SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
December 31, 1996 No. 1-6059
SCIENCE MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 21-0692362
(State or other jurisdiction (I.R.S. employer identification)
incorporation or organization)
721 Routes 202/206
Bridgewater, New Jersey 08807
(Address of principal executive offices)
(908) 722-0300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.10 par value
(Title of Class)
None
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained to
the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of August 31, 1997 was approximately $538,340.
The number of shares of Common Stock outstanding as of August 31, 1997
was 1,999,604.
The Exhibit Index required by 17 CFR Par 240.0-3(c) is located on Page
22 hereof.
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PART I
ITEM 1. BUSINESS
Background
Science Management Corporation ("SMC") has traditionally operated
through a series of subsidiaries offering management services and systems,
environmental consulting and engineering services to both the public and private
sectors. During the 1970's and 1980's, SMC grew from a relatively small company
to a large, multi-national company with several subsidiaries and aggregate
annual sales of approximately $90 million. By the early 1990's, SMC began to
suffer financially from a soft economy, expensive lease obligations undertaken
in the 1980's, large overhead costs and personnel defections in two of its
subsidiaries. In the early 1990's, discretionary spending for professional
services in the United States and internationally slowed dramatically, and, as a
result, SMC's business suffered a decline in revenue. This loss of revenue
created a cash flow problem, particularly because SMC was obligated to continue
fulfilling office lease obligations that could not be renegotiated. By 1993,
although SMC had attempted to survive the difficult market conditions by selling
several of its subsidiaries and taking other corporate action, the Board of
Directors of SMC determined that the financial condition of SMC could best be
enhanced by seeking relief through the bankruptcy process. Consequently, SMC,
but not its operating subsidiaries, in cooperation and agreement with its bank,
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of New
Jersey in July 1993.
At the time the bankruptcy petition was filed, Constellation Bank N.A.
(the "Bank") held a first priority lien on the stock of SMC's domestic
subsidiaries and was owed approximately $5,150,000. In addition, Donald Gant,
who was owed approximately $2,000,000, held a first priority lien on the stock
of SMC's foreign subsidiaries except for the United Kingdom subsidiary.
Throughout 1993 and 1994, SMC continued to pursue a reorganization
program intended to reduce losses, strengthen and refocus its business and
generate working capital. SMC made substantial progress towards cost containment
in a number of areas, and began to realize the benefits of this cost reduction
program in the results of operations during 1994. Notwithstanding such progress,
in 1995 and 1996, SMC operations were adversely affected by the lack of
liquidity and working capital. SMC's cash position dramatically declined during
this period. During the pendency of the bankruptcy proceedings, no new capital
was invested in SMC, nor did it have any bank financing.
On June 28, 1994, SMC and its domestic subsidiaries executed an
agreement (the "Agreement") with the Bank and Somerset Kensington Capital Corp.
("Somerset"), pursuant to which the Bank's claim of approximately $5,400,000 was
assigned to Somerset for the sum of $900,000. A dispute then arose between SMC
and Somerset concerning their respective rights under the Agreement. Ultimately,
Imperial Capital Worldwide Partners, L.P. ("Imperial") took an assignment of the
Bank's claim from Somerset for the sum of approximately $1,035,000. Prior to
SMC's motion to the Bankruptcy Court for approval of this assignment, Imperial
had assured SMC management that it would become a co-proponent of a plan of
reorganization for SMC and that it would contribute substantial additional
working capital to SMC.
During 1995, SMC and Imperial contentiously dealt with several disputes
arising from the written agreement between SMC and Imperial regarding the
reorganization plan and the introduction of working capital to SMC. On January
25, 1996, after months of protracted negotiations, SMC and Imperial, as
co-proponents, filed the Fifth Modified Plan of Reorganization (the "Bankruptcy
Plan"), which was confirmed by the U.S. Bankruptcy Court in a hearing held on
April 17, 1996. The Bankruptcy Plan became effective and SMC emerged from
bankruptcy protection on July 10, 1996 (the "Effective Date").
Pursuant to the Bankruptcy Plan, SMC was recapitalized as follows.
SMC's old common stock (3,300,000 shares outstanding) and all other equity
interests related thereto were canceled, annulled and extinguished. A total of
10,000,000 shares of new common stock were authorized, and 1,999,604 of such
shares were issued and distributed.
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SMC also issued 1,750,000 shares of new preferred stock, redeemable subject to
restrictions specified in the Bankruptcy Plan.
On the Effective Date, in satisfaction of Imperial's claim as successor
to the Bank and Somerset, Imperial received approximately 53.5% of SMC's new
common stock, 100% of SMC's new preferred stock and an option to purchase an
additional 17.5% of SMC's new common stock from all of the other holders of
SMC's new common stock on a pro rata basis. The unsecured creditors received 20%
of SMC's new common stock plus cash in the amount of $570,000, to be paid over a
three-year period on each anniversary of the Effective Date. The remaining
shares of SMC's new common stock were issued to certain management stockholders
(17%), the former equity holders of SMC (7.5%) and Charles Gordon Holladay (2%).
At a foreclosure auction conducted pursuant to the Bankruptcy Plan, Mr.
Gant purchased SMC's interest in its foreign subsidiaries except for the United
Kingdom subsidiary in exchange for his secured claim.
The Bankruptcy Plan also addressed the composition of the Board of
Directors of SMC, giving Imperial the right to designate three members and
providing that James A. Skidmore, Jr., who has been President and Chief
Executive Officer and a director of SMC since 1972 and Chairman of the Board of
SMC since 1975, would be Chairman of the Board and that he would have the right
to designate an additional member of the Board. Mr. Skidmore's designee was
Aaron Locker.
From inception, the Board appointees of Imperial, Harvey Borsuk,
Jonathan Borsuk and Michelle Borsuk Dana (collectively, the "Borsuks"), and the
other directors and management of SMC disagreed as to the management of SMC and
the requirements of the Bankruptcy Plan. One of the major disagreements was
regarding the subject of working capital. The Bankruptcy Plan did not provide
for any injection of working capital by Imperial or any other person; it did,
however, permit SMC to seek asset-based debt financing for purposes of working
capital. After the Effective Date, SMC continued to suffer financial difficulty,
primarily from the lack of working capital, as the Board of Directors of SMC
(controlled by Imperial) continually rejected management's working capital
proposals.
These disagreements and others led to a deadlock between management and
the Board and the inability of SMC to implement a viable business and financing
plan. In connection with these and related disagreements, including the
involuntary termination of Mr. Skidmore as President and Chief Executive Officer
of SMC in violation of his Employment Agreement, the following two lawsuits were
instituted against the Borsuks and Imperial: James A. Skidmore, Jr. et. al. vs.
Imperial Capital et al., pending before the Superior Court of New Jersey,
Monmouth County, Chancery Division (the "Superior Court Action") and Ravin
Sarasohn et al. vs. Imperial Capital et al., pending before the United States
Bankruptcy Court, New Jersey Division (the "Ravin Sarasohn Action"). See Item 3
- - "Legal Proceedings" for a discussion of these lawsuits.
As a result of the Ravin Sarasohn Action, the Bankruptcy Court enjoined
the Borsuks from paying themselves any compensation. As a result of the Superior
Court Action, Mr. Skidmore was restored to his position as President and Chief
Executive Officer of SMC and both Imperial and the Borsuks were restrained from
interfering with his exercise of the corporate duties associated with his
position, including his ability to oversee the day-to-day operations of SMC, and
the Borsuks agreed to negotiate in good faith with Mr. Skidmore to resolve their
differences or to effectuate a buyout by one party of the other.
On or about December 4, 1996, Mr. Skidmore and his counsel, other
representatives of SMC and Harvey and Jonathan Borsuk and their counsel met to
discuss, among other things, whether or not other outside investors could be
brought in to purchase the Borsuks' equity interests in SMC. During that meeting
the Borsuks stated that they would negotiate in good faith if Mr. Skidmore could
produce such a potential investor.
During the ensuing period, from December 1996 through March 1997, SMC
management worked vigorously at contacting potential investors. In early April
1997, SMC received a written proposed term sheet from Versar, Inc. ("Versar").
The term sheet provided that Versar would pay $2,790,000 for Imperial's equity
interests in SMC, would follow all of the terms of the Bankruptcy Plan and would
provide SMC with adequate working capital to pursue a business plan to be agreed
upon and to meet all of SMC's obligations under the Bankruptcy Plan.
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Effective on April 30, 1997, Versar executed an Agreement to Merge (the
"Agreement to Merge") in favor and for the benefit of each of the plaintiffs in
the Superior Court Action, and Versar also executed a revised term sheet, which
provided that it would become a legally binding obligation of Versar effective
upon the closing of Versar's purchase of Imperial's equity interests. Pursuant
to the Agreement to Merge, Versar agreed with such plaintiffs to cause SMC to be
merged with and into a newly formed, wholly-owned subsidiary of Versar, with SMC
common stock being converted into Versar common stock at an exchange ratio of
.573584 shares of Versar common stock to each share of SMC common stock. The
merger was required to take place as soon as practicable following the Imperial
closing.
On May 2, 1997, pursuant to a Stock Purchase Agreement dated April 30,
1997 among Imperial Capital Worldwide Partners L.P., Imperial Capital Investors
Corp., Jonathan Borsuk, Harvey Borsuk and Versar (the "Stock Purchase
Agreement"), Versar purchased from Imperial Capital Worldwide Partners, L.P. all
of its equity interests in SMC, consisting of 1,070,000 shares of SMC Common
Stock, 1,750,000 shares of SMC Preferred Stock and an option to purchase an
additional 350,000 shares of SMC Common Stock pro rata from all holders of
outstanding shares of SMC Common Stock, which option was subsequently cancelled.
Effective April 30, 1997, pursuant to the Stock Purchase Agreement, the
Borsuks resigned as directors of SMC (as well as from all other positions held
with SMC and its subsidiaries) and Benjamin M. Rawls, Lawrence W. Sinnott and
James C. Dobbs, Chairman and CEO, Vice President and CFO and Vice President and
General Counsel, respectively, of Versar were elected to SMC's Board of
Directors.
To fulfill Versar's obligations under the Agreement to Merge, after the
May 2, 1997 closing Versar and SMC negotiated a Merger Agreement dated July 29,
1997 to set forth in full the terms upon which a merger would occur. The merger
is subject to the approval of a majority of SMC's stockholders, which approval
is assured due to Versar's 53.5% equity interest in SMC. The meeting of SMC
stockholders to vote on the merger is expected to take place in the fall of
1997.
General
SMC is a diversified international professional services firm,
providing clients in the private and public sectors with expertise in four major
areas as follows: (i) management services, (ii) information system services,
(iii) environmental services and (iv) engineering, design and construction
services to the process industry. These services are provided through four
primary operating groups -- SMC Business Information Systems, SMC Consulting,
SMC Environmental Services Group and SMC McEver (SMC's Engineering, Design and
Construction Services Group). SMC's operating groups provide (i) systems support
and technology-based services in the area of facilities management, business
recovery and professional support services, (ii) consulting services to the
healthcare, food and petrochemical industries to assist companies to more
effectively utilize their human and physical resources, (iii) geotechnical,
civil and environmental engineering, design and construction management services
to municipal and industrial clients and (iv) design, engineering and
construction services to the petrochemical industry, material handling projects
and specialty chemical plants.
SMC was incorporated under the laws of the State of Delaware in 1957 as
the successor to Work Factor Company, which commenced doing business in 1946.
SMC is headquartered in Bridgewater, New Jersey and has offices in New York,
Connecticut, Pennsylvania, Tennessee, Texas, London and Paris.
SMC filed for bankruptcy in the Bankruptcy Court in the District of New
Jersey (the "Bankruptcy Court") on July 28, 1993 and emerged from bankruptcy on
July 10, 1996 pursuant to the Bankruptcy Plan. During the pendency of SMC's
bankruptcy, SMC's operating subsidiaries, which were not included in the
bankruptcy proceedings, continued to operate SMC's traditional business, albeit
with limited financial resources. In order to enhance its operating cash
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flows during this period of limited financial resources, SMC instituted
stringent cost controls and emphasized targeted marketing of those of its
services that have relatively high profit margins.
Pursuant to the Bankruptcy Plan, SMC sold its operations in Belgium,
Germany, France and the Netherlands in satisfaction of certain pre-petition
secured debt. Revenues from these operations constituted 20% of SMC's total
revenues and 81% of its European revenues for the seven months ended July 31,
1996.
Following emergence from bankruptcy, due to certain disputes between
SMC management and the then new majority stockholder of SMC, Imperial, as
further described above, and the failure of the SMC Board of Directors (the "SMC
Board") (which was controlled by Imperial) to approve the securing of working
capital lines, SMC suffered continuing problems in growing its business and
returning to profitability. These problems have now been resolved by the
acquisition by Versar of the equity interests held by Imperial as described
above.
Notwithstanding these difficulties, since emerging from bankruptcy, SMC
has developed a new consulting operation in France and has signed a strategic
alliance with its ex-Dutch subsidiary which continues to use the SMC
international tradename.
Set forth below is a discussion of the primary operating groups within
SMC.
SMC Business Information Systems
SMC Business Information Systems ("BIS") is headquartered in
Bridgewater, New Jersey, with offices in Connecticut, Tennessee and New York.
The business of BIS is conducted through SMC Business Information Systems, Inc.,
a wholly-owned subsidiary of SMC. BIS offers systems support in technology-based
services to the business community and nonprofit sector in three distinct,
although not mutually exclusive, areas as follows: Facilities Management,
Business Recovery, and Professional Support Services.
In the facilities management or "outsourcing" area, BIS offers clients
a full range of services in managing, staffing and operating data processing
centers, operations or specific functions in accordance with client
specifications. Services performed and functions managed include data entry,
tape handling, library management, maintenance, and systems development. BIS
currently manages data centers in Connecticut and Tennessee under multi-year
subcontracts from IBM, performing a variety of activities for clients in several
industries. With low overhead and highly skilled management, BIS is able to
offer outsourcing services at significantly lower costs than larger competitors.
The facilities management operations of BIS have built an excellent service
record, historically achieving performance reliability targets well in excess of
contract requirements with consistency.
In the business recovery area, BIS offers a complete menu of services
covering all aspects of business continuation and recovery services. Through its
highly qualified staff and consultants, BIS professionally and cost- effectively
evaluates a client's business continuation and recovery needs, creates specific
disaster recovery plans and programs, and audits, updates or tests existing
client plans for data backup and disaster response. Unlike many of its
competitors, however, BIS can also perform as a full solution provider, offering
clients online backup facilities and access to state of the art alternate EDP
operating sites in its capacity as a business partner to IBM and other well
known vendors. In this role, BIS professionals assist clients in identifying and
specifying their needs, arrange for backup or "hot sites" with their business
partners and support implementation, testing, and periodic update of the total
business continuation or disaster recovery program.
The professional services support group of BIS supports all of its
services and can also offer clients support in a variety of systems needs,
including network and internet anti-virus protection programs and products.
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SMC Consulting
SMC Consulting (the "Consulting Group") with offices in Bridgewater,
New Jersey, London and Paris carries on a fifty year tradition of providing
client productivity enhancement services which constituted the original core
business of SMC. The business of the Consulting Group is conducted through SMC
Management Services Group, Inc., a wholly-owned subsidiary of SMC, and two
European subsidiaries. The Consulting Group provides management consulting
services designed to support and guide clients in their efforts to improve
operating efficiency, reduce cost, satisfy customer needs, assure quality and
increase profitability without disruption to operations or major capital
expenditures.
The Consulting Group provides consulting services to assist its clients
in identifying areas needing improvement, makes specific recommendations,
develops programs and actively participates in their implementation. With a
"Total Enterprise" approach to productivity, the Consulting Group helps clients
improve profitability by more effectively employing all their resources
(personnel, materials, equipment, facilities, organizational structure and
technology) in day-to-day operations and in adapting to everchanging business
conditions. The Consulting Group's area of service include:
o Profit improvement
o Team building and management effectiveness
o Organizational analysis
o Complexity reduction
o Quality effectiveness/reengineering
o Business process reengineering
o Continuous improvement
o Logistics
o Documentation reduction
o Maintenance
o Technology management
o Plant flexibility and scheduling
The Consulting Group employs a variety of proprietary analytical
techniques that SMC has developed, including the "Work-Factor(R) System" a
widely recognized, predetermined elemental time system used to measure the human
work component of highly-repetitive manufacturing processes. SMC has also
developed other systems and techniques designed to improve the productivity of
administrative, support and professional personnel in a wide range of functions.
Historically, the Consulting Group has provided services for a lengthy
list of major clients in a variety of industries both domestically and overseas.
In the early 1990s, as resources became limited and the domestic consulting
market softened, SMC made a strategic decision to concentrate on its consulting
business in Europe. During this period, the domestic consulting business was
wound down and domestic clients were not aggressively pursued. In 1995, SMC
began a process of reentry into the domestic consulting market. In reentering
the domestic market, SMC has faced a
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variety of significant obstacles including continued resource limitations and
the reorganization process in connection with the Bankruptcy Plan. In addition,
SMC has suffered from a lack of current domestic client references, a lengthy
selling cycle and stiff competition in the marketplace. In an effort to overcome
these obstacles, SMC has renewed contacts with former clients and established a
Work-Factor(R) user newsletter. Additionally, personnel with prior SMC
credentials have been added at minimal cost, both on staff and through
consulting arrangements. Through cross-licensing agreements with outside
vendors, automated Work-Factor(R) packages have been added to SMC's offerings.
Assignments of long-term recurring or multi-location implementation potential
are being aggressively pursued. The Consulting Group has recently obtained a
significant domestic assignment in the healthcare field. However, no assurance
can be given that the Consulting Group's marketing efforts will result in the
award of additional contracts.
In Europe, the Consulting Group has faced a challenge of rebuilding its
business from a significantly restructured base. In connection with the
Bankruptcy Plan, certain former subsidiaries in several countries were divested.
SMC is now focusing on rebuilding its former Pan-European business through its
existing office in London and a newly established French company. Business
contracts in both Western and Eastern Europe have been secured. SMC is also
seeking opportunities for strategic alliances or licensing relationships and has
recently concluded such an arrangement with its former subsidiary in the
Netherlands.
SMC Environmental Services Group
SMC Environmental Services Group ("ESG"), founded in 1956 and acquired
by SMC in 1970, is headquartered in King of Prussia, Pennsylvania with a branch
office in Bridgewater, New Jersey. The business of ESG is conducted through SMC
Environmental Services Group, Inc., a wholly-owned subsidiary of SMC. ESG
provides geotechnical, civil and environmental engineering and design and
construction management services to clients in the public and private sectors.
ESG has developed a reputation for excellence and practical
problem-solving and innovative management of land, resources and waste. Its
business has been built through years of integrating applied science with
engineering. ESG engineers work hand-in-hand with regulatory specialists to
provide clients with cost-effective solutions to problems. Engineers are backed
by SMC's experts in land planning, hydrology, risk assessment, water and air
resources, wetlands and surveying.
Since SMC emerged from bankruptcy, and in light of a reduction in
environmental activity in the private and public sectors, ESG has suffered
protracted delays in contract awards and reestablishment of client
relationships. During this period, many state governments have also relaxed
their environmental cleanup standards to promote economic growth, slow the
conversion of green open space and discourage industrial businesses from
relocating. As a result of this slowdown in the environmental services area, ESG
has developed a focus on "niche" innovative environmental technologies in the
functional areas of:
o Remedial design and engineering
o Soil and groundwater cleanup
o Consulting Services
More and more clients are asking how their project can be accomplished
more efficiently with imaginative approaches. To this end, ESG has made the
investment in terms of the marketing and technical expertise in a new
alternative to conventional remedial technologies, known as Bio-Injection. This
method of remediation allows the concurrent treatment of soils and groundwater
with a mixture of bacteria and nutrients. This process typically requires a
one-time treatment with positive results achieved within months instead of years
at a fraction of the cost of conventional treatment methods.
ESG has also positioned itself to be a leader in marketing services
related to the environmental standards
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currently under consideration by the International Organization for Standards,
ISO 14000. A follow on to the ISO 9000 quality standards promulgated and widely
adopted several years ago, ISO 14000 will establish voluntary environmental
compliance standards for the international business community. ESG has been
working over a year to position itself on the "Leading Edge" for marketing its
consulting services to the creation or audit of compliance programs targeting
ISO 9000 certified companies. While the emergence of this market has been
significantly delayed awaiting the issuance of final standards, management
believes it to be a very large potential market for ISO 14000 certification. As
a non-capital intensive service driven by "in-house expertise", management
anticipates a potential for a profitable addition to ESG's offerings.
Engineering, Design and Construction Services Group
SMC's Engineering, Design and Construction Services Group ("McEver") is
a Houston based engineering and construction company. The business of McEver is
conducted through SMC McEver, Inc., a wholly-owned subsidiary of SMC. Founded in
1966, and acquired by SMC in 1978, McEver provides design, engineering and
construction services to the process industries. Typical clients include
refinery and petrochemical plants, materials handling projects, specialty
chemical plants, bulk storage terminals, pipelines and other manufacturing
facilities. McEver also provides consulting services for a variety of projects
with unique engineering and construction demands.
With very special expertise in the engineering and construction of
refinery and petrochemical plants, McEver focuses its resources and experience
on providing services that encompass all relevant disciplines from concept
through completion and startup. This includes:
o Construction and construction management
o Detailed design and documentation
o Engineering specifications
o Equipment and materials procurement
o Cost analysis
o The preparation of bid packages
o Environmental impact statements
McEver's team of certified professionals are experts in all the
necessary disciplines. Assisted by a force of highly-skilled technicians, they
prepare and supervise every phase of each project. Although providing a
comprehensive set of services from a single source, McEver offers clients the
choice of using any individual service, or combination of services it provides,
including services available from other SMC divisions. McEver was recently
awarded a substantial contract for the design and construction of a specialty
chemical plant.
Employees
At June 30, 1997, SMC had approximately 200 domestic employees and
approximately 20 employees located in Europe. SMC uses the services of a variety
of contractors and sub-contractors as needed to perform various assignments for
clients.
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ITEM 2. PROPERTIES
SMC sub-leases approximately 5,700 square feet, at the rate of $22 per
square foot, in an office building in Bridgewater, New Jersey, in which the
Company's executive and administrative offices are located. The lease is
currently effective on a month-to-month basis. SMC is negotiating a new two-year
lease for this space.
SMC and its subsidiaries also currently lease (a) approximately 11,000
square feet in King of Prussia, Pennsylvania (Lease is running month-to-month);
(b) approximately 17,700 square feet in Houston, Texas (Lease expires on May 31,
2002 with a five year renewal option); (c) approximately 500 square feet in
Oyster Creek, Texas (Lease expires on July 31, 1998); (d) approximately 500
square feet in London, England (Lease expires on May 12, 1998); (e)
approximately 500 square feet in Bievres Cedex, France (Lease expires on June
30, 2000 with two three-year renewal options).
ITEM 3. LEGAL PROCEEDINGS
Shortly after SMC emerged from bankruptcy on July 10, 1996, disputes
arose between its new majority investors, Imperial, and the management of SMC.
Subsequently, two lawsuits were instituted against Imperial and its principals.
On September 6, 1996, two SMC administrative creditors filed a complaint for
injunctive and other relief entitled Ravin, Sarasohn, Cook, Baumgarten, Fisch &
Rosen, P.C. and Shanley & Fisher, P.C. v. Imperial Worldwide Partners, L.P., et
al. Case No. 93-34553 in the United States Bankruptcy Court, District of New
Jersey, to restrain certain actions by Imperial and its principals and to
designate James A. Skidmore, Jr. as the manager of SMC to operate SMC on a day
to day basis and carry out the terms of the Plan of Reorganization. On November
6, 1996, James A. Skidmore, Jr. and other management shareholders, and certain
other shareholders, filed a complaint against Imperial entitled - James A.
Skidmore, Jr. et al. v. Imperial Capital Worldwide Partners, L.P. et al. Docket
No. MON C 278-96 in the Superior Court of New Jersey, Monmouth County, Chancery
Division seeking an injunction against Imperial and its principals to rescind
certain Board of Directors actions, including the termination of Mr. Skidmore's
employment as President and Chief Executive Officer of SMC, to enjoin their
interference with Mr. Skidmore's day to day management of SMC and to permit SMC
to obtain working capital.
As part of the Stock Purchase Agreement dated April 30, 1997 between
Versar and Imperial it was agreed that the Plaintiffs and the Defendants in the
two above cited proceedings would execute mutual releases from further liability
and agree to enter into Stipulations of Dismissal for both actions. The
Stipulation of Dismissal has been filed in the Ravin, Sarasohn case. The mutual
releases have been signed by all but one plaintiff in the Skidmore case. The
court in the Skidmore case issued an Order of Dismissal on September 9, 1997
dismissing the case without prejudice and providing that the dismissal will
become with prejudice in 14 days unless a motion seeking to vacate the Order of
Dismissal is filed before then. The one plaintiff who has not signed a release
could file such a motion and attempt to pursue the claim; however, she will be
unable to pursue the claim if she does not file such a motion within the 14-day
period.
In June 1996, Flintlock Ltd, a client of SMC McEver, a subsidiary of
SMC, filed an action in the 165th Judicial District Court of Harris County,
Texas, entitled Flintlock Ltd. v. SMC McEver, Inc., Case No. 96-002700.
Flintlock alleged that SMC McEver negligently failed to manage the construction
of a citronella candle project and negligently misrepresented the project's
cost. Flintlock asserts that it incurred over $700,000 in damages. SMC McEver
has counterclaimed for over $244,000 which it claims is due under the contract
between the parties. The parties have taken certain discovery which remains
ongoing. The parties have also engaged in discussions regarding possible
mediation. SMC McEver has retained counsel and is defending this matter
vigorously. SMC does not expect the outcome of this litigation to have a
material adverse effect on its financial condition or its results of operations.
SMC and its subsidiaries are parties to various other legal actions
arising in the normal course of business. SMC believes that the ultimate
unfavorable resolution of these other legal actions would not have a material
adverse affect on its consolidated financial condition and results of
operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of SMC's security holders during
the last quarter of fiscal year 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Although SMC is a reporting company under the Securities Exchange Act
of 1934 and has been publicly traded in the past on the American Stock Exchange,
SMC's common stock now trades on the over-the-counter bulletin board. There is
no established public trading market for SMC's common stock and trades in the
stock are sporadic, constituting on average fewer than one trade per month. The
number of recordholders of SMC common stock as of August 31, 1997 was 655.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with SMC's Consolidated Financial Statements and notes thereto
beginning on page F-3 of this report.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------
1996(1) 1996(2) 1996(3) 1995(3) 1994(3) 1993(3) 1992(3)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of (In thousands, except per share data)
Operations related data:
Gross Revenue ............................ $11,707 $14,039 $28,835 $22,821 $21,828 $34,837
Operating Income (Loss) .................. (351) (318) 23 163 (5,245) (3,451)
Net Income (Loss) ........................ (307) 320 (484) (789) (6,725) (6,114)
Net Loss per Share ....................... (.15) -- -- -- -- --
Weighted Average Shares Outstanding ...... 2,000 -- -- -- -- --
Consolidated Balance Sheet
related data:
Working Capital .......................... 1,208 1,307 (6,284) (5,544) (5,413) (1,142)
Current Ratio ............................ 1.40 1.56 0.52 0.56 0.57 0.91
Total Assets ............................. 5,776 5,354 8,232 8,338 8,636 15,958
Current Liabilities ...................... 2,996 2,332 13,221 17,242 12,545 12,781
Liabilities from
reorganization plan .................... 1,123 1,058 -- -- -- --
Total Liabilities ........................ 4,119 3,390 17,620 17,242 16,751 17,273
Stockholders' Equity ..................... 1,657 1,964 (9,388) (8,904) (8,115) (1,315)
</TABLE>
- ---------
1 Represents five-month period ended December 31, 1996 of reorganized company
following SMC's emergence from bankruptcy.
2 Represents Balance Sheet data as of July 31, 1996 of reorganized company.
3 Represents Statement of Operations data for seven-month period ended July
31, 1996 and Statement of Operations and Balance Sheet data for the fiscal
years ended December 31, 1992 through 1995 of the predecessor company prior
to SMC's emergence from bankruptcy. Statement of Operations data for
December 31, 1992 through 1995 and Balance Sheet data for December 31, 1992
through 1994 are unaudited. Earnings (Loss) per share of the predecessor
company are not presented as the presentations are not meaningful.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison Of The Five Months Ended December 31, 1996, The Seven Months Ended
July 31, 1996, And The Years Ended December 31, 1995 and 1994
SMC filed a voluntary petition for relief under Chapter 11, Title 11 of
the U.S. Bankruptcy Code on July 28, 1993. During all of 1994 and 1995, SMC
operated as a debtor-in-possession under the supervision of the Bankruptcy
Court. SMC's Bankruptcy Plan was confirmed by the Bankruptcy Court on April 17,
1996, and became effective on July 10, 1996. At that time, SMC adopted "fresh
start" reporting procedures in accordance with the American Institute of
Certified Public Accountants' Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code." Application of the
principles of "fresh start" reporting effectively results in the creation of a
new reporting entity following emergence from the bankruptcy proceedings.
Accordingly, the accompanying financial presentation for 1996 have been
segregated into two periods, with the seven-month period ended July 31, 1996
reflecting operations of SMC prior to emergence from the Chapter 11 proceedings,
and the five-month period ended December 31, 1996, reflecting the operations of
the reorganized company subsequent to emergence.
Substantially all of SMC's revenues are derived from the operations of
the SMC subsidiaries. SMC's result for the seven months ended July 31, 1996,
include the operations of SMC's former European subsidiaries in Belgium,
Germany, France, and the Netherlands, which, in accordance with the terms of the
Bankruptcy Plan, were sold in May, 1996, in satisfaction of certain debt which
had been secured by the stock of those subsidiaries.
Sales of $14,039,000 for the seven-month period of 1996 included
approximately $2,854,000 derived from the disposed European subsidiaries'
operations. Sales for that period of $11,185,000, representing the operations of
the surviving entities, reflected an increase of approximately 14% over the
first seven months of 1995. Reorganized company sales of $11,707,000 for the
five months ended December 31, 1996, compare favorably with both sales for the
first seven months of the year and "surviving entity" sales of approximately
$11.0 million for the final five months of 1995. In both cases, the increases
came about primarily as a result of strengthened contributions from the
reorganized company's engineering design and construction unit, coupled with the
contribution in the five-month period of a newly established consulting unit in
Europe and increased domestic consulting revenues. These gains were offset in
part by a decline in sales from the environmental engineering unit.
The predecessor company's sales increase of $6.0 million (26%) from
1994 to 1995 resulted primarily from a substantial increase in revenues in the
engineering group. This group of SMC's business, which had suffered from a
dearth of new projects in 1993 and 1994, was significantly bolstered in both
1995 and 1996 by awards of substantial design and construction contracts from
major clients. The 1995 increase was somewhat offset by a sales decline in the
consulting group.
Cost of sales for the seven-month period represented 82% of sales,
compared with 88% for the reorganized company's five-month period in 1996. The
higher percentage for the five months reflected the absence of the relatively
higher-margin European consulting businesses coupled with the increased revenue
derived from construction projects in the engineering group, which included
significant direct materials costs "passed through" to the clients with little
or no associated markup. Similarly, the predecessor company's costs of sales
relative to gross sales increased from 73% in 1994 to 79% in 1995 as a result of
the proportional 1995 revenue increase attributable to construction projects in
the engineering group noted above.
Selling, general, administrative expenses for the seven-month period of
the predecessor company in 1996 were $2,775,000, or 20% of sales, compared with
$1,771,000 (15% of sales) for the reorganized company in the five months ended
December 31, 1996. The decrease relative to sales reflected comparatively high
selling, general, and administrative expenses in the European companies during
the first five months. Fixed overhead costs in the
12
<PAGE>
management services and systems services units, which include such items as
incentive compensation and government mandated benefits expenses, have been
greater in the management services unit, particularly in Europe. The reorganized
company benefitted from relatively lower selling, general, and administrative
costs reflecting both the ongoing cost control measures in place in the domestic
units and the greater proportion of project-driven direct costs in the
engineering businesses than in the management services and systems services
unit.
Selling, general, and administrative expenses were relatively stable
from 1994 to 1995, decreasing from $6,044,000 to $5,956,000 (1%). This reflected
the same fixed cost trends noted above. The significant decrease in selling,
general, and administrative expenses as a percentage of sales for those periods
(26% in 1994 compared with 21% in 1995) resulted from the greater contribution
to total sales from the engineering group, with lower selling, general, and
administrative and higher cost of sales patterns, in the latter year.
Interest income (net) in each of the predecessor company's seven-month
period ended July 31, 1996 and years ended December 31, 1994 and 1995, primarily
reflected interest charges on the $2,000,000 loan secured by the stock of the
European subsidiaries, offset in part by interest earnings on excess cash held
in those subsidiaries. With this debt satisfied upon reorganization by the sale
of the European subsidiaries in satisfaction of the debt, neither the interest
expense on the debt itself nor the benefit from invested cash balances in the
European companies were present in the five months ended December 31, 1996, for
the reorganized company.
The aforementioned sale of the subsidiaries in satisfaction of the
secured debt in May, 1996, resulted in the $846,000 gain on sale. The gain
reflected the difference between the carrying value of the debt and unpaid
interest satisfied through the sale and that of the investment in the
subsidiaries sold.
Net reorganization costs reported for each of 1996, 1995 and 1994
include the directs associated with SMC's reorganization process. In each case,
these consist primarily of legal and other professional fees; other components
include fees paid to the office of the U.S. Trustee and, in 1996, costs
associated with the cancellation of SMC's old common stock and issuance of new
stock, as specified in the Bankruptcy Plan. The Bankruptcy Plan specified a
maximum amount of administrative and professional fees which would be allowed
under its terms; this ceiling was reached in late 1995. As a result, the level
of such costs decreased significantly in 1996.
As a result of operating loss carryforwards and ongoing operating
losses, SMC has not incurred a Federal income tax liability during any of the
reported periods. Amounts reported as provision for income taxes for each of the
years ended December 31, 1994 and December 31, 1995, and the seven months ended
July 31, 1996, are comprised of foreign income taxes and reflect the results of
the European operations.
Reorganized SMC reported a net loss of $307,000 for the five months
ended December 31, 1996, compared with predecessor company net income of
$320,000 for the seven months ended July 31, 1996, and net losses of $484,000
and $789,000, for the years ended December 31, 1995 and 1994, respectively. The
reorganized company loss in the five-month period primarily reflected losses in
the environmental engineering business and the surviving overseas management
services units. The seven-month 1996 period benefitted from significant profits
in the engineering and systems units and a gain from the sale of certain
European subsidiaries. The European units and domestic engineering business
contributed operating profits in 1994, although the former was significantly
reduced by income tax costs, with reorganization costs and lagging domestic
consulting income producing a net loss.
Liquidity And Capital Resources
Throughout 1994, 1995 and 1996, the Company continued to suffer from
liquidity difficulties, both during the pendency of the Chapter 11 proceedings
and following its emergence from Chapter 11 in July, 1996. The absence of
adequate financial resources throughout the reported periods significantly
impaired the ability of SMC to pursue and secure business in all of its domestic
units. However, SMC did make substantial progress in enhancing its operating
cash flows through stringent cost control and emphasis on targeted marketing of
those of its services which attract higher margins.
13
<PAGE>
At December 31, 1995, the predecessor company's current liabilities
exceeded its current assets by $6.3 million. With the emergence from the Chapter
11 proceedings, the reorganized company's current assets exceeded current
liabilities by amounts of $1.3 million and $1.2 million at July 31, 1996 and
December 31, 1996, respectively. However, the bulk of the current assets at
those dates consisted of accounts receivable and unbilled receivables (work in
process) which lacked the currency of continuing liabilities.
Under the Bankruptcy Plan, no injection of working capital was realized
by the reorganized SMC. Debt financing proposals negotiated by SMC's management
during the five months ended December 31, 1996, intended to provide access to a
revolving working capital facility, were repeatedly rejected by the SMC Board of
Directors. As a result, the Company has continued to suffer significantly from
lack of cash during the post-emergence period.
Subsequent Events
During the first quarter of 1997, SMC continued to suffer from
liquidity difficulties. While working capital at March 31, 1997, increased by
$99,000 (8%) from December 31, 1996; cash balances decreased by $100,000 due to
increased receivables. SMC continued its efforts to secure new financing
throughout the first quarter of 1997.
Following Versar's purchase of 53.5% of the outstanding SMC Common
Stock and all the outstanding SMC Preferred Stock, and in connection with the
execution of the Agreement to Merge and the related term sheet, Versar agreed to
assist SMC in meeting its working capital requirements. As of June 30, 1997,
Versar has loaned SMC approximately $700,000 for working capital purposes.
Impact of Inflation
SMC seeks to protect itself from the effects of inflation. The majority
of contracts SMC performs are for a period of one year or less or are cost plus
fixed-fee type contracts and, accordingly, are less susceptible to the effects
of inflation. Multi-year contracts provide for projected increases in labor and
other costs.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK.
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data begin on
page F-3 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Until the engagement on May 5, 1997 of Arthur Andersen LLP, no
independent accountant had been engaged to audit financial statements since
1992. During the pendency of SMC's bankruptcy and since emerging from bankruptcy
until the preparation of the audited financial statements included herein, SMC
had not prepared audited financial statements.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors and Executive Officers
The identities of the directors and executive officers of SMC as of
August 1, 1997, and certain information regarding each of them, are set forth in
the following table:
Director
or Officer
Name Age Since Position
---- --- ----- --------
James A. Skidmore, Jr. 65 1972 Chairman of the Board, Chief
Executive Officer, President
and Director
Aaron Locker 69 1979 Director
Benjamin M. Rawls 56 1997 Director
James C. Dobbs 52 1997 Director
Lawrence W. Sinnott 35 1997 Director
Frank S. Rathgeber 62 1990 Executive Vice President
Marion G. Hilferty 53 1975 Vice President/Administration
and Secretary
Messrs. Skidmore and Locker have been elected to serve as directors
until July 10, 1999 and until their successors have been elected and qualified.
SMC's other Directors have been elected to serve as directors until April 30,
1998 and until their successors have been elected and qualified. The officers of
SMC have been elected to serve until their successors are elected and qualified.
Each of SMC's executive officers has held his or her position with SMC
for over five years, except that Ms. Hilferty's title prior to the Effective
Date was Vice President and Secretary. SMC's executive officers are also
officers of various subsidiaries of SMC.
The principal occupation and business experience during at least the
last five years for each Director of SMC is set forth below.
James A. Skidmore, Jr. has served as President and Chief Executive
Officer and a director of SMC since 1972 and as Chairman of the Board of
Directors of SMC since 1975. Mr. Skidmore is a director of Blue Cross and Blue
Shield of New Jersey, HMO Blue and Medigroup, a consultant to the U.S. Junior
Chamber of Commerce, a member of the Board of Advisory Trustees for The State
University of New Jersey, Rutgers-Management School of Business, a member of the
Board of Trustees for the Public Affairs Research Institute of New Jersey, Inc.
and a Board member of the New Jersey State Chamber of Commerce.
Aaron Locker is President of Locker, Greenberg & Brainin, P.C.,
attorneys at law. Mr. Locker is a director
15
<PAGE>
of Oerlikon-Buhrle U.S.A. Inc., Bally, Inc. and Bally Retail, Inc. During 1997,
Locker Greenberg & Brainin performed legal services for the Special Committee of
the Board of Directors of SMC that reviewed the proposed merger between SMC and
a wholly-owned subsidiary of Versar. Mr. Locker was the sole member of the
Special Committee.
Benjamin M. Rawls, M.B.A., is President and Chief Executive Officer of
Versar and has served in such capacity since April 1991. He became Chairman of
the Board of Directors of Versar in November 1993. From 1988 to April 1991, Mr.
Rawls was President and Chief Executive Officer of Rawls Associates, Inc., a
management consulting firm. Mr. Rawls was President and Chief Executive Officer
of R-C Holding, Inc. (Now Air & Water Technologies Corporation) from 1987 to
1988 and was Chairman of Metcalf & Eddy, Inc., a subsidiary of Research-
Cottrell, Inc., from 1984 to 1988.
James C. Dobbs, J.D., L.L.M., is Vice President, General Counsel, and
Secretary of Versar and has served in such capacity since 1992. From 1984 to
1992, Mr. Dobbs was employed by Metcalf & Eddy, Inc. as Vice President and
General Counsel where he was responsible for providing legal and regulatory
advice to senior management.
Lawrence W. Sinnott, CPA, B.S., is Vice President, Chief Financial
Officer and Treasurer of Versar and has served in such capacity since 1994. Mr.
Sinnott originally joined Versar in 1991 as Assistant Controller. In 1992, he
became Corporate Controller. In 1993 he was elected Treasurer and Corporate
Controller. From 1989 to 1991, Mr. Sinnott was Controller of a venture capital
company, Defense Group, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Each of the current executive officers of SMC, James A. Skidmore, Jr.,
Frank S. Rathgeber and Marion G. Hilferty, as well as Dennis M. Casey, SMC's
former Vice President and Chief Financial Officer, failed to file with the
Securities Exchange Commission on a timely basis during 1996 a report required
by Section 16(a) of the Securities Exchange Act of 1934 reporting the issuance
to them of shares of common stock of SMC pursuant to the Bankruptcy Plan in
consideration, among other things, for their continued employment with SMC.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid or accrued by SMC for services in all capacities for Mr.
Skidmore, SMC's Chairman of the Board, Chief Executive Officer and President,
and Mr. Rathgeber, SMC's Executive Vice President. Ms. Hilferty, SMC's Vice
President/Administration and Secretary, is not included in the table because she
did not receive compensation in excess of $100,000 for 1996.
16
<PAGE>
SUMMARY COMPENSATION TABLE
Annual Compensation(1)
Name and All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($)
- ------------------ ---- ---------- --------- ----------------
James A. Skidmore, Jr., 1996 $189,648(2) -- $1,194(3)(4)
Chairman of the Board, 1995 $180,000 -- $1,194(3)
Chief Executive 1994 $180,000 -- $1,194(3)
Officer and President
Frank S. Rathgeber, 1996 $124,875(2) -- --(4)
Executive Vice 1995 $124,875 $30,000 --
President 1994 $124,875 -- --
- ---------
(1) For both Mr. Skidmore and Mr. Rathgeber, perquisites and other personal
benefits aggregated less than 10% of total salary and bonus each year and
are therefore omitted from the table as permitted by the rules of the
Securities and Exchange Commission.
(2) Includes $24,135 for Mr. Skidmore and $10,406 for Mr. Rathgeber that was
not paid until June 1997.
(3) Represents the portion of the premium paid by SMC for whole life insurance
coverage. SMC pays an amount equal to the cost of the same amount of term
life coverage, and Mr. Skidmore pays the balance of the premium.
(4) Does not include the value of 240,000 shares of SMC common stock issued to
Mr. Skidmore and 40,000 shares of SMC common stock issued to Mr. Rathgeber
pursuant to the Bankruptcy Plan.
The following table sets forth the estimated annual benefits payable
upon normal retirement pursuant to SMC's Employees' Pension Plan to persons in
the remuneration classifications as set forth below. SMC is in the process of
terminating this pension plan.
PENSION PLAN TABLE
Annual Benefit After Specified Years of Service(2)
Average Earnings(1) 5 10 15 or More
- ---------------- ------ ------- ----------
$50,000...................... $3,000 $ 6,000 $ 9,000
$100,000..................... $6,000 $12,000 $18,000
$150,000(3).................. $9,000 $18,000 $27,000
- ----------
(1) "Average Earnings" means the highest average annual compensation for any
five consecutive years during the period of employment. For Mr. Skidmore,
annual compensation for pension plan purposes for each year was $150,000,
which was the maximum compensation allowed in determining benefits under
qualified retirement plans for each of 1994, 1995 and 1996. For Mr.
Rathgeber, annual compensation for pension plan purposes for each year was
the amount set forth under the heading "Annual Compensation" in the Summary
Compensation Table above, plus his car allowance, which is not shown (and
which is not required to be
17
<PAGE>
shown) in the Summary Compensation Table; provided that his annual
compensation for pension plan purposes in 1995 was the maximum amount of
$150,000.
(2) As of December 31, 1996, the following individuals had credited years of
service under the Plan as indicated: Mr. Skidmore, 28: Mr. Rathgeber, 33.
The benefit amounts shown in the table are not subject to any deduction for
social security or other offset amounts.
(3) For the year ended December 31, 1996, compensation is limited to $150,000
for determining benefits and deductions under qualified retirement plans.
Compensation of Directors
Outside directors of SMC are compensated for their service as directors
of SMC in the amount of $10,000 per year plus $1,000 per meeting attended.
Directors who are not outside directors receive no additional compensation for
their service as Directors. During 1996, the SMC Board, while under the control
of Imperial, determined that the SMC Directors who were affiliated with Imperial
but who were not employees of SMC would be treated as outside directors for
purposes of director compensation, notwithstanding Imperial's equity interest in
SMC. Accordingly, two SMC Directors affiliated with Imperial were paid $1,000
each for attending a Board meeting in 1996. In late 1996, the Bankruptcy Court
enjoined the payment of further compensation to the SMC Directors affiliated
with Imperial. Current SMC Directors who are employed by Versar, which became
SMC's majority stockholder in 1997, are treated as not being outside directors
for purposes of compensation of directors and therefore receive no additional
compensation for their service as Directors of SMC.
Employment Agreements
SMC has entered into employment agreements with Messrs. Skidmore and
Rathgeber. Each of the agreements is for a three year term that commenced on
July 10, 1996 (the Effective Date). The agreements provide for annual salaries
of not less than $200,000 for Mr. Skidmore and not less than $124,875 for Mr.
Rathgeber. Mr. Rathgeber's salary was increased to $150,000 effective June 1,
1997. Mr. Skidmore is also entitled to receive additional annual compensation in
an amount equal to 4% of SMC's income before income taxes, as well as certain
disability and life insurance benefits. Mr. Rathgeber's agreement provides that
he is eligible to receive a discretionary bonus. If Mr. Skidmore's employment is
terminated without cause by SMC or for cause by Mr. Skidmore (as such terms are
defined in the agreement), Mr. Skidmore will be entitled to receive liquidated
damages equal to the aggregate salary payable with respect to the remainder of
the three year term plus an additional $100,000, as well as continuation of
benefits for the remainder of the term. Mr. Rathgeber's employment may be
terminated by SMC only for cause.
Compensation Committee Interlocks and Insider Participation
SMC does not have a Compensation Committee or any other committee of
the Board of Directors that performs equivalent functions. These functions are
performed by SMC's Board of Directors. There were no deliberations of SMC's
Board of Directors during 1996 concerning executive officer compensation.
18
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth the number of shares of SMC common stock
beneficially owned by the following persons known by SMC to own more than 5% of
the outstanding SMC common stock. See also, "- Security Ownership of
Management."
Number of Shares Beneficially Percentage
Name and Address Owned of Class
- ---------------- ----- --------
Versar, Inc. 1,070,000(1) 53.5%
6850 Versar Center
Springfield, VA 22151
Vista Properties 121,684(2) 6.1%
c/o Dreyer & Traub
101 Park Avenue
New York, NY 10178
- ---------
(1) As reported in Schedule 13D filed with the Commission on May 30, 1997.
(2) Pursuant to the Fifth Modified Plan of Reorganization, dated January 25,
1996, of SMC.
In addition to the above, Versar owns 1,750,000 shares of SMC Preferred
Stock, representing 100% of the outstanding SMC Preferred Stock.
19
<PAGE>
Security Ownership of Management
According to information furnished to SMC, as of August 31, 1997, the
directors of SMC and all directors and officers of SMC as a group, beneficially
owned shares of SMC common stock as follows:
Name of Individual Number of
or Identity of Shares Beneficially Percentage
Group Owned (1) of Class (2)
----- --------- ------------
James A. Skidmore, Jr.(3) 249,683 12.5%
641 Ocean Avenue
Sea Girt, NJ 08750
Aaron Locker, Esq. 4,157 --
Benjamin M. Rawls(4) 0 --
James C. Dobbs(4) 0 --
Lawrence W. Sinnott(4) 0 --
All present directors
and executive officers
as a group (7 persons)(5) 310,283 15.7%
- ----------
(1) Nature of ownership consists of sole voting and investment power unless
otherwise indicated.
(2) Percentages for each person or group are based on the aggregate number of
shares outstanding on August 31, 1997. Percentages of less than 1% are not
shown.
(3) Includes 973 shares held in Mr. Skidmore's account in the Employee Capital
Accumulation Plan of SMC, which were issued pursuant to the Bankruptcy Plan
with respect to shares purchased through the Employee Capital Accumulation
Plan prior to the commencement of the bankruptcy proceedings, and as to
which he has voting and investment discretion as described in Note (5)
below; 23 shares owned by Mr. Skidmore's wife; and 113 shares which are
held in an Individual Retirement Account.
(4) As reported in Form 3, dated June 11, 1997, filed with the Commission.
Messrs. Rawls, Dobbs and Sinnott are officers of Versar, which owns
1,070,000 shares of SMC Common Stock and 1,750,000 shares of SMC Preferred
Stock. Messrs. Rawls, Dobbs and Sinnott disclaim beneficial ownership of
such SMC stock.
(5) Includes 1,474 shares owned in the Employee Capital Accumulation Plan as of
June 30, 1997, over which participants have voting discretion and
investment discretion, with respect to that portion of their accounts
pertaining to their voluntary contributions in excess of 1% of their
salary.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
Financial Statements
The following financial statements are filed as part of this report:
a) Report of Independent Public Accountants
b) Consolidated Balance Sheets as of December 31, 1996, July 31, 1996 and
December 31, 1995
c) Consolidated Statements of Operations for the five months ended December
31, 1996, the seven months ended July 31, 1996 and the years ended December
31, 1995 and 1994
d) Consolidated Statements of Shareholders' Equity for the five months ended
December 31, 1996, the seven months ended July 31, 1996 and the years ended
December 31, 1995 and 1994
e) Consolidated Statements of Cash Flows for the five months ended December
31, 1996, the seven months ended July 31, 1996 and the years ended December
31, 1995 and 1994
f) Notes to Consolidated Financial Statements
21
<PAGE>
Financial Statement Schedules
There are no financial statement schedules applicable to SMC.
Exhibits
The following exhibits are filed as a part of this report:
2.1 Fifth Modified Plan of Reorganization dated January 25, 1996
2.2 First Modification to Confirmed Fifth Modified Plan of Reorganization
3.1 Restated Certificate of Incorporation
3.2 Restated By-Laws
10.1 Employment Agreement with James A. Skidmore, Jr. effective July 10, 1996(1)
10.2 Employment Agreement with Frank S. Rathgeber effective July 10, 1996 (1)
10.3 Employment Agreement with Marion G. Hilferty effective July 10, 1996 (1)
10.4 Stock Purchase Agreement with Donald R. Gant dated April 17, 1996
21.1 Subsidiaries of the registrant
27.1 Financial Data Schedule
- ----------
(1) Constitutes a management contract or a compensatory plan or arrangement
required to be filed as an exhibit to this report.
Reports on Form 8-K
SMC did not file any reports on Form 8-K during the fourth quarter of
the year ended December 31, 1996.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SCIENCE MANAGEMENT CORPORATION
/s/ James A. Skidmore, Jr.
---------------------------------
James A. Skidmore, Jr., President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
SIGNATURES DATE
---------- ----
/s/ James A. Skidmore, Jr. September 5, 1997
- ----------------------------------------
James A. Skidmore, Jr., President, Chief
Executive Officer and Director
/s/ Dennis M. Casey September 5, 1997
- ----------------------------------------
Dennis M. Casey, Controller
/s/ James C. Dobbs September 5, 1997
- ----------------------------------------
James C. Dobbs, Director
/s/ Benjamin M. Rawls September 5, 1997
- ----------------------------------------
Benjamin M. Rawls, Director
/s/ Lawrence W. Sinnott September 5, 1997
- ----------------------------------------
Lawrence W. Sinnott, Director
/s/ Aaron Locker September 5, 1997
- ----------------------------------------
Aaron Locker, Director
23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Science Management Corporation:
We have audited the accompanying consolidated balance sheets of Science
Management Corporation (Successor) and subsidiaries as of December 31, 1996 and
July 31, 1996, and the related consolidated statements of operations, cash flows
and shareholders' equity for the five months ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Science Management
Corporation (Successor) and subsidiaries as of December 31, 1996 and July 31,
1996, and the results of their operations and their cash flows for the five
months ended December 31, 1996, in conformity with generally accepted accounting
principles.
Washington, D.C.
July 3, 1997
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Science Management Corporation:
We have audited the accompanying consolidated balance sheet of Science
Management Corporation (Predecessor) and subsidiaries as of December 31, 1995
and the related consolidated statements of operations, cash flows and
shareholders' equity for the seven months ended July 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Science Management
Corporation (Predecessor) and subsidiaries as of December 31, 1995, and the
results of their operations and their cash flows for the seven months ended July
31, 1996, in conformity with generally accepted accounting principles.
Washington, D.C.
July 3, 1997
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
F-2
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 1996, July 31, 1996, and December 31, 1995
(in thousands of dollars)
Predecessor
Reorganized Company Company
--------------------- ------------
December 31, July 31, December 31,
1996 1996 1995
------------ ------- ------------
Assets
Current assets:
Cash ................................... $ 406 $ 125 $ 2,227
Accounts and notes receivable:
Billed ............................... 2,510 2,257 4,376
Unbilled ............................. 1,508 982 1,703
Allowance for doubtful accounts ...... (385) (376) (1,984)
------- ------- -------
Net accounts receivable .............. 3,633 2,863 4,095
Prepaid expenses and supplies .......... 165 651 615
------- ------- -------
Total current assets ... 4,204 3,639 6,937
Property and equipment:
Leasehold improvements ............... 18 18 101
Furniture and equipment .............. 428 445 2,451
Less: Accumulated depreciation and
amortization ................... (37) -- (1,921)
------- ------- -------
Net property and equipment ..... 409 463 631
Reorganization value in excess of
amounts allocated to identifiable assets 1,157 1,157 --
Less: Accumulated amortization ....... (80) -- --
------- ------- -------
Net reorganization value ....... 1,077 1,157 --
Goodwill ................................. -- -- 474
Other assets ............................. 86 95 190
------- ------- -------
Total assets ......................... $ 5,776 $ 5,354 $ 8,232
======= ======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 1996, July 31, 1996, and December 31, 1995
(in thousands of dollars)
Predecessor
Reorganized Company Company
----------------------- ------------
December 31, July 31, December 31,
1996 1996 1995
------------- -------- ------------
Current liabilities:
Accounts payable .......................... $1,736 $ 1,460 $ 2,138
Note payable .............................. -- -- 5,150
Loan from shareholder ..................... -- -- 2,000
Accrued expenses .......................... 1,260 872 3,933
------- ------- -------
Total current liabilities ................. 2,996 2,332 13,221
Long term liabilities:
Liabilities from reorganization plan ....... 1,123 1,058 --
Liabilities subject to compromise .......... -- -- 4,399
------- ------- -------
Total liabilities ........................... 4,119 3,390 17,620
Shareholders' equity:
Preferred stock, $1 par value, 1,750,000
shares authorized and outstanding ......... 1,750 1,750 --
New common stock, $.10 par value,
10,000,000 shares authorized; 1,999,604
shares issued and outstanding ............. 200 200 --
Old common stock, $.10 par value, 10,000,000
shares authorized; 3,696,000 shares issued -- -- 369
Additional paid-in-capital ................. 14 14 16,833
Accumulated deficit (See Note 1) ........... (307) -- (23,907)
Less: Common stock in treasury, 370,000
shares, at cost ....................... -- -- (2,683)
------- ------- -------
Total shareholders' equity .................. 1,657 1,964 (9,388)
------- ------- -------
Total liabilities and shareholders' equity .. $ 5,776 $ 5,354 $ 8,232
======= ======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Five Months Ended December 31, 1996,
the Seven Months Ended July 31, 1996
and the Years Ended December 31, 1995 and 1994
(in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Company
Five Months -------------------------------------------------
Ended Seven Months Year Ended Year Ended
December 31, Ended December 31, December 31,
1996 July 31, 1996 1995 1994
------------- -------------- ------------ --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales ...................................................... $ 11,707 $ 14,039 $ 28,835 $ 22,821
Cost of sales .............................................. 10,287 11,582 22,856 16,614
Selling, general and administrative
expenses ................................................ 1,771 2,775 5,956 6,044
-------- -------- -------- -------
Income (loss) from operations .............................. (351) (318) 23 163
Interest income (expense), net ............................. 3 (43) (115) (75)
Gain on transfer of foreign subsidiary to
creditor in satisfaction of liability ................... -- 846 -- --
Net reorganization costs ................................... -- (63) (329) (522)
Other income (expense) ..................................... 41 113 51 (118)
Provision for income taxes ................................. -- (215) (114) (237)
-------- ------- ------- -------
Net income (loss) .......................................... $ (307) $ 320 $ (484) $ (789)
======== ======= ======= =======
Net loss per share ......................................... $ (0.15)
========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Five Months Ended December 31, 1996,
the Seven Months Ended July 31, 1996 and
the Years Ended December 31, 1995 (unaudited);
and 1994 (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Preferred Common Stock Additional Treasury Stock
Stock ----------------- Paid-in Accumulated -----------------
Amount Shares Amount Capital Deficit Shares Amount Total
------ ------ ------ ------- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 ............ $ -- 3,696 $ 369 $ 16,833 ($22,634) (396) ($ 2,683) ($ 8,115)
Net loss ............................ -- -- -- -- (789) -- -- (789)
------ ----- ------- ------- ------- ------ ------ -------
Balance, December 31, 1994 .......... -- 3,696 369 16,833 (23,423) (396) (2,683) (8,904)
Net loss ............................ -- -- -- -- (484) -- -- (484)
------ ----- ------- ------- ------- ------ ------ -------
Balance, December 31, 1995 .......... -- 3,696 369 16,833 (23,907) (396) (2,683) (9,388)
Net income .......................... -- -- -- -- 320 -- -- 320
Eliminate predecessor equity
accounts in connection with
fresh start reporting (See Note 1) -- (3,696) (369) (16,833) 23,587 396 2,683 9,068
Issuance of new stock pursuant
to reorganization plan ............ 1,750 2,000 200 14 -- -- -- 1,964
------ ----- ------ ------- ------- ------ ------ -------
Balance, July 31, 1996 .............. 1,750 2,000 200 14 -- -- -- 1,964
Net loss ............................ -- -- -- -- (307) -- -- (307)
------ ------ ------ ------- ------- ------ ------ -------
Balance, December 31, 1996 .......... $ 1,750 2,000 $ 200 $ 14 ($307) -- $ -- $ 1,657
======== ====== ======= ======== ======= ====== ====== =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
F-6
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Five Months Ended December 31, 1996, the Seven
Months Ended July 31, 1996, and the Years Ended
December 31, 1995, and 1994
(in thousands of dollars)
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Company
Five Months --------------------------------------------------
Ended Seven Months Year Ended Year Ended
December 31, Ended December 31, December 31,
1996 July 31, 1996 1995 1994
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities (Unaudited) (Unaudited)
Net (loss) income .................................... $(307) $ 320 $ (484) $ (789)
Adjustments to reconcile net (loss)
income to net cash provided
(used) by operations:
Depreciation and amortization expenses ............ 171 123 249 240
Gain on transfer of foreign subsidiary to
creditor in satisfaction of liability ............. -- (846) -- --
(Increase) decrease in accounts receivable ........ (770) 443 523 627
(Increase) decrease in prepaid expenses ........... 486 (26) (348) 299
(Increase) decrease in other assets................ 9 (2) 60 142
Increase (decrease) in accounts
payable and accrued expenses ...................... 729 (2,072) 93 209
------- ------- ------ -------
Net cash provided (used) by operations ................. 318 (2,060) 93 728
Cash flows from investing activities
Capital expenditures ................................. (37) (42) (36) (87)
------- ------- ------ -------
Cash flows from financing activities
Net borrowings on note payable ........................ -- -- -- 209
------- ------- ------ -------
Net increase (decrease) in cash ........................ 281 (2,102) 57 850
Cash - beginning of period ............................. 125 2,227 2,170 1,320
------- ------- ------ -------
Cash - end of period ................................... $ 406 $ 125 $2,227 $ 2,170
======= ======= ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-7
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1 BASIS OF PRESENTATION
Science Management Corporation ("SMC") and Subsidiaries (collectively referred
to as the "Company") is an international professional services firm that applies
its expertise in management, information and engineering and technological
services to a wide range of clients. During 1996, Science Management Corporation
had seven active subsidiaries: SMC Management Services Group, SMC International
(U.K.), SMC International Holdings, SMC France, SMC Business Information Systems
Inc., SMC McEver Inc. and SMC Environmental Services Group. SMC Management
Services Group, SMC International (U.K.), SMC International Holdings, and SMC
France (started in June 1996) provide comprehensive re-engineering and
transformation management programs and systems, competitive analysis, and
organizational effectiveness. SMC International Holdings was disposed of during
1996 (see Note 9). SMC Business Information Systems Inc. offers solutions for
all aspects of business recovery services, facilities management (outsourcing)
and professional services. SMC McEver Inc. and SMC Environmental Services Group
provide a diversity of engineering and technology services in the fields of
design and engineering analysis, environmental and geotechnical consulting,
process plant design and construction, contract engineering and maintenance.
On July 28, 1993, Science Management Corporation filed a voluntary petition for
relief under Chapter 11, Title 11 of the U.S. Bankruptcy Code and operated its
business as a debtor-in-possession under the supervision of the Bankruptcy Court
until July 10, 1996. SMC's subsidiaries were not subject to the bankruptcy
proceeding. The Company's emergence from bankruptcy proceedings was accomplished
through a series of mutually interdependent transactions and agreements executed
simultaneously at the closing.
Pursuant to the American Institute of Certified Public Accountants Statement of
Position No. 90-7 (SOP 90-7), the Company adopted fresh start reporting which
has resulted in the creation of a new reporting entity. The Company's assets and
liabilities were adjusted to reflect fair values on July 31, 1996. In fresh
start reporting, an aggregate value of $1,964,000 was assigned to SMC's common
stock and preferred stock. Management established these values with the
assistance of its financial advisors. These valuations considered SMC's expected
future performance, relevant industry and economic conditions, and analyses and
comparisons with comparable companies.
The reorganization value of SMC has been allocated to the Reorganized Company's
assets and liabilities in a manner similar to the purchase method of accounting
for a business combination. The fresh start reporting adjustments resulted in,
among other things, the allocation of substantial amounts to "reorganization
value in excess of amounts allocated to identifiable assets." The amortization
of this intangible asset, while not requiring the use of cash, will
significantly affect future operating results. Adjustments have been made to
reflect the discharge of pre-petition liabilities in accordance with the terms
of the Plan of Reorganization.
The reorganization value of SMC has been determined using a modified version of
the five-year cash flow projections presented in Exhibit L to the Disclosure
Statement and a terminal value calculated in accordance with guidance contained
in SOP 90-7. The five-year cash flow projections were modified to reflect SMC's
emergence in July 1996, rather than the first quarter of 1996, as had been
assumed in the Disclosure Statement, and since SMC has not achieved the
anticipated level of cash flows originally estimated, modifications were made to
reflect this shortfall and modify anticipated future cash flow performance based
on an assessment of current circumstances. Estimated future cash flows and
terminal values were discounted using an assumed rate of 14%. Liabilities
arising under the Plan are stated at present value, using the same 14% discount
rate applied to future cash flows.
F-8
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Under the Bankruptcy Code, substantially all of SMC's liabilities existing prior
to July 28, 1993 were stayed. These liabilities were presented at historical
cost and classified in the Consolidated Balance Sheets as "Liabilities Subject
to Compromise." Liabilities subject to compromise exclude pre-petition debt
which was fully secured. Creditors and others affording pre-petition claims
against the Company were obliged to file the basis of such claims with the Court
by January 31, 1994. These claims were settled under the Plan of Reorganization
through issuance of 400,000 shares of New Common Stock and payment of
approximately $570,000 in cash to be paid over a three-year period on each
anniversary of the effective date of the Plan of Reorganization.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Science Management
Corporation and all subsidiaries. Intercompany balances and transactions have
been eliminated.
Revenue Recognition
Unbilled receivables are stated at the lower of actual costs incurred plus
accrued profits or net estimated realizable value of incurred costs, reduced by
progress billings. The Company records income from major fixed-price contracts,
extending over more than one accounting period, using the
percentage-of-completion method. During performance of such contracts, estimated
final contract prices and costs are periodically reviewed and revisions are made
as required. The effects of these revisions are included in the periods in which
the revisions are made. On cost-plus-fee contracts, revenue is recognized to the
extent of costs incurred plus a proportionate amount of fee earned, and on
time-and-material and other reimbursable contracts, revenues including any
applicable mark-ups are recorded as costs are incurred. Losses on contracts are
recognized in the period in which they become known. Disputes arise in the
normal course of the Company's business on projects where the Company is
contesting with customers for collection of funds because of events such as
delays, changes in contract specifications and questions of cost allowability or
collectibility. Such disputes, whether claims or unapproved change orders in the
process of negotiation, are recorded at the lesser of their estimated net
realizable value or actual costs incurred and only when realization is probable
and can be reliably estimated. Claims against the Company are recognized when
the loss is considered probable and is reasonably determinable in amount.
It is the Company's policy to provide reserves for the collectibility of
accounts receivable when it is determined that it is probable that the Company
will not collect all amounts due and the amount of reserve requirements can be
reasonably estimated.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expense during the reporting
period. Actual results could differ from those estimates.
Property and Equipment
Property and equipment prior to July 1996 were stated at cost. Pursuant to fresh
start reporting, the property and equipment was reflected at estimated fair
value at July 31, 1996. Depreciation is provided principally on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized over the lesser of the estimated useful life of the
asset or the lease term.
F-9
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Excess of Cost Over Net Assets of Businesses Acquired
Prior to July 1996, excess of cost over net tangible assets of businesses
acquired ("goodwill") resulted from acquisitions accounted for as purchases, was
amortized over a 40-year period. Amortization of approximately $22,000, $22,000,
and $13,000 is included in selling, general and administrative expenses in the
Consolidated Statements of Operations for the years ended December 31, 1994,
1995 and the seven months ended July 31, 1996, respectively. On July 31, 1996,
the balance was reduced to zero with all intangible assets being included in the
caption "Reorganization Value". Amortization of the Reorganization Value
included in selling, general and administrative expenses in the Consolidated
Statement of Operations for the five months ended December 31, 1996 was $80,000.
Income Taxes
Income taxes are calculated in accordance with Statement of Financial Accounting
Standards No. 109. Deferred income taxes result from timing differences between
financial reporting and taxable income. Deferred tax assets are reduced by a
valuation allowance when, based on management's estimates, it is more likely
than not that a portion of the deferred tax assets will not be realized in a
future period.
Loss Per Share
Net loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during the applicable period (1,999,604
shares). Earnings (loss) per share of the predecessor company are not presented
as the presentations are not meaningful.
Common and Preferred Stock
Pursuant to the Plan of Reorganization (the "Plan"), which was confirmed by the
Bankruptcy Court on April 17, 1996, and became effective on July 10, 1996, all
of the common stock of SMC outstanding as of July 10, 1996 (the Old Common
Stock) was cancelled. As provided by the terms of the Plan, holders of Old
Common Stock, the holders of unsecured claims allowed by the Court in Chapter 11
proceedings, and certain members of the Company's management, received
distributions of new common stock of SMC ("New Common Stock"). In addition, and
as described in the Plan, Imperial Capital Worldwide Partners, L.P., the holder
of the largest secured claim against SMC, received a distribution of 1,070,000
shares of New Common Stock together with a distribution of 1,750,000 shares of
Science Management Corporation Preferred Stock, with a par value of $1.00 per
share. The Preferred Stock is non-convertible, non-dividend bearing, and
redeemable by the Company subject to conditions and restrictions contained in
the Plan.
A total of 10,000,000 shares of New Common Stock, par value $0.10 per share,
were authorized under the Plan, with 1,999,604 shares issued as described above
on July 10, 1996.
F-10
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands of dollars):
December 31, July 31, December 31,
1996 1996 1995
---- ---- ----
Advance billings ........................ $ 122 $ 74 $ 87
Payroll and other taxes payable ......... 336 40 371
Accrued salaries and vacation ........... 137 91 520
Accrued commissions and bonuses ......... 12 -- 469
Accrued pension and profit sharing ...... 208 201 187
Accrued legal and accounting fees ....... -- -- 521
Other accrued expenses .................. 445 466 1,778
------ ------ ------
TOTAL ................................... $1,260 $ 872 $3,933
====== ====== ======
F-11
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
NOTE 4 - INCOME TAXES
The components of income (loss) before income tax expense are as follows (in
thousands of dollars):
Seven Months
Five Months Ended Ended Year Ended Year Ended
December 31, 1996 July 31, 1996 December 31, 1995 December 31, 1994
----------------- ------------- ----------------- -----------------
Domestic $(344) $309 $ (27) $(837)
Foreign 37 226 (343) 285
----- ----- ----- -----
Total $(307) $535 $(370) $(552)
The provisions for income taxes were composed on the following (in thousands of
dollars):
Seven Months
Five Months Ended Ended Year Ended Year Ended
December 31, 1996 July 31, 1996 December 31, 1995 December 31, 1994
----------------- ------------- ----------------- -----------------
Foreign $ -- $215 $114 $212
Federal -- -- -- --
State -- -- -- 25
---- ---- ---- ----
Total $ -- $215 $114 $237
The foreign tax provision is entirely a current provision which is the statutory
tax on earnings in Belgium.
The Company has recorded a valuation allowance which offset the impact of any
income tax provisions or benefits for U.S. federal tax purposes for the years
presented.
SMC and its domestic subsidiaries file separate returns for state purposes. The
state tax provision in 1994 relates to the states in which the Company had
profitable operations.
At December 31, 1996, the Company has net operating loss carryforwards of
$9,313,000 for federal income tax purposes, which will expire in the years 1997
through 2010. Due to the substantial changes in the Company's ownership, there
are annual limitations on the amount of the carryforwards that can be utilized.
The Company also has net operating loss carryforwards available for use in the
United Kingdom of approximately $1,000,000, which are available indefinitely, as
well as minor amounts available for use in other jurisdictions. Due to the
annual limitations and questions surrounding the Company's ability to utilize
these carryforwards, the Company has recorded a valuation allowance to reserve
the full amount of the net operating loss carryforwards.
Foreign and other tax credits of $2,018,000 are available to offset taxes
otherwise payable. These credits generally expire through 2007.
F-12
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The following is a breakout by year of the Federal net operating losses and tax
credits. In each case, expiration dates are December 31 of the indicated year
(in thousands of dollars):
Expiration Dates Net Operating Losses Foreign Tax Credit
---------------- -------------------- ------------------
2000 $ 266 $ --
2003 805 --
2004 325 --
2005 1,095 858
2006 -- 736
2007 3,422 424
2008 2,520 --
2009 850 --
2010 30 --
------ ------
Total $9,313 $2,018
====== ======
NOTE 5 - NOTE PAYABLE
As of December 31, 1995, Imperial Capital Worldwide Partners, L.P. held claim to
previous bank debt of the Company in the amount of approximately $5,150,000
which was secured by a first priority lien on the stock of SMC's domestic
subsidiaries. Under the terms of the assignment, the debt was no longer accruing
interest. (See Note 2 for a description of the satisfaction of the Imperial
claim.)
NOTE 6 - STOCK OPTION PLANS
Prior to the reorganization in 1996, the Company maintained various stock option
plans to provide incentive and nonqualified stock options to directors, officers
and other key employees of the Company. There were no shares granted for the
years presented. All stock option plans were terminated when the reorganization
plan became effective.
NOTE 7 - PROFIT SHARING AND PENSION PLANS
SMC and certain subsidiaries have contributory or non-contributory profit
sharing and pension plans covering substantially all of their employees.
Subsequent to December 31, 1993, and as a result of the Company's cost savings
reviews, actions were taken to terminate the profit sharing plans and
consolidate the pension plans of the Company and its subsidiaries. As a result,
there was no profit sharing expense during the three year period. Net periodic
pension cost for 1996, 1995 and 1994 included the following components (in
thousands of dollars):
F-13
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
1996 1995 1994
------ ------ ------
Service costs-benefits earned during the period ..... $ 93 $ 77 $ 77
Interest cost on projected benefit obligation ....... 145 130 139
Actual return on plan assets ........................ (240) (433) 75
Net amortization and deferral ....................... 3 216 (308)
---- ---- ----
Net periodic pension cost (income) for defined
benefit plans ....................................... $ 1 $ (10) $ (17)
The weighted average assumed rate of return on assets for the Company's defined
benefit pension plans was seven percent in 1996, 1995 and 1994. Benefits were
calculated based on a seven percent weighted average assumed discount rate for
all years. In addition, the weighted average assumed annual increase in
compensation over employees' estimated remaining working lives was four percent
for 1996, 1995 and 1994.
Benefits under the plans are generally based on years of service and employees'
compensation during the last years of employment. The Company's policy is
generally to fund net periodic pension costs as determined by actuarial
valuations. As of December 31, 1996, the plan assets were composed of
approximately 16 percent cash and equivalents, 48 percent fixed income
securities (including preferred stock) and 36 percent common stock.
Presented below are the plans' funded status and amounts recognized in the
Company's Consolidated Balance Sheets at December 31, 1996 and 1995 for its
defined benefit pension plans (in thousands of dollars):
1996 1995
---- ----
Actuarial present value of benefit obligation:
Vested ............................................ $ 2,155 $ 1,993
Non-vested ........................................ 42 35
----- -----
Accumulated benefit obligation ....................... 2,197 2,028
Additional benefits based on estimated future salary.. 220 119
----- -----
Projected benefit obligation ......................... 2,417 2,147
Less: Fair value of assets .......................... 2,723 2,616
----- -----
Plan assets in excess of projected benefit
obligation ........................................... 306 469
Unrecognized transition obligation ................... (250) (300)
Unrecognized net gain ................................ (65) (182)
Unrecognized prior service cost ...................... (80) (74)
----- -----
Total accrued pension cost ........................... $ (89) $ (87)
The Employee Capital Accumulation Plan (EM CAP), a 401-K savings plan, is
designed to encourage employees of the Company to save systematically through
payroll deductions. Contributions by eligible employees are voluntary, and are
not supplemented by the Company.
F-14
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
NOTE 8 - OPERATING LEASES
The Company leases certain office equipment with remaining noncancellable lease
terms in excess of one year and occupies office facilities under long-term
operating lease agreements.
The future minimum rental payments as of December 31, 1996, associated with
long-term noncancellable lease obligations, net of sublease income, are as
follows (in thousands of dollars):
Year Ending December 31,
1997 $415
1998 178
----
Total $593
====
Rental expense, net of sublease income, was $195,000 for the five months ended
December 31, 1996, $275,000 for the seven months ended July 31, 1996, $522,000
for the year ended December 31, 1995 and $624,000 for the year ended December
31, 1994.
NOTE 9 - RELATED PARTY TRANSACTIONS
During 1992, the Company entered into transactions with Donald R. Gant, a
stockholder who held a significant portion of SMC's Old Common Stock. Under the
terms of the transaction, SMC sold 500,000 shares of Old Common Stock to Mr.
Gant for an aggregate purchase price of $750,000, paid in cash. Mr. Gant also
loaned $2 million to SMC for working capital and general corporate purposes. The
loan had a term of three years, with an interest rate of 9 % per annum and was
secured by certain assets of the Company held by SMC International Holdings. The
Company did not make all of the required interest payments to service this loan,
and was in default thereof. As part of the plan of reorganization, Mr. Gant
exchanged the note for ownership of SMC International Holdings resulting in a
gain of $846,000.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Shortly after Science Management Corporation emerged from bankruptcy on July 10,
1996, disputes arose between its new majority investors, Imperial Capital
Worldwide Partners, L.P. and the management of the Company. Subsequently, two
lawsuits were instituted against Imperial and its principals. On September 6,
1996, two SMC administrative creditors filed a Complaint for injunctive and
other relief entitled Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen, P.C. and
Shanley & Fisher, P.C. v. Imperial Worldwide Partners, L.P. et al. Case No.
93-34553 in the United States Bankruptcy Court, District of New Jersey, to
restrain certain actions by Imperial and its principals and to designate James
A. Skidmore, Jr. as the manager of the Company to operate the Company on a day
to day basis and carry out the terms of the Plan of Reorganization. On November
6, 1996, James A. Skidmore, Jr. and other management shareholders, and certain
other shareholders filed a Complaint against Imperial entitled James A.
Skidmore. Jr. et al. v. Imperial Capital Worldwide Partners, L.P. et al. Docket
No. MON C 278-96 in the Superior Court of New Jersey, Monmouth County, Chancery
Division, seeking an injunction against Imperial and its principals to rescind
certain Board of Directors actions, to enjoin their interference with Mr.
Skidmore's day to day management of the Company and to permit the Company to
obtain working capital.
As part of the Stock Purchase Agreement dated April 30, 1997 between Versar,
Inc. and Imperial Worldwide Partners, L.P. it was agreed that the Plaintiffs and
the Defendants in the two above cited proceedings would execute mutual releases
from further liability and agree to enter into Stipulations of Dismissal for
both actions. The mutual releases have been signed by all but one plaintiff in
the Skidmore case. In the event all releases are executed, Stipulations of
Dismissal will be filed in the appropriate courts. Management does not expect
that this case will have a material impact on the results of operations or
financial condition of the Company.
F-15
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
In June 1996, Flintlock Ltd., a client of SMC McEver, a subsidiary of the
Company, filed an action in the 165th Judicial District Court of Harris County,
Texas, entitled Flintlock Ltd. v. SMC McEver, Inc., Case No. 96-002700.
Flintlock alleged that SMC McEver negligently failed to manage the construction
of a citronella candle project and negligently misrepresented the project's
cost. Flintlock asserts that it incurred over $700,000 in damages. SMC McEver
has counterclaimed for over $244,000 which it claims is due under the contract
between the parties. The parties have taken certain discovery which remains
ongoing. The parties have also engaged in discussions regarding possible
mediation. SMC McEver has retained counsel and is defending this matter
vigorously. Management is evaluating the Company's defenses and potential
exposure. The Company does not expert a material adverse effect on the financial
condition or results of operations.
SMC has entered into employment agreements with Messrs. Skidmore and Rathgeber.
Each of the agreements is for a three year term that commenced on July 10, 1996
(the Effective Date). The agreements provide for annual salaries of not less
than $200,000 for Mr. Skidmore and not less than $124,875 for Mr. Rathgeber. Mr.
Rathgeber's salary was increased to $150,000 effective June 1, 1997. Mr.
Skidmore is also entitled to receive additional annual compensation in an amount
equal to 4% of SMC's income before income taxes, as well as certain disability
and life insurance benefits. Mr. Rathgeber's agreement provides that he is
eligible to receive a discretionary bonus. If Mr. Skidmore's employment is
terminated without cause by SMC or for cause by Mr. Skidmore (as such terms are
defined in the agreement), Mr. Skidmore will be entitled to receive liquidated
damages equal to the aggregate salary payable with respect to the remainder of
the three year term plus an additional $100,000, as well as continuation of
benefits for the remainder of the term. Mr. Rathgeber's employment may be
terminated by SMC only for cause.
SMC and its subsidiaries are parties to various other legal actions arising in
the normal course of business. The Company believes that the ultimate
unfavorable resolution of these other legal actions will not have a material
adverse effect on its financial condition or results of operations.
NOTE 11 BUSINESS INFORMATION
The Company operates principally in one industry segment, which offers
professional services for management, information, and engineering and
technological services. The Company's operations include its domestic consulting
operations as well as consulting operations in European countries. Revenue
information by geographic area for 1996, 1995 and 1994 is as follows (in
thousands of dollars):
Domestic Foreign
Operations Operations Total
---------- ---------- -------
Five months ended December 31, 1996 ........ $11,067 $ 640 $11,707
Seven months ended July 31, 1996 ........... 10,519 3,520 14,039
Year ended December 31, 1995 ............... 19,250 9,585 28,835
Year ended December 31, 1994 ............... 12,496 10,325 22,821
F-16
<PAGE>
SCIENCE MANAGEMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
NOTE 12 - REORGANIZATION COSTS
The process of reorganization gave rise to various types of revenues, expenses,
gain and loss realizations, and provisions for anticipated losses (collectively,
"net reorganization costs"). Net reorganization costs for the seven months ended
July 31, 1996 and years ended December 31, 1995 and 1994, have been identified
as such in the Consolidated Statements of Operations, and are as follows (in
thousands of dollars):
1996 1995 1994
---- ---- ----
Accounting fees ......................... $ 11 $ 9 $105
Legal fees .............................. 30 305 402
Other ................................... 22 15 15
---- ---- ----
Total ................................... $ 63 $329 $522
F-17
Exhibit 2.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
In re: : Case No. 93-34553(SAS)
:
SCIENCE MANAGEMENT CORP., : Chapter 11
:
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
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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
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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
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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
XIIICode 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.
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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.
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15. "Confirmation Date" means the date on which the Bankruptcy Court enters
an order on its docket confirming this Planin 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-In- Possession 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.
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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.
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.
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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.
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-
5
<PAGE>
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 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
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collateralizing such Claim, as filed, or as determined by the Bankruptcy Court
pursuant to ss.506(a) of the Bankruptcy Code.
56. "Somerset" means Somerset-Kensington Capital Corp., a New Jersey
corporation.
57. "Substantial Consummation" shall have the meaning set forth in
ss.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 P. 3 below,
7
<PAGE>
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 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 P. 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
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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
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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 ss.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
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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
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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
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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
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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
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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 ss.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:
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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%
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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. ss.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. ss.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
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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 ss.ss.1129(a)(1) through (13) of the
Bankruptcy Code, except subsection (8) thereof, the Bankruptcy Court confirm
this Plan pursuant to ss.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
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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 ss.ss. 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 ss.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 ss.ss.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
ss.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
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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
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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.
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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.
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ARTICLE XIII
GENERAL PROVISIONS
1. 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:
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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
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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
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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. ss.1334 to hear, and to the full extent
permitted under 28 U.S.C. ss.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
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<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.
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<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
Exhibit 2.2
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".
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 Paragraph 1 of the Promissory Note attached
hereto as Exhibit "A"
SCIENCE MANAGEMENT CORPORATION
By:______________________________
James A. Skidmore, Jr.,
President, Chief Executive Officer
IMPERIAL CAPITAL WORLDWIDE PARTNERS, LP
By:______________________________
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:______________________________
Paul Kizel, Esq.
BAER, MARKS & UPHAM, LLP
Counsel for Imperial Capital Worldwide
Partners, LLP
By:______________________________
SCIENCE MANAGEMENT CORPORATION
RESTATED CERTIFICATE OF INCORPORATION
FILED ON 7/11/96
WITH THE SECRETARY
STATE OF DELAWARE
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
SCIENCE MANAGEMENT CORPORATION
SCIENCE MANAGEMENT CORPORATION, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is SCIENCE MANAGEMENT CORPORATION and the
name under which the corporation was originally incorporated is THE WORK-FACTOR
COMPANY, INC.
The date of filing its original Certificate of Incorporation with the
Secretary of State was December 30, 1957.
2. This Restated Certificate of Incorporation restates and integrates and
further amends the Certificate of Incorporation of this corporation to read as
herein set forth in full:
CERTIFICATE OF INCORPORATION
OF
SCIENCE MANAGEMENT CORPORATION
FIRST. The name of the corporation is SCIENCE MANAGEMENT CORPORATION.
SECOND. The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted
is: To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the corporation shall
have authority to issue is:
(a) Ten Million (10,000,000) shares of common stock with the par value of
each share of such stock of ten cents ($0.10) amounting in the aggregate to One
Million Dollars ($1,000,000). All authorized and issued shares of common stock
shall have one (1) vote per share.
(b) One Million Seven Hundred Fifty Thousand (1,750,000) shares of
preferred stock, with the par value of each share of such stock of one dollar
($1.00) amount in the aggregate to One Million Seven Hundred Fifty Thousand
Dollars ($1,750,000.00), which stock as a class shall have a vote equal to .01%
of the vote of all issued and outstanding shares of common stock. The preferred
2
<PAGE>
sock shall be non-convertible, non-dividend bearing and have a preference when
redeemed by the corporation or upon liquidation of the corporation equal to One
Dollar ($1) for each share of stock issued. The shares of preferred stock may be
redeemed by the corporation in accordance with Article IV(A)(ii) of the Fourth
Modified Plan of Reorganization of Debtor and Imperial Capital Worldwide
Partners, L.P., Co-Proponents, Under Chapter 11 of the United States Bankruptcy
Code for Science Management Corporation dated July 7, 1995, in a case entitled
In re: Science Management Corporation, Case No. 93-34553(SAS) (hereinafter
referred to as the "Plan").
FIFTH. The corporation is to have perpetual existence.
SIXTH. The Board of Directors is expressly authorized to make, alter or
repeal the by-laws of the corporation.
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and substantially all of its creditors or any class of them (holding
more than 66 2/3 of the debt then owed by the Corporation) and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application of this
corporation or of any creditor or stockholder thereof, or on the application of
any receiver or receivers appointed for this corporation under the provisions of
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
3
<PAGE>
EIGHTH. Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the corporation. Elections of directors
need not be by written ballot unless the by-laws of the corporation shall so
provide.
NINTH. Management:
(a) Board of Directors:
(1) Number; Election. The Board of Directors of this corporation shall
consist of five (5) directors. As provided under the Plan, initially,
following the corporation's emergence from Chapter 11, Imperial Capital
Worldwide Partners, L.P. shall designate three (3) of the directors.
Initially, following the corporation's emergence from Chapter 11, James A.
Skidmore, Jr. shall be a director and Chairman of the Board of Directors
and shall have the right to designate one other individual to serve on the
Board of Directors. The identity of the names and addresses of the five (5)
individuals who are to serve pursuant to the Plan as initial directors of
the corporation until the third anniversary of the Effective Date under the
Plan and until their successors shall hve been elected and qualified are:
NAME ADDRESS
--------- -------
James A. Skidmore, Jr. 641 Ocean, Sea Girt, NJ 08750
Aaron Locker, Esq. 2 Martin Court, Kings Point, NY 110924
Harvey Borsuk 8 E. 63 St., New York, NY 10021
Jonathan L. Borsuk 46 E. 65th St., New York, NY 10021
Michelle Borsuk Dana 360 E. 72 St., New York, NY 10021
Except as expressly provided in this subparagraph (1) or in the event of
their prior death, resignation or removal, directors shall be elected annually
by the shareholders and shall serve for a term of one year and until their
successors shall have been elected and qualified.
(2) Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
vote of a majority of the entire Board of Directors, and the director or
directors so chosen shall hold office until the next election of directors
and until a successor is duly elected and shall qualify, unless sooner
displaced or, unless a majority of the Board of Directors shall vote to
call a special meeting of stockholders to fill such vacancies. If there are
4
<PAGE>
no directors in office, then an election of directors may be held in the
manner provided by statute. Whenever the holders of any class or classes of
stock or series thereof are entitled to elect one or more directors,
vacancies and newly created directorships of such class or classes or
series may be filled by a majority of the directors elected by such class
or classes or series thereof then in office, or by a sole remaining
director so elected. If, at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less
than a majority of the whole Board of Directors (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of
any stockholder or stockholders holding at least ten percent of the total
number of the shares at the time outstanding having the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
(3) Removal of Directors. Directors of this corporation may be removed
for cause by the holders of a majority of the shares then entitled to vote
at an election of directors, after taking into account the express terms of
any class or series of any class of this corporation with respect to such
vote. Except as may otherwise be provided by the law, cause for removal
shall be construed to exist only if the director whose removal is proposed
has been convicted of a felony by a court of competent jurisdiction and
such conviction is no longer subject to direct appeal, or has been adjudged
by a court of competent jurisdiction to be liable for negligence, or
misconduct, in the performance of his duty to this corporation in a matter
of substantial importance to this corporation, or has been found to have
breached any duty owed to the corporation or its stockholders or to have
acted in a manner detrimental to the corporation and such adjudication is
no longer subject to direct appeal. No decrease or increase in the size of
the Board shall shorten or otherwise affect the term of any incumbent
director.
(4) Sale of Subsidiaries. Until the third anniversary of the Effective
Date under the Plan, a vote of four of the five directors serving on the
Board of Directors of the corporation shall be required for any sale of
more than twenty percent of any entity comprising more than twenty-five
percent of a total value of the assets of the corporation at the fair
market value as provided under Article VI (I) of the Plan.
5
<PAGE>
(b) Officer.
(1) The names of the individuals who are to serve pursuant to the Plan
as officers of the corporation are:
Title Name
----- ----
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
and Secretary Marion G. Hilferty
(c) Stockholder Authorization of Corporation Transactions.
(1) The sale, lease, exchange or other disposition of all or
substantially all of the assets of the corporation shall be authorized only
upon receiving at least eighty percent (80%) of the vote of the holders of
the corporation's common stock voting at a duly commenced meeting of
shareholders; provided, however, that this provision shall be of no force
and effect on or after the third anniversary of the Effective Date under
the Plan.
(2) Notwithstanding any other provision herein, in the event the
corporation cannot meet its mature and maturing obligations with the honest
use of credit, a simple majority of the vote of all voting stockholders
voting at a duly convened meeting of shareholders may elect to liquidate,
lease, exchange, sell or otherwise dispose of all or substantially all of
the assets of the corporation or any portion thereof.
(3) Except as otherwise provided in the Plan or under applicable law,
any action requiring shareholder approval, shall require a vote of a simple
majority of shareholders present and voting at a duly convened general or
special meeting of shareholders.
(d) By-law and Series Preferred Stock Provisions:
The provisions of this Article shall be subject to the express terms of any
class or series of any class of series preferred stock of this corporation. The
by-laws of this corporation shall not contain any provisions inconsistent with
this Article.
6
<PAGE>
(e) Stockholder Nominations:
No person may be nominated for election as a director at an annual or
special meeting of this corporation unless written notice of such stockholders'
intent to make such nomination has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of this corporation at the
principal executive offices of this corporation not later than (i) with respect
to an election to be held at an annual meeting of stockholders, 90 calendar days
in advance of the date of the proxy statement released to stockholders of the
corporation in connection with the previous year's annual meeting of
stockholders, except that if no annual meeting was held in the previous year or
the date of the annual meeting for the current year has been changed by more
than 30 calendar days from the corresponding date contemplated at the time of
the previous year's proxy statement, such nomination or nominations shall be
received by the corporation a reasonable time before the solicitation is made,
and (ii) with respect to an election of directors, the close of business on the
seventh day following the day on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting and intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice; (c) a
description of any arrangements or understandings between the stockholder and
each nominee or any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated by the Board of Directors; and (e) the consent of each
nominee to serve as a director of this corporation if so elected. By vote of a
majority of the directors present at a meeting, the corporation may refuse to
acknowledge the nominations of any person not made in compliance with foregoing
procedures.
TENTH. To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or may hereafter be amended, a director of this
corporation shall not be liable to the corporation or its stockholders for
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<PAGE>
monetary damages (including, without limitation, any judgment, amount paid in
settlement, fine, penalty, punitive damages, excise tax assessed with respect to
an employee benefit plan, or expense of any nature [including attorneys' fees])
for breach of fiduciary duty as a director.
ELEVENTH. Subject to the provisions of Article Ninth hereof, the
corporation reserves the right to amend, alter, change or repeal any provision
contained in the by-laws or this certificate of incorporation, in the manner now
or hereafter prescribed by statute (provided that any amendment, alteration,
change or repeal shall not be inconsistent with anything contained in the Plan)
and all rights conferred upon stockholders herein are granted subject to this
reservation.
This Restated Certificate of Incorporation of the corporation was duly
approved by the United States Bankruptcy Court for the District of New Jersey
pursuant to the Plan in accordance with Section 303 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said SCIENCE MANAGEMENT CORPORATION has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
James A. Skidmore, Jr., its President, and attested to by Marion G.
Hilferty, its Secretary, as of the 10th day of July, 1996.
8
BY-LAWS OF
SCIENCE MANAGEMENT CORPORATION
(RESTATED)
<PAGE>
BY-LAWS
OF
SCIENCE MANAGEMENT CORPORATION
(A Delaware Corporation)
ARTICLE I
---------
OFFICES
-------
Section 1.01 Registered Office. The registered office of the Corporation
shall be at 1209 Orange Street, in the City of Wilmington, County of New Castle,
State of Delaware, until otherwise established by a vote of a majority of the
board of directors in office, and a statement of such change is filed in the
manner provided by statute. The resident agent in charge shall be THE
CORPORATION TRUST COMPANY.
Section 1.02. Other Offices. The corporation may also have an office or
offices at such other place or places, within or without the State of Delaware,
as the board of directors may from time to time designate or the business of the
corporation requires.
ARTICLE II
----------
MEETING OF STOCKHOLDERS
-----------------------
Section 2.01. Place of Meeting. All meetings of the stockholders of the
corporation shall be held at the registered office of the corporation, or at
such other place within or without the State of Delaware as shall be designated
by the board of directors in the notice of such meeting.
Section 2.02. Annual Meeting. The board of directors may fix the date and
time of the annual meeting of the stockholders, but if no such date and time is
fixed by the board, the meeting for any calendar year shall be held on the third
Wednesday of May in such year, if such date is not a legal holiday, and if a
legal holiday then on the next proceeding business day, at 10 A.M. (local time),
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or such other time of day as may be determined by the board of directors. At
such meeting, the stockholders then entitled to vote shall elect directors and
transact such other business as may properly be brought before the meeting.
If the election of directors is not held at the annual meeting, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a special meeting of the stockholders as soon thereafter as convenient. At
such special meeting, the stockholders may elect the directors and transact
other business with the same force and effect as at an annual meeting duly
called and held.
Section 2.03. Special Meetings. Special meetings of the stockholders of the
corporation for any purpose or purposes for which meetings may lawfully be
called may be called at any time by the chairman of the board, a majority of the
board of directors, the president, or at the request, in writing, of
stockholders owning a majority of the entire capital stock of the corporation
then issued and outstanding and entitled to vote. Particularly, and without
intending to limit the purposes for which a special meeting of stockholders may
be called, any director or directors may, by a majority of the votes of all the
stockholders present in person or by proxy at such meeting and entitled to vote
thereat, be removed from office, either with or without cause and his successor
or their successors may be elected at such meeting; or the remaining directors
may, to the extent vacancies are not filled by such election, fill any vacancy
or vacancies created by such removal. At any time, upon written request of any
person or persons who have duly called a special meeting, which written request
shall state the purpose or purposes of the meeting, it shall be the duty of the
secretary to fix the date of the meeting to be held, which date shall be not
less than ten or more than sixty days after the receipt of the request, and to
give due notice thereof (which shall not be less than ten (10) days). If the
secretary shall neglect or refuse to fix the time and the date of such meeting
and give notice thereof within twenty (20) days of such request, the person or
persons calling the meeting may do so.
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<PAGE>
Section 2.04. Notice of Meetings. Written notice of the place, date and
time of every meeting of the stockholders, whether annual or special, shall be
given to each stockholder of record entitled to vote at the meeting not less
than ten or more than sixty days before the date of the meeting. Every notice of
a special meeting shall state the purpose or purposes thereof.
Section 2.05. Quorum, Manner of Acting and Adjournment. The presence, in
person or by proxy of the holders of a majority of the issued and outstanding
stock (not including treasury stock) entitled to vote shall constitute a quorum
at all meetings of the stockholders except as otherwise provided by statute, by
the certificate of incorporation or by these by-laws. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present or represented by proxy, shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present or
represented. At any such adjourned meeting, at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, written notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. When a quorum is present
at any meeting, the vote of the holders of a majority of the stock having voting
power present, in person or represented by proxy, shall decide any questions
brought before such meeting, unless the question is one upon which, by express
provision of the applicable statute, the certificate of incorporation, or these
by-laws, a different vote is required in which case such express provision shall
govern and control the decision of such questions.
Section 2.06. Organization. At every meeting of the stockholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated: the president or vice presidents of the corporation
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<PAGE>
in their order of rank, a chairman designated by the board of directors or a
chairman chosen by the stockholders, shall act as chairman, and the secretary,
or in his or her absence, an assistant secretary, or in the absence of the
secretary and the assistant, a person appointed by the chairman shall act as
secretary.
Section 2.07. Voting. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
common stock having voting power held by such stockholder. No proxy shall be
voted on after three years from its date, unless the proxy provides for a longer
period. Every proxy shall be executed in writing by the stockholder or by his
duly authorized attorney-in-fact and filed with the secretary of the
corporation. A proxy, unless coupled with an interest, shall be revocable at
will, notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the secretary of the corporation. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. A proxy shall not be revoked by the death
or incapacity of the maker unless, before the vote is counted or the authority
is exercised, written notice of such death or incapacity is given to the
secretary of the corporation.
Section 2.08. Consent of Stockholders in Lieu of Meeting. Any action
required to be taken at any annual or special meeting of stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without vote if a consent in writing, setting forth the action so taken, shall
be signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
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<PAGE>
meeting at which all shares entitled to vote thereon were presented and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Section 2.09. Voting Lists. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be available for examination by any
stockholder, for any purpose, during ordinary business hours, for a period of at
least ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, at the principal office of the corporation. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 2.10. Judges of Election. All elections of directors shall be by
written ballot. Unless otherwise provided in the certificate of incorporation
the vote upon any other matter need not be by ballot. The board of directors may
appoint judges of election, who need not be stockholders, in advance of any
meeting of stockholders to act at such meeting or any adjournment thereof. If
judges of election are not so appointed, the chairman of any such meeting may,
and upon the demand of any stockholder or his proxy at the meeting and before
voting begins shall, appoint judges of election. The number of judges shall be
either one or three, as determined, in the case of judges appointed upon demand
of a stockholder, by a vote of a majority of stockholders present and entitled
to vote. No person who is a candidate for office shall act as a judge. In case
any person appointed as judge fails to appear, or fails or refuses to act, the
vacancy may be filled by appointment made by the board of directors in advance
of the convening of the meeting, or at the meeting by the chairman of the
meeting.
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<PAGE>
If judges of election are appointed, they shall, (i) determine the number
of shares outstanding and the voting power of each such share, (ii) the number
of shares present and voting at the meeting, (iii) the existence of a quorum,
(iv) the authenticity and validity of proxies, (v) compile and tabulate votes or
ballots, (vi) hear or determine all challenges and questions arising in
connection with the right to vote, the tabulation of votes, the result of votes,
and (vii) do such acts as may be proper and necessary to conduct the election or
vote with fairness to all stockholders. If there are three judges of election,
the decision, act or certificate of a majority shall be effective in all
respects as the decision, act or certificate of all.
On request of the chairman of the meeting or of any stockholder or his
proxy, each judge shall make a report in writing of any challenge or question or
matter determined by them, and execute a certificate of any fact found by them.
ARTICLE III
-----------
BOARD OF DIRECTORS
------------------
Section 3.01. Powers. The board of directors shall have full power to
manage the business affairs of the corporation; and all powers of the
corporation, except those specifically reserved or granted to the stockholders
by statute, the certificate of incorporation or these by-laws, are hereby
granted to and vest in the board of directors.
Section 3.02. Number and Term of Office. The board of directors shall
consist of five (5) directors as provided in the certificate of incorporation.
Except as otherwise provided in the certificate of incorporation, each director
shall serve for a term of one year and until a successor shall have been elected
and qualified, except in the event of death, resignation or removal.
Section 3.03. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a vote of a majority of the entire board of directors, and the director or
directors so chosen shall hold office until the next election of directors and
7
<PAGE>
until a successor is duly elected and shall qualify, unless sooner displaced or,
unless a majority of the board of directors shall vote to call a special meeting
of stockholders to fill such vacancies. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
Whenever the holders of any class or classes of sock or series thereof are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole remaining
director so elected. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office.
Section 3.04. Resignations. Any director of the corporation may resign at
any time by giving written notice to the president or secretary of the
corporation. Such resignation shall take effect at the date of the receipt of
such notice or at any later time specified therein and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3.05. Removal. Directors may be removed by vote of the stockholders
as provided in the certificate of incorporation. Except as may otherwise be
provided by law, cause for removal shall be construed to exist only if the
director whose removal is proposed has been convicted of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct
8
<PAGE>
appeal, or has been adjudged by a court of competent jurisdiction to be liable
for negligence, or misconduct, in the performance of his duty to this
corporation in a matter of substantial importance to this corporation, or has
been found to have breached any duty owed to this company or its stockholders or
to have acted in a manner detrimental to the corporation and such adjudication
is no longer subject to direct appeal.
Section 3.06. Organization. At every meeting of the board of directors, the
chairman of the board, if there be one, or, in the case of a vacancy in the
office or absence of the chairman of the board, one of the following officers
present in the order stated: the vice chairman of the board, if there be one,
the president, the vice presidents in their order of rank and seniority, or a
chairman chosen by a majority of the directors present, shall preside, and the
secretary, or, in his or her absence, an assistant secretary or in the absence
of the secretary and assistant secretaries, any person appointed by the chairman
of the meeting, shall act as secretary.
Section 3.07. Place of Meeting. The board of directors may hold its
meetings, both regular and special, at such place or places within or without
the State of Delaware as the board of directors may from time to time designate,
or as may be designated in the notice calling the meeting.
Section 3.08. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and place as shall be designated from
time to time by resolution of the board of directors. If the date fixed for any
such regular meeting be a legal holiday under the laws of the State where such
meeting is to be held, then the same shall be held on the next succeeding
business day, or on such other day as may be determined by resolution of the
board of directors. At such meetings, the directors shall transact such business
as may properly be brought before the meeting.
Section 3.09. Special Meetings. Special meetings of the board of directors
shall be held whenever called by the president or by two or more of the
directors. Notice of each such meeting shall be given to each director by oral,
telegraphic or written notice at least 8 hours (in the case of oral notice) or
48 hours (in the case of telegraphic or written notice) before the time at which
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<PAGE>
the meeting is to be held; however, a meeting of the board of directors may be
held without notice immediately after the annual meeting of stockholders. Each
notice given pursuant to this section shall state the time and place of the
meeting to be so held.
Section 3.10. Quorum, Manner of Acting and Adjournment. At all meetings of
the board, the majority of the directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Unless otherwise restricted by the certificate of incorporation or these
by-laws, an action required or permitted to be taken at any meeting of the board
of directors or of any committee thereof may be taken without a meeting, if all
members of the board consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board.
Section 3.11. Executive and other Committees. The board of directors may,
by resolution adopted by a majority of the whole board, designate an Executive
Committee and one or more other committees, each committee to consist of three
or more directors. The board may designate one or more directors as alternate
members of any committee who may replace any absent or disqualified member of
any meeting of the committee. In the absence or disqualification of a member,
and the alternate or alternates, if any, designated for such member, of any
committee the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another director to act at the meeting in the place of any
such absent or disqualified member.
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<PAGE>
Any such committee to the extent provided in the resolution establishing
such committee shall have and may exercise all the power and authority of the
board of directors in the management of the business and affairs of the
corporation, except as may be prohibited by applicable law. Such committee or
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee so formed shall
keep regular minutes of its meetings and report the same to the board of
directors at each regular meeting of the board of directors.
Section 3.12. Compensation of Directors. Unless otherwise restricted by the
certificate of incorporation, the board of directors shall have the authority to
fix the compensation of the directors. The directors may be paid their expenses,
if any, for attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as a director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may also be allowed compensation for
expenses incurred in attending committee meetings, and may be paid a fixed sum
for attendance at each committee meeting or a stated salary for serving as a
member of a committee.
Section 3.13. Eligibility. No person shall be eligible for election or
re-election to the board of directors after attaining age 70, except under
extraordinary circumstances to be determined in each instance by the board of
directors, upon the recommendation of the Executive Committee, if any.
ARTICLE IV
----------
NOTICE - WAIVER - MEETINGS
--------------------------
Section 4.01. Notice, What Constitutes. Whenever, under the provisions of
the statutes of Delaware or the certificate of incorporation or these by-laws,
notice is required to be given to any director or stockholder, it shall be
construed to mean notice given in writing, by mail, addressed to such director
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<PAGE>
or stockholders, at his address as it appears on the records of the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States Mail. Notice to
directors may also be given in accordance with Section 3.09. of ARTICLE III,
hereof.
Section 4.02. Waivers of Notice. Whenever written notice is required to be
given under the certificate of incorporation, these by-laws, or statute, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, shall be deemed to satisfy the requirement giving of such notice. Except
in the case of a special meeting of stockholders, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of
stockholders, directors, or members of a committee of directors need be
specified in any notice, or waiver of notice.
Attendance of a person, either in person or by proxy, at any meeting, shall
constitute a waiver of notice of such meeting, except where a person attends a
meeting for the express purpose of objecting to the transfer of any business
because the meeting was not lawfully called or convened.
Section 4.03. Meetings by Phone or Teleconference. One or more directors
may participate in a meeting of the board of directors, or of a committee of the
board of directors, by the use of telephone, teleconference, video conference,
or similar communications equipment which allow all persons participating in the
meeting to communicate with each other. Participation in a meeting pursuant to
this section shall constitute attendance at such meeting.
ARTICLE V
---------
OFFICERS
--------
Section 5.01. Number, Qualification and Designation. Except as provided in
the certificate of incorporation, the officers of the corporation shall be
chosen by the board of directors and shall be a president, one or more vice
presidents, a secretary, a chief financial officer, and such other officers as
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<PAGE>
may be elected in accordance with other provisions of Section 5.03 of this
Article. One person may hold more than one office. Officers may be, but need not
be, directors or stockholders of the corporation. The board of directors may
elect from among the members of the board a chairman of the board and a vice
chairman of the board.
Section 5.02. Election and Term of Office. The officers of the corporation,
shall be elected annually by the board of directors and each such officer shall
hold his office until his successor shall have been elected and qualified, or
until his earlier resignation, or removal. Any officer may resign at any time
upon written notice to the corporation.
Section 5.03. Subordinate Officers, Committees and Agents. The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as it deems necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as are provided in these by-laws, or as the board of directors may from
time to time determine. The board of directors may delegate to a committee the
power to elect subordinate officers and to retain or appoint employees or other
agents, or committees thereof, and to prescribe the authority and duties of such
subordinate officers, committees, employees or other agents.
Section 5.04. The Chairman and Vice Chairman of the Board. The chairman of
the board or in his absence, the vice chairman of the board, shall preside at
all meetings of the stockholders and of the board of directors, and shall
perform such other duties as may from time to time be assigned to them by the
board of directors.
Section 5.05. The President. The president shall have general supervision
over the business and operations of the corporation, subject, however, to the
control and review of the board of directors. He shall sign, execute and
acknowledge, in the name of the corporation, deeds, mortgages, bonds, contracts
or other instruments, authorized by the board of directors, except in cases
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where the signing and execution thereof shall be expressly delegated by the
board of directors, or by these by-laws, to some other officer or agent of the
corporation and, in general, shall perform all duties incident to the office of
president, and such other duties as from time to time may be assigned to him by
the board of directors.
Section 5.06. The Vice Presidents. The vice presidents shall perform the
duties of the president in his absence and such other duties as may from time to
time be assigned to them by the board of directors or by the president.
Section 5.07. The Secretary. The secretary, or an assistant secretary,
shall attend all meetings of the stockholders and of the board of directors and
shall record proceedings of the stockholders and of the committees of the board
in a book or books to be kept for that purpose; see that notices are given and
records and reports are properly kept and filed as required by law; be the
custodian of the seal of the corporation and see that it is affixed to all
documents to be executed on behalf of the corporation under the seal; and, in
general, perform all duties incident to the office of secretary and such other
duties as may from time to time be assigned to him or her by the board of
directors or the president.
Section 5.08. The Chief Financial Officer. The chief financial officer
shall have or provide for the custody of the funds or other property of the
corporation; collect and receive or provide for the collection and receipt of
monies earned by or in a manner due to or received by the corporation; deposit
all funds in his custody as chief financial officer in such banks or other
places of deposit as the board of directors may from time to time designate;
whenever so required by the board of directors, render an accounting showing his
transactions as chief financial officer and the financial condition of the
corporation; and, in general, discharge such other duties as may from time to
time be assigned to him by the board of directors or the president.
Section 5.09. Officers' Bonds. No officer of the corporation need provide a
bond of quarantee to assure for the faithful discharge of his duties unless the
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board of directors shall by resolution so require a bond in which event such
officer shall give the corporation a bond (which shall be renewed if and as
required) in such sum and with such surety or sureties as shall be satisfactory
to the board of directors for the faithful performance of the duties of his
office.
Section 5.10. Salaries. The salaries of the officers and agents of the
corporation elected by the board of directors shall be fixed from time to time
by the board of directors.
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ARTICLE VI
----------
CERTIFICATE OF STOCK, TRANSFER, ETC.
------------------------------------
Section 6.01. Issuance. Each stockholder shall be entitled to a certificate
or certificates for shares of stock of the corporation owned by him upon his
request therefor. The stock certificates of the corporation shall be numbered
and registered in the stock ledger and transfer books of the corporation as they
are issued. They shall be signed by the president or a vice president and by the
secretary or an assistant secretary, and shall bear the corporate seal, which
may be facsimile, engraved or printed. Any or all of the signatures upon such
certificate may be facsimile, engraved or printed. In case of any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any share certificate shall have ceased to be such officer,
transfer agent or registrar, before the certificate is issued, it may be issued
with the same effect as if he were such officer, transfer agent or registrar at
the date of its issue.
Section 6.02. Transfer. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for such shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. No transfer shall be made which would be
inconsistent with the provisions of Article 8, Title 6, of the Delaware Uniform
Commercial Code-Investment Securities.
Section 6.03. Stock Certificates. Stock certificates of the corporation
shall be in such form as provided by statute and approved by the board of
directors. The stock record books and the blank stock certificate books shall be
kept by the secretary or by any agent(s) designated by the board of directors
for that purpose.
Section 6.04. Lost, Stolen, Destroyed or Mutilated Certificates. The board
of directors may direct a new certificate or certificates to be issued in place
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of any certificate or certificates theretofore issued by the corporation alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost stolen or
destroyed.
Section 6.05. Record Holder of Shares. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such shares or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
Section 6.06. Determination of Stockholders of Record. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversation or exchange of stock
or for the purpose of any other lawful action, the board of directors may fix,
in advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than (60) days prior to
any other action.
If no record date if fixed:
(1) The record date for determining the stockholders entitled to notice of
or to vote at a meeting of stockholders shall be those holders of
record at the close of business on the days next preceding the day on
which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is
held.
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(2) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no
prior action by the board of directors is necessary, shall be the day
on which the first written consent is expressed.
(3) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
ARTICLE VII
-----------
INDEMNIFICATION OF DIRECTORS, OFFICERS
--------------------------------------
OTHER AUTHORIZED REPRESENTATIVES
--------------------------------
Section 7.01. Indemnification of Authorized Representatives in Third Party
Proceedings. The corporation shall indemnify any person who was or is an
"authorized representative" of the corporation (which shall mean for the
purposes of this Article a director, officer or employee of the corporation, or
a person serving at the request of the corporation as a director, officer,
employee or trustee of another corporation, partnership, joint venture, trust or
other enterprise, including any such person serving as a director or officer of
a subsidiary of the corporation) and who was or is a "party" (which shall
include for purposes of this Article the giving of testimony or similar
involvement) or if threatened to be made a party to any "third party proceeding"
(which shall mean for purposes of this Article any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation which
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shall arise from or in connection with such individual's involvement with the
corporation) by reason of the fact that such person was or is an authorized
representative of the corporation, against expenses (which shall include for
purposes of this Article attorneys' fees), judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such third party proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal third party
proceeding (including any action or investigation which could or does lead to a
criminal third party proceeding), had no reasonable cause to believe such
conduct was unlawful. The termination of any third party proceeding by judgment,
order, settlement, indictment, conviction or upon a plea of nolo contendere or
its equivalent, shall not of itself create a presumption that the authorized
representative did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal third party proceeding, had
reasonable cause to believe that such conduct was unlawful.
Section 7.02. Indemnification of Authorized Representatives in Corporate
Proceedings. The corporation shall indemnify any person who was or is an
authorized representative of the corporation and who was or is a party or is
threatened to be made a party to any "corporate proceeding" (which shall mean
for the purposes of this Article any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor or
investigative proceeding by the corporation ) by reason of the fact that such
person was or is an authorized representative of the corporation, against
expenses actually and reasonably incurred by such person in connection with the
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defense or settlement of such corporate action if such person acted in good
faith and in a manner reasonably believed to be in, or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such corporate proceeding was pending
shall determine upon application that, despite the adjudication of liability,
but in view of all the circumstances of the case, such authorized representative
is fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
Section 7.03. Mandatory Indemnification of Authorized Representatives. To
the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any third party or corporate
proceeding of in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses actually and reasonably incurred by such
person in connection therewith.
Section 7.04. Determination of Entitlement to Indemnification. Any
indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless ordered
by a court) shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the authorized representative
is proper in the circumstances because such person has either met the applicable
standard of conduct set forth in Section 7.01 or 7.02 or has been successful on
the merits or otherwise as set forth in Section 7.03 and that the amount
requested has been actually and reasonable incurred. Such determination shall be
made:
(1) By a majority of the board of directors present at a duly
convened meeting of the board of directors who were not parties
to such third party or corporate proceeding, or
(2) By a vote of a majority of the stockholders.
Section 7.05. Advancing Expenses. Expenses actually and reasonably incurred
in defending a third party or corporate proceeding shall be paid by the
corporation on behalf of a director of the corporation, and shall be paid on
behalf of any other authorized representative to the extent authorized by the
board of directors in advance of the final disposition of such third party or
corporate proceeding as authorized in the manner provided in Section 7.04 of
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this Article (which authorization may be a general authorization of the
advancement of expenses) upon receipt of an undertaking by or on behalf of such
director or other authorized representative to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized in this Article. The financial ability of such
authorized representative to make such payment shall not be a prerequisite to
the making of an advance.
Section 7.06. Employee Benefit Plans. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed against a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involve
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the best
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Article.
Section 7.07. Scope of Article. The indemnification of (and advancement of
expenses on behalf of) authorized representatives, as authorized by this Article
shall (1) not be deemed exclusive of any other rights to which those seeking
indemnification (or the advancement of expenses may be entitled under any
statute, agreement vote of stockholders or disinterested director, or otherwise,
both as to action in an official capacity and as to action in another capacity,
(2) continue as to person who cease(s) to be an authorized representative unless
otherwise provided when authorized, and (3) inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7.08. Reliance on Provisions. Each person who shall act as an
authorized representative of the corporation shall be deemed to be doing so in
reliance upon the rights of indemnification provided by this Article.
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ARTICLE VIII
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GENERAL PROVISIONS
------------------
Section 8.01. Dividends. Dividends upon the capital stock of the
corporation, subject to the applicable provisions of the certificate of
incorporation, if any, may be declared by the board of directors at any duly
convened regular or special meeting of the board of directors. Dividends may be
paid in cash, in property, or in shares of the capital stock of the corporation,
subject to the provisions of the certificate of incorporation. Before payment of
any dividends, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
think conducive to the interest of the corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
Section 8.02. Annual Statements. The board of directors shall present at
each annual meeting and at any special meeting of the stockholders when called
for by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 8.03. Contracts. Except as otherwise provided in these by-laws, the
board of directors may authorize by resolution or written consent any officer or
officers including the chairman and vice chairman of the board of directors, or
any agent or agents, to enter into any contract or to execute or deliver any
instrument on behalf of the corporation and such authority may be general or
confined to specific instances.
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Section 8.04. Checks. All checks, notes, bills of exchange or other orders
in writing shall be signed by such person or persons as the board of directors
may from time to time designate.
Section 8.05. Corporate Seal. The corporate seal of the corporation shall
consist of two concentric circles, between which shall be the name of the
corporation, and in the center shall be inscribed the year of its incorporation
and the words, "Corporate Seal Delaware."
Section 8.06. Deposits. Any funds of the corporation shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies, or other depositories as the board of directors may approve or
designate, and all such funds shall be withdrawn only upon checks signed by one
or more officers or employees as the board of directors shall from time to time
determine.
Section 8.07. Corporate Records. At least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of and
number of shares registered entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of and number of shares registered
entitled to vote at the meeting, arranged in alphabetical order, and showing
address of and number of shares registered in the name of each stockholder,
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholders who is present.
Every stockholder shall, upon written demand under oath stating the purpose
thereof, have a right to examine, in person or by agent or attorney, during the
usual hours for business, for any proper purpose, the stock ledger, books or
records of account, and records of the proceedings of the stockholders and
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directors, and make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the corporation at its registered office in Delaware or at its principal place
of business. Where the stockholder seeks to inspect the books and records of the
corporation, other than its stock ledger or list of stockholders, the
stockholder shall first establish (1) compliance with the provisions of this
Section respecting the form and manner of making demand for inspection of such
document; and (2) that the inspection sought is for a proper purpose. Where the
stockholder seeks to inspect the stock ledger or list of stockholders of the
corporation and has complied with the provisions of this Section respecting the
form and manner of making demand for inspection of such documents, the burden of
proof shall be upon the corporation to establish that the inspection sought is
for an improper purpose.
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his position as a director. The Court of Chancery is
hereby vested with the exclusive jurisdiction to determine whether a director is
entitled to the inspection sought. The court may summarily order the corporation
to permit the director to inspect any and all books and records, the stock
ledger and the stock list and to make copies or extracts therefrom. The court
may, in its discretion, prescribe any limitations or conditions with reference
to the inspection, or award such other and further relief as the court may deem
just and proper.
Section 8.08. Fiscal Year. The fiscal year of the corporation shall begin
on the first day of January in each year and shall end on the thirty-first of
December of the following year, unless otherwise determined by the board of
directors.
Section 8.09 Amendment of By-laws. Provided that they are not inconsistent
with the provisions of the Fourth Modified Plan of Reorganization, these by-laws
may be altered, amended or repealed or new by-laws may be adopted by the
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stockholders or by the board of directors, when such power is conferred upon the
board of directors by the certificate of incorporation, at any regular meeting
of the stockholders or of the board of directors or at any special meeting of
the stockholders or of the board of directors, if notice of such alteration,
amendment, repeal or adoption of new by-laws be contained in the notice of such
special meeting.
EMPLOYMENT AGREEMENT
AGREEMENT made this 10th day of July 1996 between SCIENCE MANAGEMENT
CORPORATION, a Delaware corporation having its principal offices at 721 Route
202-206, Bridgewater, County of Somerset, New Jersey 08807 (hereinafter called
the "Corporation"), and JAMES A. SKIDMORE, JR., c/o SCIENCE MANAGEMENT
CORPORATION, 721 Route 202-206, Bridgewater, County of Somerset, New Jersey
08807 (hereinafter called "Skidmore").
1. Employment and Terms
(a) Employment. The Corporation hereby employs Skidmore, and Skidmore
hereby accepts employment by the Corporation upon the terms and conditions
set forth in this Agreement.
(b) Term. The terms of employment hereunder is for a three (3) year
period from the effective date of the Corporation's confirmed Plan of
Reorganization, renewable by mutual agreement of both parties, and could
end earlier on the following dates:
(1) the date of termination of Skidmore's employment in
accordance with Paragraph 4 hereof;
(2) the date which is six (6) months after Skidmore's continuous
absence from active employment by the Corporation by reason
of his "total disability", as that term is defined in the
Corporation's long-term disability plan for all full-time
employees; or
(3) the date of Skidmore's death.
2. Conditions of Employment
During the term of employment set forth in Paragraph 1(b) hereof, the
conditions of Skidmore's employment by the Corporation shall be as set forth
hereinbelow.
(a) Duties. Skidmore shall be employed as President and Chief
Executive Officer of the Corporation, as well as in any additional
executive position of the Corporation and shall serve at the pleasure of
the Board of Directors. Subject to his election by the stockholders each
<PAGE>
year, he shall be a member of the Board of Directors but in such event
shall not participate in any action of the Board which directly affects
Skidmore's employment by the Corporation. In addition and at the pleasure
of the Board of Directors, he shall serve as Chairman of the Board of
Directors and Chairman of the Executive Committee of the Board of
Directors.
(b) Extent of Services. This Agreement shall not be construed as
preventing Skidmore's investment of his personal assets in businesses which
do not compete with the Corporation, so long as such investments do not
require any services on the part of Skidmore in the operation of the
affairs of the companies in which such investments are made. Nor shall this
Agreement prevent Skidmore's purchasing securities in any corporation whose
securities are regularly traded, provided that such purchases do not result
in his owning beneficially, individually or by the rules of attribution
provided for in the Internal Revenue Code, at any one time, one percent
(1%) or more of the equity securities of any corporation engaged in a
business competitive to that of the Corporation.
Skidmore shall be entitled to serve as a member of the board of
directors of one (1) or more companies engaged in businesses which do not
compete with the Corporation, so long as such membership activities do not
prevent Skidmore from fulfilling his duties and obligations as an executive
officer of the Corporation and with notice to the Board of Directors.
(c) Restrictive Covenants. The terms and conditions of a restrictive
and non-competitive agreement between the Corporation and Skidmore --
entitled "Employment Agreement", dated September 29, 1972 and a copy of
which is appended hereto as Attachment A -- are hereby incorporated into
this Agreement. Such terms of said "Employment Agreement" shall survive
termination of employment hereunder, in accordance with its terms.
Notwithstanding any provision of said "Employment Agreement" to the
contrary, Skidmore shall not, for a period of two years after termination
of his employment with the Corporation, solicit any clients or customers of
the Corporation or its subsidiaries.
3. Compensation
During the term of employment hereunder and in accordance with Paragraph 5
hereof, Skidmore shall receive, for all services rendered to the Corporation,
the following compensation:
(a) Salary. While Skidmore is an active employee -- and during the
first six (6) months of his absence from active employ by reason of "total
disability" (as defined herein), although offset by disability payments to
Skidmore from all sources -- the Corporation shall pay Skidmore a salary of
not less than $200,000 per annum. Such salary shall be subject to annual
review by the Board of Directors, to consider such increases, if any, as it
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may determine in its sole discretion. It shall be the responsibility of the
Secretary of the Corporation on or about October 1 of each year during
which this Agreement is in effect to notify the members of the Compensation
Committee of the Board of Directors of the forthcoming January 1 date for
the purposes of considering a salary increase for Skidmore; provided,
however, that nothing hereinabove shall preclude Skidmore's participation
in any across-the-board salary increases to all employees when approved by
the Board of Directors.
(b) Additional Compensation. In addition to the salary provided for
under the provisions of Paragraph 3 (a) hereof, during the term of this
Agreement (including any extensions thereof) Skidmore shall receive as
additional compensation an amount equal to four percent (4%) of the
Corporation's "income before income taxes" (as hereinafter defined), if
any, for each calendar year. Said amount shall be paid in cash no later
than 30 days after the Corporation's receipt of its audited financial
statements. If the term of employment under this Agreement during a
calendar year is less than the full year of the Corporation because
Skidmore's termination of employment occurs during such calendar year, then
Skidmore shall receive a pro rata amount of such additional compensation,
based upon the Corporation's next annual audited financial statements after
such termination -- except as provided in Paragraph 5 (b) (2) hereof. Any
pro rata amount due to Skidmore shall be paid in a single lump sum in cash,
within 30 days after the date such audited financial statements are
received by the Corporation.
The term "income before income taxes", as used herein, shall mean the
consolidated income before income taxes which the Corporation and its
subsidiaries shall earn from all sources. Such income before income taxes
shall be determined in accordance with generally accepted accounting
principles applied on a consistent basis. Notwithstanding anything
contained in this Paragraph 3 (a) or any other provision of this Agreement
to the contrary, no amount of additional compensation shall be payable to
Skidmore to the extent that any Creditor of the Corporation that is
entitled to receive a payment under a confirmed Plan of Reorganization is
due any amount from the Corporation at the time such payment is due. The
additional compensation that would otherwise have been payable to Skidmore
shall accrue and be paid as soon as practicable after no sums are past due
to such Creditors.
(c) Further Additional Compensation. Skidmore shall also be eligible
to participate in any perquisites, executive fringe benefits, director's
fees of employee directors and long-term incentive compensation plans
(whether stock option, stock appreciation right, restricted stock grant,
performance bonus or otherwise) available to officers and/or directors of
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the Corporation, in accordance with the terms thereof. This Agreement shall
not however, be deemed in any way to mandate that Skidmore receive any such
further additional compensation.
(d) Regular Group Benefit. Skidmore shall be entitled to participate
in all Corporation-sponsored regular group benefit plans and programs for
employees, including but not limited to tax-qualified pension,
tax-qualified profit-sharing, group life insurance and other group
insurance (medical, dental and disability benefit) plans, in accordance
with the terms thereof. This Agreement shall not; however, be deemed in any
way to mandate that Skidmore receive any such further additional
compensation.
(e) Other Supplemental Benefits. Skidmore shall also be entitled to
the following supplemental benefits:
(1) Disability Benefits. Provided Skidmore can pass the
insurer's required medical examination, the Corporation
shall obtain, at its sole cost and expense, a policy or
policies of long-term disability insurance which shall
provide Skidmore with total long-term disability benefits in
the event of Skidmore's total disability (as defined
herein).Said benefits shall be payable monthly but not
beyond the term of this Agreement (without any renewals)
and, together with any benefits payable from the
Corporation's long-term disability plan for all full-time
employees and from Social Security, shall be fifty percent
(50%) of Skidmore's salary as in effect on the first date of
absence from work by reason of total disability.
(2) Life Insurance. So long as Skidmore can pass the insurer's
medical examination without being rated for insurance
purposes, the Corporation shall provide Skidmore -- at its
own expense -- life insurance on his life, such that the
total death benefit payable to his beneficiary (including
benefits payable from the Corporation's basic group term
life insurance plan for all full-time salaried employees) is
not less than two (2) times his annual salary at date of
death.
In addition, an individual term life insurance policy shall
be issued, to Skidmore on Skidmore's life, in the amount of
$100,000. At Skidmore's discretion and provided he can pass
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the insurer's medical examination, Skidmore may convert this
policy to a whole life policy. In such event, Skidmore shall
pay the difference in premium between the cost of whole life
insurance and the cost of term life.
(f) Expenses and Automobile. The Corporation recognizes that Skidmore,
in rendering services hereunder, may be required to spend sums of money for
the entertainment of various persons and representatives of companies and
organizations with which the Corporation is having, or would like to have,
business relationships. The Corporation shall reimburse Skidmore for such
reasonable expenses incurred on behalf of the Corporation including, but
not limited to, entertainment and travel. The Corporation shall also
provide Skidmore with a suitable automobile, and provide for the
automobile's maintenance and storage and pay all reasonable expenses
related thereto. The Company shall pay Skidmore's reasonable annual tax
preparation costs.
4. Termination of Employment
The parties to this Agreement may terminate Skidmore's employment hereunder
as follows:
(a) Without Cause, by Corporation. The Corporation may terminate
Skidmore's employment hereunder without cause only upon authorization from
the Board of Directors, and upon no less than sixty (60) days' written
notice to Skidmore; however, the Corporation shall be obligated hereunder
to pay Skidmore until the conclusion of this Agreement. The Corporation may
also terminate Skidmore's employment hereunder by giving notice to Skidmore
of its intention to terminate the then existing term of Skidmore's
employment at the end of the term.
Termination of employment by reason of Skidmore's "total disability"
(as defined herein) in accordance with Paragraph 1 (b) (2) hereof, as well
as termination by reason of Skidmore's death in accordance with Paragraph 1
(b) (3) hereof, shall be treated as termination by the Corporation without
cause.
(b) For Cause, by Skidmore. Skidmore may terminate employment
hereunder for cause upon no less than sixty (60) days' written notice to
the Corporation. "Cause" for termination by Skidmore shall mean the
following conduct of the Corporation.
(1) Material breach of any material provision of the Agreement,
which breach shall not have been cured by the Corporation
within thirty (30) days of written notice of said breach;
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(2) Substantial change in Skidmore's duties (other than such
duties as are subject to shareholder vote or approval (but
only if Imperial Capital Worldwide Partners, L.P. does not
own a majority interest in the stock of the Company)) as set
forth in Paragraph 2 (a) of this Agreement, and including
the assumption of new and excessive travel duties or a
requirement that Skidmore relocate his principal place of
business so as reasonably to be expected to move his
principal residence -- as to all of the above, without
Skidmore's prior written consent;
(3) Failure to maintain Skidmore at the level of officer set
forth in Paragraph 2 (a) of this Agreement; or
(4) The Corporation's merger with, or acquisition by another
corporation, after which Skidmore is not retained as Chief
Executive Officer of either the surviving corporation or the
subsidiary or division that carries on the business of the
Corporation, provided Skidmore gives notice of termination
of employment hereunder within six (6) months of said
merger/acquisition and failure to retain.
If termination of Skidmore for cause occurs, such
termination shall not adversely affect Skidmore's rights
under the terms of the Corporation's tax-qualified pension
plan.
(c) Without Cause, by Skidmore. Skidmore may terminate employment
hereunder without cause upon no less than ninety (90) days' written notice
to the Corporation. If such termination occurs, such termination shall not
adversely affect Skidmore's rights under the Corporation's tax-qualified
pension plan.
(d) For Cause, by Corporation. The Corporation may terminate
Skidmore's employment hereunder for cause upon no less than thirty (30)
days' written notice to Skidmore which cause shall be determined in good
faith solely by the Board of Directors. "Cause" for termination by the
Corporation shall mean the following conduct of Skidmore:
(1) Material breach of any provision of the Agreement, which
breach shall not have been cured by Skidmore within thirty
(30) days of written notice of said breach; or
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(2) Engages in Malfeasance, willful misconduct, willful or gross
neglect, Fraud, or any other act or omission, of a similar
nature, otherwise to the material and demonstrable detriment
of the Corporation.
5. Severance Pay/Benefits Upon Termination of Employment
(a) In the event of termination of Skidmore's employment pursuant to
Paragraph 4 (a) or 4 (b) hereof, Skidmore shall be entitled to the
following:
(1) any accrued but unpaid salary and vacation to the date of
the event of termination;
(2) the pro rata share of any additional compensation provided
for in Paragraph 3 (b) hereof, for the period of time during
the year up to the end of the month in which termination
occurs;
(3) pro rate payment for performance bonuses in mid- cycle, full
vesting in restricted stock grants, and reasonable allowance
for post-termination exercise of outstanding stock options
and stock appreciation rights to the extent permitted by
applicable law and the terms of any such plans.
(4) except in the event of termination by reason of "total"
disability or death, liquidated damages equal to the
aggregate salary (at the then-current rate) as determined
pursuant to Paragraph 3 (a) hereof to become due during the
remaining term of this Agreement plus an additional amount
of $100,000 payable at termination.)
In no event shall this payment be offset by any retirement
pay, post-termination salary or other compensation for
Skidmore's personal employment or as a consultant other than
from the Corporation pursuant to an agreement post-dating
this Agreement.
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(5) During the remainder of the term of this Agreement, he shall
continue to participate in the benefits described in
Paragraphs 3 (d), 3 (e) and 3 (f) hereof (other than tax
qualified pension and profit sharing plans) sponsored by the
Corporation -- but only to the extent that such continued
participation is permissible under the general terms and
provisions of such benefit arrangements. To the extent that
continued participation is not permissible but for which
Skidmore would otherwise qualify if he continued to be an
employee, in any all-employee medical, dental, long-term
disability or group term life insurance plan, then the
Corporation shall provide Skidmore with comparable benefits,
either on an insured or self- insured basis. Any continuing
benefits described herein shall be offset by comparable
benefits which Skidmore might be entitled by a prior or
successor employer.
(b) In the event of termination of Skidmore's employment pursuant to
Paragraph 4 (c) or 4 (d) hereof, Skidmore shall not be entitled to any
compensation or benefit hereunder after the date of such termination, other
than the following:
(1) except with respect to payments described in Paragraph 3 (b)
any unpaid salary, accrued vacation and other benefits
earned and accrued under this Agreement, and reimbursement
for expenses incurred (to the extent otherwise payable
hereunder), prior to such termination; and
(2) the pro rata share of any additional compensation provided
for in Paragraph 3 (b), for the period of time during the
year up to the end of the month in which termination
occurs--but only if termination is pursuant to Paragraph 4
(c).
6. Other Provisions
(a) Resolution of Difference Over Agreement.
Any controversy or claim arising out of, or relating to this
Agreement, or the breach thereof, shall be settled by recourse -- including
for temporary or preliminary injunctive relief -- to the courts having
jurisdiction thereof.
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(b) Waiver of Breach. The waiver by the Corporation or Skidmore of a
breach of any provision of this Agreement by the other party, shall not
operate nor be construed as a waiver of any subsequent breach by such other
party.
(c) Assignment. The rights and obligations of the Corporation under
this Agreement shall inure to the benefit of, and shall be binding upon,
the successors and assigns of the Corporation.
(d) Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by registered mail
-- in the case of Skidmore, to his residence; and in the case of the
Corporation, to the "Board of Directors, in care of the Secretary, Science
Management Corporation, 721 Route 202-206, Bridgewater, New Jersey 08807,"
and to Imperial Capital Worldwide Partners, L.P., at 666 Fifth Avenue, New
York, New York -- or at such other address with respect to each party as
such party shall notify the other in writing. Such notice shall be deemed
effective when so addressed and mailed.
(e) Construction of Agreement.
(1) Applicable Law This Agreement shall be governed by and
construed under the laws of the State of New Jersey.
(2) Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
(3) Headings. The descriptive headings of the several paragraphs
of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
(f) Entire Agreement. This instrument contains the entire agreement of
the parties, and all promises, representations, understandings,
arrangements and prior agreements merged herein and superseded hereby --
except the restrictive and non-competition agreement, entitled "Employment
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Agreement", which is a part of this Agreement. The provisions of this
Agreement may not be amended, modified, repealed, waived, extended or
discharged except by an agreement in writing signed by the party against
whom enforcement of any amendment, modification, repeal, waiver, extension
or discharge is sought. No person, other than pursuant to a resolution of
the Board of Directors or a committee thereof, shall have authority on
behalf of the Corporation to agree to amend, modify, repeal, waive, extend
or discharge any provision of this Agreement or anything in reference
thereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
effective date of the Corporation's confirmed Plan of Reorganization.
SCIENCE MANAGEMENT CORPORATION
By: _______________________________
Marion G. Hilferty
Secretary
Accepted on ________________
_____________________________
James A. Skidmore, Jr.
10
July 10, 1996
Mr. Frank S. Rathgeber
c/o Science Management Corporation
721 Route 202-206
Bridgewater, New Jersey 08807
Dear Frank:
This will confirm our agreement with respect to your responsibilities and
personal remuneration as Executive Vice President of Science Management
Corporation and Chairman, SMC Management Services Group, Inc. and is effective
for the three year period beginning as of the effective date of the
Corporation's approved Plan of Reorganization, renewable with the agreement of
both parties.
Base Salary
- -----------
Effective as of the effective date of the Plan or Reorganization, you will be
paid an annual base salary of not less than $124,875.
Incentive Compensation
- ----------------------
You will be eligible to receive a bonus at the discretion of the Chairman,
President & Chief Executive Officer, subject to the approval of the Board of
Directors.
No Guarantee of Results to Clients
- ----------------------------------
Because specific results of professional services, such as those rendered to
clients of the Company cannot be guaranteed, the Company has long established a
policy that no guarantee or inference of such guarantee be made at any time
orally or in writing to the client. In any case where such oral or written
guarantee is made or implied, the Corporation reserves the right to cancel such
engagement without obligation to pay incentive remuneration on such rejected or
canceled order or part thereof. Any such guarantee, in writing or orally offered
by you, will be cause for immediate termination.
<PAGE>
Mr. Frank S. Rathgeber
July 10, 1996
Page 2
Car Allowance
- -------------
You will receive an automobile allowance of $400 per month.
Expenses
- --------
All business expenses must be fully documented with appropriate receipts and
submitted to me for approval prior to reimbursement in accordance with standard
Company practices.
Resignation
- -----------
In the event of your resignation, no incentive compensation will be payable to
you during the year in which the resignation occurs.
Term of Agreement
- -----------------
During the three year period, your employment may be terminated at any time by
the Company for cause.
Non-Compete
- -----------
You agree that for a period of one year after the termination of your employment
with the Company, you will not, either directly or indirectly, have ownership or
control of, be employed by or receive or accrue any remuneration from any
business which during such year performs or contracts to perform services of the
type then performed by the Company during the year preceding the date on which
your employment with the Company was terminated.
You also agree that you will not at any time, either directly or indirectly,
disclose to or utilize on behalf of yourself or any other individual or entity
any trade secrets or confidential information of the Company and its
subsidiaries, including without limitation, client names and information,
financial information, marketing plans or strategies, projections, discoveries,
ideas, designs, research and development materials, processes, procedures, or
skill.
<PAGE>
Mr. Frank S. Rathgeber
July 10, 1996
Page 3
Upon expiration of your employment with the Company, you will return to the
Company any and all documentation containing or pertaining to trade secrets or
confidential information of the Company. Nothing contained in this letter shall
have any effect upon the restrictions contained in your Employment Agreement
with SMC, dated November 14, 1984 that is attached hereto. Notwithstanding any
provisions of said "Employment Agreement" to the contrary, you shall not, for a
period of two years after termination of your employment with the Corporation,
solicit any clients or customers of the Corporation or its subsidiaries or
divisions.
Applicable Law
- --------------
This letter agreement shall be governed by and construed under the laws of the
State of New Jersey.
Please sign and return one copy of this letter agreement.
Sincerely,
James A. Skidmore, Jr.
Chairman, President and
Chief Executive Officer
Attachment
July 10, 1996
Ms. Marion G. Hilferty
c/o SCIENCE MANAGEMENT CORPORATION
721 Route 202-206
Bridgewater, New Jersey 08807
Dear Marion:
This letter will confirm our agreement with respect to your responsibilities and
personal remuneration as Vice President/Administration & Secretary of Science
Management Corporation and is effective for the three year period beginning as
of the effective date of the Corporation's approved Plan of Reorganization,
renewable with the agreement of both parties.
Base Salary
- -----------
Effective as of the effective date of the Plan of Reorganization, you will be
paid an annual base salary of not less than $74,225 per annum. Such salary shall
be subject to annual review by the Chairman, President & Chief Executive Officer
and ratification by the Board of Directors.
Discretionary Bonus
- -------------------
In addition, you will be eligible to receive an annual discretionary bonus up to
10% of your base salary which shall be recommended to the Board by me and will
be subject to the Board's approval.
Employee Benefits
- -----------------
You will be eligible to continue to participate in various benefit plans offered
by the Company. Such plans currently include:
1. A completely company-paid life insurance policy in an amount equal to
twice your annual rate of base salary.
2. Health and Dental Insurance. The Company provides a comprehensive
medical and dental insurance plan to employees for single or single
and dependent coverage.
<PAGE>
Ms. Marion G. Hilferty
July 10, 1996
Page 2
As an alternative, you may choose to enroll in a Health Maintenance
Organization (HMO) if SMC offers one in your geographic area.
3. A completely company-paid, long-term disability benefit that covers
you during travel for the company in the amount of $100,000.
4. A completely paid long-term disability benefit program. If disability,
as a result of sickness or accident arises either off the job or on
the job, you will be eligible for benefits equaling 60% of your basic
monthly salary to a maximum benefit of $6,000 per month after such
disability has precluded the performance of duties for a period of 90
days.
5. Company-paid vacation and holidays in accordance with our standard
policy.
6. The SMC Employee Capital Accumulation Plan, 401(k).
Expenses
- --------
All business expenses must be fully documented with appropriate receipts and
submitted to me for approval prior to reimbursement in accordance with the
Company's usual practices.
Termination
- -----------
Your employment may be terminated by the Company at any time, with or without
cause. In the event of your termination of employment by the Company, without
cause, your base salary will be paid to the end of the sixth month following
which notice of termination was given. If, however, during such period of notice
of termination, you should earn a salary or other compensation from your
personal employment by another firm or individual, you agree to report such
earnings to Science Management Corporation and such earnings shall be credited
against termination payments made by the Corporation.
<PAGE>
Ms. Marion G. Hilferty
July 10, 1996
Page 3
In addition, in the event of your termination without cause prior to the
expiration of three years from the first date of your employment term hereunder,
you shall receive an additional sum of $5,000 per year (or such proportional
share thereof) for each year left on your employment agreement, payable within
30 days following such termination. Your rights, should you claim you have been
wrongfully terminated, shall be limited to the amount payable pursuant to this
paragraph.
Confidentiality
- ---------------
You also agree that you will not at any time, either directly or indirectly,
disclose to or utilize on behalf of yourself or any other individual or entity
any trade secrets or confidential information of the Company and its
subsidiaries, including, without limitation, customer names and information,
financial information, marketing plans or strategies, projections, discoveries,
ideas, designs, research and development materials, processes, procedures or
know-how. Upon expiration of your employment with the Company, you will return
to the Company any and all documentation containing or pertaining to trade
secrets or confidential information of the Company.
Applicable Law
- --------------
This letter agreement shall be governed by and construed under the laws of the
State of New Jersey.
Please sign and return one copy of this letter agreement.
Sincerely,
James A. Skidmore, Jr.
Chairman, President and
Chief Executive Officer
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement ("Agreement") made as of the 17th day of
April, 1996 by and among SCIENCE MANAGEMENT CORPORATION (hereinafter referred to
as "SMC" or "SELLER"), a Delaware Corporation, with a place of business at 721
Route 202-206, Bridgewater, New Jersey 08807 and DONALD R. GANT (hereinafter
referred to as "GANT") residing at Young's Road, P.O. Box 83, New Vernon, New
Jersey 07976. The SELLER and GANT being sometimes hereinafter collectively
referred to as the "Parties."
WITNESSETH:
-----------
WHEREAS, SMC is the owner of all of the issued and outstanding shares
of capital stock (hereinafter referred to as "SHARES") of SMC INTERNATIONAL
HOLDINGS, INC., a Delaware Corporation ("HOLDINGS");
WHEREAS, HOLDINGS is the owner of all of the issued and outstanding
shares of stock of Science Management International, GmbH (Germany), Science
Management Internationale, S.A. (France), Science Management International, S.A.
(Belgium), and Science Management Corporation International, B.V. (Holland) (the
"SUBSIDIARIES"), except for directors' qualifying shares of each of the
SUBSIDIARIES as reflected on Exhibit A annexed hereto;
WHEREAS, SMC is the owner of all of the issued and outstanding shares
of capital stock of Science Management Corporation Limited (United Kingdom) (the
"U.K. SUB");
WHEREAS, pursuant to a Loan Agreement dated June 29, 1992, among other
things, GANT loaned the sum of $2,000,000 to SMC and HOLDINGS, and in return SMC
pledged the SHARES of HOLDINGS to GANT;
WHEREAS, on July 28, 1993, SMC filed a petition under Chapter 11 of the
United States Bankruptcy Code, 11 U.S.C. ss. 101 et. seq. ("Bankruptcy Code") in
the United States Bankruptcy Court for the District of New Jersey, Case
No. 93-34553 ("Bankruptcy Court");
WHEREAS, SMC has filed an amended plan of reorganization (the "Plan")
and disclosure statement (the "Disclosure Statement") in the Bankruptcy Court;
WHEREAS, the Plan provides, among other things, for a public auction
sale of the SHARES, free and clear of liens pursuant to Sections 363(b) and
363(f) of the Bankruptcy Code, with GANT having the right to credit bid pursuant
to Section 363(k) of the Bankruptcy Code;
WHEREAS, Science Management Internationale S.A. (France), on April 12,
1996, filed a liquidation proceeding under the laws of France;
<PAGE>
WHEREAS, GANT was the successful bidder for the SHARES at the aforesaid
sale;
WHEREAS, the terms and provisions hereof are an integral part of, and
consistent with, the Plan, having been approved by an order of the Bankruptcy
Court;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth, and subject to the terms and conditions set forth herein, the Parties
to this Agreement hereby agree as follows:
ARTICLE 1
---------
TERMS OF SALE AND PURCHASE
--------------------------
SECTION 1.1 - SALE AND PURCHASE OF SHARES. On the Closing Date, SMC
shall sell, transfer and assign to GANT, and GANT shall purchase from SMC, the
SHARES for the purchase price specified herein. At the Closing, SMC shall
deliver to GANT certificates representing all of the SHARES which are required
to be delivered or are otherwise deliverable by SMC pursuant hereto, duly
endorsed in blank for transfer or accompanied by duly executed stock powers
assigning such shares in blank.
SECTION 1.2 - PURCHASE PRICE. The purchase price ("Purchase Price") for
the SHARES shall be the credit bid of GANT in the sum of $1,000.00.
ARTICLE 2
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 2.1 - REPRESENTATIONS AND WARRANTIES OF THE SELLER. The SELLER
hereby represents and warrants to GANT, as of the date hereof, and as of the
Closing, as follows:
(a) HOLDINGS is duly organized, validly existing and in good standing
under the laws of Delaware and has all requisite corporate power and
authority to carry on its business as presently conducted.
(b) The total authorized capital stock of HOLDINGS consists of one
thousand (1,000) shares of capital stock without par value all of which are
issued and outstanding as of the date of this Agreement.
(c) SMC is the record and beneficial owner of all of the issued and
outstanding SHARES of HOLDINGS.
(d) HOLDINGS is the record and beneficial owner of all of the issued
and outstanding shares of capital stock of each of the SUBSIDIARIES, except
2
<PAGE>
for directors' qualifying shares as reflected on Exhibit A, and such shares
are not subject to any other claims, liens or interests affecting the
right, title and interest of HOLDINGS therein and thereto.
(e) SMC is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware.
(f) Subject to the entry of an order confirming the plan, SMC has full
corporate power and authority to enter into this Agreement and to sell,
transfer and deliver the SHARES to GANT, free and clear of any lien,
encumbrance, claim, demand or charge as of the Closing.
(g) To the best of SMC's knowledge, information and belief after due
inquiry, execution of this Agreement by SMC is not in conflict with or in
violation of any existing agreement, whether formal or informal, written or
unwritten, to which SMC is a party.
(h) (i) To the best of SMC's knowledge, information and belief after
due inquiry, the Schedule of Post-Petition Intercompany Charges and Cash
Transactions Between the Debtor and the SUBSIDIARIES, annexed to the
Disclosure Statement as Exhibit P, is true, complete and accurate;
(ii) SMC has not withdrawn from the SUBSIDIARIES in the aggregate
after October 31, 1995, any amounts other than (i) $43,023 due to it as
of October 31, 1995, (ii) $21,000 per month, (iii) allocable insurance
costs incurred by SMC on behalf of the SUBSIDIARIES to the extent not
already reimbursed, (iv) the allocable share of the 1995 year-end bonus
earned by Frank Rathgeber, not to exceed $20,000, and (v) amounts paid to
GANT for his quarterly interest.
(iii) The U.K. SUB has not withdrawn from the SUBSIDIARIES any
amount of money after July 28, 1993, which has not been repaid, and the
U.K. SUB has not incurred any liability to or on behalf of any of the
SUBSIDIARIES after July 28, 1993, which has not been paid or otherwise
satisfied.
(i) The sale of the SHARES and this Agreement have been approved by a
duly entered order of the Bankruptcy Court dated April 17, 1996, after a
public auction sale conducted before the Bankruptcy Court on April 17, 1996
(the "Sale Hearing").
(j) To the best of SMC's knowledge, information and belief after due
inquiry, no other person or entity has any rights with respect to SHARES
being sold and purchased hereunder.
(k) To the best of SMC's knowledge, information and belief after due
inquiry, no representation, warranty or statement made by SMC in this
Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary to make such representation, warranty or
statement not misleading.
3
<PAGE>
(l) This Agreement, upon its execution and delivery, shall constitute
the valid and binding agreement of SMC, enforceable in accordance with its
terms.
(m) To the best of SMC's knowledge, information and belief after due
inquiry, no legal action is pending or to its knowledge threatened against
SMC which would affect its ability to sell the SHARES.
(n) All federal, state and local, income, franchise, excise, sales and
use tax ("Taxes") returns required to be filed with respect to HOLDINGS and
the SUBSIDIARIES have been filed in a timely manner, and all Taxes shown as
due on such returns have been paid.
Except as otherwise represented and warranted by SELLER as set forth in
this Section 2.1, it is understood and agreed by the Parties that SELLER is
selling and GANT is buying the SHARES of HOLDINGS "as is."
SECTION 2.2 - REPRESENTATIONS AND WARRANTIES OF PURCHASER. GANT
represents and warrants to SELLER, as of the date hereof and as of the Closing,
as follows:
(a) GANT may lawfully undertake the obligations set forth herein.
(b) To the best of GANT'S knowledge, information and belief after due
inquiry, execution of this Agreement by GANT is not in conflict with or in
violation of any existing agreement, whether formal or informal, written or
unwritten, to which GANT is a party.
(c) To the best of GANT'S knowledge, information and belief after due
inquiry, no representation, warranty or statement by GANT in this Agreement
contains any untrue statement of a material fact or omits to state a
material fact necessary to make such representation, warranty or statement
not misleading.
(d) This Agreement, upon its execution and delivery, shall constitute
the valid and binding agreement of GANT, enforceable in accordance with its
terms.
(e) To the best of GANT'S knowledge, information and belief after due
inquiry, no legal action is pending or to its knowledge threatened against
GANT which would affect his ability to purchase the SHARES.
4
<PAGE>
ARTICLE 3
---------
THE CLOSING AND DELIVERY OF DOCUMENTS
-------------------------------------
SECTION 3.1 - CLOSING. The Closing of the sale and purchase of the
SHARES hereunder (referred to herein as the "Closing") shall take place within
15 days after the entry of an order of the United States Bankruptcy Court for
the District of New Jersey approving the sale and this Agreement at the offices
or Ravin, Sarasohn, Cook, Baumgarten, Fisch & Rosen, P.C., 103 Eisenhower
Parkway, Roseland, New Jersey 07068. The date of such Closing or any adjourned
or rescheduled date thereof is referred to herein as the "Closing Date."
SECTION 3.2 - SELLER CLOSING DOCUMENTS. At the Closing, SELLER, or such
SELLER'S attorney-in-fact shall deliver:
(a) Stock certificates representing all of the SHARES of HOLDINGS
owned by SELLER duly endorsed in blank for transfer to GANT;
(b) Stock certificates, or other evidences of ownership, representing
all of the SHARES of the SUBSIDIARIES, including all of the directors'
qualifying shares duly endorsed in blank for transfer to HOLDINGS or the
designee of GANT;
(c) Documentation of the tax basis of HOLDINGS in all of its assets;
(d) Certified corporation resolutions authorizing the execution and
delivery of this Agreement and performance by SELLER of the transactions
and obligations contemplated hereunder;
(e) The resignations of all officers and directors of HOLDINGS and the
resignations of all officers and directors of each of the SUBSIDIARIES who
will not continue to be employed by a SUBSIDIARY following the purchase of
HOLDINGS by GANT;
(f) All property and corporate, financial and other records of
HOLDINGS, including without limitation, the corporate seal, minute books,
stock books, and stock transfer ledgers of HOLDINGS and the stock
certificates or other evidences of ownership by HOLDINGS of all of the
issued and outstanding shares of each of the SUBSIDIARIES; and
(g) All property and corporate, financial and other records of the
SUBSIDIARIES, including, without limitation, the corporate seals, minute
books, stock books and stock transfer ledgers of the SUBSIDIARIES to the
extent that any of the foregoing are in the possession of SELLER, the U.K.
SUB, or any of the domestic subsidiaries of SELLER.
5
<PAGE>
SECTION 3.3 - PURCHASER CLOSING DOCUMENTS.
(a) Since GANT was the successful bidder utilizing a credit bid of
$2,450,000 or less, nothing shall be required of him under this ARTICLE at
Closing.
ARTICLE 4
---------
ADDITIONAL TERMS AND PROVISIONS
-------------------------------
SECTION 4.1 - PAYMENT TO/BY GANT; WAIVER OF DEFICIENCY. SMC and GANT agree
as follows:
(a) Since GANT was the successful bidder, and was allowed a credit bid
up to the sum of $2,450,000, he shall not be required to pay at Closing any
amount of the Purchase Price.
(b) Regardless of the amount bid by GANT as the successful bidder,
GANT waives any deficiency claim against SMC.
SECTION 4.2 - USE OF NAMES, MARKS, ETC. Subject to subsections 4.2(a) and
(b), GANT shall have the right to the exclusive and uncontested use of the
tradenames, trademarks and logos which are claimed to be property rights of SMC
currently or historically used by HOLDINGS or any of the SUBSIDIARIES in the
territories so used, for a period of three (3) months (the "Use Period").
(a) GANT shall pay SMC the sum of $20,000 per month for each month of
the Use Period. Upon and after the conclusion of the Use Period, GANT,
HOLDINGS and the SUBSIDIARIES shall not in any location (i) use or cause to
be used, in the ordinary course of their businesses (including any
businesses that they may subsequently engage in) or otherwise in
competition with SMC, the SMC Domestic Subsidiaries (as defined in the
Plan) or the UK SUB, the marks "SMC" or "Science Management Corporation"
whether or not alone, in any permutation, or in combination with other
names or marks, (ii) use or cause to be used in the ordinary course of
their businesses (including any businesses that they may subsequently
engage in) or otherwise in competition with SMC, the SMC Domestic
Subsidiaries or the UK SUB any of the logos attached hereto as Exhibit B
and (iii) use or cause to be used in the ordinary course of their
businesses (including any businesses that they may subsequently engage in)
or otherwise in competition with SMC, the SMC Domestic Subsidiaries or the
UK SUB the names and trademark/service mark registrations set forth on
Exhibit C annexed hereto.
(b) At Closing, GANT shall secure the total payments under subsection
4.2(a) above with a letter of credit or its equivalent. The form and issuer
thereof shall be mutually acceptable to SELLER and GANT.
6
<PAGE>
SECTION 4.3 - MUTUAL COVENANTS NOT TO COMPETE. For the period of time
designated by GANT in Section 4.2 above, and only for that period of time:
(a) SMC agrees that neither it nor its U.K. SUB, nor any of its
subsidiaries shall compete with the businesses, as presently conducted, of
HOLDINGS and/or the SUBSIDIARIES in the countries in which they are
located.
(b) GANT agrees that neither HOLDINGS nor any of the SUBSIDIARIES
shall compete with the businesses, as presently conducted, of SMC, and/or
any of its subsidiaries, including its U.K. SUB in the countries in which
they are located.
(c) After the period of time designated has expired, the Parties and
the entities referred to herein shall have the right to compete with each
other without any of the restrictions contained in Sections 4.3(a) and (b)
above.
(d) At the Closing, SELLER shall cause each of the SUBSIDIARIES
[except Science Management Internationale S. A. (France)], the UK SUB and
each of the SMC Domestic Subsidiaries to deliver an agreement executed by
each of them acknowledging the terms and conditions of sections 4.2(a) and
4.3 of this Agreement and agreeing that each of them in its individual
capacity is bound by the terms and provisions set forth in sections 4.2(a),
4.3(a), (b) and (c) of this Agreement. GANT hereby consents to such action
by each of the SUBSIDIARIES.
Notwithstanding anything to the contrary set forth in this section 4.3, and
consistent with French law, SMC, the U.K. SUB and the SUBSIDIARIES, other than
Science Management Internationale S.A. (France), shall not be restricted in any
manner whatsoever from (i) hiring any employee of Science Management
Internationale S.A. (France), (ii) soliciting its customers, or (iii) otherwise
competing for its business.
SECTION 4.4 - INTERCOMPANY CLAIMS CANCELED; MUTUAL RELEASES. Except as
otherwise provided for herein, at and after the Closing:
(a) All intercompany debts and claims by and between (i) HOLDINGS and
the SUBSIDIARIES, on one hand, and (ii) SMC and all of its subsidiaries,
including the U.K. SUB, on the other hand, shall be deemed canceled.
(b) All agreements by and between the aforesaid parties shall be
deemed terminated.
(c) The Parties and the aforesaid parties shall exchange general
releases.
SECTION 4.5 - OPERATIONS PENDING CLOSING. Between the execution of this
Agreement and the Closing Date, SMC shall cause the SUBSIDIARIES to operate
their businesses in the ordinary course, consistent with past practice. In
addition, SMC shall not withdraw from the SUBSIDIARIES, in the aggregate, any
amounts in excess of $21,000 per month, together with the allocable insurance
costs incurred by SMC on behalf of the SUBSIDIARIES to the extent not already
reimbursed and the allocable share of the 1995 year-end bonus paid to Frank
Rathgeber not to exceed $20,000, to the extent not already reimbursed.
7
<PAGE>
ARTICLE 5
---------
MISCELLANEOUS
-------------
SECTION 5.1 - BINDING EFFECT. The provisions of this Agreement shall
inure to the benefit of and shall be binding upon and enforceable against the
respective Parties hereto, their heirs, legal representatives, successors and
assigns.
SECTION 5.2 - COUNTERPARTS. This Agreement may be executed
simultaneously in counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
SECTION 5.3 - GOVERNING LAW AND JURISDICTION. This Agreement is being
delivered and is intended to be performed in the State of New Jersey and shall
be considered and enforced in accordance with the laws of such state. In the
event of a dispute or controversy under this Agreement, the Parties agree to
submit to the exclusive jurisdiction of the United States Bankruptcy Court for
the District of New Jersey.
SECTION 5.4 - ENTIRE AGREEMENT. This Agreement, together with the
exhibits thereto and all other documents required or permitted under the terms
of this Agreement, constitutes the entire agreement of the parties hereto
relative to the subject matter hereof and supersedes all prior agreements and
undertakings between any of the parties hereto.
SECTION 5.5 - CAPTIONS. The section headings or captions contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning, content or interpretation hereof.
SECTION 5.6 - FURTHER ASSURANCES. Any of the parties hereto shall,
without any further consideration, at the request of any other party, execute
and deliver or cause to be executed and delivered, all such documents or
instruments and take or cause to be taken, such further action, as shall be
reasonably necessary or appropriate to effectuate the transactions contemplated
hereunder.
SECTION 5.7 - SEVERABILITY. If any term or provision of this Agreement
is held to be invalid by any Court of competent jurisdiction, such invalidity
shall not affect the other terms and provisions of this Agreement, which shall
remain in full force and effect.
SECTION 5.8 - NOTICES. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed given on
the earlier of the date the same is (i) personally delivered with receipt
acknowledged, (ii) mailed by certified mail , return receipt requested, postage
prepaid, or (iii) sent by facsimile, telex or telegraph, addressed as follows:
8
<PAGE>
SMC: Science Management Corporation
721 Route 202-206
Bridgewater, New Jersey 08807
Attention: Marion G. Hilferty, Secretary
and Vice President
Facsimile Number: (908) 722-0421
With a Copy to:
Ravin, Sarasohn, Cook, Baumgarten,
Fisch & Rosen, P.C.,
103 Eisenhower Parkway
Roseland, New Jersey 07068-1072
Attention: Paul Kizel, Esq. and
David N. Ravin, Esq.
Facsimile Number: (201) 228-9250
GANT: Donald R. Gant
Young's Road
P.O. Box 83
New Vernon, New Jersey 07976
With a Copy to:
Jerry E. Muntz, Esq.
Haythe & Curley
237 Park Avenue
New York, New York 10017
Facsimile Number: (212) 682-0200
- and -
Frank J. Vecchione, Esq.
Crummy, Del Deo, Dolan,
Griffinger & Vecchione
One Riverfront Plaza
Newark, New Jersey 07102
Facsimile Number: (201) 596-0545
SECTION 5.9 - MODIFICATIONS. This Agreement may not be modified,
altered or amended except by a writing executed by the Parties hereto.
9
<PAGE>
SECTION 5.10 - GENDER. Whenever necessary or appropriate, the use
herein of any gender shall be deemed to include the other gender.
SECTION 5.11 - SURVIVAL. The representations and warranties in ARTICLE
2 shall survive the Closing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
SELLER:
ATTEST: SCIENCE MANAGEMENT CORPORATION
_______________________________ By:____________________________
MARION G. HILFERTY, Secretary JAMES A. SKIDMORE, JR.,
President
WITNESS (ATTEST):
________________________________ ____________________________
DONALD R. GANT
10
Exhibit 21.1
State or jurisdiction
of incorporation
---------------------
SMC ENVIRONMENTAL SERVICES GROUP, INC. Pennsylvania
SMC McEVER, INC. Texas
SMC BUSINESS INFORMATION SYSTEMS, INC. Delaware
SMC MANAGEMENT SERVICES GROUP, INC. New Jersey
SCIENCE MANAGEMENT CORPORATION (UK) LTD. UK
SMC REAL TIME SYSTEMS, INC. Connecticut
SMC HENDRICK, INC. Massachusetts
SMC PERSONNEL SUPPORT, INC. Delaware
SMC ENGINEERING, INC. Delaware
SCIENCE MANAGEMENT CORPORATION New Jersey
LOCHPRIDE, LTD. UK
SMC INTERNATIONAL S.A.R.L. France
All subsidiaries conduct business under their own names except that SMC
Management Services Group, Inc. conducts business under the name SMC Consulting.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Column 1 represent the five-month financial data after the bankruptcy emergence.
Column 2 represents the seven-month financial data prior to the bankruptcy
emergence.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
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<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> AUG-01-1996 JAN-01-1996
<PERIOD-END> DEC-31-1996 JUL-31-1996
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<DEPRECIATION> (37) 0
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0 0
1,750 1,750
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<OTHER-EXPENSES> (41) (113)
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</TABLE>