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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 28, 1997
SONIC ENVIRONMENTAL SYSTEMS, INC.
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(Exact name of Registrant as specified in charter)
Delaware 0-21832 13-1949528
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification Number)
incorporation)
141 New Road, Parsippany, New Jersey 07054
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 882-9288
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP
On July 17, 1996, certain of Registrant's creditors instituted an
involuntary liquidation proceeding against Registrant under Chapter 7 of the
Federal Bankruptcy Code in the United States Bankruptcy Court for the District
of New Jersey (#96-26268).
Upon Registrant's motion, the Court converted this involuntary proceeding
into a Chapter 11 voluntary reorganization proceeding on September 16, 1996,
thereby permitting Registrant's management to remain in control of Registrant's
business operations while attempting to formulate a reorganization plan that
would be acceptable to both creditors and the Court.
On March 7, 1997, Registrant filed a plan of reorganization with the Court.
On or about April 21, 1997, Registrant filed a first amended plan of
reorganization with the Court. On June 3, 1997, Registrant filed certain
modifications to the first amended plan of reorganization with the Court (the
plan of reorganization, as so amended and modified, is hereinafter referred to
as the "Plan").
On July 3, 1997, following approval of the Plan by the requisite number and
percentage of Registrant's creditors and a confirmation hearing held by the
Court on June 16, 1997, the Court entered an order confirming the Plan (the
"Confirmation Order"), subject to certain non-material modifications therein as
more fully set forth in the Confirmation Order.
The Plan calls for Registrant's consolidation (the "Consolidation") with
Turbotak Technologies, Inc. ("Turbotak"), a privately-owned Canadian company
engaged in the design, manufacture and servicing of air pollution control
equipment, to form a company which will be called TurboSonic Technologies, Inc.
("TurboSonic").
The Plan provides that TurboSonic will have 10,000,000 shares of common
stock outstanding following the Consolidation, of which 8,200,000 shares or 82%
will be beneficially owned by Turbotak's present shareholders, and 1,255,700
shares or approximately 12.6% will be issued to Registrant's then shareholders
on a pro rata basis. The balance of such 10,000,000 shares will be issued to
Registrant's creditors and others as described in the Plan.
The Plan also provides that all existing and outstanding shares of
Registrant's common stock, as well as all outstanding warrants and options to
purchase Registrant's common stock, will be cancelled.
Upon completion of the Consolidation, Turbotak's secured claims against
Registrant of approximately $940,000 will be extinguished.
Registrant anticipates that the Consolidation will be completed no later
than September 1997.
Copies of the Plan and the Confirmation Order, as well as the most recent
unaudited balance sheet of Registrant filed with the Court, are attached as
exhibits hereto.
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Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(c) Exhibits
99.1 First Amended Plan of Reorganization, as modified
99.2 Bankruptcy Court Order
dated July 3, 1997 confirming
Registrant's plan of reorganization.
99.3 Registrant's balance sheet (unaudited) as of
April 30, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 28, 1997 SONIC ENVIRONMENTAL SYSTEMS, INC.
(registrant)
By: /s/ Richard H. Hurd
--------------------------------
Richard H. Hurd
President
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RAVIN, SARASOHN, COOK,
BAUMGARTEN, FISCH & ROSEN
A Professional Corporation
103 Eisenhower Parkway
Roseland, New Jersey 07068-1072
Bruce Buechler, Esq. (BB 0324)
(201) 228-9600
Attorneys for Debtor
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
_________________________________
:
In re: : Honorable Rosemary Gambardella
:
SONIC ENVIRONMENTAL SYSTEMS, : Case No. 96-26268
INC., :
: Chapter 11
Debtor. :
:
_________________________________
DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION AS MODIFIED
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TABLE OF CONTENTS
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Page
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INTRODUCTION.............................................. 1
ARTICLE I - DEFINITIONS................................... 2
ARTICLE II - CLASSIFICATION OF CLAIMS AND INTERESTS....... 10
ARTICLE III - TREATMENT OF ADMINISTRATIVE AND TAX CLAIMS.. 11
ARTICLE IV - TREATMENT OF CLASSES UNDER THE PLAN.......... 14
ARTICLE V - CLASSES OF CLAIMS AND INTERESTS
IMPAIRED AND ENTITLED TO VOTE.............. 18
ARTICLE VI - MEANS FOR IMPLEMENTATION OF THE PLAN......... 19
ARTICLE VII- MANAGEMENT OF THE REORGANIZED DEBTOR......... 22
ARTICLE VIII - EXECUTORY CONTRACTS AND UNEXPIRED LEASES... 24
ARTICLE IX - EVENTS OF DEFAULT UNDER THE PLAN............. 26
ARTICLE X - RETENTION OF JURISDICTION BY THE
BANKRUPTCY COURT........................... 27
ARTICLE XI - CONDITIONS PRECEDENT TO CONFIRMATION
AND EFFECTIVENESS OF THE PLAN.............. 30
ARTICLE XII - DISCHARGE AND TITLE TO PROPERTY............. 31
ARTICLE XIII- MISCELLANEOUS PROVISIONS OF THE PLAN........ 33
SIGNATURES................................................ 40
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INTRODUCTION
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Sonic Environmental Systems, Inc. (the "Debtor") hereby proposes the
following Plan of Reorganization (hereinafter the "Plan") pursuant to the
provisions of Chapter 11 of Title 11 of the United States Code, 11 U.S.C. (S)(S)
101, et seq.
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1
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ARTICLE I - DEFINITIONS
-----------------------
Unless otherwise provided in this Plan, all terms used herein shall have
the meanings assigned to such terms in Title 11 of the United States Code. For
the purposes of this Plan, the following terms (which appear in the Plan in
capitalized terms) shall have the meanings set forth below, and such meanings
shall be equally applicable to the singular and to the plural form of the terms
defined, unless the context otherwise requires.
1.1 "ADMINISTRATIVE CLAIM" shall mean, and be the collective reference to,
all costs and expenses of administration of the Reorganization Case with
priority under Bankruptcy Code Section 507(a)(1), including, without limitation,
costs and expenses allowed under Bankruptcy Code Section 503(b), the actual and
necessary costs and expenses of preserving the Estate of the Debtor, and the
indebtedness or obligations incurred or assumed by the Debtor and any fees or
charges assessed against the Estate of the Debtor under 28 U.S.C. Section 1930.
No Claim of Turbotak shall or should be deemed to be an Administrative Claim.
1.2 "ALLOWED CLAIM" shall mean a Claim which (i) has been scheduled by the
Debtor pursuant to Bankruptcy Rule 1007 and (a) is not scheduled as disputed,
contingent or unliquidated, or (b) is not a Claim as to which no proof of Claim
has been filed; (ii) is a Claim as to which a timely proof of Claim has been
filed as of the Bar Date and no objection thereto, or application to equitably
subordinate or otherwise limit recovery, has been made; or, (iii) has been
allowed by a Final Order. An Allowed Claim shall not include interest on the
amount of any Claim except with respect to an Allowed Secured Claim as permitted
by Section 506(b) of the Bankruptcy Code or as specifically provided in the
Plan.
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1.3 "ALLOWED [CLASS DESIGNATION] CLAIM" or "ALLOWED [CLASS DESIGNATION]
INTEREST" shall mean an Allowed Claim or an Allowed Interest in the specified
Class.
1.4 "ALLOWED PRIORITY CLAIM" shall mean that portion of an Allowed Claim
entitled to priority under Section 507(a) of the Bankruptcy Code exclusive of
Allowed Tax Claims. No Claim of Turbotak shall or shall be deemed to be an
allowed Priority Claim.
1.5 "ALLOWED SECURED CLAIM" shall mean that portion of an Allowed Claim,
equal to the value, as determined by the Bankruptcy Court pursuant to Section
506(a) of the Bankruptcy Code and Bankruptcy Rule 3012, of the interest of the
Holder of the Allowed Secured Claim in the properties of the Debtors securing
such Allowed Secured Claim.
1.6 "ALLOWED TAX CLAIM" shall mean that portion of an Allowed Claim which
is entitled to priority under Section 507(a)(7) of the Bankruptcy Code.
1.7 "ALLOWED UNSECURED CLAIM" shall mean any Allowed Claim which is not
an Administrative Claim, not an Allowed Priority Claim, not an Allowed Secured
Claim and not an Allowed Tax Claim.
1.8 "ASSET" shall mean all of the right, title and interest of the
Debtor in and to property of whatsoever type or nature (real, personal and
mixed) including property of the Estate as is defined in Bankruptcy Code Section
541, including Causes of Action.
1.9 "BANKRUPTCY CODE" shall mean Title 11 of the United States Code, 11
U.S.C. (S)(S)101 et seq., together with all amendments, modifications and
replacements as the same exist on any relevant date to the extent applicable to
the Debtor's bankruptcy case.
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1.10 "BANKRUPTCY COURT" shall mean the United States District Court for the
District of New Jersey with jurisdiction over this Reorganization Case and, to
the extent of any reference made pursuant to 28 U.S.C. Section 157, the United
States Bankruptcy Court for the District of New Jersey or any court having
competent jurisdiction to enter the Confirmation Order.
1.11 "BANKRUPTCY RULES" shall mean the Rules of Bankruptcy Procedure,
effective August 1, 1983, or the Federal Rules of Bankruptcy Procedure,
effective August 1, 1991, in accordance with the provisions of Section 2075,
Title 28, United States Code, as the same shall from time to time be amended.
1.12 "BAR DATE" shall mean April 14, 1997, the date by which all Persons
asserting a Claim or Interest must file a Proof of Claim or a Proof of Interest
or be forever barred from asserting such Claim or Interest against the Debtor or
its property, and from voting on the Plan and/or sharing in any distribution
thereunder.
1.13 "BUSINESS DAY" shall mean a day (i) other than Saturday, Sunday, legal
holiday or other day on which commercial banks in the State of New Jersey are
authorized or required by law to close or (ii) as defined in Bankruptcy Rule
9006(a).
1.14 "CASH" shall mean cash equivalents in certified or immediately
available funds, including but not limited to bank deposits, checks and similar
items.
1.15 "CAUSE OF ACTION" shall mean all rights, claims, torts, liens,
liabilities, obligations, actions, causes of action, avoiding powers, suits,
proceedings, debts, contracts, judgments, damages and demands
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whatsoever in law or in equity, whether known or unknown, contingent or
otherwise, that the Debtor now has.
1.16 "CLAIM" shall mean:
A. a right to payment from the Debtor (including, without
limitation, a guarantee) whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured; or
B. a right as against the Debtor to an equitable remedy for breach
of performance if such breach gives rise to a right to payment, whether or not
such right to an equitable remedy is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured.
1.17 "CLASS" shall mean any group of Holders of Claims or Interests as
specified in Article II of the Plan.
1.18 "COMMITTEE" shall mean the Official Committee of Unsecured Creditors
appointed by the Office of the United State's Trustee in this Reorganization
Case.
1.19 "CONFIRMATION DATE" shall mean the date on which the Confirmation
Order is entered by the Bankruptcy Court. The Confirmation Date may be
adjourned from time to time, by the Bankruptcy Court, without further notice
other than the announcement of the adjourned date at the hearing to consider
Confirmation of the Plan.
1.20 "CONFIRMATION ORDER" shall mean the order of the Bankruptcy Court
confirming the Plan, pursuant to Section 1129 of the Bankruptcy Code, and
approving the transactions contemplated herein.
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1.21 "CONTROLS" shall mean Sonic Environmental Controls, Inc., a
wholly-owned subsidiary of the Debtor.
1.22 "CREDITOR" shall mean any person that is a Holder of a Claim against
the Debtor that arose or is deemed to have arisen on or before the Filing Date
with respect to each of the Debtors, including, without limitation, Claims of
the kind specified in Bankruptcy Code Sections 502(b), 502(h) or 502(i).
1.23 "DEBTOR" shall mean Sonic Environmental Systems, Inc.
1.24 "DISBURSING AGENT" shall mean (i) the Committee for the Cash
distributions to Holders of Allowed Unsecured Claims in Class 3 and (ii)
TurboSonic for the stock distribution in Class 3 and all other distributions
required under the Plan.
1.25 "DISCLOSURE STATEMENT" shall mean the Disclosure Statement for the
Plan of Reorganization and exhibits thereto, filed pursuant to Bankruptcy Code
Section 1125.
1.26 "DISPUTED CLAIM" shall mean 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 by 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 the 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 the 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
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scheduled by the Debtor in its Schedules of Liabilities as other than disputed,
contingent or unliquidated.
1.27 "EFFECTIVE DATE" shall mean 20 days after the Confirmation Date
provided that the Confirmation Order has become a Final Order. If the
Confirmation Order has not become a Final Order, then the Effective Date shall
be when the Confirmation Order has become a Final Order unless the Debtor and
Turbotak waive this condition in writing.
1.28 "EQUITY INTEREST" OR "INTEREST" shall mean collectively the
shareholders or stockholders of the Debtor as of the Filing Date.
1.29 "ESTATE" shall mean the estate of the Debtor created by Section 541 of
the Bankruptcy Code.
1.30 "EXECUTORY CONTRACT" shall mean any executory contract or unexpired
lease, subject to Section 365 of the Bankruptcy Code, between the Debtor and any
other Person, specifically excluding all of the contracts and agreements
entered into pursuant to this Plan.
1.31 "FILED" shall mean filed with the Bankruptcy Court in the Debtor's
bankruptcy case.
1.32 "FILING DATE" shall mean July 17, 1996, the date an involuntary
petition was filed against the Debtor. An Order for Relief under Chapter 11 was
entered on September 16, 1996.
1.33 "FINAL ORDER" shall mean an order or judgment of the Bankruptcy Court
as entered on the docket that has not been reversed, stayed, modified or amended
and as to which the time to appeal, petition for certiorari, or seek reargument
or rehearing has run or as to which any right to appeal, reargue, petition for
certiorari or seek rehearing has been waived in writing in a manner satisfactory
to the Debtor or, if an appeal, reargument, petition for certiorari, or
rehearing thereof has been denied,
7
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and the time to take any further appeal or to seek certiorari or further
reargument or rehearing has expired. Notwithstanding, and in lieu of the
foregoing, insofar as the Confirmation Order confirming the Plan is concerned,
Final Order means such order or judgment with respect to which no stay is in
effect.
1.34 "HOLDER" shall mean the owner or holder of any Claim or of any
Interest.
1.35 "INITIAL DISTRIBUTION DATE" shall mean the later of (i) ten Business
Days after the Effective Date or (ii) such other date as the Bankruptcy Court
may order.
1.36 "INSIDER" shall have the meaning assigned to such term in (S)101(31)
of the Bankruptcy Code.
1.37 "PERSON" shall mean any individual, corporation, limited liability
corporation, general partnership, limited partnership, limited liability
partnership, association, joint stock company, joint venture, estate, trust,
unincorporated organization, government or any political subdivision thereof or
other entity.
1.38 "PLAN" shall mean this Plan of Reorganization (as the same may be from
time to time, modified or amended by the Debtors in accordance with the
Bankruptcy Code, the Bankruptcy Rules and this Plan) and any exhibits hereto and
any documents incorporated herein by reference.
1.39 "PRIORITY CLAIM" shall mean all Claims that are entitled to priority
pursuant to Section 507(a) of the Bankruptcy Code and that are not
Administrative Claims or Tax Claims.
1.40 "PRO RATA" shall mean, as to any distribution provided for by the Plan
in respect of any Class of Claims, the allocation of the aggregate
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amount of such distribution to any Class in accordance with that percentage of
the total of Allowed Claims in such Class that is represented by the Allowed
Claim receiving the distribution.
1.41 "REORGANIZATION CASE" shall mean the Debtor's Chapter 11 case which is
pending before the Bankruptcy Court.
1.42 "REORGANIZED DEBTOR" shall mean the entity resulting from the merger
of the Debtor and Turbotak, resulting in an entity to be called TurboSonic
Technologies, Inc.
1.43 "SECURED CLAIM" shall mean a Claim secured by a lien or security
interest on any Asset, which lien or security interest is valid, perfected and
enforceable and is not subject to avoidance under the Bankruptcy Code or under
other applicable non-bankruptcy law, but only to the extent that such Claim does
not exceed the value of the Asset securing such Claim.
1.44 "TAX CLAIM" shall mean a Claim of the kind specified in Section
507(a)(7) of the Bankruptcy Code, whether or not such Claim would be entitled to
priority under that Section.
1.45 "TURBOTAK" shall mean Turbotak Technologies, Inc.
1.46 "TURBOSONIC" shall mean the entity resulting from the merger of the
Debtor and Turbotak resulting in an entity to be called TurboSonic Technologies,
Inc.
1.47 "UNSECURED CLAIM" shall mean any claim which is not an Administrative
Claim, not a Secured Claim, not a Priority Claim and not a Tax Claim.
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ARTICLE II - CLASSIFICATION OF CLAIMS AND INTERESTS
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All Claims and all Interests, as defined herein and in Section 101(5) of
the Bankruptcy Code against the Debtor, of whatever kind or nature, whether or
not scheduled or liquidated, absolute or contingent, whether resulting in an
Allowed Claim or not, shall be bound by the provisions of the Plan and are
hereby classified as follows.
2.1 CLASSIFICATION OF CLAIMS. Section 2.2 sets forth the designation of
Classes of Claims. A Claim is classified in a particular Class for voting and
distribution purposes only to the extent that the Claim qualifies within the
description of the Class and is classified in a different Class or Classes to
the extent any remainder of the Claim qualifies within the description of that
different Class or Classes. Unless otherwise provided, to the extent a Claim
qualifies for inclusion in a more specifically-defined Class and a more
generally-defined Class, it shall be included in the more specifically-defined
Class.
2.2 CLASSES. For purposes of this Plan, those Persons holding Claims and
Interests against the Debtor are grouped in accordance with Section 1122(a) of
the Bankruptcy Code.
A. Class 1: Allowed Priority Claims. This Class consists of all
---------------------------------
Allowed Priority Claims other than Claims of taxing authorities entitled to
priority under Section 507(a)(1) or (7) of the Bankruptcy Code.
B. Class 2: Consists of Claims of Turbotak.
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C. Class 3: Consists of Unsecured Claims.
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D. Class 4: Consists of Equity Interests.
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ARTICLE III - TREATMENT OF ADMINISTRATIVE AND TAX CLAIMS
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3.1 ADMINISTRATIVE CLAIMS.
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A. Administrative Claims. All costs or expenses of administration
----------------------
related to the Debtor's bankruptcy case from the commencement of the bankruptcy
case, which include, without limitation, fees and expenses of all attorneys,
accountants, appraisers, consultants, and all other professionals retained by
the Debtor and the Committee, all post-petition claims, expenses and payables
(known or unknown and hereafter arising), and all other administration expenses,
shall be paid by TurboSonic (i) in cash on the Initial Distribution Date or (ii)
within ten (10) days after an Order of the Bankruptcy Court approving and
allowing the appropriate fee applications becomes a Final Order unless such
Holder shall agree to different treatment of its Claim; provided, however, (a)
that Administrative Claims representing obligations incurred in the ordinary
course of the Debtor's businesses shall be paid or performed in accordance with
the terms of such agreement(s) relating thereto and (b) the fees and expenses of
the Committee's professionals for which TurboSonic is required to pay are capped
at $60,000 for Ravin, Greenberg & Marks and at $25,000 for M.R. Weiser. Any
fees and expenses Allowed by Bankruptcy Court Order to the Committee's
professionals above these caps shall be paid out of the cash available for
distribution in Class 3. The Debtor's professionals have agreed to the following
caps: (i) Arthur Andersen will not receive any fees beyond its initial cap of
$40,000 and (ii) Ravin, Sarasohn, Cook, Baumgarten, Fisch and Rosen, P.C. is
capped at $25,000 beyond its initial retainer, but excluding any fees and
disbursements for preparation of the merger documents and litigation in
adversary proceedings including, but not limited to, the intellectual property
litigation. No interest shall be paid on any Administrative Claim unless
expressly allowed by a Final Order of the Bankruptcy Court.
B. Applications for Professional Fees. All applications for
-----------------------------------
professional fees for services rendered and reimbursement of expenses in
connection with the Reorganization Case and with the Plan prior to the
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Effective Date are Administrative Claims and shall be filed with the Bankruptcy
Court within ninety (90) days after the Effective Date. Any application not
filed within ninety (90) days after the Effective Date shall be barred from
receiving payment on account thereof. Turbotak promptly shall pay or cause
payment of professional fees for services rendered prior to the Confirmation
Date in accordance with paragraph 3.1(A) above on the Effective Date or when
allowed by a Final Order of the Bankruptcy Court, whichever is earlier. Only
professional fees of the Debtor for services rendered in connection with the
Reorganization Case and the Plan after the Confirmation Date, including those
relating to the resolution of Disputed Claims, and all expenses of the
Disbursing Agent, shall be paid by or caused to be paid by TurboSonic upon the
submission of invoices without the requirement of Bankruptcy Court approval.
Any objection(s) thereto by TurboSonic not amicably resolved shall be
adjudicated by the Bankruptcy Court. The Committee's professionals can seek
payment of fees and expenses for the post-confirmation period upon submission of
an appropriate application and entry of an Order of the Bankruptcy Court. Any
such award of fees and expenses to the Committee's professionals above the caps
set forth above shall be paid out of the Cash available for distribution to the
Holders of Allowed Unsecured Claims, not from TurboSonic.
3.2 TAX CLAIMS. All Tax Claims shall be paid by TurboSonic their Allowed
amount over a period of six years from the date of assessment thereof or else on
the Effective Date, whichever is later, in equal consecutive quarterly payments
commencing on the Effective Date pursuant to Bankruptcy Code Section 1129(a)(9).
Said Tax Claims may be prepaid at any
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time without penalty. Interest on Allowed Tax Claims shall be paid at the rate
of 8.25% per annum.
To the extent that any federal, state or municipal taxing authorities
asserts a claim for taxes owed as a result of transfers made pursuant to the
Plan, any such Allowed Tax Claim shall be paid by TurboSonic over six years in
equal consecutive quarterly payments commencing on the later of the Effective
Date or the date as which an Order allowing such claim(s) becomes a Final Order.
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ARTICLE IV - TREATMENT OF CLASSES UNDER THE PLAN
4.1 SATISFACTION OF CLAIMS. The treatment of and consideration to be
received by Holders of Allowed Claims and by Holders of Allowed Interests
pursuant to this Article IV of the Plan shall be in full satisfaction, release
and discharge of their respective Claims and Interests against the Debtor.
4.2 CLASS 1: ALLOWED PRIORITY CLAIMS. Each Holder of an Allowed Priority
Claim shall receive 100% of the Allowed amount of such Claim in Cash on the
later of the date on which such Allowed Priority Claim is due and payable or in
accordance with the terms of its written agreement with Turbotak or the Debtor.
4.3 CLASS 2: CLAIMS OF TURBOTAK. Turbotak's pre-petition Secured Claim
in the amount of approximately $940,000 and post-petition super priority claim
in the amount of approximately $100,000 shall be extinguished in its entirety on
the Effective Date. The Reorganized Debtor shall issue upon Confirmation to
Turbotak or its shareholders (as directed by Turbotak) 82% of the shares of
stock of the Reorganized Debtor in complete and full satisfaction of Turbotak's
claims.
4.4 CLASS 3: UNSECURED CLAIMS. Holders of Allowed Unsecured Claims shall
receive on the Effective Date a pro rata basis, in full and complete
satisfaction of their Claims, (i) the $100,000 in cash received from the sale of
Controls; (ii) an assignment of the note for $100,000 plus interest at 10%
received by the Debtor from the sale of Controls secured by a lien on two
patents, personally guaranteed by Chris Sagar, and is not subject to any setoff,
offset or counterclaim; (iii) 250,000 shares of stock of the Reorganized Debtor;
(iv)
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any net proceeds recovered from preference actions and voidable gap period
transfers.
The cost of disbursing the Cash (and the note when due) and any
professional fees and expenses incurred by the Committee's professionals above
the cap of $60,000 for Ravin, Greenberg & Marks and $25,000 for M.R. Weiser
shall be paid out of the Cash available for distribution in Class 3./1/
4.5 CLASS 4: EQUITY INTERESTS. All existing and outstanding stock,
warrants and options of the Debtor shall be terminated and cancelled effective
on the Effective Date. Turbotak shall consolidate with the Debtor on the
Effective Date in accordance with the provisions of Section 4.11 hereof. The
merged entity (the Reorganized Debtor) shall be a public entity known as
TurboSonic. The Reorganized Debtor shall be authorized to issue the following
numbers of shares of common stock which shall be exempt from all federal and
securities laws pursuant to 11 U.S.C. Section 1145:
Turbotak/2/ 8,200,000 shares
Holders of Allowed
Unsecured Claims 250,000 shares
Purchaser of Controls 25,000 shares
Gaines, Berland, Inc. and
its nominees/3/ 189,000 shares
- ----------
/1/ Of the shares allocated for unsecured creditors, Ravin, Greenberg & Marks
will receive 20,000 shares in the Reorganized Debtor. In addition, the
Committee's professionals (attorneys and accountants) will be able to receive up
to the amount of $7,500.00 from the initial $100,000.00 cash distribution, and
up to another $7,500.00 from the promissory note toward satisfaction of their
fees. The Committee's professional can recover any additional fees, without
limitation, from preference and gap transfer claims.
/2/ The Debtor's existing Board Members, Richard Hurd, Richard Horgan and
Robert Ferb, shall receive from Turbotak approximately 225,000 shares in total
in connection with the merger, plus options to purchase additional shares of
TurboSonic. The option price is $1.00 per share and must be exercised within two
years of the Confirmation Date or they shall expire and be null and void. The
Turbotak shares shall be issuable in exchange for the Sonic Canada Class B
Shares as more particularly described in Section 4.11 hereof.
/3/ Gaines, Berland, Inc. and its nominees shall receive from Turbotak
approximately 125,000 additional shares. Gaines, Berland, Inc. and its nominees
paid $110,000 in connection with its purchase of all of these shares.
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Former and Current Employees of the
Debtor and Controls/3/ 80,300 shares
Former stockholders of the
Debtor on a pro rata basis 1,255,700 shares
-----------------
TOTAL 10,000,000 SHARES
4.6 A. FULL AND FINAL SATISFACTION. All payments and all distributions
hereunder shall be in complete and full and final satisfaction, settlement,
release and discharge of all Claims of any kind or nature whatsoever known or
unknown, from the beginning of time up to the Confirmation Date against the
Debtor.
4.7 FRACTIONAL CENTS. Whenever any payment of a fraction of a cent would
otherwise be called for, the actual payment shall reflect a rounding of such
fraction to the nearest whole cent (rounding down in the case of .5).
4.8 UNCLAIMED PAYMENTS. Any payment to a Creditor under this Plan that is
not claimed and cashed within 3 months of the payment shall be forfeited and the
payment redistributed to holders of Allowed Claims in the Class of that
particular creditor.
4.9 DE MINIMIS PAYMENTS. No payment shall be required to be made to the
Holder of a Claim under this Plan unless the amount of the payment is at least
$25.00.
- ----------
/4/ The following people shall receive the number of shares listed next to
their name: Sonic Systems Employees: Frank Kretch, 5,800; John Tricarico, 5,800;
Florence Brophy, 5,800; Rich Roland, 5,800; Katherine DeLaurentis, 1,500; Nancy
Esposito, 3,000; Cheryl Brough, 3,000; Sharon Liparini, 4,200; Harold McNamara,
14,000. Sonic Controls Employees: Mark Metke, 14,000; M. Litzenberg, 3,000; R.
Foucault, 2,100; E. Thompson, 2,100; Marylou Metke, 4,200; I. Mallkazi, 2,100;
S. Simpson, 3,000; A. Rothstein, 1,000. TOTAL: 80,300.
16
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4.10 CLAIM WAIVERS. The Debtor's directors, Richard Hurd, Richard Horgan
and Robert Ferb, shall waive any pre-petition unsecured claim they have against
the Estate for distribution purposes only, but they shall be entitled to vote
their claims in connection with the Plan and use their claims as a setoff or
offset to any preference action commenced against them. The Estate shall waive
all preference claims against Mr. Hurd up to $15,000.00 and Messrs. Horgan and
Ferb up to $4,000.00 each.
Section 4.11 METHOD FOR ISSUANCE OF TURBOTAK SHARES
A. Debtor Name Change; Incorporation of Sonic Canada, Inc. Upon the
Effective Date, the Debtor will amend its certificate of incorporation to
change its name to TurboSonic, Inc. ("TurboSonic"). TurboSonic shall
incorporate a subsidiary corporation in the Province of Ontario, Canada, to
be designated Sonic Canada, Inc. ("Sonic Canada"), which will be authorized
to issue two classes of common stock, i.e., Class A and Class B. The
----
Reorganized Debtor will be issued 100% of the Sonic Canada Class A shares
in exchange for a nominal capital contribution.
B. EXCHANGE OF TURBOTAK SHARES FOR SONIC CANADA CLASS B SHARES. Upon the
Effective Date, holders of shares of Turbotak shall exchange one hundred
percent (100%) of the shares of Turbotak for Sonic Canada Class B shares,
which shall be distributed to each Turbotak shareholder on a pro rata basis
in accordance with their respective equity interests in Turbotak. As a
result of this exchange, Turbotak shall become a wholly owned subsidiary of
Sonic Canada. The exchange by Turbotak shareholders of their shares for
Sonic Canada Class B shares is subject to the approval of the shareholders
of Turbotak in accordance with the requirements of Canadian law.
C. EXCHANGE OF SONIC CANADA CLASS B SHARES. The Sonic Canada Class B
shares shall be exchangeable, at the election of the holders of such
shares, into an equivalent of such shares of Reorganized Debtor common
stock. The Reorganized Debtor, Sonic Canada, and a commercial bank shall
serve as trustee, shall enter into a Voting and Exchange Trust Agreement
pursuant to which the trustee shall exercise such voting rights, privileges
and preferences as may be required to secure voting rights relating to the
common stock of the Reorganized Debtor for the benefit of the holders of
the Sonic Canada Class B shares as if such holders had exchanged their
shares for Reorganized Debtor common stock.
D. RESERVATIONS FOR ISSUANCE OF TURBOTAK SHARES. Upon the Effective Date,
the Reorganized Debtor shall reserve up to 8,200,000 of its authorized
common stock for issuance upon the exchange of any Sonic Canada Class B
shares.
17
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ARTICLE V - CLASSES OF CLAIMS
AND INTERESTS IMPAIRED AND ENTITLED TO VOTE
-------------------------------------------
5.1 IMPAIRMENT. In the event of any issue or controversy regarding
-----------
whether a Claim or Interest is impaired or unimpaired, the Bankruptcy Court
shall determine whether the Allowed Claim, Allowed Interest, Class of Allowed
Claims or Class of Allowed Interest is impaired or is unimpaired.
5.2 UNIMPAIRED CLASSES. Allowed Claims in Class 1 are not impaired under
-------------------
the provisions of the Plan. The Debtor is not soliciting acceptances from
Holders of Claims in this Class because, under Section 1126(f) of the Bankruptcy
Code, Claims in this Class are conclusively presumed to have accepted the Plan.
5.3 IMPAIRED CLASSES. Allowed Claims or Allowed Interests in Classes 2, 3
-----------------
and 4 are impaired under the provisions of the Plan. The Debtor is soliciting
acceptances from the Holders of Allowed Claims and of Allowed Interests in these
Classes.
18
<PAGE>
ARTICLE VI - MEANS FOR IMPLEMENTATION OF THE PLAN
-------------------------------------------------
6.1 BAR DATE FOR OBJECTIONS TO CLAIMS. Unless an earlier time is set by
Order of the Bankruptcy Court, all objections to Claims shall be filed by the
later of sixty (60) days after the Confirmation Date or thirty (30) days after a
particular proof of claim is filed, unless these deadlines are extended by an
Order of the Bankruptcy Court.
6.2 UNCLAIMED PROPERTY. Any Cash, including interest earned thereon (if
any), that is unclaimed for a period of three (3) months after distribution
thereof by mail to the latest known mailing address Filed by or for the Person
entitled thereto (or to the last mailing address maintained in the records of
the Debtors) shall revest in the Reorganized Debtor.
6.3 MANNER OF PAYMENTS UNDER THE PLAN. At the option of the Disbursing
Agent, any Cash payment to be made pursuant to the Plan may be made by check or
wire transfer or as otherwise required or provided for in any applicable
agreement.
6.4 METHODS OF MAKING DISTRIBUTIONS UNDER THE PLAN.
A. CASH DISTRIBUTIONS TO HOLDERS OF ALLOWED UNSECURED CLAIMS IN CLASS
3. The Committee shall be the Disbursing Agent for all Cash distributions
(including the note received by the sale of Controls) to Holders of Allowed
Unsecured Claims in Class 3. All reasonable fees and expenses of the Committee
as Disbursing Agent shall be paid from the funds available for distribution in
Class 3 after Bankruptcy Court approval.
B. ALL OTHER DISTRIBUTIONS. TurboSonic shall be the Disbursing Agent
for (i) stock distributions to Class 3 Holders and (ii) all other
19
<PAGE>
distributions required under the Plan. All reasonable fees and expenses of
TurboSonic as the Disbursing Agent shall be paid by TurboSonic.
C. QUALIFICATION. No Person other than the Committee and TurboSonic
shall be authorized by the Bankruptcy Court to serve as Disbursing Agent unless
and until (a) that Person executes and files a statement with the Bankruptcy
Court (i) agreeing to perform all of the duties of the Disbursing Agent under
the Plan and (ii) consents to the jurisdiction of the Bankruptcy Court in
respect to all matters relating to the performance of its duties as the
Disbursing Agent under the Plan and (b) the Debtor and Turbotak consent in
writing to that Person serving as Disbursing Agent.
6.5 AVOIDANCE POWER ACTIONS. The Debtor is hereby assigning any and all
causes of action to recover preferential transfers pursuant to Bankruptcy Code
Section 547 and voidable gap period transfers to the Committee for the benefit
of Holders of Allowed Unsecured Claims in Class 3. A preferential transfer
claim can only be recovered against Richard Hurd if the preference exceeds
$15,000 and against Robert Ferb and Richard Horgan if the preference exceeds
$4,000. All fees and expenses related to the prosecution of any such actions
shall be paid solely from monies recovered in those actions. Preference actions
can be commenced either prior to or after Confirmation. The following is the
list of the individuals or entities that may be subject to an action to recover
a preferential transfer under Bankruptcy Code Section 547. The Committee and
Debtor reserve their right to commence preference actions against others:
ROI Systems, Inc.
Wayne Hartshorn
Metropolitan State Bank
Faber Mechanical Product, Inc.
Magnatrol Valve Corporation
Parsippany Paper & Janitorial
Frankel Travel Associates
Precision Metal Machining, Inc.
Mr. H. Lockwood, Jr.
Jersey Sheet Metal & Machinery
Hago Industrial Corp.
Parker, Duryee, Rosoff & Hart
Kaye & MacDonald, Inc.
Batsche-McMangh, Inc.
Tavor Corp.
Cabel Corp.
Flexline
Northeast Controls, Inc.
American Express
Laubeck Corp.
6.6 DISPUTED CLAIMS. There shall be reserved from any distribution the
amount of the distribution which would be paid in respect of a Disputed
20
<PAGE>
Claim if it were deemed to be an Allowed Claim, or such lesser amount as the
Bankruptcy Court may determine. The reserved amount shall be held in escrow by
the Committee (or their counsel) or Debtor's counsel, depending on what Class
their claim is in. After the Disputed Claim(s) have been resolved by a Final
Order of the Bankruptcy Court, all sums due and owing on account of the Allowed
Claim(s) shall promptly be disbursed by the Disbursing Agent.
6.7 COMMITTEE SUIT. Upon the entry of the Confirmation Order, the
Committee's adversary proceeding against Turbotak, Adv. Pro. No. 96-2734,
shall be dismissed with prejudice and without costs to any party.
21
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ARTICLE VII- MANAGEMENT OF THE REORGANIZED DEBTOR
-------------------------------------------------
Commencing on the Effective Date all of the Debtor's assets (which prior to
the Effective Date were subject to liens and security interests of Turbotak)
shall be owned and managed exclusively by TurboSonic under the merger
contemplated by the Plan. Commencing on the Effective Date the assets shall not
be, and shall not be deemed to be, encumbered by any Claims against the Debtor,
of any kind or nature whatsoever, except as may be expressly stated in the Plan.
On the Effective Date, Turbotak shall have the right to select five of the
eight directors for the Reorganized Debtor. The Reorganized Debtors By-Laws and
corporate governance documents shall be so amended to provide for the increase
in the size of the Board of Directors. The Debtor's current three Board
Members (Hurd, Ferb and Horgan) shall retain their respective Board positions.
These eight directors shall serve until the next annual meeting of the
Reorganized Debtor (TurboSonic) subsequent to confirmation of the Plan or until
their successors shall have otherwise been qualified and elected. It is
anticipated that the officers and directors of TurboSonic and their respective
salary are as follows:
NAME TITLE ANNUAL SALARY
Edward F. Spink President & CEO $100,000
Director
Patrick J. Forde Secretary/Treasurer $ 60,000
Director
Donald R. Spink Chairman of the Board -
Fred Berlet Director -
Robert J. Ferb Director -
Richard A. Horgan Director -
22
<PAGE>
Richard H. Hurd Director -
Sean McNamara Director -
23
<PAGE>
ARTICLE VIII - EXECUTORY CONTRACTS AND UNEXPIRED LEASES
-------------------------------------------------------
8.1 ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. With the
exception of the February 15, 1995 Ceramic Heat Exchanger System Patent and
Know-How Assignment Agreement (the "Lockwood Agreement"), the Debtor shall not
assume any Executory Contracts or Unexpired Leases. Thus, all Executory
Contracts or Unexpired Leases other than the Lockwood Agreement shall, by the
Confirmation Order, be deemed rejected and disaffirmed as of the Confirmation
Date unless previously assumed and/or rejected pursuant to a Final Order of the
Bankruptcy Court. The leases and the projected liability from rejection are as
follows:
(a) First Union Bank computer equipment lease - $12,365.10
(b) Oce-USA equipment lease - $14,472.45
(c) Pitney Bowes Credit Corp. equipment leases - $51,716.00
8.2 CURE OF DEFAULTS. As to any Executory Contracts and Unexpired
---- ------------------
Leases assumed pursuant to this Article VIII, TurboSonic 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 or Unexpired Lease by
paying the amount, if any, claimed by any party to such Executory Contract or
Unexpired Lease in a proof of Claim, which proof of Claim shall be filed with
the Bankruptcy Court within ten (10) days of when an Order of the Bankruptcy
Court authorizing assumption becomes a Final Order. Payment of an amount
claimed in such a proof of Claim shall be in full settlement, satisfaction,
release, discharge and cure of all such defaults (including any other Claims
filed by any such party as a result of such defaults) under the Executory
Contract or Unexpired Lease; provided, however, that if TurboSonic, the
-------- -------
Committee or the Debtor files, within sixty (60) days of the filing of such
proof of Claim, an objection in writing to the amount set forth in the Proof of
Claim, the Bankruptcy Court shall determine the amount due and owing in respect
of the defaults or shall approve the settlement of any Claims. Payment of such
Claims shall be made by TurboSonic on the later of (i) ten (10) Business Days
after the expiration of the sixty (60) day period for filing an objection in
respect
24
<PAGE>
of any proof of Claim filed pursuant to this Section 8.3 or (ii) ten (10)
Business Days after an order of the Bankruptcy Court allowing such Claim becomes
a Final Order.
8.3 CLAIMS FOR DAMAGES. Each Person who was a party to an Executory
Contract or to an Unexpired Lease which is rejected pursuant to this Article
VIII shall be entitled to file, not later than ten (10) days after such
rejection by a Final Order, a proof of Claim for damages alleged to have arisen
from the rejection of the Executory Contract or of the Unexpired Lease to which
such Person is a party. Objections to any proof of Claims shall be filed by the
Debtor or by the Committee not later than sixty (60) days after such proof of
Claim is filed. In the event that an objection if filed, the Bankruptcy Court
shall determine the amount due and owing to the Person that filed the Proof of
Claim. Distribution(s) and payment(s) on account of such Claims consistent with
the distribution(s) and payment(s) received or to be received by Holders of
other Claims in the Classes into which such Claims are identified, as determined
by this Section 8.3 of this Article VIII shall be made on the later of (i) ten
(10) Business Days after the expiration of the sixty (60) day period for filing
an objection in respect of any proof of Claim filed pursuant to this Section 8.2
or (ii) ten (10) Business Days after the Claim has been Allowed by a Final Order
provided that no such payment shall be made before the Effective Date.
- --------
8.4 CLASSIFICATION OF CLAIMS. Allowed Claims arising from the rejection
of an Executory Contracts and/or an Unexpired Lease shall be treated in Class 3
of the Plan.
25
<PAGE>
ARTICLE IX - EVENTS OF DEFAULT UNDER THE PLAN
---------------------------------------------
The following shall constitute events of default under the Plan:
The payment of the Cash and issuance of stock to Holders of Allowed Claims
and Interests in Classes 3 and 4, but not including the payment of the note
given by the purchaser of Controls.
26
<PAGE>
ARTICLE X - RETENTION OF
JURISDICTION BY THE BANKRUPTCY COURT
------------------------------------
10.1 JURISDICTION OF BANKRUPTCY COURT. Upon Confirmation, the Bankruptcy
Court shall retain jurisdiction of the Debtor's Reorganization Case for the
following purposes:
A. 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.
B. (i) To hear and determine any and all applications, adversary
proceedings, applications, contested matters and other litigated matters pending
on the Confirmation Date, and (ii) to hear and determine any and all Estate
Causes of Action, including, without limitation, all avoidance power recovery
actions such as preference actions and fraudulent conveyance actions whether
pending on the Confirmation Date or commenced Post-Confirmation.
C. To ensure that the distributions to Holders of Claims and
Interests are accomplished as provided herein.
D. To hear and determine any objections to Claims filed both before
and after Confirmation of the Plan, including any objections to the
classification of any Claim and to allow or disallow any Disputed Claim in whole
or in part.
E. To enter and implement such orders as may be appropriate in the
event Confirmation is for any reason stayed, reversed, revoked, modified or
vacated.
27
<PAGE>
F. To hear and determine all applications for compensation of
professionals and reimbursement of expenses except to the extent not required
pursuant to the Plan.
G. To hear the Debtor's or Turbotak's applications, if any, to modify
the Plan in accordance with Section 1127 of the Bankruptcy Code. After
Confirmation, Turbotak may also, so long as it does not adversely affect the
interest of Creditors, institute proceedings in the Bankruptcy Court to remedy
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 the Plan.
H. To hear and determine disputes arising in connection with the Plan
or its implementation, including disputes arising under agreements, documents or
instruments executed in connection with this Plan.
I. To construe and to take any action to enforce the Plan and issue
such orders as may be necessary for the implementation, execution and
consummation of the Plan.
J. To take any action to resolve any disputes arising out of or
relating to any Claim; to hear and determine other issues presented by or
arising under the Plan; and to take any action to resolve any disputes of
Creditors with respect to their Claims.
K. To determine such other matters and for such other purposes as may
be provided in the Confirmation Order.
L. To hear and determine issues relating to, and issue any necessary
orders with respect to, any governmental or regulatory agency or
instrumentality.
28
<PAGE>
M. To hear and determine applications for orders sought pursuant to
any provision of the Plan.
N. To hear and determine any other matters not inconsistent with
Chapter 11 of the Bankruptcy Code.
29
<PAGE>
ARTICLE XI - CONDITIONS PRECEDENT TO
CONFIRMATION AND EFFECTIVENESS OF THE PLAN
------------------------------------------
11.1 CONDITIONS TO CONFIRMATION. Confirmation of this Plan shall not
occur unless each of the following conditions has occurred or has been waived or
extended by the Debtors:
A. The Confirmation Date shall occur no later than June 30, 1997.
B. The Confirmation Order shall be in form and substance reasonably
acceptable to the Committee, the Debtor and Turbotak. The Confirmation Order
shall expressly authorize and direct the parties to fulfill their respective
obligations under this Plan.
11.2 CONDITIONS TO EFFECTIVENESS. Notwithstanding any other provision of
the Plan or in the Confirmation Order, the Effective Date of the Plan shall not
occur unless and until each of the following conditions has occurred or has been
waived or extended by the Debtor and Turbotak:
A. No stay of the Confirmation Order is in effect on the Effective
Date.
B. The Effective Date shall occur no later than July 31, 1997.
30
<PAGE>
ARTICLE XII - DISCHARGE AND TITLE TO PROPERTY
---------------------------------------------
12.1 DISCHARGE. Except as otherwise provided by the Plan or in the
Confirmation Order, Confirmation shall operate as a discharge, pursuant to
Bankruptcy Code Section 1141(d)(1) effective as of the Confirmation Date, of
any and all debts or Claims against the Debtor, whether accrued before, on, or
up to and including the Filing Date. On the Confirmation Date, as to every
discharged debt or Claim, the Creditor that held such debt or Claim shall be
precluded from asserting against the Reorganized Debtor or against the
Reorganized Debtor's Assets or properties, 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. Without limiting
the generality of the foregoing, upon the payment or deposit by the Reorganized
Debtor or TurboSonic of all amounts due to be paid on the Initial Distribution
Date pursuant to the provisions of the Plan, and upon delivery of the various
documents provided for by the Plan, the Debtor shall be discharged from any debt
that arose before the Confirmation Date and any debt of any kind specified in
Sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, to the full extent
permitted by Section 1141(d) of the Bankruptcy Code.
12.2 VESTING OF PROPERTY. Except as otherwise provided in this Plan
or the Confirmation Order, upon Confirmation all Assets of the Debtor's Estate,
wherever situated, shall vest in TurboSonic or its designees and shall be free
and clear of all liens, security interests and Claims of Creditors, except
obligations pursuant to the Plan and Confirmation Order and the liens and
security interests, if any, granted or maintained pursuant to the Plan. After
Confirmation, all cash deposited
31
<PAGE>
with the Disbursing Agent for distribution to Holders of Allowed Unsecured
Claims in Class 3 of the Plan shall be free and clear of all Claims, liens and
security interests except of the Claims of Creditors of the Reorganized Debtors
arising in connection with the Plan.
32
<PAGE>
ARTICLE XIII- MISCELLANEOUS PROVISIONS OF THE PLAN
--------------------------------------------------
13.1 GOVERNING LAW. Except to the extent that the Bankruptcy Code or
Bankruptcy Rules are applicable, 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 without giving effect to the principles of
conflicts of law thereof.
13.2 HEADINGS. The headings of the articles, paragraphs and sections
of this Plan are inserted for convenience only and shall not affect the
interpretation hereof.
13.3 SEVERABILITY. Should the Bankruptcy Court determine, prior to
the Confirmation Date, that any provision in the Plan is either illegal on its
face or illegal as applied to any Claim, such provisions shall be unenforceable
either as to all Holders of Claims and/or Interests or as to the Holder of such
Claim and/or Interest as to which the provision is illegal, respectively. Such
a determination of unenforceability shall in no way limit or affect the
enforceability and operative effect of any other provision of the Plan.
13.4 REVOCATION. The Debtor reserves the right to revoke and withdraw
the Plan prior to the Confirmation Date. If the Debtor revokes or withdraws
this Plan then the Plan shall be null and void and, in such event, nothing
contained herein 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, or be deemed an admission by the Debtor.
33
<PAGE>
13.5 THE FAILURE TO SATISFY A CONFIRMATION CONDITION OR AN EFFECTIVE
DATE CONDITION. If one or more of the conditions to Confirmation or to the
occurrence of the Effective Date that has not been waived by the Debtor and
Turbotak is not satisfied, and the time within which such condition must be
satisfied has expired, the Plan shall be deemed null and void, and, in such
event, nothing contained herein 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, or be deemed an admission by the Debtor.
13.6 TIME. In computing any period of time prescribed or allowed by
this Plan, the day of the act, event or default from which the designated period
of time begins to run shall not be included. The last day of the period so
computed shall be included, unless it is a Saturday, a Sunday or a legal holiday
or, when the act to be done is the Filing of a paper in court, a day on which
weather or other conditions have made the clerk's office inaccessible, in which
event the period runs until the end of the next day which is not one of the
aforementioned days. When the period of time prescribed or allowed is less than
8 days, intermediate Saturdays, Sundays, and legal holidays shall be excluded in
the computation. As used in this Plan, "legal holiday" includes New Years Day,
the birthday of Martin Luther King Jr., Washington's birthday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day (and
the day thereafter), Yom Kippur (including the day before), Rosh Hashanah (both
days), Christmas Day and any other day designated as a
34
<PAGE>
holiday by the President or by the Congress of the United States or by the State
of New Jersey.
13.7 CONSTRUCTION. The rules of construction as set forth in Section
102 of the Bankruptcy Code shall apply to the construction of the Plan.
13.8 AMENDMENTS. Except as otherwise provided herein, the Plan may be
amended, modified or supplemented by the Debtor and/or by TurboSonic before or
after the Confirmation Date, in the manner provided for by Section 1127 of the
Bankruptcy Code or as otherwise permitted by law without additional disclosure
pursuant to Section 1125 of the Bankruptcy Code, except as the Bankruptcy Court
may otherwise order.
13.9 NO INTEREST. Except as expressly stated in this Plan, or allowed
by Final Order of the Bankruptcy Court, no interest, penalty or late charge is
to be allowed on any Claim subsequent to the petition date.
13.10 NO ATTORNEYS OR PROFESSIONAL FEES. No attorneys or professional
fees will be paid with respect to any Claim unless Allowed by final order of the
Bankruptcy Court.
13.11 AMOUNTS OF CLAIMS. All references to Claims and amounts of
Claims refer to the amount of the Claim allowed by Final Order by the Bankruptcy
Court or by this Plan; provided, however, that Claims which have been objected
-------- -------
to and which have not been allowed or disallowed prior to the date set for
return of ballots shall be voted and counted at the amount as estimated by the
Bankruptcy Court. The Debtor and other interested parties reserve the right,
both before and after Confirmation, to object to Claims so as to have the
Bankruptcy Court determine the Allowed amount of such Claim to be paid under
this Plan.
35
<PAGE>
13.12 NO WAIVER OF DISCHARGE. Except as otherwise specifically
provided herein, nothing in this Plan shall be deemed to waive, limit or
restrict in any way the discharge granted to the Debtor upon Confirmation of the
Plan in Section 1141 of the Bankruptcy Code.
13.13 CONFIRMATION OVER OBJECTION. If any impaired Class of Creditors
shall fail to accept the Plan, the Debtor reserves the right to request that the
Bankruptcy Court confirm the Plan in accordance with the applicable provisions
of Section 1129(b) of the Bankruptcy Code.
13.14 EXCULPATION. Neither the Debtor and the Committee, nor any of
the Debtor's or Committee's employees, attorneys, accountants or agents shall
have or incur any liability to any Creditor for any act or omission in
connection with or arising out of their administration of this Reorganization
Case, the Plan or the property to be distributed under the Plan except for
willful misconduct or gross negligence.
13.15 NOTICES. All notices, requests or demands for payments provided
for in the Plan shall be in writing and shall be deemed to have been given when
personally delivered by hand or deposited in any general or branch post office
of the United States Postal Service. Notices, requests and demands for payments
shall be addressed and sent postage pre-paid or delivered in the case of
notices, requests or demands for payments to the Debtor, c/o Ravin, Sarasohn,
Cook, Baumgarten, Fisch & Rosen, P.C., 103 Eisenhower Parkway, Roseland, New
Jersey 07068, Attention: Bruce Buechler, Esq.; Turbotak c/o O'Boyle, Damanti &
Lynch, 744 Broad Street, Newark, New Jersey 07102, Attn: Stephen B. McNally,
Esq.; and the Committee c/o Ravin, Greenberg & Marks, 101 Eisenhower Parkway,
Roseland, New Jersey 07068, Attention: David Edelberg, Esq.
36
<PAGE>
13.16 PLAN CONTROLS DISCLOSURE STATEMENT. In the event and to the
extent that any provision of the Plan is inconsistent with a provision of the
Disclosure Statement, the provision of the Plan shall control and take
precedence.
13.17 FILING OF ADDITIONAL DOCUMENTS. On or before substantial
consummation of the Plan, the Debtor and Turbotak shall file with the Bankruptcy
Court such agreements or other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the Plan.
13.18 RESERVATION OF RIGHTS. If the Plan is not confirmed by the
Bankruptcy Court or any other Court of competent jurisdiction for any reason,
the rights of the Debtor and all parties in interest in the Debtor's Chapter 11
bankruptcy cases are and will be reserved in full. Statements and provisions
made in the Plan or in the Disclosure Statement are made only for the purpose(s)
of the Plan. If the Plan is withdrawn, if a Confirmation Date does not occur or
if an Effective Date does not occur, no Person shall be bound by or deemed
prejudiced by any such statement or provision.
13.19 DIRECTION TO A PARTY. From and after the Effective Date, the
Debtor, the Committee and/or Turbotak may apply to the Bankruptcy Court for the
entry of an order directing any Person to execute or deliver or to join in the
execution or delivery of any instrument reasonably necessary or reasonably
appropriate to effect a transfer of properties dealt with by this Plan, and to
perform any other act (including the satisfaction of any lien or security
interest) that is reasonably necessary or reasonably
37
<PAGE>
appropriate for the consummation of the Plan and of the purposes and interest
thereof.
13.20 BLANK BALLOTS. Any ballot which is executed by the Holder of an
Allowed Claim or Interest but which does not indicate an acceptance or rejection
of the Plan shall be deemed to be an acceptance of the Plan.
13.21 WAIVER OF SUBORDINATION. Any provision of the Plan to the
contrary notwithstanding, all Holders of Claims and/or Interests 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 Confirmation
Order shall permanently enjoin, effective as of the Effective Date, all Holders
of Claims and/or Interests from enforcing or attempting to enforce any such
rights against any Person receiving distributions under the Plan.
13.22 RELEASE OF CLAIMS. With respect to any and all Claims or causes
of action which have arisen prior to the Confirmation Date, whether presently
known or thereafter discovered, the rights afforded to Holders of Claims and/or
Interests by and in the Plan shall be in exchange for and in complete release,
settlement, satisfaction and discharge of all Claims and/or Interests of any
kind or nature whatsoever against the Debtor, and acceptance of payments and/or
distributions under the Plan shall, and shall be deemed irrevocably to generally
release any and all Claims of any type, kind or nature whatsoever against the
Debtor and against Turbotak and any of the Debtor's and Turbotak's present and
former affiliates, Insiders, employees, agents, attorneys, representatives,
accountants, financial advisors, successors and assigns and all other entities.
38
<PAGE>
13.23 SUCCESSORS AND ASSIGNS. The rights, duties and obligations of
any Person named or referred to in this Plan shall be binding on, and shall
inure to the benefit of, the successors and assigns of such Person.
39
<PAGE>
SIGNATURES
----------
SONIC ENVIRONMENTAL SYSTEMS, INC.
By: /s/ Richard H. Hurd
-------------------------------
Richard H. Hurd, President
Dated: April 21, 1997
Roseland, New Jersey
RAVIN, SARASOHN, COOK,
BAUMGARTEN, FISCH & ROSEN
A Professional Corporation
Attorneys for the Debtor
BY: /s/ Bruce Buechler
-------------------------------
Bruce Buechler, Esq. (BB 0324)
103 Eisenhower Parkway
Roseland, New Jersey 07068
(201) 228-9600
Dated: April 21, 1997
Roseland, New Jersey
40
<PAGE>
EXHIBIT 99.2
Ravin, Sarasohn, Cook,
Baumgarten, Fisch & Rosen, P.C.
103 Eisenhower Parkway
Roseland, New Jersey 07068-1072
Bruce Buechler, Esq. (BB 0324)
(201) 228-9600
Attorneys for Debtor
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
- -------------------------------------- X
:
In Re: : Case No. 96-26268(RG)
:
SONIC ENVIRONMENTAL SYSTEMS, INC., : Chapter 11
:
DEBTOR. : Hearing Date: June 16, 1997
:
- -------------------------------------- X
ORDER CONFIRMING DEBTOR'S FIRST
AMENDED PLAN OF REORGANIZATION AS MODIFIED
------------------------------------------
THIS MATTER having been brought before the Court by Ravin, Sarasohn,
Cook, Baumgarten, Fisch & Rosen, P.C., attorneys for the above-referenced
debtor Sonic Environmental Systems, Inc. (the "Debtor"), seeking the entry
of an order confirming the Debtor's First Amended Plan of Reorganization as
amended by the Modification ("Plan"), and upon notice to all creditors and
parties-in-interest, and the Court having considered the Plan and the
objections to confirmation, and the Court having conducted a confirmation
hearing on June 16, 1997, and the Court having found that the Debtor's Plan
complies with 11 U.S.C. (S)1129, and the Debtor having testified that the
<PAGE>
modifications to the Plan do not affect the cash and stock distributions to be
made to creditors under the Plan, and that the modifications will not have any
negative tax implications for the Reorganized Debtor, and the modifications
shall not dilute the percentage ownership in the Reorganized Debtor of holders
of Allowed Unsecured Claims and Interests pursuant to the Plan, and that the
modification shall not affect the publicly traded nature of the shares in the
Reorganized Debtor, and for the reasons set forth by the Court at the hearing
held on June 16, 1997, and for good cause shown;
IT IS, on this 3rd day of July, 1997;
ORDERED, as follows:
1. The Debtor's First Amended Plan of Reorganization as modified by the
Modification and on the record at the June 16, 1997, hearing be, and hereby is,
confirmed;
2. That the Plan is hereby modified (collectively the
"Modification") as follows:
a) In accordance with the modifications set forth in the Modified
filed with the Court on June 3, 1997;
b) Section 4.3 of the Plan is amended to delete the phrase the
"post-petition super-priority claim in the amount of approximately
$100,000." Turbotak Technology, Inc.'s ("Turbotak") post-petition super-
priority claim in the amount of $100,000 shall remain on the Reorganized
Debtor's books and records;
c) That the Effective Date for distribution of the stock under the
Plan shall be sixty (60) days after the Confirmation Order becomes a Final
Order; and
2
<PAGE>
d) That in the event the Ontario Securities Commission or the
Ontario Supreme Court do not authorize Turbotak's shareholders to
effectuate the merger contemplated by the Plan as amended by the
Modification, that the Debtor and Turbotak may consummate the merger as
originally set forth in the Plan and not in accordance with the
Modification. Counsel for the Creditors Committee shall be notified of the date
and method of the issuance of the shares;
3. Pursuant to Bankruptcy Rule 3019 and 11 U.S.C. (S)1127, the Plan as
amended by the Modification is hereby approved and no further solicitation of
acceptances or rejections of the Plan as modified by the Modification is
required;
4. That in accordance with 11 U.S.C. (S)1142, the Debtor be, and hereby
is, authorized, empowered and directed to execute, deliver, file and record any
agreement or document to implement, consummate and otherwise effectuate the Plan
in accordance with its terms;
5. That the Court's April 7, 1997, Order authorizing that the sale of
substantially all of the assets of Sonic Environmental Controls, Inc. shall not
be affected by the confirmation of the Plan and the Purchase and Sale Agreement
and the various documents executed in connection with the sale of substantially
all of the assets of Sonic Environmental Controls, Inc. are and shall remain
binding on the Debtor and the Reorganized Debtor;
6. That the Debtor's by-laws and corporate governance documents be, and
in accordance herewith, amended (i) to increase the size of the Board of
Directors to eight individuals; (ii) to change the name of the Debtor to
TurboSonic Technologies, Inc.; and (iii) as otherwise necessary to
implement, consummate and effectuate the merger of the Debtor and Turbotak
3
<PAGE>
including, but not limited to, authorizing additional shares or classes of
common or preferred stock;
7. That, pursuant to (S)1145(a) (1) of the Bankruptcy Code, the issuance
and delivery of 1,800,000 shares in the Reorganized Debtor upon the Effective
Date to holders of allowed claims and interests in the Debtor other than
Turbotak, as specified in Article IV, Section 4.5 of the Plan (the "Non-Turbotak
Share Issuance") be, and hereby is, exempt from the registration and prospectus
delivery requirements of Section 5 of the Securities Act of 1933 and any State
or local law requiring registration for offer or sale of a security or licensing
of an issuer of, underwriter of, or broker or dealer in, a security;
8. That, pursuant to (S)(S)1145(a) (1) and (a) (2) of the Bankruptcy
Code, the issuance of 8,200,000 shares in the Reorganized Debtor upon or after
the Effective Date, as the case may be, and the delivery thereof in exchange for
Sonic Canada Class B Shares, as specified in Article IV, Sections 4.5 and 4.11
of the Plan (the "Turbotak Share Issuance") be, and hereby is, exempt from
the registration and prospectus delivery requirements of Section 5 of the
Securities Act of 1933 and any State or local law requiring registration for
offer or sale of a security or licensing of an issuer of, underwriter of, or
broker or dealer in, a security;
9. That the subsequent resales of the shares in the Reorganized
Debtor issued in connection with the Non-Turbotak Share Issuance and the
Turbotak Share Issuance, by persons other than affiliates (as such term is
defined for purposes of the Securities Act of 1933) of the Reorganized
Debtor at the time of resale, shall further be exempt from the registration
4
<PAGE>
and prospectus delivery requirements of Section 5 of the Securities Act of
1933 any State or local law requiring registration for offer or sale of a
security or licensing of an issuer of, underwriter of, or broker or dealer in, a
security, provided that such recipient is not deemed an underwriter as defined
in (S)1145 (b) (1);
10. That the Note executed by the purchaser of substantially all of the
assets of Sonic Environmental Controls, Inc. in favor of the Debtor shall be
revised to state that it is not subject to any set-offs, defenses, counterclaims
or adjustments whatsoever within fifteen (15) days of the entry of this Order.
Further, the UCC-1 financing statement and recordation of patent liens to
collateralize this Note must be filed within fifteen (15) days of the entry of
this Order, with copies sent to counsel for the Creditors Committee and the
escrow established;
11. That when the audit being performed for the Debtor as of April,
1996, is completed, a copy will be furnished to counsel for the Creditors
Committee; and
12. That the entry of this Order is without prejudice to the rights of the
Debtor, Turbotak, Hanford Lockwood and HNL Technologies concerning Adv. Proc.
No. 97-2059 and whether the patents that are the subject of that adversary
proceeding are or are not an executory contract. Disposition of these issues
shall occur in the ordinary course in connection with Adv. Pro. No. 97-2059.
ROSEMARY GAMBARDELLA
-----------------------------------
HON. ROSEMARY GAMBARDELLA, U.S.B.J.
5
<PAGE>
BALANCE SHEET As of April 30, 1997
------------- ----------------------------
Debtor Name: SONIC ENVIRONMENTAL SYSTEMS, INC.
Case Number: 96-26268 (RG)
ASSETS Current Month Prior Month
- ------ ============ ============
Current Assets
Cash 187,080.00 187,227.00
------------ ------------
Inventory 292,393.00 250,611.00
------------ ------------
Accounts Receivable 226,245.00 344,201.00
------------ ------------
Notes Receivable
------------ ------------
Other (attach list)
------------ ------------
Total Current Assets 705,718.00 782,039.00
------------ ------------
Fixed Assets
Property and Equipment 701,000.00 701,000.00
------------ ------------
Accumulated Depreciation 564,000.00 564,000.00
------------ ------------
Total Fixed Assets 137,000.00 137,000.00
------------ ------------
Other Assets 111,433.00 111,433.00
------------ ------------
(attach list) 954,151.00 769,329.00
============ ============
TOTAL ASSETS
LIABILITIES
- -----------
Post-petition Liabilities:
Accounts Payable 25,636.00 25,012.00
------------ ------------
Notes Payable 100,000.00 100,000.00
------------ ------------
Rents & Leases Payable
------------ ------------
Taxes Payable
------------ ------------
Accrued Interest
------------ ------------
Other:
------------ ------------ ------------
------------ ------------ ------------
Total Post-petition Liabilities 125,636.00 125,012.00
------------ ------------
Pre-petition Liabilities
Unsecured Debt 2,456,549.00 2,456,549.00
------------ ------------
Notes Payable-Secured 1,065,000.00 1,065,000.00
------------ ------------
Other Debt (priority
Claims)
------------ ------------
Taxes 221,400.00 221,400.00
------------ ------------
Wages
------------ ------------
Deposits
------------ ------------
Other:
------------ ------------ ------------
Total Pre-petition Liabilities 3,742,949.00 3,742,949.00
------------ ------------
TOTAL LIABILITIES 3,868,585.00 3,867,961.00
============ ============
<PAGE>
OWNER EQUITY (DEFICIT)
- ----------------------
Preferred Stock 10,655,759.00 10,655,759.00
------------- -------------
Common Stock
------------- -------------
Capital Surplus
------------- -------------
Retained Earnings (13,570,193.00) (13,493,248.00)
------------- -------------
PARTNERS' INVESTMENT (DEFICIT)
- -----------------------------
------------- -------------
TOTAL OWNER EQUITY
(NET WORTH) (2,914,434.00) 1,030,472.00
============= =============
TOTAL LIABILITIES AND
- ---------------------
OWNER EQUITY
- -----------------......................... 954,151.00 1,030,472.00
============= =============
NOTES:
1. Explain significant events, including contingent liabilities and pending
lawsuits, which may have a material effect on the financial condition of the
debtor.
2. Value assets at lower of cost or market and identify which method is being
used.
3. Explain the method of inventory valuation if other than the lower of cost or
market.
4. Identify any changes in stock holdings of "insiders" during the reporting
period.
