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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
Date of Report (Date of Earliest Event Reported): October 23, 1998
------------------
FRONTLINE COMMUNICATIONS CORP.
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24223 13-3950283
- --------------------------- ------------ -----------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Blue Hill Plaza, Pearl River, New York 10965
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914)623-8553
-------------
Not Applicable
- --------------------------------------------------------------------------
Former name or former address, if changed since last report
<PAGE>
Item 2. Acquisition of Assets.
Acquisition of US Online, Inc.
Pursuant to an order of the United States Bankruptcy Court,
District of New Jersey, on October 23, 1998, the Company acquired substantially
all of the assets used in the business of US Online, Inc. ("US Online"),
including a point of presence in the Philadelphia area, and assumed two of US
Online's executory contracts for consideration of $566,000 in cash paid upon
closing. At the time of the acquisition, US Online was engaged in the business
of providing internet access, web hosting and leased communications lines to
approximately 3580 subscribers in New York, New Jersey and Pennsylvania.
The source of the consideration paid was cash on hand. The
amount of consideration paid by the Company in connection with the transaction
was determined by arm's-length negotiations.
The description of the transaction discussed above is
qualified in its entirety by reference to the letter agreement, which is
attached hereto as an exhibit and is incorporated herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of the Business Acquired.
---------------------------------------------
Audited financial statements relating to the acquisition will
be filed by amendment within 60 days of the date this report was required to be
filed.
(b) Pro Forma Financial Information and Exhibits.
--------------------------------------------
Pro Forma financial information relating to the acquisition
will be filed by amendment within 60 days of the date this report was required
to be filed.
(c) Exhibits
--------
Exhibit 1 - Letter Offer to Purchase Substantially All of the
Assets of US Online, Inc.
Exhibit 2 - Order Pursuant to ss.ss. 363, 365 and 105 of The
Bankruptcy Code Authorizing and Approving (i) Sale of Debtor's
Assets and (ii) Assumption and Assignment of Executory
Contracts with Respect Thereto.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: November 2, 1998
FRONTLINE COMMUNICATIONS CORP.
By/s/ Stephen J. Cole-Hatchard
------------------------------
Name: Stephen J. Cole-Hatchard
Title: Chief Executive Officer
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<PAGE>
FRONTLINE COMMUNICATIONS CORP.
One Blue Hill Plaza
P.O. Box 1548
Pearl River, New York 10965
October 1, 1998
U.S. Online, Inc.
135F Gaither Drive
Mt. Laurel, New Jersey 08054-1700
Attn: Mr. John Thomas
Re: Offer to Purchase Substantially All
of the Assets of U.S. Online, Inc.
-----------------------------------
Dear Mr. Thomas:
This letter is to set forth, among other things, the
terms and conditions of the offer by Frontline Communications
Corp. ("Frontline") to purchase substantially all of the assets
of U.S. Online, Inc. (the "Debtor"), and further to confirm the
manner and terms by which the parties shall consummate the
transaction contemplated herein.
We understand that the Debtor filed a petition for relief
under Chapter 11 of the Bankruptcy Code on August 25, 1998 in the United States
Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court").
Therefore, this offer is conditioned upon, among other things, Bankruptcy Court
approval by final and non-appealable orders of the Bankruptcy Court pursuant to
the applicable provisions of the Bankruptcy Code, including, but not limited to,
ss.ss. 363, 364 and 365.
1. Assets to Be Purchased
----------------------
Frontline is to acquire substantially all of the assets of the
Debtor, including, but not limited to, the following (collectively, the
"Assets") free and clear of all liens, claims and encumbrances. Frontline may,
in its sole discretion, determine to exclude certain of the Assets from the
acquisition, provided, however, that there shall be no corresponding reduction
in the purchase price.
a. any and all contracts with "upstream" provider TCG, Inc. ("TCG")
b. Philadelphia point of presence, known as the Philadelphia superpop
(lease assignments, exclusive access and equipment as per annexed schedule)
<PAGE>
c. any and leases with respect to all hardware and equipment at
Philadelphia superpop and Mt. Laurel headquarters as per annexed schedule
d. any and contracts with respect to all telephone lines at
Philadelphia superpop and Mt. Laurel headquarters
e. any and all servers
f. any and all customers and subscribers identified in annexed schedule
g. any and all mail and news service agreements
h. any and all domain names and addresses
i. any and all contracts and leases with respect to the 800 and
customer support telephone numbers as per annexed schedule
2. Consideration
-------------
The purchase price shall be $566,000, consisting of the following:
a. $46,500 in cash or credit against the Debtor in Possession loan
described in paragraph "7" below (the "Deposit"), to be paid on or before
October 2, 1998 as a good faith deposit with respect to the sale of the Assets
contemplated herein;
b. $353,500 in cash, payable at closing which amount, together with the
Deposit, shall be used to satisfy the creditors of the Debtor; and
c. In the sole discretion of Frontline, either (i) $166,250 in cash,
and/or (ii) shares of common stock of Frontline, par value $.01 per share
("Frontline Common Stock"), with an aggregate Market Value of $166,250, to be
delivered at the closing (the "Share Consideration"); provided, however, that in
no event shall the Share Consideration exceed 40,000 shares of Frontline Common
Stock. For purposes hereof, "Market Value" shall mean the average closing bid
price of Frontline Common Stock on the Nasdaq SmallCap Market for the five (5)
trading days immediately prior to the Closing.
3. Representations and Warranties
------------------------------
The Debtor represents and warrants to Frontline as follows:
a. Organization, Standing and Power. The Debtor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full corporate power and corporate authority to (i) own, lease
and operate its
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properties, (ii) carry on the business as currently conducted by it, and (iii)
execute and deliver, and perform under this Agreement and each other agreement
and instrument to be executed and delivered by it pursuant hereto.
b. Authority. The execution and delivery by the Debtor of this
Agreement and of all of the agreements to be executed and delivered by the
Debtor pursuant hereto, the performance by the Debtor of its obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate action on the part of the Debtor, and the Debtor has all necessary
corporate power and corporate authority with respect thereto. This Agreement is,
and when executed and delivered by the Debtor, each of the other agreements to
be delivered by the Debtor pursuant hereto will be, valid and binding
obligations of the Debtor, in accordance with their respective terms, except as
the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the rights of creditors generally and subject to the rules
of law governing (and all limitations on) specific performance, injunctive
relief, and other equitable remedies.
c. Accounts Receivable. The accounts receivable as of August 31, 1998
were approximately $19,000. Those accounts receivable are good and collectible
in the ordinary course of business at the aggregate recorded amounts thereof,
less the respective amount of the allowances for doubtful accounts receivable,
if any, reflected thereon, and are not subject to offsets other than in the
ordinary course of business. The accounts receivable of the Debtor which were
added after August 31, 1998, are good and collectible in the ordinary course of
business, less the amount of the allowance(s) for doubtful notes receivable, if
any, reflected thereon (which allowances were established on a basis consistent
with prior practice), and are not subject to offsets other than in the ordinary
course of business.
d. Litigation. Other than set forth in the annexed schedule, there are
no claims, suits or actions, or administrative, arbitration or other proceedings
or governmental investigations, pending or, to the best knowledge of the Debtor,
threatened, against or relating to the Debtor, the transactions contemplated
hereby or any of the Assets. There are no judgments, orders, stipulations,
injunctions, decrees or awards in effect which relate to the Debtor, this
Agreement, the transactions contemplated, the business or any of the Assets, the
effect of which is (a) to limit, restrict, regulate, enjoin or prohibit any
business practice of the Debtor in any area, or the acquisition by the Debtor of
any properties, assets or businesses, or (b) otherwise adverse to the business,
any of the Assets or the Debtor Common Stock.
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e. No Violation of Law. The Debtor is not engaging in any activity or
omitting to take any action as a result of which it is in violation of any law,
rule, regulation, zoning or other ordinance, statute, order, injunction or
decree, or any other requirement of any court or governmental or administrative
body or agency, applicable to the Debtor, the business or any of the Assets.
f. Customers and Suppliers. The Debtor has previously provided to
Frontline a complete and correct list setting forth, as of September 21, 1998,
(i) the customer list of the business, amounting in all to approximately 4,578
customers who currently do business with the Debtor, and the amount for which
each such customer has been invoiced, and (ii) the 10 largest suppliers of the
business and the amount of goods and services purchased from each such supplier.
g. Information as to the Debtor. None of the representations or
warranties made by the Debtor in this Agreement is, or contained in any of the
Debtor Documents to be executed and delivered hereto will be, false or
misleading with respect to any material fact, or omits to state any material
fact necessary in order to make the statements therein contained not misleading.
h. Securities Act Representation. The Debtor is acquiring the Frontline
Common Stock solely for investment purposes, with no intention of distributing
or reselling any such stock or any interest therein. The Debtor is aware that
the Frontline Common Stock will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and that neither the Frontline Common
Stock nor any interest therein may be sold, pledged, or otherwise transferred
unless the Frontline Common Stock is registered under the Securities Act or
qualifies for an exemption under the Securities Act. In any event, the Debtor
agrees not to sell or otherwise transfer the stock for a one year period
following the Closing, provided, however, that the Debtor can distribute the
stock to its shareholders or secured creditors who will also be bound by the
provisions of said lock-up.
i. Secured Creditors. The secured creditors of the Debtor
are all passive lenders; none of the individuals are involved in
the internet service industry.
4. Non-Compete Covenant.
--------------------
The Debtor, and those principal officers, directors, and shareholders
identified in the schedule annexed hereto,hereby agree to enter into a
non-compete agreement in the form annexed hereto as Exhibit A.
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5. Conditions Precedent
--------------------
The obligations of Frontline to consummate the transactions
contemplated herein shall be subject to the fulfillment at or prior to the
Closing of the following conditions, unless waived in writing by Frontline:
a. Loan Approval. The terms and conditions of the loan described in
paragraph "7" of this Agreement is approved pursuant to Bankruptcy Court Order
on or before September 30, 1998.
b. Bid Procedures Approval. The bid procedures and breakup fee
described in paragraph "6" of this Agreement is approved pursuant to Bankruptcy
Court Order on or before September 30, 1998.
c. Assumption and Assignment; Cure Amounts. Simultaneously with the
sale contemplated herein, the executory contracts identified in the schedule
annexed hereto are assumed and assigned to Frontline pursuant to ss. 365 of the
Bankruptcy Code and the cure amounts thereunder on an aggregate basis do not
exceed $160,000, which sum is to be paid from the sale proceeds.
d. Sale Order. The Bankruptcy Court Order approving the sale is
satisfactory in form and substance to Frontline, and provides, among other
things, that the Assets are sold to Frontline free and clear of all liens,
claims, and encumbrances, and that Frontline is deemed a good faith purchaser
for value entitled to the protection of ss. 363(m) of the Bankruptcy Code.
e. Results of Due Diligence Investigation. Frontline, in its sole
discretion, shall be satisfied with the results of any investigation of the
business and affairs of the Debtor undertaken by them.
f. No Material Adverse Change. Except as otherwise provided by this
Agreement, there shall not have occurred after the date hereof, in the sole
discretion and judgment of Frontline, a material adverse change in the financial
or business condition of the Debtor, including, but not limited to (i) a
reduction in the number of the Debtor's customers or subscribers to less than
3,500, or (ii) the actual or threatened cancellation of service by TCG.
g. Accuracy of Representations and Warranties. The representations and
warranties of the Debtor shall have been true when made, and, in addition, shall
be true in all material respects on and as of the Closing with the same force
and effect as though made on and as of the Closing.
h. Performance of Agreements. The Debtor shall have performed, observed
and complied in all material respects with its obligations, covenants and
agreements, and shall have
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satisfied or fulfilled in all material respects conditions contained in any
Debtor Document and required to be performed, observed or complied with, or to
be satisfied or fulfilled, by the Debtor at or prior to the Closing.
i. Litigation. No order of any court or administrative agency shall be
in effect which restrains or prohibits the transactions contemplated hereby, and
no claim, suit, action, inquiry, investigation or proceeding in which it will
be, or it is, sought to restrain, prohibit or change the terms of or obtain
damages or other relief in connection with this Agreement or any of the
transactions contemplated hereby, shall have been instituted or threatened by
any person or entity, and which, in the reasonable judgment of Frontline (based
on the likelihood of success and material consequences of such claim, suit,
action, inquiry or proceeding), makes it inadvisable to proceed with the
consummation of such transactions.
j. Consents and Approvals. All consents, waivers, approvals, licenses
and authorizations by third parties and governmental and administrative
authorities (and all amendments or modifications to existing agreements with
third parties) required as a precondition to the performance by the Debtor of
its obligations hereunder and under any agreement delivered pursuant hereto, or
which in Frontline's reasonable judgment are necessary to continue unimpaired,
subsequent to the Closing, any rights in and to the Assets and/or the business
which could be impaired by the consummation of this transaction, shall have been
duly obtained and shall be in full force and effect.
k. Date of Consummation. The transactions contemplated herein shall
have been consummated on or prior to October 20, 1998, time being of the
essence, or such later date as the parties shall agree by a written instrument
signed by all of them.
l. Continued Employment by John Thomas. John Thomas, President and CEO,
agrees to continue his employment with US Online on a part-time basis for at
least thirty (30) days from the date of this Agreement, and further agrees to
cooperate fully with Frontline's due diligence investigation and transition of
customers.
6. Bidding Procedures; Break-Up Fee; Notice
----------------------------------------
a. The proposed sale shall close on or before October 20, 1998.
b. The proposed sale shall be subject to higher and better offers on
notice to all creditors consistent with the applicable provisions of the
Bankruptcy Code and the Bankruptcy Rules.
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c. The Debtors shall not entertain any offer for the Assets other than
a higher and better offer.
d. No bid for the Assets shall be accepted unless (i) such bid is made
at an open auction conducted without suspension, (ii) in the case of the first
such bid, such bid is at least $571,000, with successive bids thereafter to be
in increments of at least $5,000, (iii) the entity making such bid presents to
counsel for the Debtor at or prior to the Sale Hearing, a certified check or
bank check in an amount not less than $46,500, which amount shall serve as a
good faith deposit against the purchase price, and satisfactory evidence to
complete the purchase of the Assets on the Closing without a financing
contingency, and (iv) such bid is for all of the Assets and on terms and
conditions no less favorable to the Debtor than those specified in the Agreement
or otherwise agreed to by the Frontline and the Debtor.
e. No bid for the Assets shall constitute a higher and better offer if
it does not exceed Frontline's last bid by at least $25,000 (the amount of the
Break-Up Fee, as defined below).
f. If a higher and better offer for the Assets is made by an entity
other than Frontline and approved by the Bankruptcy Court, the Deposit shall be
repaid to Frontline, and the Debtor shall pay an additional $25,000 from the
proceeds of such sale to Frontline for reimbursement of the Frontline's
professional and due diligence expenses incurred in connection with the
Agreement and proposed sale (the "Break-Up Fee").
g. The sale of the Assets is on a cash basis. Any successful bidder
will be obligated to close without any financing or other contingency whatsoever
and to demonstrate at the Sale Hearing the financial ability to pay the balance
of the purchase price and to close by October 20, 1998.
7. Debtor in Possession Loan
-------------------------
On a interim basis, pending the Closing of the sale contemplated
herein, and in order to enable the Debtor to continue operations, Frontline
shall make a debtor in possession loan on the following terms and conditions,
unless waived in writing by Frontline:
a. Lender: Frontline Communications Corp.
-------
b. Borrower: U.S. Online, Inc., Debtor in Possession
---------
c. Amount: $46,500
-------
d. Maturity: On demand, or if Debtor refinances, or
--------- if proposed purchase of assets is not
consummated
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e. Interest: 8% per annum
---------
f. Purpose: Working capital for payment
-------- of obligations to employees and
suppliers in accordance with annexed
budget, including the payment of
$35,000 to TCG.
g. Collateral: Senior lien on all property of the
---------- estate (as defined by 11 U.S.C.ss.541),
including, but not limited to, all cash,
contracts, accounts, accounts
receivable, customer lists, causes of
action, and equipment.
h. Further
Assurance: Superpriority Administrative Expense
--------- Status pursuant to 11 U.S.C. ss. 364(c)(1)
i. Conditions: Subject to approval by final order of
---------- the United States Bankruptcy Court for
the District of New Jersey, in form and
substance satisfactory to Lender. No
material adverse change in the business,
assets on financial condition of
Borrower. Subordination of
shareholders'/insiders' asserted liens.
j. Documentation: To be fully executed in form and
-------------- substance satisfactory to Lender.
8. Termination
-----------
This Agreement may be terminated at any time prior to the Closing in
the event of any of the following: (a) the Break-Up Fee or the loan described in
paragraphs "6" and "7", respectively, are not approved by Bankruptcy Court
Order(s) on or before September 29, 1998, (b) any of the other conditions
precedent are not timely fulfilled, (c) there is a breach of this Agreement by
any party, (d) the Closing does not take place on or before October 20, 1998, or
(e) written agreement by the parties.
Very truly yours,
FRONTLINE COMMUNICATIONS CORP.
/s/ Stephen J. Cole-Hatchard
------------------------------
By: Stephen J. Cole-Hatchard
President & CEO
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<PAGE>
AGREED TO AND ACCEPTED AS OF
THIS 31 DAY OF SEPTEMBER, 1998
US ONLINE, INC.,
Debtor and Debtor in Possession
/s/ John Thomas
- ----------------------------------
By: John Thomas, President
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<PAGE>
FRANK & ROSEN
BY: ALAN L. FRANK, ESQUIRE
IDENTIFICATION NO. AF5534
BY: JILL S. BRODIE, ESQUIRE
IDENTIFICATION NO. JB6412
STEVEN N. PYSER, ESQUIRE
IDENTIFICATION NO. SP5953
EXECUTIVE MEWS, SUITE G-39
1930 EAST ROUTE 70
CHERRY HILL, NEW JERSEY 08003
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
- -------------------------
:
IN RE: :
: Chapter 11
US ONLINE, INC. :
: Case No. 98-17909
:
Debtor :
- --------------------------
ORDER PURSUANT TO ss.ss. 363, 365 AND 105 OF
THE BANKRUPTCY CODE AUTHORIZING AND
APPROVING (i) SALE OF DEBTOR'S ASSETS
AND (ii) ASSUMPTION AND ASSIGNMENT OF
EXECUTORY CONTRACTS WITH RESPECT THERETO
----------------------------------------
AND NOW, this 21 day of October, 1998, upon consideration of
the notice of motion (the "Motion") of US Online, Inc., debtor and debtor in
possession (the "Debtor"), for entry of an order, pursuant to ss.ss. 363(b) and
(f), 365 and 105(a) of Title 11, United States Code (the "Bankruptcy Code"),
authorizing and approving (i) the sale of substantially all of the Debtors'
Assets (as defined below) free and clear of all liens, claims and encumbrances
(collectively, the "Encumbrances"), and (ii) the assumption and assignment of
the Debtor's executory contracts with
<PAGE>
Teleport Communication Group, Inc. ("TCG") and Critical Path ("CP") (together,
the "Executory Contracts"), copies of which are annexed hereto as Exhibits "A"
and "B", respectively; and upon this Court's Order Granting Debtor's Motion to
Approve Post-Petition Loan and Asset Purchase Bidding Procedures dated September
29, 1998; and upon the letter agreement between the Debtor and the Buyer dated
October 1, 1998 previously filed with this Court on or about October 5, 1998, a
copy of which is annexed hereto as Exhibit "C"; and upon the revised and
supplemental notices with respect to the Motion dated October 14 and 16, 1998
and upon the limited objection of Darryl Forman; and the Court having considered
the Motion and the record in these proceedings, and having heard testimony and
received evidence in support of the relief requested of this Court at the
hearings held on September 29 and October 20, 1998 (together, the "Hearing");
and the Court finding that notice of the Motion, the relief requested of this
Court, and the Hearing was sufficient under the circumstances; and the Court
having determined that the Debtor has provided all interested entities with a
full and fair opportunity to bid on the Assets and, thus, that all offers for
the Assets were subject to higher and better offers; and the Court having
determined that the legal and factual bases set forth in the Motion and at the
Hearing establish just cause and sound business justification for the relief
granted in this Order;
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THE COURT MAKES THE FOLLOWING FINDINGS OF FACT AND
CONCLUSIONS OF LAW:
Jurisdiction
------------
1. The Court has jurisdiction over the Motion and the relief
afforded herein pursuant to 28 U.S.C. ss.ss. 157 and 1334. This proceeding is a
core proceeding under 28 U.S.C. ss. 157(b)(2). Venue of this proceeding and the
Motion is proper in this District pursuant to 28 U.S.C. ss.ss. 1408 and 1409.
The statutory predicates for the relief requested in the Motion are ss.ss. 363,
365 and 105(a) of the Bankruptcy Code, as complemented by Rules 2002, 6004,
6006, 9007 and 9008 of the Federal Rules of Bankruptcy Procedure (the
"Bankruptcy Rules").
Notice
------
2. Due notice of the Motion and the Hearing has been given to
all parties entitled thereto, as evidenced by the affidavits of service filed
with the Court. Such notice constitutes appropriate and adequate notice to all
parties in interest and complies with ss. 102(1) of the Bankruptcy Code and
Bankruptcy Rules 2002, 6004, 6006, 9007 and 9008. No other or further notice of
the Motion, the Hearing or the entry of this Order is necessary.
3. Under the circumstances, a reasonable opportunity to object
or be heard regarding the relief requested of this Court has been afforded to
all interested entities, including TCG and Critical Path, all known entities
holding or asserting a security interest in or lien against any of the Assets,
the Office of the United States Trustee, all those how have filed a notice of
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appearance in the Debtor's Chapter 11 case, and all of the Debtor's known
creditors and equity security holders at their last known address.
4. The Debtor has provided all interested entities with a full
and fair opportunity to bid on the Assets; thus, all offers for the Assets were
subject to higher and better offers.
Miscellaneous Findings and Determinations
-----------------------------------------
5. The offer submitted by Frontline Communications Corp. (the
"Buyer") in the sum of $566,000 is the highest and best offer for the Assets,
and the purchase price constitutes full and adequate consideration and
reasonably equivalent value for the Assets.
6. The Executory Contracts are in full force and effect, have
not been rejected or terminated, and are not deemed rejected or terminated under
ss. 365(d) of the Bankruptcy Code.
7. The Debtor's estate has title to the Assets and the
Executory Contracts.
8. TCG (consistent with the letter acknowledgment annexed
hereto as Exhibit "C") and CP have agreed to accept, and the respective cure
amounts under the Executory Contracts pursuant to ss. 365 of the Bankruptcy Code
are hereby fixed at, the sums of $160,000 and $1,000, respectively, to be paid
to TCG from the Buyer's $566,000 offer and to CP by the Buyer on or before
October 23, 1998, whereupon the Buyer, the Debtor and the estate shall have no
further liability to such parties with respect to any defaults now extant.
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<PAGE>
Justification for Sale
----------------------
9. The Debtor has established sound business justification for
the proposed sale of the Assets to the Buyer and for the assumption and
assignment of the Executory Contracts to the Buyer. Such business justifications
include, but are not limited to, the facts that (a) there is a risk of
deterioration of the value of the Assets if the sale is not consummated quickly,
(b) the Buyer's offer constitutes the highest and best offer for the Assets
because of its value per se and because it was subject to higher and better
offers, (c) the Buyer's offer presents the best opportunity to realize value for
the Assets and avoid any further decline and devaluation of such assets, (d)
claims against the Debtor's estate will be minimized as a result of the prompt
sale of the Assets and the assumption and assignment of the TCG Contract to the
Buyer, and (e) the Buyer has provided adequate assurance of future performance
under the Executory Contracts. After considering the circumstances described in
the Motion, the Court has determined that the Buyer's offer for the Assets
presents the best opportunity for the Debtor's estate to realize the highest
distribution possible to all creditors. The sale process conducted by the Debtor
was non-collusive, fair, reasonable, and conducted in good faith.
10. The Debtor may sell the Assets free and clear of all
Encumbrances because, in accordance with ss. 363(f) of the Bankruptcy Code, the
purchase price to be paid for the Assets exceeds the aggregate value of all
Encumbrances against the Assets, the holders of interests in the Assets could be
compelled, in a legal or
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<PAGE>
equitable proceeding, to accept a money satisfaction of such interest, and the
holders of interests in the Assets have consented to the proposed sale.
Moreover, the Encumbrances will attach to the proceeds of the sale of the Assets
consistent with the requirements of ss. 363(e) of the Bankruptcy Code.
11. The transactions contemplated by the Motion, as approved
and implemented by this Order, are in compliance with and satisfy all applicable
provisions of the Bankruptcy Code including, without limitation, ss.ss. 363(b),
(e), (f), and 365. The terms and conditions of the sale of the Assets and the
other transactions approved by this Order are fair and reasonable. The sale of
the Assets outside of a plan of reorganization is reasonable and appropriate
under the circumstances and is a prerequisite of any Chapter 11 plan of the
Debtor.
12. The sale of the Assets pursuant to the terms and
conditions of the Buyer's offer is in the best interests of the Debtor, its
estates, its creditors, and all parties in interest.
Good Faith
----------
13. The Buyer's offer was proposed and accepted by the Debtor
in good faith, at arms-length, and without collusion. The sale to the Buyer is a
true third-party transaction, as the Buyer has no relationship to the Debtor,
the Buyer is not an "insider" or "affiliate" of the Debtor (as each such terms
are defined in the Bankruptcy Code), or as otherwise set forth in the record of
the Hearing. Neither the Debtor nor the Buyer engaged in any conduct that would
prevent the application of ss. 363(m) of the Bankruptcy Code or cause the
application of ss. 363(n) of the Bankruptcy Code to
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this transaction. Consequently, the Buyer is a good faith purchaser for value
pursuant to ss. 363(m) of the Bankruptcy Code and, as such, is entitled to the
protections afforded thereby.
14. The Buyer will be acting in good faith within the meaning
of ss. 363(m) of the Bankruptcy Code in closing the transactions contemplated
hereby, including the assumption and assignment of the Executory Contracts.
Assumption and Assignment of Executory Contracts
------------------------------------------------
15. The assumption of the Executory Contracts and the
assignment of the Executory Contracts to the Buyer pursuant to the terms of this
Order realizes fair value for the Debtor's estate, and is in the best interests
of the Debtor, its creditors and its estate and represents the exercise of the
Debtor's sound business judgment.
16. The Buyer has provided adequate assurance of its future
performance within the meaning of ss.ss. 365(b)(1)(C) and 365(f)(2)(B) of the
Bankruptcy Code with respect to the Executory Contracts.
17. Effective as of the closing date, the transfer of the
Assets and the assumption and assignment of the Executory Contracts (a) will be
legal, valid and effective transfers of property of the Debtor's estate to the
Buyer, (b) will be valid assumption by the Debtor and assignment to the Buyer of
the Executory Contracts; and (c) will vest the Buyer with all right, title, and
interest of the Debtor in and to the Assets and the Executory Contracts free and
clear of all Encumbrances under ss.ss. 363, 365, and 105(a) of the Bankruptcy
Code.
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18. The transfer of the Assets and the assumption and
assignment of the Executory Contracts do not and will not subject the Buyer to
any liability for claims against the Debtor by reason of such transfer under the
laws of the United States, any state, territory or possession thereof or the
District of Columbia applicable to such transactions.
Corporate Authority; Consents and Approvals
-------------------------------------------
19. The Debtor has full power and authority to execute
and deliver all agreements and other documents necessary or appropriate to
effectuate any of the transactions contemplated hereby, and the sale of the
Assets by the Debtor has been duly and validly authorized by all necessary
corporate power and authority necessary to consummate the transactions
contemplated by hereby. No consents or approvals, other than this Order, are
required for the Debtor to consummate such transactions.
BASED UPON THE FOREGOING, IT IS HEREBY ORDERED, ADJUDGED
AND DECREED that
(a) The Motion be, and it hereby is, granted and approved in
all respects. All objections to the Motion that were not withdrawn or settled on
the record are overruled. The record and transcript of the Hearing, and all
findings and determinations of this Court, are hereby incorporated herein. To
the extent that the relief requested in the Motion has been modified,
supplemented or amended, such modification, supplementation or amendment is
granted and approved in all respects.
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Sale of the Assets
------------------
(b) The Assets are hereby defined as, and such term as
utilized in the Letter Agreement is hereby amended and clarified to mean, the
following:
(i) All inventory and equipment owned by the Debtor
and located at its Philadelphia point of presence (the "Philly Superpop") and
Mt. Laurel facility, including but not limited to two (2) bay switches, one (1)
Cisco router, two (2) Astrocom CSU's, one (1) radius server, and one (1)
Platypus computer with accompanying software;
(ii) All customers of the Debtor who may be billed
within the next twelve (12) months and who are grouped within the following pop
locations: Blackwood, Browns Mills, Burlington, Garden City, Manhattan, White
Plains, Philadelphia, Quakertown, New York, PA Superpop, and South Jersey
Superpop locations;
(iii) The Debtor's interests in the Executory
Contracts;
(iv) A Cisco 4000 router; and
(v) All domain names owned by the Debtor, including
but not limited to, "USCom.Com".
(c) The Buyer's offer and each of its terms and conditions
thereof are approved in their entirety. The sale of the Assets to the Buyer for
the sum of $566,000 is hereby authorized under ss.ss. 363(b) and (f) of the
Bankruptcy Code. The Debtor is hereby authorized at the closing to execute,
deliver, and implement, all instruments and documents which may be reasonably
necessary, convenient or desirable to implement the terms hereof,
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to perform the obligations and effectuate the transactions
contemplated hereby.
(d) Subject to the fulfillment of the terms and conditions of
the Buyer's offer, at the closing, the Debtor will sell, transfer, assign and
convey to the Buyer the Assets, including, without limitation, the Executory
Contracts. The Debtor is authorized and empowered to deliver at the closing a
bill of sale, assignment and other such documentation that may be necessary or
reasonably requested by the Buyer to evidence the transfers contemplated by this
Order.
(e) Pursuant to ss.ss. 363(b), (f), 365 and 105 (a) of the
Bankruptcy Code, on the closing date, the Assets and all of Debtor's right,
title, and interest therein shall be transferred to the Buyer and shall be free
and clear of all Encumbrances. All such Encumbrances will be released,
terminated, and discharged as to the Assets with all such Encumbrances attaching
to the proceeds of the sale of the Assets, in the order of their priority, with
the same validity, force, and effect which they now have against the Assets.
(f) The proceeds derived from the sale of the Assets shall be
held in escrow at interest by the Debtor's counsel, Frank & Rosen, pending
further order(s) of this Court as to how such proceeds shall be distributed.
(g) All persons and entities holding Encumbrances of any kind
and nature with respect to the Assets are hereby forever barred and permanently
enjoined from asserting such Encumbrances of
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any kind and nature against the Assets or the Buyer or its
successors, assigns, or affiliates.
Assumption and Assignment of the Executory Contracts
----------------------------------------------------
(h) The Debtor is hereby authorized in accordance with ss.
365(b) and (f) of the Bankruptcy Code at the Closing to (a) assume and assign to
the Buyer the Executory Contracts and (b) execute and deliver to the Buyer such
documents or other instruments as may be necessary to assign and transfer the
Executory Contracts.
(i) The Buyer has provided adequate assurance of its future
performance within the meaning of ss.ss. 365(b)(1)(C) and 365(f)(2)(B) of the
Bankruptcy Code with respect to the Executory Contracts.
(j) The Debtor shall file its motion for authority to reject
its remaining unexpired leases or executory contracts (with the effective date
of rejection of November 15, 1998, except as set forth in the next decretal
paragraph), on or before October 30, 1998, and a hearing thereon shall be held
before this Court on November 23, 1998 at 10 a.m. The Buyer shall be obligated
for the Debtor's usual charges thereunder for the period from the date of the
closing through and including November 15, 1998 with no further liability
thereon.
(k) With respect to the Debtor's unexpired leases and
executory contracts with (i) USPP, Inc. (for the lease of Suite F and the
computer room in Suite E at 135 Gaither Drive, Mt. Laurel, New Jersey), (ii)
Karmish Investment Group, Inc. (for the telephone system), and (iii) Colonial
Pacific (for office furniture, account
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number 308143003), the effective date of the rejection shall be November 30,
1998, and the Buyer shall be obligated for the Debtor's usual charges thereunder
for the period from the date of the closing through and including November 30,
1998, with no further liability therefor.
Release of Liens
----------------
(l) This Order is and shall be effective as a determination
that, on the closing, all Encumbrances existing prior to the closing have been
and hereby are unconditionally released and terminated as to the Buyer and the
Assets. Each and every federal, state, and local governmental agency or
department is hereby directed to accept for filing or recording this Order and
any and all documents and instruments necessary and appropriate to consummate
the transactions contemplated hereby.
(m) Upon the reasonable request of the Buyer after the closing
date, each of the Debtor's creditors shall execute and deliver to the Buyer
releases of all Encumbrances against the Assets, if any, as such Encumbrances
may have been recorded or may otherwise exist. If any person or entity that has
filed financing statements or other documents or agreements evidencing
Encumbrances against the Assets has not delivered to the Buyer prior to the
closing, in proper form for filing and executed by the appropriate parties,
termination statements, instruments of satisfaction, or releases of all
Encumbrances that such person or entity has with respect to the Assets, the
Buyer is authorized and directed to execute and file such statements,
instruments, releases and other
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documents on behalf of such person or entity with respect to the
Assets.
Section 1146(c) Exemption
-------------------------
(n) In accordance with ss.ss. 1146(c) and 105(a) of the
Bankruptcy Code, the transfer of the Assets to the Buyer and the making,
execution, delivery or recordation of any deed, termination or modification of
any lease or other instrument of transfer or assignment executed in connection
with any of the transactions contemplated hereby is exempt from and not subject
to (i) taxation under any federal, state or local law imposing a sales,
transfer, recording, stamp or similar tax, or (ii) any state or local filing or
notice requirements related to bulk transfers or bulk sales.
Jurisdiction
------------
(o) This Court has and retains exclusive jurisdiction to
implement and enforce the terms and provisions of this Order, including, without
limitation, any disputes or controversies relating thereto or with respect to
the sale, the proceeds of sale, the transfer or assignment and delivery of the
Assets to the Buyer and the Buyer's peaceful use and enjoyment thereof after the
closing, regardless of whether a plan of reorganization or liquidation has been
confirmed in these cases and irrespective of the provisions of any such plan or
order confirming such plan.
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Miscellaneous
-------------
(p) Except as may be expressly provided for herein, the Buyer
shall not be deemed to assume or be liable for any of the liabilities or
obligations of the Debtor or any of its affiliates, officers, directors or
shareholders, of any kind or nature, whether presently in existence or arising
hereafter.
(q) On an interim basis, the Buyer will allow the Debtor to
keep its equipment at the Philly Superpop without charge, provided, however,
that the Debtor maintains insurance therefor.
(r) The terms and provisions of this Order are binding in all
respects upon the Debtor, its present and former employees, officers, directors
and shareholders, its creditors, any entities that received notice of the Motion
and the Hearing, any affected third parties and other parties in interest, any
persons asserting a claim against or an interest in the Debtor's estate or to
any of the Assets sold, conveyed and assigned under this Order, the Buyer, TCG,
and all the aforementioned parties' successors or assigns.
(s) This Order is a final order and enforceable upon entry. To
the extent necessary under Bankruptcy Rules 5003, 9014, 9021 and 9022, this
Court expressly finds that there is no just reason for delay in the
implementation of this Order and expressly directs entry of this Order.
(t) Under ss. 363(m) of the Bankruptcy Code, the reversal or
modification of this Order on appeal will not affect the validity of the
transfer of the Assets to the Buyer and the assumption and assignment of the
Executory Contracts, as well as
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the transactions contemplated or authorized by this Order, unless the same is
stayed pending appeal prior to the Closing of the transactions authorized by
this Order.
Dated: October 21, 1998
BY THE COURT:
-----------------------------------
JUDITH H. WIZMUR
UNITED STATES BANKRUPTCY JUDGE
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