Day occurring three (3) full
months after the immediately proceeding Periodic Distribution Date.
1.118 PERSON means any individual, corporation, partnership,
limited liability company, association, indenture trustee, organization,
joint stock company, joint venture, estate, trust, governmental unit or any
political subdivision thereof, the Creditors' Committee, Equity Interest
holders, Claimholders, current or former employees of any Debtor, or any
other entity.
1.119 PETITION DATE means February 18, 1999.
1.120 PLAN means this Joint Consolidated Plan of
Reorganization, dated as of the date set forth on the first page hereof,
for the Debtors, together with any amendments or modifications hereto as
the Debtors may File hereafter in accordance with the terms of the Plan
(such amendments or modifications only being effective if approved by order
of the Bankruptcy Court).
1.121 PLAN SOLICITATION PROCEDURES ORDER means the order, which
is entitled "Order Establishing Voting Procedures and Approving Forms of
Ballots" entered by the Bankruptcy Court upon the Debtors' motion approving
plan solicitation procedures.
1.122 PRIORITY CLAIM means any Claim, if Allowed, which is
entitled to priority pursuant to Section 507(a) of the Bankruptcy Code,
other than: (a) an Administrative Claim; (b) a Priority Tax Claim; or (c) a
Fee Claim.
1.123 PRIORITY TAX CLAIM means any Claim, if Allowed, which is
entitled to priority pursuant to Section 507(a)(8) of the Bankruptcy Code.
1.124 PROFESSIONAL means a Person retained or to be compensated
for services rendered or costs incurred on or after the Petition Date
through and including the Effective Date pursuant to Section 327, 328, 330,
503(b) or 1103 of the Bankruptcy Code.
1.125 PURCHASE AGREEMENT means the Stock Purchase Agreement by
and among USN Communications, Inc., USN Wireless, Inc., the direct
subsidiaries of USN Wireless, Inc. and Alexandra Telephone Acquisition,
LLC, dated as of November 17, 1999, a copy of which is annexed as Exhibit
"A" hereto, inclusive of all ancillary documents executed in connection
therewith, exhibits and schedules annexed thereto or referred to therein."
1.126 PURCHASE CONSIDERATION means the consideration to be paid
by Buyer pursuant to the Purchase Agreement.
1.127 PURCHASED BUSINESS means: (a) if the Purchase Agreement
is consummated, then all of the equity in Reorganized USN Communications
issued and outstanding on the Effective Date, but specifically excluding
the Excluded Assets; or (b) if the Purchase Agreement is terminated and an
Alternative Purchase Agreement is consummated, then (i) if the Alternative
Buyer purchases equity in Reorganized USN Communications, such percentage
of the Reorganized Stock issued and outstanding on the Effective Date as
the Alternative Purchase Agreement provides will be acquired by the
Alternative Buyer, (ii) if the Alternative Buyer purchases the Wireless
Stock, such portion of the Wireless Stock sold and conveyed which is sold
by the Debtors to the Alternative Buyer pursuant to such Alternative
Purchase Agreement, or (iii) if the Alternative Buyer purchases assets of
the Wireless Companies, such assets of the Wireless Companies as the
Debtors or the Liquidating Trustee cause the Wireless Companies to sell and
convey to, and are purchased and accepted by, the Alternative Buyer
pursuant to such Alternative Purchase Agreement.
1.128 RATABLE, RATABLY, RATABLE SHARE OR PRO RATA means a
number (expressed as a percentage) equal to the proportion that an Allowed
Claim in a particular Class bears to the aggregate amount of: (a) Allowed
Claims plus (b) Disputed Claims (in their aggregate Face Amount) in such
Class as of the date of determination.
1.129 RELEASED PARTY means the Debtors, any Debtor, the
Liquidating Trustee or any agent, advisor, accountant, investment banker,
consultant, attorney or other representative (including any current or
former director, officer, employee, member or professional) of the
foregoing.
1.130 REORGANIZATION CASE means the chapter 11 case of each
Debtor pending before the Bankruptcy Court.
1.131 REORGANIZED STOCK means all of the voting common stock of
Reorganized USN Communications from and after the Effective Date after
giving effect to the USN Communications Amended and Restated Certificate of
Incorporation issued and outstanding as of the Effective Date.
1.132 REORGANIZED USN COMMUNICATIONS means USN Communications
from and after the Effective Date.
1.133 RESIDUAL ASSETS means, collectively, all Assets, other
than the Purchased Business, including, without limitation, the Excluded
Assets (or Alternative Excluded Assets, as the case may be), the Purchase
Consideration (or Alternative Purchase Consideration, as the case may be),
all Cash, Avoidance Claims, Hatten Transaction Claims, Hatten Fiduciary
Claims and other Litigation Claims, any and all other claims, causes of
action or rights of the Debtors under federal or state law, letters of
credit issued on the Debtors' behalf and the proceeds thereof, monies
deposited to secure the performance of any contract or lease by any Debtor
or Affiliate and any and all consideration the Debtors have received or are
entitled to receive in connection with the CoreComm Sale.
1.134 SALE TRANSACTION means the transaction or transactions
through which the Buyer will acquire the Purchased Business.
1.135 SCHEDULE OF ASSETS AND LIABILITIES means a Debtor's
schedule of assets and liabilities Filed with the Bankruptcy Court pursuant
to Sections 521(1) and 1106(a)(2) of the Bankruptcy Code, as amended on or
about June 18, 1999, and as further amended on or about December 15, 1999.
1.136 SECURED CLAIM means, pursuant to Section 506 of the
Bankruptcy Code, that portion of a Claim that is secured by a valid,
perfected and enforceable security interest, lien, mortgage or other
encumbrance, that is not subject to avoidance under applicable bankruptcy
or non-bankruptcy law, in or upon any right, title or interest of any of
the Debtors in and to property of the Estates, to the extent of the value
of the holder's interest in such property as of the relevant determination
date. The defined term Secured Claim includes any Claim that is: (i)
subject to an offset right under applicable law; and (ii) a secured claim
against any of the Debtors pursuant to Sections 506(a) and 553 of the
Bankruptcy Code. Such defined term shall not include for voting or
Distribution purposes any such Claim that has been or will be paid in
connection with the cure of defaults under an assumed executory contract or
unexpired lease under Section 365 of the Bankruptcy Code.
1.137 SECURITIES SUIT means the consolidated class action
lawsuit captioned "Danis, on behalf of himself and all others similarly
situated v. USN Communications, Inc., et al.," No. 98 C 7482, pending in
the United States District Court for the Northern District of Illinois,
Eastern Division.
1.138 SECURITIES LITIGATION CLAIM means any Claim, right or
cause of action, whether known or unknown, that was or could have been
asserted (notwithstanding the applicability of the automatic stay
provisions of Section 362 of the Bankruptcy Code) in the Securities Suit
against any Person, whether or not insured under the D&O Insurance,
including, without limitation, any of the Debtors and their current or
former officers, directors, employees, agents, representatives, counsel,
advisors and other professionals.
1.139 SENIOR NOTES means, as is appropriate to the context, 14%
Senior Notes and/or the 14 5/8% Senior Notes.
1.140 SENIOR NOTES CLAIM means any Claim arising under,
relating to or evidenced by any of the Senior Notes, but excluding any
Claim that is a Subordinated Securities Claim.
1.141 SENIOR NOTES INDENTURE means, as is appropriate to the
context, the 14% Senior Notes Indenture and/or the 14 5/8% Senior Notes
Indenture.
1.142 SENIOR NOTES INDENTURE TRUSTEE means, as is appropriate
to the context, the 14% Senior Notes Indenture Trustee and/or the 14 5/8%
Senior Notes Indenture Trustee.
1.143 SUBSTANTIVE CONSOLIDATION ORDER means the order, or
provision of the Confirmation Order, substantively consolidating the
Reorganization Cases as provided in Article XIII of the Plan.
1.144 SUBORDINATED SECURITIES CLAIM means a Claim, other than a
Securities Litigation Claim, subject to subordination under Section 510(b)
of the Bankruptcy Code that arises from rescission of, or for damages,
reimbursement or contribution with respect to a purchase or sale of a
security (as defined in Section 101(49) of the Bankruptcy Code) of any of
the Debtors or an Affiliate of any of the Debtors.
1.145 TERMINATION FEE shall have the meaning ascribed to such
term in the Purchase Agreement.
1.146 UNCLAIMED PROPERTY means any Distribution or
distributable property unclaimed on or after the Effective Date or the date
on which an additional Distribution would have been made to the holder of
an Allowed Claim. Unclaimed Property shall include: (a) checks (and the
funds represented thereby) mailed to a Distribution Address and returned as
undeliverable without a proper forwarding address; (b) funds for uncashed
checks; and (c) checks (and the funds represented thereby) not mailed or
delivered because no Distribution Address to mail or deliver such property
was available, notwithstanding efforts by the Debtors or the Liquidating
Trustee to locate such address which were commercially reasonable under the
circumstances.
1.147 UNITED STATES TRUSTEE means the Office of the United
States Trustee for the District of Delaware.
1.148 UNSECURED CLAIM means any Claim that is not: (a) an
Administrative Claim; (b) a Priority Claim; (c) a Priority Tax Claim; (d) a
Secured Claim; (e) a Fee Claim; (f) a Convenience Claim; (g) a Securities
Litigation Claim; or (h) a Subordinated
Securities Claim.
1.149 U.S. GOVERNMENT OBLIGATIONS means securities that are
direct obligations of, or obligations guaranteed by, the United States of
America for the timely payment of which obligation or guarantee the full
faith and credit of the United States of America is pledged, or funds
consisting solely of such securities, including funds managed by the
Liquidating Trustee or one of its Affiliates (further including such funds
for which it or its affiliates receives fees in connection with such
management).
1.150 USN COMMUNICATIONS AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION means the Amended and Restated Certificate of Incorporation
to be amended and restated in accordance with Section 9.1(c) hereof, in
substantially the form of Exhibit "B" to the Plan.
1.151 USN COMMUNICATIONS AMENDED AND RESTATED BY-LAWS means the
Amended and Restated By-Laws of USN Communications to be amended and
restated in accordance with Section 9.1(d) hereof, in substantially the
form of Exhibit "C" to the Plan.
1.152 WIRELESS COMPANIES means USN Wireless, Inc., Connecticut
Telephone & Communications System, Inc., Connecticut Mobilcom, Inc., USN
Wireless of Massachusetts, Inc., and USN Wireless of Rhode Island, Inc.,
and/or their assets and businesses.
1.153 WIRELESS STOCK means all of the issued and outstanding
capital stock of USN Wireless, Inc.
ARTICLE II.
RULES OF CONSTRUCTION
2.1 GENERALLY. For purposes of the Plan, (a) any reference in
the Plan to an existing document or Exhibit Filed or to be Filed means such
document or Exhibit as it may have been or may be amended, modified or
supplemented, (b) unless otherwise specified, all references in the Plan to
Sections, Articles, Schedules and Exhibits are references to Sections,
Articles, Schedules and Exhibits of or to the Plan, and (c) the rules of
construction set forth in Section 102 of the Bankruptcy Code and the
Bankruptcy Rules shall apply unless superseded herein or in the
Confirmation Order.
2.2 EXHIBITS. Unless otherwise noted, all Exhibits are
incorporated into and are a part of the Plan as if set forth in full herein
and, to the extent not annexed hereto, such Exhibits shall be Filed with
the Bankruptcy Court on or before the Exhibit Filing Date. Copies of
Exhibits can be obtained upon written request to Morris, Nichols, Arsht &
Tunnell, 1201 N. Market Street, P.O. Box 1347, Wilmington, Delaware 19899,
Attn: Robert J. Dehney, Esq., counsel to the Debtors.
2.3 TIME PERIODS. In computing any period of time prescribed or
allowed by the Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
2.4 MISCELLANEOUS RULES. (a) The words "herein," "hereof,"
"hereunder," and other words of similar import refer to this Plan as a
whole, or to any particular Section, subsection, or clause, unless the
context requires otherwise; (b) whenever it appears appropriate from the
context, each term stated in the singular or the plural includes the
singular and the plural, and each pronoun stated in the masculine, feminine
or neuter includes the masculine, feminine and the neuter, and (c) captions
and headings to Articles and Sections of the Plan are inserted for
convenience or reference only and are not intended to be a part or to
affect the interpretation of the Plan.
ARTICLE III.
METHOD OF CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
AND GENERAL PROVISIONS
3.1 GENERAL RULES OF CLASSIFICATION. Generally, a Claim is
classified in a particular Class for voting and distribution purposes only
to the extent the Claim has not been paid, released or otherwise satisfied
and qualifies within the description of that Class, and is classified in
another Class or Classes to the extent any remainder of the Claim qualifies
within the description of such other Class or Classes.
3.2 ADMINISTRATIVE CLAIMS, PRIORITY TAX CLAIMS AND FEE CLAIMS.
Administrative Claims, Priority Tax Claims and Fee Claims have not been
classified and are excluded from the Classes set forth in Article IV in
accordance with Section 1123(a)(1) of the Bankruptcy Code. Priority Claims
are classified in Class 1.
3.3 BAR DATE FOR ADMINISTRATIVE CLAIMS. To be eligible to
receive Distributions under the Plan on account of an Allowed
Administrative Claim, a holder of an Administrative Claim, at a minimum,
must have Filed a request for payment of such Administrative Claim by the
applicable bar date of January 18, 2000, unless otherwise provided in the
Bankruptcy Court's Order, dated December 17, 1999, establishing a bar date
for Administrative Claims. Unless otherwise ordered by the Bankruptcy
Court, any Person that fails to File such a request for payment of such
Administrative Claim on or before such date shall be forever barred from
asserting such Administrative Claim against any of the Debtors, the
Liquidating Trust, the Liquidating Trustee, Reorganized USN Communications
or their property, and the holder thereof shall be enjoined from commencing
or continuing any action, employment of process or act to collect, offset
or recover such Administrative Claim. Notwithstanding anything to the
contrary in this Section 3.3 of the Plan, the Buyer may File a request for
payment of any Administrative Claim comprised solely of the Termination Fee
and/or Expense Reimbursement by the date that is 45 days after the
Effective Date (or, if such date is not a Business Day, by the next
Business Day thereafter).
3.4 BAR DATE FOR AMENDED SCHEDULE CLAIMS. For the holder of an
Amended Schedule Claim to be eligible to receive a Distribution under the
Plan, at a minimum, a holder of such an Amended Schedule Claim must have
Filed a proof of such Claim on account of such Amended Schedule Claim by
the applicable bar date of January 18, 2000, unless otherwise provided in
the Bankruptcy Court's Order, dated July 2, 1999.
3.5 BAR DATE FOR FEE CLAIMS. Unless otherwise provided in this
Plan, the Confirmation Order or another order of the Bankruptcy Court, all
proofs of Claim or applications for payment of Fee Claims must be Filed
with the Bankruptcy Court by the date that is 45 days after the Effective
Date (or, if such date is not a Business Day, by the next Business Day
thereafter).
ARTICLE IV.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
All Claims and Equity Interests, except Administrative Claims,
Fee Claims and Priority Tax Claims are placed in Classes as set forth
below. A Claim or Equity Interest is classified in a particular Class only
to the extent that the Claim or Equity Interest qualifies within the
description of that Class, and is classified in other Classes to the extent
that any remainder of the Claim or Equity Interest qualifies within the
description of such other Classes. A Claim is also classified in a
particular Class for the purpose of receiving Distributions pursuant to the
Plan only to the extent that such Claim is an Allowed Claim in that Class,
and such Claim has not been disallowed, paid or released prior to the
Effective Date.
4.1 CLASS 1 CLAIMS (PRIORITY CLAIMS):
(a) Classification. Class 1 shall consist of all
Priority Claims against any of the Debtors.
(b) Impairment and Voting. Class 1 Claims are
unimpaired and are not entitled to vote on the Plan.
4.1 CLASS 2 CLAIMS (SECURED CLAIMS):
1. Classification. Class 2 shall consist of all
Secured Claims, whether validly perfected under applicable state law
prior to the Petition Date or validly perfected after the Petition Date
in accordance with Section 546(b) of the Bankruptcy Code. Each Allowed
Secured Claim in Class 2 shall be considered to be a separate subclass
within Class 2, and each such subclass shall be deemed to be a separate
Class for purposes of the Plan.
2. Impairment and Voting. Class 2 Claims are
unimpaired and are not entitled to vote on the Plan.
4.1 CLASS 3 CLAIMS (CONVENIENCE CLAIMS):
(a) Classification. Class 3 shall consist of all
Convenience Claims.
(b) Impairment and Voting. Class 3 Claims are
Impaired and are entitled to vote on the Plan.
4.1 CLASS 4 CLAIMS (UNSECURED CLAIMS):
(a) Classification. Class 4 shall consist of all
Unsecured Claims.
(b) Impairment and Voting. Class 4 Claims are
Impaired and are entitled to vote on the Plan.
4.1 CLASS 5 CLAIMS (SECURITIES LITIGATION CLAIMS):
(a) Classification. Class 5 shall consist of all
Securities Litigation Claims.
(b) Impairment and Voting. Class 5 Claims are
Impaired and are entitled to vote on the Plan.
4.1 CLASS 6 CLAIMS (SUBORDINATED SECURITIES CLAIMS):
(a) Classification. Class 6 shall consist of all
Subordinated Securities Claims.
(b) Impairment and Voting. Class 6 Claims are
Impaired and are deemed not to have accepted the Plan.
4.1 CLASS 7 CLAIMS (EQUITY INTERESTS):
(a) Classification. Class 7 shall consist of all
Equity Interests.
(b) Impairment and Voting. Class 7 Claims are
Impaired and are deemed not to have accepted the Plan.
ARTICLE V.
PROVISIONS FOR PAYMENT OF
ADMINISTRATIVE CLAIMS, FEE CLAIMS AND PRIORITY TAX CLAIMS
Pursuant to Section 1126(f) of the Bankruptcy Code, holders of
unimpaired Claims shall be deemed to have accepted the Plan.
5.1 ADMINISTRATIVE CLAIMS. Subject to the terms of Section 12.8
hereof and unless (a) otherwise provided for herein or (b) the holder of an
Allowed Administrative Claim agrees to receive other, less favorable
treatment, each holder of an Allowed Administrative Claims shall be paid
100% of the unpaid amount of such Allowed Claim in Cash on or as soon as
reasonably practicable after the later of (x) Initial Distribution Date and
(y) the first Periodic Distribution Date after the date such Administrative
Claim becomes an Allowed Administrative Claim. Notwithstanding the
immediately preceding sentence Administrative Claims of the United States
Trustee for fees pursuant to 28 U.S.C. ss. 1930(a)(6) shall be paid in
accordance with the applicable schedule for payment of such fees.
Furthermore, in the event the Buyer becomes entitled to the Termination Fee
and/or Expense Reimbursement pursuant to, and subject to, the Purchase
Agreement, the Termination Fee and Expense Reimbursement shall be paid in
full from the proceeds of the Alternative Purchase Consideration prior to
such funds being transferred to the Liquidating Trust.
5.2 FEE CLAIMS. Unless (a) otherwise provided herein or (b) the
holder of an Allowed Fee Claim agrees to receive other, less favorable
treatment, each holder of an Allowed Fee Claim shall receive 100% of the
unpaid allowed amount of such Claim in Cash on or as soon as reasonably
practicable after the later of (x) Effective Date and the first Periodic
Distribution Date after the date such Fee Claim becomes an Allowed Fee
Claim.
5.3 PRIORITY TAX CLAIMS. Unless (a) otherwise provided for
herein or (b) the holder of an Allowed Priority Tax Claim agrees to receive
other, less favorable treatment, each holder of an Allowed Priority Tax
Claim shall receive the following treatment:
(a) Each holder of an Allowed Priority Tax Claim (other
than any such Claim that is an Allowed Federal Priority Tax Claim) against
any of the Debtors shall be paid 100% of the unpaid amount of such Allowed
Priority Tax Claim in Cash on or as soon as reasonably practicable after
the later of (x) the Initial Distribution Date and (y) the first Periodic
Distribution Date after the date such Priority Tax Claim becomes an Allowed
Priority Tax Claim.
(b) Each holder of an Allowed Priority Tax Claim that is
a Federal Priority Tax Claim, at the option of the Liquidating Trustee,
shall either: (i) be paid 100% of the unpaid amount of such Allowed
Priority Tax Claim in Cash on or as soon as reasonably practicable after
the later of (x) the Initial Distribution Date and (y) the first Periodic
Distribution Date after the date such Priority Tax Claim becomes an Allowed
Priority Tax Claim; or (ii) be paid in equal semi-annual Cash payments in
arrears over a period not exceeding six (6) years from the date of
assessment of such Claim, with simple interest at the deficiency rate as
determined on the Effective Date under Section 6621(c) of the Internal
Revenue Code or such other rates as may be fixed by a Final Order of the
Bankruptcy Court, until such Claim is paid in full.
(c) Any claim or demand for penalty relating to any
Priority Tax Claim (including without limitation any Federal Priority Tax
Claim) shall be disallowed, and the holder of an Allowed Priority Tax Claim
shall not assess or attempt to collect such penalty from the Debtors or the
Liquidating Trustee.
ARTICLE VI.
TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS
6.1 PRIORITY CLAIMS. Unless (a) otherwise provided for herein
or (b) the holder of an Allowed Priority Claim agrees to receive other,
less favorable treatment, each holder of an Allowed Priority Claim shall be
paid 100% of the unpaid amount of such Allowed Priority Claim in Cash on or
as soon as reasonably practicable after the later of (x) the Initial
Distribution Date and (y) the first Periodic Distribution Date after the
date such Priority Claim becomes an Allowed Priority Claim.
6.2 SECURED CLAIMS. Subject to the provisions of Sections
502(b)(3) and 506(d) of the Bankruptcy Code, each holder of an Allowed
Secured Claim shall receive, at the Liquidating Trustee's option and to the
extent such Claim is secured by Collateral in the possession of the
Liquidating Trustee: (a) 100% of the Net Proceeds from the sale of the
relevant Collateral, up to the unpaid Allowed amount of such Claim (with
such payments to be made, if applicable, from accounts set up by the
Debtors, during their Reorganization Cases, in connection with the sale of
such Collateral), subject to applicable inter-creditor lien priorities; (b)
the return of the relevant Collateral; or (c) such other treatment as shall
be agreed to between the holder of such Claim and the Debtors or the
Liquidating Trustee. Such Distribution shall be made on or as soon as
reasonably practicable after the later of (x) the Initial Distribution Date
(subject, if applicable, to the Liquidating Trustee's receipt of the
proceeds of the sale of the relevant collateral) and (y) the first Periodic
Distribution Date after such Secured Claim becomes an Allowed Secured
Claim. Upon receipt by the relevant holder of such Distributions, such
holder's lien or other security interest in the relevant Collateral shall
be deemed released. To the extent a Claim is partially an Allowed Secured
Claim based on an offset right and partially an Allowed Claim of another
type, such Secured Claim shall be deemed to have been (i) setoff only to
the extent of the Allowed amount of the Allowed, liquidated, nondisputed,
noncontingent claim owing to the relevant Debtor or Debtors, and (ii) a
Claim classified in another relevant Class for any excess of such Claim
over the amount so set off. If a Claim is fully a Secured Claim based on an
offset right, the allowance of such Claim shall not affect any obligations
or liabilities due and payable (at such time) to the Debtors or the
Liquidating Trust that are in an amount in excess of the amount validly
offset and the payment, in full and in cash, of all amounts due and owing
as of the Effective Date to the Liquidating Trust and the turnover of any
property of the Debtors or the Liquidating Trust held by such claimant on
account of any unliquidated, Disputed or contingent right of setoff shall
be a precondition of the allowance of such Secured Claim.
6.3 CONVENIENCE CLAIMS. On or as soon as practicable after the
Effective Date, $100,000 of Cash shall be transferred into the Convenience
Class Reserve. On the later of the Initial Distribution Date or the date
that a Convenience Claim becomes an Allowed Convenience Claim, each holder
of any such Allowed Convenience Claim shall receive (a) its Ratable share
of the Cash in the Convenience Class Reserve and (b) its ratable share of
Cash from the Distribution Reserve with such ratable share being calculated
as the proportion that the Face Amount of such Convenience Claim (without
giving effect to any Distributions received by such Claimholder from the
convenience Class Reserve) bears to the aggregate Face Amount of all
Unsecured Claims and Convenience Claims (including Disputed Claims, but
excluding Disallowed Claims); provided, however, no holder of an Allowed
Convenience Claim shall receive, on account of such Convenience Claim, more
than the Allowed amount of such Convenience Claim.
6.4 UNSECURED CLAIMS.
(a) Subject to Section 6.2(b) hereof, each holder of an
Allowed Unsecured Claim shall receive its ratable share of the Liquidating
Trust Assets remaining after: (a) all Allowed Administrative Claims,
Allowed Priority Tax Claims, Allowed Fee Claims, Allowed Priority Claims
and Allowed Secured Claims have been satisfied in full; (b) all Disputed
Administrative Claims, Disputed Priority Claims, Disputed Priority Tax
Claims, Disputed Fee Claims, Disputed Secured Claims, and Disputed
Unsecured Claims have been reserved for in accordance with this Plan; (c)
the Convenience Class Reserve has been funded; and (d) all Liquidating
Trust Administrative Expenses either have been (x) satisfied in full or (y)
reserved for in accordance with this Plan, with such ratable share being
calculated as the proportion that the Face Amount of such Unsecured Claim
bears to the aggregate Face Amount of all Unsecured Claims and Convenience
Claims (including Disputed Claims, but excluding Disallowed Claims).
(b) Subordination rights arising out of contractual
subordination provisions between and among the Senior Notes and the Senior
Notes Indentures, on the one hand, and the Junior Notes and the Junior
Notes Indentures, on the other hand, shall remain in full force and effect.
Based on the enforcement by the holders of Senior Notes Claims of the
foregoing contractual subordination rights and the Debtors' recognition of
the continued vitality of the foregoing subordination agreements under
Section 510(a) of the Bankruptcy Code, holders of Allowed Junior Note
Claims shall be deemed, without further action by any Person, to have
transferred their entire right, title and interest, if any, as holders of
Unsecured Claims to receive Distributions under the Plan to the holders of
Allowed Senior Notes Claims and shall not be entitled to retain any
Distributions on account of such Allowed Junior Notes Claims. Subject to
the conditions stated in this Plan (including, without limitation, the
conditions stated in Section 8.3 hereof) and the Confirmation Order,
Distributions that, but for the existence and enforceability of the
foregoing subordination rights, would be made on account of Allowed Junior
Notes Claims shall be made, in accordance with Section 11.8 hereof, to the
Senior Notes Indenture Trustees for distribution to the holders of Allowed
Senior Notes Claims.
6.5 SECURITIES LITIGATION CLAIMS.
(a) IF CLASS 5 VOTES TO ACCEPT THE PLAN. If Class 5 votes
to accept the Plan, each holder of an Allowed Securities Litigation Claim
shall receive its Ratable share of the Available D&O Insurance Proceeds.
The foregoing shall not preclude, restrict or limit any Person who is
covered by D&O Insurance and who is sued from defending against or opposing
any claim by any Person.
(b) IF CLASS 5 VOTES TO REJECT THE PLAN. If Class 5 votes
to reject the Plan, holders of Securities Litigation Claims shall receive
no Distributions on account of such Claims.
6.6 SUBORDINATED SECURITIES CLAIMS. All holders of Subordinated
Securities Claims shall receive no Distributions on account of such
Subordinated Securities Claims.
6.7 EQUITY INTERESTS. All holders of Equity Interests shall
receive no Distribution of any kind under the Plan on account of such
Equity Interests. On the Effective Date, all Equity Interests shall be
deemed cancelled.
ARTICLE VII.
ACCEPTANCE OR REJECTION OF THIS PLAN
OR CONSENT TO DIFFERENT TREATMENT
7.1 IMPAIRMENT OF CLASSES OF CLAIMS AND EQUITY INTERESTS. Class
3 (Convenience Claims), Class 4 (Unsecured Claims), Class 5 (Securities
Litigation Claims), Class 6 (Subordinated Securities Claims) and Class 7
(Equity Interests) are Impaired by this Plan.
7.2 EACH IMPAIRED CLASS OF CLAIMS ENTITLED TO VOTE SEPARATELY.
Each Impaired Class of Claims will be entitled to vote separately to accept
or reject this Plan.
7.3 PERSONS ENTITLED TO VOTE. All holders of Claims in Class 3,
Class 4 and Class 5 that the Debtors have scheduled as liquidated in amount
and not Disputed or contingent or (b) as more fully set forth in the Plan
Solicitation Procedures Order, for which a motion pursuant to Rule 3018(a)
of the Federal Rules of Bankruptcy Procedure seeking temporary allowance of
such Claim for voting purposes only has been timely Filed along with a
completed proof of Claim and against which the Debtors have not Filed an
opposition or an objection, in which case the Claimholder shall only be
allowed to cast a vote on this Plan upon order of Bankruptcy Court, shall
be entitled to vote.
7.4 PRESUMED ACCEPTANCES BY UNIMPAIRED CLASSES. Class 1 and
Class 2 are unimpaired by the Plan. Under Section 1126(f) of the Bankruptcy
Code, such holders of Claims in Class 1 and Class 2 are conclusively
presumed to accept the Plan, and the votes of such Claimholders will not be
solicited.
7.5 CLASS DEEMED TO REJECT THE PLAN. Holders of Subordinated
Securities Claims in Class 6 and Equity Interests in Class 7 are not
entitled to receive or retain any property under this Plan on account of
their respective Claims and Equity Interests. Under Section 1126(g) of the
Bankruptcy Code, such holders of Subordinated Securities Claims in Class 6
and Equity Interests in Class 7 are deemed to reject this Plan and the
votes of such holders will not be solicited.
7.6 ACCEPTANCE BY A CLASS OF CLAIMS. In accordance with Section
1126(c) of the Bankruptcy Code and except as provided in Section 1126(e) of
the Bankruptcy Code, an Impaired Class of Claims shall have accepted this
Plan and therefore bind all members of such accepting Class if this Plan is
accepted by the holders of at least two-thirds (2/3) in dollar amount and
more than one-half (1/2) in number of the Allowed Claims of such Class that
have timely and properly voted to accept or reject this Plan.
7.7 ACCEPTANCE BY AN INDIVIDUAL CLAIMHOLDER. Subject to and in
accordance with the provisions of the Plan Solicitation Procedures Order,
an individual Claimholder will have accepted this Plan if such Claimholder
votes to accept this Plan by (a) appropriately marking the ballot for the
Class in which such Claim is placed under this Plan and (b) timely
returning such ballot as instructed on the face thereof. Any ballot which
is validly executed but which does not clearly indicate acceptance or
rejection of this Plan shall be deemed to constitute a vote for acceptance
of this Plan.
7.8 CRAMDOWN. If any particular Impaired Class of Claims fails
to accept, or is deemed to reject, this Plan in accordance with Sections
1126 and 1129(a) of the Bankruptcy Code, the Debtors request that the
Bankruptcy Court confirm this Plan in accordance with Section 1129(b) of
the Bankruptcy Code as to any such rejecting Class or Classes.
7.9 CONFIRMABILITY AND SEVERABILITY OF PLAN. The confirmation
requirements of Section 1129 of the Bankruptcy Code must be satisfied.
Except as limited in Section 16.2 hereof, the Debtors reserve the right to
alter, amend, modify, revoke or withdraw the Plan. A determination by the
Bankruptcy Court that the Plan is not confirmable pursuant to Section 1129
of the Bankruptcy Code shall not limit or affect the Debtors' exclusive
right and ability to modify the Plan to satisfy the confirmation
requirements of Section 1129 of the Bankruptcy Code.
ARTICLE VIII.
SURRENDER AND CANCELLATION OF SECURITIES
8.1 CANCELLATION AND SURRENDER OF SECURITIES GENERALLY.
(a) CANCELLATION OF EQUITY INTERESTS. All Equity
Interests shall be deemed cancelled on the Effective Date.
(b) CANCELLATION OF SECURITIES GENERALLY. On the
Effective Date, other than as expressly provided in Section 8.2 hereof and
except to the extent of the treatment provided for herein for Claimholders,
(a) the existing securities and any other note, bond, indenture, or other
instrument or document evidencing or creating any indebtedness or
obligation of the Debtors, shall be cancelled, and (b) the obligations of,
and/or Claims against, the Debtors under, relating or pertaining to any
agreements, indentures or certificates of designations governing the
existing securities and any other note, bond, indenture or other instrument
or document evidencing or creating any indebtedness or obligation of the
Debtors, as the case may be, shall be released and discharged.
(c) SURRENDER OF OUTSTANDING SECURITIES. Except as
expressly provided in Section 8.3 of this Plan, as a condition to the
receipt of any Distributions under this Plan by the holder of an Allowed
Claim, such Claimholder must surrender to the Debtors or the Liquidating
Trust, the certificates, notes, debentures or other evidence of
indebtedness evidencing such holder's Allowed Claim, if any so exist. Such
certificates, notes, debentures or other evidence of indebtedness
surrendered will be marked as "cancelled" or "paid," as appropriate. In the
event of any lost, stolen, mutilated or destroyed security, the holder of
such security must deliver to the Debtors or the Liquidating Trust, as
appropriate, (a) evidence satisfactory to the Liquidating Trustee of the
loss, theft, mutilation or destruction of such security and, including
without limitation and affidavit containing averments describing the
circumstances under which such security was lost, stolen, mutilated or
destroyed, and (b) such security or indemnity as may be required by the
Liquidating Trustee to hold the Liquidating Trustee harmless with respect
thereto. Any holder of a certificate, note, debenture or other evidence of
indebtedness that fails to surrender or be deemed to have surrendered such
certificate, note, debenture or other evidence of indebtedness within the
second anniversary after the Effective Date shall have its Claim for a
Distribution pursuant to the Plan on account of such certificate, note,
debenture or other evidence of indebtedness discharged and shall be forever
barred from asserting any such Claim against any of the Debtors, the
Liquidating Trust, Reorganized USN Communications or any of their property.
8.2 CANCELLATION OF NOTES INDENTURES. To the extent that each
of the Notes Indentures are not executory contracts rejected pursuant to
Section 14.1 hereof (which rejection shall not give rise to rejection
damages or additional Claims by the holders of the notes issued under any
of the foregoing indenture trustees), the rights and obligations of the
Debtors and the Liquidating Trust, if any, under any indenture shall be
deemed canceled pursuant to Section 1123(a)(5)(F) of the Bankruptcy Code on
the Effective Date, except to the extent that any provisions of any of the
Notes Indentures are incorporated by reference into the Plan or are
expressly deemed in the Plan to survive defeasance or termination under the
respective Notes Indentures. Notwithstanding the rejection or cancellation
of any of the Notes Indentures, such rejection or cancellation shall not
Impair the rights of the holders of Notes Claims arising under or evidenced
by any of the foregoing Notes Indentures to receive Distributions on
account of such Notes Claims under the Plan or the Liquidating Trust
Agreement pursuant to and in accordance with the terms of the particular
Notes Indenture pursuant to which the notes evidencing or giving rise to
such Notes Claims were issued. The Notes Indentures shall continue in
effect to the extent necessary to (a) allow the Senior Notes Indenture
Trustees to make the Distributions required to be made to the holders of
Allowed Senior Notes Claims under the Plan; (b) enforce the subordination
rights arising out of contractual subordination agreements between and
among the Convertible Notes, the Consent Convertible Notes, the 14% Senior
Notes and the 14 5/8% Senior Notes; and (c) permit the Senior Notes
Indenture Trustees to maintain any rights or liens they may have in
Distributions received by such Senior Notes Indenture Trustees for fees,
costs, expenses and indemnification under their respective Senior Notes
Indentures and to be paid or reimbursed from such Distributions for such
prepetition and postpetition fees, costs, expenses and indemnification
(until payment in full) that are governed by the Senior Notes Indentures in
accordance with the provisions set forth therein.
8.3 SURRENDER OF SENIOR NOTES; CONDITION TO RECEIPT BY SENIOR
NOTES INDENTURE TRUSTEES OF DISTRIBUTIONS MADE ON ACCOUNT OF ALLOWED JUNIOR
NOTES CLAIMS. With respect to Senior Notes, on or as soon as reasonably
practicable after the Effective Date, instructions regarding the time and
manner in which Senior Notes are to be surrendered will be transmitted by
the relevant Senior Notes Indenture Trustee to the holders of the Senior
Notes. Any holder of a Senior Note that fails to surrender or be deemed to
have surrendered such Senior Note to the relevant Senior Note Indenture
Trustee within the second anniversary after the Effective Date shall have
its claim for a Distribution pursuant to the Plan on account of such Senior
Note discharged and shall be forever barred from asserting any such claim
against any of the Debtors, the Liquidating Trust, Reorganized USN
Communications or any of their property. Upon receipt of a surrendered
Senior Note the relevant Senior Note Indenture Trustee shall mark such
Senior Note as "cancelled" or "paid," as appropriate. As a condition to a
Senior Note Indenture Trustee's receipt of any Distribution for the benefit
of a holder of an Allowed Senior Notes Claim, on or before the second
anniversary after the Effective Date, such Senior Notes Indenture Trustee
must deliver to the Liquidating Trustee: (a) in respect of any Distribution
on account of an Allowed Senior Notes Claim, (i) evidence reasonably
satisfactory to the Liquidating Trustee that the Senior Note or Senior
Notes evidencing such Senior Note Claim have been surrendered to the
relevant Senior Notes Indenture Trustee or, in the case of the loss, theft,
mutilation or destruction of such Senior Note or Senior Notes, evidence
reasonably satisfactory to the Liquidating Trustee of the loss, theft,
mutilation or destruction, including, without limitation, an affidavit
containing averments describing the circumstances under which such Senior
Note was lost, stolen, mutilated or destroyed, and (ii) such security or
indemnity as may be required by the Liquidating Trustee to hold the
Liquidating Trustee harmless with respect thereto; and (b) in respect of
any Distribution on account of an Allowed Junior Notes Claim for which the
corresponding Junior Note or Junior Notes have not been surrendered to the
Liquidating Trustee, such security or indemnity as may be required by the
Liquidating Trustee to hold the Liquidating Trustee harmless with respect
thereto.
ARTICLE IX.
IMPLEMENTATION OF THE PLAN
9.1 PLAN IMPLEMENTATION RELATED TO SALE TRANSACTION. The
Bankruptcy Court has approved the Purchase Agreement as the highest and
best offer to date for the Purchased Business. The following shall occur
upon the closing of the Purchase Agreement:
(a) ISSUANCE OF REORGANIZED STOCK. The Reorganized
Stock, which shall constitute all of the authorized but unissued
common stock of Reorganized USN Communications, shall be issued and
transferred to the Buyer.
(b) REVESTING OF CERTAIN ASSETS IN REORGANIZED USN
COMMUNICATIONS. The Assets of the Estate of USN Communications, other
than the Excluded Assets and the Purchase Consideration, shall revest
in Reorganized USN Communications. Thereafter, Reorganized USN
Communications may operate its business and may use, acquire, and
dispose of property free of any restrictions of the Bankruptcy Code,
the Bankruptcy Rules and the Bankruptcy Court. All property of
Reorganized USN Communications shall be free and clear of all Claims
and Equity Interests, except as specifically provided in this Plan,
the Purchase Agreement or the Confirmation Order and all such Claims
and Equity Interests shall be both discharged and released as to
Reorganized USN Communications.
(c) AMENDMENT AND RESTATEMENT OF THE CERTIFICATE OF
INCORPORATION OF USN COMMUNICATIONS. The certificate of incorporation
of USN Communications shall be amended and restated in substantially
the form of the USN Communications Amended and Restated Certificate
of Incorporation, inter alia, (a) to prohibit the issuance of
nonvoting equity securities as required by Section 1123(a)(6) of the
Bankruptcy Code, subject to further amendment of such USN
Communications Amended and Restated Certificate of Incorporation as
permitted by applicable law, (b) to authorize the cancellation of the
Existing USN Communications Interests and the issuance of the
Reorganized Stock, (c) to change the name of Reorganized USN
Communications to a name recommended by Buyer in accordance with the
Purchase Agreement and (d) to effectuate the provisions of the Plan.
(d) AMENDMENT AND RESTATEMENT OF BY-LAWS OF USN
COMMUNICATIONS. The by-laws of USN Communications shall be amended
and restated in substantially the form of the USN Communications
Amended and Restated By-Laws.
(e) CONSUMMATION OF SALE TRANSACTION. The Buyer
shall accept the Reorganized Stock, manage Reorganized USN
Communications, appoint officers, and otherwise conduct the business
and affairs of Reorganized USN Communications for all appropriate
purposes under applicable law.
(f) TRANSFER OF RESIDUAL ASSETS TO LIQUIDATING
TRUST. The Buyer shall transfer the Purchase Consideration to the
Liquidating Trust and the Debtors shall transfer all of the Debtors'
right, title and interest in the Residual Assets to the Liquidating
Trust.
9.1 ALTERNATIVE PLAN IMPLEMENTATION RELATED TO ALTERNATIVE SALE
TRANSACTION. In the event the Purchase Agreement has been terminated and
the Debtors have executed an Alternative Purchase Agreement, the Plan shall
be implemented by one of the following means:
(a) SALE OF REORGANIZED STOCK. If the Alternative
Purchase Agreement contemplates the issuance and sale to an Alternative
Buyer of the Reorganized Stock, the following shall occur upon the closing
of such Alternative Purchase Agreement:
(i) Issuance of Reorganized Stock. The Reorganized
Stock, which shall constitute all of the authorized but unissued common
stock of Reorganized USN Communications, shall be issued and transferred to
the Alternative Buyer.
(ii) Revesting of Certain Assets in Reorganized USN
Communications. The Assets of the Estate of USN Communications, other than
the Alternative Excluded Assets and the Alternative Purchase Consideration,
shall revest in Reorganized USN Communications. Thereafter, Reorganized USN
Communications may operate its business and may use, acquire, and dispose
of property free of any restrictions of the Bankruptcy Code, the Bankruptcy
Rules and the Bankruptcy Court. All property of Reorganized USN
Communications shall be free and clear of all Claims and Equity Interests,
except as specifically provided in this Plan, the Alternative Purchase
Agreement or the Confirmation Order and all such Claims and Equity
Interests shall be both discharged and released as to Reorganized USN
Communications.
(iii) Amendment and Restatement of the Certificate of
Incorporation of USN Communications. The certificate of incorporation of
USN Communications shall be amended and restated in substantially the form
of the USN Communications Amended and Restated Certificate of
Incorporation, inter alia, (a) to prohibit the issuance of nonvoting equity
securities as required by Section 1123(a)(6) of the Bankruptcy Code,
subject to further amendment of such USN Communications Amended and
Restated Certificate of Incorporation as permitted by applicable law, (b)
to authorize the cancellation of the Existing USN Communications Interests
and the issuance of the Reorganized Stock and (c) to effectuate the
provisions of the Plan.
(iv) Amendment and Restatement of By-Laws of USN
Communications. The by-laws of USN Communications shall be amended and
restated as of the Effective Date in substantially the form of the USN
Communications Amended and Restated ByLaws.
(v) Consummation of Sale Transaction. The Alternative
Buyer shall accept the Reorganized Stock, manage Reorganized USN
Communications, appoint officers, and otherwise conduct the business and
affairs of Reorganized USN Communications for all appropriate purposes
under applicable law.
(vi) Transfer of Residual Assets to Liquidating
Trust. The Alternative Buyer shall transfer the Alternative Purchase
Consideration to the Liquidating Trust and the Debtors shall transfer all
of the Debtors' right, title and interest in the Residual Assets to the
Liquidating Trust.
(b) SALE OF WIRELESS STOCK. If the Alternative Purchase
Agreement contemplates a sale of the Wireless Stock to an Alternative
Buyer, the following shall occur:
(i) Consummation of Alternative Sale Transaction.
Upon the closing of such Alternative Sale Agreement, pursuant to such
Alternative Purchase Agreement, this Plan, the Disclosure Statement and
Sections 105(a) and 363 of the Bankruptcy Code, except to the extent
provided in such Alternative Purchase Agreement, this Plan and the
Conformation Order, the Alternative Buyer shall acquire the Purchased
Business free and clear of all Claims and Encumbrances against the Wireless
Stock.
(ii) Transfer of Residual Assets to Liquidating
Trust. (A) If the closing of the Alternative Purchase Agreement occurs
prior to the Effective Date, upon the closing of Such Alternative Purchase
Agreement, the Alternative Buyer shall transfer the Alternative Purchase
Consideration to the Debtors, and, upon the occurrence of the Effective
Date, the Debtors shall transfer all of the Debtors' right, title and
interest in the Residual Assets (including, without limitation, the
Alternative Purchase Consideration) to the Liquidating Trust. (B) If the
closing of the Alternative Purchase Agreement occurs on or after the
Effective Date, the Alternative Buyer shall transfer the Alternative
Purchase Consideration to the Liquidating Trust and the Debtors shall
transfer all of the Debtors' right, title and interest in the Residual
Assets to the Liquidating Trust.
(c) SALE OF THE ASSETS OF THE WIRELESS COMPANIES. If the
Purchase Agreement contemplates a sale of the assets of the Wireless
Companies to the Buyer the following shall occur:
(i) Consummation of Alternative Sale Transaction.
Upon the closing of the Alternative Purchase Agreement, pursuant to such
Alternative Purchase Agreement, this Plan, the Confirmation Order and
Sections 105(a) and 363 of the Bankruptcy Code (to the extent applicable),
except to the extent provided in the Alternative Purchase Agreement, this
Plan and the Conformation Order, the Alternative Buyer shall acquire the
Purchased Business in accordance with such Alternative Purchase Agreement.
(ii) Transfer of Purchase Consideration to USN
Wireless, Inc. Upon the closing of such Alternative Purchase Agreement, the
Alternative Buyer shall transfer the Alternative Purchase Consideration to
USN Wireless, Inc., pursuant to the Purchase Agreement.
(iii) Transfer of Estates' Assets to Liquidating
Trust. Upon the occurrence of the Effective Date, all of the Estates'
Assets, including, without limitation, the Wireless Stock, shall be
transferred to the Liquidating Trust. The Liquidating Trustee shall be
authorized, empowered and directed to take all actions and execute all
documents necessary to cause USN Wireless, Inc. to legally dividend or
otherwise disburse the net proceeds of the Purchase Consideration to the
Liquidating Trust.
9.1 IMPLEMENTATION OF PLAN ABSENT CONSUMMATION OF A SALE
TRANSACTION OR ALTERNATIVE SALE TRANSACTION. If no Sale Transaction or
Alternative Sale Transaction described in Sections 9.1 or 9.2 of this Plan
is consummated pursuant to the Plan on or before the Effective Date, as of
the Effective Date all of the Debtors' right, title and interest in all
Assets of the Estates shall be transferred to the Liquidating Trust,
subject to the rights, if any, of the Buyer (or Alternative Buyer, as the
case may be), if any, under the Purchase Agreement (or Alternative Purchase
Agreement, as the case may be) as may then be in existence, not terminated
and enforceable. The Liquidating Trust shall succeed to all of the rights
of the Debtors respecting the Purchase Agreement (or Alternative Purchase
Agreement, as the case may be), including, without limitation, all legal
and equitable remedies of the Debtors arising out of or related to the
Purchase Agreement (or Alternative Purchase Agreement, as the case may be).
Additionally, the Liquidating Trustee shall be authorized to enter into any
agreement or execute any document required by or consistent with the Plan
and the Purchase Agreement (or Alternative Purchase Agreement, as the case
may be) and perform all obligations thereunder.
9.2 DISSOLUTION OF CORPORATION ENTITIES. On the Effective Date,
each of US Network Corporation, FoneNet/Ohio, Inc., USN Communications Long
Distance, Inc., USN Communications Virginia, Inc., USN Communications
Maine, Inc., Quest United, Inc., USN Communications Atlantic, Inc., USN
Solutions, Inc., USN Communications Southwest, Inc., USN Communications
West, Inc., USN Communications Midwest, Inc., and USN Communications
Northeast, Inc. shall be dissolved without any further action by the
stockholders or directors of the Debtors; provided, however, that if the
Sale Transaction is not consummated, or an Alternative Sale Transaction
which provides for an Alternative Buyer to acquire the Reorganized Stock is
not consummated, then USN Communications, Inc. also shall be dissolved. The
Liquidating Trustee shall be the sole Person authorized and responsible to
effect the dissolutions provided for in this Section 9.4 of the Plan.
9.3 DIRECTORS AND OFFICERS. On the Effective Date, the
authority, power and incumbency of the persons then acting as directors and
officers of the Debtors shall be terminated and such directors and officers
shall be deemed to have resigned.
9.4 DANIELS' TRANSACTION FEE. Upon the occurrence of
consummation of a Sale Transaction (or Alternative Sale Transaction, as the
case may be) the Daniels Transaction Fee shall paid (without further
notice, hearing or application by Daniels) from the proceeds of the
Purchase Consideration (or Alternative Purchase Consideration, as the case
may be) prior to such funds being transferred to the Liquidating Trust.
9.5 TERMINATION OF DIP FACILITY. Upon the Effective Date, the
following shall occur in respect of the DIP Facility and the DIP Order: (a)
all DIP Claims and other obligations, if any, of the Debtors under the DIP
Facility and the DIP Order shall be deemed satisfied in full and released;
and (b) the DIP Facility, if not previously terminated, shall be deemed
terminated and all Encumbrances, liens and security interests granted to
secure any obligation under the DIP Facility shall be deemed terminated and
of no further force and effect.
9.6 APPLICABILITY OF SECTIONS 1125 AND 1145 OF THE BANKRUPTCY
CODE. The protection afforded by Section 1125(e) of the Bankruptcy Code
with regard to solicitation of acceptances or rejections of the Plan and
the offer, issuance, sale or purchase of the Reorganized Shares, shall
apply to the fullest extent provided by law, and the entry of the
Confirmation Order shall constitute the determination by the Bankruptcy
Court that the Debtors, Reorganized USN Communications, the Buyer, the
Creditors' Committee, the PEDC (if appointed), the Liquidating Trust and
the Liquidating Trustee and each of their respective officers, directors,
partners, employees, members, agents, attorneys, accountants or other
professionals, shall have acted in good faith and in compliance with the
applicable provisions of the Bankruptcy Code pursuant to Section 1125(e) of
the Bankruptcy Code. In addition, the exemption from the requirements of
Section 5 of the Securities Act of 1933, 15 U.S.C. ss. 77e, and any state
and local law requiring registration for the offer or sale of a security
provided for in Section 1145 of the Bankruptcy Code shall apply to the
Reorganized Stock.
9.7 DISSOLUTION OF THE CREDITORS' COMMITTEE. As of the
Effective Date, the Creditors' Committee shall thereby be released and
discharged of and from all further authority, duties, responsibilities and
obligations relating to, arising from and in connection with the
Reorganization Cases, and the Creditors' Committee shall be deemed
dissolved, unless prior thereto the Bankruptcy Court shall have entered an
order extending the existence of the Creditors' Committee.
9.8 THE PEDC.
(a) CREATION OF THE PEDC. The Creditors' Committee is
authorized, in its sole discretion to appoint and create the PEDC. If the
Creditors' Committee desires to create the PEDC, on or before the Effective
Date, the Creditors' Committee shall identify the initial members of the
PEDC (subject to the consent of the Debtors, which consent shall not be
unreasonably withheld) and upon the occurrence of the Effective Date the
Creditors' Committee shall cease to exist and the PEDC shall be deemed
created and the identified initial members appointed. The PEDC may adopt
such bylaws as it deems appropriate, provided that such bylaws do not
conflict with the Plan, the Confirmation Order, the Liquidating Trust
Agreement or the Purchase Agreement (or Alternative Purchase Agreement, as
the case may be).
(b) REIMBURSEMENT OF PEDC EXPENSES. Members of the PEDC shall
not be entitled to compensation but shall receive reimbursement of
reasonable, actual and necessary expenses incurred by them in carrying out
the purpose of the PEDC.
(c) AUTHORITY OF PEDC. The powers and authority of the PEDC, if
appointed, shall be the following: (i) in accordance with Section 9.11(f)
of the Plan, to appoint a successor Liquidating Trustee; (ii) if the
Liquidating Trustee determines, in the exercise of the Liquidating
Trustee's discretion, that he has a material conflict of interest with
respect to the settlement of Claims, the resolution or prosecution of
litigation or any other matter, the PEDC shall exercise the Liquidating
Trustee's rights and authorities with respect to such matter; and (iii) to
review and comment upon any final account prepared by the Liquidating
Trustee in respect of the Liquidating Trust at least twenty (20) days prior
to the Filing of such final accounting with the Bankruptcy Court.
(d) INDEMNIFICATION. If the PEDC is created, except as
otherwise set forth in this Plan, the members of the PEDC (solely with
respect to each member of the PEDC's conduct in furtherance of its, his or
her duties as a member of the PEDC, and not with respect to the actions of
such members as individual creditors) and any Person employed or retained
by the members of the PEDC (solely with respect to employment or retention
in furtherance of such Person's duties on behalf of the PEDC) shall be
defended, held harmless and indemnified from time to time by the
Liquidating Trust against any and all losses, Claims, costs, expenses and
liabilities to which such indemnified parties may be subject by reason of
such indemnified party's execution in good faith of their duties; provided,
however, that the indemnification obligations arising pursuant to this
Section shall indemnify neither the members of the PEDC, nor any Person
employed or retained by the PEDC for any actions taken by such indemnified
parties which constitute bad faith, willful misconduct, gross negligence,
willful disregard of their duties or material breach of this Plan.
Satisfaction of any obligation of the Liquidating Trust arising pursuant to
the terms of this Section shall be payable only from the Liquidating Trust
Assets and such right to payment shall be prior and superior to any other
rights to receive a Distribution of the Liquidating Trust Assets.
9.1 ESTABLISHMENT OF THE LIQUIDATING TRUST AND TRUSTEE.
(a) ESTABLISHMENT OF LIQUIDATING TRUST. On the Effective Date,
the Debtors shall (i) execute the Liquidating Trust Agreement, in
substantially the form attached as Exhibit "D" hereto, (ii) take all other
steps necessary or appropriate to establish the Liquidating Trust, (iii)
transfer, deliver and assign to the Liquidating Trust on behalf of all
Creditors all of their right, title and interest in, to, under and in
connection with all Residual Assets free and clear of any interest in such
property of any other Person. For federal income tax purposes, the
beneficiaries of the Liquidating Trust will be treated as the grantors of
the Liquidating Trust and deemed to be the owners of the Liquidating Trust
Assets and the Debtors will treat the transfer of the Liquidating Trust
Assets to the Liquidating Trust as a deemed transfer to such beneficiaries
followed by a deemed transfer by such beneficiaries to the Liquidating
Trust.
(b) PURPOSES OF THE LIQUIDATING TRUST. The Liquidating Trust
will be organized for the sole purpose of liquidating the Liquidating Trust
Assets with no objective or authority to continue or engage in the conduct
of a trade or business. In particular, the Liquidating Trust, through the
Liquidating Trustee, shall (i) collect and reduce the Liquidating Trust
Assets to Cash, (ii) make distributions on account of Allowed Claims
Pursuant to this Plan and the Liquidating Trust, (iii) take such steps as
are reasonably necessary to accomplish such purpose, all as more fully
provided in, and subject to the terms and provisions of, the Liquidating
Trust Agreement. The Liquidating Trust shall not have authority to engage
in trade or business, and no portions of the Liquidating Trust Assets shall
be used in the conduct of a trade or business.
(c) POWERS AND OBLIGATIONS OF THE LIQUIDATING TRUST. In
addition to all powers enumerated in the Liquidating Trust Agreement and in
subparagraph (k) of this Section 9.11 hereof, from and after the Effective
Date, the Liquidating Trust shall succeed to all of the rights of the
Debtors necessary to protect, conserve and liquidate all Liquidating Trust
Assets as quickly as reasonably practicable. In that capacity, the
Liquidating Trust shall have the exclusive power, on behalf and in the name
of the Debtors, to prosecute, defend, compromise, settle and otherwise deal
with all such Liquidating Trust Assets subject to the restrictions of the
Liquidating Trust Agreement, this Plan and the Confirmation Order;
provided, however, that the Liquidating Trustee shall have no right to use
Liquidating Trust Assets to conduct trade or business.
(d) LIQUIDATING TRUSTEE. On or prior to the Confirmation Date,
the Creditors' Committee shall select and appoint the Liquidating Trustee
(subject to the consent of the Debtors, which consent shall not be
unreasonably withheld). The Liquidating Trustee shall administer the
Liquidating Trust in accordance with the Liquidating Trust Agreement, this
Plan and the Confirmation Order.
(e) RETENTION OF PROFESSIONALS. The Liquidating Trustee shall
be authorized to retain and engage such other professionals and persons as
may be necessary to carry out his or her duties under the Liquidating Trust
Agreement. Professionals retained by the Liquidating Trustee shall submit
monthly invoices to the Liquidating Trustee. If the Liquidating Trustee
wishes to assert an objection to the compensation or reimbursement sought
in a particular invoice, the Liquidating Trustee shall object in writing
within fifteen days of receipt of the monthly invoice. If no timely
objection is made, the Liquidating Trustee may pay, without Bankruptcy
Court order, the amounts requested from the Liquidating Trust
Administrative Reserve. If the Liquidating Trustee's objection to the
compensation or reimbursement sought in a particular invoice is not
resolved within ten days, either party may submit the issue to the
Bankruptcy Court for resolution.
(f) RESIGNATION, DEATH OR REMOVAL OF LIQUIDATING TRUSTEE. The
Liquidating Trustee may resign at any time upon thirty (30) days' written
notice, in accordance with the notice provisions of this Plan, to the
Court, counsel to the Liquidating Trust and the PEDC (if appointed). Such
resignation may become effective prior to the expiration of such thirty
(30) day notice period upon the appointment of a permanent or interim
successor Liquidating Trustee. The Liquidating Trustee may be removed by
the Bankruptcy Court upon application for good cause shown, which
application may be brought only by the PEDC or, if the PEDC is not
appointed, any party in interest. In the event that the Liquidating Trustee
position becomes vacant, the PEDC (if appointed) shall appoint a successor
Liquidating Trustee; provided, however, that if the PEDC has not been
appointed or if the PEDC fails to appoint a successor Liquidating Trustee
within thirty (30) days after the occurrence of such vacancy, the
Liquidating Trustee vacancy shall be filled by the Bankruptcy Court based
upon recommendations submitted from beneficiaries of the Liquidating Trust.
Upon his, her or its appointment pursuant to this Plan, the successor
Liquidating Trustee, without any further act, shall become fully vested
with all of the rights, powers, duties and obligations of his, her or its
predecessor.
(g) COMPENSATION OF LIQUIDATING TRUSTEE. In addition to
reimbursement of the reasonable, actual and necessary out-of-pocket
expenses incurred, the Liquidating Trustee, and any employees or
professionals engaged or retained by the Liquidating Trustee, shall be
entitled to reasonable compensation for services rendered. The Liquidating
Trust Agreement shall set forth the amounts of reasonable compensation that
shall be paid to the Liquidating Trustee.
(h) TRUSTEE STANDARD OF CARE; EXCULPATION. Neither the
Liquidating Trustee, nor any director, officer, affiliate, employee,
employer, professional, agent or representative of the Liquidating Trustee
shall be personably liable in connection with affairs of the Liquidating
Trust to any Claimholder or beneficiary of the Liquidating Trust, or the
Liquidating Trust, or any other person, except for such of the Liquidating
Trustee's acts or omissions as shall constitute willful misconduct or gross
negligence. Persons dealing with the Liquidating Trustee, or seeking to
assert claims against the Debtors or the Liquidating Trust, shall look only
to the Liquidating Trust Assets to satisfy any liability incurred by the
Liquidating Trustee to such persons in carrying out the terms of the
Liquidating Trust Agreement and shall have no recourse whatsoever to
Reorganized USN Communications, the Buyer or the Wireless Companies.
(i) INDEMNIFICATION. Except as otherwise set forth in this
Plan, the Liquidating Trustee and any Person employed or retained by the
Liquidating Trustee shall be defended, held harmless and indemnified from
time to time by the Liquidating Trust against any and all losses, Claims,
costs, expenses and liabilities to which such indemnified parties may be
subject by reason of such indemnified party's execution in good faith of
its, his or her duties pursuant to the discretion, power and authority
conferred on such Person by the Liquidating Trust Agreement, the Plan or
the Confirmation Order; provided, however, that the indemnification
obligations arising pursuant to this Section shall indemnify neither the
Liquidating Trustee, nor any Person employed or retained by the Liquidating
Trustee for any actions taken by such indemnified parties which constitute
bad faith, willful misconduct, gross negligence, willful disregard of their
duties or material breach of this Plan. Satisfaction of any obligation of
the Liquidating Trust arising pursuant to the terms of this Section shall
be payable only from the Liquidating Trust Assets and such right to payment
shall be prior and superior to any other rights to receive a Distribution
of the Liquidating Trust Assets.
(j) TRANSFER OF BOOKS AND RECORDS; PRESERVATION OF PRIVILEGES
AND IMMUNITIES.
(i) Subject to the rights, if any, of the Buyer under the
Purchase Agreement or an Alternative Buyer under an Alternative Purchase
Agreement, on the Effective Date or as soon thereafter as is reasonably
practicable, all books and records of the Debtors, including, without
limitation, all books and records relating to the administration of the
Liquidating Trust, all Claims against the Debtors and the Liquidating Trust
and all Litigation Claims, shall be transferred deemed assigned to the
Liquidating Trust; provided, however, that the Purchase Agreement or
Alternative Purchase Agreement, as the case may be, shall not be construed
to deny the Liquidating Trustee such access to the books and records
transferred to the Buyer or Alternative Buyer, as the case may be, as is
reasonably necessary to the administration of the Liquidating Trust and the
resolution of all Claims and Litigation Claims. The Debtors, their
Affiliates and agents shall take all steps, and execute all documents,
necessary to cause the transfer of all of the books and records of the
Debtors in accordance with this Plan.
(ii) Subject to the rights, if any, of the Buyer under the
Purchase Agreement or an Alternative Buyer under an Alternative Purchase
Agreement, in connection with any rights and causes of action transferred
to the Liquidating Trust, any attorney-client privilege, work-product
privilege or other privilege or immunity attaching to any documents or
communications (whether written or oral) transferred to the Liquidating
Trust shall vest in the Liquidating Trustee and its, his or her
representatives, and the Debtors, Reorganized USN Communications and the
Liquidating Trustee are authorized to take all necessary actions to
effectuate the transfer of such privileges. After the Effective Date, no
Person other than the Liquidating Trustee shall have the right to assert or
waive any privilege of the Debtors or to make any admission or statement
against interest respecting the Debtors.
(iii) Subject to the rights, if any, of the Buyer under the
Purchase Agreement or an Alternative Buyer under an Alternative Purchase
Agreement, the Liquidating Trust shall succeed to all rights of the Debtors
respecting access to and preservation of books and records transferred to
CoreComm pursuant to the CoreComm Agreement, including without limitation
all of the Debtors' rights under section 6.2 of the CoreComm Agreement.
(k) DUTIES AND POWERS OF THE LIQUIDATING TRUSTEE. The duties
and powers of the Liquidating Trustee shall include the following, but in
all cases shall be consistent with the terms of the Plan and the
Confirmation Order:
(i) To exercise all power and authority that may be or
could have been exercised, commence all proceedings that may be or could
have been commenced and take all actions that may be or could have been
taken by any officer, director or shareholder of the Debtors with like
effect as if authorized, exercised and taken by unanimous action of such
officers, directors and shareholders.
(ii) To open and maintain bank accounts on behalf of or in
the name of the Liquidating Trust, calculate and make Distributions and
take other actions consistent with the Plan and the implementation hereof,
including the establishment, re-evaluation, adjustment and maintenance of
appropriate reserves, in the name of the Liquidating Trust.
(iii) To receive, conserve and manage the Liquidating Trust
Assets.
(iv) To hold legal title to any and all Liquidating Trust
Assets.
(v) Subject to the applicable provisions of the Plan, to
collect and liquidate all Assets of the Estates pursuant to the Plan.
(vi) To object to Claims and supervise and administer the
resolution, settlement and payment of such Claims and the Distribution to
the beneficiaries in accordance with this Liquidating Trust Agreement and
the Plan. Specifically, the Liquidating Trustee may compromise or settle
any Claim (Disputed or otherwise), free of any restrictions other than
those restrictions expressly imposed by the Plan, the Confirmation Order or
this Liquidating Trust Agreement.
(vii) Exercise such rights of setoff as the Debtors or the
Estates may have had against any beneficiary and/or seek Court approval of
such exercise.
(viii) Voluntarily engage in arbitration or mediation with
regard to any dispute.
(ix) To make decisions regarding the retention or
engagement of professionals, employees and consultants by the Liquidating
Trust and to pay, from the Liquidating Trust Administrative Reserve, the
fees and charges incurred by the Liquidating Trust on or after the
Effective Date for fees of professionals, disbursements, expenses or
related support services relating to the implementation of the Plan without
application to the Bankruptcy Court.
(x) To (i) seek a determination of tax liability under
section 505 of the Bankruptcy Code, (ii) file, if necessary, any and all
tax and all tax and information returns required with respect to the
Liquidating Trust treating the Liquidating Trust as a grantor trust
pursuant to Treas. Reg. 1.671-4(a) or otherwise, (iii) make tax elections
by and on behalf of the Liquidating Trust and (iv) pay taxes, if any,
payable by the Liquidating Trust.
(xi) To establish, fund and administer the
Administrative/Priority Claims Reserve, the Fee Claims Reserve, the
Liquidating Trust Administrative Reserve, the Hatten Claims Recoveries
Reserve, the Convenience Class Reserve, the Disputed Claims Reserve the
Distribution Reserve and other reserves required to be established, funded
or administered under the Plan, the Confirmation Order and the Liquidating
Trust Agreement, all in accordance with and pursuant to the Plan, the
Confirmation Order and this Liquidating Trust Agreement.
(xii) To pay all lawful, expenses, debts, charges and
liabilities of the Liquidating Trust.
(xiii) To take all other actions consistent with the
provisions of the Plan which the Liquidating Trustee deems reasonably
necessary or desirable to administer the Plan.
(xiv) To make all Distributions to holders of Allowed
Claims provided for or contemplated by the Plan.
(xv) To withhold from the amount distributable to any
Person such amount as may be sufficient to pay any tax or other charge
which the Trustee has determined, in its sole discretion, may be required
to be withheld therefrom under the income tax laws of the United States or
of any state or political subdivision thereof. In the exercise of his, her
or its discretion and judgment, the Trustee may enter into agreements with
taxing or other governmental authorities for the payment of such amounts as
may be withheld in accordance with the provisions of this section.
(xvi) To invest Cash as deemed appropriate by the
Liquidating Trustee in Cash Equivalents; provided, however, that the scope
of any such permissible investments shall be limited to include only those
investments, or shall be expanded to include any additional investments, as
the case may be, that a "liquidating trust", within the meaning of Treasury
Regulation Section 301.7701-4(d) may be permitted to hold, pursuant to the
Treasury Regulations, or any modification in the IRS guidelines, whether
set forth in IRS rulings, other IRS pronouncements or otherwise.
(xvii)To hold title to any investment in its name as
Liquidating Trustee or in a nominee name.
(xviii) To collect any accounts receivable or other claims
of the Debtors or the Estates not otherwise disposed of pursuant to the
Plan.
(xix) To enter into any agreement or execute any document
required by or consistent with the Plan and perform all obligations
thereunder.
(xx) To abandon in any commercially reasonable manner,
including abandonment or donation to a charitable organization of its
choice, any assets if it concludes that they are of no benefit to the
Liquidating Trust.
(xxi) If any of the Liquidating Trust Assets are situated
in any state or other jurisdiction in which the Liquidating Trustee is not
qualified to act as trustee, to nominate and appoint a Person duly
qualified to act as trustee in such state or jurisdiction and require from
each such trustee that security as designated by the Liquidating Trustee;
confer upon such trustee all the rights, powers, privileges and duties of
Liquidating Trustee, subject to the conditions and limitations of this
Liquidating Trust, except as modified or limited by the Liquidating Trustee
and except where the conditions and limitations may be modified by the laws
of such state or other jurisdiction (in which case, the laws of the state
or other jurisdiction in which such trustee is acting shall prevail to the
extent necessary); require such trustee to be answerable to the Liquidating
Trustee for all monies, assets and other property that may be received in
connection with the administration of all property; and remove such
trustee, with or without cause, and appoint a successor trustee at any time
by the execution by the other Liquidating Trustee of a written instrument
declaring such trustee removed from office, and specifying the effective
date and time of removal.
(xxii) To have exclusive power to prosecute and/or settle
all Litigation Claims (including, without limitation, all Avoidance Claims,
Hatten Transaction Claims and Hatten Fiduciary Claims) and exercise,
participate in or initiate any proceeding before the Bankruptcy Court or
any other court of appropriate jurisdiction and voluntarily participate as
a party or otherwise in any administrative, arbitrative or other
nonjudicial proceeding and litigate or settle such Litigation Claims on
behalf of the Debtors or the Liquidating Trust, and pursue to settlement or
Final Order such actions.
(xxiii) To hold any unclaimed Distributions or payment to a
beneficiary in accordance with this Liquidating Trust Agreement, the
Confirmation Order and the Plan.
(xxiv) To purchase or create and carry all insurance
policies and pay all insurance premiums and costs it deems necessary or
advisable.
(xxv) To implement and/or enforce all provisions of the
Plan.
(xxvi) If the Sale Transaction (or Alternative Sale
Transaction, as the case may be) is not consummated on or before the
Effective Date, to consummate the Sale Transaction (or Alternative Sale
Transaction, as the case may be), in accordance with the Plan, the
Confirmation Order and the Purchase Agreement (or an Alternative Purchase
Agreement, as the case may be).
(xxvii) To collect and liquidate all Liquidating Trust
Assets pursuant to the Plan, the confirmation Order and this Liquidating
Trust Agreement and close the Reorganization Cases.
(a) TERMINATION OF LIQUIDATING TRUST. The Liquidating Trust
will terminate no later than the seventh (7th) anniversary of the Effective
Date; provided, however, that, on or prior to the date that is three (3)
months prior to such termination, the Bankruptcy Court, upon motion by a
party in interest (including the PEDC, if appointed, or the Liquidating
Trustee), may extend the term of the Liquidating Trust if it is necessary
to the Liquidating and orderly distribution of the Liquidating Trust
Assets. Notwithstanding the foregoing, multiple extensions can be obtained
provided that the Bankruptcy Court approval is obtained at least three (3)
months prior to the expiration of each extended term; provided, however,
that the aggregate of all such extensions shall not exceed three (3) years
unless the Liquidating Trustee receives a favorable ruling from the United
States Internal Revenue Service that any further extension would not
adversely affect the status of the Liquidating Trust as a grantor trust for
federal income tax purposes.
9.1 THE ADMINISTRATIVE/PRIORITY CLAIMS RESERVE.
(a) On the Effective Date, the Liquidating Truseet shall
deposit funds into the Administrative/Priority Claims Reserve in an amount
sufficient to pay such Administrative Claims, Priority Claims and Priority
Tax Claims. The initial amount funded to the Administrative/Priority Claims
Reserve shall be an amount to be determined by the Debtors, in consultation
with the Creditors' Committee, as necessary to pay the amounts of (a) all
timely Filed Administrative Claims, Priority Claims and Priority Tax Claims
that are not Disputed Claims and (b) all Disputed Claims in such Classes
and categories that may become Allowed Claims. Furthermore, to the extent
the Liquidating Trustee determines that funding of the
Administrative/Priority Claims Reserve is insufficient, the net proceeds of
the continuing liquidation of the Debtors' Assets shall, to the extent
necessary for such purposes, be allocated to the Administrative/Priority
Claims Reserve.
(b) The Liquidating Trustee shall disburse funds from the
Administrative/Priority Claims Reserve to pay the Administrative Claims,
the Priority Claims, and the Priority Tax Claims. Once all Administrative
Claims, Priority Claims and Priority Tax Claims have been either paid in
full or Disallowed, any remaining funds shall be deposited in the
Distribution Reserve.
9.2 FEE CLAIMS RESERVE.
(a) On the Effective Date, the Liquidating Trustee shall
establish the Fee Claims Reserve for the payment of Fee Claims Allowed by
Final Order of the Bankruptcy Court. The Fee Claims Reserve shall be
established in an amount to be determined by the Debtors, in consultation
with the Creditors' Committee, representing the aggregate of (x) accrued
holdbacks relating to Fee Claims approved by the Bankruptcy Court prior to
the Confirmation Date or accrued in accordance with the Fee Order, and (y)
the Debtors' estimate of the reasonable Fee Claims accrued or likely to
accrue through the Effective Date but not yet approved or disapproved by
the Bankruptcy Court or paid pursuant to the Fee Order, less the amount of
any retainers held by, for or on behalf of such Professionals.
(b) Any remaining unapplied retainers held by, for or on
behalf of such Professionals following payment in full of their Allowed
Claims shall be deposited in the Distribution Reserve.
(c) After all Fee Claims have been Allowed or Disallowed
pursuant to Final Orders and after all Allowed Fee Claims have been paid,
the remaining or excess funds, as applicable, in the Fee Claims Reserve
shall be deposited in the Distribution Reserve.
9.3 LIQUIDATING TRUST ADMINISTRATIVE RESERVE. On the Effective
Date, the Liquidating Trustee shall establish the Liquidating Trust
Administrative Reserve and deposit funds into the Liquidating Trust
Administrative Reserve in an amount to be determined by the Debtors, in
consultation with the Committee, as reasonably sufficient to pay the
Liquidating Trust Administrative Expenses. Furthermore, to the extent the
Liquidating Trustee determines that funding of the Liquidating Trust
Administrative Reserve is insufficient, the net proceeds of the continuing
liquidation of the Debtors' Assets shall, to the extent necessary for such
purposes, be allocated to the Liquidating Trust Administrative Reserve.
After all costs and expenses associated with the Liquidating Trust have
been paid, and/or upon the reasonable determination of the Liquidating
Trustee that the funds in the Liquidating Trust Administrative Reserve
exceed the amounts necessary to pay the expenses of for which such fund is
established, the remaining or excess funds, as applicable, in the
Liquidating Trust Administrative Reserve shall be deposited in the
Distribution Reserve.
9.4 THE HATTEN TRANSACTION CLAIMS RECOVERIES RESERVE. The
Hatten Transaction Claims Recoveries Reserve shall be established on the
Effective Date and all proceeds received by the Liquidating Trust through
the prosecution and/or compromise of the Hatten Transaction Claims shall be
deposited into the Hatten Transaction Claims Recoveries Reserve. All fees
and expenses associated with the prosecution and/or compromise of the
Hatten Transaction Claims shall be paid from the Liquidating Trust
Administrative Reserve. No Distribution from the Hatten Transaction Claims
Recoveries Reserve contemplated by the Adversary Proceeding Settlement
shall be made unless and until all fees and expenses associated with the
prosecution and/or compromise of the Hatten Transaction Claims shall have
been paid, including, without limitation, the reimbursement of any amounts
drawn from the Liquidating Trust Administrative Reserve to pay fees and
expenses associated with the prosecution and/or compromise of the Hatten
Transaction Claims. Any proceeds remaining in the Hatten Transaction Claims
Recoveries Reserve after all Distributions contemplated by the Adversary
Proceeding Settlement have been made shall be transferred to the
Distribution Reserve.
9.5 THE CONVENIENCE CLASS RESERVE. On or as soon as reasonably
practicable after the Effective Date, the Liquidating Trust shall deposit
$100,000 in Cash in the Convenience Class Reserve for the purpose of making
Distributions to the holders of Allowed Convenience Claims. After all
Distributions authorized by this Plan shall have been made to holders of
Allowed Convenience Claims, any funds remaining in the Convenience Class
Reserve shall be transferred to the Distribution Reserve.
9.6 THE DISTRIBUTION RESERVE. On or after the Effective Date,
except as otherwise provided in Section 9.15 of this Plan, all Liquidating
Trust Assets remaining after the Administrative/Priority Claims Reserve,
the Fee Claims Reserve and the Liquidating Trust Administrative Reserve
have been funded shall be deposited into a Distribution Reserve. Except as
otherwise expressly provided in this Article 9 of the Plan all proceeds
received, recovered or earned by the Liquidating Trust shall be deposited
into the Distribution Reserve for the purpose of making Distributions on
account of Allowed Convenience Claims and Allowed Unsecured Claims required
under this Plan.
ARTICLE X
PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS
10.1 OBJECTION DEADLINE. As soon as practicable, but in no
event later than one hundred eighty (180) days after the Effective Date
(subject to extension by the Bankruptcy Court upon motion of the
Liquidating Trustee without notice or hearing), objections to Claims shall
be Filed with the Bankruptcy Court and served upon holders of each of the
Claims to which objections are made.
10.2 PROSECUTION OF DISPUTED CLAIMS. The Liquidating Trustee
shall have the exclusive right to object to the allowance, classification
or amount of any Claim Filed in any of the Reorganization Cases. The
Liquidating Trustee is authorized and empowered, but not required, to
resolve consensually any disputes regarding the allowance, classification
or amount of any Claim. All objections that are Filed and prosecuted as
provided herein shall be litigated to Final Order or compromised and
settled in accordance with Section 10.4 of this Plan.
10.3 DISPUTED CLAIM RESERVE. In determining the amount of
Distributions to be made under the Plan to holders of Allowed Claims, the
appropriate Distribution required by the Plan shall be made according to
estimates and subject to the provisions of the Plan. The Disputed Claim
Reserve shall be established for each Disputed Claim. The Liquidating
Trustee shall fund the Disputed Claim Reserve from the Liquidating Trust
Assets in an amount that reasonably approximates the Ratable Distribution
that would otherwise be made to such Claimholder assuming such Claim were
to be Allowed in the amount set forth on the Claimholder's proof of Claim
or as estimated pursuant to agreement with the Claimholder or order of the
Bankruptcy Court.
10.4 CLAIMS SETTLEMENT GUIDELINES. Notwithstanding any
requirement that may be imposed pursuant to Bankruptcy Rule 9019, from and
after the Effective Date all Claims and all claims that any of the Debtors
have asserted against other parties may be compromised and settled
according to the following procedures:
(a) Subject to subsection (b) this Section 10.4, the
following settlements or compromises do not require the review or approval
of the Bankruptcy Court or any other party in interest:
(i) The settlement or compromise of a Claim
pursuant to which such Claim is Allowed in an amount of $20,000 or less;
and
(ii) The settlement or compromise of a Claim where
the difference between the amount of the Claim listed on the Schedules and
the amount of the Claim proposed to be Allowed under the settlement or
compromise is $20,000 or less; and
(b) The following settlements or compromises shall be
submitted to the Bankruptcy Court for approval and, if the PEDC has been
appointed, notice such proposed settlement or compromise shall be served
upon counsel for the PEDC (or the members of the PEDC if the PEDC has not
retained counsel):
(i) Any settlement or compromise not described in
subsection (a) of this Section 10.4; and
(ii) Any settlement or compromise of a Claim or a
claim asserted by the Debtors or the Liquidating Trust involving an
"insider" as defined in Section 101(31) of the Bankruptcy Code.
10.5 ESTIMATION OF CLAIMS. The Liquidating Trustee may, at any
time, request that the Bankruptcy Court estimate any Disputed Claim
pursuant to Section 502(c) of the Bankruptcy Code regardless of whether the
Debtors, Creditors' Committee or Liquidating Trustee has previously
objected to such Claim or whether the Bankruptcy Court has ruled on any
such objection, and the Bankruptcy Court will retain jurisdiction to
estimate any Claim at any time during litigation concerning any objection
to any Claim, including during the pendency of any appeal relating to any
such objection. If the Bankruptcy Court estimates any Disputed Claim, that
estimated amount will constitute either the Allowed amount of such Claim or
a maximum limitation on such Claim, as determined by the Bankruptcy Court.
If the estimated amount constitutes a maximum limitation on such Claim, the
Liquidating Trustee may elect to pursue any supplemental proceedings to
object to any ultimate Distribution on such Claim. All of the objection,
estimation, settlement and resolution procedures set forth in the Plan are
cumulative and not necessarily exclusive of one another. Claims may be
estimated and subsequently compromised, settled, withdrawn or resolved by
any mechanism approved by the Bankruptcy Court.
ARTICLE XI.
DISTRIBUTIONS
11.1 NO DISTRIBUTION PENDING ALLOWANCE. Notwithstanding any
other provision of the Plan, no payment or Distribution shall be made with
respect to any Claim to the extent it is Disputed unless and until such
Disputed Claim becomes an Allowed Claim.
11.2 DISTRIBUTIONS AFTER ALLOWANCE. Distributions to each
holder of a Disputed Claim, to the extent that such Claim ultimately
becomes Allowed, shall be made in accordance with the provisions of the
Plan governing the Class of Claims to which such Claimholder belongs.
11.3 THIRD PARTY AGREEMENTS; SUBORDINATION. The Distributions
to the various classes of Claims hereunder shall not affect the right of
any Person to levy, garnish, attach, or employ any other legal process with
respect to such Distributions by reason of any claimed subordination
rights, or otherwise. All of such rights and any agreements relating
thereto, including, without express or implied limitation, subordination
rights arising out of contractual subordination provisions between and
among the Senior Notes and Senior Notes Indentures, on the one hand, and
the Junior Notes and the Junior Notes Indentures, on the other hand, shall
remain in full force and effect. Distributions made by the Liquidating
Trustee shall not be inconsistent with such contractual subordination
provisions and may be modified only by a Final Order directing that
Distributions be made other than as provided in the Plan and Confirmation
Order; provided, however, that neither the Liquidating Trust nor the
Liquidating Trustee (or any of its agents, representatives, professionals
or employees) shall be liable to any Person on account of Distributions
made in good faith which are ultimately determined to be inconsistent with
inter-creditor contractual subordination agreements or rights.
11.4 NO RECOURSE TO LIQUIDATING TRUST, LIQUIDATING TRUSTEE OR
REORGANIZED USN COMMUNICATIONS. Notwithstanding that the Allowed amount of
any particular Disputed Claim is reconsidered under the applicable
provisions of the Bankruptcy Code and Bankruptcy Rules or is Allowed in an
amount for which there is insufficient Cash in the relevant account to
provide a recovery equal to that received by other holders of Allowed
Claims in the relevant Class, no Claim holder shall have recourse to the
Debtors, the Liquidating Trust, the Liquidating Trustee, Reorganized USN
Communications or any of their respective professionals, or their
successors or assigns, or the holder of any other Claim, or any of their
respective property. However, nothing in the Plan shall modify any right of
a holder of a Claim under Section 502(j) of the Bankruptcy Code. THUS, THE
BANKRUPTCY COURT'S ENTRY OF AN ESTIMATION ORDER MAY LIMIT THE DISTRIBUTION
TO BE MADE ON INDIVIDUAL DISPUTED CLAIMS, REGARDLESS OF THE AMOUNT FINALLY
ALLOWED ON ACCOUNT OF SUCH DISPUTED CLAIMS.
11.5 NON-CASH PROPERTY. Any non-Cash property of the Estates
may be sold, transferred or abandoned by the Liquidating Trust. Notice of
such sale, transfer or abandonment shall be provided to the holders, if
any, of Secured Claims holding liens on such Assets. If, in the Liquidating
Trustee's judgment, such property cannot be sold in a commercially
reasonable manner, the Liquidating Trustee shall have the right to abandon
or otherwise dispose of such property, including by donation of such
property to a charity designated by the Liquidating Trustee. Except in the
case of willful misconduct, no party in interest shall have a cause of
action against any Debtor, any director, officer, employee, consultant or
professional of any Debtor, the Liquidating Trust, the Liquidating Trustee
or any director, officer, employee, consultant or professional of the
Liquidating Trust or Liquidating Trustee arising from or related to: (a)
the disposition of non-Cash property in accordance with this Section; or
(b) the investment of amounts by the Liquidating Trustee pursuant to
Section 9.11(k)(xvi) hereof.
11.6 TRANSMITTAL OF DISTRIBUTIONS AND NOTICES.
1. Any property or notice which a Person is or becomes entitled
to receive pursuant to the Plan may be delivered by regular mail, postage
prepaid, in an envelope addressed to that Person at the address indicated
on any notice of appearance Filed by that Person or his authorized agent
prior to the Effective Date. If no notice of appearance has been Filed,
notice shall be sent to the address indicated on a properly Filed proof of
Claim or, absent such a proof of Claim, the address set forth in the
relevant Schedule of Assets and Liabilities for that Person. Property
distributed in accordance with this Section shall be deemed delivered to
such Person regardless of whether such property is actually received by
that Person.
1. A holder of a Claim or Equity Interest may designate
a different address for notices and Distributions by notifying the
Liquidating Trustee, or with respect to a holder of a Notes Claim, the
appropriate indenture trustee for the indenture under which such Note Claim
arose, of that address in writing. Any change of address of a party
entitled to receive Distributions hereunder must be provided to the
Liquidating Trustee by registered mail in order to be effective. Such
notification shall be effective upon receipt.
2. DISTRIBUTIONS TO HOLDERS OF NOTES CLAIMS
(a) INDENTURE TRUSTEES AS CLAIMHOLDERS.
(i) The 14% Senior Notes Indenture Trustee shall be
deemed to be the sole holder of all Allowed 14% Senior Notes Claims and any
Distributions provided for in the Plan or the Liquidating Trust Agreement
on account of Allowed 14% Senior Notes Claims shall only be made to the 14%
Senior Notes Indenture Trustee.
(ii) The 14 5/8% Senior Notes Indenture Trustee
shall be deemed to be the sole holder of all Allowed 14 5/8% Senior Notes
Claims and any Distributions provided for in the Plan or the Liquidating
Trust Agreement on account of Allowed 14 5/8% Senior Notes Claims shall
only be made to the 14 5/8% Senior Notes Indenture Trustee.
(iii) The Convertible Notes Indenture Trustee shall
be deemed to be the sole holder of all Allowed Convertible Notes Claims.
(iv) The Consent Convertible Notes Indenture
Trustee shall be deemed to be the sole holder of all Allowed Consent
Convertible Notes Claims.
(b) OBLIGATION OF INDENTURE TRUSTEES TO TRANSMIT
DISTRIBUTIONS RECEIVED.
(i) The 14% Senior Notes Indenture Trustee shall
distribute, in accordance with 14% Senior Notes Indenture, all
Distributions, if any, received to the record holders of the 14% Senior
Notes as soon after the 14% Senior Notes Indenture Trustee's receipt of
such Distributions as is reasonably practicable, without prejudice to the
14% Senior Notes Indenture Trustee's rights under the 14% Senior Notes
Indenture to reimbursement or payment of fees, expenses and other charges.
(ii) The 14 5/8% Senior Notes Indenture Trustee shall
distribute, in accordance with 14 5/8% Senior Notes Indenture, all
Distributions, if any, received to the record holders of the 14 5/8% Senior
Notes as soon after the 14 5/8% Senior Notes Indenture Trustee's receipt of
such Distributions as is reasonably practicable, without prejudice to the
14 5/8% Senior Notes Indenture Trustee's rights under the 14 5/8% Senior
Notes Indenture to reimbursement or payment of fees, expenses and other
charges.
3. DISPUTED PAYMENT. If any dispute arises as to the identity
of a holder of an Allowed Claim who is to receive any Distribution, the
Liquidating Trustee may, in lieu of making such Distribution to such
Person, make such Distribution into an escrow account until the disposition
thereof shall be determined by Bankruptcy Court order or by written
agreement among the interested parties to such dispute.
4. UNCLAIMED PROPERTY. If any Distribution remains unclaimed
for a period of six months after it has been delivered (or attempted to be
delivered) in accordance with the Plan to the holder entitled thereto, such
Unclaimed Property shall be forfeited by such holder, whereupon all right,
title and interest in and to the Unclaimed Property shall immediately and
irrevocably vest in the Liquidating Trust, the holder of the Allowed Claim
previously entitled to such Unclaimed Property shall cease to be entitled
thereto, and such property shall be retained by the Liquidating Trust and
allocated pursuant to the Liquidating Trust Agreement.
5. WITHHOLDING TAXES AND EXPENSES OF DISTRIBUTION. Any
federal, state or local withholding taxes or other amounts required to be
withheld under applicable law shall be deducted from Distributions
hereunder. All Persons holding Claims shall be required to provide any
information necessary to effect the withholding of such taxes. In addition,
all Distributions under the Plan shall be net of the actual and reasonable
costs of making such Distributions.
6. METHOD OF CASH DISTRIBUTIONS. Any Cash payment to be made
by the Liquidating Trust pursuant to the Plan will be in U.S. dollars and
may be made, at the sole discretion of the Liquidating Trust, by draft,
check, wire transfer, or as otherwise required or provided in any relevant
agreement or applicable law.
7. FRACTIONAL CENTS. When any payment of a fraction of a cent
would otherwise be called for, the actual payment shall reflect a rounding
of such fraction to the nearest whole cent (rounding down in the case of
$0.50 or less and rounding up in the case of more than $0.50)
8. DISTRIBUTIONS ON NON-BUSINESS DAYS. Any payment or
Distribution due on a day other than a Business Day shall be made, without
interest, on the next Business Day.
9. NO DISTRIBUTION IN EXCESS OF ALLOWED AMOUNT OF CLAIM.
Notwithstanding anything to the contrary herein, no holder of an Allowed
Claim shall receive in respect of such Claim any Distribution (of a value
set forth herein or in the Disclosure Statement) in excess of the Allowed
amount of such Claim. Except as otherwise expressly provided herein, no
Claim shall be Allowed to the extent that it is for postpetition interest.
10. DE-MINIMIS DISTRIBUTIONS. No Distributions of less than
twenty-five dollars ($25.00) shall be made from the Liquidating Trust to
the holder of any Claim unless a request therefore is made in writing to
the Liquidating Trustee.
ARTICLE XII.
EFFECTS OF CONFIRMATION
12.1 DISCHARGE. Pursuant to Sections 524 and 1141(d) of the
Bankruptcy Code, except as expressly provided in this Plan and the
Confirmation Order, the Distributions and other rights or treatment of
Claims and Equity Interests under the Plan will be in exchange for, and in
complete satisfaction, discharge and release of, all Claims and termination
of all Equity Interests of any nature whatsoever, including any interest
accrued thereon from and after the Petition Date, against the Debtors, or
any of their Estates, Assets, properties or interests in property,
regardless of whether any property shall have been distributed or retained
pursuant to the Plan or on account of such Claim or Equity Interest. Except
as otherwise expressly provided in the Plan or the Confirmation Order,
entry of the Confirmation Order acts as a discharge effective as of the
Effective Date of any and all Claims against and Equity Interests in
Debtors or any of their assets that arose at any time prior to the entry of
the Confirmation Order. Reorganized USN Communications shall not be
responsible for any obligations of the Debtors except those expressly
assumed by Reorganized USN Communications. The discharge shall be effective
as to each Claim and Equity Interest except as otherwise expressly provided
in the Confirmation Order, regardless of whether:
(a) a proof of Claim based on such debt or
liability is Filed or deemed Filed under Section 501 of the
Bankruptcy Code;
(b) a Claim based on such Claim, Equity Interest,
debt or liability is Allowed; or
(c) the holder of a Claim based on such Claim,
Equity Interest, debt or liability has accepted the Plan.
12.11 TERM OF BANKRUPTCY INJUNCTION OR STAYS. Except as
expressly provided in this Plan or the Confirmation Order, all injunctions
or stays provided for in the Reorganization Cases under Section 105 or 362
of the Bankruptcy Code, or otherwise, and is in existence on the
Confirmation Date, shall remain in full force and effect until the
Effective Date.
12.12 WAIVER OF CLAIMS. As of the Confirmation Date, but
subject to the occurrence of the Effective Date, and except as otherwise
expressly provided in this Plan or the Confirmation Order, all Persons who,
directly or indirectly, have held, hold or may hold Claims against or
Equity Interests in the Debtors shall be deemed, by virtue of their receipt
of Distributions and/or other treatment contemplated under the Plan, to
have forever covenanted with the Debtors, Reorganized USN Communications
and with each of the Released Parties to waive, release and not to (a) sue,
or otherwise seek any recovery from the Debtors, Reorganized USN
Communications or any Released Party, whether for tort, contract,
violations of federal or state securities laws, or otherwise, based upon
any act or occurrence or failure to act taken from the beginning of time
through the Effective Date arising out of the business or affairs of the
Debtors, or (b) assert any Claim, obligation, right, cause of action and
liability which any such holder of a Claim against or Equity Interest in
any Debtor has or may assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, based in whole or in part upon
any act or omission, transactions or the occurrence taking place from the
beginning of time through the Effective Date in any way relating to the
Debtors, the Reorganization Cases, or the Plan.
12.13 DEBTORS' RELEASES. Except as expressly provided in the
Confirmation Order and this Plan, each Debtor hereby waives, releases and
discharges all Released Parties from any claim (as such term "claim" is
defined in Section 101(5) of the Bankruptcy Code) arising from the
beginning of time through the Effective Date related to such Released
Party's acts or omissions to act (including, but not limited to, any claims
arising out of any alleged fiduciary or other duty) as an agent, advisor,
accountant, investment banker, consultant, attorney or other representative
(including any current or former director, officer, employee, member or
professional) of any Debtor or Affiliate thereof, in that capacity. Any
such release shall additionally act as an injunction against any
Claimholder or holder of an Equity Interest of any Debtor from commencing
or continuing any action, employment of process or act to collect, offset
or recover any claim that is so released.
12.14 INJUNCTIONS. The Confirmation Order shall provide, among
other things, that all Persons who have held, hold or may hold Claims
against or Equity Interests in any of the Debtors are, with respect to any
such Claims or Equity Interests, permanently enjoined from and after the
Confirmation Date from taking any of the following actions (other than
actions to enforce any rights or obligations under the Plan): (i)
asserting, commencing, conducting or continuing in any manner, directly or
indirectly, any suit, action or other proceeding of any kind (including,
without limitation, any proceeding in a judicial, arbitral, administrative
or other forum) against or affecting the any of the Debtors, the
Liquidating Trust, any of the Released Parties, Reorganized USN
Communications, the Buyer, the Wireless Companies or any of their
Affiliates or property; (ii) enforcing, levying, attaching (including,
without limitation, any prejudgment attachment), collecting or otherwise
recovering by any manner or means, whether directly or indirectly, any
judgment, award, decree or order against any of the Debtors, the
Liquidating Trust, any of the Released Parties, Reorganized USN
Communications or any of their Affiliates or property; (iii) creating,
perfecting or otherwise enforcing in any manner, directly or indirectly,
any Encumbrance of any kind against any of the Debtors, the Liquidating
Trust, any of the Released Parties, Reorganized USN Communications, the
Buyer, the Wireless Companies or any of their Affiliates or property; (iv)
asserting any right of setoff, subrogation, or recoupment of any kind,
directly or indirectly, against any obligation due any of the Debtors, the
Liquidating Trust, any of the Released Parties, Reorganized USN
Communications, the Buyer, the Wireless Companies or any of their
affiliates or property; (v) acting or proceeding in any manner, in any
place whatsoever, that does not conform to or comply with the provisions of
the Plan; and (vi) prosecuting or otherwise asserting any right, claim or
cause of action released pursuant to the Plan. Any Person injured by any
willful violation of such injunction shall recover actual damages,
including costs and attorneys' fees, and, in appropriate circumstances, may
recover punitive damages, from the willful violator.
12.15 EXCULPATION. Except as otherwise expressly provided in
this Plan or the Confirmation Order, the Debtors, the Released Parties, the
Creditors' Committee and members thereof (solely with respect to each
member of the Creditors' Committee's conduct in furtherance of its, his or
her duties as a member of the Creditors' Committee, and not with respect to
the actions of such members as individual creditors), the PEDC (if
appointed, and then solely with respect to each member of the PEDC's
conduct in furtherance of its, his or her duties as a member of the PEDC,
and not with respect to the actions of such members as individual
creditors), the Liquidating Trustee, Reorganized USN Communications, the
Buyer and any of such parties' respective present or former members,
officers, directors, employees, advisors, attorneys, representatives,
financial advisors, investment bankers or agents and any of such parties'
successors and assigns, shall not have or incur, and are hereby released
from, any claim, obligation, cause of action or liability to one another or
to any Claimholder or holder of any Equity Interest, or any other party in
interest, or any of their respective agents, employees, representatives,
financial advisors, attorneys or affiliates, or any of their successors or
assigns, for any act or omission in connection with, relating to or arising
out of the Debtors' Reorganization Cases, the pursuit of confirmation of
the Plan, the consummation of the Plan, the administration of the Plan or
the property to be distributed under the Plan, except for their willful
misconduct, and in all respects shall be entitled to reasonably rely upon
the advice of counsel with respect to their duties and responsibilities
under the Plan.
Notwithstanding any other provision of this Plan, no
Claimholder or holder of an Equity Interest, or other party in interest,
none of the their respective agents, employees, representatives, financial
advisors, attorneys or affiliates, and no successors or assigns of the
foregoing shall have any right of action against the Debtors, any of the
Released Parties, the Creditors' Committee and members thereof (solely with
respect to each member of the Creditors' Committee's conduct in furtherance
of its, his or her duties as a member of the Creditors' Committee, and not
with respect to the actions of such members as individual creditors), the
PEDC (if appointed, and then solely with respect to each member of the
PEDC's conduct in furtherance of its, his or her duties as a member of the
PEDC, and not with respect to the actions of such members as individual
creditors), the Liquidating Trustee, Reorganized USN Communications, the
Buyer and any of such parties' respective present or former members,
officers, directors, employees, advisors, attorneys, representatives,
financial advisors, investment bankers or agents and any of such parties'
successors and assigns, for any act or omission in connection with,
relating to or arising out of the Reorganization Cases, the pursuit of
confirmation of the Plan, the consummation of the Plan, the administration
of the Plan or the property to be distributed under the Plan, except for
their willful misconduct.
12.16 PRESERVATION OF CERTAIN CLAIMS. Nothing in this Article
12 of the Plan shall discharge, release, limit or impair the rights of the
Debtors or Liquidating Trust in respect of: (a) any Hatten Fiduciary Claim
against any current or former officer or director; provided, however, no
current or former officer or director shall have liability in excess of the
Available D&O Insurance Proceeds to any Person (including, without
limitation, the Debtors, the Estates and/or the Liquidating Trust) arising
out of or related to any Hatten Fiduciary Claim; and (b) any claim, cause
of action, right, title and interest of the Debtors or the Liquidating
Trust arising under or related to the Purchase Agreement (or an Alternative
Purchase Agreement, as the case may be), including, without limitation, the
right to receive the Purchase Consideration (or the Alternative Purchase
Consideration, as the case may be).
12.17 SETOFFS. In the event the Debtors or the Liquidating
Trust have a claim of any nature whatsoever against a Claimholder, the
Debtors or the Liquidating Trust may, but are not required to, set off
against such Claim (and any Distributions or other rights to receive
property arising out of such Claim under this Plan) the Debtors' or the
Liquidating Trust's claim against such Claimholder, unless any such claim
is or will be released under the Plan, subject to the provisions of Section
553 of the Bankruptcy Code. Neither the failure to set off nor the
allowance of any Claim under the Plan shall constitute a waiver or release
by the Debtors or the Liquidating Trust of any claims that the Debtor or
the Liquidating Trust have against a Claimholder.
12.18 RETENTION AND ENFORCEMENT OF CLAIMS AND EQUITY INTERESTS.
Upon the occurrence of the Effective Date, pursuant to Section 1123(b)(3)
of the Bankruptcy Code, except as provided herein, the Liquidating Trust
will have the exclusive right to enforce any and all causes of action
against any Person and rights of the Debtors that arose before or after the
Petition Date, including but not limited to the rights and powers of a
trustee and debtor-in-possession, against any Person whatsoever, including
but not limited to all avoidance powers granted to the Debtors under the
Bankruptcy Code and all causes of action and remedies granted pursuant to
Sections 502, 510, 541, 544, 545, 547 through 551 and 553 of the Bankruptcy
Code.
12.19 PRESERVATION OF INSURANCE. The provisions of this Plan
shall not diminish or impair the enforceability of any Insurance Policies,
including, without limitation, the D&O Insurance, that may cover Claims
against the Debtors or any other Person.
ARTICLE XIII.
SUBSTANTIVE CONSOLIDATION
13.1 SUBSTANTIVE CONSOLIDATION. The Plan contemplates and is
predicated upon entry of the Substantive Consolidation Order, which shall
effect the substantive consolidation of the Reorganization Cases into a
single chapter 11 case solely for the purposes of all actions associated
with confirmation and consummation of the Plan. On the Confirmation Date or
such other date as may be set by a Final Order of the Bankruptcy Court, but
subject to the occurrence of the Effective Date: (i) all Intercompany
Claims by and among the Debtors shall be eliminated; (ii) all Assets and
liabilities of the Debtors shall be merged or treated as though they were
merged; (iii) all prepetition cross-corporate guarantees of the Debtors
shall be eliminated; (iv) all Claims based upon guarantees of collection,
payment or performance made by one or more Debtors as to the obligations of
another Debtor or of any other Person shall be discharged, released and of
no further force and effect; (v) any obligation of any Debtor and all
guarantees thereof executed by one or more of the Debtors shall be deemed
to be one obligation of the consolidated Debtors; (vi) any Claims Filed or
to be Filed in connection with any such obligation and such guarantees
shall be deemed one Claim against the consolidated Debtors; and (vii) each
and every Claim Filed in the individual Reorganization Case of any of the
Debtors shall be deemed Filed against the consolidated Debtors in the
consolidated Reorganization Cases and shall be deemed a single obligation
of all of the Debtors under the Plan on and after the Confirmation Date;
provided, however, that nothing herein shall affect the obligations of each
of the Debtors under the Plan.
13.2 ORDER GRANTING SUBSTANTIVE CONSOLIDATION. Unless
substantive consolidation has been approved by a prior order of the
Bankruptcy Court, this Plan shall serve as a motion seeking entry of an
order substantively consolidating the Reorganization Cases. Unless an
objection to substantive consolidation is made in writing by any creditor
affected by the Plan as herein provided on or before five (5) days prior to
the date that is fixed by the Bankruptcy Court as the last date on which
acceptances to this Plan may be received, or such other date as may be
fixed by the Bankruptcy Court, the Substantive Consolidation Order (which
may be the Confirmation Order) may be entered by the Bankruptcy Court. In
the event any such objections are timely Filed, a hearing with respect
thereto shall be scheduled by the Bankruptcy Court, which hearing may, but
need not, coincide with the Confirmation Hearing.
ARTICLE XIV.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
14.1 ASSUMPTION OR REJECTION OF EXECUTORY CONTRACTS AND
UNEXPIRED LEASES
(a) On the Effective Date, all executory contracts and
unexpired leases of the Estates shall be rejected by the Debtors pursuant
to the provisions of Sections 365 and 1123 of the Bankruptcy Code, except:
(i) any executory contract or unexpired lease that is the subject of a
separate motion to assume or assume and assign Filed pursuant to Section
365 of the Bankruptcy Code by the Debtors before the entry of the
Confirmation Order, provided, however, that upon denial or withdrawal of
any such motion, such executory contract or unexpired lease shall
automatically be rejected as if rejected hereunder as of the Effective
Date; (ii) executory contracts and unexpired leases listed in the Executory
Contract Schedule to be served and Filed by the Debtors at least 10 days
before the Confirmation Hearing which shall provide, as of the Effective
Date, for the assumption, or assumption and assignment, of such executory
contracts or unexpired leases; (iii) all executory contracts or unexpired
leases assumed under this Plan or by order of the Bankruptcy Court entered
before the Confirmation Date and not subsequently rejected pursuant to an
order of the Bankruptcy Court; (iv) any executory contract or unexpired
lease set forth in the Executory Contract Schedule that is or becomes the
subject of a dispute over the amount or manner of cure pursuant to Section
14.3 hereof, if the Debtors or the Liquidating Trust, as the case may be,
make or makes a motion to reject such contract or lease based upon the
existence of such dispute at any time; and (v) any agreement, obligation,
security interest, transaction or similar undertaking that the Debtors
believe is not an executory contract or lease that is later determined by
the Bankruptcy Court to be an executory contract or unexpired lease that is
subject to assumption or rejection under Section 365 of the Bankruptcy
Code, which agreements shall be subject to assumption or rejection within
30 days of any such determination. Any executory contract or unexpired
lease assumed by the Liquidating Trust pursuant to or in accordance with
the provisions of this Section shall become property of the Liquidating
Trust, and be subject to assignment by the Liquidating Trustee in
accordance with Section 365 of the Bankruptcy Code within 180 days after
the Effective Date, irrespective of any limitation or prohibition contained
in such executory contract or unexpired lease. The Liquidating Trust shall
have the right to amend the Executory Contract Schedule within 60 days
after the Effective Date, and will provide notice of any amendments to the
Executory Contract Schedule to the parties to the executory contracts or
unexpired leases affected thereby. Any order entered after the Confirmation
Date by the Bankruptcy Court, after notice and hearing, authorizing the
rejection of an executory contract or unexpired lease shall cause such
rejection to be a prepetition breach under Sections 365(g) and 502(g) of
the Bankruptcy Code, as if such relief were granted and such order were
entered prior to the Confirmation Date.
(b) Listing a contract or lease in the Executory Contract
Schedule shall not constitute an admission by the Debtors or the
Liquidating Trust that such contract or lease, including related
agreements, is an executory contract or unexpired lease or that the Debtors
or the Liquidating Trust have any liability thereunder.
(c) Subject to subsection (a) of this Section 14.1 and
Section 14.3 below, the Confirmation Order shall constitute an order of the
Bankruptcy Court approving the rejection of executory contracts and
unexpired leases the rejection of which is provided for in subsection (a)
of Section 14.1 hereof pursuant to Section 365 and 1123 of the Bankruptcy
Code and such rejection shall be deemed effective as of the Effective Date.
14.2 BAR DATE FOR REJECTION DAMAGES. If the rejection of any
executory contract or unexpired lease under the Plan gives rise to a Claim
by the non-Debtor party or parties to such contract or lease, such Claim,
to the extent that it is timely Filed and is an Allowed Claim, shall be
classified as a Class 4 Unsecured Claim; provided, however, that the
Unsecured Claim arising from such rejection shall be forever barred and
shall not be enforceable against the Debtors, the Liquidating Trust, the
Liquidating Trustee, their successors or properties, unless a proof of such
Claim is Filed and served on the Liquidating Trust within forty-five (45)
days after the date of notice of the entry of the order of the Bankruptcy
Court rejecting the executory contract or unexpired lease which may
include, if applicable, the Confirmation Order.
14.3 CURE/OBJECTIONS TO ARTICLE XIV. On the Effective Date, the
leases and executory contracts listed on the Executory Contract Schedule
shall be deemed assumed pursuant to Section 365 of the Bankruptcy Code
subject to subsection (a) of Section 14.1 hereof. The Executory Contract
Schedule shall list the unexpired leases and executory contracts to be
assumed, and the cure amounts necessary for such assumption. If a party to
an unexpired lease or executory contract disagrees with (a) the cure amount
stated or opposes the assumption of that lease or contract on any ground,
including the inability to provide adequate assurance of future performance
or (b) any term or provision of Article XIV of the Plan, such party must
File and serve an objection at least seven (7) days prior to the
Confirmation Date. All such objections shall be determined at the
Confirmation Hearing. THE FAILURE TIMELY TO FILE AND SERVE SUCH AN
OBJECTION SHALL CONSTITUTE A WAIVER OF ANY OBJECTION TO SUCH ASSUMPTION OR
THE CURE AMOUNT AND THE WAIVING PARTY, ITS SUCCESSORS AND ASSIGNS SHALL BE
FOREVER BARRED FROM CONTESTING ASSUMPTION OR ASSERTING A CLAIM FOR
ADDITIONAL AMOUNTS AGAINST THE DEBTORS OR THEIR ESTATES, SUCCESSORS OR
ASSIGNS.
At the election of the Liquidating Trust, any monetary defaults
under an unexpired lease or executory contract to be assumed under this
Plan shall be satisfied by the Liquidating Trust from the Liquidating Trust
Administrative Reserve pursuant to Section 365(b)(1) of the Bankruptcy Code
in one of the following ways: (a) by payment of the default amount in Cash
on or as soon as practicable after the later to occur of (i) thirty (30)
days after determination of the cure amount; (ii) the Effective Date or
such other period as may be ordered by the Bankruptcy Court; or (b) on such
other terms as may be agreed to by the parties to such unexpired leases or
executory contracts. If a dispute occurs regarding the cure amount, the
cure payments required by Section 365(b)(1) of the Bankruptcy Code shall be
made following the entry of a Final Order resolving the dispute and
approving assumption.
Any contract or lease assumed pursuant hereto may be assigned
by the Liquidating Trust within 180 days after the Effective Date, upon
notice to any third party to such contract or lease, in accordance with
Section 365 of the Bankruptcy Code.
ARTICLE XV.
CONDITIONS PRECEDENT
15.1 CONDITIONS TO CONFIRMATION. The following are conditions
precedent to confirmation of this Plan that may be satisfied or waived in
accordance with Section 15.3 of this Plan:
(a) the Bankruptcy Court shall have approved by Final
Order the Disclosure Statement with respect to this Plan in form and
substance reasonably acceptable to the Debtors; and
(b) the Confirmation Order shall be in form and substance
reasonably acceptable to the Debtors.
15.2 CONDITIONS TO THE EFFECTIVE DATE. This Plan may not be
consummated, and the Effective Date shall not occur unless and until each
of the following conditions shall have been either satisfied or waived
pursuant to Section 15.3 of this Plan:
(a) the Confirmation Order shall have been entered by the
Bankruptcy Court, shall be a Final Order and no request for revocation of
the Confirmation Order under Section 1144 of the Bankruptcy Code shall have
been made, or, if made, shall remain pending; and
(b) all necessary consents, authorizations and approvals
shall have been given for the transfers of property and the payments
provided for or contemplated by the Plan.
15.3 WAIVER OF CONDITIONS TO CONFIRMATION OR CONSUMMATION. The
Debtors may waive any of the conditions set forth in Sections 15.1 and 15.2
of the Plan in Writing executed by each of them and without notice and a
hearing. Additionally, the relevant Debtors' benefits under the "mootness
doctrine" shall be unaffected by any provision hereof. The failure to
satisfy any condition may be asserted by the Debtors regardless of the
circumstances giving rise to the failure of such condition to be satisfied
(including, without limitation, any act, action, failure to act or inaction
by any of the Debtors). If the Debtors fail to assert the non-satisfaction
of any such conditions, such failure shall not be deemed a waiver of any
other rights hereunder.
ARTICLE XVI.
ADMINISTRATIVE PROVISIONS
16.1 RETENTION OF JURISDICTION. Notwithstanding confirmation of
the Plan or occurrence of the Effective Date, the Bankruptcy Court shall
retain such jurisdiction as is legally permissible, including, without
limitation, for the following purposes:
(a) To determine the allowability, classification, or
priority of Claims upon objection by the Debtors, the, the Liquidating
Trust, PEDC or any other party in interest entitled to File an objection,
and the validity, extent, priority and nonavoidability of consensual and
nonconsensual liens and other encumbrances;
(b) To issue injunctions or take such other actions or
make such other orders as may be necessary or appropriate to restrain
interference with the Plan or its execution or implementation by any
Person, to construe and to take any other action to enforce and execute the
Plan, the Confirmation Order, or any other order of the Bankruptcy Court,
to issue such orders as may be necessary for the implementation, execution,
performance and consummation of the Plan and all matters referred to
herein, and to determine all matters that may be pending before the
Bankruptcy Court in the Reorganization Cases on or before the Effective
Date with respect to any Person;
(c) To protect the property of the Estates, including,
without limitation, Litigation Claims (and further including, without
limitation all Avoidance Claims, Hatten Transaction Claims and Hatten
Fiduciary Claims), from claims against, or interference with, such
property, including actions to quiet or otherwise clear title to such
property or to resolve any dispute concerning liens, security interest or
encumbrances on any property of the Estates;
(d) To determine any and all applications for allowance
of Fee Claims;
(e) To determine any Priority Tax Claims, Priority
Claims, Administrative Claims or any other request for payment of claims or
expenses entitled to priority under Section 507(a) of the Bankruptcy Code;
(f) To resolve any dispute arising under or related to
the implementation, execution, consummation or interpretation of the Plan
and the making of Distributions hereunder or under the Liquidating Trust
Agreement;
(g) To determine any and all motions related to the
rejection, assumption or assignment of executory contracts or unexpired
leases, or to determine any motion to reject an executory contract or
unexpired lease pursuant to Section 14.1 of the Plan;
(h) To determine all applications, motions, adversary
proceedings, contested matters, actions, and any other litigated matters
instituted in and prior to the closing of the Reorganization Cases,
including any remands;
(i) To enter a Final Order closing the Reorganization
Cases;
(j) To modify the Plan under Section 1127 of the
Bankruptcy Code, remedy any defect, cure any omission, or reconcile any
inconsistency in the Plan or the Confirmation Order so as to carry out its
intent and purposes;
(k) To issue such orders in aid of consummation of the
Plan and the Confirmation Order notwithstanding any otherwise applicable
non-bankruptcy law, with respect to any Person, to the full extent
authorized by the Bankruptcy Code;
(l) To enable the Liquidating Trust to prosecute any and
all proceedings to set aside liens or encumbrances and to recover any
transfers, Assets, properties or damages to which the Debtors may be
entitled under applicable provisions of the Bankruptcy Code or any other
federal, state or local laws except as may be waived pursuant to the Plan;
(m) To determine any tax liability pursuant to Section
505 of the Bankruptcy Code;
(n) To enter and implement such orders as may be
appropriate in the event the Confirmation Order is for any reason stayed,
revoked, modified or vacated;
(o) To resolve any disputes concerning whether a Person
had sufficient notice of the Reorganization Cases, the applicable Claims
bar date, the hearing to consider approval of the Disclosure Statement or
the Confirmation Hearing or for any other purpose;
(p) To resolve any dispute or matter arising under or in
connection with any order of the Bankruptcy Court entered in the
Reorganization Cases;
(q) To authorize sales of Assets as necessary or
desirable and resolve objections, if any, to such sales;
(r) To hear and resolve Litigation Claims, including,
without limitation, the Avoidance Claims, Hatten Transaction Claims and
Hatten Fiduciary Claims;
(s) To resolve any disputes concerning any release of a
nondebtor hereunder or the injunction against acts, employment of process
or actions against such nondebtor arising hereunder;
(t) To approve any Distributions, or objections thereto,
under the Plan;
(u) To approve any Claims settlement entered into or
offset exercised by the Liquidating Trust;
(v) To oversee any dispute concerning improper or
excessive draws under letters of credit issued for the account of the
Debtors; and
(w) To determine such other matters, and for such other
purposes, as may be provided in the Confirmation Order or the Liquidating
Trust Agreement, or as may be authorized under provisions of the Bankruptcy
Code.
16.2 AMENDMENTS TO PLAN.
(a) PRECONFIRMATION AMENDMENT. The Debtors may modify the
Plan at any time prior to the entry of the Confirmation Order, provided
that the Plan, as modified, and the disclosure statement pertaining thereto
meet applicable Bankruptcy Code requirements.
(b) POSTCONFIRMATION AMENDMENT NOT REQUIRING
RESOLICITATION. After the entry of the Confirmation Order, the Debtors or
Liquidating Trustee may modify the Plan to remedy any defect or omission or
to reconcile any inconsistencies in the Plan or in the Confirmation Order,
as may be necessary to carry out the purposes and effects of the Plan,
provided that: (i) the Debtors or the Liquidating Trustee obtains approval
of the Bankruptcy Court for such modification, after notice and a hearing;
and (ii) such modification shall not materially and adversely affect the
interests, rights, treatment or Distributions of any Class of Allowed
Claims or Equity Interests under the Plan. Any waiver under Section 15.3
hereof shall not be considered to be a modification of the Plan.
(c) POSTCONFIRMATION/PRECONSUMMATION AMENDMENT REQUIRING
RESOLICITATION. After the Confirmation Date and before substantial
consummation of the Plan, the Debtors or the Liquidating Trustee may modify
the Plan in a way that materially or adversely affects the interests,
rights, treatment, or Distributions of a Class of Claims or Equity
Interests, provided that: (i) the Plan, as modified, meets applicable
Bankruptcy Code requirements; (ii) Bankruptcy Court approval is obtained
for such modification, after notice and a hearing; (iii) such modification
is accepted by at least two-thirds in amount, and more than one-half in
number, of Allowed Claims or Equity Interests voting in each Class affected
by such modification; and (iv) the Debtors and/or the Liquidating Trustee,
as applicable, complies with Section 1125 of the Bankruptcy Code with
respect to the Plan as modified.
16.3 SUCCESSORS AND ASSIGNS. The rights, benefits and
obligations of any Person named or referred to in the Plan shall be binding
on, and shall inure to the benefit of, the heirs, executors,
administrators, successors and/or assigns of such Person.
16.4 GOVERNING LAW. Except to the extent that the Bankruptcy
Code, Bankruptcy Rules or other federal laws apply, the rights and
obligations arising under this Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware, without
giving effect to principles of conflicts of law.
16.5 CONTROVERSIES CONCERNING IMPAIRMENT. If a controversy
arises as to whether any Claim or Equity Interest or any Class of Claims or
Equity Interests are Impaired under the Plan, the Bankruptcy Court, after
notice and a hearing, shall determine such controversy before the
Confirmation Date.
16.6 EXEMPTION FROM TRANSFER TAXES. Pursuant to Section 1146(c)
of the Bankruptcy Code, the issuance, transfer, or exchange of notes or
equity securities under the Plan by the Debtors or the Liquidating Trustee,
the creation of any mortgage, deed of trust, or other security interest,
the making or assignment of any lease or sublease, or the making or
delivery of any deed or instrument of transfer under, in furtherance of, or
in connection with the Plan, including, without express or implied
limitation, the transfers to the Buyer pursuant to the Purchase Agreement,
the transfers to an Alternative Buyer under an Alternative Purchase
Agreement or any transfers by the Liquidating Trust, shall not be subject
to any stamp, real estate transfer, mortgage recording, or other similar
tax.
16.7 CORPORATE ACTION. The dissolution of the Debtors and any
other matters provided for under the Plan involving the corporate or entity
structure of any Debtor or corporate action, as the case may be, to be
taken by or required of any Debtor shall be deemed to have occurred and be
effective as provided herein and shall be authorized and approved in all
respects, without any requirement of further action by stockholders or
directors of any of the Debtors or the Liquidating Trust, as the case may
be.
16.8 EFFECTUATING DOCUMENTS AND FURTHER TRANSACTIONS. Each
Debtor and the Liquidating Trust shall be authorized to execute, deliver,
File, or record such documents, contracts, instruments, releases, and other
agreements and take such other actions as may be necessary to effectuate
and further evidence the terms and conditions of the Plan. On or before the
Effective Date, the Debtors shall File with the Bankruptcy Court such
agreements and other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the Plan.
16.9 CONFIRMATION ORDER AND PLAN CONTROL. To the extent the
Confirmation Order and/or this Plan is inconsistent with the Disclosure
Statement, the Liquidating Trust Agreement, any other agreement entered
into between or among any Debtors, or any of them and any third party, the
Plan controls the Disclosure Statement and any such agreements and the
Confirmation Order (and any other orders of the Bankruptcy Court) control
the Plan.
16.10 NOTICES. All notices or requests in connection with the
Plan shall be in writing and will be deemed to have been given when
received by mail and addressed to:
(a) if to the Debtors:
USN Communications, Inc.
10 South Riverside Plaza
Suite 1810
Chicago, Illinois 60606
Attn: J. Thomas Elliott
with copies to:
Morris, Nichols, Arsht and Tunnell
1201 Market Street
Wilmington, Delaware 19801
Attn: Robert J. Dehney, Esquire
-and-
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Attn: John Wm. Butler, Jr., Esquire
(b) If to the Creditors' Committee, the PEDC, if
appointed, or the Liquidating Trustee:
[Liquidating Trustee]
[Address 1]
[Address 2]
[Address 3]
with a copy to:
Foley & Lardner
One IBM Plaza, Suite 3300
330 North Wabash Avenue
Chicago, Illinois 60611-3608
Attn: Mark Prager, Esquire
-and-
Saul Ewing Remick & Saul LLP
222 Delaware Avenue, Suite 1200
P.O. Box 1266
Wilmington, Delaware 19899
Attn: Mark Minuti, Esquire
16.11 NO ADMISSIONS. Notwithstanding anything herein to the
contrary, nothing contained in the Plan shall be deemed an admission by the
Debtors or the Liquidating Trust with respect to any matter set forth
herein, including, without limitation, liability on any Claim or the
propriety of a Claim's classification.
Dated:December ___, 1999
USN COMMUNICATIONS, INC.
By: /s/ J. Thomas Elliott
---------------------------------------
Name: J. Thomas Elliott
Title: Authorized Representative of
USN Communications, Inc. and
Each of the Debtors Herein
On behalf of itself and the following
Debtors:
US NETWORK CORPORATION
FONENET/OHIO, INC.
USN COMMUNICATIONS LONG DISTANCE, INC.
USN COMMUNICATIONS VIRGINIA, INC.
USN COMMUNICATIONS MAINE, INC.
QUEST UNITED, INC.
USN COMMUNICATIONS ATLANTIC, INC.
USN SOLUTIONS, INC.
USN COMMUNICATIONS SOUTHWEST, INC.
USN COMMUNICATIONS WEST, INC.
USN COMMUNICATIONS MIDWEST, INC.
USN COMMUNICATIONS NORTHEAST, INC.
EXHIBIT "A"
(To Plan)
EXHIBIT "B"
(To Plan)
[TO COME]
EXHIBIT "C"
(To Plan)
[TO COME]
EXHIBIT "D"
(To Plan)
[TO COME]
EXHIBIT "E"
(To Plan)
[TO COME]
