EMPLOYEE WAGE CLAIM OBJECTION PROCEDURES

I. PROCEDURES

The following procedures (these "Procedures") shall apply to all Wage Claims (as defined below) that have been filed by or on behalf of Employees or that have been scheduled in the jointly administered Chapter 11 cases of Mercury Companies, Inc. and its debtor affiliates (collectively, the "Debtors") and objections to such Wage Claims. For purposes of these Procedures, "Wage Claims" are claims for wages (whether such claim is a general unsecured claim or is entitled to priority pursuant to 11 U.S.C. § 507(a)(4)), vacation pay, expenses, automobile allowance, commissions, notary fees, bonuses and/or damages for an alleged breach of employment agreement.

A link to these Procedures and frequently asked questions shall be provided on the website maintained by the Debtors' claims agent, The Garden City Group ("GCG"), at
http://www.mercurycompaniesbankruptcy.com.

A. Application of Procedures

  1. These Procedures shall apply to objections to all Wage Claims.

  2. The Debtors will also follow Section I.B. of these Procedures for Wage Claims to which the Debtors have no objection.

  3. These Procedures shall not apply to any claims with respect to (a) a contribution to a 401(k) plan; (b) funds due pursuant to a class action settlement; (c) the deferred compensation plan of Mercury Companies Inc.; or (d) medical or other expenses incurred as a result of Mercury Companies, Inc. terminating its benefits plans.

B. Notice of Allowance and/or Disallowance of Wage Claims

  1. The Debtors shall mail a Notice of Proposed Allowance and/or Disallowance of Wage Claims in substantially the form attached hereto as Annex 1 (the "Notice") to each Employee who has a Wage Claim (whether scheduled or the subject of a Proof of Claim). Among other things, the Notice shall:

    1. state the amount of the Wage Claim the Debtors propose to allow (i) as a priority claim pursuant to 11 U.S.C. §507(a)(4), and (ii) as a general unsecured claim;

    2. identify the Debtor against whom the Debtors believe the Wage Claim should be allowed;

    3. state that the Debtors object to any Wage Claim that is (i) inconsistent with the amounts and/or priority the Debtors propose to be allowed and/or (ii) filed against a Debtor other than the Debtor against whom the Debtors believe the Wage Claim should be allowed;

    4. explain that, if the Employee agrees with the proposed treatment of his/her Wage Claim, the Employee does not have to respond to the Notice;

    5. identify a response deadline and the response procedures if the Employee does not agree with the Debtors' proposed treatment of his/her Wage Claim, including providing a form of response that will be mailed with the Notice (the "Response");

    6. state that if the Employee fails to respond, the Court may enter an order allowing the Wage Claim as proposed by the Debtors;

    7. describe the process for the Debtors and the Employee to attempt to resolve the dispute over the Wage Claim;

    8. notify the Employee that, if the dispute is not resolved, the Court will set a hearing and the Employee will be notified of the date, time and place of the hearing; and

    9. describe how copies of Proofs of Claim in the Debtors' cases may be obtained.

  2. The Debtors need not attach copies of any Proofs of Claim to the Notice. Copies of all Proofs of Claims may be obtained, without charge, from the website maintained by GCG, the Debtors' claims agent, at http://www.mercurycompaniesbankruptcy.com or by requesting copies from GCG directly.

  3. Each Notice shall be sent by first class mail, postage prepaid, to the address identified as the address to which notices should be sent on the standard proof of claim form. If an Employee filed more than one claim and used more than one address, the Notice shall be sent to the last address provided by the Employee. If no Proof of Claim was filed, the Notice shall be sent to the address for the Employee on the Debtors' schedules.

  4. The Debtors shall file with the Court an "omnibus" certificate of service certifying that Notices in the form to be attached to such certificate of service were served on the Employees identified in the certificate of service.

  5. If the Employee does not serve a timely Response, the Debtors shall file a certificate of non-contested matter and proposed order with the Court.

  6. After the entry of an order sustaining the Debtors' proposed treatment of the Wage Claim as described in the Notice, the Debtors shall serve a copy of the order on the Employee at the address to which the Notice was mailed.

C. Requirements for Responses

  1. An Employee who disagrees with the Debtors' proposed treatment of the Employee's Wage Claim as described in the Notice must serve a timely Response to avoid waiving any rights with respect to the treatment of the Wage Claim. The form of Response shall be mailed with the Notice.

  2. The form Response shall provide, among other things:

    1. a statement that the Employee disagrees with the Debtors' proposed treatment of the Employee's Wage Claim;

    2. the amount in which the Employee believes his/her Wage Claim should be allowed (including the amount the Employee proposes be allowed as a priority claim under 11 U.S.C. §507(a)(4) and the amount the Employee proposes be allowed as a general unsecured claim);

    3. the Debtor against whom the Employee believes his/her Wage Claim should be allowed; and

    4. a daytime phone and/or e-mail address at which the Debtors can contact the Employee to attempt to resolve the disagreement over the Wage Claim.

  3. As part of the description of the Response procedures, the Notice shall state that the Employee should attach to the Response any documents upon which he/she is relying for his/her objection to the Debtors' proposed treatment of his/her Wage Claim.

  4. The Response must be served upon Debtors' counsel in a manner that ensures receipt thereof on the date stated in the Notice, but not less than 30 calendar days after the date of service of the Notice (the "Response Deadline"). The Notice shall clearly state that the Response is not to be filed with the Court. The Response Deadline will be clearly set forth in the Notice.

  5. If an Employee who is properly served with a Notice does not serve a timely Response in compliance with the foregoing procedures, the Court may sustain the Debtors' proposed treatment of the Wage Claim described in the Notice without further notice to the Employee or a hearing. The Employee shall be notified of this potential outcome in the Notice.

  6. If an Employee timely serves a Response and the Debtors and the Employee are unable to resolve their dispute over the Wage Claim, the Debtors shall request the Court to set a hearing. The hearing may be scheduled to be conducted at one of the regularly scheduled omnibus hearing dates in the Debtors' cases that is at least __ calendar days after service of the Notice.

  7. At least [5] business days before the hearing, the Debtors shall file with the Court, and serve on counsel for the Committee, the Response (together with attachments) served upon counsel for the Debtors.

  8. The Debtors shall maintain a register of each Notice and each Response received including the date such Response is received.

II. EMPLOYEE WAGE CLAIM SETTLEMENT PROCEDURES

To promote the efficient resolution of Wage Claims, the following claim settlement procedures shall apply to the resolution of any Wage Claim subject to a pending Notice and timely Response.

A. Permitted Settlements.

  1. The Debtors and an Employee may agree in writing, without further order of the Court, to (a) the disallowance of any Wage Claim; (b) the allowance of any Wage Claim, or portion thereof, as a prepetition, general unsecured, nonpriority claim in an amount of $20,000 or less; or (c) the allowance of a Wage Claim, or portion thereof, as a priority claim under 11 U.S.C. §507(a)(4) or (5) of the Bankruptcy Code in an amount of $10,950 or less, in addition to any general unsecured nonpriority claim consistent with (b) above. An agreement consistent with the terms of this Section II.A.1 is referred to as a "Permitted Settlement."

  2. Any Permitted Settlement shall be binding upon the Debtors' estates and the Employee without further order of the Court or notice to any party. The Debtors may, in their discretion, seek approval of the Permitted Settlement by a motion pursuant to Fed. R. Bankr. Pro. 9019. All such Permitted Settlements shall be promptly provided to GCG, which shall update the claims docket to reflect such settlements.

  3. On a periodic basis, the Debtors shall file a written report with the Court identifying all Permitted Settlements consummated during the applicable reporting period. Permitted Settlement reports may (but are not required to) include copies of any written agreements memorializing the Permitted Settlements described therein.

B. Settlement Motions.

  1. For any proposed settlement of an Wage Claim that does not fall within the parameters for Permitted Settlements or that includes other substantive terms and conditions beyond the allowance or disallowance of a Wage Claim, the Debtors shall file a motion to approve such settlement (a "Settlement Motion") under Bankruptcy Code § 502, Fed. R. Bankr. Pro. 9019, Local Bankruptcy Rule 202, and any other applicable provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, or the Local Bankruptcy Rules.

  2. Even if a settlement otherwise falls within the parameters for Permitted Settlements, the Debtors, in their discretion, may seek approval of such settlement pursuant to a Settlement Motion.