<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-19737
NOEL GROUP, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-2649262
------------------------ ----------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
667 Madison Avenue, New York, New York 10021-8029
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 371-1400
-------------------------------------------------
(Registrant's telephone number, including area code)
</TABLE>
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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class Outstanding at May 7, 1999
- ------------------------------- --------------------------
Common Stock - $.10 Par Value 20,567,757
</TABLE>
<PAGE>
<PAGE>
NOEL GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
Part I - FINANCIAL INFORMATION
<S> <C>
Item 1. Statements of Net Assets in Liquidation
March 31, 1999 and December 31, 1998 3
Statements of Changes in Net Assets in Liquidation
For the Three Months Ended March 31, 1999 and 1998 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 3. Defaults upon Senior Securities 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
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<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
NOEL GROUP, INC.
STATEMENTS OF NET ASSETS IN LIQUIDATION
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents .......................... $ 110 $ 250
Short-term investments.............................. 3,001 3,151
---------- ----------
Total cash and short-term investments .............. 3,111 3,401
Investments (Note 2) ............................... 27,248 27,826
Income taxes (Note 3) .............................. 5,500 5,500
Other assets........................................ 147 321
---------- ----------
Total assets ....................................... 36,006 37,048
---------- ----------
Liabilities
Accounts payable ................................... 15 --
Accrued expenses (Note 4) .......................... 2,199 2,640
---------- ----------
Total liabilities .................................. 2,214 2,640
---------- ----------
Net assets in liquidation .......................... $33,792 $34,408
========== ==========
Number of common shares outstanding ................ 20,567,757 20,567,757
========== ==========
Net assets in liquidation per outstanding share .... $1.64 $1.67
===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
<PAGE>
NOEL GROUP, INC.
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1999 1998
----- ----
<S> <C> <C>
Net assets in liquidation at January 1 ......................... $34,408 $83,561
Changes in estimated liquidation values of assets and
liabilities (Note 5) ........................................ (616) 1,413
Liquidating distribution (Note 6) .............................. -- (14,397)
------- -------
Net assets in liquidation at March 31 .......................... $33,792 $70,577
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
<PAGE>
NOEL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
This Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements, including those regarding
valuation of assets and liabilities. Such statements, including, as more fully
set forth below, those relating to management's estimates of the net value of
the Company's assets in liquidation, involve certain risks and uncertainties,
including, without limitation, those risks and uncertainties discussed below.
Should one or more of these risks or uncertainties materialize, actual outcomes
may vary materially from those indicated.
1. PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
On March 19, 1997, the shareholders of Noel Group, Inc. ("Noel")
approved a Plan of Complete Liquidation and Dissolution (the "Plan"), which had
been adopted by Noel's Board of Directors on May 21, 1996. Under the Plan, Noel
is being liquidated (i) by the sale of such of its assets as are not to be
distributed in kind to its shareholders, and (ii) after paying or providing for
all its claims, obligations and expenses, by cash and in-kind distributions to
its shareholders pro rata and if required by the Plan or deemed necessary by the
Board of Directors, by distributions of its assets from time to time to one or
more liquidating trusts established for the benefit of the then shareholders, or
by a final distribution of its then remaining assets to a liquidating trust
established for the benefit of the then shareholders.
As a result of the approval of the Plan by the shareholders, Noel
adopted the liquidation basis of accounting as of April 1, 1997. Under the
liquidation basis of accounting, assets are stated at their estimated net
realizable values and liabilities are stated at their anticipated settlement
amounts. See Note 2 for a discussion of the methods used to determine
the estimated net realizable values of investments.
The valuation of assets and liabilities necessarily requires many
estimates and assumptions and there are substantial uncertainties in carrying
out the provisions of the Plan. The actual value of any liquidating distribution
will depend upon a variety of factors including, but not limited to, the actual
market prices of any securities distributed in-kind when they are distributed,
the actual proceeds from the sale or other disposition of any of Noel's assets,
the ultimate settlement amounts of Noel's liabilities and obligations, actual
costs incurred in connection with carrying out the Plan, including
administrative costs during the liquidation period and the actual timing of
distributions.
The valuations presented in the accompanying Statements of Net Assets in
Liquidation represent management's estimates, based on present facts and
circumstances, of the net realizable values of assets and costs associated with
carrying out the provisions of the Plan based on the assumptions set forth in
the accompanying notes, which assumptions management believes to be reasonable,
based on present facts and circumstances. The actual values and costs are
expected to differ from the amounts shown herein and could be higher or lower
than the amounts recorded. Accordingly, it is not possible to predict the
aggregate net values ultimately distributable to shareholders and no assurance
can be given that the amount to be received in liquidation will equal or exceed
the price or prices at which Noel Common Stock has generally traded or is
expected to trade in the future.
-5-
<PAGE>
<PAGE>
2. INVESTMENTS
Investments:
Investments are recorded at their estimated net realizable value in
liquidation. This valuation may not be reflective of actual amounts obtained
when and if these investments are distributed or of prices that might be
obtained in actual future transactions. Because of the inherent uncertainty of
the valuation of securities both where a public market exists and where it does
not exist, the estimated liquidation basis amounts shown may materially differ
from the actual amounts which may be received in the future.
Noel's holding of the common shares of Career Blazers Inc. ("Career
Blazers") is unregistered.
<TABLE>
<CAPTION>
Estimated
Common Liquidation
Shares Price Per Basis Amount
Owned Share March 31, 1999
------ ------ --------------
(Dollars in thousands, except per share amount)
<S> <C> <C> <C>
Career Blazers (a) 2,026,104 $4.88 $9,887
Carlyle Industries, Inc. ("Carlyle")
Series B, 6% preferred stock (b) 10,788
Ferronorte Participacoes, S.A. ("Ferropar") (c) 6,302
Other holdings 271
-------
Total investments at estimated liquidation basis
amounts $27,248
=======
</TABLE>
(a) Recorded at $4.88, the value determined by an independent investment
banking firm in conjunction with the April 15, 1999 distribution to
shareholders of Noel's entire 2,026,104 share holding of Career Blazers
common stock. On the distribution date, shareholders received 20,567,757
uncertificated units of the CBI Distribution Trust, valued at $.48072
per unit.
Career Blazers, headquartered in New York and Dallas, is a leading
provider of integrated staffing and training services, operating through
170 branch offices in 18 states. The present company was created in
December 1997 by the merger of Career Blazers Personnel Services, Inc.
and Staffing Resources, Inc.
(b) Noel's investment in Carlyle comprises 9,920,908 shares of Carlyle
series B preferred stock with a redemption value of $9,920,908 and
accrued dividends of approximately $2,910,000 at March 31, 1999. The
shares of Carlyle preferred series B stock are recorded at a discount
to redemption value plus accrued dividends based on management's
assessment of a variety of market factors including, an evaluation
of the projected operating results of Carlyle. As of March 31, 1999,
Carlyle is in default on its obligation to Noel to redeem the entire
liquidation preference of its preferred stock as well as accumulated
unpaid dividends of approximately $2,910,000 to the extent of its
legally available funds.
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<PAGE>
Because of the unique characteristics of the investment in Carlyle and
the non-marketability of the Carlyle preferred stock, the valuation of
this investment is highly judgmental and subject to an unusual degree of
uncertainty. The eventual amount realized in an actual transaction may
be substantially less than the recorded value. Also, for various
reasons, included those stated below, there may be delays in realizing
Noel's holding of Carlyle preferred stock.
Noel and Carlyle are engaged in discussions with a view of satisfying
Carlyle's remaining obligations to the holders of the preferred stock in
accordance with the terms of its charter and consistent with its
resources. Discussions have dealt with the amount and timing of payments
and possible modifications of the terms of the preferred stock. Any such
modifications would require the agreement of Carlyle and the holders of
the preferred stock. Carlyle has informed Noel that it intends to
fulfill its obligations to its preferred shareholders, as required by
Carlyle's charter, to the extent that Carlyle has cash resources in
excess of those required to operate its business. Carlyle has also
informed Noel that, as Carlyle believes that it does not currently have
such excess resources, its ability to make payments on account of the
preferred stock in the future will depend on Carlyle's future cash flow,
the timing of the settlement of the liabilities recorded on its
financial statements, the outcome of its discussions with Noel described
above, the ability of Carlyle to obtain additional financing and
compliance with Carlyle's new credit facility which presently permits
only specified payment amounts, including 25% of "excess cash flow", as
defined in the agreement.
The Carlyle board of directors is continuing its review of Carlyle's
strategic alternatives, including, among other things, the sale of
Carlyle through merger, sale of stock or otherwise, possible
acquisitions by Carlyle and possible refinancing. Any such transaction
and/or the discussions between the companies may result in the
modification of the terms of the preferred stock or in the acceleration
of the redemption of the preferred stock and/or the reduction in the
total amounts eventually received by Noel for its holdings of Carlyle
preferred stock.
In addition, Carlyle has agreed to notify the Pension Benefits Guaranty
Corporation ("PBGC") prior to making any dividend or redemption
payments. Carlyle's decision to make any such payments will depend on
the successful resolution of any issues which may arise with the PBGC
relating to Carlyle's unfunded liability to its benefit plan.
Carlyle is a packager and distributor of buttons, gifts and craft
products.
(c) Noel owns 10,624,886 shares of Ferropar which were recorded at a
60% discount to the third- party valuation determined at the time
of the reorganization of Novoeste S.A. and Ferronorte, S.A. Ferrovia
Norte Brasil to form Ferropar in June 1998. The discount percentage
reflects illiquidity and the risks of operating in Brazil, including
foreign currency risk. Since the merger transaction occurred, the Reals
per Dollar exchange rate has declined by approximately 33%.
Consequently, as of March 22, 1999, the carrying value of $6,302,000
represents an approximate discount of 40% to the Real value established
in the merger transaction. While the level of uncertainty related to the
Brazilian economy has increased, there have been no events at Ferropar,
which Noel is aware of, which indicate the need for an additional
discount, however, Noel cannot predict how future developments to
Brazil's economy or to the exchange rate would impact the value of this
investment.
-7-
<PAGE>
<PAGE>
Ferropar holds two concessions to operate privatized railroads in
Brazil. Realization of this investment is dependent upon a sale by Noel
of its interest in Ferropar. In February 1999, Noel engaged a Brazilian
investment bank to sell its shares. A sale is projected for the second
quarter of 1999, at the earliest. The actual amount realized for this
investment could be lower or higher than the amount recorded.
3. INCOME TAXES
Estimated income taxes are calculated at a 35% rate on the taxable
income and losses which would be generated if the assets were realized and
liabilities settled at the amounts shown on the financial statements. This
estimate is subject to significant variation if, among other things, the actual
values of assets distributed, sold or otherwise disposed of varies from current
estimates. The income tax asset is projected to be realized through the filing
of the 1998 and 1999 tax returns and assumes that Noel's liquidation will be
completed by December 31, 1999. The bulk of the projected tax asset will be
realized by carrying back the projected taxable loss in 1999 to 1997. Events
subsequent to December 31, 1998, may limit Noel's ability to carry back the
projected 1999 loss due to the change in ownership provisions of Section 382 of
the Internal Revenue Code. The amount of the income tax refund would be subject
to audit adjustment by the IRS.
The components of the income tax asset are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----- ----
<S> <C> <C>
Net unrealized capital loss $5,204 $5,002
Net realized capital gain (139) (139)
Realized net operating loss carryforwards 145 145
Loss from the settlement of recorded 288 490
liabilities
Other 2 2
------- ------
Net income tax asset $5,500 $5,500
======= ======
</TABLE>
Noel had additional net operating loss carryforwards of approximately
$8,133,000 at December 31, 1998, which expire from 2004 through 2012. Noel has
undergone "ownership changes" within the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended. Consequently, future utilization of these
Federal tax loss carryforwards is significantly limited. If Noel's assets and
liabilities are realized at the values recorded at March 31, 1999, these
carryforwards will not be realizable because Noel will not generate future
taxable income.
4. ACCRUED EXPENSES
Accrued expenses include estimates of costs to be incurred in carrying
out the Plan and provisions for known liabilities. These costs include a
provision for costs to be incurred in connection with the distribution, sale or
other disposition of Noel's investments including legal and investment banking
fees and salaries and related expenses of officers and employees assigned to
effect the distribution, sale or other disposition of specific investments.
-8-
<PAGE>
<PAGE>
The components of accrued expenses are as follows (dollars in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----- ----
<S> <C> <C>
Salaries and benefits $ 572 $1,063
Rent and other expenses 609 544
Professional fees 374 391
Other, net 644 642
------ ------
$2,199 $2,640
====== ======
</TABLE>
This projection of accrued expenses assumes that Noel will substantially
complete its operations by June 30, 1999. The actual costs incurred could vary
significantly from the related accrued expenses due to uncertainty related to
the actual length of time required to complete the Plan, the exact method by
which each of Noel's assets will be realized and other contingencies.
For the three months ended March 31, 1999, Noel's cash operating
expenses exceeded the return on its cash and cash equivalents and short-term
investments by $537,000.
Noel's cash operating expenses for the three months ended March 31,
1999, were as follows (dollars in thousands):
<TABLE>
<S> <C>
Salaries and benefits $287
Rent and other expenses 185
Professional fees 107
----
$579
====
</TABLE>
5. CHANGES IN ESTIMATED LIQUIDATION VALUES OF ASSETS AND LIABILITIES
The changes in the estimated liquidation values of assets and
liabilities were as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
To adjust investments to
estimated liquidation values, net $(578) $2,199
To adjust estimated accrued expenses (38) 122
To adjust estimated income taxes -- (908)
------ ------
Total adjustments $(616) $1,413
====== ======
</TABLE>
-9-
<PAGE>
<PAGE>
6. LIQUIDATING DISTRIBUTIONS
On April 25, 1997, Noel distributed 3,754,675 shares of common stock of
HealthPlan Services Corporation ("HPS") valued at $14.375 per HPS share for a
total value of $53,974,000 to Noel shareholders of record at the close of
business on April 18, 1997. The distribution rate was 0.1838631 of a share of
HPS common stock per share of Noel Common Stock and the value of the
distribution was $2.6430 per share of Noel Common Stock.
On October 6, 1997, Noel distributed 412,601 shares of HPS common stock
valued at $21.1565 per HPS share for a total value of $8,729,000 to Noel
shareholders of record at the close of business on September 29, 1997. The
distribution rate was 0.02006 of a share of HPS common stock per share of Noel
Common Stock and the value of the distribution was $.4244 per share of Noel
Common Stock.
On December 1, 1997, Noel distributed 2,205,814 shares of Carlyle common
stock valued at $1.40 per Carlyle share for a total value of $3,088,000 to Noel
shareholders of record at the close of business on November 21, 1997. The
distribution rate was 0.107246 of a share of Carlyle common stock per share of
Noel Common Stock and the value of the distribution was $.1501 per share of Noel
Common Stock.
On March 27, 1998, Noel distributed $.70 per outstanding Noel share for
a total amount of $14,397,000 to shareholders of record at the close of business
on March 20, 1998.
On April 30, 1998, Noel distributed $.45 per outstanding Noel share for
a total amount of $9,255,000 to shareholders of record at the close of business
on April 22, 1998.
On August 14, 1998, Noel distributed $.92 per outstanding Noel share for
a total amount of $18,922,000 to shareholders of record at the close of business
on July 31, 1998.
On April 15, 1999, Noel distributed 20,567,757 units of the CBI
Distribution Trust representing ownership of its entire 2,026,104 share holding
of Career Blazers common stock to shareholders of record on the close of
business on April 15, 1999, for a total value of $9,888,000, or approximately
$.48072 per share of Noel Common Stock.
7. COMMITMENTS AND CONTINGENCIES
Certain of Noel's holdings are involved in various legal proceedings
generally incidental to their businesses. While the result of any litigation
contains an element of uncertainty, management believes that the outcome of any
known, pending or threatened legal proceeding or claim, or all of them combined,
will not have a material adverse effect on Noel's financial position.
-10-
<PAGE>
<PAGE>
Item 2. - Management's Discussion and Analysis of Financial Condition
This Quarterly Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements regarding future financial
condition and results of operations. Such statements involve certain risks and
uncertainties, including, without limitation, those risks and uncertainties
discussed below and in the footnotes to the financial statements. Should one or
more of these risks or uncertainties materialize, actual outcomes may vary
materially from those indicated.
Liquidity and Capital Resources:
On March 31, 1999, Noel had cash and cash equivalents and short-term
investments of approximately $3.1 million. The future cash needs of Noel will be
dependent on the implementation of the Plan. It is management's intention that
Noel's existing liquid assets will be available to fund Noel's working capital
requirements and to meet its other obligations through the remainder of the
liquidation period. Pursuant to the Plan, subject to the payment or the
provision for payment of the Company's obligations, the cash proceeds of any
asset sales together with other available cash will be distributed from time to
time pro rata to the holders of the Common Stock on record dates selected by the
Board of Directors with respect to each such distribution. Noel believes that
its cash and cash equivalents and short-term investments are sufficient to fund
its working capital requirements through the completion of the Plan.
Sources of potential liquidity include the sale or refinancing of
current holdings, dividends and preferred stock redemptions from current
holdings. Noel does not currently receive, nor expect to receive in the
immediate future, cash dividends from any of its holdings.
Statements of Net Assets in Liquidation:
March 31, 1999 versus December 31, 1998
Cash and cash equivalents and short-term investments decreased by $.3
million primarily to fund operating expenses.
Investments decreased $.6 million primarily as a result of the
write-down of Career Blazers.
Statement of Changes in Net Assets in Liquidation:
Three Months Ended March 31, 1999
The decrease in estimated liquidation values of assets and liabilities
of $.7 million primarily relates to the decrease in the liquidation value of
Career Blazers of $.6 million.
Year 2000 Issues
The Company does not expect to be in existence after 1999 and therefore
has not fully assessed its Year 2000 issues. In the event that Noel operates
beyond 1999, management does not believe that the consequences of its Year 2000
issues would have a material effect on the Company's financial condition.
-11-
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
There are no pending material legal proceedings to which Noel or, to
Noel's knowledge, its subsidiaries is a party or to which any of their property
is subject, other than ordinary routine litigation incidental to their
respective businesses, other than as disclosed in Noel's Form 10-K for the year
ended December 31, 1998.
Item 3. - Defaults upon Senior Securities
a) None
b) Noel is the holder of 9,929,908 shares (approximately 93%) of Series B
Preferred Stock of Carlyle. Carlyle is in default of its mandatory
redemption obligations to the holders of such Preferred Stock to the
extent of its legally available funds. As of March 31 1999, the accrued
but unpaid dividends amounted to approximately $2.9 million.
Item 6. - Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
Item No. Item Title Exhibit No.
- -------- ---------- -----------
<S> <C>
(2) Plan of Complete Liquidation and Dissolution of Noel Group, Inc. (a)
(3) Articles of Incorporation and By-Laws.
(A) Certificate of Incorporation, as amended. (b)
(B) By-Laws, as amended and restated. (c)
(4) Instruments defining the rights of security holders, including indentures.
(A) Excerpts from Certificate of Incorporation, as amended. (b)
(B) Excerpts from By-Laws, as amended and restated. (c)
(10) Trust Agreement dated April 12, 1999 by and among Noel Group,
Inc., Samuel F. Pryor III and Herbert M. Friedman, as trustees 10
(11) Statement re: computation of per share earnings is not required because
the relevant computations can be clearly determined from the material
contained in the financial statements included herein.
(15) None.
(18) None.
(19) None.
</TABLE>
-12-
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(22) None.
(23) None.
(24) None.
(27) Financial Data Schedule.
(99) None.
- -------------------------
(a) This exhibit was filed as an exhibit to Noel's Proxy Statement
for the Special Meeting of Shareholders held on March 19, 1997,
which exhibit is incorporated herein by reference.
(b) These exhibits were filed as exhibits to Noel's Registration
Statement on Form S-1, Registration No. 33-44178, effective
January 29, 1992, and are incorporated herein by reference.
(c) These exhibits were filed as exhibits to Noel's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, and are
incorporated herein by reference.
</TABLE>
b) Reports on Form 8-K
The following reports on Form 8-K were filed by the registrant during
the quarter for which this report is filed:
(i) None.
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.
Signature
NOEL GROUP, INC.
Date: May 14, 1999
By: /s/ Todd K. West
-------------------------
Todd K. West Vice
President - Finance
and Secretary (As both
a duly authorized
officer of Registrant
and as chief financial
officer of Registrant).
-13-
<PAGE>
<PAGE>
TRUST AGREEMENT
NOEL GROUP -- CBI DISTRIBUTION TRUST
THIS TRUST AGREEMENT is entered into this 12th day of April, 1999 (this
"Agreement"), by and among NOEL GROUP, INC., a corporation duly organized and
existing under the laws of the State of Delaware (the "Corporation"), and SAMUEL
F. PRYOR III and HERBERT M. FRIEDMAN, as Trustees hereunder (the "Trustees").
WHEREAS, on May 21, 1996, the Board of Directors of the Corporation
approved a Plan of Complete Liquidation and Dissolution of Noel Group, Inc. (the
"Plan of Liquidation") contemplating this Agreement.
WHEREAS, on March 19, 1997, the shareholders of the Corporation approved
the Plan of Liquidation contemplating this Agreement.
WHEREAS, the Corporation has heretofore made liquidating distributions
to its shareholders and the Board of Directors of the Corporation has concluded
that a distribution pursuant to the Plan of Liquidation of the 2,026,104 shares
of the Common Stock, par value $.01 per share, of Career Blazers, Inc., a
Delaware Corporation, held by the Corporation (the "CBI Shares"), is desirable
and appropriate at this time.
WHEREAS, the Board of Directors has determined that, it would not be in
the best interests of the Corporation and its shareholders for the CBI Shares to
be distributed directly to the Corporation's shareholders at this time.
WHEREAS, the Board of Directors of the Corporation has approved the
creation of a trust to facilitate the distribution of the CBI Shares by
providing a temporary repository to which the CBI Shares might be transferred
and assigned for the respective use and benefit of the shareholders of record at
the close of business on March 29, 1999 (the "Record Date"), of the
Corporation's Common Stock (such record holders being referred to herein as the
"Stockholder-Beneficiaries"), their successors and permitted assigns.
WHEREAS, pursuant to the Plan of Liquidation, the Corporation is hereby
appointing the Trustees as agents on behalf of the Stockholder-Beneficiaries,
their successors and permitted assigns, and not as agents, officers or directors
of the Corporation, to receive and hold for them in trust the CBI Shares and to
distribute such CBI Shares (or proceeds from the sale thereof) to the
Stockholder-Beneficiaries at such date or dates as, in the sole judgment and
discretion of the Trustees, such distribution would be advantageous to the
Stockholder-Beneficiaries, but in any event not later than the Final
Distribution Date (as defined in Section 3 hereof), provided that the Trustees
shall have no personal liability for making or failing to make such a
distribution.
WHEREAS, the Trustees have agreed to act as trustees of the trust
created by this Agreement for the benefit of the Stockholder-Beneficiaries.
<PAGE>
<PAGE>
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confessed, and in order to declare the terms and provisions upon and subject to
which the Trustees are to receive, hold, administer and dispose of the
properties, property rights and agreements hereby granted and conveyed to them,
the parties hereto agree as follows:
1. ESTABLISHMENT OF THE TRUST. The Corporation hereby conveys, sets
over, assigns and delivers the CBI Shares to the Trustees and their successors,
and the Trustees agree to accept and hold the same in trust for the benefit of
the Stockholder-Beneficiaries, their successors and permitted assigns, and
either (at the sole discretion of the Trustees) (i) to distribute the CBI Shares
to the Stockholder-Beneficiaries, or (ii) to sell the CBI Shares in one or more
public or private sales and distribute the proceeds of such sale or sales to the
Stockholder-Beneficiaries, or (iii) a combination of (i) above and (ii) above;
in each case at such date or dates, but in any event not later than the Final
Distribution Date, as, in the sole judgment and discretion of the Trustees,
shall be advantageous to the Stockholder-Beneficiaries, provided that the
Trustees shall have no personal liability for making or failing to make such a
distribution or sale, all subject to the terms of this Agreement (the "CBI
Distribution Trust" or "Trust"). The Corporation hereby agrees to pay such
expenses as may reasonably be incurred by the Trustees in connection with
administration of the Trust, as and when such expenses are actually incurred. In
the course of its liquidation, the Corporation shall use all reasonable efforts
to set aside and withhold from any distributions sufficient assets to pay such
expenses. Notwithstanding the foregoing, the directors of the Corporation shall
have no personal liability for any failure of the Corporation to pay or provide
for the payment of such expenses. It is the intention of the parties hereto
that, for purposes of federal income taxes, any applicable state or local income
or franchise taxes, and any other applicable taxes imposed upon, measured by, or
based upon gross or net income (collectively, "Relevant Taxes"), the Trust shall
be treated as a liquidating trust that is classified as a grantor trust, or
failing that, in any event as other than an an association or publicly traded
partnership taxable as a corporation. The terms of this Agreement shall be
interpreted to further this intention of the parties.
2. PURPOSE OF THE TRUST; POWERS OF THE TRUSTEES.
(a) The primary purpose of the Trust is to serve as a temporary
repository for the CBI Shares so that the Corporation may divest itself of all
ownership thereof and interests therein and the Stockholder-Beneficiaries may
acquire such ownership, and to liquidate and distribute the CBI Shares and the
proceeds thereof to the Stockholder-Beneficiaries, all in accordance with the
terms of this Agreement.
(b) The Stockholder-Beneficiaries shall be the sole beneficiaries
of the Trust and in no event shall any part of the CBI Shares revert or be
distributed to the Corporation. Any Unclaimed Assets, as hereinafter defined,
shall be subject to disposition in accordance with applicable laws.
(c) The Trustees shall have no power or authority to enter into
or carry on any business or trade in respect of the CBI Shares or otherwise, and
no part of the CBI
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Shares or the proceeds, dividends, revenue or income therefrom (collectively
with the CBI Shares, the "Trust Assets") shall be reinvested, used or disposed
of by the Trustees for any purpose other than (1) the payment of, and the
creation and investment (in accordance with the provisions of this Section 2(c))
of such reserves as the Trustees may in their sole discretion deem reasonably
necessary for the payment of, expenses incurred in connection with, and claims
and contingencies arising out of, the administration of the Trust, including
such reserves as may be reasonably necessary to preserve or protect the Trust
Assets ("Reserves"); (2) the sale of the CBI Shares in accordance with the
provisions of this Agreement; and (3) the distribution of the Trust Assets to
the Stockholder-Beneficiaries in accordance with the terms of this Agreement.
Other than the Reserves, the Trustees shall not hold any monies forming a part
of the Trust Assets for longer than 90 days, and any Reserves shall be held only
in (1) checking accounts, savings accounts or certificates of deposit maturing
in one year or less of domestic banks having in excess of $100,000,000 in
capital and surplus; or (2) checking accounts, savings accounts or certificates
of deposit maturing in one year or less issued by any savings institution
insured by the Federal Deposit Insurance Corporation or the Federal Savings and
Loan Insurance Corporation; provided no instrument with a maturity date beyond
the next scheduled distribution date shall be purchased and that any instruments
purchased shall be held until maturity unless the Trustees determine that such
instruments should be sold because monies are needed to pay expenses or monies
need no longer be retained in the Reserve and may be distributed to the
Stockholder-Beneficiaries.
(d) The powers, duties and authorities of the Trustees hereunder
are limited to holding title to the Trust Assets, the payment or discharge of
expenses of the Trust, the collection of the proceeds, dividends, income and
revenue from time to time accruing to or otherwise payable in respect of the
Trust Assets, the preservation and protection of the same, the holding of any
monies forming a part of the Reserve as provided for in Section 2(c) hereof, the
sale of the Trust Assets through public or private sale, the distribution to the
Stockholder-Beneficiaries of the proceeds, dividends, income and revenue from
time to time received with respect to the Trust Assets, and the distribution of
the Trust Assets to the Stockholder-Beneficiaries at such date or dates but in
any event not later than the Final Distribution Date, as in the sole judgment
and discretion of the Trustees, such distribution would be advantageous to the
Stockholder-Beneficiaries, provided that the Trustees shall have no personal
liability for making or failing to make such a distribution. However, in the
exercise of such power and authority and the discharge of such duties, the
Trustees shall have, and are hereby granted, such incidental and additional
powers and authority, not in conflict with any of the provisions hereof or with
any provisions of applicable law, as they shall deem necessary, appropriate or
desirable to effectuate the purposes of the Trust, including (without
limitation) the following:
(1) The Trustees may employ clerks, attorneys, accountants and
other experts and may obtain any special services required, and pay the
reasonable compensation and expenses of all persons and for all such
services, in addition to the compensation of the Trustees.
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(2) The Trustees may employ a corporation or other entity, or one
or more individuals, to provide general administrative services to the
Trust, regardless of whether such corporation, individual or individuals
are Stockholder-Beneficiaries of the Trust, or whether such individual
or individuals are Trustees acting hereunder, or whether any Trustee
acting hereunder is an officer, director, member, employee or
shareholder of such corporation. The Trustees shall pay such
corporation, individual or individuals the reasonable compensation and
expenses for all such general administrative services, in addition to
the compensation of the Trustees.
(3) In order to preserve and protect the Trust Assets, the
Trustees may take such action as may be reasonably necessary or
desirable to protect and preserve the Trust Assets against waste pending
sale or other disposition or distribution to the
Stockholder-Beneficiaries.
(4) The Trustees shall have the power to cast the votes entitled
to be cast by the holder of the CBI Shares but shall have no liability
in respect of the manner in which such votes are cast or for the failure
to cast any such votes.
(5) The Trustees shall have the power to sell the CBI Shares (or
from time to time a portion or portions thereof) at public auction or
through other public or private sale for cash or other consideration;
provided, however, that the Trustees may accept consideration other than
cash only if acceptance of such consideration is reasonably advisable to
realize the value of the CBI Shares for the Stockholder-Beneficiaries,
such consideration may be immediately distributed to the
Stockholder-Beneficiaries, and the Trustees have obtained either an
opinion of counsel or a ruling of the Internal Revenue Service or other
applicable agency that under the circumstances at the time obtaining,
the acceptance of consideration other than cash will not cause the Trust
to be treated as an association or publicly traded partnership taxable
as a corporation for purposes of Relevant Taxes. CBI Shares shall only
be sold if the Trustees shall, in their sole discretion, determine that
either (i) the value of the CBI Shares has or may become impaired or
(ii) such sale is reasonably advisable to realize the value of the CBI
Shares for the benefit of the Stockholder-Beneficiaries.
(6) The Trustees shall have the power to pay all expenses
incurred in connection with the administration of the Trust, including,
without limitation, insurance and other expenses incurred for the
maintenance and protection of the Trust Assets, insurance of the
Trustees' entitlement to indemnification and reimbursement as provided
for in Section 9 hereof, taxes, expenses incurred in communicating with
Stockholder-Beneficiaries, legal, accounting and similar expenses, the
Trustees' compensation as Trustees and expenses (including reasonable
attorneys' fees) incurred by the Trustees in connection with the
performance of their obligations hereunder.
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(7) In connection with the sale or other disposition or
distribution of any securities held by the Trustees, the Trustees shall
comply with all applicable Federal and state securities laws.
(8) The Trustees shall have full power and authority to execute
and deliver any conveyances, assignments, contracts, stock or security
transfer powers, or any other written instrument of any character
appropriate to any of the powers or duties conferred upon the Trustees;
as the designated attorneys-in-fact for the Stockholder-Beneficiaries,
to hold any property in bearer form or in the name of the registered
nominee, provided the Trust Assets and the Unclaimed Assets, as
hereinafter defined, are at all times identified as Trust Assets or
Unclaimed Assets on the books of the Trust or books of any custodian or
agent; to keep any and all of the Trust Assets in any place or places in
the United States of America; and to delegate the responsibility for the
physical custody of Trust Assets to any bank or trust company.
(9) The Trustees are authorized to contract for and to borrow
money from third parties, to pay interest thereon and to pledge the CBI
Shares as security for such borrowing, solely for the purpose of funding
operating expenses and, in connection therewith, the Trustees are
authorized to draw, make, accept, endorse, execute, issue and deliver
promissory notes, drafts and other negotiable or transferable
instruments and evidence of indebtedness and all renewals or extensions
of same.
(10) The Trustees are authorized to submit to binding
arbitration, or to compromise or settle any claims by or against the
Trust, or in their name as Trustees, to bring, defend or intervene in
actions affecting the Trust, or for the purpose of enforcing claims held
by the Trust against others or defending claims asserted by others
against the Trust, and no Stockholder-Beneficiary shall be a necessary
party in any such proceeding; provided, however, that the Trustees shall
have no obligation to bring, defend or intervene in any such legal
proceeding, or to continue prosecution or defense of any such proceeding
if once commenced, if in the good faith determination of the Trustees
the remaining Trust Assets are not sufficient to insure the payment of
all expenses incurred by the Trustees in any such proceeding, including
reasonable attorneys' fees, unless the Trustees shall have received
funds and/or assurances from one or more persons or firms (whether or
not Stockholder-Beneficiaries of the Trust) sufficient in amount, in the
sole discretion of the Trustees, to insure payment of all costs and
expenses, including attorneys' fees, which may be incurred and, in
addition, sufficient to hold the Trustees harmless and indemnify them in
respect of any liability which may be asserted or established in
connection with any such proceeding.
(11) In the event any of the property which is or may become a
part of the Trust Assets is situated in any state or other jurisdiction
in which the Trustees are not qualified to act as Trustees, the Trustees
are empowered to nominate and appoint an individual or corporate trustee
qualified to act in such state or other jurisdiction in connection with
the property situated in that state or other
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jurisdiction as trustee of such property and require from such trustee
such security as may be designated by the Trustees. The trustee so
appointed shall have all the rights, powers, privileges and duties and
shall be subject to the conditions and limitations of this Agreement,
except as modified or limited by the Trustees, and except where the same
may be modified by the laws of such state or other jurisdiction (in
which case, the laws of the state or other jurisdiction in which such
trustee is acting shall prevail to the extent necessary). Such trustee
shall be answerable to the Trustees herein appointed for all monies,
assets and other property which may be received by it in connection with
the administration of such property. The Trustees hereunder may remove
such trustee, with or without cause, and appoint a successor trustee at
any time by the execution by the Trustees of a written instrument
declaring such trustee removed from office, and specifying the effective
date and time of removal.
(12) The exercise of any discretionary power vested in the
Trustees shall be final and conclusive upon all
Stockholder-Beneficiaries hereunder and upon all persons whomsoever.
(13) No bond shall be required of the Trustees appointed herein,
and no successor trustee shall be required to furnish bond.
(14) Items of income, gain, deduction, expense and credit
attributable to any portion of the Trust Assets are to be treated as
owned by the Stockholder-Beneficiaries, and to the extent required by
law such items shall be reported by the Trustees on a separate schedule
attached to Internal Revenue Service Form 1041 pursuant to Treas. Reg.
Section 1.671-4 or such other form as may be required. To the extent
required by law the Trustees shall make available to each of the
Stockholder-Beneficiaries, within a reasonable time after the close of
the taxable year, a copy of such Schedule setting forth his share
therein. The Trustee shall, to the extent required by law, prepare and
file any additional appropriate Federal income tax returns and other
returns and reports on behalf of the Trust. All returns and reports
filed by or on behalf of the Trust shall be consistent with the
treatment of the Trust as a grantor trust for tax purposes.
(15) The Trustees in their discretion are authorized to retain
all or any part of the CBI Shares until the Final Distribution Date
regardless of whether such assets are (or may become) underproductive,
unproductive or a wasting asset, or whether such assets, if considered
to be investments, might be considered to be speculative, extra
hazardous or worthless.
The Trustees' powers are exercisable solely in a fiduciary capacity
consistent with, and in furtherance of, the purposes of this Agreement, i.e.,
the dissolution of the Trust preceded by its distribution of the Trust Assets to
the Stockholder-Beneficiaries at such date or dates as, in the sole judgment and
discretion of the Trustees, such distribution shall be advantageous to the
Stockholder-Beneficiaries, but in any event not later than the Final
Distribution Date, provided that the Trustees shall have no personal liability
for making or failing to make such a distribution, or, in the event any portion
of
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the Trust Assets is returned or remains unclaimed, the disposition of such
Unclaimed Assets, as hereinafter defined, in accordance with applicable laws,
and the termination and dissolution of the Trust.
Notwithstanding the foregoing, the Trustees may exercise the powers set
forth in this agreement only to the extent that exercise of such powers is
advisable to maintain or preserve the value of the Trust Assets. The Trustees
may in no event acquire any assets or property other than the Trust Assets, any
cash proceeds or income derived from the Trust Assets and any other
consideration permitted by Section 2(d)(5) hereof.
3. DISPOSITION OF TRUST ASSETS; UNCLAIMED ASSETS.
In no event later than three years from the date of the execution of
this Agreement by the Corporation (the "Final Distribution Date"), the Trustees
shall distribute the remaining Trust Assets, if any, subject to any remaining
undischarged or unpaid liabilities of the Trust, to the
Stockholder-Beneficiaries, their successors and permitted assigns, at their last
known address on the Trustees' books, in proportion to their respective interest
in the Trust. If any interest of any Stockholder-Beneficiary in the Trust Assets
is unclaimed (collectively, the "Unclaimed Assets"), the Trustees shall have
disposed of such Unclaimed Assets in accordance with applicable laws in no event
later than the Final Distribution Date; provided, however, that the Trustees may
continue to hold any Unclaimed Assets for and on behalf of the owners thereof
(and not as Trust Assets) for a period not to exceed six months following the
Final Distribution Date.
(a) Within 90 days after a collection of income, dividends,
revenues or proceeds with respect to the CBI Shares or any other Trust Assets,
the Trustees shall distribute such income or proceeds proportionately among the
Stockholder-Beneficiaries of the Trust (after establishing and retaining a
reserve in an amount deemed reasonable by the Trustees for the payment of (1)
claims and contingencies, and (2) the expenses of administering the Trust). The
Trustees shall not receive or retain for longer than 90 days, cash in excess of
such reserve. The Trustees shall withhold from distributions to a
Stockholder-Beneficiary any taxes required to be withheld with respect to such
Stockholder-Beneficiary under applicable law (and any amounts so withheld will
be treated as if they were distributed to such Stockholder-Beneficiary), and
shall remit any amounts so withheld to the appropriate taxing authority in
accordance with applicable law.
(b) To the extent not previously distributed, the Trustees shall,
as soon as practicable following the close of each fiscal year, distribute to
the Stockholder-Beneficiaries of the Trust their allocable shares of the net
income (if any), realized by the Trust during such fiscal year (after reducing
such amount by any amount which must be retained in the reserve for the payment
of (1) contingencies, and (2) the expenses of administering the Trust).
(c) In the event any part of the Trust Assets shall have been
retained by the Trustees pursuant to the provisions of this Agreement and it
shall subsequently be determined by the Trustees that all of such part of the
Trust Assets so retained shall not
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be required, any excess shall be distributed proportionately among the
Stockholder-Beneficiaries within 45 days of such determination.
(d) All such distributions may at the discretion of the Trustees
be delivered in person or sent by first class mail, postage prepaid, or by
certified or registered mail, return receipt requested, to such
Stockholder-Beneficiary's last known address as shown on the books of the
Trustees.
(e) The Trustees shall be fully discharged from their obligations
hereunder in respect of any Trust Asset distributed as income or principal to
any Stockholder-Beneficiary and, upon final distribution after termination of
the Trust, shall be completely discharged from any and all further
responsibility under this Agreement with respect to the Trust Assets.
4. PAYMENT OF TRUST EXPENSES AND CLAIMS AGAINST THE TRUST.
(a) The Corporation agrees to pay such expenses as may reasonably
be incurred by the Trustees in connection with the administration of the Trust,
as and when such expenses are actually incurred, upon the written request of a
majority of the Trustees setting forth the nature and amount of such expense.
The Corporation shall use all reasonable efforts to set aside and withhold from
any distributions sufficient assets to pay such actually incurred and reasonably
anticipated expenses. To the extent that the Corporation does not pay such
expenses of the Trust, then the Trustees shall pay all such expenses out of the
funds provided in Section 2(d)(9) hereof, and out of the Trust Assets,
including, without limitation, insurance and other expenses incurred for the
maintenance and protection of the Trust Assets, insurance of the Trustees'
entitlement to indemnification and reimbursement as provided for in Section 9
hereof, taxes, expenses incurred in communicating with
Stockholders-Beneficiaries, legal, accounting and similar expenses, (including
reasonable attorneys' fees) incurred by the Trustees in connection with the
performance of their obligations hereunder. The Trustees may pay any such
expense without further authorization or direction and no
Stockholder-Beneficiary shall have any claim against the Trustees for any funds
so expended.
(b) In the event any Stockholder-Beneficiary or any other party
shall agree in writing to indemnify the Trustees and the Trust against any loss
or liability arising out of any specified liabilities, including contingent
liabilities, then, in such event, the Trustees may, but shall not be obligated
to, make distributions to the Stockholder-Beneficiaries without reserving assets
for the payment of the liability to which such indemnity relates. The Trustees
making such distribution shall have no liability to the creditors or to the
Stockholder-Beneficiaries for their failure to reserve assets for the payment of
such claim if the Trustees shall have acted in good faith in reliance on such
indemnity. To the extent any party making such indemnity pays such claim, he
shall be entitled to be reimbursed, subject to the terms of his indemnity
agreement, out of the assets of the Trust otherwise available for distribution
to the Stockholder-Beneficiaries.
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(c) If any person, firm, or governmental or regulatory entity or
body, including, without limitation, any of the Stockholder-Beneficiaries, shall
assert a claim against the Corporation or the Trust, which claim is enforceable
against the Trust, the Trustees shall pay the same out of the Trust Assets
either if they determine such payment to be proper or upon a final determination
by a court or other tribunal having jurisdiction directing or authorizing
payment. The Trustees shall have the right to apply to any state or Federal
court having jurisdiction for a declaratory judgment, judgment in interpleader,
or other appropriate relief, and, upon the filing of any such suit and the
deposit into the registry of the court of the remaining Trust Assets, the
Trustees shall be discharged from any further responsibility under this
Agreement in respect of the Trust Assets. In no event shall the Trustees have
any responsibility for any liability of, or claim against, the Trust, even
though determined to be valid and properly asserted against the Trust, in an
aggregate amount exceeding the least of (1) the value of the remaining Trust
Assets held by the Trustees at the time of the assertion of such claim(s); (2)
the amount of such claim(s); or (3) the amount deposited in the registry of a
court pursuant to this paragraph.
5. IDENTIFICATION OF BENEFICIARIES. The Trustees may rely conclusively
on the accuracy and completeness of the list of Stockholder-Beneficiaries of the
Corporation as of the Record Date supplied to them by the Corporation, and the
Trustees shall maintain a similar list of the names and addresses of the
Stockholder-Beneficiaries until final distribution of the Trust. A copy of such
list and of this Agreement, and any amendments thereto, shall be made available
by the Trustees at their principal office during business hours, upon request,
for inspection (and copying at the expense of the person making the inspection)
by any Stockholder-Beneficiary.
6. BOOKS AND RECORDS. The Trustees shall maintain in respect of the
Trust and the Stockholder-Beneficiaries, books and records relating to the
assets and income of the Trust and the payment of expenses of, and claims
against, the Trust in such detail and for such period of time as may be
necessary to enable them to make full and proper accounting in respect thereof
and to comply with applicable provisions of law, including in particular, but
without limitation, state and Federal tax laws. Nothing in this Agreement is
intended to require the Trustees to file any accounting or seek approval of any
court with respect to the administration of the Trust, or as a condition for
making any payment or distribution out of the Trust Assets or the Unclaimed
Assets, and the Trustees shall not be required to do so unless otherwise
required by law.
7. TRANSFER OF BENEFICIAL INTERESTS.
(a) The interests of the Stockholder-Beneficiaries in the Trust
(the "Trust Interests") are transferable only by will or intestate succession
or, in the case of a corporation, partnership or other entity, to a successor
entity, and in any such case such Trust Interest in the hands of such transferee
will remain subject to the same restrictions on transfer as it was when held by
the transferor. In addition to the foregoing, any Stockholder-Beneficiary may
surrender his Trust Interest for no consideration by instrument in writing
delivered to the Trustees, in which event such Stockholder-Beneficiary shall
cease to be a Stockholder-Beneficiary as of the date such instrument is so
delivered and shall have no further interest in or claim upon the Trust or its
assets.
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(b) The Trustees shall not be required to record any transfer in
favor of any transferee which, in the sole discretion of the Trustees, is or
might be construed to be ambiguous or to create uncertainty as to the owner of
the beneficial interest or does not comply with the restrictions set forth in
clause (a) of this Section 7. Until a transfer of any such beneficial interest
is in fact recorded on the books and records maintained by the Trustees for the
purpose of identifying Stockholder-Beneficiaries of the Trust, the Trustees,
whether or not in receipt of documents of transfer or other documents relating
to the transfer, may nevertheless make distribution of income and principal of
the Trust, and send communications to Stockholder-Beneficiaries of the Trust, as
though it had no notice of any such transfer, and in doing so the Trustees shall
be fully protected and incur no liability to any purported transferee or any
other person.
(c) If any conflicting claims or demands are made or asserted as
to any interest of any Stockholder-Beneficiary, or there should be any
disagreement among the transferees, assignees, heirs, representatives, or
legatees succeeding to all or part of the interest of any
Stockholder-Beneficiary resulting in adverse claims or demands in connection
with such interest, then, in any of such events, the Trustees shall be entitled
in their sole discretion, to refuse to comply with any such conflicting claims
or demands. In so refusing, the Trustees may elect to make no payment or
distribution to the interest involved, or any part thereof, and in so doing the
Trustees shall not be or become liable to any such parties for their failure or
refusal to comply with any of such conflicting claims or demands, nor shall the
Trustees be liable for interest on any funds which they may so withhold. The
Trustees shall be entitled to refrain and refuse to act until (1) the rights of
the adverse claimants have been adjudicated by a final judgment of a court of
competent jurisdiction, or (2) all differences have been adjusted by valid
written agreement among all of such parties, and the Trustees shall have been
furnished with an executed counterpart of such agreement. The Trustees may, in
their discretion, require that there be furnished a surety bond or other
security satisfactory to the Trustees, as they shall deem appropriate to fully
indemnify the Trustees as to conflicting claims or demands.
8. EXCULPATORY PROVISIONS.
(a) The Trustees shall have only such affirmative obligations as
are provided for in this Agreement or as may be required by law, including,
without limitation, Federal, state and local income tax laws.
(b) Except for gross negligence, fraud or willful misconduct, the
Trustees shall not be subject to any claim, suit or liability of any kind in
connection with the administration of the Trust, including a claim arising from
any loss occurring by reason of the depreciation in value, the distribution or
the failure to make a distribution of any property constituting part of the
Trust Assets, regardless of whether such claim or suit has been brought by or
such liability is to the Stockholder-Beneficiaries, persons having claims
against the Trust, or any other person.
(c) In the absence of bad faith, the Trustees may conclusively
rely on the existence of any fact or the correctness of any opinion which has
been reduced to
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writing and certified or signed by, or on behalf of, a person reasonably
believed by the Trustees to have knowledge of the fact or to be competent to
express the opinion.
(d) No officer, director, agent or other representative of the
Trustees shall be subject to, or incur, any personal liability in respect of the
Trust, except only for his or her gross negligence or fraudulent or willful
misconduct.
(e) The Trustees may consult with legal counsel, and the opinion
and advice of such counsel shall constitute full and complete authorization and
protection to the Trustees in respect of any action taken or not taken in good
faith and in reliance thereon.
(f) The Trustees shall have the right to rely upon and shall be
fully protected in acting upon the advice or opinion of any attorney, auditor or
other expert at any time employed by them in connection with any matter
concerning the Trust or the Trust Assets, and they shall also have the right to
rely upon and shall be fully protected in acting upon any notice, credential,
certificate, assignment or other document or instrument believed by the Trustees
to be genuine and to be signed by the proper party or parties.
9. COMPENSATION OF THE TRUSTEES AND PAYMENT OF THE TRUSTEES' EXPENSES.
(a) Each Trustee shall be entitled to receive out of the Trust
Assets a fee in the amount of $10,000 per annum (or at such time as there is
only one Trustee, a fee in the amount of $20,000 per annum), to compensate the
Trustees for services rendered by them regarding the Trust. Each Trustee shall
also be entitled to reimbursement out of the Trust Assets for any reasonable
expense incurred by such Trustee in connection with the administration of the
Trust.
(b) The Trustees shall be indemnified by, and shall be entitled
to receive reimbursement, including without limitation counsel fees or
out-of-pocket costs incurred in litigation, from the Trust against and from any
and all liability claims, damage or loss incurred in connection with their
duties as Trustees, and in the omission or commission of any act done or
performed as Trustees of the Trust, whether such claim is made by or on behalf
of the Trust, and Shareholders-Beneficiaries or any other person, save and
except such liabilities, claims, damages or losses as may be attributable to the
fraud, gross negligence or willful misconduct or the Trustees or of any of their
officers, directors, or employees. To the extent the Trust does not have cash
immediately available to indemnify the Trustees as provided above, the
Corporation shall promptly indemnify the Trustees on the same basis to the full
extent permitted by law. Such costs and expenses shall be reimbursed as incurred
and within 30 days after request therefor.
(c) The Trustees shall have a lien upon the Trust to secure them
for such indemnification and reimbursement as well as any other sums due the
Trustees pursuant to the terms of this Agreement.
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(d) The Trustees shall be entitled to cause the Trust to obtain
an insurance policy insuring the Trustees' entitlement, pursuant to this Section
9, to indemnification and reimbursement for certain reasonable costs and
expenses incurred by the Trustees in connection with their duties as Trustees,
in the event the Trust Assets are insufficient to so reimburse the Trustees.
10. ACTION BY TRUSTEES; REMOVAL, SUCCESSORS.
(a) The number of Trustees shall be two. Any action required or
permitted to be authorized or taken by the Trustees hereunder may be authorized
or taken by any Trustee then serving unless otherwise specified in this
Agreement.
(b) Any Trustee at any time acting hereunder may resign as
Trustee to the extent permitted by law, without leave of court. Any such
resignation shall be effective upon delivery of a written instrument of
resignation, duly signed by such Trustee, to the remaining Trustees and, if
required by law, with the approval of the court having jurisdiction over the
Trust.
(c) Any Trustee at any time acting hereunder may be removed from
office at any time for cause by the unanimous vote or approval of the remaining
Trustees then serving or, with or without cause, by a vote of a majority in
interest of the Stockholder-Beneficiaries. The Trustees shall hold a special
meeting of the Stockholder-Beneficiaries for the purpose of considering such
removal upon the written request of fifteen percent in interest of the
Stockholder-Beneficiaries.
(d) In the event of the death, incapacity, resignation or removal
of any of the Trustees, a successor Trustee shall be appointed by a majority of
the remaining Trustees. The remaining Trustees shall give notice of each
resignation, removal or vacancy of any Trustee and each appointment of a
successor Trustee by mailing written notice of such event by first-class mail,
postage prepaid, to each Stockholder-Beneficiary as their names and addresses
appear on the books and records of the Trust. The appointment of such successor
Trustee shall become effective upon the expiration of twenty-one days after the
mailing of such notice; provided, however, that fifteen percent in interest of
the Stockholder-Beneficiaries may, by written notice received by the remaining
Trustees within such twenty-one day period, require the Trustees to hold a
special meeting of the Stockholder-Beneficiaries for the purpose of electing a
successor Trustee. In default of such appointment, a successor Trustee or
Trustees may be appointed by a majority of those persons who constitute, or most
recently constituted, the Board of Directors, or the Executive Committee of the
Board of Directors, of the Corporation other than Messrs. Samuel F. Pryor III
and Herbert M. Friedman.
11. TERM OF THE TRUST.
(a) Except as hereinafter provided, the Trust is irrevocable and
shall continue and remain effective until (1) the Trust Assets have been fully
distributed or expended in accordance with the terms and provisions of this
Agreement and the Unclaimed Assets of the Trust have been disposed of in
accordance with applicable law;
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(2) a majority in interest of the Stockholder-Beneficiaries, or a majority of
the Trustees, approve by vote the distribution of the Trust Assets and disposal
of the Unclaimed Assets in accordance with applicable law; or (3) the Final
Distribution Date; whichever shall first occur, at which time the Trust shall
terminate; provided, however, that in the case of clauses (2) and (3) above, the
Trust shall not terminate pursuant to this Section 11(a) so long as any payment
obligation, contingent or otherwise, of the Trust shall remain either unpaid or
unprovided for but in no event longer than six years from the date hereof. The
Trustees will use their reasonable efforts not to unduly prolong the term of the
Trust.
(b) Upon termination of the Trust, the Trustees may retain the
books, records, Stockholder-Beneficiary lists and files which shall have been
delivered to or created by the Trustees. At the Trustees' discretion, they may
destroy all of such records and documents at any time after three years from the
date of termination of the Trust.
(c) For the purpose of dissolving, liquidating and winding up the
affairs of the Trust at its termination, the Trustees shall continue to act as
Trustees until their duties have been fully performed. After so doing, the
Trustees shall have no further duties nor be subject to any further liability.
12. MISCELLANEOUS.
(a) No person dealing with the Trustees shall be responsible for,
or be required to see to, the application of any money or other thing of value
paid to or delivered to the Trustees and the receipt of the Trustees shall be a
full discharge to the extent of the property so delivered.
(b) A Stockholder-Beneficiary's interests in the Trust and/or the
Trust Assets shall be evidenced by the books and records of the Trust and not by
any formal certificate or other instrument.
(c) The recitals of fact contained herein shall be taken as
statements of the Corporation, and the Trustees assume no responsibility for the
correctness of the same.
(d) This Agreement may be executed in a number of counterparts,
each of which when so executed shall be deemed to be an original for all
purposes, but all of such executed counterparts together shall constitute but
one and the same instrument.
(e) The Trustees shall not be responsible for the execution and
acknowledgment hereof or the validity hereof, the validity to the Trust Assets
or any part thereof, or the authority of the Corporation to make and execute
this Agreement.
(f) The Trust created hereunder shall be irrevocable except in
accordance with the express terms hereof, and, except as provided for herein, no
person shall have the right or power, whether alone or in conjunction with
others, in whatever capacity, to alter, amend, revoke or terminate the Trust, or
any of the terms of this Agreement, in whole or in part, or to designate the
persons who shall possess or enjoy the Trust Assets or the income therefrom.
13
<PAGE>
<PAGE>
13. AMENDMENT. The Trustees shall have the power to amend the Agreement
as may be necessary or appropriate to (i) correct any defect or error in the
Agreement to properly effect its intent or (ii) conform to any requirements
which are or may be imposed by applicable tax laws for treatment of the trust as
a grantor trust, or failing that, as other than an association or publicly
traded partnership taxable as a corporation for purposes of Relevant Taxes. The
Trustees shall have the power to further amend this Agreement with the consent
of a majority in interest of the Stockholder-Beneficiaries present at a meeting
called for this purpose. Notwithstanding the foregoing, no amendment shall,
without the consent of a majority in interest of the Stockholder-Beneficiaries,
materially adversely affect the rights of the Stockholder-Beneficiaries, and no
amendment shall be made whatsoever which adversely affects the status of the
Trust as a grantor trust, or failing that, as other than an association or
publicly traded partnership taxable as a corporation for purposes of Relevant
Taxes.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York applicable to contracts made and to be performed wholly within
such state. Any legal action relating to or arising out of the Trust or this
Agreement shall be brought only in the state courts of or the federal courts
sitting in the City and State of New York. This Agreement shall bind and inure
to the benefit of the Trustees, the Stockholder-Beneficiaries, and the
respective successors and permitted assigns of the foregoing. If for any reason
any part of this Agreement shall be invalid, illegal or inoperative, it is
intended, never-the-less, that the remaining part shall be fully effective and
operative. The Trustees may seek and obtain court instructions from time to time
and as often as the Trustees may deem necessary for the purpose of construing or
carrying out the terms, provisions and intentions expressed in this Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto caused these
presents to be executed on their respective behalf and their seals hereunto
affixed the day and year first above written.
ATTEST: NOEL GROUP, INC.
By:
- ------------------------------- -------------------------
Todd K. West
Vice President-Finance
ATTEST:
- ------------------------------- -------------------------
Samuel F. Pryor III, Trustee
ATTEST:
- ------------------------------- ----------------------------
Herbert M. Friedman, Trustee
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 0 <F1> 0 <F1>
<SECURITIES> 0 <F1> 0 <F1>
<RECEIVABLES> 0 <F1> 0 <F1>
<ALLOWANCES> 0 <F1> 0 <F1>
<INVENTORY> 0 <F1> 0 <F1>
<CURRENT-ASSETS> 0 <F1> 0 <F1>
<PP&E> 0 <F1> 0 <F1>
<DEPRECIATION> 0 <F1> 0 <F1>
<TOTAL-ASSETS> 0 <F1> 0 <F1>
<CURRENT-LIABILITIES> 0 <F1> 0 <F1>
<BONDS> 0 <F1> 0 <F1>
<COMMON> 0 <F1> 0 <F1>
0 <F1> 0 <F1>
0 <F1> 0 <F1>
<OTHER-SE> 0 <F1> 0 <F1>
<TOTAL-LIABILITY-AND-EQUITY> 0 <F1> 0 <F1>
<SALES> 0 <F2> 0 <F1>
<TOTAL-REVENUES> 0 <F2> 0 <F1>
<CGS> 0 <F2> 0 <F1>
<TOTAL-COSTS> 0 <F2> 0 <F1>
<OTHER-EXPENSES> 0 <F2> 0 <F1>
<LOSS-PROVISION> 0 <F2> 0 <F1>
<INTEREST-EXPENSE> 0 <F2> 0 <F1>
<INCOME-PRETAX> 0 <F2> 0 <F1>
<INCOME-TAX> 0 <F2> 0 <F1>
<INCOME-CONTINUING> 0 <F2> 0 <F1>
<DISCONTINUED> 0 <F2> 0 <F1>
<EXTRAORDINARY> 0 <F2> 0 <F1>
<CHANGES> 0 <F2> 0 <F1>
<NET-INCOME> 0 <F2> 0 <F1>
<EPS-PRIMARY> 0 <F2> 0 <F1>
<EPS-DILUTED> 0 <F2> 0 <F1>
<FN>
<F1> See March 31, 1999 Statement of Net Assets in Liquidation.
<F2> See March 31, 1999 Statement of Changes in Net Assets in Liquidation.
</FN>
</TABLE>
