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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
--
SCIENCE MANAGEMENT CORPORATION
(Name of Issuer)
COMMON STOCK, par value $.10 per share
PREFERRED STOCK, par value $1.00 per share
(Title of Class of Securities)
808638209 (common) and 808638308 (preferred)
(CUSIP Number)
Anne E. Pitter, Esq.
Baer Marks & Upham
805 Third Avenue
New York, New York 10176
(212) 702-5944
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
July 10, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement. [X]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 808638209 (Common) Page 2 of 8 Pages
------------------ ------ -----
808638308 (Preferred)
---------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Imperial
Capital Worldwide Partners, L.P.
EIN #13-3806745
---------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS* WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
7. SOLE VOTING POWER 670,000 shares common (includes a
proxy for 12,500 shares not owned
by Reporting Entity) 1,090,250
shares preferred and call for
NUMBER OF 218,050 shares common and options
SHARES to buy 412,500 shares common,
BENEFICIALLY 659,750 shares preferred and a call
OWNED BY for 131,950 shares common
EACH
REPORTING
PERSON WITH
8. SHARED VOTING POWER ------
9. SOLE DISPOSITIVE POWER 657,500 shares common,
1,090,250 shares preferred and
call for 218,050 shares common
and options to buy 412,500
shares common, 659,750 shares
preferred and a call for
131,950 shares common
10. SHARED DISPOSITIVE POWER ------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,170,000
(1,750,000 preferred and
1,420,000 common)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 71.6% of
common - 100% of preferred
14. TYPE OF REPORTING PERSON* Co.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP No. 808638209 (Common) Page 3 of 8 Pages
------------------ ------ -----
808638308 (Preferred)
---------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Jonathan
Borsuk - Social Security No.###-##-####
-------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS* N/A
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e)
6. CITIZENSHIP OR PLACE OF ORGANIZATION USA
7. SOLE VOTING POWER 670,000 shares common (includes a
proxy for 12,500 shares not owned
by Reporting Entity), 1,090,250
shares preferred and call for
NUMBER OF 218,050 shares common and options
SHARES to buy 412,500 shares common,
BENEFICIALLY 659,750 shares preferred and a call
OWNED BY for 131,950 shares common
EACH
REPORTING
PERSON WITH
8. SHARED VOTING POWER
------------
9. SOLE DISPOSITIVE POWER 657,500 shares common,
1,090,250 shares preferred and
call for 218,050 shares common
and option to buy 412,500
shares common, 659,750 shares
preferred and a call for
131,950 shares common
10. SHARED DISPOSITIVE POWER
------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,170,000 (1,750,000 preferred and 1,420,000 common) (these are
the same holdings reported for Imperial)
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 71.6% of
common - 100% of preferred
14. TYPE OF REPORTING PERSON* IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP No. 808638209 (Common) Page 4 of 8 Pages
------------------ ------ -----
808638308 (Preferred)
---------------------
Item 1.Security and Issuer
-------------------
This Report relates to shares of common stock, $.10 par value and shares of
preferred stock, $1.00 par value of Science Management Corporation (the
"Company"), whose principal executive offices are located at 721 Route 202/206,
Bridgewater, New Jersey 08807-1760.
Item 2.Identity and Background
-----------------------
(a) This Report is filed by Imperial Capital Worldwide Partners, L.P.
("Imperial") and Jonathan Borsuk, presently the sole limited partner of Imperial
and the sole stockholder, sole director and president of Imperial Capital
Investors Corp., Imperial's general partner (both the "Reporting Entities" or
individually a "Reporting Entity"). The Reporting Entities are making this
joint filing because they are affiliated and therefor may be deemed to
constitute a "group" within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934 as amended, although neither the fact of this filing nor
anything contained herein shall be deemed to be an admission by the Reporting
Entities that a group exists.
Imperial is a private investment company. Mr. Borsuk is a private
investor.
(b) The business address of the Reporting Entities is 666 Fifth Avenue,
37th floor, New York, New York 10103.
(c) See (a) above.
(d) During the past five (5) years, neither the Reporting Entities nor any
executive officer, director or controlling person of Imperial or its general
partner has been convicted of a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) During the past five (5) years, neither the Reporting Entities nor any
executive officer, director or controlling person of Imperial or its general
partner was a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction as a result of which proceeding it or he was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to federal or state securities laws
or finding any violation with respect to such laws.
(f) Imperial is a Delaware limited partnership.
Mr. Borsuk is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
Imperial acquired "Imperial's Total Interests" pursuant to the Company's
bankruptcy "Plan" in satisfaction of its claim against the Company and
additional funding of $463,000; the source of the $463,000 was the sale by
Imperial of its rights to certain shares of the Company's New Preferred Stock
and New Common Stock to Sorol. See Item 4 below.
--- ------
<PAGE>
CUSIP No. 808638209 (Common) Page 5 of 8 Pages
------------------ ------ -----
808638308 (Preferred)
---------------------
Item 4. Purpose of Transaction
----------------------
The purpose of the acquisition of Imperial's Total Interests was to invest
in and acquired control of the Company.
Imperial was the co-proponent, with the Company, of the Company's Fifth
Modified Plan of Reorganization in the Company's bankruptcy proceedings, Case
No. 93-34553 (SAS) filed in the United States Bankruptcy Court District of New
Jersey. Said Plan was confirmed pursuant to an order of the Bankruptcy Court
dated April 17, 1996 and was subsequently modified pursuant to an agreement
dated July 10, 1996 among the Company, Imperial and the Company's administrative
claimants for professional fees (said plan, as so amended, is hereinafter
referred to as the "Plan").
In 1995, Imperial acquired the senior, secured position of Constellation
Bank, N.A., which had provided senior, secured loans to the Company. As of the
date the Company filed its bankruptcy petition, it was indebted to the bank for
approximately $5,150,000 and thereafter borrowed an additional $250,000 from the
bank. The indebtedness of the Company to the bank and related collateral were
purchased by Imperial and formed the basis of Imperial's claims against the
Company.
Pursuant to the Plan, the Company agreed to issue 1,750,000 shares of newly
authorized preferred, non convertible, non dividend bearing preferred stock
which stock, as a class, is entitled to .01% of the vote of all issued and
outstanding shares of "New Common Stock" as hereinafter defined (the "New
Preferred Stock") and 2,000,000 shares of newly authorized common stock with
one vote per share (the "New Common Stock"). On the effective date of the Plan,
the Company agreed to issue to Imperial (a) all of the New Preferred Stock
(1,750,000 shares), (b) 55.5% or 1,110,000 shares of New Common Stock, and (c)
an 18 month option to acquire 17.5% or 350,000 shares of the New Common Stock
for an aggregate exercise price of $750,000 (the "Option Stock"), in return for
satisfaction of Imperial's claims against the Company and an additional $463,000
in funding from Imperial.
Pursuant to the Plan, Imperial assigned 2% (40,000 shares) of the New
Common Stock to Charles Gordon Holladay, who had acted as a broker with respect
to the transaction, provided that a portion of his stock would be held subject
to the call option described in clause (c) of the preceding paragraph.
By agreement dated June 17, 1996 (the "Rana Contract"), Imperial agreed to
sell 12,500 shares of the New Common Stock to Rahual Rana (the "Rana Stock").
By agreement dated June 27, 1996 (the "Imperial/Sorol Contract"), Imperial
agreed to sell (a) 659,750 shares of the New Preferred Stock, (b) 400,000 shares
of the New Common Stock and (c) the right to purchase 131,950 shares of the
Option Stock (collectively, the "Sorol Stock and Stock Rights"), to Sorol, a New
York general partnership ("Sorol") for $500,000. Sorol agreed to give Imperial
the option, for 18 months, to purchase all of the foregoing back from Sorol (or
its assigns) for a total price of $760,000. Imperial further has the right to
match any offer made to Sorol to acquire any of Sorol's Stock and Stock Rights,
as described in Item 6 below.
The closing under the Plan and the transaction with Sorol became effective
as of July 10, 1996. As a result of all of the foregoing, Imperial (a) owns
1,090,250 shares of New Preferred Stock and (b) owns 657,000 shares of New
Common Stock ((a) and (b) being referred to as the "Imperial Stock"), (c) owns a
call option to acquire an additional 218,050 shares of New Common Stock pursuant
to the Plan, (d) has the right to purchase from Sorol all of the Sorol Stock and
Stock Rights and (e) has the right for five years to match any offer for the
Rana Stock and to require Mr. Rana to sell all or part of the Rana Stock under
certain conditions as described in Item 6 below, ((c), (d) and (e) being
referred to as the "Imperial's Stock Rights" and, collectively with Imperial's
Stock, as "Imperial's Total Interest").
<PAGE>
CUSIP No. 808638209 (Common) Page 6 of 8 Pages
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808638308 (Preferred)
---------------------
Item 5. Interest in Securities of the Issuer
------------------------------------
As to the Reporting Entity direct beneficial owner of preferred stock, for
1,978,300 shares of the Issuer's common stock
Imperial's Total
----------------
Imperial's Stock Interests
---------------- ---------
(i.e. the New Preferred and (i.e. Imperial's Stock
New Common Stock Currently and all options/warrants
Owned by Imperial) to acquire additional shares)
sole voting power 1,760,250(1) 3,170,000
shared voting
power ---- ----
sole disposition
power 1,748,750 3,170,000
shared disposition
power ---- ----
------------------------
(1) Includes 12,500 shares of New Common Stock for which Imperial has a
proxy, as set forth in Item 6 below.
Voting and sale of Imperial's Total Interests are subject to certain
restrictions as described in Item 6 below.
No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, such
securities.
The 3,170,000 shares represents 84.53% of the total of the Company's issued
and outstanding shares of New Preferred Stock and New Common Stock, in the
aggregate.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
---------------------------------------------------------------------
to Securities of the Issuer
---------------------------
Pursuant to the Rana Contract, Mr. Rana agreed that for a period of five
years, he would give Imperial written notice of the terms and conditions of any
proposed sale of the Rana Stock and the option to match such terms and
conditions. Mr. Rana also gave Imperial an irrevocable proxy to vote his shares
for a period of three years. Also pursuant to the Rana Contract, Imperial
agreed that, if it sells a majority of the voting control of the Company, then
Mr. Rana will be given the option to sell a pro-rata portion of the Rana Stock
in such sale on the same terms and conditions as Imperial. Mr. Rana further
agreed that, in the event of a sale of voting control by Imperial, Imperial can
require Mr. Rana to sell that portion of the Rana Stock as Imperial designates
on the same terms as Imperial sells its shares or, if Mr. Rana elects not to,
then Imperial can repurchase the Rana Stock for a price equal to the greater of
the price originally paid by Mr. Rana to Imperial plus 25% per annum and the
last known bona fide bid for the New Common Stock in the market place.
Pursuant to the Imperial/Sorol Contract, both Imperial and Sorol agreed
that, if either wishes to sell any of its interests in the Company to a third
party, it will give the other written notice of the terms and conditions of such
proposed sale and the option to match such terms and conditions.
Also pursuant to the Imperial/Sorol Contract, the Reporting Entities agreed
(a) not to vote, as director, officer or shareholder, for any action by the
Company that would materially and adversely affect Sorol's economic interests in
the Sorol Stock and Stock Rights (including without limitation, the issuance of
additional stock by the Company) unless consented to by Sorol, which consent
shall not be unreasonably withheld, conditioned or delayed, except as otherwise
may be required pursuant to their
<PAGE>
CUSIP No. 808638209 (Common) Page 7 of 8 Pages
------------------ ------ -----
808638308 (Preferred)
---------------------
respective fiduciary duties or applicable law and (b) to consult with Sorol
prior to any vote at any director or shareholder meetings of the Company. The
Imperial/Sorol Contract continues for as long as they are shareholders of the
Company.
There are no written agreements between the Reporting Entities and the
Company other than the Plan which Imperial and the Company co-proposed.
Pursuant to the Plan, Imperial has the right to designate three of the
Company's five directors. Jonathan Borsuk is a director of the Company, in
accordance with the terms of the Plan and may, at some future time, be elected
as an officer of the Company as well. In addition, Mr. Borsuk's father, Harvey
Borsuk, and his sister, Michelle Borsuk, are directors of the Company. The
three Borsuks constitute a majority of the Company's board of directors.
Item 7. Material to Be Filed as Exhibits
--------------------------------
Exhibit 1 Fifth Modified Plan of the Company as amended by July 10, 1996
Agreement (the "Plan" described above).
Exhibit 2 June 27, 1996 Agreement among the Reporting Entities, Sorol and
Harvey Borsuk (the "Imperial/Sorol Contract" described above).
Exhibit 3 June 17, 1996 Agreement between Imperial and Rahul Rana (the
"Rana Contract" described above).
<PAGE>
CUSIP No. 808638209 (Common) Page 8 of 8 Pages
------------------ ------ -----
808638308 (Preferred)
---------------------
Signature
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule is true, complete and
correct.
Imperial Capital Worldwide Partners, L.P.
by: Imperial Capital Investors Corp., its general partner
July 22, 1996
By: /s/ JONATHAN BORSUK
------------------------------------------------------
Jonathan Borsuk, President
July 22, 1996
/s/ JONATHAN BORSUK
---------------------------------------------------------
Jonathan Borsuk
Exhibit 1
FIFTH MODIFIED PLAN OF REORGANIZATION
EXHIBIT A TO FIFTH MODIFIED
DISCLOSURE STATEMENT
<PAGE>
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
-------------------------
In Re: Case No. 93-34553(SAS)
:
Chapter 11
:
SCIENCE MANAGEMENT :
CORP.,
:
:
Debtor.
:
-------------------------
FIFTH MODIFIED PLAN OF REORGANIZATION OF
DEBTOR AND IMPERIAL CAPITAL WORLDWIDE
PARTNERS, L.P., CO-PROPONENT, UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE FOR
SCIENCE MANAGEMENT CORPORATION
RAVIN, SARASOHN, COOK,
BAUMGARTEN, FISCH & ROSEN
A Professional Corporation
103 Eisenhower Parkway
Roseland, New Jersey 07068
(201) 228-9600
David N. Ravin, Esq.
Paul Kizel, Esq.
Attorneys for Debtor
ROGERS & WELLS
Two Hundred Park Avenue
New York, NY 10166-0153
(212) 878-8000
Dennis Drebsky, Esq.
Jack Rose, Esq.
Attorneys for Imperial Capital
Worldwide Partners, L.P.
DATED: January 25, 1996
<PAGE>
TABLE OF CONTENTS
------------------
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS . . . . . . . . . . . . 7
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PROVISION FOR PAYMENT OF ADMINISTRATIVE,
TAX AND PRIORITY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . 7
A. Administrative Claims. . . . . . . . . . . . . . . . . . . . 7
Payment Period . . . . . . . . . . . . . . . . . . . . . . . 7
Applications for Professional Fees . . . . . . . . . . . . . 8
Payment of Professional Fees . . . . . . . . . . . . . . . . 8
B. Tax Claims. . . . . . . . . . . . . . . . . . . . . . . . . 8
C. Priority Claims. . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PROVISIONS FOR TREATMENT OF
CLASSES OF CLAIMS AND INTERESTS . . . . . . . . . . . . . . . . . . . 9
A. Class 1: . . . . . . . . . . . . . . . . . . . . . . . . . . 9
B. Class 2: . . . . . . . . . . . . . . . . . . . . . . . . . . 10
C. Class 3: . . . . . . . . . . . . . . . . . . . . . . . . . . 11
D. Class 4: . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
STOCK OPTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
MEANS FOR IMPLEMENTATION OF THE PLAN . . . . . . . . . . . . . . . . . 14
i
<PAGE>
A. Satisfaction of Obligations . . . . . . . . . . . . . . . . 14
B. Continued Corporate Existence. . . . . . . . . . . . . . . . 14
C. Revesting of Assets. . . . . . . . . . . . . . . . . . . . . 14
D. Corporate Action. . . . . . . . . . . . . . . . . . . . . . 15
E. Cancellation and Issuance of Stock. . . . . . . . . . . . . 15
F. New Stock . . . . . . . . . . . . . . . . . . . . . . . . . 15
G. Affiliate Resales . . . . . . . . . . . . . . . . . . . . . 15
H. Stock Exchange Listing . . . . . . . . . . . . . . . . . . . 16
I. Obligation to Make Distributions. . . . . . . . . . . . . . 16
J. Management of the Debtor. . . . . . . . . . . . . . . . . . 16
(A) Board of Directors. . . . . . . . . . . . . . . . . . . 16
(B) Officers. . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXECUTORY CONTRACTS AND UNEXPIRED LEASES . . . . . . . . . . . . . . . 18
A. Assumption of Executory Contracts and Unexpired Leases. . . 18
B. Cure of Defaults. . . . . . . . . . . . . . . . . . . . . . 18
C. Claims for Damages. . . . . . . . . . . . . . . . . . . . . 18
D. Survival of Indemnification Obligations . . . . . . . . . . 19
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CRAM DOWN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EFFECTS OF CONFIRMATION: VESTING OF PROPERTY,
DISCHARGE AND INJUNCTION . . . . . . . . . . . . . . . . . . . . . . . 19
A. Vesting of Property. . . . . . . . . . . . . . . . . . . . . 19
B. Discharge. . . . . . . . . . . . . . . . . . . . . . . . . . 20
C. Injunction. . . . . . . . . . . . . . . . . . . . . . . . . 20
D. Release of Directors,Officers and Imperial . . . . . . . . . 21
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CONDITIONS PRECEDENT TO EFFECTIVENESS . . . . . . . . . . . . . . . . 22
Conditions to Effectiveness. . . . . . . . . . . . . . . . . . . . . . 22
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ii
<PAGE>
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
A. Objections to Claims and Distribution to Holders
of Disputed Claims . . . . . . . . . . . . . . . . . . . . . 24
B. Modification. . . . . . . . . . . . . . . . . . . . . . . . 24
C. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
D. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 25
E. Rights If Plan Not Confirmed. . . . . . . . . . . . . . . . 25
F. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 25
G. Construction. . . . . . . . . . . . . . . . . . . . . . . . 25
H. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
I. Waiver of Certain Claims . . . . . . . . . . . . . . . . . . 25
J. Waiver of Subordination. . . . . . . . . . . . . . . . . . . 26
K. Fractional Shares. . . . . . . . . . . . . . . . . . . . . . 26
L. Minimum Distribution . . . . . . . . . . . . . . . . . . . . 26
M. Unclaimed Distribution. . . . . . . . . . . . . . . . . . . 26
N. Disbursing Agent . . . . . . . . . . . . . . . . . . . . . . 26
O. Committee . . . . . . . . . . . . . . . . . . . . . . . . . 26
P. Retiree Benefits . . . . . . . . . . . . . . . . . . . . . . 27
Q. Further Actions . . . . . . . . . . . . . . . . . . . . . . 27
R. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 27
S. Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE XIV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT . . . . . . . . . . 28
iii
<PAGE>
Science Management Corp., the Debtor herein, and Imperial Capital Worldwide
Partners, L.P. ("Imperial") propose the following Plan of Reorganization
pursuant to 11 U.S.C. Section 1121(a) and agree to be bound and liable
hereunder:
ARTICLE I
---------
DEFINITIONS
-----------
For the purpose of this Plan, to the extent not otherwise provided herein,
the following terms shall have the meanings herein set forth. Unless otherwise
indicated, the singular shall include the plural and capitalized terms shall at
all times refer to the terms as defined in this article. Any term used in this
Plan that is not defined in this Plan but that is used in the Bankruptcy Code
shall have the meaning assigned to it in the Bankruptcy Code. Any term used in
this Plan that is not defined herein or in the Bankruptcy Code but is defined in
the Bankruptcy Rules shall have the meaning assigned to it in the Bankruptcy
Rules. Accounting terms, if any, not otherwise defined in this Plan shall have
the meanings assigned to them in accordance with generally accepted accounting
principles currently in effect. The words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Plan as a whole, including all
exhibits and schedules, if any, annexed hereto, as the same may be amended or
supplemented, and not to any particular article, section or subdivision
contained in this Plan.
1. "Administrative Claim" means a claim for any cost or expense of
administration of Debtor's Chapter 11 case to the extent that it is of the kind
described in Section 503(b) of the Bankruptcy Code and is entitled to priority
under Section 507(a)(1) and (2) of the Bankruptcy Code, including, without
limitation: (i) the actual, necessary costs and expenses incurred on and after
the Petition Date and up to the Effective Date of preserving the Debtor's estate
and of operating the business of the Debtor and (ii) compensation and
reimbursement of costs and expenses for professional services to the extent
allowed under Section 330 of the Bankruptcy Code or otherwise allowed by the
Bankruptcy Court.
2. "Allowed Claim" means a Claim (a) which is listed on the Debtor's
Schedules of Liabilities, as the same may be amended from time to time, and has
not been listed as disputed, contingent or unliquidated; or (b) proof of which
has been properly filed with the Bankruptcy Court and with respect to which no
objection to the allowance thereof has been interposed; or, (c) as to which any
objection has been determined or which has been otherwise allowed by a Final
Order. An Allowed Claim shall not include interest on the amount of such Claim
accruing from and after the Petition Date.
1
<PAGE>
3. "Allowed [Class Designation] Claim" means an Allowed Claim in the
specified Class.
4. "Assets" means all of the Debtor's right, title and interest in and to
property of whatever type or nature including property of the Debtor's Estate as
defined in Bankruptcy Code Section 541 and any and all claims, rights or causes
of action of the Debtor.
5. "Bankruptcy Code" means Title 11 of the United States Code, which
Congress enacted into positive law by Public Law 95-598, November 5, 1978, 92
Stat. 2549, as the same may be amended from time to time.
6. "Bankruptcy Court" means the unit of United States District Court for
the District of New Jersey having jurisdiction over the Chapter 11 Case.
7. "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as
the same shall from time to time be amended, as applicable to the Chapter 11
Case.
8. "Cause of Action" means all rights, claims, torts, remedies,
liabilities, obligations, actions, causes of action, avoiding powers, suits,
proceedings, judgments, damages and demands whatsoever in law or in equity,
whether known or unknown, contingent or otherwise.
9. "Chapter 11 Case" means the case under Chapter 11 of the Bankruptcy
Code in which Science Management Corp. is the Debtor and Debtor-in-Possession.
10. "Claim" means any right to payment from the Debtor within the meaning
of Section 101(5)(A) and (B) of the Bankruptcy Code, including a claim under
Section 502(h) of the Bankruptcy Code, which has not been settled or
compromised.
11. "Claimant" means the holder of an Allowed Claim.
12. "Class" means any group of Claimants or Interest holders as specified
in Article III of this Plan.
13. "Committee" means the Official Committee of Unsecured Creditors
appointed in the Chapter 11 Case pursuant to section 1102 of the Bankruptcy
Code.
14. "Confirmation" means the entry by the Bankruptcy Court of an order
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.
15. "Confirmation Date" means the date on which the Bankruptcy Court
enters an order on its docket confirming this Plan
2
<PAGE>
in accordance with the provisions of Section 1129 of the Bankruptcy Code.
16. "Confirmation Order" means the Order of the Bankruptcy Court
confirming this Plan pursuant to Section 1129 of the Bankruptcy Code, and
approving the transactions contemplated under this Plan.
17. "Creditor" means any Person that holds a Claim.
18. "Debtor" means Science Management Corp., Debtor-InPossession in case
No. 93-34553(SAS) pending in the Bankruptcy Court.
19. "Deficiency Claim" means an Allowed Claim of a Claimant equal to the
amount by which the aggregate Allowed Claim of such Claimant exceeds the Allowed
Secured Claims of such Claimant; provided, however, that if a holder of such
-----------------
Allowed Secured Claim or the Class of which such Allowed Secured Claim is a
member makes the election provided in Section 1111(b)(2) of the Bankruptcy Code,
there shall be no Deficiency Claim in respect of such Allowed Secured Claim.
20. "Disclosure Statement" means the disclosure statement relating to this
Plan distributed in accordance with, inter alia, Sections 1125, 1126 and 1145 of
----- ----
the Bankruptcy Code and Rule 3018 of the Federal Rules of Bankruptcy Procedure
and which was approved by the Bankruptcy Court.
21. "Disputed Claim" means a Claim against the Debtor to the extent that a
proof of Claim has been timely filed or deemed timely filed under applicable
law; and, as to which an objection has been or may be timely filed by the Debtor
or any other party-in-interest and which objection, if timely filed, has not
been withdrawn on or before any date fixed for filing such objections by this
Plan or order of the Bankruptcy Court, and has not been denied by a Final Order.
Prior to the time that an objection has been or may be timely filed, for the
purposes of this Plan, a Claim shall be considered a Disputed Claim to the
extent that the amount of the Claim specified in the proof of claim exceeds the
amount of the Claim scheduled by the Debtor as other than disputed, contingent
or unliquidated.
22. "Effective Date" means the date on which the Plan shall take effect as
provided in Article XI of the Plan.
23. "Estate" means the Debtor's estate created by Section 541 of the
Bankruptcy Code.
24. "Executory Contract" means any executory contract or unexpired lease,
subject to Section 365 of the Bankruptcy Code, between the Debtor and any other
Person as of the Petition Date.
3
<PAGE>
25. "Final Order" means an order or judgment of the Bankruptcy Court which
has not been stayed and as to which Order (or any revision, modification or
amendment thereof) the time to appeal or seek certiorari review or rehearing has
----------
expired and as to which no appeal or petition for certiorari review or rehearing
----------
is pending.
26. "Gant" means Donald Gant, an individual.
27. "Gant Loan Agreement" means that certain Loan Agreement dated June 29,
1992 between the Debtor, SMC International and Gant.
28. "Gant Secured Claim" means the Allowed Secured Claim of Gant.
29. "General Unsecured Creditor" means the holder of an Unsecured Claim.
30. "Imperial" means Imperial Capital Worldwide Partners, L.P., a Delaware
limited partnership.
31. "Imperial Call Option" means the call option described in Article
IV(A)(iii) of this Plan.
32. "Imperial Claim" means the entire Claim of Imperial.
33. "Imperial Entities" means, collectively, Imperial and Imperial
Funding.
34. "Imperial Funding" means Imperial Capital Funding Corp., a Delaware
corporation.
35. "Imperial Litigation" means the litigation pending in the United
States Bankruptcy Court for the District of New Jersey under case number 95-3193
entitled Science Management Corp. v. Imperial Capital Funding Corp. and Imperial
-----------------------------------------------------------------------
Capital Worldwide Partners, L.P., including the appeal taken by the Imperial
- --------------------------------
Entities from an order preliminarily enjoining the Imperial Entities from
foreclosing on their collateral, together with the two appeals taken by the
Imperial Entities from an order of the Bankruptcy Court denying Imperial's
motion (i) for authorization to foreclose on its collateral and (ii) to direct
the Debtor to turnover its collateral.
36. "Insured Claim" means any Claim against the Debtor that the Debtor
asserts is payable, in whole or in part, by an insurance policy or policies
issued on behalf of the Debtor.
37. "Letter Agreement" means the Letter Agreement dated December 20, 1994,
between the Debtor and Imperial which was approved by an order of the Bankruptcy
Court dated January 5, 1995.
4
<PAGE>
38. "New Common Stock" means the shares of common stock to be issued by
Reorganized SMC pursuant to Article IV of this Plan. Between 1.8 million and
2.2 million shares of New Common Stock will be issued.
39. "Old Common Stock" means the issued and outstanding shares of common
stock of the Debtor as of the Petition Date.
40. "Old Equity Interest" means any equity interest in the Debtor
represented by any equity security including but not limited to, the Old Common
Stock and any warrants or options.
41. "Person" means an individual, corporation, partnership, joint
venture, association, joint stock company, trust, estate, unincorporated
organization, governmental unit or other entity.
42. "Petition Date" or "Filing Date" means July 28, 1993, the date on
which the Debtor filed its voluntary petition for relief under Chapter 11 of the
Bankruptcy Code.
43. "Plan" means this Second Amended Plan of Reorganization (including all
exhibits and all documents referred to herein and therein) as modified or
amended from time to time as and to the extent permitted herein or by the
Bankruptcy Court.
44. "Preferred Stock" means Preferred Stock, as defined and set forth in
the Settlement Agreement, to be issued to Imperial on the Effective Date
pursuant to, and in accordance with the terms contained in, Article IV(A) of
this Plan.
45. "Priority Claim" means any Claim, other than an Administrative Claim
or a Tax Claim, to the extent entitled to priority in payment under Section
507(a) of the Bankruptcy Code.
46. "Pro Rata" means, with respect to an amount of cash or other property
to be paid or distributed to the holder of an Allowed Claim on a particular
date, in accordance with the ratio, as of such date, of the dollar amount of the
Allowed Claim in the indicated class to the aggregate dollar amount of all
Allowed Claims in the indicated class (including, in each such calculation, the
full amount of disputed claims in the indicated class which have not yet been
allowed or otherwise determined).
47. "Released Claims" means any and all claims, demands, debts, actions,
causes of action, suits, covenants, contracts, agreements, obligations,
promises, accounts, damages, costs, expenses, offsets, liabilities, defenses,
counterclaims, cross-claims, third-party claims, losses, contribution,
subrogations (contractual or equitable), duties and obligations of any kind and
character whatsoever, known or unknown, suspected or unsuspected, whether
sounding in tort, fraud, contract or otherwise, at law or in equity, fixed or
contingent, direct or indirect, asserted or
5
<PAGE>
unasserted, liquidated or unliquidated, choate or inchoate, disclosed or
undisclosed, matured or unmatured, by reason of any matter, cause or thing
whatsoever including without limitation, claims arising under fraudulent
conveyance or other laws relating to creditors rights generally, claims with
respect to federal or state securities laws, and claims related to fiduciary
obligations held by or against the Debtor, its officers, directors, agents,
representatives, professional representatives, successors or assigns or the
Imperial Entities, their officers, directors, agents, representatives,
professional representatives, successors or assigns as a result of or in
connection with their involvement in this Chapter 11 Case.
48. "Reorganized SMC" means the Debtor on and after the Effective Date.
49. "Settlement Agreement" means the agreement between the Debtor and
Imperial memorialized in a letter dated June 30, 1995.
50. "SMC" means Science Management Corp., a Delaware corporation.
51. "SMC Domestic Subsidiaries" means, collectively, SMC Environmental
Services Group, Inc., SMC McEver, Inc., SMC Business Information Systems, Inc.,
SMC Management Services Group Inc., SMC Real Time Systems Inc., SMC Hendrick,
Inc., SMC Personnel Support, Inc., SMC Engineering, Inc., Science Management
Corporation (New Jersey) and Handy Associates International.
52. "SMC Foreign Subsidiaries" means, collectively, Science Management
International, GmbH, Science Management International, S.A. (Belgium), Science
Management International, S.A. (FR), SMC International, S.L., SMC Inter AG,
Science Management Corporation International B.V., and Science Management
Corporation U.K. Limited.
53. "SMC International" means SMC International Holdings, Inc., a Delaware
corporation, a wholly-owned subsidiary of the Debtor.
54. "SMC Subsidiaries" means the SMC Domestic Subsidiaries, the SMC
Foreign Subsidiaries and SMC International, collectively.
55. "Secured Claim" shall mean that portion of a Claim equal to the value
of the interest in the property of the Debtor collateralizing such Claim, as
filed, or as determined by the Bankruptcy Court pursuant to Sec.506(a) of the
Bankruptcy Code.
56. "Somerset" means Somerset-Kensington Capital Corp., a New Jersey
corporation.
6
<PAGE>
57. "Substantial Consummation" shall have the meaning set forth in
Sec.1101(2) of the Bankruptcy Code.
58. "Tax Claim" means any Claim entitled to priority under Section
507(a)(7) of the Bankruptcy Code.
59. "Unsecured Claim" means a Claim which is not a Priority Claim, a
Secured Claim, a Tax Claim or an Administrative Claim.
ARTICLE II
----------
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
---------------------------------------------
For purposes of this Plan, those Persons holding Claims against, or
Interests in, the Debtor are grouped as follows in accordance with Section
1122(a) of the Bankruptcy Code, provided, however, in accordance with Section
1123(a)(1) of the Bankruptcy code, Administrative Claims and Tax Claims have not
been classified.
(a) Class 1 consists of the Allowed Imperial Claim;
(b) Class 2 consists of the Allowed Gant Claim;
(c) Class 3 consists of Allowed Unsecured Claims;
(d) Class 4 consists of Old Common Stock.
ARTICLE III
-----------
PROVISION FOR PAYMENT OF ADMINISTRATIVE,
-----------------------------------------
TAX AND PRIORITY CLAIMS
-----------------------
A. Administrative Claims.
1. Payment Period. Each holder of an Allowed Administrative Claim shall
--------------
receive in full satisfaction of such Allowed Claim, cash equal to the amount of
the Allowed Claim, on the later of (i) the Effective Date and (ii) the date that
is ten (10) days after the date on which such Claim becomes an Allowed Claim,
unless such Holders shall have agreed to different treatment of such Claims;
provided, however, that administrative claims that comprise in whole or in part
fees and expenses for or relating to professional services performed on behalf
of the Debtor or Committee prior to the Effective Date shall be paid in
accordance with Par.3 below, provided, however, Reorganized SMC's obligation to
pay such fees and expenses shall be limited to $966,000.00. Any professional
fees and expenses outstanding after the Effective Date shall be secured by a
first priority lien against the assets of both Reorganized SMC and the SMC
Domestic Subsidiaries, with the 22 exception of the stock of SMC International.
In
7
<PAGE>
addition, Administrative Claims representing obligations incurred in the
ordinary course of business by the Debtor after the Petition Date shall be
assumed by Reorganized SMC and shall be paid or performed in accordance with the
terms and conditions of the particular transactions and the agreements relating
thereto without interest.
2. Applications for Professional Fees. All applications for professional
----------------------------------
fees for services rendered in connection with the Chapter 11 Case prior to the
Effective Date shall be filed with the Bankruptcy Court within forty-five (45)
days after the Effective Date.
3. Payment of Professional Fees. Allowed fees and expenses for or
----------------------------
relating to professional services performed prior to the Effective Date on
behalf of the Debtor or Committee shall be paid as follows:
(i) On or within ten days of the Effective Date, one-half of all such
fees and expenses which have been allowed as of the Effective Date shall be paid
in cash provided, however, the aggregate distribution shall not exceed
$466,000.00. All professionals shall be paid on a pro-rata basis to the extent
their allowed fees and expenses exceed the amount of funds available for
distribution;
(ii) With respect to any applications for professional fees submitted
subsequent to the Effective Date, in accordance with Par.2 above, one-half of
such amounts as may be approved by the Bankruptcy Court shall be paid within
ten days after the order granting such approval is served upon Reorganized SMC
provided, however, the distributions made pursuant to Article III(A)(3)(i) &
(ii) shall not exceed $466,000.00. All professionals shall be paid on a
pro-rata basis to the extent their allowed fees and expenses exceed the amount
of funds available for distribution;
(iii) The balance of such fees and expenses shall be paid on the
first anniversary of the Effective Date subject to the limitation on fees and
expenses set forth in Article III(A)(1) above and shall be secured by the lien
described in Article III (A)(1). All professionals shall be paid on a pro-rata
basis to the extent their allowed fees and expenses exceed the amount of funds
available for distribution.
B. Tax Claims.
At the sole discretion of Reorganized SMC, holders of Allowed Tax Claims,
if any, shall be paid: (a) in cash equal to the amount of such Allowed Claim, on
the Effective Date or upon such other terms as may be agreed to between the
Debtor and any Holder of an Allowed Tax claim; or (b) in the manner permitted by
Section 1129(a)(9)(C) of the Bankruptcy Code, and, in such event, interest shall
be paid on the unpaid portion of such Allowed Tax Claim at a rate to be agreed
to by the Debtor and the appropriate governmental
8
<PAGE>
unit or, if they are unable to agree, to be determined by the Bankruptcy Court,
or (c) on such other terms as may be agreed upon by Reorganized SMC and such
holder.
C. Priority Claims.
Each holder of a Priority Claim shall receive l00% of such Claim in cash on
the later of (i) 15 days after the Effective Date (ii) ten days after such Claim
becomes an Allowed Priority Claim, or (iii) upon such other terms and conditions
agreed to by the Debtor and the holder of an Allowed Priority Claim.
ARTICLE IV
----------
PROVISIONS FOR TREATMENT OF
----------------------------
CLASSES OF CLAIMS AND INTERESTS
-------------------------------
The treatment of and the consideration received by holders of Allowed
Claims or Allowed Interests pursuant to this Article IV of the Plan shall be in
full satisfaction, release and discharge of their respective Claims against or
Interests in the Debtor. For purposes of this Plan, those Persons holding
Claims against, or Interests in, the Debtor are grouped as follows in accordance
with Section 1122(a) of the Bankruptcy Code:
A. Class 1: Class 1 consists of the Imperial Claim. (i) On the
--------
Effective Date, Imperial shall provide to Reorganized SMC $463,000.00 for the
purpose of funding the Plan. Imperial shall have no obligation to provide any
funds to the Debtor or Reorganized SMC before the Effective Date or for any
purpose other than funding the Plan and shall not in any circumstances be
required to remit to the Debtor or Reorganized SMC any amount in excess of
$463,000.00 or be found to have any other obligation, express or implied, to the
Debtor hereunder. SMC shall give Imperial thirty (30) days written notice of
the Effective Date. SMC further agrees that it shall use its best efforts to
give Imperial sixty (60) days written notice of the Effective Date.
(ii) On the Effective Date, simultaneous with the payment of the funds
described in Article IV(A)(i) above, in full and complete satisfaction of the
Imperial Claim, Reorganized SMC shall issue and Imperial shall receive (A)
shares of New Common Stock of Reorganized SMC in such an amount that results in
Imperial owning 55.5% of the New Common Stock of Reorganized SMC and (B) $1.75
million of Reorganized SMC non-convertible, non-dividend bearing preferred stock
with limited redeemability as described below (the "Preferred Stock"). All
Preferred Stock as a class shall have a vote equal to .01% of the total
outstanding New Common Stock of Reorganized SMC. Imperial will assign to
Charles Gordon Holladay, from the 55.5% of New Common Stock issued to it, an
amount equal to two percent (2%) of the New Common Stock of Reorganized SMC.
Reorganized SMC may redeem the Preferred Stock on or before the
9
<PAGE>
third anniversary of the Effective Date of the Plan, only if four of the five
then appointed directors of Reorganized SMC approve of such redemption provided,
that after the third anniversary of the Effective Date or, in the event
Reorganized SMC cannot meet its mature and maturing obligations with the honest
use of credit on or before the third anniversary of the Effective Date, there
shall be no restriction on redemption of the Preferred Stock except as provided
by applicable law.
(iii) On the Effective Date, Imperial shall be issued a call option
for 17.5% of the New Common Stock of Reorganized SMC which 17.5% shall be
taken, pro-rata, from the New Common Stock to be issued to all Persons other
than Imperial pursuant to this Plan which option shall be exercisable at the
sole discretion of Imperial, in whole, in part or in increments, at any time(s)
within eighteen (18) months of the Effective Date for an aggregate cost to
Imperial of no more than $750,000.00 in cash. In the event the Imperial Call
Option is exercised in part, from time to time during the eighteen (18) month
call period, it shall be exercised on a pro-rata basis among all the New Common
Stock subject to the Imperial Call Option and the exercise price would be pro-
rated in accordance with the ratio of the maximum exercise price of $750,000.00
to the total number of shares of New Common Stock subject to the Imperial Call
Option.
(iv) In the event the class of unsecured creditors (Class 3) rejects
the Plan, all Old Equity Interests in SMC shall be deemed cancelled and void and
the New Common Stock of Reorganized SMC which would have been distributed to
holders of Old Common Stock shall be distributed to Imperial in addition to the
55.5% of New Common Stock that Imperial will receive pursuant to Article
IV(A)(i) of this Plan. Imperial will, in turn, within thirty (30) days after
the Effective Date, distribute to holders of Old Common Stock, in accordance
with a schedule to be provided by the Debtor or Reorganized SMC, on a pro-rata
basis, an amount of New Common Stock of Reorganized SMC which shall represent
7.5% of the issued and outstanding New Common Stock of Reorganized SMC, a
portion of which equal to 2.82% of the New Common Stock shall be held in escrow
and subject to the Imperial Call Option. Class 1 is impaired.
B. Class 2: Class 2 consists of the Allowed Gant Secured Claim. In
--------
satisfaction of the Allowed Gant Secured Claim, Reorganized SMC shall sell the
stock of SMC International, which stock constitutes all the collateral owned by
the Debtor which secures the Allowed Gant Secured Claim. The sale will be a
public auction sale and shall take place at a hearing (the "Sale Hearing") to be
conducted before the Honorable Stephen A. Stripp, United States Bankruptcy
Judge, at the United States Bankruptcy Court for the District of New Jersey, 402
East State Street, Trenton, New Jersey on the same day as the hearing on
confirmation of the Plan, provided, however, the Sale Hearing shall take place
only in the
10
<PAGE>
event that the Bankruptcy Court confirms the Plan. In the event the hearing on
confirmation is adjourned, the Sale Hearing shall be adjourned to the same date
and time as the adjourned hearing on confirmation.
All bids, together with evidence of financial ability to perform, must be
presented at the Sale Hearing. In addition, at the Sale Hearing, each bidder
must indicate as part of its bid whether it includes the use of the Marks Etc.
(as referenced and defined in Section 4.2 of the Stock Purchase Agreement
annexed to the Disclosure Statement as Exhibit N) and, if so, the length of the
Use Period (as referenced and defined in Section 4.2 of the Stock Purchase
Agreement). The Use Period, if any, shall be either three (3) or six (6)
months. The payments to be made in consideration of the Use Period, if any,
shall be governed by Section 4.2 of the Stock Purchase Agreement.
The sale shall be free and clear of all liens, with Gant's lien to attach
to the proceeds of such sale, with such proceeds to be paid to Gant upon receipt
up to the amount of Gant's claim which shall be fixed and allowed for purposes
of this Plan for $2,450,000.00. Gant shall have the right to credit bid at the
sale pursuant to Sec.363(k) of the Bankruptcy Code. Any funds generated by the
sale in excess of the Allowed Gant Secured Claim shall be retained by
Reorganized SMC. To the extent that the amount of Gant's Allowed Secured
Claim exceeds the sales price, Gant will be deemed to have waived any right he
may have to assert a Deficiency Claim against (i) the Debtor, (ii) Reorganized
SMC, and in the event Gant is not the successful bidder, (iii) SMC
International, the co-obligor of the debt owed to Gant. The Debtor reserves the
right to submit a bid or participate in a joint bid with other parties,
provided, however, that Imperial must consent to any bid made by the Debtor on
its own behalf or in conjunction with other parties.
ALL OF THE TERMS AND CONDITIONS OF THE SALE ARE SET FORTH IN THE STOCK
PURCHASE AGREEMENT WHICH IS ANNEXED TO THE DISCLOSURE STATEMENT AS EXHIBIT N AND
INCORPORATED IN ITS ENTIRETY HEREIN.
The successful bidder (except Gant) must pay to the Debtor, in immediately
available funds, including cash or certified check, a non-refundable deposit
equal to 20% of the purchase price prior to the conclusion of the Sale Hearing.
The balance of the purchase price shall be paid at the closing of the sale which
shall take place within 15 days of the entry of an order by the Bankruptcy Court
approving the sale. The successful bidder and the Debtor shall execute a stock
purchase agreement substantially in the form as that annexed to the Disclosure
Statement as Exhibit N prior to the conclusion of the Sale Hearing. The Class 2
Claim is impaired.
C. Class 3: Class 3 consists of Allowed Unsecured Claims. On the
--------
Effective Date, or as soon thereafter as is practicable, but
11
<PAGE>
in no event later than thirty (30) days after the Effective Date, twenty per
cent (20%) of the New Common Stock shall be issued on a pro rata basis to
holders of Allowed Unsecured Claims , provided, however, a portion of the
New Common Stock to be issued hereunder equal to 7.53% of all New Common Stock
shall be held in escrow for the benefit of holders of Allowed Unsecured Claims
and shall be subject to the Imperial Call Option. The New Common Stock subject
to the Imperial Call Option shall be held in escrow for the benefit of the
holders of Allowed Unsecured Claims in accordance with a certain Escrow
Agreement to be entered into as of the Effective Date by and among Reorganized
SMC, Imperial, and the attorney for the Committee, or such other person as
agreed to by Imperial, the Debtor and the Committee and approved by the
Bankruptcy Court, acting as escrow agent, including terms and provisions
providing that the New Common Stock subject to the Imperial Call Option will be
subject to and shall be released from escrow and delivered to Imperial in the
event of the exercise of the Imperial Call Option and that as monies are
received from Imperial same shall be distributed on a pro-rata basis to holders
of Class 3 Allowed Unsecured Claims.
In addition, cash equal to the lesser of two and one-half per cent (2.5%)
of all Allowed Unsecured Claims or $190,000.00 (the "Deferred Payments") shall
be distributed on a pro-rata basis to holders of Allowed Unsecured Claims on
each of the first, second and third anniversary dates of the Effective Date of
the Plan. The Deferred Payments shall be secured by a lien subordinate to (i)
the lien to be issued to secure the allowed professional fees and expenses due
to be paid on the first anniversary of the Effective Date and (ii) any lien
issued in support of working capital financing which may be subsequently
obtained by Reorganized SMC and/or the SMC Subsidiaries.
The Committee shall be entitled to designate one individual to be a non-
voting observer on Reorganized SMC's Board of Directors until such time as all
of the Deferred Payments have been made. The observer shall receive $500 per
half day and $1,000.00 per day to attend board of directors meetings and
Reorganized SMC shall reimburse the observer for reasonable and necessary
expenses incurred in connection with the attendance at Board meetings, but in no
event shall such reimbursement exceed $250.00 per meeting. Reorganized SMC
shall not be liable to the observer for any costs, expenses or compensation
other than those set forth in this Article IV(C). In the event that directors
and officers liability insurance can be obtained and the observer can be
included in the coverage thereunder at no additional cost to the Debtor, the
observer will be included on Reorganized SMC's directors and officers liability
insurance policy. The Class 3 Claims are impaired.
D. Class 4: Class 4 consists of holders of Old Common Stock. In the
--------
event holders of Class 3 claims accept the Plan, in
12
<PAGE>
full satisfaction, release and discharge of their interests, on the Effective
Date, or as soon thereafter as is practicable, but in no event later than thirty
(30) days after the Effective Date, holders of Old Common Stock shall receive on
a pro rata basis, an amount of New Common Stock of Reorganized SMC which shall
represent 7.5% of the issued and outstanding New Common Stock of Reorganized
SMC, provided, however, that a portion of the New Common Stock issued to members
of Class 4 equal to 2.82% of all New Common Stock shall be held in escrow and
shall be subject to the Imperial Call Option, and that as monies are received
from Imperial the same shall be distributed to holders of Old Common Stock on a
pro-rata basis. In the event holders of Class 3 reject the Plan, all Old
Equity Interests in the Debtor shall be deemed cancelled and void and the New
Common Stock of Reorganized SMC which would have been distributed to holders of
Old Common Stock shall be distributed to Imperial in addition to the 55.5% of
New Common Stock that Imperial will receive pursuant to Article IV(C)(i) of this
Plan. Imperial will, in turn, within thirty (30) days of the Effective Date,
distribute to holders of Old Common Stock in accordance with a schedule to be
provided by the Debtor or Reorganized SMC, on a pro-rata basis, an amount of New
Common Stock of Reorganized SMC which shall represent 7.5% of the issued and
outstanding New Common Stock of Reorganized SMC, provided, however, a portion of
the New Common Stock issued hereto equal to 2.82% of all New Common Stock shall
be held in escrow and shall be subject to the Imperial Call Option. The holders
of Class 4 Old Common Stock are impaired.
ARTICLE V
---------
STOCK OPTION PLANS
------------------
All stock option plans will be terminated on the Effective Date.
Reorganized SMC anticipates adopting one or more stock option plans, provided,
however, the creation and terms of such stock option plan or plans shall be at
the sole discretion of the Board of Directors of Reorganized SMC and shall be
subject to the approval of the shareholders of Reorganized SMC.
ARTICLE VI
----------
SALE OF ASSETS
--------------
(i) The sale, lease, exchange or other disposition of all or substantially
all of the assets of Reorganized SMC must be approved by a vote of 80% of the
holders of Reorganized SMC's common stock voting at a duly convened meeting of
shareholders, provided, however, that this provision shall be of no force or
-------- -------
effect on or after the third anniversary of the Effective Date.
(ii) A vote of 4 of the 5 directors serving on the Board of Directors of
Reorganized SMC shall be required for any sale of more than 20% of any entity
comprising more than 25% of the total value
13
<PAGE>
of the assets of Reorganized SMC at a fair market value provided, however, that
this provision shall cease to be of any force or effect on or after the third
anniversary of the Effective Date. The fair market value shall be determined
through binding arbitration. Either the Reorganized SMC or Imperial may
institute arbitration under this section by sending a Notice of Arbitration to
the other, identifying its selection as an arbitrator (the "Arbitrating Party").
Within five (5) business days of receipt of such notice, the other party hereto
shall send to the Arbitrating Party a notice setting forth its selection of an
arbitrator. In the event arbitration proceedings are commenced, James A.
Skidmore, Jr. shall be authorized to select the arbitrator on behalf of the
Reorganized SMC. The two selected arbitrators shall select a third arbitrator
within five (5) business days. The arbitration shall occur within five (5)
business days of the selection of the third arbitrator. The parties further
agree that they will seek arbitration prior to seeking judicial intervention in
any dispute governed by this provision.
(iii) Notwithstanding the foregoing, in the event Reorganized SMC cannot
meet its mature and maturing obligations with the honest use of credit, a simple
majority of all shareholders voting at a duly convened meeting of shareholders
may elect to liquidate, lease, exchange, sell or otherwise dispose of any, all
or substantially all of the assets of Reorganized SMC, its subsidiaries, or any
portion thereof.
ARTICLE VII
-----------
MEANS FOR IMPLEMENTATION OF THE PLAN
------------------------------------
A. Satisfaction of Obligations. On the Effective Date, Imperial shall
---------------------------
provide the funds as set forth in Article IV(A)(i) of this Plan. Reorganized
SMC shall fund all other obligations under this Plan from available cash of the
Reorganized Debtor and/or any of its subsidiaries.
B. Continued Corporate Existence. Except as provided in the Plan, the
-----------------------------
Debtor shall continue to exist after the Effective Date of the Plan in
accordance with the law applicable in the jurisdiction in which it was
incorporated and pursuant to the certificate of incorporation and by-laws in
effect prior to the Effective Date, except to the extent such certificate of
incorporation and by-laws are amended as required by the Plan or as otherwise
permitted by applicable law. Copies of the amended certificate of incorporation
and by-laws are annexed to the Disclosure Statement as Exhibits E and F.
C. Revesting of Assets. The property of the estate of the Debtor shall
-------------------
revest in Reorganized SMC on the Effective Date. Except as may otherwise be set
forth in this Plan, Reorganized SMC may operate its business, and may use,
acquire, and dispose of
14
<PAGE>
property free of any restrictions of the Bankruptcy Code. As of the Effective
Date, all property of the Debtor shall be free and clear of all Claims and
Equity Interests of Creditors and holders of Equity Interests, except as
provided herein.
D. Corporate Action. On or prior to the Effective Date, the Debtor shall
----------------
amend its Certificate of Incorporation and By-Laws to satisfy the provisions of
this Plan and Bankruptcy Code Section 1123(a)(6); provided, however, Reorganized
SMC reserves the right to amend further its Certificate of Incorporation and By-
Laws as permitted by applicable state law on or after the Effective Date. On
the Effective Date or as soon thereafter as is practicable, Reorganized SMC
shall file with the Secretary of State of the State of Delaware in accordance
with sections 103 and 303 of the Delaware General Corporation Law its
Certificate of Incorporation as amended. On the Effective Date, the election of
directors and officers pursuant to Section J hereof, and the other matters
provided under the Plan involving the corporate structure of the Debtor or
Reorganized SMC, or corporate action by the Debtor or Reorganized SMC, shall be
deemed to have occurred and shall be in effect from and after the Effective Date
pursuant to Section 303 of the Delaware General Corporation Law without any
requirement of further action by the stockholders or directors of the Debtor or
Reorganized SMC.
E. Cancellation and Issuance of Stock. On the Effective Date, or as soon
----------------------------------
thereafter as is practicable, the following transactions shall occur in the
following order:
(1) The cancellation, annulment and extinguishment of all existing Old
Common Stock and Old Equity Interests, and
(2) The issuance, distribution and transfer by Reorganized SMC of the
New Common Stock and Preferred Stock in accordance with the terms of the Plan.
F. New Stock. All stock distributed pursuant to the Plan, shall be New
---------
Common Stock or Preferred Stock. Upon issuance of the shares of New Common
Stock and Preferred Stock, all such shares will be deemed fully paid and non-
assessable. All shares of Preferred Stock shall have in the aggregate a vote
equal to .01% of the vote of all New Common Stock. All authorized and issued
shares of New Common Stock shall have one vote per share. The New Common Stock
shall have a par value of $.10 per share. The Preferred Stock shall be
redeemable for $1.75 million with such amount being distributed equally among
each share of Preferred Stock subject to Article IV(A)(ii) of this Plan.
G. Affiliate Resales. The issuance of New Common Stock and Preferred
-----------------
Stock pursuant to this Plan shall be exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 1145(a)(1) of the
Bankruptcy Code. Rule 144 promulgated
15
<PAGE>
by the Securities and Exchange Commission under the Securities Act may be
available to any Person deemed to be an "affiliate" under the Securities Act for
purposes of permitting resales of New Common Stock and Preferred Stock by any
such Person. See Paragraph "G" of "Means For Implementation of Plan" contained
---
in the Disclosure Statement for a more detailed description of the applicability
of Sec.1145.
H. Stock Exchange Listing. Reorganized SMC shall use its reasonable
----------------------
efforts to cause the New Common Stock to be accepted for listing on the American
Stock Exchange or such other stock exchange as Reorganized SMC may deem
desirable.
I. Obligation to Make Distributions. The obligation to make the
--------------------------------
distributions required under the Plan shall be assumed by Reorganized SMC which
shall have the obligation to make all distributions of notes, stock, and cash to
be issued by Reorganized SMC under the Plan.
J. Management of the Debtor.
------------------------
(A) Board of Directors. On the Effective Date, the Board of
Directors of Reorganized SMC shall have control over the management and
operation of Reorganized SMC and, through control of each of its Subsidiaries'
respective Boards of Directors, each of its Subsidiaries. The Board of
Directors of Reorganized SMC will consist of five directors each of whom shall
be appointed for an initial term of 3 years; Imperial shall designate three
members of the Board of Directors. James A. Skidmore, Jr. shall be the Chairman
of the Board of Directors and shall designate one other individual to serve on
the Board. The names of the initial directors will be identified at least five
days prior to the date of the Confirmation Hearing and will be set forth in the
amended and restated certificate of incorporation. All such directors shall be
deemed elected pursuant to the Confirmation Order. After the initial 3-year
term, the Board of Directors will be chosen by Reorganized SMC's shareholders
pursuant to the certificate of incorporation and by-laws of the Reorganized SMC.
Those directors not continuing in office upon the Effective Date shall be deemed
removed therefrom pursuant to the Confirmation Order. The Board of Directors
shall be authorized, acting by majority vote of the directors then in office, to
fill vacancies on the Board of Directors. The Committee shall be authorized to
designate one individual to be a non-voting observer authorized to attend all
Board of Directors meetings until such time as all Deferred Payments are made.
(B) Officers. Upon the Effective Date, the officers of Reorganized
SMC shall be as follows:
16
<PAGE>
President and
Chief Executive Officer James A. Skidmore, Jr.
Executive Vice President Frank S. Rathgeber
Vice President -
Chief Financial Officer Dennis M. Casey
Vice President - Administration
& Secretary Marion G. Hilferty
The tenure and manner of selection of the officers of Reorganized SMC shall be
as provided in the amended Certificate of incorporation and amended by-laws of
Reorganized SMC. On the Effective Date, Reorganized SMC and James A. Skidmore,
Jr. shall enter into a three-year employment agreement, dated and effective as
of the Effective Date, which shall be substantially in the form annexed to the
Disclosure Statement as Exhibit G, and shall provide for, among other things, a
base annual salary of not less than $200,000.00.
In addition, on the Effective Date, Reorganized SMC shall enter into three-
year employment agreements with Frank Rathgeber, Dennis Casey and Marion
Hilferty pursuant to which they will receive annual base salaries of not less
than $124,875.00, $84,000.00 and $74,225.00, respectively. The employment
agreements shall provide for termination with or without cause (with the
exception of the Rathgeber agreement which can only be terminated for cause),
provided, however, upon termination without cause each of these individuals
shall be entitled to continue to receive their salaries for a period of six
months after notice of termination is provided. In addition, in the event of her
termination without cause prior to the expiration of three years, Marion
Hilferty shall receive an additional sum of $5,000.00 per year (or such
proportional share thereof) for each year left on her employment contract.
Attached collectively to the Disclosure Statement as Exhibit H are copies of the
employment agreements that will be entered into with Rathgeber, Casey and
Hilferty.
In addition, on the Effective Date, Reorganized SMC shall issue the
following amount of New Common Stock of Reorganized SMC to the following
individuals in consideration, among other things, for their continued employment
with Reorganized SMC.
James A. Skidmore, Jr. 12%
Frank A. Rathgeber 2%
Marion G. Hilferty 1%
Samuel L. Gipson 1%
Dennis M. Casey .5%
Neal F. Basile .25%
Peter A. Lanigan .125%
William Ponticello .125%
17
<PAGE>
A portion of the New Common Stock to be issued to the above-named
individuals equal to 6.40% of all New Common Stock shall be held in escrow and
subject to the Imperial Call Option described in Article IV(A)(iii) of this
Plan.
ARTICLE VIII
-------------
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
----------------------------------------
A. Assumption of Executory Contracts and Unexpired Leases.
Unless previously assumed pursuant to an order of the Bankruptcy Court, on
the Effective Date, Reorganized SMC shall assume, pursuant to Sections 365 and
1123(b)(2) of the Code, the Executory Contracts and Unexpired Leases listed in
Exhibit J to the Disclosure Statement. Unless previously rejected or assumed,
all executory contracts and unexpired leases shall be deemed rejected pursuant
to U.S.C. Sec.365(a) on the Effective Date, provided, however, the executory
contracts shown on Exhibit K to the Disclosure Statement shall be deemed
rejected pursuant to 11 U.S.C. Sec.365(a) as of the closing of the sale of the
stock of SMC International.
B. Cure of Defaults. As to any Executory Contracts assumed pursuant to
this Article VIII, Reorganized SMC shall, pursuant to the provisions of Section
1123(a)(5)(G) of the Bankruptcy Code, cure all defaults existing under and
pursuant to such Executory Contract by paying the amount, if any, claimed by any
party to such Executory Contract in a proof of Claim, which proof of Claim shall
be filed with the Court and served upon the Debtor within thirty (30) days of
such assumption. Payment of an amount claimed in such a proof of claim shall be
in full satisfaction, discharge and cure of all such defaults (including any
other Claims filed by any such party as a result of such defaults); provided,
however, that if any Person or the Debtor files, within thirty (30) days of the
filing of such proof of claim, an objection in writing to the amount set forth,
the Bankruptcy Court shall determine the amount actually due and owing in
respect of the defaults or shall approve the settlement of any Claims. Payment
of such Claims shall be made on the later of (i) ten (10) business days after
the expiration of the thirty (30) day period for filing an objection in respect
of any proof of Claim filed pursuant to this paragraph B or (ii) ten (10)
business days after an order of the Bankruptcy Court allowing such Claim or any
portion thereof becomes a Final Order.
C. Claims for Damages. Each Person who was a party to an Executory
Contract which is rejected pursuant to this Article VIII shall be entitled to
file, not later than thirty (30) days after such rejection, a proof of claim for
damages alleged to have arisen from the rejection of the Executory Contract to
which such Person is a party. Objections to each proof of claim shall be filed
not later than thirty (30) days after such proof of claim is filed. In
18
<PAGE>
the event that an objection is filed, the Bankruptcy Court shall determine the
amount due and owing in respect of the objection. Payment of such Claims shall
be made on the later of (i) ten (10) business days after the expiration of the
thirty (30) day period for filing an objection in respect of any proof of claim
filed pursuant to this paragraph B or (ii) ten (10) business days after the
Claim has been Allowed by a Final Order.
D. Survival of Indemnification Obligations. The obligations of the
Debtor to indemnify its respective directors, officers, agents, employees,
representatives and others who were serving in such capacities as of the
Effective Date or had served in such capacities prior to the Effective Date,
pursuant to various indemnification agreements, the charters and by-laws of the
Debtor, insurance policies, applicable law or otherwise, (a) shall not be
discharged or impaired by Confirmation of the Plan, (b) shall survive unaffected
by the reorganization contemplated by the Plan, and (c) shall be performed and
honored by Reorganized SMC to the fullest extent permitted by such charters, by-
laws, insurance policies, agreements and applicable laws as of the Effective
Date regardless of such Confirmation. Reorganized SMC hereby assumes on the
Effective Date, but retroactive to the Confirmation Date, pursuant to the
provisions of Bankruptcy Code Section 1123(b)(2), all such indemnification
agreements, by-laws and insurance policies, to the extent any such
indemnification agreements, bylaws or insurance policies are deemed Executory
Contracts.
ARTICLE IX
----------
CRAM DOWN
---------
The Debtor hereby requests that, if all the applicable requirements for
Confirmation are met as set forth in Sec.Sec.1129(a)(1) through (13) of the
Bankruptcy Code, except subsection (8) thereof, the Bankruptcy Court confirm
this Plan pursuant to Sec.1129(b) of the Bankruptcy Code, on the basis that
this Plan does not discriminate unfairly, and is fair and equitable with
respect to all Classes, including any impaired dissenting Class, whether of
Claims or Interests.
ARTICLE X
---------
EFFECTS OF CONFIRMATION: VESTING OF PROPERTY,
---------------------------------------------
DISCHARGE AND INJUNCTION
------------------------
A. Vesting of Property. Except as otherwise provided herein or in the
-------------------
Confirmation Order, upon the Effective Date, (a) all Assets of SMC shall vest in
Reorganized SMC, and subsequently shall be retained by Reorganized SMC subject
to the provisions hereof and of the Confirmation Order. After the Effective
Date, all Assets retained by Reorganized SMC pursuant hereto shall be free and
clear of all Claims and Interests of all Holders, except the obligation
19
<PAGE>
to perform according to this Plan, the Confirmation Order and any liens granted
pursuant to this Plan. Except as otherwise provided herein or in the
Confirmation Order, upon the Effective Date and thereafter, Reorganized SMC may
operate their respective businesses free of any restrictions imposed by the
Bankruptcy Code and in accordance with applicable law and pursuant to its
amended Articles or Certificate of Incorporation.
B. Discharge. Except as otherwise provided herein or in the Confirmation
---------
Order, Confirmation shall (a) operate as a discharge, pursuant to Sec.Sec. 524
and 1141(d)(1) of the Bankruptcy Code effective as of the Effective Date, of
any and all debts, as such term is defined in Sec.101(12) of the Bankruptcy
Code, or Claims against the Debtor that arose at any time before the
Confirmation Date, including, but not limited to, all Claims asserted and/or
pursued by or on behalf of holders of Interests, and all principal and
interest, whether accrued before, on or after the Petition Date; (b) terminate
all Equity Interests; and (c) except as provided in Sec.Sec.1141(d)(2) and (3)
of the Bankruptcy Code bind the provisions hereof upon the Debtor, all holders
of Claims and Equity Interests, and their respective legal representatives,
successors and assigns, whether or not the Claim or Interest of any such holder
is impaired hereunder, and whether or not such holder has accepted this Plan.
On the Effective Date, as to every discharged debt and Claim, the Creditor that
held such debt or Claim shall be permanently enjoined and precluded from
asserting against the Debtor or Reorganized SMC or any of the Assets any other
or further Claim based upon any document, instrument, act, omission,
transaction or other activity of any kind or nature that occurred prior to the
Confirmation Date, but such Creditor shall have any and all rights provided for
herein, including the right to receive distributions hereunder. Except as
otherwise specifically provided herein, nothing herein shall be deemed to
waive, limit or restrict in any way the discharge granted upon, and other
effects of, Confirmation, in accordance with Sec.1141 of the Bankruptcy Code.
C. Injunction.
----------
1. Effective on the Confirmation Date, all Persons who have held, hold or
may hold Claims or Allowed Claims, or who have held, hold or may hold Equity
Interests, shall be enjoined from taking any of the following actions against or
affecting the Debtor, or the Assets (other than actions brought to enforce any
rights or obligations hereunder or appeals, if any, from the Confirmation
Order):
(a) commencing, conducting or continuing in any manner, directly or
indirectly, any suit, action or other proceeding of any kind
against the Debtor, the Assets, any direct or indirect successor-
in-interest to any Debtor, or any Assets of any such
20
<PAGE>
transferee or successor, on account of any Claim or Interest;
(b) enforcing, levying, attaching, collecting or otherwise recovering
by any manner or means, whether directly or indirectly, any
judgment, award, decree or order against the Debtor, the Assets,
any direct or indirect successor-in- interest to any Debtor, or
any Assets of any such transferee or successor, on account of any
Claim or Interest;
(c) creating, perfecting or otherwise enforcing in any manner,
directly or indirectly, any lien of any kind against the Debtor,
the Assets, any direct or indirect successor-in-interest to any
Debtor, or any Assets of any such transferee or successor, on
account of any Claim or Interest, other than as allowed and
authorized by this Plan;
(d) asserting any set-off, right of contribution, subrogation or
recoupment of any kind, directly or indirectly, against any
obligation due the Debtor, the Assets, any direct or indirect
successor-in-interest to any Debtor, or any Assets of any such
transferee or successor, on account of any Claim or Interest; and
(e) proceeding in any manner in any place whatsoever with any action
that does not conform to or comply with the provisions hereof.
2. All Persons are enjoined from asserting any Released Claim against the
Debtor or any of the Imperial Entities or any of the representatives, partners,
officers, directors, agents or professional representatives of either of the
foregoing.
D. Release of Directors,Officers and Imperial. On the Effective Date,
------------------------------------------
but retroactive to the Confirmation Date, Reorganized SMC, on its own behalf,
and on behalf of the Debtor's stockholders, creditors and other parties-in-
interest (to the extent such Persons may have or may assert any Released Claims
derivatively through the Debtor), hereby waive, release and discharge any and
all Released Claims existing on or prior to the Confirmation Date against (a)
any of the present or former directors, officers and shareholders of the Debtor
(including without limitation any predecessors-in-interest of the Debtor) (and
their respective heirs, representatives, successors and assigns), (b) any Person
serving as a fiduciary or trustee with respect to any Debtor's employee benefit
plans (and their respective heirs, representatives and assigns), and (c) each of
the Imperial Entities and any of the following agents, advisors, professional
persons and
21
<PAGE>
representatives of the Debtor and Imperial Entities (and the Debtor's and
Imperial Entities' respective present and former directors, officers,
shareholders, partners, employees, heirs, representatives, successors and
assigns): Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen, P.C., Bederson &
Company, Rogers & Wells and Kaufman, Goldstein, Gartner & Taub, P.C.
ARTICLE XI
----------
CONDITIONS PRECEDENT TO EFFECTIVENESS
-------------------------------------
Conditions to Effectiveness. Notwithstanding any other provision hereof or
---------------------------
of the Confirmation Order, the Effective Date shall occur on the 30th day after
the entry of the Confirmation Order or such other date as Imperial and the
Debtor may agree to in writing but in no event later than 90 days after the
entry of the Confirmation Order unless the Confirmation Order is stayed. The
Effective Date shall be contingent upon Imperial making the payment to
Reorganized SMC on the Effective Date pursuant to Article IV(A)(i) of this Plan.
Neither Imperial's obligation to fund the Plan or the Effective Date are
contingent upon the Confirmation Order becoming a Final Order, provided,
however, that no stay has been entered. In the event of a material adverse
change ("MAC") in the financial condition of the Debtor from the date hereof
(including but not limited to its domestic subsidiaries), Imperial shall be
entitled to withdraw as a co-proponent of this Plan. Imperial shall notify the
Debtor in writing of the MAC. Upon receipt of such notice, the Debtor may
within five (5) business days send a notice to Imperial and file with the
Bankruptcy Court an application (the "MAC Application") for a determination of
whether a MAC has occurred. If SMC does not contest the occurrence of a MAC or
if a MAC is found to occur, Imperial shall have no obligation under this Plan.
In the event a dispute should arise as to whether there has been a MAC, the
Bankruptcy Court, upon receipt of the MAC Application, shall schedule a hearing
(the "Advisor Hearing") at which the Bankruptcy Court shall appoint a special
advisor (the "Advisor") for the purpose of preparing a report, which report
shall include findings, determine whether a MAC has occurred, what constitutes a
MAC and what factors should be considered in determining whether a MAC has
occurred. At or before the Advisor Hearing, the Debtor and Imperial shall
submit to the Bankruptcy Court either (i) the name of a Person who is mutually
acceptable to act as the Advisor or, if no Person is mutually acceptable, (ii)
the name of a Person who each believes is qualified to act as the Advisor. The
Bankruptcy Court will select as the Advisor either the Person who is mutually
acceptable to Imperial and the Debtor, one of the two Persons selected by the
Debtor and Imperial, or any other Person that the Bankruptcy Court deems
acceptable. The Bankruptcy Court shall accept all of the Advisor's findings
unless clearly erroneous.
22
<PAGE>
At the Advisor Hearing, the Bankruptcy Court, after consultation with
counsel for the Debtor, Imperial and the Committee, shall issue an order of
reference to the Advisor setting forth the procedures which will govern the
proceedings conducted by the Advisor.
The Bankruptcy Court shall determine the compensation to be paid to the
Advisor. The Debtor shall pay the compensation awarded to the Advisor which
compensation shall not be included as part of the Administrative Claims subject
to the cap of Article III(A)(1) of the Plan. If a final determination is made
that a MAC exists, SMC shall have five (5) days to cure the MAC. If a final
determination is made that a MAC does not exist, Imperial shall have five (5)
days to perform its obligations then outstanding under the Plan and shall have
no further liability as a result of any action taken under this provision.
ARTICLE XII
-----------
SETTLEMENT OF LITIGATION
------------------------
The Imperial Litigation
- -----------------------
On the Effective Date, all claims asserted or that could be asserted by and
between the parties to the Imperial Litigation shall be mutually released and
stipulations of dismissal with prejudice with respect to the complaint and
counterclaims asserted by the parties shall be promptly filed and the notices of
appeals filed by Imperial shall be withdrawn with prejudice.
The Navy Litigation
- -------------------
The United States of America, on behalf of its agency, the Department of
Navy (the "Navy"), asserts a constructive trust claim in the amount of
$512,450.00 against funds in the possession of or to come into the possession of
the Debtor (the "Navy Claim"). The basis of the constructive trust claim is
that the Debtor knowingly submitted incorrect pricing information to the Navy in
connection with a government contract entered into between the Navy and SMC.
The Debtor and the Navy have agreed to settle the Navy Claim in accordance with
the terms and conditions of a settlement agreement substantially in the form
annexed to the Disclosure Statement as Exhibit Q.
23
<PAGE>
ARTICLE XIII
------------
GENERAL PROVISIONS
------------------
A. Objections to Claims and Distribution to Holders
-------------------------------------------------
of Disputed Claims
------------------
(i) Except as otherwise provided herein, as soon as practicable, but in
no event more than thirty (30) days after the Effective Date, objections to
Claims shall be filed with the Bankruptcy Court and served upon the holder of
such Claim to which Debtor has objected.
(ii) Unless otherwise ordered by the Bankruptcy Court, only the Debtor,
Imperial or the Committee may litigate, settle or withdraw objections to Claims.
(iii) No distributions will be made on account of any Disputed Claim.
Distributions with respect to and on account of Claims to which the Debtor or
the Committee has objected shall be made without interest, within ten business
days after the Order, judgment, decree or settlement agreement with respect to
such Claim becomes a Final Order.
B. Modification. Subject to the Bankruptcy Code, the Debtor and
------------
Imperial reserve the right to amend or modify this Plan prior to Confirmation.
After Confirmation, Reorganized SMC may, upon order of the Bankruptcy Court, in
accordance with Section 1127(b) of the Bankruptcy Code remedy any defect or
omission or reconcile any inconsistency in this Plan in such manner as may be
necessary to carry out the purpose of this Plan.
C. Notices. All notices, requests or demands in connection with this
-------
Plan shall be in writing and shall be deemed to have been given when received,
or if mailed, five days after the date of mailing provided such writing shall be
sent by registered or certified mail, postage prepaid, return receipt requested,
and if sent to the Debtor, addressed to:
Science Management Corporation
721 Route 202-206
Bridgewater, New Jersey 08807
Attn: James A. Skidmore, Jr.
with copies to:
24
<PAGE>
Ravin, Sarasohn, Cook, Baumgarten
Fisch & Rosen, P.C.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Attn: David N. Ravin, Esq.
and Paul Kizel, Esq.
Counsel to Debtor
and
Rogers & Wells
Two Hundred Park Avenue
New York, New York 10166-0153
Attn: Jack J. Rose, Esq.
Counsel to Imperial Capital Worldwide Partners, LP
and
Imperial Capital Worldwide Partners, LP
666 Fifth Avenue, 37th Floor
New York, New York 10103
Attn: Jonathan L. Borsuk
D. Headings. The headings used in this Plan are inserted for convenience
--------
only and neither constitute a portion of this Plan nor in any manner affect the
provisions of this Plan.
E. Rights If Plan Not Confirmed. If Confirmation of this Plan does not
----------------------------
occur or if the Effective Date does not occur, the Plan shall be deemed null and
void. In such event, nothing contained in this Plan shall be deemed to
constitute a waiver or release of any Claims by or against the Debtor or any
other Person, or to prejudice in any manner, the rights of the Debtor or any
Person in any further proceedings involving the Debtor.
F. Governing Law. Except to the extent that the Bankruptcy Code is
-------------
applicable, or as otherwise provided under this Plan or the agreements
hereunder, 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 New
Jersey.
G. Construction. The rules of construction as set forth in Section 102
------------
of the Bankruptcy Code shall apply to the construction of the Plan.
H. Time. In computing any period of time prescribed or allowed hereby,
----
unless otherwise set forth herein, the provisions of Bankruptcy Rule 9006(a)
shall apply.
I. Waiver of Certain Claims. On the Effective Date, the claims of James
------------------------
A. Skidmore, Jr. and Marion Hilferty, in the
25
<PAGE>
approximate amounts of $6,437,000.00 and $1,067,000.00, respectively, shall be
deemed waived and discharged.
J. Waiver of Subordination. Any provision of the Plan to the contrary
-----------------------
notwithstanding, all holders of Claims shall be deemed to have waived any and
all contractual subordination rights which they may have with respect to the
distributions made pursuant to the Plan, and the Bankruptcy Court in the
Confirmation Order shall permanently enjoin, effective as of the Effective Date,
all holders of Claims from enforcing or attempting to enforce any such rights
against any Person receiving distributions under the Plan.
K. Fractional Shares. Any other provision of the Plan notwithstanding,
-----------------
distribution of or on account of fractions of shares will not be made. All
shares of New Common Stock represented by fractional shares that are not
distributed by reason of this Article XII(K), shall be held by Reorganized SMC
as treasury stock.
L. Minimum Distribution. Notwithstanding any other provision of the Plan
--------------------
to the contrary, no payment will be made on account of an Allowed Claim where
the amount of each payment would be less than five ($5.00) dollars.
M. Unclaimed Distribution. If any Person entitled to receive a
----------------------
distribution under the Plan cannot be located, the proceeds of such distribution
shall be set aside and held by Reorganized SMC. If such Person cannot be
located within two (2) months of the date on which such property is
distributed, the New Common Stock or cash held on account of such Person shall
be released to Reorganized SMC as treasury stock provided, however, that in the
event 1% or more of the shares of New Common Stock that are issued to holders of
Class 3 Claims remain unclaimed for 2 months after the date of distribution,
Reorganized SMC shall issue those shares pro-rata among the holders of Class 3
claims whose shares were claimed. Nothing in this Plan shall require
Reorganized SMC to attempt to locate any such Person beyond attempting to
communicate with that Person at his last known address, the last known address
of his attorney of record, or the address set forth in any proof of claim filed
on behalf of such Person.
N. Disbursing Agent. Subject to Bankruptcy Court approval Reorganized
----------------
SMC shall be the Disbursing Agent with respect to distributions hereunder,
provided, however, Reorganized SMC may hire one or more Persons to assist in the
performance of such duties.
O. Committee. On the Effective Date, the Creditors' Committee shall
---------
dissolve and the members of the Creditors' Committee shall be released and
discharged from all rights and duties arising from or related to the Chapter 11
Case. The
26
<PAGE>
professionals retained by the Creditors' Committee and the members thereof shall
not be entitled to compensation or reimbursement of expenses for any services
rendered after the Effective Date, except for services rendered and expenses
incurred in connection with any applications for allowance of compensation and
reimbursement of expenses pending on the Effective Date and approved by the
Bankruptcy Court pursuant to Sections 503(b), 330 and 331 of the Bankruptcy
Code.
P. Retiree Benefits. After the Effective Date, to the extent required
----------------
under Bankruptcy Code Section 1129(a)(13), Reorganized SMC shall continue to pay
all retiree benefits (if any) (as that term is defined in Bankruptcy Code
Section 1114) maintained or established by the Debtor prior to the Confirmation
Date; provided, however, that Reorganized SMC shall retain all rights, if any,
under all documents establishing such retiree benefits to unilaterally modify
such retiree benefits.
Q. Further Actions. The Debtor, Reorganized SMC and the Disbursing Agent
---------------
shall be authorized to execute, deliver, file or record such documents,
contracts, instruments, releases and other agreements and take such other action
as may be necessary to effectuate and further evidence the terms and conditions
of the Plan.
R. Exculpation. Neither (a) the Debtor nor Reorganized SMC, (b) the
-----------
Creditors' Committee and each of its members (c) the present or former
directors, officers, employees, agents, advisors, professional persons and
representatives of each of the foregoing, or (d) the Imperial Entities, their
partners, employees, officers, directors, agents, advisors, and professional
persons shall have or incur any liability to any Person for any act or omission
in connection with or arising out of their administration of the Plan or the
property to be distributed under the Plan or arising from or in connection with
their involvement or activities in this Chapter 11 Case, except if such act or
omission is determined in a Final Order to have constituted gross negligence or
willful misconduct, and in all respects, each of such Persons listed in clauses
(a), (b), (c) and (d) above in this Article XII(R) shall be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan and shall be fully protected in acting or in refraining from
action in accordance with such advice if done so in good faith.
S. Pension Plan. The Debtor is the sponsor of two defined benefit plans
------------
which have recently been merged in accordance with the provisions of Title IV
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Debtor's current intention is to maintain the merged plan and to comply with
all applicable laws and regulations subsequent to the Effective Date. All
annual required contributions have been timely made and the
27
<PAGE>
Debtor intends to timely make any necessary required contributions after the
Effective Date.
T. The obligation to prove feasibility of this Plan shall be the sole
obligation of the Debtor.
ARTICLE XIV
------------
RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT
-------------------------------------------------
Subsequent to the Effective Date, the Bankruptcy Court shall have exclusive
jurisdiction over all matters arising under this case or the Plan to the full
extent permitted under 28 U.S.C. Sec.1334 to hear, and to the full extent
permitted under 28 U.S.C. Sec.157 to determine, all proceedings in respect
thereof, including, but not limited to, proceedings involving the following:
a. Implementing and carrying out the Plan.
b. Entry of a final decree closing this case.
c. To hear and determine any and all pending applications for the
rejection and disaffirmance, assumption or assignment of Executory Contracts or
unexpired leases, any objection to Claims resulting therefrom and the allowance
of Claims resulting therefrom.
d. To hear and determine any and all applications, adversary
proceedings, applications, contested matters and other litigated matters pending
on the Confirmation Date.
e. To ensure that the distributions to Holders of Claims and
Interests are accomplished as provided herein.
f. To hear and determine any objections to Claims filed both before
and after Confirmation of this Plan, including any objections to the
classification of any Claim or Interest and to allow or disallow any Disputed
Claim in whole or in part.
g. To enter and implement such orders as may be appropriate in the
event Confirmation is for any reason stayed, reversed, revoked, modified or
vacated.
h. To hear and determine all applications for compensation of
professionals and reimbursement of expenses except to the extent not required
pursuant to this Plan.
i. To hear the Debtor's or Reorganized SMC's applications, if any,
to modify the Plan in accordance with Section 1127 of the Bankruptcy Code.
After Confirmation, any proponent may also, so long as it does not adversely
affect the interest of Creditors, institute proceedings in the Bankruptcy Court
to remedy
28
<PAGE>
any defect or omission or reconcile any inconsistencies in the Plan or the
Confirmation Order, in such manner as may be necessary to carry out the purposes
and effects of this Plan.
j. To hear and determine disputes arising in connection with this
Plan or its implementation, including disputes arising under agreements,
documents or instruments executed prior to or in connection with this Plan,
including but not limited to the stock purchase agreement annexed to the
Disclosure Statement as Exhibit N.
k. To take any action to resolve any disputes arising out of or
relating to any Claim or any Interest; to hear and determine other issues
presented by or arising under this Plan; and to take any action to resolve any
disputes of Creditors with respect to their Claims.
l. To determine such other matters and for such other purposes as
may be provided in the Confirmation Order.
m. To hear and determine issues relating to, and issue any necessary
orders with respect to, any governmental or regulatory agency or
instrumentality.
n. To hear and determine applications for orders sought pursuant to
this Plan.
29
<PAGE>
Science Management Corp.
Debtor and Debtor-in-Possession
By: /s/ James A. Skidmore, Jr.
----------------------------
James A. Skidmore, Jr.
President, Chairman &
Chief Executive Officer
RAVIN, SARASOHN, COOK,
BAUMGARTEN, FISCH & ROSEN
A Professional Corporation
Counsel for the Debtor
103 Eisenhower Parkway
Roseland, NJ 07068
(201) 228-9600
By: /s/ Paul Kizel
-----------------------------
Paul Kizel, Esq.
IMPERIAL CAPITAL WORLDWIDE PARTNERS, LP
By: /s/ Jonathan L. Borsuk
----------------------------
Imperial Capital Investors Corp.,
its sole general partner
Jonathan L. Borsuk, President
ROGERS & WELLS
Counsel for Imperial Capital Worldwide
Partners, LP
Two Hundred Park Avenue
New York, NY 10166-0153
(212) 878-8000
By: /s/ Jack J. Rose
-----------------------------
Jack J. Rose, Esq.
DATED: January 25, 1996
30
<PAGE>
RAVIN, SARASOHN, COOK,
BAUMGARTEN, FISCH & ROSEN
A Professional Corporation
103 Eisenhower Parkway
Roseland, New Jersey 07068-1072
(201) 228-9600
Counsel for Science Management Corp.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
- ----------------------------------
In re: : Case No. 93-34553(SAS)
:
SCIENCE MANAGEMENT CORP., : Chapter 11
:
Debtor, :
:
- ----------------------------------
FIRST MODIFICATION TO CONFIRMED FIFTH MODIFIED
PLAN OF REORGANIZATION OF SCIENCE MANAGEMENT CORPORATION
--------------------------------------------------------
Article III of the captioned debtor's Fifth Modified Plan of Reorganization
dated January 25, 1996 (the "Plan") which was confirmed by Order of this Court
dated April 14, 1996 be and hereby is modified as follows:
A.Reorganized SMC's obligation to pay fees and expenses for or related to the
professional services performed on behalf of the Debtor or Committee of
Unsecured Creditors prior to the Effective Date shall be increased from $966,000
to $1,016,000. Fees that are not paid as of the Effective Date will be paid in
accordance with the terms of the Note annexed hereto as Exhibit "A".
B. The first priority lien against assets of Reorganized SMC and the SMC
Domestic Subsidiaries (as those terms are defined in the Plan) granted under
Article III(A)(1) shall be subordinated to institutional financing that may be
obtained by the Debtor pursuant to the terms of the Security Agreement annexed
hereto as Exhibit "B".
<PAGE>
C. The first sentence of Article 3(A)(3) of the Plan shall be deleted in
its entirety and shall be replaced with the following:
The balance of such fees and expenses shall be paid in
accordance with the payment schedule set forth in Par.1 of the
Promissory Note attached hereto as Exhibit "A"
SCIENCE MANAGEMENT CORPORATION
By: /s/ James A. Skidmore, Jr.
--------------------------------
James A. Skidmore, Jr.,
President, Chief Executive Officer
IMPERIAL CAPITAL WORLDWIDE PARTNERS, LP
By: /s/ Jonathan L. Borsuk
-------------------------------
Imperial Capital Investors Corp.,
its sole general partner
Jonathan L. Borsuk, President
RAVIN, SARASOHN, COOK,
BAUMGARTEN, FISCH & ROSEN
A Professional Corporation
Counsel for the Debtor
By: /s/ Paul Kizel
---------------------------------
Paul Kizel, Esq.
BAER, MARKS & UPHAM, LLP
Counsel for Imperial Capital Worldwide
Partners, LLP
By: /s/ Anne Elizabeth
----------------------------------
Dated: 7/10/96
2
Exhibit 2
AGREEMENT
---------
AGREEMENT, dated June 27, 1996, among Imperial Capital Worldwide Partners,
L.P. ("Imperial"), SOROL, a New York general partnership ("Purchaser"), Jonathan
Borsuk and Harvey Borsuk.
WHEREAS, Science Management Corporation ("Science Management"), a Delaware
corporation that filed for reorganization pursuant to 11 U.S.C. Sec.101 et seq.,
had its Fifth Amended Plan of Reorganization approved by the United States
Bankruptcy Court for the District of New Jersey on April 17, 1996 (the "Plan");
and
WHEREAS, pursuant to the Plan, on the Effective Date of and as defined in
the Plan (the "Effective Date"), Science Management is to, among other things,
issue (a) two million (2,000,000) shares of new Science Management common stock
(the "New Common Stock") to replace and supersede all Science Management common
stock theretofore in existence, and (b) one million seven hundred and fifty
thousand (1,750,000) shares of new Science Management preferred stock possessing
a par value of one dollar ($1.00) per share (the "New Preferred Stock") to
replace and supersede all Science Management preferred stock theretofore in
existence; and
WHEREAS, pursuant to, and on the Effective date of, the Plan, Imperial is
to, among other things, pay Four Hundred and Sixty Three Thousand Dollars
($463,000.00) to Science Management, and Science Management is to, among other
things, place in escrow for the Call Period (as hereinafter defined) three
hundred and fifty thousand (350,000) shares of New Common Stock subject to the
Call Option (as hereinafter defined) (the "Escrowed New Common Stock") and
distribute to Imperial the following, hereinafter collectively referred to as
the "Science Management Interests": (a) one million seventy thousand
(1,070,000) shares of the New Common Stock, (b) a call option to acquire the
Escrowed New Common Stock, which option may be exercised in whole, in part or in
increments, by the holder thereof at any time(s) within the period commencing
with the Effective Date and ending eighteen (18) months thereafter (the "Call
Period"), for $2.143 in cash per share (the "Call Price") of Escrowed New Common
Stock so acquired (the "Call Option"), and (c) all the New Preferred Stock which
New Preferred Stock is, without limitation, redeemable for cash at par value by
Science Management three (3) years after the Effective Date; and
WHEREAS, Purchaser desires to purchase and Imperial desires to sell (a)
that portion of the Call Option that would permit the holder thereof to acquire
one hundred and thirty-one thousand nine hundred and fifty (131,950) shares of
Escrowed New Common Stock, which option represented by said portion of the Call
Option may be exercised in whole, in part or in increments, by the holder
thereof at any time(s) during the Call Period for the Call Price ("Purchaser s
Call Option"), (b) four hundred thousand (400,000) shares of New Common Stock,
and (c) six hundred and fifty-nine thousand seven hundred and fifty (659,750)
shares of New Preferred Stock, all of the foregoing being hereinafter referred
to as the "Relevant Assets"; and
-1-
<PAGE>
WHEREAS, Purchaser and Imperial desire to set forth certain terms and
conditions regarding their ownership and voting of shares of Science Management;
and
WHEREAS, Imperial has represented to Purchaser that, to the best of
Imperial s knowledge, the balance sheets and profit and loss statements of
Science Management presented to Purchaser are true and correct in all material
respects and do not fail to state a material fact necessary to make such balance
sheets and profit and loss statements, in light of the circumstances under which
they were presented, not misleading; and
WHEREAS, Purchaser has represented to Imperial that it, its principals, or
its beneficiaries are "accredited investors" as defined under Regulation D of
the U.S. Securities Act of 1933, as amended, and have the financial wherewithal
to make, and bear the risk of loss of their total investment in connection with,
a purchase of interests in Science Management as contemplated by this Agreement;
and
WHEREAS, each of Imperial and Purchaser has represented one to the other
that (i) it is duly organized, validly existing and in good standing under the
laws of the State of its organization or formation, (ii) it has all necessary
power and authority to execute, deliver and perform this Agreement, (iii) this
Agreement, upon and after execution, will be a valid and binding obligation of
such party, enforceable in accordance with its terms, the making and performance
of which will have been duly authorized by all necessary action, and will not
violate, or constitute a default, or require the consent of any person or
entity, under the provisions of any agreement or instrument by which such party
is bound, or any law, requirement or restriction imposed by a judicial, arbitral
or governmental instrumentality on such party, and (iv) no brokerage, finder s,
escrow or like fees or commissions are due any person as a result of this
Agreement or the transactions contemplated hereby.
NOW THEREFORE:
1. Purchaser agrees that on or before the Effective Date Purchaser shall
deliver to Rogers & Wells, counsel to Imperial, as escrow agent ("Escrow
Agent"), a certified or bank check payable to Science Management Corporation in
the amount of Four Hundred and Sixty Three Thousand Dollars ($463,000.00) (the
"SMC Check"), which check shall be held and released by Escrow Agent pursuant to
the terms of that certain Escrow Agreement annexed hereto as Exhibit A (the
"Escrow Agreement"). Purchaser agrees that on the Effective Date, upon Escrow
Agent s notification to Purchaser of Escrow Agent s receipt of the Relevant
Assets legended pursuant to paragraph 5 hereinbelow (the "Legended Relevant
Assets"), Purchaser shall pay to Imperial the sum of Thirty Seven Thousand
Dollars ($37,000.00), by bank or certified check payable to Imperial Capital
Worldwide Partners, L.P., or by wire transfer to the favor of Republic National
Bank of New York, 452 Fifth Avenue, New York, New York, United States of
America, ABA# 021004823, for the account of Imperial Capital Worldwide Partners,
L.P., Account Number 318265346 (the "Imperial
-2-
<PAGE>
Payment"), and Imperial shall thereupon notify Escrow Agent of Imperial s
receipt of the Imperial Payment, and Escrow Agent shall, pursuant to the Escrow
Agreement, deliver to Purchaser the Legended Relevant Assets. Imperial shall
give Purchaser three (3) business days notice of the Effective Date.
2. Imperial hereby represents, warrants and covenants that (a) Imperial
shall on the Effective Date own the Relevant Assets, free and clear of any
liabilities, obligations, liens, pledges, security interests, contractual
commitments, charges, equities or other encumbrances (collectively
"Encumbrances"), (b) upon transfer of the Relevant Assets to Purchaser in
accordance with this Agreement, good and marketable title in and to the Relevant
Assets, free and clear of Encumbrances, shall have been transferred and sold to
Purchaser, (c) during the Shareholder Cooperation Period (as hereinafter
defined) none of Imperial, Jonathan Borsuk, Harvey Borsuk or their respective
affiliates (the "Affiliates"), shall, except as otherwise may be required
pursuant to their respective fiduciary duties or applicable law, vote for any
action in their capacity as director, officer or shareholder of Science
Management which will materially and adversely affect the economic interests of
the Purchaser in the Relevant Assets, including without limitation the issuance
of additional securities by Science Management, unless consented to by Purchaser
which consent shall not be unreasonably withheld, conditioned or delayed, and
(d) during the Shareholder Cooperation Period, Purchaser shall be consulted by
Imperial prior to any vote by any of the Affiliates at any Board of Directors or
shareholders meetings of Science Management.
3. (a) At any time from and after the Effective Date (unless and until
Imperial re-purchases the Relevant Assets from Purchaser pursuant to paragraph 4
hereinbelow) (the "Shareholder Cooperation Period") if either Purchaser or
Imperial desires to sell any of their interests in Science Management to a third
party (a "Triggering Sale"), such intending selling party (the "Seller") shall,
in writing, offer the other party hereto (the "Option Holder") the option, which
such Option Holder may exercise in its sole discretion by delivering written
notice to the Seller within the seven (7) days, and closing on such option
within the thirty (30) days (unless the Seller desires to extend such period),
following receipt of such written offer, either (i) to sell in such Triggering
Sale up to the Maximum Allotment (as hereinafter defined) of its interests in
which case a sufficient amount of the Seller s interests to be sold in such
Triggering Sale shall be withdrawn from such Triggering Sale to the extent
necessary to accommodate the sale of interests pursuant hereto by the Option
Holder, (ii) to cancel such Triggering Sale by instead acquiring all of the
Seller s and all other intended sellers interests intended to be sold in such
Triggering Sale upon the same terms and conditions of such Triggering Sale, or
(iii) to take no action whatsoever with respect to such Triggering Sale.
(b) As used herein, the "Maximum Allotment" refers to, with respect to
each type of interest to be sold in a Triggering Sale, the amount of all like
interests held by the Option Holder multiplied by a fraction of which the
numerator is the number of
-3-
<PAGE>
like interests intended to be sold by the Seller in such Triggering Sale and the
denominator of which is the total amount of such interests held by the Seller
immediately preceding such Triggering Sale.
(c) Notwithstanding anything to the contrary contained in this
Agreement, any and each sale or other transfer of any of the Relevant Assets
shall be subject to Imperial s rights contained in paragraph 4 hereinbelow which
rights shall be paramount and extend to, along with the obligations of Purchaser
attendant to such rights which obligations shall be assumed by and binding upon,
any purchaser or transferee of any of the Relevant Assets (an "Assign"), or such
sale or transfer will be null and void ab initio.
-- ------
4. Notwithstanding anything to the contrary, Imperial shall have the
right, but not the obligation, to at any time until after the date that is
eighteen (18) months after the Effective Date (the "Buyback Period"), re-
purchase, from and whether held by Purchaser, one or more Assigns or both, for a
total price of Seven Hundred and Sixty Thousand Dollars ($760,000.00) in cash,
allocable to Purchaser and any and each Assign in accordance with the applicable
agreements among Purchaser and such Assign, all of the Relevant Assets and all
rights or assets of any nature arising therefrom or relating or accruing thereto
from and after the Effective Date (by virtue of dividends, the exercise, in
whole or in part, of Purchaser s Call Option, or otherwise, and irrespective of
when in such period, or whether to the benefit of Purchaser or any Assigns, so
arising, relating or accruing, but excluding the payment by Science Management
or Imperial to Purchaser of the advisor compensation referred to in paragraph 6
hereinbelow).
5. The parties agree that the Science Management Interests shall be
legended as set forth in Exhibit B annexed hereto to give notice of the
provisions of paragraphs 3 and 4 hereinabove and that such interests will only
be transferred subject to said provisions. Purchaser hereby grants Imperial an
irrevocable and unconditional power of attorney to affix the legend on the
Science Management Interests only as set forth in Exhibit B annexed hereto.
6. Imperial agrees to use its reasonable best efforts, to the extent
consistent with its fiduciary duties and applicable law, to cause Science
Management to (a) offer to hire Purchaser as advisor to Science Management at a
compensation of two thousand dollars ($2,000.00) per month for a period
commencing with the Effective Date and ending on the earlier of the expiration
of the Shareholder Cooperation Period or the third anniversary of the Effective
Date (the "Advisory Period"), and (b) permit Purchaser to attend every meeting
of the Science Management Board of Directors during the Advisory Period, and
Jonathan Borsuk agrees, during the Advisory Period and to the extent consistent
with his fiduciary duties and applicable law, to submit matters on the record of
the meetings of the Science Management Board of Directors as may be requested by
Purchaser. Furthermore, Imperial intends that Jonathan Borsuk shall be
-4-
<PAGE>
actively involved in the management of Science Management during the Advisory
Period. If Science Management does not offer to hire Purchaser as advisor as
contemplated in clause (a) of this paragraph 6, Imperial shall offer to hire
Purchaser as advisor to Imperial for the Advisory Period at a compensation of
two thousand dollars ($2,000.00) per month.
7. (a) Imperial agrees to indemnify Purchaser and hold it harmless from
and against, and shall be obligated to pay or reimburse Purchaser in respect of,
the consequences of any claims by Irwin Kallman by virtue of the transactions
contemplated by this Agreement, including, without limitation, any and all
deficiency, direct or indirect losses, damages to its interests, and reasonable
costs (including attorneys fees) and other reasonable expenses which it may
sustain or incur as a result thereof.
(b) Imperial agrees that, during the Shareholder Cooperation Period,
it shall keep Purchaser apprised of all material developments in the case styled
Irwin Kallman v. Imperial Capital Worldwide Partners, L.P, et al., filed in the
- -----------------------------------------------------------------
Supreme Court of the State of New York, County of New York, Index No. 12167/95,
and any related or associated claims or actions arising from the subject matter
thereof.
(c) In the event that, during the Shareholder Cooperation Period,
Irwin Kallman ("Kallman") obtains a judgment against Imperial pursuant to which
Kallman would be entitled to receive any of the interests in Science Management
received by Imperial pursuant to the Plan, then Purchaser shall have the right
but not the obligation to acquire such interests by payment to Imperial, for
contemporaneous payment by Imperial to Kallman, of the amount of said judgment.
8. Jonathan Borsuk and Harvey Borsuk unconditionally guarantee the
performance of all obligations and undertakings and the accuracy of all
representations and warranties, of Imperial under this Agreement.
9. It is understood and agreed by the parties that monetary damages would
not suffice as a remedy for any breach hereunder, and that the parties shall be
entitled to, without limitation, equitable relief, including injunction and
specific performance, in order to enforce the terms and provisions of this
Agreement.
10. The address of each party, for delivery of all notices, notifications,
communications and other deliveries hereunder, shall be as follows or such other
address as such party may hereafter designate by written notice to the other
party as herein provided: if for Imperial, Jonathan Borsuk or Harvey Borsuk,
care of Imperial Capital Funding Corporation, 666 Fifth Avenue, 37th Floor, New
York, New York 10103, and if for Purchaser, care of Andrew Romay, 200 West 86th
Street, New York, New York 10024, with a copy to Paul Soros, care of Soros
Associates, 888 Seventh Avenue, New York, New York 10106.
-5-
<PAGE>
11. This Agreement may be executed in counterparts each of which shall be
deemed an original and all of which taken together shall constitute but one and
the same instrument. A facsimile signature on any counterpart hereto will be
deemed an original for all purposes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
SOROL
By:
---------------------------
Its:
By:
---------------------------
Its:
IMPERIAL CAPITAL WORLDWIDE PARTNERS, L.P.
By Imperial Capital Investors Corp.,
its general partner
By:
---------------------------
Its:
-------------------------
Jonathan Borsuk
-------------------------
Harvey Borsuk
-6-
Exhibit 3
AGREEMENT
---------
WHEREAS, Science Management Corporation ("Science Management"), a Delaware
corporation that filed for reorganization pursuant to 11 U.S.C. Sec.101 et seq.,
had its Fifth Amended Plan of Reorganization approved by the United States
Bankruptcy Court for the District of New Jersey on April 17, 1996 (the "Plan");
and
WHEREAS, among other things pursuant to the Plan, on the Effective Date of
and as defined in the Plan (the "Effective Date"), Science Management is to
issue two million (2,000,000) shares of new Science Management common stock (the
"New Stock") to replace and supersede all Science Management common stock
theretofore in existence of which New Stock one million seventy thousand
(1,070,000) shares will be issued to Imperial as part of Imperial s distribution
under the Plan; and
WHEREAS, Rahul Rana, an individual with an address at 321 East 48th Street,
Penthouse B, New York, New York 10017 ("Purchaser"), desires to purchase and
Imperial desires to sell twelve thousand five hundred (12,500) shares of the New
Stock to be received by Imperial under the Plan (the "Purchaser Stock"); and
WHEREAS, Purchaser has represented to Imperial that it has independently
performed all of the due diligence and investigation of Science Management prior
to, has relied only upon same in connection with its decision to consummate, and
has the financial wherewithal to make, and bear the risk of loss of its total
investment in connection with, a purchase of interests in Science Management as
contemplated by this Agreement.
NOW THEREFORE:
1. Purchaser agrees that within the three (3) business days following
Imperial s request made upon or after the Effective Date, Purchaser will pay
Imperial the sum of Thirty Thousand Dollars ($30,000.00) (the "Purchase Price")
by bank or certified check payable to Imperial Capital Worldwide Partners, L.P.,
or by wire transfer to the favor of Republic National Bank of New York, 452
Fifth Avenue, New York, New York, United States of America, ABA# 021004823, for
the account of Imperial Capital Worldwide Partners, L.P., Account Number
318265346, and in return, Imperial agrees that upon receipt of said Purchase
Price (the "Closing"), Imperial will deliver to Purchaser the Purchaser s Stock
subject to the following terms and conditions.
2. (a) Purchaser hereby grants an irrevocable proxy to Imperial
permitting Imperial to vote all of the shares of
-1-
<PAGE>
Purchaser s Stock until after the third anniversary of the Closing (the "Parting
Date").
(b) If at any time until the Parting Date Imperial intends to sell any
of its New Stock received pursuant to the Plan, and such sale encompasses the
sale of a majority of the voting control of Science Management (an "Intended
Sale of Control"), then Purchaser shall be given the option of selling
Purchaser s Stock in such sale ratably on the same basis as Imperial has agreed
to sell such New Stock therein. Notwithstanding the foregoing, if Imperial
requires that Purchaser sell any amount or or all of Purchaser s Stock in an
Intended Sale of Control, Purchaser shall sell such amount of Purchaser s Stock
as designated by Imperial in such Intended Sale of Control on the same terms as
Imperial has agreed to sell its New Stock therein, provided, however, that if
Purchaser elects not to do so, Imperial shall have the right to re-purchase the
Purchaser s Stock from Purchaser for a price equal to the greater of (i) the
Purchase Price plus an amount accruing thereon at the annual rate of twenty five
percent (25%) pro rated from the date of the Closing to the date of such re-
purchase by Imperial pursuant hereto, or (ii) the last known bona fide bid for
---- ----
the New Stock in the marketplace.
(c) If at any time prior to the fifth anniversary of the Closing,
Purchaser desires to sell any of Purchaser s Stock, Purchaser will first notify
Imperial of any such offer and Imperial shall have seven (7) business days after
receipt of such written notice to match any third party offer and to purchase
such Purchaser s Stock on the same terms and conditions as offered by that third
party.
(d) Purchaser agrees that all of Purchaser s Stock shall be
appropriately legended or affected to give notice of the re-purchase rights,
proxy and other rights of Imperial set forth in this paragraph 2 and that the
Purchaser s Stock will only be transferred subject to said re-purchase rights,
proxy and other rights. Purchaser hereby grants Imperial an irrevocable and
unconditional power of attorney to effectuate Imperial s re-purchase rights,
proxy and other rights of Imperial and cause the Purchaser s Stock to be
legended or affected in accordance with the intent of this paragraph 2.
3. This Agreement may be assigned by the parties hereto provided that the
assignee assumes all of such assignor s respective obligations hereunder,
whereupon such assignor shall be released therefrom. The parties hereto agree
to execute such further documents as may be necessary to effectuate the intent,
terms and provisions of this Agreement.
-2-
<PAGE>
4. It is understood and agreed by the parties that monetary damages would
not suffice as a remedy for any breach hereunder, and that the parties shall be
entitled to, without limitation, equitable relief, including injunction and
specific performance, in order to enforce the terms and provisions of this
Agreement.
5. This Agreement may be executed in counterparts each of which shall be
deemed to be one and the same instrument. Without limitation, a facsimile or
copy of this Agreement shall be deemed sufficient evidence of this Agreement.
Dated: June , 1996
-----
RAHUL RANA
-----------------------------------
IMPERIAL CAPITAL WORLDWIDE PARTNERS, L.P.
By Imperial Capital Investors Corp.,
its general partner
-----------------------------------
By:
Its:
-3-
